Conservation Security Program: Despite Cost Controls, Improved USDA Management Is Needed to Ensure Proper Payments and Reduce Duplication with Other Programs
Published: 2006-04-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Conservation Security Program (CSP)--called for in the 2002 farm bill and administered by the U.S. Department of Agriculture's (USDA) Natural Resources Conservation Service (NRCS)--provides financial assistance to producers to reward past conservation actions and to encourage further conservation stewardship. CSP payments may be made for structural or land management practices, such as strip cropping to reduce erosion. CSP has raised concerns among some stakeholders because CSP cost estimates generally have increased since the 2002 farm bill's enactment. For example, the Congressional Budget Office's estimate increased from $2 billion in 2002 to $8.9 billion in 2004. GAO determined (1) why CSP cost estimates generally increased; (2) what authority USDA has to control costs and what cost control measures exist; and (3) what measures exist to prevent duplication between CSP and other USDA conservation programs and what duplication, if any, has occurred.
section_title: What GAO Found
paragraphs: Various factors explain why estimates of CSP costs generally increased since the 2002 farm bill's enactment. Of most importance, little information was available regarding how this program would be implemented at the time of its inception in 2002. As more information became available, cost estimates rose. In addition, the time frames on which the estimates were based changed. While the initial estimates covered years in which the program was expected to be nonoperational or minimally operational, subsequent estimates did not include these years. The farm bill provides USDA general authority to control CSP costs, including authority to establish criteria that enable it to control program participation and payments and, therefore, CSP costs. For example, NRCS restricts participation by limiting program enrollment each year to producers in specified, priority watersheds. NRCS also has established certain CSP payment limits at levels below the maximum allowed by the statute. However, efforts to control CSP spending could be improved by addressing weaknesses in internal controls and inconsistencies in the wildlife habitat assessment criteria that NRCS state offices use, in part, to determine producer eligibility for the highest CSP payment level. Inconsistencies in these criteria also may reduce CSP's conservation benefits. The farm bill prohibits duplicate payments for the same practice on the same land made through CSP and another USDA conservation program. Various other farm bill provisions also reduce the potential for duplication. For example, as called for under the farm bill, CSP may reward producers for conservation actions they have already taken, whereas other programs generally provide assistance to encourage new actions or to idle or retire environmentally sensitive land from production. In addition, CSP regulations establish higher minimum eligibility requirements for CSP than for other programs. However, despite these legislative and regulatory provisions, the possibility that producers can receive duplicate payments remains because of similarities in the conservation actions financed through these programs. In addition, NRCS does 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.

section_title: Letter
paragraphs: Farmers and ranchers own and manage about 940 million acres, or about  half of the continental United States’ land area, and are thus among the  most important stewards of our soil, water, and wildlife habitat.  Because  of this important responsibility, how private land is used is increasingly  recognized as vital to protecting the nation’s environment and natural  resources.  For example, to help protect water quality and conserve wildlife  habitat, private landowners have installed millions of acres of conservation  buffers. Despite these efforts, state water-quality agencies report that  agricultural production is still a leading contributor to impaired water  quality; similarly, habitat loss associated with agriculture has been a factor  in the declining populations of numerous wildlife species, including many  threatened or endangered native species.  Recognizing the critical role  played by private landowners, Congress significantly increased authorized  funding for an array of conservation programs managed by the U.S.  Department of Agriculture (USDA) in the Farm Security and Rural  Investment Act of 2002 (farm bill). Specifically, Congress authorized  additional funding for these programs for fiscal years 2002 through 2007,  estimated by the Congressional Budget Office (CBO) to be $20.8 billion,  nearly an 80 percent increase over the previous baseline for these  programs. Part of this increase was for several new conservation programs called for by the farm bill, including the Conservation Security Program  (CSP).
CSP supports ongoing conservation stewardship of agricultural lands by  providing financial and technical assistance 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 problems such as excessive soil erosion or nutrient runoff, CSP  is unique in that it rewards farmers and ranchers who already meet very  high standards of conservation and environmental management in their  operations.  The program seeks to encourage these producers to continue  and further enhance their high level of stewardship while creating an  incentive for other producers to increase their level of stewardship in order  to qualify for CSP assistance as well.  CSP is also unique among USDA  conservation programs in that Congress authorized it without placing limits  on either its funding or the number of acres enrolled, although at times  Congress has capped its funding in other legislation. CSP is open to all  eligible agricultural producers, regardless of size of operation, crops  produced, or geographic location.  CSP is administered by USDA’s Natural  Resources Conservation Service (NRCS) and funded through USDA’s  Commodity Credit Corporation (CCC).
CSP rewards three levels, or tiers, of conservation treatment for qualified  producers who enter into CSP contracts with NRCS. Tier I participants  must have addressed soil and water quality resource concerns to a  specified minimum level of treatment on at least part of the participant’s  operation prior to applying to the program. Under this tier, contracts are of  5-year duration, and annual payments of up to $20,000 are to be made.  Tier  II participants must have addressed soil and water quality resource  concerns to the minimum level of treatment on the entire agricultural  operation prior to application and must treat an additional significant  resource concern as well.  Under this tier, contracts are of a 5- to 10-year  duration, and annual payments of up to $35,000 are to be made.  In addition  to addressing soil and water quality resource concerns to specified  minimum levels, Tier III participants must have addressed all other  applicable resource concerns, including wildlife habitat, to a minimum  level on their entire agricultural operation before application.  These  additional resource concerns are described in the CSP sign-up notice, and  the related criteria for the minimum treatment levels are provided in CSP  regulations and may be further augmented by NRCS state offices to reflect  local conditions.  For example, for the fiscal year 2004 and fiscal year 2005  CSP sign-ups, wildlife habitat management was identified as an applicable  resource concern in the sign-up notices.  Under Tier III, contracts are of a 5-  to 10-year duration, and annual payments of up to $45,000 are to be made.
Regardless of the tier, a producer’s total CSP contract payment may include  up to four components: (1) an annual stewardship component for the base  level of conservation treatment required for program eligibility, (2) an  annual existing practice component for the maintenance of existing  conservation practices, (3) an annual enhancement component for  additional activities that provide increased resource benefits beyond the  base level of conservation treatment that is required for program  eligibility, and (4) a one-time new practice component for additional  approved practices. In determining which CSP contract applications to  accept, NRCS first determines whether an application meets the minimum  requirements for Tier I, II, or III.  NRCS then groups qualified applications  into one of five enrollment categories—defined by criteria such as a  producer’s willingness to undertake additional conservation activities— and funds the applications beginning with the highest category in each tier  until the available funding is exhausted.  The farm bill requires NRCS to  provide technical assistance to producers for the development and  implementation of conservation security contracts but in an amount not to  exceed 15 percent of amounts expended for the fiscal year.
NRCS held the first CSP sign-up in fiscal year 2004.  Nearly 2,200 farmers  and ranchers participated in the program that year, with contracts covering  nearly 1.9 million acres in 18 watersheds in 22 states.  Producer payments  totaled about $34.6 million in fiscal year 2004.  For fiscal year 2005, NRCS  approved over 12,700 CSP contract applications, covering over 9 million  acres in 220 watersheds in 50 states and Puerto Rico.  Producer payments  totaled about $171.4 million (including payments for contacts approved in  2004) in fiscal year 2005.  In January 2006, USDA announced that it plans to  offer CSP contracts to producers in an additional 60 watersheds during  fiscal year 2006, with participants receiving an estimated $220 million  (including payments for contracts approved in 2004 and 2005).  Over time,  NRCS plans to accept CSP contract applications from eligible producers in  each of the nation’s 2,119 watersheds.
CSP has attracted considerable interest by stakeholders in Congress and in  farm, conservation, and environmental organizations for a variety of  reasons.  Notably, cost estimates for CSP generally have increased since  the program’s inception, and some stakeholders are concerned that CSP  may duplicate assistance provided under other USDA conservation  programs.  Regarding program costs, estimates made by CBO and the  Office of Management and Budget (OMB) generally have increased over  time.  For example, in May 2002, CBO estimated CSP would cost about $2  billion over 10 years.  CBO revised its 10-year cost estimate to $7.8 billion in  January 2003 and then increased it again to $8.9 billion in March 2004.   OMB’s estimates also increased.  In May 2002, OMB estimated CSP would  cost $5.9 billion over 10 years.  OMB increased its estimate to $9.7 billion in  January 2004.  Regarding potential program duplication, some stakeholders  note that CSP and other USDA conservation programs appear to provide  financial and technical assistance for similar conservation activities, such  as creating conservation buffers around cropped fields, creating the  possibility that a producer could receive duplicate payments for the same  activity.
In this context, you asked us to determine (1) why CBO and OMB cost  estimates for CSP generally increased over time; (2) what authority USDA  has to control CSP costs and what cost control measures are in place; and  (3) what legislative and regulatory measures exist to prevent duplication  between CSP and other USDA conservation programs and what  duplication, if any, has occurred.
To determine why CSP costs estimates have increased, we interviewed  CBO and OMB officials and reviewed documentation they provided.  We  did not attempt to re-estimate or audit the CBO or OMB estimates or data  discussed in this report.  To determine USDA’s authority to control CSP  costs and the cost control measures implemented, we reviewed relevant  legislation, CSP regulations, and NRCS’s Conservation Programs Manual  and related guidance.  We also interviewed NRCS and other USDA officials  and reviewed documentation they provided.  To determine what legislative  and regulatory measures exist to prevent duplication between CSP and  other conservation programs and what duplication, if any, has occurred, we  reviewed relevant authorizing legislation and CSP regulations.  We also  interviewed NRCS and other USDA officials and reviewed the documents  they provided.  In addition, we interviewed NRCS officials specifically  responsible for developing a plan to coordinate USDA’s conservation  programs to, among other things, eliminate redundancy.  Furthermore, to  identify apparent cases of duplication, we reviewed and analyzed 2004  payments data for CSP and two other USDA conservation programs that  also provide assistance to implement conservation practices on land used  for agricultural production.  We then discussed these cases with NRCS  officials to determine the extent of duplication, if any.  Finally, we  interviewed officials and reviewed documentation they provided at farm,  conservation, and environmental organizations.  We conducted our review  from February 2005 through February 2006 in accordance with generally  accepted government auditing standards.  Appendix I provides additional  information on our objectives, scope, and methodology.
subsections: section_title: Background
paragraphs: CSP, called for under section 2001 of the 2002 farm bill, is a voluntary  conservation program that supports ongoing stewardship of private and  tribal agricultural lands by providing payments to producers for  maintaining and enhancing natural resources.  According to USDA, CSP  identifies and rewards those farmers and ranchers who are meeting the  highest standards of conservation and environmental management on their  operations, while creating powerful incentives for other producers to meet  those same standards of conservation performance.  In turn, the  conservation benefits gained will help these farms and ranches to be more  economically and environmentally sustainable while increasing natural  resources benefits to society at large.
CSP provides financial and technical assistance to agricultural producers  who advance the conservation and improvement of soil, water, air, energy,  plant and animal life, and other conservation purposes on working lands.   Such lands include cropland, grassland, prairie land, improved pasture, and  rangeland, as well as forested land and other noncropped areas that are an  incidental part of the agriculture operation.  The program is available in all  50 states, the District of Columbia, the Commonwealth of Puerto Rico,  Guam, the Virgin Islands of the United States, American Samoa, the  Commonwealth of the Northern Marianna Islands, and the Trust Territory  of the Pacific Islands.  Under the farm bill, the program is open to all  agricultural producers, regardless of size of operation, crops produced, or  geographic location.  CSP is administered by NRCS.
