[House Hearing, 105 Congress] [From the U.S. Government Publishing Office]AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1998 ======================================================================== HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTH CONGRESS FIRST SESSION ________ SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES JOE SKEEN, New Mexico, Chairman JAMES T. WALSH, New York MARCY KAPTUR, Ohio JAY DICKEY, Arkansas VIC FAZIO, California JACK KINGSTON, Georgia JOSE E. SERRANO, New York GEORGE R. NETHERCUTT, Jr., Washington ROSA L. DeLAURO, Connecticut HENRY BONILLA, Texas TOM LATHAM, Iowa NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full Committee, and Mr. Obey, as Ranking Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. Timothy K. Sanders, Carol Murphy, John J. Ziolkowski, and Joanne L. Orndorff, Staff Assistants ________ PART 1 AGRICULTURAL PROGRAMS Page Secretary of Agriculture......................................... 1 Office of the Chief Economist Office of Budget and Program Analysis Office of the Inspector General.................................. 263 Departmental Administration...................................... 429 Office of the Chief Financial Officer Office of the Chief Information Officer Office of Communications Office of the General Counsel National Appeals Division ________ Printed for the use of the Committee on Appropriations ________ U.S. GOVERNMENT PRINTING OFFICE 41-029 O WASHINGTON : 1997 ------------------------------------------------------------------------ For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 COMMITTEE ON APPROPRIATIONS BOB LIVINGSTON, Louisiana, Chairman JOSEPH M. McDADE, Pennsylvania DAVID R. OBEY, Wisconsin C. W. BILL YOUNG, Florida SIDNEY R. YATES, Illinois RALPH REGULA, Ohio LOUIS STOKES, Ohio JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania JOHN EDWARD PORTER, Illinois NORMAN D. DICKS, Washington HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota JOE SKEEN, New Mexico JULIAN C. DIXON, California FRANK R. WOLF, Virginia VIC FAZIO, California TOM DeLAY, Texas W. G. (BILL) HEFNER, North Carolina JIM KOLBE, Arizona STENY H. HOYER, Maryland RON PACKARD, California ALAN B. MOLLOHAN, West Virginia SONNY CALLAHAN, Alabama MARCY KAPTUR, Ohio JAMES T. WALSH, New York DAVID E. SKAGGS, Colorado CHARLES H. TAYLOR, North Carolina NANCY PELOSI, California DAVID L. HOBSON, Ohio PETER J. VISCLOSKY, Indiana ERNEST J. ISTOOK, Jr., Oklahoma THOMAS M. FOGLIETTA, Pennsylvania HENRY BONILLA, Texas ESTEBAN EDWARD TORRES, California JOE KNOLLENBERG, Michigan NITA M. LOWEY, New York DAN MILLER, Florida JOSE E. SERRANO, New York JAY DICKEY, Arkansas ROSA L. DeLAURO, Connecticut JACK KINGSTON, Georgia JAMES P. MORAN, Virginia MIKE PARKER, Mississippi JOHN W. OLVER, Massachusetts RODNEY P. FRELINGHUYSEN, New Jersey ED PASTOR, Arizona ROGER F. WICKER, Mississippi CARRIE P. MEEK, Florida MICHAEL P. FORBES, New York DAVID E. PRICE, North Carolina GEORGE R. NETHERCUTT, Jr., Washington CHET EDWARDS, Texas MARK W. NEUMANN, Wisconsin RANDY ``DUKE'' CUNNINGHAM, California TODD TIAHRT, Kansas ZACH WAMP, Tennessee TOM LATHAM, Iowa ANNE M. NORTHUP, Kentucky ROBERT B. ADERHOLT, Alabama James W. Dyer, Clerk and Staff Director AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1998 ---------- Wednesday, February 26, 1997. SECRETARY OF AGRICULTURE WITNESSES DAN GLICKMAN, SECRETARY OF AGRICULTURE RICHARD ROMINGER, DEPUTY SECRETARY KEITH COLLINS, CHIEF ECONOMIST STEPHEN B. DEWHURST, BUDGET OFFICER Opening Remarks Mr. Skeen. The committee will come to order. We will go on the record. Today, we have before us Secretary Glickman. Mr. Secretary, is it all right if I call you Dan? Secretary Glickman. Yes, you may. Mr. Skeen. It's a little awkward saying Mr. Secretary all of the time to somebody I've known as long as you. Besides, you're my next door neighbor. Secretary Glickman. Mr. Fazio has to call me Mr. Secretary. Mr. Skeen. Okay. Mr. Secretary, I want to welcome you here before the committee. I believe you know everyone here. It's nice to have a former colleague before us who is so well- respected by all sides of the political spectrum. We're here today to look at how you spend the taxpayers' money. We all want it to be spent wisely so we get a good return on our investment. This holds true whether we're looking at research, rural housing, WIC, or contract payments. And Mr. Secretary, I've looked at your statement. The third paragraph mentions balancing the budget by the year 2002. Now, we're all for that, but as you know we're here to deal with a shorter-term problem. We deal with the budget one year at a time. Savings projected for the years 2001 and 2002 are all well and good, but we have a very serious problem facing us in fiscal year 1998 as you well know and understand. Let me sum up the problem. The Farm Bill let a mandatory crop insurance program for agent commissions convert to a discretionary cost. This is a $200 million problem. You're asking for nearly a $400 million increase for WIC. Welfare reform has taken away any provision which we have used in recent years to save more than $300 million from the Food Stamp Program. Those three things cause us to face a $900 million problem in discretionary spending in 1998, not in 2002. Our allocation for discretionary spending has gone down from $14.6 billion to $12.9 billion since 1994. The President's request for this bill in fiscal year 1998 is $14.1 billion. This is not in the cards under any agreement. All of this is my way of telling you before we get carried away with the joys of coming into the year 2002, we have a huge problem right now with the discretionary budget for the Department of Agriculture. It is also my way of telling you when we get down to making reductions in your proposal, don't be surprised. On that wonderful note, we will turn it over to you, Mr. Secretary and we are delighted to have you here. I want to say this too. Thanks to our cooperation, we didn't have any shutdown the last time we went through this exercise. Let's keep it rolling. Statement of the Secretary Secretary Glickman. Thank you, Joe. And to Vic Fazio and George Nethercutt, I thank you very much for having us again. As you know with me are my partner, Rich Rominger, the Deputy Secretary. Mr. Skeen. Very familiar. Secretary Glickman. Very familiar. And then two of our finest career employees who are also very familiar with you, our Budget Director Steve Dewhurst, who has been here--how many times? Mr. Dewhurst. About twenty. Secretary Glickman. Twenty times. And Keith Collins who has probably been here almost as many times; not quite. Mr. Skeen. They possess great institutional memory. Secretary Glickman. That's correct. Plus they know a lot about the Department and its programs. Let me just make a couple of points. First of all, I appreciate the committee's work. Your committee enabled us to get a budget the last couple of years. In one year when the rest of the Government was shutdown we were not. We were often viewed as if we were preferred or something was wrong with the Department of Agriculture? And I told them--in fact when I would make speeches--I would say that the appropriations process worked when it came to agriculture. It was because of your leadership that it worked. I also understand the nature of the budget problems. But I have to come here to give you some of the priorities and then try to let you work with us to figure out how to spend within those priorities. FOUR FUNDAMENTAL PRIORITIES There are four fundamental priorities in this budget. One is expanding economic and trade opportunities. We had record exports last year. This year exports will be down a little bit, but they will be record again in the years to come. So, that is one area. Ensuring a healthy, safe, affordable food supply is number two. We had our implementation of our Hazard Analysis and Critical Control Program--HACCP--rules that we're undergoing now to continue to provide safe, healthy, nutritious, and affordable food. Number three is managing our natural resources in a sensible way. The 1996 Farm Bill emphasizes conservation as much as anything else in terms of the programs for the future. And the fourth priority is reinventing Government and saving taxpayers money. So, I do want to tell you that when we submitted this budget to you, even though in your judgment it is higher than what you would like to see, it was necessary for us to make difficult decisions to restrain, reduce, and redirect spending. I was just talking to one of your colleagues outside about recent possible decisions to further downsize the Farm Service Agency--FSA--faster than maybe what Congress had intended. I have talked to Congressman Dickey about this particularproblem. And so, I think it does indicate that we are in the process of trying to set priorities. I should also point out that through recent changes in legislation, USDA also contributes to balancing the budget through reductions in mandatory spending. The 1996 Farm Bill reduces budgetary exposure by providing strict payments; definite payments to farmers which are set over a seven-year period by law. Implementation of the USDA portion of welfare reform also is projected to save nearly $3.5 billion in 1998 and $21 billion over five years. But there are some adverse affects that we have to deal with in this budget exercise; and particularly, quite frankly, if the Congress were to adopt the Balanced Budget Amendment I think it would affect our response to natural disasters. I was out in California. We responded in the Dakotas. And the fact is natural disasters require emergency action from the Government. It is one of the places that people demand action from their Government. I think the pressure on Food Stamp benefits in time when we're in recession are times that are the greatest worry for me. With the inflexibility of what an amendment might do, as well as the intense pressures to reduce valuable programs for our farm and rural clientele, I worry given the demographics of the country and the Congress. There are just not that many people living in rural America. And the pressures on programs affecting rural America would be hit, I think, just doubly hard given the priorities that we face. DISCRETIONARY SPENDING But in any event, the current request for this committee is $13.2 billion for discretionary spending. As you say, that's about a half billion above the level for 1997. We are proposing legislation that would increase user fees, particularly in meat and poultry inspection; as well as limiting reimbursements to private insurance companies. With the effect of this legislation, we're proposing a discretionary budget of about $12.7 billion which is about the same as the 1997 level. I would also note that the total staff year levels, Federal and Non-Federal, associated with the budget are down substantially. We are projecting a total staff year requirement of just under 110,000 for 1998 compared to nearly 130,000 in 1993. The President's budget indicates significant further reductions in staff through the year 2002. And as I said, this is somewhat controversial, even in our own states, in terms of at what speed do we accomplish that? Also associated with the 1998 budget we're requesting a supplement of $100 million for the Women; Infant and Children-- WIC--Program to prevent a large drop in participation and ensure a smooth transition between 1997 and 1998. We've also requested a $6.2 million supplemental for the Nutrition Education Training Program to restore funds lost from the Welfare Reform Act. That Act removed the mandatory funding status of the program, leaving it with no funds. These supplementals are fully offset, including a $50 million rescission in budget authority for the Public Law 480, Title I Program. ECONOMIC AND TRADE OPPORTUNITIES Now, if I might just quickly talk about the priorities I mentioned. The first priority is economic and trade opportunities. As you know, the 1996 Farm Bill provides farmers the flexibility to plant for the market rather than government programs; to deal with the added risk of farming brought about by this legislation; the variability of prices. Perhaps dairy has been the most classic example, but the price swings have been greater in the last year than I think we've seen for some time, to deal with this variability where we are expanding crop insurance tools as a part of our commitment to maintain a safety net for producers. Last year we worked with the private industry in developing a pilot program for revenue insurance which protects farmers against price declines, as well as, production losses. This program is being continued in 1997. And for 1998 we are proposing that revenue insurance be offered nationwide. Our legislative proposal will be budget neutral in this area and will provide for a comprehensive set of improvements in the Crop Insurance Program. These include changes in the reimbursement rates for delivery expenses, and the statutory limit on loan losses, as well as, administrative changes that would strengthen program compliance. Of particular interest to this committee is our proposal to change both the amount of discretionary funds needed to operate the program and the range of expenses that would be paid with such funds. SAFETY NET As a part of our safety net proposal, this committee also should be aware, not as a part of the budget proposals directly, but indirectly, we are requesting that the authorizing committees give us authority to extend commodity loans in certain circumstances, allow for managed haying and grazing of Conservation Reserve Program--CRP--acreage, increase planting flexibility; and, provide for flexibility in the timing of production flexibility contract payments. We're also proposing legislation to improve farm credit services. Also, we're requesting appropriated funds to expand the collection and dissemination of weather data for agricultural areas. But we believe there is not enough current, accurate, up- to-date weather information guiding farmers as to variability of weather conditions. So, we need more accurate weather forecasts and observations which would help producers mitigate the adverse impacts of weather-related events. On the farm credit front, we continue to provide essential financial support for those who cannot obtain credit elsewhere. Therefore, we are requesting that these programs be funded in 1998 at a level of about $2.8 billion in loans and guarantees. SOCIALLY DISADVANTAGED FARMERS Portions of both direct and guaranteed farm operating and ownership loans would be targeted at the beginning to socially disadvantaged farmers. We are also requesting that $5 million be appropriated for 1998 to continue the outreach program for Socially Disadvantaged Farmers. Only $1 million was appropriated for 1997. And we have just allocated an additional $4.5 million in funding for 1997 from the Fund for Rural America which was set-up in the 1996 Farm Bill. Our outreach efforts will help ensure that members of these groups receive the training and management assistance necessary to remain in farming. TRADE AREA In the area of trade, as I said before, we had nearly $60 billion in export sales last year. It is critical we continue our trade expansion efforts. Changes in domestic farm programs have made America's farmers and ranchers more dependent than ever on exports to maintain and expand their income. In addition, although many tariffs and trade barriers have been lowered, we continually face new challenges in our efforts to access new markets such as what I call phonysanitary and phytosanitary measures not based on sound science or concerns about genetically engineered products, particularly in Western Europe. Competition in international markets also remains keen. Our budget proposals continue our strong commitment to export promotion and growth; about $7.7 billion in 1998. In the case of the Export Enhancement Program, we propose full funding on levels permitted under the 1996 Farm Bill of $500 million or up from $100 million in this past year's appropriations. We also propose continuing the Market Access Program--MAP--at last year's levels as well. Rural Development In the area of rural development, rural America continues to face persistent poverty, lack of basic amenities, and limited economic opportunity. The 1998 budget provides funding for several key Administration initiatives to address these problems, including the EZ/EC or the Empowerment Zone Enterprise Community Initiative, the Water 2000, the President's National Home Ownership Initiative, and the Administration's National Information Super Highway Initiative. The 1998 budget provides funding for over $9.1 billion in loans and grants under our rural development programs which is about $1 billion more that can be supported with the 1997 appropriation. This includes $1 billion for single family housing direct loans. Further, we are proposing that $689 million of the budget authority which is enough to support an estimated $2.5 billion in loans and grants, be provided under the Rural Community Advancement Program--RCAP--that was authorized by the 1996 Farm Bill. This approach allows greater flexibility for matching funding to state and local priorities, and it provides block grants to states to have the opportunity to administer those programs similar to those conducted under our ongoing programs. Further, the Fund for Rural America is being used to provide $100 million in additional funding for critical rural development programs and high priority research for 1997. We would like to propose a technical correction in the Farm Bill to move up the release date making another $100 million available in 1998. In research, as many of you know, the research functions of the USDA will have to be reauthorized this year. But we are requesting a total of $1.8 billion for the research, education, and economics mission area in 1998. This is critical to expanding economic and trade opportunities, as well as ensuring a safe, healthful, and affordable food supply. And so this is a very high priority for us to make sure that our research is adequately funded; particularly as it relates to the long-term global competitiveness of the United States. In 1998, we will conduct the Census of Agriculture for the first time and thereby expand significantly its role as an information provider. Although USDA has been appropriated funding for the Census in 1997, the authorization legislation to transfer the function from Commerce to USDA has not been passed. I urge you to support swift passage of this legislation to provide the funds needed to conduct the Census in 1998. In marketing and inspection, we're making excellent progress in combating many plant and animal pest and disease programs such as brucellosis. The 1998 budget proposes increased funds for pest detection activities such as Karnal bunt and the Agricultural Quarantine Inspection at the borders. In addition, we have several proposals regarding packer market competition and poultry industry compliance as recommended by our Advisory Committee on Agricultural Concentration. Some new user fees in the marketing and inspection area are proposed to recover specific federal costs in delivering these programs. IMPLEMENTING THE HACCP SYSTEM The next priority is a healthy, safe, and affordable food supply. As you know, we're implementing the HACCP system; a science and performance based system. We believe that it's working very well. We're doing our best to work cooperatively with both large and small packers to get them to comply. For 1998 we are requesting a budget of $591.2 million which is a $17.2 million increase over the 1997 level to maintain inspection and continue making investments in technology, training, and science. This budget builds on our 1997 budget, which you approved, which maintains a front line work force capable of rigorous, client-based inspection. This is an important point that I'm sure the committee is going to focus on. Legislation will be proposed to recover the direct cost of providing inspection to slaughter plants which is estimated at $390 million in 1998. This user fee proposal assures that the resources will be available to provide the level of inspection necessary to meet the demand for such services without being subject to annual budget pressures. This action will also reduce the pressure to trade off investment and improving inspection with the need to meet legislative requirements for providing inspection. Separating the cost of inspection from the cost for administering the program will permit the agency to focus more on the investment in science and technology to improve the effectiveness of the program. ADMINISTRATIONS FOOD SAFETY INITIATIVE As a part of the President's recently announced food safety initiatives, we are also requesting $9.1 million for research, education, and improved inspection systems used for pre- and post-harvest food safety research and improve the capability to trace back a food born illness. The public continues to be concerned about these activities. We believe that they will lead to increased food safety. In support of the implementation of the Food Quality Protection Act of 1996; a major piece of legislation that you passed. We are requesting that an increase of $10.2 million be made available to the Agricultural Marketing Service--AMS--to administer the Pesticide Data Program. We believe that funding for the program, in this service, is preferable to the current funding arrangement through the Environmental Protection Agency--EPA. I had mentioned this to you before. This program is very important to ensure that there is accurate monitoring of pesticides. It's supported by all parties, both consumer groups and industry, and it is one that we believe needs to be in our budget frankly. FOOD PROGRAMS In the area of food programs, we are obviously interested in WIC. We are proud to say that WIC has grown to full participation, achieving a long-standing bi-partisan goal. A budget of $4.1 billion request is proposed to provide adequate resources to support full funding participation of 7.5 million participants by the end of 1998. We will continue to work with the states to improve case load management and to operate the program within available funds. We've requested full funding of $7.8 billion for theSchool Lunch and the Child Nutrition Programs. We have stepped up our nutrition education activities designed to help schools serve more nutritious meals and teach children healthier eating habits. We are also requesting $12 million for a new human initiative in 1998; with additional increases each year until the initiative reaches $53 million in 2002. Virtually all the human nutrition research in government is done through the Department of Agriculture. Several places: Baylor Medical School, University of Texas in Houston, Tufts in Boston, San Francisco, University of Arkansas. This is the premier research in human nutrition in the world. And we are doing it out of USDA laboratories. At the Texas Medical Center in Houston I visited labs where they were able to improve the absorption of vitamins and minerals for premature babies and allow them to be released from the hospital earlier. So, these are programs that we think ought to justify some additional funding. Also, in the nutrition assistance area we are working actively with states to implement welfare reform. We plan to offer modest legislative changes to the authorizing committees to moderate the harsher aspects of welfare reform. The legislation would provide a softer landing and extend a helping hand to anyone able and willing to work, but unable to find a job. That proposed legislation would add $845 million in 98 and $3.3 billion over five years. Also, in the food area I want to call to your attention the leadership role we are taking on behalf of the Federal Government to promote food rescue in gleaning around the country. It is estimated that we throw away 15 to 20 million meals into the garbage; from institutional servings of food that is not saved; 15 to 20 million meals a day. Now, the Congress passed the Bill Emerson/Good Samaritan Act last year which will be very profoundly helpful in relieving people of liabilities so they can donate food. That has already had some significant effect. Major food chains are beginning to make donations. So, this is a program we can help without costing the taxpayers any money whatsoever. CONSERVATION I want to just briefly talk about conservation and saving some money. I will be done in about five minutes. Common sense management of natural resources is high on our agenda. The 1996 Farm Bill does a lot of things; extending the Conservation Reserve Program--CRP, Wetlands Reserve Program, and it changed how conservation, cost share, and land retirement programs are funded. CCC--Commodity Credit Corporation--funds are now used on many of these programs instead of direct appropriations. We face a critical year in deciding the fate of 21 million acres that are coming out of expiring CRP contracts. The revised CRP will target only our most environmentally sensitive land so that we get the maximum environmental benefit for each dollar spent. Less environmentally sensitive land better suited for planting crops will be returned to production. Using CCC funds our goal is to reach and then maintain the 36 million acre maximum enrollment established by Congress, but that will not be done in one year. That will take us some time to accomplish. In conjunction with CRP, CCC funds will be used to enroll an additional 212,000 acres into the Wetlands Reserve Program during 1998, bringing total enrollment to about 655,000 acres which represents about two-thirds of our goal. We are requesting appropriated funds of $821 million for our Natural Resources Conservation Service--NRCS--to carry out conservation technical assistance and water shed work we do along with state and local partners. SAVINGS TO TAXPAYERS Finally, I would like to address how we are reinventing the good and saving taxpayers money. We continue to implement the reorganization authorized by Congress in October 1994. We have already consolidated agencies and restructured the headquarters and some field offices. Our initial efforts have resulted in substantial savings and reductions in employment. Our projections indicate that we will achieve savings of more than $4 billion by 1999 and nearly $8 billion by the year 2002. We are continuing to close and collocate field offices to streamline operations to provide more efficient services. I will have to tell you I wrote you all in the last few days indicating that there are no specific plans that I have approved on further reductions, although some will be needed. But there is great fear out there that we've already made the decisions on reducing the field offices. Those decisions have not been made to date. Further, streamlining and downsizing, however, is also dependent on better management of technology resources. USDA's total Federal and county employment in 1996 was over 16,000 below its 1993 level. By the year 2000, it will be more than 26,000 below the 1993 level. So, if people are looking for a place in Government where cuts have been made, this is it. And USDA's employment today is lower than it has been at any time in the last 30 years. And that trend is going to continue. I will have to tell you, that while efficiencies can result in a lot of that, it does create a significant amount of stress within the ranks when you're doing that kind of major massive reduction. Besides reorganization, we are also working to combat fraud and reinvent administrative processes. Several initiatives are underway. You are all aware of the Electronic Benefit Transfer--EBT--Program for Food Stamp to reduce errors and to reduce trafficking. And that's operational in 18 states and under development in all other states. We are also stepping up our management integrity efforts on child nutrition and WIC. To site another example of reinvention, we have moved from a costly inefficient system of managing single family direct housing loans to a program using state-of-the-art technology which reduced regulations and fewer staff. This new centralized servicing system is known as DLOS--Dedicated Loans Origination and Servicing. It is expected to save over $400 million in taxpayers money over the next five years while increasing service to borrowers and reducing delinquencies. Similar opportunities must be found for the Department to manage the substantial changes and responsibilities in the farm service area imposed by the Farm Bill. The 1998 budget includes substantial further reductions in staffing at USDA, including the service centers, largely because the budget numbers have come down. These reductions continue through fiscal year 2002. In fact, the President's budget has us going to 2000 service centers by the end of 1999. Right now, we have about 2,650 Farm Service Agency--FSA--Offices. Now, those aren't all field service centers. But the Department will be challenged to meet these targeted reductions while maintaining a high level of service to our clients. We'll do everything we can to meet the challenges. We'restudying our county-based activities to identify options and to improve efficiency and enhance coordination of our efforts. I would have to tell you, after serving in the Congress for 18 years and coming to the Department, I don't know how other agencies are organized, but this particular Department is organized in a very stove-piped operation. Every Under Secretary, every agency operates, has historically operated separate and apart from the rest of the agencies and the rest of the Department. For example, Rural Development, to the Natural Resources Conservation Service, to the Farm Service Agency. So, one of the problems we have in terms of managing and downsizing in the Department is trying to implement what we call a USDA spirit, not a Farm Services Agency spirit or a Natural Resources Conservation Service spirit. And it is tough. When I ask people where they work and they say I work for the Farm Service Agency, I say, no you don't. You work for the United States Department of Agriculture--USDA. But that has been a phenomenon in this Department for 60 years now. And in order to make these major management changes, reduce payroll, consolidate computer acquisition and the other kinds of major things, we must get people to think that they are working for a common agency and that the four-letter word ``turf'' doesn't guide everybody's perspective. And that is a constant challenge for us. civil rights Finally, I want to mention the issue of civil rights. I want to sincerely thank the committee for its help last year in honoring our request for $1.5 million to help strengthen our staff resources in this area. We have many activities underway to reduce the existing backlog of Equal Employment Opportunity and program discrimination complaint cases in the Department; and, to ensure that the same situation does not occur in the future. I am not proud of the backlog or the fact that we do not clearly have the best record in Government in handling Equal Employment Opportunity cases or program discrimination cases. A few months ago, I created a Civil Rights Action Team to do a thorough audit of USDA's Civil Rights issues and provide me with recommendations for improvements. I also asked our Inspector General to look at it as well. We held a series of listening sessions around the country to gather information and hear the concerns of employees and program participants. Deputy Secretary Rominger and I attended all of these sessions or basically all of them. I have received the team's report with recommendations for improvement. They are profound recommendations. I'm going to have a press conference on Friday to talk about what we can do; and, what the Congress is going to have to help us do. But the fact of the matter is, I am committed to making positive changes at USDA to ensure that both our customers and our employees are treated fairly and with dignity. It's something we need to do much better. Mr. Chairman, this completes the remarks I want to make. As I said when I started my remarks, I know it doesn't get any easier every year for you to develop and pass the agriculture appropriations budget, given all of the competing demands. I would tell you this, by and large the state of American agriculture is excellent. The projections for exports are high. Farm income is up. The land grant colleges tell me they're seeing a renewed interest of younger people pursuing agricultural careers. Some aspects, particularly dairy, for example, have been hurting very badly. But by and large, things are better today in agriculture. I think that is owed to the ingenuity of the American farmer, perhaps the optimism from the 1996 Farm Bill may have something to do with it. But we have a lot to be proud of in terms of the workload of both USDA, as well as, this committee. Thank you very much. [Clerk's note.--The Secretary's written testimony appears on pages 198 through 224. Secretary Glickman's, Mr. Rominger's, Mr. Collins', and Mr. Dewhurst's biographical sketches appear on pages 196 through 197. The Office of the Secretary's explanatory statement appears on pages 225 through 235. The Office of the Chief Economist's explanatory statement appears on pages 236 through 253. The Office of Budget and Program Analyses' explanatory statement appears on pages 254 through 262.] nafta expansion to include chile Mr. Skeen. Thank you very much, Dan. I appreciate the breadth, the depth, and the whole dimension that you had to go through to put this thing together because it's a good report. We may have some differences in there, but we're still working on trying to go in the same direction. Talking about exports brings to mind, I know, from the news reports, the Administration wants to go ahead on the North American Free Trade Agreement--NAFTA--expansion to include Chile. You've just recently, I think today, had the President of Chile here and the opportunity to visit with him. Can you give us a timetable for these negotiations to expand, the NAFTA negotiations, and some indications of the prospects for U.S. agriculture? I see also that Chairman Smith, in his recent visit there said that while Chile exports about $400 million annually to the United States they maintain a wide variety of obstacles to U.S. imports or exports. Secretary Glickman. Well, the President of Chile is here. In fact I was with President Clinton when he welcomed him. We had a little meeting. Agriculture was actually the first subject brought up at that meeting. We have agreed to establish a consultative process to deal with some sanitary and phytosanitary issues which have to be resolved. One is wheat. The Chileans have made it extremely difficult to get our wheat into Chile. They have requirements that are far greater than most countries in the world and they are not necessary. Another one is poultry; where it has been difficult for us to get our poultry in as well. The Chileans want to get other items into the United States. So, we have agreed to a consultative commission. I am somewhat encouraged that we will get these matters resolved on a higher bi-lateral level. I mentioned to the President of Chile that the extent to which these agricultural issues are resolved will have a lot to do with the Congress' interest in pursuing Fast Track. And that was basically based on my history here. The President does want to move ahead on this. And I think we should. But it is clear that agricultural issues have to be worked out. So, I'm going to go to Chile sometime soon. I talked to Bob Smith. I think Bob Smith did some good when he was down there. Mr. Skeen. I agree. I think he did too. Secretary Glickman. But, it is our desire to move ahead on Fast Track. Mr. Skeen. Dan, in that same vein, we noticed that any country you visit, particularly from the southern hemisphere, would like to trade with us. But then they don't want our goods because of something with the inspection process or things of that kind. So there isstill home turf issues in most respects. We'd like to get that opened up. field office closings Let me switch to a totally different subject. That's the field office closings. We have been swamped with calls mostly from USDA employees about closing offices. I know you mentioned that in your dissertation. Can you tell me what's going on there specifically? We all know you had a long-term plan to consolidate and go from 3,500 to 2,000. Now, all of a sudden people are talking about 1,500 and saying the reason is a lack of funding. I'll be the first to say that money is a real problem, but in this case closing offices is more a reflection of USDA reorganization and Farm Bill changes rather than from a lack of funds. Secretary Glickman. Let me answer it the best way I can and then I'd ask Steve Dewhurst to answer it as well. We started in 1994 with the Reorganization Act. We have closed or consolidated approximately 1,200 county locations. The goal was to get down to 2,500 USDA Service Centers. These were places farmers could go to where USDA would be located, not just at a Farm Service Agency office, but a farm service center of USDA. We're down to about 2,600 or 2,650 service centers, which includes some separate Farm Service Agency offices. The goal was to reduce down to 2,500. Mr. Skeen. That is more of an all service? Secretary Glickman. Yes, an all service center. Now, it is easier said than done. I go back to this issue of turf. You have the Farm Service Agency which is largely composed of Federally paid county employees. This does not occur anywhere else in the Government of the United States. You have people working for the government who are not Federal employees, but their pay checks come from Uncle Sam. That's the way it's been since the 1930's with the county office employees. And merging that system with, let's say with NRCS rural development who are all Federal employees tends to create an arrangement that is cumbersome. Moreover, it tends to rekindle the turf battles that come between them. I'm just telling you, it's a big challenge to do that. However, we're still doing pretty well given the uniqueness of the challenge we are faced with. In fact, they're doing better at the county level making those decisions sometimes, than they do at the Federal and State levels in making those same kinds of decisions. But in any event, we've reduced Federal staffing in the Farm Service Agency by 16 percent and county office staffing by 15 percent, and staffing in rural development by 16 percent. This is all between fiscal year 1993 and 1996. And staffing in the NRCS has been reduced by about 14 percent. Now, as a result of the 1996 Farm Bill there are a lot of changes in what these agencies are going to do. In the Farm Service Agency there is going to be less micro-management for example in proving yields and bases. However, on the other hand, the 1996 Farm Bill resulted in signing up 98 percent of the eligible farm areage in the United States. Participation was well up from the 70 to 75 percent of the farms which signed up in the past. So, there was more work required as a result of the 1996 Farm Bill in terms of paperwork and interaction with producers than we'd ever seen before. But at the same time, over the long term there probably won't be as much work. So, we must take a hard look at the budget and try to review all levels--headquarters, regional, state, and field--and adjust everything we can in an effort to achieve the staffing changes projected in the budget. Now, the President's budget, based on the numbers in the Farm Service Agency does provide that we would get down to 2,000 service centers at the end of 1999. Some of our State Directors then went out and decided well, it may not be as efficient to have 2,000 offices with this many people because you will have too few people in each field office. Maybe what we ought to do is have fewer field office centers, more people in each one, and do it in such a way so farmers aren't terribly inconvenienced. They came up with some sort of formula which says that one service center couldn't be any more than 20 or 25 miles from another service center. That was kind of the theory. So, then they prepared an unofficial working draft of thier analysis. I'm not sure, but in some of your counties where you don't have field office centers they may be 100 miles apart. Mr. Skeen. Well, for every mile we have to go we count it as two. Secretary Glickman. Okay. This is particularly an acute problem, I would say, to Mr. Kingston and Mr. Dickey in states in the south where you have lots of counties and lots of county offices. That's where the impact would probably be felt the most. But it would also be felt in Kansas and in other mid- western states. The State Directors came up with the idea that maybe we ought to do 1,500 offices. They then sent requests out to their state offices asking them to come up with which offices they would close if we went to 1,500. And needless to say, I've heard from about 50 Members of Congress already and hundreds of letters. What are you doing to us? So, I sent a letter out to everybody saying, no, we're not reducing the service centers to 1,500. The budget does provide that we go down to 2,000 which will require further closings, assuming that you approve this budget. We are going to have further consolidations and closings, but I commit to you today that we will not engage any plan without coming to you and giving you notice and getting your comments and assistance in working through the numbers on it. It is clear, in some parts of this country we have field offices very close to each other. In this modern world of computers and fax machines, you don't need the same kind of office structure that we needed in 1935. We have been reducing it during this time period. But there ought to be various factors to go into this decision, in terms of, convenience and the nature of the crop in the area, and those kinds of concerns. So, my answer would be no formal plan on the books. I haven't approved anything else. The President's budget does require us to go down to 2,000 by the end of FY 1999. usda computerization Mr. Skeen. You mentioned computerization. How is that program coming along? It's been a very serious problem in the past. Secretary Glickman. I will ask Rich Rominger to comment on computers. Mr. Rominger. You're correct. That has been a problem in the past when we had every agency developing their own computer system. We now have a process and a plan. In fact, we have a moratorium right now on any new systems until we have a department-wide architecture in place. Mr. Skeen. You're networking. Mr. Rominger. So that they can network. That's correct. We're getting on top of it and we're making good headway. Mr. Skeen. Thank you. Let's try to stay as much to the five-minute rule as we can. I'd appreciate it. Mr. Fazio. Mr. Fazio. Thank you, Mr. Chairman. Ms. Kaptur wanted me to say that she is sorry she couldn't be here today. She has a family illness that prevents her. But it's really my privilege to be able to welcome both Danny Glickman and Rich Rominger, long time friend and constituent and good friend and colleague. I really am pleased to be able to, for the first time in my years in Congress, be directly engaged with this budget because I've been indirectly involved with it for a long time. I did want to chime in on the Chairman's comment on Chilean membership in NAFTA. In California, I think I can tell you if we can't get some help on the wine issue with Mexico and the preferential treatment that Chile has there, we will have a much harder time getting the votes that traditionally come from our state on this issue. I just thought I'd put that on the record and remind everybody of our frustration. Mr. Skeen. No threat intended. electronic benefits transfer Mr. Fazio. Danny, we had a very good presentation from the Inspector General a couple of weeks ago. Among the things that he highlighted for us was the evolution of EBT as a way of getting benefits to people through the Food Stamp Program particularly. I didn't realize it but in the Welfare Reform Bill we took a real step forward by assuming liability at the federal level for lost cards that I think were impeding the states from wanting to take on what has obviously given us some real savings. I wonder if you could comment on how quickly you might be able to complete the implementation of Electronic Benefit Transfer around the country because the savings to federal taxpayers is truly astounding and the service to the beneficiaries is significant as well. Secretary Glickman. Right now, about 15 percent of Food Stamp recipients use the card. The goal is to have full implementation by 2002. Currently, EBT is operating statewide in Utah, Texas, South Carolina, New Mexico, and Maryland. It's partially operational in Pennsylvania, New Jersey, Connecticut, North Dakota, South Dakota, Minnesota, Illinois, Iowa, Kansas, Ohio, Louisiana, Colorado, and Wyoming where it is expected to be fully operational within a year. Actually North Dakota, South Dakota and Kansas are expected to go nationwide actually next month. So, in all other states EBT is in various stages of planning and implementation. So, that's about the best I can tell you on that. Our budget has $4.5 million to support EBT implementation. Actually, that's a reduction of $2 million from 1997. But a large part of that, however, was was due to the up front expenses that have already occurred. Mr. Fazio. One of the concerns that was expressed though is a reluctance on the part of states to put up the additional 22 cents a card that would give you the fraud proof approach, the approach that many of the credit card issuers are providing with individual signature. I'm hopeful that can be also pursued because I think there is no question we will benefit greatly from reduction in fraud, both costs to the states and in most cases federal. Secretary Glickman. I don't know if Mr. Viadero talked about how they monitor Food Stamp fraud with the EBT card. But properly on-line, you can determine within seconds excessive utilization anywhere. While you can still fraudulently use EBT cards, the opportunities for immediate auditing are there. So, it really is a very positive thing. Mr. Fazio. You also indicated that relatively few fraudulent marketers of food under the Food Stamp Program exist. But we could really go a long way to saving money if we would require a bond up-front when people go into business. Some of the people who have been going into business simply to rip us off obviously would not succeed if we required that. Is there any willingness to consider the way you might prevent fraudulent operations? Most of the markets who are providing Food Stamps successfully have been in business and would have no problem. It's the fly-by-night operator we're worried about. Secretary Glickman. Yes. First of all, I don't know whether legislatively we can require a bond without a change in statute. I think the reluctance has been in a lot of cases that many of the people that use Food Stamp are in smaller stores. So, the question is coming up with an affordable type of bond. On the other hand, most of these stores make their money on selling food through the Food Stamp Program. That cost would probably be a very small part of their activity. Mr. Fazio. We really ought to investigate this because there is a tremendous percentage of the fraud occurring in a few places which appear, in retrospect, to be set-up simply to rip us off. We're not trying to impede a smaller market. There has got to be some sliding scale or something that would relate to the size of the establishment, the amount of food sold or what have you. school lunch program I wanted to ask you a question about the School Lunch Program. The dietary guidelines for Americans have been a watch word for the program apparently. And USDA has proposed a rule that's going to allow schools to serve yogurt as an accredited food item in the program. Apparently, this is a very significant issue. We have a lot of teenage girls who are not getting an adequate amount of nutrition in the program. Given the benefit to the dairy industry, as well as the nutrients in yogurt, this would be a significant addition to the program. I wondered why this decision has been held up for so long. There is a tremendous cross-section of support from the American Food Service Association, dietetic groups all the way across to the people who provide this as a product. Secretary Glickman. Well, first of all, the rule is still under review. As you can imagine, it is fairly controversial. Mr. Fazio. Perhaps you can enlighten us about the controversy. Secretary Glickman. Well, I think a part of the controversy has to do with using yogurt as a meat substitute. It has been viewed by some folks in the livestock industry as an attempt to remove meat from the program. That's not the intent at all. But to do that, we wanted to make sure that if we're going to go down this road which we have proposed, both meat and yogurt have to be considered to supply important nutrients in the diet. So the rule would allow yogurt to be credited towards the meat requirement in school lunches and breakfasts. Something that's also permissible, right now is called New Menus. So, my own belief is that yogurt is not likely to gain much of a level of acceptance in the substitute for meat, so it would have a marginal impact on the meat market. But when you're considering a rule like this, you have to consider its impact on other food choices as well. But we did propose the rule and we're still considering it. However, I am not sure what the current state of affairs is, whether the comment period is closed or not. Mr. Fazio. The comment period is closed, but I think the decision has been in abeyance for quite awhile. And I guess my question reflects the frustration of people who thought you were right the first time and want to assure you. They still do. Secretary Glickman. Okay. Mr. Fazio. Mr. Chairman, I think I'll wait for the next round. Thank you. Mr. Skeen. Thank you, Mr. Fazio. Mr. Walsh. class i differential price structure report Mr. Walsh. Thank you, Mr. Chairman. Mr. Secretary, it's good to see you. I have some questions I'd like to ask about the Federal milk marketing order process. The one issue that I wanted to talk about a little bit is this Price Structure Report which affects Class I differentials. Apparently, there was a report put together by people who were brought together to discuss this from the private sector and from academia and so on, and they submitted a report. Apparently the report was favorable to the northeast and the southeast. As you know, the reason for these Class I differentials is that in the mid-west most of the milk goes into cheese production. Secretary Glickman. Right. Mr. Walsh. Whereas in the east and the southeast, most of it is fluid milk or for milk at the table. So, in order to keep milk fresh you have to transport it over long distances quickly. There are costs to that and that's why we have these Class I differentials in a nutshell. But this price structure report has been held up. I was just wondering what the status of that report is and what's your Department's position on it? Secretary Glickman. Okay. I'm going to ask Keith Collins to respond more directly. But first, just let me tell you that there is a bigger picture. This is a part of the whole process of reforming the milk marketing order structure which Congress required us to do in the 1996 Farm Bill. Both in terms of consolidation of orders, as well as, to deal with the pricing structure including Class I, as well as, the other classes of milk. Needless to say I don't have to tell you that if the wisdom of Solomon were required in anything I've ever done in life, it's required in the milk marketing order process. You could get 50 states together and they would have 10,000 different opinions on how to price milk. And the differential you've talked about is perhaps one of the greatest ones where people from the upper mid-west feel theologically and religiously against the differential existing at all. Mr. Obey. Solomon never lived in the mid-west. Secretary Glickman. By the way, I want you to know that I did not cause your physical problem. I've been hearing about this lately. In any event, I might ask Keith Collins to respond. Mr. Collins. As a part of the order reform time table we had planned to issue a report on a price surface in early December 1996. The report we planned to issue however was not a report prepared by academics. We hired two academic institutions to advise us; Cornell University and Texas A&M. They did provide reports to us. That was raw material for our own task force to produce its own report, which I might say, differed from the reports that were submitted by the universities. Mr. Walsh. Say that again. The reports submitted by the Universities were raw material for your report? Mr. Collins. That is correct. Mr. Walsh. But your report differed from their conclusions? Mr. Collins. Yes. It did. Mr. Walsh. What information did you draw upon to give a counter opinion? The mid-west? Mr. Collins. No. The people who assembled our report were people who were milk marketing order administrators from around the United States. They are our experts in the Department's Dairy Division in the Agricultural Marketing Service. Their report was submitted for Departmental clearance. And at the Department we decided that we wanted to look at some options. The report that's about ready to be released now will include some options for a pricing surface which we will then seek public comment on. Secretary Glickman. Here is the problem. Congress said reform the system. We however, opened this process up to obtain greater input across regional lines. Although we had a lot of people pulling their hair out about doing something different, we had virtually no responses of what I would call formal legitimate proposals submitted to us. So, I decided I needed more in order to make this decision. And that's basically what the hang up has been. But we're about ready to release the report fairly soon. class i differentials Mr. Walsh. Well, let me just refer to a statement that I believe was attributed to you. It was before the Senate last year in which you I believe, said, ``Class I differentials should be substantially reduced or eliminated.'' Is that still your position? Secretary Glickman. I think I said something like that, yes. Mr. Walsh. And that is your position and the report will reflect that opinion? Secretary Glickman. No. I think the report is going to reflect options. After all, I've got to do something that's best for the country as a whole. I would have to tell you that the differentials, particularly the size and the scope of the differentials have disturbed me. And I've said so publicly. But we have to come up with sound alternatives to that, that do not prejudice other regions of the country as well. But yes, I did make that statement or something like that. Mr. Walsh. I see. Mr. Collins. Can I just add to that? We are bound in this reform process to adhere to the Agricultural Marketing Agreement Act of 1937 which requries that we use classified pricing in milk. Classified pricing means that you're going to have different values based on use which implies that there will be differentials. So, a part of the Secretary's statement in which he said ``elimination'' is probably not feasible. Secretary Glickman. What he is saying there is that I said something that was not possible to do because of the statute,since he knows more about it than I do. I did make it a point. To the extent possible, I thought the variations in differentials ought to be reduced if it could be done without doing harm elsewhere. But I have to live by the earlier statute. Mr. Walsh. It would seem that, based on the information that I have here, the cost to get fluid milk to market, in the northeast and southeast, is probably about twice the cost, at least based on the report that was provided by Cornell and Texas A&M. Mr. Skeen. What was that University again? Mr. Walsh. Texas A&M; great school. And I think you should follow the recommendation, Mr. Chairman. So, there really is a differential in terms of cost to getting the product to market. And I just end by assuring you that the religious fervor that's felt in the mid-west about the problems with those differentials, there is an equally strong religious fervor against the small group of cheese manufacturers in Green Bay setting the price of the milk all over the country that northeastern farmers don't think really helps them. Secretary Glickman. I would agree that the furor against the cheese exchange is not limited to only one part of the country. We are, right now working very vigilantly trying to find a substitute for the cheese exchange. I've gone up with Senator Spector to Pennsylvania. And Congressman Obey and the other Members of the Wisconsin delegation met with me. There seems to be a general feeling that there needs to be another way to compute the price of cheese as a part of the basic formula price. Mr. Walsh. Thank you, Mr. Secretary. Mr. Skeen. I want to thank you too. Along the same line of questioning and a point of personal privilege, the number one agricultural product out of New Mexico today is dairy. It used to be beef cattle. I sat for one afternoon while some of their experts were telling me how they arrive at the price of milk. To this day I cannot tell you at all. I thought I could pick-up on it very quickly, but I think you have to be born into that. But we do appreciate Southern California moving to New Mexico. Mr. Obey, I know you have another engagement. So, we're going to let you have your shot. Besides that, we're on a very good topic for you. Mr. Obey. Thank you, Mr. Chairman. Mr. Secretary, I do need to inform you that I asked the President last night to fire you. Secretary Glickman. I heard that. green bay cheese exchange Mr. Obey. I make that point for the Gentleman from New York--three weeks ago I was at the Secretary's Office with a delegation of Wisconsin farmers complaining vociferously about what was happening at the Green Bay Cheese Exchange. Secretary Glickman made me do a lot of heavy lifting for those farmers. We then went into a press conference. Midway through that press conference I felt a sharp pain and discovered I had a strangulated hernia and went right to the hospital and had surgery. And I told the President last night that I know you got the short straw and you couldn't attend the State of the Union address, but it's a hell of a note when a Cabinet Officer makes certain a Member of Congress can't attend that State of the Union address either. Let me simply ask you, Mr. Secretary, three basic questions. First of all, where are we with respect to evaluating the situation at the Green Bay Cheese Exchange and finding a different approach to a price discovery mechanism? Secretary Glickman. Keith, do you want to tell them the status of this? Mr. Collins. Yes. Right now, we're in a public comment period. The Secretary put out a call for public comments to be received at the Department until March 31st. We've started to receive some. At this same time, we are also doing our own work to look at what can be done. The issue here is can the Secretary do something by using his discretionary authority or does he have to go through formal rulemaking as required under Milk Marketing Orders? For us to do something without going through formal rulemaking, which is what most people want and what essentially the Senate resolution on this issue asked for. We have to find clearly that the cheese exchange price is defective; and, we have to find an alternative that remedies the defects. So, those are the two issues that we're working on right now. Secretary Glickman. Right now, we don't have an alternative yet. There are options to try to get some futures market trading in cheese. And those are being reviewed by some of the futures exchanges. The option would be is whether we could do it ourselves and we're looking at that as well. Mr. Collins. The issue is finding an accurate, reliable representative market value of cheese. Right now, there is only one market in the United States that produces that and that's the market that's under attack. Mr. Obey. Well, let me simply say that Mid-western farmers feel just as strongly as farmers anywhere else that it ought to be under attack because it's a cock-a-mamie system that has resulted in incredible irrationalities. And I hope that we can continue to work with you to move it forward. I would simply note in response to the Gentleman from New York's comments that I think our objection to the milk marketing order system is number one, that times have changed since 1937. I mean, I remember reading about the actions of Congressman Jerry Boila who represented my district in 1937 when these differentials were debated at length in the Congress. The issue hasn't change a heck of a lot, but the economy certainly has. And I think it well-merits change. Secondly, I would simply make the point that you also have the fact that Congress itself meddled with that process by legislatively adding to those differentials two farm bills ago--or was it three? I think it was two. So, the differential was not one that was established solely by administrative action, which I think also demonstrates that it was politically manipulated on the Floor of the House of Representatives. fsa field office staffing Let me go to the FSA situation. It is certainly a logical extension of the passage of the Farm Bill which mandates that government get out of agriculture in many respects. It's certainly a logical extension that holds from that, that you will have fewer services and, therefore, you need fewer people and fewer offices. I would simply ask two things. That number one, the regional impact of that should wind up being fair. Secondly, is ittrue that you are planning to cut the number of folks in those positions by about 65 percent? Is that true, long-term? Secretary Glickman. By the year 2002, 65 percent from what number are we talking about? From the figure of 1993 to the figure of 2002, we're talking about 65 percent of the staff years within the Farm Service Agency? Steve, is that right? Mr. Dewhurst. No. We're talking about county office employees which are a part of the staffing of the Farm Service Agency. When we began this process in 1993, we had in the county offices 14,953 staff years of employment. Based on the projections in the President's budget by the year 2002 we would have in those offices 4,879 staff years of employment; or, a 66 percent reduction. That reduction, of course, has become a lot steeper now into the future because of the Farm Bill and the other things that have been done which produced changes in the workload in that area. fsa federal staffing Mr. Obey. Is it true that Federal staffing would be reduced by about 14 percent over that same period? Secretary Glickman. Federal staffing over that same period in the Farm Service Agency comes down about 22 percent. Mr. Obey. Twenty-two percent. Mr. Dewhurst. I can give you the numbers. I should say in our own defense that the Federal staffing in that agency is largely attributable to our Farm Credit Programs. The budget projections for the farm credit programs are for relatively stable programs for farm ownership and operating loans. Secretary Glickman. What happened, as you know, as part of the reorganization the old agriculture credit people used to be in Rural Development in the former Farmers Home Administration. They're now in the Farm Service Agency. They largely make up the Federal employees. Mr. Obey. Well, I have some other questions I'd like to submit for the record. I ask that you expand on that in your reply for the record. [The information follows:] [Pages 22 - 23--The official Committee record contains additional material here.] Mr. Obey. And I would simply again urge that you do as much as you can to deal with the necessity to change that milk marketing order system to reflect the fact that the world is a bit different now than it was in 1937. Thank you, Mr. Chairman. I appreciate the time. Mr. Skeen. Thank you, Mr. Obey. Mr. Dickey. Mr. Dickey. Mr. Glickman, I'd like to just kind of go over your presentation; kind of give you a grade. I think you're reading a lot better. Secretary Glickman. Thank you. Mr. Dickey. You really are. You mentioned Arkansas without calling it Ar-KANSAS. I want to thank you for that. Secretary Glickman. It was tough. Mr. Dickey. I know. I understand that. And you said, ``I've got just five minutes to go,'' and you went 11 minutes and 41 seconds. Secretary Glickman. That's about what you do; isn't it? Mr. Dickey. I'm asking the questions. Secretary Glickman. Sorry. Mr. Dickey. Now, I'd like for that not to count on my time. That was just introductory. Is that possible? Mr. Skeen. You have a free ticket. field office closings Mr. Dickey. Well, I thank you, sir. Thank you. I like this. For the record, Mr. Glickman, I appreciate you talking to me the other day about the closures. Will you say again on the record what you said to me about that we've got some time? Secretary Glickman. Well, what I've said was is that the fear out there at the field office level that we have come up with a proposal to further reduce offices, it's on paper and ready to go is not accurate. I have not approved any such proposal. I've said that the budget requires us to get down to about 2,000 service centers by fiscal year 2000. We're about a little over 2,600 right now. So, obviously some further closings are going to happen; but, there is no formal plan out there to achieve that. While there have been some discussions between the national office and the state offices on how you could get down to 1,500 offices total which is below what we've even talked about doing. And Mr. Obey asked about this before. One of the things our people did, as they looked at these numbers for the year 2002 was to ask themselves, what would happen if you had fewer field offices. Could you have more people serving in a larger geographical environment? And that's one of the reasons they've talked about getting this down from 2,000 to 1,500 in order that you wouldn't have to have this massive reduction of people. You'd have large offices with somewhat larger staffs. So, that's a possibility. However, we are not in a position to decide how further reorganization will specifically affect each state, state-by- state. We're going to have to come up to you, talk to you about that, look at our budget numbers, and make that judgment accordingly. Mr. Dickey. What period of time is involved? Secretary Glickman. We're currently on the road to 2,500 service centers right now. The budget asks us to go to 2,000. But that budget is based upon what the appropriations process does. Therefore, the best thing I could tell you is that there is a big employment change. For fiscal year 1998 in this appropriations bill we're estimating about 9,879 county office employees which is down about 1,900 from where it would be the current fiscal year. Then you're talking about going down another 5,000 over the next four fiscal years if you keep going down this road. So, that's kind of the time line that would be used if we were to go down this road, unless you decided that you wanted us to slow it down or move it in some other direction. county committees Mr. Dickey. The problem that I'm hearing more and more is about taking away the committees. Now, the committees are not any financial burden on the USDA; are they? Secretary Glickman. I'm sorry I don't have the number. There is some expense. I think we pay a per diem or some kind of minimal expense figure to the committees, butit's not a big part of our budget. Mr. Dickey. Well, when those folks select those people, that's a serious thing in my part of the country. And it's sort of like keeping the local school board. I just wanted to express that to you because it's been expressed to me, and folks aren't sure we're getting that word up here. Secretary Glickman. I agree with you. We do not want to destroy or make incapable the county committee system from operating or functioning. Now, I will tell you this. There is probably going to be some growing discussion of the issue of county office versus Federal employees out there. As you know, the people who work on those county committees are paid by the Federal Government, but they're not Federal employees. And I suspect that you're going to find some serious effort to make them Federal employees. One reason is you've got the Rural Development employees who work in the same offices that are Federal employees. They all get their checks from the same place. And I think that item is one that you probably will hear discussed from us or other sources as well. But regardless of what happens, it's not going to take way the ability of the county committees to make decisions on farm programs and those kinds of things. Mr. Dickey. So, Mr. Secretary, what you're suggesting maybe is you're going to come up with a plan and then we're going to approve it here? Secretary Glickman. Well, let me put it to you like this. With the current numbers, we're going to come up with a plan. We're then going to come to you and discuss the plan. Obviously, we're going to work closely with you on the plan. We have to administer the dollars that you give us in the best way possible, but you will not be surprised by any of our decisions. Whatever we do, we'll make sure you're not going to be surprised. We're going to work with you on this. Mr. Dickey. But I want you to know now that if you leave all of the employees in the Fourth District of Arkansas the same, I'm not going to object and you don't need to even run anything by me. Do you understand that? Now, as we are cutting and reducing, the farmers are taking a lot of the load, and they keep mentioning this--that over the years the agriculture program has just taken cut, after cut, after cut. And here they come with the FSA cut. export markets Is there any corresponding effort being made to get us new markets or to secure our markets, say, in the EU and in that area? Are we really using the weight that we have as a country to help these farmers? Secretary Glickman. That's a good question. The ultimate safety net is access to our markets because one out of every three acres that we grow in this country goes in foreign markets. Last year we hit record exports of just under $60 billion. Within our budget we're proposing in the Foreign Agricultural Service an increase in CCC short-term guarantees. We're proposing the Export Enhancement Program be fully implemented pursuant to the Farm Bill. So, we're proposing about $600 million more in actual international programs and activities geared specifically to the export credit and promotion programs, than we had last year. The Farm Bill takes away a lot of the basic program support. Our two alternatives are to keep pushing on the export side, as well as, developing a risk management program that effectively protects people against price volatility. That's why we proposed this revenue insurance which has worked well on a pilot basis in Iowa and in Nebraska. We're trying to make that go nationwide as well. The other side of the coin is that the main farm program payments which used to be under this committee in previous years, is under another committee. Those are program payments that we fully support under the Agricultural Market Transition Act--AMTA. But the downside of that is that everything else is getting cut. But we've supported the integrity of keeping those payments as provided over the seven years of the Farm Bill. So, there is nothing in the President's budget that changes that. Mr. Dickey. Mr. Secretary, I don't know if this is a proper characterization, but what I think the farmers want from our government and your agency in particular, your Department, is to have an advocate over there. Now, we can talk all we want to about how we've got this much money. We're planning to do this. But you've got to have some force and some leverage. I think I'm really just saying this without knowing how you might do it, but if you'll just come out of the corner swinging for us when it comes to the EU. You know, the cattle situation over there in the European Union. What are you all talking about when I'm talking? When I'm talking, don't you all be visiting like that. Secretary Glickman. He's trying to help me answer your question. Mr. Dickey. I know. I know. But I really wonder, is there anything that I can take back? Secretary Glickman. Let me give you one example. Chickens are important in your state, as I recall. Mr. Dickey. They're a small item. chicken exports to russia Secretary Glickman. Okay. This past year, the United States of America, basically through commercial sales, sold nearly $1 billion worth of chickens to the Russians. Mr. Dickey. Okay. Secretary Glickman. Ten years ago our level of exports to Russia was zero. Today, a third of all of our poultry exports go to Russia. Nearly 25 percent of what the Russians buy from us--airplanes, pharmaceuticals, etc.--are chickens. This was a market that was nothing ten years ago. In the last recent year, there was an effort to keep our chickens out of Russia. Mr. Dickey. That's right. Secretary Glickman. On the basis that they were not as sanitary as those chickens produced inside of Russia. We thought that, that was probably not an accurate reflection of the state of affairs. Mr. Dickey. Well, that's what I'm talking about right there. Secretary Glickman. We decided to work it. Now, the industry working with a bipartisan Congressional delegation and the Administration worked together to keep that Russian market open. Quite frankly, the relationship between the Vice President and the Prime Minister of Russia, Mr. Chernamerden-- they have a commission going--was very helpful in seeing that happen. There is an example of a market that started from zero ten years ago that is not the most significant market that wehave, we've a number of examples like that. european union Mr. Dickey. How about cattle in the EU, European Union? Secretary Glickman. The EU will not buy our cattle that are fed with any grain that's been treated with hormones. We've filed a petition with the World Trade Organization on that because our meat is perfectly safe. It's purchased by the Japanese and by people all over the world. The Europeans, won't do it. We also have this pending problem with genetically modified organisms, BT--Bacillus Thuringiensis--corn. All these things that we think are safe, by using sound science have been shown to be safe. We worry that these countries are using these sanitary and phytosanitary barriers really as a way to keep our products out and not necessarily as a way for justifiable food safety. But I guess my point to you is, the ultimate safety net is selling our product into the export market. Ninety-six percent of the people in the world live outside of the United States of America. That's where our markets are. Mr. Dickey. I just want to say one other thing. Keep it up on the chickens; will you? Secretary Glickman. Okay. Mr. Dickey. Just keep it up. Thank you, Mr. Chairman. Mr. Skeen. We don't mean to cut you short on your chickens, Mr. Dickey. Mr. Dickey. Thank you. I know. I'm not offended. Mr. Skeen. Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. Mr. Secretary, welcome. I bring you greetings from all the farmers I represent in the South Bronx. It is interesting. I probably represent more people who used to live on a farm, either in Puerto Rico or in the south, than a lot of other people do. I'm fascinated by the whole chicken and cheese conversation. We, in New York City probably eat more cheese than most other places, but we don't put them on franks or wieners or hot dogs or whatever you want to call them. Yankee Stadium uses that quite a bit. programs in urban areas Along those lines, Mr. Secretary, a couple of people have wondered what the heck I am doing on this committee. But we know the Department does quite a bit in the urban areas. For the record, I'd like you briefly to tell us some of the programs that do take place in the urban areas, that affect the urban areas of this country. Secretary Glickman. The total number of our budget that goes into food and nutrition programs is about 60 percent. And that, of course, is primarily the Food Stamp Program. While the Food Stamp Program is affected by welfare reform, I believe it has maintained itself as the primary Federal entitlement program for transfer income via food assistance. In addition to that, the School Lunch Program provides nearly half of the commodities served in about 100,000 school lunches at schools around the United States. These commodities come from USDA's Women, Infant, and Children [WIC] Program, which we're asking for an increase. These are the commodity distribution programs that we're talking about. These programs consume a big chunk of our budget dollars. There are more dollars that actually go into food and nutrition programs than actually go into traditional farm programs as a result of this Department's function in that area. I might also say we inspect meat and poultry. So, every constituent of every Member of this committee wants to have safe meat and poultry. We think it's the safest in the world. We think it's one of the reasons why people here aren't like the Europeans in terms of the scares that exist in other parts of the world when there are food safety problems. By and large people have confidence that our food safety system works well. So, that is obviously a big part of our budget as well. Those two are just part of the answer to you. There is a lot more that we do. In our conservation area, a lot of water quality. It is not in the jurisdiction of this subcommittee, but the U.S. Forest Service. I participated in Urban Resources Partnership Grants in your district, I think a year or two ago. Mr. Serrano. Bronx Restoration. Secretary Glickman. Parks restoration. Some of that may be in the NRCS, but most of that would probably be in the Forest Service. Mr. Serrano. Right. I appreciate that. In fact, I'm very active with the Bronx Restoration Corporation which has taken the Bronx River and included the community and the children, the school children, from the area and brought about a whole new outlook on the environment in the area. I do commend you for it. There is one part of your testimony that---- Mr. Walsh. Would you yield? Mr. Serrano. Yes. Mr. Walsh. Just for a point of information. One of the things that USDA does and have been very, very helpful throughout the country, particularly in New York State and New York City, is the Watershed Protection Plan. There is a tremendous amount of money going in to make sure that New York City doesn't have to build billions of dollars in infrastructure to filter that water. It is the best water in the world. And the USDA is doing a lot to keep it that way. civil rights Mr. Serrano. In fact, our water is bottled and sold at Macy's. In the Bronx, you can get it from the tap. It's amazing. There is from your testimony something that concerns me. First of all, let me tell you that on this whole issue of civil rights, I commend the stand you've taken and the fact that by this Friday you will tell us how you intend to deal with this issue. But the GAO report indicates that this has been going on for quite a while. Why did it take so long to reach such a high level where a decision will be made and this will be attacked as it should be? Because you have to understand something, Mr. Secretary. Many of us deal with these issues on a daily basis, but if any one had ever brought up the issue of discrimination in farming or in programs available to farmers, that was the last thing we'd expect; education, employment, the military recently; never in farming. Farming is so much a part of the communities most affected. We heard about the African American community. We know that there have been problems with the Hispanic farmers complaining and Asian Americans and so on. Why did it take so long? Was there a desire on the part of some people just not to discuss the issue or was it an issue that just didn't sell in this country and no one ever discussed it before? Secretary Glickman. It's a hard question to answer. We'vebeen getting reports for 30 years on this. There have been lots of them. Lots of them have gathered dust. There have been some improvement in some areas. But I must tell you that this is a long-festering problem. Most of our employees are honest and capable and want to do the right thing. A part of it, I suspect, has to do with the nature of USDA. It is an agency that is stove-piped. It's very decentralized. Decision-making is often at the local level. That's the way Franklin Roosevelt and others intended it to be. But it is harder to establish department-wide solutions than I suspect in other agencies. The other point I would make is during the last 15 or 20 years it's been very, very hard for smaller and family size operators generally to cope in agriculture. We have seen a massive trend towards consolidation and concentration in agriculture generally. Smaller and mid-size producers, whatever their color or race, but as a general proposition minority farmers that tended to fall within that category had been hurt disproportionately because of economic trends as well. And then when you overlay that with an insensitivity on the part of some employees it is a prescription for great difficulty. I've created this action team within USDA. A career African American has lead the team. He's come up with a report that has multiple recommendations for us. Some are things I can do myself, however, there are other things you're going to have to do here. And that's a political decision within the Congress to deal with. But we are going to make changes in that Department. I'm telling you that right now. Mr. Serrano. And that was my final question. You believe that after Friday you will set a tone for behavior that will begin to turn this around? Secretary Glickman. Yes. Again, I can't tell you I'm going to snap my fingers and it's all going to be miraculously changed over night. But it's a comprehensive set-up, organizational issues within USDA, personnel evaluation type issues, commitment on the part of managers, some just treating fellow human beings decently which you can't legislate. A combination of all of these things that I think will be helpful. For example, and I don't want to prejudge the report, but you have vast areas of this country where you have 40, 50, 60 percent farmers in a county that are minorities. And yet you find no minority members on the county committee; none. I mean it's not right. We're not going to engage in any quota kind of behavior here, but we are going to try to make sure that the process is fair. I like the county committee system. I think it works great. It's one of the most democratized system in the world; but, you've got to have people participating in it who are subject to its rules. Those are some of the things that we're going to try to do as a part of this reporting requirement. Mr. Serrano. Well, I encourage you to do so. I know you certainly have our support in turning this around. Thank you. Mr. Skeen. Thank you. Mr. Kingston. Mr. Kingston. Thank you, Mr. Chairman. Mr. Secretary, it's good to have you back with the committee. I'll skip my FSA questions because I think we've passed that around. I would agree to everything that was said. Secretary Glickman. I would say your state, because of the numbers of counties, is one that we will particularly have to work with you on. I think Georgia has the most counties of any state. Mr. Kingston. We have 159 counties and they are small. Secretary Glickman. But from the size, you've got probably more per square mile than any place else. Mr. Kingston. It's interesting. I had a farmer complaining to me last week that he goes to his FSA office probably 40 times a year and it's a 21-mile drive. I'll bet for the Chairman, his farmers would jump at such a short distance. But it is just a different way of looking at things. sugar program Let me ask you about sugar. We had adopted a conference report last year asking your Department to issue a report twice a year discussing raw prices, the ratio of raw cane and beet sugar to see if they're sufficient to prevent forfeitures. That the stock to use ratio was sufficient to ensure stable and adequate supplies to consumers and so forth. To-date, I don't believe a report has been issued. Do you know anything about this report? Secretary Glickman. I regret to say, I don't know the specific report. We may have issued something, I'm not sure. We do, as you know, issue estimates every month. Mr. Kingston. This was something that was adopted by the House and Senate Conferees last year. It was, I believe, report language in the Appropriations Bill. Secretary Glickman. I can only say we will have to check on that. Mr. Kingston. If you could look into that. To my knowledge a report has not been issued. We would just like to see that. As soon as you can, let us know when it will be coming out. Secretary Glickman. Okay. [The information follows:] [Pages 32 - 45--The official Committee record contains additional material here.] karnal bunt Mr. Kingston. Karnal bunt spores have been detected in the southeast. Tests remain inconclusive and no bunted kernels have been found in the regions' wheat, but there is a great deal of speculation and hysteria about the fact that the USDA and APHIS plans to regulate areas where only spores have been found. Is that going to be the case that USDA is going to start regulating? Secretary Glickman. First of all, Karnal bunt, is a wheat disease that is not particularly serious from a public health point of view. It has no effect on humans. Unless you have a lot of bunted kernels, it doesn't have much affect on the wheat itself either. Mr. Dickey. Bunt? Like in baseball? Mr. Kingston. He wakes up ever 20 minutes. You won't hear from him for awhile. Secretary Glickman. If he had it in his state, he probably would be up with you right now. Mr. Kingston. He'd still be asking questions. Secretary Glickman. The fact is, however, that I don't think the disease is a very serious public health or plant health problem. Its affect on quality appears only when there are high levels of infection. However, it does pose a great risk to our wheat exports because half of our wheat crop is exported and half of that is shipped to countries that say we cannot ship wheat to them from counties where Karnal bunt is known to occur (sic). So, we've got this kind of problem where on the one hand it is not that serious technically. However, on the other hand the trade is too important to our wheat industry not to deal with it. What we've done to-date is, even where we've found spores with Arizona being the prime state; a little bit in California and a little bit in New Mexico, we've provided compensation in those areas where we've been able to identify the fields that it comes from. We're going to make sure that comparable levels of compensation are provided to the people in the Southeast. What we're trying to do is get the world to recognize that Karnal bunt is not a monumentally catastrophic problem and to get our importing nations to do that. I was in South Africa last week as a part of a trip with the Vice President. South Africa had stopped taking our wheat. And we did agree that they would take wheat that had been twice tested negative. That's about $35 million worth of wheat trade a year. We're currently working with the Chileans right now on the same kind of situation. If I were a wheat producer anywhere and we found, spores, I would also feel like probably your constituents do and others. But we've got this problem where wheat that has lost its value export is wheat that has virtually no value at all. I'm encouraged by the fact that more countries are encouraging--the relaxation of regulatory restrictions on Karnal bunt. Again, this is a very high priority for me personally. Mr. Kingston. Okay. One other question. The National Plant Board, the American Farm Bureau, and the National Association of State Departments of Agriculture have urged that it should be deregulated and classified as a minor disease. Will you move in the minor disease or the major? It sounds like you're going in the minor area. Secretary Glickman. I would like to move towards the deregulation of it, but I have to get the agreement of our importing nations to do that as well. We've got to continue to push in that direction. The fact of the matter is, I don't think it's a major disease substantively. But as long as it keeps our wheat from being sold in the world market place it remains a major disease from a trade perspective. Mr. Kingston. And you will bring that up at the International Plant Protection Convention? Secretary Glickman. Yes, I will. tobacco program Mr. Kingston. Another question; I believe that the President's budget or FDA's budget has asked for $34 million in tobacco regulation? I believe that's correct. Is that the case for FDA? Can you guys comment on that because traditionally they have not been getting money to regulate. You don't want to comment on that? I wanted to understand. Secretary Glickman. The only think I can tell you is we intend to continue to operate the tobacco programs within USDA as we always have. Mr. Kingston. Yes. Secretary Glickman. That's the best I can tell you. Mr. Kingston. It might be something that you want to see what they're doing and what kind of duplication there may or may not be. I don't know. I'm concerned about that. wic program The other thing is on the WIC Program, I know that you're asking for a $400 million increase. On WIC, I believe the consumers can buy the formula by the can as opposed to the case. Is that correct? Do any of you know? The reason why I asked that is a retailer brought that up to me. He said, you know, if you have a baby you're going to buy formula by the case anyhow. And by the case it's less expensive per unit than it is by the can. But that the WIC regulations allow you to buy it by the can. And I'm thinking if that is true, if that is the case and there is not an advantage to it, then maybe we should look into changing the law and requiring it to be purchased by the case. Babies will take formula at least to a year old. And that might be something that we want to look into. Maybe you can look into it. Secretary Glickman. We'll let you know exactly what the purchase requirements are for the formula. [The information follows:] [Pages 48 - 52--The official Committee record contains additional material here.] Secretary Glickman. I know there has been some discussion in the past about the lack of competition among the formula manufacturers, but I'm not familiar with this issue. Mr. Kingston. Because of the political sensitivity, it seems like any time you have a WIC criticism you're anti- children which I think keeps the program from being a better program. When the administrators guard it so carefully that they don't want any criticism, I think they're ultimately hurting the people that they're allegedly trying to help. So, that is a possible something we can have a dialogue on. Also, we've had nutrition experts testify before this committee that mother's milk is almost always better for the baby, even if the baby is eating junk food than is formula. I know there are lots of people who are making money selling this formula and so forth. But I think WIC should continue to push efforts which I understand are ongoing already in terms of encouraging mothers to nurse their own babies. Secretary Glickman. That is a part of the program. Mr. Kingston. Yes. And I really commend you for that. I think you're heading in the right direction. But I think that we have to open this up and be very frank and specific that if we're worried about the children we should let them do that as much as possible. Thank you, Mr. Secretary and Mr. Chairman. Mr. Skeen. Ms. DeLauro. Ms. DeLauro. Thank you, Mr. Chairman. How are you Mr. Secretary? Secretary Glickman. Fine. Ms. DeLauro. It's great to see you. I will just say that we continue to miss you here; your thoughtfulness, but your wit and your singing as well. Secretary Glickman. I could sing my testimony. Mr. Dickey, however, might make fun of me. Ms. DeLauro. Like my colleague, Mr. Serrano, I often get the questions about why am I serving on this committee. But in fact I do have dairy farmers in my district in the State of Connecticut. wic program Let me ask about two or three questions that have to do with the WIC Program. There is a high priority that's placed on the WIC Program as evidenced by this year's budget submission. It's popular. It gets bipartisan support. It's often been talked about as the gateway to other kinds of health and social services which I'd like you to comment about. Second, with regard to WIC, as I understand it, it currently serves about 7.4 million people. I want to address that issue first and then a couple of other issues about WIC and supplemental funding for 1997. It appears that many participants could be forced out of the program by the end of the year. Can you comment on the enrollment effect of the requested supplemental funding and how have enrollment expectations or price changes affected the WIC funding? Secretary Glickman. Well, I'm going to ask Steve Dewhurst to respond to the enrollment issues. But I would say WIC is, on a bipartisan basis, one of the most effective Government programs because the record does show it has quantifiable results including fewer premature births among pregnant women who are more likely not to get health care without this program. It's a delivery system. Once you get referrals of WIC participants to other types of health care facilities it allows WIC participants to get not only the basic food needs, but health needs, dental assistance, counseling, drug and alcohol abuse counseling. It's one of the few delivery systems where you're actually getting a physical benefit that people use. It plays a vital role in linking a lot of people who need the help into the community as a whole. In fact, the President is very interested in how to get welfare to work and in some way getting this continuous information flowing through a variety of programs, including WIC. A lot of people touch WIC Programs that don't touch any other kind of Federal type of assistance program. It saves money. I think you know the specifics. Our estimates are that it saves about $3 in Medicaid for every WIC dollar spent on a pregnant woman. It is one of the reasons why it's on a bipartisan basis. People believe in it very strongly. Now, on the participation, I will ask Steve to explain the numbers. Mr. Dewhurst. The program, as you know has been growing. In 1993 there were about 5.9 million people on the WIC Program. The Administration has committed to a target of 7.5 million people, and funding for 7.5 million people in the program. We achieved a level somewhat over 7.4 million in October and November of the past year. We're now looking at data for December which we are receiving from the States. It appears that the number is down just slightly to about 7.3 million for seasonal reasons. The appropriation we have for fiscal year 1997 may only support roughly 7.2 million people in the program on an average basis. As you can see, the participation level for all three of the first months of this fiscal year was above that level. Therefore, the Administration has requested a supplemental appropriation this year of $100 million, which if provided, will permit us to support the current level in the program throughout the remainder of this fiscal year and then set the basis for continuing on in fiscal year 1998 to achieve the full 7.5 million participants that's been the target. Ms. DeLauro. Without the supplemental funding, what number of people would be forced off the program? Mr. Dewhurst. We went out to the States, the Food and Consumer Service did, with some very detailed instructions in terms of analyzing their funding availability and their case load requirements. Those reports have been coming back in this week. We don't know the results yet. Obviously the level that we have can't be sustained. We will not know until we look at every State's report what the exact magnitude of the problem is. sugar cap Ms. DeLauro. Okay. I'd like to keep in touch with you on that issue. Let me ask a further question on WIC, and it has to do with the sugar cap. USDA raised the possibility some months ago that it might alter the sugar cap for breakfast cereals approved under the WIC Program. Again, as I understand it there has been an avalanche of negative comments from parents, teachers, health professionals, and child care groups. What's come out of some of that commentary is that the WIC diet is a supplementary diet designed to be nutrient dense. And for this reason there are limited amounts of sugar, fats, sodium in terms of the content. There appears, and this is my view, that there is no rational reason for adding more sugar calories to a prescriptive diet that's designed for under-nourished children. Can we expect that the retention of the sugar cap will be proclaimed by the Department in the near future? Secretary Glickman. I would say this, we're not going to make any rules changes over night. I think the question here has to be answered by good science. So, what I'm going to do is ask the Agricultural Research Service and the Food Nutrition and Consumer Services to conduct a comprehensive review of the nutrient analysis and sugar issues within the WIC Program and come back to me. Let me tell you how this issue kind of came up. One of the cereal companies wanted to serve--I think it was Raisin Bran-- within the WIC Program. And because of the sugar content of the bran, because it's sugar coated, the bran in that cereal, after adding the raisins in would up the grams more than the WIC limits. So, the cereal company said, wait a second. If weoffered free raisins in the program so when you left with the bran that was basically sugared up a little bit and you offered raisins, they could take the raisins. So, why couldn't you offer Raisin Bran in the cereal. I responded, why don't you all make your bran without sugar, so then you could put the raisins in there and meet the gram limits. I'm sure that my understanding of how a cereal company does business is pretty limited. They laughed at me. We haven't looked at these rules for a long time. So, I agree that we should look at the whole issue of nutrient analysis components, as well as, sugar within the program. But what we do has got to be based on good science and good nutrition. And it will be. I think what some of the companies have said, is take a look at these in the modern world of how diets actually are. We're going to do that. But I'm not going to do anything to jeopardize the nutritional quality of what is served and is a part of the WIC Program. Ms. DeLauro. I appreciate that. We went through a whole round of commentary about national nutrition standards in the last session of this Congress. I happen to think that nutrition is key, particularly in the WIC Program that we're talking about. The American Dental Association, as I'm sure you know, is very, very concerned about altering the sugar cap because of the effect on tooth decay. We also know what is common with youngsters and low income youngsters. I just might add that the 1995 dietary guidelines for Americans advises the American public to ``choose a diet moderate in sugars.'' There is a whole variety of commentary that suggests that we should not fiddle around with what we have, with what is working. We ought to maintain this cap, hold on to it, and not be revisiting this issue every year or so. Secretary Glickman. I agree, but I also think you have to look at issues of refined versus natural sugars. Fresh fruits are high in sugars, but it's considered to be a natural sugar and not as harmful to the teeth. We've got to make sure that even though we don't want to go above the cap, we also have to make sure that the rules are modern in a world where we're encouraging people to eat fresh fruits and vegetables. So, I think we can do all of the above. Ms. DeLauro. Okay. Thank you. Thank you, Mr. Chairman. Secretary Glickman. When I said to serve the bran raw, they didn't think it was very tasty. Ms. DeLauro. It's the amount. Mr. Skeen. In this connection, Mr. Secretary, could I ask that Steve provide us with copies of the State responses you've asked for as to how and why they can have 7.4 million participants within available funds? We'd like to have those responses by the end of the week if possible. Secretary Glickman. We will provide you with everything we have. Mr. Skeen. I appreciate that. Secretary Glickman. I assume we've gotten them all back, but I don't know for sure. Mr. Skeen. I think it's vital to this question about what we're going to do on WIC and the funding on it. [Clerk's note.