Agricultural Conservation: USDA Should Improve Its Management of Key Conservation Programs to Ensure Payments Promote Environmental Goals
Published: 2007-01-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Environmental Quality Incentives Program (EQIP) and the Conservation Security Program (CSP), administered by the U.S. Department of Agriculture's (USDA) Natural Resources Conservation Service (NRCS), are designed to promote conservation goals. In recently issued reports on these programs, GAO assessed (1) NRCS's process for allocating EQIP funds to the states to optimize environmental benefits, (2) NRCS's measures to monitor EQIP's performance, and (3) the legislative and regulatory measures available to prevent duplication between CSP and other conservation programs, such as EQIP.
section_title: What GAO Found
paragraphs: Because farmers and ranchers own and manage about 940 million acres, or about half of the continental United States' land area, they are among the most important stewards of our soil, water, and wildlife habitat. EQIP provides assistance to farmers and ranchers to take new actions aimed at addressing identified conservation problems, whereas CSP rewards farmers and ranchers who already meet very high standards of conservation and environmental management on their operations. In fiscal year 2006, EQIP and CSP provided about $1 billion and $260 million, respectively, in financial and technical assistance to farmers and ranchers. Efficient and effective management of these programs by NRCS is especially important in light of the nation's current deficit and growing long-term fiscal challenges. GAO found the following weaknesses in the management of EQIP and CSP. NRCS's process for providing EQIP funds to states is not clearly linked to the program's purpose of optimizing environmental benefits; as such, NRCS may not be directing funds to states with the most significant environmental concerns arising from agricultural production. To allocate most EQIP funds, NRCS uses a general financial assistance formula that consists of 31 factors and weights. However, NRCS does not have a documented rationale for how each factor contributes to accomplishing the program's purpose. In addition, some data that NRCS uses in applying the formula are questionable or outdated. NRCS has begun to develop long-term, outcome-oriented performance measures for EQIP. Such measures can provide information to better gauge program performance and also help NRCS refine its process for allocating funds to the states by directing funds to areas of the country that need the most improvement. However, NRCS did not have plans to link these measures to the EQIP funding allocation process. Despite legislative and regulatory provisions, it is still possible for producers to receive duplicate payments through CSP and other USDA conservation programs because of similarities in the conservation actions financed through these programs. However, NRCS did not have a comprehensive process to preclude or identify such duplicate payments. In reviewing NRCS's payments data, GAO found a number of examples of duplicate payments. Ensuring the integrity and equity of existing farm programs is a key area needing enhanced congressional oversight. Such oversight can help ensure that conservation programs, such as EQIP and CSP, benefit the agricultural sector as intended and protect rural areas from land degradation, diminished water and air quality, and loss of wildlife habitat.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the U.S. Department of  Agriculture’s (USDA) management of two of its agricultural conservation  programs—the Environmental Quality Incentives Program (EQIP) and the  Conservation Security Program (CSP). Because farmers and ranchers own  and manage about 940 million acres, or about half of the continental  United States’ land area, they are among the most important stewards of  our soil, water, and wildlife habitat. EQIP and CSP, administered by  USDA’s Natural Resources Conservation Service (NRCS), are designed to  encourage and reward activities that promote conservation goals. EQIP  provides assistance to farmers and ranchers to take new actions aimed at  addressing identified conservation problems, whereas CSP rewards  farmers and ranchers who already meet very high standards of  conservation and environmental management in their operations.
We at GAO are anxious to assist the 110th Congress in meeting its  oversight agenda. To that end, we have recommended that ensuring the  integrity and equity of existing farm programs is a key area needing  congressional oversight. The Farm Security and Rural Investment Act of  2002 (2002 farm bill) authorized funding for several agricultural  conservation programs, among them EQIP and CSP, estimated by the  Congressional Budget Office to be $20.8 billion for fiscal years 2002  through 2007. In fiscal year 2006 alone, EQIP and CSP provided about $1  billion and $260 million, respectively, in financial and technical assistance  to farmers and ranchers. Given the size and significance of these programs  in protecting rural areas from land degradation, diminished water and air  quality, and loss of wildlife habitat, it is essential that they be managed  effectively and efficiently.  Appendix I provides information on authorized  funding for these and other key USDA conservation programs.
