Disaster Assistance: USDA and SBA Could Do More to Help Aquaculture and Nursery Producers
Released: 2012-09-13T00:00:00

Letter

Background

Natural disasters, such as droughts, floods, hurricanes, and other adverse weather events, pose risks to agricultural producers. The federal government has played an active role in mitigating those risks through a variety of disaster assistance programs. USDA provides a basic safety net of permanently authorized and regularly funded programs to help agricultural producers recover financially from losses resulting from natural disasters. Congress has historically supplemented these ongoing programs in an ad hoc manner by providing one-time payments through disaster assistance programs that compensate producers for disaster- related crop and livestock losses they sustained. The aquaculture and nursery industries are two growing agricultural industries covered by federal disaster assistance.

Federal Crop Insurance and Noninsured Crop Disaster Assistance Programs Provide a Basic Safety Net for Agricultural Producers

The Federal Crop Insurance Program and the Noninsured Crop Disaster Assistance Program (NAP) offer agricultural producers protection against crop losses if they enroll in the programs prior to experiencing a loss. Federal crop insurance, administered by USDA’s Risk Management Agency (RMA), protects participating farmers against financial losses because of production risks—droughts, floods, and other natural disasters—as well as other risks. Under the Federal Crop Insurance Program, farmers can choose various levels and types of insurance protection: they can insure against losses caused by poor crop yields, declines in crop prices, or both, for each insurable crop they produce. These crops include major crops—such as corn, cotton, soybeans, and wheat, which accounted for three-quarters of the acres enrolled in the program in 2011—as well as nursery crops and certain fruits and vegetables. RMA is also conducting pilot aquaculture crop insurance projects for clams and oysters. For crops for which federal crop insurance is not available, farmers can obtain coverage through FSA’s NAP, which provides cash payments to producers when natural disasters are responsible for low crop yields or loss of value or prevent planting from occurring. NAP is limited by statute to include crops for which the catastrophic risk protection level of crop insurance is not available and that are grown for food and fiber, and other crops such as floriculture, ornamental nursery, Christmas tree crops, turfgrass sod, and aquaculture.

Disaster declarations are required to trigger some federal disaster assistance programs. For agricultural disaster assistance programs, disaster declarations can be made by the President, the Secretary of Agriculture, or the SBA Administrator. The Robert T. Stafford Disaster Relief and Emergency Assistance Act authorizes the President to issue major disaster or emergency declarations in response to catastrophes in the United States that overwhelm state and local governments. Such declarations result in the distribution of a wide range of federal aid to individuals and families, certain nonprofit organizations, and public agencies (see app. II). The Federal Emergency Management Agency (FEMA), in the Department of Homeland Security, is responsible for coordinating federal response and recovery efforts under presidential disaster declarations. FEMA works with other federal, state, and local agencies to assist individuals after major disasters, and volunteer organizations, such as the American Red Cross, also participate in these efforts.disaster recovery centers where individuals can meet with representatives from federal agencies, including FSA and SBA; obtain information about the recovery process; and register for federal disaster assistance.

Federal Disaster Assistance Programs That Become Available to Agricultural Producers and Businesses That Support Agriculture Following a Natural Disaster

In addition to crop insurance and NAP, which are purchased before a disaster, FSA provides eight disaster assistance programs that become available to producers after a natural disaster. Title XV of the Food, Conservation, and Energy Act of 2008 (the 2008 farm bill) established five disaster assistance programs that provide assistance to agricultural producers who suffer crop and livestock losses incurred as a result of a disaster, adverse weather, or other environmental condition that occurred on or before September 30, 2011. Agricultural producers may apply for this assistance following a natural disaster. USDA’s FSA administers these programs and funds them through the Agricultural Disaster Relief Trust Fund providing approximately $3.6 billion in assistance through the end of calendar year 2011 to agricultural producers of all sizes.

The five programs are the following:

The Supplemental Revenue Assistance Payments Program (SURE) provides cash assistance for agricultural producers with crop production losses or crop quality losses.

The Tree Assistance Program (TAP) provides partial cost reimbursements to orchard and nursery producers for replanting or rehabilitating lost or damaged trees, bushes, or vines.

The Livestock Indemnity Program provides cash assistance to producers for livestock deaths.

The Livestock Forage Disaster Program provides cash assistance to livestock producers when their livestock are prevented from grazing due to drought or fire on federally managed land.

The Emergency Assistance for Livestock, Honeybees, and Farm- raised Fish Program (ELAP) provides cash assistance to eligible producers who have losses that are not covered under the other 2008 farm bill programs due to adverse weather and disease, among other things.

FSA also administers three other disaster assistance programs that producers can apply for following a disaster. These programs are generally funded through annual appropriations and are as follows:

The Emergency Forest Restoration Program, which also was created in the 2008 farm bill, provides payments to eligible owners of nonindustrial private forestland to carry out emergency measures to restore land damaged by a natural disaster. This program was implemented in 2010 to cover disasters starting in January 2010. It has provided $2 million from fiscal years 2010 through 2011.

The Emergency Conservation Program provides funding and technical assistance for farmers and ranchers who carry out emergency measures to rehabilitate farmland damaged by natural disasters and for carrying out emergency water conservation measures in periods of severe drought. This program provided $345 million from fiscal years 2008 through 2011.

