Detailed Information on the
Federal Crop Insurance Assessment

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

Developing other efficiency measures that incorporate the whole taxpayer cost (administrative, indemnities, underwriting gains, premium subsidies and company reimbursements) needed to run the program.

Achieving proposed legislative changes to make the program more effective and efficient by covering more acres at a lower subsidy cost.

Measure: Number of risk management tools which address pasture, rangeland, and forage production needs. (Cumulative)

Explanation:

Measure: Increase the value of risk protection provided to agricultural producers through Federal Crop Insurance Corporation (FCIC) sponsored insurance. (dollars in millions)

Explanation:The value equals the amount of insurance in force protecting the agricultural economy. This adjusted liability measure uses an average of the 2000 to 2004 commodity prices for the ten major crops for all years listed.

Measure: The ratio of Agency Administrative and Operating Expenditures (A&O) to the value of risk protection provided.

Explanation:

Measure: The ratio of net delivery cost to the value of risk protection provided.

Explanation:The net delivery cost include the RMA A&O expenditures, producer premium subsidies, company A&O (including CAT LAE), and the RMA underwriting gain or loss. Whether or not RMA experiences an underwriting gain or loss in any given year is largely beyond the Agency's control as it is primarily a function of weather. In practice, this measure is going to show significant year-to-year variability, none of which is attributable to changes in the Agency's actual efficiency in delivering the program.

Measure: Increase the participation rate for the ten staple crops by a half a percent annually.

Explanation:This is the percentage of planted acres of principal crops as reported by NASS that are insured. The ten staple crops include corn for grain, soybeans, wheat, cotton, sorghum, barley, rice, potatoes, tobacco, and peanuts.

Measure: The ratio of the total cost of administering the program to the value of risk protection provided.

Explanation:The total cost of administering the program includes the Administrative and Operating Expenses (A&O) to the companies, plus producer subidy,and Agency A&O. The value of risk protection provided is the amount of insurance in force.

Measure: Value of risk protection provided to agricultural producers in underserved States ($ in million)

Explanation:These states are characterized as traditionally having and continuing to have a low level of Federal crop insurance participation and availability. They are: Maine, New Hampshire, Vermont, Maryland, Pennsylvania, New York, New Jersey, Massachusetts, Connecticut, Delaware, Rhode Island, West Virginia, Nevada, Wyoming, & Utah.

Is the program purpose clear?

Explanation: The purpose of the program is to promote, support, and regulate sound risk management solutions to strengthen and preserve the economic stability of American agricultural producers.

Evidence: The Federal Crop Insurance Act (FCIA), as amended (7 U.S.C. 1501 et. seq.), and the Crop Insurance Program regulations at 7 C.F.R. 400, et. seq. Agency Mission Statement published on the RMA Website.

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

Explanation: "Without this program, insurance as a risk management tool for producers, would be prohibitively expensive and, in effect, non-existent. This is due in part to the fact that catastrophic losses are the norm rather than the exception with crop losses. For instance, when drought strikes it will generally impact a large geographic area. The regular widespread loss areas common to the agriculture industry prevented the commercial development of crop insurance. Therefore, subsidies are necessary to make the premiums affordable. "

Evidence: Only crop hail policies were commercially available to the general farming community prior to the introduction of crop insurance in the 1930's. The economic devastation from the dust bowl era experienced by many in the agriculture community has not been replicated as a result of a variety of programs including Crop Insurance. Crop insurance plays a large and essential role in the Federal government's efforts to ensure the economic stability of agriculture. Agricultural lenders frequently require crop insurance as collateral for farm loans and numerous Congressional testimonials have been given as to the essential and growing role of crop insurance to stabilize farm income during poor growing years or in the face of disaster.

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

Explanation: "The Federal Crop Insurance Corporation (FCIC) is restricted by the FCIA from offering insurance available in the private sector. There is no other like program comparable to crop insurance at the Federal, State, or local level, except for the NAP program administered by the Farm Service Agency which covers production risks not yet covered by the Federal Crop Insurance Program. "

Evidence: There are no other comparable insurance programs in the private market or in the public sector. Evidence data from the private sector are the lack of redundant policies and regular requests by producers for the FCIC to develop risk management tools in the absence of private or public alternatives. FCIC Board requires such evidence to approve new tools (see FCIC new product submission regulation). Evidence data from the public sector would be the flood program and NAP which do not cover risks covered by the Federal Crop Insurance Program.

