Commodity Credit Corporation: Information on the Availability, Use, and
Management of Funds (Letter Report, 04/28/1998, GAO/RCED-98-114).
As the federal government's financing arm for an array of domestic and
international agricultural programs, the government-owned and -operated
Commodity Credit Corporation (CCC) finances an array of income and
commodity support programs through direct payments and loans. These
programs assist producers in the production and marketing of
agricultural commodities, such as feed grains, wheat, rice, and cotton.
In addition, CCC's mission has expanded in recent years to include the
financing of a range of commodity export, resource conservation, and
disaster assistance programs. These programs are intended to enhance the
price competitiveness of U.S. commodities in foreign markets, help
producers implement conservation practices on their farms, and indemnify
producers for crop or livestock losses resulting from weather-related
disasters and pest infestations. This report provides information on (1)
how much money CCC had available and spent in fiscal years 1996 and
1997, including the sources of these funds and the programs and
activities for which they were used; (2) what management practices are
used to control CCC funds; and (3) whether CCC's funding for
administrative purposes, such as the purchase of computer and
telecommunications equipment, fell within statutory funding caps in
fiscal years 1996 and 1997 and whether the programs CCC funded had a
statutory basis for using CCC funds.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-98-114
TITLE: Commodity Credit Corporation: Information on the
Availability, Use, and Management of Funds
DATE: 04/28/1998
SUBJECT: Commodity sales
Financial statement audits
Agricultural programs
Internal controls
Budget outlays
International trade
Credit sales
Budget administration
Financial management
Borrowing authority
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GAO/RCED-98-114
Cover
================================================================ COVER
Report to the Chairman, Committee on Agriculture, Nutrition, and
Forestry,
U.S. Senate
April 1998
COMMODITY CREDIT CORPORATION -
INFORMATION ON THE AVAILABILITY,
USE, AND MANAGEMENT OF FUNDS
GAO/RCED-98-114
Use of Commodity Credit Corporation Funds
(150729)
Abbreviations
=============================================================== ABBREV
CCC - Commodity Credit Corporation
FAS - Foreign Agricultural Service
FSA - Farm Service Agency
GAO - General Accounting Office
NRCS - Natural Resources Conservation Service
OIG - Office of Inspector General
OMB - Office of Management and Budget
USDA - U.S. Department of Agriculture
Letter
=============================================================== LETTER
B-279384
April 28, 1998
The Honorable Richard G. Lugar
Chairman, Committee on Agriculture,
Nutrition, and Forestry
United States Senate
Dear Mr. Chairman:
As the federal government's financing arm for an array of domestic
and international agricultural programs, the government-owned and
-operated Commodity Credit Corporation (CCC) has had a significant
impact on the nation's agricultural economy. Located within the U.S.
Department of Agriculture (USDA), CCC was established in 1933 to
stabilize, support, and protect farm incomes and prices and to assist
in maintaining balanced and adequate supplies of agricultural
commodities and in facilitating their orderly distribution. CCC
carries out this mission by financing a variety of income and
commodity support programs through direct payments and loans. These
programs assist producers in the production and marketing of
agricultural commodities such as feed grains, wheat, rice, and
cotton. In addition, CCC's mission has been expanded in recent years
to include the financing of a range of commodity export, resource
conservation, and disaster assistance programs. Among other things,
these programs are intended to enhance the price competitiveness of
U.S. commodities in foreign markets, assist producers in
implementing conservation practices on their farms, and indemnify
producers for the extraordinary losses of crops or livestock
resulting from weather-related disasters and pest infestations. CCC
itself has no employees; its operations are carried out principally
through the personnel and facilities of USDA's Farm Service Agency
(FSA), Foreign Agricultural Service (FAS), and Natural Resources and
Conservation Service (NRCS).
CCC finances its operations through two basic mechanisms. First,
most of its programs are financed through a borrowing authority of up
to $30 billion; CCC borrows these funds from the Department of the
Treasury. This borrowing authority is akin to an open line of
credit--CCC obtains funds by borrowing against this line of credit on
an as-needed basis. CCC receives annual appropriations for its net
losses (expenditures that the Corporation will never recover, such as
payments to producers) from operations financed through its borrowing
authority. These appropriations, along with receipts from some CCC
programs (such as loan repayments from producers), enable CCC to
repay its debt to the Treasury, thereby replenishing its borrowing
authority. Second, CCC finances several of its commodity export
programs through direct annual appropriations and other funding.
Given the diversity of CCC's operations and the magnitude of its
borrowing authority, you asked us to provide information on how CCC
funds are spent and controlled. Specifically, you asked for
information on (1) how much money CCC had available and spent in
fiscal years 1996 and 1997, including the sources of these funds and
the programs and activities for which they were used; (2) what
management practices are used to control CCC funds; and (3) whether
CCC's funding for administrative purposes (such as the purchase of
computer and telecommunications equipment and services) fell within
relevant statutory funding caps in fiscal years 1996 and 1997, and
whether the programs CCC funded had a statutory basis for using CCC
funds.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The amount of funds available to the Commodity Credit Corporation
through its $30 billion borrowing authority fluctuates as the
Corporation alternately borrows against and/or replenishes the
authority every business day. To enable the Corporation to repay its
debt associated with the borrowing authority, the Congress made
appropriations to the Corporation totaling $10.5 billion in fiscal
year 1996 and $1.5 billion in fiscal year 1997. The Corporation also
received about $6.9 billion and $5.7 billion in program receipts--in
fiscal years 1996 and 1997, respectively--that it also used to
replenish its borrowing authority. In addition, the Corporation
received separate appropriations and other funding (such as carryover
funds from prior years) totaling $2.1 billion in fiscal year 1996 and
$1.9 billion in fiscal year 1997 to fund several of its commodity
export programs that are not funded through its borrowing authority.
Most of the Corporation's net outlays (expenditures that take into
account offsetting receipts) made through its borrowing authority
were for its income and commodity support programs--about $4.4
billion and $5.1 billion, in fiscal years 1996 and 1997,
respectively.\1 The remaining outlays made in these years--about $640
million and $2.3 billion, respectively--were primarily for the
Corporation's other programs; however, some were used for
administrative purposes, such as purchasing computer and
telecommunications equipment and reimbursing U.S. Department of
Agriculture agencies and other government entities for services
provided to support the Corporation's operations. In addition to the
net outlays associated with its borrowing authority, the Corporation
had net outlays of about $334.4 million in fiscal year 1996 and $38.7
million in fiscal year 1997 for the commodity export programs that
received direct appropriations and other funding.
A range of management practices are used to control the Corporation's
funds. These practices include controls over spending related to the
annual budget and apportionment processes; the Corporation's periodic
reports of its financial activities to the Congress; the Farm Service
Agency's implementation of internal controls to protect the
Corporation's assets and account for its financial transactions;
program managers' allocation and monitoring of the Corporation's
funds used in their programs; and periodic reviews of program
activity by compliance staff from the agencies that implement the
Corporation's programs. In addition, the U.S. Department of
Agriculture's Office of Inspector General audits the Corporation's
annual financial statements, including its year-end expenditure
reports. In a July 1997 report, the Office of Inspector General
noted problems with some of the Farm Service Agency's internal
controls, which it believes could adversely affect the Corporation's
ability to prepare reliable financial statements and account for its
assets.
We found no instances in fiscal years 1996 and 1997 in which the
Corporation's funding for administrative uses exceeded the relevant
statutory funding caps. Furthermore, each Corporation program has a
statutory basis for using the Corporation's funds.
--------------------
\1 For a given fiscal year, there is no direct correlation between
the appropriations made to CCC to repay the debt associated with the
borrowing authority and the net outlays CCC makes with borrowing
authority funds. This is because the appropriations are made
primarily to reimburse CCC for net realized losses incurred in prior
fiscal years.
