GAO-06-312, Conservation Security Program: Despite Cost Controls, Improved USDA Management Is Needed to Ensure Proper Payments and Reduce Duplication with Other Programs


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entitled 'Conservation Security Program: Despite Cost Controls, 
Improved USDA Management Is Needed to Ensure Proper Payments and Reduce 
Duplication with Other Programs' which was released on April 28, 2006. 

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Report to the Chairman, Committee on Appropriations, U.S. Senate: 

April 2006: 

Conservation Security Program: 

Despite Cost Controls, Improved USDA Management Is Needed to Ensure 
Proper Payments and Reduce Duplication with Other Programs: 

GAO-06-312: 

GAO Highlights: 

Highlights of GAO-06-312, a report to the Chairman, Committee on 
Appropriations, U.S. Senate. 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

Figure: Strip Cropping to Reduce Soil Erosion: 

[See PDF for Image] 

[End of Figure] 

What GAO Recommends: 

GAO recommends, in part, that NRCS review its state offices’ wildlife 
habitat assessment criteria and develop a process to preclude and 
identify duplicate payments. NRCS generally agreed with GAO’s findings 
and recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-312]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robert A. Robinson at 
(202) 512-3841 or robinsonr@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Estimates of CSP Costs Generally Increased because of Better 
Information on Program Implementation and Changes to the Time Frames 
Covered by the Estimates: 

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: 

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: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: CSP Payments Information for Fiscal Years 2004 and 2005: 

Appendix III: CSP Application and Enrollment Process Flowchart: 

Appendix IV: Other Key USDA Conservation Programs: 

Appendix V: Explanation of Budget Scoring: 

Appendix VI: Time Line of Legislative Actions and CBO and OMB 10-Year 
Estimates of CSP Costs: 

Appendix VII: Description of USDA and NRCS Internal Controls and the 
Results of Reviews of These Controls: 

Appendix VIII: Comments from the U.S. Department of Agriculture: 

GAO Comments: 

Appendix IX: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: CSP Payment Tiers: 

Table 2: CBO's CSP Cost Estimates, Fiscal Years 2002 through 2016: 

Table 3: OMB's CSP Cost Estimates, Fiscal Years 2002 through 2016: 

Table 4: Key Farm Bill and Regulatory Cost Control Measures Used in the 
Fiscal Year 2005 CSP Sign-up: 

Table 5: Tier III Contracts and Payments by Watershed, Fiscal Year 
2004: 

Table 6: Conservation Payments Available through CSP, EQIP, and WHIP: 

Table 7: Priority Watersheds, Lead NRCS State Offices, and CSP 
Contracts Awarded in the Fiscal Year 2004 CSP Sign-up: 

Table 8: Total CSP Payments and Contracts by Tier, Fiscal Year 2004: 

Table 9: Total CSP Payments by Payment Type, Fiscal Year 2004: 

Table 10: Total CSP Enhancement Payments by Enhancement Type, Fiscal 
Year 2004: 

Table 11: Distribution of All CSP Contracts by Payment Range (Excluding 
and Including Advance Enhancement Payments in Contract Amounts), Fiscal 
Year 2004: 

Table 12: Distribution of Tier I CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Table 13: Distribution of Tier II CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Table 14: Distribution of Tier III CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Table 15: Total CSP Payments and Contracts by Tier, Fiscal Year 2005: 

Table 16: Total CSP Payments by Payment Type, Fiscal Year 2005: 

Table 17: Total CSP Enhancement Payments by Enhancement Type, Fiscal 
Year 2005: 

Table 18: Distribution of CSP Contracts by Payment Range, Fiscal Year 
2005: 

Table 19: Acres Enrolled in CSP by Land Type, Fiscal Years 2004 and 
2005: 

Table 20: Description of Other Key USDA Conservation Programs: 

Figures: 

Figure 1: Watersheds Included in the Fiscal Year 2004 and Fiscal Year 
2005 CSP Sign-ups: 

Figure 2: Comparison of CBO and OMB 10-Year Estimates of CSP Costs: 

Abbreviations: 

CBO: Congressional Budget Office: 

CCC: Commodity Credit Corporation: 

CRS: Congressional Research Service: 

CSP: Conservation Security Program: 

EQIP: Environmental Quality Incentives Program: 

IG: Inspector General: 

NRCS: Natural Resources Conservation Service: 

O&E: Oversight and Evaluation: 

OMB: Office of Management and Budget: 

USDA: U.S. Department of Agriculture: 

WHIP: Wildlife Habitat Incentives Program: 

Letter: 
April 28, 2006: 

The Honorable Thad Cochran: 
Chairman: 
Committee on Appropriations: 
United States Senate: 

Dear Mr. Chairman: 

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.[Footnote 1] 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).[Footnote 2] 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.[Footnote 3] 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.[Footnote 4] 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).[Footnote 5] 

CSP rewards three levels, or tiers, of conservation treatment for 
qualified producers who enter into CSP contracts with NRCS.[Footnote 6] 
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.[Footnote 
7] 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,[Footnote 8] 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,[Footnote 9] (2) an annual existing practice component for 
the maintenance of existing conservation practices,[Footnote 10] (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,[Footnote 11] and 
(4) a one-time new practice component for additional approved 
practices.[Footnote 12] 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.[Footnote 13] 

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.[Footnote 14] 

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. 

Results in Brief: 

Various factors explain why CBO and OMB estimates of CSP costs 
generally have increased over time. Most importantly, agency officials 
indicated that little information was available regarding how the 
program would be implemented at the time of the original cost estimates 
in May 2002. Consequently, these officials relied 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, and the amount and types of 
payments made. Later, when more information became available as to how 
USDA planned to implement the program, officials' estimates were better 
informed and more accurately captured program costs, resulting in 
higher estimates. In addition, increases in estimated CSP costs also 
can be attributed to revising the time frames on which the estimates 
were based. The agencies' initial estimates were based on the 10-year 
period fiscal years 2002 through 2011 and included years in which the 
program was not operational (2002 and 2003) or minimally operational 
(2004). The agencies' subsequent estimates were based on different 10- 
year intervals. For example, CBO's and OMB's fiscal year 2004 estimates 
were based on the 10-year period fiscal years 2005 through 2014 and 
assumed the program would be fully operational in each of these years. 

The farm bill provides USDA general authority to control CSP costs, and 
while USDA has used its statutory authority to establish several cost 
control measures, its efforts to control program spending may be 
enhanced 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. More 
specifically, 

* the farm bill establishes some eligibility requirements for CSP, but 
gives USDA the authority to establish additional requirements. For 
example, the farm bill 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 
requirements for each tier. Furthermore, under the legislation, 
payments for each tier are not to exceed specified amounts, giving the 
Secretary of Agriculture the discretion to set payments for each tier 
below these limits. Under this statutory authority, NRCS implemented a 
number of CSP cost control measures to restrain program spending 
primarily by either restricting participation 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. 

* NRCS's cost control efforts may be undermined by weaknesses in the 
internal controls the agency uses to ensure accurate program payments. 
According to a January 2006 draft report, NRCS internal auditors found 
problems with several aspects of the agency's implementation of CSP, 
including its implementation of some internal controls. Among other 
things, the auditors found weaknesses in quality assurance and case 
file documentation. For example, they found that 33 of 55 fiscal year 
2004 CSP contracts studied had not had an annual contract review, as 
required by NRCS's programs manual, to document that CSP participants 
are following contract provisions. The absence of an annual contract 
review, according to the internal auditors, could result in payments 
being made for conservation activities that are not being done or are 
not yet completed as scheduled in the producer's conservation security 
plan. NRCS plans to prepare a management action plan describing its 
response to this draft report's recommendations. In addition, other 
aspects of NRCS's internal controls have been criticized. For example, 
in January 2005, the USDA Inspector General reported that 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. 

* NRCS's cost control efforts also may be undermined by inconsistencies 
in the wildlife habitat assessment criteria used by NRCS state offices, 
in part, to determine producer eligibility for Tier III payments. For 
the fiscal year 2004 CSP sign-up, according to NRCS, state offices 
developed wildlife habitat assessment criteria that were extremely 
variable, contributing significantly to differences in Tier III 
participation and payments among the various watersheds. For example, 
among the nine watersheds where cropland was the predominant type of 
land enrolled, the percentage of payments going to Tier III contracts 
ranged from 0 to 75 percent. In response, NRCS developed national 
guidance that its state offices were to follow in creating wildlife 
habitat assessment criteria. However, we found--and NRCS officials 
agreed--that some state offices developed and applied criteria for the 
fiscal year 2005 sign-up that were inconsistent with the national 
guidance. For example, the criteria used in watersheds under these 
states' jurisdiction did not require that a minimum percentage (as 
determined by the relevant state office) of a producer's operation be 
noncrop vegetative cover, such as grassy or riparian areas managed for 
wildlife, as specified in the national guidance. Thus, producers in 
these watersheds were eligible for Tier III payments even though they 
may not have satisfied criteria for one of the resource components that 
the national guidance specifies is necessary for eligibility. Moreover, 
an NRCS 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. Finally, the 
use of criteria that are inconsistent with the national guidance not 
only weakens CSP cost control measures by making more Tier III payments 
possible, it also reduces NRCS's ability to ensure that CSP is 
achieving its intended wildlife habitat benefits. Despite the possible 
undesirable outcomes associated with inconsistencies in state offices' 
wildlife habitat assessment criteria, as of February 2006, NRCS had not 
reviewed or field tested each state office's criteria and did not have 
plans to do so. In addition, NRCS has not incorporated a reference to 
the national guidance in its Conservation Programs Manual used by the 
agency's field staff. 

Various legislative and regulatory measures exist to reduce the 
potential for duplication between CSP and other USDA conservation 
programs; however, the possibility that producers can receive duplicate 
payments for the same conservation action from CSP and other programs 
remains. Specifically, the farm bill explicitly prohibits duplicate 
payments under CSP and other conservation programs for the same 
practice on the same land. The farm bill also prohibits NRCS from 
making payments under CSP for certain activities that can be funded 
under other conservation programs, such as the construction or 
maintenance of animal waste storage or treatment facilities. 
Furthermore, NRCS designed its CSP regulations to prevent duplication 
between CSP and other conservation programs. For example, the 
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 these other programs. The 
regulations also encourage CSP participants to implement conservation 
actions, known as enhancements, intended to achieve a level of 
treatment that generally exceeds the level required by other USDA 
conservation programs. However, despite statutory provisions and NRCS 
actions designed to prevent CSP from duplicating other programs, the 
potential for duplicate payments still exists and duplicate payments 
have occurred. In particular, payments for CSP's conservation 
enhancements--which represented about 81 percent of total CSP payments 
in fiscal years 2004 and 2005--could duplicate payments for other 
programs' conservation practices. For example, in the course of 
performing limited file reviews at several NRCS field offices, we found 
a case where a producer received payments under CSP and another program 
in 2004 for the same conservation activity--establishing a small grain 
cover crop--on the same tract of land. Furthermore, our analysis of 
2004 payments data for CSP and two other USDA conservation programs 
revealed other potential examples of duplicate payments. Specifically, 
we found 121 cases of payments that were made under CSP and another 
program that year that were potentially duplicates. We then selected 12 
of these cases for further investigation, and we found that in 8 cases 
duplicate payments had occurred. NRCS officials acknowledged that 
duplicate payments had occurred in 4 of these cases but did not agree 
in the other 4 cases. Finally, NRCS officials stated the agency lacks a 
comprehensive process 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 staff and 
the records they keep as a guard against potential duplication. 

In light of these findings, we are recommending that USDA direct NRCS 
to (1) review its state offices' wildlife habitat assessment criteria 
to ensure consistency with the agency's national guidance for 
developing these criteria; (2) include a reference to the national 
guidance in its Conservation Programs Manual to emphasize the 
importance of this guidance; (3) establish a comprehensive process to 
identify potential duplicate payments in the future, as well as such 
payments that already may have been made under existing CSP contracts; 
and (4) take action to recover duplicate payments already made. 

In commenting on a draft of this report, NRCS generally agreed with the 
findings and recommendations and provided information on actions it has 
taken, is taking, or will take to implement them. NRCS's comments are 
reprinted in appendix VIII. NRCS also provided us with suggested 
technical corrections, which we incorporated into this report as 
appropriate. 

We also provided a draft of this report to CBO and OMB for review and 
comment. Their clarifying comments were incorporated into this report 
as appropriate. 

Background: 

CSP, called for under section 2001 of the 2002 farm bill,[Footnote 15] 
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.[Footnote 16] 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. 

Table 1: CSP Payment Tiers: 

Annual payment limit. 

Tier: I; 
Contract period: (years): 5; 
Annual payment limit: $20,000;  
Conservation criteria: (The producer must have addressed…): water and 
soil quality to meet specified minimum levels of treatment on part of 
the agricultural operation prior to enrollment. 

Tier: II; 
Contract period: (years): 5 to 10; 
Annual payment limit: $35,000; 
Conservation criteria: (The producer must have addressed…): water and 
soil quality to meet specified minimum levels of treatment on the 
entire agricultural operation prior to enrollment and agree to address 
at least one additional locally significant resource concern by the end 
of the contract.[A]. 

Tier: III; 
Contract period: (years): 5 to 10; 
Annual payment limit: $45,000; 
Conservation criteria: (The producer must have addressed…): all 
existing resource concerns to meet specified minimum levels of 
treatment on the entire agricultural operation. 

Source: 2002 farm bill and NRCS's CSP regulations. 

[A] Producers can satisfy the requirement to address an additional 
resource of concern by demonstrating that the locally significant 
resource concern is not applicable to their operation or that they have 
already addressed it in accordance with NRCS's quality criteria.

[End of table] 

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.[Footnote 17] 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.[Footnote 18] 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.[Footnote 19] 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[Footnote 20]--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.[Footnote 21] 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.[Footnote 22] 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).[Footnote 23] 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. 

Figure 1: Watersheds Included in the Fiscal Year 2004 and Fiscal Year 
2005 CSP Sign-ups: 

[See PDF for image] 

Note: NRCS allowed the 18 watersheds included in the fiscal year 2004 
sign-up to be reopened only for new applicants for the fiscal year 2005 
sign-up. This was because NRCS received many complaints from producers 
in these watersheds that they did not have sufficient time or did not 
know enough about CSP to apply for assistance under the program in the 
fiscal year 2004 sign-up. The arrows denote some of the smaller 
watersheds included in the fiscal year 2005 sign-up.

[End of figure] 

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;[Footnote 24] (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.[Footnote 
25] 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.[Footnote 26] 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.[Footnote 27] 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. 

Estimates of CSP Costs Generally Increased because of Better 
Information on Program Implementation and Changes to the Time Frames 
Covered by the Estimates: 

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. 

Estimates of CSP Costs Generally Have Increased over Time: 

Over time, CBO and OMB each made several estimates of CSP costs for 
specified 10-year periods, and these estimates generally 
increased.[Footnote 28] 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. 

Figure 2: Comparison of CBO and OMB 10-Year Estimates of CSP Costs: 

[See PDF for image]

Notes: (1) CBO's December 2001 estimate was based on an early Senate 
version of the farm bill, S. 1731. The farm bill, which called for 
establishment of CSP, was enacted into law on May 13, 2002. (2) The 
Deficit Reduction Act of 2005 repealed the $6.0 ($6.037) billion cap 
for fiscal years 2005 through 2014. Instead, the act limits CSP 
spending to $1.954 billion for fiscal years 2006 through 2010 and to 
$5.650 billion for fiscal years 2006 through 2015.

[End of figure]

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.[Footnote 29] 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.[Footnote 30] 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.[Footnote 31] 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.[Footnote 32] As a result, subsequent OMB and CBO estimates 
increased substantially. 

Congress acted again to cap CSP funding in October 2004, passing 
legislation to limit the program's funding to approximately $6 billion 
for the 10-year period fiscal years 2005 through 2014.[Footnote 33] 
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.[Footnote 34] 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.[Footnote 35] 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. 

As More Information on CSP Implementation Became Available, Cost 
Estimates Increased: 

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,[Footnote 
36] 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.[Footnote 37] OMB also 
reviewed and commented on NRCS's proposed and interim final rules 
before their publication in the Federal Register.[Footnote 38] 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. 

