type: other

jurisdiction: US

text: b' U.S. Department of Agriculture\n Office of Inspector General\n Financial Audit Operations\n\n\n\n\n AUDIT REPORT\n Department of Agriculture\xe2\x80\x99s\nConsolidated Financial Statements for\n Fiscal Years 2010 and 2009\n\n\n\n\n Audit Report 50401-70-FM\n November 2010\n\x0c United States Department of Agriculture\n Office of Inspector General\n Washington, D.C. 20250\n\n\n\n\nDATE: November 15, 2010\n\nAUDIT\nNUMBER: 50401-70-FM\n\nTO: Jon M. Holladay\n Acting Chief Financial Officer\n Office of the Chief Financial Officer\n\nATTN: Kathy Donaldson\n Audit Liaison Officer\n Office of the Chief Financial Officer\n\nFROM: Phyllis K. Fong /s/\n Inspector General\n\nSUBJECT: Department of Agriculture\xe2\x80\x99s Consolidated Financial Statements for\n Fiscal Years 2010 and 2009\n\n\nThis report represents the results of our audits of the Department of Agriculture\xe2\x80\x99s consolidated\nfinancial statements for the fiscal years ending September 30, 2010 and 2009. The report\ncontains an unqualified opinion on the financial statements as well as the results of our\nassessment of the Department\xe2\x80\x99s internal control over financial reporting and compliance with\nlaws and regulations. Your response is included in its entirety as exhibit D.\n\nIn accordance with Departmental Regulation 1720-1, please furnish a reply within 60 days\ndescribing the corrective actions taken or planned, and timeframes for implementing the\nrecommendations for which management decisions have not been reached. Please note that the\nregulation requires management decision to be reached on all recommendations within 6 months\nfrom report issuance.\n\nWe appreciate the courtesies and cooperation extended to us by members of your staff during the\naudit.\n\x0cTable of Contents\n\n\nExecutive Summary .................................................................................................1\n Key Recommendations...........................................................................................1\nOpinion on the Consolidated Financial Statements .............................................3\nInternal Control Over Financial Reporting ..........................................................4\nCompliance and Other Matters ..............................................................................5\nResponsibilities .........................................................................................................5\nFindings and Recommendations.............................................................................7\nSection 1: Material Weaknesses in Internal Control Over Financial Reporting\n....................................................................................................................................7\n Finding 1: Improvements are Needed in Overall Financial Management .............7\n Recommendation 1 ..........................................................................................8\n Finding 2: Improvements are Needed in Information Technology Security and\n Controls...................................................................................................................9\nSection 2: Noncompliance with Laws and Regulations ......................................10\n Finding 3: Lack of Substantial Compliance with FFMIA Requirements ............10\n Finding 4: Anti-Deficiency Act Violations ..........................................................11\nAbbreviations .........................................................................................................12\nExhibit A: Audit Reports Related to the Fiscal Year 2010\nFinancial Statements ..............................................................................................13\nExhibit B: Summary of Prior Year Recommendations .....................................14\nExhibit C: Status of Prior Year Noncompliance Findings ................................16\nExhibit D: Agency Response .................................................................................17\nExhibit E: Performance and Accountability Report ..........................................18\n\x0cDepartment of Agriculture\xe2\x80\x99s Consolidated Financial Statements for\nFiscal Years 2010 and 2009 (Audit Report 50401-70-FM)\n\nExecutive Summary\n\nPurpose\nOur audit objectives were to determine whether (1) the consolidated financial statements present\nfairly, in all material respects, in accordance with accounting principles generally accepted in the\nUnited States of America, the assets, liabilities, and net position, net costs, changes in net\nposition, and budgetary resources; (2) the internal control objectives over financial reporting\nwere met; (3) the Department complied with laws and regulations for those transactions and\nevents that could have a direct and material effect on the consolidated financial statements; and\n(4) the information in the Performance and Accountability Report was materially consistent with\nthe information in the consolidated financial statements.\n\nWe conducted our audits at the financial offices of various Department of Agriculture (USDA)\nagencies and the Office of the Chief Financial Officer located in Washington, D.C., and its\nNational Finance Center located in New Orleans, Louisiana. We also performed site visits to\nselected agencies\xe2\x80\x99 field offices.\n\nResults in Brief\nIn our opinion, the consolidated financial statements referred to above present fairly, in all\nmaterial respects, the financial position of USDA, as of September 30, 2010 and 2009, and its net\ncosts, changes in net position, and budgetary resources for the years then ended, in conformity\nwith accounting principles generally accepted in the United States of America.\n\nOur consideration of internal controls over financial reporting identified two significant\ndeficiencies. Specifically, we identified weaknesses in USDA\xe2\x80\x99s:\n\n \xc2\xb7 overall financial management, and\n \xc2\xb7 information technology (IT) security and controls.\n\nWe believe that these two significant deficiencies are material weaknesses.\n\nOur consideration of compliance with laws and regulations discusses two instances of\nnoncompliance relating to the Federal Financial Management Improvement Act of 1996, and the\nAnti-Deficiency Act.\n\nKey Recommendations\nAs discussed in its Federal Managers\xe2\x80\x99 Financial Integrity Act Report on Management Control,\nthe Department has plans to address the majority of the weaknesses discussed in the report. The\nrecommendation in this report is limited to additional improvements needed in financial\nmanagement with respect to abnormal balances.\nAUDIT REPORT 50401-70-FM 1\n\x0cAgency Response\nThe Department concurs with the two material weaknesses and findings related to compliance\nwith laws and regulations in the report. It generally agrees with the recommendation and will\ndevelop corrective action plans with milestones by January 15, 2011.\n\nOIG Position\nManagement decision should be achievable upon review of the plans for corrective action.\n\n\n\n\nAUDIT REPORT 50401-70-FM 2\n\x0cIndependent Auditor\xe2\x80\x99s Report\nJon M. Holladay\nActing Chief Financial Officer\nOffice of the Chief Financial Officer\n\nWe have audited the accompanying consolidated balance sheets of the Department of\nAgriculture (USDA), as of September 30, 2010 and 2009, and the related consolidated\nstatements of net costs; changes in net position; and the combined statements of budgetary\nresources (hereinafter referred to as the \xe2\x80\x9cconsolidated financial statements\xe2\x80\x9d) for the fiscal years\nthen ended. The objective of our audits was to express an opinion on the fair presentation of\nthese consolidated financial statements. In connection with our fiscal year 2010 audit, we also\nconsidered USDA\xe2\x80\x99s internal control over financial reporting and tested USDA\xe2\x80\x99s compliance with\ncertain provisions of applicable laws, regulations, contracts, and grant agreements that could\nhave a direct and material effect on these consolidated financial statements.\n\nThe following sections discuss our opinion on USDA\xe2\x80\x99s consolidated financial statements; our\nconsideration of USDA\xe2\x80\x99s internal control over financial reporting; our tests of USDA\xe2\x80\x99s\ncompliance with certain provisions of applicable laws, regulations, contracts, and grant\nagreements; and management\xe2\x80\x99s, as well as our, responsibilities.\n\nThe Findings and Recommendations section presents the material weaknesses in internal control\nand instances of noncompliance with laws and regulations, as of and for the year ended\nSeptember 30, 2010. Exhibit A of this report presents the audit reports related to the fiscal year\n2010 statements. Exhibit B summarizes the current year status of prior year audit\nrecommendations. Exhibit C provides an update to previously reported instances of\nnoncompliance with laws and regulations. USDA\xe2\x80\x99s response is presented in its entirety in\nexhibit D.\n\nOpinion on the Consolidated Financial Statements\n\nIn our opinion, the consolidated financial statements referred to above present fairly, in all\nmaterial respects, the financial position of USDA, as of September 30, 2010 and 2009, and its net\ncosts, changes in net position, and budgetary resources for the years then ended, in conformity\nwith accounting principles generally accepted in the United States of America.\n\nAs discussed in Notes 1 and 19 to the consolidated financial statements, in fiscal year 2010,\nUSDA made certain reclassifications to prior year amounts to conform to the current year\npresentation on the Statement of Net Cost. As discussed in Note 24, in fiscal year 2010 USDA\nalso changed its treatment of unobligated balances for an indefinite appropriation for one of its\nreporting components, the Federal Crop Insurance Corporation, due to a change in accounting\nprinciple. In addition, as discussed in Note 32, in fiscal year 2010 the Department disclosed a\nsubsequent legal settlement that occurred on October 19, 2010. Furthermore, as discussed in\nNotes 1 and 10, in fiscal year 2009 the Department completed the implementation of Statement\nof Federal Financial Accounting Standards (SFFAS) 29, Heritage Assets and Stewardship Land,\nby reclassifying appropriate heritage assets and stewardship land information. Lastly, as\ndiscussed in Notes 1 and 30, in fiscal year 2009 the Department implemented SFFAS 31,\nAccounting for Fiduciary Activity, and no longer recognizes fiduciary assets on the balance\nsheet.\nAUDIT REPORT 50401-70-FM 3\n\x0cUSDA\xe2\x80\x99s Management\xe2\x80\x99s Discussion and Analysis (MD&A), and required supplementary\ninformation (including stewardship information) contains a wide range of information, some of\nwhich is not directly related to the financial statements. This information is not a required part of\nthe consolidated financial statements, but is supplementary information required by accounting\nprinciples generally accepted in the United States of America and the Office of Management and\nBudget (OMB) Circular A-136. We have applied certain limited procedures, consisting\nprincipally of comparing this information for consistency with the financial statements and\nmaking inquiries of management regarding the methods of measurement and presentation of this\ninformation. However, we did not audit this information and, accordingly, we express no\nopinion on it. As a result of such limited procedures, we believe that the controls over required\nsupplementary information related to deferred maintenance are not sufficient to ensure the\naccuracy and completeness of the reported information.\n\nThe information in the Other Accompanying Information section is presented for purposes of\nadditional analysis, as required by OMB Circular A-136, and is not required as part of the\nfinancial statements. This information has not been subjected to auditing procedures and,\naccordingly, we express no opinion on it.\n\nInternal Control Over Financial Reporting\n\nOur consideration of the internal control over financial reporting was for the limited purposes\ndescribed in the Responsibilities section of this report and would not necessarily identify all\ndeficiencies in the internal control over financial reporting that might be significant deficiencies\nor material weaknesses.\n\nSignificant deficiencies are deficiencies, or a combination of deficiencies, in internal control that\nare less severe than a material weakness, yet important enough to merit attention by those\ncharged with governance. Material weaknesses are deficiencies or a combination of deficiencies\nin internal control, such that there is a reasonable possibility that a material misstatement of the\nconsolidated financial statements being audited will not be prevented, or detected and corrected\non a timely basis. Because of inherent limitations in any internal control, misstatements due to\nerror or fraud may occur and not be detected.\n\nIn our fiscal year 2010 audit, we noted certain matters described in this report\xe2\x80\x99s findings and\nrecommendations, involving the internal control over financial reporting and its operation that\nwe consider to be significant deficiencies. Specifically, we identified weaknesses in USDA\xe2\x80\x99s:\n\n \xc2\xb7 overall financial management, and\n \xc2\xb7 information technology (IT) security and controls.\n\n\nWe believe these two deficiencies are also material weaknesses. These weaknesses are discussed\nin this report in Findings and Recommendations, Section 1, Material Weaknesses in Internal\nControl Over Financial Reporting.\n\nWe did not identify any material weaknesses that were not disclosed in USDA\xe2\x80\x99s Federal\nManagers\xe2\x80\x99 Financial Integrity Act (FMFIA) Report on Management Control.\n\n\nAUDIT REPORT 50401-70-FM 4\n\x0cCompliance and Other Matters\n\nWe performed tests of USDA\xe2\x80\x99s compliance, as described in the Responsibilities section of this\nreport. Our tests disclosed two instances of noncompliance with laws and regulations that are\nrequired to be reported under Government Auditing Standards and OMB Bulletin 07-04, as\namended. Specifically, the results of our tests of the Federal Financial Management\nImprovement Act of 1996 (FFMIA) disclosed instances, described in more detail in Finding 3 in\nthe Findings and Recommendations section of this report, where USDA\xe2\x80\x99s financial management\nsystems did not substantially comply with Federal financial management system requirements,\napplicable Federal Accounting Standards, and the U. S. Standard General Ledger (SGL) at the\ntransaction level. Additionally, we reported noncompliance with the Anti-Deficiency Act\n(ADA), as described in more detail in Finding 4 of the Findings and Recommendations section\nof this report.\n\nResponsibilities\nManagement\xe2\x80\x99s Responsibilities\n\nUSDA\xe2\x80\x99s management is responsible for (1) preparing the consolidated financial statements in\nconformity with accounting principles generally accepted in the United States of America;\n(2) establishing, maintaining, and assessing internal control to provide reasonable assurance that\nthe broad control objectives of the FMFIA are met; (3) ensuring that USDA\xe2\x80\x99s financial\nmanagement systems substantially comply with FFMIA requirements; and (4) complying with\napplicable laws and regulations.\n\nAuditor\xe2\x80\x99s Responsibilities\n\nOur responsibility is to express an opinion on the fiscal years 2010 and 2009 consolidated\nfinancial statements of the USDA based on our audits. We conducted our audits in accordance\nwith auditing standards generally accepted in the United States of America; the standards\napplicable to financial audits contained in Government Auditing Standards, issued by the\nComptroller General of the United States; and OMB Bulletin 07-04, Audit Requirements for\nFederal Financial Statements, as amended. Those standards and OMB 07-04, as amended,\nrequire that we plan and perform the audit to obtain reasonable assurance about whether the\nfinancial statements are free of material misstatement. An audit includes consideration of\ninternal control over financial reporting as a basis for designing audit procedures that are\nappropriate in the circumstances, but not for the purpose of expressing an opinion on the\neffectiveness of USDA\xe2\x80\x99s internal control over financial reporting. An audit also includes\nexamining, on a test basis, evidence supporting the amounts and disclosures in the financial\nstatements, assessing the accounting principles used and significant estimates made by\nmanagement, and evaluating the overall financial statement presentation. We believe that our\naudits provide a reasonable basis for our opinion.\n\n\n\n\nAUDIT REPORT 50401-70-FM 5\n\x0cIn planning and performing our audits, we considered USDA\xe2\x80\x99s internal control over financial\nreporting by obtaining an understanding of the design effectiveness of internal controls,\ndetermining whether the internal controls had been placed in operation, assessing control risk,\nand performing tests of controls in order to determine our auditing procedures for the purpose of\nexpressing our opinion on the consolidated financial statements. We limited our internal control\ntesting to those controls necessary to achieve the objectives described in OMB Bulletin 07-04, as\namended and Government Auditing Standards. We did not test all internal controls as defined by\nthe FMFIA. The objective of our audit was not to provide an opinion on USDA\xe2\x80\x99s internal\ncontrol. Consequently, we do not provide an opinion on internal control over financial reporting,\nnor on USDA\xe2\x80\x99s assertion on internal control included in its MD&A.\n\nAs part of obtaining reasonable assurance about whether the consolidated financial statements\nare free of material misstatement, we performed tests of USDA\xe2\x80\x99s compliance with certain\nprovisions of laws and regulations, contracts and agreements, and Governmentwide policy\nrequirements, noncompliance with which could have a direct and material effect on the\ndetermination of the consolidated financial statement amounts. We also obtained reasonable\nassurance that USDA complied with certain provisions of other laws and regulations specified in\nOMB Bulletin 07-04, as amended, including requirements referred to in the FFMIA, except for\nthose that, in our judgment, were clearly inconsequential. We limited our tests of compliance to\nthe provisions described in the preceding sentences and did not test compliance with all laws and\nregulations applicable to USDA. However, providing an opinion on compliance with laws and\nregulations was not an objective of our audit and, accordingly, we do not express such an\nopinion.\n\nUSDA\xe2\x80\x99s response to the findings in our audit is included in its entirety in exhibit D. We did not\naudit the response and, accordingly, express no opinion on it.\n\nThis report is intended solely for the information of the management of USDA, OMB, the\nU.S. Government Accountability Office and the U.S. Congress, and is not intended to be, and\nshould not be, used by anyone other than these specified parties.\n\n\n\nPhyllis K. Fong /s/\nInspector General\n\nNovember 12, 2010\n\n\n\n\nAUDIT REPORT 50401-70-FM 6\n\x0cFindings and Recommendations\n\nSection 1: Material Weaknesses in Internal Control Over Financial\nReporting\n\nFinding 1: Improvements are Needed in Overall Financial Management\nDuring fiscal year 2010, USDA continued to make improvements in its financial management.\nFor example, exhibit B describes actions taken by the Department relating to obligations.\nAdditionally, the Department initiated implementation of its Financial Management\nModernization Initiative to improve financial performance through a modern financial system\nthat provides maximum support to the Department and its agencies. However, we noted areas\nwhere further improvements are needed.\n\n\xc2\xb7 We again noted that obligations1 were not always valid because agencies did not effectively\nmonitor and review unliquidated obligations (ULO). We selected a nonstatistical sample of 66\nULOs from 10 agencies for which no activity had occurred for over 2 years.2 We determined\nthat 27 (41 percent) ULOs were invalid because no future expenditures were expected. We also\nfound that 17 (26 percent) ULO balances were valid obligations but should have been paid off in\nprior fiscal years if they had been properly monitored. These obligations inappropriately\nremained open, in part because USDA agencies failed to submit final payments to other USDA\nagencies. Additionally, agencies did not always timely research or respond to requests for\nadditional information to close obligations from other USDA agencies.\n\nThe U.S. Department of Treasury\xe2\x80\x99s (Treasury) annual closing guidance (Treasury Bulletin 2010-\n07, Yearend Closing, dated June 16, 2010) requires an annual review of ULOs. Departmental\nRegulation 2230-1, Reviews of Unliquidated Obligations, dated April 21, 2009, further requires\nquarterly reviews and certifications as to the validity of ULO balances from agency Chief\nFinancial Officers (CFO).\n\nIneffective monitoring and reviewing of obligation balances resulted in invalid obligations\nremaining open. Invalid obligations improperly restrict the availability of funding authority.\nThis also increases the risk of misstating obligations as of yearend.\n\nIn its FMFIA Report on Management Control for 2010, USDA continued to report a material\nweakness relating to the lack of consistent review and follow-up on ULOs. The Department\nindicated that several corrective actions have already been taken, such as developing an\nExecutive scorecard for inactive obligations, and initiating fast-track action to deobligate\nbalances with no activity in 2 years through the ULO workgroup. The Department plans\nadditional corrective actions, such as revising policies, procedures, and processes to improve the\nmanagement, review, and closeout of ULOs, as well as conducting training on these new\nprocesses. The Department estimates that all corrective actions will be completed in fiscal year\n2011.\n\n1\n An obligation is a binding agreement that will result in outlays, immediately or in the future. Budgetary resources\nmust be available before obligations can be incurred legally.\n2\n Nonstatistical sample selected from activity as of June 30, 2010.\nAUDIT REPORT 50401-70-FM 7\n\x0c\xc2\xb7 We continued to identify abnormal balances3 in the USDA fiscal yearend trial balance that\nwere not fully researched and corrected. For fiscal year 2010, we noted 30 abnormal account\nbalances, totaling about $760 million (absolute) at yearend. According to the Department, the\nexistence of an abnormal balance indicates that transactions or adjustments may have been\nposted in error. In addition, abnormal balances increase the risk of material misstatement on the\nfinancial statements.\n\n\xc2\xb7 In fiscal year 2010, we again attempted to perform an audit of the Natural Resources\nConservation Service\xe2\x80\x99s (NRCS) Financial Statements (Audit Report 10401-4-FM, NRCS\xe2\x80\x99\nFinancial Statements for Fiscal Year 2010, dated November 8, 2010). NRCS was once more\nunable to provide sufficient evidential matter in support of certain transactions and account\nbalances, as presented in the NRCS consolidated financial statements, as of and for the year\nended September 30, 2010, particularly with respect to beginning net position balances and\ncurrent year activity; recoveries of prior year obligations; obligations incurred, including accrued\nexpenses and undelivered orders; leases; accounts receivable, unfilled customer orders;\nstewardship land; and the allocation of costs in the Statement of Net Cost. NRCS was unable to\ncomplete corrective actions and make adjustments as necessary to financial statement amounts,\nprior to the completion of its audit.\n\n\xc2\xb7 In fiscal year 2010, we identified improper payments4 made by the Farm Service Agency\n(FSA) through its various farm assistance programs. A separate report will be issued with\nfurther detail and recommendations regarding these improper payments.\n\nBecause of actions planned by the Department for ULOs and recommendations in other audit\nreports, the only recommendation made herein relates to abnormal balances.\n\nRecommendation 1\nProvide additional oversight to ensure that agencies are properly reviewing, researching, and\ntimely implementing action to correct abnormal balances.\n\n\n\n\n3\n A balance that deviates from the standard balance as defined by Treasury\xe2\x80\x99s SGL.\n4\n An improper payment is any payment that should not have been made or that was made in an incorrect amount\nunder statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts are\noverpayments and underpayments.\nAUDIT REPORT 50401-70-FM 8\n\x0cFinding 2: Improvements are Needed in Information Technology Security and\nControls\n\nWe performed an independent evaluation of the Department\xe2\x80\x99s IT security program and practices,\nas required by the Federal Information Security Management Act of 2002 (FISMA). We also\nperformed reviews of the control structure of the Office of the Chief Information\nOfficer/National Information Technology Center (OCIO/NITC) and the Office of the Chief\nFinancial Officer/National Finance Center (OCFO/NFC), located in Kansas City, Missouri, and\nNew Orleans, Louisiana, respectively.5\n\nIn fiscal year 2010, both OCIO/NITC and OCFO/NFC sustained unqualified opinions on their\ncontrol environments. Additionally, in fiscal year 2010, the Department began implementing\nsome very significant security projects, that, once completed, will provide real-time, continuous\nvisibility and control over workstations and servers on the network, as well as provide a\nfoundation for enterprisewide security monitoring detection and protection.\n\nAlthough improvements continue to be made in the Department\xe2\x80\x99s IT security, our FISMA report\nnotes that many long-standing weaknesses remain. Since 2001, the Office of Inspector General\nhas reported material weaknesses in the design and effectiveness of the Department\xe2\x80\x99s overall IT\nsecurity program. Our fiscal year 2010 FISMA report provides details on the weaknesses we\ncontinued to note in the design and effectiveness of the Department\xe2\x80\x99s overall IT security\nprogram.6\n\nIn its FMFIA Report on Management Control for 2010, USDA continued to report an overall IT\nmaterial weakness relating to deficiencies in the internal control design and operating\neffectiveness for logical access controls, configuration management, physical access and\nenvironmental protection, and disaster recovery. As noted in its FMFIA report, the Department\nindicated that corrective actions have been taken, such as final deployment of a Departmentwide\nend-point management tool and standardization of the configuration management and change\ncontrol processes. The Department has additional corrective actions planned in fiscal year 2011.\n\nBecause of actions planned by the Department and recommendations made in other audits, we\nare making no further recommendations in this report.\n\n\n\n\n5\n See exhibit A for information regarding the cited reports.\n6\n Audit Report 50501-2-IT, Department of Agriculture, Office of the Chief Information Officer, Fiscal Year 2010\nFederal Information Security Management Act, issued November 2010.\nAUDIT REPORT 50401-70-FM 9\n\x0cSection 2: Noncompliance with Laws and Regulations\n\nFinding 3: Lack of Substantial Compliance with FFMIA Requirements\nFFMIA requires agencies to annually assess whether their financial management systems comply\nsubstantially with (1) Federal Financial Management Systems Requirements (FFMSR),\n(2) applicable Federal accounting standards, and (3) the SGL at the transaction level. In\naddition, FISMA requires each agency to report significant information security deficiencies,\nrelating to financial management systems, as a lack of substantial compliance under FFMIA.\nFFMIA also requires auditors to report in their CFO Act financial statement audit reports\nwhether financial management systems substantially comply with FFMIA\xe2\x80\x99s system\nrequirements.\n\nDuring fiscal year 2010, USDA evaluated its financial management systems to assess\ncompliance with FFMIA. The Department reported that it was not substantially compliant with\nFFMSR, applicable accounting standards, SGL at the transaction level, and FISMA\nrequirements.\n\nAs noted in its MD&A, USDA plans to continue efforts to achieve compliance with the FFMIA\nand FISMA objectives. Improving Federal financial management systems is critical to\nincreasing the accountability of financial program managers, providing better information for\ndecision making, and increasing the efficiency and effectiveness of services provided by the\nFederal Government.\n\nIn its FFMIA report, the Department reported noncompliance with FFMSR and FISMA for\nmultiple agencies relating to logical access controls, configuration management, physical access\nand environmental protection, and disaster recovery.\n\nAdditionally, in its FFMIA report, the Department noted noncompliances for two of its\ncomponent agencies, described below.\n\n 1. The Commodity Credit Corporation\xe2\x80\x99s (CCC) funds control management system is not\n integrated with its financial management system. Thus, CCC is not able to comply with\n FFMSR. CCC is working towards integration and is modernizing its financial systems.\n Corrective action is scheduled for completion by December 30, 2012.\n\n 2. NRCS did not comply with FFMSR, Federal accounting standards, and the SGL at the\n transaction level. Corrective actions are scheduled for completion by April 15, 2011.\n\nBecause of actions planned by the Department, we are making no further recommendations in\nthis report.\n\n\n\n\nAUDIT REPORT 50401-70-FM 10\n\x0cFinding 4: Anti-Deficiency Act Violations\n\nIn fiscal year 2010, the Department reported ADA violations in its fiscal year 2010 Statement of\nAssurance, included in the Performance and Accountability Report, relating to Rural\nDevelopment, CCC, and FSA. Details follow:\n\n\xc2\xb7 During fiscal year 2010, Rural Development identified ADA violations regarding its Rural\nUtility Services\xe2\x80\x99 Broadband Program. According to Rural Development officials, the violations\ninvolved eight broadband loans from fiscal year 2004, with an aggregate loan amount of\n$170 million. The appropriation for this program in fiscal year 2004 was available for 1 year.\nLoan subsidies obligated for fiscal year 2004 broadband loans ceased to be available for\ndisbursement on October 1, 2009. Using the fiscal year 2010 subsidy rate, the budget authority\nassociated with the undisbursed balance of these loans was approximately $7 million, as of\nOctober 1, 2009.\n\n\xc2\xb7 During fiscal year 2010, CCC and FSA became aware that some contracts under the Biomass\nCrop Assistance Program (BCAP) were in violation of the ADA. The basis for the ADA\nviolations was that the performance of the contracts either explicitly or implicitly continued past\nthe March 31, 2010 period of performance deadline imposed by OMB under the terms of the\napportionment for the BCAP.\n\nThe letters reporting these violations are pending clearance by Department officials.\n\n\n\n\nAUDIT REPORT 50401-70-FM 11\n\x0cAbbreviations\nADA Anti-Deficiency Act\nBCAP Biomass Crop Assistance Program\nCCC Commodity Credit Corporation\nCDRP Contingency and Disaster Recovery Plans\nCFO Chief Financial Officer\nCSAM Cyber Security Assessment and Management\nFFMIA Federal Financial Management Improvement Act of 1996\nFFMSR Federal Financial Management Systems Requirements\nFISMA Federal Information Security Management Act of 2002\nFMFIA Federal Managers\xe2\x80\x99 Financial Integrity Act of 2002\nFSA Farm Service Agency\nISA Interconnection Security Agreements\nIT information technology\nMD&A Management\xe2\x80\x99s Discussion and Analysis\nNFC National Finance Center\nNITC National Information Technology Center\nNRCS Natural Resources Conservation Service\nOCFO Office of the Chief Financial Officer\nOCIO Office of the Chief Information Officer\nOIG Office of Inspector General\nOMB Office of Management and Budget\nPOA&M plan of action & milestones\nSFFAS Statement of Federal Financial Accounting Standards\nSGL U.S. Government Standard General Ledger\nSSP System Security Plans\nTreasury U.S. Department of Treasury\nULO Unliquidated Obligations\nUSDA Department of Agriculture\n\n\n\n\nAUDIT REPORT 50401-70-FM 12\n\x0cExhibit A: Audit Reports Related to the Fiscal Year 2010\nFinancial Statements\nThe following is a list of reports which are related to the Office of Inspector General\xe2\x80\x99s audit of\nthe Department of Agriculture\xe2\x80\x99s fiscal year 2010 financial statements.\n\n\n AUDIT NUMBER AUDIT TITLE RELEASE DATE\n Federal Crop Insurance\n Corporation/Risk Management\n 05401-19-FM November 2010\n Agency\xe2\x80\x99s Financial Statements for\n Fiscal Years 2010 and 2009\n Commodity Credit Corporation\xe2\x80\x99s\n 06401-25-FM Financial Statements for Fiscal Years November 2010\n 2010 and 2009\n Forest Service\xe2\x80\x99s Financial Statements\n 08401-11-FM November 2010\n for Fiscal Years 2010 and 2009\n\n Natural Resources and Conservation\n 10401-4-FM November 2010\n Service\xe2\x80\x99s Financial Statements for 2010\n Statement on Auditing Standards No.\n 11401-33-FM 70, Report on the National Finance September 2010\n Center General Controls Review\n Food and Nutrition Service Financial\n 27401-35-HY Statements for Fiscal Years November 2010\n 2010 and 2009\n Fiscal Year 2010 Federal Information\n 50501-2-IT November 2010\n Security Management Act Report\n\n Rural Development\xe2\x80\x99s Financial\n 85401-18-FM Statements for November 2010\n Fiscal Years 2010 and 2009\n Statement on Auditing Standards No.\n 70, Report on the National Information\n 88501-14-FM September 2010\n Technology Center General Controls\n Review\n\n\n\n\nAUDIT REPORT 50401-70-FM 13\n\x0cExhibit B: Summary of Prior Year Recommendations\n\nAudit Report 50401-67-FM, U.S. Department of Agriculture\xe2\x80\x99s Consolidated Financial\nStatements for Fiscal Years 2009 and 2008, dated November 16, 2009.\n\nFinding 1\n\nRecommendation 1\nProvide additional oversight to ensure agencies (1) properly monitor and review obligation\nbalances, (2) provide valid certifications based on complete and accurate reviews as required by\nDepartmental Regulation 2230-001, and (3) understand the importance of responding to requests\nfor bills or additional information in a timely manner.\n\nDepartmental Status\nDuring fiscal year 2010, the Department continued to monitor obligations via ULO working\ngroup meetings as well as through monthly corrective action status reports and quarterly Chief\nFinancial Officer certifications. In addition, balances over 2 years old were fast tracked for\ndeobligation.\n\nOIG Results\nThe Material Weakness continues to exist, as discussed in Finding 1.\n\nFinding 2\n\nRecommendation 2\nCreate a plan of actions & milestones (POA&M) to correct deficiencies noted in both System\nSecurity Plans (SSP) and Contingency and Disaster Recovery Plans (CDRP), (2) revise Cyber\nSecurity Assessment and Management (CSAM) and/or system documentation to reflect\nconsistent and accurate information, and (3) institute policy and procedures to ensure review and\nsignature of all parties bound by Interconnection Security Agreements (ISA).\n\nDepartmental Status\nDuring fiscal year 2010, the Department created POA&Ms for the deficiencies noted in the SSPs\nand CDRPs. System documentation was revised and loaded to CSAM to reflect consistent and\naccurate information. In addition, re-signed ISAs were included in the appropriate system\ndocumentation.\n\nOIG Results\nOur audit disclosed that the Department has completed actions to the extent that this is no longer\na reportable condition.\n\nAUDIT REPORT 50401-70-FM 14\n\x0cExhibit B: Summary of Prior Year Recommendations\n\nAudit Report 50401-65-FM, U.S. Department of Agriculture\xe2\x80\x99s Consolidated Financial\nStatements for Fiscal Years 2008 and 2007, dated November 14, 2008.\n\nFinding 1\n\nRecommendation 1\nProvide additional oversight to ensure that general ledgers reflect valid obligations and that\nagencies perform the required reviews timely and effectively.\n\nDepartmental Status\nSee Departmental status for Recommendation 1 of Audit Report 50401-67-FM, U.S. Department\nof Agriculture\xe2\x80\x99s Consolidated Financial Statements for Fiscal Years 2009 and 2008, dated\nNovember 16, 2009.\n\nOIG Results\nThe Material Weakness continues to exist, as discussed in Finding 1.\n\n\n\n\nAUDIT REPORT 50401-70-FM 15\n\x0cExhibit C: Status of Prior Year Noncompliance Findings\n\nAudit Report 50401-67-FM, U.S. Department of Agriculture\xe2\x80\x99s Consolidated Financial\nStatements for Fiscal Years 2009 and 2008, dated November 16, 2009.\n\nFinding 3\n\nReported Noncompliance\nThe Department reported a lack of substantial compliance with the Federal Financial\nManagement Improvement Act of 1996 requirements. The Department reported that it was not\nsubstantially compliant with the Federal Financial Management Systems Requirements\n(FFMSR), applicable accounting standards, the U.S. Government Standard General Ledger\n(SGL) at the transactions level, and the Federal Information Security Management Act (FISMA)\nof 2002 requirements.\n\nStatus\nIn fiscal year 2010, the Department continued to report substantial noncompliance with FFMSR,\napplicable standards, SGL at the transactions level, and FISMA requirements, as discussed in\nFinding 3.\n\nFinding 4\n\nReported Noncompliance\nThe Natural Resources Conservation Service (NRCS) did not always obligate transactions in\naccordance with appropriations law. NRCS did not obligate leases, training, and various other\ntransactions prior to payment.\n\nStatus\nIn fiscal year 2010, the NRCS audit disclosed that corrective actions were completed and this\nwas no longer a reportable condition.\n\n\n\n\nAUDIT REPORT 50401-70-FM 16\n\x0cExhibit D: Agency Response\n\n\n\n\nAUDIT REPORT 50401-70-FM 17\n\x0cExhibit E: Performance and Accountability Report\n\n\n\n\n USDA\n PERFORMANCE AND ACCOUNTABILITY\n REPORT\n FISCAL YEARS 2010 and 2009\n\n\n\n\n (PREPARED BY USDA)\n\n\n\n\n SECTIONS 1, 2, AND 4 ARE UNAUDITED\n\n\n\n\nAUDIT REPORT 50401-70-FM 18\n\x0c\x0cThis Performance and Accountability Report (PAR) can be downloaded at www.usda.gov. From\nthere, click on \xe2\x80\x9cAbout USDA.\xe2\x80\x9d The U.S. Department of Agriculture (USDA) can be contacted\nthrough the same Web site by clicking \xe2\x80\x9cContact Us.\xe2\x80\x9d\nUSDA prohibits discrimination in all its programs and activities on the basis of race, color,\nnational origin, age, disability, and where applicable, sex, marital status, familial status, parental\nstatus, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or\na part of an individual\xe2\x80\x99s income is derived from any public assistance program. (Not all prohibited\nbases apply to all programs.) Persons with disabilities who require alternative means for\ncommunication of program information (Braille, large print, audiotape, etc.) should contact\nUSDA\xe2\x80\x99s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of\ndiscrimination, write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue,\nS.W., Washington, D.C. 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).\nUSDA is an equal opportunity provider and employer.\nOnly Federal employees participated in the preparation of the performance and financial\ninformation contained in this report.\n\x0c Table of Contents\nMessage from the Secretary ...................................................................................................................... ii\nAbout this Report ...................................................................................................................................iv\n1. Management\xe2\x80\x99s Discussion and Analysis ..............................................................................................1\n Resources ............................................................................................................................................................................ 5\n Performance Goals, Objectives, and Results ...................................................................................................................... 6\n Future Demands, Risks, Uncertainties, Events, Conditions, and Trends .......................................................................... 8\n Financial Statement Highlights .......................................................................................................................................... 9\n Systems, Controls, and Legal Compliance ....................................................................................................................... 13\n Federal Managers\xe2\x80\x99 Financial Integrity Act Report on Management Control .................................................................. 14\n2. Annual Performance Report ............................................................................................................ 23\n Strategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self-Sustaining, Repopulating and\n Economically Thriving ..................................................................................................................................................... 23\n Strategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made\n More Resilient to Climate Change, While Enhancing Our Water Resources ................................................................ 40\n Strategic Goal 3: Help America Promote Agricultural Production and Biotechnology Exports as America Works to\n Increase Food Security ...................................................................................................................................................... 55\n Strategic Goal 4: Ensure that All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and Balanced Meals ........ 60\n Selected Results in Research, Extension, and Statistics .................................................................................................... 73\n Selected 2010 Program Evaluations ................................................................................................................................. 79\n3. Financial Statements, Notes, Supplemental and Other Accompanying Information ............................ 83\n Message from the Chief Financial Officer ....................................................................................................................... 83\n Consolidated Financial Statements .................................................................................................................................. 85\n Required Supplementary Stewardship Information ....................................................................................................... 156\n Required Supplementary Information ............................................................................................................................ 165\n\n\n\n4. Other Accompanying Information ................................................................................................. 175\n Appendix A \xe2\x80\x94Response to Management Challenges ................................................................................................... 175\n Appendix B \xe2\x80\x94 Improper Payment and Recovery Auditing Details .............................................................................. 186\n Appendix C\xe2\x80\x94Inspector General Act Amendments of 1988: Management\xe2\x80\x99s Report on Audit Follow-Up ................ 208\n Appendix D\xe2\x80\x94Acronyms ................................................................................................................................................ 214\n\n\n\n\n FY 2010 Performance and Accountability Report\n i\n\x0c Message from the Secretary\nIn fulfillment of its duty to the people, the President, and Congress, the U.S.\nDepartment of Agriculture (USDA) respectfully submits this Fiscal Year (FY) 2010\nPerformance and Accountability Report.\nAs the Obama Administration worked to stabilize and grow the economy, USDA\nworked to implement the American Recovery and Reinvestment Act of 2009 (ARRA)\nand other measures to create and save tens of thousands of jobs. At the same time, the\nDepartment supported families hard hit by the recession. It provided food assistance to\none in four Americans, and credit and disaster assistance to help struggling farmers and\nranchers maintain their operations. USDA also worked to build a foundation for long-\nterm economic growth. The Department helped 138,000 rural families become homeowners by building and\nrenovating critical infrastructure like broadband, hospitals and police stations across the Nation, and expanding\nproduction of renewable energy.\nThe Department\xe2\x80\x99s wide range of programs and responsibilities touched the lives of every American, every day.\nUSDA worked to support the American agricultural economy, to strengthen rural communities, to protect and\nconserve our natural resources, and to provide a safe, sufficient and nutritious food supply for the American\npeople.\nTogether with President Obama, we outlined a plan to build a revitalized rural economy that creates real\nopportunity for growth and prosperity. To make this vision a reality, USDA is ensuring access to innovative\ntechnologies, opening new markets for crops, and better utilizing our natural resources and promoting production\nof renewable fuel and energy. The Department accomplishes these tasks by:\n\xe2\x80\xa2 Providing financing to help rural businesses expand and innovate, creating or saving 128,000 jobs;\n\xe2\x80\xa2 Using ARRA funding to help nearly 7 million rural Americans gain access to broadband, which is expected to\n save or create more than 25,000 jobs while expanding access to state-of-the-art health care, educational, and\n cultural resources. This funding also allowed local businesses to compete in the global economy;\n\xe2\x80\xa2 Supporting the expansion of U.S. agricultural exports, expected to exceed $105 billion in FY 2010, with\n grants and loan guarantees to support international market development. These exports support more than\n 800,000 American jobs; and\n\xe2\x80\xa2 Funding thousands of renewable energy and energy efficiency projects, providing more than $240 million in\n funding under the Biomass Crop Assistance Program, and establishing 5 regional research centers to focus,\n accelerate, and coordinate the science and technology needed to develop a national biofuels industry powered\n by feedstocks produced in every corner of the country.\nUSDA also looked at new efforts \xe2\x80\x93 and at streamlining and targeting existing work \xe2\x80\x93 to preserve the Nation\xe2\x80\x99s\nforests and clean waterways, while mitigating global climate change. The Department:\n\xe2\x80\xa2 Used $40 million through the Migratory Bird Habitat Initiative to improve habitat on more than 471,000\n acres for migratory birds that could be impacted by the Deepwater Horizon oil spill;\n\xe2\x80\xa2 Improved water and soil quality, enhanced wildlife habitat, and addressed the effects of climate change,\n through the Conservation Stewardship Program. USDA awarded almost 21,000 contracts to improve and\n sustain conservation efforts on nearly 25.2 million acres, a land area equivalent in size to the State of Virginia;\n\xe2\x80\xa2 Protected 53,000 acres of the most critical and important farmland from conversion to nonagricultural uses by\n conservation easements;\n\n\n\n\n FY 2010 Performance and Accountability Report\n ii\n\x0c\xe2\x80\xa2 Supported jobs and rural economies through the sale of more than 2.56 billion board feet of timber. Many of\n these projects were designed with restoration as an emphasis on these public lands; and\n\xe2\x80\xa2 Accepted 4.3 million acres into the Conservation Reserve Program to give farmers the tools they need to\n continue filtering our air and water, and preventing soil erosion long into the future.\nThe Department worked to improve the health of America\xe2\x80\x99s children with partnerships to encourage nutritious\neating and more physical activity. In FY 2010, USDA:\n\xe2\x80\xa2 Made it easier for low-income working families to get the Supplemental Nutrition Assistance Program by\n encouraging States to adopt broad-based categorical eligibility and other policy options. Today, 39 States use\n broad-based categorical eligibility;\n\xe2\x80\xa2 Enabled low-income children to receive free school meals without an application by promoting direct\n certification. This effort allowed 1.6 million more children to be directly certified in School Year 2009-10\n than the previous year;\n\xe2\x80\xa2 Supported and recognized healthier nutrition environments for school children through HealthierUS School\n Challenge awards \xe2\x80\x93 reaching a cumulative total of more than 800 by the end of FY 2010;\n\xe2\x80\xa2 Spurred innovation to make healthy food choices and physical activity fun for children through the Let\xe2\x80\x99s\n Move! Apps for Healthy Kids competition \xe2\x80\x93 resulting in nearly 100 entries from students, software designers,\n game developers, and independent entrepreneurs; and\n\xe2\x80\xa2 Helped researchers, policy makers, and the public find information on a range of factors that affect access to\n healthy, affordable food, with the launch of Your Food Environment Atlas, an online mapping tool that\n compares the food environment of U.S. counties.\nUSDA is ensuring that America is the world leader in sustainable crop production. It conducts cutting-edge\nagricultural research and provides farmers and ranchers across America with direct support, disaster assistance,\ntechnical assistance, and access to credit. This work included:\n\xe2\x80\xa2 Making approximately $5 billion in direct and counter-cyclical payments, and $6.7 billion in marketing\n assistance loans to farmers and ranchers;\n\xe2\x80\xa2 The Department completing its first year of competitive grant funding through National Institute of Food\n and Agriculture. It awarded more than $176 million to research universities and colleges across the U.S. for\n projects focused on critical issues for America, including sustainable production of food and biomass for\n biofuels;\n\xe2\x80\xa2 Revealed the genetic blueprints of a host of plants and animals including the genomes of apples, pigs, turkeys,\n and a grass with great potential as a biofuel crop. This work allows us to bypass generations of selective\n breeding to bring more abundant, nutritious food to the American table, and increase domestic energy\n supplies; and\n\xe2\x80\xa2 Protected the U.S. citrus industry against the further spread of the devastating citrus greening disease\xe2\x80\x94saving\n thousands of jobs and preventing $2.88 billion in lost production annually. FY 2010 also marked the\n eradication of Plum Pox Virus from Pennsylvania, protecting the $1.4 billion U.S. stone fruit industry.\nAnd as we fulfill our responsibility to serve the American people, we are working to live up to President Obama\xe2\x80\x99s\ncall to deliver the most transparent, accountable, and responsive government in history. USDA worked hard to\nmake the best use of the taxpayers\xe2\x80\x99 dollars. By putting farmers and taxpayers first, the Department saved $6 billion\nby negotiating a new Standard Reinsurance Agreement for crop insurance. Of that total, $4 billion will go to pay\ndown the Federal deficit while the balance will expand critical programs for America\xe2\x80\x99s producers. Other USDA\nagencies have identified millions of dollars in savings by finding efficiencies in travel, facilities, processes, and\nother operating expenses.\nFederal oversight of food safety was identified by the Government Accountability Office\xe2\x80\x99s high risk report in\n2009, the only USDA area on the list. The Department is committed to ensuring Americans have access to safe,\n\n\n FY 2010 Performance and Accountability Report\n iii\n\x0cnutritious, and balanced meals. Prevention is the foundation principle for USDA\xe2\x80\x99s approach to food safety. Thus,\nit takes a farm-to-table approach to reducing and preventing foodborne illness. USDA also works closely with its\nFederal partners to improve the organization of Federal food safety responsibilities. From our front line inspectors\nto our labs and management, USDA is working to ensure it has the tools to build the best food safety system\npossible. While the Department works to improve the system, until it makes it perfect, we consider it our\nresponsibility to communicate with consumers about appropriate food handling and preparation. USDA invests in\nits inspection workforce and data infrastructure to prevent harm to consumers. The Department strives to reduce\nthe prevalence of food contaminants, and quickly identify and prevent foodborne illness outbreaks. While the\nFood Safety Inspection Service did not meet its FY 2010 performance standards, it will build upon its ongoing\ninitiatives, including the following specific actions taken to further protect and improve public health:\n\xe2\x80\xa2 Continuing to participate in President Obama\xe2\x80\x99s Food Safety Working Group to build an inter-agency food\n safety system that will meet the challenges posed by the global food supply of the 21st century;\n\xe2\x80\xa2 Issuing draft performance standards for the pathogen Salmonella in raw poultry products and proposing the\n first standards for the pathogen Campylobacter in poultry, both of which can cause severe illness;\n\xe2\x80\xa2 Beginning a new verification testing program for beef manufactured trimmings derived from cattle not\n slaughtered on site at an establishment, and issuing draft guidelines on methods for controlling pathogen E.\n coli O157:H7 on the farm, before cattle come to slaughter; and\n\xe2\x80\xa2 Continuing to develop and test its dramatically improved surveillance and data collection and analysis system\n \xe2\x80\x93 known as the Public Health Information System \xe2\x80\x93 which will help USDA respond more rapidly to current\n and potential threats in the food safety system, and thus better prevent contamination, recalls, and, ultimately,\n foodborne illnesses.\nThe Department\xe2\x80\x99s management team continues to oversee USDA\xe2\x80\x99s assessment of internal control over its\nprograms, operations, financial systems, and financial reporting. The Department\xe2\x80\x99s work is consistent with the\nprovisions of the Federal Managers\xe2\x80\x99 Financial Integrity Act (FMFIA) and the Federal Financial Management\nImprovement Act (FFMIA). USDA\xe2\x80\x99s continuous monitoring and remediation efforts allow us to provide the\ntaxpayers reasonable assurance that the content of this report is based on sound, accurate data.\nNevertheless, continued improvement is needed to remediate existing material weaknesses and financial system\nnon-compliance. To accomplish this goal, management continues to implement corrective action plan activities.\nTherefore, I provide qualified assurance that, except for the areas in need of improvement as described in the\nManagement Assurances section of this report, USDA\xe2\x80\x99s internal control over operations, financial systems, and\nfinancial reporting meet the objectives of FMFIA and FFMIA. The financial and performance information\npresented herein is complete and accurate, and in accordance with law and Office of Management and Budget\nguidance.\nI salute USDA employees for their outstanding work. I thank you for your interest in the Department. I am\nproud to share this information with our stakeholders. We will continue to serve the needs of the people every day\nand in every way.\n\n\n\n\nThomas J. Vilsack\nSecretary of Agriculture\nNovember 15, 2010\n\n\n\n\n FY 2010 Performance and Accountability Report\n iv\n\x0c About this Report\nThis Fiscal Year 2010 Performance and Accountability Report (PAR) is the year-end progress report of the United\nStates Department of Agriculture (USDA). The Department reviews its strategic goals, objectives, and\nperformance measures it set for itself at the beginning of the fiscal year. USDA then compares these targets to the\nyear\xe2\x80\x99s performance. The data used by the Department to measure performance are collected using a standardized\nmethodology. This methodology has been vetted by Federally employed scientists and policymakers, and,\nultimately, the undersecretaries of the respective mission areas. All attest to the completeness, reliability, and\nquality of the data.\nThe Government Performance and Results Act of 1993 (GPRA) is the basis of Federal agency planning and\nreporting. GPRA and later laws and executive branch guidance drive the planning and reporting process in this\nfashion: the 5-year Strategic Plan is used to craft the Annual Performance Plan, and progress on the Annual\nPerformance Plan is reported in the PAR. All plans and reports are available at usda.gov.\nThe PAR is divided into four sections:\n1. Management\xe2\x80\x99s Discussion and Analysis\n \xe2\x80\xa2 Summarizes the information contained in Sections 2, 3, and 4 of the PAR\n \xe2\x80\xa2 Includes the Secretary\xe2\x80\x99s Statement of Assurance\n2. Annual Performance Report\n \xe2\x80\xa2 Reports results of actions taken toward meeting the performance measures put forth in the Annual\n Performance Plan. Note that this FY2010 PAR has a different performance measure numbering scheme\n than the FY2009 PAR, based on differences in the FY2010 Annual Performance Plan.\n3. Financial Statements, Notes, Supplemental, and Accompanying Documents\n \xe2\x80\xa2 Highlights USDA\xe2\x80\x99s progress in financial management during FY 2010\n4. Other Accompanying Documents\n \xe2\x80\xa2 Includes appendices and additional information USDA deems relevant, but that may not be required to\n be reported\nThe American Recovery and Reinvestment Act of 2009 (ARRA) augmented the delivery of USDA programs to\nthe American people. This report highlights some of the diverse benefits that ARRA funds had on numerous\nUSDA programs. Additional information on USDA\xe2\x80\x99s role in recovery can be found at USDA.gov/recovery.\nThe programs once rated by the Performance Assessment Rating Tool (PART) are represented by performance\nmeasures or program discussion presented in the Annual Performance Plan and subsequently reported in the\nPAR.\n\n\n\n\n FY 2010 Performance and Accountability Report\n v\n\x0cFY 2010 Performance and Accountability Report\n vi\n\x0c Section 1.\n Management\xe2\x80\x99s Discussion and Analysis\n\n\n\n\nT\n1. Management\xe2\x80\x99s Discussion and Analysis\n he U.S. Department of Agriculture (USDA) was founded by President Abraham Lincoln in 1862, when more\n than half of the Nation\xe2\x80\x99s population lived and worked on farms. The population has increased approximately\n tenfold, and is estimated at 307 million people, the vast majority of whom do not live on farms or in rural\nareas. The magnitude of America\xe2\x80\x99s evolved needs for food, fiber, forest products, and public services has required\nUSDA to grow and deliver expanded public services.\nToday, USDA improves the Nation\xe2\x80\x99s economy and quality of life by touching the lives of almost every American\nevery day. More than 100,000 employees deliver more than $188.7 billion to provide public services through\nUSDA\xe2\x80\x99s more than 300 programs worldwide.\nBecause America\xe2\x80\x99s food and fiber producers operate in a global, technologically advanced, rapidly diversifying, and\nhighly competitive business environments, USDA is constantly helping producers meet the needs of the Nation.\nUSDA\xe2\x80\x99s strategic goals, as outlined in the Strategic Plan for FY 2010-2015 (usda.gov, see \xe2\x80\x9cAbout USDA\xe2\x80\x9d), are:\n\xe2\x80\xa2 Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and\n Economically Thriving;\n\xe2\x80\xa2 Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made More Resilient\n to Climate Change, While Enhancing Our Water Resources;\n\xe2\x80\xa2 Help America Promote Agricultural Production and Biotechnology Exports as America Works to Increase\n Food Security; and\n\xe2\x80\xa2 Ensure That All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and Balanced Meals.\nThese goals mirror USDA\xe2\x80\x99s commitment to provide first-class service, state-of-the-art science, and consistent\nmanagement excellence across the Department. USDA assesses and seeks to improve program performance so\nthat the Department can maximize its impact. Program assessments identify how well and efficiently a program is\nworking and what specific actions can be taken to improve its performance. Summary program evaluations\nconducted during fiscal year (FY) 2010 are included in this document at the end of Section 2, \xe2\x80\x9cAnnual\nPerformance Report.\xe2\x80\x9d\nUSDA\xe2\x80\x99s management structure can be found in Exhibit 1, Headquarters Organization.\nUSDA\xe2\x80\x99s FY 2010 accomplishments include:\n\xe2\x80\xa2 Helped more than 38 million Americans who need food assistance by administering an average increase in\n benefits of $80 per month to low-income households of 4. This funding is a fast-acting economic stimulus as\n every $1 in food benefits generates up to $1.84 in total economic activity;\n\xe2\x80\xa2 Unveiled the \xe2\x80\x9cKnow Your Farmer, Know Your Food\xe2\x80\x9d Initiative, which promotes local and regional food\n systems by stimulating community economic development and ensuring equitable access to affordable fresh\n and local food;\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 1\n\x0c\xe2\x80\xa2 Provided 2,636 loans to farmers and ranchers help them purchase the farm equipment, feed, seed, and fuel\n they needed to keep their farms operating and support jobs in the rural economy (approximately half of these\n loans went to beginning farmers and 25 percent to socially disadvantaged farmers);\n\xe2\x80\xa2 Aided 85,420 rural Americans in purchasing or repairing their homes with affordable loans while\n simultaneously stimulating the economy, and creating jobs in the construction and real estate sectors;\n\xe2\x80\xa2 Helped create private sector jobs protecting rural communities from large wildfires, while improving the\n health of our forests, water, and air resources;\n\xe2\x80\xa2 Created green jobs at plants that use wood from forest restoration activities to generate renewable energy \xe2\x80\x93\n grants worth $50 million went to projects that will power 223,000 homes;\n\xe2\x80\xa2 Assisted more than 5,000 schools to purchase equipment to ensure that safe and healthy meals are served to\n children;\n\xe2\x80\xa2 Donated 11,000 tons of rice, vegetable oil, yellow peas, and lentils to help feed 390,000 children in Haiti and\n Afghanistan under the McGovern-Dole International Food for Education and Child Nutrition Program;\n\xe2\x80\xa2 Announced annual funding to help all States and trust territories sustain the Nation\'s urban and rural forests,\n and to protect communities and the environment from wildfires, insects, diseases and invasive species;\n\xe2\x80\xa2 Debuted the first-ever joint public workshop with the U.S. Department of Justice on competition and\n regulatory issues in the agriculture industry. The workshop, led by U.S. Agriculture Secretary Tom Vilsack\n and U.S. Attorney General Eric Holder, featured panel discussions on a variety of topics important to\n America\'s farmers and ranchers, including competitive dynamics in the seed industry, trends in contracting,\n transparency, and buyer power, and concluded with public testimony; and\n\xe2\x80\xa2 Announced that soil erosion on cropland declined by more than 40 percent during the past 25 years, with\n help from USDA conservation programs.\nExhibit 1: Headquarters Organization (FY 2010)\n\n SECRETARY\n\n Deputy Secretary\n\n\n\n\n Director of Inspector General Assistant Secretary for Assistant Secretary for Assistant Secretary for\n Communications General Counsel Congressional Relations Administration Civil Rights\n\n\n\n\n Chief Information Chief Financial Executive\n Officer Officer Operations\n\n\n\n\n Under Secretary for Under Secretary for Under Secretary Under Secretary for Under Secretary for Under Secretary for Under Secretary for\n Natural Resources Farm and Foreign for Rural Food, Nutrition and Food Safety Research, Education Marketing and\n and Environment Agricultural Services Development Consumer Services and Economics Regulatory Programs\n Forest Service Farm Service Rural Utilities Food and Nutrition Food Safety and Agricultural Research Agricultural Marketing\n Natural Resources Agency Service Service Inspection Service Service\n Conservation Foreign Agricultural Rural Housing Center for Nutrition Service National Institute of Animal and Plant\n Service Service Service Policy and Promotion Food and Agriculture Health Inspection\n Risk Management Rural Business- Economic Research Service\n Agency Cooperative Service Service Grain Inspection,\n National Agricultural Packers and\n Library Stockyards\n National Agricultural Administration\n Statistics Service\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 2\n\x0cMISSION AREAS\n The Department\xe2\x80\x99s work is organized by mission areas, which\n Mission Statement are a collection of agencies that work together to achieve\n USDA\xe2\x80\x99s strategic goals. Descriptions of USDA\xe2\x80\x99s seven\n USDA provides leadership on food, agriculture,\n mission are as follows.\n natural resources, and related issues based on\n sound public policy, the best available science, and Natural Resources and Environment\n efficient management. The Natural Resources and Environment (NRE) mission\n area ensures the health of the land through sustainable\nmanagement. Its agencies work to prevent damage to natural resources and the environment, restore the resource\nbase, and promote good land management. NRE consists of the Forest Service (FS) and the Natural Resources\nConservation Service (NRCS). FS manages public lands in national forests and grasslands, which encompass 193\nmillion acres. NRCS provides leadership in a partnership effort to help America\'s private land owners and\nmanagers conserve their soil, water, and other natural resources. Both agencies work in partnership with tribal,\nFederal State, and local Governments; and community-related groups to protect soils, watersheds, and\necosystems.\nFarm and Foreign Agricultural Services\nThe Farm and Foreign Agricultural Services (FFAS) mission area helps keep America\'s farmers and ranchers in\nbusiness as they face the uncertainties of weather and markets. FFAS delivers commodity, credit, conservation,\ndisaster, and emergency assistance programs that help improve the stability and strength of the agricultural\neconomic sector. This mission area is comprised of the Farm Service Agency (FSA), the Foreign Agricultural\nService (FAS), and the Risk Management Agency (RMA). FSA administers and manages farm commodity,\ncredit, conservation, disaster, and loan programs as laid out by Congress through a network of Federal, State, and\ncounty offices. FAS works to improve international market access for U.S. products, build new markets, improve\nthe competitive position of domestic agriculture in the global marketplace, and provide food aid and technical\nassistance to other countries. RMA helps producers manage their business risks through effective, market-based\nrisk management solutions.\nThis mission area also includes two Government-owned corporations. The Commodity Credit Corporation\n(CCC) works to stabilize farm income to help ensure an adequate, affordable supply of food and fiber. This\ncorporation is a financial mechanism by which agricultural commodity, credit, export, conservation, disaster, and\nemergency assistance is provided. The Federal Crop Insurance Corporation (FCIC) improves the economic\nstability of agriculture through a sound system of crop insurance.\nRural Development\nThe Rural Development (RD) mission area focuses on helping improve the economy and quality of life in all of\nrural America. RD provides financial programs to support such essential public facilities and services as water and\nsewer systems, housing, health clinics, emergency service facilities, and electric and telephone services. RD\npromotes economic development by providing loans to businesses through banks and community-managed\nlending pools, while also helping communities participate in community empowerment programs. RD provides\ngrants, loans, and loan guarantees to farmers, ranchers, and rural small businesses to develop renewable energy\nsystems and make energy efficient improvements.\nFood, Nutrition, and Consumer Services\nThe Food, Nutrition, and Consumer Services (FNCS) mission area works to harness the Nation\'s agricultural\nabundance to reduce hunger and improve health in the U.S. FNCS\xe2\x80\x99s agencies administer Federal domestic\nnutrition assistance programs. FNCS is comprised of the Food and Nutrition Service (FNS) and the Center for\nNutrition Policy and Promotion (CNPP). FNS administers USDA\xe2\x80\x99s 15 Federal nutrition assistance programs.\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 3\n\x0cCNPP works to improve the health and well-being of Americans by developing and promoting dietary guidance\nthat links scientific research to the nutrition needs of consumers.\nFood Safety\nThe Food Safety and Inspection Service (FSIS) is the public health agency responsible for ensuring that the\nNation\xe2\x80\x99s commercial supply of meat, poultry, and egg products is safe, wholesome, labeled, and packaged\ncorrectly.\nResearch, Education, and Economics\nThe Research, Education, and Economics (REE) mission area is dedicated to the creation of a safe, sustainable,\ncompetitive U.S. food and fiber system, as well as the development of strong communities, families, and youth\nthrough integrated research, analysis, and education. REE is comprised of the Agricultural Research Service\n(ARS), the National Institute of Food and Agriculture (NIFA), the Economic Research Service (ERS), the\nNational Agricultural Statistics Service (NASS), and the National Agricultural Library (NAL).\nMARKETING AND REGULATORY PROGRAMS\nThe Marketing and Regulatory Programs (MRP) mission area facilitates the domestic and international\nmarketing of U.S. agricultural products and ensures the health and care of animals and plants. MRP is made up of\nthe Agricultural Marketing Service (AMS), the Animal and Plant Health Inspection Service (APHIS), and the\nGrain Inspection, Packers, and Stockyards Administration (GIPSA). AMS administers programs that facilitate\nthe efficient, fair marketing of U.S. agricultural products, including food, fiber, and specialty crops. APHIS\nprovides leadership in ensuring the health and care of animals and plants. GIPSA facilitates the marketing of\nlivestock, poultry, meat, cereals, oilseeds, and related agricultural products.\nDEPARTMENTAL MANAGEMENT\nDepartment-level offices provide centralized leadership, coordination, and support for USDA\xe2\x80\x99s policy and\nadministrative functions. Their efforts maximize the energy and resources agencies devote to the delivery of\nservices to USDA customers and stakeholders.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 4\n\x0cResources\nCongressional appropriations are the primary funding source for USDA operations. FY 2010 program obligations\ntotaled $188.7 billion, an increase of $18.2 billion compared to FY 2009. These are current year obligations from\nunexpired funds.\nExhibit 2 shows USDA\xe2\x80\x99s net cost of program operations for FY 2010, organized by strategic goal and compared\nto FY 2009. Total net costs for FY 2010 were $132.4 billion compared to $119 billion for FY 2009.\n\nExhibit 2: FY 2010 USDA Net Cost of Program Operations by Strategic Goals (in millions)\n\n\n\n\nGoal 1: Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and\n Economically Thriving;\nGoal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made More\n Resilient to Climate Change, While Enhancing Our Water Resources;\nGoal 3: Help America Promote Agricultural Production and Biotechnology Exports as America Works to\n Increase Food Security; and\nGoal 4: Ensure That All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and Balanced Meals.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 5\n\x0cPerformance Goals, Objectives, and Results\nOf the 41 performance measures contained in USDA\xe2\x80\x99s FY 2010 Annual Performance Plan, 31 were met or\nexceeded, 8 were unmet, and 2 were deferred. The following Performance Scorecard table, organized by USDA\xe2\x80\x99s\nstrategic goals and objectives, provides a summary of the Department\xe2\x80\x99s performance results. Additional analysis of\nthese results can be found in the Annual Performance Report section of this report.\n\n PERFORMANCE SCORECARD FOR FY 2010\n Objectives Annual Performance Goals Result\n Strategic Goal 1: Assist Rural Communities to Create Prosperity So they are self sustaining, repopulating and Economically Thriving\n 1.1 Enhance Rural Prosperity 1.1.1 Number of jobs created or saved through USDA financing of businesses Exceeded\n 1.1.2 Number of borrowers/subscribers receiving new or improved Met\n telecommunication services (millions)\n 1.2 Create Thriving Communities 1.2.1 Number of borrowers/subscribers receiving new or improved service from Exceeded\n agency funded water facility\n 1.2.2 Homeownership Opportunities Provided\n \xe2\x80\xa2 Guaranteed Loans Exceeded\n \xe2\x80\xa2 Direct Loans Exceeded\n \xe2\x80\xa2 Total\n 1.2.3 Percentage of customers who are provided access to new and/or improved\n essential community facilities\n \xe2\x80\xa2 Health Facilities Exceeded\n \xe2\x80\xa2 Safety Facilities Exceeded\n 1.2.4 Number of borrowers/subscribers receiving new and/or improved electric Exceeded\n 1.3 Support a Sustainable and Competitive 1.3.1 Percentage of beginning farmers, racial and ethnic minority farmers, and Exceeded\n Agricultural System women farmers financed by USDA\n 1.3.2 Dollar value of agriculture trade preserved through trade agreement Exceeded\n negotiation, monitoring, and enforcement ($ billions) Non-\n Sanitary/Phytosanitary (SPS) Activities\n 1.3.3 Value of trade preserved annually through USDA staff interventions leading Exceeded\n to resolution of barriers created by SPS or Technical Barrier to Trade (TBT)\n actions\n 1.3.4 Value of Federal Crop Insurance Corporation (FCIC) risk protection Met\n coverage provided through FCIC sponsored insurance ($ billions)\n 1.3.5 Normalized value of FCIC risk protection coverage provided through FCIC Met\n sponsored insurance ($ billions)\n 1.3.6 The number of farmers and ranchers that gained an economic, Met\n environmental or quality-of-life benefit from a change in practice learned by\n participating in a Sustainable Agricultural Research and Education (SARE)\n project.\n 1.3.7 Percent of industry compliance with the Packers Stockyards Act Unmet\n 1.3.8 Maintain or increase percentage of program benefits delivered through a Deferred\n Web environment\n Strategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made More Resilient to Climate\n Change, While Enhancing Our Water Resources\n 2.1 Restore and Conserve the Nation\xe2\x80\x99s 2.1.1 Conservation Reserve Program (CRP): Restored wetland acreage (millions Exceeded\n Forests, Farms, Ranches and of acres)\n Grasslands 2.1.2 Conservation Technical Assistance (CTA): Cropland with conservation Met\n applied to improve soil quality (millions of acres)\n 2.1.3 Envirionmental Quality Incentive Program (EQIP): Cropland with Met\n conservation applied to improve soil quality (millions of acres)\n 2.1.4 CTA: Grazingland and forest land with conservation applied to protect and Exceeded\n improve the resource base (millions of acres)\n 2.1.5 EQIP: Grazinglands and forest lands with conservation applied to protect Exceeded\n and improve the resource base (millions of acres)\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 6\n\x0c PERFORMANCE SCORECARD FOR FY 2010\n Objectives Annual Performance Goals Result\n 2.1.6 Farmland Ranchland Protection Program (FRPP): Prime, unique or Exceeded\n important farmland protected from conversion to non-ag uses buy\n conservation easements (acres)\n 2.1.7 Wildlife Habitat Incentive Program (WHIP): Non-Federal land with Unmet\n conservation applied to improve fish and wildlife habitat quality (acres)\n2.2 Protect and Enhance America\xe2\x80\x99s Water 2.2.1 CTA: Comprehensive nutrient management plans applied. (number of Met\n Resources plans)\n 2.2.2 EQIP: Comprehensive nutrient management plans applied (number of Unmet\n plans)\n 2.2.3 Wetlands Restoration Program (WRP): Wetlands created, restored or Met\n enhanced (acres)\n2.3 Reduce risk from catastrophic wildfire 2.3.1 Percentage of total National Forest System land base for which fire risk is Unmet\n and restore fire to its appropriate place reduced through movement ot a better condition class\n on the landscape. 2.3.2 Acres of Wildland Urban Interface (WUI) fuels treated to reduce the risk of Exceeded\n catastrophic fire\n 2.3.3 Percenatge of acres treated in the WUI that have been indentified in Met\n Community Wildfire Protection Plans\n\n Strategic Goal 3: Help America promote Agriculutral Production and Biotechnology Exports as America Works to Increase Food Security\n3.1 Ensure US Agricultural Resources 3.1.1 Food Aid Targeting Effectiveness Ratio (percent) Met\n Contribute to Enhanced Global\n Security\n3.2 Enhance Americas Ability to Develop 3.2.1 Cumulative number of genetically engineered plant lines reviewed by Unmet\n and Trade Agricultural Products USDA and found safe for use in the environment.\n Derived From New Technologies\n Strategic Goal 4: Ensure that All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious and Balanced Meals\n4.1 Increase Access to Nutritious Foods 4.1.1 Participation levels for major Federal nutrition assistance programs Met\n Supplemental Nutrition Assistance Program (SNAP) (millions per month)\n 4.1.2 Improve SNAP payment accuracy rate Deferred\n 4.1.3 Pariticipation levels for the major Federal nutrition assistance programs\n Special Supplemental Nutrition Program for Women, Infants, and Children\n (WIC) (millions per month)\n \xe2\x80\xa2 National School Lunch Program Met\n \xe2\x80\xa2 School Breakfast Program Met\n 4.1.4 Pariticipation levels for the major Federal nutrition assistance programs.\n (millions per month) Met\n4.2 Promote healthy diet and physical 4.2.1 Application and usage level of nutritional guidance tools (billions of pieces Unmet\n activity behavior of information)\n4.3 Protect Public Health by Ensuring Food 4.3.1 Overall public exposure to Salmonella from broiler carcasses. Unmet\n is Safe 4.3.2 Total illnesses from all Food Safety and Inspection Service (FSIS) Unmet\n regulated products\n 4.3.3 Percent of establishments with a functional food defense plan Exceeded\n4.4 Protect Agricultural Health by 4.4.1 Value of damage prevented and mitigated annually as a result of selected Met\n Minimizing Major Diseases and Pests plant and animal health monitoring and survelliance efforts ($ billions)\n Ensuring Access to Safe, Plentiful, and\n Nutritious Food\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 7\n\x0cACTIONS ON UNMET AND DEFERRED GOALS\nUSDA continuously works to improve its performance across all of its strategic goals and objectives. Sometimes\ncircumstances arise that result in the Department falling short of its goals. At other times, the Department\nconsciously alters its approach in ways that enhance its service to the public, but that make a specific performance\ngoal a less effective indicator of real progress.\nThe \xe2\x80\x9cAnnual Performance Report\xe2\x80\x9d section of this report offers further discussion of the Department\xe2\x80\x99s actions on\nits goals, objectives, and performance measures.\n\nFuture Demands, Risks, Uncertainties, Events, Conditions, and Trends\nFarmers and food companies operate in highly competitive markets both domestically and internationally. Rapid\nshifts in consumer demands associated with quality, convenience, taste, and nutrition dictates that farming and\nmarketing infrastructures become more fluid and responsive.\nNational security is a significant, ongoing priority for the Department. USDA is working with the U.S.\nDepartment of Homeland Security to help protect agriculture from intentional and accidental acts that might\nimpact America\xe2\x80\x99s food supply or natural resources.\nExternal factors that will challenge USDA\xe2\x80\x99s ability to achieve its goals include:\n\xe2\x80\xa2 Weather-related hardships and other uncontrollable events domestically and abroad;\n\xe2\x80\xa2 Domestic and foreign macroeconomic factors, including consumer purchasing power, the strength of the U.S.\n dollar, and political changes abroad that can impact domestic and global markets greatly at any time;\n\xe2\x80\xa2 Sharp fluctuations in farm prices, interest rates, and unemployment that could impact the ability of farmers,\n other rural residents, communities, and businesses to qualify for credit and manage their debts;\n\xe2\x80\xa2 The impact of future economic conditions and actions by a variety of Federal, State, and local Governments\n that will influence the sustainability of rural infrastructure;\n\xe2\x80\xa2 The increased movement of people and goods, which provides the opportunity for crop and animal pests and\n diseases, such as avian influenza and bovine spongiform encephalopathy, to move quickly across national and\n foreign boundaries;\n\xe2\x80\xa2 Potential exposure to hazardous substances, which may threaten human health and the environment, and the\n ability of the public and private sectors to collaborate effectively on food safety, security, and related\n emergency preparedness efforts;\n\xe2\x80\xa2 The risk of catastrophic fire, depending on weather, drought conditions, and the expanding number of\n communities in the wildland-urban interface; and\n\xe2\x80\xa2 Efforts to reduce hunger and improve dietary behaviors depend on strong coordination between USDA and a\n wide array of Federal, State, and local partners.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 8\n\x0cFinancial Statement Highlights\nBUDGETARY RESOURCES\nUSDA receives most of its funding from appropriations authorized by Congress and administered by the U.S.\nDepartment of the Treasury. Total budgetary resources consist of the balance at the beginning of the year,\nappropriations received during the year, spending authority from offsetting collections and other budgetary\nresources. Total budgetary resources was $225.3 billion for FY 2010 compared to $208.7 billion in FY 2009, an\nincrease of $16.6 billion.\nThe unobligated balance brought forward including recoveries of prior year unpaid obligations increased $4.5\nbillion, budget authority net of transfers and resources temporarily not available increased $30.1 billion and\nbudgetary resources permanently not available increased $18 billion.\n % Obligations Incurred And Net Outlays\n 2010 2009 Change\n Total Budgetary $225,385 $208,761 8% Obligations Incurred increased $18.1 billion in FY 2010.\n Resources This increase is primarily due to a $16.3 billion increase at\n Obligations Incurred $188,668 $170,508 11% FNS for the Supplemental Nutrition Assistance (SNAP)\n Net Outlays $135,634 $121,759 11% program; a $6.3 billion increase at RD for ARRA; a $2.2\n Data in millions billion increase at FSA for disaster programs; offset by a $5\nbillion decrease at RMA for indemnities paid.\nNet Outlays increased $13.8 billion in FY 2010, primarily in relation to the increase in obligations described\nabove.\nBALANCE SHEET\nCONDENSED BALANCE SHEET DATA\n FY 2010 FY 2009 % CHANGE\n Fund Balance with Treasury $75,805 $72,334 5%\n Accounts Receivable, Net 7,608 8,866 -14%\n Direct Loan and Loan Guarantees, Net 89,405 85,657 4%\n General Property, Plant and Equipment, Net 2,964 2,972 0%\n Other 626 810 -23%\n Total Assets 176,408 170,639 3%\n Debt 87,915 84,119 5%\n Loan Guarantee Liability 2,857 1,844 55%\n Benefits Due and Payable 3,356 3,119 8%\n Other 34,796 36,642 -5%\n Total Liabilities 128,924 125,724 3%\n Unexpended Appropriations 36,261 38,302 -5%\n Cumulative Results of Operations 11,223 6,613 70%\n Total Net Position 47,484 44,915 6%\n Total Liabilities and Net Position $176,408 $170,639 3%\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 9\n\x0cAs of September 30, 2010 and 2009\n(in millions)\nTotal Assets\nTotal assets increased $5.7 billion in FY 2010. This increase is primarily due to an increase in Fund Balance with\nTreasury of $3.4 billion; an increase in Direct Loan and Loan Guarantees, Net of $3.7 billion; offset by a decrease\nin accounts receivable for the Tobacco Transition Payment Program at CCC of $807 million and premiums from\nApproved Insurance Providers at RMA of $395 million.\nDirect Loan and Loan Guarantees, Net is the single largest asset on the USDA Balance Sheet. RD offers both\ndirect and guaranteed loan products for rural housing and rural business infrastructure. These represent 86 percent\nof the total USDA loan programs. Loan programs administered by the FSA represent 8 percent of the total. FSA\nprovides support to farmers who are temporarily unable to obtain private, commercial credit. The remaining 6\npercent represents commodity loans and credit programs administered by CCC. CCC\xe2\x80\x99s loans are used to improve\neconomic stability and provide an adequate supply of agricultural commodities. CCC credit programs provide\nforeign food assistance, expand foreign markets and provide domestic low-cost financing to protect farm income\nand prices.\nTotal Liabilities\nTotal liabilities increased $3.2 billion in FY 2010. This increase is primarily due to a $3.7 billion increase in Debt,\na $1 billion increase in Loan Guarantee Liability, offset by a $1.8 billion decrease in other liabilities.\nDebt represents amounts owed primarily to Treasury by CCC and RD. For CCC, the debt primarily represents\nfinancing to support Direct and Counter Cyclical, Crop Disaster and Loan Deficiency programs. For RD, the\ndebt primarily represents financing to support Electric and Housing loan programs.\nTotal Net Position\nTotal net position increased $2.5 billion in FY 2010. This increase is due to an increase in cumulative results of\noperations of $4.6 billion less $2 billion in unexpended appropriations.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 10\n\x0cNET COST OF OPERATIONS\nCONDENSED STATEMENT OF NET COST\nFor the Years Ended September 30, 2010 and 2009\n(in millions)\n %\n FY 2010 FY 2009 CHANGE\n Goal 1: Assist Rural Communities to Create Prosperity so They\n Are Self-Sustaining, Repopulating, and Economically Thriving: $20,611 $26,193 -21%\n Goal 2: Ensure Our National Forests and Private Working Lands\n Are Conserved, Restored, and Made More Resilient to Climate\n Change, While Enhancing Our Water Resources: 11,134 9,864 13%\n Goal 3: Help America Promote Agricultural Production and\n Biotechnology Exports as America Works to Increase Food\n Security: 2,856 1,510 89%\n Goal 4: Ensure that All of America\xe2\x80\x99s Children Have Access to\n Safe, Nutritious, and Balanced Meals: 97,837 81,501 20%\n Net Cost of Operations $132,438 $119,068 11%\n\n\nNet Cost of Operations\n\n 2010 2009 % Change Net cost of operations increased $13.3 billion in\nNon-Federal Physical $77 $87 -11% FY 2010. This increase is primarily due to increased\nProperty participation in the SNAP program at FNS of $16.1\nHuman Capital $652 $595 10% billion; an increase in disaster program payments at\nResearch and $2,307 $2,202 5% FSA of $2 billion; offset by decreased price support\nDevelopment and indemnity payments at CCC and RMA of $3\nData in millions billion and $3.6 billion, respectively.\nStewardship Investments\nStewardship investments are substantial investments made by the Federal Government for the benefit of the\nnation but are not physical assets owned by the Federal Government. When incurred, they are treated as expenses\nin determining the net cost of operations. However, these items merit special treatment so that users of Federal\nfinancial reports know the extent of investments that are made for long-term benefit. Such investments are\nmeasured in terms of expenses incurred for non-Federal physical property, human capital, and research and\ndevelopment.\nLimitations of the Financial Statements\nThe principal financial statements have been prepared to report the financial position and results of operations of\nthe entity, pursuant to the requirements of 31 U.S.C. 3515(b).\nWhile the statements have been prepared from the books and records of the entity in accordance with GAAP for\nFederal entities and the formats prescribed by OMB, the statements are in addition to the financial reports used\nto monitor and control budgetary resources, which are prepared from the same books and records.