--The information is to lengthy to reprint. A copy is retained in Committee files.] Mr. Skeen. Thank you, Ms. DeLauro. Ms. DeLauro. Thank you, Mr. Chairman. Mr. Skeen. Mr. Bonilla. FEDERAL DISASTER EMERGENCY PROGRAM Mr. Bonilla. Thank you, Mr. Chairman. Welcome, Mr. Secretary. I want to once again thank you for last year during that horrible drought we had in Texas for being so responsive to what we needed. I will never forget working the phones with you and Charlie Stenholm and trying to figure out what we could possibly do. It was a horrible situation. We're getting some rain down there now, but not enough yet. But we appreciate what you did for us in Texas. Secretary Glickman. I'd like to just mention, as long as you raised that issue. Mr. Bonilla. Sure. Secretary Glickman. We have a real problem having to do with emergency assistance. As you know, we no longer have a Federal disaster emergency program. So, what we did in Texas with the drought and in North and South Dakota during the blizzards was use an emergency grain reserve of limited quantity and monetized it to try to provide some relief. The Emergency Grain Reserve is virtually exhausted or will be very soon. There is not going to be anything really left if we have another drought or another disaster problem. I think we had a total of 30 million bushels of grain total. So, we've used nearly half of it already. Mr. Bonilla. I appreciate you letting me know about that, because even though it was a small amount last year, it's gone now. Every little bit helped back then. USER FEES I want to start out, Mr. Secretary, talking about the user fees for meat and poultry inspection. This is an idea that has come up year-after-year and has never really gone anywhere. Do you think there is any reason to believe this time that the authorization committee will feel any different about user fees and approve them? Secretary Glickman. I'll just tell you from my perspective over here because when I was in the House I used to be somewhat reluctant about these as well. I'll tell you from over on this side of the aisle. We have an extremely tight discretionary budget and I've talked to the Chairman about this. We are implementing HACCP now. Fifty percent of the sales of American agriculture are in livestock, and out of that, 80 percent are in cattle. But 50 percent are tens of billions of dollars a year. The public has confidence that the system works and a part of that is that the meat and poultry inspection system is good. We're changing it and we're going to try to make it better. So, I have a problem on the one hand of wanting to make sure that we have an adequately funded and financed meat and poultry inspection system that the public has confidence in that they will buy meat and poultry and not be scared every time there is a newspaper story. On the other hand, not having enough discretionary dollars to fund our priorities. What we said was we would propose fees to pay in-plant inspection. The industry usually comes back and says, look, this is a public purpose function. The taxpayers ought to pay it. We're going to have to pass the costs along to the consumer. We expect the cost could be about a half cent a pound according to what our economists tell us, if we did implement this kind of thing. I think the public would agree to pay that if they felt it was going to maintain a safe meat and poultry inspection system. It's kind of like we pay an airplane ticket tax which supports the operation of part of the airport and airways construction funds. It may be slightly different. I don't know. My point to you is if we can't get it the normal way through the discretionary funding mechanism then I have to look at other options. The livestock industry is probably worth almost $100 billion a year. It is the largest part of American agriculture. Therefore, we must make sure the public continues to have confidence that the system is safe. If this doesn't work, you've got to find the money somewhere else. Mr. Bonilla. Do you have any concerns at all, that since the ratio would be something like 70/30, with 70 percent being paid through users fees, that the public might wonder about a program that is in essence being funded by those who are being inspected? Secretary Glickman. Well, no, not really. I think that as long as the inspectors and the process remain under Federal regulation, I don't think that's a problem. I think the real issue here, quite frankly, is whether the industry will put on a full court press to try to stop it because they'll make the argument it's a general public purpose function of government; and, they'll have to pass the cost on to consumers. My response to that is, then we've got to find the money to pay for it somewhere else. Mr. Bonilla. In reference to that, the argument then is whether or not it is a public responsibility and, since they are the beneficiary, the public ought to pay for it. The ratio again being 70/30, can I ask you how you got to that ratio? Secretary Glickman. The in-plant I guess is 70 percent versus the rest of the inspection cost. Is that right Steve? Mr. Dewhurst. Yes, sir. The way it would work is, the plant would pay for the cost of the inspectors that are in the plant. The taxpayers would pay for everything above that level; the laboratory service, the overhead, and supervision which essentially is roughly 30 percent of the costs. That's how that ratio came about. User Fees Mr. Bonilla. What about the question of if this were to take place then you'd have the industry paying more. What kind of safeguards would be in place to make sure there wouldn't be run away costs since the industry wouldn't have control over how the money is spent? How would we know that they would have to continue paying a higher rate? Secretary Glickman. I presume the expenditures would still have to go through the appropriations process. Is that right, Steve? Mr. Dewhurst. Yes, sir. Even user fee programs are subject to annual review within the budget process and review by this committee. We present all of those programs in our explanatory notes. So, there would be both the oversight of the industry in terms of reacting to the costs that they might be paying and oversight from the Government in terms of reviewing the budget every year the same way we do now. Mr. Bonilla. Okay. I want to move on to another subject real quick. It's more of a parochial concern. I'm not sure if the Secretary has actually heard about this yet. There is a situation going on in Reeves County. I spoke with your office about it, Mr. Secretary, and it may relate to a more widespread problem nationwide. Reeves County FSA Office One of the FSA offices in my district in Reeves County has been under investigation by the USDA for mistakes which affect the payment levels of farmers under the new Freedom to Farm Act. The mistake involves miscalculations in CAVs when farmers enrolled in the AMTA program. Final 1996 AMTA payments were due September 30th. And the first 1997 payments were due January 15th. Because of the ongoing investigation, neither of these payments have been made to a number of producers in this county. Banks, farm equipment dealers, and creditors in addition to the farms are being put in a terrible bind over the hold-up of these payments. First of all, I'm concerned that this may be a systemic problem beyond my district. We heard from the Inspector General two weeks ago that payments under the AMTA program will continue to be evaluated. Is this the kind of problem we can expect to take place as field office staff continues to be cut or is Reeves County's problem an isolated incident? Secretary. Glickman. To date, we have not seen the problem exist in very many other places. I can't tell you whether it may not exist in other places, but it seems to be a rather unusual problem. Let me just give you some background. In early September during a routine review of the AMTA contracts, the Texas State FSA office discovered a number of discrepancies in Reeves County. They sent in a jump team to review all of the records. They immediately ran into problems with adjusted crop acreage basis, CRP contract acreage, and altered documents. At this point, the balance of the producer payments were suspended. Approximately 80 percent of the 1996 final payments have been made; about $750,000, but no 1997 advance payments have yet been made. So, we brought in the Inspector General, as well as the Office of General Counsel. Here is what I can report to you. The General Counsel has advised that until a further determination has been made on the discrepancies, payments will not be issued because of statutory provisions, including the 90-day rule. We may not be able to collect over payments that are issued. That's what we're looking at right now. We are currently unsure of the extent to which documents have been altered and the extent of producer involvement in these problems. Next week, on Monday, a team of FSA employees from other states and a representative from our General Counsel's Officehere will go to Reeves County to determine how we can most expeditiously determine eligible payments. And I understand the seriousness of these financial circumstances that affect individual farmers and ranchers who may have nothing to do with the problems there. However, it is something that we're trying to work on as fast as we can. Mr. Bonilla. I appreciate that, Mr. Secretary. My understanding is that they're trying to reconstruct a lot of files there. It is frankly a mess. I'm just wondering if there is any way, and maybe you've answered this already, why we can't start at least making some temporary payments to the producers that we're obligated to make under AMTA and if adjustments need to be made to crop acreage basis if they can be made at a later time. That can then be done as the records reflect this need. Because as I've said here and as you've acknowledged, these producers got caught in the crossfire and it's not their fault. It's an office that's run amuck and is a mess. And we understand that. But I wish there was something we could do for them. Secretary Glickman. Early next week there is going to be a team down there. I'll ask them to report to me to see if there is some way that we can make partial payments. We'll try to do that. We're very aware that this money can be the difference between economic life and death, particularly as we get close to the time that we have to prepare the land for planting and that kind of thing. So, I'll do my best on it. TEXAS STATE OFFICE Mr. Bonilla. One final question on this. The Texas State Office of USDA submitted a proposal in 1996 to correct this problem which has never been acted on. What's the status of this plan? Would the plan have started a clean slate by using the CAB submitted at the beginning of 1996? And I wonder if you've heard of this? Secretary Glickman. I don't know anything about that. We'll check on it. Mr. Bonilla. Okay, Mr. Secretary, thank you very much. Thank you, Mr. Chairman. Mr. Skeen. Mr. Latham. Mr. Latham. Thank you, Mr. Chairman. I want to welcome the Secretary here. Secretary Glickman. You're in your new capacity. Mr. Latham. Right. Secretary Glickman. You used to be a lot further away. Mr. Latham. That's right. We're more up close and personal here. I will have to tell you, I really appreciated what you said about the future of agriculture as far as exports. I would hope that you and the rest of the administration will work with us when we get to the floor to build support in Congress for exactly that because we had some real tough battles last year and some close votes. We need to work together and make sure that we can get everything done that we both understand has to be done for the future of agriculture. FSA FIELD OFFICE CLOSINGS I don't want to spend a lot of time on this but, on the FSA offices, the administrator here in Washington apparently has sent memos to Iowa. And you say there was no plan, but they're saying that they are going to close 35 offices by October and another 15 by August or October of 1998. I know Mr. Kingston is gone, but they've identified the counties and everything already. I guess it has caused a great deal of concern obviously, which you're well aware of. You say there is no plan, but still there are specific numbers out there. Secretary Glickman. I will tell you a couple of things. I've seen the memo or the letter that went out. And I thought to myself it's too bad that it wasn't constructed in a way that says there are several options being looked at over the next few years to deal with the Farm Service Agency and one of the options is this, but it hasn't been decided yet. But it didn't go out that way. All I can tell you is that you will not be surprised. We will talk to you before we implement any plan. There will be further reductions, but we are not at any stage yet where anything has even come up the pike into the Deputy's office or my office to review yet. And a lot of it is based upon what the appropriations bill does. I think it is fair to say if you will look at our budget proposal this year which projects to go down to 2,000 offices by the year January 1, 2000, there will be further closings. That's probably an accurate statement. Mr. Latham. Well, and I think with the Farm Bill, there should not be as many hours needed over a period of time because we're not measuring every tenth of an acre. We shouldn't have the paperwork over a period of time either. I guess that subject leads into what my question is going to be about. I know when these memos were sent out, there is a tremendous infrastructure in the Department and through all of the employees. INFORMATION TECHNOLOGY And the fax machines must have been running overtime because instantaneously every person in every office in the country was alerted that this was going on. And there were, something like action memos, put out to call their Member of Congress obviously. Do you know how much money is being spent in the Department in the budget this time for information technology, I mean, the hardware? Secretary Glickman. A lot. Mr. Dewhurst might be able to give you the specific amounts. Mr. Dewhurst. I actually have a table on that. In the Department in total in fiscal 1998 we'll spend about $1.2 billion on information technology. Mr. Latham. Would that include the Forest Service as well? Mr. Dewhurst. Yes. It includes all of the component agencies of the Department. As the Secretary says, the largest single component of our Information Resources Management [IRM] spending is the U.S. Forest Service which has almost $300 million of that total, but there are large investments in other agencies as well, such as the Natural Resources Conservation Service. Secretary Glickman. That includes the investment we're making in EBT around the country for Food Stamp. It also includes the computer support for the Farm Service Agency and all of the other things we will do. Mr. Latham. And I guess that raises some real concerns from past history in the Department. Isn't there supposed to be a moratorium in place? You're talking about $1.2 billion, but there is a moratorium in place? Mr. Rominger. Yes, there is a moratorium in place. Mr. Latham. Except for the $1.2 billion? Mr. Rominger. No. This is the proposed budget for this year. But there is a moratorium in place until we get a Department-wide architecture in place so that the systems that we buy from now on will be compatible; and will be ableto talk to each other and that will provide the information that we need. We know that, that was not the case in the past, but that's what we're working on right now. We're making some good headway. Mr. Latham. Is it true you can't E-mail from the south building to the north building? Mr. Rominger. It's true that we have more than one E-mail system in the Department. Secretary Glickman. I think you can do it, but you have to go through several different circuits to do it. If I may just respond. Mr. Latham. You hand deliver the E-mail over there. Secretary Glickman. No. You don't need to hand deliver the E- mail. This goes back to a point I raised earlier concerning functional perceptions, you have a very stove-piped Department. For example, on the service centers. I wish I could tell you why we can't just move all of these agencies together at the county office level and why they can't operate in a compatible information system with each other. Some are doing it right now. But as a general proposition, the perceptual functional structure is not of one Department, but of 12, 13 or 14 Departments of Government. So, that's one of the reasons why Congress was correct on asking us to have a moratorium on the purchase of new information technology for the time being. infoshare program Mr. Latham. The InfoShare program, spent $115 million and it wouldn't work. That's why the moratorium is there. You spent $115 million doing that and finally threw up your hands. Is there anyone in charge? Is there anyone responsible for seeing to it that it works? Mr. Rominger. Yes. Under the legislation that Congress passed for a Chief Information Officer. We have a Chief Information Officer and that's her full-time responsibility to make sure that the systems are fixed. And that's what we're doing. Mr. Latham. I'm not sure if the accountability is there. I don't know whether you need an information officer or someone who has total accountability and authority to do it--a Chief Executive Officer or something. Because obviously after $115 million, it's like the IRS spending $4 billion and throwing up their hands on a system. Secretary Glickman. One of the things I will tell you, again, and I don't mean to beat this dead horse. One of the things I have found is that in USDA the administrative function of the Department is not really delegated to be centrally coordinated in one shop. We have an Assistant Secretary of Administration. But when you compare this to other Departments of the Federal Government our Assistant Secretary for Administration does not have the same kind of authority. What you tend to have is a lot of the purchasing information system, Congressional Affairs communications. They're all located in each separate agency. I'm not wringing my hands about it. We're going to do our best to give that person more authority over cross agency problems like information technology. Mr. Latham. Does that take an act of Congress to do that? Secretary Glickman. I don't think so. Mr. Latham. Administratively, can't you hold somebody accountable for the whole thing? Secretary Glickman. We can. Let me give you one example. In USDA we have separate departments of Congressional Affairs, separate departments of communications in each agency. Quite frankly, to a large extent that's the way the appropriations process has set it up over the last 40, 50, or 60 years. I suspect that you have a lot of that separation in a variety of management functions. This is something that I, as Secretary, will have to get a handle on. We have a Chief Financial Officer and a Chief Information Officer. But from a management perspective, you do need a CEO or COO, Chief Operations Officer, in the Department who has the authority to tell mission areas and work with them on computer acquisition so they can't just do these on their own and other kinds of things. This is something that's not historical with the Department of Agriculture. Mr. Rominger. But that's what we are doing now. We have, in addition to having a Chief Information Officer, an Executive Information Technology Investment Board which I chair. And that Board meets to approve any of the investments that we're going to make concerning information technology. The members of that Board are the other sub-Cabinet officers. information technology Mr. Latham. So, for the first time, you do have some executive review over the whole thing in terms of in technology. That's fairly new. I'm real concerned that the same thing is going to happen again if you don't have your 27 agencies, or whatever it is, working together in a common purpose with somebody who has some authority over all of them, making sure they understand. I think the Forest Service in the case of the Rocky Mountain Station has done a very good job as far as internally in that they're able to quantify the cost of the services that they give out. I mean right now, you can't tell us apparently how much it cost you to write a Farm Bill check or anything else. Mr. Rominger. The Forest Service has a ways to go. Mr. Latham. But apparently, they're way ahead of everyone else from what I understand. If we could do something or you have suggestions for the appropriations bill or something else that we can do to make somebody accountable and vested with the authority to make the system work with all agencies, I want to work with you. Thank you. Mr. Rominger. Thank you. Mr. Skeen. Mr. Nethercutt. Mr. Nethercutt. Thank you, Mr. Chairman. Mr. Secretary, gentlemen I'm sorry I had to leave earlier. I had another subcommittee meeting. But I'm glad to be back and ask a few questions. Mr. Secretary, when you were here right after you were appointed to this position, my memory is that I asked you what your priorities were and you stated that they were research, export enhancement, and regulatory relief. Are those still your priorities? Not in any necessary order, but are those high on your list? Secretary Glickman. They're high on my list. I would say that exports, trade, and economic opportunity is the highest things that we can do to have a climate for agriculture that's strong both here and around the world. Also, clearly nutrition and food assistance, those are also very high priority as well. adequate funding for research Mr. Nethercutt. I heard you testify before I left thisafternoon that research must be adequately funded. That is your position. I notice in a quick review of the geographic breakdown of the Agriculture Research Service that you increased the level of funding for 17 states. You level-funded 11 states and the rest are reduced slightly. These were only two instances in the documents on page 9-41 through 9-45 that you eliminated Agriculture Research Service stations. One of those ARS Service stations is in my state. Secretary Glickman. Sorry about that. Mr. Nethercutt. I'm very sorry about it because it was a $2 million reduction in a state that exports 90 percent of its wheat overseas. We have a tremendous balance of trade from our state. The elimination of the station at Prosser really causes a major problem for the pea and lentil industry. They are very interested in it. I'm very interested in it. Pea and lentil disease is studied there, conducted there, minor crops, big issues. I know you're conferring and trying to figure out what happened. Secretary Glickman. Go head. I apologize. Mr. Nethercutt. I don't mean to ambush you with it. I'm just concerned about it because we can't just go buy a research person next year or the year after. Research in my judgment is a high priority of this subcommittee. It should be. I would like to have you explain why you selected the Prosser Station for termination. Secretary Glickman. I was just trying to figure out what we did with that research station. We terminated, I guess, two ARS facilities; one in Mandan, North Dakota and one in Prosser, Washington. The projects were to be transferred to Miles City, Montana; Pullman, Washington; and Aberdeen, Idaho. Again, tell me what the Prosser station does. Mr. Nethercutt. A lot of pea and lentil research; disease studies for peas and lentils. We have a lot of peas and lentils in my district. Prosser is not in my district. But it's close enough that agriculture in my district really relies on this research station. I won't beat it to death, other than to say, would you kindly take another look because it is really important to my district. We're fearful as we search for researchers in the Pacific Northwest that we're going to lose. You can't eliminate researchers one year and then get them back the next. It's a long term process. We're delighted to have a wheat research facility at Pullman and we do a lot of great research there at Washington State University. I would be grateful if you'd reexamine the termination of the Prosser station. The other thing I wanted to chat with you about is export enhancement. I believe you've testified that you're asking for $500 million. Secretary Glickman. Which is the maximum under the 1996 Farm Bill. Mr. Nethercutt. Right. We had $100 million in EEP last year. Secretary Glickman. This year. EXPORT ENHANCEMENT PROGRAM Mr. Nethercutt. This year. Yes; correct. My memory is that we only used about $2 million relative to wheat. Again, I'm all for Export Enhancement funds, but what has been your policy? It seems that your policy has been not to use them. If that is the case, why is that we need $500 million if we're not using $100 million? Secretary Glickman. We had very tight markets last year. We didn't need to use the Export Enhancement Program--EEP--as much last year in order to be market competitive. In addition to that, the program is used as a way to meet trade distorting activities by other countries. It does appear to us that the European Union, at least in recent months, has been opening the door to heavy subsidization. We're talking about billions, and billions, and billions of dollars of subsidies there. Therefore, we want to have it in our arsenal. I don't want to have to go down the road, quite frankly, of using export subsidies. It's market distorting. It's inconvenient. And in many cases, it's almost impossible to administer. On the other hand, we'll fight fire with fire. And I've said that before. That's about the best answer I can tell you. We've had some of the tightest markets we have had in generations in the last year. They've loosened up some. Maybe Mr. Collins might have just a couple of things to say because it is an important subject. Mr. Nethercutt. This subject is important to me. I believe I wrote you a letter about it and said, why don't you use EEP. I think we had a condition in Egypt if I'm not mistaken where we felt we were being competitively disadvantaged and it might send a signal to our foreign governments who want to help their farmers that the United States is vigilant about open trade and we're going to be careful about that. Mr. Collins. I think the main concern has been that during the past year, 1996, we saw wheat prices, in cash markets, go to over $7 per bushel. It set an all-time record, monthly record, in May. Those kinds of wheat prices are pretty hard to justify to the American public, while subsidizing exports. I would point out that in January, our most recent data for U.S. farm-level prices for wheat were still around $4 a bushel which is still at the target price level. Again, it's still hard to justify export subsidies at those price levels. Our own stocks are extremely tight. We have a 25 percent reduction in exports this year that we foretold just on the basis of our own restricted supply, not on the basis of being out subsidized by foreign competitors. We expected that decline because of our limited supply. Now, as we move through the rest of this year, we're going to have to see what happens with the 1997 crop. If we were to have a huge harvest combined with the record crops we've seen in foreign countries and wheat prices were to plunge and the European Union were to continue a heavy subsidization of their exports, then the Secretary would have to be in a position to really take a hard look at EEP. But at the moment we are still in a tight situation. By the end of this marketing year, U.S. and global wheat supplies will actually be tighter than they were at the start of the 1995/96 season in which we set the all-time record wheat price. So, it's not a world that's awash in wheat at this point. Mr. Nethercutt. I thank you. I am concerned that if we have this weapon in our arsenal, there should be a willingness to use it. And given at least the last year, I was concerned about why we're seeking more money for EEP in a very tight budget as all of us struggle to meet all of the needs of agriculture. I believe my time has expired but I do have a few more for the next round. Mr. Skeen. Go ahead. Mr. Nethercutt. Vic, do you mind? Mr. Fazio. No, go ahead. wic program Mr. Nethercutt. I know there has been discussion today of WIC. It is a good program. It helps people. In fact I was just out in my district a week ago and visited my own WIC office in Spokane, one of them, and had a very nice visit. It was now Senator Durbin and I who proposed to this subcommittee the amendment that allowed you, as Secretary, to use carry-over WIC funds deemed to be in excess, for other purposes, limited purposes, within your budget in order to meet other needs. I think it was rural water and sewer programs. Secretary Glickman. Some rural development functions. Mr. Nethercutt. And that seemed to me to make sense since we did have a carry over in WIC. Can you verify for the record whether in fact FCS, in light of that amendment and that concern perhaps within the agency about carry over, and wishing to use that carry over, did or did not notify the various states across the country who would use WIC funds to spend that money and enhance enrollment in the WIC Program? Secretary Glickman. You mean to avoid the carry over? Mr. Nethercutt. Exactly. Because now we see another, what is it, $300 million sought in this budget. My own WIC office in Spokane stated this same reason. Because we had a tough winter, it wasn't that tough, but we did have some floods and the birth rate went up. Therefore, the case load went up. Therefore, we need $300 million more. My fear is, that the integrity of the program seems to me now to be somewhat in jeopardy. And I think it's drawing the attention of others who want to be sure that this program works well. That it meets the needs that are there, but isn't excessive and isn't endless in terms of cost. This desire sometimes in government that we say, we've got a program, come and use it so we can perpetuate our existence. I don't know how you want to respond, but I guess what I'm worried about is that there is going to be an investigation that says, yes, there is mismanagement. I think you've stated in the past that you want to look at the management, but only until it's fully utilized. Fully utilized may be endless. So, again, balancing budget requirements with efficiency in programs seems to me a high priority. I'm just wondering if you can dissuade me of the notion that there is some promotion going on here, self-promotion in order to have self-perpetuation, in order to spend more money, in order to put more pressure on programs that we really didn't need to spend money on? Secretary Glickman. I will let Steve answer first. Mr. Dewhurst. Mr. Nethercutt, in terms of what happened earlier in this current fiscal year 1997, you are correct in that the Food and Consumer Service--FCS--sent a notice to states having to do with the allocation of WIC funds for this year. It assumed again, as in 1996, that there would be some transfer from the WIC Program to Rural Development. That was done for two reasons. We know that interest rates were affecting our Rural Development Programs and driving those program levels lower than we had anticipated in the budget. We were trying to preserve some options to try to deal with that situation. In fairness, it had not become entirely obvious to us at that point that the WIC case load was growing quite as large as it was. It seemed reasonable at that point to warn states that there might be that transfer. Well, it wasn't long after that notice went out that we were getting WIC data in for September, then October, and November. It became clear that the case load was building up and that the feasibility of a transfer to Rural Development really wasn't going to appear this year given those numbers. And I don't remember the dates. However, at a later date last fall FCS did put out a second notice which gave the states a revised allocation which was slightly higher because it did not anticipate a rural development transfer. Secretary Glickman. I can't tell you whether they were out promoting the spending of WIC in some way. I do know that the WIC Program, like any other program, I'm sure that there are some that have problems with the administration of it. Our goal is to try to alleviate those. By and large the case load has been growing because of natural demographic and economic factors. You can trace that regionally to those parts of the country that have been struggling the most. Quite frankly, as a result of the welfare reform changes, there are probably going to be additional people wanting to use the WIC opportunities for them; particularly parents with newborns. I think it is a very important program as a part of the mix. But it should not be immune for us to making sure it's being administered appropriately and correctly. income eligibility Mr. Nethercutt. I'm glad because I looked at the eligibility levels, income eligibility, accept to 185 percent of poverty. And this is no picnic for sure. But for fiscal year 1996, I'm informed $28,860 for a family of four and $33,707 if the mother is pregnant. In my community, the average income is about $25,000. That covers an awful lot of people. Again, don't misunderstand. I'm willing to help people in need, but I guess the question becomes can we afford to help everybody even at those levels which, again, for some aren't high, but for others are. Mr. Dewhurst. If I could say a couple of things? Mr. Nethercutt. Sure. Mr. Dewhurst. One, of course, is that the eligibility for the program is largely set by statute. Mr. Nethercutt. Sure. Mr. Dewhurst. Another thing that makes the numbers in this program so hard to predict is that when you use those income figures and use Census data, it appears that there are about 11.5 million people in the country who could qualify for the program on the basis of income. So, when we make an estimate that full funding will produce something like 7.5 million on the program, we're assuming that between 30 and 40 percent of the people who are income-eligible for the program will not ultimately participate; either because they could not pass the nutrition risk criteria which is the other part of the program, or they simply chose not to participate. So, there is a lot of discounting that goes on before we get to that number. There is some fair debate in the management of the program, particularly with respect to the nutrition risk criteria and how well that's enforced at the clinic level. I think there are some folks in the Department working hard to get a better handle on the enforcement ofthat criteria. Mr. Nethercutt. Well, thank you. Do I have any more time? Mr. Skeen. I'm going to let Mr. Fazio go ahead at this point. Then I'll wind up here and I'll come back to you. Mr. Nethercutt. Thank you. Mr. Skeen. Okay. exports Mr. Fazio. Thank you, Mr. Chairman. I wanted to get back to this issue of exports. The trend is up in terms of our dollar value of export crops, but I think the trend is down in terms of Congressional support. When OPIC was defeated on the Floor of the House I think it was a premonition that maybe we're going to have additional problems. You know, we've always struggled with the MPP Program. The authorization is quite low compared to past history. I wonder if you could, Danny, kind of put on the record for us why you think, particularly in the aftermath of GATT, market promotion programs are increasingly important in light of the reduction in subsidies that other countries long have had to their growers. It seems to me they're transferring much of that budgetary support to the promotion of those growers' exports. Some people are saying it's a distinction without a difference. But the point is it's happening. We're up against some very stiff competition. Secretary Glickman. Last year I went to Indonesia. I went to a farmer's market outside in an open air stall. I saw this enormous collection of apples. I went there and they were Washington State apples. We now sell, I think, more apples in Indonesia than we do in all of Europe largely because of the Washington State Apple Commission's expert marketing and their affiliation with the Market Access Program which gave them some seed money to do this kind of thing. That was just one example of how you penetrate markets. And I think the Congress has changed the program enough in recent years so that it is not oriented as much to large companies. It's helping more small- and medium-sized companies. It is having a remarkable effect and it does make a difference. Perhaps we need to do a better job of working with the people who use the program to develop the case studies so that it can be in your hands and you can see the kind of effect. To this day, every time you talk about this program, you always hear the same anecdotal stories that you would have heard ten years ago. McDonald's is getting benefits to sell hamburgers overseas. That's not how the program is being used. Mr. Fazio. Right. Secretary Glickman. We proposed basically a flat line program for this year. We think it's very worthwhile. It's a drop in the bucket compared to the agricultural contribution to the trade balance. Our agriculture exports gross about $60 billion. Our net is somewhere around $28 billion. Agriculture is the largest positive contributor to our balance of trade. The money that goes into promotion is like a postage stamp compared to the operation of a business the whole year. Mr. Fazio. The last I checked, the EC was doing ten times as much. Secretary Glickman. Yes. I think that somebody told me that we spend as much on our market promotion as France spends alone on the promotion of their wines around the world; the government of France is what I'm talking about. Again, I think we need to use the program carefully so we don't benefit entities that don't need the assistance from a brand name perspective. For example, one of the highest and fastest growing areas is in fresh fruits and vegetables. There is a lot of competition for those markets. I was just in South Africa. There is a growing opportunity for them to sell in the markets. While we don't want trade barriers to exist, you've got to somehow do your best to get your product and the information about your product to the rest of the world. Mr. Fazio. I think in California we've determined that about 80 percent of our wine grape growers who have varying sizes of acreage are marketing their products through probably four or five of the largest wineries. So, if you want to help most of the small growers, you've got to work through the people who've got the economic capability to compete in international markets. It's frustrating when all we hear about is the large winery and not about people who are really benefitting who are the farmers who this program was put together for. I think we're going to need a lot of help. I think we're in for a real tough time, not only because of all of the cries of corporate welfare, but because these programs are harder and harder to support when you're up against other programs like we've talked about today that have broader support in the Congress. Secretary Glickman. If I may just mention, the biggest threat to world trade and agriculture is the use of these, what I call, phony sanitary and phytosanitary measures. Sometimes we get hit because we let some products in like we did with avocados recently under a limited review. But I would point out that Mexico just announced the purchase of cherries. The thing is, you've got to make these decisions based on good science. If you don't then you'll have new trade barriers worse than the old trade barriers. But while you do that and while you open barriers, you cannot give up your ability to try to promote your product. That just is not sound in terms of growing these markets. food quality protection act Mr. Fazio. Let me move on. The specialty crop agriculture we've been talking about here is very dependent on EPA for approval of pesticides. We've had, as you know, the passage of the Food Quality Protection Act which was a landmark bipartisan effort to get rid of the Delaney clause. And now, we've created a whole new world. We really don't know where we're going to end up in this regard. I know this is not directly in your purview, but I'm really pleading with the Department to get engaged in what EPA is doing to implement that law. I heard, for example, that now EPA is going to be asking that they be given purview to all of the issues of plant breeding because in fact we're going to deal with our pesticide application programs through integrated pest management. And one of the most effective ways of doing that is to breed plants that are resistant to pests. But this is a whole new piece of turf for EPA. And I sometimes question whether they really understand the reality of what they are holding in the palm of their hand in terms of power over American agriculture. We've already, as you've indicated, tossed this hot potato back and forth in budgetary terms here. But I'm very concerned about getting USDA directly involved in sorting out some of the issues that suddenly have shown up on EPA's radar screen and are going to be more important than many of the issues we've talked abouthere for the farmers I represent. You remember that meeting we had in the Farm Bureau in Yolo County, Dan, last year. They were far more focused on some of the programs that you only deal with peripherally at the Department. Mr. Rominger. We are involved with EPA. I was involved in several of the meetings when they were developing how they were going to implement the Food Quality Protection Act. We do have an ongoing group as well, our Pesticide Group, under the leadership of Lon Hatamiya, Administrator of our Agricultural Marketing Service who meets regularly with EPA. We do share your concerns about the implementation of the Food Quality Protection Act because we've got a new set of things to work on now. We need to make sure that we have the resources to be able to work with EPA and the implementation there. So, having money for the Pesticide Data Program is a part of that as well. Mr. Fazio. Well, the people who seem to be the most upset about the loss of those funds were people who were engaged in the collection of that data to help agriculture make its case to the consumer. Mr. Rominger. Right. Mr. Fazio. As you point out, we can lose a lot of money; whether it be an apple scare, or whether it be a mad cow disease. We're all terribly vulnerable to this kind of market impact. It's a permanent loss of market share. I hope we can continue to support these programs even if they are inconvenient given the budget dilemmas we face. NRCS FLOOD ASSISTANCE I just wanted to end by saying how much I appreciate the work of the NRCS with the flooding we've had out in California. You've had some very stellar performers among your people on the ground out there. We really benefitted from some of the work that they did on an emergency basis; working particularly on levies that are not core project levies that are important to agriculture and to rural communities. Do you happen to know, by the way, whether there is any possibility that the NRCS is going to have any funding in the supplemental that I know is working its way through because of flood-related activity? Secretary Glickman. Steve. Mr. Dewhurst. I think so. I suspect there will be some. We've submitted estimates to the Office of Management and Budget, but I don't know at this point what the decisions will be. Mr. Fazio. But we will certainly weigh in to see if we can help you in that regard. The point I would want to reiterate is that you've got some really good people who deserve to be recognized for the service they've rendered the department and the people you serve out there. FUND FOR RURAL AMERICA Lastly, the Fund for Rural America has sort of become the place everybody is told to go for money. How do you fend all that off, Danny? How are you going to allocate your 100x3? Secretary Glickman. We've actually done our allocation. Mr. Fazio. What's your rationale? Secretary Glickman. We did a third designated for research; a third designated for rural development, by law; and then a third was basically my discretionary funds. And I divided that into research and rural development. Mr. Fazio. Based on George's recognition of your three earlier priorities, how about some export promotion in there. Secretary Glickman. We have some research on competitiveness, and telecommunications infrastructure research in rural areas. A lot of the work went into areas that we've had problems generally in terms of the budget process like Section 502 housing loans; that kind of thing. For example, distance learning and medical link grants. We had more applications than you could even dream of from around the country. So, in the normal process we could only take a few. We just started going down the list. We took more of those because there were a lot of rural communities that wanted to get into hooking up medical links to large medical centers; that kind of thing. But it's $100 million. It's not a lot you can fund out of there. Mr. Fazio. Yes. I understand the backlog and demand for some of these rural development projects, for example, water systems. Secretary Glickman. Water and waste disposal. Mr. Fazio. Incredible. Secretary Glickman. The backlog is large. Mr. Fazio. Do you know what it would be? Secretary Glickman. The backlog is what, Steve? Mr. Dewhurst. I understand it is, at least, twice what we have on an annual basis. Secretary Glickman. Several billion dollars. Mr. Fazio. I've heard several billion, yes. So, the bank is closed. Is that what you're telling us. Secretary Glickman. The bank is closed this year although the application process is open for--some of these projects are going to be dealt with on a competitive grant basis. Mr. Fazio. I thank you, Mr. Chairman. I appreciate your testimony. Mr. Skeen. I thank you. You can always try the credit card route. Mr. Nethercutt, we will let you go now and then wind up. Mr. Nethercutt. Thank you, Mr. Chairman. Very quickly; I don't mean to hold you up. Mr. Skeen. We've belabored the Secretary I think quite a bit this afternoon. EEP/MAP Mr. Nethercutt. As a follow-up to our discussion about export enhancement and market promotion, I agree with your comments. I think it's very important. I notice that there was a reduction in funding for the Foreign Market Cooperator Program, which really is a program that individual producers participate in growing markets for U.S. agriculture, commodities, wheat, corn, peas, lentils, forest products, and other things. I don't know if there is an explanation for that relative to your---- Secretary Glickman. I'm sure this is related to the tight discretionary budgeting. But I'd ask Mr. Dewhurst to give you a specific answer. Mr. Dewhurst. Yes. That's what it is. We just ran out of money. The budget for the FAS is set for them to absorb some costs that had previously been paid by the Commodity Credit Corporation because those costs used to be on the mandatory side of the budget. Now, they're considered to be on the discretionary side of the budget. FAS ends up with a very restricted discretionarybudget including some additional costs they have to absorb within the total. The net result is a reduction in the Cooperator Program. There just wasn't anything we could do to avoid that, given the numbers that we were working with. Mr. Nethercutt. Well, maybe we can massage it here. It is a good program. It's a contributing program by producers which is a cost-sharing concept. It's not a bad one. It's a private- public partnership arrangement. Final question, can you for the record advise what the status of the U.S. talks with China are relative to TCK. And maybe that's out of your jurisdiction. What can you tell us? Secretary Glickman. Well, the USTR Ambassador Barshefsky and I continue to raise this subject. I can't give you any absolute date for resolution now. I will do that. I will tell you that I went with the President to Manilla at the APEC Conference. We sat there with President Jon Jemin around this little room. The first subject that was brought up was Tilletia Controversa Kuhn--TCK. And we talked to the Chinese about it. And as the President was leaving, I said, as he was talking through an interpreter, we've got to work through this TCK problem. This is a serious problem. He was smiling and he stopped. And he understood what I said. And he said, well, maybe we need to grind the wheat differently. At least that's what I thought he said. You know, I'm not sure. But he heard enough TCK to know this is a real problem for us. When I was in China, we continued to raise the issue. It is, again, I'm not sure, if it is a failure of communication in terms of a technical view of the world as much as it's a trade issue. But it has been like pulling teeth to get it resolved. I will have to tell you that. I'll try to get you a more recent report on it. But it is raised all of the time with the Chinese. [The information follows:] China and TCK U.S. and Chinese authorities continue to work on this important issue at both a policy and technical level. Deputy Under Secretary James Schroeder accompanied a team from the U.S. Trade Representative's Office to China last fall to make clear that resolution of this long- standing problem is a priority for us in China's accession to the World Trade Organization. USDA and USTR officials continue to raise the issue with the Chinese at every appropriate juncture. A high-level technical team from China, composed of a number of representatives from different Chinese state entities, came to the United States in November 1996 to meet with industry and USDA representatives to understand the U.S. grain system better and to discuss the basis for recent problems. As a result, the Chinese now have a much clearer understanding of the fact that there is no way the United States can guarantee the absence of TCK in future shipments and, therefore, China's stance of zero tolerance is unworkable. We believe this clarification will form the technical foundation for a resolution of this issue. Secretary Glickman. In fact, when we talk about WTO exclusion, this subject is always talked about; TCK with it. Mr. Nethercutt. Good. Well, thank you for your work and for your time today, all of you Gentlemen. We're very grateful. Thank you. TRADE SITUATION Mr. Skeen. Thank you. I want to wind this up, Dan, by telling you a little story about this trade situation which is very bothersome. I know it is a very important aspect and a very important program. I had the opportunity to do a little visiting in Australia and New Zealand. They consider us a threat. All you could hear was the euphonious names of EEP and DEIP; Export Enhancement Program and Dairy Export Incentive Program. Of course, they have a lock on Southeast Asia in most agriculture categories. I told them that's not the problem. You folks won't buy our chickens or many of our ag products. They said, well, they're not sanitary. And I said that's baloney. We've got better standards than you folks have ever experienced in your entire history. We can ship you the chickens, but you're afraid we're going to get in your wheat market with EEP funds. But the thing that's really the problem for both the Australians and the New Zealand folks and to us in the United States is the European Economic Community. It has been abstinent and has barred the importation of American beef, even in the face that they've got the mad cow disease running rampant all over the place, but they still don't want American beef which is probably the most wholesome product we ship out of this country. It's well-inspected. ANIMAL GROWTH HORMONES Now, they're--the EU--complaining about the beef hormones. We're saying, all we want to know is what can USDA do, what can we do to help you overcome this situation with the Europeans, particularly the French? And we don't want to get into the diplomacy part of it or mess up somebody else. But we want to enhance our exports because it's vital to us and our economy. We need those dollars. We need that income. Secretary Glickman. We have filed a case that should be heard sometime this spring. We hope they will render a decision that goes our way. Mr. Skeen. Well, just on the hormone situation. There is no test for that kind of hormone anywhere in the world and they keep using this as a barrier. Any way to overcome that? Secretary Glickman. One is if we got a WTO decision which indicates that it's safe and good science prevails, that will probably be the most helpful thing to us. You may not be aware of this, but I was in Rome for the World Food Summit. And I had an interesting thing happen to me. We had a news conference, and I was there with our former colleague Tim Worth and others who are now at the State Department. We were up there having this news conference talking about world food and some protesters from the European Community took off all their clothes, stood up on a table, and had an alternative news conference. Mr. Skeen. That was public revelation; wasn't it? Secretary Glickman. Well, let me put it to you like this. They lost interest in me. Mr. Skeen. You didn't try to compete? Secretary Glickman. No. Then they threw seeds at us. It could have been kind of rough. The seeds were nongenetically modified barley, I think, which were natural. I got more attention doing that than frankly anything else I've gotten in this job. What struck me about this is that we have a growing problem with a lot of these issues, especially with what new technology is doing. How we deal with consumers in certain parts of the world who have a cultural reluctance to deal with things that they don't think are natural. That is coupled with the fact that some of these governments use this as a trade restriction as well. The Europeans do not have the confidence that their institutions work like ours. For example, if our FDA, our USDA, or our CDC says something is safe, by and large the Americans think they're safe. Not true over there. And the hormone issue kind of feeds into that. The fact is, it's safe. Virtually, everybody else in the world will buy our beef. Virtually, everybody else in the world raises their beef like we do. They also eat a lot of beef. There is a lot of meat that comes in that is, in fact the same as ours as well. They don't like to publicly admit it. But it in fact happens. It is a tough nut to crack because both culture as well as trade protectionism. All we can do is just keep pouncing on it all the time. I'm worried about the beef forum. I'm also worried about biotechnology corn, biotechnology soy beans. Mr. Skeen. Absolutely. Secretary Glickman. You know, all of this stuff that we're going to have as we come down the pike. Mr. Skeen. Well, it's the same genre. They'll use any excuse possible because, you know, for years we got out of the trade business. We were so happy feeding our population because we had a growing population. We had a great food source. Food is the cheapest item and most abundant item we have. The most successful agricultural program anywhere in the entire world, with low population and great agricultural production. That's why we don't have civil wars and all of that sort of thing that goes on in every other country. We're letting these folks beat us. We've decided to get back in the trade business. Quite frankly, they don't want us in there. Well, I think it's time that we asserted ourselves and said, let's cut out the baloney and let's start shipping beef. Secretary Glickman. Good. You might want to sell some bologna too. Mr. Skeen. I've seen some trying to come back into the U.S. and the USDA was picking it up. Folks were bringing it in, in their suitcases. Secretary Glickman. Yes. And our dogs, our beagles at the airport. Mr. Skeen. Your dogs and the new scanning devices over there honestly are really great. It beats the machinery. That's worthwhile. We were in Miami Airport over there and saw them; just one group of people coming off of several flights. There were three huge garbage containers with stuff they were bringing in just in suitcases; plants, sausage, and bologna. Dan, we want to thank you and the entire group over there. You always make a great presentation. We worked you long and hard. We could offer you a drink of water. We want to thank you very much. Secretary Glickman. Thank you, Mr. Chairman. Mr. Skeen. We appreciate the work that you're doing. We want to be helpful. We are adjourned. [Clerk's note.--The following questions were submitted to be answered for the record:] Secretary of Agriculture public affairs Mr. Skeen. Would you please update the table that appears on pages 99, 100, and 101 of last year's hearing record, showing the number of professional and clerical staff from each agency assigned to public affairs activities and the cost by agency, to include the 1998 data. [The information follows:] [Pages 76 - 78--The official Committee record contains additional material here.] congressional liaison Mr. Skeen. Update the table that appears on pages 103 through 107 of last year's hearing record showing a breakout of congressional relations activities to include fiscal year 1998. [The information follows:] [Pages 80 - 84--The official Committee record contains additional material here.] export enhancement program Mr. Skeen. Every year, you provide a table for the record that shows the total value of bonuses paid, by exporter, since the inception of the EEP. Would you please update this table for us again this year? [The information follows:] [Pages 86 - 89--The official Committee record contains additional material here.] st. petersburg model farm Mr. Skeen. A total of $2.4 million in CCC funds has been spent on a model farm outside of St. Petersburg, Russia. Is this farm still in operation? Is USDA currently involved in the farm? If so, how? Response. Yes, the farm is still in operation. Although USDA's Extension Service has oversight of the program and makes periodic assessment visits, the farm has been turned over to the Russians, and they are adapting to managing a demonstration/research farm. The farm will focus on further development of an Information and Consultative Service, which is analogous to our own Extension Service, at the oblast and rayon levels. ccc export credit guarantees Mr. Skeen. For the record, provide a list of the countries that have been the major recipients of GSM-102 and GSM-103, the commodities that were sold to those countries, and the value of the commodities that were sold to those countries for fiscal years 1995 and 1996. [The information follows:] [Pages 91 - 97--The official Committee record contains additional material here.] loan resolution task force Mr. Skeen. Former Secretary Espy created a Loan Resolution Task Force whose purpose was to resolve delinquent loan accounts with an indebtedness of $1 million or more. What is the status of both the Task Force and the number of delinquent loans? Response. The Task Force was established in 1994 to resolve large- size delinquent farm credit loans. Ultimately, its universe was narrowed to include only million dollar loans. In its first year the Task Force portfolio consisted of 907 delinquent accounts totaling $1.05 billion in principal. By the time the Task Force ended on September 30, 1996, 515 accounts had been resolved. The Federal Government recovered $131.3 million on the total outstanding principal of $566 million or about 23 cents for each dollar of principal outstanding. Early estimates indicated recovery would be about 10 cents on the dollar. All remaining 392 delinquent accounts were transferred to the Loan Servicing and Property Management Division of Farm Credit. At the State level, the State Executive Directors will be responsible for ensuring that resolution of delinquent accounts continues to be a high priority. At the end of fiscal year 1996, there were 480 delinquent million- dollar accounts. This is comprised of the 392 accounts transferred from the Task Force and 88 accounts that were not included as they became delinquent after the Task Force was established. The status of the 480 remaining delinquent million-dollar accounts follows: [Page 99--The official Committee record contains additional material here.] loan resolution task force Mr. Skeen. How many loans have been written off and how many have been restructured? Response. Since its inception on October 1, 1994, the Loan Resolution Task Force has resolved 515 delinquent accounts owing more than $1 million. A total of 391 accounts were resolved through writeoffs and a total of 62 accounts were resolved through a restructuring of the debt. Mr. Skeen. When the Task Force was originally established, there were about 7,000 cases. The Task Force is responsible for 834 cases. The remaining 6,166 cases were turned over to state and county offices for servicing. What is the status of these cases? Response. Since March 1995, the 6,166 cases have been returned to the respective Farm Service Agency county offices to be serviced by the Agriculture Credit Managers under the supervision and direction of the State Executive Directors. The remaining cases are now part of the total county office existing case loans and are managed with all the other problem accounts. They are not tracked separately at the State and national levels but are included in the total numbers serviced. Mr. Skeen. Please update the tables that appear on pages 86 and 87 of last year's hearing record, showing the amount of direct farm loans, direct housing loans, and rural development insurance fund loans that have been written off the books since fiscal year 1985, to include fiscal year 1996. [The information follows:] [Page 101--The official Committee record contains additional material here.] Mr. Skeen. What is the current error rate in processing loan servicing applications? Response. As we reported last year, our estimate of the error rate in processing loan servicing applications is based on Secretary Espy's suspension of foreclosures from March, 1993 to February, 1994 in order to allow for an extensive review to determine if the Agency was complying with its own due process procedures. It was determined that the Agency had a 35 percent error rate. An extensive review of this nature has not been conducted since that time due to costs and other factors. However, as a result of the review that was conducted, the Agency developed and distributed a checklist to its field offices to ensure that the most common loan servicing mistakes are avoided in the future. The Agency also provided training to its loan officers on the identified discrepancies. We are confident that the error rate in processing loan servicing applications today has significantly decreased. tobacco activities Mr. Skeen. For the record, please provide a copy of the most recent updated tobacco table that shows the related administrative expenses for carrying out the tobacco program. [The information follows:] [Pages 103 - 105--The official Committee record contains additional material here.] options pilot program Mr. Skeen. The pilot options program was started as a way to see if commodity options might be used in place of, or in conjunction with the CCC price support programs. Give us an update on the program. Since the 1996 Farm Bill did away with the price support programs, what impact has this had on the program? Response. The Options Pilot Program was implemented in 1993, 1994, and 1995. The program was not implemented in 1996, and we do not anticipate implementing the program in subsequent years. The goal of the program was to use the futures market system to provide farmers with protection equivalent to the deficiency payments and price support loans. For example, the Department would provide producers a subsidy sufficient to purchase put options with strike prices equal to the target price. Most producers would purchase and sell the subsidized option in the same day, in effect locking-in an amount equal to the anticipated deficiency payment. The utility of the program for this purpose has diminished with provisions of the 1996 Farm Bill which replace variable deficiency payments with fixed production flexibility contract payments. However, the use of the futures market as a risk management tool is becoming increasingly important. For example, we are proposing legislation which will allow us to accelerate the development and implementation of revenue insurance products which combine price protection, based on futures market transactions, and yield protection, based on traditional crop insurance models. empowerment zones and enterprise communities Mr. Skeen. You provided a list of empowerment zones and enterprise communities that had been selected, to date, for the record last year. Would please provide an updated list for this year's record. Response. Mr. Chairman, the list is unchanged from last year's. The three Empowerment Zones are: 1. LKentucky Highlands--serving Clinton, Jackson and Wayne Counties in Kentucky. 2. LMid-Delta--serving Bolivar, Sunflower, Leflore, Washington, Humphries, and Holmes Counties in Mississippi. 3. LRio Grande Valley--serving Starr, Cameron, Hidalgo, and Willacy Counties in Texas. The Enterprise Communities are as follow: 1. Chambers County, Alabama. 2. Greene and Sumpter Counties, Alabama. 3. Mississippi County, Arkansas. 4. Imperial County, California. 5. Jackson County, Florida. 6. LMacon Ridge (Catahoula, Concordia, Franklin, Morehouse, and Tensas) Parishes in Louisiana. 7. Lake County, Michigan. 8. North Delta (Panola, Quitman, and Tallahatchie Counties), Mississippi. 9. City of East Prairie and Mississippi County, Mississippi. 10. Mora County, New Mexico. 11. Halifax, Edgecombe, and Wilson Counties, North Carolina. 12. Greater Portsmouth (Scioto County), Ohio. 13. Lock Haven, Pennsylvania. 14. Beadle and Spink Counties, South Dakota. 15. Fayette and Haywood Counties, Tennessee. 16. Accomack and North Hampton Counties, Virginia. 17. LCentral Appalachia (Roane, Braxton, Clay, Nicholas, and Fayette Counties), West Virginia. 18. McDowell County, West Virginia. 19. Scott and McCreary Counties, Tennessee. 20. Northeast Louisiana Delta (Madison Parish), Louisiana. 21. Robeson County, North Carolina. 22. Yakima County, Washington. 23. Williamsburg and Florence Counties, South Carolina. 24. Josephine County, Oregon. 25. McCurtain and Choctaw Counties, Oklahoma. 26. Crisp and Dooly Counties, Georgia. 27. LCentral Savannah River (Burke, Hancock, Jefferson, McDuffie, Taliaferro, and Warren Counties, Georgia. 28. Watsonville, California. 29. Arizona Border Region (Cochise, Yuma, and Santa Cruz Counties), Arizona. 30. Eastern Arkansas (Cross, Lee and St. Francis Counties), Arkansas. Mr. Skeen. Also for the record, please provide a list of all USDA accounts where funds are spent for these zones as well as how much has been spent. [The information follows:] [Page 108--The official Committee record contains additional material here.] usda americorps activities Mr. Skeen. Please update the table that appears on page 72 of lasts year's record on USDA Americorps activities. [The information follows:] [Page 110--The official Committee record contains additional material here.] under secretary/assistant secretary offices Mr. Skeen. Provide tables similar to the ones provided on pages 66 through 70 of last year's hearing record that lists current staff on board in each of the OSEC offices, the position title, the grade level, the pay costs associated with each position, the identify of the appointment, and how they are funded for fiscal years 1996 and 1997. Response. The following table lists current staff on board in each of the OSEC offices, the position title, the grade level, and the pay costs associated with each position. The table also identifies Presidential Appointments with Senate Confirmation-PAS, Schedule C, Non-career, Career positions, and how they are funded. Details are those positions which are not funded by OSEC, as shown in the table. The table reflects staff on board as of September 30, 1996, for fiscal year 1996 and as of February 26, 1997, for fiscal year 1997. [Pages 112 - 117--The official Committee record contains additional material here.] ebt Mr. Skeen. What percentage of food stamp benefits are currently being delivered by EBT? Response. Currently about 16 percent of food stamp issuance is made through EBT. EBT is operational in eighteen States right now. By the end of fiscal year 1998 we anticipate that about 40 States, representing 55 percent of food stamp purchasing power will have EBT in operation. wic eligibles estimate Mr. Skeen. Please submit a copy of the Department's most recent estimate of WIC eligibles for the record. [The information follows:] [Pages 119 - 121--The official Committee record contains additional material here.] wic month to month participation Mr. Skeen. Update the table that appears on page 52 of last year's hearing record showing the monthly participation levels of the WIC program to include fiscal year 1996, and to date in fiscal year 1997. [The information follows:] [Page 123--The official Committee record contains additional material here.] statutory advisory committees, panels, task forces, commissions etc. Mr. Skeen. Provide a list of the statutory advisory committees, panels, task forces, commissions, etc. that were eliminated as well as the new ones that were established in the 1996 Farm Bill. Response. The 1996 Farm Bill did not eliminate any statutory advisory committees, panels, task forces, commissions, etc. Following is a list of the new ones established by the 1996 Farm Bill. Safe Meat and Poultry Inspection Panel. Edward R. Madigan United States Agricultural Export Excellence Award. Water Rights Task Force. Commission on 21st Century Production Agriculture. Natural Resources Conservation Foundation. Conservation of Private Grazing Land Advisory Committee. Task Force on Agricultural Air Quality. National Agricultural Research, Extension, Education, and Economics Advisory Board. Strategic Planning Task Force. advisory committees Mr. Skeen. The fiscal year 1997 appropriations bill included language that not more than $1.0 million may be expended on advisory committees, panels, task forces, commissions, etc. For the record, please provide a list of all activities that were funded. Indicate those that are mandated by law and those that are discretionary as well as the funding level of each. Response. I will provide for the record a listing of those advisory committees, panels, commissions and task forces that are subject to the $1 million limitation. [Pages 125 - 126--The official Committee record contains additional material here.] private counsel Mr. Skeen. Were any outside private counsels hired by the Department in fiscal year 1996? Does the Department plan to hire any private outside counsels in fiscal year 1997? If so, please provide a brief description of the nature of the work that they are performing for the Department and the amount spent for this service. Response. The Rural Housing Service (RHS) annually contracts with private attorneys throughout the country for judicial foreclosures of RHS single family housing loans. In fiscal year 1997 RHS has continued to contract for judicial foreclosure services with private attorneys. Private attorneys are used to judicially foreclose in Florida, Hawaii, Idaho, Illinois, Louisiana, Maine, New Jersey, New Mexico, Ohio, Oklahoma, South Carolina, South Dakota, and Wisconsin. The Farm Service Agency (FSA) used private attorney to foreclose farm loan program loans in Louisiana in fiscal year 1996 and continues to use private attorneys for farm loan program farm foreclosures in Louisiana in fiscal year 1997. The total cost for fiscal year 1996 was $142,110, and the cost so far in fiscal year 1997 is $56,695. conservation reserve program Mr. Skeen. Update the table that appears on page 63 of last year's hearing record showing the total cost of the CRP program since its inception to include fiscal year 1996 actuals and fiscal year 1997 estimates. Response. A summary of costs, by fiscal year, since the inception of the program, including both cash outlays and the value of CCC commodity certificates issued for rental payments follows. CONSERVATION RESERVE PROGRAM [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- CCC commodity Fiscal year Cash outlays certificates Total ---------------------------------------------------------------------------------------------------------------- 1986............................................................ 23,146 .............. 23,146 1987............................................................ 267,024 409,969 676,993 1988............................................................ 291,477 759,067 1,050,544 1989............................................................ 1,372,205 -13,509 1,358,696 1990............................................................ 1,513,092 -3,507 1,509,585 1991............................................................ 1,630,977 .............. 1,630,977 1992............................................................ 1,669,275 -178 1,669,097 1993............................................................ 1,689,602 -251 1,689,351 1994............................................................ 1,735,587 -268 1,735,319 1995............................................................ 1,732,342 -237 1,732,105 1996 \1\........................................................ 1,732,194 -50 1,732,144 ----------------------------------------------- Total....................................................... 13,656,921 1,151,036 14,802,708 ---------------------------------------------------------------------------------------------------------------- \1\ Outlays in FY 1996 include funds from the appropriated account ($1.730 billion) and the CCC account ($1.946 million). p.l. 480 cargo preference costs Mr. Skeen. Your proposed program level for P.L. 480 is $990 million. How much will be spent for cargo preference in fiscal year 1998? How much are you spending this fiscal year? Response. USDA pays two-thirds of the ocean freight differential costs incurred in carrying out Titles I, II and III of P.L. 480. The Maritime Administration, Department of Transportation, is responsible for the remaining one-third of the ocean freight differential costs. For fiscal year 1998, USDA's cargo preference costs for P.L. 480 are estimated at $31.0 million. For fiscal year 1997, the estimate is $33.9 million. karnal bunt Mr. Skeen. What is the status of the Karnal Bunt issue today? Response. We are continuing to deal with the infestation in the Southwest and indications from the National Survey that Karnal bunt exists in the Southeast. With survey data, we can clearly demonstrate where the disease is and is not. Because of this, we have largely maintained market access for U.S. wheat from non-affected areas. To date, negotiations have been successful with several significant markets, including Germany and Italy. (Based on subsequent development, we have determined that Karnal Bunt is not located in the Southeast.) Mr. Skeen. How much has been spent to date on Karnal Bunt compensation? Response. Since March 1996 we have paid out $13 million in compensation. Mr. Skeen. What are your projections for the future? Response. The budget includes an increase of $4.5 million for increased pest detection activities by APHIS. These funds will enable them to follow-up the program operations in areas regulated for Karnal bunt and to conduct the National Survey. fund for rural america Mr. Skeen. Please provide a table showing the levels of funding, both program level and budget authority, for the Fund for Rural America along with the levels of funding for those activities provided for in the FY 97 and requested FY 98 budget. Response. The information for fiscal year 1997 follows. We have made no decisions on how to use the Fund for fiscal year 1998. [Page 129--The official Committee record contains additional material here.] rural community advancement program Mr. Skeen. The Rural Community Advancement Program (RCAP) may provide approximately $57 million in grants to states, territories and federally recognized Indian tribes. The Inspector General has informed the Committee that several state Attorneys General have refused to allow their state institutions to cooperate with him in investigations of possible waste, fraud and abuse in the state mediation program. Can you give us your full assurance that any entity receiving money under the RCAP will cooperate fully with the Inspector General, the GAO, and the Committee on Appropriations in auditing the use of this money? Response. I cannot give you my full assurance that others would cooperate with us in investigations. But, I can give my full assurance that unless those terms were agreed to by the State, in a grant agreement, that the State will not be a participant in the RCAP program. fsis user fees Mr. Skeen. Did you consult with industry and consumer groups before developing the plan for user fees in the FSIS budget? Response. No, we did not consult with industry and consumer groups before developing the plan for user fees in the FSIS budget. However, we plan to meet with them in the near future to discuss issues pertaining to the collection of such fees. Mr. Skeen. Implementation of the FSIS user fees requested by the Administration will require authorization. What is the Administration's plan for securing that authorization and what will be your role in the plan? Response. The Administration will be submitting a legislative proposal for consideration by Congress in the near future. We are planning on briefing appropriate congressional committees on alternative fee structures, the impact of fees on consumers and producers, and a regulatory strategy to ensure assessment of fees by October 1, 1998. codex alimentarius Mr. Skeen. What is the total Department budget for activities of the Codex Alimentarius? Response. For 1996, USDA agencies spent approximately $377,000 on Codex Alimentarius activities. Of this amount FSIS spent $246,000 for three staff years, operating expenses, and equipment to accomplish activities as the coordinator of Codex functions in USDA. FSIS and FAS contributed $53,000 for meetings, in addition to the $25,000 contributed by FDA for these meetings. Travel to Codex meetings for all USDA agencies accounts for $65,000. An additional $13,000 is used to train U.S. delegates in CODEX administrative procedures. For 1998, the budget includes an increase of $100,000 within FSIS for additional staffing, work associated with an increased number of meetings, and improved coordination on food safety and science issues. campaign contributions Mr. Skeen. According to the Center for Responsive Politics, of 50 law firms, corporations, organizations and other groups, USDA employees contributed the third largest amount to President Clinton's reelection campaign from January 1995 to mid-1996. What precautions does the Department take to make sure that these contributions are collected in compliance with applicable campaign finance and federal employment statutes? Response. The Department has no statistics on the level or amounts of political campaign contributions made by USDA employees in support of candidates for elective office at the National, State, or local levels. Whilesome limitations remain on the political activities in which Federal employees may engage under the recent revisions to the Hatch Act, Federal employees have always been permitted under the law to make campaign contributions in support of candidates for elective office. The Department plays no role in encouraging or discouraging such contributions by its employees. The Department does, however, actively educate its employees, by means of briefings and periodic written reminders, of the limitations placed on Federal employees under the law. For example, while employees may generally engage in partisan political activities, and may make contributions in support of political candidates, they may not do so while on official duty, or while in Federal buildings or on government premises, or in any manner in which they are identified as Federal employees while engaged in such activities. food assistance for north korea Mr. Skeen. Please describe the food aid program that the Administration is proposing for North Korea, including dollar amounts, specific tonnages, and the schedule of delivery. Response. In response to a World Food Program appeal for 100,000 metric tons of food assistance for North Korea, the United States Government recently decided to provide about 27,000 metric tons of U.S. corn-soy blend, corn, and rice at a cost of $10 million. This assistance will be provided under P.L. 480 Title II through the World Food Program as emergency food aid for children under age five and flood victims; it is expected to arrive in North Korea during the second half of May. Mr. Skeen. What assurances do we have that this food aid will go to those who deserve it and not to the North Korean military? Response. The World Food Program will monitor distribution to ensure that the aid reaches those in need. The World Food Program, which has an office in North Korea, has demonstrated its ability to monitor the distribution of food aid in the country. The monitoring procedures for this assistance will be essentially the same as for our contribution in June of last year. service centers for home loans Mr. Skeen. In inaugurating the service center for home loans in St. Louis, you have said that the new center will save the taxpayer more than $250 million in the first five years and $100 million per year thereafter. That would mean a savings of $50 million in FY `98. Your budget justification shows a savings of $15.5 million for administration of loan and grant programs because of the new center. Where are the other $34.5 million in savings? From which accounts will additional $200 million in savings come in the next four fiscal years? Response. We have estimated that DLOS will save taxpayers more than $250 million from FY 1997 to 2001, and $100 million per year thereafter. However, the $250 million in savings is not evenly distributed over the five years. The estimated savings from the DLOS service center are greater in the later years because many of the costs associated with the conversion of the portfolio are incurred up front, and then the savings build in the later years. The $15.5 million savings from FY 1998 is consistent with our original estimate of $250 million in savings overall. Our analysis assumes that about two-thirds of the savings from implementing DLOS are mandatory savings from earnings on escrow payments, fees, and reduced default and foreclosure costs. These savings will occur in the Rural Housing Insurance Fund liquidating and financing accounts for existing loans. The other third of the estimated savings would be discretionary savings from a number of sources, reflecting the operating efficiencies from the DLOS system. These savings would occur in the salaries and expense account for the Rural Housing Service. limiting response to natural disasters Mr. Skeen. Your testimony says a balanced budget amendment could limit the Department's ability to respond to natural disasters. Could you describe the specific language in the balanced budget amendment which would cause this problem and give some examples? Response. The balanced budget amendment would impose both procedural barriers and budgetary pressures that would constrain the Government's ability to provide timely disaster aid. Section 1 of the amendment would require a ``supermajority'' approval of both the House and Senate to appropriate supplemental disaster assistance, if the budget is otherwise in balance, and could prevent us from dealing expeditiously with natural disasters. For example, when Hurricane Hugo caused billions of dollars in damage in 1992, Congress was able to respond effectively by appropriating $2.7 billion in emergency supplemental assistance. Further, we believe that reductions in spending driven by the amendment could threaten the viability of the crop insurance program and other on-going disaster assistance programs. In an overwhelmingly urban America, crop insurance, market transition payments, conservation reserve program payments and other farm programs are vulnerable. As I have indicated before, when political push comes to financial shove, under a balanced budget amendment, critical farm programs are sitting ducks. proposed legislation Mr. Skeen. Your testimony describes a wide range of proposed legislation for various USDA programs including the safety net for farmers, user fees and rural development programs. Can you provide us with a timetable as to when all of this legislation will be presented to Congress? [The information follows:] ------------------------------------------------------------------------ Approximate date to the Title Congress ------------------------------------------------------------------------ Amendments to secure the farm bill safety Late April. net. USDA omnibus bill......................... To be determined. Fund for rural America--technical Late April. correction. User fees for marketing agreements and Late April. orders. APHIS omnibus user fees................... Late April. User fees for standardization activities.. Late April. License fees.............................. Late April. User fees for meat, poultry and egg Late April. products inspection services. Salvage timber sales...................... Late April. Food Stamp Amendments Act................. Early April. Aquaculture under NAP..................... To be determined. Issuing payments expeditiously............ Early May. Dairy indemnity program payments.......... To be determined. Census of agriculture..................... Early May. Extend cooperative services to To be determined. nonagricultural cooperatives. Facilitiate privatization of the rural Late May. telephone bank. ------------------------------------------------------------------------ export enhancement program Mr. Skeen. You are proposing a $400 million increase in the Export Enhancement Program. As your testimony indicates, U.S. agricultural exports set another record last year with very little use of the EEP. Why do you expect to use EEP so heavily next year? Please identify the countries where EEP will be used and what commodity exports the program will support. Response. The goal of inducing competitors to negotiate an end to unfair trading practices has been strongly advanced, but not entirely resolved by the Uruguay Round Agreement. Limits on direct export subsidies are a major accomplishment, but the fact remains that the Agreement allows those limited export subsidies to continue and, furthermore, does not address the differential pricing practices of monopoly export organizations like the Canadian and Australian wheat boards. EEP allows us to compete with these monopolies and the export subsidies that the European Union will continue to grant. Allocations for July 1996-June 1997 EEP programming were announced last summer at the maximum allowable levels under the Uruguay Round Agreement, and made wheat, wheat flour, barley, barley malt, rice, vegetable oil, eggs, and frozen poultry eligible for programming during this period. However, prevailing market conditions have not warranted the use of the program during the past year. Unfortunately, the responsible restraint by the United States has been tested by renewed subsidization by the European Union, which began in September 1996. We believe it is extremely important that we maintain a strong position in order to protect our agricultural trade interests. Resumption of EEP is an option we may need to consider and we have, therefore, provided for EEP at the maximum level permitted by the 1996 Farm Bill. The commodities which could be made eligible for programming are the same as those which are eligible for the 1996-1997 period. Countries which would be targeted for EEP programming during fiscal year 1998 will not be identified until the 1997-1998 allocations are announced. p.l. 480 tonnages Mr. Skeen. Please provide a breakdown by titles of the 3.2 million metric tons of commodity assistance proposed for P.L. 480 activities for fiscal year 1998. Response. Based on current price projections, the budget request will support programming of 634,000 metric tons of commodities through Title I, 2,423,000 metric tons through Title II, and 155,000 metric tons through Title III. These tonnages are on a grain equivalent basis. Mr. Skeen. You estimate 3.2 million metric tons for fiscal year 1997 also. Does this level include the proposed rescission of $50 million from Title I? Response. The estimate of 3.2 million metric tons for 1997 does include the effect of the proposed rescission for the Title I program. The rescission is estimated to lower Title I commodity shipments by about 200,000 metric tons. market news Mr. Skeen. Your budget for the Agricultural Marketing Service proposes increases for expanding foreign market news reporting. Isn't this a responsibility of the Foreign Agricultural Service? Response. International market news reports of the type generated by the Agricultural Marketing Service (AMS) are not the responsibility of the Foreign Agricultural Service (FAS). FAS commodity-related reports are typically focused on historical and projected production outlook, including acres planted, animal numbers, etc., as well as status and changes in agricultural policies and trade leads. AMS international market news reports provide time-sensitive daily, bi- weekly, or weekly wholesale price information. On a very limited basis, for example, we have already begun reporting prices for selected fruits and vegetables at key wholesale markets in Mexico on a twice-weekly basis. Similarly, we are reporting wholesale prices for U.S. and Australian beef, along with domestic beef, in Japan. These limited data are being well received by U.S. industry. We have found substantial interest among AMS market news users for expanded international market coverage through our customer survey efforts. Mr. Skeen. You are proposing a separate budget of $4,828,000 for the Chief Information Officer including a transfer of $4,498,000 from Departmental Administration. The table accompanying the request does not show an increase in staff for FY '98. Why is the additional money necessary? Response. The additional funding of $330,000 is needed to partially fund anticipated pay increases and fund a small immediate staff for the Chief Information Officer to enhance the leadership and coordination capabilities of the office. It is my understanding that the staffing increase was reflected in FY 1997 and funded within available resources at the expense of other IRM activities including some of the new requirements of the Clinger-Cohen Act. status of amta implementation Mr. Skeen. Title I of the 1996 Farm Bill, the Agricultural Market Transition Act (AMTA), authorizes the Secretary of Agricultural to enter into Production Flexibility Contracts with eligible landowners. In exchange for annual contract payments totaling at least $5.8 billion in 1998, producers agree in the contracts to comply with Highly Erodible Land and wetland provisions of the Food Security Act. Please review for the Committee the status of AMTA implementation? Response. Final regulations for the AMTA program were published in July of 1996. Singup opened May 20, 1996, and closed July 12, 1996. Advance payments on 1996 crop contracts were made beginning 30 days after signup. Final payments on the 1996 crop were made by September 30, 1996. A total of 1.7 million farms and 207 million acres were enrolled in the program in 1996. Given the fact that the farm bill wasn't enacted until April of 1996, the successful implementation of such a massive program in such a short time represented a tremendous effort on the part of FSA and other staff of the Department. Work has continued this year as advance payments on the 1997 crop were made at the option of the producer on either December 15, 1996, or January 15, 1997. About 800,000 contracts have been modified for the 1997 crop. Payments of about $5.2 billion have been made on the 1996 crop, and about $3.3 billion in advance payments have been made on the 1997 crop. Mr. Skeen. What is the magnitude of the AMTA workload for the Farm Service Agency and the Natural Resources Conservation Service? Response. The planting flexibility provisions and multi-year contract provisions of the new farm bill are expected to substantially reduce workload requirements at the field office level. An analysis by the General Accounting Office (GAO) of commodity program provisions similar to those enacted in the 1996 Farm Bill concluded that the changes could reduce FSA workload in 1998 by up to 13 percent from 1995 levels. Most of the reduction would be at the county office level. Excluding conservation and credit activities, tobacco program activities, referenda, and a share of related administrative functions for these activities, AMTA workload for FSA non-federal county staff in 1998 would total about 7,130 staff years. Based on an earlier analysis of conservation technical assistance, compliance workload in NRCS county offices directly associated with AMTA enrollment would total roughly 1,500 staff years. staff year reductions Mr. Skeen. The department has reduced the number of staff years by more than 16,000 since fiscal year 1993. Provide a table for the record that shows by fiscal year and agency, the staff year reductions that have occurred. [The information follows:] [Page 134--The official Committee record contains additional material here.] production flexibility contracts Mr. Skeen. On page three of your statement, you state that nearly 99 percent of eligible producers entered into production flexibility contracts. How does this compare with the percentage of producers that participated in the price support programs? Response. In 1996, a total of 210 million acres were eligible for production flexibility contracts, of which 207 million acres were enrolled (99 percent). In 1995, a total of 210 million acres were eligible for the support program, of which 166 million acres were enrolled (79 percent). In terms of the number of farms, in 1996 1.9 million farms were eligible for production flexibility contracts, of which 1.7 million were enrolled (88 percent). In 1995, a total of 1.9 million farms were eligible for support payments, of which 0.9 million farms were enrolled (47 percent). Mr. Skeen. I continually hear that because of the changes in the 1996 Farm Bill the Administration is concerned about the adequacy of the safety net for producers. The changes in the Farm Bill are what producers wanted and lobbied for. They wanted the shift from price support programs to a production flexibility contract so they could make planting decisions based on global market demand. Where does the concern about an adequate safety net originate? Response. The Farm Bill substituted fixed payments for payments that varied with market prices so that when prices were high payments were low and when prices were low payments were high. The Farm Bill also reduced the role of Government in managing supply in order to maintain fair and stable prices. It's now the case that when farm prices fall there will be less the Government can do to either stabilize prices or to compensate for lower prices with higher payments. But the commodity programs are only a small part of the changes in farming that change the risks farmers face. Farming risk is changing through the process of industrialization of agriculture and reorganization, concentration, and globalization of markets. Changes in technology, environmental and health concerns, and rapid spread of pests and disease are other essential factors to consider. Producers are responding and contributing to these changes by finding new ways of doing business, using new technologies and practices, and making new financial and other commitments. Government has a role in helping farmers understand and deal with these changes, and we give a high priority to enacting legislation that will improve crop insurance, commodity lending programs, and other risk management programs. Mr. Skeen. Would you please submit a detailed description of why the 1998 budget projects CCC outlays for commodity price and income support programs will increase from about $5.0 billion in 1997 to $6.2 billion in 1998. Response. Outlays for program crops (feed grains, wheat, cotton and rice) increase by $0.3 billion between 1997 and 1998, from $5.6 billion to $5.9 billion. Outlays for nonprogram crops (soybeans, tobacco, dairy, peanuts and other commodities) increase by $0.9 billion over the period, from $0.6 billion to $0.3 billion. Program crop outlays increase because producers refunded $1.1 billion for prior year deficiency payments in 1997, while no refunds will be received in 1998. Outlays for production flexibility contracts decrease as payments, adjusted for prior crop year payments, fall from $6.3 billion in 1997 to $5.7 billion in 1998. The net effect is an increase of about $0.5 billion in direct payments for program crops in 1998. Other changes in outlays for program crops in 1998 included a reduction of about $0.4 billion in marketing loan outlays and an increase of about $0.2 billion in outlays for cotton marketing certificates and other expenditures. Nonprogram crop outlays increase largely because outlays for the tobacco program increase from net receipts of $0.7 billion in 1997 to net outlays of $0.1 billion in 1998, reflecting low placements and high repayments in 1997and the reverse in 1998. direct farm loans/beginning and socially disadvantaged farmers and ranchers Mr. Skeen. What is the level of direct farm credit loans that are targeted to beginning and socially disadvantaged farmers and ranchers? Response. Direct operating loans for beginning farmers are targeted at 25 percent for years 1996-1998, 30 percent in year 1999, and 35 percent in years 2000-2002. These funds are targeted until September 1 of each year. After that, the targeting is removed and any remaining funds may be used for any applicant that qualifies for this program. For direct farm ownership loans, all years are targeted to beginning farmers at 70 percent, of which 60 percent is set aside for down payment loans until April 1. Beginning farmer funds are targeted until September 1. After that, the targeting is removed and any remaining funds may be used for any applicant that qualifies for this program. Guaranteed operating loans are targeted at 40 percent, for all years, until April 1. In all years, the guaranteed farm ownership is targeted at 25 percent until April 1. On August 1, guaranteed operating unsubsidized funds must be moved to fund direct farm ownership beginning farmer down payment loans. On September 1, guaranteed operating-unsubsidized funds must be moved to fund direct farm ownership beginning farmer loans. Once these transfers of funds have been accomplished and allotted to States, any funds not used by the end of the fiscal year must be returned to Treasury and cannot be transferred to any other State or loan program. crp competitive bid process Mr. Skeen. The budget request assumes a competitive bid process will be used to enroll nearly 19 million acres of new and expiring acres into the Conservation Reserve Program. How much of the 19 million acres will be new acres and how much will be reenrollments of expiring acres? Response. We cannot determine this until we evaluate all CRP offer data. Each offer will be evaluated based on the environmental benefits index. Only the highest ranked offers will be enrolled into CRP. We cannot speculate on what the breakout on new versus reenrollment acres will be. Based on the offers received and reported through the second week of signup, 23% of the offered acreage is acreage not currently enrolled in the CRP. crp rental payment rates Mr. Skeen. You anticipate CRP rental payments to increase to $2.2 billion in 1998. Why is this the case when new contracts will be based on lower prevailing rental rates? Response. We are not sure where the $2.2 billion for rental payments originated. Outlays in fiscal year 1998 do not include rental payments on new acres enrolled in the signup occurring March 3 through 28, 1997, and therefore do not reflect the new market-based rate system. The total estimate for outlays in fiscal year 1998 is $1.951 billion which includes rental payments of $1.668 billion, cover costs of $246 million, and technical assistance of $38.3 million which includes $23.5 million funded by appropriated funds. Per-acre rental payments may not necessarily decrease in the future because (1) land values are higher now than they were 10 years ago when much of the current CRP lands were enrolled and (2) maximum acceptable rental rates on individual tracts of land offered for enrollment could be higher or lower than maximum rates used during earlier signups. emergency fund Mr. Skeen. The President's budget proposes the establishment of a new $5.8 billion contingent reserve for emergency funding requirements resulting from various disaster assistance needs. USDA has two programs that would be eligible to receive emergency funding from this reserve account, the Emergency Conservation Program and the Watershed and Flood Prevention Operations Program. How much of the $5.8 billion do you anticipate would be used for these programs? Response. The proposed contingent reserve for emergency disaster relief funding could be used for certain designated disaster relief activities including the flood prevention and emergency conservation program activities of the Department referred to in your question. The $5.8 billion proposed in the fund is based on historical average spending for the programs it is to support. But, the 10 year average expense for the two programs you mentioned is $26.4 million per year for the emergency conservation program activities and $61.7 million per year for the emergency watershed program activities. So that may be a rough guide to the average amount we might expect to use for them over a period of years. crop insurance delivery expenses Mr. Skeen. Submit for the record a copy of the analysis conducted by the Office of Risk Management and the GAO in support of the legislative proposal to reduce the reimbursement rate for delivery expenses of the crop insurance program. Response. The GAO Report regarding the legislative proposal to reduce the reimbursement rate for delivery expenses is currently in draft status and subject to change. GAO advised RMA that the report could not be released at this time. We would be pleased to provide you with a copy once the report has been released by GAO. Mr. Skeen. Describe in further detail the proposal to make a portion of the overall reimbursement rate discretionary. Response. Let me begin by saying that we tried to be fair to the agents and to avoid having to tell the insurance companies how much they would be allowed to pay their agents. As you know, sales commissions have been paid out of the FCIC Fund, which is a mandatory spending account, although still subject to appropriation. However, current law requires that they be treated as discretionary spending beginning in 1998. This adds a fairly large amount of money, $203 million, to the discretionary account. We would have to negotiate with the companies on how that money would be allocated. Our proposal recognizes that the delivery expenses, in total, not just sales commissions, may have been too high. Consequently, we are proposing that the statutory ceiling on delivery expenses be reduced from 28% to 24.5% of the premium on multi-peril coverage, which applies to production risks. For revenue insurance, which has a higher premium, because it applies to price as well as production risks, the rate will be somewhat less, but the amount will be at least as much as the amount paid on multi-peril coverage. We estimate that delivery expenses under our proposal would be $417 million, compared to $460 million under current law, which is a savings of $43 million, net of about $10 million in additional cost for an increase in business. We wanted to take these savings on the discretionary side of the budget in order to reduce the burden of the shift to discretionary spending that is required by current law. The 10.5 percentage point limitation we are proposing represents about 43% of the 24.5 percentage point rate. It would result in $150 million of the $417 million total for delivery expenses being treated as discretionary, and save $53 million from the $203 million in discretionary spending that would be required under current law. As I mentioned earlier, while we wanted to reduce delivery expenses, we did not want agents to have to bear more than a fair share of the reduction. We wanted this to be a matter of negotiation between the agents and their companies, without our getting into the matter. So, our proposal provides for eliminating the distinction in current law that subjects only the sales commission portion of delivery expenses to discretionary spending ceilings. market access program Mr. Skeen. Page nine of the statement states that, in 1996, 56 percent of MAP funds for promotion of branded products was made available to small entities. What is the Department's definition of a small entity? Response. The Department follows the Small Business Administration's Small Business Size Regulations. Under these regulations, SBA establishes the appropriate size standards applicable to particular Standard Industrial Classification--SIC--codes. SBA determines which concerns qualify as small under the appropriate size standard. This process often includes a self-certification procedure by which a concern certifies its size eligibility. Mr. Skeen. Briefly describe the MAP program improvements that have been made to broaden participation, clarify participation criteria, strengthen evaluation and accountability, and simplify program requirements. Response. Consistent with the Administration's commitment to streamlining government activity, new MAP regulations were published on February 1, 1995, that increased flexibility and simplified program requirements for the participants. The revised regulations also reflected public comments and changes made by the Omnibus Budget Reconciliation Act of 1993. Specific changes in the final rule include: (a) U.S. exporters no longer need to show that a U.S. agricultural commodity faces an unfair trade practice in an overseas market; (b) small businesses and cooperatives are accorded priority consideration in the allocation of brand promotion funding; (c) application and allocation approval criteria are clarified; (d) procedures for appealing compliance findings are added; and (e) paperwork requirements have been reduced by simplifying contracting standards and procedures and streamlining the format for various program documents. With regards to evaluation, FAS allocates funds in a manner that effectively support decision-making initiatives of the Government Performance and Results Act (GPRA) of 1993. FAS considers a number of factors when reviewing MAP proposals, several of which relate to export performance, both past performance and projected export goals. In fact, in the MAP competitive allocation process, 60 percent of the total weight relates to export performance. In addition, each participant is required to conduct an annual program evaluation to determine the effectiveness of the participant's strategy in meeting overall goals. Participants must identify goals to be met within a specified time, a schedule of measurable milestones for gauging success, plans for achievement, and results of activities at regular intervals. The evaluation results are analyzed by FAS and help guide the development and scope of a participant's program. With these changes in place, program management and accountability have been strengthened. For example, over the last 6 years compliance findings against program participants have decreased and repayments by program participants for unauthorized or inappropriate expenditures have been less than 1 percent of the total MAP funding level, a clear indication that these steps are working. food recovery foundation Mr. Skeen. On page 15 of the statement you talk about a proposal to promote food recovery through creation of a non-governmental, charitable foundation. Please describe this initiative in further detail. Response. I would be happy to explain this low-cost, large-gain proposal--something that creates a non-governmental, charitable foundation to serve public purposes, not a new bureaucracy. The formal proposal itself is circulating within the Administration for comment and should be ready for formal transmittal to the Congress within a few weeks. The foundation would be provided with seed money, not more than $500,000 annually, from the Federal government for 3 years with the expectation that the private sector and volunteer efforts will be self sustaining within that time. Thus, the total cost to the taxpayers will be $1.5 million. The intent is to foster a substantial increase in the proportion of excess food recovered and provided to needy persons principally by coordinating and stimulating non-governmental effort. With the billions in food going to waste right now, with this foundation and the Bill Emerson Good Samaritan Act, I think I can assure you that we can increase donations by at least $50 million a year. Ultimately, I think the foundation will do much better than that. Further, foundation activities will improve recipient nutritional status, help coordinate and help inspire citizen altruism by providing more effective outlets for their efforts, and increase the nutritional status and knowledge of all who are touched by the program. new mandatory conservation programs Mr. Skeen. You make the statement in your testimony that while the Farm Bill created new mandatory conservation programs funded through CCC, their technical assistance was not included as part of this funding. The law for these programs clearly states that CCC funding shall be used to provide technical assistance. Please submit where it states that technical assistance must be provided through discretionary funds. Response. Except for the new Environmental Quality Incentives Program (EQIP) for which the new Farm Bill explicitly authorizes the use of CCC funds for technical assistance and other purposes, our understanding is that CCC funding of conservation technical assistance is subject to limitations imposed by Section 161 of the 1996 Act. Basically Section 161 amended Section 11 of the CCC Charter Act to limit the total CCC funding transferred or allotted to other State and Federal Government agencies under reimbursable agreements to the total of such obligations in fiscal year 1995, which was $45.6 million. Also, the new Farm Bill did not explicitly provide for the use of CCC funds for technical assistance, except for EQIP. And, while it did not preclude use of CCC funds for technical assistance necessary for the CCC funded conservation programs, it effectively limited the amount of funds available for such use through the limitation imposed by Section 161. Since many of the activities subject to the new cap on reimbursable agreements present in the 1995 base period are still necessary and important, the level of CCC funds available for conservation technical assistance is clearly constrained. Conservation activities were not funded by CCC in the 1995 base period and the utilization of CCC funds by NRCS, FS or other public agencies for conservation technical assistance, except for EQIP, represents a new use which must be balanced against traditional uses of the limited funds available under the cap. The Farm Bill mandated CCC funding for EQIP at $200 million per year for specific purposes including technical assistance so we have concluded that the specific provisions for EQIP apply to it rather than the general limitations which affect CCC funding of technical assistance for the other CCC funded conservation programs. Funding needs for conservation technical assistance, which cannot be met without the limits on CCC funding discussed above, would need to be provided through discretionary funding. census of agriculture Mr. Skeen. Funding was provided to USDA in the fiscal year 1997 appropriations bill for Census of Agriculture work in anticipation that authorizing legislation needed to transfer the function from the Department of Commerce to USDA would follow. This legislation did not occur. Have you met with Chairman Smith of the authorizing committee to discuss this issue? What is the likelihood of legislation passing this year? Response. No, I have not yet spoken to Mr. Smith, but members of my staff have had several conversations with authorizing committee staff. Last year the legislation was passed by the House, and we are very hopeful that the legislation will pass Congress during this session. Mr. Skeen. If you don't get the legislation needed to transfer the functions of the Census, what happens? Response. NASS has funding for the Census, and has received the transferred program positions and staff from the Census Bureau. We can, through cooperative agreements with the Department of Commerce, conduct the Census of Agriculture. However, without the authorizing legislation, USDA will have to rely on Census employees for certain steps in the process and will not have the flexibility or control to make the best use of the resources provided to conduct the upcoming Census. As long as USDA has theappropriations but not the authority, we must depend on the Bureau of the Census to help us produce information that USDA will ultimately be held accountable for--information that is highly valued by the agricultural community. More specifically, the lack of the authorizing legislation will: raise the costs because of the overhead UDSA will have to pay the Bureau of the Census, reduce the timeliness of the release of the results because NASS employees will not be able to review the census data, and prevent NASS from adopting planned efficiencies such as the utilization of the State Statistical Offices (SSO's) and improvements in the mailing list. For 1997 and future censuses, current legal restrictions also prevent the Census Bureau from furnishing NASS with detailed program files that are integral to the program transfer and needed for effective data edit and future mail list development. karnal bunt Mr. Skeen. There are now nine States that have been affected by Karnal Bunt. The APHIS budget request includes an increase for Karnal Bunt activities including additional surveillance work. Is it safe to assume that additional surveillance work will lead to more discoveries of the presence of Karnal Bunt spores and fungus? Response. We are not sure whether or not these additional surveys will yield more discoveries. But it is essential that we continue this work in any case. Even if we do not detect any additional evidence of Karnal bunt, the negative surveys would enable us to certify that wheat we are exporting has originated from areas where Karnal bunt is not present. Therefore, we would be able to maintain our market share, as well as the confidence of our trade partners. (Subsequent investigation has shown reports of Karnal Bunt in five Southeastern States to be ryegrass smut.) Mr. Skeen. The program cost about $50 million last year, most of which came from CCC emergency funding. Do you have any estimates as to what the future costs of this program will be? Response. A total of $36.7 million was made available in FY 1996, not all of which was used in that year. An additional $34.8 million can be used in FY 1997. The Budget requests an additional $4.5 million for pest detection activities in FY 1998 primarily for Karnal bunt regulatory enforcement the conduct the National Survey, and research and overall control methodologies for future pest outbreaks. Mr. Skeen. For the record, describe what happens when Karnal Bunt is detected in an area, for both spores and the fungus? Response. Currently, if we detect only spores in an area, we are not taking regulatory action if there is any difficulty in verifying that the spores are from Karnal bunt. It we detect bunted kernals, though, we would have conclusive evidence that the Karnal bunt fungus is present in that area. At that point, we would propose adding that area to the current Federal quarantine area that we have already determined to be infested. Mr. Skeen. The presence of Karnal Bunt doesn't pose a health hazard. I understand that India has agreed to accept wheat shipments regardless of the presence of Karnal Bunt. Is this an indication that other countries might do the same or is India an isolated case? Response. India is an isolated case. In that country, Karnal bunt is widespread in all wheat-growing areas. Other countries have Karnal bunt present in some wheat-growing areas, but not to the same extent as India. In Mexico, for example, Karnal bunt is limited to the northwest coastal area of the country, while other wheat-growing areas remain free. Therefore, Mexico still places restrictions on wheat-imported from the United States. Skeen. Are you looking at whether or not you should declare Karnal Bunt a minor disease? Response. We have initiated plans for an international conference this summer to consider whether the status of Karnal bunt should be changed. By that time, APHIS will have the results from pathogenicity tests performed on spore samples from the southeastern United States. We will be asking Mexico and Canada to sponsor the conference, possibly through the auspices of the North American Plant Pathology Organization (NAPPO). Hopefully, this conference will provide all countries the opportunity to review the available data and create rational and objective standards for the international movement of grains affected by various smut diseases. The suggested conference title is, ``The International Conference on Regulatory Issues Related to Smut in Small Grains in the United States''. mexican hass avocados Mr. Skeen. Mr. Secretary, as you know, the California Avocado growers objected to the final rule you issued on February 5, lifting the quarantine of Mexican avocados. Nevertheless, they have decided to work with the Department of Agriculture to try to make your rule work. Of course, there was a prohibition against any meetings with USDA during the rulemaking process. Now that the rule is published, I would expect APHIS to work closely with the domestic avocado industry, just as APHIS has historically done with the livestock industry. Do you agree on the need to have APHIS meet regularly with U.S. avocado growers to implement the rule? Response. As you know, this decision was made only after careful consideration of the rulemaking process. Every opportunity for public involvement in this rulemaking process was extended. And, we remain committed to continue working with Federal and State officials, and the private sector to ensure that imported agricultural products meet plant and animal health standards comparable to those for products produced within the United States. food quality protection act Mr. Walsh. On August 3, 1997, the President signed the Food Quality Protection Act. Since that time have you or a member of your immediate staff met with the Environmental Protection Agency to discuss your role in the implementation of this new law? (There is a concern that USDA is not devoting enough resources and manpower to implementing this new law and that since EPA is devoting adequate resources to this they will quickly assume the predominate role in implementing this law which may have adverse effects for agriculture specific concerns.) Response. Several meetings have been held by USDA officials in the Office of the Secretary and the concerned program agencies with EPA officials since the FQPA was enacted. The Deputy Secretary has served on the Food Safety Advisory Committee with the EPA Deputy Administer and other key staff to discuss implementation of the Act. Additional meetings have been held to exchange information about our respective roles and the program adjustments that may be needed to respond to the new pesticide risk assessment requirements. The USDA FY 1998 budget reflects specific program requests to meet our responsibilities under the FQPA, such as restoration of the Pesticide Data Program, a special survey of food consumption by infants and children, and the development of pest control technologies needed by agricultural producers. Mr. Walsh. Is there any structure within the Office of Secretary to coordinate policy formulation, resource allocation and communication with high level officials with EPA in implementating the Food Quality Protection act as well as internally within USDA? Does your FY 1998 budget proposal reflect this structure? If so, how? Response. The USDA has recently taken steps to establish better coordination of science and technical issues with the EPA regarding the Food Quality Protection Act and other issues. A technical coordinator position has been established in the Agricultural Research Service that will receive guidance from the Office of the Secretary for policy direction. This office will track program performance of USDA agency activities, monitor resource allocation, and serve as the primary point of contact for EPA. This new senior management position and as well as an additional policy person to be announced soon will provide enhanced oversight and visibility to the Office of the Secretary of Agriculture in monitoring performance under the Food Quality Protection Act. Mr. Walsh. What are your policy objectives in implementing the Food Quality Protection Act in FY 1998 and does your budget reflect all the resources you need to achieve those objectives? Response. The Food Quality Protection Act provides that the Secretary of Agriculture become broadly engaged in the implementation of the Act and the Department is committed to fulfill this mandate. The USDA FY 1998 budget request is designed to implement those obligations by establishing programs to provide critical data needed to perform exposure assessment to pesticides and the development of new methods to control pests on major and minor crops. The specific programs that address these requirements are included in the FY 1998 budget requests of the USDA agencies. If the increases requested for FY 1998 are allowed, it will be possible to fulfill the mandates of the Food Quality Protection Act. The program increases for food exposure assessment are as follows: Pesiticide Date Program AMS $9.815 million. This request will return program funding to AMS to carry out residue testing on various agricultural commodities in trade to better estimate actual occurrence of pesticides inthe food as consumed. This data is a valuable tool in facilitating U.S. agricultural exports and reassures our customers of the high quality of our products. The PDP is also the source of information about national estimates of pesticide residue levels in food so that Government agencies can conduct realistic dietary risk assessments to the requirements of the FQPA. Food Consumption Survey of Infants and Children, ARS $6 million. Currently available food consumption surveys do not provide sufficient sample sizes to adequately estimate pesticide intake by children in various age groups. The requested survey will complement the consumption data collected in our 1994-1996 study by adding additional children to make the intake estimates statistically valid. We will provide a table which will reflect the program increases to develop new technologies for pest control, including Integrated Pest Management and related programs. [Pages 142 - 143--The official Committee record contains additional material here.] 1998 budget Mr. Walsh. The Crop Insurance Reform and Reorganization Act of 1994 created the new Farm Service Agency (FSA). The intent of Congress was a one stop service center for farmers, with Federal farm programs administered by the FSA elected county committee system. If the 1998 budget is approved, what would be the effect on: A. The present FSA Farmer Elected Committee system? B. FSA County Offices? Response. The 1998 budget does not specifically impact the current FSA Farmers Elected Committee System which was established by the USDA Reorganization Act of 1994. However, because the budget limits the level of funding FSA will have available for salaries and expenses, it is possible that FSA will ultimately need to reduce its number of county offices. If so, the number of county or area committees FSA uses may also decrease. The 1994 Act requires that committees be elected from voters in a county or area. As areas served grow in size, the number of committees needed to represent the producers in the area served should decrease. No plans have yet been approved concerning where the potential office closures, if any, will be located, and consultations with Congress will also need to occur. FSA and other program delivery agencies face a different future today than they did one year age. The 1996 Farm Bill significantly changed FSA workload requirements and further study is needed. Throughout 1997, we plan to examine additional opportunities USDA has available for facilitating greater efficiencies in the field service centers. This will include consideration of the Budget's goal that by the end of 1999, the number of USDA service centers will be about 2,000 rather than the approximately 2,500 envisioned under earlier plans. The total number of FSA offices within the potential 2,000 service centers has not yet been determined. To assure that USDA provides the best service possible to our customers, any decisions to close USDA filed offices or reduce an agency presence in a USDA service center must be done in coordination with all the agencies located at the site or in the area, including the Farm Service Agency, Rural Development and Natural Resources and Conservation Service. Mr. Walsh. If the 1998 budget is approved, what would be the effect on other USDA county offices--NRCS, Cooperative Extension, Rural Development? Response. As stated in the budget, we expect to reduce the number of county based USDA Service Centers about 500 by the end of 1999. Changes in the number of locations where each agency would be present will be reviewed in the context of the review of overall plans for the service centers. The budget projects only very modest reductions in staff levels for NRCS and Rural Development in contrast to FSA. The Cooperative Extension office situation, of course, will depend on extent of State and local support and decisions made at that level. Mr. Walsh. If the above employee reductions are made effective, the USDA would be required to develop regional or area FSA offices. Will other USDA agencies be combining their county offices then an FSA office is combined? Response. We plan to review plans for the county based agencies and the service centers over the coming months. The budget anticipates that the number of service centers will likely be reduced by at least 500 to about 2,000 by the end of 1999. Clearly, the proposed reductions in FSA staff in particular will generate a need to consider reduction in the number of offices we have no intention currently to abandon the service center concept. So, even if a full time FSA presence was not maintained at every service center, the center may remain open with NRCS and RD presence and provisions would be made to serve FSA customers from those centers. However, the likelihood of some reduction eventually in the number of service centers contemplated in the budget implies a potential for reduction in the number of regular local officesites for the agencies which operate from the service centers. Mr. Walsh. The fiscal year 1998 Appendix to the budget states ``the number of field office service centers would be reduced from 2,500 to a maximum of 2,000 by the end of 1999.'' Given this statement, why is the Government determined to close 1,000 field offices by October 1998? Response. The Department has been closing and consolidating offices as part of its streamlining efforts to improve efficiency as well as to enhance services through one-stop service centers. This effort which began before the 1996 Farm Bill, has been targeted toward reducing the number of county based field offices from about 3,700 to about 2,500 service centers. This streamlining plan included closing over 1,000 of the original offices. Since the Farm Bill has altered the anticipated workload for the programs to be administered by the service center agencies somewhat and the budget situation has tightened further, the President's budget has indicated a goal of 2,000 service centers in the future would be appropriate. So, the need for reducing the number of field offices is even stronger today than was when the original streamlining plan was developed. Therefore, we will be re-evaluating our plans in the coming months. No specific plans have been approved concerning the number or agency composition of the proposed 2,000 USDA service centers should it be determined that the reduction to 2,000 service centers is necessary. Any preliminary office closing numbers beyond the original plans to achieve 2,500 service centers reflect internal agency contingency planning and are not approved USDA plans. For example, FSA has been doing some contingency planning regarding the number of field offices with an FSA presence which could be maintained under different funding scenarios and those plans may include the possibility of reducing the number of FSA sites below 2000. However, no plans for such reductions have been approved. Furthermore, any reduction in FSA locations would not necessarily mean a reduction in the number of service centers since some centers could be maintained with NRCS and/or RD staff. We firmly believe that we need to thoroughly review how we do our business and evaluate the number of offices we need to serve our customers in light of the 1996 Farm Bill program changes and the funding we will likely have available for 1998 through 2002. We think we can deliver our USDA services more effectively and efficiently, taking into account future workload requirements and technological advances that would improve our program delivery. office closings Mr. Walsh. In New York State, the proposed plan would close FSA offices in my district. One plan being reviewed is the combination of FSA offices in Seneca and Cayuga Counties into one regional office. If NRCS is not required to move into the new regional office, the farmers will be required to make two stops: One to FSA and the other to NRCS. Where is the service to the farmer? Response. The basic thrust of the Department's plans for the delivery of county based programs is to consolidate services in one- stop service centers to facilitate service convenience for our clientele. So plans for office consolidation will be reviewed in this broader context so that we can minimize any inconvenience for the customer. No decisions have been approved concerning the closing of additional specific FSA offices and those decisions will not be made until this broader review has been made. Mr. Walsh. Where is the savings for the taxpayer? Response. We believe that in the long run, savings should be possible through combining local offices into single service centers and, unless it can be shown otherwise upon further review, that is the approach we are following. If circumstances are such that cost savings and services to our customers can be enhanced through other approaches, we will, of course, consider alternative arrangements. But I believe that the one-stop shopping concept is a good one for both our clients and the taxpayers. Mr. Walsh. Recently, a credit implementation team, headed by the FSA's Program Division Director, identified a need for at least 20 more loan officers and 12 more technical support staff members to work on ag. credit delivery needs. Proposing a reduction in FSA employees who administer commodity and conservation programs, while forecasting a need for people to adequately deliver ag credit programs does not make sense. Why isn't the agency looking at accelerating training for new ag credit positions and realigning the work force to meet those challenges? Shouldn't this situation be addressed before office closures and RIF's? Response. FSA has been and is currently, employing additional loan officers from within the agency and has implemented a national training program to ensure uniformity in the delivery of farm credit services. Each State Executive Director has developed and is currently implementing a plan to fully integrate the ag. credit program into all FSA county offices, using all available Federal and non-Federal employee resources. Because FSA is a new agency, the level of integration varies by State. The individual State plans, however, are designed to ensure that producers are served timely and by adequately trained employees. Office closures and reductions in force of employees will be the result of agency and USDA plans to create more efficiencies in the program delivery system and to acknowledge both the workload changes resulting from the 1996 Farm Bill and the funding constraints we anticipate we will be faced with. county committees Mr. Walsh. If this budget is approved, is it the USDA's plan to submit legislation that would change the role of FSA's farmer elected county committee system and their authority to administer Federal farm programs? Response. The budget for fiscal year 1998 will have no direct or immediate effect on the committee system. The committees would continue to function in 1998 as they have in the past. Of course, potential future reductions in the number of service centers and other potential changes in field office operations have some effect on the number of committees and the details of their operations, but no fundamental changes are anticipated in the budget. However, the Civil Rights Action Team, which I recently appointed, has been reviewing the county committee system in the context of representation of and service to minority producers and their report, which I believe will be announced on February 28, will include some recommendations for legislation to modify some aspects of the committee system. I plan to follow up on those recommendations and will make them available to this committee when they are released. The report by the Civil Rights Action Team recommended that legislation be proposed to remove the county committees from making farm loan determinations; to convert county non-Federal employees, including county executive directors to Federal status; and to provide for the appointment of two voting members to county committees to represent members of groups who are otherwise under-represented on the elected county committee. These proposals, which are now being developed and reviewed in the Department, will address some of the concerns raised by the civil rights report. While the proposal would remove the county committees from their role in hiring and supervising county office staff, it would not alter their traditional authority to