GAO Blasts RMA in Crop Insurance Fraud Study

Inspections conducted by the Risk Management Agency (RMA) are not being used for maximum effect, according to a study released yesterday by the U.S. Government Accountability Office (GAO).

In “Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to Fraud, Waste, and Abuse,” the GAO also found that RMA’s analysis of the largest farming operations is incomplete; quality insurance programs are not being overseen; and RMA has not used its sanction authority to address program abuses to the full extent.

Eight recent crop insurance fraud cases, investigated by USDA’s Office of Inspector General and resulting in criminal prosecutions between June 2003 and April 2005, reflect these issues. Totaling $3 million in insurance claims, these cases show how producers, sometimes in collusion with insurance agents and others, falsely claim prevented planting, weather damage and low production. In some cases, producers hid or moved production from one field to another. Several of these cases also demonstrate the importance of having the Farm Service agency (FSA) and RMA work together to identify and share information on questionable farming practices/activities.

Although RMA employs a range of processes to help prevent and detect fraud, waste and abuse, and has reported more than $300 million in savings in the past four years in the crop insurance program, GAO found that RMA does not effectively use all the tools it has available.

Between 2001 and 2004, the FSA conducted only 64 percent of the inspections RMA had requested. Without inspections, producers may falsely claim crop losses.

Additionally, RMA’s data analysis of the largest farming operations is incomplete, according to the study. In 2003, about 21,000 of the largest farming operations in the program did not report individuals or entities with an ownership interest in these operations. As a result, the USDA should be able to recover up to $74 million in claims payments. FSA did not give RMA access to the data needed to identify such individuals or entities.

RMA is not effectively overseeing insurance companies’ quality assurance programs. GAO’s review of 120 cases showed that companies completed only 75 percent of the required reviews and those that were conducted were largely paper exercises.

RMA has infrequently used its new sanction authority to address program abuses. RMA imposed only 114 sanctions from 2001 through 2004. Annually, RMA identifies about 3,000 questionable claims, not all of which are necessarily sanctionable.

Among other steps, GAO recommends reducing payments to those who repeatedly file questionable claims; improving the effectiveness of in-season inspections, and strengthening oversight of insurers’ use of quality controls.

To read the entire report, go to http://www.gao.gov/new.items/d05528.pdf

Topics Fraud Agribusiness