Prevention of Payments to Deceased Persons, 81832-81836 [2010-32760]

Agencies

• DEPARTMENT OF AGRICULTURE
• Farm Service Agency

[Federal Register Volume 75, Number 249 (Wednesday, December 29, 2010)]
[Rules and Regulations]
[Pages 81832-81836]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32760]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 707

RIN 0560-AH91


Prevention of Payments to Deceased Persons

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Farm Service Agency (FSA) is amending regulations as 
required by the Food, Conservation, and Energy Act of 2008 (the 2008 
Farm Bill) to clarify the regulations governing payments earned by 
persons who die, disappear, or are declared incompetent before the 
payment is made. The payments must have been timely requested by that 
person themselves or by an authorized representative. These amendments 
are intended to clarify payment provisions and to prevent incorrect 
payments, particularly with respect to instances where persons have 
died. Payment eligibility where the payment was earned by persons who 
have since died is the subject of a specific 2008 Farm Bill requirement 
addressed in this rule.

DATES: Effective Date: December 29, 2010.

FOR FURTHER INFORMATION CONTACT: Candace Thompson, Director, 
Production, Emergencies and Compliance Division, FSA, US Department of 
Agriculture (USDA), Mail Stop 0517, 1400 Independence Avenue,

[[Page 81833]]

SW., Washington, DC 20250-0517; telephone: (202) 720-3463; electronic 
mail: Candy.Thompson@wdc.usda.gov. Persons with disabilities who 
require alternative means for communication (Braille, large print, 
audio tape, etc.) should contact the USDA Target Center at (202) 720-
2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    Current FSA regulations in 7 CFR part 707 govern certain farm 
related payments earned by persons who have died, disappeared, or been 
declared incompetent before the payment was made. Section 1611 of the 
2008 Farm Bill (Pub. L. 110-246, 7 U.S.C. 8786) requires, with respect 
to persons who have died, that FSA clarify these regulations to 
describe the circumstances in which such payments will be made. This 
rule, however, addresses all three subjects covered in the part 707 
regulations (death, disappearance, and a finding of incompetency). The 
2008 Farm Bill also requires the Secretary of Agriculture to reconcile 
data with the Social Security Administration (SSA) to determine if 
persons receiving payments are alive. As discussed below, by the time 
the 2008 Farm Bill was enacted, FSA had implemented that required data 
reconciliation process and other procedures intended to address 
previous Government Accountability Office (GAO) concerns with payments 
on behalf of deceased persons.
    This rule adds a new paragraph to Sec.  707.3 to specify payment 
eligibility for estates and surviving family members of deceased 
persons. The new paragraph makes explicit that payment will not be made 
on behalf of a deceased person unless the payment was earned by that 
person before the person died and was requested by the person 
themselves or their authorized representative before they died or after 
their death by a person authorized by law, independent of these FSA 
regulations, to act for that person. The rules in part 707 specify to 
whom the payment will be made if there is a proper application, but 
that issue is separate from the question of whether the payment has 
been properly applied for by the deceased or someone authorized by law 
to act for the deceased before or after the death. Payment must have 
been requested before the person died or requested after the death by 
someone authorized by law (independently of the part 707 regulations) 
to act for the deceased.
    Assuming a proper application for payment has been made, Sec.  
707.3 specifies the order of precedence for potential payees, which 
includes executors and surviving family members. That order is not 
changed in this rule. Again, that order of precedence applies only if 
there was a proper application for payment by someone authorized to act 
for the deceased (including the deceased prior to the death). For 
example, if a husband individually earned a disaster payment and 
applied for the payment before his death but the payment had not yet 
been made when the death occurred, there are some instances under Sec.  
707.3 in which the deceased's spouse could receive the payment under 
the terms of that section even though the spouse did not have the power 
under local law to act for the deceased. On the other hand, if the 
deceased had not applied for the payment, though had otherwise earned 
the payment, and there was no one legally authorized to act for the 
deceased, the payment rules of Sec.  707.3 would not apply. They would 
only apply if someone could act for the deceased and then filed the 
application, at which point the payment rules of Sec.  707.3 would 
apply. In this manner, the question of who can file the application and 
who can receive the payment can be two separate issues. One of those 
issues (the issue of who is legally authorized to act for the deceased) 
may have to be resolved independently of part 707. This is clarified in 
this rule for all matters covered in that part. Those three matters are 
death, disappearance, and a finding of incompetency. These amendments 
all clarify rather than change current FSA practice.
    Also, because of changes in the 2008 Farm Bill on payment 
limitations, the term ``person'' is now taken to mean only individuals, 
as opposed to ``entities,'' and payments are attributed to individuals 
through corporations. The regulations in this rule only provide the 
clarifications noted above. The regulations in this rule do not cover 
the attribution of payments for payment limitation purposes. The amount 
of an actual payment eligibility would be covered by the regulations 
that cover the specific program in which the payment was earned and the 
general payment limitation regulations found in 7 CFR part 1400.
    Section 1611 of the 2008 Farm Bill, the authority for this rule 
concerning prevention of improper payments to the deceased, uses the 
term ``individual.'' To be consistent with the payment limitation and 
attribution rules in 7 CFR part 1400 and with the existing 7 CFR part 
707, and to provide needed clarity on payment eligibility, this rule 
uses the term ``person'' to mean an ``individual.''