Changing Time Frames Also Account for Increases in Estimates: 

CBO and OMB officials also attributed increases in their CSP cost 
estimates to revisions in the time frames on which the estimates were 
based.[Footnote 39] 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. 

Table 2: CBO's CSP Cost Estimates, Fiscal Years 2002 through 2016: 

Date of Estimate: May 2002; 
Dollars in millions: Estimates by fiscal year: 2002: 0; 
Dollars in millions: Estimates by fiscal year: 2003: $3; 
Dollars in millions: Estimates by fiscal year: 2004: $19; 
Dollars in millions: Estimates by fiscal year: 2005: $55; 
Dollars in millions: Estimates by fiscal year: 2006: $110; 
Dollars in millions: Estimates by fiscal year: 2007: $182; 
Dollars in millions: Estimates by fiscal year: 2008: $267; 
Dollars in millions: Estimates by fiscal year: 2009: $361; 
Dollars in millions: Estimates by fiscal year: 2010: $459; 
Dollars in millions: Estimates by fiscal year: 2011: $544; 
Dollars in millions: Estimates by fiscal year: 2012: Dash; 
Dollars in millions: Estimates by fiscal year: 2013: Dash; 
Dollars in millions: Estimates by fiscal year: 2014: Dash; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: 10-year total: $2,000. 

Date of Estimate: January 2003; 
Dollars in millions: Estimates by fiscal year: 2002: [A]; 
Dollars in millions: Estimates by fiscal year: 2003: [A]; 
Dollars in millions: Estimates by fiscal year: 2004: $73; 
Dollars in millions: Estimates by fiscal year: 2005: $177; 
Dollars in millions: Estimates by fiscal year: 2006: $319; 
Dollars in millions: Estimates by fiscal year: 2007: $493; 
Dollars in millions: Estimates by fiscal year: 2008: $687; 
Dollars in millions: Estimates by fiscal year: 2009: $877; 
Dollars in millions: Estimates by fiscal year: 2010: $1,050; 
Dollars in millions: Estimates by fiscal year: 2011: $1,207; 
Dollars in millions: Estimates by fiscal year: 2012: $1,378; 
Dollars in millions: Estimates by fiscal year: 2013: $1,499; 
Dollars in millions: Estimates by fiscal year: 2014: Dash; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: 10-year total: $7,760. 

Date of Estimate: March 2004; 
Dollars in millions: Estimates by fiscal year: 2002: - Dollars in 
millions: Estimates by fiscal year: 2003: [A]; 
Dollars in millions: Estimates by fiscal year: 2004: [A]; 
Dollars in millions: Estimates by fiscal year: 2005: $282; 
Dollars in millions: Estimates by fiscal year: 2006: $649; 
Dollars in millions: Estimates by fiscal year: 2007: $846; 
Dollars in millions: Estimates by fiscal year: 2008: $942; 
Dollars in millions: Estimates by fiscal year: 2009: $993; 
Dollars in millions: Estimates by fiscal year: 2010: $1,018; 
Dollars in millions: Estimates by fiscal year: 2011: $1,032; 
Dollars in millions: Estimates by fiscal year: 2012: $1,039; 
Dollars in millions: Estimates by fiscal year: 2013: $1,045; 
Dollars in millions: Estimates by fiscal year: 2014: $1,050; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: 10-year total: $8,896. 

Date of Estimate: March 2005[B]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: Dash; 
Dollars in millions: Estimates by fiscal year: 2005: [A]; 
Dollars in millions: Estimates by fiscal year: 2006: $331; 
Dollars in millions: Estimates by fiscal year: 2007: $450; 
Dollars in millions: Estimates by fiscal year: 2008: $582; 
Dollars in millions: Estimates by fiscal year: 2009: $676; 
Dollars in millions: Estimates by fiscal year: 2010: $737; 
Dollars in millions: Estimates by fiscal year: 2011: $761; 
Dollars in millions: Estimates by fiscal year: 2012: $767; 
Dollars in millions: Estimates by fiscal year: 2013: $768; 
Dollars in millions: Estimates by fiscal year: 2014: $761; 
Dollars in millions: Estimates by fiscal year: 2015: $835; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: 10-year total: $6,668. 

Date of Estimate: March: 2006[C]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: Dash; 
Dollars in millions: Estimates by fiscal year: 2005: [A]; 
Dollars in millions: Estimates by fiscal year: 2006: [A]; 
Dollars in millions: Estimates by fiscal year: 2007: $373; 
Dollars in millions: Estimates by fiscal year: 2008: $446; 
Dollars in millions: Estimates by fiscal year: 2009: $436; 
Dollars in millions: Estimates by fiscal year: 2010: $440; 
Dollars in millions: Estimates by fiscal year: 2011: $579; 
Dollars in millions: Estimates by fiscal year: 2012: $685; 
Dollars in millions: Estimates by fiscal year: 2013: $763; 
Dollars in millions: Estimates by fiscal year: 2014: $794; 
Dollars in millions: Estimates by fiscal year: 2015: $875; 
Dollars in millions: Estimates by fiscal year: 2016: $1,008; 
Dollars in millions: 10-year total: $6,399. 

Source: CBO. 

Note: Dashes (-) indicate that CBO did not include an estimate for that 
fiscal year.

[A] Estimates were provided for these years but were not included in 
the table to show only the years included in the 10-year estimate 
total. 

[B] This is a capped estimate for all years except 2015, based on 
legislation capping the program at $6.037 billion over 10 years (fiscal 
years 2005 through 2014) to help pay for agricultural disaster 
assistance. 

[C] This is a capped estimate for all years except 2016 based on the 
Deficit Reduction Act of 2005 that established caps on program funding 
of $1.954 billion for fiscal years 2006 through 2010 and $5.650 billion 
for fiscal years 2006 through 2015.

[End of table] 

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. 

Table 3: OMB's CSP Cost Estimates, Fiscal Years 2002 through 2016: 

Dollars in millions. 

May 2002; 
Dollars in millions: Estimates by fiscal year: 2002: 0; 
Dollars in millions: Estimates by fiscal year: 2003: $11; 
Dollars in millions: Estimates by fiscal year: 2004: $87; 
Dollars in millions: Estimates by fiscal year: 2005: $270; 
Dollars in millions: Estimates by fiscal year: 2006: $442; 
Dollars in millions: Estimates by fiscal year: 2007: $659; 
Dollars in millions: Estimates by fiscal year: 2008: $870; 
Dollars in millions: Estimates by fiscal year: 2009: $1,015; 
Dollars in millions: Estimates by fiscal year: 2010: $1,183; 
Dollars in millions: Estimates by fiscal year: 2011: $1,278; 
Dollars in millions: Estimates by fiscal year: 2012: Dash; 
Dollars in millions: Estimates by fiscal year: 2013: Dash; 
Dollars in millions: Estimates by fiscal year: 2014: Dash; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: Dash; 
10-year total: $5,858. 

March 2003[B]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: $10; 
Dollars in millions: Estimates by fiscal year: 2005: $77; 
Dollars in millions: Estimates by fiscal year: 2006: $166; 
Dollars in millions: Estimates by fiscal year: 2007: $261; 
Dollars in millions: Estimates by fiscal year: 2008: $356; 
Dollars in millions: Estimates by fiscal year: 2009: $442; 
Dollars in millions: Estimates by fiscal year: 2010: $527; 
Dollars in millions: Estimates by fiscal year: 2011: $612; 
Dollars in millions: Estimates by fiscal year: 2012: $658; 
Dollars in millions: Estimates by fiscal year: 2013: $681; 
Dollars in millions: Estimates by fiscal year: 2014: Dash; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: Dash; 
10-year total: 3,788. 

January 2004; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: [A]; 
Dollars in millions: Estimates by fiscal year: 2005: $249; 
Dollars in millions: Estimates by fiscal year: 2006: $457; 
Dollars in millions: Estimates by fiscal year: 2007: $665; 
Dollars in millions: Estimates by fiscal year: 2008: $873; 
Dollars in millions: Estimates by fiscal year: 2009: $1,046; 
Dollars in millions: Estimates by fiscal year: 2010: $1,118; 
Dollars in millions: Estimates by fiscal year: 2011: $1,191; 
Dollars in millions: Estimates by fiscal year: 2012: $1,264; 
Dollars in millions: Estimates by fiscal year: 2013: $1,337; 
Dollars in millions: Estimates by fiscal year: 2014: $1,448; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: Dash; 
10-year total: 9,650. 

October 2004[C]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: Dash; 
Dollars in millions: Estimates by fiscal year: 2005: $249; 
Dollars in millions: Estimates by fiscal year: 2006: $348; 
Dollars in millions: Estimates by fiscal year: 2007: $465; 
Dollars in millions: Estimates by fiscal year: 2008: $582; 
Dollars in millions: Estimates by fiscal year: 2009: $675; 
Dollars in millions: Estimates by fiscal year: 2010: $668; 
Dollars in millions: Estimates by fiscal year: 2011: $704; 
Dollars in millions: Estimates by fiscal year: 2012: $740; 
Dollars in millions: Estimates by fiscal year: 2013: $777; 
Dollars in millions: Estimates by fiscal year: 2014: $832; 
Dollars in millions: Estimates by fiscal year: 2015: Dash; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: Dash; 
10-year total: 6,041. 

January: 2005[D]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: Dash; 
Dollars in millions: Estimates by fiscal year: 2005: [A]; 
Dollars in millions: Estimates by fiscal year: 2006: $314; 
Dollars in millions: Estimates by fiscal year: 2007: $470; 
Dollars in millions: Estimates by fiscal year: 2008: $559; 
Dollars in millions: Estimates by fiscal year: 2009: $648; 
Dollars in millions: Estimates by fiscal year: 2010: $693; 
Dollars in millions: Estimates by fiscal year: 2011: $738; 
Dollars in millions: Estimates by fiscal year: 2012: $760; 
Dollars in millions: Estimates by fiscal year: 2013: $804; 
Dollars in millions: Estimates by fiscal year: 2014: $849; 
Dollars in millions: Estimates by fiscal year: 2015: $893; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: Dash; 
10-year total: 6,728. 

January 2006[E]; 
Dollars in millions: Estimates by fiscal year: 2002: Dash; 
Dollars in millions: Estimates by fiscal year: 2003: Dash; 
Dollars in millions: Estimates by fiscal year: 2004: Dash; 
Dollars in millions: Estimates by fiscal year: 2005: Dash; 
Dollars in millions: Estimates by fiscal year: 2006: [A]; 
Dollars in millions: Estimates by fiscal year: 2007: $342; 
Dollars in millions: Estimates by fiscal year: 2008: $396; 
Dollars in millions: Estimates by fiscal year: 2009: $456; 
Dollars in millions: Estimates by fiscal year: 2010: $500; 
Dollars in millions: Estimates by fiscal year: 2011: $640; 
Dollars in millions: Estimates by fiscal year: 2012: $723; 
Dollars in millions: Estimates by fiscal year: 2013: $719; 
Dollars in millions: Estimates by fiscal year: 2014: $783; 
Dollars in millions: Estimates by fiscal year: 2015: $831; 
Dollars in millions: Estimates by fiscal year: 2016: Dash; 
Dollars in millions: Estimates by fiscal year: $831; 
10-year total: $6,222. 

Source: OMB. 

Note: Dashes (-) indicate that OMB did not include an estimate for that 
fiscal year. 

[A] Estimates were provided for these years but were not included in 
the table to show only the years included in the 10-year estimate 
total. 

[B] This is a capped estimate based on legislation capping the program 
at $3.773 billion over 11 years (fiscal years 2003 through 2013) to, 
according to OMB, help pay for drought disaster assistance. This cap 
was later removed in early 2004. 

[C] This is a capped estimate based on legislation capping the program 
at $6.037 billion over 10 years (fiscal years 2005 through 2014) to 
help pay for agricultural disaster assistance. 

[D] This is a capped estimate for all years except fiscal year 2015. 

[E] This is a capped estimate for all years except fiscal year 2016 
based on the Deficit Reduction Act of 2005 that established caps on 
program funding of $1.954 billion for fiscal years 2006 through 2010 
and $5.650 billion for fiscal years 2006 through 2015.

[End of table] 

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: 

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. 

The Farm Bill Provides USDA Authority to Control CSP Costs: 

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.[Footnote 40] 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.[Footnote 41] In 
addition, the Secretary must ensure that the lowest cost conservation 
practice alternative is used to fulfill the purposes of the 
plan.[Footnote 42] 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.[Footnote 43] 

NRCS Established Cost Control Measures in CSP Regulations Designed to 
Limit Program Enrollment and Payments: 

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. 

Table 4: Key Farm Bill and Regulatory Cost Control Measures Used in the 
Fiscal Year 2005 CSP Sign-up: 

Cost control measures: Program enrollment limited to specified 
watersheds; 
Farm bill: No specific language to restrict enrollment based on 
location. However, the Secretary of Agriculture shall determine and 
approve the minimum eligibility requirements for each tier; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: One of the 
eligibility requirements is that a majority of the agricultural 
operation must be within a watershed selected for sign-up. According to 
NRCS, limiting enrollment each year to priority watersheds enables NRCS 
to adjust the potential scope of the program in accordance with the 
available funding. In addition, according to NRCS, this approach 
constrains technical assistance costs associated with processing CSP 
applications by limiting the number of applications. 

Cost control measures: Sign-ups are periodic, not continuous; 
Farm bill: No specific language regarding when sign-ups should occur; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: CSP 
enrollment is restricted to specified sign-up periods. For example, the 
fiscal year 2005 sign-up period ran from March 28, 2005, through May 
27, 2005. 

Cost control measures: Minimum conservation treatment requirements for 
eligibility; 
Farm bill: Tier I: An applicant must--in a plan of conservation 
practices--(1) address at least one significant resource of concern for 
the enrolled portion of the agricultural operation at a level that 
meets the appropriate nondegradation standard and (2) cover active 
management of conservation practices that are implemented or maintained 
under the conservation security contract.[A]. 

Tier II: An applicant must--in a plan of conservation practices--(1) 
address at least one significant resource of concern for the entire 
agricultural operation at a level that meets the appropriate 
nondegradation standard and (2) cover active management of conservation 
practices that are implemented or maintained under the conservation 
security contract. 

Tier III: An applicant must--in a plan of conservation practices--(1) 
apply a resource management system that meets the appropriate 
nondegradation standard for all resources of concern for the entire 
agricultural operation and (2) cover active management of conservation 
practices that are implemented or maintained under the conservation 
security contract.[C]; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: Tier I: An 
applicant must have addressed both soil and water (i.e., two) resource 
concerns on at least part of the operation to a specified minimum level 
of treatment.[B]. 
Tier II: An applicant must have addressed both soil and water (i.e., 
two) resource concerns on the entire operation to a specified minimum 
level of treatment. In addition, the applicant must agree to address an 
additional resource concern by the end of the contract period. 
Tier III: An applicant must have addressed all applicable resource 
concerns on the entire operation to a specified minimum level of 
treatment.[D]. 

Cost control measures: Prioritization of eligible applications for 
funding; 
Farm bill: No specific language to prioritize eligible applications. 
However, the Secretary of Agriculture shall determine and approve the 
minimum eligibility requirements for each tier.[E]; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: New program 
enrollments may be limited in any fiscal year to enrollment categories 
designed to focus on priority conservation concerns and enhancement 
measures. For the fiscal year 2005 sign-up, NRCS placed all eligible 
applications into five enrollment categories that prioritized 
applications for funding. Beginning with the highest enrollment 
category, NRCS accepted applications until the available funding was 
exhausted.[F]. 

Cost control measures: Requirement for documentation of existing 
conservation treatment; 
Farm bill: No specific language to require documentation of existing 
conservation treatment. However, the Secretary of Agriculture shall 
determine and approve the minimum eligibility requirements for each 
tier; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: An 
applicant must provide NRCS with documentation that includes 
information on existing conservation practices, treatment, and 
activities on the applicant's operation. NRCS used this information to 
determine if the application met the minimum eligibility requirements 
and, if so, to place the application in an enrollment category. 

