Propriety of the Commodity Credit Corporation Paying for Hazard Insurance

The Inspector General of the Department of Agriculture (USDA) requested an opinion on the propriety of the Commodity Credit Corporation (CCC) paying for hazard insurance on CCC-owned and stored commodities. In a previous report, GAO recommended that CCC eliminate hazard insurance coverage on grain for which it pays storage charges and obtain commensurate reductions in storage rates. In response to these recommendations, CCC discontinued the requirement that commercial warehousemen carry insurance on CCC-owned commodities. Warehousemen who desired to store CCC-owned grain were required to submit uninsured storage rates lower than their insured storage rates. This new policy was discontinued as a result of numerous complaints lodged against it. The USDA General Counsel advised CCC that it was not required to contract for uninsured storage of the commodities it owned. GAO concurred with this opinion. It was noted, however, that the Government's practice of self-insurance is one of policy, not law. The policy arose because it was felt that the magnitude of the Government's resources and the wide dispersion of the type and geographical location of the risks made self-insurance generally more advantageous to the Government than would the procurement of commercial insurance. The Inspector General also asked whether GAO opinions are binding on CCC. CCC is not bound by GAO decisions because CCC is vested with the authority to determine the character and necessity of its own obligations and expenditures and to settle and adjust its accounts. GAO has the right and the duty to report to Congress any activity or expenditure by CCC which GAO regards as illegal.