[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE USDA
ADMINISTRATION OF CONSERVATION PROGRAM CONTRACTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSERVATION, CREDIT,
ENERGY, AND RESEARCH
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 25, 2009
__________
Serial No. 111-3
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
COLLIN C. PETERSON, Minnesota, Chairman
TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking
Vice Chairman Minority Member
MIKE McINTYRE, North Carolina BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas
JOE BACA, California TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California SAM GRAVES, Missouri
DAVID SCOTT, Georgia MIKE ROGERS, Alabama
JIM MARSHALL, Georgia STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas
Dakota K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska
JIM COSTA, California JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER, BILL CASSIDY, Louisiana
Pennsylvania CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho
______
Professional Staff
Robert L. Larew, Chief of Staff Nicole Scott, Minority Staff
Andrew W. Baker, Chief Counsel Director
April Slayton, Communications
Director
(ii)
Subcommittee on Conservation, Credit, Energy, and Research
TIM HOLDEN, Pennsylvania, Chairman
STEPHANIE HERSETH SANDLIN, South BOB GOODLATTE, Virginia, Ranking
Dakota Minority Member
DEBORAH L. HALVORSON, Illinois JERRY MORAN, Kansas
KATHLEEN A. DAHLKEMPER, SAM GRAVES, Missouri
Pennsylvania MIKE ROGERS, Alabama
BETSY MARKEY, Colorado STEVE KING, Iowa
MARK H. SCHAUER, Michigan RANDY NEUGEBAUER, Texas
LARRY KISSELL, North Carolina JEAN SCHMIDT, Ohio
JOHN A. BOCCIERI, Ohio ADRIAN SMITH, Nebraska
MIKE McINTYRE, North Carolina ROBERT E. LATTA, Ohio
JIM COSTA, California BLAINE LUETKEMEYER, Missouri
BRAD ELLSWORTH, Indiana GLENN THOMPSON, Pennsylvania
TIMOTHY J. WALZ, Minnesota BILL CASSIDY, Louisiana
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
FRANK KRATOVIL, Jr., Maryland
WALT MINNICK, Idaho
EARL POMEROY, North Dakota
------
Nona Darrell, Subcommittee Staff Director
(iii)
C O N T E N T S
----------
Page
Goodlatte, Hon. Bob, a Representative in Congress from Virginia,
opening statement.............................................. 3
Prepared statement........................................... 3
Holden, Hon. Tim, a Representative in Congress from Pennsylvania,
opening statement.............................................. 1
Prepared statement........................................... 2
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4
Prepared statement........................................... 5
Witnesses
Stephenson, Robert, Acting Deputy Administrator for Field
Operations, Farm Service Agency, U.S. Department of
Agriculture, Washington, D.C.; accompanied by Candy Thompson,
Acting Deputy Administrator for Farm Programs, Farm Service
Agency, U.S. Department of Agriculture......................... 6
Joint prepared statement..................................... 8
White, Dave, Chief, Natural Resources Conservation Service, U.S.
Department of Agriculture, Washington, D.C..................... 14
Joint prepared statement..................................... 8
Tighe, Kathleen S., Deputy Inspector General, Office of the
Inspector General, U.S. Department of Agriculture, Washington,
D.C............................................................ 30
Prepared statement........................................... 31
Shames, Lisa, Director, Natural Resources and Environment, U.S.
Government Accountability Office, Washington, D.C.............. 35
Prepared statement........................................... 36
Jurich, John J., Investigator, Committee on Agriculture, U.S.
House of Representatives, Washington, D.C...................... 47
Prepared statement........................................... 49
Submitted Questions
Response to submitted questions.................................. 57
HEARING TO REVIEW THE USDA
ADMINISTRATION OF CONSERVATION PROGRAM CONTRACTS
----------
WEDNESDAY, MARCH 25, 2009
House of Representatives,
Subcommittee on Conservation, Credit, Energy, and
Research,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 1300 of the Longworth House Office Building, Hon. Tim
Holden [Chairman of the Subcommittee] presiding.
Members present: Representatives Holden, Halvorson,
Dahlkemper, Markey, Schauer, Peterson (ex officio), Boccieri,
Massa, Minnick, Goodlatte, Moran, Pomeroy, Schmidt, Smith,
Luetkemeyer, and Thompson.
Staff present: Nona Darrell, Adam Durand, Tyler Jameson,
John Konya, Robert L. Larew, Anne Simmons, April Slayton,
Rebekah Solem, Kristin Sosanie, Patricia Barr, Tamara Hinton,
Josh Maxwell, Pelham Straughn, and Jamie Mitchell.
OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN
CONGRESS FROM PENNSYLVANIA
The Chairman. This hearing of the Subcommittee on
Conservation, Credit, Energy, and Research to review the USDA
administration of conservation program contracts will come to
order.
I would like to welcome our witnesses to today's hearing.
In this hearing, we hope to examine how the U.S. Department of
Agriculture administers conservation program contracts and
whether USDA has been a good manager. The Inspector General's
recent audit of the Natural Resources Conservation Service
showed that NRCS was unable to provide sufficient evidence to
support certain transactions and account balances. The agency
was not able to fix the problems before the audit concluded.
The agency failed to provide proper oversight of its contracts
and obligations, and the audit identified weaknesses in
accounting and controls in many areas. I hope the agency can
learn from the results and be a better manager of its funding.
There is a question that we heard a lot in the news lately:
where did the money go? The taxpayers are asking for
accountability and responsibility with their dollars. I hope we
will hear the answers to other questions as well: where are the
problems, what needs to be fixed and why did this happen. We
must ensure that the NRCS and FSA are effective and efficient
in the administration of conservation programs, and also
following through with contract obligations. We must ensure
that contracts are completed to receive the best result for the
environment. We must ensure that taxpayer dollars are used
properly to receive the best outcome for the effort.
We made substantial funding increases in the 2008 Farm Bill
and we all worked long and hard to reauthorize and make needed
changes to USDA programs. We know that conservation funds have
allowed many farmers to meet environmental regulations in this
changing industry. Conservation programs assist our farmers and
ranchers in strengthening their environmental stewardship. We
know that USDA has supported farmers in being good stewards of
the land. We know that we need NRCS to be better stewards of
the taxpayers' money.
I am extremely interested in hearing what our witnesses say
today. I hope we can then move forward to improve
administration of conservation programs and ensure
agriculture's continued role in conservation.
[The prepared statement of Mr. Holden follows:]
Prepared Statement of Hon. Tim Holden, a Representative in Congress
from Pennsylvania
I would like to welcome our witnesses to today's hearing. In this
hearing, we hope to examine how the U.S. Department of Agriculture
administers conservation program contracts, and whether USDA has been a
good manager.
The Inspector General's recent audit of the Natural Resources
Conservation Service showed that NRCS was unable to provide sufficient
evidence to support certain transactions and account balances; the
agency was not able to fix the problems before the audit concluded. The
agency failed to provide proper oversight of its contracts and
obligations, and the audit identified weaknesses in accounting and
controls in many areas.
I hope the agency can learn from the results, and be a better
manager of its funding.
There's a question we've heard in the news a lot lately: Where did
the money go? The taxpayers are asking for accountability and
responsibility with their dollars.
I hope we will hear the answers to other questions, as well: Where
are the problems? What needs to be fixed? Why did this happen?
We must ensure that NRCS and FSA are effective and efficient in the
administration of conservation programs, and also following through
with contract obligations. We must ensure that contracts are completed
to receive the best result for the environment. We must ensure that
taxpayer dollars are used properly to receive the best outcome for the
effort.
We made substantial funding increases in the 2008 Farm Bill, and we
all worked long and hard to reauthorize and make needed changes to USDA
programs.
We know that conservation funds have allowed many farms to meet
environmental regulations in this changing industry. Conservation
programs assist our farmers and ranchers in strengthening their
environmental stewardship.
We know that USDA has supported farmers in being good stewards of
the land. We know that we need NRCS to be better stewards of taxpayer
money.
I am extremely interested in hearing what our witnesses say today.
I hope we can then move forward to improve administration of
conservation programs, and ensure agriculture's continued role in
conservation. Thank you for being here today.
The Chairman. Thank you for being here today, and I now
recognize the Ranking Member of the Subcommittee, the gentleman
from Virginia, Mr. Goodlatte.
OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN
CONGRESS FROM VIRGINIA
Mr. Goodlatte. Thank you, Mr. Chairman, and I would like to
thank you for calling today's hearing to review the USDA
administration of conservation contracts.
Since 1985, farm bills have increased the size and
complexity of conservation programs to meet the needs of
individual constituencies. Today there are a number of programs
that assist producers in being good stewards of the land.
However, these programs can also be duplicative in nature and
create inefficiencies. Some of the testimony we will hear today
speaks to the fact that we have multiple programs that have
similar or overlapping purposes. In my district, I have one
progressive producer who in an attempt to address water quality
and quantity needs has used six different programs on her farm:
CRP, CREP, EQIP, GRP, WHIP, and CSP. Each one of these programs
has its own set of rules, its own applications and its own
rankings and evaluations. I believe we missed a great
opportunity in the 2008 Farm Bill to streamline and simplify
the delivery of conservation programs. That was a time to look
at the programs as a whole to see if there were any overlapping
missions and goals, to see if programs were working as
effectively as they can, to see if money used for such programs
was sent efficiently. We owe it to the producers and landowners
to create programs that work toward on-the-ground conservation.
We owe it to the American taxpayer to manage those programs so
every dollar spent is accounted for and used wisely.
Throughout today's hearing, I hope to learn more about the
implementation of the 2008 Farm Bill. My constituents in
Virginia continue to ask about how programs will operate in
their final form so they can determine what practices they will
be doing this year. It has been 8 months since the enactment of
the farm bill and I still can't give them an answer.
Again, I thank you, Mr. Chairman, for holding this hearing
and I look forward to hearing the testimony from today's
witnesses.
[The prepared statement of Mr. Goodlatte follows:]
Prepared Statement of Hon. Bob Goodlatte, a Representative in Congress
from Virginia
Mr. Chairman, I would like to thank you for calling today's hearing
to review the USDA administration of conservation contracts.
Since 1985, farm bills have increased the size and complexity of
conservation programs to meet the needs of individual constituencies.
Today, there are a number of programs that assist producers in being
good stewards of the land. However, these programs can also be
duplicative in nature and create inefficiencies.
Some of the testimony we will hear today speaks to the fact that we
have multiple programs that have similar or overlapping purposes. In my
district, I have one progressive producer who, in an attempt to address
water quality and quantity needs, has used six different programs on
her farm (CRP, CREP, EQIP, GRP, WHIP, and CSP). Each one of these
programs has its own set of rules, its own applications, and its own
rankings and evaluations.
I believe we missed a great opportunity in the 2008 Farm Bill to
streamline and simplify the delivery of conservation programs. That was
a time to look at the programs as a whole to see if there were any
overlapping missions and goals, to see if programs were working as
effectively as they can, to see if money used for such programs was
spent efficiently.
We owe it to the producers and landowners to create programs that
work toward on-the-ground conservation. We owe it to the American
taxpayer to manage those programs so every dollar spent is accounted
for and used wisely.
Throughout today's hearing, I hope to learn more about the
implementation of the 2008 Farm Bill. My constituents in Virginia
continue to ask about how programs will operate in their final form so
they can determine what practices they will be doing this year. It has
been 8 months since the enactment of the farm bill and I still can't
give them an answer.
Again, thank you Mr. Chairman for holding this hearing. I look
forward to hearing the testimony from today's witnesses.
The Chairman. The chair thanks the gentleman and recognizes
the Chairman of the full Committee, Mr. Peterson.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
Mr. Peterson. I thank the Chairman and the Ranking Member
for their hard work in leading this Subcommittee, and thank you
for calling today's hearing.
Today's hearing is an important look at the effectiveness
of the major part of USDA's mission. Today's witnesses
conducted separate reviews and focused on different parts of
USDA's conservation mission, yet all of them call into question
the effectiveness of NRCS and FSA conservation program
management. The OIG's audit conducted last year concluded that
the NRCS lacks the proper controls in place to consistently
monitor programs and contracts. Auditors found problems with
obligations, state reimbursements, accruals, leases, financial
reporting and overall lack of documentation for many contracts.
In some cases, documentation was so poor that auditors did not
have enough information with which to complete the audit.
Although NRCS has begun to review their policies and procedures
in response to this audit, we will be keeping a close eye on
their management practices.
A recent GAO report found that USDA lacks the necessary
controls to provide Federal farm program payments to
individuals who exceed income eligibility limits. However, USDA
has recently addressed this by announcing last week that they
would request waivers from producers, which will grant the IRS
the authority to provide the USDA with income verification for
program eligibility. While it is early in the process, this
could be a step in the right direction when it comes to making
sure that program payments go only to those who are eligible.
With these reports in mind, I asked our Committee
Investigator to look at Wetlands Reserve and Wildlife Habitat
Incentive Programs project files over the past 10 years, with
an emphasis on the largest easements and restoration agreements
both in terms of acreage and dollar amount. I asked him to
review the eligibility requirements both for land and for
income, whether the land and the owners met the basic
requirements for participation in these conservation programs.
In many cases he found the adjusted gross income requirements
and 12 month ownership requirements were not followed, or if
they were, they were not properly accounted for in the program
files. His findings also echo OIG's findings regarding poor
documentation and tracking of contracts including annual
monitoring of easements and restoration projects required by
both programs. Spotty billing and accounting were also
prevalent in many of the files. Some of the program files make
it difficult to tell what, if any, restoration work has been
done on many of these program sites. The lack of follow-up from
NRCS or FSA once an easement is filed, or a restoration
agreement is made, raises questions of what actually happens to
the sites after the money is obligated.
While there may not be a smoking gun of improper payments
or outright fraud in any of these examinations, the perception
that an agency with such an important mission cannot do its job
effectively is not acceptable. Those of us who still have fresh
memories of negotiating the farm bill remember the tough
choices all of us had to make on the conservation title. That
explains why today's hearing is so important, and why this
Committee will make sure that those eligible for conservation
programs will be the ones getting them.
So I thank today's witnesses for being here and look
forward to the testimony, and again I thank the Chairman and
the Ranking Member for their hard work.
[The prepared statement of Mr. Peterson follows:]
Prepared Statement of Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Thank you, Chairman Holden for calling today's hearing and for the
work you have done on farm and conservation programs for this
Committee.
Today's hearing is an important look at the effectiveness of a
major part of USDA's mission: to assist farmers, ranchers and
landowners with the conservation of soil, water, and other natural
resources.
Today's witnesses conducted separate reviews and focused on
different parts of USDA's conservation mission. Yet all of them call
into question the effectiveness of NRCS and FSA conservation program
management.
OIG's audit, conducted last year, concluded that NRCS lacks the
proper controls in place to consistently monitor programs and
contracts. Auditors found problems with open obligations, state
reimbursements, accruals, leases, financial reporting, and overall lack
of documentation for many contracts. In some cases, documentation was
so poor that the auditors did not have enough information with which to
complete the audit. Although NRCS has begun to review their policies
and procedures in response to this audit, we will be keeping a close
eye on their management practices.
A recent GAO report found that USDA lacks the necessary controls to
prevent Federal farm program payments to individuals who exceed income
eligibility limits. However, USDA has recently addressed this by
announcing last week that they will request waivers from producers
which will grant the IRS the authority to provide the USDA with income
verification for program eligibility. While it is early in the process,
this could be a step in the right direction when it comes to making
sure program payments go only to those who are eligible.
With these reports in mind, I asked our Committee Investigator to
look at Wetland Reserve and Wildlife Habitat Incentives Programs
project files over the past 10 years, with an emphasis on the largest
easements and restoration agreements, both in terms of acreage and
dollar amount. I asked him to review eligibility requirements both for
the land and for income--whether the land and the owners met the basic
requirements for participation in these two conservation programs. In
many cases, he found the adjusted gross income requirements and 12
month ownership requirements were not followed, or if they were, they
were not properly accounted for in the program files.
His findings also echo OIG's regarding poor documentation and
tracking of contracts, including annual monitoring of the easements and
restoration projects required by both programs. Spotty billing and
accounting were also prevalent in many of the files. Some of the
program files make it difficult to tell what, if any, restoration work
had been done on many of these program sites. The lack of follow-up
from NRCS or FSA once an easement is filed or a restoration agreement
is made raises the question of what actually happens to the sites after
the money is obligated.
While there may not be a smoking gun of improper payments or
outright fraud in any of these examinations, the perception that an
agency with such an important mission cannot do its job effectively is
not acceptable.
Those of us who still have fresh memories of negotiating the farm
bill remember the tough choices all of us had to make on the
conservation title. That explains why today's hearing is so important
and why this Committee will make sure that only those eligible for
conservation programs will be the ones getting them.
I thank today's witnesses for being here and I look forward to
their testimony. Thank you, Chairman Holden, and I yield back.
The Chairman. The chair thanks the Chairman for his
statement and I will remind all our Members, they are welcome
to submit opening statements for the record.
We will now welcome our first panel. Mr. Robert Stephenson,
acting Deputy Administrator for Field Operations at the Farm
Service Agency of the U.S. Department of Agriculture, and first
of all, congratulations to Mr. Dave White for being promoted
from acting Chief to Chief of the Natural Resources
Conservation Service at the Department of Agriculture. We said
that sort of changes the protocol for today's hearing but we
look forward to a great hearing today, Mr. White. You have had
a great career with the USDA in all regions of the country and
in working with the Agriculture Committee in the House and the
Senate, so we congratulate you on your promotion and look
forward to working with you.
Mr. Stephenson, you may start when you are ready.
STATEMENT OF ROBERT STEPHENSON, ACTING DEPUTY
ADMINISTRATOR FOR FIELD OPERATIONS, FARM SERVICE AGENCY, U.S.
DEPARTMENT OF AGRICULTURE,
WASHINGTON, D.C.; ACCOMPANIED BY CANDY THOMPSON, ACTING DEPUTY
ADMINISTRATOR FOR FARM PROGRAMS, FARM SERVICE AGENCY, U.S.
DEPARTMENT OF
AGRICULTURE
Mr. Stephenson. Thank you, Mr. Chairman. We appreciate the
opportunity to review the conservation programs delivered by
the Farm Service Agency.
In addition to conservation, FSA delivers commodity, credit
and emergency programs for the nation's farmers and ranchers.
Most FSA programs are delivered through a network of state and
county offices that are located in over 2,200 rural counties.
FSA's conservation programs include the Conservation Reserve
Program, the Emergency Conservation Program, the Grass Roots
Source Water Program, Voluntary Public Access and Habitat
Incentive Program, and the Emergency Forestry Restoration
Program. We also share with NRCS delivery of the Grassland
Reserve Program.
At the contract level under CRP, FSA assists farmers and
ranchers with: enrolling the land; ensuring compliance with
program goals and requirements; managing the contract; making
payments and obtaining the technical assistance, which is
generally provided by NRCS, local conservation districts or
state and local foresters and includes practice eligibility
determinations; conservation plan development; and practice
certification. Chief among those agreements to provide
technical assistance is FSA's relationship with NRCS. Since the
Dust Bowl days of the 1930s, FSA and NRCS have been partners in
delivering financial and technical assistance in helping to
conserve and improve the nation's natural resources. At the
national level, the agencies jointly work in the development of
program policies such as CRP. The agencies also meet regularly
to discuss resource allocation issues and ways to improve
program performance.
America's farmers and ranchers have made significant
strides to lessen the impact to our nation's environment over
the last 20 years. As of February 2009, this past February, CRP
participants have restored more than 2 million acres of
wetlands and installed about 2 million acres of buffers. Land
enrolled in CRP will also reduce soil erosion by 400 million
tons each year, and has the potential to be one of the nation's
largest carbon sequestration programs on private lands. Last
fall FSA issued over 900,000 checks to CRP participants. FSA
also maintains many of the databases that are essential
including average adjusted gross income, conservation
compliance, and financial offset.
In an environment of increasing public service demands,
scrutiny and decreasing resources, FSA has improved program
integrity and fiscal stewardship by enhancing internal
controls, transparency and accountability in USDA's financial
management programs. By recognizing that internal controls and
solid financial management practices are the cornerstones, FSA
has focused much of this effort on working to address
weaknesses. Commitment to continuous improvement to
strengthening internal controls and accountability has resulted
in the achievement in seven consecutive Commodity Credit
Corporation unqualified or clean financial statement audit
opinions.
Further improvements in financial integrity are planned.
Under CRP, software to record financial obligations at the
contract level is scheduled for release within the year.
The recently enacted stimulus bill provided $50 million to
assist with the stabilization and modernization of FSA's
information technology systems. This funding will be used to
continue essential investments to stabilize the infrastructure
and performance of the web-based systems, and to initiate the
modernization program to provide a modern-day IT system
architecture supporting farm program delivery and moving away
from the 1980s-era technologies used today.
Geospatial Information Systems, or GIS, is an innovative
technology that FSA and NRCS have been working with over the
last decade to change the way the agencies manage conservation
programs and enable more efficient management of conservation
programs. The agencies, FSA and NRCS, have developed a
substantial collection of computerized map assets such as the
soil survey, aerial imagery and farm field boundaries that
describe the agricultural activities nationwide. Integration of
these powerful resources into everyday business processes is an
ongoing challenge, but significant progress has been made in
laying the foundation for implementing cost-effective and
commonsense solutions to better support FSA conservation
efforts and conservation program delivery.
Conservation programs have provided notable achievements in
both conserving and protecting our natural resources. The
strong working relationships between FSA and NRCS have led to
the efficient and effective delivery of conservation programs.
The agencies will continue to work to improve the delivery of
program services and to ensure the environmental benefits are
achieved in a sound fiduciary manner.
Thank you, Mr. Chairman, and we would be happy to respond
to any questions.
[The joint prepared statement of Mr. Stephenson and Mr.
White follows:]
Joint Prepared Statement of Robert Stephenson, Acting Deputy
Administrator for Field Operations, Farm Service Agency, U.S.
Department of Agriculture; and Dave White, Chief, Natural Resources
Conservation Service, U.S. Department of Agriculture, Washington, D.C.
Mr. Chairman and Members of the Subcommittee, we appreciate the
opportunity to review conservation programs delivered by the U.S.
Department of Agriculture (USDA). We are pleased to share our
experiences in implementing the Conservation Title. We will also offer
our observations on the changing business environment in which programs
operate, the working relationships with our USDA conservation partners,
and the opportunities and challenges we face in implementing the 2008
Farm Bill.
Farm Service Agency
Background and Programs
The Farm Service Agency (FSA) delivers conservation, commodity,
credit, and emergency programs. Program level funding varies depending
upon market and weather conditions and new legislation. For Fiscal
Years (FYs) 2007 and 2008, the program level was $30.8 billion and
$25.0 billion, respectively. We estimate the level to be $23.7 billion
for FY 2009. FSA has a staffing level of just under 14,700 staff years
and an annual salaries and expenses budget of about $1.5 billion.
FSA's conservation programs include the Conservation Reserve
Program (CRP), Emergency Conservation Program (ECP), Grass Roots Source
Water Program (Source Water), Voluntary Public Access and Habitat
Incentive Program (Public Access), and the Emergency Forestry
Restoration Program. FSA also shares program delivery with the Natural
Resources Conservation Service (NRCS) of the Grassland Reserve Program.
Implementation Model
Most FSA programs are delivered through a network of state and
county offices that are located in over 2,200 rural counties. Other
programs, such as Source Water, are implemented through the National
Rural Water Association and Public Access is implemented as grants to
state and Tribal governments.
At the contract level, under CRP, FSA assists farmers and ranchers
with enrolling land, ensuring compliance with program goals and
requirements, managing the contract, making payments, and obtaining
technical assistance which is generally provided by NRCS or local
conservation districts. In some cases, non-government providers may
also offer technical assistance which includes practice eligibility
determinations and conservation plan development.
In delivering its conservation programs, FSA has entered into
agreements with some of its partners to provide technical support.
Chief among those agreements is FSA's relationship with NRCS. Since the
1930's, FSA and NRCS employees have worked closely together to assist
farmers and ranchers in conserving and improving our nation's natural
resources.
The NRCS role included developing technical standards and providing
technical assistance. Over time, NRCS' role has expanded in the area of
program delivery as this Committee has added a number of important
conservation programs to the NRCS portfolio including the Environmental
Quality Incentives Program (EQIP), Conservation Security Program, and
Wetlands Reserve Program (WRP).