Cost control measures: Limits on total CSP contract payments; 
Farm bill: Annual contract payments to an individual or entity shall 
not exceed $20,000 for Tier I; 
$35,000 for Tier II; 
and $45,000 for Tier III; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: The payment 
limits per contract were not changed. A CSP applicant may submit only 
one application per sign-up period and have only one active contract at 
any time. 

Cost control measures: Limits on stewardship (base) payments; 
Farm bill: Annual stewardship payments are limited to $5,000 for Tier 
I, $10,500 for Tier II, and $13,500 for Tier III. For a given contract, 
the stewardship payment is based on (1) the average national per-acre 
rental rate for a specific land use during the 2001 crop year or 
another appropriate rate for the 2001 crop year that ensures regional 
equity and (2) a tier-specific percentage (i.e., 5 percent for Tier I; 
10 percent for Tier II; 
and 15 percent for Tier III); 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: Further 
reduces the stewardship payment to a percentage of the amount 
calculated under the farm bill formula (i.e., 25 percent for Tier I, 50 
percent for Tier II, and 75 percent for Tier III). 

Cost control measures: Limits on existing conservation practice 
(maintenance) payments; 
Farm bill: Payments to maintain existing conservation practices are 
limited to 75 percent of the average county costs of the practices for 
the 2001 crop year. For a beginning producer, this limit is 90 percent; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: Existing 
practice payments may be limited for any given sign-up. For the 2005 
sign-up, existing practice payments were set at 25 percent of the 
stewardship payment.[G]. 

Cost control measures: Limits on new conservation practice; 
payments; 
Farm bill: New practice payments are limited to 75 percent of the cost 
of the average county costs of the practices for the 2001 crop year. 
For a beginning producer, this limit is 90 percent; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: New 
practice payments were limited to 50 percent of the cost of adopting 
the practice during the 2001 crop year. For a beginning producer, this 
limit was 65 percent. In addition, new practice payments were limited 
to a total of $10,000 over the life of a CSP contract. Furthermore, 
within each watershed, only designated conservation practices were 
eligible for new practice payments. 

Cost control measures: Limits on enhancement payments; 
Farm bill: No specific language to limit enhancement payments; 
NRCS's CSP regulations and fiscal year 2005 sign-up notice: An 
enhancement payment limit or variable rate may be set for any given 
sign-up. For the 2005 sign-up, annual enhancement payments were limited 
to $13,750 for Tier I contracts; 
$21,875 for Tier II contracts; 
and $28,125 for Tier III contracts. 

Sources: GAO analysis of the farm bill and NRCS's amended interim final 
CSP rule, 70 Fed. Reg. 15212 (Mar. 25, 2005) (7 C.F.R. pt. 1469) and 
2005 sign-up notice, 70 Fed. Reg. 15277 (Mar. 25, 2005). 

[A] The nondegradation standard is defined as the level of measures 
required to adequately protect and prevent degradation of one or more 
natural resources as determined by NRCS in accordance with the quality 
criteria described in its handbooks. 

[B] For Tiers I and II, the minimum level of treatment for soil quality 
on cropland is considered achieved when the soil conditioning index is 
positive. For Tiers I and II, the minimum level of treatment for water 
quality on cropland is considered achieved if the current level of 
treatment meets or exceeds NRCS's quality criteria for the specific 
resource concerns of nutrients, pesticides, sediment, and salinity for 
surface water and nutrients, pesticides, and salinity for groundwater. 
For Tiers I and II, the minimum level of treatment on pastureland and 
rangeland is vegetation and animal management accomplished by following 
a grazing management plan that provides for (1) a forage-animal 
balance, (2) proper livestock distribution, (3) timing of use, and (4) 
managing livestock access to water courses. To determine that resource 
concerns were managed at specified minimum levels of conservation 
treatment, NRCS field office staff reviewed information provided by the 
applicant and verified the accuracy of this information through 
interviewing the applicant and, in some cases, performing field checks. 

[C] A resource management system is a system of conservation practices 
and management relating to land or water use that is designed to 
prevent resource degradation and permit sustained use of land, water, 
and other resources, as defined in accordance with the NRCS technical 
guide. 

[D] The minimum level of treatment for Tier III is having a fully 
implemented resource management system that meets the quality criteria 
for the local NRCS field office technical guide for all applicable 
resource concerns and considerations with the following exceptions: (1) 
the minimum requirement for soil quality on cropland is considered 
achieved when the soil conditioning index is positive, (2) the minimum 
requirement for water quantity and irrigation water management on 
cropland or pastureland is considered achieved when the current level 
of management for the system results in a water use index value of at 
least 50, and (3) the minimum requirement for wildlife is considered 
achieved when the current level of treatment and management for the 
system results in an index value of at least 0.5 using a general or 
species specific habitat assessment guide. In addition, for Tier III, 
all riparian corridors, including streams and natural drainages, within 
the agricultural operation must be buffered to restore, protect, or 
enhance riparian resources. As appropriate, riparian corridors must be 
managed or designed to intercept sediment, nutrients, pesticides, and 
other materials in surface runoff; reduce nutrients and other 
pollutants in shallow subsurface water flow; lower water temperature; 
and provide litter fall or structural components for habitat complexity 
or to slow out-of-bank floods. 

[E] The farm bill provides that "[i]n entering into conservation 
security contracts with producers…the Secretary shall not use 
competitive bidding or any similar procedure." Some stakeholders view 
NRCS's use of enrollment categories as being inconsistent with this 
statutory language. However, NRCS has stated that it is not 
implementing a competitive process but is merely implementing the 
statutory scheme of providing payments for those applicants meeting 
specified criteria, so as to stay within the budgetary and technical 
assistance limits. 

[F] Placement of applications into the five enrollment categories was 
based on the conservation treatment in place for at least 2 years, as 
well as soil conditioning index levels. If all the applications in an 
enrollment category could not be funded, the applications were funded 
based on subcategories. In the fiscal year 2005 sign-up, placement in 
these subcategories was based on various factors such as whether the 
applicant was a limited resource producer. 

[G] According to an NRCS official, NRCS generally lacks data on the 
cost of maintaining conservation practices in the 2001 crop year. As a 
result, NRCS calculates existing practice payments based on 25 percent 
of the stewardship payment amount. According to another NRCS official, 
this alternative results in lower payments. In addition, NRCS 
stipulates in its regulation that existing practice payments may be 
based on a percentage of the stewardship payment if this payment does 
not exceed 75 percent of the average 2001 county cost of installing the 
conservation practice. 

[End of table] 

Some Fiscal Year 2004 CSP Contract Payments Exceeded Farm Bill Payment 
Limits: 

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.[Footnote 44] 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. 

Although NRCS Has Established Internal Controls, Weaknesses in These 
Controls Increase the Risk of Improper Payments: 

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.[Footnote 45] (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 [NRCS] 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. 

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: 

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.[Footnote 46] 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.[Footnote 47] 

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.[Footnote 48] 
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. 

Table 5: Tier III Contracts and Payments by Watershed, Fiscal Year 
2004: 

Watershed/lead NRCS state office: Auglaize, Ohio; 
Tier III contracts: 66; 
Total contracts: 189; 
Percentage of Contracts in Tier III: 35%; 
Tier III Contract Payments: $982,117; 
Total payments: $2,831,953; 
Percentage of total payments for Tier III contracts: 35%. 

Watershed/lead NRCS state office: Blue Earth Minnesota; 
Tier III contracts: 9; 
Total contracts: 280; 
Percentage of Contracts in Tier III: 3; 
Tier III Contract Payments: $183,424; 
Total payments: 3,242,507; 
Percentage of total payments for Tier III contracts: 6. 

Watershed/lead NRCS state office: East Nishnabotna; 
Iowa; 
Tier III contracts: 8; 
Total contracts: 145; 
Percentage of Contracts in Tier III: 6; 
Tier III Contract Payments: $86,356; 
Total payments: 1,129,248; 
Percentage of total payments for Tier III contracts: 8. 

Watershed/lead NRCS state office: Hondo; 
Texas; 
Tier III contracts: 8; 
Total contracts: 16; 
Percentage of Contracts in Tier III: 50; 
Tier III Contract Payments: $61,205; 
Total payments: 71,766; 
Percentage of total payments for Tier III contracts: 85. 

Watershed/lead NRCS state office: Kishwaukee; 
Illinois; 
Tier III contracts: 16; 
Total contracts: 191; 
Percentage of Contracts in Tier III: 8; 
Tier III Contract Payments: $304,386; 
Total payments: 4,828,559; 
Percentage of total payments for Tier III contracts: 6. 

Watershed/lead NRCS state office: Lemhi; 
Idaho; 
Tier III contracts: 10; 
Total contracts: 18; 
Percentage of Contracts in Tier III: 56; 
Tier III Contract Payments: $289,917; 
Total payments: 379,555; 
Percentage of total payments for Tier III contracts: 76. 

Watershed/lead NRCS state office: Little; 
Georgia; 
Tier III contracts: 0; 
Total contracts: 37; 
Percentage of Contracts in Tier III: 0; 
Tier III Contract Payments: $0; 
Total payments: 949,539; 
Percentage of total payments for Tier III contracts: 0. 

Watershed/lead NRCS state office: Little River Ditches; 
Missouri; 
Tier III contracts: 12; 
Total contracts: 189; 
Percentage of Contracts in Tier III: 6; 
Tier III Contract Payments: $311,548; 
Total payments: 4,424,805; 
Percentage of total payments for Tier III contracts: 7. 

Watershed/lead NRCS state office: Lower Chippewa; 
Wisconsin; 
Tier III contracts: 50; 
Total contracts: 207; 
Percentage of Contracts in Tier III: 24; 
Tier III Contract Payments: $836,637; 
Total payments: 2,056,147; 
Percentage of total payments for Tier III contracts: 41. 

Watershed/lead NRCS state office: Lower Little Blue; 
Kansas; 
Tier III contracts: 18; 
Total contracts: 143; 
Percentage of Contracts in Tier III: 13; 
Tier III Contract Payments: $342,893; 
Total payments: 1,204,849; 
Percentage of total payments for Tier III contracts: 28. 

Watershed/lead NRCS state office: Lower Salt Fork Arkansas; 
Oklahoma; 
Tier III contracts: 57; 
Total contracts: 176; 
Percentage of Contracts in Tier III: 32; 
Tier III Contract Payments: $552,618; 
Total payments: 1,305,590; 
Percentage of total payments for Tier III contracts: 42. 

Watershed/lead NRCS state office: Lower Yellowstone; 
Montana; 
Tier III contracts: 13; 
Total contracts: 49; 
Percentage of Contracts in Tier III: 27; 
Tier III Contract Payments: $327,821; 
Total payments: 874,217; 
Percentage of total payments for Tier III contracts: 37. 

Watershed/lead NRCS state office: Moses Coulee; 
Washington; 
Tier III contracts: 4; 
Total contracts: 43; 
Percentage of Contracts in Tier III: 9; 
Tier III Contract Payments: $92,563; 
Total payments: 826,985; 
Percentage of total payments for Tier III contracts: 11. 

Watershed/lead NRCS state office: Punta de Agua; 
New Mexico; 
Tier III contracts: 15; 
Total contracts: 19; 
Percentage of Contracts in Tier III: 79; 
Tier III Contract Payments: $584,594; 
Total payments: 626,491; 
Percentage of total payments for Tier III contracts: 93. 

Watershed/lead NRCS state office: Raystown; 
Pennsylvania; 
Tier III contracts: 14; 
Total contracts: 36; 
Percentage of Contracts in Tier III: 39; 
Tier III Contract Payments: $82,556; 
Total payments: 145,831; 
Percentage of total payments for Tier III contracts: 57. 

Watershed/lead NRCS state office: Saluda; 
South Carolina; 
Tier III contracts: 1; 
Total contracts: 76; 
Percentage of Contracts in Tier III: 1; 
Tier III Contract Payments: $272; 
Total payments: 138,619; 
Percentage of total payments for Tier III contracts: < 1. 

Watershed/lead NRCS state office: St. Joseph; 
Indiana; 
Tier III contracts: 125; 
Total contracts: 217; 
Percentage of Contracts in Tier III: 58; 
Tier III Contract Payments: $3,122,554; 
Total payments: 4,183,158; 
Percentage of total payments for Tier III contracts: 75. 

Watershed/lead NRCS state office: Umatilla; 
Oregon; 
Tier III contracts: 83; 
Total contracts: 149; 
Percentage of Contracts in Tier III: 56; 
Tier III Contract Payments: $3,860,988; 
Total payments: 5,237,575; 
Percentage of total payments for Tier III contracts: 74. 

Watershed/lead NRCS state office: Total; 
Tier III contracts: 509; 
Total contracts: 2,180; 
Percentage of Contracts in Tier III: 23%; 
Tier III Contract Payments: $12,022,446; 
Total payments: $34,457,394; 
Percentage of total payments for Tier III contracts: 35%. 

Source: GAO analysis of NRCS data (as of July 27, 2005).

[End of table] 

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[Footnote 49] 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.[Footnote 50] 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:[Footnote 51] 

* 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.[Footnote 52] A state 
office's criteria for this component must be met for each cropland 
field.[Footnote 53] 

* 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.[Footnote 54] 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.[Footnote 55] 

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.[Footnote 56] 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.[Footnote 57] 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,[Footnote 58] 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. 

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: 

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. 

Farm Bill Provisions Lessen the Potential for Duplication: 

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.[Footnote 59] 

In addition, other farm bill provisions reduce potential duplication by 
prohibiting certain payments from being made through CSP.[Footnote 60] 
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.[Footnote 61] 

* 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.[Footnote 62] 

NRCS Regulatory Measures and Procedures Further Distinguish CSP from 
Other Programs: 

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).[Footnote 63] 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,[Footnote 64] 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.[Footnote 65] 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.[Footnote 66] 
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.[Footnote 67] Thus, to 
compensate for this diminishing income, a producer would need to add 
new enhancements over the life of a contract. 

Potential for Duplication Still Exists and Duplicate Payments Have 
Occurred: 

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. 

Table 6: Conservation Payments Available through CSP, EQIP, and WHIP: 

Payment type: Stewardship payment to reward prior conservation actions; 
CSP: X; 
EQIP: [Empty]; 
WHIP: [Empty]. 

Payment type: Existing practices payment for the cost of maintaining 
previously implemented conservation practices; 
CSP: X; 
EQIP: [Empty]; 
WHIP: [Empty]. 

Payment type: Cost-share payment for the adoption of conservation 
practices that meet nondegradation standards; these conservation 
practices include land management practices (e.g., nutrient management 
to reduce water pollution); vegetative practices (e.g., planting native 
grasses to provide wildlife habitat); and structural practices (e.g., 
fencing to keep livestock out of streams); 
CSP: X; 
EQIP: X; 
WHIP: X. 

Payment type: Incentive payment for the adoption of land management 
conservation practices that meet nondegradation standards (e.g., crop 
residue management to reduce soil erosion); 
CSP: [Empty]; 
EQIP: ; X; 
WHIP: [Empty]. 

Payment type: Enhancement payment for conservation actions that exceed 
minimum eligibility standards (e.g., delaying haying and grazing 
pasture or grassland from April 15 to August 1 to improve habitat for 
ground-nesting birds that reproduce during this period)[A]; 
CSP: X; 
EQIP: [Empty]; 
WHIP: [Empty]. 

Sources: GAO analysis of CSP, EQIP, and WHIP provisions. 

[A] The farm bill states that these enhancement payments are for 
conservation practices that exceed the minimum requirements for the 
applicable tier of CSP participation. Under these minimum requirements, 
the level of conservation treatment must meet nondegradation standards 
for the applicable resource concerns. In implementing CSP, NRCS has 
made enhancement payments available for soil, nutrient, wildlife 
habitat, pest, energy, air, irrigation water, and grazing management, 
as well as locally identified conservation needs.

[End of table] 

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,[Footnote 68] 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.[Footnote 69] 

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.[Footnote 70] 

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.[Footnote 71] 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.[Footnote 72] 
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.[Footnote 73] 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.[Footnote 74] 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. 

Conclusions: 

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. 

Recommendations for Executive Action: 

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. 

Agency Comments and Our Evaluation: 

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 [Hyperlink,  
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. 