Additional Information on Data Reconciliation Procedures

    In addition to the specific amendments made in the rule, FSA has 
strengthened and will continue to strengthen data reconciliation 
procedures to ensure that payments made on behalf of deceased persons 
are not disbursed incorrectly. The rest of this preamble to the rule 
describes those activities and provides some background on why and how 
they were implemented.
    The issuance of payments to deceased individuals was the subject of 
a 2007 GAO audit. In July 2007, the GAO released an audit report 
entitled ``USDA Needs to Strengthen Controls to Prevent Improper 
Payments to Estates and Deceased Individuals'' (GAO-07-818). Before the 
2008 Farm Bill was enacted, FSA had already taken action to address the 
GAO audit. FSA started a data-matching process that compares program 
payment information to the SSA Death Master File (DMF), beginning with 
program payments issued in fiscal year (FY) 2007. In addition, FSA has 
strengthened documentation procedures at the State and local levels for 
outstanding payments earned by estates of deceased persons, to address 
GAO's concern that FSA was not following its own procedures requiring 
such documentation for payment to estates open more than two years 
after the date of death of the deceased person.
    Review of the data-match report and of information on file in FSA 
offices revealed 121,527 payments in FY 2007 totaling $108 million were 
disbursed on behalf of persons identified as deceased prior to the date 
payment was made. The data reconciliation review showed that relatively 
few payments made on behalf of deceased persons (less than two percent 
of the total dollar value of such payments) had any indication of 
circumstances that warranted further review to ensure a greater 
certainty of the accuracy of the payments. While no instances of 
deliberate fraud were found, the rules in our handbooks are being 
clarified with respect to the question of the limited circumstances in 
which payments may appropriately be made to estates and to surviving 
relatives of deceased persons. Related changes are being made in part 
707 with respect to payments earned by persons who have disappeared or 
have been declared incompetent.
    Further review of payments ``flagged'' during the review found that 
most of these payments were in fact correct in amount and appropriately 
directed. The review revealed that not all persons

[[Page 81834]]

