TITLE: B-307720, Department of Agriculture--Conservation Security Program, September 27, 2007
BNUMBER: B-307720
DATE: September 27, 2007
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B-307720, Department of Agriculture--Conservation Security Program, September 27, 2007

   B-307720

   September 27, 2007

   The Honorable Robert F. Bennett

   Ranking Minority Member
   Subcommittee on Agriculture, Rural Development,
     Food and Drug Administration, and Related Agencies
   Committee on Appropriations
   United States Senate

   Subject: Department of Agriculture--Conservation Security Program

   Dear Mr. Bennett:

   In April 2006, at your request, GAO issued a report examining increased
   cost estimates and cost controls for the Department of Agriculture's
   Conservation Security Program (CSP). 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
   (Washington, D.C.: Apr. 28, 2006). Among other things, we found that in
   fiscal year 2004, the department made payments pursuant to CSP contracts
   that exceeded annual payment limits imposed by statute, 16 U.S.C. sect.
   3838c. See GAO-06-312, at 31-32. Subsequently, we agreed to examine
   whether the department was authorized to make these payments. Letter from
   Susan A. Poling, Managing Associate General Counsel, GAO, to the Honorable
   Robert F. Bennett, Chairman, Subcommittee on Agriculture, Rural
   Development, and Related Agencies, Committee on Appropriations, United
   States Senate, Oct. 17, 2006. As explained below, we conclude that the
   department was not authorized to make payments that exceed the statutory
   annual payment limits. Any payment that exceeds the statutory annual
   payment limit is an improper payment.

   Our practice when rendering legal opinions is to obtain the views of the
   relevant federal agency to establish a factual record and to elicit the
   agency's legal position in the matter. GAO, Procedures and Practices for
   Legal Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept.
   2006), available at www.gao.gov/legal.htm. In this case, we contacted the
   department's General Counsel to solicit her legal views and obtain factual
   information. Letter from Thomas H. Armstrong, Assistant General Counsel
   for Appropriations Law, GAO, to Nancy S. Bryson, General Counsel,
   Department of Agriculture, Oct. 24, 2006. On July 9, 2007, the department
   responded to our request providing its legal views and additional factual
   information. Letter from Stuart L. Shelton, Assistant General Counsel,
   Conservation and Environmental Division, Department of Agriculture, to
   Thomas H. Armstrong, Assistant General Counsel, GAO, July 9, 2007 (Shelton
   Letter).

   BACKGROUND

   Congress authorized CSP in Public Law 107-171[1] to provide assistance to
   agricultural producers who advance the conservation and improvement of the
   quality of soil, water, air, energy, plant and animal life. 16 U.S.C.
   sect. 3838a. CSP provides financial assistance to agricultural producers
   who meet defined standards of conservation and environmental management in
   their operations. See 16 U.S.C. sections 3838-3838c. Administered by the
   Natural Resources Conservation Service (NRCS), the program encourages
   qualifying producers to continue their high level of stewardship that
   meets the standards to qualify for CSP assistance. GAO-06-312, at 2.

   Under CSP, the department and an eligible agricultural producer enter into
   a conservation security contract after agreeing to a conservation security
   plan. 16 U.S.C. sect. 3838a(e). Under these contracts, the agricultural
   producers agree to implement the plan in exchange for the department
   making annual payments to the producers. 16 U.S.C. sect. 3838a(b),(d).
   Contracts are categorized under a three-tier system under which the length
   of contract and payment scheme may vary. 16 U.S.C. sect. 3838a(d)(5). Tier
   I contracts are 5-year contracts and include conservation practices that
   address at least one significant resource of concern, such as water
   conservation, for a portion of an agricultural operation at an appropriate
   nondegradation standard. 16 U.S.C. sect. 3838a(d)(5)(A). Tier II contracts
   are 5- to 10-year contracts and include conservation practices that
   address at least one significant resource of concern for an entire
   agricultural operation at an appropriate nondegradation standard. 16
   U.S.C. sect. 3838a(d)(5)(B). Tier III contracts are 5- to 10-year
   contracts and include conservation practices that address a resource
   management system at an appropriate nondegradation standard for all
   resources. 16 U.S.C. sect. 3838a(d)(5)(C). Congress limited the annual
   payment that agricultural producers could receive under a CSP contract for
   each tier: Tier I, $20,000; Tier II, $35,000; and Tier III, $45,000. 16
   U.S.C. sect. 3838c(b)(2). For fiscal years 2002 through 2007, Congress
   directed that the department "shall use the funds, facilities, and
   authorities of the Credit Commodity Corporation to carry out" CSP. 16
   U.S.C. sect. 3841.

   In fiscal year 2004, NRCS made payments under CSP contracts described as
   "advance enhancement payments." See GAO-06-312, at 31-32. NRCS officials
   explained that because of lower than anticipated participation in CSP in
   fiscal year 2004, NRCS did not need all of the funding that Congress
   appropriated to the department to make payments under the program. Id. at
   32. Using the excess funding, NRCS provided the advance enhancement
   payment as a one-time payment in addition to the other annual payments due
   under the CSP contracts. Id. The advance enhancement payment was intended
   to cover enhancement payments that NRCS, under the conservation security
   contracts, committed to make to producers in future years of the
   contracts. As a result of the advance enhancement payments, NRCS made 95
   Tier I annual payments that exceeded the statutory limitation of $20,000,
   209 Tier II annual payments that exceeded the statutory limitation of
   $35,000, and 105 Tier III annual payments that exceeded the statutory
   limitation of $45,000. Id. at 31.