FSA's agreement with NRCS for CRP includes providing technical
assistance. Other government partners include USDA's Forest Service
(FS) and Cooperative State Research, Education, and Extension Service;
state forestry agencies, and local soil and water conservation
districts.
FSA, NRCS, and FS have a long history of delivering conservation
programs to farm and ranch community. Since the Dust Bowl days of the
1930's, FSA and NRCS have been partners in delivering conservation
programs' financial and technical assistance. The success of our
efforts is seen across the landscape in windbreaks, waterways,
filterstrips, and wetlands implemented through programs such as
conservation compliance, ACP, EQIP and CRP.
Both agencies are committed to the delivery of conservation program
that will ``get conservation on the ground'' in an efficient and
effective manner. We take our fiduciary responsibilities seriously and
want to be accountable to the public for our performance. These common
goals require the agencies to work together and with our partners.
At the national level, the agencies jointly work in the development
of program policies such as CRP. The agencies meet on a regular basis
to discuss resource allocation issues and ways to improve program
performance. In the case of CRP, FSA administers the program but
utilizes the strength of agencies such as NRCS and FS for providing
technical assistance.
NRCS and FS are recognized as leaders in developing conservation
practice technical standards and conservation plans and providing
conservation technical assistance. Also, soil surveys and natural
resource and forest inventories are critical components of designing
effective conservation programs.
FSA has been delivering conservation programs since the 1930's.
Since the 1980's, FSA and its partners, including NRCS, transformed the
CRP program from primarily an erosion control program to a multi-
dimensional conservation program that now addresses water quality,
wildlife, water quantity, threatened and endangered species, and carbon
sequestration issues.
2008 Farm Bill Implementation
The 2008 Farm Bill responded to a broad range of ongoing
conservation challenges including soil erosion, wetlands conservation,
water quality, wildlife habitat, and potential markets for sequestered
carbon and other environmental services.
The 2008 Farm Bill re-authorized CRP and Source Water and
authorized, for the first time, Public Access and the Emergency
Forestry Restoration Program.
The CRP-related provisions will be implemented in two parts. We are
working diligently on Part one, which includes the Farmable Wetland
Program (i.e., aquaculture restoration, constructed wetlands, flooded
prairie wetlands, and wetland restoration), tree thinning, and the
conservation exception under the new Average Adjusted Gross Income
provisions.
The other CRP-related provisions of the 2008 Farm Bill which
includes cropping history requirements, transition payment to beginning
and socially disadvantaged farmers and ranchers, and routine grazing
are scheduled to be implemented after completion of an Environmental
Impact Statement.
Public Access provides grants to state governments and Tribes to
expand public access opportunities on private land and is scheduled to
be implemented later this year.
The Emergency Forestry Restoration Program will assist in the
restoration of forests damaged due to natural disasters including
replanting. An appropriation of funds is necessary to implement.
Program Accomplishments
America's farmers and ranchers have made significantly strides to
lessen the impact on our nation's environment over the last 20 years.
Under all USDA conservation programs, soil erosion on cropland has been
reduced by over 1.2 billion tons per year. As of February 2009, CRP
participants have restored more than 2 million acres of wetlands and
about 2 million acres of buffers. Land enrolled in CRP will also reduce
soil erosion by 400 million tons each year and has the potential to be
one of nation's largest carbon sequestration programs on private lands.
During October 2008, FSA issued over 900,000 checks to CRP
participants and most of the participants received their payment with a
few days after they were eligible. FSA maintains many of the databases
that are essential including Average Adjusted Gross Income,
conservation compliance, financial offset. FSA also works extensively
with NRCS to integrate our databases to assist them in implementing
programs such as Environmental Quality Incentive Program, Grassland
Reserve Program, and other programs.
Program Performance_Financial
In an environment of increasing public service demands, scrutiny
and decreasing resources, FSA has improved program integrity and fiscal
stewardship by enhancing internal controls, transparency, and
accountability in USDA's financial management programs. By recognizing
that strong internal controls and solid financial management practices
are the cornerstones of effective Federal stewardship, FSA has focused
much of this effort on working to address weaknesses.
By developing and implementing corrective action plans that ensured
a correct measurement of improper paperwork and improper payments, FSA
was able to reduce its improper payments reported from $2.9 billion
(11.2 percent) to $187 million (1.3 percent) between FYs 2006 and 2008.
In addition, commitment to continuous improvement to strengthening
internal controls and accountability has resulted in the achievement in
seven consecutive Commodity Credit Corporation (CCC) unqualified or
``clean'' financial statement audit opinions, testimony that the CCC's
financial statement data is reliable, accurate, and complete.
FSA continues to work on improving our financial controls for our
program. From FY 2006 through FY 2008, we conducted reviews under the
Improper Payments Information Act (IPIA) to determine the potential
extent of improper payments and ways to improve our business process.
These statistical surveys indicated that the error rate for
improper payments for CRP was 3.53 percent for FY 2006 which was
reduced to 1.25 percent for FY 2008. For CRP and other programs, this
reduction was achieved through an aggressive commitment by the Agency
which included: (1) direct senior management involvement; (2) agency-
wide training; (3) increased accountability at levels; (4) development
and use of checklists; (5) enhanced program eligibility verification;
(6) elimination of automatic rollover of eligibility determinations;
(7) improved documentation control; (8) a comprehensive re-examination
of payment files; and (9) increased internal controls and external
audits.
Future Outlook
Further improvements in financial integrity are planned. Under CRP,
software to record financial obligations at the contract level is
scheduled for release within the year.
The recently enacted Stimulus Bill provided $50 million to assist
with the stabilization and modernization of FSA's Information
Technology systems. This funding will be used to continue essential
investments to stabilize the infrastructure and performance of the web-
based systems and to initiate the modernization program to provide a
modern-day IT system architecture supporting Farm Program delivery and
moving away from the 1980's era technologies used today.
We also have ongoing efforts to: (1) improve data quality and
develop a data warehouse; (2) improve the governance and the quality of
user requirements; and (3) to improve and standardize common business
process. These efforts all require significant staff and financial
resources.
Geospatial Information Systems (GIS) is an innovative technology
that FSA and NRCS have been working with over the last decade to change
the way the agencies manage conservation programs. GIS provides an
intuitive solution for managing, visualizing, and understanding land
information that enables more efficient management of conservation
programs.
FSA and NRCS have acquired and developed a substantial collection
of computerized map assets such as soil survey, aerial imagery (NAIP),
farm field boundaries (Common Land Unit that describes the agricultural
activities nationwide), and others that are used both internal to USDA
and are available to the wide range of customers via data centers and
data warehouses.
Integration of these powerful resources into everyday business
processes is an ongoing challenge to the agencies but significant
progress has been made in laying the foundation for implementing cost-
effective and common sense solutions to better support FSA conservation
efforts and conservation program delivery. GIS has the capability to
support and enable better decision-making and effective solutions to
the wide range of conservation issues that FSA faces in the coming
years.
While environmental indicators clearly show progress in resource
conservation is being made, many challenges remain and new issues
continue to emerge. For example, excess nutrients impair water quality
in many rivers, streams, and lakes, and hypoxia is a significant
problem in the Gulf of Mexico, Chesapeake Bay, and other waters. In
addition, conflicts over water availability for agriculture,
environmental, and urban use are increasing as water demands increase.
As one of the largest water users, agriculture has a vital interest in
securing water quality and quantity. Conservation is bringing about
important achievements, but more can be done, particularly for wetland
and aquatic systems.
In the near term, CRP contracts enrolling about 3.9 million acres
are scheduled to expire on September 30, 2009. Taking into account the
reduced enrollment authority of 32.0 million acres and ongoing
enrollment for continuous signup practices, there is some room under
the cap to enroll more acres, though there is insufficient authority to
re-enroll all of these acres. The lost conservation benefit could
result in increases in water and air pollution and could exacerbate
recovery of the Lesser Prairie Chicken in the southern Great Plains.
Natural Resources Conservation Service
Conservation Investments and Trends
Before getting into the operational mechanics of the NRCS
conservation programs, I would like to take just a moment to put the
Federal investment in agricultural conservation programs into
perspective. Consider for a moment the following trends in conservation
program investments just in the past 12 years:
In 1996, many of the conservation programs that are so
familiar today were just in their infancy. Congress created and
authorized EQIP at $200 million per year, but it was regularly
limited to nearly $170 million per year.
In 1996, new programs such as the Farm and Ranch Lands
Protection Program (FRPP) and Wildlife Habitat Incentives
Program (WHIP) were funded at $35 million and $50 million total
over the life of that farm bill.
From the 1996 to 2002 Farm Bills, conservation program
investments were increased by more than $17 billion over the
previous baseline of spending, with programs such as EQIP
receiving over a billion in annual spending. FRPP and WHIP
greatly expanded in scope and ambitious new programs such as
the Conservation Security Program were created.
The 2008 Farm Bill continued this support with an additional
increase of more than $4 billion over the previous baseline.
Today, NRCS implements more than 20 conservation programs
and initiatives, with an annual budget of more than $3 billion.
2008 Accomplishments
The significant investments made by this Subcommittee in farm bill
conservation programs, combined with the complete range of conservation
authorities and initiatives are generating impressive results. USDA
appreciates the ongoing support of this Subcommittee to ensure that
farmers and ranchers have the financial and technical resources they
need to realize their conservation goals. Consider for a moment the
conservation accomplishments from last year:
During FY 2008, NRCS employees helped develop conservation
plans covering more than 42 million acres of privately owned
farm, ranch, and forestland. We also assisted producers and
other land managers to voluntarily implement conservation
practices on nearly 50 million acres. These actions on private
lands yield public benefits we all enjoy in the form of cleaner
and more abundant water, cleaner air, improved wildlife habitat
and healthier soils.
NRCS provided more than $2 billion in financial assistance
to landowners and communities to encourage participation in
programs such as EQIP, WHIP, CSP, FRPP and others, resulting in
tens of thousands of cost share and incentive contracts and
easements.
Volunteers contributed over 810,000 hours to NRCS efforts--
valued at over $15 million. The agency also expanded
conservation implementation capacity through the certification
and re-certification of several hundred Technical Service
Providers.
Beyond delivering planning and technical assistance, NRCS
influenced the acceleration and adoption of new technologies,
standards and approaches through Conservation Innovation Grants
and our National Technology Support Centers.
The NRCS Snow Survey and Water Supply Forecasting program
issued 12,500 water supply forecasts and we mapped or updated
soil surveys for over 35 million acres.
Cumulative Results
Looking at the implementation of conservation programs just since
the beginning of this decade, NRCS has worked with farmers, ranchers,
and landowners to:
Apply conservation plans and systems on 328 million acres.
Apply conservation practices through the Environmental
Quality Incentives Program (EQIP) on 145 million acres.
Enter into nearly 313,000 (EQIP) contracts.
Create or restore wetlands on 2.7 million acres.
Apply comprehensive nutrient management plans on almost 40
million acres.
Develop new or updated soil maps on 260 million acres.
Deploy a new Web Soil Survey Program with more than 3.5
million website visits by the public.
These accomplishments are a testament to the continued trust and
relationship that we maintain at the local level with farmers,
ranchers, Conservation Districts, and other partners. As we initiate
implementation of the 2008 Farm Bill, with its increased investment in
conservation programs, NRCS looks forward building on these
accomplishments.
Growing Conservation and Some Growing Pains_the NRCS Financial Audit
While the results of conservation programs and investments have
reshaped the landscape, it is clear that just getting conservation on
the ground is not the full measure of program success. With the change
in the scope of conservation programs and expenditures, it has come a
realization that we need to better assess and maintain excellence in
accounting procedures and execution, and to ensure that our
recordkeeping systems are robust.
In FY 2008, NRCS contracted with an external audit firm to conduct
our first stand-alone financial audit, under the supervision of the
USDA Office of Inspector General and the USDA Office of the Chief
Financial Officer. At the end of the FY 2008 audit, the auditors issued
a disclaimer of opinion. The auditors found problems with the accuracy
and completeness of the FY 2008 financial information. In some measure,
this was due to inadequate recordkeeping in NRCS offices. During the
timeframe of the audit period, NRCS was unable to provide the auditors
adequate support to verify our financial information as presented for
FY 2008. In other words, we could not prove the validity of our
numbers.
The auditors found five material weaknesses: accounting and
controls for (1) undelivered orders, (2) unfilled customer orders, (3)
accrued expenses, (4) property, plant and equipment, and (5) controls
over financial reporting. They also identified deficiencies in our
internal controls over purchase and fleet card transactions, and the
general controls environment for our information systems.
NRCS understands the seriousness of these findings and is moving
aggressively to correct them. When informed of the auditors'
preliminary findings, NRCS began developing a corrective action plan
and initiated a massive undertaking--a review of over 160,000 open
obligations. To our knowledge, a review of this size and scope is
unprecedented in the Federal Government. The agency developed and
delivered training to over 330 NRCS personnel in mid-November, 2008 and
continues to aggressively review open obligations. So far NRCS has
deobligated over $1.3 billion since the review started in FY 2007. To
help prevent this from reoccurring, NRCS now mandates that all line
officers formally certify on a quarterly basis the accuracy,
reliability, and completeness of information in 21 separate areas of
financial management.
During this file-by-file, transaction-by-transaction evaluation, we
learned a great deal about our existing contracts, easements, and other
open obligations. As a result of the audit and our aggressive approach,
we have outlined a comprehensive corrective action plan necessary to
establish a firm foundation for going forward. NRCS is analyzing and
rewriting policy and procedures for program, administrative, and
financial aspects of our business to ensure that all responsible
parties understand what is required. In addition, we have begun an
initiative to redesign and streamline our business processes. I am
confident this initiative will lead to the development of new
strategies for delivering conservation assistance that are more
efficient and effective.
The external auditor is currently performing a special review of
corrective actions taken to date for the FY 2008 audit. The results of
this review will be available in April. In addition, the audit firm has
started work on the FY 2009 financial audit. Our goal is to have a
clean audit in the near future.
Clarifying the Term, ``Deobligation of Funds''
Prior to the stand-alone audit, a limited scope review in FY 2007
showed a high number of fund deobligations within our agricultural
conservation programs. Deobligation of funding occurs when funding that
was previously obligated--either through a contract or agreement--is
released because of cancellation, termination, modification or spending
adjustments.
A key point to remember is that whenever funds are deobligated,
they are not lost to the taxpayer nor are the funds necessarily lost to
a prospective farmer or rancher. Funds deobligated in our discretionary
programs--Conservation Technical Assistance, Emergency Watershed
Protection, Watershed Rehabilitation, for example--are generally
shifted to other priority projects within the respective program. Funds
deobligated in mandatory farm bill programs, if not used for contract
modifications or cost overruns, are eventually returned to the
Treasury.
There are a number of reasons why funds may be deobligated out of
contracts. These reasons vary across the diverse suite of programs
delivered by NRCS. Some deobligations historically have occurred
because of how NRCS delivered its programs. Here are some examples:
(1) A WHIP contract included a plan for a field border, including
the number of acres and the costs associated with creating the
border. Both the number of acres and the costs were estimates
at the time of obligation. Two years later, when the producer
went to install the field border, the costs both came in less
than estimated. The excess funding in the contract resulted in
a deobligation of the difference between the estimate and the
actual cost.
(2) For a WRP contract, restoration costs were estimated based on a
preliminary restoration plan. When the wetland restoration was
actually completed some time later, it was found that the
restoration costs were overestimated, leading to deobligation
of some funds.
Deobligations also routinely occur because of noncompliance caused
by the sale or transfer of property, changes in agricultural
operations, death or serious illness of participants, natural
disasters, bankruptcies, and personal hardships. These factors cannot
be anticipated at the time a contract is signed. Here are a few
examples:
EQIP contracts can be up to 10 years in length. A producer
signed up in year 1 with a commitment to install a grassed
waterway in year 5 of the contract. Funding was obligated for
all of the practices in the contract at the time the contract
was signed at the beginning of year 1. In year 3, the producer
passed away and the family decided to sell the farm. The funds
for the grassed waterway had to be deobligated.
In 2004, a producer signed a contract that included an
animal waste structure to be built in 2006. After Hurricane
Katrina, the cost of construction materials skyrocketed. The
producer was unable to afford his or her share of the cost to
build the structure in 2006, and the funds were deobligated.
Again, deobligations due to these types of producer noncompliance
cannot be anticipated at the time a contract is signed. We have a keen
interest in answering the question--what is an acceptable rate of
deobligation for the types of programs NRCS administers? A 2005
Economic Research Service analysis estimated that the average annual
exit rate for farms is nine to ten percent per year. Our latest
estimated exit rate for EQIP contracts is thirteen percent annually.
The constantly shifting mosaic of conditions in the agricultural
economy and industry as a whole and at the individual farm scale
indicates that some level of deobligation is expected. That is not to
say, however, that NRCS is not committed to reducing deobligations. We
have embarked on a number of efforts to do just that, to reduce to the
greatest extent possible the number and amount of deobligations due to
NRCS business practices and program policies.
A key point to remember is that farm bill conservation program
contracts are distinctive agreements. These contracts are a product of
an individual farmer or rancher voluntarily offering his or her own
financial resources toward a benefit not just for themselves but for
the public writ large. NRCS manages hundreds of thousands of
conservation program contracts. It is inevitable that, with some
frequency, a producer's personal or financial situation will change
over the lifetime of a contract. Our objective is to ensure that
farmers can be good conservation stewards while maintaining
productivity and profitability. Cancellation of conservation projects
are a reality and, given the emerging economic climate, may increase in
the near term.
Moving Forward
Looking ahead, we believe we are better positioned to handle the
issues raised by the audit and fund deobligation statistics. Starting 2
years ago, NRCS began developing a number of new business tools and
practices that will improve our financial management controls. This
fall, we will introduce a business tool that will integrate easement
contracts into our financial management system. Currently, we are
reviewing every policy document produced by the agency to find ways to
improve program delivery, tighten financial controls, and reduce fund
deobligations. In 2008, the agency implemented a new WRP business model
that will result in improved payment controls and fewer deobligations.
Two other program policy changes--payment schedules and a payment
inflation index--should also help reduce future deobligations. Finally,
as I mentioned earlier, we have launched an initiative to establish a
new vision for delivering our programs and carrying out the agency's
core activities--conservation planning and the application of
conservation practices--through a new business model and modernized
workforce.
The audit has been a positive experience for NRCS in that it
pointed out ways that the agency can achieve a higher standard in
implementation of its programs. The issues that the audit raised are
solvable and we have taken aggressive action to immediately address the
deficiencies and weaknesses in our financial system. However, we
recognize that these issues will not be solved overnight. Our
corrective action plan details actions that will be implemented over
the next year and beyond. NRCS leadership is evaluating options to
address accounting expertise across the Agency and issuing strengthened
policies and procedures governing business and financial management
processes. In February 2009, the USDA Office of Inspector General
concurred, without exception, to our planned actions.
We believe we are on the right track to be better equipped for
success in financial management for the future. NRCS has evolved
greatly over the last 2 years in our understanding of proper accounting
for our financial resources. We have embraced the financial audit as a
way to improve achieving our mission and stewardship of taxpayer
assets. I want to reinforce that the audit did not show any instances
of funds being misused or improper payments. We recognize that there
are three critical aspects of the situation: human capital, processes,
and systems. Our planned remedies to the problems revealed by the audit
will address each of these critical areas.
Conclusion
Conservation programs have provided notable achievements in both
conserving and protecting our natural resources. However, several
existing and emerging environmental challenges will require needed
attention. Efficient and effective delivery of USDA conservation
programs could not occur without a strong working relationship between
FSA and NRCS. The agencies will continue to work to improve the
delivery of program services and to ensure the environmental benefits
are achieved in a sound fiduciary manner. We thank the Chairman and
Members of the Subcommittee and would be happy to respond to any
questions that Members might have.
The Chairman. Thank you, Mr. Stephenson.
Mr. White.
STATEMENT OF DAVE WHITE, CHIEF, NATURAL RESOURCES CONSERVATION
SERVICE, U.S. DEPARTMENT OF
AGRICULTURE, WASHINGTON, D.C.
Mr. White. Greetings, Mr. Chairman, Members of the
Subcommittee. It is an honor to be here to discuss with you
some of the conservation activities of the Natural Resources
Conservation Service.
You said it well, Mr. Holden, Mr. Peterson, and mentioned
it as well, Mr. Goodlatte: There has been a substantial and an
incredible increase in funding for conservation across our
nation, particularly since the 2002 Farm Bill, and these things
are transforming our landscape. In my written testimony, I talk
a lot about acres and number of plans and stuff like that and I
am not going to visit with you about that. In your packet you
should have some color photographs. They show before and afters
of what the land looked like before the conservation practices
and what they look like now. You will see stuff from Chesapeake
Bay, from the West, from the South. I am not going to belabor
it but I would like to draw your attention to the cover
picture, which is of two little, baby, girl bear cubs. This is
the Louisiana black bear. It is the only black bear species on
the threatened and endangered list. In 2007, these two little
cubs were born in Mississippi. They were the first Louisiana
black bears born in the delta of Mississippi in something like
40 years, and they were born on a WRP-restored site.
But while these programs are helping to reshape America,
transform our landscape, just getting conservation on the
ground is not enough. With the increased resources we have
increased demands, particularly in the financial category, and
Mr. Peterson, when you were taking about WRP and you said it is
not acceptable, I agree with you: it is not acceptable and we
are going to fix it, sir.
In 2008, and this is what brings me here today, we had our
first full stand-alone audit as an agency. We have been in
business since 1933. And when we sent out the RFP, the request
for proposals, the company that won it was KPMG. This is one of
the best auditing firms in the nation. For our first-ever
audit, we brought in the A-Team and they found nine
deficiencies. Mr. Peterson mentioned some of them. Five of them
were material weaknesses. And as a result, the audit conclusion
was a disclaimer. They couldn't come to a conclusion. There
wasn't enough documentation. They couldn't reach a final
number. I would emphasize again that they did not find any
misuse of funds or improper payments, and I have been told that
other agencies when they have this first stand-alone it is
something like a 3 to 5 year journey to get there. Some
agencies have taken over a decade. So that was November 2008.
December 2008, we went and undertook one of the most massive
open-obligation reviews ever. We looked at 160,000 open
obligations. We created a web-based tool that was transparent
that allowed us to monitor so we could see real-time action in
that. We also looked at our leases, the capitalized and the
operating leases. Mr. Goodlatte, I know you mentioned the
deobligations, we deobligated something like $241 million in
that effort. On deobligations, let us talk a little bit about
that. They occur for a variety of reasons. Producers often
request contract cancellations, resulting in deobligations.
Their financial situation changes. Their life changes. We have
disasters like Hurricane Katrina. There are processes internal
to NRCS, activities that cause them that we have since
corrected, particularly in the Wetlands Reserve Program.
Our goal, Mr. Chairman, we know we have problems. We want
to fix those problems. We want to be absolutely stellar in how
we operate these programs. Let me just give you a few of the
steps we are taking. We now require quarterly financial
certifications from our State Conservationists and our leaders
at headquarters. We have put a stand-alone financial
measurement in everyone's performance appraisal. We have
developed a corrective action plan that tracks those nine
deficiencies that KPMG found. We sent it up here the other day
but those nine deficiencies are outlined, what actions we are
going to take, what we have taken. This was submitted to the
Office of Inspector General on January 30. They accepted it
without comment, without any changes, which I was told was
pretty unusual, and we are in progress with that. The key thing
we need to do, and I know we have an auditor, a CPA here, so I
am a little bit nervous; what we need to do is to establish
that agreed-to baseline number so we can move to getting that
clean audit.
We have some problems, Mr. Chairman. I agree with that, but
I hope you will also agree that they are fixable and we are on
the road to fixing them. Mr. Chairman, I have been in
agriculture for a long time and I know that things grow best in
the sunshine. I am going to commit to you that we are going to
be open, we are going to be honest with you and the Members of
this Subcommittee and full Committee, and we are going to be
transparent as we go about fixing this thing. You can see the
pictures, how we are transforming the landscape. Our challenge
now is to bring our paperwork stuff up to snuff.
Thank you. I look forward to any questions.
[The joint prepared statement of Mr. Stephenson and Mr.
White is located on p. 8:]
The Chairman. Thank you, Mr. White.
The chair would remind Members that they will be recognized
for questioning in order of seniority for Members who were here
at the start of the hearing. After that, Members will be
recognized in order of arrival.
