Office of

 Inspector General

FY 2003 ANNUAL PLAN 

October 1, 2002 - September 30, 2003

FOREWORD

This is the Office of Inspector General’s (OIG) Annual Plan for fiscal year (FY) 2003. This plan describes our 

strategies for conducting audits, investigations, and evaluations to provide our Department’s managers with

information they can use to improve the programs and operations they administer. We noted in our Annual Plan for 

FY 2002 that the terrorist attacks on September 11, 2001, caused us to readjust our priorities, and the subsequent 

anthrax attacks further highlighted the need. We are again focusing our priorities on those issues to help ensure a safe 

food supply, identify vulnerabilities to avert accidental or intentional release of agricultural threats, and help ensure 

that USDA’s information technology systems and resources are secure. 

Our priorities for FY 2003 will include a review of security provisions used to protect food stored in USDA 

warehouses earmarked for food service programs, including school lunch and child and adult care food programs, 

from deliberate contamination; a review of the food safety information system to ensure immediate actions are taken 

when unsafe meat and poultry products enter the marketplace; evaluating controls over permits issued to facilities that

import biohazards, and systems used to track them; and evaluating security controls in place on e-Government 

program initiatives to ensure the integrity and confidentiality of these programs are not compromised. 

Infrastructure security will again play a key role in our planning in other program areas as well. Some of these areas 

include: (1) assessing the Department’s implementation and administration of the programs provided under the 

newly enacted Farm Security and Rural Investment Act of 2002; (2) assessing the steps being taken to reorganize the 

meat and poultry food safety inspection system; (3) reviewing the national fire plan; (4) monitoring the continued

expansion of the Electronic Benefits Transfer systems for entitlement programs; and (5) determining that

management controls are in place to ensure that funds Congress authorized for the newly created Federal-State 

partnerships – the Delta Regional Authority and the Northern Great Plains Regional Authority – are safeguarded 

against waste and abuse. In addition, our investigative resources will continue to be directed to issues affecting food

and consumer protection and to threats to the health and safety of the public, as well as threats against USDA 

employees. 

We are required by the Government Information Security Reform Act to perform annual reviews of the Department’s 

information security procedures. We are also obligated to audit the Department’s compliance with the requirements 

of the Federal Activities Inventory Reform Act. Recently enacted legislation now requires USDA’s OIG to perform

independent investigations of any Forest Service firefighter whose death is caused by wildfire entrapment or 

burnover. We also set aside time to handle those unexpected, critical issues that invariably arise during the course of 

a year. These could include identifying the cause of food-borne illnesses, reviewing disaster-related situations that 

might be vulnerable to abuse and fraud, and acting on requests received from members of Congress and USDA 

agencies. Limited funding, along with increasingly new statutory mandates for Inspectors General, have forced OIG 

to divert resources from our core audit and investigative work. 

Last fiscal year, we conducted a complete review of OIG’s operations with the goal of re-engineering our business 

practices to take full advantage of state-of-the-art technologies in our audit and investigative activities, streamline 

operations, and increase office efficiencies. This year we envision implementing our re-engineering efforts so we

may provide more proactive assistance to USDA agencies as they carry out new and existing Federal programs. 

As always, we encourage agency management to provide input into our planning process, and where possible, we

have included their suggestions in our FY 2003 plan. 

>signed< 

JOYCE N. FLEISCHMAN 

Acting Inspector General

TABLE OF CONTENTS

MANAGEMENT CHALLENGES .................................................................................................1 

THE OIG MISSION ......................................................................................................................19 

AUDIT AND INVESTIGATIVE UNIVERSE .............................................................................20 

BUSINESS PROCESS RE-ENGINEERING................................................................................20 

STRATEGIC PLANNING............................................................................................................21 

USDA ORGANIZATIONAL CHART .........................................................................................23 

OIG ORGANIZATIONAL CHART.............................................Error! Bookmark not defined.

DISTRIBUTION OF OIG RESOURCES 

BY UNDER AND ASSISTANT SECRETARIES....................................................................25 

PERCENTAGE BY AGENCY...................................................................................................26 

INVESTIGATIONS ......................................................................................................................27 

INVESTIGATIVE PLANNING.................................................................................................27 

THE INVESTIGATIVE PROCESS...........................................................................................28 

HOTLINE.....................................................................................................................................29 

SPECIAL REPORTING OF BRIBES OR GRATUITIES.......................................................31 

OIG INVESTIGATIONS EMERGENCY CONTACTS..........................................................31 

DISTRIBUTION OF INVESTIGATIVE RESOURCES 

BY UNDER AND ASSISTANT SECRETARIES....................................................................33 

PERCENTAGE BY AGENCY...................................................................................................34 

AUDIT...........................................................................................................................................35 

AUDIT PLANNING....................................................................................................................36 

THE AUDIT PROCESS..............................................................................................................37 

DISTRIBUTION OF AUDIT RESOURCES 

BY UNDER AND ASSISTANT SECRETARIES....................................................................39 

PERCENTAGE BY AGENCY...................................................................................................40 

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APPENDIX I 

OIG STRATEGIES...................................................................................................................................41 

FARM PROGRAMS ................................................................................................................42

MARKET DEVELOPMENT...................................................................................................44 

CIVIL RIGHTS.........................................................................................................................47 

NATURAL RESOURCES CONSERVATION SERVICE ...................................................49 

ENTITLEMENT PROGRAMS ...............................................................................................52 

FOREST SERVICE ..................................................................................................................54 

RESEARCH AND TECHNOLOGY TRANSFER ................................................................56 

INTEGRITY OF USDA PERSONNEL..................................................................................60 

HOMELAND SECURITY.......................................................................................................61 

PROTECTING U.S. FOOD SUPPLY AND AGRICULTURE ............................................65 

RISK MANAGEMENT............................................................................................................68 

GOVERNMENT PERFORMANCE AND RESULTS ACT.................................................70 

ACCOUNTING AND FINANCIAL MANAGEMENT........................................................73 

INFORMATION TECHNOLOGY/SECURITY....................................................................76 

RURAL DEVELOPMENT......................................................................................................79 

MANAGEMENT/CONTROL OF ENVIRONMENTAL HAZARDS.................................82 

PROGRAM COMPLIANCE, ECONOMY, AND EFFICIENCY........................................84 

APPENDIX II 

MAJOR AUDITS PLANNED FOR FISCAL YEAR 2003...................................................................87 

APPENDIX III 

FISCAL YEAR 2003 AUDITS PLANNED.........................................................................................100 

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ACRONYMS

AMS Agricultural Marketing Service GIPSA Grain Inspection, Packers and 

Stockyards Administration 

APHIS Animal and Plant Health

Inspection Service 

GISRA Government Information 

Security Act 

ARS Agricultural Research Service GPRA Government Performance and 

Results Act 

CCC Commodity Credit Corporation NASS National Agricultural Statistics 

Service 

CR Civil Rights NRCS Natural Resources Conservation 

Service 

CSREES Cooperative State Research, 

Education, and Extension Service 

OCFO Office of the Chief Financial 

Officer 

2002 Farm

Bill 

Farm Security and Rural 

Investment Act of 2002 

OCIO Office of the Chief Information 

Officer 

FAS Foreign Agricultural Service OIG Office of Inspector General 

FCIC Federal Crop Insurance 

Corporation 

OMB Office of Management and 

Budget 

FMFIA Federal Managers’ Financial 

Improvement Act 

PCIE President’s Council on Integrity 

and Efficiency 

FNS Food and Nutrition Service RBS Rural Business-Cooperative

Service 

FS Forest Service RHS Rural Housing Service 

FSA Farm Service Agency RMA Risk Management Agency 

FSIS Food Safety and Inspection 

Service 

RUS Rural Utilities Service 

FY fiscal year U.S. United States

GAO General Accounting Office USDA U.S. Department of Agriculture 

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MANAGEMENT CHALLENGES

Over the past several years congressional committees, including the Senate Governmental 

Affairs Committee, Senate Budget Committee, House Government Reform Committee, and 

House Budget Committee, requested OIG to provide information on what we considered to be 

the most serious management challenges facing USDA. OIG is now required to include a 

statement, in accordance with Public Law 106-531, “Reports Consolidation Act of 2000,” 

summarizing these management and performance challenges. The following paragraphs depict, 

as of September 25, 2002, OIG’s most recent summary. 

USDA HOMELAND SECURITY

1. Homeland Security Issues 

The events of September 11, 2001, and the subsequent anthrax attacks on Government and media 

officials have alerted U.S. Department of Agriculture (USDA) at all levels to the need for 

increased vigilance and the strongest possible defenses. The Administration established the 

Office of Homeland Security to provide coordination and guidance across the Federal 

Government. As reflected in the Office of Homeland Security’s priorities and the 

Administration’s request for supplemental funding, homeland security comprises four missions: 

to support first responders to terrorist attacks, to defend against biological attacks, to secure our 

borders, and to share information about suspect activity. USDA’s operations involve it in all 

four missions. The attacks also added a new dimension to the Department’s priorities, 

particularly its mission to ensure the safety and abundance of the Nation’s food supply, from the 

farm to the American people’s table. However, based on our past and ongoing reviews, if the 

Department is to effectively respond to these new circumstances, it faces several challenges 

which it has not often confronted in the past: increased communication and coordination across 

the Department and its agencies, consistent departmental policies and procedures, and an 

emphasis on security (as opposed to safety) from potentially terrorist activities or other deliberate 

conspiracies. 

The Office of Inspector General (OIG) experienced these challenges that the Department now 

faces in our recent efforts reviewing the USDA laboratory facilities. High on the list of potential 

weapons are the biological agents that USDA laboratories use for research on plant and animal 

diseases. OIG recently issued an audit report on the Department’s controls over the security of 

its biological agents. The aim of the audit was to determine what pathogens the Department used 

and stored in over 300 laboratories around the country and what security those laboratories 

established to guard against break-ins. Our audit found that the responsibility for dealing with 

security was fragmented among the laboratory units. There were no policies or procedures in 

place to identify the type and location of the pathogens. Security in general at the laboratories 

needed improvement, but laboratory managers also needed to restrict access. 

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In response to the need for greater biosecurity in the wake of the September 11 attacks, the 

Secretary assigned a task force to develop policies and procedures for biosecurity within the 
Department. On August 30, 2002, the Secretary’s Chief of Staff signed for the Secretary the 

decision memorandum adopting for USDA-wide implementation Departmental Memo 9610-1, 

entitled “USDA Security Policies and Procedures for Biosafety Level – 3 Facilities.” (The 

Department is also currently working on the draft policies and procedures for its other 

laboratories and technical facilities excluding Biosafety Level-3 facilities.) The affected USDA 

agencies have been developing corrective actions in response to our report and in response to the 

new Department policies and procedures on biosecurity. The recently-issued policies and 

procedures constitute the first major effort by the Department to issue Departmentwide 

biosecurity policies and procedures. Furthermore, any effective implementation of these 

corrective actions will entail a major change in the approach by the agencies’ staff. To ensure 

that the current impetus is carried forth effectively, we have planned followup reviews to 

evaluate and verify whether these facilities have properly implemented their corrective actions. 

Inadequate security procedures even after September 11 was observed during OIG’s review of 

the security provided by the Forest Service over aircraft, including air tankers used for aerial 

dispersal of flame retardant chemicals and other fire suppression activities, because of its 

potential use as a weapon. The Forest Service owns 44 aircraft and leases another 800 under 

contract. Our review found that the Forest Service had not assessed the risk of theft and misuse 

by terrorists of these aircraft because, prior to September 11, officials did not consider the threat 

significant. In response to our concerns, the Forest Service assembled a team of security experts 

to review their air bases. At each site visited, the team planned to conduct a threat assessment 

and analyze the countermeasures needed to mitigate that threat. 

We have been reviewing the Department’s operation to prevent the entry of Foot and Mouth 

Disease and contaminated food products into the United States (see also sections on “Food 

Safety” and “Marketing and Regulatory Programs”). In an earlier review, we found that the two 

USDA agencies (that is, Animal and Plant Health Inspection Service (APHIS) and Food Safety 

and Inspection Service (FSIS)) responsible for preventing contaminated meat and poultry 

products from entering the Nation’s food supply did not always coordinate their activities, giving 

importers an opportunity to bypass the inspection system. We are continuing our oversight of 

FSIS’ inspection activities, particularly their systems to track, account for, and inspect all meat 

and poultry products arriving at U.S. ports of entry. If the Department is to ensure the safety of 

the American food supply, the Department and particularly the two affected agencies, APHIS 

and FSIS, must increase coordination and communication among themselves. 

Currently, we have a number of ongoing reviews evaluating the spectrum of USDA agencies’ 

homeland security initiatives and activities in response to the heightened alert resulting from

September 11. These include a number of ongoing efforts looking at APHIS’ role in monitoring 

America’s vulnerable ports of entry; a review of APHIS’ permit system involving the 

importation and domestic transshipment of biological agents (for example, animal and plant 

pests and pathogens), and a review of APHIS’ agricultural imports inspection system, 

particularly on inspections of cargo and passengers at major ports of entry and border crossings 

to prevent entry of prohibited pests and diseases into the United States. We have initiated the 

second phase of our reviews of controls and oversight over biohazardous agents; in this phase, 

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we are evaluating the biosecurity and biosafety controls and procedures at USDA-funded 

laboratories (that is, university and private laboratory facilities receiving USDA financial 

assistance). So far, we have found minimal or no departmental guidance involving biosecurity to 

these laboratories. We have also initiated a review of controls and procedures over chemicals 

and radioactive materials stored and used at USDA facilities. In our earlier audit several years 

ago, we had reported material accountability problems. The urgency for strengthened 

Department controls over these substances materialized with the recent “dirty bomb” alert. 

Communications and information technology are among the Department’s primary assets and 

have been a target of hackers in the past. OIG has been involved in strengthening the 

Department’s security of this technology well before September 11. To date, we have reviewed 

or are in the process of reviewing nine separate information systems within the Department. 

Successful hackers could release Government payments to individuals unassociated with Federal 

programs or employment. Terrorists could cause economic chaos by altering sensitive pricing 

data related to commodities markets. Our reviews found several weaknesses in the security of 

information technology within the Department. Increased cyber security remains a priority for 

the Department. (See also section 15 on Information Resources Management.) 

As the Department and its agencies have undertaken efforts to identify vulnerable assets and to 

perform vulnerability assessments of their facilities and programs, they have realized the need to 

secure sensitive information that could be subject to criminal misuse by potential terrorists or to 

cause major harm to the agriculture sector of the economy. In response, the Department and 

some agencies initiated actions to remove some sensitive information from their websites. 

However, they are still faced with the required public disclosure of any document or information 

they have compiled or collected under the Freedom of Information Act since they do not have 

classification authority. Because of this vulnerability, the Department and agencies expressed 

concerns about compiling such information or issuing vulnerability reports. The Department and 

agencies are seeking a more permanent solution to this dilemma by requesting classification 

authority. The request has been forwarded to the White House for approval. 

On January 10, 2002, President Bush signed the Defense Appropriations Act, which included 

$328 million for security upgrades and other activities in response to the terrorist attack. 

Emphasizing the protection of the Nation’s food supply, the Act designates $119 million for 

APHIS, $113 million for the Agricultural Research Service, and $15 million for the Food Safety 

and Inspection Service. The remaining $80 million is designated for other USDA homeland 

security priorities. Furthermore, Congress is considering providing additional supplemental 

funds for FY 2002 for strengthening the Nation’s defenses related to homeland security. The 

Department faces a challenge in ensuring that these significant funds are expeditiously expended 

for the purposes specifically authorized by the act. 

FARM AND FOREIGN AGRICULTURAL SERVICES 

2. Federal Crop Insurance 

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Crop insurance has become USDA’s farmer “safety net.” The Federal Crop Insurance Reform

Act of 1994 did away with the traditional crop loss disaster payments, and the Federal 

Agricultural Improvement and Reform (FAIR) Act of 1996 phased out the traditional crop 

deficiency payments. Between crop years 1996 and 2001, crop insurance coverage increased 

from 205 million acres to 212 million acres (or an increase of about 3.4 percent), and the 

Government’s total insurance liability increased from $26.9 billion to $36.7 billion (an increase 

of about 36.4 percent), as of March 18, 2002. Although both the number of acres and total 

liability has increased, the total liability has had a substantially larger increase. This illustrates 

that the total liability per acre has increased, probably due to increases in specialty crop acreage, 

as well as, the increase in revenue coverage. This substantial increase in liability per acre also 

results in a probability for larger per acre indemnity payment. The total indemnity payments in 

1996 were $1.5 billion compared to $2.8 billion in 2001 (or an increase of approximately 88 

percent), as of March 18, 2002. For the 2001 calendar year (CY), the total annual premiums

were about $3 billion; of which, $1.8 billion (or approximately 59 percent) was paid by the 

Government through the legislated subsidy. The Government’s subsidy was $982,062,000, out 

of a total premium of $1,838,559,000 (or 53.4 percent) for CY 1996. This represents an 80.2 

percent increase in total subsidy payments from the 1996 CY to the 2001 CY. 

Areas within the Federal crop insurance program where we believe management controls need to 

be strengthened based on past audit reviews or that we believe pose high vulnerability based on 

our assessment include the following: 

Implementation of ARPA - The Agricultural Risk Protection Act (ARPA), enacted in June 2000, 

required the Secretary to develop and implement additional methods of ensuring Federal crop 

insurance program compliance and integrity, including a plan for the Farm Service Agency (FSA) 

to assist the Risk Management Agency (RMA) in the ongoing monitoring of crop insurance 

programs. ARPA also increased the Government’s support (subsidy) of the insurance premium. 

The subsidy ranges from 67 percent for additional coverage equal to or greater than 50 percent, but

less than 55 percent, of the recorded or appraised average yield to 38 percent for additional coverage 

equal to or greater than 85 percent. In the case of additional coverage, all insurance other than 

catastrophic, the amount of the premium shall (1) be sufficient to cover anticipated losses and a 

reasonable reserve, and (2) include an amount for operating and administrative expenses, as

determined by the Federal Crop Insurance Corporation, on an industry-wide basis as a percentage of 

the amount of the premium used to define loss ratio. RMA has begun the process of modifying the 

basic policy provisions to incorporate the changes mandated by ARPA, particularly the program

integrity provisions. For example, RMA believes that data mining has provided constructive 

feedback to the agency. We will continue to actively monitor and provide oversight as RMA 

continues to implement the multitude of provisions mandated by ARPA. 

Oversight by Insurance Companies and RMA – To evaluate overall program integrity and 

compliance on the claims for loss filed by insured producers, RMA uses a quality control (QC) 

review system that consists largely of reinsurance company internal reviews and periodic agency 

verifications. This process of oversight and monitoring procedures by the reinsurance companies 

and by RMA needs to be strengthened. In our current audit of the oversight and monitoring 

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procedures titled “Monitoring of RMA’s Implementation of Manual 14 Reviews/Quality Control 

Review System,” we raised the following concerns: (1) over the years, RMA has been unsuccessful

at responding to recommendations regarding the establishment of an effective QC review made by 

both OIG and the General Accounting Office; (2) RMA abandoned its standard error rate review; 

(3) reinsurance company internal reviews implemented through the Manual 14 process were not

reliable; (4) the QC process does not have regulatory authority; and (5) RMA’s error rate does not 

count all errors. RMA’s earlier stated commitment to QC has not answered basic policy questions. 

In our report, in addition to recommending the need to strengthen its QC review system, we also 

recommended that RMA identify and report the absence of a reliable QC review system as a

material internal control weakness in its Federal Managers’ Financial Integrity Act (FMFIA) report. 

According to RMA, this QC review system is part of a more comprehensive package of oversight 

and monitoring activities over the insurance companies. RMA agrees that the QC review system as 

being conducted by insurance companies and its oversight of this process need to be strengthened

and is working closely with OIG to that end. To address our recommendations, RMA is (1)

updating its Manual 14 which prescribes the type and number of internal reviews to be performed 

by the insurance companies and (2) evaluating alternative methods to improve its oversight 

responsibilities which will be included in a new Manual 14. RMA has issued a statement of work 

seeking non-government services of performance management experts to develop a more effective 

QC review system. Furthermore, before implementing any changes, RMA believes that it may need

to re-evaluate the best method for implementing these changes; for example, evaluating the pros and 

cons for seeking statutory versus regulatory changes. We will continue to monitor this process to 

ensure that an effective QC review system is implemented. 

3. Farm Security and Rural Investment Act of 2002 

The Farm Security and Rural Investment Act of 2002 (also referred to as the 2002 Farm Bill) 

was signed by President Bush on May 13, 2002. The Act covers the plethora of programs 

administered by the Department – re-authorizing many existing programs, establishing new 

programs and initiatives, establishing significantly higher program caps and budget authority – 

from fiscal year (FY) 2002 through FY 2007. However, many of the provisions are effective for 

the current crop year (2002). In addition to strengthening the safety net for producers, the bill 

also provides a major commitment to and strengthening of the conservation programs, reinforces 

our international trade and export programs, improves nutrition programs, and continues strong 

support for developing rural communities and businesses. According to the Congressional 

Budget Office’s recently released cost estimate, the 10-year cost of the bill is $82.8 billion. By 

some estimates, it is expected to cost about $190 billion over 10 years. 

With enactment of the FAIR Act of 1996, OIG was actively involved with the Department and 

its agencies from the early stages of developing the then-mandated program procedures through 

the implementation of these programs. We believe that our initial, proactive approach as FAIR 

was being implemented was beneficial and efficient in ensuring that adequate management 

controls and procedures were timely implemented by the agencies. Based on the perceived 

vulnerabilities and risks in those programs, we continued to monitor and review many of those 

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programs. Although the 2002 Farm Bill reauthorized many of the programs from the FAIR Act 

of 1996, this new bill authorizes a number of new programs. Furthermore, the bill not only 

reauthorized many existing programs, but established significantly increased funding authority or 

increased program caps for many of these existing programs. Prior OIG audits have reported 

serious problems with some of these existing programs, particularly with respect to some smaller 

programs that were re-introduced. Therefore, as we previously did as FAIR was being 

implemented, we believe an upfront, proactive approach during the initial stages of

implementing the 2002 Farm Bill will be more cost effective to the agency and to the 

Department. 

 

Examples of areas in the 2002 Farm Bill where our resources need to be targeted follow. 

Farm Programs - The bill continued and enhanced many of the provisions of the FAIR Act of

1996, which provided long-term planting flexibility contract payments to major program

commodities plus marketing assistance loans and loan deficiency payments. To strengthen the 

safety net to producers against falling prices, the bill provides for new counter-cyclical payments 

based on established target prices. In addition to the crops authorized under the 1996 bill, the 

2002 Farm Bill expanded the scope of marketing assistance loans and loan deficiency payments 

to new crops – wool, mohair, honey, dry peas, lentils, and chickpeas. The bill terminated the 

marketing quota program for peanuts, which was basically a no-cost program, by authorizing a 

quota buyout program, a direct and counter-cyclical program, and marketing assistance loans and 

loan deficiency payments for peanuts. Although limitations on program payments were not 

significantly changed from current levels for ongoing programs, eligibility for payments are now 

subject to a $2.5 million adjusted gross income cap. Furthermore, the bill supplanted the existing 

regional dairy compacts by establishing a national safety-net program, Dairy Market Loss 

Payment Program, and continuing the Milk Price Support Program. Prior audits have reported 

ineligible producers resulting from comparable adjusted gross income caps in the disaster 

assistance programs, and have recommended discontinuing some special crop programs that 

have been reintroduced in the current bill. The net outlays on commodity programs in Title I of

the bill alone are estimated to increase by $49.7 billion over the next 10 years. 

Conservation Programs - The 2002 Farm Bill represents the single most significant commitment 

of resources toward conservation on private lands in the Nation’s history. The bill also

establishes a balanced portfolio of tools, including technical assistance, cost-sharing, land 

retirement, and a new stewardship incentives program. The bill not only reauthorized the 

Environmental Quality Incentives Program through 2007, but also provided significant budget 

authority amounting to approximately $6 billion for the period. The bill established a new 

Conservation Security Program to assist producers in implementing conservation practices 

rewarding ongoing stewardship on working lands; the new program is intended to supplement 

the other ongoing conservation programs. The bill reauthorized a number of other conservation 

programs: Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP), Wildlife 

Habitat Incentives Program (WHIP), and Farmland Protection Program (FPP). In the cases of 

CRP and WRP, the bill increased their overall acreage caps. And with respect to WHIP and 

FPP, the bill significantly increased the budget authority for these programs. Overall, the 

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increased budget authority for all of these changes will amount to $17.1 billion over the 6-year 

time period of the bill (or additional net outlays over the 10-year time period of $13.2 billion). 

