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Agricultural Marketing Service Controls Over the Specialty Crop Block Grant Program

We identified and evaluated AMS’ management controls over SCBGP.

Audit Report: 01601-0002-23
Published: 10/06/2020
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Fast Facts

The mission of the Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS) is to facilitate the strategic marketing of the Nation’s agricultural products in domestic and international markets.  AMS conducts its mission while ensuring fair trading practices and promoting a competitive and efficient marketplace to benefit producers, traders, and consumers of U.S. food and fiber products.  AMS works with a variety of organizations to support rural America and the Nation’s agricultural sector by administering programs that improve domestic and international marketing opportunities. The AMS Transportation and Marketing Program’s Grants Division (Grants Division) oversees 10 grant programs, including the Specialty Crop Block Grant Program (SCBGP).

Congress established SCBGP in the Specialty Crops Competitiveness Act of 2004 (Act) and amended the program in the 2014 Farm Bill.  The Act authorized AMS to award block grants to the States each fiscal year in order to carry out projects that enhance the competitiveness of specialty crops.  In practice, the term “specialty crops” is generally used to describe all crops except those commodities that receive direct income support under the Farm Bill.5 The Act defines specialty crops as “fruits and vegetables, tree nuts, dried fruits, and horticulture and nursery crops (including floriculture).”  Specialty crops account for roughly one-third of annual U.S. farm crop sales.  For fiscal years (FY) 2014 through 2017, SCBGP provided over $250 million in funds to over 2,900 projects.  These projects include a range of initiatives that support specialty crops, including market promotion, plant pest and disease prevention, and food safety enhancement.

Federal Oversight
The Grants Division is responsible for the oversight and administration of SCBGP.  Currently, AMS has six staff, primarily located in Washington, D.C., who are responsible for administering SCBGP.  The Grants Division staff prepares the requests for application (RFA), awards grants, provides guidance and technical assistance to States, monitors States’ performance and financial progress, and performs onsite reviews of the States’ management process of the grant program.  The Grants Division and State must both follow the provisions of the Office of Management and Budget’s (OMB) “Guidance for Grants and Agreements,” as well as the SCBGP regulations contained in Title 7 of the Code of Federal Regulations (C.F.R.) Part 1291.  

The Grants Division conducts onsite reviews of all States on a periodic basis and provides recommendations in onsite review reports to improve the implementation of SCBGP.  During these reviews, the Grants Division reviews grant documentation, performs interviews with State officials, and provides technical assistance to ensure compliance with the grant agreements between AMS and the State.  AMS performs these reviews to:  (1) enhance the performance of the recipient and grant program; (2) identify effective practices and outstanding program outcomes; (3) facilitate decision making by parties responsible for overseeing or initiating corrective action; (4) improve public accountability; and (5) prepare State officials for potential future audits.

State Oversight
States are responsible for developing proposals and overseeing SCBGP-funded projects.  This oversight includes ensuring that subrecipients maintain appropriate records and follow all applicable Federal statutes and regulations, as well as the grant agreement and the terms and conditions of award.  States are required to use a competitive review process for selecting projects to participate in SCBGP.  After approving the projects, each State develops a State Plan that outlines how it will utilize the SCBGP funds.  This plan includes all approved projects; each project’s purpose, impact, and expected measurable outcomes; and budget details.  AMS approves the State Plan and then awards the block grant to the States.  Those States will offer portions of the block grant (“subawards”) to the subrecipients included in the State Plan.  The subrecipient and the State will sign a subaward agreement.

States are responsible for ensuring the subrecipients are meeting measurable outcomes and/or performance goals and are using the Federal funds as intended.  The States establish a monitoring process aligned with the applicable regulations to ensure subrecipients meet the post-award requirements.  These monitoring efforts include reviewing subrecipients’ advance and reimbursement requests and establishing a formal risk-based systematic approach for monitoring projects noted in their State Plan, which includes site visits and/or desk reviews.  For each project, the States are required to conduct a risk assessment to determine the risk of subrecipient noncompliance with Federal statutes, regulations, and the terms and conditions of the grant.

As part of the State’s post-award process, a State is required to make payments to a subrecipient within 30 calendar days after receipt of the billing for expenses incurred for the operation of the project.  Subrecipients request payments at least quarterly but no more than monthly.  The payments are made to the subrecipient after the State reviews the invoice to ensure the costs are allowable, reasonable, and necessary.

OBJECTIVE
Our objectives were to identify and evaluate AMS’ management controls over SCBGP.  Specifically, we evaluated the processes used by AMS to award and disburse grant funds to the States as well as AMS’ and States’ processes used to monitor the grants.

WHAT OIG FOUND
The mission of the Department of Agriculture’s (USDA)Agricultural Marketing Service (AMS) is to facilitate the strategic marketing of the Nation’s agricultural products in domestic and international markets.  AMS works with a variety of organizations to support rural America and the Nation’s agricultural sector by administering programs that improve domestic and international marketing opportunities, including the Specialty Crop Block Grant Program (SCBGP).

The Office of Inspector General (OIG) found that AMS awarded and disbursed SCBGP funds to the States, as required, to enhance the competitiveness of specialty crops.  However, we found that both AMS and the States need to improve their processes used to monitor the grants.  First, we found that AMS did not effectively oversee the States to ensure funds were expended in accordance with applicable laws and regulations.  This occurred because AMS relied on the States to use their individual policies and procedures to identify grant issues instead of providing additional comprehensive Federal oversight.  We also found that two of the three States in our sample did not adequately monitor SCBGP projects.  Specifically, we found the two States did not perform risk assessments nor conduct reviews of the 20 projects in our sample. This occurred because the two States did not have any policies or procedures in place to perform risk assessments and conduct reviews.  In addition,the two States had limited resources and elected not to use administrative funds to conduct the necessary monitoring.

AMS agreed with our recommendations, and we accepted management decision on the four recommendations.

Redaction Notice

This report contains sensitive information that has been redacted for public release because it contains content that has been deemed privileged.