Farm Programs: USDA Needs to Do More to Prevent Improper Payments to Deceased Individuals
Released: 2013-07-29T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: USDA spends about $20 billion annually on federal programs that support farm income, conserve natural resources, and help farmers manage risks from natural disasters, benefiting over 1 million participants. Given their cost and continuing nationwide budget pressures, these programs have come under increasing scrutiny. One concern has been the distribution of benefits to ineligible participants, including potentially improper payments to deceased individuals, which, as GAO and others have reported, may call into question whether these farm safety net programs are benefiting the agricultural sector as intended. GAO was asked to evaluate USDA controls over payments to the deceased. This report examines the extent to which procedures are in place to prevent (1) FSA and (2) NRCS from making potentially improper payments to deceased individuals and (3) RMA from providing potentially improper subsidies on behalf of deceased individuals. GAO reviewed a random sample of payments, compared USDA's databases with SSA's master list of deceased individuals, and interviewed agency officials.

section_title: What GAO Found
paragraphs: Since 2007, the Department of Agriculture's (USDA) Farm Service Agency (FSA), which administers various programs for farmers that help support farm incomes and provide disaster assistance, has established procedures for preventing improper payments to deceased individuals, including, on a quarterly basis, matching payments to program participants with the Social Security Administration's (SSA) data on deceased individuals. In addition, FSA state and county offices review and verify whether payments made to deceased individuals are proper or improper. Overall, these procedures have enabled FSA to identify thousands of deceased individuals who were paid $3.3 million in improper payments after their dates of death, of which FSA has recovered approximately $1 million. GAO reviewed a generalizable random sample of payments to deceased individuals that FSA identified as proper and found that 9 percent did not have sufficient support to be coded as proper. More monitoring to ensure that county offices' coding of payments is supported by documentation could help reduce the error rate.

The Natural Resources Conservation Service (NRCS), a USDA agency that administers voluntary conservation programs, does not have procedures to prevent potentially improper payments to deceased individuals. For example, NRCS's ability to verify whether payment recipients have died is limited because the agency does not match these recipients against SSA's master list of deceased individuals. Under the standards for internal control in the federal government, agencies are to clearly document such control in the form of management directives, administrative policies, or operating manuals. GAO did a data review for fiscal year 2008 to April 2012, and estimates that NRCS made $10.6 million payments on behalf of 1,103 deceased individuals 1 year or more after their death. Some of these payments may have been proper, but NRCS cannot be certain because it neither identifies which of its payments were made to deceased individuals, nor reviews each of these payments.

USDA's Risk Management Agency (RMA), which administers crop insurance programs, does not have procedures in place consistent with federal internal control standards to prevent potentially improper subsidies on behalf of deceased individuals. For example, RMA does not use SSA's master list of deceased individuals to verify whether its policyholders have died. GAO matched every policyholder's Social Security number in RMA's crop insurance subsidy and administrative allowance data for crop insurance years 2008 to 2012 with SSA's master list of deceased individuals and found that $22 million in subsidies and allowances may have been provided on behalf of an estimated 3,434 program policyholders 2 or more years after death. Many of these subsidies and allowances may have been proper, but without reviewing each subsidy and allowance made on behalf of deceased individuals, RMA cannot be certain that these subsidies and allowances are proper. In addition, without accurate records of which policyholders are deceased, RMA may be less likely to rely on results from data mining--a technique for extracting knowledge from large volumes of data--and therefore be less likely to detect fraudulent, wasteful, or abusive crop insurance claims.

section_title: What GAO Recommends
paragraphs: GAO recommends that FSA further strengthen its verification of payments to deceased individuals, NRCS develop and implement procedures to prevent improper payments to deceased individuals, and RMA develop and implement procedures to prevent improper crop insurance subsidies on behalf of deceased policyholders and to improve the effectiveness of its data mining. USDA generally agreed with GAO's findings and recommendations.

section_title: Letter
paragraphs: The U.S. Department of Agriculture (USDA) spends about $20 billion  annually on federal programs that support farm income, conserve natural  resources, and help farmers and farming entities manage risks from  natural disasters. These programs benefit over 1 million participants.  Given their cost to the federal government, these agricultural safety net  programs have come under increasing scrutiny over the years,  particularly in light of the nation’s severe budget pressures and high farm  income levels. One area of concern has been the distribution of benefits  to ineligible participants, including potentially improper payments to  deceased individuals, which, as we and others have reported, may call  into question whether these safety net programs are benefiting the  agricultural sector as intended.

Three USDA agencies—the Farm Service Agency (FSA), the Natural  Resources Conservation Service (NRCS), and the Risk Management  Agency (RMA)—play key roles in aiding farmers. FSA administers various  programs that help support farm income and provide assistance after  disasters. NRCS works with farmers and other landowners to implement  practices to conserve natural resources, such as soil and water. RMA  administers the federal crop insurance program, which subsidizes crop  insurance to farmers to mitigate losses due to poor crop yields, declines  in crop prices, or both. Both FSA and NRCS provide payments to farmers  and farming entities through a network of agency headquarters, state,  and county offices. RMA, in contrast, administers crop insurance to  farmers through a network of 17 approved insurance companies. In 2012,  FSA provided $7.4 billion for farm commodity and conservation programs,  NRCS provided $4.0 billion for financial and technical assistance in  conservation efforts, and RMA provided $8.3 billion in subsidies and  allowances for crop insurance.