The Emergency Loan Program helps agricultural producers recover from production and physical losses. Unlike FSA’s other disaster assistance programs, the Emergency Loan Program is available only to small agricultural producers, which USDA classifies as family-sized farms. FSA obligated $32 million for the Emergency Loan Program in fiscal year 2011.

By law, SBA is prohibited from providing disaster loans to most agricultural producers. However, SBA has two loan programs that are relevant to agriculture and provided 103 loans totaling about $15 million in disaster loans to eligible small aquaculture producers, nursery producers affected by drought, and businesses that support agriculture that reported losses to SBA from October 2007 through the end of 2011. The two programs are the following:

The Economic Injury Disaster Loan Program provides working capital loans for disaster-related needs to meet financial obligations that could have been met had the disaster not occurred. Small businesses or private nonprofit organizations are eligible for these loans if they have suffered substantial economic injury—i.e., the business cannot meet its obligations or pay necessary operating expenses—as a direct result of a declared disaster. Aquaculture producers and nursery producers affected by drought may qualify for these loans.

The Business Physical Disaster Loan Program provides loans for a business to repair, rehabilitate, or replace damaged property, including real estate, equipment, inventory, and fixtures. Any business, other than an agricultural enterprise, or private, nonprofit organization (large or small) located in a declared disaster area that has incurred damage during the disaster may apply for these loans, including businesses that support agriculture.

Characteristics of Aquaculture and Nursery Industries

The 10 USDA and SBA disaster assistance programs have slightly different definitions for aquaculture. USDA defines aquaculture as the production and rearing of aquatic species under controlled or selected environments. SBA uses a definition from the U.S. Department of Commerce’s National Oceanic and Atmospheric Administration, which defines aquaculture as the propagation and rearing of aquatic organisms in controlled or selected aquatic environments for any commercial, recreational or public purpose. A 2012 Congressional Research Service report stated that, until recently and with a few exceptions, U.S. aquaculture has been considered a minor industry. USDA’s 2005 Census of Aquaculture reported that U.S. sales of aquaculture products were approximately $1.1 billion. Aquaculture crops include fish for human consumption, such as catfish, salmon, and trout; crustaceans such as crawfish; mollusks such as oysters and clams; and ornamental fish and baitfish. Fish for human consumption and baitfish are normally grown in freshwater. Crawfish are grown in freshwater, and farm-raised oysters and clams are grown in coastal areas of the United States.

Nursery producers grow a variety of trees and plants, such as oak trees, shrubs, and potted plants, with some producers growing hundreds of varieties. USDA has reported that, since the 1970s, the greenhouse and nursery industry had been growing more rapidly than all other agricultural commodities, in terms of cash receipts. Cash receipts for the top five greenhouse and nursery producing states were nearly $10 billion in 2006.

Disaster Assistance Programs Leave Few Gaps in Coverage for Small Agricultural Producers

The 10 FSA and SBA disaster assistance programs we identified that small agricultural producers and businesses that support agriculture can use to recover from natural disasters provide assistance that can cover most losses. FSA provides cash assistance to agricultural producers, including small producers, for crop and livestock losses and damages to land. FSA also provides disaster loans to these producers to cover production losses, while SBA provides disaster loans to cover physical damages and economic injury losses to businesses that support agriculture and economic injury to a limited aquaculture sector and for nurseries only when a drought is declared. Together, the FSA and SBA disaster assistance programs are fragmented, but they leave few gaps in the assistance available to most small agricultural producers in the wake of a natural disaster.programs we identified and the types of losses they cover.

Awareness and Eligibility Issues Limit Small Aquaculture and Nursery Producers’ Participation in Disaster Assistance Programs

Three main factors may limit small aquaculture and nursery producers’ participation in the 6 of the 10 disaster assistance programs for which they could be eligible. First, many producers did not apply for the assistance because they were not aware of these programs. Second, some producers did not apply for it because they sought relief through other options, such as other federal grants and private loans. Third, some producers applied but did not qualify because they did not meet certain program requirements. Table 4 shows the six disaster assistance programs—four cash assistance and two loan programs—that small aquaculture and nursery producers could apply for.

Many small aquaculture producers and some small nursery producers did not apply for disaster assistance because they were not aware of FSA’s or SBA’s programs, according to aquaculture and nursery industry representatives and FSA and SBA officials we interviewed. According to most state-level aquaculture industry representatives and, to a lesser extent, nursery industry representatives, aquaculture and nursery producers in their states were generally not aware of FSA’s or SBA’s disaster assistance programs or that they could be eligible for financial assistance through these programs. For example, a representative of a state-level aquaculture association said its members were either not aware they could be eligible for, or were misinformed about, FSA disaster assistance programs and did not use SBA programs. Several FSA and SBA officials told us that both small aquaculture and nursery producers fall outside of their usual customer bases and may not be aware of their disaster assistance programs. In general, these producers do not have a past or current relationship with FSA or SBA. However, in two states where aquaculture producers also grow other crops and participate in other FSA programs, FSA officials said these producers were more likely to become aware of FSA’s disaster assistance programs. For example, FSA officials in one large aquaculture state told us that some of the state’s small aquaculture producers are aware of FSA because they grow other crops covered by FSA’s agriculture support programs. In addition, a catfish producer we spoke with had worked with FSA on other issues and was familiar with FSA disaster assistance programs but was not aware of SBA Economic Injury Disaster Loans. In contrast, a representative of a state nursery industry association said that he had not considered going to FSA for nursery-related matters, despite having experience working with FSA on matters affecting other types of agricultural producers. He also said that nursery producers in his state may not be aware of disaster assistance programs and do not identify themselves as agricultural producers, so do not think of FSA as a resource when a disaster occurs.

