Detailed Information on the
Direct Crop Payments Assessment

The limitations of the direct payment program will have to be dealt with legislatively. The Administration will reduce trade barriers through trade negotiations, to create new markets for U.S. agricultural exports, so that farmers will be less reliant on government income support.

The program management has devised performance goals that are designed to improve the delivery of the program.

Reducing trade barriers through trade negotiations, to create new markets for U.S. agricultural exports, so that farmers will be less reliant on government support.

Requiring producers to purchase higher levels of crop insurance for all crops that they receive direct payments; limiting the need for ad hoc disaster assistance and maintainining farm income.

Measure: Percentage of gross farm income from government payments (%)

Explanation:The data source is the USDA Economic Research Service (ERS). ERS compile the components of farm income statistics from a wide variety of sources. Many components are not available until well after the completion of the year thus the "actuals" are not available until August of the following year. "In 2006, the methodology was changed so that (1) Direct Crop Payment data will be reported separately from Counter-Cyclical and Agriculture Marketing Loan Payments and (2) program (crop) direct payments as a percentage of gross market revenue from commodities eligible for direct payments for a given crop year will be reported as the data for the following fiscal year. (i.e. 2005 direct payments are reported for FY 2006) EPAS used the "Commodity Estimates Book" (an OMB document) to calculate data."

Measure: Reduction in erroneous payments (%)

Explanation:For direct payment improper payment goals, during the risk assessment of the direct payment program, it was determined to be of low risk for improper payment. Because of this determination, no statistical sampling was completed or required to determine the actual percentage of improper payments "prior to FY 2005. NOTE: OMB requested that FSA include this measure. 2006 percentage is based on statistical sample of FY 2005 payments made for Direct and Counter-Cyclical payments completed in FY 2006."

Is the program purpose clear?

Explanation: To remove the link between income support payments and farm prices by providing production flexibility contracts (PFC) , whereby producers on farms enrolled during the one-time signup receive annual fixed but declining PFC payments for FY 1996-2002. From 2003 to 2007, the purpose is to provide direct payments to provide a minimal level of income support to keep land in farm uses (including idle).

Evidence: Federal Agriculture and Reform Act of 1996, P.L. 104-127 (1996 Act) and Farm Security and Rural Investment Act of 2002, P.L. 107-171.

Does the program address a specific interest, problem or need?

Explanation: The program is designed to provide a minimum level of income support to keep land in farm uses. However, the program provides support to 36% of farmers, 60% of whom have annual sales of at least $50,000.

Evidence: ERS/USDA Agricultural Outlook, October 2000, p.10-14. "A Safety Net for Farm Households" USDA/ERS Agricultural Economic Report No. 788. 44 pp, Dec 2000.

Is the program designed to have a significant impact in addressing the interest, problem or need?

Explanation: If program would have had a significant impact, producers would have been weaned off of direct government support. Conversely, a number of supplemental AMTA payments were made to producers, and the 2002 Farm Bill re-instituted fixed direct payments. Direct payments are designed as part of a safety-net for farmers, but direct payments go to about a third of all farmers, the majority of which have annual sales of at least $50,000 (not necessarily needing a safety-net).

Evidence: 2002 Farm Bill. For FY02, PFC payments of over $4 billion of assistance was made to producers. For FY03, as direct payments begin, payment amounts have not been determined but we anticipate similar payment amounts. ERS/USDA Agricultural Outlook, October 2000, p.10-14. "A Safety Net for Farm Households" USDA/ERS Agricultural Economic Report No. 788. 44 pp, Dec 2000.

Is the program designed to make a unique contribution in addressing the interest, problem or need (i.e., not needlessly redundant of any other Federal, state, local or private efforts)?

Explanation: PFC payments provided a base level of guaranteed income for farmers from the implementation of the 1996 Act until 2002, which was designed to be phased out, reducing producers' reliance on government support. The 2002 Act authorizes direct payments to replace the PFC payments, which also provided income support regardless of commodity production or prices. Both types of payments are very minimally production/trade distorting, compared to other farm program payments.

Evidence: 1996 Act and 2002 Farm Bill. No other program provides farmers a minimum level of guaranteed income for keeping land in agricultural uses, regardless of market prices, and no other agricultural payment program has been designed to reduce producer reliance on financial support.

Is the program optimally designed to address the interest, problem or need?