I will ask our panelists if they could explain in more
detail how your agencies share information. Do you use the same
computer system and how does the flow of information between
the agencies work?
Mr. Stephenson. Thank you, Mr. Chairman. Information flow
comes from a number of different ways. We do have automated
processes that include name and address files, it includes a
lot of subsidiary information such as the average adjusted
gross income, conservation compliance, financial offset. On a
local level where they have access to that data, we also still
have to transfer some data manually. For CRP, for example, FSA
will generally take the offer even though NRCS is sometimes the
first contact, depending upon who is there to speak with the
farmer. After we take the initial information, NRCS will do
some initial eligibility work from a technical perspective, and
then that information is passed back to us to go ahead and
process the contract.
The Chairman. Mr. White?
Mr. White. Thank you, Mr. Chairman. Bob pretty much said it
all. There are critical intersections between us and probably
one of the greatest is the adjusted gross income. We are
completely reliant on FSA and our ProTracts system, which is
our main web-based tool that we do our contracting in. It goes
into the FSA system to find the adjusted gross income, to look
at producer eligibility, so there is a lot of cooperation
between us. At NRCS, we also maintain this thing called the
Office Information Profile (OIP). It is the list of offices. We
do that for the Department. But there are many, many areas that
we work together and share data across the agencies.
The Chairman. The GAO report indicates that they found
$49.4 billion went to ineligible individuals and that six
percent of that was in conservation payments. Can you explain
the roles of each of your agencies in determining payment
eligibility for the adjusted gross income test?
Mr. White. I can address part of that. There was an audit
that found that there was some duplication of payments between
the Conservation Security Program (CSP), EQIP, and the Wildlife
Habitat Incentives Program (WHIP). We have put in place in our
ProTracts system a check that will go back and forth between
those programs to make sure that there aren't duplicate
payments. Now, we do rely on the adjusted gross income from the
database that is maintained by FSA.
The Chairman. Mr. Stephenson?
Mr. Stephenson. Mr. Chairman, a colleague of mine actually
is versed in the data that is collected with the adjusted gross
income which she can answer.
The Chairman. Absolutely.
Ms. Thompson. Good morning. My name is Candy Thompson. I am
the acting Deputy Administrator for Farm Programs in FSA.
Currently, producers when they come into the county office or
the service center, they fill out a form 926, which collects
information. They certify to their adjusted gross income. As
you know, the farm bill provided three different adjusted gross
income provisions, $1 million for conservation, and there are
three questions on that form, the $500,000 for non-farm, the
$750,000 for farm income and then the $1 million for
conservation, and that information is collected and entered
into the subsidiary files.
The Chairman. Thank you.
Mr. White, you mentioned steps that you are taking for
improvement at the agency. Can you assure the Subcommittee that
the implementation of the 2008 Farm Bill conservation programs
will be smooth and on time?
Mr. White. I think only a madman would make that assurance.
I can assure you we are going to do your darnedest to make sure
they run smoothly. We will cooperate with our agencies. We are
putting into effect the electronic computerized systems that
will help us do that, sir.
The Chairman. Thank you.
The gentleman from Virginia, the Ranking Member, Mr.
Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman.
Let me direct this question to both of you. In the
Government Accountability Office's October 2008 report
referencing payments to participants who exceed the adjusted
gross income, there was a recommendation that the USDA work
with the IRS to develop a method to determine whether all
recipients of farm program payments meet income eligibility
requirements. Last week the USDA published a proposal in the
Federal Register that would require all applicants of farm
programs to sign a waiver allowing the Internal Revenue Service
to release tax information to FSA. I want to ask each of you if
you believe that this proposal includes applicants of
conservation programs.
Ms. Thompson. That press release that went out on the data-
sharing efforts with IRS addresses all of the adjusted gross
income requirements.
Mr. Goodlatte. Including conservation programs?
Ms. Thompson. Including conservation.
Mr. Goodlatte. So under what authority are you acting for
Title II programs? And let me just add, we certainly did not
discuss anything like this and I don't know that it was the
intent of the Congress. Why are you requiring all applicants
for these programs to do something, sign a waiver of very
personal information that I am sure many people are not going
to be very happy about at all to do something that Congress did
not express any intention to have you do that?
Ms. Thompson. In the farm bill, it did have a provision for
enforcement of the adjusted gross income provision, and we are
working to enforce these provisions and ensure that only
eligible persons receive the payments. By teaming with the IRS
through this data-sharing effort, we hope to identify producers
who may exceed the statutory provisions, but we don't intend to
obtain tax information from the IRS, just more of an indication
from the IRS that producers may have exceeded these AGI
provisions.
Mr. Goodlatte. Do you intend to run that check on every
single applicant for the programs?
Ms. Thompson. The intent is to start with our programs
where we collect the AGI form for and ask them to sign this
waiver form to enable the IRS to look at the data for us.
Mr. Goodlatte. Will this delay the applicant's processing
of their application for farm payment programs? I know that
when we have had these issues in other areas where one
government agency has to seek information from another, there
is sometimes very lengthy delays in getting the information.
Ms. Thompson. It is not our intent to delay the payments.
We are working with the IRS on this provision right now and we
do not have all the details worked out, but it is not our
intent to delay the payments.
Mr. Goodlatte. Let me switch subjects to another one that I
did mention in my opening statement, and that is the concern of
some of my constituents, some of whom had personal experience
with this, interested in knowing about the status of these
conservation programs. I wonder if you can give us a timeline
when the 2008 Farm Bill conservation programs will be fully
implemented. Let us start with you, Mr. Stephenson, and go to
Mr. White.
Mr. Stephenson. For the Conservation Reserve Program, we
are going to be implementing in two parts. Part one hopefully
will be implemented this spring and part two will be
implemented after completion of the environmental impact
statement. That is probably going to be some time next year,
the first half of the year hopefully. The Voluntary Public
Access Program is in the queue. It is $50 million for states
and tribes for public access. It is in the queue. It is
probably going to be this summer. The Emergency Forest
Restoration Program is an appropriated program and we need
funds to be made available so we can do the NEPA work before we
will be able to implement that program.
Mr. Goodlatte. Mr. White, and by the way I want to also
extend my congratulations to you being named the official head
of the agency and we have always enjoyed working with you and
look forward to continuing to do that.
Mr. White. Thanks, Mr. Goodlatte. Mr. Holden mentioned the
rules changes, now that I am permanent, you can pummel away.
The rules cover a lot of different programs here. By the time
January 20 had occurred, most of them had been published as
interim final rules. Post that, we had to pull a couple of them
back to make a technical correction. There had to be a
technical corrections in EQIP and Wildlife Habitat Incentives
Program, and those have since been reissued and it dealt with
the payments on joint tenants. The rules as initially published
had said that a husband and wife would be treated as one entity
instead of two and we had to make it conform with the rules. So
there were some corrections, but those rules are back out now
for public comment. And we took advantage of the re-publishing
to also ask for comment on how these could be used for climate
change within the statutory authorities. I know that is of
interest to this Committee and we will share those comments
when we get them. There is one that is going to go out probably
this week on procedures for the State Technical Advisory
Committees, and then there are three others that are back in
USDA for internal clearance. One is the Wetlands Reserve
Program, then we have the Farmland Protection Program and the
Grassland Reserve Program. Farmland Protection Program,
Grassland Reserve Program, we have resolved our internal
differences. I think they will go out pretty quick. Wetlands
Reserve Program, I am meeting with the Office of General
Counsel this afternoon to discuss some of our differences. The
last big one is the Conservation Stewardship Program. It is an
internal clearance at USDA. We hope to publish it in April, Mr.
Goodlatte. We are on track to have the sign-ups, do everything
in June, hopefully July, enter into the contracts August,
September to have full implementation of all the programs in
the 2008 Farm Bill, sir.
Mr. Goodlatte. Thank you very much, and Mr. Chairman, thank
you.
The Chairman. The chair thanks the gentleman and recognizes
the Chairman of the full Committee, Mr. Peterson.
Mr. Peterson. Thank you.
Just to follow up a little bit, as I understand this
process with the IRS, first of all, producers already have to
sign this waiver so that is not something new. As I understand
how this is going to work, maybe you can confirm this, that the
IRS is going to run the people that get these payments and if
they are in the range of $500,000 or $750,000 or a million,
depending on what their situation is, then that is going to be
just given back to you, that these people potentially are in
this range and then you are going to follow up and get
verification. So that is kind of how it is going to work. They
are not going to be getting any information from the IRS. They
are just giving them the names so the IRS can run them against
their tax returns to see if their adjusted gross income is
close to $500,000 or to $750,000 or whatever it is, and then if
it is, then they will send the names back and then they look
into it further. So I don't think it is a very intrusive thing
that they are doing. I think it makes sense and hopefully it
will resolve this issue so we are not embarrassed by getting
another report that comes out that says we are not doing what
we should be doing.
The other question I have regarding these payments is how
are you going to track the payments to comply with these new
direct attribution rules and is the FSA computer system set up
to do this?
Ms. Thompson. You are correct about how the data-sharing
effort will work with IRS, and on the direct attribution, we
are working to implement those provisions on both the old
system, on the system 36, and also on our web-based
applications. It will track it back to the person that has
signed up through either our 902 form, which is our payment
eligibility and limitation form, or the 901, which shows the
members' IDs of that entity, if it is an entity who is
participating in the programs, and the payments will be
attributed to that individual ID number.
Mr. Peterson. Thank you.
Mr. White, what directions were State Conservationists
offices given in regard to their ability to waive the previous
1 year land ownership requirement for WRP, and did anybody in
the national office keep track of how many waivers were taking
place?
Mr. White. You know, sir, the waivers were in policy and if
you felt that it met certain criteria, and I can't recall those
right now, but you could issue a waiver, and that was on the 12
month ownership rule at that time. I do not know if those
waivers were tracked at headquarters or not.
Mr. Peterson. Do you have anybody keeping track of how many
waivers are going on?
Mr. White. Well, I will now.
Mr. Peterson. Fair enough. Mr. White, could you be able to
tell the Committee how much mandatory farm bill conservation
spending was returned to the Treasury because of contracts that
weren't completed?
Mr. White. In the last 3 years we have deobligated about
$1.3 billion total. I think since 2002 we have deobligated
about $19 billion in both discretionary and mandatory. We have
deobligated about $1.3 billion, but not all of that has been
returned to the Treasury. If you had an 2007 EQIP contract and
for some reason it was cancelled, and say it was $10,000, that
$10,000 would go back into the 2007 EQIP pot. If Mr. Goodlatte
needed funds for certain reasons, they could draw from that. So
until those Treasury symbols expire, they are available for
other farmers depending on the year, but at some point in time
they will go back. But, as far as how much we have actually
sent back to Treasury, I will have to get you that, sir.
Mr. Peterson. Well, if you could get that information, I
would appreciate it.
Mr. Chairman, I yield back.
The Chairman. The chair thanks the Chairman.
The gentleman from Missouri, Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
I guess this question is for Mr. White. I am kind of
curious. We had an overpayment here of about $49 million. What
are the plans to recover that, if any?
Mr. White. The $40 million----
Mr. Luetkemeyer. Forty-nine million dollars, is that
correct, from 2003 to 2006, overpayments of that amount. Are
there plans to recover that or withhold future payments from
those individuals who received checks through overpayments of
funds?
Mr. White. Right. Is this from the GAO report?
Mr. Luetkemeyer. Yes.
Mr. White. And this was overpayments in conservation?
Mr. Luetkemeyer. Right.
Mr. White. Okay. I think of that, and I am a bit unclear,
sir, of that $49 million, it was like $6 million in
conservation, and I don't know, was that related to the AI--I
always mess this up. I am saying AIG. It is AGI.
Mr. Luetkemeyer. AGI. Yes.
Mr. White. It is not the other one.
Mr. Luetkemeyer. We still have financial troubles here,
don't we?
Mr. White. Yes, we do, sir. Let us hope we never get like
that. Of the $49 million, there was $6 million in NRCS and I
will have to go back and find out exactly what the process is
right now. What we have done in the past when we found
overpayments is, we worked with the producer to get that
funding back. In areas like the Conservation Security Program
where you would get funding over a set period of years, say we
find out you got paid too much in year 1, well, we can reduce
year 2, year 3 and we can even out the payments without having
to collect a lot of money from the producer, assuming it is not
a scheme or device or something like that. But we will get back
to you, sir.
Mr. Luetkemeyer. Also along that line, I know there has
been previous discussion with regards to verifying income and
using IRS to initially do that. Do we not require just a page
off a tax return to verify income?
Ms. Thompson. For adjusted gross income verification, right
now it is a certification that we take from the producer. They
can provide tax information, or they can have a certification
from a CPA or another third party approved by the Secretary to
also provide that certification as to their AGI.
Mr. Luetkemeyer. Is there a sharing of this information
between different programs?
Ms. Thompson. Yes. We have one AGI process that all the
programs use.
Mr. Luetkemeyer. So in other words, if the farmer--because
Mr. Goodlatte a while ago made mention of one of his
constituents had six or seven different programs that she was
accessing. All those would be able to take from that initial
file, whatever information is presented and shared among all
those programs?
Ms. Thompson. That is correct.
Mr. Luetkemeyer. Then why do we have a problem with income
verification?
Ms. Thompson. It is a certification from the producer on an
annual basis, so I don't think we have a problem with it. The
GAO did this data mining with IRS and identified these possible
ineligible payments from producers who may have exceeded the
AGI provisions. In the past we have taken either the producer's
certification or if they were pulled for spot check, then we
would look for additional documentation.
Mr. Luetkemeyer. Well, if we are already verifying for it,
why do we need to go back to the IRS for some additional
information? Am I missing something here?
Ms. Thompson. We take a certification from the producer and
so this is an effort to verify that certification.
Mr. Luetkemeyer. Okay. The certification from the producer
is not a tax return?
Ms. Thompson. No, it is a form.
Mr. Luetkemeyer. It is a form that he can sign and he
doesn't necessarily have to tell the truth on it. Is that what
you just said?
Ms. Thompson. Basically, yes.
Mr. Luetkemeyer. Okay. So why then aren't we getting the
tax return? You are going back to the IRS instead of getting
the copy of the tax return.
Ms. Thompson. I think there is a concern with us getting
tax data from the IRS, and I am not sure that the Tax Code
would allow us to get the tax information. This is a way to
work with the IRS, for the IRS to look at the tax information
and then provide to us whether or not the producer may have
exceeded that AGI.
Mr. Luetkemeyer. Doesn't Farm Services also deal with some
credit?
Ms. Thompson. Right, the farm loans.
Mr. Luetkemeyer. And don't you get income tax information
from the individual who you loan money to there?
Ms. Thompson. Probably, but on a smaller scale. I mean, on
the Direct and Countercyclical Payment Program, we have about
1.7 million producers.
Mr. Luetkemeyer. I yield back the balance of my time, Mr.
Chairman.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from New York, Mr. Massa.
Mr. Massa. Thank you, Mr. Chairman, and Mr. White, as a
freshman Member of this Committee, I must express to you that
your candor is very, very welcome. Thank you very much, and
thank you for what your personnel in the field do in the many,
many farms in my district. This is a question away from
finances, but as I have traveled in the last 3 or 4 months
throughout the farms, there has been a great appreciation for
what the field personnel do where the rubber hit the roads.
But, there is also a significant concern as we see the
retirement of an awful lot of individuals that have been doing
this for 25 to 30 years, and the difficulty in recruiting new
personnel who are knowledgeable to take their place. Could you
please comment as it pertains to your organizations what kind
of recruiting efforts need to be held, and do you see this as a
problem as I see it as a problem?
Mr. White. Absolutely. We are an aging workforce. You know,
my 15 minutes are going to be up pretty soon and then hopefully
I am going to be on a beach somewhere. But I am not there yet.
We do have a human capital strategy. We know the number, as
this bulge, the Baby Boomers, move through all our
organizations, and we trying to aggressively find ways to have
younger people or newer employees come into the system. We are
very aware of it, very cognizant of it. Could I also talk a
little bit about, when you talk about the people in the field
offices?
Mr. Massa. Please.
Mr. White. They are the ones that are on the sharp edge of
the sword. That is where we have to implement these programs. I
started there carrying a surveying rod for a technician 30-some
years ago, and I still love and respect those people. We are
trying to look at our organizational structure right now, not
so much as what does headquarters look like and then flow down,
but what do those people on the sharp edge of the sword, what
do they need. Can we develop a direct line of sight from that
district person all the way to the Office of the Chief and
structure ourselves where we meet their needs, as you move up
the organization, we can get more in the field, and we do a
better job.
Mr. Massa. I appreciate that. That is exactly the feedback
I am hearing from the farmers with whom I am traveling over the
winter months. I would like to know if you would be willing to
accept an invitation to come to my district so I can introduce
you to some of those people out in the field, and I can satisfy
myself that that direct line of sight is in fact being
connected. Would you be open to that invitation?
Mr. White. Do they serve value-added barley products there?
Mr. Massa. Yes, we do, but more importantly, we serve
value-added vinting products.
Mr. White. I am not afraid, sir. I am there.
Mr. Massa. Again, thank you very much.
Mr. White. Thank you, Mr. Massa.
The Chairman. The chair thanks the gentleman and recognizes
the gentleman from Pennsylvania, Mr. Thompson.
Mr. Thompson. Thank you, Mr. Chairman.
My first question actually is for Mr. Stephenson. You
mentioned in your testimony that some expiring CRP acres will
not be able to be reenrolled due to the reduced enrollment
authority of 32 million acres. Are any of these expiring acres
suitable for crop production?
Mr. Stephenson. Well, yes, I suppose certainly some of them
are, and when it comes to the expiration of those contracts, we
will work with those producers and NRCS will work with those
producers if they want to return it to crop production. It does
depend on each individual contract and the location of that
land, what types of crops and how they could be cropped, but
certainly some of it could be returned to crops. That is
correct.
Mr. Thompson. Just a follow-up then. With the current
struggle to meet the RFS mandate and also provide an adequate
and affordable feed supply, shouldn't we focus on enrolling our
more environmentally sensitive land and bringing out suitable
cropland for production?
Mr. Stephenson. We have tried to make great strides in CRP
in the past 20-plus years now to convert it from essentially a
supply control program to a multidimensional environmental
program that focuses on water quality, wildlife, soil erosion,
now carbon sequestration, and air quality. We have attempted in
the past to restrict, as much as we can, prime farmland from
being enrolled in CRP because that land should be cropped.
There are some overlaps because no matter the acre, they all
provide environmental benefit of some type, especially around
streams, for example. So we have endeavored to move in that
direction. We understand those demands and we want to work with
those demands as these contracts expire and as we remake the
program. One of the issues we are going to be focusing on over
the next year is soliciting public input on the future
direction of CRP and how it should go, given all the demands
for land for production, for biomass, for energy, and for
conservation.
Mr. Thompson. I am certainly encouraged at getting our
farmers as part of that, obviously the key stakeholders there.
Kind of following that line of unintended consequences, you
talk about trying to prevent certain things from happening. A
lot of my district is actually a very rural district in
Pennsylvania, and I have a question regarding the CREP. Some of
the farmers in my district are relying on CREP as a form of
retirement because the current reimbursement rate under the
program really is significantly higher than the open market
value in rural Pennsylvania. Where there are certainly positive
benefits from CREP, there is no doubt about that, I am
convinced of that, I really do have concerns that one of the
unintended consequences is that farms are not easily passed
along from generation to generation because of that. Have there
been any efforts to address this situation, from either
panelist, please?
Mr. Stephenson. I am a little confused as to the question
about transferring property to heirs, to family?
Mr. Thompson. Right, with the CREP program providing
incentives obviously to take it out of production and hence,
because of the reimbursement rates, kind of trumps the
incentive to pass the farms along in a productive state so that
we are continuing to sustain farming through the generations.
Mr. Stephenson. We do need to be mindful of that, I agree.
When we negotiate CREP agreements with state governments, we
endeavor to focus on the environmental need of the state and
ensure that it is an important environmental need to the nation
as well. The state throws in some extra money and we usually
end up with effective payment rates a little bit higher than
market level or some higher than market levels. Really, I don't
think our intent under CREP is for that to be a retirement
program. Generally, although not exclusively, but, generally,
our hope is we are focusing on smaller acreages. That said, we
also have a 25 percent cropland enrollment limit by county for
the program as well. We would certainly like to work with you
on that issue to kind of better understand it and follow up if
we could.
Mr. Thompson. Thank you, Mr. Chairman.
The Chairman. The chair thanks the gentleman. The Chairman
will ask Members for their indulgence here, but Mr. Pomeroy has
a problem in North Dakota that he has to attend to. I would
like to recognize him out of order at this time. Mr. Pomeroy.
Mr. Pomeroy. I thank the Chairman. We have all kinds of
problems in North Dakota. I do want to verify with NRCS what
Chairman Peterson verified with Minnesota. Is there an
emergency reserve being established to deal with such relief as
the program administers to inundated areas like is now
occurring in the Red River? We are also getting flooding from
ice jams in the Missouri at the present time.
Mr. White. Mr. Pomeroy, Godspeed as you go back.
Mr. Pomeroy. Thank you.
Mr. White. I wanted to let you know that the program we
operate, the Emergency Watershed Protection Program, which
helps clean up afterwards, we have already established two
accounts, one with Minnesota, one with North Dakota, $500,000
each, so if they need to do something tonight at midnight or
over the weekend, they can do it. They have the money, they
have the authority. And the other thing, Mr. Pomeroy, is if
they need more, pick up the phone. The second thing is, we are
currently conducting a floodplain easement signup across the
nation. We have $145 million in Recovery Act funding for that,
and because of what is happening in Minnesota and North Dakota,
there are some other areas where Members have asked, we are
going to extend that floodplain easement signup for 2 weeks if
individuals were interested in that. So, yes, sir, I will
confirm that.
Mr. Pomeroy. Thank you, and thanks for that extension. I am
really not in a position to even evaluate whether we might be
talking about a further extension, but at the moment we have
high water. We will worry about cleanup tomorrow.
Mr. White. You are doing triage right now.
Mr. Pomeroy. Correct. Thank you very much.
Mr. Chairman, thank you.
The Chairman. The chair thanks the gentleman.
The gentleman from Minnesota, Mr. Schauer.
Mr. Schauer. I pass.
The Chairman. The gentleman passes. The gentlewoman from
Colorado, Ms. Markey.
Ms. Markey. I hope you haven't covered this but over the
course of the audit, the NRCS had to cancel some contracts, I
understand, because the landowner was getting paid for work not
done. If that is so, can you tell me the extent of that number
of any contracts that had to be cancelled?
Mr. White. Thank you, Ms. Markey. I appreciate it.
Deobligations occur for a variety of reasons with producers,
health, financial. If you don't mind, I brought some samples
just to give you an idea. This is from Texas. ``I am requesting
termination of the last practice in my contract. Due to the
loss of my husband, I can no longer financially be able to
continue the contract. I hate to not complete what my husband
started but with all these increases in expenses, I need to
find different avenues.'' We have one from Colorado. This is a
couple that says, ``When we were originally awarded the
contract, we were in the middle of the growing season and we
decided to do it in the fall. Then Katrina hit. Everything we
needed for our project went to double or more of the prices we
had obtained. The supply of pipe was just not there. This was
followed by 3 years of drought and water shortage, which caused
us financial problems, and this year was the final blow to our
plan when Vince became ill and we were unable to do the work
ourselves. There is no money in place to be able to hire the
work done.'' The last one: ``I am writing on behalf of my
mother. Several things have happened. My brother and partner
died. My aunt, who owned part of the place, also passed away.
Furthermore, on March 12, 2006, fire burned 99 percent of this
place, leaving it unusable. Because of this, we are forced to
sell our cattle herd at a huge discount.'' Those are the kind
of letters that I got as a State Conservationist in Montana,
that my colleagues around the nation get, and how could I not
sign to cancel those contracts? We are not going to
investigate, did her husband really pass away or things like
that. These are human stories and they are all here, Ms.
Markey, and there are real reasons why we deobligated some of
these contracts. ERS data shows that there is about a ten
percent quit rate in farming every year. Our EQIP data has
shown a 13 percent contract cancellation rate. So are we in the
ballpark? I don't know. But I saw it in Montana when Katrina
hit. The price, anything with steel or pipe in it just doubled
or tripled. Our producers can't afford it. We are not--this is
different. We are not sending them money. We are helping them
pay the cost. They are putting in money to establish these
conservation practices that those photos show. It is a joint
effort, and when our partners have difficulty, we need to be
compassionate and we need to understand their needs, ma'am.