\nThe statements should be read with the realization that they are for a component of the U.S. Government, a\nsovereign entity.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 11\n\x0cFinancial Management Systems\nThe Financial Management Modernization Initiative (FMMI) Project was initiated to modernize USDA\xe2\x80\x99s\noutdated financial system technology. FMMI will replace the Corporate Financial Management System (CFMS),\nincluding the mainframe-based Foundation Financial Information System (FFIS) financial system, with Systems,\nApplications and Products (SAP) Enterprise Resource Planning (ERP) 6.0, migrating the current distributed,\nmulti-instance mainframe system to a Federally compliant, consolidated, single-instance Web-based system.\nFMMI is operational and 74 percent complete:\n\xe2\x80\xa2 All corporate interfaces, including Payroll, Procurement, Travel and Property, are completed and deployed;\n\xe2\x80\xa2 Operational in 13 Departmental Staff Offices and 6 agencies. By the end of calendar year 2010, FMMI will\n be implemented in 4 more agencies;\n\xe2\x80\xa2 Processing 20 percent of total accounting transaction volume in the FMMI system, which will increase to\n approximately 40 percent during the next 6 months;\n\xe2\x80\xa2 More than 1,500 users conducting business in system daily and another 1,750 will be added by early 2011;\n\xe2\x80\xa2 Data warehouse for financial statement, and standard and ad hoc reporting is in production; and\n\xe2\x80\xa2 On track for schedule, cost, and performance.\n\nFMMI has the following key attributes:\n\xe2\x80\xa2 Integration with eGovernment Travel Services, ePayroll, Grants.gov, and eLoans; corporate solutions for\n which results must be reflected in the budgetary and general ledger accounts of the Department (e.g., asset\n management and procurement); and program-specific systems that support the general ledger;\n\xe2\x80\xa2 Integration with performance management and budgeting, allowing USDA to meet management\xe2\x80\x99s objects\n and Government and Performance Results Act requirements; and\n\xe2\x80\xa2 Compliance with FFMIA, including Federal financial management system requirements, applicable Federal\n accounting standards, and U.S. Government Standard General Ledger at the transaction level.\nThe FMMI project addresses the need for improved financial performance through a modern financial system\nthat provides maximum support to mission and USDA\xe2\x80\x99s financial objectives including:\n\xe2\x80\xa2 Ensuring that financial management systems support data integrity, reliability, and consistency across the\n Department and for the community of direct users;\n\xe2\x80\xa2 Providing online, on-demand querying capabilities and access to reports for financial managers and,\n ultimately, program managers (new users);\n\xe2\x80\xa2 Ensuring that information and reports are clearly communicated and organized in a format that promotes\n understanding, and is directly relevant to the needs of end users;\n\xe2\x80\xa2 Providing technology that supports future growth and changes in requirements;\n\xe2\x80\xa2 Promoting USDA\xe2\x80\x99s credibility and trust with Congress, the Executive Office of the President, and the public\n by demonstrating full compliance with financial laws, regulations, and Federal financial standards, including\n maintaining an unqualified audit opinion;\n\xe2\x80\xa2 Ensuring that the investment advances the Department\xe2\x80\x99s strategic plan, including its responsiveness to the\n fulfillment of mandates such as Federal core financial management system requirements;\n\xe2\x80\xa2 Demonstrating the strategic use of USDA\xe2\x80\x99s human capital by supporting the realignment from internally\n focused positions to decision support or citizen-facing roles, and enhancing workplace desirability for current\n and future financial employees;\n\xe2\x80\xa2 Demonstrating the strategic use of the Department\xe2\x80\x99s information technology (IT) by leveraging IT within\n USDA and across the Government to facilitate streamlining and unification of services; and\n\xe2\x80\xa2 Demonstrating good stewardship of public funds by securing the best performance and highest measure of\n accountability in the use of taxpayer dollars.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 12\n\x0cSystems, Controls, and Legal Compliance\nManagement Assurances\nSTATEMENT OF ASSURANCE\nThe United States Department of Agriculture\xe2\x80\x99s (USDA) management is providing a\nqualified statement of assurance that its management has established and maintained\neffective internal controls over financial reporting and financial management systems that\nmeet the objectives of the Federal Managers\xe2\x80\x99 Financial Integrity Act (FMFIA), with the\nexception of two material weaknesses in internal controls over financial reporting and one\nfinancial system non-conformance. Management is providing reasonable assurance that the\ninternal controls over operations are effective. The details of the exceptions are provided in\nthe FMFIA and the Federal Financial Management Improvement Act (FFMIA) sections of this report.\nUSDA conducted an assessment of its financial management systems and internal control over the effectiveness\nand efficiency of operations and compliance with applicable laws and regulations as of September 30, 2010,\nand financial reporting as of June 30, 2010, which includes safeguarding of assets and compliance with applicable\nlaws and regulations, in accordance with the requirements of Office of Management and Budget (OMB) Circular\nA-123, \xe2\x80\x9cManagement\xe2\x80\x99s Responsibility for Internal Control.\xe2\x80\x9d\nOther than the exceptions noted, USDA financial management systems conform substantially with the objectives\nof FMFIA and the internal controls were operating effectively and no other material weaknesses were found in\nthe design or operation of the internal control over 1) the effectiveness and efficiency of operations and\ncompliance with applicable laws and regulations as of September 30, 2010, and 2) financial reporting as of June\n30, 2010. The Department identified violations of the Antideficiency Act that were not considered chronic or\nsignificant. Rural Development loan disbursements were made beyond their statutory time limitations for the\nRural Utilities Service Broadband Program. Commodity Credit Corporation entered into contracts administered\nby Farm Service Agency for matching agreements that extended beyond the period of performance authorized by\nOffice of Management and Budget\xe2\x80\x99s apportionment for the Biomass Crop Assistance Program. The letters\nreporting these violations are pending clearance by Department officials.\n\n\n\n\nThomas J. Vilsack\nSecretary of Agriculture\nNovember 15, 2010\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 13\n\x0cFederal Managers\xe2\x80\x99 Financial Integrity Act Report on Management Control\nBACKGROUND\nThe Federal Managers\xe2\x80\x99 Financial Integrity Act (FMFIA) requires ongoing evaluations of internal control and\nfinancial management systems. These evaluations lead to an annual statement of assurance that:\n\xe2\x80\xa2 Obligations and costs comply with applicable laws and regulations;\n\xe2\x80\xa2 Federal assets are safeguarded against fraud, waste, and mismanagement;\n\xe2\x80\xa2 Transactions are accounted for and properly recorded; and\n\xe2\x80\xa2 Financial management systems conform to standards, principles, and other requirements to ensure that\n Federal managers have timely, relevant, and consistent financial information for decision-making purposes.\nUSDA annually evaluates its internal controls over financial reporting in accordance with Office of Management\nand Budget (OMB) Circular A-123, \xe2\x80\x9cManagement\xe2\x80\x99s Responsibility for Internal Control,\xe2\x80\x9d Appendix A, \xe2\x80\x9cInternal\nControl Over Financial Reporting\xe2\x80\x9d (A-123, Appendix A).\nThe Department operates a comprehensive internal control program. This program ensures compliance with the\nrequirements of FMFIA and other laws and OMB Circulars A\xe2\x80\x93123, Appendix A, and A\xe2\x80\x93127, \xe2\x80\x9cFinancial\nManagement Systems.\xe2\x80\x9d All USDA managers must ensure that their programs operate efficiently and effectively,\nand comply with relevant laws. They must also ensure that financial management systems conform to applicable\nlaws, standards, principles, and related requirements. In conjunction with the Office of Inspector General\n(OIG) and the Government Accountability Office (GAO), the Department\xe2\x80\x99s management works\naggressively to determine the root causes of its material weaknesses so that it can direct resources to focus on\ntheir remediation.\nUSDA remains committed to reducing and eliminating the risks associated with its deficiencies. It also strives to\nefficiently and effectively operate its programs in compliance with FMFIA.\nFY 2010 Results\nUSDA has two existing material weaknesses: Information Technology and Financial Reporting \xe2\x80\x93 Unliquidated\nObligations. There is one system non-conformance: Funds Control Management. Thus, the \xe2\x80\x9cSecretary\xe2\x80\x99s\nStatement of Assurance\xe2\x80\x9d provides qualified assurance that USDA\xe2\x80\x99s system of internal control complies with\nFMFIA objectives. The following exhibit summarizes the results reported in USDA\xe2\x80\x99s Consolidated Financial\nStatements Audit Report.\nExhibit 3: Summary of Financial Statement Audit\n\n Audit Opinion Unqualified\n Restatement No\n Beginning Ending\n Material Weakness Balance New Resolved Consolidated Reassessed Balance\n Improvement Needed in Overall Financial 1 1\n Management\n Improvements Needed in Information Technology 1 1\n Security and Controls\n T OT AL MAT E R IAL W E AK NE S S E S 2 2\n\n\nThe following exhibit lists USDA\xe2\x80\x99s material weaknesses and the financial system non-conformance as related to\nmanagement\xe2\x80\x99s assurance for FMFIA and the certification for FFMIA.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 14\n\x0cExhibit 4: Summary of Management Assurances\n\n Effectiveness of Internal Control Over Financial Reporting (FMFIA \xc2\xa7 2)\n Statement of Assurance Qualified\n Beginning Ending\n Material Weakness Balance New Resolved Consolidated Reassessed Balance\n Information Technology 1 1\n Financial Reporting \xe2\x80\x93 Unliquidated Obligations 1 1\n Financial Reporting \xe2\x80\x93 Credit Reform 1 1 0\n TOTAL MATERIAL WEAKNESSES 3 2\n Effectiveness of Internal Control Over Operations (FMFIA \xc2\xa7 2)\n Statement of Assurance Unqualified\n Beginning Ending\n Material Weakness Balance New Resolved Consolidated Reassessed Balance\n TOTAL MATERIAL WEAKNESSES 0 0\n Conformance with Financial Management System Requirements (FMFIA \xc2\xa7 4)\n Statement of Assurance Qualified\n Beginning Ending\n Material Weakness Balance New Resolved Consolidated Reassessed Balance\n Funds Control Management 1 1\n TOTAL NON-CONFORMANCE 1 1\n Compliance with Federal Financial Management Improvement Act (FFMIA)\n Agency Auditor\n Overall Substantial Compliance No No\n 1. System Requirements No No\n 2. Accounting Standards No No\n 3. United States Standard General Ledger at No No\n Transaction Level\n 4. Information security policies, procedures, and No No\n practices\n\nMaterial Weakness Reassessed and Downgraded\nFinancial Reporting \xe2\x80\x93 Credit Reform \xe2\x80\x94 This weakness was reassessed and downgraded to a significant deficiency.\nDuring FY 2010 RD completed the following actions:\n\xe2\x80\xa2 Ensured that second party review procedures are performed and documented by personnel independent of\n those preparing the assumption curves;\n\xe2\x80\xa2 Established process improvements for version control related to the curves;\n\xe2\x80\xa2 Evaluated automation support to determine feasibility of performing curve calculations systematically; and\n\xe2\x80\xa2 Determined the reasonableness of the curves for re-estimation purposes that focused on the accuracy of the\n calculations and portfolio trends.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 15\n\x0cSummary of Outstanding Material Weaknesses\n Material Weakness 1. USDA Information Technology Overall Estimated Completion Date FY 2011\n Existing\n Internal control design and operating effectiveness deficiencies in four areas: logical access controls, configuration\n management, physical access and environmental protection, and disaster recovery. These deficiencies represent an overall\n Information Technology (IT) material weakness.\n FY 2010 Accomplishments: FY 2011 Planned Actions:\n \xe2\x80\xa2 Expanded encryption to include mobile media such as thumb drives by \xe2\x80\xa2 Implement the "Getting to Federal Information Security\n the end of the fiscal year; Management Act (FISMA) Green" and the Office of Inspector\n \xe2\x80\xa2 Finalized deployment of the Department-wide end-point management General \xe2\x80\x9cGet Healthy\xe2\x80\x9d Plans;\n tool; \xe2\x80\xa2 Continue leveraging cyber security assessment and management\n \xe2\x80\xa2 Expanded the Department-wide Security Operations Center system (CSAM) and the monthly FISMA scorecard to manage\n incorporating 24/7 border protection and monitoring, end point information technology security program compliance and oversight;\n compliance, and improved incident response processes; \xe2\x80\xa2 Continue using CSAM to implement Continuous Monitoring and\n \xe2\x80\xa2 Established improved and sustainable processes and procedures for automate the Concurrency Review process;\n identity and access management; \xe2\x80\xa2 Continue using Security Metrics and agency program reviews to\n \xe2\x80\xa2 Standardized the configuration management and change control measure agency Security Program compliance and maturity;\n processes through improved processes and procedures; \xe2\x80\xa2 Monitor compliance with the Department\xe2\x80\x99s IT security regulations;\n \xe2\x80\xa2 Improved the A-123, Appendix A and FISMA monitoring and reporting \xe2\x80\xa2 Develop the Department-wide Privilege Management Plan;\n process to ensure weaknesses are timely identified and corrected; and \xe2\x80\xa2 Implement Digital Signature and Encryption Plans;\n \xe2\x80\xa2 Established functional disaster recovery site for mainframe and critical \xe2\x80\xa2 Complete Identity Credential Access Management (ICAM)\n mid-range systems. technical infrastructure;\n \xe2\x80\xa2 Continue Departmental initiatives to establish and fund alternate\n "hot sites" for Service Center Agencies; and\n \xe2\x80\xa2 Continue Departmental training and oversight activities to ensure\n effective Continuity of Operations for all systems.\n\n\n Material Weakness 2. Financial Reporting \xe2\x80\x93 Unliquidated Overall Estimated Completion Date FY 2011\n Existing Obligations\n\n Lack of consistent review and follow-up on unliquidated obligations (ULO). (Department and NRCS)\n FY 2010 Accomplishments: FY 2011 Planned Actions:\n \xe2\x80\xa2 Developed and shared Executive scorecard with the Chief Financial \xe2\x80\xa2 Department will:\n Officer Council to present obligations inactive for 12 months by major \xe2\x80\xa2 Revise policies, procedures, and processes to improve the\n category; management, review, and closeout of ULOs;\n \xe2\x80\xa2 Initiated fast-track action to deobligate balances with no activity in 2 \xe2\x80\xa2 Conduct training on new processes to manage, review, and closeout\n years through the ULO workgroup; ULOs;\n \xe2\x80\xa2 Assembled a team of subject matter experts for contracts and grants to \xe2\x80\xa2 Monitor implementation of agencies\xe2\x80\x99 corrective action plans; and\n analyze deobligation/closeout processes to determine the root causes \xe2\x80\xa2 Work with USDA agencies to complete cleanup of obligations\n of invalid unliquidated contract and grant obligations; recorded in FFIS and FMMI.\n \xe2\x80\xa2 Analyzed risk and controls objectives for the closeout process and \xe2\x80\xa2 NRCS will:\n established minimum control activities to lead to timely deobligation \xe2\x80\xa2 Create a risk-based statistical sample that segments the obligation\n and closeout of grants; population, then select samples for testing and perform testing on a\n \xe2\x80\xa2 Established procedures to process final Greenbook billings in Financial quarterly basis;\n Management Modernization Initiative annually by September 30 and \xe2\x80\xa2 Increase accountability by including an unliquidated obligation\n automatically deobligate any remaining balances; and performance objective in the performance plans of State\n \xe2\x80\xa2 Developed weekly reports to track overdue unsubmitted travel Conservationists;\n vouchers and began monitoring agencies performance to improve \xe2\x80\xa2 Provide training for open obligation reviews that address audit\n timeliness of voucher submissions. findings; and\n \xe2\x80\xa2 Publish procedures for fund certification, upward and downward\n adjustments, monitoring of unliquidated obligations, and\n obligation/close-outs.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 16\n\x0cSUMMARY OF OUTSTANDING SYSTEM NON-CONFORMANCE\n\n System Non- 1. Funds Control Management Overall Estimated Completion Date FY 2012\n Conformance\n Existing System improvements needed in recording obligations at the transactions level. (CCC)\n Non-compliance with Federal Financial Management Improvement Act of 1996. (NRCS)\n FY 2010 Accomplishments: FY 2011 Planned Actions:\n \xe2\x80\xa2 CCC: \xe2\x80\xa2 CCC:\n \xe2\x80\xa2 Enhanced the use of the Electronic Funds Management System (eFMS) \xe2\x80\xa2 Incorporate transaction level obligations for the Conservation\n by incorporating transaction level obligations for the Tobacco Transition Reserve Program (CRP) Annual Rental program as well as\n Payment Program, and Direct Payments, that check funds availability at additional Farm Programs as they are implemented;\n the time of obligation; \xe2\x80\xa2 Continue to incorporate WBSCM programs into eFMS as those\n \xe2\x80\xa2 Implemented Web-based Supply Chain Management (WBSCM) to programs are moved from the Processed Commodities Inventory\n integrate obligation transactions for the Commodity Credit Corporation Management System (PCIMS) to WBSCM; and\n (CCC) Commodity Operations programs into eFMS for the programs \xe2\x80\xa2 Continue to develop the MIDAS program, and to make sure\n currently \xe2\x80\x9clive\xe2\x80\x9d or deployed in WBSCM; and financial requirements are clearly captured in the design of this\n \xe2\x80\xa2 Completed planning phase and began software and acquisition phase of system.\n the Modernize and Innovate the Delivery of Agriculture Systems (MIDAS) \xe2\x80\xa2 NRCS:\n project. \xe2\x80\xa2 Obtain United States Standard General Ledger posting models to\n \xe2\x80\xa2 NRCS: appropriately record transactions without reclassification;\n \xe2\x80\xa2 Issued final policy on reimbursable agreements, open obligations, includes easements and advances;\n accruals, capital leases, internal use software, and unfilled customer \xe2\x80\xa2 Revise process and procedures to capture and properly report in\n orders. the Statement of Net Costs in accordance with U.S. generally\n accepted accounting principles (GAAP); and\n \xe2\x80\xa2 Revise process and procedures to record and report on\n stewardship, property, plant and equipment as required by\n Statement of Federal Financial Accounting Board (SFFAS) 29.\n\n\nFederal Financial Management Improvement Act Report on Financial Management Systems\nBACKGROUND\nThe Federal Financial Management Improvement Act (FFMIA) is designed to improve financial and program\nmanagers\xe2\x80\x99 accountability, provide better information for decision-making, and improve the efficiency and\neffectiveness of Federal programs. FFMIA requires that financial management systems provide reliable, consistent\ndisclosure of financial data in accordance with generally accepted accounting principles and standards. These\nsystems must also comply substantially with: 1) Federal Financial Management System requirements;\n2) applicable Federal accounting standards; and 3) the United States Standard General Ledger (USSGL) at the\ntransaction level. Additionally, the Federal Information Security Management Act (FISMA) requires that there\nbe no significant weaknesses in information security policies, procedures or practices to be substantially compliant\nwith FFMIA. The following exhibit contains the outstanding initiatives to achieve compliance.\nExhibit 5: Initiatives To Be Completed\n\n Outstanding Initiatives to Achieve FFMIA Compliance\n Section of Target Completion\n Initiative Non-compliance Agency Date\nInformation Technology\xc2\xb9 Federal Financial Management Multiple 9/30/2011\n System requirements, and Information\n security policies, procedures, and/or\n practices.\nFunds Control Management Federal Financial Management CCC 12/30/2012\n System requirements.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 17\n\x0c Outstanding Initiatives to Achieve FFMIA Compliance\n Section of Target Completion\n Initiative Non-compliance Agency Date\n Federal Financial Management NRCS 4/15/2011\n System requirements, Federal\n Accounting Standards, and U.S.\n Standard General Ledger at the\n transaction level.\n\xc2\xb9 The information technology material weakness, which is reported in the Federal Managers\xe2\x80\x99 Financial Integrity Act Report on Management Control, is comprised of four\nissues: logical access controls, configuration management, physical access and environmental protection, and disaster recovery.\n\n\nFY 2010 RESULTS\nDuring FY 2010, USDA evaluated its financial management systems to assess substantial compliance with the\nact. In assessing FFMIA compliance, the Department considered auditors opinions on component agencies\xe2\x80\x99\nfinancial statements, and progress made in addressing the material weaknesses identified in the FY 2009\nPerformance and Accountability Report. The Department is not compliant with Federal Financial Management\nSystem requirements, Federal accounting standards, and the standard general ledger at the transaction level.\nAdditionally, as reported in the FMFIA section of this report, USDA continues to have weaknesses in\ninformation technology controls that result in non-compliance with the FISMA requirement. As part of USDA\xe2\x80\x99s\nfinancial systems strategy, USDA agencies continue working to meet FFMIA and FISMA objectives.\nForest Service mitigated deficiencies related to its systems and methodologies to comply with USSGL at the\ntransaction level.\nFederal Financial Management System Requirements\nCCC continues to develop a fully integrated funds control system, the electronic Funds Management System\n(eFMS), within the FSA/CCC Core financial management system. This work includes integration with CCC\xe2\x80\x99s\ngeneral ledger system at the transaction level. The eFMS system will also provide management with timely\ninformation to monitor and control the status of budgetary resources recorded in the general ledger.\nFY 2010 accomplishments include:\n\xe2\x80\xa2 Enhanced use of eFMS by incorporating transaction level obligations for the Tobacco Transition Payment\n Program, and Direct Payments, that check funds availability at the time of obligation;\n\xe2\x80\xa2 Implemented Web-based Supply Chain Management (WBSCM) system to integrate obligation transactions\n for CCC Commodity Operations programs into eFMS for the programs currently \xe2\x80\x9clive\xe2\x80\x9d or deployed in\n WBSCM; and\n\xe2\x80\xa2 Completed planning phase and began software and acquisition phase of MIDAS.\nIn FY 2011, CCC will:\n\xe2\x80\xa2 Incorporate transaction level obligations for the Conservation Reserve Program (CRP) Annual Rental\n Program as well as additional Farm Programs as they are implemented;\n\xe2\x80\xa2 Continue to incorporate WBCSM programs into eFMS as those program are moved from the Processed\n Commodities Inventory Management System (PCIMS) to WBSCM; and\n\xe2\x80\xa2 Continue to develop the MIDAS Program, and to make sure financial requirements are clearly captured in\n the design of this system.\nIn FY 2012, CCC will:\n\xe2\x80\xa2 Complete software modifications to Web-based program applications to send obligation transactions for\n CCC Farm Programs;\n\xe2\x80\xa2 Implement Financial Management Modernization Initiative (FMMI) for FSA/CCC program activity; and\n\n Management\xe2\x80\x99s Discussion and Analysis\n 18\n\x0c\xe2\x80\xa2 Complete Initial Operating Capability for FSA\'s Modernize and Innovate the Delivery of Agricultural\n Systems (MIDAS).\nNRCS continues working to mitigate auditor-identified deficiencies. Financial management systems do not\nsubstantially comply with Federal Financial Management System Requirements, the USSGL at the transaction\nlevel, and applicable Federal Accounting Standards for obligations; accruals; capital leases and internal use of\nsoftware as part of property, plant, and equipment; and unfilled customer orders. Deficiencies were also noted\nregarding proper use of USSGL.\nFY 2010 accomplishments included:\n\xe2\x80\xa2 Issued final policy on internal controls, reimbursable agreements, obligations, accruals, real and personal\n property, capital leases, internal use software, and unfilled customer orders.\nIn FY 2011, NRCS will:\n\xe2\x80\xa2 Review and enhance A-123, Appendix A program for open obligations, unrecorded obligations, and non-\n referencing transactions, including feedback to reporting entities;\n\xe2\x80\xa2 Provide training for open obligations review based on quarterly certifications process, audit exceptions and A-\n 123 findings; and\n\xe2\x80\xa2 Develop procedures on funds certification.\nELIMINATING IMPROPER PAYMENTS\nThe Improper Payments Information Act (IPIA) of 2002 is designed to identify programs susceptible to\nsignificant improper payments and reduce the amount and number of erroneous payments. IPIA\xe2\x80\x99s goal is to\nimprove the integrity of the government\'s payments and the efficiency of its programs and activities.\nUSDA first reported on improper payments in the 2004 Performance and Accountability Report (PAR) by\ndisclosing error rates and amounts for the Supplemental Nutrition Assistance Program and the Federal Crop\nInsurance Corporation Program. The Department now has 16 programs considered at risk for significant\nimproper payments. Measuring and reporting improper payments is mandatory for five of the programs under\nOMB Circular A-11, Preparation, Submission, and Execution of the Budget. USDA identified the additional 11\nprograms at risk of significant improper payments through the Departmental risk assessment process.\nIPIA requires that agencies measure their improper payments annually, establish reduction targets and corrective\naction plans and track the results annually to ensure that the corrective actions are effective. USDA\xe2\x80\x99s Office of the\nChief Financial Officer (OCFO) issued specific policy guidance including templates and timelines for\nimplementing IPIA. USDA continues to make progress in accurately measuring and reporting improper\npayments, developing and implementing corrective actions, and recovering improper payments.\nUSDA\xe2\x80\x99s improper payment error rate of 5.37 percent for FY 2010, declined from 5.92 percent in FY 2009.\nHowever, due to a $21.5 billion increase (30 percent) in high risk program outlays from FY 2009 to FY 2010,\nUSDA\xe2\x80\x99s estimated improper payments amount were $5.0 billion for FY 2010, an increase from $4.3 billion in FY\n2009. The increase in outlays was largely attributable to the increase in demand for food and nutrition assistance\ndue to the economic downturn. The FY 2010 results demonstrate that improper payment error rates are being\nreduced and progress is being made:\n\xe2\x80\xa2 Seven USDA high risk programs reported improper payment error rates below their FY 2009 error rate;\n\xe2\x80\xa2 Six USDA high risk programs, representing 61 percent of USDA\xe2\x80\x99s total high risk program outlays, reported\n error rates below their reduction targets in FY 2009. This exceeded USDA\xe2\x80\x99s goal of achieving reduction\n targets for 50 percent or more of the Department\xe2\x80\x99s total high risk program outlays;\n\xe2\x80\xa2 Forest Service\xe2\x80\x99s (FS) Wildland Fire Suppression Management Program error rate of 0.00 percent was below\n its reduction target of 0.02 percent and equal to its FY 2009 error rate of 0.00 percent;\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 19\n\x0c\xe2\x80\xa2 Food and Nutrition Service\xe2\x80\x99s (FNS) Supplemental Nutrition Assistance Program (SNAP) error rate of 4.36\n percent was below its reduction target of 5.00 percent, and below its FY 2009 error rate of 5.01 percent. The\n SNAP error rate is a historic low for the program. This is the sixth year in a row the program\xe2\x80\x99s error rate has\n been less than 6 percent;\n\xe2\x80\xa2 FNS\xe2\x80\x99 Child and Adult Care Food Program error rate of 0.99 percent was below its reduction target of 1.46\n percent, and below its FY 2009 error rate of 2.07 percent;\n\xe2\x80\xa2 FNS\xe2\x80\x99 National School Lunch Program (NSLP) error rate of 16.28 percent was below its FY 2009 error rate\n of 16.44 percent; however, this was above its reduction target of 15.60 percent;\n\xe2\x80\xa2 FNS\xe2\x80\x99 Women, Infants and Children Program error rate of 1.17 percent was below its FY 2009 error rate of\n 1.27 percent; however, this was above its reduction target of 0.80 percent;\n\xe2\x80\xa2 Rural Development\xe2\x80\x99s (RD) Rental Assistance Program error rate of 1.39 percent was below its reduction\n target of 2.00 percent, and below its FY 2009 error rate of 2.06 percent;\n\xe2\x80\xa2 Farm Service Agency\xe2\x80\x99s (FSA) Market Assistance Loan Program error rate of 0.81 percent was below its\n reduction target of 1.50 percent, and below its FY 2009 error rate of 2.56 percent;\n\xe2\x80\xa2 FSA\xe2\x80\x99s Loan Deficiency Payments Program error rate of 0.44 percent was below its reduction target of 0.60\n percent; and\n\xe2\x80\xa2 FSA\xe2\x80\x99s Noninsured Assistance Program error rate of 11.65 percent was below its FY 2009 error rate of 14.18\n percent; however, this was above its reduction target of 9.22 percent.\nThe root causes of improper payments are summarized into the error categories of verification, authentication and\nadministrative. Verification errors relate to verifying recipient information such as earnings, income, assets, work\nstatus, etc. Authentication errors relate to authenticating the accuracy of qualifying for program specific\nrequirements, criteria or conditions. Administrative errors relate to the accuracy of the entry, classification, or\nprocessing of information associated with applications, supporting documents, or payments.\nFor FY 2010, the root causes of USDA improper payments were categorized as:\n\xe2\x80\xa2 49 percent attributable to verification error; and\n\xe2\x80\xa2 51 percent attributable to administrative error.\nUSDA establishes improper payment recovery targets for high risk programs, where appropriate, and actively\ncollects recoveries. Actions taken by USDA during FY 2010 include:\n\xe2\x80\xa2 Implemented Departmental High-Dollar Quarterly Report of improper payments identified in high-risk\n programs and actions taken by agencies to recover overpayments;\n\xe2\x80\xa2 Developed and provided additional error measurements with semi-annual reporting, designated a Senate-\n confirmed appointee as the Accountable Official, and provided an Annual Accountable Official Report to the\n USDA Inspector General for the USDA high-priority programs (SNAP and NSLP);\n\xe2\x80\xa2 Provided Departmental improper payments information for the Government-wide PaymentAccuracy.gov\n Website that includes key indicators and statistics by program;\n\xe2\x80\xa2 Completed 32 risk assessments for 32 programs in FY 2010 as scheduled on a three year cycle. No new programs\n were declared high risk as a result of the risk assessments;\n\xe2\x80\xa2 Recovered $310 million in improper payments, exceeding the Departmental recovery target of $54 million;\n\xe2\x80\xa2 Analyzed requirements and impacts of S. 1508, Improper Payments Elimination and Recovery Act of 2010,\n and provided comments to OMB;\n\xe2\x80\xa2 Participated in OMB workgroups established under Executive Order (EO) 13520 \xe2\x80\x9cReducing Improper\n Payments\xe2\x80\x9d to research specific topics identified in the EO and made recommendations to OMB on actions to\n aid Federal agencies in reducing improper payments; and\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 20\n\x0c\xe2\x80\xa2 Led the Executive Order (EO) 13520, \xe2\x80\x9cReducing Improper Payments,\xe2\x80\x9d Forensic Accounting and Auditing\n Workgroup. The workgroup submitted recommendations to OMB for utilizing forensic accounting and\n auditing techniques to prevent improper payments.\nUSDA\xe2\x80\x99s goal is to continue to achieve error reduction and recovery targets established for FY 2011. In addition to\nmeeting the requirements of the IPIA, USDA is preparing to implement the new requirements of EO 13520, the\nPresidential Memorandum \xe2\x80\x9cEnhancing Payment Accuracy Through a \xe2\x80\x98Do Not Pay List,\xe2\x80\x99\xe2\x80\x9d the Presidential\nMemorandum \xe2\x80\x9cFinding and Recapturing Improper Payments,\xe2\x80\x9d and the Improper Payments Elimination and\nRecovery Act (IPERA) of 2010.\nUSDA\xe2\x80\x99s actions planned for FY 2011 include:\n\xe2\x80\xa2 Develop a Departmental action plan outlining the requirements and actions necessary to implement IPERA;\n EO 13520, \xe2\x80\x9cReducing Improper Payments\xe2\x80\x9d; and the other new Government-wide requirement to reduce,\n eliminate, and recover improper payments;\n\xe2\x80\xa2 Develop and implementing policies, controls, procedures, and checklists at appropriate levels to reduce the\n number of improper payments;\n\xe2\x80\xa2 Create aggressive correction plans that target the verification and administrative root causes of errors and\n address internal control issues for each program;\n\xe2\x80\xa2 Provide training to field personnel and cooperative partners that address specific issues found in internal\n controls, control procedures, and the potential risks of noncompliance;\n\xe2\x80\xa2 Sustain accountability at all levels by incorporating the employee\xe2\x80\x99s individual results into their annual\n performance evaluations;\n\xe2\x80\xa2 Provide grants and technical assistance to State agencies aimed at simplifying the application and eligibility\n determination systems of SNAP;\n\xe2\x80\xa2 Provide Departmental criteria for statutory, technical, and other functionality of the Government-wide \xe2\x80\x9cDo\n Not Pay List\xe2\x80\x9d Web site being developed to allow agencies to verify eligibility against multiple databases before\n grants, contract, benefit award, and/or payments are issued;\n\xe2\x80\xa2 Issue a Departmental payment recapture/recovery auditing contract available to all programs to address\n IPERA requirements for identifying and recovering overpayments; and\n\xe2\x80\xa2 Participate in interagency workgroups to assist OMB in developing Government-wide guidance for\n implementing IPERA, EO 13521, and other initiatives to reduce improper payments and recover\n overpayments.\n\n\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n 21\n\x0cManagement\xe2\x80\x99s Discussion and Analysis\n 22\n\x0c Section 2.\n Annual Performance Report\n\n\n\n\nT\n2. Annual Performance Report\n he mission of the United States Department of Agriculture (USDA) is to provide leadership on food,\n agriculture, natural resources, and related issues based on sound public policy, the best available science, and\n efficient management.\nThe Department has established strategic goals to fulfill this vital mission. The goals were introduced in USDA\xe2\x80\x99s\nStrategic Plan Fiscal Year 2010-2015 (usda.gov, see \xe2\x80\x9cAbout USDA\xe2\x80\x9d). The goals are:\n1. To Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and\n Economically Thriving;\n2. To Ensure Our National Forests and Private Working Lands are Conserved, Restored and Made More\n Resilient to Climate Change, While Enhancing Our Water Resources;\n3. To Promote Agricultural Production and Biotechnology Exports as America Works to Increase Food\n Security; and\n4. To Ensure That All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and Balanced Meals.\nThis Annual Performance Report section of the Performance and Accountability Report (PAR) is organized by\nthe Department\xe2\x80\x99s strategic goals. The goals are then divided by objectives, which are supported by performance\nmeasures. These measures track activities and determine if a program met targets for the fiscal year (FY) just\nended that were established at the beginning of the year and published in USDA\xe2\x80\x99s Annual Performance Plan.\nWhen performance targets are unmet, an explanation is provided.\n\nStrategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self-Sustaining,\n Repopulating and Economically Thriving\nUSDA is the leading advocate for rural America. The Department supports rural communities and enhances\nquality of life for rural residents by improving their economic opportunities, community infrastructure,\nenvironmental health, and the sustainability of agricultural production. The common goal is to help create\nthriving rural communities where people want to live and raise families, and where the children have economic\nopportunities and a bright future.\nUSDA revitalizes rural communities by expanding economic opportunities and creating jobs for rural residents.\nThe Department, in cooperation with its public and private partners, is connecting rural residents to the global\neconomy. USDA is expanding access to broadband to unserved and underserved communities; promoting rural\nleadership in sustainable renewable energy development; creating new opportunities for small agricultural\nproducers to market their products by developing local and regional food systems; ensuring that rural residents\ncapitalize on potential opportunities presented by the Nation\xe2\x80\x99s efforts to develop markets for ecosystem services\nand mitigate climate change; and generating jobs through recreation and natural resource conservation,\nrestoration, and management in rural areas. USDA operates job training and business development programs that\ngive rural residents the tools and capacity to access markets and enter the green economy.\n\n Annual Performance Report\n 23\n\x0cThe Department is working to enhance the livability of rural communities. USDA uses 21st century technology\nto rebuild infrastructure, ensure that rural residents have decent housing, and homeownership opportunities, clean\nwater, adequate systems for handling waste, reliable electricity and renewable energy systems, and critical\ncommunity facilities including healthcare centers, schools, and public safety departments. USDA also helps\ncommunities invest in strategic green-infrastructure planning and protection of critical natural resources.\nOBJECTIVE 1.1 ENHANCE RURAL PROSPERITY\n1.1.1 Number of jobs created or saved through USDA financing of business\nOverview\nUSDA\xe2\x80\x99s programs help finance rural businesses and promote opportunities for economic growth as measured by\njobs created and saved.\nThe Department provides capital to enable rural businesses to participate in the global economy. A primary\nprogram furthering this goal is the Business and Industry Guaranteed Loan Program (B&I). B&I provides capital\nin the form of loan guarantees designed to improve, develop, or finance business, industry, and employment, and\nto improve the economic and environmental climate in rural communities. This is achieved by bolstering the\nexisting private credit structure through the guarantee of quality loans, which provide lasting community benefits.\nDuring FY 2010, B&I obligated approximately $1.4 billion in guaranteed loans, and assisted in the creation of\napproximately 21,000 jobs in a struggling economy. B&I also obligated $1.6 billion in American Recovery and\nReinvestment Act of 2009 (ARRA) stimulus funds that created or saved more than 33,000 jobs for rural\nAmericans.\nUSDA\xe2\x80\x99s grants to under-resourced rural communities help improve local infrastructure or expertise to attract new\nbusinesses, and maintain appeal to local residents. For instance, while rural improvements are usually funded by\nspecial local business tax assessments, these assessments may not be affordable in marginally viable areas. When\ncompanies looking to relocation need special skill sets, USDA grants can fund small targeted job-training\nprograms. In addition to B&I, Rural Business and Cooperative Programs offer a full menu of economic\ndevelopment loan and grant options. These options are delivered through cooperatives, non-profit organizations,\ninstitutions of higher learning, local and tribal governments, and other rural business and economic development\nstakeholders. These programs increase access to capital and business based services for rural communities and\nfinance infrastructure to assist with business development.\nThe Rural Energy for America Program provides grants and loan guarantees to rural residents, agricultural\nproducers, and rural businesses. These guarantees can be used for energy efficiency and renewable energy systems,\nenergy audits, and technical assistance. The program funds projects ranging from biofuels to wind, solar,\ngeothermal, methane gas recovery, advanced hydro, and biomass.\nRenewable energy projects funded by USDA loans and grants improve the local economy by creating new jobs at\nenergy plants, enhancing the tax base, and increasing local business profits. Recent funds allowed many\nagricultural producers and rural small business owners to decrease their energy consumption and increase their\nprofit margins.\nAnalysis of Results\nUSDA exceeded the target for this performance measure. The number of jobs created or saved is linked directly to\nthe amount of total available funding, amounts obligated and disbursed to awardees, and local economic\nconditions. ARRA funds helped USDA exceed the target. Annual job targets are based on historic program\noperations, subsidy rates, and annual appropriations. The target job numbers assume a level funding horizon and\ntimely allocations of funds without regard to the potential impact of major natural disasters. Budget authorities,\nsubsidy rates, and program levels vary annually. Recently, these factors resulted in a general decline in annual job\n\n\n\n Annual Performance Report\n 24\n\x0cnumbers. The targets, results, and usage of funds for USDA programs fulfilled expectations. Remaining program\nfunds will be carried over into FY 2011, and will continue to provide benefits to rural communities.\n\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.1.1 Number of jobs created or saved through 71,715 72,710 72,907 68,969 74,0051 128,808 Exceeded\n USDA financing of businesses.\n 1The target in the Annual Performance Plan, 72,369, was revised upward to 74,005 to reflect actual performance in FY 2009, as final numbers were unavailable when the\n Annual Performance Plan was drafted. The performance data for FY2008 and FY2009 were revised to reflect updated performance figures.\n Rationale for Met Range: Job projected data are gathered when projects are obligated in the Guaranteed Loan System (GLS) data warehouse based on a formula\n driven by historic results. Final job counts are verified on closing the loan and grant.\n Data Assessment of Performance Measure 1.1.1\n Business program data are collected in various systems and ways. The program\xe2\x80\x99s finance office records and reports total loan and grant obligations as\n of the date they are executed. These data are collected as part of the obligation process. The GLS, collects additional information to satisfy reporting\n requirements, and for management and evaluation purposes. This information includes the number of jobs projected at obligation and verified jobs\n created or saved at the transaction\xe2\x80\x99s closing. Data used to determine the Business and Industry Guaranteed Loan Program\xe2\x80\x99s delinquency status are\n generally reported directly by lenders into GLS. For other programs, USDA staff reports delinquency information.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Business program data are considered final and complete as of September 30 at the close of fiscal year, unless there are\n any year-end closing adjustments.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Business and Industry guaranteed loan borrower financial performance is reported by many, but not all, lenders semi-annually\n to USDA. Grantees generally report quarterly or semi-annually. There is inconsistency in the time periods represented by lender reports. In lieu of a\n reliable, consistent, and complete data set from lenders, the program\xe2\x80\x99s finance office\xe2\x80\x99s financial data have been found acceptable to the Office of\n Inspector General, as are state office-verified data on the financial performance of loans. Data for jobs created or saved are obtained by state office\n staff from borrowers and lenders. They are entered into GLS at the same time obligations are recorded. These data are reliable when they have\n been updated and verified by state staff. USDA reports the computed jobs saved or created based on underlying market and financial feasibility\n projections that support loan applications. The jobs are counted only in the fiscal year in which the loan is obligated. The delinquency rate, which\n excludes loans in bankruptcy, is based on reports supplied by lenders on the performance of each loan. While the percentage of States verifying\n third-party financial and jobs data have improved each year, further improvements are needed. The Department is testing an economic model to\n more accurately and completely show the impact of business programs in rural areas.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 While the percentage of States verifying third-party financial and jobs data has improved each year, further improvements are\n needed. The economic model described above should lead to these improvements.\n\n\n\nChallenges for the Future\nRural economies face many challenges, including:\n\xe2\x80\xa2 Land development pressure and regulatory influences;\n\xe2\x80\xa2 Low profit margins on commodity sales, yet strong competition from commodities produced overseas;\n\xe2\x80\xa2 Large-scale changes in technology; and\n\xe2\x80\xa2 A lagging national economy.\nRural areas typically have underdeveloped public services that make it difficult to attract or retain businesses. The\nlack of public funding for amenities which are common in urban areas, such as dedicated business parks or\nexpanded transportation links, creates additional challenges. Furthermore, a persistent lack of well paying job\nopportunities (and the related local tax base ramifications) places many rural county and municipal governments\nunder great stress as they attempt to meet the community development and human services needs of their\nconstituents.\n\n\n\n\n Annual Performance Report\n 25\n\x0c1.1.2 Number of borrowers/subscribers receiving new or improved telecommunication services (broadband)\n (millions)\nOverview\nUSDA\xe2\x80\x99s telecommunications program provides loans and grants specifically targeted for the deployment of\nbroadband service in small towns and communities. Utilizing advanced telecommunications services, the program\nis a powerful tool in building strong rural economies, and increasing educational and healthcare services in rural\ncommunities across the country. The telecommunications program finances broadband services that support the\neconomic growth of rural communities, including the creation or retention of rural businesses and jobs. All\nfacilities financed must be capable of providing high-speed Internet services.\nThe telecommunications program provides direct support to prospective loan and grant applicants through the\ngeneral field representatives who live and work in the rural communities that they serve. In cooperation with\nUSDA state offices, field and headquarters staff conduct outreach. This work increases awareness of and\nparticipation in the program\xe2\x80\x99s broadband loan and grant program and the broadband initiatives program of the\nARRA. It provides funding to ensure that farmers continue to contribute to local economies, take steps to build\nand preserve critical infrastructure in communities across America, and implement new resource conservation\nmeasures.\nAnalysis of Results\nThe telecommunications program met the FY 2010 performance target for number of borrowers/subscribers\nreceiving new and/or improved telecommunication services (broadband).\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.1.2 Number of borrowers/subscribers receiving 0.30 0.36 0.78 0.19 0.711 0.66 Met\n new and/or improved telecommunication\n services (broadband)(millions)\n 1The 2009 figure includes ARRA funds. The FY 2010 Annual Performance Plan figure was calculated without ARRA funds. The amount reported in the FY 2009 PAR was\n recalculated for FY 2010.\n Rationale for Met Range: Annual targets for this measure are based on historic activity and adjusted according to program level received each fiscal year. Met range\n represents a possible 7 percent deviation from target.\n Data Assessment of Performance Measure 1.1.2\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The county data are collected from each approved loan application. Applicants are required to detail their proposed\n service territories. This includes the number of subscribers to be served in the location by county. Loan funds are advanced only for approved\n purposes. Measuring the extent to which broadband service is deployed in rural America on a county-by-county basis will enable USDA to assess\n improved economic conditions because of the availability of high-speed telecommunications network access for residents and business. The data\n on the number of counties to be served for each loan are derived from applicants\xe2\x80\x99 loan applications. Data must be complete before loans can be\n approved.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 While applicants are required to perform market surveys of their proposed service areas, the actual counties served may vary\n from the plan if all funds are not used, or the borrower later requests a change of purpose from the original loan application. Overall, the data on\n counties served are reliable.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 All applications undergo an extensive review to determine eligibility. Additionally, all approved applications must show feasibility\n from a financial and technical standpoint. Applicants also are required to perform market surveys of their proposed service areas. Therefore, the\n data are reliable. As previously noted, the data on the number of counties to be served for each loan approved come from the applicant\xe2\x80\x99s loan\n application. The data depend on the borrower drawing down loan funds and constructing the system as portrayed in the applicant\xe2\x80\x99s loan design.\n Loan funds only may be used for the approved purposes for which the loan was made. Variance may result if a borrower does not draw down all\n loan funds or request approval for a change of purpose from the original loan. This could result in a different number of counties served from the\n number specified in the plan.\n\n\nChallenges for the Future\nARRA provided an additional $3.5 billion in funding for broadband projects. The hundreds of new ARRA\nbroadband projects must be monitored to ensure completion of the projects within the required timeframe.\n\n Annual Performance Report\n 26\n\x0cThe Department will continue to coordinate with the U.S. Federal Communications Commission as it prepares\nfor the implementation of the National Broadband Plan. The plan is designed to ensure that all Americans have\naccess to broadband.\nOBJECTIVE 1.2 CREATE THRIVING COMMUNITIES\n1.2.1 Number of borrowers/subscribers receiving new or improved service from agency funded water facility\n (millions)\nOverview\nThe water and environmental programs play a leading role in providing rural communities with modern,\naffordable water and waste disposal services. These programs direct technical and financial program resources to\nrural communities with the greatest need. These communities may be poverty-stricken because of out-migration,\nnatural disasters, or economic stress.\nAnalysis of Results\nThe water program exceeded the performance target for number of borrowers/subscribers receiving new and/or\nimproved service from USDA-funded water facilities. The target for the water program was calculated without\nARRA funds, but the program received ARRA funding in addition to regular funding. Thus, the target was\nexceeded by 1.5 million borrows/subscribers.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.2.1 Number of borrowers/subscribers receiving 1.7 1.3 4.4 4.21 3.42 4.9 Exceeded\n new or improved service from agency funded\n water facility (millions).\n 1,2The 2009 figure includes ARRA funds; the FY 2010 Annual Performance Plan figure was calculated without ARRA funds. The amount reported in the FY 2009 PAR\n was recalculated for FY 2010.\n Rationale for Met Range: Annual targets for this measure are based on historic activity and adjusted according to program level received each fiscal year. Also, ARRA\n performance goals were set, based on the amount of funding provided for the program level according to historical activity. Met range represents a 5 percent deviation\n from target.\n Data assessment metrics to meet the target allow for an actual number in the range of 3,122,010 to 3,524,850.\n Data Assessment of Performance Measure 1.2.1\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The Water and Environmental Programs (WEP) collects data initially through the Community Programs Application\n Processing (CPAP) system. CPAP is a non-financial system in which the agency field staff input data about applicants, borrowers, funding and\n services provided. The data obligations flow through the Rural Utilities Loan Servicing System, to the Program Loan Accounting System, and\n through a data server to a data warehouse.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 USDA\xe2\x80\x99s data warehouse stores historical information on Department programs and such non-agency data as census\n information. Program data are downloaded to the warehouse every evening from several accounting databases. Data generally are current through\n the previous day. The warehouse provides data about obligations and can be used to measure the number of loans, loan amounts, number of\n borrowers and funds advanced. The warehouse is an easy, accessible online method of extracting information and data for reports and analyses.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Based on information in CPAP, the number of subscribers receiving new or improved water or wastewater service can be\n extrapolated from the data warehouse. The WEP National Office and USDA field offices use data from CPAP, the data warehouse, and Department\n accounting systems to review or evaluate the financial, operational, and managerial programs of the utilities serving rural customers.\n\n\nChallenges for the Future\nRural communities must invest in modern water and wastewater facilities to attract families and businesses vital to\nthriving communities. The communities must decide how to balance investing in new facilities to serve new or\nproposed customers, with investing in upgrades to facilities that serve existing customers. They must weigh\ngrowing their customer base, controlling costs, and modernizing aging facilities. Gaining access to credit markets\nand leveraging funds from Federal, State, and private sources will continue to challenge rural communities.\n\n\n\n\n Annual Performance Report\n 27\n\x0c1.2.2 Homeownership opportunities provided\nOverview\nUSDA provides homeownership opportunities through the Single Family Housing Direct and Guaranteed\nPrograms. These programs provide homeownership opportunities to low- and moderate-income rural Americans\nthrough several loan, grant, and loan guarantee programs. The programs also make funding available to\nindividuals to finance vital improvements necessary to make their homes decent, safe, and sanitary.\nRevitalization of rural communities through the recovery of the ailing housing market is essential to a healthy\nnational economy. USDA\xe2\x80\x99s Direct and Guaranteed Loan programs have helped to fill the void as private\nmortgage lenders pulled back from financing homes for very low, low- and moderate-income families. The\nDepartment provided record numbers of homeownership opportunities to rural families with direct loans or\nGovernment guarantees during FY 2010.\nAnalysis of Results\nThe housing programs exceeded targets for the number of homeownership opportunities provided. As a result of\ncurrent mortgage credit markets, demand for guaranteed loans has increased. ARRA provided the Single Family\nHousing direct and guaranteed Programs with more than $11.6 billion (Guaranteed and Direct).\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.2.2 Homeownership opportunities provided\n \xe2\x80\xa2 Guaranteed Loans 31,131 35,322 62,933 133,045 97,000 121,537 Exceeded\n \xe2\x80\xa2 Direct Loans 12,326 11,448 10,179 12,150 9,030 16,200 Exceeded\n \xe2\x80\xa2 Total 43,457 46,770 73,112 145,195 106,030 137,737\n Variance in totals between the Annual Performance Plan and the PAR is due to infusion of ARRA funds.\n Rationale for Met Range: The range of 10 percent is based on the historical variance from the target during the past several years in the number of houses sold in the\n Guaranteed and Direct Single Family Housing Loan Programs.\n Data Assessment of Performance Measure 1.2.2\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Homeownership data are complete and final. Homeowenrship data are entered in the Web-based DLOS system. This\n centralized server application ensures viable data collection. It tracks performance and can be used to forecast needs. Information is entered into\n UniFi and uploaded nightly to the MortgageServe System. This system obligates funds, establishes closed loans, administers escrow accounts, and\n performs other administrative functions. Hyperion, a query and reporting tool, serves as the interface between the data warehouse and USDA staff.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Homeownership data originate in systems used to obligate funding and are reliable. Data for initial placement of households\n into their own homes are reliable. They are linked directly to homeownership loans maintained in USDA\'s financial accounting systems. No\n adjustments are made for later defaults and the resulting loss of homeownership.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Homeownership data are based on loan obligations collected in the Dedicated Loan Origination and Servicing System, and\n stored in USDA\'s Data Warehouse. Thus, the data on the number of households are auditable. Data represent the popultion served based on the\n available U.S. Census Data.\n\n\nChallenges for the Future\nThe demand for guaranteed loans is at an all time high and USDA is providing unprecedented support for the\nloan program.\nTo meet the demands of this challenging market environment, USDA is developing the necessary tools of\nautomation and training. A comprehensive loan system designed to streamline the application and loan approval\nprocess for a number of Department loan and grant programs is under development. Improvements to USDA\xe2\x80\x99s\nautomation products will increase capacity and allow lenders, partners, and remotely located employees to\ninterface with other data systems. These changes will increase the speed and efficiency of operations.\n\n\n\n\n Annual Performance Report\n 28\n\x0cWhile economic growth is needed to help America\xe2\x80\x99s housing market recover, USDA\xe2\x80\x99s housing programs will\ncontinue to play a central role in providing funding and support to the many rural Americans still in need of\nadequate, safe, and affordable housing.\n1.2.3 Percentage of customers who are provided access to new and/or improved essential community facilities\nOverview\nUSDA\xe2\x80\x99s Community Facilities (CF) programs provide loans, grants, and loan guarantees for water and\nenvironmental projects, as well as community facilities projects. CF demand exceeded that for previous years. The\nDepartment attributes the increased demand to the lack of credit available for the capital needs of rural\ncommunities.\nAnalysis of Results\nThe programs exceeded goals in each category. Across all areas of the program, USDA touched roughly one-\nquarter of all rural Americans. Some of the community facilities projects received ARRA funds.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.2.3 Percentage of customers who are provided\n access to new and/or improved essential\n community facilities\n \xe2\x80\xa2 Health Facilities 3.8 7.2 4.8 5.4 5.0 5.5 Exceeded\n \xe2\x80\xa2 Safety Facilities 3.8 6.2 5.7 5.0 5.4 6.0 Exceeded\n Rationale for Met Range: It is a challenge to measure the range of residents served because grants may vary widely, even within a category. One grant for a fire engine,\n for example, may serve 1,000 people, whereas another grant for a similar amount for a healthcare project might serve 10,000. Therefore, USDA would consider its 2010\n goal unmet if CF serves fewer than 4.7 percent of the rural population with new healthcare facilities and provides new fire, rescue and public safety facilities for less than\n 5.1 percent of the rural population. The ranges include all CF program funding, including ARRA funds.\n Data Assessment of Performance Measure 1.2.3\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Program data are complete and final. The Finance Office records and reports total loan and grant obligations as of the\n date of obligations. Additionally, the Department collects information for management and evaluation purposes. Data on delinquencies are reported\n by the Finance Office for CF direct loans, and by lenders for CF guaranteed loans.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 CF data are entered into GLS by field staff as the program funds are obligated. These data are final, complete, and reliable.\n These data include the population served based on available U.S. census information. The service area for each facility is based on estimates. The\n Department screens the data regularly for irregularities. Given the variety of areas served by different types of community facilities, estimating the\n service area is not a precise science. Population estimates are based on engineering studies used for the design of new or expanded facilities.\n USDA is developing mapping technologies to improve this process.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data are projected based on historical performance. The target information uses data dependent upon the baseline projections\n from numerous Department agencies.\n\n\nChallenges for the Future\nManagement will need to carefully consider the best ways to meet the demand for the program. Increasing\nemphasis on partnering with other entities, requiring applicant contributions, and a maximum loan ceiling may be\nconsidered. As long as the economic crisis continues, CF remains the major source for credit \xe2\x80\x93 in many cases,\nvirtually the only source \xe2\x80\x93 in rural communities.\n1.2.4 Number of borrowers/subscribers receiving new and/or improved electric facilities (millions)\nOverview\nProviding reliable, affordable electricity is essential to the economic well-being and quality of life for the Nation\'s\nrural residents. USDA\xe2\x80\x99s electric loan program provides leadership and capital to upgrade, expand, maintain, and\nreplace America\'s vast rural electric infrastructure. The electric program makes direct loans and loan guarantees to\nelectric utilities and other entities that serve customers in rural areas. The loans and loan guarantees help finance\nelectric distribution, transmission, and generation facilities, including system improvements and replacement,\n\n Annual Performance Report\n 29\n\x0cdemand-side management, energy efficiency and conservation programs, and on-grid and off-grid renewable\nenergy systems. Loans are made to corporations, States, territories and subdivisions, and local agencies, such as\nmunicipalities, utility districts, and cooperatives that provide retail electric service needs to rural areas, or supply\nthe power needs of distribution borrowers in rural areas.\nAnalysis of Results\nThe electric program exceeded its goal for providing new and improved electric facilities. The $7.1 billion of\napproved new loan funding provides a major boost in modernizing electric infrastructure in rural America. More\nthan $500 million in loans approved will support grid modernization with more than 35,000 miles of new and/or\nimproved transmission and distribution improvements, and $133 million in new advanced meter systems. With\nthe assistance of USDA electric loans, borrowers will provide improved electric service to more than 9.4 million\nretail consumers, including more than 300,000 new rural customers. The program has continued its priority for\nrenewable energy projects. More than $150 million in new loan guarantees for renewable electric generation\nfacilities were approved in FY 2010.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.2.4 Number of borrowers\xe2\x80\x99 consumers receiving 8.2 5.8 8.1 9.8 6.1 9.4 Exceeded\n new or improved electric facilities (millions)\n Rationale for Met Range: Targets for this measure are based on historical results and adjusted according to program funding. Met range represents a 5 percent\n deviation from target.\n Data assessment metrics to meet the target allow for an actual number in the range 5.8 \xe2\x80\x93 6.4 (millions).\n Data Assessment of Performance Measure 1.2.4\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The Rural Utilities Service (RUS) Electric Programs performance data are collected from various agency documents,\n including RUS Form 740c, Borrower\xe2\x80\x99s Statistical Profile, Information Publication 201-1, and borrower loan applications. The data are complete and\n accurate. They also are collected at the time of loan approval and/or reported annually.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 First-time loan applicants must submit extensive financial and electric system data in support of their loan. Existing borrowers\n are required to report financial and operating data annually to the RUS. The data are used to administer Department loan funds and ensure the\n security of the loans. Borrower information and loan and grant approvals and advances are tracked in the Rural Utilities Loan Servicing System\n (RULSS). Borrower financial and system reports and information are collected and maintained through the data collection system in the Rural\n Development data warehouse.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Performance goal data on the number of borrower consumers receiving new or upgraded electric service are derived from\n information in loan applications and annual reports. All applications are reviewed for compliance with all eligibility requirements for the various\n electric programs loans, guarantees, and grants. All approved applications must demonstrate financial feasibility and adequate loan security. Loan\n funds may be used only for the approved purposes for which the loan was made. Borrower loan applications and annual submissions are reviewed\n by field representatives and Headquarters staff for completeness and accuracy.\n\n\nChallenges for the Future\nRural electric providers face many challenges and uncertainties because of economic conditions and new\nenvironmental and energy policy initiatives. Electricity demand has continued to grow in rural communities at a\nhigher rate than in urban areas. This disparity reflects demographic conditions and economic development.\nExpansion of renewable energy production in rural areas has been an additional source of increased electricity\ndemand in many rural areas. Interest in developing new renewable electricity projects and the expansion of energy\nefficiency and conservation programs is also increasing. The program is working on regulations and policies that\nwill fully implement the new authorities of the Food Conservation and Energy Act of 2008 in these areas.\n\n\n\n\n Annual Performance Report\n 30\n\x0cOBJECTIVE 1.3 SUPPORT A SUSTAINABLE AND COMPETITIVE AGRICULTURAL SYSTEM\n1.3.1 Percentage of beginning farmers, racial and ethnic minority farms, and women farmers financed by USDA\nOverview\nUSDA provides direct and guaranteed farm ownership and operating loans that aid family farmers and ranchers\nin starting and maintaining profitable operations. The financial assistance provided through the loan programs is\na vital component of the Department\xe2\x80\x99s farm safety net. Loan funds are used to pay normal operating or family\nliving expenses. They also help make capital improvements, refinance certain debts, and purchase farmland,\nlivestock, equipment, feed, and other materials essential to farm and ranch operations.\nThe loan programs are particularly important to beginning, minority, and women farmers. Because these farming\ngroups typically have fewer resources, they tend to be less likely to qualify for credit from a commercial source.\nTherefore, USDA specifically targets a portion of its lending to these groups each year. The credit provided by\nthe Department helps reduce such barriers to entry as initial capital investment, high land values, and increasing\ninput costs.\nThe long-term success of American agriculture is dependent upon new farmers and ranchers entering the\neconomy. Unfortunately, the agricultural census indicates that the number of new entrants into farming has fallen\nover time. The USDA Farm Loan Programs (FLP) helps offset this trend. FLPs enable beginning, minority, and\nwomen farmers to enter the agricultural economy.\nAnalysis of Results\nUSDA exceeded its FY 2010 performance target for lending to beginning, minority, and women farmers. The\nDepartment has made significant progress in expanding credit access to beginning, minority, and women farmers.\nLending to these groups has increased by more than 80 percent during the past decade, from $995 million in FY\n2000 to nearly $1.8 billion in FY 2010. In FY 2010, USDA made more than 17,000 loans to beginning, minority,\nand women farmers. As of September 30, 2010, the Department has nearly 53,000 beginning, minority, and\nwomen farmers in its portfolio of direct and guaranteed loans.\nStrong demand for USDA direct and guaranteed operating and farm ownership loans continues. Price weakness\nin the livestock sector and the unusually long harvest season, caused by adverse weather conditions, combined\nwith heightened risk sensitivity in the commercial lending sector, resulted in increased application and loan\nactivity. Loan obligations totaled nearly $5 billion, the highest amount since 1985.\nOverall FLP portfolio performance remains strong despite the continued weaknesses in specific sectors of the\nagricultural economy during the past few years. Delinquency and loss rates for both direct and guaranteed loan\nprograms remain well below historic averages. In the direct loan program, the loss rate was 0.8 percent and the\ndelinquency rate was 6.2 percent. The guaranteed loan program registered a loss rate of 0.41 percent and a\ndelinquency rate of 1.88 percent.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.1 Percentage of beginning farmers, racial and 15.5% 15.9% 16.2% 17.4% 17.5% 19.7% Exceeded\n ethnic minority farmers, and women farmers\n financed by USDA\n The FY 2010 result is estimated based on three quarters of actual data and a fourth quarter projection.\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 17.0-18.0 percent, since the threshold is +/-.5 percent.\n Data Assessment of Performance Measure 1.3.1\n Farm Loan Programs (FLP) data reside in the Program Loan Accounting System, Guaranteed Loan System, Direct Loan System, and FLP Databases.\n Information obtained from the 2002 Census of Agriculture is also used for this performance measure. The measure is calculated by taking the total\n number of minority, women, and beginning farmers in the loan portfolio, and dividing it by the number of members of those three groups listed in the\n\n\n\n Annual Performance Report\n 31\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2002 Census of Agriculture with at least $10,000 in sales. (This sales figure excludes hobby farms, which are not the intended market for FLPs).\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Data reported will be considered final as of September 30, 2010.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Data are considered reliable. System enhancements and built-in edits coupled with comprehensive internal control review\n programs help ensure data reliability and quality. While Census of Agriculture data are considered reliable, the resulting percentage reported likely\n understates the importance of USDA\'s service to these targeted groups. Despite this limitation, these data are the best available for estimating\n USDA\'s performance in reaching the targeted groups.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 FLP data are of high quality. Most FLP data originate from accounting systems, which are subject to OIG audit. FLP data are\n collected for multiple purposes and gathered throughout the normal lending process. Data derived from the 2002 Census of Agriculture were\n developed in FY 2006. They will be used until new performance targets are developed as part of a strategic planning process to be completed in FY\n 2011. At that time, the 2002 Census data will be replaced with data from the 2007 Census.\n\n\nChallenges for the Future\nIn recent years, USDA has improved FLP operational effectiveness and efficiency through program streamlining\nand information technology initiatives. Building on these efforts in the future will be necessary to continue\nproviding high levels of customer service and program oversight and monitoring.\nAdditionally, as the U.S. agricultural sector continues to change, with farms becoming larger and increasingly\ndependent on technology, entry into farming is more capital intensive than ever before. The costs associated with\noperating a farm also continue to increase because of higher prices for feed, seed, fuel, and other input expenses.\nThese factors result in significant barriers and challenges for the groups that the USDA FLPs are intended to\nassist.\n1.3.2 Dollar value of agriculture trade preserved through trade agreement negotiation, monitoring, and\n enforcement ($ billions) Non-Sanitary Phyto/Sanitary (non-SPS) Activities\nOverview\nUSDA continues to play a leadership role in negotiation of the Doha Development Agenda (DDA) which is\ndesigned to lower trade barriers around the world to allow countries to increase trade globally. DDA negotiations\ncenter around such issues as agriculture, tariffs, and trade remedies. An ambitious and balanced conclusion of the\nDoha Round will substantially expand global trading opportunities, increase U.S. agricultural exports, and\ncontribute to the President\xe2\x80\x99s goals for the National Export Initiative, which is designed to help farmers and small\nbusinesses increase their exports and expand their markets. Substantial progress has been made in addressing\nissues in all three \xe2\x80\x9cpillars\xe2\x80\x9d of the DDA agriculture negotiations \xe2\x80\x93 domestic support, market access, and export\ncompetition.\nUSDA is participating in Trans-Pacific Partnership (TPP) negotiations with Australia, Brunei, Chile, New\nZealand, Peru, Singapore, and Vietnam. TPP is an Asian-Pacific trade agreement designed to increase American\nexports in the region and create jobs domestically.\nThe Department also negotiated bilateral accession agreements with countries seeking World Trade Organization\n(WTO) membership. The WTO is an international body that oversees the rules of trade between nations. In\n2010, USDA played a critical role in supporting negotiations with Russia, Kazakhstan, Serbia, and several other\ncountries.\nThe Department works closely with the Office of the U.S. Trade Representative (USTR) to negotiate agreements\nto maintain access to global markets for U.S. agriculture. USTR develops and recommends U.S. trade policy,\nconducts trade negotiations, and coordinates trade policy within the Government. In June 2010, USDA played a\ncritical role in negotiating a framework with Brazil regarding the WTO cotton dispute. In the dispute, a WTO\npanel found that the U.S. provided prohibited and actionable subsidies to domestic producers, users, and/or\n\n\n Annual Performance Report\n 32\n\x0cexporters of upland cotton. The framework with Brazil helped avert the imposition of countermeasures of more\nthan $800 million in 2010.\nAnalysis of Results\nThe performance measure was exceeded. USDA employs a performance measure that estimates the value of trade\npreserved through WTO agreement, enforcement, creation, and maintenance of free trade agreements, and\naddresses trade barriers. Extensively monitoring and enforcing existing trade agreements helped the Department\nto reach its target.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.2 Dollar value of agricultural trade preserved $14 $670 $484 $368 $500 $520 Exceeded\n through trade agreement negotiation,\n monitoring, and enforcement ($ millions)\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Rationale for Met Range: The target for this measure is influenced by foreign parties. It reflects U.S. efforts to negotiate new agreements, addressing compliance with\n existing trade agreements, and resolving trade access issues that arise so that domestic exports can continue.\n Data Assessment of Performance Measure 1.3.2\n Data for the World Trade Organization and tariff rates are projected estimates based on results posted to the performance tracking system within\n USDA. Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on results posted during the\n first three quarters of FY 2010\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on results\n posted during the first three quarters of FY 2010.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Data are reliable and used by the Department to highlight successes in the trade-policy arena.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 USDA maintains a standardized methodology to forecast trade impacts. Calculation of trade benefits from preserving existing\n trade is fairly straightforward and easy using this standard methodology. The primary sources of trade data are Department of Homeland Security\xe2\x80\x99s\n U.S. Customs and Border Protection, the Census Bureau, the USDA publication, Foreign Agricultural Trade of the United States, and other\n databases. Other sources include market reports compiled by USDA and industry estimates. Since measuring expected trade benefits from broad\n new trade agreements is extremely difficult, the Department evaluates its estimates against other outside estimates when available.\n\n\nChallenges for the Future\nThe key challenge for increasing access to global markets is progress in the WTO Doha Round negotiations.\nUSDA will continue to monitor and take action on trade barriers relating to established trade agreements.\nBarriers will continue to be addressed through the WTO dispute-settlement process, while others will be\naddressed bilaterally. Improving market opportunities under bilateral and regional trade agreements depends on\nthe approval and implementation of agreements by all partners.\n1.3.3 Value of trade preserved annually through USDA staff interventions leading to resolution of barriers created\n by Sanitary/Phytosanitary (SPS) or Technical Barrier to Trade (TBT) measures\nOverview\nWhile U.S. farmers and ranchers are among the world\xe2\x80\x99s most productive and efficient, they frequently face\ncomplex Sanitary/Phytosanitary (SPS) and Technical Barrier to Trde (TBT) in the global marketplace. These\nbarriers limit exports and/or impose additional costs on exporters. These factors reduce farm income and prevent\njob growth in the agricultural sector.\nOvercoming such barriers requires exceptional coordination across USDA, the rest of the U.S. Government, the\nprivate sector, and with foreign officials. To overcome each barrier, the Department engages in such activities as\nexchanging technical information, high-level political dialogue, and formal dispute settlement proceedings.\n\n\n\n Annual Performance Report\n 33\n\x0cIn FY 2010, USDA facilitated the prevention or removal of more than 30 SPS and TBT measures in more than\n15 countries. These successes benefitted a wide variety of U.S products and included:\n\xe2\x80\xa2 Reopening the Russian and Chinese markets for U.S. pork and pork products;\n\xe2\x80\xa2 Overcoming Turkey\xe2\x80\x99s ban on the import of all unapproved products containing or derived from agricultural\n biotechnology, including soy, cotton, and corn;\n\xe2\x80\xa2 Persuading China and Indonesia to adopt less restrictive food safety laws that affected a wide variety of U.S.\n agricultural products;\n\xe2\x80\xa2 Persuading the European Union (EU) to align its standards for acceptable levels of aflatoxins in tree nuts to\n international standards;\n\xe2\x80\xa2 Persuading Taiwan to adopt a maximum residue level for the pesticide malathion, thereby facilitating the\n entry of U.S. cherries; and\n\xe2\x80\xa2 Ensuring that EU\xe2\x80\x99s cosmetic standards for grapefruit would not downgrade Florida grapefruit to a lower\n quality category, which would command a lower price.\nAnalysis of Results\nUSDA exceeded this performance measure. USDA tracks the value of trade preserved by resolving trade barriers\narising from SPS and TBT measures imposed by foreign governments. Trade issues and their impact on U.S.\nexports depend primarily on foreign action. Sometimes, this action is in response to events in the U.S., such as a\nlivestock disease outbreak. Both the problems and the solutions are unpredictable. Solutions can range from a\nquick agreement with officials at the port of entry to a long negotiation process followed by a lengthy regulatory\nor legislative process in the country in question. The impact of an action can range from a few thousand to billions\nof dollars. While USDA can establish priorities in advance for known constraints, unforeseen events frequently\nrequire realigning priorities. In addition, volatile exchange rates affect the results reported for this measure.\nThe majority of SPS and TBT measures impacted food rather than bulk agricultural products. Resolution of\nbarriers to Asian markets showed a relative upswing from FY 2009, with a decrease in those from the Americas.\nThis reflects the growing importance of Asian markets as U.S. trading partners. Over the past 5 years, the top 10\ndestinations for U.S. agricultural products took approximately two-thirds of all agricultural exports, but the\nmakeup of the top 10 shifted over this period. Canada, Mexico, Japan, China, Taiwan, and S. Korea make up the\ntop six, with Turkey at number nine. By 2009, Hong Kong, Indonesia, and Russia had edged out the United\nKingdom, the Netherlands, and Germany. Largely due to barriers to U.S. pork and poultry, Russia dropped off\nthe list during the first half of 2010, replaced by the Philippines. China has overtaken Mexico and Japan to\nbecome the second largest importer of U.S. agricultural products, second only to Canada. With its rise in\nimportance as a U.S. trading partner, China also presents the Nation with a larger number of significant SPS and\ntechnical barriers to trade.\nUSDA changed the methodology for computing this measure. In prior years, the measure was an estimate of the\nannual value of trade preserved or gained as a result of Department intervention in SPS and TBT issues.\nBeginning in FY 2010, the measure is computed as actual, cumulative trade from the time a barrier is lifted, or\nfrom the proposed effective date of a restriction prevented by USDA intervention. Because of the change in\nmethodology, the value of reported results will initially decline significantly from that reported in recent years.\nThis decline is because of the cumulative nature of the new measure and the frequent lag between barrier\nresolution and the full restoration of interventions is not included in results reported under the new method, the\nreported value is expected to grow as impact is tracked over time.\n\n\n\n\n Annual Performance Report\n 34\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.3 Value of trade preserved annually through $2.6 $2.5 $7.3 $9.5 $3.6 $4.0 Exceeded\n USDA staff interventions leading to resolution\n of barriers created by Sanitary/Phytosanitary\n (SPS) ($ billions)\n Rationale for Met Range: The target for this measure is influenced by foreign parties. It reflects U.S. goals for addressing compliance with existing trade agreements and\n resolving trade access issues that arise so that domestic exports can continue. A met or exceeded target reflects USDA successes in addressing these barriers. An\n unmet target may not reflect that USDA monitoring activities prevented noncompliance.\n Data assessment metrics to meet the target allow for an actual number in the range $3.4-$3.8 ($ billions).\n\n Data Assessment of Performance Measure 1.3.3\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 USDA uses a performance tracking system to collect and analyze actual performance data. The data are collected from\n the Department\xe2\x80\x99s network of overseas offices and headquarters staff. The staff conducts trade compliance and enforcement activities, and provides\n trade negotiation support to the U.S. Trade Representative.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on results\n posted during the first three quarters of FY 2010.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 In addition to audits and internal control review of the performance tracking system, an established procedure is maintained to\n review each reported success for verification and the prevention of double counting.\n\n\nChallenges for the Future\nThe prevention and resolution of SPS and technical trade barriers are essential if U.S. agricultural products are to\nenjoy the full benefits of market liberalization gained through multilateral trade negotiations. As developing\ncountries become increasingly active in the global trading system and as U.S. trading partners, their ability to\ndevelop and implement transparent, science-based regulatory systems is increasingly vital to the long-term\nviability of U.S. agriculture and our food supply. Besides monitoring and enforcing its rights under the World\nTrade Organization SPS and TBT agreements, USDA continues to support the development and adoption of\nscience-based international standards and SPS regulatory systems.\nMeat and poultry exports continued to be hampered by a variety of unjustified SPS barriers including those\nrelated to animal diseases, maximum residue limits (MRLs) for veterinary drugs, zero tolerance pathogen\nstandards, and slaughter and processing plant approvals, particularly foreign insistence on plant-by-plant\napprovals. Many of these problems manifest themselves in foreign export certification requirements that are\nneither science-based nor consistent with international guidelines. The largest single technical trade issue of\nconcern to USDA remains the normalization of beef trade after the market closures caused by the 2003 findings\nof Bovine Spongiform Encephalopathy, a progressive neurological disorder of cattle, in the U.S.\nTrade barriers related to biotechnology also require increasing attention from USDA. To date, the most broadly\naccepted new technology has been genetically engineered (GE) crops (soybeans, corn and cotton) and products\nderived from these crops (oils, meal and feed). Together they comprise about one-third of total U.S. agricultural\nexports. In addition, it is estimated that some 80 percent of processed foods sold domestically contain ingredients\nand oils from GE crops. USDA efforts to overcome barriers to GE products include the advancement of science-\nbased regulations, efforts to ensure adherence to and enforcement of existing global commitments governing\ntrade, and coalition building with other countries interested in the safe use of agricultural biotechnology.\nFinally, country-by-country variation in MRLs for pesticides poses a significant ongoing risk to U.S. fruit and\nvegetable exports to many countries. While the U.S. is a global leader in the development and approval of safer\nand more effective pesticides, the approval of pesticides in other countries and by international standards-setting\norganizations often lags behind. The variation in approved pesticides that exists between trading partners appears\nto be growing, increasing the potential for disrupting U.S. agricultural trade as new pesticides becomes approved\n\n\n\n Annual Performance Report\n 35\n\x0cfor the U.S. market. Specialty crop products have a particularly high risk of incurring MRL violations because\nthey require extensive pest control measures.