Agricultural Conservation:

USDA Should Improve Its Process for Allocating Funds to States for the Environmental Quality Incentives Program

GAO-06-969: Published: Sep 22, 2006. Publicly Released: Sep 27, 2006.

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The Environmental Quality Incentives Program (EQIP) assists agricultural producers who install conservation practices, such as planting vegetation along streams and installing waste storage facilities, to address impairments to water, air, and soil caused by agriculture or to conserve water. EQIP is a voluntary program managed by the U.S. Department of Agriculture's (USDA) Natural Resources Conservation Service (NRCS). NRCS allocates about $1 billion in financial and technical assistance funds to states annually. About $650 million of the funds are allocated through a general financial assistance formula. As requested, GAO reviewed whether USDA's process for allocating EQIP funds to states is consistent with the program's purposes and whether USDA has developed outcome-based measures to monitor program performance. To address these issues, GAO, in part, examined the factors and weights in the general financial assistance formula

NRCS's process for providing EQIP funds to states is not clearly linked to the program's purpose of optimizing environmental benefits; as such, NRCS may not be directing funds to states with the most significant environmental concerns arising from agricultural production. To allocate most EQIP funds, NRCS uses a general financial assistance formula that consists of 31 factors, including such measures as acres of cropland, miles of impaired rivers and streams, and acres of specialty cropland. However, this formula has several weaknesses. In particular, while the 31 factors in the financial assistance formula and the weights associated with each factor give the formula an appearance of precision, NRCS does not have a specific, documented rationale for (1) why it included each factor in the formula, (2) how it assigns and adjusts the weight for each factor, and (3) how each factor contributes to accomplishing the program's purpose of optimizing environmental benefits. Factors and weights are important because a small adjustment can shift the amount of funding allocated to each state on the basis of that factor and, ultimately, the amount of money each state receives. For example, in 2006, a 1 percent increase in the weight of any factor would have resulted in $6.5 million more allocated on the basis of that factor and a reduction of 1 percent in money allocated for other factors. In addition to weaknesses in documenting the design of the formula, some data NRCS uses in the formula to make financial decisions are questionable or outdated. For example, the formula does not use the most recent data available for 6 of the 31 factors, including commercial fertilizers applied to cropland. As a result, any recent changes in a state's agricultural or environmental status are not reflected in the funding for these factors. During the course of GAO's review, NRCS announced plans to reassess its EQIP financial assistance formula. NRCS recently developed a set of long-term, outcome-based performance measures to assess changes to the environment resulting from EQIP practices. The agency is also in the process of developing computer models and other data collection methods that will allow it to assess these measures. Thus, over time, NRCS should ultimately have more complete information on which to gauge program performance and better direct EQIP funds to areas of the country that need the most improvement.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: To address our recommendation, Natural Resources Conservation Service (NRCS) hired a consulting firm, which reviewed multiple conservation program formulas, including EQIP, and made recommendations for improvement. Based on this information and GAO's recommendations, NRCS modified its EQIP Fiscal Year 2009 financial assistance formula. The new formula and its rationale are documented in an NRCS publication available on its website. NRCS's modifications to the formula included changing and deleting factors, changing factor weights, and updating data sources. NRCS also took steps to identify the performance goals to which various factors relate.

    Recommendation: To achieve EQIP's purpose of optimizing environmental benefits, the Secretary of Agriculture should direct the Chief of the Natural Resources Conservation Service to ensure that the rationale for the factors and weights used in the general financial assistance formula are documented and linked to program priorities, and data sources used in the formula are accurate and current.

    Agency Affected: Department of Agriculture: Natural Resources Conservation Service

  2. Status: Closed - Not Implemented

    Comments: Action not taken.

    Recommendation: To achieve EQIP's purpose of optimizing environmental benefits, the Secretary of Agriculture should direct the Chief of the Natural Resources Conservation Service to continue to analyze current and newly developed long-term performance measures for the EQIP program and use this information to make any further revisions to the financial assistance formula to ensure funds are directed to areas of highest priority.

    Agency Affected: Department of Agriculture: Natural Resources Conservation Service

 

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