Detailed Information on the
Agricultural Commodity Grading and Certification Programs Assessment

Develop value-added services to support agricultural marketing by establishing procedures to guide AMS audit verification activities.

Improve program efficiency and reporting accuracy by implementing a single, uniform system for financial billing and tracking for voluntary user fee activities (CAMS).

Adjust the fee structure to recover the costs associated with reviewing, modifying and developing standards beginning in FY 2006. This change is the result of the recognition that the grade standards are integral to the agency??s fee-for-service grading program.

Develop improved annual and long-term performance measures.

Develop improved baselines and targets that demonstrate progress towards achieving the programs stated performance goals.

Measure: Unit cost of providing the grading and certification service per hundredweight of product/commodity graded through 2009 (after inflation).

Explanation:AMS delivery of grading and certification services must remain affordable to customers over long-term despite cost pressures.

Measure: Annual grading fee (after inflation) cost per hundredweight of product graded

Explanation:AMS delivery of grading and certification services must remain affordable to customers every year despite cost pressures

Measure: Accuracy rate for application of USDA grading and certification services.

Explanation:Evaluates the minimum acceptable accuracy rate percentage for application of USDA grading and certification services.

Measure: Volume of commodity graded through the grading and certification program, measured in pounds (billion lbs).

Explanation:Total demand for AMS grading and certification services, measured in pounds graded

Is the program purpose clear?

Explanation: The purpose of the grading and certification program is to facilitate marketing through the application of uniform grade and quality standards. AMS grading programs facilitate the marketing of agricultural products, and provide the foundation for transparent business transactions. AMS provides these services with impartiality and strict oversight to ensure uniform application of grades and standards.

Evidence: Legislative authority provided by Agricultural Marketing Act of 1946 (7 U.S.C. 1621-1627), Sec. 203 (h): "To inspect, certify, and identify the class, quality, quantity, and condition of agricultural products when shipped or received in interstate commerce, under such rules and regulations as the Secretary of Agriculture may prescribe, including assessment and collection of such fees as will be reasonable and as nearly as may be to cover the cost of the service rendered, to the end that agricultural products may be marketed to the best advantage, that trading may be facilitated, and that consumers may be able to obtain the quality product which they desire, except that no person shall be required to use the service authorized by this subsection." Additional authority provided for specific commodities by the Cotton Statistics and Estimates Act of 1927, U.S. Cotton Standards Act, Tobacco Inspection Act, Tobacco Adjustment Act of 1983, and the Organic Foods Production Act of 1990.

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

Explanation: AMS grading services provide buyers and sellers of agricultural commodities with a vehicle to ensure the application of a common, reliable language that communicates quality, quantity, and value. AMS grading programs are mostly voluntary (with the exceptions of tobacco) and the service will continue as long as the market recognizes a need for verification of agricultural product quality based on either inspection of the goods to be traded or of production processes for quality assurance. Due to grade requirements, many buyers and sellers of commodities covered by Marketing Orders and Agreements utilize AMS grading services.

Evidence: The continuing demand for AMS grading services demonstrates that these services are of value to the agricultural industry. AMS monitors the changing needs of the agricultural industry and offers new or alternative fee-supported quality and contract verification services to provide evolving, on-going support for agricultural marketing.

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

Explanation: AMS cooperates with programs in all 50 States and Puerto Rico in providing grading services for fresh fruits and vegetables, with 48 States to provide half of the licensed poultry graders, for certain processed products such as with Florida for orange juice, and to provide dairy product grading and dairy plant sanitation inspection in a variety of States. AMS also cooperates with other Federal agencies to provide resources such as cross-servicing activities with FSIS in livestock and poultry processing facilities under inter-agency agreements. The meat grading and certification program has entered into cooperative agreements with 16 States and universities to provide official grading and certification services.

Evidence: The Agricultural Marketing Act of 1946, Sec. 203(h) states that "Any official certificate issued under the authority of this subsection shall be received by all officers and all courts of the United States as prima facie evidence of the truth of the statements therein contained."

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

Explanation: Standardization development costs are not covered by user fees. The purpose of AMS' grading program is to facilitate marketing of agricultural commodities and as a result, it is appropriate to charge recipients of the service for the development of the grade standards. In the majority of cases, AMS develops grading standards at the request of industry and with substantial industry input.

Evidence: One way to strengthen the efficiency and transparancy of AMS grading programs would be to charge industry beneficiaries for the full cost of the program, including standards development/modification.

