Federal Farm Programs:
USDA Needs to Strengthen Management Controls to Prevent Improper Payments to Estates and Deceased Individuals
GAO-07-1137T, Jul 24, 2007
Farmers receive about $20 billion annually in federal farm program payments, which go to individuals and "entities," including corporations, partnerships, and estates. Under certain conditions, estates may receive payments for the first 2 years after an individual's death. For later years, the U.S. Department of Agriculture (USDA) must determine that the estate is not being kept open primarily to receive farm program payments. This testimony is based on GAO's report, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Improper Payments to Estates and Deceased Individuals (GAO-07-818, July 9, 2007). GAO discusses the extent to which USDA (1) follows its regulations that are intended to provide reasonable assurance that farm program payments go only to eligible estates and (2) makes improper payments to deceased individuals.
USDA has made farm program payments to estates more than 2 years after recipients died, without determining, as its regulations require, whether the estates were kept open to receive these payments. As a result, USDA cannot be assured that farm payments are not going to estates kept open primarily to obtain these payments. From 1999 through 2005, USDA did not conduct any of the required eligibility determinations for 73, or 40 percent, of the 181 estates GAO reviewed. Sixteen of these 73 estates had each received more than $200,000 in farm payments, and 4 had each received more than $500,000. Only 39 of the 181 estates received all annual determinations as required. Even when FSA conducted determinations, we found shortcomings. For example, some USDA field offices approved groups of estates for payments without reviewing each estate individually or without a documented explanation for keeping the estate open. USDA also cannot be assured that it is not making improper payments to deceased individuals. For 1999 through 2005, USDA paid $1.1 billion in farm payments in the names of 172,801 deceased individuals (either as an individual recipient or as a member of an entity). Of this total, 40 percent went to those who had been dead for 3 or more years, and 19 percent to those dead for 7 or more years. Most of these payments were made to deceased individuals indirectly (i.e., as members of farming entities). For example, over one-half of the $1.1 billion in payments went through entities from 1999 through 2005. In one case, USDA paid a member of an entity--deceased since 1995--over $400,000 in payments for 1999 through 2005. USDA relies on a farming operation's self-certification that the information it provides USDA is accurate; operations are also required to notify USDA of any changes, such as the death of a member. Such notification would provide USDA with current information to determine the eligibility of the operation to receive payments. The complex nature of some farming operations--such as entities embedded within other entities--can make it difficult for USDA to avoid making payments to deceased individuals.