Participation among small aquaculture and nursery producers was low in certain FSA disaster assistance programs, according to FSA officials, and few aquaculture producers applied for SBA’s Economic Injury Disaster Loan Program, according to SBA officials. For example, FSA officials we interviewed in one state with aquaculture and nursery farms numbering in the top 10 compared with other states, as of 2009 and 2007, respectively, reported receiving only 1 aquaculture and 3 nursery applications out of a total of nearly 2,500 applications for SURE between January 2011 and June 2012. In addition, they reported receiving only 2 aquaculture and 2 nursery applications out of a total of nearly 2,750 for Emergency Conservation Program assistance during 2011. FSA national-level loan officials also said that they received few applications for Emergency Loans from aquaculture and nursery producers. For example, FSA officials from a state with large aquaculture and nursery industries reported that they did not receive any Emergency Loan applications from aquaculture producers and only 7 applications from nursery producers in fiscal years 2010 through 2011. Similarly, SBA officials told us, as of July 2012, they had received only 3 Economic Injury Disaster Loan applications from aquaculture producers since the Small Business Jobs Act of 2010 extended eligibility to aquaculture producers.

We have reported that reaching a program’s intended recipients is an important measure of program performance.

Outreach is one approach to increasing awareness of federal programs among intended recipients. Both FSA and SBA conduct outreach related to their disaster assistance programs, but their methods do not help to ensure that small aquaculture and nursery producers are aware of their potential eligibility for the programs. Therefore, aquaculture and nursery producers may be missing opportunities to receive assistance that could help them maintain a viable business after experiencing a natural disaster. Specifically, FSA’s outreach activities include notifying local media outlets; minority, civic, and business organizations; and FSA’s existing customers about FSA’s disaster assistance programs. In addition, FSA national-level officials told us that the public may sign up for disaster assistance e-mail updates on the FSA website. However, FSA national-level officials told us FSA’s outreach approach does not directly target aquaculture and nursery industry organizations. In addition, aquaculture and nursery producers are often not in FSA’s customer database, so they would not receive FSA newsletters that contain information about disaster assistance. For example, FSA officials in a state with a large nursery industry said that they do not conduct outreach to the nursery industry, although they reach out to other agricultural producers. Therefore, aquaculture and nursery producers may not see all information FSA releases. In addition, those who receive disaster assistance information may not realize they could be eligible for assistance from FSA because some do not identify as a part of the agriculture industry.

Similarly, SBA provides information to disaster victims; current SBA customers; media outlets; Small Business Development Centers; Chambers of Commerce; and federal, state, and local officials about SBA disaster loans. SBA national-level officials told us they have not contacted small aquaculture or nursery producers or their industry representatives directly about SBA disaster loans. While SBA developed postdisaster procedures that include contacting aquaculture industry associations, officials told us that, as of July 2012, they had not contacted any aquaculture industry associations. They told us there has been little disaster activity affecting aquaculture producers since they became eligible for SBA Economic Injury Disaster Loans, but that they would follow these procedures for future disaster declarations. As a result, aquaculture and nursery producers may not be aware they could be eligible for SBA disaster assistance.

FSA and SBA have indicated a willingness to help aquaculture and nursery producers seek disaster assistance when asked. Several representatives of state-level aquaculture and two nursery industry associations said they have requested and received help from FSA field offices on numerous occasions about disaster assistance eligibility and payment issues. Of these, most noted they have a good relationship with the agency. For example, one state’s aquaculture association representative noticed that his producers were not aware they could be eligible for, or were misinformed about, FSA disaster assistance. He requested FSA’s help in educating producers about disaster assistance. As a result, FSA may participate in the industry’s annual conference to increase producers’ familiarity with FSA services. Similarly, SBA national- level officials told us they were interested in helping aquaculture producers obtain access to SBA’s Economic Injury Disaster Loans and have taken steps to bring these producers to SBA. For example, SBA’s disaster loan announcements specify that aquaculture producers are eligible for their Economic Injury Disaster Loan Program.

Some Producers Do Not Apply for Disaster Assistance Because They Have Other Options