   The department concedes that NRCS, in fiscal year 2004, made annual
   payments to 409 CSP participants that were above the statutory maximums
   allowed for their tiers. Shelton Letter, at 3-4, referring to GAO-06-312,
   at 31-32. The department asserts, however, that its regulations allowed
   NRCS to advance a portion of the annual contract payment in the first year
   of the CSP contract. Shelton Letter, at 1-2. The annual payment made to
   each program participant consists of three elements, 16 U.S.C.
   sect. 3838c(b)(1), only one of which is at issue here--the enhancement
   payment,[2] 16 U.S.C. sect. 3838c(b)(1)(C)(iii). NRCS makes an enhancement
   payment to a producer engaged in or who has agreed to engage in practices
   that, among other things, provide increased resource benefits beyond the
   minimum level that is required for program eligibility. 16 U.S.C.
   sect. 3838c(b)(1)(C)(iii). The department's regulations provide that
   payment for "[e]nhancements above the minimum criteria for the resource
   concern . . . may be included in the first CSP payment." 7 C.F.R.
   sect. 1469.23(d)(7).

   According to the department, the enhancement payment consists of two
   components--the "benchmark" portion, based upon efforts already undertaken
   and identified during a benchmark inventory process to determine program
   eligibility, and an "other exceptional conservation efforts" portion,
   based upon future efforts. Shelton Letter, at 1-2. The department states
   that, consistent with 7 C.F.R. sect. 1469.23(d)(7), NRCS paid the
   benchmark portion of the enhancement payment due under the entire term of
   the contract as an advance enhancement payment to some CSP participants.
   Id. at 2. The department explains that if a participant received $20,000
   as an advance enhancement payment in the first year of a 5-year CSP
   contract, NRCS then would offset this $20,000 payment through the
   remaining 4 years of the CSP contract term by deducting a pro rata amount,
   in this case $4,000, from the remaining annual payments due to the
   participant under the contract. Shelton Letter, at 3. So, in the remaining
   4 years, NRCS would pay the producer $16,000 per year instead of $20,000
   per year.

   DISCUSSION

   At issue here is whether NRCS, during the course of a year, may make
   payments to agricultural producers under a CSP contract that exceed the
   statutory limits on annual payments in the CSP authorizing act. In the CSP
   authorizing act, Congress provided that--

     "the Secretary shall make an annual payment, directly or indirectly, to
     an individual or entity covered by a conservation security contract in
     an amount not to exceed--

       "(i) in the case of a Tier I conservation security contract, $20,000;
       "(ii) in the case of a Tier II conservation security contract,
       $35,000; or
       "(iii) in the case of a Tier III conservation security contract,
       $45,000."

   16 U.S.C. sect. 3838c(b)(2)(A) (emphasis added).

   Here, the language of section 3838c(b)(2) is clear: annual payments cannot
   exceed the amounts listed for each tier. When the language of a law is
   clear and unambiguous on its face, it is the plain meaning of that
   language that controls. See Connecticut National Bank v. Germain, 503 U.S.
   249, 253-54 (1992). In this case, neither we nor the department have
   identified a statutory exception. Indeed, the department has conceded that
   "NRCS does not have any information to dispute [the] finding" that 409
   payments exceeded the limits set out in section 3838c(b)(2). Shelton
   Letter, at 4. We conclude that the department had no authority to exceed
   the annual payment limitations set out in section 3838c(b)(2).

   The department argues that its regulations allow NRCS to advance the
   enhancement payment portion. The department's regulation, 7 C.F.R.
   sect. 1469.23(d)(7), provides that payment for "[e]nhancements above the
   minimum criteria for the resource concern . . . may be included in the
   first CSP payment." Id. We do not object to the department's
   interpretation of 7 C.F.R. sect. 1469.23 to allow NRCS to advance the
   enhancement payment portion of the annual payment in the first year of the
   contract, as long as NRCS's contract payments in any one year do not
   exceed the annual payment limitation imposed by section 3838c(b)(2).
   Section 3838c(b)(2) is clear and provides for no exception. The department
   may not apply its regulation in such a way as to permit payments that
   exceed a clear statutory limitation on annual payments. See Oregon v.
   Ashcroft, 368 F.3d 1118, 1130 (9^th Cir. 2004) (no effect is given to an
   agency's interpretation of its regulations that contradicts federal law).