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

Explanation: The crop insurance program is a valuable tool for agricultural producers. However, as evidenced by the Administration's proposals in the President's Budget as far back as FY 2003 requests, there is room for changes that would make this program more effective and efficient. In addition, the Administration's position during the most recent SRA re-negotiation was much farther reaching than what was finally agreed to, indicating that there are ways to change the program that would provide improvements. Further, given that on the horizon the Premium Reduction Plan (PRP) is expected to be opened up to all companies and that they will all eventually offer this option to the farmer, it is clear that there are additional efficiencies to be gained. This program is effective at providing a risk management tool, but there is no evidence that can show that this is the best way, in terms of taxpayer dollars, to achieve this level of risk protection for the farmer.

Evidence: "FY 2003 throught FY 2006 President's Budgets (proposals have included capping underwriting gains, lowering the administrative expense reimbursements to the companies, and lowering the premium subsidies to the farmer). RMA's Standard Reinsurance Agreement. Premium Reduction Plan Proposed Rule. "

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

Explanation: "RMA's portfolio is designed to assure that to the greatest extent possible a product is available to meet the needs of ag. producers both large and small. Insurance products are delivered through private insurance providers who maintain an agent workforce in the locations where intended beneficiaries live and farm. Underserved/targeted areas are helped through such means as additional subsidies, education and outreach/partnering. RMA established $4.5 million in cooperative agreements to benefit States that are underserved and $4.2 million in financial assistance to encourage participation in 15 targeted States. RMA has partnered with state departments of agriculture, extension service and private sector parties to reach specialty crop producers, small and limited resource producers and producers in states designated as underserved. In addition, RMA continues to develop new policies. During 2004, RMA awarded over $12 million in contracts to expand the number of crop insurance tools available to U.S. agricultural producers. Currently, RMA has several contracts underway focused on providing products for the most significant non-insured specialty crops. RMA continually strives and succeeds in expanding its targeted beneficiaries through these efforts."

Evidence: 1998 and 2005 Standard Reinsurance Agreements (SRA) require private sector delivery partners to serve all farmers who seek crop insurance; Statement of RMA Administrator before Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies, March 3, 2005; FCIC Product Portfolio Review Phase 2 Report; Program announcements for funding of new product development, education, outreach and non-insurance tool development; Attendance records at education and outreach and testimonials of their effectiveness; Increases in program participation and buy up insurance; and large indemnities paid in drought years.

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 specific long-term performance measure that focuses on outcome is to: "increase the value of risk protection provided to agricultural producers through FCIC sponsored insurance". The term "value" denotes the amount of insurance in-force protecting and stabilizing the agricultural economy. As the Program progressed to insuring not just the major crops, but also livestock, forage, and specialty crops etc., RMA designed this measure to reflect an overarching quantifiable outcome. This demonstrates the meaningful connection of its various activities to its program purpose of strengthening and preserving the agriculture economy. Additional long-term measures include increasing the number of risk management tools which address pasture, rangeland, and forage production needs from 2 to 4 by 2009.

Evidence: "This measure has been vetted with the Department, FCIC, and OMB. The Measure is also included (with abbreviated wording) in the USDA Annual Performance Plan 2004, the USDA 2004 P&AR, and the RMA 2006 Budget Explanatory Notes. "

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

Explanation: RMA and USDA started using the above mentioned long-term outcome measure during the FY 2004 cycle of GPRA related activities. Due to crop price fluctuation that greatly impacted the targets, RMA recently refined the methodology to establish its annual targets by normalizing or adjusting the data using a constant price for the ten major crops for all years listed. This was also done to ensure that targets being set were ambitious and not just the result in price increases. The new 2002 baseline is $39,955 million with the projection for 2009 is $43,765 million.

Evidence: The RMA draft 2005-2009 Strategic Plan and consultation with the RMA OMB Examiner.

