Congress closing longstanding loophole on farm subsidies

Addressing a longstanding criticism of the farm bill, lawmakers are closing a loophole federal investigators said allowed people to get government benefits without actually doing work.

The U.S. Department of Agriculture hands out roughly $5 billion annually in payments and farm subsidies, but the requirements aren’t stringent enough to stop payments to people who aren’t actively engaged in farming, investigators said.

Now both the House and Senate have passed legislation that would require individuals to “make a significant contribution of personal labor” to a farm in order to receive benefits.

“It’s a change that’s long overdue,” said Daren Bakst, an agricultural policy analyst at the Heritage Foundation, a conservative think tank. “It’s been an abuse that’s existed that’s allowed people who really have no role in farming to get payments.”

The money went to support not only farm workers but also managers. Yet the definition of what qualified as “management” was too broad, according to the Government Accountability Office, Congress’ chief watchdog arm.

The Farm Service Agency that oversees the funding had difficulty determining “whether an individual had made a significant contribution of active personal management, potentially allowing individuals who may have had limited involvement in a farming operation to receive payments,” GAO said.

Mr. Bakst said the system allowed for abuse by people who received money for farms on which they rarely — if ever — worked.

“The concern is that you create a general partnership and get a bunch of people that you say have a management role that live five states away and really have nothing to do with the farm,” he said.

The general partnerships receive the most money and have the most potential for abuse, GAO said. The largest such partnership received almost $652,000 in 2012, based on 16 different people claiming they were managing the farm.

Now both the House and Senate have passed legislation that would only allow a single person per farm to be considered a manager. Mr. Bakst said the final bill being negotiated in Congress has a good chance to pass and be sent to the president for a signature.

Sen. Chuck Grassley, an Iowa Republican who serves on the Senate Agriculture Committee, said there’s been too much subterfuge under the current law.

“The loophole has been allowed to stand for too long,” he said in a news release. “It’s time to close it once and for all and put the issue to rest so we can maintain a safety net for the farmers who really need it.”

GAO investigators have document several examples of questionable behavior under the current rules. One farm in the Midwest listed 11 different people as providing personal management, including two who lived hundreds of miles away in southern Florida. One of the Florida residents was 88 years old, while another person listed as a manager was only 16 when he or she first began getting payments from the government.

And another farm paid three full-time managers according to their records, yet listed an additional eight people as managers when applying for federal benefits, GAO said.

Oversight has been ineffective, investigators argued, and most people were taken at their word when they claimed to work on farms. In a 2009 survey of 688 people who claimed management responsibilities, FSA state offices disqualified only four individuals.

A 2010 check eliminated a few more: out of 664 people claiming management responsibilities, officials found only 639 qualified.

GAO and FSA have sparred in the past over what qualifies as management. In 2004, the GAO said the regulations needed to be stricter, but FSA has often said it would wait for congressional action first because its guidelines were adequate.

“The current regulatory definition of a significant contribution of active personal management has been in effect for over 20 years; Congress has not mandated a more restrictive definition during that time,” FSA said in 2010.

Now, FSA said it agrees with the GAO’s recommendation that farm management oversight needs to be tightened — an indication the agency expects the new guidelines to become law.

Mr. Bakst said closing the loophole is a small step toward combating fraud and waste.

“There’s not much when it comes to reforms,” he said. “This would be one way to address an abuse but there’s so many other programs that are worse that drive up prices for taxpayers, consumers and neither bill really addresses those programs.”