Disaster Assistance:

Crop Insurance Can Provide Assistance More Effectively Than Other Programs

RCED-89-211: Published: Sep 20, 1989. Publicly Released: Sep 20, 1989.

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Pursuant to a congressional request, GAO provided information about the Department of Agriculture's (USDA) role in providing agriculture disaster assistance since 1980, focusing on various programs' costs and effectiveness.

GAO found that: (1) USDA spent about $6.9 billion for direct cash payments, $6.4 billion for disaster emergency loans, and $4.3 billion for crop insurance between 1980 and 1988; and (2) low participation rates in the crop insurance program necessitated continued use of direct payments and emergency loan programs. GAO also found that none of the programs met all of the criteria for equitable and efficient disaster assistance, involving: (1) assistance based on loss, not disaster severity; (2) provision of similar amounts of assistance for similar amounts of losses; (3) assistance limited to the amount of losses; (4) lack of incentives increasing the likelihood and extent of losses; (5) long-range planning; (6) assistance focusing on recovery from the effects of natural disasters; (7) predictable annual costs; and (8) ability to meet objectives at the lowest possible cost. In addition, GAO found that the crop insurance program: (1) satisfied three of those criteria, the payment program satisfied one, and the loan program satisfied none; (2) competed with the direct assistance and loan programs, which received more federal funds and had more attractive terms; (3) had a history of management problems and would require stronger controls if it became the sole assistance source; and (4) was only appropriate for compensating for the disaster-caused loss of crops, and other insurance would be necessary to cover disaster-caused damages to farming and ranching infrastructure.

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