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: "RMA uses increasing the value of risk protection provided as both a long-term (LT) and annual performance measure and has set annual and LT targets. This ensures the linkages required and ensures that progress towards meeting the goal is monitored quarterly, annually, and in LT cycles. By measuring the value of protection provided, RMA can illustrate the use of this major risk management tool by producers of various commodities. RMA has other specific annual performance measures that demonstrate progress in reaching its LT goal: the participa- tion rate for the ten staple crops using insured acreage and the value of risk protection provided to agricultural producers in underserved States. Insured acreage, participation, and activity in underserved States are some of the various areas that have impacted the value of risk protection provided. Maintaining past gains with in these areas serves to illustrate whether or not the Program products remain viable to producers and help determine whether RMA can reach its LT goal through additional projected growth with the introduction of new or combined products currently in the development phase. "

Evidence: "Annual outcome performance measures contained in this document include: a) increase the value of risk protection provided to agricultural producers with targets (in millions) of $41,866 for 2005, $42,417 for 2006, $42,855 for 2007, $43,253 for 2008, and $43,765 for 2009; b) participation rate for the ten staple crops with annual targets that increase .5% annually starting with a baseline of 78% in 2003; c) the value of risk protection provided to agricultural producers in underserved States with targets (in millions) of 1048 in 2005, 1148 in 2006, 1148 in 2007, and 1148 in 2008 and 2009. The RMA draft 2005-2009 Strategic Plan; consultation with the OMB Examiner; and the RMA 2006 Budget Explanatory notes; USDA 2004 P&AR. "

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

Explanation: "RMA has established baselines and ambitious targets in its Strategic Plan for several performance measures. The targets show continued growth at a determined pace related to the market penetration that already exists. For example in its outcome measure, RMA has set an approximate 2% annual growth target to increase the value of risk protection provided to agricultural producers over a multi-year span. The value is already in the billions of dollars so a 2% rate is significant especially when considering actuarial soundness and available markets. RMA set a .5% annual growth target for participation in the ten staple crops that is an area where RMA has been heavily invested in the past and the market is considered by many to be saturated. RMA has also been very successful in increasing the value of risk protection provided to producers in underserved States through partnerships with growth rates exceeding its original 5% annual targets. RMA is projecting, that due to its targeted states program, it will be able to maintain the value of risk protection provided in the targeted states in spite of declining commodity prices. "

Evidence: For explicit information pertaining to annual targets, please see 2.3 above. Additional information regarding performance data including baselines, actuals, and targets are submitted with this document; RMA draft 2005-2009 Strategic Plan; the RMA 1st Quarterly Report; the RMA 2006 Budget Explanatory Notes; Portfolio Review Report, Phase 2.

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: "RMA's primary partners are the private sector insurance companies that sell and service the crop insurance policies nationwide. By their acceptance of the SRA, and their ongoing discussions with RMA, they are involved with and committed to the long-term goals of the Program. Additionally, for RMA's commodity partnership agreements and community outreach, targeted States, and cooperative agreements, funding is awarded through competitive processes and recipients are required to enter into a partnership agreement committing to complying with the terms of the agreement and implementing stated objectives. Private sectors product developers are held to specific standards for products and subjected to rigorous scrutiny for consistency with program goals and statutory requirements by expert reviewers and the FCIC Board of Directors before a product is approved and the development and maintenance expenditures are reimbursed. "

Evidence: "The RMA 2005 SRA; 2004 RFAs for Education, Outreach and Non-insurance tool development; Executed Partnership Agreements between private sector product developers, expert reviewers, and RMA; Compliance reviews; data mining results; FCIC Board minutes and product submission regulations; and Private sector Insurers newsletters and advertisements. "

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: The Review of the FCIC Product Portfolio, a 2003 independent evaluation, focused on underwriting, subsidies, new product development, potential redundancies, and gaps in the Program. It provided models for comprehensive risk assessments of individual crops and livestock enterprises. These can be effectively used in developing feasibility studies and new products, and is leading to the establishment of a framework for organizing and prioritizing expansion and new product decisions. Simplification by combining five revenue products into one is an example of the use of this evaluation. Also, GAO periodically reviews selected aspects of the program. RMA is evaluated by USDA's OIG on a regular basis, which is published in the OIG Annual Plan. The audits are independent, frequent, and comprehensive in scope. They cover program, management, technological, and financial areas. The Program is annually audited, typically by a big six accounting firm, to assure that the program projection and business are fiscally sound.