administer farm programs other than for farm credit loan programs. farm service agency county employees Mr. Walsh. Is the goal of the proposed legislation to change all remaining FSA non-Federal employees to civil service status? Response. I believe that will be one of the potential recommendations of the Civil Rights Action Team. In any case, the issue is something we will be reviewing in the near future. One of the complications faced in the Department's reorganization and streamlining has been this area of non-Federal versus Federal county office employees. We now have employees working side-by-side in the FSA county offices and in the service centers under the two different systems. A more uniform employee system may have some advantages. Mr. Walsh. If it is, will the conversion take place before or after the proposed fiscal year workforce reduction? Response. The timing of any possible conversion of the non-Federal workforce to Federal status would depend ultimately on when and if legislation would be enacted and the provisions of the legislation, which are not yet known. I would note that, since fiscal year 1998 will begin this October 1 and workforce reductions for 1998 would need to begin early in the fiscal year, there is not much time to effect a conversion before that time. Mr. Walsh. How will the conversion effect the career status of current FSA non-Federal employees? Response. While it is premature to speculate about the specifics of any possible changes, I would not want to endorse any changes which would be inherently adverse to the status of our non-Federal employees. They have an outstanding record of performance and service to our farm program clientele. Although some staff reductions are necessary, we are committed to providing the best employment conditions possible for those who remain to continue the vital functions needed to administer the FSA programs. county committees and loan problems Mr. Walsh. Much has been said recently about the role of FSA's County Committees regarding the delivery of farm programs to minority and low income farmers. Due to the 1994 USDA reorganization legislation, FSA County Committees have determined eligibility for ag loans since January 1, 1996. Does the USDA have the actual number of problem cases that occurred after January 1, 1996? Response. Actually the FSA used Agricultural Credit Teams to perform the functions of the former FmHA and its county committees for a transition period which extended into 1996. It wasn't until late in 1996 that the FSA county committees became actively involved in the farm credit functions. We have continued to receive complaints about problems with loans and other programs since January 1996 and most likely some of them originated with activities before that time and some likely are recent. I do not believe we have data on the number of problem cases attributed specifically to eligibility determinations made by the FSA committees as opposed to decisions made by employees either before or after January 1996. If I find otherwise I will provide the information to you. Clearly the FSA county committees, under the new system, have dealt with farm loan issues for only a very short while, but I believe the Civil Rights Action Team has reviewed the situation and will have some suggestions regarding the county committees' role in loan program issues. And, as I indicated previously the team's recommendations will be made available to this Committee. Likewise, if we do find some data related to the actual numbers of problem cases, I will also make it available. On February 28, 1997, the USDA Office of the Inspector General published its Evaluation Report for the Secretary on Civil Rights Issues--Phase I,Report No. 50801-2-Hq(1). In the report OIG identified an FSA backlog of 241 complaints of which 230 were related to farm loan programs involving minority and socially disadvantaged farmers. In determining the number of outstanding farm program complaints, OIG also reviewed information on the number of closed farm program complaints since 1993. Of the 230 outstanding complaints, 67 were filed after January 1, 1996. The report also listed some 49 complaints for which no date could be determined as to when the cases were filed. Mr. Walsh. In addition, how many of these complaints occurred under the former FmHA Committee system prior to 1996? Response. I believe it is safe to say that the majority of the problem cases regarding farm loans for minority and low income farmers originated in prior years under the former FmHA system or during the transition period. The new FSA committees have only been in operation a short while as we just discussed. Mr. Walsh. If there are isolated incidents of County Committee abuse, why didn't the appropriate State Executive Director address the situation and/or remove the County Committee from office? Response. The State Farm Service Agency Committee is responsible under the regulations to ensure that County Committee actions are taken and are proper. The State Executive Director, acting with the authority of the State Committee, is responsible for investigating allegations concerning incidents of abuse. Documented evidence of abuse has and will continue to lead to disciplinary action against County Committees or any committee member. FSA has and will continue to suspend or remove from office committee members who abuse their authority or fail to carry out their duties and responsibilities. Mr. Walsh. OMB believes that the passage of the FAIR Act has reduced the workload in FSA county offices. In particular, OMB feels the seven-year Market Transition Program has eliminated the annual sign-up farmers once participated in. A county in my district has over 800 Market Transition contracts. As many as 600 contracts do not have continuous lease agreements to operate rented land. This means farmers must come into the office every year to change or update contracts. In addition, many farmers rent new land, purchase or sell land every year. Successors-in-interest contracts must be created or updated in these instances. Why doesn't FSA receive proper workload credit for the maintenance of these contracts? Response. It is true that only a portion of the farms are ``Designated'' for the entire seven-year period. There is, however, an additional percentage of farms which have an annual lease that is re- leased to the same operator. Those farms require only a small amount of updating and do not require nearly the equivalent amount of work as the initial signup. Additionally, the payment process for this program has been greatly simplified by reducing both the number of payment cycles per year and the number of checks issued per producer. The compliance requirements for this program, although not eliminated, provide for reduced acreage reporting. Those acreage reports can be greatly summarized, which requires less time. Reduced acreage reports, in turn, mean reduced spotchecking and field work. FSA county offices complete a workload report at the end of each fiscal year. This report allows county offices to report the actual work completed during the year and to estimate total workload for the upcoming fiscal year, including information on maintaining Market Transition Program contracts. county committees Mr. Dickey. Mr. Secretary, my constituents believe the Farm Service Agency (FSA) farmer-elected country committee system has served them well. The committee is elected by the farmers in the county by a plurality vote. Every farmer in the county can nominate a candidate and each farmer receives a ballot. This system was created because Congress recognized that micro-management from Washington would not serve the specific needs of rural America. Do you think this system should be replaced by one that is less democratically accountable and has less local control? Response. I agree that the farmer-elected county committee system has served the majority of our producers quite well. It has provided some of the practical ``grass-roots'' involvement in program design and implementation which has helped make out programs effective and tailored to the real needs in rural areas. However, there have been some unfortunate instances where the interests of minority or female producers have neither been adequately represented or served by the committees. And while FSA has appointed minority advisors to address this problem, we have concluded that this system is not effective. The Civil Rights Action Team, which I appointed, will make some specific recommendations to address this issue which will be announced on February 28. I anticipate following up the team's report with a legislative proposal to enhance minority representation on the committees while not substantially altering the basic nature of the committee system. The report by the Civil Rights Action Team, Civil Rights at the United States Department of Agriculture, February 1997, included a recommendation that legislation be proposed to amend the 1935 Soil Conservation and Domestic Allotment Act to add two voting members of groups who are otherwise under-represented on the elected county committee. Selection of the two members should be based upon recommendations from under-represented groups in the county to the State executive director and the State committee. The report also recommended that the committees not be involved in farm credit program loan determinations and that county non-Federal staff be converted to Federal station. This would remove the committee's from the process of hiring and supervising personnel, but would not alter their traditional programmatic roles with regard to farm income and price support activities and certain conservation program activities. Mr. Dickey. According to the non-Federal county employees in my district, under the preliminary budget allocation for FSA offices from FY 1997 to FY 2002, the Federal staff would stay rather steady at about 95.6 percent of its current level. But, non-Federal county staff would be slashed to 41.6 percent of its current level. These cuts will result in more FSA management and support level employees than county office employees. While the county offices will clearly have reduced workloads under the 1996 Farm Bill, shouldn't more of the budget burden be borne by Federal support staff so that service at the field office level doesn't suffer? Response. The FSA has been making staffing reductions over the past several years. From FY 1993 to the current FY 1997, the Agency has reduced total staffing 21 percent. These reductions reflect an overall 19 percent reduction in Federal staff years, including 27 percent at Headquarters, and a 22 percent reduction in non-Federal staff years. As you stated, FY 1998 and the years through FY 2002 reflect major proposed decreases in FSA non-Federal staff years. The FY 1998 budget proposes a reduction of 2,119 staff years for FY 1998, of which 269 are Federal staff years and 1,850 are non-Federal staff years. It should be noted that although non-Federal staffing is being reduced by the programmatic impacts of the 1996 Act, the projected FY 1998 Federalworkforce of 5,877 includes approximately 2,265 employees at the county level performing Agricultural Credit program workload for direct and guaranteed loans. Furthermore, there are an additional 1,463 Federal FTE's at the State office level, including personnel that support farm credit activities as well as CCC activities, that perform program oversight, supervisory, and other support functions. There is some concern as to the magnitude of these reduced FSA county staffing levels by 2002 relative to projected Agency workload beyond 1998 because we want to assure service delivery to producers. We intend to do an independent study this year to see if there are additional opportunities to achieve efficiencies to balance acceptable service delivery with reduced staffing. farm program workload and staff reductions Mr. Dickey. A General Accounting Office (GAO) audit dated May 22, 1996, found that FSA would need 1,495 fewer county employees to administer the Freedom to Farm Act through 2002. Why are the county office staff being considered for cuts so far below the recommendation from GAO? Response. I believe the GAO analysis was based on an earlier version of the farm bill, so it is not a fully up-to-date assessment. However, we agree with the basic thrust of the GAO report that the 1996 Act will reduce FSA workload. For example, the pre-Farm Bill FY 1997 President's Budget Estimates prepared in January 1996 included county workload staffing needs of 13,224 FTE's for FY 1996. Following passage of the 1996 act in April 1996, FSA performed an internal workload analysis that showed lower staffing needs for 1996, down to an estimated 12,835 county office FTE's. The actual FTE's worked for 1996 were 12,738. FSA's analysis also showed declining workload for FY 1997 and for FY 1998. None-the-less it is fair to say that our budget proposes substantial staff reductions in 1998 and beyond which not only reflect the workload reductions made possible by the Farm bill, but also that the reductions reflect the Administration's intent to make maximum efforts to further increase efficiency and reduce costs. Therefore, as mentioned in the budget, we will be initiating an independent study this year of how such efficiencies might be accomplished. Mr. Dickey. The way the cuts are distributed between and within the States will not doubt be a great controversy, and apparently there will be hearings on this issue at the authorizing committee. In deciding how to distribute the cuts, it seems workload levels should be the determining factor. Workload can be accurately estimated on a county by county basis. Shouldn't this data be used in deciding which office to close rather than some arbitrary criterion such as a minimum 25 mile limit between offices? Response. Workload levels reflect the staffing resource needs at a given location and not necessarily whether a physical presence is needed. A large workload office is generally more efficient than a small workload office because of the numbers of employees available to perform specialized services and the general efficiencies associated with volume transactions. A criterion such as a minimum 25 mile limit between offices reflects an assumption associated with all producers having reasonable access to service. In the 1930's when most USDA offices were established, local transportation was limited. Today, with the significant improvements in transportation and the technological capabilities available, the distance a producer would travel to receive services can be increased without any significant hardship. Workload is certainly an important factor in determining staff levels for field offices and will be considered in the Department's analysis of ways it will operate within budget realities and how it will apply staff reductions. However, other factors must also be considered to assure that USDA provides customers the best service possible. Any decisions to close USDA field offices, or reduce an agency presence within a USDA service center must be done in coordination with all agencies involved, including the Farm Service Agency, Rural Development and Natural Resources and Conservation Service. Mr. Dickey. In your prepared testimony, you indicated that the $100 million supplemental request for WIC programs is to ``prevent a large drop in participation.'' Could you explain further what you mean by that? Response. When we prepared the 1998 budget, September participation, the last month of fiscal year 1996, was 7.4 million. Given the cost of the food packages and the expectation that WIC carry out will be drawn down some, we saw the potential for participation to drop as low as 7.0 million by the end of 1997. Simply put, the Administration believes that unless $100 in supplemental funding is provided to WIC in FY 1997, States may not be able to sustain their current caseload levels in fiscal year 1997. Mr. Dickey. Beyond preventing a drop in participation, what is the rationale for the supplemental request and what would be the consequences if the supplemental funds were unavailable? Response. Our rationale for requesting the supplemental really is simple. We are committed to full funding WIC, serving about 7.5 million eligibles by the end of fiscal year 1998. This goal would be compromised by participation fall off forced by lack of funds. Food and Consumer Service historical data suggests that States usually underspend their grants, due to correctly cautious management and to the uncertainties of rebate cash flows, fluctuating demand for service and unanticipated food cost changes. This has resulted in carry over funds from one year to the next, While States will work harder than ever to fully use their grants this year, and should reduce carry over, program history suggests that carry over will be about 2.5 percent. If there is no supplemental, States may not be able to sustain their current caseload levels in fiscal year 1997. animal and plant health inspection service Mr. Kingston. Mr. Secretary, recognizing that Karnal Bunt has yet to be discovered in the southeast, does the most recent rule for regulating Karnal Bunt, the October 4, 1996, rule, allow for quarantines or surveillance areas to be put in place based on the finds of ``suspect'' spores? Response. No, it does not, We will not take regulatory action until proof exists that Karnal Bunt is present. We are examining wheat lots for bunted kernels and conducting pathogenicity tests with spores recovered from the southeast to determine the presence of the disease. At this time, no evidence of Karnal Bunt has been observed in the southeast other than the teliospores. If there is a need to regulate, we are considering classifying areas that may be regulated in the southeast as surveillance areas. As a result, the only significant requirement for wheat farmers would be a single test of wheat shipments leaving the regulated area. Wheat testing negative could move interstate and internationally without restrictions. Mr. Kingston. Looking at your budget request, I see that APHIS has requested a $4.5 million increase for the pest detection programs. In your justification for this increase, it is stated that the dollars would be used ``to ensure that the U.S. wheat crop remains free of Karnal Bunt'' and that ``the increase would enable the Agency to provide assurance to all trade partners that Karnal Bunt is not present in major wheat producing areas of the United States.'' Given the fact that spores have been found from coast to coast, are you saying that ``eradications'' of Karnal Bunt is your agency's goal, and if so, how do you plan to fund such an eradication strategy? Response. As a regulatory agency, APHIS considers eradication a reasonable first objective in dealing with a new quarantine pest. When Karnal Bunt was first detected in March 1996, this position was strongly supported by various industry groups, State departments of agriculture, and officials involved in international trade. Currently, our program is guided by four main goals: (1) to protect U.S. export markets; (2) to protect U.S. wheat producers in Karnal Bunt free areas; (3) to provide the best possible options for producers in regulated areas; and, (4) to maintain the best possible information on where Karnal Bunt is located. Our budget includes funding for these activities. Mr. Kingston. Can USDA/APHIS' pathogenicity tests distinguish between Karnal Bunt spores and the rye grass spores found in Oregon? Response. The pathogenicity tests underway are designed to determine if the rye grass pathogen infects wheat. We are developing other tests to distinguish the two pathogens based on physical and chemical properties. Mr. Kingston. If you find a bunted kernel in a field that is double-cropped, are you going to place any restrictions on planting, movement and/or cleaning of equipment for the rotated root crops, such as peanuts or onions? Response. If we find a bunted kernel in a field that is double- cropped, we would place restrictions only on soil movement. The term ``soil'' generally refers to large clumps or clods; dust or road film is not considered to be soil. Field-packed fruits and vegetables and fruits and vegetables that meet normal industry standards for cleanliness are not considered to be contaminated with soil. pilot program for peaches Mr. Kingston. The USDA intends to initiate a pilot program for peaches in South Carolina and Georgia by 1999 under which crop insurance would be based on the costs of production. Please address the possibility of expediting the process, to make it available for the 1998 crop. Response. USDA has committed to working with peach growers to determine if a revenue-based insurance plan that covers part of a grower's costs of production is feasible. Risk Management Agency (RMA) has been meeting with Southeast peach growers to determine what kind of crop insurance model would best be suited to the needs of Georgia and South Carolina growers. Growers from the two States have not yet reached a consensus on the model that they feel would be most appropriate for them, but meetings are ongoing and a decision should be reached this spring. If it is determined to be feasible, it is unlikely that the cost and revenue information necessary for the development of an actuarially sound program can be collected and submitted by growers in time for a 1998 crop year program that would need to be sold in the fall of 1997. food safety and inspection service Mr. Latham. Last year the red meat industry petitioned USDA on the inequities between red meat and poultry inspection programs. These inequities estimated $3 billion competitive advantage to poultry over the pork and beef industries. What beyond the February 4 final rule on fecal contamination has the Department made to eliminate these inspection inequalities? Response. We are considering a number of regulatory reform measures to ensure that any inequities that may exist between meat and poultry inspection are corrected. Any action we take will be subject to public comment and rulemaking. Mr. Latham. Where is the Department concerning the other five outstanding petition issues? a. Elimination of the allowance for added water; b. Requirement of identical standards of identity for poultry and red meat; c. Requirement of the same sanitation requirements for inspection; d. Elimination of the disparity with respect to added water in processed meat and poultry products; e. Requirement of disclosure in the ingredient statement of the presence of detached skin. Response. We are currently evaluating these petitions and will be responding to them in the near future. Mr. Latham. What impact would new meat and poultry inspection user fees have on HACCP and consumer confidence? Response. The Administration believes that expanding the authority for the collection of user fees is essential to the successful long- term implementation of meat, poultry, and egg products inspection reforms, including HACCP. The collection of user fees will permit the agency to achieve dual goals of ensuring that the demand for on-site inspection services are met and the implementation of reforms to improve food safety are completed. Ensuring adequate inspection coverage and improving inspection processes will give consumers greater confidence in the safety of the American food supply. Some have indicated that the collection of user fees will compromise our ability to fulfill our obligation to ensure the safety of the food supply. This is not so. We currently collect fees for overtime and holiday inspection services, which does not affect the manner in which we carry out our inspection responsibility. Mr. Latham. It is my understanding that the Department is looking to reduce the number of USDA Service Centers by 500 over five years. What are the time frame, criteria, and rationale for this reduction? Response. The original plan was to establish about 2,500 USDA Service Centers. However, the 1996 Federal Agriculture Improvement and Reform Act (FAIR Act) provisions and budget considerations have caused us to reevaluate the plan. I have asked each of the involved USDA agencies, as well as our Service Center Implementation Team, to provide some recommendations as to how we can organize within the FY 1998 budget levels. While we have made a general commitment to reduce the number of our service centers, we have made no decisions about individual offices. The Service Center Implementation Subcommittee of the National Food and Agriculture Council, comprised of the agency leaders of the service center partner agencies has been asked to develop the time frame and criteria for this reduction. Mr. Latham. There are also rumors that the selection process for office consolidation and closing may have a political component to it. Would you reassure the Committee that will not be the case. Response. The current streamlining plan was based on an index of workload and operating efficiency. The analysis included six basic criteria: Program Delivery Cost; Service Group (Customer Base); Complexity; Geographic Service Area; Collocation Status; and Workload Intensity and Productivity of the Office. Based on this analysis, the Secretary of Agriculture determined the number of Service Centers that would be allocated to each State. The State Food and Agriculture Council, comprised of the state level service center agency heads, was asked to review the analysis and determine which offices would be closed. Let me assure you that there has not been, and that there will not be a political component to determining office moves and closures. Our main goal in this process has been to improve customer service and, at the same time, reduce costs to the taxpayer. Criteria for future reductions will be designed with those goals in mind. food quality protection act implementation Mr. Latham. What are your policy objectives in implementing the Food Quality Protection Act for FY 1998? Response. The Food Quality Protection Act provides that the Secretary of Agriculture become broadly engaged in the implementation of the Act and the Department is committed to fulfill this mandate. The USDA FY 1998 budget request is designed to implement those obligations by establishing programs to provide critical data needed to perform exposure assessment to pesticides and the development of new methods to control pests on major and minor crops. Mr. Latham. Does your FY 1998 budget request reflect all the resources you need to achieve those objectives? Response. The specific programs that address these requirements are included in the FY 1998 budget requests of the USDA agencies. If the increases requested for FY 1998 are allowed, it will be possible to fulfill the mandates of the Food Quality Protection Act. The program increases for food exposure assessment are as follows: Pesticide Data Program, AMS $9.815 million. This request will return program funding to AMS to carry out residue testing on various agricultural commodities in trade to better estimate actual occurrence of pesticides in the food as consumed. This data is a valuable tool in facilitating U.S. agricultural exports and reassures our customers of the high quality of our products. The PDP is also the source of information about national estimates of pesticide residue levels in food so that Government agencies can conduct realistic dietary risk assessments to the requirements of the FQPA. Food Consumption Survey of Infants and Children, ARS $6 million. Currently available food consumption surveys do not provide sufficient sample sizes to adequately estimate pesticide intake by children in various age groups. The requested survey will complement the consumption data collected in our 1994-1996 study by adding additional children to make the intake estimates statistically valid. We will provide a table which will reflect the program increases to develop new technologies for pest control, including Integrated Pest Management and related programs. [Pages 153 - 154--The official Committee record contains additional material here.] impact of reduction in delivery expenses Mr. Latham. What is the Department's estimate of the impact of the proposed cuts in administrative operating expenses for the delivery of the crop insurance program in the following areas: services to farmers, rural employment, competition, risk management education, and program integrity? Response. The General Accounting Office (GAO) recently concluded an audit of expenses associated with the delivery of the crop insurance program. The audit was performed at the request of the Congress in the Federal Crop Insurance Reform and Departmental Reorganization Act of 1994 (the 1994 Act). The GAO audited expenses for the 1994 and 1995 years. The GAO found that current reimbursement rates exceeded delivery expenses. This suggests that there are opportunities to achieve savings in the reimbursements paid to companies without having an adverse effect on program delivery. Further, we expect that competition among the companies will help reduce costs. The risk management education effort is funded directly out of the mandatory spending Federal Crop Insurance Corporation (FCIC) Fund. The reduction in reimbursements paid to the companies should not effect this effort. There is no indication that farmers, rural development or program integrity will be affected by proposed cuts. pilot program for peaches Mr. Latham. Does the Department or the Risk Management Agency have plans to reduce the regulatory and administrative costs of the program in a commensurate amount, as required by law, to the cut being proposed in the budget--a full 21 percent below the 1996 level? Response. Since enactment of the law referred to, Risk Management Agency (RMA) has worked continuously to identify, evaluate and implement ideas that would simplify the administration of the Federal Crop Insurance program. We have sought suggestions from farmers, reinsured companies, FSA's local offices, and the general public. We have evaluated these ideas against the other requirements of the FCIC Act that require that the program be managed in an actuarially sound manner. We have worked with all the reinsured companies and with their industry associations to evaluate the ideas presented. Of over 100 ideas presented, we and the industry have agreed on the merit of implementing 38. Of these, 27 have been successfully implemented and 11 are still in progress. While it is still too early to be able to report definitively on the value of the savings generated from the ideas, we anticipate that both RMA and the companies will benefit. Further, we would note that there is evidence to suggest that the companies have been overcompensated for delivery in the program, which is the reason we are proposing that the reimbursement rate for delivery expenses be reduced. information technology Mr. Latham. Do you feel that your Chief Information Officer has the authority she needs to ensure that the various agencies within USDA properly analyze their missions and program delivery systems before spending any more money on hardware? Response. It is a responsibility that I expect the Chief Information Officer--CIO--to execute vigilantly. We believe that the overall decision making structure that we have put into place--the new CIO, the new IRM Board and Investment Review Board, and the capital planning process that we are developing will ensure that this is done. During the interim, the moratorium and waiver approval process provides for this check. The CIO is and will be a key individual in both these processes. The CIO is responsible for determining whether the agencies have done the proper analysis prior to allowing an agency to proceed with an acquisition. The responsibility remains with the agencies to conduct this analysis. The CIO position is relatively new. As part of our continuing modernization effort, we will be looking at all of the authorities and responsibilities and making adjustments as necessary to ensure success. Mr. Latham. Who is the one person who is responsible for making sure that USDA agencies engage in the business re-engineering that GAO, OIG and OMB all agree is badly needed? Response. Ultimately, that one person is the Secretary. In turn, I hold my subcabinet and Agency heads accountable for continually improving their program delivery and business processes in conjunction with the promise to deliver the best service at the lowest cost. Specifically, the CIO has the responsibility to review the program area regarding business process re-engineering--BPR--prior to approval of information technology acquisitions. This will ensure that funds being expended and systems being acquired are for updated processes and not for those which have yet to be re-engineered. This helps ensure the best value for our dollar. However, the business process re-engineering activity itself is the responsibility of the program organizations. Additionally, the Modernization of Administrative Processes office has an overall responsibility to identify the business reengineering process for USDA and to carry out BPR for administrative systems. Mr. Latham. Are you aware of the activity-based costing study completed by the Forest Service's Rocky Mountain Station? Response. The Rocky Mountain Station has been in a unique situation for the last 13 years as one of the first organizations within the Forest Service to provide administrative services to a variety of Forest Service and external federal agency customers in Fort Collins. Historically, charges for services provided were based on yearly negotiations between Station and customer managers. This type of charging methodology, while useful in the past, has proven to be inadequate due to workload increases at the same time that budget and staff were being reduced. The need to insure that all costs for services rendered are recovered from each customer is crucial to the Rocky Mountain Station. Given this situation, the Rocky Mountain Station management embarked on a study to determine the cost of services in certain administrative areas and to identify inefficient business processes using Activity Based Costing (ABC) as a tool. As a result of the ABC study, the fiscal year 1997 Pricing Plan for administrative services provided by the Rocky Mountain Station was developed. Pricing of services is based on the cost of providing the service by the Station administrative staff. The Pricing Plan provides a description of each service that is available from the Rocky Mountain Station administrative units and unit price for each service. Also included in the Pricing Plan are service quality standards that describe the level of timeliness and quality the customer can expect from each service. One objective of pricing services in this way is to operate the Station administrative support units more like a business. One in which services provided are paid for by the customer on a unit price basis. The unit price is based on units that are measurable and trackable. Mr. Latham. Why has this shining example not been extended throughout the Forest Service and the rest of USDA? Response. We will certainly review the success of this initiative and try to use some of the information learned as we review other opportunities to streamline administrative processes throughout the Forest Service and the Department. Mr. Latham. What is the cost to FSA to cut an AMTA check or to process a farm loan application for a farmer? Response. Although FSA does not have an accounting system that allows us to accurately calculate a cost for the processing of a specific activity such as writing an AMTA check or processing a farm loan application for a farmer, we continually strive to design or revise our administrative systems, including ADP operations associated with processing producer payments, to be as efficient as possible. FSA is currently working with a contractor to examine the feasibility of a centralized process for checkwriting which could make that process, for certain types of payments, more cost-effective. The cost of writing an AMTA check, were it calculable, would depend on whether it was issued in the initial signup or in a subsequent year. For example, some of the functions associated with providing an AMTA check to a producer in the initial year of the contract included establishing basic eligibility through review and approval of payment limitation information, lease agreements, and compliance with the Sodbuster/Swampbuster provisions. Contract shares had to be calculated and signatures obtained for all producers with an interest in the contract. In contrast, producers in subsequent years with minimal or no change to the contract would require only a cursory review of the information prior to issuing the check. On the other hand, revised AMTA contracts would require virtually the same process as the initial year of the contract before a check could be issued. As can readily be seen, there could be a wide range of costs and functions associated with issuing an AMTA administrative process. Likewise, the functions involved in processing a farm loan application are also variable, and include interviewing potential borrowers; performing credit reviews through references and reports; preparing the Farm and Home Plan; and determining eligibility. The amount of time involved, from initial contact to the closing of a loan, varies greatly from one individual to another since each application is based on the individual involved, and also varies greatly with the type of farm loan being applied for. Mr. Latham. What is the per care cost of NRCS to perform a wetland delineation? Response. An average per acre cost of a delineation to NRCS would be very difficult to estimate and may not be very meaningful or representative. Requests for delineations from farmers range from staking a small wetland in the field, requiring a few hours, to several days in the field on very large tracts where clients desire resource data on their wetlands. The fixed costs associated with servicing delineation requests, regardless of size or complexity, include: collecting and evaluating soils, hydrology and vegetative data, evaluating previous or planned manipulations of hydrology, viewing and interpreting aerial photos, other remotely sensed data and visiting the site to confirm and/or stake-out the delineation. food stamps Ms. DeLauro. Saturday's Washington Post detailed the effect of the welfare law on food stamp recipients. Many who have been on food stamps for three months and who have not found jobs are losing their benefits. I appreciate the revisions to the welfare law proposed in the agriculture budget because I am concerned that in many communities there may not be enough jobs for those who may lose their benefits. Could you comment on how the administration's proposal would address the lack of sufficient job opportunities for food stamp recipients? Response. The Administration proposes refinements to certain Welfare Reform changes made last year, since our growing economy may not be enough to create jobs for able-bodied program recipients, and Welfare Reform only gives them 3 months of benefits while they look. We would increase the funding available for job training slots and would also allow the unemployed more time to find jobs before losing food stamp benefits. The Administration proposal would limit participation of unemployed able-bodied adults 18 to 50 years of age, who have no dependents, to 6 months within a 12 month period. Currently they are limited to 3 months within a 36 month period. We also propose to increase the amount of food stamp Employment and Training funding, which is directed at 18 to 50 year old able-bodied adults without dependents. Further, we would require States to direct increasing portions of funds toward the 18 to 50 group. We will impose tough sanctions on those people who refuse to work, while protecting those who are willing to work, but have been unable to find jobs. These changes will add about $200 million to program costs in 1998 and $2.4 billion through fiscal year 2002 by keeping about 600,000 of the affected recipients on the rolls in 1998, declining to an estimated 180,000 in 00. Under the current law, we are reviewing State requests for work requirement waivers under the new provisions. Waivers can be granted for areas with an unemployment rate at or above 10 percent, or with insufficient jobs, to date, 41 States have applied for waivers for about 800 of their total 2,600 counties. We have approved waivers for 28 States and 500 counties, and the remainder are pending. child nutrition Ms. DeLauro. I have worked hard to protect child nutrition programs and especially the School Lunch program. Could you tell me how your Team Nutrition proposal will improve the quality of the meals children eat? Response. The School Meal Initiative is the most sweeping nutrition education, training and technical assistance effort in the history of the Child Nutrition Programs. Team Nutrition and the Nutrition Education and Training (NET) programs work together in a two-pronged approach to improving children's health--one on the supply side, and the other on the demand side. Team Nutrition and NET help States with extensive training and technical assistance for the food service professionals responsible for operating the school lunch program to help them improve the nutritional quality of meals they supply to the Nation's school children. Team Nutrition and NET also help with nutrition education to children-- encouraging the children to eat the meals that are provided--and, not incidentally, to make wise nutritional decisions in and out of school. Nutrition education is designed to be fun and to deliver consistent messages to children where they live, learn and play. The children are the demand side. Each side must work together to improve the quality of meals--and we believe that they are. food safety Ms. DeLauro. Secretary Glickman, in your testimony, you mention food related illnesses due to the pathogen Campylobacter. In recent years, we have heard about and many people, including unfortunate victims in my district, have experienced illnesses due to the E. coli bacteria. could you tell me more about Campylobacter and explain how the new food safety initiatives will address these threats to the safety of our food supply? Response. Campylobacter is the most frequently identified cause of acute infectious diarrhea in developed countries and is the most commonly isolated bacterial intestinal pathogen in the United States. It has been estimated that between 170,000 and 2.1 million cases of campylobacteriosis occur each year with an associated 120 to 360 deaths. Several prospective studies have implicated raw or undercooked chicken as major sources of Campylobacter infections. Unpasteurized milk and untreated water have also caused outbreaks of the disease. We reached a milestone last July with the publication of the final rule for Pathogen Reduction and Critical Control Point (HACCP) systems. This rule is expected to contribute significantly to reducing foodborne illness in the United States by targeting and systematically reducing harmful bacteria on raw products, as well as other likely hazards. To build on this success, the President's food safety initiative, requests funds for FDA, CDC, and USDA's food safety monitoring research, education, and inspection activities. Specifically, USDA's budget includes additional funds for pre-and post-harvest food safety research undertaken in Federal laboratories, cooperative research and extension programs with land-grant universities, and improved traceback of foodborne illness associated with Campylobacter with the Centers for Disease Control and Prevention. These research and education programs will address issues related to pathogen detection and safe food handling practices. Information gained from these efforts will be made available to industry and consumers through technology transfer and education programs. hazard analysis and critical control points system Ms. DeLauro. Secretary Glickman, also with regard to food safety, could you describe how the Hazard analysis and Critical Control Points (HACCP) systems represent an improvement on earlier food inspection regimes? Response. The current inspection system does not directly target and systematically reduce harmful bacteria on raw product, nor does the current system equip our inspectors with the scientific and regulatory tools they need to ensure slaughter establishments are meeting an acceptable standard for food safety performance with respect to such bacteria. Our HACCP rulemaking provides the framework for significantly improving food safety by incorporating science-based preventive controls into industry production processes and achieving an acceptable level of food safety performance with respect to harmful bacteria. It will equip inspection personnel with the scientific and regulatory tools they need to ensure that slaughter establishments meet specific standards and will reinforce all establishment's responsibilities for producing safe product. [Pages 159 - 183--The official Committee record contains additional material here.] implementation of the government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issues.) What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The Office of the Chief Economist (OCE) has submitted its strategic plan to the Office of the Chief Financial Officer. The strategic plan identifies OCE's mission and articulates results- oriented goals that are in accordance with GPRA and the guidelines set by the Office of Management and Budget (OMB). Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts. If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. OCE has no program implementation responsibilities. Goals outlined by OCE support critical Department's missions for crop and weather information reporting and analysis and regulatory review. OCE has subjected its proposed goals to a rigorous review and evaluation process and its strategic goals are compatible. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? Response. Consistent with the Administration's effort to produce a balanced budget, OCE's five-year strategic plan realistically assume a modest reduction in available resources. OCE will make every effort to achieve its strategic plan while streamlining its operations and increasing the productivity of its staff. Completion of the plan willrequire redirecting OCE resources and may require additional budget authority with the realization that OCE initiatives will be reviewed in the context of USDA-wide priorities. Mr. Skeen. How are you ensuring that your goals are realistic in light of expected resources? Response. OCE goals are realistic and essential for it to achieve its mission and carry out the responsibilities delegated to it by the Secretary of Agriculture. Where stated goals include objectives that would require increased levels of resources, these additional resources are clearly identified. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. The OCE strategic plan submitted to the Office of the Chief Financial Officer identifies the linkages between general goals and performance goals. In the appendix section of the strategic plan, OCE references each performance goal to a specific general strategic goal. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's Budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goal? Response. OCE's strategic and performance goals are compatible with the program activity structure contained in the President's Budget. Because the strategic plan covers a five-year period, OCE recognizes the possibility that changes or modifications in its activities may occur, especially, if funding levels are insufficient or support from other agencies is inadequate. It is for this reason that OCE has developed certain objectives whose realization are clearly contingent on the availability of resources. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being made? Response. OCE's performance measures are results-oriented, based upon the feedback from reviewers of the plan. A major challenge will be to accurately interpret indicators of service quality, effectiveness, and amount or proportion of need that is being met because of the broad range of OCE clients and customers, which range from the Secretary to individual subscribers of OCE information publications. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. OCE was not a participant in the Results Act pilot phase. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider your agency's primary stakeholders and how will you incorporate their views into the strategic plan? Response. OCE faces a broad demand for its analytical and information products and services. Stakeholders include the Secretary, other Cabinet officials, the White House, Congress, other USDA organizations and Federal agencies, farmers, ranchers, agribusiness, commodity traders, exporters, food processors, farm input suppliers, and others. There are a variety of channels through which stakeholders' views have been and will continue to be incorporated into the strategic plan. One channel is the feedback that stakeholders, such as the Secretary and others provide when briefings and analytical products are presented. Another is the annual Data User Conference in which OCE participants. At these conferences, stakeholders, who use OCE publications, provide feedback concerning service quality, effectiveness, and amount or proportion of need that is being met. Feedback on information needs is also solicited at the Department's annual Outlook Forum that is organized by OCE. Also, feedback is provided to OCE by agencies developing regulations under the new USDA statutes and through agencies' participation in OCE training and advisory activities. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other Federal agencies are you working with to ensure that your strategic plans are coordinated? Response. The accomplishment of OCE strategic and performance goals depends on the involvement and cooperation of a number of other agencies. This assumed interdependence among OCE and other agencies is critical for OCE to successfullycarry out its mission. Within USDA, OCE works primarily with the Economic Research Service, National Agricultural Statistics Service, Farm Service Agency, Agricultural Marketing Service, Risk Management Agency, Foreign Agricultural Service, Grain Inspection, Packers and Stockyards Administration, Natural Resources Conservation Service, Forest Service, Agricultural Research Service, Animal and Plant Health Inspection Service, and Food Safety and Inspection Service. Outside the Department, OCE regularly works with the National Weather Service, National Aeronautics and Space Administration, National Oceanic and Atmospheric Administration, Food and Drug Administration, the Department of State, the Department of Labor, the Office of Management and Budget, and the President's Council of Economic Advisors. Mr. Skeen. What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other Federal efforts? Response. OCE's mission and responsibilities are unique within and outside the Department. In those limited cases of possible duplication of effort, such as surveying stakeholders, OCE has advised agencies, such as the National Agricultural Statistics Service and Economic Research Service, that it would like to work with them in obtaining feedback from their stakeholders, who, in many cases, are also OCE stakeholders. Also, OCE conducts training and resource development programs for other agencies to support regulatory development reform objectives. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Response. All USDA mission areas/agencies have prepared draft strategic plans which are currently being reviewed by the Under/ Assistant Secretary, the Senior Policy Staff and the Secretary. Upon completion of the review, the Department plans to provide copies of the strategic plan (including an overall Departmentwide Executive Summary and the strategic plans for individual mission area/agencies) to relevant Congressional Committees. Thereafter, we will look forward to meeting with members or staff to discuss our strategic plan and to solicit your input and advice on refinements to that plan. We plan to provide copies of the Department Strategic Plan to the following committees: House Agriculture Committee House Appropriations Committee House Economic and Educational Opportunities Committee House Government Reform and Oversight Committee House Resources Committee Senate Agriculture, Nutrition, and Forestry Committee Senate Appropriations Committee Senate Energy and Natural Resources Committee Senate Governmental Affairs Committee Mr. Skeen. Which Committees will you consult with? How will you resolve differing views? Response. In addition to the House and Senate Appropriations Committees, the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry are the most likely committees with which OCE will consult. OCE would work with Senior Policy Staff of the Department and Congressional staff to arrive at a satisfactory resolution of any differing views. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of Federal management and decision making to be more results-oriented. Organizations that have successfully become results oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results- oriented? Response. OCE management and staff have held extensive discussions about the results-oriented focus of GPRA. Also, OCE has drawn on the results of internal surveys and on recommendations given at outside GPRA meetings to develop a set of measures to best implement results- oriented goals. Although OCE has not needed to initiate changes in program policy, it has made changes in its organizational structure in terms of assignments of personnel to monitor the progress toward completing performance indicators and objectives. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. Managers will be responsible for accomplishing general goals through the fulfillment of performance goals and related objectives, the indicators of which are measured by the results achieved. Output is no longer considered a stand-alone indicator of the successful fulfillment of individual responsibilities. Mr. Skeen. How is the agency using Results Act performance goals and information to derive daily operations? Response. Each member of OCE has been provided with a copy of strategic and performance plan goals and objectives. When annual reviews are made of how successfully the organization progressed toward achievement of goals, OCE individuals will be evaluated on how well they helped achieve these goals. Office of Budget and Program Analysis breakout of resources for obpa's responsibility Mr. Skeen. Please update the table that appears on page 671 of last year's hearing record showing a breakout of resources for the areas of OBPA responsibility to include fiscal year 1997 actuals and fiscal year 1998 estimates. [The information follows:] U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF BUDGET AND PROGRAM ANALYSIS [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Key Areas SY FY 1996 SY FY 1997 SY FY 1998 ---------------------------------------------------------------------------------------------------------------- Program review/policy analysis.... 28 2,231 28 $2,335 27 $2,297 Budget preparation, presentation and execution.................... 25 1,996 25 2,077 24 2,024 Legislative reporting and regulatory analysis.............. 9 717 9 748 9 757 Administrative management and automated systems................ 10 791 10 826 10 840 Total......................... 72 5,735 72 5,986 70 5,918 ---------------------------------------------------------------------------------------------------------------- organization Mr. Skeen. Provide a tree chart that shows the organization of the office. [The information follows:] [Page 188--The official Committee record contains additional material here.] personnel compensation and benefits Mr. Skeen. Your budget request includes a reduction of $152,000 and two staff years in fiscal year 1998, yet the total for personnel compensation and benefits only decreases by $7,000. What is the reason for this? Response. The budget request includes a reduction of $152,000 and two staff years for personnel compensation and benefits in fiscal year 1998. However, this amount is offset by a requested increase of $84,000 to cover part of the anticipated fiscal year 1998 pay raise, and $61,000 which was reprogrammed to help absorb the remaining pay raise. The net result is a decrease of $7,000 in personnel compensation and benefits. object class 25.2, other services Mr. Skeen. Provide a sub-object class breakout for object class 25.2, other services, for fiscal year 1996, 1997 and 1998. [The information follows:] U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF BUDGET AND PROGRAM ANALYSIS [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Service 1996 actual 1997 estimate 1998 estimate ---------------------------------------------------------------------------------------------------------------- Contractual Services and Agreements.................... $24 $31 $23 Equipment/Software Maintenance......................... 24 24 22 Training............................................... 27 25 15 Telephone Equipment.................................... 13 0 0 Office Furniture....................................... 6 0 0 Other Services......................................... 12 5 5 Total.............................................. 106 85 65 ---------------------------------------------------------------------------------------------------------------- object class 25.3, purchases of goods and services from government accounts Mr. Skeen. Why does object class 25.3, purchases for goods and services from government accounts increase from $45,663 in fiscal year 1996 to $81,000 in fiscal year 1997? Response. In fiscal year 1996, there were charges totaling $36,554 that were inadvertently placed in object class 25.2. If these charges had been correctly placed in 25.3, the total coast would be $82,217. The actual cost for fiscal year 1996 is $82,217, which is compatible with fiscal year 1997's estimated cost of $81,000. legislative proposals Mr. Skeen. How many legislative proposals were sent to Congress in fiscal years 1995 and 1996 and to date in fiscal year 1997? How many were enacted into law? Response. USDA has sent a total of 14 legislative proposals since fiscal year 1995. We submitted nine in fiscal year 1995, five in fiscal year 1996 and none for fiscal year 1997. We plan to forward approved fiscal year 1997 budget related proposals in the future. Our records indicate two proposals were enacted into law, PL 104-307, Wildfire Suppression Aircraft Transfer Act of 1996 and PL 104-127, Federal Agriculture Improvement and Reform Act of 1996. code of federal regulations Mr. Skeen. The Department's goal to eliminate or reinvent 11,700 pages in the Code of Federal Regulations is about 60 percent complete. When will you complete this goal? Response. USDA is fully committed to this initiative and we expect it to be completed in late 1999. the 1997 buyouts Mr. Skeen. What is the status of buyouts at the Department for fiscal year 1997? Response. As of January 15, 1997, the Department has used a total of 1,554 buyouts, which is approximately 69 percent of the number of buyouts proposed in the Department's Streamlining Plan. Net savings from these buyouts for fiscal year 1997 are estimated to be over $11 million. Details of the Department's buyouts follow: Farm Service Agency............................................... 939 Rural Development................................................. 430 Natural Resources Conservation Service............................ 106 Food Safety and Inspection Service................................ 53 Departmental Administration....................................... 14 Forest Service.................................................... 7 Economic Research Service......................................... 3 National Appeals Division......................................... 1 Office of Communications.......................................... 1 ----------------------------------------------------------------- ________________________________________________ Total......................................................... 1,554 staff year reductions and the 1996 farm bill Mr. Skeen. Your office provided analysis of the reductions in force needed due to the farm program changes made by the 1996 farm bill. Briefly summarize the results of this analysis and provide the Committee with a more detailed copy for the record. Response. The 1996 Farm Bill made a fundamental shift in farm policy away from the production-oriented programs to support farm income, to one of fixedproduction flexibility contract payments. These production-oriented programs had been the linchpin of agricultural policy in recent years. This change meant fewer Farm Service Agency-- FSA--staff were needed, particularly at the field office level. In the fall of 1996, we developed an analysis of the costs and savings associated with the separation of 1,339 FSA staff years. The number of staff years used was based on a workload review completed by the Farm Service Agency. The analysis presented three scenarios: one assuming that all separations would be achieved through buyouts; a second one assuming that all separations would be achieved through a reduction-in-force-RIF; and a third one assuming a combination of buyouts and RIFs. The results of the analysis indicated that despite the initially high cost of buyouts, over a five-year time frame, the use of buyouts rather than RIFs resulted in total higher savings to the Federal Government. This is largely due to the buyouts attracting employees at higher grade levels so that the salary and benefit savings associated with these employees were greater over time. RIF's are likely to affect lower graded employees as a result of ``bumping and retreating'' rights. Further, no relocation, out placement or training costs were associated with the buyout approach since buyouts could be more closely targeted to specific positions or locations where downsizing would be needed. Copies of the three scenarios are provided for the record. [Pages 191 - 193--The official Committee record contains additional material here.] the usda budget summary Mr. Skeen. What is the cost to print and distribute the USDA budget summary document? How much of these cost are recovered through fees? Response. The cost to print the USDA 1998 Budget Summary was $11,550. No costs are recovered through fees. government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least 5 years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. OBPA has defined its mission and developed a draft strategic plan with goals, objectives and performance measures. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. We have not identified any conflicting goals for any of our program efforts. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. OBPA developed its strategic plan based on the FY 1998 Budget and the outyear funding and staff year levels in the FY 1998 Budget. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's Budget. What progress have you made in establishing clear and direct linkage between the general goals of your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that more agencies had not made sufficient progress in this critical area. Response. Due to the nature of our mission, the general goals in our strategic plan are the same as the goals in our annual performance plan. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's Budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. OBPA has only one program activity in the President's budget so we do not anticipate any need to change or modify our program activity structure. Mr. Skeen. Overall, What progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. We have defined results-oriented performance measures for each of our goals. Many of these measures, however, are qualitative due to the nature of our mission. We plan to do an internal performance assessment which will allow us to make a descriptive statement of sufficient precision to allow for an accurate, independent determination that the performance goal was achieved. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. OBPA was not a participant in the Results Act pilot phase. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plan. Stakeholders can include State and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plan? Response. OBPA's customers include the USDA agencies, USDA policy officials, the Office of the Secretary, OMB, and Congress. These entities will be provided an opportunity to review OBPA's strategic plan and their view will be incorporated, as appropriate. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other Federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other Federal efforts? Response. The mission of OBPA is unique. OBPA provides centralized coordination and direction for the Department's budget, legislative, and regulatory functions, as well as providing analysis and evaluation to support the implementation of critical USDA policies and programs. OBPA does not have any direct program implementation responsibilities, and therefore, does not have any programs that duplicate other Federal efforts. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the require consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committee will you consult with? How will you resolve differing views? Response. All USDA Agencies have prepared draft Strategic Plans which are currently being reviewed by the Senior Policy Staff and the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan (including an overall Departmentwide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies) to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. Copies of the Department's Strategic Plan will be provided to the following Committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of Federal management and decisionmaking to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. OBPA was a results-oriented organization prior to the passage of GPRA. Although OBPA has not made changes in its organizational structure or program content, we have made changes in personnel duties to place more emphasis on achieving results. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. As part of the annual performance appraisal process, results oriented outcomes are included in the performance elements of all OBPA managers. Managers are responsible for achieving these performance elements and annual performance appraisals are based on the level of achievement attained. OBPA expects in the future that managers' performance elements will track and be fully consistent with the elements in the OBPA GPRA annual performance plan. Mr. Skeen. How is the agency using the Results Act performance goals and information to drive daily operations? Response. Actually, OBPA's daily operations are not likely to be changed by the Results Act performance goals and information. OBPA has always strived to fulfill its mission and modified its operations if the goals were not being accomplished. However, the Results Act will bring a greater discipline to the monitoring and evaluation of whether the organization's mission is accomplished efficiently and effectively. ______ Dan Glickman u.s. secretary of agriculture Birthday: November 24, 1944. Birthplace: Wichita, Kansas. Sworn In: March 30, 1995. Dan Glickman was sworn in as the 26th U.S. Secretary of Agriculture on March 30, 1995. Prior to his confirmation, Glickman represented for 18 years Kansas' 4th Congressional District in the U.S. House of Representatives. During his congressional career, Glickman developed a reputation for being an inquisitive and thoughtful legislator. Whether the issue was fighting for improved airline safety or serving as a chief architect of the last four farm bills, Glickman has been a vocal advocate for the people of Kansas and the country. As he begins his service as Secretary of Agriculture, Glickman will bring with him the experience gained by serving nearly two decades on the House Agriculture Committee, including six years as chairman of the Subcommittee on General Farm Commodities and its predecessor, the Subcommittee on Wheat, Soybeans and Feed Grains. He is widely recognized as a leading spokesman for American agriculture. In addition to his work on farm bills in 1977, 1981, 1985 and 1990, Glickman led the way in areas such as expanding trade in agriculture goods, food safety, and reinventing the USDA. Glickman was the original author of House legislation to streamline and reorganize the USDA. In recognition of his hard work and leadership, in January 1993 the Speaker of the House appointed Glickman to serve a two-year term as the Chairman of the House Permanent Select Committee on Intelligence. This appointment made Glickman the first full committee chairman from Kansas in 40 years. As chairman of the intelligence committee, Glickman pursued policies to ``de-mystify'' the intelligence community by holding open hearings, pushing the intelligence community to publicly explain its functions in the post-Cold War era, and reducing the number of classified documents. In addition, Glickman launched a major committee investigation into the Aldrich Ames spy case. Glickman's legal experience and his seat on the Judiciary Committee enabled him to become a leader in the battle to make reasonable reforms in general aviation product liability laws. He also devoted considerable time to finding ways to strengthen lobbying disclosure laws, revamp the administrative law judge corps and develop effective ways to combat crime. He was the author of a 1987 law that created criminal penalties for violence directed at religious property and practice. Prior to being elected to Congress in 1976, Glickman served as president of the Wichita, Kansas School Board; was a partner in the law firm of Sargent, Klenda and Glickman; and served as a trial attorney for the U.S. Securities and Exchange Commission. Glickman received his B.A. in history from the University of Michigan and his law degree from The George Washington University. He married Rhoda Yura of Detroit in 1966. They have two children, Jon, 25 and Amy, 22. ______ Richard E. Rominger deputy secretary of agriculture Richard E. Rominger was nominated for the post of deputy secretary of agriculture by President Clinton, and was sworn in on May 12, 1993. As deputy secretary, Rominger assists the Secretary in supervising the activities of the U.S. Department of Agriculture, one of the largest and most diverse departments in federal government. USDA's mission includes management of traditional farm programs, domestic food assistance, research and education, agricultural marketing, international trade, meat and poultry inspection, forestry and rural development. Rominger is a family farmer who worked with his brother, sons and nephews to raise alfalfa, beans, corn, rice, safflower, sunflowers, tomatoes, wheat and other crops in California. He served in government as director of the California Department of Food and Agriculture from 1977 to 1982. During that period, he served terms as president of the Western Association of State Departments of Agriculture and the Western U.S. Agricultural Trade Association. He also was on the board of directors for the National Association of State Departments of Agriculture. Rominger was on the board of directors of American Farmland Trust from 1986 to 1993. He is active in a number of professional agricultural organizations concerned with soil and water policy, education, research and development and marketing. He was selected Agriculturalist of the Year at the California State Fair in 1992, and throughout his career he has received numerous other awards including the Distinguished Service Award by the California Farm Bureau Federation in 1991. Born in Woodland, Calif., Rominger received a Bachelor of Science Degree in plant science from the University of California at Davis. He is married to the former Evelyne Rowe. They have four children, Rick, Charlie, Ruth and Bruce. ______ Biography of Keith J. Collins Mr. Collins is Chief Economist of the U.S. Department of Agriculture and is responsible for the Office of the Chief Economist, the World Agricultural Outlook Board, and the Office of Risk Assessment and Cost-Benefit Analysis. During 1993 and 1994, Keith was Acting Assistant Secretary for Economics which included responsibility for the Economic Research Service and the national Agricultural Statistics Service. As Chief Economist, Mr. Collins is responsible for the Department's agricultural projections and forecasts and advises the Secretary on economic implications of alternative programs, regulations, and legislative proposals. Mr. Collins, a member of the Senior Executive Service, received the Presidential Rank Awards in 1990 and 1992. Mr. Collins, a native of Connecticut, holds degrees from Villanova University and the University of Connecticut and a Ph.D. in economics and statistics from North Carolina State University. Biography of Stephen Dewhurst Stephen B. Dewhurst is currently Director of the Office of Budget and Program Analysis and Budget Officer for the U.S. Department of Agriculture. Mr. Dewhurst first joined the Department of Agriculture in 1966 as a budget analyst. Since that time, he has served in a number of positions as a program and budget analyst for a variety of USDA programs in the Office of Budget and Program Analysis and its predecessor organizations. Mr. Dewhurst has twice been cited by the Department for superior performance and was the Secretary's 1979 nominee for the William A. Jump Memorial Award. He was recently a recipient of the Presidential designation as a Meritorious Executive in the Senior Executive Service. He is currently the President of the American Association for Program and Budget Analysis. During the period 1968-1970, her served as an enlisted man in the U.S. Army with the Judge Advocate General's Corps. He was awarded the Army Commendation Medal for his service in legal assistance office, Fort Knox, Kentucky. Mr. Dewhurst is a native of New York City. In 1964, he received a Bachelor of Arts Degree in Political Science from the George Washington University and in 1967 he received a Juris Doctor Degree from the Same University. Mr. Dewhurst is a member of the D.C. Bar and the American Bar Association. He presently resides with his wife, Miriam and his two sons in Falls Church, Virginia. [Pages 198 - 262--The official Committee record contains additional material here.] Wednesday, February 12, 1997. OFFICE OF THE INSPECTOR GENERAL WITNESSES ROGER C. VIADERO, INSPECTOR GENERAL JAMES R. EBBITT, ASSISTANT INSPECTOR GENERAL FOR AUDIT CRAIG L. BEAUCHAMP, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS DELMAS R. THORNSBURY, DIRECTOR, RESOURCES MANAGEMENT DIVISION DENNIS KAPLAN, BUDGET OFFICE, DEPARTMENT OF AGRICULTURE Opening Remarks Mr. Skeen. I want to welcome you all here today. We always like to kick-off our hearing schedule with your testimony because you're involved with all our agencies and programs. The Department can provide the subcommittee with valuable information as we get ready for the agency budget hearings. Before you begin, I want to welcome back our returning Members of the subcommittee: Ms. Kaptur, from Ohio who I'm happy to announce is our new ranking Member; Mr. Walsh from New York; Mr. Dickey from Arkansas; Mr. Kingston from Georgia; Mr. Nethercutt from Washington; Mr. Fazio from California; the distinguished Chairman of the Appropriations Committee, Mr. Livingston from Louisiana; and the distinguished Ranking Member of the Appropriations Committee, Mr. Obey from Wisconsin. I would also like to introduce our four new Members of this subcommittee: Mr. Latham from Iowa; Mr. Bonilla from Texas; Mr. Serrano from New York; and returning for a second term, Ms. DeLauro from Connecticut. We want to welcome them aboard. With that, I'll turn over the microphone to you, Roger, and I would ask that you be as brief as possible in your opening remarks. We've read your statement. It will be published in its entirety. We have five Members, including Mr. Walsh, who is the new Chairman of the Legislative Branch Subcommittee who will have to leave. They have a meeting that is starting at 1 p.m., but they are going to have to have a little forbearance and give us at least 10 minutes of their time. So, they'll have to leave in about 30 minutes or so for another hearing, but they would like to have a chance to ask you some questions before they go. I know you want to show a short video, so, maybe we could do that and then get right to the questions. Mr. Viadero. If it's all right with you, we're proposing since time is limited and other Members have to go on and attend to other business, if they have questions as we complete the sections that we go through, we'd be happy to entertain those questions at that time. Mr. Skeen. That's fine, Roger. Would you introduce your panel? Mr. Viadero. Yes, sir. Good afternoon, Mr. Chairman and Members of the committee. I am pleased to have this opportunity to visit with you today to discuss the activities of the Office of Inspector General. I'd like to introduce the members of my staff who are with me today. Mr. James Ebbitt, Assistant Inspector General for Audit; Mr. Craig Beauchamp, Assistant Inspector General for Investigations; and Del Thornsbury, our infamous Director of Resources Management. The Office of Inspector General was established to prevent and detect fraud, waste, and abuse of the Department's more than 300 programs and operations. We also keep you and the Secretary informed of our problems and deficiencies and report criminal violations to the Attorney General. We have a diverse staff of auditors, criminal investigators, and other personnel in offices throughout the country to carry out these activities. I am proud to say that in fiscal year 1996, we continued to more than pay our own way. In the audit arena we issued 282 audit reports and obtained management's agreement on 1,627 recommendations. Our audits resulted in questioned costs of $1.5 billion. Management also agreed, as a result of our audit work, to recover $11.4 million and put $264.7 million to better use. Additionally, our investigative staff completed 956 investigations and obtained 738 convictions. Investigations also resulted in $71.5 million in fines, restitutions, and other recoveries. Still, our auditors and investigators can continue to recover and save money for the taxpayers only if we have the tools that are needed to perform these duties. For several years, we have been required to absorb increases in personnel costs, which has forced us to limit our replacement hiring and has extensively limited the funding we have available for other necessary items such as travel and specialized law enforcement equipment. As an example, in 1993, we had 875 employees on board. Now, we have only 745, a reduction of 130 in less than 4 years. At this level, we are able to only deal with crisis issues needing immediate audit and investigative attention. Many critical issues, including agency concerns, simply must be put on hold because there are just no more people to do these jobs. This is especially disconcerting in the investigative arena where it is critical to address issues as quickly as they are brought to our attention. We currently have a backlog of approximately 1,400 cases, many of which we have had to decline during the past year, primarily because we don't have the staff to do the work. Adequate funding for our office makes good sense because we create a Government that works better and produces positive results. While I recognize that there are difficult budget times and every agency must do more with less, I believe the Office of Inspector General cannot continue to provide sufficient service and assistance to you, the Congress, and the Department of Agriculture and its agencies without being provided adequate resources. And I request that our proposed funding level be approved. I believe that resources allocated to the Office of Inspector General are very cost effective in view of the money we save the taxpayers, not to mention the important role we serve in helping to protect the nation's food supply. Before I move on to specific investigative audit areas, I'd like to update the committee on our progress in implementing our new forfeiture authority. With the committee's support, we are now authorized to receive proceeds from forfeiture actions arising from our investigations. In the past year, all of our special agents received specialized training on this new law enforcement tool and how it could be used. Extensive administrative control systems were established to monitor and track forfeiture actions, and any proceeds identified to be provided to this Government. These are now all in place and operational. While over $10 million has been identified for possible forfeiture to the Government as a result of our investigative actions since this office has been provided with the authority as of November 1995, to date, this agency has not received any funds from these proposed forfeitures. We are continuing, however, to work with the Department, the Office of Management and Budget, and the Departments of Treasury and Justice to ensure the Office of Inspector General receives its equitable share of proceeds from these proposed forfeited assets as approved by you. I'd also like to mention that in recognition of my agency's standing as a law enforcement arm of this Government, we were the only Office of Inspector General requested to provide security at the Summer Olympics this past year in Atlanta. Sixty of my agents worked on this special security assignment in Atlanta for approximately 1 month under the auspices of the Department of Justice at a cost to this office of nearly $700,000 of which Justice reimbursed a mere $256,000, causing a $444,000 budget shortfall which we had to absorb from other budget lines. In fiscal 1997, we are focusing our audit efforts on the Department's financial accounting systems, on credit programs, civil rights implementation and compliance with the Farm Bill, and the Food Stamp Program, including its electronic benefits transfer project. Our investigative priorities include the timely and thorough investigation of threats to the health and public safety, employee integrity issues and fraud in the Department's loan, regulatory and benefit programs. We continue to spend the greatest portion of our time and resources on the Food Stamp Program. So, let me tell you about some of our efforts in that particular area. The EBT system, Electronic Benefits Transfer, is designed to replace food coupons and other federal benefits with electronic delivery of those systems. The national strategy includes expanding EBT services to all States by fiscal year 1999. Under agreement with the President's Council on Integrity and Efficiency, we were assigned the lead to review EBT systems that deliver state- administered programs, including the Department of Agriculture's Food Stamp Program, the Special Supplemental Nutrition Program for Women, Infants and Children, commonly called WIC, the Department of Health and Human Services Aid to Families With Dependent Children, which is now called Temporary Assistance to Needy Families under Welfare Reform, and the State's general assistance programs. Currently, 15 States have operational EBT systems which issued approximately $1.4 billion in Food Stamp benefits during fiscal 1996. Five of the States operate statewide. Program spending levels for fiscal 1996 were about $22.8 billion for Food Stamps, $4 billion for the WIC Program, and $16.9 billion for Temporary Assistance to Needy Families. We are very supportive of EBT and firmly believe it will reduce trafficking by recipients, as well as make trafficking by retailers easier to detect and investigate. EBT takes Food Stamps off the streets and keeps the benefits in the hands of those who need them. I want to show you some pictures of our work involving Food Stamp trafficking that we were able to detect using EBT safeguards. This first picture is in the back counter of a store, the McKean and Westwood Grocery Store in Baltimore, Maryland. They kept cash and pistols--the arrows point to the pistols--there while conducting Food Stamp trafficking transactions. We found that one of the owners had instructed his employees to add $3 and change to all trafficking transactions. I'm sure you can all read that. Just tell us which way the ``E'' goes. They added $3 and change to every transaction. If you can't see up there, I'll read it for you. The first transaction was $120. And what the traffickers did was to add $3.89 to it. As you can see, we find that down that whole sheet of paper there on that chart. All transactions show an additional amount of $3.29, $3.89, et cetera, which was very peculiar. We were able to target the traffickers based upon being able to detect the even amounts. Very rarely totals come out to even amounts when we buy groceries. So, they added $3 and change; nice twist. A total of $745,623 or 92 percent of all Food Stamp transactions exceeding $20 at that store included this $3 and change. And that's during an 18-month period, I'd like to add. That's three-quarters of a million dollars in 18 months. The next chart shows transactions indicating the $3 and change tactic used by the store. For instance, the transaction which we just mentioned was $120. It got billed out for $123.89. OIG's highest investigative priority has always involved health and safety issues affecting the Department and its programs, especially those which may endanger the wholesomeness of the American food supply. For example, during a joint investigation with California's Department of Food and Agriculture, we found that chickens were slaughtered in a filthy facility using equipment that was contaminated by rats, fecal matter, other decomposing chickens and the presence of cats and dogs in the immediate slaughter area. The equipment used for slaughter consisted of a plywood table with deep scar marks, the barrels under it, and a knife with a rusted blade. The table was adjacent to a row of wire cages which were covered with an accumulation of matted feathers and also contained decomposing chickens which had been present for an undetermined length of time. The plastic barrels contained feathers and what appeared to be chicken fat or feather oil. No hot water supply was available to allow for clean up. During the course of the investigation, IG agents observed uninspected adulterated poultry products being entered into commerce in order to be sold to the public for human consumption. The owner, along with his wife and brother, were indicted for violations of the Federal Poultry Products Inspection Act. This case is currently awaiting trial. We also had a video that was about an hour and a half long on the search warrant. The video showed most disgusting, most deplorable conditions. And just to think that this food entered our food chain--that's the most disgusting part. I want to show you some pictures taken by our agents during the time of this investigation. The picture on the left demonstrates the slaughter facility. That's the slaughter house, folks, the piece of plywood there. And there is the great slaughter instrument to the right. It's just an old knife. It's pretty well rusted and blood stained; absolutely deplorable. The Company ceased operations after a search warrant was executed. In another investigation closer to home here in Pennsylvania, the driver of a rendering truck delivered spoiled meat, bones, grease, and floor sweepings from his truck into a meat market. The spoiled meat was washed, trimmed, ground, mixed with other waste products, and made into ground beef or beef patties and sold to the public. I'd like to take some time to show you the photographs on this investigation. The one on the left is just a rendering bin, if you will, that was dropped off at the food processor. And that has the floor sweepings and other miscellaneous debris in there, in addition to the bones and adulterated meat. The picture on the right is just a picture of the truck with the barrels of these waste products before they're dumped into the dumpster on the left. During the course of this investigation, the driver of this truck encouraged a witness to lie to IG special agents in order to thwart the investigation. Eventually, the driver pled guilty to the sale of adulterated meat and conspiracy, and following a trial was convicted of witness tampering. The meat market pled guilty to selling adulterated meat and was sentenced to 1 year of probation and fined $10,000. Also, the presiding judge prepared a public notice stating how the market violated the Federal Meat Inspection Act and sold adulterated meat products, which he ordered to be published in a local newspaper. At last year's hearing, Mr. Chairman, I advise (advised) this committee of a concern regarding our authority. I want to update you on this very sensitive issue. The Texas Attorney General instructed Texas Tech University officials to deny Office of Inspector General access to Mediation Program records, asserting that such records were confidential under Texas law. We have issued Inspector General subpoenas to obtain the records and litigation regarding our subpoenas is pending. In the Northern District of Texas there is also a criminal investigation underway now. In our audit work, we identified a potential conflict of interest for three of the four full-time Mediation Program employees. We also identified excessive grant reimbursements to the University for salary reimbursement for individuals who did not work in the Mediation Program and were ineligible for such reimbursement. During our continuing review of the State Certified Mediation Programs, we were denied access to Mediation Program records for the Michigan, North Dakota and Minnesota Mediation Programs. We continued to meet with the Farm Service Agency Administrator and other departmental officials to discuss resolution for these issues. Another area that has been of major concern to this agency during this past year has been the flight safety of Forest Services Airtankers. These are the large multiengine aircraft used by the Forest Service fire fighters to drop fire retardant chemicals to suppress or extinguish wild fires. They play a significant role in the Forest Service's Fire Fighting Program to save the national forests and reduce the Government's timber loss. There have been several fatal crashes of these planes. We found that the Forest Service sometimes allowed airtankers to fly hazardous fire fighting missions with broken or malfunctioning equipment; that risk management guidance set forth in the Forest Service's own Aviation Safety Plan was not being followed, resulting in necessary maintenance not being performed. Let me show you some photos here. That's a picture of a C- 130A dropping fire retardant over a wild fire in a national forest. The second photo shows a Lockheed P2V airtanker on July 29, 1994, prior to the crash later that day in the Lolo National Forest in Montana, killing both the captain and copilot. So, we have the before and we have the after photograph. In another case, follow-up was not reported to determine the impact of information reported by the National Transportation Safety Board concerning the cause of at least one fatal Forest Service airtanker crash. According to the NTSB's brief of the accident, the most probable cause of the accident was deemed to be fuel leakage due to O-ring failure. Upon receiving the NTSB's conclusions, the Forest Service Aviation Safety manager determined that no action was needed and simply filed the report away. When we became aware of this potentially dangerous situation, we recommended that Forest Service inspectors immediately check O-rings on similar airtankers to ensure the same problems would not cause another fatality. In December 1996, the Forest Service submitted a plan to address our recommendations. Once the specific actions outlined in this plan are in place and operating, we believe that the Preseason Inspection Program and Overall Air Safety Program will be more effective. Now, if you will bear with me, I have a 3-minute video tape. It's an interview I did with Congressman Menendez on CNN regarding this matter. Mr. Skeen. If you would hold that in abeyance for about an hour to let some of the subcommittee---- Mr. Walsh. I really don't have anything to ask. Certainly, I would thank the committee for providing testimony. It has also been very leading and very aggressive. We applaud that. I chair the legislative subcommittee--we try to spread the wealth around a little bit. So I'll go over there now and get started. Thank you. Mr. Skeen. Thank you, Mr. Walsh. Mr. Viadero you can go ahead with your video. [Video shown.] Forest Service Mr. Viadero. The purpose of taking the time--and I understand that this committee does not appropriate funds for the Forest Service. However, this committee appropriates funds for the Office of Inspector General. And I'm charged with also auditing and investigating incidents in the Forest Service. And that's taken this year approximately 10 to 15 percent of both my time and my money to do these investigations. So, we're really running very, very close to the wire, folks, of being antideficient. And I am asking if we can, Mr. Chairman, if you could make a recommendation, if you see fit to refer this over to the Interior Appropriations Committee. They might give us a bit of help here financially. Mr. Skeen. I know that committee and I'll assure you that we will. I'd like to ask Ms. Kaptur, who is our Ranking Member, do you have to go? Ms. Kaptur. Thank you, Mr. Chairman. I do have a conflict as does Mr. Walsh. I'll stay here for awhile. That's all right. I'll stay for awhile with you, Mr. Chairman. APHIS--Animal Treatment Mr. Viadero. We have one concluding area we'd like to mention. It has to do with the Animal and Plant Health Inspection Service, APHIS, which is responsible for regulating the use of warm blooded animals in research, exhibition and commerce in order to ensure their humane treatment. We found that the broad wording of APHIS' regulations has allowed a wide variety of individuals to obtain animal licenses. 64 percent of the licensees we visited did not exhibit their animals, but instead maintained them as personal pets. In some instances, we found large and dangerous animals that were housed in enclosures that were inadequate to contain them. In one such case, a licensee's pet tiger had to be shot to prevent it from escaping to the surrounding neighborhood. I'd like to show you a couple of pictures here too. The first two photographs are of a cougar in a small, inadequate cage; in one case, in the basement of a personal residence. The next photograph demonstrates the news media's interest in the welfare of these animals. The photograph is an article discussing a file in Roy Boy's Tatoo Parlor and Gym in Gary, Indiana, where the fire fighters, much to their amazement, discovered a basement full of full- grown dangerous animals: two Bengal tigers, a five-foot alligator, and a rather large albino python. The photograph in the news article shows one of the actual Bengal tigers. Based on our recommendation, APHIS is working to amend its regulations to: one, restrict the definition of an exhibitor to exclude pet owners; two, require that applicants meet standards of knowledge and experience before being licensed to exhibit; and three, limit the ability of licensees to obtain additional large or dangerous animals without APHIS' approval. In addition to these examples of our activities, my written statement also includes additional examples of the results of many of our audits and investigations of this Department's varied programs. Mr. Chairman, this concludes my presentation. And I will be more than pleased to respond to any questions. [Clerk's note.--Mr. Viadero's written testimony appears on pages 328 to 392. Mr. Viadero's, Mr. Ebbitt's, and Mr. Beauchamp's biographical sketches appear on pages 325 through 327. The Office of the Inspector General's explanatory statement appears on pages 393 through 428.] Mr. Skeen. Thank you very much, Mr. Viadero. I'd like to yield to Mr. Latham, who is also on the Legislative Branch Subcommittee. I know his time is constrained, so if he has any questions or a statement to make. payment limitations Mr. Latham. I thank the Chairman very much. And I guess I just have one question. In the accomplishments section of your budget submission, you refer to a review of the payment limitation and it's continued circumvention. How much do you estimate as being paid out over the limitation? And what producer groups or programs or participants are the worst offenders? Mr. Vaidero. Well, I'm going to put Mr. Ebbitt on the spot for this one, Mr. Latham. Mr. Latham. Thank you. Mr. Ebbitt. Mr. Latham, we really don't have an estimate of how much, how many dollars are involved in this particular scam. Historically, we have found where producers are approaching the payment limitation level, the $40,000 or the $50,000 level. That's when it happens. That's when they will work with, frequently with family members, with other tenants, with sharecroppers to setup a scam to evade the payment limitation. Now, we find these cases. Frequently, the agency will refer them to us where they have a question. Frequently, the neighbor down the road will say, I know that the unit that my neighbor has created is not a fair situation or it is not reality. And that's essentially how we find these cases. We also do, periodically, we do computer runs of the Kansas City--the Department's data in Kansas City to look for people that are at or close to a level. And we will take samples of those cases and go out and take a look to see what is going on there. But there isn't any number out there that I can give you that says we have so many producers and so many dollars impacted. What we do see is that over the years, every time Congress has attempted to tighten that regulation, producers have found ways to evade it and that continues to this day. Mr. Latham. I guess I'm trying to get a little more specific. Is there any type of producer that is more apt to be involved in this? I mean, by commodity or region. Mr. Ebbitt. Well, in the farm payment arena you get to the limit very quickly on cotton and on rice. Historically, we have found bigger problems for those couple of crops. Corn, in mid- America corn--not as many producers will reach the level as quickly. We have found cotton and rice to be a bigger problem. By type, it's people that are bumping up against the limit that begin to look for ways to evade it. Mr. Latham. I think for now, Mr. Chairman, that's all the questions. Thank you. Mr. Skeen. Thank you, Mr. Latham. Ms. Kaptur. I apologize for not taking you first. Ms. Kaptur. Oh, no, that's all right. I understand. Being on the other subcommittee also, I know some of the constraints. So, I think it's important you get there. agricultural market transition act (amta) Thanks Mr. Chairman. I wanted to thank the Inspector General for his testimony. One of the issues I'm interested in which is referenced in your testimony, but you didn't speak about it here and that's the monitoring that you're doing of the Agricultural Market Transition Act. One of the efforts that I led here last year was to require that farmers plant or engage in conservation practices in order to receive any kind of program payments under the law. In your testimony you discuss a three-phase effort to assess the implementation of the Act. And you talk about a third phase under which you will examine internal controls over conversion and contract acreage to nonagricultural use, planting flexibility, and protection of contract acreage from weeds and erosion. Could you enlighten me a little bit on what you're going to look at there and if your efforts will help assure me that any benefits under the Act will go to those that are actually engaged in production or conservation? Mr. Viadero. Mr. Ebbitt. Mr. Ebbitt. Sure. I would hope that we can give you that assurance, Ms. Kaptur. When the Farm Bill passed and the AMTA provisions of the Farm Bill, we began immediately to look at how the Department implemented the new bill and the corresponding regulations to go with that. We gave them some early feedback on control issues that we were concerned about. We're pushing them to get these control issues into the regulations. I would point out that in our assessment, the Department has done a very good job of implementing the new Farm Bill, of getting the producers signed up. They did it in a very tight time frame under some tough conditions that some county officers were working under. We were out there at the same time, on-site, looking at this activity and we found that they did a good job. Specifically, on compliance activities, we looked at how farmers have signed into this long-term agreement; how they are carrying it out; and how they are fulfilling the promises under that agreement. We have staff out there right now in all regions of the country specifically looking at what farmers are doing under the contract, whether they are maintaining the land in conservation uses or in crop production as required under the contract. We're looking to make sure that a new Holiday Inn or a new parking lot hasn't been constructed on this land that we have a long-term contract on. So, that assessment is underway right now. We will be reporting periodically on what we find out there. As those reports come out, of course, we will share them with this committee. Ms. Kaptur. thank you very much. I appreciate that. We just want to make sure that the provision is followed for the betterment of all. Mr. Viadero. Yes. Allegations of Discriminatory Lending Ms. Kaptur. I wanted to ask, in the backlog cases that you have under your jurisdiction, there have been allegations of discriminatory lending practices by USDA. How many of the backlog cases that currently exist are discriminations? Mr. Beauchamp. From an investigative side, we are not looking at those as a criminal activity. We're looking to do an audit there. Mr. Viadero. The bulk of our cases would be Food Stamp cases, food safety inspection cases, APHIS cases, employee integrity cases, timber theft cases; things like that; more of a finite criminal area if you will. Ms. Kaptur. Do you have any recommendations from your own perspective on what the Department could do to ensure that all individuals have equal access to USDA programs; equal treatment in the delivery of those programs? Do you see any role for yourself as an Inspector General in assuring that? Mr. Viadero. As I recall at a secretarial staff meeting, the people from the Farm Services Administration are taking a look at that particular issue in line with the new Farm Bill. We would normally review this after it's up and running for about two or three years to see how it's doing. We'll go back in and monitor it, and report back to you in 2 or 3 years as to how it's phased in. Ms. Kaptur. All right. Mr. Ebbitt. If I could, we also have a review underway right now looking at exactly how does the Department and its agencies handle cases of discrimination that have been filed either by a producer or by a Department employee. And we are looking at the handling of those cases and how efficiently, the Department handles them and makes decisions regarding those cases. And that, I think, gets specifically to your question of equal access and whether farmers and producers that apply for the Department's programs are being treated fairly. And the Secretary, of course, has spoken on that. He has a task force underway in the Department right now looking at that particular issue. He asked the IG to look at the handling of these cases. And that's what we have underway right now. We anticipate a report towards the end of the month regarding our assessment of the processing of these cases in the Department. Mr. Kaptur. I would very much appreciate for the record if you could provide a summary, how you view your role on the discrimination issue. Mr. Viadero. As soon as we--and forgive me. I misinterpreted the type of request you just mentioned. We're just finishing up Phase I of this review. And we are in discussions with the Secretary awaiting his official response to our report. As soon as we get that official response, each Member of this committee will receive a copy of that report. Ms. Kaptur. Thank you very much. Mr. Viadero. Yes, ma'am. Mr. Kaptur. And I would appreciate, just for my own purposes and for purposes of the record, if your office could give us a clear sense of how you view your role in the Department in trying to deal with these discriminatory charges that have been leveled against the USDA. Mr. Viadero. Yes, ma'am. [The information follows:] The Secretary asked me to review the process for handling complaints of discrimination of the loan programs within the Department and primarily at the Farm Services Agency. We are looking at the process in the Department for handling these cases, who is responsible for taking action to resolve these cases, and the timeliness for completing action on these cases. After this phase of our review is completed, we intend to visit selected locations around the country where discrimination complaints have been more prevalent to do some on-site analysis of how loan applications and other USDA program activities are handled for minority farmers as compared to non-minority farmers. When our work is completed for these activities, we will provide the committee with our reports. unsanitary poultry and beef products Ms. Kaptur. In contrast to the other parts of USDA that are also working on this. Okay. Thank you. I wanted to ask you also on the films that you showed us there are pictures about the chickens that were being slaughtered in unsanitary situations and also the beef patties that were reprocessed and so forth. Who was the buyer in each of those instances? In other words, the chickens were slaughtered, who bought those? Were they only in California? Was it a California retail store? Was it a mom-and-pop store? I guess what I'm getting at, does it tend to occur in the parts of the economy that are largely you would say serving the low and moderate income communities as opposed to suburban areas? Mr. Viadero. As I understand the chickens, the bulk of those went to restaurants. Mr. Beauchamp. They sold the chickens largely to restaurants and very small markets in the city. Ms. Kaptur. In San Francisco? Mr. Beauchamp. It's a city in California. Ms. Kaptur. A city in California. And what about the beef patties? Mr. Beauchamp. The beef patties were sold at a market, a fairly large market near Philadelphia. Ms. Kaptur. Is it a retail chain or is it a ma-and-pa? Mr. Beauchamp. It was a retail market. It was not a chain. It really varies when you look at these types of cases. We testified, Roger testified last year, about a large sausage manufacturer in Oakland, California, Coast Packing Company, that had multi-million dollar contracts with the Defense Department and also had large retail sales all over the country. They were also taking in bad meat from renderers until we shut them down with a search warrant. And that was a fairly large operation. Ms. Kaptur. Explain to me why those respective States wouldn't have shut those down before you arrived on the scene? Mr. Beauchamp. Well, this was a crime that they were not aware of. It's a crime that violates the Federal Meat Inspection Act or, in the case of the video, the Federal Poultry Products Inspection Act. So, the Department has an enforcement responsibility. The States often also share that responsibility, and we work closely with the States, if it's a violation of State law. Mr. Viadero. The poultry issue was a joint investigation with the State. Ms. Kaptur. Are you at liberty to say how you found out about that in either case? Mr. Viadero. At this point it might jeopardize the criminal proceedings, ma'am. electronic benefits transfer--wic Ms. Kaptur. Okay. On the review of the Electronic Benefits Transfer for Food Stamps and the WIC Program; what type of monitoring do you do of WIC? We have had such substantial increases in the dollars going out in that program for the last several years. To what extent have you been monitoring the WIC Program? Mr. Viadero. Well, on WIC, as it relates to EBT, first of all, I don't know the exact location, Ms. Kaptur, where WIC is operating on Electronic Benefits Transfer. It's very limited right now around the country. Ms. Kaptur. Very limited. Mr. Ebbitt. As far as distribution of WIC by Electronic Benefits Transfer. It's probably going to be better. I mean, EBT generally has made these programs better from a control standpoint and making sure that the people get the food that the program is trying to get out there to the right people. As far as other areas in WIC, eligibility; we've looked at eligibility requirements over the years and how states do in making sure that they determine eligibility correctly. And, again, generally they've done a pretty good job. We haven't found major problems in determining eligibility. One area over the years where we have had a problem is with the WIC voucher. And the same thing happens as was demonstrated on the Food Stamp chart where the retailer increases by $3 the actual purchase amount. On WIC vouchers, it's normally a not- to-exceed amount on the voucher. And the person would go in and spend $20, $25 on food and the retailer marks up $28 or $30 on the voucher. It processes through and he gets $30 for a $25 purchase. We have pushed over the years very hard for the Department to propose rules to get better monitoring. And the Department has been slow on getting that accomplished. It hasn't occurred yet. We're looking for stronger monitoring efforts of those vouchers. Having said that, again, EBT will go a long ways towards getting that better monitoring. You can see what's happening much easier with EBT than you can with those vouchers. backlog--food stamp cases Ms. Kaptur. And a final question for this round; of the backlog cases that you have, 1,400, what categories do those fall under? Are most of those Food Stamp? Mr. Viadero. Yes. The vast majority of them are Food Stamp operations. It is also critical to note that I have about 225 agents I place in the field. That covers seven regions. Personally, I'd like to get out and do more WIC work. I'd like to do more farm work. And the bulk of our Food Stamp work, we open very few Food Stamp cases in the major metropolitan areas for under $1 million. So, we have to be selective in what we take even in Food Stamps due to the limited number of resources that we can put in the field to investigate them. So, we're only taking the best of the--or the most mileage of the Food Stamp cases. Ms. Kaptur. Explain something to me. In my own community, our prosecutor takes several Food Stamp cases to court every year. Is the difference that the IG would concentrate on those for the million dollars or more and the smaller cases are left behind? Mr. Viadero. Well, we also do the ones that are interstate because we find people as groups that will deal in trafficking Food Stamps on an interstate basis. That's something that the State would be precluded from, if you will. So, we're doing interstate operations too where Food Stamps are issued in one State and trafficked in another and perhaps are cleared in an authorized or in an unauthorized store in yet another State. And that's the type of data base that we're putting together. So, we're putting together the intelligence base and doing a targeted selection of major traffickers. And these, again, are very protracted and very time consuming and cumbersome cases in line with the paperwork that's involved. This is the best white color crime I've seen in 29 years in law enforcement right here in agriculture. Ms. Kaptur. And in the case of prosecutors, local prosecutors taking on some of these cases, how would you distinquish between what they do and what you do? I hear what you're saying about interstate and the large volume. Mr. Viadero. Well, we do our best to investigate every case that comes in. And if it doesn't meet the federal prosecutive guideline, we refer it to the State for prosecution. Also, many of the states have State law enforcement bureau benefits where they get reimbursed from USDA for doing this, the SLEB agreements. Mr. Beauchamp. Another breakdown is the type of Food Stamp crime. Most of the country prosecutors or State prosecutors are investigating or prosecuting recipients who make false applications for state benefits. Because of the way the Food Stamp Program is set-up where the States, the country welfare offices, are responsible for certifying recipients, they are also largely responsible for the investigation of recipient fraud. That's where the vast majority of those prosecutions are. At the Federal level, we're responsible for authorizing retail stores where recipients can go to use their Food Stamps. We're also responsible for the redemption of the Food Stamp coupons for the Federal Reserves. So, in OIG we target the retail store. Mr. Viadero. As an example, 2 years ago, almost 3 years ago now, we prosecuted a case in Baltimore involving three stores and a city market. It was an EBT case. We actually took only, six defendants out of the three stores. However, we referred 7,500 recipient fraud cases to the States' Attorney. The Assistant States' Attorneys were not happy to see their case load increase by 7,500 in about a half an hour. Ms. Kaptur. I thank you for that clarification. Mr. Chairman, I'll suspend at this point. Mr. Skeen. Thank you, Ms. Kaptur. Mr. Kingston. aphis, animal cases--legislation Mr. Kingston. Thank you, Mr. Chairman. After the animal cases, you said that you had made recommendations to APHIS who had drafted legislation. One of the things I cannot stand, and I think many Members of Congress and the public can't stand, is when unelected Washington bureaucrats set rules, policies and regulations that should come under the purview of elected legislative bodies on a State, Local or a Federal level. How much of that is going on? Because I mean they're talking about bringing individual pet owners under their law which I know they have the right to do, but still I frankly would like to undo as much of their right as possible and return that to elective bodies. And this gets to be a philosophical question, but I really am very interested in stopping that interagency, frankly, bureaucrat elitism. And I'm not saying that you're being elitist about it because you're doing what always has been done. But for APHIS to go out and do this, I think is mildly heavy-handed. I think it should come through us or through State government; State elected government. Mr. Viadero. Well, to agree with you from my position as the IG, again, we have no--we're prohibited statutorily from having program responsibility. I'd be happy to work with any, if not all, of you to correct this. The main concern here is the proper treatment of these animals, because every time we let out an audit report involving animals, this is our most highly sought after audit report. It has to do with pets and animals. I think it's fair to say that and some of the tigers can weigh up to 500 pounds; keeping a 500-pound animal in a basement with no light and in a small cage is inhumane. Mr. Kingston. I'm not discussing the merits of it. I'm talking about the mechanics of it. Mr. Viadero. I'd be happy to work with you and see if we can come up and do a legislative fix with this. Mr. Kingston. How can we make it so that when you're making recommendations to other departments that they come to us before they go off creating more laws? This is just a tremendous problem nationally. We lose freedom because, I mean let's say there are 100 people who abuse tigers in America, which is probably extremely generous. Does that mean that the other 260 million of us have to lose a freedom to keep a tiger because some APHIS inspector is going to come up with, the perfect solution? Anybody who would keep the animals in a basement I think is a creep. I'm in agreement with you. Anyone who cares about the animal probably would not own an animal. But, you know, in America where there are the Ted Turners in the world; I think he owns a grizzly bear or something like that. You have these people who like to own animals and have the ability to own animals, I think they should have that right without it being a Federal law that they have to, let them do it locally on a State level. That's what I'm saying. Again, it's a philosophical question. But what could you recommend to Congress to keep bureaucratic agencies from year-after-year writing new laws on top of existing laws and giving them more power which should go through elected bodies, hearings, votes, public scrutiny and so forth? Mr. Viadero. You're right. It's a philosophical question and I think for minds bigger and better than mine, but I'd be happy to meet with you and discuss it and see if we can work something out. Mr. Kingston. Well, I think it might be something the committee would like to know about also. So, why don't you respond in writing and maybe carbon other Members. Maybe I'm the only one out on a tear, but I don't think I am. And I'm only picking on you because you're sitting here and brought it up. So, let me say that. Mr. Viadero. That's all right. My ribs don't hurt. I had another meeting before this. The issue, Mr. Kingston, we have seen, again, in dealing with the APHIS issue, in particular, we've seen where States have neglected their right, particularly at the puppy mills. They've abdicated their rights and controls. And we see that these animals continue to be abused. But I'd be happy to meet with anybody. Again, this is a tough question and I'll get back to you in writing on it. [The information follows:] Recommended APHIS Legislation A private citizen may own an animal, without an APHIS license, State and/or local laws permitting. APHIS only becomes involved when the person wishes to exhibit the animal to the public. What we found was that some individuals circumvented State and/or local laws prohibiting the ownership of such animals by obtaining an exhibitor's license from APHIS. In many of the jurisdictions included in our review, obtaining the APHIS exhibitor's license overrode State and/or local laws. We recommended regulatory changes that would permit APHIS to deny licenses to applicants whose possession of exotic animals would violate State or local laws and would require applicants to meet minimum standards of knowledge and experience regarding animals to be exhibited. Our recommendations regarding legislation related to our previous audits of provisions of the Animal Welfare Act covering the humane care and treatment of warm blooded animals wholesaled as pets, or used for research. This would grant APHIS the authority to deny license renewals or suspend or revoke licenses when serious violations occur, something APHIS can not now do without a lengthy administrative process. forest service--airtankers Mr. Kingston. Okay. And I would appreciate that. Also, on the forestry inspection; I'm glad that you are doing this on the airplane, the airtankers and so forth. And it sounds like you're very much on top of the issue. It's deplorable that your recommendations were originally ignored. However, I'm sure that the Forestry Department has another side of the story. And have they had the opportunity to talk to that? We don't, as you say, control their spending. The Chairman, and did you say the Ranking Member also, or a couple of people from this committee will be involved in that? Mr. Viadero. Well, they had the opportunity when we issued the audit report. And they responded back within seven days and concurred with all of our findings and recommendations. That was their primary arena with which to take exception to that report. Mr. Kingston. They just pled guilty and shrugged off the two---- Mr. Viadero. Well, I didn't say guilty. They did nolo on it. Mr. Kingston. That is outrageous. Mr. Viadero. They continue to tell us that they're working very aggressively to take care of these recommendations. Mr. Skeen. Is that the Forest Service? Mr. Viadero. Yes, the Forest Service. Mr. Kingston. Yes. He was in the Forest Service. Mr. Kingston. I hope, Mr. Chairman, that some of you on the proper committee raise some cain and get a little pain out of them for that. Mr. Skeen. You have our promise. olympics security Mr. Kingston. The final question I had was your agreement with the DOJ on the Olympics security, $700,000, and your shortfall of $440,000, what was the original agreement? Was it dollar-for-dollar reimbursement? Mr. Viadero. The agreement was that we would be reimbursed for our costs. However, when we met with the Deputy Attorney General on this, she stated that she only had so much in this pot of money that was given to her for this special appropriation for the Olympics and it came out as a reimbursement per agent. That's how she did it. She took up the total number of agents that were assigned there from all Federal agencies and just divided it up by the number of agents. Unfortunately, they're claiming they didn't get the same--the amount of appropriation that they were expecting. Mr. Kingston. You know, Mr. Chairman, it's real interesting because the Olympic Organizing Committee had a huge surplus, which, as I understand, they gave away in the forms of bonuses to some of their key people. Mr. Viadero. Yes, sir; my question too. Mr. Kingston. There, again, if you had a recommendation on that. I wonder how many other agencies such as yours got a shortfall and how much the taxpayers are expected to pickup while these folks have kind of feathered their own nests and done it very adequately. Now, having been critical and frank with you on a couple of issues, let me conclude in saying that you guys are doing a good job. And I appreciate the hard work that you do. You are on the front line of so many of our intentions. Mr. Chairman, I yield back. Mr. Skeen. Thank you, Mr. Kingston. Mr. Fazio. Mr. Fazio. Thank you, Mr. Chairman. ebt--nationwide 1I'd like to followup on the questions that Ms. Kaptur is asking about Electronic Benefits Transfers. We only have five States that have really gone full bore into this, reading quickly through your testimony. Mr. Viadero. Right; that are on-line statewide. Mr. Fazio. On-line. Mr. Viadero. We have several other States that are on either within a region in the State or a small group of counties or an individual county that is still testing it out. Mr. Fazio. Do you think it would be helpful to the Federal taxpayers if every State were on EBT and all of our benefit programs were handled by fraud proof at least theoretically fraud proof, techniques like EBT? Mr. Viadero. Oh, most definitely so. And, again, as I mentioned to the Chairman and Ms. Kaptur, 2 years ago, when we first started coming up here, I mean, this was the greatest thing. We all have a proprietary interest in EBT because in 1999 our pensions will be on EBT. So, I have a very proprietary interest in EBT in that the controls are in place and working. The interesting part is we've presented, and it took us awhile to get the people's attention. The basic cost of an EBT card, just a plain card, is $1.70. The cost of a smart card, if you will, these new debit cards, whatever you want to call them, with state-of-the-art control---- Mr. Fazio. Holograms. Mr. Viadero. Holograms; the whole thing. The holograms, including the ability to put in, monitor, change and adjust the fraud profile as the market changes costs $1.92 or, what? A 22 cents difference in the card, of which half of that is reimbursable from the Food and Consumer Services to the State as a reimbursable cost. So, we're talking 11 cents a card; basically 11 cents a family and yet that seems to be a very difficult selling point to the States. Mr. Fazio. Well, that's what I was getting at. We seem to be making very little progress in expanding EBT around the country. It seems to me that we have far more incentive to do this. We are holding the largest bag in this process. The states are being asked to spend the money to implement a system that is basically for our benefit. Haven't we got perhaps our priorities out of whack if we're not willing to provide some additional incentive to them; perhaps financial, perhaps legal? I don't know. Mr. Viadero. I think it's going to reduce their case load too with EBT. Mr. Fazio. Well, they have some benefit to gain as well. Mr. Viadero. I mean, it's greatly going to reduce their case load because they don't need issuing points anymore for stamps. Mr. Fazio. Right. Mr. Viadero. Those are a lot of jobs at issue there as well. Mr. Fazio. But what is taking, in your opinion, so long to make this the universal application of benefits that everybody has talked about, but which they never seem to quite accomplish? Mr. Viadero. We don't handle the contract. Treasury handles the contract on EBT. And that seems to be an issue with the financial management section for the Department of Treasury as to whether they're going to go to a RFP or use an invitation for expression of interest. Mr. Fazio. What is the subtlety I'm missing there? Mr. Viadero. One is you have to go through the bid process. And one is, if we've done business with you before, in order to trim the process down by a few months. Mr. Fazio. I understand that a part of this dilemma is that the banking industry wants in on the ground floor. They want to control EBT. I've noticed that in my State, many of the banks are moving into the supermarkets, closing branches, firing tellers, and putting ATM's in the supermarkets. This is all part, I think, of a game plan to bring the benefit user into the bank's net. There are obviously other entities in the private sector that would like to do this work and perhaps are losing out because of the Treasury take-over of the control of this issue. Do you have any information you might bring to this discussion? ebt losses Mr. Ebbitt. Mr. Fazio, if I could; one point that I think broke the log jam a little bit on EBT was the Treasury regulation referred to as Regulation E. And I'm not an expert on that by any means. But in effect what that regulation says is, your own personal credit card, if you lose it and somebody uses it, you're limited to a $50 responsibility on that card. The big question was similar for EBT, if that card is lost or stolen, who is going to be responsible for the benefit level that may be abused and misused. States didn't want the responsibility, certainly. The private sector didn't want that responsibility either. And the Welfare Reform Bill laid off that responsibility, if you will, back to the Federal Government. And so, having broken that log jam in welfare reform, we now have 19 States stepping up to the plate working now with vendors on EBT contracts. We have five statewide. We have about eight others at selected locations in their States. So, the log jam does seem to be moving. I think we're going to see a lot more come on much quicker. 