In implementing CSP, NRCS emphasizes soil and water quality as nationally  important resource concerns because of the potential for significant  environmental benefits from conservation treatment that improves their  condition.  Thus, although the farm bill required producers to treat at least  one resource of concern under CSP, NRCS program regulations require  producers to treat at least two resources—soil and water—to be eligible for  the program. Producers can use CSP payments to fund a variety of soil  and water quality conservation practices.  Soil quality practices include  crop rotation, planting cover crops, tillage practices, prescribed grazing,  and providing adequate wind barriers.  Water quality practices include  conservation tillage, strip cropping, vegetative filter strips, terraces,  grassed waterways, managed access to water courses, nutrient and  pesticide management, prescribed grazing, and irrigation water  management.  In addition, under the farm bill and NRCS regulations, to be  eligible for CSP, both the producer and the producer’s operation must first  meet several basic eligibility criteria, including (1) the land must be private  agricultural land, forested land that is an incidental part of an agricultural  operation, or tribal land with the majority of the land located within a  selected priority watershed; (2) the applicant must be in compliance with  highly erodible land and wetlands provisions of the Food Security Act of  1985 and generally must have control of the land for the life of the contract;  and (3) the applicant must share in the risk of producing any crop or  livestock and be entitled to a share in the crop or livestock available for  marketing from the operation.
The farm bill establishes three tiers or levels of participation.  Each tier has  a specified contract period and an annual payment limit and calls for a plan  addressing resources of concern (as further delineated in NRCS  regulations), as indicated in table 1.
In addition to these tiers, NRCS’s program regulations and sign-up  announcements establish enrollment categories and subcategories.  Under  NRCS regulations, enrollment categories may be defined by criteria related  to resource concerns and levels of historic conservation treatment,  including a producer’s willingness to achieve additional environmental  performance or conduct conservation enhancement activities.  For the  fiscal year 2005 sign-up, five enrollment categories (A through E) were  used for cropland, pasture, and rangeland.  For example, for cropland, the  enrollment categories were defined by various levels of soil conditioning  index scores and the number of stewardship practices and activities in place on the farm for at least 2 years. All applications that met the sign-up  criteria were placed in an enrollment category, regardless of available  funding.  NRCS then funded all eligible producers enrolled in category A  before funding producers in category B and subsequent categories until  available funding was exhausted. If an enrollment category could not be  fully funded, then the subcategories were used to determine application  funding order within a category.  For the fiscal year 2005 sign-up, 12  subcategories were used.  These subcategories included factors such as  whether (1) the applicant is a limited resource producer or a participant in  an ongoing environmental monitoring program; (2) the agricultural  operation is in a designated water conservation area or aquifer zone,  drought area, or nonattainment area for air quality; or (3) the agricultural  operation is in a designated area for threatened and endangered species  habitat creation and protection.
The producer’s CSP contract identifies the type and amount of program  payments that a producer will receive.  NRCS has established criteria for  calculating each of the four components of the program payment.  For  example, the stewardship component is based on the number of acres  enrolled in CSP, the stewardship payment rate established for the  watershed, and reduction factors based on the tier of enrollment.  At a  minimum, all CSP contract payments include amounts for the stewardship  and existing practice components.  To be eligible to participate in CSP, the  producer must develop a conservation security plan (also known as a  conservation stewardship plan) that identifies the land and resources to be  conserved; describes the tier of conservation security contract and the  particular conservation practices to be implemented, maintained, or  improved; and contains a schedule for the implementation, maintenance,  or improvement of these practices.  This plan must be submitted to and  approved by NRCS.
According to NRCS, about 1.8 million farmers and ranchers nationwide are  potentially eligible for CSP.  However, the agency has chosen a staged  approach to implementing CSP, based on limiting program sign-ups to  selected, priority watersheds each year. In part, this reflects CSP’s  newness.  As with any new program, there have been birthing and growing  pains as the agency has grappled with developing program regulations,  training its staff, outreaching to producers and stakeholder groups, and  adjusting program implementation based on lessons learned from one  program sign-up year to the next.  NRCS also chose a staged approach in  light of limited program funding—Congress authorized caps for total CSP  funding in fiscal year 2004 and for salaries and expenses of personnel to  carry out CSP in fiscal years 2005 and 2006—and the statutory limitation  on the amount of CSP funding that can be used for technical assistance— NRCS cannot incur technical assistance costs in excess of 15 percent of the  funds expended in a given fiscal year for CSP.  According to NRCS, focusing  on priority watersheds reduces the administrative burden on applicants  and the costs of processing a large number of applications that cannot be  funded.  In addition, the agency notes that everyone in the United States  lives in a watershed and, because each year producers in approximately  one-eighth of the nation’s 2,119 watersheds will be eligible for the sign-up,  all eligible producers will have the opportunity to participate over an 8-year  period, subject to available funding.
NRCS held the first CSP sign-up in fiscal year 2004.  Nearly 2,200 farmers  and ranchers participated in the program that year with contracts covering  nearly 1.9 million acres in 18 watersheds in 22 states. Producer payments  totaled about $34.6 million in fiscal year 2004, and NRCS used about $5.9  million for technical assistance. For fiscal year 2005, NRCS approved over  12,700 CSP contract applications, covering nearly 9 million acres in 220  watersheds in 50 states and Puerto Rico.  These 220 watersheds included  the 18 watersheds covered by the fiscal year 2004 sign-up.  Producer  payments totaled about $171.4 million (including payments for contracts  approved in 2004) in fiscal year 2005, and NRCS used about $30.2 million  for technical assistance. In January 2006, USDA announced that it plans to  offer CSP contracts to producers in an additional 60 watersheds during  fiscal year 2006, with participants receiving an estimated $220 million  (including payments for contracts approved in 2004 and 2005). More  detail on the CSP payments made in fiscal years 2004 and 2005 is  summarized in appendix II, including information on these payments by  tier, payment type, and enhancement type.  Figure 1 shows the watersheds  included in the fiscal year 2004 and fiscal year 2005 CSP sign-ups.
In general, NRCS implements CSP by (1) offering periodic sign-ups in  specific, priority watersheds across the Nation; (2) requiring producers to  complete a self-assessment, including a description of conservation  activities on their operations, to determine their eligibility for the  program; (3) scheduling interviews with eligible producers in local NRCS  field offices to review the producers’ applications; (4) determining which  program tier and enrollment category an eligible producer may participate  in; (5) selecting the enrollment categories to be funded for CSP contracts;  (6) developing conservation security plans and contracts for the producers  selected; and (7) making the associated payments.  Appendix III provides a  flowchart describing the CSP application and enrollment process in more  detail.  Applicants may submit only one application for each sign-up.   Producers who are participants in an existing CSP conservation  stewardship contract are not eligible to submit another application.
Many stakeholders refer to CSP as an “entitlement” program. However,  the farm bill does not refer to the creation of any entitlements under the  program.  Moreover, the legislation provides the Secretary of Agriculture  with discretion to establish additional eligibility requirements, provides  that the Secretary must approve a producer’s conservation security plan  before entering into a conservation security contract, and only states that  payments “may” be received under three tiers of contracts.  Thus, CSP is  not an entitlement program.
Finally, many proponents of CSP maintain that this program will help U.S.  producers stay competitive in the world market while providing significant  societal environmental benefits.  These proponents note that traditional  farm commodity programs tend to distort trade and will thus face  increasing pressure for reduction or elimination in the next round of World  Trade Organization talks. However, they note, “green payments” programs  such as CSP that are designed to promote conservation and stewardship of  natural resources on working lands are more likely to survive in these  talks. They also maintain that several European countries are far ahead of  the United States in using green payments programs to provide financial  assistance to their producers while promoting conservation and  environmental stewardship.  CSP is generally regarded as the most  comprehensive green payments program developed in the United States,  primarily because CSP promotes integrated, whole-farm planning for  conservation.
Information on other USDA conservation programs is presented in  appendix IV.
section_title: Estimates of CSP Costs Generally Increased because of Better Information on Program Implementation and Changes to the Time Frames Covered by the Estimates
paragraphs: Various factors explain why CBO and OMB estimates of CSP costs  generally have increased over time.  Of most importance, CBO and OMB  officials indicated that little information was available regarding how the  program would be implemented at the time of its inception in May 2002.   Subsequent estimates have been better informed because USDA had  developed and implemented program regulations and had data on the  number of participants from program sign-ups.  In addition, increases in  estimated CSP costs also can be attributed to revising the time frames on  which the estimates were based.  In general, this involved replacing  estimates from earlier years during which the program was not operational,  or minimally operational, with later years during which the program is  expected to be more fully operational.
subsections: section_title: Estimates of CSP Costs Generally Have Increased over Time
paragraphs: Over time, CBO and OMB each made several estimates of CSP costs for  specified 10-year periods, and these estimates generally increased. CBO  and OMB developed these estimates as part of their responsibilities for  budget scoring (also known as scorekeeping).  These responsibilities are  discussed in appendix V.  As reflected in figure 2, CBO and OMB estimates  generally increased during the period 2001 through 2006, although at times  the estimates dropped because of legislative actions to cap or limit CSP  funding.  Appendix VI also provides a more detailed time line of legislative  actions and CBO and OMB 10-year estimates of CSP costs during the period  2001 through 2006.
As shown in the figure, CBO made its first estimate of CSP costs—$3.7  billion for fiscal years 2002 through 2011—in December 2001, about 5  months before the farm bill was enacted (May 13, 2002).  At the time, CBO  based its estimate on the Senate’s version of the farm bill; the House of  Representative’s version of the farm bill did not include provisions for CSP  at that time. In early May 2002, just before the farm bill’s enactment, CBO  estimated CSP costs to be $2 billion for the same 10-year period.  CBO  officials cited changes in the final bill’s provisions as the basis for the  reduction in its estimate. They also cited an agreement they stated had  been reached by members of the Senate Agriculture Committee that only  $2 billion of the new funds to be made available for the farm bill’s  conservation title would be used for CSP.  The farm bill, as enacted, does  not specifically include a $2 billion limit; however, it does include language  that CBO officials said would result in reducing program costs to about $2  billion. OMB also made its first estimate of CSP costs—$5.9 billion for  fiscal years 2002 through 2011—in May 2002, soon after the farm bill’s  enactment.  OMB officials said that, although they were aware of an  agreement reached in the Senate to limit CSP funding to $2 billion, because  this limit was not included in the final legislation, they disregarded it in  making their cost estimate.  As a result, OMB’s cost estimate was nearly  three times larger than CBO’s estimate, although both estimates were made  in May 2002, were based on the same farm bill provisions, and covered the  same 10-year period.
As indicated by the figure, subsequent CBO and OMB estimates of CSP  costs were more similar and generally increased, except in cases where  one or both agencies’ estimates reflected legislative actions to cap or limit  CSP funding.  For example, in January 2003, CBO estimated CSP costs to  be $7.8 billion for the 10-year period fiscal years 2004 through 2013.  In  February of that year, Congress enacted legislation that capped CSP  funding at approximately $3.8 billion through fiscal year 2013 in order to,  according to OMB, generate savings for drought disaster assistance. The  following month, in light of this cap, OMB estimated CSP costs to be $3.8  billion for fiscal years 2004 through 2013.  However, in January 2004,  Congress repealed the $3.8 billion cap. As a result, subsequent OMB and  CBO estimates increased substantially.
Congress acted again to cap CSP funding in October 2004, passing  legislation to 1imit the program’s funding to approximately $6 billion for  the 10-year period fiscal years 2005 through 2014. This action was taken to  offset emergency supplemental appropriations for hurricane disaster  assistance.  Later that month, because of the cap, OMB estimated CSP  costs to be $6 billion for the same period.  However, in January 2004, about  9 months earlier, OMB had estimated the costs for this 10-year period to be  $9.7 billion.