Evidence: "FCIC Product Portfolio Executive Report dated May 27,2003; the OIG schedule of RMA audits that can be viewed in the OIG Annual Plan Appendix at www.usda.gov/oig/; USDA OIG Annual Crop Insurance Audit Report, FCIC RMA's Financial Statements for FY 2004 and 2003, #05401-13-FM, November 2004; FCIC Board actions recorded in the Board minutes; GAO reports. The FCIC Board of Directors, comprised of six outside and four inside Directors, exercises regular and in depth independent reviews of all FCIC activities and provides strategic and operational direction to the manager to ensure program purposes and goals are fulfilled and necessary corrective actions taken. This is done through scheduled quarterly and annual reports to the Board. In an evaluation of the education program in the targeted States, SJH & Company, Inc. "Services to Provide Targeted States Crop Insurance Education and Information Program" September 2004, stated that "progress has been made with regard to program effectiveness in raising producer awareness and skill levels, and in the use of effective methods for delivering education and information by professional stakeholders"". "

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: RMA's Executive Managers have established Program priorities based on the Strategic Plan. RMA's 2006 budget request comprehensively reflects these priorities in clear terms. However, RMA's A&O request does not factor in the amount/level of underwritten insurance as part of their request. The Mandatory Federal Crop Insurance Fund projects the likely indemnities in relation to the total amount of insurance underwritten but does not reflect in a meaningful and transparent way the long-term and annual performance measures.

Evidence: "RMA maintains the following source documents to support development and reporting of budget estimates with linkage to performance goals: Staff Year Dispersion by Objectives, IT Investments by Objectives, All other Resources by Objectives; RMA 2006 Budget Explanatory Notes; Annual budget request to OMB and FCIC portion of President's Budget; and Congressional testimony to appropriations and authorizing committees. "

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

Explanation: RMA has worked diligently to correct the deficiencies noted in its last PART examination. In-house personnel conducted all headquarters and field communications, strategy sessions, planning meetings etc. The RMA Administrator conducted listening sessions around the country to gather customer input. RMA has consulted with the USDA OCFO and OBPA, the FCIC Board of Directors, and most recently with the OMB Examiner prior to finalizing the Plan. RMA Administrator conducted management level strategic planning exercise from which a clear mission, vision, and goal statements were developed, vetted by the entire Agency and reviewed and approved by the FFAS Undersecretary and the FCIC Board. RMA developed the Secretary's Risk Management Initiative that incorporated these goals into specific action steps many of which have been accomplished and some continue to be implemented. A revised agency strategic plan has been adopted and is in the Departmental concurrence phase.

Evidence: USDA 2004 P&AR; RMA draft 2005-2009 Strategic Plan; RMA quarterly reports to USDA; RMA 2006 Budget Explanatory Notes; Administrator's Presentation on RMA web-site; and RMA website published mission statement.

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: "Participation information, specifically, liability and acreage are some of the data RMA uses to determine performance. RMA's delivery partners provide this information to RMA on a daily basis at a producer level. RMA implements a full spectrum of electronic data information edit checks to provide reasonable assurance that the information received is timely and credible. In addition, RMA has instituted an internal quarterly reporting system to ensure that annual performance output measures are monitored to manage the program. One specific example of performance measurement monitoring is the development of the adjusted methodology to illustrate performance data related to value of risk protection provided through the crop insurance program. RMA realized that the data contained in earlier performance reports were impacted heavily by the fluctuation of commodity prices. These fluctuations caused mistaken impressions, both positive and negative, of RMA performance. In order to alleviate this, RMA designed a "normalized" value that uses an average of the 2000 through 2004 ten staple commodity prices that comprise the bulk of the liability or value. "

Evidence: The SRA and Manual 13 provide specifications for the type and timing of required data reporting. Current information received from the companies includes price and coverage level, insured acres, premium, actual production history data, subsidy and indemnity amounts. Data received are validated through the Data Acceptance System and accepted data are used as the basis for payment of expense reimbursement to companies, as well as for analytical and statistical reporting within RMA.