Is the program effectively targeted, so that resources will reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: AMS commodity grading and certification program services are provided on a voluntary basis (except for tobacco) often at the request industry groups. Through the agency's website, AMS provides potential customers with detailed information on available grading and certification services and also provides consumers with information on how to use and understand grade standards for their purchases.

Evidence: The program benefits consumers and agricultural commodity traders by providing them with evidence of the quality of the AMS-graded products they purchase. The program is designed to reach the highest practicable percentage of target beneficiaries to take advantage of economies of scale. This means that AMS services should be made available to as great a number of customers as possible, since hourly costs decrease as operational volume increases. Intended beneficiaries are those requesting and paying for services.

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 Commodity Grading and Certification program's long-term measure evaulates the minimum acceptable percentage accuracy rate for application of USDA grading and certification services.

Evidence: AMS must ensure a high level of accuracy and consistency in the application of quality standards. AMS will work to improve its accuracy rate over time by strengthening performance monitoring and supervision.

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

Explanation: The performance targets that accompnay the program's long-term measure set a goal of improving the accuracy rate by 8 percent by 2010. This is an ambitious target because the agency will have to improve the performance of 1,300 permanent employees as well as part time and seasonal graders that work with almost 300 billion lbs of product.

Evidence: In addition to the targets that relate to the program's long-term measure, the agency's Strategic Plan includes a baseline of grading costs at 8 cents per hundredweight of product graded and the agency's goal to maintain that level through 2009.

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: The Commodity Grading and Certification program's annual measure considers the total annual demand for the agency's grading and certification service by looking at the volume of commodity graded (measured in poundage).

Evidence: Explanation'the volume of commodity graded demonstrates the ongoing interest and need for program services by the agricultural industry. Because most AMS grading programs are voluntarily requested and fee-supported, the level of demand for grading, certification, and audit services verifies the agricultural industry's recognition that an unbiased and accurate assessment of quality adds value to their products.

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

Explanation: Commodity grading and certification services are offered on a voluntary basis, so customers can discontinue AMS grading at any time. Also, there are a great number of external factors that can reduce the level of work requested (weather, markets, customer preferences, changes in business methods, etc.) by grading customers. Consequently, AMS must continuously monitor and update the fee services offered to ensure that they add value to the product (as perceived by the industry/customers) at fee rates that are acceptable to those customers. Therefore, this target is ambitious because it requires not only that the programs maintain the current level of demand for service, but aims for an increase in customer demand.

Evidence: Each commodity program manager sets internal targets for service delivery, which depend on the type of service, delivery mechanism (i.e., in-plant contract services vs. on-demand grading by lot). Program managers review profit/loss data monthly and the agency reviews the financial status of all fee activities on a quarterly, annual, and biannual basis.

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 majority of fee services are delivered by Federal employees. AMS also works with State agencies to provide fee services for some commodities. To ensure that they meet the program goals and requirements, AMS establishes cooperative agreements with State agencies. Employees of State programs authorized to apply USDA quality labeling are Federally supervised and AMS provides standardized training for State personnel offering Federal grading and certification services.

Evidence: AMS works cooperatively with FSIS on meat and poultry labeling issues under agreements between the agencies which outline each agency's responsibilities. AMS graders are also cross-licensed with FGIS and National Marine Fisheries for inspection services. AMS has a memorandum of understanding with FDA to ensure Good Manufacturing Practices at food processing facilities for processed fruits and vegetables. AMS audits cooperating State agencies to ensure that their activities under applicable cooperative agreements are consistent with annual and/or long-term program goals.

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: Currently, program evaluation is obtained through meetings with industry advisory committees which provide their input on program activities.

Evidence: The purpose of Section 203(h) of the AMA of 1946 is for AMS to provide a service to industry that will help it market its products in a manner that is beneficial (more efficient) to buyers and sellers. The users of AMS' grading programs are the most helpful critics. They observe and pay for the services provided and are quick to identify problems and inefficiencies.

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 guidance states that a Yes answer would reflect program budgeting based upon levels to meet annual and long-term targets. The program received a No for this question because it does not have adequate annual and long-term performance goals.

Evidence: Part guidance states that evidence can include documentation of how the budget request directly supports achieving performance targets.

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

Explanation: The programs performance and budget planning processes are integrated.

Evidence: The financial status of fee programs is reviewed on a quarterly basis with a more formal multi-year fee analysis being prepared annually. The major component of increased cost to grading programs is the annual Federal salary increase. The grading programs have been able to maintain an inflation adjusted constant $.08 cost per hundredweight for several years and are expected to be able to continue into the future.

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: AMS's user fee programs have implemented program-level plans that include requirements for periodic internal and external audits designed to measure the accuracy of product grade placements. The audit data provides a basis for management actions. AMS collects and reviews profit/loss data monthly, quarterly, and annually as well as cost per hundredweight annually. AMS frequently discusses program performance with industry advisory groups and trade associations to gather information for program management and performance improvements.

Evidence: AMS graders work directly in the companies for which they provide services. This allows agency representatives to engage customers in dialogue and meet the performance expectations of the industry. AMS analyzes the program's financial peformance based on detailed data generated by the National Finance Center accounting system and reports to program managers on a monthly basis and agency leaders on a quarterly basis the projected financial status for the year and subsequent years to assist management decision-making.

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: AMS fee program managers at all levels are held directly accountable for cost, schedule, and program performance. These factors are included in their performance standards which are rated semi-annually through the performance evaluation process. Federal and State partners are held to the requirements of their reimbursable or cooperative agreements.

Evidence: Federal managers are held accountable for cost, schedule, and program performance. This accountability is reflected in performance standards for these managers who are evaluated semi-annually for their ability to carry out these responsibilities.

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

Explanation: AMS fee programs have strict financial controls to track revenues and expenditures. AMS follows the requirements set out by the Office of the Chief Financial Officer and the FFIS accounting system. Requirements for program partners are included in cooperative and reimbursable agreements. AMS closely monitors revenue and expenditures at both the program and the agency level. AMS' customers keep a close watch on fee rates for these programs through advisory committees and trade meetings.

Evidence: AMS reviews monthly, quarterly and annual financial reports, prepares quarterly status reviews, works with OIG auditors on annual financial audits, and prepares annual and biennial reviews of fees. Program employees and managers are responsible for obligating funds in a timely manner and verifying entries into the accounting system as required by the agency's Funds Control Directive. Program managers are held accountable by agency leadership through performance evaluation. AMS' budget office reviews the program's actual revenue, spending, and reserve balances on a quarterly basis and reports the status to the program managers and the AMS Administrator.

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: AMS user fee programs are divided by commodity (cotton, dairy products, fruits and vegetables, livestock, poultry, etc.) and each area is accountable for monitoring its own financial performance. Each commodity grading program's financial performance is reviewed quarterly by the Office of the Administrator. Each program, in turn, requires its principal operating units - typically geographic - to monitor financial performance (revenue and expenses) and to adjust activities to enhance efficiency. The program measures efficiency through per-unit costs and timeliness of service.

Evidence: Program managers routinely review information such as staff utilization rates, financial status (profit/loss), and cost per unit by office, regional area, service type, etc. in managing their program activities. AMS fee programs follow Federal procurement guidelines for gathering cost comparisons when equipment and service acquisitions exceed the authorized threshold level. AMS IT staff provide advice to program personnel regarding information technology issues.

Does the program collaborate and coordinate effectively with related programs?

Explanation: To achieve the program's performance measures, AMS collaborates and coordinates its activities with State programs wherever possible. This collaboration avoids duplication of presence, maximizes resource needs, and reduces cost. AMS grading programs currently have 139 cooperative agreements with State Departments of Agriculture. AMS also coordinates agency fee-program activities with FSIS inspection activities in meat and poultry plants.

Evidence: AMS and FSIS cross-train and cross-utilize employees in poultry and livestock facilities and with FGIS for grain under cooperative agreements to maximize the efficiency of both agencies. The program collaborates with the Department of Defense to ensure the quality and wholesomeness of food products provided to service men and women and the National Marine Fisheries Service to provide facility auditing services. AMS has a number of memoranda of understanding with the Food and Drug Administration under which the agency monitors certain food production facilities and certain commodities for compliance with FDA requirements and/or guidelines.

Does the program use strong financial management practices?

Explanation: AMS follows the financial management procedures established under the USDA accounting system (FFIS), which requires extensive documentation of entries. AMS also holds program managers accountable for the financial status of their programs by agency directive and personnel performance standards. For all services, voluntary and mandatory, Agency managers are able to deny services to accounts which become delinquent in order to assure payment collections.

Evidence: AMS completed an erroneous payment review in 2004 under the guidance of USDA's OCFO as a component of USDA's Department-wide review. This review determined that significant erroneous payments were highly unlikely for this program. Financial information is verified by program employees for accuracy on a monthly basis as required by the AMS Funds Control Directive, and formally reviewed by agency management on a quarterly basis.

