GAO Report Criticizes USDA on Subsidy Rules
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General Accountability Office report
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A new report from the Government Accountability Office (GAO) provides some support for tightening subsidy eligibility rules in the new farm bill. GAO did the report at the request of Sen. Chuck Grassley (R-Iowa). Link to report
Engaging. Both the Senate-passed bill (S 954) and the House version (HR 2642) deal with the definition of what it means to be "actively engaged" in farming, the requirement for getting government payments.
GAO said the current definition of "actively engaged" is so broad that an individual can live far from an operation, and not even visit it, but still qualify for its subsidies.
The report also noted that USDA’s subjective criteria make it hard for Farm Service Agency (FSA) offices to decide whether subsidy recipients make the significant contribution of active personal management that the rules require.
FSA officials told GAO they have no plans to tighten the regulations unless Congress changes the law.
The report said USDA’s enforcement efforts have lagged, with FSA state offices often far behind in finishing compliance reviews. Only 14% of the assigned 2010 compliance reviews and 24 percent of the 2009 reviews were finished within the expected time frame, the auditors found. As of this June, 13 state offices still had not completed the compliance reviews assigned in 2009.
Sen. Grassley said the report showed that additional changes are needed to the eligibility requirements for being "actively involved" in farming. The GAO also wrote in the report that the legislative language in the Senate passed farm bill would be an appropriate fix to the agency’s findings. The report can be found on Grassley’s website, grassley.senate.gov.
"The report shows that there is still far too much subterfuge of the actively engaged law. For instance, taxpayers are footing the bill for farm payments to 11 active managers of one farm, who supposedly provide significant management experience, yet perform no labor," Grassley said. "The loophole has been allowed to stand for too long. It’s time to close it once and for all and put the issue to rest so we can maintain a safety net for the farmers who really need it."
Grassley said that the conferees to the farm bill should take notice of the report and take a hands off approach to the provisions in both the House and Senate bills. "This is just one more reason that my payment limits provisions included in the Senate and House bills -- placing a hard cap on farm payments and closing loopholes that allow non-farmers to game the system -- should stay untouched," Grassley said.
The report reviewed the Farm Service Agency’s compliance reviews of farming operation members’ claimed contributions of active personal management and personal labor. The GAO report also examines the Farm Service Agency’s state offices’ timeliness in completing and reporting compliance reviews and the results.
Specifically, GAO recommended, "Congress should consider modifying the definition of significant contributions of management activities, either as it did in recent deliberations on reauthorizing the farm bill or in other ways designed to make contributions more clear and objective."
The legislative language in the farm bill mirrors Grassley’s Farm Program Integrity Act of 2013. He said the bill would define clearly the scope of people who are able to qualify as actively engaged by only providing management for the farming operation. The language allows only one off-farm manager, "which will help the Department of Agriculture crack down on the general partnerships that have multiple non-farmers trying to qualify for farm payments by exploiting the management loophole."
Here are several highlights of the report. The report can be found here.
- Farm Service Agency officials consistently said current ‘actively engaged’ regulations are too vague to enforce in a meaningful way.
- Farms organized as general partnerships receive the most in payments and have the highest percentage of members receiving payments based on ‘active personal management only.’ General partnerships with 11 or more individual members received 84 percent of their farm payments based on members contributing ‘active personal management only.’
- Operations that have members determined out of compliance at the local level for not being able to demonstrate adequate knowledge to contribute ‘active personal management’ have appealed the decisions to the state and federal levels and won because they have time to prepare the individual in question. In one instance, an individual was still allowed to receive farm payments after failing two interviews with state and local USDA officials. The individual finally persuaded a national official in the third attempt that they had adequate knowledge of the farming operation.
- A farm in the Midwest which received roughly $400,000 in payments for 2012 was organized as a general partnership with six corporations and 11 individual members of the same family who ranged in age from 18-88. Publicly available data indicated two of the individuals, including the 88 year-old, lived in South Florida and claimed ‘active personal management only’ for eligibility purposes.