Detailed Information on the
Agricultural Marketing Loan Payments Assessment

Implement policies to reduce improper payments.

Conduct more frequent external audits of program effectiveness.

Establish policy within parameters of new Farm Bill legislation to improve delivery of the program.

Make the delivery of services to producers consistent across county offices.

Measure: Maintain commodity support for program commodities at the loan rate.

Explanation:Measures whether the program is successfully supporting the return to the producer at the loan rate. Measures whether the combination of the national average price and the marketing loang benefit (payment) is greater than the loan rate. The numerator of the ratio consists of sum of the average national market price and the average MAL benefit received by producers. The denominator is the loan rate. FSA's targeted objective is to ensure that producers on average receive at least the loan rate for their MAL-eligible production; therefore the ratio must be at least one if the program is functioning successfully. Thus, when prices are low, FSA will, on average, act to make up the difference between the price and the loan rate. Producers may receive more than the loan rate, especially during times of relatively high prices. In such cases, FSA would not act to provide marketing loan gains or LDPs, and a ratio notably greater than one would simply indicate that the price received by producers is well above the loan rate.

Measure: Increase MAL program participation when market prices are lower than the loan rate.

Explanation:Participation is measured as the quantity of production that is put under loan or that receives a program payment. A participation rate of 70% means that 70% of the production is put under loan or collects a program payment. When daily prices are below the safety-net support level (loan rate), FSA will encourage participation by setting repayment rates to satisfy both measures (1) and (3). To ensure producers on average receive the safety net support level and to reduce forfeitures when prices are low, prior evidence indicates that targeted participation of at least 70 percent of production is needed. If prices are above the loan rate we expect participation to decline. In years when prices are above the loan rate, the actual will be reported as NA.

Measure: Maintain a minimum percentage of eligible commodities placed under loan.

Explanation:The majority of program participants collect program payments, but do not use the loan aspect of the program. However, a number of producers (particularly those with smaller operations) use the loan program as a source of interim financing, which is one of the goals of the program, even when prices are above the loan rate. FSA has a targeted objective of maintaining the proportion of the crop put under loan for interim financing at no less than 10 percent, but generally will not encourage producers to secure commodity loans during relatively high-price years.

Measure: Reduce the percentage of commodities put under loan that are forfeited to CCC.

Explanation:Producers can forgeit their commodities to the CCC to fulfill their loan. However, forfeitures result in additional costs to be borne by the U.S. Government including storage, transportation, and the sale of the commodity. Successfully attaining this measure means that forfeitures decline as a percentage of the quantity of commodities put under loan. The lower the percentage, the greater the proportion that is made available to the market rather than being kept under loan until maturity to be forfeited.

Measure: Reduce the administrative cost per loan of the MAL Program.

Explanation:This measure is the total county, State, and headquarters cost per MAL loans excluding LDPs. The FY 2006 and beyond targets were adjusted due to an increase in Farm Storage Facility Loan activity and projected high market years when efficiencies based on volume are mitigated. The volume of loans has significantly impacted the costs. To get the average cost per loan there are several sources and assumptions used. This estimation method will change once the Agency implements its activity-based cost management system nation-wide.

Measure: Reduction in erroneous program payments (%).

Explanation:This measure will track the percentage of erroneous payments for all agricultural marketing loan payments each year. The targets for 2007 onward are those agreed to by USDA and OMB as part of the Improper Payments Improvement Act monitoring process.

Is the program purpose clear?

Explanation: The Marketing Assistance Loan (MAL) Program, and its component, the Loan Deficiency Payment (LDP), subsequently referred to as the MAL Program, clearly focuses on: (1) facilitating the orderly marketing or distribution of major agricultural commodities by providing interim financing to farmers; and (2) providing per-unit revenue support for commodities when market prices are relatively low, while minimizing potential loan forfeitures, commodity stocks on hand, and storage costs incurred by the Commodity Credit Corporation (CCC). The MAL Program is statutorily mandated for the following commodities: wheat, feed grains (corn, grain sorghum, barley, oats), upland cotton, extra long staple cotton (which does not have marketing loan provisions), rice, oilseeds (soybeans, sunflower seed, flaxseed, canola, rapeseed, safflower seed, mustard seed, crambe, sesame seed), peanuts, honey, wool, unshorn wool, mohair, and pulses (dry peas, lentils, and small chickpeas.)

Evidence: See Farm Security and Rural Investment Act of 2002, Sections 1201-1209, P.L. 107-171; Subtitle B-Marketing Assistance Loans and Loan Deficiency Payments continues Non-recourse MAL and LDP provisions of previous legislation; 7 Code of Federal Regulations (CFR), Part 1421, 1425 and 1427; "MAL and LDP Program Farm Service Agency (FSA) Fact Sheet."

Does the program address a specific and existing problem, interest, or need?

Explanation: American agricultural producers, particularly field crop producers, face many risks. The MAL Program is intended to provide a safety net to help alleviate the price risk inherent in selling commodities and provides short-term or interim financing. Instead of selling immediately at harvest, the MAL Program allows a producer who grows an eligible crop to store the production and pledge the crop as collateral. The loan proceeds help the producer to maintain financial stability without having to sell the harvested crop at the time of year when prices tend to be at their lowest levels. Later, when market conditions may be more favorable, a producer can sell the crop and repay the loan. Alternatively, the producer may forgo the loan and receive a loan deficiency payment (LDP) at any time up to the loan availability deadline. Loan proceeds are based on loan rates set by statute and the quantity of eligible commodity pledged. MALs are Non-recourse, which means CCC must accept the quantity of a commodity pledged as collateral for a loan as repayment if a producer chooses to forfeit to CCC at loan maturity. In the 1980s, prior to the advent of marketing loan provisions, forfeitures were high. In 1985 almost two-thirds of wheat placed under loan was forfeited. The MAL and LDP provisions, instituted by various changes in the enabling legislation over the years, have reduced producer incentives to forfeit their production to CCC, thereby reducing Government storage costs while making U.S.-produced loan commodities more competitive in domestic and international markets. An assured per-unit revenue level (loan rate) gives producers an expected minimum revenue for harvested quantities. An expectation of a minimum per-unit revenue leads to stability in production from one year to the next, thereby benefiting producers and consumers alike. Program participation in terms of eligible commodity production for some loan commodities approached 100% in low-price years.

