BULLETIN NO.: MGR-96-016

TO:       All Reinsured Companies
          All Risk Management Field Offices
          FSA Headquarters, Program Delivery and Field Operations

FROM:     Kenneth D. Ackerman
          Deputy Administrator

SUBJECT:  Tolerance Reviews for Category B Crops


BACKGROUND:

Reinsured companies are required by Federal Crop Insurance Corporation (FCIC) 
Directive Number 14010, Guidelines and Expectations for Delivery of Multiple 
Peril Crop Insurance (Manual 14), Section 8.G(c)(1) and (2) to conduct actual 
production history (APH) tolerance reviews on Category B crops.  Many 
reinsured companies have submitted data which shows that the selection 
process and the tolerances result in an unusually large number of reviews.  
FCIC has analyzed the data submitted and agrees with the companies' concerns.

ACTION:

For the 1996 crop year and until Manual 14 is revised, the requirements of 
Section 8.G(c)(1) and (2) are suspended and the following requirements are 
established for Category B crop APH reviews.  Reinsured companies must review 
a minimum of one percent of the crop policies for each Category B crop using 
the following tolerances:

     1)   If a unit's actual APH yield reported on the current year's 
          production report exceeds the previous year's Approved APH yield 
          (Block 20(B)) by more than 150 percent, all units of the crop 
          policy must be reviewed.

     2)   If the number of crop policies selected in Number 1 above exceeds 
          one percent of the total policies for that crop, the crop policies 
          which exceed the tolerance by the greatest percentage will be 
          reviewed.  All policies which exceed the 150 percent tolerance but 
          are not reviewed because of the one percent limit will remain 
          subject to the one percent random selection specified in Manual 14.


Additional reviews to establish program confidence may be required by the 
reinsured company.  This bulletin does not change any other language 
contained in Manual 14.

The intent of this procedure is to protect against abuse in the calculation 
of APH yields.  The objective of this selection process is to identify yields 
which are in error, or which may be inflated in an attempt to abuse the 
Federal crop insurance program.  Selection of a minimum of one percent of the 
crop policies will provide a reasonable method to identify these potential
problems.

Companies seeking relief for the 1995 crop year may limit their tolerance 
reviews to one percent of their 1995 Category B crop policies.  If you should 
have any questions, please contact your Reinsurance Services Liaison Branch 
(RSLB) Account Executive.