BACKGROUND
------------------------------------------------------------ Letter :2
CCC was originally incorporated in 1933 under a Delaware charter and
was reincorporated in 1948 as a federal corporation within USDA by
the Commodity Credit Corporation Charter Act (P.L. 80-806, June 29,
1948). Although CCC operates under a large number of statutory
directives and limitations, its broad powers under the CCC Charter
Act authorize it to carry out almost any operation required to meet
its objectives. The principal operations that CCC funds are the
income and commodity support programs. CCC also funds commodity
export, resource conservation, and disaster assistance programs.
CCC's programs--including its income and commodity support, resource
conservation, and disaster assistance programs and most of its
commodity export programs--are classified as mandatory spending
programs, and therefore CCC does not require annual appropriations in
order to make outlays for them. Instead, CCC borrows funds from the
Department of the Treasury to finance these programs.\2 CCC may have
outstanding borrowing of up to $30 billion at any one time. In
contrast, several of CCC's commodity export programs--the export
credit guarantee programs and the Food for Peace Program--are
financed primarily through direct annual appropriations in addition
to other funding.
CCC's nonrecoverable losses are reimbursed through an annual
appropriation.\3 In fiscal year 1996, the appropriation included
funds to cover the actual and estimated nonrecoverable losses from
prior fiscal years as well as an advance on estimated future
nonrecoverable losses. In fiscal year 1997, the appropriation
included funds to cover actual losses from fiscal year 1996 only.\4
In addition, CCC collects program receipts from its commodity
programs--mainly commodity loan repayments and the proceeds from the
sale of commodities held in inventory by CCC. Together, these
appropriations and program receipts allow CCC to repay, with
interest, its debt to the Treasury and to replenish its borrowing
authority. Appendix I shows CCC's flow of funds.
A board of directors oversees CCC's operations, subject to the
supervision and direction of the Secretary of Agriculture, who is the
ex officio chairperson of the board. The members of the board and
the Corporation's officers are all USDA officials. Over time, the
direct role of the board in overseeing the Corporation's operations
has diminished; as of December 1997, the board had met only twice in
the past 2 years. In general, the Corporation's officers and their
designees manage the Corporation's business affairs. Appendix II
lists CCC's board of directors and officers.
CCC has no employees--the programs it funds are carried out primarily
through the personnel and facilities of several USDA agencies. For
example, FSA administers all of CCC's income and commodity support
and disaster assistance programs and two of its resource conservation
programs. FSA also handles the budgeting and accounting for all CCC
programs. In addition, FAS administers CCC's commodity export
programs,\5 and NRCS administers most of CCC's resource conservation
programs. The Corporation may also use the services of other
government entities to help administer its programs.\6
--------------------
\2 CCC may also borrow funds from private lending agencies and
others, but it has not done so for about 30 years.
\3 CCC's nonrecoverable losses are also referred to as "net realized
losses." Net realized losses describe outlays that CCC will never
recover and that are the basis of appropriations. These losses
include those resulting from the disposal of CCC's commodity assets
and direct payments to farmers. They also include commercial storage
and transportation payments for CCC's commodity inventories, interest
payments on borrowing from the Treasury, and general operating
expenses.
\4 In response to a recommendation from USDA's Office of Inspector
General, FSA officially changed--beginning with fiscal year 1998--the
manner in which it calculates its request for an appropriation to
cover CCC's nonrecoverable losses. Specifically, this calculation no
longer includes reimbursements for estimated prior and future losses;
instead, the appropriation requested will be based solely on actual
losses for the most recent fiscal year for which CCC has complete
data. The Office of Inspector General made its recommendation in
light of CCC's excessive appropriation for nonrecoverable losses in
fiscal year 1996--about $5 billion more than was needed because FSA
had overestimated CCC's prior and future losses.
\5 FAS does not have the sole responsibility for administering the
Food for Peace Program, which has multiple titles giving
responsibility for the program to several agencies. Two of these
titles are administered by the Agency for International Development.
\6 Other government entities include any agency of the federal
government, any state, the District of Columbia, any territory or
possession, or any political division thereof.
CCC FUNDS AVAILABLE AND SPENT
IN FISCAL YEARS 1996 AND 1997
TOTALED IN THE BILLIONS
------------------------------------------------------------ Letter :3
During fiscal years 1996 and 1997, CCC used its borrowing authority
to finance most of its programs and related operations; only a few of
its programs were financed through direct appropriations and other
funding sources. Of the net outlays made with borrowing authority
funds--about $5 billion in fiscal year 1996 and $7.5 billion in
fiscal year 1997--most were for the income and commodity support
programs. The remainder financed commodity export, resource
conservation, and disaster assistance programs as well as
administrative expenses. In addition to the net outlays made through
its borrowing authority, CCC had net outlays for programs and
activities that receive direct appropriations and/or other
funding--principally several of its commodity export programs.
CCC'S AVAILABLE FUNDING
DERIVED PRIMARILY FROM ITS
BORROWING AUTHORITY
---------------------------------------------------------- Letter :3.1
Most of CCC's funds in fiscal years 1996 and 1997 derived from its
borrowing authority. This authority, limited by law to $30 billion
in outstanding borrowing at any one time, fluctuated as loans were
made from and repaid to the Department of the Treasury throughout the
year. CCC replenished its borrowing authority through (1) annual
appropriations--about $10.5 billion in fiscal year 1996 and $1.5
billion in fiscal year 1997--and (2) program receipts amounting to
about $6.9 billion in fiscal year 1996 and $5.7 billion in fiscal
year 1997.\7
Several of CCC's commodity export programs--the export credit
guarantee programs and Food for Peace Program--received direct
appropriations and other funding that totaled about $2.1 billion and
$1.9 billion, in fiscal years 1996 and 1997, respectively.\8 The
appropriations provided for these programs were unrelated to the
borrowing authority.
In each of fiscal years 1996 and 1997, CCC was also authorized to use
about $3 million in funds from USDA's appropriation for hazardous
waste management; CCC used the funds for cleanup initiatives for its
commodity storage facilities. In addition, in fiscal year 1997, the
Food for Peace Program returned to CCC about $25 million in
unobligated funds.\9
--------------------
\7 In the course of CCC's day-to-day operations, program receipts may
be used to finance additional program activity in lieu of repaying
Treasury debt. However, the net effect is the same: Receipts used
for program activity reduce the need for further borrowing from the
Treasury. Similarly, receipts used to repay debt with the Treasury
replenish the borrowing authority by the same amount. For the sake
of simplicity, we have chosen to treat all program receipts as
replenishing the borrowing authority.
\8 While much of the funding for these programs derived from direct
appropriations--about $1.5 billion and $1.1 billion in fiscal years
1996 and 1997, respectively--the programs also received unobligated
carryover funds from prior years' appropriations. The export credit
guarantee programs also obtained funding in these years through a
permanent indefinite authority--authorized under the Credit Reform
Act of 1990 (Sec. 13201 of P.L. 101-508, Nov. 5, 1990)--that is
unrelated to CCC's $30 billion borrowing authority. In addition, in
USDA's fiscal year 1996 appropriations act, the Congress directed
that CCC use its $30 billion borrowing authority to make available
$60 million to the Food for Peace Program.
\9 In Apr. 1993, the President announced a package of U.S.
assistance for Russia. As part of this package, CCC transferred $385
million in borrowing authority funds to a special account--the Russia
Food for Progress Program. By fiscal year 1997, about $25 million of
these funds remained unobligated and were returned to CCC.
CCC SPENT SEVERAL BILLION
DOLLARS IN BORROWING
AUTHORITY FUNDS EACH YEAR,
PRIMARILY FOR INCOME AND
COMMODITY SUPPORT PROGRAMS
---------------------------------------------------------- Letter :3.2
CCC's net outlays (expenditures that take into account offsetting
receipts) made through its borrowing authority totaled about $5
billion in fiscal year 1996 and about $7.5 billion in fiscal year
1997. Most of these outlays\10 were for income and commodity support
programs--about $4.4 billion and $5.1 billion, respectively, for that
period. The remaining outlays were for CCC's commodity export
(excluding programs directly appropriated), resource conservation,
and disaster assistance programs; and administrative expenses.
Figures 1 and 2 depict the relative share of net outlays made with
CCC borrowing authority funds in fiscal years 1996 and 1997,
respectively.