Monitoring the changes, particularly in light of substantially increased funding authority and 

increased acreage, for the reauthorized programs and monitoring the new initiatives will require 

substantial audit resources. Compliance reviews will play a key role in ensuring program

integrity, and our past reviews indicate that the USDA agencies will need to strengthen their 

monitoring and oversight activities.

FOOD, NUTRITION AND CONSUMER SERVICES 

4. Food Stamp Program 

The Food Stamp Program (FSP), administered by the Food and Nutrition Service (FNS), helps 

put food on the table of some 7.3 million households, about 17.3 million people. It provides 

low-income households with coupons or electronic benefits they can use like cash at 

participating grocery stores to access a healthy diet. Because of the size and vulnerability of the 

FSP, OIG has annually devoted a large number of staff days auditing and investigating the 

program. 

Electronic Benefits Transfer (EBT) Systems Implementation - All States are mandated to 

implement EBT for food stamps by October 2002. As of July 2002, 48 States and the District of 

Columbia have operational systems with 45 being operational State or districtwide. About 87 

percent of food stamp benefits are now issued through EBT systems. OIG has audited controls 

over these systems as they were implemented and it will continue to audit the remaining systems 

as they are implemented. 

Six State agencies will not meet the October 2002 deadline including California, Delaware, 

Guam, Iowa, Maine, and West Virginia. With the exception of Guam, all have negotiated a 

contract for a statewide EBT system and are in the development phase. While FNS has made 

great strides in getting EBT systems implemented, the remaining States will provide a challenge, 

in particular California with its county-centered organizational structure. 

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Improper Payments – FNS has had a quality control (QC) system in place for a number of years 

to measure the accuracy of States’ certification of participants. Between FY’s 1993 and 2001, 

the annual error rates have fluctuated between 10.81 percent and 8.7 percent, which include both 

overpayments and underpayments. In FY 2001, the latest year testing was completed, the total 

erroneous payments were $1.33 billion. At the time of OIG’s audit in 1997 to review FNS’ 

efforts to reduce the error rate through reinvestment of QC penalties, it was thought that the high 

error rate was attributable to large increases of participation without a corresponding increase in 

State certification personnel. However, between 1995 and 2001, there was a significant decline 

in the number of participants and program outlays (34 percent in program dollars). While there 

was a decline in certification errors, about 8 percent for the same period, the decline in 

participation did not result in a corresponding drop in the certification errors. The Under 

Secretary for Food, Nutrition and Consumer Services noted in his testimony in March 2002, that 

while payment accuracy was at its highest level, 91.3 percent, this also meant that 8.7 percent of 

the payments were erroneous. His testimony indicated that FNS’ budget proposes revamping the 

QC system and having it focus sanctions on States with the most serious problems and 

consistently high error rates. 

Retailer Abuses – Curbing the incidence of unlawful transactions (trafficking) by authorized and 

unauthorized retailers remains an area of significant mutual concern for FNS and OIG. FNS’ 

latest estimate is over $600 million annually. Over the past several years, OIG and FNS have 

explored and developed a series of corrective measures to address trafficking. Conversion to 

EBT systems has allowed for more timely information to identify possible violations. However, 

further reducing the amount of trafficking will remain a challenge. 

5. National School Lunch and School Breakfast Programs 

Eligibility Determinations for Free and Reduced-Price Meals – In its FY 2003 budget, FNS 

estimates that the National School Lunch Program (NSLP) outlays will be about $6 billion with 

the School Breakfast Program (SBP) approaching $1.7 billion. Both programs share common 

eligibility requirements for free and reduced-price meals. For FY 2001, the latest reporting year, 

almost 57 percent of lunches were served free or reduced-price, while 83 percent of breakfasts 

were served free or reduced-price. Eligibility is based on income with households submitting 

applications to school food authorities for eligibility determinations at the beginning of each 

school year. To ensure that households correctly report their income, school food authorities 

(SFA) are required to sample applications to verify the information. Two sampling methods are 

provided by regulations, and most SFAs select a random sampling method of the lesser of 3,000, 

or 3 percent of the applications. 

In August 1997, OIG issued a report concerning Illinois’ application verification process for the 

NSLP. While SFAs were generally following regulations, SFAs did not expand sampling when 

high error rates were found. Overall, Illinois had a 19 percent error rate of households 

underreporting income or failing to respond to verification requests. This meant that up to $31.2 

million per year, 18.9 percent of $165.1 million Illinois received from FNS for free or reducedprice lunches, was potentially paid out for households that were not eligible. OIG recommended 

8 
that FNS establish a threshold for the maximum percentage of errors allowable during the 

verification process and require additional sampling when that percentage is exceeded. OIG 

further recommended that States be required to monitor SFA verification efforts and take 

appropriate followup action. 

FNS did not initially agree to make regulatory change based only on Illinois, but subsequently 

revised this position when information it gathered on additional States showed an average error 

rate of 26 percent. FNS will publish a proposed rule requiring State agencies to collect, analyze, 

and act on verification results of SFAs annually. FNS currently has pilot projects underway in 

23 SFAs to assess 3 different options to address the verification process and the current high 

error rate. The Under Secretary for Food, Nutrition and Consumer Services noted in his 

testimony before the House Subcommittee on Agriculture, Rural Development, Food and Drug 

and Related Agencies, in March 2002, that the evidence is strong that more students are certified 

for free or reduced-price school meals than appear to be eligible with the most recent data 

showing it to be 27 percent. He also noted that the issue is complicated because certification 

data is used to distribute billions of dollars in education aid. FNS and OIG both agree that the 

eligibility determination and verification process is a management challenge that must be 

addressed. 

FOOD SAFETY 

6. Food Safety Issues 

Food safety and quality issues have received considerable attention over the last few years, 

including the implementation of the Hazard Analysis and Critical Control Point (HACCP) 

inspection system. OIG issued four audits in FY 2000 on the Food Safety and Inspection 

Service’s (FSIS) Implementation of the Hazard Analysis and Critical Control Point System; FSIS 

Laboratory Testing of Meat and Poultry Products; FSIS’ Imported Meat and Poultry Inspection 

Process, Phase I; and FSIS’ District Enforcement Operations Compliance Activities. FSIS 

generally agreed with our findings and recommendations with the exception of two 

recommendations in the Imported Meat and Poultry Inspection Process, Phase I. The two 

recommendations concerned reporting control weaknesses in the equivalency determination 

process as a material internal control weakness for FSIS and establishing a followup process to 

obtain annual certifications from foreign countries that failed to timely submit them. 

OIG currently has two audits underway reviewing additional facets of FSIS’ responsibilities for 

imported meat and poultry products. Countries may export meat and poultry products to the 

United States if their meat and poultry inspection systems are determined to be equivalent to the 

U.S. inspection system. Individual plants within a country may then be approved to export to the 

United States. Product entering the United States is subject to FSIS reinspection before entering 

U.S. commerce. 

• One audit is focusing on FSIS’ reinspection process and whether it has effective 

procedures and controls to provide FSIS with a means of ensuring that only wholesome, 

9
unadulterated and properly labeled product enters U.S. commerce. The fieldwork has 

been completed and OIG has determined there are reportable conditions warranting FSIS’ 

corrective action. 

• The second audit is also underway and concerns the equivalency determinations FSIS 

makes of foreign inspection systems. In the Phase I audit cited above, OIG reviewed 

equivalency determinations for Sanitation Standard Operation Procedures (SSOP) and E. 

coli testing. At that time, the HACCP and Salmonella testing requirements were not in 

place. The audit is focusing on equivalency determinations for HACCP and Salmonella. 

MARKETING AND REGULATORY PROGRAMS 

7. Animal and Plant Health Inspection Service (APHIS) 

APHIS carries out inspections at U.S. ports-of-entry to prevent the introduction of foreign plant 

and animal pests and diseases which are harmful to our country’s agriculture. It engages in 

cooperative programs to control pests of imminent concern to the United States and carries out 

surveys in cooperation with States to detect harmful plant and animal pests and diseases. The 

programs also help determine if there is a need to establish new pest or disease eradication 

programs. Through APHIS’ Wildlife Services program, it protects agriculture from detrimental 

animal predators. 

The importance of APHIS’ mission and challenges has been highlighted over the past few years 

as Asian longhorn beetle, citrus canker, and Karnal bunt found their way into the United States 

and foot and mouth disease (FMD) broke out in the United Kingdom. The foreign terrorist 

attack on the U.S. mainland alerted USDA to the need for increased vigilance to protect U.S. 

agriculture from potential threats of terrorism to agriculture. OIG has reviews underway, some

which began prior to September 11, 2001, to assess APHIS’ activities to protect U.S. agriculture, 

as well as safeguarding APHIS’ assets which could be used to further terrorist activities. 

• In July 2001, OIG issued a report detailing a review of the Department’s controls to 

ensure that the Nation was adequately protected against the increased threat of an FMD 

outbreak from abroad. We determined the Department needed more stringent controls to 

ensure meat products entering the United States were free of FMD. Communications 

between APHIS and FSIS were weak. Both agencies initiated action to address the 

weaknesses. OIG currently has a review underway focusing on APHIS’ policies and 

procedures for (1) identifying and assessing risk among the various types of imported 

goods to prevent the entry of exotic pests and diseases; (2) conducting inspections at 

airports, seaports, and land-border crossings; (3) providing inspection coverage at all 

major ports-of-arrival of cargo and passengers, particularly during times of high-volume 

traffic; and (4) ensuring that sealed transportation and exportation shipments entering the 

United States exit the country under seal as required. We have issued Management 

Alerts to APHIS on weaknesses that needed to be immediately addressed. 

10 
• In protecting agriculture from animal predators, APHIS’ Wildlife Services uses 

pesticides, drugs, and other hazardous materials which in the wrong hands could be 

harmful to people and animals alike. In a review begun prior to September 11, 2001, 

OIG found APHIS could not account for 60 pounds of strychnine-treated bait and over 

2,000 capsules containing sodium cyanide. Transfers of agents between locations were 

not documented. A second phase of this review is now underway with specific focus on 

pesticide and drug accountability. We will determine if the missing strychnine and 

cyanide have been accounted for, as well as 13 other restricted-use compounds. 

• APHIS’ Plant Protection and Quarantine and Veterinary Services divisions each have 

separate permit systems for the importation and domestic transfer of specified plant and 

animal pathogens and other restricted materials. Anthrax is one example of a pathogen 

which would fall under the permit requirements. OIG currently has a review underway to 

evaluate APHIS’ controls over permits issued to colleges and universities, public and 

private laboratories, and other users. An adequate control structure is needed to ensure 

that the pathogens and restricted materials are not made available to terrorists or others 

intent on harming U.S. citizens or agriculture. 

NATURAL RESOURCES AND ENVIRONMENT 

8. Forest Service (FS) Management and Program Delivery Issues 

Management issues within the FS have proven resistant to change. We attributed part of this to 

the agency's decentralized management structure. The agency delegates broad authority to its 

field units (regions, forests, and ranger districts) without having an adequate system of internal 

controls to ensure policies established by top management are followed. The use and accuracy 

of management performance information is severely limited. As a result, agency actions often 

run counter to the intent of top management. Following are some of the areas where recent 

audits and evaluations have identified significant issues. 

• Our reviews of the agency’s administration of grants to State and nonprofit organizations 

have disclosed significant weaknesses in all aspects of management of the program. 

These weaknesses increase the likelihood that program objectives will not be achieved 

and Federal funds were spent for unauthorized purposes. 

• We identified serious weaknesses in the controls over the preparation and implementation 

of the environmental analyses required for timber sales. These weaknesses could result 

in environmental damage that could be either mitigated or avoided. In addition, 

weaknesses in the FS’ environmental analyses process have resulted in successful appeals 

of FS management decisions. This has halted or delayed FS efforts at ecosystem

management. It has also resulted in successful lawsuits for monetary damages from the 

timber industry and exposed the FS to significant future damages. 

11
• FS has not developed agency-wide policies for dealing with partnerships with private 

parties. As the agency moves to increased use of partnerships with private groups to 

meet its mission requirements, direction is needed to ensure these relationships comply 

with existing laws. 

• FS’ Strategic and Annual Plans have lacked meaningful goals and objectives with 

relevant performance measures. Past performance measurement data has been irrelevant 

and lack basic accuracy. 

FS has reported initiating management action to address many of these challenges. However, at this 

time OIG has not verified the extent or effectiveness of these corrective actions. 

9. Forest Service National Fire Plan 

As a result of the devastating 2000 wildfire season the President and Congress directed and 

funded the “National Fire Plan” (NFP). The NFP included objectives to prepare to fight future 

forest fires, rehabilitate burned lands, actively reduce fuel loads in vulnerable areas, and assist 

local communities. In October 2000, Congress provided FS over $1.1 billion of additional 

funding. This increased funding has continued and is projected to continue for at least 10 years. 

This program has support from both State and local governments. The dramatic increase in 

funding has presented FS with challenges in effectively and efficiently implementing the NFP. 

Our initial survey identified issues regarding the agency’s ability to accurately project funding 

requirements and ensure funds were spent for only authorized purposes. Our survey work 

indicates that this area is vulnerable to waste and misuse of funds. 

10. Grant and Agreement Administration 

FS has not effectively managed grants agreements to ensure that funds appropriated by Congress 

were expended for their intended purposes and grantees complied with applicable financial 

management standards. Our reviews identified the following issues. 

• Funds were used for purposes not authorized under the enabling legislation. 

• Grantees were not matching Federal funds with required private funding. 

• Unauthorized expenditures were paid with Federal funds. 

• Accounting records were not adequate to allow for audits. 

• Records were not adequate to determine if the grants achieved their intended purpose. 

• FS created a new agreement “Participating agreements” that did not conform to the 

Federal Grants and Cooperative Agreements Act or to the Office of Management and 

Budget (OMB) and departmental regulations, to transfer funds without obtaining 

12 
contractual assurance that the recipient will use the funds for intended purposes and 

without the provisions necessary for effective FS oversight. 

FS officials have taken some actions to address these issues. Our future audits will address the 

adequacy of these actions. 

RURAL DEVELOPMENT 

11. Rural Rental Housing (RRH)

Portfolio Management - The Rural Housing Service (RHS) RRH program provides low-cost 

apartments to residents with low incomes in rural areas. The 2003 budget reflects a decision by 

the Administration to conduct a thorough review of alternatives for both making new loans and 

servicing the existing portfolio of over 17,000 RRH projects that contain about 460,000 housing 

units, with indebtedness of almost $12 billion. A substantial portion of this portfolio is over 

20 years old. The FY 2003 proposed budget does not include funding for the direct loans for 

new RRH projects, although funding for RRH construction may be reinstated. However, it does 

include $60 million in direct loans for repair and rehabilitation of the current portfolio. RHS 

faces a major challenge to maintain its current portfolio in good repair so that it will provide safe, 

decent, and affordable housing for rural Americans. 

Guaranteed RRH Program - We reported that during the first 4 years of the pilot program RHS 

reported to Congress, and included in their Government Performance and Results Act (GPRA) 

accomplishment report, the construction of over 6,000 apartment units. Our audit found that as 

of August 25, 2000, the pilot program had completed construction of only 222 units. RHS had 

reported apartment units that were obligated to be built, as being built. RHS restated the GPRA 

report to reflect the status of the units proposed for construction rather than built. We need to 

continue to monitor the program’s growth and success and whether RHS has implemented 

sufficient controls to ensure accurate reporting of units built. 

Rental Assistance - The RRH rental assistance program was increased from $707 million in 

FY 2002 to $712 million in FY 2003. This assistance makes up the difference between what the 

tenant pays and the rent required for the project owner to meet debt servicing and other costs. 

Tenants receiving this assistance are mostly elderly and have very low incomes. Most recipients 

pay only a small portion of the average $300 monthly rent. 

Currently, there are proposed regulatory changes that will require project owners to increase the 

balances in the RRH reserve accounts used to fund the increasing demands for repair and 

rehabilitation of aging projects. The increased reserves will be funded by increased rents. For 

those tenants on rental assistance, their basic rent will not increase. To match the increased 

rents, the amount of rental assistance needed to make up the difference between what the tenant 

pays, and the actual rent necessary for the project owner to meet expenses, will increase. Thus, 

the cost to the Government will increase because funding for rental assistance will need to 

increase. RHS needs to plan for these increased funding requirements. 

13
RRH Projects Leaving the Program - As the RRH portfolio continues to mature, the possibility 

that project owners will want to pre-pay their loans will increase. Loans made between 1979 and 

1989 can pre-pay their loans after 20 years. Projects obligated after 1989 cannot pre-pay. 

However, the majority of the over 17,000 projects in the portfolio are over 20 years old. The 

incentives for owners to pre-pay includes increasing repair costs, loss of tax credits, and the 

possibility of higher rents from more affluent tenants, if they left the program. 

RHS offers incentive payments for project owners to stay in the program. The payments are 

equal to the equity value in the property at the time pre-payment is planned. To be eligible for 

the incentive payment, owners must maintain the property in good physical condition and they 

must continue to serve lower income rural residents. RHS and OIG need to monitor the number 

of incentive payments and ensure that once made, project owners continue to participate in the 

program and meet the conditions of the incentive payment. 

Unallowable and Excessive Expenses Charged to RRH Projects - RRH programs are vulnerable 

to program fraud and abuse because of the large cashflows involved. OIG has worked with RHS 

to detect fraud and abuse and remove from participation those who abuse the program. The 

report titled “Uncovering Program Fraud and Threats to Tenant Health and Safety,” described 

the results of our team approach to identify and act on the worst offenders. We found 18 owners 

who misused over $4.2 million while neglecting the physical condition of the properties, some of 

which threatened the health and safety of tenants. Our audits continue to disclose unallowable 

and excessive expenses charged to RRH projects. Currently, RHS has proposed major 

regulatory revisions, which are intended to resolve 19 open recommendations from OIG audits 

that address improper RRH project expenses and program deficiencies. The proposed regulation 

is intended to bring consistency and better controls to the RRH program, as well as resolving the 

open recommendations. We are working with RHS to ensure that the proposed regulation 

adequately addresses the open recommendations, or that appropriate alternative corrective 

actions, such as program handbooks to supplement the proposed regulation, are issued along 

with the regulation. Continued monitoring of the agency’s implementation of the new regulation 

is needed to ensure the desired results are achieved. 

14 
12. Rural Business-Cooperative Service (RBS) 

Business and Industry (B&I) Loan-making and Servicing Procedures - RBS loan-making and 

-servicing procedures in the B&I guaranteed loan program are not being properly 

administered/adhered to by some State office and field office program staff. In a few cases, 

States have had their loan-making and -servicing authority rescinded by the National office, due 

to concerns pertaining to compliance with rules and regulations. We are in the process of 

conducting a nationwide review of RBS’ B&I program and have, so far, issued 13 reports on the 

guaranteed B&I program with monetary findings of $32 million. Six more reports on the 

B&I program have yet to be issued, with two reports due on the direct B&I loan program. An 

additional $30 million in monetary findings is projected. We have found serious conditions with 

the B&I loans including borrowers with insufficient collateral to secure the loan, businesses that 

default within months after the loan is made, and loan proceeds used for unauthorized purposes. 

We are working with the RBS National office to resolve these issues. 

Waivers of Internal Controls - The previous Administrator of RBS endangered the integrity of 

the B&I Program by granting waivers to B&I loan regulations. Based on these waivers many 

improper B&I loans were made which resulted in large dollar losses to the Government. RBS’ 

internal review programs and future OIG reviews should focus on any waivers to established 

regulations and instances where internal control mechanisms have been eliminated or bypassed. 

Our report recommended the re-establishment of loan review controls, which had been waived 

by a former RBS Administrator, requiring National Office Executive Loan (NOEL) oversight

committee and participation by the Office of the General Counsel (OGC) to review and comment 

on large dollar loans, or loans that may be questionable for any reason. In response to our 

review, RBS also established internal instructions which require that OGC, NOEL, and the 

Under Secretary for Rural Development’s office concur with the rationale and support for the 

waiver. We need to continually monitor future use of waiver authority to ensure that these 

established controls are not circumvented. 

ADMINISTRATION 

13. Civil Rights Complaints 

The Director of the Office of Civil Rights (CR) has full responsibility for investigating, adjudicating 

and resolving complaints of discrimination arising out of USDA employment activities or in the 

context of federally assisted or federally conducted programs. This includes complaints made by 

USDA employees, applicants for employment and USDA program participants and customers. 

During fiscal years 1997 through 2000, OIG performed seven reviews of CR’s operations relating to 

program and employment complaint processing at the requests of the Secretary and the Assistant 

Secretary for Administration. 

15

Our reviews resulted in 7 reports and 1 Confidential Memorandum with 94 recommendations to 

address the weaknesses reported. As of April 17, 2002, management decision had been reached 

on 84 recommendations, but 10 recommendations in 4 reports and the Confidential 

Memorandum remain without management decision. These recommendations involved things 
such as: (1) designing corrective actions to address civil rights review results in 2 counties;

(2) finalizing operating procedures to ensure recipients of USDA financial assistance comply 

with civil rights laws and regulations; (3) vetting of settlements with OIG to ensure there are no 

outstanding fraud or criminal actions involving the complainant; (4) re-review of 70 civil rights 

cases to assess their proper disposition; and (5) review of employment-related casefiles to assess

whether necessary documents are available and accounted for. Until action plans are drafted, 

and timeframes developed to implement the actions, CR activities will remain a management 

challenge at USDA. 

CHIEF FINANCIAL OFFICER 

14. Financial Management 

Financial management in the Department is of major importance; USDA's balance sheet, for 

example, exceeds $127 billion. Financial management within the Department has not, however, 

been sufficient to provide assurances that its consolidated financial statements are reliable and 

presented in accordance with generally accepted accounting principles. For the past 8 years our 

disclaimer of opinion means the Department does not know whether it correctly reported all 

collected monies, the cost of its operations, or other meaningful measures of financial 

performance. 

The Office of Chief Financial Officer (OCFO) has taken extraordinary strides, however, in the 

past year to resolve these longstanding issues. According to the Chief Financial Officer, among 

the initiatives consummated or in process are the following. 

• Providing effective leadership and talent from OCFO to USDA’s agencies and the 

National Finance Center (NFC) to capture break-through rather than incremental value 

from extensive changes in financial management accountability and accounting 

operations. 

• Implementing effective operational accounting processes within the branches of the NFC, 

problem agencies, and OCFO while transferring knowledge through documentation and 

training. 

• Successfully completing the implementation of a standard accounting system at USDA. 

• Renovating related corporate administrative systems during FY 2002 with focused, 

disciplined effective projects. 

• Resolving Credit Reform deficiencies and maintaining improvements. 

• Transforming the Forest Service into operating as an effective, sustainable accountable, 

financial management function. 

16 
• Correcting real and personal property accounting and stewardship inadequacies. 

• Developing cost accounting capabilities. 

• Enhancing decision-making and cash management of USDA’s Working Capital Fund. 

• Providing guidance on USDA’s lending function. 

• Installing the leadership and management structure to support sustained excellence within 

USDA’s financial management and accounting operations. 

Although many of these have been completed, others await audit verification (which we will 

focus upon in our upcoming audit of the FY 2002 Departmentwide financial statements). 

CHIEF INFORMATION OFFICER 

15. Information Resources Management 

As the Department continues to expand its use of information technology (IT) for program and 

service delivery, this component of USDA’s infrastructure has become a key element for 

operational integrity and control. One of the more significant dangers the Department faces is a 

cyberattack on its IT infrastructure, whether by terrorists seeking to destroy unique databases or 

criminals seeking economic gain. The Department has numerous information assets, which 

include market-sensitive data on the agricultural economy and its commodities, signup and 

participation data for programs, personal information on customers and employees, agricultural 

research, and Federal inspection information ensuring the safety of the food supply, as well as 

accounting data. The information and related systems face unprecedented risk from intentional 

or accidental disruption, disclosure, damage or manipulation. 