Some small aquaculture and nursery producers may not apply for FSA or SBA disaster assistance programs for which they could be eligible because they have other options for assistance, including other federal grant programs and other federal or private loans, according to FSA officials and industry representatives. FSA national-level officials told us that one reason they had received few applications for ELAP from aquaculture producers to cover disaster-related feed losses was because many aquaculture producers had received assistance for historically high feed costs through FSA’s Aquaculture Grant Program, which was active in 2008 and 2009. Aquaculture producers who receive 2008 or 2009 Aquaculture Grant Program payments are not eligible for aquaculture feed losses under ELAP for the same species for which the grant benefits were received because producers cannot receive duplicate payments for the same loss under multiple programs. FSA officials also noted that SURE covers physical losses for the majority of aquaculture species, while ELAP only covers physical losses of game fish and baitfish. Therefore, FSA received few ELAP applications from aquaculture producers. In addition, some small nursery producers in particular do not apply for FSA Emergency Loans or SBA Economic Injury Disaster Loans because they apply for other loans or prefer not to take out a loan, according to most loan officials and several nursery representatives. For example, some FSA officials said that some small nursery producers choose to apply for FSA Operating Loans rather than Emergency Loans. According to FSA national-level officials, Operating Loans may be more attractive to these producers because their interest rates are currently lower than Emergency Loans, and they do not require applicants to document disaster losses. The Operating Loan interest rate has been below the Emergency Loan interest rate since November 2008—1.25 percent as of July 2012 and 3.75 percent since January 1994, respectively. However, as previously noted, USDA announced in July 2012 that the Emergency Loan rate would be reduced to 2.25 percent. The Operating Loan rate is tied to the government’s cost of borrowing, and FSA officials told us it is historically low because of the economic downturn. However, FSA officials noted that Emergency Loans remain an important option for some producers who have exhausted their Operating Loan statutory term limits by receiving an Operating Loan in 7 different years or have reached the statutory loan size limit of $300,000 and need additional funds. SBA officials said that some aquaculture producers’ disaster losses may be covered sufficiently by insurance or they may seek out grants rather than loans. In addition, two nursery industry representatives said that small nursery producers affected by disasters may take out private loans because they are familiar with their local banks. Another nursery industry representative said that other small nursery producers do not take out any loans because they do not want to take on more debt.

Some Small Producers Do Not Meet Certain Requirements for Disaster Assistance

Some small aquaculture and nursery producers did not receive disaster assistance from FSA or SBA primarily because (1) their losses were less than the required minimums, (2) they did not meet the crop insurance or NAP coverage requirement, or (3) they did not meet loan eligibility requirements. First, three programs available to aquaculture and nursery producers—SURE, TAP, and the Emergency Loan Program—set minimum loss requirements as a condition of receiving assistance. As a result, some small aquaculture and nursery producers did not experience the required levels of losses. Several FSA officials told us this was primarily because they tend to have more control over their operating conditions relative to other types of agricultural producers, which tends to limit damage from a disaster. For example, FSA officials in a state with a large aquaculture industry told us that catfish ponds tend to experience little damage from flooding. In addition, FSA officials in another state denied five of six SURE applications from nursery and aquaculture producers last year because controlled operating conditions limited disaster losses. Therefore, these applicants did not meet the SURE requirement that they experience at least a 10 percent crop loss on at least one crop of economic significance on their farm if they were located in a declared disaster county or a county adjacent to a disaster county or, at least a 50 percent loss of the normal production on their farms from a natural disaster if they were not located in a declared disaster county or contiguous county. Similarly, FSA national-level officials told us that small nursery producers often do not qualify for TAP because their trees or plants were damaged but not destroyed in a disaster. Only trees that are destroyed or damaged such that it would be more cost-effective to replace them are considered in determining whether the loss threshold is met and, therefore, whether an applicant will receive a payment. As previously mentioned, to qualify for TAP, a producer must have sustained a loss in excess of 15 percent of the trees, bushes, or vines in an individual stand—a contiguous acreage of the same type of plant—after adjusting for normal mortality or damage.

Furthermore, because aquaculture and nursery producers have more control over their operating conditions compared with other types of agricultural producers, FSA expects these producers to follow certain management practices to decrease their risk of disaster losses. If they fail to do so, FSA may deny a request for assistance. For example, according to FSA officials in one state, they did not approve an application for SURE from a tilapia producer because they determined that the producer could have prevented the tilapia losses. That is, the tilapia died because the water in their tank was too hot, and the producer could have controlled the water temperature. Similarly, FSA disaster assistance programs typically do not cover nursery losses from drought because irrigation is a standard practice for nursery producers. FSA officials in a state with a large nursery industry also told us that nursery producers can control the location of their potted trees and plants. As such, producers could avoid losses from a freeze by moving the pots indoors.

Second, several representatives from state-level nursery industry associations said that small nursery producers often did not receive disaster assistance because they did not enroll in crop insurance. As previously mentioned, enrolling in crop insurance or purchasing NAP are generally prerequisites for several FSA disaster assistance programs. FSA officials in some states in which we conducted interviews also said that nursery producers often do not meet this requirement. FSA national- level officials told us that because crop insurance coverage is widely available to nurseries, there are few instances when nurseries would use NAP. National-level officials from USDA’s RMA told us that nursery producers may not enroll in crop insurance because they see little risk of disaster losses because they operate under controlled conditions. In addition, RMA officials told us that both aquaculture and nursery producers continuously plant and harvest their crops, reducing their risk of losing an entire year’s crops to a single natural disaster. According to one state’s nursery industry representative, some producers do not realize that crop insurance is a prerequisite for receiving disaster assistance under several of the FSA programs. FSA national-level officials said that because disaster assistance programs only recently included crop insurance or NAP enrollment as a eligibility requirement, many producers are just beginning to see the connection between having crop insurance and obtaining disaster assistance. Small aquaculture producers’ participation in crop insurance and NAP tended to vary by state, according to state aquaculture representatives.