Over the years, we and USDA’s Office of Inspector General have  reported on the risks of fraud, waste, and abuse in these programs and  recommended ways to alleviate such risks. Specifically, a 2013 study by  USDA’s Office of Inspector General found that FSA, NRCS, and RMA  were among seven USDA agencies with high-risk programs vulnerable to  significant improper payments. In a July 2007 report, we found that from  1999 through 2005, FSA paid $1.1 billion in farm payments in the names  of 172,801 deceased individuals, and we made recommendations for  improving FSA’s ability to prevent improper payments. Among other  things, we recommended that FSA implement management controls to  verify that individuals receiving payments have not died and to determine  if improper payments were made to deceased individuals or to entities,  such as corporations or partnerships, that did not disclose the death of a  member and, if so, to recover the appropriate amounts. Subsequently, the  Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) was  enacted, requiring FSA to reconcile records of individuals who received  payments with Social Security Administration (SSA) data twice each year  to determine if the individuals are alive. In addition, we also reported in  April 2012 on weaknesses in RMA’s crop insurance program, and we  screened our past work to identify principles significant to integrity,  effectiveness, and efficiency in farm bill programs. One of these  principles, framed as a question, applies to oversight of these programs  by federal agencies: “Does the program have mechanisms, such as  management controls, to monitor compliance and help minimize fraud,  waste, and abuse in areas where these are most likely to occur?” In an  April 16, 2013, hearing before the House Committee on Appropriations,  Subcommittee on Agriculture, Rural Development, Food and Drug  Administration, and Related Agencies, the Secretary of Agriculture  commented that a reduction in crop insurance errors, including fraud,  could save tens of millions of dollars. Further, the Improper Payments  Information Act of 2002, as amended, requires federal agencies to  periodically review their programs and to identify those that may be  susceptible to significant improper payments, including payments and  insurance subsidies to ineligible individuals. In addition, the Improper  Payments Elimination and Recovery and Improvement Act of 2012 gives  specific statutory authority to the Do Not Pay initiative, requiring federal  agencies to review prepayment procedures and available databases with  relevant information on eligibility, including SSA’s death master file, to  determine program eligibility and prevent improper payments. Federal  law and USDA regulations also require that certain participants be  actively engaged in farming to qualify for farm program payments.

In this context, you asked us to evaluate USDA’s guidance and control  over payments to deceased individuals and the appropriateness of such  payments. This report examines the extent to which procedures are in  place to prevent (1) FSA from making potentially improper payments to  deceased individuals, (2) NRCS from making potentially improper  payments to deceased individuals, and (3) RMA from providing potentially  improper subsidies on behalf of deceased individuals.

To address all three objectives, we reviewed the 2008 Farm Bill, USDA  regulations and guidance, and relevant reports by us and USDA’s  Inspector General; we also interviewed officials about what steps the  agencies take to prevent potentially improper payments or benefits to  deceased individuals. We interviewed USDA officials in Washington,  D.C.; California; Illinois; Kansas; Missouri; and Texas to obtain  information about agency procedures and adherence to guidance. We  selected these locations to reflect a variety of characteristics, such as a  high number of FSA payments made to deceased individuals, and  geographic diversity. To address the first objective, we also interviewed  FSA officials about the extent to which this agency follows requirements  to compare agency data with the data in SSA’s death master file and the  steps the agency takes to recover improper payments. To determine if  state and county offices properly coded payments made to deceased  individuals (coding designates a given payment as proper or improper),  we used a generalizable, random sample of 100 payments made by FSA  to deceased individuals for the most recent four consecutive quarters of  data available—starting in the third quarter of fiscal year 2011 (i.e., July  2011)—after FSA implemented a web-based system for reviewing  payments to deceased individuals. We also reviewed and analyzed  supporting hard-copy documentation to determine the individuals’  eligibility. To understand the reasons for potential errors, we generated a  nonprobability sample of 20 payments made to deceased individuals for  the same period and deemed erroneous by the agency, and we reviewed  and analyzed the supporting documentation for these improper payments  as well. Because this sample was a nonprobability sample, the results  cannot be generalized to all recipients of FSA payments, but they offer  examples of improper payments to deceased individuals. To address the  second objective, we compared NRCS payment data since the 2008  Farm Bill—from fiscal year 2008 through April 2012—with the death  master file to determine the extent to which NRCS has made potentially  improper payments to deceased individuals. To address the third  objective, we interviewed RMA agency officials to obtain information  about the steps the agency takes to verify its records of eligible  policyholders. To determine the extent to which RMA ensures that its  records are regularly updated to verify whether policyholders have died,  we compared the death master file with crop insurance data from RMA for  crop reinsurance year 2008 through reinsurance year 2012. For all three  agencies’ payment information and for SSA’s death master file, we found  that their data were sufficiently reliable for the purposes of our review.  Appendix I presents a more detailed discussion of our scope and  methodology.

We conducted this performance audit from March 2012 through June  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.
subsections: section_title: Background
paragraphs: USDA provides various programs that assist farmers and landowners  through its subsidiary agencies FSA, NRCS, and RMA.
subsections: section_title: FSA Provides Benefits through Commodity and Crop Disaster Assistance Programs
paragraphs: FSA provides benefits to farmers through various programs, including  farm commodity and crop disaster assistance programs authorized in the  2008 Farm Bill. FSA has overall responsibility for administering these  programs, including ensuring that all recipients meet eligibility  requirements and do not receive payments in excess of program  limitations. Farming operations—whether individuals or entities—applying  for benefits must file a farm operating plan and an annual acreage report  with their local field office, and if any changes occur that could affect  program eligibility, such as changes affecting one’s status as actively  engaged in farming, the farming operation must file a revised farm  operating plan. These documents record farming information, such as the  name of each individual with an interest in the farming operation, which  crops are planted on each field, and the farming practices used. FSA  uses this information to determine farm program payments, including  payments for various agricultural disaster assistance programs. Most  farmers receive farm program payments directly from FSA as individual  operators. Some farmers, however, use legal entities to organize their  farming operations, thereby reducing their exposure to financial liabilities.  Many FSA farm programs have statutory payment limits that set the  maximum payment amount that an individual can receive per year. For  example, for one of FSA’s farm commodity programs, the annual  payment limit is $40,000 per individual. FSA carries out these  responsibilities through its headquarters office, 50 state offices, and over  2,100 field offices.