Sincerely yours, 

Signed by:

Robert A. Robinson: 
Managing Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

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);[Footnote 75] USDA appropriations acts for fiscal years 2004, 
2005, and 2006;[Footnote 76] and other legislation that capped CSP 
funding for the 11-year period, fiscal years 2003 through 
2013,[Footnote 77] and for the 10-year period, fiscal years 2005 
through 2014.[Footnote 78] 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.[Footnote 79] 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;[Footnote 80] 
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.[Footnote 81] 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.[Footnote 82] 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. 

Table 7: Priority Watersheds, Lead NRCS State Offices, and CSP 
Contracts Awarded in the Fiscal Year 2004 CSP Sign-up: 

Priority watershed: Auglaize; 
Lead NRCS state office: Ohio; 
CSP contracts awarded: 189. 

Priority watershed: Blue Earth; 
Lead NRCS state office: Minnesota; 
CSP contracts awarded: 280. 

Priority watershed: East Nishnabotna; 
Lead NRCS state office: Iowa; 
CSP contracts awarded: 145. 

Priority watershed: Hondo; 
Lead NRCS state office: Texas; 
CSP contracts awarded: 16. 

Priority watershed: Kishwaukee; 
Lead NRCS state office: Illinois; 
CSP contracts awarded: 191. 

Priority watershed: Lemhi; 
Lead NRCS state office: Idaho; 
CSP contracts awarded: 18. 

Priority watershed: Little; 
Lead NRCS state office: Georgia; 
CSP contracts awarded: 37. 

Priority watershed: Little River Ditches; 
Lead NRCS state office: Missouri; 
CSP contracts awarded: 189. 

Priority watershed: Lower Chippewa; 
Lead NRCS state office: Wisconsin; 
CSP contracts awarded: 207. 

Priority watershed: Lower Little Blue; 
Lead NRCS state office: Kansas; 
CSP contracts awarded: 143. 

Priority watershed: Lower Salt Fork Arkansas; 
Lead NRCS state office: Oklahoma; 
CSP contracts awarded: 176. 

Priority watershed: Lower Yellowstone; 
Lead NRCS state office: Montana; 
CSP contracts awarded: 49. 

Priority watershed: Moses Coulee; 
Lead NRCS state office: Washington; 
CSP contracts awarded: 43. 

Priority watershed: Punta de Agua; 
Lead NRCS state office: New Mexico; 
CSP contracts awarded: 19. 

Priority watershed: Raystown; 
Lead NRCS state office: Pennsylvania; 
CSP contracts awarded: 36. 

Priority watershed: Saluda; 
Lead NRCS state office: South Carolina; 
CSP contracts awarded: 76. 

Priority watershed: St. Joseph; 
Lead NRCS state office: Indiana; 
CSP contracts awarded: 217. 

Priority watershed: Umatilla; 
Lead NRCS state office: Oregon; 
CSP contracts awarded: 149. 

Priority watershed: Total; 
Lead NRCS state office: Dash; 
CSP contracts awarded: 2,180. 

Source: GAO analysis of NRCS data (as of July 27, 2005)

[End of table] 

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.[Footnote 83] 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. 

[End of section] 

Appendix II: CSP Payments Information for Fiscal Years 2004 and 2005: 

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.[Footnote 84] 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. 

Table 8: Total CSP Payments and Contracts by Tier, Fiscal Year 2004: 

Tier: I; 
Payments: $5,696,212; 
Percentage of total payments: 17%; 
Contracts: 785; 
Percentage of total number of contracts: 36%; 
Average payment: $7,256. 

Tier: II; 
Payments: 16,738,736; 
Percentage of total payments: 49; 
Contracts: 886; 
Percentage of total number of contracts: 41; 
Average payment: 18,892. 

Tier: III; 
Payments: 11,022,446; 
Percentage of total payments: 35; 
Contracts: 509; 
Percentage of total number of contracts: 23; 
Average payment: 23,620. 

Tier: Total; 
Payments: $34,457,394[A]; 
Percentage of total payments: 100%; 
Contracts: 2,180; 
Percentage of total number of contracts: 100%; 
Average payment: $15,806. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

Note: The percentages may not total 100 due to rounding.

[A] Our analysis of NRCS ProTracts data indicates that total CSP 
payments in fiscal year 2004 were $34,457,394 (or $34.5 million), as 
reflected in the table. However, according to an NRCS official, more 
recent data in USDA's Foundation Financial Information System indicates 
that these total payments were $34,556,220 (or $34.6 million). 

[End of table] 

Table 9: Total CSP Payments by Payment Type, Fiscal Year 2004: 

Payment type: Stewardship; 
Payments: $5,401,915; 
Percentage of total payments: 16%. 

Payment type: Existing practice; 
Payments: 1,355,826; 
Percentage of total payments: 4. 

Payment type: New practice; 
Payments: 5,148; 
Percentage of total payments: <1. 

Payment type: Enhancement; 
Payments: 14,082,782; 
Percentage of total payments: 41. 

Payment type: Advance enhancement payment[A]; 
Payments: 13,611,724; 
Percentage of total payments: 40. 

Payment type: Total; 
Payments: $34,457,394; 
Percentage of total payments: 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

Note: The percentages do not total 100 due to rounding. 

[A] Fiscal year 2004 payments included advance enhancement payments. 
These payments were to be limited to $10,000 per contract. For a 
producer who received an advance enhancement payment, NRCS will make 
deductions from subsequent payments over the remaining years of the 
producer's contract such that the total advance payment would be 
offset. For example, for a producer whose contract has 9 remaining 
years, NRCS would deduct one- ninth of the advance enhancement payment 
in each of these years. 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. 

[End of table] 

Table 10: Total CSP Enhancement Payments by Enhancement Type, Fiscal 
Year 2004: 

Enhancement type: Air resource management; 
Payments: $216,545; 
Percentage of total: enhancement payments: 2%. 

Enhancement type: Energy management; 
Payments: 712,384; 
Percentage of total: enhancement payments: 5. 

Enhancement type: Grazing management; 
Payments: 344,716; 
Percentage of total: enhancement payments: 2. 

Enhancement type: Habitat management; 
Payments: 953,736; 
Percentage of total: enhancement payments: 7. 

Enhancement type: Nutrient management; 
Payments: 3,506,663; 
Percentage of total: enhancement payments: 25. 

Enhancement type: Pest management; 
Payments: 3,680,118; 
Percentage of total: enhancement payments: 26. 

Enhancement type: Soil management; 
Payments: 4,349,110; 
Percentage of total: enhancement payments: 31. 

Enhancement type: Water management; 
Payments: 319,508; 
Percentage of total: enhancement payments: 2. 

Enhancement type: Total; 
Payments: $14,082,782; 
Percentage of total: enhancement payments: 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

Note: The information in this table excludes advance enhancement 
payments made in fiscal year 2004. 

[End of table] 

Table 11: Distribution of All CSP Contracts by Payment Range (Excluding 
and Including Advance Enhancement Payments in Contract Amounts), Fiscal 
Year 2004: 

Payment: $1-$5,000; 
Number of contracts (amounts exclude advance enhancement payments): 
1,043; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 48%; 
Number of contracts (amounts include advance enhancement payments): 
763; 
Percentage of all contracts (amounts include advance enhancement 
payments): 35%. 

Payment: $5,001-$10,000; 
Number of contracts (amounts exclude advance enhancement payments): 
394; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 18; 
Number of contracts (amounts include advance enhancement payments): 
375; 
Percentage of all contracts (amounts include advance enhancement 
payments): 17. 

Payment: $10,001-$15,000; 
Number of contracts (amounts exclude advance enhancement payments): 
232; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 11; 
Number of contracts (amounts include advance enhancement payments): 
233; 
Percentage of all contracts (amounts include advance enhancement 
payments): 11. 

Payment: $15,001-$20,000; 
Number of contracts (amounts exclude advance enhancement payments): 
138; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 6; 
Number of contracts (amounts include advance enhancement payments): 
136; 
Percentage of all contracts (amounts include advance enhancement 
payments): 6. 

Payment: $20,001-$25,000; 
Number of contracts (amounts exclude advance enhancement payments): 
143; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 7; 
Number of contracts (amounts include advance enhancement payments): 
173; 
Percentage of all contracts (amounts include advance enhancement 
payments): 8. 

Payment: $25,001-$30,000; 
Number of contracts (amounts exclude advance enhancement payments): 
104; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 5; 
Number of contracts (amounts include advance enhancement payments): 75; 
Percentage of all contracts (amounts include advance enhancement 
payments): 3. 

Payment: $30,001-$35,000; 
Number of contracts (amounts exclude advance enhancement payments): 40; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 2; 
Number of contracts (amounts include advance enhancement payments): 78; 
Percentage of all contracts (amounts include advance enhancement 
payments): 4. 

Payment: $35,001-$40,000; 
Number of contracts (amounts exclude advance enhancement payments): 86; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 4; 
Number of contracts (amounts include advance enhancement payments): 56; 
Percentage of all contracts (amounts include advance enhancement 
payments): 3. 

Payment: $40,001-$45,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 
140; 
Percentage of all contracts (amounts include advance enhancement 
payments): 6. 

Payment: $45,001-$50,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 58; 
Percentage of all contracts (amounts include advance enhancement 
payments): 3. 

Payment: $50,001-$55,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 4; 
Percentage of all contracts (amounts include advance enhancement 
payments): <1. 

Payment: $55,001-$60,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 23; 
Percentage of all contracts (amounts include advance enhancement 
payments): 1. 

Payment: $60,001-$65,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 66; 
Percentage of all contracts (amounts include advance enhancement 
payments): 3. 

Payment: Total; 
Number of contracts (amounts exclude advance enhancement payments): 
2,180; 
Percentage of all contracts (amounts exclude advance enhancement 
payments): 100%; 
Number of contracts (amounts include advance enhancement payments): 
2,180; 
Percentage of all contracts (amounts include advance enhancement 
payments): 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

Note: The percentages may not total 100 due to rounding. 

[End of table] 

Table 12: Distribution of Tier I CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Payment: $1-$5,000; 
Number of contracts (amounts exclude advance enhancement payments): 
546; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): 70%; 
Number of contracts (amounts include advance enhancement payments): 
428; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 55%. 

Payment: $5,001-$10,000; 
Number of contracts (amounts exclude advance enhancement payments): 
133; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): 17; 
Number of contracts (amounts include advance enhancement payments): 
141; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 18. 

Payment: $10,001-$15,000; 
Number of contracts (amounts exclude advance enhancement payments): 
104; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): 13; 
Number of contracts (amounts include advance enhancement payments): 78; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 10. 

Payment: $15,001-$20,000; 
Number of contracts (amounts exclude advance enhancement payments): 1; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): <1; 
Number of contracts (amounts include advance enhancement payments): 43; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 5. 

Payment: $20,001-$25,000; 
Number of contracts (amounts exclude advance enhancement payments): 
1[A]; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): <1; 
Number of contracts (amounts include advance enhancement payments): 94; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 12. 

Payment: $25,001-$30,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 1; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): <1. 

Payment: Total; 
Number of contracts (amounts exclude advance enhancement payments): 
785; 
Percentage of Tier I contracts (amounts exclude advance enhancement 
payments): 100%; 
Number of contracts (amounts include advance enhancement payments): 
785; 
Percentage of Tier I contracts (amounts include advance enhancement 
payments): 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

[A] This contract payment was $21,427, which exceeds the statutory 
payment limit of $20,000 for a Tier I contract.

[End of table] 

Table 13: Distribution of Tier II CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Payment: $1-$5,000; 
Number of contracts (amounts exclude advance enhancement payments): 
337; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 38%; 
Number of contracts (amounts include advance enhancement payments): 
220; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 25%. 

Payment: $5,001-$10,000; 
Number of contracts (amounts exclude advance enhancement payments): 
160; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 18; 
Number of contracts (amounts include advance enhancement payments): 
159; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 18. 

Payment: $10,001-$15,000; 
Number of contracts (amounts exclude advance enhancement payments): 81; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 9; 
Number of contracts (amounts include advance enhancement payments): 97; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 11. 

Payment: $15,001-$20,000; 
Number of contracts (amounts exclude advance enhancement payments): 90; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 10; 
Number of contracts (amounts include advance enhancement payments): 57; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 6. 

Payment: $20,001-$25,000; 
Number of contracts (amounts exclude advance enhancement payments): 
113; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 13; 
Number of contracts (amounts include advance enhancement payments): 45; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 5. 

Payment: $25,001-$30,000; 
Number of contracts (amounts exclude advance enhancement payments): 83; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 9; 
Number of contracts (amounts include advance enhancement payments): 42; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 5. 

Payment: $30,001-$35,000; 
Number of contracts (amounts exclude advance enhancement payments): 22; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 2; 
Number of contracts (amounts include advance enhancement payments): 57; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 6. 

Payment: $35,001-$40,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 35; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 4. 

Payment: $40,001-$45,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 0; Number of contracts (amounts include advance enhancement 
payments): 128; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 14. 

Payment: $45,001-$50,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 46; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 5. 

Payment: Total; 
Number of contracts (amounts exclude advance enhancement payments): 
886; 
Percentage of Tier II contracts (amounts exclude advance enhancement 
payments): 100%; 
Number of contracts (amounts include advance enhancement payments): 
886; 
Percentage of Tier II contracts (amounts include advance enhancement 
payments): 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005). 

Note: The percentages do not total 100 due to rounding.

[End of table] 

Table 14: Distribution of Tier III CSP Contracts by Payment Range 
(Excluding and Including Advance Enhancement Payments in Contract 
Amounts), Fiscal Year 2004: 

Payment: $1-$5,000; 
Number of contracts (amounts exclude advance enhancement payments): 
160; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 31%; 
Number of contracts (amounts include advance enhancement payments): 
115; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 23%. 

Payment: $5,001-$10,000; 
Number of contracts (amounts exclude advance enhancement payments): 
101; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 20; 
Number of contracts (amounts include advance enhancement payments): 75; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 15. 

Payment: $10,001-$15,000; 
Number of contracts (amounts exclude advance enhancement payments): 47; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 9; 
Number of contracts (amounts include advance enhancement payments): 58; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 11. 

Payment: $15,001-$20,000; 
Number of contracts (amounts exclude advance enhancement payments): 47; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 9; 
Number of contracts (amounts include advance enhancement payments): 36; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 7. 

Payment: $20,001-$25,000; 
Number of contracts (amounts exclude advance enhancement payments): 29; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 6; 
Number of contracts (amounts include advance enhancement payments): 34; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 7. 

Payment: $25,001-$30,000; 
Number of contracts (amounts exclude advance enhancement payments): 21; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 4; 
Number of contracts (amounts include advance enhancement payments): 32; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 6. 

Payment: $30,001-$35,000; 
Number of contracts (amounts exclude advance enhancement payments): 18; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 4; 
Number of contracts (amounts include advance enhancement payments): 21; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 4. 

Payment: $35,001-$40,000; 
Number of contracts (amounts exclude advance enhancement payments): 86; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 17; 
Number of contracts (amounts include advance enhancement payments): 21; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 4. 

Payment: $40,001-$45,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 12; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 2. 

Payment: $45,001-$50,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 12; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 2. 

Payment: $50,001-$55,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 4; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 1. 

Payment: $55,001-$60,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 23; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 5. 

Payment: $60,001-$65,000; 
Number of contracts (amounts exclude advance enhancement payments): 0; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 0; 
Number of contracts (amounts include advance enhancement payments): 66; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 13. 

Payment: Total; 
Number of contracts (amounts exclude advance enhancement payments): 
509; 
Percentage of Tier III contracts (amounts exclude advance enhancement 
payments): 100%; 
Number of contracts (amounts include advance enhancement payments): 
509; 
Percentage of Tier III contracts (amounts include advance enhancement 
payments): 100%. 

Source: GAO analysis of NRCS ProTracts data (as of July 27, 2005).

[End of table] 

Table 15: Total CSP Payments and Contracts by Tier, Fiscal Year 2005: 

Tier: I; 
Payments: $49,407,374; 
Percentage of total payments: 28%; 
Contracts: 7,294; 
Percentage of total number of contracts: 49%; 
Average payment: $6,774. 