Figure 1: Percentage
Distribution of Net Outlays
Made With Borrowing Authority
Funds, Fiscal Year 1996
(See figure in printed
edition.)
Source: GAO's analysis of data from CCC's fiscal year 1996 Summary
Expenditure Report.
Figure 2: Percentage
Distribution of Net Outlays
Made With Borrowing Authority
Funds, Fiscal Year 1997
(See figure in printed
edition.)
Source: GAO's analysis of data from CCC's fiscal year 1997 Summary
Expenditure Report.
As discussed, CCC's net outlays for its income and commodity support
programs were about $4.4 billion and $5.1 billion in fiscal years
1996 and 1997, respectively. In general, these programs assist
producers through loans, purchases, payments, and other operations;
they also make available the materials and facilities required to
produce and market agricultural commodities. The CCC Charter Act, as
amended, also authorizes CCC to sell agricultural commodities
acquired under its income and commodity support programs to other
government agencies and foreign governments (generating program
receipts).
CCC's net outlays for the commodity export programs funded through
its borrowing authority were about $391.2 million and $235.7 million
for fiscal years 1996 and 1997, respectively. CCC's export programs,
including those funded by appropriations, help develop new foreign
markets and increase the U.S. share in existing markets. For
example, some programs provide credit guarantees that allow other
countries to obtain commercial financing to purchase U.S.
commodities; some provide exporters with cash or commodity bonuses in
order to make U.S. commodities more price competitive in foreign
markets; and yet another program provides government-to-government
concessional sales of U.S. commodities, including lengthy repayment
terms at low interest rates.
CCC's net outlays for its resource conservation programs were about
$8.5 million and $1.8 billion in fiscal years 1996 and 1997,
respectively. Recently added to CCC's mission, these conservation
programs became CCC programs in April 1996, following the passage of
the Federal Agriculture Improvement and Reform Act of 1996 (P.L.
104-127, Apr. 4, 1996)--more commonly known as the 1996 farm
bill.\11 Several of these programs were created by the farm bill;
others were previously funded through appropriations and administered
by FSA or NRCS.\12 Under some of the resource conservation programs,
CCC purchases easements or rents cropland from agricultural land
users in order to retire environmentally sensitive land from
agricultural production or to preclude nonagricultural uses of the
land. Under these and other CCC conservation programs, the
Corporation may also share the cost of implementing conservation
practices with agricultural land users through direct payments or
low-cost loans.
CCC's net outlays for disaster assistance programs were about $127
million and $226.1 million in fiscal years 1996 and 1997,
respectively. CCC's disaster assistance programs provide a safety
net to indemnify producers for extraordinary losses they may incur as
a result of weather-related disasters, such as droughts or blizzards.
In addition, the funding for these years included about $32.3 million
in fiscal year 1996 and $29.3 million in fiscal year 1997 in
emergency funding for activities to control and eradicate (1) a grain
fungus, known as Karnal bunt, that affected wheat production in the
southwestern United States and (2) an infestation of fruit flies that
affected fruit and vegetable production in California.\13
Appendixes III through VI provide additional information on each of
CCC's income and commodity support, commodity export, resource
conservation, and disaster assistance programs, including each
program's purpose and its net outlays for fiscal years 1996 and 1997.
CCC's administrative expenses include (1) the purchase of computer
and telecommunications equipment and services and (2) reimbursements
to agencies within USDA and other government entities for services
they provide to support CCC's operations. CCC's net outlays for
computer and telecommunications equipment and services were about
$77.5 million and $73.8 million in fiscal years 1996 and 1997,
respectively. Its net reimbursements to other government agencies
were about $41.6 million and $33.7 million, respectively, for these
years, including about $11.8 million each year to FAS as payment for
FAS' costs in operating a computer facility for CCC.
--------------------
\10 For purposes of this report, the terms "outlays" and
"expenditures" are used interchangeably.
\11 The Conservation Reserve Program was funded through CCC's
borrowing authority in fiscal years 1986 and 1987. From fiscal year
1988 through fiscal year 1995, this program was financed through
annual appropriations. According to USDA officials, however, if in
any of these years the program had not received an appropriation,
USDA was authorized to use CCC's borrowing authority to carry out the
program's operations. Thus, in the view of these officials, the
Conservation Reserve Program was technically a CCC program even
before the 1996 farm bill's enactment.
\12 Because these conservation programs were recently added to CCC's
mission, their outlays were relatively low in fiscal year 1996.
Programs that existed before the 1996 farm bill's passage had already
received appropriations for fiscal year 1996 and therefore used
little or no CCC funds in that year. Those that were created by the
farm bill were generally unable to use CCC funds in fiscal year 1996,
since most were not operational before the end of that year.
\13 In the event of a severe disease or pest outbreak, the Secretary
of Agriculture can declare an emergency that, among other things,
allows the Secretary to use CCC funds to help pay for control and
eradication activities and to indemnify producers for their losses.
The Secretary's authority to use CCC funds for emergencies is found
in USDA's annual appropriations legislation and in 7 U.S.C. 147b.
The funds are usually transferred from CCC to USDA's Animal and Plant
Health Inspection Service for subsequent outlay.
SOME NET OUTLAYS WERE
ASSOCIATED WITH CCC PROGRAMS
AND ACTIVITIES THAT RECEIVED
DIRECT APPROPRIATIONS AND
OTHER FUNDING
---------------------------------------------------------- Letter :3.3
With regard to CCC's spending from appropriations (excluding payments
made to the Department of the Treasury to repay borrowing) and other
funding, CCC's aggregate net outlays totaled about $337.5 million in
fiscal year 1996 and $41.3 million in fiscal year 1997.\14 These
totals included net outlays of about $334.4 million and $38.7 million
in fiscal years 1996 and 1997, respectively, for the export programs
that received direct appropriations and other funding.\15 They also
included net outlays of about $3.1 million and $2.6 million in these
years, respectively, made with funds CCC was authorized to use from
USDA's appropriations for hazardous waste activities.
CCC also had outlays of $139.5 million for net interest payments in
fiscal year 1996 related to repaying its debt with the Treasury. CCC
did not have outlays for net interest payments in fiscal year 1997
because its interest receipts exceeded its interest outlays by
approximately $118.4 million. CCC's interest receipts derived from
the interest paid by producers on their commodity loans and the
interest earned on funds CCC had on deposit with the Treasury.
--------------------
\14 These amounts do not include receipts for the reimbursement of
overpayments made with appropriated funds in prior years for disaster
assistance related activities. In fiscal year 1996, these receipts
amounted to about $900,000. In fiscal year 1997, they amounted to
about $15.7 million.
\15 Net outlays for these programs were much lower than the related
appropriations primarily because the rate of default on loans made
under the export credit guarantee programs was lower than USDA
expected. Other factors included offsetting program receipts and the
fact that not all obligations made under the export credit guarantee
programs and Food for Peace Program in fiscal years 1996 and 1997
were paid out by the end of these fiscal years.
A VARIETY OF MANAGEMENT
PRACTICES ARE USED TO CONTROL
CCC FUNDS
------------------------------------------------------------ Letter :4
CCC uses a variety of management practices to control its funds: (1)
controls over spending related to the annual budget and apportionment
processes, (2) periodic reporting of its financial activities to the
Congress, (3) FSA's implementation of internal controls to protect
CCC's assets and account for its financial transactions, (4) program
managers' allocation and monitoring of CCC funds, and (5) periodic
reviews of program activity by compliance staff from agencies
responsible for implementing CCC programs. In addition, USDA's
Office of Inspector General (OIG) audits CCC's annual financial
statements, including its year-end expenditure reports.
CCC'S ANNUAL BUDGET SERVES
AS AN OPERATING PLAN
---------------------------------------------------------- Letter :4.1
As a government-owned corporation, CCC is required to prepare a
budget for each fiscal year in accordance with the provisions of the
Government Corporation Control Act of 1945, as amended (31 U.S.C.
9103). This budget serves as a general operating plan that guides
CCC's spending. The budget, prepared by FSA's Budget Division on
behalf of CCC, is reviewed by USDA's Office of Budget and Program
Analysis as well as by the Office of Management and Budget (OMB).
