FARM PROGRAMS

Changes Are Needed 

to Eligibility 

Requirements for 

Being Actively 

Involved in Farming

Report to the Ranking Member, 

Committee on the Judiciary,

U.S. Senate

September 2013

GAO-13-781

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-781, a report to the 

Ranking Member, Committee on the Judiciary, 

U.S. Senate

September 2013

FARM PROGRAMS

Changes Are Needed to Eligibility Requirements for 

Being Actively Involved in Farming

Why GAO Did This Study

Agricultural producers receive about $5 

billion annually in farm program 

payments for which being actively 

engaged in farming is required by the 

Farm Program Payments Integrity Act. 

GAO was asked to review FSA’s 

processes for implementing actively 

engaged in farming regulations to

determine payment eligibility.

This report examines, among other 

things, (1) FSA’s compliance reviews 

of farming operation members’ claimed 

contributions of active personal 

management and personal labor and 

(2) FSA state offices’ timeliness in 

completing and reporting compliance 

reviews and their results. GAO 

reviewed FSA regulations and 

procedures, examined compliance 

review files in five states selected 

based on the number of assigned 2009 

and 2010 compliance reviews (the 

latest available), analyzed compliance 

review data for those years, and 

interviewed FSA officials. 

What GAO Recommends

Congress should consider modifying 

the definition of significant 

contributions of management activities, 

either as it did in recent deliberations 

on reauthorizing the Farm Bill, or in 

other ways designed to make 

contributions more clear and objective. 

GAO recommends that FSA establish 

a plan and a time frame for using its 

new database to monitor the status of 

compliance reviews. FSA concurred 

with GAO’s findings and 

recommendation.

What GAO Found

Compliance reviews conducted by the U.S. Department of Agriculture’s Farm 

Service Agency (FSA) to determine if farming operation members (individuals 

and entities) meet the payment requirements for being actively engaged in 

farming are hindered by broad and subjective requirements and difficulty in 

verifying individuals’ evidence of claimed contributions. To be actively engaged in 

farming, an individual is to make significant contributions to that operation in 

personal labor or active personal management (or both). However, the definition 

of active personal management in FSA regulations is broad and can be satisfied 

by an individual performing at least one of eight services representing categories 

such as supervision of activities necessary in the farming operation. Also, FSA 

regulations allow farming operation members to make contributions of 

management without visiting the operation, enabling individuals who live 

significant distances from an operation to claim such contributions. An FSA state 

official said that the agency finds problems with management contributions more 

often for those who live significant distances from an operation. FSA officials 

have also noted that the requirements for what constitutes a management 

contribution are subjective. FSA’s handbook states that it is difficult to measure 

what constitutes a management contribution and that such a contribution must be 

critical to the profitability of a farming operation. FSA officials said that making 

such a determination is difficult and subject to interpretation. Also, officials from 

FSA headquarters and state offices GAO visited said that verifying evidence of 

management contributions is challenging, in part due to the extent to which 

compliance reviews must rely on interviews with payment recipients. FSA 

recognizes that it has the authority to change the definition of what constitutes a 

significant contribution of management in its regulations. However, as FSA stated 

in 2010 final regulations for farm program eligibility and as a senior FSA official 

told GAO in August 2013, FSA does not plan to change the regulatory definition 

of active personal management without direction from Congress. In recent 

congressional deliberations on reauthorizing the Farm Bill, statutory changes 

were considered that would allow one person per farming operation to contribute 

management activities satisfying the criteria for being actively engaged in 

farming. The timeline for Farm Bill reauthorization is unclear. 

Most FSA state offices did not complete and report their assigned 2009 and 2010 

compliance reviews within FSA’s expected time frame (i.e., within 12 months of 

being notified by FSA headquarters of which farming operations to review). FSA 

state offices completed and reported about 24 percent of their assigned 2009 

compliance reviews and 14 percent of their 2010 compliance reviews on time. In 

addition, FSA headquarters did not always know the status and results of the 

2009 and 2010 reviews for oversight purposes when GAO discussed this issue 

with them in November 2012. With a delayed awareness of several years, FSA 

cannot reasonably assess the level of recipients’ compliance with the act and 

may be missing opportunities to recapture payments that were made to ineligible 

recipients. To improve its monitoring of compliance reviews, FSA in May 2013 

implemented a database for state and county FSA officials to electronically report 

their assigned compliance reviews’ status and results. However, FSA has not 

developed a time frame or plan for using the database and until the agency does 

so it cannot fully utilize the database and realize its intended benefits.

View GAO-13-781. For more information, 

contact Anne-Marie Fennell at (202) 512-3841

or FennellA@gao.gov. 
Page i GAO-13-781 Farm Programs

Letter 1 

Background 8

FSA Compliance Reviews Are Hindered by Broad and Subjective 

Eligibility Requirements and Difficulty Verifying Evidence of 

Members’ Claimed Contributions 15

Most State Offices Did Not Complete and Report Compliance 

Reviews in a Timely Manner, and Almost Always Found That 

Members Made Their Claimed Contributions 24

General Partnerships Received the Highest Payments and Had the 

Highest Percentage of Payments Based on Members’ Claims of 

Active Personal Management 31

Conclusions 36

Matter for Congressional Consideration 37

Recommendation for Executive Action 37

Agency Comments 37

Appendix I Common Ways Farmers Organize Their Farming Operations 39

Appendix II Farming Operations That Farm Service Agency 

Headquarters Selected for 2009 and 2010 Compliance 

Reviews, by State 41

Appendix III Objectives, Scope, and Methodology 43

Appendix IV Distribution and Amount of Farm Program Payments in 

General Partnerships, Categorized by Number of Individual 

Members and Grouped by Type of Contribution, 2012 51

Appendix V Distribution and Amount of Farm Program Payments in Joint 

Ventures, Categorized by Number of Individual Members and 

Grouped by Type of Contribution, 2012 52

Contents 
Page ii GAO-13-781 Farm Programs

Appendix VI GAO Contact and Staff Acknowledgments 53

Related GAO Products 54

Tables

Table 1: Input and Service Contribution Requirements for Farming 

Operation Members to Be Considered Actively Engaged in 

Farming 8

Table 2: Status of Assigned Compliance Reviews of Farming 

Operations within the Farm Service Agency’s (FSA) 

Expected Time Frame, 2009 and 2010 26

Table 3: Members’ Contributions in Farming Operations Reported 

by 11 Farm Service Agency (FSA) State Offices, 2009 29

Table 4: Members’ Contributions in Reviewed Farming Operations 

Reported by 9 Farm Service Agency (FSA) State Offices, 

2010 30

Table 5: Distribution and Amount of Farm Program Payments by 

Type of Entity, 2012 32

Table 6: Farm Program Payments and Claimed Contributions of 

Active Personal Management, Personal Labor, or a 

Combination for Selected Examples of General 

Partnerships, 2012 35

Table 7: Farming Operations that Farm Service Agency (FSA) 

Headquarters Selected for 2009 and 2010 Compliance 

Reviews, by State 41

Figures

Figure 1: FSA’s Process to Review Farm Operating Plans 13

Figure 2: Percentage of General Partnerships’ Farm Program 

Payments That Were Based on Claims of Active Personal 

Management Only, Categorized by Number of Individual 

Members in the General Partnerships, 2012 33
Page iii GAO-13-781 Farm Programs

Abbreviations

ACRE Average Crop Revenue Election

EYRT End-of-Year Review Tracking

FSA Farm Service Agency

USDA U.S. Department of Agriculture

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Page 1 GAO-13-781 Farm Programs

441 G St. N.W.

Washington, DC 20548

September 26, 2013

The Honorable Charles E. Grassley

Ranking Member

Committee on the Judiciary

United States Senate

Dear Senator Grassley:

From 2009 through 2012, agricultural producers participating in U.S. 

Department of Agriculture (USDA) farm programs collectively received an 

average of approximately $5.2 billion per year in total payments for which 

being actively engaged in farming is a requirement. These payments went 

to producers, both individuals and entities, such as partnerships, 

corporations, and trusts (app. I describes common types of farming 

operation entities).1

Following publicized instances of farm payments going to individuals not 

involved in farming, Congress enacted the Agricultural Reconciliation Act 

of 1987, commonly referred to as the Farm Program Payments Integrity 

Act. Among other things, the act established eligibility criteria that limit 

payments to individuals and entities that are “actively engaged in 

farming.”2 It also established criteria that discourage farming operations 

from avoiding program payment limits by adding individuals or entities to 

their operation.3

 

1

Entities also include other legal organizations such as joint ventures, limited liability 

companies, limited partnerships, limited liability partnerships, estates, and charitable 

organizations. 

Proponents of payment limits, however, have expressed 

concerns about the effectiveness of actively engaged in farming 

2

The Agricultural Reconciliation Act of 1987, was enacted as title I of the Omnibus Budget 

Reconciliation Act of 1987, Pub. L. No.100-203 101 Stat. 1330. The relevant provisions of 

the act became effective in the 1989 crop year.

3

Congress approved statutory limits for certain farm program payments thereby 

establishing, for various program payment types, the maximum amount that an individual 

or entity can receive each year. Current payment limits were set in the Food, 

Conservation, and Energy Act of 2008, also known as the 2008 Farm Bill (Pub. L. No. 

110-246, 122 Stat. 1651). For example, the maximum amount that an individual or entity 

can receive each year for a type of payment known as direct payments is $40,000. The 

USDA farm program payment types for which being actively engaged in farming is a 

requirement are discussed in the Background of this report.

 
 

Page 2 GAO-13-781 Farm Programs

requirements and the potential for individuals, whose claims of eligibility 

are questionable because they may have little involvement in a farming 

operation, to receive farm program payments. Congress and others’ 

scrutiny of farm program payments has intensified in recent years in light 

of federal budget pressures and record farm income.

For an individual to meet the criteria for being actively engaged in 

farming, he or she must make significant contributions to a farming 

operation4 in two areas: (1) capital, land, or equipment (or some 

combination of the three) and (2) personal labor or active personal 

management (or a combination of the two).5 For an entity, such as a 

corporation, to meet the criteria for being actively engaged in farming, it 

must separately make a significant contribution of capital, land, or 

equipment, and its members must collectively make a significant 

contribution of personal labor or active personal management to the 

farming operation. For both individuals and entities, their share of a 

farming operation’s profits or losses must be commensurate with their 

contributions to the farming operation and those contributions must be at 

risk.6

USDA’s Farm Service Agency (FSA), which reports having 2,170 state 

and county offices, is responsible for (1) administering the Farm Program 

Payments Integrity Act and (2) ensuring that farming operation members 

meet the actively engaged in farming criteria and that they do not receive 

payments in excess of program payment limits. In particular, FSA state or 

county officials examine the operating plans of all farming operations 

applying for farm program payments and make an initial determination of

whether individuals, legal entities, and/or members of general 

 

4

A farming operation is a business enterprise engaged in the production of agricultural 

products that is operated by an individual or an entity. Throughout this report, we often 

use the terms farming operation members and entity members. A member can be either 

an individual or an entity. 

5

USDA regulations define active personal management to include such tasks as arranging 

financing for the operation, supervising the planting and harvesting of crops, and 

marketing the crops. A landowner may be considered actively engaged in farming with 

respect to the owned land, without providing a significant contribution of personal labor or 

active personal management so long as he or she received rent or income based on the 

land’s production or the farming operations results, his or her share of the profits is 

commensurate with the landowner’s contributions, and those contributions are at risk.

6

For such contributions to be considered at risk, there must be a possibility that the 

individual or member of an entity could suffer a financial loss. 
 

Page 3 GAO-13-781 Farm Programs

partnerships or joint ventures meet the requirements for being actively 

engaged in farming.7 In addition, FSA headquarters annually selects 

certain farming operations for compliance reviews8 to determine whether 

they carried out their operating plans as represented when FSA made its 

initial determination of whether farming operation members satisfied 

actively engaged in farming requirements. Appendix II shows the number 

of farming operations that FSA headquarters selected for 2009 and 2010 

compliance reviews by state.9

We have previously questioned the adequacy of the current actively 

engaged in farming requirements, particularly the definition of active 

personal management, and we have reported that farming operation 

members may be receiving payments despite questionable evidence to 

support claims of active personal management contributions. For 

example, in April 2004, we reported that the lack of a measurable 

standard for what constitutes a significant contribution of active personal 

management allows individuals and entities who may have little 

involvement in a farming operation to be eligible for payments.

According to an FSA official, these years 

were the most recent for which compliance review information was 

available at the time of our review.

10

 

7

The farm operating plan documents, among other things, the name of each farming 

operation member, the number of members applying for payments, the members’ share of 

profits and losses, and the members’ claimed contributions.

We 

recommended that USDA develop and enforce measureable 

requirements defining a significant contribution of active personal 

management. However, USDA disagreed with our recommendation and 

stated that its regulations and procedure for determining what constitutes 

a significant contribution of active personal management were consistent 

with the intent of Congress in the Farm Program Payments Integrity Act.

8

The criteria that FSA headquarters uses to select farming operations for compliance 

reviews include whether a farming operation has undergone an organizational change in 

the past year and are discussed in the Background of this report.

9

FSA uses the term “end-of-year reviews.” Consistent with prior GAO reports, however, 

we use the term “compliance review” when discussing FSA’s annual reviews of select 

farming operations for the purpose of determining whether the farming operations were 

conducted consistent with their operating plans as presented when FSA made its initial 

determination regarding actively engaged in farming requirements.

