Read the GAO report [PDF 1.56 MB]
Under the 2008 “farm bill” legislation, participants whose incomes exceed specific limits are ineligible for certain program payments (i.e., farm program-related payments). Verification of participants with incomes below the limits is done by reviewing either tax returns (with consent from participants) or statements from accountants or attorneys.
The GAO was asked to review the income verification practices.
The GAO reviewed 115 tax return files and 163 files with accountants' and attorneys' statements—files selected to reflect geographic and program diversity, analyzed agency data, and interviewed agency officials.
Of the 115 tax return files reviewed, the GAO identified potentially improper farm program payments to participants whose incomes exceeded the limits. For example, the GAO found errors in 19 of the 22 tax return files it reviewed from offices in two states, and one of these errors led to a potentially improper payment of $40,000.
The GAO noted that reviews of tax returns are not monitored, even though federal standards direct agencies to monitor and assess the quality of performance. Also, the GAO observed that the 2008 farm bill provisions requiring a distinction between farm and nonfarm income make the task of verifying whether participants' incomes exceed the limits difficult.
Recent bills introduced in the House and Senate propose using total adjusted gross income, instead of farm and nonfarm income, as the criterion for determining income eligibility for payments.
The GAO’s report recommends that to reduce the risk of improper payments to participants whose incomes exceed statutory limits, Congress must consider simplifying those limits.
In the meantime, the GAO recommended monitoring of reviews of tax returns and accountants’ and attorneys’ statements and also a process to verify that these statements accurately reflect incomes.
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni, in Philadelphia
Or Associate National Director of KPMG’s Cooperative Tax Services
Brett Huston, in Sacramento