The budget is submitted to the Congress as part of the President's
annual budget submission.
In reviewing CCC's budget, the Congress may question some proposed
expenditures. If the questioned expenditures concern one of CCC's
mandatory programs, the Congress must pass legislation to preclude
CCC from using its funds for this program. On the other hand, if the
questioned expenditures concern one of CCC's appropriated programs,
the Congress determines the amount of funds available to the program
in USDA's annual appropriations act.
As discussed, CCC's budget serves as a general operating plan that
guides the Corporation's spending. The planned expenditures in the
budget--particularly with regard to CCC's mandatory programs--are
considered to be no more than estimates. For example, spending for
some income and commodity support programs depends on variables--such
as the weather, economic conditions, and commodity market
prices--that are difficult to predict. Thus, CCC's actual
expenditures for these programs may be greater or less than initially
estimated. At the same time, however, FSA officials said that CCC
can pay out funds only for those programs included in its budget,
unless the Congress directs it to do otherwise in legislation.
OMB APPORTIONS FUNDS FOR
SELECTED CCC PROGRAMS AND
OPERATING EXPENDITURES
---------------------------------------------------------- Letter :4.2
OMB apportions (distributes) the funds available for obligation for
selected CCC programs and operating expenditures.\16 The approved
apportionment by OMB follows the review and approval of CCC's funding
request by USDA's Office of Budget and Program Analysis in
consultation with appropriate policy officials. OMB apportions the
funds available for CCC's resource conservation programs, for
purchasing computer and telecommunications equipment and services,
and for reimbursing USDA agencies and other government entities. In
addition, since fiscal year 1997, OMB has apportioned the funding for
commodity export and disaster assistance programs. In general, funds
are apportioned annually at the beginning of a fiscal year. However,
OMB may choose to apportion funds on a quarterly or other basis. In
addition, CCC may ask OMB to approve a reapportionment of funds
during the fiscal year.
For each program or operating expense, the amount OMB apportions sets
a limit on the funds available for obligation and subsequent outlays.
OMB's apportionments also serve as a check to ensure CCC's compliance
with statutory funding caps or other legislatively mandated funding
limitations. For example, provisions in the 1996 farm bill limited
CCC's funding for computer and telecommunications equipment and
services to a maximum of $170 million in fiscal year 1996 and $275
million for fiscal years 1997 through 2002. In addition, funding for
the reimbursement of agencies within USDA and other government
entities for their support of CCC programs was capped at $45.6
million a year starting with fiscal year 1997.\17 Furthermore, USDA's
annual appropriations legislation sometimes sets additional limits on
funding for specific programs, as was the case with CCC's Farmland
Protection Program in fiscal year 1997.
--------------------
\16 The Antideficiency Act, as amended, requires that OMB apportion
funds available for obligation for certain CCC programs (31 U.S.C.
1512). However, this act precludes OMB from apportioning funds for
CCC's income and commodity support programs and for the removal of
surplus agricultural commodities held in inventory by CCC (31 U.S.C.
1511).
\17 Both funding caps limit the amount of obligations that CCC can
make for these types of expenditures. In addition, the cap on
reimbursements made to USDA agencies and other government entities is
based on the level of these obligations in fiscal year 1995. USDA
plans to increase the cap to $46.2 million beginning in fiscal year
1999 because it recently discovered it had inadvertently omitted
three reimbursements from the initial calculation of the cap.
However, in early April 1998, USDA's Office of General Counsel issued
a legal opinion that the cap is overstated by $10 million because
program costs associated with the administration of CCC's Emerging
Markets Program were erroneously included in the initial calculation
of the cap. As of Apr. 15, 1998, an official decision on removing
this reimbursement from the cap had not been made.
CCC PERIODICALLY REPORTS ITS
FINANCIAL ACTIVITIES TO THE
CONGRESS
---------------------------------------------------------- Letter :4.3
CCC issues two reports to the Congress on its financial activities.
The first--CCC's annual report--is required by the Government
Corporation Control Act, as amended. This report provides an
overview of the Corporation's purpose, mission, and goals; financial
and program summaries; and performance measures. The report also
contains CCC's financial statements and accompanying notes and an OIG
opinion letter on the OIG audit of CCC's financial statements. The
second report, a quarterly expenditure report known as the Summary
Expenditure Report, is required by the CCC Charter Act, as amended.
This report provides data on cumulative expenditures for similar
products and services for the quarter and fiscal year. Both the
annual report and the quarterly expenditure report are prepared by
FSA's Financial Management Division.
The Summary Expenditure Report also provides detailed information on
administrative expenditures, such as those for (1) purchases of
computer and telecommunications equipment and services and (2)
reimbursements paid to agencies within USDA and other government
entities. For example, for computer and telecommunications
purchases, the report lists outlays on a vendor-by-vendor basis, and
for reimbursements, the report lists outlays on an agency-by-agency
basis. FSA officials said they chose to provide this added level of
detail on these types of expenditures to more fully disclose outlays
that are subject to statutory funding caps and that therefore may be
of particular interest to the Congress. The report is reviewed by
USDA's Office of the Chief Financial Officer before its submission to
the Congress.\18 It is also subject to an annual audit by the OIG.
FSA's financial management staff has made further changes to the
expenditure report, beginning with fiscal year 1998, in response to
concerns raised by the report's congressional users. Most of these
changes relate to the reporting of CCC's outlays for computer and
telecommunications equipment and services. Specifically, FSA has (1)
eliminated the vendor-by-vendor detail, (2) included a cumulative
total specifically for these outlays (as distinct from other
administrative support and property outlays), and (3) added
information on apportioned and obligated amounts associated with
these outlays. In addition, FSA has added information on the
apportioned and obligated amounts associated with outlays for
reimbursements paid to USDA agencies and other government entities.
--------------------
\18 In accordance with provisions of the Chief Financial Officers Act
of 1990 (P.L. 101-576, Nov. 15, 1990), USDA and other major federal
departments or agencies must appoint a chief financial officer to (1)
oversee financial management activities related to the agency's
programs and operations; (2) develop and maintain an integrated
accounting and financial management system that provides reliable
cost and performance-measure information; and (3) monitor the
financial execution of the agency's budget.
FSA HAS IMPLEMENTED
MANAGEMENT CONTROLS INTENDED
TO ENSURE THE ACCURATE
ACCOUNTING OF CCC'S
FINANCIAL TRANSACTIONS
---------------------------------------------------------- Letter :4.4
FSA's Financial Management Division has implemented a number of
management controls intended to ensure that its accounting and
financial management systems accurately reflect CCC's financial
activity and comply with applicable laws and regulations. These
controls, also known as internal controls, include policies and
procedures intended to provide FSA management with reasonable
assurance that assets--such as cash, commodity inventories, computer
and telecommunications equipment, and office furniture and
supplies--are safeguarded against loss from unauthorized use or
disposition. They are also intended to ensure that financial
transactions--such as disbursing and collecting cash; authorizing and
disbursing commodity loans, credits, and guarantee payments; and
processing accounting entries--are executed as authorized by
management and recorded properly to permit the preparation of CCC's
annual financial statements, quarterly Summary Expenditure Reports,
and other periodic reports. The director of FSA's Financial
Management Division (who also serves as CCC's controller) and members
of his staff (who also serve as CCC's treasurer and chief accountant)
have the primary responsibility for issuing the policies and
procedures that constitute the division's internal control structure.
These officials also assist in carrying out and evaluating the
effectiveness of these controls.
MANAGERS OF CCC PROGRAMS
OFTEN PLAY A ROLE IN
ALLOCATING AND MONITORING
THE USE OF PROGRAM FUNDS
---------------------------------------------------------- Letter :4.5
Each CCC program has a designated manager from the USDA agency
responsible for implementing the program for CCC. The manager's
duties often include allocating and monitoring the use of program
funds. These managers carry out these duties in consultation with
their supervisors--usually division directors--and other agency
personnel. For example, a manager's recommended allocations of funds
are reviewed by the manager's supervisor and must usually be approved
by the cognizant agency head. Similarly, in monitoring the use of
funds, managers often rely on periodic reports summarizing
obligations and outlays that are prepared by their agency's financial
management staff.