My testimony today is based on our recent reports evaluating NRCS’s  implementation of EQIP and CSP. I will focus on three primary issues  discussed in these two reports: (1) NRCS’s process for allocating EQIP  funds to the states to optimize environmental benefits, (2) NRCS’s  measures to monitor EQIP performance, and (3) the legislative and  regulatory measures available to prevent duplication between CSP and  other USDA conservation programs and the duplication that has occurred.  To perform this work, we reviewed relevant statutory provisions, NRCS  regulations, program documentation, and guidelines for implementing  EQIP and CSP and spoke with NRCS officials. Our work was conducted in  accordance with generally accepted government auditing standards.
In summary, we reported that NRCS’s process for allocating EQIP funds to  the states does not clearly link to the program’s purpose of optimizing  environmental benefits; as such, NRCS may not be directing EQIP funds to  states with the most significant environmental concerns arising from  agricultural production. We also reported that NRCS has developed long- term, outcome-oriented measures to assess changes to the environment  resulting from EQIP practices as part of its 2005 strategic planning effort.  These measures could help the agency refine its process for allocating  funds to the states through its financial assistance formula by directing  funds toward areas of the country that need the most improvement.  However, at the time of our report, NRCS had not yet done so. Finally,  with respect to CSP, we reported that despite provisions in the 2002 farm  bill and NRCS regulations and procedures designed to reduce the potential  for duplication between CSP and other conservation programs, duplicate  payments for the same conservation practice or activity on the same land  have occurred. On the basis of these findings, we made recommendations  to improve USDA’s process for allocating EQIP funds to the states and to  develop a process to preclude and identify duplicate payments between  CSP and other conservation programs.
subsections: section_title: NRCS’s Process for Allocating EQIP Funds to the States Does Not Link to the Program’s Purpose of Optimizing Environmental Benefits
paragraphs: NRCS’s process for providing EQIP funds to the states is not clearly linked  to the program’s purpose of optimizing environmental benefits. In  particular, NRCS’s general financial assistance formula, which accounts  for approximately two-thirds of funding provided to the states, does not  have a documented rationale for each of the formula’s factors and weights,  which are used to determine the allocation of funds to the states to  address environmental issues. Thus, it is not always clear whether the  formula factors and weights direct funds to the states as effectively as  possible. In addition, the financial assistance formula relies on some  questionable and outdated data. As a result, NRCS may not be directing  EQIP funds to states with the most significant environmental concerns  arising from agricultural production.
subsections: section_title: NRCS Does Not Have A Documented Rationale for Formula Factors and Weights
paragraphs: In fiscal year 2006, approximately 65 percent of EQIP funds were  considered general financial assistance—funds for installing conservation  practices—and were allocated using a general financial assistance  formula. This formula contains 31 factors related to the availability of  natural resources and the presence of environmental concerns or  problems. For example, factors in the formula measure acres of wetlands  and at-risk species habitat, pesticide and nitrogen runoff, and the ratio of  commercial fertilizers to cropland. NRCS assigns each of the formula’s  factors a weight that determines the funds to be allocated to states based  on that factor. For example, factors with the highest weights include acres  of highly erodible cropland, acres of fair and poor rangeland, the quantity  of livestock, and the quantity of animal waste generated. A state’s total  allocation is composed of the funds it receives for each of the 31 factors.
NRCS has periodically modified factors and weights to emphasize  different national priorities, most recently in fiscal year 2004, following the  passage of the 2002 farm bill. However, NRCS has not documented the  basis for its decisions regarding the formula factors and weights nor  explained how they achieve the program’s purpose of optimizing  environmental benefits. Thus, it is not always clear whether the formula  factors and weights help direct funds to the states as effectively as  possible.
