Cumulatively, USDA paid  $10.6 billion—almost one-fourth of total direct payments from 2003  through 2011—to producers who did not, in a given year, plant any of the  crop for which they had base acres. For  the complete results of our analysis on the extent to which producers did  not grow any of a crop for which they had base acreage in a given year,  by crop, see appendix V.

		About 2,300 Farms for Which Direct Payments Were Made Did Not Plant Any Crop of Any Type Each Year From 2007 through 2011

Also according to our analysis of USDA data, about 2,300 farms, or about  0.15 percent of the 1.6 million farms receiving direct payments in 2011,  reported all their land as “fallow,” that is, producers did not plant any  crops of any type on this land, for each year of the last 5 years (i.e., 2007  through 2011), as allowed under the farm bill. Direct Payments Do Not Align with Certain Principles

Direct payments generally do not align with the principles significant to  integrity, effectiveness, and efficiency in farm bill programs, identified in  our April 2012 report, which could be used to guide implementation of the  2012 Farm Bill. These payments align with the principle of being  “distinctive,” in that they do not overlap or duplicate other farm programs. However, they do not align with the five other principles. Direct Payments May No Longer Be Relevant

Direct payments were expected to be transitional when first authorized  and may no longer be relevant. Subsequent farm  bills, however, including those passed in 2002 and 2008, have continued  these payments as “direct payments.” In a press statement released in  February 2012, the Chairwoman of the U.S. Senate Committee on  Agriculture, Nutrition and Forestry, referred to direct payments as “an  indefensible program of the past.” In April 2012, this committee’s website  posted draft legislation on the reauthorization of agricultural programs  through 2017 that proposed eliminating direct payments. Direct Payments Do Not Appropriately Target Benefits

Direct payments do not appropriately target benefits (i.e., distribute  benefits consistently with contemporary assessments of need) in three  key ways. According to our review of FSA direct payment data, in 2011, the  top 10 percent of payment recipients received 51 percent of direct  payments, and the top 25 percent of payment recipients received  73 percent of direct payments. During the course of our work, we identified cases where direct payments  support recipients who FSA officials said own farmland that would not be  economically viable in the absence of these payments. Direct payments may  have less potential than other farm programs to distort prices and  production, but economic distortions can nonetheless result from these  payments. Oversight of Direct Payments Is Weak

During the course of our work, we identified several concerns with regard  to FSA’s oversight of direct payments: FSA has not developed a  systematic process to report on acreage that may no longer be usable for  agriculture and therefore ineligible for direct payments; FSA conducts  relatively few end-of-year reviews and generally does not complete these  reviews within expected time frames; and FSA has not kept data on  enforcement. FSA has not systematically reported or corroborated the extent to which  land may no longer be eligible for direct payments because it has been  converted to nonfarm uses. Maintaining a safety net for farmers is worthwhile, but during  times of record-high crop prices and farm incomes, providing payments  that do not align with principles significant to integrity, effectiveness, and  efficiency in farm bill programs raises questions about the continued need  for direct payments. Recommendations for Executive Action

To help ensure that direct payments, while they remain in effect, and  other farm programs, including ACRE and counter-cyclical payments, are  made in a manner consistent with farm bill provisions and related  implementing regulations, and to minimize the potential for improper  payments, we recommend that the Secretary of Agriculture direct the  Administrator of the Farm Service Agency to take the following four  actions:
Develop and implement a systematic process to report on land that  may no longer be usable for agriculture, as required for annual  reporting to Congress. In  written comments, which are reproduced in appendix VII, USDA generally  agreed with two of our recommendations and disagreed with two others. USDA stated that it  concurs that timely, high-quality end-of-year reviews are important;  however, it also stated that its current practices already meet this standard. Given  this very small sample and the lack of timeliness associated with many of  these reviews, we continue to believe that USDA should consider options  to increase the number and improve the timeliness of these reviews. Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to: (1) provide information regarding  the geographic distribution and ownership characteristics of payment  recipients, as well as the dollar amount of direct payments made for land  with qualifying acreage and amount and types of crops grown on  qualifying acreage from 2003 through 2011 and (2) examine whether  direct payments are aligned with principles significant to integrity,  effectiveness, and efficiency in farm bill programs. 3.
Why GAO Did This Study