An exception to this are the FSA managers responsible for CCC's
income and commodity support programs, who have little, if any,
direct role in allocating or monitoring the use of funds. FSA
officials said that because financial assistance under these programs
is, in a sense, open-ended, managers of these programs do not manage
against a specified funding level. Rather, program participation
and, hence, program outlays depend on such variables as weather,
economic conditions, and market prices--none of which is readily
predictable.\19 All producers who apply and qualify for benefits
under these programs will receive them, unless CCC exhausts its $30
billion borrowing authority.
However, other FSA managers of CCC programs, including the managers
of CCC's disaster assistance programs, are actively involved in
managing the use of funds. For example, in fiscal year 1997, the
manager of the Livestock Indemnity Program allocated and monitored
the use of the $50 million authorized by the Congress to provide
emergency relief to livestock producers in the upper Midwest during a
particularly harsh winter.\20 Under this program, FSA state and
county office personnel in the affected states evaluated and approved
qualified applicants, awarded funds, and reported the associated
obligations and outlays through FSA's financial accounting system.
The program manager reviewed weekly reports from FSA's Financial
Management Division that summarized these obligations and outlays to
ensure that the $50 million cap, as well as the share of these funds
allocated to each affected county, was not exceeded.
FAS managers of commodity export programs and NRCS managers of
resource conservation programs are also generally involved in
allocating and monitoring the use of program funds. For example, the
FAS manager of the Market Access Program managed an annual budget of
$90 million in fiscal years 1996 and 1997. Under this program, which
finances promotional activities to expand the export of U.S.
agricultural commodities, the manager evaluates and approves
applicants' proposals, awards funds, reviews subsequent reimbursement
requests to ensure they do not exceed the amount of award, and
authorizes payments to the appropriate parties. The manager also
tracks obligations for this program in an FAS agricultural marketing
database and obtains information on program outlays from FSA's
Financial Management Division.
Similarly, the NRCS manager of the Wetlands Reserve Program managed a
budget of $159.7 million and $137.9 million in fiscal years 1996 and
1997, respectively. This program offers producers payments for
wetlands that have previously been drained and converted to
agricultural uses. Under this program, the manager, with the
approval of the Chief, NRCS, allocates funds by state. NRCS state
and county office staff evaluate land offered by producers for
enrollment in the program and award funds to purchase easements on
the land selected. These staff report the obligations associated
with these awards through NRCS' financial system. The outlays,
however, are reported by FSA staff working in these same offices, who
pay landowners for the easements purchased, through their agency's
financial system. The program manager receives periodic reports
summarizing obligations and outlays from NRCS' financial management
staff.
To better ensure that funds are being properly used, the manager of
the Wetlands Reserve Program said that he maintains his own database
of program obligations that is based on data provided directly to him
by his field staff. According to this official, keeping his own
tally of obligations allows him to stay current on the program's
financial activity and progress towards meeting its enrollment goals.
In addition to the activities of its program managers, NRCS has
assigned a program official and a financial official to work in FSA's
Financial Management Division--the office responsible for managing
CCC's financial affairs. The program official works primarily with
FSA officials on funding issues, including budget formulation,
concerning NRCS' CCC programs; the financial official works with FSA
officials on accounting issues for these programs. According to
senior NRCS officials, the assignment of these two staff reflects
NRCS' concern that it not inadvertently misuse CCC funds. The
officials noted that working in a CCC-funded environment is still
relatively new to NRCS because the agency became responsible for
managing CCC-funded programs only after the passage of the 1996 farm
bill.
--------------------
\19 Although it is difficult to predict program participation and,
hence, program outlays for a number of CCC's income and commodity
support programs, this is not the case with CCC's payments for
production flexibility contracts. With regard to these contract
payments, producer eligibility was limited to a one-time sign-up in
fiscal year 1996, and annual payments for fiscal years 1996 through
2002 are fixed at specified levels, which are unaffected by variables
such as economic conditions or market prices.
\20 The Congress directed that the $50 million used under this
program in fiscal year 1997 be obtained through the sale of grain
held in inventory by CCC.
CCC-FUNDED PROGRAMS ARE
PERIODICALLY REVIEWED BY
AGENCY COMPLIANCE STAFF
---------------------------------------------------------- Letter :4.6
Periodically, compliance staff in each of the agencies responsible
for administering CCC-funded programs review program activity,
including the financial management of these programs. The results of
these reviews are generally documented in written reports and sent to
the relevant program office for response and corrective action, if
necessary. For example, FAS' compliance review staff conducts a
financial and compliance review of each participant in the Market
Access Program at least once every 3 years. Among other things, the
review is intended to determine whether program expenses reimbursed
by CCC were authorized and reasonable and whether the office
administering the program has a financial system in place to track
CCC's resources.
OIG AUDITS CCC'S COMPARATIVE
FINANCIAL STATEMENTS AND
END-OF-YEAR EXPENDITURE
REPORT
---------------------------------------------------------- Letter :4.7
Annually, USDA's OIG audits CCC's comparative financial statements
and its end-of-year Summary Expenditure Report.\21 The results of
these audits are reported to CCC's board of directors. In general,
the OIG's objectives in conducting these audits are to determine
whether (1) CCC's financial statements fairly present the
Corporation's financial position, (2) CCC's internal control
structure provides reasonable assurance that specific program goals
are achieved, and (3) CCC has complied with the laws and regulations
for those transactions and events that could have a material effect
on its financial statements.
In accordance with USDA's departmental regulations, CCC is required
to reply to the OIG's reports within 60 days of their issuance. If
CCC concurs with the OIG's findings, it must then describe corrective
actions taken or planned and the time frames for implementation. A
management decision must also be reached on all findings and
recommendations within 6 months of a report's issuance.
During its most recent audit of CCC's comparative financial
statements (fiscal years 1996 and 1995) and its end-of-year
expenditure report (fiscal year 1996),\22 the OIG noted several
material weaknesses in FSA's internal controls.\23 For example, the
OIG found that FSA's operations analysis staff was not obtaining
operations review reports for the agency's county offices. The
reviews of these offices, whose activities are integral to the
implementation of CCC's income and commodity support, resource
conservation, and disaster assistance programs, are conducted
periodically by designated FSA state and county employees to identify
systemic problems in office operations. According to the OIG,
without reviewing compilations of these reports, the operations
analysis staff would be unable to detect any nationwide problems that
required corrective action and, if material, inclusion in FSA's
report under the Federal Managers' Financial Integrity Act.\24
In response, the operations analysis staff said that it was obtaining
copies of the operations review reports from county offices, but that
it lacked the staff resources and automated data processing
capability to compile and analyze the reports. However, the staff
agreed in principle with the need to do so.
The OIG also found that FSA's financial systems and related
accounting procedures are not designed to readily and efficiently
compile the data needed to prepare CCC's Summary Expenditure Report
in a timely manner. According to the OIG, these difficulties occur
because CCC's financial systems, which function on an accrual basis
of accounting, cannot provide automated information on cash
expenditures. Furthermore, the OIG found that the systems are not
designed to provide automated data in the level of detail and
categories required for the report. As a result, FSA financial
management staff must manually extract some data from CCC's financial
systems and perform certain automated and manual referencing
procedures to develop cash expenditures.
In responding to the OIG's finding, FSA's Financial Management
Division indicated that it was developing a new accounting system
that it believes will significantly improve FSA's ability to compile
expenditure information for the Summary Expenditure Report. However,
according to FSA financial management officials, the implementation
of this accounting system may not be completed until fiscal year
1999. In addition, these officials said that the limitations of
other accounting systems, such as those used by FSA's disbursing
offices, that will "feed" into the new system will continue to cause
problems in preparing this report, necessitating some manual
preparation of expenditure data.