In 2005, both agencies estimated CSP costs to be $6.7 billion for the 10-year  period fiscal years 2006 through 2015.  In large measure, these estimates  reflected the $6 billion legislative cap covering fiscal years 2005 through  2014. However, that cap was scheduled to expire at the end of fiscal year  2014, meaning the estimated costs for fiscal year 2015 were not subject to a  cap.  In February 2006, Congress repealed the $6 billion cap, replacing it  with caps of $1.954 billion for fiscal years 2006 through 2010 and $5.650  billion for fiscal years 2006 through 2015. The estimate made by OMB in  January 2006—$6.2 billion for fiscal years 2007 through 2016—anticipated  this change.  CBO’s March 2006 estimate for fiscal years 2007 through 2016  was $6.4 billion.
section_title: As More Information on CSP Implementation Became Available, Cost Estimates Increased
paragraphs: According to CBO and OMB officials, the primary reason for increases in  their estimates of CSP costs over time is that subsequent estimates have  been better informed.  Specifically, subsequent estimates have been better  informed by USDA’s development and implementation of program  regulations and data from the results of program sign-ups.  As a result,  these estimates more accurately capture program costs, resulting in higher  estimates.
At CSP’s inception in May 2002, little information was available about how  it would be implemented and the expected level of producer participation.   CBO and OMB officials noted that the farm bill provided a basic framework  for CSP and only a very limited basis for cost estimation, giving USDA wide  discretion on how to implement the program.  Consequently, these officials  had to rely on their professional judgment and past experience with  estimating costs when making assumptions about key aspects of CSP, such  as the level of participation, number of acres enrolled, land rental rates,  and the amount and types of payments made.  However, according to CBO  and OMB officials, CSP’s uniqueness made this more difficult as these  officials had not made cost estimates for a similar program in the past.
Later, NRCS’s development of CSP regulations provided key information on  how the program would be implemented.  In this regard, NRCS issued an  advance notice of proposed rulemaking in February 2003; a proposed rule  in January 2004; an interim final rule in June 2004; and an amended interim  final rule in March 2005.  For example, the proposed rule indicated that  NRCS planned to limit enrollments to specific sign-up periods rather than  allow continuous sign-ups; limit CSP enrollment to producers in selected,  priority watersheds rather than offer nationwide enrollment for a given  sign-up; and prioritize funding by way of enrollment categories to ensure  that producers with the highest commitment to conservation are funded  first.  The amended interim final rule incorporates each of these elements.   In addition, CBO and OMB officials had informal conversations with NRCS  officials to obtain information on how the agency intended to implement  the program.  For example, CBO officials said that they learned that NRCS  anticipated program participation would be greater than it originally  expected and that enhancement payments would be a more important component of total producer payments than originally planned. OMB also  reviewed and commented on NRCS’s proposed and interim final rules  before their publication in the Federal Register. And CBO and OMB  officials indicated that they conferred with one another from time to time  to discuss issues related to estimating CSP costs, although the agencies  arrived at their estimates independently.
Finally, CBO and OMB officials stated that after making their initial CSP  cost estimates at the program’s inception, they had more time to develop  subsequent estimates, including more time to gather and consider program  implementation information.  They also said that their future estimates of  program costs will be even better informed as more data become available  from each annual CSP sign-up, including data on program participation and  the mix of payments made by tier and type.
section_title: Changing Time Frames Also Account for Increases in Estimates
paragraphs: CBO and OMB officials also attributed increases in their CSP cost  estimates to revisions in the time frames on which the estimates were  based. In making their initial estimates in May 2002, CBO and OMB took  into account a time lag assumed for program development and  implementation by NRCS, which included the time needed for rulemaking  and public comment, training NRCS field staff, and outreach to producers  and stakeholder groups.  Thus, these initial estimates, covering the 10-year  period fiscal years 2002 through 2011, included years in which the program  was either not expected to be operational, such as fiscal years 2002 and  2003, or minimally operational, such as fiscal year 2004.  For example, in  CBO’s May 2002 estimate, the costs associated with these first 3 fiscal years  totaled only $22 million.  In contrast, CBO’s March 2004 estimate, covering  a later 10-year period, fiscal years 2005 through 2014, assumed the program  would be fully operational in each of these years.  CBO’s cost estimates for  the three additional fiscal years—2012, 2013, and 2014—totaled $3.1 billion.
Thus, the substitution of fiscal years 2012 through 2014 in the latter  estimate for fiscal years 2002 through 2004 in the earlier estimate amounted  to an increase of more than $3 billion and helps to explain, in part, why the  subsequent estimate was greater.  Table 2 provides further information on  CBO estimates of CSP costs for various 10-year periods during fiscal years  2002 through 2016.
A similar pattern can be seen with OMB’s estimates.  OMB’s May 2002  estimate, covering the 10-year period fiscal years 2002 through 2011,  included fiscal years 2002, 2003, and 2004, years in which the program was  assumed not to be implemented or only minimally implemented.  OMB’s  estimate for these 3 fiscal years was $98 million.  In contrast, OMB’s  January 2004 estimate, covering a later 10-year period, fiscal years 2005  through 2014, included three additional years, fiscal years 2012, 2013, and  2014.  OMB’s estimate for these years was $4.049 billion.  Thus, the  substitution of fiscal years 2012 through 2014 in the latter estimate for  fiscal years 2002 through 2004 in the earlier estimate amounted to an  increase of about $3.95 billion and helps to explain, in part, why the  subsequent estimate was greater.  Table 3 provides further information on  OMB estimates of CSP costs for various 10-year periods during fiscal years  2002 through 2016.
section_title: USDA Has Authority to Control CSP Costs and Has Established Cost Control Measures but Needs to Improve Internal Controls and Better Ensure Consistency in NRCS State Offices’ Determinations of Producer Eligibility
paragraphs: The farm bill provides USDA general authority to control CSP costs.  While  USDA’s NRCS has established several cost control measures under this  statutory authority, its efforts to restrict program spending could be  improved by addressing (1) weaknesses in internal controls used to ensure  the accuracy of program payments and (2) inconsistencies in the wildlife  resource criteria used by NRCS state offices to determine producer  eligibility for Tier III, the highest CSP payment level.  Furthermore, because  of inconsistencies in wildlife resources criteria, NRCS cannot ensure that  CSP is achieving its intended wildlife habitat benefits.
subsections: section_title: The Farm Bill Provides USDA Authority to Control CSP Costs
paragraphs: The farm bill establishes some eligibility requirements for CSP but gives  USDA the authority to establish additional requirements that would enable  it to control CSP costs, even absent legislative caps on CSP funding.  For  example, the farm bill establishes some producer and land eligibility  requirements for CSP but also states that a payment under CSP “may” be  received under three tiers of conservation contracts and that the Secretary  of Agriculture “shall” determine and approve the minimum eligibility  requirements for each tier—giving USDA the authority to establish  additional eligibility requirements that would enable it to control program  participation and, therefore, CSP costs. This provision, for example, gives  the Secretary discretion to establish a tier eligibility requirement that a  producer be located within a specified watershed.  The Secretary also must  approve a producer’s conservation stewardship plan—as meeting both the  statutory eligibility requirements and any tier requirements—for the  producer to be eligible to participate in CSP. In addition, the Secretary  must ensure that the lowest cost conservation practice alternative is used  to fulfill the purposes of the plan. Furthermore, the farm bill sets a  payment limit for each tier level ($20,000 for Tier I; $35,000 for Tier II; and  $45,000 for Tier III) but, in stating that payments shall be determined by the  Secretary and shall not exceed such amounts, provides discretion to the  Secretary to further limit the payment amounts.
section_title: NRCS Established Cost Control Measures in CSP Regulations Designed to Limit Program Enrollment and Payments
paragraphs: Under the statutory authority provided by the farm bill, NRCS has  implemented a number of CSP cost control measures to restrain program  spending, primarily by either restricting CSP enrollment or limiting  payments to individual producers.  For example, NRCS restricts CSP  participation by limiting program enrollment each year to producers in  specified, priority watersheds.  In addition, NRCS limits annual  stewardship payments to 25, 50, and 75 percent of the maximum amount  that the farm bill allows for Tiers I, II, and III, respectively.  Key cost control  measures—found either in the farm bill, in CSP regulations, or in the  program sign-up notice—in place for the fiscal year 2005 CSP sign-up are  described in table 4.
section_title: Some Fiscal Year 2004 CSP Contract Payments Exceeded Farm Bill Payment Limits
paragraphs: Some fiscal year 2004 CSP contract payments exceeded applicable  payment limits established in the farm bill.  As discussed, the farm bill  limited annual contract payments to an individual or entity to $20,000 for  Tier I; $35,000 for Tier II; and $45,000 for Tier III.  However, we found that  409 (19 percent) of the 2,180 fiscal year 2004 CSP contract payments  exceeded these limits.  Specifically, 95 (12 percent) of Tier I payments  exceeded $20,000; 209 (24 percent) of Tier II payments exceeded $35,000;  and 105 (21 percent) of Tier III payments exceeded $45,000.  (Tables 12, 13,  and 14 in app. II show the distribution of fiscal year 2004 contract payments  for Tiers I, II, and III, respectively.)
According to NRCS officials, these contract payments exceeded the  statutory limits because they included an “advance” enhancement payment  component.  These officials noted that NRCS did not intend for this  advance component to be included in the annual contract payment limit  because it was a one-time payment.  Furthermore, they said that any  producer who received an advance enhancement payment would have that  payment (generally limited to $10,000) offset through deductions over the  remaining years of that producer’s CSP contract.  For example, for a  producer whose contract had 9 remaining years, NRCS would deduct one- ninth of the advance enhancement payment in each of these years.  Thus,  over the life of a contract, no producer would receive more than the  maximum total possible payment (e.g., $450,000 over 10 years for a Tier III  contract).  NRCS officials explained that for the fiscal year 2004 CSP sign- up, NRCS, using its borrowing authority, obtained the maximum amount of  funding available, or $41.443 million.  However, because of lower than  anticipated producer participation in CSP that year, NRCS did not need all  of this money to make annual contract payments to producers.  NRCS  decided to use the remaining amounts—about $13.6 million—to make a  one-time advance enhancement payment to most (2,070 of 2,180) of the  producers enrolled in CSP that year. In addition, according to NRCS  officials, in subsequent years, the offsetting deductions made for these  fiscal year 2004 advance enhancement payments would result in more  funding being available for new CSP contracts.
We plan to pursue with USDA’s Office of General Counsel the availability of  remaining CSP funds for advance enhancement payments that, when  included with annual contract payments, exceed the statutory payment  limits.
section_title: Although NRCS Has Established Internal Controls, Weaknesses in These Controls Increase the Risk of Improper Payments
paragraphs: In addition to the cost control measures in the farm bill and CSP  regulations, USDA and NRCS have established internal controls that help  to ensure the accuracy and appropriateness of payments made through  agricultural conservation programs, including CSP.  These controls, also  referred to as management controls, include the organizational policies and  procedures used to reasonably ensure that (1) programs achieve their  intended results; (2) resources are used consistent with agency and  departmental missions; (3) programs and resources are protected from  waste, fraud, and mismanagement; (4) laws and regulations are followed;  and (5) reliable and timely information is obtained, maintained, reported,  and used for decision-making. (More specific information on USDA and  NRCS internal controls is presented in app. VII.)  However, recent reviews  of these internal controls done by NRCS’s Oversight and Evaluation (O&E)  Staff and the USDA Inspector General raise concerns regarding the  adequacy of some of these controls to preclude improper payments being  made under CSP.
