More specifically, as stated in FSA’s handbook, to satisfy the actively  engaged in farming criteria, an active personal management contribution  must, among other things, be critical to the profitability of the farming  operation. FSA Compliance Reviews Are Hindered by Broad and Subjective Eligibility Requirements and Difficulty Verifying Evidence of Members’ Claimed Contributions

FSA compliance reviews of farming operation members’ claims of  eligibility to receive payments for being actively engaged in farming are  hindered by (1) a broad definition of active personal management, (2)  subjective requirements of what constitutes significant contributions of  management, and (3) difficulty in verifying individuals’ evidence of  claimed contributions of active personal management and personal labor. Broad Definition of Active Personal Management Makes It Difficult for FSA to Determine Significant Contributions in Compliance Reviews

Based on our review of FSA’s regulations, its handbook on payment  eligibility and limitations, and a sample of 2009 and 2010 compliance  review files and interviews with FSA officials, we found that the definition  of active personal management is broad and makes it difficult for FSA to  determine whether an individual had made a significant contribution of  active personal management. According  to an FSA state office official, compliance reviews find problems with  management contributions more often for individuals who live significant  distances from the farming operation than they find for individuals who  live near the farming operation. However, it appears unlikely that FSA will change its regulatory  definition of active personal management in view of its 2010 statements in  the Federal Register that the “current regulatory definition of a significant  contribution of active personal management has been in effect for over 20  years” and that “Congress has not mandated a more restrictive definition  during that time.” In August 2013, a senior-level FSA headquarters official  said that the agency does not plan to change the regulatory definition of  active personal management without direction from Congress. The timeline for the reauthorization of the Farm Bill is unclear. FSA’s handbook acknowledges that it is difficult to measure what  constitutes a significant active personal management contribution. Officials we  interviewed from several FSA state offices said that determining whether  a management contribution is critical to the profitability of a farming  operation is difficult and subject to interpretation. One of the reasons for this  difficulty is the extent to which compliance reviews must often rely on  interviews with individual payment recipients. Most State Offices Did Not Complete and Report Compliance Reviews in a Timely Manner, and Almost Always Found That Members Made Their Claimed Contributions

Most state offices did not complete and report their assigned 2009 and  2010 compliance reviews within FSA’s expected time frame (i.e., within  12 months of being notified by FSA headquarters of which farming  operations to review), according to our analysis of compliance review  summary documents that state offices submitted to FSA headquarters. Similarly, FSA headquarters did  not know the status of 2009 and 2010 compliance reviews assigned to  several other state offices when we discussed this issue with them in  November 2012. With a delayed awareness of several years, FSA cannot reasonably  assess the level of recipients’ compliance with the act and may be  missing opportunities to recapture payments that were made to ineligible  recipients. To improve its ability to monitor the status and results of compliance  reviews, in May 2013, FSA implemented the End-of-Year Review  Tracking System, a database available to state and county FSA officials  to electronically report their assigned compliance reviews’ status and  results. In deliberations on reauthorizing  the 2008 Farm Bill, both the Senate and the House of Representatives  have recently considered statutory changes that would allow one person  per farming operation to contribute management activities as a condition  that would satisfy the criteria for actively engaged in farming. Until FSA  develops a plan and time frame for using the database, including using it  to generate specific queries, however, there is no guarantee that FSA will  fully utilize the database and realize its intended benefits, including to  generate reports from specific queries. Matter for Congressional Consideration

To reduce the risk that individuals who have little involvement in a farming  operation use the active personal management provision to qualify for  farm program payments, Congress should consider modifying the  definition of contributions of management activities as a condition that  would satisfy the criteria for being actively engaged in farming, either as  both the Senate and the House of Representatives did in recent  deliberations on reauthorizing the Farm Bill, or in other ways designed to  make the criteria for such contributions more clear and objective. Appendix III: Objectives, Scope, and Methodology