\n1.3.4 Value of Federal Crop Insurance Corporation (FCIC) risk protection coverage provided through FCIC\n sponsored insurance\n1.3.5 Normalized value of FCIC risk protection coverage provided through FCIC sponsored insurance\nOverview\nUSDA provides and supports cost-effective means for managing the risks of agricultural producers. This\nassistance is designed to improve the economic stability of agriculture and rural communities. After assessing the\nproducers\xe2\x80\x99 needs, USDA develops a variety of effective risk-management tools. These tools help farmers and\nranchers protect their livelihood in times of disasters or other uncontrollable conditions.\nThe USDA Federal Crop Insurance Program overseen by the Federal Crop Insurance Corporation (FCIC)\nprovides actuarially sound risk management insurance products to reduce agricultural producers\xe2\x80\x99 economic losses\ndue to natural disasters or low prices. The Department partners with private crop insurance companies who\nmarket and service individual policies and both share the risk. This partnership is governed by the Standard\nReinsurance Agreement (SRA).\nIn response to an authorization from Congress in the 2008 Farm Bill, negotiations for the 2011 SRA began late\nin 2009, and were completed on July 13, 2010, when USDA announced that all approved crop insurance\ncompanies had signed the new SRA. The new SRA calls for insurance companies to deliver risk-management\ninsurance products to eligible producers under specific terms and conditions. Companies are responsible for all\naspects of customer service and guarantee payment of producer premiums to the FCIC. In return, FCIC reinsures\nthe policies and provides premium subsidy to producers. It also reimburses the companies for administrative and\noperating expenses associated with delivering and servicing the insurance products. The new SRA will have no\nimpact on farmers\xe2\x80\x99 premium costs. It allows the administrative and operating subsidies paid to the insurance\ncompanies to fluctuate within a range, but removes the potential for unreasonable increases in payments, such as\nexperienced during the 2007 through 2009 crop price bubble. It also reduces the rates of return insurance\nproviders are expected to earn from underwriting gains to a reasonable level. The resulting agreement will achieve\n$6 billion in savings over the next 10 years against USDA program benchmarks.\nUSDA has implemented initiatives to increase awareness and service to beginning, small, and limited resource\nfarmers and ranchers and other under-served groups and areas. Through partnership agreements with public and\nprivate agricultural organizations, land grant colleges and universities, community-based organizations, farmers\nand ranchers, Hispanic Serving Institutions, and other stakeholders, the Department provides technical program\nassistance and risk management education on strategies associated with economic, legal, production, marketing,\nhuman resources, and labor risks. The new SRA provides additional incentives for insurance companies to provide\nservice in underserved states.\nUSDA uses the value of risk protection to measure the effectiveness of risk management. The value of risk\nprotection denotes the amount of crop insurance in effect protecting and stabilizing individual producers\xe2\x80\x99 incomes\nand consequently rural communities and economies.\nAnalysis of Results\nThe Department met its targets for the amount of risk protection provided to producers. The performance\nmeasures illustrate the normalized and real dollar values of FCIC coverage in force within the agricultural\neconomy. The actual value performance measure (1.3.4) also shows the amount of potential collateral provided to\nqualify for commercial loans. The normalized value performance measure (1.3.5) is a rolling average of several\nyears of actual value to account for the volatility of market prices. Since the 1999 crop year, the normalized value\nhas increased by approximately $26 billion, while the real value has increased by approximately $48 billion. While\nthere are a number of factors that influence these figures, including market-price increases and inflation, both\n\n\n Annual Performance Report\n 36\n\x0crepresent a major growth in the amount of the agricultural economy insured via the FCIC-sponsored insurance.\nDuring the 2010 crop year, which covered parts of both the 2009 and 2010 fiscal years, the economic risk of\nAmerican agricultural producers was reduced by approximately $79 billion through Federal crop insurance\ncoverage.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.4 Value of FCIC risk protection coverage $49.9 $67.3 $89.9 $79.91 $81.4 $78.9 Met\n provided through FCIC sponsored insurance\n ($ billions)\n 1.3.5 Normalized value of FCIC risk protection $48.1 $50.7 $51.5 $53.91 $51.9 $56.2 Met\n coverage provided through FCIC sponsored\n insurance ($ billions)\n These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n 1The baseline model uses actual inputs (acres covered, prices, & yields) as they become available over time replacing previously projected figures. Therefore the results\n\n for each year may and usually do change from one computation of the baseline model results to the next. End-of-year results will be different from previously used results\n for earlier budget submissions.\n Rationale for Met Range: Annual targets for these measures allow a variation of plus or minus $4.4 billion in order to be met. The value of risk protection denotes the\n amount of insurance in effect protecting and stabilizing the agricultural economy. USDA\xe2\x80\x99s value projection target is based on projections developed in November 2009,\n forecasted participation, and conditions current at that time. The normalized value of risk protection denotes the amount of insurance, holding prices constant, in effect\n protecting and stabilizing the agricultural economy. USDA\xe2\x80\x99s normalized value projection target is based on projections developed in November 2009, forecasted\n participation, and conditions current at that time. The baseline model uses the latest information from the crop insurance program, and combines it with USDA baseline\n projections for major crops. These crops include corn, wheat, soybeans, sorghum, barley, rice, and cotton. In making the projections, the model holds various factors\n constant, such as premium rates and average coverage level. The model assumes that all non-major crops produce yields consistent with USDA projections for major\n crops. The baseline model is a tool for developing budget projections. The budget and performance projections for the crop insurance program depend on baseline\n projections from numerous USDA agencies.\n Data Assessment of Performance Measure 1.3.4 and 1.3.5\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The data used in conjunction with performance information are based on actual information reported through the end of\n the third quarter. To provide the annual data, USDA projects the results for the fourth quarter of the fiscal year based on prior year performance.\n Analysis has shown that normally 99 percent of the final actual data will be reported to USDA during the first quarter of the next fiscal year. The\n Department receives the actual data from insurance companies. It then maintains data through two integrated processing systems that validate the\n information. The data then are sent through the system to generate all accounting functions. These processing systems ensure that data received\n are accurate, errors are corrected quickly, and timely monthly accounting reports are provided.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94The insurance companies receive data from the producers and transmit them to the Department. Once received, USDA takes\n extensive steps to verify the data\xe2\x80\x99s accuracy and validity. The Standard Reinsurance Agreement also provides reinsured companies with\n disincentives for not following prescribed guidelines and procedures.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data are projected based on historical performance. The target information uses data dependent upon the baseline projections\n from numerous USDA agencies. To the extent that any of the projections are inaccurate, the projection of value will also be inaccurate.\n\n\nChallenges for the Future\nUSDA\xe2\x80\x99s challenge is to maintain the core crop insurance products that provide the farm financial safety net for\nthe vast majority of producers and rural communities, while expanding and improving insurance coverage and\nother risk management solutions, particularly for beginning producers, underserved states, areas, communities,\nand commodities. The Department is addressing the management systems and financial information technology\ncosts associated with operating and maintaining existing program data needs. These systems and technologies also\nservice new and revised products. USDA continues to research how to deliver more crop and livestock products.\nThis research includes reviewing and approving private-sector insurance products reinsured by FCIC that are\ntargeted to the needs of underserved areas and various specialty crops. The new SRA provides additional\nincentives for insurance companies to provide service in underserved states.\n\n\n\n\n Annual Performance Report\n 37\n\x0c1.3.6 Number of farmers and ranchers that gained an economic, environmental, or quality-of-life benefit from a\n change in practice learned by participating in a Sustainable Agricultural Research and Education (SARE)\n project\nOverview\nThe Sustainable Agricultural Research and Education (SARE) program is a regionally administered program that\nfunds competitive grants for research, education, outreach, and training of agricultural professionals. SARE\nprojects are designed to improve agricultural production systems. They bring scientists, educators,\ncommunicators, and producers together to develop new ways for farmers and ranchers to simultaneously improve\nprofitability, protect the environment, and enhance their quality of life.\nAnalysis of Results\nUSDA met this performance measure. SARE\xe2\x80\x99s benefits have been measured through several analyses. These\nanalyses have determined the number of farmers and ranchers reached by the various types of projects supported\nby SARE, the percentage of these who changed practices as a result, and the percentage where these changed\npractices persist. Through these analyses, USDA estimates the cumulative number of farmer and ranchers who\nhave benefitted from SARE as the total number of projects it has funded has increased.\nAdditional measures of program benefits have included the percent of project participants performing an outreach\nactivity (75 percent), the percent reporting improved soil quality (79 percent), and the percent reporting increased\nsales (64 percent). The program has also measured the number of producers adopting new practices after reading\nSARE publications (53 percent).\nThe high percentage of farmers and ranchers reporting a positive impact from SARE projects and publications\ncan be attributed to multiple attributes of the program. These attributes include the regional structure of the\nprogram, the diverse composition of the regional administrative councils, a focus on objectives and outcomes, the\nactive involvement of farmers and ranchers throughout the process, a multidisciplinary approach, a broad portfolio\nof project types that addresses multiple nodes on the research, education and implementation continuum, and\nconsistent consideration for outreach, training, and education.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.6 The number of farmers and ranchers that 9,610 10,240 10,849 11,4881 11,800 11,800 Met\n gained an economic, environmental or quality-\n of-life benefit from a change in practice\n learned by participating in a SARE project.\n 1The figure for 2009 has been updated since the Annual Performance Plan was released. The number is calculated in July each year for the previous year.\n\n Rationale for Met Range: This measure assesses the SARE program\'s progress toward helping farmers and ranchers improve their knowledge of sustainable agriculture\n production and marketing practices that ultimately lead to improved profitability, environmental stewardship, and quality of life. Notes: (a) As part of the program\'s\n requirements, this measure is calculated from periodic program impact studies.\n \xe2\x80\xa2 Data assessment metrics to meet the target allow for an actual number in the range 11,550-12,050 (+/- 250)\n Data Assessment of Performance Measure 1.3.6\n The number of farmers and ranchers who gained an economic, environmental or quality-of-life benefit from a change in practice learned by\n participating in a SARE project. This measure assesses SARE\'s progress toward helping farmers and ranchers improve their knowledge of sustainable\n agriculture production and marketing practices that ultimately leads to improved profitability, environmental stewardship, and quality of life. Notes: (a)\n As part of the program\'s requirements, this measure is calculated from periodic program impact studies.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The data are based on actual data reported by SARE.\n \xe2\x80\xa2 Reliability of Data\xe2\x80\x94This measure is calculated from periodic program impact studies that are part of the program\'s requirements.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data are projected based on historical performance. To the extent that any of the Department\xe2\x80\x99s projections are inaccurate, the\n projection of value will also be inaccurate.\n\n\n\n\n Annual Performance Report\n 38\n\x0cChallenges for the Future\nUSDA must extend its outreach and expand collaborative partnerships. These steps are necessary to satisfy the\ngrowing interest in sustainability across much of the Nation\xe2\x80\x99s agricultural enterprise.\nSARE has supported a number of systems research projects to characterize and quantify interrelationships\nbetween production, economic, environmental, and social factors over the years. There is now a growing interest\nto increase support for such larger scale systems research projects. At the same time, the program leaders want to\nbe very careful to maintain a diverse portfolio of project types that includes small scale exploratory projects which\nhave historically been a rich source of innovation.\n1.3.7 Percentage of industry compliance with the Packers and Stockyards Act\nOverview\nUSDA\xe2\x80\x99s Packers and Stockyards Program measures its overall performance by annually measuring regulated\nentities\xe2\x80\x99 compliance with the Packers and Stockyards (P&S) Act. P&S prohibits unfair, deceptive, unjustly\ndiscriminatory, and fraudulent practices. It also bans regulated businesses from engaging in specific anti-\ncompetitive practices.\nThe performance measure encompasses activities the Department conducts that directly or indirectly influence\nindustry compliance. The overall performance rate is a composite index of five program-wide audit and inspection\nactivities. The index includes:\n\xe2\x80\xa2 Poultry contract compliance reviews;\n\xe2\x80\xa2 Financial audits of a random sample of a firm\xe2\x80\x99s custodial accounts with the sample size set to yield 90 percent\n confidence when inferred to the population of regulated entities;\n\xe2\x80\xa2 Financial audits of the prompt pay records of a random sample of firms with sample size set to yield 90\n percent confidence;\n\xe2\x80\xa2 Inspection of all scales and weighing practices in all packing plants purchasing more than 1,000 head per year;\n and\n\xe2\x80\xa2 Inspection of all carcass evaluation devices and practices for a random sample of packing plants purchasing\n more than 1,000 head per year.\nThe aggregated industry compliance rate index reflects the statutory and regulatory compliance of the regulated\nindustry with the P&S.\nAnalysis of Results\nThis performance measure was unmet. Industry compliance with P&S remained at 80 percent in 2010, sustaining\n2008\xe2\x80\x99s improvement over the 75 percent rate of 2007. Results of the individual component inspections and audits\nthat comprise the aggregate index show a year-to-year increase in compliance rates in 2009 for four of the five\nareas\xe2\x80\x99 reviews (not shown). The fifth component, poultry contract compliance review, replaced insolvency audits\nin 2009 and scored a relatively low rate of 60 percent. If insolvency audits had been included in the aggregate\nindex as in prior years, the aggregate index score would have been 85 percent.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 1.3.7 Percent of industry compliance with the n/a 75% 80% 80% 83% 80% Unmet\n Packers and Stockyards Act\n These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Rationale for Met Range: This lower than expected rate is attributed to two factors not known at the time of the target forecast\xe2\x80\x99s creation. One is the current financial\n turmoil the industry is experiencing and how that influences compliance with custodial account and prompt payment provisions. The second is how that influences\n compliance with prompt payment laws.\n\n\n\n\n Annual Performance Report\n 39\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n Data Assessment of Performance Measure 1.3.7\n The index measure denotes the level of industry compliance with the Packers and Stockyards Act. USDA\xe2\x80\x99s measure of industry compliance is a\n composite measure based on actual data collected through audit and inspection activities. Details about the composite index can be found in the\n narrative above.\n \xe2\x80\xa2 Completeness of Data\xe2\x80\x94Depending on the activity, the data is based on either entities within a predefined threshold or random samples of entities\n with sample size to yield 90 percent confidence.\n \xe2\x80\xa2 Reliability of Data\xe2\x80\x94Department employees conduct the audits and inspections and thus collect the data directly.\n \xe2\x80\xa2 Quality of Data\xe2\x80\x94Data are collected by trained USDA employees. For items using a random sample, the sample size is chosen to yield a 90 percent\n confidence level.\n\n\n\nDescriptions of Actions for Unmet Measures\nThis lower than expected rate is due largely to the poor economy\xe2\x80\x99s impact on the industry and how that influences\ncompliance with prompt payment laws.\nChallenges for the Future\nIn general, the index measures three business and two financial practices for industry compliance with the P&S\nAct. While additional focus on activities to achieve industry compliance has resulted in increased compliance,\ngeneral economic conditions within the industry will also affect year-to-year compliance. Weak economic\nconditions may increase the incentive for industry non-compliance more quickly in the financial components than\nin the business practice areas. The full effect of these external conditions on the compliance rate is unknown. To\nthe degree that this measure only has a 4-year history, understanding the interaction of these variables on the\noverall compliance rate will be a challenge USDA confronts in future years.\n1.3.8 Maintain or increase percentage of program benefits delivered through a Web environment\nThe performance measure \xe2\x80\x9cMaintain or increase percentage of program benefits delivered through a Web\nenvironment\xe2\x80\x9d is not included in the FY 2010 PAR. Data supporting the measure did not provide information\nneeded to accurately measure how farmers enter data into a Web-enabled form. It is also clear that development\nof two or more measures to track both short and longer term information technology (IT)/Web performance\nacross the Farm Service Agency is necessary to provide an accurate picture of the effort USDA is putting forth to\nmodernize its IT systems. The Department and Agency commit to this task and have set a target of including\nsuch measures in the FY 2011 PAR. Our goal will be to have a set of metrics that captures the key phases of\nimplementing modernized IT applications, especially those which enable producers to transact business with\nUSDA on the Web. Ultimately, this will make the process of participation in USDA programs by producers more\neffective and efficient.\n\nStrategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved,\n Restored, and Made More Resilient to Climate Change, While Enhancing Our\n Water Resources\nAmerica\xe2\x80\x99s prosperity is inextricably linked to the health of its lands and natural resources. Forests, farms, ranches,\nand grasslands offer enormous environmental benefits as a source of clean air, clean and abundant water, and\nwildlife habitat. These lands generate economic value by supporting the vital agriculture and forestry sectors,\nattracting tourism and recreation visitors, sustaining green jobs. They are also of immense social importance,\nenhancing rural quality of life, sustaining scenic and culturally important landscapes, and providing opportunities\nto engage in outdoor activity and reconnect with the land.\n\n\n\n\n Annual Performance Report\n 40\n\x0cFederal, tribal, State, and private lands face increasing threats from climate change, catastrophic wildfires, intense\nfloods and drought, air and water pollution, aggressive diseases and pests, invasive species, and development\npressures. These threats result in land and water conversion and reduced wildlife habitat. At the same time, there\nare immense opportunities to capture and increase the environmental, economic, and social benefits these lands\nprovide. USDA plays a pivotal role in protecting and restoring America\xe2\x80\x99s forests, farms, ranches, and grasslands\nwhile making them more resilient to threats and enhancing natural resources. The Department partners with\nprivate landowners to help protect the Nation\xe2\x80\x99s 1.3 billion acres of farm, ranch, and private forestlands. As public\nland stewards, USDA works to conserve and restore 193 million acres of National Forests and Grasslands in the\nNational Forest System. The Department also partners with Federal, tribal, and State Governments and non-\ngovernmental organizations to assist land and natural resource managers and connect people to the Nation\xe2\x80\x99s\nmagnificent lands.\nUSDA is also a key player in the President\xe2\x80\x99s America\xe2\x80\x99s Great Outdoors Initiative to build a 21st century\nconservation agenda, based on the experience and ideas of people from across the country. The goal of the\ninitiative is to conserve natural resources, both public and private, while reconnecting Americans to the outdoors.\nOBJECTIVE 2.1 RESTORE AND CONSERVE THE NATION\xe2\x80\x99S FORESTS, FARMS, RANCHES AND GRASSLANDS\n2.1.1 Conservation Reserve Program (CRP): Restored wetland acreage (millions of acres)\nOverview\nUSDA\xe2\x80\x99s Conservation Reserve Program (CRP) allows producers to plant long-term, resource-conserving covers.\nCRP is designed to improve the quality of water, control soil erosion, and enhance wildlife habitat on land\nenrolled in the program. In return, USDA provides participants with rental payments and cost-share assistance.\nContract duration is between 10 and 15 years. The program is designed to prevent degradation of wetland areas,\nincrease sediment trapping efficiencies, improve water quality, prevent soil erosion and provide habitat for\nwaterfowl and other wildlife.\nCRP includes several initiatives for wetland restoration and enhancement. One is the Farmable Wetlands\nProgram (FWP). FWP restores acres of farmable wetlands and associated buffers by improving the lands\xe2\x80\x99\nhydrology and vegetation. FWP is designed to prevent degradation of wetland areas, increase sediment trapping\nefficiencies, improve water quality, prevent soil erosion, and provide habitat for waterfowl and other wildlife.\nOther initiatives include the 250,000 acre Bottomland Hardwood Timber Initiative, the 250,000 acre Non-\nfloodplain Wetland Restoration Initiative, and the 150,000 acre Prairie Pothole Duck Nesting Habitat Initiative.\nAnalysis of Results\nThe target for this performance measure was exceeded. USDA has made substantial progress in protecting\nwatershed health and enhancing soil quality. Total CRP enrollment stands at more than 31.3 million acres. These\nacres annually reduce soil erosion by more than 450 million tons. They also reduce nitrogen, phosphorus, and\nsediment leaving the field by more than 85 percent, and sequester more than 44 million metric tons of carbon\ndioxide. CRP has reached more than 2 million acres of restored wetlands.\nCRP also contributes to increased wildlife populations. It has helped the duck population of the North Prairie\nRegion expand by 2 million. The program has also recovered sage and sharp-tailed grouse populations in Eastern\nWashington and increased ring-necked pheasant and grassland bird populations.\n\n Fiscal Year 2010\n Annual Performance Goals, Indicators,\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.1.1 CRP: Restored wetland acreage (million 2.03 2.08 1.98 2.04 1.99 2.05 Exceeded\n acres)\n\n\n\n\n Annual Performance Report\n 41\n\x0c Fiscal Year 2010\n Annual Performance Goals, Indicators,\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 1.94-2.04 million acres.\n Data Assessment of Performance Measure 2.1.1\n The data source for this measure is the National CRP Contract and Offer Data Files.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The targets and actual data are annual. Data are based on estimated results through September 30, 2010. The measure\n reports national acres under contract with the following wetland practices: Wetland Restoration, Marginal Pastureland Buffers, Bottomland Trees,\n and Shallow Water Areas for Wildlife, and Farmable Wetlands Programs. There are no known data limitations.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Data is collected locally, cross-checked, and aggregated at HQ. CRP is authorized through FY 2012.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 The Department is conducting research to quantify the environmental functions provided by CRP wetland restoration. When\n available, these estimates may also be used to track performance.\n\n\nChallenges for the Future\nIn FY 2010, CRP enrollment authority was decreased in the Food, Conservation and Energy Act of 2008 to no\nmore than 32 million acres. The Act is designed to expand food security programs, protect the Nation\xe2\x80\x99s vital\nnatural resources, promote healthier foods and local food networks, and reform commodity and biofuel programs\nto reflect domestic priorities. During FY 2011, enrollments are expected to be between 31 and 32 million acres.\nWhile creating a challenging situation, USDA remains strongly committed to attaining its conservation and\nglobal change objectives. Special focus will be placed on targeting and monitoring acreage impacts in the\nPresident\xe2\x80\x99s High Priority Performance Goals priority areas. To advance this area, the Department will seek new\nwetland contracts for more than 50,000 acres in FY 2011 and FY 2012. USDA will also seek contracts covering\n40,000 acres to fulfill riparian buffers and grass filter goals. In addition, USDA will continue several initiatives,\nincluding the 350,000-acre upland bird buffer, the 150,000-acre Duck Nesting Habitat Initiative, and the State\nAreas for Wildlife Enhancement Initiative. The latter is a 650,000-acre initiative announced in FY 2007 to\nimprove habitat for endangered, threatened, or high-priority fish and wildlife species. USDA will also continue\nthe 250,000 acre initiative to restore longleaf pine. In the early 1700s, more than 90 million acres of longleaf pine\necosystem existed. Today, fewer than 4 million acres exist.\n2.1.2 Conservation Technical Assistance (CTA): Cropland with conservation applied to improve soil quality\n (millions of acres)\n2.1.3 Environmental Quality Incentives Program (EQIP): Cropland with conservation applied to improve soil\n quality (millions of acres)\nOverview\nAgriculture and the quality of America\xe2\x80\x99s soil and water resources are vital to the Nation\xe2\x80\x99s welfare. Approximately\n1.5 billion acres (79 percent of the total acres within the contiguous United States) are non-Federal land.\nApproximately 90 percent of these acres are cropland, rangeland, pastureland, or private non-industrial forestland.\nThe care and health of privately owned working farm and ranch lands are dependent upon the individuals who\nown and manage them. High-quality soils support the efficient production of crops for food, fiber and energy;\nthey support sustainability of agricultural operations through good stewardship, and minimize offsite\nenvironmental impacts to surface and groundwater systems.\nRestoring and maintaining high-quality soils on working agricultural land is one of the objectives of conservation\nplanning. USDA helps producers install conservation practices and systems that meet established technical\nstandards and specifications. The Department also provides financial incentives and assistance to encourage\nproducers to adopt land treatment practices proven to provide significant public benefits. Conservation planning is\nthe first step in addressing a resource concern. These plans provide producers with information on the current\n\n\n Annual Performance Report\n 42\n\x0ccondition of the land, irrigation management, and wildlife habitat needs. This work gives the owner/operator a\nfull understanding of the conservation practices needed to address any problems. It also introduces the USDA\nprograms available to assist in financing conservation practice implementation.\nAnalysis of Results\nUSDA met its targets for helping producers apply conservation practices on cropland to improve soil quality. The\nDepartment assisted landowners and operators in developing 14.1 million acres of conservation planning, and\n14.6 million acres of applied conservation practices from all USDA programs on privately owned and operated\ncrop and hay land. Operation changes in crop rotations, equipment, or management practices often necessitate\nthe need for technical assistance to adjust conservation systems or conservation practice timing, even on land well-\nprotected under previous systems. Approximately 13.2 million unique acres of cropland were treated for soil\nquality across the nation. Sixty-three percent or 8.2 million acres of that land was treated through CTA technical\nassistance, and 36 percent or 4.8 million acres treated using EQIP technical and financial assistance1.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.1.2 CTA: Cropland with conservation applied to 6.4 7.3 8.3 7.6 7.5 8.2 Met\n improve soil quality (millions of acres)\n 2.1.3 EQIP: Cropland with conservation applied to 3.4 5.3 5.6 4.8 5.0 4.8 Met\n improve soil quality (millions of acres)\n These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Actual performance October 1, 2009 through September 30, 2010.\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range: CTA 6.8 (90 percent) \xe2\x80\x93 8.3 (110 percent);\n EQIP 4.5 (90 percent) \xe2\x80\x93 5.5 (110 percent). The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the\n Program Contracts Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.1.2 and 2.1.3\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied\n are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in the\n Customer Service Toolkit (Toolkit). The same land unit may benefit from the application of more than one conservation practice. Where more than one\n program is used to apply practices on the same land unit, each program is credited under the performance measure.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated and\n received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Toolkit, and\n warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID, enabling detailed quality-\n assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nChallenges for the Future\nThe economy influences producers\xe2\x80\x99 decisions on conservation measures. Even with the availability of financial\nassistance, there is hesitation to commit to conservation practices in an uncertain economic climate.\n\n\n\n\n1 Approximately 0.2 million acres of cropland received soil quality improvement through other NRCS programs.\n\n\n\n\n Annual Performance Report\n 43\n\x0c2.1.4 CTA: Grazing land and forest land with conservation applied to protect and improve the resource base\n (millions of acres)\n2.1.5 EQIP: Grazing land and forest land with conservation applied to protect and improve the resource base\n (millions of acres)\nOverview\nGrazed forests, range and grasslands comprise nearly 55 percent of the Nation\xe2\x80\x99s total land area of 2.3 billion acres.\nHealthy forests, grazing and grasslands contribute to the health and well-being of the Nation\xe2\x80\x99s soil, water, air and\nwildlife. USDA\xe2\x80\x99s strategic focus is to reduce fire danger, minimize the threat of invasive species, reduce soil\nerosion, maximize groundwater recharge and improve surface water quality. The Department provides technical\nassistance to farmers and ranchers on privately held forests, working agricultural lands and grasslands.\nConservation planning is the first step in maintaining a sustainable, highly productive grazing system.\nOwners/operators are advised of USDA programs that may help finance conservation practice implementation.\nThis process is designed to:\n\xe2\x80\xa2 Improve or maintain the natural moisture holding capacity of the soil;\n\xe2\x80\xa2 Maintain or enhance groundwater recharge areas;\n\xe2\x80\xa2 Maintain animal carrying capacity;\n\xe2\x80\xa2 Improve offsite water quality;\n\xe2\x80\xa2 Provide carbon sequestration;\n\xe2\x80\xa2 Reduce competition from invasive species on native plants; and\n\xe2\x80\xa2 Maximize forest productivity, all while minimizing wild fire fuel levels.\nAnalysis of Results\nUSDA exceeded both its CTA and EQIP targets for conservation applied to protect and enhance the nation\xe2\x80\x99s\nprivately owned and operated grazing and forest lands. USDA conservation experts assisted landowners and\noperators in writing or updating conservation plans and applying conservation practices on private forest, grazing,\nand grasslands. Operation changes in crop rotations, equipment, or management practices often necessitate the\nneed for technical assistance to adjust conservation systems or conservation practice timing, even on land well-\nprotected under previous systems.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.1.4 CTA: Grazing land and forest land with 8.0 12.2 16.5 16.0 14.6 17.6 Exceeded\n conservation applied to protect and improve\n the resource base (millions of acres)\n 2.1.5 EQIP: Grazing land and forest land with 12.2 16.5 16.9 17.2 15.0 17.5 Exceeded\n conservation applied to protect and improve\n the resource base (millions of acres)\n These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Data assessment metrics to meet the CTA target allow for an actual number in the range 13.1 (90 percent) \xe2\x80\x93 16.1 (110 percent).\n Data assessment metrics to meet the EQIP target allow for an actual number in the range 13.5 (90 percent) \xe2\x80\x93 16.5 (110 percent).\n Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts\n Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.1.4 and 2.1.5\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied\n are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit.\n The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices\n on the same land unit, each program is credited under the performance measure.\n\n\n\n Annual Performance Report\n 44\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated\n and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Customer Service\n Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID,\n enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported\n data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nChallenges for the Future\nSeveral serious threats pose risks to public and private forestland and grassland. They include wild fire, invasive\nspecies, loss of open space and unmanaged outdoor recreation. In many areas, especially in the West, most\nwatersheds and landscapes include public land managed by several Federal agencies and private, State and tribal\nlands. Protecting the natural resources in these areas requires cooperation among a large number of stakeholders.\n2.1.6 Farm and Ranchlands Protection Program (FRPP): Prime, unique, or important farmland protected from\n conversion to nonagricultural uses by conservation easements, acres\nOverview\nThe health of the Nation\xe2\x80\x99s working lands and natural resources directly affect the sustainability of food and fiber\nproduction, water quality and quantity, wildlife habitat, aquifer recharge, and clear air. The sustainability of\nworking farms provides essential economic stability to the rural community.\nUSDA works with farmers, ranchers, and forest landowners to maintain working lands and preserve open space.\nThis includes developing markets and purchasing land or conservation easements. The latter is designed to slow,\nand in some cases reverse, the conversion and fragmentation of environmentally and economically significant\nfarms and grasslands. The Farm and Ranch Protection Program (FRPP) allows the Department to purchase\nconservation easements to protect topsoil by limiting nonagricultural uses of the land. USDA also partners with\nState, local, and tribal governments and non-government organizations to share in the costs of acquiring\nconservation easements. For every Federal dollar invested through FRPP, an additional two dollars has been\ncontributed by the participating State, local, and tribal entities, non-governmental organizations, and landowners.\nAnalysis of Results\nThe performance measure was exceeded, at 13,898 acres, or 35 percent, above target. The historical percentage of\nprime farmland easement acres to total FRPP easement acres is 65 percent (prime acres/farmland acres). In FY\n2010, a combination of above-average closing on total FRPP farmland easements (+16,646 acres) and a prime to\nfarmland percentage increase to 74 percent explain why the target exceeded estimates.\nThe combined acreage from all 4 easement programs totaled 173,323 acres. FRPP farmland made up 72,646 of\nthat total. FRPP easements on prime, unique, and important farmland was 53,898 acres. To achieve this result,\nUSDA worked with eligible State, tribal, or local governments or non-governmental organizations to acquire\nconservation easements from interested landowners. This performance measure emphasizes how vital prime,\nunique, and important farmland is to the Nation\xe2\x80\x99s food security through sustained agricultural production.\n\n\n\n\n Annual Performance Report\n 45\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.1.6 FRPP: Prime, unique, or important farmland 46,909 38,495 27,401 38,260 40,000 53,898 Exceeded\n protected from conversion to nonagricultural\n uses by conservation easements (acres)\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Actual performance October 1, 2009 through September 30, 2010.\n Data assessment metrics to meet the target allow for an actual number in the range 36,000 (90 percent) \xe2\x80\x93 44,000 (110 percent).\n Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts\n Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.1.6\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied\n are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit.\n The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices\n on the same land unit, each program is credited under the performance measure.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY 2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated\n and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Customer Service\n Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID,\n enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported\n data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nChallenges for the Future\nAgricultural land conversions have slowed in recent years, but are expected to rise in the future. The loss of\nagricultural operations and their associated lands destabilizes rural economies and places stress on agricultural\nbusinesses. The demand for conservation easements far exceeds available funds, so providing easements to\nagricultural operations that provide the most benefits to the local community will remain a major challenge.\n2.1.7 Wildlife Habitat Incentives Program (WHIP): Non-Federal land with conservation applied to improve fish\n and wildlife habitat quality, acres\nOverview\nUSDA addresses the needs of wildlife on privately owned working agricultural lands. The Department provides\ntechnical and financial assistance to landowners and managers to restore, improve or maintain suitable habitat.\nUSDA technical experts provide on-site assistance to assess the quality of wildlife habitat, the actions necessary to\nrestore or enhance that habitat, and develop management plans to maintain the habitat in a suitable (sustainable)\ncondition. These technical experts develop management plans with recommendations for wildlife shelter, nesting,\nwater and food relative to current site conditions. Implementation of the plan results in sustained and enhanced\nwildlife habitat.\nThe Department combines financial and technical assistance through a variety of programs to improve resident or\nseasonal habitat for wildlife considered threatened and listed on endangered species lists (Federal or State). These\nprograms are also designed to help other species experiencing serious declines due to habitat loss. USDA financial\nassistance may involve assistance with conservation practice installation, the development of long-term easements\nto protect against conversion, or a combination of the two. USDA provided technical and financial assistance to\n\n\n Annual Performance Report\n 46\n\x0crestore or enhance wildlife habitat to 13 million acres and, using the Wetlands Reserve Program (WRP), secured\neasements on an additional 74,180 acres. WRP is a voluntary program offering landowners the opportunity to\nprotect, restore, and enhance wetlands on their property.\nUSDA also works with other agencies and private organizations to provide producers with technical and financial\nassistance, information and other resources to evaluate, and encourage the adoption of conservation measures and\nmanagement practices beneficial to wildlife.\nAnalysis of Results\nThe Department\xe2\x80\x99s target was not met. The measure identifies where USDA technical experts, using WHIP,\nassisted landowners with the installation of conservation practices designed to improve or restore critical wildlife\nhabitat. Some of the conservation practices installed were on WRP easements.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.1.7 WHIP: Non-Federal land with conservation 175,543 388,769 316,896 335,402 350,000 295,227 Unmet\n applied to improve fish and wildlife habitat\n quality (acres)\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Actual performance October 1, 2009 through September 30, 2010.\n Data assessment metrics to meet the target allow for an actual number in the range 315,000 (90 percent) \xe2\x80\x93 385,000 (110 percent).\n Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts\n Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.1.7\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices\n appliedare accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in\n Toolkit. The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply\n practices on the same land unit, each program is credited under the performance measure.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY 2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated\n and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Customer Service\n Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID,\n enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported\n data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nDescriptions of Actions for Unmet Measures\nProducers are less willing to make long-term commitments regarding the use of their land during times of\neconomic uncertainty. This affects the creation and restoration of critical upland and wetland habitats.\nChallenges for the Future\nMany wildlife projects are supported by a combination of Federal, State, local, and private funds. State and local\nbudget constraints may affect project implementation.\n\n\n\n\n Annual Performance Report\n 47\n\x0cOBJECTIVE 2.2 PROTECT AND ENHANCE AMERICAS WATER RESOURCES\n2.2.1 CTA: Comprehensive nutrient management plans applied (number of plans)\n2.2.2 EQIP: Comprehensive nutrient management plans applied (number of plans)\nOverview\nThe Department provides science-based technical assistance to land users on privately owned lands to help protect\nand enhance the Nation\xe2\x80\x99s water resources. The Conservation Technical Assistance Program (CTA) is designed to\nprovide technical assistance to land users to address opportunities, concerns, and problems related to the use of\nnatural resources. This assistance helps land users make sound natural resource management decisions on private,\ntribal, and other non-Federal lands. A major component of a conservation plan on animal operations is the\nComprehensive Nutrient Management Plan (CNMP). A CNMP addresses the specialized requirements of\nanimal agriculture. The plan covers such issues as animal feed, animal manure storage, and manure (nutrient)\napplication on crop and hay lands.\nA CNMP is not one practice, but an integrated set of practices which fully address feed, storage, nutrient, and\nerosion control on all land associated with the animal operation. USDA conservation experts assist land owners\nand operators by developing CNMPs that take into account the crop production (food), manure applications\n(nutrient), and potential offsite environmental impacts to surface and groundwater systems, such as soil and\nnutrient runoff. As a result, the technical expert and owner/operator agree to an integrated set of conservation\npractices consistent with the farm/ranch operation, maximize the use of nutrient resources and protect ground and\nsurface water quality. In addition, the availability of financial assistance through one or more of the Department\xe2\x80\x99s\nprograms for practice implementation is discussed. More than 60 percent of USDA\xe2\x80\x99s financial assistance for\nsurface and groundwater protection is focused on animal operations.\nOnce a CNMP is developed, the Department provides owners and operators with technical and financial\nassistance. This assistance helps them install the conservation practices and systems identified within the CNMP.\nAll practices designed and installed using USDA technical or financial assistance meet established technical\nstandards and specifications. As animal agriculture has become more concentrated, public concern about potential\nenvironmental damage has increased. The Department focuses on helping producers comply with State and local\nregulations to minimize the potential for damage to water or air resources from livestock operations.\nAnalysis of Results\nUSDA met its CTA target, but did not meet the EQIP target.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.2.1 CTA: Comprehensive nutrient management 2,269 1,911 1,745 1,485 1,300 1,349 Met\n plans applied (number of plans)\n 2.2.2 EQIP: Comprehensive nutrient management 2,774 2,490 2,520 2,019 2,000 1,739 Unmet\n plans applied (number of plans)\n These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Actual performance October 1, 2009 through September 30, 2010.\n Data assessment metrics to meet the target allow for an actual number in the range CTA 1,170 (90 percent) \xe2\x80\x93 1,430 (110 percent).\n Data assessment metrics to meet the target allow for an actual number in the range EQIP 1,800 (90 percent) \xe2\x80\x93 2,200 (110 percent).\n Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts\n Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.2.1 and 2.2.2\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied\n are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit.\n\n\n\n Annual Performance Report\n 48\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices\n on the same land unit, each program is credited under the performance measure.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY 2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated\n and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Customer Service\n Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID,\n enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported\n data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nDescriptions of Actions for Unmet Measures\nUSDA fell short of its EQIP target by 261 plans.\nUncertainty within the economic sector continues to influence individual conservation practice installation and\ncompletion of CNMPs. This uncertainty affects the willingness of landowner/operators to invest in conservation\npractices that do not provide an immediate financial return. In most cases, low- or no-cost, easily implemented\nCNMPs have been completed. Those that remain, both planned and in the design stage, are far more\ncomplicated. They require a higher level of owner/operator financial investment. Since CNMPs are reported only\nafter all planned practices are installed, postponing or cancelling the installation of even one practice seriously\nimpacts Department performance with regard to anticipated workload. This was the case in FY 2010, and could\nbe a factor over the next few years.\nChallenges for the Future\nThe quality of ground and surface waters to support intended uses is a continuing concern, as is the supply of\nthese waters to meet expanding demand. Challenges to maintaining the quality of ground and surface waters will\ninclude the continuing concentration of livestock operations, increased acreage cropped for ethanol and cellulosic\nsources of biomass, the risk of soil erosion from more frequent and intense storm events, and reduced surface\nplant cover due to drought. Competition for water will continue to increase, especially in areas with a limited or\nvariable water supply. In addition, the expansion of cropped acres to produce energy may increase agricultural\ndemand for water. Climate change may also impact future water quality and quantity. Drought, increasingly\nvariable precipitation rates, and urban uses in many parts of the Nation, result in water shortages in areas that\nhave had adequate supplies in the past.\nIf global market demands encourage increased food and feed production, agricultural producers may use\nenvironmentally sensitive land for production rather than establishing long-term crop rotations suitable for site\nconditions, such as conservation covers or buffers.\n2.2.3 Wetlands Reserve Program (WRP): Wetlands created, restored or enhanced (acres)\nOverview\nApproximately 87 percent of the Nation\xe2\x80\x99s surface supply of drinking water originates on forest, farms and range\nlands. Protection and restoration of America\xe2\x80\x99s wetland ecosystems is crucial to improving water quality. These\necosystems provide habitat for fish and wildlife, store floodwaters, and maintain surface water flow during\nseasonal dry periods. According to the Council on Environmental Quality, agricultural conservation and technical\nassistance accounts for 58 percent of the wetland acreage restored or created by Federal programs.\n\n\n Annual Performance Report\n 49\n\x0cUSDA has several programs to provide technical assistance in managing wetland habitats as well as financial\nassistance to secure easements and apply conservation practices. The Wetlands Reserve Program (WRP) is the\nprimary USDA program dedicated to the restoration, creation and enhancement of wetland ecosystems. Often,\nUSDA partners with individuals, communities, non-governmental organizations, tribes, State and local\ngovernments to provide the assistance necessary in order to secure long-term or permanent easements on wetland\nhabitat and systems in danger of conversion or loss.\nAnalysis of Results\nThe Department met the FY 2010 target for the performance measure. USDA provides technical and/or financial\nassistance to install one or more conservation practices designed to create, restore or enhance wetlands on working\nfarms and ranches. The objective of practice installation is the restoration, creation, or enhancement of a working\nwetland system.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.2.3 WRP: Wetlands created, restored or 181,979 149,330 128,860 106,379 125,000 129,082 Met\n enhanced. (acres)\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Actual performance October 1, 2009 through September 30, 2010.\n Data assessment metrics to meet the target allow for an actual number in the range 112,500 (90 percent) \xe2\x80\x93 137,500 (110 percent).\n Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts\n Database (ProTracts) and the Performance Results System (PRS).\n Data Assessment of Performance Measure 2.2.3\n To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be\n linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied\n are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit.\n The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices\n on the same land unit, each program is credited under the performance measure.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The performance reported for these measures is based on actual data reported through September 30 of FY 2010.\n Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must adhere\n to a set of quality assurance requirements during the upload process to be credited towards the performance measure.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 For FY 2010, the data reported for these performance measures were calculated within PRS based on information validated\n and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the Customer Service\n Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID,\n enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of reported\n data.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field staffs\n are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements and reports\n within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.\n\n\nChallenges for the Future\nCommodity prices, economic conditions, weather, and developmental pressures influence the ability and\nwillingness of agricultural producers to restore, improve and protect habitat areas. In hard or uncertain economic\ntimes, producers are less willing to make long-term commitments regarding the use of their land. This hesitation\nmay affect easement acquisition and wetland restoration of prior converted cropland.\n\n\n\n\n Annual Performance Report\n 50\n\x0cOBJECTIVE 2.3 REDUCE RISK FROM CATASTROPHIC WILDFIRE AND RESTORE FIRE TO ITS APPROPRIATE PLACE ON THE LANDSCAPE\n2.3.1 Percentage of total National Forest System land base for which fire risk is reduced through movement to a\n better condition class\nOverview\nUSDA measures the relative progress of hazardous fuels treatments against a 2005 baseline measure of Fire\nRegime Condition Class (FRCC). FRCC is an expression of the departure of the current condition from the\nhistorical fire regime, resulting in alterations to the ecosystem. A condition class is measured as a 1, 2, or 3, with 3\nbeing the most significant departure from the historical fire regime. Activities that cause the departure include fire\nexclusion, timber harvesting, grazing, and the growth of exotic plant species, insects, and disease.\nThe measure is calculated by determining how many acres were moved to an improved condition class during the\nfiscal year. That number is added to the previous year\xe2\x80\x99s cumulative total and divided by the baseline number of\nacres that \xe2\x80\x9cneeded\xe2\x80\x9d improvement. The baseline was developed in 2005 based on an estimate of how many acres\nwere in fire regime condition class 2 or 3.\nIn 2005, it was estimated that 123 million acres were in FRCC 2 or 3. The acres which move to a better\ncondition class are added to a cumulative total and divided by the 2005 baseline. Therefore, the annual increment\nis only a fraction of a percent.\nAnalysis of Results\nUSDA did not reach the performance target.\nHazardous fuel treatments are completed on more than 2 million acres each year. Though many treatments do\nnot improve condition class, the area treated will likely have a reduced risk of unnaturally severe fire to\ncommunities and resources, while producing integrated benefits for restoring fire-adapted ecosystems, enhancing\nwildlife habitat, and increasing forest health and watershed quality. In addition, while some treatments maintain\ncondition class and others are incremental steps toward an improved condition class, several hundred thousand\nacres are moved to a better condition class annually. A variety of factors influence the ability to meet this goal,\nincluding weather, resource availability, and the number of treatments required. It often takes multiple treatments\nto move an area toward its desired condition, and it may take repeated entries over time to move an area to the\ndesired condition.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.3.1 Percentage of total National Forest System 1.1% 1.9% 2.1% 3.0% 3.0% 2.55% Unmet\n land base for which fire risk is reduced\n through movement to a better condition class\n The FY 2010 result is estimated based on three quarters of actual data and a fourth quarter projection.\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 2.85 percent to 3.15 percent. USDA projects that it will\n narrowly miss this target. While USDA has conducted numerous treatments using both prescribed fire and mechanical treatment in FY 2010, it often can take multiple\n treatments in a single area to move an acre to Condition Class 1. Condition Class 1 refers to acres in a condition where fire regimes are within a historical range and the\n risk of losing key ecosystem components is low. Also, while acres affected by wildland fires can contribute to improved condition class, the number of wildfires, and the\n acreage affected on National Forest System lands in FY 2010 was somewhat lower than expected.\n Data Assessment of Performance Measure 2.3.1\n The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program\n managers collected, compiled, and analyzed the data.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Values shown are final FY 2010 data.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and the U.S.\n Department of Interior (DOI) land-management agencies co-developed the system. Its data are collected, compiled, and analyzed by program\n managers, and certified by the respective line officer.\n\n\n\n\n Annual Performance Report\n 51\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored\n continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on historical\n performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon completion of the\n project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to ensure the timely entry of\n project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality.\n\n\nDescriptions of Actions for Unmet Measures\nFRCC is primarily a measure of current ecological condition compared to an historic fire regime. It is not a direct\nmeasure of fire risk or fire danger. The performance measure was not met because the program shifted funds to\ntreatment of Wildland Urban Interface (WUI) acres. WUI refers to residential areas in locations subject to\nwildland fire. This change in funding and emphasis reduced overall accomplishment of acres and thereby reduced\nthe total number of acres that improved condition class. Treatments in the WUI are more likely to emphasize\nobjectives related to resource protection over objectives related to ecological conditions.\nChallenges for the Future\nUSDA continues to increase its focus on treating more strategic acres in the more costly WUI. The Department\xe2\x80\x99s\nshift in focus to these priority acres means that fewer acres overall will be treated, leading to fewer changes in\ncondition class. In addition, rising costs, such as fuel and aviation, contributed to increased expenditures, not all of\nwhich could be offset by cost management actions. Other integrated accomplishments will decrease due to\nreduced budgets in programs that contribute to the overall unified fuels target. These reductions will affect\nprogress towards the desired conditions.\n2.3.2 Acres of WUI fuels treated to reduce the risk of catastrophic fire\nOverview\nUSDA\xe2\x80\x99s hazardous fuels reduction program conducts fuel-reduction treatments on forest lands. These treatments\nare designed to reduce the risk of catastrophic fire and restore and maintain fire-adapted ecosystems.\nImplementing fuel treatments near communities in the WUI continues to be a high priority. As part of this\nprocess, communities are allowed to determine the best ways to reduce the risk of wildfire through Community\nWildlife Protection Plans (CWPPs).\nAnalysis of Results\nUSDA exceeded the target for this measure.\nWUI treatments have become more expensive and increasingly more complex. This is due to the treatment\nproximity to communities and infrastructure, and the associated air quality regulations and safety concerns.\nUSDA provides cost-effective protection to communities and resources by shifting its focus to the highest priority\nareas. As a result of a more focused application of resources, including California making significant contributions\nto the total acres treated, the 2010 target was exceeded.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.3.2 Acres of WUI fuels treated to reduce the risk 1,590 1,654 1,940 1,740 1,470 1,545 Exceeded\n of catastrophic fire (in thousands)\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 1,397 to 1,544. USDA continues to emphasize\n treatments in the WUI. In addition, Recovery Act treatments and a less severe fire season allowing additional fuels work both contributed to meeting this target.\n\n\n\n\n Annual Performance Report\n 52\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n Data Assessment of Performance Measure 2.3.2\n The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program\n managers collected, compiled, and analyzed the data.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Values shown are final FY 2010 data.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and the U.S.\n Department of Interior (DOI) land-management agencies co-developed the system. Its data are collected, compiled, and analyzed by program\n managers, and certified by the respective line officer.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored\n continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on historical\n performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon completion of the\n project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to ensure the timely entry of\n project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality.\n\n\nChallenges for the Future\nIn FY 2011, USDA will focus on complex high-priority work in WUIs where Community Wildfire Protection\nPlans (CWPP) or equivalent plans have been completed. Only 1,600 CWPPs have been completed out of the\n69,696 communities identified as at-risk from wildfire.\n2.3.3 Percentage of acres treated in the WUI that have been identified in Community Wildlife Protection Plans\nOverview\nUSDA works with other Federal and state foresters, local communities, and non-governmental organizations in\ndeveloping CWPPs. CWPPs are designed to enable communities to determine the best ways to reduce the risk of\nwildfire. This collaboration helps establish clear objectives for hazardous fuel reduction and wildfire prevention\nefforts. There are other equivalent plans and efforts to help make a community more fire adapted in the WUI\nwhere treatments are effective and important.\nAnalysis of Results\nThe Department exceeded the target for acres treated in the WUI that had been identified in a CWPP. USDA is\nprogressing towards protecting high-priority values at risk, especially human life and property.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 2.3.3 Percentage of acres treated in the WUI that 17% 25% 36% 28% 41% 43% Met\n have been identified in Community Wildlife\n Protection Plans\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 38.95 percent to 43.05 percent. USDA projects that it will\n meet the target for this measure. USDA continues to stress the importance of working with partners in helping communities plan and prepare for wildland fires, which has\n likely led to an increase in these types of treatments.\n Data Assessment of Performance Measure 2.3.3\n The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program\n managers collected, compiled, and analyzed the data.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Values shown are final FY 2010 data.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and the U.S.\n Department of Interior (DOI) land-management agencies co-developed the system. Its data are collected, compiled, and analyzed by program\n managers, and certified by the respective line officer.\n\n\n\n\n Annual Performance Report\n 53\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored\n continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on historical\n performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon completion of the\n project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to ensure the timely entry of\n project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality.\n\n\nChallenges for the Future\nAn even greater emphasis on high priority WUI treatments is planned. These treatments will take place in more\ncostly and complex areas. These treatments already have been identified in CWPPs or an equivalent plan.\n\n\n\n\n Annual Performance Report\n 54\n\x0cStrategic Goal 3: Help America Promote Agricultural Production and Biotechnology Exports as\n America Works to Increase Food Security\nA productive agricultural sector is critical to increasing global food security. For many crops, a substantial portion\nof domestic production is bound for overseas markets. USDA helps American farmers and ranchers use efficient,\nsustainable production, biotechnology, and other emergent technologies to enhance food security around the\nworld and find export markets for their products.\nFood security is measured by the availability of food and the ability to purchase food. A family is considered food\nsecure when its members do not live in hunger or fear of starvation. Food security in foreign countries is affected\nby a number of factors, including the extent of the domestic food supply; the proportion of a nation\xe2\x80\x99s total volume\nof commodities used for such nonfood uses as feed or fuel; post-harvest losses due to waste and decay; the ability\nto finance food and agricultural imports; population income levels; and the proportion of income that must be\ndevoted to food.\nThe Department is working to ensure U.S. agricultural resources contribute to enhanced global food security;\nenhance America\xe2\x80\x99s ability to develop and trade agricultural products derived from new technologies; and promote\nsustainable and productive agricultural systems that enable food-insecure nations to feed themselves.\nOBJECTIVE 3.1 ENSURE US AGRICULTURAL RESOURCES CONTRIBUTE TO ENHANCED GLOBAL SECURITY\n3.1.1 Food Aid Targeting Effectiveness Ratio\nOverview\nTo combat hunger, malnutrition, and poverty, USDA is working to promote enhanced food security through its\ninternational development programs. Major goals include enhancing agricultural productivity, mitigating and\nadapting to global climate change, and increasing trade with, and investment in, developing countries. This work\nwill enhance economic growth, food security, and the supply and affordability of food. USDA also provides food\nassistance to developing countries through the donation of food commodities via its Food for Education and Food\nfor Progress programs. In combination with food assistance that covers gaps in supplies and helps to keep the\npopulation healthy, the Department is assisting foreign governments in adopting productivity-enhancing\ntechnologies. These technologies include biotechnology, reconstructing agriculture in post-conflict or disaster\nareas, developing sustainable natural resource management systems, and strengthening agricultural research and\nextension programs. USDA also works with foreign counterparts to advance market-based policies and\ninstitutions, and expand international trade through trade capacity building. This work helps countries meet their\nWorld Trade Organization (WTO) obligations, avoid or eliminate barriers to trade, and strengthen policy and\nregulatory frameworks, with an emphasis on food safety and biotechnology. WTO is an international body that\noversees the rules of trade between nations.\nIn FY 2010, USDA collaborated with other Federal agencies in crafting the Feed the Future (FTF) Initiative.\nFTF is designed to reduce global hunger and poverty by addressing their root causes and employing proven\nstrategies for achieving large scale and lasting changes. Through the initiative, the Department works with host\ngovernments, development partners, and other stakeholders to achieve those goals. FTF links USDA\xe2\x80\x99s technical\nassistance efforts with the U.S. Agency for International Development, the White House, the State Department,\npartner countries, multilateral institutions, private voluntary organizations, the private sector, donors, and civil\nsocieties around the world.\nUSDA\xe2\x80\x99s technical assistance has fostered positive change in other countries. Under the Iraqi Agricultural\nExtension Revitalization Project, the Department and a five-member university consortium headed by Texas\nA&M University helped professors and extension agents improve advisory services for Iraqi producers. They also\nconducted an independent training needs assessment for the Iraqi Red Meats Association. USDA has also\nprovided technical assistance to the Government of the Republic of Georgia\xe2\x80\x99s national statistics service, GeoStat.\n\n\n Annual Performance Report\n 55\n\x0cAs a result, GeoStat has developed an emerging, highly skilled agricultural division. This division is now\ncollecting and disseminating nationally- and regionally-representative statistics on the agricultural situation, while\nalso providing critical information for policy makers and the private sector.\nUSDA also has seen international success with the McGovern-Dole International Food for Education and Child\nNutrition Program. McGovern-Dole helps promote education, child development, and food security for some of\nthe world\xe2\x80\x99s poorest children. It provides for donations of U.S. agricultural products and financial and technical\nassistance for school feeding and maternal and child nutrition projects in developing countries. In Senegal, for\nexample, USDA continued to fund Counterpart International (CPI) to enhance the education and health status\nof target communities. CPI provides school meals, health clinics, school gardens, and capacity building for\nparent-teacher associations. It has helped children show dramatic improvement in their ability to pass compulsory\nexams and advance to the next grade level. In Bolivia, the Department continued its support of Project Concern\nInternational. Project Concern is an international health organization that saves the lives of children and families\naround the world by preventing disease and providing access to clean water and nutritious food. This\ncollaboration has provided school meals, teacher training, and government capacity building. Attendance rates for\nall children have increased more than 10 percent since the program\xe2\x80\x99s 2005 inception.\nAnalysis of Results\nThe performance measure was met. The Food Aid Targeting Effectiveness Ratio (FATER) is based on a USDA\nfood security assessment. For countries with greater food insecurity, there is a larger estimated food gap. FATER\nmeasures the effectiveness of USDA food aid in closing the gap. The higher the FATER score, the larger the\npercentage of the estimated food gap met by USDA programmed food aid. In countries with greater food\ninsecurity, the FATER value would be relatively low because of large food gaps in those countries. The FATER\nvalue would be higher in countries with less food insecurity, where the food gaps are smaller. A target of 35\npercent represents a balance of food aid programming across countries with greater and lesser levels of food\ninsecurity.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 3.1.1 Food Aid Targeting Effectiveness Ratio 30-35% 38% 57% 49% 37% 37% Met\n (Percent)\n Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 34-39 percent.\n Data Assessment of Performance Measure 3.1.1\n Data on quantities and use of food aid commodities of food aid are captured through the USDA Food Assistance Division database.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Data for successfully reporting on the effectiveness ratio are based on the annual provision and use of food aid. Total\n quantities of commodities and how these commodities are used by the beneficiary in the country of donation is compiled and analyzed by USDA.\n Data include food aid provided by the Department.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 Data are reliable, of good quality, and used by agency officials to highlight the success and impacts of food aid programs and\n strengthen food security.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 Data for successfully verifying the quantities and use of food aid commodities in which USDA analyzes to show the effectiveness\n of food aid are captured through the USDA Food Assistance Division database. The outcome from the analysis also is further confirmed through a\n variety of credible sources, including:\n \xe2\x88\x92 Reports from USDA and U.S. Department of State personnel at overseas posts;\n \xe2\x88\x92 Program activity reports as provided by USDA partner organizations;\n \xe2\x88\x92 Follow-on evaluations conducted by USDA;\n \xe2\x88\x92 Reports from other USDA agencies, the U.S. Department of State, and the U.S. Agency for International Development;\n \xe2\x88\x92 On-going assessment of the progress of projects; and\n \xe2\x88\x92 Evaluation of activities by outside consulting firms.\n\n\n\n\n Annual Performance Report\n 56\n\x0cChallenges for the Future\nIn the Food Security Assessment, 2010-2020, USDA estimates that the number of food-insecure people in\ndeveloping countries will decrease about 7.5 percent from 953 million in 2009 to 882 million in 2010. Despite\nthis drop, the number of food-insecure people will not improve much during the next decade, declining by only 1\npercent. While there will be notable improvements in Asia and Latin America, the situation in sub-Saharan\nAfrica is projected to deteriorate after 2010. Food-insecure people are defined as those consuming less than the\nnutritional target of 2,100 calories per day per person. Any increase or decrease highlights that consumption for\nlarge portions of the populations in lower income countries is clustered around the nutritional target. Even a brief\neconomic slowdown or food production shock could result in millions of additional people being subjected to food\ninsecurity. Conversely, a slight improvement in economic conditions can propel people past the nutritional target.\nUSDA will continue to work with other Federal agencies through FTF. The Department also will work with\nglobal stakeholders to provide the political momentum and resources needed to address these challenges.\nUSDA will also continue to improve the efficiency and effectiveness of its food aid programs. The Web-based\nSupply Chain Management Project and the Food Aid Information System will bring improved technology and\nup-to-date information to the grants process. Implementation of both systems will take place in FY 2011. The\nimplementation will require testing, training, and resources. Increasing efficiency will be important to help offset\nexpected increases in commodity prices and the budget environment.\nOBJECTIVE 3.2 ENHANCE AMERICAS ABILITY TO DEVELOP AND TRADE AGRICULTURAL PRODUCTS DERIVED FROM NEW TECHNOLOGIES\n3.2.1 Cumulative number of genetically engineered plant lines reviewed by USDA and found safe for use in the\n environment\nOverview\nUSDA takes a science-based approach in regulating products derived from new technologies, such as genetic\nengineering (GE). GE is a precise and predictable method used to introduce new traits into plants and animals by\nmoving genetic elements from one or more organisms into another. This system allows for the safe development\nand use of agricultural goods derived from genetic engineering. These technologies provide increased production\noptions to agricultural producers. Before a GE crop can be commercialized, the Department thoroughly evaluates\nit to ensure there is no plant-pest risk. This evaluation process enhances public and international confidence in\nthese products.\nAfter a GE organism has been extensively field tested and demonstrates no plant pest risk, the developer may\npetition USDA for a non-regulated status. The Department also acts proactively to include the public in its\nregulatory processes. It gives the public a chance to comment on substantive regulatory changes and proposals\nthrough Federal Register notices and rulemaking procedures. USDA approves a petition when it is determined\nthat the plant-pest risks posed by the GE organism are not greater than its non-GE counterparts.\nAnalysis of Results\nThe performance measure is unmet.\nThe Department processed approximately 91,000 constructs during FY 2010, compared to 63,000 in FY 2009.\nEach construct requires individual environmental analyses. Technological and scientific advancements result in\nnew crops and traits, concurrently increasing the complexity of sound regulatory decisions.\nUSDA tracks the cumulative number of GE crops it no longer regulates. When a GE plant line is no longer\nregulated, the developer is free to sell the product to producers who then make it available to growers. This\nprocess demonstrates the new and innovative GE technologies that have the potential to enter the marketplace\nand enable the U.S. to compete in international trade. USDA set a goal to approve five GE plant lines in FY\n2010. It fell short of meeting the target and only approved three lines.\n\n\n\n Annual Performance Report\n 57\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 3.2.1 Cumulative number of genetically engineered 70 741 762 783 85 81 Unmet\n plant lines reviewed by USDA and found safe\n for use in the environment\n 1,2,3USDA reviewed the calculation methodology for this performance measure and discovered that a previous deregulation of a plant line was accounted for in the wrong\n\n fiscal year \xe2\x80\x93 the data for 2007 was off by one and the following fiscal years were adjusted accordingly.\n Data Source: Data regarding the cumulative number of approved petitions for deregulated status are available at http://www.aphis.usda.gov/biotechnology/not_reg.html.\n Rationale for Met Range: The cumulative number of genetically engineered (GE) plant lines reviewed by USDA and found safe for use in the environment is an indicator\n of the GE technologies that can be commercialized by their developers. Some deregulated GE plant lines do not reach the market \xe2\x80\x93 this is a business decision made by\n the developer. USDA has established an ambitious target to increase the number of deregulation decisions by 5-8 from FY 2008 through FY 2012 because of the\n implications of deregulation decisions for GE developers, and ultimately, agricultural producers who may choose to use GE technology. The FY 2011 and FY 2012 targets\n are a cumulative 92 and 100 deregulations of GE plant lines, respectively.\n Data Assessment of Performance Measure 3.2.1\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 USDA maintains the currency of its Web site \xe2\x80\x93 new petition requests are updated weekly. When a petition request is\n granted, the Web site is updated to reflect its decision.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 This performance measure serves as an indicator of the rate of the petition process. The data is used by both internal\n managers and external stakeholders as an authoritative source of information. The measure is currently included in the USDA High Priority\n Performance Goals and was validated by the Office of Management and Budget as an effective measure for the overall program.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 USDA has a series of checks and balances to ensure that the information reported on its Web site accurately reflects the\n decisions made regarding the deregulation of genetically engineered plant lines. This information is also transmitted to the public via the Federal\n Register to ensure transparency of regulatory decision making.\n\n\nDescriptions of Actions for Unmet Measures\nMany factors contributed to USDA not meeting the target. Several lawsuits have challenged USDA\xe2\x80\x99s\nenvironmental documentation. These challenges have necessitated more extensive environmental analysis for each\npetition. The number and complexity of issues submitted during public comment periods have increased\nsignificantly. The Department reviewed 21 petitions for non-regulated status for GE plants. Historically, USDA\nreviewed approximately four to five petitions per year. The unprecedented volume of petitions has greatly affected\nthe timeliness of the decision-making process. In addition, the steadily increasing number of permit and\nnotification applications for field trials and other programmatic activities has affected the speed of decisions. The\nDepartment is taking steps to address the increasing workload and to improve the deregulation process.\nLawsuits involving Round-Up Ready alfalfa and sugar beets recently challenged the processes USDA had in place\nwhen considering petitions for deregulations. While the Department approved the deregulation of these plant\nlines based on sound science and regulatory authority, after examining the deregulation processes and procedures,\nit reviewed the petition process. Special attention was paid to steps hindering time to deregulate, enhancing\nquality assurance, and improving quality control methods. In FY 2011, USDA will finalize its project plan to\nundertake specific process improvement actions. These actions will establish new timeframes for intermediate\nprocess steps. They also will revise tracking mechanisms from receipt of petition to publication of a decision and\ntrain staff to use consistent and thorough implementation of the step in the revised petition process.\nThe implications of the two court cases indicated a need to strengthen the Department\xe2\x80\x99s internal National\nEnvironmental Policy Act (NEPA) processes and procedures. NEPA establishes national environmental policy\nand goals for the protection, maintenance, and enhancement of the environment. It also provides a process for\nimplementing these goals within Federal agencies. USDA created a new unit to prepare and oversee the\ndevelopment of NEPA documents to better inform petition decisions. The Department established a system to\nassist in the development of environmental documentation while also allowing itself to focus on complex and\ncontroversial initiatives. This process is consistent with other Federal agencies and departments that oversee the\ndevelopment of environmental documents. To improve transparency and public involvement in the NEPA\n\n\n\n\n Annual Performance Report\n 58\n\x0cprocess, USDA will continue to improve outreach capacity through Web site improvements and direct\ncommunication to stakeholders and interested parties.\nChallenges for the Future\nLegal challenges over USDA decisions to deregulate GE crops emphasize their controversial nature. Legal\nchallenges require an enormous investment of resources\xe2\x80\x94the same resources invested in petition review processes\nand procedures. Legal challenges will dramatically affect USDA\xe2\x80\x99s ability to meet the targeted performance.\nThe public will continue its vigilance over the development of GE agricultural products. The Department will\ncontinue its commitment to ensure public participation in its regulatory decision making. USDA will post ample\nnotice in the Federal Register, host public meetings when appropriate, organize stakeholder engagements, and\nupdate the Web site. Such engagement requires an investment in resources and impacts the rate at which USDA\nis able to undertake petition reviews.\n\n\n\n\n Annual Performance Report\n 59\n\x0cStrategic Goal 4: Ensure that All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and\n Balanced Meals\nA plentiful supply of safe and nutritious food is essential to the well-being of every family and the healthy\ndevelopment of every child in America. USDA supports and protects the Nation\xe2\x80\x99s agricultural system and the\nconsumers it serves. The Department safeguards the quality and wholesomeness of meat, poultry, and egg\nproducts. USDA also provides nutrition assistance to children and low-income people who need it. It also\naddresses and prevents loss and damage from pests and disease outbreaks.\nThe Department works to improve the healthy eating habits of all Americans, especially children. Science has\nestablished strong links between diet, health, and productivity. Even small improvements in the average diet will\nyield large health and economic benefits. USDA\xe2\x80\x99s programs provide an infrastructure that enables the natural\nabundance of U.S. lands in combination with the ingenuity and hard work of the Nation\xe2\x80\x99s agricultural producers.\nThis combination creates a food supply system unparalleled in its abundance, safety, and quality.\nUSDA helps put a healthy diet within reach of every American consumer by increasing access to nutritious food;\npromoting healthy diet and physical activity behaviors; protecting public health by ensuring food is safe; and\nprotecting agricultural health by minimizing major diseases and pests to ensure access to safe, plentiful, and\nnutritious food.\nOBJECTIVE 4.1 INCREASE ACCESS TO NUTRITIOUS FOODS\n4.1.1 Participation levels for major Federal nutrition assistance programs SNAP (millions per month)\nOverview\nThe Supplemental Nutrition Assistance Program (SNAP) is the foundation of America\xe2\x80\x99s nutrition assistance\nprogram system. SNAP provides benefits that can be used to purchase food at authorized retailers for preparation\nand consumption at home. It makes resources that can be used for food available to most households with little\nincome. Benefit levels are based on the Thrifty Food Plan, a representative healthful and minimal cost meal plan\nthat shows how a nutritious diet may be achieved with limited resources. The benefit levels are adjusted based on\nthe economic circumstances of participating households.\nAnalysis of Results\nUSDA met its performance target. In FY 2010, the Department and its program delivery partners sustained\neffective access to SNAP. Average monthly participation reached 39.2 million in 2010, within the range (37.5\nmillion-43.5 million) for the 2010 target of 40.5 million.\nProgram participation increased almost 17 percent during FY 2010. USDA\xe2\x80\x99s efforts to support and encourage\nSNAP participation included:\n\xe2\x80\xa2 Continued efforts with states to develop outreach strategies. Forty-four out of 53 State agencies \xe2\x80\x94 up from\n 40 in FY 2009 \xe2\x80\x94 now have formal outreach plans or other documented outreach activity;\n\xe2\x80\xa2 Supported innovative state practices to promote access by simplifying the application process. Twenty-six\n States use an Internet-based application filing system. Nearly 30 States allow telephone interviews. Twenty-\n seven States use call centers;\n\xe2\x80\xa2 Implemented the Defense Appropriations Act of 2010 to provide $400 million in administrative funding to\n states in further response to the economic downturn; and\n\xe2\x80\xa2 Provided numerous strategies to help States manage workloads because of increasing participation and\n decreasing State resources due to the economic downturn. These strategies include policy waivers; a workload\n management matrix tool; a program access toolkit; and encouragement of broad-based categorical eligibility\n to improve access to applicants and simplify policies for state administration.