Explanation: Limited Department discretion in program administration reduces effectiveness. As a program transitioning farmers off of support it failed, and as a safety-net it is not well targeted. Less than 50% of farmers receive payments and more than half of the payments go to farms with sales of at least $50,000.

Evidence: "U.S. Farm Program Benefits: Links to Planting Decisions & Agricultural Markets." USDA/ERS Agricultural Outlook, October 2000. "A Safety Net for Farm Households" USDA/ERS Agricultural Economic Report No. 788. 44 pp, Dec 2000.

Does the program have a limited number of specific, ambitious long-term performance goals that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Long-term goal of PFCs was to reduce producer support, weaning them from payments. The Strategic Plan will be revised to replace PFC's with Direct Payments and to update the long-term goal to reflect the statutory changes in the program. PFC payment levels were determined by legislation which was intended to reduce producers' dependence on payments.

Evidence: Long-term goal of PFCs was to reduce producer support, weaning them from payments (USDA Annual Performance Plan).

Does the program have a limited number of annual performance goals that demonstrate progress toward achieving the long-term goals?

Explanation: None currently are included in the FSA Annual Performance Plan for PFCs. However, the annual goals listed in Section IV will be added to next year's performance plan for Direct Payments.

Evidence: The annual performance goals will be(1) to eliminate fraudulent payments, and (2) to reduce interest penalty payments.

Do all partners (grantees, sub-grantees, contractors, etc.) support program planning efforts by committing to the annual and/or long-term goals of the program?

Explanation: Program criteria and funding levels determined through legislation. FSA is dedicated to deliver the program.

Evidence: FSA does not have any partners in this program.

Does the program collaborate and coordinate effectively with related programs that share similar goals and objectives?

Explanation: Direct payments in combination with counter-cyclical payments and the marketing loan program provide a comprehensive safety net for farmers while remaining in compliance with international trading rules.

Evidence: All these programs are delivered through a field office structure and share data related to eligible producers. The programs are described in the legislation and in FSA documentation.

Are independent and quality evaluations of sufficient scope conducted on a regular basis or as needed to fill gaps in performance information to support program improvements and evaluate effectiveness?

Explanation: At Agency level, County Office Reviews are scheduled and other evaluations are done on an ad-hoc basis. Every county office is reviewed on average once every four years. The Office of the Inspector General also monitors the payment system and conducts annual audits of the Commodity Credit Corporation (CCC), and GAO monitors as well.

Evidence: The County Office Review Program and compliance reviews are scheduled throughout the fiscal year, OIG schedules and conducts reviews, and other ad-hoc reviews are conducted.

Is the program budget aligned with the program goals in such a way that the impact of funding, policy, and legislative changes on performance is readily known?

Explanation: In terms of the PFC program, budget outlays were linked to the goal of reducing producer support. As budget outlays are linked to stable participation levels, any changes could be closely determined because of the linkage. As this is a mandatory program, budget projections take into account proposed policy change (such as the move from PFC's to direct payments).

Evidence: Budget keeps program staff routinely informed of funding levels and outlays in daily and monthly reports.

Has the program taken meaningful steps to address its strategic planning deficiencies?

Explanation: The only area that the Agency really controls is the delivery of the program. The Agency does have a strategic plan in the delivery of the program each year. Some deficiencies noted relate to the timeliness of getting payments to producers. The strategic plan will be modified to address the deficiencies.

Evidence: Deficiencies in the timeliness in program delivery are identified by increased prompt payment interest being paid by the Agency related to the program. When payments are determined to be unearned, receivables are established and collections made. Receivable are reported by program for control purposes. The Agency plans to implement a yearly sign up program that should minimize the number of unearned payments.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Data collected can not be used to measure performance. Internal audits, reviews, and compliance checks are performed, which improves efficiency of program, minimizes fraud, waste and abuse.

Evidence: The County Office Review Program produces an annual report that identifies areas in need of improvement. Based on recommendations from this report the Agency has taken action to re-enforce instructions and resolve problem areas.

Are Federal managers and program partners (grantees, subgrantees, contractors, etc.) held accountable for cost, schedule and performance results?

Explanation: Agency managers are responsible for implementing and monitoring program activities. Program managers are introducing electronic delivery features into the program and E-Forms to improve overall program efficiency. The number of offices used to service customers continues to be reduced further reducing the cost of delivering the program. The Agency plans to implement a yearly sign up for the program which will further improve performance results, by further reducing the number of unearned payments that are made.

