NRCS’s Process for Allocating EQIP Funds to the States Does Not Clearly Address the Program’s Purpose of Optimizing Environmental Benefits

NRCS’s process for providing EQIP funds to the states is not clearly linked  to the program’s purpose of optimizing environmental benefits. In addition, the financial assistance formula relies on some  questionable and outdated data. As a result, NRCS may not be directing  EQIP funds to states with the most significant environmental concerns  arising from agricultural production. NRCS Does Not Have A Specific, Documented Rationale for Formula Factors and Weights

Although the 31 factors and weights used in the general financial assistance  formula give it an appearance of precision, NRCS does not have a clearly  documented rationale for including each factor in the formula and  assigning or modifying each weight. For example, the formula includes a  factor addressing river and stream impairment but no factor for impaired  lakes and other bodies of water. While the factors in the EQIP general financial assistance formula  determine what resource and environmental characteristics are considered  when allocating funds, the weights associated with these factors directly  affect how much total funding is provided for each factor and, thus, the  amount of money each state receives. In 2006, if the weight of any of the 31 factors had increased by 1 percent,  $6.5 million would have been allocated on the basis of that factor at the  expense of one or more other factors. Such a shift could impact the amount  of financial assistance received by each state. For example, a 1 percent  increase in the weight of the specialty cropland factor with a corresponding  decrease of 1 percent in the American Indian tribal land factor could result  in large changes to the distribution of EQIP general financial assistance. Not using  recent data raises questions about whether the formula allocates funds to  areas of the country that currently have the greatest environmental needs,  because recent changes in a state’s agricultural or environmental status  may not be reflected. As part of its 2005  strategic planning effort, NRCS developed outcome-based, long-term  measures to assess changes to the environment resulting from the  installation of EQIP conservation practices. According to NRCS, it has developed baselines for its long-term, outcome- based performance measures and plans to assess and report on them once  computer models and other data collection methods that estimate  environmental change are completed. Recommendations for Executive Action

To achieve EQIP’s purpose of optimizing environmental benefits, we  recommend that the Secretary of Agriculture direct the Chief of the Natural  Resources Conservation Service to take the following two actions:  ensure that the rationale for the factors and weights used in the general  financial assistance formula are documented and linked to program  priorities, and data sources used in the formula are accurate and  current; and  continue to analyze current and newly developed long-term  performance measures for the EQIP program and use this information  to make any further revisions to the financial assistance formula to  ensure funds are directed to areas of highest priority. Objectives, Scope, and Methodology

At the request of the Ranking Democratic Member, Senate Committee on  Agriculture, Nutrition, and Forestry, we reviewed the extent to which (1)  the U.S. Department of Agriculture’s (USDA) process for allocating  Environmental Quality Incentives Program (EQIP) funds to states is  consistent with the program’s purpose of optimizing environmental  benefits and (2) USDA has developed measures to monitor program  performance.
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 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 1 percent increase in the weight of any factor would have resulted in $6.5 million more allocated on the basis of that factor and a reduction of 1 percent in money allocated for other factors. In addition to weaknesses in documenting the design of the formula, some data NRCS uses in the formula to make financial decisions are questionable or outdated. For example, the formula does not use the most recent data available for 6 of the 31 factors, including commercial fertilizers applied to cropland. As a result, any recent changes in a state's agricultural or environmental status are not reflected in the funding for these factors. During the course of GAO's review, NRCS announced plans to reassess its EQIP financial assistance formula. NRCS recently developed a set of long-term, outcome-based performance measures to assess changes to the environment resulting from EQIP practices. The agency is also in the process of developing computer models and other data collection methods that will allow it to assess these measures. Thus, over time, NRCS should ultimately have more complete information on which to gauge program performance and better direct EQIP funds to areas of the country that need the most improvement.