FCIC was established in 1938 to temper the economic impact of the Great Depression, and was significantly expanded in 1980 to protect farmers from the financial losses brought about by drought, flood, or other natural disasters. RMA administers the program in partnership with private insurance companies, which share a percentage of the risk of loss and the opportunity for gain associated with each insurance policy written. RMA acts as a reinsurer—reinsurance is sometimes referred to as insurance for the insurance companies—for a portion of all policies the federal crop insurance program covers. In addition, RMA pays companies a percentage of the premium on policies sold to cover the administrative costs of selling and servicing these policies. In turn, insurance companies use this money to pay commissions to their agents, who sell the policies, and fees to adjusters when claims are filed. FCIC insures agricultural commodities on a crop-by-crop and county-by- county basis, considering farmer demand and the level of risk associated with the crop in a given region. Major crops, such as grains, are covered in almost every county where they are grown, while specialty crops such as fruit are covered in only some areas. Participating farmers can purchase different types of crop insurance and at different levels. RMA establishes the terms and conditions that the private insurance companies selling and servicing crop insurance policies are to use through the SRA. The SRA provides for the cost allowance intended to cover administrative and operating expenses the companies incur for the policies they write, among other things. The SRA also establishes the minimum training, quality control review procedures, and performance standards required of all insurance providers in delivering any policy insured or reinsured under the Federal Crop Insurance Act, as amended. Under the crop insurance program, participating farmers are assigned (1) a “normal” crop yield based on their actual production history and (2) a price for their commodity based on estimated market conditions. Farmers can then select a percentage of their normal yield to be insured and a percentage of the price they wish to receive if crop losses exceed the selected loss threshold. In addition, under the crop insurance program’s “prevented planting” provision, insurance companies pay farmers who were unable to plant the insured crop because of an insured cause of loss that was general to their surrounding area, such as weather conditions causing wet fields, and that had prevented other farmers in that area from planting fields with similar characteristics. These farmers are entitled to claims payments that generally range from 50 to 70 percent, and can reach as high as 85 percent, of the coverage they purchased, depending on the crop. RMA is responsible for protecting against fraud, waste, and abuse in the federal crop insurance program. In this regard, RMA uses a broad range of tools, including RMA’s compliance reviews of companies’ procedures, companies’ quality assurance reviews of claims, data mining, and FSA’s inspections of farmers’ fields. For example, insurance companies must conduct quality assurance reviews of claims that RMA has identified as anomalous or of those claims that are $100,000 or more to determine whether the claims the companies paid comply with policy provisions. Congress enacted ARPA, amending the Federal Crop Insurance Act, in part, to improve compliance with, and the integrity of, the crop insurance program. Among other things, ARPA provided RMA authority to impose sanctions against producers, agents, loss adjusters, and insurance companies that willfully and intentionally provide false or inaccurate information to FCIC or to an insurance company—previously, RMA had authority to impose sanctions only on individuals who willfully and intentionally provided false information. It also provided RMA with authority to impose sanctions against producers, agents, loss adjusters, and insurance companies for willfully and intentionally failing to comply with any other FCIC requirement. In addition, it increased the percentage share of the premium the government pays for most coverage levels of crop insurance, beginning with the 2001 crop year. The percentage of the premium the government pays declines as farmers select higher levels of coverage. However, ARPA raised the percentage of federal subsidy for all levels of coverage, particularly for the highest levels of coverage. For example, the government now pays more than one-half of the premium for farmers who choose to insure their crop at 75-percent coverage. RMA has taken a number of steps to improve its procedures to prevent and detect fraud, waste, and abuse, such as data mining, expanded field inspections and quality assurance reviews. In particular, RMA now develops a list of farmers each year whose operations warrant an on-site inspection during the growing season because data mining uncovered patterns in their past claims that are consistent with the potential for fraud and abuse. The list includes, for example: farmers, agents, and adjusters linked in irregular behavior that suggests collusion; farmers who for several consecutive years received most of their crop insurance payments from prevented planting indemnity payments; farmers who appear to have claimed