$736M Farm Subsidy Loopholes Reward Absentee Managers

BOSTON ( TheStreet) -- This month, the U.S. Government Accountability Office released a report that found about half of the $1.5 billion in farm subsidies distributed last year were to people not "actively engaged" in farming.

In other words, about $736 million in farm subsidies went to people who don't take part in a farm's daily operation and are very often not at the farm. In fact, many farm subsidy recipients do not even live near the farms they get subsidies for -- sometimes they're not even living in the same state, since the agency's guidelines don't require a manager to actually visit the farm operation to be eligible.

The USDA's Farm Services Agency, which is responsible for the distribution of the subsidies, requires that a prospective recipient must be "actively engaged" in the farming operation to qualify for funding. But the GAO found that the agency defines "actively engaged" too broadly, and what constitutes as a "management" role.

"The requirements say the management contribution must be critical to the profitability of a farming operation, but Farm Service Agency officials told the GAO that making that kind of determination is difficult and subject to interpretation," the report says.

Furthermore, the GAO found that some farming operations were getting multiple subsidies for managerial positions.

In one instance, the GAO found that a farm in the Midwest got $400,000 in subsidy payments last year distributed among 11 members of the same family who all claimed management contributions, and two live in south Florida.

The Environmental Working Group, a nonprofit advocating for reform of the Farm Bill and monitoring farm subsidy distributions, found that more than $24 million in direct payment farm subsidies were distributed to residents of America's 54 largest cities, including New York City, San Francisco and Chicago, regardless of whether they had ever worked on a farm.

Direct payments are based on a farm's historical production, meaning someone can still get funding under the program regardless of need or even whether a farm produces a crop. Even though land converted to non-farm uses is legally ineligible for direct payment subsidies, the GAO found that the USDA does a poor job of tracking land use changes.

In the meantime, EWG has been pushing to limit subsidy payments and close loopholes allowing multiple payments to a single operation.

"Ultimately, it's farmers and taxpayers -- two groups Congress claims to care about -- who are hurt the most by these wasteful and misdirected farm subsidies," said Mike Lavender, EWG's ag reform coordinator, on its AgMag blog . "At a time of record farm profits and record federal deficits, farmers have been the first to admit that these programs need to change."

The EWG, though one of the loudest voices on Farm Bill subsidy reform, is not the only one.

"That manager loophole has cost taxpayers hundreds of millions of dollars and has concentrated farm program payments in the hands of mega farms," said Ferd Hoefner, policy director of the National Sustainable Agriculture Coalition, in a press release.

U.S. Sen. Chuck Grassley, the Iowa Republican who released the GAO report, has taken the lead in introducing statutory changes in the Farm Bill that would seek to limit subsidy payments -- including letting only one person per farming operation qualify as a subsidized "manager."

In August, after a senior farm agency official told the GAO it does not plan to change the regulatory definition of "active personal management" without direction from Congress, Grassley said on his Senate website that it was "just one more reason that my payment limits provisions included in the Senate and House bills -- placing a hard cap on farm payments and closing loopholes that allow non-farmers to game the system -- should stay untouched."

The GAO also found that individual recipients at 14 of 50 farming operations in the agency's database were not at the right addresses.

The agency implemented an End-of-Year Review Tracking System database in May so state and county agency officials can report information on the status of the subsidy recipients they are in charge of evaluating. It is designed to improve monitoring of compliance reviews, but the agency does not have a timeframe or strategic plan for using the database.

In April 2004, the GAO issued a report that had similar findings to the one released this month -- even recommending that Congress modify the definition of "management activities" for farm operations in determining future farm subsidy payments.

Until it happens, millions of public dollars may be spent needlessly.

As stated by the EWG's Lavender: "By eliminating loopholes and adding responsible limits to subsidy programs, Congress can ensure that taxpayers won't be on the hook and that farmers who really need the help will get it."

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