10GAO, Farm Program Payments: USDA Needs to Strengthen Regulations and Oversight 

to Better Ensure Recipients Do Not Circumvent Payment Limitations, GAO-04-407 

(Washington, D.C.: Apr. 30, 2004).
 

Page 4 GAO-13-781 Farm Programs

USDA wrote new regulations for farm program payment limits and 

payment eligibility to be consistent with provisions of the 2008 Farm Bill.11

FSA issued new regulations in 2008, which it subsequently amended to 

address comments and make minor technical corrections in 2010.12

According to FSA’s summary of the more than 5,000 public comments on 

the proposed regulations, 73 percent stated that payment eligibility rules 

needed to be made more restrictive, particularly in the area of the 

requirements for active personal management. FSA’s summary of these 

comments said in part that “A more rigorous definition of active personal 

management is needed; too many people per legal entity are qualifying 

for payment eligibility based on only active personal management.” In 

responding to these public comments in the Federal Register, FSA stated 

the following:13

The definition of what constitutes a significant contribution is provided by regulation, not by 

statute and therefore could be changed. We recognize the difficulty in determining the 

significance of a management contribution under the current definition and the appeal of a 

measurable, quantifiable standard. However, unlike labor, the significance of a 

management contribution is not appropriately measured by the amount of time a person 

spends doing the claimed contribution. The current regulatory definition of a significant 

contribution of active personal management has been in effect for over 20 years; 

Congress has not mandated a more restrictive definition during that time, including in the 

2008 Farm Bill.

Most recently, as Congress deliberated the reauthorization of the 2008 

Farm Bill, it considered changing the statute governing actively engaged 

in farming. A provision in farm bill legislation approved by the Senate in 

June 2013 would remove active personal management as a condition that 

would satisfy the criteria for actively engaged in farming and would 

require members of farming operations to make a significant contribution 

of personal labor to be eligible for payments, with an exception that would 

allow one farm manager per farming operation to provide management 

activities.14

 

11Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat. 1651. 

The House of Representatives approved farm bill legislation 

1273 Fed. Reg. 79, 267 (Dec. 29, 2008) (codified as amended by 75 Fed. Reg. 887 (Jan. 

7, 2010), at C.F.R. pt. § 1400.

1375 Fed. Reg. 887, 893.

14S. 954, 113th Cong. (2013). 
 

Page 5 GAO-13-781 Farm Programs

that included a similar provision in July 2013.15

You asked us to review FSA’s processes for implementing actively 

engaged in farming regulations to determine payment eligibility. Our 

objectives for this report were to examine (1) FSA’s compliance reviews 

of farming operation members’ claims of significant active personal 

management and personal labor contributions to meet actively engaged 

in farming requirements, (2) the extent to which FSA state offices 

completed and reported compliance reviews within expected time frames 

and the results of reported reviews of management and personal labor 

contributions, and (3) the distribution and amount of payments to farming 

operations by type of entity and members’ claims of active personal 

management or personal labor contributions.

The timeline for the 

reauthorization of the Farm Bill is unclear.

To address the first objective, we reviewed the 2008 Farm Bill provisions 

on actively engaged in farming, relevant USDA regulations, and FSA’s 

handbook on payment eligibility and payment limits.16 We also 

interviewed FSA state and county officials in five states— Arkansas, 

Kansas, Louisiana, Mississippi, and Texas. We selected the states for 

site visits based on the number of 2009 and 2010 compliance reviews 

that FSA headquarters had assigned to them and the diversity of crops 

produced in the states.17 In each of these states, we visited the FSA state 

office and one or two county offices. We selected county offices for site 

visits based on the number of 2009 and 2010 compliance reviews that 

FSA headquarters had assigned to them and the county offices’ physical 

location to limit travel costs. During these visits to FSA state and county 

offices, we discussed compliance review processes and results with FSA 

officials and examined examples of 2009 and 2010 compliance review 

files.18

 

15H.R. 2642, 113th Cong. (2013). 

These files included supporting documents submitted by farming 

operations that described their members’ contributions to the farming 

16Farm Service Agency handbook, Payment Eligibility, Payment Limitation, and Average 

Adjusted Gross Income, 4-PL, Amendment 10.

17We also used these criteria to select two additional states—California and Illinois—for 

state office interviews. We contacted these state offices to broaden our scope with respect 

to diversity of crops produced. 

18These years were the most recent for which compliance reviews were to have been 

completed when we conducted our review. 
 

Page 6 GAO-13-781 Farm Programs

operation in the areas of active personal management and personal labor 

and FSA forms documenting compliance review processes and results. 

We selected compliance reviews for examination based on the number of 

farming operation members and the organizational complexity of the 

farming operations that were reviewed. Information collected from the site 

visits and derived from the compliance review files is illustrative and not 

generalizable to all FSA offices or compliance review files for 2009 and 

2010.

To address the second objective, we interviewed an FSA headquarters 

official in charge of selecting farming operations for compliance reviews, 

and we obtained and reviewed relevant documents related to compliance 

reviews. For example, we obtained and reviewed FSA headquarters’ 

memos that notified states of the 2009 and 2010 selection of farming 

operations and expected states to complete and report the respective 

reviews by August 1, 2011 and December 1, 2012. We also obtained and 

reviewed state offices’ hard copies of 2009 and 2010 compliance review 

summary documents submitted to FSA headquarters. Further, we 

obtained and analyzed 2009 and 2010 FSA electronic data on the results 

of state offices’ compliance reviews of farming operations and their 

members as of April 30, 2013. We examined data on the results of the 

2009 compliance reviews of 11 FSA state offices and the 2010 

compliance reviews of 9 FSA state offices that reported the results of 70 

percent or more of their assigned reviews. We chose to examine data on 

the compliance review results only for those state offices that reported at 

least 70 percent of their 2009 and 2010 assigned reviews because 

examining compliance reviews from state offices with lower completion 

and reporting rates would not be representative of those offices’ 

compliance reviews.19

 

19We excluded the results of compliance reviews from state offices that reported less than 

70 percent of their 2009 and 2010 assigned reviews because the results of their reported 

reviews may not be representative of those offices’ compliance reviews. For example, the 

reviews for which the results were reported may have been more likely to find that farming 

operation members had made their claimed contributions. Relative to the compliance 

reviews that were not reported, the results of reviews that were reported may have been 

from compliance reviews that were easier to complete because the evidence that farming 

operation members were making their claimed contributions was unambiguous. 

In particular, we analyzed the data to determine 

the number of total members in the farming operations, the number and 

percentage of members’ claiming contributions of active personal 

management only, personal labor only, or a combination of both active 

personal management and personal labor, and the number and 
 

Page 7 GAO-13-781 Farm Programs

percentage of members meeting these claimed contributions. The results 

of this analysis are limited to farming operations selected by FSA 

headquarters and do not include results from farming operations selected 

as spot checks or added by FSA state committees or county committees. 

In addition, the results are not generalizable to the results of all 2009 or 

2010 compliance reviews or the results of all states. To assess the 

reliability of the data, we (1) interviewed FSA agency officials 

knowledgeable about FSA’s database, (2) performed logic tests of 

relevant data elements, and (3) reviewed related documentation. We 

determined that the data elements related to the assigned and waived 

compliance reviews were sufficiently reliable for the purposes of 

determining the number of compliance reviews assigned to states in 2009 

and 2010, the number of compliance reviews that were waived, and the 

number of compliance reviews that states were directed to complete and 

report to FSA headquarters after waivers were granted. We also 

determined that the data were sufficiently reliable for the purposes of 

showing the results of members’ contributions across 202 compliance 

reviews from 11 states for the 2009 review year and the results of 

members’ contributions’ across 119 compliance reviews from 9 states for 

the 2010 review year.

To address the third objective, we obtained and analyzed 2009 through 

2012 FSA data on applicable farm program payments made to entities. 

We also analyzed 2012 data on entity members’ contributions of active 

personal management, personal labor, and a combination of both to 

farming operations to meet the requirements to be actively engaged in 

farming and 2012 FSA data on applicable farm program payments 

attributed to these members. We analyzed the data to determine the 

distribution and amount of payments made based on individual members’ 

claims of active personal management or personal labor contributions 

categorized by the number of members in various entities. To assess the 

reliability of both FSA datasets, we (1) performed electronic tests of 

pertinent data elements, (2) reviewed information about the data, and (3) 

interviewed agency officials knowledgeable about the data. We 

determined that the data were sufficiently reliable for the purposes of 

determining the distribution and amount of payments to types of farming 

operations based on individual members’ claims of active personal 

management or personal labor contributions. This analysis is limited to 

only those farm program payments that could be attributed to individual 

members’ contributions and were recorded in FSA’s database. Appendix 

III presents a more detailed discussion of our objectives, scope, and 

methodology.
 

Page 8 GAO-13-781 Farm Programs

We conducted this performance audit from May 2012 to September 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

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

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In 1987, Congress enacted what is commonly known as the Farm 

Program Payments Integrity Act, requiring that an individual or entity be 

actively engaged in farming to receive farm program payments. To be 

considered actively engaged in farming, the act requires an individual or 

entity to provide the farming operation with a significant contribution of 

inputs of capital, land, or equipment, as well as a significant contribution 

of services of personal labor or active personal management. Table 1 

shows the input and service contribution requirements that farming 

operation members must meet to be considered actively engaged in 

farming.

Table 1: Input and Service Contribution Requirements for Farming Operation 

Members to Be Considered Actively Engaged in Farming

Sources: GAO analysis of the Farm Program Payments Integrity Act of 1987 and FSA’s handbook on payment eligibility and payment 

limits.

More specifically, as stated in FSA’s handbook, to satisfy the actively 

engaged in farming criteria, an active personal management contribution 

must, among other things, be critical to the profitability of the farming 

operation. For personal labor, the contribution is to be an amount that is 

the smaller of 1,000 hours annually or 50 percent of the total hours that 

would be required to conduct a farming operation comparable in size to 

the individual’s or legal entity’s commensurate share in the farming 

operation.

Background 

Input contribution Service contribution

Significant contribution to the farming 

operation of one or a combination of

• capital,

• land, or

• equipment.

Significant contribution to the farming 

operation of one or a combination of

• personal labor or

• active personal management. 
 

Page 9 GAO-13-781 Farm Programs

In addition to meeting the input and services requirements, a farming 

operation member’s contributions to the farming operation must be in 

proportion to his or her share of the operation’s profits and losses, and 

the contributions must be “at risk.” For a member’s contribution to be 

considered at risk, there must be a possibility that the member could 

suffer a financial loss. For example, if a member of a general partnership 

or joint venture receives a guaranteed payment for any part of a 

contribution of labor or management, that contribution is not at risk, and 

the contribution is to be excluded in determining whether that member is 

actively engaged in farming.

In addition to the requirements specified in the act, FSA’s handbook on 

payment eligibility and payment limits provides direction for actively 

engaged in farming determinations involving spouses. According to the 

handbook, if spouses are farming together in a general partnership or 

joint venture and one spouse is determined to be making a significant 

contribution of active personal management, the other spouse is credited 

with a significant contribution of active personal management. The other 

spouse would still have to meet other requirements, such as making a 

significant contribution of land, capital, or equipment.

In accordance with the 2008 Farm Bill, to receive certain farm program 

payments—that is, direct payments, counter-cyclical payments, and 

Average Crop Revenue Election (ACRE) payments—a farming operation 

member must be actively engaged in farming. Each of these types of 

payments and their payment limits are described as follows:

• Direct payments: Direct payments are fixed annual payments based 

on a farms’ historical crop production. FSA calculates potential direct 

payments using a formula that factors in “base acres,” a measure of a 

farm’s crop production history based on the number of acres planted 

on the farm during certain past years. The term base acres refers to a 

farm’s average planted acreage of eligible crops during those years. 

The direct payment formula uses base acres and multiplies that 

number by the farm’s historical crop yield and a statutorily fixed 

payment rate for each crop. The percentage and payment rates for 

each crop are specified in farm bills. For 2009 through 2011, this 

percentage was set at 83.3 percent; for 2012, it was set at 85 

Types of Payments and 

Payment Limits Subject to 

Actively Engaged in 

Farming Requirements
 

Page 10 GAO-13-781 Farm Programs

percent.20 The direct payment limit for general partnerships and joint 

ventures is $40,000 per member or partner who meets payment 

eligibility requirements.21

• Counter-cyclical payments: Counter-cyclical payments are price 

support payments that are made when the actual price of an eligible 

crop falls below a legislatively determined target price. Like direct 

payments, potential counter-cyclical payments are calculated using 

the historical base acres and crop yields established for a farm. The 

counter-cyclical payment limit for general partnerships and joint 

ventures is $65,000 per member or partner who meets payment 

eligibility requirements including being actively engaged in farming. 

The counter-cyclical payment limit for corporations, limited liability 

companies, and other entity types is $65,000 per entity that meets 

payment eligibility requirements. According to USDA data, total 

counter-cyclical payments from 2009 through 2012 averaged $348 

million annually.

The direct payment limit for corporations, 

limited liability companies, and other entity types is $40,000 per entity 

that meets payment eligibility requirements. According to USDA data, 

total direct payments from 2009 through 2012 averaged $4.7 billion 

annually.

