Prairie farmers likely owe governments more than $3 million after they overstated their 1996 grain sales by about $100 million for the Net Income Stabilization Account program.
NISA auditors conducted a preliminary audit in February and found up to 20 percent of producers included freight from elevator to port as part of their grain income.
So they sent requests for detailed 1996 grain sales information to about 16,000 farmers in June, said Reg Grenier, spokesperson for the NISA administration.
Producers make deposits into their NISA accounts based on three percent of sales. Governments match the deposit.
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The national NISA committee, which sets policies for the program, has never considered freight to be part of sales, said Grenier.
It defines the point of sale as the time when farmers relinquish full direct risk for the grain and when it becomes pooled with other farmers’ grain.
But once the Crow grain transportation subsidy died, producers were stuck with higher freight bills. At the same time, some grain companies started to put the cost of freight on the gross amount of the grain ticket.
“They could see it on their ticket, plus they were paying more, so a lot of them thought that maybe they should be putting the freight in with their sale amount,” Grenier explained.
Farmers had until June 30 to mail their replies to NISA’s request for sales information.
The 16,000 farmers were selected by computer based on information reported on freight or sales that indicated a “high likelihood” the farmers incorrectly reported amounts, said Grenier.
“A lot of them will come back with no change, but as best as they (auditors) can guess, this was the best target group to request the information from.”
Fact-finding cost money
Grenier said he won’t know the cost of the audit until it’s finished, but estimated it would be more than $100,000.
NISA administrators will re-process all the accounts with changes, and remove overpayments directly from NISA accounts. Farmers who have an account balance of zero will get a letter asking for money back.
NISA also sent a letter to major accounting firms and 62,000 farmers earlier this spring to remind them of the point of sale rules when filling out the forms for 1997 income.
One group of farmers believes farmers should lobby the national NISA committee to change the way it defines point of sale.
Keystone Agricultural Producers discussed the audit at a meeting in Brandon last week. Reporters were asked to leave during the discussion so farmers who had been audited were not embarrassed.
Don Dewar, president of KAP, said NISA point of sale policies are “fuzzy,” seem to differ between commodities, and should be cleared up.
Eligible net sales for NISA should recognize value received net of deducted costs or directly paid costs, said Dewar.
The provincial and federal governments should also increase their contributions to four percent, he said.