Our objectives were to examine (1) the U.S. Department of Agriculture’s  (USDA) FSA’s compliance reviews of farming operation members’ claims  of significant active personal management and personal labor  contributions to meet actively engaged in farming requirements; (2) the  extent to which FSA state offices complete and report compliance reviews  within expected time frames, and the results of reported reviews of  management and labor contributions; and (3) the distribution and amount  of payments to farming operations by type of entity and members’ claims  of active personal management or personal labor contributions.
Why GAO Did This Study

Agricultural producers receive about $5 billion annually in farm program payments for which being actively engaged in farming is required by the Farm Program Payments Integrity Act. GAO was asked to review FSA's processes for implementing actively engaged in farming regulations to determine payment eligibility.
This report examines, among other things, (1) FSA's compliance reviews of farming operation members' claimed contributions of active personal management and personal labor and (2) FSA state offices' timeliness in completing and reporting compliance reviews and their results. GAO reviewed FSA regulations and procedures, examined compliance review files in five states selected based on the number of assigned 2009 and 2010 compliance reviews (the latest available), analyzed compliance review data for those years, and interviewed FSA officials.

What GAO Found

Compliance reviews conducted by the U.S. Department of Agriculture's Farm Service Agency (FSA) to determine if farming operation members (individuals and entities) meet the payment requirements for being actively engaged in farming are hindered by broad and subjective requirements and difficulty in verifying individuals' evidence of claimed contributions. To be actively engaged in farming, an individual is to make significant contributions to that operation in personal labor or active personal management (or both). However, the definition of active personal management in FSA regulations is broad and can be satisfied by an individual performing at least one of eight services representing categories such as supervision of activities necessary in the farming operation. Also, FSA regulations allow farming operation members to make contributions of management without visiting the operation, enabling individuals who live significant distances from an operation to claim such contributions. An FSA state official said that the agency finds problems with management contributions more often for those who live significant distances from an operation. FSA officials have also noted that the requirements for what constitutes a management contribution are subjective. FSA's handbook states that it is difficult to measure what constitutes a management contribution and that such a contribution must be critical to the profitability of a farming operation. FSA officials said that making such a determination is difficult and subject to interpretation. Also, officials from FSA headquarters and state offices GAO visited said that verifying evidence of management contributions is challenging, in part due to the extent to which compliance reviews must rely on interviews with payment recipients. FSA recognizes that it has the authority to change the definition of what constitutes a significant contribution of management in its regulations. However, as FSA stated in 2010 final regulations for farm program eligibility and as a senior FSA official told GAO in August 2013, FSA does not plan to change the regulatory definition of active personal management without direction from Congress. In recent congressional deliberations on reauthorizing the Farm Bill, statutory changes were considered that would allow one person per farming operation to contribute management activities satisfying the criteria for being actively engaged in farming. The timeline for Farm Bill reauthorization is unclear.
Most FSA state offices did not complete and report their assigned 2009 and 2010 compliance reviews within FSA's expected time frame (i.e., within 12 months of being notified by FSA headquarters of which farming operations to review). FSA state offices completed and reported about 24 percent of their assigned 2009 compliance reviews and 14 percent of their 2010 compliance reviews on time. In addition, FSA headquarters did not always know the status and results of the 2009 and 2010 reviews for oversight purposes when GAO discussed this issue with them in November 2012. With a delayed awareness of several years, FSA cannot reasonably assess the level of recipients' compliance with the act and may be missing opportunities to recapture payments that were made to ineligible recipients. To improve its monitoring of compliance reviews, FSA in May 2013 implemented a database for state and county FSA officials to electronically report their assigned compliance reviews' status and results. However, FSA has not developed a time frame or plan for using the database and until the agency does so it cannot fully utilize the database and realize its intended benefits.

What GAO Recommends

Congress should consider modifying the definition of significant contributions of management activities, either as it did in recent deliberations on reauthorizing the Farm Bill, or in other ways designed to make contributions more clear and objective. GAO recommends that FSA establish a plan and a time frame for using its new database to monitor the status of compliance reviews. FSA concurred with GAOs findings and recommendation.