Tier: II; 
Payments: 67,268,160; 
Percentage of total payments: 38; 
Contracts: 4,530; 
Percentage of total number of contracts: 30; 
Average payment: 14,849. 

Tier: III; 
Payments: 60,708,854; 
Percentage of total payments: 34; 
Contracts: 3,059; 
Percentage of total number of contracts: 21; 
Average payment: 19,846. 

Tier: Total; 
Payments: $177,384,387[A]; 
Percentage of total payments: 100%; 
Contracts: 14,883; 
Percentage of total number of contracts: 100%; 
Average payment: $11,919. 

Source: GAO analysis of NRCS ProTracts data (as of October 1, 2005). 

Note: The information in this table is based on contracts approved for 
fiscal years 2004 and 2005. Specifically, the information includes the 
payments made in the second year of the fiscal year 2004 contracts and 
the first year of the fiscal year 2005 contracts. 

[A] Our analysis of NRCS ProTracts data indicates that total CSP 
payments in fiscal year 2005 were $177,384,387 (or $177.4 million), as 
reflected in the table. However, according to an NRCS official, more 
recent data in USDA's Foundation Financial Information System indicates 
that these total payments were $171,388,723 (or $171.4 million). 

[End of table] 

Table 16: Total CSP Payments by Payment Type, Fiscal Year 2005: 

Payment type: Stewardship; 
Payments: $27,428,071; 
Percentage of total payments: 15%. 

Payment type: Existing practice; 
Payments: 6,864,218; 
Percentage of total payments: 4. 

Payment type: New practice; 
Payments: 119,777; 
Percentage of total payments: <1. 

Payment type: Enhancement; 
Payments: 142,972,322; 
Percentage of total payments: 81. 

Payment type: Total; 
Payments: $177,384,387; 
Percentage of total payments: 100%. 

Source: GAO analysis of NRCS ProTracts data (as of October 1, 2005). 

Notes: (1) The information in this table is based on contracts approved 
in fiscal years 2004 and 2005. Specifically, the information includes 
the payments made in the second year of the fiscal year 2004 contracts 
and the first year of the fiscal year 2005 contracts. (2) NRCS did not 
make any advance enhancement payments in fiscal year 2005. (3) The 
percentages do not total 100 due to rounding. 

[End of table] 

Table 17: Total CSP Enhancement Payments by Enhancement Type, Fiscal 
Year 2005: 

Enhancement Type: Air resource management; 
Payments: $4,767,408; 
Percentage of total: enhancement payments: 3%. 

Enhancement Type: Drainage management; 
Payments: 965,890; 
Percentage of total: enhancement payments: 1. 

Enhancement Type: Energy management; 
Payments: 6,259,355; 
Percentage of total: enhancement payments: 4. 

Enhancement Type: Grazing management; 
Payments: 4,552,552; 
Percentage of total: enhancement payments: 3. 

Enhancement Type: Habitat management; 
Payments: 11,186,833; 
Percentage of total: enhancement payments: 8. 

Enhancement Type: Nutrient management; 
Payments: 27,239,832; 
Percentage of total: enhancement payments: 19. 

Enhancement Type: Pest management; 
Payments: 32,400,211; 
Percentage of total: enhancement payments: 23. 

Enhancement Type: Salinity management; 
Payments: 2,067; 
Percentage of total: enhancement payments: <1. 

Enhancement Type: Soil management; 
Payments: 50,025,411; 
Percentage of total: enhancement payments: 35. 

Enhancement Type: Water management; 
Payments: 5,572,763; 
Percentage of total: enhancement payments: 4. 

Total; 
Payments: $142,972,322; 
Percentage of total: enhancement payments: 100%. 

Source: GAO analysis of NRCS ProTracts data (as of October 1, 2005). 

Notes: (1) The information in this table is based on contracts approved 
in fiscal years 2004 and 2005. Specifically, the information includes 
the payments made in the second year of the fiscal year 2004 contracts 
and the first year of the fiscal year 2005 contracts. (2) The 
percentages do not total 100 due to rounding.

[End of table] 

Table 18: Distribution of CSP Contracts by Payment Range, Fiscal Year 
2005: 

Payment: $1-$5,000; 
Number of contracts: 5,423; 
Percentage of total contracts: 36%. 

Payment: $5,001-$10,000; 
Number of contracts: 2,738; 
Percentage of total contracts: 18. 

Payment: $10,001-$15,000; 
Number of contracts: 2,504; 
Percentage of total contracts: 17. 

Payment: $15,001-$20,000; 
Number of contracts: 1,162; 
Percentage of total contracts: 8. 

Payment: $20,001-$25,000; 
Number of contracts: 724; 
Percentage of total contracts: 5. 

Payment: $25,001-$30,000; 
Number of contracts: 998; 
Percentage of total contracts: 7. 

Payment: $30,001-$35,000; 
Number of contracts: 630; 
Percentage of total contracts: 4. 

Payment: $35,001-$40,000; 
Number of contracts: 284; 
Percentage of total contracts: 2. 

Payment: $40,001-$45,000; 
Number of contracts: 420[A]; 
Percentage of total contracts: 3. 

Payment: Total; 
Number of contracts: 14,883; 
Percentage of total contracts: 100%. 

Source: GAO analysis of NRCS ProTracts data (as of October 1, 2005). 

Note: The information in this table is based on contracts approved in 
fiscal years 2004 and 2005. Specifically, the information includes the 
payments made in the second year of the fiscal year 2004 contracts and 
the first year of the fiscal year 2005 contracts. 

[A] This total includes one contract payment that exceeded $45,000 
($45,228). 

[End of table] 

Table 19: Acres Enrolled in CSP by Land Type, Fiscal Years 2004 and 
2005: 

Fiscal year: 2004; 
Cropland: 1,083,055; 
Irrigated cropland: 189,682; 
Pasture: 30,443; 
Range: 577,004; 
Other: 8,227; 
Total: 1,888,411. 

Fiscal year: 2005; 
Cropland: 4,805,342; 
Irrigated cropland: 1,483,755; 
Pasture: 107,257; 
Range: 2,639,641; 
Other: 0; 
Total: 9,035,995. 

Fiscal year: Total; 
Cropland: 5,888,397; 
Irrigated cropland: 1,673,437; 
Pasture: 137,700; 
Range: 3,216,645; 
Other: 8,227; 
Total: 10,924,406. 

Source: NRCS. 

[End of table] 

[End of section] 

Appendix III: CSP Application and Enrollment Process Flowchart: 

[See PDF for image

[End of figure]

[End of section] 

Appendix IV: Other Key USDA Conservation Programs: 

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. 

Table 20: Description of Other Key USDA Conservation Programs: 

Dollars in millions. 

Conservation Reserve Program; 
Description: Provides annual rental payments and cost-share and 
technical assistance to establish permanent vegetative land cover in 
exchange for taking environmentally sensitive cropland out of 
production for 10 to 15 years. Most program lands are enrolled through 
the use of contracts and competitive bidding during designated sign-
ups. Some economic uses of enrolled land are allowed with a reduction 
of annual rental payments, such as the installation of wind turbines 
and managed haying and grazing. Up to 39.2 million acres may be 
enrolled at any one time; 
Total authorization, fiscal years 2002 through 2007: $11,118. 

Environmental Quality Incentives Program; 
Description: Offers incentive and cost-share payments and technical 
assistance through 1-to 10-year contracts to implement structural and 
land management practices or to develop a comprehensive nutrient 
management plan. At least 60 percent of annual funds made available for 
cost-share and incentive payments are required to be targeted at 
practices relating to livestock production; 
Total authorization, fiscal years 2002 through 2007: $5,800. 

Wetlands Reserve Program; 
Description: Targets restoration of prior- converted and farmed 
wetlands to a wetland condition; 
Acreage can be enrolled in the program through the use of permanent 
easements, 30-year easements, and restoration cost-share agreements. 
Program lands may be used for compatible economic uses such as hunting, 
fishing, or limited timber harvests. Up to 2.275 million acres may be 
enrolled; 
Total authorization, fiscal years 2002 through 2007: $1,506. 

Farmland Protection Program; 
Description: Purchases easements or other interests in eligible land 
(up to 50 percent of fair market value) for the purpose of protecting 
topsoil by limiting nonagricultural uses of the land. Eligible land 
means land on a farm or ranch that is subject to a pending offer for 
purchase from an eligible entity and that has prime, unique, or other 
productive soil or that contains historical or archeological resources. 
Eligible land includes cropland, rangeland, grassland, pastureland, and 
forestland that is an incidental part of the agricultural operation; 
Total authorization, fiscal years 2002 through 2007: $597. 

Wildlife Habitat Incentives Program; 
Description: Offers cost-share payments through 5-to 10-year agreements 
to develop and protect and restore wildlife habitat. Allows up to 15 
percent of funds each year to be used for increased cost-share 
assistance to producers who enter into 15-year agreements; 
Total authorization, fiscal years 2002 through 2007: $360. 

Grassland Reserve Program; 
Description: Offers permanent and 30-year easements[A] and 10-to 30-
year rental agreements to grassland owners to assist owners in 
restoring and conserving eligible land. Up to 2 million acres may be 
enrolled; 
Total authorization, fiscal years 2002 through 2007: $$254. 

Sources: GAO analysis of USDA and CBO information and the 2002 farm 
bill. 

[A] In states that impose a maximum duration for easements, the 
Secretary can use an easement for the maximum duration allowed under 
state law.

[End of table] 

[End of section] 

Appendix V: Explanation of Budget Scoring: 

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.[Footnote 85] 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.[Footnote 86] 

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. 

[End of section] 

Appendix VI: Time Line of Legislative Actions and CBO and OMB 10-Year 
Estimates of CSP Costs: 

[See PDF for image]

[A] Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-
171, 116 Stat. 134 (2002). 

[B] Agricultural Assistance Act of 2003, Pub. L. No. 108-7, tit. II, § 
216, Stat. 538, 546 (2003). 

[C] Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2004, § 752, and Miscellaneous 
Appropriations and Offsets Act, 2004, § 101, enacted by the 
Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, 118 Stat. 3 
(2004). The exact amounts of these caps were $41.443 million and $3.773 
billion, respectively. 

[D] Emergency Supplemental Appropriations for Hurricane Disasters 
Assistance Act, 2005, § 101(e), enacted by the Military Construction 
Appropriations and Emergency Hurricane Supplemental Appropriations Act, 
2005, Pub. L. No. 108-324, 118 Stat. 1220 (2004). The exact amount of 
this cap was $6.037 billion. The Deficit Reduction Act of 2005, Pub. L. 
No. 109-171, § 1202, (2006), repealed this cap. 

[E] Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2005, § 749, enacted by the 
Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat. 
2809 (Dec. 8, 2004). This law limited the amount of funds available to 
pay the salaries and expenses of personnel to carry out CSP to $202.411 
million. NRCS officials said that this amount was the total amount of 
funding available to CSP for fiscal year 2005. 

[F] Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2006, Pub. L. No. 109-97, tit.VII, 
§ 741, 119 Stat. 2120, 2155 (Nov. 10, 2005). 

[G] Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 1202 (2006). 
The exact amount of these caps were $1.954 billion for fiscal years 
2006 through 2010 and $5.650 billion for fiscal years 2006 through 
2015. 

[H] Estimate based on CSP as proposed in S. 1731, 107th Cong. (2001). 

[I] Estimate based on CSP as in the farm bill conference report, H.R. 
Conf. Rep. No. 107-424 (2002), just prior to the farm bill being 
enacted into law. 

[End of figure] 

[End of section] 

Appendix VII: Description of USDA and NRCS Internal Controls and the 
Results of Reviews of These Controls: 

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.[Footnote 87] 
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.[Footnote 88] 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.[Footnote 89] 
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.[Footnote 90] 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.[Footnote 91] 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.[Footnote 92] 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.[Footnote 93] 

[End of section] 

Appendix VIII: Comments from the U.S. Department of Agriculture: 

United States Department of Agriculture: 
Natural Resources Conservation Service: 
P.O. Box 2890: 
Washington, D.C. 20013: 

April 10, 2006: 

SUBJECT: Response to Draft GAO-06-312, "Conservation Security Program, 
Despite Cost Controls, Improved USDA Management is Needed to Ensure 
Proper Payments and Reduce Duplication with Other Programs" 

TO: Robert A. Robinson Managing Director Natural Resources and 
Environment: 

Thank you for giving the Natural Resources Conservation Service (MRCS) 
the opportunity to provide a response to the draft report: 
"Conservation Security Program, Despite Cost Controls, Improved USDA 
Management is Needed to Ensure Proper Payments and Reduce Duplication 
with Other Programs." This report provides valuable information that 
will help NRCS to improve implementation of the Conservation Security 
Program: 

Attached is our response which includes technical corrections and 
responses to findings, referencing sections of the report as identified 
by a page reference and the report text. It is understood that these 
comments will be in the final report from the Government Accountability 
Office (GAO). The Appendices are provided as additional information for 
GAO, and do not have to be included in the report. 

If you have any questions, please contact Dan Runnels, Director, 
Operations Management and Oversight Division, at (202) 720-9135. 

Signed by:

Bruce I. Knight: 
Chief: 

Attachment: 

USDA Responses to GAO-06-312 Draft Report: 

Technical Corrections: 

For all tables and charts where data source is acknowledged as NRCS, 
include the date of the data source. Program implementation is dynamic, 
participant contracts are modified and terminated, and quantities 
change. Therefore, all data represents a snapshot on the date of the 
data download. 

Page 35 O&E reference: The subject report starting at the paragraph, 
"Regarding case file documentation, O&E Staff found that documentation 
used to support decisions on an applicant's eligibility and payment 
level were not evident in 90 percent - 104 of 116 - case files 
reviewed. For example, most case files - 85 percent - did not include a 
copy of the conservation stewardship plan, although the staff found 
that the plans were done in every case. According to the staff, the 
lack of documentation in the file outlining the basis for making tier 
and category decisions places NRCS at risk when dealing with possible 
contract violations and appeals. This would require an extensive 
expenditure of staff time to recreate the events and data that lead to 
`these decisions." 

NRCS Comment: These statements do not accurately portray what is 
currently in the O&E CSP report or the information shared with Jim 
Jones (see below) on February 23, 2006, nor in an e-mail to Jim Jones 
on February 17, 2006 (also below). What GAO has in this section is from 
a previous draft. 

(Contents of Email to Jim Jones on February 23, 2006): 

In addition to the hard copy case file information, the review team 
went back and looked at the entire 116 case file data contained in our 
national conservation planning database. 

This latest draft report indicates that Conservation Stewardship Plans 
were found, but components were in a combination of places including 
hard copy case files, conservation system guides, the CCC-1200, Toolkit 
and ProTracts, and some had missing components. Some components such as 
plan maps and plan map attribute information were in almost all plans. 
Other information such as information to enable evaluation of the 
effectiveness of the plan in achieving its environmental objectives 
were either missing or incomplete in up to 60 percent of the 
stewardship plans. The draft finding recommendations on this issue asks 
for revised contract folder assembly guidance and a form to be 
developed. This form will allow field office personnel to use as a 
check off to make sure that they all have needed conservation 
stewardship plan components the location of those components, and to 
state quality assurance reviews examine case files for complete 
conservation stewardship plans. 

The list of Conservation Stewardship Plan components can be found in 
the Conservation Programs Manual Part 518.70(d). They include: 

1. To the extent practicable, a quantitative and qualitative 
description of the conservation and environmental benefits that the 
conservation stewardship contract will achieve; 
a plan map showing the acreage to be enrolled in CSP; 
the conservation stewardship plan map includes the name of selected 
watershed, conservation district, county, and State; 
land use designations: client-specific land use designations can be 
used on the plan map as desired. The CSP related land use as defined in 
CPM 518.42a. 

2. A verified benchmark condition inventory as described in CPM 
518.61c, --a description of the significant resource concerns and other 
resource concerns to be addressed in the contract through the adoption 
of new conservation measures. 

3. A description and implementation schedule for: individual 
conservation practices and measures to be maintained during the 
contract, consistent with the requirements for the tier(s) of 
participation and the relevant resource concerns and with the 
requirements of the sign-up; individual conservation practices and 
measures to be installed during the contract, consistent with the 
requirements for the tier(s) of participation and the relevant resource 
concerns; eligible enhancement activities as selected by the applicant 
and approved by NRCS; and a schedule for transitioning to higher 
tier(s) of participation, if applicable. 

