Confused about farm income limits? So are some at FSA
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WASHINGTON, Aug. 29, 2013- Varying income limits for federal Farm Service Agency (FSA) payments and lack of oversight of procedures in state offices caused some improper payments to program participants in 2009 and 2010, according to a Government Accountability Office (GAO) report published today.
GAO focused on USDA procedures intended to identify if farm and conservation program participants had incomes below statutory limits for eligibility in 2009 and 2010 program payments. USDA's FSA follows income eligibility requirements for programs it administers and also for conservation programs administered by NRCS under the guidelines set under the 2008 Farm Bill.
The limitations are $500,000 average nonfarm AGI for commodity programs and $750,000 average farm AGI for direct payments under the Direct and Counter-cyclical Program or ACRE program.
FSA reviews either tax returns or statements from accountants or attorneys to determine if participants are below the income level. The GAO conducted its study in light of the fact that during a time of high farm incomes and constrained federal budgets, the cost of federal farm and conservation programs, which was about $15 billion annually from 2009 through 2012, has come under scrutiny.
GAO reported that reviews of tax returns by FSA's state offices varied in quality. GAO's review of 115 tax return files from selected state offices found that some files met agency guidance and had no apparent errors. However, GAO noted it found errors in 19 of the 22 tax return files it reviewed from FSA offices in two states; one of these errors led to a potentially improper payment of $40,000.
According to the report, 2008 Farm Bill provisions requiring a distinction between farm and nonfarm income make it difficult for agency officials to verify if participants' incomes exceed the limits without making errors.
“FSA officials must comb through sometimes long and complex tax returns to classify and calculate income--a difficult task for those who are not accountants or tax preparers,” GAO noted.
Bills introduced in the House and Senate have proposed using total adjusted gross income instead of farm and nonfarm income, which GAO said would reduce the need for FSA to review tax returns.
GAO also found that when relying on accountants' and attorneys' statements to verify participants' incomes for 2009 and 2010, FSA state offices sometimes accepted statements that did not meet agency guidance or contained errors.
A review of 163 files with accountants' and attorneys' statements from selected state offices found that state offices' adherence to FSA's guidance varied. The report noted 14 of the 16 statements GAO reviewed from one FSA state office met agency guidance, whereas 21 of the 39 statements GAO reviewed in two other state offices did not.
One common factor for each type of review is that FSA headquarters does not monitor the state office's reviews of tax returns or accountants' and attorneys' statements.
In addition to recommending that Congress consider simplifying the income limits for the agency, GAO also recommended that FSA monitor state office reviews and implement a process to verify that they accurately reflect incomes.
In the same report, GAO also found that the Natural Resources Conservation Service (NRCS) has not identified the amount of overpayments made or begun recovering payments it made to ineligible participants in 2009 and 2010. This is because NRCS had to first update project management software in February 2013.
GAO reported that NRCS issued new guidance with procedures for identifying and collecting overpayments that were made and expects to send letters by September 2013 seeking reimbursement of overpayments.
In May 2012, FSA started to recover about $143 million in overpayments made to its participants in 2009 and 2010.
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