Monday, November 27, 2006

Attempting the Perfect Payment System

How do you make payments perfectly? My metaphor is you work upstream--to have perfect water at the mouth of the river you need to work your way up the river cleaning as you go, then work on major tributaries and then the minor ones. For example, how do I make perfect payments to my power company?

I started out long ago by reading the bill, getting my checkbook, writing the amount into a check and signing it. There were multiple sources of error: I could forget to pay the bill; I could fail to complete the check; I could misread the amount; I could lose the envelope on the way to the mailbox, my writing could be illegible so the check wouldn't be accepted.

A big step in improvement came as I bought a PC and Quicken software (and as Quicken made their yearly improvements in software). The software reminded me that the payment was due and ensured that I completed all the entries.

The next step was electronic payments--I could cut out the mail and send the payment electronically, thus cutting out the dedicated public servants of the USPS.

Then electronic billing--I can receive the bill electronically. And the final step is automatic payment by authorizing the power company's computer to deduct the amount from my checking account. (I've not taken the last two steps yet, but I expect to.)

FSA/USDA has followed a similar route from its beginning in the New Deal. The sequence was roughly: typing checks based on manually prepared payment documents with humans calculating the amounts; typing them in OCR font so the carbons could be sent to Kansas City for scanning and validity checking; having a computer print them; going upstream by getting the farm, crop, and producer share data into the computer to compute the amounts and print the checks; the next tributaries were getting data like payment limitation allocations and sod/swamp and "person" determination data into the computer after the forms were signed and determinations made so the computer could validate eligibility and handle special cases (claims and assignments). That's about where we were when I retired.

The problem with the 10 percent of "improper" (or as I prefer "defective" payments) is that the manually prepared supporting documentation, the forms the farmer signs to affirm his or her compliance with certain provisions or the accuracy of information, were found to be incomplete or inaccurate (at least, that's my understanding). So how does the agency go upstream from here?

[The following may well be erroneous, given the time I've been away.) The key is FSA's move to Internet (technically intranet) based software to update farmer data. Instead of an FSA employee showing the farmer how to complete a form, then updating the computer to reflect the completion (the current process), now the farmer could complete the form on line so software can ensure that she makes all entries and the data can be captured without human action. Theoretically FSA could have had their employees completing the forms on the county computer, which would at least ensure that they were completely and consistently filled out. But that's not much bang for the buck unless you can flow the completion of the form into the payment process.

Note however there's still the problem of matching "reality" with what's in the computer which is designed based on pictures in our head. Just because we have a consistent set of data in the computer that passes all validity checks and seems to match what Congress wrote into the legislation does not ensure a match with what's happening on the farm and nor that the program helps the farmer and his community.

No comments: