	FSA Does Not Systematically Determine the Eligibility of Estates for Farm Program Payments and Cannot Be Assured That Payments Are Proper

While many estates are kept open for legitimate reasons, we found that  FSA field offices do not systematically determine the eligibility of all  estates kept open for more than 2 years, as regulations require, and when  they do conduct eligibility determinations, the quality of the  determinations varies. Without performing annual determinations, an  essential management control, FSA cannot identify estates being kept  open primarily to receive these payments and be assured that the  payments are proper. For most  farm program payments, USDA regulations allow an estate to receive  payments for the first 2 years after the death of the individual if the estate  meets certain eligibility requirements for active engagement in farming. FSA did not conduct any program eligibility determinations for 73, or 40  percent, of the 181 estates that required a determination from 1999  through 2005. Because FSA did not conduct the required determinations,  the extent to which these estates remained open for reasons other than for  obtaining program payments is not known. Sixteen of these 73 estates  received more than $200,000 in farm program payments and 4 received  more than $500,000 during this period. Second, even when FSA conducted at least one eligibility determination,  we found shortcomings. FSA also approved eligibility on  the basis of insufficient explanations for keeping the estate open. Without Appropriate Management Controls, FSA 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 it does not have appropriate  management controls, such as computer matching, to verify that it is not  making payments to deceased individuals. In  addition, complex farming operations, such as corporations or general  partnerships with embedded entities, make it difficult for FSA to prevent  improper payments to deceased individuals. FSA Made Millions of Dollars in Farm Program Payments to Deceased Individuals from Fiscal Years 1999 through 2005

FSA paid $1.1 billion in farm program payments in the names of 172,801  deceased individuals—either as individuals or as members of entities,  from fiscal years 1999 through 2005, according to our matching of FSA’s  payment databases with the Social Security Administration’s Death Master  File. 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. 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 one or more entities. 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  operation to receive the payments.
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 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.

What GAO Found

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.