Although NRCS has established internal control guidance for CSP,  implementation of these controls has sometimes been criticized.  For  example, in reviews it conducted in 2005, NRCS’s O&E staff found  problems with several aspects of the agency’s implementation of CSP,  including its implementation of some internal controls.  (We examined  draft reports related to these reviews in January 2006; NRCS considers the  information contained in these drafts to be predecisional and subject to  change pending management review and the agency’s preparation of  management action plans describing its response to the reports’  recommendations.)   In assessing internal controls, the O&E staff  conducted work at NRCS field offices located in 18 watersheds (in 13  states) that were eligible for either the fiscal year 2004 or fiscal year 2005  CSP sign-up.  Among other things, the staff found weaknesses in quality  assurance and case file documentation.  For example, the staff found that  12 of 13 NRCS state-level Quality Assurance Plans reviewed did not include  specific CSP components such as those related to conservation planning  and application, that NRCS’s Conservation Programs Manual (sec. 518.75  (b)) states must be included.  In addition, the staff found that 33 of 55 fiscal  year 2004 CSP contracts studied had not had a contract review.  The  Conservation Programs Manual (sec. 518.101) provides that “the  designated  conservationist will review the contract annually and  document that the provisions of the contract are followed.” According to  the O&E staff, the absence of a contract review could result in payments  being made for enhancements that are not being done or not yet completed  as scheduled in the producer’s conservation security plan.
Regarding case file documentation, the O&E staff found that many  conservation stewardship plans were missing components.  For example,  most plans included components such as maps and map attribute  information, but information needed to evaluate the effectiveness of a plan  in achieving its environmental objectives was either missing or incomplete  in up to 60 percent of the plans.  The preparation of conservation  stewardship plans is required by the farm bill and, according to the  Conservation Programs Manual (sec. 518.70), this plan “is the basis for a  conservation stewardship contract.” In general, a plan identifies the  objectives for the associated contract, the time frames for implementing  new practices, enhancements that will impact payment levels over the life  of the contract, and additional measures needed to move to a higher tier  level.  In light of these findings, O&E staff offered several tentative  recommendations related to revising NRCS’s written guidance documents,  developing a checklist for staff to use in compiling conservation  stewardship plans, improving management oversight, and providing staff  further training.
In addition, other aspects of NRCS’s internal controls have been criticized.   For example, in January 2005, the USDA Inspector General reported that  (1) NRCS had neither identified the internal control measures in place to  preclude, or detect in a timely manner, improper payments for the  programs it administers, including CSP, nor did it know if the controls were  in operation and (2) NRCS had not conducted risk assessments of potential  improper payments for these programs.  In addition, USDA reported  several material weaknesses to its financial and accounting systems and  information security program in its fiscal year 2005 Performance and  Accountability Report.  See appendix VII for further discussion of these  matters.
In its planning documents, NRCS notes that the nation made a massive  financial commitment to conservation in the 2002 farm bill and thus NRCS  must manage the taxpayers’ money well, including documenting how these  funds have been spent.  Among other things, the agency said it would  develop processes to better record obligations and improve the accuracy  and timeliness of its financial information.   However, until actions are  completed to correct these internal control problems, NRCS cannot be  certain that contract payments information for CSP and other programs is  accurate.  This increases the potential for improper payments being made  under these programs.
section_title: Inconsistencies in State Office Determinations of Producer Eligibility for CSP Payments May Undermine NRCS Cost Controls and the Achievement of CSP’s Intended Wildlife Habitat Benefits
paragraphs: NRCS’s efforts to control program spending may be weakened by  inconsistencies in NRCS state offices’ determinations of producer  eligibility for the three CSP payment tiers.  Several NRCS state officials  expressed concerns about such inconsistencies, suggesting that some state  offices may have been more lenient than their own state in determining  producers’ eligibility for CSP payments.   In particular, several NRCS state  officials had specific concerns about inconsistencies in the wildlife habitat  assessment criteria that NRCS state offices use, in part, to determine  applicant eligibility for Tier III, the highest CSP payment level. The farm  bill requires a producer to meet minimum standards for all applicable  resource concerns on the entire agricultural operation, which would  include wildlife habitat, to be eligible for Tier III payments.
For the fiscal year 2004 CSP sign-up, NRCS provided limited guidance to its  state offices that were responsible for developing the assessment criteria  that were used to determine whether a producer met minimum standards  for protecting wildlife habitat.  However, a post-sign-up debriefing of NRCS  headquarters and state officials to identify lessons learned indicated that  the state offices developed assessment criteria that were extremely  variable, contributing to significant differences in the rate of CSP  participation and payments at the Tier III level among the various  watersheds included in the sign-up. According to documentation based on  this debriefing, this variability in assessment criteria was attributed to (1)  differences in the type of assessment criteria used (i.e., some states used  targeted species assessment criteria while others used general wildlife  assessment criteria) and (2) differences among the states’ general wildlife  assessment criteria.  Table 5 shows the Tier III participation and payment  rates for each of these watersheds.
As shown in the table, the percentage of total contracts in Tier III varied  from a low of 0 in one watershed to a high of 79 percent in another  watershed.   Part of this variation may be attributed to differences in land  uses among watersheds.  For example, land that is in an intensive  agricultural use, such as cropland, tends to be less suitable as wildlife  habitat than land that is not used intensively such as rangeland.  However,  even among watersheds in which CSP enrollments were over 90 percent  cropland—Auglaize, Blue Earth, East Nishnabotna, Kishwaukee, Little,  Little River Ditches, Lower Chippewa, Raystown, and St. Joseph—the  percentage of total contracts in Tier III varied from 0 to 58 percent, and the  percentage of payments going to Tier III contracts ranged from 0 to 75  percent.
In response to the variation in wildlife habitat assessment criteria used  during the fiscal year 2004 sign-up and related differences in Tier III  participation, NRCS’s Wildlife Team, responsible for technical matters  concerning wildlife habitat under CSP, developed national guidance that  NRCS state offices were to follow in creating their criteria for subsequent  sign-ups.  The national guidance was provided to state office staff during  training sessions held before the fiscal year 2005 CSP sign-up.
The Wildlife Team developed the national guidance based on NRCS’s CSP  regulations that state that the minimum requirement for wildlife habitat is  considered achieved when a producer’s level of treatment and management  results in an index value of at least 0.5 based on a general or species- specific habitat assessment guide.  A Wildlife Team official said this 0.5  index value corresponds to 50 percent of the potential habitat for a given  land area and stated that the national guidance was developed  accordingly.  He noted that, because habitat needs differ across the nation,  it is not possible to develop one set of criteria that would work for the  whole country and apply to all situations. Because of these differences, the  national guidance instructs each state to define its own minimum criteria  for each of the listed wildlife resource components in the national guidance based upon the state’s own unique set of conditions. For example, for  rangeland, the national guidance identifies vegetative height management  during nesting season as a component that must be addressed and instructs  state offices to define the minimum foliage height of grasses.  Despite this  flexibility, the official said that the purpose of this national guidance was to  avoid the wide variations in criteria that led to large discrepancies and  inconsistencies in the fiscal year 2004 sign-up.
According to the national guidance, NRCS state offices’ general wildlife  habitat assessment criteria for cropland must address the following six  wildlife resource components: Amount of noncrop vegetative cover.   These areas include woodlots,  windbreaks, field corners, hedgerows, grassed areas, wetlands, or  riparian areas managed for wildlife.  According to the guidance, state  offices must define a minimum percentage of noncrop vegetative cover  within or adjacent to offered cropland fields. A state office’s criteria for  this component must be met for each cropland field.
Size of noncrop vegetative cover.  State offices must define a minimum  dimension for these areas.  According to a Wildlife Team official, an  example is a minimum width.
Interspersion of noncrop vegetative cover. State offices must define a  minimum distance from all parts of cropland fields to noncrop  vegetative cover.
Condition of noncrop vegetative cover.  Minimum standards for the  composition and structure of the noncrop vegetative cover must be  defined.  Examples include minimum plant heights and restrictions on  mowing.
Conditions for lakes, ponds, wetlands, and streams.  Minimum  conditions, such as buffer widths, must be defined   Crop residue management.  Minimum levels of crop residue must be  defined.
According to Wildlife Team officials, the national guidance instructed each  NRCS state office to develop wildlife habitat assessment criteria that  consisted of questions corresponding to the wildlife resource components  in the national guidance.   For each component of the national guidance,  these officials said these questions were to include specific criteria  established by the state offices and were intended to determine if a CSP  applicant was meeting these criteria and thus was addressing the wildlife  habitat resource concern.  In general, the phrasing and number of questions  that state offices included in these assessment criteria, as well as the  overall design of the assessment criteria, varied.  For example, one state  office’s assessment criteria had nine questions and required a “yes”  response to each question.  Another state office’s assessment criteria  included six questions and required a “yes” response to each question.
In reviewing the wildlife habitat assessment criteria that NRCS state offices  used in the fiscal year 2005 sign-up, we found that some NRCS state offices  used criteria that were inconsistent with the national guidance.  For  example, the design of the assessment criteria used for cropland in three  states made it possible for NRCS to determine that a producer was  addressing the wildlife habitat resource concern even though that producer  may not have met the state criteria for each of the six resource components  identified in the national guidance.  Although these three state offices’  wildlife habitat assessment criteria included a question or questions that  generally related to each of the national guidance’s components, the state  offices required “yes” responses to only five of the seven questions listed in  the assessment criteria.  Thus, in effect, these states did not require  producer compliance with all aspects of their state criteria or, by extension,  all six components of the national guidance.  A Wildlife Team official  explained that although NRCS has not undertaken a review to determine  whether producers have qualified for Tier III payments under this scenario,  based on informal discussions with field office staff, this official concluded  that some producers received such payments during the fiscal years 2004  and 2005 sign-ups. In addition, another Wildlife Team official said it was  particularly problematic that a producer could receive a Tier III payment in  these states without meeting the state criteria related to the amount of  noncrop vegetative cover. According to this official, this component of the  national guidance is particularly important for cropland because it is  intensively farmed and generally unsuitable for wildlife habitat.  Thus, the  creation or preservation of areas of noncrop vegetative cover associated  with cropland is critical to providing adequate wildlife habitat.
As a result of these inconsistencies with the national guidance, producers  in these states could qualify for Tier III payments even though they might  not be providing habitat as intended by the national guidance and might not  have qualified for Tier III payments in another state that used criteria that  more closely followed the national guidance.  In addition, the use of criteria  that are inconsistent with the national guidance reduces NRCS’s ability to  ensure that CSP is achieving its intended wildlife habitat benefits.  If  producers are not providing the wildlife habitat benefits intended by the  national guidance, the environmental benefit achieved per dollar of CSP spending may be reduced, and CSP cost control measures would be  weakened.  Furthermore, some NRCS state officials said such variability in  state assessment criteria could lead to pressures for more lenient payment  eligibility determinations within their own states.  According to these  officials, when producers in a state that is conforming to the national  wildlife habitat guidance see that other states are using more lenient  criteria, they may pressure their NRCS state office to adopt more lenient  criteria as well.
NRCS Wildlife Team officials agreed with our assessment that some NRCS  state offices used wildlife habitat assessment criteria for the fiscal year  2005 sign-up that were not consistent with the national guidance.  In  addition, these officials said that NRCS should conduct field tests of states’  criteria to ensure that these criteria are consistent with the national  guidance and to determine the extent to which Tier III contracts provide  adequate wildlife habitat benefits.  However, they cited time constraints as  the primary reason that states’ criteria have not been field tested and they  indicated, as of February 2006, that NRCS does not have plans to do this  testing.  Regarding reasons why some state offices have not developed  criteria consistent with the national guidance, these officials noted that  some state office officials hold the view that CSP is a working lands  program and, therefore, should not place too much emphasis on wildlife  habitat or force a producer to take land out of production in order to create  the habitat needed to qualify for a Tier III payment.  Some of the state  officials we contacted corroborated this point.  In addition, the Wildlife  Team officials noted that some state office officials might not have  understood what guidance they were supposed to follow during the fiscal  year 2005 sign-up because NRCS’s Conservation Programs Manual—the  principal source of guidance for NRCS field office staff for implementing  conservation programs—had no explicit reference to the national  guidance.  Accordingly, the Wildlife Team officials said they had  recommended to NRCS’s programs office that a reference to the national guidance be included in the manual.  They opined that inclusion of this  reference would emphasize the importance of the national guidance to the  agency’s field staff.