Evidence: See Farm Security and Rural Investment Act of 2002, P.L. 107-171; Subtitle B-Marketing Assistance Loans and Loan Deficiency Payments continues Non-recourse MAL and LDP provisions of previous legislation; FSA Fact Sheet, "About the Commodity Credit Corporation," which may be found at: http://www.fsa.usda.gov/FSA; 7 CFR 1421.9 "Basic Loan Rates"; 7 CFR 1421.102 "Adjustment of Basic Loan Rates;" 7 CFR 1421.3, "Loan Deficiency Payment."

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The MAL Program is one of several United States Department of Agriculture (USDA) programs designed to provide producers of selected commodities with income and revenue support. The MAL Program provides eligible producers with a maximum of ten months of interim financing when market prices tend to be low during and following harvest. The loan is Non-recourse in nature, and based on actual production rather than historical production figures. Other Federal programs include the Direct and Guaranteed Operating Loan Programs, Direct and Counter-cyclical Payment Programs, and Non-Insured Crop Disaster Assistance and Federal Crop Insurance Corporation (FCIC), Crop Insurance Programs. Operating loan programs are based on cash flow determinations, are recourse in nature, and do not support the per-unit revenue of specific commodities. Counter-cyclical payments for a commodity are only issued if the effective price for a commodity is below the established target price for the commodity at the end of the established marketing year. The payments are not duplicative as the Secretary of Agriculture determines if counter-cyclical payments will be made for a covered commodity, and counter-cyclical payments are not made at prices below the loan rate. Disaster assistance programs provide assistance when a producer has qualifying quantity and/or quality losses associated with natural disasters. Taken together, they assist in extending the safety net for American agricultural producers. While these programs are related, each addresses a different scenario depending on the specific needs of the individual farmer. These programs do not duplicate each other or any other Federal, State, local, or private effort.

Evidence: See Farm Security and Rural Investment Act of 2002, Subtitle B; USDA/FSA Fact Sheets: "Loans for Socially Disadvantage Persons (Minorities and Women)," December 2006; "Non insured Crop Disaster Assistance Program," January 2007; "Loans for Beginning Farmers and Ranchers," December 2006; "Direct and Counter-cyclical Payment Program," March 2006.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: Under the 2002 farm bill, national loan rates are fixed. As a result, loan rates for some commodities have been established at levels well above market prices year after year. Some claim that the fixed loan rates create incentives for producers to plant one crop over another, simply because relative loan rates may not reflect the trends in market prices, stimulating additional production. The loan deficiency payment has allowed some producers to lock in lucrative payments from the government, even when they actually sell their commodity at levels well above the safety net prices set in the 2002 Farm Bill. The program is also perceived to be flawed from the perspective of international trade agreements. The MAL Program is recognized by the United States and other World Trade Organization (WTO) member countries as an "amber box" or a trade-distorting program. The Program benefits are tied to production. The benefits may be forthcoming when prices are below statutorily established loan rates. Under the U.S. WTO Agriculture Proposal, if MAL Program benefits are in excess of five percent of a commodity's gross revenue, then all such benefits are counted as part of the U.S. aggregate measure of support (AMS). The AMS for all programs is added to determine the U.S. compliance with its fixed and bound commitment level. While national loan rates were fixed in the 2002 farm bill, county loan rates were allowed to adjust. Changes imposed by USDA to the county level loan rates are thought to have partially offset the trade distorting effects of the MAL Program. Furthermore, the Administration's proposed legislation for the 2007 Farm Bill also attempts to address these issues. On February 1, 2007, USDA proposed revising marketing loan rates by (1) setting loan rates for each commodity at 85 percent of the five-year Olympic average, excluding high and low years, (2) capping loan rates at levels established by the House-approved 2002 farm bill, and (3) changing from a daily posted county price to a monthly price. These proposed changes would further reduce market distortions and encourage farmers to plant crops based on expected market returns rather than on per-unit revenue support or subsidy payment levels.

Evidence: See Office of the United States Trade Representative, Doha Development Agenda Policy Brief, "Implications of U.S. WTO Agriculture Proposal On Trade-Distorting Domestic Support" October 2005; USDA, 2007 Farm Bill Proposals, February 1, 2007, pp. 9-15 located at http://www.usda.gov/wps/portal; USDA/FSA "Fact Sheet, "Non-recourse Marketing Assistance Loan and Loan Deficiency Payment Program," June 2003.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: As statutorily mandated, the Marketing Assistance Loan and LDP program is targeted at providing support on production of relevant marketing assistance loan commodities (major row crops). However, producers of other crops may be more in need of assistance. Also, the program contains a loophole that allows producers to exceed their payment limits. Another shortcoming of the program is that it provides the same level of support (on a per unit basis) to all producers, regardless of financial need. Lastly, the program permits producers to collect large subsidies just after harvest, when prices are low, and to sell their commodities at a higher price later in the year. The Administration is proposing to address these concerns in their 2007 Farm Bill proposals.

Evidence: See Farm Security and Rural Investment Act of 2002, Subtitle B; USDA, 2007 Farm Bill Proposals, pp. 9-15 located at http://www.usda.gov/wps/portal, February 1, 2007.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The MAL Program has four long-term outcome performance measures. All tier down from the FSA Strategic Goal 1, "Supporting Productive Farms and Ranches," Objective 1.2, "Mitigating Market Losses." All four directly reflect the purpose of the Program and its long-term goals by providing short-term financing and per-commodity-unit revenue support to ensure the farm safety net is in place as intended. Performance values, strategies, and projections dramatically shift depending on expected market conditions. These conditions also affect producer decisions as to which component of the Program is best suited for their individual needs. Significant and potentially unexpected price variability means that performance measure targets are dependent on the expectation of future prices relative to MAL safety net or loan rate support levels. Congress is in the process of considering a 2007 Farm Bill that may impact these measures. The first measure is to "maintain the MAL Program income support to producers at least at the level of the loan rate." This measure identifies the overall impact the Program has in providing income stability. Farmers who take out MALs can forfeit their crops to CCC when the loan matures and keep the loan proceeds, thus "providing a price floor" for those producers carrying loans. This measure seeks to gauge how well the MAL Program supports per-unit revenue for loan-eligible commodities, regardless of the portion of production that was actually involved with the MAL Program. Although only farmers taking out loans have the "price floor" guarantee, the measure uses the loan rates as a target for per-unit revenue for all loan-eligible commodities. Strong market revenue could negate the need for any benefits from the MAL Program, driving the measure higher without any outlays under the MAL Program. A lower result would indicate that benefits alone do not, on average, close the gap between market revenues and the loan rate. Although successful achievement of this measure would not guarantee that the price plus LDP rate would equal the loan rate in each individual case, it would indicate that the Program achieved that result on an annual average basis. The second long-term outcome measure is to "increase MAL production participation when market prices are low in comparison to the safety net or loan rate." By participation, FSA is referring to the amount of production participation rather than individual producers. Setting loan repayment rates below the loan rate when prices are relatively low encourages many producers to take an LDP or repay their loan, thereby making their harvested quantities available to the market. It also reduces potential forfeitures, which is a statutory objective, thereby reducing the marketing-distorting effects of the MAL Program. FSA constructed this measure as a composite across eight major loan-eligible commodities. As a composite, there may be situations where the loan rates of one or more eligible commodities are offset by others. As a whole, it clearly indicates if the Program is an effective safety net during times of low market prices. The third measure is to "maintain the percentage of eligible commodities placed under loan." The measure complements measure two and indicates whether the safety net is adequately maintained. In relatively high price years, FSA simply seeks to ensure loans are available, as it recognizes that many producers will use the MAL Program as a cash flow and delayed-marketing tool. The fourth measure, "reduce the proportion of production put under loan that is forfeited to CCC," indicates if the market is adjusting supply to demand as well as if the Program incentives to reduce forfeitures are functioning. Farmers who take out MALs have the option of forfeiting their commodities to CCC when the loan matures in lieu of repaying the loan. The 2002 Act indicates that CCC should set repayment rates so as to "Minimizing potential forfeitures."