Ms. Markey. Thank you.
The Chairman. Does the gentlewoman yield back?
Ms. Markey. Yes, I yield back.
The Chairman. The gentleman from Kansas, Mr. Moran.
Mr. Moran. Mr. Chairman, thank you very much. Just a couple
of questions, probably directed at FSA. The proposal of having
farmers sign a waiver for IRS information, I have concerns with
that. One of them is the value of that information to USDA in
the sense that an IRS form, a tax form shows adjusted gross
income. It doesn't differentiate that the more important issue
from an FSA or USDA point of view, which is non-farm adjusted
gross income versus farm adjusted gross income. So just getting
a line on a tax return that says adjusted gross income is
insufficient amount of evidence one way or another about
whether or not a farmer qualifies. Any thoughts about that?
Ms. Thompson. I think we agree with you on that. It isn't a
simple calculation for the adjusted gross income provisions. So
we are working on a formula in looking at the tax return, for
IRS to look at the tax return, not only the adjusted gross
income but any schedules that are associated with that to give
an indication that their non-farm income exceeds the $500,000,
and then they would provide that ID number back to Farm Service
Agency for us to contact the producer for additional follow-up.
Mr. Moran. And that follow-up occurs at what level? Is the
county committee going to be involved in examining a
neighboring farmer's return?
Ms. Thompson. Our intent is to handle it at a centralized
level, but we are not sure yet of the volume, and so the intent
is to try to handle it at a more centralized level, a national
level.
Mr. Moran. I have concerns about having it handled at the
local level because the privacy invasion is even greater, but
at a centralized level, which may mean national, a farmer may
be called upon to come to that centralized location, long
distance, time, effort, in order to explain his or her tax
return. I hope you all take a second look at what you are
proposing to do, and thank you for your answer.
In regard to CRP, one of the most common conversations that
I have with landowners when I am home is, ``Moran, are they
going to have a signup this year?'' It is a question that
farmers, landowners need answers to. We have a huge number of
acres that will come out of the program this year. Some of
those acres probably could be farmed. Others probably should
not be, and September is rapidly approaching. We need answers
from USDA about CRP intentions.
Mr. Stephenson. Mr. Moran, we do not intend on having a
general signup this year. We do intend on having a general
signup next year. There are about 4 million acres of land
coming due, contracts expiring this fall, and they could return
to production. If their land is eligible for continuous signup,
they can reenroll the land under a continuous signup contract.
They can do that.
Mr. Moran. Have you reached the conclusion that you now
have to go through a NEPA process before you can do a CRP
signup?
Mr. Stephenson. We know that before we can issue the final
rule to implement much of the program that, yes, we will need
to do an environmental impact statement on CRP.
Mr. Moran. Which is a new development in the process?
Mr. Stephenson. Actually we did an environmental impact
statement after the 2002 Farm Bill before we issued the final
rule, and since the beginning of the program before the 2002
Farm Bill back to the beginning of the program, we did an
environmental assessment before we issued the rule.
Mr. Moran. But now the change is that every signup will be
preceded by an environmental evaluation?
Mr. Stephenson. No, sir, it is going to be by farm bill.
Mr. Moran. By farm bill?
Mr. Stephenson. Yes.
Mr. Moran. Thank you, Mr. Chairman.
The Chairman. The chair thanks the gentleman.
The gentleman from Michigan.
Mr. Schauer. Thank you, Mr. Chairman, and I appreciate the
opportunity to learn as a new Member about the conservation
programs. It is great to have both of you here. I am from
Michigan, the only Member from the Michigan delegation on the
Agriculture Committee, a very important sector in our economy.
Michigan has the second most diverse agricultural economy in
the country. I am sure you know that, and thanks to your
programs for helping us grow. Everything I think about here as
a Member of Congress is, how can we help create jobs. We are
scrutinizing the conservation program contracts, but I wonder
if you can talk about this topic within the context of how can
we help fuel our agricultural economy, and if you want to talk
about states that are particularly hurting with high
unemployment rates, that would be fine with me.
Mr. Stephenson. You are correct. The farm bill generally
provides quite a bit of money locally and there is a multiplier
effect for that money. Take CRP for an example: We make both
annual and cost-year payments with that. We are quite confident
that seed is bought. They may need to at least do maintenance
or buy some small equipment for CRP and the rest of their
operation. All that is bought locally. We know in some cases in
CRP there is a recreational benefit, public viewing as well as
hunting. Hunters come in, they spend money, stay in lodging and
maybe even pay the CRP participant. Also, just more broadly in
the farm bill, the commodity title pays out lots of money a
year locally. Our farm loan programs make loans locally. Under
the stimulus bill, the farm loan programs are also providing
money throughout, about $168 million, we have already obligated
with stimulus money under our farm loan programs. So that is
probably the FSA part.
Mr. White. I am ready. There is a program. It is called
IMPLAN. It is a computerized program. It was developed by the
Forest Service and University of Minnesota, I believe, and you
can actually figure out the multiplier effect that Bob was
talking about. In Montana every year, we would figure out how
much money was spent on conservation in the various programs
and we would actually issue news releases by county on what
that meant to the people who lived there because there is a
direct relationship. If you buy a fencepost, somebody has to
sell it, somebody has to transport it, somebody has to put it
up. So a lot of this turns over a great deal. Specifically on
the Recovery Act funding, we changed our policy. I mentioned
earlier when Mr. Pomeroy was here on the floodplain easements,
part of the purpose of that funding is to increase the
workforce, and what we have done is upgrade the restoration
requirements of those floodplain easements. We don't want to
just buy it and set it and forget it like the ``Showtime
Rotisserie,'' but we want to actively restore the hydrology,
restore native plants, knock the dikes out and that is all
going to create jobs. We have the Watershed Rehabilitation
Program. We have $50 million in that. That is all going to be
locally contracted jobs to repair those old dams. Your Ranking
Member, Mr. Lucas, has one of the highest populations of those
dams in the state as does Texas, so that is going to be jobs
there. We are very cognizant. There is a huge spillover impact.
I will tell you what I will do is, I will go back and see if we
have the IMPLAN data for Michigan and see if we can't provide
you specifically what the NRCS, those programs are doing.
Mr. Schauer. That would be great. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. The chair thanks the gentleman.
Mr. Stephenson, you mentioned use of the Geospatial
Information System as a useful tool for managing and
understanding land information that enables more efficient
management of conservation programs. Can you elaborate on how
you use this technology? Is it available to everyone? Do they
pay for it? And how will you spend the recent appropriation of
$24 million?
Mr. Stephenson. I will start with describing GIS and maybe
I can have some help about how we are going to the spend the
$24 million. We use Geospatial Information System technology
to--let me back up. We maintain farm field data history, land
use data throughout the country, however many farms in the
country there are and 300 or so million acres. We are in a
process now of digitizing all that information, putting it on a
layer, a GIS layer, for example. Then program people like Dave
White or myself under CRP, we will be able go read that data
and it will help us target what programs--maybe we don't need
as much acreage, maybe we can do a better job of targeting the
right acreage when we enroll programs. It can also help us with
compliance work as far as programs are concerned. We have not
yet finished the digitization of all that land nationally. With
luck, I believe it will be done by the end of the year, but it
is a long process and so there are some states because of
Katrina in 2005 are a little behind schedule. One thing we have
done in CRP with the GIS is, when we implemented in 2006 the
Emergency Forestry Conservation Reserve Program for the 2005
hurricanes, we did it using GIS as much we could in that area
and we did it on a web-based program. More recently in the past
year or so, we have rolled out web-based continuous signup for
CRP that also uses GIS. I do not believe that data is yet
available publicly even though I suspect we are going to have
to address that sometime in the future.
The $50 million on the stimulus is not going to be used for
GIS, but we are going to be using with 2009 money $24 million
to support--I need to give you some more information.
The Chairman. I have several other questions and some
suggestions, and maybe I will just submit them to you and you
could respond back to the Subcommittee as quickly as possible.
But just one, and if you can't answer this, I understand it,
but you just said $50 million in the stimulus you are not going
to use. Do you know what you are going to use it for?
Mr. Stephenson. It is going to be used for stabilization of
the system and perhaps modernization of our automated system. I
did not mean to suggest that it was going to necessarily all be
used for GIS.
The Chairman. Like I said, sir, I have several more
questions and suggestions. I will submit them to you and if you
can get back to us as soon as possible.
Mr. White?
Mr. White. I would like to talk about GIS because we have
upgraded our capabilities. We do cooperate a lot with FSA, but
one key thing and it directly relates to what Ms. Markey was
saying. I gave her deobligations from a personal producer
standpoint but there are other reasons for that as well, like
when we would do an EQIP contract. We use a program called
ToolKit and we will have the map from the common land unit from
FSA and say we were going to put a fence. Well, in the past we
would say well, that looks like about 1,000 feet. We would
estimate it. With GIS now, we can go in there and we know it is
963.5 feet, and that means our contracts are more accurate and
we are less likely to overestimate or underestimate when we put
those conservation plans together. That is one of the great
things that GIS is doing for us.
The Chairman. Thank you.
Do any Members have any follow-up questions?
Mr. Moran. Mr. Chairman, Mr. Goodlatte had a question that
I would appreciate----
The Chairman. The chair recognizes the gentleman from
Kansas.
Mr. Moran. Thank you, Mr. Chairman.
Mr. Peterson of the Committee contended that producers have
had to sign a waiver before the 2008 Farm Bill to release
information to the IRS. Is that accurate, and what is that
waiver and is it mandatory?
Ms. Thompson. Beginning with this year with the signup for
the 2009 direct and countercyclical payments, there is a new
adjusted gross income form that producers are signing that does
have a statement on there that the producer agrees to allow
Farm Service Agency to contact IRS to verify the AGI
information.
Mr. Moran. And that comes about with giving USDA
authority--let me say that differently. I am sorry. In what way
did Congress give USDA authority in regard to that waiver?
Ms. Thompson. The way we are reading it, it is part of the
enforcement provision on the adjusted gross income.
Mr. Moran. From the previous farm bill?
Ms. Thompson. No, this was under the 2008 Farm Bill.
Mr. Moran. So any authority that you have to require a
farmer to grant the waiver for access to information in your
opinion comes from the 2008 Farm Bill?
Ms. Thompson. Right, and I am not sure about the previous
farm bill. I would have to check on that.
Mr. Moran. If you would, thank you.
Ms. Thompson. Thank you.
Mr. Moran. Thank you, Mr. Chairman.
The Chairman. I thank the gentleman. Any other follow-up
questions?
The chair thanks the panel for their testimony and looks
forward to working with you.
We will now call up our second panel. Ms. Kathleen Tighe,
Deputy Inspector General, Office of Inspector General, U.S.
Department of Agriculture; Ms. Lisa Shames, Director of Natural
Resources and Environment, U.S. Government Accountability
Office; and Mr. John Jurich, Investigator for the Agriculture
Committee, U.S. House of Representatives.
Ms. Tighe, you may proceed when you are ready.
STATEMENT OF KATHLEEN S. TIGHE, DEPUTY INSPECTOR GENERAL,
OFFICE OF THE INSPECTOR GENERAL, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.
Ms. Tighe. Thank you very much, Mr. Chairman, Members of
the Subcommittee. Thank you for asking us here to address the
Natural Resources Conservation Service's administration and
management of its programs.
As part of our oversight responsibilities, we have
conducted a variety of work in this area including both
financial statement audits and audits of NRCS's and FSA's
program operations. The Chief Financial Officers Act mandated
that the Office of Inspector General perform audits of the
Department's financial statements. We have conducted the audit
of the Department's consolidated financial statements and
stand-alone audits of FNS, RD, Forest Service and CCC. For the
other agencies including FSA, we selected transactions from
them in the universe we look at for purposes of the
consolidated financial statement.
In Fiscal Year 2007, our financial audit responsibilities
were expanded to include a separate audit of NRCS's financial
statements. For Fiscal Year 2008, NRCS, in conjunction with us,
contracted with KPMG for a full financial statement audit. That
audit was the first attempt to audit NRCS's transactions
comprehensively. KPMG found that NRCS could not support its
transactions and account balances due to a wide range of
documentation problems including lack of evidence supporting
obligations such as accrued expenses, undelivered orders and
unfilled customer orders. We found these problems occurred
mainly because NRCS lacked Federal financial accounting
experience or expertise. Until 2004, NRCS had relied on FSA
employees to help account for its transactions and had not
developed a staff of accounting professionals.
As to the NRCS program operations, I would like to talk
about a couple of recent audits we have done in the Wetlands
Reserve Program. The Wetlands Reserve Program has been the
subject of three different audits over the last several years.
Our first audit dealt with how NRCS compensated owners for land
that would be used for conservation. Legally, NRCS was required
to limit landowner compensation to the difference between the
fair market value of the land before and after the conservation
easement. NRCS assumed the land subject to these easements had
little or no remaining market value. However, our review found
that the market value can be substantial. As a result, we
estimated that NRCS could have potentially saved the program
more than $159 million for the 5 year period we looked at.
Our second audit report found that ongoing problems of
coordination between NRCS and FSA resulted in producers
receiving farming subsidies for lands that should have been
retired. When producers participate in the Wetlands Reserve
Program, they must inform FSA that they have reduced the arable
land they are farming by the number of acres now being
dedicated to conservation. In our review, we found cases in
which landowners had not notified FSA and continued receiving
farm subsidy payments for land where the conservation easements
had been purchased by the government. We also found a handful
of cases involving the grassland reserve easements where NRCS
in fact had done the notifications but FSA hadn't made the
adjustments to the crop base.
Our third report noted problems with how NRCS monitored
landowners' overall compliance with conservation programs. We
found that five of the six state offices we reviewed did not
annually monitor nearly 90 percent of our sample of 153
easements. We also found possible noncompliance issues on
approximately 40 percent of the easements we did visit.
We are currently completing a review of NRCS's
implementation of its Dam Rehabilitation Program. Congress
appropriated approximately $160 million for Fiscal Years 2002
through 2007 for purposes of assessing and rehabilitating our
aging system of flood control structures. We found, however,
that NRCS had not assessed for rehabilitation 79 percent of the
dams categorized as high hazard. In our preliminary discussions
with senior NRCS officials, they acknowledged the need to
expeditiously complete these assessments.
We appreciate the cooperation and the assistance of NRCS
and FSA during our oversight reviews, and I am happy to answer
any questions.
[The prepared statement of Ms. Tighe follows:]
Prepared Statement of Kathleen S. Tighe, Deputy Inspector General,
Office of the Inspector General, U.S. Department of Agriculture,
Washington, D.C.
Good morning, Mr. Chairman and Members of the Subcommittee. Thank
you for inviting me to appear before you today to address the Natural
Resource Conservation Service's (NRCS) administration and management of
its programs.
As the oversight agency of the U.S. Department of Agriculture
(USDA), the Office of Inspector General (OIG) works to ensure that the
Department's programs are delivered as efficiently and as effectively
as possible and to prevent fraud, waste, and abuse in USDA's programs
and operations. As part of overseeing NRCS, we have conducted a variety
of recent audit work, including financial statement audits and audits
of NRCS' program operations. We appreciate the agency's cooperation and
assistance during these oversight reviews, and we note the good work
being done by NRCS personnel across the country. I will begin my
remarks by addressing NRCS' efforts to adequately account for the tax
dollars it receives and spends.
Financial Statement Audits
The Chief Financial Officers Act of 1990 mandated that OIG perform
financial statement audits of the Department's financial statements. In
Fiscal Year 2007, OIG's financial audit responsibilities were expanded
to include a separate audit of NRCS' financial statements. For Fiscal
Year 2008, NRCS, in conjunction with OIG, contracted for an NRCS
financial statement audit. The contractor, KPMG, conducted the audit
with OIG serving as the Contracting Officer's Technical Representative
to oversee and monitor the contract. For Fiscal Year 2008, KPMG was
unable to provide an opinion on NRCS' financial statements because the
agency could not document or support its transactions and account
balances.
To understand how NRCS arrived at this point, some background is
necessary. Prior to 2004, NRCS and the Farm Service Agency (FSA) shared
responsibility for farm programs. As part of this arrangement between
the two agencies, NRCS provided the technical assistance producers
required, and FSA administered the programs, including providing the
financial accounting. Since the Chief Financial Officers Act of 1990
did not require a separate financial statement audit of NRCS, OIG did
not issue a separate opinion on the agency's financial statements.
Instead, NRCS' transactions were included in the universe from which we
selected transactions for the consolidated financial statement audit.
The Farm Security and Rural Investment Act of 2002 changed this
arrangement by making NRCS fully responsible for administering its own
farm programs, including the necessary financial accounting. Full
responsibility switched to NRCS with the start of Fiscal Year 2004,
which meant that NRCS employees were now preparing the transactions we
sampled in our consolidated financial statements.
Beginning in Fiscal Year 2007, the Office of Management and Budget
(OMB) required a separate financial statement audit of NRCS. In this
requirement's first year, the agency contracted to perform a review of
several accounts instead of a comprehensive audit. OIG monitored the
contractor's work by attending meetings, reviewing audit evidence, and
reviewing and approving deliverables. The contractor issued a report
noting that NRCS' accounting departed from generally accepted
accounting principles. These accounting problems were caused by NRCS
overstating unpaid and undelivered orders, needing better accounting
controls, and lacking complete supporting documentation. After the
review, NRCS embarked on a project to improve its records in
preparation for the Fiscal Year 2008 financial statement audit.
The 2008 financial statement audit was the first attempt to audit
NRCS' transactions comprehensively. The independent certified public
accounting firm contracted to perform this work--KPMG--was unable to
provide an opinion because NRCS could not support its transactions and
account balances. There were a wide range of documentation problems,
including a lack of evidence supporting obligations such as accrued
expenses, undelivered orders, and unfilled customer orders. For
example, KPMG found a number of accrued expenses (which are expenses
that are incurred during 1 fiscal year, but paid later) that either
lacked support or lacked support that matched the expense. In addition,
KPMG also found deficiencies in how NRCS accounted for leases and
easements.
These problems occurred because NRCS lacked Federal financial
accounting expertise. Until 2004, NRCS had relied on FSA employees to
help account for its transactions, and had not cultivated a staff of
accounting professionals. Part of this problem also has to do with how
NRCS understands its mission within USDA. Many NRCS officials perceive
their primary role as providing technical and scientific assistance to
producers. Training employees to correctly account for its activities
was not the agency's first priority.
NRCS has taken steps to address the deficiencies disclosed in the
2008 financial audit. To reach a correct statement of the agency's
balances as of September 30, 2008, NRCS has:
Trained over 300 NRCS employees concerning financial
accounting principles in the areas that were identified as
deficiencies in the Fiscal Year 2008 audit.
Developed an automated tool to assist these employees as
they validate and correct balances for specific general ledger
accounts.
Performed quality assurance reviews of the clean-up efforts
performed by the states to address issues identified in the
audit.
Required the Deputy Chiefs and State Conservationists to
attest that their financial information is complete, accurate,
and reliable.
Based on the results of this clean-up effort, NRCS will adjust its
financial statements to what it believes are the correct balances for
the fiscal year ending September 30, 2008. NRCS believes these ending
balances will serve as the foundation for an improved Fiscal Year 2009
financial statement.
Beginning last month, NRCS engaged the services of KPMG to evaluate
the effectiveness of its efforts to clean up its financial statements.
While it would be premature to anticipate the results of KPMG's
evaluation, NRCS believes that its clean-up efforts will enable the
agency to achieve an unqualified opinion on future financial statement
audits, which KPMG will also be performing.
Wetlands Reserve Program (WRP): Financial Accounting
As an illustration of how NRCS' financial accounting and its
program operations are interrelated, I would like to discuss one of our
recent audits of NRCS' Wetlands Reserve Program (WRP).\1\ WRP is a
voluntary program that offers landowners technical and financial
support to restore, enhance, and protect qualified wetlands on their
property. By the end of Fiscal Year 2008, over 2 million acres were
enrolled in WRP under approximately 9,400 easements and 1,200
restoration agreements. As of October 15, 2008, NRCS had obligated
approximately $150 million in WRP funds for Fiscal Year 2008.
---------------------------------------------------------------------------
\1\ ``WRP--Wetlands Restoration and Compliance,'' Audit Report
10099-4-SF, dated August 25, 2008.
---------------------------------------------------------------------------
Early in our review of WRP payments, we found that NRCS was
obligating expired funds--the agency was using funds that had been
authorized under the 1996 Farm Bill after that bill had been superseded
by the 2002 Farm Bill. We found over 1,400 WRP contracts, totaling
almost $74 million, that had been obligated using expired WRP funds.
NRCS' financial management officials allowed these expired funds to
be used because they had mistakenly assumed that 1996 Farm Bill funds--
like the 1990 Farm Bill funds--were ``no-year funds'' and, therefore,
were available for obligation in subsequent fiscal years. We
recommended that NRCS adjust its financial accounts to correct for
these improper obligations, and the agency took corrective action to
resolve this problem.
NRCS Program Management
Turning from NRCS' efforts to account for the funds it receives and
spends, I would like to comment now on a number of audits concerning
NRCS' program operations that OIG has already issued, or will soon
issue.
WRP has been the subject of three different audit reports.\2\ OIG's
first audit dealt with how NRCS compensated owners for land that would
be used for conservation. Under the WRP statute, NRCS was required to
limit landowner compensation to the difference between the fair market
value of the land before the WRP conservation easement and the fair
market value of the land after the WRP easement (also known as the
``residual value'').\3\ NRCS assumed that lands subject to WRP
easements had little or no remaining market value; therefore, the
agency issued instructions to establish a residual value of zero.
However, we found that the residual value can be substantial. As a
result, we estimated that NRCS could have potentially saved the program
more than $159 million from 1999 to 2003. In response to our
recommendation, NRCS modified its WRP appraisal methodology to
recognize the residual value of easement-encumbered lands.\4\
---------------------------------------------------------------------------
\2\ ``WRP--Wetlands Restoration and Compliance,'' Audit Report
10099-4-SF, dated August 25, 2008; ``Compensation for Easements,''
Audit Report 10099-3-SF, dated August 2005; and ``Crop Bases on Lands
with Conservation Easements--State of California,'' Audit Report 50099-
11-SF, dated August 2007.
\3\ Residual value is the value of the land with the conservation
easement restrictions, which may include the landowner's continued
control of access to the land; the right to allow hunting and fishing;
and the pursuit of other undeveloped recreational uses, provided such
uses do not impact other prohibitions listed in the warranty easement
deed.
\4\ ``Compensation for Easements,'' Audit Report 10099-3-SF, dated
August 2005.
---------------------------------------------------------------------------
When producers participate in WRP, they must inform FSA that they
have reduced the arable land they are farming by the number of acres
now being dedicated to conservation. This step is important because it
decreases the farm subsidy the producer receives from FSA. We found
cases in which landowners had not notified FSA and continued receiving
improper farm subsidy payments for land where conservation easements
had been purchased by the government.\5\ This issue formed the basis of
our second audit report on WRP, which found that ongoing problems of
coordination between NRCS and FSA resulted in producers receiving
farming subsidies for land they should have retired.\6\ \7\
---------------------------------------------------------------------------
\5\ We also found similar problems in NRCS' Emergency Watershed
Protection Program and FSA's Grassland Reserve Program easements.
\6\ ``Crop Bases on Lands with Conservation Easements--State of
California,'' Audit Report 50099-11-SF, dated August 2007.
\7\ In this report, we audited easements only in California, but
NRCS took corrective action nationwide.
---------------------------------------------------------------------------
Our third report on WRP noted problems with how NRCS monitored
landowners' compliance with WRP conservation provisions.\8\ During our
audit of activities from 2003 to 2005, we found that five NRCS state
offices did not annually monitor nearly 90 percent of our sample of 153
WRP easements. We found possible noncompliance issues on approximately
40 percent of the easement sites we inspected. With the number of
easements increasing and field staff decreasing, NRCS has fewer
resources to monitor its easements for compliance with program
requirements. To correct this problem, NRCS agreed to develop a risk-
based monitoring system to optimize its monitoring resources.
---------------------------------------------------------------------------
\8\ ``WRP--Wetlands Restoration and Compliance,'' Audit Report
10099-4-SF, dated August 25, 2008.
