Audit finds loopholes in subsidy programs

Mateusz Perkowski
A new Government Accountability Office report finds that farm subsidy regulations don't sufficiently ensure that recipients are actively involved in farm operations.

Rules intended to prevent absentee farmers from getting subsidy payments are easily circumvented or manipulated, according to a government audit.

The Government Accountability Office report found that it’s difficult for the USDA to verify that subsidy recipients are actually actively engaged in farming.

Due to this uncertainty, “the federal government risks distributing millions of dollars to individuals who may have little actual involvement in farming operations at a time of fiscal constraints,” the audit said.

To receive subsidy payments, people are required to contribute labor or “active personal management” to a farm operation, as well as capital, land or equipment.

Direct payments, which are paid regardless of crop prices and based on historical production, are capped at $40,000 per member of a farm entity.

Countercyclical payments, which are made when crop prices fall below certain levels, are limited to $65,000 per member.

Farm entities with higher numbers of members can receive larger subsidy payments from the government, the GAO said. A farm with 10 members, for example, can collect up to $400,000 in annual direct payments, while an entity with only two partners would be limited to $80,000, the report said.

The USDA’s Farm Service Agency uses a broad definition of “active personal management” and has trouble ensuring that people actually perform the duties they claim. 

“Combined, these factors make it difficult for FSA to determine whether an individual had made a significant contribution of active personal management, potentially allowing individuals who may have had limited involvement in a farming operation to receive benefits,” the report said.

Since a diversity of tasks can qualify a person for subsidies, a farm can assign duties to as many individuals as possible to increase the total payment, the audit said.

For example, the company can have separate people making decisions about crop insurance, farm machinery, seed and fertilizer purchases and other issues, GAO said.

The agency’s rules also don’t require subsidy recipients to physically visit the farm, allowing people to actively manage operations from “significant distances,” the report said.

“We found that some of the individual members who claimed contributions of active personal management had addresses that were hundreds of miles from the address of the farming operation,” the audit said.

Officials from the Farm Service Agency told the auditors that figuring out whether a person’s contribution is critical to farm profitability is “subject to interpretation.”

In one case, the agency found that the entity members didn’t qualify for subsidies because the farm was run by several professional managers. However, the family appealed the decision and it was eventually overturned by the USDA’s National Appeals Division.

“According to FSA officials, during appeal interviews, individuals with little involvement in farming operations can overstate their management contributions by giving rehearsed answers or providing new information that has not been verified, often with the assistance of hired consultants,” the audit said.

According to the auditors, a “senior-level FSA headquarters official” acknowledged that the agency had the regulatory authority to enact a stricter definition of “active personal management.”

However, the official said FSA had no plans to tighten the regulation without instruction from Congress, the report said.



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