Through one facet of the farm safety net, USDA provides farmers and other producers with fixed annual payments, called direct payments, based on their farms historical crop production. Direct payments do not vary with crop prices or crop yields. In March 2011, GAO reported on observations and options regarding direct payments and suggested to Congress that they be eliminated or reduced. GAO was asked (1) to provide information regarding the geographic distribution and ownership characteristics of payment recipients, as well as the dollar amount of direct payments made for farms with acreage that qualified, and the amount and types of crops grown on such acreage for years 2003 to 2011, and (2) to examine whether direct payments are aligned with principles significant to integrity, effectiveness, and efficiency in farm bill programs. To conduct this work, GAO analyzed USDA data and interviewed agency officials.

What GAO Found

From 2003 through 2011, the U.S. Department of Agriculture (USDA) made more than $46 billion in direct payments to farmers and other producers. These producers planted varying percentages of acres that qualified for payments based on their historical planting yields and designated payment rates (qualifying acres). Cumulatively, USDA paid $10.6 billionalmost one-fourth of total direct payments made from 2003 through 2011to producers who did not, in a given year, grow the crop associated with their qualifying acres, which they are allowed to do. About 2,300 farms (0.15 percent of farms receiving direct payments) reported all their land as fallow, and producers did not plant any crops on this land for each year for the last 5 years, from 2007 through 2011; in 2011, these producers received almost $3 million in direct payments.
Direct payments generally do not align with the principles significant to integrity, effectiveness, and efficiency in farm bill programs that GAO identified in an April 2012 report. These payments align with the principle of being distinctive, in that they do not overlap or duplicate other farm programs. However, direct payments do not align with five other principles. Specifically, they do not align with the following principles:
Relevance : When the precursors to direct payments were first authorized in 1996 legislation, they were expected to be transitional, but subsequent legislation passed in 2002 and 2008 has continued these payments as direct payments. However, in April 2012, draft legislation for reauthorizing agricultural programs through 2017 proposed eliminating direct payments.
Targeting : Direct payments do not appropriately distribute benefits consistent with contemporary assessments of need. For example, they are concentrated among the largest recipients based on farm size and income; in 2011, the top 25 percent of payment recipients received 73 percent of direct payments.
Affordability : Direct payments may no longer be affordable given the United States current deficit and debt levels.
Effectiveness : Direct payments may have unintended consequences. Direct payments may have less potential than other farm programs to distort prices and production, but economic distortions can result from these payments. For example, GAO identified cases where direct payments support recipients who USDA officials said own farmland that is not economically viable in the absence of these payments.
Oversight : Oversight of direct payments is weak. With regard to oversight, USDA has not systematically reported on land that may no longer be eligible for direct payments because it has been converted to nonfarm uses, as required for annual reporting to Congress. In addition, GAO identified weaknesses in USDAs end-of-year compliance review process. For example, USDA conducts relatively few reviews and generally does not complete these reviews within expected time frames.
Continuing to provide payments that generally do not align with principles significant to integrity, effectiveness, and efficiency in farm bill programs raises questions about the purpose and need for direct payments.

What GAO Recommends

Congress should consider eliminating or reducing direct payments. GAO also recommends that USDA take four actions to improve its oversight of direct payments including developing a systematic process to report on land that may no longer be usable for agriculture, and considering ways to increase the number of cases selected for end-of-year reviews and completing these reviews in a timely manner. USDA generally agreed with two of GAOs recommendations and disagreed with two others, stating that it believes its current processes or practices are adequate. GAO continues to believe that it is important for USDA to take the recommended actions.