Finally, some NRCS state officials also expressed concerns about other  inconsistencies among state offices in determining producer eligibility for  certain CSP payments.  In particular, they cited inconsistencies in states’  determinations that producers are sufficiently addressing water quality  issues.  According to NRCS officials, the agency has been aware of this  issue since the fiscal year 2004 sign-up when it relied on state-based  standards to determine if CSP applicants were meeting eligibility  requirements for water quality concerns.  In the 2005 sign-up, to increase  consistency, NRCS required its state offices to develop water quality  checklists based on national criteria to assess applicant eligibility regarding  water quality issues.  These checklists were to address all critical water  quality concerns, including those related to nutrients, pesticides, and  sediment.   In the 2006 sign-up, to further increase consistency, NRCS  developed a national water quality eligibility “tool” that uses indices and  scales to achieve an overall water quality assessment rating for each  applicant.  Using the tool, NRCS assigns points for an applicant’s current  conservation activities and the level of water quality protection those  activities provide.
section_title: Despite Legislative and Regulatory Measures That Lessen Possible Duplication between CSP and Other Programs, the Potential for Duplicate Payments Still Exists, and Such Payments Have Occurred
paragraphs: The farm bill and CSP regulations include various measures that reduce the  potential for duplication between CSP and other USDA conservation  programs.  For example, as authorized in the statute, CSP can reward  producers for conservation actions that they have already taken, whereas  other programs generally provide assistance to producers to encourage  them to take new actions intended to address conservation problems on  working lands or to idle or retire environmentally sensitive land from  production.  In addition, USDA regulations establish higher minimum  eligibility standards for CSP than exist for other programs, helping to  differentiate the applicant pool for CSP from these programs.  However, the  possibility remains that producers could receive duplicate payments for the  same conservation action from CSP and other programs, and such  duplication has occurred.  In addition, NRCS does not have a  comprehensive process to preclude or identify such duplicate payments.
subsections: section_title: Farm Bill Provisions Lessen the Potential for Duplication
paragraphs: CSP operates under a number of statutory provisions that distinguish it  from other USDA conservation programs and make duplicate payments  less likely.  Specifically, the farm bill   explicitly prohibits duplicate payments under CSP and other  conservation programs for the same practices on the same land.  provides incentives to producers, through CSP’s Tier III payments, to  address all applicable resource concerns on entire agricultural  operations (i.e., whole-farm planning).  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.  establishes several types of CSP payments—stewardship, existing  practice, and enhancement payments—that are unique to CSP and not  offered under other programs.
In addition, other farm bill provisions reduce potential duplication by  prohibiting certain payments from being made through CSP. For example,  CSP payments cannot be made for  construction or maintenance of animal waste storage or treatment  facilities or associated waste transport or transfer devices for animal  feeding operations.    conservation activities on lands enrolled in the Conservation Reserve  Program, the Wetlands Reserve Program, and the Grassland Reserve  Program.
Furthermore, if a producer receives payments under another program— such as a commodity price support program—that are contingent on the  producer’s compliance with requirements for the protection of highly  erodible land and wetlands, the farm bill only authorizes a CSP payment on  that land for practices that exceed those requirements.
section_title: NRCS Regulatory Measures and Procedures Further Distinguish CSP from Other Programs
paragraphs: In addition to farm bill provisions that reduce potential duplication, a  number of NRCS regulatory measures and procedures further distinguish  CSP from other USDA conservation programs.  These include the  following:   NRCS’s CSP regulations and Conservation Programs Manual elaborate  on statutory provisions that prevent producers from receiving payments  under CSP for the same practice on the same land.  For example, the  manual states that a CSP participant may not receive CSP cost-share  funding for new conservation practices that were applied with financial  assistance from other USDA conservation programs.  In addition, the  manual states that a participant may not receive a CSP payment for  enhancement activities if the participant is also earning financial  assistance payments through other programs for the same conservation  practice or action on the same land during the same year.
CSP regulations establish higher minimum eligibility standards for CSP  than exist for other programs, helping to differentiate the applicant pool  for CSP from the potential applicants for other programs.  For example,  to be eligible for a Tier I CSP contract, a producer must already have  addressed water and soil quality to a minimum level of treatment.  NRCS  encourages producers who do not meet these higher standards to apply  for assistance under other programs.
For the 2005 sign-up, NRCS limited CSP cost-share payments for new  conservation practices to 50 percent (65 percent for beginning and  limited-resource producers) of implementation costs.  NRCS allows  cost-share payments of up to 75 percent under the Environmental  Quality Incentives Program (EQIP) and the Wildlife Habitat Incentives  Program (WHIP). Thus, producers have a stronger financial incentive  to apply for new conservation practice payments through EQIP or WHIP  rather than CSP.  In addition, NRCS has limited the number of  conservation practices that are eligible for funding through CSP.  In any  given watershed, CSP payments for new conservation practices were  only offered for up to about 20 of the approximately 200 conservation  practices that can be funded through EQIP.
NRCS has encouraged enhancement payments for conservation actions  that exceed the minimum treatment standards required for CSP  eligibility.  According to NRCS officials, emphasizing enhancements  helps to differentiate CSP from other programs, such as EQIP and WHIP,  which do not offer similar payments.  As discussed, EQIP and WHIP  payments generally assist producers in achieving a level of treatment  that meets the minimum or nondegradation standard for a conservation  activity, as defined by NRCS, which generally is less than the minimum  treatment standard for CSP enhancements.  Most CSP payments made  in fiscal years 2004 and 2005 were for enhancements.  In fiscal year 2004,  enhancement payments and advance enhancement payments accounted  for about 81 percent of total CSP payments. In fiscal year 2005,  enhancement payments were 81 percent of total CSP payments.
CSP regulations and procedures also provide financial incentives for  enhancements.  Specifically, in order to receive a larger payment up to  the full total payment allowed under each enrollment tier, a producer  must agree to implement enhancements because of the limits on  stewardship, existing practice, and new practice payments.   Stewardship payments are capped under the farm bill and CSP  regulations at $5,000 for Tier I, $10,500 for Tier II, and $13,500 for Tier  III. Furthermore, CSP sign-up notices have limited existing practice  payments to a flat rate of 25 percent of the stewardship payment for  each tier and have limited new practice payments to $10,000 for each  tier.  As a result of these limits, the maximum total payment a producer  could receive (i.e., the total of the stewardship, existing practice, and  new practice payments) without an enhancement payment would be  $16,250 for Tier I, $23,125 for Tier II, and $26,875 for Tier III.  Therefore,  in order to receive the full amount of CSP financial assistance available  for an enrollment tier (e.g., $20,000 for Tier I; $35,000 for Tier II; and  $45,000 for Tier III), the producer must agree to implement  enhancements.  In addition, to encourage participants to add new  enhancements over the life of a contract, NRCS incorporated variable  enhancement payments into the fiscal year 2005 CSP contracts that  gradually reduce the annual payments for a contract’s base (initial)  enhancements over the contract’s term. Thus, to compensate for this  diminishing income, a producer would need to add new enhancements  over the life of a contract.
section_title: Potential for Duplication Still Exists and Duplicate Payments Have Occurred
paragraphs: Despite farm bill and NRCS regulatory measures and procedures that  lessen possible duplication between CSP and other programs, the potential  for duplication still exists and has occurred with regard to CSP  enhancement payments.  For example, although some payments made  through CSP are unique to that program, payments for new conservation  practices or actions such as nutrient management can be made through  CSP and other programs, creating the potential for duplicate payments.  In  addition, CSP payments for enhancement actions have the potential to  overlap with payments under other programs for conservation practices.   Regarding the latter possibility, we found a number of cases where  duplicate payments had been made for CSP enhancements and  conservation practices under other programs for the same conservation  action on the same land during the same year.  In addition, NRCS lacks a  comprehensive process to identify potential duplicate payments or  duplicate payments already made.
Table 6 summarizes the types of conservation payments available through  CSP, EQIP, and WHIP.
As indicated in the table, the farm bill allows cost-share payments for the  adoption of conservation practices that could be implemented through any  of these programs, creating the possibility that a producer could receive  duplicate payments for the same conservation practice under CSP and  another program.  In reviewing fiscal year 2004 contracts and payments  data for CSP, EQIP, and WHIP, we did not find evidence of duplicate  payments related to funding the adoption of the same conservation  practice under CSP and another program on the same operation during the  same year.  However, the opportunity for such duplicate payments to have  been made during fiscal year 2004 was very low because only four  producers received CSP payments for the adoption of new conservation  practices that year.  NRCS officials said that, because the fiscal year 2004  contracts were approved in July 2004, the time remaining in the fiscal year  was not sufficient for most CSP participants to implement new  conservation practices and receive a payment.  In addition, these officials  said NRCS encourages producers to use programs other than CSP to obtain  financial assistance for new conservation practices.  As discussed, these  other programs generally offer a higher cost share for new practices than  offered under CSP.  In the future, greater numbers of producers may  receive CSP payments for new conservation practices, increasing the  potential for duplicate payments.
The potential for duplicate payments also exists between CSP  enhancement payments and conservation practice payments made under  other programs.  Each year, NRCS state offices develop lists of  conservation actions eligible for CSP enhancement payments in their  states.  NRCS headquarters officials then review and approve the states’  lists.  If the reviewing officials find that a proposed enhancement includes  conservation actions that do not exceed the minimum standard for the  related conservation practice, as defined by NRCS, they work with the  NRCS state office to revise the proposed enhancement. However, some  overlap may occur because a given conservation action can have a different  purpose under another program.   For example, several states offer CSP  enhancement payments for the use of conservation crop rotation for the  purpose of breaking plant pest cycles to reduce the need for pesticide  applications.  At the same time, these states offer EQIP funding for the use  of conservation crop rotation for the purposes of reducing soil erosion,  providing wildlife cover and food, and improving soil organic matter.  This  overlap increases the potential for a producer to receive two payments for  the same conservation action on the same land during the same year.  The  farm bill prohibits payments under CSP and another conservation program  for the same practice on the same land.  The CSP manual elaborates on this  provision, stating that a participant may not receive a CSP payment for  enhancement activities if the participant is also earning financial assistance  payments through other programs for the same practice or activity on the  same land during the same year.
Our file reviews and analysis of NRCS payments data for calendar year  2004 showed that duplicate payments have occurred.  Specifically, we  found cases where a producer received duplicate payments from CSP and  EQIP for performing the same conservation action on the same land during  the same year.  For example, in the course of performing limited file  reviews at several NRCS field offices, we found that a producer had  received a CSP enhancement payment and an EQIP conservation practice  payment for the same conservation action—establishing a small grain  cover crop—on the same tract of land during 2004.  This producer also was  scheduled to receive the same duplicate payments during 2005.
Furthermore, our analysis of 2004 payments data for CSP, EQIP, and WHIP  revealed other cases in which a producer received a CSP enhancement  payment and an EQIP payment for performing a similar conservation  action during the same year.  Our analysis of these 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 as well. None of these 2,180 producers  received a WHIP payment that year. In analyzing the conservation actions  funded for the 172 producers who received both CSP and EQIP payments,  we initially identified 72 producers who received payments that appeared  to be for similar or related conservation actions and may have been  duplicates.  Specifically, in aggregate, these producers received a total of  121 payments under each program that were potentially duplicates.  We  then selected 11 of these producers, who in aggregate received a total of 12 payments under each program, for more detailed analysis. We discussed  these 12 cases with NRCS field office officials to determine if any of these  payments were made for implementing the same conservation action on  the same land.  In 6 of the 12 cases, a producer received a CSP  enhancement payment and an EQIP payment for conservation actions that  appeared to be similar (e.g., CSP and EQIP payments for nutrient  management).  In the other 6 cases, a producer received a CSP  enhancement payment based on an index score that may have increased as  a result of a conservation action for which the producer received an EQIP  payment.