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: "The Standard Reinsurance Agreement (SRA) contains specific language regarding types of data to be reported and timeliness of reporting. Requirements of timely reporting center around critical policy and administrative dates associated with the crop insurance cycle. Penalties are imposed for late reported data and in extreme cases of non-compliance RMA has the option of canceling the SRA and imposing other applicable penalties (debarment, etc.). RMA routinely reviews policies with indemnities to determine the accuracy of the actual loss determinations and can assess additional penalties, over and above denial of reinsurance, if a company exhibits a pattern and practice of non-compliance (2005 SRA section IV.H.). Under the terms of the basic provisions, companies who do not process timely indemnities for their policyholders must pay interest at the rate prescribed in the applicable Basic Provisions. One example of RMA efforts to hold companies accountable for timeliness and accuracy is the nearly $4 million in penalties which have been assessed against insurance companies for late filing of sales reports from 2002 to the present. Backup tables are available documenting penalties imposed."

Evidence: In accordance with the SRA and the FCIA, reinsured company expense reimbursements are reduced if sales or acreage information is not reported within specified time periods based on when they should have received the information from the producers (e.g. individual crop policy provisions require producers to apply for insurance by specified sales closing dates and report acreage planted by certain acreage reporting dates).

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

Explanation: "Section 516(a) of the FCIA authorizes RMA to be appropriated such sums as are necessary to cover administrative and operating expenses of the Corporation for sales commissions of agents and premium subsidies, including the administrative and operating expenses of an approved insurance provider. Additionally, RMA routinely conducts reviews of each insurance provider's Annual Plan of Operations annually to ensure that any financial weaknesses are addressed. ARPA 2000 authorized funding for new product development, other risk management tools, education, outreach, and related support for products. The Agency and the FCIC Board regularly seek and rely on Office of General Counsel (OGC) opinions and OGC, OBPA, and OCFO guidance in the obligation of funds. Regular reviews of Agency budget expenditures and progress toward financial targets are conducted with the Executive Management Team (EMT) comprised of all operating division heads and with staff functions. IT expenditures are prioritized and funding and spending are monitored by the IRM Review Board comprised of the EMT, Chief Information Officer, and Chief Financial Officer. "

Evidence: "The FCIA, Section 516(b) identifies the types of expenses such as premium subsidies and indemnities, and all administrative and operating expenses of agent commissions, and approved insurance providers. In accordance with the SRA, amount of premium sold is the basis for administrative expense reimbursement. Producer premium data is electronically audited by RMA and used to calculate the amount of expense reimbursement and premium subsidy due. Payments are made on a monthly basis. Indemnity payments are made by the companies to producers in accordance with policy terms (e.g. within 60 days of signature date on the claim). On a daily basis, and as companies issue checks to the producers, indemnity information is also submitted to RMA to fund escrow accounts. Accepted indemnity information is funded and paid on a daily basis. RMA Financial Analysis Template Reports; RMA RFA's for education, outreach and non-insurance tools partnerships clearly state the purpose of funding and independent panels ensure that only those who meet the requirements are chosen for funding. "

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: "RMA has a number of cost-saving procedures. The Simplified Claim Process (SCP) Pilot streamlines the loss adjustment process by allowing a policyholder to certify harvested production and acreage when certain underwriting conditions are met. SCP reduces administrative costs without exposing the crop insurance program to excessive or unacceptable risk. RMA has also initiated data mining to promote efficiency by assisting in the detection of anomalies in program vulnerabilities and, with the assistance of the Farm Service Agency offices, conducts growing season spot-checks to ascertain the cause of the results. RMA believes that over $320 million in estimated savings for the last four years is attributable to this process. They also have the premium reduction plan (PRP). PRP allows a company to offer crop insurance at a discount, provided that the discount is a direct result of the company being able to operate below what the government reimburses it to operate the program. This has been in effect through procedures since 2003. RMA has written formal regulations that will more firmly establish this program and will likely result in more companies offering PRP, thereby promoting and sustaining efficiency within the crop insurance companies. "

Evidence: Authorizing statute, regulations and the Standard Reinsurance Agreement that set up all the rules, regulations and procedures that RMA has in place such as the Simplified Claim Process Pilot, Data Mining and the Premium Reduction Plan.

Does the program collaborate and coordinate effectively with related programs?

Explanation: FCIC is restricted by the FCIA from offering insurance available in the private sector. There is no other like product to crop insurance at either the Federal, state or local level. However, RMA does partner with the Cooperative State Research, Education, and Extension Service (CSREES), the Commodity Futures Trading Commission, the USDA National Office of Outreach to provide risk management education to farmers and ranchers, the National Association of Insurance Commissioners, and State Insurance Commissioners. RMA serves on the Department Drought and Soybean Rust Councils and interdepartmental IT development and regularly coordinates with FSA on disaster bill implementation. RMA seeks participation from other agencies in its annual panels to evaluate RFA responses for risk management education, outreach, and non-insurance tool development.

