B-307720, Department of Agriculture--Conservation Security Program, September 27, 2007

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.