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

Explanation: To address questions regarding program integrity and uniformity, AMS established a separate training and development center in Fredericksburg, VA. New personnel receive as much as ten weeks of in-residence training regarding professional responsibility and technical matters. In addition, current personnel receive as much as two weeks annual refresher training. The center will also train AMS employees on ISO 9000 and has begun developing the training modules.

Evidence: AMS operates a training and development center in Fredricksburg, VA which will train AMS employees on ISO 9000 standards requirements once implemented. New personnel receive as much as ten weeks of in-residence training regarding professional responsibility and technical matters. In addition, current personnel receive as much as two weeks annual refresher training.

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

Explanation: In FY 2004, AMS programs met the ambitious targets for accuracy and is continuing to evaluate its graders against those targets

Evidence: AMS has maintained its grading fee rate per hundreweight (in constant dollars) of product graded from FY 2001 - FY2003. The agency monitors this goal over the long term by annually assessing the cost of services per hundredweight of product graded, net of inflation. This measure is reported in the Budget Estimates for the U.S. Department of Agriculture.

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

Explanation: Agency fee programs have achieved their goals. AMS not only tracks grading poundage data as a management measure, but uses this data to calculate its efficiency measure of cost per hundredweight graded. These targets are also an integral part of revenue assessment and fee-setting.

Evidence: AMS' Strategic Plan establishes the goal of maintaining a constant fee level, measured by the cost per hundredweight of product graded. These results are included in the Budget Estimates for the U.S. Department of Agriculture. An AMS directive establishes responsibility for cost recovery and reserve targets to be maintained through fee collection. Program managers are responsible for meeting that goal and the financial status of each fee activity is reviewed quarterly, annually, and biannually. The program has established internal strategic plans by commodity group which describe their service improvement goals and targets. The level of demand for program services is monitored on an ongoing basis by program managers, reported to agency managers quarterly as part of the programs' financial status, and compiled for all programs on an annual basis.

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

Explanation: The agency's target is to keep the cost for services level over the term of the AMS' Strategic Plan (2004 though 2009). The program has met this goal in past years and expects to accomplish it again by offsetting cost pressures such as pay increases with increased efficiency of service delivery.

Evidence: AMS has maintained its grading fee rate per hundreweight (in constant dollars) of product graded from FY 2001 - FY2003. The agency monitors this goal over the long term by annually assessing the cost of services per hundredweight of product graded, net of inflation.

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

Explanation: For most commodities, only Federal or licensed State employees apply Federal grade labels and no comparable State or private grading programs exist. AMS maintains that continued requests for service validate the value and need for Federal grading programs. Since AMS grading programs are voluntary, the agricultural industry can request any existing private entity to supply grading services. Private quality labeling is used for some commodities, but these are not widespread because they do not provide the same domestic or international trading recognition as Federal grades. International traders frequently include the requirement for Federal verification of product quality in their contracts. There are complementary Federal and Federal/State partnership programs for Fresh fruits and vegetable grading. AMS graders perform grading services at centralized terminal markets and supervises authorized State employees who apply Federal labeling on fresh fruit and vegetables (Federal/State fresh fruit and vegetable inspection) at shipping points (widespread packing locations).

Evidence: The Agricultural Marketing Act of 1946, Sec. 203(h) states that "Any official certificate issued under the authority of this subsection shall be received by all officers and all courts of the United States as prima facie evidence of the truth of the statements therein contained." To the extent that comparable programs exist, AMS periodically reviews its fee structure and has determined that the program's fees are comparable to those of other entities.

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

Explanation: AMS is in constant contact with industry groups and advisory committees. The Secretary appoints industry advisory committees on fruit and vegetable, cotton, and tobacco grading services. AMS managers and specialists regularly attend and participate in industry meetings so that they can monitor changing customer needs and expectations and modify services as needed. A recent and growing example of AMS response to industry/Advisory Committee requests is the emergence of AMS audit-based grading services. These generally require fewer AMS employees to carry out, and allow the firm or business requesting them to assume greater responsibility for quality management of production processes and products produced. Formal plans are developed that specify the responsibilities of participating firms and AMS in order to ensure quality results. Continued increased requests for Federal grading services and the absence of industry complaints demonstrate that AMS has been able to tailor its services to meet the needs of the industries served.

Evidence: The agency is in the process of adopting ISO 9000 standards. Once adopted, these standards will require AMS to review, document, and revise processes. However, because the grading services provided by AMS are not currently operating under an ISO 9000 certified system, the agency cannot receive credit for initiatives under consideration.