Be Prepared for an FSA End-of-Year Audit

Nobody likes to receive an audit notice. But, every year, around this time, FSA mails out letters to randomly selected farmers and landowners informing them they are facing an end-of-the-year review audit.

The audit helps FSA determine the accuracy of your 902 form, or Farm Operating Plan. The six-page 902 form is used to establish eligibility for farm program payments, participation in certain NRCS conservation programs and other USDA benefits. 

“For those who receive an audit notice, FSA wants to know whether your actual operation matches what you reported on your 902 two years earlier,” says Bill Penn, function director for Pinion’s Farm Program Services. 

FSA auditors will look at the full gamut of your operations, including all invoices, bills, financial statements, ownership status and tax returns for that crop year. They’ll inspect the sources of your farm’s operating capital. They’ll examine whether that capital actually supports reported land, equipment, labor and management contributions and, ultimately, meets the requirements of being actively engaged in farming.

“If FSA determines that your 902 form isn’t correct, you have to give back any program money you received, and you might be ineligible for future program participation,” Penn adds.

If you’re one of the few who gets pulled for an FSA audit of the 902 form you submitted in 2021, don’t panic. Get help from experts who deal regularly with FSA reviews. You’ll have 30 days to respond to FSA, but don’t sit on the letter because FSA will require what Penn calls “an extreme amount of documentation.”

“Make sure you get professional help right away,” he notes. “We’ve seen producers get into more trouble when they answer the FSA notice without assistance. You wouldn’t want to go through an IRS review without having your accountant or an advisor to assist you. It’s the same for an FSA review where potentially hundreds of thousands of dollars are at risk.”

If you don’t receive one of these notices, just be aware one day you might. Be prepared in case you need to produce evidence that verifies your 902 documentation. When was the last time you reviewed your 902 form? Is it current and accurate? 

“It’s really important for producers to do that every year,” Penn says. “Being prepared now prevents a whole lot of trouble later.”

Bill Penn is a strong advocate for U.S. farmers, helping position agribusinesses for both survival and success. As the leader of Pinion’s Farm Program Services group, Bill uses his unique expertise and insight from years spent working for the USDA, to help farmers navigate the program changes that impact their business — and their bottom line.