USDA told to curb payment fraud

USDA told to curb payment fraud

- Nearly 29,000 deceased individuals received farm payments in 2011-12. - GAO probe focuses on FSA, NRCS and RMA. - GAO urges fortifyi

ACCORDING to a new Government Accountability Office (GAO) report, more can be done to prevent payouts of U.S. farm program payments to those who are deceased.

The U.S. Department of Agriculture spends about $20 billion annually on federal programs that support farm income, conserve natural resources and help farmers manage risks from natural disasters and have more than 1 million participants.

Since 2007, USDA's Farm Service Agency (FSA), which administers various programs for farmers that support farm incomes and provide disaster assistance, has established procedures for preventing improper payments to deceased individuals, including, on a quarterly basis, matching payments to program participants with the Social Security Administration's (SSA) data on deceased individuals.

In addition, FSA state and county offices review and verify whether payments made to deceased individuals are proper or improper.

According to FSA officials, establishing these procedures has enabled the agency to identify thousands of individuals — 17,409 in fiscal 2011 and 13,684 in fiscal 2012, for example — who were paid after their date of death.

Of 28,613 deceased individuals who were paid in 2011 and 2012, FSA determined that 1,799 individuals, or about 6%, received a total of $3.3 million in improper payments during the two-year period. GAO reported that FSA has recovered approximately $1 million of these improper payments and, according to FSA officials, continues to pursue the remaining amount.

GAO reviewed a generalizable random sample of payments to deceased individuals that FSA identified as proper and found that 9% did not have sufficient support to be coded as proper. "More monitoring to ensure that county offices' coding of payments is supported by documentation could help reduce the error rate," GAO recommended in its report.

The Natural Resources Conservation Service (NRCS), a USDA agency that administers voluntary conservation programs, does not have procedures in place to prevent potentially improper payments to deceased individuals. For example, its ability to verify whether payment recipients have died is limited because NRCS does not match these recipients against SSA's master list of deceased individuals.

Under the standards for internal control in the federal government, agencies are required to clearly document such control in the form of management directives, administrative policies or operating manuals.

GAO reviewed data for fiscal 2008 through April 2012 and estimated that NRCS made $10.6 million payments on behalf of 1,103 deceased individuals one year or more after their death. Some of these payments may have been proper, but NRCS cannot be certain because it neither identifies which payments were made to deceased individuals nor reviews each of these payments, GAO said.

The report also found that USDA's Risk Management Agency (RMA), which administers crop insurance programs, does not have procedures in place consistent with federal internal control standards to prevent potentially improper subsidies on behalf of deceased individuals.

For example, RMA does not use SSA's master list of deceased individuals to verify whether its policyholders have died. GAO matched the Social Security Number of every policyholder in RMA's crop insurance subsidy and administrative allowance data for crop insurance years 2008-12 with SSA's master list of deceased individuals and found that $22 million in subsidies and allowances may have been provided on behalf of an estimated 3,434 program policyholders two or more years after their death.

"Many of these subsidies and allowances may have been proper, but without reviewing each subsidy and allowance made on behalf of deceased individuals, RMA cannot be certain that these subsidies and allowances are proper," the report notes.

In addition, without accurate records of which policyholders are deceased, RMA may be less likely to rely on results from data mining — a technique for extracting knowledge from large volumes of data — and, therefore, less likely to detect fraudulent, wasteful or abusive crop insurance claims.

 

Recommendations

GAO recommended that FSA further strengthen its verification of payments to deceased individuals, that NRCS develop and implement procedures to prevent improper payments to deceased individuals and that RMA develop and implement procedures to prevent improper crop insurance subsidies on behalf of deceased policyholders and to improve the effectiveness of its data mining.

USDA generally agreed with GAO's findings and recommendations and said it believes the agencies' normal operating procedures provide opportunities to identify deceased participants. Although NRCS and RMA can identify some deceased participants during their normal operations, GAO said it does not believe this is a "reliable substitute for having a systematic process."

According to a comment letter from USDA, RMA implemented a new computer matching procedure, effective May 1, to check federal crop insurance program eligibility, subsidies and payments to policyholders against the public version of the death master file, and when the complete death master file is available, RMA is prepared to integrate the file into its computer matching system.

GAO noted that "the steps RMA is taking are promising" and encouraged NRCS to take similar steps.

Volume:85 Issue:31

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