WASHINGTON (AP) _ Agriculture Department investigators say they have found foreign-owned farms skirting the law to collect thousands of dollars in federal subsidies.

USDA's Office of Inspector General said it discovered the violations during an investigation in Arkansas that focused on a foreign-owned corporation that manages farms for foreign owners, American Agricultural Service Arkansas Inc.

USDA's investigators looked at 19 farms operating on foreign-owned land in Arkansas and found that five of the owners had received subsidies of $45,177 in 1989 and 1990, although they were ineligible for such payments, according to an audit obtained by The Associated Press under the Freedom of Information Act.

An Agriculture Department official said the problem appears to be an isolated incident, but two Democratic lawmakers said they're concerned it may stretch well beyond the Arkansas state lines.

Under the law, a foreign landlord is prohibited from receiving subsidy payments from the Agricultural Stabilization and Conservation Service unless the individual is providing a substantial amount of active, personal labor. The investigators said that in none of the five farms did the landlords provide such labor.

The auditors also found violations of federal farm regulations over landlord-tenant rent arrangements.

''It looks like these foreign-owned farms are doing a lot more than picking corn, cotton and rice. It also looks like they're picking the pockets of the American taxpayer,'' said Sen. Tom Daschle, D-S.D., a member of the Senate Agriculture Committee. ''It's difficult enough getting farm program benefits to deserving family farmers without having them go to foreign corporations.''

ASCS is now trying to recover the subsidies. The case is before the agency's National Appeals Division in Washington, said Charles F. Smith, a Dardanelle, Ark., attorney who represents American Ag.

Smith declined to comment on specifics of the case because his appeal is pending, other than to say he disputes the investigators' claims. He told the auditors, according to their report, that American Ag is owned by two Swiss nationals and continues to provide farm management services to foreign landowners.

In an interview Thursday, Smith said he had never met any of the company's owners and deals strictly with the managers.

The Inspector General's office identified the five farms as Buck Creek Farm, Chris-Tom Farm and Sisemore Farm, all of Lonoke County; Mat-Cem Farm in Chicot County; and Prairie Farm in Prairie County. The owners were not named; neither were their nationalities. The farms produce rice, cotton, sorghum and soybeans.

The February audit said that at the end of 1989, 7,998 foreign owners held nearly 13 million acres of agricultural land in the United States, or approximately 1 percent of the total farmland. In Arkansas, foreign owners claimed about 182,650 acres, the audit said.

William Penn, assistant deputy administrator for state and county operations at ASCS, said he has seen nothing to suggest there is a nationwide problem with foreign owners unlawfully collecting farm subsidies.

But if the agency does find a problem, it will move quickly to address it, Penn said.

Rep. Glenn English, D-Okla. and chairman of the House Agriculture subcommittee on conservation, credit and rural development, said the Arkansas findings are ''an indication that there's indeed some smoke, and we must concern ourselves about whether there is fire.''

Daschle said USDA must determine ''how widespread this abuse is and then take serious steps to assure that it ends immediately.''