Evidence: See: FSA Strategic Draft Plan Fiscal Years 2005-2011; FSA Draft Strategic Framework Fiscal Years 2005-2011 (currently in Departmental clearance); USDA Strategic Plan FY 2005-2010; Farm Security and Rural Investment Act of 2002, Title I, Section 1204, "Repayment of Loans."

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: All four long-term performance measures have ambitious targets and timeframes. The first measure is to "maintain the MAL Program income support to producers at least at the level of the loan rate." A successful outcome of the formula would be a value of one or higher, that is, the market revenue plus average loan benefits at least equals the loan rate. Strong market revenue could negate the need for any benefits from the MAL Program, driving the measure higher than one without the need for any outlays under the MAL Program. For this reason, the targets are considered to be ambitious. The second long-term outcome measure is to "increase MAL production participation when market prices are low in comparison to the safety net or loan rate." It indicates whether the Program is an effective safety net during times of low market prices. The targets are ambitious as they are aimed at increasing MAL Program participation by 0.5 percent per year above the 70 percent level when the market price is less than 105 percent of the national loan rate. The third measure is to "maintain the percentage of eligible commodities placed under loan." This measure complements measure two and maintains the safety net concept of interim financing. In relatively high price years, FSA will simply ensure that loans are available. Through this measure, FSA recognizes that many producers will still use the MAL Program as a cash flow and delayed-marketing tool. Likewise, this measure indicates that FSA will not seek to encourage high participation in relatively high-price years. For this reason, targets for FY 2007 and beyond are currently set at ten percent based on current market forecasts for higher market prices. The fourth measure is to "reduce the proportion of production put under loan that is forfeited to CCC." While there are external factors that impact this measure, such as relatively high market prices, etc., there are still a number of producers who continue to use this option as a marketing tool. MAL is a non-recourse program; CCC is obligated to accept the collateral as settlement for a MAL. In the 2000s forfeitures have been low, thus FSA proposes a slightly declining pathway for this measure. To arrive at the targets, the measure includes forfeitures of major field commodities, which are weighted by the amount of that commodity placed under loan. The targeted forfeited percentage by FY 2011 is 1.0 percent, as the Program is currently experiencing a record low forfeiture rate. For this reason, the targets are ambitious.

Evidence: Performance targets for the MAL Program are as follows: (1) "maintain the MAL Program income support to producers at least at the level of the loan rate," targets are FY 2007 1.0, FY 2008 1.0, FY 2009 1.0, FY 2010 1.0, FY 2011 1.0; (2) "increase MAL production participation when market prices are low in comparison to the safety net or loan rate," targets are: FY 2007 72%, FY 2008 72.5%, FY 2009 73%, FY 2010 73.5%, FY 2011 74%; (3) maintain the percentage of eligible commodities placed under loan," targets are FY 2007 10%, FY 2008 10%, FY 2009 10%, FY 2010 10%, FY 2011 10%; (4) "reduce the proportion of production put under loan that is forfeited to CCC," targets are FY 2007 1.4%; FY 2008 1.3%; FY 2009 1.2%; FY 2010, 1.1%, FY 2011 1.0%.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: FSA established four quantifiable annual outcome performance measures for MAL that serve as both long-term and annual performance measures. This ensures the linkages required to demonstrate progress towards achieving the Program's long-term goals and ensures that progress is monitored in annual and long-term cycles. The performance measures directly reflect the purpose of the Program by providing short-term financing and per-commodity unit revenue support to ensure the farm safety net is in place as intended. Congress is in the process of considering a 2007 Farm Bill that may impact these performance measures. The first annual performance measure is to "maintain MAL Program income support to producers at least at the level of the loan rate." The measure identifies the overall impact that the Program has in providing income stability. It is a composite ratio of the per-unit revenue to the national loan rate (NLR). FSA determines the per-unit revenue for each commodity as the sum of the marketing year average price plus the average loan program benefit. In turn, the average loan program benefit for each commodity is equal to the sum of the loan deficiency payments, marketing loan gains, and certificate exchange gains divided by the total crop year production. The second long-term outcome measure is to "increase Program participation when market prices are low in comparison to the safety net support rate." It indicates whether the Program is an effective safety net during times of low market prices. This measure, in conjunction with measure three, illustrates whether the Program continues to meet the combined safety net needs of producers. The third annual measure is to "maintain the percentage of eligible commodities placed under loan." This measure indicates the MAL Program continues to serve as a viable method of interim financing for producers based on the share of production is pledged as loan collateral. By providing short-term financing to producers, the Program also benefits agricultural product consumers by facilitating the orderly distribution of major agricultural commodities. The MALs assist by holding commodities off the market at harvest and redistributing those sales when greater demand elevates the price. The fourth annual measure, "reduce the proportion of production put under loan that is forfeited to CCC," illustrates not only if the market is adjusting supply to demand but also if the Program incentives to reduce forfeiture are functioning. Adjustments made to Program provisions over the years have attempted to make forfeiture of loan collateral to CCC less appealing. Borrowing at low interest rates and holding commodities until prices go up is financially better for producers. Furthermore, CCC-owned surpluses may impose a significant taxpayer burden in the form of storage costs.

Evidence: See FSA Draft FY 2005-2010 Strategic Plan; USDA FY 2005-2010 Strategic Plan; The MAL annual performance measures are to "maintain the MAL Program income support to producers at least at the level of the loan rate," "increase MAL production participation when market prices are low in comparison to the safety net or loan rate," "maintain the percentage of eligible commodities placed under loan," and "reduce the proportion of production put under loan that is forfeited to CCC."

Does the program have baselines and ambitious targets for its annual measures?

Explanation: FSA has some ambitious targets for its annual performance measures, however the targets for the cost per loan payment are not at all ambitious. The targets are higher than the average of the last four years costs. The annual measure to "reduce the proportion of production put under loan that is forfeited to CCC" has adequate measures. In the 2000s forfeitures have been low, thus FSA proposes a conservative declining pathway for this measure. The last annual performance measure is to reduce erroneous payments. From the time OMB required statistical sampling of erroneous payments, erroneous payments for this program have increased as USDA adopted the OMB methodology for the mearsurement of erroneous payments. USDA is making significant efforts to reduce erroneous payments, though their targets are not yet ambitious.

Evidence: Targets for MAL performance measures are: (4) "reduce the proportion of production that is forfeited to CCC." Targets are FY 2007 1.4%; FY 2008 1.3%; FY 2009 1.2%; FY 2010, 1.1%, FY 2011 1.0%. (5) reduce erroneous payments. Targets are FY 2007 18%; FY 2008 14%; FY 2009 10%; FY 2010 2.5%.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The MAL primary partners are the USDA Natural Resources Conservation Service (NRCS), Agricultural Marketing Service (AMS), World Agricultural Outlook Board (WAOB) and National Agricultural Statistics Service (NASS). These partnerships exist primarily to assist in the development and sharing of information. For example, beginning with the 2002 crop year, FSA has coordinated with NASS and AMS to determining credible pricing data to establish loan rates for peanuts. NASS and WAOB data are particularly helpful in performing trend analysis. In December 2006, FSA, their partners, and NRCS completed the construction of the Section 1614 Benefits database. This effort will assist the Agency in determining the amounts some individuals have received in total and by benefit category. The construction and public release of this database makes the benefit and recipient system much more transparent and will aid the agricultural policy making process. FSA also obtains pricing information from merchants at commodity purchase points to calculate local loan repayment rates. The Agency has also worked in partnerships to assess commodity specific situations. FSA has conducted extensive analysis of market price data from NASS, AMS, and private sources to develop a methodology for setting regional and class rice loan rates that reflect recent market price relationships. Those rates have historically been determined using static relationships, which do not reflect regional or class market price relationships. The Farm and Foreign Agricultural Services (FFAS) mission area within USDA is currently conducting industry consultations to establish a timeframe for adopting rice loan rates that reflect recent market prices. FSA expects to implement some changes in these rates for the 2007 crop.

Evidence: See USDA, NASS, "Agricultural Statistics," various years available at the U.S. Government Printing Office; Agreement No. 05-IA-04000000-N15, April 8, 2005, with NASS to prepare and provide FSA with Federal county estimates; Agreement No. 05-IA-04000000-N29, Septembers 30, 2005, with GIPSA, AMS, ARS, and/or University work for package testing, development, evaluation, and inspection.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent evaluations have been conducted regularly to support MAL Program improvements as needed. Taken together, the evaluations provide the scope and quality needed to address Program improvements. In April 2001, the USDA, Economic Research Service issued its "Analysis of the U.S. Commodity Loan Program with Marketing Loan Provisions" that investigated the nature of market effects in the U.S. agricultural sector resulting from the commodity loan program with marketing loan provisions. FSA also contracted with an external economic analysis group, Informa Economics, to review and make recommendations for improvement to the system established to determine the Posted County Price (PCP.) In addition, this external review evaluated certain key aspects of the Program to improve the Program market orientation. The final report was issued December 22, 2006. In an effort to determine customer satisfaction, the Agency is currently collaborating with the Department of Treasury's Federal Consulting Group and the University of Michigan to design American Customer Satisfaction Index surveys for Program recipients, specifically those receiving MALs and LDPs. The Agency intends to use the survey results in performance reports and policy-making decisions. The ACSI Team will develop performance and impact scores for all elements of the models. For the initial study anticipated, the analysis will include a review of each of the 10 regions and, to the extent possible, a review of MAL respondents by four commodity groups of interest. The USDA, Office of Inspector General (OIG) and the FSA, County Operations Reviewers (CORs), conduct regular reviews. OIG monitors the Program delivery and payment systems and conducts or contracts for annual audits of the CCC loan programs. An appointed COR, under County Office Operations Review Program (CORP) protocols developed by the national office, periodically reviews MAL delivery in county offices. If significant discrepancies are found, State or national level program managers may request a national MAL target CORP review focusing on a particular issue or set of issues. These reviews are conducted by the COR independently as they report directly to the State Executive Directors.

Evidence: See USDA, Economic Research Service, "Analysis of the U.S. Commodity Loan Program with Marketing Loan Provisions," Agricultural Economic Report No. 801, April 2001; Informa Economics, "Determination of Alternative Repayment Rates for Marketing Assistance Loans," final report dated December 22, 2006; MOU between FSA and U.S. Department of Treasury, Federal Consulting Group, September 28, 2006; County Office Operations Review Program FY 2005 Report, issued February 2006; FSA, COR, "2005 Loan Deficiency Payments and Marketing Assistance Loans-National Target Review Report," issued July 31, 2006; OIG Audit 03601-0046-TE, "FSA's Compliance with the Improper Payment Act of 2002," issued March 21, 2005, closed June 20, 2005; OIG Audit 03601-0047-TE, "Non-recourse Marketing Assistance Farm-Stored Loans," issued September 13, 2006; Independent audit conducted by KPMG, "Commodity Credit Corporation's Financial Statements for Fiscal Years 2006 and 2005," issued November 13, 2006.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The program does not report all direct and indirect costs needed to attain the performance results, including applicable agency overhead, retirement, and other costs that might be budgeted elsewhere, so it does not qualify for a yes answer. However, mandatory budget outlays are directly linked to the goal of financially supporting the producers when market conditions fluctuate. The FSA Budget Division analyzes anticipated market fluctuations/conditions and participation levels when determining outlays. As a mandatory Program, budget projections take into account proposed policy or legislative changes such as the addition of commodities in the 2002 Farm Act. Full-cost resource needs are determined on a county basis and Program levels and outlays are estimated and tracked each fiscal year. MALs are not required to be apportioned, but beginning in FY 2007 LDPs will be. Mandatory outlays are projected by FSA's Economic and Policy Analysis Staff. Actual outlays are obtained from the accounting system. The FSA Budget Division (BUD) keeps Program staff informed of funding levels and outlays in monthly and annual reports.

Evidence: See FSA Draft FY 2005-2010 Strategic Plan and USDA FY 2005-2010 Strategic Plan. FSA maintains the following accounting and financial source documents to support development and reporting of budget estimates with linkage to performance goals: see FY 2006 ANN 4 and 5 reports; BUD39 report from the CCC C.O.R.E. accounting system; FSA 2007 and 2008 CCC portion of President's Budget; FY 2007 and 2008 Explanatory Notes for FSA and CCC; and FY 2007 FSA Administrator's Congressional testimony to Appropriations Committees. Also, see OMB scorecards located at http://whitehouse.gov/results/agenda.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The MAL has incorporated a nuber of signigicant changes to its procedures as a result of the Agency addressing strategic planning deficiencies. The Agency took specific actions to correct its deficiencies in this area by assigning a high priority to correcting inproper payments in its strategic planning process. FSA's Strategic Plan includes a measure to maintain or increase percentage of propper payments. FSA has worked diligently to develop its strategic planning process and has established a comprehensive FY 2005-2010 Draft Strategic Plan. FSA conducted extensive strategic planning stakeholder sessions to develop clear mission, vision, and goals. In-house personnel have conducted headquarters and field communications, strategy sessions, and planning meetings throughout each year. The FSA Draft Strategic Plan guides the way FSA carries out its mission, and is used to identify and justify the financial, personnel, and other resources necessary to best deliver its programs and measure results. FSA re-engineered key goals to improve Agency mission effectiveness, identified workable strategies for accomplishing the goals across traditional program "stove pipes," and established more meaningful, quantifiable, and outcome focused measures to help managers gauge progress more effectively and convincingly.

Evidence: See FSA Draft FY 2005-2010 Strategic Plan; FSA FY 2005-2011 Strategic Framework (currently in clearance with the Department); USDA FY 2005-2010 Strategic Plan found at http://usda.gov.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The Agency collects specific Program data from various resources within FSA and several USDA partners, which include the NASS, Economic Research Service (ERS), and AMS to measure, manage, and improve Program performance. Primary partners provide statistical crop data to: (1) help forecast Program spending and outlays; (2) estimate crop acreage eligible for MAL and LDP; and (3) gather individual commodity specific information. Program managers work closely with State Departments of Agriculture, commodity organizations, and State and field office FSA employees to identify deficiencies, make necessary policy clarifications, and ensure the Program is properly being administered at all levels of government. FSA analyzes market price data from NASS, AMS, and private sources to develop a methodology for setting regional rice loan rates by class to reflect market price relationships. Beginning with the 2002 crop year, FSA has coordinated with NASS and AMS to determine credible pricing data to establish loan rates for peanuts. FSA routinely relies on ERS and AMS reports to prepare annual budget estimates and Program outlays. These reports are used to identify marketing trends or specific concerns with quality or quantity of loan eligible commodities. Some of these concerns may require FSA to make administrative changes or clarification to the Program. Information shared between agencies is used to help formulate policy decisions in carrying out other aspects of the Program. As a result of an OIG audit, FSA created a task force that included NASS personnel to develop a sampling process for completing compliance or spot checks by producer instead of completing an individual spot check for each program area. FSA continues to work with the Grain Inspection, Packers and Stockyards Administration (GIPSA) and industry representatives, such as warehouse operators and merchandisers, to establish grading and quality factors for loan eligible commodities. These grading and quality factors assist FSA in establishing applicable premiums and discounts for commodities pledged as collateral. FSA announces schedules of premiums and discounts for all eligible loan commodities annually. The Agency also collects specific Program data from its primary partners, the American farmers, which measure Program performance. Specifically, data are collected on loan applications and reviewed by Agency personnel for Program eligibility compliance. The Agency maintains collected data in a comprehensive automated database that tracks and measures daily, weekly and monthly loan and LDP disbursements, repayments, and collection performance. Program data such as the number of outstanding loans, loan maturity dates, number of settlements and forfeitures are used to: (1) monitor repayment activity; (2) make CCC inventory projections based on potential forfeited loan quantities; (3) remind State and county offices of necessary actions to be taken when a loan matures; and (4) identify potential marketing trends/prices. The data are stored in a database warehouse and are used to generate management reports that aid Agency managers with analyzing, monitoring, and identifying marketing trends of specific commodities. Extensive reports are available and generated upon request.

Evidence: See FSA News Release, "USDA Farm Service Agency Completes Payment Database'" December 19, 2006; Agreement No. 05-IA-04000000-N15, April 8, 2005, with NASS to prepare and provide FSA with Federal county estimates; Agreement No. 05-IA-04000000-N29, Septembers 30, 2005, with GIPSA, AMS, ARS, and/or University work for package testing, development, evaluation, and inspection.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Agency managers are responsible for implementing, improving, and monitoring Program activities. Beginning in FY 2006, FSA implemented a new employee-performance management system. Under the new system, at least one element of the FSA employee performance plans must be linked to the FSA mission, goals, and outcomes in the Agency Strategic Plan. Program managers are responsible for accomplishing the objectives of the applicable statutory laws in the most cost effective manner while assessing potential impacts on producers, stakeholders, the agricultural economy, the Department, and the Administration. Producer accountability is evaluated through compliance checks throughout the duration of the Program, while managers? performance indicators are evaluated routinely for responsiveness to the objectives and requirements of the Agency at each organizational level of the Agency through the Department level. Annual reports are provided to Congress detailing expenditures for the Program. Reports of loan and LDP activity and market gains are accessible for public inspection through the Agency website. Program costs are continuously monitored through the FSA Budget and Financial Management Offices, reported throughout the Department, and used to determine cost effectiveness of the Program. The Kansas City Management Office (KCMO) provides detailed loan and LDP data based on loan and LDP applications processed at the local FSA county offices. KCMO also provides market price data, settlement/forfeiture data, and information pertaining to CCC inventory and storage. This information is analyzed and used by management to: (1) project future program year budget projections, (2) identify possible market price distortions, (3) identify program administration deficiencies, and (4) develop and recommend information technology (IT) enhancements.

