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Sunday, August 19, 2012

Will Your Crop Insurance Claim Be Large Enough For An Audit?


If you are a Cornbelt farmer, and have corn or soybeans covered by crop insurance, there is a strong possibility you may have a claim to file for either loss of production or revenue.  With an estimated $20-30 billion to be paid this year in crop insurance indemnity checks, both the USDA’s Risk Management Agency and the crop insurance companies have to ensure that all claims are valid, and have made it well known that anyone with a claim of more than $200,000 will be subject to an audit.  But how do you prepare for an audit?  What records do you need?  Here are answers to your questions.


The auditing process should not be considered as a witch hunt, and anyone audited should not consider themselves as being suspected of financial shenanigans.  The audit is something required by law and is part of the crop insurance process as much as signing and dating your application for coverage.  Additionally, it might be said that anyone farming for multiple landowners, and under the scrutiny of a farm manager, may already have all of the required information at hand.  For many farms with good record keeping systems, those documents and data will likely satisfy the audit process.  Different companies may handle the audit in different ways, but the following information comes from one of the largest crop insurance providers and will be close to what the others require as well.


The audit will come after your harvest, and possibly after you have either used or disposed of some or all of your grain.  Subsequently, data will depend on where the grain remains or its means of disposal:   farm stored, commercially stored, sold to another end user, or fed on the farm.  Data will be needed from the 2012 crop, along with that of the prior two years.


Data needed for farm stored grain:

Measurement of grain in bins will help determine total production, and measurement can be done by FSA staff or a third party approved by your insurance company.  Your insurance company may have a worksheet which will be handy in completing that process.  The data will need a measurement of the structure, the insurance units involved, the FSA farm numbers that produced the grain, and a legal description of the field.

If the grain was weighed before it was stored on the farm, a certified scale must be used and the scale tickets will be handy.  Such scales should be non-portable farm scales or commercial elevator scales. A grain cart with a scale can be used, if the scale prints a ticket, and if the integrated display panel shows the weight, and if the grain cart is available for inspection to determine its capacity.  Since the tickets fade over time, they should be photocopied to help with the permanency of the information.

Acceptable weight tickets from each load must be provided.  Federal Crop Insurance Corporation requires:  
1. Insured’s Name

2. Load Number or Ticket Number

3. Crop

4. Gross Weight

5. Tare Weight

6. Date Weighed

7. Net Weight of Production

8. Field Identification from which the production was harvested for correlation with the unit number of the stored crop.

9. Identification and/or Location of farm-storage structure in which the load(s) are stored and/or satisfactory explanation of disposition of the production, if any or all of the production is no longer stored at the time of inspection.


The copies of the scale tickets must accompany the information about the storage structure or the settlement sheet, showing total production.

There are also some other acceptable records that can be used to help sort out the correct information.  Those include records from combine monitors or load records that can be used to pro-rate measured production.  Many data books carried by farmers can also be used if they show regular updates of daily information and identify the unit and field number, date of harvest, truck or wagon used to haul the grain and the estimated bushels on the load.

Load records can be adjusted for moisture, but that calculation will be compared by the adjustor to the calculated production.

If you use combine monitor records, they should be printable, and showing the location of the field, field identification and unit numbers, the name of the crop and the date, along with bushels.


Data needed for grain commercially stored or sold:

If your grain went to the elevator, production records must reflect all of your production.  If you sold your grain to a feed lot or other end user it must reflect the weight from either the buyer or from a third party such as an elevator or commercial scale operator.  Grain that was either stored or sold to an elevator must be accounted for on storage sheets or settlement sheets, which include the name and address of the buyer, the name of the insured producer, and information for each load that identifies the crop, the gross weight, the tare weight, and the date weighed.  Also the sale or settlement sheet should include the unit number and farm serial number which can be handwritten, as well as percent of foreign material, moisture percentage, and test weight.  If any load information is missing, those loads will not be credited.

Loads of grain cannot be split between insurance units, since that is considered co-mingling.  Individual scale tickets must be supported by other documentation, such as a third party ledger or settlement sheet from a buyer or commercial warehouse.


Data needed for grain being fed on your farm:

A formal written record system of insured grain that is fed to livestock must be maintained.  Your crop insurance agent will have a suggested record system from the USDA’s Crop Insurance Handbook, and that completed record must be submitted with a claim.


If the fed grain was stored on the farm, and bin measurements were taken by your adjustor, those will need to be included with the claim.  It must indicate the insurance units involved, the FSA farm numbers involved and the location of the fields where the grain was harvested.


The information needed by the adjustor will include the amount of grain fed daily, the bin from which the grain was removed, the number and specie of livestock, the estimated average weight of the livestock, as well as the location and identifier of their pen, the number of the insurance unit from which the grain was fed, and whether the grain was fed in previous years, and whether it was fed from the bin or from directly from the field.



The drought and its impact on crop production mean that many farmers will be filing claims, and many of those will involve large indemnity payments.  Payments over $200,000 will be audited as a matter of recourse by insurance companies.  Many farmers will already have the necessary records that will be needed to verify production and their claim, whether the grain is stored, sold to an end user, or fed to livestock on the farm.  Insurance companies will provide worksheets, but supplemental documents such as scale tickets, settlement sheets, and even reports produced by combine monitors and grain carts can all be used for the audit.  





Posted by Stu Ellis on 08/19 at 10:12 PM | Permalink

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