Public confidence in the security and confidentiality of the Department’s information and 

technology is essential. Our audit of USDA Information Technology, required by the 

Government Information Security Reform Act, found that USDA had initiated actions to 

strengthen information security in the Department. The Department, through its Chief 

Information Officer (CIO) has established a Departmentwide security program, implemented a 

departmental security incident response program, and strengthened its oversight function through 

review of USDA agencies’ security programs. In this report we stated that the Department and 

its agencies had other IT security weaknesses that included: 

• The Department is not fully compliant with several requirements of OMB 

Circular A-130 and Presidential Decision Directive 63 that require all Federal 

departments and agencies (1) prepare and test contingency and business continuity plans, 

(2) have certified the security controls in place on their systems, and (3) assess the risks 

to their systems and establish plans to mitigate those risks. 

17
• Networks and systems vulnerable to internal and external intrusion. 

• Inadequate physical and logical access controls to ensure that only authorized users can 

access critical agency data. 

• Inadequate oversight to ensure that contractors have the proper security clearances and 

background checks and they are sufficiently trained in Federal security requirements. 

OCIO has reported that many of these items have been mitigated but more needs to be done. 

18 
THE OIG MISSION 

The Office of Inspector General was legislatively established in 1978 with the enactment of the 

Inspector General Act (Public Law 95-452). The act requires the Inspector General to 

independently and objectively 

• perform audits and investigations of the Department’s programs and operations; 

• work with the Department’s management team in activities that promote economy, 

efficiency, and effectiveness or that prevent and detect fraud and abuse in programs and 

operations, both within USDA and in non-Federal entities that receive USDA assistance; 

and 

• report OIG activities to the Secretary and the U.S. Congress semiannually as of March 31 

and September 30 each year. 

We accomplish this mission by 

• investigating allegations of criminal activity; 

• using preventive audit approaches, such as reviews of systems under development; 

• conducting audits of the adequacy and vulnerability of management and program control 

systems; and 

• auditing the adequacy of large USDA payments, such as insurance and deficiency 

payments, major loans, and reimbursements for school breakfasts and lunches. 

OIG is headquartered in Washington, D.C., and has regional offices located in Atlanta, Georgia; 

Beltsville, Maryland; Chicago, Illinois; Mission, Kansas; New York, New York; 

San Francisco, California; and Temple, Texas. Our Financial and Information Technology 

Operations regional office is also located in Mission, Kansas, as is our Computer Forensics Unit. 

Our offices in Mission, Kansas, are scheduled to move to Kansas City, Missouri, during the first 

quarter of FY 2003. 

We emphasize service to management at all levels of the Department by briefing senior 

Department officials on major audits and investigations. We also work with agency managers, 

as part of a consolidated team, by directly encouraging management input into the audit and 

investigative process to help resolve difficult problems impacting program management and 

operations. As a member of the President’s Council on Integrity and Efficiency (PCIE), we 

participate with other Inspectors General in multiagency projects where the issues are 

crosscutting and need to be addressed Governmentwide. 

19
AUDIT AND INVESTIGATIVE UNIVERSE 

The audit and investigative universe comprises all programs, functions, and organizations, and 

the contractors and grantees for which USDA is responsible. USDA’s FY 2003 proposed budget 

contains a broad agenda of budget programs to support the Department’s agencies and program

operations. The annual program level, over $105 billion, represents the value of benefits 

provided to the public by USDA. These benefits may be in the form of financial assistance 

through grants, payments, guaranteed or direct loans, cost-sharing, professional services such as 

research or technical assistance, or in-kind benefits such as commodities. 

USDA programs are delivered in every State, county, and city in the Nation by over 

110,000 Federal and non-Federal government employees. In addition, the Secretary of 

Agriculture has appointed agricultural ministers, attaches, and officers to 80 U.S. embassies, 

consulates, and trade offices covering over 100 countries. USDA is involved in extensive food 

quality and safety issues, food aid and assistance programs, market development activities, rural 

development initiatives, environmental and biotechnology issues, and a wide range of export 

promotion programs. 

BUSINESS PROCESS RE-ENGINEERING 

During FY 2002, OIG embarked on a full agencywide review of our business practices to 

determine how we could achieve greater efficiencies in carrying out our operations and activities. 

Our goals were to streamline our processes and implement more modern business practices 

through the use of state-of-the-art information technology (IT) to free our employees to do more 

of the work they are uniquely qualified to do. The major portion of our Business Process 

Reengineering (BPR) review has now been completed, and we have identified a number of ways 

to improve efficiencies in our operations. As a result of our review, the agency has developed a 

detailed, 3-year strategic plan to equip our employees with state-of-the-art technologies and train 

them in the use of these new automated tools. 

We have recently established a number of task forces, composed of representatives from all parts 

of the agency, to work on recommendations affecting the agency as a whole. During FY 2003, 

these task forces will make determinations on how best to implement needed changes in 

information technology, OIG’s website, recruitment, management development, and a number of 

other areas. In addition, Investigations and Audit will continue to explore recommendations that 

affect only themselves. We will also continue to review OIG processes to achieve additional 

efficiencies and economies. 

20 
Our IT infrastructure and security changes will support the President’s e-Government

Management Agenda initiative. Consistent with the President’s outsourcing initiative, our BPR 

review identified possibilities for contracting out certain activities, such as financial statement 

audit work, an IT helpdesk, and other IT support for our regional offices. Many 

Governmentwide studies support our conclusion that it is far more effective to contract out 

certain work than to perform it internally. Further, our review will enable us to better manage 

our vital human capital resources – another critical Presidential Management initiative – by 

redirecting and realigning them to the tasks most critical to the agency and providing them with 

the latest equipment, technologies, and training available to perform these tasks. Finally, the 

BPR results will enable us to better relate our performance to OIG’s budget expenditures as 

required under the Government Performance and Results Act. 

STRATEGIC PLANNING 

Our strategic approach to planning and prioritizing audit and investigative activities enables us to 

focus our resources on those programs most vulnerable to criminal activity, or those where the 

largest dollar losses are most likely to occur. In each strategic area, we establish goals and plans 

for both short- and long-term emphasis. We work closely with agency management to identify 

those areas where we could provide assistance in resolving difficult issues. 

In addition, we took into consideration the goals and objectives of the FY 2002 President’s 

Management Agenda (PMA) and the Department’s 5-year Strategic Plan (draft as of August 

2002) in formulating our strategies. We strive to connect the audits planned for the upcoming 

fiscal year to the goals and objectives reflected in these two critical documents. Following is a 

matrix of OIG’s strategic areas that reflect the initiatives and key outcomes noted in both the 

PMA and the Strategic Plan. 

21
USDA’s 5-year Strategic Plan Key Outcomes OIG’s Strategic Areas 

Goal 1: Provide Effective Services to USDA 

Constituents 

Key Outcome 1.1: Implement the Farm Security and Rural

Investment Act

Farm Programs

Market Development

Natural Resources Conservation Service 

Rural Development 

Key Outcome 1.2: Expand Market Opportunities for U.S. 

Agriculture 

Market Development

Key Outcome 1.3: Meet Responsibilities for Homeland

Security Effectively 

Homeland Security 

Protecting U.S. Food Supply and Agriculture

Forest Service

Information Technology/Security 

Key Outcome 1.4: Provide Risk Management and 

Credit/Financial Tools to Support Production Agriculture 

and Improve Quality of Life in Rural Areas 

Risk Management

Rural Development 

Key Outcome 1.5: Protect the Nation’s Agriculture and 

Food Supply 

Homeland Security 

Protecting U.S. Food Supply and Agriculture

Key Outcome 1.6: Ensure Food and Nutrition Security for 

Low-Income Americans 

Entitlement Programs

Key Outcome 1.7: Provide Sensible Management of Our

Natural Resources 

Natural Resources Conservation Service 

Forest Service

Management/Control of Environmental Hazards 

Goal 2: Enhance USDA Operations through the 

President’s Management Agenda ** 

Key Outcome 2.1: Improve Human Capital Management Program Compliance, Economy, and Efficiency

Key Outcome 2.2: Improve Financial Management Accounting and Financial Management

Information Technology/Security 

Program Compliance, Economy, and Efficiency 

Key Outcome 2.3: Expand Electronic Government Information Technology/Security

Key Outcome 2.4: Establish Budget and Performance 

Integration

Government Performance and Results Act

Information Technology/Security 

President’s Management Agenda 

Governmentwide Initiative 2: Competitive Sourcing Program Compliance, Economy, and Efficiency 

Program Initiative 13: Reform of Food Aid Programs Market Development 

** Key Outcomes of the Department’s second goal emulates four of the five Government-wide initiatives of the FY 2002 President’s 

Management Agenda. 

Descriptions of our strategies and examples of planned audit and investigative work within the 

strategies are described in more detail in appendix I. A description of major audits and a 

complete list of all audits planned can be found in appendices II and III. 

22 
USDA ORGANIZATIONAL CHART 

23
 

24 
FY 2003 ANNUAL PLAN 

DISTRIBUTION OF OIG RESOURCES

BY UNDER AND ASSISTANT SECRETARIES 

OTHER

4%

FS

5%

FNCS

24%

FFAS

20%

MRP

7%

NRE

7%

REE

2%

MULTI

20%

RD

11%

LEGEND

NRE Under Secretary, Natural Resources and Environment

FFAS Under Secretary, Farm and Foreign Agricultural Services

RD Under Secretary, Rural Development

FNCS Under Secretary, Food, Nutrition, and Consumer Services

FS Under Secretary, Food Safety 

REE Under Secretary, Research, Education, and Economics

MRP Under Secretary, Marketing and Regulatory Programs 

OTHER Includes Administration, OCIO, and OCFO

25
DISTRIBUTION OF OFFICE OF INSPECTOR GENERAL RESOURCES 

PERCENTAGE BY AGENCY 

FY 2003 PLANNED

NATURAL RESOURCES AND Forest Service 5.6

ENVIRONMENT Natural Resources Conservation 

Service 

1.6

Farm Service Agency 12.9

Foreign Agricultural Service .7

FARM AND FOREIGN 

AGRICULTURAL SERVICES

Risk Management Agency 6.1

Rural Utilities Service 1.5

Rural Housing Service 5.6

RURAL DEVELOPMENT

Rural Business-Cooperative Service 3.9

FOOD, NUTRITION, AND 

CONSUMER SERVICES

Food and Nutrition Service 25.0

FOOD SAFETY Food Safety and Inspection Service 4.5

Agricultural Marketing Service 1.8

Animal and Plant Health Inspection 

Service 

4.5

MARKETING AND 

REGULATORY PROGRAMS

Grain Inspection, Packers and 

Stockyards Administration 

.3

Agricultural Research Service .5

Cooperative State Research, 

Education, and Extension Service 

1.3

RESEARCH, EDUCATION, 

AND ECONOMICS

National Agricultural Statistics 

Service 

*

MULTIPLE AGENCY 20.3

OTHER Administration; OCFO; OCIO 3.9

*No Audit time planned for this agency; however it may be included in multi-agency reviews 

and/or other unplanned work. 

26 
INVESTIGATIONS 

Investigations are authorized inquiries to gather the facts needed to resolve an allegation that 

someone has violated a law or regulation pertaining to USDA programs or operations. 

OIG Special Agents are criminal investigators who specialize in the investigation of crimes 

involving USDA programs. Each investigator receives initial training at the Federal Law 

Enforcement Training Center (FLETC) in Glynco, Georgia. Additional training in law 

enforcement procedures, investigative techniques, and USDA program regulations is provided 

throughout the career of the investigator. 

Computer Forensic Unit computer specialists are uniquely trained members of our investigative 

team who assist Special Agents during investigative activities involving electronic/digital 

evidence collection and analysis. These specialists have received in-depth training through 

FLETC and other specialized providers relating to the investigation of high-tech criminal 

activity. 

INVESTIGATIVE PLANNING 

The investigative planning process focuses on identifying program vulnerabilities and 

investigative priorities, which establishes the general guidelines for the allocation of our 

investigative resources. It includes an analysis of historical patterns, trends, and results; a review 

of recent legislative, regulatory, and program changes; consideration of U.S. Department of 

Justice prosecutive guidelines; consideration of budgetary and staffing restrictions; and 

coordination with audit activities. Through the investigative planning process, we have 

identified priorities that include the timely investigation of

• threats to the health and safety of the public, agriculture infrastructure and USDA 

employees, such as the sale of tainted food products, food product tampering, the 

introduction or dissemination of animal and plant diseases through intentional acts or 

inadvertently through the smuggling of prohibited plants, animals, and other products, 

homeland security issues, as well as threats against and assaults of USDA employees; 

• issues involving allegations of USDA employee bribery, conflict of interest, 

embezzlement, theft, misuse of computers, including Internet fraud and accessing child 

pornography, or collusion with program participants; and 

• other criminal activity in the loan, regulatory, and benefit programs. 

In preparing our plan for FY 2003, we analyzed data on requests for investigations received in 

previous years, the number of cases opened, and the results of those investigations. We reviewed 

recent legislative, regulatory, and program changes, and contacted agencies within USDA for 

suggestions and recommendations. We also reviewed audit plans for FY 2003 and considered 

27
our budget and anticipated staffing. Based on these considerations, we developed general 

guidelines for emphasizing areas for investigation. 

Our regional managers will review these guidelines during FY 2003 before they decide which 

referrals to take on as active cases. They will also consider the potential program impact, the 

likelihood of criminal prosecution, the likelihood of large civil monetary recovery, and the 

deterrent value. 

The majority of the investigations are based on referrals from USDA agencies. Departmental 

Regulation 1700-2, “OIG Organization and Procedures,” requires that USDA agencies 

expeditiously report known or suspected violations of law or regulations to OIG. Activities, 

which must be reported to OIG, include: 

• alleged violations of Federal criminal statutes, 

• allegations of criminal conduct or serious misconduct involving any USDA employee. 

THE INVESTIGATIVE PROCESS 

The investigative process usually begins with the receipt of an allegation of criminal activity 

from any source, including the OIG USDA Hotline, USDA agency officials, other government 

agencies, or the public. Investigations are opened in OIG regional offices in accordance with 

priorities and general guidelines established at the headquarters level. 

After an investigation is opened, it is assigned to a Special Agent who plans the investigation. 

This planning process includes a review of the criminal and civil statutes, program regulations, 

and departmental or agency policies that may be involved. The Special Agent then conducts the 

investigation, which may require interviewing witnesses, reviewing and analyzing records, 

obtaining physical evidence, and conducting surveillance and undercover operations. If the 

Special Agent determines that a crime has been committed, he or she will discuss the 

investigation with a Federal and/or local prosecutor to determine if prosecution will be pursued. 

Upon completion of the investigation, the Special Agent prepares an investigative report 

summarizing the facts disclosed during the investigation. 

The investigative report is distributed to prosecuting attorneys and agency officials who may 

have an official interest in the results of the investigation. If the prosecuting attorney decides to 

proceed with a criminal or civil prosecution, the Special Agent assists the attorney in any 

preparation for court proceedings that may be required. This assistance may include serving 

subpoenas, locating witnesses, executing arrest and search warrants, and testifying before a 

grand jury and at trial. 

At the conclusion of any court actions, we advise the administrative agency involved of the court 

results and monitor any corrective or disciplinary action that may be taken by the agency. OIG 

28 
collects data summarizing the court and administrative results of its investigations and includes 

this data in its semiannual report to the U.S. Congress. 

HOTLINE 

Established under the provisions of the Inspector General Act of 1978, OIG operates the USDA 

Hotline in accordance with procedures recommended by the PCIE. Allegations received through 

the Hotline may involve any agency, program, or employee of USDA. The OIG USDA Hotline 

staff review and analyze each complaint and refer them for inquiry and appropriate action. 

Complaints are referred to OIG Audit or Investigations, to the USDA agency responsible for the 

program, or to the responsible Federal, State, or local agency. For complaints requiring a 

response back to OIG, the Hotline staff must determine whether the USDA agency’s response to 

the complaint is adequate and whether to recommend further investigative or audit work by OIG. 

Significant audit findings, investigative results or administrative program changes have been 

obtained based on information received through this critical function. 

During FY 2001, the USDA Hotline received, reviewed, and processed 2,022 complaints from

USDA employees and the general public. In the first 9 months of FY 2002, 1,622 complaints 

were received. The following graph depicts the Hotline activity over the last 12 years. 

HOTLINE COMPLAINTS RECEIVED FY’s 1991-2002* 

3270

3942

6637

5461

5184

4674

3796

2452

1831 1973 2022 1622

0

1000

2000

3000

4000

5000

6000

7000

91 92 93 94 95 96 97 98 99 00 01 02

* FY 2002 – First 9 months.

29
The USDA Hotline has a toll-free telephone number for reporting fraud, mismanagement, or 

waste in a USDA program or misconduct by a USDA employee. Callers may choose to remain 

anonymous or may request that OIG keep their identity confidential. OIG will also pay a cash 

reward for information leading to convictions of persons defrauding USDA programs. 

We have three Hotline numbers established for use by the public and departmental employees. 

These numbers can be called while complaint analysts are on duty 8:00 a.m. to 4:00 p.m., eastern 

time, Monday through Friday. Complainants may also write to the OIG Hotline at 

P.O. Box 23399, Washington, D.C. 20026. USDA Hotline contact information is provided to 

USDA employees and the public via formal training, posters, and business cards. In addition, 

this information can be found on the USDA and OIG home pages via the Internet 

(www.usda.gov/oig/hotline.htm). 

800-424-9121 This is a toll-free number to be used outside 

 Washington, D.C. 

202-690-1622 This number is to be used in the Washington, D.C., 

 metropolitan area. 

202-690-1202 This number connects to a telecommunications device for 

the hearing impaired. 

 (NO TOLL FREE NUMBER, CALL COLLECT) 

30 
SPECIAL REPORTING OF 

BRIBES OR GRATUITIES

Many USDA employees serve as inspectors and graders of meat, poultry, dairy products, eggs, 

and produce or distribute USDA program services and benefits. These employees are 

occasionally subject to offers of bribes and gratuities to influence their official duties. Also, 

USDA employees’ duties on occasion can lead to confrontations, which may lead to threats or 

violence against the USDA employee. USDA employees who receive bribe offers or threats 

may contact OIG via the direct line telephone number indicated below. Special Agents respond 

24 hours a day. Complainants may also write to the Office of Inspector General at 

P.O. Box 23399, Washington, D.C. 20026. 

202-720-7257 This number is to be used by USDA employees to report 

offers of bribes or gratuities 

888-620-4185 24 hours a day. 

OIG INVESTIGATIONS 

EMERGENCY CONTACTS

HEADQUARTERS 

Duty Hours (8am – 4pm) 24-Hour Duty Agent Pager 

(202) 720-7257 (888) 620-4185 

REGIONAL OFFICE LOCATIONS 

Northeast Region Phone (212) 264-8400 (8am – 5:00pm)

New York, NY Duty Pager (888) 437-9575 (24 hrs)

 Fax (212) 264-8416 

Areas Served: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and

Vermont

31
Mid-Atlantic Region Phone (301) 504-2000 (7am - 5:00pm) 

Beltsville, MD Duty Pager (888) 436-6158 (24 hrs)

 Fax (301) 504-2025 

Areas Served: Delaware, District of Columbia, Maryland, North Carolina, Pennsylvania, Virginia, and West

Virginia 

Southeast Region Phone (404) 730-3170 (24 hrs)

Atlanta, GA Fax (404) 730-3181 

Areas Served: Alabama, Florida, Georgia, Puerto Rico, South Carolina, Tennessee, and U.S. Virgin Islands 

Midwest Region Phone (312) 353-1358 (7:30am - 5:00pm)

Chicago, IL Duty Pager (888) 803-8174 (24 hrs)

 Fax (312) 353-8963 

Areas Served: Indiana, Kentucky, Michigan, Ohio, eastern district of Wisconsin, and the northern district of

Illinois 

Southwest Region Phone (254) 743-6535 (7:30am – 5:00pm)

Temple, TX Duty Pager (800) 752-3307 + 618-2305 (24 hrs) 

 Fax (254) 298-1358 

Areas Served: Arizona, Arkansas, Louisiana, Mississippi, New Mexico, Nevada (Las Vegas, Clark County), 

Oklahoma, and Texas 

Great Plains Region Phone (913) 261-7606 (24 hrs) 

Mission, KS Fax (913) 261-7699 

(to move to Kansas City, MO, in FY 2003) 

Areas Served: Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, 

Wyoming, Utah, western district of Wisconsin, and southern district of Illinois 

Western Region Phone (415) 744-2887 (24 hrs)

San Francisco, CA Fax (415) 744-2896 

Areas Served: Alaska, California, Hawaii, Idaho, Nevada, Oregon, Territory of Guam, U.S. Trust Territories of 

the Pacific, and Washington 

[Updated as of 09/01/2002]

32 
FY 2003 ANNUAL PLAN 

DISTRIBUTION OF INVESTIGATIVE RESOURCES

BY UNDER AND ASSISTANT SECRETARIES 

OTHER

5% FS

8%

FNCS

29%

FFAS

26%

MRP

11%

NRE

7%

REE

2%

RD

12%

LEGEND

NRE Under Secretary, Natural Resources and Environment

FFAS Under Secretary, Farm and Foreign Agricultural Services

RD Under Secretary, Rural Development 

FNCS Under Secretary, Food, Nutrition, and Consumer Services

FS Under Secretary, Food Safety

REE Under Secretary, Research, Education, and Economics

MRP Under Secretary, Marketing and Regulatory Programs 

OTHER Includes Administration, OCIO, and OCFO

33
DISTRIBUTION OF INVESTIGATIVE RESOURCES

PERCENTAGE BY AGENCY 

FY 2003 PLANNED

NATURAL RESOURCES AND Forest Service 5.0

ENVIRONMENT Natural Resources Conservation 

Service 

2.0

Farm Service Agency 19.0

Foreign Agricultural Service .5

FARM AND FOREIGN 

AGRICULTURAL SERVICES

Risk Management Agency 7.5

Rural Utilities Service .5

Rural Housing Service 6.5

RURAL DEVELOPMENT

Rural Business-Cooperative Service 5.0

FOOD, NUTRITION, AND 

CONSUMER SERVICES

Food and Nutrition Service 30.0

FOOD SAFETY Food Safety and Inspection Service 7.5

Agricultural Marketing Service 3.0

Animal and Plant Health Inspection 

Service 

7.0

MARKETING AND 

REGULATORY PROGRAMS

Grain Inspection, Packers and 

Stockyards Administration 

.5

RESEARCH, EDUCATION, AND Agricultural Research Service 1.0

ECONOMICS Cooperative State Research, 

Education, and Extension Service 

.5

OTHER Administration; OCFO; OCIO; OIG; 

Other 

4.5

34 
AUDIT 

Audit is the examination and verification of the economy and efficiency of an agency’s 

operations, its effectiveness in achieving program results, its compliance with applicable laws 

and regulations, and its fairness in reporting its financial operations. We also routinely conduct 

evaluations. An evaluation is a review, study, or analysis of USDA’s programs or activities for 

the purpose of providing information to managers for decision-making; for making 

recommendations for improvements to programs, policies, or procedures; and for administrative 

action. In addition to audits performed by OIG staff, we contract with certified public 

accountants for some audits and oversee the quality of the work of auditors under contract to 

other agencies of the Department. 

OIG auditors conduct their work in accordance with the “Government Auditing Standards: 1994 

Revision” (Yellow Book), as amended, published by the U.S. General Accounting Office 

(GAO), and in accordance with the professional standards set by the American Institute of 

Certified Public Accountants. We have established and implemented a program to ensure that 

our staff maintains professional proficiency through continuing education and training. Training 

directly related to the Government auditing environment is provided to newly hired, 

intermediate, and advanced level OIG auditors through in-house audit academies. 

Government Auditing Standards, as prescribed by GAO, describes the types of audits that 

Government and non-Government organizations conduct and the audit standards to be followed. 

Government audits are classified as financial or performance audits. 

FINANCIAL AUDITS

Financial statement audits provide reasonable assurance about whether the financial statements 

of an audited entity present fairly the financial position and results of operations in accordance 

with generally accepted accounting principles. 

Financial related audits determine whether financial reports and related items, such as 

elements, accounts, or funds, are fairly presented; whether financial information is presented in 

accordance with established or stated criteria; whether the entity has adhered to specific financial 

compliance requirements; and whether the entity’s internal control structure over financial 

reporting and/or safeguarding assets is suitably designed and implemented to achieve the control 

objectives. 