According to the OIG, the material weaknesses it noted in FSA's
internal control structure could adversely affect CCC's ability to be
reasonably assured that its transactions are properly recorded and
accounted for so that it can prepare reliable financial statements
and maintain accountability over its assets. The OIG also noted that
some of these weaknesses were identified in previous audits of CCC's
financial statements.
--------------------
\21 Comparative financial statements are those in which financial
data for 2 or more years are placed in adjacent columns so that
changes are easily discernible. CCC's comparative financial
statements include those for financial position, operations, and cash
flows.
\22 U.S. Department of Agriculture: Commodity Credit Corporation's
Comparative Financial Statements for Fiscal Years 1996 and 1995
(USDA/OIG Audit Report No. 06401-6-FM, July 15, 1997).
\23 In determining whether a problem related to internal controls
constitutes a material weakness, an agency must consider factors such
as the amount and sensitivity of the resources involved, conflicts of
interest, and violations of statutory requirements.
\24 The Federal Managers' Financial Integrity Act of 1982 (P.L.
97-255, Sept. 8, 1982) requires each federal agency to establish
systems of internal controls. The act also requires that each agency
prepare an annual self-assessment of its internal controls that
identifies any material weaknesses in these controls. This
self-assessment is addressed to the President and the Congress and is
reviewed by GAO.
CCC'S ADMINISTRATIVE
EXPENDITURES CONFORMED WITH
STATUTORY FUNDING CAPS, AND ITS
PROGRAMS HAVE STATUTORY BASIS
FOR USING CCC FUNDS
------------------------------------------------------------ Letter :5
We found no instances in fiscal years 1996 and 1997 in which CCC's
funding for administrative uses exceeded the relevant statutory
funding caps. Furthermore, each CCC program has a statutory basis
for using CCC funds. We did not, however, perform a detailed review
on the propriety of the individual administrative or programmatic
transactions made in these years.
STATUTORY FUNDING CAPS WERE
NOT EXCEEDED
---------------------------------------------------------- Letter :5.1
CCC's funding for administrative uses related to the purchases of
computer and telecommunications equipment and services and the
reimbursements paid to agencies within USDA and other government
entities--in fiscal years 1996 and 1997--was within relevant
statutory funding caps. As discussed, provisions in the 1996 farm
bill limited CCC's funding for computer and telecommunications
purchases to a maximum of $170 million in fiscal year 1996 and $275
million for fiscal years 1997 through 2002. Furthermore, as
discussed, the funding for the reimbursement of agencies within USDA
and other government entities was capped at $45.6 million a year
starting with fiscal year 1997.\25
The funding for computer and telecommunications purchases and
reimbursements paid to USDA agencies and other government entities is
also subject to apportionment by OMB, which may further limit funds
available for obligation. For example, USDA officials requested
$80.9 million in CCC funds for computer and telecommunications
purchases in fiscal year 1997. However, OMB apportioned only $54.8
million for this purpose that year because it believed that all of
CCC's ongoing and high-priority needs related to computer and
telecommunications purchases could be met with this lesser amount.
Table 1 provides information on the funding cap, apportionment, and
obligation amounts associated with CCC's funding for computer and
telecommunications equipment and services in fiscal years 1996 and
1997. Table 2 provides similar information for reimbursement funding
in these years.
Table 1
Funding Cap, Apportionment, and
Obligation Amounts for Computer and
Telecommunications Purchases, Fiscal
Years 1996 and 1997
(Dollars in millions)
Fiscal year Funding cap Apportionment Obligation
------------------------ -------------- -------------- ------------
1996 $170.0 $155.0 $144.0
1997 \a 54.8 36.1
----------------------------------------------------------------------
\a There was no specific funding cap for fiscal year 1997.
Source: GAO's analysis of CCC's information.
Table 2
Funding Cap, Apportionment, and
Obligation Amounts for Reimbursements
Paid to USDA Agencies and Other
Government Entities, Fiscal Years 1996
and 1997
(Dollars in millions)
Fiscal year Funding cap Apportionment Obligation
---------------------- -------------- -------------- --------------
1996 \a $50.0 $51.2\b
1997 $45.6 43.7 39.3
----------------------------------------------------------------------
\a There was no specific funding cap for fiscal year 1996.
\b This overobligation of OMB's apportionment represents a violation
of the Antideficiency Act (31 U.S.C. 1517(a)). OMB's apportionment
for reimbursements paid to USDA agencies and other government
entities was first issued in September 1996. However, USDA
subsequently determined that reimbursements associated with the State
Option Contract Program should have been included in its
apportionment request. During the year-end closing of CCC's
financial accounts for fiscal year 1996, retroactive year-end closing
adjustments were made to the reimbursement obligations for the State
Option Contract Program. When the adjusted amount was added to CCC's
other reimbursements, CCC's total obligations exceeded its $50
million apportionment. Accordingly, in our view, the violation of
the Antideficiency Act appears to be inadvertent.
Source: GAO's analysis of CCC's information.
--------------------
\25 In commenting on a draft of this report, NRCS officials expressed
concern about the future source of funding for technical assistance
associated with the resource conservation programs that became funded
by CCC under the 1996 farm bill. These expenses, currently funded
with NRCS' carryover appropriations, will eventually be subject to
the reimbursement cap, which was based on obligations made prior the
1996 farm bill.
EACH CCC PROGRAM HAS A
STATUTORY BASIS FOR USING
CCC FUNDS
---------------------------------------------------------- Letter :5.2
Each of CCC's income and commodity support, commodity export,
resource conservation, and disaster assistance programs has a
statutory basis for using the Corporation's funds to finance program
operations. For example, provisions of the 1996 farm bill authorize
the use of these funds for each of CCC's resource conservation
programs. Information on the statutory basis for using CCC funds for
each CCC program is provided in appendixes III through VI.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :6
We provided a draft of this report to USDA for its review and
comment. We met with the Administrator, Farm Service Agency, and
other officials from USDA's Foreign Agricultural Service, Farm
Service Agency, Natural Resources Conservation Service, Office of
Budget and Program Analysis, and Office of General Counsel. The
officials agreed that the draft provided a comprehensive, accurate
overview of Commodity Credit Corporation's operations. They provided
a number of technical changes and clarifications to the report, which
we have incorporated as appropriate.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7
In developing the information for this report, we interviewed and
obtained documents from a broad range of USDA officials associated
with CCC programs. Specifically, to obtain information on the amount
of CCC funds available and spent, we interviewed FSA budget and
financial management officials and reviewed relevant documents. To
determine how these funds were used, we interviewed program staff in
FSA, FAS, and NRCS. We also reviewed CCC's annual financial reports,
Summary Expenditure Reports, and documents related to the
Corporation's compensation of USDA agencies and other government
entities for their support of CCC's operations.
To obtain information on the management practices used to control CCC
funds, we interviewed and obtained documents from budget, financial,
compliance review, and program officials in FSA, FAS, and NRCS as
well as from the OIG. To obtain information on whether CCC's funding
for administrative purposes--computer and telecommunications
purchases and reimbursements paid to USDA agencies and other
government entities--conformed with statutory funding caps in fiscal
years 1996 and 1997, we compared the obligations made by CCC for
these purposes with the statutory caps and related apportionments by
OMB. To obtain information on whether the programs CCC funded had a
statutory basis for using CCC funds, our Office of General Counsel
reviewed relevant statutes to determine the source of funding for
these programs.
We conducted our review from June 1997 through April 1998, in
accordance with generally accepted government auditing standards. We
did not, however, independently verify the accuracy of outlay data
related to the operation of CCC programs.
---------------------------------------------------------- Letter :7.1
We are sending copies of this report to the appropriate congressional
committees, interested Members of Congress, the Secretary of
Agriculture, the Director of the Office of Management and Budget, and
other interested parties. We will also make copies available upon
request.
If you have any questions, please call me at (202) 512-5138. Major
contributors to this report are listed in appendix VII.
Sincerely yours,
Robert A. Robinson
Director, Food and
Agriculture Issues
FLOW OF FUNDS INTO AND OUT OF THE
COMMODITY CREDIT CORPORATION
=========================================================== Appendix I
(See figure in printed
edition.)