1999 is the goal nationwide to have everybody on-line. I don't think that's going to happen, but I think you're going to see an awful lot of movement in the next year, year and a half towards that end. ebt--savings Mr. Fazio. Well, this 11 cents cost would remove much of the risk in this whole area that we've just talked about. Mr. Viadero. Yes. That's correct. Mr. Fazio. Who would be responsible for liability will be much less an issue once we spend a little bit more to make these cards a little bit more foolproof from the standpoint of illegal use. Am I correct? Mr. Viadero. Well, it's such a great system. This is an editorial comment. With such a great system, we're arguing over the cost of less than a First Class postage stamp to secure the benefits and safeguard them. Mr. Fazio. And for the benefit of all of us, how much do you estimate we would save by getting rid of the amount of fraud that exists in the current system? Mr. Viadero. Well, let's start by saying we eliminate in excess of $50 million a year just in printing Food Stamps. That's a start. Mr. Fazio. That's a start. Mr. Viadero. Not counting these centers for distribution and other things. Mr. Fazio. That's correct. Mr. Viadero. Just in printing costs. Mr. Fazio. Yes; that's not bad. If we took that savings and invested it to some degree in maybe providing some incentives-- -- Mr. Viadero. Like these budgets? Mr. Fazio. No, no, no, no. Don't be too self-interested. In perhaps giving the states that are most strapped or reluctant to move forward, it would come back to us very quickly, wouldn't it, in savings? Mr. Viadero. I would assume so. Yes, sir. Mr. Fazio. Has anybody ever proposed that? Mr. Viadero. Well, I had a conversation with one State. The total benefit that they would have to put up for this was less than $10,000 for the State. And the State controller was adamant. He wouldn't move. And he said to me, well, what's going to make me move? I said, well, when Mike Wallace shows up at my office at 8 a.m. on Monday, I'm just going to refer him to you and ask him why fraud is rampant in your state. That state has now signed up for their $10,000 and they are covering that 11 cents cost. Mr. Fazio. Good. So, the 60-Minute factor will come in to help. Mr. Viadero. I would say so. Yes, sir. Mr. Fazio. Yes. Well, it seems to me that anything we could do, I'd be interested in your suggestions, editorially or officially, to move this process along. It's only in the interest of every Federal taxpayer that we put this system in place. And I would think it is in the interest of many of the beneficiaries, particularly children, who are seeing funds diverted to other purchases that are not legal under the law and which are made with the cash that people obtain from the misuse of Food Stamps. Mr. Viadero. It's interesting to note that the heavier users of Food Stamps benefits like the larger cities, the larger industrial states, if you will, that have the concentration of Food Stamp recipients, are more than willing to go along. They see the need for it. It's those areas of the country that really haven't seen much in the area of Food Stamp trafficking, that haven't been exposed to the same fraud, that are a bit reluctant to assume those extra costs. Mr. Fazio. Well, I can tell you in representing rural committees, we have fraud in them as much as we do in the urban communities. And I think just because it doesn't appear quite as easy for us to obtain, it's there. Are you convinced that in providing Food Stamp benefits, for example, through EBT that you are doing what the industry, the retail market industry, wants or do you find, in some cases, they are benefiting from the misuse and therefore are somewhat ambivalent about implementation of this? food stamps/compliance Mr. Viadero. Well, about 80 percent, 75 to 80 percent, of the Food Stamp benefit is transacted in about 15 percent of the stores; the large food chains. And if you're going to have an incident of Food Stamp trafficking let's say at a Giant, or an Albertsons store, or a Von's store in California, you're going to find that on an entrepreneurial basis, that is a deal set between the cash register operator, the checkout person, and the individual. And that's going to be as a matter of convenience. We find no systemic issues in the large chain stores. They are, by and far, the cleanest of the operations if you will. The issues go to those stores that are basically, unauthorized or the stores that have minimal food stuffs on the shelves. We did a sweep 2 years ago where we went into some stores and the cans on the shelf were there so long they were rusted together. There was a bag of potato chips. We don't do compliance. That's up to the Compliance Section of FCS to go in and do that. We started this go around 3 years ago with FCS. We also made other recommendations, such as, we would like to see a store that participates in the program, if they're not in business for a minimum of 1 year to post a bond like they do in other USDA programs and also supply us with their tax returns. If it's a 1040, we don't want the whole thing--we just want the Schedule C. We have one investigation now where the individual--I'll give you a rough figure. CPA stands for ``can't pass arithmetic'' for me. This individual claimed $50,000 in food sales, yet transacted more than a million dollars' worth of Food Stamps. Something is wrong here. Okay. And when we asked to see the documentation, he also happened to give us his tax return. And this man had such nerve as to claim an EIC, an Earned Income Credit. So, he also got an Earned Income Credit. I mean, that's taking with two hands. Mr. Fazio. Yes; chutzpah. Mr. Viadero. Or something like that, yes. Mr. Fazio. Yes. Mr. Viadero. This guy just took with two hands. He got very greedy. Mr. Fazio. Yes. Mr. Viadero. And these are the type people that we're left with. These are the ones we have to get. Okay; whether or not they're trading in commerce for gasoline or to make rent payments. That's something else. That's not legal. That's violation of the program. EBT will help prevent that. Mr. Fazio. Have you proposed this bonding concept for start-up? Mr. Viadero. Yes. Mr. Fazio. And what's happened to that proposal? Mr. Viadero. In fact, coincidentally, the Department revisited that issue with me 2 weeks ago. And we're hoping that will be rolled into the Welfare Reform amendments. The bonding and the Certificate of Incorporation or business license, if you will. We want to make sure that they are a viable entity before they get issued an authorized Food Stamp redemption certificate. The big issue is when somebody sees that ``We Accept Food Stamps'' sign on the door, it should be a matter of trust that this store has met certain standards. And we don't see this, therefore, as a right that every marketer has. It's something you earn. I take it as a drivers license in a State. Every State says, driving in my state is not a right. It's a privilege. And I think it should be a privilege. It should be an honor to be an authorized Food Stamp store. wic--eligibility Mr. Fazio. Just briefly on WIC. The State directors will come in and testify. I've had some communication with my own in California. They indicate that USDA food price projections fall below the actual cost of food for them, the actual prices that they have to pay. And that there is a great discrepancy between what the eligible population is determined to be by USDA versus the State. These are the kinds of issues that I'm sure bedevil us in every State as we try to figure out what is appropriate. And this of course has been already indicated as going to be one of the major concerns of this subcommittee this year. Is this an area you have any information about or could help us with? We don't want to just take anecdotally what we're hearing. On the other hand, if there are flaws in the data that USDA is using that make it impossible for the program to work as intended, we should know about it. Could you comment? Mr. Ebbitt. Mr. Fazio, we don't have any information regarding the cost of food. I mean, USDA does various market basket studies to look at what costs are. But we haven't really gotten into that. Mr. Fazio. I suppose it would vary from one metropolitan area to another, right? Mr. Ebbitt. Cetainly, it will. Mr. Fazio. Because the cost of food will vary depending on a lot of other factors. Mr. Ebbitt. That's correct. Regarding eligibility, historically there has been more recipients, more people that technically would be eligible for WIC, but there hasn't been money there to provide that benefit. WIC is not an entitlement as Food Stamps have been. And therefore, they do have people that could be determined eligible if the State had more money available. And historically, that's been true. Mr. Fazio. Is it possible you could do some work in this area to help this committee in the future iron out some of these, what apparently seem to be disagreements that we can't resolve? Mr. Viadero. We'll get in contact with the Office of the Chief Economist and see what we can work out, Mr. Fazio, and report back to you. [The information follows:] State-level estimates of income-eligible infants and children in 1994 were used in the funding formula to determine each State's share of the 1994 national total of income- eligible infants and children. This percentage share was used to determine a State's ``fair share'' of the fiscal year 1996 food funds. For example, for a State with 1 percent of the national total of income-eligible infants and children, the fair share would be 1 percent of total food funds. Since food costs vary from State to State, it is possible for national USDA food price projections to fall below the actual prices some States experience. The discrepancy between what the eligible population is determined to be by USDA versus the State is likely a difference in the methodology used. For USDA, WIC eligible population is determined by using a technique known as shrinkage. Shrinkage is a statistical approach which combines information from survey samples with other data. For the State eligibles estimates, shrinkage was used to combine income data from the Current Population Survey (CPS), prepared by the Census Bureau, with other State-level economic data which has been demonstrated to have value in predicting the prevalence of low-income infants and children. This additional State-level data provided more information to use in developing an eligibles estimate. The ``shrinkage'' estimate that results from the combination of the CPS with this additional data provides an estimate of income eligibles that is more precise than the CPS sample estimates taken alone. I am not aware of how individual States have determined their eligible population. Estimates of persons eligible for the WIC program are used for several purposes. They provide an indication of the number of persons who would participate in WIC if the program was expanded. As such, the eligibles estimates are the basis for developing program budget estimates used in the President's budget request and the Congressional budget process. Finally, the eligibles estimates provide a basis for estimating program coverage--that is, for determining what share of the eligible population the program is currently reaching. Mr. Fazio. Thank you. Mr. Skeen. Thank you Mr. Fazio. Mr. Nethercutt. EBT--Number of States Mr. Nethercutt. Thank you, Mr. Chairman, Mr. Viadero. Gentlemen, thank you for being here. I just want to follow up on Mr. Viadero's comments on an inquiry about EBT. And I notice on page 9 of the testimony makes reference that 15 States have operational EBT systems. Five of the systems operate statewide. An additional 30 States have sought the EBT processor and are currently negotiating contracts. FCS anticipates the system is coming on-line in 1997 and 1998. Can you give us, just for the record, a little better indication of how many States and when in that 1997, 1998 period; I mean, that's 45 States which is pretty good. I know we're all impatient. But maybe there is more information that will clarify specifically when you expect them to come on-line. Mr. Viadero. Okay. Currently, 13 States have operational long-line Food Stamp EBT systems. Mr. Nethercutt. So, is this a mistake, the 15 states in the testimony; just for my record-keeping here? Mr. Viadero. No sir. We also have two States that are operational off line. Mr. Nethercutt. I got you. Sorry. Mr. Viadero. There are two types of EBT. I call it an EBT one and a son of EBT. They have the open and the closed system. The open system will allow you to take benefits across state lines. And those are generally done by the financial institutions at particular banks. The closed systems are done by nonbanking institutions. And they're only good within the individual States. So, we have 13 that are open and two that are closed for a total of 15 States. Mr. Nethercutt. With regard to the additional 30, is there a better indication of when you expect those? Mr. Ebbitt. What I would suggest Mr. Nethercutt, that is really, it's a moving target. It changes every day. Missouri, for example; Missouri has been wanting to--they were going to come on-line last October. For a variety of reasons, problems with vendors getting everything set and so on; they've experienced a lot of delays. But within the Department, FCS has--they keep that running total. And we can certainly pull that out and get it up to you, current as of today, what is the understanding as to when these other States are going to come on-line. Mr. Nethercutt. Sure, That would be helpful. Thank you so much. [The information follows:] [Pages 286 - 287--The official Committee record contains additional material here.] fns--discrepancies disclosed in audit Mr. Nethercutt. The other line of inquiry I want to pursue is with regard to an issue that came before this subcommittee the last 2 years relative to the Food and Consumer Services audit that was done in your investigation which found some rather startling discrepancies and some practices within that agency that were troubling. Can you provide please some update as to where that audit has been and what your findings are as of today versus what you found, and what I was particularly concerned about, in the last 2 years. [The information follows:] Our audit of the fiscal year (FY) 1994 Food and Nutrition Service (renamed Food and Consumer Service (FCS) in 1995) financial statements resulted in a disclaimer of opinion. This opinion was based on the agency's inability to support $14 billion of operating and program expenses and over $3 billion of nonoperating charges. Although the Food and Nutrition Service lacked accounting support for certain line items on its financial statements, we found no evidence of misuse of funds or other improprieties. Due to extraordinary efforts on the part of the FCS' employees preparing the FY 1995 financial statements and OIG staff auditing these statements, we were able to render an unqualified (clean) opinion. This effort was required due to many of the accounting and internal control weaknesses identified in the FY 1994 financial statement audit continuing to exist. We are currently auditing the FCS FY 1996 financial statements. To date we have found that FCS has continued to address and correct accounting and internal control weaknesses identified in prior audits; however, it is too early in the audit process to determine what opinion can be rendered on the FY 1996 statements. audit of fcs's financial statement Mr. Viadero. For, fiscal year 1994, as you are well aware, we rendered a disclaimer of opinion for the Food and Consumer Services. A disclaimer of opinion is no opinion. We couldn't render one. It sort of was non-auditable, if you will. For fiscal year 1995, the Food and Consumer Services received a clean opinion, an unqualified opinion. Now, a lot of that had to do with luck. And, again, I'll take luck over substance any time I can get it. I'd like to take credit for it on a personal basis because we put in a Management Advisory Service. We offered that to FCS, and they reimbursed us for the cost of one of our auditors who was a long-time auditor of FCS prior to being reassigned. He was intimate with the system. He went in and offered a guiding hand. Also, FCS changed their financial management. And I'd like to say Mr. Chris Martin, the Regional Administrator for the Northeast Region for FCS and Marlane Evans who is the Regional Inspector General who audits the Northeast Region, they already had a working relationship over several years. They went in and collectively they talked. They argued. They straightened things out. So, FCS has come light-years in its financial management. That is not to say they still do not have major problems. Particularly, we gave them an unqualified opinion in their financial statements. However, they got a rather significant write-up on the Internal Controls Review. And they are working as we speak to correct that. I think the biggest thing we can say is yes, we have FCS's attention. And FCS is working with us and we're working with FCS. So finally, there is a dialogue there and both agencies are meeting. And we're working to get them even a better opinion in the internal controls. financial statements--internal controls Mr. Nethercutt. Is it my memory that, that was like a $39 billion number. And we were sort of looking for $13 billion? Mr. Viadero. Yes. It was almost $18 billion as it turned out to be. Mr. Nethercutt. That's an unconscionable amount of money that I'll give the benefit of the doubt in terms of whether it was lost or not spent properly. That's highly questionable with regard to the management under that agency. So, I'm just wanting to be sure for the public's confidence that there is some answer for the fact that there was this disappearance. Mr. Viadero. I think it's safe to say that the money wasn't purloined, peculated, or otherwise embezzled. I think it's also safe to say that their accounting system was almost non- existent. Mr. Nethercutt. Yes. Mr. Viadero. That's the area that we took remedial action with and we brought everybody up to speed. And everybody understood, or hopefully everybody understands. We'll know with the current fiscal 1997 financial statements. The audit is on the way. Mr. Nethercutt. Okay. Well, I'll look forward to their testimony here; whoever will be in the chair. INVESTIGATIONS BACKLOG The final thing I want to just inquire quickly. I wrote down that you have a 1,400 case backlog. You've got 225 agents covering seven regions. What in that 1,400 case backlog--I assume you set priorities. Mr. Viadero. Yes, sir. Mr. Nethercutt. So, what are we as a subcommittee to glean from the 1,400 case backlog? Are those just suggestions of impropriety? Are they investigations that are ongoing? How serious are those 1,400 relative to the other work that you're doing? Maybe you could just give us your perspective on that. Mr. Viadero. First of all, there were no food safety inspection cases. Whatever we have in the Food Stamp arena, if we have a food safety case, the food safety case moves to number one. There is nothing more important than the safety of the food chain here. Then we'll prioritize it within that. INTEGRITY CASES Another prime example of a priority case indicator, if you will, would be integrity cases; particularly involving ranking USDA officials. We're fortunate that we have very, very few of those. And then we'll go into the Food Stamp cases and the Export Enhancement Program, et cetera, et cetera. And we'll prioritize them within that arena. It's on a regional priority basis because it costs more money than I have just to relocate agents on temporary duty because of the rates of per diem in some of the cities. New York is about $200 a day now. Mr. Nethercutt. Well, thank you. My time I'll respect here, Mr. Chairman. Mr. Skeen. Thank you, Mr. Nethercutt. Mr. Bonilla. EBT--LOSSES Mr. Bonilla. Thank you, Chairman. Roger, it's nice of you to come by and say hello before the hearing. I enjoyed getting a chance to go over a couple of things that were going to be presented in testimony here today, and I look forward to working closely with you in the future on whatever issues of mutual importance. I wanted to follow up on some things that other Members have brought up earlier. First, Mr. Fazio asked a good question about how much money we could save if all states moved to the EBT system. My question, more specifically, is with the current losses, the fraud that hovers at about $2.4 billion; you mentioned earlier that we could save money on printing costs and so forth which is all of the administrative stuff. But with regard to the illegal stuff, how much could we drive that $2.4 billion down and save in that area if all of the states went to the EBT system? Mr. Viadero. Well, if I can, we come out with a figure that estimates the fraud and abuse at about $3 billion. Mr. Bonilla. $3 billion. Mr. Viadero. Yes. EBT will reduce it because what we end up with EBT is that it eliminates a lot of preliminary field work in these investigations; we know the who, the what, the where, the when, and the how much, because the computers fortunately don't get overtime. They work on weekends. They don't have sick leave, et cetera, et cetera. And the computer, we can modify to build in a fraud profile such as it might say that Mr. Skeen would normally purchase his groceries between 4 p.m. and 9 p.m. Now, all of a sudden, we notice Mr. Skeen purchasing--and he normally does this at a major food chain. Now, all of a sudden Mr. Skeen is out in a small convenience store at 3 a.m. purchasing $300 in food. Ms. Kaptur shows up at the same store at 3:01 a.m. for $200, and Mr. Fazio at 3:03 p.m. for another $500. First of all, nobody in these stores is capable of ringing up that much in groceries in a minute. That's the $3 and change that we mentioned. Mr. Skeen. I'll tell you what, the three of us have a smooth operation. Mr. Viadero. That's why you're the chairman. And it gives us this ability to better talk at these institutions and also report back to FCS Compliance people to go out and do a review. And I think it's safe to say a quotable quote from Former President Dwight Eisenhower when he was the Commander-in-Chief of Allied Forces in World War II. He said that the unaudited or the uninspected, if you will, deteriorates. And this is true. It has taken some 35 years for this system to get in the condition it's in. FCS has approximately 50 Compliance people that are charged with going out and visiting these stores. And we have about 200,000 stores. This system will, if you will, provide a therapeutic enforcement, because these people will know when they've been found out because this will then tailor- make these inspection lists, if you will, for FCS. However, this does not negate the need for FCS to go out prior to the issuance of the authorization as a Food Stamp redeemer. They have to visit the stores first. They have to verify that there is a store there. And I'd be happy to supply the Sweep Report for the record for each of you, since you weren't on the committee at the time we went out to seven major metropolitan areas and found an error rate. [Clerk's note.--The report is too lengthy for reprint. A copy is retained in Committee files.] Mr. Viadero. Basically, 30 percent of the stores just didn't belong in the system. They just didn't belong or didn't exist and still had the Food Stamp redemption certificate. fraud in the food stamp program Mr. Bonilla. So, then using your figure of $3 billion in fraud and abuse, do you think if all of the States someday went to the EBT Program, we could eliminate most of that? Two-thirds of that? Mr. Viadero. Well, I don't want to eliminate it at all because then you don't need an IG. Mr. Bonilla. No. That's just for the Food Stamp Program. Mr. Viadero. Oh. The States are mandated by 1999 to be on- line. So, they're going to be coming up on-line rapidly. Again, of the remaining states, of those approximately 30 States, that we've talked about, they are all seeing the light. They're coming up on-line. I would hope that we get it to a manageable figure. A manageable figure to me would be less than a billion dollars. But I think any time we can get in and save $2 billion a year, that's a lot of bucks. And I think if we come up on our learning curve, and FCS comes up on their learning curve, and we better use these machines, we'll be able to get that much more work done. Mr. Bonilla. Okay, Roger. Now, touching on something my friend Mr. Nethercutt asked about in terms of the cases that you can't get to and what the priorities are in getting to those cases. I heard you say, which is good, that you put food safety at the very top. What about the overall audit priorities? Being a new Member of the committee, how do you establish the priorities after food safety? annual audit plan Mr. Viadero. Well, by statute, we have to publish an annual audit plan. And if you want to see paper, I invite you to come down and participate with the Regional audit IGs down at the office in July. It's unbelievable to prioritize the work that has to be done. In fact last week, we had a week where we did the mid-year plan to see where we were. So, this is published and it is supplied to each Member of the committee, the annual audit plan and the methodology as to how we go about saying what's auditable. Again, the high risk areas are number one. As the risk goes down, they'll get a lesser priority. However, the reality of it is we always end up doing things to put out fires. The fire fighting suppression that we do on the audit side is generally referred to by Members of Congress. They'll have a particular need. They'll have a particular incident that was reported to them and they want reviewed. Please remember that you folks up here are our clients. The IG works with the Congress or for the Congress here. And we report technically to the Secretary, but we also report to you folks; sort of that unique dual reporting responsibility. I think it is more than fair to say that the big issues that are reported to us we audit; such as what Ms. Kaptur was referring to. We dropped everything or virtually everything to get this civil rights review done for the Secretary. This is an important issue. The Secretary has been up here. He has testified. He's come out in the press with it. That, needless to say, was a priority issue for us. wic--vendor activity Mr. Bonilla. Let me move now to WIC briefly. With the Administration requesting $378 million in new money for WIC, do you feel it is time that the WIC Program should be added to the priority list in terms of being audited to make sure that the money they're now getting is being properly used before a commitment is made to give a huge amount of additional funds to this program? Mr. Ebbitt. Yes, Mr. Bonilla. In fact, as I mentioned earlier, we're concerned about vendor activities. I think if there is a problem in WIC, it's there. Again, with vendors and how they're handling those vouchers that are out there right now. And as I mentioned, we had pushed the Department to publish stronger regulatory procedures and how they monitor the activities of retailers. And they haven't done that. And we have waited for some years now for them to publish these regulations. They haven't done it. So, we're going to go back out and look at the retailers's side; look at how States working with the Federal Government monitor and control what's coming back through stores. And with the additional monies there, I mean the time is right now to do that. texas agricultural mediation program Mr. Bonilla. Very good. I have one final question, Roger. We touched on this. Rather, you touched on it in your testimony and we talked about it in my office. In regard to the investigation of the Texas Agricultural Mediation Program, if the Texas Tech Program cannot be funded until all issues in the audit report have been resolved, what's the purpose of recertifying the program? And how much money is at issue here. What's the annual funding for the mediation program? Mr. Viadero. Well, your question is the exact same question we had. It is funded. It was funded as of January 27th. The Administrator of the Farm Services Agency released the funds, unconditionally released the funds. We had asked that, as a condition of this funding, this $2 million fund; Mediation, ladies and gentlemen, was funded--the $2 million for the operation of the program. And that's just for the Mediation Program. The larger issue is the loan portfolio that, that $2 million creates. Okay. The Administrator of FSA released the funds on January 27th. We had asked that as a condition of these funds, these agreements with the State, that an audit statement be put in there that this is all based upon the State's allowing the Inspector General to come in and review the mediation files. What we have here for the benefit of the Members, I'm being estopped. My office is being estopped from being able to use its authority under the Inspector General Act which clearly states that the Inspector General has the right, the authority to go in and look at any records, programs, writings, diminution, anything related to the Department of Agriculture and/or its programs. The States are asserting an alternative dispute resolution statute that says that due to confidentiality, my office cannot go in and see which farmers--what they did in mediation. And this gets back to the classic hog story. As we mentioned one farm submitted a farm and home plan where his sows were yielding five to six pigs, which is normal as I found out. Again, remember I'm from the South Bronx. So, hogs and sows are a little different for me. All of a sudden 1 week later he comes upon with a new farm and home plan for mediation where these same sows are yielding 16 pigs. So, the quick question there is we solve pork production in America. And I thought we should clone those--grab those pigs and get them cloned so we can do genetic research on them. We wanted to go in and look at the mediation files. We were estopped from looking at them because they asserted the confidentiality statute. I offered to the Texas Mediation Program at Texas Tech University the use of the State auditors to assist us in this, so they could participate with us and see what we were looking at. I also want to remind the Members, my office regularly handles sensitive security and national security issues. And if we can handle national security issues and secrets, I think we can handle individual farmer's records in rural America. We're not keeping anybody's records. We're not making them public. We routinely handle tax files which to me would be more confidential than mediation records. So, in line with Texas estopping us and the posture they've taken, we now have three other states--North Dakota, Michigan, and Minnesota taking the same posture and estopping us from going in and reviewing these files. The next result is as of January 1st with the new Statement on Auditing Standards, which for the very first time makes auditors responsible for the detection and reporting of fraud; however, I cannot guarantee with any certainty that here is not a fraud going on there. Therefore, I would be in the position, for instance, and we might get to this this year, of disclaiming an opinion on the financial records for the record. And that would include the entire USDA Financial Statement. The minimum amount at risk is the Farm Loan portfolio of $12 million. I cannot--I can't go to sleep at night knowing that I'm personally responsible for reporting to the readership, which, number one, is you; and number two, the taxpayer of America, that there isn't something going wrong with these billions of dollars. And that's going to ring a bell. At least it should ring a bell to the readership that there is the possibility of something going on there. Mr. Bonilla. Thank you very much. Mr. Viadero. Sure. Mr. Bonilla. We'll be talking more about this. I appreciate your time. Thank you, Chairman. Food Stamps Ineligible Recipients Mr. Skeen. Thank you. Roger, I notice we are talking about something like $2.4 billion in loss in the entire Food Stamp Program. And this is made up generally from inaccurate information, and updating information on recipients, mistakes, or mistaken and erroneous information given by the beneficiary. In addition to that, I understand we have people in prison where their food is taken care of, but they're still on the Food Stamp Program. Mr. Viadero. On the Food Stamp Program; yes, sir. Mr. Skeen. What are we going to do? What is being done to update this situation? Mr. Viadero. Well, I'm happy to say that the Department of Agriculture does not certify the recipients. That still is a State function. I'd also like to say with a great deal of pride one of my agents in the Northeast Region, who at this time has been working with the States of Maryland and Virginia looking at their respective inmates. GAO also went out and did a rather nice study. Again, that's not to say that many of the people that are incarcerated that receive Food Stamps mailed to the house or picked up by the house that the household still is not in need of the Food Stamps. It's just that the people that are incarcerated are still listed as the recipient. Mr. Skeen. At least there should be some control on that kind of a situation. Mr. Viadero. I more than concur, sir. Mr. Skeen. But this would have to be done by the State itself. Mr. Viadero. Yes, sir. FCS is pushing them to make these matches now. Mr. Skeen. So, something is being done about this. Mr. Viadero. They're trying, sir. Yes, sir. forfeiture Mr. Skeen. Very good. On forfeiture, you mentioned that you haven't had any transfers of money or goods from the forfeiture program at all. What's holding it up? Mr. Viadero. Well, what's happening is we have people in one department say we're not entitled to an equitable share. Mr. Skeen. Is this at GAO? Mr. Viadero. No. I'm happy to say GAO is not guilty. This is the Department of Justice. Mr. Skeen. Oh, the Justice Department is guilty? Mr. Viadero. Yes, sir. Mr. Skeen. We're going to have to do something about Justice. How much money is involved that you think should be attributed to your benefit? Mr. Viadero. At this time we have approximately $10 million in assets subject to forfeiture, of which OIG would claim a share. Mr. Skeen. $10 million? Mr. Viadero. Yes. Mr. Skeen. What would you do if you had that money? Mr. Viadero. The first priority would be to go out and get the proper equipment for the people that I have such as the technical surveillance equipment. Because any time we run a surveillance right now, we have to do it step-and-fetch-it, and beg, borrow, and steal from the larger investigative agencies such as the Secret Service and the FBI. The next thing we would do is get better training for people. It's been a while these people have been trained. And that's not to say that they're not trained, okay. But I would like to give them better training. I'd like to get them out to do, particularly some white collar crime training; some extensive legal training; some support training. The training, just to train the agents in forfeiture, was in excess of $150,000. That was for the training. Mr. Skeen. For investigations? Mr. Viadero. No. That was for the agency, sir. Yes, sir. It included the printing of the manuals, the per diem costs, bringing people from the regions for the training. It was about $152,500 to get everybody trained because that's an important thing, especially with the way many Federal agencies are being looked at and abusing some of the rights of individuals under forfeiture. As we've stated here and as you folks concurred, we will not do a Judicial forfeiture unless it's court-ordered. And there is a big distinction between seizure authorities of OIG and that of the other agencies in that context. We will not move on those forfeitures unless it's directed by a U.S. District Judge or a Magistrate Judge. Mr. Skeen. That's your backup. Mr. Viadero. Well, sir. I think they're the independent third arbiter here. budget--fte's Mr. Skeen. You're asking for a $2.231 million increase in your budget and this is primarily for what, investigators? Mr. Viadero. Well, as I mentioned, when I hire, if I hire one investigator, I hire one auditor. And I still--even with that $2 million plus, I still cannot come up to my staffing level, my authorized FTE. Mr. Skeen. What is that level? Mr. Viadero. My authorized FTE was 811, sir. Mr. Skeen. What do you have? Mr. Viadero. I have 745 at this time. Mr. Skeen Okay. Does anyone else have any other questions? Ms. Kaptur. white collar crime Ms. Kaptur. I know we have a vote on. I just wanted to thank the Inspector General for excellent testimony and for fine work. I did want to have you elaborate on a comment you made when I was asking you questions before. You said you've done investigatory work in other agencies. And prior to coming to the Department of Agriculture, but you said it was the worst criminal activity that you've seen. Mr. Viadero. No. I said it's the best white collar crime I've seen. Ms. Kaptur. All right. Could you elaborate on that. What do you mean by that? Mr. Viadero. This is some of the finest white collar crime, from an investigative standpoint, it's almost stimulating, Ms. Kaptur. I must tell you that this is not nickel and dime white collar crime. With the program fraud that is going, seeing some of the companies that we've been dealing with, we're not just dealing in the street. This is a very unique operation. We deal Food Stamps in the street and we deal program fraud in the board rooms of some of the largest corporations in America. And with 29 years in the business, this is the best work I've ever seen. banco nationale scandal Ms. Kaptur. Foreign Agricultural Service, the largest fraud settlement in history of USDA. It was a conspiracy case. Can you add anything to what's in the testimony on that? $25 million, am I reading this right; $25 million to the U.S. Government in civil penalties? Mr. Viadero. Mr. Beauchamp shepherded this one through personally. So, I'll let him do it. Mr. Beauchamp. That was an investigation that came out of the Banco Nazionale del Lavoro scandal concerning food sales to Iraq. This was the latest prosecution, although other cases are still going on. The Company was the Continental Grain Company. Ms. Kaptur. Ah, that's what I wondered. Mr. Beauchamp. And its affiliate. It is a European affiliate. Mr. Skeen. She'd make a good agent for you. Ms. Kaptur. Thank you, Mr. Chairman. Would you provide me with more detail on that case for the record? Mr. Skeen. We would like to have it. [The information follows:] Banco Nationale Scandal On November 22, 1996, the Continental Grain Company (Continental) and Arab Finagrain Agri-Business Trading, Ltd. (Arab Finagrain), a foreign-based affiliate of Continental, agreed to a civil and criminal settlement in U.S. District Court for the District of Columbia concerning the sale of agricultural commodities to Iraq. Arab Finagrain pled guilty to a criminal information which charged it with conspiring to defraud USDA and was sentenced to pay a $10 million criminal fine. At the same time, Continental paid the Government an additional $25 million to resolve the Government's civil claims against it and Arab Finagrain in connection with the investigation. The criminal information charged that Arab Finagrain fraudulently participated, through Continental, in USDA's Export Credit Guarantee Programs which are funded by the Commodity Credit Corporation. Through those programs, USDA provides payment guarantees to qualified exporters which sell their goods on credit to importers in designated countries. The programs were established to expand foreign markets for domestic agricultural goods by reducing the risk of doing business in developing countries. The OIG investigation which led to the criminal and civil action found that from 1987 through 1990, Arab Finagrain caused Continental to register for and obtain export credit guarantees for sales of agricultural goods to Iraqi government agencies. The investigation showed that Arab Finagrain, a Swiss-based company in which Continental owned a majority interest, fraudulently used Continental to register the commodity sales with USDA because Arab Finagrain, which had no office or presence in the United States, was not eligible to participate in the export credit programs. Mr. Skeen. Mr. Fazio. Mr. Fazio. No Thank you, Mr. Chairman. Closing Remarks Mr. Skeen. Thank you very much. We're going to go vote. We appreciate your testimony. We appreciate the work that you're doing. Thank goodness somebody is watching where it's going. Mr. Viadero. Thank you, sir. Mr. Skeen. Thank you all very, very much. We are adjourned. [The following questions were submitted to be answered for the record:] Inspector General high error rates--fcs Mr. Skeen. The Food and Consumer Service's 1995 error rate reduction plan outlined a number of actions to provide states with error rate reduction assistance and to monitor the states' progress. Have you conducted any follow-up audits and investigations to assess the effectiveness of this plan? If so, what did you find? If not, do you plan to do any follow-up work? Response. We are just completing an audit of FCS' reinvestment of quality control penalties. The reinvestment program is designed to require State agencies to reinvest penalty funds into corrective action efforts to bring down high error rates. This is an important piece of FCS' efforts to reduce error rates since it sanctions States for excessive error rates and seeks to have States reinvest penalty amounts into program functions that should reduce error rates. Our report will be completed in about a month, and we will provide it to the Committee. high error rates--new york Mr. Skeen. At last year's hearing you told the Committee you had a joint operation going with the New York State Inspector General to address the high error rate in New York City. What is the status of this joint effort and what impact has it had on reducing the City's error rate? Response. New York State's Inspector General had asked us to participate with him in a review focusing on possible dual participation by people enrolled in alcohol and drug rehabilitation programs. After our initial meeting, New York State's Inspector General has not been in a position to proceed with the review. We are presently in New York City following up on our previous audit of case file documentation. The documentation of establishing a household's eligibility and determining the level of program benefits is one of the key areas in reducing error rates. The report will be completed this spring, and we will make it available to the Committee. food stamp certification process Mr. Skeen. Mr. Viadero, in fiscal year 1995 you told the Committee that you had made some recommendations to the Food and Consumer Service on ways to improve the food stamp certification process, thereby reducing State's error rate, and that they had agreed to take corrective action. At last year's hearing you told us that you were going to give the states time to implement the corrective actions and initiate a follow-up audit during fiscal year 1996. What were the findings of this follow-up audit and what impact have these actions had on reducing state's error rate? Response. When we conducted our nationwide audit of FCS's error rate reduction activities (report issued December 20, 1995), we found that more FCS involvement in corrective action planning and monitoring of State's as called for in its FY year 1995 error reduction plan was needed to reduce errors. Although FCS had performed administrative reviews of States' corrective action plans, assisted States with error reduction strategies, and established sanctions for high error rates, the past actions have not led to downward trends in the overall error rate. As a result, we recommended that FCS ensure that regional offices: (1) develop with the States specific corrective action initiatives applicable to each State's circumstances; and (2) follow through with periodic onsite monitoring of States' implementation of the approved corrective action initiatives. In an effort to allow States ample time to implement the corrective actions, we have not yet conducted a followup audit. However, a followup audit will be planned for fiscal year 1998. food stamp legislation Mr. Skeen. Of the recommendations that you made to the authorizing committee for improving the food stamp program, how many were incorporated into either the Farm Bill or the Welfare Reform Bill? Response. Seven of the 10 recommendations I discussed before the U.S. House of Representatives Committee on Agriculture regarding ``Enforcement of the Food Stamp Act'' on February 1, 1995, have been incorporated into the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Welfare Reform bill). They include authority to request income and sales tax records; require site visits by FCS to retailers in the process of being authorized; periodic reauthorization of retailers; allow for the forfeiture of proceeds, property used in the transaction, or to facilitate the commission of an applicable violation; immediate suspension of a retailer effective the date of notification of disqualification; permanent disqualification of a retailer at the Secretary's discretion; and require retailers to be disqualified from the Food Stamp Program for the same length of time as the disqualification period from the Special Supplemental Nutrition Program for Women, Infants, and Children program. resources devoted to the food stamp program Mr. Skeen. During fiscal year 1996, what percentage of your investigative and audit resources were devoted to the food stamp program? What percentage of your fiscal year 1997 resources will be devoted to food stamp activities? Response. In FY 1996, Investigations devoted 46 percent and Audit devoted 11 percent of their available resources to the food stamp program. We expect these activities to continue at approximately the same level in FY 1997. resources used to monitor food stamp program Mr. Skeen. Please update the table that appears on pages 203 and 204 of last year's hearing record, which shows how much of your budget is spent on monitoring the food stamp program, to reflect fiscal year 1996 actuals and fiscal year 1997 estimates. [The information follows:] Budget Spent on Monitoring the Food Stamp Program Fiscal year Amount 1991................................................. $11,225,000 1992................................................. 12,839,000 1993................................................. 13,775,000 1994................................................. 18,600,000 1995................................................. 19,743,000 1996................................................. 17,952,000 1997*................................................ 17,900,000 *Estimated questionable ebt transactions Mr. Skeen. Your office assisted the Food and Consumer Service in the development of a computer package to assist in identifying Electronic Benefit Transfer (EBT) traffickers. The nationwide system was scheduled to be operational in July 1996. Have your completed your evaluation of its effectiveness? What were your findings? Response. FCS deployed its Anti-fraud Locator EBT Redemption Transactions nationwide system for identifying questionable EBT transactions in the fall of 1996 for States operating on-line EBT systems and in January 1997 for the two States operating off-line EBT systems. We have not begun an evaluation of this system. However, we have consulted with and provided comments to FCS on the implementation and operation of this system. recipient fraud Mr. Skeen. When we asked you last year if more State and local resources were needed to combat recipient fraud, you stated that as soon as additional EBT systems were brought on-line you would be in a better position to assess the effectiveness of state and local investigators and the necessary level of resources that should be committed to fighting fraud in the program. Give us an update on this situation. Response. Currently, we have not been able to assess the need for additional State and local resources to investigate food stamp recipient fraud. There are 15 States that have operational EBT systems--13 on-line and 2 off-line--an increase of 4 States since December 1995. An additional 30 States are expected to begin delivering food stamp benefits through EBT by FY 1998. As more States implement EBT systems, we will be in a better position to assess this issue. ebt fraud Mr. Skeen. At this time last year your office had 97 open investigations in six states involving EBT fraud. This number was up from 48 open cases the year before. What is your current number of open investigations of EBT fraud? Can you give us a synopsis of these cases and tell us why there are so many? Response. Since my testimony of last year, OIG investigations of EBT trafficking have resulted in 57 indictments, 45 convictions, and monetary results of $2.8 million. At present, we have 35 open investigations involving EBT fraud. These cases are located in Maryland, Ohio, New Mexico, Texas, Minnesota, and New Jersey. EBT allows us to identify fraudulent activity in a store after it has occurred. Also, we are now able to analyze transaction data and, using a number of investigative techniques, estimate an amount of fraud at the particular store under investigation. This gives us another tool by which to successfully prosecute cases which we were previously unable to prove using food stamp coupons. As the number of States that have EBT increases, we will continue to see an increase in these type of cases. Last year, EBT in Texas expanded to include Houston which dramatically increased the number of individuals and authorized retailers utilizing EBT. As the indictments and convictions of persons who traffick in EBT increase, we believe the knowledge that we can detect EBT trafficking patterns will act as a deterrent to EBT trafficking. retailer eligibility--non ebt states Mr. Skeen. How does allowing states to expand their EBT systems into non-EBT states diminish FCS' control over retailers eligibility to transact EBT benefits? Response. States that do not operate an EBT system have not performed onsite visits to ensure authorized FSP retailers in their State continue to meet FSP requirements. A regional consortium proposed to allow retailers, nationwide, who adopt the QUEST mark, a quasi-EBT network, to accept EBT benefits without entering into a agreement with the State agency as required by FSP regulations. This agreement is required to address certain areas relating to EBT participation, liabilities, manual transactions, etc. Also, both FCS and OIG are aware that the listing of retailers authorized to participate in FSP includes retailers who are no longer in business, retailer who do not meet the minimum eligibility requirements, and locations with multiple authorizations. Before FCS allows a retailer to accept EBT transactions, FCS must have adequate assurances that the retailer is a legitimate business concern and meets FCS' program requirements. ebt cards security Mr. Skeen. Currently, what controls have been installed on EBT cards? Why isn't FCS taking your recommendations and incorporating adequate safety features? Response. Currently, the security controls we recommended and supported by the Secret Service and other oversight bodies are not installed on EBT cards nor do current FSP regulations require them. The controls we recommended include fine-line printing, holograms, multi- color cards, and expiration dates. In current operational systems, the EBT card includes the following elements: recipient name, card number, signature panel, and magnetic strip. FCS has proposed regulations that address our concerns and incorporate adequate safety features. These regulations are currently being reviewed by the Office of Management and Budget. ebt contractor operating controls Mr. Skeen. What is being done to address concerns raised over operating controls established by EBT contractors? Response. During our initial EBT audit work, we focused on being proactive and identified potential areas of concern related to protection of personal data of FSP recipients and sensitive retailer information residing at the EBT contractor. These recommendations were to make FCS aware of potential problems that might occur. As a result, we are continuing to monitor and work with FCS in establishing controls by EBT contractors. We are also working with OMB to develop ``agreed to audit procedures'' that will be used by auditors conducting audits at EBT vendors. Such procedures will allow for consistent coverage of EBT operations at vendors. ebt card cost Mr. Skeen. There has been some talk about deducting the cost of the EBT card from a recipient's benefits. This would be about $2.00 per card. Does FCS have the authority to do this? Response. FCS regulations allowed the State agency, with FCS' approval, to impose a replacement fee which could not exceed the cost to replace the EBT card. The recent Welfare Reform Act gave FCS the authority to allow States to collect this fee by reducing the recipient's monthly allotment. FCS does not have the authority nor are they allowing States to impose a fee to issue an initial EBT card. Also, FCS regulations do not allow States to charge recipients transaction fees to use their food stamp benefits. ebt card safeguards Mr. Skeen. What would an EBT card cost to have adequate safeguards included in it? Response. The bid for the Southern Alliance of States, a coalition of eight States, indicated the proposed card specifications would cost an additional 22 cents per card or three-fourths of 1 cent per case, per month. A two-State project area, with a significantly lower case load than the Southern Alliance of States, has verbally quoted approximately 3 cents per case per month by its EBT contractor for the enhanced features. reducing food stamp fraud Mr. Skeen. Maryland was the first state to implement an EBT program statewide for food stamps. Give us a comparison of the level of fraud that occurred in the coupon program and the EBT program in Maryland. Response. In the past, we were not able to measure the level of fraud that occurred using food stamp coupons. Currently, through an analysis of computerized data, EBT allows us to readily identify potential fraud of both retailers and recipients. However, we have not determined the level of fraud occurring in the EBT program in Maryland or any other EBT State. We continue to strongly support the EBT initiative and believe getting food coupons off the street goes a long way toward preventing street trafficking. fcs retailer tracking system Mr. Skeen. What were the results of your review of the Food and Consumer Service's redesigned retailer tracking system at the Minneapolis Computer Center, a system used to monitor over 200,000 authorized retail stores? Response. Our review concluded that, although FCS has made progress in reducing retailer food stamp trafficking, much work remains. We believe that the FCS National Office needs to modify its strategy to include more direction, guidance, and oversight by the national and regional offices. Without this, both FCS' long-term and short-term efforts will continue to be fragmented and less effective than desired. FCS' plans for combating trafficking have focused on compliance activities instead of developing strategies to prevent it. FCS needs to emphasize the role of field offices with their onsite preauthorization visits as a first line of defense in preventing problem retailers from entering the Food Stamp Program. rolling stores Mr. Skeen. What action has the Food and Consumer Service taken to address the problems with ``rolling stores'' in the food stamp program? Response. In response to the recommendations in our FY 1995 audit on ``rolling stores,'' FCS agreed to evaluate the need for such trade routes in all large cities and metropolitan areas in the region. Further, as part of its overall plan, it was to remove ``rolling store'' operations from certain counties in the Southeast Region and examine on a case-by-case-basis throughout the region the continued operation of the stores. Until we perform a followup audit, we do not know what action FCS has taken. A followup audit in Louisiana is included in our FY 1997 plan. food stamp cases Mr. Skeen. Provide a table similar to the one that appears on page 205 of last year's hearing record showing the number of food stamp cases that were issued, the number referred to the Department of Justice, and the number accepted by the Department of Justice, for fiscal year 1996. [The information follows:] U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF INSPECTOR GENERAL FOOD STAMP PROGRAM REFERRALS, FY 1996 ------------------------------------------------------------------------ Cases Referred to Accepted by State by DOJ issued DOJ DOJ ------------------------------------------------------------------------ Arizona.......................... 9 2 0 Arkansas......................... 3 3 1 California....................... 57 8 2 Colorado......................... 15 5 1 Connecticut...................... 10 4 0 Delaware......................... 3 2 1 District of Columbia............. 1 0 0 Florida.......................... 69 26 23 Georgia.......................... 12 9 8 Hawaii........................... 2 1 1 Illinois......................... 27 10 6 Indiana.......................... 10 4 0 Iowa............................. 1 0 0 Kansas........................... 50 6 3 Louisiana........................ 36 16 0 Maryland......................... 16 11 9 Massachusetts.................... 6 6 6 Michigan......................... 8 4 4 Minnesota........................ 1 0 0 Mississippi...................... 4 1 1 Missouri......................... 22 17 9 Nevada........................... 1 1 0 New Jersey....................... 23 15 2 New Mexico....................... 3 0 0 New York......................... 71 41 9 North Carolina................... 10 8 7 Ohio............................. 14 7 4 Oklahoma......................... 10 0 0 Oregon........................... 4 1 1 Pennsylvania..................... 33 12 5 Rhode Island..................... 1 1 0 South Carolina................... 1 1 1 South Dakota..................... 1 1 1 Tennessee........................ 1 1 0 Texas............................ 118 81 0 Virginia......................... 18 4 2 West Virginia.................... 9 2 1 -------------------------------------- Total...................... 680 311 108 ------------------------------------------------------------------------ monitoring wic funding Mr. Skeen. An audit you did reviewing the disqualification of stores that are both a retailer for the food stamp program as well as a vendor for the WIC program showed that procedures utilized by FCS field offices and WIC state agencies were inadequate. The results being that violation-prone retailers and vendors were not always sanctioned and/or disqualified from participation in all FCS programs. You also found that FCS procedures provide only minimal guidance to the WIC state agencies for removing disqualified retailers and vendors. Can you tell the Committee how much WIC funding is going to sanctioned and/or disqualified retailers and vendors? Response. We are not aware of how much WIC funding is going to sanctioned and/or disqualified vendors. However, in our audit of five WIC State agencies, we questioned $8.7 million--$3.8 million to WIC violators who were not fully investigated and adjudicated, $3.7 million to WIC disqualifications not timely referred, and $1.2 million for appeals process that delays or prevents FSP withdrawals. Mr. Skeen. Are WIC benefits slated to be included on the same EBT card as food stamp benefits? Response. Yes. Currently, Wyoming is operating an off-line EBT system with WIC benefits in seven counties. Also, the Southern Alliance of States, a regional consortium of eight States, will be conducting a feasibility test in three States utilizing an on-line system to issue WIC benefits. wic program Mr. Skeen. Now that we are talking about WIC, give us a rundown on the audit and investigation work you are doing in this program? Response. In terms of EBT, we are currently reviewing the Wyoming EBT system. We are evaluating the adequacy of the established controls and an assessment of whether it is functioning as designed. We have a number of ongoing audits in the WIC program including: Nutrition Education Costs Charged, Puerto Rico; Integrated Statewide Information System, California; Administrative Costs, California; and Accountability of Vouchers, Minnesota. In addition, we are planning audits of WIC Food Delivery Systems--Vendor Compliance and Administration and Management of the Virginia WIC Program. We currently have seven open WIC program investigations. During fiscal year 1996, we obtained two convictions and $131,220 in monetary results. Additionally, WIC violations are often discovered during our investigations of food stamp trafficking and charged in the same indictment. However, since the investigations were initiated as food stamp cases and tracked as such in our management information system, we are unable to specifically identify WIC program statistics from these cases. welfare reform act Mr. Skeen. Your office is reviewing draft regulations and issue papers that FCS is preparing to comply with the Welfare Reform Act. Give the Committee a complete description of this review. Response. We are reviewing all draft documents that FCS will issue either to its regional offices or State agencies that are related to provisions of the Welfare Reform Act. For the FSP, we have reviewed and commented, as appropriate, on questions and answers and policy memorandum related to certification policy issues, guidance for conducting quality control reviews, implementation of the retailer provisions, disqualifications and collection of overissuances, eligibility of noncitizens, recipient claims retention rates, guidance for States seeking waivers, employment and training programs, and eligibility of able-bodied adults without dependent children. We have also reviewed and commented on the following draft FSP regulations: recipient claims regulations and collection standards. These are the only FSP regulations, as of this date, that have begun the approval process within the Department. For the other FCS programs, we have reviewed and commented, as appropriate, on advisory memorandums related to reimbursement for meals served in the Child and Adult Care Food Program and Summer Food Service Program; implementation of Commodity Distribution Programs; changes to the Child and Adult Care Food Program, Summer Food Service Program, the National School Lunch and School Breakfast Programs; and WIC-related provisions. We have also reviewed an interim rule related to Child Nutrition and WIC Reauthorization Act amendments. financial statement audits Mr. Skeen. Please update the table that appears on page 207 of last year's hearing record showing which financial statement audits you contract-out and which you do in-house as well as the cost of each audit to include fiscal year 1996 actuals and fiscal year 1997 estimates. [The information follows:] COST OF FINANCIAL STATEMENT AUDIT ACTIVITY DURING FY 1996 ------------------------------------------------------------------------ Method of Audited agency performance FY 1996 cost ------------------------------------------------------------------------ FCIS (now Risk Management Agency). Contract............ \1\ $218,000 RTB (now part of RUS)............. In-House \2\........ 244,000 CCC............................... In-House............ 981,000 FCS............................... In-House \3\........ 1,487,000 FS................................ In-House............ 970,000 RECD (now Rural Development)...... In-House............ 905,000 Consolidated...................... In-House............ 418,000 ------------------------------------------------------------------------ \1\ Contract amount plus other costs incurred by OIG. \2\ Audit of RTB's FY 1995 operating results was contracted out. FY 1996 is being performed in-house, and FY 1997 will also be performed in- house. \3\ The cost of audit activity during FY 1995 was $1,138,000 or $349,000 less than FY 1996. Additional efforts were needed during FY 1996 to adjust and validate FCS's financial information so that its statements for the year ending September 30, 1995, could receive an unqualified opinion. Except for FS and USDA's consolidated statements, costs should be approximately the same for audit activity during FY 1997. FS was not able to produce auditable financial statements for the year ending September 30, 1996. Consequently, we could not perform an audit of its statements, and the scope limitation restricted our ability to audit USDA's consolidated statements. The audit resources are being used to participate in a coordinated effort between FS, OIG, and OCFO to develop and implement a corrective action plan which achieves financial health within FS. ccc financial audits Mr. Skeen. What was your cost of performing audits of CCC financial statements and what was the reimbursement from CCC? Why doesn't the reimbursement cover the full cost of doing the audit? Response. Our in-house cost to perform audits of CCC's financial statements during FY 1996 totaled $981,000; whereas, the reimbursement from CCC for audit work performed during FY 1996 was only $795,000. In FY 1997, the reimbursement from CCC has been increased to $842,000, although we expect the audit cost to be approximately the same for FY 1997. The reimbursement estimates are developed well in advance of when the audits are performed and the actual costs have been higher. reimbursements Mr. Skeen. Please update the table that appears on pages 207 and 208 of last year's hearing record showing the reimbursement received and the actual cost of the audit for CCC, FCIC, and RUS, to include 1996. [The information follows:] OIG AUDIT COSTS AND REIMBURSEMENT ---------------------------------------------------------------------------------------------------------------- In-house/ Audited agency Fiscal year contract cost Reimbursement \1\ ---------------------------------------------------------------------------------------------------------------- CCC................................................................ 1991 $1,183,000 $675,000 1992 1,017,000 723,000 1993 832,000 752,000 1994 827,000 741,000 1995 931,000 857,000 1996 981,000 795,000 FCIC............................................................... 1991 218,000 200,000 1992 277,000 208,000 1993 255,000 216,000 1994 210,000 210,000 1995 225,000 225,000 1996 218,000 170,000 RUS................................................................ 1991 184,000 175,000 1992 231,000 210,000 1993 236,000 233,000 1994 189,000 170,000 1995 175,000 175,000 1996 244,000 170,000 ---------------------------------------------------------------------------------------------------------------- \1\ Contract amounts plus other costs incurred by OIG. amounts spent on outside public accountants Mr. Skeen. Please update the table that appears on page 213 of last year's hearing record showing the amount of funds expended for outside public accountants hired under contract, to include fiscal year 1996 actuals and fiscal year 1997 estimates. Also, provide an explanation for the increases which occurred over the years. [The information follows:] Contracted Public Accountants Fiscal year Contract amounts 1989................................................. $102,000 1990 \1\............................................. 774,000 1991 \1\............................................. 1,937,000 1992 \1\............................................. 1,660,000 1993................................................. 338,000 1994................................................. 258,000 1995 \2\............................................. 396,000 1996 \2\............................................. 397,000 1997 est.\3\......................................... 166,500 \1\ Includes FCS Child and Adult Care Food Program contract audits. \2\ Includes audits of tobacco manufacturers. \3\ RBT audit previously contracted out, now being performed in-house. rural development Mr. Skeen. RECD received a qualified opinion due to the absence of supporting documentation for estimates used to determine its allowance for subsidy on direct and guaranteed loans obligated in fiscal year 1991. You were working with RECD to develop a method that will provide adequate support for the elements included in computing the subsidy estimates and reestimates. What is the status of this issue? Response. OIG and OCFO entered into an agreement to identify a methodology that managers and financial auditors could use to document and support the assumptions and cash flows used to establish and reestimate loan subsidy cost. A sensitivity analysis of each of the data elements used to establish the credit subsidy has recently been completed. Based on that analysis, alternative sources of data will be established for the most sensitive elements. The final report from the study is presently being completed. Agency officials have initiated actions towards correcting the problems we identified, and we are working with them to develop a sound and verifiable methodology for estimating and reestimating loan subsidy costs in the future. credit reform Mr. Skeen. You were also involved in a government-wide task force on credit reform requirements. What is the status of this initiative? Response. Our audit staff has actively participated in the government-wide credit reform task force. A member of our staff was cochairperson of the audit subgroup and took an active role in developing issue papers drafted by the task force. An issue paper finalized by the task force details a model information store concept that can be used to provide adequate support for elements included in computing subsidy estimates and reestimates. The task force also recommended changes in financial statement reporting requirements that were incorporated into OMB Bulletin 97-01, ``Form and Content of Agency Financial Statements.'' In addition, issue papers are being drafted to address preparing and auditing direct loan and loan guarantee subsidies under credit reform and the timing of subsidy reestimates. These issue papers are expected to (1) address the actions necessary by agencies, such as Rural Development, to fairly state the loan subsidy costs on their financial statements and (2) provide guidance to auditors on internal control and substantive procedures to be used when auditing the loan subsidy costs. The task force began operating in mid-1995 and expects to finalize the draft issue papers in mid-1997. At that time, it is expected to occasionally meet as issues arise. infoshare Mr. Skeen. The Department's InfoShare project has changed direction many times. It is now being managed through the USDA Service Center Implementation Initiative. At last year's hearing you stated your office was assessing these changes and plan to increase coverage of the project. Tell us your analysis of the current project. Response. The Field Service Center Implementation project has evolved from the technology-driven InfoShare project to an approach that is more closely related to the business processes and needs of the partner agencies. The project has recently become more focused on the identification, analysis, and reengineering of those business processes. Spending on information resources for the partner agencies has largely been restricted to the installation of telecommunications needs such as LAN, WAN, or voice that are deemed necessary for the move by the partner agencies from individual field office locations to collocated USDA Service Centers. Presently, OIG is assessing the adjustments made in Service Center implementation as a result of the FAIR Act, Rural Development's Direct Loan Origination and Servicing System, the departmentwide moratorium on information technology investments, budget constraints of the current fiscal year, and projected constraints for FY 1998. confidential funds Mr. Skeen. Update the table that appears on pages 208 and 209 of last year's hearing record showing the amount spent for confidential operational activities, to include fiscal year 1996 actuals and fiscal year 1997 estimates. [The information follows:] CONFIDENTIAL OPERATIONS ACTIVITIES ------------------------------------------------------------------------ Year Available Spent ------------------------------------------------------------------------ 1990.......................................... $87,000 $67,151 1991.......................................... 89,000 42,445 1992.......................................... 95,000 89,500 1993.......................................... 89,000 42,445 1994.......................................... 95,000 83,995 1995.......................................... 95,000 80,577 1996.......................................... 95,000 69,337 1997.......................................... \1\ 95,000 95,000 ------------------------------------------------------------------------ \1\ Estimated through the end of the fiscal year. Throughout the year, as we conduct day-to-day investigations, we often have a need for more confidential funds than appropriated for this purpose. During our numerous undercover investigations, we utilize confidential informants whom we pay for important information concerning criminal activity. Because these needs vary so greatly depending on the particular workload, the $95,000 limitation can restrict the agency's investigative flexibility. hotline Mr. Skeen. How many complaints did you receive through the hotline in fiscal year 1996? Response. The hotline received 4,674 calls, letters, and walk-ins in FY 1996. hotline--responses Mr. Skeen. How many were you able to look into; how many were referred to an agency; how many were referred to the Department of Justice; and how many went unanswered? Response. OIG inquired into 245 of the hotline complaints received in FY 1996, 6 of which were referred to the U.S. Department of Justice for prosecution. We referred 4,216 complaints to the appropriate USDA agency. Of the complaints referred, we requested a response on 950; 2,515 complaints concerning food stamp recipients were forwarded to the Food and Consumer Service for corrective action with no response required; and 751 were minor violations that required no response back to us. Of the remaining complaints, 146 were referred to other law enforcement agencies for action. No action was taken on 67 complaints because they contained insufficient information. raisin crop insurance Mr. Skeen. Your investigation into the raisin crop insurance program revealed that the reconditioners who can profit from buying raisins at salvage prices and reconditioning them for resale are the same people who determined if a raisin crop is fit only for salvage. How is this problem being addressed? Response. We recommended that Risk Management Agency (RMA) develop and implement a methodology to value raisins sold as salvage using historic yields based on defects, including a methodology to pull a representative sample of damaged raisins for inspection by the Agricultural Marketing Service rather than relying on reconditioners to make a determination of whether raisins could be reconditioned. In their response to the audit, RMA said it would require loss adjusters to select a sample of no more than 10 tons of damaged raisins for reconditioning. However, if the grower chose not to pick up the raisins, a small sample would be taken by hand. This sample would be graded by USDA. A procedure developed by a committee of reinsured companies was recently implemented for the 1996 crop year. In its proposed rule for the 1997 crop year, FCIC included language saying that it may require the producer to recondition a representative sample of 10 tons of damaged raisins to determine if it meets standards. If standards are met, FCIC may require the producer to recondition all damaged production. However, we informed FCIC that additional wording should be added to its proposed rule that would allow FCIC to value damaged production at the maximum dollar amount if the producer is required to recondition a 10-ton sample and does not do so. Also, RMA's Compliance Staff has identified reconditioners who bought damaged raisins at salvage prices and then reconditioned the raisins and sold them at market prices after stating to insurance adjusters the raisins could not be reconditioned. These actions resulted in additional crop insurance payments to insured producers by FCIC. We are working with the U.S. attorney to pursue possible recoupment of damages to the Government resulting from false statements made by the reconditioners. gao report on crop insurance Mr. Skeen. At last year's hearing I asked you about a GAO report in the crop insurance area. It stated that because of a decision at USDA, instead of paying farmers who could not plant crops because of adverse weather conditions the normal 50 percent rate, they paid farmers at the rate of 75 percent without first adjusting the premium rates to account for the increase. This decision cost the Federal government about $135 million in additional claims that cannot be recovered. You were reviewing the report. For the record, tell the Committee your assessment. Response. OIG has not performed an indepth assessment of the referenced GAO report which questioned the Department's decision to increase the payment rate for prevented planting because of the wet weather in 1995. We do agree with the GAO report in that this action did increase the indemnity payments, and these additional costs cannot be collected unless future insurance premiums are increased by an amount that would compensate for these additional FCIC costs. However, our understanding from discussions with RMA personnel in Kansas City is that the prevented planting coverage was returned to the 50 percent rate effective for 1996 and that FCIC did not consider the additional losses that were incurred in 1995 when setting the premiums for the 1996 crop year. We have not evaluated the extent or propriety of premium rate adjustments. However, we have scheduled an audit of FCIC prevented planting activities for the last half of FY 1998. crop insurance abuse in south texas Mr. Skeen. Abuse of the crop insurance program was discovered in the south Texas area. The Office of Risk Management is reviewing all insurance claims filed in this area for evidence of abuse with oversight by your office. What are the findings of this review? Response. We performed an onsite review of crop insurance program abuses in the Coastal Bend area of south Texas. The four major findings include: (1) the use of inappropriate seed viability tests by loss adjusters to determine appraised potential; (2) insured crops destroyed without consent; (3) crop releases made less than 7 days after planting; and (4) acreage not replanted to the same crop when it was practical to do so. As of December 5, 1996, the dollar determinations of the potential indemnity overpayments resulting from the respective procedural or policy violations were estimated to be over $3.2 million. The RMA is working to determine appropriate overpayments and claims. crop insurance summary Mr. Skeen. Give us a complete rundown on the work you are doing in the crop insurance area. Response. OIG currently has various audit projects within the crop insurance area. These projects include audits of: (1) large indemnity payments on 1995 and 1996 crops; (2) establishment of producers' actual production histories; (3) almond losses in California; (4) fresh market tomatoes in Florida; (4) nursery crop losses; (5) expansion of the Crop Revenue Coverage Program; and (6) an evaluation of the Quality control process for crop insurance determinations performed by the reinsured companies. The large claims audit included reviews of apples, apricots, corn, cotton, cranberries, fresh market tomatoes, forage production, peanuts, plums, potatoes, soybeans, and wheat. The preliminary findings show potential overpaid indemnities estimated at $1.1 million as of January 15, 1997, because of such items as: (1) incorrectly established yields; (2) incorrect establishment of units; (3) failure of policyholders to retain records for required periods; (4) incorrect acreage reported or used; (5) loss occurrence after insurance period expiration; and (6) understated production. The evaluation of a statistical sample of Actual Production Histories is still being performed. However, our survey shows a 38 percent error rate based on judgment sampling of those Actual Production Histories for which three companies performed self reviews. Under the Crop Review Coverage Program review, we reported to RMA that it needs to strengthen management controls over the development and implementation of privately developed programs like the Crop Review Coverage. In addition, we are working with RMA in developing new regulations and procedures for this program. All the other audit work is still in the developmental stage. We currently have 32 open investigations involving the Risk Management Agency. During FY 1996, we obtained 10 indictments and 9 convictions, filed 2 civil suits, and received 8 civil judgments in this area. In 1996, our monetary results associated with our work in RMA programs totaled over $1.4 million. non-insured assistance program Mr. Skeen. At last year's hearing you were just starting audit work of the Non-Insured Assistance Program or NAP. What were your findings and recommendation? Response. We have performed audits of NAP in two States, California and Minnesota. We are issuing reports for San Joaquin and Monterey counties, in California and one State report in Minnesota In the California reports, we recommended that FSA recover up to $1,550,603 from producers who were overpaid and pay $8,263 to producers who were underpaid. We also found up to $569,477 in excess disaster loans should be recovered from two of these producers. Errors in payments and loans resulted because producers underreported production and FSA county office staff made calculation errors. In Monterey County, we reviewed 54 producers and determined that 30 had provided incomplete or inaccurate production evidence and 10 had producers whose payments were calculated incorrectly by the county office. In San Joaquin County, we reviewed 82 producers and determined 18 of them underreported their production by providing incomplete or inaccurate evidence which enabled them to receive higher payments than they were entitled to. In Minnesota, we reviewed 1995 NAP alfalfa losses in losses in Scott and Nicollet Counties. We questioned $51,000 in payments in Nicollet County because the actual production history for 22 of 44 producers that received 1995 NAP were based on inaccurate and/or insupportable production evidence provided by producers. In addition, 6 of the 22 producers also provided false certifications to the County Committee regarding production in 1 or more years since the production provided exceeded production already reported and used in prior years for the calculation of payments under the old ad hoc disaster assistance program. We recommended that overpayments be collected and that needed administrative controls be implemented. The major weakness is in assuring that producers report all production when applying for assistance. This was also the major weakness with the old ad hoc disaster assistance program. The volume of payments under the 1996 NAP appear to be larger, and we plan to initiate some audit work in that program before the end of FY 1998. indictments, convictions, and suits Mr. Skeen. Of the indictments, convictions, and suits for fiscal year 1996, provide a table of the number filed by each agency of the Department. [The information follows:] FY 1996 INDICTMENTS, CONVICTIONS, AND SUITS ------------------------------------------------------------------------ Agency Indictments Convictions Suits ------------------------------------------------------------------------ AMS............................ 4 6 0 APHIS.......................... 6 3 0 FAS............................ 1 3 0 FCS............................ 767 609 73 FS............................. 6 2 1 FSA............................ 104 53 22 FSIS........................... 10 21 0 Multi-Agency................... 0 3 0 NRCS........................... 4 2 0 OBPA........................... 1 1 0 OIG............................ 1 1 0 OO............................. 4 4 0 RBS............................ 1 1 0 RHS............................ 22 20 8 RMA............................ 10 9 2 ---------------------------------------- Total.................... 941 738 106 ------------------------------------------------------------------------ 1996 audit and investigations results Mr. Skeen. Please update the table that appears on page 213 of last year's hearing record showing the number of audit reports, investigative reports, indictments, convictions, and suits filed, to include fiscal year 1996. [The information follows:] AUDIT 22 INVESTIGATIVE RESULTS ---------------------------------------------------------------------------------------------------------------- Fiscal year-- -------------------------------------------- 1992 1993 1994 1995 1996 ---------------------------------------------------------------------------------------------------------------- Audit reports...................................................... 412 360 261 328 282 Investigative reports.............................................. 1,484 1,267 1,079 974 956 Indictments........................................................ 1,040 944 856 967 941 Convictions........................................................ 785 982 886 859 738 Suits.............................................................. 41 61 84 66 106 ---------------------------------------------------------------------------------------------------------------- electronic data sharing on conservation plans Mr. Skeen. As a result of inadequate procedures identified by your office within the Natural Resources Conservation Service (NRCS) in carrying out the conservation compliance program, NRCS and the Farm Service Agency (FSA) agreed to develop and implement an electronic data sharing effort to assure more timely revisions to conservation plans. Your office was considering this area for follow-up audit work in fiscal year 1997. Have you conducted any follow-up reviews to date? If so, what did you find? Response. No, we have not conducted any followup reviews to date. Our followup review of conservation compliance is scheduled to begin in March 1997 and will include coverage of the electronic data sharing effort. controls over production flexibility contracts Mr. Skeen. Provide a list of your recommendations to strengthen controls over production flexibility contracts that were submitted to FSA and NRCS. Response. We made four recommendations to the Farm Service Agency in our July 11, 1996, management alert. These were: (1) clarify existing cash lease procedures to require county offices to obtain the landowner's concurrence for the current year which includes precluding the designation of shares past 1996 unless a written agreement is obtained prior to any future contract approvals; (2) obtain the needed documentation for any applicable contracts that have already been approved and correct payment designations where appropriate; (3) reconsider the criteria for what constitutes a Fruits and Vegetables double-cropping history and determine if any other States are using trees as double-cropping history; and (4) issue a reminder to the State offices to emphasize the importance of obtaining all producer signatures and CCC representative approval before issuing payments on a contract, obtaining County Office Committee determinations before updating the ``person'' and ``actively engaged in farming'' flags, and obtaining proper power of attorney forms before allowing an agent to sign for a producer or owner. These recommendations were made as part of our Phase I, implementation of Agricultural Market Transition Act, audit work. FSA took corrective action on these recommendations as the audit field work was in process by issuing notices and other instructions to its field offices. As a result, FSA field offices were to review all contracts for the 1997 crop year to assure that shares were properly assigned and leases were correct, all contracts were properly signed and approved by the County Office Committee, and that proper power of attorney forms were on file. FSA also had its State and county offices review Fruits and Vegetables double-cropping designations prior to the time the list was published in the Federal Register. This review resulted in reductions in the number of counties that were designated as double- cropping counties. agricultural market transition act Mr. Skeen. Your assessment of the Agricultural Market Transition Act implementation will occur in three phases. For the record, please describe each phase and the timeframe for completing each. Response. Phase I, implementation of Agricultural Market Transition Act, is completed, and a report is being prepared. During Phase I, we provided FSA officials with our early findings and recommendations, and corrective actions were taken as applicable during the audit. Phase II covers the adequacy of controls over software development. We looked at 1996 data upload activities, computation of payments, and contract revisions. As an addition, phase II included a review to determine whether producers and/or county office personnel signed up fictitious and/or nonparticipating farms to obtain program benefits to which they are not entitled. Field work is completed, and the report is being prepared. Phase III addresses whether producers were in compliance with eligibility requirements. Field work is completed, and the report is being prepared. attempts to circumvent payment limitations Mr. Skeen. Your review of large landowners in two states determined that they were using combination leases to circumvent payment limitations. FSA agreed to correct this problem by clarifying the lease provisions for future payments. Have you conducted any follow-up investigations to see if the action FSA took was enough to rectify this problem? Response. We have not conducted any followup actions to determine whether corrective action will be sufficient to rectify the problem. OIG and FSA are still working together to agree on the appropriate corrective action. list and type of firearms Mr. Skeen. For the record, please provide the Committee with a list of the type and number of all firearms owned by OIG staff. [The information follows:] OIG owned firearms Type of firearm: Number 9mm semiautomatic pistols..................................... 373 .357 cal. revolvers........................................... 11 .38 cal. revolvers............................................ 52 12 gauge shotguns............................................. 49 Miscellaneous rifles and handguns maintained at headquarters for training purposes only.................................. 35 budget request Mr. Skeen. Provide a detailed breakout of your budget request to the Secretary; the Secretary's request to OMB; and the OMB allowance? Response. Our budget request to the Secretary was $83,805,000; the Secretary's request to OMB was $69,000,000; and the OMB allowance was $65,259,000. use of investigations resources by agency, fiscal year 1996 Mr. Skeen. Please provide a table similar to the one that appears on pages 213 and 214 of last year's hearing record, showing the breakdown of the OIG's resources and the percent of each that went towards investigations of each agency under USDA for fiscal year 1996. [The information follows:] USE OF INVESTIGATIONS RESOURCES BY AGENCY FISCAL YEAR 1996 [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Total OIG Investigations ----------------------------------------------------------- Percent Percent of OIG of OIG Dollars Staff- Dollars dollars Staff- staff- years per years yrs per Agency Agency ---------------------------------------------------------------------------------------------------------------- RMA................................................. $616 7 $475 77 5 71 FSA................................................. 17,269 209 7,261 42 75 36 FAS................................................. 1,236 15 475 38 5 33 FCS-FSP............................................. 17,952 195 14,488 81 149 76 FCS--Other.......................................... 5,163 65 1,427 28 15 23 AMS................................................. 974 12 222 23 2 17 APHIS............................................... 1,022 12 571 56 6 50 GIPSA............................................... 35 0 0 0 0 0 FSIS................................................ 2,230 24 1,712 77 17 71 ARS................................................. 66 1 63 95 1 100 CSREES.............................................. 173 2 0 0 0 0 ERS................................................. 0 0 0 0 0 0 NASS................................................ 0 0 0 0 0 0 RBS................................................. 457 6 31 7 0 0 RHS................................................. 3,223 37 1,934 60 20 54 RUS................................................. 505 7 64 13 1 14 FS.................................................. 3,850 50 476 12 5 10 NRCS................................................ 700 8 412 59 4 50 OO.................................................. 48 1 0 0 0 0 OP.................................................. 0 0 0 0 0 0 OCFO................................................ 1,148 0 0 0 0 0 NAD................................................. 0 15 0 0 0 0 OIG (Internal)...................................... 380 4 380 100 4 100 Multi-Agency........................................ 4,846 65 0 0 0 0 Other............................................... 1,712 18 1,712 100 18 100 OICD................................................ 83 1 0 0 0 0 ----------------------------------------------------------- Total......................................... 63,688 754 31,703 50 327 43 ---------------------------------------------------------------------------------------------------------------- use of audit resources by agency, fiscal year 1996 Mr. Skeen. Provide a similar table showing the breakdown and percentage by agency for audits. [The information follows:] USE OF AUDIT RESOURCES BY AGENCY FISCAL YEAR 1996 [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Total OIG Audit ----------------------------------------------------------- Percent Percent of OIG of OIG Dollars Staff- Dollars dollars Staff- staff- years per years yrs per Agency Agency ---------------------------------------------------------------------------------------------------------------- RMA................................................. $616 7 $141 23 2 29 FSA................................................. 17,269 209 10,008 58 134 64 FAS................................................. 1,236 15 761 62 10 67 FCS-FSP............................................. 17,952 195 3,464 19 46 24 FCS--Other.......................................... 5,163 65 3,736 72 50 77 AMS................................................. 974 12 752 77 10 83 APHIS............................................... 1,022 12 451 44 6 50 GIPSA............................................... 35 0 35 100 0 0 FSIS................................................ 2,230 24 518 23 7 29 ARS................................................. 66 1 3 5 0 0 CSREES.............................................. 173 2 173 100 2 100 ERS................................................. 0 0 0 0 0 0 NASS................................................ 0 0 0 0 0 0 RBS................................................. 457 6 426 93 6 100 RHS................................................. 3,223 37 1,289 40 17 46 RUS................................................. 505 7 441 87 7 86 FS.................................................. 3,850 50 3,374 88 45 90 NRCS................................................ 700 8 288 41 4 50 OO.................................................. 48 1 48 100 1 100 OP.................................................. 0 0 0 0 0 0 OCFO................................................ 1,148 0 1,148 100 0 0 NAD................................................. 0 15 0 0 15 100 OIG (Internal)...................................... 380 4 0 0 0 0 Multi-Agency........................................ 4,846 65 4,846 100 65 100 Other............................................... 1,712 18 0 0 0 0 OICD................................................ 83 1 83 100 1 100 ----------------------------------------------------------- Total......................................... 63,688 754 31,985 50 427 57 =========================================================== Reimbursements: CCC............................................. 795 ........ 795 100 ........ ........ FSA (FCIC)...................................... 170 ........ 170 100 ........ ........ RUS (REA)....................................... 170 ........ 170 100 ........ ........ Other........................................... 400 ........ 400 100 ........ ........ ----------------------------------------------------------- Total......................................... 1,535 ........ 1,535 100 ........ ........ ---------------------------------------------------------------------------------------------------------------- rural housing service Mr. Skeen. At last year's hearing you told the Committee that the Rural Housing Service agreed to management decisions which require that all of the $1.36 million in reserve accounts involving several rural rental housing projects be restored. What is the status of this issue? Response. The Texas State Office of Rural Development issued the borrower a demand letter for the $1.36 million in February 1996. In a subsequent Administrative Appeal hearing, the National Appeals Division reversed the portion of the agency decision requiring immediate deposit into property reserve accounts. Other portions of the agency decision were upheld, and debarment proceedings against the borrower are now in progress. delinquent loans Mr. Skeen. What were the results of your review into the servicing of delinquent loans that receive both HUD section 8 and RHS section 515 assistance? Response. RHS' Rural Rental Housing projects receiving HUD's section 8 assistance generally are in an excess cash condition because HUD's method of computing assistance, based upon prevailing market conditions, results in much higher subsidies than RHS' cost reimbursement methodology. This disparity was highlighted in our February 1996 report entitled ``Legislative Proposals to Strengthen the Rural Housing Service's Rural Rental Housing Program.'' Due, in part, to the availability of unneeded funds, we estimated that 330 projects of the 1,329 in our universe had used about $11 million of project funds for questionable or unauthorized purposes. Many of the cases we identified were referred for criminal investigation. forfeiture Mr. Skeen. Give us a complete description on where you stand with forfeiture proceedings. Response. OIG's forfeiture authorities have expanded in two ways. First, appropriations language was passed authorizing OIG to accept proceeds from forfeitures resulting from investigations involving USDA programs and operations. Second, the Government's authority to seek forfeiture of property involved in food stamp trafficking was expanded. In light of these statutory advances, OIG has completed a comprehensive, mandatory forfeiture training course for every OIG special agent. OIG is also working with the Department of Treasury and the Department of Justice in order to establish procedures for transferring proceeds from forfeiture actions to OIG. Additionally, OIG has established accounts to receive these proceeds, as well as fiscal controls to ensure financial integrity. OIG is exploring three ways to conduct such transfer--through equitable sharing, petitions for remission or mitigation, or as a participating agency. With respect to the first option, OIG's requests for equitable sharing transfers have been denied by Treasury and Justice. Regarding petitions for remission, OIG has filed seven such petitions with Justice and two with Treasury. Justice has responded to one of the seven with a request for additional information; Treasury has not responded to date. Finally, with respect to participating agency status, Treasury has notified OIG that OIG is prohibited by law from becoming a participating agency in Treasury's forfeiture fund. Justice has offered OIG participating agency status; however, OIG believes transfer through petitions for remission and equitable sharing are preferable at this point based on OIG's status as a non-Department of Justice agency. The Office of Management and Budget is currently working on a solution that can be accepted by the three agencies. Mr. Skeen. Has the Court issued its ruling on the legality of forfeiting assets through civil cases that were seized through criminal cases? If so, what did it rule? Response. The U.S. Supreme Court has settled the question regarding legality of parallel criminal prosecutions and in rem forfeiture actions. Last year, the Court, in United States v. Ursery, 116 S. Ct. 2135, held that the Fifth Amendment's Double Jeopardy Clause does not prohibit the Government from bringing parallel criminal prosecutions and in rem civil forfeiture proceedings based upon the same underlying offense. The Court held that punishing a defendant for a criminal offense and forfeiting the defendant's property for the same offense in a separate civil proceeding does not violate the Double Jeopardy Clause because in rem civil forfeitures do not constitute ``punishment'' for purposes of the Double Jeopardy Clause. Mr. Skeen. At last year's hearing you stated that you were working on a control system to monitor and track the funds that came into the agency through forfeitures. According to your statement this year, these controls are now in place and over $10 million has been identified for possible forfeiture as a result of your investigate work. When do you expect to receive your first transfer of funds? Response. Regarding anticipated dates of transfer of funds, Justice and Treasury have agreed to accept petitions for remission or mitigation filed by OIG. Neither Justice nor Treasury have, however, notified OIG of when to expect a final decision on the petitions filed in December 1996 and January and February 1997. The Office of Management and Budget is currently working on a solution that can be accepted by the three agencies. Mr. Skeen. Once you receive funds how do you plan to use them? Response. OIG plans to use such funds in order to advance its law enforcement mission, specifically, for equipment and training of OIG special agents. Mr. Skeen. Describe the process you go through in a forfeiture case. Maybe you could give us an example of one. Response. The process OIG goes through in a forfeiture case is the same process that applies to all Federal law enforcement agencies. There are three types of forfeitures--administrative, civil, and criminal. An administrative forfeiture is allowed in limited cases, i.e., those involving nonrealty and personal property valued at $500,000 or less and any amount of cash and where the individual who claims ownership in the property does not contest the forfeiture. Once an individual contests the forfeiture, it becomes a civil matter decided upon by the U.S. district courts. A criminal forfeiture is a forfeiture that results from a criminal conviction for a violation of law that includes forfeiture as a penalty for that violation. Criminal forfeitures are also decided upon by U.S. district courts. The general process is as follows. For any forfeiture, the property at issue is seized either before a final decision on the forfeiture--these are administrative and civil actions and certain criminal actions--or before the final decision--criminal actions. A decisionmaker, either Justice or a U.S. district court, rules on the forfeiture after interested parties are given an opportunity to contest the action. A decision is then issued. Following that decision, third-parties have another opportunity to request remission or mitigation--or ``forgiveness''--of the forfeiture. The property is then disposed of as required by law. An example of a forfeiture case involving an OIG investigation would include an investigation in Louisiana during which we established that an authorized retailer was involved in food stamp trafficking. Through various investigative methods, such as analysis of business and bank records, we identified that assets owned by the subjects of the investigation were directly related to the food stamp trafficking. These assets were listed as forfeitable property in the indictment, per Title 18 U.S. Code, Section 9882(b)(1)(A). Upon presentation to a Federal grand jury, we obtained a true bill of indictment. The information obtained during the investigation was included in an application and affidavit for seizure warrant, which is similar to an affidavit for a search warrant. This affidavit was presented to a U.S. magistrate who issued the seizure warrant, which is similar to an arrest warrant but is for property. Agents from IRS-CID served the seizure warrant, ``arrested'' the listed property, and processed the necessary paperwork. The five defendants pled guilty to various charges including food stamp trafficking and money laundering. At sentencing, the judge issued a Final Judgment of Forfeiture in which all the assets which had been ``arrested'' were formally seized and vested to the U.S. Government. The assets seized during this investigation included vehicles, boats, real estate, and bank accounts. fsis's controls over imported meat and poultry Mr. Skeen. Your office planned to conduct a survey last year to assess FSIS's oversight, policies, and control systems to guarantee that countries that export meat, poultry, or egg products into this country maintain and enforce inspection procedures and systems that are equal to that of the U.S. What were your findings and recommendations? Response. In December 1996, we issued a report that identified that FSIS has maintained adequate controls over the imported meat inspection process, and FSIS has taken steps to ensure that meat and poultry imports are produced under inspection systems equivalent to U.S. inspection systems. We did identify two issues that FSIS management should address in order to maintain the integrity of the imported meat inspection process. When FSIS determines that a foreign establishment is ineligible to import products into the United States, it is based on public health reasons; however, the specific reason for the establishment's ineligibility is not fully explained. Also, FSIS is in the process of reorganizing in order to implement new food safety standards. Under the reorganization plan, import inspection responsibilities and support functions will be merged with new organizational offices. FSIS will need to maintain its control over the imported inspection process since some of the functions will not be controlled under one organization as it was previously. We recommended FSIS develop and implement procedures to specify the reason for a foreign establishment's ineligibility and ensure that adequate control is maintained over the imported meat and poultry process throughout the agency's reorganization. A copy of that report is included for your information. [Clerk's note.--A copy of the report is retained in Committee files.] 1993 ad hoc disaster assistance program Mr. Skeen. What is the status of the collection of over $16 million in excess payments through the 1993 Ad Hoc Disaster Assistance Program? Response. The actual collections of funds are tracked by FSA and the Office of the Chief Financial Officer. We accept management decisions when the agency either establishes a claim or justifies noncollection. The $16 million was questioned in 45 different audits and, as of now, our management system shows that FSA has collected or is in the process of collecting $6 million. There are still about $10 million in recommended recoveries without management decision. This would include amounts pending investigations and other legal actions. FSA has been advised to delay collection in many instances pending the completion of ongoing investigations and/or court actions. some of these court actions are just now being completed. In addition, some producers have appealed the agency determinations to the National Appeals Division, and those cases are tied up or have been reversed in the appeal process. Further, it should be noted that some funds will not be collected due to such reasons as application of the 90-day rule and county committees providing producers with misinformation. 