Evidence: See "Performance Management at FSA, RMA, and FAS," issued by the FSA Human Resources Division (December 2005); E-mail from the FSA Administrator to all employees, dated May 4, 2006, entitled "Linking Farm Service Agency (FSA) Employees to FSA's Draft Strategic Plan Framework;" FSA Strategic Plan Framework FY 2005-2011; FSA Notice A)-1371, "FSA FY 2005-2011 Strategic Plan Framework Posted to Budget and Performance Management System Web Site," dated December 27, 2006; FSA Notice PM-2530, "Performance Management Issues," March 28, 2006; FSA Notice PM-2482, "New FSA Performance Management System," September 2, 2005; FSA Notice PM-2435, "Linking Performance Plans to Agency Goals," October 20, 2004; Agreement No. 05-IA-04000000-N15, April 8, 2005, with NASS to prepare and provide FSA with Federal county estimates; Agreement No. 05-IA-04000000-N29, Septembers 30, 2005, with GIPSA, AMS, ARS, and/or University work for package testing, development, evaluation, and inspection. Loan and LDP reports may be found at: http://www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=psr; Performance plan of program manager.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: This program is one of the USDA programs with the highest percentage of improper payments. A large percentage of the improper payments was caused by noncompliance with administrative procedures. While failure to follow administrative procedures may not have caused the payment to be disbursed in error, it is not possible to determine whether the payment was appropriate without the documentation. For example, it was determined that a producer who did not certify whether it had a delinquent Federal non-tax debt but still received a payment was considered an improper one. In such cases, while the producer may have been a legitimate recipient, because he or she failed to indicate his or her status this was considered an improper payment. USDA is taking corrective actions to rectify the problem.

Evidence: See USDA's 2006 Performance and Accountability Report.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: FSA continuously modifies and enhances existing automated systems and procedures for the delivery of the MAL Program. The goal is to reduce MAL processing and disbursement time, and provide best service in the most cost effective manner. There are several ongoing initiatives to do this: (1) FSA has leveraged existing web-based systems, such as SCIMS, at the county Office levels, online lien searches and UCC-1 filings to provide the most efficient process for determining producer eligibility and disgursement of payments. (2) FSA is developing an eLoan System Development Life Cycle (SDLC) for the design of a future web-based eLoan system which will allow FSA customoers to request eLoans online. The validation, review, and approval process time will be reduced greatly with the creation and implementation of the eLoan system. (3) FSA is developing an RFP for competitive sourcing that will apply Earned Value Management. (4) FSA instituted a checklist system in December 2006 to help County Offices prepare necessary loan documentation and enter loan data into automated systems. As a result of the PART process, FSA is also focusing on operational performatnce indicators that include the two efficiency measures in this PART: the administrative cost per loan, and percentage of erroneous payments.

Evidence: The annual efficiency measure is to "reduce the administrative cost per loan of the MAL Program," Targets are FY 2007 $137.31; FY 2008 $136.62; FY 2009 $135.94; FY 2010 $135.26; and FY 2011 134.58. See USDA-FSA Modernization Project Document, September 14, 2004, Exhibit 300, OMB Assessment, revised edition expected to be released in March 2007; eLDP Training module (Training module provides instructions and screen prints of the eLDP process;) FSA PM Notice, "Electronic Warehouse Receipts Pilot Project for Rice."

Does the program collaborate and coordinate effectively with related programs?

Explanation: While the safety-net function of the MAL program coordinates effectively with related programs to provide a safety-net for producers, the program should collaborate more effectively with crop insurance to ensure that producers are reporting the same production/yields for both programs. USDA's OIG has stressed the importance of data mining to improve the integrity of the programs and to ensure program compliance. While the 2002 Farm Bill provided funding for a data mining effort, implementation of a data mining program has been very slow due to differences in the way the MAL/LDP program and the crop insurance program define farm units. Both programs would be more effective if the definition was standardized across the two programs. The MAL Program is one of several USDA programs that assist in extending the safety net for producers. FSA manages most of these programs. With the exception of the FCIC Crop Insurance Program, these programs share a common field force, program management, and executive leadership in addition to logistical support throughout the organization. Additionally, FSA coordinates with NASS and AMS to determine credible pricing data to establish loan rates for peanuts. FSA also works with AMS to obtain classing data for cotton, and GIPSA to obtain grading and quality determinations for grains and oilseeds. The data obtained allow FSA to apply the correct loan rate based on the quality and quantity of the applicable commodity.

Evidence: See USDA OIG Audit Report No. 03601-12-Ch.

Does the program use strong financial management practices?

Explanation: MAL and LDP disbursements and payments are approved and issued in the local FSA county office or in Kansas City by a certifying official. MAL and LDP disbursements are reviewed by a second party before final issuance. The payments are reported through the financial statements of the CCC. These statements are independently audited every year. In the FSA/CCC FY 2006 Federal Managers' Financial Integrity Act (FMFIA) Assurance Statement and Report on Material Weaknesses and Systems Nonconformance submission, FSA identified the following material weaknesses: (1) improvement needed in information security controls,(2) improvement needed in financial system functionality and funds control (section 4), and (3) improvement needed in financial accounting and reporting policies and procedures. These findings stem from the annual audit conducted of the CCC financial statements for FYs 2005 and 2006. These findings apply to the entirety of the FSA/CCC financial management controls, which would include MAL as one of the Agency programs even though MAL is not specifically mentioned in the reports. However, FSA has a corrective action plan (CAP) in place and is reporting the progress made to implement it.