Source: GAO's analysis of Commodity Credit Corporation's (CCC)
information.
CCC BOARD OF DIRECTORS AND
OFFICERS,
FISCAL YEAR 1998
========================================================== Appendix II
(See figure in printed
edition.)
Source: CCC documents.
CCC'S INCOME AND COMMODITY SUPPORT
PROGRAMS
========================================================= Appendix III
(Dollars in millions)
Stat
utor
y
basi
s
for
usin
g
Fiscal year Fiscal year CCC
Program Responsible 1996 net 1997 net fund
Program\a purpose agency outlay outlay s
-------------- -------------- -------------- ------------ ------------ ----
Commodity Procure, FSA ($292.2) ($106.9) 15
Inventory and store, U.S.
Disposal transport, and C.A.
dispose of 714c
commodities to .
support market
prices and
supply
domestic and
foreign food
programs.
Upland Cotton Increase FSA 32.7 6.4 7
User Marketing competitivenes U.S.
Program s of U.S. C.
cotton in 7236
world markets ;
by making 7281
bonus payments (Sup
to domestic p.
users and II,
exporters of 1997
this ).
commodity.
Dairy Price Purchase FSA 0.346 23.4 7
Support surplus U.S.
Program butter, C.
cheese, and 7251
nonfat dry ;
milk from 7281
dairy (Sup
processors to p.
support the II,
price of milk. 1997
).
Deficiency Provide income FSA 567.5 (1,118.5) 7
Payments\b support U.S.
payments to C.
producers who 1441
participated -2;
in wheat, feed 1444
grains, rice, -2;
or cotton 1444
programs prior f;
to 1996. 1445
b-
3a
(199
4).
Loan Provide direct FSA 0.045 0.003 7
Deficiency payments to U.S.
Payments producers who C.
Program agree not to 7235
obtain price ;
support loans 7281
for wheat, (Sup
feed grains, p.
upland cotton, II,
rice, or 1997
oilseeds. ).
Nonrecourse Provide price FSA (950.6) 109.8 7
Commodity Loan support loans U.S.
Program to producers C.
of wheat, feed 7231
grains, ;
cotton, 7281
peanuts, (Sup
tobacco, rice, p.
sugar, and II,
oilseeds. 1997
Producers may ).
keep the money
borrowed and
forfeit the
crop they
pledged as
collateral or
repay the
loan,
depending on
market prices.
Options Pilot Support farm Risk 4.7 0.017 7
Program income through Management U.S.
options Agency C
contracts 7331
offered to ;
producers of 7281
wheat, corn, (Sup
and soybeans. p.
Program in II,
effect from 1997
1993-2002. ).
Peanut Price Provide price FSA 0.0\c 0.0\c 7
Support support loans U.S.
Program to producers C
of peanuts. 7271
,
7281
(Sup
p.
II,
1997
).
Production Provide income FSA 5,141.0 6,320.1 7
Flexibility support U.S.
Contracts payments to C.
producers of 7211
selected ;
crops; 7281
available (Sup
through fiscal p.
year 2002. II,
Program is 1997
intended to ).
transition
producers from
deficiency
payments.
Tobacco Price Provide price FSA 0.0\c 0.0\c 7
Support support loans U.S.
Program to producers C.
of tobacco. 1421
;
1445
.
Wool and Provide price FSA 55.8 0.029 7
Mohair Program support U.S.
payments to C.
producers of 1782
wool and (199
mohair. 4).
Program ended
12/31/95.
================================================================================
Total $4,559.2\d $5,234.3\d
--------------------------------------------------------------------------------
\a Some of the entries in this column are not programs per se but
represent significant activities related to CCC's income and
commodity support operations.
\b The Federal Agriculture Improvement and Reform Act of 1996 (P.L.
104-127, Apr. 4, 1996)--also known as the 1996 farm bill--replaced
deficiency payments with production flexibility contract payments.
The net receipts shown for fiscal year 1997 represent the return (by
producers) of advance deficiency payments from prior years.
\c Producers, processors, or purchasers are required to pay a
marketing assessment fee per unit of production sold to ensure that
Peanut and Tobacco Price Support Programs operate as no net cost
programs to the federal government. However, the government does
incur a small amount of interest expense on its use of borrowing
authority specifically for these programs.
\d Figures do not include receipts of about $183.5 million and $92.6
million in fiscal years 1996 and 1997, respectively, from
assessments, collections, claims, and miscellaneous receipts not
specifically attributed to individual programs.
Note: Negative amounts reflect net receipts. Totals may not add due
to rounding.
Source: USDA and CCC documents.
CCC'S COMMODITY EXPORT PROGRAMS
========================================================== Appendix IV
(Dollars in millions)
Statutory
Fiscal year Fiscal year basis for
Program Responsible 1996 net 1997 net using CCC
Program purpose agency outlay outlay funds
-------------- -------------- -------------- ------------ ------------ -------------
Dairy Export Provide FAS $36.6 $37.1 15 U.S.C.A.
Incentive payments to 713a-14.
Program exporters of
U.S. dairy
products to
increase price
competitivenes
s of these
products in
foreign
markets.
Direct Credit Provide short- FAS 0.0 0.0 7 U.S.C.
Sales Program term U.S. 5621.
government
financing of
commercial
exports of
U.S.
agricultural
commodities.
Direct Export Sell dairy FAS 0.0 0.0 7 U.S.C 1731
Sales of Dairy products from note.
Products U.S.
Program government
inventory to
foreign
governments or
private
importers,
consistent
with the
obligations of
multilateral
trade
agreements.
Donation of Provide FAS 0.0 0.0 7 U.S.C.
Surplus donations of 1431b.
Commodities surplus CCC-
Program\a owned
commodities to
developing
countries.
Emerging Provide FAS 4.8 12.6 7 U.S.C. 5622
Markets technical (Supp. II,
Program assistance to 1997).
private and
public
organizations
for projects
designed to
develop or
expand foreign
markets for
U.S.
agricultural
commodities.
Export Credit Provide U.S. FAS 0.0\c 0.0\c\ 7 U.S.C. 5622
Guarantee Government note; 7
Programs\b guarantees for U.S.C. 5641b.
repayment of
private,
short-and
intermediate-
term credit to
promote the
export of U.S.
agricultural
commodities
and products.
Export Provide FAS 37.2 0.352 7 U.S.C.
Enhancement payments to 5651e (Supp.
Program exporters to II, 1997).
increase price
competitivenes
s of U.S.
commodities in
foreign
markets.
Food for Peace Provide FAS 0.0\c 0.0\c 7 U.S.C. 1736
Program government- (Title I) (1994) (Supp.
to-government II, 1997).
sales of U.S. Agency for 0.0\c 0.0\c
commodities on International
concessional Development
terms (Title (Titles II &
I) and III)
donations and/
or grants of
commodities
(Titles II &
III). Program
is targeted to
developing
countries to
(1) combat
hunger and
malnutrition
and (2)
develop and
expand foreign
markets for
U.S.
commodities.
Food for Provide direct FAS 94.7 59.1 7 U.S.C.
Progress financing or 1736o.
Program grants of U.S.
agricultural
commodities to
developing
countries and
emerging
democracies.
Market Access Provide cost- FAS 120.5 100.7 7 U.S.C.
Program share payments 5623; 5641(c)
to eligible (Supp. II,
trade 1997).
organizations
that implement
programs to
develop or
expand foreign
markets for
U.S.
commodities.
=========================================================================================
Total $293.7\d $209.9\d
-----------------------------------------------------------------------------------------
\a This program is authorized under section 416(b) of the
Agricultural Act of 1949 and is commonly referred to as the section
416(b) program.
\b CCC administers four export credit guarantee programs: (1)
Supplier Credit Guarantee Program--CCC guarantees a portion of the
financing that exporters have extended directly to importers for up
to 180 days; (2) Export Credit Guarantee Program--CCC guarantees
credit extended by private banks or exporters for up to 3 years; (3)
Intermediate Export Credit Guarantee Program--CCC guarantees credit
extended by private banks or exporters for up to 10 years; and (4)
Facility Guarantee Program--CCC guarantees credit for financing
manufactured goods and services exported from the United States to
improve or establish facilities for handling, marketing, processing,
storage, or distribution of imported agricultural commodities or
products in emerging markets.