35
PERFORMANCE AUDITS

Economy and efficiency audits determine whether the entity is acquiring, protecting, and using 

its resources economically and efficiently; what the causes of any inefficiencies or uneconomical 

practices are; and whether the entity has complied with laws and regulations concerning matters 

of economy and efficiency. 

Program audits determine whether the desired results or benefits established by the legislature 

or any other authorizing body are being achieved; whether the organizations, programs, 

activities, or functions are effective; and whether the entity has complied with laws and 

regulations applicable to the program. 

AUDIT PLANNING

Each year, we begin the planning process by soliciting audit suggestions from the Under and 

Assistant Secretaries, agency heads, and OIG staff. In prioritizing the suggestions for inclusion 

in the FY 2003 Annual Plan, we considered 

• current and potential dollar magnitude; 

• audit requirements established by law; 

• statutory and regulatory requirements; 

• adequacy of internal control systems; 

• newness, changed conditions, or sensitivity of the organization, program activity, 

or function; 

• extent of Federal participation in terms of resources or regulatory authority; 

• management needs to be met; 

• prior audit history;

• prior investigation history; and 

• timeliness, reliability, scope, and results of audits or evaluations performed by 

others. 

36 
THE AUDIT PROCESS 

The phases of the audit process include the following 

Development of an audit approach includes determining the reasons for 

selecting the audit subject, overall audit objectives and scope, locations to be 

audited, OIG staff who will perform the audit, staff-days needed, other 

resources required (e.g., specialists with timber or banking expertise) to 

perform the audit, and benefits anticipated from the audit. 

Audit 

Approach

Audit notification to the appropriate USDA agency or office informs auditees of 

our intent to begin an audit. 

Audit 

Notification

OIG staff hold entrance conferences with agency officials to discuss and obtain 

input on the purpose and objectives of the audit, its scope, and the general 

methodology and procedures to be followed. 

Entrance 

Conference

Survey Work Auditors perform survey work to gather information and identify problems. 

Detailed audit testing and interviewing are undertaken if the survey indicates 

the need to learn more about conditions noted. 

Field Audit 

Work

During the course of an audit, issues may arise which require the immediate 

attention of management. This interim report furnishes the vehicle to provide 

management the information needed to initiate immediate corrective action.

Management 

Alert

At the conclusion of an audit, OIG holds a formal exit conference with the 

agency’s principal officials to review the audit results presented in a discussion 

draft report. This gives management an opportunity to confirm information, to 

ask questions, and to provide any necessary clarifying data. 

Discussion 

Draft Report

and Exit 

Conference

 

After the exit conference, OIG makes necessary changes to the draft report and 

presents it as an official draft report to the agency for final written comments. 

The agency is generally given 30 days to respond to the official draft report. 

Official Draft 

Report

Final Report OIG prepares and issues a final report which contains the agency’s written 

response. 

37
A management decision (agreement to take action on an audit 

recommendation) must be reached on all report recommendations within 

6 months of issuance of the report. OIG tracks management’s actions through 

the achievement of management decision; the Office of the Chief Financial 

Officer tracks actions from the achievement of management decision to 

completion of final action. The status of management decisions is included in 

OIG’s semiannual report to the U.S. Congress. The status of final actions, 

including those not completed within 1 year of the management decision, is 

reported in the semiannual Secretary’s Management Report to the 

U.S. Congress. 

Management 

Decision and 

Final Action

38 
FY 2003 ANNUAL PLAN 

DISTRIBUTION OF AUDIT RESOURCES 

BY UNDER AND ASSISTANT SECRETARIES 

OTHER

3%

FS

2%

FNCS

20%

FFAS

12%

MRP

2% NRE

8%

REE

2%

MULTI

41%

RD

10%

LEGEND

NRE Under Secretary, Natural Resources and Environment

FFAS Under Secretary, Farm and Foreign Agricultural Services

RD Under Secretary, Rural Development

FNCS Under Secretary, Food, Nutrition, and Consumer Services

FS Under Secretary, Food Safety 

REE Under Secretary, Research, Education, and Economics

MRP Under Secretary, Marketing and Regulatory Programs 

OTHER Includes Administration, OCIO, and OCFO

39
DISTRIBUTION OF AUDIT RESOURCES

PERCENTAGE BY AGENCY 

FY 2003 PLANNED

NATURAL RESOURCES AND Forest Service 6.7

ENVIRONMENT Natural Resources Conservation 

Service 

1.1

Farm Service Agency 6.8

Foreign Agricultural Service .9

FARM AND FOREIGN 

AGRICULTURAL SERVICES

Risk Management Agency 4.7

Rural Utilities Service 2.5

Rural Housing Service 4.7

RURAL DEVELOPMENT

Rural Business-Cooperative Service 2.7

FOOD, NUTRITION, AND 

CONSUMER SERVICES

Food and Nutrition Service 20.1

FOOD SAFETY Food Safety and Inspection Service 1.4

Agricultural Marketing Service .5

Animal and Plant Health Inspection 

Service 

1.9

MARKETING AND 

REGULATORY PROGRAMS

Grain Inspection, Packers and 

Stockyards Administration 

*

RESEARCH, EDUCATION, AND Agricultural Research Service *

ECONOMICS Cooperative State Research, 

Education, and Extension Service 

2.0

National Agricultural Statistics 

Service 

*

MULTIPLE AGENCY 40.6

OTHER Administration; OCFO; OCIO 3.4

*No Audit time planned for this agency; however it may be included in multi-agency reviews 

and/or other unplanned work. 

40 
APPENDIX I

OIG STRATEGIES 

The FY 2003 Strategies are: 

 Ö FARM PROGRAMS 

 Ö MARKET DEVELOPMENT 

 Ö CIVIL RIGHTS 

 Ö NATURAL RESOURCES CONSERVATION SERVICE 

 Ö ENTITLEMENT PROGRAMS

 Ö FOREST SERVICE 

 Ö RESEARCH AND TECHNOLOGY TRANSFER 

 Ö INTEGRITY OF USDA PERSONNEL 

 Ö HOMELAND SECURITY 

 Ö PROTECTING U.S. FOOD SUPPLY AND AGRICULTURE 

 Ö RISK MANAGEMENT 

 Ö GOVERNMENT PERFORMANCE AND RESULTS ACT 

 Ö ACCOUNTING AND FINANCIAL MANAGEMENT 

 Ö INFORMATION TECHNOLOGY/SECURITY 

 Ö RURAL DEVELOPMENT 

 Ö MANAGEMENT/CONTROL OF ENVIRONMENTAL HAZARDS 

 Ö PROGRAM COMPLIANCE, ECONOMY, AND EFFICIENCY 

Descriptions of the strategies, with examples of audit and investigative work recently performed and 

planned for FY 2003, are presented on the following pages.

41
FARM PROGRAMS

The Farm Programs strategy encompasses a variety of farm commodity, farm credit, and 

conservation programs administered by the Farm Service Agency (FSA). The programs are 

funded primarily through the Commodity Credit Corporation (CCC), a Government entity for 

which FSA provides operating personnel. The principal activities of FSA are the administration 

of farm commodity programs; farm ownership, operating, and emergency loans; conservation 

and environmental programs; emergency and disaster assistance; and domestic and international 

food assistance and international export credit programs. Outlays for these activities increased 

from $19.7 billion in FY 1999 to a record high of $32.6 billion for 2000 and then declined to 

$25.1 billion in 2001. The high levels of spending between 1999 and 2001 are generally 

attributed to higher marketing assistance loan program outlays associated with low market prices 

and to authorized emergency spending, which totaled over $5 billion in 1999, about $14 billion 

in 2000, and approximately $10.5 billion in 2001. Total outlays are projected to be about 

$20.1 billion in 2002 and $23.8 billion in 2003. No emergency supplemental assistance has been 

authorized, except for about $200 million in special assistance provided in the 2002 Agriculture 

Appropriations Act and the Farm Security and Rural Investment Act of 2002 (FSRIA – the 2002 

Farm Bill) for apple and onion producers and other minor programs. 

AUDIT

Our strategy is designed to ensure overall farm program integrity, efficiency, and effectiveness. 

Emphasis on farm programs is needed because of the magnitude of funding (FSA’s 2003 

program level budget comprises nearly 31 percent of the Department’s total); prior audit results 

and known internal control problems; enactment of the 2002 Farm Bill and implementation of its 

programs; continued emergency spending; the pending administrative convergence of the FSA, 

Natural Resources Conservation Service, and Rural Development mission area staffs; reductions 

in FSA staff; the decentralized delivery system; and the critical nature of the programs to the 

agency’s mission. 

In FY 2002, we audited FSA’s implementation and administration of the Quality Loss Program

(QLP) and the QLP for Apples and Potatoes (QLP-AP). We focused on the development and 

testing of the automated systems, the establishment of quality adjustment factors, sign-up 

operations in selected State and county FSA offices, eligibility determinations, and FSA county 

committee determinations. We concluded FSA procedures were generally effective in 

administering QLP and QLP-AP. We also tested crop insurance linkage requirements for the 

2000 Crop Disaster Program (CDP); prior audits had disclosed that producers did not comply 

with disaster program crop insurance linkage requirements and were not properly assessed 

liquidated damages by FSA. We found for the 2000 CDP, applicants met the crop insurance 

42 
linkage requirements. Additional farm program initiatives begun in FY 2002, such as

assessment of the 2002 Farm Bill, continue into FY 2003. 

In FY 2003, OIG will continue monitoring implementation of the 2002 Farm Bill and intends to 

conduct early reviews of affected farm programs. Among the reviews planned for FSA in 

FY 2003 are audits of the newly enacted Peanut Quota Buyout and Direct and Counter-Cyclical 

Programs (QBOP and DCP). For QBOP we will review controls to ensure program participants

are eligible quota holders. Under DCP, we will test the base and yield options selected by 

farmers and review calculations of the national average market prices and loan rates for 

computing payments. Additional planned work includes an assessment of FSA’s internal end-ofyear payment limitation review process, as well as examinations of borrower eligibility and 

security for emergency disaster loans and producer compliance with Conservation Reserve 

Program provisions. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.1, 

Implement the Farm Security and Rural Investment Act. 

INVESTIGATIONS

The major emphasis of our Farm Programs investigative strategy has been to investigate 

allegations of fraud. Historically, our major concerns in FSA programs have been the 

unauthorized disposition of property mortgaged to the Government, fraud by warehouse 

operators, false statements by commodities producers and exporters, and false statements by 

borrowers in order to obtain more or greater dollar value loans or debt write-downs than those to 

which they are actually entitled. 

Our decision to initiate an investigation is based on several factors, including the likelihood of 

criminal prosecution or large civil monetary recovery, determined primarily in consultation with 

the appropriate U.S. Attorney’s office. Another factor which influences the decision to open a 

case for investigation is the deterrent value of the Government bringing court actions against a 

producer. Those matters not investigated by OIG are referred back to FSA for appropriate 

administrative action. The agency also has the option of resubmitting a request for an 

investigation based on additional or updated information. 

Our regional offices have always maintained a close working relationship with FSA State offices 

to ensure timely referral of investigative matters and to develop an understanding of FSA’s 

priorities, resources, and needs. Headquarters informs the regional offices of significant program

changes, develops national guidelines for referral of investigative matters, and alerts top agency 

managers to any program provisions that allow a potential for abuse. 

Approximately 19 percent of our investigative resources will be spent on FSA programs in 

FY 2003. 

43
MARKET DEVELOPMENT

The President, Secretary of Agriculture, and Congress have repeatedly emphasized the need for 

developing additional domestic and foreign markets for agricultural commodities. 

U.S. agriculture looks overseas to expand sales and boost incomes. Exports also generate 

additional economic activity that ripples through the domestic economy. According to USDA's 

Economic Research Service, every dollar of exports creates another $1.47 in supporting activities 

to process, package, ship, and finance agricultural products. This means that agricultural exports, 

expected to reach $53.5 billion in 2002, will generate an additional $79 billion in supporting 

business activities. Exports also mean jobs: jobs that pay higher than average wages and are 

distributed across many communities and professions, both on the farm and off, in urban and 

rural communities. Agricultural exports currently provide employment for 765,000 Americans. 

The Foreign Agricultural Service (FAS) administers a variety of programs designed to promote 

U.S. agricultural exports, develop long-term markets overseas, and improve world food security. 

These activities are consistent with a primary tenet of the Administration’s review of the U.S. 

food and agriculture system in the 21st century, which highlights the critical importance of the 

global marketplace and trade expansion for the long-term health and prosperity of the 

agricultural sector. With 96 percent of the world’s population outside the United States, future 

growth in demand for food and agricultural products will occur primarily in overseas markets. 

The Administration’s report, Food and Agricultural Policy: Taking Stock for the New Century, 

makes clear that enhancing the competitiveness of U.S. food and agriculture in global markets 

must be one of the primary objectives of U.S. farm policy. To achieve this goal, the proper 

program tools must be provided so that American producers and exporters can capture the 

benefits of expanding overseas markets. FAS’ international activities play a critical role in 

helping to open new markets and in facilitating U.S. competitiveness and, by doing so, help the 

future growth and development of American agriculture. 

To implement the USDA Long-Term Agricultural Trade Strategy, USDA has designed program

delivery that involves providing subsidies, credit guarantees, and long-term loans; publishing 

magazines and reports; advertising; engaging in trade negotiations; setting quality standards; 

regulating markets; entering into grants and cooperative agreements; and participating in trade 

fairs and international conferences. Agricultural trade offices are making potential foreign 

customers aware of our farm products. To carry out the diverse programs, USDA works with 

State and foreign governments, producer groups, nonprofit commodity groups, agricultural 

processors, exporters, land-grant colleges, county extension agents, and individual producers. 

Export promotion includes business counseling, training, market research information, trade 

missions and fairs, and export finance and assistance. Due to high domestic inventory levels of 

farm commodities resulting in depressed commodity prices, there has been a renewed effort to 

develop export markets. Major programs follow. 

44 
CCC Export Credit Guarantee Programs. CCC provides payment guarantees for the 

commercial financing of U.S. agricultural exports. These programs facilitate exports to buyers in 

countries where credit is necessary to maintain or increase U.S. sales, but where financing may 

not be available without CCC guarantees. 

Market Development Programs. CCC funds are used to reimburse participating organizations 

for a portion of the costs of carrying out overseas marketing and promotional activities, such as 

direct consumer promotions. 

Export Subsidy Programs. Bonus payments are made available to exporters of 

U.S. agricultural commodities to enable them to be price competitive and thereby make sales in 

targeted overseas markets where competitor countries are making subsidized sales. 

Public Law 480 (P.L. 480). Assistance provided under the authority of the Agricultural Trade 

Development and Assistance Act of 1954 (Public Law 83-480) is the primary means by which 

the United States provides foreign food assistance. P.L. 480 has three components. 

• Title I provides for sales of U.S. agricultural commodities on concessional credit terms to 

government and private entities in developing countries. 

• Title II provides for donations of humanitarian food assistance to needy people in foreign 

countries in response to malnutrition, famine, and other extraordinary relief requirements 

to meet economic development needs.

• Title III provides food assistance on a grant basis to least developed countries through 

government-to-government agreements. 

Food for Progress. The Food for Progress Act of 1985 authorizes U.S. agricultural 

commodities to be provided to developing countries and emerging democracies that have made 

commitments to introduce and expand free enterprise in their agricultural economies. 

Section 416(b) Donations. Section 416(b) of the Agricultural Act of 1949 authorizes the 

donation of surplus CCC-owned commodities in order to carry out programs of assistance in 

developing countries and friendly countries. 

The 2002 Farm Bill continues and, in same cases, bolsters authorizations for the Department’s 

export promotion, market development, and foreign food assistance programs through 2007. 

Specifically, the bill renewed the long-standing U.S. commitment to alleviating global hunger 

and malnutrition, by reauthorizing P.L. 83-480 and Food for Progress programs, but calling for 

more streamlined program management and operation of these activities. This latter initiative is 

very much congruent with the President’s program initiatives. 

45
AUDIT

Our audit strategy is to evaluate the trade agreement activities and oversight of private voluntary 

organizations within FAS to determine whether programs and activities are being properly 

implemented and helping the Department achieve its goal of increased exports. 

During FY 2003 we plan to review FAS’ oversight of private voluntary organizations (PVO). 

This will be a follow-up audit to review grant fund accountability for Food for Progress, Global 

Food for Education, and Section 416(b) programs. We will determine whether prior report 

recommendations were implemented. We will also identify and test controls designed to ensure 

that PVO’s use commodities and funds provided for direct distribution and monetization 

programs in accordance with program regulations. We expect to complete a performance audit 

to determine whether funds provided for market development programs were properly expended. 

These programs were designed to support the development, maintenance, and expansion of 

commercial export markets for U.S agricultural commodities and products, which FAS 

accomplishes through reimbursements and cost share agreements with various trade 

organizations. We will also evaluate USDA’s efforts at (1) implementing the 2002 Farm Bill 

provisions within existing food and trade programs and establishing newly authorized programs 

and (2) working with other Departments and agencies that administer food aid programs to 

streamline these programs in keeping with the President’s initiatives. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.1, 

Implement the Farm Security and Rural Investment Act; key outcome 1.2, Expand Market 

Opportunities for U.S. Agriculture; and to the President’s Management Agenda program

initiative No.13, Reform of Food Aid Programs. 

INVESTIGATIONS

We will continue to work closely with OIG-Audit and FAS to ensure allegations involving FAS 

programs are reviewed in a timely manner. One area that we expect to receive more attention in 

FY 2003 involves potential fraud by FAS employees in activities relating to the issuance of 

visas. We anticipate that available staff workdays devoted to FAS cases will be approximately .5 

percent. 

46 
CIVIL RIGHTS

The Civil Rights Act of 1964, Title VI, states: “No person in the United States shall, on the 

ground of race, color, or national origin, be excluded from participation in, be denied the benefits 

of, or be subjected to discrimination under any program or activity receiving Federal financial 

assistance.” 

Since the passage of Title VI, several other statutes have been enacted to expand the prohibition 

against discrimination. Title IX of the Higher Education Amendments Act of 1972 prohibits 

gender-based discriminatory practices. Section 504 of the Rehabilitation Act of 1972 prohibits 

discrimination against persons with disabilities. The Age Discrimination Act of 1975 prohibits 

discrimination based upon age. Also, Title VII of the Civil Rights Act of 1964 prohibits 

discrimination in employment based on race, color, religion, sex, or national origin. 

The Department’s civil rights functions have undergone major restructuring. Secretary’s 

Memorandum 1010-4, dated May 16, 1997, gave the Assistant Secretary for Administration the 

full authority for the performance and oversight of all civil rights functions within the 

Department. The Assistant Secretary for Administration has the authority to delegate civil rights 

functions to agency heads, as appropriate, and to rate the agency heads on their performance of 

civil rights functions. The memorandum also established the Office of Civil Rights and 

mandated that it be headed by a Director who reports to the Assistant Secretary for 

Administration. 

The Director of Civil Rights has full responsibility for investigation, adjudication, and resolution 

of complaints of discrimination arising out of USDA employment activities or in the context of 

federally assisted or federally conducted programs, including complaints made by USDA 

employees, applicants for employment, and USDA program participants and customers. 

The 2002 Farm Bill authorizes the Secretary of Agriculture to establish the position of Assistant 

Secretary for Civil Rights within USDA. A working group has been established to make 

recommendations to the Secretary as to the mission, responsibilities, and operating structure of 

this new office. 

47
AUDIT

We continue to meet with Office of Civil Rights and program officials to resolve the outstanding 

recommendations from OIG reports issued between September 1998 and March 2000. These 

reports reviewed the Office of Civil Rights’ efforts to: reduce the backlog of Program 

complaints, implement settlements, implement prior recommendations, and manage employment 

complaints. 

48 
NATURAL RESOURCES

CONSERVATION SERVICE 

The Natural Resources Conservation Service’s (NRCS) mission is to provide national leadership 

in a partnership effort to help people conserve, improve, and sustain the Nation’s natural 

resources and environment. NRCS directs its financial and technical assistance programs to land 

users through the USDA Service Centers and through local conservation districts, which are 

units of State or local governments organized for the purpose of developing and carrying out 

local conservation programs. USDA has entered into a Memorandum of Understanding with 

each conservation district, and these formal agreements provide a basis for the Department’s 

working relationship with each district. 

NRCS proposes to eliminate under performing or ineffective programs that have a limited scope, 

that have goals that can be addressed through other existing or reformed programs, or that are 

more appropriately carried out by the non-Federal sector. All emergency watershed planning 

and operations work will no longer be funded in order to redirect staffing resources to higher 

priority and emerging environmental concerns. NRCS is seeking $111 million in appropriated 

funding for the Emergency Watershed Protection Program, which will enable the Department to 

provide immediate assistance to farmers and communities in the event of a natural disaster. 

Since emergency activities are difficult to predict and vary from year to year, this proposal will 

be an important level of stability and security to rural areas to help address sudden, urgent, 

unforeseen, and non-permanent expenditures. Major programs follow. 

• Conservation Operations (CO). NRCS is seeking $897 million for CO, which included 

$787 million for Conservation Technical Assistance. This will maintain the agency’s 

activities that support locally led, voluntary conservation through the unique partnership 

that has developed over the years within each conservation district 

• Watershed and Flood Protection Operations. NRCS proposes to eliminate funding for 

non-emergency watershed-related work. 

• Watershed Surveys and Planning. NRCS works with local sponsoring organizations to 

develop plans on watersheds dealing with quality, flooding, water and land management, 

and sedimentation problems. 

• Resource Conservation and Development (RC&D). The purpose of the RC&D 

program is to encourage and improve the capability of State and local units of 

49
government and local nonprofit organizations in rural areas to plan, develop, and carry 

out programs for RC&D. 

• Environmental Quality Incentives Program (EQIP). The purpose of EQIP is to 

provide flexible technical, educational, and financial resources to landowners that face 

serious natural resource challenges that impact soil, water and related natural resources, 

including grazing lands, wetlands, and wildlife habitat management. 

• Wetlands Reserve Program (WRP). WRP is a voluntary program in which landowners 

are paid to retire cropland from agricultural production if those lands are restored to 

wetlands and protected, in most cases, with a long-term or permanent easement. 

• Conservation Reserve Program (CRP). CRP is USDA’s largest conservation/ 

environmental program. The purpose of CRP is to assist farm owners and operators in 

conserving and improving soil, water, air, and wildlife resources by retiring 

environmentally sensitive land from agricultural production and keeping it under longterm resource-conserving cover. CRP participants enroll acreage for periods of 10 to 15 

years in return for annual rental payments and cost-share and technical assistance for 

installing approved conservation practices.

The 2002 Farm Bill represents the single most significant commitment of resources toward 

conservation on private lands in the Nation’s history. The bill not only authorized a major new 

program (Conservation Security Program), but also reauthorized many of the above programs at 

significantly higher funding authorization levels and/or significantly increasing acreage caps on 

these programs. 

AUDIT

Our audit strategy is to evaluate NRCS’ administration of and management controls over its 

conservation programs. Our prior audits of NRCS’ responsibilities (e.g., producer compliance 

with the conservation provisions and the reduction in soil loss through conservation compliance) 

disclosed weaknesses in the agency’s management controls. Recent OIG audits of NRCS’ 

responsibilities for Highly Erodible Land and Conservation Reserve Enhancement Program

showed program controls should be strengthened. Continued emphasis on the conservation 

provisions is needed because of the significance of prior audit findings and the 2002 Farm Bill’s 

goal to address high-priority environmental concerns. 

Major reviews of NRCS activity planned for FY 2003 include an audit of NRCS’ Conservation 

Security Program - Highly Erodible Land, in which we expect to evaluate the implementation of 

the newly-mandated Conservation Security Program and evaluate its implementation of the 

Highly Erodible Land program provisions and conservation compliance procedures. We also 

expect to audit EQIP where we will evaluate the administration of EQIP based on increased 

funding and changes in funding methodology as specified in the 2002 Farm Bill. 

50 
This audit strategy links most closely to the USDA Strategic Goal 1, key outcomes 

1.1, Implement the Farm Security and Rural Investment Act; and 1.7, Provide Sensible 

Management of Our Natural Resources. 

INVESTIGATIONS

We will continue to work closely with NRCS and OIG Audit to ensure that necessary 

investigative services are provided. We estimate that about 2 percent of our investigative 

resources will be dedicated to NRCS matters. 