• ACRE payments: An ACRE payment is a revenue-support payment 

that is available as an alternative to counter-cyclical payments and 

offered for certain crops if (1) actual state revenue (i.e., crop yield 

multiplied by market price) is less than a guaranteed state level for the 

crop and (2) the individual farm’s actual farm revenue for a crop is 

less than the farm’s benchmark revenue for the crop. The acreage on 

which ACRE payments are made cannot exceed a farm’s historical 

base acres. For members of farming operations that elect to enroll in 

ACRE, direct payments are reduced by 20 percent. The ACRE 

 

20In 2012, the direct payment for 100 base acres of corn that had a historical yield of 110 

bushels of corn per acre would be 100 multiplied by 110 multiplied by 85 percent (the fixed 

percentage of the base acres) multiplied by 28 cents per bushel (the statutorily fixed 

payment rate for corn). Thus, the payment for these 100 base acres would have been 

$2,618. 

21According to FSA’s handbook, a general partnership is composed of two or more 

individuals or entities, formed under State law, and subject to the terms of a formalized 

agreement. In a general partnership, responsibility for management, profits, and, the 

liability for debts is shared by the members. A joint venture is defined by FSA as a shortterm association of individuals or entities, where the association exists without an actual 

partnership. The liability for debts is shared by the joint venture’s members.
 

Page 11 GAO-13-781 Farm Programs

payment limit for general partnerships and joint ventures is $65,000 

per member or partner who meets payment eligibility requirements 

including being actively engaged in farming. The ACRE payment limit 

for corporations, limited liability companies, and other entity types is 

$65,000 per entity that meets payment eligibility requirements. 

According to USDA data, total ACRE payments from 2009 through 

2012 averaged $120 million annually.

As we reported in 2004,22 it is possible for farming operations organized 

as general partnerships or joint ventures to receive payments above the 

payment limit. For a farming operation with a large number of base acres 

of crops, especially crops that garner higher payment rates per acre, such 

as rice, peanuts, and cotton, the base acres and payment rates per acre 

are large enough to result in potential direct payments that are 

substantially more than the $40,000 payment limit for direct payments. 

The actual direct payments would depend on the number of farming 

operation members who meet payment eligibility requirements.23 For 

example, a farming operation that was organized as a general partnership 

or joint venture and had about 4,200 base acres of rice with an annual 

direct payment rate of $96 per acre has the potential to receive up to 

about $400,000 annually in direct payments, if it had 10 members who 

met payment eligibility requirements (i.e., $40,000 for each of the 10 

members). By contrast, if this farming operation had only 2 members who 

met payment eligibility requirements, it would receive only $80,000 

annually in direct payments (i.e., $40,000 for each of the 2 members). In 

2004,24

 

22

we reported that some farming operations may have been 

organized to overcome program payment limits and maximize the amount 

of their farm program payments. One of the examples we cited was a 

general partnership consisting of 11 members, several of whom appeared 

to have little involvement in farming operations that received $1 million in 

farm program payments on its 11,900 cropland acres in 2001.

GAO-04-407. 

23These payment eligibility requirements include meeting requirements for being actively 

engaged in farming. 

24GAO-04-407. 

Potential for Farming 

Operations to Receive 

Payments Above the 

Payment Limit
 

Page 12 GAO-13-781 Farm Programs

In June 2013, the Senate approved farm bill legislation that would repeal 

direct payments, counter-cyclical payments, and ACRE payments, while 

creating new farm programs.25 In July 2013, the House of 

Representatives approved farm bill legislation that included similar 

provisions. Some of these farm programs would have payment limits. 

Therefore, if this farm bill legislation is enacted into law, payment limits 

may continue to be a financial consideration for farming operations.

All participants in programs subject to the actively engaged in farming 

requirements must complete a USDA form known as a farm operating 

plan, either for an individual or legal entity.26 The information disclosed 

about the farming operation on this form becomes the basis for the 

determination of payment eligibility.27

 

25S. 954, 113th Cong.

The farm operating plan documents 

the name of each farming operation member, the number of members 

applying for farm payments, the members’ shares of profits and losses, 

and the members’ roles in the farming operation and their claimed 

contributions. FSA’s process for reviewing farm operating plans is shown 

in figure 1.

26USDA revised the regulations for payment limits and payment eligibility to be consistent 

with provisions of the 2008 Farm Bill. FSA directed all farming operations to provide 

updated farm operating plans for 2009. For 2010 and subsequent years, FSA directs 

farming operations that underwent an organizational change during the year to provide 

updated farm operating plans.

27As defined by the Improper Payments Information Act of 2002, as amended, a payment 

to an ineligible recipient is an improper payment. 

FSA’s Process for 

Reviewing Farms’ 

Operating Plans
 

Page 13 GAO-13-781 Farm Programs

Figure 1: FSA’s Process to Review Farm Operating Plans

Note: For farming operations that have six or more members, an FSA state office makes the initial 

determination of whether the members meet requirements for being actively engaged in farming. For 

farming operations that have fewer than six members, an FSA county office makes the initial 

determination. According to FSA officials, after FSA headquarters selects certain farm operations for 
 

Page 14 GAO-13-781 Farm Programs

compliance reviews, FSA state offices then establish review teams composed of state or county 

officials to conduct the reviews.

After farming operations submit completed farm operating plans for farm 

program payments, officials from FSA state or county offices examine the 

operating plan and make an initial determination of the number of farming 

operation members that qualify for payments and whether the members 

meet requirements for being actively engaged in farming. For farming 

operations that have six or more members, an FSA state office makes the 

initial determination. For farming operations that have fewer than six 

members, an FSA county office makes the initial determination.

Each year, FSA headquarters selects certain farm operations for a more 

detailed examination, called an “end-of-year review” (i.e., compliance 

review) to evaluate whether farming operations were conducted as 

represented in the operating plan, including determining whether each of 

the members of the selected farming operation was actively engaged in 

farming. FSA headquarters selects farming operations for compliance 

reviews based on, among other criteria, whether the operation (1) has 

undergone an organizational change in the past year and (2) received 

payments greater than a specified amount.28 FSA headquarters selected 

1,213 and 312 farming operations for 2009 and 2010 compliance reviews, 

respectively.29

FSA headquarters then notifies FSA state offices of the farming 

operations selected for compliance reviews. According to FSA’s 

handbook, state offices may waive compliance reviews under certain 

circumstances. For example, a waiver may be granted if a farming 

operation selected for a compliance review involved only a husband and 

a wife. FSA state offices then establish review teams composed of state 

and county officials to conduct the compliance reviews, according to FSA 

According to FSA officials, given resource constraints, FSA 

limits the number of farming operations selected for compliance reviews 

to better enable state offices to be more thorough in conducting assigned 

reviews.

 

28According to an FSA official, this amount was $80,000 for 2009 and 2010. In addition to 

FSA headquarters’ selection of farming operations, FSA state and county offices may also 

choose to conduct additional compliance reviews of other farming operations in certain 

situations, such as when FSA has reason to believe a farm operating plan was not 

followed as represented. 

29As a point of reference, about 103,000 entities received payments that were subject to 

actively engaged in farming requirements in 2012, according to our analysis of FSA data.
 

Page 15 GAO-13-781 Farm Programs

officials. FSA headquarters expects state offices to complete and report 

their assigned compliance reviews within 12 months of being notified by 

FSA headquarters of which farming operations to review.

In performing compliance reviews, FSA’s handbook on payment eligibility 

and payment limits directs FSA staff to inspect key documents provided 

by farming operations, such as partnership agreements, canceled checks 

and loan documents showing the signature of the applicable farming 

operation members, and narrative summaries of the members’ 

management duties. If the documents provided do not adequately 

establish a significant management contribution for a member, FSA staff 

are to interview the member to assess the member’s knowledge of the 

farming operation and their claimed contribution of management. 

According to FSA officials, to assess claims of significant contributions of 

personal labor, FSA staff are to determine whether the member lived near 

the farming operation and could have provided the claimed labor, as well 

as review documents such as records of hours worked. In addition, FSA 

staff are to review evidence supporting members’ claims of the other 

types of contributions: capital, equipment, and land.

If any partner, stockholder, or member with an ownership interest in a 

farming operation does not meet the actively engaged in farming 

requirements, farm program payments are to be reduced by the 

corresponding share held by that partner, stockholder, or member. FSA is 

then responsible for recovering the payments that are subject to actively 

engaged in farming requirements.

FSA compliance reviews of farming operation members’ claims of 

eligibility to receive payments for being actively engaged in farming are 

hindered by (1) a broad definition of active personal management, (2) 

subjective requirements of what constitutes significant contributions of 

management, and (3) difficulty in verifying individuals’ evidence of 

claimed contributions of active personal management and personal labor. 

Combined, these factors make it difficult for FSA to determine whether an 

individual had made a significant contribution of active personal 

management, potentially allowing individuals who may have had limited 

involvement in a farming operation to receive payments.

FSA Compliance 

Reviews Are Hindered 

by Broad and 

Subjective Eligibility 

Requirements and 

Difficulty Verifying 

Evidence of Members’ 

Claimed 

Contributions 
 

Page 16 GAO-13-781 Farm Programs

Based on our review of FSA’s regulations, its handbook on payment 

eligibility and limitations, and a sample of 2009 and 2010 compliance 

review files and interviews with FSA officials, we found that the definition 

of active personal management is broad and makes it difficult for FSA to 

determine whether an individual had made a significant contribution of 

active personal management.

Under FSA’s regulatory definition, a person is considered to be providing 

active personal management with respect to a farming operation if that 

person is personally providing and participating in (1) the general 

supervision and direction of activities and labor involved in the farming 

operation or (2) services (whether performed on-site or off-site) 

reasonably related and necessary to the farming operation. These 

services may include any of the following:

• supervision of activities necessary in the farming operation,

• business-related actions that include discretionary decision making,

• evaluation of the financial condition and needs of the farming 

operation,

• assistance in structuring or preparing financial reports or analyses for 

the farming operation,

• consultations in or structuring of business-related financing 

arrangements for the farming operation,

• marketing and promotion of agricultural commodities produced by the 

farming operation,

• acquiring technical information used in the farming operation, or

• any other management functions reasonably necessary to conduct 

the farming operation and for which service the farming operation 

would ordinarily be charged a fee.

Similarly, in the FSA handbook, the definition of active personal 

management is broad and can be satisfied by providing any one of the 

Broad Definition of Active 

Personal Management 

Makes It Difficult for FSA 

to Determine Significant 

Contributions in 

Compliance Reviews
 

Page 17 GAO-13-781 Farm Programs

eight services identified in the regulations.30

The FSA regulations are also broad in that they allow farming operation 

members to make significant contributions of active personal 

management without physically visiting the farming operation. This allows 

individuals who live significant distances from the farming operation to 

claim that they made significant contributions of management. According 

to an FSA state office official, compliance reviews find problems with 

management contributions more often for individuals who live significant 

distances from the farming operation than they find for individuals who 

live near the farming operation. We examined address data from FSA’s 

database to review the distances between the addresses of farming 

operations and those of their individual members for the 50 farming 

operations that received the highest payments subject to actively 

engaged in farming requirements in 2012.

This broad range of active 

personal management services makes it possible for farming operations 

to claim payment eligibility for multiple individuals based on their 

management contributions. In some instances, these individuals may 

have little involvement in the farming operation. Management 

responsibilities can be distributed among farming operation members so 

as to increase the number of individuals who can claim eligibility for 

payments based on management contributions. According to FSA 

officials, a farming operation may have a primary manager who makes 

the key decisions with various personal management services being the 

responsibilities of other farming operation members. For example, one 

individual may be responsible for crop insurance and land conservation 

issues, a second individual may be responsible for equipment needs and 

human resources, a third may be responsible for seed and fertilizer 

purchases, and a fourth may be responsible for land acquisition and 

landlord relations.

31

 

30FSA’s regulations and handbook on payment eligibility and payment limits define active 

personal management broadly, in part according to FSA officials, because of how USDA 

interprets congressional intent behind the Farm Program Payments Integrity Act. 

We found that some of the 

individual members who claimed contributions of active personal 

management had addresses that were hundreds of miles from the 

address of the farming operation.

31The 50 farming operations consisted of 49 general partnerships and 1 joint venture. 

When we examined individual members’ address data for the top 50 farming operations, 

we excluded 3 farming operations because we could not find payments based on 

individual members’ contributions of active personal management in FSA’s database.
 

Page 18 GAO-13-781 Farm Programs

In addition, we found that the address data for farming operation 

members are not always accurate in FSA’s database. We compared the 

addresses for individual members with publicly available sources of 

address data and found that a number of these individual members had 

addresses that did not match the address shown in FSA’s database. For 

example, 14 of the 50 farming operations in FSA’s database showed that 

most or all of the individual members had the same address as the 

farming operation, but our analysis of publicly available sources of 

address data found that for all of these 14 farming operations, some of 

the individual members’ addresses did not match the address shown in 

FSA’s database. Based on these publicly available sources, some of 

these individual members’ addresses were hundreds of miles from the 

farming operation address. One of these farming operations, located in a 

Midwestern state, received payments of about $400,000 in 2012, 

according to our analysis of FSA data, and farmed about 25,000 acres, 

according to FSA officials. This farming operation, organized as a general 

partnership, included 6 corporations and 11 individual members of the 

same family who ranged in age from 18 to 88. According to the publicly 

available sources, 2 of the individuals, including the 88-year-old, had

addresses in south Florida. According to an FSA official, these 2 

individuals claimed contributions of active personal management only, 

and the other 9 individuals claimed contributions of a combination of 

active personal management and personal labor. In addition, according to 

the FSA official, the individual whose age was 18 in 2012 first received 

payments in 2010. A compliance review of this farming operation for 2010 

found that all of the members were making their claimed contributions. 

