WASHINGTON, Dec. 22, 2014 – The cost of a livestock disaster program has soared to more than $4 billion this year – far beyond what Congress expected – even as auditors are finding that earlier payments under the program were rife with errors.
The payments are being made under the Agriculture Department’s Livestock Forage Program, which was created under the 2008 farm bill, allowed by Congress to lapse after 2011, and then reinstated under the 2014 Farm Bill.
A new report by the USDA’s inspector general suggests the department was struggling to administer the program properly even before it was revived by the farm bill in February and the department had to rush to process applications for payments going back to 2012 and 2013.
Auditors from the IG’s office reviewed 155 payments made in 2010 and 2011 to 120 producers in two states – Texas and Oklahoma - and found errors in 78 of the applications.The errors by USDA’s Farm Service Agency, which included mistakes in calculating the amount of forage eligible to be covered under the program, amounted to $373,135, or 7 percent, of the $5.7 million in total payments made to the 120 producers.
All but about $14,000 of the mistakes involved overpayments to the producers, not underpayments.
The auditors also said that one of the 120 producers made a false application to get $67,838. That producer, whose identity was not disclosed, falsely claimed to have kept livestock the farm didn’t have.
The report noted that the Farm Service Agency, which administers the program, has been hit by budget and staff cuts in recent years. FSA’s salary and expense budget shrank from nearly $1.6 billion in fiscal 2010 to $1.4 billion in fiscal 2013.
Many of the incorrect payments were due to counties making mistakes in manually calculating acreage figures, according to the auditors.
USDA officials say they are making improvements to cut down on errors, but some of the modifications will be too late for the rush of applications that hit the department when the program was reinstated this year. For example, FSA said it hoped to have an automated process in place for making the acreage calculations by March 31, 2015.
“One of FSA’s many goals is to be able to automate the process of calculating total acres under the LFP and eliminate the need for manually inputting these acres on the application as resources permit,’ the agency said in a response to the IG’s report.
The new farm bill allowed producers to make claims retroactively for losses in 2012 and 2013 as well as for 2014 and future years. In addition, the bill eliminated a previous requirement that farmers and ranchers must have insured their grazing land through crop insurance or the Noninsured Assistance Program.
Restoring the program was a top priority of the chairman of the House Agriculture Committee, Frank Lucas, R-Okla., whose district has been a major recipient of the payments.
“With LFP becoming an important program to livestock producers to provide financial relief and help due to drought,” the IG report said, “it is important that FSA invest its resources to reduce errors in the administration of LFP that cause improper payments.”
FSA officials did not respond on the record Monday to a request for comment on the IG report and what the agency had done this year to avoid the previous errors.
The agency has made $4.1 billion in payments so far in calendar 2014 under LFP, far in excess of what either the Congressional Budget Office or USDA anticipated.
CBO had estimated the total cost of the bill’s disaster assistance programs, including LFP, at $897 million for fiscal 2014, which ended Sept. 30. USDA was off by even more, having estimated the cost at $756 million for fiscal 2014. CBO estimated the programs would cost $2.17 billion through 2018.
USDA’s chief economist, Joseph Glauber, said Monday that he didn’t know why the estimates were off by so much although he said the former crop insurance requirement could have discouraged signup previously. He said the demand for the program reflected the severe drought losses that hit Plains cattle producers in 2012 and 2013.
USDA received 33,000 applications within the first two weeks of signup for the farm bill’s disaster programs, mostly for LFP.
Four states – Oklahoma, Texas, Nebraska and Kansas – have accounted for $2.1 billion in payments this year, more than half the total, according to FSA data. Producers in Oklahoma alone have received $833 million, followed by Texas ($592 million), Nebraska ($513 million), and Kansas ($451 million).