Farm Programs:

Finality Rule Should Be Eliminated

RCED-97-46: Published: Mar 7, 1997. Publicly Released: Mar 7, 1997.

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GAO reviewed the impact of the congressionally mandated finality rule, focusing on the: (1) number and dollar amount of overpayments not repaid by farmers under the rule since its inception in November 1990 and the characteristics of individual overpayments; and (2) actions the Farm Service Agency (FSA) has taken to reduce the number of finality-rule cases and associated dollar amounts.

GAO noted that: (1) from November 1990 through September 1996, FSA applied the finality rule to 10,694 cases in which overpayment errors were not discovered within 90 days of the date of payment or the filing of a program application; (2) the rule allowed farmers to keep about $4.2 million in overpayments, an average of $395 per case; (3) almost 90 percent of the overpayments involved payments made under the disaster assistance and acreage reduction programs; (4) although the finality rule sought to protect farmers from the hardship of repaying large sums long after payments were made, most of the overpayments to which the finality rule was applied in fiscal years (FY) 1995 and 1996 involved small amounts of money, represented only a small percentage of the correct payments, and were discovered within a relatively short time, 9 months or less; (5) during these 2 fiscal years, about 86 percent of the finality-rule cases involved $500 or less, 59 percent had overpayments amounting to 10 percent or less of the correct payment amounts, and 67 percent were discovered within 9 months of the date of payment or the filing of a program application; (6) while most overpayments were small, a few large payments accounted for most of the total dollar value of overpayments; (7) in recent years, several actions by the FSA and Congress have reduced the number of finality-rule cases and associated overpayments; (8) for example, FSA has taken action to improve the accuracy of disaster assistance information before payments are made by including district directors and county office review staff in the review of the applications and by targeting for closer review applications for disaster assistance from farms that might have had questionable activity in the past; (9) in addition, the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 reduced the potential for disaster assistance payments by requiring farmers to rely primarily on crop insurance for certain crops rather than disaster assistance; and (10) the 1996 farm bill ended the acreage reduction program, thereby eliminating potential overpayments under this program.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In June 1997, the Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry introduced a legislative proposal to eliminate the finality rule. The legislative proposal still has to clear the conference committee in September 1997 and be signed by the President before becoming law. If that happens, GAO will prepare an accomplishment report.

    Recommendation: To reduce the overpayments by the federal government associated with the finality rule, the Secretary of Agriculture should submit a legislative proposal to Congress to eliminate the finality rule.

    Agency Affected: Department of Agriculture

 

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