51
ENTITLEMENT PROGRAMS

The Food and Nutrition Service (FNS) administers the Department’s food assistance programs, 

which include the Food Stamp Program (FSP); the Child Nutrition Programs (CNP); and the 

Special Supplemental Nutrition Program for Women, Infants and Children (WIC). These three 

major entitlement programs will account for approximately $40 billion in estimated expenditures 

in FY 2003. The States, through agreements with FNS, administer these programs with a few 

minor exceptions. The States, in turn, enter into agreements with county and project offices to 

deliver program benefits. 

AUDIT 

Our audit strategy includes both FNS’ overall administration of the programs, especially the 

FSP, and the adequacy of controls and systems FNS has in place to manage the programs. 

During FY 2002 our audits of FNS programs focused on the FSP and CNP since they are the 

largest of the entitlement programs. 

Food Stamp Program - We completed Electronic Benefits Transfer (EBT) systems audit work 

in three States, and found that controls needed to be strengthened in some areas including 

controls over EBT access and ensuring benefits are updated prior to issuance. We evaluated 

Florida’s corrective action plan for reducing food stamp payment error rates and its management

of food stamp claim activities for FYs 1999 and 2000 and concluded that the State’s plans did 

not contain mandatory elements and components to detail deficiencies, corrective actions, and 

results. Due to concerns over the widespread collection and sharing of personal information, and 

occurrences of identity theft, we also initiated an audit of controls over the access, disclosure, 

and use of social security numbers (SSN) in the FSP and concluded that overall controls were in 

place; however, in some instances States needed to limit access to SSN’s. Finally, we reviewed 

FSP administrative costs claimed by California to determine the accuracy and the allowability of 

those costs and found that claims were not always accurate and costs were not always 

supportable. 

Child Nutrition Programs - We performed a database analysis for six large Child and Adult 

Care Food Program (CACFP) sponsors. Our analysis showed that improvements are needed in 

the computer system controls over program payments and operations. In New York City, we 

determined that the school district’s eligibility verification process for the National School Lunch 

Program did not provide reasonable assurance that children served meals were correctly 

classified as eligible for free or reduced-price meals. 

52 
Since FNS programs have large cash outlays, the potential exists for fraud and large dollar 

losses. In FY 2003, we will emphasize audits of FNS programs, particularly FSP, to ensure that 

critical internal control checks are in place to guarantee efficiency, effectiveness, and economy. 

We will continue to monitor EBT systems as they are implemented. Additionally, our plan calls 

for audits of the administration and management of the WIC program, the Summer Food Service 

Program, and security issues in food service programs. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.6, Ensure 

Food and Nutrition Security for Low-Income Americans. 

INVESTIGATIONS

We expect to focus a considerable amount of our investigative efforts on stores with high 

redemptions or stores involved in conspiracies to purchase food stamps or EBT food benefits at 

less than face value for redemption at full value to USDA (trafficking). As almost all States are 

now distributing benefits through EBT, we expect a growing proportion of our food stamp 

investigations to make use of the tools provided by EBT to detect trafficking and to compile 

evidence against traffickers. We spent some time in FY 2002 investigating authorized stores 

suspected of laundering proceeds to terrorist organizations overseas and expect this activity will 

continue in FY 2003. At the same time, we expect to continue to reduce time spent on food 

stamp trafficking investigations involving unauthorized individuals or entities. Also, we will 

continue our investigative initiative that was started in FY 1998 to enforce provisions added to 

the Food Stamp Act by the Personal Responsibility and Work Opportunity Reconciliation Act of 

1996. This initiative, known as Operation Talon, includes computer matches of fugitive felons 

against the rolls of the FSP and, in conjunction with cooperating State and local authorities, the 

arrests of the fugitives. 

We also anticipate continuing our investigations of fraud in the WIC, CACFP, and the National 

School Lunch Program. 

In FY 2003, we plan to use approximately 30 percent of staff workdays on FNS programs, 

primarily FSP. 

53
FOREST SERVICE

The Forest Service (FS) has the responsibility for providing leadership in the management, 

protection and use of the Nation’s forests and rangelands. The agency’s overall mission is to 

achieve quality land management under the sustainable multiple-use concept. Through the 

National Forest System, the agency is responsible for managing more than 192 million acres of 

public land. These lands are distributed among 46 States, commonwealths, and territories. The 

agency administers these lands through over 700 offices. Through its State and Private 

organizations, FS cooperates with State and local government and private landowners in the 

management of forest resources, and through its research organization, the agency provides 

leadership in forest and rangeland research. The total FY 2003 budget for FS is projected at 

$4.85 billion while receipts generated through timber sales and other activities on the public 

lands are estimated at about $655 million. Congress has significantly increased FS funding to 

implement the National Fire Plan. These funding increases are continuing, with the long-term

goal of reducing the threat of catastrophic fire on public and private lands. 

AUDIT

During FY 2002, FS contracted with a large CPA firm to conduct the annual financial statement 

audit. OIG acts as the Contracting Officer’s Technical Representative (COTR) and monitors the 

completion of the audit. During the fiscal year we completed our audit work related to the 

agency’s land adjustment program and concluded that the controls implemented in response to 

our previous audits were working effectively. We initiated survey work related to FS’ efforts to 

implement the National Fire Plan. Our survey identified two issues we reported to the agency. 

We found that budget estimates made by FS had not included all applicable costs and therefore, 

the agency’s ability to fully implement the plan were in question. We also found that the agency 

had not implemented adequate controls to ensure funds designated for rehabilitating burned over 

areas were properly spent. We also initiated work related to homeland security issues within the 

FS. We found that the agency needed to take more aggressive action to safeguard its owned and 

leased aircraft. 

For FY 2003 we will continue to monitor the CPA audit of FS’ financial statements. We will 

also continue our review of FS’ implementation of the National Fire Plan. Since significant 

financial resources are being dedicated to implementation of the fire plan our audit will 

emphasize how effectively the agency has accomplished budget and performance integration. 

We will continue our work related to reviewing homeland security issues within FS operations. 

We also plan on initiating work related to FS management of the National Environmental 

Protection Act process and on agency actions to prevent timber theft. 

54 
This audit strategy links most closely to the USDA Strategic Goal 1, key outcomes 1.3, Meet 

Responsibilities for Homeland Security Effectively; and 1.7, Provide Sensible Management of 

Our Natural Resources. 

INVESTIGATIONS

Our FS investigations have typically focused on embezzlement and theft of Government funds 

and property, as well as cases involving the FS’ contracting for goods and services. During FY 

2002, OIG investigators have also been involved in investigations relating to potential arson in 

forest fires. Recently enacted legislation (P.L. 107-203) requires the USDA’s OIG to perform an 

independent investigation of any FS firefighter deaths that are caused by wildfire entrapment or 

burnover. In part because of this new statutory requirement, we estimate that we will be 

spending approximately 5 percent of our investigative resources on FS cases in FY 2003. 

55
RESEARCH AND TECHNOLOGY TRANSFER

USDA is the lead agency for the Federal investment in agricultural research and development 

and for programs that introduce new and improved technologies to the production, processing, 

and marketing of agricultural and forestry products. 

The principal agencies of the Department’s research and technology transfer effort are: 

• the Agricultural Research Service (ARS), which supports direct Federal research and 

provides information (including the National Agricultural Library) on new and improved 

technologies on problems of national impact in production, processing, and marketing of 

agricultural and forestry products; 

• the Cooperative State Research, Education, and Extension Service (CSREES), which 

administers the Federal partnership with the State Land Grant system and other public 

and private institutions for science capacity building, basic and applied research, and the 

dissemination of information and technology; 

• the Economic Research Service (ERS), which provides economic and social science 

information and analysis to public and private decision makers for improving agricultural 

profitability and the rural economy; 

• the National Agricultural Statistical Service (NASS), which is USDA’s source for the 

collection and publication of the Nation’s agricultural production statistics; and 

• the Forest Service Research programs, which are designed to improve resource 

conservation, productivity, and protection of 1.6 billion acres of private- and publiclyowned forests and rangelands through direct research and the sharing of scientific 

information with other Government agencies, colleges and universities, businesses, and 

private landowners. 

ARS 

ARS provides access to scientific data, conducts research to develop new scientific knowledge, 

and transfers technology to the private sector to solve technical agricultural problems of broad 

scope and high national priority. ARS houses the National Agricultural Library (NAL), the 

Nation's major information resource in the food, agricultural and natural resource sciences. ARS 

has over 100 locations throughout the U.S. and abroad. Beltsville, Maryland, is the site of the 

world's largest multi-disciplinary agricultural research facility. ARS is comprised of seven 

programmatic objectives as follows: 

56 
• Soil, Water, and Air Sciences; 

• Plant Science; 

• Animal Science; 

• Commodity Conversion and Delivery; 

• Human Nutrition;

• Integration of Agricultural Systems; and 

• Information and Library Services. 

The ARS 2003 budget includes over $1 billion to support ongoing research and activities in high 

priority areas. ARS has recently increased funding for the following priority research areas: 

• Emerging, Reemerging, and Exotic Diseases of Animals. Program initiatives in 2003 will 

target Bovine Spongiform Encephalopathy (BSE) or “mad cow disease,” Foot and Mouth 

Disease (FMD), Marek’s Disease, Porcine Respiratory Disease Complex, and Exotic 

Newcastle Disease in poultry. 

• Emerging and Exotic Diseases of Plants. ARS research will provide the technology to 

identify, characterize, control, and prevent exotic plant diseases, as well as address emerging 

diseases offshore. 

• New Uses for Agricultural Products. ARS research in this area will be coordinated with 

other Federal agencies and will focus on the development of industrial and bioenergy 

products that offer the opportunity to meet environmental needs and expand market 

opportunities. 

• Agricultural Genomes. ARS research in this area will include challenges facing the 

U.S. agricultural systems, such as environmental regulations that complicate agricultural 

production, new pests and pathogens, and diminishing or inaccessible genetic resources that 

can only be met by harnessing the inherent potential of genetic resources. 

CSREES 

CSREES has primary responsibility for providing linkages between the Federal and State 

components of a broad-based, national agricultural research, extension, and higher education 

systems. CSREES provides funding for projects conducted in partnership with the State 

Agricultural Experiment Stations, State Cooperative Extension Systems, land-grant universities, 

colleges and other research and education institutions. Federal funds are distributed to 

universities and institutions by statutory formula funding, competitive awards, and special grants. 

CSREES is responsible for administering USDA's primary competitive research grants program, 

the National Research Initiative (NRI), which supports investigator-initiated research with strong 

potential to contribute to major breakthroughs in agricultural science. 

57
CSREES has a budget, which totals just over $1 billion, which provides funding for ongoing 

programs and key provisions of the Agricultural Research, Extension, and Education Reform Act 

of 1998 (the Reform Act). The NRI is the Nation’s premier competitive peer reviewed research 

program for fundamental and applied sciences in agriculture. The 2003 budget includes an 

increase of $120 million for NRI, which will contribute to research on issues such as food safety, 

bio-based products, global change, human nutrition, invasive species, emerging diseases, and 

genetic resources. 

National Research Initiative (NRI). Producers and consumers of agricultural products – which 

include every citizen – face a wide array of challenges on a daily basis, including growing 

concerns over potential terrorist threats to the safety of the food supply. Producers are 

contending with new pest and disease threats, stronger competition in world markets, growing 

awareness and concern over environmental issues and rising input costs. Consumers also face 

new threats to food safety and are increasingly concerned with methods used to produce food 

and with nutrition issues. The President’s budget recognizes that a significant boost in research 

is needed now to provide the technology to address this list of challenges. A proposed doubling 

of the NRI will provide increased resources, which will be targeted to the most highly, qualified 

projects to address critical issues in key priorities: 

ERS 

ERS provides economic and other social science information and analysis on agriculture, food, 

environment, and rural development. ERS supplies such information and analyses for use by the 

general public and to help policymakers develop, administer and appraise agricultural and rural 

policies and programs. 

Agricultural Resources Management Survey (ARMS). ERS will support joint efforts with 

NASS to improve this annual national survey of farms, which provides data and analysis to 

characterize the economic conditions and rapidly changing structure of the agricultural sector. 

ARMS is the primary source of information about the financial condition, production practices, 

use of resources, and economic well being of America’s farmers. 

Initiative on the Effects of Invasive Pests and Diseases on the Competitiveness of 

U.S. Agriculture. The results of this initiative will provide information that can be used to help 

guide resource allocation for efforts to exclude and control invasive species. 

NASS 

The mission of NASS is to provide timely, accurate, and useful statistics in service to 

U.S. agriculture. NASS statistics provide the information necessary to keep agricultural markets 

stable and efficient and help maintain a “level playing field” for all users of agricultural statistics.

58 
Agricultural Resources Management Survey (ARMS). A joint initiative of ERS and NASS, 

this funding will improve ARMS, which provides data and analysis to characterize the economic 

conditions and rapidly changing structure of the agricultural sector. 

The Census of Agriculture. The census provides comprehensive data on the agricultural 

economy with national, State, and county level details. 

Locality Based Agricultural County Estimation Program. Funding is used to develop an 

annual integrated locality based agricultural county/small area estimation program. Private 

industry, Federal, State, and local governments and universities currently use these statistics. 

NASS Computer Security and e-Government. Support e-Government data dissemination and 

electronic data reporting for NASS to initiate actions to address the Government Paperwork 

Elimination Act (GPEA) mandate. GPEA requires the acquisition and use of information 

technology, including alternative information technologies that provide for electronic 

submission, maintenance, or disclosure of information as a substitute for paper and for the use 

and acceptance of electronic signatures. 

AUDIT

For this strategy, the audit objectives are (1) determine the adequacy of the National Plant 

Germplasm System storage and laboratory facilities controls that ensure genetically engineered 

organisms are properly identified, inventoried, and controlled; (2) determine whether the 1862 

Land Grant Institutions have implemented the Agricultural Research, Extension, and Education 

Reform Act of 1998; (3) determine whether CSREES has adequate controls over the disposition 

of intellectual property designed, and/or developed with CSREES grant funds; (4) determine 

whether CSREES is providing adequate oversight of the competitive grant expenditures for the 

Initiative for Future Agriculture and Food Systems; (5) determine whether ARS and CSREES 

effectively use the Current Research Information System to produce reports, plan research 

activities, and avoid duplication of research; and (6) evaluate management controls implemented 

to protect the Federal Government’s interest in Cooperative Research and Development 

Agreements and licensing arrangements to develop and market the results of Federally funded 

research. 

INVESTIGATIONS

Investigations will be conducted as deemed necessary, in close coordination with the respective 

USDA agencies and OIG-Audit. In particular, OIG will continue to investigate and monitor the 

location and security for high profile labs to insure that USDA programs are not compromised. 

Additionally, we will monitor, along with the agencies, visiting scholars and scientists to ensure 

that USDA security is not compromised. 

59
INTEGRITY OF USDA PERSONNEL

The integrity of USDA personnel is essential to maintain the public’s confidence that tax dollars 

and resources are adequately protected. A myriad of laws, Executive orders, and regulations 

prescribe what is expected of public servants before, during, and after Government employment. 

During employment, public servants are held to high ethical standards, including prohibitions 

against acceptance of gifts and gratuities, private compensation, and the appearance of a conflict 

of interest. Certain prohibitions also apply after an employee leaves the Government. For 

example, the Federal Procurement Policy Act (41 U.S.C. § 23) imposes a 1-year restriction 

prohibiting individuals from representing a contractor in the negotiation or performance of a 

contract if that individual was personally and substantially involved in either the negotiation or 

review and approval of that same contract as a Government representative. 

INVESTIGATIONS

The prompt investigation of allegations of criminal activities involving the integrity of USDA 

employees continues to be a high priority of OIG. Employee misconduct most often involves 

allegations of embezzlement, bribery, and conflict of interest. We have made a significant 

commitment to ensure that allegations of employee criminal misconduct are investigated timely, 

in order that corrupt public servants may be brought to justice and the agencies involved may 

proceed expeditiously with appropriate administrative action. We also expect an increase in the 

number of investigations involving employees misusing their government computers, including 

accessing and downloading child pornography. 

We intend to continue our commitment to employee integrity investigations by spending about 

10 percent of investigative time in this area. 

60 
HOMELAND SECURITY

OIG’s Homeland Security and Biological Security Program was established to provide 

interagency response coordination for bio-security and agriculture threat events. OIG has met 

with numerous USDA and State agency officials, State food and agriculture councils, State 

emergency boards, State and local audit and law enforcement organizations, other Federal 

Inspector General offices, and private industry groups. OIG has also participated in homeland 

security exercises and drills, and provided presentations to such agriculture-related organizations 

concerning OIG’s role and responsibilities in the event of an agricultural attack or outbreak. 

OIG has established and is training and outfitting emergency response teams (ERTs) to 

participate in interagency responses to bio-security and agriculture threat events, and to act as the 

USDA law enforcement component within the incident command structure during such events. 

The ERTs will respond to reports of threats, attacks, perceived attacks, or outbreaks. The ERTs, 

augmented as needed with additional OIG law enforcement and audit personnel, will: 

• Coordinate with USDA veterinarian staff for the proper handling, packaging, and 

transportation of samples to the appropriate laboratory for testing and forensic analysis.

• Assist in the enforcement of quarantines. 

• Enforce the Secretary of Agriculture orders. 

• Protect USDA employees and facilities. 

• Coordinate security for the movement of quarantined animals. 

• Coordinate and work with other law enforcement and non-law enforcement agencies on 

the local, State, and Federal levels. 

• Conduct criminal investigations and provide other investigative assistance. 

• Coordinate criminal referrals, or as needed, other issues with local, State, and Federal 

prosecutors. 

OIG has begun an aggressive outreach initiative to contact USDA, Federal, State, and local 

agriculture, law enforcement, and emergency preparedness officials. The goal was to expand 

and/or establish the liaisons necessary to respond in the event of an agricultural bio-security/ 

bio-terrorism event. OIG has also cooperated with USDA in the development of the Federal 

61
Emergency Response Plan for Foot-and-Mouth Disease and Other Highly Contagious Diseases. 

OIG also reached out to industry groups that interact with and/or impact agriculture-related 

activities. After the events of September 11th, OIG expanded this initiative and embarked on an 

awareness campaign to encourage our counterparts to actively identify and report suspicious 

activities impacting USDA programs and assets, the American food supply, and the consuming 

public. 

OIG’s efforts in Homeland Security have been undertaken with three basic objectives: (1) to 

identify and protect USDA assets, both physical and cyber-based; (2) to prevent USDA assets 

from being used against the United States; and (3) to preclude USDA programs from being used 

to finance terrorism. For example, high on a list of potential weapons are the biological agents 

that USDA laboratories use for research on plants and animals. Last spring, OIG issued an audit 

report on the Department’s controls over the security of its biological agents. In general, we 

found that responsibility for dealing with security was fragmented, no policies or procedures 

were in place to identify the type and location of the pathogens, security in general at the 

laboratories needed improvement, and personnel access to these laboratories needed to be 

restricted. Subsequently, OIG actively worked with and provided comments to the Department 

as it drafted the policies and procedures addressing our recommendations. Recently, the 

Secretary signed off on these policies and procedures as Departmental Regulation. 

This past year, OIG had a number of efforts evaluating (with respect to the three above-cited 

objectives) the spectrum of USDA agencies’ Homeland Security activities and initiatives that

extend from protecting our natural resources to ensuring the health and safety of our agriculture 

economy and the food supply. We also completed a review of security provided by the FS over 

aircraft, including air tankers used for aerial dispersal of flame retardant chemicals and other fire 

suppression activities, because of its potential use as a weapon. As a result, FS agreed to conduct 

a threat assessment at the air bases and analyze the countermeasures needed to mitigate the 

threat. Other efforts include the following: evaluating APHIS’ role in monitoring vulnerable 

ports of entry; a review of APHIS’ permit system involving the importation and domestic 

transshipment of biological agents; a review of APHIS’ agricultural imports inspection system; a 

review of security over FS’ munitions supply; and a review of controls and procedures over 

chemicals and radioactive materials at USDA facilities. 

As part of our strategy in Homeland Security, OIG continues to spend considerable time and 

resources reviewing the Department’s operation to prevent the entry of Foot and Mouth Disease 

and other diseases and contaminated food products into the United States (see also section on 

“Protecting U.S. Food Supply and Agriculture” for more information in this area). 

Communications and information technology are among the Department’s primary assets and 

have been a target of hackers in the past. To date, we have reviewed or are in the process of 

reviewing a number of information systems within the Department. Our reviews found several 

weaknesses in the security of information technology. Increased cyber security remains a 

priority in the Department (see also section on “Information Technology/Security” for more 

information). Recently, OIG issued a report to the Department citing the need for the 

62 
Department and its agencies to review for and to remove sensitive information from their 

websites. 

OIG audit and law enforcement have worked closely with the Department and its agencies to 

review and strengthen USDA’s controls for visiting foreign scientists, researchers, and 

physicians sponsored through USDA programs. OIG has provided extensive feedback and 

comments on the agencies’ draft procedures, which are preliminary to getting the USDA 

sponsorship program reinstated. OIG has also worked closely with other Federal Offices of 

Inspector General to coordinate Homeland Security issues that are crosscutting among the 

Federal departments and to identify other potential issues for OIG to follow up within the 

Department. 

AUDIT

OIG’s audit strategy in Homeland Security is to ensure that the Department and its agencies have 

established controls to meet the three above-mentioned objectives. We are continuing a number

of efforts that were initiated in the past year: a review of controls over chemicals and radioactive 

materials at USDA facilities; a review of controls over biological agents, chemicals, and 

radioactive materials at USDA-funded research facilities; a review of APHIS’ permit system

involving the importation and domestic transshipment of biological agents; and a review of FS 

security over sensitive infrastructure. To ensure that the impetus from our earlier review of 

biological agents at USDA laboratories is carried forth effectively, we will be performing 

followup fieldwork reviews to evaluate and verify whether USDA laboratories have properly 

implemented their corrective actions, particularly in light that the Department has approved the 

issuance of the policies and procedures as Departmental Regulation. We will be initiating a 

number of new efforts this fiscal year, such as reviewing the use of supplemental funding that 

Congress appropriated for Homeland Security activities in the Department. Our objective is to 

ensure that such funds were used for the intended purposes and were timely expended. We also 

have planned a number of efforts to protecting the food supply from deliberate contamination: to 

review controls to protect food supply stored in USDA warehouses that are intended for school 

feeding programs, and to review controls to prevent livestock/poultry injected or exposed to 

diseases from entering the food supply. 

For other upcoming reviews relating to the food supply and information technology, see sections 

on “Protecting U.S. Food Supply and Agriculture” and “Information Technology/Security.” 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.3, Meet 

Responsibilities for Homeland Security Effectively; and key outcome 1.5, Protect the Nation’s 

Agriculture and Food Supply. 

63
INVESTIGATIONS

We established a Biological Security Program to respond to intentional or catastrophic biological 

security threats to U.S. agriculture. It was established to address OIG’s increasing investigative 

workload involving the attempted introduction of specific diseases or chemically contaminated 

agricultural products. A part of this program is OIG ERT, which will respond to immediate 

threats and attacks directed against the U.S. agriculture infrastructure. Due to OIG’s knowledge 

of USDA programs, these teams will coordinate efforts with other local, State, and Federal law 

enforcement agencies in the event of a terrorist or catastrophic incident. 

OIG Special Agents continue to assist Joint Terrorism and Financial Task Forces throughout the 

United States in support of “Operation Green Quest.” Operation Green Quest is a national 

project ordered by the President in Executive Order 13224 to target money transfer businesses 

sending funds overseas to terrorist groups. Since September 11, 2001, OIG has opened a 

number of investigations related to counterterrorism and/or homeland security. 

64 
PROTECTING U.S. FOOD SUPPLY 

AND AGRICULTURE

Protecting the food supply and agriculture within the Department includes those activities 

designed to ensure that the food the consumer eats is safe and properly labeled and graded, and 

the Nation’s plant and animal resources are safeguarded. These activities are performed by the 

Food Safety and Inspection Service (FSIS); Agricultural Marketing Service (AMS); Animal and 

Plant Health Inspection Service (APHIS); and the Grain Inspection, Packers and Stockyards 

Administration (GIPSA). The activities include inspecting all domestic establishments that 

prepare meat and poultry products for sale or distribution; reviewing foreign inspection systems 

and establishments; inspecting and quarantining animals and plants at U.S. ports-of-entry; 

controlling agricultural losses caused by predatory animals; developing standards for licensing 

and testing veterinary biologics; establishing grading standards for eggs, tobacco, livestock, dairy 

products, poultry, fruits, vegetables, and grain; and performing weighing and inspection services 

to ensure the standards are met. The public depends on these agencies to ensure a safe food 

supply; farmers depend upon these agencies to protect agricultural resources and maintain 

consumer confidence in the market for their products. OIG’s response to protecting the food 

supply and agriculture encompasses: 

• Threats to spread foot and mouth disease, anthrax, and other animal and plant diseases. 