In a 2007 report, we recommended that FSA implement management  controls, such as matching payment files with SSA’s death master file, to  verify that an individual receiving payments has not died and to provide  reasonable assurance that the agency does not make improper payments  to deceased individuals. We also recommended that FSA determine if  improper program payments have been made to deceased individuals or  to entities that failed to disclose the death of a member and, if so, recover  the appropriate amounts.

The 2008 Farm Bill required FSA (1) to promulgate regulations that  (a) describe the circumstances under which payments may be issued in  the name of a deceased individual and (b) preclude the issuance of  payments to, and on behalf of, deceased individuals who were not eligible  for the payments and (2) to at least twice each year reconcile SSA’s  numbers of all individuals who receive commodity program payments.

section_title: NRCS Administers Conservation Programs
paragraphs: NRCS administers voluntary programs that offer financial and technical  assistance to eligible landowners and producers to help manage natural  resources in a sustainable manner. Through these programs, the agency  approves conservation program contracts or conservation easements,  which provide participants financial assistance for planning and  implementing conservation practices to save energy and improve  resources, such as soil and water on agricultural lands and on  nonindustrial private forestland. These programs can be divided into two  categories—working-lands programs and easement programs.working-lands programs, NRCS provides program participants with  financial and technical assistance through contracts, which are generally  in effect for up to 10 years, to implement conservation practices on  agricultural land and nonindustrial private forestland. Under easement  programs, NRCS purchases conservation easements to restore, protect,  or enhance grasslands and wetlands and provides assistance to eligible  entities to purchase development rights to keep productive farm and  ranch lands in agricultural uses. According to NRCS officials, when an  NRCS program participant dies, NRCS considers the contract canceled,  unless the participant had identified an executor or other estate   Under  representative to act on his or her behalf to transfer the contract to an  eligible successor or to complete the contracted activities.

section_title: RMA Administers Subsidized Crop Insurance
paragraphs: By promoting crop insurance, the federal government has played an  active role in helping to mitigate the effects on income of production  risks—droughts, floods, and other natural disasters—as well as price  risks that farmers face. RMA administers the federal crop insurance  program, including controlling costs and protecting against fraud, waste,  and abuse. The agency partners with 17 approved insurance companies,  which sell and service the federal program’s insurance policies and share  in a percentage of the associated risk of loss and opportunity for gain.  The federal government subsidizes about 60 percent of the insurance  premiums the insurance companies charge farmers and also pays the  companies an allowance for administrative expenses, which is intended  to cover the companies’ expenses for selling crop insurance policies and  providing customer service to policyholders. Unlike payments made by  FSA and NRCS, subsidies for crop insurance premiums are not paid  directly to policyholders but can be considered a financial benefit to them.  Without a premium subsidy, a policyholder would have to pay the full  amount of the premium. The allowances for administrative expenses can  be considered a further benefit to these policyholders, since these  allowances are paid on their behalf. RMA also shares with insurance  companies payments made on policyholders’ claims for losses.

section_title: FSA Has Established Procedures for Preventing Improper Payments to the Deceased, but Some Supporting Information Is Incomplete
paragraphs: Since 2007, FSA has established procedures for preventing improper  payments to deceased individuals, including matching payments to  program participants with SSA’s data on deceased individuals.  Nevertheless, the SSA data used by FSA for this match have been  incomplete, and our review of a sample of payments made to deceased  individuals raised some questions.
subsections: section_title: FSA Established Procedures to Compare Its List of Program Participants with a Master List of Deceased Individuals
paragraphs: Since our 2007 report and enactment of the 2008 Farm Bill, FSA has  taken steps to implement and strengthen procedures to prevent improper  payments to program participants who have died. Specifically, in 2007,  FSA began computer matching its payment data with a list of deceased  individuals, directed county and state offices to review the results of this  match, and established procedures and updated guidance accordingly.  According to FSA officials, to identify program participants who had died,  in fiscal year 2007 FSA began computer-matching program participants’  names, addresses, and Social Security numbers—stored in FSA’s  primary database of farm program participants—against SSA’s death  master file. This match identifies any program participants who have died.  FSA then compares this list of deceased program participants against its  list of participants to whom payments were made during the previous  quarter and creates a report listing deceased participants who have  received payments. In 2008 FSA began performing these matches  quarterly—twice a year more than required under the 2008 Farm Bill; FSA  also directed its county and state offices to review these reports to  determine whether payments were proper or improper. Every quarter,  county officials code each payment to a deceased participant as proper or  improper, and state officials review and verify the counties’ coding.  According to FSA officials, most payments found to be improper are to be  recovered by FSA.

By the end of December 2010, FSA had issued a final rule clarifying the  regulations governing payments earned by a person who died and  describing strengthened procedures for matching program participants  with SSA’s death master file and having county, then state, offices check  which payments to deceased individuals were proper and improper. The  agency further improved this process in 2011, by moving from electronic  spreadsheets to a web-based system, which, officials told us, greatly  improved data accuracy and ease of reviewing and coding payments  made to deceased individuals.

In addition to implementing this quarterly data-matching and review  process, FSA has revised and updated its handbooks since the 2008  Farm Bill to include guidance related to making payments in cases where  a program participant has died. The revised guidance defines the  respective roles to be played by county and state offices, clarifies how  county offices are to record payments to deceased individuals as proper  or improper, and offers guidance for both county and state offices  reviewing these records. Agency officials may also take other steps to  find out about deceased program participants: in some counties, they  may check obituaries in local papers or telephone program participants  each year to ask if any changes have occurred among eligible  participants.