identified as dead were in fact deceased, and that where an entity that 
included a deceased shareholder received a payment, the total payment 
made to the entity was in most cases correct and appropriately made. In 
cases where the entity had failed to notify FSA in a timely fashion 
that a person or entity member had died, the payment to the entity was 
nearly always correct and the same amount as if the current entity 
member information had been timely received. Since many small entities 
are well below the payment limits specified in 7 CFR part 1400 for one 
person, the death of a person with an interest in an entity does not 
necessarily reduce the payment to such entity even if that death would 
otherwise reduce the overall number of potential payment eligibilities 
for the entity such as a general partnership. Where the data 
reconciliation review revealed erroneous payments for FY 2007, FSA 
immediately started collection procedures. To reduce the number of 
questionable payments going forward, FSA now provides county offices 
with a list of persons who have been identified as deceased as a result 
of the data reconciliation process.
    The data reconciliation review found many cases in which FSA had 
appropriately made payments on behalf of deceased persons, but where 
the source of potential concern about the appropriateness of the 
payment was that the amount of time between the death and the payment 
was more than a year. For example, most of the FY 2007 payments made on 
behalf of deceased persons were for the Direct and Counter-cyclical 
Program, where counter-cyclical payments may be disbursed 18 months 
after the final enrollment period for the applicable year, so a person 
could have earned payments more than a year before the payments were 
issued for that crop. For disaster program benefits, the payment could 
be several years after the loss. In many cases, the program benefits 
had been requested by the person before the date of the person's death. 
In this rule, the regulations are made more explicit to specify that 
even if the payment was not requested before the death, the payment may 
still be applied for by a person authorized by law to act for the 
deceased. If a proper application is filed, then the payment rules of 
Sec.  707.3 apply. As a practical matter, this means that if the 
deceased did not file an application before the time of death, the 
payment will likely go to the executor or administrator of the estate 
of the deceased for the benefit of the estate. Presumably the 
administrator or executor would be the only party authorized to act for 
the deceased. Section 707.3 provides that if there is an executor or 
administrator, then the payment will go to the estate. Payment to 
family members would only occur under Sec.  707.3 if the payment was 
applied for prior to the death of the individual involved. The data 
reconciliation process also found that some payments that appeared to 
have been made to deceased persons were instead appropriately made to 
estates using the Social Security numbers of the deceased, or to trusts 
using Social Security numbers.
    A few payments were found to be erroneous, and FSA took action to 
collect refunds of those payments. The causes of erroneous payments did 
not appear to be fraud, because while FSA did not have the correct or 
current information to determine payment eligibility, it did not appear 
that someone had deliberately provided FSA with information they knew 
was false. For example, the causes of erroneous or improper payments 
made on behalf of deceased persons for FY 2007 included the following:
     A person who had power of attorney for another person did 
not realize that person had died before the crop year for which the 
program payment applied, and that therefore the deceased person was not 
eligible for payment.
     FSA was not timely informed of a person's death, the 
formation of an estate for the deceased, or the settlement of an 
estate. The executor was not aware that FSA should have been notified, 
or the farm manager was not aware or informed of the death of an 
interest holder of the entity.
    FSA has made the data reconciliation process and use of the SSA's 
DMF a part of its standard procedure for verifying payment eligibility. 
This is a change from previous procedures that depended on producers 
and their representatives to report producer deaths to FSA. For FY 2008 
and subsequent years, quarterly reports of persons who have been 
identified as deceased based on the data reconciliation process have 
been made available to all FSA State and county offices. FSA offices 
are required to conduct additional data review and verification for 
such persons before issuing any payment, and must document in writing 
why the person, their estate, or their authorized representative is 
eligible for payment. These documentation procedures are specified in 
our updated handbooks.

Notice and Comment

    These regulations are exempt from the notice and comment 
requirements of the Administrative Procedure Act (5 U.S.C. 553), as 
specified in section 1601(c) of the 2008 Farm Bill, which requires that 
the regulations be promulgated and administered without regard to the 
notice and comment provisions of section 553 of title 5 of the United 
States Code or the Statement of Policy of the Secretary of Agriculture 
effective July 24, 1971, (36 FR 13804) relating to notices of proposed 
rulemaking and public participation in rulemaking.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
significant under Executive Order 12866 and, therefore, OMB reviewed 
this final rule. A cost benefit assessment of this rule is summarized 
below and is available from the contact listed above.

Cost Benefit Analysis

    FSA analyzed payment records for FY 2007; as a result FSA 
categorized approximately $2 million in FY 2007 payments issued to the 
deceased as payments that were ``issued in error,'' but that were 
legitimate payments that would have been made correctly if paperwork 
had been updated. The ``issued in error'' categorization includes the 
instances where FSA was not informed of the original direct or indirect 
payment recipient's death. The FY 2007 analysis found no instances of 
use of identification numbers of deceased farmers to collect payments 
fraudulently, though the possibility remains that analysis of later 
years' results as they become available might uncover some such 
instances. These initial results suggest that FSA's institution of 
ongoing cross referencing of SSA data on the deceased and FSA payment 
records may result in some monetary recoveries for the Government, 
perhaps on the order of $1 million annually or less. The annual cost of 
acquiring SSA data on the deceased is just $6,000, but the cost of the 
time field staff dedicated to analyzing the reports could offset any 
amounts recovered. The largest benefit from the procedures clarified in 
this regulation will be FSA's enhanced ability to ensure that payments 
are being distributed in accordance with all laws and regulations.