Evidence: "OMB's 2004 Budget Common Measure for disaster insurance participation rates used benchmarking for comparison due to the fact that there were no other comparable programs.Section 192 of the 1996 FAIR Act; MOUs with NASS, National Association of Insurance Commissioners, State Insurance Departments; Notes of meetings with CFTC, CSREES, NASS, etc.; Results of RFA panels. "

Does the program use strong financial management practices?

Explanation: RMA has strong financial management practices in certain areas and receives clean audits. RMA conducts financial reviews; deriving program error rates and related corrective actions; and data mining to identify fraud, which helps to minimize erroneous payments. However, they have farther to go in ensuring the reduction of erroneous payments. It has been difficult for them just to devise a credible erroneus payment rate that can be used to track performance and results in this area. Additionally, financial systems do not currently meet all statutory requirements for system security resulting in material internal control weaknesses and system non-conformances. In all of these areas, RMA has implemented remediation and corrective action plans with oversight and assistance provided by Department OCIO and OCFO. RMA's financial information is accurate and timely to support day-to-day operations.

Evidence: USDA OIG audit "Federal Crop Insurance Corporation/Risk Management Agency's Financial Statements for Fiscal Years 2004 and 2003" (05401-13-FM), Status of Funds reports, FFMIA remediation plan to USDA.

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

Explanation: "In all of these areas, RMA has implemented remediation and corrective action plans with oversight and assistance provided by Department OCIO and OCFO with all work scheduled to be completed by May 31, 2005. RMA is also addressing other challenges in program integrity through management audits. In 2004, RMA negotiated and issued a new SRA effective for 2005 and subsequent years. It includes a tightened monitoring system of SRA holders with respect to financial solvency and waste, fraud, and abuse issues and implements a rigorous plan of operation submission and review standards for all insurers. In addition, RMA is strengthening its ties with State regulators and the National Association of Insurance Commissioners (NAIC). RMA actively addresses any issues identified on the OIG management challenges list prepared from audit findings. RMA has a system for internal tracking of planned corrective actions and milestones for each item listed by quarter. All are on schedule or completed. Additionally, RMA routinely conducts reviews of each insurance provider's Annual Plan of Operations annually to ensure that any financial weaknesses are addressed. "

Evidence: "2005 SRA; FY 2005 First Quarter Progress Report to USDA; USDA P&AR; RMA Financial Analysis Template Reports; Management decisions reached on OIG audits and responses to GAO audits. "

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

Explanation: "RMA has seen dramatic growth in its program. In 2004, the economic risk coverage for American agricultural producers was $41.45 billion. This compares to $30.3 billion in 1999. The data are normalized to hold the prices for the ten major crops constant using 2000 to 2004 commodity price averages. In actual dollars, risk coverage for agricultural producers was $46.7 billion in 2004, which is up from $30.9 billion in 1999. "

Evidence: USDA 2004 P&AR; RMA, R&D Actuarial calculations.

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

Explanation: "Participation in the Federal Crop Insurance Program has increased steadily over the years. Not only is RMA achieving its targets for its annual and long-term performance (see above), but also RMA now protects approximately 78.5% of the acreage of the ten staple crops and the total acreage insured under the program has shown strong growth. The total U.S. crop acreage, excluding pasture, rangeland and forage, is approximately 285 million. In 1999, RMA insured approximately 68% or 193 million of these cropland acres. By 2004, this figure rose to an approximate 72% or 203 million of these cropland acres. Due to the introduction of products/pilots for rangeland and forage, acreage insured by RMA in these areas has shown very strong growth increasing from less than 4 million acres in 1999 to over 18 million acres in 2004. In 1999, RMA insured over 325 commodities and more than 34,800 county-commodity-product combinations. In 2004, RMA insured 370 commodities and more than 43,400 county-commodity-product combinations. RMA has also been very successful in increasing the value of risk protection provided to producers in under- served States through partnerships with growth rates exceeding its original 5% annual targets. "

Evidence: USDA 2004 P&AR; RMA Summary of Business available on the RMA web-site; annual measures contained in this report. As mentioned in 2.3 of this report, RMA is working towards developing a new annual outcome measure to address pasture, rangeland, and forage which will reflect the long-term output measure of the number of risk management tools which address pasture, rangeland, and forage production needs.