Overall, according to FSA officials, establishing these procedures has  enabled the agency to identify thousands of individuals—17,409 in fiscal  year 2011 and 13,684 in fiscal year 2012, for example—who were paid  after their dates of death. Of a total of 28,613 deceased individuals who  were paid in 2011 and 2012, FSA determined that 1,799 individuals, or  about 6 percent, were paid a total of $3.3 million in improper payments  during the 2-year period. According to figures from FSA’s DMF Review  Report for fiscal years 2011 and 2012, FSA has recovered  approximately $1 million of these improper payments and, according to  agency officials, continues to pursue the remaining amount of improper  payments.

section_title: Incomplete Data and FSA’s Payment Review Process Have Hindered FSA’s Ability to Identify Improper Payments to the Deceased
paragraphs: The version of SSA’s death master file against which FSA matches its  payment records has been incomplete. Specifically, FSA has been  matching its payment records against the public version of the death  master file. This version—containing about 87 million death records and  available to the public for purchase—lists all deaths since 1936 that have  been reported to SSA by sources other than the states, such as hospitals  and funeral homes. According to SSA documentation, to ensure  confidentiality under section 205(r) of the Social Security Act, death  records provided to the administration by the states are not to be publicly  disclosed, except to other agencies that pay federally funded benefits. In  May 2013, we testified before the U.S. Senate’s Committee on Homeland  and Governmental Affairs that according to SSA officials, the complete  death master file contains approximately 98 million records, about  11 million more records than the public version of the file. Therefore,  until the agency begins matching its payment records to the complete  death master file, it may continue to miss deceased individuals to whom it  should no longer be making payments.

During our review, FSA took steps to seek access to the complete death  master file, and in January 2013, FSA received approval from SSA to  obtain such access, along with NRCS and RMA. FSA officials said that  they have been coordinating with NRCS and RMA on how they will use,  share, and pay for this access. As of early June 2013, however, FSA had  not received the complete file from SSA or incorporated these data into its  quarterly reviews of payments made to deceased individuals.

In addition, our review of FSA’s payment files raised questions about the  state and county offices’ coding and review of payments as proper or  improper. We examined a generalizable random sample of 100 payments  that were made to deceased individuals over a 1-year period beginning in  April 2011 and coded as proper, and we estimated that FSA county  offices coded 91 percent of these payments correctly. On the basis of supporting evidence FSA provided us, we found 9 payments that did not  have sufficient support to be coded as proper. For 4 of these 9 payments,  the supporting documentation bore the signature of the deceased  individual or a representative but was dated after the individual’s death.  For example, a deceased individual in Alabama received a payment of  $4,273 in 2011. County officials coded this payment as proper, but our  review identified that some program eligibility documents had been  signed and dated in the deceased individual’s name more than 6 months  after the individual had died. We spoke with the relevant county and state  officials about this case, and they agreed that this payment should have  been coded as improper. An agency official told us that the deceased  individual’s heirs submitted correct paperwork for the next fiscal year and  that FSA did not attempt to recover the 2011 payment. The remaining  5 payments, all made through one program and paid to deceased  individuals after their dates of death, were coded by counties as proper  but were actually improper. According to FSA officials, the statutory  requirements for this program differ from those of most FSA programs in  that they do not permit payments to a deceased individual after the date  of death under any circumstances, and any such payment must be  recovered. Officials told us that under this program, even if payments go  to the correct heirs, such as a spouse, they are still considered improper  until the right to receive payment has been transferred to an heir. The  officials told us that some counties nevertheless code such payments as  proper while awaiting completion of transfer paperwork, even though the  payments are actually improper; the officials agreed that the 5 payments  we found were indeed improper. According to an FSA official, in May  2012, FSA updated its guidance related to this program, including how to  handle payments when a participant dies, and reminded relevant officials  of the proper procedures.

The 95 percent confidence interval for this estimate is (4,16). effectiveness of the quarterly review process.process has largely enabled the agency to identify thousands of  individuals who were paid after their dates of death. Nevertheless, if some  coded payments were revisited, perhaps annually, to ensure that  documentation supported the coding of payments as proper, the error  rate could be further lowered, particularly for programs or county offices  where errors were previously identified.

section_title: NRCS Does Not Have Procedures in Place to Prevent Improper Payments to Deceased Individuals
paragraphs: NRCS does not have procedures to prevent improper payments to  deceased individuals, and its ability to verify whether payment recipients  are dead or alive is limited. As a result, the agency cannot be certain that  payments it made to over a thousand deceased individuals are proper.

According to NRCS officials we spoke with, not all conservation payments  to deceased individuals are improper because they may have been made  for work performed before the individuals died, or they were associated  with easement contracts that became part of the deceased individuals’  estates and remained linked to their Social Security numbers. In addition,  the officials believe that the risk of the agency’s making improper  payments to deceased individuals is low, in part because NRCS  conservation programs have certain built-in protections that help prevent  such payments. The officials also explained that NRCS staff frequently  interact with conservation program participants at the sites where projects  are located. NRCS officials develop a conservation plan for the site in  consultation with participants and typically revisit sites to certify  implementation and discuss any deficiencies. As a result, they have  regular opportunities to become aware of a participant’s death. Further,  NRCS officials commented, counties the agency operates in are often  small enough for local officials to know most program participants  personally, and thus they would know if a participant died. Moreover,  NRCS officials stated that the agency requires that heirs of the deceased  notify the agency within 60 days of transferring property to another owner  because of death or other reasons. NRCS officials acknowledged,  however, that they may be unaware of the death of individuals who  receive payments as members of an entity, because officials have less  contact with members of an entity than with individual program  participants. Thus, NRCS may be unaware that a member of an entity  has died if other entity members do not notify the agency.

