WASHINGTON – Alabama, Mississippi and other Gulf states have changed the way they distribute federal grants to catfish farmers after an audit found that millions of dollars in hurricane aid may have gone to farmers who suffered little or no losses from the storms.

The new approach is in response to an Agriculture Department inspector general report last fall that said lax oversight led to “significant disparities” in how states distributed grants after the devastating 2005 hurricane season that included Katrina, Rita and other storms.

The audit reviewed $25 million in grants that USDA’s Farm Services Agency gave catfish farmers and other aquaculture operations such as crawfish and shrimp farms.

Mississippi got the most money, about $10.8 million. Alabama received $5 million; Louisiana $4.5 million; Florida $3.7 million; and Texas and North Carolina got less than $1 million apiece. North Carolina was included because of an Atlantic storm.

The report said that in deciding each state’s allocation, USDA’s Farm Service Agency used criteria such as the number and annual production of farms instead of estimates of actual losses from the storms. That meant that farmers in Louisiana, for example, which suffered the most damage, received relatively little assistance compared to others.

Also, after releasing the money, FSA took a hands-off approach, the audit said, allowing each state to decide how to distribute it among individual farmers, without monitoring their programs.

Alabama didn’t require producers to report losses at all and instead paid grants based on the size of square-footage of their ponds; Mississippi based its grants on how much feed the producers had purchased.

Such ad hoc methodologies left some producers with huge losses getting only small grants, while others who were less affected by the storms got bigger payouts. Producers raising baby catfish who buy less feed, for example, fared particularly poorly, the audit said. It found one Mississippi producer who suffered more than $400,000 in damages but was paid only about $2,000 instead of the maximum $80,000.

State officials defended their programs, saying they distributed the money as fairly and as quickly as they could. They also noted that USDA signed off on the arrangements and that the audit didn’t find any fraud or misconduct.

“It was our mission because of the strain and stress that all the farmers were under to get it out as fast we could. I don’t know that we could have done it any other way to be honest with you,” said Alabama Agriculture Commissioner Ron Sparks. “We helped our farmers. I’m not going to apologize for it.”

But FSA accepted the audit’s recommendations to tighten controls and has established new rules for handing out aid that Congress approved last year to help farmers cope with recent years’ drought.

Sparks’ agency, for example, recently distributed some $3 million to catfish farmers. The amounts were determined by weather readings as well as the volume of feed the farmers purchased in 2007. Mississippi Agriculture Department spokesman Andy Prosser said his state is using a similar methodology in handing out some $9.7 million in aquaculture aid.