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Market Facilitation Program—Interim Report

The objective of our ongoing audit is to evaluate FSA’s administration of MFP— this report provides interim results related to FSA’s demographic data collection policies.

Interim Report: 03601-0003-31 (1)
Published: 09/30/2020
View Report PDF
Fast Facts

On July 24, 2018, the U.S. Department of Agriculture (USDA) announced that, in response to trade damage caused by increased tariffs by foreign trading partners, it would be offering a trade mitigation package of up to $12 billion to assist producers impacted by these tariffs.  As the tariffs continued into the following year, on May 23, 2019, the Secretary announced a second trade mitigation package.  This second iteration was authorized to provide up to $16 billion in additional support.

Within USDA, the Farm Service Agency’s (FSA) mission is to equitably serve all producers and agricultural partners by delivering effective, efficient agricultural programs to all Americans.  The agency administers farm loan, commodity, conservation, and disaster assistance programs. USDA authorized FSA to distribute up to $25.1 billion in trade mitigation package funding through the Market Facilitation Program (MFP).  This program provides payments to assist producers directly affected by retaliatory tariffs that result in the loss of traditional exports.  USDA authorized MFP to distribute up to $10.6 billion for program year 2018 and up to $14.5 billion for program year 2019.

USDA’s Office of Inspector General (OIG) received a Congressional request with questions involving the trade mitigation packages and the programs within them, including MFP.  In May 2020, we issued a report detailing the results of our review of the 2018 and 2019 trade mitigation packages.  Regarding MFP, we were asked whether there was a fair and equitable process for determining which producers would receive payments.  The request included a question about which demographic groups received MFP payments, including the amount and percentage of funding that each group received.  Additionally, in response to the Congressional request, we included a review of the geographic disbursement of MFP funds as a part of this engagement.  The request also asked OIG to review the eligibility of recipients, as well as whether any producers received more than the payment limitation.

FSA’s Payment Process for the Market Facilitation Program

For producers, the process for receiving an MFP payment involved applying for the program within the required timeframe and demonstrating eligibility to FSA.  FSA made MFP applications available to all producers via its farmers.gov website.  Additionally, FSA instructed its county offices to publicize MFP.  Information required from producers on MFP applications included which commodities were planted, produced, or owned, as well as the amount of production or number of eligible acres.  Producers who both completed an MFP application and met the program’s requirements were eligible to receive a payment.

While there were some differences between the 2018 and 2019 program years (for example, payment caps for each person or legal entity, eligible commodities), in both years, payment amounts depended on which eligible commodities producers planted, produced, or owned.  Payment limits were capped for individuals and legal entities (excluding joint ventures or general partnerships).  Payments made to joint ventures or general partnerships could not exceed the amount determined by multiplying the maximum payment amount by the number of persons who own the joint venture or general partnership.

Collection of Demographic Information
The 2008 Farm Bill states that the Secretary of Agriculture shall periodically compile demographic data on applicants and participants for each program that serves agricultural producers and landowners.  This data should include the number and percentage of applicants and participants by race, ethnicity, and gender and should be made available to the public.  As a result of this provision, USDA issued a Departmental regulation stating that agencies must biannually compile data on the number and percentage of program applicants and participants by race, ethnicity, and gender.  The Departmental regulation further stipulates that agencies must not collect data based on a visual assessment. FSA issued an internal notice to implement the Departmental regulation and to provide State and county offices with instructions for entering the data collected into the Service Center Information Management System (SCIMS).  FSA uses SCIMS to manage customer data for several of its programs, including MFP.

FSA uses seven forms, approved by the Office of Management and Budget (OMB), to collect information regarding the race, ethnicity, and gender of its applicants and participants.  FSA then provides the race, ethnicity, and gender information it collects to the National Agricultural Statistics Service (NASS) for inclusion in the USDA Race, Ethnicity, and Gender Program Statistics site, known as REGStats.   REGStats is USDA’s official tool for making program application and participation rate data available to the public on the internet.