---------------------------------------------------------------------------
OIG also has completed, or will soon complete, audits on other
aspects of NRCS' program operations. For instance, we are currently
performing an audit of the Conservation Security Program, intended to
evaluate the adequacy of NRCS' controls over the program and to review
participant and land eligibility.
We are also completing a review of NRCS' implementation of its dam
rehabilitation program.\9\ Recognizing the threat to public safety
posed by the aging system of flood control structures, Congress
appropriated approximately $160 million from Fiscal Years 2002 to 2007
for the purpose of assessing and rehabilitating these dams. We found,
however, that NRCS has not always rehabilitated the dams that pose the
greatest risk to public safety. Instead, 7 years after the program was
initiated, NRCS has not assessed 1,345 of 1,711 (79 percent) high
hazard dams for rehabilitation and has spent $10.1 million (of the $160
million) to rehabilitate lower priority dams--dams where failures would
be unlikely to result in the loss of human life. NRCS' efforts to
implement the dam rehabilitation program have been hindered because the
agency does not own the dams and lacks direct regulatory authority over
dam owners. However, NRCS has not always established cooperative
relationships with the state agencies responsible for overseeing dams.
These state agencies can, if the need arises, compel owners to repair a
dangerous structure. In our preliminary discussions with senior NRCS
officials, they acknowledged the need to expeditiously complete
assessment of high hazard dams. They also stated that the additional
funding provided under the American Recovery and Reinvestment Act of
2009 will help accomplish this goal.
---------------------------------------------------------------------------
\9\ ``Rehabilitation of Flood Control Dams,'' Audit Report 10601-1-
At. The report is not yet released.
---------------------------------------------------------------------------
The American Recovery and Reinvestment Act of 2009 (Recovery Act)
Our review of the dam rehabilitation program is especially timely
because the Recovery Act appropriated an additional $50 million for
rehabilitating dams. In a recent meeting with senior NRCS officials,
they agreed that our draft report will help them develop ``best
practices'' as the agency prepares to expend the additional funding. We
plan to do a followup review of this program later this fiscal year or
early next fiscal year, which will provide NRCS an opportunity to
demonstrate how it has responded to our recommendations as it spends
this stimulus money.
The Recovery Act also appropriated to NRCS an additional $290
million, which NRCS distributed by allocating $145 million for
floodplain easements and $145 million for watershed operations. The
Department recently announced that it will release the full $145
million to restore floodplains and protect an estimated 60,000 acres
through the floodplain easement component of its Emergency Watershed
Protection Program (EWP). Since signups for the easements will end on
March 27, we have already staffed an audit team to review this
additional funding. In the first phase of this review, we will evaluate
the adequacy of NRCS' management controls over easements in EWP, given
the control weaknesses we found in the processing of easements under
WRP. In the second phase of our review, we intend to verify the
eligibility of the participants and whether funds were expended
properly.
We plan to apply a similar approach and methodology to our planned
review of the $145 million allocated for watershed operations projects.
In its announcement on March 9, 2009, the Department stated that it
would be releasing $80 million of the amount that week. The funding
will be provided to sponsoring local organizations, which will operate
projects intended to protect watersheds, and promote flood mitigation
and water quality improvements.
Mr. Chairman and Members of the Subcommittee, I would like to
conclude by thanking the Subcommittee for the opportunity to present
OIG's recent work on these issues. I am happy to answer any questions
you may have.
The Chairman. Thank you, Ms. Tighe.
Ms. Shames.
STATEMENT OF LISA SHAMES, DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE, WASHINGTON, D.C.
Ms. Shames. Mr. Chairman and Members of the Subcommittee, I
am pleased to be here today to discuss our work on USDA's
management of its conservation programs. As you know, these
programs provide billions of dollars in assistance each year.
That is why their efficient and effective management can
enhance the stewardship of our natural resources.
My testimony will discuss findings from past GAO reports.
Specifically, we found duplicate payments under CSP, EQIP funds
not linked to environmental purposes, and farm program payments
made to individuals who exceeded the income limit. In response
to these findings and our recommendations, USDA has taken a
number of actions intended to improve its management of these
programs. Overall, these actions appear promising but we have
not evaluated their effectiveness.
First, regarding CSP duplicate payments, both legislative
and regulatory measures are designed to reduce the potential
for duplication between CSP and other conservation programs.
For example, both the 2002 and 2008 Farm Bills explicitly
prohibit CSP payments for activities that can be funded under
other conservation programs. Also, NRCS regulations establish
higher minimum eligibility standards for CSP. Despite these
measures, our analysis found duplicate payments. In one case, a
producer received a CSP payment of over $9,000 and an EQIP
payment of nearly $800 on the same parcel of land for the same
conservation action. In response to our recommendations, NRCS
said it had updated software to compare CSP applications and
existing contracts, issued a bulletin describing measures to
preclude duplicate payments, and indicated it would require
applicants to identify any payments received under another
conservation program. Subsequently, NRCS told us that it had
identified 760 potential or actual duplicate payments totaling
nearly $1 million and has taken appropriate action to preclude
or recover these payments.
Regarding EQIP funds, we reported that the general
financial assistance formula which accounts for about \2/3\ of
funding to the states did not clearly link to the program's
purpose of optimizing environmental benefits. Specifically, the
formula did not have a documented rationale for its factors and
weights. Small differences in the weight can significantly
affect the amount of funding a state receives by $6.5 million.
We also reported that the formula used questionable and
outdated data. Positively, at the time of our review, we found
NRCS had begun to develop performance targets and measures to
assess environmental changes resulting from EQIP practices. We
noted that this information could help direct funds towards
areas of the country that needed the most improvement. In
response to our recommendations, NRCS modified the factors and
weights, updated some data sources and described how factors in
the formula linked to a number of performance measures.
Regarding the integrity of farm program payments, we
reported that about $49 million in farm payments were made to
about 2,700 potentially ineligible individuals between Fiscal
Years 2003 and 2006. Of the $49 million, $14 million was from
CRP payments and $3 million from EQIP. We found that FSA does
not test for income. Instead, FSA tests compliance by looking
at how much a farm received in payments in the previous year
and whether it experienced a change in ownership, among other
things.
The need for management controls will remain critical. The
2008 Farm Bill lowered the income eligibility caps, thus the
number of individuals whose adjusted gross income exceeds the
caps is likely to rise to as many as 23,000, according to our
analysis, and increases the risk that USDA could make improper
payments and our analysis shows that that could be as high as
$90 million.
USDA agreed with our recommendations that FSA work with IRS
to develop a way to determine whether payment recipients meet
eligibility requirements. Last week USDA announced that
recipients would be required to sign a form that grants IRS
authority to provide income information to USDA so that it can
verify it.
In conclusion, USDA conservation programs can play an
invaluable role in encouraging farmers to act as stewards of
the nation's natural resources. On a positive note, USDA has
taken a number of actions to address our findings.
Nevertheless, while these actions appear promising, continued
oversight is especially critical in light of the nation's
current fiscal challenges.
Mr. Chairman, this concludes my prepared statement and I
would be pleased to answer any questions that you or Members of
the Subcommittee may have.
[The prepared statement of Ms. Shames follows:]
Prepared Statement of Lisa Shames, Director, Natural Resources and
Environment, U.S. Government Accountability Office, Washington, D.C.
Improved Management Controls Can Enhance Effectiveness of Key
Conservation Programs
Highlights
Highlights of GAO-09-528T (http://www.gao.gov/new.items/
d09528t.pdf), testimony before the Subcommittee on Conservation,
Credit, Energy, and Research, House Committee on Agriculture.
Why GAO Did This Study
The U.S. Department of Agriculture (USDA) administers conservation
programs, such as the Conservation Stewardship Program (CSP, formerly
the Conservation Security Program) and the Environmental Quality
Incentives Program (EQIP), to help farmers reduce soil erosion, enhance
water supply and quality, and increase wildlife habitat, among other
things.
This testimony is based on GAO reports on CSP and EQIP, each issued
in 2006, and a 2008 report on farm program payments. It discusses (1)
the potential for duplicate payments between CSP and other conservation
programs, (2) USDA's process for allocating EQIP funds to the states to
optimize environmental benefits, and (3) USDA's management controls
over farm program payments.
What GAO Recommends
Among other things, GAO recommended that USDA (1) develop a
comprehensive process to preclude and identify duplicate payments
between CSP and other conservation programs, (2) take steps to improve
the EQIP general financial assistance formula, and (3) work with the
Internal Revenue Service (IRS) to develop a method for determining
whether all recipients of farm program payments meet income eligibility
requirements. USDA agreed with these recommendations and has taken
actions to implement them, but GAO has not assessed the effectiveness
of these actions.
View GAO-09-528T or key components. For more information, contact
Lisa Shames at [Redacted], [Redacted].
What GAO Found
While legislative and regulatory measures are in place to reduce
the possibility of duplicate payments, the potential still exists
because CSP and other USDA conservation programs may be used to finance
similar conservation activities. GAO previously reported that USDA did
not have a comprehensive process to preclude or identify such duplicate
payments, and GAO found a number of instances of duplicate payments.
USDA was unaware of this duplication. However, USDA has since updated
its contracting software to identify potential duplication and issued
written guidance to its field offices outlining measures to preclude
duplicate payments. As a result, USDA said that it has identified about
760 examples of potential or actual duplicate payments since Fiscal
Year 2004 totaling about $1 million, and has taken action to preclude
or recover these payments, as appropriate.
GAO previously reported that USDA's process for allocating EQIP
funds was not clearly linked to the program's purpose of optimizing
environmental benefits. Therefore, USDA may not have directed funds to
states with the most significant environmental concerns arising from
agricultural production. To allocate most EQIP funds, USDA uses a
general financial assistance formula that consists of 31 factors and
weights. However, USDA did not have a documented rationale for how each
factor contributes to accomplishing the program's purpose; some of the
formula's data was questionable or outdated; and the funding allocation
process was not linked to USDA's long-term performance measures. For
Fiscal Year 2009, USDA has issued updated guidance for this formula
that appears to address a number of these elements.
GAO reported that USDA does not have adequate management controls
in place to verify that farm program payments, including those for
conservation programs, are made only to individuals who do not exceed
income eligibility caps. As a result, USDA cannot be assured that
millions of dollars in farm payments are proper. GAO found that $49.4
million in farm payments were made to about 2,700 potentially
ineligible individuals between Fiscal Years 2003 and 2006. About six
percent of this amount was for EQIP payments; 29 percent was for the
Conservation Reserve Program, a program that pays farmers to retire
environmentally-sensitive cropland. The need for management controls
will remain critical, since recent legislation lowered the income
eligibility caps and makes the number of individuals whose income
exceeds these caps likely to rise. In March 2009, USDA announced that
it has begun working with IRS to ensure that high-income individuals
and entities who request farm payments meet income limits as set forth
in law, and that once this verification system is fully operational, it
should identify inappropriate payments before they are disbursed. As
GAO has previously reported, ensuring the integrity and equity of farm
programs is a key area needing enhanced Congressional oversight. Such
oversight can help ensure that conservation programs benefit the
agricultural sector as intended and protect rural areas from land
degradation, diminished water and air quality, and loss of wildlife
habitat.
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our work on the U.S.
Department of Agriculture's (USDA) management of its conservation
programs designed to help farmers be better stewards of our natural
resources. Under these programs, primarily the Conservation Stewardship
Program (CSP, formerly the Conservation Security Program) and the
Environmental Quality Incentives Program (EQIP), USDA and producers
(farmers and ranchers) enter into contracts to implement practices to
reduce soil erosion, enhance water supply and quality, and increase
wildlife habitat, among other things. These conservation programs are
administered by USDA's Natural Resources Conservation Service (NRCS).
Another USDA agency, the Farm Service Agency (FSA), is responsible for
ensuring that only individuals who meet certain eligibility criteria
receive Federal farm program payments, including payments for many
conservation programs.
As you know, farmers and ranchers own or manage about 940 million
acres, or about half of the continental United States' land area, and
thus they are among the most important stewards of our soil, water, and
wildlife habitat. USDA's conservation programs, which provide billions
of dollars in assistance each year, are a key resource in promoting
this environmental stewardship. Therefore, it is essential that they be
managed effectively and efficiently and that they be adequately
overseen to assure that payments are provided only to eligible
individuals. We are eager to assist the 111th Congress in meeting its
oversight agenda. To that end, we have recommended that ensuring the
integrity and equity of the farm programs is a key area needing
Congressional oversight.\1\
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\1\ GAO, Suggested Areas for Oversight for the 110th Congress, GAO-
07-235R (http://www.gao.gov/new.items/d07235r.pdf) (Washington, D.C.:
Nov. 17, 2006).
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My testimony today is based on our reports on CSP, EQIP, and
Federal farm program payments.\2\ I will focus on three primary issues
discussed in these reports: (1) the potential for duplicate payments
under CSP and other USDA conservation programs for similar conservation
activities, (2) NRCS's process for allocating EQIP funds to the states
to optimize environmental benefits, and (3) FSA's efforts to ensure the
integrity of farm program payments, including payments for
conservation. To perform this work, we reviewed relevant statutory
provisions, NRCS, FSA, and other USDA regulations, program
documentation, guidelines for implementing EQIP and CSP, and guidance
for making farm program payments. We also analyzed data on farm program
payments, producer income, and funding allocated to the states under
EQIP and to priority watersheds under the Conservation Security
Program. In addition, we spoke with officials at NRCS, FSA, other USDA
offices, and the Internal Revenue Service (IRS). We conducted our work
in accordance with generally accepted government auditing standards.
---------------------------------------------------------------------------
\2\ GAO, Conservation Security Program: Despite Cost Controls,
Improved USDA Management Is Needed to Ensure Proper Payments and Reduce
Duplication with Other Programs, GAO-06-312 (http://www.gao.gov/
new.items/d06312.pdf) (Washington, D.C.: Apr. 28, 2006). GAO,
Agricultural Conservation: USDA Should Improve Its Process for
Allocating Funds to States for the Environmental Quality Incentives
Program, GAO-06-969 (http://www.gao.gov/new.items/d06969.pdf)
(Washington, D.C.: Sept. 22, 2006). GAO, Federal Farm Programs: USDA
Needs to Strengthen Controls to Prevent Payments to Individuals Who
Exceed Income Eligibility Limits, GAO-09-67 (http://www.gao.gov/
new.items/d0967.pdf) (Washington, D.C.: Oct. 24, 2008). Copies of the
Highlights pages for these reports are attached to this statement.
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In summary, USDA has taken a number of actions to address our
recommendations to improve its management of these conservation
programs and the integrity of farm program payments. Specifically:
Regarding CSP, we reported that duplicate payments had
occurred despite legislative and regulatory measures that were
to reduce the potential for duplication between CSP and other
programs. We recommended that NRCS develop a process to
preclude further duplicate payments as well as to identify and
recover past duplicate payments. In response, NRCS updated its
contracting software to identify potential duplication and
issued written guidance to its field offices in October 2006
outlining measures to preclude duplicate payments. As a result,
NRCS reportedly has identified 760 examples of potential or
actual duplicate payments since Fiscal Year 2004 totaling
nearly $1 million, and has taken action to preclude or recover
these payments, as appropriate.
Regarding EQIP, we reported that NRCS's formula for
allocating financial assistance, which accounts for most of the
funding provided to the states, does not link to the program's
purpose of optimizing environmental benefits. We recommended
that NRCS ensure that the rationale for the formula's factors
and weights used to determine the state allocations is
documented and linked to program priorities, and that data
sources used in the formula are accurate and current. We also
recommended that NRCS use information from long-term
performance measures to further revise the formula to ensure
funds are directed to areas of highest priority. In response,
in January 2009, NRCS issued updated guidance for its EQIP
funding allocation formula that appears to address a number of
the elements raised in our recommendation.
Regarding the integrity of farm program payments, we
reported that USDA cannot be certain that millions of dollars
in farm program payments, including conservation payments, it
made are proper because it does not have management controls to
verify that payments are made only to individuals who did not
exceed income eligibility caps. We recommended that FSA work
with IRS to develop a method for determining whether all
recipients of farm payments meet income eligibility criteria.
In response, USDA announced last week that it has begun working
with IRS to ensure that high-income individuals and entities
who request farm program payments meet income limits as set
forth in law. According to USDA, once this verification system
is fully operational, it should identify inappropriate payments
before they are disbursed.
While these are positive steps, we have not evaluated their
effectiveness. In the latter two cases, the agency actions to implement
our recommendations are so recent that there is little or no basis yet
to do this evaluation.
Legislative and Regulatory Measures Reduce the Potential for
Duplication Between CSP and Other Programs, but Duplicate
Payments Have Occurred
EQIP provides assistance to farmers and ranchers to take new
actions aimed at addressing identified conservation problems. CSP
rewards farmers and ranchers who already meet very high standards of
conservation and environmental management in their operations. Farm
bill provisions and NRCS regulations are designed to reduce the
potential for duplication between CSP and other USDA conservation
programs, such as EQIP. For example, the Farm Security and Rural
Investment Act of 2002 (2002 Farm Bill) and the Food, Conservation, and
Energy Act of 2008 (2008 Farm Bill): \3\
---------------------------------------------------------------------------
\3\ The Conservation Security Program was originally authorized in
the 2002 Farm Bill and included measures to reduce the potential for
duplication with other USDA conservation programs. Similar measures are
also included in the Conservation Stewardship Program authorized in the
2008 Farm Bill.
provide 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; and
explicitly prohibit (1) duplicate payments under CSP and
other conservation programs for the same practice on the same
land and (2) CSP payments for certain activities that can be
funded under other conservation programs, such as the
construction or maintenance of animal waste storage or
treatment facilities.
USDA has also issued CSP regulations that can prevent duplicate
payments between CSP and other conservation programs. For example, the
regulations:
establish higher minimum eligibility standards for CSP than
for other programs, which help to differentiate the applicant
pool for CSP from the potential applicants for these other
programs; and
encourage CSP participants to implement conservation
actions, known as enhancements, to achieve a level of treatment
that generally exceeds the level required by other USDA
conservation programs.
Despite these legislative and regulatory measures, we reported in
2006 that the potential for duplicate payments still existed because of
similarities in conservation actions financed through CSP and other
programs. At that time, we found that duplicate payments had occurred.
Our analysis of Fiscal Year 2004 payments data showed 72 producers who
received payments under CSP and EQIP that appeared to be for similar
conservation actions. Of these, we examined 11 cases in detail and
found duplicate payments had occurred eight times. For example, four of
these duplicate payments were made to producers who received a CSP
enhancement payment and an EQIP payment for conservation actions that
appeared to be similar. In one of these cases, a producer received a
CSP pest management enhancement payment of $9,160 and an EQIP payment
of $795 on the same parcel of land for the same conservation action--
conservation crop rotation.
NRCS state officials agreed that the payments made in these four
cases were duplicates. They stated that they were unaware that such
duplication was occurring and that they would inform their district
offices of it. At the time of our report, NRCS headquarters officials
stated that the agency lacked a comprehensive process to either
preclude duplicate payments or identify them after a contract has been
awarded. Instead, these officials said, as a guard against potential
duplication, NRCS relied on the institutional knowledge of its field
staff and the records they keep.
NRCS has the authority to recover duplicate payments. Under a CSP
contract, as required in the 2002 and 2008 Farm Bills, a producer
agrees that if the producer violates any term or condition of the
contract, the producer is to refund payments and forfeit all rights to
receive payments or is to refund or accept adjustments to payments,
depending on whether the Secretary of Agriculture determines that
termination of the contract and return of payments is or is not
warranted, respectively.
Duplicate payments reduce program effectiveness and, because of
limited funding, may result in some producers not receiving program
benefits for which they are otherwise eligible. For these reasons, we
recommended that the Secretary of Agriculture direct the Chief of NRCS
to develop processes to review (1) CSP contract applications to ensure
that CSP payments, if awarded, would not duplicate payments made by
other USDA conservation programs and (2) existing CSP contracts to
identify cases where CSP payments duplicate payments made under other
programs and take action to recover appropriate amounts and to ensure
that these duplicate payments are not repeated in Fiscal Year 2006 and
beyond.
Regarding the first recommendation, in July 2006, NRCS said it had
created an automated system within its contracting software to conduct
a comparison between new CSP applications and existing contracts for
other conservation programs to reveal potential duplication. In
addition, in October 2006, NRCS issued a national bulletin to its field
staff describing measures needed to preclude duplicate payments.
According to the bulletin, NRCS conducted a comparison between existing
contracts for several conservation programs, including EQIP, and Fiscal
Year 2006 CSP applications to identify potential duplication. This
comparison found 81 potential duplicate payments for conservation
practices. NRCS said it adjusted the CSP applications to prevent these
duplicate payments. Furthermore, NRCS indicated that starting with the
Fiscal Year 2006 CSP sign-up, it would require applicants to complete a
form that asks an applicant to identify any payments the applicant
receives under another conservation program on any of the land being
offered for enrollment in CSP. While these actions are positive steps,
we have not assessed their effectiveness.
Regarding the second recommendation, NRCS indicated it would use
its contracting software to compare existing CSP contracts with
existing contracts for EQIP and other conservation programs.
Specifically, according to NRCS's national bulletin, its field offices
are to compare CSP contract enhancement activities with the practices
financed under other conservation program contracts to determine
whether duplicate payments are planned in Fiscal Year 2007 and beyond,
or if duplicate payments occurred during Fiscal Years 2004 through
2006. NRCS said that all identified duplicate payments would be dealt
with according to the NRCS contracting manual. According to NRCS
officials, the agency did not have a CSP sign-up in 2007, so there were
no new applications that year. In 2008, NRCS received about 2,300 CSP
applications, but agency officials said they did not have information
on potential duplicate payments. For 2004 to 2006, NRCS officials said
the agency found 371 duplicate payments between CSP and EQIP totaling
about $420,000. These officials did not have information on the amount
of these payments recovered, but noted that they represented less than
one percent of total CSP payments made during these years. Furthermore,
NRCS officials stated the agency found 389 scheduled payments totaling
about $520,000 under these programs that would have been duplicates.
NRCS was able to preclude these payments from being made.
NRCS's Process for Allocating EQIP Funds to the States Does Not Link to
the Program's Purpose of Optimizing Environmental Benefits
In 2006, we reported that NRCS's process for providing EQIP funds
to the states is not clearly linked to the program's purpose of
optimizing environmental benefits. Specifically, we found that NRCS's
general financial assistance formula, which accounts for approximately
\2/3\ of funding provided to the states, did not have a documented
rationale for each of the formula's factors and weights, which are used
to determine the allocation of funds to the states to address
environmental issues. In addition, the formula sometimes relied on
questionable and outdated data. As a result, NRCS may not have been
directing EQIP funds to states with the most significant environmental
concerns arising from agricultural production.
More specifically, in Fiscal Year 2006, approximately 65 percent of
EQIP funds were allocated using a general financial assistance formula.
This formula contained 31 factors related to the availability of
natural resources and the presence of environmental concerns, such as
acres of wetlands and at-risk species habitat, pesticide and nitrogen
runoff, and the ratio of commercial fertilizers to cropland. NRCS
assigns each of the formula's factors a weight. Factors with the
highest weights included acres of highly erodible cropland, acres of
fair and poor rangeland, the quantity of livestock, and the quantity of
animal waste generated.
At the time of our report, NRCS had periodically modified factors
and weights to emphasize different national priorities, such as in
Fiscal Year 2004, following the passage of the 2002 Farm Bill. However,
NRCS had not documented the basis for its decisions on the formula
factors and weights or explained how they achieve the program's purpose
of optimizing environmental benefits. Thus, it was not always clear
whether the formula's factors and weights directed funds to the states
as effectively as possible.
Small differences in the weights can shift the amount of financial
assistance directed at a particular concern. For example, in 2006, if
the weight of any of the 31 factors had increased by one percent, $6.5
million would have been shifted at the expense of one or more other
factors. The potential for the weights to significantly affect the
amount of funding a state receives underscores the importance of having
a well-founded rationale for assigning them.
We also reported that weaknesses in the financial assistance
formula were compounded by NRCS's use of questionable and outdated
data. First, five of the 29 data sources in the financial assistance
formula were used more than once for separate factors. Using the same
data for multiple factors may result in more emphasis being placed on
certain environmental concerns than intended. Second, NRCS could not
confirm the source of data used in ten factors in the formula; as such,
we could not determine the accuracy of the data, verify how NRCS
generated the data, or fully understand the basis on which the agency
allocates funding. Third, NRCS did not use the most current data for
six factors in the formula.
