USDA's Commodity Program:

The Accuracy of Budget Forecasts

PEMD-88-8: Published: Apr 21, 1988. Publicly Released: May 9, 1988.

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Pursuant to a congressional request, GAO reviewed the accuracy of the Department of Agriculture's (USDA) commodity program budget forecasts for 1972 through 1986 to determine the reasons for errors.

GAO found that the USDA commodity programs' budget estimates: (1) were substantially incorrect in most years, with absolute errors totalling $64.1 billion and averaging about $4.3 billion annually; and (2) underestimated actual budget levels by an average of $3.1 billion annually. GAO also found that USDA: (1) developed its budget estimates using estimates for individual farm commodities for supply and demand, farmer participation, and market price forecasts; (2) did not document how it used such macroeconomic forecasts; (3) did not systematically attempt to identify the source of forecasting errors or implement a structured quality control program for those factors which were controllable; and (4) did not inform Congress about its estimates' limitations. In addition, GAO found that consistent problems in USDA management of forecasting processes included: (1) limited or no evaluation of forecasting methods to determine accuracy; (2) poor or nonexistent data management and recordkeeping regarding input data and their use; (3) poor or nonexistent documentation of analysts' forecast production methods; and (4) decentralized managerial accountability that weakened problem identification and solution.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Secretary has complied with the GAO recommendation.

    Recommendation: The Secretary of Agriculture should assign management responsibility for coordinating the forecasting program and for establishing a structured quality control program to a specific organization.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: USDA has implemented this recommendation.

    Recommendation: USDA should establish an ongoing evaluation program that ensures that forecasters regularly perform studies of forecast accuracy to determine what caused errors and to relate the errors to the components of the forecasting processes, so that resources can be allocated for improvement.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: GAO does not expect USDA to implement this recommendation because of internal constraints.

    Recommendation: USDA should ensure that the forecasting process and its results are documented and that forecast results include explanations of the limitations of the data, including forecast ranges based on historical error rates, alternative program implementation strategies, and alternative assumptions regarding supply and demand.

    Agency Affected: Department of Agriculture

 

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