4. A description of the conservation activities that is required for a 
participant to transition to a higher tier of participation. 

5. Information that will enable evaluation of the effectiveness of the 
plan in achieving its environmental objectives. 

6. Other information determined appropriate by NRCS and described to 
the applicant. 

(Contents of E-mail to Jim Jones February 17, 2006): 

As discussed earlier in our comments, we have completed an analysis of 
the other electronic data files (Conservation Toolkit - by policy the 
means for developing a stewardship plan and Protracts which holds the 
electronic contract documentation) to determine if stewardship plans 
were completed for the reviewed contracts. The previous review as we 
discussed earlier we felt was incomplete, because the analysis the team 
had completed was based upon hard copies in the files only. 

The revised DRAFT O&E report now reflects a finding as follows 
regarding the stewardship plans: 

Conservation Security Program electronic or hard copy participant case 
file documentation is not always complete in meeting requirements for 
conservation stewardship plans. This is caused by unclear guidance in 
the Conservation Programs Manual for the development of Conservation 
Stewardship Plans and the lack of State Quality Assurance Reviews 
examining Conservation Stewardship Plan case files for all components 
listed in the Conservation Programs Manual 518.70(d). 

The stewardship plans were present in either hard copy or electronic 
files, but we found missing components. The draft report contains 
recommendations for actions on policy clarification, training, and 
quality assurance reviews of plans similar to the sentence you 
suggested that you were going to add to your report. Since we have not 
reviewed this report with leadership, and reached agreement on the 
findings and recommendations, we view the report not completed as 
stated earlier. We would ask that you still recognize that in your 
report. 

Responses to Findings and Recommendations: 

Page 11 second sentence Issue: Quality assurance and case file 
documentation: 

The GAO report indicates that an internal NRCS audit had determined a 
weakness in NRCS quality assurance procedures and case file 
documentation requirements; 
because the auditors found that many of the 2004 contracts studied had 
not had an annual contract review, according to documentation that was 
available in the case file. 

NRCS Response: The 2004 sign up and contracting activities were 
completed very late in fiscal year (FY) 2004, and concluded in 
September of 2004, just before the end of the fiscal year. In August 
2005, NRCS issued a revised Conservation Program Manual with updated 
instructions on conducting contract reviews. The current NRCS policy 
provides that the Designated Conservationist will review contract 
implementation annually for all long-term contracts. 

512.55 Contract Reviews - provides the following: (b) Annual Reviews 
Required: 

The Designated Conservationist (DC) will review contract implementation 
annually. 

* If all practices are applied as scheduled and other contract 
provisions are being followed, this finding will be documented in the 
contract folder. 

* If the provisions of the contract are not being followed, the NRCS 
representatives will document those findings on form NRCS-CPA-13. The 
contract review will be signed by the NRCS representative. When the 
NRCS representative is a person other than: 

the Designated Conservationist (DC), both the reviewing representative 
and DC will sign form NRCS-CPA-13. A copy will be provided to the 
participant, and the original will be placed in the contract folder. 

* The DC will work with the participant(s) to resolve all issues and 
document all actions that need to be taken to complete the contract, 
including establishing a timeframe for the participant to comply with 
the contract provisions. The document will be signed by the DC and the 
participant. (Form NRCS-LTP-153 may be used.) 

If the DC finds that all practices are applied as scheduled and other 
contract provisions are being followed, this finding is to be 
documented in the contract folder. If everything in the contract is on 
schedule, there are no forms to fill out and no field verification 
visits necessary. NRCS plans to emphasize the need for the DC to 
complete the case file documentation that the annual contract review 
was completed, and then proceed to make the annual payment. 

For CSP, the newly developed contracts that were reviewed by the 
oversight and evaluation team were in fact being applied as scheduled 
and had received their annual payment. The fact that the auditors 
determined there was not adequate documentation in the case file, was 
due to the recent change in the Conservation Program Manual where the 
previously used form CPA-13 was not completed. In the past, the CPA-13 
form was completed for each review and filed with the contract. Since 
the new CSP contracts were on schedule and being carried out as 
expected, there was no need to fill out the contract review form, but 
notes about the review should have been entered in the case file notes. 
NRCS will provide additional training to State offices and field 
offices about the need to provide documentation in the case file notes 
about the annual contract review. NRCS plans to release a National 
Bulletin to all State and field offices in FY 2006 to address this 
issue. 

Pages 12, 42, and 57 - Wildlife habitat assessment criteria: 

The report states, "as of February 2006, NRCS had not reviewed or field 
tested each State office's criteria and did not have plans to do so." 

NRCS Response: NRCS wildlife biologists did collect the wildlife 
habitat models that were used in all States in 2005. Although NRCS did 
not conduct a thorough review and field test of the State models, a 
quick cursory review found that most States had developed the wildlife 
models as instructed in the national guidance. However, a couple of 
States still need to make additional changes to more fully adhere to 
the national guidance for 2006. 

At the CSP national training in October and November 2005, specific 
instruction was provided to all States to follow the national criteria 
for developing their State wildlife habitat assessment tools. In 
addition, the national program office also conducted an Internet-based 
net-conference with all States to review the required criteria for 
development of the assessment tools and emphasized the need for 
adherence to the established criteria. NRCS has issued a National 
Bulletin to all offices during the 2006 sign-up to reemphasize the 
criteria that States must use in developing their wildlife habitat 
assessment models. This national directive was issued to all States as 
National Bulletin 300-6-37, on March 21, 2006. The directives stated 
purpose was to issue CSP guidance to the State and Field level 
employees for the FY 2006 sign-up on Wildlife Habitat Assessment 
Criteria. 

The specific instructions provided to States for 2006 are attached in 
Appendix A. 

Page 29 - Section Heading: The GAO report states, "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." 

NRCS Comment: NRCS has strived to continually improve CSP program 
delivery by field personnel and uphold sufficient internal controls and 
State-to-State consistency. In 2004 and 2005, NRCS conducted special de-
briefing meetings with field personnel involved in program 
implementation. For example, after the 2005 de-briefing held in October 
2005, the NRCS national CSP program staff took immediate action to 
correct the concerns or deficiencies identified at the meeting and 
produced 36 National Bulletins to address the issues. In Appendix B is 
a list and brief summary of the actions taken by program staff at the 
national office to strengthen internal controls and program delivery. 

Page 30: The GAO report provides a good background on the history of 
the CSP program and its implementation since being approved in the 2002 
Farm Bill. 

NRCS Comment: NRCS suggests that the background information in the GAO 
report also include an estimate of the projected costs for implementing 
the program without the cost controls introduced by NRCS on a 
nationwide basis. The report does a good job of identifying many of the 
cost controls mechanisms that NRCS has put in place, but falls short in 
not providing a discussion of the full cost of the program with out 
such controls. 

NRCS noted that safeguards placed on the program (sub-category 
qualifications and the number of eligible watersheds) as well as on 
budgetary outlays has significantly reduced the likelihood of budget 
overruns. For example, some analysts originally estimated that nation- 
wide CSP participation levels at over 900,000 (or almost 50 percent of 
all agricultural producers) at a cost ranging from almost $5 billion to 
as high as $7 billion over the life of the program (Page 42 and 48 of 
the March 18, 2005 CSP Amendment to the Interim Final Rule Benefit-Cost 
Assessment [Hyperlink, 
http://www.nrcs.usda.gov/programs/csp/2005_CSP_WS/CSP-AmendIFR-econ-
analysis.pdf]. 

Page 44: Producer eligibility based on water quality issues. 

The report states: "NRCS state officials also expressed concerns about 
other inconsistencies among States in determining producer eligibility 
for certain CSP payments. In particular, the cited inconsistencies in 
State's determinations that producers are sufficiently addressing water 
quality issues. An NRCS official said that NRCS's program office was 
aware of this issue and that NRCS had developed a national water 
quality checklist that seeks to bring about more consistency in water 
quality determinations by requiring that all FY 2006 signup applicants 
complete the checklist as part of the application process." 

NRCS Comment: There appears to be a bit of confusion in these 
statements because they do not differentiate CSP program activities on 
water quality between the years 2004, 2005, and 2006. In 2004, NRCS 
relied on its State-based practice standards 590 and 595, Nutrient 
Management and Pest Management, for determining if CSP applicants were 
meeting eligibility requirements for water quality concerns. Even 
before the end of the 2004 sign up, NRCS was convinced this process 
needed to be changed due to differences in States practice standards 
due to State specific regulations and requirements that became 
problematic where CSP watersheds transcended State lines. 

In 2005, NRCS improved its management process for determining CSP 
eligibility by utilizing a water quality checklist developed by each 
State with national criteria for each watershed area that included 
criteria for all the critical concerns regarding nutrients, pesticides, 
and sediment that each applicant was required to meet for eligibility. 
The water quality checklist provided more consistent results in 2005 
than the State-based practice standards used in 2004. 

However, NRCS remained committed to additional management improvements 
in determining water quality eligibility in CSP, and initiated work to 
develop a tool that used indices and scales to achieve an overall water 
quality assessment rating. NRCS has made good progress in introducing 
the use of several very efficient and simple tools to determine 
eligibility in CSP, including the Soil Conditioning Index, the Water 
Management Index, the Water Quality Eligibility Tool, and is working on 
Grazing Land Eligibility Tool. The new national water quality 
eligibility tool that assigns points for the applicant's current 
conservation activities and the level of water quality protection it 
provides. This tool is a major management improvement for the year 2006 
and provides a better level of consistency and quality than years 2004 
and 2005. 

Page 58 - second recommendation: The GAO report recommended that NRCS 
include a reference to the national guidance for wildlife habitat 
assessment criteria in the CSP Program Manual. 

NRCS Comment: Typically, NRCS does not restate special technical 
procedures in its program manuals for activities such as conservation 
planning, or assessment tools and techniques that are more fully 
described in other agency handbooks, such as the NRCS Planning 
Procedures Handbook, the National Agronomy Manual, and the National 
Biology Manual. This is necessary to avoid a maintenance and revision 
problem with changes in the source document or the program manual. In 
addition, the specific wildlife habitat assessment criteria that is 
cited above was included in the training material packets that were 
used at 5 national training events in 2005 where more than 1,500 NRCS 
employees were instructed on how to develop the assessment tools. 
Furthermore, given the significance of this concern, NRCS is proposing 
the development of a special Technical Note that would be prepared by 
NRCS Wildlife Biologists to describe the use of the assessment tool and 
assessment criteria to be used by States for programs such as CSP. 

Page 58 - third recommendation: The GAO report recommended that NRCS 
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. 

NRCS Comment: NRCS has initiated a certification form in the Self 
Assessment workbook for the CSP 2006 sign up that informs the applicant 
that the Farm Bill prohibits duplicative payments for financial 
assistance payments made through CSP and another program on the same 
land, at the same time. This addendum to the self assessment workbook 
will ask the applicant to certify whether or not they are receiving 
payments from another conservation program on any of the land being 
offered for enrollment in the CSP-06-01 sign-up. If they are, they must 
identify the source of payments; what the payment is for; and what part 
of the agricultural operation is receiving the payment. This addendum 
to the CSP Self Assessment was issued as a directive to all States in 
National Bulletin 300-6-36, dated March 15, 2006, for use in the 2006 
CSP sign up. 

The addendum document is attached in Appendix C: 

In addition, NRCS plans to revise the current CCC-1200 Contract 
Appendix to include a statement about prohibitions on duplicative 
payments. NRCS will ensure that both the field staff and the program 
participant are fully aware of the prohibition on duplicative payments. 
Until other automation features can be developed and incorporated into 
NRCS' contracting software, these procedures will help to eliminate the 
occurrence of duplicative payments made under CSP and other 
conservation programs. 

Page 58 fourth recommendation - The GAO report recommended that NRCS 
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 remedy the situation and to ensure that 
these duplicative payments are not repeated in FY 2006 and beyond. 

NRCS Comment: NRCS has improved management oversight to cross check 
payments made to CSP participants and participants under other 
conservation programs, namely the Environmental Quality Incentive 
Program (EQIP) and the Wildlife Habitat Incentive Program (WHIP), to 
see if duplicative payments have been made. This analysis process will 
be used for all current and new participants to perform a cross check 
to prevent duplicative payments. If duplicative payments have been 
made, NRCS has existing contracting procedures that can be utilized to 
recover the payments.

The following are GAO's comments on the letter from the U.S. Department 
of Agriculture dated April 10, 2006. 

GAO Comments: 

1. We deleted the language cited by NRCS as being from an earlier 
Oversight and Evaluation (O&E) draft report and no longer accurate. 

2. 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. While the promulgation of this bulletin 
should be helpful, we still believe that NRCS should review and field 
check each NRCS state office's assessment criteria to ensure that 
states use consistent criteria and achieve the wildlife habitat 
benefits intended by the national guidance. In addition, field checks 
would help to establish baseline information on the habitat results 
produced by the existing general wildlife habitat assessment criteria. 
Such information would be useful in determining whether these criteria 
need adjustment. 

3. We are not aware of any formal estimates or studies of the potential 
cost of CSP in the absence of funding caps and NRCS cost controls. The 
report discusses estimates of program costs developed by the 
Congressional Budget Office (CBO) and the Office of Management and 
Budget (OMB) that have ranged as high as $9.7 billion. In general, 
these estimates consider statutory funding caps, farm bill provisions, 
and the manner in which NRCS has implemented the program, including 
cost control measures. NRCS cites the benefit-cost assessment it 
prepared for the amendment to the interim final rule for CSP as a 
possible source of this information. However, according to this 
assessment, none of the alternatives discussed fully excludes NRCS cost 
controls. In addition, the assessment notes that the benefit-cost model 
used has a number of simplifying assumptions and, because of these 
assumptions, the model should not be relied on to predict actual 
participation rates, tier or regional distribution, or the magnitude of 
payments. Instead, the assessment indicates the model is best used to 
predict the direction of how participation would change if a particular 
program feature is changed, rather than the magnitude of the change. 
Furthermore, the assessment states that the benefit-cost model has not 
been validated so its ability to predict program participation has not 
been assessed. 

4. We have modified the report to reflect this information on the 
methods NRCS has used to determine whether producers are sufficiently 
addressing water quality issues. 

5. 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 should be used by NRCS state 
offices. While this step would be useful, we still believe that the 
inclusion of a reference in the manual to the national guidance would 
help to emphasize its importance to NRCS state and field-level 
employees. The Conservation Programs Manual is the primary guidance 
document used by NRCS state and field-level officials in implementing 
CSP. Furthermore, the inclusion of a reference in this manual need not 
be a complete restatement of the national guidance that is provided in 
other documents, including training materials and the technical note, 
if created. Instead, this reference could state that national guidance 
exists and should be followed by state offices in developing their 
wildlife habitat assessment criteria. The reference also could identify 
relevant resource materials (other manuals, bulletins, technical notes, 
training materials, etc.) that describe this guidance. 

6. We agree that the planned revisions in the self-assessment workbook 
and the contract appendix will provide greater assurance that CSP 
payments do not duplicate payments made by other USDA conservation 
programs. However, while most producers probably provide accurate and 
complete information on their program applications, NRCS has found that 
this is not always the case. For example, according to a February 2006 
News Release by NRCS's Washington state office, 15 CSP contract holders 
in the Upper Crab and Rock watersheds were issued "intent to terminate" 
notices regarding their submission of apparently false information 
associated with their program applications. Specifically, these 
producers appeared to have provided false or altered soil test results. 
USDA's Office of Inspector General is investigating this matter. 
Because program applicants may purposefully or inadvertently provide 
inaccurate information in their program applications, we urge NRCS to 
proceed with the development and implementation of automated methods to 
identify potentially duplicative payments before they are made. 

[End of section] 

Appendix IX: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Robert A. Robinson (202) 512-3841: 

Staff Acknowledgments: 

In addition to the individual named above, James R. Jones, Jr., 
Assistant Director; William B. Bates; Gary T. Brown; John W. Delicath; 
Barbara J. El Osta; Nathan A. Morris; Lynn M. Musser; Katherine M. 
Raheb; and Amy E. Webbink made key contributions to this report. 