Finally, we reported that NRCS had begun to develop more long-term,
outcome-oriented performance measures to assess changes to the
environment resulting from EQIP practices as part of its 2005 strategic
planning effort. These measures included such things as reducing
sediment runoff from farms, improving soil conditions on working
cropland, and increasing water conservation. NRCS also included
proposed targets for each measure to be achieved by 2010, such as
reducing sediment runoff by 18.5 million tons annually. At the time of
our report, NRCS told us it had developed baselines for these
performance measures, and planned to assess and report on them once
computer models and other data collection methods that estimate
environmental change were completed.
Although we did not assess the comprehensiveness of the EQIP
performance measures, the additional information they provide about the
results of EQIP outcomes should allow NRCS to better gauge program
performance. As a next step, such information could also help the
agency refine its process for allocating funds to the states through
its general financial assistance formula by directing funds toward
practices that address unrealized performance targets and areas of the
country that need the most improvement. The Chief of NRCS's
Environmental Improvement Programs Branch agreed that information about
program performance might eventually be linked to the EQIP funding
allocation process. However, at the time of our report, the agency did
not have plans to make this linkage.
Because of our concerns about the general financial assistance
formula, we recommended that NRCS ensure its rationale for the factors
and weights was documented and addressed program priorities, and the
data sources used in the formula were accurate and current. We also
recommended that the Secretary of Agriculture direct NRCS to continue
to analyze current and newly developed long-term performance measures
for EQIP and use this information to make further revisions to the
financial assistance formula to ensure funds are directed to areas of
highest priority.
Since our report, NRCS has made progress in implementing our
recommendations by modifying its financial assistance formula for the
Fiscal Year 2009 EQIP state allocation. In 2007, an outside consultant
hired by NRCS concluded that NRCS should take a number of steps to
improve its conservation program formulae, including improving their
analytical soundness, making the process more transparent, and
integrating performance information into the formulae. NRCS reviewed
the EQIP formula and made changes prior to its 2009 allocation,
including modifying the factors and weights, and updating some data
sources. NRCS also described how factors in the formula relate to a
number of EQIP and NRCS performance measures. While NRCS's actions are
positive steps, we have not assessed whether they fully address our
recommendations.
Additional USDA Management Controls Could Provide More Assurance of
Conservation Program Integrity
Additional management controls by USDA's FSA could provide more
assurance of the conservation programs' integrity by ensuring
conservation payments are awarded only to individuals who meet income
eligibility requirements.\4\ In October 2008 we reported that USDA
cannot be certain that millions of dollars in farm program payments it
made are proper, because it does not have management controls, such as
reviewing an appropriate sample of recipients' tax returns, to verify
that payments were made only to individuals who did not exceed the
income eligibility caps. We determined that $49.4 million in farm
payments were made to about 2,700 potentially ineligible individuals
between Fiscal Year 2003 and Fiscal Year 2006. These recipients
included a founder and former executive of an insurance company, an
individual with ownership interest in a professional sports franchise,
a top executive of a major financial services company, a former
executive of a technology company, and individuals residing outside the
United States.
---------------------------------------------------------------------------
\4\ Although these limits changed in the 2008 Farm Bill, under the
2002 Farm Bill, an individual or entity with an average adjusted gross
income (AGI) of over $2.5 million, over the previous 3 tax years
immediately preceding the applicable crop year, was ineligible for farm
program payments unless at least 75 percent or more of the average AGI
was farm income, defined as income from farming, ranching, or forestry
operations. The AGI provision of the 2002 Farm Bill covered crop years
2003 through 2008 and applied to most farm program payments, including
those for crop subsidy payments (e.g., fixed payments based on
historical production, known as direct payments, and price support
payments), conservation practices, and disasters.
---------------------------------------------------------------------------
As shown in figure 1, about six percent of the $49.4 million was
for EQIP payments and 29 percent was for the Conservation Reserve
Program. Payments made under the ``other programs'' category included
payments made for other NRCS conservation programs, such as CSP, the
Grassland Reserve Program, Wetlands Reserve Program, and Wildlife
Habitat Incentives Program.
According to FSA officials, a number of factors--such as resource
constraints that hamper its ability to examine complex tax and
financial information and lack of authority to access and use IRS tax
filer data for such purposes--contribute to its inability to verify
that each individual who received farm program payments was eligible.
We also found, however, that the sample FSA draws to check recipient
eligibility does not test for income eligibility; instead, FSA reviews
compliance with eligibility requirements other than income, such as how
much a farming operation received in farm program payments in the
previous year and whether it experienced a change in ownership. FSA
therefore cannot ensure that only individuals who meet the income
eligibility caps are receiving farm payments.
Without better management controls, USDA cannot be assured that
millions of dollars in farm program payments, including conservation
payments, are proper. This need for management controls will remain
critical, since the 2008 Farm Bill lowered the income eligibility caps.
This change makes the number of individuals whose adjusted gross income
exceeds the caps likely to rise, which increases the risk that USDA
could make improper payments to more individuals.
To ensure greater program integrity, we recommended that the
Secretary of Agriculture direct FSA to work with IRS to develop a
method for determining whether all recipients of farm program payments
meet income eligibility requirements, and, if the Secretary finds that
USDA does not have authority to obtain information from IRS, request
the authority it would need from Congress. USDA agreed with our
recommendations and, in a March 19, 2009, news release, the agency
announced that it would work with IRS to ensure that high-income
individuals and entities who request USDA payments meet income limits
set forth in the 2008 Farm Bill. Specifically, in order to be eligible
for USDA payments all recipients will be required to sign a separate
form that grants IRS authority to provide income information to USDA
for verification purposes. According to USDA, once this verification
system is fully operational, it should identify inappropriate payments
before they are disbursed.
Conclusions
In conclusion, USDA conservation programs can play an invaluable
role in encouraging farmers and ranchers to act as stewards of the
nation's natural resources. However, the weaknesses we previously
identified in the management of CSP and EQIP funds, as well as our
concerns with controls related to farm program payments more generally,
could undermine the effectiveness of USDA conservation programs. On a
positive note, in response to our recommendations, USDA has taken a
number of promising actions to eliminate duplicate payments between CSP
and other programs, refine the EQIP allocation formula by updating its
factors, weights, and data sources and, in some cases, identifying how
the factors relate to long-term performance measures, and strengthen
management controls over farm program payments. While these actions are
positive, continued oversight of these programs, such as today's
hearing, helps ensure funds are spent as economically, efficiently, and
effectively as possible and benefit the agricultural sector as
intended. Such oversight is especially critical in light of the
nation's current deficit and growing long-term fiscal challenges.
Mr. Chairman, this concludes my prepared statement. I would be
pleased to respond to any questions that you or other Members of the
Subcommittee may have.
Contacts and Staff Acknowledgements
Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this statement. For
further information about this testimony, please contact Lisa Shames,
Director, Natural Resources and Environment, [Redacted] or [Redacted].
Key contributors to this statement were James R. Jones, Jr., Assistant
Director; Thomas M. Cook, Assistant Director; Kevin S. Bray; Gary T.
Brown; Paige M. Gilbreath; Leslie V. Mahagan; and Carol Herrnstadt
Shulman.
Attachment 1
Conservation Security Program
Despite Cost Controls, Improved USDA Management Is Needed to Ensure
Proper Payments and Reduce Duplication with Other Programs
Highlights
Highlights of GAO-06-312 (http://www.gao.gov/new.items/d06312.pdf),
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 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.
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 [Redacted] or [Redacted].
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.
Note: Strip cropping means growing row crops, forages, or small
grains in equal width strips.
Attachment 2
Agricultural Conservation
USDA Should Improve Its Process for Allocating Funds to States for the
Environmental Quality Incentives Program
Highlights
Highlights of GAO-06-969 (http://www.gao.gov/new.items/d06969.pdf),
a report to the Ranking Democratic Member, Committee on Agriculture,
Nutrition, and Forestry, U.S. Senate.
Why GAO Did This Study
The Environmental Quality Incentives Program (EQIP) assists
agricultural producers who install conservation practices, such as
planting vegetation along streams and installing waste storage
facilities, to address impairments to water, air, and soil caused by
agriculture or to conserve water. EQIP is a voluntary program managed
by the U.S. Department of Agriculture's (USDA) Natural Resources
Conservation Service (NRCS). NRCS allocates about $1 billion in
financial and technical assistance funds to states annually. About $650
million of the funds are allocated through a general financial
assistance formula.
As requested, GAO reviewed whether USDA's process for allocating
EQIP funds to states is consistent with the program's purposes and
whether USDA has developed outcome-based measures to monitor program
performance. To address these issues, GAO, in part, examined the
factors and weights in the general financial assistance formula.
What GAO Recommends
GAO recommends, among other things, that NRCS document its
rationale for the factors and weights in its general financial
assistance formula and use current and accurate data. USDA agreed with
GAO that the formula needed review. USDA did not agree with GAO's view
that NRCS's funding process does not clearly link to EQIP's purpose of
optimizing environmental benefits. It believes that the funding process
clearly links to EQIP's purpose, but it has not documented the link.
www.gao.gov/cgi-bin/getrpt?GAO-06-969.
To view the full product, including the scope and methodology,
click on the link above. For more information, contact Daniel Bertoni
at [Redacted] or [Redacted].
What GAO Found
NRCS's process for providing EQIP funds to states is not clearly
linked to the program's purpose of optimizing environmental benefits;
as such, NRCS may not be directing funds to states with the most
significant environmental concerns arising from agricultural
production. To allocate most EQIP funds, NRCS uses a general financial
assistance formula that consists of 31 factors, including such measures
as acres of cropland, miles of impaired rivers and streams, and acres
of specialty cropland. However, this formula has several weaknesses. In
particular, while the 31 factors in the financial assistance formula
and the weights associated with each factor give the formula an
appearance of precision, NRCS does not have a specific, documented
rationale for (1) why it included each factor in the formula, (2) how
it assigns and adjusts the weight for each factor, and (3) how each
factor contributes to accomplishing the program's purpose of optimizing
environmental benefits. Factors and weights are important because a
small adjustment can shift the amount of funding allocated to each
state on the basis of that factor and, ultimately, the amount of money
each state receives. For example, in 2006, a one percent increase in
the weight of any factor would have resulted in $6.5 million more
allocated on the basis of that factor and a reduction of one percent in
money allocated for other factors. In addition to weaknesses in
documenting the design of the formula, some data NRCS uses in the
formula to make financial decisions are questionable or outdated. For
example, the formula does not use the most recent data available for
six of the 31 factors, including commercial fertilizers applied to
cropland. As a result, any recent changes in a state's agricultural or
environmental status are not reflected in the funding for these
factors. During the course of GAO's review, NRCS announced plans to
reassess its EQIP financial assistance formula.
NRCS recently developed a set of long-term, outcome-based
performance measures to assess changes to the environment resulting
from EQIP practices. The agency is also in the process of developing
computer models and other data collection methods that will allow it to
assess these measures. Thus, over time, NRCS should ultimately have
more complete information on which to gauge program performance and
better direct EQIP funds to areas of the country that need the most
improvement.
Attachment 3
Federal Farm Programs
USDA Needs to Strengthen Controls to Prevent Payments to Individuals
Who Exceed Income Eligibility Limits
Highlights
Highlights of GAO-09-67 (http://www.gao.gov/new.items/d0967.pdf), a
report to the Ranking Member, Committee on Finance, U.S. Senate.
Why GAO Did This Study
Farmers receive about $16 billion annually in Federal farm program
payments. These payments go to about two million recipients, both
individuals and entities. GAO previously has reported that the U.S.
Department of Agriculture (USDA) did not consistently ensure that these
payments went only to those who meet eligibility requirements.
GAO was asked to evaluate (1) how effectively USDA implemented 2002
Farm Bill provisions prohibiting payments to individuals or entities
whose income exceeded $2.5 million and who derived less than 75 percent
of that income from farming, ranching, or forestry operations, (2) the
potential impact of the 2008 Farm Bill's income eligibility provisions
on individuals who receive farm payments, and (3) the distribution of
income of these individuals compared with all 2006 tax filers. GAO
compared USDA data on individuals receiving payments with the latest
available Internal Revenue Service (IRS) data on these individuals.
What GAO Recommends
GAO recommends that USDA work with IRS to develop a system for
verifying the income eligibility for all recipients of farm program
payments. If USDA determines that it needs authority to work with IRS,
it should seek this authority from Congress, as appropriate. In
commenting on a draft of this report, USDA agreed with these
recommendations but disputed some of the findings. GAO believes that
the report is fair and accurate.
To view the full product, including the scope and methodology,
click on GAO-09-67 (http://www.gao.gov/new.items/d0967.pdf). For more
information, contact Lisa Shames at [Redacted] or [Redacted].
What GAO Found
USDA does not have management controls, such as reviewing an
appropriate sample of recipients' tax returns, to verify that payments
are made only to individuals who do not exceed income eligibility caps
and therefore cannot be assured that millions of dollars in farm
program payments it made are proper. GAO found that of the 1.8 million
individuals receiving farm payments from 2003 through 2006, 2,702 had
an average adjusted gross income (AGI) that exceeded $2.5 million and
derived less than 75 percent of their income from farming, ranching, or
forestry operations, thereby making them potentially ineligible for
farm payments. Nevertheless, USDA paid over $49 million to these
individuals. According to USDA officials, a number of factors--such as
resource constraints that hamper its ability to examine complex tax and
financial information as well as a lack of authority to obtain and use
IRS tax filer data for such purposes--contribute to the department's
inability to verify that each individual who receives farm program
payments complies with income eligibility provisions. However, USDA
does not routinely sample individuals receiving farm payments to test
for income eligibility; instead, its annual sample selected for review
is based primarily on compliance with eligibility requirements other
than income. The 2008 Farm Bill directs USDA to use statistical methods
to target those individuals most likely to exceed income eligibility
caps.
The 2008 Farm Bill will increase the number of individuals likely
to exceed the income eligibility caps. That is, with lower income
eligibility caps under the 2008 Farm Bill, the number of individuals
whose AGI exceeds the caps will rise, increasing the risk that USDA
will make improper payments to more individuals. For example, had the
new farm bill been in effect in 2006, as many as 23,506 individuals who
received farm program payments would likely have been ineligible for
crop subsidy and disaster assistance payments totaling as much as $90
million.
Compared with all tax filers, individuals who participated in farm
programs in 2006 are more likely to have higher incomes. For example,
as shown in the figure below, 12 of every 1,000 individuals receiving
farm program payments reported AGI between $500,000 and $1 million
compared with about four of all tax filers who reported income at this
level.
The Chairman. Thank you, Ms. Shames.
Mr. Jurich.
STATEMENT OF JOHN J. JURICH, INVESTIGATOR, COMMITTEE ON
AGRICULTURE, U.S. HOUSE OF REPRESENTATIVES, WASHINGTON, D.C.
Mr. Jurich. Thank you. Chairman Holden, Members of the
Committee, my name is John Jurich and I work as an Investigator
for the House Agriculture Committee. I am pleased to testify
before you this morning about a review of conservation programs
that was performed this past year. The review is still in
progress and the findings are of an interim category.
The review entailed examination of more than 100 Wetlands
Reserve Program and Wildlife Habitat Incentives Program project
files from 20 states along with interviews of senior program
managers in Washington, D.C., and St. Paul, Minnesota. These
projects spanned a timeframe of about 10 years from 1998 until
last year, 2008, and were focused primarily on the larger
easements and restoration agreements in the program both in
dollar amount and acreage. The files that were examined
represented payments and restoration costs totaling over $150
million.
The primary focus of the review was to examine program
eligibility requirements, whether the land as well as the
landowners met the basic requirements for participation in WRP
and WHIP. Briefly stated, the results of the review disclosed
that NRCS was very careful to demonstrate the eligibility of
the land with various wetland requirements, as well as
establishing legal ownership of the land, clear title and the
absence of any encumbrances. However, the agency was often in
poor compliance with AGI requirements set in the 2002 Farm
Bill. NRCS also routinely ignored or excused its noncompliance
with 12 month ownership requirement of earlier legislation.
With respect to AGI compliance, the files demonstrated the
general failure of the agency personnel either to request the
required financial checks, or to adequately document that such
checks had been performed. The initial set of state files that
were reviewed contained 63 easements or long-term agreements
executed between 2003 and 2008. Of the 63 files, only eight
contained either signed certifications or database printouts
documenting program eligibility. A second set of files
comprising 35 Minnesota contracts contained just three examples
of AGI eligibility documentation. Both the national office in
Washington and Minnesota State office in St. Paul sought
additional certifications and printouts for some of the missing
documents, but in many instances the certifications had not
been requested by NRCS at the time of application and were
missing from the FSA program database.
The program management also calls into question the
effectiveness of the 12 month ownership requirement. A number
of conservation and wildlife protection partner organizations,
both governmental and non-governmental, worked out mutual
understandings with landowners and NRCS to acquire private land
along with the WRP easements. These agreements were made
sometimes with and sometimes without waivers of the 12 month
ownership requirement by State Conservationists. The partners
purchased properties from private landowners at the same time
as NRCS placed easements on the land, or shortly before the
easements were filed. Legal agreements among the parties in
many instances made clear that the easement funds from NRCS
were part and parcel of down payments for land acquisition by
the partners without which the agreements would be voided.
Irrespective of the waivers, the acquisitions appeared to be an
end run around the 12 month ownership requirement. In many of
these cases, the conservation partner was enrolling the land in
a preexisting refuge, a water storage area of a wildlife
district. NRCS in these instances simply became a cash cow,
enabling the partner organizations to acquire private lands at
discount prices. In some of the instances, there was
simultaneous closing. The land was sold from the private
landowner to the partner organization at the same time that
NRCS placed the easement on the land. In these instances, there
was not 12 months of ownership. The agency was lucky if there
was 12 minutes.
Additional program management issues such as project
implementation, billing and regular project oversight were also
raised during this review. NRCS was generally quick to schedule
and pay for the cost of appraisals, land surveys and title work
of projects, but it appeared somewhat sluggish in beginning the
actual restoration work. Some WRP projects had anywhere from 18
months to a 2 year lag between the filing of the easement or
long-term agreement and the start of restoration work. A few
projects, according to the file documentation, underwent no
restoration work whatsoever. I will comment briefly on some of
the more egregious examples. The NRCS signed a long-term cost-
share agreement with one of the water districts down in south
Florida. The cost-share agreement for more than $1 million was
signed in 2003. In 2004, nothing was done. In 2005, 2006, 2007,
nothing was done. In 2008, NRCS and the partner organization,
the water district, basically agreed to disagree. They decided
they couldn't come together and get a common restoration plan
and the agreement was cancelled. For 5 or 6 years then you had
$1 million in program funds sitting on the books and
obligations, and nothing being done with the money.
Billing for restoration work was also at times severely
delayed. This happened often in larger contracts with partner
organizations, but in some cases applied to contracts with
individual landowners. Some of these billings and payments
reached into six figures and were submitted up to a year or
more after the restoration work in question had begun. Such
delays defeat any kind of real oversight over the performance
of the work and the accuracy of the amount being billed.
The monitoring of restoration projects was uneven and
appeared to follow no set plan. The regulations required annual
reviews with at least one actual site visit every 3 years until
the conservation practices were established. Some states
completed annual status reviews both during and after
restoration. Other states did little, if anything, to evaluate
program compliance once the easements were filed and
restoration work had begun. In these instances, it is not
difficult to understand why OIG went out a couple of years ago
and found 40 percent of the easements they visited in
noncompliance with one or more of the easement restrictions.
The program files, as I mentioned, were very uneven in
terms of documentation. Only a handful of agency offices noted
the completion of restoration work in the project files. A few
states did an excellent job in documenting the files, most
notably, Indiana, Nebraska and Louisiana. The state office in
Minnesota also had excellent files. However, many other states
did not, and absent from many of the states files were the
normal documentation of financial eligibility, highly erodable
land determinations, site monitoring, cultural and historical
site reviews.
I appreciate the opportunity to discuss the results of this
review with you and look forward to any of your questions.
Thank you.
[The prepared statement of Mr. Jurich follows:]
Prepared Statement of John J. Jurich, Investigator, Committee on
Agriculture, U.S. House of Representatives, Washington, D.C.
Subcommittee Chairman Holden, Ranking Member Goodlatte, and Members
of the Subcommittee, I am pleased to testify before you today about the
review of two Federal conservation programs that was performed this
past year.
This review entailed an examination of more than 100 Wetlands
Reserve Program (WRP) and Wildlife Habitat Incentives Program (WHIP)
project files from twenty states, along with interviews of senior
program managers in Washington, D.C., and St. Paul, Minnesota.
These projects spanned a time frame of 10 years, from 1998 to 2008,
and were focused primarily on the larger easements and restoration
agreements in the program, both in dollar amount and acreage. The files
that were examined represented easement payments and restoration costs
totaling over $150 million.
The primary focus of the review was to examine program eligibility
requirements--whether the land as well as the landowners met the basic
requirements for participation in WRP and WHIP. Briefly stated, the
results of the review disclosed that the Natural Resources Conservation
Service (NRCS) was very careful to demonstrate the eligibility of the
land with various wetlands requirements, as well as establishing the
ownership of the land as a legal possession. However, the agency was
often in poor compliance with the adjusted gross income (AGI)
requirements set in the 2002 Farm Bill. NRCS also routinely ignored, or
excused its non-compliance with, the twelve month ownership requirement
of earlier legislation.
The file review also demonstrated problems with the timely
attention to restoration activities once an easement had been filed or
a restoration plan had been agreed to. Both the actual startup work and
the subsequent submission of billings or invoices by participants and
contractors were often delayed. Finally, the files were frequently
lacking documentation of the annual monitoring of the easements and
restoration projects required by both programs.
With respect to AGI compliance, the files demonstrated a general
failure of agency personnel, either to request the required financial
checks, or to adequately document that such checks had been performed.
The initial set of state files that were reviewed contained sixty-three
easements or long-term agreements executed between 2003 and 2008. Of
these sixty-three files, only eight contained either signed
certifications or SCIMS database printouts documenting program
eligibility. A second set of files, comprising thirty-five Minnesota
contracts, contained just three examples of AGI eligibility
documentation. Both the national office in Washington and the Minnesota
State office in St. Paul sought additional certifications and printouts
for some of the missing documents. But in many instances, the
certifications had not been requested by NRCS at the time of
application. The certifications were not only missing from agency files
but never entered into the FSA program database.
The program management also calls into question the effectiveness
of the twelve month ownership requirement. A number of conservation and
wildlife protection partner organizations, both governmental and non-
governmental, worked out mutual understandings with landowners and NRCS
to acquire private land along with WRP easements. These agreements were
made sometimes with and sometimes without waivers of the twelve month
ownership requirement by the state conservationists. The partners
purchased properties from the private landowners at the same time as
NRCS placed easements on the land or shortly before the easements were
filed. Legal agreements among the parties in many instances made clear
that the easement funds from NRCS were part and parcel of down payments
for the land acquisitions by the partners without which the agreements
would be voided.
Irrespective of the waivers, the acquisitions appeared to be an end
run around the 12 month waiting requirement. In many of these cases,
the conservation partner was enrolling the land in a pre-existing
refuge, water storage area, or wildlife district. NRCS, in these
instances, simply became a cash cow enabling partner organizations to
acquire private lands at discount prices.
Additional program management issues, such as project
implementation, billing, and regular project oversight, were also
raised during this review. While NRCS was generally quick to schedule
and pay for the costs of appraisals, land surveys, and title work of
projects, it appeared somewhat sluggish in beginning the actual
restoration work. Some WRP projects had anywhere from an 18 month to 2
year lag between the date of easement or long term agreement and the
start of restoration work. A few projects, according to the file
documentation, underwent no restoration work whatsoever.
In a few instances, the agency wholly deferred the management and
oversight of restoration work and easement sites to certain partner
organizations, such as the U.S. Fish & Wildlife Service, state
conservation agencies, and others. In these cases, it was impossible to
tell if any restoration work had been done at all. If NRCS has no
intention of overseeing a WRP conservation easement to ensure
compliance with program requirements, then it should not be filing one.
Billings for restoration work were also at times severely delayed.
This happened often in large contracts with partner organizations, but
in some cases applied to contracts with individual landowners. Some of
these billings and payments reached into six figures and were submitted
up to a year or more after the restoration work in question had begun.
