According to GAO Report Number GAO-09-67, the U.S. Government spends approximately $16 billion annually in federal farm program payments, a good portion of which is handed out to individuals and various business entities that exceed income eligibility limits.
The report states that out of the 1.8 million recipients getting subsidy payments from the years 2003 through 2006, a whopping 2,702 of them had adjusted gross incomes that exceeded the $2.5 million cap. On top of that, these individuals and/or corporate entities were shown to derive less than three-quarters of their income from farming, ranching or forestry which, under the law, would render them ineligible for the subsidy payments as well.
Nevertheless, $49 million was paid to these entities by the USDA. The USDA cited a number of reasons for the erroneous payments; namely, inadequate resources to properly examine tax and financial information of the individuals receiving the subsidies along with a lack of authority to obtain tax filer data from the individuals for the purposes of reconciling the figures with the requests for subsidies. For this reason, there was virtually no verification process in place to determine which of the entities requesting subsidies were actually qualified to receive them.
Under the 2008 Farm Bill, income eligibility caps have been significantly lowered, thereby increasing the possibility that even more individuals and/or corporate entities will fall into the category of being ineligible for the subsidies as they may easily pass the threshold of a lower cap. However, without adequate resources to determine an entity’s eligibility, this just means that more erroneous subsidy payments will be made to those who apply for but who do not qualify for the assistance.
In addition, in July 2007 the GAO reported that from 1999 to 2005, the USDA sent $1.1 billion in farm payments to over 170,000 deceased individuals. Why? Because the USDA has no standard for ensuring payments are actually going to individuals engaged in farming but instead allowed individuals with limited involvement with the farming operation to receive the payments.
This report was issued in October of 2008 with a recommendation that the Secretary of Agriculture direct the Farm Service Agency Administrator to work with the IRS and develop a verification system to test the eligibility of all recipients of farm program payments, but, if the Secretary determines it does not have authority to develop such a system, then the authority needs to come from Congress. No word on how long that could take.
In a follow-up to this story, we will discuss just who those rich individuals are who are taking advantage of the farm subsidy program, tell you which members of Congress are enjoying the fruits of the program (no pun intended), and we’ll discuss how President Obama is taking the farm subsidy program to task in his efforts to trim wasteful spending in Washington and how this is being met with considerable opposition to his proposed amendments.