1994 ad hoc disaster assistance programs--losses Mr. Skeen. In your review of the 1994 Ad Hoc Disaster Assistance Program, you performed 26 audits covering a total of $13 million in loss claims. You identified $5.3 million in overpayments. This is 41 percent of the total audited. what was the total amount of loss claims in the 1994 program? What is being done to recover the $5.3 million? Response. The total 1994 loss claims were about $1 billion of which we audited $13 million. The $5.3 million is being collected through the normal resolution and closure process. OIG accepts managements decision when the agency agrees to collect the amount or is able to justify noncollection. The office of the Chief Financial Officer tracks the collections after we reach management decision. alternate agriculture research and commercialization center Mr. Skeen. Your office identified potential conflicts of interest in board decisions of the Alternative Agriculture Research and Commercialization Center (AARC). As a result, the Center established several written policies which the board approved to address issues raised by the evaluation. Have you conducted a follow-up evaluation? If so, have the problems been solved? Response. At the time the policies were developed, we reviewed and approved of the policies. A followup evaluation is scheduled for the second half of FY 1997. equipment Mr. Skeen. What was the $1.1 million in Object Class 31, Equipment, used for in fiscal year 1996? Response. Over $800,000 of this amount was for the replacement of obsolete and worn ADP equipment including desktop and laptop computers and printers for distribution to our offices nationwide. Other larger dollar purchases included telephone replacement systems in two of our suboffices for approximately $65,000 and a special law enforcement targeting training system for approximately $70,000. The balance of the funds was used for the purchase of replacement office equipment which was obsolete or broken. insurance and indemnities Mr. Skeen. Why does Object Class 42, Insurance and Indemnities, increase from $2,016 in fiscal year 1996 to $31,000 in fiscal year 1997? Response. The total for Object Class 42, Insurance and Indemnities, fluctuates from year to year: from a high of $42,000 in FY 1991 to a low of $2,000 in FY 1996. The $31,000 figure is estimated based on prior history in this object class. oig vehicles Mr. Skeen. Provide a table that shows the number of vehicles leased from GSA, the number commercially leased under GSA approved contracts, and the number the agency owns. Response. In FY 1996, we leased 152 vehicles from GSA, and 11 vehicles were commercially leased under GSA-approved contracts; OIG owns 33 vehicles. reception and representation activities Mr. Skeen. You are requesting authority to use up to $2,500 of your appropriation level for reception and representation activities. Why does the Inspector General need an entertaining budget? Response. This authority would permit the Inspector General to host official functions for the President's Council on Integrity and Efficiency, the International Criminal Police Organizations, the International Association of Chiefs of Police, and similar functions. Currently, any such expenditures incurred must be paid out of pocket by the Inspector General. tracking and monitoring of proposed savings Mr. Skeen. Every year, based on the results of your audits and investigations, you identify and report monetary values that either the agency agrees to collect or make management changes that will result in savings. Once these amounts are identified, whose responsibility is it to track and monitor the agencies to make sure the money that's owed the Federal Government is actually collected and the agency has taken action on internal changes to save Federal dollars? Response. In USDA, the Office of the Chief Financial Officer is responsible for the tracking and monitoring of the agencies to make sure that the money that is owed to the Federal Government is actually collected and that the agency has taken action on internal changes to save Federal dollars. law enforcement retirement benefits Mr. Skeen. You are requesting an increase of $600,000 to help cover the cost of law enforcement retirement benefits under FERS. You state that, in fiscal years 1995 and 1996, FERS law enforcement benefits increased 33 percent and 70 percent, respectively. Why is this the case? Response. In FY 1995, FERS law enforcement benefits totaled over $2.4 million for OIG--an increase of almost 33 percent from the previous year. In FY 1996, FERS law enforcement benefits totaled over $4.1 million, an additional increase of over 70 percent. Each year, the amount of money needed for FERS law enforcement benefits has increased steadily. The ``normal cost'' percentage for law enforcement benefits is over 25 percent, and is much higher than the percentage cost of FERS nonlaw enforcement benefits. Due to the high cost of law enforcement benefits and the lack of resources to absorb these costs, the agency has had to operate below its ceiling with fewer special agents, limiting its ability to accomplish its mission. This problem is compounded by the fact that, by law, all GS-1811 investigators are required to work an average of 50 hours per week and are compensated for such additional work by 25 percent availability pay in addition to their regular salary. This increases FERS costs proportionately. Further, all new agents are hired as FERS employees, with considerably higher cost to the agency. Since most of the investigators who have retired in recent years were under the Civil Service Retirement System, this has greatly increased the number of OIG agents under FERS which is increasing the agency cost. Mr. Skeen. What is the percentage increase cost of FERS nonlaw enforcement retirement benefits compared to law enforcement retirement benefits? Why is there a difference? Response. By law, all investigators are required to work an average of 50 hours per week and are compensated for such additional work by 25 percent availability pay in addition to their regular salary. Benefits increase accordingly. Additionally, law enforcement benefits are calculated at a higher rate than nonlaw enforcement benefits. The percentage cost of FERS nonlaw enforcement benefits is about 25 percent. FERS law enforcement benefits are over 40 percent. oig realignment Mr. Skeen. Please provide a more detailed description of how you plan to realign your offices to more closely parallel USDA agencies. Also provide a table that shows the number of employees in each location before and after this realignment. Response. We have realigned our headquarters divisions in relation to the Department's reorganization of its mission areas. In this process, we were able to reduce the number of audit divisions from five to four and Investigations divisions from four to three, as well as replace four high grade special assistant positions with lower level audit and investigative staff. Although USDA mission areas have been reorganized and changes in the Farm Bill have impacted our workload, our field offices have never been organized along departmental mission lines. We did not alter our regional office structure which is organized to conduct audits and investigations in particular segments of the United States. Audit and investigative workload in the field has continued to exceed OIG resources in all areas of the United States; however, as available, we transfer personnel between field offices to meet the new workload requirements as required. Our overall headquarters and field staff did not change. Mr. Skeen. Provide a five year table that shows the number of supervisors and field auditors at the agency. Response. [The information follows:] OIG FIELD AUDITORS AND SUPERVISORS ------------------------------------------------------------------------ Audit Fiscal year Field supervisors auditors agencywide ------------------------------------------------------------------------ 1996.......................................... 293 42 1995.......................................... 293 138 1994.......................................... 322 132 1993.......................................... 334 140 1992.......................................... 353 145 ------------------------------------------------------------------------ adp Mr. Skeen. You are requesting an increase of $150,000 as the first year of a three-year plan to upgrade your ADP system. What is the total cost of this plan? Response. OIG's long-range requests are primarily for maintaining the current standard of computer services. We have completed the major upgrade in headquarters and have purchased most of the hardware and software for the regional upgrades. Purchases over the next 3 years are expected to be mainly for the replacement of aging desktop and laptop personal computers and new software that becomes available which is applicable to OIG. The total cost of this 3-year plan is estimated at $900,000. Although we expect cost to average about $300,000 a year, we are only requesting an increase of $150,000, and the balance will be obtained from current funds. audit training Mr. Skeen. How much are you spending in fiscal year 1997 for audit training? Response. We plan to spend approximately $125,000 on training programs. In addition, the agency conducts its own entry level audit academy and professional development conferences to ensure compliance with the GAO requirement that each auditor receive at least 80 hours of continuing professional education every 2 years. This is the minimum amount necessary to meet this legislative requirement; it does not, however, allow for training to allow us to stay current in the computer auditing area. That is why we have requested additional training funds in our budget request. additional staffing Mr. Skeen. The budget request shows an increase in FTE's of eight, from 754 in fiscal year 1997 to 762 in fiscal year 1998, but you are only requesting funding for an additional three FTE's. How will the other five FTE's be funded and what will they do at the agency? Response. The other 5 FTE's will be used by OIG to perform its personnel servicing function which was previously delegated to the Office of Personnel. These positions will be funded by an increase of $150,000, of which $100,000 would come from an offset from the appropriation for Departmental Administration. texas tech mediation program Mr. Skeen. It has been identified that the Texas Tech University State mediation program received more than $1.0 million in excess payments. What is being done to recover this money? Response. FSA plans to have Texas Tech work off the excess payments from future transactions in lieu of collecting the money. Mr. Skeen. FSA has decided to recertify the Texas Tech mediation program for fiscal year 1997 with the caveat that no funding would be provided unless all issues identified in the audit report were resolved. What is the status of this issue? Is your office involved in following this situation? Response. We are still working with FSA to ensure that all issues presented in the audit report are resolved. However, GSA has approved release of mediation funds to all States. In Texas, FSA has agreed, in principle, to a ``work out'' program allowing Texas to repay ineligible charges from previous years' programs through State funding of the current year program. Thus, USDA mediation funds have been approved, in effect, for Texas, even though the primary audit finding, access to records, remains unresolved. state mediation program Mr. Skeen. In the explanatory notes you state four States are withholding information needed to conduct audits of the State Mediation Program. If you are denied access to this information and these States are using Federal funds, who is performing oversight as to how these funds are spent and if they are being used in accordance with established rules and regulations? Response. The mediation officials in the four States continue to deny us access to the information. The bottom line is that as long as we are denied access to the information, there is no oversight as to how the funds are spent and no assurance that Federal funds are spent properly. loan resolution task force Mr. Skeen. About 150 loan specialists were transferred to the Loan Resolution Task Force in October 1994 for a two year period to resolve over 7,000 delinquent accounts. The two years are now over. What is the status of these accounts? How many have been resolved? How many will never be resolved? What is the dollar value associated with all 7,000 accounts? How much has been recovered to date? What is being done to resolve the remaining accounts? Response. In October 1994, 7,024 delinquent farmer program accounts with outstanding indebtedness (principal and interest) totaling $3.3 billion were transferred to the Loan Resolution Task Force (LRTF). Effective April 1, 1995, over 6,000 farm credit delinquent accounts with outstanding indebtedness of less than $1 million were transferred back to the State and county offices, and the task force concentrated on resolving delinquent accounts in excess of $1 million. When LRTF began operations in October 1994, about 860 farmer program borrower accounts had an outstanding indebtedness of $2 billion and were delinquent more than $1 million each. These accounts were transferred from the State and county offices to LRTF. The LRTF chairperson stated that it eventually received 907 accounts that were delinquent more than $1 million and that it resolved 515 of these accounts. The remaining 392 accounts were transferred back to the State and county offices effective October 1, 1996, concurrent with the termination of LRTF. State and county office personnel, in coordination with the Deputy Administrator for Farm Credit, will continue to be responsible for resolving delinquent accounts. We have not tracked the status of these accounts since they were returned to the State and county offices. Accordingly, we are unable to provide you with current information or resolution by the State and county offices, how many accounts will never be resolved, and how much has been recovered to date. olympic security Mr. Skeen. Sixty OIG employees were sent to Atlanta this summer to assist in providing security at the summer Olympics. This was at a net cost to your agency of $444,000. How were these costs absorbed? What work failed to get done as a result either through loss of employee time and/or money? Response. Our special agents provided security at the Olympic Games at the request of the Vice President of the United States. In the spirit of cooperation, we provided about 25 percent of our criminal investigators for this detail. When we committed to send this many agents, we understood that the U.S. Department of Justice would reimburse our agency for all expenses incurred during the entire detail. Only later did we learn that we would receive only partial reimbursement. To make up for the unreimbursed costs, we reduced spending on travel, training, and technical equipment. We ensured that all high priority casework was completed in spite of our large contingent at the Olympics. Special agents assigned to high priority matters, e.g., food safety issues, or who were required for court appearances were not assigned to the Olympic detail. However, with a significant percentage of our workforce at the Olympics for over a month, many of our lower priority investigations were delayed for a comparable length of time. minority enterprise financial acquisition corporation (mefac) Mr. Skeen. Describe for the record, in further detail, the evaluation you conducted on the cooperative agreement between NRCS and the Minority Enterprise Financial Acquisition Corporation. Response. Our evaluation of the $250,000 cooperative agreement disclosed that funds were channeled through the NRCS Alabama State office, paid to a Kansas City organization, and ultimately used, in part, to benefit pastors and active lay persons of specific religious denominations. We found that a Rural Business-Cooperative Service (RBS) official took direct personal action to facilitate the award of the agreement to MEFAC. For example, the RBS official personally signed Request for Reimbursement forms in lieu of requiring signatures from MEFAC officials. These forms are intended to be signed by the recipient and include a certification that funds have been expended in accordance with the terms of the agreement and with applicable laws and regulations. MEFAC violated the terms and conditions of the agreement with NRCS. Although the corporation drew down $150,000 of the $250,000 of the cooperative agreement, it did not conduct any regional workshops as was required by the agreement. The corporation was not a recognized tax- exempt organization under Internal Revenue Code 501(c)(3) as stated in its proposal and other documentation. Further, the corporation did not maintain accounting records to show the disposition of the funds received under the agreement. The scattered records which were provided in response to our request confirmed material noncompliance with regulations for the use of cooperative agreement funds, excessive expenditures, and the purchase of other unallowable goods and services. As a result of our evaluation, we concluded that neither the Government nor the rural communities received value for the $150,000 in Federal funds expended. We recommended that NRCS terminate the cooperative agreement and recover the funds expended. Mr. Skeen. If the purpose of the agreement was the establishment of economic development to assist rural communities on business and economic issues, why was NRCS involved? Response. NRCS was involved because it had legislative authority to enter into cooperative agreements. Prior to the execution of the agreement, RBS officials believed they did not have legal authority to enter into cooperative agreements. Therefore, a decision was made to transfer funds from Rural Development through the Rural Business- Cooperative Service to NRCS. Mr. Skeen. You have recommended terminating the agreement and recovering the funds. What is the status of this recommendation? Response. On December 17, 1996, NRCS initiated the process to cancel the cooperative agreement and collect the funds. food aid assistance to the russian federation Mr. Skeen. What is the status of the $600,000 in misappropriated funds and unaccounted for commodities and proper disposition of $3.6 million of sale proceeds relating to food aid assistance to the Russian Federation? Response. CCC will establish an accounts receivable for $600,000 by April 1997. Following established departmental procedures, OIG is asking for documentation showing that an accounts receivable was established and a copy of the demand letter requesting repayment of the funds. CCC is gathering additional information from the program participant concerning the proper disposition of the $3.6 million. By April 1997, FAS will decide on an appropriate plan of action. raisin crop insurance Mr. Skeen. Your semiannual report says that the raisin crop insurance program is subject to abuse and notes that indemnity payments of $20.9 million were paid to four companies. What controls have been strengthened in the raisin crop insurance program as a result of your recommendations? Response. As discussed earlier, we recommended that RMA develop and implement a methodology to value raisins sold as salvage using historic yields based on defects, including a methodology to pull a representative sample of damaged raisins for inspection by the Agricultural Marketing Service rather than relying on reconditioners to make a determination of whether raisins could be reconditioned. RMA responded that it would require loss adjusters to select a sample of no more than 10 tons of damaged raisins for reconditioning. However, if the grower chose not to pick up the raisins, a small sample would be taken by hand. This sample would be graded by USDA. A procedure developed by a committee of reinsured companies was recently implemented for the 1996 crop year. In addition, we also recommended that FCIC pay producers for reconditioning costs to encourage producers to recondition rather than sell raisins as salvage material. The proposed rule for the 1997 crop year included a reconditioning payment of up to $125 per ton to insure producers. Another control weakness of the raisin policy is that, unlike other crop policies, the raisin policy does not limit insured production to a producer's history of production. In addition, the insured liability for raisins is not established until the raisin crop is delivered or the loss is adjusted after damage has occurred. As a result, insured raisin producers may be able to inflate insured production in loss years to maximize indemnity payments and underreported insured production in nonloss years to minimize premium payments. We recommended that insured tonnage be limited to a producer's history of production and that the insured liability for raisins be established prior to loss adjustment. In its response to the report, RMA stated that it agrees that limiting insured tonnage in loss years would be an effective way to prevent some cases of improper inflation of insured liability in those years. However, according to RMA, the recommendation requires policy change and cannot be implemented for the 1997 crop year. For example, RMA will continue its monitoring program which addresses this problem directly. RMA believes that the administrative changes will adequately protect the program in the interim. To address the issue of establishing liability prior to loss adjustment, RMA stated that, for 1997, the raisin policy will contain a provision requiring an acreage report by the sales closing date. This requirement was included in the proposed rule for the 1997 crop year. aarc program Mr. Skeen. Your semiannual report says the Department will probably lose $800,000 invested in a business enterprise by the AARC program. Has AARC followed your recommendations to have no further business arrangements with the company pending and investigation? When will this investigation be completed? What ``appropriate changes'' has AARC made in its project management as a result of this problem? Response. AARC agreed with all OIG audit recommendations. AARC stated that it had realigned responsibilities for project monitoring and was installing an automated system to track the status of each client company and compliance with the AARC agreement. OIG will assess AARC actions in a followup review later in FY 1997. The investigation is on hold pending a decision by an assistant U.S. attorney on the Department of Justice's course of action. AARC met with the attorney and discussed repayment or rebuilding the facility, which was destroyed by fire, as an option to legal action. rural housing service's corrective action Mr. Skeen. What has the Rural Housing Service done as a result of your recommendations regarding two rural rental housing projects as identified in your recent semiannual report? Response. RHS has agreed to implement all of the recommendations made in both reports. Debarment proceedings have been initiated and some recoveries made. We are currently working with RHS State office officials to develop a timeframe for completion of the corrective action. rural rental housing program Mr. Skeen. Your office audited 11 multifamily rental projects for the poor and elderly in Michigan in FY '94. As a result, you recommended that the borrower make reimbursements for unallowable costs and that the borrower be debarred from managing any projects in the Rural Rental Housing program. What has been the result of your recommendations? Response. State RHS officials did not agree with the findings and recommendations and have not implemented a corrective action plan consistent with our recommendations. As a result, RHS has not pursued any replacement or debarment of the management company. We are currently working with the RHS National Office to reach a management decision. convictions Mr. Skeen. On page 60 of your semiannual report, you list 71 indictments and 22 convictions in Foreign Agricultural Service activities for a six-month period in FY 1996. Please provide a list describing the activities for which these indictments and convictions were obtained and the programs with which they are associated. Response. The statistics to which your refer, found on the Indictments and Convictions table in our Semiannual Report to Congress for the second half of FY 1996, reflect a typographical error by the printer. The table should have attributed these indictments and convictions to the Farm Service Agency rather than the Foreign Agricultural Service. During the 6-month period covered in that Semiannual Report, there were no indictments or convictions involving FAS. rural community advancement program Mr. Skeen. The Farm Bill created a Rural Community Advancement Program or RCAP. The program would consolidate the funding of 12 existing programs into the RCAP. Up to 10 percent of this funding could go to states as a block grant. If we were to agree with the Administration's proposal this would amount to about $56 million in block grants to states. What authority will your office have to conduct audits and investigations of how this money is spent by the states? Response. The Inspector General Act grants OIG authority to access information to review all USDA programs which would include Rural Community Advancement Program funds. Also, Rural Community Advancement Program funds requirement under the single Audit Act of 1984, P.L. 98- 502, and the Office of Management and Budget Circulars A-128 relating to State agencies and A-133 relating to nonprofit entities. Reports of audits conducted under either the Single Audit Act or the block grant statutes are submitted to the OIG Regional Inspector General for Audit responsible for the Federal region in which the block grant recipient is located. Mr. Skeen. Do you foresee any barriers to timely access to information on the uses of this money by the states? Response. No. We do not foresee any barriers at this time. Mr. Skeen. I understand that there are some problems with your investigation into the state mediation program. Some people may not be familiar with the program so why don't you take a few minutes and first tell us how this program operates. Response. The FSA Director of the Advisory and Corporate Operations Staff is responsible for administering USDA's agricultural mediation program, including allocating USDA grant funds. Mediation is a process in which a trained, impartial person, or mediator, facilitates communication between disputing parties to promote reconciliation, settlement, or understanding among them. A mediator has no decisionmaking authority. At the State and local levels, mediation programs are either administered by State agencies for certified or State-administered programs or by FSA State Offices for FSA- administered programs. Certified State programs are administered by State agencies designated or authorized by the State government and certified by USDA as meeting the requirements of operating a mediation program with which USDA agencies will participate. For those States that do not have a certified program, mediation is provided under the administration of FSA State Executive Directors. State Executive Directors. assign either a third-party contract mediator of FSA personnel who have not been involved with the producer/borrower to mediate the cases. Section 502 of the Agricultural Credit Act of 1987, P.L. 100-233, dated January 6, 1988, authorized the Secretary of Agriculture to help States develop certified mediation programs. The 1987 Act authorized an appropriation of $7.5 million for each of the fiscal years 1988 through 1991 with matching grants limited to the lesser of 50 percent or $500,000 for the cost of any State mediation program. The Food, Agriculture, Conservation and Trade Act of 1990, P.L. 101-624, dated November 28, 1990, extended this authorization through FY 1995. The Agricultural Credit Improvement Act of 1992, dated October 28, 1992, increased the USDA reimbursement to 70 percent. The Federal Crop Insurance Reform and the Department of Agriculture Reorganization Act of 1994, P.L. 103-354, dated October 13, 1994, extended this authorization through FY 2000. Until the 1994 Act, USDA was required to participate in mediation to resolve agricultural loan disputes. Section 282 of the 1994 Act expanded mediation to include wetland determinations, conservation compliance, agricultural credit, rural water loan programs, grazing on national forest system lands, pesticides, and other issues the Secretary deemed appropriate. Section 275 of this act required that if a USDA certified State mediation program is available as part of the informal hearing process, the appeal participant will be offered mediation. Since 1988, USDA has obligated $19.7 million for State mediation programs in 20 States. For FY 1996, there were 19 States with certified mediation programs while 31 States used the mediation services provided by FSA State offices. Mr. Skeen. Now tell us some of the problems you are having. Response. The Texas attorney general instructed Texas Tech University officials to deny OIG access to mediation program records, asserting that such records were confidential under Texas law. We have issued Inspector General subpoenas to obtain the records, and litigation in this matter is pending. We identified a potential conflict of interest for three of the flour full-time mediation program employees. A Texas Agricultural Mediation official, who is a licensed attorney, had a private law practice specializing in farm matters such as delinquent loans, appeals, bankruptcy, and reorganization. This official confirmed that he sometimes represented USDA borrowers in his law practice. Another employee of Texas Agricultural Mediation was also an attorney with a private law practice. In addition, an employee on the Texas Tech Agricultural Financial Analysis Project had outstanding USDA farmer program loans totaling approximately $475,000 and had not taken any action in over 10 years to repay or otherwise resolve the delinquency. To meet the 50 percent matching fund requirement during fiscal years 1989 through 1993, Texas Tech claimed a portion, usually 25 percent, of the salaries paid to nine university professors and a Department chairperson as part of the cost to operate the mediation program. Since these individuals did not work with the mediation program, Texas Tech received excessive grant reimbursements totaling over $485,000 during this period. Texas Tech also claimed a Texas Agricultural Mediation official as a full-time employee of the mediation program. However, this official routinely taught courses at the university, was allowed 10 to 12 hours per week by Texas Tech for personal business purposes and routinely served during normal work hours as an active member of various professional organizations. His salary, benefits, and related indirect costs totaled over $479,000 during fiscal years 1989 through 1995. Texas Tech Mediation Program accounting records showed $347,500 charged to the ``Mediation Training'' account during FY 1993 through the third quarter of FY 1995; however, we could not identify any formal training provided to Texas Tech or other mediators. We recommended that the FSA Administrator cancel the certification of the agricultural mediation program administered by Texas Tech and instruct the FSA Texas State Executive Director to implement an alternative mediation program--regulations already provide for such a program--for Texas borrowers. we also recommended that FSA recover the excessive grant funds, clarify the extent and type of mediation training required to meet the mediation program certification requirement, and evaluate the effectiveness of the agricultural loan Mediation Program by determining whether grant funds are being used effectively. FSA has decided to recertify the Texas Tech mediation program for FY 1997; however, FSA officials stated that the program would not be funded until all issues identified in the audit report are resolved. During our continuing review of the State-certified mediation programs we were denied access to mediation program records for the Michigan, North Dakota, and Minnesota mediation programs. We continue to meet with the FSA Administrator and other Department officials to discuss resolution of these issues. Mr. Skeen. If you are denied access to information needed to perform your job by anyone using Federal funds--and this includes states, private companies, colleges and universities, non-profit organizations, etc.--then who is performing oversight as to how these funds are spent and if they are being used in accordance with the law? What assurances does Congress have that Federal dollars are being spent properly? Response. All University programs are included in the universe of programs to be included in audits required by OMB Circular A-133; however, the mediation program is relatively small dollars compared to other university programs and, generally, is not selected for testing in the A-133 audit. Nevertheless, we were informed by Texas mediation officials that neither GAO nor State auditors would be given access to records because of confidentiality concerns and State law. The bottom line is that there is no oversight as to how funds are spent and no assurance that Federal funds are spent properly. implementation of the government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. OIG has drafted a strategic plan defining our mission, guiding principles, goals, and objectives. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. OIG has no conflicting goals in our program efforts. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. OIG has developed its goals based upon its current level of resources. Our strategic plan is prepared in line with our budget request which was recently submitted to the Committee. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. We have drafted our annual performance plan. We have, so far, developed linkages in our strategic plan which depict the types of measures and indicators needed to assist us in achieving our general goals. Also, we have met with OMB to review our progress under GPRA. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. We have developed the conceptual structure to mesh our strategic and annual performance goals. Health and safety issues, for which USDA is responsible and which are consistent with the President's budget, remain our first priority. The prevention and detection of fraudulent activity are also very important in our plan. We do not believe we will need to change or modify our activity structure to be consistent with our goals. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--in defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. OIG activities do not lend themselves to quantitative measurement because each event--audit or investigation--is mutually exclusive and unlike those that preceded or follow. Nonetheless, we have defined results-oriented performance measures such as percentages of planned audits initiated and completed during the fiscal year. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. OIG was not one of the agencies selected to participate in the pilot phase. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. OIG considers the Congress and the Secretary and USDA agencies to be our primary customers and stakeholders. We solicit and consider their views for incorporation into our strategic plan on an ongoing basis. For example, we seek management's views of program activity at the start of every audit. We also consider the views of our other stakeholders, such as the public, requestors of information under the freedom of Information Act, the news media, and others to whom our audit and investigate reports are not directly transmitted. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. We do coordinate on an ongoing basis with the Government Accounting Office and the other Inspectors General during the conduct of Governmentwide audits to preclude overlap. In accordance with the Inspector General Act of 1978, OIG is the sole entity within USDA charged with the conduct of independent audits and investigations. Accordingly, no potential duplication exists within the Department. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultation. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. OIG prepared draft Strategic Plans which are currently being reviewed by Senior Policy Staff for the Secretary, before it goes to OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan (including an overall Departmentwide Executive Summary and the Strategic Plans for individual Mission Areas/ Agencies) to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. The Department plans to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee House Appropriations Committee House Economic and Educational Opportunities Committee House Government Reform and Oversight Committee House Resources Committee Senate Agriculture, Nutrition and Forestry Committee Senate Appropriations Committee Senate Energy and Natural Resources Committee Senate Governmental Affairs Committee Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decisionmaking to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results- oriented? Response. We have not identified any policy or organizational changes which we believe are necessary for OIG. We fully expect that the results of the performance goals and other information generated by these activities to be beneficial as the process is implemented. We have continued to refine our planning process and our program risk assessment processes to better identify the most significant areas in which to utilize our resources. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. We will establish mechanisms to ensure accountability as the process unfolds and will monitor the achievement of our performance goals. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. We have continued to refine our planning and program risk assessment processes to better identify the most significant areas in which to utilize our resources. We annually update our investigative universe through a profiling process and then develop specific issues and activities to independently assess by crafting annual strategies. These strategic are considered in our daily determinations of where and how resources should deployed. infoshare Mr. Latham. What steps is the Office of Inspector General taking to audit the Infoshare program at the USDA. Response. As mentioned earlier to Mr. Skeen, the Field Service Center Implementation project has evolved from the technology-driven Infoshare project to an approach that is more closely related to the business processes and needs of the partner agencies. The project has recently become more focused on the identification, analysis, and reengineering of those business processes. Spending on information resources for the partner agencies has largely been restricted to the installation of telecommunications needs such as LAN, WAN, or voice that are deemed necessary for the move by the partner agencies from individual field office locations to collocated USDA Service Centers. Presently, OIG is assessing the adjustments made in Service Center implementation as a result of the FAIR Act, Rural Development's Direct Loan Origination and Serving System, the departmentwide moratorium on information technology investments, budget constraints of the current fiscal year, and projected constraints for FY 1998. Mr. Latham. Will any of the new FTE's being requested be used to further investigate and audit the infoShare program? Response. Yes, we have requested an additional 3 FTE's in order to provide oversight and monitor the Department's implementation of its Service Center initiative, formerly called InfoShare. Due to the complexity of this undertaking which spans the business process reengineering of the Department's programs to information technology acquisitions, a review of this activity will be extraordinarily time consuming and demanding. audit of wic program Mr. Latham. Has the Inspector General ever done an audit of the WIC program? Has anyone ever asked them to perform one? Response. OIG has done many audits of the WIC program. As part of our annual planning process, we work with departmental agency managers to obtain their views concerning coverage they believe would be beneficial for their respective programs and operations, and, occasionally, we have received requests for audits of the WIC program. Currently, audits in process in the WIC program are: Nutrition Education Cost Charged, Puerto Rico; Integrated Statewide Information System, California; Administrative Costs, California; and Accountability of Vouchers, Minnesota. We also have included in this year's plan audits of WIC Food Delivery Systems--Vendors Compliance and Administration and Management of the Virginia WIC Program. backlog Mr. Latham. In the testimony, mention was made of a backlog of approximately 1,400 cases, yet no additional staff is requested to tackle this problem. How will the FY 98 budget submission help the Office of Inspector General cope with this backlog? Response. The additional appropriations we requested will allow us to hire additional investigators, closer to our authorized personnel ceiling. The additional investigative staff-years which would then be available would allow us to reduce the current case backlog. Mr. Latham. The Inspector General is requesting language in the bill to provide him with authority for $2,500 for official reception and representation. For what is this money used and why is an increase in authority warranted? Response. This authority would permit the Inspector General to host official functions for the President's Council on Integrity and Efficiency, the International Criminal Police Organizations, the International Association of Chiefs of Police, and similar functions. Currently, any such expenditures incurred must be paid out of pocket by the Inspector General. food stamps and electronic benefits transfer Mr. Fazio. During your oral presentation to the Committee, you cited the possible cost-savings for the food stamp program associated with total changeover to an electronic benefits transfer (EBT) system. For the record, provide a comparison of the estimated level of food stamp fraud for states who have instituted an EBT program and those who have not. Provide any additional estimates of cost-savings that would be accomplished by a total EBT system. Response. In the past, we were not able to measure the level of fraud that occurred using food stamp coupons that would be needed to make such a comparison. Currently, through an analysis of computerized data, EBT allows us to readily identify potential fraud of both retailers and recipients. However, it will take some time to determine the specific benefits of fraud reduction due to EBT. [Pages 325 - 428--The official Committee record contains additional material here.] Tuesday, March 18, 1997. DEPARTMENTAL ADMINISTRATION WITNESSES PEARLIE REED, ACTING ASSISTANT SECRETARY IRWIN T. DAVID, ACTING CHIEF FINANCIAL OFFICER ANNE F. THOMSON REED, ACTING CHIEF INFORMATION OFFICER CONSTANCE D. GILLAM, BUDGET OFFICER STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE Opening Remarks Mr. Skeen. The committee will come to order. We have with us this afternoon the people who are responsible for critical personnel, administrative, financial, and information management functions at USDA. In other words, the people who are responsible for making that place work. We've got all kinds of visionaries, but you've got to have functionaries. These folks make it work. They are Mr. Pearlie Reed, the Acting Assistant Secretary for Administration; Mr. Ted David, Acting Chief Financial Officer; and Ms. Anne Thomson Reed, the Acting Chief Information Officer. With them today is Ms. Constance Gillam, Budget Officer in the Office of the CFO, and also the man who needs no introduction, the legendary, the great, wonderful, ever present, Stephen Dewhurst, Chief Budget Officer for the USDA. Steve, how many years? Mr. Dewhurst. Well, 1978; 19 years. Mr. Skeen. My math is no good. Mr. Dewhurst. Nineteen years. Mr. Skeen. Nineteen years; very good. We have a lot of ground to cover today. So, Mr. Reed, if you don't mind, I'll let you lead off. If the three of you would like to make short statements so we can get to the questions; and as always, your full statements will be inserted in the record. So, welcome. Go ahead and proceed. Statement of Acting Assistant Secretary Mr. Pearlie Reed. Good afternoon, Mr. Chairman. I appreciate the opportunity to appear before you today. You already have the budget request for the Assistant Secretary for Administration. The budget and supporting materials were prepared before I assumed the position of Acting Assistant Secretary for Administration, about eight days ago. Mr. Skeen. You're not responsible for all of it. Mr. Reed. None of it, yet. In addition to the multitude of administrative and management issues that I must deal with on a continuing basis, Secretary Glickman has asked me to do two things. They are, number one, to provide the leadership for the implementation of the Secretary's Civil Rights Action Team Report Recommendations. There are 92 recommendations, and we are currently developing an implementation strategy. Our plans are to implement the recommendations that do not require legislation by September of this year. Our goal is to get those that do require legislation implemented during the first session of this Congress. The second thing that the Secretary has asked me to do is to provide the leadership for better coordination of all administration and management functions at USDA. We all agree that there are many opportunities for improvements in Departmental Administration. I am committed to working with my colleagues here at the table today and appropriate others to make these much needed improvements. Mr. Chairman, I will close by simply thanking you in advance for your support in helping us to bring about the changes and improvements that we all agree are needed at USDA. Thank you. Mr. Skeen. We'll come back with questions later on. Now we will hear from Anne F. Thomson Reed, Acting Chief Information Officer; Statement by Acting CIO Ms. Anne Thomson Reed. Thank you, Mr. Chairman. I will submit my testimony for the record and also offer a few remarks. The 1998 budget request for information technology at the Department is about $1.2 billion. This includes the Department and all of its agencies. Included in this amount are approximately $234 million for acquisitions, including equipment and software; $253 million for commercial support services, including operations and maintenance; $474 million for inter-governmental payments, including grants to the States and FTS 2000 services; $326 million in personnel costs; and $60 million in other services, including non-FTS 2000 voice and data communications. Offsetting these costs are collections from non-USDA agencies of approximately $179 million. adp investments Included in the $1.2 billion request are a number of projects which include the following notable investments for the fiscal year 1998. The Food Safety and Inspection Service is asking for $8.5 million for field automation and information management to continue to modernize the way it inspects meat, poultry, and egg products using technology as a part of its modernization effort. The Animal and Plant and Health Inspection Service, APHIS, is asking for $4 million in fiscal year 1998 for the Integrated Systems Acquisition Project to continue to upgrade its existing information technology infrastructure. This expenditure will support the APHIS mission of ensuring the health and care of animals and plants, and improving agricultural productivity and competitiveness. Nine million dollars is included for Rural Development's Dedicated Loan Origination Servicing System which enables Rural Development to manage and service its $18 billion portfolio of single family housing loans. The Forest Service is planning to spend as much as $140 million for implementation of its Project 615, which addresses Legacy System replacement and upgrades geospacial information management capabilities. Two hundred forty million dollars in grants are provided to the States by Food and Consumer Service for information technology related to support of the Food Stamp Program and the Special Supplemental Nutrition Program for Women, Infants, and Children. Fifty-four million dollars will go to implement the Electronic Benefit Transfer Program in the States. These are but a few examples of how the Department of Agriculture is improving its program delivery capabilities through the use of technology. office of cio USDA established the Office of Chief Information Officer in August 1996 to meet the requirements of the Information Technology Management Reform Act of 1996, now known as the Clinger-Cohen Act. As the Acting CIO, I provide the Departmentwide policy guidance, leadership, coordination, and oversight of USDA information management and information technology investment activities to support USDA program delivery. Many challenges we face are not unique to USDA, but they affect the entire Federal community. However, we recognize that some of our efforts in the past have raised concerns among our oversight agencies. During the past 6 months, I have set in motion a decisive course of action to begin to implement the Clinger-Cohen Act and to address the challenges that USDA faces in the information technology arena. strategic irm plan While much remains to be done, I'd like to share some of our activities and accomplishments with you. In accordance with the Government Performance and Results Act, we initiated the development of a strategic IRM Plan for the Department. The approach of this plan was three-fold: First, to invest in the planning process and assure that information technology, selection, and deployment are based on business needs; Second, to invest in the infrastructure to improve service delivery for more effective information systems and data management; Third, to invest in human resources by implementing professional development strategies to ensure that skills necessary to meet the challenges of delivering programs are available. The strategic plan is consistent with the requirements of the Clinger-Cohen Act and with our own IRM Modernization Plan which was first launched in the summer of 1995. The two highest priorities of our IRM Modernization Plan are to ensure senior policy level accountability for information technology investments and priorities, and to establish an information technology architecture. it decisonmaking process To improve our decision-making process, we have established two Boards. One is the Executive Information Technology Investment Review Board, EITIRB, which is Chaired by the Deputy Secretary and consists of sub-Cabinet Officials from each mission area. This Board assures that major technology investment issues are addressed by the senior policy makers in the Department. The second Board is comprised of senior IRM Officials from each mission area. They provide technical advice to me and to the Executive Board. Because they operate from different perspectives for meeting program delivery goals, these Boards will bring a much needed balance to decision-making. The plan is to use this new decision-making process to ensure compliance with our information technology architecture and to provide the best value for USDA as we implement the decisions for 1998, and as we make decisions for fiscal year 1999. information technology architecture The second priority identified by the Modernization Plan and one of the key responsibilities of the CIO, as defined in the Clinger-Cohen Act, is the development and maintenance of an integrated information technology architecture for USDA. An architecture seeks to provide a blueprint or a common framework for information technology investments, including standards and operating policies that will assure that information can be shared more effectively among our agencies and customers. At this point, the USDA architecture is a high level document which establishes an umbrella, beneath which we now need to fill in the pieces. The architecture reflects the Department's ongoing effort to develop a more effective process for making technology investments that support USDA business needs. moratorium on acquistions In November 1996, Deputy Secretary Rominger instituted a moratorium on significant information technology acquisitions and certain telecommunications equipment acquisitions until this architecture is developed. This action has constrained spending while we bring the architecture development together. A waiver process was instituted to avoid unacceptable disruption to delivery and mission critical programs. As of March 7, 18 waivers have been granted, mostly for telecommunications initiatives. year 2000 date change Another challenge facing all of us is the year 2000 date change. To ensure that hardware, software, and information technology application systems are certified year 2000 compliant prior to the turn of the century, USDA has been working to prepare for this possible disruption through an integrated, coordinated strategy based on a five phase approach: awareness, assessment, renovation, validation, and implementation. Approximately $35 million will be spent on this effort in fiscal year 1998. At the current time, the total USDA investment plan for year 2000 related projects is approximately $100 million. USDA is also working to establish a telecommunications environment that is optimized for maximum benefit and cost to the Department as a whole. conclusion With the telecommunications architecture as a guide, the existing Departmental and agency networks will become a single USDA enterprise-wide network, integrated and efficient telecommunications utility. To provide leadership and over- sight for USDA's IT direction, the fiscal year 1998 Office of the Chief Information Officer budget request totals $4,828,000. This concludes my statement, Mr. Chairman. I'm happy to answer any questions which you might have. Mr. Skeen. Next we will hear from Mr. Irwin T. David. statement by acting cfo Mr. David. Thank you very much. Good afternoon, Mr. Chairman and Members of the subcommittee. I appreciate the opportunity to appear before you today and to present USDA's progress in improving financial management and to present the President's budget for the USDA Office of the Chief Financial Officer, the OCFO, and the Department's Working Capital Fund. With me today is Mr. Allan Johnson, the Associate CFO of USDA. Mr. Chairman, Members of the subcommittee, most decisions by USDA's policy, program, and management personnel have financial implications. When we in the Office of the Chief Financial Office improve the quality of the information on which such decisions are based, we promote better, more effective government. In addition to Department-wide financial management, the Office of the Chief Financial Officer also coordinates implementation of the Government Performance and Results Act, GPRA, in USDA. I'd like to very briefly describe some of the financial management challenges facing the USDA, and a few of our many activities to meet those challenges. financial management challenges Currently, USDA operates approximately 67 financial management systems with 133 different applications to meet various requirements. Weaknesses in USDA's financial management systems and practices have not only hampered effective decision-making, but have resulted in less than unqualified audit opinions on USDA's consolidated financial statements and some agency financial statements during the last 5 years. The challenge facing my office and the entire USDA financial management community is to revolutionize the financial management systems and programs of the Department so that they are producing quality information for users whose needs may differ significantly. Accurate, timely, reliable, consistent, and useful financial information are the key management requirements for effective program delivery decisions and to ensure the financial health, efficiency, and effectiveness of USDA and its programs. This is not an easy task, nor one that can be achieved quickly. Further, once we succeed in improving financial management at USDA we must sustain or exceed the baseline to inspire continued confidence in our ability to manage our programs effectively. We are asking for a modest increase to meet this challenge. The investment we are asking you to make will more than pay for itself in terms of management improvements, increased program effectiveness, and increased efficiency. Such improvements will be seen in many areas, including financial systems, unqualified audit opinions on our financial statements and implementation of cost management practices. financial systems OCFO is leading a major effort to transform its outdated, cumbersome, inefficient financial systems into a single integrated financial information system responsive to the needs of USDA policy, program, and management personnel. We have assembled a highly trained interdisciplinary team to continue the phased implementation of the Financial Information System Vision and Strategy Program--FISVIS--an effort that will eliminate many of the current system weaknesses and which we have described to this committee in the past. Implementing FISVIS, however, is just the beginning. The standards of the system must be maintained. OCFO must constantly update and monitor financial standards and ensure that all Departmental financial and mixed information systems are consistent with the foundation financial system. audited financial statements Until FISVS implementation is complete, however, we are systematically addressing USDA's financial management weaknesses, working with the General Accounting Office and the Office of Inspector General, among others. As I mentioned, USDA's consolidated financial statements and several agency financial statements have not been able to achieve an unqualified or clean audit opinion for the last several years. OCFO staff are working directly with USDA agencies, including the Forest Service, Rural Development, Farm Service Agency, Food and Consumer Service, and the National Finance Center to eliminate systems and management weakness. In fact, we have formed a unique partnership between the OCFO, the Office of Inspector General, and the agencies to resolve many of the identified problems. Our target is to achieve an unqualified audit opinion for the fiscal year 1998 consolidated financial statements. cost accounting Cost information is one of the crucial factors for program decisionmaking and for judging performance under the Government Performance and Results Act. Such cost information must be available for programs, activities, functions, organizations, and services. USDA is now in the initial stage of the implementation of improved cost management practices. And we are beginning to see results. For example, one USDA agency that provides services to other agencies, both internal and external to USDA has revamped its pricing structure based on an analysis of its costs. The agency is now more fully recovering its costs. In another instance, one of our operating programs is being redesigned to reduce the cost and improve the quality of its services. In other examples, the use of cost management principles are aiding in the modernization of administrative systems. We are now striving to institutionalize these techniques throughout USDA. fiscal year 1998 request These are but a few of the examples of our initiatives to meet USDA's financial management challenges. To continue our efforts to address the financial management needs of the Department and to implement the CFO Act, we are requesting a budget of $4,718,000. This is an increase of $435,000 over our fiscal year 1997 current estimate and consists of an increase of $60,000 for one half of pay cost and an increase of $375,000 to build upon the financial management efforts currently underway. We plan to use the additional resources in the following ways: First, to hire four people who will focus on implementing and maintaining the single integrated financial information system. In that way, we can provide timely, accurate, consistent, reliable, and useful financial information for decision makers. Second, to achieve and maintain an unqualified audit opinion on agency and consolidated financial statements. Such an unqualified opinion will ensure the credibility of our financial reports and our financial systems. Third, to implement cost management procedures Departmentwide so we can support management decisions in this time of constrained resources. working capital fund I'd like now to describe briefly USDA's Working Capital Fund or WCF. As I know you are aware, the Working Capital Fund is a financing mechanism that allows us to pool resources to develop and operate central administrative services. The WCF provides 22 centralized administrative services ranging from the National Finance Center to Central Copying Services. The OCFO manages the largest of central services, the National Finance Center, and provides financial oversight for the entire Fund. Making our administrative services available to other Federal agencies, so-called cross servicing, helps us to reduce unit costs by spreading our fixed cost of operations over a larger group of users. As an example, the average cost of payroll for an employee in 1998 at the National Finance Center will be more than 25 percent less than the cost would have been if we did not cross service other entities. cross-servicing In the fiscal year 1997, Congress required the OCFO to actively market NFC services. We are actively following your direction and guidance. In 1996, we began servicing the Federal Mediation and Conciliation Service and the Office of Congressional Compliance. We are scheduled to add another four agencies over the next two years. The House side of the U.S. Capitol Police, the U.S. Architectural and Transportation Barriers Compliance Board, the Federal Housing Finance Board and the Federal Elections Commission. We are also pursuing several other potential clients for our payroll systems, as well as for other administrative payments systems at NFC. We are pursuing a number of marketing strategies to make our services more visible and appealing to potential users, including the use of the Internet. Other WCF activities are also expanding cross servicing. For example, the National Information Technology Center will be expanding its services to the General Services Administration over the next two years. And the Consolidated Forms and Publication Distribution Center will expand its cross servicing activity in fiscal years 1997 and 1998. transition to year 2000 I want to reiterate what Ms. Reed said about the year 2000. We are taking special care to ensure a seamless transition into the year 2000. The National Finance Center is pursuing a year 2000 strategy to prevent any disruption caused by two-digit year dates. This involves approximately 26,000 programs totalling over 22 million lines of code. NFC has had a plan in place for over a year to deal with this transition, and we are on target for completing our plan on time. funding the wcf We are not here to ask for money from Congress for the WCF. The WCF is entirely cost-reimbursable. We recover all WCF operating costs through the charge for goods and services. We do not use appropriations to subsidize any of our activities. In that respect, the WCF and the services it supports operates very much like business enterprises. Because we are a business, it is very important that customers participate in the oversight of our activities and the financial management of the fund. Therefore, last year we restructured the way we oversee WCF and its activities. The cost estimates provided to you are the result of that cooperative oversight process, where customers, service providers, and financial managers work together. The WCF is one of the real success stories of financial management in USDA. I will be pleased to answer questions as you might choose. Thank you, sir. [Clerk's note--Mr. Pearlie Reed's written testimony appears on pages 720 through 735. Ms. Anne Thompson Reed's written testimony appears on pages 736 through 745. Mr. Irwin David's written testimony appears on pages 746 through 760. Mr. Pearlie Reed's, Ms, Anne Thompson Reed's, Mr. Irwin David's, Mr. Ira Hobb's, and Mr. Blake Velde's biographical sketches appear on pages 713 through 719. The Departmental Administration explanatory notes appear on pages 761 through 822. The Office of the Chief Financial Officer's explanatory notes appear on pages 833 through 868. The Office of the Chief Information Officer's explanatory notes appear on pages 823 through 832. The Office of Communication's explanatory notes appear on pages 869 through 881. The Office of General Counsel's explanatory notes appear on pages -- through --. The National Appeals Division explanatory notes appear on pages 921 through 935. The Office of Small and Disadvantaged Business Utilization explanatory notes appear on pages 935 through 942.] Mr. Skeen. Thank you very much. Let's start with Mr. Pearlie Reed. We want to offer you congratulations and condolences for taking over this job. The Secretary obviously has a great deal of confidence in you. We want to give you all the support we possibly can. So, put us on your team. civil rights action team report The task you have in front of you just in the Civil Rights area, and that's only one part of your responsibility, is very demanding. The report by the Civil Rights Action Team has nine pages of previous reports and studies on the problems in the Department, most of them dealing with the Civil Rights problems and personnel and farm operating loans that still exist today. regional centers And last year the Department testified that it spent $700,000 to start-up six Regional Civil Rights Enforcement Centers which you now propose to eliminate. With all this background already on record, why wasn't more done and what new directions can you take that haven't been taken before to resolve this problem? Mr. Reed. Mr. Chairman, as I indicated earlier, this is my eighth day on the job. And with respect to responding to the technical part of your question, I'll ask Ira Hobbs to respond to that. Mr. Skeen. That will be just fine, Mr. Hobbs. If you'd like just take the chair on the end down there and we'll get you a microphone. Mr. Hobbs. Mr. Chairman, it would be very helpful to me if you could repeat the first part of the question. I didn't hear it all. Mr. Skeen. The report by the Civil Rights Action Team had nine pages of reports and studies on the problems in the Department. Most of them dealt with Civil Rights problems in personnel, in farm operating loans, and we still have that problem existing today. Last year, the Department testified that it spent $700,000 to start-up six Regional Civil Rights Enforcement Centers which we're now proposing to close down. Give me some idea of why we didn't get more done and what new direction can we take that hasn't been already taken to solve these problems? Mr. Hobbs. I will try to answer that. The six Regional Centers that were put into place last year dealt predominantly with Title VII cases. Mr. Skeen. Explain to us what Title VII cases are. Mr. Hobbs. Yes, sir. Title VII cases are cases of employment issues where employees within the Department have filed complaints against managers or supervisors. It was not set-up to deal with problems associated with farm loans. Consequently, the problems occurring in farm loan programs continued as they had in prior years. I don't think anyone was really aware of the magnitude of the problem in farm service programs, and to the extent that people were, they did not say anything about it. I think it has been only within the last year that the magnitude of that problem has been uncovered. And I think it's been only within the last three months that a proposal has been developed to address it. There are now two reports: the Civil Rights Action Team Report, which I believe that you are aware of and a report by the Inspector General's Office. This report which was requested by the Secretary, really goes even further in identifying the problems and the issues that exist in the farm loan program. In terms of the new directions you mentioned I don't really think there is a new direction. I think what has happened is that there is a new attitude. This new attitude is about going in, managing, making the tough decisions, making the tough calls, and being prepared and committed to stay the course until the problem is corrected. Mr. Skeen. So, the problem wasn't apparent going in. It has risen after the action was initiated. Mr. Hobbs. I think there has been such a hue and cry from farmers across the country that the Department was forced to look at itself. And in doing so, really started to understand the magnitude of the problem in the Farm Service Agency in terms of its delivery of program services, as well as the volume of complaints that were being filed and alleged by consumers that were not being positively responded to. scope of problem Mr. Skeen. What's the scope of the problem with the Farm Service Agency in so far as loans to minority farmers? Mr. Hobbs. I don't know that I can answer that question, because I am not in the Farm Service Agency. My experience in the last year, is that it's pretty tough. It's bad. Mr. Skeen. There is a business plan and it needs to be addressed. Mr. Hobbs. There is a problem. It needs to be addressed and it will require, I believe, a new leadership to address it. Mr. Skeen. How many discrimination cases have we had filed? Do they have to file them? Mr. Hobbs. It is a case that's filed. Mr. Skeen. So, they are filed cases. Mr. Hobbs. Yes, sir. Mr. Skeen. But we're going to recommend eliminating the County Committee System and replacing it with some other agency or some other form of---- Mr. Pearlie Reed. Mr. Chairman, I'd like to respond to that. Mr. Skeen. All right, sir. Mr. Reed. The Secretary has gone on record indicating that he does not want to eliminate the County Committee System, but instead would like to make those improvements that are necessary to ensure that the socially disadvantaged are treated fairly across the country. legislative package Mr. Skeen. The Civil Rights Action Team's Report mentions a legislative package to be sent to Congress. When can we expect to receive that? Mr. Reed. There are approximately 13 of the 92 report recommendations that we believe will require action by the Congress. We're in the process right now of developing a plan to pull all of the appropriate information together for the Secretary. I think our time line is to get that done within the next 60 to 120 days. Mr. Skeen. To whom are you sending it to on the Hill? Mr. Reed. The Secretary will send it to the appropriate person or persons. I don't know yet who they are. Mr. Skeen. As yet to be identified? Mr. Reed. I'm sure that the Secretary's legislative folks know exactly where it's going, but I don't. Mr. Skeen. We don't either. Mr. Reed. I will get that answer for you. Mr. Skeen. That's why we'd like to get it unscrambled here. [The information follows:] In accordance with OMB Circular A-19 on legislative coordination and clearance, the legislative packages necessary to implement 13 of the recommendations in the Civil Action Team's Report will be sent to the Speaker of the House and the President of the Senate under transmittal letter. reorganization proposal Mr. Skeen. The organization chart on page 53 of the Report proposes retaining the Offices of the Chief Financial Officer, CFO, and the CFO Officer within Departmental Administration. What's the status of the proposal and when will this be decided? Mr. Reed. The background is that the Secretary asked the Civil Rights Action Team to broaden its scope to look at all of Departmental Administration. He is of the opinion that he has five or six different administration type activities stove piped directly to his office. He asked us to look at that and come forward with recommendations that would provide a framework for better coordination of all Departmental Administration. The report reflects the collective judgment of the Civil Rights Action Team. The Secretary has yet to decide how far he will go in implementing that recommendation. clinger-cohen act Mr. Skeen. Thank you. Ms. Anne Reed, can you please briefly describe the Clinger-Cohen Act which establishes the CIO Office and the Chief Information Officer position? And tell us what that means for the Department. Ms. Anne Reed. Yes, Mr. Chairman. The Clinger-Cohen Act was designed to strengthen the management attention given to information technology; understanding that it is a key tool in changing the way in which we do business. The Act required the Department to establish a Chief Information Officer. It gave more authority to the major departments to manage their own information technology, thereby lessening the authority that had previously existed in the General Services Administration. With that authority, of course, comes greater accountability. The legislation requires that we establish a capital planning improvement process. It also requires that we establish an information architecture. It finally requires that we focus more on training our individuals. All of this of course is very consistent with the USDA's strategic plan which I referred to in my owning remarks. Mr. Skeen. Does your office and the two oversight boards you mentioned have complete authority over the departmental purchase, both from appropriated funds and from CCC funds? Ms. Anne Reed. The scope of our responsibility is not defined by the source of funds. We are charged to look intensively at all information technology investments in the Department regardless of the source of funds. direct purchasing authority Mr. Skeen. Really, do Chief Information Officers in the government have direct purchasing authority for their agencies. That is, do they have the funds appropriated to them for purchasing? Ms. Anne Reed. I do not know the answer to that question. I will get that for you and provide it for the record. [The information follows:] In conversations with OMB and with other CIO offices, it appears that information technology funds are appropriated directly to the programs, agencies or bureaus within Departments, rather than to the CIO offices. The programs, agencies, or bureaus then decide how the money is to be spent, subject to any upper-level management controls which might have been placed on information technology acquisitions. CIOs generally do not appear to have purchasing authority except for their own, immediate offices. year 2000 date changes Mr. Skeen. That will be fine. I appreciate you doing that. You mentioned a problem of converting computers in the preparation for the year 2000. Can you give us an explanation for the non-computer person of what the problem is? Ms. Anne Reed. The difficulty arose from software programming predominately where it's very simply a matter of defining a date field. The programmers used two digits instead of four. When you change to the year 2000, the machine cannot distinguish it from 1900 and all of a sudden all of your dates and all of the mathematical equations---- Mr. Skeen. That's about the same age as some of the equipment they've been using. Ms. Anne Reed. I think most people felt that maybe the equipment and most of those software programs would in fact be replaced by the year 2000. People didn't envision that we would be living with these systems for as long as we have. I think there was a hope that there would be a technological fix to the problem, a silver bullet, if you will. While there are many tools that do help us, it is still a very labor intensive operation. There is no silver bullet. Mr. Skeen. With the aggravation of just sitting in these hearings through all of the years of my experience in this body, when we talk about technology, particularly in the area of computerization, and getting ourselves upgraded on this, we run into all of these networking problems and other kinds of problems. You begin to wonder whether the machines are smarter than the people we have working on them--I'm talking about the service individuals, the people who sell these to the government. IRS is having a problem. We have a problem at the Department of Agriculture. It seems to me we need to find some way to get some responsible people in there who can clear up a mess like that. lessons learned Ms. Anne Reed. Yes, sir. I think that one of the things that we have learned through the years at the Department of Agriculture--and I think it's evidenced in the findings in other departments and clearly was one of the premises behind the establishment of the Clinger-Cohen Act--is that we truly do need to invest a great deal more in planning. And, that our planning needs to be focused on what our strategic objectives are and how we can then use technology to achieve those objectives. We also know that we need to approach projects in a more disciplined way. The grand design where we try to identify all of the problems and solve them all in one full swoop is a solution that is fraught with difficulties. We are far better served if we scope the issue into smaller chunks and achieve success in smaller bites leading towards that broader objective. Mr. Skeen. Moving from bites to chunks. Ms. Anne Reed. Yes, you could put it that way. cost of year 2000 change Mr. Skeen. Let me ask you about the cost of getting these changes done. Are they paid by the individual agencies or is there a central account for it? Ms. Anne Reed. It is financed by each individual agency. Mr. Skeen. They're allocated back then to each agency? Ms. Anne Reed. Each agency within its appropriation is to find the resources to tackle this problem. national finance center Mr. Skeen. I think you've done a good job of explaining an ongoing problem in just about every agency we've dealt with here. Mr. David, let me ask you, you answered a lot of the questions we hadn't intended to ask you. But turning to the National Financial Center, the NFC went without a Director for a long time and now has a Director who will be there only on an interim basis. Are we still trying to recruit a Director for the long-term? Mr. David. Yes, we are, sir. We have issued a vacancy announcement. We are in the process of reviewing the responses to that announcement. I hope we will be able to appoint a new Director in the very near future. Mr. Skeen. In the near future? Mr. David. I tried to answer that question last year and was wrong, but I hope within the next couple of months. Mr. Skeen. Well, we don't want to be wrong two years in a row. I know it's not your fault. Mr. David. We are hoping to make that decision within the next couple of months. Mr. Skeen. Within the next couple of months. Mr. David. Yes, sir. cross-servicing Mr. Skeen. Okay. Your testimony indicates that cross servicing at NFC is increasing. Has NFC lost any clients for cross serving the payrolls? What are their prospects for the coming year? Mr. David. Well, we have a number of agencies we are talking to who are very close to signing up, but they have not signed their agreements with us. There are several agencies with whom we are having discussions that are still undecided. We have not lost any payroll clients. We have lost one or two clients for some of our other administrative services. There are agencies that have put in their own complete accounting systems and have decided that they want to do some of their administrative payments. We are also seeing some interest in some of our new Administrative Payments systems; most notably, the Purchase Card Management System, which automates small purchases. Many agencies, including all of USDA will be implementing this system shortly. house payroll Mr. Skeen. Has there been any further talks with the House Administration about the House payroll? Mr. David. We have not talked with the House about the House payroll, but we are implementing the House side of the Capitol Police. They are due to come onto the system within the next month or so. We are currently in the process of parallel testing. Mr. Skeen. So, you're going by whatever, like the Police? Mr. David. Well, we're happy to take on as rapidly as the Administration of the House is looking to identify and provide new services. Mr. Skeen. When you get to our payroll, we'd sure like to hear from you. Mr. David. We will look forward to it. Mr. Skeen. Thank you, sir. Mr. Fazio. Mr. Fazio. Thank you, Mr. Chairman. I was just thinking that the only way we can get a pay raise is have our pay taken care of in New Orleans and then have the year 2000 thing added and then everything will come together. Mr. David. Of course, you would not want to be paid at 1900 rates of pay. Mr. Fazio. We'll have to work on this, won't we? Mr. David. Yes. Mr. Fazio. I have to say that Ed Lombard, the Clerk over at the Legislative Branch Committee, is probably one of the greatest proponents of your financial center in New Orleans that I've run into. He keeps pushing every agency in this branch of government into your arms. Mr. David. Terrific. And we will be happy to take on all comers. Mr. Fazio. I'm sure you will. And he will probably make sure that eventually they all do come. I just wanted to say hello to my friend, Pearlie Reed, and indicate to him that I'd like him to, if he would, answer just from his own experience. I mean, here is a man who has been, what, a 27-year USDA employee? civil rights problems If you could, and I know you've got some help in some of the questions we had a minute ago about Civil Rights, but tell us, if you could from your own experience, what you think the problems with USDA and its clients are that have brought us to this point where Civil Rights is such a concern. I'm interested in you being a bit perhaps more philosophical than legal, a little more personal than professional. I'd be interested in your--I mean, you've got the kind of tenure now. You're immune from any kind of vindictiveness on the part of anybody. I think you've made your way. Your career is a success. Just tell us from your own experience. What's the problem and what if anything can we do to be helpful? Mr. Reed. Well, I'll try to respond to the later first. The thing that you can do to help us is to fully support the Secretary and USDA as we go about implementing the recommendations that are in the report. Some of them are very sensitive, but all of the members of the Civil Rights Action Team feel that if the recommendations are implemented, we will clean up all of the problems in civil rights at USDA. Now, to respond to the former, as most of you know, I am a product of the limited resource farming community. I was born and raised on a small farm in East Arkansas, and my parents still live on our farm. I come from a family of 18 sisters and brothers. I have experienced first-hand both inside of USDA and outside of USDA, most of the things that we reported out in our report. The problem as I see it is that USDA never had the wherewithal to come together and act on the recommendations that the Chairman mentioned earlier. We have approximately 113 reports listed in our report going back to 1965. And 80 percent of the recommendations in our report have been made before, but nobody really ever followed through. This time, though, I think things are different. I think the Secretary is committed and he has directed me, the Sub-cabinet, and the rest of the leadership at USDA to get on with it. And I think after this effort, we will be in a position where we won't have to revisit civil rights in this context ever again. county committee system Mr. Fazio. The Chairman asked, I think, about the question of the county employees and the approach that we've historically taken to delivering services. And there are those who look back at the history of the Department, particularly since the Depression, and say that to some extent the problem is an outgrowth of the approach that was taken, particularly in that region of the country where counties are so prevalent and local offices therefore are as well. And that there has been maybe a double standard in the way those have operated. Yet you respond by saying you don't want to do away with that concept in terms of organizational structure. Do you believe that it can be done under the existing system that we are apparently going to remain wedded to? Mr. Reed. When I responded to the Chairman by indicating that the Secretary has gone on record as wanting to keep it--I probably should have said a county committee system, not necessarily the country committee system. I think all of us at USDA feel that local input into decision-making is very, very important, but that local input should be done in a fair and equitable way. When you look at the details behind some of the recommendations in our report, once those recommendations are fully implemented, Mr. Fazio, it will not be business as usual. Mr. Fazio. Could you tell the committee what those might be? We're not all as familiar with it as we'd like. What is going to break us into the clear here? What is going to keep the benefits of local involvement, but do it in a way that is, obviously certainly in terms of participating farmers, color blind. nepotism Mr. Reed. For example, right now there are allegations and there is some truth to them that nepotism is running rampant in the county committee, county employee, non-federal employee system. One of our recommendations will deal directly with that. In one or more of our listening sessions individuals pointed out where, for example, they were denied an opportunity to participate in the Buy Back Program. Just to cite specifics, one farmer alleged that he was offered the opportunity to buy back his land, say, at $150,000 and he couldn't do it. He found out that the land was actually appraised at $100,000. And then he found out later that the land was sold at auction for $30,000 and the person that bought it was a relative of a county committee member. Mr. Fazio. They call that insider trading on Wall Street. perception of conspiracy Mr. Reed. Yes, and the most disturbing thing to me is, and I think the most disturbing thing for all of us should be that there is a perception--and we heard it every place we went, except when we were on the Navajo Nation--that there is a conspiracy by the U.S. Government with USDA being the nucleus behind that conspiracy to take land away from the socially disadvantaged. Mr. Fazio. Some people think that is a continuation of a policy that has gone on from about the 1870s right up until this entity became a method for doing it. Mr. Reed. Absolutely. Mr. Fazio. Yes. Well, thank you Mr. Chairman. I know others have questions. I might put some more on the record. I certainly hope our committee can be of support and help to the Department. Mr. Skeen. I second that. Mr. Latham. Mr. Latham. Thank you, Mr. Chairman. Thank you very much. I'll go to Ms. Anne Reed here to begin with. We had the opportunity to visit last week. And I appreciate very much that chance. I think for the record, though, maybe we should go through a little bit about what we talked about. authority for adp systems integration First of all, my real concern has been and will continue to be that we're not maintaining the smokestack mentality that we've had. And that someone is in charge and someone has the authority to integrate the system at USDA. I just wanted to ask you, do you have the authority or the power to successfully accomplish the mission, do you think at USDA, of integration; to have everybody in the same system? Ms. Anne Reed. Through the planning process that we have established, I believe that we are significantly strengthening our capacity to achieve that kind of integration. With the establishment of the Executive Board at the sub-cabinet level led by the Deputy Secretary with myself as the Vice Chair, I think we can bring focus at the policy level to the decisions that need to be made in order to break down those stovepipes. At the same time, I think that the work that we are doing in developing a Department architecture raises to a higher level the kinds of issues that we need to address from a purely technical perspective in ensuring that we are achieving greater integration across the Department. Mr. Latham. Do you have budget authority over the--I get different numbers all the time--31 agencies as far as procurement? If you don't, would having that authority be of great benefit to you? Ms. Anne Reed. At the present time, I do not have specific budget authority over the information technology budgets of the agencies. Some organizations in the private sector have taken that strategy as being an effective one in better managing information technology and achieving the integration. There may be some instances where that makes some sense. I personally worry a little bit about separating the information technology too far from the mission of the individual agencies because we want to make sure that what we're doing is using technology to support our mission delivery. Mr. Latham. Doesn't that just kind of go right back to the same hole we're in right now though? Ms. Anne Reed. There are certainly some challenges in operating within this appropriations structure. procurement moratorium Mr. Latham. As I made you aware, last week, you know, we've had the moratorium on procurement. And then we just got a press release showing a $212 million computer contract was awarded. Would you explain to us how that fits into the moratorium? Ms. Anne Reed. Yes, sir. The contract that was awarded was a contract for support services, not a contract to support any new acquisition of technology or new system development. Mr. Latham. There is no hardware? Ms. Anne Reed. To the extent that there is provision in that contract where they could take advantage of acquisition, they are subject to the moratorium. It is a task order contract. A series of six companies have been given this contract. There is no requirement to use those. It's available to the agency. It is a multi-agency contract which I think is something that we've tried to strive for in breaking down some of those stovepipes. If they want to make an acquisition that would be a significant upgrade or a new system, it would still be subject to the moratorium and would require a waiver from my office. Mr. Latham. Are the 31 different agencies at the Department responsible for their own procurement? I mean like in this contract, are they going to individually tell the contractor what they want? As an example, not necessarily confined to that. Ms. Anne Reed. Yes. Not all of the 31 agencies have their own procurement office, but they do work with procurement offices to execute the contracts. They are all subject to the moratorium on any new acquisition that would be a significant upgrade or a new system. Mr. Latham. I'm still puzzled by a moratorium when we're offering new contracts. capital planning improvement process Ms. Anne Reed. It's an acquisition based moratorium, not an obligation or expenditure based moratorium. Mr. Latham. It doesn't sound like that there is a coordinated plan in place at the Department then. I mean you're still having individual agencies continue to make their own decisions by themselves. Their own information technology person is making the procurement decisions. Is there a plan in place? Ms. Anne Reed. This is the effort that we're launching through our Capital Planning Improvement Process, where we have the Executive Board. The proposals will be submitted to that Board which will make the decisions before the budget is even sent forward to the Office of the President or on to the Congress. So, we will have that Department level review at a senior policy level up-front. As we transition now through the execution process, we have had the moratorium. At the point at which we come out from under moratorium, it will only be when we have a new process in place for a changed decision-making methodology. Mr. Latham. Do you have the tools or the authority to make everybody come to the same table? It just doesn't seem--what tools do you have to force people to finally recognize that you have to have an integrated system? Is there any hammer behind anything? Ms. Anne Reed. Other than the bully pulpit which, by the way, I've been able to use to some effect, the specific delegated authority that I have now from the Secretary is one of technical approval for information technology projects. Every project that exceeds a certain threshold over its life cycle must come in to me for approval. At any point I can withdraw the technical approval authority for those projects and initiatives. So, that is a specific delegated authority that I already have. I also have the authority to approve the selection of representatives who order telecommunications lines and that turns out to be of management significance. Because we have multiple numbers of people ordering the opportunities for confusion and overlap increase. I'm in the process now of significantly reducing that number of people, and I do have the authority to do that. Mr. Latham. I wish you the best of luck. I think you are very competent. I still do not believe that you have been given the authority and the power to actually make stuff happen. I just don't think it's going to happen. We're going to go down the same path that we've spent $115 million on before and threw up our hands on. I'm just very concerned that nobody--you have the responsibility, but I don't think you have the authority. Ms. Anne Reed. I'd be happy to have discussions with you and others at a later point in time about what authority you think might be appropriate and we can talk about how that---- Mr. Latham. I will tell you that someone has got to tell every agency over there that you will do this. And that going off by yourselves and having your own little kingdom is not going to work anymore. Otherwise, it's not going to happen. environmental justice Just a couple of questions for Mr. Pearlie Reed here. In the summary, in the budget summary and justification there is reference to environmental justice principles. Would you explain that a little bit? Mr. Reed. Mr. Latham, I cannot, as I indicated earlier, I've been on the job only eight days. I have Blake Velde here to respond to that. Mr. Velde. Thank you, Mr. Latham. My name is Blake Velde. I'm the Director of Hazardous Waste Management. The Office of Civil Rights and Departmental Administration led the effort by the Department to develop regulations to implement the Environmental Justice Executive Order signed by the President last year. Briefly, the principle of Environmental Justice is that minority and socially disadvantaged communities exist around and near hazardous waste sites and other areas where management practices affected the disposal of hazardous waste. It has given them a disproportionate exposure to toxic chemicals around the country. In an effort to correct that situation the President signed an Executive Order that looks into and asks agencies to develop a plan and regulations to make sure that their practices and their regulations aren't adversely affecting minority and socially disadvantaged communities around the country. That would also include groups like migrant farm workers who might be exposed to pesticides in the fields. It doesn't particularly relate to hazardous waste dumps that the Department has. Most of our waste sites are abandoned mines that are not located in and around populations. numerical objectives in affirmative action Mr. Latham. Okay. Just one last question. I am very concerned too about the Civil Rights issues in this. Does the Department use ``numerical objectives'' in its affirmative employment program? Mr. Reed. I don't know. Mr. Latham. Don't feel bad. Mr. Reed. What we've found as we went through the Civil Rights Action Team process of putting together this report is that, as it relates to all of the civil rights, nothing is really working. We don't have any really good data systems. Our policies need to be updated. But that is an issue that we plan to deal with as we proceed with implementing the recommendations that are in the report. Mr. Latham. Okay. So, the answer is you don't know whether they use numerical objectives right now or not. Would you submit that if you could please? Mr. Reed. Yes, I will. [The information follows:] Yes, the Department does use numerical objectives in the affirmative employment program. Equal Employment Opportunity Commission Management Directive, MD-714 supports the use of numerical objectives or goals in the affirmative employment program planning process in situations where the work force representation of a targeted group is less than its representation in the civilian labor force. Mr. Latham. Also Ms. Anne Reed, I think maybe it would be helpful if you could supply for the record the specific budgets for each of the agencies; if you could get that by agency at the Department please. Ms. Anne Reed. Yes, sir. [The information follows:] [Pages 449 - 450--The official Committee record contains additional material here.] Mr. Latham. Thank you, Mr. Chairman, very much. Mr. Skeen. Thank you, Mr. Latham. Mr. Serrano. civil rights Mr. Serrano. Thank you, Mr. Chairman. It is interesting listening to my colleague's question on numerical objectives and then, being as concerned as I am about this report on the Civil Rights issue, it is interesting to know that, intentionally or unintentionally, the Department historically has had numerical objectives, but in reverse perhaps--keeping people from participating in programs and lowering the number of people that could participate in these programs. Now, Mr. Reed, in dealing with this particular issue over the last couple of weeks, the issue of Civil Rights, I have to admit that I've learned a big lesson. Coming from a big city, New York, my experience with the issue of Civil Rights is urban-related. It never dawned on me--I never focused in on the fact that even though this agency was created at a time when so many Americans worked the land, there were many people who that agency later did not take care of properly--farmers. Somehow I thought that USDA was probably one of the few that were doing everything you're supposed to be doing in this country. And yet this report and the conversations over the last few weeks and months indicate just the opposite. In answering Mr. Fazio's question, you said what you need most from Congress is support, what you need from us is to support the Secretary's recommendations. And with that in mind, I ask you a question. Any time you name someone to be in charge of the Civil Rights issue, that means that agency, that department, that community is paying attention to the issue and that's good. line of authority for civil rights But I do notice that in this particular recommendation, the person or persons would answer to the Assistant Secretary for Administration. In contrast, in the Department of Education there is an Assistant Secretary for Civil Rights all by itself. And at HHS the Office of Civil Rights answers directly to the Secretary. Has USDA inadvertently given Civil Rights, even now that it tries to deal with it, a lower priority than other agencies, in your opinion? Or if not, then how do we explain the difference in treatment in different agencies of this issue? Mr. Pearlie Reed. We looked at what's occurring all around town. Some agencies have an Assistant Secretary for Civil Rights. Some agencies have an Office of Civil Rights reporting directly to the Secretary. Other have what we recommended and what we currently have in USDA, which is that the Assistant Secretary for Administration is the principal policy person on behalf of the Secretary with an Office of Civil Rights reporting to the Assistant Secretary. To make a long story short, as we looked at all of the options and what needed to be done in the short as well as the intermediate run, we concluded that what we recommended would best serve USDA employees and our customers. However, the Secretary, in responding to that question coming from other quarters, has indicated that he is still open-minded. And what he wants is the best fit for USDA. Mr. Serrano. And at this time it is your feeling, or the Action Team's feeling, that this chart, if you will, is the best fit for USDA at this time? Mr. Reed. We feel that it is, but more importantly we feel that the commitment of the Secretary to follow through and delegate the authority and hold people accountable are the keys to correcting the problems at USDA. Mr. Serrano. Well, when the Secretary was here, he was very strong on that issue. He left it clear, orally, that he was not going to tolerate anything but total progress and a total turn around. And your feeling is that this commitment is legitimate and that we can in fact turn these things around if we follow the recommendations and support the Secretary on those actions. action on report recommendations Mr. Reed. Absolutely. I have taken the Secretary at his word. And we're moving ahead expeditiously to implement the recommendations. Mr. Serrano. With that in mind, several of the Action Team's recommendations involve steps to be taken immediately or within a short time after the report is released. Is the Department moving already on these recommendations? Is it the Department's feeling that for some parts of the recommendations you first have to hear comments from other places, such as Congress? I say that, by the way, because if you come to me--the beauty of 535 Members is that each one is an individual and each one has a history. And each one has a story to tell. Some stories are different from others. If you come to me and say ``I found a Civil Rights problem and I want to solve it. And here is what I'm going to do; I need to get with it right away.'' I'm going to say ``go ahead and do it.'' There might be other Members who honestly will say, ``well, wait a minute. In doing that you're going to upset this and turn around that and maybe we should be commenting on that before you do it.'' Do you feel that you have the go ahead to do these things and to move ahead without having to check with other people in other places? Mr. Reed. Both. But we feel this needs to be done in a participatory way. This past Saturday and Sunday, I caucused with my leadership team, as well as the Civil Rights Implementation Team that the Secretary has appointed to follow- up on these recommendations. We developed a strategic plan to begin to implement these recommendations. And a part of that will be making sure that we touch base with all of the appropriate people to get the right advice and counsel, as well as to have the appropriate oversight as we move forward in implementing the recommendations. Of course, a part of this strategy not only involves working with Members of Congress, but community based organizations, the special interest employees, and customers as well. community outreach Mr. Serrano. One last thought. I noticed in the report that there was talk, as you just mentioned, about community organizations. There was talk about reaching out in the media to try to deal with these problems. I watch Spanish-language TV on a regular basis. And again, it could be that I wasn't focusing in on this question. But I see a lot of public service announcements from many of the Federal agencies. And I can't honestly say that I remember seeing PSAs, from USDA inviting people who get their information in Spanish to apply for any federal program. Did your report look at that? Mr. Reed. Absolutely. In some of our listening sessions, that issue was brought out by our customers. And as a part of our strategic plan to implement the Report recommendations, we want to make sure that we reach all of the appropriate communities. You will note that the report also indicates the need to have people who speak languages other than English strategically placed in offices to make sure that we are appropriately servicing our customer base. Mr. Serrano. Well, I wish all of you a lot of luck. And I offer, sir, my personal support. And I know that other Members feel the same way. Thank you. Thank you, Mr. Chairman. Mr. Skeen. Thank you, Mr. Serrano. Mr. Bonilla. problems in implementing new technologies Mr. Bonilla. Thank you, Mr. Chairman. Mr. Reed, I'd like to just start out by asking about the concern that we've expressed over and over again about the lag in the implementation of the new technologies just in the facilities themselves at USDA. For instance, we've heard that employees in the South Building cannot E-mail employees in other USDA locations. My question is are there problems similar to this being addressed by your Human Resources, Strategic Plan, or are we stuck with these situations until the South Building renovations are complete in 2005? Ms. Anne Reed. Let me take the first part of that question. Mr. Bonilla. Sure. Ms. Anne Reed. And then I'll defer on the facilities question to Mr. Reed. But in fact, E-mail between the buildings is no longer a problem. Within the last year we have managed to connect allocate of the agencies within the Metropolitan Washington area with the exception of the Food and Consumer Service. And we are working with them on that. Right now, we have the capability to reach through our E- mail approximately 20,000 people. That includes not just Headquarters, but many of the folks in the field. So, we have made great progress in our capability to communicate via E-mail within the Department, if that answers your question. cost of year 2000 date change Mr. Bonilla. I think it does, unless Mr. Reed wants to add something. But while you have the microphone, I heard you mention earlier the problem with the two zeros at the end of 2000--on the dates. I didn't hear, maybe I missed it, how much it's going to cost to switch your computers over and whether or not you expect any problems getting that done before the turn of the Century? Ms. Anne Reed. We have identified approximately $35 million for the fiscal year 1998 that will be used for this purpose, and approximately $100 million that will be needed to resolve the problem. I would like to be able to assure you categorically that we have done everything that is possible to be done to solve the problem. I will tell you that we're working very hard at it. Most of our major organizations have been pursuing it quite aggressively. Mr. David, talked a little bit about what they've been doing at the National Finance Center. And they're pursuing it very aggressively. Our larger computer centers I think are better positioned than many of our smaller offices. So, I personally have a greater concern for the smaller units in making sure that they are taking the steps that are necessary. I also have a concern about what they call embedded computer chips in our facilities. For example, many elevators rely upon computer chips, some of which it turns out have this date function in them that could cause them to malfunction. So, some of the areas that there might be considered peripheral are where I think we need to turn more attention. And I intend to do that. Mr. Bonilla. I wonder if some of the big computer geniuses like Bill Gates are trying to think of some chip or some simple answer, this would be magic. Just think of all of the people in the private sector as well that are getting ready to spend millions and billions of dollars nationally to switch over. Ms. Anne Reed. This is a worldwide problem. It's not even a government or a business or national one. It is a world wide problem. And we have a deadline that will not be deferred. Mr. Bonilla. A hard deadline. Did you have anything to add, Mr. Reed. I didn't want to cut you off. Mr. Pearlie Reed. No. I do not. disaster assistance Mr. Bonilla. Let's move on now to disaster assistance. I'd like to know what your office is doing, Mr. Reed, in terms of disaster relief. I know that your office coordinates with FEMA and tried to help us last year with the drought problems that we had in Texas. They were horrible. We're so excited that we've had a lot more rain this year. The drought is not over in some parts of the state, but last year was a whole different story. With some of the traditional disaster relief programs available to producers being phased out of the Farm Bill, do you think producers and USDA field staff have been adequately informed of the types of natural disaster assistance that will be available in the future? Mr. Pearlie Reed. Okay. I cannot respond to that. And unless Mr. Dewhurst can, we'll have to follow-up and provide that information. Mr. Bonilla. I would appreciate that, if you could follow- up, unless there is something you'd like to say now. [The information follows:] It is the responsibility of the Farm Service Agency to ensure that the USDA field staff keeps the public adquately informed of natural disaster assistance that will be available in the future. The Farm Service Agency has a variety of methods to inform the public about natural disaster assistance. The Agency encourages staff to make use of all these means. With this approach, it is unlikely that producers are not aware of the assistance that is available to them. Mr. Dewhurst. Well, I might just say that the Department, has a wide range of disaster response programs. Some of the ones that farmers and rural Americans depend on most have not been decreased in legislation. The Emergency Watershed Program of the Natural Resources Conservation Service and the Emergency Conservation Program of the Farm Service Agency are both current programs that have not been decreased. The first thing, that farmers want is help from those programs. They are authorized. And frankly, they're likely to be included in a supplemental request the President will be sending to the Congress fairly shortly. We don't have a Disaster Payment Program anymore. We have some crop insurance alternatives and some other kinds of programs. And you raise a very good question about how well we're doing in making sure producers are aware of what those changes have been and how those new programs work. There is money in this budget, particularly in the crop insurance area, to continue a major education and outreach effort to help producers understand what those programs are and how they differ from the past. So, the Farm Service Agency and others are doing the best they can to get that word out. Mr. Bonilla. And, again, we just want to be prepared because we never know when a drought is going to happen again. Last year, I think for even those of us who live in cities, it was something we thought about all the time because the drought was so terrible in all parts of Texas. hazardous waste management Let me ask a question now about hazardous waste. Your office oversees, Mr. Reed, the Hazardous Waste Management Program. Can you clarify exactly what role the USDA plays in hazardous waste clean-up and the Superfund sites? Because at a glance it seems a little odd that USDA would have an active role in this process to start out with. Mr. Reed. Blake Velde will respond to that. Mr. Velde. Mr. Bonilla, I'm Blake Velde. I'm the Director of the Hazardous Waste Programs for the Department. We currently have about 1,700 abandoned and inactive mines on Forest Service lands that we're addressing. We also have over 140 landfills in sites on Forest Service lands. And also, because of past practices of the Commodity Credit Corporation, we're looking at grain storage bins the Department leased to store grain in the 1960s and 1970s. Because of the management practices at the time, the grain was fumigated with carbon tetrachloride, which has contaminated public and private drinking water systems in primarily Nebraska and Kansas. That's the largest part of the hazardous waste problems that the Department is working on. We also have had at some of our facilities, notably the Beltsville Agricultural Research Center, some hazardous waste practices that were not what they should have been. They have resulted in some disposal problems that we're currently addressing. We only have one facility, the Beltsville facility, that is on the EPA Superfund list of worst contaminated sites. The rest of them are what EPA considers non-Superfund National Priority List sites, but are still required under the Superfund Law to be cleaned up. We also work under the Resource Conservation and Recovery Act, on current hazardous material disposal practices so that hopefully we won't create new problems. Mr. Bonilla. That is a lot more than the general public might initially think that you're involved in at some of the clean-up sites. Mr. Velde. That's correct, sir. beltsville facility Mr. Bonilla. It is funny you should mention Beltsville. I have one final question about Beltsville. This would be for Mr. Reed. The Strategic Space Fund, mentions that the Beltsville, Maryland facility is scheduled to be occupied by January of next year. Mr. Velde also mentioned that the Beltsville facility will eventually be occupied by one or more USDA agencies. My question is, has there been a discussion as to which USDA agency will eventually reside in Beltsville? Mr. Reed. Yes, sir, and Ira Hobbs will respond to that. Mr. Hobbs. I am Ira Hobbs, Director of Operations. We put forth last week a technical proposal or recommendation to the Secretary identifying future tenants for the Beltsville facility. A final decision has not been made yet. We expect a decision within the next two to three weeks. It looks like two to three agencies from within the Department will be permanent residents at the Beltsville facility. Mr. Bonilla. How big is that facility? Mr. Hobbs. It will accommodate 1,500 employees; it is somewhere in the neighborhood of about 350,000 square feet of space. Mr. Bonilla. It's a big place. Mr. Hobbs. Yes, sir. Mr. Bonilla. Thank you very much. Thank you, Mr. Chairman. Mr. Skeen. Mr. Nethercutt. advisory committees Mr. Nethercutt. Thank you, Mr. Chairman. Ladies and Gentlemen, welcome. I noticed as Mr. Bonilla was talking about his line of questioning regarding hazardous waste, I was looking through your budget documents and noticed that you have a lot of advisory committees, and one in particular having to do with, task force on agricultural air quality research, among others. What happens to the recommendations of those advisory committees? To what extent are they published? Do you use them? Can you cite whether they're doing you any good in the administration of the Department? And to what extent are they coordinated with other agencies that may be duplicating the same kind of subject matter? I know that's a compound question. Do the best you can, if you will. Mr. Reed. Mr. Dewhurst, I'm going to ask you to handle that. Mr. Nethercutt. You won, Mr. Dewhurst. Mr. Dewhurst. Well, you're correct. We have a number of advisory committees in the Department, although there has been some reduction in number of those committees in recent years. Many of the committees, particularly in the research area and in the nutrition area, as well as in the foreign trade area, have very formalized sorts of processes where they hold meetings and prepare recommendations for the Secretary on a variety of subjects. And those recommendations are published; particularly in the research area. Most of these groups will publish their views of what our research priorities ought to be, what kind of funding levels we ought to have and so forth. So, most of them find a way to provide input into our processes in a fairly formal way. And in that way they have some influence on the kinds of policies and budgets we recommend to the Congress. value of advisory committee recommendation Mr. Nethercutt. Are they worthwhile in your judgment? Maybe it's not your judgment to make, but in the judgment of the panel? Is there any way we can cut back on these? Is there not private sector, university based advisory groups that we could save some money? I don't mean to pick nits with you, sir, but I'm just wondering at a time when we're facing tight budgets, the need for more efficient administration, I'm just wondering if they're valuable, that's good to know. If you think we can do something better then---- Mr. Dewhurst. The Department will next year spend something on the order of $1 million on advisory committees. I could tell you that's a fairly small percentage of what we do. We don't usually pay salaries for advisory committees. We may pay a person's travel, although sometimes that's voluntary. In the research area, the advisory committees often consist of representatives from the Land Grant Universities. The purpose of the committee is to bring all of those people together and get a set of recommendations in a fairly coherent way. So, there are judgments other folks will make about that process, but frankly it makes some sense to me that we have at least a number of these committees that bring these kinds of recommendations. Mr. Nethercutt. And the Department does act on their recommendations I take it? Mr. Dewhurst. Yes. I mean, in fairness we either act on them or they know that we haven't and why not. There is an interaction that goes back and forth. Mr. Nethercutt. I was looking further at the agriculture buildings, facilities, and rental payments section of your budget documents. I'm wondering--it appears to me your personnel compensation in Washington, DC went up from $3.8 to $4.3 between 1996 and 1998. I'm on page 213, if it's available to you. operation and maintenance of facility And I noticed that the communications, utilities, and miscellaneous charges went up over double. And your operation of maintenance and facilities went way down. It's going to be $15 million it looks like in 1998. Is there some reason for that? Did your leases run out? Are you not having as many facilities or what? I guess I'm trying to understand if you have divested yourselves of any buildings or facilities over the last year and whether you plan to do so in the future. Mr. Reed. Yes, sir. We're going to ask Mr. Hobbs who is in charge of that to respond to that question. Ira. Mr. Hobbs. I'll try to answer the question. Mr. Nethercutt. You may wish to supply it for the record, I'm not trying to test your memory. Mr. Hobbs. Oh, no. I can supply it for the record. But I also think that some of it went down simply because we're deferring things from a maintenance standpoint as it relates to our efforts toward modernization. And also the deferral of certain funds that we're now using in the construction of the Beltsville facilities and complex. I'm not sure of the one on the personnel cost in terms of if that was a big jump. It doesn't seem to my recollection that it was. But that's certainly information that we can provide for the record. [The information follows:] The increase in personnel compensation between fiscal year 1966 to fiscal year 1998 is due to the filling of vacancies, within grade increases and annualization of prior year pay increases and the anticipated pay increase for fiscal year 1998. The reduction in operations and maintenance is a direct result of the completion of the Beltsville Office Facility in December 1997 and the anticipated reduced level of minor repairs and building maintenance during the initial phase of the South Building renovation. cost accounting Mr. Nethercutt. Sure. That would be great and I appreciate it. Last year at this hearing your agency talked about implementing a new cost accounting system for the collection of fees. Has this new system been implemented? Mr. David. We are in the process of implementing cost accounting within USDA which will be useful to us both in understanding the costs underlying the services that we provide for fee collection, as well as providing information for management decisions. We are implementing a new financial management system which will enable us to improve the identification of costs. That system is still in process and has not yet been implemented. However, we are undertaking a number of decisionmaking sessions with all of our financial management folks, as well as a number of our program folks, to better structure the kinds of cost information we need for both fee setting, as well as decision making purposes. One undertaking is the effort to comply with the new standards from the Federal Accounting Standards Advisory Board, so, our financial statements properly reflect the cost of our providing services. Another undertaking is a major educational program to help the financial, as well as the program, managers to understand the value of cost accounting within USDA. Mr. Nethercutt. When will this implementation of the new cost accounting system be completed? Mr. David. Well, we anticipate that the new financial system will be implemented by fiscal year 1999. And as a part of that, the cost accounting features will be implemented. Quite candidly, it will take some time to then learn how to properly use that system. But we will have the basics in place under our so-called FISVIS Initiative by fiscal year 1999. vehicle acquisition Mr. Nethercutt. Okay. One final question. I'm wondering if you can tell the committee about your process of vehicle acquisition? Has there been an increase in vehicle acquisition? How many vehicles do you purchase annually? What's your procedure for doing so, as well as the cost of maintaining the vehicle before you decide to sell it? Can you provide, either now or for the record, some explanation of the process you go through and how you make your purchases? Mr. Reed. With your permission, Mr. Nethercutt, we'd like to provide that for the record. Mr. Nethercutt. Okay. All right. [The information follows:] First, we determine that we have a need for a vehicle, and then we perform a cost analysis to determine the most economical way to acquire the vehicle. This could be a purchase, a commercial lease, a lease from the General Services Administration--GSA--Interagency Fleet Management System, excess or a transfer. Once this is determined, the vehicle is acquired from the most economical source. Our records do not specifically indicate purchases annually. They include transfers, acquired from excess, as well as purchases, and that figure is approximately 15 percent of the total fleet per year and has not changed over the last several years. All purchased vehicles are acquired through a consolidated Federal procurement coordinated by GSA unless we request and receive a waiver to procure through the commercial market. Cost of maintaining the vehicle is not usually the only determining factor for replacing a vehicle. We basically follow GSA standards--Federal Property Management Regulations--and replace vehicles based on age, mileage and cost. Mr. Nethercutt. I thank you for your work. I thank you for testifying. Thank you very much. Mr. Skeen. Thank you, Mr. Nethercutt. Mr. Serrano. Mr. Serrano. No questions, Mr. Chairman. Mr. Skeen. I believe we've about exhausted you and us. We want to thank you for your testimony, and thank you for your responses to the questions. If we have questions that we might want to ask later, we will submit them in writing. We thank you very much. We appreciate the work you're doing. Mr. Reed, I think if you can withstand this, you can take care of just about anything down there. Mr. Reed. I appreciate that. Mr. Skeen. You have some very good support. Thank you. We're adjourned. [Clerk's note.