According to an FSA official, the broad definition of active personal 

management is difficult for FSA to apply in compliance reviews of such 

farming operations.

According to an FSA headquarters official, the agency has not formally 

considered changing the definition of active personal management since 

FSA issued final regulations for farm program payment limits and 

payment eligibility in 2010. At that time, FSA stated in responding to the 

public comments in the Federal Register to its interim regulations: “The 

definition of what constitutes a significant contribution is provided by 

regulation, not by statute and could be changed.” Thus, FSA recognizes 

that it has the authority to change the definition of what constitutes a 

significant contribution for active personal management. And according to 

FSA’s summary of the majority of the over 5,000 public comments on the 

proposed regulations, “A more rigorous definition of active personal 

management is needed; too many people per legal entity are qualifying 

for payment eligibility based on only active personal management.” 

Furthermore, without additional criteria or restrictions on the use of 
 

Page 19 GAO-13-781 Farm Programs

management contributions to qualify for payments for which being 

actively engaged in farming is required, the reliability and integrity of 

FSA’s compliance reviews will continue to be uncertain, and the federal 

government risks distributing millions of dollars to individuals who may 

have little actual involvement in farming operations. In April 2004, we 

reported that the lack of a measurable standard for what constitutes a 

significant contribution of active personal management allows individuals 

and entities who may have little involvement in a farming operation to be 

eligible for payments. USDA disagreed with our recommendation, saying 

that its regulations and procedure for determining what constitutes a 

significant contribution of active personal management were consistent 

with the intent of Congress in the Farm Program Payments Integrity Act. 

Thus, no action has been taken to address this issue.

In this report, we have some findings that are similar to those we made in 

2004. However, it appears unlikely that FSA will change its regulatory 

definition of active personal management in view of its 2010 statements in 

the Federal Register that the “current regulatory definition of a significant 

contribution of active personal management has been in effect for over 20 

years” and that “Congress has not mandated a more restrictive definition 

during that time.” In August 2013, a senior-level FSA headquarters official 

said that the agency does not plan to change the regulatory definition of 

active personal management without direction from Congress. In 

deliberations on reauthorizing the 2008 Farm Bill, Congress has recently 

considered statutory changes that would affect the use of active personal 

management. A provision in farm bill legislation approved by the Senate 

in June 2013 would remove active personal management as a condition 

that would satisfy the criteria for actively engaged in farming and would 

require each member of a farming operation to make a significant 

contribution of personal labor to be eligible for payments, with an 

exception that would allow one farm manager per farming operation to 

provide management activities.32 The House of Representatives 

approved farm bill legislation that included a similar provision in July 

2013.33 The timeline for the reauthorization of the Farm Bill is unclear.

 

32S. 954, 113th Cong. (2013). 

33H.R. 2642, 113th Cong. (2013). 
 

Page 20 GAO-13-781 Farm Programs

In reviewing FSA’s regulations, its handbook on payment eligibility and 

limitations, and a sample of 2009 and 2010 compliance review files and 

interviewing FSA officials, we found that the requirements for what 

constitutes a significant contribution of active personal management are 

subjective. Our findings are consistent with what we reported in 200434

FSA’s handbook acknowledges that it is difficult to measure what 

constitutes a significant active personal management contribution. 

According to the handbook, an individual’s or legal entity’s contribution of 

active personal management is to be “critical to the profitability of the 

farming operation, taking into consideration” the individual’s or legal 

entity’s commensurate share in the farming operation. Officials we 

interviewed from several FSA state offices said that determining whether 

a management contribution is critical to the profitability of a farming 

operation is difficult and subject to interpretation.

when we stated that FSA officials acknowledged, that under current 

regulations, only land, equipment, capital, and labor are measurable, and 

that enforcing the current management contribution standard is difficult 

because of its subjective nature.

Such a subjective criterion makes it difficult for FSA to determine whether 

an individual had made a significant contribution of active personal 

management. To demonstrate this issue, an FSA state office official cited 

a 2009 compliance review of a farming operation that consisted of eight 

individual members: an elderly married couple, their three children, and 

the children’s spouses. The parents were the only members who lived 

near the farming operation, which had about 10,000 acres of crops. While 

all eight of the individual members claimed contributions of active 

personal management, the farming operation also employed three paid 

farm managers. FSA compliance reviewers found that the three paid farm 

managers provided the majority of the operation’s management and 

concluded that the eight individuals did not provide significant 

contributions of active personal management. The farming operation 

appealed the compliance review determination to the FSA state 

committee, which upheld the determination. The farming operation then 

appealed to the National Appeals Division, which overturned the 

compliance review determination. According to FSA documentation, the 

National Appeals Division hearing officer stated that the compliance 

 

34GAO-04-407. 

Subjective Eligibility 

Requirements Hinder FSA’s 

Ability to Evaluate 

Claimed Contributions of 

Management
 

Page 21 GAO-13-781 Farm Programs

review determination was erroneous because (1) while one full-time paid 

farm manager and other employees implemented the farming operation 

members’ decisions and performed “routine day-to-day farming operation 

functions,” the eight individual members collectively made the significant 

management decisions and (2) the full-time farm manager’s salary in 

2009 was about 42 percent of what a third-party vendor would charge for 

the same management services, leaving more than 50 percent to be 

contributed by the farming operation’s eight members.35 FSA appealed 

this decision to the National Appeals Division Director. Among other 

things, FSA stated that “There is no regulatory basis or evidence in the 

record to support using this dollar value basis comparison for which the 

hearing officer uses it as a basis for the decision.” In addition, FSA stated 

that “there is nothing that demonstrates exactly what each of these 

supposed members who are seeking to qualify themselves as actively 

engaged separate persons individually decided or actually did that 

impacted the profitability of the farming operation.” However, the National 

Appeals Division Director found the hearing officer’s findings were 

supported by substantial evidence and rejected FSA’s arguments 

regarding the members’ contributions of active personal management. 

FSA stated that it did not agree with the Director’s determination.

In 2003, a USDA commission established to look at the impact of 

changes to payment limitations concluded that determining active 

personal management is very difficult, and lack of clear criteria likely 

facilitates the creation of persons for payment limit purposes. The 

commission’s report stated the following:36

The Commission is concerned that some individuals may become eligible for payments 

even when their active personal management is not contributing in a meaningful way to 

the farming operation. This may occur because of the difficulty of measuring management 

and determining compliance. Hence, the criterion of providing management may present a 

very low threshold for qualifying for payments, thus facilitating creation of persons for 

payment limit purposes.

 

35The National Appeals Division hearing officer’s analysis did not include two employees 

who were considered to have provided management by FSA’s compliance review. 

36U.S. Department of Agriculture, Office of the Chief Economist, Commission on the 

Application of Payment Limitations for Agriculture, Report of the Commission on the 

Application of Payment Limitations for Agriculture (Washington, D.C.: August 2003).

Members’ Claimed 

Management Contributions 

Are Often Difficult to 

Verify
 

Page 22 GAO-13-781 Farm Programs

FSA headquarters and officials from the five state offices we visited 

consistently said that verifying evidence of significant contributions of 

active personal management is challenging. One of the reasons for this 

difficulty is the extent to which compliance reviews must often rely on 

interviews with individual payment recipients. For example, when 

compliance reviewers do not find sufficient documentation to support an 

individual’s claim of a significant contribution of active personal 

management, reviewers should interview the individual to determine his 

or her knowledge of the farming operation and the claimed personal 

management contribution, as outlined in FSA’s handbook. If, following the 

interview, FSA officials determine that an individual did not make a 

significant contribution of active personal management, the individual can 

appeal the decision to the FSA state committee, which may entail, among 

other things, the individual being interviewed for a second time. 

Furthermore, even if the FSA state committee also concludes that the 

individual did not make a significant contribution of management, the 

individual can appeal the decision to USDA’s National Appeals Division, 

which may result in the individual being interviewed a third time. 

According to FSA officials, during appeal interviews, individuals with little 

involvement in farming operations can overstate their management 

contributions by giving rehearsed answers or providing new information 

that has not been verified, often with assistance of hired consultants. For 

example, in a case file document responding to a National Appeals 

Division decision to overturn a compliance review determination, FSA 

stated the management contributions were not accurately represented. In 

addition, FSA stated the farming operation had “hired a representative 

who has now come up with an entirely different explanation of each 

partner’s actual duties and activities.” This indicates the concern of some 

FSA officials that the characterization of management contributions can 

change over time, making it difficult for them to verify claims of such 

contributions.

In another example cited by an FSA state official, FSA did a compliance 

review of a farming operation that had eight individual members from the 

same family who each claimed to be making a significant contribution of 

active personal management. The compliance review determined that 

four of the individuals did not make a significant contribution. According to 

an FSA official, this determination was based in part on interviews of 

these four individuals who appeared to have limited knowledge of the 

farming operation and did not provide information that confirmed their 

personal management contributions. In addition, the four individuals did 

not live close to the farming operation. The farming operation appealed 

the compliance review determination to the FSA state committee, and the 
 

Page 23 GAO-13-781 Farm Programs

four individuals were interviewed again. Based on these interviews and 

the individuals’ written statements, the FSA state committee overturned 

the compliance review’s determination for three of the individuals and 

upheld the compliance review’s determination for the fourth individual. 

The farming operation then appealed the determination on the fourth 

individual to USDA’s National Appeals Division, and the fourth individual 

was interviewed for a third time. In the third interview, according to the 

FSA official, the individual demonstrated more knowledge of the farming 

operation and provided more information about the claimed management 

contribution. Based on the interview and the individual’s written 

statement, the National Appeals Division overturned the determinations of 

the compliance review team and the FSA state committee and found that 

the individual had made a significant management contribution. According 

to the official, these changes in both the written statements and interviews 

show how the characterization of management contributions can change 

over time, making it difficult for FSA to verify them.

Even with FSA’s regulations providing a quantifiable standard of a 

significant contribution of personal labor, it can be difficult for FSA officials 

to verify farming operation members’ claims of personal labor 

contributions.37 While FSA compliance review staff who are located near 

a farming operation can generally determine whether an individual lived 

near a farming operation and could have provided the claimed personal 

labor, those review staff may not be able to verify that the individual 

actually performed the required hours of labor. For example, the evidence 

available to review staff may be limited to reviewers’ own anecdotal 

observations of the individual’s activities throughout the year. 

Furthermore, if the review staff were not located near the farming 

operation, they may not have access even to such anecdotal 

observations.38

In addition, it may be difficult for compliance reviewers to verify that an 

individual’s labor contribution is “at risk,” as described in FSA’s handbook. 

 

37According to FSA’s handbook, the quantifiable standard of a significant contribution of 

personal labor is an amount that is the smaller of 1,000 hours annually or 50 percent of 

the total hours that would be required to conduct a farming operation comparable in size 

to the individual’s or legal entity’s commensurate share in the farming operation. 

38FSA staff who perform reviews may be located in another part of the state.

Members’ Claimed 

Contributions of Personal 

Labor Can Be Difficult for 

FSA to Verify
 

Page 24 GAO-13-781 Farm Programs

That is, there must be a possibility that the individual could suffer a 

financial loss.39 However, according to an FSA official, it may be difficult 

for compliance reviewers to determine that an individual was not 

compensated for labor because the individual could receive 

compensation from arrangements established outside of the farming 

operation. For example, some large farming operations engage in 

transactions with nonfarming operations that may be owned or have close 

ties to the farming operation’s partners. These transactions include 

activities such as purchasing the farming operation’s goods and 

services—including land, equipment, and capital—and also selling the 

farming operation’s crops. Such business arrangements may enable 

nonfarming operations to compensate an individual for labor provided to a 

farming operation.

Most state offices did not complete and report their assigned 2009 and 

2010 compliance reviews within FSA’s expected time frame (i.e., within 

12 months of being notified by FSA headquarters of which farming 

operations to review), according to our analysis of compliance review 

summary documents that state offices submitted to FSA headquarters. 

FSA headquarters did not always know the status and results of the 

reviews for oversight purposes. For those reviews reported in 2009 and 

2010 in FSA’s compliance review database, FSA almost always 

determined that individual members of farming operations met the 

standards for a significant contribution of active personal management or 

personal labor as claimed.

 

39An individual could suffer a financial loss if the farming operation lost money and he or 

she had provided unpaid labor as a partner in the farming operation.

Most State Offices Did 

Not Complete and 

Report Compliance 

Reviews in a Timely 

Manner, and Almost 

Always Found That 

Members Made Their 

Claimed 

Contributions 
 

Page 25 GAO-13-781 Farm Programs

Most state offices exceeded FSA’s expected time frame in completing 

and reporting the results of their assigned 2009 and 2010 compliance 

reviews.40

FSA expects state offices to complete and report their assigned 

compliance reviews within 12 months of being notified by FSA 

headquarters of which farming operations to review, according to an FSA 

headquarters official. The 2009 and 2010 assigned reviews were to be 

completed and reported by August 1, 2011, and December 1, 2012, 

respectively. According to our analysis of compliance review summary 

documents that state offices submitted to FSA headquarters, state offices 

completed and reported about 24 percent of their 889 assigned 2009 

compliance reviews and about 14 percent of their 305 assigned 2010 

compliance reviews within FSA’s expected time frame.