Third, some small aquaculture and nursery producers did not meet the requirements of FSA’s Emergency Loan or SBA’s Economic Injury Disaster Loan Programs. According to most FSA state-level loan officials, small aquaculture and nursery producers did not receive assistance from the Emergency Loan Program primarily because they could not demonstrate an ability to repay the loan. The program requires that applicants submit a farm operating plan as part of their loan application to demonstrate their ability to pay back the loan according to a set schedule. The farm operating plan includes applicants’ projected cash flow budget reflecting production, income, expenses, and loan repayment plan. FSA reviews the farm operating plan along with other application documents. If FSA officials determine the plan is not feasible, they will deny the loan request. For example, an FSA loan official in one state with a large nursery industry told us that the small nursery producer applicants who were denied Emergency Loans were often in tenuous financial positions prior to the disaster and, once the disaster hit, did not have the means to repay a loan.

Federal barrier resource area. The third application was withdrawn by the applicant before SBA began processing it.

FSA and SBA Efforts to Collaborate on Disaster Assistance to Small Aquaculture and Nursery Producers Are Limited

FSA and SBA engaged in some efforts to collaborate in providing disaster assistance to small aquaculture and nursery producers, but the efforts were limited to referring producers from one agency to the other without identifying the assistance that may be available to these producers. Specifically, FSA officials told us that when they collaborate with SBA, it is at the local level on a disaster-by-disaster basis or when a disaster event is concentrated and losses are immediate. These collaborative efforts generally are limited to presidentially declared disasters, where, both SBA and FSA officials told us, the agencies have participated in multiagency disaster recovery centers established by FEMA. According to SBA officials and as provided by SBA’s website, the agency also has taken steps on its own to inform agricultural producers (including small aquaculture and nursery producers) that FSA provides disaster assistance. SBA posts some information on its website showing that FSA administers and manages disaster assistance and loan programs through a network of federal, state, and county offices and that producers eligible for SBA assistance should also consider getting assistance from FSA. SBA also mentions FSA and USDA in the disaster notices it publishes following a Secretary of Agriculture-declared disaster. In addition, according to SBA officials, SBA advises applicants orally and in writing to check with FSA for assistance when they have been declined SBA assistance because their affected businesses were primarily agricultural and not covered by the statutes that extended eligibility to aquaculture and nursery producers. However, SBA typically does not provide producers information about the type of FSA disaster assistance.

We identified one primary reason for FSA’s and SBA’s limited collaboration. Both FSA national-level officials and state-level Emergency Loan officials told us that FSA field staff know little about SBA’s disaster assistance programs, and SBA staff know little about what factors affect whether an agricultural loan will be repaid. According to FSA national- level officials, the FSA Emergency Loan and SBA disaster loan programs have little in common, but FSA’s limited knowledge of SBA’s programs may reduce the abilities of both agencies to meet the needs of small aquaculture and nursery producers affected by disasters. FSA national- level officials said that their loan officers at the state and county levels may have some general knowledge of SBA’s disaster assistance programs, but that those loan officers may not know the programs in enough detail to inform a producer about them. They also said that FSA does not expect its county officials to be familiar with SBA’s disaster assistance programs. Consequently, the national-level FSA officials said that any knowledge their loan officers might have about SBA’s programs is likely to occur in local FSA offices that know more about SBA. Similarly, several state-level FSA loan officials we spoke with said that they were aware that SBA had disaster assistance programs but were not necessarily familiar with them. Also, FSA’s national-level office has not provided any guidance explaining SBA’s programs to its staff. In contrast, SBA national-level officials told us that they and their customer service representatives were generally familiar with FSA’s disaster assistance programs; however, they also told us that they have a limited understanding of the factors that might lead small aquaculture and nursery producers to repay their loans, which could make it challenging to serve them. SBA officials also told us that, historically, SBA has not focused on providing disaster assistance to aquaculture and nursery producers because SBA is prohibited by law from providing disaster loans to other agricultural producers. Consequently, the officials told us, SBA has not provided disaster assistance to many small aquaculture and nursery producers. Similarly, the FSA officials said that they and SBA understand the small aquaculture and nursery industries differently, giving them little reason to collaboratively provide assistance. However, both FSA and SBA provide assistance to aquaculture and nursery producers that is complementary, but they have not established compatible policies, procedures, and other means to coordinate their programs. In the absence of such practices, collaboration between FSA and SBA has been informal.

GAO, National Security: Key Challenges and Solutions to Strengthen Interagency Collaboration, GAO-10-822T (Washington, D.C.: June 9, 2010). work collaboratively by articulating their roles and responsibilities in formal documents to facilitate decision making. Such formal documents can include memoranda of understanding, interagency guidance, or interagency planning documents, signed by senior officials in the respective agencies. These documents can clarify which agencies will be responsible for particular activities and how they will organize their joint and individual efforts. As we reported in October 2005, agencies that have complementary programs can enhance the value of these programs through interagency collaboration. Among the key practices we identified were (1) defining and articulating a common federal outcome; (2) establishing strategies that are mutually reinforcing or joint to help the agencies align their activities, core processes, and resources to accomplish their common outcome; (3) agreeing on roles and responsibilities; (4) establishing compatible policies, procedures, and other means to operate across agency boundaries; and (5) including collaboration competencies in designing performance management systems and set performance expectations for collaboration to reinforce individual accountability for collaborative efforts. In the absence of such practices, collaboration between FSA and SBA has been based on limited information and not guided by any formal collaborative policy, guidance, or process. FSA and SBA have not adopted formal or written memoranda of understanding or interagency policies regarding their collaboration on disaster assistance programs. Both FSA and SBA national-level officials told us that they have no central guidance in place to facilitate collaboration with SBA on implementing their assistance programs. The SBA officials added that they did not see any need for written guidance because, in their view, the FSA and SBA disaster assistance programs do not overlap, and thus there are no “gray” areas that would require formal collaboration.

