Subcommittee Reviews Integrity of Crop Insurance Program

Jun 15, 2006

WASHINGTON, D.C. – Today Rep. Jerry Moran, Chairman of the Subcommittee on General Farm Commodities and Risk Management, convened a hearing to review efforts to eliminate waste, fraud and abuse in the federal crop insurance program. In a House-wide effort to curb wasteful spending, Chairman Moran exercised the Subcommittee’s oversight authority to determine if sufficient prevention and detection efforts are in place in the administration of the crop insurance program.

“Crop insurance is a vital component of many farm operations throughout the nation and this Committee is charged with ensuring that the program is not only meeting the needs of our producers, but money is not being drained from the program by cases of waste, fraud and abuse,” said Chairman Moran.

As farming is an inherently risky enterprise, many producers rely on insurance policies to protect their investments in land, livestock, seed, and crops. In order to ensure that insurance options were available to producers, the Congress passed the Federal Crop Insurance Act of 1980 and created a unique partnership between private insurance companies and the federal government within the crop insurance program. In 2005, the program provided producers with over $44 billion in liability protection through about 1.2 million policies. The RMA estimates less than one half of one percent of the agency’s spending in 2005 was a result of waste, fraud and abuse.

“When waste, fraud and abuse are allowed to flourish, farmers lose confidence in the crop insurance system. Congress cannot allow that to happen. It is our responsibility to ensure that the executive branch is actively rooting out waste, fraud and abuse, and hearings like this are key to that effort,” said Subcommittee Ranking Minority Member Bob Etheridge.

In response to growing concern from producers about abuses in the crop insurance program, Congress included provisions in the Agriculture Risk Protection Act (ARPA) of 2000 to equip the U.S. Department of Agriculture (USDA) with the additional tools needed to better monitor waste, fraud and abuse. Since 2000, RMA has made significant progress in the detection of abuse and fraud such as the expanded use of data mining.

Risk Management Agency (RMA) Administrator Eldon Gould testified that the application of data mining has resulted in significant savings for the agency. Since 2001, data mining has achieved a savings of $456 million, representing a $23 return for every dollar spent by RMA on data mining since the inception of the program.

“Spending on agriculture accounts for less than 1 percent of the total U.S. budget and we want to ensure that all of those dollars are being put to the use they were intended for,” said Chairman Moran. “I believe that the federal crop insurance program and its governing agencies are making significant efforts to preserve the integrity of the program which has become a vital component of U.S. agricultural production.”

The Subcommittee will continue to closely monitor the crop insurance program as well as other programs under its jurisdiction to ensure the administering agencies have the authority and tools needed to curb waste, fraud and abuse.

Witness testimony is available on the Committee website, and a full transcript of the hearing will be available on the Committee website 4-6 weeks following the hearing.

Witness List
Panel I
Mr. Eldon Gould., Administrator, Risk Management Agency, United States Department of Agriculture, Washington, D.C.
Mr. Daniel Bertoni, Acting Director, Natural Resources and Environment Division, Government Accountability Office, Washington, D.C.

Panel II
Mr. Robert W. Parkerson, President, National Crop Insurance Services, Inc., Overland Park, Kansas
Dr. Bert Little, Associate Vice President for Academic Research, Executive Director, Center for Agribusiness Excellence, Tarleton State University, Stephenville, Texas
Mr. Donald P. Brown, Chief Financial Officer, Vega Imaging Solutions, LLC, Roseville, Minnesota