Some state offices did not report compliance review results on 

time because they waited to submit reports to FSA headquarters until 

they had completed all of their assigned reviews, according to an FSA 

headquarters official. Thus, some reviews were completed but not 

reported.

41 At the state 

office level, 12 of the 33 state offices with assigned 2009 compliance 

reviews completed and reported their reviews on time, and 21 did not. For 

2010 reviews, 7 of the 26 state offices with assigned compliance reviews 

completed and reported their reviews on time, and 19 did not.42

 

40According to an FSA official, assigned compliance reviews are those reviews that 

remain after FSA state offices waive reviews of some farming operations. 

Furthermore, as of June 2013, 13 state offices had not completed and 

reported the results of the compliance reviews assigned in 2009, and 15 

state offices had not completed and reported the results of the 

compliance reviews assigned in 2010. In this regard, as of June 2013, 

about a third of compliance reviews assigned in 2009 had been 

completed and reported by state offices, meaning that 70 percent had not 

been completed and reported. Compliance reviews assigned in 2010 

41FSA headquarters selected 1,213 and 312 farming operations for 2009 and 2010 

compliance reviews, respectively. According to FSA’s handbook, FSA state offices could 

waive compliance reviews of farming operations that met certain criteria. After waivers 

were granted, the assigned compliance reviews that remained were 889 reviews for 2009 

and 305 reviews for 2010. As a point of reference, about 103,000 entities received 

applicable payments in 2012, according to our analysis of FSA data. 

42According to an FSA headquarters official, FSA headquarters does not always assign 

compliance reviews to every FSA state office for each year because some states do not 

have any farming operations that meet FSA’s selection criteria. 

Most State Offices 

Completed and Reported 

Compliance Reviews Late, 

and Headquarters Did Not 

Always Know the Reviews’ 

Status 
 

Page 26 GAO-13-781 Farm Programs

fared slightly better, as of that date, with 40 percent having been 

completed and reported by state offices. Table 2 shows the extent to 

which state offices completed and reported the results of their 2009 and 

2010 compliance reviews within FSA’s expected time frame as of June 

2013.

Table 2: Status of Assigned Compliance Reviews of Farming Operations within the Farm Service Agency’s (FSA) Expected 

Time Frame, 2009 and 2010 

Assigned reviews completed and reported 

by state offices within FSA’s time framea Assigned reviews completed and reported 

by state offices as of June 2013

Review 

year

Reviews assigned 

to state offices by 

headquarters Number Percentage Number Percentage 

2009 889 215 24.2 261 29.4

2010 305 44 14.4 120 39.3

Source: GAO analysis of FSA data.

Note: According to FSA officials, the large difference between the number of reviews assigned in 

2009 and 2010 was because 2009 was the first year after the 2008 Farm Bill was enacted, 

necessitating USDA’s revisions of its regulations for payment limits and payment eligibility. As a 

result, FSA directed all farming operations to provide updated farm operating plans for 2009. FSA 

officials said that, after 2009 and subsequent years, FSA only required updated farm operating plans 

from farming operations that underwent an organizational change during the year.

a

Moreover, in our interviews with FSA officials, we found that FSA 

headquarters did not always know the status and results of state offices’ 

2009 and 2010 assigned compliance reviews for oversight purposes. In 

some cases, FSA headquarters was not aware that state offices had not 

started their assigned 2009 and 2010 compliance reviews. For example, 

when we first contacted one state office in October 2012, it had not yet 

begun conducting its 2009 and 2010 compliance reviews. Until we 

brought this matter to FSA headquarters’ attention, they were unaware 

that the office had not started its reviews. Similarly, FSA headquarters did 

not know the status of 2009 and 2010 compliance reviews assigned to 

several other state offices when we discussed this issue with them in 

November 2012. This finding is consistent with what we found in our April 

2004 report, where FSA headquarters officials were also not aware of 

some state offices not conducting compliance reviews for several years. 

With a delayed awareness of several years, FSA cannot reasonably 

assess the level of recipients’ compliance with the act and may be 

missing opportunities to recapture payments that were made to ineligible 

recipients. Officials in the five state offices we visited cited travel budget 

constraints and competing priorities as the main reasons why compliance 

reviews were not completed and reported on time. In addition, FSA 

FSA’s expected time frame is within 12 months of being notified by FSA headquarters of which 

farming operations to review.
 

Page 27 GAO-13-781 Farm Programs

headquarters officials said that budget constraints in recent years affected 

state offices’ staffing levels and may have also affected their ability to 

start and in turn complete 2009 and 2010 compliance reviews on time.43

To improve its ability to monitor the status and results of compliance 

reviews, in May 2013, FSA implemented the End-of-Year Review 

Tracking System, a database available to state and county FSA officials 

to electronically report their assigned compliance reviews’ status and 

results. Prior to the database’s implementation, states would mail or fax to 

FSA headquarters the results of their assigned compliance reviews, 

according to an FSA official. An FSA headquarters official said FSA 

expects to use the database to collect, track, and analyze compliance 

reviews. The official told us that FSA also foresees using the database to 

conduct various analyses, including of compliance review results to 

enforce program payment limits. However, the database does not have 

the capacity to generate reports from specific queries, such as those 

related to individual farming operation members’ claimed contributions. 

Without the capacity to generate queries related to farming operation 

members’ contributions of management and labor, the analyses that FSA 

can conduct for oversight purposes are limited. Moreover, as of July 

2013, FSA had not developed a time frame or specific plan for using the 

End-of-Year Review Tracking System to conduct oversight and support 

programmatic decisions. FSA officials cited competing priorities, such as 

conducting other payment eligibility oversight responsibilities, as reasons 

why the agency had not developed a time frame and plan for using the 

database. In the absence of a specific plan and time frame for using the 

database, however, there is no guarantee that FSA will fully utilize the 

End-of-Year Review Tracking System and realize the intended benefits of 

the database.

For example, budget cuts in fiscal years 2011 and 2012 resulted in a 12.5 

percent reduction of field office staff, according to FSA headquarters 

officials.

FSA’s handbook highlights the importance of compliance reviews in the 

oversight of implementation of payment eligibility provisions. More 

 

43According to FSA officials, completing compliance reviews is labor intensive. FSA 

officials generally said they do not track the staff days used to complete reviews. One 

official estimated that completing one compliance review generally takes about 2 staff 

days but could take more if a farming operation has many members or appeals a review 

determination. 
 

Page 28 GAO-13-781 Farm Programs

specifically, FSA’s handbook states that compliance reviews help 

maintain the integrity of farm program payment eligibility provisions. For 

example, in its 2009 and 2010 compliance reviews, one state office said it 

identified potential fraud in eight related farming operations with members 

who were related and referred them to USDA’s Office of Inspector 

General for further investigation. Compliance reviews serve as FSA’s 

internal control for its farm program payments and safeguard the 

agency’s assets by preventing and detecting errors and fraud. According 

to the federal standards of internal control, such control should be 

designed to provide reasonable assurance regarding the prevention of or 

prompt detection of unauthorized acquisition, use, or disposition of an 

agency’s assets. The substantial delays we identified in state offices’ 

completing and reporting compliance reviews to FSA headquarters and 

FSA headquarters’ not being aware of the status of compliance reviews in 

some state offices weakens the reviews’ effectiveness as an oversight 

tool and as internal control. This undermines FSA’s ability to identify 

fraud, waste, and abuse and avert potential improper payments, as well 

as enforce farm program legislation and related regulations.

Our analysis of 2009 and 2010 compliance reviews reported by selected 

FSA state offices (11 and 9, respectively)44 found that farming operation 

members in most of these states always met the requirements for a 

significant contribution of active personal management or personal labor 

as they had claimed.45

Table 3 shows the results of the 2009 compliance reviews that were 

completed by 11 selected state offices and reported to FSA’s End-of-Year 

Review Tracking System, as of April 2013. These compliance reviews 

covered 202 farming operations and included a total of 775 members.

 

44The results for 2009 are from 11 states with 202 farming operations. The results from 

2010 from 9 states are from 119 farming operations.

45These results are not generalizable to all compliance reviews that were completed and 

reported for all state offices for 2009 and 2010. As of April 30, 2013, 33 and 26 FSA state 

offices, respectively, reported 2009 and 2010 compliance review results in FSA’s End-ofYear Review Tracking System. However, we examined compliance review results for 11 

and 9 FSA state offices, respectively, for 2009 and 2010 because these state offices 

completed and reported at least 70 percent of their assigned reviews. As noted, we 

excluded the results of compliance reviews from state offices that completed and reported 

less than 70 percent of their assigned reviews because those results would not be 

representative of those offices’ compliance reviews results.

Compliance Reviews from 

Most Selected State 

Offices Found That 

Members Had Made Their 

Claimed Contributions
 

Page 29 GAO-13-781 Farm Programs

The compliance reviews reported by 10 of the 11 state offices found that 

farming operation members always met the requirements for making a 

significant contribution of active personal management, personal labor, or 

a combination of active personal management and personal labor as they 

had claimed. In total, 688 out of 775 farming operation members claimed 

contributions of active personal management, either active personal 

management only, or a combination of active personal management and 

personal labor, and the compliance reviews found that 684 of these 688 

members made the contribution they claimed.46

Table 3: Members’ Contributions in Farming Operations Reported by 11 Farm Service Agency (FSA) State Offices, 2009 

As we mentioned earlier, 

an FSA official said the broad definition of active personal management is 

difficult for FSA to apply in compliance reviews of farming operations.

Active personal 

management contribution 

(only)

Personal labor contribution 

(only)

Combination of active 

personal management and 

personal labor contribution

State 

Number of 

members

Members 

claiming 

Members 

meeting

Members 

claiming 

Members 

meeting 

Members 

claiming 

Members 

meeting 

Arkansas 429 304 304 57 57 68 68

Alabama 53 29 29 21 21 3 3 

Georgia 55 48 48 0 0 7 7 

Iowa 34 0 0 0 0 34 30

Louisiana

a

77 58 58 0 0 19 19

Michigan 29 9 9 0 0 20 20

Nebraska 74 15 15 9 9 50 50

Nevada 8 0 0 0 0 8 8 

Utah 3 0 0 0 0 3 3 

Virginia 7 7 7 0 0 0 0 

Wisconsin 6 0 0 0 0 6 6 

Total 775 470 470 87 87 218 214

Source: GAO analysis of FSA data.

Note: This table includes compliance review results for the 11 state offices that completed and 

reported 70 percent or more of their assigned 2009 reviews to FSA’s End-of-Year Review Tracking 

System, as of April 2013.

 

46If any partner, stockholder, or member with an ownership interest in a farming operation 

does not meet the actively engaged in farming requirements, farm program payments are 

to be reduced by the corresponding share held by that partner, stockholder, or member. 

FSA is then responsible for recovering the payments that are subject to actively engaged 

in farming requirements.
 

Page 30 GAO-13-781 Farm Programs

a

Table 4 shows the results from the 2010 compliance reviews that were 

completed by 9 selected state offices and reported to FSA’s End-of-Year 

Tracking System, as of April 2013. These compliance reviews covered 

119 farming operations and included a total of 831 members. Similar to 

the 2009 compliance review results, results from the 2010 compliance 

reviews show that most states found that farming operation members 

always met the requirements for making a significant contribution of 

active personal management, personal labor, or a combination of active 

personal management and personal labor as they had claimed.

For instances in which FSA compliance reviewers determined that a member had not made the 

claimed contribution, FSA’s End-of-Year Review Tracking System does not specify why the member 

did not meet the claimed contribution and does not include information on subsequent actions, such 

as whether the member appealed the compliance review’s determination.

Table 4: Members’ Contributions in Reviewed Farming Operations Reported by 9 Farm Service Agency (FSA) State Offices, 

2010

Active personal 

management contribution 

(only)

Personal labor contribution 

(only)

Combination of active 

personal management and 

personal labor contribution

State 

Number of 

members

Members 

claiming 

Members 

meeting

Members 

claiming 

Members 

meeting 

Members 

claiming 

Members 

meeting 

Alabama 37 37 37 0 0 0 0 

Arizona 122 109 103 0 0 13 6

Arkansas 

a

431 217 217 160 160 54 54

Colorado 14 8 8 0 0 6 6 

Indiana 60 45 45 0 0 15 15

Iowa 32 12 12 0 0 20 20

Kansas 27 21 17 0 0 6 5

Missouri

a

71 52 51 7 7 12 6

Tennessee

a

37 33 33 0 0 4 4 

Total 831 534 523 167 167 130 116

Source: GAO analysis of FSA data.

Note: This table includes compliance review results for the 9 state offices that completed and 

reported 70 percent or more of their assigned 2010 reviews to FSA’s End-of-Year Review Tracking 

System, as of April 30, 2013.

a

For instances in which FSA compliance reviewers determined that a member had not made the 

claimed contribution, FSA’s End-of-Year Review Tracking System does not specify why the member 

did not meet the claimed contribution and does not include information on subsequent actions, such 

as whether the member appealed the compliance review’s determination.
 

Page 31 GAO-13-781 Farm Programs

In examining the distribution and amount of FSA’s 2012 farm payments to 

farming operations by type of entity, general partnerships received both 

the highest total and average payments. General partnerships received 

most of their total payments based on individual farming operation 

members’ claims of contributing active personal management. Moreover, 

general partnerships’ percentage of payments based on individual 

members’ claims of contributing active personal management were 

highest for those general partnerships with the greatest number of 

individual members.

