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Report warns of farmers gaming U.S. subsidy programs

WASHINGTON (Reuters) - U.S. lawmakers must tighten farm subsidy rules to make sure the money goes only to active farmers and landowners, a congressional report said on Tuesday, warning that millions of dollars are at stake.

Senator Charles Grassley, who requested the report, said it showed "there is still far too much subterfuge" involved in the way farm payments are made and limits applied.

The Iowa Republican called for "closing loopholes that allow non-farmers to game the system."

The House and Senate have proposed stricter eligibility standards as part of five-year omnibus farm bills. The new farm law is a year overdue. Work has been slowed by disagreements over how much to cut from U.S. nutrition programs, commonly known as food stamps.

The Government Accountability Office, the investigative arm of Congress, looked at rules intended to restrict subsidies to active farmers. To count as a farmer, applicants must provide capital, equipment or land and labor or management of a farm.

In its 60-page report the GAO said it found cases where people who claimed subsidies for management of a farm located hundreds of miles from their homes, or farms with several people who said they provided active management and merited subsidy payments of up to $40,000 each.

As one example, GAO said a Midwestern farm covering 25,000 acres received $400,000 in payments in 2012 with 11 members of the same family said to provide management, from an 88-year-old resident of south Florida to an 18-year-old who began receiving payments at age 16.

"The federal government risks distributing millions of dollars to individuals who have little actual involvement in farming operations," said the report.

It noted broad definitions of what counts as "management," and the difficulty in verifying the role performed by farm program recipients.

Ferd Hoefner of the small-farm group National Sustainable Agriculture Coalition said the current definition of farm management was "a wide-open loophole ... used to get almost unlimited payments" to large operations.

The House and Senate bills would allow only one person per farm to claim subsidies as the manager. They also would set a $250,000 per limit on payments for a couple and bar payments to the wealthiest operators. The two bills, which are yet to be reconciled, have different levels for the cut-off point for income.

There is no overall payment limit at present although subsidies are barred to people with more than $1.25 million a year in adjusted gross income from farm and off-farm sources.

The GAO is currently closed because of the U.S. federal government shutdown. Grassley's office released the report on its website:

http://www.grassley.senate.gov/issues/upload/Agriculture-10-08-13-GAO-report-on-actively-engaged.pdf

(Reporting by Charles Abbott, Editing by Ros Krasny and Ken Wills)

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