• Product contamination and tampering. 

• Auditing information technology and cyber security. 

• Smuggling of prohibited agricultural products. 

• Evaluating the security of biological agents and pathogens. 

• Domestic acts of terrorism against USDA facilities and employees. 

AUDIT 

Food safety and quality issues have received considerable attention over the last few years. In 

addition, increased foreign trade has become a key economic objective. Our strategy is to assess 

management control systems which ensure that the Department is effectively protecting both the 

consumer and the agricultural resources of the Nation. Our strategy focuses on the intensified 

65
activities in food safety to identify and implement new meat, poultry, and egg inspection 

technologies. 

During FY 2002 we completed audits of APHIS’ safeguards to prevent the entry of prohibited 

pests and diseases into the country, and controls over the citrus canker monitoring and 

eradication efforts in Florida. We also focused on evaluating controls over permits to import 

hazardous materials, and continued a review of the Wildlife Service’s controls over hazardous 

material.

In addition, our FY 2002 efforts included reviews of FSIS’ imported meat and poultry 

reinspection processes, the initial equivalency process, and product recall operations. We

completed an audit of FSIS’ controls over overtime charged by plant inspectors. 

For FY 2003, we plan to audit controls over APHIS’ Animal Care Program and controls and 

procedures for the Investigation and Enforcement Services. In FSIS we will continue our efforts

in assessing the steps that FSIS is taking to reorganize and overhaul the meat and poultry food 

safety inspection system; as part of that effort we plan to follow up on recommended actions 

identified in the Food Safety Initiative Meat and Poultry Products report. Under our ongoing 

Food Safety efforts we will continue to monitor the implementation of the Hazard Analysis and 

Critical Control Points (HACCP) regulation along with evaluating very small meat and poultry 

establishments’ compliance with HACCP requirements and review FSIS’ food safety automated 

information systems. In addition, we will conduct work to review the Egg Processing Inspection 

activity. We also plan to audit AMS’ controls over the National Organic Program, controls over 

meat grading, and assess the validity of sources and accuracy of data reported in its Market News

Reports. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcomes 1.3, Meet 

Responsibilities for Homeland Security Effectively; and 1.5, Protect the Nation’s Agriculture 

and Food Supply. 

INVESTIGATIONS

Investigations into threats to or attacks on the health and safety of the agricultural sector and 

consumers remain our highest priority. When such threats are identified, we immediately begin 

an investigation. We coordinate our efforts with the responsible regulatory agency to ensure 

corrective action is taken to protect the public. 

Food and Consumer Products. We continue to be concerned both about health and safety 

cases (i.e., those involving potential sale or movement in interstate commerce of uninspected or 

adulterated products, and those involving tampering with food products) and about economic 

impact cases. We intend to continue regular meetings with FSIS compliance officials to ensure 

the wholesomeness of meat products in U.S. commerce and conduct criminal investigations 

where indicated. We will work more closely with them especially as future FSIS compliance 

66 
offices are planned to be moved contiguous with OIG Investigations offices and in order to 

ensure better communication and facilitate additional joint investigations.

Animal and Plant Health Protection. We intend to continue our proactive investigations of 

smuggling and other criminal violations of law that could endanger the health and welfare of our 

citizens as well as our Nation’s agricultural economy. We also intend to expand our intelligence 

base to detect threats to animal and plant health, and to interdict potentially diseased and/or pestridden smuggled animal and plant products before they can cause disease or pest outbreaks. 

We estimate that our commitment of investigative resources to AMS, FSIS, APHIS, and GIPSA 

will be about 18 percent in FY 2003. 

67
RISK MANAGEMENT

The risk management strategy encompasses a variety of Federal Crop Insurance Corporation 

(FCIC) programs administered by the Risk Management Agency (RMA). FCIC receives funds 

from four main sources: capital stock subscriptions from the U.S. Treasury, premium income

from producers purchasing insurance policies, administrative fees paid by producers purchasing 

catastrophic risk protection insurance, and appropriations for Federal premium subsidies and 

operating expenses. The principal activities of RMA/FCIC included in this strategy are the 

administration and management of the various crop insurance programs established by Congress. 

These programs make crop insurance available to producers through private companies that 

RMA “reinsures.” The estimated insurance in force for the 2003 crop year is over $34 billion in 

risk protection on about 208 million acres, or about 77 percent of the Nation’s acres planted to 

principal crops. RMA’s premium income is estimated at $2.8 billion, of which $1.7 billion is in 

the form of premium subsidy, and the remaining $1.1 billion is producer-paid premiums. The 

major estimated FY 2003 program expenses are: $3 billion in indemnities, $639 million in 

delivery expenses, $64.5 million in Agricultural Risk Protection Act (ARPA) initiatives, and $76 

million in administrative and operating expenses. 

The US. Department of Agriculture’s FY 2003 budget summary contained the following 

statement: 

“As a result of the increased premium subsidies provided by the Federal Government, 

participation in the Crop Insurance Program has increased significantly and participants are 

purchasing higher levels of coverage. Consequently, the crop insurance companies have 

experienced a windfall. In recent years, underwriting gains have increased about 400 

percent from the levels seen in the early 1990’s. Therefore, included in the 2003 budget 

request is a proposal to cap underwriting gains at 12.5 percent of the retained premium. 

This proposal is expected to save about $115 million in 2003.” 

AUDIT

Our strategy is designed to ensure overall program integrity, prevent and detect program/ 

insurance losses, provide a visible audit presence, ensure program objectives are being 

accomplished, and assist program managers to find solutions for known or potential program

weaknesses. Emphasis on crop insurance programs is needed because of the significance of 

prior audit findings; the expansion (i.e., new types of insurance) and revision of major insurance 

programs; the reliance placed upon the Federal Crop Insurance Programs by Congress to be the 

“safety net” for American farmers; and the mandated changes under ARPA. 

68 
Our FY 2002 audits continued to disclose problems with RMA’s administration of the FCIC 

programs in the areas of crop loss claims (preparation and loss adjustment), implementation of 

new pilot programs, producers’ reporting of production, conflicts of interest within the reinsured 

companies and/or representatives, and establishment of a reliable quality control system. 

Among the major audits of RMA planned for FY 2003 are the FCIC Financial Statements audits 

and program audits or evaluations to assess the Nursery Crop Insurance Program, RMA’s 

administration of optional units policy, management of RMA’s established yields, RMA’s 

compliance with GPRA and FMFIA requirements, and FCIC/RMA’s corporate accounting 

system controls. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.4, Provide 

Risk Management and Credit/Financial Tools to Support Production Agriculture and Improve 

Quality of Life in Rural Areas. 

INVESTIGATIONS

Our investigative strategy in risk management is to investigate apparent fraud involving Federal 

crop insurance programs and to continue working closely with the RMA risk compliance 

division to ensure the timely referral of matters of interest and to strengthen the effectiveness of 

the compliance unit. We expect to increase the number of investigations we conduct in this area 

in FY 2003, and anticipate devoting over 7 percent of our investigative resources to it. 

69
GOVERNMENT PERFORMANCE AND

RESULTS ACT 

The Government Performance Results Act (GPRA) of 1993 requires that all Federal departments 

and agencies establish performance measures that measure outcomes of their programs. USDA 

is one of largest cabinet level departments and includes agencies that have very diverse missions. 

These missions include management of traditional farm programs, private lands conservation, 

domestic food assistance, agriculture research and education, agricultural marketing, 

international trade, meat and poultry inspection, forestry and rural development programs. 

Under GPRA, USDA and its agencies develop annual performance plans that establish 

performance goals and measures covering the fiscal year and provide direct linkages between 

USDA’s longer-term goals and the agencies’ day-to-day activities. USDA agencies prepare 

annual performance reports that are incorporated into the Department’s Annual Performance and 

Accountability Report. 

USDA has developed two strategic goals with 11 key outcomes related to the important mission 

areas of the Department. The two goals and associated outcomes are as follows: 

Goal No. 1: Provide effective services to USDA constituents

Key Outcomes: (1) Implement the Farm Security and Rural Investment Act; (2) expand 

market opportunities for U.S. agriculture; (3) meet responsibilities for homeland security 

effectively; (4) provide risk management and credit/financing tools; (5) protect the 

Nation’s agriculture and food supply; (6) ensure food and nutrition security for low-income

Americans; and (7) provide sensible management of our natural resources. 

Goal No. 2: Enhance USDA Operations through the President’s Management Agenda 

Key Outcomes: (1) Improve human capital management; (2) improve financial 

management; (3) expand electronic government; and (4) establish budget and performance 

integration. 

The strategic goals and outcomes have a number of performance goals that must be met before 

the Department accomplishes them. The General Accounting Office (GAO) has issued two 

reports that evaluated USDA’s progress in accomplishing its established program outcomes. 

Based on its review of USDA’s FY 2000 performance report and its FY 2002 performance plan, 

GAO concluded that USDA still needed to take additional actions on its established program

outcomes. However, GAO concluded that USDA had made some improvements over its FY 

1999 performance report and FY 2001 performance plan. The FY 2002 performance plan, as 

70 
stated by GAO, “presented USDA as single department with clear missions, rather than a 

collection of separate agencies with a diversity of loosely related roles.” 

AUDIT

In FY 2000, we issued an audit report that reviewed the Forest Service’s (FS) Implementation of 

GPRA. Our review found that FS’ FY 1999 annual performance report was based on flawed 

data and assumptions to the extent that the report did not provide reliable information about 

actual performance or the agency’s progress in meeting its goals and objectives. In addition, we 

found that internal controls over performance measures were inadequate as designed and 

implemented. FS has no way of reviewing and correcting improper reporting of performance 

accomplishments submitted by its field units. We recommended that FS develop and implement 

a comprehensive strategy to ensure the collection and reporting of accurate, complete, and 

meaningful performance data. Our audit of FS’ FY 2000 Financial Statements found that it had 

developed a comprehensive strategy to collect and report accurate, complete and meaningful 

performance measures but had not fully implemented procedures. 

In FY 2001, we issued an audit report that reviewed Rural Development’s (RD) implementation 

of GPRA. Our review found that performance data contained in RD’s FY 1999 Annual 

Performance Report was inaccurate or unsupported and targets established were not always 

documented, resulting in a report that was of little or no utility. In addition, we found RD 

included performance measures that were not relevant to its mission goals and, therefore, those 

measures did not provide meaningful information for assessing performance. We recommended 

RD develop procedures to implement GPRA that include processes that ensure collecting and 

reporting of accurate, complete, and meaningful performance data. RD agreed with our 

recommendations and stated that it would establish a GPRA committee to document and 

implement a comprehensive strategy to ensure the collection and reporting of accurate, complete, 

and meaningful performance data. 

In FY 2002, we also issued an audit report that reviewed the implementation of GPRA in the 

Farm Service Agency (FSA). Our review found that FSA’s performance measures need to be 

improved to show what progress is being made in achieving its strategic goals. The OIG 

auditors found that 18 of 21 performance measures were output oriented (expressed in terms of a 

quantitative result), rather than outcome oriented (expressed in terms of a program result), which 

is preferred under GPRA to assess the benefit of a program activity. The auditors also reported 

three errors in reported results for performance measures. We recommended that FSA develop 

performance measures that are outcome oriented, linked to the achievement of its long-term

goals, and for which results reported would indicate the degree to which the long-term goals are 

being met. We also recommended that FSA implement written procedures to ensure internal 

controls over the collection, calculation, and reporting of performance plans are in place and 

operating. FSA agreed with our recommendations and has initiated corrective actions. 

71

For FY 2003, our audit strategy will use a significant amount of OIG audit resources to review 

USDA’s and its agencies’ implementation of GPRA. All financial statement and performance 
audits will include procedures to review the internal controls over the audited agencies’ 

collecting and reporting of their performance data. In FY 2003, we will be performing a review 

of USDA’s Departmentwide GPRA planning and reporting. The objectives of this review will 

be to evaluate the system of controls over departmental performance planning and reporting for 

GPRA. We will assess the development of performance measures and the reporting of

applicable results to determine if they support the Department’s strategic goals and key 

outcomes. We will also gauge the extent to which those goals and outcomes are being achieved. 

We will evaluate the source and support for results reported by the Department and evaluate the 

controls in place to ensure the validity and verifiability of the reported performance data. 

This portion of our audit strategy has some connection (depending on the particular performance 

measures being assessed) to all of the Department’s strategic goals and key outcomes, but it is 

most directly linked to Goal 2, key outcome 2.4, Establish Budget and Performance Integration. 

Our audit work in this area will provide a means of assessing how well the Department is 

progressing in its implementation of budget and performance integration. It will also provide an 

indication of the quality of USDA’s reporting on its progress toward meeting the aforementioned 

strategic goals and key outcomes. 

This portion of our audit strategy ties to the fifth Presidential Management Government-wide 

Initiative “Budget and Performance Integration.” This Presidential Management Agenda 

Initiative is designed to provide a greater focus on performance in budget-making decisions. Our 

review of the Departmentwide GPRA process will provide information as to how well the 

Department is doing in assessing and reporting on USDA’s performance in key programmatic 

areas of significance to the budget-making process. 

72 
ACCOUNTING AND

FINANCIAL MANAGEMENT 

The Chief Financial Officers (CFO) Act of 1990 designated USDA as part of the pilot program

to prepare and audit financial statements, beginning with the FY 1990 statements. The 

Government Management Reform Act of 1994 further defined the CFO Act requirements for 

agencies to submit audited financial statements to OMB. Financial statements are now being 

prepared each year covering all departmental activities, including all revolving and trust funds 

and programs that perform substantial commercial functions. 

The President’s Management Agenda (PMA) has placed more emphasis on improving financial 

management in all Federal Departments, not just USDA. Over the last 9 years, OIG has been 

unable to express and has not expressed an opinion on USDA’s annual Consolidated Financial 

Statements. We have consistently identified problems with the Department’s processes for 

calculating and recording financial information in the accounting systems. According to OMB, 

USDA is the second largest component of the Federal Government’s Consolidated Balance Sheet 

and represents one of the largest remaining barriers to the government receiving an unqualified 

opinion on the combined financial statements. The Department has made significant 

improvements and these efforts may soon allow it to obtain an unqualified opinion on its annual 

Consolidated Financial Statements.1

 The Secretary of Agriculture, through the Draft Strategic 

Plan, has also placed emphasis on improving USDA’s financial management.2

 The Department 

has taken actions to enhance internal controls, improve financial data integrity, obtain additional 

management expertise and improve decision-making. These actions may help the Department 

improve its audit opinion and give program managers access to timely financial and operating 

information. Significant barriers remain, however, to an improved opinion, most notably 

longstanding material weaknesses in the Forest Service. 

In its FY 2001 financial statements, the Department reported net assets of over $127 billion and 

total liabilities of approximately $117 billion. In addition to the reported assets, the Department 

is responsible for over 192 million acres in stewardship land. Other account balances in the 

FY 2001 financial statements included almost $74 billion in net loans receivable and 

approximately $80 billion in long-term debt owed by USDA. Financial management systems 

maintained by the Department are used to process all transactions for USDA. These systems 

also provide financial reports to agency managers as well as to nondepartmental entities. The 

systems are maintained on large-scale computers at either the National Information Technology 

Center (NITC) or the National Finance Center (NFC). 

 

1

 Draft outline of PMA goals, prepared by OMB and dated July 3, 2002. 

73

2

 USDA Draft Strategic Plan, provided to OMB and dated July 8, 2002
AUDIT

Our audit strategy encompasses the Department’s financial statements, as well as the financial 

management systems and the responsibilities of the Office of Chief Financial Officer (OCFO). 

OCFO provides leadership, expertise, coordination, and evaluation in the development of 

departmental and agency programs in financial management, accounting, Federal assistance, and 

performance measurements. OCFO also provides, through NFC, central accounting and/or 

administrative services for all USDA agencies and about 86 other Federal agencies/bureaus 

outside USDA. 

In FY 2002, we performed audits or provided oversight of audits of the FY 2001 financial 

statements for CCC, FCIC, FNS, FS, and the Rural Development (RD) mission area, including 

the Rural Telephone Bank (RTB), as well as the FY 2001 consolidated USDA financial 

statements. All entities received an unqualified opinion except FS, which received a disclaimer. 

We also completed an audit of the FY 2001 financial statements for the Department’s working 

capital fund. These financial statements also received a disclaimer. In addition, we monitored 

implementation of the USDA Foundation Financial Information System (FFIS). 

In FY 2003, we plan to audit the FY 2002 financial statements for CCC, FCIC, FNS, FS, and the 

RD mission area, including RTB, as well as the consolidated USDA financial statements. We

also plan to audit the USDA working capital fund financial statements for FY 2002, USDA’s 

compliance with the Federal Activities Inventory Reform (FAIR) Act, as well as complete our 

review of USDA’s compliance with improper payment reporting requirements. We will 

continue to monitor the implementation of FFIS, audit NITC’s General Controls, review NFC’s 

internal control structure, and monitor USDA’s implementation of a cost accounting system. In 

addition, we plan to continue our review and validation of cash flow models associated with 

credit reform activities involving RD, CCC, and FSA. FS and CCC contracted with a large CPA 

firm to conduct their FY 2002 financial statement audits. These contracts have subsequent 

option years that could be exercised upon the agreement of FS, CCC and OIG. We serve as the 

Contracting Officer’s Technical Representative (COTR) and monitor and review all audit work 

performed by the firm. FNS and the RD mission area will also contract their FY 2003 financial 

statement audits. 

Our efforts to work with and provide technical assistance to the Department in the area of 

accounting and financial management will continue into FY 2003. OIG is a member of the 

USDA Accounting Policy and Financial Statements Coordinating Committee; through this 

committee we provide our views and technical assistance to the working groups. We also meet 

with work teams, task forces, and review boards to deal with subjects on USDA’s FFIS, cash 

management, cost accounting, credit reform, and other financial management issues. We strive 

to become partners with OCFO in order to improve operations. We coordinate with OCFO on 

general control reviews and system audits, training, and the resolution of issues with OMB and 

GAO. 

74 
This audit strategy relates most closely the USDA Strategic Goal 2, key outcome 2.2, Improve 

Financial Management. Department managers must have access to timely financial and 

operating information, in order to make program decisions, protect USDA assets and conserve 

scarce budget resources. Our audits provide necessary information about the timeliness and 

accuracy of USDA financial information. 

This audit strategy applies most closely to the PMA on improved financial performance as it 

relates to our annual financial statement and other financial related audits. Our audit efforts help 

determine if USDA’s financial systems provide accurate and timely information to the 

Department’s management. 

75
INFORMATION TECHNOLOGY/SECURITY

Information technology (IT) is critical to the delivery of USDA’s programs. The use of the 

Web-based technology, commonly referred to as e-Government, offers the Department the 

opportunity to improve the processes it uses to conduct business and achieve its mission 

objectives. The Department currently uses the Internet for program delivery including sharing of 

trade information, signup procedures, and outreach activities. Additional e-Government 

initiatives remain under development. As technology has enhanced the ability to share 

information instantaneously among computers and networks, it has made organizations more 

vulnerable. The Department’s mission critical information systems and networks are now exposed 

to an unprecedented level of risk including equipment failures, human errors, physical and 

electronic cyber attacks. The Department has established a Departmentwide security program; 

however, it has not reached its goal of adequately securing the Department’s critical resources. 

Congress and the President continue to emphasize making Government services available via 

Web-based technology. The Government Paperwork Elimination Act (P.L. 105-277) directs 

OMB to develop procedures to provide for (1) the option of electronic submission, maintenance 

and disclosure of information, and (2) the use and acceptance of electronic signatures. The 

Freedom to e-File Act (P.L. 106-222) requires USDA to establish an electronic filing and 

retrieval system to enable farmers to file forms. The President’s Management and Performance 

Plan for FY 2002 identified electronic government as one of five Governmentwide initiatives. 

Congress recognizes the Government will need to protect the confidentiality, integrity, and 

availability of information in a networked environment. The Government Information Security 

Act (GISRA) (P.L. 106-398) provides a framework for Federal agencies to make information 

systems more secure. Among other features, the legislation requires each Government agency to 

implement a computer security plan, undergo an annual information security audit, report 

intrusions, and train workers in security awareness. 

The Chief Information Officer (CIO) has overall responsibility for establishing departmental 

security policy and ensuring the Department’s IT management is consistent with security 

requirements standards. However, each USDA agency remains responsible for managing its 

own security operations. In August 1999, the CIO issued “An Action Plan to Strengthen USDA 

Information Security,” which identified weaknesses and made recommendations for improving 

the IT security of the Department. The CIO is addressing the issues identified in the plan but 

additional work is needed. 

76 
The major issues surrounding USDA’s IT activities include the use of Web-based technology, 

the adequacy of security and control over IT systems and resources, and the lack of integration of 

many disparate systems. Of current major significance in USDA are: 

• IT security as the Department implements Web-based technologies to deliver services 

and operate the Department’s programs. 

• Migration and conversion of data and operations from existing legacy systems to new 

Web-based systems. 

• Business reengineering initiatives to ensure the Department has adequately modified its 

processes to assure it can adequately deliver its services in an electronic environment. 

• Implementation of the Corporate Administrative Strategy, which seeks to eliminate and 

consolidate legacy accounting, procurement, payroll, and human resources systems. 

• Capital planning and investment control requirements from the Clinger-Cohen Act 

through guidance issued by OMB. 

• Management and control over information placed on the Department’s websites to ensure 

that no information is posted that could assist in the production of weapons of mass 

destruction, or endanger USDA employees, property, or the public. 

AUDIT 

This strategy highlights USDA’s increasing reliance upon Web-based technology to deliver and 

manage its operations, the significant investment in and use of automated resources, the 

importance of careful planning to ensure that the resources acquired are needed and prudently 

obtained, and the importance of designing and implementing effective security and control 

measures. 

In FY 2002, we completed (1) audits of the IT security programs, including access, physical, and 

network controls at several USDA agencies; (2) an evaluation of the Department’s overall 

information security program as required by GISRA; (3) reviews of NFC and NITC general 

controls including selected aspects of automated data processing security; and (4) an assessment 

of USDA’s controls over website security. We reported that the Department and most 

component agencies have not assessed the risks to their systems and established mitigation plans. 

Further, the agencies have not prepared and/or tested contingency and business continuity plans. 

We used commercial off-the-shelf software products to assess selected USDA network 

components. Our scans disclosed a large number of potential vulnerabilities that could be 

exploited from within the Department’s networks and from the Internet. We determined that the 

agencies have not established adequate physical and logical access controls to ensure that only 

authorized users can access critical agency data. We continued to monitor the development and 

77
implementation of the Department’s new financial system, the Foundation Financial Information 

System. 

In FY 2003, we will perform a review of the NITC’s General Controls, to assess whether general 

controls are in place and operating effectively. We will also perform a review of security over 

USDA IT resources as is mandated by the GISRA. Currently, electronic government (E-GOV) 

initiatives are in place in 20 USDA programs. We will be performing a review of these 

initiatives to evaluate the security controls in place, and to assess whether data integrity and 

confidentiality may be compromised. We will be performing a review of application controls on 

critical USDA systems to determine whether there is an effective level of security built-in to 

protect data integrity and confidentiality. We will also be performing a review to evaluate 

security controls and the overall management of information technology assets at select agencies. 

Prior audits have identified significant weaknesses in physical and logical access controls, and a 

lack of adequate system documentation and contingency planning. 

This audit strategy relates most closely to USDA Strategic Goal 2, key outcome 2.2, Improve 

Financial Management; key outcome 2.3, Expand Electronic Government; and key outcome 2.4, 

Establish Budget and Performance Integration. IT resources provide key data to government 

managers for decision-making and secure public access for electronic government. Our audits 

will provide necessary information on the security of these IT resources. 

This audit strategy applies most closely to the PMA on expanded electronic government as it 

relates to our planned audit of USDA’s E-GOV efforts, and to the PMA on improved financial 

performance in so far as our audit efforts help ensure the delivery of secure accurate financial 

information to management. 