--The following questions were submitted to be answered for the record. Questions were also submitted for the Office of Communications, the Office of the General Counsel, the National Appeals Division, and the Office of Small and Disadvantaged Business Utilization.] Departmental Administration civil rights Mr. Skeen. Secretary Glickman released his Civil Rights Action Team report in February. The Report cites numerous studies ranging from 1965 to 1990 that detailed civil rights problems in USDA. Please tell the Committee why so little action was apparently taken. Response. In most cases, the previous reports did not include an implementation plan outlining proposed actions or milestones for completion and responsibility was not clearly identified so managers could be held accountable. Finally, few additional resources were allocated for implementation. blue ribbon task force Mr. Skeen. What were the recommendations from the Department's 1996 Blue Ribbon Task Force on Equal Opportunity and Diversity? How do they compare with the February 1997 Civil Rights Action Team Report recommendations? Response. The Report of the Blue Ribbon Task Force on Equal Opportunity and Diversity contained recommendations concerning accountability, underrepresentation, underutilization, complaint management, resources and structure. Unlike the Report of the Civil Rights Action Team, the Blue Ribbon Task Force's Report did not contain specific action items for addressing the underlying problems. An audit of all previous reports found that few, if any, of the 1996 recommendations were implemented or taken seriously. minority farmers forced off farms by federal employees Mr. Skeen. What is your estimate of how many minority farmers were forced off their farms in part by the actions of Federal employees? Response. Specific data on minority farmers forced off their farms is not available. An extensive study would have to be conducted to determine the actual adverse impact on socially disadvantaged minority farmers. According to the most recent Census of Agriculture, the number of all minority owned farms has fallen for numerous reasons. Data reflect that there were 950,000 in 1920 to around 60,000 minority owned farms in 1992 as compared to 6,454,000 in 1920 to 1,925,300 in 1992 for all farms. For African Americans the number fell from 925,000, 14 percent of all farms in 1920, to only 18,000, or 1 percent of all farms in 1992. Although the number of farms owned by other minorities has increased in recent years, particularly among Hispanics, the total acres of land farmed by these groups has actually declined. Only women have seen an increase in both number of farms and acres farmed. During this time, the number of non-minority framers has also dramatically declined, although at a slower rate. Over time many farmers have chosen other careers. minority farmers forced off farms by non-federal employees Mr. Skeen. What is your estimate of how many minority farmers were forced off their farms in part by the actions of non-Federal employees that administer Federal programs at the local level? Response. We are not aware of any data of this nature, nor can we provide estimates. An extensive study would have to be conducted to determine this impact. complaint backlog Mr. Skeen. The Civil Rights Action Team Report indicated that USDA averages 200 new discrimination complaints each year. Last year only 108 were closed, increasing the backlog of complaints. What is being done to eliminate the complaint backlog? Response. The Civil Rights Implementation Team--CRIT--is currently developing a plan to eliminate the current backlog. CRIT will also develop plans to address the underlying issues involved so that these problems do not return in the future. We will update you as we develop and implement plans to solve these problems. accountability Mr. Skeen. One of the themes that runs through the Civil Rights Action Team report is the lack of civil rights accountability in the Department of Agriculture. How will the Department help ensure accountability? Response. Secretary Glickman's goal is for all USDA employees and customers to be treated fairly and equitably, and with dignity and respect. He has already revised and reissued a new Civil Rights Policy Statement stating goals and that he will hold Subcabinet and agency heads accountable. All USDA employees will be required to have civil rights training annually, and all managers will be accountable for having a diverse pool of job applicants and a diverse workforce. administering civil rights Mr. Skeen. Once in place, will the new civil rights structure and program increase the costs of administering civil rights and EEO policy? Response. USDA has not yet had time to assess the costs of a new civil rights structure and program, so we cannot say whether it will increase costs. We would assume, however, that over time, costs for litigation and claims settlement should be reduced, and there should be a significant reduction in the number of complaints. settlements Mr. Skeen. Did the Civil Rights Action Team make an estimate of the cost of reparations or settlements for past program discrimination? Response. The Civil Rights Action Team--CRAT--did not make an estimate of the cost of reparations or settlements for past discrimination. The Civil Rights Implementation Team will be making this estimate within the next few months. civil rights violations Mr. Skeen. One of the major contributing factors to civil rights violations appears to be the Federally funded non-Federal employees involved at the local level with loan and other financial assistance programs. What are the plans to address this issue while maintaining local involvement so critical to successful implementation of Federal agricultural programs? Response. USDA is planning to address the issue of non-Federal employees by working with the White House and Congress to introduce legislation that will change these positions from non-Federal status to Federal to assure accountability for civil rights. legislative package Mr. Skeen. The Civil Rights Action Team Report refers several times to a proposed legislative package. What comprises the legislative package and when do you anticipate sending the package to Congress? Response. Any future legislative package will be coordinated with the White House and Congress. We hope to be able to have a package introduced during the current session. independent review group Mr. Skeen. Who will be on the independent review group that will conduct a review of county committees and county office staffs to determine whether nepotism, conflict of interest, or discrimination in program delivery exists? Response. The independent review group will include stakeholders, unions, employee group representatives and others that we identify as appropriate members. magnitude of discrimination problem Mr. Skeen. What is the magnitude of the discrimination problem? For example, how many loans were denied, how many farmers were involved? Response. The General Accounting Office found that between October 1, 1994, and March 31, 1996, 33 percent of minority applications, and 27 percent of nonminority applicants in the Agricultural Conservation Program were disapproved. During the same period, 16 percent of minority, and 10 percent of nonminority loans in the direct loan program were disapproved. foreclosures Mr. Skeen. Will USDA suspend foreclosures? How many foreclosures are currently pending, what states are they located in, and how much do the loans total? Response. Yes, On December 18, 1996, Secretary Dan Glickman temporarily halted all foreclosure sales on delinquent farm loans until determinations can be made on each case as to whether there is any evidence of discrimination or inconsistency in program delivery. There are pending foreclosures--accelerated loans--in all 50 States, including Puerto Rico, the Virgin Islands, and Guam. As of April 11, 1997, there are a total of 4,551 accelerated loans. According to a report from the Farm Loan Programs, Farm Service Agency, the accelerated loans principal and interest total $2,000,157,956. debt for nature program Mr. Skeen. One of the recommendations from the Civil Rights Action Team Report is to fully implement the Debt for Nature program authorized in the 1996 Farm Bill. Please describe this program and how it will help minority and socially disadvantaged farmers. Response. The Debt for Nature Program, part of the original Consolidated Farm and Rural Development Act (Sec. 349), 1985, was designed to allow the Farm Service Agency (FSA) to substantially reduce the amount of a producer borrower's debt in exchange for an ``easement'' right to the borrower's land for conservation purposes for a term not less than 50 years. It can be used for: Prevention of the breaking of sod on highly erodible grassland or wetland, which would be allowed to revert to a more suitable grassland/wetland cover; easements tailored to the conservation needs of at-risk plants or animal species; the protection of scenic views or historically significant property; Farmland Protection easements where development rights could be granted to eligible parties; or, the most often used easement with greatest potential debt reduction, Full set-aside contracts where all agricultural based economic use is limited. As amended in the 1996 Farm Bill, the minimum term for a debt cancellation easement (50 years) was eliminated and the term easement was replaced with ``contract.'' The value of the easements for minority or socially disadvantaged farmers, or any other qualified farmer, is that it provides an alternative to losing their land outright if they are caught in debt. To date there has been limited acceptance of the program. Fewer then 100 easements have been recorded. program discrimination complaints Mr. Skeen. The data provided for last year's testimony on program discrimination complaints displays a disturbing trend with the number of cases received nearly tripling since 1982. Why are the number of cases increasing and what is the department doing to address this problem? Response. Complaints are increasing because the public is becoming more educated on what their rights are. We believe that when the recommendations in the Civil Rights Action Team report are implemented, the problem will be addressed. cost of resolving program discrimination complaints Mr. Skeen. How much does it cost to resolve a program discrimination complaint? Response. We do not track specifically the cost for full processing to resolution of any individual complaint nor the costs of all complaints. Various aspects of complaint processing (particularly the fact gathering) are shared with USDA agencies, and these costs are not centrally tracked or aggregated. In addition, some personnel perform these functions on a collateral basis, while others have a number of other civil rights functions to perform. This makes direct attribution of costs very difficult. We know that using private sector contracting for fact finding and decision drafting would cost approximately $5,500 per case, plus contract oversight costs. satellite offices Mr. Skeen. Do you have an estimate of the number of satellite offices that would be needed to meet the needs of underserved customers and the associated costs? Response. No we do not because relevant data are not available. In the Civil Rights Action Team Report there is a recommendation to instruct State Food and Agriculture Councils to work with representatives of underserved customers to identify locations with concentrations of socially disadvantaged customers and determine whether full Service Centers or satellite offices are most appropriate to meet those customers' needs. This is to be implemented immediately. service centers needed on indian tribal lands Mr. Skeen. Do you have an estimate of the number and cost of USDA full-time Service Centers needed on Indian Tribal lands? Response. According to the latest figures available from the listing in the Federal Register, there are over 550 federally recognized Tribes. Most of the Tribes own at least a small reservation (12 acres to 100 acres) but not all would require a full time Service Center for their Tribal lands. The Intertribal Agriculture Council has advocated for Service Centers for those reservations with lands totaling over 100,000 acres. Using the threshold acreage of 85,000 acres, there are 72 reservations meeting the criteria. However, Navajo Nation was counted in four separate States (it lies within Arizona, Colorado, New Mexico, and Utah) and Duck Valley is contained in Idaho and Nevada. If the threshold is raised to 100,000 and the two reservations in multiple states are counted as single entities the number drops to 67 full-time Service Centers. USDA currently has 27 offices on American Indian Reservations under the Service Center Concept. By subtracting the existing 27 offices from 67 (the number of offices that need to be opened using the 100,000 acres threshold), we get a total of 40. The estimated cost for start up for each Service Center is approximately $250,000 which is based upon an estimated cost of $70,000 per employee for staffing/supplies/benefits with a representative from Natural Resources Conservation Service, Farm Service Agency, Rural Development, and Cooperative State, Research, Education, & Extension Service. The office space is provided by the benefiting Tribe per the 1990 Farm Bill. Total is estimated first year start up cost for the 40 full-time Service Centers is $10 million. 40 $250,000. = $10,000,000 The source for the reservation acreage is American Indian Reservations and Trust Areas, 1996, Veronica E. Velarde Tiller, Tiller Research, Inc., Albuquerque, NM. Prepared under an award from Economic Development Administration, U.S. Department of Commerce. Additional references: ``Recommended Placement of NRCS Offices at Tribal Headquarters,'' Natural Resources and Conservation Services' memo from Alan C. Epps, National American Indian Liaison (NRCS), and Intertribal Agriculture Council Memo, ``Potential Placement of USDA Reservation Offices Based on Acreage.'' The reservations listed below meet the threshold of 85,000 acres. Reservation Acreage Arizona: Colorado River Indian Tribes Reservation............ 269,921 Fort Apache Reservation............................. 1,664,972 Gila River Reservation.............................. 371,933 Havasupai Reservation............................... 188,077 Hopi Reservation.................................... 1,561,213 Hualapai Reservation................................ 992,463 Kaibab-Paiute Reservation........................... 120,840 Navajo Nation....................................... 16,224,896 San Carlos Apache Reservation....................... 1,853,841 Tohono O'odham Reservation (formerly Papago)........ 2,774,370 California: Hoppa Valley Reservation............................ 85,445 Colorado: Southern Ute Reservation............................ 818,000 Ute Mountain Ute Reservation........................ 595,787 Florida: Florida State Reservation (Jointly owned by Seminole Tribe and Miccosukee Tribe 84,914.92)............. 104,000 Idaho: Coeur D'Alene Reservation........................... 345,000 Duck Valley Reservation (Idaho 145,545; Nevada 144,274).......................................... 289,819 Fort Hall Reservation............................... 544,000 Nez Perce Reservation............................... 750,000 Maine: Penobscot Reservation............................... 148,525 Michigan: Isabella Reservation................................ 138,240 Minnesota: Bois Forte Reservation.............................. 105,284 Fond du Lac Reservation............................. 100,000 Leech Lake Reservation.............................. 602,880 Red Lake Band Reservation........................... 837,736 White Earth Reservation............................. 837,120 Montana: Blackfeet Reservation............................... 1,525,712 Crow Reservation.................................... 2,235,093 Flathead (Salish and Kootenai) Reservation.......... 1,244,000 Fort Balknap Reservation............................ 654,000 Fort Peck Reservation............................... 2,093,318 Northern Cheyenne Reservation....................... 450,000 Rocky Boy's Reservation............................. 120,000 Nevada: Pyramid Lake Reservation............................ 476,689 Walker River Reservation............................ 323,406 New Mexico: Acoma Pueblo........................................ 378,114 Isleta Pueblo....................................... 211,045 Jicarilla Apache Reservation........................ 870,580 Laguna Pueblo....................................... 533,000 Mescalero Apache Reservation........................ 460,679 Ramah Reservation (Navajo).......................... 146,953 Taos Pueblo......................................... 95,341 Zia Pueblo.......................................... 121,611 Zuni Pueblo......................................... 463,271 North Dakota: Devils Lake Sioux Reservation....................... 245,141 Forth Berthold Reservation.......................... 1,000,000 Lake Traverse Reservation........................... 107,245 Turtle Mountain Reservation......................... 140,107 Oklahoma Apache Tribe of Oklahoma............................ 231,906 Cherokee Nation..................................... 124,000 Choctaw Nation...................................... 131,524 Comanche Tribe of Oklahoma.......................... 281,906 Creek (Muskogee) Nation............................. 1,904,800 Osage Reservation................................... 1,470,559 Oregon: Umatilla Reservation................................ 172,140 Warm Springs Reservation............................ 643,570 South Dakota: Cheyenne River Sioux Tribe Reservation.............. 1,419,504 Crow Creek Sioux Reservation........................ 122,531 Lower Brule Reservation............................. 240,000 Pine Ridge Reservation.............................. 1,771,082 Rosebud Reservation................................. 954,572 Standing Rock Reservation........................... 847,799 Yankton Reservation................................. 434,942 Utah: Goshute Reservation................................. 112,086 Uintah and Ouray Reservation........................ 2,100,000 Washington: Colville Reservation................................ 1,400,000 Quinault Reservation................................ 208,150 Spokane Reservation................................. 154,898 Yakama Reservation.................................. 1,372,000 Wisconsin: Menominee Reservation............................... 235,000 Wyoming: Wind River Reservation.............................. 2,268,008 environmental justice executive order Mr. Skeen. Please provide an overview of how the Environmental Justice Executive Order impacts USDA. Response. The Environmental Justice--EJ--Executive Order requires the Department to implement an EJ program and issue regulations. Those regulations are undergoing internal development. EJ can have several impacts on USDA programs and USDA customers. In general, EJ refers to adverse environmental or health impacts to minority or socially disadvantaged communities through the actions or activities of an agency. An example of this might be the effect a USDA rulemaking regarding the application of pesticides or other agricultural practice might have on minority workers that might be disproportionately at high risk of exposure to the procedure or chemical. Historically, the concept of EJ envolved with the siting of hazardous waste disposal facilities in minority or low income areas. The perception was that these facilities were intentionally located in these areas. Others have argued that the presence of the disposal facility occurred prior to the growth and development of minority or social disadvantaged communities and that these communities developed in and around the facilities because property values were much more affordable. The concept of EJ has since expanded beyond the citing of hazardous waste facilities to include other adverse environmental and human health impacts upon minority or socially disadvantaged populations. The USDA will most likely evaluate impacts to farm workers, farm practices in and around minority or socially disadvantaged communities, and other appropriate programs or activities. on-site reviews Mr. Skeen. Did you conduct any on-site reviews or complaint investigations regarding civil rights in fiscal year 1996? If so, please describe them. Response. We did not conduct any on-site reviews or complaint investigations regarding civil rights in fiscal year 1996. number of complaints Mr. Skeen. Please update the table provided to the Committee last year showing the number of complaints of program discrimination you received and the number resolved to include fiscal year 1996 actuals. [The information follows:] ------------------------------------------------------------------------ Fiscal year ---------------------------------------- Cases received Cases resolved \1\ ------------------------------------------------------------------------ 1982........................... 373 N/A 1983........................... 398 N/A 1984........................... 479 N/A 1985........................... 460 N/A 1986........................... 518 N/A 1987........................... 576 533 1988........................... 578 537 1989........................... 645 602 1990........................... 651 681 1991........................... 721 622 1992........................... 794 791 1993........................... 824 688 1994........................... 853 638 1995........................... 924 818 1996........................... 196 118 ------------------------------------------------------------------------ \1\ N/A--OCRE did not have a tracking mechanism for this category from fiscal years 1982-1986. examples of usda programs Mr. Skeen. Did the Civil Rights Action Team find any examples of USDA programs or offices that could be used as models of how USDA programs can be fairly administered? Response. No, the CRAT did not find any such examples. civil rights enforcement regional centers Mr. Skeen. Last year's testimony indicated that the Civil Rights Enforcement Regional Centers expended almost $700,000 in start-up costs. Why didn't the Civil Rights Regional Service Centers address the Department's civil rights enforcement needs? Response. The problems in the centers were twofold: First, due to budget constraints, key positions could not be filled and critically needed training could not be provided to staff. Second, the focus was on only part of the civil rights program--employment complaints. These two factors resulted in reduced service levels and less program effectiveness. equal employment opportunity complaints Mr. Skeen. Please list the number of open Equal Employment Opportunity Complaints existing at the end of the four previous fiscal years. As of April 1, 1997, how many cases are open? Response. The number of open EEO complaints existing at the end of the four previous fiscal years were as follows: 9/30/93--879 9/30/94--1,046 9/30/95--1,473 9/30/96--1,873 As of March 21, 1997, there were 1,455 open complaints. transfer of eeo counselors Mr. Skeen. Last year you completed the transfer of 65 EEO counselors from the agencies to the Department. Please explain why you are proposing to transfer the EEO counselors back to the agencies. Response. Decentralizing the EEO counselors will help make their roles within the agencies clearer and will help hold agency heads accountable for civil rights. processing complaints Mr. Skeen. Last year you reported that the average time to process discrimination complaints was 107 days and the average time to process employment complaints was 496 days. Please explain how ``processing'' is defined. What are the current processing times? What can be done to further reduce the processing time? Response. For employment complaints, ``processing'' is defined as the number of calendar days which elapse between the date a formal complaint is filed and the date it is closed within the Department. A complaint is considered ``closed'' when (1) a settlement agreement is reached, (2) the employee withdraws the complaint, (3) the Department issues a decision to dismiss the complaint in accordance with criteria established by the Equal Employment Opportunity Commission--EEOC, or (4) the Department issues a decision on the merits of the complaint. To reduce the processing time, we can first, redouble our efforts to reach amicable resolution agreements with employees, even after they file formal complaints. If more agreements could be reached early in the process, much of the ``processing'' time and expense could be eliminated. Second, we can make every effort to streamline our procedures. I am placing a new team in charge of the complaint process, and I expect them to bring new ideas with them on how to process complaints more quickly. Each step of the process will be reviewed to improve on how we now approach complaints, from standardization and simplification to delegation and empowerment. We need to place less emphasis on producing perfect decisions at the expense of timeliness, so long as we are confident the decisions are fair and supportable. Third, we need to assess the resources allocated to perform this function. Do we have enough resources in terms of money, equipment, and people? And how can we increase the skills and productivity of those who are tasked with complaint processing? These questions should be answered as the new management team reviews and implements the recommendations of the Civil Rights Action Team. offices reporting to assistant secretary for administration Mr. Skeen. The Civil Rights Action Team recommends moving the Offices of the Chief Financial Officer and the Chief Information Officer from reporting to the Secretary to reporting to the Assistant Secretary for Administration. Although there may be good reasons to make these moves, it is not clear from the report if there are civil rights reasons for making these changes in the USDA organizational chart. Please explain the underlying rationale for having the CFO and CIO report to the Assistant Secretary for Administration. Also, reference any organizational reporting requirements stipulated in the CFO Act or the Clinger-Cohen Act. Response. The CRAT recommendations concerning the financial management and information resources management functions of USDA did not stem from civil rights concerns. Instead, the Secretary recognized that implementation of the CRAT recommendations also provided an opportunity to address problems in coordination of administrative activities. The initial intent of the CRAT recommendations was to reassign financial management and information resources management functions currently assigned to the CFO and CIO, respectively, to the Assistant Secretary for Administration. In turn, the Assistant Secretary for Administration would serve as the CFO and the CIO. This model is similar to that used in Treasury and Interior. Section 902(a)(1) of the Chief Financial Officers Act of 1990 requires the Chief Financial Officer to report to the head of the agency. The Clinger-Cohen Act amended the Paperwork Reduction Act of 1995 to require the Chief Information Officer to report to the head of the agency. field service centers Mr. Skeen. How much does USDA plan to spend in fiscal year 1998 to implement the new Field Service Centers, and what will be acquired with these investments? Response. In fiscal year 1998, USDA plans to spend $100,610,000 to implement the new Field Service Centers. The following is a breakdown of the estimated budget: $10,750,000--For office closures, relocations, and consolidations. $3,660,000--For Change Management/Customer Service training. During fiscal year 1997, Change Management/Customer Service training for coordinators and facilitators who will train field personnel will be completed. These Coordinators/Facilitators have already begun training delivery to USDA field staff. USDA expects to provide training to over 9,000 Service Center employees during fiscal year 1997. The estimated fiscal year 1998 budget allows USDA to complete the delivery of this training to all field personnel. This training will provide the field staff with the necessary skills to deal with change, work cooperatively as a team, and improve customer service. $6,800,000--For Business Process Reengineering--BPR activities. The BPR working group was re-established in December 1996. Since then, BPR activities have moved forward on four BPR projects: (a) Customer Interface--community outreach and providing information; (b) Customer Service--assistance with services and benefits; (c) Geospatial Information Services; (d) Administrative Management. The BPR projects will provide the basis for improvements in program operations and administrative processes, and future IRM acquisitions. Given the resource relatities we face in the President's budget projections, we must move aggressively on these projects. $79,400,000--For the Information Resources Initiative. (a) $50 million for digital ortho-photography and digitization of soils data; (b) $24.3 million for development and testing of the common computing environment shared information system and migration from legacy systems; (c) $5.1 million for final activities related to the LAN/WAN/Voice telecommunications infrastructure. Mr. Skeen. How much of this amount does USDA plan to fund using CCC money in fiscal year 1998? Response. Mr. Chairman, at this time we plan to invest about 36 million from the CCC for these activities in fiscal year 1998. usda streamlining Mr. Skeen. Please update the Committee on the status of USDA streamlining. Response. Since 1993, USDA has reduced its staff years by 15,900. Approximately 6,600 employees left during this period under the ``Buyout/Earlyout Program.'' The remainder ended their employment for other reasons. metrication Mr. Skeen. Last year's testimony indicated that the Department's agencies were responsible for metrication activities within their own agency. Executive Order 12770 called for Federal agencies to develop specific time tables and milestones for the transition to metric. Please provide the Committee with a table summarizing the metrication plan including milestones, dates, and costs. Response. Individual USDA agencies are working on a plan to incorporate a dual system of metrics and non-metric measurements in the programs. At this time, a consolidated Departmental list of time frames and milestones for the various agency metric transition programs is not available. mediation services Mr. Skeen. Is the Department's assistance to the Department of State and other agencies with mediation services still provided on a non-reimbursable basis? Response. These services are no longer provided. funding and staff years in departmental administration Mr. Skeen. Please provide a table showing the funding and staff year levels for each office within Departmental Administration for fiscal years 1995 and 1996 and estimates for fiscal years 1997 and 1998. Response. Departmental Administration reorganized in fiscal year 1995 and, therefore, I have prepared two tables. The first table represents Departmental Administration's funding and staff year levels in the previous structure and the second table represents Departmental Administration in the current structure. DEPARTMENTAL ADMINISTRATION FUNDING AND STAFF YEARS FOR FISCAL YEAR 1995 ------------------------------------------------------------------------ 1995 actual ------------------------ Staff office Staff Amount years ------------------------------------------------------------------------ Personnel...................................... $7,080,198 109 Operations..................................... 3,308,889 48 Information resources management............... 5,928,908 71 Civil rights enforcement....................... 8,505,428 106 Administrative law judges/judicial officer..... 1,576,581 19 Disaster management and coordination staff..... 279,000 4 Modernization of administrative process staff.. 144,000 2 Total, Departmental administration............. 26,823,937 2 Unobligated balance............................ 48,849 ....... ------------------------ Total available.......................... 26,872,786 359 ------------------------------------------------------------------------ DEPARTMENTAL ADMINISTRATION FUNDING AND STAFF YEARS FOR FISCAL YEARS 1996-98 [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- 1996 actual 1997 estimate 1998 estimate ----------------------------------------------------------- Offices Staff Staff Staff Amount years Amount years Amount years ---------------------------------------------------------------------------------------------------------------- Human resources management.......................... $4,262 58 $4,207 49 $4,259 48 Civil rights........................................ 2,964 36 2,885 30 2,920 29 Property and procurement management................. 2,888 41 2,997 34 3,034 33 Information resources management.................... 4,620 51 4,498 54 4,553 54 Office of Operations................................ 7,050 80 8,729 99 8,636 98 Management services................................. 4,687 67 4,620 66 4,678 65 Administration law judges/judicial officer.......... 1,467 21 1,508 19 1,527 19 MAP................................................. 209 3 202 3 204 3 ----------------------------------------------------------- Subtotal, DA.................................. 28,147 357 29,646 354 29,811 349 Transfer to OCIO............................ (4,620) (51) (4,498) (54) (4,553) (54) ----------------------------------------------------------- Revised DA total.............................. 23,527 306 25,148 300 25,258 295 ---------------------------------------------------------------------------------------------------------------- transfer of excess property to 1890 land-grant institutions Mr. Skeen. Please provide a table showing the amount of property that has been transferred to 1890 Land-Grant Institutions, which do not fully participate in property programs, for fiscal years 1995, and 1996 and estimates for fiscal year 1997. Response. I am providing a table that lists the original acquisition cost of excess personal property transferred to the 1890 Land-Grant institutions from fiscal year 1995-1997. Based on their needs, the institutions fully participate in the excess property program. Estimated acquisitions for fiscal year 1997, are expected to be approximately $1 million. [Page 469--The official Committee record contains additional material here.] usda/1890 national scholars program Mr. Skeen. Please update the information provided to the Committee last year on the USDA/1890 National Scholars program including the number of students in the program and the costs of operation in fiscal years 1996 and 1997. Response. USDA established the Scholars Program in order to increase recruitment efforts, employment opportunities, program accessibility, partnership, and outreach to all under represented groups in order to strengthen work force diversity. In 1992, the National Scholars Program was announced to provide scholarships at the seventeen 1890 Land-Grant Institutions to attract more students to agriculture, food, and natural resource sciences. In order to be eligible, National Scholars candidates must be graduating high school seniors with a minimum 3.0 GPA, a composite SAT of at least 1,000 or ACT of 21, and must plan to attend one of the 17 Historically Black Land-Grant Colleges and major in Agriculture or a related discipline. Candidates must also be U.S. Citizens. Final selections are made by USDA based on merit ranking of applicants by the Institutions. USDA provides full tuition, fees, books, use of a personal computer and software, and summer employment, including employee benefits, during each of the four undergraduate years. Each scholarship is valued between $15,000 and $22,000, per student, per year. The 1890 Institution provides scholarship recipients with room and board. The National Scholars Program provided scholarships for 45 students in 1993; 34 students in 1994; 29 students in 1995; and 34 in 1996. There are currently 126 students in the program. In fiscal year 1996, the cost was approximately $1,173,200. Of this total, $335,200 is for tuition, books, and fees; $138,000 is for computers; $120,000 for administration of the program; and $580,000 covers salary and benefits costs for the students' summer employment. In fiscal year 1997, we anticipate an additional 32 to 34 students will join the program and that program costs will be approximately $1,300,000. Students will be eligible for permanent employment with USDA upon graduation. The criteria used to determine how many students will be funded is outlined in our agreement with the 1890 Institutions. Our agreement provides for 34 scholarships annually, two at each of the 1890 Institutions. alternative discipline plan Mr. Skeen. Update the Committee on the Alternative Discipline Plan in terms of number of employees using the plan and its effectiveness. Response. USDA's Alternative Discipline program has been in place since 1993. An estimated 350 employees, or 35 percent of total disciplinary actions in 1996, were handled through alternative discipline. The alternative disciplinary option has increased the involvement of supervisors in dealing directly with their subordinates in disciplinary matters, instead of handing off problems to the human resource or personnel office to resolve. Because employees must admit to their wrong doing before alternative discipline is even considered, the majority of employees who enter into an alternative discipline agreement complete the terms and conditions of the agreement and do not engage in future misconduct. The Department's human resource professionals report that the option of alternative discipline has been an important tool to resolve workplace conflict in a more professional and timely manner and frees up resources to deal with the most serious misconduct issues. purchase cards and third party drafts Mr. Skeen. Please report on the status of implementing purchase cards and third party drafts. Response. In fiscal year 1996, we formed a multi-disciplinary Purchase Card Implementation Team; increased the number of cardholders by 3,941; developed a new streamlined regulation with expanded authorities; developed the Purchase Card Management System--PCMS, an on-line reconciliation system; developed a number of user aids; and began piloting PCMS. In fiscal year 1997, we developed a training video; increased the number of cardholders by 2,136 through February; developed a multimedia tutorial; moved to a corporate bank platform; initiated a check writing pilot; developed an alert system; developed a small purchase self-study course; implemented report writing software to provide comprehensive management information; completed the PCMS pilot; developed PCMS enhancements as a result of the pilot testing; implemented an electronic method of distributing PCMS; and developed a planning template for full implementation. Full implementation of the purchase card program in USDA is expected to begin in summer 1997 and be available for cross servicing to other agencies once deployment across USDA is fully completed. We are currently implementing the recommendations of the Modernization of Administrative Processes project office-led purchase card and third party draft--TPD reengineering study. PCMS's check writing capability will allow us to combine and streamline both the purchase card and TPD programs. The processing techniques for either the purchase card or TPD transactions will become essentially the same. The TPD program is being phased out as the purchase card program, including check writing capability, is implemented. telecommunications within modernization of administration processes Mr. Skeen. The telecommunications component of the Modernization of Administrative Processes (MAP) effort was to have begun implementation in 1996. Please summarize the process to date. Response. Three General Accounting Office--GAO audits reported that USDA needs to improve the management of its telecommunications investments and resources. As a result of GAO's recommendations, a Telecommunications Executive Steering Committee was established in October 1995. This Executive Steering Committee, chaired jointly by Anne F. Thomson Reed and Irwin T. David, established the telecommunications Task Force--TTF to further assess the state of telecommunications management in USDA. The TTF found that the processes associated with planning, ordering, billing, invoicing, inventory control, payments, and management of telecommunications services and equipment are in need of reengineering from a Departmental perspective. A major recommendation of the TTF was the immediate initiation of a project to analyze the broad perspective telecommunications management activities within USDA. This recommendation resulted in the initiation of the Telecommunications Services Redesign Project. Planning for the Telecommunications Services Redesign Project began in the first quarter of fiscal year 96. The project was scheduled to occur in two phases. A project team of individuals from various agencies and the Department was assembled in June 1996, and phase I of the project began. During this phase, the team documented the current processes, collected customer and stakeholder requirements, and researched other practices for managing telecommunications. At the beginning of fiscal year 1997, phase II of the project started and is ongoing at the present time. Currently, the project team is developing recommendations for substantial process improvements, conducting a cost analysis of the impact of these redesigned processes, and identifying specific business modernization initiatives for implementing the new processes. Phase II of the project is scheduled to conclude in the third quarter of fiscal year 1997. The first project to begin implementing the recommendations will began shortly thereafter assuming management's concurrence with the proposed changes is received. When all recommendations of the Telecommunications Services Redesign Project are implemented, USDA should realize some dramatic improvements in the management of administrative activities related to telecommunications. Some of the significant objectives identified for the project include: Integrate telecommunications services management, procurement property management, and financial management process to support improvements in the quality and reliability of telecommunications inventory, usage, and payment data. Recommend modifications to the telecommunications management processes to take advantage of legislative changes and technological improvements. Provide necessary information to end users and telecommunications managers so that agencies can partner together in the procurement and usage of telecommunication resources. modernization of administrative processes initiatives Mr. Skeen. Please provide a status report on the remaining Modernization of Administrative Processes initiatives. Response. MAP efforts for fiscal year 1997 are being directed at three major administrative business areas: Procurement, Human Resources Management and Information Resources Management. Employee Civil Rights is to be added by the end of the year. MAP successes are improving USDA administrative processes and systems. The Purchase Card Business Reengineering effort described in question above, has led the way for initiatives currently in progress. MAP's Procurement Systems Modernization Project--PSMP has conducted a detailed business analysis emphasizing the redesign, streamlining, and consolidation of USDA's acquisition processes. The PSMP team is examining the many levels of review that can be streamlined or eliminated. Process improvements identified by the team will be forwarded to USDA's Procurement Executive for evaluation and implementation. During fiscal year 1997, the team will make a ``build or buy'' determination for developing a new acquisition system. To ensure that the new USDA acquisition system represents the best in both Government and industry, the PSMP team is now bench marking other federal agencies and private industry systems. Current plans call for a USDA acquisition system which provides the following core functionality: standardized acquisition, full electronic commerce integration, acquisition planning, requisitioning, order and contract document generation, one time data entry, approvals and work assignments on-line, rules, regulations and policies on-line, integrated reporting, and direct interface with other administrative systems. In the human resources business area, MAP has just entered the user-test phase of a business modernization initiative on the time and attendance records keeping process. In the first quarter for fiscal year 1997 the MAP team completed a business case of recommendations that clearly define specific cost avoidances and projected benefits. Stakeholders were identified and interviews were held with Department management and other USDA and external organizations. Some of the stakeholders were the Departments of Treasury, Justice, and Commerce. Recommendations include exception reporting, whereby an employee who works the same schedule each pay period needs not complete a time and attendance report. Implementation is scheduled to begin in fiscal year 1998. MAP's Human Resources Management Analysis--HRMA project, to be completed by the end of Fiscal year 1997, is a business analysis emphasizing redesign, streamlining, and refocusing of the activities in USDA's human resources area. Improving the way USDA conducts its human resources business is critical in order to address the work force reduction and streamlining goals identified in the NPR. The HRMA team has assessed the gap between current activities and an ideal human resources management system in order to identify activities that are inefficient and need to be deleted, or further streamlined. Within the business case, the team will recommend a clearly defined and prioritized set of projects which, when completed, will move USDA to less costly and more effective human resources management. This improved human resources system will provide the following core functionality: more effective work force planning, faster hiring, improved dispute resolution, and a single USDA information system that minimizes data entry and provides integrated reporting and interface with other administrative systems. When appropriate, MAP will evaluate business-driven technology solutions for these process improvements, including commercial off-the-shelf, other federal agency solutions and best practices in private industry. Project recommendations will reflect and support relevant recommendations of the recent Civil Rights Action Team Report. In the telecommunications business area, a MAP team is now analyzing the procurement of telecommunications activities as they relate to both services and equipment. In addition to those projects, MAP developed in fiscal year 1996 a set of architectures for administrative functions in USDA. These architectures describe the business, information, and technical architectures that support administrative activities. These architectures will contribute to the USDA architectures being developed by the Office of the Chief Information Officer--OCIO. Overall, by the close of fiscal year 1997, it is expected that MAP will have begun or designed at least eight business modernization initiatives. These will consist of three in procurement; two in human resources; one in civil rights; and three in information resources management and telecommunications. These initiatives include the full range of business improvements and radical redesign approaches. In each of these efforts, a definitive list of performance measures will be developed against which their success can be gauged. Solutions to organizational change issues will be well integrated into project design and implementation. map costs Mr. Skeen. How much, in total, has been spent on the MAP project? [The information follows:] Fiscal year MAP costs 1994.................................................... $1,032,000 1995.................................................... 2,202,552 1996.................................................... 4,442,555 -------------------------------------------------------- ____________________________________________________ Total............................................... 7,677,107 MAP is partially financed through the DA appropriation and the USDA's Working Capital Fund--WCF. The annual budget for MAP is as follows: ---------------------------------------------------------------------------------------------------------------- Working capital Fiscal year DA appropriation fund Total ---------------------------------------------------------------------------------------------------------------- 1997 est............................................... $202,000 $4,627,000 $4,829,000 1998 est............................................... 204,000 4,627,000 4,831,000 ---------------------------------------------------------------------------------------------------------------- map and other reengineering efforts Mr. Skeen. How does the MAP project relate to the other reengineering efforts in USDA? If other agencies within USDA are reengineering their administrative processes, how is this being coordinated with the MAP program. Response. MAP Coordinates USDA reengineering activities through the MAP Executive Board which prioritizes and oversees activities associated with reengineering administrative processes. The MAP Executive Board is composed of senior administrative or financial executives from each of the mission areas. In addition, this board, chaired by the Assistant Secretary for Administration also includes the Chief Financial Officer, the Associate Inspector General, an executive from a USDA program area, and a representative from the USDA cross- serviced clients. This board approves priorities and recommends funding for MAP projects. The Procurement Systems Modernization Project has coordinated its activities with all USDA agencies through the executive board and through the USDA Procurement Council. Two major USDA projects in the Human Resources area, the Staffing and Classification Integrated Personnel System and the Farm Service Agencies Administrative Management Reengineering--part of the Service Center Implementation Initiative--are closely coordinated with MAP. MAP's BPR Manager directly assisted the Service Center Team in establishing its business reengineering projects, including the administrative management reengineering effort. She continues as the Departmental liaison ensuring that Departmental guidelines and methodologies are followed. reengineered processes Mr. Skeen. How will the reengineered processes be implemented at the mission area and agency levels throughout USDA, and what authority does USDA have to make agencies implement MAP initiatives and cancel or suspend Information Technology projects that are not consistent with MAP initiatives? Response. MAP uses several mechanisms to partner with agencies to ensure that reengineered processes will be implemented. The primary mechanisms are the executive leadership provided through the MAP Executive Board and the prioritization of MAP funding achieved through the Working Capital Fund Process. Additionally, when project teams are formed, maximum participation is sought from the USDA mission areas. In many cases, USDA agencies are signed up as potential ``pilot'' sites, prior to actual initiation of the reengineering projects. MAP takes every opportunity to ensure that projects are directed towards implementation. Business Reengineering projects are chartered for up to two years, to ensure continuity and oversight through pilot phases and into the implementation phase. The Secretary of Agriculture has delegated to MAP the authority to coordinate the reengineering of USDA's administrative and financial processes. In addition, the Assistant Secretary for Administration, as Senior Procurement Executive, may suspend any procurement that is not in the best interest of the Department. contracting out administrative functions Mr. Skeen. Has the Department investigated contracting out any administrative functions? Response. The Department has investigated contracting out administrative functions to the private sector. We have already contracted out the administrative portion of the Unemployment Compensation activities, building maintenance, and computer center operations in our Kansas City Computer Center. procurement reform Mr. Skeen. Please update the status report on procurement reform submitted for last year's testimony. Response. Improvement and streamlining of the procurement process has been an ongoing objective within Departmental Administration. We currently have underway major initiatives to review and reengineer procurement processes within USDA. We continue to implement and support the initiatives of the Office of Federal Procurement Policy and are expanding our outreach efforts. Some highlights of our activities are: As part of our Purchase Card Reengineering efforts, we are continuing to train and empower non-procurement personnel to accomplish micro-purchases. Purchase card deployment has increased by 34 percent in fiscal year 1996, and thus far in fiscal year 1997 has increased by 18 percent. The new purchase card program includes revised and streamlined policies, procedures, check writing capability, and a new computer software application. The system includes an alert system to notify managers and the Office of the Inspector General of potential misuse and a user friendly report writer that provides comprehensive management information. We have completed the pilot field testing of PCMS at one location in the Agricultural Research Service and two locations in the Forest Service. PCMS enhancements are underway to insure a successful deployment, which will begin in summer 1997. PCMS will be available for cross servicing of other government entities. As part of our procurement modernization efforts, an interagency team was formed to review and reengineer the remaining USDA procurement process. The Procurement Systems Modernization Project--PSMP--Team has completed a draft report on reengineering the USDA procurement process. Significant process, regulatory and system improvement opportunities have been identified and are currently under final review and analysis. When implemented, the identified process improvements will provide increased savings in the areas of time management, quality, and cost avoidance. The initial implementation of improvements designated as priorities is scheduled to commence in the third quarter of fiscal year 1997. Working with representatives of many USDA procurement offices we have defined the functional requirements for a new, core USDA procurement system. A build-buy analysis will be completed by summer 1997. We are also beginning to identify the interface requirements to link the next procurement system to the Foundation Financial Information System and our existing Property System. USDA, as a leader in the Javits-Wagner-O'Day Act Program--JWOD, advocates and carries out the activities of the Presidential Committee for the Purchase From People Who are Blind or Severely Disabled. In fiscal year 1996 USDA once again increased its JWOD sales from prior years, boosting its purchases of JWOD products and services by 38 percent over fiscal year 1995. At a volume of $21.9 million, USDA trails only GSA, the Department of Defense, and the Postal Service in acquisition of JWOD products and services. We participate on a Task Force established to advise the Office of Federal Procurement Policy in its implementation of the Acquisition Workforce requirements of Section 4307 of the Clinger-Cohen Bill-- Maloney Provisions. We are reviewing and will be updating the existing USDA training program for acquisition personnel to ensure continued improvement in the skills and knowledge of the USDA acquisition workforce and to ensure compliance with the Maloney Provisions. The Office of Federal Procurement Policy initiative to increase the use of performance based service contracting--PBSC methods is an opportunity for USDA to achieve increased savings. Initial surveys of our agencies indicate that portions of PBSC methods are already used in some USDA agencies. We are currently studying the extent to which agencies now use PBSC methods and will establish a baseline for further training and use of all tools associated with these methods. We are currently finalizing the selection of procurement performance measures which we will use to assess and review our acquisition operation. We are planning to begin implementation of our procurement performance measurement plan this fiscal year. The types of measures initially selected will be developed with consideration given to currently available data collection systems. The measures used will continue to evolve and will ultimately be incorporated into our Government Performance and Results Act implementation. To minimize the resource impact of data collection requirements, we plan to ensure that the performance measures and data collection needs are reflected in the Procurement Systems Modernization Project efforts. performance management system Mr. Skeen. Last year the Department created a new policy concerning the performance management system. Please summarize for the committee the major changes in the policy, the intended purpose of the changes, and results from the implementation of the policy. Response. The new performance management system allows agencies greater flexibility in designing performance management programs tailored to the needs of their organization. It focuses on improving individual and organizational performance and provides better linkage with the Government Performance and Results Act. The policy also provides for as many as five and as few as two summary rating levels, e.g., ``Pass/Fail'', which was not included in the old system. To date, only two USDA agencies submitted revised performance programs for approval. It is too early to evaluate the impact of this policy change. celebration of excellence ceremony Mr. Skeen. Did USDA conduct a Celebration of Excellence Ceremony for USDA employees in fiscal year 1996 and 1997? If so, what were the costs? Response. Yes, the cost for the Secretary's Honor Awards ceremony was $41,013 in fiscal year 1996. This represented a 57 percent reduction in costs from fiscal year 1995 costs of $95,626. Planning for fiscal year 1997 Honor Awards in June is underway now. A budget of $54,050 is allocated for fiscal year 1997. expenditures for special emphasis programs Mr. Skeen. Last year the Department spent $235,000 on special emphasis programs and that expenditure is expected to increase to $295,000 in 1998. Please describe what the funds are used for. Response. The role of the Special Emphasis Programs of the Department has been primarily focused on Employment issues. Currently the Department has six Special Emphasis Programs. They include the Federal Women's Program, the Hispanic Employment Program, the Native American Program, the African American Program, the Asian Pacific American Program, and the Disability Employment Program. The Special Emphasis Programs were established through Executive Orders to address particular employment concerns. Currently the Office of Civil Rights is reviewing the role of Special Emphasis Programs and how they can be strengthened to fully incorporate concerns regarding program delivery. There is an apparent need for more focus on program delivery as it relates to small and disadvantaged farm programs as well as other ``outreach'' programs within USDA. classes of employment Mr. Skeen. The Departmental Administration staff includes five ``CA'' grade and four ``AL'' grade employees. What are these classes of employment and how are they paid? Response. These pay schedules apply to members of our Board of Contract Appeals--CA, and to our Administrative Law Judges--AL. The 1997 rates of pay for members of the Board of Contract Appeals ranges from $116,491 to $123,100 per annum, and the Administrative Law Judge pay scale begins at $80,552 and ends at $123,100 per annum. personnel costs for departmental administration Mr. Skeen. Personnel costs for Departmental Administration are increasing $619,000 in 1998 but staffing falls by 10 FTEs. Please provide an explanation. Response. Total personnel compensation and benefits increase by a net of $619,000 between fiscal years 1997 and 1998. This increase is composed of pay costs and annualization increases for staff on board in fiscal year 1997 ($620,000), and costs associated with with-in grade increases, promotions, and other compensation ($215,000) for a total increase of $835,000, which is offset by a reduction of $216,000 for the reduction of 5 staff years in fiscal year 1998. advisory and assistance services decrease Mr. Skeen. Object class 25.1, advisory and assistance services, falls by 47 percent. What is the underlying reason for this change? Response. In order to fund our projected payroll, fixed support costs, and mission-essential variable costs within the President's Budget level, we are reducing other discretionary costs such as services under this object class. advisory and assistance services Mr. Skeen. For Object Class 25.1, advisory and assistance services, please provide details of what services are required. Please also provide a list of those providing consulting services for the current fiscal year. [The information follows:] DEPARTMENTAL ADMINISTRATION CONSULTING SERVICES, FISCAL YEAR 1997-98 ------------------------------------------------------------------------ Contractor Subject ------------------------------------------------------------------------ Professional Pavement Management.......... Parking management. Tillman-Ramsey Group...................... EEO/Civil rights complaint adjudication. ------------------------------------------------------------------------ decrease in other services Mr. Skeen. Object Class 25.2, Other Services falls by 26 percent. Why have these costs changed? Response. In this austere budgetary environment, we have to prioritize each of our resource requirements. In order to fund our projected payroll, fixed support costs, and other mission critical variable costs within the President's budget. We have reduced our projected spending in other discretionary costs, including training. Federal and commercial contract services have been substantially reduced as a result. I have tasked my managers to do their best to get the best benefit from every dollar. decrease in the cost of goods and services Mr. Skeen. The purchase of goods and services from government accounts, object class 25.3, has fallen by $170,000 in 1998. What is the cause of this reduction? Response. With the exception of pay and fixed expense related costs whose estimates reflect their projected costs partially adjusted for inflation, projected obligations in virtually every other object class have been reduced. decrease in maintenance costs Mr. Skeen. Both the operation and maintenance of facilities (object class 25.4) and equipment (object class 25.7) have had their request reduced in 1998 by a total of $150,000. What has changed that would allow the Department to lower its maintenance costs? Response. The needs for facilities and equipment maintenance haven't gone away, but we are trying to manage our resources in the most efficient manner possible and provide funds for mission-critical activities. decrease for civil rights complaint adjudication Mr. Skeen. How does the Civil Rights Action Team Report affect the proposed 1998 decrease of $200,000 for civil rights complaint adjudication? Response. This decrease in the Departmental Administration budget was offset by an equivalent increase in the Office of the General Counsel budget request in anticipation of increased needs for legal support of our complaints adjudication caseload. time and attendance reporting system Mr. Skeen. Please report on the nature of and the benefits derived from the improvements made in the time and attendance reporting system in December 1996. Response. The Time and Attendance Business Process Reengineering Business Case is currently under review to better determine the viability of some of the recommendations on both a short-term and long- term basis. Once the recommendations stemming from the Time and Attendance Business Case are fully implemented, USDA will receive the following benefits to the process: streamlined reporting, reviews and approvals of time sheets; management by exception reports that will allow managers to review a report rather than individual time sheets; reduced administrative burden by one staff day per person per year; ability to reassign timekeepers to more mission-critical duties; decreased volume and complexity of timekeeping data; lower transaction error rates; and reduced paperwork. proposed paperless personnel request system Mr. Skeen. Please provide an overview of the proposed paperless personnel request system. Include a timetable for implementation, an estimate of the costs, and an evaluation of the benefits. Response. The proposed paperless personnel request system will electronically link the first line manager with the servicing personnel office. After processing the request, the servicing personnel office will transmit the data electronically to the USDA payroll/personnel system maintained by the National Finance Center--NFC--in New Orleans. Significant costs can be avoided by automating this process. For USDA, the salary cost avoidance in the servicing personnel offices alone is estimated at over $4 million per annum. It is important to point out, however, that personnel office staffing cuts have already been taken due to our streamlining efforts. This will allow us to maintain the pre-streamlining level of customer service with the reduced staff. The costs associated with developing and implementing such a system for USDA have been estimated at $6.2 million. This estimate was based on in-house adaptation by NFC of the Integrated Personnel System originally developed by the Forest Service. Due to new guidance from the Office of Management and Budget on information technology, USDA is also considering various commercial-off-the-shelf options and developing new cost estimates. The timing of implementation of this system will depend on the success of small scale pilot tests of prototype software to be conducted in the fall of 1997. Once a system is successfully piloted, implementation Departmentwide will be phased in over a two to three year period. status of usda reorganization Mr. Skeen. Please provide the Committee with an update on the status of the USDA reorganization including: reduction in targeted personnel categories, senior executive allocations, civil rights impacts, implementation of customer service plans, and implementation of the President's Labor Management Relations Partnership Councils. Response. USDA mission areas reported their status as of October 1996, in meeting the requirements of the USDA reorganization. This report was compiled and analyzed jointly by the Office of the Assistant Secretary for Administration and the Office of Budget and Program Analysis. USDA mission areas reported significant progress in meeting targeted employment goals. USDA currently has an SES allocation of 359 positions. All of these slots have been allocated and are filled or approvals are pending. Of the twelve organizations that reported on customer service plans in November 1996, all but two had indicated that they have established Customer Service Performance standards. These organizations are working on their Standards and will be asked to submit an update within the next month. USDA developed detailed guidance for conducting appropriate and accurate civil rights impact analysis for missions areas and agencies. This guidance was issued under regulation 1010-1, dated July 3, 1996. In addition, the Policy Analysis and Coordination Center--Civil Rights has reviewed all mission areas proposals to reorganize and has conducted a civil rights impact analysis. This report is currently being reviewed and refined within USDA and is expected to be completed by April 30, 1997. The USDA Labor-Management Partnership Council was formed at the Department level in December 1993, two months after the President issued the Executive Order requiring Federal agencies to establish partnerships with their employee unions. USDA was one of the first Departments to begin union-management partnership. In addition to the Department level Council, there are over 70 partnership councils throughout the mission areas, including those organizations affected by the reorganization. early out and buy out options Mr. Skeen. How many USDA employees took the early out and buy out options in 1996? What were their grades and occupations? How many of these employees left positions that had to be refilled? Finally, what was the cost to USDA? Response. In Fiscal Year 1996, 199 USDA employees took early retirement and 225 took a buyout. Their grades and occupations were as follows: [Page 478--The official Committee record contains additional material here.] USDA BUY OUTS, FISCAL YEAR 1996 ---------------------------------------------------------------------------------------------------------------- GS-6 GS-11 GS-14 Number of Occupational Wage GS-1 to to GS- to GS- to GS- series grade GS-5 10 13 15 employees ---------------------------------------------------------------------------------------------------------------- Social Sciences........................... 0 0 0 4 4 0 8 Personnel Management...................... 0 0 3 3 1 1 8 General Administrative.................... 0 2 11 19 9 1 42 Biological Sciences....................... 0 0 0 47 23 3 73 Accounting and Budget..................... 0 0 5 9 2 0 16 Engineering............................... 0 0 12 23 6 1 42 Legal..................................... 0 0 1 1 4 0 6 Information and Arts...................... 0 0 1 1 2 0 4 Business and Industry..................... 0 1 1 6 2 0 10 Physical Sciences......................... 0 0 4 2 0 0 6 Mathematics/Statistics.................... 0 0 2 0 0 0 2 Equipment & Facilities.................... 0 0 0 2 0 0 2 Printing & Reproduction................... 1 0 0 0 0 0 1 Industrial Equipment...................... 2 0 0 0 0 0 2 Transportation............................ 2 0 0 1 0 0 3 --------------------------------------------------------------------- Totals.............................. 5 3 40 118 53 6 225 ---------------------------------------------------------------------------------------------------------------- Of those taking early outs and buyouts, 147 left positions which needed to be refilled by their Agency. However, overall the Department reduced its employment ceiling by one for each buyout departure. Buyout payment costs to the agencies are estimated to be $2,701,000, offset by the salary and benefit costs avoided by early out and buy out actions. plans for early out or buy out authority Mr. Skeen. Do you plan on using the early out or the buy out authority in 1997 or 1998? If so, how many employees do you think will use the early out or buy out option? Response. To date, 844 Federal and 694 County employees left the Department by accepting a buyout. Since the inception of civilian agency buyouts in 1994, a total of 6,630 Federal and 1,070 County employees left USDA through this mechanism. Of those opting for buyout in fiscal year 1997, 20 percent were in supervisory positions, 19 percent were administrative, and over 86 percent of the total were nonminorities. Rural Development led the way with 430 buyouts, while the Farm and Foreign Agriculture Service had 215, and the Natural Resources Conservation Service had 115. Application and departure windows for fiscal year 1997 are closed; However, as many as 234 delayed departures, approved under the initial buyout legislation, may still occur this year. The Department's buyout authority extends for the next three years. Later this year, we will examine the benefits of implementing another round of early of early out and buy out offers for fiscal year 1998. status of employee express pilot Mr. Skeen. Please report to the Committee on the status of the Employee Express pilot cost to implement? What are the benefits of the new system? When will the pilot be expanded to full implementation? Response. Several USDA agencies are participating in the pilot testing of the government-wide Employee Express system. The 10,000 employees in the pilot like the system. They like the Kiosk for ease of use and the telephone voice response system for its availability directly from home or office. USDA's widely disbursed workforce would require too many Kiosks, so USDA joined other participating agencies to fund an Internet access option. The Office of Personnel Management--OPM projects this option will be available in the Summer of 1997. Employee Express eliminates the personnel office as an unnecessary layer in employee-initiated actions, such as address changes and payroll deductions. Over the past three years, USDA paid OPM approximately $300,000 as the Department's share of development and maintenance costs. The benefits include greater customer service to employees and a reduction in the costly paperwork burden on personnel offices. While the paperless personnel system is the long term solution to the paperwork burden, Employee Express provides immediate relief to overburdened personnel offices and USDA is exploring the cost of Departmentwide implementation with OPM. However, many employees continue to do business the old, paper-intensive way and do not avail themselves of Employee Express. Making the employee Express system available to all employees in USDA would allow blanket publicity coverage encourage more employees to use it and drive down the cost per transaction. savings in worker's compensation costs Mr. Skeen. Please make an estimate of the savings in workers' compensation claim costs resulting from the automated workers' compensation cost management system. When will it be fully operational and how much has it cost to develop? Response. Most USDA agencies have been using the workers' compensation automated case management system since December 1996. It is difficult to gauge cost savings at this time since the Department is midway through the program year and this system has been operational throughout USDA for only three months. It is estimated that claim costs will continue to decline an average of $700,000 per year. Developmental costs for the workers' compensation automated case management system database were less than $5,000. Comparable desktop database applications developed by contractors are available for approximately $115,000. Comparable workers' compensation databases run by mainframe computers average $175,000 per year. agricultural acquisition regulation Mr. Skeen. Please provide a status report on the Agricultural Acquisition Regulation. How much time and money will be saved? Response. The first comprehensive update of the Agricultural Acquisition Regulation--AGAR since 1990 was published as a final rule on October 15, 1996, and became effective November 14, 1996. This was a regulatory reform initiative that resulted in a 17 percent reduction in the new version of the AGAR. A copy of the AGAR was submitted to Congress as required by the Small Business Regulatory Enforcement Fairness Act of 1996. The AGAR is posted under the Departmental Administration Home Page on the Internet. We are planning to issue the first change circular for the new AGAR by the end of calendar year 1997. It is difficult to quantify the effect of updating and streamlining the AGAR in terms of time or money savings. Any cost reductions or time savings from revision of the AGAR are spread over numerous contracting offices and vendors throughout the United States. Delegating approval authority downwards by one or more levels frees time for both front line offices and administration by eliminating layers of review. One example of this is the review of mistakes in bid alleged before award; such mistakes used to be reviewed by the Departmental Senior Procurement Executive, but now are resolved by the awarding agency. Updating the AGAR to parallel the current Federal Acquisition Regulation--FAR makes it easier to refer to AGAR coverage which supplements the FAR. The update implements such procurement reforms as designation of a Task Order Ombudsman and establishment of a procedure for filing protests with the agency. The update reduces the number of prescribed clauses and contract provisions in the AGAR from 69 to 45. This reduction eliminates redundant clauses and provisions, and allows contracting officers flexibility to craft solicitation language. adjudicated eeo complaints Mr. Skeen. Of the EEO complaints adjudicated in 1996, how many were resolved without materially punishing the individual at fault but a payment was made to the party filing the complaint. Response. There is no finding of fault when the cases are administratively closed. During fiscal year 1996, USDA agencies closed 387 EEO complaints with 354 settlement agreements. Of the 354 settlement agreements, 144 included monetary payments to the complainant. office of administrative law judges Mr. Skeen. Material submitted by the Department shows that the Administrative Law Judges had 34 percent fewer hearings and 12 percent fewer depositions in 1996 than 1995. Why was this the case? This continues a trend from 1994. Has this trend continued in 1997? Does this reduction imply that the Office of Administrative Law Judges could be scaled back? Response. While recent trends continue to reduce the number of hearings and dispositions, cases have become more complex. I believe that we need to maintain the capability to address future increases in caseload while redirecting scarce resources now. As a result, this office has kept one Administrative Law Judge and one Attorney-Advisor position vacant as the result of attrition and made necessary improvements to office automation and case tracking systems. number of credit cards issued Mr. Skeen. Please report on the number of credit cards issued in 1996 and the number issued so far in 1997. Response. The number of credit cards issued in 1996 was 3,941 for a total of 11,547 active cards at the end of the year. The number of credit cards issued through February 1997 is 2,136 for a total of 13,683 active cards. savings through credit cards Mr. Skeen. What are the estimated annual savings achieved through the use of credit cards? Response. The USDA average administrative processing cost for a purchase order totals $77. Using a purchase card, under our purchase card procedures, we incur an average administrative processing cost of approximately $32. With our reengineered purchase card system, which will include check writing, we expect to lower the processing cost to approximately $17 per transaction. We have already eliminated the Over- The-Counter Purchase Order System within USDA, with a realized savings of $400,000 annually. Given the volume of USDA procurement transactions, the cost avoidance, as you can see from these reduced per transaction costs, are significant. Note that this cost avoidance will aid USDA to continue the delivery of services given the budget reductions the Department is already facing through the end of the decade. estimated annual savings Mr. Skeen. Please update the Committee on the estimated annual savings for each of the following programs: Third Party Draft, USDA Recycling, and Improved Property Management. Response. The average current administrative processing cost of a Third Party Draft--TPD--is $54. This is a reduction from the $77 average administrative processing cost for a purchase order transaction. In fiscal year 1996, USDA processed 41,106 TPD transactions for a savings of $945,438. The TPD program is being phased out as the new reengineered purchase card program, which includes an integrated check-writing capability, is implemented in the Department. Purchase card transactions, using the reengineered process, will have an administrative processing cost of approximately $17. The Department's solid waste recycling program is managed on a local level by USDA locations Nationwide. There is no central accounting system in place to track dollars saved Departmentwide. However, for those USDA offices which are located in General Services Administration controlled space and participate in GSA's recycling collection program, we have information available on the revenue returned to USDA from GSA for the sale of recovered waste materials. For fiscal year 95, the first year for which figures are available, USDA received $48,134 from the recycling revenue program. Fiscal year 96 figures have not yet been finalized, but we anticipate that GSA's final accounting will show a similar level of participation and recycling revenue. In accord with the authorizing legislation, these recycling revenue funds will be directed into the operation and enhancement of the USDA recycling program, and for other environmental and energy conservation purposes. In the area of property management, in fiscal year 1996 the following practices resulted in cost savings: Fleet Credit Card--Due to the expiration of the SF-149, U.S. Government National Credit Card, a new fleet credit card has been adopted governmentwide. The award of the new contract to Wright Express will result in an approximate annual savings of $30,000 to USDA. In the past the government was charged $1.50 per credit card issued with a two year expiration date. In the new contract this fee has been eliminated. Equipment Management Information System/Personal Property System-- Currently, the Department is merging these two administrative systems which collect information on motor vehicles and other types of personal property. This will result in a one time estimated savings of $95,000. Policy Change in the Accountability Threshold--Recently, in response to NPR initiatives, USDA raised the accountability threshold for personal property from $1,000 to $5,000. The savings from this initiative are intangible, but we believe it will reduce the administrative burden on current resources which will result in administrative savings. Agriculture Property Management Regulations--The Departmental Property Management Regulations were reviewed and changed, as necessary, resulting in a reduction of more than 50 per cent of the document. Once the initial distribution of the revised document has been completed, we plan to upload the entire document onto the Departmental Administration's Home Page for access by all concerned parties. Future updates will be handled electronically, providing a cost avoidance of approximately $8,500 per distribution. status of kansas city and davis Mr. Skeen. Please provide the Committee with a status report on the collocation projects at Kansas City and Davis. Response. The Kansas City initiative will collocate eight agencies--Farm Service Agency, Civil Rights Enforcement and Adjudication, Food and Consumer Service, Food Safety and Inspection Service, Grain Inspection, Packers and Stockyards Administration, Office of the General Counsel, Office of the Inspector General, and Risk Management Agency--and require approximately 350,000 square feet of rentable space to house an estimated 1,800 personnel. The General Services Administration received initial offers in October 1996 and lease award is anticipated in June 1997. Occupancy is scheduled for the year 2000. The Davis project will collocate three USDA State Offices--Farm Service Agency, Natural Resources Conservation Service, and Rural Development--the Risk Management Agency regional office--and four additional agency locations--Agricultural Research Service, Civil Rights Enforcement and Adjudication, Forest Service, and Office of the Inspector General--in a single facility of approximately 60,000 square feet of office and related space. USDA is working with the General Services Administration's San Francisco regional office, which awarded a lease on February 14, 1997. targeted disabilities Mr. Skeen. Please update the information on page 330 of last year's hearing record regarding employment of persons with targeted disabilities. Response. Using the first quarter data for fiscal year 1997, people with severe disabilities represent 1.01 percent of the total permanent workforce. People with all reported disabilities equal 7,391 or 6.6 percent of our permanent workforce. As of September 30, 1996, there was a total of 1,141 persons with targeted (severe) disabilities employed by USDA. As a result of downsizing, USDA's total workforce dropped from 89,894 (as of 9/30/96) to 89,058 (as of 1/14/97) permanent employment, reflecting a net loss of four persons with severe disabilities. Our goal is to increase representation of people with severe disabilities to 1.37 percent by the end of this fiscal year. motor vehicles Mr. Skeen. As a means to reduce costs, USDA is placing a greater proportion of vehicles under Department ownership. How many vehicles at the Department are USDA owned, how many are GSA leased, and how many are commercially leased. How has this changed over the past five years? Response. USDA is continuing, whenever funding permits, to purchase vehicles in lieu of leasing. As of September 30, 1996, USDA owns 33,393 domestic vehicles which includes sedans, station wagons, light trucks, medium trucks, heavy trucks, buses and ambulances. In fiscal year 1996, USDA leased approximately 4,400 vehicles from GSA--which is approximately 1,200 less than Fiscal year 1995--and 383 vehicles commercially--which is 98 less than Fiscal year 1995. Over the past five years the percentage of owned vehicles of our entire fleet has risen from 82 percent to the current 87 percent with commercial leases varying from 1 to 2 percent and GSA reduced from 16 to 12 percent. MOTOR VEHICLES ---------------------------------------------------------------------------------------------------------------- Commercail Number owner and leases and GSA leased and Fiscal year percent of total percent of total percent of total fleet fleet fleet ---------------------------------------------------------------------------------------------------------------- 1992...................................................... 34,928--82% 501--2% 7,000--16% 1993...................................................... 35,196--83% 614--2% 6,400--15% 1994...................................................... 34,699--84% 750--2% 5,950--14% 1995...................................................... 34,159--85% 481--1% 5,600--14% 1996...................................................... 33,393--87% 383--1% 4,400--12% ---------------------------------------------------------------------------------------------------------------- distribution of motor vehicles Mr. Skeen. Please update the table on pages 330 and 331 of last year's testimony showing the distribution of the Department's vehicles by agency. [The information follows:] USDA Domestically Owned Vehicles (as of 9/30/96) Agricultural Marketing Service................................ 56 Agricultural Research Servce.................................. 2,973 Farm Service Agency........................................... 11 Animal and Plant Health Inspection Service.................... 2,982 Rural Development............................................. 16 Grain Inspection, Packers & Stockyards Administration......... 4 Food Safety and Inspection Service............................ 1 Forest Service................................................ 16,937 National Agricultural Statistics Service...................... 20 Office of the Inspector General............................... 34 Office of Operations.......................................... 2 Natural Resources Conservation Service........................ 10,357 -------------------------------------------------------------- ____________________________________________________ Total Domestically Owned Vehicles..................... 33,393 In addition to the 33,393 owned sedans, station wagons, light trucks, medium trucks, heavy trucks, buses, and ambulances listed in the above table, USDA owns and operates various special purpose vehicles which include: fire trucks, trash compactors, construction equipment, trailers, motorcycles, and snowmobiles. We also operate 232 vehicles in foreign countries and obtain approximately 4,400 vehicles from GSA and approximately 383 vehicles commercially. USDA also owns and loans through the Federal Excess Property Program--FEPP--about 25,000 pieces of fleet equipment made up of trucks, buses, and heavy equipment. distribution of aircraft Mr. Skeen. Also for the record, provide a similar table showing the Department's distribution of aircraft by agency. [The information follows:] Distribution of Owner and Operated Aircraft (as of 9/30/96) Agricultural Research Service..................................... 6 Animal and Plant Health Inspection Service........................ 23 Forest Service.................................................... 42 ----------------------------------------------------------------- ________________________________________________ Total Owned Aircraft.......................................... 71 In addition, the Forest Service owns 306 aircraft which are on loan to State Forestry organizations and 28 aircraft which are on loan to museums. These organizations pay all costs associated with the aircraft. The Animal and Plant Health Inspection Service also leased on a year-round basis eight aircraft and borrowed six aircraft from cooperators. In addition, the Department acquired by contract, charter, lease or rental approximately $127 million in aircraft and aircraft services which is higher than usual due to a severe fire season. summer interns Mr. Skeen. Please update the Committee on the total number of summer interns the Department hired in 1996? How many were from 1890 Land Grant Institutions, how many were from the Hispanic Association of Colleges and Universities, how many were from American Indian Colleges, and how many were from other Colleges and Universities? Response. In 1996, the Department hired 952 summer interns. Of these 200 were from 1890 Land Grant Institutions, 124 were from the Hispanic Association of Colleges and Universities, 46 were from American Indian Colleges, and 582 were from other Colleges and Universities. historically black colleges and universities Mr. Skeen. Please update the table provided to the Committee last year (page 333 of Hearings) showing the funds USDA provided to Historically Black Colleges and Universities to include fiscal year 1996 actual and 1997 estimates. [The information follows:] [Page 485--The official Committee record contains additional material here.] land grant universities Mr. Skeen. Provide a table showing a complete list, by agency, of all funds being transferred to each Land Grant University for fiscal year 1996 and estimates for fiscal year 1997. Response: The total amount for fiscal year 1997 will be about the same as the 1996 level. However, a large part of the funds are awarded competitively and recipients are not known at this time. [The information follows:] [Pages 487 - 488--The official Committee record contains additional material here.] competitive grants process Mr. Skeen. Based on the information in last year's testimony, about 20 percent of the universities received over 50 percent of the funds distributed by USDA. Does the Department monitor the competitive process used by the agencies to distribute funds to Land Grant Universities? If so, what proportion of the funds are distributed on a competitive basis? Response: For competitively awarded programs, the Cooperative State Research, Education, and Extension Service uses a peer review or merit review process to evaluate all proposals submitted regardless of the type of institution involved. When assembling panels, CSREES takes into consideration the areas being review by the panel and strives to constitute the panel with the best qualified experts in that particular area. In some of our programs, such as the National Research Initiative, we also mail out the proposals to ad hoc reviews to get their options on the quality and value of the proposed research. The largest CSREES competitive program is the National Research Initiative--NRI--and Peer review panel members and ad hoc reviewers are selected based upon their training and experience in relevant scientific or technical fields taking into account the following factors: the level of formal scientific or technical education and other relevant experience of the individual as well as the extent to which an individual is engaged in relevant research and other relevant activities; the need to include as peer reviewers experts from various areas of specialization with relevant scientific technical fields; the need to include as peer reviewers experts from a variety of organizational types, such as universities, industry, private consultants, and from diverse geographic locations; and the need to maintain a balanced composition of peer review groups with regard to minority and female representation, and an equitable age distribution. The following table reflects the composition of NRI peer panels in fiscal year 1996. The panel membership is very similar to the distribution by types of institutions submitting proposals. In fiscal year 1996, 71 percent of the NRI proposals were submitted by Land Grant Institutions and 71 percent of the panel members were from Land Grant Institutions. The process used by the NRI is very similar to the process used by the National Science Foundation. USDA has established Strengthening Awards component under the NRI Program to ensure that faculty of small and mid-sized academic institutions with limited institutional success and faculty at institutions in USDA-EPSCoR--Experimental Program to Stimulate Competitive Reserch--States receive a portion of available funding. Small and mid-sized institutions means academic institutions with a current total enrollment of 15,000 or less, including undergraduate and graduate and full and part-time students. USDA-EPSCoR States are those which have had a funding level from the NRI Program no higher than the 38th percentile of all States, based on a three-year rolling average, and all United States Territories and the District of Columbia. Proposals submitted under the Strengthening Awards component of the NRI undergo merit review by peer panels separate from those panels assembled to review Standard Research Grant proposals. Several of our higher education grants programs focus entirely on enhancing educational opportunities in the food and agricultural sciences at institutions other than 1862 Land Grant Institutions. Two examples are the Capacity Building Grants Program, under which only 1890 Land Grant Institutions are eligible to receive funds, and the Hispanic Service Institutions Program, initiated in fiscal year 1997, under which only institutions with at least 25 percent Hispanic enrollments are eligible to receive funds. These are competitive programs and proposals submitted by eligible institutions undergo merit review by peer panels assembled for each program. A new competitive extension program is also being initiated in 1997 for the 1994 Institutions. The Department engages in substantial oversight of competitive grant programs through reviews, audits, and assessments. In addition, independent organizations such as the National Research Council and Federation of American Societies for Experimental Biology have assessed--or are assessing--the goals, procedures, and outcomes of several of our competitive programs, including the NRI and the Biotechnology Risk Assessment Research grant programs. In fiscal year 1997, approximately 17 percent of the CSREES research, education, and extension program funds are being awarded competitively. I will provide for the record a table. DISTRIBUTION OF NRICGP PANEL MEMBERSHIP FISCAL YEAR 1996 A. Distribution by Geographical Region. ------------------------------------------------------------------------ Area Number Percentage ------------------------------------------------------------------------ Northcentral.................................. 105 30.8 Northeast..................................... 57 16.7 South......................................... 80 23.5 West.......................................... 99 29.0 ------------------------------------------------------------------------ B. Distribution by Institution Type. ------------------------------------------------------------------------ Institution Number Percentage ------------------------------------------------------------------------ Land-Grant.................................... 243 71.3 Public/Private................................ 38 11.1 Federal....................................... 29 8.5 Inst/Industry/other........................... 31 9.1 ------------------------------------------------------------------------ C. Distribution by Academic Rank. ------------------------------------------------------------------------ Rank Number Percentage ------------------------------------------------------------------------ Assistant Professor........................... 53 15.5 Associate Professor........................... 105 30.8 Professor..................................... 124 36.4 Fed/Industry/other............................ 59 17.3 ------------------------------------------------------------------------ D. Distribution of Women and Minorities. ------------------------------------------------------------------------ Classification Number Percentage ------------------------------------------------------------------------ Nonminority males............................. 217 63.6 Nonminority females........................... 83 24.3 Minority male/female.......................... 41 12.0 ------------------------------------------------------------------------ implementation of south building modernization Mr. Skeen. Please provide further details on the request for an additional $5,000,000 requested on page 2-14 of this year's budget request package. Response. We are requesting $5,000,000 in fiscal year 1998 to continue implementation of the South Building modernization under our Strategic Space Plan. The modernization is now planned to consist of eight primary phases ranging in size from about 100,000 square feet to 150,000 square feet of office space, with agencies being consolidated into each phase as it is completed. The first phase of about 100,000 square feet is scheduled to be awarded in September 1997. We plan to request funds for the second primary phase of about 150,000 square feet in fiscal year 1999. We will need funds in fiscal year 1998 to address badly-needed infrastructure improvements to electrical, plumbing, telecommunications, chilled water, fire protection and steam systems in the South Building. Under the architect-engineer contract now underway, a detailed building modernization plan is being completed which will provide the detailed engineering analyses, requirements and cost estimates for this necessary work. The work elements to be done using the fiscal year 1998 funding of $5,000,000 will be defined in more detail in this study. one-time relocation expenses Mr. Skeen. Please provide a breakdown of the costs, for each agency involved, of the one time relocation expenses mentioned on pages 2-14 and 2-20. [The information follows:] [Pages 491 - 495--The official Committee record contains additional material here.] Advisory Committees advisory committees staff costs Mr. Skeen. USDA agencies are allowed to obligate funds for portions of salaries and benefits for staff time devoted to support advisory committees. Update the table on page 338 of last year's testimony, showing the breakout of funds obligated for this purpose by agency. [The information follows:] ADVISORY COMMITTEE STAFF COSTS [In thousands of dollars] ------------------------------------------------------------------------ Agency Salaries Benefits Total ------------------------------------------------------------------------ Food, Nutrition and Consumer Services........................ 23 4 27 Food Safety...................... 45 8 53 Agricultural Research Service.... 14 4 18 Cooperative State Research, Education, and Extension Service 118 25 143 Grain Inspection, Packers and Stockyard Administration........ 0 0 0 Animal and Plant Health Inspection Service.............. 19 3 22 Agricultural Marketing Service... 21 5 26 Farm and Foreign Agricultural Services........................ 70 18 88 -------------------------------------- Total, All Agencies.......... 310 67 377 ------------------------------------------------------------------------ cost to department for maintaining advisory committees Mr. Skeen. Please identify the total cost to the Department of maintaining these panels, commissions, and task forces if the limitation of $1,000,000 was lifted, as the Department requests. If the limitation is lifted, which advisory committees, panels, commissions and task forces would the Department fund and what would be the total cost? [The information follows:] [Page 497--The official Committee record contains additional material here.] advisory committees unobligated balance Mr. Skeen. What did the Department do with the unobligated balance of $25,102 for advisory committees from FY 1996? Response. These funds ceased to be available for new obligations on September 30, 1996. advisory committees funded from other accounts Mr. Skeen. This appropriation funds all authorized advisory committee activities except those included in the Forest Service or financed by user fees or other funds. Please provide an update of the table on page 339 that lists all committees funded through other accounts. Also, explain any additions or deletions to the tables. [The information follows:] USDA ADVISORY COMMITTEES FUNDED FROM FOREST SERVICE ------------------------------------------------------------------------ 1997 Committee title estimate ------------------------------------------------------------------------ Blue Mountains............................................. $11,750 Allegheny National Forest: Northern............................................... 3,300 Southern............................................... 3,300 Brule River (Wisconsin and Michigan) Study Committee....... 0 California Spotted Owl Federal Advisory Committee.......... 250,000 Carp River Study Committee................................. 0 Committee of State Foresters............................... 7,550 Intergovernmental Advisory Committee to the Regional Interagency Executive Committee........................... 144,970 Little Manistee River Study Committee...................... 0 National Urban and Community Advisory Council.............. 112,000 Ontonagon River Study Committee............................ 0 Paint River Study Committee................................ 0 Presque Isle River Study Committee......................... 0 Provincial Interagency Executive Committee Advisory Committee................................................. 714,597 Sturgeon River (Hiawatha National Forest) Study Committee.. 0 Sturgeon River (Ottawa) Study Committee.................... 0 Tahquameon River (Hiawatha)................................ 0 White River Study Committee................................ 0 Whitefish River Study Committee............................ 0 Wildcat River Advisory Commission.......................... 3,800 Water Rights Task Force \1\................................ 143,900 ------------ Total, Forest Service................................ 1,395,167 ------------------------------------------------------------------------ \1\ This task force was added by statute and is expected to be terminated this fiscal year. Note: Advisory Committees showing zero funding will not meet in fiscal year 1997. All Forest Service (FS) Advisory Boards and Committees are funded from regular FS appropriated funds under the Department of Interior and Related Agencies appropriations. USDA ADVISORY COMMITTEES FUNDED FROM COMMODITY CREDIT CORPORATION ------------------------------------------------------------------------ 1997 Committee title estimate ------------------------------------------------------------------------ Advisory Committee on Emerging Markets..................... 30,000 ------------ Total, Commodity Credit Corporation.................... 30,000 ------------------------------------------------------------------------ USDA ADVISORY COMMITTEES FUNDED FROM USER FEES ------------------------------------------------------------------------ 1997 Committee title estimate ------------------------------------------------------------------------ Advisory Committee on Universal Cotton Standards........... 9,500 Burley Tobacco Advisory Committee.......................... 39,894 Flue-Cured Tobacco Advisory Committee...................... 35,466 National Advisory Committee for Tobacco Inspection Services 44,654 Plant Variety Protection Advisory Board.................... 9,785 ------------ Total, User Fees....................................... 139,299 ------------------------------------------------------------------------ current advisory committees Mr. Skeen. Please up-date the tables on pages 342 through 344 that list all advisory committees that are currently funded, along with the memberships numbers, the total cost to the Department, and identify which are statutory and which are discretionary. [The information follows:] [Pages 500 - 501--The official Committee record contains additional material here.] ---------------------------------------------------------------------------------------------------------------- Committee 1997 Committee title Discretionary Statutary membership estimate ---------------------------------------------------------------------------------------------------------------- Little Manistee River Study Committee..................... ............. S 10 0 National Urban and Community Advisory Council............. ............. S 15 112,000 Ontonagon River Study Committee........................... ............. S 10 0 Paint River Study Committee............................... ............. S 10 0 Presque Isle River Study Committee........................ ............. S 10 0 Provincial Interagency Executive Committee Advisory Committee................................................ D ........... 298 714,597 Sturgeon River (Hiawatha National Forest) Study Committee. ............. S 10 0 Sturgeon River (Ottawa) Study Committee................... ............. S 10 0 Tahquameon River (Hiawatha)............................... ............. S 10 0 White River Study Committee............................... ............. S 10 0 Whitefish River Study Committee........................... ............. S 10 0 Wildcat River Advisory Commission......................... ............. S 7 3,800 Water Rights Task Force................................... ............. S 9 143,900 ----------------------------------------------------- Total, Forest Service................................. ............. ........... ........... 1,395,167 ---------------------------------------------------------------------------------------------------------------- research, education, and economics advisory committees Mr. Skeen. The Research, Education, and Economics advisory committees have increased their costs by 72 percent in 1997. Please explain why the costs in this area have increased so much. Response. There are three reasons for this increase. First, the National Agriculture Research, Education, Extension, and Economics Advisory Board, mandated in the 1996 Farm Bill, was established. This committee replaced several existing advisory committees and is now the principal committee advising the Secretary, the Under Secretary for Research, Education and Economics, and the land-grant colleges and universities on a broad range of issues relating to research, education, and economics programs, including setting long-term and short-term National policies and priorities and strategic planning and implementation. The increase in the budget of the new committee over the combined budgets of the previous committees reflects the broader responsibilities of the new committee and the higher resource levels needed to fulfill them. Second, the responsibility for funding and organizing the Census Advisory Committee on Agricultural Statistics was transferred to USDA when responsibility for the Census of Agriculture was transferred from the Census Bureau to the National Agricultural Statistics Service. Third, USDA has assumed responsibility for funding initial work by the Dietary Guidelines Advisory Committee leading to development of the next guidelines. This funding responsibility rotates between USDA and Health and Human Services, and the next guideline efforts will be supported by USDA. commodity distribution Mr. Skeen. What were the results of the meeting of the National Advisory Council on Commodity Distribution last year? Response. The Council elected officers, received background information on program operations and initiatives, and began developing potential recommendations for discussion in more detail at a second meeting. The issues discussed at the meeting included improving the coordination of commodity deliveries to State agencies and encouraging wider use of computer networks. Due to budget constraints, however, a second meeting was never held. Authority for the Council expired on September 30, 1996. reports and recommendations by advisory committees Mr. Skeen. Please provide copies of all reports and recommendations made by the advisory committees that met in fiscal year 1996. Response. Copies of all reports and recommendations made by the advisory committees that met in fiscal year 1996 were provided to the committee under separate cover. [Clerk's note.--The subcommittee has copies of these recommendations in their files.] Agriculture Buildings and Facilities strategic space plan Mr. Skeen. Please provide a report on the status of the strategic space plan. Update the table that appeared on pages 310 and 311 of last year's report. Response. The goal of our Washington Area Strategic Space Plan is to consolidate USDA Headquarters into two Government-owned locations, to house our employees in modern and safe facilities, enhance USDA operations, and reduce our facility costs. It consists of two major projects--the new USDA Office Facility and the modernization of the South Agriculture Building. The USDA Office Facility, now under construction, is located on government-owned land at the Beltsville Agricultural Research Center. The facility has been designed as a low-rise campus of four buildings with 350,000 gross square feet to house approximately 1,500 employees. The contractor was issued Notice to Proceed with construction on June 12, 1996. Construction of all four buildings is underway and is progressing on-schedule with a planned completion date in December 1997. The sixty-year-old South Agriculture building, eligible for listing on the National Register of Historic Places, is in dire need of repair and renovation to make it safe, efficient and functional. The required renovation work includes fire protection systems; abatement of hazardous materials such as asbestos, PCB light fixtures, and lead paint; replacement of old, inefficient heating ventilation and air- conditioning systems; improved accommodations for disabled persons and accommodation of modern office telecommunications systems. The current plan is to modernize the building in eight primary phases and to consolidate USDA agencies into the modernized areas as each construction phase is completed. The first phase will include Wing 3, and has been funded in fiscal year 1997. The architect-engineer contract to develop the concept design for the entire building and the contract documents for the modernization of Wings 3 and 4 was awarded on January 17, 1997. By the end of the South Building Modernization project, with funding to be requested in each fiscal year through 2005, USDA Headquarters offices will have been consolidated into two locations, the Beltsville facility and the downtown Headquarters Complex, eliminating our reliance on leased space after all downsizing has occurred. We have spent about $50 million for planning of this initiative and construction of the Beltsville facility since fiscal year 1995, and have about $27 million now available in fiscal year 1997 to complete the Beltsville project and to began the South Building modernization. I will provide a table for the record showing our current preliminary cost estimates and schedule for the South Building Modernization. ---------------------------------------------------------------------------------------------------------------- Amount (in Fiscal year Location Description thousands) ---------------------------------------------------------------------------------------------------------------- 1997..................................... Relocate wing \3\.......... Award phase I construction $18,505 (fiscal year 1997 funding). 