\n\n\n\n Annual Performance Report\n 60\n\x0cUSDA also estimates the number of people eligible for the program along with the rate at which eligible people\nare participating. The latest study shows that, in 2008, 67 percent of all persons eligible for SNAP participated.\nWhile the number of those eligible continued to grow rapidly in 2008, increasing by 5.5 percent over the 2007\nlevel, the number of participants increased by 7 percent. Also in 2008, participants received 84 percent of all\nbenefits available if every eligible person participated. This number indicates that the program is effectively\nreaching those most in need.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.1.1 Participation levels for the major Federal 26.7 26.5 28.2 33.5 40.5 39.2 Met\n nutrition assistance programs (millions per\n month): Supplemental Nutrition Assistance\n Program Avg.(Monthly) participation (millions)\n Rationale for Met Range: Thresholds for 4.1.1 reflect the margin of error in forecasts of future participation. For Supplemental Nutrition Assistance Program (SNAP)\n participation, results from 2 independent assessments suggest that predictions of the number of SNAP participants are accurate to within plus-or-minus 7.5 percent (on\n average). This reflects the pattern of variance between actual and target performance during the past 5 years.\n \xe2\x80\xa2 For 2010, this percentage thus allows for actual performance that meets the target in the range of 37.5-43.5 million for SNAP.\n Data Assessment of Performance Measure 4.1.1\n SNAP participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional offices.\n There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data Bank\n (NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the state\n agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports,\n they will be downloaded to NDB for public release. If not, the Department works with regional offices and states to resolve problems and\n inconsistencies. This process of review and revision ensures that the data are as accurate and reliable as possible.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Figures represent 12-month, fiscal year averages. Participation data are collected and validated monthly before being\n declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 2010.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data are\n used in published analyses, studies, and reports. They also are used to support dialogue with and information requests from the U.S. Government\n Accountability Office, the Office of Inspector General, and the Office of Management and Budget.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 As described above, the data used to develop this measure are used widely for multiple purposes, both within and outside\n USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance.\n\n\nChallenges for the Future\nStudies indicate that some SNAP-eligible people are not participating due to a lack of awareness of their\neligibility. Efforts to improve access to and promote awareness of SNAP, and seeking improvements in policy and\noperations that make applying easier are ongoing challenges.\nThe quality of program delivery by third parties\xe2\x80\x94hundreds of thousands of State and local government workers\nand their cooperators\xe2\x80\x94is critical to USDA\xe2\x80\x99s efforts to reduce hunger and improve nutrition. Proper program\nadministration, including timely determination of eligibility, is of special concern.\n4.1.2 Improve SNAP payment accuracy\nOverview\nEnsuring that SNAP and other Federal nutrition assistance programs are administered with integrity is central to\nUSDA\xe2\x80\x99s mission. Waste and abuse draw scarce resources away from the children who need them the most. Just as\nimportantly, the programs are ultimately not sustainable without public confidence that benefits go to those who\nqualify, are used appropriately, and achieve their intended purposes. The Department seeks to increase food\nsecurity and reduce hunger in a manner that inspires public confidence that taxpayer dollars are used wisely.\nDesigned to respond to economic conditions, participation in the program has recently grown and benefits have\nincreased, yet USDA remains strongly committed to program integrity. The Department takes its stewardship\nresponsibilities for tax payer dollars seriously through an established Quality Control (QC) system and long-\n\n\n Annual Performance Report\n 61\n\x0cstanding support for payment accuracy initiatives. The Department continuously works to improve payment\naccuracy through partnerships with States, and regulatory and statutory requirements for a system that rewards\nexemplary program performance while holding low-performing states accountable. It also uses an early detection\nsystem to target states that may be experiencing a higher incidence of errors based on preliminary QC data.\nActions then are taken by regional offices to address these situations in the individual states.\nAnalysis of Results\nThe FY 2010 result is deferred, and will be reported in the FY 2011 PAR. SNAP payment accuracy reached a\nrecord-high 95.64 percent in 2009, the latest for which data are available. The number reflects the excellent\nperformance by State agencies in administering the program. This combined rate reflects 3.53 percent in\noverpayments and 0.83 percent in underpayments for a total of 4.36 in erroneous payments.\nForty-seven States had a payment accuracy rate greater than 94 percent, including 29 States with rates greater\nthan 96 percent. These figures are up from the 35 States with 94 percent accuracy and 15 with 96 percent\naccuracy the previous year.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.1.2 Improve SNAP Payment Accuracy Rate 94.2% 94.4% 94.3% 94.9%1 95.0% Not Deferred\n Available\n 1Data reported for 2006 in the Annual Performance Report has been adjusted to its proper value. The 2009 figure is based on data available after the Annual\n Performance Report was released.\n FY 2010 data will be available in 2011. USDA doesn\xe2\x80\x99t tabulate data until states\xe2\x80\x99 SNAP data is received.\n Rationale for Met Range: The 95 percent confidence interval around the estimate of payment accuracy is \xc2\xb1.33.\n \xe2\x80\xa2 For 2010, this confidence level allows for actual performance that meets the target in the range 94.7-95.3 percent.\n Data Assessment of Performance Measure 4.1.2\n The Supplemental Nutrition Assistance Program (SNAP), formerly the Food Stamp Program, uses annual payment accuracy data from the Quality\n Control (QC) process to support SNAP management. The data are based upon statistically valid methodology. The QC process uses a systematic\n random sampling of SNAP participants to determine a combined payment error rate for each state. The combined error rate is composed of over-\n issuances and under-issuances of SNAP benefits. A regression formula is applied to the results of the reviews to calculate official error rates. State\n agencies review selected cases monthly to determine the accuracy of the eligibility and benefit-level determination. The process includes a client\n interview and verification of all elements of eligibility and the basis of issuance. Federal reviewers validate a sample of the state\xe2\x80\x99s reviews by\n conducting a re-review. The process has proven to be a sound method of calculating reliable data.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 The most current data available for this measure are for FY 2009. The payment accuracy rate of 95.64 percent exceeded\n the performance goal/measure target. FY 2010 performance will be deferred until next year\xe2\x80\x99s report.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 QC data are valid and accepted by state SNAP agencies as a basis for performance-incentive payments and penalties. The\n U.S. Government Accountability Office and the Office of Inspector General also use it regularly.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 As described above, the data used to develop this measure are used widely for multiple purposes, both within and outside\n USDA. The measure itself is frequently cited as an important, high-quality indicator of program performance.\n\n\nChallenges for the Future\nThe most critical challenge impacting future success is continuing resource limitations for State agencies. State\nbudgets have been and will continue to be extremely tight. This factor could hurt state performance in payment\naccuracy. USDA will continue to provide technical assistance and support to maintain payment accuracy in the\ncontext of this difficult program environment.\n4.1.3 Participation levels for the school meals programs (millions of children per school day)\nOverview\nThe National School Lunch Program (NSLP) and the School Breakfast Program (SBP) support schools in\nensuring access to nutritious food for the children they serve. The programs provide per-meal reimbursement to\n\n\n\n Annual Performance Report\n 62\n\x0cState and local governments for meals and snacks served. All meals must meet Federal nutrition standards to\nqualify for reimbursement.\nNSLP serves lunches and snacks in more than 101,000 schools and residential child-care facilities. More than 60\npercent of meals are served to low-income children for free or at reduced price.\nSBP helps school children start the day ready to learn by serving breakfast in more than 88,000 schools and\nresidential child-care facilities. More than 80 percent of meals are served free or at reduced price to low-income\nchildren, with more than 75 percent of participating schools serving low-income areas.\nAnalysis of Results\nUSDA met its target for this performance measure. In FY 2010, USDA and its program delivery partners\nsustained effective access to school meals. The increased use of direct certification for free school meals for\nchildren enrolled in means-tested programs such as SNAP or the Temporary Assistance for Needy Families\n(TANF) program has helped to provide easy access to school meal benefits. During the 2008-09 school year, 78\npercent of school districts used direct certification, up from 67 percent in the prior year. TANF provides financial\nassistance for children and their parents or relatives who are living with them.\nNSLP participation levels reached 31.8 million in FY 2010, within the Met range (30.5 million-33.7 million) for\nthe 2010 target of 32.1 million. Participation increased slightly from FY 2009, continuing the trend of increases\nin recent years. SBP participation levels reached 11.6 million in FY 2010, within the Met range (11.1 million-12.3\nmillion) for the 2010 target of 11.7 million.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.1.3 Participation levels for the school meals\n programs (millions)\n \xe2\x80\xa2 National School Lunch Program 30.1 30.5 30.9 31.6 32.1 31.8 Met\n Avg.(Daily)\n \xe2\x80\xa2 School Breakfast Program Avg. (Daily) 9.8 10.1 10.6 11.0 11.7 11.6 Met\n Historical figures for FY2006-FY2008 have been revised from those published in the Annual Performance Report to reflect more recent data.\n Rationale for Met Range: Thresholds for 4.1.3 reflect the margin of error in forecasts of future participation, estimated at 5 percent for the school meals programs. This\n reflects the pattern of variance between actual and target performance for both programs during the past 5 years.\n For 2010, this percentage range allows for actual performance that meets the targets in the range of 30.5- 33.7 million for the National School Lunch Program and 11.1-\n 12.3 million for the School Breakfast Program.\n Data Assessment of Performance Measure 4.1.3\n School meals participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional\n offices. There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data\n Bank (NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the state\n agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports,\n they will be downloaded to NDB for public release. If not, USDA works with regional offices and states to resolve problems and inconsistencies. This\n process of review and revision ensures that the data are as accurate and reliable as possible.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Figures for NSLP and SBP are based on 9-month (school year) averages. Participation data are collected and validated\n monthly before being declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 2010.\n \xe2\x80\xa2 Reliability of Data\xe2\x80\x94 The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data are\n used in published analyses, studies and reports. They also are used to support dialogue with and information requests from the Government\n Accountability Office, the Office of Inspector General, and the Office of Management and Budget.\n \xe2\x80\xa2 Quality of Data\xe2\x80\x94 As described above, the data used to develop this measure are used widely for multiple purposes, both within and outside USDA.\n The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance.\n\n\n\n\n Annual Performance Report\n 63\n\x0cChallenges for the Future\nWhile almost all school children have access to Federally-subsidized school lunches, significantly fewer schools\noperate SBP. USDA will work to ensure that all students are able to start the day with a nutritious breakfast, at\nhome or at school.\nAs with other nutrition assistance programs, the Department relies on its partnerships with third parties\xe2\x80\x94\nhundreds of thousands of state and local government workers and their cooperators\xe2\x80\x94 to sustain effective school\nmeals program delivery.\n4.1.4 Participation levels for the WIC program (millions per month)\nOverview\nThe Special Supplemental Nutrition Program for Women, Infants and Children (WIC) is a critical component of\nthe nutrition assistance safety net. WIC\xe2\x80\x99s major objective is to address the nutrition needs of low-income\npregnant, breastfeeding, and postpartum women, infants, and children up to 5 years of age who are found to be at\nnutritional risk.\nAnalysis of Results\nThe measure was met. In FY 2010, average monthly WIC participation was approximately 9.2 million\nparticipants, within range (9.2 million-9.8 million) for the 2010 target of 9.5 million. USDA continued to meet\nits ongoing commitment to provide sufficient program resources to support participation for all eligible people\nwho apply for benefits.\nThe Department also estimates the number of people eligible for WIC and calculates the rate at which eligible\npeople are participating. The latest study shows that, in 2007, WIC served an estimated 59 percent of the\npopulation eligible for benefits. This figure reflects participation by more than 80 percent of eligible infants, 66\npercent of eligible pregnant women, more than 85 percent of eligible breastfeeding women, and 71 percent of\neligible postpartum women.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.1.4 WIC Program average monthly participation 8.1 8.3 8.7 9.1 9.5 9.2 Met\n (millions)\n Rationale for Met Range: Thresholds for 4.1.4 reflect the margin of error in forecasts of future participation, estimated at 3 percent for the WIC program. This reflects the\n pattern of variance between actual and target performance for both programs over the past 5 years.\n \xe2\x80\xa2 For 2010, this percentage thus allows for actual performance that meets the target in the range of 9.2-9.8 million for WIC.\n Data Assessment of Performance Measure 4.1.4\n WIC participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional offices.\n There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data Bank\n (NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the state\n agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports,\n they will be downloaded to NDB for public release. If not, USDA works with regional offices and states to resolve problems and inconsistencies. This\n process of review and revision ensures that the data are as accurate and reliable as possible.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Figures represent 12-month, fiscal year averages. Participation data are collected and validated monthly before being\n declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 2010.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data are\n used in published analyses, studies and reports. They also are used to support dialogue with and information requests from the Government\n Accountability Office, the Office of Inspector General, and the Office of Management and Budget.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 As described above, the data used to develop this measure are used widely for multiple purposes, both within and outside\n USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance.\n\n\n\n\n Annual Performance Report\n 64\n\x0cChallenges for the Future\nEnsuring that adequate, timely funding is available to USDA\xe2\x80\x99s program partners to support participation among\nall eligible applicants is an ongoing challenge. Scarce discretionary budget resources add to this challenge. The\nDepartment and its partners must continue to work together to manage funds carefully and maintain efficient\noperations to serve all those in need.\nOBJECTIVE 4.2 PROMOTE HEALTHY DIET AND PHYSICAL ACTIVITY BEHAVIOR\n4.2.1 Nutrition guidance, education and promotion materials distributed\nOverview\nGood nutrition and physical activity are important throughout the life cycle. Both, combined, are major forces to\nbe used to help reduce the rates of obesity among different segments of the U.S. population, especially among\nchildren. Good nutrition and physical activity will help reduce the obesity epidemic and help prevent the chronic\ndiseases associated with unhealthful dietary practices, such as diabetes, cardiovascular disease, and high blood\npressure. To encourage Americans to eat well and be more physically active, USDA uses Federal nutrition policy\nand nutrition education \xe2\x80\x94 both for the general public and those served by nutrition assistance programs. This\nwork helps provide scientifically based information about healthful diets and lifestyles.\nThe Department values the trust the public has in the information it provides \xe2\x80\x94 information that is based on the\nmost recent, credible science. In addition, during the past few decades, evidence-based systematic reviews have\nreplaced expert opinion as the predominant basis for health-related treatment guidelines and policy. In response,\nUSDA created the Nutrition Evidence Library to specialize in conducting systematic reviews to inform nutrition\npolicy and programs. For the first time, the Department and the U.S. Department of Health and Human Services\nused the Nutrition Evidence Library to update the 2010 Dietary Guidelines for Americans.\nUSDA uses the Dietary Guidelines and the MyPyramid food guidance system, to advise people in the U.S. on how\nto improve their overall health through proper nutrition. MyPyramid, located at MyPyramid.gov, implements the\nguidelines through a network of educational tools. The Department will continue to use the Nutrition Evidence\nLibrary to conduct systematic reviews of the science that represents the foundation of its policy and nutrition\neducation tools. It also will continue encouraging partners and \xe2\x80\x9cinformation multipliers\xe2\x80\x9d \xe2\x80\x94 such as healthcare\nproviders, supermarkets, and school teachers \xe2\x80\x94 to maximize the reach and impact of nutrition education\nmessages, both within Federal nutrition-assistance programs and with the general public.\nOther key FY 2010 accomplishments include:\n\xe2\x80\xa2 Continuing the collaborative effort to increase all communication of dietary and physical activity guidance\n messages. Partnering with MyPyramid, with more than 230 members, showcases the role of various industries\n and others (e.g., youth groups) as Government partners to encourage healthier eating and physical activity\n behaviors among families. The partnership is designed to empower nutrition gatekeepers by providing easy to\n apply guidance for modeling a healthy lifestyle. It also provides information to help them make healthy food\n choices for themselves and their families where they prepare food, work, play, and purchase food; and\n\xe2\x80\xa2 USDA released its newest educational tool: MyFood-A-Pedia, located at MyPyramid.gov, this mobile tool\n provides consumers quick access to nutrition information for more than a thousand foods. Consumers can\n check calorie amounts, the contribution of a food to the food groups, and the amount of extra calories from\n solid fats, added sugars, and alcohol in a food.\nAnalysis of Results\nUSDA did not meet the target for this performance measure. USDA continued its leadership role in promoting\nnutrition guidance through educational tools designed to motivate people to live healthier. The Department\ndistributed more than 1.6 billion pieces of nutrition guidance materials via the Web and in print. Since the\nimplementation of the 2005 Dietary Guidelines for Americans, USDA distributed more than 22 billion pieces of\n\n\n Annual Performance Report\n 65\n\x0cnutrition guidance materials. The 2010 distribution level, while substantial, fell short of USDA\xe2\x80\x99s goal \xe2\x80\x93 a change\nfrom the years immediately following the release of the 2005 Dietary Guidelines for Americans. During that time,\ndistribution performance typically exceeded goals.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.2.1 Nutrition guidance, education and promotion 1.5 2.6 3.2 3.5 3.0 1.7 Unmet\n materials distributed (e-hits and print\n materials) (billions of pieces of information)\n This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and\n reporting.\n Rationale for Met Range: The precision of USDA\xe2\x80\x99s tracking systems and forecasting methods allow for actual figures to meet the 2010 target in the range 2.8-3.2 billion.\n Thresholds reflect trends of MyPyramid.gov \xe2\x80\x9chits\xe2\x80\x9d and print materials distributed (MyPyramid and the Dietary Guidelines for Americans).\n Data Assessment of Performance Measure 4.2.1\n Data on the application and usage level of nutrition guidance tools are drawn from electronic records associated with\n http://www.mypyamid.gov/MyPyramid.gov, survey analysis, and from inventory records of print materials.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Data related to MyPyramid.gov are collected instantaneously, indicating the number of e-hits to the Web site and the\n number of registrations to MyPyramid Tracker. However, data for October-December 2009 were not available for all parts of the site due to system\n problems. Estimates based on prior year performance were used for this portion of the performance period. For print materials, data from national\n headquarters represent counts of what was distributed among divisions of FNCS.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 The data are highly reliable. The number of hits is instantaneously recorded, the online survey is continual and well-tested,\n and the number of distributed print materials is tracked.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 The data are used to report on the success of the MyPyramid Food Guidance System. Because of the simultaneous recording of\n MyPyramid.gov usage, and the thoroughness and continual nature of the customer satisfaction survey, usage and customer satisfaction levels are\n a high-quality indicator of the degree to which USDA promotes, and customers respond to, interactive tools and print materials designed to help\n Americans personalize their diets. With a change in the system used to record MyPyramid.gov usage, the Department will again be able to rely on\n the quality of the data to report whether performance goals have been met.\n\n\nDescriptions of Actions for Unmet Measures\nThe number of nutrition education materials distributed via the Web and print materials is a direct measure of the\ndegree to which people will seek information that will help them make prudent decisions about their diet and\nlifestyle. Typically, a drop in the numbers of requests is anticipated prior to the release of the next edition of the\nDietary Guidelines (in this case, the 2010 Dietary Guidelines for Americans). In 2010, the tremendous public, press,\nand nutrition community interest in the concluding activities of the 2010 Dietary Guidelines Advisory\nCommittee, and the release of its advisory report resulted in a larger drop in requests than expected with the view\nthat new information was looming. However, with the upcoming release of the 2010 Dietary Guidelines policy\ndocument, the publicized future release of a revamped food pyramid icon, and the pending updated educational\nmaterials and modernized on-line nutrition education tools in 2011, USDA expects to exceed its target for Web-\naccessed and print materials in 2011.\nChallenges for the Future\nUSDA must craft actionable, understandable, science-based, and consistent nutrition messages and nutrition\neducation programs. This communication should promote positive behavioral change to help people make better\nfood choices requires understanding their current choices. There also must be an awareness of the relationships\nbetween these choices and their attitudes towards and knowledge of diet/health links. The data that can address\nthis information gap, however, are limited.\nThe ability of existing nutrition guidance and promotional materials to achieve behavior change remains\nchallenging. Limited resources are available for nutrition promotion relative to other messages, products and\npractices in the food marketplace. Physical activity and other lifestyle issues also significantly impact body weight\nand health.\n\n\n\n Annual Performance Report\n 66\n\x0cUSDA tracks its annual performance in promoting healthful eating and physical activity by monitoring its annual\ndistribution of nutrition education materials. Over the longer term, the Department assesses the effect of these\nefforts with its Healthy Eating Index (HEI). HEI assesses the conformance to Federal dietary guidance and is\nbased on nutrition surveillance data.\nOBJECTIVE 4.3 PROTECT PUBLIC HEALTH BY ENSURING FOOD IS SAFE\n4.3.1 Reduce overall public exposure to Salmonella from broiler carcasses\n4.3.2 Reduce total illnesses from all FSIS-regulated products\n4.3.3 Increase the percentage of establishments with a functional Food Defense Plan (large, small and very small\n establishments)\nOverview\nUSDA is committed to ensuring Americans have access to safe, nutritious, and balanced meals. Today, as many as\none in four Americans experience a foodborne illness annually. 2 The Department takes a farm-to-table approach\nto reducing and preventing foodborne illness. USDA invests in its workforce and data infrastructure to prevent\nharm to consumers by reducing the incidence of food contaminants, and quickly identifying and preventing\noutbreaks. Effective food safety inspections and enforcement depend upon timely, quality data and analysis.\nThe Department protects public health by ensuring that meat, poultry, and processed egg products are safe,\nsecure, wholesome, and correctly labeled and packaged. Currently, USDA is focused on protecting the food\nsupply and preventing illnesses from Salmonella, Listeria monocytogenes (Lm), and E. coli O157:H7. These three\nbacterial pathogens are known to cause human illness, hospitalization, and death.\nThe Department is also working to better verify that effective food safety systems are being implemented in\nUSDA-regulated slaughter and processing establishments. It trains inspection personnel and has developed an\nautomated system to alert inspectors about potential food safety problems through effective inspection data\nanalysis according to risk. These actions give inspectors greater and timelier access to establishment performance\ndata.\nUSDA uses three key measures to assess its performance to ensure that food is safe:\n\xe2\x80\xa2 Increase the percentage of Federally inspected establishments in \xe2\x80\x9cCategory 1,\xe2\x80\x9d reducing overall public\n exposure to generic Salmonella from broiler carcasses. Establishments are placed in Category 1 if they\n demonstrate consistent process control in USDA Salmonella verification testing. 3\n\xe2\x80\xa2 Total Illnesses from all Food Safety Inspection Service (FSIS)-regulated products: Salmonella, Lm, and E. coli\n O157:H7 (All-Illness Measure). The All Illness Measure is aimed at reducing Salmonella, Lm, and E. coli\n O157:H7 illnesses from USDA-regulated products. Of the illnesses attributed to USDA-regulated products\n in 2009, 97 percent of illnesses came from Salmonella, .23 percent from Lm, and 2.8 percent from E. coli\n O157:H7. This is the equivalent of 1 illness for every 298,796 servings of meat and poultry products\n consumed annually. 4\n\xe2\x80\xa2 Increase the percent of Federally inspected establishments with a functional food defense plan (large, small\n and very small establishments).USDA measures the industry adoption of functional food defense plans. These\n plans assist industry in preventing intentional contamination of food products, thereby protecting public\n health and reducing the negative economic impact on the food infrastructure.\n\n2 Based upon the estimated 76 million annual number of domestically acquired foodborne illnesses, Mead et al. (1999). Mead PS, Slutsker L, Dietz V, McCaig LF, Bresee JS,\nShapiro C, Griffin PM, and Tauxe RV. \xe2\x80\x9cFood-related illness and death in the United States\xe2\x80\x9d. Emer Infect Dis: 1999, 5(5):607-25.\n3 USDA plans to tighten its Salmonella performance measure for broilers, which will require a downward adjustment to a lower percentage attained for the FY 2015\nperformance goal for Salmonella broiler carcasses in the first quarter of FY 2011.\n4Data for this measurement is obtained using FSIS illness estimates and food availability data from ERS. ERS data are available at the following Web site:\nhttp://www.ers.usda.gov/Data/FoodConsumption/app/reports/displayCommodities.aspx?reportName=Total%20meat&id=39#startForm\n\n\n Annual Performance Report\n 67\n\x0cAnalysis of Results\nUSDA did not meet its goals for 4.3.1 and 4.3.2, but exceeded its goal for 4.3.3.\n4.3.1 Reduce overall public exposure to Salmonella from broiler carcasses\nUSDA employs a \xe2\x80\x9ccategory\xe2\x80\x9d system to measure the Salmonella performance of establishments producing raw\nproducts. Selection of the category system was partially based on the long-term evidence from USDA regulatory\nsamples (collected between 1998 and 2004). These samples showed a statistically significant difference in the\nlikelihood of serotypes of Salmonella in Category 2 establishments compared to Category 1 establishments. USDA\ncompares how many establishments are in Category 1 from one quarter to the next and from one year to the next.\nCategory 1 represents establishments that have results from their two most recent completed sample sets that are\nat or below half of the performance standard. Category 1 represents the highest measure attainable by\nestablishments. Category 2 represents establishments that have achieved greater than 50 percent on at least one of\nthe two most recent test sets without exceeding the performance standard or baseline guidance. Category 3\nrepresents establishments that have exceeded the performance standard or baseline guidance on the most recent\nUSDA test set. As more establishments attain Category 1 status, USDA believes that fewer people will be\nexposed to Salmonella from raw classes of Department-regulated products.\n4.3.2 Reduce total illnesses from all FSIS-regulated products\nThe Department calculates a measure that estimates all foodborne illnesses for Salmonella, Lm, and E. coli\nO157:H7 from USDA-regulated products. Objectives for this measure are set using a combination of data from\npublished case rates from the U.S. Centers for Disease Control\xe2\x80\x99s (CDC) FoodNet data and National Outbreak\nReporting System (NORS) outbreak data. These case rates are aligned with Healthy People 2010 goals and the\nHPPG for Salmonella. USDA will shift to using quarterly FoodNet pathogen-specific case rates to estimate the\ntotal number of foodborne illnesses from Salmonella, Lm, and E. coli O157:H7.\n4.3.3 Increase the percentage of establishments with a functional Food Defense Plan (large, small and very small\n establishments)\nThe food defense measure was developed with the goal of increasing the number of establishments with a\nfunctional food defense plan. Such plans should be developed, written, implemented, assessed, and maintained by\nestablishments if they are to be considered functional. The Department considers these plans to be important\nmeasures for preventing intentional product adulteration. It has developed guidance materials to assist in the\ndevelopment and understanding of what constitutes a food defense plan for establishments. This performance\nmetric is measured by the annual USDA Food Defense Plan Survey. The survey gathers data about industry\xe2\x80\x99s\nvoluntary adoption of food defense plans. Results from the first survey, conducted in August 2006, established a\nbaseline adoption rate of food defense plans by industry of 34 percent. USDA\xe2\x80\x99s goal for the adoption of food\ndefense plans by FY 2015 is that 90 percent of all establishments (large, small, and very small) will voluntarily\nimplement a plan.\n\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 20061 2007 2008 20092\n and Trends\n Target Actual Result\n 4.3.1 Reduce overall public exposure to Salmonella 45% 73% 83% 82% 90% 82% Unmet\n from broiler carcasses\n 4.3.2 Reduce total Illnesses for all FSIS Products \xe2\x80\x94 598,087 656,702 615,014 577,262 640,362 Unmet\n 4.3.3 Increase Percent of Establishments With a 34% 39% 46% 62% 67% 73.6% Exceeded\n Food Defense Plan\n \xe2\x80\xa2 Large Establishment 81% 91% 96% 97%9 90% 97.1%\n \xe2\x80\xa2 Small Establishment 48% 53% 64% 72% 75% 82.3%\n \xe2\x80\xa2 Very Small Establishment 18% 21% 25% 49% 56% 63.6%\n\n\n\n Annual Performance Report\n 68\n\x0c Annual Performance Goals, Indicators, Fiscal Year 2010\n 20061 2007 2008 20092\n and Trends\n Target Actual Result\n Data from 2006-2008 represent the percentage of facilities with a written plan, while the data from 2009 and 2010 represents the percentage of facilities with a functional\n plan, as defined above. Variations from previous year figures and from Annual Performance Plan figures are due to recalculated, more accurate totals.\n The FY 2009 baseline in the FY 2011 Budget of 96 percent, 64 percent, and 25 percent has been revised here and reflects actual data collected via the annual FY 2009\n FSIS Food Defense Survey as opposed to objectives that were set prior to the survey being conducted.\n USDA measures its Salmonella performance in terms of a percentage of broiler chicken processing establishments that are in Salmonella performance Category 1.\n Establishments are placed in Category 1 if they demonstrate consistent process control in Department verification testing.\n Rationale for Met Range: Up to April 2010, the performance standards were anchored to 1999 illness burden data and objectives were set for each pathogen using the\n Healthy People Goals for 2010. USDA shifted to using CDC FoodNet data, which are pathogen-specific case rates updated annually to calculate the burden of foodborne\n illnesses. These case rates are superior data from 1999 as they are an up-to-date, actual measure of the burden of foodborne illnesses. The final shift in methodology\n occurred in August 2010 where, at the request of the CDC, USDA shifted to using only simple foods when calculating pathogen-specific attribution fractions. The simple\n foods methodology only takes illnesses from simple foods, such as chicken or a steak, into account when calculating the pathogen-specific attribution fraction, rather than\n using complex plus simple foods.\n Data Assessment of Performance Measure 4.3.1, 4.3.2, and 4.3.3\n Through consultations with its stakeholders, USDA continuously examines the Nation\xe2\x80\x99s changing food safety system and practices. The Department\n articulates a long-term view in regard to its performance and the benefits to public health. USDA also monitors its performance against the Healthy\n People 2010 goals for these three critical pathogens \xe2\x80\x94 Salmonella, Lm and E. coli O157:H7. The Department developed an attribution model to\n determine what percentage of all Salmonella, Lm, and E. coli illnesses result from USDA-regulated contaminated products.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 Results are based upon USDA\xe2\x80\x99s laboratory results analyzed as of June 30, 2010. They are the best available indication\n of FY 2010 fourth-quarter results. Quarterly and annual data are based on sampling at a range of establishments, from very small to large.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 The data are reliable because they are based on testing and verification from the USDA\xe2\x80\x99s field service laboratories for\n regulated establishments. Each sample is subjected to highly specific verification testing. The primary goal of these sampling programs is to monitor\n how well each establishment is maintaining control of food safety through its Hazard Analysis and Critical Control Point, sanitation and supporting\n programs. USDA recognizes that its verification testing samples for Salmonella in raw classes of product and for Lm in ready-to-eat foods are\n biased in favor of being collected at establishments with poor process controls and/or higher volume. This factor likely results in overestimates in\n public exposure to these two pathogens. This factor is not the case for E. coli O157:H7 because FSIS programs sample every establishment and\n take into account establishment production volume. USDA is working towards incorporating statistical design into its verification testing programs\n for Salmonella and Lm to have true measures of prevalence.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 The volume adjusted data show that these measures historically correlated with the CDC and Prevention foodborne illness\n outbreak data.\n\n\nDescriptions of Actions for Unmet Measures\nA primary reason why USDA did not meet the goal of reducing overall public exposure to Salmonella from\nbroiler carcasses was that the poultry industry (broiler and turkey carcass establishments) did not take the requisite\nsteps to improve operational performance. (Second quarter results were 80.47 percent and third quarter 82\npercent, an improvement from the beginning of the year.)\nThe poultry industry relies upon USDA for guidance on the actions needed to make poultry safer. New poultry\nstandards will be announced in a Federal Register notice at the end of November, 2010. The standards will be\nimplemented by January 1, 2011. Due to the fact that Salmonella accounts for the largest number of illnesses in\nproportion to the other pathogens in the \xe2\x80\x9ctotal illnesses\xe2\x80\x9d measure, USDA did not meet the target for that\nmeasure. The FY 2010 target for the total number of illnesses from Salmonella, Lm, and E. coli O157:H7\nassociated with USDA-regulated products was an estimated 577,262 illnesses. The actual number was an\nestimated 640,362 illnesses. While USDA has not met the overall performance goal for the all-illness measure, it\ndid meet the performance goal for two of the three pathogens.\nChallenges for the Future\nEnsuring the safety of the Nation\xe2\x80\x99s food supply is a challenge and requires a strong and robust infrastructure\ncoupled with sound science. USDA uses a data-driven, scientific approach to food safety, incorporating public\nhealth data critical to combating the ever-changing threats to public health. This is a challenge since the\nDepartment has minimal control of animals on the farm or food products once they leave Federally inspected\n\n\n\n Annual Performance Report\n 69\n\x0cestablishments. Educating producers about best practices on the farm, and retailers and the public on how to\nsafely store and prepare meat and poultry products is an important requirement for USDA.\nWhile the Department firmly believes that its day-to-day activities directly impact the burden of foodborne illness\nin this country, it is often challenging to quantitatively relate such USDA activities as pathogen verification\ntesting to reductions in foodborne illness. The Department measures its progress in meeting its public health\nperformance measures quarterly. Consequently, it has also developed an Operational Performance Measures\nReport to supplement the three key measures reported by USDA. This report will allow the Department to assess\nwhether it is carrying out its regular, routine activities to reduce or prevent contamination of the products it\nregulates, ensure import activities are carried out appropriately, and provide educational material to the public,\namongst other activities. These operational performance measures allow USDA to prioritize activities, inform\nresource allocation, and identify program area gaps. As the operational performance measures report will be\nproduced monthly, it will allow the Department to measure its progress towards meeting its key objectives before\nthe end of a quarterly reporting period, and allow for mid-reporting adjustments in a more timely and effective\nmanner. Currently, USDA is reviewing the Operational Performance Measure report. Upon completion of the\nreview, the Department intends to include several key operational performance measures in each USDA Quarterly\nReport.\nUSDA is also a key partner in the President\xe2\x80\x99s Food Safety Working Group (FSWG), which is co-chaired by\nAgriculture Secretary Tom Vilsack. In support of the FSWG recommendation to intensify USDA efforts to meet\nthe performance goal of reducing overall public exposure to Salmonella from young chicken carcasses, the\nDepartment proposed tightening its performance standard. The proposal was based on results from the 2008\nNationwide Young Chicken Microbiological Baseline. The aim is to reduce the occurrence of Salmonella, thereby\ndiminishing the public\xe2\x80\x99s exposure to it in USDA-regulated products.\nAnother food safety challenge is small and very small establishments that often lack the technical knowledge to\ndesign and implement food safety systems. To assist establishments, USDA has released a Compliance Guide for\nPoultry Slaughter to reduce Salmonella and Campylobacter. This guide includes the latest information about\ntechnologies to reduce those pathogens\xe2\x80\x99 occurrence in Department-regulated products. As consumers are\nincreasingly purchasing raw poultry products in \xe2\x80\x98parts\xe2\x80\x99 rather than whole birds, USDA has also initiated a\nnationwide study of young chicken parts microbiological baseline to learn more about the public\xe2\x80\x99s possible\nexposure to Salmonella.\nIn its work to contain Lm and meet future illness reduction goals, USDA is continually challenged as illnesses\nmay occur due to re-contamination of product after it leaves the USDA establishment, for example in retail\nslicing operations or during the distribution process. The Department does not currently conduct inspection\nactivities at the retail level.\nFinally, the Department is working to improve its trace back positive E. coli O157:H7 test results. USDA is also\nworking to ensure that its policies evolve to address a broader range of pathogens, beyond E. coli O157:H7. This\nwork will ensure that public health and food safety policy keeps pace with the demonstrated advances in science\nand data about foodborne illness to best protect consumers.\nOBJECTIVE 4.4 PROTECT AGRICULTURAL HEALTH BY MINIMIZING MAJOR DISEASES AND PESTS ENSURING ACCESS TO SAFE, PLENTIFUL\nAND NUTRITIOUS FOOD\n\n4.4.1 Value of damage prevented and mitigated annually as a result of selected plant and animal health\n monitoring and surveillance efforts ($ billions)\nOverview\nUSDA ensures access to a diverse supply of fruits, vegetables, meat, and poultry. The Department protects the\nagriculture production system and defends against plant and animal pests and diseases. There are several programs\n\n\n Annual Performance Report\n 70\n\x0cthat contribute towards the prevention and mitigation of economic and environmental damage to U.S.\nagricultural resources. USDA\xe2\x80\x99s monitoring and surveillance programs assist with documenting the health status of\nU.S. agricultural products. This work results in the prevention and early detection of plant and animal pests and\ndiseases. The Department also conducts various pest and disease programs to limit the damage caused by known\npests and diseases. Together, these efforts contribute towards the Nation\xe2\x80\x99s overall agricultural health. USDA\nmonitors the health status of agricultural resources and quickly detects and responds to pests and diseases to\nprevent their spread.\nAnalysis of Results\nUSDA met the target for this performance measure. USDA reached the target of preventing and mitigating $1.07\nbillion in damage to agricultural resources. Several efforts contributed towards meeting the target. The\nDepartment enhanced the Nation\xe2\x80\x99s capabilities of finding and responding to plant and animal diseases. This work\npre-empted any potentially significant damage to the agricultural production system and food supply. USDA\xe2\x80\x99s\nanimal health monitoring and surveillance efforts are focused on finding diseases quickly, tracing them to their\norigin, and preventing their spread.\nThere were no significant outbreaks of animal diseases in FY 2010. As a result of the increasing diversity of\nlivestock and poultry rearing facilities in the U.S., a more flexible animal disease traceability system is needed to\neffectively respond to animal disease concerns, and minimize harm to producers. To replace the original effort\xe2\x80\x94\nthe National Animal Identification System, which was perceived as being too intrusive\xe2\x80\x94USDA announced a new\napproach to animal disease traceability. The Department gathered input from the public through a variety of\nmechanisms to develop a comprehensive understanding of how to design and deliver an animal disease traceability\nprogram. USDA held eight listening sessions with associated public comment periods. It has invited ongoing\nstakeholder input. These forums enabled the Department to provide details about the framework and learn from\nindustry representatives and producers about how to best support the states and tribes as they develop workable\ntraceability systems. Additionally, USDA distributed informational packets to more than 560 Federally\nrecognized tribes. It has worked with the Indian Nations Conservation Alliance to reach out to tribes in nine\nStates. The Department also maintained information systems developed under the previous system that assist\nwith tracing animals potentially exposed to a disease.\nUSDA continues to develop a specific plan on traceability that is more flexible than the previous system. The new\nsystem allows States, tribes, territories, and producers to use their expertise to develop the animal disease\ntraceability approach that works best for them. Detecting an animal disease before many animals have been\nexposed to it limits the spread of the disease. It allows for more timely eradication and management efforts. The\nDepartment estimates that a half week delay in intervention can increase total costs by $135 million, including\nproduction and trade losses related to a major disease event. Therefore, the monitoring and surveillance activities\nare crucial to minimizing and preventing damages to the U.S. livestock industry, and ensuring access to a variety\nof meat and poultry products.\nUSDA also prevented and mitigated economic and environmental damage to such other agricultural commodities\nas grapes. The European Grapevine Moth (EGVM), a significant pest of grapes and other specialty crops, was\ninitially discovered in major grape production areas of northern California in 2009. The pest damages grape\nproduction when larvae feed on the flowers and berries; subsequent fungal infection causes further damage. High\npopulation densities of EGVM can destroy entire vineyards, resulting in a total loss of grapes at harvest. Other\npotential impacts include reduced availability of fresh and processed commodities, a decreased number of export\nmarkets for the grape and stone fruit industry, and increased costs to both the producers and consumers.\nThe Department believes that many of the impacts have been avoided due to the rapid response to the initial\ndiscovery of the pest. USDA, State, county, and university cooperators continue to conduct survey and regulatory\nactivities, as well as education and outreach efforts. The Department and cooperators have been conducting\n\n\n\n Annual Performance Report\n 71\n\x0cintense regulatory compliance activities to prevent the movement of infested products from quarantined areas.\nGrowers in affected areas also are conducting treatments to suppress the moth.\n\n Annual Performance Goals, Indicators, Fiscal Year 2010\n 2006 2007 2008 2009\n and Trends\n Target Actual Result\n 4.4.1 Value of damage prevented and mitigated N/A $1.37 $1.38 $1.05 $1.07 $1.07 Met\n annually as a result of selected plant and\n animal health monitoring and surveillance\n efforts ($ billions)\n Rationale for Met Range: The value of the agricultural resources protected can vary year to year and are disease and commodity specific. A threshold boundary equal to\n the economic assumptions for a given year are considered acceptable.\n Data Assessment of Performance Measure 4.4.1\n Data Source: Data for animal health programs are entered by state partners into a USDA database and verified by Department officials to document\n the results of surveillance efforts and the health status of the U.S. herd. Data for plant health programs are maintained in the Cooperative Agricultural\n Pest Survey program database. The estimated value of savings is a calculation of the costs associated with conducting monitoring and surveillance\n programs versus potential losses of not having these programs in place.\n \xe2\x80\xa2 Completeness of Data \xe2\x80\x94 USDA maintains the databases and results are entered directly into the system. Should a pest or disease be detected, the\n Department updates information on its detection and response efforts to plant and animal pests and diseases daily at http://www.aphis.usda.gov/.\n The pests and diseases of highest concern are easily identified from USDA\xe2\x80\x99s Web site.\n \xe2\x80\xa2 Reliability of Data \xe2\x80\x94 The surveillance results are used by both internal managers and external partners and stakeholders as an authoritative\n source of information.\n \xe2\x80\xa2 Quality of Data \xe2\x80\x94 USDA ensures the information reported on its Web site accurately reflects the status of U.S. plant and animal health.\n\n\nChallenges for the Future\nUSDA is faced with prioritizing and determining an appropriate Federal response to an increasing number of\nagricultural health threats. The Department must continually prioritize the list of major pest and disease threats,\nsince these threats are increasing domestically and internationally. In addition, USDA\xe2\x80\x99s monitoring and\nsurveillance efforts will need to be adjusted to respond to these threats to protect agricultural resources and ensure\nthat America has access to nutritious foods.\n\n\n\n\n Annual Performance Report\n 72\n\x0cSelected Results in Research, Extension, and Statistics\nUSDA engages in scientific research and extension work that helps farmers and others involved in producing food\nand fiber, and statistical analysis designed to aid understanding of agricultural issues. This important facet of\nUSDA\xe2\x80\x99s role supports its mission through its strategic goals, as outlined below. The examples provided are a small\nselection from a large effort to further our understanding.\nSTRATEGIC GOAL 1: ASSIST RURAL COMMUNITIES TO CREATE PROSPERITY SO THEY ARE SELF-SUSTAINING, REPOPULATING, AND\nECONOMICALLY THRIVING\nObjective 1.1 \xe2\x80\x93 Enhance Rural Prosperity\nAmerica\xe2\x80\x99s Family Farms. Most U.S. farms\xe2\x80\x9498 percent in 2007\xe2\x80\x94are family-owned operations. While large-scale\nfamily farms and nonfamily farms account for 12 percent of those in the U.S., they also comprise 84 percent of\nthe value of production. In contrast, small family farms make up most of the U.S. farm count while producing a\nmodest share of farm output. Small farms are less profitable than large-scale farms, on average, and tend to rely on\noff-farm income for their livelihood. Generally speaking, farm-operator households cannot be characterized as\nlow-income when both farm and off-farm income are considered. Nevertheless, limited-resource farms still exist\nand account for 3 to 12 percent of family farms. This research provides decision makers with an ongoing\nassessment of the economic status of family farms.\nSmall Farms in the United States: Persistence under Pressure. Ninety-one percent of U.S. farms are classified as small,\nwith gross cash farm income (GCFI) of less than $250,000. About 60 percent of these small farms are very small,\ngenerating GCFI of less than $10,000. These very small noncommercial farms, in some respects, exist\nindependently of the farm economy because their operators rely heavily on off-farm income. The remaining small\nfarms\xe2\x80\x94small commercial farms\xe2\x80\x94account for most small-farm production. Overall farm production, however,\ncontinues to shift to larger operations, while the number of small commercial farms and their share of sales\nmaintain a long-term decline. This research provides decision makers with an assessment of the current economic\nstatus of the Nation\xe2\x80\x99s small farms.\nObjective 1.2 \xe2\x80\x93 Create Thriving Communities\nPromoting Local Community Sustainability. Because of the increased demand for local foods, especially by restaurants,\nUSDA-funded extension programs now link growers to consumers. In Oregon, one town has 22 restaurants, 85\nsmall farms/growers, 5 food markets, 3 fishing boats, and consumers participating in a food Web linkage project,\nin which participants share a wide range of food expertise using the Internet. It is estimated that more than\n$129,000 in local food trade occurred in 2009 within these groups. As a result of the demand generated by the\nproject, 4 new farms began production. This production added between $80,000 and $320,000 annually in net\nincome to an economically depressed community. The project can be a model of sustainability for other\ncommunities to emulate.\nObjective 1.3 \xe2\x80\x93 Support a Sustainable and Competitive Agricultural System\nOrganic Production Survey. The 2008 Farm Bill provided funding for USDA to develop statistics on organically\nproduced agricultural products. The Organic Production Survey results were released in FY 2010 in response to\nthis mandate. The one-time funding provided by the Farm Bill allowed the Department to develop baseline\nstatistics about this quickly expanding and vital sector of U.S. agriculture. Information on this survey and on the\nCensus of Agriculture can be found at http://www.agcensus.usda.gov/.\nDecoding the Swine Genome. An international team of scientists, funded with a grant from USDA, has completed\nthe first draft sequence of the genome of a domesticated pig. A genome is the full complement of genetic material\nwithin an organism. This first draft sequence will spur advancements in swine production and human medicine.\nUnderstanding the swine genome will lead to health advancements in the swine population. It will also accelerate\n\n\n\n Annual Performance Report\n 73\n\x0cthe development of vaccinations for pigs. This new insight into the genetic makeup of the swine population can\nhelp reduce disease and enable medical advancements in both pigs and humans.\nImproving Sustainability in the Agricultural System. USDA funded the Western Sustainable Agriculture Research and\nEducation (SARE) program to educate and help the agriculture industry become more profitable, protect natural\nresources and the environment, and improve the quality of life for producers and consumers. The number of\nseparate SARE-impacted farms and ranches which increased profits and/or reduced costs was documented as at\nleast 1,452. Adjacent farms and ranches totaled more than 3,000, impacting 4,178,000 acres. Of these farms and\nranches, 82 percent reported the sustained use of the research-based idea or practices tested. Finally, across the 5-\nyear life-span of this cooperative agreement, and across the entire western region, there was a positive economic\nimpact of more than $500 million.\nSTRATEGIC GOAL 2: ENSURE OUR NATIONAL FORESTS AND PRIVATE WORKING LANDS ARE CONSERVED, RESTORED, AND MADE MORE\nRESILIENT TO CLIMATE CHANGE, WHILE ENHANCING OUR WATER RESOURCES\nObjective 2.1 \xe2\x80\x93 Restore and Conserve the Nation\xe2\x80\x99s Forests, Farms, Ranches, and Grasslands\nParticipation in Conservation Programs by Targeted Farmers: Beginning, Limited-Resource, and Socially Disadvantaged\nOperators\' Enrollment Trends. Beginning, limited-resource, and socially disadvantaged farmers make up as much as\n40 percent of all U.S. farms. Some Federal conservation programs contain provisions that encourage participation\nby such \xe2\x80\x9ctargeted\xe2\x80\x9d farmers. A 2010 USDA report provided Departmental decision makers with a comparison of\nthe natural resource characteristics, resource issues, and conservation treatment costs on targeted farmers against\nthose of other participants in the largest U.S. conservation programs. Some evidence shows that targeted farmers\ntend to operate more environmentally sensitive land than other farmers, have different conservation priorities, and\nreceive different levels of payments. The different conservation priorities among types of farmers suggest that, if a\nsignificantly larger proportion of targeted farmers participate in these programs, the programs\xe2\x80\x99 economic and\nenvironmental outcomes could change.\n\xe2\x80\x98Recovery\xe2\x80\x99, a New Grass Cultivar to Improve Rangeland Restoration. Western wheatgrass is an important native grass in\nmany range land ecosystems. Despite its importance, its low rate of seed production and poor seedling vigor limit\nits use when quick establishment is needed to stabilize and restore degraded range lands. USDA scientists in\nLogan, Utah, worked with the Army Corps of Engineers to develop and jointly release \xe2\x80\x98Recovery\xe2\x80\x99, a superior and\nmore easily established western wheatgrass. Developed and tested for more than 10 years, Recovery was designed\nfor reseeding range lands following severe disturbance, frequent wildfires, and soil erosion. With a 20-48 percent\nincrease in the rate of successful establishment, \xe2\x80\x98Recovery\xe2\x80\x99 enables land managers to use a native grass species to\nhelp limit weed infestation and soil erosion in systems where reestablishment of wheatgrass is inhibited by\nfrequent disturbances. USDA and the Army Corps of Engineers recommend \xe2\x80\x98Recovery\xe2\x80\x99 for reseeding private,\npublic, and military training lands throughout the northern plains and intermountain west.\nObjective 2.2 \xe2\x80\x93 Lead Efforts to Mitigate and Adapt to Climate Change\nReducing Greenhouse Gases. In Nebraska, proven technologies and management practices could reduce the pumping\nof irrigation water by at least 460 billion gallons per year, and energy use by at least 42 million gallons of fuel per\nyear. In addition, for every acre-inch of water not pumped, the environment benefits from 55 pounds of reduced\ncarbon dioxide emissions. This could result in a 490,000-ton reduction of carbon dioxide emissions. Participants\nin a USDA-funded University of Nebraska program estimated that the skills gained during the educational\nexperiences would allow them to reduce water use between 1.4 and 2.6 inches of water per acre. Increased carbon\nstorage has multiple environmental benefits, such as reduced soil erosion, increased water-holding capacity for\nplants, and a slower rise in atmospheric carbon dioxide concentrations.\n\n\n\n\n Annual Performance Report\n 74\n\x0cObjective 2.3 \xe2\x80\x93 Protect and Enhance America\xe2\x80\x99s Water Resources\nUse of On-Farm Irrigation. The Farm and Ranch Irrigation Survey (FRIS), conducted every 5 years, provides the\nonly complete, consistent data regarding on-farm irrigation activities in the Nation. The 2008 FRIS, released in\nFY 2010, provided information that will promote efficient irrigation practices, and ensure long-term sustainability\nof the Nation\xe2\x80\x99s water resources. Statistics were provided on irrigation water use, including application methods,\nequipment, facilities, expenditures, crop acreage and yield, and many other areas. The survey results are used by\nindustry, Government, and producers. FRIS aids in developing improved technology, more efficient water use\npractices, and sound programs and policies. The survey can be found under \xe2\x80\x9cCensus Highlights\xe2\x80\x9d at\nhttp://www.agcensus.usda.gov/.\nObjective 2.4 \xe2\x80\x93 Reduce Risk from Catastrophic Wildfire and Restore Fire to its Appropriate Place on the Landscape\nPrescribed Burning Reduces Emergence of Invasive Weeds. Common rangeland weed control methods rarely prevent\nweed seeds already on the ground from germinating and reestablishing the weed population. USDA scientists in\nMiles City, Montana, evaluated how fire management could reduce seed viability. Seeds of Japanese brome,\nspotted knapweed, Russian knapweed, and leafy spurge were deposited on the soil surface. Scientists burned the\nseeds at six fuel loads common to grasslands. The results were compared with a non-burned control. At fuel loads\ncommon to the northwestern Great Plains, seedling emergence was reduced 79 to 88 percent. At fuel loads\ncommon to the north-central Great Plains, emergence was reduced at least 97 percent. At fuel loads typical of the\nnortheastern Great Plains, emergence probabilities were less than 1 percent for all species except spotted\nknapweed. Results indicate the high potential for using fire to disrupt the life cycle of invasive species across the\nnorthern Great Plains. Reducing invasive weeds through proper fire management provides an affordable method\nto aid in weed control. It also increases livestock production and protects the ecosystem services of native\nrangelands.\nSTRATEGIC GOAL 3: HELP AMERICA PROMOTE AGRICULTURAL PRODUCTION AND BIOTECHNOLOGY EXPORTS AS AMERICA WORKS TO\nINCREASE FOOD SECURITY\nObjective 3.1 \xe2\x80\x93 Ensure U.S. Agricultural Resources Contribute to Enhanced Global Food Security\nFood Security Assessment, 2009-2010. USDA analysis finds that global food security improved between 2009 and\n2010. The improvement is the result of moderation of the global economic downturn. Department analysis warns\nof a long-term deterioration in food security in some regions, most notably sub-Saharan Africa.\nEarly-flowering genes identified that accelerate fruit tree breeding. Fruit tree breeding is a slow and expensive process\nbecause of the long delay between planting a seedling and the plant\xe2\x80\x99s first flowering. Years of breeding and testing\ncan be saved if that time is shortened. USDA scientists have identified and incorporated into breeding stock a\ngene that promotes early flowering and fruiting. This new gene shortens the juvenile stage of plum trees from 4\nyears to less than 12 months. Once breeding results are achieved, the genetically engineered early-flowering trait\ncan be removed, which creates a tree that can be categorized as non-genetically engineered. Early flowering and\nfruiting will allow for the rapid development of new and improved varieties of plum and other fruits, as well as\nforest and woody ornamental species.\nObjective 3.2 \xe2\x80\x93 Enhance America\xe2\x80\x99s Ability to Develop and Trade Agricultural Products Derived from New\nTechnologies\nTrade Negotiations and Policy Analysis. USDA research on trade policy provides decision makers with analysis that\nevaluates the impact of changes in U.S. and other countries\' agricultural trade policies. Department research in\nsupport of World Trade Organization (WTO) negotiations has helped to inform and strengthen U.S. negotiating\npositions on agriculture. WTO is the only international body dealing with the rules of trade between nations.\nDespite strong critics of WTO, membership continues to grow as countries seek the benefits of expanding trade.\n\n\n\n\n Annual Performance Report\n 75\n\x0cWithin the organization, member countries trade concessions to gain access to foreign markets, benefiting foreign\nproducers and consumers.\nNew value-added lentil products. Many people are allergic to gluten (Celiac disease). Gluten is a protein found in\ncereal grains, especially wheat. The gluten-free market is valued at $700 million. Using extrusion technology,\nlentil-based snacks rich in gluten-free dietary fiber and protein were developed by USDA researchers in\ncollaboration with the California Departments of Food Science and Human Nutrition and Biological Systems\nEngineering at Washington State University. The commercialization of lentil-based, gluten-free products will\nbenefit a large number of consumers and increase demand for this commodity.\nObjective 3.3 \xe2\x80\x93 Support Sustainable Agriculture Production in Food-Insecure Nations\nProtecting Global Agricultural Markets. USDA-funded scientists in Arkansas have developed the Arkansas Global\nRice Model (AGRM). This model generates a 10-year baseline projection of the global rice market. The baseline\nincludes all major rice producing, consuming, and trading nations. During the past year, AGRM was used to\nevaluate bio-fuels policies in explaining the spikes in global rice prices in 2008. The research on the global rice\neconomy and analysis of trade protection has received considerable attention from the World Bank, the United\nNations, Congress, and many policy decision-makers in the U.S. and the rest of the world. The World Bank, the\nOrganization for Economic Cooperation and Development, the Food and Agriculture Organization of the\nUnited Nations, and the Government of Japan have requested assistance from the Arkansas Global Rice\nEconomics Team in developing rice market analysis.\nDevelopment of Ug99 Resistant Wheat for Production in Afghanistan and Pakistan. Ug99 causes stem rust, a significant\ndisease of cereal crops. USDA, in partnership with the International Maize and Wheat Improvement Center and\nthe International Center for Agriculture Research in Dry Areas, is working to bring Afghanistan and Pakistan\ninto the Borlaug Global Rust Initiative. The initiative is designed to systematically reduce the world\xe2\x80\x99s vulnerability\nto stem, yellow, and leaf rusts of wheat. It also advocates the evolution of a sustainable international system to\ncontain the threat of wheat rusts, and the continuation of the productivity enhancements required to withstand\nfuture global threats to wheat. The partnership strives to help safeguard wheat production in the aforementioned\ncountries. The Food and Agriculture Organization of the United Nations has determined that more than a\nquarter of the world\xe2\x80\x99s wheat crop is vulnerable to Ug99. Both Afghani and Pakistani wheat lacks resistance to\nUg99 and are at extreme risk since the rust is advancing towards their wheat growing areas. The Department\nworked with the Egyptian Agricultural Research Center to provide resistant wheat seed to Afghanistan. They also\norganized a 3-year project with Pakistan to develop resistant wheat varieties for release in that country.\nSTRATEGIC GOAL 4: ENSURE THAT ALL OF AMERICA\xe2\x80\x99S CHILDREN HAVE ACCESS TO SAFE, NUTRITIOUS, AND BALANCED MEALS\nObjective 4.1 \xe2\x80\x93 Increase Access to Nutritious Food\nHousehold Food Security in the United States. Food security for a household means that it can access, at all times,\nenough food for an active, healthy life. To inform policy makers and the public about the extent to which U.S.\nhouseholds consistently have economic access to enough food, USDA publishes an annual statistical report on\nhousehold food security in the U.S. The latest report, Household Food Security in the United States, 2008, based on\ndata from the December 2008 Food Security Survey and published in FY 2010, provides the most recent statistics\non the food security of U.S. households. It documents how much was spent for food, and the extent to which\nfood-insecure households participated in Federal and community food assistance programs. Results show that 85\npercent of American households were food secure throughout 2008. The remaining 15 percent of households\nwere food insecure at least some time during that year.\nThe U.S. Food Environment Atlas. The Atlas is a Web-based mapping tool USDA developed to allow users to\ncompare U.S. counties in terms of their \xe2\x80\x9cfood environment,\xe2\x80\x9d the set of factors that help determine and reflect a\ncommunity\xe2\x80\x99s access to affordable, healthy food. The 90 indicators of the food environment currently included in\nthe Atlas cover a wide range of demographic, health, and food access characteristics, most at the county level. The\n\n\n Annual Performance Report\n 76\n\x0cbasis of the U.S. Food Environment Atlas is a recognition that factors such as store/restaurant proximity, food\nprices, food and nutrition assistance programs, and community characteristics, interact to influence food choices\nand diet quality.\nNew Dietary Supplement Ingredient Database. A partnership between USDA scientists in Beltsville, Maryland, and\nthe National Institutes of Health, Office of Dietary Supplements, resulted in release of the Dietary Supplement\nIngredient Database, Version 1. The database can be found at http://dietarysupplementdatabase.usda.nih.gov.\nThis list of hundreds of multivitamin/mineral products is the first of several related goals to provide better dietary\nassessments of the American people. This database will be used by researchers who determine how much of\nvarious nutrients people consume. Because half the population takes dietary supplements, this new information\nwill make estimates of intake more accurate. It will also lead to better dietary recommendations for health.\nObjective 4.2 \xe2\x80\x93 Promote Healthy Diet and Physical Activity Behaviors\nNew Intervention Method Can Decrease Obesity. A USDA-funded integrated research/extension project at the\nChildren\xe2\x80\x99s Nutrition Research Center, Baylor College of Medicine, investigated adding a new intervention to\nExpanded Food and Nutrition Education Program (EFNEP) classes in Texas. At issue was whether it would lead\nto improved dietary behaviors and lower body mass index (BMI) as compared with groups receiving standard\nEFNEP classes. BMI is the ratio of a person\xe2\x80\x99s weight to height. While both the control and intervention groups\xe2\x80\x99\nimproved dietary behaviors, the intervention group also experienced a significant decrease in BMI. This project\ndemonstrates the potential for EFNEP to significantly impact family dietary behaviors in populations at risk for\nobesity.\nGolden Rice as an Effective Source of Vitamin A. Vitamin A deficiency leads to premature disability and millions of\ndeaths worldwide each year. Scientists from USDA nutrition centers in Houston and Boston proved that golden\nrice provides enough beta-carotene (an organic compound that can easily be converted to vitamin A) to satisfy the\nrequirements for this essential vitamin. Widespread consumption of golden rice would help eliminate this nutrient\ndeficiency.\nObjective 4.3 \xe2\x80\x93 Protect Public Health by Ensuring Food is Safe\nFighting Food Pathogens at the Source. Although cattle are important reservoirs of foodborne pathogens, no validated\nmethod exists to monitor them on farms. The goal of this project was to improve food safety by developing\nefficient, effective methods to determine the E. coli O157:H7 and Salmonella status of pens of feedlot cattle. It\nalso looked to reduce the potential for these foodborne pathogens to be transmitted outside the feedlot. USDA-\nfunded scientists in Nebraska developed and validated a pen-testing protocol as a monitoring tool for feedlot\nproduction Hazard Analysis and Critical Control Points (HACCP) programs. HACCP is a process that has been\nestablished for juice, meat, poultry, and seafood processing to prevent foodborne illness. Scientists also look to use\nthe protocol. This work was important to the understanding of when and where food safety pathogens occur in\ncattle feedlots and enable the development of control strategies.\nSalmonella Serotyping. Definitively characterizing Salmonella species isolated from foods is a critical issue for\nUSDA. Department scientists in Athens, Georgia, developed a multiplex polymerase chain reaction (PCR)\nSalmonella serotyping technique for high-throughput analysis. PCR is a scientific technique in molecular biology\nto amplify a single or a few copies of a piece of deoxyribonucleic acid (DNA) to generate thousands to millions of\ncopies of a particular DNA sequence. DNA is a molecule that carries the genetic information of all living\norganisms. A serotype is a group of organisms, microorganisms, or cells distinguished by how they produce\nimmune-defense molecules. The multiplex PCR assay can identify the top 50 serotypes isolated, which represent\n85 percent of all clinically isolated Salmonella. It has been adapted to a high-throughput platform by incorporation\nof capillary analysis of the multiplex PCR products. The impact of the research will be immediate. The technique,\nwhich requires little training, could replace traditional serotyping for most Salmonella isolates. It facilitates the\ndetermination of up to 90 isolates in 24 hours with very little hands-on time at a cost of $1.50 per sample. This\nresult compares to several days and about $40 for traditional serotyping. The technique is currently being tested\n\n Annual Performance Report\n 77\n\x0cand validated by several Federal and State public health laboratories in the U.S., and the Public Health Agency of\nCanada.\nE-beam Technology for Developing Poultry Vaccines. Some microorganisms, particularly bacteria, cause serious disease\nin commercial poultry. They can also be of importance in causing food poisoning in poultry products reaching the\nconsumer. New methods are needed to minimize the effects of such microorganisms. USDA scientists, in\ncollaboration with Texas A&M University scientists, used high energy electron-beam (E-beam) irradiation to\nrender Salmonella non-viable as an infectious agent, while retaining the necessary antigenic properties to\nstimulate a strong immunological response in poultry. The research established that broiler chickens exposed to\nE-beam-treated bacteria were much more efficient in fighting off subsequent infections by normal, viable bacteria.\nThis finding suggests that the irradiated bacteria could serve as a vaccine. It also shows that, although vaccines\nagainst viruses are well known and relatively easy to create, developing effective ones against bacteria have\nhistorically been much more difficult.\nX-ray Treatments to Improve Seafood Safety. USDA-funded scientists at Mississippi State University evaluated the\nuse of X-ray technology on oysters and shrimp to reduce bacterial pathogen levels. In half- and whole-shell\noysters and ready to eat shrimp, more than 1 million cells of the foodborne pathogens E. coli O157: H7,\nSalmonella, Shigella flexneri, and Vibrio parahaemolyticus could be killed with X-ray treatments of between 2 to\n5 kGy (kGy, or KiloGray, is a unit of radiation measurement). More importantly, X-ray treatment did not kill the\noysters even with the highest dose (5 kGy). This research will have a direct impact on producers, particularly in\nsouthern States, which are eager for an alternative pathogen intervention process that does not impact product\nquality.\nObjective 4.4 \xe2\x80\x93 Protect Agricultural Health by Minimizing Major Diseases and Pests to Ensure Access to Safe,\nPlentiful, and Nutritious Food\nNational Network of Labs Detect Diseases Early. The National Plant Diagnostic Network (NPDN) developed links to\nlaboratories in every State. NPDN provides a nationwide network of public agricultural institutions with a\ncohesive, distributed system to quickly detect high consequence pests and pathogens introduced into agricultural\nand natural ecosystems, identify them, and immediately report them to appropriate responders and decision\nmakers. ISDA funding has enabled NPDN to increase the cumulative number of specific plant diseases labs\nwithin the network prepared to detect from 3 in 2004 to 10 in 2010. Plant disease (and insect) detection criteria\nhave been developed for soybean rust, sudden oak death, Ralstonia stem rot, plum pox virus, pink hibiscus\nmealybug, potato wart, huanglongbing (citrus greening), Potato Cyst Nematode, Late Blight and Beet Curly\nTop. The Department also helped fund and provide leadership to establish the National Animal Health\nLaboratory Network (NAHLN), a multifaceted network comprised of sets of laboratories that focus on different\ndiseases, using common testing methods and software platforms to process diagnostic requests and share\ninformation. USDA\xe2\x80\x99s work helped enable NAHLN to increase the number of animal diseases that labs within the\nnetwork can detect.\nGenome of the Citrus Greening Bacterium Sequenced. USDA scientists in Fort Pierce, Florida, in collaboration with\nuniversity researchers, have completely sequenced the genome of Candidatus Liberibacter asiaticus. This bacterium\nis the likely causative agent associated with citrus greening disease. Knowledge of the genome will be used to\nbetter understand the microbe\xe2\x80\x99s genetic make-up and nutritional requirements. Such knowledge can be exploited\nto interrupt disease transmission and find cures for the disease.\n\n\n\n\n Annual Performance Report\n 78\n\x0cSelected 2010 Program Evaluations\n\n Perform.\n Measure Title Findings and Recommendations/Actions Availability\n2.4.1, 2.4.2, Managerial Cost Accounting Findings: The Forest Service (FS) should continue to http://www.gao.gov/products/GAO-06-\n2.4.3 Practices: Department of place a high priority on addressing its remaining 1002R\n Agriculture, Forest Service financial management and reporting problems. At the\n (FY2007 study, action same time, the Secretary of Agriculture should direct\n continued in FY2010) appropriate FS officials to assess FS MCA needs and\n require that they are appropriately addressed in any\n new systems that are implemented.\n Actions: In 2010, the USDA Office of the Chief\n Financial Officer (OCFO) and Forest Service (FS)\n officials assessed and defined its managerial cost\n accounting needs and requirements. FS assessed its\n managerial cost accounting needs through participation\n in the USDA Managerial Cost Accounting Workgroup\n ongoing discussions led by the OCFO, including\n discussions in FY 2008-2010 of a strategic framework\n for MCA practices across the Department. Additionally,\n at that time, FS, along with USDA\'s OCFO, was\n charged with responsibility for identifying and ensuring\n MCA requirements are incorporated in the cost\n accounting module of USDA\'s Financial Management\n Modernization Initiative (FMMI). The MCA requirements\n identified included 34 mandatory Financial Systems\n Integration Office (FSIO) cost management\n requirements and 12 additional USDA-mandatory\n requirements. These requirements are to enable\n USDA-wide cost management, including recording and\n accumulating financial data, cost distribution and full\n cost reporting. If fully and effectively implemented,\n USDA\'s actions to identify and establish MCA\n requirements for the FMMI cost accounting module,\n should enable FS obtain more relevant MCA\n information to help support decision making at USDA\n and its components, including Forest Service.\n\n3.2.1 Managerial Cost Accounting Findings: To promote the implementation and use of http://www.gao.gov/products/GAO-06-\n Practices: Department of MCA methodologies at APHIS, the Secretary of 1002R\n Agriculture, Animal and Plant Agriculture should direct appropriate APHIS officials to\n Health Inspection Service finalize and document procedures for using ACMS data\n (APHIS) (FY2007 study, action fields for MCA as a step toward better informed\n continued in FY2010) managerial decision making.\n Actions: In FY2010, the Animal and Plant Health\n Inspection Service (APHIS) issued a APHIS Cost\n Management System (ACMS) User Guide that\n provided instructions on recording and accumulating\n cost data into appropriate ACMS data fields in the\n system\'s spending and collections module to track\n costs associated with APHIS information and\n technology investments. The spending and collections\n module is to provide important information, such as\n planned and committed costs related to APHIS\n program agreements and cost centers. At the same\n time, APHIS also expanded reporting capabilities in\n ACMS to include managerial reports for tracking costs\n for component organizations and programs to include\n\n\n\n Annual Performance Report\n 79\n\x0c Perform.\n Measure Title Findings and Recommendations/Actions Availability\n reporting on allocations, agreements, strategic funds,\n forecasting and performance. Further, in March 2010,\n APHIS conducted three training sessions on using\n ACMS specifically for APHIS managers who have\n responsibility for managing agency funding and making\n spending decisions. Based on these collective APHIS\n actions, if fully and effectively implemented, APHIS will\n have greater assurance that relevant managerial cost\n accounting data is available to support APHIS program\n decision making.\n\n4.1.1 Enhancing Supplemental This report uses information from case studies http://www.fns.usda.gov/ora/MENU/Publ\n Nutrition Assistance Program conducted in 14 SNAP agencies in 2009 to describe ished/snap/FILES/ProgramOperations/E\n Certification: SNAP states\xe2\x80\x99 goals for modernization, factors that led to shifts nhancedCertification_FinalSummary.pdf\n Modernization Efforts -- Final in business practices, and types of changes. These\n Report (released first quarter changes include efforts to improve customer service in\n FY2010) the local offices, and manage workload, technological\n innovations, and partnering arrangements.\n Actions: No recommendations for action.\n4.1.1 Low Income Household This study uses information from the Consumer http://www.fns.usda.gov/ora/MENU/Publ\n Spending Patterns and Expenditure Survey to compare spending patterns ished/snap/FILES/Participation/Spendin\n Measures of Poverty (April, across major consumption categories for SNAP gPatterns.pdf\n 2010) households, income-eligible non participating\n households, and ineligible households with incomes\n between 130 and 300 percent of poverty.\n Findings: All three categories spent less than one-\n quarter of their household income on food, with SNAP\n participants spending slightly higher percentages than\n other low-income people. SNAP participants are less\n likely to have checking and savings accounts than non-\n participants, and tend to carry much lower account\n balances.\n Actions: No recommendations for action.\n\n4.1.1 Implementing Supplemental This study assesses the feasibility and effects of adding http://www.fns.usda.gov/ora/MENU/Publ\n Nutrition Assistance Program the Commonwealth to SNAP in place of its current ished/snap/FILES/ProgramDesign/Puert\n in Puerto Rico: A Feasibility block grant for nutrition assistance to low-income oRico.pdf\n Study (June, 2010) families.\n Findings: Changing the current NAP block grant to\n SNAP in the Commonwealth would increase\n participation by about 85,000 households, with 220,000\n people in an average month, and increase annual costs\n by roughly $500 million. However, these estimates are\n highly sensitive to economic conditions and policy\n choices.\n Actions: No recommendations for action.\n\n4.1.1 Summary of Nationwide Findings: Office of Inspector General (OIG) concluded http://www.usda.gov/oig/webdocs/27099\n Electronic Benefits Transfer that, while FNS generally had adequate controls over -71-Hy.pdf\n (EBT) Operations (January, EBT processing, there were a small number of\n 2010) instances in which retailers redeemed SNAP benefits\n using incorrect store authorization numbers.\n Actions: While OIG made no formal recommendations,\n FNS agreed to take action to validate and cross-check\n retailer authorization numbers.\n\n\n\n\n Annual Performance Report\n 80\n\x0c Perform.\n Measure Title Findings and Recommendations/Actions Availability\n4.1.3 Direct Certification in the Presents information on the effectiveness of State and http://www.fns.usda.gov/ora/MENU/Publ\n National School Lunch local efforts to directly certify children for free school ished/CNP/FILES/NSLPDirectCertificati\n Program (NSLP): State meals in School Year (SY) 2008-09. on2009.pdf\n Implementation Progress Findings: Seventy-eight percent of local education\n Report to Congress 2009 agencies directly certified SNAP-participating students\n (released first quarter FY2010) in SY 2008-09. These LEAs enroll 96 percent of all\n students in NSLP-participating schools. The median\n direct certification rate was 72 percent in SY 2008-\n 2009. This is up from 69 percent in SY 2007-08.\n Actions: No recommendations for action.\n4.1.3 Child and Adult Care Food Estimates the accuracy level of CACFP meal http://www.fns.usda.gov/ora/MENU/Publ\n Program (CACFP) \xe2\x80\x93 reimbursement levels (\xe2\x80\x9ctiering\xe2\x80\x9d), and related improper ished/CNP/FILES/CACFPTiering08.pdf\n Assessment of Sponsor Tiering payments in 2008.\n Determinations \xe2\x80\x93 2008 Findings: The level of improper payments was\n (released March 2010) comparable to the estimates from previous years at\n about 2 percent of total CACFP meal reimbursements.\n Actions: No recommendations for action.\n4.1.3 Regional Office Review of Assesses administrative error associated with the local http://www.fns.usda.gov/ora/MENU/Publ\n Applications (RORA) for educational agency\xe2\x80\x99s approval of applications for free ished/CNP/FILES/rora2008.pdf\n School Meals 2008 (released and reduced-price school meals.\n February 2010) Findings: The percent of all students with\n administrative errors in the processing of their\n applications for meal benefits has remained relatively\n stable during the 4-year period, with administrative\n errors ranging between 3 and 4 percent.\n Actions: No recommendations for action.\n4.1.3 Analysis of Verification Presents results of an analysis of the data on the http://www.fns.usda.gov/ora/MENU/Publ\n Summary Data School Year application verification process reported by States for ished/CNP/FILES/CNVerification2007-\n 2007-08 (released first quarter SY 2007-08. 08.pdf\n FY2010) Findings: Of the almost 300,000 applications selected\n for verification by local education agencies, about half\n (48 percent) were confirmed at the initial free or\n reduced price status, 9 percent changed from free to\n reduced price, 9 percent changed from free or reduced\n price to paid, 2 percent changed from reduced price to\n free, and about a third (32 percent) resulted in non-\n response.\n Actions: No recommendations for action.\n\n4.1.1, 4.1.2, Food and Nutrition Service Findings: OIG reviewed FNS financial statements for http://www.usda.gov/oig/webdocs/27401\n4.1.3. 4.1.4 Financial Statements for Fiscal Fiscal Years 2008 and 2009. FNS\xe2\x80\x99 statements received -34-HY.pdf\n Years 2009 and 2008 an unqualified opinion. The agency\xe2\x80\x99s core financial\n (released first quarter FY2010) management system was found to be in substantial\n compliance with the Federal Financial Management\n Improvement Act of 1996.\n Actions: The report contains no recommendations.\n\n4.1.1, 4.1.3. Domestic Food Assistance: Findings: The U.S. Government Accountability Office http://www.gao.gov/new.items/d10346.\n4.1.4 Complex System Benefits (GAO) found research suggesting that, while pdf\n Millions, but Additional Efforts participation in the Special Supplemental Nutrition\n Could Address Potential Program for Women, Infants and Children (WIC), the\n Inefficiency and Overlap National School Lunch Program, the School Breakfast\n among Smaller Programs Program, and SNAP is associated with positive health\n (April, 2010) and nutrition outcomes, little is known about the\n effectiveness of the remaining 11 programs because\n\n\n\n Annual Performance Report\n 81\n\x0c Perform.\n Measure Title Findings and Recommendations/Actions Availability\n they have not been well studied. GAO also found that,\n while the existing range of multiple programs may help\n to increase access to food for vulnerable or target\n populations, it shows signs of program overlap. This\n overlap can create unnecessary work and lead to\n inefficient use of resources.