Are you going to have a crop insurance audit?
November 8, 2012
When we hear the word AUDIT, it just scares the heck out of most of us. I look at an audit as an opportunity to prove that my farm/ranch records are accurate and a chance to show my partners the same. You may ask, who are my partners? They are anyone that you do business with, which would make your crop insurance agent, one of your partners in your business. We don't specialize in crop insurance audits, but we do help our farm and ranch families gather the supporting data to help the audit go more smoothly.
Let's go back to the starting point of a crop insurance audit. What will qualify you for a crop insurance audit? You may have been audited in previous years and have not known about it, because they didn't find any errors. In the 2012 crop year, the southern part of South Dakota has been under extreme drought and the production of corn per acre is from 0 bushels to 150 bushels per acre. If you have a crop loss of greater than $200,000 per crop per county, you are in line for an automatic crop insurance audit. You may say to yourself that I will never be affected, but if you have 600 acres of 5 bushel corn all in the same county, you may qualify for an audit. The auditors have the right to go back 3 more years and audit your crop production records, crop sales receipts, and crop feed to livestock records. This may sound like a migraine headache. What we need to do is determine all of the bushels available minus the bushels used and compare our ending inventory to what the bin measurements show us.The following may help you get prepared for a crop insurance audit. So let's get started and make this a simple exercise in proving our records are accurate and we will use the corn crop in our illustration.
1. Start with your Jan. 1, 2009, balance sheet to determine how many bushels of corn you had on inventory.
2. You can add to that your corn crop reported production for the 2009, 2010, 2011, 2012 years.
3. You then can add the bushels of corn you purchased.
4. That should give you your total bushels that were available for the 2009-2012 years.
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5. Then you can subtract the number of bushels sold for those years.
6. You then need to determine how many bushels were fed during those years and subtract that number from the total available.
7. You will then need to have FSA measure your bins to determine how many bushels you have on inventory.
8. You then will need to subtract your total bushels available from total bushels disappeared and compare that number of bushels to the FSA measured inventory and make adjustments. The adjustments maybe for test weight and moisture content of the corn. This may seem like a long process, but with good accurate records, a bit of common sense, and your patience, it is not that long of a process. Gather all of the pieces of the puzzle and put them together.
You will need hard copies to verified records from anindependent third party to verify your records. Some of the records you will need as proof for your audit are: bank balance sheets, assembly sheets from who you sold your grain to, crop insurance records to prove production, feed fed records, FSA bin measurements. Your crop insurance audit will go much easier if you spend the time to gather your information and prepare for your audit. The farm/ranch families enrolled in the South Dakota Center for Farm/Ranch Management have keep most of these records as they are preparing their records for their annual yearend Finpack analysis of their operation. If you would like to enroll in the Center you may contact us at http://www.mitchelltech.edu and click on Programs and the Center or call us at 1-800-684-1969.
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