As part of addressing the Congressional request, we analyzed MFP payment and demographic data for the period audited. This analysis included a review of race, ethnicity, gender, socially disadvantaged status, limited resource status, beginning farmer status, and veteran status. See Exhibit A through Exhibit D.

Market Facilitation Program Payment Distribution by Geographic Area
Across the 2 program years, FSA distributed over $23 billion in MFP payments. MFP payments were made to producers in all 50 States and in Puerto Rico.  These payments were made to over 715,000 producers of 38 eligible commodities, including non-specialty crops (grains and oilseeds), specialty crops (nuts and fruits), and livestock products (hogs and dairy).

2018 Market Facilitation Program
For program year 2018, commodities covered by MFP included five non-specialty crops, two types of livestock, and two specialty crops.  Payments for this year were capped such that a person or legal entity could receive payments totaling up to:  (1) a combined $125,000 for non-specialty crop payments; (2) a combined $125,000 for livestock payments; and (3) a combined $125,000 for specialty crop payments. Overall, a person or legal entity could receive up to $375,000.

MFP payment rates for the covered commodities in 2018 were determined by USDA’s Office of the Chief Economist. As of April 27, 2020, FSA had issued over $8.6 billion in MFP payments for program year 2018. These payments were issued to more than 590,000 producers. For example, FSA paid a total of over $683 million to over 34,600 producers in Minnesota, for an average payment of more than $19,700.

2019 Market Facilitation Program
For program year 2019, commodities covered by MFP included 26 non-specialty crops, 2 types of livestock, and 10 specialty crops.  Payments for this year were capped at a different amount from program year 2018. For program year 2019, a person or entity could receive payments totaling up to:  (1) a combined $250,000 for non-specialty crop payments; (2) a combined $250,000 for dairy production and hog payments; and (3) a combined $250,000 for specialty crop payments.  No producer could receive more than $500,000 combined across all three commodity groups.

MFP payment rates for the covered commodities in 2019 were also determined by the Office of the Chief Economist.  As of April 27, 2020, FSA had issued over $14.4 billion in MFP payments for program year 2019. These payments were issued to more than 657,000 producers.  For example, FSA paid a total of over $1 billion to over 36,600 producers in Minnesota, for an average payment of more than $29,000.

 

 

OBJECTIVE
The objective of our ongoing audit is to evaluate FSA’s administration of MFP.  Specifically, we are evaluating FSA’s oversight of producer eligibility and certifications, the accuracy of MFP payments, and the distribution of MFP payments by demographic and geographic area.  This report provides interim results related to FSA’s demographic data collection policies.

WHAT OIG FOUND
In July 2018, and again in May 2019, the U.S. Department of Agriculture (USDA) announced that, in response to trade damage caused by increased tariffs by foreign trading partners, it would be offering trade mitigation packages to assist producers impacted by these tariffs.

USDA authorized its Farm Service Agency (FSA) to distribute up to $25.1 billion in trade mitigation package funding through the Market Facilitation Program (MFP).  This program provides payments to assist producers directly impacted by retaliatory tariffs that result in the loss of traditional exports. USDA’s Office of Inspector General (OIG) received a Congressional request for oversight work with questions involving the trade mitigation packages and the programs within them, including MFP.

We found that the manner in which FSA collected demographic information for programs it administers, including MFP, did not always follow USDA policy. Departmental regulation prohibits the collection of race, ethnicity, and gender data based on a visual assessment, yet FSA county office employees assigned race, ethnicity, and/or gender to producers through such means. This occurred because FSA’s policy and customer data management system continued to require
entry of the data after the Departmental regulation was implemented.  As a result, the system contains race, ethnicity, and gender data not provided by producers. In addition, FSA shared this data with third parties, and it may not accurately represent demographic information for over 530,000 producers within the agency’s programs.

FSA concurred with our findings and recommendations and we accepted management decision on all recommendations.