NRCS’s built-in protections are limited, however, because the agency  does not systematically verify whether its program participants have died,  such as by matching participants’ Social Security numbers against SSA’s  death master file. Under a memorandum of agreement with FSA, such a  match is to be performed by FSA, and FSA is to provide NRCS with a list  of “current year program payment recipients” who are deceased. FSA  officials, however, told us that because they do not know which program  participants have been paid by NRCS, they have not provided such a list  to NRCS. FSA officials said they are working on a new memorandum of  agreement (the previous one expired at the end of fiscal year 2012), in  which they hope each agency’s responsibilities will be better defined, to  enable FSA to provide the matching service. Moreover, FSA and NRCS  officials said that the agencies are also coordinating with each other to  acquire SSA’s complete death master file.

To examine whether NRCS was making potentially improper payments to  deceased individuals, we used program participants’ Social Security  numbers to match program payment data the agency provided to us for  fiscal year 2008 through April 2012 against SSA’s complete death master  file. In so doing, we estimate that NRCS made $10.6 million in payments  on behalf of 1,103 individuals 1 year or more after death.

To better understand the reasons for payments that appeared to have  been made on behalf of deceased individuals 1 or more years after death,  we presented NRCS with six sample cases of such payments, and NRCS  explained that four of the six cases were proper payments. For example,  in one case, a data entry error appears to have linked the Social Security  number of an individual who died in 2001 with multiple program payments  made from 2008 through 2012—payments that had not been made to the  deceased individual but in actuality, to the appropriate living participants.  In another case, NRCS made two direct deposits into the bank account of  a participant in a working-lands program 21 months and 32 months after  the participant’s death. No one had notified the agency of the participant’s  death or transferred the program contract to his legal heirs, although  according to agency officials, the terms of his will did transfer his property  to his widow. In another case, however, NRCS did not have proper  signatures on a program contract for two payments made in 2008, and  agency officials acknowledged that they would not have paid participants  had they been aware of this error.

Without procedures such as matching its program participants with the  death master file and reviewing those matches, NRCS does not know  how many payments it made on behalf of deceased individuals, how  often, or in what amounts. Under the standards for internal control in the  federal government, agencies are to clearly document internal control in  the form of management directives, administrative policies, or operating  manuals, and the documentation should be readily available for  examination. Furthermore, without reviewing each payment apparently  made to a deceased individual, NRCS cannot know whether such  payments were proper or improper. Under the standards for internal  control in the federal government, monitoring is to be performed  continually and include regular management and supervisory activities,  comparisons, and reconciliations, which could identify potentially  improper payments to deceased individuals. These standards indicate  that monitoring should assess the quality of performance over time and  ensure that the findings of audits and other reviews are promptly  resolved.

section_title: RMA Does Not Have Procedures in Place to Prevent Improper Subsidies on Behalf of Deceased Individuals
paragraphs: RMA does not have procedures in place to prevent improper subsidies on  behalf of deceased individuals. Specifically, the agency does not  systematically verify its policyholders by matching these policyholders’  information against SSA’s death master file. As a result, RMA may have  provided potentially improper crop insurance subsidies and administrative  allowances on behalf of thousands of deceased individuals. According to  agency officials, however, the crop insurance cycle provides one or more  opportunities each year to verify that an individual on whose behalf a  subsidy or allowance is paid is alive: policyholders are required to provide  a signed certification when filing their annual reports on production and  yield and provide a written signature if they file a claim. RMA officials also  told us that in 2007—on a one-time basis—the agency compared  policyholders with the public death master file and, working with its  partner insurance companies, updated and corrected records in its central  database of participants, claims, and subsidies, all of which are linked by  Social Security number. RMA officials commented that they have not  compared the agency’s database of policyholders with the public death  master file since then because they learned that this file does not have  complete information on deceased individuals. Along with FSA and  NRCS, however, RMA received approval from SSA for access to the  complete file and, according to RMA officials, is coordinating with the  other two agencies to begin using it.

To determine whether some of RMA’s subsidies and allowances may  have been provided on behalf of policyholders who were deceased, we  matched policyholders’ Social Security numbers from RMA’s crop  insurance subsidies and administrative allowance data for crop  reinsurance years 2008 through 2012 against SSA’s complete death  master file. We found that approximately $22 million in subsidies and  allowances may have been provided on behalf of 3,434 policyholders 2 or  more reinsurance years after death. To better understand the reasons  for subsidies that appeared to have been made to policyholders after  death, we discussed with RMA five sample cases of such subsidies. RMA  believed that all were proper, explaining that several were due to errors,  such as incorrect Social Security numbers, in RMA’s database. Without  reviewing each subsidy that could have been made to a deceased  individual and reconciling it with SSA’s complete death master file,  however, RMA cannot know whether such subsidies were proper or  improper. Without such reconciliations or matches, RMA is not employing  monitoring specified in federal internal control standards.

The Agricultural Risk Protection Act of 2000, Pub. L. No. 106-224, 114 Stat. 358,  amended the Federal Crop Insurance Act. We have evaluated RMA’s data-mining  activities in several reports: see GAO-12-256; GAO, Crop Insurance: Continuing Efforts  Are Needed to Improve Program Integrity and Ensure Program Costs Are Reasonable,  GAO-07-944T (Washington, D.C.: June 7, 2007); Crop Insurance: More Needs to Be  Done to Reduce Program’s Vulnerability to Fraud, Waste, and Abuse, GAO-06-878T  (Washington, D.C.: June 15, 2006); and Crop Insurance: Actions Needed to Reduce  Program’s Vulnerability to Fraud, Waste, and Abuse, GAO-05-528 (Washington, D.C.:  Sept. 30, 2005). on behalf of individuals who may be deceased. Under the standards for  internal control in the federal government, agencies are to clearly  document internal control in the form of management directives,  administrative policies, or operating manuals, and the documentation  should be readily available for examination.policyholders, RMA may be unable to rely on results from data mining  and therefore be less likely to detect fraudulent, wasteful, or abusive crop  insurance claims.