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

Explanation: "One of RMA's efficiency measures, "the ratio of Agency Administrative and Operating Expenditures to the value of risk protection provided", specifically illustrates the improved efficiencies and cost effectiveness in achieving program goals. However, it has only recently been developed as an official measure for the agency and is not a source for management decisions in terms of actual effciency. Additionally, it fluctuates and is not always reliable measure and target. In 1999, the ratio of was .20%. In 2004 the ratio is .15%, and while this ratio may fluctuate somewhat in the face of requested IT investment, the ratio continues depicting improved efficiencies. The program has: expanded coverage to new crops and commodities, such as rangeland, pasture, hogs, and cattle; undertaken initiatives to combine programs and eliminate redundancies that will improve efficiencies and cost effectiveness such as the combination of revenue and yielded insurance products. By combining products, RMA will lower overhead costs and paperwork requirements to not only RMA, but all participants."

Evidence: RMA Summary of Business; draft regulations that combine 5 insurance plans into one; contracted studies to improve programs and achieve effectiveness; 2005 SRA; annual efficiency measure contained in this report; FCIC Product Portfolio Review. The RMA efficiency measures are 1) the ratio of Agency Administrative and Operating Expenditures to the value of risk protection provided or insurance in force as measured in actual dollars. The targets are .18% for 2005, .21% for 2006, .21% for 2007, .20% for 2008, and .20% for 2009; 2) the ratio of the total cost of administering the program to the value of risk protection provided with targets of 7.45% for 2005, 7.40% for 2006, 7.41% for 2007, 7.40% for 2008, and 7.40% for 2009; and 3) the ratio of net delivery cost to the value of risk protection provided with targets of 8.92% for 2005, 8.86% for 2006, 8.87% in 2007, 8.86% in 2008, and 8.86% in 2009. The efficiency measures are using actual versus normalized data included in the key outcome measure thus making them more susceptible to commodity price fluctuations.

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

Explanation: "FCIC is restricted by the FCIA from offering insurance available in the private sector. There is no other like products to crop insurance at the Federal, State, or local level. "

Evidence: "FCIA and OMB's 2004 Budget Common Measure for disaster insurance participation rates used benchmarking for comparison due to the fact that there were no other comparable programs. "

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

Explanation: One study concluded that this is an effective/efficient method to protect agricultural producers, and that RMA soon will reach crops to the maximum extent that is practical. Taking into account the existing programs, pilot programs, and planned pilot programs, over 99 percent of all the potential crop market will have some form of crop insurance available. A paper by Babcock, et al suggested that the availability of optional units could represent a program inefficiency. However, it measures inefficiency as the higher premium charged. Yet, if a higher premium were not assessed, the program would be actuarially unsound. Another study of optional units contracted by RMA indicates that, in the aggregate, an appropriate amount of premium is being collected from users of optional units, strongly arguing against the inefficiency hypothesis. In regards market distortion, a study by Young, et al shows that crop insurance has, at most, very modest impacts on commodity markets, concluding: "Total planted acreage to major field crops would be about 0.4% higher with government subsidized crop insurance than in the absence of any insurance program." In addition to supplying data, a process is in place for RMA to collaborate with CAE to identify, research, and correct duplications and errors found in data. Annual audits confirm that the program is effective and achieving results.

Evidence: Portfolio Analysis and Rate Review study; RMA Summary of Business; CAE Spot Check List reports; RMA contracted studies; USDA OIG, Annual Crop Insurance Audit Report (05401-13-FM) November 2004; The OIG schedule of RMA audits may be viewed in the OIG Annual Plan Appendix. Young, Edwin C., Monte L. Vanderveer, and Randall D. Schneff, "Production and Price Impacts of U.S. Crop Insurance Programs," pp. 1196-1203, American Journal of Agricultural Economics 83 (December 2001). USDA Unit Division Structure Review. In an evaluation of the education program in the targeted States, SJH & Company, Inc. "Services to Provide Targeted States Crop Insurance Education and Information Program" September 2004, stated that "progress has been made with regard to program effectiveness in raising producer awareness and skill levels, and in the use of effective methods for delivering education and information by professional stakeholders."