We discussed the first 6 cases—those in which a producer received a CSP  enhancement payment for a conservation action and an EQIP payment for  a similar conservation action—with NRCS field office officials.  Based on  these discussions, we determined that duplicate payments were made in 4  of these 6 cases.  For example, in one instance, a producer received a CSP  pest management enhancement payment of $9,160 for a conservation crop  rotation.  On the same parcel of land, the producer also received an EQIP  payment of $795 for the same conservation action—conservation crop  rotation. Regarding these 4 cases, in 2 instances, NRCS field office  officials acknowledged that duplicate payments had occurred, i.e., that the  producer received a CSP enhancement payment and an EQIP conservation  practice payment for the same conservation action on the same land during  the same year.  In these cases, these officials said the duplicate payments  resulted from simple error.  In the other 2 cases, NRCS field office officials  held the view that even though the payments were for the same  conservation action, if they were made for different conservation purposes  (e.g., a CSP-funded conservation crop rotation to break pest cycles and an  EQIP-funded conservation crop rotation to improve soil quality), then they  were not duplicates.  However, the farm bill clearly prohibits payments  under CSP and another conservation program for the same practice on the  same land.  In addition, NRCS’s Conservation Programs Manual  elaborates on this provision, stating that a participant may not receive a  CSP payment for enhancement activities if the participant is also earning  financial assistance payments through other programs for the same  practice or activity on the same land during the same year.  NRCS state  office and headquarters officials agreed with our interpretation that in such  situations producers should not receive payments under both programs.
We also discussed the other 6 cases—those in which a producer received a  CSP enhancement payment based on an index score that may have  increased as a result of a conservation action for which the producer  received an EQIP payment in the same year—with NRCS field office  officials.  In 4 of these cases, a producer received a CSP soil management  enhancement payment based on a soil conditioning index score while also  receiving an EQIP payment for conservation practices that reduce soil  erosion.  For each of these cases, these officials stated that the EQIP- funded conservation practice had contributed to increasing the soil  conditioning index score and, as a result, had increased the CSP  enhancement payment.  For example, a producer may implement an EQIP- funded soil conservation practice that is factored into the calculation of a  soil conditioning index score, increasing the index score from 0.2 to 0.5.  If  CSP soil management enhancement payments in that producer’s state  increase by $1.16 per acre for each 0.1 increase in the soil conditioning  index, the producer’s enhancement payment would increase by $3.48 per  acre.
The NRCS field office officials we interviewed had mixed views as to  whether these payments were duplicates.  We believe such payments were,  at least in part, duplicates.  However, an NRCS headquarters official stated  that such payments are not duplicates.  According to this official, EQIP  payments are intended to compensate producers for “input” costs  associated with installing or initiating conservation actions, while CSP  enhancement payments are intended to reward producers for conservation  “outputs” (i.e., benefits derived from conservation actions).  Therefore, the  official said, such payments are not duplicates.  We do not agree with this  rationale.  Payments for producer “input” costs under EQIP are made  because of their resulting conservation “outputs,” and payments for CSP  conservation “outputs” are made to compensate producer “input” costs.  In  other words, the programs are both compensating the same action but are  doing so either before or after the fact.  To receive payments from both for  the same action would thus clearly be duplication.  Moreover, we continue  to consider such payments to be inconsistent with both the farm bill  prohibition and NRCS’s guidance on duplicate payments.
In the other 2 cases related to index scores, the producers received CSP  enhancement payments based on a wildlife habitat management index  score while also receiving an EQIP payment for conservation practices that  may improve wildlife habitat.  In one of these cases, the EQIP-funded  conservation practice was not taken into consideration in determining the  index score because the practice did not affect habitat for the species of  concern, bobwhite quail.  In the other case, an NRCS field office official  stated that, to prevent the payment from being a duplicate, he had not  included the EQIP-funded conservation practice in calculating the index  score.  We agreed that duplicate payments had not occurred in these 2  cases.
NRCS headquarters officials stated the agency lacks a comprehensive  process, such as an automated system, to either preclude duplicate  payments or identify them after a contract has been awarded.  Instead,  these officials said that NRCS relies on the institutional knowledge of its  field office staff and the records they keep to prevent duplicate payments.   Several NRCS state officials noted that the field staff are familiar with the  assistance that producers in their county receive under various programs  and suggested that these staff would reject a CSP application for a  conservation activity already financed through another program.  However,  reliance on the institutional knowledge of staff can be problematic,  especially since NRCS reported in June 2003 that almost 50 percent of its  field-level workforce would be eligible to retire in 5 years, representing a  serious loss of knowledge, experience, and institutional memory as these  employees are replaced with less-experienced, newly hired employees. In  addition, because CSP sign-ups operate under a compressed time schedule,  additional staff—who do not have knowledge of local producers’ prior and  current participation in conservation programs—are often temporarily  relocated from other parts of a state to assist in developing CSP contracts.   These staff would not be familiar with local producers and their history of  conservation program participation.
A number of NRCS officials acknowledged the need for a comprehensive  process to prevent duplicate payments and said NRCS is considering a  modification of CSP contract information stored in the Program Contracts  System (ProTracts), NRCS’s contract management information system, that  would allow the agency to identify potential duplicate payments before  CSP contracts are approved.  For example, these officials said NRCS is  considering a modification to ProTracts that would flag a planned CSP  enhancement payment that may duplicate a conservation practice payment  made under another program, such as EQIP.  However, these officials said  such a modification could require adding more detailed information on  enhancement payments to ProTracts than currently exists within the  system.  By the same token, these officials also acknowledged a need to  develop a process to efficiently identify duplicate payments—such as those  we found—already being made under CSP contracts issued in fiscal years  2004 and 2005.  At present, NRCS does not know the extent of these  duplicate payments or their aggregate dollar value. Although the total  dollar amount of duplicate payments may be relatively small at present, in  the future, as the program grows to include more participants, the  frequency and total dollar value of duplicate payments could become  significant.  Furthermore, since CSP and EQIP offer producers multiple- year contracts, these duplicate payments, if undetected, would continue in  subsequent years.  To the extent that duplicate payments are being made,  the effectiveness of CSP and the other programs involved is undermined  and, because of limited funding, some CSP enrollment categories or  subcategories that otherwise would have been funded may not be funded.   As a result, some eligible producers may not receive CSP payments that  they otherwise qualify for and would have received in the absence of these  erroneous payments.
Finally, NRCS has 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 farm  bill, a producer agrees that on violation of any term or condition of the  contract the producer will 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.
section_title: Conclusions
paragraphs: Despite farm bill provisions and NRCS actions to control CSP costs,  inconsistencies in the wildlife habitat assessment criteria used by NRCS  state offices for determining producer payments in the highest CSP  payment category may undermine these cost controls.  Specifically, some  state offices have used criteria less stringent than those outlined in the  NRCS national guidance, potentially resulting in Tier III payments to  producers who are not providing the wildlife habitat benefits intended by  the national criteria.  Based on NRCS officials’ observations and the  weaknesses we found in some state offices’ criteria, we believe it is highly  likely that such payments have occurred.  Currently, NRCS does not  systematically review and field check its state offices’ criteria so that  inconsistencies with the national guidance can be detected and the agency  can determine whether Tier III contracts are providing the wildlife habitat  benefits intended.  Furthermore, because there is no reference to the  national guidance in NRCS’s Conservation Programs Manual, some NRCS  state and field offices may not know what wildlife habitat assessment  criteria to follow or may fail to appreciate the importance of the national  guidance.
In addition, despite farm bill provisions and NRCS regulations and  procedures designed to prevent CSP from duplicating payments made by  other conservation programs, the potential for duplication still exists, and  duplicate payments for the same practice or activity on the same land have  occurred.  Duplicate payments reduce the effectiveness of the programs  involved and, because of limited funding, may result in some producers not  receiving program benefits for which they are otherwise eligible.  For these  reasons, NRCS also should use its authority to recover duplicate payments  already made.  At present, NRCS lacks a comprehensive process, such as  an automated system, to identify payments that are potential duplicates  before they are made.  The agency also lacks an effective way to identify  duplicate payments already made under existing CSP contracts.
Without question, NRCS’s challenge in implementing CSP—a new, unique,  and complex conservation program—has been formidable.   However, we  believe that factors such as  the substantial increase in conservation  funding authorized by the 2002 farm bill; the extent of agriculture’s  continuing contribution to impaired soil, water, air, and wildlife habitat;  and the importance of farmers and ranchers as stewards of the nation’s  natural resources underscore the need for NRCS to manage CSP in a way  that ensures consistent program implementation nationwide, achieves  intended environmental benefits, and prevents duplicate payments.
section_title: Recommendations for Executive Action
paragraphs: To improve NRCS’s implementation of the Conservation Security Program,  we recommend that the Secretary of Agriculture direct the Chief of NRCS  to take the following four actions:   Review and field check each NRCS state office’s wildlife habitat  assessment criteria to ensure that states use consistent criteria and  achieve the habitat benefits intended by the national guidance;   Include a reference to the national guidance for wildlife habitat  assessment criteria in NRCS’s Conservation Programs Manual;   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  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.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to NRCS for review and comment.  We  received written comments from NRCS’s Chief, which are reprinted in  appendix VIII.  Among other things, NRCS stated that our report provides  valuable information that will help NRCS to improve implementation of  CSP.  NRCS also provided us with suggested technical corrections, which  we have incorporated into this report, as appropriate.
NRCS generally agreed with our findings and recommendations and  discussed the actions that it has taken, is taking, or plans to take to address  our recommendations.   Regarding our first two recommendations, while  acknowledging that problems exist, NRCS indicated that it recently has  taken or is considering corrective actions other than those suggested in our  recommendations.  For example, because some NRCS state offices have  not fully adhered to the agency’s national guidance for wildlife habitat  assessment criteria, NRCS said that it issued a national bulletin to all of its  state offices during the fiscal year 2006 CSP sign-up to reemphasize the  guidance that these offices must use in developing their wildlife habitat  assessment criteria.   However, while the promulgation of this bulletin  should be helpful, we still believe that NRCS should review and field check  each state office’s assessment criteria to ensure its adherence to the  national guidance.  In the second case, in lieu of including a reference in its  Conservation Programs Manual, NRCS said that it is proposing that NRCS  wildlife biologists develop a special technical note that would describe how  the national guidance for wildlife habitat assessment criteria should be  used by NRCS state offices.  Again, while we support this step, we still  believe that the inclusion of a reference in the Conservation Programs  Manual to the national guidance would help to emphasize its importance to  NRCS state and field-level employees.
Regarding our third recommendation, NRCS indicated that other  automation features will be developed and incorporated into NRCS’s  contracting software to avoid duplicate payments.  In the meantime, NRCS  said that it had implemented other procedures to help eliminate the  occurrence of duplicate payments.  For example, for the fiscal year 2006  sign-up, NRCS is requiring 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.  In addition, NRCS said it plans to revise the CSP  contract appendix to include a statement about prohibitions on duplicative  payments.  Regarding our fourth recommendation, NRCS said that it has  improved management oversight to cross-check payments made to CSP  participants and participants under other conservation programs to  determine if duplicative payments have been made.  If duplicative  payments have been made, NRCS said it has contracting procedures that  can be utilized to recover the payments.
We also provided a draft of this report to CBO and OMB for review and  comment.  These agencies provided us with suggested technical  corrections, which we incorporated into the report, as appropriate.
We are sending copies of this report to interested congressional  committees; the Secretary of Agriculture; the Director, CBO; the Director,  OMB; and other interested parties.  We also will make copies available to  others upon request.  In addition, the report will be available at no charge  on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841 or robinsonr@gao.gov.  Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report.  GAO staff who made major contributions to this report are  listed in appendix IX.
section_title: Objectives, Scope, and Methodology
paragraphs: At the request of the Chairman, Senate Committee on Appropriations, we  reviewed issues related to the U.S. Department of Agriculture’s (USDA)  implementation of the Conservation Security Program (CSP). Specifically,  we determined (1) why Congressional Budget Office (CBO) and Office of  Management and Budget (OMB) cost estimates for CSP generally increased  over time; (2) what authority USDA has to control CSP costs and what cost  control measures are in place; and (3) what legislative and regulatory  measures exist to prevent duplication between CSP and other USDA  conservation programs, and what duplication, if any, has occurred.