INVESTIGATIONS

We are very concerned about unauthorized access to departmental computer systems and data. 

The CIO, as the departmental agency responsible for collecting information regarding computer 

intrusions, refers these violations to OIG. In FY 2003, we will continue to investigate intrusions 

where warranted. 

In recognition of the major role computers play in all aspects of departmental operations, 

Investigations has established a Computer Forensics Unit (CFU). CFU information technology 

experts provide assistance in investigations throughout the country in which electronic evidence 

must be secured and preserved for possible use in judicial proceedings. They also represent 

Investigations in agency planning activities involving future information technology needs, 

including as they pertain to progress in E-GOV initiatives. In FY 2003, we expect to expand 

this unit and to further equip CFU staff to expeditiously perform their duties. 

78 
RURAL DEVELOPMENT

USDA’s Rural Development enhances rural communities’ ability to grow and to improve their 

quality of life by targeting financial and technical resources in areas of greatest need through 

activities of greatest potential. The three Rural Development mission areas are Rural BusinessCooperative Service, Rural Housing Service, and Rural Utilities Service. 

The Rural Business-Cooperative Service (RBS) provides leadership in building competitive 

businesses including sustainable cooperatives that can prosper in the global marketplace. 

Through direct, intermediary or guaranteed loans and grants, RBS invests in financial resources 

and provides technical assistance establishing strategic alliances and partnerships, which 

leverage public, private, and cooperative resources to create jobs and stimulate rural economic 

activity. RBS’ Cooperative Service staff provides technical assistance to existing or planned 

cooperatives, conducts research, and produces information to market and distribute agricultural 

products. 

The Rural Housing Service (RHS) provides credit assistance primarily through direct and 

guaranteed loans for housing programs, both single and multifamily. RHS also funds 

community facilities to build and improve other types of essential public services such as health 

care facilities, schools and libraries, child and adult day care centers, community centers, 

transportation services, and fire and police stations. RHS provides to borrowers (who have the 

minimum required number of low and moderate-income families) interest credit subsidies that 

lower rents to tenants. RHS provides additional housing subsidies to borrowers with low- and 

moderate-income in the form of rental assistance, furthering lower tenant rental costs. 

The Rural Utilities Service (RUS) makes direct and guaranteed loans to nonprofit associations, 

public bodies, for-profit entities, and rural cooperatives to finance construction of distribution 

lines and systems in rural areas for electric, telecommunications, and water and waste facilities. 

RUS awards grants to schools, libraries, hospitals, and medical facilities for distance learning 

and telemedicine and for the improvement and management of water resources and waste 

disposal systems 

AUDIT 

In FY 2002, many of OIG’s resources were focused to ensure the integrity of homeland security, 

including reviews of physical assets such as generation and transmission of cooperative electrical 

assets, rural water systems, communication channels, and website security. Where appropriate, 

we shared concerns with agency personnel. 

79
As part of our FY 2002 reviews, OIG evaluated the insurance costs charged by one broker, who 

provided coverage to 6 management companies responsible for over 900 RRH projects in 

23 States and the Virgin Islands. We determined that for 728 RRH projects the property loss 

deductibles exceeded the maximum USDA allowed by about $15.5 million. In addition, two 

management companies overcharged $181,000 in 1999 and 2000 unemployment insurance. 

In the last year, we issued four RBS program audit reports. When reviewing the direct loan 

program, we determined RBS personnel did not always perform collateral inspections, or 

collateral appraisals, or file the liens on security property. For the guaranteed program, we 

determined the lenders did not always ensure the borrower complied with loan requirements, 

ensure the loan collateral secured the loan, or account for all collateral at liquidation. 

In prioritizing the work to be performed during FY 2003, we will continue our focus on areas 

that have historically been “high risk” and will add coverage to monitor the effects of major 

shifts in program policy, large dollar increases in appropriations and program levels, and new 

programs. 

For FY 2003, we plan to complete our work on Rural Rental Housing insurance expenses by 

addressing RHS’ internal controls at the national level as related to our finding reported in the 

first three insurance audits. Additionally, we plan to complete our nationwide report on RBS’ 

Business and Industry (B&I) loan program. We plan to complete our B&I liquidation audit 

which is in process. 

Finally, we will again audit Rural Development’s FY 2002 financial statements and continue to 

oversee the contracted audit work for the Rural Telephone Bank financial statements. 

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.4, Provide 

Risk Management and Credit/Financial Tools to Support Production Agriculture and Improve 

Quality of Life in Rural Areas. 

INVESTIGATIONS

We continue to investigate allegations of fraud in RHS’ single-family housing and RRH 

programs. Single-family housing fraud typically involves the borrower’s failure to accurately 

report household income, or composition, or both. RRH fraud investigations primarily involve 

housing project managers’ theft or misuse of funds from reserve accounts, falsification of records 

of tenants or occupancy, and “layering” of management functions and costs in order to siphon off 

money without justification and for personal gain. RBS investigations most frequently involve 

falsified applications for guaranteed and direct loans, including false appraisals of collateral, and 

misuse of loan proceeds for unauthorized purposes. 

During FY 2003, we expect some increase in the number of investigations into RHS program

fraud. In addition, we anticipate a substantial increase in time spent on investigations involving 

80 
RBS guaranteed and direct loan fraud. We will expend about 9 percent of our investigative 

resources on RD programs. 

81
MANAGEMENT/CONTROL OF 

 ENVIRONMENTAL HAZARDS

This strategy brings together a wide range of agency programs and operations under a general 

concern for the protection of the environment and the abatement of any environmental hazards 

that result from practices in agriculture and forestry. Agricultural production is considered to be 

a major contributor to the Nation’s pollution problems. The Department has adopted a 

comprehensive policy that guides efforts for correcting these problems and reducing future 

environmental damage from farming and forestry. 

Agencies of the Federal Government are required to identify and remedy their noncompliance 

with Federal, State, and local standards for environmental quality. Noncompliance could include 

pollution from noise, the use of pesticides and chemicals, and toxic and radioactive wastes. 

USDA operates over 21,000 buildings at more than 15,000 locations and controls nearly 

193 million acres of land. Violations of Federal or State standards at Government-owned or -

operated facilities subject agencies to legal and administrative actions which may result in the 

criminal prosecution of Federal employees, the loss of program funds, or delayed projects. 

USDA works with the U.S. Environmental Protection Agency to schedule problem areas for 

remedial action. These plans are coordinated and presented as a single funding item under the 

budget for departmental administration. Major areas of funding are associated with actions to 

prevent and remedy environmental damage from active and abandoned mines on the public lands 

that are under the stewardship of USDA. Other pollution abatement and prevention issues are 

conducted through the program efforts of numerous agencies. Among the responsibilities of 

these agencies is the assurance that environmental program funds and activities are distributed 

without discrimination due to race or income. 

USDA’s management and control of environmental hazards is coordinated through the 

Hazardous Materials Management Program, which provides for the efficient management and 

cleanup of hazardous materials on facilities and lands under the jurisdiction, custody, and control 

of the Department and prevention of releases of hazardous substances from USDA facilities. The 

program is funded, at approximately $16 million, through a central appropriation and agency 

funds. 

82 
 AUDIT 

In FY 2002, we completed our evaluation of the Hazardous Materials Management Fund and 

Hazardous Materials Management Program. In FY 2003, our strategy is to review the 

Department’s controls for assessing environmental liabilities prior to the acquisition or disposal 

of land. We will review the application of the requirements of agencies’ land transactions (sales, 

trades, or other conveyances), and examine the adverse impact from inadequate, negligent, or 

false certifications of hazardous environmental conditions.

This audit strategy links most closely to the USDA Strategic Goal 1, key outcome 1.7, Provide 

Sensible Management of Our Natural Resources. 

. 

83
PROGRAM COMPLIANCE,

ECONOMY, AND EFFICIENCY

The Program Compliance, Economy, and Efficiency strategy incorporates all programs and 

activities not included in other strategic areas. It includes special requests; audit followup; 

developmental audits; single audits of States, local governments, and nonprofit organizations; 

and the quality of audits performed by non-Federal auditors. 

AUDIT

During any year, issues develop which we cannot anticipate during the planning process. These 

issues usually develop from Secretarial, agency, congressional, or OIG concerns regarding fraud, 

waste, or abuse. In order to respond to these concerns, OIG reserves time for any unanticipated 

requests. 

We also set aside time in our plan to monitor the management decisions made for audit 

recommendations presented in our audit reports. The purpose of management decisions is to 

ensure that the auditee and OIG agree on the actions to be taken to correct deficiencies. Once 

OIG agrees with the management decision, management is responsible for implementing final 

actions. Final actions are monitored and tracked by OCFO. 

Our FY 2003 plan includes time for ensuring the quality of audits performed by non-Federal 

auditors in accordance with OMB Circular A-133, as well as those submitted to USDA agencies 

under program-specific requirements. When substandard audit work is identified, we refer the 

independent auditor to the State Board of Licensing Authorities and the American Institute of 

Certified Public Accountants. 

We also plan in FY 2003 to perform an audit of USDA’s compliance with the requirements of 

the Federal Activities Inventory Reform (FAIR) Act. This review will include an examination of

the agencies’ recordkeeping to determine whether estimated costs for Federal processes to the 

taxpayer are being appropriately maintained, and are complete and accurate. The review will 

also incorporate steps to assess whether the agencies’ recordkeeping provides sufficient data to 

permit a comparison of the cost of performing the work by the government versus by the private 

sector. The FAIR Act requires that agencies provide an inventory of procedures performed by 

Federal workers that is reported to the OMB and Congress. We will verify the completeness and 

accuracy of the inventory. 

84 
This proposed audit is linked to USDA’s Strategic Goal 2, key outcomes 2.1 and 2.2: Improve 

Human Capital Management and Improve Financial Management, respectively, by providing an 

assessment as to whether USDA agencies are appropriately implementing the FAIR act to 

minimize the cost of its operations. 

This proposed audit is linked to Presidential Management Initiative No. 2 “Competitive 

Sourcing” in that it will provide an assessment of how USDA is doing in implementing the intent 

of the PMA 

85
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86 
APPENDIX II 

MAJOR AUDITS PLANNED FOR

FISCAL YEAR 2003 

Below are brief descriptions of major audits and initiatives planned for FY 2003. A complete 

listing of audits planned for the upcoming year is provided in appendix III. 

NATURAL RESOURCES AND ENVIRONMENT

Forest Service (FS)

TITLE: Timber Theft Prevention Controls 

OBJECTIVE(S): Determine if FS has implemented past OIG recommendations regarding 

controls needed to prevent theft of timber from the National Forest 

System. 

TITLE: FS Security Over Sensitive Infrastructure 

OBJECTIVE(S): Conduct a survey to become familiar with all laws, regulations, policies,

and procedures pertaining to the FS’ role in safeguarding the sensitive 

infrastructure assets located within the National Forest System such as 

water treatment plants, dams and reservoirs, oil and gas pipelines and 

facilities, communications sites, etc. Identify key internal controls 

pertaining to the security of these infrastructure assets as well as determine 

issues that warrant future audit coverage. 

TITLE: FY 2002 FS Financial Statements 

FY 2003 FS Financial Statements 

OBJECTIVE(S): Determine if FS’ financial statements are presented fairly in all material

respects in accordance with applicable accounting principles, if internal 

accounting controls are adequate, and if FS complies with applicable laws 

and regulations. (FS has contracted the FY 2002 audit to a large CPA firm 

and the audit will remain contracted for FY 2003. OIG will serve as the 

contracting officer’s technical representative for both contracts.) 

87
TITLE: National Fire Plan (NFP) Hazardous Fuel Reduction and Rehabilitation 

and Restoration Programs 

OBJECTIVE(S): Assess whether the projects FS is selecting under the NFP meets 

established criteria. Verify that selected projects are accomplished as 

planned. Review the database FS is currently developing to track funding 

and accomplishments for these NFP projects. 

Natural Resources Conservation Service 

TITLE: Conservation Security Program - Highly Erodible Land 

OBJECTIVE(S): Evaluate the implementation of the newly-enacted Conservation Security 

Program and evaluate its implementation with the Highly Erodible Land 

Program provisions and the conservation compliance procedures. 

FARM AND FOREIGN AGRICULTURAL SERVICES

Commodity Credit Corporation (CCC)

TITLE: FY 2002 CCC Financial Statements 

FY 2003 CCC Financial Statements 

OBJECTIVE(S): Determine if CCC’s financial statements are presented fairly in all 

material respects in accordance with applicable accounting principles, if 

internal accounting controls are adequate, and if CCC complies with 

applicable laws and regulations. (CCC has contracted the FY 2002 audit 

to a large CPA firm, and it will remain contracted for FY 2003.) 

Foreign Agricultural Service Agency (FAS)

TITLE: Oversight of Private Voluntary Organizations (PVO) Operations 

OBJECTIVE(S): In follow-up to a prior audit of FAS PVO grant fund accountability for 

Food for Progress, Global Food for Education, and Section 416(b) 

programs, determine if the prior report’s recommendations were 

implemented. Identify and test FAS controls designed to ensure that 

PVO’s use commodities and funds provided for direct distribution and 

monetization programs in accordance with program objectives. 

88 
TITLE: FAS Market Development Programs 

OBJECTIVE(S): Determine whether funds provided for market development programs 

were properly expended. These programs are designed to support 

development, maintenance, and expansion of commercial export markets 

for U.S. agricultural commodities and products. Determine whether FAS 

accomplished program objectives through reimbursements and cost share 

agreements with various trade organizations with the $120 million it 

invested in market development programs. 

Farm Service Agency (FSA)

TITLE: End-of-Year Payment Limitation Reviews (EOYR) 

OBJECTIVE(S): Determine, across State lines, whether FSA EOYR’s are adequate to 

detect errors and irregularities and whether FSA collects sufficient 

competent evidence to support EOYR conclusions. 

TITLE: Implementation of the New Peanut Program

OBJECTIVE(S): Determine whether payments were issued to eligible quota holders. 

TITLE: Direct and Counter-Cyclical Program (DCP) Under the 2002 Farm Bill 

OBJECTIVE(S): Determine whether DCP payment bases and yields are proper for the 

2002 through 2007 program years and test calculated national average 

market prices and loan rates. 

Risk Management Agency (RMA)

TITLE: Federal Crop Insurance Corporation (FCIC)/RMA’s Corporate 

Accounting System Controls 

OBJECTIVE(S): Define corporate accounting system and components; evaluate the 

effectiveness and applicability of financial reports; identify whether 

additional or improved controls are needed over RMA’s corporate 

accounting system and components; determine whether RMA’s corporate 

accounting system and components meet Joint Financial Management 

Improvement Program core financial systems requirements and Federal 

Financial Management Improvement Act standard general ledger 

requirements; and ascertain whether RMA’s accounting system is in full 

compliance with OMB Circulars A-123, A-127, and A-130. 

89
TITLE: RMA Optional Units 

OBJECTIVE(S): Quantify potential abuse and/or program savings caused by the use of 

optional units. Optional units allow producers, with little chance of 

detection, to shift production to increase losses and actual production 

histories (APH). 

TITLE: Management of RMA’s Established Yields 

OBJECTIVE(S): Determine if APH and T-yields are sound. This would include yields for 

traditional and non-traditional crops such as forage. Also review the 

propriety of yields and acreages for catastrophic policies. 

TITLE: Nursery Crop Insurance Programs 

OBJECTIVE(S): Determine if the nursery crop insurance program has been administered in 

compliance with the reinsurance agreement. Specifically to identify any 

weaknesses and improprieties in the crop insurance program that allows 

producers to improperly maximize indemnities caused by policy 

weaknesses instead of crop loss. 

TITLE: FY 2002 FCIC Financial Statements 

FY 2003 FCIC Financial Statements 

OBJECTIVE(S): Determine if FCIC’s financial statements are presented fairly in all 

material respects in accordance with applicable accounting principles, if 

internal accounting controls are adequate, and if FCIC complies with laws

and regulations. (OIG has contracted the FY 2002 FCIC Financial 

Statement Audit, and it will remain contracted in FY 2003.) 

RURAL DEVELOPMENT

TITLE: Delta Regional Authority 

OBJECTIVE(S): Determine if the Delta Regional Authority’s management controls are in 

place to ensure funds appropriated by Congress are safeguarded against 

waste and abuse. 

TITLE: Northern Great Plains Regional Authority 

OBJECTIVE(S): Determine if the Northern Great Plains Regional Authority’s management

controls are in place to ensure funds, when appropriated by Congress, are 

safeguarded against waste and abuse.

90 
TITLE: FY 2002 Rural Development Financial Statements 

FY 2003 Rural Development Financial Statements 

OBJECTIVE(S): Determine if Rural Development’s consolidated financial statements are 

prepared fairly in all material respects in accordance with applicable 

accounting principles, if internal accounting controls are adequate, and if 

Rural Development complies with applicable laws and regulations. (Rural 

Development will contract for its FY 2003 Financial Statement Audit.) 

Rural Business-Cooperative Service (RBS)

TITLE: Business and Industry (B&I) Loans – Liquidations 

OBJECTIVE(S): Determine if lenders submitted required documentation (liquidation plans) 

to RD in a timely manner. Determine if RD reviewed the information 

submitted and sufficiently followed up on the status of the loan liquidation

plans and collection of proceeds from liquidation. Determine if 

regulations were followed relating to liquidation of loans and collateral 

proceeds obtained during the liquidation were correctly reported and 

applied to the guaranteed loans. 

Rural Housing Service (RHS)

TITLE: Appraisals of B&I Loan Collateral 

OBJECTIVE(S): Determine if policies and procedures for completing appraisals of loan 

collateral are adequate; lenders and appraisers are following appraisal 

procedures; appraisals reflect the true value of loan collateral; and lenders 

evaluate appraisals to ensure that pledged collateral adequately secures the 

B&I loan. 

TITLE: Rental Assistance Paid to Rural Rental Housing (RRH) Projects in Florida 

OBJECTIVE(S): Determine if RRH project management is properly determining tenants 

eligibility for rental assistance. Determine if RHS officials properly 

monitor RRH projects and the rental assistance program. 

TITLE: Rollup of RRH Program – Oversight of Insurance Expense and Coverage 

OBJECTIVE(S): Perform a review of RHS’ controls over insurance expenses and coverages 

for RRH projects. Assess RHS’ management and internal controls over 

insurance expenses and coverages at the national level. 

TITLE: Rural Rental Housing Construction Costs 

91
 

OBJECTIVE(S): Determine that loan funds were used for authorized purposes and reported 

correctly. 

TITLE: Rural Rental Housing Project Management 

 

OBJECTIVE(S): Evaluate RHS’ implementation of corrective actions to issues disclosed in 

the joint 1998 – 1999 Presidential initiative review of RRH projects. 

Rural Utilities Service (RUS)

TITLE: FY 2002 Rural Telephone Bank Financial Statements 

FY 2003 Rural Telephone Bank Financial Statements 

OBJECTIVE(S): Determine if RTB’s financial statements are presented fairly in all material

respects in accordance with applicable accounting principles, if internal 

accounting controls are adequate, and if RTB complies with laws and 

regulations. (OIG contracted the FY 2002 RTB Financial Statement Audit 

with a CPA firm, and it will remain contracted for FY 2003.) 

FOOD, NUTRITION AND CONSUMER SERVICES

Food and Nutrition Service (FNS)

TITLE: WIC – Vendor Monitoring 

OBJECTIVE(S): Assess States’ compliance with recent WIC rules regarding (retailer) food

delivery systems that were to be implemented no later than February 2002. 

Determine if States are properly identifying high-risk vendors, performing 

required compliance (undercover type) investigations, applying 

appropriate sanctions for vendors and participants, and safeguarding food 

instruments or other means of benefit delivery. 

TITLE: FNS FY 2002 Financial Statements 

FNS FY 2003 Financial Statements 

OBJECTIVE(S): Determine if FNS’ financial statements are prepared fairly in all material 

respects in accordance with applicable accounting principles, if internal 

accounting controls are adequate, and if FNS complies with applicable 

laws and regulations. (FNS will contract for its FY 2003 Financial 

Statement Audit.) 

TITLE: Monitoring of Electronic Benefit Transfer (EBT) Operations

92 
OBJECTIVE(S): Review and assess various EBT system databases to identify opportunities 

to improve operations. Specifically, examine retailer, client, and 

transaction databases and selected management reports. 

TITLE: Administration and Management of the New York WIC Program

OBJECTIVE(S): Determine if: (1) proper corrective action has been taken; (2) management 

evaluation reviews are being performed as required and used to identify 

and correct local agency operating weaknesses; (3) there was

accountability and security over food instruments, and (4) administrative 

costs are allowable and properly supported. 

TITLE: FNS’ Summer Food Service Program 

OBJECTIVE(S): Evaluate the adequacy of FNS’ and State agencies’ administration of the 

Summer Food Service Program. Determine whether program sponsors 

complied with applicable laws and regulations. 

TITLE: National Security Issues in Food Service Programs 

OBJECTIVE(S): Determine if FNS has developed specific security provision to protect 

food stored in USDA warehouses for the National School Lunch Program, 

Child and Adult Care Food Program, and Summer Food Service Program

from deliberate contamination. Also, determine if the security at 

processing and storage facilities is adequate, and determine if the 

background of employees are verified. 

FOOD SAFETY

Food Safety and Inspection Service (FSIS)

TITLE: Review of Food Safety Information Systems 

OBJECTIVE(S): Determine if FSIS effectively uses its information systems, such as the 

Field Automation and Information Management and Performance Based 

Inspection System (PBIS), to manage inspection and labeling activities, to

ensure necessary actions are taken when plant inspections identify serious 

deficiencies, and when unsafe meat and poultry product enter the 

marketplace. Evaluate FSIS implementation of prior audit 

recommendations for the improvement of PBIS. 

93

TITLE: Hazardous Analysis and Critical Control Points (HACCP) – Compliance 

by Very Small Plants 
OBJECTIVE(S): Evaluate FSIS’ and plants’ effectiveness in implementing and monitoring 

HACCP in very small plants (plants with 10 or fewer employees). 

TITLE: Food Safety Initiative Meat and Poultry Products – Followup on 

Recommended Actions 

OBJECTIVE(S): Assess whether FSIS has followed up and implemented recommended 

controls based on our prior audits and evaluate the effectiveness of these 

controls. 

TITLE: Egg Processing Inspections 

OBJECTIVE(S): Determine whether FSIS’ monitoring of sanitation and processing in egg 

product plants is adequate. 

RESEARCH, EDUCATION, AND ECONOMICS

Cooperative State Research, Education, and Extension Service (CSREES)

TITLE: Implementation of Agricultural Research, Extension, and Education 

Reform Act (AREERA) of 1998 at 1862 Land Grant Institutions 

OBJECTIVE(S): Determine whether the 1862 Land Grant Institutions have implemented 

AREERA. 

TITLE: Management of the Initiative for Future Agriculture and Food Systems 

(IFAFS) Competitive Grant Expenditures 

OBJECTIVE(S): Determine whether CSREES is providing adequate oversight of the 

competitive grant expenditures for IFAFS. 

MARKETING AND REGULATORY PROGRAMS

Animal and Plant Health Inspection Service (APHIS)

TITLE: Investigation and Enforcement Services 

OBJECTIVE(S): Evaluate APHIS’ Investigation and Enforcement Service’s controls and 

procedures to ensure timely investigation of referrals and the assessment 

of fines and penalties for inspections and animal care activities at 

universities and research facilities. 

94 
TITLE: Controls Over APHIS Issuance of Genetically Engineered Organisms 

Release Permits 

OBJECTIVE(S): Determine if controls over APHIS’ issuance of genetically engineered 

organisms release permits are adequate and ensure compliance with 

current laws and regulations. 

TITLE: Animal Care Programs – Western States 

OBJECTIVE(S): Evaluate inspections and animal care activities at universities and research

facilities. 

TITLE: Controls Over Permits to Import Biohazardous Materials 

OBJECTIVE(S): Evaluate APHIS’ controls over permits issued to colleges/universities and

others to import biohazards. Review operations at various APHIS 

locations. In addition, review APHIS’ process for evaluating applicants’ 

suitability for issuance of a permit and APHIS’ system for tracking 

biohazards imported under permit. 

OFFICE OF THE CHIEF FINANCIAL OFFICER

TITLE: FY 2002 USDA Working Capital Fund Financial Statements 

OBJECTIVE(S): Determine if USDA’s Working Capital Fund (WCF) financial statements 

are presented fairly in all material respects in accordance with applicable 

accounting principles, if internal accounting controls are adequate, and if 

WCF complies with applicable laws and regulations. 