   The department also argues that because NRCS had enough money in fiscal
   year 2004 to cover advance payments, the department acted within its
   authority. Shelton Letter, at 1-2. See also GAO-06-312, at 31-32. In the
   department's fiscal year 2004 appropriations act, Congress provided that
   "[n]ot more than $41,443,000 for fiscal year 2004 of funds appropriated or
   otherwise made available by this or any other Act shall be used to carry
   out the conservation security program . . ."[3] Pub. L. No. 108-199, div.
   A, title VII, sect. 752, 118 Stat. 3, 38 (Jan. 23, 2004). NRCS explained
   that it did not actually need $41,443,000 to meet its contractual
   commitments to agricultural producers; NRCS, therefore, used its surplus
   to advance payments to producers. The department would have us conclude
   that because it had more than enough money to satisfy its fiscal year 2004
   contract commitments, it could ignore the statutory limitations imposed on
   contract payments. To do so, we would have to read the fiscal year 2004
   appropriations act as repealing, at least for fiscal year 2004, section
   3838c(b)(2) and its limitations on contract payments. We are unwilling to
   do so. It is a well-established rule that such repeal by implication is
   strongly disfavored. Tennessee Valley Authority v. Hill, 437 U.S. 153, 189
   (1978). Instead, rules of statutory construction provide that, where acts
   address the same subject in a manner that may present a conflict, effect
   should be given to all acts if at all possible. See B-303268, Jan. 3, 2005
   (citing Posadas v. National City Bank of New York, 296 U.S. 497, 503
   (1936)).

   The appropriations act contains no language that could be construed to
   repeal the annual payment limits per contract within section 3838c(b)(2).
   Reading the appropriations act and section 3838c(b)(2) together, we find
   no difficulty in giving effect to both. The amounts available to the
   department in fiscal year 2004 were available for use only in a manner
   that was consistent with the CSP authorizing statute, 16 U.S.C. sections
   3838-3838c. The fact that the level of participation in the CSP program
   did not require the $41,443,000 that Congress made available for
   obligation and expenditure does not allow the department to circumvent
   Congress's clear direction that the department make annual payments to
   agricultural producers that do not exceed prescribed amounts depending
   upon a participant's qualifying tier.

   The department has conceded that NRCS made payments in excess of the
   annual limits in section 3838c(b)(2) in 409 CSP contracts. See Shelton
   Letter, at 4. All payments made in excess of the statutory limits are
   improper payments. B-309181, Aug. 17, 2007; B-239592, Aug. 23, 1991. The
   95 Tier I improper payments have been resolved by the passage of time.
   Tier I contracts are 5-year contracts. In fiscal year 2004, NRCS advanced
   payments to cover fiscal years 2005 through 2008 (or the remaining years
   of a then current Tier I contract). In reducing the annual payments made
   in those 4 years to cover the amounts advanced in fiscal year 2004, NRCS,
   effectively, has resolved those improper payments. However, many of the
   Tier II and Tier III contracts are for periods of up to 10 years,
   continuing through fiscal year 2013. The department should identify these
   Tier II and Tier III contracts and promptly resolve any improper
   payments--for example, by adjusting the next payments due under the
   contracts. It would be irresponsible of the department to leave the
   discharge of improper payments to the passage of time. To do so would
   render the statutory limitations on contract payments meaningless.

   We note that the department has taken administrative measures to ensure
   that statutory annual payment limits are respected in the future. The
   department adjusted its CSP sign-up notices for subsequent fiscal years to
   state clearly that any annual contract payment, including any advance
   enhancement portion, would not exceed statutory limitations. See Notice,
   Natural Resources Conservation Service Conservation Security Program, 71
   Fed. Reg. 6250, 6252 (Feb. 7, 2006); Notice, Conservation Security
   Program, 70 Fed. Reg. 15,277, 15,279 (Mar. 25, 2005). The department
   informed us that it also has improved its administrative software to take
   into account the annual payment limits. Shelton Letter, at 5. We commend
   the department for taking these actions. It is important that the
   department ensure adherence to Congress's clearly stated annual payment
   limits.

   CONCLUSION

   The department was not authorized to make payments that exceed the annual
   payment limits established by 16 U.S.C. sect. 3838c(b)(2). Accordingly,
   the 409 contract payments that exceeded the statutory annual limits were
   improper payments. To the extent that such improper payments will not be
   resolved with the fiscal year 2008 payment to CSP recipients, the
   department should take action to resolve any remaining improper payment
   balance yet to be recovered.

   Sincerely yours,

   Gary L. Kepplinger
   General Counsel

   DIGEST

   The Department of Agriculture was not authorized to make annual payments
   to Conservation Security Program participants that exceeded the annual
   payment limits imposed by 16 U.S.C. sect. 3838c(b)(2). Any payment that
   exceeded the annual payment limit is improper and should be promptly
   resolved.

   ------------------------

   [1] Pub. L. No. 107-171, title II, subtitle A, sect. 2001, 116 Stat. 134,
   223 (May 13, 2002).

   [2] The other two parts are a base payment, 16 U.S.C.
   sect. 3838c(b)(1)(C)(i), and an amount calculated by reference to the
   county costs for operations, 16 U.S.C. sect. 3838c(b)(1)(C)(ii).

   [3] For fiscal years 2002 through 2007, Congress directed that the
   department "shall use the funds, facilities, and authorities of the Credit
   Commodity Corporation to carry out" CSP. 16 U.S.C. sect. 3841.