section_title: Conclusions
paragraphs: Since our July 2007 report and the enactment of the 2008 Farm Bill, FSA  has taken important steps to prevent improper payments to deceased  individuals. We commend the agency for exceeding the 2008 Farm Bill’s  requirement that it match its payment records against SSA’s death master  file twice a year—the agency performs this match quarterly—and for  reviewing all payments made to deceased individuals to determine  whether they were proper or improper. In addition, FSA, NRCS, and RMA  began working together during our review to acquire SSA’s complete  death master file, an effort we also commend, and they have received  approval from SSA for access. FSA’s quarterly review process has largely  enabled the agency to identify thousands of individuals who were paid  after their dates of death. Nevertheless, under current procedures, FSA  may not verify all improper payments to deceased individuals, and an  error rate of about 9 percent in coding payments could persist. As FSA  conducts its reviews, if it employs ongoing monitoring activities, such as  reconciliations, to ensure that county offices’ coding of payments is  supported by documentation, the error rate could be reduced.  Furthermore, until and unless NRCS and RMA develop and implement  procedures to have their payment or subsidy data records matched  against SSA’s complete death master file, either through coordination  with FSA or on their own, these agencies cannot know if they are  providing payments to, or subsidies on behalf of, deceased individuals;  how often they are providing such payments or subsidies; or in what  amounts. Without such procedures, NRCS and RMA are not employing  internal controls specified in federal standards. And without reviewing  each payment to or subsidy provided on behalf of a deceased individual,  the agencies do not know if each payment or subsidy is proper or  improper. In addition, without accurate information on policyholders, RMA  may be unable to rely on results from data mining.

section_title: Recommendations for Executive Action
paragraphs: We are making the following three recommendations to the Secretary of  Agriculture:

To further strengthen FSA’s procedures for preventing improper  payments to deceased individuals, we recommend that the Secretary  of Agriculture direct the Administrator of FSA to employ ongoing  monitoring activities, such as reconciliations, to ensure that county  offices’ coding of payments is supported by documentation.

To help NRCS prevent improper payments to deceased individuals,  we recommend that the Secretary of Agriculture direct the Chief of  NRCS to develop and implement procedures to prevent potentially  improper payments to deceased individuals, including (1) coordinating  roles and responsibilities with FSA to ensure that either FSA or NRCS  matches NRCS payment files against SSA’s complete death master  file and (2) reviewing each payment to a deceased individual to  ensure that an improper payment was not made.

To help RMA prevent improper crop insurance subsidies on behalf of  deceased individuals and to improve the effectiveness of its data  mining, we recommend that the Secretary of Agriculture direct the  Administrator of RMA to develop and implement procedures to  prevent potentially improper subsidies on behalf of deceased  individuals, including (1) matching RMA’s crop insurance records  against SSA’s complete death master file and (2) reviewing each  subsidy provided on behalf of a deceased individual to ensure that an  improper subsidy was not provided.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to USDA for review and comment.  USDA provided written comments, which are summarized below and  reproduced in appendix II. In its comment letter, USDA generally agreed  with our report’s findings and recommendations but stated that it believes  we inaccurately represented NRCS and RMA as having no procedures in  place to identify deceased participants. USDA stated that it believes the  agencies’ normal operating procedures provide opportunities to identify  deceased participants. In its comment letter, USDA stated that for NRCS  conservation easement programs, transferring property rights involves a  title escrow agent, thereby providing an opportunity to determine whether  any individuals identified on a deed of trust have died. For RMA, the letter  stated that the agency’s preliminary analysis of sample cases of  deceased individuals that we provided suggests that the potential scope  of remaining questionable payments to deceased individuals is more  limited than we reported. In addition to the fact that someone is paying  the premium each year, the letter stated, the crop insurance cycle  provides one or more opportunities each year to verify that an individual  on whose behalf a subsidy or allowance is paid is alive—information we  have incorporated into our report.

Although NRCS and RMA can identify some deceased participants during  their normal operations, we do not believe that identifying deceased  individuals during normal operations is a reliable substitute for having a  systematic process. As we noted in the report, the agencies have not had  specific procedures in place to verify and prevent potentially improper  payments to deceased individuals. Indeed, in our review, we found that,  without reviewing whether these payments or subsidies were proper,  NRCS made payments to more than 1,000 deceased individuals in fiscal  year 2008 through April 2012 and that RMA provided subsidies and  allowances on behalf of more than 3,000 deceased policyholders in  reinsurance years 2008 through 2012. We are therefore pleased to learn  from USDA’s comment letter that RMA has begun implementing formal,  systematic procedures to identify and prevent subsidies on behalf of  deceased individuals consistent with our recommendation. According to  the comment letter, effective May 1, 2013, RMA implemented a new  computer matching procedure to check federal crop insurance program  eligibility, subsidies, and payments to policyholders against the public  version of the death master file, and, when the complete death master file  is available, RMA is prepared to integrate it into the agency’s computer  matching system. The steps RMA is taking are promising. We encourage  NRCS to take similar steps, because until and unless NRCS has its  payment data records matched against SSA’s complete death master file,  it cannot know if it is providing payments to deceased individuals or  whether these payments are proper or improper.

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 garciadiazd@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix III.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of our review were to determine the extent to which  procedures are in place to prevent (1) the Farm Service Agency (FSA)  from making potentially improper payments to deceased individuals,  (2) the Natural Resources Conservation Service (NRCS) from making  potentially improper payments to deceased individuals, and (3) the Risk  Management Agency (RMA) from providing potentially improper subsidies  on behalf of deceased individuals.

To address all three objectives, we reviewed relevant sections of the  Food, Conservation, and Energy Act of 2008 (2008 Farm Bill), the  Improper Payments Information Act of 2002, the Improper Payments  Elimination and Recovery Act of 2010, the Improper Payments  Elimination and Recovery Improvement Act of 2012, and the Do Not Pay  initiative. We also reviewed relevant studies prepared by the U.S.  Department of Agriculture’s (USDA) Office of Inspector General, as well  as our own past reports.