For example, NRCS has not demonstrated that it has the most appropriate  water quality factors in its formula. Specifically, the formula includes a  factor addressing impaired rivers and streams but no factor for impaired  lakes and other bodies of water. Moreover, it is not certain whether the  impaired rivers and streams factor results in funds being awarded on the  basis of general water quality concerns or water pollution specifically  caused by agricultural production. As a result, it was not certain whether  the formula allocates funds as effectively as possible to states with water  quality concerns arising from agricultural production.
While the factors in the EQIP general financial assistance formula  determine what resource and environmental characteristics are  considered when allocating funds, the weights associated with the factors  directly affect how much total funding is provided for each factor and,  thus, the amount of money each state receives. Small differences in the  factor weights can shift the amount of financial assistance directed at a  particular resource concern. For example, in 2006, if the weight of any of  the 31 factors had increased by 1 percent, $6.5 million would have been  allocated on the basis of that factor at the expense of one or more other  factors. Such a shift could affect the amount of financial assistance  received by each state. The potential for the weights to significantly affect  the amount of funding a state receives underscores the importance of  having a well-founded rationale for assigning them.
Some stakeholders we spoke with questioned NRCS’s assignment of  weights to certain factors in the financial assistance formula because they  did not believe NRCS’s formula adequately reflected the states’  environmental priorities. For example, the formula allocates 6.3 percent of  EQIP funds to the states on the basis of factors specifically associated  with animal feeding operations. However, states have spent more than 6.3  percent of their EQIP funding on conservation practices related to animal  feeding operations.  For example, in fiscal year 2005, states spent a total of  11 percent of EQIP financial assistance, or $91.1 million, on just one such  practice—the construction of animal waste storage facilities.  This  discrepancy suggests that the weights in the formula may not reflect  states’ priorities.
section_title: Financial Assistance Formula Relies on Some Questionable and Outdated Data
paragraphs: Weaknesses in the financial assistance formula are compounded by  NRCS’s use of questionable and outdated data as they apply to the  formula. Accurate data are key to ensuring that funds are distributed to  states as intended. However, we identified several methodological  weaknesses in the data sources: (1) data that were used more than once in  the formula, (2) data sources whose accuracy could not be verified, and  (3) data that were not as current as possible.
First, 5 of the 29 data sources in the financial assistance formula were  used more than once for separate factors, potentially causing NRCS to  overemphasize some environmental concerns at the expense of others.
For example, NRCS uses the same data—data estimating the potential for  pesticide and nitrogen runoff from agricultural land—for two factors in  the formula intended to represent unique environmental concerns. Using  the same data for multiple factors may result in more emphasis being  placed on certain environmental concerns than intended. Furthermore,  using data created for one factor for a second factor also makes the  formula less transparent and potentially less reliable for allocating state  funding.
Second, NRCS could not confirm the source of data used in 10 factors in  the formula; as such, we could not determine the accuracy of the data,  verify how NRCS generated the data, or fully understand the basis on  which the agency allocates funding. For example, we could not verify how  NRCS generated data for factors measuring the quantities of livestock and  animal waste. NRCS said it had not retained documentation on how the  data for these factors were calculated. As a result, it was uncertain  whether NRCS had chosen the most appropriate data as its basis for  allocating funds to states with pollution problems from livestock or  whether the data were accurately calculated.
Third, NRCS does not use the most current data for six factors in the  formula. For example, according to NRCS, the source of data on the ratio  of commercial fertilizers to cropland was a 1995 report by the Association  of American Plant Food Control Officials. We found a 2005 version of the  same report with more current data. The absence of the most recent data  for these six factors raises questions about whether the formula allocates  funds to areas of the country that currently have the greatest  environmental needs, because recent changes in a state’s agricultural or  environmental status may not be reflected.