\n Actions: GAO recommended that USDA identify and\n develop methods for addressing potential inefficiencies\n and reducing unnecessary overlap among smaller\n programs, while ensuring access to the programs for\n those who are eligible. FNS agreed to consider a study\n to examine potential inefficiencies and overlap among\n smaller programs.\n\n Review of the Emergency Findings: OIG found that the agency was not http://www.usda.gov/oig/webdocs/27703\n Food Assistance Program frequently and consistently reviewing State operations -01-AT.pdf\n (March 2010) of the Emergency Food Assistance Program (TEFAP).\n It also found that the evaluations performed did not\n necessarily focus on States and territories that were at\n the greatest risk of fraud, waste, and abuse.\n Actions: OIG recommended setting policies and\n timeframes for TEFAP reviews. FNS will explore the\n use of a standard, risk-based approach to identifying\n TEFAP agencies that should receive priority reviews. It\n also will develop guidance to improve consistency in\n the review process.\n\n4.2.1 Food Expenditures and Diet Uses data from several national surveys to compare http://www.fns.usda.gov/ora/MENU/Publ\n Quality among Low-Income food spending and household diet quality of SNAP ished/snap/FILES/Other/FoodExpendDi\n Households and Individuals participants with other low-income households. etQuality.pdf\n (July 2010) Findings: Ten-percent higher food spending is\n associated with a small but, for some groups,\n statistically significant positive difference in diet quality.\n Actions: No recommendations for action.\n\n4.2.1 WIC Breastfeeding Peer Provides a comprehensive and systematic picture of http://www.fns.usda.gov/ora/MENU/Publ\n Counseling Study Final the implementation of the Loving Support Peer ished/WIC/FILES/WICPeerCounseling_\n Implementation Report (June Counseling Program. (A second phase of the project, Summary.pdf\n 2010) now underway, will assess the impact of enhancing\n Loving Support on breastfeeding outcomes for WIC\n participants.)\n Findings:\n \xe2\x80\xa2 More than half of pregnant WIC participants were\n enrolled at local WIC agencies that offered the\n Loving Support program.\n \xe2\x80\xa2 The dollar amount of FNS Loving Support grants\n per pregnant WIC participant varies widely.\n \xe2\x80\xa2 Breastfeeding peer counseling contacts occur both\n in WIC offices and on the telephone.\n Actions: No recommendations for action.\n\n\n\n\n Annual Performance Report\n 82\n\x0c Section 3.\n Financial Statements, Notes, Supplemental\n and Other Accompanying Information\n\n3. Financial Statements, Notes, Supplemental and Other Accompanying Information\nMessage from the Chief Financial Officer\nThe Office of the Chief Financial Officer leads the U.S. Department of Agriculture (USDA) with fiscally sound,\ncost-effective program delivery. Our efforts are supported by reliable financial management information and\ninfrastructure. Because we are accountable to the American taxpayer, we strive for peak performance in all facets\nof the Department. We continually adjust our operations to improve the quality of services we provide to the\nAmerican people.\nThe purpose of Sections 3 and 4 of this Fiscal Year 2010 Performance Accountability Report is to provide factual\ndata that clearly characterize our accomplishments in managing USDA resources with maximum efficiency.\nSections 3 and 4 include detailed information regarding:\n\xe2\x80\xa2 Financial Statements;\n\xe2\x80\xa2 Audit Reports;\n\xe2\x80\xa2 Findings and Recommendations;\n\xe2\x80\xa2 Balance Sheets;\n\xe2\x80\xa2 Supplemental Notes; and\n\xe2\x80\xa2 Other Accompanying Information.\nThrough the leadership and collaborative efforts of USDA managers, employees, business partners, and\nstakeholders, we have made significant strides in fiscal year 2010, advancing the Department\xe2\x80\x99s impressive record\nof excellence in financial management.\n\xe2\x80\xa2 Highlights of USDA\xe2\x80\x99s significant progress in financial management during FY 2010 include:\n\xe2\x80\xa2 Received another clean financial audit opinion;\n\xe2\x80\xa2 Continued implementation of a core financial system to replace USDA\xe2\x80\x99s 9 general ledger systems;\n\xe2\x80\xa2 of the 29 agencies and offices that form the Department, 21 have implemented the Financial Management\n Modernization Initiative System;\n\xe2\x80\xa2 Completed the assessment of internal control over financial reporting as required by Office of Management\n and Budget Circular A-123, Appendix A, \xe2\x80\x9cInternal Control over Financial Reporting.\xe2\x80\x9d As a result of testing,\n USDA identified 182 new control deficiencies. The Department also closed 32 business-process corrective\n action plans and 182 general-computer-control plans of action and milestones from prior years\xe2\x80\x99 assessments;\n\xe2\x80\xa2 Reduced USDA\xe2\x80\x99s inventory of audits open 1 or more years without final action by 39 percent;\n\xe2\x80\xa2 Reduced improper payments from 5.92 percent to 5.37 percent;\n\xe2\x80\xa2 Exceeded USDA\xe2\x80\x99s recovery target of $54.1 million with total improper payment recoveries of $310.3 million;\n and\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 83\n\x0c\xe2\x80\xa2 Provided cost-effective and secure payroll, and other administrative services reliably and accurately\n Government-wide through our National Finance Center.\nThough we are continually making progress in financial management, we cannot yet give unqualified assurance of\ncompliance with the Federal Managers\xe2\x80\x99 Financial Integrity Act, nor with the financial systems requirements of\nthe Federal Financial Management Improvement Act. We will continue to focus on these efforts in the coming\nyear.\nWe remain proud of the accomplishments of our hard working employees at USDA. All of us are committed to\nthe sound management of resources under our stewardship. We look forward to more financial management\nimprovements in fiscal year 2011.\n\n\n\n\n November 15, 2010\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 84\n\x0c Consolidated Balance Sheet\n As of September 30, 2010 and 2009\n (In Millions)\n 2010 2009\nAssets (Note 2):\nIntragovernmental:\n Fund Balance with Treasury (Note 3) $ 75,805 $ 72,334\n Investments (Note 5) 154 165\n Accounts Receivable, Net (Note 6) 288 270\n Other (Note 11) 83 4\n Total Intragovernmental 76,330 72,773\n\n Cash and Other Monetary Assets (Note 4) 161 248\n Investments (Note 5) 3 3\n Accounts Receivable, Net (Note 6) 7,320 8,596\n Direct Loan and Loan Guarantees, Net (Note 7) 89,405 85,657\n Inventory and Related Property, Net (Note 8) 47 205\n General Property, Plant, and Equipment, Net (Note 9) 2,964 2,972\n Other (Note 11) 178 185\n\nTotal Assets 176,408 170,639\n\n Stewardship PP&E (Note 10)\n\nLiabilities (Note 12):\n Intragovernmental:\n Accounts Payable 7 5\n Debt (Note 13) 87,915 84,119\n Other (Note 15) 11,735 11,774\n Total Intragovernmental 99,657 95,898\n\n Accounts Payable 580 734\n Loan Guarantee Liability (Note 7) 2,857 1,844\n Federal Employee and Veteran Benefits 881 846\n Environmental and Disposal Liabilities (Note 14) 9 9\n Benefits Due and Payable 3,356 3,119\n Other (Notes 15 & 16) 21,584 23,274\n Total Liabilities 128,924 125,724\n\n Commitments and Contingencies (Note 17)\n\nNet Position:\n Unexpended Appropriations - Earmarked Funds (Note 18) (302) 1,263\n Unexpended Appropriations - Other Funds 36,563 37,039\n Cumulative Results of Operations - Earmarked Funds (Note 18) 429 (349)\n Cumulative Results of Operations - Other Funds 10,794 6,962\n Total Net Position 47,484 44,915\n\nTotal Liabilities and Net Position $ 176,408 $ 170,639\n\n\n\n\n Consolidated Financial Statements\n\n\n The accompanying notes are an integral part of these statements.\n\n\nFinancial Statements, Notes, Supplemental and Other Accompanying Information\n 85\n\x0c Consolidated Statement of Net Cost\n For the Years Ended September 30, 2010 and 2009\n (In Millions)\n\n\n 2010 2009\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\n Gross Costs $ 25,912 $ 36,036\n Less: Earned Revenue 5,301 9,843\n Net Costs 20,611 26,193\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\n Gross Costs 11,804 10,529\n Less: Earned Revenue 670 665\n Net Costs 11,134 9,864\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\n Gross Costs 3,231 1,890\n Less: Earned Revenue 375 380\n Net Costs 2,856 1,510\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\n Gross Costs 98,684 82,296\n Less: Earned Revenue 847 795\n Net Costs 97,837 81,501\n\n\nTotal Gross Costs 139,631 130,751\nLess: Total Earned Revenue 7,193 11,683\n\nNet Cost of Operations (Note 19) $ 132,438 $ 119,068\n\n\n\n\n The accompanying notes are an integral part of these statements.\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 86\n\x0c Consolidated Statement of Changes in Net Position\n For The Year Ended September 30, 2010\n (In Millions)\n\n Earmarked\n Funds All Other Consolidated\n (Note 18) Funds Eliminations Total\nCumulative Results of Operations:\n Beginning Balances $ (349) $ 6,962 $ - $ 6,613\n\n Budgetary Financing Sources:\n Other Adjustments (recissions, etc.) - (44) - (44)\n Appropriations Used 5,673 124,330 - 130,003\n Non-exchange Revenue - 5 - 5\n Donations and Forfeitures of Cash and Equivalents 1 - - 1\n Transfers In (Out) without Reimbursement 1,444 5,812 - 7,256\n Other Financing Sources (Non-Exchange):\n Transfers In (Out) without Reimbursement (60) (30) - (90)\n Imputed Financing 57 3,982 (2,949) 1,090\n Other 44 (1,217) - (1,173)\n Total Financing Sources 7,159 132,838 (2,949) 137,048\n\n Net Cost of Operations (6,381) (129,006) 2,949 (132,438)\n\n Net Change 778 3,832 - 4,610\n\n Cumulative Results of Operations 429 10,794 - 11,223\n\nUnexpended Appropriations:\n Beginning Balances 1,263 37,039 - 38,302\n Adjustments:\n Changes in Accounting Principles (Note 24) (444) - - (444)\n Beginning Balance, as Adjusted 819 37,039 - 37,858\n\n Budgetary Financing Sources:\n Appropriations Received 6,909 124,360 - 131,269\n Appropriations Transferred In (Out) (5) 177 - 172\n Other Adjustments (2,352) (683) - (3,035)\n Appropriations Used (5,673) (124,330) - (130,003)\n Total Budgetary Financing Sources (1,121) (476) - (1,597)\n\n Unexpended Appropriations (302) 36,563 - 36,261\n\n Net Position $ 127 $ 47,357 $ - $ 47,484\n\n\n\n\n The accompanying notes are an integral part of these statements.\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 87\n\x0c Consolidated Statement of Changes in Net Position\n For The Year Ended September 30, 2009\n (In Millions)\n\n Earmarked\n Funds All Other Consolidated\n (Note 18) Funds Eliminations Total\nCumulative Results of Operations:\n Beginning Balances $ (490) $ 9,108 $ - $ 8,618\n\n Budgetary Financing Sources:\n Appropriations Used 6,986 104,227 - 111,213\n Non-exchange Revenue - 10 - 10\n Donations and Forfeitures of Cash and Equivalents 1 - - 1\n Transfers In (Out) without Reimbursement 1,639 4,592 - 6,231\n Other Financing Sources (Non-Exchange):\n Transfers In (Out) without Reimbursement (70) (492) - (562)\n Imputed Financing 48 3,785 (2,800) 1,033\n Other 48 (911) - (863)\n Total Financing Sources 8,652 111,211 (2,800) 117,063\n\n Net Cost of Operations (8,511) (113,357) 2,800 (119,068)\n\n Net Change 141 (2,146) - (2,005)\n\n Cumulative Results of Operations (349) 6,962 - 6,613\n\nUnexpended Appropriations:\n Beginning Balances 1,428 29,355 - 30,783\n\n Budgetary Financing Sources:\n Appropriations Received 6,778 114,209 - 120,987\n Appropriations Transferred In (Out) (5) 22 - 17\n Other Adjustments 48 (2,320) - (2,272)\n Appropriations Used (6,986) (104,227) - (111,213)\n Total Budgetary Financing Sources (165) 7,684 - 7,519\n\n Unexpended Appropriations 1,263 37,039 - 38,302\n\n Net Position $ 914 $ 44,001 $ - $ 44,915\n\n\n\n\n The accompanying notes are an integral part of these statements.\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 88\n\x0c Combined Statement of Budgetary Resources\n For The Years Ended September 30, 2010 and 2009\n (In Millions)\n\n 2010 2009\n Non-Budgetary Non-Budgetary\n Credit Reform Credit Reform\n Budgetary Financing Accounts Budgetary Financing Accounts\nBudgetary Resources:\nUnobligated balance, brought forward, October 1 (Note 24) $ 33,120 $ 4,689 $ 28,078 $ 5,314\nRecoveries of prior year unpaid obligations 3,721 1,106 3,934 754\nBudget Authority -\n Appropriation 144,701 - 132,335 -\n Borrowing Authority 39,063 21,852 28,870 14,905\n Earned -\n Collected 21,285 10,988 22,678 9,496\n Change in receivables from Federal Sources 189 1 (60) -\n Change in unfilled customer orders -\n Advances received 426 - 140 -\n Without advance from Federal Sources 309 (34) (47) 220\n Expenditure transfers from trust funds 937 - 1,130 -\nNonexpenditure transfers, net, anticipated and actual (253) - (431) -\nTemporarily not available pursuant to Public Law (134) - (12) -\nPermanently not available (50,335) (6,246) (32,938) (5,605)\nTotal Budgetary Resources 193,029 32,356 183,677 25,084\n\nStatus of Budgetary Resources:\nObligations Incurred -\n Direct 138,924 24,059 122,471 20,395\n Reimbursable 25,685 - 27,642 -\nUnobligated Balance -\n Apportioned 10,349 4,233 13,786 2,324\n Exempt from Apportionment 1,392 5 873 4\nUnobligated balance not available 16,679 4,059 18,905 2,361\nTotal Status of Budgetary Resources 193,029 32,356 183,677 25,084\n\nChange in Obligated Balances:\nObligated balance, net, brought forward October 1 29,604 23,298 25,277 20,694\nObligations incurred 164,609 24,059 150,113 20,395\nGross outlays (154,185) (17,174) (141,959) (16,818)\nRecoveries of prior year unpaid obligations, actual (3,721) (1,106) (3,934) (754)\nChange in uncollected payments from Federal Sources (498) 34 107 (220)\nObligated balance, net, end of period -\n Unpaid obligations 37,540 30,193 30,836 24,414\n Uncollected customer payments from Federal Sources (1,730) (1,082) (1,232) (1,116)\nObligated Balance, net, end of period 35,810 29,111 29,604 23,298\n\nNet Outlays:\nGross outlays 154,185 17,174 141,959 16,818\nOffsetting collections (22,648) (10,989) (23,948) (9,496)\nDistributed offsetting receipts (1,512) (576) (3,100) (474)\nNet Outlays $ 130,025 $ 5,609 $ 114,911 $ 6,848\n\n\n\n\n The accompanying notes are an integral part of these statements.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 89\n\x0c Notes to the Consolidated Financial Statements\n As of September 30, 2010 and 2009\n (In Millions)\n\n\nNOTE 1. SIGNIFICANT ACCOUNTING POLICIES\nOrganization\nThe Department of Agriculture (USDA) provides a wide variety of services in the United States and around the\nworld. USDA is organized into seven distinct mission areas and their agencies that execute these missions.\nListed below are the missions and the agencies within each mission including four Government corporations:\nFarm and Foreign Agricultural Services (FFAS)\n\xe2\x80\xa2 Farm Service Agency (FSA)\n \xe2\x88\x92 Commodity Credit Corporation (CCC)\n\xe2\x80\xa2 Foreign Agricultural Service (FAS)\n\xe2\x80\xa2 Risk Management Agency (RMA)\n \xe2\x88\x92 Federal Crop Insurance Corporation (FCIC)\nFood, Nutrition, and Consumer Services (FNCS)\n\xe2\x80\xa2 Food and Nutrition Service (FNS)\nFood Safety\n\xe2\x80\xa2 Food Safety and Inspection Service (FSIS)\nMarketing and Regulatory Programs (MRP)\n\xe2\x80\xa2 Agricultural Marketing Service (AMS)\n\xe2\x80\xa2 Animal and Plant Health Inspection Service (APHIS)\n\xe2\x80\xa2 Grain Inspection, Packers and Stockyards Administration (GIPSA)\nNatural Resources and Environment (NRE)\n\xe2\x80\xa2 Forest Service (FS)\n\xe2\x80\xa2 Natural Resources Conservation Service (NRCS)\nResearch, Education, and Economics (REE)\n\xe2\x80\xa2 Agricultural Research Service (ARS)\n\xe2\x80\xa2 National Institute of Food and Agriculture (NIFA)\n\xe2\x80\xa2 Economic Research Service (ERS)\n\xe2\x80\xa2 National Agricultural Statistics Service (NASS)\nRural Development\n\xe2\x80\xa2 Rural Development (RD)\n \xe2\x88\x92 Alternative Agricultural Research and Commercialization Corporation (AARC)\nEffective October 1, 2009, Section 7511(f) (2) of the Food, Conservation, and Energy Act of 2008 transferred all\nauthorities administered by the Cooperative State Research, Education, and Extension Service (CSREES) to the\nnewly established National Institute of Food and Agriculture (NIFA).\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 90\n\x0cConsolidation\nThe financial statements consolidate all the agencies\xe2\x80\x99 results. The effects of intradepartmental activity and\nbalances are eliminated, except for the Statement of Budgetary Resources that is presented on a combined basis.\nThe financial statements are prepared in accordance with generally accepted accounting principles for the Federal\nGovernment.\nReclassifications\nCertain reclassifications have been made to prior year amounts to conform to the current year presentation. The\nFY 2009 Statement of Net Cost and related note was reclassified to align with the strategic goals presented in the\nUSDA Strategic Plan for 2010 \xe2\x80\x93 2015.\nUse of Estimates\nThe preparation of financial statements requires management to make estimates and assumptions that affect the\namounts reported in the financial statements and accompanying notes. Actual results could differ from those\nestimates.\nRevenue and Other Financing Sources\nRevenue from exchange transactions is recognized when persuasive evidence of an arrangement exists, delivery has\noccurred or services have been rendered, sales price is fixed or determinable, and collection is reasonably assured.\nIn certain cases, the prices charged by the Department are set by law or regulation, which for program and other\nreasons may not represent full cost. Prices set for products and services offered through the Department\xe2\x80\x99s working\ncapital funds are intended to recover the full costs incurred by these activities. Revenue from non-exchange\ntransactions is recognized when a specifically identifiable, legally enforceable claim to resources arises, to the\nextent that collection is probable and the amount is reasonably estimable. Appropriations are recognized as a\nfinancing source when used. An imputed financing source is recognized for costs subsidized by other Government\nentities.\nInvestments\nThe Department is authorized to invest certain funds in excess of its immediate needs in Treasury securities.\nInvestments in non-marketable par value Treasury securities are classified as held to maturity and are carried at\ncost. Investments in market-based Treasury securities are classified as held to maturity and are carried at\namortized cost. The amortized cost of securities is based on the purchase price adjusted for amortization of\npremiums and accretion of discounts using the straight-line method over the term of the securities.\nAccounts Receivable\nAccounts receivable are reduced to net realizable value by an allowance for uncollectible accounts. The adequacy\nof the allowance is determined based on past experience and age of outstanding balances.\nDirect Loans and Loan Guarantees\nDirect loans obligated and loan guarantees committed after fiscal 1991 are reported based on the present value of\nthe net cash-flows estimated over the life of the loan or guarantee. The difference between the outstanding\nprincipal of the loans and the present value of their net cash inflows is recognized as a subsidy cost allowance; the\npresent value of estimated net cash outflows of the loan guarantees is recognized as a liability for loan guarantees.\nThe subsidy expense for direct or guaranteed loans disbursed during the year is the present value of estimated net\ncash outflows for those loans or guarantees. A subsidy expense also is recognized for modifications made during\nthe year to loans and guarantees outstanding and for reestimates made as of the end of the year to the subsidy\nallowances or loan guarantee liability for loans and guarantees outstanding.\nDirect loans obligated and loan guarantees committed before fiscal 1992 are valued using the present-value\nmethod. Under the present-value method, the outstanding principal of direct loans is reduced by an allowance\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 91\n\x0cequal to the difference between the outstanding principal and the present value of the expected net cash flows.\nThe liability for loan guarantees is the present value of expected net cash outflows due to the loan guarantees.\nInventories and Related Property\nInventories to be consumed in the production of goods for sale or in the provision of services for a fee are valued\non the basis of historical cost using a first-in, first-out method. Commodities are valued at the lower of cost or net\nrealizable value using a weighted average method.\nProperty, Plant and Equipment\nProperty, plant and equipment (PP&E) are stated at cost less accumulated depreciation. Depreciation is\ndetermined using the straight-line method over the estimated useful lives of the assets. Useful lives for PP&E are\ndisclosed in Note 9. Capitalization thresholds for personal property and real property are $25,000 and $100,000\nfor internal use software. There are no restrictions on the use or convertibility of PP&E.\nPension and Other Retirement Benefits\nPension and other retirement benefits (primarily retirement health care benefits) expense is recognized at the time\nthe employees\xe2\x80\x99 services are rendered. The expense is equal to the actuarial present value of benefits attributed by\nthe pension plan\xe2\x80\x99s benefit formula, less the amount contributed by the employees. An imputed cost is recognized\nfor the difference between the expense and contributions made by and for employees.\nOther Post-employment Benefits\nOther post-employment benefits expense for former or inactive (but not retired) employees is recognized when a\nfuture outflow or other sacrifice of resources is probable and measurable on the basis of events occurring on or\nbefore the reporting date. The liability for long-term other post-employment benefits is the present value of\nfuture payments.\nEarmarked Funds\nIn accordance with SFFAS 27, Identifying and Reporting Earmarked Funds, the Department has reported the\nearmarked funds for which it has program management responsibility when the following three criteria are met:\n(1) a statute committing the Federal Government to use specifically identified revenues and other financing\nsources only for designated activities, benefits or purposes; (2) explicit authority for the earmarked fund to retain\nrevenues and other financing sources not used in the current period for future use to finance the designated\nactivities, benefits or purposes; and (3) a requirement to account for and report on the receipt, use, and retention\nof the revenues and other financing sources that distinguishes the earmarked fund from the Government\xe2\x80\x99s general\nrevenues.\nStewardship PP&E\nSFFAS 29, Heritage Assets and Stewardship Land, reclassified all heritage assets and stewardship land\ninformation as basic except for condition information, which is classified as RSI. The reclassification as basic\ninformation was phased in per SFFAS 29. Heritage assets and stewardship land information that was previously\nreported in RSSI temporarily shifted to RSI until it moved to a note on the balance sheet as basic information.\nThe phase-in of disclosure requirements being reported as basic information provided that SFFAS 29 was fully\nimplemented for reporting periods beginning after September 30, 2008. See Note 10, Stewardship PP&E.\nContingencies\nContingent liabilities are recognized when a past event or exchange transaction has occurred, a future outflow or\nother sacrifice of resources is probable, and the future outflow or sacrifice of resources is measurable.\nAllocation Transfers\nThe Department is a party to allocation transfers with other federal agencies as both a transferring (parent) entity\nand/or a receiving (child) entity. Allocation transfers are legal delegations by one department of its authority to\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 92\n\x0cobligate budget authority and outlay funds to another department. A separate fund account (allocation account) is\ncreated in the U.S. Treasury as a subset of the parent fund account for tracking and reporting purposes. All\nallocation transfers of balances are credited to this account, and subsequent obligations and outlays incurred by the\nchild entity are charged to this allocation account as they execute the delegated activity on behalf of the parent\nentity.\nThe Department allocates funds, as the parent, to the Department of Transportation, Department of the Interior,\nDepartment of Defense, Department of Housing and Urban Development, U.S. Agency for International\nDevelopment and the Small Business Administration. The Department receives allocation transfers, as the child,\nfrom the Department of Labor, Department of Transportation, Department of the Interior, Economic\nDevelopment Administration, Appalachian Regional Commission and the Delta Regional Authority.\nInter-Entity Cost Implementation\nBeginning in FY 2009, SFFAS 30, Inter-Entity Cost Implementation became effective. This standard requires\nfull implementation of the inter-entity cost provision in SFFAS 4, Managerial Cost Accounting Standards and\nConcepts. Each entity\xe2\x80\x99s full cost should incorporate the full cost of goods and services that it receives from other\nentities. The entity providing the goods or services has the responsibility to provide the receiving entity with\ninformation on the full cost of such goods or services either through billing or other advice.\nRecognition of inter-entity costs that are not fully reimbursed is limited to material items that (1) are significant\nto the receiving entity, (2) form an integral or necessary part of the receiving entity\xe2\x80\x99s output, and (3) can be\nidentified or matched to the receiving entity with reasonable precision. Broad and general support services\nprovided by an entity to all or most other entities should not be recognized unless such services form a vital and\nintegral part of the operations or output of the receiving entity.\nFiduciary Activities\nBeginning in FY 2009, SFFAS 31, Accounting for Fiduciary Activities became effective. Fiduciary activities are\nthe collection or receipt, and the management, protection, accounting, investment and disposition by the Federal\nGovernment of cash or other assets in which non-Federal individuals or entities have an ownership interest that\nthe Federal Government must uphold. Fiduciary assets are not assets of the Federal Government and are not\nrecognized on the balance sheet. Prior period amounts presented in the basic financial statements and notes were\nnot restated. See Note 29, Fiduciary Activities.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 93\n\x0cNOTE 2. NON-ENTITY ASSETS\nNon-entity assets include proceeds from the sale of timber payable to Treasury, timber contract performance\nbonds, employer contributions and payroll taxes withheld for agencies serviced by the National Finance Center,\ninterest, fines and penalties.\n FY 2010 FY 2009\n Intragovernmental:\n Fund balance with Treasury $ 121 $ 152\n Accounts Receivable 25 24\n Subtotal Intragovernmental 146 176\n\n With the Public:\n Cash and other monetary assets - -\n Accounts receivable 89 97\n Subtotal With the Public 89 97\n\n Total non-entity assets 235 273\n\n Total entity assets 176,173 170,366\n\n Total Assets $ 176,408 $ 170,639\n\n\nNOTE 3. FUND BALANCE WITH TREASURY\nOther Fund Types include deposit and clearing accounts. Borrowing Authority not yet Converted to Fund\nBalance represents un-obligated and obligated amounts recorded at year-end that will be funded by future\nborrowings. Non-Budgetary Fund Balance with Treasury includes special fund receipt accounts; and clearing and\nsuspense account balances awaiting disposition or reclassification. Unprocessed Intragovernmental Payment and\nCollection (IPAC) transactions were not reported to Treasury at the end of FY 2010 and FY 2009 because the\nproper Treasury Account Symbol was unknown which reduced Fund Balance with Treasury by $48 million and\n$35 million, respectively.\n\n FY 2010 FY 2009\n Fund Balances:\n Trust Funds $ 472 $ 519\n Special Funds 15,230 16,977\n Revolving Funds 11,270 8,003\n General Funds 48,735 46,761\n Other Fund Types 98 74\n Total 75,805 72,334\n\n\n Status of Fund Balance with Treasury:\n Unobligated Balance:\n Available 15,979 16,987\n Unavailable 20,738 21,266\n Obligated Balance not yet Disbursed 64,797 52,748\n Borrowing Authority not yet Converted to Fund Balance (39,613) (32,803)\n Non-Budgetary Fund Balance with Treasury 13,904 14,136\n Total $ 75,805 $ 72,334\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 94\n\x0cNOTE 4. CASH AND OTHER MONETARY ASSETS\nIn FY 2010 and FY 2009, cash includes Federal crop insurance escrow amounts of $123 million and $154,\nrespectively. In FY 2010, cash includes certificates of deposit of $37 million. In FY 2009, cash includes price\nsupport transfers in transit of $93 million.\n FY 2010 FY 2009\n\n\n Cash $ 161 $ 248\n\n\n\n\nNOTE 5. INVESTMENTS\n FY 2010 Amortized Market\n Amortization (Premium) Interest Investments, Value\n Method Cost Discount Receivable Net Disclosure\n Intragovernmental:\n Non-marketable\n Par value $ - $ - $ - $ - $ -\n Market-based Straight Line 152 (1) 3 154 154\n Total $ 152 $ (1) $ 3 $ 154 $ 154\n\n\n With the Public:\n AARC $ 3 $ - $ - $ 3 $ 3\n Total $ 3 $ - $ - $ 3 $ 3\n\n\n FY 2009 Amortized Market\n Amortization (Premium) Interest Investments, Value\n Method Cost Discount Receivable Net Disclosure\n Intragovernmental:\n Non-marketable\n Par value $ - $ - $ - $ - $ -\n Market-based Straight Line 165 (1) 1 165 165\n Total $ 165 $ (1) $ 1 $ 165 $ 165\n\n\n With the Public:\n AARC $ 3 $ - $ - $ 3 $ 3\n Total $ 3 $ - $ - $ 3 $ 3\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 95\n\x0cNOTE 6. ACCOUNTS RECEIVABLE, NET\n FY 2010\n Accounts Allowance for Accounts\n Receivable, Uncollectible Receivable,\n Gross Accounts Net\n Intragovernmental $ 288 $ - $ 288\n With the Public 7,354 (34) 7,320\n Total $ 7,642 $ (34) $ 7,608\n\n FY 2009\n Accounts Allowance for Accounts\n Receivable, Uncollectible Receivable,\n Gross Accounts Net\n Intragovernmental $ 270 $ - $ 270\n With the Public 8,621 (25) 8,596\n Total $ 8,891 $ (25) $ 8,866\n\n\nNOTE 7. DIRECT LOANS AND GUARANTEES, NON-FEDERAL BORROWERS\nDirect Loans\nDirect loan obligations or loan guarantee commitments made pre-1992 and the resulting direct loans or loan\nguarantees are reported at net present value.\nDirect loan obligations or loan guarantee commitments made post-1991, and the Federal Credit Reform Act of\n1990 as amended governs the resulting direct loan or loan guarantees. The Act requires agencies to estimate the\ncost of direct loans and loan guarantees at present value for the budget. Additionally, the present value of the\nsubsidy costs (i.e. interest rate differentials, interest subsidies, delinquencies and defaults, fee offsets and other\ncash flows) associated with direct loans and loan guarantees are recognized as a cost in the year the loan or loan\nguarantee is disbursed. The net present value of loans or defaulted guaranteed loans receivable at any point in time\nis the amount of the gross loan or defaulted guaranteed loans receivable less the present value of the subsidy at\nthat time.\nThe net present value of Direct Loan and Loan Guarantees, Net is not necessarily representative of the proceeds\nthat might be expected if these loans were sold on the open market.\nDirect Loan and Loan Guarantees, Net at the end of FY 2010 was $89,405 million compared to $85,657 million\nat the end of FY 2009. Loans exempt from the Federal Credit Reform Act of 1990 represent $673 million of the\ntotal compared to $414 million in FY 2009. Table 1 illustrates the overall composition of the Department\xe2\x80\x99s credit\nprogram balance sheet portfolio by mission area and credit program for FY 2010 and FY 2009.\nDuring the fiscal year, the gross outstanding balance of the direct loans obligated post-1991 is adjusted by the\nvalue of the subsidy cost allowance held against those loans. Current year subsidy expense, modifications and\nreestimates all contribute to the change of the subsidy cost allowance throughout the year. The subsidy cost\nallowance moved from $5,284 million to $5,576 million during FY 2010, an increase of $292 million. Table 2\nshows the reconciliation of subsidy cost allowance balances from FY 2009 to FY 2010.\nTotal direct loan subsidy expense is a combination of subsidy expense for new direct loans disbursed in the current\nyear, modifications to existing loans, and interest rate and technical reestimates to existing loans. Total direct loan\nsubsidy expense in FY 2010 was $429 million compared to $977 million in FY 2009. Table 3 illustrates the\nbreakdown of total subsidy expense for FY 2010 and FY 2009 by program.\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 96\n\x0cDirect loan volume increased from $9,715 million in FY 2009 to $11,144 million in FY 2010. Volume\ndistribution between mission area and program is shown in Table 4.\nGuaranteed Loans\nGuaranteed loans are administered in coordination with conventional agricultural lenders for up to 95 percent of\nthe principal loan amount. Under the guaranteed loan programs, the lender is responsible for servicing the\nborrower\xe2\x80\x99s account for the life of the loan. The Department, however, is responsible for ensuring borrowers meet\ncertain qualifying criteria to be eligible and monitoring the lender\xe2\x80\x99s servicing activities. Borrowers interested in\nguaranteed loans must apply to a conventional lender, which then arranges for the guarantee with a Department\nagency. Estimated losses on loan and foreign credit guarantees are reported at net present value as Loan\nGuarantee Liability. Defaulted guaranteed loans are reported at net present value as Loans Receivable and\nRelated Foreclosed Property, Net.\nGuaranteed loans outstanding at the end of FY 2010 were $75,688 million in outstanding principal and $67,793\nmillion in outstanding principal guaranteed, compared to $57,367 and $51,527 million, respectively at the end of\nFY 2009. Table 5 shows the outstanding balances by credit program.\nDuring the fiscal year, the value of the guaranteed loans is adjusted by the value of the loan guarantee liability held\nagainst those loans. Current year subsidy expense, modification and reestimates all contribute to the change of the\nloan guarantee liability through the year. The loan guarantee liability is a combination of the liability for losses on\npre-1992 guarantees and post-1991 guarantees. Table 6 shows that total liability moved from $1,844 million to\n$2,857 million during FY 2010, an increase of $1,013 million. Table 7 shows the reconciliation of total loan\nguarantee liability.\nTotal guaranteed loan subsidy expense is a combination of subsidy expense for new guaranteed loans disbursed in\nthe current year, modifications to existing loans, and interest rate and technical reestimates to existing loans. Total\nguaranteed loan subsidy expense in FY 2010 was $702 million compared to $409 million in FY 2009. Table 8\nillustrates the breakdown of total subsidy expense for FY 2010 and FY 2009 by program.\nGuaranteed loan volume increased from $23,126 million in FY 2009 to $26,892 million in FY 2010. Volume\ndistribution between mission area and program is shown in Table 9.\nAdministrative Expenses\nConsistent with the Federal Credit Reform Act of 1990 as amended, subsidy cash flows exclude direct Federal\nadministrative expenses. Administrative expenses for FY 2010 and FY 2009 are shown in Table 10.\nSubsidy Rates\nSubsidy rates are used to compute each year\xe2\x80\x99s subsidy expenses. The subsidy rates disclosed in Tables 11 and 12\npertain only to the FY 2010 cohorts. These rates cannot be applied to the direct and guaranteed loans disbursed\nduring the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported in the\ncurrent year could result from disbursements of loans from both current year cohorts and prior-year cohorts. The\nsubsidy expense reported in the current year also includes reestimates.\nCredit Program Discussion and Descriptions\nThe Department offers direct and guaranteed loans through credit programs in the FFAS mission area through\nthe FSA and the CCC, and in the RD mission area.\nThe Farm and Foreign Agricultural Services Mission Area\nThe FFAS mission area helps keep America\xe2\x80\x99s farmers and ranchers in business as they face the uncertainties of\nweather and markets. FFAS delivers commodity, credit, conservation, disaster and emergency assistance programs\nthat help strengthen and stabilize the agricultural economy. FFAS contributes to the vitality of the farm sector\nwith programs that encourage the expansion of export markets for U.S. agriculture.\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 97\n\x0cFSA offers direct and guaranteed loans to farmers who are temporarily unable to obtain private, commercial credit\nand nonprofit entities that are engaged in the improvement of the nation\xe2\x80\x99s agricultural community. Often, FSA\nborrowers are beginning farmers who cannot qualify for conventional loans due to insufficient financial resources.\nAdditionally, the agency helps established farmers who have suffered financial setbacks from natural disasters, or\nhave limited resources to maintain profitable farming operations. FSA officials also provide borrowers with\nsupervision and credit counseling.\nFSA\xe2\x80\x99s mission is to provide supervised credit. FSA works with each borrower to identify specific strengths and\nweaknesses in farm production and management, and provides alternatives to address weaknesses. FSA is able to\nprovide certain loan servicing options to assist borrowers whose accounts are distressed or delinquent. These\noptions include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of easements, and\ndebt write-downs. The eventual goal of FSA\xe2\x80\x99s farm credit programs is to graduate its borrowers to commercial\ncredit.\nCCC\xe2\x80\x99s foreign programs provide economic stimulus to both the U.S. and foreign markets, while also giving\nhumanitarian assistance to the most-needy people throughout the world. CCC offers both credit guarantee and\ndirect credit programs for buyers of U.S. exports, suppliers, and sovereign countries in need of food assistance.\nCCC permits debtor nations to reschedule debt under the aegis of the Paris Club (The Club). The Club is an\ninternationally recognized organization under the leadership of the French Ministry of Economics and Finance.\nIts sole purpose is to assess, on a case-by-case basis, liquidity problems faced by economically disadvantaged\ncountries. The general premise of the Club\xe2\x80\x99s activities is to provide disadvantaged nations short-term liquidity\nrelief to enable them to re-establish their credit worthiness. The Departments of State and Treasury lead the U.S.\nDelegation and negotiations for all U.S. Agencies.\nCCC also provides loans for Farm and Sugar Storage Facilities (FSFL). FSFL provides low-interest financing for\nproducers to build or upgrade farm storage and handling facilities. The 2008 Farm Bill added hay and renewable\nbiomass as eligible FSFL commodities, extended the maximum loan term to 12 years and increased the maximum\nloan amount to $500,000.\n\nFarm and Foreign Agricultural Service List of Programs\n\n Farm Service Agency Commodity Credit Corporation\n Direct Farm Ownership General Sales Manager Guarantee Credit\n Direct Farm Operating Program\n Direct Emergency Loans Facility Program Guarantee\n Direct Indian Land Acquisition P.L. 480 Title 1 Program\n Direct Boll Weevil Eradication Direct Farm Storage Facility\n Direct Seed Loans to Producers\n Direct Sugar Storage Facilities\n Direct Conservation\n Guaranteed Farm Operating\n Subsidized/Unsubsidized\n Agricultural Resource Demonstration Fund\n Bureau of Reclamation Loan Fund\n Guaranteed Farm Ownership\n Unsubsidized\n Guaranteed Conservation\n American Recovery and Reinvestment\n Fund\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 98\n\x0cThe Rural Development Mission Area\nEach year, RD programs create or preserve tens of thousands of rural jobs and provide or improve the quality of\nrural housing. To leverage the impact of its programs, RD is working with State, local and Indian tribal\nGovernments, as well as private and not-for-profit organizations and user-owned cooperatives.\nThrough its rural housing loan and grant programs, RD provides affordable housing and essential community\nfacilities to rural communities. Rural housing programs help finance new or improved housing for moderate, low,\nand very low-income families each year. The programs also help rural communities finance, construct, enlarge or\nimprove fire stations, libraries, hospitals and medical clinics, industrial parks, and other community facilities.\nThe Rural Business Program goal is to promote a dynamic business environment in rural America. RD partners\nwith the private sector and community-based organizations to provide financial assistance and business planning.\nIt also provides technical assistance to rural businesses and cooperatives, conducts research into rural economic\nissues, and provides cooperative educational materials to the public.\nThe Rural Utilities Program helps to improve the quality of life in rural America through a variety of loan\nprograms for electric energy, telecommunications, and water and environmental projects. This program leverages\nscarce Federal funds with private capital for investing in rural infrastructure, technology and development of\nhuman resources.\nRD programs provide certain loan servicing options to borrowers whose accounts are distressed or delinquent.\nThese options include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of easements\nand debt write-downs. The choice of servicing options depends on the loan program and the individual borrower.\nRural Development List of Programs\n Rural Housing Program Rural Business Program Rural Utilities Program\n Single Family Housing Direct Loans Business and Industry Direct Loans Water and Environmental Direct Loans\n Single Family Housing Guaranteed Loans Business and Industry Guaranteed Water and Environmental Guaranteed Loans\n Self Help Housing Direct Loans Loans Electric Direct Loans\n Single Family Housing Credit Sales Intermediary Relending Program Direct Electric Guaranteed Loans\n Site Development Loans Loans Telecommunications Direct Loans\n Farm Labor Housing Direct Loans Rural Economic Development Direct Federal Financing Bank-Electric\n Multi-Family Housing Direct Loans Loans Federal Financing Bank-Telephone\n Multi-Family Housing Guaranteed Loans Biorefinery Guaranteed Loans Distance Learning and Telemedicine Direct\n Multi-Family Housing-Credit Sales Renewable Energy Guaranteed Loans Broadband Telecommunications Services\n Multi-Family Housing Relending Program Rural Microenterprise Direct Loans\n Multi-Family Housing Revitalization Program\n Community Facilities Direct Loans\n Community Facilities Guaranteed Loans\n\n\n\nEvents and Changes Having a Significant and Measurable Effect on Subsidy Rates, Subsidy Expense, and Subsidy\nReestimates\nThe Federal Credit Reform Act of 1990 as amended governs the proprietary and budgetary accounting treatment\nof direct and guaranteed loans. The long-term cost to the Government for direct loans or loan guarantees is\nreferred to as \xe2\x80\x9csubsidy cost.\xe2\x80\x9d Under the act, subsidy costs for loans obligated beginning in FY 1992 are recognized\nat the net present value of projected lifetime costs in the year the loan is disbursed. Subsidy costs are revalued\nannually. Components of subsidy include interest subsidies, defaults, fee offsets, and other cash flows.\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 99\n\x0cThe annual reestimate process updates the budget assumptions with actual portfolio performance, interest rates\nand updated estimates for future loan performance. The FY 2010 reestimate process resulted in an $52 million\nincrease in the post 1991 estimated cost of the direct loan portfolio and a $207 million increase in the post 1991\nestimated cost of the guaranteed loan portfolio.\nThe net upward reestimate for direct loans was mostly due to an upward reestimate for Housing less a downward\nreestimate for Farm:\nFor the direct loan programs under the Agricultural Credit Insurance Fund (ACIF), there was a large downward\ntechnical reestimate of $254 million, of which ownership and operating comprised 96% of the total. Cohorts 2009\nand 2010 accounted for 70% of the totals for those two programs. The largest change in direct operating was in\nthe 2009 cohort, and is due to approximately $70 million more in actual cash receipts in the first two years than\nwas reported/projected at the end of FY 2009. For direct ownership, the downward reestimate reflects the effect\nof revisions to the econometric predictions of default. The single largest contributing factor to default predictions\nfor direct ownership is the interest rate spread between the borrower interest rate and the Treasury interest rate.\nPreviously, this relationship did not take into account the effect of the very low borrower interest rate on down\npayment loans that was authorized in the 2008 Farm Bill. Therefore a change to the econometrics was necessary\nand was made during FY 2010. This change revised the default predictions to include the effect of the lower\nweighted average borrower interest rate.\nThe Housing programs had an overall upward reestimate of $315 million. The Single Family Housing program\naccounted for the largest portion of this reestimate. Due to the current decline of the housing market, combined\nwith the poor labor market, the forecasting method for projecting cash flows was revised. This revision shifted\nmore weight to current cash flows trends and less to historical trends when forecasting out years. Consequently,\nthe prepayments, recoveries, and recapture repayments (other inflows) curves were impacted. The effect of home\nvalues declining, along with the tightening of credit requirements, also resulted in fewer prepayments than\nforecasted. As borrowers were unable to obtain credit from commercial organizations, and others required\nadditional payment assistance, the costs associated with loans are anticipated to increase in comparison to previous\nyears. These assumptions were factored into the FY 2011 forecasts. The FY 2010 upward reestimate for the\nSingle Family Housing program was $270 million, while the loan cohort for the acquired properties had an\nupward reestimate of $48 million. This was due to recognizing the current impact of short sales and a model\nchange.\nThe net upward reestimate for loan guarantees was mostly due to an upward reestimate for Housing:\nThe Guaranteed Housing programs had an overall upward reestimate of $265 million. The model for the\nguaranteed programs was revised in FY 2010. Prepayment and default curves were added in order to model\nunpaid principal balance (UPB) projections more accurately. The model was also adjusted to include purchased\nunpaid principal balances separately. Finally, the model was modified to use actual cohort-specific UPB amounts,\nsubject to interest assistance, as an input. The changes impacted the current year reestimates.\nThese changes and the rise in unemployment rates were also reflective in the increase of actual default payments\nfor FY 2010. Due to increased default payments, the total default payments rate assumption increased from 3.94\npercent in FY 2009 to 4.14 percent in FY 2010. As a result of this payment rate assumption increase, an upward\nreestimate of $151 million occurred in the Guaranteed Single Family Housing program.\nChanges to the model also impacted Multi-Family Housing program\xe2\x80\x99s reestimate. The interest assistance\npercentages for historical periods were included for the reestimates. This program was also impacted by increased\ndefault assumptions. The combination of model changes and economic conditions resulted in an overall\nreestimate of $103 million for the Multi-Family Housing program.\nDuring FY 2010, the Guaranteed Single Family Housing portfolio increased due to the public\xe2\x80\x99s interest in the\nprogram. Growth in this program was achieved through several initiatives. Guaranteed loans were funded by\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 100\n\x0cARRA, regular appropriations, and from an amendment to the Housing Act of 1949. This amendment permitted\na negative subsidy rate while increasing the upfront fee to 3.5 percent.\nThe loan guaranteed liability also increased substantially due to the upward reestimates, increased fees, and\nsubsidy expense associated with the volume increase. The housing allowance increased $714 million in FY 2010.\nThe liability covers future costs of the program.\nBased on sensitivity analysis conducted for each cohort or segment of a loan portfolio, the difference between the\nbudgeted and actual interest for both borrower and Treasury remain the key components for the subsidy\nformulation and reestimate rates of many USDA direct programs. USDA uses the Governmentwide interest rate\nprojections provided by the OMB in order to do its calculations and analysis.\nThe Inter-agency Country Risk Assessment System (ICRAS) is a Federal interagency effort chaired by OMB\nunder the authority of the Federal Credit Reform Act of 1990 as amended. The system provides standardized risk\nassessment and budget assumptions for all direct credits and credit guarantees provided by the Government, to\nforeign borrowers. ICRAS identification for each country is still the basis for a given country\xe2\x80\x99s risk rating, but a\nset of program specific default and recovery rates by ICRAS grade has been established for each program.\nDomestic programs have always utilized program-specific default and recovery assumptions.\nIn accordance with the General Fund Receipt Account Guide, a liability for non-entity assets is accrued for\ndownward reestimate of subsidy. When more subsidy was collected than is necessary to fund future net cash\noutflows, the financing fund must transfer the excess subsidy, with interest, to a designated general fund receipt\naccount in the following year.\nLoan Modifications\nA modification is any Government action different from the baseline assumptions that affects the subsidy cost,\nsuch as a change in the terms of the loan contract. The cost of a modification is the difference between the\npresent value of the cash flows before and after the modification.\nMultiple-family housing direct loan program modifications related to the revitalization project, which began in\nFY 2006, continued throughout FY 2010. The revitalization project is used to rehabilitate ailing housing\ndevelopments. In this program, RD determines whether the development owner should be offered a financial\nrestructuring plan and what type of incentives, if any, should be offered to the owner to rehabilitate an ailing\nhousing development and to provide affordable rents for tenants.\nIn FY 2009, loan extension modifications were granted for three borrowers in the FFB electric program. The\nmaturity dates were extended up to 20 years on selected advances. Interest rates on the advances did not change.\nAt the time of the modification, the liquidating fund was paid off and the advances were moved to the financing\nfund. The post-modification cash flows were discounted at the first quarter net present value discount factor from\nthe FY 2009 President\xe2\x80\x99s Budget relative to the effective date of the loan extension modifications.\nThe Debt Reduction Fund is used to account for CCC\xe2\x80\x99s \xe2\x80\x9cmodified debt.\xe2\x80\x9d Debt is considered to be modified if the\noriginal debt has been reduced or the interest rate of the agreement changed. In contrast, when debt is\n"rescheduled," only the date of payment is changed. Rescheduled debt is carried in the original fund until paid.\nWith one exception, all outstanding CCC modified debt is carried in the Debt Reduction Fund and is governed\nby the Federal Credit Reform Act of 1990 as amended.\nForeclosed Property\nProperty is acquired largely through foreclosure and voluntary conveyance. Acquired properties associated with\nloans are reported at their market value at the time of acquisition. The projected future cash flows associated with\nacquired properties are used in determining the related allowance (at present value).\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 101\n\x0cAs of September 30, 2010 and 2009, foreclosed property consisted of 1,209 and 1,082 rural single-family housing\ndwellings, with an average holding period of 16 and 15 months, respectively. As of September 30, 2010 and 2009,\nFSA-Farm Loan Program properties consist primarily of 59 and 64 farms, respectively. The average holding\nperiod for these properties in inventory for FY 2010 and FY 2009 was 61 and 58 months, respectively. Certain\nproperties can be leased to eligible individuals.\nOther Information\nNon-performing loans are defined as receivables that are in arrears by 90 or more days, or are on rescheduling\nagreements until such time two consecutive payments have been made following the rescheduling. When RD,\nFSA and CCC calculate loan interest income, however, the recognition of revenue is deferred. Late interest is\naccrued on arrears.\nApproximately $19,000 million and $18,100 million of Rural Housing Service (RHS) unpaid loan principal as of\nSeptember 30, 2010, and 2009 were receiving interest credit, respectively. If those loans receiving interest credit\nhad accrued interest at the full-unreduced rate, interest income would have been approximately $966 million and\n$961 million higher for FY 2010 and FY 2009, respectively.\nAt the end of FY 2010 and FY 2009, the RD portfolio contained approximately 70,100 and 71,400 restructured\nloans with an outstanding unpaid principal balance of $2,500 million. At the end of FY 2010 and FY 2009, the\nfarm loan portfolio contained approximately 20,683 and 20,500 restructured loans with an outstanding unpaid\nprincipal balance of $1,189 million and $1,126 million, respectively. Direct credit and credit guarantee principal\nreceivables in the food aid and export programs under rescheduling agreements as of September 30, 2010 and\n2009, were $2,819 million and $2,887 million, respectively.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 102\n\x0cTable 1. Direct Loan and Loan Guarantees, Net\nFY 2010 Loans Present Value of Assets\nDirect Loans Receivable, Interest Foreclosed Value Related to\n Gross Receivable Property Allowance Loans\nObligated Pre-1992\n Farm $ 1,040 $ 70 $ 11 $ (108) $ 1,013\n Export - - - - -\n Food Aid 4,150 43 - (1,517) 2,676\n Housing 9,505 76 36 (4,462) 5,155\n Electric 3,994 7 - (1,457) 2,544\n Telecommunications 565 2 - (27) 540\n Water and Environmental 1,122 10 - (123) 1,009\n Business and Industry - - - - -\n Economic Development 30 - - (14) 16\nPre-1992 Total 20,406 208 47 (7,708) 12,953\n\nObligated Post-1991\n Farm 7,070 181 8 (344) 6,915\n Export - - - - -\n Food Aid 1,473 18 - (511) 980\n Housing 20,143 120 53 (2,671) 17,645\n Electric 36,723 32 - (751) 36,004\n Telecommunications 3,732 1 - 56 3,789\n Water and Environmental 9,891 95 - (740) 9,246\n Business and Industry 28 - - (3) 25\n Economic Development 551 1 - (168) 384\nPost-1991 Total 79,611 448 61 (5,132) 74,988\nTotal Direct Loan Program Receivables 100,017 656 108 (12,840) 87,941\nDefaulted Guarantee Loans\n Pre-1992\n Farm - - - - -\n Export 134 1 - (70) 65\n Food Aid - - - - -\n Housing - - - - -\n Electric - - - - -\n Telecommunications - - - - -\n Water and Environmental - - - - -\n Business and Industry 4 - - - 4\n Economic Development - - - - -\n Pre-1992 Total 138 1 - (70) 69\n\n Post-1991\n Farm 85 - - (83) 2\n Export 731 10 - (226) 515\n Food Aid - - - - -\n Housing 130 1 - (108) 23\n Electric - - - - -\n Telecommunications - - - - -\n Water and Environmental - - - - -\n Business and Industry 206 2 - (26) 182\n Economic Development - - - - -\n Post-1991 Total 1,152 13 - (443) 722\nTotal Defaulted Guarantee Loans 1,290 14 - (513) 791\nLoans Exempt from Credit Reform Act:\n Commodity Loans 671 2 - - 673\n Other Foreign Receivables - - - - -\nTotal Loans Exempt 671 2 - - 673\nTotal Direct Loan and Loan Guarantees, Net $ 89,405\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 103\n\x0cTable 1. Direct Loan and Loan Guarantees, Net (cont\xe2\x80\x99d)\nFY 2009 Loans Present Value of Assets\nDirect Loans Receivable, Interest Foreclosed Value Related to\n Gross Receivable Property Allowance Loans\nObligated Pre-1992\n Farm $ 1,219 $ 83 $ 14 $ (43) $ 1,273\n Export - - - - -\n Food Aid 4,470 48 - (1,408) 3,110\n Housing 9,984 83 33 (4,667) 5,433\n Electric 6,877 1 - (1,675) 5,203\n Telecommunications 706 2 - (44) 664\n Water and Environmental 1,224 12 - (142) 1,094\n Business and Industry - - - - -\n Economic Development 34 - - (16) 18\nPre-1992 Total 24,514 229 47 (7,995) 16,795\n\nObligated Post-1991\n Farm 6,057 169 5 (500) 5,731\n Export - - - - -\n Food Aid 1,615 20 - (518) 1,117\n Housing 18,301 103 46 (2,410) 16,040\n Electric 33,119 32 - (652) 32,499\n Telecommunications 3,409 2 - 43 3,454\n Water and Environmental 9,218 94 - (728) 8,584\n Business and Industry 30 (1) - (10) 19\n Economic Development 543 2 - (174) 371\nPost-1991 Total 72,292 421 51 (4,949) 67,815\nTotal Direct Loan Program Receivables 96,806 650 98 (12,944) 84,610\n\nDefaulted Guarantee Loans\n Pre-1992\n Farm 1 - - - 1\n Export 135 1 - (82) 54\n Food Aid - - - - -\n Housing - - - - -\n Electric - - - - -\n Telecommunications - - - - -\n Water and Environmental - - - - -\n Business and Industry 4 - - - 4\n Economic Development - - - - -\n Pre-1992 Total 140 1 - (82) 59\n\n Post-1991\n Farm 54 - - (52) 2\n Export 619 7 - (203) 423\n Food Aid - - - - -\n Housing 98 - - (65) 33\n Electric - - - - -\n Telecommunications - - - - -\n Water and Environmental - - - - -\n Business and Industry 127 3 - (14) 116\n Economic Development - - - - -\n Post-1991 Total 898 10 - (334) 574\nTotal Defaulted Guarantee Loans 1,038 11 - (416) 633\n\nLoans Exempt from Credit Reform Act:\n Commodity Loans 414 3 - (3) 414\n Other Foreign Receivables - - - - -\nTotal Loans Exempt 414 3 - (3) 414\n\nTotal Direct Loan and Loan Guarantees, Net $ 85,657\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 104\n\x0cTable 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct Loans\n FY 2010 FY 2009\n\n Beginning balance of the subsidy cost allowance $ 5,284 $ 4,661\n Add: Subsidy expense for direct loans disbursed during the year by component\n Interest rate differential costs (216) 73\n Default costs (net of recoveries) 234 253\n Fees and other collections (1) (1)\n Other subsidy costs 319 79\n Total subsidy expense prior to adjustments and reestimates 336 404\n\n Adjustments\n Loan modifications 41 9\n Fees received 49 39\n Loans written off (498) (335)\n Subsidy allowance amortization (56) (264)\n Other 368 206\n Total subsidy cost allowance before reestimates 5,524 4,720\n\n Add or subtract subsidy reestimates by component\n Interest rate reestimate 284 383\n Technical/default reestimate (232) 181\n Total reestimates 52 564\n Ending balance of the subsidy cost allowance $ 5,576 $ 5,284\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 105\n\x0cTable 3. Subsidy Expense for Direct Loans by Program and Component\n\n FY 2010\n Interest Fees and Other Subtotal Total Interest Rate Technical Total Total Subsidy\n Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates Reestimates Expense\n Direct Loan Programs\n Farm $ (16) $ 121 $ - $ - $ 105 $ - $ 41 $ (272) $ (231) $ (126)\n Export - - - - - 34 23 17 40 74\n Food Aid - - - - - - - - - -\n Housing (237) 74 (1) 326 162 7 42 262 304 473\n Electric (75) 24 - (2) (53) - 205 (202) 3 (50)\n Telecommunications (5) 11 - (1) 5 - (2) 1 (1) 4\n Water and Environmental 101 4 - (4) 101 - (18) (32) (50) 51\n Business and Industry - - - - - - (2) (5) (7) (7)\n Economic Development 16 - - - 16 - (5) (1) (6) 10\n Total Direct Loan Subsidy Expense $ (216) $ 234 $ (1) $ 319 $ 336 $ 41 $ 284 $ (232) $ 52 $ 429\n .\n\n FY 2009\n Interest Fees and Other Subtotal Total Interest Rate Technical Total Total Subsidy\n Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates Reestimates Expense\n Direct Loan Programs\n Farm $ 2 $ 160 $ - $ 1 $ 163 $ - $ 204 $ 424 $ 628 $ 791\n Export - - - - - - - - - -\n Food Aid - - - - - 19 (244) (172) (416) (397)\n Housing 24 75 (1) 85 183 6 (41) 129 88 277\n Electric (45) 13 - (4) (36) (16) 600 (324) 276 224\n Telecommunications (1) 4 - - 3 - 29 120 149 152\n Water and Environmental 75 1 - (3) 73 - (164) 19 (145) (72)\n Business and Industry - - - - - - (6) (5) (11) (11)\n Economic Development 18 - - - 18 - 5 (10) (5) 13\n Total Direct Loan Subsidy Expense $ 73 $ 253 $ (1) $ 79 $ 404 $ 9 $ 383 $ 181 $ 564 $ 977\n .\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 106\n\x0cTable 4. Total Amount of Direct Loans Disbursed (Post-1991)\n\n FY 2010 FY 2009\n Direct Loan Programs\n Farm $ 2,106 $ 1,823\n Export - -\n Food Aid - -\n Housing 2,622 1,971\n Electric 4,745 4,462\n Telecommunications 675 565\n Water and Environmental 949 842\n Business and Industry - -\n Economic Development 47 52\n Total Direct Loans Disbursed $ 11,144 $ 9,715\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 107\n\x0cTable 5. Guaranteed Loans Outstanding\n Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 Total\n Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding\n FY 2010\n Principal, Principal, Principal, Principal, Principal, Principal,\n Face Value Face Value Face Value Guaranteed Guaranteed Guaranteed\n Loan Guarantee Programs\n Farm $ 24 $ 11,771 $ 11,795 $ 21 $ 10,585 $ 10,606\n Export - 6,645 6,645 - 6,513 6,513\n Food Aid - - - - - -\n Housing 3 50,947 50,950 3 45,833 45,836\n Electric 148 202 350 147 202 349\n Telecommunications - - - - - -\n Water and Environmental - 64 64 - 55 55\n Business and Industry 5 5,879 5,884 1 4,433 4,434\n Economic Development - - - - - -\n Total Guarantees Disbursed $ 180 $ 75,508 $ 75,688 $ 172 $ 67,621 $ 67,793\n\n\n Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 Total\n Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding\n FY 2009\n Principal, Principal, Principal, Principal, Principal, Principal,\n Face Value Face Value Face Value Guaranteed Guaranteed Guaranteed\n Loan Guarantee Programs\n Farm $ 32 $ 10,675 $ 10,707 $ 29 $ 9,598 $ 9,627\n Export - 7,039 7,039 - 6,898 6,898\n Food Aid - - - - - -\n Housing 4 34,781 34,785 3 31,293 31,296\n Electric 161 210 371 161 210 371\n Telecommunications - - - - - -\n Water and Environmental - 69 69 - 60 60\n Business and Industry 13 4,383 4,396 8 3,267 3,275\n Economic Development - - - - - -\n Total Guarantees Disbursed $ 210 $ 57,157 $ 57,367 $ 201 $ 51,326 $ 51,527\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 108\n\x0cTable 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees)\n\n Liabilities for Liabilities for Loan\n Losses on Guarantees on\n FY 2010\n Pre-1992 Post-1991\n Guarantees Guarantees Total Liabilities for\n Present Value Present Value Loan Guarantees\n Loan Guarantee Programs\n Farm $ - $ 283 $ 283\n Export - 184 184\n Food Aid - - -\n Housing - 1,833 1,833\n Electric - - -\n Telecommunications - - -\n Water and Environmental - - -\n Business and Industry - 557 557\n Economic Development - - -\n Total Liability for Loan Guarantees $ - $ 2,857 $ 2,857\n\n\n\n Liabilities for Liabilities for Loan\n Losses on Guarantees on\n FY 2009\n Pre-1992 Post-1991\n Guarantees Guarantees Total Liabilities for\n Present Value Present Value Loan Guarantees\n Loan Guarantee Programs\n Farm $ - $ 170 $ 170\n Export - 221 221\n Food Aid - - -\n Housing - 1,102 1,102\n Electric - - -\n Telecommunications - - -\n Water and Environmental - (1) (1)\n Business and Industry 1 351 352\n Economic Development - - -\n Total Liability for Loan Guarantees $ 1 $ 1,843 $ 1,844\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 109\n\x0cTable 7. Schedule for Reconciling Loan Guarantee Liability\n\n FY 2010 FY 2009\nBeginning balance of the loan guarantee liability $ 1,842 $ 1,332\nAdd:Subsidy expense for guaranteed loans disbursed during the year by component\n Interest supplement costs 19 25\n Default costs (net of recoveries) 876 661\n Fees and other collections (402) (349)\n Other subsidy costs 2 -\nTotal of the above subsidy expense components 495 337\n\nAdjustments\n Loan guarantee modifications - -\n Fees received 458 344\n Interest supplements paid 132 5\n Claim payments to lenders (301) (144)\n Interest accumulation on the liability balance 64 48\n Other (40) (152)\nEnding balance of the subsidy cost allowance before reestimates 2,650 1,770\n\nAdd or subtract subsidy reestimates by component:\n Interest rate reestimate 42 (45)\n Technical/default reestimate 165 117\nTotal of the above reestimate components 207 72\nEnding balance of the loan guarantee liability $ 2,857 $ 1,842\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 110\n\x0cTable 8. Subsidy Expense for Loan Guarantees by Program and Component\n FY 2010\n Total\n Interest Fees and Other Total Interest Rate Technical Total Subsidy\n Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestimates Expense\n Farm $ 21 $ 72 $ (27) $ - $ 66 $ - $ (13) $ (60) $ (73) $ (7)\n Export - 11 (5) - 6 - (41) (22) (63) (57)\n Food Aid - - - - - - - - - -\n Housing (2) 569 (325) - 242 - 80 193 273 515\n Electric - - - - - - - - - -\n Telecommunications - - - - - - - - - -\n Water and Environmental - - - - - - - 1 1 1\n Business and Industry - 224 (45) 2 181 - 16 53 69 250\n Economic Development - - - - - - - - - -\n Total Loan Guarantee Subsidy Expense $ 19 $ 876 $ (402) $2 $ 495 $ - $ 42 $ 165 $ 207 $ 702\n\n FY 2009\n Total\n Interest Fees and Other Total Interest Rate Technical Total Subsidy\n Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestimates Expense\n Farm $ 17 $ 63 $ (25) $ - $ 55 $ - $ 5 $ (10) $ (5) $ 50\n Export - 76 (22) - 54 - (45) 9 (36) 18\n Food Aid - - - - - - - - - -\n Housing 8 445 (267) - 186 - (15) 72 57 243\n Electric - - - - - - - - - -\n Telecommunications - - - - - - - - - -\n Water and Environmental - - - - - - (1) 1 - -\n Business and Industry - 77 (35) - 42 - 11 45 56 98\n Economic Development - - - - - - - - - -\n Total Loan Guarantee Subsidy Expense $ 25 $ 661 $ (349) $ - $ 337 $ - $ (45) $ 117 $ 72 $ 409\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 111\n\x0cTable 9. Guaranteed Loans Disbursed\n FY 2010 FY 2009\n Principal, Principal, Principal, Principal,\n Face Value Guaranteed Face Value Guaranteed\n Disbursed Disbursed Disbursed Disbursed\nLoan Guarantee Programs\n Farm $ 3,117 $ 2,803 $ 2,594 $ 2,332\n Export 2,891 2,835 5,250 5,145\n Food Aid - - - -\n Housing 18,711 16,834 14,165 12,745\n Electric - - - -\n Telecommunications - - - -\n Water and Environmental 1 1 5 4\n Business and Industry 2,172 1,768 1,112 865\n Economic Development - - - -\nTotal Guaranteed Loans Disbursed $ 26,892 $ 24,241 $ 23,126 $ 21,091\n\n\n\n\nTable 10. Administrative Expenses\n FY 2010 FY 2009\n Direct Loan Programs $ 533 $ 594\n Guaranteed Loan Programs 485 375\n Total Administrative Expenses $ 1,018 $ 969\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 112\n\x0cTable 11. Subsidy Rates for Direct Loans (percentage)\n Fees and\n FY 2010 Interest Other\n Differential Defaults Collections Other Total\n Direct Loan Programs\n Farm Ownership (0.20) 4.82 - (0.54) 4.08\n Farm Operating (1.26) 5.74 - 0.25 4.73\n Farm Operating\xe2\x80\x94ARRA (1.26) 5.74 - 0.25 4.73\n Indian Tribe Land Acquisition (37.37) - - - (37.37)\n Emergency Disaster (6.92) 9.92 - 0.68 3.68\n Boll Weevil Eradication (0.88) - - (0.26) (1.14)\n Indian Highly Fractionated Land (8.18) 13.80 - 2.30 7.92\n Conservation\xe2\x80\x94Direct (6.60) 6.58 - 1.44 1.42\n Farm Storage Facility Loan Program (0.88) 0.02 (0.14) (0.01) (1.01)\n Sugar Storage Facility Loan Program (0.22) 0.83 - - 0.61\n Water and Waste Disposal Loans 7.76 0.05 - (0.27) 7.54\n Distance Learning and Telemedicine Loans - 3.18 - (0.40) 2.78\n Broadband Treasury Loans (0.02) 7.54 - (0.27) 7.25\n Electric Hardship Loans (31.86) 0.02 - 4.11 (27.73)\n FFB Electric Loans 0.07 0.12 - (0.66) (0.47)\n FFB Guaranteed Underwriting 0.87 0.96 (3.68) - (1.85)\n Telecommunication Hardship Loans (18.59) 0.04 - (0.04) (18.59)\n FFB Telecommunications Loans 3.94 0.09 - (4.68) (0.65)\n Treasury Telecommunication Loans - 0.03 - (0.46) (0.43)\n Community Facility Loans 0.46 0.88 - (0.03) 1.31\n Single-Family Housing Credit Sales (29.41) 2.64 - 11.14 (15.63)\n Multi-Family Housing Credit Sales (39.19) 18.89 - 58.70 38.40\n Section 502 Single-Family Housing (15.69) 2.69 - 16.63 3.63\n Section 504 Housing Repair 14.25 2.00 - (3.39) 12.86\n Section 515 Multi-Family Housing (38.61) 9.74 - 56.11 27.24\n Section 523 Self-Help Housing (2.21) - - - (2.21)\n Section 524 Site Development (5.18) 0.96 - - (4.22)\n Section 514 Farm Labor Housing 25.48 11.45 - (0.80) 36.13\n Multi-Family Housing Relending Program 27.89 - - - 27.89\n Multi-Family Housing Revitalization Seconds 49.03 23.83 - - 72.86\n Multi-Family Housing Revitalization Zero 28.81 9.53 - (0.18) 38.16\n Intermediary Relending Program 25.33 0.25 - (0.33) 25.25\n Rural Economic Development Loans 13.09 0.01 - (0.05) 13.05\n Rural Microenterprise Loans 8.27 3.05 - - 11.32\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 113\n\x0cTable 12. Subsidy Rates for Loan Guarantees (percentage)\n\n Fees and\n FY 2010 Interest Other\n Differential Defaults Collections Other Total\n Guaranteed Loan Programs\n CCC Export Loan Guarantees Program - 11.32 (1.40) - 9.92\n Farm Operating\xe2\x80\x94Unsubsidized - 3.24 (0.90) - 2.34\n Farm Operating\xe2\x80\x94Subsidized 11.86 2.20 - - 14.06\n Farm Ownership\xe2\x80\x94Unsubsidized - 1.26 (0.89) - 0.37\n Conservation\xe2\x80\x94Guaranteed - 1.26 (0.89) - 0.37\n Water and Waste Disposal Loans - - (0.82) - (0.82)\n Community Facility Loans - 4.07 (0.87) - 3.20\n Section 502 Single-Family Housing Purchase - 3.44 (2.00) - 1.44\n Section 502 Single-Family Housing Refinance - 2.22 (0.50) - 1.72\n Guaranteed 538 Multi-Family Housing - 1.15 - - 1.15\n Guaranteed 538 Tornado Supplemental 26.66 0.79 (8.18) - 19.27\n Business and Industry Loans Loan Guarantees - 8.42 (3.09) - 5.33\n North American Development Bank Loan Guarantees - 11.23 (3.27) - 7.96\n Renewable Energy Loan Guarantees - 15.62 (1.98) - 13.64\n Section 9003 Loan Guarantees - 39.13 (6.30) 2.65 35.48\n\n\n\nNOTE 8. INVENTORY AND RELATED PROPERTY, NET\nCommodity inventory is restricted for the purpose of alleviating distress caused by natural disasters, providing\nemergency food assistance in developing countries and providing price support and stabilization. Commodity loan\nforfeitures during the fiscal years ended September 30, 2010 and 2009 were $3 million and $47 million,\nrespectively.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 114\n\x0c FY 2010 FY 2009\nInventories $ 1 $ -\n\n Volume Volume\nCommodities:\n (in millions) Amount (in millions) Amount\n Corn (In Bushels):\n On hand at the beginning of the year - - - -\n Acquired during the year - - 2 11\n Disposed of during the year\n Sales - - - (2)\n Donations - - (2) (9)\n Other - - - -\n On hand at the end of the year - - - -\n\n Wheat (In Bushels):\n On hand at the beginning of the year - - - -\n Acquired during the year 36 208 32 217\n Disposed of during the year\n Sales (33) (187) (25) (176)\n Donations (3) (21) (7) (44)\n Other - - - 3\n On hand at the end of the year - - - -\n\n Nonfat Dry Milk (In Pounds):\n On hand at the beginning of the year 224 184 - -\n Acquired during the year - - 270 220\n Disposed of during the year\n Sales (1) (1) (1) (1)\n Donations (52) (59) (23) (27)\n Other (165) (118) (22) (8)\n On hand at the end of the year 6 6 224 184\n\n Other:\n On hand at the beginning of the year 21 15\n Acquired during the year 738 3,653\n Disposed of during the year\n Sales 141 (2,625)\n Donations (978) (1,031)\n Other 120 10\n On hand at the end of the year 42 22\nAllowance for losses (2) (1)\nTotal Commodities 46 205\nTotal Inventory and Related Property, Net $ 47 $ 205\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 115\n\x0cNOTE 9. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET\n FY 2010 Useful Net\n Life Accumulated Book\n Category (Years) Cost Depreciation Value\n\n Land and Land Rights $ 76 $ - $ 76\n Improvements to Land 10 - 50 721 (631) 90\n Construction-in-Progress 988 - 988\n Buildings, Improvements and Renovations 15 - 30 2,023 (1,322) 701\n Other Structures and Facilities 15 - 50 1,795 (1,390) 405\n Equipment 5 - 20 1,602 (1,247) 355\n Assets Under Capital Lease 3 - 20 74 (44) 30\n Leasehold Improvements 10 75 (48) 27\n Internal-Use Software 5-8 521 (338) 183\n Internal-Use Software in Development 170 (61) 109\n Other General Property, Plant and Equipment 5 - 15 - - -\n Total $ 8,045 $ (5,081) $ 2,964\n\n FY 2009 Useful Net\n Life Accumulated Book\n Category (Years) Cost Depreciation Value\n\n Land and Land Rights $ 76 $ - $ 76\n Improvements to Land 10 - 50 707 (611) 96\n Construction-in-Progress 983 - 983\n Buildings, Improvements and Renovations 15 - 30 1,991 (1,269) 722\n Other Structures and Facilities 15 - 50 1,776 (1,346) 430\n Equipment 5 - 20 1,661 (1,330) 331\n Assets Under Capital Lease 3 - 20 76 (42) 34\n Leasehold Improvements 10 66 (44) 22\n Internal-Use Software 5-8 579 (441) 138\n Internal-Use Software in Development 137 (1) 136\n Other General Property, Plant and Equipment 5 - 15 4 - 4\n Total $ 8,056 $ (5,084) $ 2,972\n\n\n\n\nNOTE 10. STEWARDSHIP PP&E\nStewardship PP&E consist of assets whose physical properties resemble those of General PP&E that are\ntraditionally capitalized in the financial statements. Due to the nature of these assets however, valuation would be\ndifficult and matching costs with specific periods would not be meaningful. Stewardship PP&E include heritage\nassets and stewardship land.\nHeritage Assets\nHeritage assets are unique and are generally expected to be preserved indefinitely. Heritage assets may be unique\nbecause they have historical or natural significance, are of cultural, educational or artistic importance, or have\nsignificant architectural characteristics. The assets are reported in terms of physical units rather than cost, fair\nvalue, or other monetary values. No amounts are shown on the balance sheet for heritage assets, except for multi-\nuse heritage assets in which the predominant use of the asset is in general government operations. The costs of\nacquisition, betterment, or reconstruction of multi-use heritage assets is capitalized as general PP&E and\ndepreciated. The costs of acquiring, constructing, improving, reconstructing, or renovating heritage assets, other\nthan multi-use is considered an expense in the period incurred when determining the net cost of operations.\nHeritage assets consist of collection type, such as objects gathered and maintained for exhibition, for example\nlibrary collections; and non-collection-type, such as memorials, monuments and buildings.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 116\n\x0cNational Forests, National Grasslands and Other Sites\xe2\x80\x94FS manages its heritage assets by site. Sites include National Forests,\nNational Grasslands, other Forest Service-managed sites, and non Forest Service- managed sites such as museums\nand university laboratories. The mission of the FS is to sustain the health, diversity, and productivity of the\nNation\xe2\x80\x99s forests and grasslands to meet the needs of present and future generations. The FS strives to achieve\nquality land management under the sustainable multiple-use management concept to deliver the necessary\nproducts and services that are essential for enhancing natural resource stewardship and to meet the diverse needs\nof people.\nHeritage Asset categories can include the following:\nPriority Heritage Assets (PHA): Heritage assets of distinct public value that are, or should be, actively\nmaintained, and meet one or more of the following criteria:\n\xe2\x80\xa2 The property is recognized through an official designation; such as a listing on the National Register of\n Historic Places, State register, etc.\n\xe2\x80\xa2 The property is recognized through prior investment in preservation, interpretation, and use. Any\n improvement to a PHA that meets real property designation criteria is considered real property.\n\xe2\x80\xa2 The property is recognized in an agency-approved management plan.\n\xe2\x80\xa2 The property exhibits critical deferred maintenance needs, and those needs have been documented.\nOther Heritage Assets: Assets that may have potential important historical or cultural significance, but lack\nformal listing and the demonstrated need for active maintenance.\nAssemblage Assets: Any grouping of artifacts or archival materials aggregated through donation, agency events,\nsite-specific or other field collection, other acquisition method, or combination therein. This would include\nmaterials donated to the FS; artifact or archival materials collected from a single site, FS administrative unit, or\nevent; or any combination thereof.\nResearch Centers\xe2\x80\x94ARS conducts research at centers nationwide to develop and transfer solutions to agricultural\nproblems of high national priority and provides information access and dissemination to ensure high-quality, safe\nfood and other agricultural products; assess the nutritional needs of Americans; sustain a competitive agricultural\neconomy; enhance the natural resource base and the environment; and provide economic opportunities for rural\ncitizens, communities, and society as a whole. NRCS owns one research center, the Tucson Plant Material Center\n(TPMC). The TPMC develops and evaluates native plants and addresses an array of resource issues in the areas\nof rangeland, mined land, urban lands, cropland riparian areas and desert lands. Research centers are considered\nheritage assets because one or more buildings or structures at these centers is on the National Register of Historic\nPlaces or have been identified as eligible for inclusion on the National Register.\nLibrary Collections\xe2\x80\x94The National Agricultural Library (NAL) as a whole is the largest collection of materials\ndevoted to agriculture in the world. The collections are in constant use to support the research activities of\nUSDA, departmental operations and to answer citizen inquiries. NAL houses and provides access to millions of\nbooks and periodicals. The overwhelming number of these items were published more than 25 years ago and\nalmost all of them are out-of-print and unavailable for purchase. By statute, NAL is the primary depository of\npublications and information concerning the research and other activities of USDA. Included in the collection are\ngovernment documents and many items that are unique and irreplaceable. NAL collects, preserves and provides\naccess to manuscripts, rare books, photographs, posters, oral histories and other unique materials. Collection\nconcentrations include the fields of agriculture, horticulture, entomology, poultry sciences, botany, natural history\nand agricultural history. Although focused primarily on American agriculture and related sciences, NAL holds\nnumerous items of international origin.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 117\n\x0cAcquisition and Withdrawal of Heritage Assets \xe2\x80\x94 The FS generally does not construct heritage assets, although in some\ncircumstances important site-structural components may be rehabilitated or reconstructed into viable historic\nproperties to provide forest visitors with use and interpretation. Heritage assets may be acquired through the\nprocurement process, but this rarely occurs. Normally, heritage assets are part of the land acquisition and\ninventory process. Withdrawal occurs through land exchange or natural disasters. Most additions occur through\ninventory activities where previously undocumented sites are discovered and added to the total. Although not\ntechnically additions\xe2\x80\x94they already existed on NFS lands\xe2\x80\x94they do represent an increased management\nresponsibility commensurate with the spirit of \xe2\x80\x9cadditions.\xe2\x80\x9d\nStewardship Land\nStewardship land is land and land rights not acquired for or in connection with items of general PP&E. Land is\ndefined as the solid surface of the earth, excluding natural resources. Stewardship land is valued for its\nenvironmental resources, recreational and scenic value, cultural and paleontological resources, vast open spaces,\nand resource commodities and revenue provided to the Federal government, states, and counties. These assets are\nreported in terms of physical units rather than cost, fair value, or other monetary values. No asset amount is\nshown on the balance sheet for stewardship land. The acquisition cost of stewardship land is considered an\nexpense in the period acquired when determining the net cost of operations. Stewardship land consists primarily\nof the national forests and grasslands owned by the FS and conservation easements purchased by NRCS.\nNational Forests\xe2\x80\x94National forests are formally established and permanently set aside and reserved for national\nforest purposes, including National Wilderness, National Primitive, National Wild and Scenic River, National\nRecreation, National Scenic Research, National Game Refuges and Wildlife Preserve, and National Monument\nareas.\nNational Grasslands\xe2\x80\x94National grasslands are designated by the Secretary of Agriculture and permanently held by\nthe USDA under Title III of the Bankhead-Jones Farm Tenant Act.\nResearch and Experimental Areas\xe2\x80\x94Research and experimental areas are reserved and dedicated by the Secretary of\nAgriculture for forest and range research experimentation. Areas reported are located outside the exterior\nboundaries of a national forest or national grassland.\nNational Preserves and Other Areas\xe2\x80\x94National preserves are units established to protect and preserve scientific, scenic,\ngeologic, watershed, fish, wildlife, historic, cultural and recreational values; and provide for multiple use and\nsustained yield of its renewable resources. Other areas include areas administered by the FS that are not included\nin one of the above groups.\nConservation Easements\xe2\x80\x94 NRCS\xe2\x80\x99s objective in administering the conservation easement programs are to provide\nlandowners financial and technical assistance in return for maintaining and improving high quality productive\nsoils, clean and abundant water, healthy plant and animals communities, clean air , an adequate energy supply,\nand working farm and ranch land. NRCS\xe2\x80\x99s objective in managing, monitoring and enforcing the terms and\nconditions of the easement deed is to ensure that the taxpayers investments are properly used in accordance with\nthe intent of the program, to ensure that the agency is a good steward of the land and to be a good neighbor to\nadjacent landowners. The uses for the land are identified under each program. Withdrawals from the program are\nnot allowed. Stewardship resources involve a substantial investment by the NRCS for long-term benefits for the\nAmerican public to help people help the land. The purchase of easements is to restore or enhance wetlands,\nprotect farmland, restore and protect grassland, restore and protect forest ecosystems, and to restore, protect,\nmaintain and enhance the functions of the floodplain.\nAcquisition and Withdrawal of Stewardship Lands\xe2\x80\x94 The Land and Water Conservation Fund (L&WCF) Land Acquisition\nProgram acquires land for the FS NFS. The program coordinates with a variety of partners, including State, local,\nand Tribal governments, and private landowners through statewide planning for development of a land-\nadjustment strategy.\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 118\n\x0cThe Land Acquisition Program preserves, develops, and maintains access to NFS lands and waters for the public\nand provides permanent access to public lands for recreation, commodity production, resource management,\npublic safety, and community economic viability.\nThe L&WCF statutory authority specifically defines the purpose to also include protecting the quality of\nscientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, archeological values, as\nwell as food and habitat for fish and wildlife, and managing the public lands for minerals, food, timber and fiber.\nFrom these several allowable uses of program funding, the program concentrates on protecting habitat for priority\nspecies identified in the national forest and grassland\xe2\x80\x99s Land Management Plans (LMPs) and enhancing\nrecreational opportunities for areas with high demand for recreation. The program focuses acquisitions on\ninholdings and areas adjacent to existing NFS lands.\n\n\n FY 2010 Additions Withdrawals FY 2009\n Heritage Assets\n National Forests 155 - - 155\n National Grasslands 20 - - 20\n Other Sites 155 20 - 135\n Research Centers 36 - (1) 37\n Library Collections 1 - - 1\n Total 367 20 (1) 348\n\n Stewardship Land\n National Forests 155 - - 155\n National Grasslands 20 - - 20\n Research and Experimental Areas 3 - - 3\n National Preserves and Other Areas 3 - - 3\n Conservation Easements 11,085 251 - 10,834\n Total 11,266 251 - 11,015\n\n\n\n\nNOTE 11. OTHER ASSETS\nIn FY 2010 and FY 2009, other assets include investments in trust for loan asset sales of $35 million and $35\nmillion, respectively.\n FY 2010 FY 2009\n Intragovernmental:\n Advances to Others $ 70 $ 4\n Other Assets 13 -\n Subtotal Intragovernmental 83 4\n\n With the Public:\n Advances to Others 142 148\n Other Assets 36 37\n Total Other Assets $ 261 $ 189\n\n\n\n\nNOTE 12. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES\nIn FY 2010 and FY 2009, other intragovernmental liabilities not covered by budgetary resources include accruals\nfor Federal Employee Compensation Act (FECA) of $169 million and $169 million, contract disputes claims\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 119\n\x0cpayable to Treasury\xe2\x80\x99s Judgment Fund of $19 million and $18 million, deposit funds and clearing accounts of $40\nmillion and $38 million, and custodial of $5 million and $4 million, respectively. In FY 2010, unemployment\ncompensation was $16 million.\nIn FY 2010 and FY 2009, other liabilities with the public not covered by budgetary resources include, Tobacco\nTransition Payment Program of $3,797 million and $4,705million, future funded indemnity costs of $724 million\nand $339 million, unfunded leave of $647 million and $629 million, Payments to States $409 million and $443\nmillion, contingent liabilities of $1,157 million and $20 million, and deposit funds and clearing accounts of $25\nmillion and $17 million, respectively. In FY 2010, custodial was $1 million. In FY 2009, rental payments under\nthe Conservation Reserve Program (CRP) were $1,735 million.\n FY 2010 FY 2009\n Intragovernmental:\n Other $ 249 $ 229\n Subtotal Intragovernmental 249 229\n With the Public:\n Accounts Payable 1 -\n Federal employee and veterans\' benefits 881 846\n Environmental and disposal liabilities 8 9\n Other 6,761 7,887\n Subtotal With the Public 7,651 8,742\n\n Total liabilities not covered by budgetary resources 7,900 8,971\n\n Total liabilities covered by budgetary resources 121,024 116,753\n\n Total Liabilities $ 128,924 $ 125,724\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 120\n\x0cNOTE 13. DEBT\n Beginning Ending\n FY 2010\n Balance Net Borrowing Balance\n Intragovernmental\n Debt to the Treasury $ 55,629 $ 970 $ 56,599\n Debt to the Federal Financing Bank 28,490 2,826 31,316\n Total Intragovernmental 84,119 3,796 87,915\n\n Agency Debt:\n Held by the Public - - -\n\n Total Debt $ 84,119 $ 3,796 $ 87,915\n\n Beginning Ending\n FY 2009\n Balance Net Borrowing Balance\n Intragovernmental\n Debt to the Treasury $ 51,201 $ 4,427 $ 55,628\n Debt to the Federal Financing Bank 26,376 2,115 28,491\n Total Intragovernmental 77,577 6,542 84,119\n\n Agency Debt:\n Held by the Public - - -\n\n Total Debt $ 77,577 $ 6,542 $ 84,119\n\n\n\n\nNOTE 14. ENVIRONMENTAL AND DISPOSAL LIABILITIES\nThe Department is subject to the Comprehensive Environmental Response, Compensation, and Liability Act,\nthe Clean Water Act, and the Resource Conservation and Recovery Act for cleanup of hazardous waste. In FY\n2010 and FY 2009, the CCC and FS estimate the liability for total cleanup costs for sites known to contain\nhazardous waste to be $8 million and $1 million, respectively, based on actual cleanup costs at similar sites. These\nestimates will change as new sites are discovered, remedy standards change and new technology is introduced.\nNOTE 15. OTHER LIABILITIES\nIn FY 2010, other liabilities with the public include estimated losses on crop insurance claims of $1,575 million,\nestimated underwriting gains on crop insurance of $2,334 million, crop insurance premium subsidy deficiency\nreserve of $724 million, Payments to States of $409 million, Brazilian Cotton Industry of $286 million, estimated\nprogram delivery cost to reinsurer of $11 million, loans paid in advance for multi-family housing of $11 million,\nundistributed credits for insured loans of $10 million, credit reform programs of $8 million, and purchaser road\ncredits of $1 million.