[End of section] 

Related GAO Products: 

Agricultural Conservation: USDA Should Improve Its Methods for 
Estimating Technical Assistance Costs. GAO-05-58. Washington, D.C.: 
November 30, 2004. 

Information Security: Further Efforts Needed to Address Serious 
Weaknesses at USDA. GAO-04-154. Washington, D.C.: January 30, 2004. 

Department of Agriculture: Status of Efforts to Address Major Financial 
Management Challenges. GAO-03-871T. Washington, D.C.: June 10, 2003. 

Agricultural Conservation: USDA Needs to Better Ensure Protection of 
Highly Erodible Cropland and Wetlands. GAO-03-418. Washington, D.C.: 
April 21, 2003. 

Agricultural Conservation: State Advisory Committees' Views on How USDA 
Programs Could Better Address Environmental Concerns. GAO-02-295. 
Washington, D.C.: February 22, 2002. 

Environmental Protection: Federal Incentives Could Help Promote Land 
Use That Protects Air and Water Quality. GAO-02-12. Washington, D.C.: 
October 31, 2001. 

Budget Scoring: Budget Scoring Affects Some Lease Terms but Full Extent 
Is Uncertain. GAO-01-929. Washington, D.C.: August 31, 2001. 

Budget Issues: Budget Enforcement Compliance Report. GAO/AIMD-00-174. 
Washington, D.C.: May 31, 2000. 

Natural Resources Conservation Service: Additional Actions Needed to 
Strengthen Program and Financial Accountability. GAO/RCED-00-83. 
Washington, D.C.: April 7, 2000. 

Water Quality: Federal Role in Addressing--and Contributing to-- 
Nonpoint Source Pollution. GAO/RCED-99-45. Washington, D.C.: February 
26, 1999. 

Commodity Credit Corporation: Information on the Availability, Use, and 
Management of Funds. GAO/RCED-98-114. Washington, D.C.: April 28, 1998. 

Budget Process: Issues Concerning the 1990 Reconciliation Act. 
GAO/AIMD- 95-3. Washington, D.C.: October 7, 1994. 

Budget Policy: Issues in Capping Mandatory Spending. GAO/AIMD-94-155. 
Washington, D.C.: July 18, 1994. 

(360544): 

FOOTNOTES 

[1] Conservation buffers are strips or areas of land in permanent 
vegetation--such as grasses, shrubs, or trees--designed and 
strategically placed to intercept pollutants--such as nutrients and 
pesticides--that wash off cropland or to serve other environmental 
purposes, such as to provide wildlife habitat or windbreaks. 

[2] Pub. L. No. 107-171, 116 Stat. 134 (2002). 

[3] In April 2001, CBO estimated the baseline for USDA conservation 
programs to be $11.6 billion for fiscal years 2002 through 2007, 
assuming neither changes nor additions to these programs. However, with 
the passage of the new farm bill in May 2002, Congress made a number of 
changes and additions to these programs. As a result, CBO increased its 
estimate by nearly 80 percent to $20.8 billion for fiscal years 2002 
through 2007. 

[4] Since calling for the establishment of CSP, Congress has capped 
program funding in some manner in other legislation. For example, in 
the annual appropriations act for fiscal year 2004, Congress limited 
the amount of funding available for CSP to $41.443 million, Pub. L. No. 
108-199, div. A, tit. VII, § 752, 118 Stat. 3, 38 (2004). For fiscal 
years 2005 and 2006, Congress limited the amount of funding available 
to pay salaries and expenses of personnel in carrying out CSP to 
$202.411 million and $259 million, respectively. Pub. L. No. 108-447, § 
749, 118 Stat. 2809 (2004) and Pub. L . No. 109-97, § 741, 119 Stat. 
2120 (2005). In addition, legislation enacted in February 2006 capped 
CSP's funding at $1.954 billion for fiscal years 2006 through 2010 and 
$5.650 billion for fiscal years 2006 through 2015. Pub. L. No. 109-171, 
120 Stat. 4 (2006). See appendix VI for more information. 

[5] CCC is a government-owned and government-operated corporation under 
USDA that was created in 1933 to stabilize, support, and protect farm 
income and prices. CCC also helps to maintain balanced and adequate 
supplies of agricultural commodities and aids in their orderly 
distribution. Essentially, CCC is a financing institution for USDA's 
farm price and income support commodity programs, agricultural export 
subsidies, and some agricultural conservation programs, including CSP. 
CCC has the authority to borrow up to $30 billion from the U.S. 
Treasury, private lending institutions, and others to carry out its 
obligations. Net losses from CCC's operations are subsequently restored 
through the congressional appropriations process. 

[6] A CSP contract (conservation stewardship contract) means a legal 
document that specifies the rights and obligations of any participant 
who has been accepted to receive assistance through participation in 
CSP. 

[7] Resource concern refers to the condition of natural resources that 
may be sensitive to change by natural forces or human activity. 
Resource concerns include soil erosion, soil condition, soil 
deposition, water quality, water quantity, air condition, plant 
management, and animal habitat and management. 

[8] Sign-up notice means the public notification document that NRCS 
provides to describe the particular requirements for a specific CSP 
sign-up. This notice is published in the Federal Register. 

[9] Conservation treatment refers to any and all conservation 
practices, measures, and works of improvement that have the purpose of 
alleviating resource concerns, solving or reducing the severity of 
natural resource use problems, or taking advantage of resource 
opportunities. 

[10] Conservation practice refers to a specified treatment, such as a 
structural or land management practice, that is planned and applied to 
NRCS standards and specifications. 

[11] Enhancement payments may be made for implementing or maintaining 
multiple conservation practices that exceed minimum requirements for 
the applicable tier; 
addressing local conservation priorities in addition to resources of 
concern for the agricultural operation; 
participating in an on-farm conservation research, demonstration, or 
pilot project; 
participating in a watershed or regional resource conservation plan 
that involves at least 75 percent of producers in a targeted area; 
or carrying out assessment or evaluation activities relating to 
practices included in a conservation security plan. 

[12] At a minimum, all CSP contract payments include some amount for 
the stewardship and existing practice components. The enhancement 
payment and new practice component amounts may be zero in some cases. 

[13] According to NRCS, technical assistance refers to conservation 
planning, design, and implementation assistance that NRCS provides to 
producers, including assisting producers to enroll in NRCS programs. 

[14] NRCS has limited CSP enrollment each year to producers in selected 
watersheds to stay within funding and staff resource constraints. NRCS 
anticipates it will take 8 years--fiscal years 2004 through 2011--to 
implement the program in all 2,119 watersheds, subject to available 
funding. 

[15] The Farm Security and Rural Investment Act of 2002 amended the 
Food Security Act of 1985 and required the Secretary of Agriculture to 
establish CSP. 

[16] The CSP regulations are found at 7 C.F.R. Part 1469. 

[17] The soil conditioning index is used to predict the consequences of 
cropping systems and tillage practices on the trend of soil organic 
matter. This index has three main components: (1) the amount of organic 
matter returned to the soil, (2) the effects of tillage and field 
operations on organic matter decomposition, and (3) the effect of 
predicted soil erosion associated with the management system. The index 
gives an overall rating based on these components. Negative ratings 
indicate declining soil organic matter, while positive ratings indicate 
increasing soil organic matter. 

[18] According to NRCS, it uses enrollment categories to determine 
funding hierarchy due to budget limits and statutory constraints on 
technical assistance. The farm bill prohibits competitive bidding or 
similar practices, but NRCS states that it does not have applicants 
compete with one another for contracts. 

[19] Under NRCS regulations, NRCS is to prioritize watersheds 
considering several factors including (1) potential of surface water 
and groundwater quality to degradation, (2) potential of soil to 
degradation, (3) potential of grazing land to degradation, (4) state or 
national conservation and environmental issues (such as location of air 
nonattainment zones or important wildlife or fisheries habitat), and 
(5) local availability of management tools needed to more efficiently 
operate the program (such as digitized soils information). 

[20] USDA officials explained that they consider the caps appearing in 
the annual appropriations acts for fiscal years 2005 and 2006 to be 
limitations on the total funding available for CSP, not just for the 
salaries and expenses of personnel to carry out the program. In 
providing technical comments on a draft of this report, these officials 
explained that they understood that the wording, "to pay the salaries 
and expenses of personnel," was used for scorekeeping purposes to count 
savings against discretionary spending limits. According to these 
officials, this language has been used across the board, i.e., for all 
farm bill programs in several of the past appropriations acts. They 
stated that the effect is to prevent any administrative actions to 
implement a program that spends more than the amount set out in the 
provision. Accordingly, these officials said that it was understood 
that the caps were, in fact, limits on total program spending, 
including financial assistance to producers as well as technical 
assistance (i.e., salaries and expenses of NRCS employees to implement 
CSP). 

[21] Congress capped CSP funding at $41.443 million for fiscal year 
2004. Agency officials said that they reserved $996,322 of fiscal year 
2004 funding for unexpected contract costs associated with producer 
contracts. Applying principles established in the Account Closing 
Statute (31 U.S.C. § 1553) and under OMB guidance (OMB Circular A-11, 
Preparation, Submission, and Execution of the Budget, Part 1, § 
20.4(c), Nov. 2, 2005), agency officials indicated that the budget 
authority for this reserve expired at the end of fiscal year 2004, but 
the amount remains available for an additional 5 fiscal years to pay 
for certain adjustments to contract costs and legitimate contract 
modifications. 

[22] For fiscal year 2005, Congress limited the amount of funds 
available to pay salaries and personnel expenses to carry out CSP to 
$202.411 million. NRCS interpreted this limit on salaries and personnel 
expenses to be a limit on total program funding. According to NRCS 
officials, the agency reserved about $842,770 of this funding for 
legitimate contract adjustments and modifications as described in note 
21. 

[23] For fiscal year 2006, Congress limited the amount of funds 
available to pay salaries and personnel expenses to carry out CSP to 
$259 million. Again, NRCS interpreted this limit on salaries and 
personnel expenses to be a limit on total program funding. Based on 
this level of funding, on August 25, 2005, USDA announced preliminary 
selection of 110 watersheds for the fiscal year 2006 CSP sign-up. 
However, on Jan. 31, 2006, USDA announced that this sign-up would be 
limited to 60 watersheds only because of anticipated reductions to the 
CSP funding cap for future years to generate savings for deficit 
reduction. Specifically, the Deficit Reduction Act of 2005, Pub. L. No. 
109-171, § 1202, 120 Stat. 4 (2006), repeals the $6.037 billion cap on 
CSP funding through 2014 but creates new caps that limit CSP spending 
to $1.954 billion for the period fiscal years 2006 through 2010 and 
$5.650 billion for the period fiscal years 2006 through 2015. CBO 
estimates that these new caps will generate savings of $649 million 
over the period fiscal years 2006 through 2010 and savings of $1.1 
billion over the period fiscal years 2006 through 2015. 

[24] Among other things, the self-assessment details the type of 
agricultural operation, land uses, existing conservation practices, 
resource concerns, and the producer's willingness to do additional 
conservation in the future. 

[25] Entitlement authority is authority to make payments for which 
budget authority is not provided in advance by appropriation acts to 
any person or government if, under the provisions of the law containing 
such authority, the U.S. government is legally required to make the 
payments to persons or governments that meet the requirements 
established by law. 2 U.S.C. § 622(9). 

[26] In the 1994 Uruguay Round Agreement on Agriculture of the General 
Agreement on Tariffs and Trade, World Trade Organization members, 
including the United States, made commitments to improve market access, 
reduce export subsidies, and limit and, in some cases, reduce trade- 
distorting domestic agricultural supports. The United States and other 
World Trade Organization members are currently engaged in another round 
of multilateral trade negotiations that began in Doha, Qatar, in 2001, 
where they reaffirmed their commitment to agricultural trade 
liberalization, and in July 2004, the members agreed on a framework to 
guide negotiations on agriculture. The U.S. negotiating position has 
emphasized harmonizing, reducing, and further disciplining agricultural 
subsidies. In the interim, existing Uruguay Round commitments will 
continue at established levels. World Trade Organization members found 
to be in violation of these commitments can be subject to retaliatory 
measures, such as punitive tariffs on exports. 

[27] Green payments are made to producers as compensation for 
environmental benefits that accrue as a result of or in conjunction 
with their farming activities. In general, these payments are deemed to 
be minimally trade distorting and are excluded from reduction 
commitments in the Uruguay Round Agreement on Agriculture. 

[28] NRCS also estimated CSP costs as part of benefit-cost assessments 
it prepared in conjunction with issuing an interim final rule (June 
2004) and an amended interim final rule (March 2005) for CSP. 
Specifically, these assessments estimated the dollar value of the 
benefits, to the extent deemed possible, and costs associated with 
various program alternatives. According to the benefit-cost 
assessments, because of the simplifying assumptions that were used, 
these assessments should not be used to predict the actual magnitude of 
CSP costs. 

[29] See S. 1731, 107th Cong. (2001); 
H.R. 2646, 107th Cong. (2001). 

[30] According to CBO officials, these changes included the following: 
(1) stewardship payment rates were reduced and the basis for 
stewardship payments was frozen at 2001 land rental rates; 
(2) maximum stewardship payments were reduced from 75 percent of the 
tier payment limit for all tiers to 25 percent for Tier I and 30 
percent for Tiers II and III (e.g., the maximum stewardship payment for 
Tier I went from 75 percent of $20,000 [$15,000] to 25 percent of 
$20,000 [$5,000]); 
(3) cost share payment rates for new management practices were reduced; 
(4) eligibility requirements for the three tiers were made more 
complete; 
(5) the payment limit for Tier III contracts was reduced from $50,000 
to $45,000; 
and (6) funding for CSP technical assistance was limited to 15 percent 
of total CSP funding. 

[31] Pub. L. No. 108-7, tit. II, § 216, 117 Stat. 538, 546 (2003). The 
exact amount of this cap was $3.773 billion. 

[32] Pub. L. No. 108-199, § 101, 118 Stat. 3, 434 (2004). 

[33] Pub. L. No. 108-324, § 101, 118 Stat. 1220, 1231 (2004). The exact 
amount of this cap was $6.037 billion. 

[34] Congress also has acted to limit CSP's funding on an annual basis. 
For example, in fiscal year 2004, Congress limited the total funding 
available for CSP to $41.443 million. For fiscal year 2005, Congress 
capped funding for salaries and expenses of personnel to carry out CSP 
to $202.411 million. USDA officials said that they consider the fiscal 
year 2005 cap to be a limit on the total funding available for CSP. A 
cap on the available funding for a given year affects estimates for 
subsequent years because the cap limits the number of producers 
receiving CSP contract payments that year and in subsequent years 
covered by their contracts. 

[35] Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 1202, 120 
Stat. 4, 5 (2006). 

[36] The farm bill requires USDA to determine CSP base payments based 
on either the average national per-acre rental rate for a specific land 
use during the 2001 crop year or another appropriate rate for the 2001 
crop year that ensures regional equity. 

[37] Enhancement payments are made for additional listed conservation 
activities (known as enhancements) that provide increased resource 
benefits beyond the minimum standard. In order for a producer to 
receive the full amount of financial assistance available under each of 
CSP's payment tiers, the producer must undertake enhancements. 

[38] The regulation was subject to review by OMB's Office of 
Information and Regulatory Affairs. See Executive Order No. 12866, 58 
Fed. Reg. 51735 (Sept. 30, 1993). 

[39] Each year, CBO and OMB prepare estimates of budgetary costs for 
the next 10 fiscal years. For example, in March 2004, CBO prepared an 
estimate of budgetary costs for fiscal years 2005 through 2014. 

[40] 16 U.S.C. § 3838a(d)(6). 

[41] 16 U.S.C. § 3838a(b)(1)(A). Such plans are referred to as 
Conservation Security Plans in the farm bill but are called 
Conservation Stewardship Plans by NRCS. 

[42] 16 U.S.C. § 3838a(d)(1)(B)(ii). 

[43] 16 U.S.C. § 3838c(b). 

