In October, the Government Accountability Office (GAO) issued a report titled “Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Payments to Individuals Who Exceed Income Eligibility Limits.”  The report was requested by Senator Charles E. Grassley (R-Iowa), the ranking member of the Senate Finance Committee.

The GAO report found that payments went to thousands of individuals who may not have met the income eligibility requirements under the 2002 Farm Bill.  GAO also concluded that it is likely that “under the 2008 Farm Bill, even more individuals will exceed income eligibility requirements and still receive payments.”

GAO found that “of the 1.8 million individuals receiving farm payments from 2003 through 2006, 2,702 had an average adjusted gross income (AGI) that exceeded $2.5 million and derived less than 75 percent of their income from farming.”  This should have disqualified them from receiving farm subsidy payments.  Altogether, USDA paid at least $49 million to these wealthy individuals.

The 2008 Farm Bill lowered the AGI ineligibility threshold to $750,000 farm income from direct payments and $500,000 non-farm income for crop subsidy and disaster payments, so the number of individuals likely to exceed the income eligibility requirements will increase for crop years 2009 through 2012.  According to GAO, if these new thresholds had been in place in 2006, “as many as 23,506 individuals who received farm program payments would likely have been ineligible for crop subsidy and disaster assistance payments.”  These improper payments would have totaled as much as $90 million.

GAO discovered that of the 2,702 individuals that received improper payments from 2003 through 2006, 427 of these received improper payments in each of the four years.  Plus, USDA had even noted in its own database that 87 of these individuals exceeded the income caps and were ineligible to receive payments.  Yet, USDA had no explanation for why these individuals continued to receive payments, even though the department had identified them as ineligible.

GAO discovered a number of outrageous examples of improper payments, including a former insurance company executive who received more than $300,000 in farm program payments, an individual with ownership interest in a professional sports  franchise who received more than $200,000, and a major financial services firm executive who received more than $60,000.

Although USDA is responsible for ensuring that only eligible individuals receive farm program payments, GAO found that “USDA has relied principally on individuals’ one-time self-certification that they do not exceed income eligibility caps, and their commitment that they will notify USDA of any changes that cause them to exceed these caps.”  This naïve approach is letting the fox guard the henhouse.

While USDA does review a sample of individuals receiving farm payments, this review does not assess compliance with income eligibility requirements, nor has an individual’s income been a criterion in selecting this sample.  It’s as if USDA is doing everything it can to not discover anyone that might be ineligible.

USDA lamely claims that it cannot do more to assure that farm payments are legal because there is no access to IRS tax records without a waiver from the individual tax filer.  In fact, USDA has never explored the possibility of requiring farm program payment recipients to provide such waivers, nor has USDA ever requested any other authority from Congress that would allow it to better verify the income eligibility for all recipients of farm program payments.        

  -- John Frydenlund