Such delays defeat any kind of real oversight over the performance of
the restoration work and the accuracy of the amounts being billed.
The monitoring of restoration projects was uneven and appeared to
follow no set plan. The regulations required annual reviews with at
least one actual site visit every 3 years until the conservation
practices were established. Some states completed annual status
reviews, both during and after restoration. Other states did little, if
anything, to evaluate program compliance once the easements were filed
and restoration work had begun.
The program files were also uneven in terms of documentation. Only
a handful of agency offices noted the completion of restoration work in
the project files. A few states did an excellent job in documenting the
files, most notably Indiana, Nebraska, and Louisiana. Many other
states, however, did not. Absent from many of the state files were
documentation of financial eligibility, highly erodible land
determinations; site monitoring; and the cultural and historical site
reviews.
Occasionally absent were other required forms such as the program
applications, conservation plans, schedules of operation, cost
estimates, certificates of ownership and possession, hazardous
substance and environmental reviews, or compatible use agreements. Some
files lacked even the basic contractual agreements between the
landowners and the government, the easements, or the long term
restoration contracts.
I appreciate the opportunity to discuss the results of the review
of these conservation programs and look forward to answering any of
your questions.
Thank you.
The Chairman. Thank you, Mr. Jurich. First of all, how long
have you been working for the Committee?
Mr. Jurich. Eight years.
The Chairman. Well, you must be doing your job down at the
Department out in the field, because I don't believe we ever
met before.
Mr. Jurich. They don't let me in the Longworth Building. I
am over in the Ford Building.
The Chairman. Mr. Jurich, during your investigation with
field staff, where do you think the breakdown in communication
occurred? Does the field staff not have enough guidance from
the Department or is there just not enough staff to get the job
done well?
Mr. Jurich. I think that they have the proper guidance from
the headquarters staff. I think that the implementation at the
state and the district level is catch as catch can. Some of
them follow the guidance, others don't. The files were very,
very, very uneven. You had a couple of states where you had
everything that you would want to see in the file. In other
states, you were hard pressed to understand what had happened.
The Chairman. So you gave some egregious examples of using
the NRCS as a cash cow. I wonder if you had any more that you
wanted to add besides the one you mentioned, and more
importantly, what are the penalties for the actors? Are there
criminal penalties, civil penalties? What do we do, just say
don't do that again?
Mr. Jurich. Exactly. I am not sure if there would be any
kind of civil or criminal remedy. The Florida water districts
were the more egregious examples. There was 10s, if not 20s of
millions of dollars basically entered into these joint
agreements with them, and it appeared to me that the water
districts had a different agenda than NRCS. The water districts
wanted to use the land basically for economical purposes,
whereas, of course, NRCS was interested in the conservation
impacts of the land. Consequently, when you look at what
happened afterwards, the water districts wanted to continue
grazing on the upland portions of the land. They wanted to
continue haying. They wanted to continue also in some instances
rentals for farming. And you could see where NRCS was hard
pressed to say no. In some instances they issued compatible use
authorizations. In other instances they simply noted the
violation in the site reviews and did virtually nothing about
it.
The Chairman. Ms. Shames and Ms. Tighe, is there an audit
for FSA conservation programs and how do we ensure the issues
we are confronting with NRCS are not occurring right now at
FSA?
Ms. Shames. Mr. Chairman, we have not done the work so at
this point we can't say. We can't speak to how FSA has been
implementing the AGI provision, and what I can say is that
given the new farm bill requirements and the lower eligibility
limit, that it is going to put even further pressure to ensure
that there is AGI compliance.
The Chairman. Ms. Tighe?
Ms. Tighe. I can tell you that we are in the final stages
of doing a review of CSP. I can tell you just generally that we
have found issues in terms of eligibility and at the point the
audit should be out, I would say in the next month or so, and
we will be able to come up and talk a little more in detail on
it at that point. We are in the beginning stages of doing an
audit ourselves on AGI. We had started it when GAO was sort of
looking at it, and we are looking at it from a different sort
of viewpoint. We are looking at it for purposes of looking at
NRCS's controls over AGI.
The Chairman. And I don't know if either one of you can
explain the audit process at USDA. Why did NRCS have to do
their own audit? I guess it was the last farm bill. How does
this compare to the process at FSA or other USDA agencies?
Ms. Tighe. The process differs a little. FSA is included in
our consolidated financial statement as was NRCS up until a few
years ago when OMB essentially mandated that they have a stand-
alone audit. So that is why, and that process began in a very
brief way in 2007 where we reviewed, or KPMG reviewed, a few
line items on the financial statements. The first full-blown
stand-alone audit was 2008.
The Chairman. Why did OMB do that? Why did they determine
that?
Ms. Tighe. I am assuming they had concerns over NRCS's
financial reporting that caused them to want to have that.
The Chairman. Thank you.
The gentleman from Pennsylvania, Mr. Thompson.
Mr. Thompson. Thank you, Mr. Chairman.
Actually this question is for all the panel to respond to.
You know, each of you testified to accounting errors or program
documentation errors by the NRCS. Are these mistakes out of the
ordinary compared to other agencies such as FSA?
Ms. Tighe. I will go ahead and take that. The issue with
NRCS--is because they weren't used to doing this themselves and
didn't have financial expertise, they weren't doing it all that
well. We do have an order of magnitude different than, say,
FSA, who does have accounting professionals doing the work at
the local levels where they need to have it done. We found
significant number--I mean, we have talked about deobligations
and what those are. In the 2007 review, there was hundreds of
millions of dollars in deobligations. I mean, things weren't
being done very well. Now, they are certainly working on it and
we have every reason to think, as Mr. White said, that the
problem can be fixed but they still have a way to go.
Mr. Thompson. Any other panelists have thoughts or opinions
on that?
Mr. Jurich. I am familiar with the investigative files of
OIG both as an agent and as a supervisor, and you would not see
in an OIG file that kind of incomplete documentation.
Mr. Thompson. Thank you. In terms of follow-up, the amounts
that are reflected as to resources or preparation: Of the
recommendations that came out of these investigations, are
there organizational and structural changes to the agencies as
not to address the current problems that obviously need to be
addressed that you have kind of drilled down and found, but to
prevent going forward this type of waste of resources?
Ms. Shames. We have made the specific recommendations that
could improve the programs as they were being implemented. We
do keep track of these recommendations to see the extent of
actions that have been taken, and as I said in my short
statement, they are promising, these initial steps, but it
would require GAO to do further audit work to really test the
effectiveness of them. After 4 years, our feeling is, if an
agency hasn't implemented our recommendations, we basically
write them off. If they are not done in 4 years, our experience
is that they are just not done.
Mr. Thompson. So to date then with the findings, your
opinions are, has NRCS taken the proper measures to correct the
issues?
Ms. Tighe. I think as to the financial statements, yes, I
mean, they correctly stated we did look at their action plan
and thought it looked good. Now, it is too early to say whether
it is ultimately going to be effective. I mean, the financial
statement work for this year is just underway, and I think that
although KPMG has been asked to look at the corrected
procedures, which we will fold that into their current audit
work, I don't think we know at this point whether it is going
to be effective.
Mr. Thompson. During your audits and investigation, did
anyone find what they viewed as corrupt behavior or anything
other than administrative error?
Ms. Tighe. We did not.
Ms. Shames. Nor did we.
Mr. Jurich. No, sir.
Mr. Thompson. Very good. Mr. Chairman, I will yield back my
time.
The Chairman. The chair thanks the gentleman and recognizes
the gentlewoman from Illinois, Mrs. Halvorson.
Mrs. Halvorson. Thank you, Mr. Chairman.
Thank you, panelists, for being here. I have a very rural
district in Illinois, and I feel very strongly about the fact
that my farmers and farming is a risky business. I also think
that proper conservation is also necessary for good
environmental stewardship. However, from what I am hearing, is
that there has been a lot of duplication and maybe people are
receiving payment for doing both. When there is talk from the
Administration that they want to cut some of these safety net
subsidies, I guess is what they are calling them, I have stood
strong with my farmers saying that we are not going to do that.
When people are ruining the system by collecting probably
duplicative payments, I think the problems are coming from the
Department or organizations within the Department that aren't
talking to each other. What could somebody give us as some of
the suggestions on how to coordinate so that we are not
duplicating services, and what could possibly fix the problems,
if there are any? From what I am hearing, there may be, so I
don't know who wants to answer that one.
Ms. Tighe. I can certainly speak initially on it. It is
certainly one of our concerns within USDA as a whole that the
different agencies don't communicate effectively. That is one
of our management challenges that we report to you all every
year. That has been a consistent one for a while. In the
context of these conservation programs, some of our audits have
pointed to problems certainly where NRCS needed to give
information on the fact that a conservation easement was
effected to FSA, and that ensures then that producer isn't
getting paid for subsidy payments, when in fact they are
getting paid conservation payments. So we need good
communication. It is still a work in progress in many respects
for NRCS and FSA both, but all of our reports that we do in
some fashion make recommendations to try to make improvements
in that.
Mrs. Halvorson. But what are your suggestions? I mean, it
is a work progress, I mean, but how do we get there? I mean, is
it better IT, it is----
Ms. Tighe. Well, some of it is certainly better IT systems.
I think that is a good and logical thing to work on. And there
was some discussion in Mr. White's testimony about some of the
work they have done along those lines to automate certain
things, and that is all good.
Mrs. Halvorson. Thank you.
I yield back.
The Chairman. The Ranking Member, Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman.
Let me ask all the panelists if they can comment on the
conflict between trying to make NRCS programs work region by
region, state by state, and having to administer a national
program. They take pride is making programs work to fit the
different conservation priorities of different regions or
different states. Do you believe there is an inherent conflict
in having a decentralized culture while trying to uniformly
administer a national program?
Ms. Tighe. Well, I think there certainly can be a conflict
in that area. You know, you want to have, in certain cases
national priorities set. If I can move briefly out of the
conservation area into the dam audit we just did, it was our
view that having national priorities instead of local actions
would have ensured that these high-risk dams were in fact being
targeted. But without that, I think you need--I do understand
what you say. You need to have sort of local input, but there
are certain cases where you really have to look nationally.
Mr. Goodlatte. Thank you.
Ms. Shames. We certainly saw in the EQIP program that there
was not a link to national priorities, and in those instances,
there is a risk that perhaps monies could be spent in an
environment area that has greater need of those funds. That is
why we found it was so important that these factors and weights
be based on accurate data, current data, and also that there be
a discussion why there are these factors and why there are
these weights. So, that there is a better understanding and
improved transparency in terms of where the funds are going to
ensure that they are truly optimizing those environmental areas
of greatest need.
Mr. Goodlatte. Thank you.
Mr. Jurich?
Mr. Jurich. There was an extreme difference between the
conservation practices that were being installed down in the
Everglades versus the prairie pothole region up in Minnesota
and North Dakota. I don't see how you can do it at a national
level. You have to have state and local input.
Mr. Goodlatte. Do you find that there is a cultural problem
with NRCS officials who are suited to provide technical
assistance, but may have difficulty providing program
administration? And if so, can this be corrected without hiring
additional administrative employees?
Ms. Tighe. Well, we certainly found that when you are
relying on people with scientific and technical expertise to do
other sorts of functions, I mean, we certainly found a problem
with the financial statements because accounting expertise is
not something you can usually train a more science-oriented
person to have. I mean, you need a lot of training to do that
and a degree in accounting and some experience in that area. I
think that probably goes over to some of the other
administrative sort of functions, procurement and some other
things that I don't think you can avoid hiring that expertise.
Mr. Goodlatte. Ms. Shames?
Ms. Shames. While we did not look at the culture
specifically at NRCS, I should note that human capital is a
government-wide issue to make sure that we do have the right
expertise with the right skills to make sure that the sort of
deficiencies that we have all reported don't happen.
Mr. Goodlatte. Thank you.
Mr. Jurich?
Mr. Jurich. In Minnesota, the state office had a financial
wizard there who basically controlled the payment of expenses
for the conservation practices, and what I saw there was very,
very, very good controls over not only the--well, over the
payment of the conservation practices and it was sadly missing
from many of the other states. I think they need financial
expertise at the state level more than anything else.
Mr. Goodlatte. Thank you.
Thank you, Mr. Chairman.
The Chairman. I thank the Ranking Member.
The gentlewoman from Pennsylvania, Mrs. Dahlkemper.
Mrs. Dahlkemper. Thank you, Mr. Chairman.
Mr. Jurich, you indicate that in some cases the NRCS
deferred management to other government agencies. Are you
saying that the NRCS contracted out to the U.S. Fish and
Wildlife Service and others, and if so, did they get any money
for this?
Mr. Jurich. There was no contract but there was an
agreement between NRCS and the Fish and Wildlife Service where
NRCS basically allowed Fish and Wildlife Service to take over
the total management of the easement and they were not going to
have any part and parcel of it thereafter. My question in that
instance, why even have payment for the easement if you are not
going to supervise the easement guidelines.
Mrs. Dahlkemper. And so was there any----
Mr. Jurich. There was no payment. There was no payment with
a Memorandum of Understanding between the two agencies.
Mrs. Dahlkemper. Okay. Also, your investigation covered
projects that spanned from 1998 to 2008, and over this
timeframe did you see any trends in the documentation oversight
of projects that would be helpful for the Committee?
Mr. Jurich. The trend was to improve. The WHIP contracts
that I looked at were much better than the earlier WRP
contracts, so the states started to do a better job in
assembling and documenting things that they should be doing
normally.
Mrs. Dahlkemper. Any suggestions going forward here for us?
Mr. Jurich. I am waiting for the second round of files from
NRCS. When I get those, I will be prepared to give you a
recommendation.
Mrs. Dahlkemper. Thank you very much.
The Chairman. The chair thanks our witnesses. Under the
rules of the Committee, the record of today's hearing will
remain open for 10 calendar days to receive additional material
and supplementary written responses from the witnesses to any
questions posed by a Member.
This hearing of the Subcommittee on Conservation, Credit,
Energy, and Research is adjourned.
[Whereupon, at 12:00 p.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Questions
Response from Robert Stephenson, Acting Deputy Administrator for Field
Operations, Farm Service Agency; and Dave White, Chief, Natural
Resources Conservation Service, U.S. Department of Agriculture
Question 1. Can you please explain how the agencies work together
in administering conservation programs? Please outline exactly what
each agency does.
Answer.
Conservation Reserve Program and Emergency Conservation Program
At the national, state, and local levels, FSA and NRCS meet
regularly to discuss program needs and plan future actions. FSA is
generally responsible for all program facets and it arranges for
technical assistance which is generally provided by NRCS, and to a
lesser degree state foresters and local conservation districts. NRCS
uses FSA data in Adjusted Gross Income (AGI) determinations. The
agencies also share the Service Center Information Management System
(SCIMS) database to obtain producer information.
FSA's tasks include making policy determinations at the program and
producer levels including the obligation of funding and making
payments. NRCS and other providers of technical assistance, apply CRP
practice standards, make or recommend technical determinations, develop
the conservation plans, and perform any necessary follow-up through the
term of the contract.
Grassland Reserve Program
FSA and NRCS jointly administer the GRP. Generally, NRCS is
responsible for the administration of easements and FSA is responsible
for rental contracts. NRCS also provides the technical assistance and
FSA issues payments.
Voluntary Public Access and Habitat Improvement Program
FSA implements this grant program to states and Tribes.
Grass Roots Source Water Program
FSA implements this grant program through State Rural Water
Associations.
Conservation Compliance
FSA provides enforcement of the conservation compliance provisions
by determining whether persons are eligible for USDA program benefits.
NRCS makes technical determinations under highly erodible land and
wetland conservation compliance provisions. FSA maintains records and
provide reports related to conservation compliance activities. FSA
county committees may hear appeals on individual cases.
Question 2. Is there anything in your rules that requires the
adjusted gross income limitation to be verified in order for payments
to be issued?
Answer. Section 1400.502 of the payment limitation regulations (7
CFR Part 1400) provides that, to comply with the average adjusted gross
income limitation, a person or legal entity, including all interest
holders in a legal entity, general partnership, or joint venture, must
provide annually, as required by CCC, ``authorization for CCC to obtain
tax data from the Internal Revenue Service for purposes of verification
of compliance [with the average AGI limitations].''
Question 3. Although not addressed in GAO's testimony today, GAO
reported in September 2007 that farm support programs and conservation
programs may be working at cross-purposes. For example, the farm
support programs may be encouraging conversion of grasslands, such as
pasture, range, and native prairie, to cropland by reducing a
landowner's financial risk, while some conservation programs, such as
the Conservation Reserve Program, pay farmers to take cropland out of
production and establish a perennial vegetation cover--usually
grasses--on this land. What steps has USDA taken to reconcile this
contradiction?
Answer. For cropland to be eligible for enrollment in CRP, the land
must be cropped 4 of the 6 years from 1996 to 2001. This prevents
producers from tilling native sod and later enrolling in CRP. Though
the 2008 Farm Bill updated this to say that the land must be cropped 4
of 6 years preceding the date of the 2008 Farm Bill enactment, FSA must
complete a revised Environmental Impact Statement on CRP prior to
implementing this change
2008 Farm Bill Section 12020 ``Crop Production on Native Sod'' also
addresses the cross-purpose question. This section prohibits the
agricultural producers from receiving crop insurance benefits and
noninsured crop assistance on native sod acreage during the first 5
years of tilling native sod for annual crop production in Prairie
Pothole National Priority Areas with the election of the governor of
the respective state.
Native sod is defined as land on which the plant cover is composed
principally of native grasses, grass-like plants, forbs, or shrubs
suitable for grazing or browsing; and that has never been tilled for
the production of an annual crop as of the date of enactment.
In addition, to better determine the extent to which farm programs
(e.g., crop insurance) and conservation programs (e.g., CRP) may be
working at cross purposes, the Administrator of the Economic Research
Service, the Administrator of the Farm Service Agency, and the Chief of
the Natural Resources Conservation Service have developed a 2 year
research plan that was forwarded to the Secretary in November 2008. The
first part of the study includes a description of whether and where
grassland conversions are taking place; the second part involves
determining what the causes are of any such conversions. ERS is
starting to do modeling for the plan based on 2003 NRI data and is
awaiting the availability of 2007 NRI data necessary to complete the
analysis.
Response from Dave White, Chief, Natural Resources Conservation
Service, U.S. Department of Agriculture
Question 1. What actions have been taken to address the OIG
Financial Audit? Is it now complete? If not, when will the information
be made available?
Answer. The financial audit is an annual requirement now that the
agency has been designated as a stand-alone entity by Office of
Management and Budget (OMB). Up through Fiscal Year (FY) 2007, the NRCS
financial information was part of the USDA consolidated audit. In FY
2008, NRCS underwent its first stand-alone audit, where an independent
auditor conducted a separate audit of NRCS financial information. As a
result, a disclaimer of opinion was issued.
Immediately following the issuance of the audit report, NRCS
initiated aggressive action to address the deficiencies which included
five material weaknesses:
Amounts for obligations were not recorded in the accounting
system for some goods and services ordered by the agency. In
some instances, obligations could not be supported; orders of
goods or services NRCS furnished for other government agencies
on a reimbursable basis (unfilled customer orders);
expenses that NRCS incurred but had not yet paid (accrued
expenses);
NRCS' knowledge of how much property owned and its total
value (accounting for property, plant and equipment);
financial reporting to provide reliable information to the
President, the Congress, and the public.
Auditors also found two significant deficiencies (general controls
over the information technology environment, and a lack of controls
over purchase and fleet card transactions), and areas of non-compliance
with accounting standards, financial systems requirements, and proper
use of the U.S. Standard General Ledger for recording financial
transactions. In addition, auditors determined that NRCS does not
obligate all transactions required by appropriations law and does not
substantially comply with the Federal Financial Management Improvement
Act of 1996.
Two specific actions were taken to address issues with the FY 2008
ending balances. we hope they will improve our preparedness for the FY
2009. First, we developed a comprehensive Corrective Action Plan,
approved by USDA OIG, that included a comprehensive review to determine
the correct balance of obligations and accruals as reported in the
beginning balance. Agency personnel completed this review of over
160,000 transactions and certified to its accuracy as of December 31,
2008. Second, we used the results of the obligation review along with
additional work on reimbursable agreements and accounting for leases to
prepare draft restatement of the beginning balances for FY 2009 for the
auditors. An independent audit firm is currently reviewing our proposed
revised beginning balances, with results expected in mid-May.
Additional corrective actions, including the development of
financial policies and procedures, requirements for review and
certification of financial information, training, changes in business
processes, and the strengthening of internal controls are underway.
Progress is reported monthly to the USDA Office of Inspector General.
In addition to the work on the beginning balances, independent
auditors have begun the FY 2009 financial audit. The FY 2009 audit will
be completed in October 2009, followed closely by issuance of the audit
report and conclusions in November 2009.
Question 2. After the audit, NRCS sent employees out to survey the
contracts. Are you able to tell us what you found during that period?
Answer. Beginning on December 1, 2008, NRCS dispatched a team of
oversight specialists to 19 states and six other NRCS entities to
review and evaluate the corrections made during the open obligations
review. Over a 3 week period, the team reviewed 865 open obligation
samples where determinations were considered complete by twenty
different states and other entities such as our Centers. The team
identified deficiencies in the samples, mainly due to insufficient file
and contract documentation and monitoring, as well as misinterpretation
of review questions and procedures. The team reviewed samples for
validity of obligations and the proper execution of accruals. As a
result of the review, additional clarification was provided to the
states to reduce the overall deficiency rate. Our evaluation teams are
continuing to carry out quality assurance reviews throughout the year.
Question 3. A key point of the audit was that NRCS had a problem
with open obligations. How much money was left open and/or unspent?
Answer. The issue is not with NRCS' ability to obligate funds, but
rather its ability to obligate funds in a way that results in
accomplishing effective conservation. Though NRCS has a high initial
rate of fund obligation--for example, at the end of Fiscal Year 2008,
the agency had only $17 million of FY 2008 Farm Bill funds unobligated
( an obligation rate of more than 99 percent of apportioned funds)--
NRCS has deobligated over $1.4 billion since the open obligation review
began in 2007. Most of the issues surrounding open obligations occur
subsequent to the initial obligations. Some of these are due to issues
outside of NRCS control and some small level of deobligations is
inevitable. However, NRCS recognizes that this level of deobligation is
clearly unacceptable and that many deobligations were a result of
faulty program implementation. As a result, NRCS is taking aggressive
action by analyzing and rewriting policy and procedures for program,
administrative, and financial aspects of our business to ensure that
all responsible parties understand what is required. In addition, we
have begun an initiative to redesign and streamline our business
processes.
Question 4. Would you say NRCS has been a good manager of the
conservation programs?
Answer. NRCS is proud of what it has accomplished with the
significant increases in funding and new authorities provided by
Congress since the 1996 Farm Bill. From the 1996 to 2002 Farm Bills,
conservation program investments were increased by more than $17
billion over the previous baseline of spending, with programs such as
EQIP receiving over a billion dollars in annual spending. NRCS has
worked with farmers, ranchers and other private landowners to develop
and implement approximately 313,000 EQIP contracts, applying
conservation practices on 145 million acres. More than 2 million acres
have been enrolled in the Wetlands Reserve Program. NRCS also manages
more than 10,000 individual easements.
But while the results of conservation program investments have
reshaped the landscape, we know that just getting conservation on the
ground is not the full measure of program success. NRCS recognizes that
we need to put as much effort in financial management as we do in
conservation planning and conservation practice implementation. To that
end, we have made great strides and improvements in financial and
programmatic controls in recent years, including improvements to our
ProTracts contracting system, development of the Practice Payment
Schedule, and development of the soon-to-be-released Easement Business
Tool. These changes and others institute financial controls and
business practices that respond directly to audit findings and
strengthen NRCS' financial management going forward.
Question 5. When did NRCS know they had problems with tracking and
documenting contacts? Was there steps taken to improve this prior to
the 2008 audit? If so, how or why was this audit unable to be
completed?
Answer. Soon after implementation of the 2002 Farm Bill, NRCS
recognized that the paper-based system used to manage our cost-share
programs was inadequate for properly tracking and managing conservation
contracts. At that point, we designed and implemented our ProTracts
contracting system, which manages contracts for EQIP, WHIP, AMA, and
CSP. Because ProTracts interfaces with FSA's program eligibility tool
and USDA's financial accountability systems, we have been able to
nearly eliminate improper payments as reflected in our reporting under
the Improper Payments Improvement Act. In the near future, the USDA
Office of Inspector General (OIG) will release an audit on the
Conservation Security Program (CSP). The potential for improper
payments in CSP is one of the issues being looked at by the OIG.. We
are currently developing a software tool similar to ProTracts, to be
rolled out this fall, for our easement programs.