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act since 
FSA is not required to publish a notice of proposed rulemaking for this 
rule.

[[Page 81835]]

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and FSA regulations 
for compliance with NEPA (7 CFR part 799). The changes in this rule to 
the eligibility requirements for deceased producers, required by the 
2008 Farm Bill, that are identified in this final rule, are solely 
administrative. Therefore, FSA has determined that NEPA does not apply 
to this final rule and no environmental assessment or environmental 
impact statement will be prepared.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published in the Federal 
Register on June 24, 1983 (48 FR 29115).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988. This rule 
is not retroactive and it does not preempt State or local laws, 
regulations, or policies unless they present an irreconcilable conflict 
with this rule. Before any judicial action may be brought regarding the 
provisions of this rule the administrative appeal provisions of 7 CFR 
parts 11 and 780 must be exhausted.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the Federal 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the states is not required.

Executive Order 13175

    This rule has been reviewed for compliance with Executive Order 
13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' This Executive Order imposes requirements on the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. The policies contained in this rule do not preempt 
Tribal law. This rule was included in the October through December, 
2010, Joint Regional Consultation Strategy facilitated by USDA that 
consolidated consultation efforts of 70 rules from the 2008 Farm Bill. 
USDA sent senior level agency staff to seven regional locations and 
consulted with Tribal leadership in each region on the rules. When the 
consultation process is complete, USDA will analyze the feedback and 
then incorporate any required changes into the regulations.

Unfunded Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local, and Tribal governments or the private sector. 
In addition, CCC was not required to publish a notice of proposed 
rulemaking for this rule. Therefore, this rule is not subject to the 
requirements of sections 202 and 205 of UMRA.

Small Business Regulatory Enforcement Fairness Act

    In general, any rule designated by OMB under Executive Order 12866 
as economically significant is also a major rule. As noted above, OMB 
designated this rule as significant, but not economically significant. 
As a result, this rule is not considered a major rule under SBREFA. 
Therefore, FSA is not required to delay the effective date for 60 days 
from the date of publication to allow for Congressional review and this 
rule is effective on the date of publication in the Federal Register.

Paperwork Reduction Act

    The regulations in this rule are exempt from the requirements of 
the Paperwork Reduction Act (44 U.S.C. chapter 35), as specified in 
section 1601(c)(2) of the 2008 Farm Bill, which provides that these 
regulations be promulgated and administered without regard to the 
Paperwork Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 707

    Agriculture, Grant programs--agriculture, Loan programs--
agriculture, Price support programs.

0
For the reasons discussed above, this rule amends 7 CFR part 707 as 
follows:

PART 707--PAYMENTS DUE PERSONS WHO HAVE DIED, DISAPPEARED, OR HAVE 
BEEN DECLARED INCOMPETENT

0
1. Revise the authority citation for part 707 to read as follows:

    Authority:  7 U.S.C. 1385 and 8786.


0
2. Amend Sec.  707.3 by revising paragraph (a) introductory text, to 
read as set forth below:


Sec.  707.3  Death.

    (a) Where any person who would otherwise be eligible to receive a 
payment dies before the payment is received, payment may be released in 
accordance with this section so long as, and only if, a timely program 
application has been filed by the deceased before the death or filed in 
a timely way before or after the death by a person legally authorized 
to act for the deceased. Timeliness will be determined under the 
relevant program regulations. All program conditions for payment under 
the relevant program regulations must have been met for the deceased to 
be considered otherwise eligible for the payment. However, the payment 
will not be made under this section unless, in addition, a separate 
release application is filed in accordance with Sec.  707.7. If these 
conditions are met, payment may be released without regard to the 
claims of creditors other than the United States, in accordance with 
the following order of precedence:
* * * * *


0
3. Amend Sec.  707.4 by revising paragraph (a) introductory text, to 
read as set forth below:


Sec.  707.4  Disappearance.