Because of our concerns about the general financial assistance formula,  we recommended that NRCS ensure its rationale for the factors and  weights was documented and addressed program priorities, and the data  sources used in the formula were accurate and current. In responding to  our report, USDA agreed that the EQIP formula needed review but did not  agree with our assessment that NRCS’s funding process lacked a clear link  to the program’s purpose of optimizing environmental benefits. We  continue to believe, however, that the weaknesses we identified in the  general financial assistance formula lessen its ability to optimize  environmental benefits. Additional information describing its reasons for  including or excluding factors in the formula would help ensure that  EQIP’s purpose of optimizing environmental benefits is more evident.
section_title: NRCS Has Begun to Develop More Outcome-Oriented Performance Measures for EQIP, but Has Not Yet Linked Them to the Funding Allocation Process
paragraphs: NRCS has begun to develop more long-term, outcome-oriented  performance measures to assess changes to the environment resulting  from EQIP practices.  In addition to providing information to better gauge  program performance, these measures could also help NRCS refine its  funding allocation process to the states by directing funds to areas of the  country that need the most improvement. However, at the time of our  report, NRCS did not yet have any plans to link these performance  measures to the EQIP funding allocation process.
In 2000, we reported that performance measures tied to outcomes would  better communicate the results NRCS intended its conservation programs  to achieve and would be more useful in judging NRCS’s performance in  carrying out its mission. In 2002, NRCS established annual performance  measures for EQIP. However, they were primarily program outputs—the  number and type of conservation practices installed—and as such  provided limited information for decision makers.
Subsequently, as part of its 2005 strategic planning effort, NRCS developed  long-term, outcome-oriented performance measures to assess changes to  the environment resulting from the installation of EQIP conservation  practices. These measures include such things as reducing sediment runoff  from farms, improving soil condition on working cropland, and increasing  water conservation. They also include proposed targets for each measure  to be achieved by 2010, such as reducing sediment runoff by 18.5 million  tons annually. According to NRCS, it has developed baselines for these  performance measures, and plans to assess and report on them once  computer models and other data collection methods that estimate  environmental change are completed.
According to the Director of NRCS’s Strategic Planning and Performance  Division, NRCS expects to assess and report on the status of all measures  by 2010 but will be able to assess the results of some measures sooner,  such as improved soil condition on working cropland. In the meantime,  the agency will continue to use its existing annual measures to assess  performance. The director acknowledged that the outcome-oriented  measures were not as comprehensive as needed but represented measures   NRCS could reasonably assess using modeling and data collection  methods that would soon become available. NRCS plans to continue to  improve its performance measures.
Although we did not assess the comprehensiveness of the EQIP  performance measures, the additional information they provide about the  results of EQIP outcomes should allow NRCS to better gauge program  performance. As a next step, such information could also help the agency  refine its process for allocating funds to the states through its general  financial assistance formula by directing funds toward practices that  address unrealized performance targets and areas of the country that need  the most improvement. The Chief of NRCS’s Environmental Improvement  Programs Branch agreed that information about program performance  might eventually be linked to the EQIP funding allocation process.  However, at the time of our report, the agency did not have plans to make  this linkage.
We recommended that the Secretary of Agriculture direct NRCS to  continue to analyze current and newly developed outcome-oriented  performance measures for EQIP and use this information to make any  further revisions to the financial assistance formula to ensure funds are  directed to areas of highest priority. In its response, NRCS stated that the  current measures have been revised to reflect the most recent results of its  effort to track and report program performance.
section_title: Legislative and Regulatory Measures Reduce the Potential for Duplication between CSP and Other Programs, but the Potential Remains for Duplicate Payments, and Such Payments Have Occurred
paragraphs: A number of legislative and regulatory actions have been taken that reduce  the potential for duplication between CSP and other USDA conservation  programs, such as EQIP. For example, the 2002 farm bill provides that CSP  may reward producers for maintaining conservation practices that they  have already undertaken, whereas other programs generally provide  assistance to encourage producers to take new actions to address  conservation problems on working lands or to idle or retire  environmentally sensitive land from agricultural production. In addition,  the 2002 farm bill explicitly prohibits duplicate payments under CSP and  other conservation programs for the same practice on the same land. It  also prohibits CSP payments for certain activities that can be funded  under other conservation programs, such as the construction or  maintenance of animal waste storage or treatment facilities.