\nIn FY 2009, other liabilities with the public include estimated losses on crop insurance claims of $2,865 million,\nestimated underwriting gains on crop insurance of $2,194 million, crop insurance premium subsidy deficiency\nreserve of $839 million, Payments to States of $443 million, estimated program delivery cost to reinsurer of $13\nmillion, loans paid in advance for multi-family housing of $9 million, undistributed credits for insured loans of $4\nmillion, credit reform programs of $7 million, and purchaser road credits of $1 million.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 121\n\x0cFY 2010 Non-Current Current Total\nIntragovernmental:\n Other Accrued Liabilities $ 19 $ 22 $ 41\n Employer Contributions and Payroll Taxes - 96 96\n Unfunded FECA Liability - 169 169\n Other Unfunded Employment Related Liability - 17 17\n Advances from Others - 69 69\n Liability for Deposit Funds, Clearing Accounts - 29 29\n Liability for Subsidy Related to Undisbursed Loans - 179 179\n Resources Payable to Treasury - 11,084 11,084\n Custodial Liability - 37 37\n Other Liabilities - 14 14\nSubtotal Intragovernmental 19 11,716 11,735\n\nWith the Public:\n Other Accrued Liabilities - 13,154 13,154\n Accrued Funded Payroll and Leave - 437 437\n Unfunded Leave - 647 647\n Advances from Others - 63 63\n Deferred Credits - 505 505\n Liability for Deposit Funds, Clearing Accounts - 112 112\n Contingent Liabilities - 1,257 1,257\n Capital Lease Liability 22 11 33\n Custodial Liability 3 1 4\n Other Liabilities 21 5,351 5,372\nSubtotal With the Public 46 21,538 21,584\n\nTotal Other Liabilities $ 65 $ 33,254 $ 33,319\n\n\nFY 2009 Non-Current Current Total\nIntragovernmental:\n Other Accrued Liabilities $ 18 $ 31 $ 49\n Employer Contributions and Payroll Taxes - 86 86\n Unfunded FECA Liability - 169 169\n Other Unfunded Employment Related Liability - 17 17\n Advances from Others - 37 37\n Liability for Deposit Funds, Clearing Accounts - 9 9\n Liability for Subsidy Related to Undisbursed Loans - 564 564\n Resources Payable to Treasury - 10,799 10,799\n Custodial Liability - 44 44\nSubtotal Intragovernmental 18 11,756 11,774\n\nWith the Public:\n Other Accrued Liabilities - 13,930 13,930\n Accrued Funded Payroll and Leave - 239 239\n Unfunded Leave - 629 629\n Advances from Others - 51 51\n Deferred Credits - 613 613\n Liability for Deposit Funds, Clearing Accounts - 127 127\n Contingent Liabilities 16 1,254 1,270\n Capital Lease Liability 25 15 40\n Custodial Liability - (1) (1)\n Other Liabilities 21 6,355 6,376\nSubtotal With the Public 62 23,212 23,274\n\nTotal Other Liabilities $ 80 $ 34,968 $ 35,048\n\n\n\n\nFinancial Statements, Notes, Supplemental and Other Accompanying Information\n 122\n\x0cNOTE 16. LEASES\nUSDA activities based in the Washington D.C. area are located in General Services Administration (GSA) leased\nfacilities, and USDA owned buildings. The USDA Headquarter complex (Whitten Building, and South\nBuilding) is a government owned facility, which is part of the GSA Federal Buildings Inventory. As the result of a\n1998 Agreement between GSA and USDA, a moratorium was placed on the rental billings for the Headquarters\ncomplex beginning in FY 1999.\nAt current market rate, the estimated yearly rental payment for the above mentioned space would be $63 million.\nThis agreement is still in effect and as a result, USDA activities located in the Headquarter complex are not billed\nfor rental costs.\nFY 2010\nCapital Leases:\n Summary of Assets Under Capital Leases\n Land and Building $ 73\n Machinery and Equipment -\n Accumulated Amortization (44)\n\n Future Payments Due:\n Machinery &\n Land & Buildings Other Totals\n Equipment\n Fiscal Year\n 2011 13 - - 13\n 2012 12 - - 12\n 2013 11 - - 11\n 2014 10 - - 10\n 2015 9 - - 9\n After 5 Years 35 - - 35\nTotal Future Lease Payments 90 - - 90\nLess: Imputed Interest 39 - - 39\nLess: Executory Costs 18 - - 18\nLess: Lease Renewal Options - - - -\nNet Capital Lease Liability 33 - $ - 33\n\nLease liabilities covered by budgetary resources 33\n\nOperating Leases:\n Future Payments Due:\n Machinery &\n Land & Buildings Other Totals\n Fiscal Year Equipment\n 2011 126 1 1 128\n 2012 111 - 1 112\n 2013 97 - 1 98\n 2014 89 - - 89\n 2015 80 - 1 81\n After 5 Years 468 - 2 470\n Total Future Lease Payments $ 971 $ 1 $ 6 $ 978\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 123\n\x0cFY 2009\nCapital Leases:\n Summary of Assets Under Capital Leases\n Land and Building $ 76\n Machinery and Equipment -\n Accumulated Amortization (42)\n\n Future Payments Due:\n Machinery &\n Land & Buildings Other Totals\n Equipment\n Fiscal Year\n 2010 14 - - 14\n 2011 13 - - 13\n 2012 12 - - 12\n 2013 11 - - 11\n 2014 11 - - 11\n After 5 Years 44 - - 44\nTotal Future Lease Payments 105 - - 105\nLess: Imputed Interest 44 - - 44\nLess: Executory Costs 21 - - 21\nLess: Lease Renewal Options - - - -\nNet Capital Lease Liability 40 - $ - 40\n\nLease liabilities covered by budgetary resources 40\n\nOperating Leases:\n Future Payments Due:\n Machinery &\n Land & Buildings Other Totals\n Fiscal Year Equipment\n 2010 117 1 - 118\n 2011 104 1 1 106\n 2012 93 - 1 94\n 2013 82 - 1 83\n 2014 76 - 1 77\n After 5 Years 462 - 2 464\n Total Future Lease Payments $ 934 $ 2 $ 6 $ 942\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 124\n\x0cNOTE 17. COMMITMENTS AND CONTINGENCIES\nThe Department is subject to various claims and contingencies related to lawsuits as well as commitments under\ncontractual and other commercial obligations.\nFor cases in which payment has been deemed probable and for which the amount of potential liability has been\nestimated, $1,257 million and $1,270 million has been accrued in the financial statements as of September 30,\n2010 and 2009, respectively.\nNo amounts have been accrued in the financial statements for claims where the amount is uncertain or where the\nprobability of judgment against USDA is remote. The Department\xe2\x80\x99s potential liability for claims where a\njudgment against the Department is reasonably possible ranges from $2,136 million to $3,663 million as of\nSeptember 30, 2010, compared to $547 million to $741 million as of September 30, 2009.\nCRP rental payments are estimated to be $1,800 million annually through FY 2016. Commitments to extend\nloan guarantees are estimated to be $4,802 million and $6,066 million in FY 2010 and FY 2009, respectively.\nNOTE 18. EARMARKED FUNDS\nEarmarked funds are financed by specifically identified revenues, often supplemented by other financing sources,\nwhich remain available over time. These specifically identified revenues and other financing sources are required\nby statute to be used for designated activities, benefits or purposes and must be accounted for separately from the\nGovernment\xe2\x80\x99s general revenues.\nFinancial information for all significant earmarked funds follows the descriptions of each fund\xe2\x80\x99s purpose shown\nbelow.\nRisk Management Agency\nFederal Crop Insurance Corporation Fund (FCIC)\nResources for the FCIC Fund includes funds collected from the public for insurance premiums and other\ninsurance related fees that are used with appropriations from Congress and unobligated balances from previous\nyears to fund the Federal Crop Insurance Program. Funds are available under 7 U.S.C. 1501-1519.\nAgricultural Marketing Service\nFunds for Strengthening Markets, Income, and Supply\nThis fund is used to purchase commodities for schools and elderly feeding programs, to provide goods and other\nnecessities in emergencies and disasters, and to purchase agricultural commodities to stabilize markets. The fund\nis permanently financed by statutory transfer of an amount equal to 30 percent of customs receipts collected\nduring each calendar year and is automatically appropriated for expanding outlets for perishable, non-price\nsupported commodities. An amount equal to 30 percent of receipts collected on fishery products is transferred to\nthe Food and Nutrition Service and is used to purchase commodities under section 6 of the National School\nLunch Act and other authorities specified in the child nutrition appropriation. Funds are available under section\n32 of the Act of August 24, 1935, as amended (7 U.S.C. 612c).\nExpenses and Refunds, Inspection and Grading of Farm Products\nThe commodity grading programs provide grading, examination, and certification services for a wide variety of\nfresh and processed food commodities using federally approved grade standards and purchase specifications. This\nfund is financed by the collection of fees charged to producers of various food commodities who request, on a\nvoluntary basis, inspection and grading of agricultural food commodities. This program is authorized by the\nAgricultural Marketing Act of 1946 (7 U.S.C. 1621-1627).\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 125\n\x0cAnimal Plant Health Inspection Service\nAgricultural Quarantine Inspection User Fee Account\nThis fund is used to record and report expenditures and revenue associated with operating Agricultural\nQuarantine Inspection (AQI) activities at ports of entry. The Farm Bill of 1990, as amended by the Federal\nAgriculture Improvement and Reform Act of 1996, gave the Animal and Plant Health Inspection Service\n(APHIS) the authority to charge user fees for AQI services, and to use the revenue to fund AQI activities. In\nMarch of 2003, a portion of the AQI program was transferred to the Department of Homeland Security (DHS);\nhowever, APHIS retained the authority to collect AQI revenue. APHIS transfers a portion of the revenue to\nDHS periodically throughout the year to fund their expenditures. The revenue in the fund is collected from\nairlines, air passengers, vessels, trucks, and railroad cars that are subject to AQI inspection at ports of entry. These\nuser fees are an inflow of revenue from the public that is used to fund AQI inspections that are required by\nAPHIS and DHS. The authority is codified in 21 U.S.C. 136(a).\nForest Service\nCooperative Work\nCooperative contributions are deposited for disbursement in compliance with the terms and provisions of the\nagreement between the cooperator and the Forest Service. Cooperators include timber purchasers, not-for-profit\norganizations, and local hunting and fishing clubs. The governing authorities are the Cooperative Funds Act of\nJune 30, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act.\nLand Acquisition\nEach fiscal year this fund receives a transfer of recreation user fees from the Department of the Interior\xe2\x80\x99s Land\nand Water Conservation Fund, to be used for the acquisition of land or waters, or interest therein, including\nadministrative expenses, to carry out the provisions of the Land and Water Conservation Fund Act of 1965, as\namended (16 U.S.C. 460l-4-11), pertaining to the preservation of watersheds. The Land Acquisition program is\nauthorized by the Interior and Related Agencies Appropriations Act of December 30, 1982 (96 Stat. 1983, Public\nLaw 97-394).\nPayments to States, National Forest Fund\nThe Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as \xe2\x80\x9cPayments to States\xe2\x80\x9d, requires with\na few exceptions, that 25.0 percent of all monies received from the national forests and deposited into the\nNational Forest Fund during a fiscal year from timber, grazing, special-use permits, power and mineral leases, and\nadmission and user fees be paid to the States in which the national forests are located, for public schools and\npublic roads in the county or counties in which the national forests are situated. The Secure Rural Schools and\nCommunity Self-Determination Act of 2000 (P.L. 106-393) as amended by \xc2\xa7 601 of The Emergency Economic\nStabilization Act of 2008, (H.R. 1424) (P.L. 110-343), provides stabilized education and road maintenance\nfunding through predictable payments to counties, job creation in those counties, and other opportunities\nassociated with the restoration, maintenance, and stewardship of Federal lands.\nTimber Salvage Sales\nThe Timber Salvage Sale Fund was established to facilitate the timely removal of timber damaged by fire, wind,\ninsects, disease, or other events. Amounts collected from the sale of salvaged timber are used on other qualifying\nsalvage sales to cover the cost of preparing and administering the sales. The Timber Salvage Sales program is\nauthorized by 16 USC 472(a).\nState, Private, and International Forestry Land and Water Conservation Fund\nThe Fiscal Year 2004 Department of the Interior and Related Agencies Appropriation Act (Public Law 108-108)\nauthorizes the Forest Service to receive a transfer of receipts from the Department of the Interior\xe2\x80\x99s Land and\nWater Conservation Fund to finance the existing Forest Legacy Program, funded previously by State and Private\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 126\n\x0cForestry general appropriation. To accommodate the new financing arrangement and at OMB\xe2\x80\x99s request, the U.S.\nDepartment of Treasury established a new special fund, \xe2\x80\x9cState, Private and International Forestry Land and\nWater Conservation Fund\xe2\x80\x9d. The program expenditures include grants and an occasional land purchase, but no\nreal property will be procured or constructed.\nRecreation Fee Demonstration Program\nThe Recreation Fee Demonstration Program fund receives deposits of recreation fees collected from projects that\nare part of the Recreation Fee Demonstration Program. These monies are retained and used for backlog repair\nand maintenance of recreation areas, sites or projects. These funds are also used for interpretation, signage, habitat\nor facility enhancement, resource preservation, annual operation, maintenance, and law enforcement related to\npublic use of recreation areas and sites. The Recreation Fee Demonstration Program is authorized by 16 U.S.C.\n4601-6(a).\nRestoration of Forest Lands and Improvements\nThe Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579(c)) states any monies received by the\nUnited States with respect to lands under the administration of the Forest Service (a) as a result of the forfeiture\nof a bond or deposit by a permittee or timber purchaser for failure to complete performance of improvement,\nprotection, or rehabilitation work required under the permit or timber sale contract or (b) as a result of a\njudgment, compromise, or settlement of any claim, involving present or potential damage to lands or\nimprovements, shall be deposited into the United States Treasury and are appropriated and made available until\nexpended to cover the cost to the United States of any improvement, protection, or rehabilitation work on lands\nunder the administration of the Forest Service rendered necessary by the action which led to the forfeiture,\njudgment, compromise, or settlement: Provided, that any portion of the monies received in excess of the amount\nexpended in performing the work necessitated by the action which led to their receipt shall be transferred to\nmiscellaneous receipts.\nAcquisition of Lands to Complete Land Exchanges\nAs authorized by 7 statutes, this program is funded annually by congressional appropriation action, with forest\nrevenues generated by the occupancy of public land or from the sale of natural resources other than minerals. All\nfunds appropriated that remain unobligated at the end of the fiscal year are returned to the receipts of the affected\nnational forests. These funds are used to purchase land and for related expenditures such as title search, escrow,\nrecording, and personnel costs when the purchase is considered necessary to minimize soil erosion and flood\ndamage. This appropriation is available for land acquisition within the exterior boundaries of the national forests.\nNational Institute of Food and Agriculture (NIFA)\nNative American Institutions Endowment Fund\nThe Native American Institutions Endowment Fund was authorized by Public Law 103-382, and provided an\ninitial installment to establish an endowment to benefit the 1994 land grant institutions. The public law states\nthat \xe2\x80\x9cThis program will enhance educational opportunities for Native Americans by building educational capacity\nat these institutions in the areas of student recruitment and retention, curricula development, faculty preparation,\ninstruction delivery systems, and scientific instrumentation for teaching.\xe2\x80\x9d While the principal (corpus) of the fund\ncannot be used, the interest that is earned on the endowment fund investments in Treasury instruments can be\nused for the purposes described above. After the close of a fiscal year, the income is distributed after making\nadjustments for the cost of administering the fund.\nFarm Service Agency\nAgricultural Disaster Assistance Transition \xe2\x80\x93 Recovery Act and Agricultural Disaster Relief Trust Fund\nThe Agricultural Disaster Assistance Transition \xe2\x80\x93 Recovery Act and the Agricultural Disaster Relief Trust Fund\nshall make amounts available for the purpose of expenditures to meet the obligations of the United States incurred\nunder section 901 or section 531 of the Federal Crop Insurance Act. The trust funds will be used to make\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 127\n\x0cpayments to farmers and ranchers under seven disaster assistance programs: (1) Supplemental Revenue Assistance\nPayments (SURE) Program, (2) Livestock Feed Program (LFP), (3) Livestock Indemnity Program (LIP), (4)\nTree Assistance Program (TAP), (5) Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish\nProgram (ELAP), (6) Recovery Act for the Supplemental Revenue Assistance Payments Program, and (7)\nRecovery Act for the Tree Assistance Program. The funds are appropriated an amount equivalent to 3.08 percent\nof the amounts received in the general fund of the Treasury of the United States during fiscal years 2008 through\n2011 attributable to the duties collected on articles entered, or withdrawn from warehouse, for consumption under\nthe Harmonized Tariff Schedule of the United States.\nOther\nFinancial information is summarized for all other earmarked funds with total assets less than $50 million listed\nbelow.\nAgricultural Marketing Service\nPerishable Agricultural Commodities Act\nWool Research, Development and Promotion Trust Fund\nAnimal Plant Health Inspection Service\nMiscellaneous Contributed Funds\nForest Service\nNational Forest Fund Receipts\nRoads and Trails for States, National Forest Fund\nReforestation Trust Fund\nPayments to Counties, National Grasslands\nTimber Sales Pipeline Restoration Fund\nOperation and Maintenance of Forest Service Quarters\nTimber Roads, Purchaser Elections\nExpenses, Brush Disposal\nRange Betterment Fund\nAcquisition of Lands for National Forests, Special Acts\nConstruction of Facilities or Land Acquisition\nRecreation Fees for Collection Costs\nPayment to Minnesota (Cook, Lake and Saint Louis Counties)\nLicensee Program\nTongass Timber Supply Fund\nResource Management Timber Receipts\nQuinault Special Management Area\nMNP Rental Fee Account\nMidewin National Tallgrass Prairie Restoration Fund\nLand Between the Lakes Management Fund\nAdministration of Rights-of-Way and Other Land Uses Fund\nValles Caldera Fund\nHardwood Technology Transfer and Applied Research Fund\nStewardship Contracting Product Sales\nMount Saint Helens Highway\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 128\n\x0cGifts, Donations and Bequests for Forest and Rangeland Research\nLand Between the Lakes Trust Fund\nGifts and Bequests\nNatural Resources Conservation Service\nMiscellaneous Contributed Funds\nAgricultural Research Service\nConcessions Fees and Volunteer Services\nGifts and Bequests\nMiscellaneous Contributed Funds\nRural Development\nAlternative Agricultural Research and Commercialization Revolving Fund\nForeign Agricultural Service\nMiscellaneous Contributed Funds\nGifts and Bequests\nGrain Inspection, Packers and Stockyards Administration\nInspection and Weighing Services\nFood Safety and Inspection Service\nExpenses and Refunds, Inspection of Farm Products\nOffice of the Inspector General\nInspector General Assets Forfeiture, Department of Justice\nInspector General Assets Forfeiture, Department of Treasury\nNational Agricultural Statistics Service\nMiscellaneous Contributed Funds\nEconomic Research Service\nMiscellaneous Contributed Funds\nDepartmental Offices\nGifts and Bequests\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 129\n\x0cEarmarked Funds\n\n\n RMA AMS AMS APHIS FS FS FS FS\n\n Expenses and\n Funds for Refunds, Agricultural\n Federal Crop Strengthening Inspection and Quarantine Payments to\n Insurance Markets, Income, Grading of Farm Inspection User States, National Timber Salvage\nBalance Sheet As of September 30, 2010 Corporation Fund and Supply Products Fee Account Cooperative Work Land Acquisition Forests Fund Sales\n 12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 12X5204\nFund Balance with Treasury $ 646 $ 141 $ 52 $ 91 $ 357 $ 35 $ 197 $ 49\nInvestments - - 20 - - - - -\nOther Assets 2,557 486 46 117 21 46 4 3\nTotal Assets 3,203 627 118 208 378 81 201 52\n\nOther Liabilities 5,246 4 65 74 52 1 392 5\nTotal Liabilities 5,246 4 65 74 52 1 392 5\n\nUnexpended Appropriations (677) 302 - - - - - -\nCumulative Results of Operations (1,366) 321 53 134 326 80 (191) 47\n\nTotal Liabilities and Net Position 3,203 627 118 208 378 81 201 52\n\n\n\n\nStatement of Net Cost For the Period\nEnded September 30, 2010\nGross program costs 4,171 854 195 192 111 54 38 27\nLess Earned Revenue 602 1 151 504 79 - 119 21\nNet Cost of Operations 3,569 853 44 (312) 32 54 (81) 6\n\n\n\n\nStatement of Changes in Net Position\nFor the period Ended September 30, 2010\nNet Position Beginning of Period (2,577) 677 54 129 359 71 (272) 54\nChanges in Accounting Principles (Note 24) (444) - - - - - - -\nBeginning Balance, as Adjusted (3,021) 677 54 129 359 71 (272) 54\n\nNon-Exchange Revenue 4,547 799 1 (307) - 63 - -\nOther Financing Sources - - 42 - (1) - - (1)\nNet Cost of Operations (3,569) (853) (44) 312 (32) (54) 81 (6)\n\nChange in net Position 978 (54) (1) 5 (33) 9 81 (7)\n\nNet Position End of Period $ (2,043) $ 623 $ 53 $ 134 $ 326 $ 80 $ (191) $ 47\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 130\n\x0cEarmarked Funds\n\n\n FS FS FS FS NIFA FSA FSA\n State, Private,\n and International Agricultural\n Forestry, Land Restoration of Acquisition of Native American Disaster\n and Water Recreation Fee Forest Lands Lands to Institutions Assistance Agricultural\n Conservation Demonstration and Complete Land Endowment Transition - Disaster Relief\nBalance Sheet As of September 30, 2010 Fund Program Improvements Exchanges Fund Recovery Act Trust Fund Other Total\n 12X5367 12X5268 12X5215 12X5216 12X5205 129/05591 12X5531\nFund Balance with Treasury $ 124 $ 98 $ 169 $ 38 $ 14 $ 287 $ 87 $ 319 $ 2,704\nInvestments - - - - 126 - - 9 155\nOther Assets 8 4 3 37 - 1 5 34 3,372\nTotal Assets 132 102 172 75 140 288 92 362 6,231\n\nOther Liabilities 49 5 1 - - 47 108 55 6,104\nTotal Liabilities 49 5 1 - - 47 108 55 6,104\n\nUnexpended Appropriations - - - - 69 - - 4 (302)\nCumulative Results of Operations 83 97 171 75 71 241 (16) 303 429\n\nTotal Liabilities and Net Position 132 102 172 75 140 288 92 362 6,231\n\n\n\n\nStatement of Net Cost For the Period\nEnded September 30, 2010\nGross program costs 73 96 37 6 3 624 1,459 220 8,160\nLess Earned Revenue - 65 33 6 6 - - 192 1,779\nNet Cost of Operations 73 31 4 - (3) 624 1,459 28 6,381\n\n\n\n\nStatement of Changes in Net Position\nFor the period Ended September 30, 2010\nNet Position Beginning of Period 80 128 175 75 125 - 1,531 305 914\nChanges in Accounting Principles (Note 24) - - - - - - - - (444)\nBeginning Balance, as Adjusted 80 128 175 75 125 - 1,531 305 470\n\nNon-Exchange Revenue 76 - - - 12 865 (88) 29 5,997\nOther Financing Sources - - - - - - - 1 41\nNet Cost of Operations (73) (31) (4) - 3 (624) (1,459) (28) (6,381)\n\nChange in net Position 3 (31) (4) - 15 241 (1,547) 2 (343)\n\nNet Position End of Period $ 83 $ 97 $ 171 $ 75 $ 140 $ 241 $ (16) $ 307 $ 127\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 131\n\x0cEarmarked Funds\n\n\n RMA AMS AMS APHIS FS FS FS FS\n\n Expenses and\n Funds for Refunds, Agricultural\n Federal Crop Strengthening Inspection and Quarantine Payments to\n Insurance Markets, Income, Grading of Farm Inspection User States, National Timber Salvage\nBalance Sheet As of September 30, 2009 Corporation Fund and Supply Products Fee Account Cooperative Work Land Acquisition Forests Fund Sales\n 12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 12X5204\nFund Balance with Treasury $ 1,218 $ 427 $ 61 $ 79 $ 388 $ 23 $ 150 $ 55\nInvestments - - 40 - - - - -\nOther Assets 2,981 253 17 127 22 49 3 4\nTotal Assets 4,199 680 118 206 410 72 153 59\n\nOther Liabilities 6,776 3 64 77 51 1 425 5\nTotal Liabilities 6,776 3 64 77 51 1 425 5\n\nUnexpended Appropriations 897 302 - - - - - -\nCumulative Results of Operations (3,474) 375 54 129 359 71 (272) 54\n\nTotal Liabilities and Net Position 4,199 680 118 206 410 72 153 59\n\n\n\n\nStatement of Net Cost For the Period\nEnded September 30, 2009\nGross program costs 10,060 1,017 183 230 126 59 400 36\nLess Earned Revenue 2,878 1 148 486 91 - 163 24\nNet Cost of Operations 7,182 1,016 35 (256) 35 59 237 12\n\n\n\n\nStatement of Changes in Net Position\nFor the period Ended September 30, 2009\nNet Position Beginning of Period (2,210) 680 53 220 263 80 (35) 66\n\nNon-Exchange Revenue 6,815 1,013 1 (347) 131 50 - -\nOther Financing Sources - - 35 - - - - -\nNet Cost of Operations (7,182) (1,016) (35) 256 (35) (59) (237) (12)\n\nChange in net Position (367) (3) 1 (91) 96 (9) (237) (12)\n\nNet Position End of Period $ (2,577) $ 677 $ 54 $ 129 $ 359 $ 71 $ (272) $ 54\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 132\n\x0cEarmarked Funds\n\n\n FS FS FS FS NIFA FSA\n State, Private,\n and International\n Forestry, Land Restoration of Acquisition of Native American\n and Water Recreation Fee Forest Lands Lands to Institutions Agricultural\n Conservation Demonstration and Complete Land Endowment Disaster Relief\nBalance Sheet As of September 30, 2009 Fund Program Improvements Exchanges Fund Trust Fund Other Total\n 12X5367 12X5268 12X5215 12X5216 12X5205 12X5531\nFund Balance with Treasury $ 106 $ 129 $ 150 $ 43 $ 20 $ 1,533 $ 314 $ 4,696\nInvestments - - - - 105 - 10 155\nOther Assets 6 4 26 33 - - 32 3,557\nTotal Assets 112 133 176 76 125 1,533 356 8,408\n\nOther Liabilities 32 5 1 1 - 2 51 7,494\nTotal Liabilities 32 5 1 1 - 2 51 7,494\n\nUnexpended Appropriations - - - - 60 - 4 1,263\nCumulative Results of Operations 80 128 175 75 65 1,531 301 (349)\n\nTotal Liabilities and Net Position 112 133 176 76 125 1,533 356 8,408\n\n\n\n\nStatement of Net Cost For the Period\nEnded September 30, 2009\nGross program costs 76 86 10 8 3 5 219 12,518\nLess Earned Revenue - 67 30 9 4 - 106 4,007\nNet Cost of Operations 76 19 (20) (1) (1) 5 113 8,511\n\n\n\n\nStatement of Changes in Net Position\nFor the period Ended September 30, 2009\nNet Position Beginning of Period 107 147 154 74 112 833 394 938\n\nNon-Exchange Revenue 49 - 1 - 12 703 33 8,461\nOther Financing Sources - - - - - - (9) 26\nNet Cost of Operations (76) (19) 20 1 1 (5) (113) (8,511)\n\nChange in net Position (27) (19) 21 1 13 698 (89) (24)\n\nNet Position End of Period $ 80 $ 128 $ 175 $ 75 $ 125 $ 1,531 $ 305 $ 914\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 133\n\x0cNOTE 19. SUBORGANIZATION PROGRAM COSTS/PROGRAM COSTS BY SEGMENT\n FY 2010 FSA CCC FAS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\n Assist Rural Communities to Create Prosperity so They Are\n Self-Sustaining, Repopulating, and Economically Thriving:\n Gross Costs $ 998 $ 4,253 $ 1,077 $ 5,342 $ 102 $ 144\n Less: Earned Revenue 240 200 21 174 44 3\n Net Costs 758 4,053 1,056 5,168 58 141\n\n Ensure Our National Forests and Private Working Lands Are\n Conserved, Restored, and Made More Resilient to Climate Change,\n While Enhancing Our Water Resources:\n Gross Costs 111 471 415 2,012 - -\n Less: Earned Revenue 27 22 - 1 - -\n Net Costs 84 449 415 2,011 - -\n\n Help America Promote Agricultural Production and\n Biotechnology Exports as America Works to Increase Food Security:\n Gross Costs - - 161 2,566 50 70\n Less: Earned Revenue - - 137 188 21 2\n Net Costs - - 24 2,378 29 68\n\n Ensure that All of America\'s Children Have Access\n to Safe, Nutritious, and Balanced Meals:\n Gross Costs - - - - - -\n Less: Earned Revenue - - - - - -\n Net Costs - - - - - -\n\n Total Gross Costs 1,109 4,724 1,653 9,920 152 214\n Less: Total Earned Revenue 267 222 158 363 65 5\n Net Cost of Operations $ 842 $ 4,502 $ 1,495 $ 9,557 $ 87 $ 209\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 134\n\x0cFY 2010 RMA FNS FSIS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 74 $ 4,201 $ - $ - $ - $ -\nLess: Earned Revenue - 603 - - - -\nNet Costs 74 3,598 - - - -\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - - - - -\nLess: Earned Revenue - - - - - -\nNet Costs - - - - - -\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - - - - -\nLess: Earned Revenue - - - - - -\nNet Costs - - - - - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - 1,129 94,460 382 936\nLess: Earned Revenue - - 2 49 2 157\nNet Costs - - 1,127 94,411 380 779\n\nTotal Gross Costs 74 4,201 1,129 94,460 382 936\nLess: Total Earned Revenue - 603 2 49 2 157\nNet Cost of Operations $ 74 $ 3,598 $ 1,127 $ 94,411 $ 380 $ 779\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 135\n\x0cFY 2010 AMS APHIS GIPSA\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 98 $ 465 $ 54 $ 146 $ 35 $ 68\nLess: Earned Revenue 2 92 6 82 1 49\nNet Costs 96 373 48 64 34 19\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - 35 93 - -\nLess: Earned Revenue - - 4 52 - -\nNet Costs - - 31 41 - -\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 21 56 - -\nLess: Earned Revenue - - 2 32 - -\nNet Costs - - 19 24 - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs 113 540 298 800 - -\nLess: Earned Revenue 1 107 33 450 - -\nNet Costs 112 433 265 350 - -\n\nTotal Gross Costs 211 1,005 408 1,095 35 68\nLess: Total Earned Revenue 3 199 45 616 1 49\nNet Cost of Operations $ 208 $ 806 $ 363 $ 479 $ 34 $ 19\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 136\n\x0cFY 2010 FS NRCS ARS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 241 $ 976 $ 45 $ 224 $ 87 $ 336\nLess: Earned Revenue 24 89 8 1 11 6\nNet Costs 217 887 37 223 76 330\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs 1,088 4,396 542 2,749 54 213\nLess: Earned Revenue 108 402 94 10 7 4\nNet Costs 980 3,994 448 2,739 47 209\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 1 4 40 155\nLess: Earned Revenue - - - - 5 3\nNet Costs - - 1 4 35 152\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - - - 130 506\nLess: Earned Revenue - - - - 17 9\nNet Costs - - - - 113 497\n\nTotal Gross Costs 1,329 5,372 588 2,977 311 1,210\nLess: Total Earned Revenue 132 491 102 11 40 22\nNet Cost of Operations $ 1,197 $ 4,881 $ 486 $ 2,966 $ 271 $ 1,188\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 137\n\x0cFY 2010 NIFA ERS NASS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 20 $ 650 $ 13 $ 20 $ 55 $ 141\nLess: Earned Revenue 16 - - - 23 11\nNet Costs 4 650 13 20 32 130\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs 5 151 5 7 - 1\nLess: Earned Revenue 4 - - - - -\nNet Costs 1 151 5 7 - 1\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs 4 134 8 13 - -\nLess: Earned Revenue 3 - - - - -\nNet Costs 1 134 8 13 - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs 6 192 10 15 3 8\nLess: Earned Revenue 6 - - - 1 1\nNet Costs - 192 10 15 2 7\n\nTotal Gross Costs 35 1,127 36 55 58 150\nLess: Total Earned Revenue 29 - - - 24 12\nNet Cost of Operations $ 6 $ 1,127 $ 36 $ 55 $ 34 $ 138\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 138\n\x0cFY 2010 RD DO Total\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 4,023 $ 3,144 $ 201 $ 365 $ 7,123 $ 20,475\nLess: Earned Revenue 496 3,224 328 (3) 1,220 4,531\nNet Costs 3,527 (80) (127) 368 5,903 15,944\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - 117 213 2,372 10,306\nLess: Earned Revenue - - 192 (2) 436 489\nNet Costs - - (75) 215 1,936 9,817\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 12 22 297 3,020\nLess: Earned Revenue - - 20 - 188 225\nNet Costs - - (8) 22 109 2,795\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - 156 286 2,227 97,743\nLess: Earned Revenue - - 256 (2) 318 771\nNet Costs - - (100) 288 1,909 96,972\n\nTotal Gross Costs 4,023 3,144 486 886 12,019 131,544\nLess: Total Earned Revenue 496 3,224 796 (7) 2,162 6,016\nNet Cost of Operations $ 3,527 $ (80) $ (310) $ 893 $ 9,857 $ 125,528\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 139\n\x0cFY 2010 Intradepartmental\n Eliminations Grand Total\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ (1,686) $ 25,912\nLess: Earned Revenue (450) 5,301\nNet Costs (1,236) 20,611\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs (874) 11,804\nLess: Earned Revenue (255) 670\nNet Costs (619) 11,134\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs (86) 3,231\nLess: Earned Revenue (38) 375\nNet Costs (48) 2,856\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs (1,286) 98,684\nLess: Earned Revenue (242) 847\nNet Costs (1,044) 97,837\n\nTotal Gross Costs (3,932) 139,631\nLess: Total Earned Revenue (985) 7,193\nNet Cost of Operations $ (2,947) $ 132,438\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 140\n\x0cFY 2009 FSA CCC FAS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 904 $ 1,974 $ 1,095 $ 11,757 $ 70 $ 193\nLess: Earned Revenue 219 223 2 2,361 87 -\nNet Costs 685 1,751 1,093 9,396 (17) 193\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs 103 226 399 1,825 - -\nLess: Earned Revenue 25 26 - 1 - -\nNet Costs 78 200 399 1,824 - -\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 136 1,612 34 94\nLess: Earned Revenue - - 192 112 43 -\nNet Costs - - (56) 1,500 (9) 94\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - - - - -\nLess: Earned Revenue - - - - - -\nNet Costs - - - - - -\n\nTotal Gross Costs 1,007 2,200 1,630 15,194 104 287\nLess: Total Earned Revenue 244 249 194 2,474 130 -\nNet Cost of Operations $ 763 $ 1,951 $ 1,436 $ 12,720 $ (26) $ 287\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 141\n\x0cFY 2009 RMA FNS FSIS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 67 $ 10,082 $ - $ - $ - $ -\nLess: Earned Revenue - 2,878 - - - -\nNet Costs 67 7,204 - - - -\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - - - - -\nLess: Earned Revenue - - - - - -\nNet Costs - - - - - -\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - - - - -\nLess: Earned Revenue - - - - - -\nNet Costs - - - - - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - 1,097 78,332 354 875\nLess: Earned Revenue - - 2 40 3 140\nNet Costs - - 1,095 78,292 351 735\n\nTotal Gross Costs 67 10,082 1,097 78,332 354 875\nLess: Total Earned Revenue - 2,878 2 40 3 140\nNet Cost of Operations $ 67 $ 7,204 $ 1,095 $ 78,292 $ 351 $ 735\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 142\n\x0cFY 2009 AMS APHIS GIPSA\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 79 $ 682 $ 49 $ 129 $ 32 $ 64\nLess: Earned Revenue 1 107 4 74 - 41\nNet Costs 78 575 45 55 32 23\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - 20 52 - -\nLess: Earned Revenue - - 1 30 - -\nNet Costs - - 19 22 - -\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 20 52 - -\nLess: Earned Revenue - - 2 30 - -\nNet Costs - - 18 22 - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs 61 528 298 788 - -\nLess: Earned Revenue 1 83 24 450 - -\nNet Costs 60 445 274 338 - -\n\nTotal Gross Costs 140 1,210 387 1,021 32 64\nLess: Total Earned Revenue 2 190 31 584 - 41\nNet Cost of Operations $ 138 $ 1,020 $ 356 $ 437 $ 32 $ 23\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 143\n\x0cFY 2009 FS NRCS ARS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 260 $ 1,111 $ 28 $ 126 $ 79 $ 315\nLess: Earned Revenue 27 115 5 - 25 12\nNet Costs 233 996 23 126 54 303\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs 991 4,227 520 2,296 49 193\nLess: Earned Revenue 101 436 90 10 16 9\nNet Costs 890 3,791 430 2,286 33 184\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 1 4 36 142\nLess: Earned Revenue - - - - 12 5\nNet Costs - - 1 4 24 137\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - - - 116 463\nLess: Earned Revenue - - - - 36 18\nNet Costs - - - - 80 445\n\nTotal Gross Costs 1,251 5,338 549 2,426 280 1,113\nLess: Total Earned Revenue 128 551 95 10 89 44\nNet Cost of Operations $ 1,123 $ 4,787 $ 454 $ 2,416 $ 191 $ 1,069\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 144\n\x0cFY 2009 NIFA ERS NASS\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 23 $ 686 $ 15 $ 20 $ 54 $ 132\nLess: Earned Revenue 28 - - - 20 3\nNet Costs (5) 686 15 20 34 129\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs 5 158 5 7 1 1\nLess: Earned Revenue 6 - - - - -\nNet Costs (1) 158 5 7 1 1\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs 4 135 10 14 - -\nLess: Earned Revenue 6 - - - - -\nNet Costs (2) 135 10 14 - -\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs 6 203 11 15 1 2\nLess: Earned Revenue 8 - - - - -\nNet Costs (2) 203 11 15 1 2\n\nTotal Gross Costs 38 1,182 41 56 56 135\nLess: Total Earned Revenue 48 - - - 20 3\nNet Cost of Operations $ (10) $ 1,182 $ 41 $ 56 $ 36 $ 132\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 145\n\x0cFY 2009 RD DO Total\n Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ 4,069 $ 2,707 $ 204 $ 340 $ 7,028 $ 30,318\nLess: Earned Revenue 471 3,320 320 3 1,209 9,137\nNet Costs 3,598 (613) (116) 337 5,819 21,181\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs - - 108 181 2,201 9,166\nLess: Earned Revenue - - 169 2 408 514\nNet Costs - - (61) 179 1,793 8,652\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs - - 12 20 253 2,073\nLess: Earned Revenue - - 18 - 273 147\nNet Costs - - (6) 20 (20) 1,926\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs - - 158 263 2,102 81,469\nLess: Earned Revenue - - 247 3 321 734\nNet Costs - - (89) 260 1,781 80,735\n\nTotal Gross Costs 4,069 2,707 482 804 11,584 123,026\nLess: Total Earned Revenue 471 3,320 754 8 2,211 10,532\nNet Cost of Operations $ 3,598 $ (613) $ (272) $ 796 $ 9,373 $ 112,494\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 146\n\x0cFY 2009 Intradepartmental\n Eliminations Grand Total\n\n\n\n\nAssist Rural Communities to Create Prosperity so They Are\nSelf-Sustaining, Repopulating, and Economically Thriving:\nGross Costs $ (1,310) $ 36,036\nLess: Earned Revenue (503) 9,843\nNet Costs (807) 26,193\n\nEnsure Our National Forests and Private Working Lands Are\nConserved, Restored, and Made More Resilient to Climate Change,\nWhile Enhancing Our Water Resources:\nGross Costs (838) 10,529\nLess: Earned Revenue (257) 665\nNet Costs (581) 9,864\n\nHelp America Promote Agricultural Production and\nBiotechnology Exports as America Works to Increase Food Security:\nGross Costs (436) 1,890\nLess: Earned Revenue (40) 380\nNet Costs (396) 1,510\n\nEnsure that All of America\'s Children Have Access\nto Safe, Nutritious, and Balanced Meals:\nGross Costs (1,275) 82,296\nLess: Earned Revenue (260) 795\nNet Costs (1,015) 81,501\n\nTotal Gross Costs (3,859) 130,751\nLess: Total Earned Revenue (1,060) 11,683\nNet Cost of Operations $ (2,799) $ 119,068\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 147\n\x0cNOTE 20. COST OF STEWARDSHIP PP&E\nThe acquisition cost of stewardship land in FY 2010 and FY 2009 was $449 million and $168 million,\nrespectively.\n\n\nNOTE 21. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED\n\n FY 2010\n Direct Reimbursable Total\n Apportionment by Fiscal Quarter $ 35,605 $ 2,075 $ 37,680\n Apportionment for Special Activities 126,313 23,609 149,922\n Exempt from Apportionment 1,065 1 1,066\n Total Obligations Incurred $ 162,983 $ 25,685 $ 188,668\n\n\n FY 2009\n Direct Reimbursable Total\n Apportionment by Fiscal Quarter $ 38,698 $ 2,310 $ 41,008\n Apportionment for Special Activities 103,216 25,331 128,547\n Exempt from Apportionment 952 1 953\n Total Obligations Incurred $ 142,866 $ 27,642 $ 170,508\n\n\n\n\nNOTE 22. AVAILABLE BORROWING AUTHORITY, END OF PERIOD\nAvailable borrowing authority at September 30, 2010 and 2009 was $39,385 million and $32,508 million,\nrespectively.\n\n\nNOTE 23. TERMS OF BORROWING AUTHORITY USED\nThe Secretary of Agriculture has the authority to make and issue notes to the Secretary of Treasury for the\npurpose of discharging obligations for RD\xe2\x80\x99s insurance funds and CCC\xe2\x80\x99s nonreimbursed realized losses and debt\nrelated to foreign assistance programs. The permanent indefinite borrowing authority includes both interest\nbearing and non\xe2\x80\x93interest bearing notes. These notes are drawn upon daily when disbursements exceed deposits.\nNotes payable under the permanent indefinite borrowing authority have a term of one year. On January 1 of each\nyear, USDA refinances its outstanding borrowings, including accrued interest, at the January borrowing rate.\nIn addition, USDA has permanent indefinite borrowing authority for the foreign assistance and export credit\nprograms to finance disbursements on post-credit reform, direct credit obligations, and credit guarantees. In\naccordance with the Federal Credit Reform Act of 1990 as amended, USDA borrows from Treasury on October\n1, for the entire fiscal year, based on annual estimates of the difference between the amount appropriated (subsidy)\nand the amount to be disbursed to the borrower. Repayment under this agreement may be, in whole or in part,\nprior to maturity by paying the principal amount of the borrowings plus accrued interest to the date of repayment.\nInterest is paid on these borrowings based on weighted average interest rates for the cohort, to which the\nborrowings are associated. Interest is earned on the daily balance of uninvested funds in the credit reform\nfinancing funds maintained at Treasury. The interest income is used to reduce interest expense on the underlying\nborrowings.\nUSDA has authority to borrow from the Federal Financing Bank (FFB) in the form of Certificates of Beneficial\nOwnership (CBO) or loans executed directly between the borrower and FFB with an unconditional USDA\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 148\n=\n\x0crepayment guarantee. CBO\xe2\x80\x99s outstanding with the FFB are generally secured by unpaid loan principal balances.\nCBO\xe2\x80\x99s outstanding are related to pre-credit reform loans and no longer are used for program financing.\nFFB\xe2\x80\x99s CBO\xe2\x80\x99s are repaid as they mature and are not related to any particular group of loans. Borrowings made to\nfinance loans directly between the borrower and FFB mature and are repaid as the related group of loans become\ndue. Interest rates on the related group of loans are equal to interest rates on FFB borrowings, except in those\nsituations where an FFB funded loan is restructured and the terms of the loan are modified.\nPrepayments can be made on Treasury borrowings without a penalty; however, they cannot be made on FFB\nCBO\xe2\x80\x99s, without a penalty.\nFunds may also be borrowed from private lending agencies and others. USDA reserves a sufficient amount of its\nborrowing authority to purchase, at any time, all notes and other obligations evidencing loans made by agencies\nand others. All bonds, notes, debentures, and similar obligations issued by the Department are subject to approval\nby the Secretary of the Treasury. Reservation of borrowing authority for these purposes has not been required for\nmany years.\nNOTE 24. ADJUSTMENT TO BEGINNING BALANCE OF BUDGETARY RESOURCES DUE TO CHANGE IN ACCOUNTING PRINCIPLE\nFCIC has permanent indefinite appropriations available to fund premium subsidy, delivery expenses, losses in\nexcess of premiums and research and development costs. Beginning in FY 2010, FCIC returned to the U.S.\nTreasury all unobligated balances in its indefinite appropriation in excess of the amount FCIC is authorized by\nstatue to retain which includes the capital stock, paid-in capital, and the contingency fund. Prior to this change,\nFCIC carried over its unobligated balances each year. As a result of this change, FCIC adjusted the unobligated\nbalance brought forward on the Statement of Budgetary Resources and the unexpended appropriations beginning\nbalance on the Statement of Changes in Net Position in FY 2010 for the amount that would have been returned\nhad the change been made in FY 2009. This reduced beginning balances by $444 million.\nNOTE 25. PERMANENT INDEFINITE APPROPRIATIONS\nUSDA has permanent indefinite appropriations available to fund 1) subsidy costs incurred under credit reform\nprograms, 2) certain costs of the crop insurance program, (3) certain commodity program costs and 4) certain costs\nassociated with FS programs.\nThe permanent indefinite appropriations for credit reform are mainly available to finance any disbursements\nincurred under the liquidating accounts. These appropriations become available pursuant to standing provisions of\nlaw without further action by Congress after transmittal of the Budget for the year involved. They are treated as\npermanent the first year they become available, as well as in succeeding years. However, they are not stated as\nspecific amounts but are determined by specified variable factors, such as cash needs for liquidating accounts, and\ninformation about the actual performance of a cohort or estimated changes in future cash flows of the cohort in\nthe program accounts.\nThe permanent indefinite appropriation for the crop insurance program is used to cover premium subsidy, delivery\nexpenses, losses in excess of premiums and research and delivery costs.\nThe permanent indefinite appropriation for commodity program costs is used to encourage the exportation of\nagricultural commodities and products, to encourage domestic consumption of agricultural products by diverting\nthem, and to reestablish farmers\xe2\x80\x99 purchasing power by making payments in connection with the normal\nproduction of any agricultural commodity for domestic consumption.\nThe permanent indefinite appropriation for FS programs is used to fund Recreation Fee Collection Costs, Brush\nDisposal, License programs, Smokey Bear and Woodsy Owl, Restoration of Forest Lands and Improvements,\nRoads and Trails for States, National Forest Fund, Timber Roads, Purchaser Elections, Timber Salvage Sales and\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 149\n=\n\x0cOperations, and Maintenance of Quarters. Each of these permanent indefinite appropriations is funded by\nreceipts made available by law, and is available until expended.\nNOTE 26. LEGAL ARRANGEMENTS AFFECTING USE OF UNOBLIGATED BALANCES\nUnobligated budget authority is the difference between the obligated balance and the total unexpended balance. It\nrepresents that portion of the unexpended balance unencumbered by recorded obligations. Appropriations are\nprovided on an annual, multi-year, and no-year basis. An appropriation expires on the last day of its period of\navailability and is no longer available for new obligations. Unobligated balances retain their fiscal-year identity in\nan expired account for an additional five fiscal years. The unobligated balance remains available to make legitimate\nobligation adjustments, i.e., to record previously unrecorded obligations and to make upward adjustments in\npreviously underestimated obligations for five years. At the end of the fifth year, the authority is canceled.\nThereafter, the authority is not available for any purpose.\nAny information about legal arrangements affecting the use of the unobligated balance of budget authority is\nspecifically stated by program and fiscal year in the appropriation language or in the alternative provisions section\nat the end of the appropriations act.\nNOTE 27. DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES GOVERNMENT\nThe differences between the FY 2009 Statement of Budgetary Resources and the FY 2009 actual numbers\npresented in the FY 2011 Budget of the United States Government (Budget) are summarized below.\nThe Budget excludes expired accounts that are no longer available for new obligations. Adjustments were made\nsubsequent to the Budget submission as follows:\nCCC zeroed out the balance in its Export Guarantee Program, Negative Subsidies account for FACTS II\nreporting and corrected an abnormal balance in its Export Credit Guarantee Program fund.\nThe Budget includes the Milk Market Orders Assessment Fund since employees of the Milk Market\nAdministrators participate in the Federal retirement system, though these funds are not available for use by the\nDepartment.\nOther items are mainly due to rounding.\nA comparison between the FY 2010 Statement of Budgetary Resources and the FY 2010 actual numbers\npresented in the FY 2012 Budget cannot be performed as the FY 2012 Budget is not yet available. The FY 2012\nBudget is expected to be published in February 2011 and will be available from the Government Printing Office.\n\n FY 2009\n Distributed\n Budgetary Obligations Offsetting\n Resources Incurred Receipts Net Outlays\n\n\n Combined Statement of Budgetary Resources $ 208,761 $ 170,508 $ 3,574 $ 125,333\n Reconciling items:\n Expired accounts (13,252) (2,634) - -\n CCC export guarantee program negative subsidies 27 27 - (91)\n Milk Market Orders Fund 54 54 - -\n Other (22) (2) - 6\n Budget of the United States Government $ 195,568 $ 167,953 $ 3,574 $ 125,248\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 150\n=\n\x0cNOTE 28. UNDELIVERED ORDERS AT THE END OF THE PERIOD\nBudgetary resources obligated for undelivered orders as of September 30, 2010 and 2009 was $54,799 million and\n$44,332 million, respectively.\nNOTE 29. INCIDENTAL CUSTODIAL COLLECTIONS\nCustodial collections represent National Forest Fund receipts from the sale of timber and other forest products,\nmiscellaneous general fund receipts such as collections on accounts receivable related to canceled year\nappropriations, civil monetary penalties and interest, and commercial fines and penalties. Custodial collection\nactivities are considered immaterial and incidental to the mission of the Department.\n\n\n Revenue Activity: FY 2010 FY 2009\n Sources of Collections:\n Miscellaneous $ 80 $ 86\n Total Cash Collections 80 86\n Accrual Adjustments (4) (4)\n Total Custodial Revenue 76 82\n Disposition of Collections:\n Transferred to Others:\n Treasury (69) (85)\n ( Increase )/Decrease in Amounts Yet to be Transferred (7) 3\n Net Custodial Activity $ - $ -\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 151\n=\n\x0cNOTE 30. FIDUCIARY ACTIVITIES\nRural Housing Insurance Fund (RHIF) was established by Public Law 89-117 pursuant to section 517 of title V\nof the Housing Act of 1949, which authorized RD to collect escrow payments on behalf of new and existing\nSingle Family Housing borrowers. Other fiduciary activities by RD include but are not limited to collections from\nborrowers, interest paid on escrow accounts, payments to insurance agencies and taxing authorities.\n\n\n\n Schedule of Fiduciary Activity\n For the Years Ended September 30, 2010 and 2009\n\n\n Rural Housing Rural Housing\n Insurance Insurance\n Fund Fund\n 2010 2009\n Fiduciary net assets, beginning of year $ 97 $ 95\n Fiduciary revenues - -\n Contributions 474 433\n Investment earnings - -\n Gain (Loss) on disposition of investments, net - -\n Administrative and other expenses - -\n Disbursements to and on behalf of beneficiaries (471) (431)\n Increases/(Decrease) in fiduciary net assets 3 2\n Fiduciary net assets, end of year $ 100 $ 97\n\n\n\n Fiduciary Net Assets\n As of September 30, 2010 and 2009\n\n\n Rural Housing Rural Housing\n Insurance Insurance\n Fund Fund\n 2010 2009\n Fiduciary Assets\n Cash and cash equivalents $ 2 $ 8\n Investments 98 $ 89\n Other assets - $ -\n Fiduciary Liabilities\n Less: Liabilities - $ -\n Total Fiduciary Net Assets $ 100 $ 97\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 152\n=\n\x0cNOTE 31. RECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS\nBudgetary and proprietary accounting information are inherently different because of the types of information and\nthe timing of their recognition. The reconciliation of budgetary resources obligated and the net cost of operations\nprovides a link between budgetary and proprietary accounting information. It serves not only to explain how\ninformation on net obligations relates to the net cost of operations but also to assure integrity between budgetary\nand proprietary accounting.\nNet obligations and the net cost of operations are different because (1) the net cost of operations may be financed\nby non-budgetary resources (e.g. imputed financing); (2) the budgetary and non-budgetary resources used may\nfinance activities which are not components of the net cost of operations; and (3) the net cost of operations may\ncontain components which do not use or generate resources in the current period.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 153\n=\n\x0c 2010 2009\n Resources Used to Finance Activities:\n Budgetary Resources Obligated -\n Obligations Incurred $ 188,668 $ 170,508\n Less: Spending authority from offsetting collections and recoveries 38,928 38,245\n Obligations net of offsetting collections and recoveries 149,740 132,263\n Less: Distributed Offsetting receipts 2,088 3,574\n Net Obligations 147,652 128,689\n\n Other Resources -\n Transfers in(out) without reimbursement (90) (562)\n Imputed financing from costs absorbed by others 1,090 1,033\n Other (1,173) (863)\n Net other resources used to finance activities (173) (392)\n\n Total resources used to finance activities 147,479 128,297\n\n Resources Used to Finance Items not Part of the Net Cost of Operations:\n Change in undelivered orders (10,505) (6,538)\n Resources that fund expenses recognized in prior periods (5,638) (4,692)\n Budgetary offsetting collections and receipts that do not affect net cost of operations -\n Credit program collections which increase liabilities for loan guarantees or allowances for subsidy 15,770 13,145\n Change in Unfilled Customer Orders 656 286\n Decrease in exchange revenue receivable from public 7,054 6,697\n Other 493 2,111\n Resources that finance the acquisition of assets (25,033) (26,597)\n Other resources or adjustments to net obligated resources that do not affect net cost of operations 2,055 359\n\n Total resources used to finance items not part of the net cost of operations (15,148) (15,229)\n\n Total resources used to finance the net cost of operations 132,331 113,068\n\n Components of the Net Cost of Operations that will not Require or Generate\n Resources in the Current Period:\n Components Requiring or Generating Resources in Future Periods -\n Increase in annual leave liability 21 12\n Increase in environmental and disposal liability - -\n Upward/Downward reestimates of credit subsidy expense 1,502 1,928\n Increase in exchange revenue receivable from the public - -\n Other (1,154) 997\n Total components of Net Cost of Operations that will require or generate\n \xc2\xa0\xc2\xa0resources in future periods 369 2,937\n\n Components not Requiring or Generating Resources -\n Depreciation and amortization 262 223\n Revaluation of assets or liabilities 27 27\n Other Components not Requiring or Generating Resources:\n Bad Debt Expense (531) (1,226)\n Cost of Goods Sold 835 2,803\n Other (855) 1,236\n Total components of Net Cost of Operations that will not require or generate resources (262) 3,063\n\n Total components of Net Cost of Operations that will not require or generate\n \xc2\xa0\xc2\xa0resources in the current period 107 6,000\n\n Net Cost of Operations $ 132,438 $ 119,068\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 154\n=\n\x0cNOTE 32. SUBSEQUENT EVENTS\nA settlement agreement was signed on October 19, 2010, including $680 million in monetary relief from the\nJudgment Fund, $80 million in debt relief, and programmatic relief in connection with a class action filed by\nNative American farmers and ranchers who allege discrimination under the Equal Credit Opportunity Act and\nTitle VI of the Civil Rights Act of 1964. After approximately a year of negotiations beginning in October 2009,\nparties presented the court with a settlement agreement on October 29, 2010. The court granted preliminary\napproval of the agreement on November 1, 2010, and will make a final determination after a fairness hearing.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 155\n=\n\x0cRequired Supplementary Stewardship Information\nSTEWARDSHIP INVESTMENTS (UNAUDITED)\n FY 2010 FY 2009 FY 2008 FY 2007 FY 2006\n Expense Expense Expense Expense Expense\n Non-Federal Physical Property:\n Food and Nutrition Service\n Supplemental Nutrition Assistance Program $ 41 $ 55 $ 32 $ 20 $ 21\n Special Supplemental Nutrition Program 17 15 10 15 12\n National Institute of Foods and Agriculture\n Extension 1890 Facilities Program 19 17 17 17 17\n Total Non-Federal Property $ 77 $ 87 $ 59 $ 52 $ 50\n\n Human Capital:\n National Institute of Foods and Agriculture\n Higher Education and Extension Programs $ 559 $ 547 $ 521 $ 524 $ 525\n Food and Nutrition Service\n Supplemental Nutrition Assistance Program 63 19 36 51 66\n Agricultural Research Service\n National Agricultural Library 24 23 22 22 22\n Risk Management Agency\n Risk Management Education 6 6 10 11 10\n Total Human Capital $ 652 $ 595 $ 589 $ 608 $ 623\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 156\n=\n\x0c FY 2010 FY 2009 FY 2008 FY 2007 FY 2006\n Expense Expense Expense Expense Expense\n Research and Development:\n\n Basic Research:\n Agricultural Research Service\n Human Nutrition $ 45 $ 43 $ 42 $ 42 $ 41\n Collaborative Research Program - 2 2 2 3\n Product Quality/Value Added 56 54 51 52 51\n Livestock Production 44 43 42 42 41\n Crop Production 119 102 99 99 97\n Food Safety 53 53 51 51 50\n Livestock Protection 45 42 40 41 43\n Crop Protection 103 100 96 97 96\n Environmental Stewardship 103 112 109 110 107\n National Institute of Foods and Agriculture\n Land-grant University System 283 256 245 245 245\n Forest Service 94 87 82 60 76\n Economic Research Service\n Economic and Social Science 8 8 8 7 7\n National Agricultural Statistics Service\n Statistical 3 3 3 3 2\n Total Basic Research $ 956 $ 905 $ 870 $ 851 $ 859\n\n Applied Research:\n Agricultural Research Service\n Human Nutrition $ 35 $ 34 $ 35 $ 35 $ 36\n Collaborative Research Program - 1 2 1 4\n Product Quality/Value Added 44 43 43 43 45\n Livestock Production 35 34 35 35 36\n Crop Production 96 82 82 83 84\n Food Safety 43 42 43 43 44\n Livestock Protection 36 33 34 34 38\n Crop Protection 82 81 80 81 83\n Environmental Stewardship 83 90 92 92 94\n National Institute of Foods and Agriculture\n Land-grant University System 461 435 418 416 416\n Forest Service 227 220 207 154 166\n Economic Research Service\n Economic and Social Science 74 71 69 68 68\n National Agricultural Statistics Service\n Statistical 4 5 5 3 3\n Total Applied Research $ 1,220 $ 1,171 $ 1,145 $ 1,088 $ 1,117\n\n Development:\n Agricultural Research Service\n Human Nutrition $ 9 $ 8 $ 8 $ 9 $ 8\n Product Quality/Value Added 11 11 11 11 11\n Livestock Production 9 9 8 8 8\n Crop Production 24 20 20 20 20\n Food Safety 11 11 10 11 11\n Livestock Protection 9 8 8 8 9\n Crop Protection 20 20 20 20 20\n Environmental Stewardship 21 23 22 22 22\n Forest Service 17 16 15 47 76\n Total Development $ 131 $ 126 $ 122 $ 156 $ 185\n\n\n Total Research and Development $ 2,307 $ 2,202 $ 2,137 $ 2,095 $ 2,161\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 157\n=\n\x0cNon-Federal Physical Property\nFood and Nutrition Service\nFNS\xe2\x80\x99 non-Federal physical property consists of computer systems and other equipment obtained by State and\nlocal governments for the purpose of administering the Supplemental Nutrition Assistance Program (SNAP).\nThe total SNAP expense for ADP Equipment & Systems has been reported as of the date of FNS\xe2\x80\x99 financial\nstatements. FNS\xe2\x80\x99 non-Federal physical property also consists of computer systems and other equipment obtained\nby the State and local governments for the purpose of administering the Special Supplemental Nutrition Program\nfor Women, Infants and Children.\nNational Institute of Food and Agriculture\nThe Extension 1890 facilities program supports the renovation of existing buildings and the construction of new\nfacilities that permit faculty, students, and communities to benefit fully from the partnership between USDA and\nthe historically African-American land-grant universities.\nHuman Capital\nNational Institute of Food and Agriculture\nThe Higher Education programs include graduate fellowship grants, competitive challenge grants, Secondary/2-\nyear Post Secondary grants, Hispanic serving institutions education grants, a multicultural scholars program, a\nNative American institutions program, a Native American institutions endowment fund, an Alaska Native\nServing and Native Hawaiian Serving institutions program, a resident instruction grant program for insular areas,\nand a capacity building program at the 1890 institutions. These programs enable universities to broaden their\ncurricula, increase faculty development and student research projects, and increase the number of new scholars\nrecruited in the food and agriculture sciences. NIFA also supports extension-related work at 1862 and 1890 land-\ngrant institutions throughout the country through formula and competitive programs. NIFA supported the\nOutreach and Assistance for Disadvantaged Farmers Program for the first time in fiscal 2003. The purpose is to\nenhance the ability of minority and small farmers and ranchers to operate farming or ranching enterprises\nindependently to assure adequate income and maintain reasonable lifestyles.\nFood and Nutrition Service\nFNS\xe2\x80\x99 human capital consists of employment and training (E&T) for the SNAP. The E&T program requires\nrecipients of SNAP benefits to participate in an employment and training program as a condition to SNAP\neligibility.\nOutcome data for the E&T program is only available through the third quarter. As of this period, FNS\xe2\x80\x99 E&T\nprogram has placed 812,318 work registrants subject to the 3 - month SNAP participant limit and 1,503,052\nwork registrants not subject to the limit in either job-search, job-training, job-workfare, education, or work\nexperience.\nAgricultural Research Service\nAs the Nation\xe2\x80\x99s primary source for agricultural information, the National Agricultural Library (NAL) has a\nmission to increase the availability and utilization of agricultural information for researchers, educators,\npolicymakers, consumers of agricultural products, and the public. The NAL is one of the world\xe2\x80\x99s largest and most\naccessible agricultural research libraries and plays a vital role in supporting research, education, and applied\nagriculture.\nThe NAL was created as the departmental library for USDA in 1862 and became a national library in 1962. One\nof four national libraries of the U.S. (with the Library of Congress, the National Library of Medicine, and the\nNational Library of Education), it is also the coordinator for a national network of State land-grant and USDA\nfield libraries. In its international role, the NAL serves as the U.S. center for the international agricultural\ninformation system, coordinating and sharing resources and enhancing global access to agricultural data. The\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 158\n=\n\x0cNAL collection of over 50 million items and its leadership role in information services and technology\napplications combine to make it the foremost agricultural library in the world.\nRisk Management Agency\nIn response to the Secretary\xe2\x80\x99s 1996 Risk Management Education (RME) initiative, and as mandated by the\nFederal Agricultural Improvement and Reform Act of 1996, the FCIC has formed new partnerships with the\nNIFA, the Commodity Futures Trading Commission, the USDA National Office of Outreach, Economic\nResearch Service, and private industry to leverage the federal government\xe2\x80\x99s funding of its RME program by using\nboth public and private organizations to help educate their members in agricultural risk management. The RME\neffort was launched in 1997 with a Risk Management Education Summit that raised awareness of the tools and\nresources needed by farmers and ranchers to manage their risks. RMA has built on this foundation since 2003 by\nexpanding State and Regional education partnerships; encouraging the development of information and\ntechnology decision aids; supporting the National Future Farmers of America (FFA) foundation with an annual\nessay contest; facilitating local training workshops; and supporting Cooperative Agreements with Educational and\noutreach organizations.\nDuring fiscal years 2010 and 2009, the RME worked toward the goals by funding risk management sessions,\nmost of which targeted producers directly. The number of producers reached through these sessions is\napproximately 47,100 and 20,000 in fiscal years 2010 and 2009, respectively. Additionally, some training sessions\nhelped those who work with producers, such as lenders, agricultural educators, and crop insurance agents, better\nunderstand those areas of risk management with which they may be unfamiliar. Total RME obligations incurred\nby the FCIC were approximately $6 million for fiscal years 2010 and 2009. The following table summarizes the\nRME initiatives since fiscal year 2006:\n\n (dollars in millions) 2010 2009 2008 2007 2006\n RME Obligations $ 6 6 10 11 10\n Number of producers attending RME sessions 47,100 20,000 49,000 49,000 48,000\n\n\nOne of the directives of the Agricultural Risk Protection Act (ARPA) is to step up the FCIC\xe2\x80\x99s educational and\noutreach efforts in certain areas of the country that have been historically underserved by the Federal crop\ninsurance program. The Secretary determined that fifteen states met the underserved criteria. These states are\nMaine, Massachusetts, Connecticut, Wyoming, New Jersey, New York, Delaware, Nevada, Pennsylvania,\nVermont, Maryland, Utah, Rhode Island, New Hampshire, and West Virginia.\nResearch and Development\nAgricultural Research Service\nThe ARS mission is to conduct research to develop and transfer solutions to agricultural problems of high\nnational priority and provide information access and dissemination to: ensure high quality, safe food, and other\nagricultural products; assess the nutritional needs of Americans; sustain a competitive agricultural economy;\nenhance the natural resource base and the environment; and provide economic opportunities for rural citizens,\ncommunities, and society as a whole. ARS\xe2\x80\x99 programs are aligned under the Department\xe2\x80\x99s priorities as follows:\nUSDA Strategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self-Sustaining, Repopulating,\nand Economically Thriving\nProduct Quality/Value Added \xe2\x80\x93 Many agricultural products are marketed as low value commodities and harvested\ncommodities often suffer losses due to spoilage or damage during shipping, storage, and handling. Healthy foods\nare often not convenient and/or are not widely accepted by many consumers. Biobased product represent small\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 159\n=\n\x0cfraction of the market for industrial products and their performance is often uncertain. Biofuels and some\nbiobased products are not yet economically competitive with petroleum-based products.\nARS has active research programs directed toward: 1) improving the efficiency and reducing the cost for the\nconversion of agricultural products into biobased products and biofuels; 2) developing new and improved products\nto help establish them in domestic and foreign markets; and 3) providing higher quality, healthy foods that satisfy\nconsumer needs in the United States and abroad. Note: Some of ARS\xe2\x80\x99 Livestock and Crop Production research is\ncarried out under this Strategic Goal and Strategic Goal 3.\nNational Agricultural Library \xe2\x80\x94 The Library, the world\xe2\x80\x99s largest library serving agriculture, delivered more than 91\nmillion direct customer service transactions in FY 2010, a reduction of about 2 per cent from the FY 2009 level\ndue to a change in the way Web usage metrics are recorded. NAL no longer reports total \xe2\x80\x9chits\xe2\x80\x9d but rather total\nunique visitors, page views, and searches.\nBuildings and Facilities \xe2\x80\x94ARS has over 100 laboratories, primarily located throughout the United States. ARS\xe2\x80\x99\nfacilities programs are designed to meet the needs of its scientists and support personnel to accomplish the\nagency\xe2\x80\x99s mission.\nUSDA Strategic Goal 2: Ensure Our National Forests and Private Working Lands Are Conserved, Restored, and Made More Resilient to\nClimate Change, While Enhancing Our Water Resources\nEnvironmental Stewardship \xe2\x80\x94 ARS\xe2\x80\x99 research programs in environmental stewardship support scientists at seventy\nlocations. Emphasis is given to developing technologies and systems that support profitable production and\nenhance the Nation\xe2\x80\x99s vast renewable natural resource base.\nARS is currently developing the scientific knowledge and technologies needed to meet the challenges and\nopportunities facing U.S. agriculture in managing water resource quality and quantity under different climatic\nregimes, production systems, and environmental conditions. ARS\xe2\x80\x99 air resources research is developing\nmeasurements, prediction, and control technologies for emissions of greenhouse gases, particulate matter,\nammonia, hydrogen sulfide, and volatile organic compounds affecting air quality and land-surface climate\ninteractions. The agency is a leader in developing measurement and modeling techniques for enhancing the health\nand productivity of soils, including developing predictive tools to assess the sustainability of alternative land\nmanagement practices. Finding mechanisms to aid agriculture in adapting to changes in atmospheric composition\nand climatic variations are also important components of ARS\xe2\x80\x99 research program.\nARS\xe2\x80\x99 grazing and range land research includes the conservation and restoration of the Nation\xe2\x80\x99s range land and\npasture ecosystems and agroecosystems through improved management of fire, invasive weeds, grazing, global\nchange, and other agents of ecological change. ARS is currently developing improved grass and forage legume\ngermplasm for livestock, conservation, bioenergy, and bioproduct systems as well as grazing-based livestock\nsystems that reduce risk and increase profitability. In addition, the agency is developing whole system\nmanagement strategies to reduce production costs and risks.\nUSDA Strategic Goal 3: Help America Agricultural Production and Biotechnology Exports As America Works to\nIncrease Food Security\nLivestock Production \xe2\x80\x94 ARS\xe2\x80\x99 livestock production program is directed toward: 1) safeguarding and utilizing animal\ngenetic resources, associated genetic and genomic databases, and bioinformatics tools; 2) developing a basic\nunderstanding of the physiology of livestock and poultry; and 3) developing information, tools, and technologies\nthat can be used to improve animal production systems. The research is heavily focused on the development and\napplication of genomics technologies to increase the efficiency and product quality of beef, dairy, swine, poultry,\naquaculture, and sheep systems.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 160\n=\n\x0cCurrent areas of emphasis include increasing efficiency of nutrient utilization; increasing animal well-being and\nreducing stress in production systems; increasing reproductive rates and breeding animal longevity; developing and\nevaluating non-traditional production systems (e.g., organic, natural); and evaluating and conserving animal\ngenetic resources.\nCrop Production \xe2\x80\x94 ARS\xe2\x80\x99 crop production program focuses on developing and improving ways to reduce crop losses\nwhile protecting and ensuring a safe and affordable food supply. The research program concentrates on effective\nproduction strategies that are environmentally friendly, safe to consumers, and compatible with sustainable and\nprofitable crop production systems. Research activities are directed at safeguarding and utilizing plant genetic\nresources and their associated genetic, genomic, and bioinformatics databases that facilitate selection of varieties\nand/or germplasm with significantly improved traits.\nCurrent research activities attempt to minimize the impacts of crop pests while maintaining healthy crops and safe\ncommodities that can be sold in markets throughout the world. ARS is conducting research to: discover and\nexploit naturally occurring and engineered genetic mechanisms for plant pest control; develop agronomic\ngermplasm with durable defensive traits, and transfer genetic resources for commercial use. ARS is also providing\ntaxonomic information on invasive species that strengthen prevention techniques, aid in detection/identification\nof invasives, and increase control through management tactics which restore habitats and biological diversity.\nUSDA Strategic Goal 4: Ensure that All of America\xe2\x80\x99s Children Have Access to Safe, Nutritious, and Balanced Meals\nFood Safety \xe2\x80\x94 Assuring that the United States has the highest levels of affordable, safe food requires that the food\nsystem be protected at each stage from production through processing and consumption from pathogens, toxins,\nand chemical contaminants that cause diseases in humans. The U.S. food supply is very diverse, extensive, easily\naccessible, and thus vulnerable to the introduction of biological and chemical contaminants through natural\nprocesses, intentional means, or by global commerce.\nARS\xe2\x80\x99 current food safety research is designed to yield science-based knowledge on the safe production, storage,\nprocessing, and handling of plant and animal products, and on the detection and control of toxin producing\nand/or pathogenic bacteria and fungi, parasites, chemical contaminants, and plant toxins. ARS\xe2\x80\x99 research activities\ninvolve a high degree of cooperation and collaboration both within the USDA-REE agencies as well as with\nUSDA\xe2\x80\x99s Food Safety and Inspection Service and the Animal and Plant Health Inspection Service, and with other\nentities, including the Food and Drug Administration, the Centers for Disease Control, the Department of\nHomeland Security, and the Environmental Protection Agency. ARS also collaborates in international research\nprograms to address and resolve global food safety issues.\nSpecific research efforts are directed toward developing new technologies that assist ARS stakeholders and\ncustomers, that is, regulatory agencies, industry, and commodity and consumer organizations in detecting,\nidentifying, and controlling foodborne diseases that affect human health.\nLivestock Protection \xe2\x80\x94 ARS\xe2\x80\x99 animal health program is directed at protecting and ensuring the safety of the Nation\xe2\x80\x99s\nagriculture and food supply through improved disease detection, prevention, control, and treatment. Basic and\napplied research approaches are used to solve animal health problems of high national priority. Emphasis is given\nto methods and procedures to control animal diseases.\nThe research program has ten strategic objectives: 1) establish ARS\xe2\x80\x99 laboratories into a fluid, highly effective\nresearch network to maximize use of core competencies and resources; 2) access specialized high containment\nfacilities to study zoonotic and emerging diseases; 3) develop an integrated animal and microbial genomics\nresearch program; 4) establish centers of excellence in animal immunology; 5) launch a biotherapeutic discovery\nprogram providing alternatives to animal drugs; 6) build a technology driven vaccine and diagnostic discovery\nresearch program; 7) develop core competencies in field epidemiology and predictive biology; 8) develop\ninternationally recognized expert collaborative research laboratories; 9) establish a best in class training center for\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 161\n=\n\x0cour Nation\xe2\x80\x99s veterinarians and scientists; and 10) develop a model technology transfer program to achieve the full\nimpact of ARS\xe2\x80\x99 research discoveries.\nARS\xe2\x80\x99 current animal research program includes eight core components: 1) biodefense research, 2) animal\ngenomics and immunology, 3) zoonotic diseases, 4) respiratory diseases, 5) reproductive and neonatal diseases, 6)\nenteric diseases, 7) parasitic diseases, and 8) transmissible spongiform encephalopathies.\nCrop Protection \xe2\x80\x93 ARS research on crop protection is directed toward epidemiological investigations to\nunderstand pest and disease transmission mechanisms, and to identify and apply new technologies that increase\nour understanding of virulence factors and host defense mechanisms.\nCurrently, ARS\xe2\x80\x99 research priorities include: 1) identification of genes that convey virulence traits in pathogens and\npests; 2) factors that modulate infectivity, gene functions, and mechanisms; 3) genetic profiles that provide\nspecified levels of disease and insect resistance under field conditions, and 4) mechanisms that facilitate the spread\nof pests and infectious diseases.\nARS is developing new knowledge and integrated pest management approaches to control pest and disease\noutbreaks as they occur. Its research will improve the knowledge and understanding of the ecology, physiology,\nepidemiology, and molecular biology of emerging diseases and pests. This knowledge will be incorporated into\npest risk assessments and management strategies to minimize chemical inputs and increase production. Strategies\nand approaches will be available to producers to control emerging crop diseases and pest outbreaks.\nHuman Nutrition \xe2\x80\x93 Maintenance of health throughout the lifespan along with prevention of obesity and chronic\ndiseases via food-based recommendations are the major emphasis of ARS\xe2\x80\x99 human nutrition research program.\nThese health-related goals are based on the knowledge that deficiency diseases are no longer the most important\npublic health concerns. Excessive consumption has become the primary nutrition problem in the American\npopulation. This is reflected by increased emphasis on prevention of obesity from basic science through\nintervention studies to assessments of large populations. ARS\xe2\x80\x99 research programs also actively study bioactive\ncomponents of foods that have no known requirement but have health promotion activities.\nFour specific areas of research are currently emphasized: 1) nutrition monitoring and the food supply, e.g., a\nnational diet survey and the food composition databank; 2) dietary guidance for health promotion and disease\nprevention, i.e., specific foods, nutrients, and dietary patterns that maintain health and prevent diseases; 3)\nprevention of obesity and related diseases, including research as to why so few of the population do not follow the\nDietary Guidelines for Americans; and 4) life stage nutrition and metabolism, in order to better define the role of\nnutrition in pregnancy, growth of children, and for healthier aging.\nNational Institute of Food and Agriculture\nNIFA participates in a nationwide land-grant university system of agriculture related research and program\nplanning and coordination between State institutions and USDA. It assists in maintaining cooperation among the\nState institutions, and between the State institutions and their Federal research partners. NIFA administers grants\nand formula payments to State institutions to supplement State and local funding for agriculture research.\nForest Service\nForest Service R&D has an integrated portfolio that supports achievement of the agency\xe2\x80\x99s strategic goals with an\nemphasis in seven strategic program areas:\nWildland Fire and Fuels - R&D provides managers the knowledge and tools to reduce the negative impacts of\nfire and enhance the beneficial effects of fire, as a natural process, and the human process of fire and fuels\nmanagement on society and the environment.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 162\n=\n\x0cResearch focuses on understanding and modeling fundamental fire processes; interactions of fire with ecosystems\nand the environment; social and economic aspects of fire; evaluation of integrated management strategies and\ndisturbance interactions at multiple scales; and application of fire research to address management problems.\nInvasive Species \xe2\x80\x94 R&D provides the scientific information, methods, and technology to reduce or eliminate the\nintroduction, spread, and impact of invasive species, and to restore or improve the functionality of ecosystems\naffected by invasives species.\nResearch focuses on plants, animals, fish, insects, diseases, invertebrates, and other species not native to an\necosystem whose introduction is likely to cause economic or environmental harm.\nWater, Air, and Soil \xe2\x80\x94 R&D enables the sustainable management of these essential resources by providing clear air\nand safe drinking water, by protecting lives and property from wildlife fire and smoke, and through adapting to\nclimate variability and change.\nThe program features ecosystem services with a high level of integration between water, air, and soil research,\nsuch as the effects of climate variability and change on water budgets or carbon sequestration from an ecosystem\nperspective.\nWildlife and Fish \xe2\x80\x94 R&D relies upon interdisciplinary research to inform policy initiatives affecting wildlife and\nfish habitat on private and public lands, and the recovery of threatened or endangered species.\nScientists investigate the complex interactions among species, ecosystem dynamics and processes, land use and\nmanagement, and any emerging broadscale threats, including global climate change, loss of open space, invasive\nspecies, and disease.\nResource Management and Use \xe2\x80\x94 R&D provides the scientific and technology base to sustainably manage and use\nforest resources and forest fiber-based products.\nResearch focuses on the plant sciences, soil sciences, social sciences, silviculture, productivity, forest and range\necology management, harvesting and operations, forest and biomass products and utilization, economics, urban\nforestry, and climate change.\nOutdoor Recreation \xe2\x80\x94 R&D promotes human and ecological sustainability by researching environmental\nmanagement, activities, and experiences that connect people with the natural world.\nResearch in Outdoor Recreation is interdisciplinary, focusing on nature-based recreation and the changing trends\nin American society; connections between recreation visitors, communities, and the environment; human benefits\nand consequences of recreation and nature contact; the effectiveness of recreation management and decision-\nmaking; and sustaining ecosystems affected by recreational use.\nInventory and Monitoring \xe2\x80\x94 R&D provides the resource data, analysis, and tools needed to monitor forest\necosystems at greatest risk from rapid change due to threats from fire, insects, disease, natural processes, or\nmanagement actions. From their research, scientists determine the status and trend of the health of the Nation\xe2\x80\x99s\nforests and grasslands, and the potential impact from climate change.\nTheir research integrates the development and use of science, technology, and remotely sensed data to better\nunderstand the incidences of forest fragmentation over time from changes in land use or from insects, disease, fire,\nand extreme weather events.\nA representative summary of FY 2010 accomplishments include the following:\n\xe2\x80\xa2 38 new interagency agreements and contracts\n\xe2\x80\xa2 12 interagency agreements and contracts continued\n\xe2\x80\xa2 1,790 articles published in journals\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 163\n=\n\x0c\xe2\x80\xa2 1,481 articles published in all other publications\n\xe2\x80\xa2 2 patents granted\nEconomic Research Service\nERS provides economic and other social science research and analysis for public and private decisions on\nagriculture, food, natural resources, and rural America. Research results and economic indicators on these\nimportant issues are fully disseminated through published and electronic reports and articles; special staff analyses,\nbriefings, presentations, and papers; databases; and individual contacts. ERS\xe2\x80\x99 objective information and analysis\nhelps public and private decision makers attain the goals that promote agricultural competitiveness, food safety\nand security, a well-nourished population, environmental quality, and a sustainable rural economy.\nNational Agricultural Statistics Service\nStatistical research and service is conducted to improve the statistical methods and related technologies used in\ndeveloping U.S. agricultural statistics. The highest priority of the research agenda is to aid the NASS estimation\nprogram through development of better estimators at lower cost and with less respondent burden. This means\ngreater efficiency in sampling and data collection coupled with higher quality data upon which to base the official\nestimates. In addition, products for data users are being improved using technologies such as remote sensing and\ngeographic information systems. Continued service to users will be increasingly dependent upon methodological\nand technological efficiencies.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 164\n=\n\x0cRequired Supplementary Information\nDEFERRED MAINTENANCE (UNAUDITED)\nDeferred maintenance is maintenance that was scheduled to be performed but was delayed until a future period.\nDeferred maintenance represents a cost that the Federal Government has elected not to fund and, therefore, the\ncosts are not reflected in the financial statements.\nMaintenance is defined to include preventive maintenance, normal repairs, replacement of parts and structural\ncomponents, and other activities needed to preserve the asset so that it continues to provide acceptable service and\nachieve its expected life. Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise\nupgrading it to service needs different from, or significantly greater than, those originally intended.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 165\n=\n\x0cForest Service\n Cost to Return to Cost of Critical Cost of Non-critical\n FY 2010\n Acceptable Condition Maintenance Maintenance\n\n\n Asset Class\n Bridges $ 172 $ 34 $ 138\n Buildings 1,038 125 913\n Dam 24 6 18\n Minor Constructed Features 115 - 115\n Fence 297 297 -\n Handling Facility 22 22 -\n Heritage 26 8 18\n Road 3,108 311 2,797\n Trail Bridge 11 4 7\n Wastewater 37 23 14\n Water 117 66 51\n Wildlife, Fish, TES 7 5 2\n Trails 296 7 289\n General Forest Area - - -\n Total Forest Service $ 5,270 $ 908 $ 4,362\n\n\n Cost to Return to Cost of Critical Cost of Non-critical\n FY 2009\n Acceptable Condition Maintenance Maintenance\n Asset Class\n Bridges $ 156 $ 29 $ 127\n Buildings 1,023 144 879\n Dam 29 10 19\n Minor Constructed Features 107 - 107\n Fence 298 298 -\n Handling Facility 22 22 -\n Heritage 25 9 16\n Road 3,178 318 2,860\n Trail Bridge 11 4 7\n Wastewater 40 24 16\n Water 118 67 51\n Wildlife, Fish, TES 6 4 2\n Trails 294 5 289\n General Forest Area - - -\n Total Forest Service $ 5,307 $ 934 $ 4,373\n\n\n\nDeferred maintenance is reported for general Property, Plant, and Equipment (PP&E), heritage assets, and\nstewardship land. It is also reported separately for critical and noncritical amounts of maintenance needed to\nreturn each class of asset to its acceptable operating condition. Critical maintenance is defined as a serious threat\nto public health or safety, a natural resource, or the ability to carry out the mission of the organization. Noncritical\nmaintenance is defined as a potential risk to the public or employee safety or health (e.g., compliance with codes,\nstandards, or regulations) and potential adverse consequences to natural resources or mission accomplishment.\nThe Forest Service began reporting deferred maintenance in 2000. Estimates of deferred maintenance for all\nmajor classes of PP&E, heritage assets, and stewardship assets are based on condition surveys. The agency has\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 166\n=\n\x0ccompleted two rounds of condition surveys providing a comprehensive national assessment of Forest Service\nproperty.\nFor roads, deferred maintenance is determined from surveys of an annual random sample of a sufficient number of\nroads to achieve estimates of 95-percent accuracy and 95-percent confidence. Validation of this process is\nongoing.\nDeferred maintenance needs for all other asset groups are determined from surveys of all individual assets on a\nrevolving schedule where the interval between visits does not exceed 5 years.\nNo deferred maintenance exists for fleet vehicles as they are managed through the agency\xe2\x80\x99s working capital fund\n(WCF). Each fleet vehicle is maintained according to schedule. The cost of maintaining the remaining classes of\nequipment is expensed.