Evidence: Federal Managers Financial Integrity Act of 1982

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Strict accounting and participant compliance are included in individual participants contracts.

Evidence: Accounting records are maintained. CCC obligates these funds as they are expended until fiscal year end where CCC will accrue the payments still due and payable on 9/30.

Does the program have incentives and procedures (e.g., competitive sourcing/cost comparisons, IT improvements) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: In terms of compliance with program rules and requirements. Agency has procedures to measure the efficiencies of the program through the prompt payment reports and EFT versus paper checks reports.

Evidence: The Agency reports the number of prompt payment penalties paid and the ratio of Electronic Funds Transfer (EFT) payments versus payments issued via Treasury Check. To achieve further efficiencies the Agency is introducing more E-forms to improve the data collection process and reduce data input time and errors. The Agency is recommending a yearly sign up for the program to reduce unearned payments and the Agency has implemented more stringent guidelines for funds control and will have a web-based funds control process available for Fiscal Year 2003.

Does the agency estimate and budget for the full annual costs of operating the program (including all administrative costs and allocated overhead) so that program performance changes are identified with changes in funding levels?

Explanation: On County basis. For budget purposes, a program level and outlay amount is estimated and tracked each fiscal year. However, the direct payments are not required to be apportioned.

Evidence: Budget estimates are based on forecasts provided by the Economic Policy and Analysis Staff. Actual outlays are obtained from the accounting system.

Does the program use strong financial management practices?

Explanation: Disbursement data is collected and reported to the financial statements of the Commodity Credit Corporation. These statements are audited every year.

Evidence: There are no material findings on the internal controls related to the disbursement process used by CCC.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: New procedures developed to improve program management efficiency (e.g. direct deposit and consolidated payments). To achieve further efficiencies the Agency is introducing more E-forms to improve the data collection process and reduce data input time and errors. The Agency is recommending a yearly sign up for the program to reduce unearned payments and the Agency has implemented more stringent guidelines for funds control and will have a web-based funds control process available for Fiscal Year 2003.

Evidence: The Agency reports the number of prompt payment penalties paid and the ratio of Electronic Funds Transfer (EFT) payments versus payments issued via Paper Check.

Has the program demonstrated adequate progress in achieving its long-term outcome goal(s)?

Explanation: Producers are no less dependent on Government support than they were prior to the 1996 Act. However, payments have been made in a timely fashion.

Evidence: The 2002 Farm Bill includes direct payments at a fixed level from 2002 to 2007.

Does the program (including program partners) achieve its annual performance goals?

Explanation: Over time, the PFC program decreased fraudulent payments and interest penalty payments. However, the annual goals did not help meet the long-term goal for the PFC program. The Direct Payment program should further reduce fraudulent payments, as an annual sign-up is required, reducing the number of payments going to people that have left farming.

Evidence:  

Does the program demonstrate improved efficiencies and cost effectiveness in achieving program goals each year?

Explanation: The Agency reports the number of prompt payment penalties paid and the ratio of Electronic Funds Transfer (EFT) payments versus payments issued via Treasury Check. To achieve further efficiencies the Agency is introducing more E-forms to improve the data collection process and reduce data input time and errors. The Agency is recommending a yearly sign up for the program to reduce unearned payments and the Agency has implemented more stringent guidelines for funds control and will have a web-based funds control process available for Fiscal Year 2003.

Evidence: Paper Check and 2002 Farm Bill regulations.

Does the performance of this program compare favorably to other programs with similar purpose and goals?

Explanation: Less market distorting than Loan Deficiency Payments (LDP). In times of low prices, counter-cyclical payments will supplement direct payments (after 2002).

Evidence: LDPs are paid based on current production, This has resulted in an increase in acreage planted to program crops and has contributed to a reduction in crop prices. USDA/ERS Agricultural Outlook, October 2002, p. 12-13.

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: Outside sources have reviewed the PFC program and determined that it has provided support in maintaining farm income but has not been effective in reducing the need for Government payment support. Direct Payments authorized under the 2002 Farm Bill will not be implemented until FY03 and cannot be assessed at this time. However, like in the PFC program, only a small portion of farmers will be eligible for direct payments and the majority of those farmers will earn at least $50,000 farming.

Evidence: "U.S. Farm Program Benefits: Links to Planting Decisions & Agricultural Markets." USDA/ERS Agricultural Outlook, October 2000. "A Safety Net for Farm Households" USDA/ERS Agricultural Economic Report No. 788. 44 pp, Dec 2000.