TITLE: FY 2002 National Finance Center Internal Control Structure Review 

FY 2003 National Finance Center Internal Control Structure Review

OBJECTIVE(S): Determine whether NFC’s internal control structure is appropriately 

documented and provides reasonable assurance that data is processed 

properly. 

OFFICE OF THE CHIEF INFORMATION OFFICER

TITLE: FY 2003 National Information Technology Center’s (NITC) General 

Control Review 

OBJECTIVE(S): Determine if the general controls at NITC are in place and operating 

effectively. 

95
MULTIPLE AGENCY AUDITS

TITLE: Departmentwide Government Performance and Results Act (GPRA) 

Planning and Reporting 

OBJECTIVE(S): Evaluate the system of controls over departmental performance planning 

and reporting for GPRA and assess the development of performance 

measures and reporting of the applicable results. 

TITLE: Application Controls on Critical USDA Systems

OBJECTIVE(S): Conduct a Nationwide review of application controls in the Department’s 

most critical systems as identified by OCIO and the Department. Also, 

evaluate security over IT resources at selected USDA agencies. 

TITLE: E-GOV Security 

OBJECTIVE(S): Currently, electronic government (E-GOV) initiatives are in place in 

20 USDA programs. Perform a review of these initiatives to evaluate the 

security controls in place on these initiatives and pilot programs to ensure 

the integrity and confidentiality are not compromised. 

TITLE: Government Information Security Reform Act (GISRA) of 2003 

OBJECTIVE(S): Perform an annual review of the Department’s information security 

performed by conducting audit procedures at OCIO and select agencies in 

accordance with mandated requirements by GISRA. 

TITLE: Implementation of the 2002 Farm Bill – the Farm Security and Rural 

Investment Act of 2002 

OBJECTIVE(S): Perform both program audits and economy and efficiency audits of 

various programs enacted under the 2002 Farm Bill. 

TITLE: Allocation and Use of Homeland Security Funds 

OBJECTIVE(S): Determine whether the funds and other resources are being appropriately 

used to help USDA attain the high level of security needed.

TITLE: Followup Review of the Security Over Biological Agents at USDA 

Facilities 

96 
OBJECTIVE(S): Evaluate the Department’s implementation of corrective action relative to 

our prior audit of controls over security of biological agents. Examine the 

implementation of new departmental policies and procedures pertaining to 

centralized inventories and biosecurity controls. 

TITLE: Controls Over Chemicals and Radioactive Materials at USDA Facilities 

OBJECTIVE(S): Determine what controls USDA has over chemical and radioactive 

materials at USDA facilities. Assess the adequacy of USDA/agency 

management control systems for ensuring USDA facility compliance with

requirements for handling, storage, and disposal of chemical and 

radioactive materials. Determine if personnel who have access to these 

materials have the proper clearances and controls minimize the 

opportunities that exist for access and unauthorized removal of chemicals 

and radioactive materials. 

TITLE: Controls Over Biological Agents, Chemicals, and Radioactive Materials at 

USDA Funded Research Facilities 

OBJECTIVE(S): Evaluate controls over biological agents, chemicals, and radioactive 

materials at universities and colleges, that receive USDA financial 

assistance for research. Examine universities’ and colleges’ compliance 

with APHIS permits requirements for transfer of biological agents: 

determine whether personnel who have access to university and college

labs have proper clearances; and evaluate controls that exist for personnel 

safety and unauthorized access. 

TITLE: USDA’s Compliance with the Requirements of the Federal Activities 

Inventory Reform (FAIR) Act 

OBJECTIVE(S): Perform an audit of USDA’s compliance with the requirements of the 

FAIR Act. This review will include an examination of the Department’s 

agencies’ recordkeeping to determine whether estimated costs for Federal 

processes to the taxpayer are being appropriately maintained, and are 

complete and accurate. 

TITLE: Controls Over Assessing Environmental Liabilities 

OBJECTIVE(S): Examine controls for assessing environmental liabilities prior to the 

acquisition or disposal of land. Review the application of the 

requirements of agencies land transactions (sales, trades, or other 

conveyances), and examine the adverse impact from inadequate, 

negligent, or false certifications of hazardous environmental conditions.

97
TITLE: Controls to Prevent Livestock Injected with Human Diseases from

Entering the Nation’s Food Supply 

OBJECTIVE(S): Identify the controls USDA has to prevent livestock/poultry that has been 

injected or otherwise exposed to human viruses or diseases and milk or 

byproducts from such animals from entering the Nation’s food supply. 

Examine the application of current laws and regulations to determine if 

USDA needs additional authority to protect consumers from meat or 

byproducts from exposed animals.

TITLE: International Food and Trade Programs 

OBJECTIVE(S): Evaluate USDA’s efforts at (1) implementing the 2002 Farm Bill 

provisions within existing food and trade programs and establishing newly 

authorized programs, and (2) working with other Departments and 

agencies that administer food aid programs to streamline these programs 

in keeping with the President’s initiatives. 

TITLE: Environmental Quality Incentives Program (EQIP) 

OBJECTIVE(S): Evaluate the administration of EQIP based on increased funding and 

changes in funding methodology as specified in the 2002 Farm Bill. 

TITLE: Biosecurity Grant Funding 

OBJECTIVE(S): Review grants made available through Agricultural Research, Education 

and Extension funds to determine grants’ effectiveness of reducing the 

vulnerability of the U.S. food and agricultural system to chemical or 

biological attack and whether funds were used for their intended purposes. 

TITLE: Monitoring of USDA Implementation of Cost Accounting System

OBJECTIVE(S) Monitor USDA’s implementation of a cost accounting system and 

determine whether the system meets the requirements of Statement of 

Federal Financial Accounting Standard (SFFAS) No. 4. 

98 
TITLE: FY 2002 USDA Consolidated Financial Statements 

FY 2003 USDA Consolidated Financial Statements 

OBJECTIVE(S): Determine if USDA’s consolidated financial statements are presented 

fairly in all material respects in accordance with applicable accounting 

policies, including proper elimination of all interagency transactions and 

proper conversion of all agencies to accrual accounting. Also determine if 

the Department’s internal control structure is adequate, and if USDA 

complies with laws and regulations in all material respects for the items

reviewed. 

TITLE: Controls Over Plant Variety Protection and Germplasm Storage 

OBJECTIVE(S): Determine the adequacy of the National Plant Germplasm System storage 

and laboratory facilities controls that ensure genetically engineered 

organisms are properly identified, inventoried, and controlled. Determine 

whether security at the facilities is adequate. 

99
APPENDIX III 

FISCAL YEAR 2003 AUDITS PLANNED

LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

AMS ADEQUACY OF MEAT GRADING PROCEDURES CH 100

MARKET NEWS COMMODITY REPORTS AT 100

AUDIT MANAGEMENT AND LIAISON ALL 90

SUBTOTAL 290

APHIS INVESTIGATION AND ENFORCEMENT SERVICES CH 100

CONTROLS OVER APHIS ISSUANCE OF 

 GENETICALLY ENGINEERED ORGANISMS 

 RELEASE PERMITS 

TE 300

ANIMAL CARE PROGRAMS - WESTERN STATES SF 250

CONTROLS OVER PERMITS TO IMPORT 

 BIOHAZARDOUS MATERIALS 

CH 100

AUDIT MANAGEMENT AND LIAISON ALL 338

SUBTOTAL 1088

CCC FY 2002 CCC FINANCIAL STATEMENTS FM 150

FY 2003 CCC FINANCIAL STATEMENTS FM 150

REVIEW OF CCC CHECK ACCOUNTING AND 

 PAYMENT CONTROL SYSTEMS 

FM 50

GSM GUARANTEED LOAN ACCOUNTING

 SYSTEM 

FM 50

AUDIT MANAGEMENT AND LIAISON ALL 180

SUBTOTAL 580

CIO FY 2003 NITC GENERAL CONTROLS FM 300

AUDIT MANAGEMENT AND LIAISON ALL 135

SUBTOTAL 435

CSREES IMPLEMENTATION OF AREERA AT 1862 

 LAND GRANT INSTITUTIONS 

TE 300

CONTROLS OVER DISPOSITIONS 

 OF INTELLECTUAL PROPERTY 

TE 100

100 
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

MANAGEMENT OF IFAFS COMPETITIVE GRANT

 EXPENDITURES 

AT KC SF 400

AUDIT MANAGEMENT AND LIAISON ALL 360

SUBTOTAL 1160

FAS OVERSIGHT OF PVO OPERATIONS AT 200

FAS MARKET DEVELOPMENT PROGRAMS AT 150

AUDIT MANAGEMENT AND LIAISON ALL 158

SUBTOTAL 508

FNS NSLP - HANDLING AND CREDIT FOR 

 COMMODITIES 

KC 200

ACCOUNTABILITY OF VENDORS PARTICIPATING

 IN FARMER'S MARKET PROGRAMS 

TE 200

REVIEW OF STATE'S ADMINISTRATIVE 

 EXPENSES FOR CHILD NUTRITION PROGRAMS

 IN MIDWEST REGION 

CH 200

WIC VENDOR MONITORING CH 150

FOOD STAMP EMPLOYMENT AND TRAINING

 PROGRAM

SF 50

FY 2002 FNS FINANCIAL STATEMENTS HY CH SF 1325

FY 2003 FNS FINANCIAL STATEMENTS HY 1600

FNS NONTRADITIONAL RETAILERS TE 200

FNS FIELD OPERATIONS SF 50

FLORIDA FSP CLAIMS MANAGEMENT AT 50

FNS VENDOR SANCTION POLICIES AT 50

FSP WORKER INTEGRITY AT 50

NEW MEXICO HUMAN SERVICES DEPARTMENT 

 AUTOMATED DATA PROCESSING PROJECT 

TE 200

ADMINISTRATION OF THE EMPLOYMENT AND 

 TRAINING PROGRAM IN TEXAS 

TE 200

AUDIT SURVEY OF THE NUTRITION EDUCATION 

 PROGRAM IN THE SOUTHWEST REGION

TE 100

EVALUATE CONTROLS OVER AND ADEQUACY 

 OF FSP FRAUD CONTROL COSTS IN NEW 

 YORK STATE 

HY 300

FSP ERROR RATE REDUCTION - CALIFORNIA SF 300

USE OF FOOD STAMP PROGRAM ENHANCED 

 FUNDING BY STATES 

TE 200

MONITORING OF EBT OPERATIONS HY SF 400

ADMINISTRATION AND MANAGEMENT OF THE 

 NEW YORK WIC PROGRAM

HY 255

FNS' SUMMER FOOD SERVICE PROGRAM HY AT CH SF TE 1050

FNS COMPLIANCE WITH FMFIA REPORTING 

 REQUIREMENTS 

CH 100

101
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

NATIONAL SECURITY ISSUES IN FOOD SERVICE 

 PROGRAMS

SF 75

NSLP - COMPASS/CHARTWELLS FOOD SERVICE 

 MANAGEMENT COMPANIES - NATIONWIDE 

KC AT CH HY SF TE 400

EFFECTIVENESS OF COMPLIANCE BRANCH 

 OPERATIONS 

CH 100

EBT ISSUANCE AND CERTIFICATION

 PROCEDURES 

CH 200

FOOD STAMP DATABASE ANALYSIS - EBT AGED

 ACCOUNTS

KC 150

AUDIT MANAGEMENT AND LIAISON ALL 3678

SUBTOTAL 11833

FS FS PROCUREMENT OF NEW FIREFIGHTING LEAD 

 PLANES

SF 100

ASSESSMENT OF FS PROGRAMS FOR FUTURE 

 AUDIT COVERAGE

SF 50

ASSESSING FS' PROGRESS WITH GOVERNMENT 

 PERFORMANCE AND RESULTS ACT (GPRA) 

 IMPLEMENTATION 

AT 50

FS TRUST FUNDS SF 50

FS MANAGEMENT OF NEPA PROCESS SF 50

COOPERATIVE FORESTRY TE 200

TIMBER THEFT PREVENTION CONTROLS TE HY SF 700

FS USE OF CATEGORICAL EXCLUSIONS IN NEPA

 PROCESS 

SF 200

FS FIRE FIGHTING INCIDENT MANAGEMENT SF 100

FS SECURITY OVER SENSITIVE 

 INFRASTRUCTURE 

SF 175

FY 2002 FS FINANCIAL STATEMENTS FM AT 250

FY 2003 FS FINANCIAL STATEMENTS FM 350

NATIONAL FIRE PLAN HAZARDOUS FUEL 

 REDUCTION AND REHABILITATION AND 

 RESTORATION PROGRAMS 

SF 400

FS USE OF COLLABORATIVE VENTURES AND 

 PARTNERSHIPS WITH NON-FEDERAL 

 ENTITIES 

SF 50

AUDIT MANAGEMENT AND LIAISON ALL 1229

SUBTOTAL 3954

FSA EVALUATION OF ELIGIBILITY AND SECURITY

 FOR EMERGENCY DISASTER LOANS

CH TE 250

CONSERVATION RESERVE PROGRAM - COST 

 SHARE CLAIMS

CH 100

VERIFICATION OF FSA'S DEBTS EXCLUDED 

 FROM TREASURY COLLECTION 

FM 50

 102 
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

IMPLEMENTATION OF NEW PEANUT PROGRAM AT 200

END OF YEAR PAYMENT LIMITATION REVIEWS AT 200

PAYMENT LIMITATIONS - MISSISSIPPI AT 100

EMERGENCY GRAZING ON CONSERVATION

 RESERVE PROGRAM (CRP) ACREAGE 

TE 200

SURVEY OF NONINSURED ASSISTANCE 

 PROGRAM

KC 150

FSA APPLE MARKET LOSS ASSISTANCE 

 PAYMENT PROGRAM

SF 50

REVIEW OF FSA'S EMERGENCY SUPPLEMENTAL 

 APPROPRIATIONS 

FM 150

IMPLEMENTATION OF E-LDP (LOAD 

 DEFICIENCY PAYMENTS) SYSTEM

FM 100

ESTABLISHMENT OF THE NATIONAL AVERAGE 

 LOAN RATE FOR COMPUTING THE COUNTER 

 CYCLICAL PAYMENT 

KC 50

DIRECT AND COUNTER CYCLICAL PAYMENT 

 PROVISIONS UNDER THE 2002 FARM BILL 

KC AT CH HY SF TE 750

AUDIT MANAGEMENT AND LIAISON ALL 1060

SUBTOTAL 3410

FSIS REVIEW OF FOOD SAFETY INFORMATION 

 SYSTEMS 

CH 100

HACCP - COMPLIANCE BY VERY SMALL PLANTS AT 200

FSIS STATE OPERATED INSPECTION PROGRAMS AT 100

FOOD SAFETY INITIATIVE MEAT AND POULTRY

 PRODUCTS - FOLLOWUP ON RECOMMENDED 

 ACTIONS 

AT CH 105

EGG PROCESSING INSPECTION CH 75

AUDIT MANAGEMENT AND LIAISON ALL 262

SUBTOTAL 842

MULTI DEPARTMENTWIDE GPRA PLANNING AND 

 REPORTING 

CH 300

FY 2003 INFORMATION TECHNOLOGY SECURITY 

 REVIEW

FM AT CH HY KC SF TE 1400

APPLICATION CONTROLS ON CRITICAL USDA 

 SYSTEMS 

FM AT CH HY KC SF TE 1400

E-GOV SECURITY FM 200

GOVERNMENT INFORMATION SECURITY 

 REFORM ACT FY 2003 

FM 200

FEDERAL RESEARCH TRANSFER PROGRAM CH 150

SURVEY OF CURRENT RESEARCH 

 INFORMATION SYSTEM

AT 100

IMPLEMENTATION OF THE 2002 FARM BILL HQ AT CH HY KC SF TE 180

103
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

 104 

ALLOCATION AND USE OF HOMELAND

 SECURITY FUNDS 

AT CH FM HY 500

FOLLOWUP REVIEW OF THE SECURITY 

 OVER BIOLOGICAL AGENTS AT USDA 

 LABORATORIES 

AT CH HY KC SF TE 650

CONTROLS OVER CHEMICALS AND

 RADIOACTIVE MATERIALS AT USDA 

 FACILITIES

AT 50

CONTROLS OVER BIOLOGICAL AGENTS, 

 CHEMICALS & RADIOACTIVE MATERIALS - 

 USDA FUNDED RESEARCH

AT 100

USDA'S COMPLIANCE WITH THE 

 REQUIREMENTS OF THE FEDERAL 

 ACTIVITIES INVENTORY REFORM ACT 

HQ 200

NATIONAL ORGANIC PROGRAM, AMS, FSIS AT 150

SURVEY OF USDA PROGRAMS IN PUERTO RICO 

 AND VIRGIN ISLANDS 

AT 350

CONTROLS OVER ASSESSING ENVIRONMENTAL

 LIABILITIES 

AT 100

CONTROLS TO PREVENT LIVESTOCK INJECTED 

 WITH HUMAN DISEASES FROM ENTERING 

 THE NATION'S FOOD SUPPLY 

AT 50

INTERNATIONAL FOOD AND TRADE PROGRAMS AT 150

EFFECTIVENESS OF QUALITY CONTROL 

 SYSTEMS IN ASSESSING PRODUCER 

 COMPLIANCE 

KC AT CH HY SF TE 550

USDA COMPLIANCE WITH IMPROPER 

 PAYMENTS REPORTING REQUIREMENTS 

CH 125

ENVIRONMENTAL QUALITY INCENTIVES 

 PROGRAM

KC 125

IMPLEMENTATION OF AGRICULTURAL RISK 

 PROTECTION ACT OF 2000

KC AT CH HY SF TE 550

BIOSECURITY GRANT FUNDING KC 150

MONITORING OF USDA IMPLEMENTATION OF 

 COST ACCOUNTING SYSTEM 

FM 50

FY 2002 USDA FINANCIAL STATEMENTS FM 400

FY 2003 USDA FINANCIAL STATEMENTS FM AT CH HY KC SF TE 1500

CONTROLS OVER PLANT VARIETY PROTECTION

 AND GERMPLASM STORAGE 

TE 200

FARM SECURITY AND RURAL INVESTMENT ACT 

 OF 2002 IMPLEMENTATION 

KC AT CH HY SF TE 225

ACTIVITIES TO RENEGOTIATE THE STANDARD 

 REINSURANCE AGREEMENT 

KC 100

INFORMATION TECHNOLOGY RESOURCE LAB FM 50

CONTRACT AUDIT ADMINISTRATION HQ 50

SINGLE AUDIT MANAGEMENT KC AT CH HY SF TE 150

DEVELOPMENTAL AUDITS ALL 3670

AUDIT FOLLOWUP ALL (EXCEPT FM) 510

SPECIAL REQUESTS ALL (EXCEPT FM) 1395
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

105

CAPTAIN/LAN/ARGOS MAINTENANCE ALL (EXCEPT AT HY KC TE) 425

AUDIT MANAGEMENT AND LIAISON ALL 7421

SUBTOTAL 23876

NRCS CONSERVATION SECURITY PROGRAM –

 HIGHLY ERODIBLE LAND 

KC 250

SURVEY OF NRCS CONTROLS OVER CENTERS

 AND INSTITUTES 

TE 200

AUDIT MANAGEMENT AND LIAISON ALL 203

SUBTOTAL 653

OCFO FY 2002 AGREED UPON PROCEDURES: 

 RETIREMENT, HEALTH AND LIFE 

 INSURANCE AND HEADCOUNT

FM 40

REVIEW OF PUBLIC KEY INFRASTRUCTURE AT 

 OCFO/NFC

FM 50

FY 2002 USDA WORKING CAPITAL FUND

 FINANCIAL STATEMENTS 

FM 50

FY 2002 NFC INTERNAL CONTROL STRUCTURE 

 REVIEW

FM 25

FY 2003 NFC INTERNAL CONTROL STRUCTURE 

 REVIEW

FM 750

REVIEW OF UNSUPPORTED AND IMPROPER 

 PAYMENTS AT OCFO/NFC 

FM 150

AUDIT MANAGEMENT AND LIAISON ALL 480

SUBTOTAL 1545

RBS BUSINESS & INDUSTRY LOANS - LIQUIDATIONS SF 100

RURAL DEVELOPMENT - BUSINESS & INDUSTRY

 LOANS 

AT 25

RBS VALUE ADDED AGRICULTURAL PRODUCT 

 MARKET DEVELOPMENT GRANTS (VADG)

KC 100

RURAL DEVELOPMENT, BUSINESS AND 

 INDUSTRY GUARANTEED LOAN PROGRAM, 

 NON-TRADITIONAL 

AT 75

AUDIT MANAGEMENT AND LIAISON ALL 135

SUBTOTAL 435

RD VERIFICATION OF RD'S DEBTS EXCLUDED 

 FROM TREASURY COLLECTION 

FM 50

DELTA REGIONAL AUTHORITY AT 50

NORTHERN GREAT PLAINS REGIONAL

 AUTHORITY 

KC 50

RD FY 2002 FINANCIAL STATEMENTS FM CH 900
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

RD FY 2003 FINANCIAL STATEMENTS FM AT CH HY KC SF TE 1310

AUDIT MANAGEMENT AND LIAISON ALL 1064

SUBTOTAL 3424

RHS RURAL DEVELOPMENT'S ESCROW PROCESS FOR 

 SINGLE FAMILY HOUSING BORROWERS 

CH 150

CENTRALIZED SERVICING CENTER SERVICING 

 ACTIONS 

CH 150

APPRAISALS OF B&I LOAN COLLATERAL AT 75

RENTAL ASSISTANCE PAID TO RRH PROJECTS IN

 FLORIDA 

AT 50

RECAPTURE OF RHS SINGLE FAMILY HOUSING 

 SUBSIDIES

SF 150

SINGLE FAMILY HOUSING PROGRAM - MAINE HY 100

RURAL RENTAL HOUSING PROJECT 

 REHABILITATION

KC 50

ROLLUP OF RRH PROGRAM - OVERSIGHT OF 

 INSURANCE EXPENSES AND COVERAGES 

KC 25

RURAL RENTAL HOUSING PROJECT 

 MANAGEMENT 

CH 150

RURAL RENTAL HOUSING CONSTRUCTION 

 COSTS 

CH 100

SINGLE FAMILY HOUSING REPAIR DIRECT 

 LOAN/GRANT - ELIGIBILITY DETERMINATION

CH 150

AUDIT MANAGEMENT AND LIAISON ALL 519

SUBTOTAL 1669

RMA FCIC/RMA'S CORPORATE ACCOUNTING SYSTEM 

 CONTROLS

KC 200

PILOT PROGRAMS TE 200

RMA OPTIONAL UNITS SF 300

MANAGEMENT OF RMA'S ESTABLISHED YIELDS KC 250

NURSERY CROP INSURANCE PROGRAMS AT 150

RMA - SALES AGENTS CHANGING INSURANCE 

 COMPANIES 

AT 75

RMA-COTTON PREMIUM RATES AT 75

CROP INSURANCE FOR SWEET POTATOES AT 100

RMA - LOSS ADJUSTMENT EXPENSE PAYMENTS AT 75

INSURANCE COMPANIES' CATASTROPHIC RISK 

 PROTECTION (CAT) 

AT 100

FCIC CIGAR TOBACCO INDEMNITY LOSSES HY 60

FY 2002 FCIC FINANCIAL STATEMENTS FM 40

FY 2003 FCIC FINANCIAL STATEMENTS FM 60

DATA ACCEPTANCE SYSTEM PROCESSING 

 CONTROLS

KC 50

 106 
LEAD ASSIST STAFF

AGENCY TITLE REGION REGIONS DAYS

RMA COMPLIANCE WITH GPRA AND FMFIA

 REQUIREMENTS 

KC 150

AUDIT MANAGEMENT AND LIAISON ALL 850

SUBTOTAL 2735

RUS RUS ELECTRIC PROGRAM POWER GENERATION 

 LOAN SECURITY, IDENTITY OF INTERESTS 

 AND PEAK ENERGY DEMAND INITIATIVE

KC 150

FY 2002 RTB FINANCIAL STATEMENTS FM 40

FY 2003 RTB FINANCIAL STATEMENTS FM 60

AUDIT MANAGEMENT AND LIAISON ALL 113

SUBTOTAL 363

GRAND TOTAL 58800 

107