\nThe overall condition of major asset classes range from poor to good depending on the location, age, and type of\nproperty. The standards for acceptable operating condition for various classes of general PP&E, stewardship, and\nheritage assets are as follows.\nConditions of roads and bridges within the National Forest System (NFS) road system are measured by various\nstandards:\n\xe2\x80\xa2 Federal Highway Administration regulations for the Federal Highway Safety Act;\n\xe2\x80\xa2 Best management practices for the nonpoint source provisions of the Clean Water Act from Environmental\n Protection Agency and States;\n\xe2\x80\xa2 Road management objectives developed through the National Forest Management Act forest planning\n process; and\n\xe2\x80\xa2 Forest Service Directives\xe2\x80\x94Forest Service Manual (FSM) 7730, Operation and Maintenance (August 25, 2005,\n amendment was superseded with October 1, 2008, revision); Forest Service Handbook (FSH) 7709.56a,\n Road Preconstruction, and FSH 7709.56b, Transportation Structures Handbook.\nDams shall be managed according to FSM 7500, Water Storage and Transmission, and FSH 7509.11, Dams\nManagement Handbook. The condition of a dam is acceptable when the dam meets current design standards and\ndoes not have any deficiencies that threaten the safety of the structure or public. For dams to be rated in\nacceptable condition, the agency needs to restore the dams to the original functional purpose, correct unsightly\nconditions, or prevent more costly repairs.\nBuildings shall comply with the National Life Safety Code, the Forest Service Health and Safety Handbook, and\nthe Occupational Safety Health Administration as determined by condition surveys. These requirements are\nfound in FSM 7310, Buildings and Related Facilities, revised November 19, 2004. The condition of\nadministrative facilities ranges from poor to good, with approximately 35 percent needing major repairs or\nrenovations; approximately 14 percent in fair condition; and 51 percent of the facilities in good condition.\nThe agency is currently developing an integrated strategy to realign our administrative facility infrastructure to\nmeet current organizational structure and to reduce the maintenance liability for unneeded buildings, free up land\nfor use by local communities and private enterprise, and provide added funds for infrastructure maintenance and\ndevelopment. Forest Service anticipates maximum benefits from a combination of appropriations, facility\nconveyance receipts, and decommissioning of unneeded facilities.\nRecreation facilities include developed recreation sites, general forest areas, campgrounds, trailheads, trails, water\nand wastewater systems, interpretive facilities, and visitor centers. These components are included in several asset\nclasses of the deferred maintenance exhibit. All developed sites are managed in accordance with Federal laws and\nregulations (Code of Federal Regulations (CFR) 36).\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 167\n=\n\x0cDetailed management guidelines are contained in FSM 2330, Publicly Managed Recreation Opportunities, and\nforest- and regional-level user guides. Quality standards for developed recreation sites were established as\nMeaningful Measures for health and cleanliness, settings, safety and security, responsiveness, and the condition of\nthe facility.\nThe condition assessment for range structures (fences and stock handling facilities) is based on (1) a\ndetermination by knowledgeable range specialists or other district personnel of whether the structure would\nperform the originally intended function, and (2) a determination through the use of a protocol system to assess\nconditions based on age. A long-standing range methodology is used to gather this data.\nHeritage assets include archaeological sites that require determinations of National Register of Historic Places\nstatus, National Historic Landmarks, and significant historic properties. Some heritage assets may have historical\nsignificance, but their primary function in the agency is as visitation or recreation sites and, therefore, may not fall\nunder the management responsibility of the heritage program.\nTrails and trail bridges are managed according to Federal law and regulations (CFR 36). More specific direction is\ncontained in FSM 2350, Trail, River, and Similar Recreation Opportunities, and the FSH 2309.18, Trails\nManagement Handbook.\nDeferred maintenance of structures for wildlife, fish, and threatened and endangered species is determined by\nfield biologists using their professional judgment. The deferred maintenance is considered critical if resource\ndamage or species endangerment would likely occur if maintenance were deferred much longer.\nCondition of Heritage Assets and Stewardship Lands\nThe Statement of Federal Financial Accounting Standard No. 29, Heritage Assets and Stewardship Lands,\nreclassified information on heritage and stewardship land assets from \xe2\x80\x9csupplementary\xe2\x80\x9d to \xe2\x80\x9cbasic.\xe2\x80\x9d This change\nmoves the acquisitions and withdrawals of these assets to the financial notes, accompanying the financial\nstatements. The condition information for these assets remains supplementary.\nHeritage Assets\nHeritage professionals are responsible for documenting and maintaining cultural resource condition assessments\nto standard. Periodic monitoring and condition assessments are the basis for applying protective measures and\ntreatments to vulnerable, deteriorating, or threatened cultural resources. The condition of heritage assets depends\non the type of asset and varies from poor to fair.\nStewardship Land\nThe condition of NFS lands varies by purpose and location. The Forest Service monitors the condition of its\nstewardship lands based on information compiled by two national inventory and monitoring programs\xe2\x80\x94Forest\nInventory and Analysis (FIA) and Forest Health Monitoring (FHM).\nAlthough most of the estimated 193 million acres of stewardship lands continue to produce valuable benefits \xe2\x80\x93\nclean air and water, habitat for wildlife, and products for human use \xe2\x80\x93 significant portions are at risk to pest\noutbreaks or catastrophic fires.\nThere are 25 million acres of NFS forest lands at risk to future mortality from insects and diseases, based on the\n2006 publication of Mapping Risk from Forest Insects and Diseases. Invasive species of insects, diseases, and\nplants continue to affect our native ecosystems by causing mortality to, or displacement of, native vegetation.\nThe projected accomplishments on NFS lands include treatment of 198,478 acres for invasives and 33,043 acres\nfor native pests. These numbers should be considered preliminary, with final amounts of acres treated for invasives\nand native pests on NFS lands available at www.fs.fed.us in February 2011.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 168\n=\n\x0cAgricultural Research Service\n\n FY 2010 FY 2009\n Asset Class\n Buildings $ 251 $ 258\n Structures 21 19\n Heritage 94 89\n Total Agricultural Research Service $ 366 $ 366\n\nDeferred Maintenance (DM) includes work needed to meet laws, regulations, codes and other legal direction as\nlong as the original intent or purpose of the fixed asset is not changed. Also includes work performed to bring an\nasset up to present environmental standards or correction of safety problems. Critical DM is DM that is identified\nfor critical systems including HVAC, electrical, roofing, and plumbing tasks. Non-critical DM is all other\nsystems. DM is reported for buildings, structures and heritage assets.\nExecutive Order (EO) 13327 requires all Federal agencies to assess the condition of their facilities and plan for\ntheir full life cycle management. The Condition Index (CI) is a general measure of the constructed asset\xe2\x80\x99s\ncondition at a specific point in time. It is calculated as the ration of repair needs, or DM, to plant replacement\nvalue (PRV). PRV can be calculated systematically and without much effort. The condition of the constructed\nasset is a more difficult figure to determine. A repair need is the amount necessary to ensure a constructed asset is\nrestored to a condition substantially equivalent to the originally intended and designed capacity, efficiency or\ncapability. Ideally, with enough money and time, repair needs would be determined for each asset by inspection,\nevaluation of the repairs required, and consistent estimating of the repairs throughout ARS. ARS does not have\navailable manpower in-house to complete this type of inspection and estimating, nor the funding to contract.\nARS looked at approaches to model ARS assets and evaluate the results for management purposes.\nWhitestone Research is a company that estimates DM based on the age of the facility, geographic location,\ntypical major components and size of the structure. Whitestone first inspected a sample of representative\nbuildings from 36 ARS sites (roughly 55 percent of the total inventory) and used parametric models to estimate\nDM and PRV. These results were generalized to the entire population of ARS facilities. Assuming a PRV of $3.8\nbillion, the CI ratio (1 - $DM/PRV) is 92 percent, an outcome commonly classified as \xe2\x80\x9cadequate.\xe2\x80\x9d\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 169\n=\n\x0cSTATEMENT OF BUDGETARY RESOURCES (UNAUDITED)\n\n FY 2010 FSA CCC FAS RMA FNS FSIS AMS APHIS\n Non-Budgetary Non-Budgetary\n Financing Financing\n Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary\n Budgetary Resources:\n Unobligated balance, brought forward, October 1 (Note 24) $ 2,692 $ 1,726 $ 2,020 $ 971 $ 368 $ 557 $ 15,471 $ 32 $ 497 $ 299\n Recoveries of prior year unpaid obligations 71 97 1,332 34 24 3 990 132 18 128\n Budget Authority:\n Appropriation 4,274 - 18,014 - 391 6,979 87,130 1,028 8,316 1,443\n Borrowing Authority - 3,034 39,063 1,199 - - - - - -\n Earned -\n Collected 660 2,389 11,294 500 48 2,449 129 141 57 143\n Change in receivables from Federal Sources (1) - 14 1 21 - - 19 - (4)\n Change in unfilled customer orders -\n Advances received - - 382 - 1 - - - - -\n Without advance from Federal Sources 4 (16) - (19) 135 - - 9 - -\n Expenditure transfers from trust funds - - 937 - - - - - - -\n Nonexpenditure transfers, net, anticipated and actual - - (3,618) - 143 1 7,039 - (7,068) (200)\n Temporarily not available pursuant to Public Law - - - - - - - - (122) -\n Permanently not available (469) (1,309) (41,586) (348) (82) (2,353) (313) (2) (134) (2)\n Total Budgetary Resources 7,231 5,921 27,852 2,338 1,049 7,636 110,446 1,359 1,564 1,807\n\n Status of Budgetary Resources:\n Obligations Incurred:\n Direct 5,383 2,676 3,127 1,228 345 7,073 95,816 1,168 1,396 1,379\n Reimbursable 421 - 22,438 - 120 - 51 141 53 140\n Unobligated Balance:\n Apportioned 460 822 305 861 176 559 3,774 46 100 268\n Exempt from Apportionment 204 - 1,188 5 - - - - - -\n Unobligated balance not available 763 2,423 794 244 408 4 10,805 4 15 20\n Total Status of Budgetary Resources 7,231 5,921 27,852 2,338 1,049 7,636 110,446 1,359 1,564 1,807\n\n Change in Obligated Balances:\n Obligated balance, net, brought forward October 1 594 479 9,308 (18) 71 392 5,347 169 168 360\n Obligations incurred 5,804 2,676 25,565 1,228 465 7,073 95,867 1,309 1,449 1,519\n Gross outlays (5,294) (2,552) (23,881) (1,115) (446) (7,233) (93,951) (1,169) (1,420) (1,341)\n Recoveries of prior year unpaid obligations, actual (71) (97) (1,332) (34) (24) (3) (990) (132) (18) (128)\n Change in uncollected payments from Federal Sources (3) 15 (14) 19 (156) - - (28) - 4\n Obligated balance, net, end of period -\n Unpaid obligations 1,046 541 9,895 238 182 230 6,272 194 181 438\n Uncollected customer payments from Federal Sources (15) (19) (247) (158) (271) - - (44) (2) (23)\n Obligated balance, net, end of period 1,031 522 9,648 80 (89) 230 6,272 150 179 415\n\n Net Outlays:\n Gross outlays 5,294 2,552 23,881 1,115 446 7,233 93,951 1,169 1,420 1,341\n Offsetting collections (660) (2,389) (12,613) (501) (49) (2,449) (129) (141) (57) (143)\n Distributed offsetting receipts (213) - - (576) - - - (10) (154) (19)\n Net Outlays $ 4,421 $ 163 $ 11,268 $ 38 $ 397 $ 4,784 $ 93,822 $ 1,018 $ 1,209 $ 1,179\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 170\n=\n\x0c FY 2010 GIPSA FS NRCS ARS NIFA ERS NASS RD DO TOTAL\n Non-Budgetary Non-Budgetary\n Financing Financing\n Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary Budgetary Accounts\n Budgetary Resources:\n Unobligated balance, brought forward, October 1 (Note 24) $ 13 $ 2,747 $ 1,768 $ 423 $ 204 $ 6 $ 7 $ 5,910 $ 1,992 $ 106 $ 33,120 $ 4,689\n Recoveries of prior year unpaid obligations 5 40 384 20 318 - 1 233 975 22 3,721 1,106\n Budget Authority:\n Appropriation 42 6,094 1,010 1,264 1,386 83 162 6,453 - 632 144,701 -\n Borrowing Authority - - - - - - - - 17,619 - 39,063 21,852\n Earned -\n Collected 49 495 113 75 15 1 18 4,886 8,099 712 21,285 10,988\n Change in receivables from Federal Sources 1 (50) 1 (22) 7 - 19 4 - 180 189 1\n Change in unfilled customer orders -\n Advances received - 8 (3) 2 23 - 3 - - 10 426 -\n Without advance from Federal Sources - 8 46 74 (32) 4 8 (2) 1 55 309 (34)\n Expenditure transfers from trust funds - - - - - - - - - - 937 -\n Nonexpenditure transfers, net, anticipated and actual - (1) 2,940 2 123 - - 356 - 30 (253) -\n Temporarily not available pursuant to Public Law - - - - (12) - - - - - (134) -\n Permanently not available (1) - - (2) (5) (1) - (5,381) (4,589) (4) (50,335) (6,246)\n Total Budgetary Resources 109 9,341 6,259 1,836 2,027 93 218 12,459 24,097 1,743 193,029 32,356\n\n Status of Budgetary Resources:\n Obligations Incurred:\n Direct 46 6,571 4,414 1,394 1,754 83 161 8,209 20,155 605 138,924 24,059\n Reimbursable 46 409 156 120 (2) 5 28 620 - 939 25,685 -\n Unobligated Balance:\n Apportioned 16 1,362 403 289 232 1 20 2,225 2,550 113 10,349 4,233\n Exempt from Apportionment - - - - - - - - - - 1,392 5\n Unobligated balance not available 1 999 1,286 33 43 4 9 1,405 1,392 86 16,679 4,059\n Total Status of Budgetary Resources 109 9,341 6,259 1,836 2,027 93 218 12,459 24,097 1,743 193,029 32,356\n\n Change in Obligated Balances:\n Obligated balance, net, brought forward October 1 6 2,290 3,225 342 1,630 26 22 5,516 22,837 138 29,604 23,298\n Obligations incurred 92 6,980 4,570 1,514 1,752 88 189 8,829 20,155 1,544 164,609 24,059\n Gross outlays (87) (6,509) (3,265) (1,353) (1,185) (69) (180) (5,474) (13,507) (1,328) (154,185) (17,174)\n Recoveries of prior year unpaid obligations, actual (5) (40) (384) (20) (318) - (1) (233) (975) (22) (3,721) (1,106)\n Change in uncollected payments from Federal Sources (1) 42 (47) (51) 25 (4) (27) (2) (1) (236) (498) 33\n Obligated balance, net, end of period -\n Unpaid obligations 10 3,072 4,242 574 1,965 46 33 8,649 29,414 511 37,540 30,193\n Uncollected customer payments from Federal Sources (6) (310) (144) (142) (62) (5) (30) (14) (905) (415) (1,730) (1,082)\n Obligated balance, net, end of period 4 2,762 4,098 432 1,903 41 3 8,635 28,509 96 35,810 29,111\n\n Net Outlays:\n Gross outlays 87 6,509 3,265 1,353 1,185 69 180 5,474 13,507 1,328 154,185 17,174\n Offsetting collections (49) (503) (110) (77) (38) (1) (21) (4,886) (8,099) (722) (22,648) (10,989)\n Distributed offsetting receipts - (429) 1 (13) (4) - - (661) - (10) (1,512) (576)\n Net Outlays $ 38 $ 5,577 $ 3,156 $ 1,263 $ 1,143 $ 68 $ 159 $ (73) $ 5,408 $ 596 $ 130,025 $ 5,609\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 171\n=\n\x0c FY 2009 FSA CCC FAS RMA FNS FSIS AMS APHIS\n Non-Budgetary Non-Budgetary\n Financing Financing\n Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary\n Budgetary Resources:\n Unobligated balance, brought forward, October 1: $ 2,215 $ 869 $ 2,098 $ 2,516 $ 382 $ 2,057 $ 14,258 $ 29 $ 433 $ 368\n Recoveries of prior year unpaid obligations 55 72 181 10 170 4 507 1,441 15 168\n Budget Authority:\n Appropriation 2,733 - 15,444 - 331 6,843 75,647 982 8,227 1,394\n Borrowing Authority - 2,937 28,870 340 - - - - - -\n Earned -\n Collected 728 1,628 11,722 553 102 4,211 84 146 58 105\n Change in receivables from Federal Sources (3) - (89) - 42 - - (15) - 8\n Change in unfilled customer orders -\n Advances received - - 154 - - - - - - -\n Without advance from Federal Sources 1 23 - (18) (13) - - 3 - -\n Expenditure transfers from trust funds - - 1,130 - - - - - - -\n Nonexpenditure transfers, net, anticipated and actual 51 - (2,241) - 102 1 6,590 - (6,616) (300)\n Temporarily not available pursuant to Public Law - - - - - - - - - -\n Permanently not available (321) (524) (27,444) (1,583) (75) (2) (2,119) (9) (295) (9)\n Total Budgetary Resources 5,459 5,005 29,825 1,818 1,041 13,114 94,967 2,577 1,822 1,734\n\n Status of Budgetary Resources:\n Obligations Incurred:\n Direct 2,317 3,279 3,573 847 529 12,113 79,454 2,419 1,274 1,099\n Reimbursable 450 - 24,232 - 144 - 42 126 51 336\n Unobligated Balance:\n Apportioned 2,523 628 329 363 89 996 1,520 12 33 267\n Exempt from Apportionment - - 841 4 - - - - 32 -\n Unobligated balance not available 169 1,098 850 604 279 5 13,951 20 432 32\n Total Status of Budgetary Resources 5,459 5,005 29,825 1,818 1,041 13,114 94,967 2,577 1,822 1,734\n\n Change in Obligated Balances:\n Obligated balance, net, brought forward October 1 497 330 7,646 6 20 456 4,288 162 122 391\n Obligations incurred 2,767 3,279 27,805 847 673 12,113 79,496 2,545 1,325 1,435\n Gross outlays (2,618) (3,036) (26,050) (879) (423) (12,173) (77,928) (1,108) (1,265) (1,289)\n Recoveries of prior year unpaid obligations, actual (55) (72) (181) (10) (170) (4) (507) (1,441) (15) (168)\n Change in uncollected payments from Federal Sources 2 (23) 89 18 (29) - - 12 - (8)\n Obligated balance, net, end of period -\n Unpaid obligations 606 514 9,541 159 187 392 5,347 186 170 387\n Uncollected customer payments from Federal Sources (12) (35) (233) (177) (116) - - (17) (2) (27)\n Obligated balance, net, end of period 594 479 9,308 (18) 71 392 5,347 169 168 360\n\n Net Outlays:\n Gross outlays 2,618 3,036 26,050 879 423 12,173 77,928 1,108 1,265 1,289\n Offsetting collections (729) (1,628) (13,006) (553) (103) (4,211) (84) (146) (58) (104)\n Distributed offsetting receipts (951) - - (474) (1) - - (11) (155) (15)\n Net Outlays $ 938 $ 1,408 $ 13,044 $ (148) $ 319 $ 7,962 $ 77,844 $ 951 $ 1,052 $ 1,170\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 172\n=\n\x0c FY 2009 GIPSA FS NRCS ARS NIFA ERS NASS RD DO TOTAL\n Non-Budgetary Non-Budgetary\n Financing Financing\n Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary Budgetary Accounts\n Budgetary Resources:\n Unobligated balance, brought forward, October 1: $ 14 $ 2,170 $ 1,793 $ 241 $ 127 $ 4 $ 4 $ 1,827 $ 1,929 $ 58 $ 28,078 5,314\n Recoveries of prior year unpaid obligations 6 38 572 111 446 4 6 153 672 57 3,934 754\n Budget Authority:\n Appropriation 40 7,107 1,308 1,387 1,270 80 152 8,847 - 543 132,335 -\n Borrowing Authority - - - - - - - - 11,628 - 28,870 14,905\n Earned -\n Collected 42 535 108 105 46 - 24 3,846 7,315 816 22,678 9,496\n Change in receivables from Federal Sources - (23) (6) - (2) - - 4 - 24 (60) -\n Change in unfilled customer orders -\n Advance received - 2 4 - (18) - - - - (2) 140 -\n Without advance from Federal Sources - (51) 17 (6) 11 1 - - 215 (10) (47) 220\n Expenditure transfers from trust funds - - - - - - - - - - 1,130 -\n Nonexpenditure transfers, net, anticipated and actual - - 1,612 3 160 - - 204 - 3 (431) -\n Temporarily not available pursuant to Public Law - - - - (12) - - - - - (12) -\n Permanently not available (1) (5) (1) (6) (5) (1) (2) (2,636) (3,498) (7) (32,938) (5,605)\n Total Budgetary Resources 101 9,773 5,407 1,835 2,023 88 184 12,245 18,261 1,482 183,677 25,084\n\n Status of Budgetary Resources:\n Obligations Incurred:\n Direct 46 6,544 3,540 1,300 1,717 81 153 5,780 16,269 532 122,471 20,395\n Reimbursable 42 482 99 112 102 1 24 555 - 844 27,642 -\n Unobligated Balance:\n Apportioned 8 2,031 794 399 202 1 5 4,423 1,333 154 13,786 2,324\n Exempt from Apportionment - - - - - - - - - - 873 4\n Unobligated balance not available 5 716 974 24 2 5 2 1,487 659 (48) 18,905 2,361\n Total Status of Budgetary Resources 101 9,773 5,407 1,835 2,023 88 184 12,245 18,261 1,482 183,677 25,084\n\n Change in Obligated Balances:\n Obligated balance, net, brought forward October 1 6 1,707 3,006 340 1,489 29 20 4,916 20,358 182 25,277 20,694\n Obligations incurred 88 7,026 3,639 1,412 1,819 82 177 6,335 16,269 1,376 150,113 20,395\n Gross outlays (83) (6,480) (2,836) (1,306) (1,223) (80) (169) (5,580) (12,903) (1,348) (141,959) (16,818)\n Recoveries of prior year unpaid obligations, actual (6) (38) (572) (111) (446) (4) (6) (153) (672) (57) (3,934) (754)\n Change in uncollected payments from Federal Sources - 74 (11) 6 (9) (1) - (4) (215) (14) 107 (220)\n Obligated balance, net, end of period\n Unpaid obligations 11 2,641 3,322 432 1,716 27 25 5,527 23,741 319 30,836 24,414\n Uncollected customer payments from Federal Sources (5) (351) (97) (90) (86) (1) (3) (11) (904) (181) (1,232) (1,116)\n Obligated Balance, net, end of period 6 2,290 3,225 342 1,630 26 22 5,516 22,837 138 29,604 23,298\n\n Net Outlays:\n Gross outlays 83 6,480 2,836 1,306 1,223 80 169 5,580 12,903 1,348 141,959 16,818\n Offsetting collections (42) (536) (111) (105) (29) - (24) (3,846) (7,315) (814) (23,948) (9,496)\n Distributed offsetting receipts - (574) 1 (23) (5) - - (1,310) - (56) (3,100) (474)\n Net Outlays $ 41 $ 5,370 $ 2,726 $ 1,178 $ 1,189 $ 80 $ 145 $ 424 $ 5,588 $ 478 $ 114,911 $ 6,848\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 173\n=\n\x0cRISK ASSUMED INFORMATION (UNAUDITED)\nRisk assumed is generally measured by the present value of unpaid expected losses net of associated premiums\nbased on the risk inherent in the insurance or guarantee coverage in force. Risk assumed information is in\naddition to the liability for unpaid claims from insured events that have already occurred. The assessment of losses\nexpected based on the risk assumed are based on actuarial or financial methods applicable to the economic, legal\nand policy environment in force at the time the assessments are made. The FCIC has estimated the loss amounts\nbased on the risk assumed for its programs to be $7,546 million and $8,930 million as of September 30, 2010 and\n2009, respectively.\n\n\n\n\n Financial Statements, Notes, Supplemental and Other Accompanying Information\n 174\n\x0c Section 4.\n Other Accompanying Information\n\n\n4. Other Accompanying Information\n\nAppendix A \xe2\x80\x94Response to Management Challenges\nThe Department of Agriculture\xe2\x80\x99s (USDA) Office of Inspector General (OIG) has identified and reported 10\nmanagement challenges for Fiscal Year (FY) 2010. The report includes the most significant challenges faced by\nUSDA. It can be found at: http://www.usda.gov/oig/webdocs/MgmtChallenges2009.pdf.\nThe OIG report also includes emerging issues that could become a Departmental challenge in upcoming years.\nOIG did not remove any of the previous year\xe2\x80\x99s challenges; however, sub-elements/issues reported under\nChallenge 2 (Internal Controls), Challenge 5 (Civil Rights), and Challenge 6 (Global Trade) were removed. OIG\nadded new issues under Challenge 1 (Interagency Coordination) and Challenge 2 (Internal Controls).\nThe following table summarizes those challenges that changed from FY 2009 to FY 2010.\n\n FY 2009 Management Challenges FY 2010 Changes\n Challenge #1 Challenge #1\n Issue: Interagency Communication, Coordination, and Program Issue added: Coordination between Federal agencies to prevent residue\n Integration Need Improvement from entering the food supply\n Emerging Issue Challenge #2\n National Organic Program Issue added: National Organic Program\n Challenge #2 Challenge #2\n Issue: Implementation of Strong, Integrated, Internal Control Systems Issue added: Standard Reinsurance Agreement\n Still Needed Issue added: Group Risk Plan and the Group Risk Income Protection\n program\n Challenge #2\n Issue: Capitalize on Farm Service Agency Compliance Activities to Issue Removed by OIG\n Improve Program Integrity\n Challenge #5\n Issue: Develop Procedures to Control and Monitor Case File Issue Removed by OIG\n Documentation and Organization\n Challenge #6\n Issue: Strengthen Trade Promotion Operations Issue Removed by OIG\n\n\n\n\n Other Accompanying Information\n 175\n\x0cThe following table includes FY 2010 accomplishments; FY 2011 planned actions, and ongoing activities to\naddress the Department\xe2\x80\x99s challenges.\nUSDA\xe2\x80\x99s Management Challenges\n\n 1) Interagency Communications, Coordination, and Program Integration Need Improvement.\n \xe2\x80\xa2 Farm Programs: Challenge #1. Farm Service Agency (FSA),Risk Management Agency (RMA), Natural Resources Conservation Service (NRCS)\n \xe2\x88\x92 Implement a Comprehensive Information Management System (CIMS) to better share program data and eliminate duplicate reporting by\n producers;\n \xe2\x88\x92 Implement a more effective data reconciliation process, as mandated by the Agricultural Risk Protection Act of 2000 (RMA and FSA);\n \xe2\x88\x92 Incorporate data mining techniques that detect data anomalies and prevent potential improper payments; and\n \xe2\x88\x92 Integrate interagency communication and coordination in their program activities to ensure that one agency\xe2\x80\x99s actions do not adversely affect\n another\xe2\x80\x99s programs.\n Fiscal Year 2010 Accomplishments\n \xe2\x80\xa2 RMA, FSA, worked jointly on the CIMS project and accomplished the following:\n \xe2\x88\x92 Met with Approved Insurance Providers (AIP) to review CIMS project, functions, and services in order to assess progress to date and future\n direction;\n \xe2\x88\x92 Established requirements for RMA Reinsured Policy Acceptance Systems to use CIMS data for verification of new producers reported to RMA;\n \xe2\x88\x92 Continued development of a streamlined acreage reporting process that will enable the producer to report common data once. RMA, FSA,\n NRCS and NASS will share the data to eliminate duplicate reporting, including the formation of a Department-wide acreage reporting effort\n sponsored by the OCIO and FFAS;\n \xe2\x88\x92 Established discovery reports of possible differences in RMA and FSA business entities and comparable crop acreage;\n \xe2\x88\x92 FSA provided CIMS access to more than 12,000 FSA county and state office workers, including use of CIMS to provide insurance production for\n use in calculating benefits in the ACRE program;\n \xe2\x88\x92 Coordinated efforts between FSA and NRCS on participant eligibility including crop insurance guarantee information for use by the\n Supplemental Revenue Assistance Payments (SURE) program in calculating 2008 benefits;\n \xe2\x88\x92 NRCS finalized the Conservation Stewardship Program (CSP) rule to include provisions that utilize the FSA farm record system to determine\n producer eligibility; and\n \xe2\x88\x92 NRCS amended program policy to address resource concerns related to land with expiring Conservation Reserve Program (CRP) contracts.\n Planned Actions for Fiscal Year 2011\n \xe2\x80\xa2 Implement future enhancements to the CIMS project;\n \xe2\x80\xa2 Improve access to data required for program benefits;\n \xe2\x80\xa2 Timely identify and discover possible data differences;\n \xe2\x80\xa2 Establish process and conditions for AIPs to report on data records differences;\n \xe2\x80\xa2 Establish a more efficient and faster producer service by allowing data to be loaded directly to AIPs systems;\n \xe2\x80\xa2 RMA will perform reviews to reconcile information utilized for FSA disaster programs where FSA county offices find instances in which RMA and\n FSA program data do not match;\n \xe2\x80\xa2 RMA will continue to research, develop and implement data mining techniques and implement them as appropriate;\n \xe2\x80\xa2 RMA and FSA will establish a memorandum of understanding for the SURE and Average Crop Revenue Election (ACRE) disaster programs\n outlying interaction between the two agencies concerning these programs;\n \xe2\x80\xa2 Continue to analyze crop reporting data recommendations from the RMA/FSA working group;\n \xe2\x80\xa2 Establish a memorandum of understanding between FSA and RMA for the SURE and ACRE disaster programs outlining interaction between the\n two Agencies concerning these programs; and\n \xe2\x80\xa2 NRCS will continue to coordinate issues and opportunities common to the conservation agencies and related to program financial assistance\n eligibility, the Service Center Information Management System and the Federal Financial Accountability and Transparency Act.\n Inspection of Agricultural Commodities: Challenge #1. Animal and Plant Health Inspection Service (APHIS)\n \xe2\x80\xa2 Develop and provide to the Department of Homeland Security\xe2\x80\x99s U.S. Customs and Border Protection (CBP), a system of risk assessment for rail\n cargo so that the degree of risk can be determined.\n Planned Actions for Fiscal Year 2011\n \xe2\x80\xa2 Coordinate with CBP on the establishment of the railway assessment project; and\n \xe2\x80\xa2 Collect data and perform risk assessment.\n National Residue Program for Cattle: Challenge #1. Food Safety and Inspection Service (FSIS)\n \xe2\x80\xa2 Improve coordination among Federal agencies to prevent residues from entering the food supply \xe2\x80\x93 build a consensus with the Food and Drug\n Administration (FDA) and the Environmental Protection Agency (EPA).\n\n\n\n\n Other Accompanying Information\n 176\n\x0cFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Held a chemical residues summit with representatives from USDA, FDA, and EPA, to coordinate chemical residue strategy.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Provide proposals to FDA and EPA to:\n \xe2\x88\x92 Update the memorandum of understanding that established the Surveillance Advisory Team (SAT) and Interagency Residue Control Group\n (IRCG);\n \xe2\x88\x92 Draft a charter governing SAT and IRCG operations;\n \xe2\x88\x92 Develop a process for elevating issues identified by SAT and IRCG to executive-level officials for appropriate action;\n \xe2\x88\x92 Develop plans to ensure the National Residue Program has the resources needed to test for substances identified as high-risk;\n \xe2\x88\x92 Develop plans through SAT for periodically reviewing FSIS\xe2\x80\x99 sampling methods;\n \xe2\x88\x92 Develop a plan to establish policies for handling hazardous substances with no tolerances; and\n \xe2\x88\x92 Work with FDA to develop a process for expedited approval of new testing methodologies.\n\n\n\n2) Implementation of Strong, Integrated Internal Control Systems Still Needed. Rural Housing Service (RHS)\n\xe2\x80\xa2 Pursue computer matching agreements with other agencies that provide disaster response and relief; and\n\xe2\x80\xa2 Develop procedures to monitor and control assistance in response to disasters.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Issued revised disaster procedures to field offices to monitor the provision of housing assistance;\n\xe2\x80\xa2 Established internal controls to prevent duplicative assistance;\n\xe2\x80\xa2 Worked with organizations and impacted communities to ensure disaster supplemental appropriations are made available and used in areas\n affected by the disaster;\n\xe2\x80\xa2 Developed a Data Check Query Tool, within the Single Family Housing Direct Program, that provides users with an automated method to ensure\n application data was entered accurately into the Dedicated Loan Origination System;\n\xe2\x80\xa2 Provided training to the field staff on identifying and correcting errors before loans are obligated; and\n\xe2\x80\xa2 Revised procedures for monitoring the delinquency rates for Section 502 direct loans.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Coordinate with other federal agencies to include Federal Emergency Management Agency and Small Business Administration to share benefit\n information on who has applied for or received disaster assistance to avoid/minimize the potential for duplicate benefits;\n\xe2\x80\xa2 Provide staff training, as needed; on (1) How delivering disaster assistance differs from regular program assistance and (2) Checking for duplicate\n benefits from other sources; and\n\xe2\x80\xa2 Perform additional enhancements to the automated system based on any agreements entered into with any other government agencies.\n\xe2\x80\xa2 Strengthen quality control and perform required reconciliation of producer/policyholder data in the Federal Crop Insurance Program (RMA)\n\xe2\x80\xa2 Continue efforts to establish a consistent and comprehensive review process to be used by all reinsured companies;\n\xe2\x80\xa2 Implement a system to evaluate the overall effectiveness and reliability of quality control reviews performed by companies;\n\xe2\x80\xa2 Develop a comprehensive, systematic, and well-defined strategy for its compliance-related efforts, to include the organizational structure needed to\n support the strategy;\n\xe2\x80\xa2 Conduct and document an overall risk assessment of program operations to identify major program vulnerabilities and focus, coordinate, and\n prioritize resources on high-risk areas; and\n\xe2\x80\xa2 Ensure that AIPs follow RMA\xe2\x80\x99s policies and procedures while underwriting nursery crop insurance policies, adjusting resulting losses, and reporting\n loss data to RMA.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Issued a new Standard Reinsurance Agreement for crop year 2011 including a revised Appendix IV Quality Assurance and Integrity document that\n establishes a consistent and comprehensive review process to be used by all reinsured companies;\n\xe2\x80\xa2 Completed National Program Operations Reviews on 5 AIPs\xe2\x80\x99 operations to determine their compliance with quality control guidelines listed in the\n Standard Reinsurance Agreement and associated Appendix IV;\n\xe2\x80\xa2 RMA expanded its strategic data acquisition and analysis efforts by incorporating additional remote sensing and geospatial analyses to its data\n warehousing and data mining initiative, and increased the application of these data and analysis tools to include underwriting and program integrity\n issues throughout the crop insurance program; and\n \xe2\x80\xa2 RMA performed spot checks on selected nursery policies to determine Approved Insurance Providers compliance with the Nursery Crop\n Provisions, Special Provisions of Insurance, and all nursery procedures including the Nursery Underwriting Guide, and the Nursery Loss\n Adjustment Standards Handbook.\n\n\n\n\n Other Accompanying Information\n 177\n\x0cPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Conduct National Program Operations Reviews on 6 AIP operations to determine their compliance with quality control guidelines listed in the\n Standard Reinsurance Agreement and associated Appendix IV; and\n\xe2\x80\xa2 Revise the \xe2\x80\x9cRMA Strategic Plan\xe2\x80\x9d to incorporate a well defined strategy for its compliance related efforts.\n\xe2\x80\xa2 Improve verification under the Group Risk Plan (GRP) and Group Risk Income Protection programs (GRIP). (RMA)\n\xe2\x80\xa2 Notify AIPs in writing that they are required to physically verify the crops they have insured under GRP/GRIP as part of the acreage report field\n reviews.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 As required in OIG Audit 05601-14-Te, \xe2\x80\x9cGroup Risk Crop Insurance,\xe2\x80\x9d RMA completed actions to formalize the reporting and analysis of Approve\n Insurance Providers required acreage field reviews for GRP/GRIP policies.\n\xe2\x80\xa2 Prepare complete, accurate financial statements without extensive manual procedures and adjustments. (all agencies that prepare financial\n statements)\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 FS:\n \xe2\x88\x92 Implemented stronger internal controls over interim financial reporting to identify trends, variances, or abnormal activity/transactions.\n Specifically:\n o Developed automated cash reconciliation tool that facilitates more timely resolution of funds balance variance and automatically produces\n cash summary reports;\n o Improved the work processes by eliminating 11 pages of FACTS II PRC Validation errors which increased the efficiency and productivity on\n FACTS II reporting and eliminated recurring year-end cash adjustments;\n o Created a trial balance tool that tracks the ARRA Funds and the top 5 treasury symbol activity;\n o Developed and implemented an internal control process to monitor SUSF activities to determine the impact on financial reporting and to\n identify aged transactions to be cleared;\n o Updated the FACTS I process to compare data on a monthly basis and improved the monitoring of the Unidentified Trading Partner Usage\n Code;\n o Developed general ledger activity and trend analysis reports to identify unusual and/or unexplained financial activity for use by Operational\n Branches in monitoring their respective account balances;\n o Created SF-133 automated tool to calculate data sets for adjustment review; and\n o Implemented stronger monitoring functions over financial reporting financial controls to supplement A-123 Appendix A testing. These\n functions are performed quarterly to form an independent basis for certification of financial statements.\n\xe2\x80\xa2 NRCS:\n \xe2\x88\x92 Developed business requirements and provided support to implement the successful resolution of financial audit findings on access controls for\n Fund Manager and ProTracts software access;\n \xe2\x88\x92 Obtained contractor support to conduct audit remediation services; conducted reviews in 18 states;\n \xe2\x88\x92 Issued interim policy via national instructions on reimbursable agreements, open obligations, accruals, capital leases, internal use software,\n and unfilled customer orders.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 FS:\n \xe2\x88\x92 Prepare for conversion to the new USDA financial systems (Financial Management Modernization Initiative);\n \xe2\x88\x92 Complete implementation of the new system for accepting credit cards for fees and services/products provided by the Agency throughout all 153\n national forests;\n \xe2\x88\x92 Work with Federal Accounting Standards Advisory Board on developing clearer guidance regarding deferred maintenance reporting\n requirements; and\n \xe2\x88\x92 Institute rotational effectiveness of field operated internal controls over financial reporting.\n\xe2\x80\xa2 NRCS:\n \xe2\x88\x92 Strengthen separation of duties for cost share agreement management by implementation of nationally standardized permissions in ProTracts;\n \xe2\x88\x92 Continue contractor support services including, performing additional state office site visits, finalizing corrective actions of audit issues, and\n training for new policies and procedures;\n \xe2\x88\x92 Complete managerial cost accounting business requirements, model design, and Statement of Net Costs methodology to ensure proper\n presentation of the Statement of Net Costs;\n \xe2\x88\x92 Prepare for conversion to the USDA Financial Management Modernization Initiative financial system;\n \xe2\x88\x92 Issue financial policies and procedures; and\n \xe2\x88\x92 Complete comprehensive training for financial and non-financial employees at all organizations levels.\n\n\n\n\n Other Accompanying Information\n 178\n\x0c\xe2\x80\xa2 Improve Forest Service (FS) and NRCS internal controls and management accountability in order to effectively manage resources, measure\n progress towards goals and objectives, and accurately report accomplishments.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 FS:\n \xe2\x88\x92 Closed significant programmatic audit recommendations for 78 audit recommendations from 20 OIG audits. Specifically:\n o Developed new databases to improve tracking and monitoring of Emergency Equipment Rental Agreements (EERAs);\n o Provided new guidance to line officers when conducting fire investigations;\n o Improved Partnership Program implementation and oversight;\n o Provided direction to Firefighting Associations to restrict privileges to create and modify electronic training records;\n o Implement actions to assure all aircraft leased for firefighting meet the airworthiness standards and appropriate maintenance and inspection\n programs;\n o Ensured all Regions using alternate appraisal methods have calculation models that are consistent with FS\xe2\x80\x99 Timber Sale Preparation\n Handbook;\n o Twenty five of the outstanding financial statement audit findings for previous years were closed in FY 2010. No material weaknesses\n identified in the financial statement audit for third consecutive year;\n o Implementing new system throughout the Agency to allow customers to use credit cards in order to streamline collection activities and\n reduce risk;\n o Implemented improved reporting and monitoring over Agency travel;\n o Implemented additional assessments over critical program management functions in areas such as ARRA program of work, grant\n management;\n o Instituted stronger programmatic controls for deferred maintenance and environmental disposal liabilities;\n o Conducted assessments of cash management functions at all FS operated Job Corp Centers;\n o Created database to trend unliquidated obligations certification, assess quality of certification, and provide feedback to regional offices.\n Auditors reduced the FS lack of monitoring over Unliquidated Obligations issue to a control deficiency and maintained that through FY 2010;\n and\n o Maintained robust and effective information security program. Continued progress in the reduction of significance of audit issues and\n maintained no material weakness in this area.\n\xe2\x80\xa2 NRCS:\n \xe2\x88\x92 Released the Conservation Effects Assessment Project (CEAP) report for cropland on the Upper Mississippi River Basin. The release of this\n report included a thorough technical review of processes which were then established for future reports on cropland; and\n \xe2\x88\x92 Implemented software controls to manage the statutory direct and indirect annual payment limitation rules for two Conservation Security\n Program signup periods.\n\n\n\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 FS:\n \xe2\x88\x92 Conduct evaluation of grant management function to identify opportunities to improve overall compliance and effectiveness of the entire\n program;\n \xe2\x88\x92 Implement stronger cash management policy and procedures for Job Corp centers;\n \xe2\x88\x92 Finish implementation of credit card system;\n \xe2\x88\x92 Fully implement recommendations for ARRA efforts;\n \xe2\x88\x92 Implement statistical evaluation of ULO balances; and\n \xe2\x88\x92 Implement corporate aggregation evaluation process that evaluates results of audit and assessments to identify systemic internal control\n weaknesses inherent in business processes that impact programmatic effectiveness.\n\xe2\x80\xa2 NRCS:\n \xe2\x88\x92 Release additional CEAP studies; Release final report for the Chesapeake Bay crop and pastureland study. With these studies, NRCS will be\n able to assess the outcome of its programs and use the reports to facilitate decisions on the most effective future programmatic investments;\n \xe2\x88\x92 Implement corrective actions on findings from the Conservation Security Program review prior to making 2010 payments; and\n \xe2\x88\x92 Release a revised Conservation Programs Manual and train all office staff.\n\n\n\n\n Other Accompanying Information\n 179\n\x0c\xe2\x80\xa2 Strengthen oversight of the National Organic Program (NOP). (Agricultural Marketing Service)\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Worked in partnership with the Office of General Counsel to pursue enforcement actions;\n\xe2\x80\xa2 Developed an enforcement policy that specifies when civil penalties or other enforcement actions are warranted;\n\xe2\x80\xa2 Implemented policy and procedures for follow up monitoring of compliance with NOP enforcement actions, and increased timeliness and efficiency\n in complaint handling;\n\xe2\x80\xa2 Provided guidance on NOP reviews and audits;\n\xe2\x80\xa2 Renewed the status of California as a state organic program;\n\xe2\x80\xa2 Initiated development of the NOP Program Handbook;\n\xe2\x80\xa2 Implemented a document control policy; and\n\xe2\x80\xa2 Revised the NOP Quality Manual to include accreditation procedures.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Establish guidelines to require certifiers to conduct periodic residue testing; and\n\xe2\x80\xa2 Issue an amendment to remove the Federal Advisory Committee Act requirements from the NOP regulations.\n3) Continuing Improvements Needed in Information Technology (IT) Security. (Office of the Chief Information Officer and agency level IT managers)\n\xe2\x80\xa2 Emphasize security program planning and management oversight and monitoring.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Implemented four time-phased strategic improvement plans, the \xe2\x80\x9cCyber and Privacy Policy and Oversight (CPPO) 100-Day Plan,\xe2\x80\x9d \xe2\x80\x9cGetting to\n Federal Information Security Management Act (FISMA) Green Plan,\xe2\x80\x9d the Agriculture Security Operations Center 36-month "Get Healthy" plan and\n the OIG\'s \xe2\x80\x9cGet Healthy - Remediation of FISMA Weaknesses Plan,\xe2\x80\x9d to systematically mitigate identified IT risks and improve the USDA Security\n posture;\n\xe2\x80\xa2 Launched the Certification and Accreditation Center of Excellence to ensure compliance with OMB Circular A-130 Appendix III and implemented\n Department-wide best practices in system authorizations, Cyber Security Assessment and Management (CSAM) utilization, Plans of Action and\n Milestones (POA&M) management, and risk management strategies;\n\xe2\x80\xa2 Completed Phase 1 of the CSAM Remediation effort to improve the consistency and quality of the C&A/system authorization data points, reporting\n and tracking of system authorizations, and risk management;\n\xe2\x80\xa2 Hosted the USDA Cyber Security Summit and Department-wide \xe2\x80\x9clive\xe2\x80\x9d Information Security Awareness and Specialized Security training sessions to\n improve cyber security education and awareness and provide specialized training Department-wide;\n\xe2\x80\xa2 Drafted the Governance, Risk, and Compliance (GRC) Strategic Plan to focus on the strategic and technical aspects of the information security\n program. The Office of the Chief Information Officer\xe2\x80\x99s (OCIO) GRC Strategic Plan emphasizes using the Risk Management Framework to mitigate\n vulnerabilities with the highest overall risk to the department;\n\xe2\x80\xa2 Worked diligently with USDA\xe2\x80\x99s agencies to promote and collaborate with the Cyber Security Plans and to validate and ensure consistency of data in\n CSAM to improve the management of IT system risks;\n\xe2\x80\xa2 Launched the Agriculture Security Operations Center (ASOC) to improve the USDA security posture and institute operational best practices; and\n\xe2\x80\xa2 Continued using the monthly FISMA program compliance scorecard to monitor agency FISMA compliance including Plans of Action and Milestones\n (POA&Ms), Whole Disk Encryption deployment, and Configuration Management to mitigate identified system risks.\n\n\n\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue implementation of \xe2\x80\x9cGetting to FISMA Green\xe2\x80\x9d and OIG \xe2\x80\x9cGet Healthy\xe2\x80\x9d Plans to systematically mitigate identified risks;\n\xe2\x80\xa2 Continue leveraging CSAM, security metrics, program reviews, and the monthly FISMA program compliance scorecard to manage IT security\n program compliance and oversight;\n\xe2\x80\xa2 Continue deployment of Risk Management Framework initiative and implement CSAM Version 3.0 to leverage CSAM\xe2\x80\x99s continuous monitoring\n capabilities across the Department;\n\xe2\x80\xa2 Continue deployment of ASOC and related program initiatives; and\n\xe2\x80\xa2 Continue Department-wide Cyber Security Awareness and Education efforts to increase end-user awareness of cyber security best practices.\n\xe2\x80\xa2 Establish an internal control program throughout the systems\xe2\x80\x99 life cycle.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Reviewed and revised Cyber Security Departmental Regulations as needed to maintain concurrency with National Institute of Standards and\n Technology (NIST) and other program requirements;\n\xe2\x80\xa2 Staffed critical positions to ensure compliance with incident handling and response requirements and improve the security management operations;\n\xe2\x80\xa2 Defined operational metrics for key security initiatives, and for endpoint health (via BigFixTM);\n\xe2\x80\xa2 Established Departmental bi-weekly meetings to discuss issues covering all aspects of NIST Security Policy 800-53 compliance and Departmental\n IT Security policies;\n\n\n\n Other Accompanying Information\n 180\n\x0c\xe2\x80\xa2 Expanded the CSAM Dashboard to improve system authorization reporting, security control tracking and management and continuous monitoring\n functionality; and\n\xe2\x80\xa2 Conducted annual reviews on: USDA Cyber Security Policies, Certification and Accreditation (C&A) documentation, agency security plans (for\n systems not undergoing Certification & Accreditation), Contingency Plan test plans and test reports, outstanding POA&Ms, security controls\n assessments, security awareness training, IT systems inventories and Acquisition Approval Requests.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue using CSAM to implement Continuous Monitoring and automate the Concurrency Review process;\n\xe2\x80\xa2 Develop dashboard and supporting analytics to monitor and assess security operational metrics; and\n\xe2\x80\xa2 Continue using Security Metrics and agency program reviews to measure agency Security Program compliance and maturity.\n\xe2\x80\xa2 Identify, test, and mitigate IT security vulnerabilities (risk assessments).\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Established C&A Center of Excellence to provide agencies with operational support and tools for the USDA C&A process, including the conduct of\n concurrency reviews, the development and management of POA&Ms, the use of CSAM tool, to ensure that USDA complies with NIST, FISMA,\n OMB, and USDA security polices and requirements;\n\xe2\x80\xa2 Began 14 and completed 10 assessments of the security practices within their IT operations programs;\n\xe2\x80\xa2 Continued reviewing selected POA&M closure documentation to validate/verify correction actions; and\n\xe2\x80\xa2 Continued C&A concurrency review program.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue implementation of the Risk Management Framework and continuous monitoring initiatives;\n\xe2\x80\xa2 Begin remaining agencies\' IT operational assessments, to complete baseline of entire department by end of FY; follow up with 2010 assessments\n to review progress on programmatic developmental milestones.\n\xe2\x80\xa2 Remediate IT Material Weakness relating to: Logical and Physical Access Controls, Disaster Recovery Planning, and Configuration Management\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Issued a memorandum directing compliance with Departmental Regulation 3505-003, Access Control Policy, and created program level POA&Ms\n as needed to address program risks;\n\xe2\x80\xa2 Developed tactical plan for monitoring monthly access control review efforts to ensure compliance with program goals;\n\xe2\x80\xa2 Integrated eAuthentication and LincPass cards to provide two-factor authentication to all eAuthentication-protected applications; and\n\xe2\x80\xa2 USDA\xe2\x80\x99s 4 largest facilities that have over 1000 users (South Building, Riverdale, the Beltsville Agriculture Research Center, and the Kansas City\n Commodity Office) have personal identity verification card readers that meet the criteria put forward by Homeland Security Presidential Directive 12:\n Policy for a Common Identification Standard for Federal Employees and Contractors;\n\xe2\x80\xa2 Validated agency change management processes during C&A concurrency reviews; and\n\xe2\x80\xa2 Deployed the BigFixTM end point monitoring tool to over 130,000 endpoints Department-wide; began awareness campaign with agency CIO\'s\n focusing on FDCC compliance, and obsolete/high risk commercial software deployment;\n\xe2\x80\xa2 Verified submission of agency continuity of operations/disaster recovery plans in CSAM; and\n\xe2\x80\xa2 Verified continuity of operations plans annual testing.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue monitoring agency compliance with access control policies;\n\xe2\x80\xa2 Develop the Department-wide Privilege Management Plan;\n\xe2\x80\xa2 Implement Digital Signature and Encryption Plans; and\n\xe2\x80\xa2 Complete the Identity Credential and Access Management technical infrastructure.\n\xe2\x80\xa2 Continue program oversight activities focusing on change/configuration and patch management.\n\xe2\x80\xa2 Expand continuous monitoring data awareness campaign to encompass OS patching, IPv6, critical trends, and the transition from informational to\n actionable reporting via BigFixTM;\n\xe2\x80\xa2 Continue Departmental initiatives to establish and fund alternate \xe2\x80\x98hot sites\xe2\x80\x99 for Service Center Agencies; and\n\xe2\x80\xa2 Continue USDA training and oversight activities to ensure effective Continuity of Operations for all systems.\n4) Departmental Efforts and Initiatives in Homeland Security Need To Be Maintained\n\xe2\x80\xa2 Implement commodity inventory systems that provide critical homeland security features. (FSA)\nPlanned Actions for Fiscal Year 2011\n Continue implementation of the Web-based Supply Chain Management (WBSCM) system to be used by the Agricultural Marketing Service, FSA,\n the Food and Nutrition Service, Foreign Agricultural Service (FAS) and the U.S. Agency for International Development;\n\xe2\x80\xa2 Begin user security role testing within the implementation phase of the WBSCM. Completed user training and data management activities for\n WBSCM;\n\xe2\x80\xa2 Continue WBSCM security testing and begin communication with external stakeholders; and\n\xe2\x80\xa2 Define validation criteria and perform validation of Transactional Data Staging Database.\n\n\n\n Other Accompanying Information\n 181\n\x0cAgriculture Quarantine and Inspection Activities. (APHIS)\n\xe2\x80\xa2 Develop the necessary processes and procedures to assess inspection effectiveness;\n\xe2\x80\xa2 Identify major risks posed by foreign pests and diseases at ports of entry; and\n\xe2\x80\xa2 Ensure that staffing levels at ports are sufficient to meet risks.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Held quarterly meetings to review data quality and performance measures; and\n\xe2\x80\xa2 Completed reviews at six ports in Texas, New Jersey, Arizona, Illinois, Florida, and Freeport/Nassau Bahamas.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Use the current staffing model that does a good job of predicting USDA\xe2\x80\x99s need for addressing agricultural risk at ports. APHIS will coordinate its\n staffing model with CBP to ensure it meets CBP staffing requirements; and\n\xe2\x80\xa2 Participate in a Trend Analysis Working Group that will analyze and predict the highest risk areas in cargo pathways.\nAvian Influenza Surveillance Activities. (APHIS)\n\xe2\x80\xa2 Develop a Memorandum of Understanding with the U.S. Department of Health and Human Services that describes coordination efforts in the event\n of a Presidential emergency; and\n\xe2\x80\xa2 Consult with other Federal agencies and the poultry industry to identify the capability needed to respond to a probable scenario for a highly\n pathogenic avian influenza (HPAI) outbreak.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Addressed quarantine and movement control issues for non-infected egg production in the event of a HPAI outbreak;\n\xe2\x80\xa2 Established a cooperative agreement with Texas A&M University to develop a preparedness and response emergency management dashboard\n system; and\n\xe2\x80\xa2 Established a cooperative agreement with the California Department of Food and Agriculture for further developing the California Animal Health\n Emergency System, to provide an information system of critical tasks and activities for responders in an outbreak.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 USDA (APHIS) and the U.S. Department of Homeland Security (DHS) will conduct a test response to a declared emergency requiring support from\n DHS\xe2\x80\x99 Federal Emergency Management Agency;\n\xe2\x80\xa2 Formalize an agreement with DHS that clarifies and defines each department\xe2\x80\x99s roles and responsibilities in the event of a USDA declared\n emergency, Presidential declared emergency, or major disaster; and\n\xe2\x80\xa2 Continue to work with DHS to identify the best interagency mechanism to formalize relationship within the context of the National Response\n Framework.\nImportation and Movement of Live Animals. (APHIS)\n\xe2\x80\xa2 Provide procedures and implementation date for entering and analyzing instances of problems through its live animal tracking information system;\n\xe2\x80\xa2 Develop an automated system to track problems with imported animals;\n\xe2\x80\xa2 Provide procedures describing coordination efforts with CBP officials at the northern border to ensure that all animal shipments are properly\n inspected;\n\xe2\x80\xa2 Provide procedures for monitoring and reconciling imported cattle, the disease risk analysis for restricted imported swine, and the import protocol\n for cattle imported from Mexico;\n\xe2\x80\xa2 Provide procedures for analyzing rejected animals at the Mexican border; and\n\xe2\x80\xa2 Provide instructions regarding the inventory of USDA seals, and a summary of seal inventory conducted in 2009.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Revised and implemented Veterinary Services Memorandum No. 592.122, \xe2\x80\x9cInventory, Use and Control of Animal and Plant Health Inspection\n Service Seals by Veterinary Services Personnel\xe2\x80\x9d; and\n\xe2\x80\xa2 Completed deployment of the Veterinary Services Process Streamlining \xe2\x80\x93 Animal Import IT application (VSPS-AI) and made available to all US\n ports-of-entry where USDA live animal inspection services are provided.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Develop procedures for entering and analyzing instances of non-compliance and the actual date of the Live Animal Imports Module (LAIM) is fully\n implemented at all ports-of-entry;\n\xe2\x80\xa2 Develop a Standard Operating Procedure that describes how USDA and CBP will coordinate efforts at the northern border of ports of entry;\n\xe2\x80\xa2 Develop a procedure for monitoring and reconciling imported cattle, and a copy of the disease risk analysis performed on restricted imported swine;\n and\n\xe2\x80\xa2 Develop procedures for entering and analyzing rejections at the border of Mexico and the actual date of LAIM system is fully implemented at all\n ports of entry on the U.S. border with Mexico.\n\n\n\n\n Other Accompanying Information\n 182\n\x0c5) Material Weaknesses Continue to Persist in Civil Rights Control Structure and Environment. (Office of the Assistant Secretary for Civil Rights)\n\xe2\x80\xa2 Develop a plan to process employment complaints timely and effectively in collaboration with USDA agencies; and\n\xe2\x80\xa2 Implement a monitoring framework to track the processing of complaints so that the agency can intervene when timeframes are not being met.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Revised Standard Operating Procedures to incorporate monitoring and measures to intervene when timeframes are not being met;\n\xe2\x80\xa2 Established timeframes for the intake process so it not will exceed the deadline for completion of the formal complaint process; and\n\xe2\x80\xa2 Implemented controls to ensure timely processing of the Final Agency Decision (FAD) report. The Director, Office of Adjudication is provided with a\n weekly FAD report for a second level of review and monitoring.\n6) USDA Needs To Develop a Proactive, Integrated Strategy To Help American Producers To Meet the Global Trade Challenge. (FAS and APHIS)\n\xe2\x80\xa2 Continue to strengthen genetically engineered organism field testing controls to prevent inadvertent genetic mixing with agricultural crops for export.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Obtained certification and accreditation on the Biotechnology Integrated Database System and written certification that the ePermits tracking\n system is fully deployed;\n\xe2\x80\xa2 Developed a revised regulation on the required field data reports and notices for all permits and notifications;\n\xe2\x80\xa2 Implemented procedures for processing missing/late progress report;\n\xe2\x80\xa2 Developed procedures for the Civil Penalty Action Team; and\n\xe2\x80\xa2 Established guidance for establishing and implementing timeframes for devitalization of genetically engineered crops.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Develop guidance to better manage Genetically Engineered (GE) Organism Field Releases; and\n\xe2\x80\xa2 Revise regulations on the location of planted GE field test sites.\n\xe2\x80\xa2 Develop a global market strategy.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Developed a Global Market Strategy in coordination with the USDA Intra-Departmental Coordination Committee on International Affairs and\n consultation with Congress; and\n\xe2\x80\xa2 Initiated periodic representational events with agricultural contacts.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue to implement the Global Market Strategy and refine as needed; and\n\xe2\x80\xa2 Continue to initiate periodic representational events with agricultural contacts.\n\n7) Better Forest Service Management and Community Action Needed to Improve the Health of the National Forests and Reduce the Cost of Fighting\nFires.\n\xe2\x80\xa2 Work with other land management agencies and State and local governments to conduct hazardous fuels reduction projects in those areas where\n they will have the greatest impact on reducing risk ;\n\xe2\x80\xa2 Work with Congress and other land management agencies to find ways to convince State and local governments to enact and enforce fire-wise\n building and zoning codes in areas threatened by wildland fire ;\n\xe2\x80\xa2 Improve its internal controls over wildland fire expenditures and the delivery of systems to help managers improve cost-containment decisions ; and\n\xe2\x80\xa2 Ensure human and physical resources to effectively address the changing environment of forest health and the expanding wildland urban interface\n (WUI).\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Allocated resources to address the changing environment of forest health and the expanding WUI;\n\xe2\x80\xa2 Continued to conduct large fire cost review and implement corrective actions, as applicable;\n\xe2\x80\xa2 Partnered with states and counties to develop and deliver fire prevention ordinances to use in planning and zoning in WUI areas;\n\xe2\x80\xa2 Participated in meetings held by the National Association of State Foresters; and\n\xe2\x80\xa2 Fully implemented the Wildland Fire Decision Support System that assists fire managers and analyst in making strategic and tactical decisions and\n introduces economic principals into the fire decision process.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Issue guidance for monitoring the effectiveness of hazardous fuel treatments and restoration projects ;\n\xe2\x80\xa2 Continue to develop tools for the Regions to use in assessing and managing wildfire risk ;\n\xe2\x80\xa2 Continue to work with State, local and tribal governments and other land management agencies to encourage the use of community programs,\n such as Firewise and Ready ! Set ! Go !, to better protect people and communities threatened by wildland fire ;\n\xe2\x80\xa2 Work with other land management agencies and State and local governments to conduct hazardous fuels reduction projects in areas with the\n greatest impact of reducing risk ;\n\xe2\x80\xa2 Direct human and physical resources to address the changing environment of forest health and the expanding WUI ; and\n\xe2\x80\xa2 Develop and implement the Cohesive Wildland Fire Management Strategy.\n\n\n Other Accompanying Information\n 183\n\x0c8) Improved Controls Needed for Food Safety Inspection Systems.\n\xe2\x80\xa2 Complete corrective actions on prior recommendations.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Responded to ongoing audits and completed final actions needed to reduce the backlog of outstanding \xe2\x80\x9copen\xe2\x80\x9d recommendations. FSIS closed 29\n recommendations increasing the percentage of recommendations issued since 2000 that are closed to 87 percent.\n\xe2\x80\xa2 Continued achievement of management decision to meet OIG deadlines ; and\n\xe2\x80\xa2 Issued reports to FSIS programs on open audit recommendations which has resulted in more coordinated and efficient reports to complete the final\n actions needed for recommendation closure.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Continue to reduce the backlog of outstanding \xe2\x80\x9copen\xe2\x80\x9d recommendations, and use the audit recommendation tracking system to keep management\n apprised of \xe2\x80\x9copen\xe2\x80\x9d recommendations.\n\xe2\x80\xa2 Develop a time-phased plan to complete assessments of the food safety system control plans developed by USDA-inspected facilities and\n assessments of those facilities\xe2\x80\x99 production processes, including a review program that includes periodic reassessment.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Performed Food Safety Assessments (FSAs) at establishments responsible for the annual production of approximately 95% of meat and poultry\n products ;\n\xe2\x80\xa2 Conducted a performance and functional testing of the Public Health Inspection System (PHIS) to ensure the system operates as intended ; and\n\xe2\x80\xa2 Issued a technical report outlining the FSA prioritization criteria and an FSIS Directive on FSA scheduling and prioritization.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Implement and complete user acceptance testing of PHIS ; and\n\xe2\x80\xa2 Test and implement the electronic FSA system in PHIS, which will include date \xe2\x80\x9cflags\xe2\x80\x9d to be used in scheduling FSAs.\n\xe2\x80\xa2 Improve the accuracy of data available in the systems.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Completed development of PHIS features, to better ensure the accuracy of compliance and other data ; and\n\xe2\x80\xa2 Completed an analysis of humane handling noncompliance rates at dairy cow establishments compared to establishments that slaughter other\n adult cattle to determine whether more frequent humane handling reviews are needed.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Complete performance and functional testing of PHIS during user acceptance testing;\n\xe2\x80\xa2 Implement PHIS training for in-plant inspection personnel nationwide;\n\xe2\x80\xa2 Continue programs to improve data quality, analysis and distribution;\n\xe2\x80\xa2 Develop Directives, Notices, and related training that emphasizes the development of data-driven inspection; and\n\xe2\x80\xa2 Improve access to AssuranceNet to help Districts meet in-Plant Performance System review requirements.\n\xe2\x80\xa2 Continue to develop and implement a strategy for hiring and training inspectors.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Continued to hire Consumer Safety Inspectors and Food Inspectors with various incentives including bonuses, superior qualification appointments,\n and paying travel and transportation expenses;\n\xe2\x80\xa2 Conducted surveys to verify that inspectors are performing assigned duties;\n\xe2\x80\xa2 Utilized a structured on-the-job training program for Food Inspectors to reinforce concepts covered in classroom training; and\n\xe2\x80\xa2 Reviewed training reports to ensure appropriate personnel receive needed training.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Complete an evaluation of the new circuit maintenance guidelines;\n\xe2\x80\xa2 Establish procedures and policies to ensure newly hired mission critical personnel receive training within 1 year of starting their position and that\n they recertify this training annually;\n\xe2\x80\xa2 Continue to offer volunteer training opportunities to veterinary students, and paid veterinary student programs to increase awareness and generate\n interest in veterinarian work at FSIS;\n\xe2\x80\xa2 Continue to train field veterinarians in Enforcement and Investigations Analysis Officer (EIAO) methodologies to conduct expanded critical public\n health assurance duties;\n\xe2\x80\xa2 Continue to offer a 9-week public health focused veterinary educational program for all new veterinary hires; and\n\xe2\x80\xa2 Continue to offer veterinarians opportunities for advancement as they follow diverse career pathways within FSIS.\n\n\n\n\n Other Accompanying Information\n 184\n\x0c9) Implementation of Renewable Energy Programs at USDA (Department-wide)\n\xe2\x80\xa2 Develop and implement a viable and comprehensive renewable energy strategy for USDA agencies and programs.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 The Energy Council Coordinating Committee (ECCC) drafted a mission and vision statement along with objectives for a proposed USDA\n Comprehensive Renewable Energy Strategic Plan (Plan);\n\xe2\x80\xa2 Prepared a Decision Memorandum to the Secretary on the development and deployment of the Renewable Energy Strategic Plan; and\n\xe2\x80\xa2 Vetted awards through the ECCC to avoid duplication of funding. USDA programs are currently being evaluated to determine what data is being\n provided to document the \xe2\x80\x9cactual\xe2\x80\x9d outcome vs. the \xe2\x80\x9cprojected \xe2\x80\x9coutcome of funded projects.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Prepare the strategic plan with a goal of having it in place by end of first quarter of FY 2011;\n\xe2\x80\xa2 Continue to evaluate potential awardees listing to assure no duplication is occurring;\n\xe2\x80\xa2 Complete the analysis of existing data to assure \xe2\x80\x9cactual \xe2\x80\x9coutcomes are being tracked.\n10) Implementation of the American Recovery and Reinvestment Act (ARRA) of 2009 (all agencies that receive Recovery Act Funds)\n\xe2\x80\xa2 Provide timely and effective oversight of USDA Recovery Act monies and activities.\n \xe2\x88\x92 Implement proper controls and oversight to ensure accountability;\n \xe2\x88\x92 Distribute funding to participants that meet eligibility guidelines;\n \xe2\x88\x92 Validate that participants properly comply with program requirements; and\n \xe2\x88\x92 Ensure the program performance measures and accomplishments are fully supported.\nFiscal Year 2010 Accomplishments\n\xe2\x80\xa2 Established the Transparency and Accountability Reporting Division in the Office of the Chief Financial Officer to support the Department with\n timely and effective ARRA reporting and guidance to ensure greater transparency in Recovery Act implementation and delivery;\n\xe2\x80\xa2 Published departmental guidance on recipient reporting and trained agencies on the new guidance;\n\xe2\x80\xa2 Continued weekly Department of Agriculture Recovery Team (DART) meetings to provide forum for agencies to identify best practices, share\n lessons learned, and resolve implementation issues;\n\xe2\x80\xa2 Continued monitoring program eligibility;\n\xe2\x80\xa2 Conducted training via webinars to prepare recipients for their reporting responsibilities;\n\xe2\x80\xa2 FNS used ARRA funding to provide about $10.8 billion in additional Supplemental Nutrition Assistance Program (SNAP) benefits \xe2\x80\x93 about $890\n million in additional benefits each month to help combat hunger and provide needed resources to communities. SNAP is now serving over 42\n million low-income Americans each month;\n\xe2\x80\xa2 RD created web-based Dashboard to provide real-time ARRA statistics to identify low-performing program areas;\n\xe2\x80\xa2 RD created an ARRA project reporting database to ensure timely reporting of a project\xe2\x80\x99s progress;\n\xe2\x80\xa2 RD invested more than $120 million in ARRA projects benefitting tribes;\n\xe2\x80\xa2 Rural Business and Cooperative Service assisted rural small businesses with $1.5 billion in loan guarantees and grants;\n\xe2\x80\xa2 Rural Housing Service\xe2\x80\x99s (RHS) Community Facilities obligated $1 billion for essential rural facilities related to health care, public safety, education,\n public services, transportation, and cultural projects;\n\xe2\x80\xa2 Rural Utilities Service\xe2\x80\x99 (RUS) Broadband obligated $1.0 billion in projects to bring broadband service to rural areas;\n\xe2\x80\xa2 RUS\xe2\x80\x99 Water Programs obligated $2.8 billion to extend new or improved water service to 1.57 million rural customers;\n\xe2\x80\xa2 RHS\xe2\x80\x99 Single Family Homes Direct and Guaranteed Programs provided rural homeowners with more than $11.2 billion in financial assistance; and\n\xe2\x80\xa2 NRCS initiated Corrective Action Plans to resolve identified deficiencies in all states with Emergency Watershed Protection Program (EWPP)\n Floodplain Easements.\nPlanned Actions for Fiscal Year 2011\n\xe2\x80\xa2 Agencies will continue servicing loans and grants;\n\xe2\x80\xa2 Agencies and Department officials will continue monitoring recipient reporting to FederalReporting.gov;\n\xe2\x80\xa2 Agencies will continue to review all quarterly recipient reports and address any discrepancies;\n\xe2\x80\xa2 RD will track project performance and job verification;\n\xe2\x80\xa2 RD will participate in tribal conferences to provide additional guidance on recipient reporting;\n\xe2\x80\xa2 RD will extend terms and contract hires and temporary ARRA employees for one-year to assist in monitoring, auditing, generating special reports;\n\xe2\x80\xa2 FS will improve the ARRA contract and grant monitoring regarding payments by implementing corrective actions as recommended in the various FY\n 2010 OIG Fast Reports; and\n\xe2\x80\xa2 NRCS will conduct follow-up state visits to determine the effectiveness of new controls that have been implemented to prevent re-occurrence of\n deficiencies noted in previous studies related to ARRA, EWPP\xe2\x80\x93Floodplain Easements.\n\n\n\n\n Other Accompanying Information\n 185\n\x0cAppendix B \xe2\x80\x94 Improper Payment and Recovery Auditing Details\nSince 2000, agencies have reported efforts to reduce erroneous payments through the Office of Management and\nBudget\xe2\x80\x99s (OMB) Circular A-11, \xe2\x80\x9cPreparation, Submission, and Execution of the Budget\xe2\x80\x9d. Under the Improper\nPayments Information Act (IPIA), executive agencies must identify any of its programs that may be susceptible to\nsignificant improper payments, estimate the annual amount of improper payments and submit those estimates to\nCongress. Certain agencies were required to conduct recovery auditing. Specifically, agencies entering into\ncontracts worth more than $500 million in a fiscal year (FY) must execute a cost effective program for identifying\nerrors made in paying contractors and for recovering amounts erroneously paid to the contractors. On August 10,\n2006, government-wide guidance was consolidated into OMB Circular A-123, \xe2\x80\x9cManagement\'s Responsibility for\nInternal Control, Appendix C, Requirements for Effective Measurement and Remediation of Improper\nPayments.\xe2\x80\x9d Under this guidance, the U.S. Department of Agriculture (USDA) has 5 programs required to report\nunder Section 57 of OMB Circular A-11 and has identified an additional 11 programs at risk of significant\nimproper payments through the risk assessment process.\nUnder the Improper Payments Information Act of 2002 (IPIA), executive agencies must identify programs\nsusceptible to significant improper payments, estimate the annual amount of improper payments, and submit\nthose estimates to Congress.\nAccomplishments this year include:\n\xe2\x80\xa2 Measuring programs at risk of significant improper payments;\n\xe2\x80\xa2 Developing corrective action plans to reduce improper payments and establishing both reduction and recovery\n targets (where appropriate) for the programs at risk of significant improper payments;\n\xe2\x80\xa2 Complying with reporting standards; and\n\xe2\x80\xa2 Completing risk assessments for all low risk programs.\nUSDA\xe2\x80\x99s improper payment error rate of 5.37 percent for FY 2010 declined from 5.92 percent in FY 2009.\nDespite the drop, a $21.5 billion increase (30 percent) in high risk program outlays from FY 2009 to FY 2010 put\nUSDA\xe2\x80\x99s estimated improper payments at $5 billion for FY 2010. This figure compares to $4.3 billion in FY 2009.\nThe increase in outlays was largely attributable to the increase in demand for food and nutrition assistance due to\nthe economic downturn. The FY 2010 results demonstrate that improper payment error rates are being reduced\nand progress is being made:\n\xe2\x80\xa2 Seven USDA high risk programs reported improper payment error rates below their FY 2009 error rate;\n\xe2\x80\xa2 Six USDA high risk programs, representing 61 percent of USDA\xe2\x80\x99s total high risk program outlays, reported\n error rates below their reduction targets in FY 2009. This number exceeded USDA\xe2\x80\x99s goal of achieving\n reduction targets for 50 percent or more of the Department\xe2\x80\x99s total high risk program outlays;\n\xe2\x80\xa2 Forest Service\xe2\x80\x99s (FS) Wildland Fire Suppression Management Program error rate of 0.00 percent was below its\n reduction target of 0.02 percent, and equal to its FY 2009 error rate;\n\xe2\x80\xa2 Food and Nutrition Service\xe2\x80\x99s (FNS) Supplemental Nutrition Assistance Program (SNAP) error rate of 4.36\n percent was below its reduction target of 5.00 percent, and below its FY 2009 error rate of 5.01 percent. The\n SNAP error rate is a historic low for the program. This is the 6th year in a row that the SNAP error rate has\n been less than 6 percent;\n\xe2\x80\xa2 FNS\xe2\x80\x99 Child and Adult Care Food Program error rate of 0.99 percent was less than its reduction target of 1.46\n percent and the FY 2009 error rate of 2.07 percent;\n\xe2\x80\xa2 Rural Development\xe2\x80\x99s (RD) Rental Assistance Program error rate of 1.39 percent was less than its reduction\n target of 2.00 percent and its FY 2009 error rate of 2.06 percent;\n\xe2\x80\xa2 Farm Service Agency\xe2\x80\x99s (FSA) Market Assistance Loan Program error rate of 0.81 percent was less than its\n reduction target of 1.50 percent and its FY 2009 error rate of 2.56 percent;\n\xe2\x80\xa2 FSA\xe2\x80\x99s Loan Deficiency Payments Program error rate of 0.44% was below its reduction target of 0.60%;\n\n\n\n Other Accompanying Information\n 186\n\x0c\xe2\x80\xa2 FNS\xe2\x80\x99 National School Lunch Program (NSLP) error rate of 16.28% was below its FY 2009 error rate of\n 16.44%; however, this was above its reduction target of 15.60%;\n\xe2\x80\xa2 FNS\xe2\x80\x99 Women, Infants and Children Program error rate of 1.17% was below its FY 2009 error rate of 1.27%;\n however, this was above its reduction target of 0.80%; and\n\xe2\x80\xa2 FSA\xe2\x80\x99s Noninsured Assistance Program error rate of 11.65% was below its FY 2009 error rate of 14.18%,\n however, this was above its reduction target of 9.22%.\nThe root causes of improper payments are summarized into the error categories of verification, authentication,\nand administrative. Verification errors relate to verifying such recipient information as earnings, income, assets,\nwork status, etc. Authentication errors relate to authenticating the accuracy of qualifying for program specific\nrequirements, criteria or conditions. Administrative errors relate to the accuracy of the entry, classification, or\nprocessing of information associated with applications, supporting documents, or payments.\nFor FY 2010, the root causes of USDA improper payments were categorized as:\n\xe2\x80\xa2 49 % attributable to verification error; and\n\xe2\x80\xa2 51 % attributable to administrative error.\nUSDA establishes improper payment recovery targets for high risk programs, where appropriate, and actively\ncollects recoveries.\nActions taken by USDA during FY 2010 include:\n\xe2\x80\xa2 Implemented Departmental High-Dollar Quarterly Report of improper payments identified in high-risk\n programs and actions taken by agencies to recover overpayments;\n\xe2\x80\xa2 Designated a Senate-confirmed appointee as the Accountable Official for meeting improper payment\n reduction targets and consolidating program integrity activities;\n\xe2\x80\xa2 Developed and provided additional error measurements with semi-annual reporting;\n\xe2\x80\xa2 Provided an Annual Accountable Official Report to the USDA Inspector General for the USDA high-priority\n programs (SNAP and NSLP);\n\xe2\x80\xa2 Provided Departmental improper payments information for the Government-wide PaymentAccuracy.gov\n website that includes key indicators and statistics by program;\n\xe2\x80\xa2 Completed risk assessments for 32 programs in FY 2010 as scheduled on a three year cycle. No new programs\n were declared high risk as a result of the risk assessments;\n\xe2\x80\xa2 Recovered $310 million in improper payments, exceeding the Departmental recovery target of $54 million;\n\xe2\x80\xa2 Analyzed requirements and impacts of S. 1508, Improper Payments Elimination and Recovery Act of 2010\n and provided comments to OMB;\n\xe2\x80\xa2 Participated in OMB workgroups established under Executive Order (EO) 13520 \xe2\x80\x9cReducing Improper\n Payments\xe2\x80\x9d providing research and recommendations to OMB on actions to aid Federal agencies in reducing\n improper payments; and\n\xe2\x80\xa2 Led the Executive Order (EO) 13520, \xe2\x80\x9cReducing Improper Payments,\xe2\x80\x9d Forensic Accounting and Auditing\n Workgroup. The workgroup submitted recommendations to OMB for utilizing forensic accounting and\n auditing techniques to prevent improper payments.\nUSDA\xe2\x80\x99s goal is to continue to achieve error reduction and recovery targets established for FY 2011. In addition to\nmeeting the requirements of IPIA, the Department is developing plans to implement the new requirements from\nEO 13520, the Presidential Memorandum \xe2\x80\x9cEnhancing Payment Accuracy Through a Do Not Pay List,\xe2\x80\x9d the\nPresidential Memorandum \xe2\x80\x9cFinding and Recapturing Improper Payments,\xe2\x80\x9d and the Improper Payments\nElimination and Recovery Act (IPERA) of 2010.\n\n\n\n\n Other Accompanying Information\n 187\n\x0cUSDA\xe2\x80\x99s actions planned for FY 2011 include:\n\xe2\x80\xa2 Develop a Departmental action plan outlining the requirements and actions necessary to implement IPERA,\n EO 13520 \xe2\x80\x9cReducing Improper Payments\xe2\x80\x9d, and the other new Government-wide requirements to reduce,\n eliminate and recovery improper payments;\n\xe2\x80\xa2 Develop and implement policies, controls, procedures and checklists at appropriate levels to reduce improper\n payments;\n\xe2\x80\xa2 Create aggressive correction plans that target the verification and administrative root causes of errors and\n address internal control issues for each program;\n\xe2\x80\xa2 Provide training to field personnel and cooperative partners that address specific issues found in internal\n controls, control procedures and the potential risks of noncompliance;\n\xe2\x80\xa2 Sustain accountability at all levels by incorporating the employee\xe2\x80\x99s individual results into their annual\n performance evaluations;\n\xe2\x80\xa2 Provide grants and technical assistance to State agencies aimed at simplifying the application and eligibility\n determination systems of SNAP;\n\xe2\x80\xa2 Provide Departmental criteria for statutory, technical and other functionality of the Government-wide \xe2\x80\x9cDo\n Not Pay List\xe2\x80\x9d Web site being developed to allow agencies to verify eligibility against multiple databases before\n grants, contract, benefit award and/or payments are issued;\n\xe2\x80\xa2 Issue a Departmental payment recapture/recovery auditing contract available for all Departmental programs to\n address IPERA requirements for identifying and recovering overpayments; and\n\xe2\x80\xa2 Participate in interagency workgroups to assist OMB in developing Government-wide guidance for\n implementing IPERA, EO 13521, and other initiatives to reduce improper payments and recover\n overpayments.\nOMB provided a reporting template for IPIA in OMB Circular A-136, \xe2\x80\x9cFinancial Reporting Requirements.\xe2\x80\x9d\nThe template requires responses to specific issues. USDA\xe2\x80\x99s response to these issues follows.\n\n\n I. Describe your agency\xe2\x80\x99s risk assessments, performed subsequent to compiling your full program\n inventory. List the risk-susceptible programs identified through your risk assessments.\n\n\nThe Office of the Chief Financial Officer (OCFO) issued detailed guidance for the risk assessment process,\nincluding templates. OCFO also reviewed drafts. Programs with larger outlays were required to perform more\ndetailed assessments than smaller programs. For USDA\xe2\x80\x99s largest programs, the risk assessment process required\nthe following:\n\xe2\x80\xa2 Amount of improper payments needed to meet the reporting standards;\n\xe2\x80\xa2 Description of the program, including purpose and basic eligibility requirements;\n\xe2\x80\xa2 Definition of improper payments specific to the program;\n\xe2\x80\xa2 Program vulnerabilities linked to improper payments;\n\xe2\x80\xa2 Internal controls designed to offset the program vulnerabilities;\n\xe2\x80\xa2 Internal controls testing for selected programs;\n\xe2\x80\xa2 Listing of significant reviews and audits;\n\xe2\x80\xa2 Final determination of risk level;\n\xe2\x80\xa2 Planned future enhancements (optional); and\n\xe2\x80\xa2 Description of how improper payments are recovered (optional).\n\n\n\n Other Accompanying Information\n 188\n\x0cUSDA has identified the following 16 programs as susceptible to significant improper payments.\n\n Selection Methodology Agency Program\n Section 57 of OMB Circular A- Farm Service Agency (FSA), Commodity Marketing Assistance Loan Program (MAL)\n 11 Credit Corporation (CCC)\n Food and Nutrition Service (FNS) Supplemental Nutrition Assistance Program (SNAP)\n National School Lunch Program (NSLP)\n School Breakfast Programs (SBP)\n Special Supplemental Nutrition Program for Woman, Infants and\n Children (WIC)\n USDA Identified as FSA, CCC Milk Income Loss Contract (MILC) Program\n Susceptible to Significant Loan Deficiency Payments (LDP)\n Improper Payments\n Direct and Counter-Cyclical Payments (LCP)\n Conservation Reserve Program (CRP)\n Miscellaneous Disaster Programs (MDP)\n Noninsured Assistance Program (NAP)\n Food Nutrition Service (FNS) Child and Adult Care Food Program (CACFP)\n Forest Service (FS) Wildland Fire Suppression Management (WFSM)\n Rural Development (RD) Rental Assistance Program (RAP)\n Risk Management Agency (RMA) Federal Crop Insurance Corporation (FCIC) Program Fund\n Natural Resources Conservation Service Farm Security and Rural Investment Act Programs (FSRIP)\n (NRCS)\n\n\n\n\n II. Describe the statistical sampling process conducted to estimate the improper payment rate for each\n program identified.\n\n\n Agency Program Sampling Process\n FNS Supplemental Nutrition Statistical Sampling\n Assistance Program Each month, States select a statistically random sample of cases from a universe of all households\n (SNAP) receiving SNAP benefits for that given month. Most States draw the samples using a constant\n sampling interval. There are some States which employ simple random and/or stratified sampling\n techniques. Required annual sample sizes range from 300 for State agencies with small SNAP\n populations to more than 1,000 for larger States. The average is approximately 950 per State.\n States are required to complete at least 98 percent of selected cases deemed to be part of the\n desired SNAP universe. Federal sub-samples are selected systematically by FNS from each State\xe2\x80\x99s\n completed reviews. These sample sizes range from 150 to 400 per State.\n Error Rate Calculation\n The National payment error rate is calculated using a multi-step process:\n \xe2\x80\xa2 Each State agency conducts quality control (QC) reviews of the monthly sample of cases. The\n QC review measures the accuracy of eligibility and benefit determinations for each sampled\n case against SNAP standards. State agencies are required to report to FNS the findings for\n each case selected for review.\n \xe2\x80\xa2 FNS then sub-samples completed State QC reviews and re-reviews selected individual case\n findings for accuracy. Based on this sub-sample, FNS determines each State agency\xe2\x80\x99s official\n error rate using a regression formula.\n \xe2\x80\xa2 The national payment error rate then is computed by averaging the error rate of the active cases\n for each State weighted by the amount of issuance in the State.