To determine why CSP cost estimates have increased, we interviewed CBO  and OMB officials and reviewed documentation they provided. At each  agency, we spoke with budget analysts about their agency’s estimating  practices, including the types of data, assumptions, and models used to  prepare cost estimates. We did not attempt to re-estimate or audit the CBO  or OMB estimates or data discussed in this report. For comparison  purposes, we also interviewed USDA officials, including Natural Resources  Conservation Service (NRCS) and Economic Research Service officials,  and reviewed documentation they provided related to NRCS’s benefit-cost  assessments of CSP. NRCS prepared these assessments in conjunction with  its issuance of interim final and amended interim final rules for the  program, published in the Federal Register in June 2004 and March 2005,  respectively. In addition, we interviewed officials at the Congressional  Research Service (CRS) and reviewed documentation they provided,  including CRS reports that discuss CSP cost and implementation issues.
We also sought the views of other interested stakeholder organizations,  such as farm, conservation, and environmental organizations, as to why the  estimated costs of CSP have risen substantially. These organizations  included the American Farm Bureau Federation, the National Association  of Conservation Districts, the Soil and Water Conservation Society, the  Sustainable Agriculture Coalition, the Theodore Roosevelt Conservation  Partnership, the Wildlife Management Institute, Ducks Unlimited, and  Environmental Defense. At each organization, we interviewed  knowledgeable officials and reviewed documentation they provided.
To determine USDA’s authority to control CSP costs and the cost control  measures in place, we reviewed relevant authorizing and appropriations  legislation and related legislative history. This legislation includes the Farm  Security and Rural Investment Act of 2002 (the farm bill); USDA  appropriations acts for fiscal years 2004, 2005, and 2006; and other  legislation that capped CSP funding for the 11-year period, fiscal years 2003  through 2013, and for the 10-year period, fiscal years 2005 through 2014.   In addition, we interviewed USDA officials and reviewed documentation  they provided at NRCS, the Economic Research Service, the Office of the  General Counsel, and the Office of Budget and Program Analysis. We also  reviewed USDA’s budget explanatory notes for fiscal years 2004 through  2007; NRCS’s CSP regulations and associated public comments and benefit- cost assessments; and NRCS’s Conservation Programs Manual and related  guidance pertaining to CSP implementation. Furthermore, we interviewed  officials and reviewed documentation they provided at farm, conservation,  and environmental organizations and at CRS.
Concerning cost control measures, we also examined NRCS internal  management controls (internal controls) related to ensuring that CSP cost  control measures are properly and consistently implemented and that CSP  contract payments are accurately determined and tracked. In particular,  we focused on controls related to the agency’s (1) verification of producer- reported data used to determine program eligibility and payment levels; (2)  monitoring of producer implementation of CSP contract provisions; and (3)  oversight of program implementation by its field offices, including  oversight of the offices’ compliance with legislative and regulatory program  provisions. To do this, we interviewed NRCS officials and reviewed  documentation they provided at the Operations Management and Oversight  Division of the Office of Strategic Planning and Accountability. This  documentation included NRCS’s General Manual and Conservation  Programs Manual. It also included an internal draft study prepared by the  division’s Oversight and Evaluation Staff regarding CSP’s implementation.  Among other things, this draft study discusses internal controls related to  the program’s application process, payment tier designation criteria, and  award of contracts across tiers and designated watersheds. In addition, we  reviewed USDA’s Management Control Manual and Management  Accountability and Control Regulation. Furthermore, we reviewed, from  USDA, relevant Office of Inspector General reports and the fiscal year 2005  performance and accountability report; and, from NRCS, the strategic plan  for fiscal years 2003 through 2008; the fiscal year 2003 performance plan;  performance reports for fiscal years 2003 and 2004; the fiscal year 2004  accomplishments report; and business plans for fiscal years 2004 and 2005.
Finally, concerning cost controls and related internal controls, we  conducted structured interviews with the relevant NRCS official(s)— usually the CSP program manager or Assistant State Conservationist in a  given NRCS state office—who had primary responsibility for implementing  CSP in each of the 18 priority watersheds included in the fiscal year 2004  sign-up. These 18 watersheds also were among the 220 watersheds  included in the fiscal year 2005 sign-up. For these interviews, we first  developed and pretested a data-collection instrument to guide the  interviews. In developing the instrument, we met with officials in NRCS  headquarters and reviewed documentation they provided to gain a  thorough understanding of CSP implementation issues and related internal  controls. To pretest the instrument, we contacted NRCS officials in Indiana  and Pennsylvania who were involved in the fiscal year 2004 sign-up. After  conducting the pretest, we interviewed the respondents to ensure that (1)  the questions were clear and unambiguous, (2) the terms we used were  precise, (3) the questions asked were independent and unbiased, and (4)  answering the questions did not place an undue burden on the agency  officials interviewed. On the basis of feedback from the pretests, we  modified the questions as appropriate. We then conducted the structured  interview by phone with NRCS officials representing each of the 18  watersheds. Table 7 lists the 18 watersheds included in the fiscal year 2004  sign-up, the lead NRCS state office for each watershed, and the number of  CSP contracts awarded in each watershed.
We did not conduct structured interviews with officials representing the  lead offices for all 220 priority watersheds included in the fiscal year 2005  sign-up because (1) time frames for completing this sign-up and awarding  contracts fell beyond the time frames for completing this portion of our  work and (2) the 18 watersheds covered by our interviews were included in  both the fiscal year 2004 and fiscal year 2005 sign-ups and provided wide  geographic coverage.
To determine what legislative and regulatory measures exist to prevent  duplication between CSP and other programs and what duplication, if any,  has occurred, we reviewed relevant authorizing legislation and program  regulations and interviewed USDA officials and reviewed documentation  they provided at NRCS, the Economic Research Service, the Office of the  General Counsel, and the Office of the Inspector General. We also included  questions in our structured interviews regarding potential duplication  between CSP and other programs. In addition, we interviewed NRCS  officials responsible for developing a plan to coordinate USDA’s land  retirement and agricultural working land conservation programs to achieve  the goals of (1) eliminating redundancy, (2) streamlining program delivery,  and (3) improving services provided to agricultural producers. As required  in the farm bill, USDA was to have submitted a report by December 31,  2005, to the Senate Committee on Agriculture, Nutrition, and Forestry and  the House Committee on Agriculture that describes this plan and the means  by which USDA will achieve these goals. As of March 2006, USDA was still  preparing this report (USDA officials indicated that the plan and report will  be one-in-the-same document).
Furthermore, to identify potential duplication, we visited and conducted  file reviews at NRCS field offices in two of the watersheds—Lower  Chippewa and St. Joseph—that were included in the fiscal year 2004 and  fiscal year 2005 sign-ups. We selected these watersheds based on several  factors, including (1) their similarity to most of the other 18 watersheds  included in both sign-ups in terms of the predominant type of land use (i.e.,  cropland), (2) the relatively high number of financial assistance contracts  provided to producers in these watersheds under CSP and other USDA  conservation programs, and (3) the availability of NRCS field staff to meet  with us at the time. In addition, our selection of watersheds reflected a  wide variation in the percent of total payments made to producers in each  watershed under Tier III, the highest CSP payment category—41 percent in  Lower Chippewa versus 75 percent in St. Joseph.  Finally, the Lower  Chippewa watershed lies entirely within the state of Wisconsin; in contrast,  the St. Joseph watershed straddles three states—Indiana, Michigan, and  Ohio—and thus multiple NRCS state offices were involved in implementing  CSP in this watershed (Indiana was the lead office). In each watershed, we  visited two NRCS county offices to review the contract files of producers  who received a CSP payment in fiscal 2004 and an Environmental Quality  Incentives Program (EQIP) payment or a Wildlife Habitat Incentives  Program (WHIP) payment in one or more years during fiscal years 2002  through 2004. We chose the offices visited because they had made  relatively large numbers of payments under these programs.
We also obtained and analyzed data from NRCS’s Program Contracts  System (ProTracts) electronic database regarding calendar year 2004  payments made under CSP and two other USDA conservation programs— EQIP and WHIP. In particular, we compared payment information for CSP  and EQIP to identify producers who received payments under both  programs that year. We then did further analysis to determine cases in  which it appeared a producer had received payments under both programs  for the same conservation practice or activity, on the same land, in the  same year. We discussed payments received by 11 producers with NRCS  officials to determine the actual extent of duplication, if any. We selected  these 11 producers from a cross section of states—Nebraska, Oklahoma,  Oregon, and South Carolina. In general, these states had the highest  number of cases of potential duplication. In each state, we contacted NRCS  field office officials in the county with the largest number of cases to  discuss whether the payments were duplicates. Our choice of these  producers, states, and counties was not intended to be representative for  projection purposes. Finally, we interviewed officials and reviewed  documentation they provided at farm, conservation, and environmental  organizations, CRS, the U.S. Fish and Wildlife Service in the Department of  the Interior, and the U.S. Environmental Protection Agency; conducted a  literature search to identify relevant studies and articles; and attended a  CSP training workshop at USDA headquarters.
We conducted our review between February 2005 and February 2006 in  accordance with generally accepted government auditing standards. We  conducted a data reliability assessment of the fiscal years 2004 and 2005  payments data for CSP, EQIP, and WHIP and determined the data to be  sufficiently reliable. For the data obtained from the other sources noted  above, we did not independently verify the data, but we discussed with  these sources, as appropriate, the measures they take to ensure the  accuracy of these data. For the purposes for which the data were used in  this report, these measures seemed reasonable.
section_title: CSP Payments Information for Fiscal Years 2004 and 2005
paragraphs: Tables 8 through 14 summarize Conservation Security Program (CSP)  payments information for fiscal year 2004. Tables 15 through 18 summarize  similar information for fiscal year 2005, including payments for new and  existing (2004) contracts. Table 19 summarizes information on the acres  enrolled in CSP by land type during these fiscal years. Although the farm  bill called for the establishment of CSP in fiscal year 2003, the Natural  Resources Conservation Service (NRCS) held the first program sign-up in  fiscal year 2004, after developing program regulations, training its field  staff, and introducing the program to producers and stakeholder groups.  Information on CSP payments for fiscal year 2006 was not available at the  time of our review.
To develop tables 8 through 18, we used payments information from  NRCS’s Program Contracts System (ProTracts). Among other things,  ProTracts is used to manage and monitor the CSP application, contracting,  and payment process. ProTracts is a feeder system into the U.S.  Department of Agriculture’s (USDA) Foundation Financial Information  System (Foundation System), the department’s official accounting system  for making payments for current and prior year programs. The Foundation  System records obligations and payments made and is the source of data  used in financial statements for all USDA programs. In general, the  payments data in the Foundation System is considered official, whereas  payments data in ProTracts is considered preliminary until it has been  checked, corrected, and migrated to the Foundation System. For this  reason, payments data taken from these systems may not be consistent.  However, in order to separate CSP payments data by tier, payment type,  and enhancement type, it was necessary to use data from ProTracts; this  level of detail or disaggregation was not possible using data from the  Foundation System.
section_title: CSP Application and Enrollment Process Flowchart
paragraphs: Ijority of gricltre  opertion in terhed  nnonced for the ign-p?
Wit for fre ign-p.
Eligiility: Ind eligile? Doe prodcer  re rik of prodcing crop or  livetock nd entitled to   re? Other (ign-pecific).YeI prodcer in complince with  highly erodile lnd &  mpbuster?
I prodcer willing to  meet complince  requirement?
Has prodcer completed elf-assssment inclding enchmrk inventory?