Evidence: See "Farm Service Agency/Commodity Credit Corporation Fiscal Year 2006 Federal Managers' Financial Integrity Act Annual Report;" Independent audit conducted by KPMG, "Commodity Credit Corporation's Financial Statements for Fiscal Years 2006 and 2005," November 13, 2006; and the "CCC Financial Statements for FY 2005 and 2004" November 8, 2005.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: Management routinely monitors cost and performance data to ensure efficient operations and uses this information to make daily and strategic decisions on Program operations. Program managers work closely with field level employees, industry representatives, commodity organizations and producers to identify Program deficiencies. Program managers also review monthly FSRs to certify to obligations and other financial information applicable to MALs and LDPs. New LDP procedures were developed to allow participants to annually notify the Agency of their intent to participate in the LDP Program. Management recently amended the regulations governing MALs and LDPs to clarify regulatory language regarding beneficial interest and other programmatic issues that were misunderstood or questioned by members of the Agricultural community. In February 2006, the Agency issued additional guidance to field staff for implementing various aspects of the Program. Management attends meetings and conducts National training to explain and introduce existing and new Program policies and to address concerns with Program implementation. Program Managers routinely update Program FACT Sheets, Program applications and forms, and issue policy notices to explain and clarify Program policies and procedures. In FY 2006, FSA performed and completed an erroneous payment risk assessment under guidelines as set forth by OMB, as required by the Improper Payments Improvement Act (IPIA), and found noncompliance with administrative procedures. FSA developed and initiated a corrective action plan (CAP) to correct the situation, which includes procedures to ensure agency managers are held accountable for reducing or recovering improper payments, and references IT system and infrastructure improvements needed to detect or reduce improper payments. FSA is strengthening and eliminating inadequate Program compliance controls in an effort to simplify the MAL approval process without compromising Program integrity. Beginning with the 2006 crop year, FSA required county office employees to complete a processing checklist for every MAL and LDP application received. The processing checklist serves as a guide for ensuring all eligibility and administrative requirements are met before an application is approved for processing and payment disbursement. In November 2006, FSA implemented an online training module regarding improper payments for State and county offices. With emphasis placed on improper payment reviews, FSA management determined that an opportunity existed to improve the overall level of uniformity in CORP reports and other data obtained through the COR process. As a result, the Agency conducted COR training January 29, 2007, through February 2, 2007, as well as additional training in Headquarters on March 12, 2007. OIG audits, county office internal audits, district director reviews, and monthly compliance checks are performed. The audit findings alert program managers of potential Program weaknesses that need to be addressed. These types of reviews and audits have assisted and improved the efficiency and delivery of the Program, and minimized fraud, waste and abuse.

Evidence: See FSA Handbook, "Marketing Assistance Loans and Loan Deficiency Payments for 2002 and Subsequent Crop Years," revised February 13, 2006; FSA, COR, "2005 Loan Deficiency Payments and Marketing Assistance Loans-National Target Review Report," issued July 31, 2006; CCC, FSA, Farm Loan Program, and FAS Corrective Action Plans Status Report, February 7, 2007; FSA Notice LP-2048, " Additional Guidance for Establishing Criteria When Conducting Lien Searches and UCC-1 Filing for Marketing Assistance Loans Less Than $25,000," issued October 12, 2006; FSA Notice PS-568, "Establishing and Maintaining eLDP Customer Profiles for Joint Operations," issued December 1, 2006; FSA Notice LP-2037, "Encouraging Users to Process LDP Requests Using eLDP Software (Except Cotton)," issued July, 17, 2006; FSA Notice PS-562, "New eLDP Web-Based Training Tools," issued July 13, 2006; FSA Notice LP-2035, "Beneficial Interest Policy Clarification for Marketing Assistance Loans and LDPs," issued July 7, 2006; FSA Notice COR-104, "2007 COR Training," issued December 22, 2006; sample CCC-633 EZ form for producers to notify the Agency of their intent to participate in the LDP Program.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The Agency is making steady progress in achieving its long-term performance goals. Over the last number of years, the MAL Program has met its targets for nearly all of its measures. The MAL Program has four long-term outcome performance measures. All four tier down from the FSA Strategic Goal 1, "Supporting Productive Farms and Ranches," Objective 1.2, "Mitigating Market Losses." All four measures directly reflect the purpose of the Program by providing short-term financing and per-commodity unit revenue support. The first measure is to "maintain the MAL Program income support to producers at least at the level of the loan rate." The measure identifies the overall impact that the Program has in providing income stability. The measure compares per-unit revenue from the market and the MAL Program to the loan rate. A result of one or higher is the indication of a successful outcome. The MAL Program has achieved this for FY 2002, FY 2003, FY 2004, FY 2005 and FY 2006. The second long-term outcome measure is to "increase MAL production participation when market prices are low in comparison to the safety net or loan rate." Using a baseline of 70 percent when market prices are low (less than 105 percent of the national loan rate), in FY 2005 and FY 2006 the targets set for the Program were 71.0 percent and 71.5 percent respectively. In FY 2005 and 2006, the Program exceeded its targets. The third measure, "maintain the percentage of eligible commodities placed under loan," indicates whether the safety net is adequately maintained and complements measure two. In relatively high price years, FSA simply ensures that loans are available. The Program has met its targets for this measure. The fourth measure, "reduce the proportion of production put under loan that is forfeited to CCC," indicates that the Program is meeting its goal and that Program incentives are functioning. While market prices have shifted from relatively high prices to low prices and back again, the Program continues to experience a record low forfeiture rate over the last few years and to exceed its targets.

Evidence: See Prior year targets and actuals for the MAL performance measures are as follows: (1) "maintain the MAL Program income support to producers at least at the level of the loan rate," targets were 1.0 for all years, actuals are FY 2002 1.16; FY 2003 1.32; FY 2004 1.19; FY 2005 1.20; (2) "increase MAL production participation when market prices are low in comparison to the safety net or loan rate," FY 2005 target 71%, actual 79.0%; FY 2006 target of 71.5%, actual 74.0%. (3) "maintain the percentage of eligible commodities placed under loan," FY 2003 target, 10.0%, actual 15.3%; FY 2004 target 10.0%, actual 11.9%; FY 2005 target 10.0%, actual 12.8%; FY 2006 target 10.0%, actual 12.0%, (4) "reduce the proportion of production put under loan that is forfeited to CCC" FY 2001 target 2.0%, actual 1.01%; FY 2002 target 1.9%, actual 1.88%; FY 2003 target 1.8%, actual .38%; FY 2004 target 1.7%, actual .18%; FY 2005 target 1.6%, actual .05%; FY 2006 target 1.5%, actual 1.01%.

Does the program (including program partners) achieve its annual performance goals?

Explanation: The MAL program has not met its annual performance goal of reducing erroneous payments. In fact, since FSA has been monitored for erroneous payments, erroneous payments have increased significantly. While this may not be purely due to incorrect payments on the part of FSA, it is unacceptable and must be rectified. The targets for the erroneous payments measure must also be more ambitious.

