Agriculture Payments:

Effectiveness of Efforts to Reduce Farm Payments Has Been Limited

RCED-92-2: Published: Dec 5, 1991. Publicly Released: Dec 11, 1991.

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Pursuant to a congressional request, GAO reviewed whether: (1) amendments to the Food Security Act of 1985 effectively prevented producers from avoiding the $50,000 payment limit and reduced program payments; and (2) the Department of Agriculture's (USDA) computer systems effectively monitor and enforce payment limit requirements.

GAO found that the Food Security Act of 1985 limited deficiency payments, which are designed to protect agricultural producers when crop prices fall below an established target price, to $50,000 per person. GAO also found that the 1987 amendments had a very limited effect in reducing payments, since: (1) the amendments allowed equitable reorganizations under which farmers could reorganize their farming operations, within a specified time period, to avoid any reductions in their total payments; (2) USDA required that only 50 percent of a corporation's ownership provide significant contributions of personal labor or active personal management for the corporation to meet the requirement that it be actively engaged in farming; and (3) individuals could qualify for payments from up to three eligible entities. In addition, GAO found that: (1) because the amendments' provisions worked against one another, the provisions only reduced 1989 program payments by $3.4 million; (2) according to a USDA report, 12 of the 52 farming operations reviewed reorganized their business structures to avoid losses in payments; and (3) USDA computer systems effectively monitor and limit payments to producers.

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