\n\n\n\n\n Other Accompanying Information\n 189\n\x0c Agency Program Sampling Process\nFNS National School Lunch \xe2\x80\xa2 USDA conducts studies approximately every 5 years to assess the level of error in program\n Program (NSLP) payments because detailed information on the circumstances of the NSLP and SBP participating\n households are not collected administratively. The November 2007 \xe2\x80\x93 NSLP/SBP Access,\n Participation, Eligibility and Certification (APEC) Study \xe2\x80\x93 makes use of a national probability\n sample of school food authorities (SFAs), schools, certified students and their households, and\n households that applied and were denied for program benefits in School Year 2005-06.\n \xe2\x80\xa2 A stratified random sample of 78 unique public SFAs was selected in the first stage of sampling.\n Stratification variables included geographic region, prevalence of schools having a SBP and\n those using Provision 2/3, and a poverty indicator. For SFAs that do not have Provision 2/3\n schools, three schools, on average, were selected for inclusion in studying the second stage of\n sampling. Schools were stratified into two groups: 1) elementary schools and 2) middle and high\n schools. The school sample included both public and private schools. A total of 264 schools\n participated in the study (216 non-Provision 2/3 schools, 24 Provision 2/3 schools in their base\n year, and 24 Provision 2/3 schools not in their base year). For the third stage of sampling,\n samples of households were selected in 240 of these schools to yield completed interviews for\n about 3,000 students certified for free and reduced-price meals, and 400 denied applicant\n households.\n \xe2\x80\xa2 The sample of approved and denied applicant households was augmented by sampling of\n applications from Provision 2/3 schools in which household surveys were not conducted.\n Application reviews of about 6,800 students approved for free and reduced-price meals and\n more than 1,000 denied applicants were conducted to estimate the case error rate due to\n administrative error.\n \xe2\x80\xa2 Data on counting and claiming errors were collected in all schools selected for application\n reviews. On randomly selected school days, field staff observed approximately 100 lunch\n transactions at each of the 245 schools participating in NSLP, as well as 50 breakfast\n transactions at each of the 218 schools participating in SBP. Cashier error was estimated using\n information from these meal transactions. Data on school-recorded daily meal totals across all\n points of sale, aggregated meal counts reported to the district, and total meals submitted to the\n State agency for reimbursement were examined to determine claiming errors.\n \xe2\x80\xa2 To update the erroneous payment rate estimates in NSLP without having to conduct another full\n round of primary data collection, a series of econometric models were developed that captured\n the relationship between characteristics of the districts that participated in the APEC study, and\n their estimated rates of certification error. Estimated coefficients from these models were used in\n conjunction with updated values of district characteristics obtained from the School Food\n Authorities Verification Summary Reports to predict certification error. Certification error rates\n were then translated into amounts and rates of erroneous payments in each district. Aggregating\n the district level estimates produced a national measure of predicted erroneous payments.\nFNS School Breakfast Program The statistical sampling process for this program is similar to NSLP. See the NSLP description.\n (SBP)\nFNS Special Supplemental FNS plans to continue periodic examinations of WIC vendor and certification error.\n Nutrition Program for \xe2\x80\xa2 Vendor Error \xe2\x80\x94 The 2005 vendor error study employed a nationally representative probability\n Women, Infants and sample of WIC vendors. A two-stage clustered design was developed to facilitate over-sampling\n Children (WIC) of WIC-only stores. Current lists of authorized WIC vendors were collected from the 45 States\n plus the District of Columbia that use retail vendors from delivery of benefits. These lists were\n used to establish the retail vendors for delivery of benefits and the national sample frame of\n vendors active during the study period. Geographic Information System software was used to\n form 365 primary sampling units (PSU) in contiguous counties. Most PSUs had at least 80\n vendors. The study selected 100 PSUs using probability non-replacement sampling with\n probabilities proportional to the size of the PSU. About 16 vendors and 4 reserve vendors were\n selected from each of the 100 PSUs. The final sample size (unweighted) was 1,768 vendors.\n The study compared the purchase price paid by the compliance buyer with i) observed shelf\n prices, and ii) the purchase amount the vendor reported to the State to yield estimates of\n overcharge and undercharge.\n\n\n\n\n Other Accompanying Information\n 190\n\x0c Agency Program Sampling Process\n \xe2\x80\xa2 Certification Error \xe2\x80\x94 The 1998 WIC Income Verification Study was designed to provide\n information on the characteristics of a nationally representative sample of WIC participants in the\n contiguous United States, certified for the program that spring. The sample was based on a\n multi-stage sample design, with 50 geographic PSUs selected at the first stage, 79 local WIC\n agencies selected at the second stage, and 178 WIC service sites selected at the third stage.\n WIC participants were randomly sampled for the study at the 178 WIC service sites as they\n appeared for WIC certification. In-person interviews were completed with 3,114 WIC participants\n at the 178 WIC service sites. The estimate of improper payments comes from a follow-up in-\n home survey conducted with approximately one out of every three persons selected for the in-\n person interviews. The in-home survey was designed to verify income information through\n review of household income documents. In-home interviews were completed with 931\n respondents.\nFNS Child and Adult Care Food The national estimate of erroneous payments for the sponsor error component is based on a\n Program (CACFP) nationally representative sample of sponsor files for 660 Family Day Care Homes (FDCH) in 60\n distinct sponsors in 14 States. The tiering status of FDCHs was first verified by determining their\n school area eligibility (at least 50 percent of students were approved for free/reduced-price meals\n and Census Block Group area eligibility (at least 50 percent of children at or less than 185 percent\n of the Federal P=overty Guidelines)) for Tier I and Tier II status. A sponsor of an FDCH not verified\n through area eligibility was contacted to secure additional documentation in support of the FDCH\xe2\x80\x99s\n tiering status, such as income and categorical eligibility.\nFSA/CCC Marketing Assistance Loan \xe2\x80\xa2 A statistical sample of high risk programs is conducted by the FSA County Office Review\n Program (MAL) Program (CORP) under the direction of the Operations Review and Analysis Staff (ORAS).\n \xe2\x80\xa2 Testing is conducted using statistically sound samples drawn from the total population of\n program payments made from September 2008 through August 2009. A professional statistician,\n under contract to FSA, is used to design the sampling approach, define the sample size, and\n identify the sample items. Sample size is chosen to achieve a 90 percent two-sided confidence\n level.\n \xe2\x80\xa2 Once the universe of the program is determined for the target fiscal year, a stratified two-stage\n sampling approach is used. County offices (COFs) making payments for the target program are\n selected in the first stage and individual payments made or contracts reviewed by COFs are\n selected in the second stage.\n \xe2\x80\xa2 That sample list of individual contracts or payments is provided to the members of the CORP\n staff covering the respective States. The CORP staff visits each of the COFs shown on the list\n and reviews the individual contracts or payments identified in the statistically sound sample. The\n CORP reviewers use a list of program division provided criteria that are drawn from legal and\n program administrative guidance. Findings of non-adherence to the criteria related to the\n individual contracts or payments in the sample will identify potential improper payments made.\n The results of that review are summarized and submitted to the CORP national office staff to be\n analyzed by the contractor statistician. That contractor determines the rate of improper\n payments based on the data provided by the CORP staff that visited the COFs and completed\n the actual review of documents.\nFSA Milk Income Loss Contract See the process described in the MAL discussion. The same process was used for this program.\n Program (MILC)\nFSA Loan Deficiency Payments See the process described in the MAL discussion. The same process was used for this program.\n (LDP)\nFSA Direct and Counter- See the process described in the MAL discussion. The same process was used for this program.\n Cyclical Payments (DCP)\nFSA Conservation Reserve See the process described in the MAL discussion. The same process was used for this program.\n Program (CRP)\nFSA Miscellaneous Disaster See the process described in the MAL discussion. The same process was used for this program.\n Programs (MDP)\nFSA Noninsured Assistance See the process described in the MAL discussion. The same process was used for this program.\n Program (NAP)\n\n\n\n\n Other Accompanying Information\n 191\n\x0c Agency Program Sampling Process\nFS Wildland Fire Suppression WFSM employs monetary unit sampling. Transactions coded to the Wildland Fire Suppression\n Management (WFSM) Fund are systematically analyzed and reviewed.\n Two samples were selected by systematic random sampling with probability proportional to size\n (dollar amount). Sample size determination was based on total transaction amounts through\n 6/30/2009 for sample one. The second sample size determination was based on total transaction\n amounts from 7/01/2009 through 9/30/2009. Due to the seasonality of the final amounts, the first\n nine months were sampled as a higher dollar rate (conservative rate) than the last three months.\n The final three months were sampled at the dollar rate for the entire balance.\n To ensure the validity of the sample design, sample sizes, and measurement methodology, a\n professional statistician from the University of New Mexico was consulted. The sample was\n selected using a 90 percent confidence level, with a precision range of 2.5 percent. Software used\n for sample selection was SAS 9.2 for Windows.\nRD Rental Assistance RD reviewed the sampling plan developed by the U.S. Department of Housing and Urban\n Program (RAP) Development for its studies. RD statisticians prepared a similar plan for this report. This report is\n based on a review of tenants receiving rental assistance (RA) during FY 2008. The sampling plan\n consisted of 666 RA payments from a universe of 3,411,380, or .02 percent. The methodology\n produced a sample with a 99-percent confidence level. This year, the audit unit from the Centralized\n Servicing Center (CSC) conducted the study rather than the RD field staff that were used in\n previous years. The study required CSC to evaluate tenant files and income calculations.\n The only parameter used to determine the eligible universe was the RA payment. No other data\n element, such as location, size of property, number of units, and availability of other rental\n assistance (such as Section 8) was a consideration. The statisticians were provided a data extract\n from the Multi-Family Housing Information System. The extract contained a list of all tenants\n receiving RA during FY 2008. The data included month of payment, project name, project identifier\n (case number/project number) and tenant name and unit number. From the data extract, the\n statisticians selected the sample by a systematic sample technique.\n Once the sample was identified, a letter was sent to the borrower/management agents that\n explained the process, provided the list of tenant payments to be reviewed, and provided a list of\n documents that needed to be provided to the Centralized Servicing Center (CSC) for review. The\n data received from the borrower/management agent were used to compare agency records. The\n study required CSC to complete the survey for the selected tenant payments. There was to be no\n substitution of the selected payment and, if the management agent was unable to submit the file,\n the payment would be considered improper.\nRMA Federal Crop Insurance RMA completed the random 2006, 2007, and 2008 crop year indemnities to review during 2007,\n Corporation Program Fund 2008, and 2009. For FY 2010 reporting, RMA sampled and reviewed the 2008 crop year, using\n (FCIC) those results to replace the 2006 crop year results. This process allowed RMA to maintain a running\n average error rate for the three most recent crop years. RMA will repeat this process for 3 years to\n compile random indemnity reviews, and build a database that will identify the RMA program-error\n rate and identify any discernable trends. Samples are drawn by the compliance staff. The staff\n oversees the compliance review database and data quality control. Limited resources make it\n impractical to conduct a statistically valid program review each year. Despite these limits, in\n combination with the National Operations Reviews conducted by RMA compliance personnel, these\n random reviews of paid indemnities should provide the program with sufficient data to establish an\n acceptable error rate for the purposes of the IPIA.\nNRCS Farm Security and Rural NRCS determined the universe size of payments for all the programs by using all transactions for\n Investment Act programs FY 2009 entered into the accounting system against general ledger account 4902 and Treasury\n (FSRIP) Symbols 12_1004. Transaction codes were identified and extracted which represented payments\n against the individual program fund codes to create a universe of payments for each individual\n program.\n Based upon last year\xe2\x80\x99s results and conversations with the individual Program Managers, NRCS\n projected the anticipated rate of occurrence. This occurrence would be the error rate from the\n previous years\xe2\x80\x99 sampling, factoring in any substantial changes made which mitigates improper\n payment risk found in prior IPIA efforts, external, and internal audits or reviews.\n NRCS estimated the precision range, i.e., the upper and lower bounds around the estimated rate of\n occurrence as 5.00 percent (+/- 2.50 percent) based upon conversations with the program\n managers. While OMB guidance recommended a 90- percent confidence level, NRCS used a more\n rigorous confidence level of 95 percent for the sample since accounting and financial applications\n\n\n\n\n Other Accompanying Information\n 192\n\x0c Agency Program Sampling Process\n typically use that confidence level. Based upon the four variables above (universe size, anticipated\n occurrence rate, precision range, and confidence level), the agency calculated the necessary\n sample size.\n Using a random number generator, NRCS selected payments for the sample. For program\n payments made through ProTracts system, payment amounts were aggregated by payment\n document number. ProTracts produced a payment transaction for each component of a payment\n request. This resulted in testing of the entire payment instead of a portion and simplifies the\n research required.\n A complete copy of the contract file was requested from the field office. The field office was required\n to verify highly erodible land/wetland conservation compliance, and obtain adjusted gross income\n compliance documentation from the participant. Headquarters financial management (FMD)\n personnel audited the contract information against the program\xe2\x80\x99s business process using a\n standard template developed for each individual program. The template ensured consistency in the\n reviews, and incorporated tests for known causes of improper payments, issues identified by the\n program managers and internal controls implemented because of prior internal and external audits\n and reviews.\n\n\n\n\n III. Describe the Corrective Action Plans for reducing the estimated rate of improper payments. Include\n in this discussion what is seen as the cause of errors and the corresponding steps necessary to\n prevent future occurrences. If efforts are already underway, and/or have been ongoing for some\n length of time, it is appropriate to include that information in this section.\n\n\n\n Agency Program Corrective Actions Planned\nFSA/CCC Marketing Assistance MAL improper payments were primarily attributable to administrative errors.\n Loan program (MAL) Causes of improper payments include:\n \xe2\x80\xa2 An acceptable acreage report was not obtained;\n \xe2\x80\xa2 All required signatures were not obtained on the storage note and security agreement before\n disbursement; and\n \xe2\x80\xa2 Loan quantity amount was not supported by acceptable documentation.\n Actions taken or that will be taken to reduce the weaknesses identified are as follows:\n a. Broad Scope Actions Taken:\n \xe2\x80\xa2 FSA has committed to reducing improper payments and program weaknesses that contribute to\n improper payments;\n \xe2\x80\xa2 FSA has taken actions to correct its deficiencies in many areas, and has incorporated the priority of\n reducing improper payments into its strategic planning documents; and\n \xe2\x80\xa2 Compliance reviews and spot-checks are required to ensure the accuracy of payments and integrity\n of FSA programs. Annually, based on a statistical sampling method, producers nationwide are\n selected for compliance review and spot-check. COFs are required to complete spot-checks and\n reviews for the various programs and activities in which the selected producers participate for the\n year, and record the results of these reviews in the National Compliance Review database. This\n reporting mechanism allows the National office to monitor the overall integrity of each program\n being implemented.\n b. Actions Already Taken that Impact All Causes of Improper Payments Identified:\n \xe2\x80\xa2 Trained field personnel on improper payments and educated them on the importance of control\n procedures as well as the potential risks of noncompliance. Training was delivered through various\n means including in person and via USDA\xe2\x80\x99s training tool, AgLearn, and is being followed up with\n communications and job aid to help facilitate compliance controls;\n \xe2\x80\xa2 Integrated the employee\xe2\x80\x99s individual performance results related to reducing improper payments\n into his/her annual performance rating;\n\n\n\n Other Accompanying Information\n 193\n\x0c Agency Program Corrective Actions Planned\n \xe2\x80\xa2 Utilized program specific checklists for COF employees to use before payment. County Executive\n Directors and District Directors review the completed checklists to help identify apparent internal\n control deficiencies and address additional training needs to reduce future errors;\n \xe2\x80\xa2 Issued various National Notices and handbook amendments to State and county offices, providing\n them with instructions to properly disburse and process repayments related to MAL benefits;\n \xe2\x80\xa2 Contacted State office (SO) managers where the majority of improper payments were identified,\n according to the statistical sample, to determine possible training and/or job aids the SO and COF\n staff may need to assist in facilitating compliance to controls;\n \xe2\x80\xa2 Issued a notice for each program for the FY 2008 National CORP review of improper payments\n providing detailed findings discovered during the FY 2008 statistical sample, including established\n policy and procedure references for each finding;\n \xe2\x80\xa2 Issued various national notices to SOs and COFs re-enforcing current program policies and\n procedures; and\n \xe2\x80\xa2 Conducted a 2008 National Farm Bill training conference that included a specific presentation\n pertained to necessary internal control procedures and action expected upon the issuance of\n national CORP review notices pertaining to improper payments. PowerPoint presentations of each\n of the respective training sessions were posted to the FSA Intranet for immediate reference for SOs\n and COFs to use in conducting subsequent training sessions for all the applicable FSA employees\n within a respective state.\n c. Actions That Will be Taken that Impact All Causes of Improper Payments Identified:\n \xe2\x80\xa2 Provide a notice to SOs and COFs providing the detailed findings discovered during the FY 2010\n program specific statistical sample including established policy and procedure references for each\n finding;\n \xe2\x80\xa2 Reinforce current program policies regarding program compliance through the issuance of National\n notices and handbook amendments to SOs and COFs personnel;\n \xe2\x80\xa2 Improve the quality of field guidance by implementing a process whereby program directives are\n vetted by at least six field office employees before directives are approved and issued Nation-wide;\n \xe2\x80\xa2 Review existing policy and procedures to determine program compliance inefficiencies and\n eliminate inadequate program compliance controls; and\n \xe2\x80\xa2 Contact State office managers where the majority of improper payments were identified during the\n 2010 IPIA reviews to facilitate necessary corrective actions in regard to training or clarifications\n regarding procedures and policies.\nFNS Supplemental SNAP improper payments were primarily attributable to administrative and verification errors.\n Nutrition Assistance Causes of improper payments include:\n Program (SNAP) Improper payments occurred when a participating household is certified for too many or too few\n benefits compared to the level for which they are eligible. This can result from incomplete or inaccurate\n reporting of income and/or assets by participants at the time of certification. It also can occur from\n changes subsequent to certification or errors in determining eligibility or benefits by caseworkers.\n Eligibility worker delays in action or inaction taken on client reported changes also can cause of\n improper payments.\n An analysis of the FY 2009 completed statistical sample revealed that approximately 65.71 percent of\n all variances occurred before or at the most recent certification/recertification. Additionally, 69.40\n percent of the errors were State agency caused. About half of the errors (54.60 percent) were income\n related and caused by client misreporting or the agency misapplying the reported income. Misreporting\n or misapplying deductions was the second largest source of errors at 27.75 percent.\n Steps that are (or will be) taken to address specific findings in the last statistical sample\n Program regulations require State agencies to analyze data to develop corrective action plans to\n reduce or eliminate program deficiencies. A State with a high error rate must develop a quality control\n (QC) corrective action plan to address deficiencies revealed through an analysis of its own QC data. A\n State with an excessive error rate will be required to invest a specified amount (depending on its error\n rate and size) designated specifically to correct and lower its error rate. The State also will face further\n fiscal penalties if it fails to lower its error rate in a future fiscal year.\n\n\n\n\n Other Accompanying Information\n 194\n\x0c Agency Program Corrective Actions Planned\n Steps that are (or will be) taken to improve the overall control environment and improper\n payments\n FNS, through its regional offices, works directly with States to impart the importance of payment\n accuracy and correct payments to State leadership. The agency also helps those leaders develop\n effective corrective action strategies to reduce payment errors. Regional offices provide many forms of\n technical assistance to States, such as:\n \xe2\x80\xa2 Analyzing data;\n \xe2\x80\xa2 Reviewing and monitoring corrective action plans;\n \xe2\x80\xa2 Developing strategies for error reduction and corrective action;\n \xe2\x80\xa2 Participating on boards and in work groups; and\n \xe2\x80\xa2 Hosting, attending, and supporting payment accuracy conferences.\n FNS administers a State Exchange Program that provides funds to States to facilitate travel for\n obtaining, observing, and sharing information on best practices, and effective techniques for error\n reduction. Coalitions have been formed among States to promote partnerships, information exchange\n and collaborative efforts. These efforts address mutual concerns and support development of effective\n corrective action.\nFNS National School NSLP improper payments were primarily attributable to verification and administrative errors.\n Lunch Program Causes of improper payments include:\n (NSLP) \xe2\x80\xa2 Benefit calculation error or duplicate payments;\n \xe2\x80\xa2 Lack of proper documentation or inadequate supporting documentation; and\n \xe2\x80\xa2 Fraud or misrepresentation by program participants or others.\n FNS has worked closely with OMB, Congress, the States, schools, and advocacy partners for two\n decades to gain a better understanding of erroneous payments, and develop and implement initiatives\n to address them.\n Strengthened the Certification Process through Legislative Program Reauthorization\n FNS worked with Congress to develop the Child Nutrition and WIC Reauthorization Act of 2004 (CNR)\n to enact program changes that address school meals certification problems. CNR strengthened the\n certification process by:\n \xe2\x80\xa2 Requiring SNAP direct certification for free meals in all school districts, and continuing authority for\n optional direct certification using data from the Temporary Assistance for Needy Families and the\n Food Distribution Program on Indian Reservations;\n \xe2\x80\xa2 Simplifying the certification process by requiring a single application for all eligible children in a\n household;\n \xe2\x80\xa2 Requiring eligibility determinations to be in effect for the entire school year;\n \xe2\x80\xa2 Modifying verification requirements, and adding authority for optional direct verification of children\xe2\x80\x99s\n eligibility;\n \xe2\x80\xa2 Requiring State agencies to conduct additional administrative reviews of school districts with higher\n rates of error;\n \xe2\x80\xa2 Requiring increased efforts to obtain household response to application verification requests; and\n \xe2\x80\xa2 Requiring districts with high rates of non-response to verification to target subsequent year\n verification activity toward error-prone applications.\n FNS continues to fully implement all the CNR provisions designed to improve program accountability.\n Improved State and Federal Oversight and Strengthen Program Integrity\n FNS conducted the following to improve oversight and technical assistance:\n \xe2\x80\xa2 Required annual training for schools on certification and accountability issues;\n \xe2\x80\xa2 Secured funding from Congress in 2004 for FNS technical assistance to help State and local\n partners reduce administrative errors and improve program integrity;\n \xe2\x80\xa2 Provided ongoing guidance and training materials to State agencies to improve school monitorings;\n \xe2\x80\xa2 Issued a revised eligibility manual, which contains information on determining students\xe2\x80\x99 eligibility for\n free and reduced price meals under 7 Code of Federal Regulations Parts 210 and 220, the National\n School Lunch Program (NSLP), including after school snacks and commodity schools, and the\n School Breakfast Program (SBP);\n\n\n\n\n Other Accompanying Information\n 195\n\x0c Agency Program Corrective Actions Planned\n \xe2\x80\xa2 Trained more than 500 State and federal reviewers on the Coordinated Review Effort (CRE)\n process and forms to ensure that performance standards related to meal counting and claiming and\n serving reimbursable meals are met. Also, the CRE Guidance, is being updated to include current\n procedures to be utilized during CRE Reviews. State agencies are implementing the CRE\n procedures that were identified during the training sessions;\n \xe2\x80\xa2 Pursuant to the CNR, FNS released applications for the fourth round of Direct\n Certification/Verification grant funding in FY 2009. These grants are available to State agencies to\n assist in implementing mandatory direct certification, direct verification, and other provisions of CNR\n related to determining eligibility to receive benefits in NSLP and SBP. Child Nutrition and SNAP\n State agencies are eligible to apply for funds. A series of grants were awarded in FY 2006-09. CNR\n provided $8.3 million for this purpose.\n \xe2\x80\xa2 FNS annually releases a solicitation for funding to State agencies for Administrative Reviews and\n Training grants. This funding is available to perform administrative reviews and training of selected\n local educational agencies identified by the States as having demonstrated a high level of, or high\n risk for, administrative error in the NSLP. A total of $4 million was set aside in FY 2005 and for each\n fiscal year thereafter.\n Additional Action Planned\n Planned efforts include:\n \xe2\x80\xa2 Implementing improvements in data reporting systems, and have launched an improved we-based\n system for States to report the results of verification activity. We anticipate that this reporting\n mechanism will improve the accuracy and timeliness of this data. In addition, we have been actively\n emphasizing to States the importance of using this and other data sources, such as the CRE Data\n Report to identify and target corrective action;\n \xe2\x80\xa2 Continue the APEC study every five years, which would enable FNS to estimate and measure\n changes in erroneous payments over time, and help inform FNS, Congress, the States, and\n advocacy partners on the development of additional guidance, training, and policy options; and\n \xe2\x80\xa2 Implement an improved web-based system for States to report the results of verification activity\n annually. This report will improve the accuracy and timeliness of reporting and provide States with a\n way to identify and target corrective actions.\nFNS School Breakfast SBP improper payments were primarily attributable to authentication and administrative errors.\n Program (SBP) The corrective actions planned for this program are similar to NSLP. See the NSLP description.\nFNS Special Supplemental WIC improper payments were primarily attributable to verification errors.\n Nutrition Program for Causes of improper payments include:\n Women, Infants and \xe2\x80\xa2 Vendor overcharges and undercharges; and\n Children (WIC) \xe2\x80\xa2 Program participants were income ineligible.\n Actions to Reduce Improper Payments\n Vendor Error:\n The Child Nutrition Act was amended in 1996 to require the disqualification of WIC vendors who\n had been disqualified by SNAP. It also was amended in 1998 to require permanent disqualification\n of vendors who had been convicted of trafficking and illegal sales. The WIC/FSP Vendor\n Disqualification Final Rule implemented these requirements and also mandated three-year\n disqualifications for overcharging and charging for food not received. The WIC Food Delivery Final\n Rule mandated nationwide standards for vendor authorization, training, and monitoring. FNS will\n annually estimate and report improper payments to vendors based on information on vendor\n investigations routinely conducted by the State WIC Agencies and reported to FNS.\n \xe2\x80\xa2 Certification Error:\n FNS plans to continue periodic examinations of certification error in the WIC Program. The Child\n Nutrition Act was amended in 1998 to require income documentation for WIC Program applicants in all\n States. The Final WIC Policy Memorandum #99-4, \xe2\x80\x9cStrengthening Integrity in the WIC Certification\n Process,\xe2\x80\x9d the WIC Certification Integrity Interim Rule, and the WIC Certification Integrity Final Rule\n implemented this requirement. The WIC Food Delivery Final Rule mandated 1-year disqualifications for\n the most serious participant violations, including dual participation and misrepresentation of income.\n The WIC Miscellaneous Final Rule required State agencies to prevent such conflicts of interest as\n clinic staff certifying themselves, close friends, or relatives, and also required State agencies to\n maintain information on participant and employee fraud and abuse.\n\n\n\n\n Other Accompanying Information\n 196\n\x0c Agency Program Corrective Actions Planned\n FNS plans to provide the results fo the measurements of improper payments due to certification error\n for FY 2009 payments, with the initial improper payment amount and error rate available in March\n 2011.\nFNS Child and Adult Care CACFP improper payments were primarily attributable to verification errors.\n Food Program Causes of improper payments include:\n (CACFP) \xe2\x80\xa2 Family Day Care Homes (FDCH) error in reporting the number of meals eligible for reimbursement;\n and\n \xe2\x80\xa2 Sponsor error in determining a participating FDCH\xe2\x80\x99s reimbursement tier.\n Actions to Reduce Improper Payments\n CACFP has three distinct parts: Child Care Centers, Adult Day Care Facilities, and Family Day Care\n Homes (FDCH). Overall program funding is provided to State agencies which provide funds to\n sponsoring organizations to pay for claims for reimbursable meals served at provider sites. Sites can\n be as large as an institution or as small as a household. Each part of CACFP has its own\n reimbursement structure.\n Payments and claim information are transferred among FNS, State agencies, program sponsors, and\n program sites. Each such transaction represents a risk for improper payment. Because requirements\n vary significantly for each different type of program sponsor and site, a full and rigorous assessment of\n the rate of improper payments is extremely complex.\n The original plan was to develop a program-wide study which would examine reimbursements for\n meals served and develop program error measurements that complied with the requirements of the\n IPIA. Because of the complexities of the program, FNS estimated that it would cost $20 million to\n measure improper payments at the precision required by IPIA. This amount has not been provided.\n In lieu of funding for a program-wide measurement, FNS has identified the FDCH component of this\n program as potentially high risk. FDCHs participate in CACFP through public or private nonprofit\n sponsoring organizations. FDCH improper payments are most likely caused by sponsor error in\n determining a participating home\xe2\x80\x99s reimbursement tier (tiering error) or by FDCH error in reporting the\n number of meals which are eligible for reimbursement (claiming error).\n Two activities are underway which provide information on improper payments in the FDCH component\n of CACFP. A third activity was pilot tested during FY2007.\n \xe2\x80\xa2 Child Care Assessment Project (CCAP)\xe2\x80\x94In the Spring of 2004, FNS began the CCAP. This\n project was designed to measure the effectiveness of efforts to improve the integrity of CACFP\n family day care homes and provide information from a broadly representative national sample of\n sponsors and providers. Over a four year period, FNS conducted comprehensive on-site\n assessments of a sample of participating family day care home sponsors. These assessments were\n designed to analyze the effectiveness of FNS regulatory and policy initiatives on program\n performance. They offered insights on the control points in the claiming and reimbursement process\n that most frequently cause or contribute to improper payments. FNS implemented the Targeted\n Management Evaluation process for FY 2010 and FY 2011, in response to identified areas of\n management weakness. The information from this process will help to estimate CACFP erroneous\n payments pursuant to IPIA.\n \xe2\x80\xa2 Tiering Error\xe2\x80\x94FNS has developed an annual sponsor tiering error measure and tested it. CACFP\n sponsors are responsible for determining whether family day care homes receive meal\n reimbursement at the higher rate (Tier 1) or lower rate (Tier 2). The third annual data collection was\n conducted to determine a nationally representative sponsor tiering determination error rate.\n \xe2\x80\xa2 Claiming Error\xe2\x80\x94FNS has identified two potential methods of estimating the risk of claiming error:\n \xe2\x88\x92 State data approach: Use data from State monitoring visits of FDCHs.\n \xe2\x88\x92 Sponsor data approach: Federal staff select a random sample of sponsoring organizations\n and from each use a random selection of the sponsor\xe2\x80\x99s monitoring visits of FDCHs.\n Both approaches compare the number of participants observed during a monitoring visit to the average\n number of meals claimed for reimbursement for the meal or snack closest to the time of the visit. FNS\n pilot-tested both approaches in conjunction with the CCAP reviews. FNS concluded that comparing\n meal claims to a sponsor\xe2\x80\x99s report of the number of children observed during a monitoring visit does not\n provide a reliable estimate of family home day care meal claiming error.\n\n\n\n\n Other Accompanying Information\n 197\n\x0c Agency Program Corrective Actions Planned\n FNS has contracted with Mathematica Policy Research, Inc. to evaluate the feasibility of three different\n data collection methods for validating FDCH meal reimbursement claims. The pretest found that parent\n recalls hold promise for validating whether meals claimed for children of interviewed parents are\n erroneous. A plan is being developed to further evaluate the use of parent-recall interviews in validating\n sponsor submitted meal claims for FDCHs.\nFSA Milk Income Loss MILC improper payments were primarily attributable to administrative errors.\n Contract Program Causes of improper payments include:\n (MILC) \xe2\x80\xa2 Incorrect payee share calculation;\n \xe2\x80\xa2 Wetland conservation certification not on file; and\n \xe2\x80\xa2 Income ineligibility.\n For MILC corrective actions, see the MAL section. The same corrective actions apply to this program.\nFSA Loan Deficiency LDP improper payments were primarily attributable to administrative errors.\n Payments (LDP) Causes of improper payments include:\n \xe2\x80\xa2 Incorrect rate used to calculate payment;\n \xe2\x80\xa2 Producer did not have beneficial interest in the commodity; and\n \xe2\x80\xa2 Producer did not have risk in producing the crop.\n For LDP corrective actions, see the MAL section. The same corrective actions apply to this program.\nFSA Direct and Counter- DCP improper payments were primarily attributable to administrative errors.\n Cyclical Payments Causes of improper payments include:\n (DCP) \xe2\x80\xa2 Payee did not have enough cropland interest to support claim;\n \xe2\x80\xa2 Required signatures and/or acreage reports were not on file; and\n \xe2\x80\xa2 Payment did not take into account required base acres reduction.\n For DCP corrective actions, see the MAL section. The same corrective actions apply to this program.\nFSA Conservation CRP improper payments were primarily attributable to administrative and verification errors.\n Reserve Program Causes of improper payments include:\n (CRP) \xe2\x80\xa2 Cost share amount was incorrect;\n \xe2\x80\xa2 Conservation reserve contract or plan of operation was not on file or missing signatures; and\n \xe2\x80\xa2 Payee share calculation incorrect.\n For CRP corrective actions, see the MAL section. The same corrective actions apply to this program.\nFSA Miscellaneous MDP improper payments were primarily attributable to administrative errors.\n Disaster Programs Each fiscal year\xe2\x80\x99s payment data represents different disaster response programs based on authorities\n (MDP) provided by legislation passed by Congress.\n Causes of improper payments include:\n \xe2\x80\xa2 Calculated payment amount is incorrect;\n \xe2\x80\xa2 Acceptable acreage report not on file; and\n \xe2\x80\xa2 Application not approved and payment should not have been made.\n For MDP corrective actions, see the MAL section. The same corrective actions apply to this program.\nFSA Noninsured NAP improper payments were primarily attributable to administrative errors.\n Assistance Program Causes of improper payments include:\n (NAP) \xe2\x80\xa2 Application for payment filed late;\n \xe2\x80\xa2 Incorrect total production used to calculate payment;\n \xe2\x80\xa2 Notice of loss filed late;\n \xe2\x80\xa2 Unit yield is not properly calculated; and\n \xe2\x80\xa2 Incorrect crop acreage used to calculate payment.\n For NAP corrective actions, see the MAL section. The same corrective actions apply to this program.\nFS Wildland Fire FS corrective actions have significantly reduced the potential for errors. Those actions resulted in a\n Suppression zero improper payment error rate for WFSM. FS improved controls with regard to review processes,\n Management (WFSM) performed continuous internal monitoring of possible improper payments, centralized accounting\n functions, improved communications, and performed follow-up prior to payment authorization.\n\n\n\n\n Other Accompanying Information\n 198\n\x0c Agency Program Corrective Actions Planned\nRD Rental Assistance RAP improper payments were primarily attributable to administrative and verification errors.\n Program (RAP) Cause of improper payment include:\n \xe2\x80\xa2 Insufficient file documentation; and\n \xe2\x80\xa2 Borrower/agent calculation errors and number transposition.\n Corrective actions include:\n \xe2\x80\xa2 Establish a tracking process in the Multi-Family Information System (MFIS) to monitor the number\n of tenant files reviewed during the property\xe2\x80\x99s triennial Supervisory Visit. This process will provide\n the agency with additional information regarding the review of tenant files outside of the IPIA audit\n to help determine trends to supplement with the IPIA review. It also will provide RD with additional\n documentation to determine on-going compliance with the proper payment of Rental Assistance.\n Timeframe \xe2\x80\x93 Completed on April 14, 2010.\n \xe2\x80\xa2 Implement a new management agent performance assessment review that will reduce\n management fees paid to noncompliant management agents. If performance decreases, there will\n be a concurrent decrease in the base management fee allowed for that year. Errors made on tenant\n certifications will be one of six criteria used for determining reduction in management fees paid.\n Timeframe \xe2\x80\x93 December 31, 2010; and\n \xe2\x80\xa2 Continue to pursue access to the Department of Health and Human Services\xe2\x80\x99 New Hires database\n and the Department of Housing and Urban Development\xe2\x80\x99s Enterprise Income Verification System to\n be shared with State offices and management agents. Ongoing.\nRMA Federal Crop Causes of improper payments include:\n Insurance \xe2\x80\xa2 Incorrect application of crop insurance policy requirements for prevented planting;\n Corporation Program \xe2\x80\xa2 Incorrect acreage reports; and\n Fund (FCIC) \xe2\x80\xa2 Incorrect indemnity calculations.\n FCIC improper payments were primarily attributable to verification errors.\n RMA completed the 5th year of the 3-year review cycle established to determine the improper payment\n rate for the Federal Crop Insurance Program. While the strategy for identifying and controlling the error\n rate includes identifying error trends and policy concerns and correcting them, no underlying policy or\n underwriting issues have become apparent. This is in part due to the diversity of crops being reviewed\n and suggests it may be several cycles before RMA may amass sufficient numbers of samples on any\n particular crop to draw meaningful comparisons in the errors identified.\n RMA continues to expand its strategic data acquisition and analysis efforts by incorporating additional\n remote sensing and geospatial analyses to its data warehousing and data mining initiative. The data\n warehouse was extended to include the compilation of detailed geospatial NEXRAD radar and rainfall\n data. The application of these data and analysis tools were then increased to include underwriting and\n program integrity issues throughout the program. Data mining activities continue to show significant\n cost avoidance savings each year by identifying and spot checking the crop insurance program most\n anomalous participants based on their history of filing claims. Additionally, RMA and FSA continue to\n work on completing the Comprehensive Information Management System. This project is designed to\n identify common and unique producer and crop information reported to both agencies; develop\n services to access the information; aid in information reconciliation; and reduce the reporting burdens\n of farmers, ranchers, producers, RMA, FSA, and crop insurance providers.\n When RMA negotiated and executed the new Standard Reinsurance Agreement (SRA) starting in\n 2005, it emphasized improved quality controls and enhanced penalties that together should encourage\n participating companies who sell and service Federal crop insurance policies to improve their improper\n payments rate. Based on the passage of the 2008 Farm Bill, RMA will have another opportunity\n beginning with the 2011 reinsurance year to further adjust and improve SRA holder quality control\n requirements.\nNRCS Farm Security and FSRI improper payments were primarily attributable to administrative error.\n Rural Investment Act Causes of improper payments include:\n programs (FSRI)\n \xe2\x80\xa2 Contract modification error.\n NRCS performs a quarterly review of open obligations. Checklists are developed to be completed\n during the reviews. NRCS will add specific questions to the checklist to address the documentation\n issues found during IPIA testing.\n\n\n\n\n Other Accompanying Information\n 199\n\x0c IV. Based on the Rate(s) Obtained in Step III, Set Annual Improvement Targets through FY 2012.\n Improper Payment Reduction Outlook FY 2010 \xe2\x80\x93 FY 2012\n\n\nBelow are summary level tables for all high risk programs outlining improper payment rates for the last two years\nand future reduction targets. When a number cannot be provided, an explanation is provided in the notes below.\nThe tables include amounts from program sampling results. USDA programs report results the year following\nsampling activity. For example, results reported during FY 2010 represent measures of FY 2009 outlays and\nprogram activity.\n\n Improper Payment Sampling Results ($ in millions)\n Results Results\n Reported in FY 2009 Reported in FY 2010\n Program Outlays IP% IP$ Outlays IP% IP$\n Marketing Assistance Loan Program, FSA/CCC [Note #3] 4,935 2.56% 85 4,151 0.81% 35\n Supplemental Nutrition Assistance Program, FNS [Note #6] 34,611 5.01% 1,733 50,360 4.36% 2,195\n National School Lunch Program, FNS [Note #1]\n Total Program 9,436 16.44% 1,551 8,925 16.28% 1,453\n Certification Error 9,436 9.56% 902 8,925 9.40% 839\n Counting/Claiming Error 9,436 6.88% 649 8,925 6.88% 614\n School Breakfast Program, FNS [Note #1]\n Total Program 2,273 24.62% 560 2,534 24.87% 630\n Certification Error 2,273 8.83% 201 2,534 9.08% 230\n Counting/Claiming Error 2,273 15.79% 359 2,534 15.79% 400\n Women, Infants and Children, FNS [Note #2]\n Total Program 4,483 N/A N/A 6,480 N/A N/A\n Certification Error Component 4,483 N/A N/A 6,480 N/A N/A\n Vendor Error Component 4,483 1.27% 57 6,480 1.17% 76\n Child and Adult Care Food Program, FNS [Note #2]\n Total Program 2,214 N/A N/A 2,461 N/A N/A\n FDC Homes \xe2\x80\x93 Tiering Decisions 713 2.07% 15 911 0.99% 9\n FDC Homes \xe2\x80\x93 Meal Claims 713 N/A N/A 911 N/A N/A\n Milk Income Loss Contract Program, FSA [Note #5] [Note #3] 2 N/A N/A 602 0.66% 5\n Loan Deficiency Payments, FSA [Note #5] [Note #3] 6 N/A N/A 114 0.44% 0.5\n Direct and Counter-Cyclical Payments, FSA [Note #3] 4,948 0.42% 20 5,921 0.96% 56\n Conservation Reserve Program, FSA [Note #3] 1,876 0.72% 11 1,814 1. 20% 24\n Miscellaneous Disaster Programs, FSA [Note #3] 2,245 0.90% 19 108 4.60% 5\n Noninsured Assistance Program, FSA [Note #3] 67 14.20% 8 59 11.65% 7\n Wildland Fire Suppression Management, FS 1,016 0.00% 0.0 710 0.00% 0.0\n Rental Assistance Program, RD 887 2.06% 18 979 1.39% 14\n Federal Crop Insurance Corporation Program Fund, RMA [Note #4] 3,545 5.79% 205 8,680 6.05% 525\n Farm Security and Rural Investment Act programs, NRCS 1,320 0.03% 0.0 1,505 0.41% 6\n USDA Total 72,363 5.92% 4,283 93,853 5.37% 5,039\n\n\n\n\n Other Accompanying Information\n 200\n\x0c Detailed Breakout of Improper Payment Reported in FY 2010\n Total Over- Under- Incorrect Incomplete\n Payments Payments Payments Other Disbursement Paperwork\n $ in millions IP % % % % % %\nMarketing Assistance Loan\nProgram, FSA/CCC 4,151 0.81% 0.81% 0.00% N/A 0.09% 0.72%\n[Note #3]\nSupplemental Nutrition 50,360 4.36% 3.53% 0.82% N/A 4.36%\nAssistance Program, FNS N/A\n[Note #6]\nNational School Lunch\n 8,925 16.28% 12.34% 3.94% N/A 16.28% N/A\nProgram, FNS\nSchool Breakfast Program,\n 2,534 24.87% 21.47% 3.40% N/A 24.87% N/A\nFNS\nWomen, Infants and Children,\n 6,480 1.17% 0.86% 0.31% N/A 1.17% N/A\nFNS\nChild and Adult Care Food\n 911 0.99% 0.99% 0.00% N/A 0.99% N/A\nProgram, FNS\nMilk Income Loss Contract\nProgram, FSA [Note #5] [Note 602 0.66% 0.41% 0.25% N/A 0.52% 0.14%\n#3]\nLoan Deficiency Payments,\n 114 0.44% 0.30% 0.14% N/A 0.44% N/A\nFSA [Note #5] [Note #3]\nDirect and Counter-Cyclical\n 5,921 0.96% 0.86% 0.10% N/A 0.74% 0.22%\nPayments, FSA [Note #3]\nConservation Reserve\n 1,814 1.20% 1.08% 0.12% N/A 0.47% 0.76%\nProgram, FSA [Note #3]\nMiscellaneous Disaster\n 108 4.60% 3.55% 1.05% N/A 3.56% 1.04%\nPrograms, FSA [Note #3]\nNoninsured Assistance\n 59 11.65% 10.23% 1.42% N/A 5.63% 7.20%\nProgram, FSA [Note #3]\nWildland Fire Suppression\n 710 0.00% 0.00% 0.00% N/A 0.00% 0.00%\nManagement, FS\nRental Assistance Program,\n 979 1.39% 1.13% 0.26% N/A 1.19% 0.20%\nRD\nFederal Crop Insurance\nCorporation Program Fund, 8,680 6.05% 6.02% 0.03% N/A 6.05% 0.00%\nRMA\nFarm Security and Rural\n 1,505 0.41% 0.41% 0.00% N/A 0.41% 0.00%\nInvestment Program, NRCS\nUSDA Total 93,853 5.37% 4.42% 0.95% 0.00% 5.30% 0.07%\n\n\n Improper Payment Reduction Outlook ($ in millions)\n FY 2011 Reporting FY 2012 Reporting FY 2013 Reporting\n Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$\nMarketing Assistance Loan Program,\n 2,278 0.81% 18 127 0.81% 1 127 0.81% 1\nFSA/CCC\nSupplemental Nutrition Assistance\n 72,577 4.36% 3,164 76,030 4.36% 3,315 76,030 4.36% 3,315\nProgram, FNS [Note #6]\nNational School Lunch Program, FNS 10,061 15.82% 1,592 10,456 15.37% 1,607 10,456 14.93% 1,561\n\n\n\n\n Other Accompanying Information\n 201\n\x0c Improper Payment Reduction Outlook ($ in millions)\n FY 2011 Reporting FY 2012 Reporting FY 2013 Reporting\n Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$\n School Breakfast Program, FNS 2,823 24.06% 679 2,959 23.27% 689 2,959 22.52% 666\n Women, Infants and Children, FNS 7,704 0.97% 75 7,467 0.77% 58 7,467 0.57% 43\n Child and Adult Care Food Program, FNS 896 0.92% 8 908 0.87% 8 908 0.82% 7\n Milk Income Loss Contract Program, FSA 225 0.66% 1 100 0.66% 0.6 100 0.66% 0.6\n Loan Deficiency Payments, FSA 183 0.44% 1 24 0.44% 0.1 24 0.44% 0.1\n Direct and Counter-Cyclical Payments,\n FSA 6,223 0.40% 25 5,712 0.39% 22 5,712 0.39% 22\n Conservation Reserve Program, FSA 1,973 0.70% 14 1,958 0.69% 14 1,958 0.69% 14\n Miscellaneous Disaster Programs, FSA 1,284 0.88% 11 1,205 0.87% 10 1,205 0.87% 10\n Noninsured Assistance Program, FSA 122 5.90% 7 124 2.50% 3 124 2.50% 3\n Wildland Fire Suppression Management,\n FS 2,300 0.02% 0.5 2,400 0.02% 0.5 2,500 0.02% 0.5\n Rental Assistance Program, RD 999 1.35% 13 1,030 1.31% 13 1,079 1.28% 14\n Federal Crop Insurance Corporation\n Program Fund, RMA 5,425 4.50% 244 6,000 4.40% 264 6,000 4.30% 258\n Farm Security and Rural Investment, NRCS\n 2,172 0.15% 3 2,688 0.10% 3 2,688 0.10% 3\n\n\nThe chart below includes recovery of improper payments from USDA\xe2\x80\x99s high risk programs. The recoveries\nrepresent overpayment amounts identified by agency post-payment reviews and annual IPIA statistical sampling.\nThe prior years column includes recoveries from FY 2004 through FY 2009. As IPERA requirements are\nimplemented, recoveries identified from additional programs will be included in future years.\n\n FY 2010 Recovery of Improper Payments ($ in Million)\n Cumulative Cumulative\n (Current & (Current &\n FY 2010 FY 2010 Prior Years Prior Years Prior Years) Prior Years)\n Amounts Amounts Amounts Amounts Amounts Amounts\n Agency Source Identified Recovered Identified Recovered Identified Recovered\n USDA (High Risk Programs) NA 310.332 NA 491.070 NA 801.402\n NA 310.332 NA 491.070 NA 801.402\n NA 310.332 NA 491.070 NA 801.402\n\n\nNote #1: Information has not been adjusted for interaction between the different sources of certification error and\ncounting/claiming error. Improper payment rates (School Year 2008/09) times SBP outlays (FY 2009).\nNote #2: WIC and CACFP tests components of their total program. WIC currently tests and reports on the\nvendor error component of the payment process. The WIC certification error component information should be\navailable in 2011. CACFP currently tests and reports on the FDCH tiering decision component of the payment\nprocess. FNS continues to evaluate the measurement processes for the CACFP meal claim component. It has not\nset a date for measurement and reporting.\n\n\n\n\n Other Accompanying Information\n 202\n\x0cNote #3: The FY 2010 estimated improper payment dollar amounts for MAL, DCP, CRP, MDP, and NAP may\nreflect variances from the relationship between the improper payment percentage and the outlays amount. These\nvariances result from the complex, multi-stage statistical sampling methodology developed by the contract\nstatistician in calculating the independent projections of the dollars/percentages in error. The variances are a\ncomplex ratio estimate weighted with respect to the payments within their applicable county stratification. They\nreflect the variability within the payment data and occur with a 90-percent confidence level. The MAL, DCP,\nCRP, MDP, NAP, MILC, and LDP universe of payments for the FY 2010 was September 2008 through August\n2009. The measurement period was adjusted to meet the report timeframe.\nNote #4: RMA uses a three year running average to calculate the improper payment error rate. This is the fifth\nyear RMA has used this process to measure the improper payment error rate.\nNote #5: FSA did not measure MILC and LDP for the FY 2009 IPIA review and reporting cycle since sampling\nwas not cost effective due to the very low outlay amounts ($2 million for MILC and $6 million for LDP). FSA\nmeasured MILC and LDP for the FY 2010 IPIA review cycle.\nNote #6: The SNAP FY 2010 improper payments error rate and estimated amount of improper payments for\npayments made in FY 2009 reflect the American Recovery and Reinvestment Act of 2009 requirement to exclude\nsmall errors of $50 and less. Future performance may be affected by the expiration of this provision. USDA and\nOMB continue to evaluate SNAP improper payment targets and the targets may be adjusted in consideration of\nincreased need resulting in further growth in the program which has been unprecedented in the last year; State\nbudget constraints; and other related factors.\n\n\n\n V. Discussion of your Agency\xe2\x80\x99s Recovery Auditing effort, if applicable, including any\n contract types excluded from review and the justification for doing so; actions taken to\n recoup improper payments, and the business changes and internal controls instituted\n and/or strengthened to prevent\n further occurrences.\n In addition, complete the table below.\n\n\nUSDA\xe2\x80\x99s task order for FY 2010 recovery auditing contractor services was unexpectedly cancelled. Alternatively,\nthe FY 2010 columns in the following chart reflect the agency identified and recovered amounts through post-\npayment reviews, contract close-outs, or notification by vendors. USDA is in the process of establishing a\nreplacement contract for recovery auditing services that will align its recovery program with the requirements of\nthe recent Improper Payments Elimination and Recovery Act of 2010 and the Presidential Memorandum titled\n\xe2\x80\x9cFinding and Recapturing Improper Payments.\xe2\x80\x9d\n\n\n\n\n Other Accompanying Information\n 203\n\x0c FY 2010 Results for Recovery Auditing of Contracts ($ in Million)\n Cumulative\n Amount Actual FY 2010 (Current & Cumulative\n Subject to Amount Amounts Prior Years Prior Years) (Current &\n Review for Reviewed Identified FY 2010 Amounts Prior Years Amounts Prior Years)\n Agency FY 2010 and for Amounts Identified for Amounts Identified for Amounts\n Component Reporting Reported Recovery Recovered Recovery Recovered Recovery Recovered\n Forest\n 480.800 0.709 0.709 0.585 0.684 0.684 1.393 1.269\n Service\n Natural\n Resources\n NA NA 0.000 0.000 0.026 0.026 0.026 0.026\n Conservation\n Service\n Agricultural\n Research NA 0.051 0.051 0.000 0.059 0.059 0.110 0.059\n Service\n Animal and\n Plant Health\n 160.200 157.822 0.000 0.000 0.395 0.395 0.395 0.395\n Inspection\n Service*\n Farm Service\n NA NA 0.000 0.000 0.047 0.047 0.047 0.047\n Agency\n Food Safety\n and\n NA NA 0.000 0.000 0.000 0.000 0.000 0.000\n Inspection\n Service\n Rural\n NA 0.004 0.000 0.004 0.000 0.000 0.000 0.004\n Development\n Agricultural\n Marketing 2.200 NA 0.000 0.000 0.002 0.002 0.002 0.002\n Service\n All Others NA NA N/A N/A N/A N/A N/A N/A\n USDA Total NA NA 0.760 0.589 1.213 1.213 1.973 1.802\n\n\n\n\n VI. Describe the steps the agency has taken and plans to take (including time line) to ensure that\n agency managers (including the agency head) are held accountable for reducing and recovering\n improper payments.\n\n\nFSA\nThe following are steps taken to ensure agency managers are held accountable for reducing and recovering\nimproper payments:\n\xe2\x80\xa2 FSA has a performance management program designed to improve individual and organizational effectiveness\n in accomplishing its mission and goals. This program provides for improper payments to be included in the\n State Executive Directors Performance Plan, element 5 titled \xe2\x80\x9cProgram Management\xe2\x80\x9d;\n\xe2\x80\xa2 National and State Office (STO) managers are held accountable for ensuring that program policies and\n procedures are provided to the STO and COF employees accurately and on a timely basis. National office\n\n\n Other Accompanying Information\n 204\n\x0c managers are also held accountable, as reflected in the performance based rating measures, for overall program\n administration at the National level. FSA employees\xe2\x80\x99 performance elements are directly related to FSA\xe2\x80\x99s\n Strategic Plan;\n\xe2\x80\xa2 COF employees, including the County Executive Director, are responsible for making payments to producers\n and following all administrative steps in doing so. Employees will be evaluated on program delivery\n compliance with regulations, policies, and procedures through their performance plans;\n\xe2\x80\xa2 The Deputy Administrator of Field Operations will facilitate meetings with the program areas to discuss any\n additional action necessary for senior management to address accountability;\n\xe2\x80\xa2 Employees at all levels of the agency will be held accountable for efficient and accurate delivery of all FSA\n programs; and\n\xe2\x80\xa2 FSA\xe2\x80\x99s Strategic Plan for 2005-2011 established a performance measure to help ensure payments are accurate\n and complete. The performance measure, \xe2\x80\x9cMaintain or Increase the Percentage of Proper Payments,\xe2\x80\x9d is\n identified in FSA\xe2\x80\x99s crosscutting management objective, \xe2\x80\x9cStrategically Managing Human Capital.\xe2\x80\x9d\nFNS\nAn agency priority is to improve stewardship of Federal funds. Within this priority are specific goals applicable to\nprograms at high risk for erroneous payments. The goal for the SNAP, WIC, and CACFP is to reduce the error\nrates by continued management improvements. The goal of the NSLP and SBP is to improve the accuracy of\nschool administration processes that certify children for school meals. The agency goals and priorities are\nincorporated into each manager\xe2\x80\x99s performance plan.\nFS\nThe FS Albuquerque Service Center management team is held accountable by performance metrics that include\nIPIA compliance. Additionally, the agency chief financial officer will provide disbursement performance\ninformation to the agency head as part of the performance appraisals for senior leadership.\nRD\nRD State Offices with improper payment errors develop a corrective action plan. The plan includes procedures to\ntrain field staff, borrowers and property manager in appropriate required documentation and follow-up with\ntenants and income-verifiers.\nRMA\nRMA revised its strategic plan to provide results to enhance accountability. It also has established procedures to\nensure RMA management takes future corrective actions to address program vulnerabilities. Additionally, every\nemployee\xe2\x80\x99s performance plan agreement has contained a position-corresponding strategic objective element since\nFY 2005.\nNRCS\nNRCS incorporated IPIA goals and objectives in the performance standards for all senior executive service\npositions. These also have been included in the regional assistant chiefs and State conservationist performance\nplans.\n\n\n\n\n Other Accompanying Information\n 205\n\x0c VII A. Describe whether the agency has the information systems and other infrastructure it needs to\n reduce improper payments to the levels the agency has targeted.\n VII B. If the agency does not have such systems and infrastructure, describe the resources the\n agency requested in its FY 2009 budget submission to Congress to obtain the\n necessary information systems and infrastructure.\n\nWhile USDA is creating information systems and infrastructure to reduce improper payments, especially for\nprograms susceptible to significant risk, efforts in some programs are constrained by limited resources. The\nDepartment has worked closely with OMB to develop action plans that focus available resources on the most\ncritical needs with regard to improper payment measurement and risk reduction.\n\n\n\n VIII. Describe any statutory or regulatory barriers which may limit the agencies\xe2\x80\x99 corrective actions in\n reducing improper payments and actions taken by the agency to mitigate the barriers\xe2\x80\x99 effects.\n\n\n\nFSA/CCC\nThe Department of Agriculture Reorganization Act of 1994, Section 281, provides that \xe2\x80\x9c[E]ach decision of a\nState, county, or area committee or an employee of such a committee, made in good faith in the absence of\nmisrepresentation, false statement, fraud, or willful misconduct shall be final not later than 90 calendar days after\nthe date of filing of the application for benefits, [and] ...no action may be taken...to recover amounts found to\nhave been disbursed as a result of the decision in error unless the participant had reason to believe that the\ndecision was erroneous.\xe2\x80\x9d This statute commonly is referred to the \xe2\x80\x9cFinality Rule.\xe2\x80\x9d\nFNS\nRecent child nutrition reauthorization legislation, while it included some changes requested by the\nAdministration to improve accountability, limited USDA\xe2\x80\x99s ability to act in this area because of concerns about\npotential barriers to participation. In many instances, the mandated goal of providing easy access to benefits must\nbe balanced against the goal of reducing improper and erroneous payments. In addition, program administration\nis highly decentralized, involving a myriad of governmental and non-governmental organizations. There are\napproximately 100,000 school meal locations at which benefits are provided. Many of these benefit providers\nsimply do not have the capacity to develop robust accountability processes. For these reasons, any approach to\nreducing school meals improper payments must:\n\xe2\x80\xa2 Improve accuracy without compromising access for low-income families. A process that keeps eligible children from\n participating would undermine the program;\n\xe2\x80\xa2 Not unduly increase burden on schools. Many schools consider the program burdensome now. Adding burden\n could discourage schools from participating.\n\xe2\x80\xa2 Be cost-effective. Improving accuracy is potentially resource-intensive. Policymakers must not create a process\n that increases net program costs; and\n\n\n\n\n Other Accompanying Information\n 206\n\x0c\xe2\x80\xa2 Answer the needs of other users of program data, which often use certification data to distribute millions of dollars\n in other kinds of benefits to schools. As these needs contribute to the problem, a solution may also require new\n commitments from those users.\nRD\nThe RD program does not have the statutory authority, similar to the Department of Housing and Urban\nDevelopment, to gain access to data from the Department of Health and Human Services, Internal Revenue\nService, Social Security Administration, and the Department of Labor to be shared with field offices and\nmanagement agents.\nNRCS\nVerification of eligibility will be an ongoing challenge for NRCS. It would be advantageous for NRCS to\ndetermine adjusted gross income eligibility on current and future Farm Security and Rural Investment Act\nprograms (Farm Bill) participants by coordinating with the Internal Revenue Service (IRS). For long-term\ncontracts, the IRS requirement for participants to maintain tax records expires prior to the expiration of the Farm\nBill contracts, limiting the ability to independently verify eligibility.\n\n\n IX. Additional comments, if any, on overall agency efforts, specific programs, best practices, or common\n challenges as a result of IPIA implementation.\n\n\nUSDA has no additional comments.\n\n\n\n\n Other Accompanying Information\n 207\n\x0cAppendix C\xe2\x80\x94Inspector General Act Amendments of 1988: Management\xe2\x80\x99s Report on Audit\nFollow-Up\nInspector General Act Amendments of 1988: Management\xe2\x80\x99s Report on Audit Follow-Up\nBACKGROUND\nThe Office of Inspector General (OIG) audits USDA\xe2\x80\x99s programs, systems, and operations. OIG then\nrecommends improvements to management based on its findings. U.S. Department of Agriculture (USDA)\nmanagement may agree or disagree with the audit\xe2\x80\x99s findings or recommendations. An agreement is reached\nduring the management-decision process. If management agrees with a recommendation, a written plan for\ncorrective action with a target completion date is developed. The plan is then submitted to OIG for concurrence.\nIf both OIG and management agree that the proposed corrective action will correct the weakness, management\ndecision is achieved for that recommendation.\nAudit follow-up ensures that prompt and responsive action is taken. USDA\xe2\x80\x99s Office of the Chief Financial\nOfficer (OCFO) oversees audit follow-up for the Department. An audit remains open until all corrective actions\nfor each recommendation are completed. As agencies complete planned corrective actions and submit closure\ndocumentation, OCFO reviews it for sufficiency and determines if final action is completed.\nFY 2010 Results\nExhibit 1: Decrease in Total Open Audit Inventory USDA agencies closed 59 audits in Fiscal Year\n (FY) 2010. OIG and USDA agencies reached\n management decision on 29 audits during the\n year. One audit is in appeal status. As shown in\n Exhibit 1, the Department reduced its\n inventory of open audits in FY 2010 by 22\n percent from 135 to 105.\n Audit Follow-Up Process\n The Inspector General Act Amendments of\n 1988 require an annual report to Congress\n providing the status of resolved audits that\nNote: The FY 2009 ending balance was revised from 127 to 135 to include 8 audits that were\n remain open. Reports on resolved audits must\ntransmitted from the Office of Inspector General after the reporting period. These adjustments include the elements listed in the\nare also reflected in the beginning balances for audits with disallowed costs and funds to be put accompanying bullets:\nto better use shown in Exhibit 3 and Exhibit 5.\n\n\n\xe2\x80\xa2 Beginning and ending balances for the number of audit reports and dollar value of disallowed costs and funds\n to be put to better use (see definitions below);\n\xe2\x80\xa2 The number of new management decisions reached;\n\xe2\x80\xa2 The disposition of audits with final action (see definition below);\n\xe2\x80\xa2 Resolved audits that remain open 1 year or more past the management decision date require an additional\n reporting element; and\n\xe2\x80\xa2 The date issued, dollar value, and an explanation of why final action has not been taken.\n\n\n\n\n Other Accompanying Information\n 208\n\x0cExhibit 2: Audit Follow-Up Definitions\n\n Term Definition\n Disallowed Cost An incurred cost questioned by OIG that management has agreed should not be chargeable to the Government.\n Final Action To complete all actions that management has agreed will address the audit findings and recommendations.\n Funds To Be Put An OIG recommendation that funds could be used more efficiently if management completes the recommendation, including:\n to Better Use \xe2\x80\xa2 Reductions in outlays or other savings;\n \xe2\x80\xa2 De-obligation of funds from programs or operation or withdrawal of subsidy costs on loans, guarantees or bonds; and\n \xe2\x80\xa2 Implementing recommended improvements for grants or contracts or unnecessary expenditures noted in pre-award reviews of\n contract or grant agreements.\n Management Agreement between management and OIG on corrective action needed to address audit findings and recommendations.\n Decision\n\n\nBeginning and Ending Inventory for Audits with Disallowed Costs and Funds to Be Put to Better Use1\n Exhibit 3: Inventory of Audits with Disallowed Costs 5 Exhibit 4: Distribution of Adjustments to DC\n\n Audits with Disallowed Costs (DC) # of Audits Amount ($) Category Amount ($)\n Beginning of the Period 42 73,482,218 Legal Decision 935,039\n Plus: New Management Decisions 4 6,773,158 Write-Offs 124,418\n Total Audits Pending Collection of 46 80,255,376 Change in Management Decision 8,774,405\n DC\n Adjustments 30,253,805 Agency Documentation 20,358,095\n Revised Subtotal 50,001,571 Agency Discovery 61,848\n Less: Final Actions (Recoveries)* 14 747,749 Total $30,253,805\n Audits with DC Requiring Final Action 32 $49,253,822\n at the End of the Period\n\n\n Exhibit 5: Inventory of Audits with Funds To Be Put to Better Use1\n\n Audits with Funds to be Put to Better Use # of\n (FTBU) Audits Amount ($)\n Beginning of the Period 15 $505,269,671\n Plus: New Management Decisions 5 43,588,709\n Total Audits Pending 20 548,858,380\n Less: Final Actions 4 6,389,749\n Audits with FTBU Requiring Final Action at the 16 $542,468,631\n End of the Period\n Disposition of FTBU:\n FTBU Implemented 6,389,749\n FTBU Not Implemented 0\n Total FTBU Amounts for Final Action Audits $6,389,749\n\n\nOf the 59 audits that achieved final action during the fiscal year, 14 contained Disallowed Costs (DC). The\nnumber of DC audits remaining in the inventory at the end of the fiscal year is 32 with a monetary value of\n$49,253,822.\n\n\n\n5\n Exhibit 3 and Exhibit 5 include only those open audits with DC and FTBU, respectively. Additionally, some audits contain both DC and FTBU amounts. For these reasons,\nthe number of audits shown as the ending balances in Exhibit 3 and Exhibit 5 does not equal the total resolved audit inventory balance in Exhibit 1.\n\n\n Other Accompanying Information\n 209\n\x0cFor audits with disallowed costs that achieved final action in FY 2010, OIG and management agreed to collect\n$31,001,554. Adjustments were made totaling $30,253,805 (98 percent of the total) because of: 1) legal decisions;\n2) write-offs; 3) USDA agencies\xe2\x80\x99 ability to provide sufficient documentation to substantiate disallowed costs; and\n4) agency discovery. Management recovered the remaining $747,749.\nFinal action occurred on four audits that involved Funds to Be Put to Better Use (FTBU) amounts. The number\nof FTBU audits remaining in the inventory to date is 16 with a monetary value of $542,468,631.\nExhibit 6: Decrease in the Number of Audits Open One or More Years Past the Management Decision Date\n\n The numbers of audits open 1 or more years without final action\n Audits one Year or More Past\n (Management Decision Date) MDD # of Audits in FY 2010 decreased from 98 to 60 audits, a 39-percent\nBeginning of the period 98\n decrease. During the year, an additional 23 audits turned 1 year\n past Management Decision Date (MDD) for a balance of 83\n Less: FY 2009 audits closed 37\n audits. USDA agencies continue to pursue compensating controls\n Audit in appeal 1\n that address many of the underlying issues identified in these\nSubtotal FY 2009 Audits one year or more 60\npast MD older audits.\n Plus: Audits that turned one year 23 Agencies have completed all planned corrective actions on 20\n during FY 2010 audits that are pending collection of associated disallowed costs.\n Audits without final action 1 year or more past the MDD and\nEnd of the Period (audit in appeal not 83 behind schedule are listed individually in the table that follows.\nlisted in Exhibit below) They are categorized by the reason final action has not occurred.\n More detailed information on audits on schedule and audits\nunder collection is available from OCFO.\nExhibit 7: Distribution of Audits Open 1 Year or More Past the MDD\n\n Audits On Schedule Audits Behind Schedule Audits Under Collection\n Agency No. DC ($) FTBU ($) No. DC ($) FTBU ($) No. DC ($) FTBU ($)\n Totals 2 $204,174 0 60 $30,988,245 $497,670,263 20 $11,295,720 $1,209,659\n\n\n\nManagement\xe2\x80\x99s Report on Audit Follow-Up\nExhibit 8: Audits Open 1 Year or More Past the MDD and Behind Schedule\n\n Revised Monetary Amount\n Date Completion\n Audits Issued Date Audit Title DC$ FTBU$\n (34) Pending issuance of policy/guidance and legislation\n 02601-1-CH 9/30/05 10/30/10 Agricultural Research Service Adequacy of Controls to - -\n Prevent the Improper Transfer of Sensitive Technology\n 03099-198-KC 8/22/08 2/15/11 Farm Service Agency Inspection of Temporary Domestic - -\n Storage Sites for Foreign Food Assistance\n 03601-11-AT 11/17/05 3/31/11 Farm Service Agency Minority Participation in Farm - -\n Service Agency\xe2\x80\x99s Programs\n 03601-17-CH 9/29/08 3/31/11 Farm Service Agency Controls Over Guaranteed Farm - -\n Loan Interest Rates and Interest Assistance\n 04099-339-AT 3/23/05 12/31/10 Rural Development, Rural Housing Service Subsidy - -\n Payment Accuracy in Multi-Family Housing Program\n\n\n\n\n Other Accompanying Information\n 210\n\x0c Revised Monetary Amount\n Date Completion\n Audits Issued Date Audit Title DC$ FTBU$\n04601-17-CH 7/2/09 2/28/11 Rural Development, Rural Housing Service Controls Over - -\n Lender Activities in the Single Family Housing\n Guaranteed Loan Program\n05601-4-KC 3/4/09 9/30/11 Risk Management Agency Use of the National Agriculture - $70,000,000\n Statistics Service County Average Yields for the Group\n Risk Protection Plans of Insurance\n08001-1-AT 4/19/07 10/30/10 Forest Service (FS) Implementation of the Capital - -\n Improvement Program\n08601-2-HY 12/22/06 12/31/10 FS Follow up on Recommendations Made on the - -\n Maintenance of Forest Service Infrastructure\n08601-30-SF 3/31/03 12/31/10 FS Review of Security Over - -\n Explosives/Munitions/Magazines Located Within the\n National Forest System\n08601-44-SF 12/7/06 12/31/10 FS Large Fire Suppression Cost - -\n08601-45-SF 8/8/06 12/31/10 FS Follow-up Review of FS Security Over - -\n Explosives/Munitions Magazines Located within the\n National Forest System\n08601-52-SF 8/22/08 12/31/10 FS Renewable Energy Program - -\n09601-4-TE 9/30/05 3/30/11 Rural Development, Rural Utilities Service Broadband $25,614,279 $308,063,204\n Grant and Loan Programs\n09601-8-TE 3/31/09 3/30/11 Rural Development, Rural Utilities Service Broadband - -\n Grant and Loan Guartanteed Program\n10401-2-FM 11/13/08 9/30/13 Natural Resources Conservation Service Financial - -\n Statements for FY 2008\n24501-1-FM 11/24/04 10/31/10 Food Safety and Inspection Service Application Controls - -\n Performance Based Inspection Service System\n24601-1-CH 6/21/00 3/31/11 Food Safety and Inspection Service Laboratory Testing of - -\n Meat and Poultry Products\n24601-2-KC 9/30/03 10/31/10 Food Safety and Inspection Service Oversight of - -\n Production Process and Recall at ConAgra Plant\n24601-5-AT 6/24/05 10/30/10 Food Safety and Inspection Service Hazard Analysis and - -\n Critical Control Point Implementation at Very Small\n Plants.\n24601-7-KC 11/28/08 10/31/10 Food Safety and Inspection Service Evaluation of FSIS - -\n Management Controls over Pre-Slaughter Activities\n27099-49-TE 3/10/08 11/30/11 Disaster Food Stamp Program for Hurricanes Katrina and - -\n Rita, Louisiana, Mississippi and Texas\n27601-3-CH 3/22/96 12/31/10 Food and Nutrition Service Food Stamp Program - -\n Disqualified Recipient System\n33601-3-CH 2/20/03 6/30/12 Animal and Plant Health Inspection Service Safeguards to - -\n Prevent Entry of Prohibited Pests and Diseases into the\n United States\n33601-7-CH 8/14/07 6/30/12 Animal and Plant Health Inspection Service Review of - -\n Customs and Border Protection Inspection Activities\n34099-2-AT 9/14/01 9/30/12 Rural Development Rural Business-Cooperative Service $4,052,351 -\n Business and Industry Loan Program, OMNIVEST\n Resources, Inc. \xe2\x80\x93 Fort Gaines, Georgia\n34601-4-AT 1/10/03 7/31/12 Rural Development, Rural Business-Cooperative Service - -\n Lender Servicing of Business and Industry Guaranteed\n Loans in Georgia\n\n\n\n Other Accompanying Information\n 211\n\x0c Revised Monetary Amount\n Date Completion\n Audits Issued Date Audit Title DC$ FTBU$\n34601-15-TE 9/30/03 12/31/10 Rural Development, Rural Business-Cooperative Service - -\n National Report on the Business and Industry Loan\n Program\n50401-65-FM 11/14/08 9/30/11 Office of the Chief Financial Officer USDA Consolidated - -\n Financial Statements FY 2007 and FY 2006\n50601-8-TE 1/28/05 9/30/12 Animal and Plant Health Inspection Service Controls Over - -\n Issuance of Genetically Engineered Organism Release\n Permits\n50601-10-AT 3/8/04 5/30/11 Agricultural Research Service Follow-up Report on the - -\n Security of Biological Agents at U.S. Department of\n Agriculture Laboratories\n50601-14-TE 2/20/09 10/30/10 Research Education and Economics USDA\xe2\x80\x99s Role in the - -\n Export of Genetically Engineered Agricultural\n Commodities\n50601-17-TE 12/12/08 10/30/10 Research Education and Economics Control over - -\n Importation of Transgenic Plant and Animals\n50801-12-AT 9/9/02 10/30/10 Departmental Management Management of Hazardous - $1,813,809\n Materials Management Funds\n(9) Pending completion of IT system security weaknesses, systems development, implementation, or enhancement\n04601-14-CH 3/20/07 10/31/10 Rural Development, Rural Housing Service Improper - -\n Payments - Monitoring the Progress of Corrective Action\n for High-Risk Programs in Rural Housing Service\n04801-6-KC 12/18/00 10/31/10 Rural Development, Rural Housing Service Rural Rental $1,029,999 $9,000\n Housing Program Insurance Expenses, Phase I\n05600-1-TE 9/28/89 10/30/10 Risk Management Agency Crop Year 1988 Insurance - -\n Contracts with Claims\n06401-17-FM 11/5/04 12/30/12 Commodity Credit Corporation\xe2\x80\x99s Financial Statements for - -\n Fiscal Years 2004 and 2003\n24601-3-CH 9/30/04 10/31/10 Food Safety and Inspection Service Review of the Food - -\n Safety Information Systems\n24601-7-HY 9/28/06 10/31/10 Food Safety and Inspection Service Issues Impacting the - -\n Development of Risk-Based Inspection at Meat and\n Poultry Processing Establishments\n24601-8-CH 8/23/07 10/31/10 Food Safety and Inspection Service Egg Products - -\n Processing Inspection\n24601-8-HY 8/24/08 10/31/10 Food Safety and Inspection Service Followup Review of - -\n Food Safety and Inspection Service\xe2\x80\x99s Controls Over\n Imported Meat and Poultry Products\n33601-1-HY 2/14/05 10/31/10 Food Safety and Inspection Service Oversight of the - -\n Importation of Beef Products from Canada\n(5) Pending results of internal monitoring or program review\n04099-212-TE 8/25/09 12/31/10 Rural Development, Rural Housing Service Multi \xe2\x80\x93 Family - -\n Housing Loans in Texas\n05099-109-KC 1/27/05 12/31/10 Risk Management Agency Renegotiation of the Standard - -\n Reinsurance Agreement\n08401-9-FM 11/13/08 10/30/10 Forest Service Audit of Fiscal Year 2009 Financial - -\n Statements\n27601-32-CH 9/28/04 6/30/11 Food and Nutrition Service Compliance with Improper - -\n Payments Reporting Requirements\n\n\n\n\n Other Accompanying Information\n 212\n\x0c Revised Monetary Amount\n Date Completion\n Audits Issued Date Audit Title DC$ FTBU$\n85401-15-FM 11/7/08 11/30/10 Rural Development\'s Financial Statements for Fiscal - -\n Years 2008 and 2007\n(2) Conclusion of external action\n08601-51-SF 8/5/08 1/31/11 Forest Service Controls over Documenting and Reporting - $116,827,492\n Its Hurricane Relief Expenditures to FEMA\n50601-6-TE 3/4/04 12/30/10 Agricultural Research Service Controls Over Plant Variety - -\n Protection and Germplasm Storage\n(3) Pending results of request for change in management decision\n04801-3-KC 3/31/99 10/30/10 Rural Development, Rural Housing Service Rural Rental $146,690 $85,516\n Housing Program Bosley Management, Incorporated \xe2\x80\x93\n Sheridan, Wyoming\n08401-8-FM 11/15/07 11/1/10 Forest Service Financial Statements for FY 2007 and - -\n 2006\n11099-44-FM 12/14/06 10/30/10 Departmental Management Purchase Card Management - -\n System Controls Need Strengthening\n(1) Pending Office of General Counsel (OGC) or OIG advice\n04601-15-CH 3/30/07 12/31/10 Rural Development, Rural Housing Service Controls over - $388,842\n Single Family Housing Funds Provided for Hurricane\n Relief Efforts\n(6) Pending administrative action\n06401-15-FM 12/26/02 12/30/12 Commodity Credit Corporation\xe2\x80\x99s Financial Statements for - -\n FY 2002\n06401-20-FM 11/9/05 12/30/12 Commodity Credit Corporation\xe2\x80\x99s Financial Statements for - -\n FY 2005 and 2004\n07016-1-AT 3/15/06 10/30/10 Foreign Agricultural Service Private Voluntary $144,923 -\n Organization Grant Fund Accountability\n07601-2-HY 7/22/08 10/30/10 Foreign Agricultural Service Export Credit Guarantee - -\n Program\n13001-3-TE 8/16/04 11/30/10 Cooperative State Research, Education, and Extension $3 $482,400\n Service Implementation of Agricultural Research,\n Extension and Education Reform Act of 1998\n50099-11-HY 3/31/05 10/30/10 Research Education and Economics Implementation of - -\n Federal Research Misconduct Policy in the U.S.\n Department of Agriculture\nTotal Number Audits (60) Total $30,988,245 $497,670,263\n\n\n\n\n Other Accompanying Information\n 213\n\x0cAppendix D\xe2\x80\x94Acronyms\n\n A\n ACRE \xe2\x80\x93 Average Crop Revenue Election ARRA \xe2\x80\x93 American Reinvestment and Recovery Act\n AGRM \xe2\x80\x93 Arkansas Global Rice Model AWEP \xe2\x80\x93 Agricultural Water Enhancement Program\n APEC \xe2\x80\x93 Access, Participation, Eligibility, and Certification Study\n\n B\n B&I \xe2\x80\x93 Business and Industry Guaranteed Loan Program BSE \xe2\x80\x93 Bovine Spongiform Encephalopathy\n BMI \xe2\x80\x93 Body Mass Index\n\n C\n CACFP \xe2\x80\x93 Child and Adult Care Food Program CPAP \xe2\x80\x93 Community Programs Application Processing\n CBWI \xe2\x80\x93 Chesapeake Bay Watershed CPI \xe2\x80\x93 Counterpart International\n CCAP \xe2\x80\x93 Child Care Assessment Project CRE \xe2\x80\x93 Coordinated Review Effort\n CDC \xe2\x80\x93 United States Centers for Disease Control CRP \xe2\x80\x93 Conservation Reserve Program\n CEAP \xe2\x80\x93 Conservation Effects Assessment Project CStP \xe2\x80\x93 Conservation Security Program\n CF \xe2\x80\x93 Community Facilities CSU \xe2\x80\x93 Colorado State University\n CNMP \xe2\x80\x93 Comprehensive Nutrient Management Plan CTA \xe2\x80\x93 Conservation Technical Assistance Program\n CNPP \xe2\x80\x93 Center for Nutrition Policy and Promotion CWPP \xe2\x80\x93 Community Wildlife Protection Program\n CNR \xe2\x80\x93 Child Nutrition and WIC Reauthorization Act of 2004\n\n D\n DC \xe2\x80\x93 Disallowed Costs DNA \xe2\x80\x93 Deoxyribonucleic Acid\n DCP \xe2\x80\x93 Direct and Counter-cyclical Program DOI \xe2\x80\x93 United States Department of the Interior\n DDA \xe2\x80\x93 Doha Development Agenda\n\n E\n EAB \xe2\x80\x93 Emerald Ash Borer EO \xe2\x80\x93 Executive Order\n EBT \xe2\x80\x93 Electronic Benefits Transfer EQIP \xe2\x80\x93 Environmental Quality Incentives Program\n EFNEP \xe2\x80\x93 The Expanded Food and Nutrition Education Program EU \xe2\x80\x93 European Union\n EGVM \xe2\x80\x93 European grapevine moth ExCEED \xe2\x80\x93 Extension Community Economic and Entrepreneurial\n EIAO \xe2\x80\x93 Enforcement, Investigations, and Analysis Officers Development Program\n\n F\n FAFH \xe2\x80\x93 Food Away From Home FSRI \xe2\x80\x93 Farm Security and Rural Investment Act\n FCIC \xe2\x80\x93 Federal Crop Insurance Corporation FSWG \xe2\x80\x93 Food Safety Working Group\n FDCH \xe2\x80\x93 Family Day Care Homes FTBU \xe2\x80\x93 Funds to Be Put to Better Use\n FLP \xe2\x80\x93 Farm Loan Program FTF \xe2\x80\x93 Feed the Future\n FPA \xe2\x80\x93 Fire Program Analysis FWP \xe2\x80\x93 Farmable Wetlands Program\n FRCC \xe2\x80\x93 Fire Regime Condition Class FWS \xe2\x80\x93 U.S. Fish and Wildlife Service\n FRIS \xe2\x80\x93 Farm and Ranch Irrigation Survey FY \xe2\x80\x93 Fiscal Year\n FRPP \xe2\x80\x93 The Farm and Ranch Protection Program\n\n G\n GAO \xe2\x80\x93 United States Government Accountability Office GLS \xe2\x80\x93 Guaranteed Loan System\n GCFI \xe2\x80\x93 Gross Cash Farm Income GM \xe2\x80\x93 Genetically Modified\n GE \xe2\x80\x93 Genetically Engineered GPRA \xe2\x80\x93 Government Performance and Results Act of 1993\n\n\n\n Other Accompanying Information\n 214\n\x0cH\nHACCP \xe2\x80\x93 Hazard Analysis and Critical Control Points HSI \xe2\x80\x93 Habitat Suitability Indices\nHEI \xe2\x80\x93 Healthy Eating Index\n\nI\nIPERA \xe2\x80\x93 Improper Payments Elimination and Recovery Act IPM \xe2\x80\x93 Integrated Pest Management\nIPIA \xe2\x80\x93 Improper Payments Information Act IVT \xe2\x80\x93 Intensified Verification Testing\n\nL\nLDP \xe2\x80\x93 Loan Deficiency Payments Lm \xe2\x80\x93 Listeria monocytogenes\nLEA \xe2\x80\x93 Local Education Agency\n\nM\nMDD \xe2\x80\x93 Management Decision Date MILC \xe2\x80\x93 Milk Income Loss Contract Program\nMDP \xe2\x80\x93 Miscellaneous Disaster Program MRL \xe2\x80\x93 Maximum Residue Limits\nMFIS \xe2\x80\x93 Multi-Family Information System\n\nN\nNAHLN \xe2\x80\x93 National Animal Health Laboratory Network NORS \xe2\x80\x93 National Outbreak Reporting System\nNAP \xe2\x80\x93 Noninsured Assistance Program NPDN \xe2\x80\x93 National Plant Diagnostic Network\nNDB \xe2\x80\x93 National Data Bank NPGS \xe2\x80\x93 National Plant Germplasm System\nNEPA \xe2\x80\x93 National Environmental Policy Act NSLP \xe2\x80\x93 National School Lunch Program\n\nO\nOCFO \xe2\x80\x93 The Office of the Chief Financial Officer OMB \xe2\x80\x93 The United States Office of Management and Budget\n\nP\nP&S \xe2\x80\x93 Packers and Stockyards PCR \xe2\x80\x93 Polymerase Chain Reaction\nPAR \xe2\x80\x93 Performance and Accountability Report PFGE \xe2\x80\x93 Pulse-field Gel Electrophoresis\n\nQ\nQC \xe2\x80\x93 Quality Control\n\nR\nRAP \xe2\x80\x93 Rental Assistance Program RULSS \xe2\x80\x93 Rural Utilities Loan Servicing System\nRORA \xe2\x80\x93 Regional Office Review of Applications RUS \xe2\x80\x93 Rural Utilities Service\nRTE \xe2\x80\x93 Ready-to-Eat\n\nS\nSARE \xe2\x80\x93 Sustainable Agricultural Research and Education SPS \xe2\x80\x93 Sanitary/Phytosanitary\nSBP \xe2\x80\x93 School Breakfast Program SRA \xe2\x80\x93 Standard Reinsurance Agreement\nSIP \xe2\x80\x93 Salmonella Initiative Program STO \xe2\x80\x93 State Office\nSNAP \xe2\x80\x93 Supplemental Nutrition Assistance Program SY \xe2\x80\x93 School Year\n\nT\nTANF \xe2\x80\x93 Temporary Assistance for Needy Families TEFAP \xe2\x80\x93 The Emergency Food Assistance Program\nTBT \xe2\x80\x93 Technical Barrier to Trade TPP \xe2\x80\x93 Trans-Pacific Partnership\n\nU\nUSDA \xe2\x80\x93 The United States Department of Agriculture USTR \xe2\x80\x93 Office of the U.S. Trade Representative\n\n\n\n\n Other Accompanying Information\n 215\n\x0cV\nn/a\n\nW\nWEP \xe2\x80\x93 Water and Environmental Programs WRP \xe2\x80\x93 Wetlands Reserve Program\nWEPS \xe2\x80\x93 Wind Erosion Prediction System WTO \xe2\x80\x93 World Trade Organization\nWFSP \xe2\x80\x93 Wildland Fire Suppression Management WUI \xe2\x80\x93 Wildland Urban Interface\nWIC \xe2\x80\x93 Special Supplemental Nutrition Program for Women, Infants\nand Children\n\n\n\n\n Other Accompanying Information\n 216\n\x0cOther Accompanying Information\n 217\n\x0c'