[44] NRCS's CSP sign-up notices for fiscal years 2005 and 2006 
indicated that advance enhancement payments would be available in those 
years as well. However, unlike the 2004 signup, the 2005 and 2006 
signup notices stated that the annual maximum payment limits would 
include any advance enhancement payment made to a producer. NRCS did 
not make advance enhancement payments in 2005. The results of the 2006 
signup were not available as of early April 2006. 

[45] Standards for Internal Control in the Federal Government (GAO/ 
AIMD-00-21.3.1, Washington, D.C.: November 1999) defines internal 
controls as an integral component of an organization's management that 
provides reasonable assurance that effectiveness and efficiency of 
operations, reliability of financial reporting, and compliance with 
applicable laws and regulations are being achieved. The five standards 
of internal control are control environment, risk assessment, control 
activities, information and communications, and monitoring. The terms 
internal control, management control, and administrative control are 
often used interchangeably. 

[46] Other NRCS state officials did not share the concern that state 
offices' wildlife habitat assessment criteria were inconsistent. They 
generally stated that they view CSP as a "working lands" program that 
should be flexible and not overemphasize wildlife habitat. 

[47] Wildlife habitat could also be a factor in determining applicant 
eligibility for Tier II. For example, to be eligible for Tier II under 
NRCS's fiscal year 2005 sign-up notice, an applicant must address a 
third applicable resource concern--in addition to soil and water 
quality--by the end of the contract period. For some watersheds, NRCS 
identified wildlife habitat as this third resource concern. 

[48] In addition, Environmental Defense, a national environmental 
organization, reviewed the fiscal year 2004 assessment criteria and 
reported--in a November 2004 discussion paper, "Targeting Wildlife 
through the Conservation Security Program (CSP): Assessment of the 2004 
Sign-up"--that the criteria were highly unequal from watershed to 
watershed. This paper, coauthored by a former NRCS wildlife biologist, 
also raised questions about whether significant wildlife habitat 
benefits were being achieved on all operations determined to be 
eligible for Tier III payments. 

[49] "Potential habitat" refers to that portion of the land area of an 
operation that would be needed to support general or species-specific 
habitat needs, such as food, cover, and water. For example, potential 
habitat areas could include shelterbelts or buffers consisting of 
trees, shrubs, grasses, or other perennial vegetation interspersed with 
cropland fields. 

[50] This instruction pertains to general wildlife habitat assessment 
criteria. For species-specific criteria--referred to in the national 
guidance as models for species of conservation concern--the guidance 
instructs state offices to define the habitat elements (food, cover, 
and water) that are required and rate those elements based upon the 
degree to which they are present within the assessment area. 

[51] In addition to a list of components for cropland, the national 
guidance includes separate wildlife resource component lists for 
rangeland, hayland, and pastureland. According to NRCS officials, 
establishing habitat assessment criteria for cropland is particularly 
difficult, because cropland is used intensively and generally is less 
compatible with wildlife habitat than other land uses. On an acreage 
basis, cropland is the leading type of land enrolled in CSP. 

[52] According to NRCS officials, this noncrop vegetative cover does 
not necessarily need to be land that the producer has recently removed 
from crop production. That is, it can be land that has not been used 
for crop production in recent years or was never used for crop 
production. 

[53] Under this guidance, state office criteria regarding size, 
interspersion, and condition of noncrop vegetative cover must also be 
met for each cropland field. 

[54] Interspersion refers to the proximity of noncrop vegetative cover 
to cropland fields. 

[55] A measure of the amount of crop residue is the percentage of crop 
residue from the previous harvest left on the soil surface before and 
after planting a new crop. 

[56] We did not conduct file reviews at these NRCS state offices to 
determine the extent of producers who answered "yes" to only five or 
six of the seven questions included in the wildlife habitat assessment 
criteria used by these states. 

[57] In addition, the states' criteria for the amount of noncrop 
vegetative cover are inconsistent with the national guidance. 
Specifically, the states' criteria require a minimum percentage of 
noncrop vegetative cover for the "offered operation," meaning the 
entire farm. However, the national guidance states that a minimum 
percentage of noncrop vegetative cover for "each cropland field" on an 
operation must be defined by the states. 

[58] For example, a producer who is not fully providing the wildlife 
habitat benefits intended by the national guidance could nevertheless 
be determined by an NRCS state office to be eligible for Tier III 
payments. Thus, this producer could receive a maximum payment of up to 
$45,000. However, if the NRCS state office had strictly applied the 
national guidance, the producer would have been enrolled in Tier II 
instead. Under this tier, the producer's maximum payment would be up to 
$35,000. In this case, the difference between the Tier III and Tier II 
payment--up to $10,000--would free up program funds for other purposes, 
such as funding the application of another eligible producer who 
otherwise would not receive program funding. 

[59] CSP stewardship payments reward producers for conservation actions 
they have already taken; 
existing practice payments support the maintenance of existing 
conservation practices; 
and enhancement payments encourage conservation actions that generally 
exceed the minimum or nondegradation standards developed by NRCS for 
individual conservation practices. The term "nondegradation standard" 
means the level of measures (actions) required to adequately protect 
and prevent degradation of one or more natural resources, as determined 
by NRCS in accordance with the quality criteria described in NRCS 
handbooks, such as the National Handbook of Conservation Practices. 
According to NRCS's regulations, a conservation practice is a specified 
treatment, such as a structural or land management practice, that is 
planned and applied according to NRCS standards and specifications. If 
a producer's conservation actions exceed the minimum standards for a 
conservation practice, the producer may qualify for an enhancement 
payment. 

[60] The farm bill also states that NRCS shall, to the maximum extent 
practicable, eliminate duplication of planning activities under 
Environmental Quality Incentives Program (EQIP) and comparable 
conservation programs. 

[61] In contrast, EQIP cost-share payments for these practices are 
significant because the farm bill required NRCS to target 60 percent of 
EQIP funds made available for cost-share and incentive payments at 
practices related to livestock and poultry production. 

[62] The conservation compliance provisions of the Food Security Act of 
1985, as amended, require, as a condition of eligibility for certain 
federal farm programs, that producers reduce erosion on highly erodible 
cropland and, with certain exceptions, prohibit the conversion of 
wetlands to cropland. Specifically, the 1985 act, as amended, requires 
farmers to do the following: (1) apply conservation systems to highly 
erodible lands cropped in any year from 1981 through 1985 to 
substantially reduce soil erosion (the act's specific "conservation 
compliance" provision); 
(2) for highly erodible land not farmed prior to the act's passage, 
apply a conservation system before planting and control soil erosion to 
a greater extent than required under conservation compliance (the act's 
"sodbuster" provision); 
and (3) avoid converting wetlands to cropland (the act's "swampbuster" 
provision). 

[63] EQIP and WHIP are described in appendix IV. Under EQIP, beginning 
and limited-resource producers may receive cost-share payments of up to 
90 percent. 

[64] Under EQIP, a producer could receive cost-share payments for 
conservation practices that exceed the nondegradation standard although 
this level of management intensity is not required per se. 

[65] Fiscal year 2004 CSP payments included $13.6 million in advance 
enhancement payments. Excluding advance enhancement payments, total 
enhancement payments made in fiscal year 2004 were about $14.1 million, 
or about 68 percent of total CSP payments made that year. 

[66] In addition, under the farm bill, stewardship payments are 
calculated by formula, taking into account acreage, land rental rates 
(or other appropriate rates), and a defined percentage that varies by 
tier. The CSP regulations reduce the stewardship payments by applying a 
reduction factor that varies by tier (i.e., 25 percent for Tier I, 50 
percent for Tier II, and 75 percent for Tier III). 

[67] For these contracts, the fiscal year 2005 enhancement payment was 
150 percent of the contract's base enhancement value. Annual 
enhancement payments are scheduled to decline to 90 percent of this 
base in fiscal year 2006, 70 percent in fiscal year 2007, 50 percent in 
fiscal year 2008, 30 percent in fiscal year 2009, and 10 percent in 
fiscal year 2010. In contrast, payments for enhancements added to a 
fiscal year 2005 contract after that year are not subject to this 
declining payment schedule. 

[68] These conservation practices must be listed in NRCS's National 
Handbook of Conservation Practices. A conservation practice is a 
specified treatment that is planned and applied according to NRCS 
standards and specifications. Practices approved by NRCS are compiled 
at each conservation district in its field office technical guide. 
Practices can be structural, such as terraces and animal waste storage 
facilities, or land management, such as strip cropping, nutrient 
management, and pest management. 

[69] "Activity" means an action other than a conservation practice that 
is included as a part of a conservation stewardship contract. These 
actions could include a measure, an incremental movement on a 
conservation index or scale, or an on-farm demonstration, pilot, or 
assessment. "Measure" means one or more specific actions that is not a 
conservation practice but has the effect of alleviating problems or 
improving the treatment of resources. 

[70] After bringing this situation to the attention of NRCS state 
office officials, these officials issued further guidance on preventing 
duplicate payments to their field office staff in October 2005. This 
guidance states that a producer who has a CSP contract and an EQIP or a 
WHIP contract with funding for the same conservation action in the same 
year cannot receive two payments for the same action. According to the 
guidance, to avoid duplicate payments, the CSP enhancement payment for 
an activity funded by EQIP or WHIP should not be made until the year 
following the year in which the last EQIP or WHIP payment for the 
activity is made. 

[71] Because EQIP is a much larger program than WHIP in terms of 
funding and participation, the potential for duplication between EQIP 
and CSP is greater than the potential for duplication between WHIP and 
CSP. 

[72] 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. 

[73] NRCS state officials agreed that these payments were duplicates. 
They stated that they were unaware that such duplication was occurring 
and that they would inform their district offices of it. In addition, 
they said that in cases where duplication is found, they would give the 
producer a choice of either receiving only one payment (and delay 
payments under the other program to a subsequent year) or, where 
applicable, eliminating that portion of the payment made under one or 
the other program for specific acres that are eligible for payments 
under both programs. 

[74] See Natural Resources Conservation Service Strategic Plan 2003 
Update, USDA/NRCS, June 2003. 

[75] Pub. L. No. 107-171, 116 Stat. 134 (2002). 

[76] Pub. L. No. 108-199, 118 Stat. 3 (2004); 
Pub. L. No. 108-447, 118 Stat. 2809 (2004); 
Pub. L. No. 109-97, 119 Stat. 2155 (2005). 

[77] Pub. L. No. 108-7, 117 Stat. 11 (2003). 

[78] Pub. L. No. 108-324, 118 Stat. 1220 (2004). 

[79] Internal controls include (1) control goals and objectives; 
(2) control procedures used to provide reasonable assurance that goals 
and objectives are met, resources are adequately safeguarded and 
efficiently used, reliable data are obtained, maintained, and fairly 
discussed in agency reports, and laws and regulations are complied 
with; 
(3) financial accounting systems; 
and (4) management monitoring systems. 

[80] NRCS did not prepare annual performance plans for fiscal years 
2004 through 2006. According to an NRCS official, in an effort to 
integrate planning and budgeting, the agency stopped publishing annual 
performance plans after fiscal year 2003 and began using a working 
performance budget. This performance budget, also called the budget 
explanatory notes or "greensheets," is part of NRCS's budget request 
and is modified based on the appropriations received by the agency. 

[81] A structured interview is one in which the questions to be asked, 
their sequence, and the detailed information to be gathered are all 
predetermined. This technique is useful where maximum consistency 
across interviews and interviewees is needed to facilitate analysis and 
develop meaningful summary information. 

[82] A data-collection instrument is a highly structured document that 
requires the user or respondent to collect or provide data in a 
systematic and highly precise fashion. 

[83] Like CSP, EQIP and WHIP are working lands programs, in contrast to 
other USDA conservation programs that seek to idle or retire working 
lands from production. 

[84] USDA's fiscal year 2005 performance and accountability report 
discusses material weaknesses related to USDA's financial and 
accounting systems. Among the weaknesses identified are NRCS's 
application controls for ProTracts. To address this weakness, NRCS 
plans to take a number of actions such as establishing a schedule for 
the systematic reconciliation of appropriations, obligations, and 
payments data in ProTracts with amounts recorded in the Foundation 
System. 

[85] Budget-scorekeeping guidelines were developed by the executive and 
legislative branches in order to ensure compliance with the Budget 
Enforcement Act of 1990, enacted by the Omnibus Budget Reconciliation 
Act of 1990, Pub. L. No. 101-508, tit. XIII, 104 Stat. 1388-573 (1990), 
which established discretionary spending limits and pay-as-you-go rules 
for mandatory programs. The Budget Enforcement Act amended the 
Congressional Budget and Impoundment Control Act of 1974, Pub. L. No. 
93-344, 88 Stat. 297 (1974), and the Balanced Budget and Emergency 
Deficit Control Act of 1985, Pub. L. No. 99-177, tit. II, 99 Stat. 
1037, 1038 (1985) (commonly known as Gramm-Rudman-Hollings). The 
Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, 107 
Stat. 312 (1993), extended these enforcement mechanisms through fiscal 
year 1998. The Budget Enforcement Act of 1997, enacted by the Balanced 
Budget Act of 1997, Pub. L. No. 105-33, tit. X, 111 Stat. 251 (1997), 
further extended these enforcement mechanisms through fiscal year 2002. 
Although the enforcement mechanisms of the Budget Enforcement Act 
expired, or became ineffective, at the end of fiscal year 2002, the 
scorekeepers continue to apply these scorekeeping principles for budget 
execution and the congressional budget process. 

[86] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget, Nov. 2, 2005. 

[87] The Federal Managers' Financial Integrity Act of 1982, Pub. L. No. 
97-255, 96 Stat. 814 (1982) also requires GAO to issue standards for 
internal control in government. The standards provide the overall 
framework for establishing and maintaining internal control and for 
identifying and addressing major performance and management challenges 
and areas at greatest risk of fraud, waste, abuse, and mismanagement. 
Office of Management and Budget (OMB) Circular A-123, Management 
Accountability and Control, provides agencies guidance on how to 
satisfy the requirements of the Federal Managers' Financial Integrity 
Act of 1982. The term "internal control" is synonymous with "management 
control," as used in the circular, and covers all aspects of an 
agency's operations--programmatic, financial, and compliance. Also, the 
Chief Financial Officers Act of 1990, Pub. L. No. 101-576, 104 Stat. 
2838 (1990), calls for financial management systems to comply with 
internal control standards, and the Federal Financial Management 
Improvement Act of 1996 (enacted by the Consolidated Appropriations 
Act, 1997, Pub. L. No. 104-208, 110 Stat. 3009 (1996) identifies 
internal control as an integral part of improving financial management 
systems. 

[88] Pub. L. No. 107-300, 116 Stat. 2350 (2002). OMB issued guidance-- 
Implementation Guidance for the Improper Payments Act of 2002, P.L. 107-
300, M-03-13--on May 21, 2003, to agencies on implementing the Improper 
Payments Information Act. Among other things, OMB defined significant 
improper payments as annual erroneous payments exceeding both 2.5 
percent of program payments and $10 million. 

[89] The departmental regulation, No. 1110-002, was issued on Apr. 14, 
2004, canceling an earlier department regulation, Internal/Management 
Controls, issued on Feb. 23, 1999. The manual, DM 1110-002, was issued 
on Nov. 29, 2002. 

[90] See U.S. Department of Agriculture, Office of Inspector General, 
Natural Resources Conservation Service: Compliance with the Improper 
Payments Information Act of 2002, Audit Report No. 10601-003-KC 
(Washington, D.C.: Jan. 10, 2005). 

[91] See Information Security: Further Efforts Needed to Address 
Serious Weaknesses at USDA, GAO-04-154, Jan. 30, 2004. 

[92] These weaknesses relate to the requirements found in the Federal 
Managers' Financial Management Integrity Act, the Federal Financial 
Management Improvement Act, and the Federal Information Security 
Management Act. A material weakness is a reportable condition in which 
the design or operation of one or more of the internal control 
components does not reduce to a relatively low level the risk that 
misstatements caused by error or fraud in amounts that would be 
material in relation to the financial statements being audited may 
occur and not be detected within a timely period by employees in the 
normal course of performing their assigned functions. 

[93] The Foundation Financial Information System is USDA's official 
accounting system for making payments for current and prior year 
programs. This system is also the source of data used in financial 
statements for all USDA programs. 

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