Evidence: Prior year targets and actuals for the MAL performance measures as follows: (1) "maintain the MAL Program income support to producers at least at the level of the loan rate," targets were 1.0 for all years, actuals are FY 2002 1.16; FY 2003 1.32; FY 2004 1.19; FY 2005 1.20; (2) "increase MAL production participation when market prices are low in comparison to the safety net or loan rate," FY 2005 target 71%, actual 79.0%; FY 2006 target of 71.5%, actual 74.0%. (3) "maintain the percentage of eligible commodities placed under loan," FY 2003 target, 10.0%, actual 15.3%; FY 2004 target 10.0%, actual 11.9%; FY 2005 target 10.0%, actual 12.8%; FY 2006 target 10.0%, actual 12.0%, (4) "reduce the proportion of production put under loan that is forfeited to CCC" FY 2001 target 2.0%, actual 1.01%; FY 2002 target 1.9%, actual 1.88%; FY 2003 target 1.8%, actual .38%; FY 2004 target 1.7%, actual .18%; FY 2005 target 1.6%, actual .05%; FY 2006 target 1.5%, actual 1.01%.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: Over the last few years, the Agency has developed new procedures to improve program management efficiency such as direct deposit, e-funds control, and consolidated payments. Electronic LDPs (or eLDPs) are Web-based applications that have enabled producers to request and obtain Program benefits online. This feature has helped to reduce the time associated with completing the LDP application. To achieve further efficiencies, the Agency has enhanced the electronic LDP (eLDP) process. The eLDP process reads the Web eligibility process in real time, which decreases the risks of issuing erroneous payments at the time of disbursement. The MAL Program has an efficiency measure to "reduce the administrative cost per loan of the MAL Program," that illustrates how efficient the MAL Program has been during the last few years. This measure does not include the LDP component of the Program. Farm Storage Facility Loans have increased on-farm storage. FSA administrative costs for farm-stored loans are significantly higher due to the need for bin measurements to ensure CCC security interest in such loans. For FY 2006, MAL targets were adjusted due to an increase in Farm Storage Facility Loan activity and projected high market years when efficiencies based on volume are mitigated. The volume of loans has significantly impacted the costs. To get the average cost per loan there are several sources and assumptions used. This estimation method will change once the Agency implements its activity-based cost management system nation-wide. The MAL Program has met its targets for this measure. See response to question 3.4 for a further description of the measure.

Evidence: The FSA efficiency measure, targets, and prior year actuals are as follows: "reduce the administrative cost per loan of the MAL Program," FY 2003 target $112.00, actual $97.00; FY 2004 target $110.82, actual $112.00; FY 2005 target $109.72, actual $105.00; FY 2006 target $138.00, actual $138.00.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: In terms of providing commodity support to producers when prices are low and for providing interim financing for cash-strapped producers, this program compares somewhat favorably to some of the other support programs. However, the marketing loan programs have some unintended consequences due to program design that are less desireable than those of other farm programs that the Admiistration proposes addressing in the 2007 farm bill. In the 2002 farm bill, loan rages for some commodities were established at levels above market prices. Most claim these fixed loan rates create incentives for producers to plant one crop over another simply because relative loan rates may not reflect the trends in market prices. Most also claim a loan rate in excess of the market price for a crop encourages produucers to plant more acreage to that crop, subsequently lowering the crop's market price and increasing program outlays even further. Unlike many of our other farm safety-net programs, the Marketing Loan payments are considered trade distorting by the World Trade Organization (WTO) because payments are based on actual production. Other programs that support producer income, such as the counter-cyclical payment program or direct crop payments are based on historical production. Federally subsidized crop insurance is another tool avalable to farmers to provide a guaranteed level of revenue. Though crop insurance may have it's own shortcomings, it compares favorably to the marketing loan program since it creates less market distortion and requires a producer paid premium. Another area where the MAL program does not compare favorable is in terms of erroneous payments.

Evidence: See 2007 Farm Bill Porposal, USDA; the 2006 PAR; and The 2007 Farm Bill and Beyond, Summary for Policymakers, AEI Agricultural Policy Series, May 2007.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Though some independent evaluations of sufficient scope and quality indicate that for the most part the Program is effective and achieving results, a number of recent analysis have pointed out a number of shorcomings of the program. Most recently, the American Enterprise Institute for Public Policy Research published a collection of research articles by well respected economists that examine commodity support programs that highlight a number of drawbacks of the MAL program -- costs versus returns, market distortion, and equity concerns were just a few of the criticisms cited. However, FSA recently contracted with an external economics analysis group, Informa Economics, to review and make recommendations for improvement to the system established to determine PCPs. This study was completed in December 2006. FSA is currently conducting, with the U.S. Department of Treasury, tailored surveys to assess customer satisfaction with the MAL and its LDP component Program services utilizing the American Customer Satisfaction Index (ACSI) methodology. For the initial study, the analysis will include a review of each of the 10 regions and, a review of MAL respondents by four commodity groups of interest. In addition, the ACSI Survey Team will develop actionable recommendations for discussions with FSA and include them in a report due out during the spring of 2007. MAL delivery is periodically reviewed in county offices by an appointed County Operations Reviewer (COR), under County Office Operations Review Program (CORP) procedure developed by the National office. If significant discrepancies are found, State or National level program managers may request a National MAL target CORP review, focusing on a particular issue or set of issues. These reviews are conducted by the COR independently of County operations. In crop years 1998 and 1999, the Agency conducted nationwide surveys regarding the delivery of LDPs. As result of the nationwide surveys, FSA took several steps improve service delivery and reduce the burden hours for information collection purposes.

Evidence: See ADI Agricutlural Policy Series "The 2007 Farm Bill & Beyond." particularly "Does the Economic Situation of U.S. Agriculture Justify Commodity Support Programs? by Bruce L. Gardner; "The Farm Program Tradition in the United States: History, Rationales, and Evaluation by Daniel Sumner; "Benefits and Beneficiaries from U.S. Farm Subsidies" by Julian Alston; and Money for Nothing: Acreage and Price Impacts of U.S. Commodity Policy for Corn, Soybeans, Wheat, Cotton, and Rice" by Bruce Babcock. Informa Economics, "Determination of Alternative Repayment Rates for Marketing Assistance Loans," final report dated December 22, 2006; Interagency Agreement between USDA, FSA and U.S. Department of Treasury, The Federal Consulting Group, dated September 28, 2006; USDA, Economic Research Service, "Analysis of the U.S. Commodity Loan Program with Marketing Loan Provisions," April 2001; County Office Operations Review Program FY 2005 Report, issued February 2006; Target Reviews; OIG Audit 03601-0046-TE, "FSA's Compliance with the Improper Payment Act of 2002," issued March 21, 2005, closed June 20, 2005; OIG Audit 03601-0047-TE, "Non-recourse Marketing Assistance Farm-Stored Loans," issued September 13, 2006; Independent audit conducted by KPMG, "Commodity Credit Corporation's Financial Statements for Fiscal Years 2006 and 2005," issued November 13, 2006