ProTracts, despite its many virtues, was not a broad-based panacea
for all problems associated with our financial management system. In FY
2007, the Office of Management and Budget (OMB) expressed concern
regarding our open obligations and deobligations, especially with
regard to NRCS easement programs, which were being reported to OMB on a
quarterly basis. As a result, we contracted with an independent audit
firm to perform a review of NRCS obligations. The audit firm issued a
report in FY 2007, citing issues with open obligations and recording
amounts payable for delivered orders not yet paid. NRCS initiated
several corrective actions in FY 2007.
Despite these actions, however, and following significant work
conducted by the independent audit firm in FY 2008, the auditors were
unable to express an opinion on NRCS' consolidated financial
statements. This is called a ``disclaimer'', and it means that the
supporting documentation provided by NRCS was nonexistent or did not
satisfy audit standards and that the auditors could not determine
whether NRCS' statements of its FY 2008 financial information were
accurate and complete.
Question 6. Do you feel confident NRCS can implement the proper
internal controls to ensure the next audit can and will be complete?
Answer. Yes, we believe that over time we will satisfy the audit
requirements. The goal of the agency is to position itself to be
``audit ready.'' To achieve this goal, NRCS has taken aggressive action
to address the deficiencies and weaknesses disclosed in the financial
audit. We submitted a Corrective Action Plan to the USDA Office of the
Inspector General (OIG), which approved all actions and timelines we
have planned to correct the reported weaknesses and deficiencies. NRCS'
goal is that the results of our proposed corrective actions, which
include updates, communication, training, and monitoring of updated
policy, procedures, and processes, will help position the agency for
future audits.
Question 7. Another key component of the financial audit was that
the financial reporting and documentation was bad. Given this, are you
confident improper payments have not been made?
Answer. NRCS performs testing and analysis in compliance with the
Improper Payments Act and OMB Circular A-123 Appendix B. The documented
rate of improper payments for Fiscal Years 2006, 2007 and 2008 on our
farm bill programs was 0.22%, 0.47% and 0.00% respectively. We are also
anticipating the release of an audit on the Conservation Security
Program in the near future which may address improper payments in that
program.
Question 8. Over the course of the audit, has NRCS had to cancel
some contracts because the landowner was getting paid for work not
done? If so, how many?
Answer. The audit firm did not find any evidence of this type of
improper payment. Our policy, processes, and tools are designed to
prevent this. Before payments are made to a contract holder, the
conservation practices are certified by a qualified NRCS employee to
ensure they meet our technical standards and specifications. This
certification is necessary before our ProTracts contracting system will
process a payment.
Question 9. What direction were State Conservationists given in
regard to their ability to waive the previous 1 year land ownership
requirement for WRP? Did anyone at the national office keep track of
how many waivers were taking place? If no, why not and do you plan to
track them in the future?
Answer. The WRP Policy Manual is the document that provides
direction to State Conservationists and their staff in all aspects of
program implementation. The manual in effect for the implementation of
the 2002 Farm Bill stated the following with regard to landowner
eligibility:
To be eligible for easements, an applicant must have:
Owned the land for 12 months before submitting an
application, unless:
the land was acquired by will or succession as a result of
the death of the previous owner,
ownership changed due to foreclosure on the land and the
owner exercises a right of redemption from the mortgage
holder in accordance with state law, or
the State Conservationist determines the new owner did not
acquire the land for the express purpose of placing it in
WRP.
Note: Persons who acquire land after an eligible application
to participate has been accepted by NRCS but before the
easement is recorded may participate in WRP if a transfer
agreement is completed between the seller and buyer and the
State Conservationist agrees to work with the new landowner.
Transfer agreements include NRCS-LTP-152 or other private
agreements.
clear title to the land and be able to provide consent or
subordination agreements from each holder of a security
interest in the land, and
a recorded right of way that provides access to the
easement area from a public road.
The national office did not keep track of the number of waivers
granted by State Conservationists to the 2002 Farm Bill's 1 year land
ownership requirement.
The new WRP Policy Manual currently being developed to implement
the 2008 Farm Bill is more explicit. It states the following:
To be eligible to enroll land in a permanent or 30 year
easement in WRP, the land must have been owned by the applicant
for at least the 7 years prior to application. A waiver to this
requirement may only be granted by the Chief. The Chief will
evaluate each application taking into consideration the
following:
1. Whether the land was acquired by will or succession as a
result of the previous landowner; or
2. the ownership change occurred due to foreclosure on the land
and the owner of the land immediately before the
foreclosure exercises a right of redemption from the
mortgage holder in accordance with state law; or
3. the landowner provides adequate assurances that the land was
not acquired for the express purpose of enrolling it in
WRP. The Chief's determination of adequate assurances shall
consider the management of the property since it was
purchased, documentation provided by the Landowner, or any
personal or financial circumstances of the Landowner at the
time of application. The following conditions constitute
examples of adequate assurances for consideration of a
waiver:
a. Change in ownership was due to retirement of the current
landowner
and the land will remain in the family; or
b. Land has been owned and operated for production of food or
fiber by the
current landowner, application would only enroll a
portion of the land
owned by the applicant, and the remainder of the land
will continue to be
operated by the current landowner for the production of
food or fiber; includ-
ing forest production lands; or
c. Land is in joint ownership and one or more of the owners is
buying out
one or more of the other owners; or
d. Lands adjacent to an existing easement or pending easement
application
that are essential to the successful restoration of that
easement; or
e. Other special circumstances such as impact to threatened and
endangered
species or other critical environmental protection.
The Manual now gives a clear description of adequate assurances
that must be provided by the landowner to request a waiver from the
Chief. In the future, the Agency will track all requests for waivers
whether granted or not.
Question 10. On page 10 of your testimony you mentioned a new WRP
business model that will result in improved payment controls and fewer
deobligations. What is the business model, and why do you think it will
offer improvements?
Answer. The new WRP business model describes the actions in the WRP
contracting process from the initial application, through easement
acquisition, restoration and easement monitoring, management and
enforcement. The new business process moves the preliminary title
searches and hazardous records search forward in the process, right
after the application is filed. This will eliminate the fallout of
projects because of the discovery of undisclosed hazardous materials or
encumbrances on the title that would prevent NRCS from restoring and
managing the easement at the least expense to the taxpayer. We
anticipate that this action will also help reduce WRP deobligations.
The new business process also moves the point at which the funds
are obligated. In the previous model, the obligation of restoration
funds occurred at the same time as the acquisition. In the new model,
the obligation of restoration occurs after the development of final
restoration plans. Previously, restoration funds were obligated early
in the process based on a very preliminary restoration plan. Obligating
restoration funds after the development of the final restoration plan
will help ensure there is a well documented need for every obligation.
We anticipate this will help reduce the amount of WRP deobligations.
Question 11. Your testimony outlines several initiatives to reduce
the rate of deobligations, does NRCS have target for an acceptable rate
of deobligations?
Answer. NRCS does not have an established acceptable rate of
deobligations. We are implementing business practices and financial
controls to reduce to the greatest extent possible the type of
deobligations due to NRCS contract management or program policies. Many
deobligations, however, occur because of change of land ownership,
death, hardship, economic changes, climate, and/or natural disasters.
The extent of this type of deobligation will vary. The Economic
Research Service has estimated that the average annual exit rate for
farms is nine to ten percent per year. The estimated cancellation rate
for EQIP contracts has been approximately thirteen percent annually.
Question 12. The 2008 Farm Bill includes several provisions in farm
and conservation programs to assist beginning and socially
disadvantaged farmers and ranchers. Understanding that contracts with
beginning and socially disadvantaged farmers may have a higher rate of
deobligation, do you think that NRCS has the flexibility to reobligate
these funds for beginning and socially disadvantaged farmers and
ranchers in the case of a deobligation?
Answer. Any deobligations that occur in the current year of the
obligation for beginning and socially disadvantaged farmers and
ranchers can only be re-obligated into new contracts for beginning and
socially disadvantaged farmers and ranchers in that same year. These
are annual funds and obligation can only occur within the same year as
the original obligation. Use of available funds in expired years is
limited to items such as within scope modifications and cost overruns.
Question 13. In some of the testimony that follows, there is a lot
of discussion about the length of time it takes to start restoration
work on WRP and then whether the landowner lives up to the terms of the
easement. Given that this was an issue even before the financial audit,
how is the agency trying to ensure that the taxpayers get what they're
paying for in terms of the expected conservation benefits?
Answer. NRCS has a number of initiatives in place to redesign and
streamline our business process. The new Easement Business Tool to be
released this fall will improve the efficiency and effectiveness with
which we manage the more than 10,000 easements currently in our
portfolio. Many of the processes that currently have to be done by hand
will be fully automated. In addition, the tool will store in one
virtual location all the documents, maps and data related to an
easement. It also will provide real time access to this information for
properly trained and authorized NRCS personnel. It will ensure
monitoring is completed on a timely basis, and by being linked to the
Agency's financial and procurement systems it will speed up acquisition
and restoration and ensure fund accountability.
Question 14. Can you elaborate on how the day-to-day operations
have changed for NRCS field office staff since the audit?
Answer. The audit has created a much greater awareness among all
NRCS employees about the importance of financial management and
contracting policies and procedures designed for our conservation
programs. Proper implementation of these policies and procedures has
been emphasized through training, additional guidance, quality reviews,
and the quarterly review of open obligations. Additionally, many NRCS
State Offices have instituted a second-level review process in which
any contract modifications completed by the field office for a
participant's contract are reviewed at the next higher administrative
level for approval.
To emphasize the importance of the issues raised by the financial
audit, a stand alone performance element addressing these issues has
been added to the employee evaluations for state and national leaders
for FY 2009.
Question 15. Are you able to tell the Committee how much mandatory
farm bill conservation spending was returned to the Treasury because of
contracts that weren't completed?
Answer. Since the 2002 Farm Bill, $301,426,814.43 in farm bill
funds have been cancelled and are to be returned to the Treasury. These
funds were cancelled because their period of availability expired and
are no longer available for any purpose.
Questions Submitted by Hon. Betsy Markey, a Representative in Congress
from Colorado
Response from Dave White, Chief, Natural Resources Conservation
Service, U.S. Department of Agriculture
Question 1. During the NRCS audit process, how many contracts did
NRCS cancel with producers because restoration was not taking place?
What is the rate of deobligations?
Answer. Cancellation of WRP contracts because restoration was not
taking place was not a significant contributor to our deobligations. A
significant amount of WRP deobligations occurred because of business
practices that have since been modified. Between Fiscal Years 2002 and
2008, out of a total of nearly $1.7 billion obligated in WRP contracts,
just over $250 million has been deobligated.
Conservation Security Program (CSP)
Question 2. How does NRCS verify the accuracy of the information
provided by CSP applicants and contract holders, including information
on other program payments they may be receiving on land being offered
for CSP enrollment, to ensure that CSP payments are made in accordance
with program rules?
Answer. NRCS implemented policy during the Fiscal Year 2008 CSP
sign-up requiring documentation of self-assessment verifications for
all FY 2008 CSP. A field visit was required to verify all information
and situations described on the self-assessment and benchmark condition
inventory for 100 percent of the FY 2008 CSP contracts. A discrepancy
in the contract because of no fault of the participant could be
remedied by the participant by correcting the deficiency within a
reasonable period of time.
For Fiscal Year 2008, NRCS created an automated internal control
system within our Programs Contracting System (ProTracts) contracting
software. This system alerts users to check all applicants with CSP
applications against contract databases for WHIP, AMA, and EQIP. This
system was designed to uncover potential areas of overlapping practices
and prevent duplicate payments from occurring.
Question 3. GAO has testified that NRCS identified about $420,000
in actual duplicate payments between CSP and EQIP, but that NRCS
headquarters does not have information on how much of this money was
recovered. What are the steps to recover duplicate payments? And, if
NRCS headquarters does not track recovered amounts, how does it ensure
that the field offices have followed through to make these recoveries?
Answer. The steps to recover duplicate payments are outlined in
national NRCS policy. When the State Conservationist initiates a cost
recovery, NRCS must notify the participant in writing. If the
participant fails to make all payments to NRCS within the requested
timeframe, the receivables account will be transferred to claims
status. After the requested timeframe has expired, the original demand
letter will become the basis for a bill. State Conservationists and
Directors of the Caribbean and Pacific Islands Areas have been directed
to recover the costs of duplicate payments made to program
participants.
NRCS has instituted policies, procedures, and automated systems to
limit to the greatest extent possible future duplicative payments. NRCS
State Offices do have the capability to track recovery activities, but
an automated national tracking system is not currently available.
Question 4. NRCS received about 2,300 CSP applications in Fiscal
Year 2008. Of these, how many potential duplicate payments did you find
and what actions were taken to preclude these payments from being made?
Answer. For Fiscal Year 2008, NRCS created an automated internal
control system within our ProTracts contracting software. This system
alerts users to check all applicants with CSP applications against
contract databases for WHIP, AMA, and EQIP. This system was designed to
uncover potential areas of overlapping practices and prevent duplicate
payments from occurring.
Question 5. What is the status of USDA efforts to develop
implementing regulations for the Conservation Stewardship Program
(formerly the Conservation Security Program)? Will there be a sign-up
in Fiscal Year 2009 for this new program? Are there any new measures
planned in this program to preclude the potential for duplicate
payments?
Answer. The interim final rule for the new Conservation Stewardship
Program is currently in the Executive Branch clearance process. NRCS
will continue to use the internal controls implemented in the fall of
2006 as a result of the GAO audit to ensure that duplicate payments do
not occur.
Environmental Quality Incentives Program (EQIP)
Question 6. Regarding the Fiscal Year 2009 program, GAO's testified
that NRCS has made some progress in documenting how funding formula
factors contribute to accomplishing program goals, updating data
sources, and describing how formula factors relate to long-term
performance measures. What additional steps does NRCS plan to take in
the 2010 program to further this progress?
Answer. Since Fiscal Year (FY) 2006, the Natural Resources
Conservation Service (NRCS) has utilized allocation models for its
conservation programs. These program-specific allocation models are
designed to have a natural resource objective foundation that is
consistent with each program's statutory purpose. They reflect national
program priorities in a state-specific manner and are transparent and
the resulting allocations are reproducible. Also, program allocation
models are designed to improve the relationship between fund
distribution and conservation needs, and thus create an opportunity to
build programs in all states where there is a corresponding
conservation need regardless of historical program activity. NRCS
recently undertook a comprehensive review of all allocation models,
which resulted in substantial changes and improvements. Some of these
improvements are described below:
Optimizing Factors--NRCS has changed the number of factors
in the allocation formulae to increase transparency and
understanding and to better address Program priorities and
Legislative intent. Redundant factors were removed and more
relevant factors were added.
Outcome Based Performance--Using the GAO EQIP audit as a
guide and considering external recommendations, NRCS has
incorporated outcome-based performance measures where possible
in allocation formulae. As new data on environmental outcomes
becomes available, it will be evaluated for inclusion in
program formulae.
Consistency--NRCS has worked to ensure consistency in
formulae for like programs by using the same factors and data
to represent similar resource conservation needs.
Enhanced State Specificity--NRCS has incorporated state
specific data, including Activity Based Cost (ABC) data, to
capture differences in state Technical Assistance requirements
in some factors.
Cost of Programs Model--NRCS has incorporated new data from
the Cost of Programs Model to determine Financial and Technical
Assistance proportional requirements for mandatory programs.
Data Definitions and Sources--NRCS has worked to ensure the
most appropriate and current validated data, with common and
agreed upon definitions, are the basis of our allocation
formulae.
Improved Documentation--In an effort to increase
transparency and facilitate understanding of our allocation
formulae, NRCS has worked to improve the explanations of our
formulae and methodologies for FY 2009.
Factor Weighting Methodology--To increase transparency, NRCS
has utilized ``Paired Comparison,'' a scientifically based
methodology, as part of the process to determine Program
formula factor weights.
In 2007, NRCS contracted with World Perspectives, Inc. to conduct
an independent evaluation of its allocation formulae. The report
stated:
``In a broader context, it should be noted that all Federal
agencies are facing increasing demands for information about
how they measure performance, how they allocate funds, and how
they assure accountability. We talked with a number of other
agencies and found a consistency of effort at better
rationalizing actions in these areas, though we did not find
any effort as comprehensive as that being undertaken by the
NRCS.''
NRCS will continually examine its conservation program models and
seek additional improvements. NRCS program allocation formulae, their
factors, and data sources are all posted on the NRCS website at http://
www.nrcs.usda.gov/programs/.
Question 7. What specific long-term, outcome-oriented performance
measures has NRCS established for EQIP, and how has the agencies
funding allocation process been linked to these measures?
Answer. following long-term performance measures have been
established for EQIP:
Working cropland with improved soil condition.
Potential sediment delivery from agricultural operations
reduced.
Potential nitrogen delivery from agricultural operations
reduced.
Water conservation: Improve irrigation water use efficiency.
Grassland condition, health, and productivity improved.
Habitat for at-risk species improved.
The national EQIP allocation formula is based on natural resource
needs (e.g., cropland eroding above the tolerable limit, irrigated
cropland, livestock animal units, grazing land, impaired streams, and
at-risk species) that are consistent with EQIP national priorities and
the statutory purpose of the program. These same priorities are
reflected in the annual and long-term performance measures developed
for EQIP.
Response from Robert Stephenson, Acting Deputy Administrator for Field
Operations, Farm Service Agency, U.S. Department of Agriculture
National Agricultural Imagery Program (NAIP)
Question 1. For the future, how crucial do you see Geospatial
Information Systems built on programs like NAIP for conducting either
conservation programs under NRCS or farm, programs under FSA? I see it
becoming an essential tool for doing business. Do you agree?
Answer. NAIP is currently a critical component of an effective GIS
because it provides the up-to-date imagery that is the base data layer
used by all applications. It will become an increasingly essential
business tool as GIS is more fully integrated into daily business
operations and decision making processes. Further, imagery is the base
reference layer in almost any GIS, USDA or government-wide; the
benefits are felt well past FSA and USDA.
Question 2. You mention the use of geospatial information system as
a useful tool for managing and understanding land information that
enables more efficient management of conservation programs. Can you
elaborate on how you use this technology? Is it available to everyone?
And how will you spend the recent appropriations of $24M?
Answer. GIS supports daily business operations, decision making and
problem solving, and display of geographic resources. It is used for a
host of program administration activities, including farm record
maintenance, crop reporting, compliance and crop monitoring activities,
conservation practice planning and management, and disaster response
and recovery.
GIS technology has been made available to USDA Service Center
agencies through enterprise hardware and software purchases and through
the IT Budgets of USDA agencies. Base imagery is acquired through FSA's
NAIP and distributed via the USDA Geospatial Data Gateway to USDA
agencies as well as to other Federal, state and local agencies and the
public.
NAIP is becoming the de facto standard base imagery for other
Federal agencies as well as state and local governments. A standard
base image helps ensure that data sets developed and maintained by USDA
agencies registers geographically and temporally with data sets from
other Departments and agencies. This increases the return on investment
for USDA by facilitating data sharing and collaboration with other
agencies.
In addition, NAIP and other unrestricted geospatial data collected
and maintained by USDA, such as Soils and the Common Land Unit, is
being made available through public facing web services that can be
accessed and viewed through web browsers and/or free GIS applications
that can be downloaded from commercial and public sites.
The FY 2009 Omnibus Appropriations report language directed FSA to
apply $24 million to NAIP; in addition to any partnership funding that
is received. Because FSA finances NAIP out of the agency's salaries and
expenses allocation, implementing this direction may impact FSA's
ability to meet other needs and discretionary funding requirements.
Question 3. Again, for the future, I understand you supply these
images free of charge to the public and other Federal agencies,
including many large private firms like Google Earth and universities,
totaling tens of thousands of internet downloads each year. How much of
NAIP's total budget is paid for by these outside users? Do you have
legal authority to charge outside users for downloading these images?
Answer. It has been an FSA policy decision to make versions of
compressed mosaics of individual county wide imagery available to the
public at no charge through download. Larger, uncompressed copies of
the imagery are available to the public on media at reproduction cost.
NAIP partners receive copies of the imagery as part of the
partnership agreement and many host websites that make the imagery
available to the public free of charge. In addition, because the
imagery is in the public domain, other non-partner sites also host this
imagery. While FSA has authority to charge fees for recovering
reproduction costs for the imagery, including downloads, this nominal
fee will only recover reproduction costs and will not generate
additional funds for acquisition purposes.
None of the NAIP budget is paid for by public users discussed
above. FSA does not have legal authority to recover anything beyond
reproduction and processing costs associated with dissemination of the
data.
Question 4. Is it important to obtain a line-item statutory
authorization for the NAIP program for the future, to assure that its
funding become stable and does not compete for operating appropriations
within the Farm Service Agency?
Answer. Yes. While NAIP has been an example of successful inter-
governmental partnerships and effective program management, the
``roller-coaster''-style funding pattern that has been the norm since
the program began has constrained the program's full potential. With
stable funding through a line item statutory authorization that did not
compete with operating appropriations, FSA would be able to focus on
continued program improvements rather than on program survival. This
would also facilitate the ability to establish additional Federal,
state and local partnerships because acquisition plans would be
predictable, allowing partners to budget for partnership contributions.
Stabilizing the program in this manner would also assist contractors
involved in NAIP to secure funding to make capital investments and
improve efficiency, creating a win-win situation for both the
government and industry.
Current funding supports NAIP acquisition for the continental U.S.
on a 3 year cycle. This represents minimum requirements for FSA, if not
other agencies. There is ample evidence from user surveys and
requirements studies that indicate acquisition on an annual cycle would
produce additional value.
FSA on income eligibility determinations
Question 5. USDA's March 19, 2009, News Release describes USDA
plans for income verification system that includes obtaining income
information from IRS. How does USDA envision such a system will
operate?
Answer. The specifics of the system are still being developed.
However, it is envisioned that, for a high percentage of participants,
IRS will be able to verify that the average AGI limitations have not
been exceeded. USDA does not plan on obtaining actual tax returns or
specific income information from IRS, routinely. We anticipate that IRS
can provide an indication whether the average AGI limitation may have
been exceeded. In those cases, additional information may be requested
from the producer to ensure that the average AGI limitation has not
been exceeded.
Question 6. Given the complex definitions and multiple caps for
farm and nonfarm income in the 2008 Farm Bill, who will actually
conduct the income eligibility determinations for individuals and
entities applying for Federal farm program payments?
Answer. USDA will make the actual determinations.
Question 7. In its testimony and related report, GAO said that
about $49.4 million in farm payments were made to about 2,700
potentially ineligible individuals between Fiscal Year 2003 and Fiscal
Year 2006. What plans does USDA have to further investigate these
individuals and seek recovery of any improper payments?
Answer. GAO did not identify these ``potentially ineligible''
individuals. We are currently working on trying to identify these
individuals and will seek recovery of any improper payments.
Question 8. Although not addressed in GAO's testimony today, GAO
reported in July 2007 that about $1.1 billion in farm program payments,
including conservation payments, were made in the names of nearly
173,000 deceased individuals during the period, Fiscal Year 1999
through Fiscal Year 2005. What specific steps has USDA taken to
identify payments made to deceased individuals, determine whether these
payments are improper, and, if improper, recover these funds? How much
as been recovered to date?
Answer. FSA implemented a data-matching process between program
payment recipients and the Social Security Administration's Death
Master File. The process identifies any payments issued to an
individual after the date of death as reported to the Social Security
Administration. Reports are generated on a quarterly basis. State FSA
offices were instructed to initiate collection of any amounts
determined to be an improper payment. We do not have information
available on what amounts have actually been recovered to date.
However, a FSA review of FY 2007 payments issued to individuals
identified as deceased found that 98.1 percent of the payments were
properly issued.
Question 3. Is there a land ownership requirement for acreage being
enrolled in the Conservation Reserve Program?
Answer. Generally, an owner is ineligible to offer land for
enrollment in CRP unless the land was owned or operated for at least 12
months. An exception may be authorized if the land was acquired,
through death, or certain foreclosures and the new owner did not
acquire the land for the express purpose of enrolling the land in CRP.