Crop insurance is one of the most scrutinized areas of public policy. Accountability starts with the private companies that deliver crop insurance. These companies have strong financial incentives to ensure payments to farmers accurately reflect bona-fide losses, and they have implemented extensive financial controls and operating procedures to ensure that accuracy. In addition, the Risk Management Agency (RMA) conducts broad oversight activities that include company operations, individual policy reviews and data mining.
Each year companies must have a detailed operating plan approved by RMA to be able to sell insurance. RMA also conducts an in-depth Operations Review of each company every three years. The Operations Review is an assessment of each company’s operational systems designed to administer crop insurance and an evaluation of the company’s delivery of the program through a review of selected policies. In all, the companies conduct various oversight reviews on about 50,000 policies each year to ensure compliance with all of RMA’s oversight and operational requirements.
Recently, RMA has begun implementing a new, more extensive effort to identify and recover improper payments, as required under the Improper Payments Elimination and Recovery Act. RMA and crop insurance are also subject to review by the Federal Crop Insurance Corporation Board of Directors, whose majority of members are appointed from the private sector. The Board has general management responsibility for crop insurance and continually reviews program operations.
Data mining is a major effort to ensure program accountability. RMA has partnered with the Center for Agribusiness Excellence (CAE) at Tarleton State University, Stephenville, Texas, which has stored all of RMA’s crop insurance data since 1996. CAE manages a centralized data warehouse, which is used to search, or mine, all data records to compare policies and detect individual producers whose policies demonstrate atypical patterns and to uncover broader patterns that may indicate potential waste, fraud or abuse. Through data mining, RMA annually develops a list of agricultural producers whose operations warrant an onsite inspection. This “spot check” list has proven to be an effective technique for deterring dishonest activity.
USDA’s Office of Inspector General (OIG) provides another line of oversight by conducting audits designed to reduce vulnerabilities, strengthen integrity and provide RMA with oversight to help achieve effective and efficient program delivery. In its most recent semi-annual report to Congress, released in November 2014, OIG reported that it had eight ongoing crop insurance audits and that have corrective actions to be implemented by RMA. These audits are targeted on a range of issues, from specific program features, to financial statements, to reducing overpayments. In addition to OIG, the Office of Management and Budget (OMB) provides added oversight through the development and execution of crop insurance’s annual budget. OMB examiners review program performance and recommend discretionary and legislative changes for improvement.
Ultimately, Congress determines the role of government in crop insurance and relies not only on the above sources of information but also calls upon the Government Accountability Office and the Congressional Research Service to conduct reviews of crop insurance. Both entities issue periodic reports on their findings. Congress also conducts public oversight hearings to monitor the expenditure of public funds on crop insurance. These multiple layers of oversight provide a high level of confidence that the public funds used to support crop insurance are being properly spent.