To determine the extent to which FSA has procedures in place to prevent  potentially improper payments to deceased individuals, we reviewed  agency guidance, such as FSA’s Handbook on Common Management  and Operating Provisions, 1-CM (Revision 3), as well as FSA’s reports  compiling the results of its matches of payment data against the Social  Security Administration’s (SSA) death master file. FSA refers to this  report as the DMF Review Report. We also interviewed agency officials at  FSA’s Washington, D.C., headquarters and at its Kansas City, Missouri,  information technology office about agency procedures, guidance,  payment processes, and the identification of improper payments. In  addition, we interviewed FSA officials about the extent to which the  agency follows requirements to compare agency data with the data in  SSA’s death master file and the steps the agency takes to recover  improper payments. To obtain information about agency procedures and  adherence to guidance, we interviewed FSA’s state and county officials in  California, Illinois, Kansas, Missouri, and county officials in Texas. We  selected offices in Texas, Illinois, and Kansas because these states  represent the highest numbers, respectively, of FSA payments made to  deceased individuals. We selected the Missouri office because of the  state’s large number of FSA payments made to deceased individuals and  its geographic proximity to other states we visited, and we selected  California for geographic diversity.

To determine if state and county offices accurately coded payments made  to deceased individuals as proper or improper, we analyzed a  generalizable, random sample of payments made by FSA to deceased  individuals from April 2011 through March 2012, and we reviewed and  analyzed supporting documentation to determine the individuals’  eligibility. Specifically, we randomly selected 100 payments made during  that 1-year period. The sample size was chosen to provide a margin of  error for an attribute measure of no greater than plus or minus  10 percentage points at the 95 percent level of confidence. Because we  followed a probability procedure based on random selections, our sample  is only one of a large number of samples that we might have drawn.  Since each sample could have provided different estimates, we express  our confidence in the precision of our particular sample’s results as a  95 percent confidence interval (i.e., plus or minus 5 percentage points).  This interval would contain the actual population value for 95 percent of  the samples we could have drawn. We also randomly selected for case  study analysis a nongeneralizable sample of 20 payments made to  deceased individuals during the same time period and deemed erroneous  by FSA. For the case study analysis, we reviewed and analyzed the  supporting payment eligibility documentation of these improper payments.  Because this analysis was a case study, the results cannot be  generalized to all erroneous payments identified by FSA, but they provide  examples of the kinds and types of improper payments made to  deceased individuals. We assessed the reliability of FSA’s payment data  by (1) reviewing existing information about the data and the system that  produced them and (2) interviewing agency officials knowledgeable about  the data. We determined that the data were sufficiently reliable for the  purposes of our review.

To determine the extent to which NRCS has procedures in place to  prevent potentially improper payments to deceased individuals, we  interviewed agency officials at NRCS’s Washington, D.C., headquarters  office and state and county offices in California, Illinois, Kansas, and  Missouri. We selected these offices for geographic diversity and because  of their close proximity to meetings we were holding with FSA officials.  Using Social Security numbers, we compared the death master file with  NRCS payment data for conservation programs from fiscal year 2008  through April 2012 to determine the number individuals paid by NRCS  who died 1 year or more before the payment dates and the amount of  these potentially improper payments. We assessed the reliability of SSA’s  death master file by (1) performing electronic testing of required data  elements and (2) reviewing relevant documentation. We determined that  the data were sufficiently reliable for the purposes of our review. We  included the following conservation programs in our analysis: the  Agricultural Water Enhancement Program, Agricultural Management  Assistance, Chesapeake Bay Watershed Initiative, Conservation Security  Program, Conservation Stewardship Program, Environmental Quality  Incentives Program, Farm and Ranch Lands Protection Program,  Grassland Reserve Program, Healthy Forests Reserve Program,  Wetlands Reserve Program, and Wildlife Habitat Incentives Program. We  did not review a portion of payments made under these programs  because NRCS was unable to provide us with the Social Security  numbers for some program participants. We assessed the reliability of  NRCS’s data by (1) performing electronic testing of required data  elements and (2) interviewing agency officials knowledgeable about the  data. We determined that the data were sufficiently reliable for the  purposes of our review.

To determine the extent to which RMA has procedures in place to prevent  improper subsidies to deceased policyholders, we interviewed RMA  officials to obtain information about the steps the agency takes to verify its  records of eligible policyholders. To determine the extent to which RMA’s  records are regularly updated to verify whether policyholders have died,  we compared the death master file with crop insurance data from RMA for  reinsurance year 2008 through reinsurance year 2012 and produced a list  of premium subsidies, administrative allowances, and claims payments  provided on behalf of policyholders 2 or more reinsurance years after  death. As mentioned earlier, we assessed the reliability of SSA’s death  master file and determined that the data were sufficiently reliable for the  purposes of our review. We assessed the reliability of RMA’s crop  insurance data by (1) reviewing related documentation, (2) performing  electronic testing of required data elements, and (3) interviewing agency  officials knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of our review.

We conducted this performance audit from March 2012 through June  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.

section_title: Appendix II: Comments from the U.S. Department of Agriculture

section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the individual above, Thomas M. Cook (Assistant Director),  Carl S. Barden, Kevin S. Bray, Allen T. Chan, Jennifer Chanley, Ellen W.  Chu, Mitchell B. Karpman, Michael Kendix, Karine E. McClosky, and Kiki  Theodoropoulos made key contributions to this report.

section_title: Related GAO Products
paragraphs: Social Security Administration: Preliminary Observations on the Death  Master File. GAO-13-574T. Washington, D.C.: May 8, 2013.

Farm Programs: Direct Payments Should Be Reconsidered. GAO-12-640.  Washington, D.C.: July 3, 2012.