In 2012, approximately $1.5 billion in federal farm program payments 

subject to actively engaged in farming requirements were distributed to 

103,235 entities. Among these entities, general partnerships received the 

highest total and average payments. Of these entities, 27,515 general 

partnerships received $736 million or about half of the total payments 

made to entities, and an average payment of approximately $27,000, as 

shown in table 5. Joint ventures received an average payment of about 

$21,000. Corporations and limited liability companies received average 

payments of about $12,000 and $7,000, respectively. Other entities, such 

as limited partnerships, received an average payment of about $3,700.

These results are consistent with the findings of our 2004 report.47 In 

2004, we analyzed 2001 farm program payments subject to actively 

engaged in farming requirements by type of entity, and we found that 

general partnerships received higher average total payments relative to 

the other entity types. One reason general partnerships receive higher 

payments is that they can receive a payment amount up to the applicable 

payment limit for each member—individual or entity—who meets payment 

eligibility requirements.48

 

47

In contrast, corporations, limited liability 

companies, and other entity types can only receive a payment amount up 

to the applicable payment limit.

GAO-04-407. 

48This also applies to joint ventures. 

General Partnerships 

Received the Highest 

Payments and Had the 

Highest Percentage of 

Payments Based on 

Members’ Claims of 

Active Personal 

Management 

Among Entities, General 

Partnerships Received the 

Highest Total and Average 

Payments
 

Page 32 GAO-13-781 Farm Programs

Table 5: Distribution and Amount of Farm Program Payments by Type of Entity, 2012 

Entities Payments 

Type of entity Number Percentage Total Percentage Average (per entity)

General partnerships 27,515 26.7 $735,957,088 49.6 $26,747

Joint ventures 6,010 5.8 125,396,872 8.5 20,865

Corporations 35,695 34.6 433,437,040 29.2 12,143

Limited liability companies 19,067 18.5 132,557,639 8.9 6,952

Othera 14,948 14.5 55,337,128 3.7 3,702

Total 103,235 100.0b $1,482,684,635 100.0 $14,363 b

Source: GAO analysis of FSA data.

Note: The farm program payments in this table are the payments that are subject to actively engaged 

in farming requirements and farm program payments to individuals are not included in this table.

a

Includes limited partnerships, irrevocable and revocable trusts, estates, and individuals operating as 

a small business. Individuals operating as a small business are considered an entity type and are not 

individuals.

b

Percentages may not total to 100 because of rounding.

General partnerships received a high proportion of their farm program 

payments subject to actively engaged in farming requirements based on 

individual members’ claims of contributing active personal management, 

either active personal management only or active personal management 

in combination with personal labor. Our analysis of FSA’s 2012 farm 

program payments found that general partnerships received 97 percent of 

their total farm program payments based on individual members’ claims 

of contributing active personal management, either active personal 

management only (27 percent) or active personal management in 

combination with personal labor (70 percent). Of general partnerships’ 

total farm program payments, 3 percent were based on individual 

members’ claims of contributing personal labor only.49

 

49Our analysis of farm program payments based on individual members’ claims of 

contributing active personal management only, personal labor only, or a combination of 

active personal management and personal labor is limited to those payments associated 

with recipients’ contributions that were included in FSA’s contributions database. For 

example, our analysis of general partnerships includes approximately 90 percent of the 

payments distributed to general partnerships because (1) at the time of our analysis these 

data were continuing to be updated and were gradually becoming more complete and (2) 

not all payment recipients are flagged for contributions of active personal management, 

personal labor, or a combination in FSA’s contributions database. 

(See app. IV for 

additional information on payments to general partnerships.) Furthermore, 

General Partnerships and 

Joint Ventures Received 

Most of Their Payments 

Based on Individual 

Members’ Claims of Active 

Personal Management
 

Page 33 GAO-13-781 Farm Programs

general partnerships with the highest number of individual members 

received the greatest percentage of total farm program payments based 

on individual members’ claims of contributing only active personal 

management. For example, as shown in figure 2, general partnerships 

with two individual members received approximately 13 percent of their 

total farm program payments based on such members’ claims of 

contributing only active personal management. However, general 

partnerships with 11 or more individual members received approximately 

84 percent of their total farm program payments based on individual 

members’ claims of contributing only active personal management.

Figure 2: Percentage of General Partnerships’ Farm Program Payments That Were 

Based on Claims of Active Personal Management Only, Categorized by Number of 

Individual Members in the General Partnerships, 2012

We found similar results for joint ventures, which received 99 percent of 

their total farm program payments based on individual members’ claims 

of contributing active personal management, either active personal 

management only or active personal management in combination with 

personal labor, and 1 percent of their payments based on individual 
 

Page 34 GAO-13-781 Farm Programs

members’ claims of contributing personal labor only.50

The 50 entities receiving the highest farm program payments in 2012 had 

an average of about $395,000 in payments and about 10 individual 

members claiming contributions. Table 6 shows a selection of entities 

across different states that were among these 50 entities, listing their 

payments as well as their number of members, and the number of 

individuals claiming significant contributions of active personal 

management, personal labor, or a combination of active personal 

management and personal labor. As shown in this table, each of these 

entities had 6 or more individuals claiming contributions, and for all but 1 

of the entities, the payments were based on all individuals’ claiming 

contributions of only active personal management. For example, the 

farming operation that received the highest payments subject to actively 

engaged in farming requirements in 2012 was a general partnership that 

received $651,910 based on 16 individual members’ claims of 

contributing only active personal management. A compliance review of 

this farming operation for 2010 found that all members had made their 

claimed contributions of active personal management.

(See app. V for 

additional information on payments to joint ventures.)

 

50Footnote 49 also applies to our analysis of joint ventures. 
 

Page 35 GAO-13-781 Farm Programs

Table 6: Farm Program Payments and Claimed Contributions of Active Personal Management, Personal Labor, or a 

Combination for Selected Examples of General Partnerships, 2012 

Entity 

example Payments State 

Number of 

members

Number of 

individual 

members a

Number of 

individual 

members claiming

active personal 

management 

(only) b

Number of 

individual 

members 

claiming 

personal 

labor (only) 

Number of 

individual 

members 

claiming 

combination of 

active personal 

management and 

personal labor

1 $651,910 Louisiana 22

(all limited liability 

companies)

20

(includes 4 

spouses)

16

(plus 4 spouses)

0 0 

2 $582,876 Arkansas 26

(all corporations)

26

(includes 5 

spouses)

6 

(plus 1 spouse)

0 15

(plus 4 spouses)

3 $440,000 Mississippi 11

(all individuals)

11

(includes 5 

spouses)

6 

(plus 5 spouses)

0 0 

4 $399,027 Arizona 10

(9 corporations and 1 

general partnership)

11 11 0 0 

5 $376,610 Indiana 11

(7 corporations and 4 

individuals)

11

(includes 1 

spouse)

10

(plus 1 spouse)

0 0 

6 $372,365 California 15

(all individuals)

15

(includes 5 

spouses)

10

(plus 5 spouses)

0 0 

Source: FSA state office officials.

Notes:

From the 50 entities that received the highest payments subject to actively engaged in farming in 

2012, we selected examples from 6 states to reflect geographic diversity. Each of these selected 

entities is a general partnership.

Members of a general partnership can be individuals or entities (e.g., corporations or limited liability 

companies). Each member represents one limitation for payment limitation purposes.

Spouses may both be considered “actively engaged in farming” and qualify for farm program 

payments if one spouse makes the requisite contributions to meet the actively engaged in farming 

requirements.

a

The number of members consists of the number of entities and individuals who are members of the 

general partnership.

b

The number of individual members includes individuals who are members of the general partnership 

as well as individuals who are members of entities within the general partnership.
 

Page 36 GAO-13-781 Farm Programs

The Farm Program Payments Integrity Act established eligibility criteria 

that limit payments to individuals and entities that are actively engaged in 

farming while allowing farming operations to maximize the receipt of farm 

program payments as long as all farming operation members meet 

eligibility requirements. FSA administers the act and exercises oversight 

of the over $5 billion annually distributed in farm program payments, 

which is challenging, as well as time and resource-intensive. 

Nevertheless, as federal fiscal pressures continue, it is important to 

ensure that farm program payments do not go to individuals or entities 

with little involvement in farming. FSA’s compliance reviews of individuals’ 

and entities’ eligibility to receive payments for being actively engaged in 

farming are complicated by broad and subjective criteria for what 

constitutes “significant” contributions of active personal management and 

difficulty in verifying individuals’ evidence of their claimed management 

contributions. FSA recognizes that it has the authority to change the 

definition of what constitutes a significant contribution for active personal 

management, but, as stated in its 2010 rulemaking, FSA also believes 

that the current statute does not support a change in its regulations to 

create a more restrictive definition of management contributions. Without 

modification of the definition of management contributions to qualify for 

being actively engaged in farming, the reliability and integrity of FSA’s 

compliance reviews will continue to be uncertain, and the federal 

government risks distributing millions of dollars to individuals who may 

have little actual involvement in farming operations at a time of fiscal 

constraints. In April 2004, we reported that the lack of a measurable 

standard for what constitutes a significant contribution of active personal 

management allows individuals and entities who may have little 

involvement in a farming operation to be eligible for payments. However, 

USDA disagreed with our recommendation, saying that its regulations 

and procedures for determining what constitutes a significant contribution 

of active personal management were consistent with the intent of 

Congress in the Farm Program Payments Integrity Act. Thus, no action 

has been taken to address this issue. In this report, we made findings that 

are similar to those we made in 2004. In deliberations on reauthorizing 

the 2008 Farm Bill, both the Senate and the House of Representatives 

have recently considered statutory changes that would allow one person 

per farming operation to contribute management activities as a condition 

that would satisfy the criteria for actively engaged in farming. The timeline 

for the reauthorization of the Farm Bill is unclear. In August 2013, a 

senior-level FSA headquarters official said that the agency does not plan 

to change the regulatory definition of active personal management 

without direction from Congress.

Conclusions 
 

Page 37 GAO-13-781 Farm Programs

Moreover, FSA headquarters did not always know the status and results 

of the completion and reporting of state offices’ 2009 and 2010 assigned 

compliance reviews for oversight purposes, when state offices completed 

and reported only 24 percent and 14 percent, respectively, of their 

reviews within FSA’s expected time frame. To the extent that FSA 

headquarters is not aware of state offices’ delays in completing and 

reporting reviews, the effectiveness of its compliance reviews as an 

oversight tool is weakened. To its credit, in May 2013 FSA implemented a 

database (End-of-Year Review Tracking System) that it intends to use for 

improving its ability to monitor the status of compliance reviews and 

analyzing their results. However, as of July 2013, FSA had not developed 

a time frame or specific plan for using the database to conduct oversight 

and support programmatic decisions, and the database does not have the 

capacity to generate reports from specific queries, such as those related 

to individual farming operation members’ claimed contributions. Until FSA 

develops a plan and time frame for using the database, including using it 

to generate specific queries, however, there is no guarantee that FSA will 

fully utilize the database and realize its intended benefits, including to 

generate reports from specific queries.

To reduce the risk that individuals who have little involvement in a farming 

operation use the active personal management provision to qualify for 

farm program payments, Congress should consider modifying the 

definition of contributions of management activities as a condition that 

would satisfy the criteria for being actively engaged in farming, either as 

both the Senate and the House of Representatives did in recent 

deliberations on reauthorizing the Farm Bill, or in other ways designed to 

make the criteria for such contributions more clear and objective.

To better monitor the status of compliance reviews and analyze their 

results to ensure the integrity of farm program payment limitations and 

payment eligibility provisions, we recommend that the Secretary of 

Agriculture direct the Administrator of the Farm Service Agency to 

establish a plan and a time frame for using the End-of-Year Review 

Tracking System database to conduct oversight and support 

programmatic decisions, including to generate reports from specific 

queries.

We provided the Secretary of Agriculture with a draft of this report for 

review and comment. In an e-mail received September 12, 2013, the 

Matter for 

Congressional 

Consideration 

Recommendation for 

Executive Action

Agency Comments
 

Page 38 GAO-13-781 Farm Programs

Farm Service Agency’s Director, Operations and Analysis Staff, stated 

that the Farm Service Agency concurred with our report’s findings and 

recommendation and had no other comments.

As agreed with your office, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of 

Agriculture, the appropriate congressional committees, and other 

interested parties. In addition, the report will be available at no charge on 

the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or fennella@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. Key contributors to this report are listed in 

appendix VI. 

Sincerely yours,

Anne-Marie Fennell

Director, Natural Resources and Environment
Appendix I: Common Ways Farmers Organize 

Their Farming Operations

Page 39 GAO-13-781 Farm Programs

Farmers organize their farming operations in various ways to reduce their 

exposure to the financial risks of farming. For example, certain business 

structures may limit a farmer’s liability when the farming operation has 

legal problems or debt that cannot be paid from its farm earnings. Some 

of the most common ways farmers organize their business and how these 

business organizations are treated under payment limitation rules are as 

follows:

• Sole proprietorship. Most farming operations are owned, operated, 

and managed by a single individual. A sole proprietorship has no legal 

existence independent of its owner, which means that only the owner, 

not the farming operation, can be sued. Owners of sole 

proprietorships are personally liable for all their farm’s debts.