With limited information and no documented approach or policy to guide their collaboration, FSA and SBA personnel have not consistently referred applicants for disaster assistance to the other agency and, in turn, there has been little opportunity for small aquaculture and nursery producers to get assistance for which they may qualify. FSA national-level officials told us that they have discussed SBA disaster assistance with FSA field staff but have not provided written guidance on when or how its staff should refer producers, including aquaculture and nursery producers, to SBA.

Further, FSA officials from two states said that, while they had referred large agricultural producers to SBA for other assistance, they had not done so for disaster assistance. They also said that because of their limited understanding of SBA’s disaster assistance programs and little contact with SBA, they were not clear about the circumstances under which they should refer producers to SBA. Officials from four FSA state offices also told us that such referrals are either few and decreasing or not made in their states. Similarly, SBA national-level officials told us that while their loan officers may advise applicants to check with FSA for assistance, they do not routinely refer applicants to FSA. Consequently, small aquaculture and nursery producers likely have had less of an opportunity to get the disaster assistance for which they may qualify than they would have if FSA and SBA consistently referred producers to the other agency. In addition, several representatives of the aquaculture and nursery industries told us that they were not sure whether or how FSA and SBA coordinated their disaster programs, and a representative from another nursery association was not aware of any nursery producers that had been referred by either agency to the other. However, a representative from another nursery association noted that SBA had referred some producers to FSA, and the representative of another nursery association recalled that FSA had referred producers to SBA. Officials with one FSA state office told us that nursery producers who sought assistance from FSA or SBA could get bounced back and forth between the agencies while they determined whether the producers were eligible for assistance. Without more formal collaboration, applicants for disaster assistance may not be consistently referred by one agency to the other, leading to fewer opportunities for these small producers to get assistance for which they otherwise might qualify, and the value of these disaster assistance programs is diminished for aquaculture and nursery producers.

Conclusions

FSA’s and SBA’s 10 disaster assistance programs serve largely different populations but can provide an important safety net to help small agricultural producers recover from disasters. However, even though six FSA and SBA disaster assistance programs are open to small aquaculture and nursery producers, these producers are missing opportunities to receive such assistance. Small aquaculture and nursery producers are not using these programs as much as other agricultural producers, in part, because of their unique operations, such as the controlled growing environments that inherently mitigate disaster losses. Furthermore, they are not fully aware of the opportunities that exist. Because they do not apply for and receive assistance for which they could be eligible, small aquaculture and nursery producers’ disaster losses have the potential to significantly affect their ability to maintain a viable business. Both FSA and SBA conduct outreach related to their disaster assistance programs, but their methods do not help to ensure that small aquaculture and nursery producers are aware of their potential eligibility for the programs. In addition, FSA and SBA engaged in some efforts to collaborate in providing disaster assistance to such producers, but the efforts were limited. Moreover, FSA’s general lack of awareness about SBA’s disaster assistance programs and SBA’s limited understanding of the factors that might lead small aquaculture and nursery producers to repay their loans reduce both agencies’ abilities to fully serve these producers. Without a more formal collaborative approach between the agencies such as through a memorandum of understanding and further education of staff about the other agency’s disaster assistance programs, applicants for disaster assistance may not be consistently referred by one agency to the other, leading to fewer opportunities for these small producers to get assistance for which they otherwise might qualify.

Recommendations for Executive Action

To help ensure that small aquaculture and nursery producers are aware of the disaster assistance programs available to them, we recommend that the Secretary of Agriculture and the Administrator of the Small Business Administration direct FSA and SBA officials to take the following two actions:

Conduct targeted outreach to small aquaculture and nursery producers, for example, by building on existing agency outreach programs.

Develop a strategy to better formalize collaboration through means such as developing a memorandum of understanding on interagency collaboration and educating staff about the other agency’s disaster assistance programs.

Agency Comments

We provided the Secretary of Agriculture and the Administrator of the Small Business Administration with a draft of this report for review and comment. The departments did not provide official written comments to include in our report. However, in e-mails received August 23, 2012, the USDA and SBA liaisons stated that USDA and SBA generally concurred with our recommendations. USDA and SBA also provided written technical comments, which we incorporated into the report as appropriate.

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If you or your staff members have any questions about this report, please contact Lisa Shames at (202) 512-3841 or shamesl@gao.gov or William B. Shear at (202) 512-8678 or shearw@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.

Appendix I: Objectives, Scope, and Methodology

Our objectives for this engagement were to (1) examine selected U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) and Small Business Administration (SBA) disaster assistance programs and the types of small agricultural producers that they cover; (2) identify the main factors, if any, that may limit small aquaculture and nursery producers’ participation in disaster assistance from FSA and SBA; and (3) examine FSA and SBA efforts to collaborate in providing disaster assistance to small aquaculture and nursery producers.

