Without performing annual determinations, an  essential management control, FSA cannot identify estates being kept  open primarily for the purpose of receiving these payments and be assured  that the payments are proper. In particular, FSA did not conduct any program  eligibility determinations for 73, or 40 percent, of estates that required a  determination from 1999 through 2005. Sixteen  of these 73 estates received more than $200,000 in farm program payments  and 4 received more than $500,000 during this period. FSA also approved eligibility on the basis of insufficient  explanations for keeping the estate open. Furthermore, some FSA field offices approved program payments to  groups of estates that were kept open after 2 years without any apparent  review. Because FSA Does Not Have Appropriate Management Controls, It Cannot Be Assured That It Is Not Making Payments to Deceased Individuals

FSA cannot be assured that millions of dollars in farm program payments  it made to thousands of deceased individuals from fiscal years 1999  through 2005 were proper because FSA does not have appropriate  management controls, such as computer matching, to verify that it is not  making payments to deceased individuals. Of  the $1.1 billion in farm payments, 40 percent went to individuals who had  been dead for 3 or more years, and 19 percent went to individuals who had  been dead for 7 or more years. The complex nature of some types of farming entities, in particular,  corporations and general partnerships, increases the potential for  improper payments. Large  farming operations are often structured as corporations or general  partnerships with other entities embedded within these entities. For  example, as shown in table 4, 8,575 deceased individuals received  payments through general partnerships from 1999 through 2005. Furthermore, of the 172,801  deceased individuals identified as receiving farm program payments, 5,081  received more than one payment because (1) they were a member of more  than one entity, or (2) they received payments as an individual and were a  member of an entity. First, it relies on the farming  operation to self-certify that the information provided is accurate and that  the operation will inform FSA of any operating plan changes, which would  include the death of an operation’s member. Such notification would  provide USDA with current information to determine the eligibility of the  entity to receive the payments. Recommendations for Executive Action

To provide reasonable assurance that FSA does not make improper  payments to estates and deceased individuals, we recommend that the  Secretary of Agriculture direct the Administrator of the Farm Service  Agency to  instruct FSA field offices to conduct all annual estate eligibility  determinations as required; implement management controls, such as matching payment files with  the Social Security Administration’s Death Master File, to verify that an  individual receiving farm program payments has not died; and   determine if improper program payments have been made to deceased  individuals or to entities that failed to disclose the death of a member,  and if so, recover the appropriate amounts. Specifically, we evaluated the extent to which FSA  (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. Appendix IV: U.S. Department of Agriculture Estate Eligibility Reviews, by State, Program Years 1999 through 2005

Table 5 shows the variation by state in FSA’s conduct of eligibility  determinations from 1999 through 2005 for the 181 estates in our sample.
Why GAO Did This Study

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 for payments. As requested, GAO evaluated 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. GAO reviewed a nonrandom sample of estates based, in part, on the amount of payments an estate received and compared USDA's databases that identify payment recipients with individuals the Social Security Administration listed as deceased.

What GAO Found

USDA has made farm 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 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. Also, for the 108 reviews USDA did conduct, GAO identified shortcomings. For example, from 1999 through 2005, 69 of the 108 estates did not receive annual reviews for every year of payments received, and some USDA field offices approved groups of estates for payments without reviewing each estate. Furthermore, 20 estates that USDA approved for payment eligibility had no documented explanation for keeping the estate open. USDA cannot be assured that millions of dollars in farm payments are proper. It does not have management controls to verify that it is not making 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 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 the farming operation's self-certification that the information provided is accurate and that the operation will inform 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 entity to receive the 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.