    (a) Where any person who would otherwise be eligible to receive a 
payment disappears before the payment is received, payment may be 
released in accordance with this section so long as, and only if, a 
timely program application has been filed by that person before the 
disappearance or filed timely before or after the disappearance by 
someone legally authorized to act for the person involved. Timeliness 
will be determined under the relevant program regulations. All program 
conditions for payment under the relevant program regulations must have 
been met for the person involved to be considered otherwise eligible 
for the payment. However, the payment will not be made unless, in 
addition, a separate release application is filed in accordance with 
Sec.  707.7. If these conditions are met, payment may be released 
without regard to the claims of creditors other than the

[[Page 81836]]

United States, in accordance with the following order of precedence:
* * * * *

0
4. Revise Sec.  707.5 to read as set forth below:


Sec.  707.5  Incompetency.

    (a) Where any person who would otherwise be eligible to receive a 
payment is adjudged incompetent by a court of competent jurisdiction 
before the payment is received, payment may be released in accordance 
with this section so long as, and only if, a timely and binding program 
application has been filed by the person involved while capable or by 
someone legally authorized to file an application for the person 
involved. Timeliness is determined under the relevant program 
regulations. In all cases, the payment application must have been 
timely under the relevant program regulations and all program 
conditions for payment must have been met by or on behalf of the person 
involved. However, the payment will not be made unless, in addition, a 
separate release application is filed in accordance with Sec.  707.7. 
If these conditions are met, payment may be released without regard to 
the claims of creditors other than the United States, to the guardian 
or committee legally appointed for the person involved. In case no 
guardian or committee had been appointed, payment, if for not more than 
$1,000, may be released without regard to claims of creditors other 
than the United States, to one of the following in the following order 
for the benefit of the person who was the subject of the adjudication:
    (1) The spouse.
    (2) An adult son, daughter, or grandchild.
    (3) The mother or father.
    (4) An adult brother or sister.
    (5) Such person as may be authorized under State law to receive 
payment for the person (see standard procedure prescribed for the 
respective region).
    (b) In case payment is more than $1,000, payment may be released 
only to such person as may be authorized under State law to receive 
payment for the incompetent, so long as all conditions for other 
payments specified in paragraph (a) of this section and elsewhere in 
the applicable regulations have been met. Those requirements include 
the filing of a proper and timely and legally authorized program 
application by or for the person adjudged incompetent. The release of 
funds under this paragraph will be made without regard to claims of 
creditors other than the United States unless the agency determines 
otherwise.


Sec.  707.6  [Amended]

0
5. Amend Sec.  707.6 by removing the words ``apply for a payment'' and 
adding, in their place, the words ``apply for a release of a payment''.

0
6. Amend Sec.  707.7 as follows:
0
a. Revise the heading to read as set forth below, and
0
b. Remove the first sentence and add in its place the seven sentences 
set forth below.


Sec.  707.7  Release application.

    No payment may be made under this part unless a proper program 
application was filed in accordance with the rules for the program that 
generated the payment. That application must have been timely and filed 
by someone legally authorized to act for the deceased, disappeared, or 
declared-incompetent person. The filer can be the party that earned the 
payment themselves--such as the case of a person who filed a program 
application before they died--or someone legally authorized to act for 
the party that earned the payment. All program conditions for payment 
must have been met before the death, disappearance, or incompetency 
except for the timely filing of the application for payment by the 
person legally authorized to act for the party earning the payment. 
But, further, for the payment to be released under the rules of this 
part, a second application must be filed. That second application is a 
release application filed under this section. In particular, as to the 
latter, where all other conditions have been met, persons desiring to 
claim payment for themselves or an estate in accordance with this part 
707 must do so by filing a release application on Form FSA-325, 
``Application for Payment of Amounts Due Persons Who Have Died, 
Disappeared or Have Been Declared Incompetent.'' * * *


    Signed in Washington, DC, on December 22, 2010.
Jonathan W. Coppess,
Administrator, Farm Service Agency.
[FR Doc. 2010-32760 Filed 12-28-10; 8:45 am]
BILLING CODE 3410-05-P