To address these objectives, we reviewed 10 FSA and SBA disaster assistance programs for agricultural producers and businesses that support agriculture and interviewed the FSA and SBA officials responsible for managing and administering each program. We reviewed these 10 programs because they become available to agricultural producers and businesses that support agriculture following a natural disaster and provide direct financial assistance in the forms of cash payments and reimbursements, as well as loans to agricultural producers and businesses that support agriculture that have experienced losses due to disasters. We use the term “agricultural producers” to refer to family farms, commodity producers, aquaculture producers, nursery producers, and other farmers and ranchers. Businesses that support agriculture refers to businesses that provide support activities for agriculture that do not lead to agricultural production. Examples of support activities include such duties as cotton ginning, soil preparation, planting, and breeding services for animals. Our primary focus was on small agricultural producers. While there is no one definition that covers all small agricultural producers, we included family farms and other farmers and ranchers whose size makes them particularly vulnerable to disasters because they tend to have less control over their economic security in general, and disasters can exacerbate that insecurity. When FSA or SBA established specific size criteria for program eligibility, we used those criteria in our review. FSA administers 8 of the 10 programs, including the 5 disaster assistance programs that were authorized by Title XV of the 2008 farm bill, the Emergency Forest Restoration Program, the Emergency Conservation Program, and the Emergency Loan Program. The programs authorized by Title XV of the 2008 farm bill are the Emergency Assistance for Livestock, Honeybees, and Farm-raised Fish Program, the Livestock Forage Disaster Program, the Livestock Indemnity Program, the Supplemental Revenue Assistance Payments Program, and the Tree Assistance Program. SBA administers the remaining two disaster assistance programs, including the Economic Injury Disaster Loan and Physical Disaster Loan Programs. We also reviewed documents about the USDA Risk Management Agency (RMA) crop insurance program and FSA Noninsured Crop Disaster Assistance Program and interviewed RMA and FSA officials about how these programs interact with the disaster assistance programs in our study.

To determine the types of small agricultural producers the FSA and SBA programs cover, we reviewed agency documents, authorizing statutes, and implementing regulations to obtain information about each program, including eligibility requirements, and interviewed FSA and SBA officials. When analyzing whether gaps in coverage exist, we reviewed and analyzed FSA technical program handbooks and SBA program summaries and interviewed FSA and SBA officials. We analyzed major categories of agricultural producers involved in the production of food and fiber, including commodities, specialty crops, orchard and nursery products, and livestock, including aquaculture producers. We believe that this has enabled us to identify gaps in coverage, but we recognize that there could be additional gaps that we did not detect in this analysis.

We focused our second objective on the factors limiting small aquaculture and nursery producers’ participation in these disaster assistance programs because aquaculture and nursery producers are covered by both FSA and SBA disaster assistance programs. Other agricultural producers are not covered by the SBA programs. We identified the factors limiting small nursery and aquaculture producers’ participation in these disaster assistance programs by reviewing the eligibility criteria for the programs that pertain to them and by interviewing FSA and SBA officials about eligibility criteria and outreach policies and practices. We also interviewed state-level FSA officials and industry representatives in seven states about the factors that may limit small aquaculture and nursery producers’ participation in disaster assistance, including program participation and outreach practices. We assessed the agencies’ outreach policies and practices against prior GAO reports on reaching a program’s intended recipients. The industry representatives we selected for interviews were heads of aquaculture or nursery industry associations or others who could represent the views of producers in their states. The states we selected were California, Florida, Louisiana, Michigan, Mississippi, North Carolina, and Washington. We selected these states because they have a significant nursery industry or aquaculture industry presence based on the number of nursery and aquaculture farms and annual sales, as reported by the 2007 USDA Census of Agriculture. We also considered the geographic distribution of the states to ensure that a variety of places experiencing different types of natural disasters was included. We did not conduct a nationwide study on this issue.

To determine how FSA and SBA collaborate to provide disaster assistance to small nursery and aquaculture producers, we reviewed authorizing statutes and FSA and SBA documents and interviewed FSA and SBA officials to obtain information about the agencies’ policies and practices for collaborating on disaster assistance. We also interviewed state-level FSA officials in seven states and industry representatives about their experience with the agencies’ collaboration. We examined the degree to which the agencies’ collaborative efforts reflected key practices we previously identified that can help enhance and sustain collaboration among federal agencies. Department of Homeland Security’s Federal Emergency Management Agency about its role in coordinating disaster assistance.

In addition, we interviewed officials at the We conducted this performance audit from September 2011 to September 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

GAO-06-15.

Appendix II: Federal Disaster Assistance Programs

Agency and program Department of Agriculture Federal Crop Insurance Program

Federally subsidized insurance program that covers crop and livestock losses due to natural disasters as well as other risks.

Provides producers in disaster counties declared or contiguous to disaster counties who have existing direct loans with FSA and are unable to make loan payments with the opportunity to set aside up to 1 full year’s payment to the end of the loan.

Provides food assistance specifically for disaster survivors following a presidentially declared disaster.

Provides cash assistance for livestock feed losses and deaths that are not covered by other FSA disaster assistance programs, farm- raised fish, and honeybee deaths and feed losses.

Provides partial reimbursement for agricultural producers to rehabilitate farmland that has been severely damaged.