In addition, CSP regulations, promulgated by USDA, were designed to  prevent duplication between CSP and other conservation programs. For  example, the regulations establish higher minimum eligibility standards for  CSP than for other programs, which help to differentiate the applicant  pool for CSP from the potential applicants for these other programs. The  regulations also encourage CSP participants to implement conservation  actions, known as enhancements, to achieve a level of treatment that  generally exceeds the level required by other USDA conservation  programs.
Despite these actions, the potential for duplicate payments still exists  because of similarities in conservation actions financed through CSP and  other programs, and our analysis has revealed that duplicate payments  have occurred. Our analysis of 2004 payments data showed that 172 (or 8  percent) of the 2,180 producers who received a CSP payment in 2004 also  received an EQIP payment that year. Among the 172 producers, we  identified 72 who received a total of 121 payments that appeared to be for  similar or related conservation actions. We then selected 11 of these  producers, who received a total of 12 payments under each program, for  more detailed analysis and found that in 8 cases duplicate payments had  occurred. For example, four of these duplicate payments were made to  producers who received a CSP enhancement payment and an EQIP  payment for conservation actions that appeared to be similar. In one of  these cases, a producer received a CSP pest management enhancement  payment of $9,160 for conservation crop rotation and, on the same parcel  of land, an EQIP payment of $795 for the same conservation action— conservation crop rotation.
NRCS state officials agreed that the payments made in these four cases  were duplicates. They stated that they were unaware that such duplication  was occurring and that they would inform their district offices of it. NRCS  headquarters officials stated that the agency lacks a comprehensive  process to either preclude duplicate payments or identify them after a  contract has been awarded. Instead, these officials said, as a guard against  potential duplication, NRCS relies on the institutional knowledge of its  field staff and the records they keep.
NRCS has the authority to recover duplicate payments. CSP contracts, by  way of reference, include a clause stating that CSP participants cannot  receive duplicate payments.  Under a CSP contract, as required in the 2002  farm bill, a producer agrees that on violation of any term or condition of  the contract to refund payments and forfeit all rights to receive payments  or to refund or accept adjustments to payments, depending on whether the  Secretary of Agriculture determines that termination of the contract is or  is not warranted, respectively.
Duplicate payments reduce program effectiveness and, because of limited  funding, may result in some producers not receiving program benefits for  which they are otherwise eligible. For these reasons, we recommended  that the Secretary of Agriculture direct the Chief of NRCS to (1) develop a  comprehensive process, such as an automated system, to review CSP  contract applications to ensure that CSP payments, if awarded, would not  duplicate payments made by other USDA conservation programs; and (2)  develop a process to efficiently review existing CSP contracts to identify  cases where CSP payments duplicate payments made under other  programs and take action to recover appropriate amounts and to ensure  that these duplicate payments are not repeated in fiscal year 2006 and  beyond.
Regarding the first recommendation, in July 2006, NRCS said it had  created an automated system within its contracting software to conduct a  comparison between existing contracts for EQIP and other conservation  programs and new CSP applications to reveal potential areas of  overlapping practices. In addition, NRCS indicated that for the fiscal year  2006 CSP sign-up, it would require applicants to complete a form that asks  an applicant to certify whether or not they are receiving payments from  another conservation program on any of the land being offered for  enrollment in CSP. These actions appear to be steps in the right direction,  but we have not assessed their effectiveness. Regarding the second  recommendation, NRCS indicated that all identified duplicate payments  would be dealt with according to the NRCS contracting manual. We do not  know the extent to which NRCS has identified and recovered duplicate  payments.
