USDA Responds To GAO Study Calling for Decreasing Waste, Fraud and Abuse in Crop Insurance OversightFri, 13 Apr 2012 15:55:20 CDT
The GAO recently released a study which says the government can save over $1 billion each year by modifying crop insurance programs and charging the USDA with doing more to eliminate fraud, waste and abuse. Senator Tom Coburn requested the study and lauded it's findings. Congressman Frank Lucas, Chairman of the House Agriculture Committee, was less enthusiastic and cautioned Congress against damaging the crop insurance program.
Matt Herrick, a spokesman for the USDA, responded with the following statement to the study and it's call for the department to carry out its mandate to do more to eliminate fraud and abuse:
After decades of belt-tightening, many of America's farmers and ranchers are excelling thanks to their tremendous productivity. At the same time, extreme droughts, floods and wildfires these past few years have threatened to put many out of business, only reinforcing the need to maintain a strong safety net for our farmers and ranchers.
And USDA continues to do our part to ensure the integrity of our programs.
The Risk Management Agency and Farm Service Agency have already begun strengthening compliance. FSA is amending current procedures to require State offices to monitor and ensure that County offices complete the inspections. This guidance will ensure spots checks are completed and documented during the 2012 crop year. Furthermore, FSA will require State offices to report to Headquarters on the status of the inspections, adding more oversight than recommended by GAO. In addition to improved spot checks by FSA, a new system in use this year will improve the efficiency and accuracy of results reported from field visits.
RMA believes the resources expended to review program issues identified by data mining helps to ensure the integrity of the federal crop insurance program and strikes a balance with competing priorities.
To make better use of data mining results, in 2011 the reinsured companies were provided a spot check list of anomalous policies with indemnities under $10,000 to complement the FSA spot check list that identifies anomalous policies with indemnities greater than $10,000 the first time companies have been provided with this list. Moreover, the companies are required to do their own independent inspections, to include a growing season inspection as well as verifying production history.
Data mining efforts have been highly successful as the cumulative cost avoidance from data mining and related activities from 2001 through 2010 is estimated to be almost $840 million, based on USDA's analysis of the changes in loss experienced for those people placed on the spot-check list. In fact, as a result of the success of the spot-check program, the 2012 SRA broadens the use of data mining and helps direct company efforts at detecting and investigating suspect behaviors. These targeted company reviews enabled by data mining will be more effective and efficient than the more random review process of past years.
Prior to being placed on the spot-check list, a producer's rate of loss was about 15 percentage points higher than other producers in their county. After being placed on the spot-check list, their rate of loss declined to less than 8 percentage points higher than other producers in their county, for a reduction of about 48%.
You can read the GAO report by clicking here.
You can read more about Senator Tom Coburn's reaction by clicking here..
Chairman Frank Lucas's comments are available here.
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