Farm Bill: Issues to Consider for Reauthorization. GAO-12-338SP.  Washington, D.C.: April 24, 2012.

Crop Insurance: Savings Would Result from Program Changes and  Greater Use of Data Mining. GAO-12-256. Washington, D.C.: March 13,  2012.

Crop Insurance: Opportunities Exist to Reduce the Costs of Administering  the Program. GAO-09-445. Washington, D.C.: April 29, 2009.

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-07-1137T. Washington, D.C.: July 24, 2007.

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent  Improper Payments to Estates and Deceased Individuals. GAO-07-818.  Washington, D.C.: July 9, 2007.

Crop Insurance: Continuing Efforts Are Needed to Improve Program  Integrity and Ensure Program Costs Are Reasonable. GAO-07-944T.  Washington, D.C.: June 7, 2007.

Crop Insurance: More Needs to Be Done to Reduce Program’s  Vulnerability to Fraud, Waste, and Abuse. GAO-06-878T. Washington,  D.C.: June 15, 2006.

Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to  Fraud, Waste, and Abuse. GAO-05-528. Washington, D.C.: September  30, 2005.


Question-summary annotations: questions: question: What has the FSA established procedures for since 2007?
answer: Since 2007, the Department of Agriculture's (USDA) Farm Service Agency (FSA), which administers various programs for farmers that help support farm incomes and provide disaster assistance, has established procedures for preventing improper payments to deceased individuals, including, on a quarterly basis, matching payments to program participants with the Social Security Administration's (SSA) data on deceased individuals. In addition, FSA state and county offices review and verify whether payments made to deceased individuals are proper or improper.
child_questions: question: What have these procedures enabled FSA to do?
answer: Overall, these procedures have enabled FSA to identify thousands of deceased individuals who were paid $3.3 million in improper payments after their dates of death, of which FSA has recovered approximately $1 million.

question: What did GAO find in its review of a sample of payments to deceased individuals?
answer: GAO reviewed a generalizable random sample of payments to deceased individuals that FSA identified as proper and found that 9 percent did not have sufficient support to be coded as proper.
child_questions: question: How could a greater degree of monitoring benefit the FSA?
answer: More monitoring to ensure that county offices' coding of payments is supported by documentation could help reduce the error rate.

questions: question: What does the NRCS lack sufficient procedures for?
answer: The Natural Resources Conservation Service (NRCS), a USDA agency that administers voluntary conservation programs, does not have procedures to prevent potentially improper payments to deceased individuals.
child_questions: question: How does this limit the NRCS's abilities?
answer: For example, NRCS's ability to verify whether payment recipients have died is limited because the agency does not match these recipients against SSA's master list of deceased individuals.

question: How does this differ from federal standards for internal control?
answer: Under the standards for internal control in the federal government, agencies are to clearly document such control in the form of management directives, administrative policies, or operating manuals.

question: What did GAO discover when reviewing NRCS's fiscal data from 2008 to 2014?
answer: GAO did a data review for fiscal year 2008 to April 2012, and estimates that NRCS made $10.6 million payments on behalf of 1,103 deceased individuals 1 year or more after their death.
child_questions: question: Why is it difficult to verify the validity of these payments?
answer: Some of these payments may have been proper, but NRCS cannot be certain because it neither identifies which of its payments were made to deceased individuals, nor reviews each of these payments.

questions: question: What does the RMA lack sufficient procedures for?
answer: USDA's Risk Management Agency (RMA), which administers crop insurance programs, does not have procedures in place consistent with federal internal control standards to prevent potentially improper subsidies on behalf of deceased individuals.
child_questions: question: What is an example of this?
answer: For example, RMA does not use SSA's master list of deceased individuals to verify whether its policyholders have died.

question: What did GAO's analysis reveal about the implications of insufficient procedures?
answer: GAO matched every policyholder's Social Security number in RMA's crop insurance subsidy and administrative allowance data for crop insurance years 2008 to 2012 with SSA's master list of deceased individuals and found that $22 million in subsidies and allowances may have been provided on behalf of an estimated 3,434 program policyholders 2 or more years after death.
child_questions: question: Why is it difficult to verify the validity of these payments?
answer: Many of these subsidies and allowances may have been proper, but without reviewing each subsidy and allowance made on behalf of deceased individuals, RMA cannot be certain that these subsidies and allowances are proper.

question: What issues might the RMA's lack of sufficient procedures cause?
answer: In addition, without accurate records of which policyholders are deceased, RMA may be less likely to rely on results from data mining--a technique for extracting knowledge from large volumes of data--and therefore be less likely to detect fraudulent, wasteful, or abusive crop insurance claims.

questions: question: What does the USDA spend $20 billion on annually?
answer: USDA spends about $20 billion annually on federal programs that support farm income, conserve natural resources, and help farmers manage risks from natural disasters, benefiting over 1 million participants.
child_questions: question: Why have such programs come under increased scrutiny?
answer: Given their cost and continuing nationwide budget pressures, these programs have come under increasing scrutiny.

question: What concerns have been voiced regarding such programs?
answer: One concern has been the distribution of benefits to ineligible participants, including potentially improper payments to deceased individuals, which, as GAO and others have reported, may call into question whether these farm safety net programs are benefiting the agricultural sector as intended.

question: What was GAO asked to do?
answer: GAO was asked to evaluate USDA controls over payments to the deceased.

question: What does this report examine?
answer: This report examines the extent to which procedures are in place to prevent (1) FSA and (2) NRCS from making potentially improper payments to deceased individuals and (3) RMA from providing potentially improper subsidies on behalf of deceased individuals.
child_questions: question: How did GAO collect data for this report?
answer: GAO reviewed a random sample of payments, compared USDA's databases with SSA's master list of deceased individuals, and interviewed agency officials.