the production amounts for multiple fields as only one field’s yield, thereby creating an artificial loss on their other field(s); and farmers who, in comparison with their peers, file unusually high claims for lost crops over many years. Since RMA began performing this data mining in 2001, it has identified about 3,000 farmers annually who warrant an on-site inspection because of anomalous claims patterns. In addition, RMA annually performs about 100 special analyses to identify areas of potential vulnerability and trends in the program. RMA also provides the names of farmers from its list of suspect claims for inspection to the appropriate FSA state office for distribution to FSA county offices, as well as to the insurance companies selling the policies to farmers. As a result of these inspections and other information, RMA reported total cost savings of $312 million from 2001 to 2004, primarily in the form of estimated payments avoided. For example, according to RMA, claims payments to farmers identified for an inspection decreased nationwide from $234 million in 2001 to $122 million in 2002. According to RMA, some of the farmers on the list for filing suspect claims bought less insurance and a few dropped crop insurance entirely, but most simply changed their behavior regarding loss claims. However, as we testified in 2006, RMA was not effectively using all of the tools it had available and that some farmers and others continued to abuse the program, as the following discussion indicates. Inspections during the growing season were not being used to maximum effect. FSA was not providing RMA with inspection assistance in accordance with USDA guidance. For example, between 2001 and 2004, farmers filed claims on about 380,000 policies annually, and RMA’s data mining identified about 1 percent of these claims as questionable and needing FSA’s inspection. Under USDA guidance, FSA should have conducted all of the 11,966 requested inspections, but instead conducted only 64 percent of them; FSA inspectors said that they did not conduct all requested inspections primarily because they did not have sufficient resources. Moreover, between 2001 and 2004, FSA offices in nine states did not conduct any of the field inspections RMA had requested in one or more of the years. Until we brought this matter to their attention in September 2004, FSA headquarters officials were unaware that the requested inspections in these nine states had not been conducted. Furthermore, FSA might not have been as effective as possible in conducting field inspections because RMA did not provide it with information on the nature of the suspected abusive behavior or the results of follow-up investigations. Finally, these inspections did not always occur in a timely fashion during the growing season. Because of these problems, the insurance companies and RMA could not always determine the validity of a claim. USDA has implemented some of our recommendations to improve inspection practices. For example, we recommended that RMA more consistently inform FSA of the suspect claim patterns that it should investigate. RMA amended its crop insurance policy manual to provide information more frequently to FSA on suspect claims, as we recommended, so that FSA can conduct timelier field inspections to detect potential abuse. Specifically, RMA now provides a list twice a year—in the fall for crops such as wheat, and in the spring for crops such as corn and soybeans. However, FSA disagreed with our recommendation that it conduct all inspections called for under agency guidance, citing insufficient resources as the reason. Nevertheless, we believe that conducting these inspections would achieve potentially substantial savings for the crop insurance program by identifying cases of fraudulent claims. RMA’s data analysis of the largest farming operations was incomplete. RMA’s data mining analysis excluded comparisons of the largest farming operations—including those organized as partnerships and joint ventures. These entities may include individuals who are also members of one or more other entities. Because it did not know the ownership interests in the largest farming operations, RMA could not readily identify potential fraud. For example, farmers who are members of more than one farming operation could move production from one operation to another to file unwarranted claims, without RMA’s knowledge that these farmers participate in more than one farming operation. RMA could not make these comparisons because it had not been given access to similar data that FSA maintains. However, ARPA required the Secretary of Agriculture to develop and implement a coordinated plan for RMA and FSA to reconcile all relevant information received by either agency from a farmer who obtains crop insurance coverage. Using FSA data, we examined the extent to which (1) farming operations report all members who have a substantial beneficial interest in the operation, (2) these farming operations file questionable crop insurance claims, and (3) agents or claims adjusters had financial interests in the claim. By comparing RMA’s and FSA’s databases, we found that 21,310 farming entities, or about 31 percent of all farming entities, did not report one or more members who held a beneficial interest of 10 percent or more in the farming operation holding the policy.