\c No outlays of borrowing authority occurred under Titles I and III
of the Food for Peace Program or the export credit guarantee
programs; however, the Congress directed the transfer of $60 million
in borrowing authority funds to Title II of the former program in
fiscal year 1996. Net outlays under foreign programs supported by
direct appropriations were about $334.4 million and $38.7 million in
fiscal years 1996 and 1997, respectively. Specifically, Title I had
net receipts of about $260.2 million and $338.3 million in fiscal
years 1996 and 1997, respectively. Titles II and III had net outlays
of about $773 million and $771 million in these years, respectively.
The Export Credit Guarantee Program had net receipts of about $238.4
million and $344 million in fiscal years 1996 and 1997, respectively.
\d Figures do not include $97.5 million and $25.8 million in foreign
transportation costs for fiscal years 1996 and 1997, respectively.
Note: Totals may not add due to rounding.
Source: USDA and CCC documents.
CCC'S RESOURCE CONSERVATION
PROGRAMS
=========================================================== Appendix V
(Dollars in millions)
Statutory
Fiscal year Fiscal year basis for
Program Responsible 1996 net 1997 net using CCC
Program purpose agency outlay outlay funds
-------------- -------------- -------------- ------------ ------------ -------------
Conservation Consolidate NRCS Not active Not active 16 U.S.C.A.
Farm Option payments for 3839bb.
production
flexibility
contracts and
the
Conservation
Reserve,
Wetlands
Reserve, and
Environmental
Quality
Incentives
Programs into
one payment
for eligible
producers who
agree to (1)
forgo income
and commodity
support
payments for
10 years and
(2) adopt a
conservation
farm plan.
Conservation Provide land FSA 1.9\a 1,670.7 16 U.S.C.A.
Reserve rental 3834; 3841a.
Program payments, for
10 to 15
years, to
producers who
agree to
convert
environmentall
y sensitive
land to
approved
vegetative
cover (usually
grass or
trees).
Program also
offers cost-
share
assistance to
establish
vegetative
cover on
enrolled land.
Environmental Provide cost- NRCS 6.5 69.0 16 U.S.C.A.
Quality share and 1341b.
Incentives technical
Program assistance to
producers who
agree to enter
into 5 to 10
year contracts
to implement
conservation
practices,
such as
livestock
waste
containment.
Farmland Provide NRCS 0.6 3.4 16 U.S.C.A.
Protection assistance to 3830, note.
Program states with
existing
farmland
protection
programs to
purchase
conservation
easements.
Flood Risk Provide FSA Not active Not active 7 U.S.C. 7334
Reduction payments to (Supp. II,
Program owners of 1997).
farmland with
high flood
potential if
the owner
agrees to
forgo certain
income and
commodity
support
payments.
Wetlands Provide land NRCS 0.0\b 32.7\c 16 U.S.C.A.
Reserve rental or 3841a.
Program restoration
cost-share
payments to
producers who
permanently
return
converted or
farmed
wetlands to
prior
condition.
Wildlife Provides cost- NRCS Not active 0.0 16 U.S.C.A.
Habitat share payments 3836a;
Incentives to producers 3841a(1).
Program who develop or
improve
wildlife
habitat on
their land.
=========================================================================================
Total $9.0\d $1,775.8
-----------------------------------------------------------------------------------------
\a In addition to the $1.9 million in funds derived from CCC's
borrowing authority, the Conservation Reserve Program had net outlays
of about $1.8 billion in appropriated funds in fiscal year 1996.
\b Although no CCC borrowing authority funds were used for the
Wetlands Reserve Program in fiscal year 1996, this program had net
outlays of about $108.6 million in fiscal year 1996 from funds
appropriated in prior fiscal years.
\c The Wetlands Reserve Program also had net outlays of about $47.3
million in fiscal year 1997 from funds appropriated in prior fiscal
years.
\d This total does not include about $500,000 in receipts related to
the reimbursements of overpayments made from funds appropriated for
the Conservation Reserve Program prior to fiscal year 1996.
Source: USDA and CCC documents.
CCC'S DISASTER ASSISTANCE PROGRAMS
========================================================== Appendix VI
(Dollars in millions)
Statutory
Fiscal year Fiscal year basis for
Program Responsible 1996 net 1997 net using CCC
Program purpose agency outlay outlay funds
-------------- -------------- -------------- ------------ ------------ -------------
Crop Disaster Provide FSA $13.4 $17.2 7 U.S.C. 1421
Assistance payments to note (1994).
Programs\a commodity
producers for
losses
resulting from
natural
disasters.
Disaster Provide FSA 2.7 40.5 7 U.S.C.
Reserve payments to 1427a (1994).
Assistance livestock
Program producers for
losses of feed
grain crops,
forage, and
grazing
resulting from
natural
disasters.
Livestock Provide FSA Not active 49.3 7 U.S.C.
Indemnity partial 1427a (1994).
Program reimbursement P.L. 105-18,
to livestock June 12,
producers for 1997; P.L.
losses of 105-86, Nov.
animals 18, 1997;
resulting from P.L. 105-
natural 119, Nov. 26,
disasters. 1997.
Other Provide FSA 76.6 38.0 7 U.S.C.
Livestock assistance to 1471; 1427
Emergency livestock (1994).
Assistance producers for
Programs\b losses of feed
or livestock
due to natural
disasters.
Noninsured Provide crop- FSA 2.0 51.7 7 U.S.C. 7333
Crop Disaster loss payments (Supp. II,
Assistance to producers 1997).
Program of commodities
not covered by
the Federal
Crop Insurance
Program.
=========================================================================================
Total $94.7\c $196.8\c
-----------------------------------------------------------------------------------------
\a Combines crop disaster payments for multiple crops and years.
Disaster assistance under this program was suspended for fiscal years
1996 through 2002 by the 1996 farm bill. The amounts shown in the
table reflect outlays related to obligations made prior to fiscal
year 1996.
\b Combines funding for Emergency Feed and Livestock Emergency
Assistance Programs. Assistance under these programs was suspended
for fiscal years 1996 through 2002 by the 1996 farm bill. The
amounts shown in the table reflect outlays related to obligations
made prior to fiscal year 1996.
\c In addition to the net outlays for disaster assistance programs in
fiscal years 1996 and 1997, USDA used additional CCC borrowing
authority funds in these years for emergencies related to the control
and eradication of agricultural diseases and pests. Specifically,
additional net outlays of about $32.3 million and $29.3 million were
made in these years, respectively, for this purpose.
Note: Totals may not add due to rounding.
Source: USDA and CCC documents.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII
RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION
Jerilynn B. Hoy, Assistant Director
James R. Jones, Jr., Evaluator-in-Charge
Nancy S. Bowser
Patricia M. Crown
Oliver H. Easterwood
Rosellen McCarthy
John C. Smith
RELATED GAO PRODUCTS
Department of Agriculture, Farm Service Agency and Commodity Credit
Corporation: Conservation Reserve Program -- Long Term Policy
(GAO/OGC-97-26, Mar. 6, 1997).
Financial Audit: Commodity Credit Corporation's Financial Statements
for 1989 and 1988 (GAO/AFMD-91-5, July 29, 1991).
Food Assistance: USDA's Implementation of Legislated Commodity
Distribution Reforms (GAO/RCED-90-12, Dec. 5, 1989).
Commodity Credit Corporation's Export Credit Guarantee Programs
(GAO/T-NSIAD-89-2, Oct. 6, 1988).
International Trade: Commodity Credit Corporation's Export Credit
Guarantee Programs (GAO/NSIAD-88-194, June 10, 1988).
USDA's Commodity Program: The Accuracy of Budget Forecasts
(GAO/PEMD-88-8, Apr. 21, 1988).
International Trade: Commodity Credit Corporation's Refunds of
Export Guarantee Fees (GAO/NSIAD-87-185, Aug. 19, 1987).
*** End of document ***