Provides partial reimbursement for owners of nonindustrial private forestland (including farmers and ranchers) in order to carry out emergency measures to restore damaged land.

Provides loans up to $500,000 to help small agricultural producers recover from production and physical losses due to drought, flooding, other natural disasters, or quarantine.

Allows livestock producers enrolled in the program to hay or graze Conservation Reserve Program acreage during an emergency in counties that have suffered a 40 percent or greater loss in normal hay and pasture production due to drought or excessive moisture.

Provides cash assistance for livestock grazing losses caused by qualifying drought conditions or a fire on federal land used for grazing.

Provides cash assistance for livestock deaths in excess of normal mortality due to adverse weather.

Provides coverage for crops for which crop insurance is not available. Results in cash payments to preenrolled producers when low yields, loss of inventory, or prevented planting occur due to natural disasters.

Provides cash assistance for agricultural producers with qualifying crop production losses or crop quality losses.

Provides partial reimbursement for qualifying orchardists and nursery producers to replant or rehabilitate eligible trees, bushes, and vines.

Provides disaster behavioral health technical assistance grant support to eligible states, territories, and federally recognized tribes; supports FEMA’s Crisis Counseling Assistance and Training Program.

Agency and program Department of Homeland Security Crisis Counseling Assistance and Training Program

Supports short-term interventions that involve the counseling goals of assisting survivors of a presidentially declared disaster in understanding their current situation and reactions, mitigating stress, assisting survivors in reviewing their disaster recovery options, promoting the use or development of coping strategies, providing emotional support, and encouraging linkages with other individuals and agencies who may help survivors in their recovery process.

Provides legal assistance to low-income disaster survivors of a presidentially declared disaster. Legal assistance generally includes help with insurance claims, hospital bills, lost property, preparing lost legal documents, and home repairs and contracts.

Provides assistance to individuals and households affected by a disaster to enable them to address necessary expenses and serious needs, which cannot be met through other forms of disaster assistance or insurance. Forms of housing assistance include temporary housing, repair, replacement, and semipermanent/permanent housing construction.

Individuals and Households Program–Other Needs Assistance Provides assistance to individuals and households affected by a disaster to enable them to address necessary expenses and serious needs, which cannot be met through other forms of disaster assistance or insurance. Forms of other needs assistance include personal property, medical, dental, and funeral.

Helps survivors in presidentially designated disaster areas to obtain mortgages to purchase a new home or rebuild their home that was destroyed or damaged by a disaster.

Provides grants to states, local governments, American Indian tribes, and other areas as a result of a presidentially declared disaster to rebuild the affected areas and provide seed money to start the recovery process. The grants are to primarily benefit low-income residents.

Provides unemployment benefits to individuals who have become unemployed as a result of a presidentially declared major disaster and are not eligible for regular unemployment insurance benefits.

Provides cash payments to federally recognized American Indians and Alaska Native tribe members who suffer from a burnout, flood, or other destruction of their homes and loss or damage to personal possessions.

Allows taxpayers to deduct nonreimbursed casualty losses in a presidentially declared disaster. Taxpayers may deduct the losses in the year the disaster occurred or file an amended return to deduct the loss in the year preceding the disaster.

Purpose Allows bond owners in areas affected by a presidentially declared disaster to redeem bonds prior to the expiration of the initial 12- month holding period.

Provides working capital loans to small businesses or private, nonprofit organizations for up to $2 million in working capital to meet financial obligations that could have been met had the disaster not occurred.

Provides loans to renters and homeowners up to $40,000 to repair or replace clothing, furniture, cars, appliances, etc. damaged or destroyed in a disaster and loans to homeowners up to $200,000 to repair or replace their primary residence to its predisaster condition.

Provides loans up to $2 million for a business to repair, rehabilitate, or replace damaged property, including real estate, equipment, inventory, and fixtures.

These programs are included in this GAO report and are those that become available to agricultural producers and businesses that support agriculture following a disaster and provide direct financial assistance.

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to the individuals named above, Anne K. Johnson, Assistant Director; Kay Kuhlman, Assistant Director; Lucas Alvarez; Kevin Bray; Anna Carbino; John Forrester; Annamarie Lopata; Lindsay Read; Anne Rhodes-Kline; and Carol Herrnstadt Shulman made significant contributions to this report.

Related GAO Products

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

Hurricanes Katrina and Rita: Federally Funded Programs Have Helped to Address the Needs of Gulf Coast Small Businesses, but Agency Data on Subcontracting Are Incomplete. GAO-10-723. Washington, D.C.: July 29, 2010.

USDA Crop Disaster Programs: Lessons Learned Can Improve Implementation of New Crop Assistance Program. GAO-10-548. Washington, D.C.: June 4, 2010.

Small Business Administration: Continued Attention Needed to Address Reforms to the Disaster Loan Program. GAO-10-735T. Washington, D.C.: May 19, 2010.

Small Business Administration: Additional Steps Should Be Taken to Address Reforms to the Disaster Loan Program and Improve the Application Process for Future Disasters. GAO-09-755. Washington, D.C.: July 29, 2009.

Gulf Coast Disaster Recovery: Community Development Block Grant Program Guidance to States Needs to Be Improved. GAO-09-541. Washington, D.C.: June 19, 2009.