In conclusion, EQIP and CSP are key agricultural conservation programs  that can play an invaluable role in encouraging farmers and ranchers to act  as stewards of the nation’s natural resources. However, the weaknesses  we identified in the management of EQIP and CSP funds may lessen these  programs’ effectiveness. Refining the EQIP allocation formula to ensure  funds are provided to states in a manner that optimizes environmental  benefits, continuing to develop outcome-oriented performance measures  to help refine its funding allocation process, and developing processes  designed to eliminate duplicate payments between CSP and other  programs would enhance the programs’ ability to effectively promote  conservation among U.S. agricultural producers. Furthermore, oversight of  these programs, such as today’s hearing, helps ensure funds are spent as  economically, efficiently and effectively as possible and benefit the  agricultural sector as intended. Such oversight is especially critical in light  of the nation’s current deficit and growing long-term fiscal challenges.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or other Members of the Committee  may have.
section_title: Contact and Staff Acknowledgments
paragraphs: Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. For further  information about this testimony, please contact Lisa Shames, Acting  Director, Natural Resources and Environment, (202) 512-3841 or  ShamesL@gao.gov. Key contributors to this statement were James R.  Jones, Jr., Assistant Director; Gary Brown; Thomas Cook; Paige Gilbreath;  and Carol Herrnstadt Shulman.
section_title: Appendix I: Description of Key USDA Conservation Programs
paragraphs: Provides annual rental payments and cost-share and technical assistance to  establish permanent vegetative land cover in exchange for taking environmentally  sensitive cropland out of production for 10 to 15 years. Most program lands are  enrolled through the use of contracts and competitive bidding during designated  sign-ups. Some economic uses of enrolled land are allowed with a reduction of  annual rental payments, such as the installation of wind turbines and managed  haying and grazing. Up to 39.2 million acres may be enrolled at any one time.
Offers various payments and technical assistance to support ongoing stewardship  of agricultural land through 5- to 10-year contracts to promote conservation and  the improvement of soil, water, air, energy, and plant and animal life on private and  tribal agricultural lands. Unlike other USDA conservation programs that provide  assistance to take new actions aimed at addressing identified conservation  problems, CSP rewards farmers and ranchers who already meet very high  standards of conservation and environmental management in their operations.
Offers incentive and cost-share payments and technical assistance through 1- to  10-year contracts to implement structural and land management practices or to  develop a comprehensive nutrient management plan. At least 60 percent of annual  funds made available for cost-share and incentive payments are required to be  targeted at practices relating to livestock production.
Purchases easements or other interests in eligible land (up to 50 percent of fair  market value) for the purpose of protecting topsoil by limiting nonagricultural uses  of the land. Eligible land means land on a farm or ranch that is subject to a  pending offer for purchase from an eligible entity and that has prime, unique, or  other productive soil or that contains historical or archeological resources. Eligible  land includes cropland, rangeland, grassland, pastureland, and forestland that is  an incidental part of the agricultural operation.
Offers permanent and 30-year easements and 10- to 30-year rental agreements to  grassland owners to assist owners in restoring and conserving eligible land. Up to  2 million acres may be enrolled.
Targets restoration of prior-converted and farmed wetlands to a wetland condition.  Acreage can be enrolled in the program through the use of permanent easements,  30-year easements, and restoration cost-share agreements. Program lands may  be used for compatible economic uses such as hunting, fishing, or limited timber  harvests. Up to 2.275 million acres may be enrolled.
Offers cost-share payments through 5- to 10-year agreements to develop and  protect and restore wildlife habitat. Allows up to 15 percent of funds each year to  be used for increased cost-share assistance to producers who enter into 15-year  agreements.
Congress authorized the Conservation Security Program without placing limits on either its funding or  the number of acres enrolled, although at times Congress has capped its funding in other legislation.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.