• Joint ventures. A joint venture is defined by the Farm Service Agency 

(FSA) as a short-term association of individuals or entities, where the 

association exists without an actual partnership. As with sole 

proprietorships, joint operations have no legal existence independent 

of their owners. The liability for debts is shared by the joint venture’s 

members

• General partnerships. A general partnership is composed of two or 

more individuals or entities, formed under state law, and subject to the 

terms of a formalized agreement. In a general partnership, 

responsibility for management, profits, and, the liability for debts is 

shared by the members. FSA makes farm program payments directly 

to the partnership rather than to the individual partners, which may be 

individuals or entities. Each partner may be able to qualify the general 

partnership for additional payments equal to the applicable payment 

limit. Each partner is personally liable for his or her own conduct and 

for the conduct of those under his or her direct supervision, as well as 

negligence, wrongful acts, and misconduct of other partners and 

partnership employees. Partners are personally liable for partnership 

commercial obligations such as loans or taxes.

• Corporations. Corporations have a separate legal existence from their 

owners, meaning that the corporation rather than the owners is 

ordinarily responsible for farm business debts, and the corporation 

can be sued. As a result, some individuals may choose the corporate 

form of farm business organization to protect their personal assets in 

case of farm financial difficulties.

• Limited liability companies. Limited liability companies are a hybrid 

form of business entity because they have the limited liability feature 

Appendix I: Common Ways Farmers Organize 

Their Farming Operations
Appendix I: Common Ways Farmers Organize 

Their Farming Operations

Page 40 GAO-13-781 Farm Programs

of a corporation and the income tax treatment of a general 

partnership. Their owners are called members.

• Limited liability partnerships. Limited liability partnerships, another 

hybrid organizational form, eliminate the liability of an individual 

partner for negligence, wrongful acts, and misconduct of other 

partners and partnership employees. Each partner remains personally 

liable for his or her own conduct and for the conduct of those under 

his or her direct supervision. Partners remain personally liable for 

partnership commercial obligations such as loans or taxes.

• Limited partnerships. Limited partners in a limited partnership are 

investors whose liability for partnership financial obligations is only as 

great as the amount of their investment. A limited partnership must 

have at least one general partner who manages the farm business 

and who is fully liable for partnership financial obligations to be 

considered eligible for farm program payments.

• Other. Other types of entities that may qualify as one member under 

current payment limitation rules include an irrevocable trust, a 

revocable trust combined with the grantor of the trust, an estate, or a 

charitable organization.
Appendix II: Farming Operations That Farm 

Service Agency Headquarters Selected for 

2009 and 2010 Compliance Reviews, by State

Page 41 GAO-13-781 Farm Programs

FSA headquarters annually selects certain farming operations for 

compliance reviews to determine whether they carried out their operating 

plans as represented when FSA made its initial determination of whether 

farming operation members satisfied actively engaged in farming 

requirements. To select farming operations for compliance reviews, FSA 

uses various criteria, such as whether a farming operation underwent an 

organizational change in the past year. Table 7 shows the number of 

farming operations by state that FSA headquarters selected for 2009 and 

2010 compliance reviews. (According to an FSA official, these are the 

most recent years for which state office compliance reviews had been 

completed and reported to FSA headquarters at the time of our review.)

The 2009 and 2010 assigned reviews were to be completed and reported 

by August 1, 2011, and December 1, 2012, respectively.

Table 7: Farming Operations that Farm Service Agency (FSA) Headquarters Selected for 2009 and 2010 Compliance Reviews, 

by State

State 

Number of farming operations selected 

by Farm Service Agency headquarters for 

2009 compliance reviews

Number of farming operations selected by Farm 

Service Agency headquarters for 

2010 compliance reviews

Alabama 24 7 

Arizona 47 18

Arkansas 185 64

California 40 28

Colorado 0 3 

Delaware 1 0 

Florida 1 0 

Georgia 19 11

Idaho 11 5 

Illinois 83 4 

Indiana 26 7 

Iowa 47 4 

Kansas 71 5 

Kentucky 0 2 

Louisiana 51 22

Michigan 7 1 

Minnesota 15 5 

Mississippi 211 69

Missouri 63 10

Nebraska 51 4 

Nevada 1 0 

Appendix II: Farming Operations That Farm 

Service Agency Headquarters Selected for 

2009 and 2010 Compliance Reviews, by State
Appendix II: Farming Operations That Farm 

Service Agency Headquarters Selected for 

2009 and 2010 Compliance Reviews, by State

Page 42 GAO-13-781 Farm Programs

State 

Number of farming operations selected 

by Farm Service Agency headquarters for 

2009 compliance reviews

Number of farming operations selected by Farm 

Service Agency headquarters for 

2010 compliance reviews

New Mexico 1 0 

New York 3 0 

North Carolina 4 1 

North Dakota 11 0 

Ohio 13 3 

Oklahoma 7 1 

Oregon 3 1 

South Carolina 0 2 

South Dakota 14 0 

Tennessee 16 6 

Texas 134 27

Utah 1 0 

Virginia 1 0 

Washington 50 2 

Wisconsin 1 0 

Total 1, 213 312

Source: GAO analysis of Farm Service Agency’s End-of-Year Review Tracking System. 

Notes:

According to the Farm Service Agency’s handbook on payment eligibility and payment limits, Farm 

Service Agency state offices waived compliance reviews of farming operations that met certain 

criteria. After waivers were granted, the assigned compliance reviews that remained were 889 

reviews for 2009 and 305 reviews for 2010.

FSA officials said that for the 14 states not listed, FSA selected no compliance reviews for either 2009 

or 2010.
Appendix III: Objectives, Scope, and 

Methodology

Page 43 GAO-13-781 Farm Programs

Our objectives were to examine (1) the U.S. Department of Agriculture’s 

(USDA) FSA’s compliance reviews of farming operation members’ claims 

of significant active personal management and personal labor 

contributions to meet actively engaged in farming requirements; (2) the 

extent to which FSA state offices complete and report compliance reviews 

within expected time frames, and the results of reported reviews of 

management and labor contributions; and (3) the distribution and amount 

of payments to farming operations by type of entity and members’ claims 

of active personal management or personal labor contributions.1

To examine FSA’s compliance reviews of farming operation members’ 

claims of significant active personal management and personal labor 

contributions to meet actively engaged in farming requirements, we 

reviewed (1) the relevant law and regulations, including the Food, 

Conservation, and Energy Act of 2008, known as the 2008 Farm Bill, and 

USDA’s regulations on payment eligibility and limitations2

; (2) FSA’s 

policies and guidance, including FSA’s handbook on payment eligibility 

and limitations, known as 4-PL3

; (3) legislation, such as the Senate and 

House of Representative bills to reauthorize the 2008 Farm Bill4

; and (4) 

past GAO work on actively engaged in farming requirements.5 We also 

interviewed FSA officials at headquarters and state and county offices 

and examined compliance review files. We visited FSA state and county 

offices in five states—Arkansas, Kansas, Louisiana, Mississippi, and 

Texas.6

 

1

A farming operation is a business enterprise engaged in the production of agricultural 

products that is operated by an individual or an entity. A farming operation member or 

entity members can be an individual or an entity. 

In each of these states, we visited the FSA state office and one 

or two county offices. During these visits, we discussed compliance 

review processes and results with FSA officials and examined examples 

of 2009 and 2010 compliance review files because these years are the 

2

7 C.F.R. pt. 1400.

3

Farm Service Agency handbook, Payment Eligibility, Payment Limitation, and Average 

Adjusted Gross Income, 4-PL (2010). 

4

S. 954, 113th Cong. (2013), and H.R. 2642, 113th Cong. (2013). 

5

GAO, Farm Programs: Direct Payments Should Be Reconsidered, GAO-12-640 

(Washington, D.C.: July 3, 2012) and GAO-04-407. 

6

Although the information from these interviews is not generalizable to all FSA offices, it 

provides illustrative information.

Appendix III: Objectives, Scope, and 

Methodology 
Appendix III: Objectives, Scope, and 

Methodology

Page 44 GAO-13-781 Farm Programs

most recent for which compliance reviews were to have been completed 

when we conducted our review. In particular, we examined files’ 

supporting documents submitted by farming operations that described 

their members’ contributions to the farming operation in the areas of 

active personal management and personal labor and FSA forms 

documenting compliance review processes and results. Some examples 

of supporting documents we reviewed include loan documents, work 

activity ledgers, and signed canceled checks. We selected the states for 

site visits based on the number of 2009 and 2010 compliance reviews 

that FSA headquarters had assigned to them and the diversity of crops 

produced.7

To determine the extent to which FSA state offices completed and 

reported compliance reviews within expected time frames, we interviewed 

an FSA headquarters official in charge of choosing the annual 

nongeneralizable selection of farming operations for compliance reviews, 

and we obtained and reviewed relevant documents related to compliance 

reviews, such as FSA headquarters’ memoranda notifying states of time 

frames for completing and reporting the results of 2009 and 2010 

compliance reviews. According to the memoranda, FSA headquarters 

notified states of the 2009 nongeneralizable selection of farming 

operations on August 19, 2010, and expected states to complete and 

report the reviews’ results by August, 1, 2011. For 2010 compliance 

reviews, FSA headquarters notified states of the nongeneralizable 

selection of farming operations on November 30, 2011, and expected 

states to complete and report the reviews’ results by December 1, 2012. 

We also obtained and analyzed 2009 and 2010 compliance review data 

reported to FSA’s End-of-Year Review Tracking (EYRT) System as of 

April 30, 2013. FSA’s EYRT is a web-based system to which state and 

Within the states we visited, we selected county offices for site 

visits based on the number of 2009 and 2010 compliance reviews that 

FSA headquarters had assigned to them and the county offices’ physical 

locations to limit travel costs. We selected compliance reviews for 

examination based on the number of farming operation members and the 

organizational complexity of the farming operations that were reviewed. 

Information collected from the site visits and derived from the compliance 

review files is illustrative and not generalizable to all FSA offices or 

compliance review files for 2009 and 2010.

 

7

We also used these criteria to select two additional states—California and Illinois —for 

interviews. 
Appendix III: Objectives, Scope, and 

Methodology

Page 45 GAO-13-781 Farm Programs

county FSA offices report information and results related to annual 

compliance reviews. In particular, we analyzed the data to determine the 

number of farming operations selected by FSA headquarters for 2009 and 

2010 compliance reviews, the number of reviews that were waived, and 

the number and percentage of compliance reviews (after waivers) 

reported to FSA headquarters by state offices within FSA’s expected time 

frame. If a farming operation was listed in the EYRT for 2009, we included 

it in 2009 compliance reviews. If a farming operation was listed in the 

EYRT for 2010, we included it in 2010 compliance reviews. We did not 

include three farming operations for either 2009 or 2010 because they 

were not associated with a year in the EYRT, and FSA officials could not 

determine the year to which they belonged. We then determined the 

number of selected farming operations that were waived for compliance 

reviews. If a farming operation was flagged in the EYRT as waived, we 

counted it as waived in its corresponding year. We then subtracted the 

waived farming operations from those selected by FSA headquarters to 

determine the number of assigned farming operations that remained and 

that states were required to complete and report to FSA headquarters for 

2009 and 2010. The results of this analysis are limited to compliance 

reviews selected by FSA headquarters and did not include those 

compliance reviews added as required by spot checks or those added by 

state offices or state and county committees.

8

 

8

Spot checks are compliance reviews of farming operations involving FSA employees that 

received an initial determination that differed from the default determination or interim 

determination that was made because FSA officials did not complete the initial review on 

time. FSA state and county offices may also choose to conduct additional compliance 

reviews of other farming operations in certain situations, such as when FSA has reason to 

believe a farming operations plan was not followed as represented. 

To assess the reliability of 

relevant EYRT data elements, such as those related to assigned, waived, 

completed, and reported compliance reviews, we (1) interviewed FSA 

agency officials knowledgeable about the database; (2) reviewed related 

documentation; and (3) performed logic tests of relevant data elements. 

We determined that the data elements related to the assigned and waived 

compliance reviews were sufficiently reliable for the purposes of 

determining the number of compliance reviews assigned to states in 2009 

and 2010, the number of compliance reviews that were waived, and the 

number of compliance reviews that states were required to complete and 

report to FSA headquarters after waivers were granted. However, the 

EYRT data element related to completion of compliance reviews was not 

sufficiently reliable for determining the number of 2009 and 2010 
Appendix III: Objectives, Scope, and 

Methodology

Page 46 GAO-13-781 Farm Programs

compliance reviews that state offices completed and reported to FSA 

headquarters within the expected time frame after waivers were granted 

for two reasons. First, as of April 30, 2013, not all states reported the 

completion status of compliance reviews to the EYRT. Second, some 

states may have completed their assigned 2009 or 2010 compliance 

reviews but may have not reported them in EYRT as completed.

Because not all state offices reported the completion status of their 

assigned compliance reviews in the EYRT, we instead obtained and 

reviewed hard copies of FSA forms submitted by state offices to FSA 

headquarters for review years 2009 and 2010. We reviewed state offices’ 

forms because they summarize compliance review results, list the 

number of compliance reviews selected by FSA headquarters that were 

assigned and completed and reported by state offices, and the date that 

state offices reported their results. If a state office’s hard copy form 

indicated that the state office reported to FSA headquarters the results of 

their assigned 2009 and 2010 compliance reviews on or before August 1, 

2011, and December 1, 2012, respectively, then we included that state 

and its number of completed compliance reviews assigned by FSA 

headquarters in the total count of completed and reported compliance 

reviews that were reported to FSA within the expected time frame. We 

compared the total count of completed and reported compliance reviews 

within FSA’s expected time frame with the number of total assigned 

compliance reviews after waivers to derive the percentage of 2009 and 

2010 compliance reviews that states completed and reported in a timely 

manner. The results of this analysis are limited to compliance reviews 

selected by headquarters and did not include those compliance reviews 

added as spot checks or those added by state offices or state and county 

committees. We assessed the reliability of hard copies of state offices’ 

forms submitted to FSA headquarters by interviewing agency officials 

knowledgeable about the forms and who received the forms from the 

state offices. We determined that the data in the forms were sufficiently 

reliable for the purposes of determining the number and percentage of 

2009 and 2010 compliance reviews that states completed and reported to 

FSA headquarters within FSA’s expected time frame.