I prodcer willing to  complete elf- assssment?
Tier III minimm requirement  re  met.
Are ll pplicable rerce  concern ddressed to the  minimm level of tretment  on the entire gricltre  opertion?
Tier II minimm requirement re  met.
Are ll oil quality nd wter  quality concern ddressed to  the minimm level of tretment  on the entire gricltre  opertion?
Are ll oil quality nd wter  quality concern ddressed to  the minimm level of tretment  on the prt of the gricltre  opertion?
I prodcer willing to  ddress oil quality nd  wter quality on the prt  of the gricltre  opertion?
Plce in enrollment  ctegory based on  enchmrk inventory.
Tier I minimm requirement re  met.
Refer prodcer to other  pproprite conervtion  progr.
Develop conervtion  ecrity plnd  contrct, determine  progrm pyment.
Wit for fre ign-  when rerce concern  re ddressed.
Implement contrct.
section_title: Other Key USDA Conservation Programs
paragraphs: In addition to to the Conservation Security Program (CSP), the U.S.  Department of Agriculture (USDA) manages a number of other  conservation programs. In general, these other programs (1) help farmers  and ranchers address existing environmental problems by paying for a  portion of the cost of needed conservation practices or structures; (2) keep  land in farming or grazing by purchasing rights to part of the land, such as  development rights through easements; or (3) idle or retire  environmentally sensitive land, such as highly erodible land or wetlands,  from production. In contrast, CSP is focused on operations that already  have addressed environmental problems and have achieved a high level of  environmental stewardship, while keeping the land in production.  Producers cannot receive CSP payments and payments under another  USDA conservation program for the same conservation practices or  activities on the same land. However, producers can use assistance  received under other USDA programs, as well as assistance received under  state or private conservation programs, to arrive at a high level of  stewardship necessary to participate in CSP. Table 20 describes other key  USDA conservation programs.
section_title: Explanation of Budget Scoring
paragraphs: Budget scoring or scorekeeping is the process of estimating the budgetary  effects of pending and enacted legislation and comparing them with a  baseline, such as a budget resolution, or to any limits that may be set in law.  Scorekeeping tracks data such as budget authority, receipts, outlays, the  surplus or deficit, and the public debt limit.  The process allows Congress  to compare the cost of proposed budget policy changes with existing law in  order to enforce spending and revenue levels agreed upon in the budget  resolution. The congressional budget committees and the Congressional  Budget Office (CBO) score legislation in relation to levels set by Congress  in concurrent budget resolutions. The Office of Management and Budget  (OMB) also scores legislation for the purposes of developing the  President’s annual budget proposal, executing the budget, and providing  the President with estimates of the budgetary impacts of pending  legislation awaiting the President’s signature (or veto).
Budget scorekeeping guidelines are used by the congressional budget  committees, CBO, and OMB (the “scorekeepers”) in measuring compliance  with the Congressional Budget and Impoundment Control Act of 1974, as  amended, and the Balanced Budget and Emergency Deficit Control Act of  1985, as amended.  The purpose of the guidelines is to ensure that the  scorekeepers measure the effects of legislation on the deficit consistent  with established scorekeeping conventions and with specific legislative  requirements regarding discretionary spending, direct spending, and  receipts. These guidelines are reviewed annually by the scorekeepers and revised as necessary to adhere to that purpose. The guidelines are  contained in Appendix A of OMB Circular No. A-11.
In general, CBO prepares costs estimates for all bills other than  appropriations bills when they are reported by a full committee of either  House of Congress. However, CBO also prepares cost estimates for  proposals at other stages of the legislative process at the request of a  committee of jurisdiction, a budget committee, or the congressional  leadership. For example, CBO may prepare cost estimates for a series of  bills to be considered by a subcommittee, including draft bills not yet  introduced, or for amendments to be considered during committee  markups. Similarly, it may prepare cost estimates for floor amendments  and for bills that pass one or both Houses. For appropriations bills, CBO  provides estimates of outlays that would result from the provision of  budget authority. CBO also provides the budget and appropriation  committees with frequent tabulations of congressional action on both  spending and revenue bills so that Congress can know whether it is acting  within the limits set by the annual budget resolution. After CBO cost  estimates have been transmitted, they may be revised to correct errors or  to incorporate new or updated information. OMB also may revise its  estimates for similar reasons.
The Director, CBO, transmits by letter all formal budget and mandate cost  estimates of legislative proposals and all requested analyses.  Scorekeeping  data published by CBO include, but are not limited to, status reports on the  effects of congressional actions and comparisons of these actions to  targets and ceilings set by Congress in the budget resolutions. Weekly  status reports are published in the Congressional Record for the Senate  during the weeks it is in session and status reports for the House of  Representatives are published at least monthly when the House is in  session. CBO is also required to produce periodic scorekeeping reports on  at least a monthly basis pursuant to section 308(b) of the Congressional  Budget and Impoundment Act of 1974, as amended. OMB scorekeeping  data generally are not published.
section_title: Time Line of Legislative Actions and CBO and OMB 10-Year Estimates of CSP Costs
paragraphs: December:  Fnding ncpped $.7 illion (FY 2002-2011)
May:  Fnding ncpped $2.0 illion (FY 2002-2011) $5.9 illion (FY 2002-2011) $7. illion (FY 2004-201) $. illion 11-yer c(FY-201) $.  2004-201) $41.4 million 1-yer cp (FY 2004) led  $. illion 11-yer c$9.7 illion (FY 2005-2014) $.9 illion (FY 2005-2014) $6.0 illion 10-yer c(FY 2005-2014) $6.0 illion (FY 2005-2014) $202.4 million 1-yer cp on sarie nd peronnel  expen (FY 2005)
January:  Fnding cpped  except for 2015 $6.7 illion (FY 2006-2015)
March:  Fnding cpped  except for 2015 $6.7 illion (FY 2006-2015) $259 million 1-yer cp on sarie nd peronnel  expen (FY 2006)
January:  Fnding cpped  except for 2016 $6.2 illion (FY 2007-2016) $1.95 illion 5-yer cp (FY 2006-2010) nd $5.65  illion 10-yer c(FY 2006-2015)
March:  Fnding cpped  except for 2016 $6.4 illion (FY 2007-2016)
Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, 116 Stat. 134 (2002).
Agricultural Assistance Act of 2003, Pub. L. No. 108-7, tit. II, § 216, Stat. 538, 546 (2003).
section_title: Description of USDA and NRCS Internal Controls and the Results of Reviews of These Controls
paragraphs: Federal agencies have been required for over 20 years to establish and  assess internal controls in their programs and financial management  activities pursuant to the Federal Managers’ Financial Integrity Act of 1982  and other legislative and administrative initiatives. Furthermore, the  Improper Payments Information Act of 2002 requires each agency to  annually review all programs and activities the agency administers and to  identify those that may be susceptible to significant improper payments.   To ensure that programs are managed with integrity and that program  operations comply with these requirements, the U.S. Department of  Agriculture (USDA) issued a departmental regulation, Management  Accountability and Control, and a related departmental manual,  Management Control Manual. The departmental regulation establishes  departmentwide policy for internal controls. The manual discusses specific  controls, including separation of duties, reconciliation of records from two  sources, reconciliation of records with physical inventories, limiting access  (e.g., authorizations on data systems), providing supervision,  documentation of processes and procedures, written delegations of  authority, analyzing and reporting on risk, and periodic reviews of  performance. As a USDA agency, the Natural Resources Conservation  Service (NRCS) is to follow the internal control guidance in this regulation  and manual.
NRCS also has established agency-specific guidance on internal controls,  found principally in its General Manual and its Conservation Programs  Manual. The General Manual establishes NRCS policy for effectively  guarding against waste, loss, and misuse of program resources.  Specifically, it outlines the process through which the agency complies  with governmentwide requirements for internal management control. The  Conservation Programs Manual provides specific policy, guidance, and  operating procedures for implementing the Conservation Security Program  (CSP) (and other programs). For example, the manual sets procedures for  key program controls such as the documentation required from an  applicant and the conduct of CSP eligibility determinations and contract  compliance reviews. The manual also discusses specific responsibilities for  program implementation as they relate to internal controls. For example,  within each state, the NRCS State Conservationist is responsible for  ensuring compliance with internal controls, including separation of duties  related to contract approval and payment certification. In addition, this  official is responsible for designating in writing the authorized NRCS  representative for obligating program funds, disbursing payments, and  acting as Contracting Officer.
USDA’s Office of Inspector General (IG) issued a report in January 2005  that examined NRCS’s compliance with the Improper Payments  Information Act of 2002. Among other things, the IG found that NRCS had  not taken sufficient action to comply with the act and related guidance set  forth by OMB and USDA’s Office of the Chief Financial Officer. In summary,  the IG found that NRCS had neither identified the internal control  measures in place to preclude, or detect in a timely manner, improper  payments nor did it know if the controls were in operation. In addition, the  IG noted that NRCS had not conducted adequate risk assessments of  potential improper payments for the programs it administers, including  CSP. According to the IG, NRCS officials stated that risk assessments were  not completed because they did not have the time or personnel to perform  them. These officials also said that they misinterpreted the guidance  regarding what they needed to do to comply with the act. Accordingly, the  IG recommended that NRCS conduct more thorough risk assessments of  all programs with outlays of $10 million or more (includes CSP) and  develop an estimated error rate by (1) developing criteria for identifying  program vulnerabilities, (2) determining acceptable risk levels, (3) ranking  the risk factors, and (4) establishing controls to ensure their timely and  accurate completion. NRCS agreed with the IG’s recommendations and  indicated that it would take corrective actions by April 30, 2005. In  February 2006, IG officials indicated that the IG had not assessed the  adequacy of these actions, including NRCS’s preparation of risk  assessments.
In a January 2004 report, GAO found that significant, pervasive information  security control weaknesses exist at USDA, including serious access  control weaknesses, as well as other information security weaknesses.   Specifically, USDA had not adequately protected network boundaries,  sufficiently controlled network access, appropriately limited mainframe  access, or fully implemented a comprehensive program to monitor access  activity. In addition, weaknesses in other information security controls,  including physical security, personnel controls, system software,  application software, and service continuity, further increase the risk to  USDA’s information systems. As a result, sensitive data—including  information relating to the privacy of U.S. citizens, payroll and financial  transactions, proprietary information, agricultural production and  marketing estimates, and mission critical data—are at increased risk of  unauthorized disclosure, modification, or loss, possibly without being  detected. Accordingly, GAO recommended that USDA establish a  comprehensive security management program, including (1) ensuring that  security management positions have the authority and cooperation of  agency management to effectively implement and manage security  programs, (2) completing periodic risk assessments for systems, (3)  completing information security plans and establishing policies and  procedures on the basis of identified risks, (4) ensuring that employees  complete security awareness training, (5) implementing ongoing tests and  evaluations of controls, (6) completing system certifications and  accreditations, and (7) developing corrective action plans that clearly tie to  identified weaknesses. USDA concurred, but as of January 2006, USDA had  not yet fully implemented these recommendations.
Furthermore, USDA’s fiscal year 2005 performance and accountability  report discusses material weaknesses related to USDA’s financial and  accounting systems and information security program. Among the  material weaknesses identified in the report are NRCS’s application  controls for its Program Contracts System (ProTracts). To address this  weakness, NRCS plans to take a number of actions in fiscal year 2006,  including (1) documenting the ProTracts change control process; (2)  documenting changes to the ProTracts software; (3) establishing a  ProTracts testing process; (4) establishing a formally approved document  for the ProTracts payment specifications; and (5) establishing a schedule  for the systematic reconciliation of ProTracts appropriations, obligations,  and payments with amounts recorded in the department’s Foundation  Financial Information System.
section_title: Comments from the U.S. Department of Agriculture
section_title: Appendix VIII
paragraphs: The following are GAO’s comments on the letter from the U.S. Department  of Agriculture dated April 10, 2006.