To determine the results of personal management and personal labor 

contributions in reported reviews, we also obtained and analyzed selected 

2009 and 2010 compliance review data from FSA’s EYRT as of April 30, 

2013. We examined only the results of the 2009 compliance reviews of 11 
Appendix III: Objectives, Scope, and 

Methodology

Page 47 GAO-13-781 Farm Programs

FSA state offices and the 2010 compliance reviews of 9 FSA state offices 

that reported the results of 70 percent or more of their assigned reviews.9

 

9

For 2009 compliance reviews, the results are from Arkansas, Alabama, Georgia, Iowa, 

Kansas, Michigan, Nebraska, Nevada, Utah, Virginia and Wisconsin. For 2010 compliance 

reviews, the results are from Alabama, Arizona, Arkansas, Colorado, Indiana, Iowa, 

Kansas, Missouri, and Tennessee.

We chose to examine the compliance review results only for those state 

offices that reported at least 70 percent of their 2009 and 2010 assigned 

reviews because examining compliance reviews from state offices with 

lower completion and reporting rates might not be representative of those 

offices’ compliance reviews. Reviews for which the results were reported 

may have been more likely to find that farming operation members had 

made their claimed contributions, for example, if the offices employed a 

strategy of pursuing easier or more clear-cut cases first. Similarly, relative 

to the compliance reviews that were not reported, the results of reviews 

that were reported may have been from compliance reviews that were 

easier to complete because the evidence that farming operation members 

were making their claimed contributions was unambiguous, and therefore 

allowed offices to complete these faster, for example. In examining the 

results of the 2009 compliance reviews of 11 FSA state offices and the 

2010 compliance reviews of 9 FSA state offices, we determined the 

number of total members in the farming operations, the number and 

percentage of members’ claiming contributions of active personal 

management only, personal labor only, or a combination of both active 

personal management and personal labor, and the number and 

percentage of members meeting these claimed contributions. The results 

of this analysis do not include results from farming operations selected as 

spot checks or those added by FSA state committees or county 

committees. In addition, the results are not generalizable to the results of 

all 2009 or 2010 compliance reviews or the results of all states. We 

assessed the reliability of relevant data EYRT elements or those related 

to members’ contributions of active personal management, personal labor 

or a combination of both by (1) interviewing agency officials 

knowledgeable about the data, (2) performing logic tests of relevant data 

elements, and (3) reviewing related documentation on the data. We 

determined that the data in these data elements were sufficiently reliable 

for the purposes of showing the results of members’ contributions across 

202 compliance reviews from 11 states for the 2009 review year and the 

results of members’ contributions’ across 119 compliance reviews from 9 

states for the 2010 review year.
Appendix III: Objectives, Scope, and 

Methodology

Page 48 GAO-13-781 Farm Programs

To determine the distribution and amount of payments to farming 

operations by type of entity, we obtained FSA’s Direct Attribution 

Payment and Business Party Share databases, and we analyzed 2009 

through 2012 data on applicable farm program payments made to 

entities. These applicable payments—direct, counter-cyclical, and 

Average Crop Revenue Election—are subject to actively engaged in 

farming requirements. When analyzing FSA’s data, we determined the 

total, percentage and average of applicable payments distributed by type 

of entity. The entities in FSA’s database included the following:

• general partnerships,

• joint ventures,

• corporations,

• limited liability companies,

• limited partnerships,

• estates,

• revocable trusts,

• irrevocable trusts, and

• individuals operating as a small business.

In our report, we consolidated limited partnerships, estates, irrevocable 

and revocable trusts, and individuals operating as a small business into a 

separate entity category called “other” because these entities individually 

represented a smaller number of entities, and because the focus of our 

analysis was on the other types of business entities. We further analyzed 

the distribution of payments made to entity types by their number of 

members. For each type of entity, we analyzed the distribution of 

payments when the entity type consisted of 2, 3 through 5, 6 through 10, 

and 11 or more members. We assessed the reliability of FSA’s 2009 

through 2012 data on applicable farm program payments made to entities 

by (1) performing electronic tests of pertinent data elements, (2) reviewing 

information about the data, and (3) interviewing and communicating with 

agency officials knowledgeable about the data. We determined that the 

data were sufficiently reliable for the purposes of reporting on the 
Appendix III: Objectives, Scope, and 

Methodology

Page 49 GAO-13-781 Farm Programs

distribution and applicable 2012 farm program payments made to farming 

operations by type of entity and their number of members.

To determine the distribution and amount of payments made based on 

members’ claims of active personal management or personal labor 

contributions by entity type, we obtained the information from FSA’s 

Business File system of files and we used that in combination with the 

Direct Attribution Payment data for 2012. We analyzed 2012 FSA data on 

members’ contributions of active personal management, personal labor, 

and a combination of both to a type of farming operation or entity, and 

2012 FSA data on applicable farm program payments attributed to these 

members. In our analysis, when we linked the Business File and Direct 

Attribution Payment databases, we attributed individual’s contributions—

not member’s contributions— of active personal management, personal

labor, and a combination of both to applicable farm program payments 

made.10

 

10A farming operation member can be an individual or an entity with an ownership interest.

Using these data, we analyzed the distribution and amount of 

payments made based on individual members’ claims of active personal 

management or personal labor contributions. We analyzed these results 

by type of entity. As with previous analysis on FSA data, these types of 

entities included general partnerships, joint ventures, corporations, limited 

liability companies and five other types that we consolidated into an 

“other” category. We further analyzed the distribution of payments to 

individual members and linked them to information on their contributions 

to farming operations; we classified each entity type by size category; that 

is, entity types were divided into those with 1, 2, 3 through 5, 6 through 

10, and 11 or more individual members. When we matched the Business 

Party Share data and Direct Attribution Payment data, we were able to 

match approximately 91 percent of the total payment dollars to their farm 

contribution record. We spoke with FSA officials who explained that these 

data are continuing to be updated and are gradually becoming more 

complete as all the individual records migrate into the Business Party 

Share File database. As a result, our analysis is limited to only those farm 

program payments that could be attributed to individual members’ 

contributions that were recorded in the Business Party Share File. We 

assessed the reliability of both FSA datasets by (1) performing electronic 

tests of pertinent data elements, (2) tracing a sample of the data to their 

original source, (3) reviewing information about the data, and (4) 

interviewing and communicating with agency officials knowledgeable 
Appendix III: Objectives, Scope, and 

Methodology

Page 50 GAO-13-781 Farm Programs

about the data. We determined that the data were sufficiently reliable for 

the purposes of determining the distribution and amount of payments to 

types of farming operations based on members’ claims of active personal 

management or personal labor contributions for only those farm program 

payments that could be attributed to individual members’ contributions 

that were recorded in the Business Party Share File.

From the 50 entities that received the highest payments subject to 

actively engaged in farming requirements in 2012, we selected entities 

from a variety of states and contacted FSA state office officials to confirm 

the number of members (i.e., individuals and entities) claiming 

contributions of active personal management, personal labor, or a 

combination of active personal management and personal labor. In 

addition, we examined address data from FSA’s database to review the 

distances between farming operation addresses and individual members’ 

addresses for the 50 entities. We also compared the addresses for 

individual members with publicly available sources of address data with 

their addresses shown in the FSA database. 

We conducted our review from May 2012 to September 2013 in 

accordance with the generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

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

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix IV: Distribution and Amount of Farm 

Program Payments in General Partnerships, 

Categorized by Number of Individual Members 

and Grouped by Type of Contribution, 2012

Page 51 GAO-13-781 Farm Programs

Type of contribution

Active personal 

management only Personal labor only

Combination of active 

personal management and 

personal labor

Number of

individual 

members

Number 

of

entities Payments Payments Percentage Payments Percentage Payments Percentage

1 379 $2,725,034 $958,340 35.2 $4,439 0.2 $1,762,255 64.7

2 12,321 247,882,491 33,300,257 13.4 3,937,162 1.6 210,645,072 85.0

3-5 8,521 264,161,288 79,772,879 30.2 8,579,874 3.2 175,808,535 66.6

6-10 1,179 68,596,754 37,736,861 55.0 2,459,919 3.6 28,399,974 41.4

11 or more 147 9,512,916 7,969,093 83.8 640,192 6.7 903,631 9.5

Total 22,547 $592,878,483 $159,737,430 26.9 $15,621,586 2.6 $417,519,467 70.4

Source: GAO analysis of Farm Service Agency data.

Notes:

The farm program payments in this table are the payments that are subject to actively engaged in 

farming requirements.

This table contains approximately 89 percent of the payments distributed to general partnerships that 

were found to be based on individual members’ contributions in FSA’s contributions database. At the 

time of our analysis, these data were continuing to be updated and were gradually becoming more 

complete.

Not all payment recipients and their related contributions data are included in the Farm Service 

Agency’s contributions database. For some of the payment recipients included in the Farm Service 

Agency’s contributions database, no contribution was identified. We did not include these payments 

in this table.

Total percentage of payments based on contributions in this table may not total to 100 because of 

rounding.

Appendix IV: Distribution and Amount of Farm 

Program Payments in General Partnerships, 

Categorized by Number of Individual Members and 

Grouped by Type of Contribution, 2012
Appendix V: Distribution and Amount of Farm 

Program Payments in Joint Ventures, 

Categorized by Number of Individual Members 

and Grouped by Type of Contribution, 2012

Page 52 GAO-13-781 Farm Programs

 Type of contribution

Active personal 

management only Personal labor only

Combination of active 

personal management and 

personal labor

Number of

individual 

members

Number 

of entities Payments Payments Percentage Payments Percentage Payments Percentage

1 70 $562,389 $173,766 30.9 0 0.0 $388,623 69.1

2 3,531 80,189,843 6,802,765 8.5 503,217 0.6 72,883,861 90.9

3-5 1,101 21,734,252 4,230,053 19.5 325,783 1.5 17,178,416 79.0

6-10 209 3,035,955 1,089,830 35.9 3,605 0.1 1,942,520 64.0

11 or more 28 905,234 587,466 64.9 0 0.0 317,768 35.1

Total 4,939 $106,427,673 $12,883,880 12.1 $832,605 0.8 $92,711,188 87.1

Source: GAO analysis of Farm Service Agency data.

Notes:

The farm program payments in this table are the payments that are subject to actively engaged in 

farming requirements.

This table contains approximately 94 percent of the payments distributed to joint ventures that were 

found to be based on individual members’ contributions in the Farm Service Agency’s contributions 

database. At the time of our analysis, these data were continuing to be updated and were gradually 

becoming more complete.

Not all payment recipients and their related contributions data are included in the Farm Service 

Agency’s contributions database. For some of the payment recipients included in the Farm Service 

Agency’s contributions database, no contribution was identified. We did not include these payments 

in this table.

Appendix V: Distribution and Amount of Farm 

Program Payments in Joint Ventures, Categorized 

by Number of Individual Members and Grouped by 

Type of Contribution, 2012
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 53 GAO-13-781 Farm Programs

Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov

In addition to the individual named above, Thomas M. Cook (Assistant 

Director), Kevin Bray, Gary Brown, John Delicath, Michael Kendix, Anne 

Rhodes-Kline, Carla Rojas Paz, Dan Royer, and Vasiliki Theodoropoulos 

made key contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 
Related GAO Products

Page 54 GAO-13-781 Farm Programs

Farm Programs: Additional Steps Needed to Help Prevent Payments to 

Participants Whose Incomes Exceed Limits. GAO-13-741. Washington, 

D.C.: August 29, 2013.

Farm Programs: USDA Needs to Do More to Prevent Improper Payments 

to Deceased Individuals. GAO-13-503. Washington, D.C.: June 28, 2013.

Farm Programs: Direct Payments Should be Reconsidered. GAO-12-640. 

Washington, D.C.: July 3, 2012.

Farm Bill: Issues to Consider for its Reauthorization. GAO-12-338SP. 

Washington, D.C.: April 24, 2012.

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Payments to Individuals Who Exceed Income Eligibility Limits. 

GAO-09-67. Washington D.C.: October 24, 2008.

Federal Farm Programs: USDA Needs to Strengthen Management 

Controls to Prevent Improper Payments to Estates and Deceased 

Individuals. GAO-07-113T. Washington D.C.: July 24, 2007.

Farm Program Payments: USDA Should Correct Weaknesses in 

Regulations and Oversight to Better Ensure Recipients do not Circumvent 

Payment Limitations. GAO-04-861T. Washington, D.C.: June 16, 2004.

Farm Program Payments: USDA Needs to Strengthen Regulations and 

Oversight to Better Ensure that Recipients Do Not Circumvent Payment 

Limitations. GAO-04-407. Washington, D.C.: April 30, 2004.

Related GAO Products

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