1998..................................... Backfill wing \3\.......... Complete phase I award 5,000 building infra-structure improvement (fiscal year 1998 funding). 1999..................................... Relocate wing & portion of Award phase II construction 26,278 head house \4\. (fiscal year 1999 funding). 1999..................................... Backfill wing & head house Complete phase II.......... \4\. 2000..................................... Relocate wing & portion of Award phase III (fiscal 26,278 head house \2\. year 2000 funding). 2000..................................... Backfill wing & portion of Complete phase III......... head house \2\. 2001..................................... Relocate wing & portion of Award phase IV (fiscal year 26,278 head house \1\. 2001 funding). 2001..................................... Backfill wing & portion of Complete phase IV.......... head house \1\. 2002..................................... Relocate wing & portion of Award phase V (fiscal year 26,278 head house \5\. 2002 funding). 2002..................................... Backfill wing & portion Complete phase V........... head house \5\. 2003..................................... Relocate wing & portion of Award phase VI (fiscal year 26,278 head house \6\. 2003 funding). 2003..................................... Backfill wing & portion Complete phase VI.......... head house \6\. 2004..................................... Relocate wing & portion of Award phase VII (fiscal 26,278 head house. year 2004 funding). 2004..................................... Backfill wing & head house Complete phase VII......... \7\. 2005..................................... Relocate tail house........ Award phase VIII (fiscal 17,972 year 2005 funding). Complete phase VIII........ ......................... ------------ Total.............................. ........................... ........................... 199,145 ---------------------------------------------------------------------------------------------------------------- \1\ Preliminary estimates reflect costs by fiscal year which include design costs, moving costs, furniture costs, and construction costs for appropriate phases. \2\ All costs after fiscal year 1998 are presented in fiscal year 1998 dollars, with no adjustment for inflation. \3\ Cost estimates are preliminary and for planning purposes only. More detailed costs will be developed as design work proceeds, and will be dependent upon available budgetary resources in annual budget requests. \4\ Funding request for Wing 4 has been deferred until fiscal year 1999. \5\ Costs shown do not include fiscal year 1995 appropriation set aside for design. renovation of south building and construction of beltsville building Mr. Skeen. Last year, you indicated that you expected to award the construction contract for Phase I of the South Building renovation in September 1997. Do you expect to meet this deadline? If not, why not. Response. Yes, we expect to meet this deadline. The South Building Modernization design contract was awarded in January 1997. The architect-engineer was issued the Notice to Proceed on January 17, 1997 and site investigations began on January 21, 1997. The current plan is to modernize the South Building in eight primary phases and to consolidate USDA agencies into the modernized areas as each construction phase is completed. The first phase will include Wing 3, which has been funded in fiscal year 1997, with the last phase completed after final funding for the last phase is requested in fiscal year 2005, subject to Congressional approval. We have scheduled award of the construction contract for Phase I in September 1997, and we are on schedule. beltsville office facility Mr. Skeen. Last year your estimate of the Beltsville Office Facility cost was $51.2 million. Have the costs changed? Response. No, our estimate of what it will cost us to complete the Beltsville Office Facility has not changed. Of course, actions will continue to be taken for design, construction, tenant fit-out, road improvements, moving and other related costs for the facility as the project approaches the scheduled completion date in December 1997. There may be adjustments in the cost estimate as actual expenditures occur. funding Mr. Skeen. How much has been appropriated for these projects and how much more will you need? [The information follows:] BUDGET AUTHORITY FOR STRATEGIC SPACE PLAN ------------------------------------------------------------------------ Appropriated Fiscal year amounts ------------------------------------------------------------------------ 1995.................................................... $28,622,000 1996.................................................... 25,587,000 1997.................................................... 23,505,000 1998-2005 estimates..................................... (\1\) ------------------------------------------------------------------------ \1\ We will need approximately $181 million to complete the South Building Modernization in eight phases. This preliminary estimate includes design, construction, moving, and furniture costs. This estimate is based on fiscal year 1998 costs and does not include escalation for future inflation. headquarters complex rental charges Mr. Skeen. Please update the table provided for last year's hearing record (page 313) showing the amount GSA charged USDA for the four buildings owned by GSA but occupied by USDA to include fiscal year 1997. [The information follows:] HEADQUARTERS COMPLEX RENTAL CHARGES [Revised as of Jan. 28, 1997] ---------------------------------------------------------------------------------------------------------------- Administration Agriculture South Auditors Fiscal year building annex building building ---------------------------------------------------------------------------------------------------------------- 1981.................................................. \1\ NA \1\ NA \1\ NA \1\ NA 1982.................................................. \1\ NA \1\ NA \1\ NA \1\ NA 1983.................................................. $1,859,496 $461,608 $14,225,076 $558,240 1984.................................................. 2,077,284 520,032 14,320,032 651,480 1985.................................................. 4,009,740 833,448 14,320,032 1,287,040 1986.................................................. 4,030,348 838,208 14,146,532 1,287,040 1987.................................................. 4,143,192 1,016,304 24,520,656 \2\ NA 1988.................................................. 4,873,616 1,195,652 28,546,320 \2\ NA 1989.................................................. 4,945,876 1,079,164 29,125,304 \2\ NA 1990.................................................. 5,057,796 1,208,180 29,677,452 2,266,420 1991.................................................. 5,241,095 1,259,653 30,871,540 2,531,864 1992.................................................. 5,736,322 1,346,795 33,473,685 3,443,770 1993.................................................. 6,083,883 1,428,235 35,498,563 3,652,899 1994.................................................. 6,235,795 1,463,717 36,383,590 3,745,102 1995 \3\.............................................. 6,117,877 1,435,956 35,691,417 3,702,278 1996 \3\.............................................. 6,245,408 1,465,915 36,443,590 3,772,519 1997 (Estimate) \3\................................... 6,245,407 1,465,914 36,443,589 3,794,119 ---------------------------------------------------------------------------------------------------------------- \1\ Prior to the creation of the Rental Payments to GSA Appropriation in fiscal year 1983, agencies were individually charged for space and a Departmental Administration level is not available. \2\ The Auditors Building was vacated for renovation from 1987 until 1989. \3\ Beginning in fiscal year 1995, USDA no longer pays GSA the value of the rent charged for the D.C. Complex. Instead, the rental payments for non-headquarter's space were increased when USDA assumed responsibilities for these buildings and began implementation of the Strategic Space Plan. The amounts shown are the GSA estimates of the value of the building space. office space Mr. Skeen. How much is USDA paying for office space in the Washington, DC area outside of the Whitten Building, the South Building, the Auditors Building, and the Agriculture Annex? Response. USDA rental cost for office space in the Washington DC area excluding the Government owned Headquarters buildings is $30,749,925. agencies move to beltsville Mr. Skeen. The material USDA submitted in its 1998 budget request indicated that agencies would be selected to occupy the new USDA Office Facility in Beltsville in early 1997. Which agencies will move to Beltsville? Response. We are now concluding the decision-making process to select tenants for the Beltsville Office Facility. I will provide this information to you as soon as we have completed this process. air quality Mr. Skeen. What were the findings of the 1996 air quality surveys performed in the South Building? Response. The IAQ report on which the annual survey of the entire South Building noted that the major heating, ventilation and air conditioning--HVAC equipment servicing the building is generally at the end of its useful life. The report also noted that the equipment is being adequately maintained. The recommended improvements by the survey included increasing the cleaning frequency, and chemical treatments on certain types of cooling equipment; implementation of a hazardous waste management plan; and air quality awareness training for operations and maintenance employees. These steps are now in either the planning or implementation stages. Individual air quality surveys indicated that many of the IAQ problems in the South Building were associated with poor air circulation within offices with modular furniture. The increased use of modular furniture has led to increased concentration of employees and equipment in these offices. The existing HVAC systems were not designed to condition office spaces divided by modular furniture. A specific IAQ report associated with the 0400 Mail Room corridor noted no contaminants found, but did forward recommendations to reduce the infiltration of outdoor exhausts into the area. These recommendations are currently in the implementation process. Another IAQ report noted that a locker room in the Fitness Center experienced problems with standing water and wet carpet. These conditions were being caused by deteriorated wall and floor tiles. Recommendations forwarded in report were implemented and the conditions abated. window restoration program--south building Mr. Skeen. Please update the table on page 312 of last year's testimony that summarizes the South Building window repair program. Is that project now complete? Response. The window restoration program for the South Building, begun in fiscal year 1988, is completed. This concludes the window restoration program for the South Building. I am providing for the record a table showing the eight phases awarded by USDA and the project costs. [The information follows:] WINDOW RESTORATION PROGRAM--SOUTH BUILDING ---------------------------------------------------------------------------------------------------------------- No. of Fiscal year Location windows\1\ Costs ---------------------------------------------------------------------------------------------------------------- 1988.......................................... E.W. and Part N. Facades........ 700 $1,118,154 1989.......................................... Complete N Facades.............. 400 759,200 1990.......................................... Court 2......................... 500 1,236,350 1991.......................................... Court 1......................... 450 1,219,090 1992.......................................... Court 4......................... \2\ 500 1,344,617 1993.......................................... Court 5......................... \2\ 500 1,058,742 1994.......................................... Court 3......................... 482 917,220 1995.......................................... Court 6......................... \2\ 500 964,011 ------------------------------- Total Costs of Construction to Date..... ................................ .............. 8,617,384 ---------------------------------------------------------------------------------------------------------------- \1\ Number of windows approximate. \2\ Contracts incude masonry repairs. rental payments and gsa repair costs Mr. Skeen. Please update the table provided for last year's hearing record on page 336 showing the amount of rental payments made to GSA and the amount spent by GSA for repairs to include fiscal years 1996 and 1997. [The information follows] Rental Payments to GSA 1985.................................................... $52,766,671 1986.................................................... 47,751,006 1987.................................................... 48,728,000 1988.................................................... 45,857,311 1989.................................................... 46,363,000 1990.................................................... 44,788,846 1991.................................................... 46,120,802 1992.................................................... 45,679,002 1993.................................................... 44,932,917 1994.................................................... 84,465,408 1995.................................................... 90,762,069 1996.................................................... 90,158,772 1997 Estimate........................................... 100,247,515 Note.--These figures reflect the rental payments for the entire Department of Agriculture nationwide (National Capital Region owned and leased space and field office locations owned and leased space). --------------------------------------------------------------------------- Estimated costs of repair contracts awarded by GSA--FY 1985-97 Jamie L. Whitten Building............................... $3,759,518 Annex Building.......................................... 2,033,605 Auditors Building (renovation included)................. 13,363,236 South Building.......................................... 6,570,167 West Auditors Building (removed from the USDA inventory in 1988)............................................ 680,000 -------------------------------------------------------- ____________________________________________________ Total estimate...................................... \1\ 26,406,526 \1\ Includes contracts awarded through January 27, 1997. Note.--USDA is now responsible for operation and maintenance of these buildings. --------------------------------------------------------------------------- employees maintaining buildings Mr. Skeen. Please provide a table showing the number of Federal employees as well as the number of contract employees that maintain the Headquarters buildings for fiscal years 1990 through 1996 and estimates for fiscal years 1997 and 1998. Also include in this table the cost of these employees. Response. The following table reflects the number of Federal employees working on preventive maintenance in the Headquarters Complex. The costs associated with contract employees cannot be separated from the total costs of the services of each contract. Therefore, the costs shown in the table for contract employees reflect the costs for maintenance contracts. FEDERAL AND CONTRACT EMPLOYEES FOR BUILDING MAINTENANCE CENTER [By fiscal years] -------------------------------------------------------------------------------------------------------------------------------------------------------- 1990 1991 1992 1993 1994 1995 1996 1997 est. 1998 est. -------------------------------------------------------------------------------------------------------------------------------------------------------- Federal employees.................. 11 11 10 10 10 10 10 10 10 Costs.............................. $359,332 $344,235 $352,552 $344,528 $373,399 $385,038 $393,264 $408,407 $420,741 Contract employees................. 35 35 35 35 35 35 35 35 35 Contract costs..................... $3,026,068 $3,878,347 $3,377,505 $3,664,583 $3,049,979 $2,816,413 $2,959,619 $3,048,408 $3,139,860 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note.--Includes cost of benefits. Actual costs include variables such as overtime and night differential. There was one Federal employee position vacant for part of fiscal year 1996. Hazardous Waste Management abandoned mines Mr. Skeen. Please update the progress made by the Forest Service in implementing the recommendations in the OIG audit of Abandoned Mines. Response. The Office of the Inspector General's recommendations and the Forest Service's responses are as follows: Recommendation 1a--Set goals for Region's completion of inventories and site investigations. Forest Service Response to 1a--The Forest Service established a goal of completing inventories by the year 1998. Each Region is allowed $200K in the base program funding to conduct site evaluations. It is estimated that approximately 40 sites will be evaluated each year. In addition, the Forest Service has established a goal of completing CERCLA action by 2045. Forest Service Response to 1b--The Forest Service believes that adequate funding can be made available to allow the above inventory and evaluation goals to be met. However, given current USDA/agency budgets, the need to proceed to reclaim mines already identified, and the need to fund other priorities, it is not considered prudent to shift funds from other priority programs. Recommendation 2--Concurrent with site discovery, require the Regions to transition from the discovery phase to identification of viable PRPs and actual cleanup. Forest Service Response to 2--The Regions were directed by a letter of 7/1/94 to begin giving these aspects of the program greater emphasis, and the transition is occurring. In addition, USDA and FS are currently working on an initiative which re-emphasizes the current policy to actively move forward on cleanups and work with PRPs to conduct more cleanups. Recommendation 3--In consultation with the Department of the Interior (DOI), develop a long-term strategy that integrates all CERCLA and other watershed restoration activities into the priorities, methodology, and funding needs of the watershed initiative. Forest Service Response to 3--The Forest Service will continue to participate as members of the ``Inter-Departmental Abandoned Mines Working Group'' to advance a comprehensive, coordinated watershed approach to reclaiming abandoned mines. Recommendation 4a--Coordinate with Regions concerning the methods used to estimate cleanup costs and update and revise estimates as necessary. Forest Service Response to 4a--The Forest Service had identified several guides which have application to estimating CERCLA costs and is in the process of collecting actual cost data from the field units. In addition, the Montana School of Mines has been contacted for information on cost estimating. Recommendation 4b--Coordinate with UDSA and DOI for sustained sources of funding that will be adequate to carry out both CERCLA and non-CERCLA cleanup projects. Forest Service Response to 4b--Consistent with the Forest Service response to Recommendation No. 3 above, the Forest Service will work with the ``Inter-Departmental Abandoned Mines Working Group'' and will take other actions to obtain sustained sources of funding. A $4.6 million program is in the FY 1998 President's Budget. In addition, CERCLA projects can be funded through an USDA appropriation entitled Hazardous Waste Management which finances projects across USDA. The Forest Service works with PRPs to conduct cleanups and seeks partnerships with other Governmental agencies. Recommendation 4c--Determine if additional specialized personnel resources will be required. Develop and coordinate personnel requirements in conjunction with funding sources. Forest Service Response to 4c--With respect to CERCLA, staffing levels and skills are reviewed during monitoring trips by the Washington Office of the Forest Service. Inadequacies are noted in monitoring reports submitted to the Regional Forester of Station Director. To the extend funding is available, improvements can be made. In addition, we adopted a training policy on June 28, 1995, for employees working with hazardous materials. By the end of April 1997, over 120 Forest Services employees will have received training as On- scene Coordinators. With respect to non-CERCLA, the Forest Service will survey their field offices and, to the extent future budgets allow, try to correct any deficiencies. Recommendation 5a--Request that OGC determine whether the Forest Service has authority to suspend mining operations and, if so, under what circumstances. If FS does not have authority to suspend mining operations, seek the necessary authority. Forest Service Response to 5a--The FS will request such a determination from OGC, particularly as it relates to cases where operations may be in violation of the CWA. Recommendation 5b--Develop and follow a schedule for inspecting mines operating under an approved plan of operation at least once each year. Forest Service Response to 5b--Existing regulations at 36 CFR 228.7(a) already require periodic inspection of operations. The report indicates the problem to primarily involve insufficient staff and funding. USDA will support and assist the FS in requesting adequate funds to ensure it can administer new and current mining operations properly. Recommendation 5c--Develop minimum standards or certification for mining administrators. Require that personnel receive training on mine administration, bonding requirements, and hazardous materials prior to being assigned to administer active operations. Forest Service Response to 5c--The Forest Service will develop standards and appropriate training. Recommendation 6--Ensure that bonds are reviewed annually and increased as needed. Forest Service Response to 6--36 CFR 228.13 only allows bonds to be adjusted when a modification of plan of operation is approved. The FS will propose a rule change to allow more flexibility in adjusting bonds. Recommendation 7--Coordinate with OGC to develop a plan that includes development and promulgation of regulations for assessing mine operators for the costs associated with preparing EA's and EIS'. If necessary, submit a remedial legislative proposal to OMB to implement fees for this purpose. Forest Service Response to 7--The Forest Service will confer with OGC and review the current policy under which the FS assumes the costs of conducting NEPA analyses in a variety of resource programs. This assessment will include consideration of the development and promulgation of regulations for assessing mine operators and other proponents of commercial uses on National Forest System lands. This review should be completed this summer. The OIG has concurred with the Forest Service management decisions. performance goals Mr. Skeen. Please report on how well the Department performed in terms of its hazardous waste management performance goals in 1996. Response. The Department did very well in most of its categories. However, the Forest Service did not accomplish all that it set out to do because of the furlough, funding shortfalls within the Forest Service, and the bad fire season last year. The Department identified 198 new sites what will need further investigation which is 32 percent more than we expected. We also completed 46 under ground storage tank removals which was 53 percent more than we projected. Underground storage tank cleanups were started at 39 sites which was 11 percent above our goal and completed 14 tank cleanups which was 40 percent of our goal. We initiated 2 natural resource damage assessments as planned and completed 1 as planned. We also conducted 4 pollution prevention plans and 3 environmental compliance audits. We conducted 90 investigations which was only 53 percent of our goal. The Office of General Counsel provided support on 175 cases and completed work on 4 settlements. The caseload was affected by an increase in complexity of several of the cases. Accordingly, funds have been reprogrammed to assist the General Counsel in providing more support to the agencies. [Page 511--The official Committee record contains additional material here.] funding for cercla, rcra and ppa Mr. Skeen. Please provide tables showing the individual budgets for fiscal years 1996 and 1997 for complying with the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), and the Pollution Prevention Act (PPA). [The information follows:] USDA HAZARDOUS WASTE MANAGEMENT CENTRAL ACCOUNT FUNDS [In thousands of dollars] ---------------------------------------------------------------------------------------------------------------- Fiscal year 1996 --------------------------------------------------- Agency Actual CERCLA Actual RCRA Actual PPA Total ---------------------------------------------------------------------------------------------------------------- Commodity Credit Corporation................................ $4,350 ........... ........... $4,350 Rural Housing Service....................................... ........... 2 104 106 Forest Service.............................................. 7,593 867 46 8,506 Agricultural Research Service............................... 600 980 ........... 1,580 Farm Service Agency......................................... 200 ........... ........... 200 Office of the General Counsel............................... 665 ........... ........... 665 Departmental Administration................................. 3 ........... ........... 3 Food Safety and Inspection Service.......................... 190 ........... 100 290 --------------------------------------------------- Total................................................. 13,601 1,849 250 15,700 ---------------------------------------------------------------------------------------------------------------- USDA HAZARDOUS WASTE MANAGEMENT CENTRAL ACCOUNT FUNDS [In thousands of dollars] ---------------------------------------------------------------------------------------------------------------- Fiscal year 1997 estimate --------------------------------------------------- Agency Actual CERCLA Actual RCRA Actual PPA Total ---------------------------------------------------------------------------------------------------------------- Commodity Credit Corporation................................ $1,000 ........... ........... $1,000 Rural Housing Service....................................... 35 200 ........... 235 Forest Service.............................................. 5,870 1,255 ........... 7,125 Agricultural Research Service............................... 2,944 1,456 ........... 4,400 Program Administration...................................... 275 100 ........... 375 Farm Service Agency......................................... 700 500 ........... 1,200 Office of the General Counsel............................... 1,000 ........... ........... 1,000 Food Safety and Inspection Service.......................... ........... 365 ........... 365 --------------------------------------------------- Total................................................. 11,824 3,876 0 15,700 ---------------------------------------------------------------------------------------------------------------- underground storage tanks Mr. Skeen. Will the Department meet the 1998 deadline to comply with underground storage tank requirements? How many of the storage tanks that the Department is responsible for still need to be addressed? What are the total and remaining costs to fully comply with RCRA? Response. As of the end of fiscal year 1996, the Department has removed, replaced, renovated, or upgraded approximately 2,442 underground storage tanks (USTs) out of a total inventory of 3,350 tanks. This total includes USTs that are regulated under either Federal RCRA regulations or under State regulations that may be more stringent such as heating oil tanks. Most of the remaining identified tanks are in compliance or will be in compliance with the established deadline of 1998. With the exception of the Farm Service Agency (FSA) Farm Credit Programs, we anticipate that USDA agencies will complete the removal, replacement, or upgrading of all known USTs to meet the 1998 deadline. Total additional costs will be included in future budget requests. FSA's current policy is that all unregulated UST's will be removed from its inventory properties and any associated contamination cleaned up. However, some cleanups involving contaminated soils or ground water could extend beyond this date. The FSA will continue to have an UST program as long as new properties are obtained through foreclosure actions. FSA is vigorously trying to identify environmental problems prior to loan enforcement actions to reduce the number of contaminated properties coming into Government inventory. In FY 1996, the FS removed 15 underground storage tanks, completed cleanup of 10 leaking underground storage tanks, and presently has 34 leaking underground storage tank cleanups in progress. USDA may also acquire USTs as part of land transfers from the Department of Defense. funding Mr. Skeen. The Department is asking for an additional $9,300,000 to comply with the Comprehensive Environmental Response, Compensation, and Liability Act and the Resource Conservation and Recovery Act. Specifically, where will this money be spent and what actions will be taken? Response. The USDA currently estimates that over 4,500 sites under our jurisdiction, custody or control will require a response action. The current estimate to complete this work is approximately, $3.6 billion. This includes 1,728 abandoned or inactive mines at a cost of $1.9 billion and up to 1,000 sites leased by the Credit Commodity Corporation at an estimated cost of $1.5 billion. The Department has begun an initiative to increase the number of site cleanups by potentially responsible parties in order to accelerate the pace and share the financial responsibility for cleanup. compliance with state laws Mr. Skeen. The Federal Facilities Compliance Act establishes that Federal facilities must comply with State environmental laws and could be obligated to pay fines and penalties for non-compliance. Provide a list of all USDA facilities that are not in compliance with State laws. Include in this list the project location, the deadline for compliance, and the total cost of compliance. Response. USDA is aware of the following sites which are responding to complaints or notices of violation for noncompliance with hazardous waste requirements of the Resource Conservation and Recovery Act are set forth below. The first site is the Plum Island Animal Disease Center in Greenport, New York. The second site is the Stored Product Insects Research Development Laboratory in Savannah, Georgia. Negotiations are underway between regulators and USDA to determine responsibility and the amount of fines and to establish compliance schedules. The total estimated cost of compliance for both sites is $4.5 million. At a third site, located in Texas, APHIS received a notice of solid waste violation concerning the improper use and disposal of hazardous waste from livestock dipping operations. USDA is currently assessing APHIS's potential responsibility in this matter. In FY 1996 FS has had no notices of violation or complaints placed against them. There are USDA sites in various stages of response actions under CERCLA that are not considered to be out of compliance since response procedures are being followed. salaries and benefits Mr. Skeen. The Forest Service and other USDA agencies charge this account for salaries and benefits of staff hours devoted to hazardous waste management activities. Provide a table showing the amount charged to this account for these activities for fiscal years 1995 and 1996 and estimates for fiscal year 1997. Response. The amounts charged for salary and benefits in the Forest Service--FS--and the Office of the General Counsel--OGC--include all salaries and benefits charged to the central account including program management, contract administration, and in-house work for CERCLA Discovery. I will provide for the record a table of those amounts. SALARIES AND BENEFITS FOR HAZARDOUS WASTE MANAGEMENT [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Office of Agricultural Fiscal Year Forest the General Research Total Service Counsel Service ---------------------------------------------------------------------------------------------------------------- 1995....................................................... 2,279 577 ............ 2,856 1996....................................................... 2,384 591 91 3,066 1997 (est)................................................. 2,781 929 0 3,710 ---------------------------------------------------------------------------------------------------------------- 1996 appropriation Mr. Skeen. How much of the fiscal year 1996 appropriation was used for salaries and benefits and how much was used for actual hazardous waste cleanup activities? Response. In fiscal year 1996, $3,066,000 was used for salary and benefits in support and completion of hazardous waste management clean- up. The remainder of $11,626,000 was used for clean-up. amounts spent by other usda agencies Mr. Skeen. How much from other USDA agencies will be used for hazardous waste management activities in 1998? Please provide a table showing the amounts proposed to be spent by each agency. Response. USDA is in the process of obtaining revised project listings from the agencies for fiscal year 1998 funding from the USDA central account and individual agency budgets. The following table summarizes the preliminary estimates proposed by each agency for the total USDA hazardous waste management program of $32.0 million. TOTAL USDA HAZARDOUS WASTE MANAGEMENT FUNDS [Dollars in thousands] ------------------------------------------------------------------------ FY 1998 HWM FY 1998 Agency central agency Total account funding funding ------------------------------------------------------------------------ Commodity Credit Corporation..... $5,000 $3,400 $8,400 Forest Service................... 14,250 2,730 16,980 Agricultural Research Service.... 3,700 895 4,595 Farm Service Agency, Farm Credit Programs........................ ........... ........... ........... Food Safety and Inspection Service......................... 390 ........... 390 Rural Housing Service............ 128 22 150 Office of the General Counsel.... 1,082 ........... 1,082 Program Administration........... 450 ........... 450 -------------------------------------- Total, USDA HWM Funds...... 25,000 7,047 32,047 ------------------------------------------------------------------------ foreclosures in the fmha inventory requiring cleanup action Mr. Skeen. How many foreclosures in the FmHA inventory require cleanup action and what is the cost to comply with the law? Please describe for us the steps that are being taken to recover these costs and tell us how successful they have been. Response. Approximately 200 properties of the 1,500 in inventory are currently undergoing some level of cleanup. It is estimated that about 80 percent of the current inventory properties have had site assessments sufficient to identify the source and level of contamination from releases of hazardous substances. FSA has about 3,000 accounts with foreclosure actions pending. They plan to evaluate these properties for the presence of hazardous wastes before finalizing a foreclosure action. A certain number of these properties will require some level of response action. It is difficult to estimate future cleanup costs until after the site evaluations are completed. However, a very rough estimate is $8 to $12 million. At this time, the FSA has no sites where a borrower has been identified as a viable potentially responsible party--PRP--with assets available for cost recovery under CERCLA. Since these properties have been obtained because of non-payments on the loan, the Agency has not pursued cost recovery for the expenses incurred for the cleanup of hazardous wastes on an inventory property. In these cases, the PRP simply would not be a viable party with respect to providing the funding to complete the work. The Agency will pursue CERCLA cost recovery if it appears that such an action is practical. In the event a cost recovery action is pursued, FSA will follow the requirements established by CERCLA and the National Contingency Plan. The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996 amended the definition of an owner or operator under CERCLA to exclude from liability a lender that did not participate in the management of the property prior to foreclosure and, after foreclosure, seeks to sell or lease the property within a commercially reasonable time. The Act also codified the 1992 EPA lender liability rule that had been struck down previously by the D.C. Circuit. The new lender liability provisions may apply when USDA forecloses on defaulting borrowers under USDA credit programs. sites requiring cleanups Mr. Skeen. Please update the list provided to the Committee last year of all sites that have been identified for cleanup, the total cost involved, and the expected completion dates? Response. I will provide a copy of the individual agency project listings which comprise the $32.0 million request. We will furnish you a revised listing when it becomes available. [Pages 516 - 546--The official Committee record contains additional material here.] Government Performance and Results Act (GPRA) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in means, the plans are to contain general goals and expected to be outcome or results oriented (such as to improve literacy) opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. Departmental Administration has produced a Draft strategic plan which contains a mission statement and performance goals. The plan is currently in the Departmental review process. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. We did not identify conflicting goals for any of our program efforts. No legislative changes are needed. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move toward a balanced budget. What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. We have set realistic goals based on our streamlining plan and historical budgetary trends, and outyear resource projections under current policy. The accomplishments we expect to achieve reflect the current policy level of resources. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concerned last year that most agencies had not made sufficient progress in this critical area. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. Departmental Administration is in the process of developing an annual performance plan linking annual performance goals to our draft strategic plan. The annual plan is being developed using input from all our offices. As we work through developing the annual plan, we recognize the need to schedule activities very carefully, and to accomplish our strategic goals within anticipated resource limitations. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. We have made progress in developing our strategic plan, but we have been challenged in our efforts to develop results-oriented performance goals and measures. Developing the performance measures for our offices is the most difficult part of the process. However, we realize the importance of measuring results and are committed to developing outcome-oriented performance measures. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. The most important lesson we learned from the pilot projects was to set measurable performance goals. We are using the experience of the pilot agencies to guide our strategic planning efforts and to assist us in setting measurable, results-oriented performance goals. Measurement of some goals will be dependent upon data captured from our information systems, and we are working to develop that capacity. Some of our personnel have received training on strategic planning and performance measurement. We are expanding that training through work groups led by the Office of the Chief Financial Officer, which is leading GPRA implementation in the Department. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general-public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. The primary stakeholder for DA is our customers, the Department agencies and their employees. Other stakeholders include the Congress, OMB, our service providers and vendors, and the American public. We have worked to incorporate the views of these stakeholders, interviewing managers and employees and OMB. We have also spent some time considering the cross-cutting issues in Departmental management which directly affect DA through personnel, procurement, property management and other centralized services we provide. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. We have worked closely with other USDA agencies, reviewing and providing comments on their strategic plans. We have also consulted with agencies outside of USDA, such as the Department of Energy, to ensure coordination of effort and to learn from the lessons of other Federal participants. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary, the Senior Policy Staff, the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan to relevant Congressional Committees. Thereafter, we will look forward to meeting with Staff Members to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. We will evaluate the input of these groups before the plan is considered final. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do ti. What changes in program, policy, organization structure, program content, and work process has the agency made to become more results- oriented? Response. We have responded to the requirements of streamlining, downsizing and performance measurement in a coordinated manner, by targeting our resources more carefully than ever toward achieving our goals. We have made organizational structure changes to make our processes more efficient and coordinated, and streamlined our policy functions. We initiated the Modernization of Administrative Processes-- MAP to improve our business processes. Also we have instituted thinking about performance goals and measures into our everyday operations. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. MAP is leading the way in DA in strategic planning and developing performance goals and measures. MAP staff are assisting other DA staff to develop performance goals and measures, and will follow with development of annual performance plans to support their strategic goals. Managers will be held responsible for achieving annual performance goals as part of their performance elements. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. We have begun an active program to train our staff on GPRA goals and objectives, strategic planning and setting performance goals and measures. More importantly, we have used the GPRA requirements to create an awareness among our employees of the importance of setting goals and measuring performance through daily activities. ogc resources Mr. Lantham. The budget calls for transferring $1 million to the Office of the General Counsel for hazardous waste activities. Is any of this money used to pursue other potentially responsible parties (PRPs) in these cases? How aggressive is USDA at ensuring any private parties involved in these cases are held responsible for their share of clean up costs? Response. In cases where USDA has identified potentially responsible parties--PRPs--who may be liable under CERCLA, the Office of the General Counsel--OGC--uses resources to pursue PRPs. OGC, along with USDA agencies, has successfully secured agreements with responsible parties for the conduct of hazardous substance cleanups estimated to be worth in excess of $15 million and continues to identify and negotiate with PRPs in other cases. OGC and the technical staff from USDA agencies work with PRPs at hazardous waste sites to ensure that, where possible, the work is conducted by the PRPs, and that the PRPs contribute their appropriate share of the clean up costs. administrative services Mr. Latham. In your testimony you cite a cost figure for the cost of providing administrative services. ($32 reduced to $17 due to reengineering) Can the other agencies at the Department give us the same type of cost breakdown for the services they provide? Response. Under the leadership of the Modernization of Administrative Processes--MAP--Office, Business Process Reengineering Studies are being done in several administrative areas. This includes doing a cost analysis of the current methods of doing business. Chief Information Officer implementation of clinger-cohen act Mr. Skeen. USDA has established an Executive Information Technology Investment Review Board--EITIRB which was given responsibilities for selecting, monitoring, and evaluating Department-wide technology investments. What is the timetable for the Board to define and promulgate a technology investment review process that conforms to the requirements of the Clinger-Cohen Act? Response. The CIO has developed a Capital Planning Investment Process Guide, which is currently under review in the Department. The processes identified in this guide will be used as a pilot during the fiscal year 1999 budget cycle. During the coming year, the guide will be refined and modified as necessary. technology investment review board Mr. Skeen. What is USDA's timetable for having the Technology Investment Review Board complete a full review of all of the Department's information technology projects using the investment review process? Response. The OCIO and EITIRB will review the Department's IT projects during the fiscal year 1999 budget cycle. This review will be supported by on-going project reviews, conducted by the CIO, of the Department's major systems. Reports of these reviews will be provided to the EITIRB for consideration. Mr. Skeen. Will the Investment Board's review result in a ranked listing of Information Technology projects using qualitative and quantitative criteria including benefits, costs, risks, and risk- adjusted return on investment. Response. As part of the Fiscal year 1999 budget process, and in accordance with OMB direction, the Board will rank major systems projects. The ranking will be based on an analysis of benefits, costs and return-on-investment. goals of improving use of technology Mr. Skeen. Please provide a list of goals established for improving USDA's use of technology in enhancing the productivity, efficiency, and effectiveness of department operations and service to the public, as required under the Clinger-Cohen Act. Response. As required by the Clinger-Cohen Act and the Government Performance and Results Act--GPRA--the Office of the Chief Information Officer recently developed a draft Departmental Strategic Plan for our Information Resources Management Program. This plan established three broad goals: Invest in Planning: Ensure that decisions regarding the selection and deployment of information technology are based on USDA business needs; Invest in Infrastructure: Implement Department-wide information and technical infrastructures which will improve service delivery through more effective information and data management; Invest in People: Implement a professional development strategy to ensure that USDA's staff possesses the skills necessary to meet the challenges of effectively delivering programs and services with information technology. We have developed specific objectives and strategies for achieving each goal, as well as performance measures to ensure that progress can be assessed. performance measures for technology Mr. Skeen. What performance measures will USDA use to assess the actual performance and contribution of technology in supporting its programs and meeting its operational goals? How will USDA measure the return on investment for its technology projects? Response. Agencies are developing performance measures for information technology which relate to the performance of their missions. These measures will be provided as part of the budget process. While they are still under development, we expect the performance measures to address such issues as: faster deliver of service to customers, reduced information collection requirements, and reduced cost of service delivery. While agencies have been asked to provide return-on-investment-- ROI--analyses, we have not used a standard methodology for ROI in the past. We will develop a standard method for ROI measurement as part of our Capital Planning and Investment Control process. revising work processes Mr. Skeen. The Clinger-Cohen Act requires agencies to benchmark and revise their work processes, where appropriate, before investing in technology to support them. What are USDA's plans for carrying out this provision of the act? Response. The Department, in conjunction with the interagency CIO Council, has already begun developing a Capital Planning and Investment Control process which addresses sections 5122 and 5123 of the Clinger- Cohen Act. Business process analysis and reengineering will continue to be important factors in our decisions to acquire and deploy information technologies. In concert with the requirements of the Clinger-Cohen Act, the Office of the Chief Financial Officer has drafted the departmental guidance for meeting the GPRA requirements. This guidance directs our planning efforts, and will help us as we develop performance indicators, measures and benchmarks. We have been successful in revising work processes prior to investing in technology: Our credit card purchase systems have reduced costs associated with small purchases; Business process reengineering is a major part of our Service Center Implementation strategy, as we follow the requirements of recent legislation and the guidance from oversight bodies that we review and revise work processes before applying technology; Meat inspection processes have been altered and will improve food safety. Computerized reporting is an important aspect of the new processes; The Modernization of Administrative Processes-- MAP program has been in the forefront of departmentwide process analysis and redesign for some time. appointment of permanent chief information officer Mr. Skeen. What is USDA's timetable for appointing a permanent Chief Information Officer (CIO)? Will the CIO report directly to the Department Secretary? Response. The Secretary has initiated the paperwork to appoint me to this position on a permanent basis. I have been in an Acting capacity since August 8, 1996. We expect approval of this action in the near future. The CIO, under the current organization structure, reports directly to the Secretary and my appointment has been submitted on that basis. As you are aware, the Civil Rights Action Team has recommended that the CIO, the Chief Financial Officer, the Service Center Implementation Team, and the Office of Small and Disadvantaged Business Utilization reporting lines be changed to report to the Assistant Secretary for Administration. The Secretary has not made a final decision on the implementation of that recommendation at this time. strengthening staff Mr. Skeen. What steps does USDA plan to take to strengthen the knowledge, skills and capabilities of its staff to effectively manage information resources, deal with emerging technologies, develop needed systems and manage systems acquisitions? What is the role of the CIO's office in accomplishing this? Response. The OCIO is currently addressing the issue of appropriate knowledge, skills and abilities to address our responsibilities within the OCIO. Once we have addressed this issue, we will begin to look more broadly at the requirement for USDA. managing information technology Mr. Skeen. Please discuss how the Clinger-Cohen Act of 1996, which established the Office of the Chief Information Officer, will change how USDA manages information technology. Have your responsibilities changed and has the system of accountability within the information community changed? Response. Under the Clinger-Cohen Act, USDA will continue with its evolutionary process of addressing information technology as a strategic Departmental resource rather than an agency-specific resource. We have: created the Office of the Chief Information Officer with responsibilities and authorities consistent with those in the Clinger-Cohen Act; strengthened the Departmental focus on IRM issues by providing better linkage between information technology and program delivery; reconstituted the Information Resources Management Council to provide the CIO with technical analysis, implementation and selected project management assistance; established an Executive Information Technology Investment Review Board, whose members are the most senior program manages in the Department, to review, prioritize and approve significant IT initiatives; and have begun developing a capital planning and investment control process. irm budget Mr. Skeen. Please describe how the Department plans to spend $1.2 billion in 1998 for information resources management by updating the table shown on pages 383 through 386 of last year's testimony. Breakout expenditures by agency and by major IRM expenditure category, including personnel. [The information follows:] [Pages 552 - 578--The official Committee record contains additional material here.] appropriated and ccc funds Mr. Skeen. For each expenditure category, show how much of the $1.2 billion will come from appropriated funds and how much will come from CCC funds. Response. Attached is an exhibit which breaks out the information technology expenditures for 1998 by funding source. The fiscal year 1998 CCC expenditures total $106 million for the Farm Service Agency. A further breakdown of these funds by expenditure category is provided below: [Pages 580 - 581--The official Committee record contains additional material here.] consolidation of irm staff Mr. Skeen. With the consolidation of mission areas authorized by Congress in 1994, has USDA consolidated IRM staff within and across these mission area? If so, where did such consolidations take place and what was saved or is expected to be saved from consolidating IRM staffs? Response. USDA has consolidated IRM staff across agencies and mission areas where program functions supported by IRM were combined. For example, the Farm Service Agency was created by combining the functions of the Agricultural Stabilization and Conservation Service, Farmers Home Administration and Federal Crop Insurance Corporation, and its IRM staff is a consolidation from these previous agencies. Other consolidations were accomplished in the Research, Education and Economics, Rural Development, and Marketing and Regulatory Programs mission areas. Most IRM functions now are in a ``lead agency'' within each mission area. USDA has saved the cost of over 900 staff years by consolidating and reducing IRM staffs. In Fiscal Year 1994 we had 7,116 IRM-related staff. As of Fiscal Year 1996, USDA's total IT staffing was 6,197, or a reduction of over 900 staff years. contractor support services Mr. Skeen. How much of the $1.2 billion fiscal year 1998 information technology budget does USDA plan to spend on contractor support services? How many contracts were in place and how much was spent or is planned to be spent in fiscal years 1996 and 1997? Response. USDA plans to spend $253 million of the $1.2 billion fiscal year 1998 information technology budget on contractor support services. USDA spent $182 million in fiscal year 1996 for contractor support services and plans to spend an additional $215 million in fiscal year 1997. During fiscal year 1996, there were 360 Information Technology support services contracts in place; $253,187,000 was obligated against these contracts. During Fiscal Year 1997 (to date) there are 232 support services contracts, against which $116,634,000 has been obligated. irm support service contracts Mr. Skeen. Please provide for the record a list of all IRM support services contracts for 1997 and 1998. For each contract, provide information on its cost, length and purpose. Response. The following attachment is a listing of the IRM support services contracts for fiscal year 1997. Fiscal Year 1998 information is not available at this time. [The information follows:] [Pages 583 - 598--The official Committee record contains additional material here.] Fixed Asset Plan and Justification Mr. Skeen. For what projects identified in the fiscal year 1998 budget did USDA prepare a fixed asset plan and justification, as provided for under part 3 of OMB's circular A-11? Response. At this time, the Department has not been able to complete these reports. In view of its relationship to the current development of strategic planning and capital asset review methodologies, we plan to incorporate this requirement beginning with the fiscal year 1999 budget. We will provide a copy to the committee when it is available. ccc funds Mr. Skeen. USDA's budget summary shows that the Department plans to spend $110 million in CCC funds for information technology in fiscal year 1997 and another $106 million in fiscal year 1998. The legislative cap for use of CCC funds for fiscal years 1997-2002 is $275 million, which means that USDA would have only about $60 million left under the CCC cap for the remaining 4 years. Please provide a breakout of how USDA plans to spend CCC funds on information technology in fiscal years 1997 and 1998. Response. Although FSA's CCC budget is for $110 million in fiscal year 1997 and $106 million in fiscal year 1998, only $109 million and $104 million, for fiscal year 1997 and fiscal year 1998 respectively, apply against the ADP cap. The other small amount applies against the separate Section 11 reimbursable cap. This table shows, by project, how FSA has budgeted to obligate CCC funds in fiscal years 1997 and 1998. COMMODITY CREDIT CORPORATION INFORMATION TECHNOLOGY BUDGET [Dollars in millions] ------------------------------------------------------------------------ Fiscal year Fiscal year System/Project 1997 \1\ 1998 ------------------------------------------------------------------------ State and county office automation project................................ 13.6 10.6 PC's and laptops........................ 6.9 4.4 Local area networks..................... 5.0 6.7 Mainframes.............................. 4.0 4.0 CORE accounting system.................. 3.9 3.4 Integrated management information system 1.8 8.8 Processed commodity inventory management system................................. 4.8 4.8 County common computing project......... 35.0 7.0 Service center implementation........... 20.5 35.8 Other................................... 13.5 18.7 ------------------------------- Total............................. 109.0 104.2 ------------------------------------------------------------------------ \1\ Of the $109 million budgeted for Fiscal year 1997, OMB has approved the use of $30 million in CCC funds for information technology. FSA is working with OMB to obtain approval for the use of additional CCC funds for it. Mr. Skeen. How much in CCC funds did USDA obligate in fiscal year 1996 under the ADP limitation of $170 million. What were these funds used for and what was done with the remaining funds? Response. In fiscal year 1996, $148.8 million in CCC funds were obligated for information technology purposes. Of that amount, $143.6 million was under the ADP limitation and the other $5.2 million was under the Section 11 limitation on reimbursable agreements. The following table is provided to show what the funds were used for. COMMODITY CREDIT CORPORATION INFORMATION TECHNOLOGY COSTS [Dollars in millions] ------------------------------------------------------------------------ Fiscal Year System/Project 1996 ------------------------------------------------------------------------ State and county office automation project.............. 18.7 PC's and laptops........................................ 6.7 Local area networks..................................... 4.0 Mainframes.............................................. 2.7 CORE accounting system.................................. 3.2 Processed commodity inventory management system......... 3.3 County common computing project......................... 8.0 Service center implementation........................... 90.5 Other................................................... 6.5 --------------- Total............................................. 143.6 ------------------------------------------------------------------------ ccc report of adp expenditures Mr. Skeen. Please provide the latest quarterly CCC report related to ADP expenditures. [The information follows:] [Pages 601 - 623--The official Committee record contains additional material here.] moratorium Mr. Skeen. USDA's Deputy Secretary invoked a moratorium on new information technology activities in November 1996 so that USDA could improve its management of information technology. What specifically has to occur before USDA lifts the moratorium? Response. Deputy Secretary Rominger, who is also chairperson of the Executive Information Technology Investment Review Board, announced recently that the moratorium will continue until the following conditions are met: Senior program managers have had an opportunity to review thoroughly and understand the information technology architecture: A new decision-making process which links IT investments to strategic business objectives is in place; and USDA agencies have demonstrated a commitment to continue refining the architecture. Mr. Skeen. When does USDA anticipate being able to lift the moratorium? Response. The EITIRB is monitoring USDA's progress towards an IT architecture and decision-making processes to support sound investment decisions and will re-evaluate that progress on a monthly basis. exemptions from the moratorium Mr. Skeen. Please provide the categories and amounts of 1997 IRM expenditures exempted from the moratorium. Please provide the rationale for each exempted category. Response. Mr. Chairman, OCIO exempted certain categories of IRM acquisitions from the moratorium, but not specific amounts. The exemptions are: 1. Renewals of existing contracts for mission-critical maintenance and leases, unless optional enhancements and/or upgrades which cost in excess of $250,000 are involved; 2. Support services contracts for existing mission-critical hardware, software and applications, including Year 2000 compliance; and 3. Information technology acquisitions by organizations other than USDA agencies but funded by USDA grants. The rationale for the first two categories was that on-going, maintenance activities for mission-critical programs should not be affected by the moratorium. The moratorium should focus on controlling purchases of new hardware, new software, new telecommunications equipment and services and new development of software until the information technology architecture is in place. For the third exempted category, these purchases are for use by organizations other than USDA agencies, such as for State governments for the Food Stamp Program, and will not be part of the USDA information technology architecture. impact of moratorium Mr. Skeen. How will the moratorium impact USDA's 1998 plans for Information Technology expenditures and how much does USDA now plan to spend for the remainder of fiscal year 1997 for information technology related items? Response. USDA's primary responsibility is the efficient delivery of program/mission services. A guiding principal of the moratorium is to hold all IT expenditures which are not mission critical. This management approach will delay planned fiscal year 1997 expenditures while the IT approaches are evaluated. IT initiatives deemed mission- critical and compliant with USDA's architecture continue to be allowed to proceed through a waiver process. When the moratorium is lifted, the 1998 technology expenditures will proceed as planned, subject to the constraints established by the Executive IT Investment Review Board and the Departmental Capital Planning Process. In the end, the moratorium itself may not affect the level of expenditures in either year, only the time table and the specifications for what is eventually purchased so that it is within the envisioned technical architecture. lan/wan/voice investment suspension Mr. Skeen. In January 1997, USDA suspended LAN/WAN/VOICE Project installations except for Dedicated Loan Origination and Servicing system an emergency sites because USDA did not want to install technology in offices which could close. How many field service centers will have LAN/WAN/VOICE capability installed by the end of fiscal year 1997, 1998, and 1999? Response. If the suspension of installation of non-Rural Development sites were lifted in June 1997, we anticipate that 1,000 sites could be completed in fiscal year 1997 with the remaining 2,102 sites completed in fiscal year 1998 under the current plan. These 3,102 sites include the 2,500 service center offices in the original plan, plus other types of offices such as State offices, resource conservation and development offices, regional offices, and others. The 1998 plan will be reviewed as part of the overall review of program delivery needs in the field. lifting the lan/wan/voice suspension Mr. Skeen. When does USDA anticipate lifting the LAN/WAN/Voice suspension? Response. The suspension was put in place because the fiscal year 1998 President's Budget proposed substantial reductions in personnel and number of offices, particularly for the Farm Service Agency. The LAN/WAN/Voice procurement and deployment was based on approximately 2,500 USDA Service Centers. We wanted to avoid installing the new system in offices which might be closed or have significantly reduced staff. We also wanted any early start-up problems solved before the major roll out of the installation began. When these issues have been addressed, installations can resume. lan/wan/voice installation Mr. Skeen. Please provide the Committee with an estimate of how much it will cost, by year, to complete the LAN/WAN/Voice installation. Response. During fiscal year 1996, $72.6 million was obligated for LAN/WAN/Voice installations. I estimate that $19 million will be obligated in fiscal year 1997, assuming the moratorium is lifted, and $5.1 million will be obligated in fiscal year 1998 for planned installations. Installations will be completed over multiple years. telecommunications savings Mr. Skeen. In 1995, the GAO reported that USDA had not acted on opportunities to save millions by consolidating and optimizing telecommunications and that USDA was not cost-effectively managing its $100 million annual telecommunications investment and therefore was paying for unnecessary telecommunications services, leased equipment not used, and services billed but never provided. What action has USDA taken to address GAO's recommendations in these reports, what has been saved to date? Response. USDA has taken the several actions to specifically address the cost reduction issues presented by GAO. I will provide this information for the record: usda telecommunications improvements A. We have completed the USDA optimization/consolidation project-- aggregation network planning Purpose.--To aggregate USDA voice, data and video traffic which is located in the same building or region onto a backbone network. Objective.--Identify opportunities to optimize/consolidate FTS2000 telecommunications services for USDA agencies and offices to reduce duplication of FTS2000 telecommunications services at locations where agencies are co-located in the same building. The project will: Provided agencies with site-specific cost reduction recommendations; Tracked agencies' decision on recommendations and implementation of recommendations; Validated total cost reductions made as a result of this project; and Train agency personnel in the USDA Network Analysis Process. Project accomplishment Through February 1997, agencies and/or offices have saved $39,909 per month by implementing the recommendations made by the Project Team, and $23,466 per month by implementing alternatives to the recommendations presented by the Project Team. This will result in an overall savings to the Department of $2.18 million for the remainder of the FTS2000 contract, which is scheduled to end on December 11, 1998. If the contract is extended one year, this savings will increase to $2.95 million. These figures have been verified by the FTS2000 billing data. As part of the moratorium declared November 12, 1996, the OCIO has revitalized the optimization and concentration activities. The following steps were taken: 1. The USDA Network Analysis model has been refreshed with FTS2000 data reflected through December, 1996. 2. A waiver from the OCIO is needed before the ordering of all telecommunications circuits, routers, hubs, and equipment for data services. 3. The OCIO has utilized the requests for waivers to aggregate and optimize the services at multi-agency sites. Currently Atlanta, Boise, Miami, and Washington are being aggregated and optimized. There are about twenty other USDA multi-agency sites identified for optimization in fiscal year 1997. B. FTS2000 service aggregation billing disputes (on-going) We have filed 42 disputes with AT&T concerning inaccurate service aggregation point (SAP) billing for the agencies. Seven of these disputes are currently outstanding. However, the resolved disputes (as of February 1997) have resulted in one-time credit adjustments of $19,920 and a cost reduction of $34,965 per month (or $953,048 over the remainder of the FTS2000 contract). C. Intra-LATA discount tariff agreement (on-going) We would like to share with you information on the implementation of department-wide discount tariff agreements for intra-LATA voice traffic. Use of the FTS2000 contract for this traffic is not mandatory, and in most States the local telephone company carries the traffic and bills USDA at the normal business rate. We began last fiscal year to implement agreements with both FTS2000 AT&T and US West for various States. We can now provide you with the resulting savings from those agreements and update you on additional agreements which are being implemented. The actual savings from agreements with both US West and AT&T is $123,337.98. This savings is for the months of June through October 1996 for US West and July through October 1996 for AT&T. During fiscal year 1997 these agreements should result in more than $296,000 in savings. It should be noted that US West is still adjusting its billing system to reflect individual reductions, and agencies should see credits in their monthly bills. These agreements were implemented with no change in agency services or current billing processes. We are continuing to implement agreements with various telecommunications companies, as we complete the analysis of their discount plans. Currently we are reviewing agreements with Pacific Bell for the State of California and Southern New England Telephone Company for the State of Connecticut. The estimated annual savings for these States is $60,000 for California and $18,500 for Connecticut. D. GSA shared service locations (on-going) In addition to the above actions we have on-going projects which are addressing GSA Shared Service locations to verify current usage charges and intra-LATA toll charges on GSA local switches to ensure cost-effective rates. It is too early to determine actual savings for these projects. We have also notified GSA of actions they have taken which have caused significant cost increases for USDA agencies, such as making changes at GSA local switches without ensuring service aggregations remain in effect. Currently we are working issues in Boise, Idaho and Duluth, Minnesota. We are working with GSA Regional Services to improve our management of the local telecommunications services provided by GSA. We have obtained current detail information from the GSA TOPS database and are reviewing this information to reconcile billing and service discrepancies. We have supported the Local Service Policy Agreement between the Inter-agency management Council and GSA to promote sharing of telecommunications resources among government agencies in local communities across the country. We have issued internal policy requiring USDA agencies to obtain a waiver from the OCIO prior to vacating GSA services. Specific locations being addressed include Boise, Duluth, Billings and St. Paul. E. Enhanced geographic network analysis (on-going) In anticipation of the migration to a USDA Enterprise Network, we have initiated a project to identify, develop and document an enhanced network analysis process to be used in the design of the enterprise network. This project, which will be completed in August, 1997, has already identified opportunities to share telecommunications resources. These opportunities include reducing the number of service access requirements within a geographical region or operational area, and sharing excess or unused service capacity. shared benefits of information technology investments Mr. Skeen. What is USDA doing under Clinger-Cohen and other federal requirements to identify information technology investments which would result in shared benefits or reduced costs with other government agencies, such as sharing telecommunications networks and data systems? Response. In February 1995, A Memorandum of Agreement--MOA--was signed by the Office of Information Resources Management--OIRM--the predecessor agency of the Office of the Chief Information Officer, and its counterpart in the Department of the Interior to facilitate the voluntary sharing of DOINet's telecommunications resources where appropriate to improve service and reduce costs. Under this MOA, USDA Forest Service participates in DOI's Alaska Regional Telecommunications Network--ARTNet--which is the first collaborative project in Alaska to address Federal agency requirements to develop a high speed data network infrastructure which connects the Federal business centers of Anchorage, Juneau, and Fairbanks with the lower 48 States. USDA participates on, or leads, various cross-cutting information sharing initiatives across the Federal Government. Examples of these include the International Trade Data System--ITDS), the Benefit Systems Review Team--BSRT and the Federal Geographic Data Committee--FGDC. Several USDA agencies, including the Agricultural Marketing Service, the Economic Research Service, the Food Safety and Inspection Service, the Farm Service Agency and the Animal and Plant Health Inspection Service are participating in the ITDS project. The Food and Consumer Service--FCS has been involved with electronic benefits transfer for several years and conducted some of the first pilot initiatives for the federal government. The FCS participated on the BSRT. The Natural Resources and Environment mission area and other USDA agencies have participated on, and led, several subgroups of the Federal Geographic Data Committee. The Forest Service--FS and the Natural Resources Conservation Service have participated in defining metadata for government-wide applications. FS has several initiatives underway with the Bureau of Land Management and state land management organizations. current market technologies and costs Mr. Skeen. USDA has many long term procurement contracts in place, including those for the Forest Service and APHIS information technology modernization efforts. Yet, technology is improving while prices fall. What is USDA's policy for ensuring that the information technology acquired on those contracts and their associated prices reflect current market technologies and costs? Response. USDA procurement policies require that all new USDA contracts contain language which requires the vendor to periodically review and update the included items to reflect current market technologies and costs. The Forest Service contract with IBM is designed to stay current with both the state of the art technology and with current market prices. These objectives are achieved through contract clauses which encourage updating the contract technology as new technology is developed and through a requirement that contract prices not exceed GSA schedule prices for like items. So far, the IBM contract has been amended several times to add new servers and workstations and to remove items which are obsolete or whose price/ performance is no longer advantageous in comparison to current technology. Additionally, IBM has reduced contract prices twice to reflect changes in market rates for technology. Finally, we recently implemented a major update to the software on all IBM systems Forest Service-wide. Similarly, the APHIS ISAP contract contains a clause in section H- Special Contract Requirements which promotes and facilitates obtaining current market technologies and costs. Clause H-20 Best Customer Status reads as follows: The contractor shall ensure that APHIS is assured of ``Best Customer Status'' throughout the contract period by: (a) providing technology which is current and standards driven, (b) employing a pricing plan to obtain competitive marketplace pricing throughout the contract life, and (c) employing a Total Quality Management Plan which will meet 100 percent of the APHIS expectations created through the ISAP contract. year 2000 problem Mr. Skeen. As the millennium approaches both the public and private sectors are modifying computer programs to accommodate the year 2000. Please submit for the record and discuss the highlights of the USDA plan to address this issue. Response. USDA is approaching Year 2000 through centralized planning, management, and oversight at the Departmental level with responsibility for execution of Year 2000 strategies occurring at the agency level. The USDA Year 2000 Strategic Plan establishes goals and objectives, identifies areas of concern, and defines the processes, including milestones, which must be completed to ensure uninterrupted service delivery at the start of the new millennium. The USDA Year 2000 Project Manager from the Office of the Chief Information Officer-- OCIO--is working with the USDA Year 2000 Working Group, established in 1996 and consisting of agency coordinators, which is currently focusing on information exchange, sharing of resources and lessons learned, establishment of a systems inventory, and monitoring of agency conversion plans. Through active participation on the CIO Council Subcommittee on Year 2000, USDA adopted the Committee's 5-phased approach to solving Year 2000 problems. The five phases are awareness, assessment, renovation, validation, and implementation and are reflected in the strategic plan. A majority of USDA agencies are currently in the assessment phase, with others in various stages of renovation, validation, and implementation. Each agency within the Department is responsible for identifying all user interfaces and ensuring that proper data exchanges occur. The National Finance Center--NFC in New Orleans has a major role in this area because USDA agencies and many external Federal agencies depend on NFC for services. In early 1995, NFC recognized its enormous responsibilities with regard to Year 2000 and established a team to review and assess its administrative and financial systems. These systems provide payroll, personnel, financial, property, and procurement services to USDA agencies and a significant number of other Federal agencies. NFC has completed its applications systems inventory and has estimated conversion costs exceeding $11 million. Through its re-engineering and modernization program, NFC has also implemented standards which ensure all new applications are properly coded for Year 2000 compliance. The National Information Technology Center--NITC--in Kansas City provides the computing environment which approximately 50 percent of the USDA agencies use for running mission-specific systems. The range and mix of software products in NITC's inventory create distinct challenges which NITC has recognized and has begun to address. NITC is inventorying hardware and software for all platforms including the mainframe, the local area network--LAN--personal computers--PCs, and UNIX-based, and is reviewing commercial-off-shelf software purchases. NITC is working with USDA agencies in implementing upgrades and modifications which are Year 2000 compliant. The Food and Consumer Service--FCS--which administers 15 food assistance programs for USDA, has included Year 2000 compliance requirements in its procurement requests for systems design and programming efforts since 1988. With its forward thinking, FCS forced industry to address Year 2000 issues early and positioned itself to ensure continued program delivery. FCS has completed an inventory of applications systems with estimated costs of $13 million for conversion. FCS has performed risk analyses and developed contingency plans. These examples of agency efforts are indicative of the progress USDA has made in reaching its goal: ``That all USDA mission critical programs continue to operate accurately and without interruption after December 31, 1999.'' Through continued assessments, agencies have identified other priority areas requiring prompt attention for meeting Year 2000 functionality. These areas include telecommunications, facilities management, security, testing, and testing facilities. The USDA Year 2000 Plan also contains specific timetables and milestones aligned with government-wide activities and goals. USDA has adopted the CIO Council Subcommittee on Year 2000's 5-phase resolution process. Each phase has specific milestones and deliverables. The Department submitted to the Office of Management and Budget milestones based on this 5-phase approach. The timetable and milestones for USDA are as follows: ---------------------------------------------------------------------------------------------------------------- Phase Measure Completion ---------------------------------------------------------------------------------------------------------------- Awareness............................... Agency Strategy Approved by CIO.......................... 11/1996 Assessment.............................. Inventory and Scope Completed............................ 4/1997 Renovation Schedule and Plans for Testing................ 6/1997 Renovation.............................. Coding Completed......................................... 9/1998 Validation, Testing and Implementation.. Contingency Plans........................................ 1/1999 Management Sign-off...................................... 9/1999 Final Testing............................................ 9/1999 Implementation........................................... 10/1999 ---------------------------------------------------------------------------------------------------------------- We are actively working with OMB in providing quarterly reports indicating the status of our mission-critical systems. These reports will provide the overall USDA position for Year 2000 compliance. We are also updating our Year 2000 plans based on the GAO document ``Year 2000 Computing Crisis: An Assessment Guide.'' impact of year 2000 Mr. Skeen. What is your assessment of the impact of year 2000 on USDA programs? Which agencies and programs will be impacted the greatest? Response. Year 2000 will have a significant impact on USDA program delivery. The use of information technology at USDA is complex. USDA's National Information Technology Center--NITC--in Kansas City and the National Finance Center--NFC--in New Orleans are responsible for storage and execution of many of USDA's major program delivery systems. These organizations are actively assessing their business and the risk associated with Year 2000 to ensure mission critical programs continue to operate accurately and without interruption after December 31, 1999. USDA agencies, who ultimately have the responsibility for delivery of programs, are identifying areas of risk as they continue to assess their systems. The Food and Consumer Service which has the responsibility for the Food Stamp Program, started modifications to their system in 1988. The NFC, responsible for payroll and personnel for USDA and other federal agencies, started working on Year 2000 activity in 1995. USDA understands the challenge and is moving forward to ensure Year 2000 compliance. Year 2000's impact will be the greatest on those programs and agencies which exchange data with the public and with other Federal and State organizations. federal costs induced by the year 2000 Mr. Skeen. Estimates of Federal costs induced by the year 2000 problem range between $2.3 billion and $30 billion. Please provide for the record a table detailing, by year, the USDA costs and the specific activities to be completed in each year. Response. Mr. Chairman, I will provide for the record the information requested. [The information follows:] Departmental estimates for Year 2000 conversion costs are: Fiscal years Millions of dollars 1997.............................................................. $22 1998.............................................................. 37 1999.............................................................. 28 2000.............................................................. 6 ----------------------------------------------------------------- ________________________________________________ Total....................................................... 93 Components of the cost estimate include the following: re- engineering efforts; Year 2000 software tools; personal computers (tested not compliant); application conversion; hardware upgrades; third-party software upgrades; contract support to assist conversion; and in-house staff. These costs do not include the 50 percent match to the states which is provided by the Food and Consumer Service for changes to state computer systems. The amount of state assistance devoted to Year 2000 is not yet known. cost of year 2000 modifications Mr. Skeen. How are you financing the cost of making the year 2000 modifications? Response. The USDA agencies will finance these costs from their own funds. There is no increase in the OCIO budget for the Year 2000 project. impact of focusing on year 2000 modifications Mr. Skeen. What will be the impact of focusing on year 2000 modifications in terms of other information systems priorities? Response. Each agency administrator is responsible for understanding the mission and core business of his or her organization and the components which are essential in becoming Year 2000 compliant. Each agency will perform business impact and risk analysis and provide a strategic approach for this challenge to the Year 2000 Program Office. As a service organization, USDA must ensure that program delivery continues in the most efficient and effective manner. Because of the immovable deadline for Year 2000 modifications, those modifications may take priority over other information systems investments. Our goal at USDA is to continue to deliver programs efficiently and effectively; Year 2000 modifications and other information systems program all contribute to this goal. positions in the chief information officer's office Mr. Skeen. You budget consists of a transfer of $4,498,000 from Departmental Administration and an additional $330,000 of which $275,000 is for three staff years. Are the three positions new? The Status of Program material submitted last year indicated that the Office of Information Resources Management already provided ``Department-wide policy guidance, leadership, coordination, and direction . . .'' Why are these additional positions required when your functions do not appear to have changed substantively? Response. The three staff years are for the Chief Information Officer and a small immediate staff. The staffing increase was reflected in fiscal year 1997 and funded within available resources at the expense of other IRM activities, particularly new requirements imposed by the Clinger-Cohen Act of 1996. Providing additional funding for this staff will free up resources for other such critical activities as developing a Capital Planning Process, conducting independent validation and verification studies of information technology projects, continuing the refinement and implementation of the USDA Information Technology Architecture, and coordination of the Year 2000 problem. vision for automation Mr. Skeen. Please discuss your vision for automating the Department of Agriculture. How much will it cost? When will it be in place? Response. USDA, like other public and private organizations, is faced with business requirements to provide state-of-the-art customer service in the Information Age. The mission of USDA's information resources management program is ``to strategically acquire and use information technology resources to improve the quality, timeliness and cost-effectiveness of USDA service delivery to its customers.'' USDA has approached this challenge by taking a broad view of its core business processes and the associated data, technical, and telecommunications framework required to carry them out. USDA has recently developed the initial version of the USDA Information Systems Technology Architecture--ISTA which addresses this mission. An ISTA Implementation and Management Plan is under development. USDA is making every effort to continually improve the management of its IT resources to respond to a changing business climate. USDA's current IT budget is approximately $1.2 billion annually. USDA continues to identify opportunities for savings and redirect these monies to high priority projects. USDA has recently established the Executive Information Technology Investment Review Board to provide cross-mission area review of high dollar and critical mission projects. USDA is also instituting a Capital Planning and Investment Control program to ensure sound IT investments. USDA has a broad base of IT resources in use, and most employees have computers on their desks or have access to one. Changing customer expectations and technology refreshment in an information-intense society demands that USDA continuously review and upgrade its IT infrastructure. The challenge of applying IT to delivery critical mission needs is an ongoing responsibility of the Department. staff years for information system support Mr. Skeen. How many staff years are devoted to information system support in the Department. How has this changed over the past ten years and how will it change over the next 5 years. Response. We estimate that USDA will have 6,368 staff years devoted to information technology and information system support in fiscal year 1997. The level in fiscal year 1987 was 5,342, and information system support staffing peaked at 7,112 in fiscal year 1992. There was a drop to about 5,846 in 1995, due to the effects of implementing Secretary Espy's reorganization plan for downsizing and streamlining the Department. The number of staff years has since grown to approximately 6,368 this fiscal year as personnel resources are shifted to support mission-critical programs through the use of information technology. We expect staffing levels to remain fairly constant over the next five years. executive controls on computer acquisition Mr. Skeen. Please give the committee an overview of the executive controls on computer acquisition. Are there opportunities to streamline computer acquisitions? If so, what are they. Response. USDA has a Technical Approval Process in place which requires large computer acquisitions--life cycle costs over $25 million, $20 million or $15 million, depending upon an agency's IT budget, be reviewed and approved by a group of USDA oversight organizations before the acquisition is initiated. The oversight representatives typically include staff from the OCIO, Office of the General Counsel, USDA procurement policy, small business representatives and Office of Budget and Program Analysis. For computer acquisitions less than those requiring Departmental approval, each USDA agency is required to have an internal control process on computer acquisitions. These processes often include review of acquisitions by an agency's IRM Review Board, which includes IRM managers in the agency. In response to the OCIO's requirement, the three Service Center Implementation Team--SCIT--agencies have instituted a coordination review process where the three Senior IRM Officials must approve computer acquisitions under $25 million in life cycle costs made by any of the SCIT agencies to avoid duplication and ensure coordination of computer acquisitions. The OCIO staff has completed Version 1 of the Information Systems Technology Architecture--ISTA. This architecture was crafted by inter- departmental teams and provides a blueprint, or a framework, for building the basic foundations and facilities needed to support day-to- day activities, and will guide the acquisition and use of technology to support mission delivery. The foundation blocks for this architecture are contained in strategic plans which establish program and administrative priorities. Several concurrent activities are in progress. We have: Established an Executive Information Technology Investment Review Board--EITIRB, whose members are the most senior program managers in the Department, to review, prioritize and approve department-wide IT initiatives; initiated a capital planning and investment control process to help us plan and evaluate IT acquisitions and deployments; suspended the installation of telephone and data communications systems at the field service agencies, except for those needed to support the Dedicated Loan Origination and Servicing system-- DLOS--initiative of our Rural Development mission area, until the fiscal year 1998 budget issues are clarified. The final budget will dictate how many field offices and service centers will be supported. We do not want to use taxpayer money to install equipment at locations which may move or be closed; strengthened the technical oversight of the IT component of the Service Center Implementation initiative by relocating oversight to the OCIO; initiated an aggressive independent verification and validation process to use outside expertise to review key IT plans, projects and initiatives, and provide us with advice on how to better strengthen them. USDA has implemented ways to streamline the acquisition of IT products and services. Examples include: two major Departmentwide contracts are available for use by all USDA agencies and contain products and services which meet the baseline technical standards which are outlined in ISTA; FSA recently awarded a multiple award support services contract to six vendors. This contract is for use primarily by FSA and NRCS, but one third of the value is reserved for other federal agencies. The multiple award streamlines the acquisition process and continues to encourage competitive pricing for the government by allowing all six vendors to bid on task orders. automation priorities Mr. Skeen. Please update the Committee on your top automation priorities, how much they will cost, and when they will be implemented. Response. I will provide a brief description of our top automation priorities for the record. For most systems, maintenance costs will continue throughout the project life. usda automation priorities The Integrated Systems Acquisitions Project will establish a strategic framework for implementing the next generation of information systems in the Animal and Plant Health Inspection Service--APHIS. In the fall of 1995, a contract was awarded. APHIS has begun a five-year phased transition to the new environment of software, hardware, telecommunications and support services. Before starting formal implementation, APHIS is sponsoring transition activities to prepare for the new architecture. Total obligations from fiscal year 1996 to fiscal year 2002, are estimated to be $52.3 million. Through hardware and software acquisition, Project 615 will refresh the Forest Service's--FS--office automation technology and provide that agency also with geographical information systems technology. This will give FS the infrastructure to change its management of forests and rangelands from a single timber focus to a multiple ecosystem focus. Through 615's series of contracts, FS will establish an open systems environment. Since awarding contract for the GIS, the agency in 1996 conducted a pilot. Fiscal year 1997 begins the full application phase, which by the end of fiscal year 2000 will bring all FS employees on line with the new technologies. Total obligations by then should reach an estimated $108.3 million. In the Food and Consumer Service--FCS, the Food Stamp Program Integrated Information System--FSPIIS--is a comprehensive, integrated, on-line, menu-driven information system to support administration of the Food Stamp Program. Through GSA's Federal Information System Support Program and the Small Business Administration's 8(a) Program, the FCS is acquiring software development and maintenance for the system. FSPIIS will have extensions and interfaces to support things like Electronic Data Interchange. In 1994, Business Process Reengineering--BPR--had prepared this. From BPR came also an initiative to consolidate food stamp forms in fiscal year 1997, which should dramatically reduce State and project area reporting burdens, in terms of both the number of reporting points--sites--and events. Through the year 2002, annual costs of FSPIIS should run near to $2.1 million, for a total obligation of $14.8 million. Under the Service Center Implementation Team, another top USDA initiative will consolidate county offices into local USDA service centers equipped with communications and computer-related technology to save costs, improve program delivery, and provide one-stop service to customers. This is a joint effort by the Farm Service Agency, Natural Resources Conservation Service and Rural Development. The implementation will support integrated voice and data communications infrastructures, reengineered business processes, data sharing within current agency systems, and a common computing environment to serve all agencies operating in any given service center. The communications systems currently being installed will cost approximately $100 million. Cost of the fully integrated common computing environment solution cannot be determined until the appropriate business process reengineering is completed and the technical alternatives to meet these business requirements are identified and tested. The Food Safety and Inspection Service's Field Automation and Information Management initiative, is a project to automate improved business processed for the agency and to provide an agency-wide information management and sharing network. Total obligations from fiscal year 1996 through fiscal year 2002 should equal about $71.5 million. In amending the Housing Act of 1949, Congress in 1988 mandated that the then Farmers Home Administration escrow taxes and insurance. To comply, the Rural Housing Service has purchased a commercial mortgage loan origination and servicing system known as the Dedicated Loan Origination and Servicing System. It has a total lifetime obligation from fiscal year 1996 to fiscal year 2002 estimated at $54.9 million, almost half of which was incurred in fiscal year 1996 and fiscal year 1997. The Foundation Financial Information System--FFIS--lies at the heart of the Department's reinvention of financial information systems. It will embody uniform USDA financial information standards and will interface with all feeder systems. Development of interfaces began in fiscal year 1996. Last year, the Office of the Chief Financial Officer--OCFO--began to develop interfaces between FFIS and Departmental administration payment systems. By October 1997, OCFO will have commenced live production in FFIS in several agencies. For fiscal years 1997 and 1998, costs were estimated at $7.1 million and $4.1 million, respectively. business process improvement projects Mr. Skeen. Please provide the Committee with an updated profile of the business process improvement pilot projects on page 337 of last year's hearing record and any conclusions you have reached from them. [The information follows:] status of business process improveemnt projects Geographical information systems--GIS.--Much progress has been made in incorporation GIS technologies into USDA business activities. GIS technologies continue to be used and improved in the pilot test counties. Work studies have been done which verify that substantial labor cost savings using GIS technologies in field offices. Current activities are focusing on incorporating commercial off-the-shelf GIS software for meeting field business applications needs. A major Business Process Reengineering effort is underway with the USDA Service Center Agencies to implement geoprocessing technologies into service center business applications. Soils.--The prototype effort to evaluate providing Internet access to soils data for the Planetor application is complete. The effort was successful and is being used to provide county level data for Planetor users. The National Resources Conservation Service has implemented the National Soil Information System--NASIS--and is in the process of adding the capability to access NASIS via Internet. The focus of the National Cooperative Soil Survey is shifting from producing static printed soil survey reports to providing a dynamic resource of soils information for a wide range of needs. NASIS is the core component of this vision and is designed to manage and maintain solid data from collection to dissemination. Plants.--The PLANTS prototype is completed and PLANTS is implemented and in full production. This application provides plant information to government and public users via an easy to use Internet interface. This is an enormously popular application. It averages over 250,000 accesses per month and interest is increasing each month. PLANTS can be accessed through the Internet at http://plants.usda.gov. PLANTS is a database which provides a single source of general information about the plant kingdom to researchers and other people interested in plants. Standardized plant information, such as common names, greatly assist the free exchange of accurate plant-related information. The following agencies are cooperative partners in the PLANTS database effort: Bureau of Land Management, Fish and Wildlife Service, National Wetland Inventory, Geological Survey, National Marine Fisheries Service, National Oceanic Data Center, Environmental Protection Agency, Smithsonian Institution, National Museum of Natural History, and the Interagency Taxonomic Information System. Common client.--The Common Client project was renamed Customer Information Profile--CIP--in 1995. As of mid 1996, CIP was able to transmit updated customer information to the FSA S/36 system. Contract work is progressing to also update the NRCS FOCS system. No activity is underway to update other agency county systems. The CIP pilot system is now active is Osage County, Kansas. The present pilot CIP application contains information only for a single office. This approach ignores customers who do business with different offices. A National CIP is planned to combine Customer name and address information using national systems originally built for ex- ASCS and ex-FmHA applications. Work has started to relate similar data elements between the County CIP application and the St. Louis-developed Guaranteed Loans Application System. service center implementation team Mr. Skeen. Last year the Department said that the Service Center Implementation Team was working with a Vermont group to develop a GIS pilot proposal. What is the status of the proposal and how much has been expended up to date? Response. During the fall of 1995, the InfoShare Program staff identified a potentially beneficial pilot opportunity involving the Vermont Center for Geographic Information. However, no funding for this project has ever been transferred from USDA. The Service Center Implementation Team has a major Business Process Reengineering Effort underway to incorporate geoprocessing technologies into Service Center business applications. Once the BPR process has been completed, pilot sites will be identified to test the reengineered business process. We may work with the Vermont group during the testing process. government performance and results act (gpra) Mr. Skeen. What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. In accordance with the requirements of the Government Performance and Results Act--GPRA, and Department guidance for strategic plan development, the Office of Chief Information Officer-- OCIO--recently published a GPRA Strategic Plan for USDA's Information Resources Management--IRM--Program. The goals, objectives, and strategies included within the plan reflect a Departmentwide IRM perspective that has been achieved through a series of discussions, planning sessions, and wide review. The plan identifies those issues that the Department's IRM community must address over the next five years in order to be able to support USDA programs effectively and efficiently. The OCIO was only recently established within USDA. Organizational and budgetary requirements for the office have yet to be fully defined. The decision to develop a Departmentwide IRM Strategic Plan in lieu of a specific OCIO strategic plan was deliberate and made in consideration of new legislative, oversight, and programmatic changes that affect the Department's entire IRM Program. The USDA IRM Strategic plan addresses the broad number of organizational, procedural, and policy issues facing all federal IRM programs and positions the Department for transition to an IRM Program that is both more efficient and more effective. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? What are the performance consequences of conflicting goals and what actions are being taken to address these conflicts? Response. While the Department acknowledges the need for individual agency autonomy, it also recognizes that much can and must be done by working collaboratively to meet common goals. The USDA IRM Strategic Plan was developed in consultation with senior IRM officials from a number of agencies and reflects our effort to collectively address the critical issues facing our IRM Program. It calls for new organizational structures and Departmentwide initiatives that will require agencies to work together to share diminishing resources. This collaboration must be balanced against agency demands to meet respective programmatic responsibilities and the delivery of critical services. Mr. Skeen. How are you taking into account projected resources that likely will be available--especially as we move to a balanced budget? What assumptions are you making? How are you ensuring your goals are realistic in light of expected resources? Response. The Department recognizes that we must continue to deliver quality services that are important to the American public with fewer resources. Reduced budgets for information systems and support personnel will require significant changes in our IRM Program. The USDA IRM Strategic Plan calls for procedural and organizational changes that will lead to closer scrutiny of the way information systems are selected and deployed. Specific measures called for in the plan, such as, the development of a standards-based architecture, executive management involvement in system selection, establishment of a Capital Planning and investment Control Program, and others, will establish a new environment that will allow the Department to leverage its resources more effectively and efficiently than previously. Mr. Skeen. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals contained in your annual performance plans? Response. The Department does not intend to develop Departmentwide annual performance plans specifically for its IRM Program. Rather, each agency will be required to address the objectives of the USDA IRM Strategic Plan in its respective annual performance plan. The Office of the Chief Information Officer will carefully scrutinize these plans to ensure that initiatives planned by agencies remain compatible and supportive of overall IRM Program goals. Mr. Skeen. What progress has been made defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. The USDA IRM Strategic Plan identifies three broad goals, and specific objectives for each. For each objective, performance measures have been developed that will serve to gauge the effectiveness of the objective and the extent to which each has been achieved. These performance measures will also serve as guides for individual agency annual performance plans as they address IRM-related initiatives. Mr. Skeen. What lessons did the agency learn from its participation in the Results Act pilot phase, and how are those lessons being applied to agency-wide efforts? What steps is the agency taking to build the capacity necessary to implement the Results Act? Response. The collaborative process is productive, but we need to build an institutionalized method for sustaining the GPRA process. Developing effective performance measures will require increased effort. Mr. Skeen. Who do you consider to be your primary stakeholders and how will you incorporate their views into the strategic plans? Response. The development of a Departmentwide IRM Strategic Plan posed several challenges in this regard. The Department recognizes that its overall goals is to provide services to a national and international community. The multitude of processes involved in providing these services have many stakeholders, including, but not limited to other Federal agencies, Congress, State Governments, interest groups, community-based organizations, and oversight authorities. It was accepted, during the development of a Departmentwide IRM Strategic Plan, that agency representatives who participated would reflect the concerns of their respective stakeholders. In particular, however, this plan assumes that for a Departmental plan for IRM, the major stakeholders would include individual agency IRM programs, Congress, and oversight agencies. In consideration of these groups, legislation and guidance provided by Congress and oversight agencies were carefully considered. Facilitated workshops that included agency IRM personnel were held to gather their concerns and ideas. Mr. Skeen. What other federal agencies are you working with to ensure that your strategic plans are coordinated? Response. We are not working with other Federal agencies at this time. Mr. Skeen. What are your plans for congressional consultation as you develop your strategic plan? What Committees will you consult with? Response. All USDA Agencies have prepared draft Strategic Plans which are currently being reviewed by the Senior Policy Staff, the Secretary, and later by OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plans for individual Mission Areas/Agencies to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. Copies of the Department's Strategic Plan will be provided to the following Committees: House Agriculture Committee. House Appropriation Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. Hosue Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. USDA is making significant and fundamental changes in the way it selects and manages its information systems. New organization structures including the establishment of an Office of Chief Information Officer and the formation of an Executive Information Resources Investment Review Board will help to develop a more corporate-wide and collaborative approach to our IRM Program. The formulation of a Capital Planning and Investment Control Program will ensure a more rigorous scrutiny of IRM initiatives and the expenditure of limited resources. Increased emphasis and procedures that will link information systems to program goals will lead to better service and greater assurance that information systems are effectively designed. And lastly, on an ongoing basis, USDA is examining its IRM processes to identify specific work activities that can be made more efficient, with an emphasis on customer identified requirements. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. Agency Information Technology budgets will be reviewed to assure that they remain consistent with the plan. Mr. Skeen. How is the agency using the Results Act performance goals and information to drive daily operations? Response. It is the Department's intention to look to established performance measures to provide the metrics by which information systems are evaluated, funded and maintained. Performance measures linked to specific program objectives will ensure that information resources are properly aligned and achieve the results intended. Performance measures will be established during the information system planning stage and will be reflective of strategic goals, established both at the Department and the agency levels. Office of the Chief Financial Officer request for additional funds Mr. Skeen. How will the additional $375,000 you are requesting help implement the CFO Act? Is this all for additional FTEs? Response: All of the $375,000 will be used for FTEs, including the related support costs. The money will help with the implementation of those requirements contained in the CFO Act that are awaiting action. Furthermore, the money will make significant improvements in the implementation of CFO Act requirements that have been initiated but which are in need of additional resources before achieving a substantive impact. Of particular note are the requirements contained in Sec. 902(a)(2), (3), (5)(B) and (D), (7), and (8). The additional resources requested will be used to accomplish many things. USDA still needs to develop financial management budgets, monitor the financial execution of the budgets in relation to actual expenditures, and prepare and submit to the Secretary timely performance reports. It is expected that this will result in the better utilization of scarce resources. The additional resources will also be used to (a) review on a biennial basis the fees, royalties, rents, and other charges imposed by USDA for the services and things of value it provides and (b) make recommendations on revising those charges to recover costs incurred. This should result in significant additional resources for the Department. The resources are needed for substantive improvements in order to obtain unqualified audit opinions. This will be aided through the approval of all USDA financial management systems design and enhancement projects, better oversight of the financial management activities of USDA programs and operations, and the development and maintenance of a single USDA integrated accounting and financial management system, including financial reporting and internal controls. OCFO needs to ensure that USDA systems comply with (a) applicable accounting and internal control standards and requirements, (b) policies and requirements prescribed by OMB, and (c) other requirements applicable to such systems. If OCFO does not ensure such compliance, the systems are not as likely to provide for (a) complete, consistent, reliable, and timely information prepared on a uniform basis that is responsive to the financial information needs of our managers and officials; (b) the development and reporting of cost information; (c) the integration of accounting and budgeting information; and (d) the systematic measurement of performance. strategic plan and performance plan Mr. Skeen. Please provide the Committee with a copy of the USDA Government Performance and Results Act strategic plan and performance plan. Response: USDA is currently in the process of developing a Departmentwide plan, which will consist of an Executive Summary and individual agency and mission area plans. The draft Executive Summary and the draft agency and mission area strategic plans are currently being revised. We will provide the revised agency and mission area strategic plans for consultation purposes, as part of the draft USDA Strategic Plan. stove piping among usda agencies Mr. Skeen. One of the concerns expressed by the Secretary during his testimony to this Committee in February 1997 was the ``stove piping'' that occurs among the USDA agencies. One way to help reduce the stove piping is coordination through the strategic planning process. Please describe how the Department has coordinated strategic planning across mission areas and agencies to reduce agency stove piping. Response: As part of the process of developing the USDA Strategic Plan, we have involved all seven program mission areas and Staff Offices in coordination meetings to identify their roles in reaching the Secretary's four goals, which are: A safe, affordable, nutritious, and accessible food supply; Expanded economic and trade opportunities for rural and farm residents; Sensible management of our natural resources; and Good government, providing our services efficiently and effectively. Program mission areas and Staff Offices are working together to develop partnerships and to identify their roles in reaching these goals. The Executive Summary of the USDA Strategic Plan will summarize how the USDA mission area are coordinating these efforts. performance results Mr. Skeen. The CFO has included performance goals and measures in its budget request. Please provide your performance results for 1996. [The information follows:] Performance results for FY-1996 Goal #1: Integrate financial management with program management; provide timely and reliable financial management information, advice and counsel to support informed decision-making. Accomplishments: Developed financial management training course for program managers entitled, ``Financial Management for Non-Financial Managers,'' and provided training to approximately 250 non-financial (program) managers in USDA. Established teams and task force to provide guidance for improved financial management of USDA resources, such as the Forest Service Financial Health Task Force. Provided specific guidance to USDA policy officials and program managers on travel management, Federal Assistance awards, cost accounting, entitlement regulations, regulatory relief for small entities, and other issues which resulted in improved management of programs, projects and processes. Goal #2: Ensure adequate controls to safeguard assets and manage liabilities, revenues and expenditures. Accomplishments: Developed and initiated implementation of a tracking system for interdepartmental funds transactions, including standardization of numbers for reimbursable agreements. Led USDA participation in promoting financial management efficiency through legislation and projects, such as passage of the Debt Collection Improvement Act and its implementation in USDA, participation in the Federal Credit Policy Working Group and the Task Force on Debt Collection Centers, and expanded use of electronic benefits transfer (EBT). Goal #3: Foster accountability for financial management performance throughout USDA. Accomplishments: Developed and initiated implementation of activity-based costing methodologies in USDA, including a system to document and support assumptions and cash flows used to establish and reestimate loan subsidy costs. Provided audit follow up guidance to USDA agencies which resulted in improved compliance with audit related management decisions as reported in the Secretary's Management Report to Congress. Assisting agencies in compliance with Federal Manager's Financial Integrity Act. Goal #4: Lead the effort to implement strategic planning and performance measures in USDA. Accomplishments: Promoted the development, use and reporting of performance measurement and strategic planning by agencies through provision of guidance, review, and coordination of strategic planning effort, which resulted in submission of draft strategic plans for all USDA agencies and mission areas. Leading USDA in meeting requirements and time table for GPRA. Goal #5: Build a productive, quality-oriented financial management workforce. Accomplishments: Established key positions in Cost Accounting and Financial Standards Administration to promote professional cost accounting and financial information standards. Provided training to OCFO staff on analytical tools, critical thinking and written communications. Developed a Human Resources Development Plan for OCFO, and initiated implementation. Developed and implemented a Tuition Assistance Program. Promoted development of Individual Development Plans for all OCFO employees. Goal #6: Establish a strong, results-oriented, highly-effective and professional financial community within USDA. Accomplishments: Developed policy for a Continuing Professional Education (CPE) program in USDA, and initiated development activities to establish a CPE program for financial managers in USDA. Established professional training program for accountants and financial managers in USDA. Goal #7: Develop and maintain financial management information systems that are responsive to user and customer needs. Accomplishments: OCFO and four additional agencies (FCS, APHIS, FS and GIPSA) participated in a production simulation for the Foundation Financial Information System (FFIS); OCFO was fully implemented. Full implementation of FFIS will be accomplished by FY-1999. Improvements to administrative systems: Unified Travel System is nearly completed and will be implemented October, 1997; Purchase Card Management System was piloted; and Electronic Data Interchange (EDI) was implemented for the UTVN (Utility Vendor) system. Graphical User Interface (GUI) was implemented on identified applications: the Purchase Order (PRCH) system, the Supply Inventory (SPIN) system, the Inquiry and Research Information System (IRIS), and the Billings and Collection (BLCO) System; The Payroll/Personnel front- end (SCIPS) system is under development; and completed planning for upgrade of the Payroll/Personnel system. Implemented, a process for automating the correcting, canceling, and updating of historical personnel actions; and Prepared a plan to achieve Level 2 of the Capability Maturity Model. This is a method for developing, implementing, and maintaining software. It ensures participation by the users and documentation by the developers at each step of the development and implementation process. Goal #8: Provide high-quality customer service. Accomplishments: Initiated customer service feedback mechanisms to promote better communications between OCFO and customers. Developed OCFO Home Page on Internet. Initiated development of service standards for the National Finance Center. performance indicator for video production increase Mr. Skeen. The Working Capital Fund performance indicator for video production (cost per hour) increases by 25 percent from 1996 to 1997. Why does the indicator increase? Response. Unit costs for video production increased from $254 in 1996 to $318 in 1997 due to a different mix of the type of productions being made. Generally, work performed in 1997 consists of larger video productions that carry with them a higher unit cost. Hourly rates for video production services in the Office of Communications' Video and Teleconferencing Unit have been unchanged for the last several years. The Video and Teleconferencing Unit is able to achieve this by implementing an efficient mix of in-house and contract support for video production services. This, and the manner in which this unit invests in technology and video production equipment, has allowed this center to hold the line on rates over the past several years. increase in working capital fund object class 25.4 Mr. Skeen. Please explain the reasons for the $762,700 increase in the Working Capital Fund object class 25.4, operation and maintenance of facilities. Response. The increase in operation and maintenance of facilities is due entirely to costs associated with critical maintenance needs of the National Finance Center. NFC estimates an increase of approximately $776,000 in this cost category. The facility occupied by the Center is over 30 years old and current demands on its infrastructure-- electrical, roofing, hearing and cooling--are far in excess of the levels of demand for which the facility was engineered. These costs must be incurred to ensure the reliable delivery of services to our customers. We are making every effort to ensure that the costs are kept to a minimum so that we can focus on service delivery. increase in the working capital fund operation and maintenance of equipment Mr. Skeen. The Working Capital Fund operation and maintenance of equipment (object class 25.7) increases by $1,128,400 in 1998. Why is this the case? Response. The increase here is due almost entirely to approximately $1.1 million in additional costs to be incurred by the National Finance Center. These costs are part of the maintenance plan to address critical needs of the Center. They include costs associated with electrical system upgrades and upgrades to fire alarm systems. increase in working capital fund equipment object class Mr. Skeen. In 1998 the Working Capital Fund Equipment object class (31) increases by $1,052,900. Please provide an explanation. Response. The increase represents the increase from fiscal year 1997 to fiscal year 1998 in capital funds available and allocated among WCF activity centers. The amount of funds available each fiscal year for equipment purchases is based on the recovery of depreciation expenses through billings to the users of WCF Services. Allocations are made to activity centers from available capital for the purpose of large-scale equipment or system acquisitions. The allocations are made on the basis of lease-purchase analyses we perform on proposed acquisitions with the funds allocated to those acquisitions where the savings are greatest by procuring compared to leasing. The annual demand for equipment funding exceeds the availability. The equipment items which cannot be funded must be acquired by leasing the equipment, generally at a higher cost. request for additional funds at nfc Mr. Skeen. The National Finance Center is requesting an additional $8,005,000 in funds. Please provide the Committee with information on how these funds will be used. Response. The National Finance Center was allocated $6,952,000 in capital funds for fiscal year 1997. In fiscal year 1998, the capital allocation will be $8,005,000. Of this amount, $5.5 million was allocated for three major acquisitions--additional direct access storage devices, a UNIX operating system, and cartridge tape replacement. Direct access storage devices, or DASD, provide easier access to larger volumes of data. The investments to be made in DASD in 1998 complete a four year plan to eliminate obsolete or nearly obsolete units. The UNIX system upgrades are necessary to accommodate expansion of workload on that system and to allow us to prevent obsolescence, improve security, and continue modernization of NFC operating systems. Expenditures for cartridge tape replacement are necessary for management control of the USDA data repository and to maintain the lowest cost, yet most modern operation. Investment in these technologies will allow us to eliminate many redundant cartridge tape operations. The cost avoidances represented in staff-years, hardware, and software exceed investment costs by a factor of three to four times. Such acquisitions are critical to maintain NFC's competitive edge in providing services to users. The remainder of the funds will be used for telecommunications equipment and software, and peripheral equipment to support mainframe and other computer operations. All costs associated with these procurements will be recovered from users of NFC services over the life of the assets procured. increase of funds for the thrift savings plan Mr. Skeen. The National Finance Center is requesting an increase of $2,316,000 for support of the Thrift Savings Plan. Why are these additional funds needed and how will they be used? Response. While we assume for 1998 that the number of accounts we maintain will be reasonably constant, we expect that the number of transactions per account will increase as more flexibility is offered to participants wishing to borrow against their accounts. The increased volume of transactions will drive up costs. In addition, system development costs, resulting from recent legislative changes, will require more resources. Although the Thrift Investment Board has contracted out the total redesign of the system, resources will be required to work with the contractors. Of course, to the extent that demand does not materialize, our estimates for the increase in Thrift Savings Plan support costs would be revised downward. amounts paid into the working capital fund by current agency structure Mr. Skeen. Provide a table that shows, by current agency structure, the amount paid into the Working Capital Fund for fiscal years 1995 and 1996. [The information follows:] [Page 640--The official Committee record contains additional material here.] wcf operating costs Mr. Skeen. In addition, update the table on page 393 of last year's hearings that compares the operating plan and actual expenditures for fiscal year 1991 through 1996. [The information follows:] WORKING CAPITAL FUND OPERATING COSTS, COMPARISON OF OPERATING PLAN AND ACTUAL EXPENDITURES--FY 1991-FY 1996 ---------------------------------------------------------------------------------------------------------------- 1991 1992 1993 1994 1995 1996 ---------------------------------------------------------------------------------------------------------------- Operating plan.................... $145,500 $156,649 $173,890 $187,084 $194,192 $203,322 Actual expenditure................ 143,858 153,132 171,174 178,017 184,093 197,389 ---------------------------------------------------------------------------------------------------------------- wcf purchase of computer equipment and services Mr. Skeen. How much did the fund contribute toward the purchase of computer equipment and services in the Department for fiscal year 1996 and how much is estimated for these purchases in fiscal years 1997 and 1998? [The information follows:] [Amounts in thousands] ------------------------------------------------------------------------ Fiscal year Description -------------------------------------- 1996 1997 1998 ------------------------------------------------------------------------ Computer equipment and services.. $39,151 $41,463 $43,473 ------------------------------------------------------------------------ The above amount includes computer related costs for Communications, Utilities, Rentals, Supplies, Other Services, and Equipment. agencies using the accounting system at nfc Mr. Skeen. Last year you reported that the first six agencies had begun to assess whether or not they would continue to use their own accounting system or begin using the basic accounting system at the National Finance Center or the National Computer Center. What did the assessment indicate? Response. So far, the assessment has indicated that we will be able to eliminate at least two systems with a total of three applications, plus an additional four applications of other systems during early 1998. The assessment is ongoing and more systems and applications are likely to be identified for elimination. AGENCIES' SYSTEMS AND APPLICATIONS BEING ELIMINATED ------------------------------------------------------------------------ Agency System Application ------------------------------------------------------------------------ Animal and plant health Integrated financial Agreement inspection service. management tracking information system. financial plan. Food and consumer service..... Administrative funds Administrative management system. funds management. Forest Service................ [Central Accounting Miscellaneous System] This is an payments; NFC accounting program system being used by management plan; the Forest Service. project It will not be planning; unpaid eliminated. obligations. ------------------------------------------------------------------------ benefits for providing payroll services to non-federal office employees Mr. Skeen. Last year you reported that a USDA team was evaluating the benefits and costs of NFC providing payroll service to the non- Federal FSA county office employees. What did the team recommend? Response. The Team did not reach a consensus. However, FSA has recently decided to have NFC payroll the non-Federal FSA county office employees. Plans are to make the conversion in 1998. staffing Mr. Skeen. In last year's testimony you reported that four full- time employees and no agency personnel were assigned to the immediate office of the Chief Financial Officer? Is this still the case? Response. Of the six full-time positions assigned to the immediate office of the Chief Financial Officer, three are currently encumbered. Positions for the Chief Financial Officer, confidential assistant and a secretary are currently vacant. No personnel are assigned from other agencies. departmentwide travel costs Mr. Skeen. Please provide the Committee with a table displaying department-wide travel costs for the past five years. [The information follows:] Fiscal year: Amount 1992................................................ $222,816,604 1993................................................ 167,143,211 1994................................................ 228,846,718 1995................................................ 216,666,146 1996................................................ 199,405,196 Please provide an update on the Financial Information System Vision and Strategy project, including its current estimated cost and completion date. Effective October 1, 1996 one of USDA's agencies, the Office of the Chief Financial Officer appropriated fund, began live production operation in the Foundation Financial Information System (FFIS), the core accounting system part of the FISVIS project, using manual interfaces to the existing National Finance Center (NFC) payment systems. During Fiscal Year 1997 eight other agencies, including one NFC cross serviced customer, have or will have begun operating in an environment that will simulate a production environment for their accounting processing. Our plan is for several agencies to begin live production operation in FFIS on October 1, 1997, including automated interfaces to the NFC payment systems. Our plan is to have all agencies in live production operation in FFIS by the end of Fiscal Year 1998. In addition to the implementation of the core accounting system, FFIS, we have developed and implemented Department wide accounting standards for all USDA agencies, and implemented control mechanisms to monitor and approve changes as needed. I will provide for the record a table that details the costs associated with this project through FY 1998. The table does not include $4,735,000 in contract funds contributed to date by the Forest Service. I should point out that capital acquisition costs provided in the table will be recovered through depreciation charges, which are operating costs. WORKING CAPITAL FUND PROJECT COSTS--FISVIS PROJECT THROUGH FISCAL YEAR 1998 [Dollars in thousands] ---------------------------------------------------------------------------------------------------------------- Fiscal years Operating ------------------------------------------------------------ Total 1993 1994 1995 1996 1997 1998 ---------------------------------------------------------------------------------------------------------------- FISVIS project office..................... 9 2,954 1,315 3,786 4,539 4,539 17,142 FFIS support.............................. 47 482 2,055 3,835 6,042 5,642 18,103 Capital................................... ........ ........ ........ ........ ........ ........ ........ FISVIS project office..................... 0 0 6,925 4,440 2,800 1,014 15,179 FFIS support.............................. 0 49 515 34 0 0 598 ---------------------------------------------------------------------------------------------------------------- financial management review Mr. Skeen. In reviewing the agencies' planned financial management system changes did the CFO find any cases where the agency did not comply with the Financial Information System Vision and Strategy initiative? If there were any such cases, how were the cases resolved? Response. We have found no cases to date where an agency's planned financial management system were not in compliance with the Financial Information System Vision and Strategy-FISVIS-initiative. gao report on fisvis Mr. Skeen. Has the Department addressed the recommendations made in the September 1995 GAO report on FISVIS? Response. The Department has completed action on recommendation 1, but the implementation of the remaining five recommendations is either long-term or ongoing in nature. We originally thought we might be able to address recommendation 3 by the end of Fiscal Year 1996, however, the task proved to be more complex than estimated. Furthermore, we have kept GAO apprised of our progress. The six recommendations contained in the GAO report are as follows: Recommendation 1: Expeditiously implement the proposed delegation of authority to provide the Chief Financial Officer--CFO--with the authority to oversee all financial management activities relating to the programs and operations of the agency, including approving component agency financial management system design and enhancement projects. Recommendation 2: Require that the CFO (1) establish review teams to determine whether USDA's current and future component agency and National Finance Center--NFC--financial and mixed systems are in compliance with the USDA Financial and Accounting Standards Manual and the USDA Financial Management Information Architecture Document and (2) take action to bring component agencies into compliance with the standards. One way USDA could undertake this task with existing resources is to create temporary teams of Office of the CFO, NFC, and component agency personnel. Recommendation 3: Direct the CFO to develop and implement a configuration management policy and version control process to ensure that the foundation system baseline software is effectively managed. Recommendation 4: Direct the CFO to update the FISVIS strategy to include a financial management systems architecture that sets forth the financial management needs of USDA's new organizational structure, and establish a detailed strategy to meet these needs. This plan should also identify opportunities to streamline and/or consolidate financial management systems across agencies and mission areas. Recommendation 5: Direct the CFO to review each of the component agencies ongoing and planned financial management system development efforts and report to the Secretary whether each of these efforts are necessary, consistent with the FISVIS initiative, and cost-effective from a Departmentwide perspective, or whether they should be consolidated with other financial management systems or development efforts. This would include, but not be limited to, determining that the component agencies' needs cannot be met by the Foundation system. If the CFO determines that any individual system development effort is not needed, the Secretary should suspend it. Recommendation 6: Delegate to the CFO authority and responsibility for (1) developing a Departmentwide financial management reengineering strategy that would include identifying the technical assistance and training necessary to successfully carry out reengineering activities and (2) reviewing and approving the reengineering of all Departmental and component agency financial processes and require component agencies' senior financial managers to work with the CFO to ensure that their reengineering efforts are planned and managed from a Departmentwide perspective. foundation financial information system at nfc Mr. Skeen. Please report on the performance of the Foundation Financial Information System at NFC. Response. The Foundation Financial Information System, or FFIS, was installed at NFC in January 1995. Prior to selecting FFIS the vendor demonstrated through an Operations Capability Demonstration that the software could operate in the NFC environment and meet our requested system requirements. Since January 1995 we have tested the system by processing small volumes of data through it, with the system configured to meet our agencies' needs. As we complete the automated links between the NFC payment systems to the FFIS, we will process increasing volumes of data through the FFIS, and plan an extensive test of the system during the summer of 1997 to ``stress test'' the system. During all of these tests we monitor the results to predict system performance that we can anticipate during live operations, which will commence with large volumes effective October 1, 1997. We are confident that the FFIS will meet our customer needs, and its performance will be acceptable. coordination of financial management systems with nfc Mr. Skeen. How are individual agency financial management systems coordinated with the overall system at NFC? Response. The primary means of coordinating individual agency financial management systems with the overall system at NFC is through the FISVIS Project. FISVIS is a collaborative team effort with representation from OCFO, including NFC, the USDA agencies, and the contract firm of American Management Services which has supplied the software for the Department's Foundation Financial Information System- FFIS. FISVIS representatives actively participate with representatives from the individual agencies to plan for new and reengineered agency financial management systems that are capable of interfacing with the overall system at NFC. The representatives work as a cohesive team to understand the needs of the agencies and the Department and how best those needs can be met within the context of FFIS. An implementation team exists for each agency scheduled to use FFIS, and each team has a full-time dedicated staff. Each implementation team is supported by other team members who work full-time on things such as systems interfaces, data conversion, reporting, and training. In instances where an existing agency financial management system duplicates the functions of FFIS, it is integrated into FFIS. When an existing system cannot be replaced with FFIS, the representatives develop an interface to transfer information from that system to FFIS using standard file formats. What has been spent in total on FISVIS to date and what is expected to be spent in fiscal year 1997 and 1998? [The information follows:] FINANCIAL INFORMATION SYSTEMS VISION AND STRATEGY PROJECT FY 1993-1998 OPERATING COSTS [Amounts in thousands] ------------------------------------------------------------------------ Fiscal years Title -------------------------------------- 1993-1996 1997 1998 ------------------------------------------------------------------------ FISVIS Project................... 8,064 4,539 4,539 FFIS \1\......................... 6,419 6,042 5,642 Total............................ 14,483 10,581 10,181 ------------------------------------------------------------------------ \1\ Foundation Financial Information System (FFIS) is the system to be operated at the National Finance Center. consolidation of financial information systems in usda Mr. Skeen. Please provide a status report on the progress made to date on consolidating the 134 financial information systems in USDA and an estimate of the savings. Response. On September 30, 1996, USDA submitted its annual Financial Management Status Report and 5-Year Plan to OMB in which it reported the existence of 67 financial management systems for a total of 133 applications. During fiscal year 1996, five systems and six applications were discontinued. In addition, 14 systems and 39 applications are designed for replacement. Five of those 14 designated systems are being upgraded, one is being replaced with an existing system, and the other eight are being replaced with three new systems under development in the Department. In conclusion, four of the eight systems will be replaced by FFIS, three by the Farm Service Agency's CORE Accounting System, and one by the Rural Utilities Service Loan Accounting and Management Information System. As the Department continues to move forward with implementing a single integrated financial management system, the number of systems that will be consolidated, replaced, or merged will likely increase. USDA currently tracks dollars and staff-years utilized for financial management, but we believe it is not cost effective to try to manually segregate, or allocate, those dollars and staff-years that are related to savings related to the consolidation of the Department's financial information systems. As we implement new cost accounting standards, we will do our best to address such requests for more detailed information. replacement of systems in the foundation financial information system Mr. Skeen. How many systems is the Foundation Financial Information System supposed to replace, what are the timeframes for completing this, and what savings are expected? Response. We estimate that four systems and 23 applications will be replaced by FFIS. This includes the two systems and seven applications being eliminated as a result of our assessment of the first six agencies scheduled to implement FFIS, plus another two systems and 16 applications as the result of assessments of two additional USDA agencies. As the Department moves forward with the implementation of FFIS, the number of systems and applications to be replaced may increase. This is due to the fact that the assessment of USDA agencies' needs is an integral part of FFIS implementation, which is still ongoing. FFIS implementation is scheduled to be completed in fiscal year 1999. The four systems that FFIS will replace include the Animal and Plant Health Inspection Service's--APHIS--Integrated Financial Management Information System, Agricultural Research Service's--ARS-- Location Obligation Tracking System, OCFO's Central Accounting System-- CAS, and Food and Consumer Service's--FCS--Administrative Funds Management System. The APHIS, ARS, and FCS systems primarily perform a funds control function for their agencies' appropriated funds. The annual volume of transactions of these three systems is 1,436; 100,000; and 100,000 respectively. OCFO's CAS is used to process almost two billion transactions as the core financial system at NFC. CAS is used for not only funds control but several other purposes such as the general ledger, budget execution, accounting control, and financial reporting for the entire Department. That leaves another 500,000 transactions being processed annually by two applications scheduled for elimination that comprise only a small part of NFC's Administrative Payments System. USDA currently tracks dollars and staff-years utilized for financial management, but we believe it is not cost effective to try to manually segregate, or allocate, those dollars and staff-years that are related to the incremental savings related to the consolidation of the Department's financial information systems. As we implement new cost accounting standards, we will do our best to address such requests for more detailed information. cost of contract at nfc with american management systems Mr. Skeen. What has been the total cost of the contract at NFC with American Management Systems to date? What has the contract procured? Response. The contract with American Management Services--AMS--was signed in December 1994. Through fiscal year 1997, contract costs for work done by AMS will amount to approximately $17.9 million. Under the AMS contract, we have procured the baseline FFIS software and installed it at the NFC. We have received training from the contractor and support from AMS in developing and implementing over 40 data bases for our customers' use of the FFIS. We have procured AMS support to work closely with our customers to understand their accounting needs, help them reengineer their accounting processes, and configure the FFIS software to support those processes. We have procured AMS support to assist NFC in the development of accounting and processing system requirements to take payment information from existing NFC payment systems and develop functional accounting records for the FFIS system. All of these activities have provided us with the groundwork to successfully convert several USDA agencies into a live production environment on October 1, 1997. additional costs for ams contract Mr. Skeen. Are additional costs for the AMS contract anticipated in fiscal year 1998? Response. We are expecting to spend $2,600,000 in fiscal year 1998 for the AMS contract. These funds will be used to convert the remaining USDA agencies to FFIS by the beginning of fiscal year 1999. We need to work closely with each of the remaining agencies to understand their unique accounting requirements and configure their portion of the FFIS so that it meets their needs. Some part of the funds will be for actual conversion of data from the existing accounting system to FFIS. collection of tax refund offsets Mr. Skeen. Did the Office of the Chief Financial Officer assist in the collection of tax refund offsets in fiscal year 1996? What was the cost to the Department to collect the money? Response. The Office of the Chief Financial Officer provided USDA agencies with technical assistance, and guidance, and prepared the Memorandum of Agreement and related documentation required by the Internal Revenue Service. The total cost to the Department to collect the $43.1 million was approximately $1.5 million. Of this total cost, approximately $736,000 was paid to the Internal Revenue Service and the Department of the Treasury's Financial Management Service for offset related costs. The remaining costs consisted of staff time. implementation of the cfo act of 1990 Mr. Skeen. What has been the cost so far to implement the CFO Act? Response. USDA has received no additional resources to implement the CFO Act. USDA has reallocated resources from other critical activities to establish the Office of the Chief Financial Officer and to implement new CFO activities. In addition, USDA reallocated resources to the Office of the Chief Financial Officer and the Office of the Inspector General to prepare and audit the financial statements as required by the CFO Act. While the Department tracks the dollars and staff years utilized for financial management, we do not have a Departmentwide summary that breaks out the costs to implement specific requirements of the CFO Act. requirements of the cfo act Mr. Skeen. Please update the committee on the progress made in implementing the requirements of the CFO Act. [The information follows:] Responsibilities under the CFO Act of 1990 In Place Report directly to the Secretary regarding financial management matters. Make recommendations to the Secretary regarding selection of the Deputy Chief Financial Officer of the Department. Provide financial management advice to the Secretary and Subcabinet officials. Prepare and transmit an annual report on financial management to the Secretary and the Director of OMB. Prepare and submit to the Secretary and the Director of OMB a 5- year financial management plan for the Department. Prepare consolidated and/or combined agency financial statements and work with the Inspector General and other auditors to improve the independent review and audit ability of those statements. In progress Ensure that the data included in financial reports are auditable. This includes performance measures. Oversee all financial management activities related to the programs of USDA and its component agencies. Establish financial management policies for the Department and its agencies. Develop and maintain an integrated departmentwide accounting and financial management system. The system is to provide information that is prepared on a uniform basis and that is responsive to the financial information needs of the Department and agency managers for: Financial reporting and internal controls. Integration of accounting and budgeting information. Systematic measurement of performance. The development and reporting of cost information. Ensure departmentwide compliance with applicable accounting, financial, and systems standards (including the U.S. Government Standard General Ledger and core financial systems requirements). Establish, review, and enforce throughout the Department internal control policies, standards, and compliance guidelines involving financial management (including the authority to require and ensure timely corrective actions regarding material weaknesses disclosed through audit findings and reports under the Federal Manager's Financial Integrity Act (FMFIA). Establish, in coordination with program managers, departmentwide and agency internal control processes; advise the Secretary on the accuracy and completeness of the Department's annual FMFIA report; and participate with agencies in monitoring and requiring corrective actions on reported material weaknesses (especially high-risk areas listed in the President's budget). Ensure adequate controls over cash and credit management, debt collection, inventories, and property, plant, and equipment. Direct, manage, and provide policy guidance and oversight of the implementation of asset management systems (including cash and credit management, debt collection, and property and inventory management and control). Develop, in coordination with program managers, financial and programmatic performance indicators for inclusion in agency financial reports and statements. Develop financial information standards and definitions for the Department and its component agencies, maintain and refine the standards, and assist with their implementation. Review and approve financial reports and statements prepared by agencies for transmittal to the Secretary as well as to the Congress, OMB, President, and other external parties. Monitor the development of accounting standards by Federal Accounting Standards Advisory Board and other central guidance agencies and implement those standards throughout the Department. Ensure that program information systems provide financial and programmatic data (including program performance measures) on a consistent, reliable, and timely basis to the Department's financial management system. Approve the selection of the heads of agency financial management activities, in addition to the job descriptions and skill requirements. Advise and provide direction to program managers on financial management matters. Just initiated Manage directly, monitor, evaluate, and approve the design, budgeting, development, implementation, operation, and enhancement of departmentwide and agency accounting, financial, and asset management systems. Direct, manage, and provide policy guidance for, and oversight of, departmental and agency financial management activities, personnel, and operations. Review, on a biennial basis, the fees, royalties, rents, and other charges imposed by agencies for the things of value they provide, and make recommendations on revising those charges to reflect the costs incurred in providing them. Provide guidance and oversight of the approval and management of departmental and agency financial management systems design or enhancement projects. Mandate data and report format requirements (consistent with OMB guidance) for program and financial managers throughout the Department. Provide departmentwide policy advice on the qualifications, recruitment, training, performance, and retention of all financial management personnel in the Department to ensure a cadre of qualified financial management professionals. Not yet initiated Develop a departmental financial management budget; approve planning, budget formulation, and legislation affecting financial management (FTE, salaries and expenses, systems, other equipment) at both the departmental and agency levels. Participate with agency heads in the annual performance evaluations of the heads of component agency financial management activities. Monitor the financial execution of the budget of the Department and its agencies in relation to actual expenditures, and prepare and submit timely performance reports to the Secretary. Ensure accurate and timely information on contract disbursements in relation to projected costs and actual commitments and test results (if any), including cost estimates for major procurements. Approve the design of other information systems that provide financial and/or program performance data used in financial statements to ensure that the CFO's needs are met. Evaluate, where appropriate, the installation and operation of systems that provide financial and programmatic data (including program performance measures) to agency financial management systems. Review all major legislative and other programmatic proposals (including major procurements and changes in credit programs) in order to provide advice to the Secretary and agency heads on Federal cost and program benefit estimates. staff year levels at the national finance center Mr. Skeen. Provide a table showing the staff year levels at the National Finance Center for fiscal years 1991 through 1996 and estimates for fiscal year 1997. [The information follows:] NATIONAL FINANCE CENTER STAFF YEAR UTILIZATION--FISCAL YEAR 1991-1997 ---------------------------------------------------------------------------------------------------------------- USDA Non-USDA Fiscal Year activity activity TSP \1\ Total ---------------------------------------------------------------------------------------------------------------- 1991........................................................ 883 277 198 1,358 1992........................................................ 800 368 281 1,449 1993........................................................ 750 471 314 1,535 1994........................................................ 786 448 379 1,613 1995........................................................ 769 407 408 1,584 1996........................................................ 662 499 430 1,591 1997 (est.)................................................. 597 543 455 1,595 ---------------------------------------------------------------------------------------------------------------- \1\ Thrift Savings Plan. cross-servicing Mr. Skeen. Please provide a list of all cross-servicing the Center performs. [The information follows:] [Page 649--The official Committee record contains additional material here.] direct deposit/electronic funds transfer Mr. Skeen. Please update the statistics of participation in the use of Direct Deposit/Electronic Funds Transfer provided on page 404 of the last year's hearing record. [The information follows:] PERCENT OF EMPLOYEES USING ELECTRONIC FUNDS TRANSFER ---------------------------------------------------------------------------------------------------------------- Pay period --------------------------------------------------- February February February Percentage 1995 1996 1997 change ---------------------------------------------------------------------------------------------------------------- USDA agencies............................................... 84.3 84.2 87.6 +3.4 Non-USDA agencies........................................... 93.6 94.2 95.9 +1.7 Department of the Treasury.................................. 88.6 85.6 88.2 +2.6 Average..................................................... 88.8 88.7 91.2 +2.5 ---------------------------------------------------------------------------------------------------------------- As of pay period 2, 1997, checks still being mailed were as follows: USDA agencies: 12,069, Department of the Treasury bureaus: 18,039, and other non-USDA agencies 7,097. impact of the farm bill Mr. Skeen. In last year's testimony you said that it was too soon to assess the impact of the 1996 Farm Bill on how USDA operates. During the past year, have you done any analysis of the changes that will have to be made in your information, financial, and management systems as a result of the 1996 Farm Bill? Response. Analyses are ongoing and several changes have already been made to our information, financial, and management systems as a result. The Farm Bill revamped conservation programs that were being administered by the Farm Service Agency--FSA--and the Natural Resources Conservation Service--NRCS. It created some new programs and led to the realignment of responsibilities. Many of the resultant changes require funding from the Commodity Credit Corporation--CCC--and appropriate changes have already been implemented through modifications to existing delegations of authority and to the related financial and mixed systems. The systems modifications have enabled USDA to effectively implement the new conservation programs as required. CCC has put in place new funds controls to ensure that the spending limitations established in the Farm Bill are not exceeded and new reporting mechanisms to report to Congress all CCC expenditures in excess of $10,000 for each quarter of the fiscal year. CCC has been submitting the quarterly reports as required but is working to improve its reporting process. cost-benefit analysis of the software systems contract Mr. Skeen. What were the principal conclusions of the cost-benefit analysis of the software systems contract at NFC required by last year's bill? Please identify the contractor who made the analysis. Response. Prior to making a final determination to use off-the- shelf software, USDA compared alternative methods of developing and implementing such software. These alternatives were examined as part of the USDA department-wide technical evaluation, conducted for all major FIPS Procurements. We received assistance in developing the analysis from Logicon Fourth Generation Technology, Inc., who not only examined cost parameters for an 8-year life cycle but other risk factors as well. The benefit cost analysis examined three alternatives: Maintaining the status quo: the use of a commercial off-the-shelf software (COTS) package; and reengineering existing systems. Alternative 1, on its face was inappropriate given the status of our current system. The 8-year life cycle cost of implementing a commercial, off-the-shelf software package, including costs of USDA development and operation, ranges from $82 to $90 million (depending on the software package which was to be selected) including the cost of USDA personnel. The cost of reengineering using NFC personnel was approximately $96 million. In addition, use of the off-the-shelf software package results in a faster implementation of a proven product, compliant with all federal mandates and requirements. As a result of the cost-benefit analysis and associated risk analysis, the contractor recommended the COTS alternative. This cost-benefit analysis has been reviewed by the Department's Chief Economist, who indicated that this analysis had been appropriately prepared. Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected an outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The OCFO Strategic Plan has been completed. We developed a mission statement and established goals with input from our customers and partners. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. We did not identify conflicting goals for any of our program efforts. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. We have been reviewing our processes and procedures to determine what must be done and what can be eliminated to meet the increasing demands for services and accountability, as a result of GPRA, the CFO Act, and other legislation. We assume that we will receive the additional resources requested for fiscal year 1998. Thereafter, we assume that we will receive increases for inflation only. However, if these assumptions are incorrect, we will make adjustments in the plan. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. We require Annual performance plans to show relationship of annual goals to longer-term goals. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. We are proceeding to develop annual performance plans based on our strategic plan. This plan covers activities that are financed from a direct appropriation and from the Departmental Working Capital Fund. In the case of activities financed from the direct appropriation, there is a single line budget activity in the President's Budget, therefore, there is no conflict between the budget structure, the Strategic Plan, and annual performance goals. In the case of activities from the Departmental Working Capital Fund, we have more complicated links between Strategic Plans and budget structure because the Fund finances activities in several organizations. However, we take care to ensure that we can identify the link between the Strategic plan and the budget structure to the greatest extent possible. The annual performance goals will reflect this linkage. We see no need to revise either the direct appropriation or the WCF budget structure at this time. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results--oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. For some activities only output measures are available, and the leap from output measures to outcome-oriented goals is very difficult. We are attempting to address this challenge. We will use customer satisfaction surveys for some of our services to measure timeliness and quality. Mr. Skeen. If applicable, what lessons will the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. OCFO did not have a pilot program, but we followed closely the efforts of those who did. Some were successful in setting goals and measuring success, but many discovered how difficult it is to set outcome-oriented measures. Of the agencies who participated and completed their pilot project, output measures were used in lieu of true outcome-oriented measures. The pilots were valuable as instructive examples of the difficulty many of our agencies will face. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's stakeholders and how will you incorporate their views into the strategic plans? Response. Our customers are largely internal, although we do consider the American public to be our ultimate customer. We did customer service surveys to determine how our goals should be set and what our target should be. We invited customer representatives from Departmental Administration and the program agencies to meet with us to develop the plan. Several persons attended from each group. Representatives attending from stakeholders groups included the Office of the Inspector General, Office of the General Counsel, and a non- profit consortium, the Public-Private Partnership. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. OCFO works cooperatively with all of the USDA Agencies and with other Federal agencies, largely through our Governmentwide CFO Advisory Council, to share information and provide assistance or the knowledge gained from experience. We are both givers and receivers of experiential information. We work cooperatively with all oversight and other program agencies to coordinate efforts where possible. The Governmentwide CFO Council meets regularly to share ideas about how to improve financial management and strategic planning. The Council has a GPRA subgroup working to coordinate information and share the benefit of experience, and USDA has been an active participant on that subgroup. The result of this involvement is to reduce duplication of effort in our Department and others. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary, the Senior Policy Staff, the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan to relevant Congressional Committees. Thereafter, we will look forward to meeting with Staff Members to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. We will evaluate the input of these groups before the plan is considered final. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decisionmaking to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. We have begun to ask ourselves whether particular activities are necessary or worth the staff hours to complete. We have begun to implement statistical sampling in our oversight procedures, and we have begun making recommendations to our customers where they can reduce costs and still provide adequate results. For instance, we approached the Office of Inspector General--OIG--with the idea that this year we could better use the time usually spent on agency audits to work on improving our reporting system deficiencies. OIG agreed, and we are proceeding to correct deficiencies we otherwise could not have addressed. We believe we are operating smarter. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. We are using annual plans to set goals for accomplishment in each Division of our agency and measuring achievement at year's end. Goals are negotiated and managers are held accountable through the performance management process for reaching their goals. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. We are using Results Act performance goals and information to allow us to better monitor and allocate our time and resources where needed, and make progress toward achieving long-term goals. Supplemental Nutrition Program for Women, Infants, and Children Ms. DeLauro. I would like to ask the Chief Financial Officer, Ted David, about the financing mechanism for a specific program. One of the important topics before the subcommittee this year is the Supplemental Nutrition Program for Women, Infants, and Children, or WIC. The administration has requested supplemental funding for the WIC program for fiscal year 1997, even though some funds were carried over from fiscal year 1996 and some funds are expected to be carried over from fiscal year 1997. Why is there a substantial amount of carry-over money in WIC? Is that an indication of management problems? Response. It is not consistent with sound management practices to operate WIC in such a way that no funds carry forward from one year to the next. To ensure that no overspending occurs, States must be cautious and expend slightly less than 100 percent of their funding allocation. States do not know exactly how much they have expended until after the fiscal year ends. Many of the WIC vouchers issued to WIC participants in the final months of the fiscal year do not come back through the State's financial system until the fiscal year is over. There are further uncertainties added due to the lagtime for receipt of infant formula rebates, which by themselves, average about $100 million per month. States have done a great job in getting contracts for rebates, with one ``expense'' being additional uncertainty in their cash flow. Ms. DeLauro. How low do you think carry-over funding can be reduced? Response. It may be possible that the total unspent recoverable amount might be reduced to approximately 2.5 percent of the total grant. This amount would equal about $100 million--the level reflected in the President's Budget. Office of Communications public affairs activities Mr. Skeen. Update the table that appears on page 535, 536, and 537 of last year's hearing record showing, by agency, the staff levels and dollars devoted to public affairs activities to include fiscal year 1997 actuals and fiscal year 1998 estimates. [The information follows:] [Pages 654 - 656--The official Committee record contains additional material here.] resources and staff levels Mr. Skeen. Provide an update on the description, resources, and staff levels that appear on page 538 of last year's hearing record. [The information follows:] Director's Office: Provides information and networking as an internal support unit to all of USDA Communications. Also in the Director's Office is the Administration Unit which services the personnel and budget needs of OC, the Press Secretary and Staff and the speech writing unit. Staff: 25. Budget: $3,450,283. Public and Media Outreach Center: Performs news, planning, placement and public liaison duties for the Office of Communications. Staff: 14. Budget: $920,819. Video, Teleconference & Radio Center: Provides video productions, live video conferences, audio conferences, and 24-hour availability service of seven to then news items on USDA's radio news line. Also provides through the USDA television news service, news actualities and new feature stories covering Department policies and programs. Staff: 10. Budget: $800,471. Design Center: Provides centralized design, leadership and creative services establishing and monitoring the visual standards of USDA. Staff: 8. Budget: $415,749. Photography Center: Maintains an extensive centralized USDA Photo Library of captioned black and white prints and color slides. Provides photographic services. Staff: 11. Budget: $571,092. Printing Management Center: Provides centralized printing to the Department and policy guidance to the many field operations. The Printing Management Center is the central printing authority, and therefore, is the liaison with the Government Printing Office, and the Joint Committee on Printing. Staff: 8. Budget: $483,054. Coordination & Review: Provides a desk system of vertical coordination within the Under or Assistant Secretary's respective program mission areas. Horizontal coordination with the other coordinators and other units within OC which enables them to coordinate news and other printed and electronic information products of the Department for editorial content, design and quality. Staff: 19. Budget: $1,496,532. communications coordinators Mr. Skeen. Six Communications Coordinators were established in fiscal year 1995 to assist each Under and Assistant Secretary areas. Provide some specific examples of the work each one has done. Response. The Communications Coordinators, representing USDA's seven mission areas, Departmental Administration and other staff offices, work together as a team to coordinate communications on cross- cutting issues or major initiatives of the Department. Communications efforts involve various forms of information for access through the Internet and its world wide web, outreach to various USDA constituent groups, availability at various meetings of organizations and responding to requests for information from the public. A major effort was undertaken by the six Communications Coordinators to coordinate the USDA-wide, multi-agency effort in communicating information to farmers, ranchers, and others about implementation of the 1996 Federal Agriculture Improvement Act. Other examples of USDA activities or events for which they coordinated public communications last fiscal year included: preparations for the 1996 World Food Summit; drought relief for farmers and ranchers, and emergency food and other disaster relief activities; the annual agricultural economic outlook forum; agribusiness concentration and its affect on producers' markets and prices; Water 2000 projects in about 35 states; improvement in nutritional value of foods purchased for schools by USDA; food stamp anti-fraud initiatives; integrated pest management symposium; various environmental events and initiatives; science-based food safety initiatives, such as Hazard Analysis and Critical Control Points and pathogen reduction initiative; fresh vs. frozen poultry issues; food safety regulatory reform initiative; release of updated dietary guidelines for Americans; National School Lunch Program anniversary; expanding farmers' markets; rural development Government-industry initiatives; National Homeownership Summit; National Bacillus Thuringiensis Form; energy-related research initiatives; U.S.-Canadian Joint Commission on Grain; crop insurance reform and other risk management activities; and first memorandum of agreement between USDA and a conservation district. In addition, the coordinators took on leadership for improving internal communications with USDA employees. They were actively involved in communication efforts dealing with the reorganization and down-sizing of the Department of Agriculture, including efforts in consolidating field offices into USDA service centers. press releases issued Mr. Skeen. Please update the table that appears on page 540 of last year's hearing record showing the number of press releases issued by your office to include fiscal year 1997. [The information follows:] Number of News Releases issued by the Office of Communications: Calendar Years 1987-1997 1987.............................................................. 1,616 1988.............................................................. 1,720 1989.............................................................. 1,688 1990.............................................................. 1,693 1991.............................................................. 1,442 1992.............................................................. 1,366 1993.............................................................. 1,068 1994.............................................................. 983 1995.............................................................. 880 1996.............................................................. 700 1997.............................................................. 500 The number of news releases issued by the Office of Communications has declined. More agency-specific or regional news releases are issued by the individual program agencies, and are not issued through the Office of Communications. Most of the agency news releases are accessible via the agency Internet web sites, and linked to the USDA Internet home page administered by the Office of Communications. Communications coordinators review and clear any news releases when dealing with significant issues. media services Mr. Skeen. Were any new media services provided in fiscal year 1996? Were any previous services deleted? Response. In fiscal year 1996, we established the Spanish Media Service. This service includes radio, press services, and the Secretary's Column to Spanish newspapers. No previous services were deleted. reimbursements from other usda agencies Mr. Skeen. Update the table that appears on page 541 of last year's hearing record showing reimbursements from other agencies to include fiscal year 1996 actuals. [The information follows:] [Page 659--The official Committee record contains additional material here.] usda visitor center Mr. Skeen. What was the number of visitors to the USDA Visitors Center in fiscal year 1996? Response. Approximately 11,618 people visited the Visitors Center in fiscal year 1996. object class for director of national services Mr. Skeen. Provide an object class and permanent positions by grade and staff-years table for the Director of National Services for fiscal years 1996, 1997, and 1998. Response. I will provide that information for fiscal year 1996. We do not have a National Service program in fiscal year 1997 and will not have one in fiscal year 1998. [Fiscal year 1996] ------------------------------------------------------------------------ Staff-year and grade Object class Amount ------------------------------------------------------------------------ 1 ES-01.......................... 1100 $99,875 1200 19,975 1 GS-15.......................... 1100 85,217 1200 11,078 1 GS-13.......................... 1100 56,050 1200 16,815 ------------------------------------- Total (3 years)............. ................. 289,010 ------------------------------------------------------------------------ funding for director of national services Mr. Skeen. Where do funds come from to support this office? Response. The Office of Communications received reimbursements totaling $215,578 from other USDA agencies. The remaining $73,432 was paid out of OC funds. national service program Mr. Skeen. Update the table that appears on page 543 of last year's hearing record showing a breakout, by agency, of how much is spent in support of the National Service program to include fiscal years 1997 and 1998. Response. In fiscal year 1997, USDA did not begin any new AmeriCorps Activities. USDA is no longer running any AmeriCorps activities, and will not run any in fiscal year 1998. No fiscal year 1997 funds have been spent on AmeriCorps Activities and no funds will be spent in fiscal year 1998. conversion of photographic library Mr. Skeen. When do you expect to complete the conversion of the entire working collection to photo CD? Response. We plan to have a fully functionable digital photo library containing 50,000 images on Kodak Photo CD by fiscal year 2000. As of October 1, 1996, approximately 20,000 images have been converted. computer matching and privacy act of 1988 Mr. Skeen. Under the Computer Matching and Privacy Act of 1988, USDA has entered into a number of matching agreements to identify employees who may owe the Federal government money. Two of these agreements, one with the Postal Service and one with the Department of Defense, are salary offset initiatives. Last year the Committee was told that collections through September 1995 were $1,958,505 and costs under the agreements were $516,750. Please update these figures for us. Response. Through September 30, 1996, collections under the two agreements totaled $2,317,603 and costs under the agreements total $597,796. salary offset initiative Mr. Skeen. What is the status of the Food and Consumer Service's salary-offset initiative? Response. Food and Consumer Service--FCS--referred all Federal employees identified in its first match for which voluntary payments were not received to the Federal employing agencies. As of September 30, 1996, FCS has collected $120,000 from Federal employing agencies and voluntary payments. FCS received some payments from Federal employees who did not respond to the Food Stamp State Agency, but who did not want their employing agency to offset their salaries. FCS collected most of the debts referred to the Postal Service for salary offset. credit alert interactive voice response system Mr. Skeen. At this time last year, the final rule to allow USDA access to the Credit Alert Interactive Voice Response System with the Department of Housing and Urban Development was in the revision/ clearance process. What is the status of this rule? Response. The final rule is in the revision/clearance stage, and expects to be published by August 9, 1997. office of communications' budget request Mr. Skeen. Provide a detailed breakout of the Office of Communications' budget request to the Secretary, the Secretary's request to OMB, and the OMB allowance. [The information follows:] OBJECT CLASS [Dollars in thousands] ------------------------------------------------------------------------ Request Secretary's Description to request to OMB secretary OMB allowance ------------------------------------------------------------------------ Fiscal year 1997 current estimate.... $8,138 $8,138 $8,138 Increases: Restoration of Congressional cuts 179 0 0 Pay costs........................ 211 106 106 Salary adjustments............... 84 0 0 Inflation........................ 31 0 0 Program increases................ 676 254 35 ---------------------------------- Total.......................... 9,319 8,498 8,279 ------------------------------------------------------------------------ object class 1100 Mr. Skeen. Why does object class 11, total personnel compensation, increase by $454,000 from fiscal year 1996 to fiscal year 1997 when the number of staff-years remains the same? Response. Object class 11, total personnel compensation, increased by $454,000 because of vacant positions being filled late in the fiscal year. Salary costs for the Director of National Service and staff were reimbursed in fiscal year 1996, but are part of the appropriation in fiscal year 1997. object class 2400, printing and reproduction Mr. Skeen. Provide a sub-object class breakout for object class 24, printing and reproduction, for fiscal years 1996, 1997, and 1998. [The information follows:] SUB-OBJECT CLASS [Dollars in thousands] ------------------------------------------------------------------------ Object class Description 1996 1997 1998 ------------------------------------------------------------------------ 2410........................ Printing, $64 $74 $80 binding, etc. 2420........................ Reproduction, 10 20 30 duplicating processes. 2421........................ Photo service 5 10 10 (AD-271). 2422........................ Copier service. 48 56 60 ------------------------------------------- Total................. ............... 127 160 180 ------------------------------------------------------------------------ increase in printing and reproduction Mr. Skeen. Total printing orders decreased from 9,868 in fiscal year 1995 to 8,594 in fiscal year 1996. Why do you anticipate printing and reproduction to increase in both fiscal years 1997 and 1998? Response. The printing costs for fiscal year 1996 were low because the USDA News printing costs were reimbursed from other agencies. The increase between fiscal year 1997 and 1998 is for the Outreach to Underserved Groups. The increase would be used to conduct an initial survey to identify the level of knowledge of USDA services and the best information channels to reach underserved groups. A staff member would then coordinate information outreach from several mission areas and package them into information programs and campaigns for each of the target audiences. outreach to underserved groups Mr. Skeen. You are requesting an increase of $35,000 for outreach to underserved groups. The Office of Communications or a predecessor has been around since 1913. One would assume that, over an 80 year timespan, you would have developed well established contacts and roots with certain groups and populations and would be able to shift resources to develop contacts and serve other groups and populations. Please tell the Committee why this hasn't been done. Response. Over the years, the Office of Communications has developed well established contacts with certain groups and populations and has been able to shift resources to develop contacts and serve other groups and populations. However, in fiscal year 1996, we established a Spanish Media Service that requires use of equipment that we previously had not used. We have set one of our GPRA goals as ``Conducting three out of town briefings,'' in order to reach out to small producers and underprivileged constituents. These individuals do not have the resources to come to Washington, D.C., and we have not previously been able to reach them via briefings. We would like to talk our briefings out to them. cost to produce agriculture fact book Mr. Skeen. What was the cost to produce the Agriculture Fact Book? How many copies were printed and distributed? What is the cost to purchase this book? Submit a copy for the record. Response. The Agriculture Fact Book was produced at a cost of $12,757.38. Of the 9,369 copies printed, 8,500 were for USDA and 869 were for the Government Printing Office (GPO) Superintendent of Documents. GPO sells the book for $9.50 per copy. We will provide a copy of the fact book. [Clerks note.--The Agriculture Fact Book is too lengthy to print and a copy has been retained in the Committee files.] The Government Performance and Results Act [GPRA] Mr. Skeen. What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The office of Communications completed its draft strategic plan and submitted it to USDA's Chief Financial Officer. The plan includes OC's mission and appropriate goals for the 5-year period. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. No conflicting goals were identified, therefore, no actions are needed to address such conflicts. Mr. Skeen. As you develop your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. Available resources were projected as constant, i.e. no budget increases are expected, no staff increases are expected. Goals and objectives are designed so that any new initiative will replace activities no longer needed due to decreased value to customers. Mr. Skeen. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? Response. We are in the process of establishing linkages, which will be completed when the annual performance plans are due. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. OC has only one program activity in the budget. Therefore, we do not anticipate the need to change or modify our program activity structure. Mr. Skeen. What progress has your agency made--and what challenges is it experiencing--defining results--oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. OC's 5-Year strategic plan will contain results-oriented performance measures. This is difficult for a communications organization which supports the Department and its program objectives. It would be easier to measure output, the more traditional performance measure for communications. To really measure communications results, surveys or selected publics would need to be conducted to see if the messages were received and understood. Mr. Skeen. What lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. We have learned many lessons from the Results Act pilot phase. One lesson is that pilot plans should be limited to one-year increments; two, that developing a 5-year long-term plan takes the management team working together to complete such a strategic plan and third; that participation during the pilot phase was too limited and needed to include managers. Mr. Skeen. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into your strategic plan? Response. News media, constituent groups, and the general public are primary stakeholders, as well as USDA agencies. Regular contact with the stakeholders and occasional formal surveys are used in determining their views and needs, and are incorporated into OC's strategic plan. Mr. Skeen. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. Since OC's mission is to serve the Department of Agriculture in a support role, coordinating its strategic plan with other federal agencies is not necessary. Efforts will be made to ensure that efforts within other programs at the Department of Agriculture do not duplicate OC's efforts, and that OC's efforts compliment efforts elsewhere in the Department of Agriculture. This will be accomplished by regular exchanges of communications' plans, overseen by OC communications coordinators. Also, OC has responsibility to provide coordination and support to other agencies communications officers. Mr. Skeen. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary, the Senior Policy Staff, the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members of Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. What changes in program policy, organization structure, program content, and work process has the agency made to become more results oriented? Response. OC intends to increase knowledge of the general public about the Department's policies, programs and initiatives through integration of communications management with Departmental policy and program management. Another goal is to improve access to and dissemination of information to news media, constituent groups and individual customers using the latest and most efficient communications technology, methods and standards. OC intends to improve communications with the Department's employees by leading and coordinating internal communications. OC intends to develop an efficient and effective, results-oriented, public affairs community within the Department that provides high-quality customer service while fostering equal opportunity for employment in OC and agency communications staffs and providing equal opportunity for contracting information products and services. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. Manager's annual performance plans will be related directly to annual performance plans, which will carry out the strategic plan. Managers will be responsible for carrying out segments of the annual performance plan through their respective staffs. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. Performance plans of OC employees will reflect goals and objectives of OC's performance plans in carrying out the strategic plan. Through regular periodic reviews and evaluation of employees' performance, managers will focus on progress in accomplishing annual performance plans which relate to the goals and objectives of the 5- year strategic plan. Expected results is that both managers and employees will spend work time to achieve described objectives. Office of the General Counsel regulations Mr. Skeen. In last year's testimony, you indicated that action had been taken on 42 percent of the regulations identified by the Department for elimination or revision. Please update the Committee on progress in eliminating or revising USDA regulations. Response. As of March 31, 1997, USDA has acted on 63 percent of the regulations we identified for elimination or reinvention; about 7,400 pages in the Code of Federal Regulations of our total regulatory reform commitment of 11,700 pages. The Department has acted on nearly 4,200 pages of the 8,100 pages that we proposed to reinvent (over 51% of our commitment), and has virtually completed its commitment to eliminate 3,200 pages of regulations. civil rights action team report Mr. Skeen. The Secretary's Civil Rights Action Team Report stated that there was a perception that the Office of the General Counsel is hostile to civil rights. Information from the listening sessions indicated that ``OGC's legal positions on civil rights issues are perceived as insensitive at the least and racist at worst.'' How is OGC addressing this concern? Response. Well, it is unfortunate that such perceptions exist, but I really do not feel that they are founded in fact. Nevertheless, it is up to us to try to remove these perceptions, wherever they come from, as best we can as we do our work. That work sometimes involves defending the Department in cases which include claims of discrimination filed in administrative tribunals and in Federal court. Our standard is to always, always, do our duties fairly and impartially in every civil rights issue that we receive. In point of fact, despite the fact that there are approximately 530 formal program discrimination complaints and 1,450 formal employment discrimination complaints on file with the Department, OGC consultation has been sought only in approximately 10 program discrimination complaints and 31 employment discrimination complaints over the last two years. We have, and will continue to work with the civil rights staff of the Department to craft fair and prompt settlements, within the law, where discrimination has occurred. Further, I have initiated a number of specific steps to address the concerns raised by the Civil Rights Action Team. First, the Secretary has approved our proposal to establish a separate Civil Rights Division within our Office, and we have taken the initial steps to do that and to select an Associate General Counsel with specialized expertise in civil rights law. I will be working with the new Associate General Counsel for Civil Rights to insure OGC's strong support for the Department's civil rights program is evident. Second, I have stressed again to all members of the OGC staff that removing these perceptions requires proactive work on our part. It is not enough to be fair in application of the law; we must act so that everyone can see that we treat USDA's employees and customers with fairness and with a view towards assuring that their civil rights are our highest priority. Finally, I have given my personal assurance to the Secretary that our attorneys have and will continue to conduct themselves effectively and honorably as they carry out our many and diverse responsibilities under the Constitution and the civil rights laws, as well as the statutes authorizing the programs which this Department administers. Mr. Skeen. Another concern the Civil Rights Action Team had was that the OGC attorneys who practice civil rights are not required to have specialized experience or education in civil rights. How will you address this issue? Response. The three most senior career attorneys presently responsible for the practice of civil rights law within OGC average 30 years of Federal service. While none of those attorneys has spent his entire career practicing in the civil rights area, and they do not presently practice full-time in this area, each has very substantial experience in interpretation and application of Federal civil rights laws. The two attorneys next in seniority who presently practice in this area within OGC have 26 and 10 years' service, respectively, and these two attorneys presently dedicate a majority of their time to civil rights. Further, there are five additional attorneys in our General Law Division who spend a portion of their time handling matters which arise under the civil rights laws, still other attorneys in that Division who participated in the recent analysis of USDA's program to determine compliance with the Supreme Court's Adarand decision and attorneys in many of our 18 field offices who also provide legal services under the civil rights laws on a part-time basis. To suggest that we have inadequate expertise with respect to the civil rights laws, and how those laws impact USDA programs and activities, is simply incorrect. Nonetheless, as I described in the answer to the above question, we will establish a new Civil Rights Division and concentrate and augment our civil rights expertise in that Division. Mr. Skeen. The OGC lawyers were also seen, in the Civil Rights Action Team Report, as lacking an understanding of the mission areas they serve. What is your plan to improve the understanding of agency programs by OGC lawyers? Response. The reference does appear in the Report that OGC attorneys should have ``better understanding of the mission areas they serve.'' The Report contained no further explanation of that view, and I am at a loss to understand it. The depth of expertise of our attorneys regarding the programs whose mission areas they serve, both in Washington, D.C. and in our OGC field offices, is truly impressive. Our attorneys have thorough knowledge both of the statutes and regulations under which USDA programs are conducted, and have had years of experience with these programs. They are routinely involved in writing or reviewing agency regulations, implementing such programs, interpreting the statutory provisions, and assisting in defending challenges to such programs which arise in the context of litigation. We will continue to strive to develop our expertise with respect to the laws authorizing USDA's programs and activities, as well as the civil rights laws which likewise apply to all of our undertakings. Mr. Skeen. Finally, the Secretary's Civil Rights Action Team Report also indicated that OGC's EEO performance was poor because only 5.4 percent of the lawyers were minorities, there are no minority senior executives at OGC, and there were no minority attorneys working on civil rights. How will OGC address this issue? Response. The Civil Rights Action Team Report stated that ``another reason for the perception that OGC is insensitive when it comes to civil rights is the lack of diversity among OGC's attorneys''. Certainly, since I have been here, the Office of the General Counsel has always maintained employment and promotion policies that prohibit unlawful discrimination. Of course, we have done mighty little hiring over this time, as our numbers have continued to be reduced, from about 420 when I came to about 360 now. On those few recent occasions that we have been able to hire, we have been proactive to assure a broad range of applicants, including minority attorneys, were included in the pool of applicants. We were successful in recruiting minority employees to fill many of these positions. Continued diversification of our attorney staff is a goal to which we are committed. user fee programs Mr. Skeen. Please update the table on pages 582 and 583 of last year's hearing record that lists all the user fee programs for which you receive a reimbursement and the amount of the reimbursement to include fiscal year 1996 actuals and estimates for fiscal year 1997. [The information follows:] USER FEE PROGRAMS, FISCAL YEAR 1996 ACTUALS AND FISCAL YEAR 1997 ESTIMATES ------------------------------------------------------------------------ Fiscal year 1996 Fiscal year 1997 Program actuals estimates ------------------------------------------------------------------------ Perishable Agricultural Commodities Act.................. $618,530 $655,800 Agricultural Marketing Act........ 4,230 4,700 Tobacco Inspection Act............ 3,054 5,400 Cotton Standards Act.............. 1,353 1,300 Plant Variety Protection Act...... 6,528 6,600 Voluntary Meat Services........... 2,447 1,200 Research and Consumer Information Act.............................. 63,714 65,800 Animal and Plant Health Inspection Service.......................... 189,959 195,200 United States Warehouse Act....... 11,742 10,400 United States Grain Standards Act. 20,072 14,000 Food Safety and Inspection Service 12,588 24,500 ------------------------------------- Total....................... 934,217 984,900 ------------------------------------------------------------------------ user fee hours Mr. Skeen. Update the table that appears on page 585 of last year's hearing showing the attorney-hours spent on each user fee account to include fiscal year 1996 actuals and estimates for 1997. [The information follows:] OFFICE OF THE GENERAL COUNSEL USER FEE HOURS ---------------------------------------------------------------------------------------------------------------- Fiscal years ---------------------------------------------------------------- Agency Estimated 1993 1994 1995 1996 1997 ---------------------------------------------------------------------------------------------------------------- AMS............................................ 12,304 12,528 14,560 10,440 12,528 APHIS.......................................... 3,998 6,264 4,160 4,176 4,176 GIPSA.......................................... 553 1,044 1,040 418 209 FSA............................................ 575 1,044 1,040 209 209 FSIS........................................... 0 1,044 416 209 418 ---------------------------------------------------------------- Total.................................... 17,430 21,924 21,216 15,452 17,540 ---------------------------------------------------------------------------------------------------------------- staff years Mr. Skeen. Please update the table that appeared on page 583 of last year's hearing record, showing staff years by appropriation and reimbursements, to include fiscal year 1996 actuals and fiscal year 1997 estimates. [The information follows:] OGC STAFF YEARS BY APPROPRIATION AND REIMBURSEMENTS, FISCAL YEARS 1993, 1994, 1995, 1996 ACTUALS AND FISCAL YEAR 1997 ESTIMATED ---------------------------------------------------------------------------------------------------------------- Fiscal Year ------------------------------------------------- 1993 1994 1995 1996 1996 ---------------------------------------------------------------------------------------------------------------- Office of the General Counsel................................. 361 367 335 328 329 Allocation from Hazard Waste Management....................... 7 8 8 7 11 Staff under other USDA appropriations: AMS....................................................... 1 ........ ........ ........ ........ RHS (Formerly FmHA)....................................... 11 ........ ........ ........ ........ FS........................................................ 14 16 15 10 5 AMS-User Fees............................................. 6 6 7 5 6 APHIS-User Fees........................................... 2 3 2 2 2 GIPSA-User Fees........................................... .5 .5 .5 .2 .1 FSA-User Fees............................................. .5 .5 .5 .1 .1 FSIS-User Fees............................................ ........ .5 .2 .1 .2 ------------------------------------------------- Total, Other USDA Appropriations........................ 35 27 25 18 13 ================================================= Total, Office of the General Counsel.................... 403 402 368 353 353 ---------------------------------------------------------------------------------------------------------------- united states-canada joint commission Mr. Skeen. Please report to the Committee on the implementation of the recommendations of the U.S.-Canada Joint Commission on Grains. Response. The Office of the General Counsel does not have any current active involvement concerning the implementation of the recommendations of the U.S.-Canada Joint Commission on Grains. The Foreign Agricultural Service has been the lead agency in this regard. We understand that some progress has been made in the grading and regulatory areas, but that there has been little movement on implementing the policy recommendations which cover institutions and programs such as the Canadian Wheat Board and the Export Enhancement Program. attorney hours by category Mr. Skeen. Please update the table that appears on page 584 of last year's hearing report, showing attorney-hours worked by category, to include fiscal year 1996 actuals. [The information follows:] [Page 668--The official Committee record contains additional material here.] attorney hours by agency Mr. Skeen. Please update the table on page 585 of last year's hearing report showing a breakout by agency of the attorney-hours worked for fiscal year 1996. [The information follows:] ATTORNEY HOURS FOR FISCAL YEAR 1996 [By Agency] ------------------------------------------------------------------------ Hours Percent ------------------------------------------------------------------------ Agricultural Marketing Service................ 25,205 6 Animal and Plant Health Inspection Service.... 23,954 6 Commodity Credit Corporation.................. 3,081 1 Farm Service Agency........................... 44,883 11 Food and Consumer Service..................... 18,488 5 Food Safety and Inspection Service............ 11,459 3 Foreign Agricultural Service.................. 5,081 1 Forest Service................................ 116,051 29 Grain Inspection, Packers and Stockyards Administration............................... 8,233 2 Natural Resources Conservation Service........ 19,841 5 Rural Business Cooperative Service............ 7,451 2 Rural Housing Service......................... 73,594 18 Rural Utilities Service....................... 15,284 4 Other (includes OGC internal management and several USDA agencies where time spent is less than 1%)................................ 31,511 7 ------------------------- Total................................... 404,116 100 ------------------------------------------------------------------------ private counsel Mr. Skeen. Last year you indicated that it was too early to determine the impact of using private counsel in the Western District of Louisiana on the workload of the Little Rock OGC Office. What is your assessment of using private counsels? What has been the affect on delinquent loan collections? Response. The experience with use of private counsel in the Western District of Louisiana has been a great success. There are seven private attorneys or law firms filing actions in Federal District Court on behalf of the Farm Service Agency (FSA). Of the 138 cases referred to these counsel, there have been 59 settlement proposals received, 26 cases paid out and closed, 10 settlement offers denied, and 21 offers still pending--several of which will be accepted. Several U.S. Marshal's sales had been scheduled, but were canceled because of the Secretary's suspension of farm foreclosure sales. The speed and efficiency of the private attorneys in collecting FSA's debts has led to more voluntary payments on the part of FSA borrowers as the word has gotten around that FSA does mean business concerning its loan collections. Mr. Skeen. Is it possible for the agencies to hire legal counsel from the private sector to represent them in cases? Response. In order for an agency to hire private counsel to conduct or defend litigation on its behalf, the agency must have specific statutory authority to do so. For example, such authority is provided to the Farm Service Agency by section 331(c) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1981(c)) and to the Rural Housing Service by section 510(d) of the Housing Act of 1949 (42 U.S.C. 1480(d)). Otherwise, only the Attorney General has the exclusive statutory authority to represent the United States and its agencies in court. See 5 U.S.C. section 516. Mr. Skeen. Are there plans to expand the use of private counsel to other districts or offices? Response. When there is a specific need, we have the authority. The question is whether U.S. Attorneys are providing adequate service. Generally they are, but I suspect that we will need additional private counsel assistance when the Secretary's suspension of foreclosures from the civil rights review is lifted. We have no specific plans at this time. attorney locations Mr. Skeen. Please update the table showing the number and locations of OGC attorneys appearing on page 586 of last year's hearing record. Response. Following is a table showing our attorneys by location as of March 31, 1997. Attorney Locations and Positions Washington, DC................................................ 133 Albuquerque, NM............................................... 2 Atlanta, GA................................................... 10 Boise, ID..................................................... 1 Chicago, IL................................................... 5 Columbus, OH.................................................. 2 Denver, CO.................................................... 13 Greenwood, MS................................................. 1 Harrisburg, PA................................................ 7 Juneau, AK.................................................... 3 Leawood, KS................................................... 8 Little Rock, AR............................................... 7 Milwaukee, WI................................................. 6 Missoula, MT.................................................. 5 Montgomery, AL................................................ 3 Ogden, UT..................................................... 3 Portland, OR.................................................. 12 Richmond, VA.................................................. 3 Sacramento, CA................................................ 1 San Francisco, CA............................................. 12 St. Paul, MN.................................................. 3 Temple, TX.................................................... 5 -------------------------------------------------------------- ____________________________________________________ Total................................................. 245 civil and criminal cases Mr. Skeen. Please update the table that appears on pages 586 and 587 of last year's hearing record, showing the number of new and pending civil and criminal cases, as well as the dollar value related to the pending cases, to include fiscal year 1996. [The information follows:] CIVIL AND CRIMINAL CASES ---------------------------------------------------------------------------------------------------------------- New cases referred Pending end of fiscal -------------------------- year ------------------------- Civil Criminal Civil Criminal ---------------------------------------------------------------------------------------------------------------- Fiscal year: 1992.................................................... 14,472 333 28,462 454 1993.................................................... 12,519 273 24,897 475 1994.................................................... 10,449 257 20,715 413 1995.................................................... 22,631 367 29,806 440 1996.................................................... 8,221 156 23,871 389 ---------------------------------------------------------------------------------------------------------------- DEBT COLLECTION ------------------------------------------------------------------------ Pending Cases Dollar amount ------------------------------------------------------------------------ September 30, 1992....................... 21,770 4,588,296,100 September 30, 1993....................... 20,379 4,319,226,106 September 30, 1994....................... 13,607 3,858,174,693 September 30, 1995....................... 13,853 4,008,728,604 September 30, 1996....................... 11,891 1,635,944,676 ------------------------------------------------------------------------ new authorities Mr. Skeen. Please provide a list of all new authorities passed in the second session of the 104th Congress, as well as a brief description of any workload increase related to these new authorities. What has been the budget and staffing impact on OGC? [The information follows:] [Pages 671 - 682--The official Committee record contains additional material here.] Mr. Skeen. Also, please provide a list of all authorities that have resulted in decreases to your workload. Include the budget and staffing impacts. [The information follows:] ------------------------------------------------------------------------ Estimated Authority Impact of attorney Dollars authority staff years ------------------------------------------------------------------------ Federal Agriculture Repealed -.05 -4,284 Improvement and Reform Act provisions of 1996 (Pub. L. 104-127). authorizing the Subcommittee on Food, Agricultural, and Forestry Research, the Joint Council on Food and Agricultural Sciences, and the Agricultural Science and Technology Review Board. Clinger-Cohen Act, Division Increased -.10 -8,568 D, Pub. L. No. 104-106. procurement of commercial items. Administrative Dispute Elimination of -.10 -8,568 Resolution Act, Pub. L. 104- General 320. Services Board of Contract Appeals. Rescissions Act of 1995 (Pub. The timber -2.50 -226,318 L. 104-19). salvage provisions of the Rescissions Act of 1995 (Pub. L. 104- 19), this law, which directed an expedited salvage sale program and the release of certain other offered timber sales, have expired. Litigation- related activity therefore has been reduced. Advice concerning implementation of other provisions involving alternative timber continues. ------------------------------------------------------------------------ law library Mr. Skeen. Please update the law library expenditures tables on page 590 of last year's hearing report to reflect 1996 actuals and fiscal year 1997 estimates. [The information follows:] law library costs Fiscal year: Total expenditures 1986...................................................... $448,655 1987...................................................... 524,103 1988...................................................... 537,826 1989...................................................... 549,451 1990...................................................... 608,280 1991...................................................... 586,983 1992...................................................... 454,518 1993...................................................... 541,416 1994...................................................... 407,885 1995...................................................... 427,083 1996...................................................... 471,977 1997 Estimate............................................. 456,612 fy 1998 budget request breakout Mr. Skeen. Please provide the Committee with a detailed breakout of your budget request to the Secretary. The Secretary's request to OMB, and the OMB allowance. [The information follows:] FISCAL YEAR 1998 BUDGET REQUEST ------------------------------------------------------------------------ Agency USDA OMB ------------------------------------------------------------------------ 1997 Base: 1997 Budget Request.......... 29,249 ........... ........... 1997 Enacted................. ........... 27,749 27,749 Changes To 1997 Base: Pay cost..................... 702 351 351 Salary Adjustments........... 473 0 0 Legal services previously funded by the Forest Service 356 356 0 Overall program trends....... 0 792 0 Predecisional legal work..... 0 824 0 Civil Rights Activities...... 0 200 200 General workload increases... 0 0 1,149 -------------------------------------- Total.................... 30,780 30,272 29,449 ------------------------------------------------------------------------ performance goals, measures and indicators Mr. Skeen. The performance goals, measures, and indicators you included in your explanatory statement raise a number of questions. First, the indicator for your annual performance goal of assuring responsiveness to the needs of all USDA agency officials is dollars. It is not clear what these dollars represent. Are they OGC funding? This makes very little sense: The greater your appropriation the better you perform. The Committee suggests that you take a serious look at GPRA and report to the Committee using meaningful performance goals, measures and indicators. If this is how you approach managing OGC, we will require that you have an outside management audit. Response. The chart to which you refer does not fully and accurately describe the performance goals and measures we have developed. Let me assure you, we have not developed a strategic plan which measures success solely on the amount of the appropriations provided to us. One of the goals of our strategic plan is to better target the limited legal resources of OGC to insure that the foremost priorities of the Department are met. Our success in meeting the priority needs of Department officials will be assessed by surveying officials of the Department in year end reviews. Another goal is to create, staff and train a new Civil Rights Division within OGC. We have formulated other performance objectives that relate to our goal of increasing the efficiency of the Office of the General Counsel. These performance objectives concern improving computer and communciation resources and developing our workforce. We will assess our performance in meeting these objectives through performance measures tied to the objectives. Therefore, contrary to the impression you have formed from the material in our budget request, our performance indicators are not directly related to the amount provided through our appropriations, but rather, how well we manage with the appropriation we receive. staffing goal Mr. Skeen. You are asking for $1,149,000 increase in your budget to ``maintain staff and provide predecisional legal work.'' In your explanation you state, ``. . . this increase should not be viewed as an increase to hire additional staff, but as an increase to maintain current staff and provide legal support for USDA programs.'' However, the current staffing level is 353 hence the increase in the 1998 budget request does indeed increase staffing from 353 to 370. In light of your request to increase staffing, how do you plan to meet the OGC staffing goal of 333 staff years by the year 2002. Response. A bit of history is necessary to answer the question. In fiscal year 1993, OGC had a staffing level of 420. Lean budgets in fiscal years 1994 and 1995 forced us to dramatically reduce staff and carry out the reorganization of the office. At the end of fiscal year 1996 and after completion of the reorganization, our staffing was 353, which then became our staff year ceiling for fiscal year 1997. However, the staff year ceiling of 353 is simply too low to adequately respond to the demands for legal services that we are receiving from the agencies of the Department and we plan to exceed that level in fiscal year 1997. We propose to maintain a staffing level of 370 through fiscal year 1998, which is our projected number of staff for the end of fiscal year 1997. With a staffing level of 370, we can provide an adequate level of legal services, in response to demands by our clients, if we plan carefully. We will be operating at a staff year level considerably lower than that of our fiscal year 1993 staff year level of 420. The other question is how we will plan to get to the staff year level of 333 by 2002. I would say two things about that. First, that's a projected number based upon outyear funding assumptions; the real question is, how much legal service this Department must have. That's what counts. Secondly, I'm optimistic that further improvement in technology and greater experience will allow more services to be delivered per attorney. I think that we are putting out just about the same level--and quality--of work now that we put up when I came on four years ago. The Secretary will review these outyear numbers as part of the FY 1999 budget process. reduction in legal services Mr. Skeen. What will not get done if the funds for additional staff are not appropriated? Response. If the requested funding is not provided, thus forcing us to reduce staff, our best efforts to improve the responsiveness of the office will be thwarted. This in turn may cause OGC to be less timely in responding to some policy officials. However, the requirements of the Secretary's office would take precedence over all others. Inadequate budgets will also prevent OGC from improving the overall efficiency of the office because it will prevent us from making expenditures for technological improvements. legal workload Mr. Skeen. What are the options for managing the USDA legal workload other than increasing the appropriation? Response. I see no viable options for the successful and timely management of the entirety of the legal workload of the USDA in the absence of an increase of OGC's fiscal year 1998 appropriation, in order to allow the current staff year level to be maintained. While the Office of the General Counsel has made significant enhancements to its ADP environment over the past couple of years, permitting greater efficiencies, and increasing the effectiveness of its staff, the complexity and volume of the legal demands of the department dictate that a realistic staffing level be maintained to facilitate this critical effort. Without the requested increases to the OGC appropriation, which will permit maintaining staff at or about the fiscal year 1997 end strength level, OGC will not be in a position to effectively manage the entirety of the Department's legal workoad, and may be compelled to reduce legal services in some areas. examples of recent progress Mr. Skeen. For each of the examples of recent progress, provide an estimate of the cost and lawyer staff years associated with providing legal assistance, the number of cases involved, and the outcome of the OGC assistance. [The information follows:] [Pages 686 - 696--The official Committee record contains additional material here.] cases before eeo commission Mr. Skeen. Provide a table that shows the number of cases OGC represented before the EEO Commission for fiscal years 1994, 1995, and 1996. [The information follows:] ------------------------------------------------------------------------ OGC cases Fiscal year before EEO Commission ------------------------------------------------------------------------ 1994.................................................... 47 1995.................................................... 43 1996.................................................... 34 ------------------------------------------------------------------------ ams user fee staff year Mr. Skeen. What is the reason for an additional staff year this year for AMS user fee work? Response. The additional staff year increase in fiscal year 1997 is an estimate, based on the projected legal services to be provided for AMS user fee work. staffing reductions Mr. Skeen. What areas of work are not being adequately met because of staffing reductions? Response. If OGC receives its requested increase of $1,149,000 to continue to fund the on-board staff at the end of fiscal year 1997, OGC anticipates no requirement to conduct any staffing reductions. Workload will continue to be prioritized to accommodate both the Secretary's and the client agency priorities. Government Performance and Results Act (GPRA) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 20, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. The Office of the General Counsel has developed a draft strategic plan which conforms to the requirements of the GPRA. That plan includes a definition of the agency's mission and includes appropriate goals by which to gauge the agency's performance. In the course of development of the draft strategic plan, we did not identify any conflicting goals. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. The strategic plan developed for the Office of the General Counsel is based on the assumption that adequate resources will be available to carry out the agency's mission. However, agency priorities, as reflected in its mission, may be affected by future resource levels. In view of the fact that the Office of the General Counsel has already carried out a significant downsizing program, which included a reduction in staff of 9.5% and contraction of the agency field organization, it is clear that further reductions will threaten the ability of the agency to provide adequate legal services to USDA officials. The assumptions underlying the OGC strategic plan are based on a recognition that staffing levels within OGC are unlikely to change significantly over the next five years. Therefore, the focus of the strategic plan will be to ensure that the Office of the General Counsel orders its work in a manner which properly reflects the priorities set for the Department by the Secretary of Agriculture, the Under and Assistant Secretaries and Agency Heads. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming years. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Overall, what progress has your agency made--and what challenges is it experiencing--defining results- oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. The Office of the General Counsel is working to establish the link between the strategic plan and the goals which will be contained in the annual performance plans. The performance goals articulated in the annual performance plan will be tied directly to the goals stated in our strategic plan. Those goals center around making the Office of the General Counsel more responsive by ensuring that demands for legal services are prioritized in a manner consistent with the priorities of the Secretary. In order to respond effectively to those priorities, we have also established a goal to improve computer technology and communication tools in order to improve the productivity of employees of the agency. Because the budget for the Office of the General Counsel is requested via a single line item in the President's budget, we do not anticipate any need to change or modify the activity structure to be consistent with our goals. We are making good progress in defining results-oriented performance measures. The accomplishment of our goals will be measured through the use of surveys to determine the extent to which we provided legal services to USDA officials consistent with the priorities set by those officials. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. The Office of the General Counsel did not participate in the pilot phase of GPRA implementation. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. Primarily, the Office of the General Counsel provides legal advice to the Secretary and other USDA officials who are responsible for program administration. Our strategic plan identifies the Secretary, Subcabinet and agency heads as our primary stakeholders. Consultations took place with many of these officials during the formulation of the strategic plan. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. Another federal agency with whom the Office of the General Counsel works on a regular basis is the United States Department of Justice, which includes the United States Attorneys. Information developed during execution of the actions necessitated by our strategic plan will be communicated to the Department of Justice, as appropriate. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary or Agency Head, the Senior Policy Staff, the Secretary and OMB. Upon completion of the review, the Department plans to provide copies of the Strategic Plan (including an overall Departmentwide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies) to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members of Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision- making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? How are managers held accountable for implementing the Result Act and improving performance? How is the agency using Results Act performance goals and information to drive daily operations? Response. While we have not fully implemented the performance goals anticipated in the Strategic Plan, it is clear that the process of more carefully prioritizing demands for legal services is clearly required by the current budget environment. It is a fact of life in the current budget climate that increases in staffing to meet constant or increasing work loads are unlikely to be forthcoming. Therefore, the Office of the General Counsel must carefully plan how legal resources will be deployed and agency officials must be educated to understand that legal resources are finite. The process envisioned by our strategic plan will force both managers in OGC and throughout USDA to include in strategic planning processes, planning for how legal resources will be used. In other words, USDA officials, within and outside of OGC, share a common set of priorities, OGC resources can be used more effectively to meet program strategic goals. Within OGC, the information gleaned through the consultation process will enable managers to better provide an understanding of priorities to agency attorneys. This in turn, will regularize the work flow and lessen to some extent, the crisis mode of handling agency legal work. Crises will still occur, because unforeseen circumstances will develop which require quick response by the Office of the General Counsel. However, the strategic planning process will give managers a better sense of how to order the work of the office. Managers will be held accountable for implementing the tasks through year end surveys conducted with agency officials which will reveal whether managers have done a good job in striving to meet the priority needs of agency officials. The results of these surveys will be discussed during managers' yearly performance evaluations. Informal performance goals similar to those anticipated to be developed in the annual performance plan are being used currently to ensure close cooperation between agency officials and OGC managers to ensure close coordination between the two. The information exchange and priority setting activities envisioned by our strategic plan will require managers to consult more frequently with agency officials and document the results of those consultations. The results of the surveys will assist the General Counsel in determining our success in assisting USDA officials in meeting their strategic program goals. National Appeals Division final rules and regulations Mr. Skeen. At the time of last year's budget hearings, comments on final rules and regulations to implement the appeals process were due by March 23, 1996. When did they become final? Response. The final rules are under review within the Department. cost and average length of time for an appeal Mr. Skeen. Update the table that appears on page 640 of last year's hearing record showing the cost and average length of time for an appeal to include fiscal year 1996. [The information follows;] COST AND AVERAGE LENGTH OF TIME FOR AN APPEAL FISCAL YEAR 1996 ---------------------------------------------------------------------------------------------------------------- Number of decisions Average number Costs Per case basis issued of days allocated ---------------------------------------------------------------------------------------------------------------- Hearing officer determinations.................. 3,436 74 $8,910,700 $2,611 Appellant requested director review determinations................................. 926 24 2,288,681 2,468 Agency requested director review determinations. 213 11 584,683 2,468 Total....................................... 4,575 .............. 11,784,064 2,575 ---------------------------------------------------------------------------------------------------------------- active appeals Mr. Skeen. How many active appeals do you currently have ongoing? Response. As of April 16, 1997, there were 781 hearings outstanding and 134 Director reviews pending. statutory time limit Mr. Skeen. There is a statutory time limit of 45 days to hold a hearing and 30 days to issue a decision after the hearing. Are you meeting these deadlines for all appeals? If not, what is the backlog and why do you have a backlog? Response. We are meeting the deadlines except in cases where a waiver is sought by the appellant or an extension is requested and granted pursuant to NAD's interim final rules. fiscal year 1996 extensions Mr. Skeen. How many extensions were requested in fiscal year 1996 and how many were granted? Response. We cannot provide this information without a manual search of the fiscal year 1996 case files. NAD's tracking system does not capture this data. 7 CFR 11.8(F) provides that the Hearing Officer will issue a notice of determination not later than 30 days after the hearing or 45 days in the case of a record review. Upon a Hearing Officer's request, the Director may establish a later deadline. 7 CFR 11.6(a)(3) provides that the Director may delegate such authority to a subordinate official of the Division. Requests for extensions are acted on by the Assistant Director in each region based upon the circumstances of each case. director appeals Mr. Skeen. Of the total decisions issued in fiscal year 1996, how many were appealed to the Director? Response. There were 1,263 Director reviews requested in fiscal year 1996. 1,006 reviews were requested by appellants and 257 requested by heads of agencies. hearing procedure handbook Mr. Skeen. The agency contracted with an administrative law consultant in fiscal year 1996 to finalize a hearing procedure handbook to ensure that uniform procedures and consistent determinations are issued by all staff. What is the status of this contract and handbook? Response. The work under this contract has been completed, and the handbook was issued to all hearing officers in April 1996. oig audit Mr. Skeen. An OIG audit on the quality of administrative appeals decisions is expected to be issued in the next several months. What were the findings and recommendations of this audit? Submit a copy of the executive summary for the record. Response. Recommendations pertaining to NAD follow: Finding No. 2:--NAD hearing officers sometimes substituted their judgment for that of the Agency. Recommendation 2a:--The NAD director requires hearing officers to limit the scope of NAD hearings by identifying the laws, etc., that the appellant claims the agency did not adhere to, and the evidence that the appellant contends was erroneous or omitted. Recommendation 2b:--That hearing officers limit their determinations to whether an agency complied with applicable laws, regulations, and generally applicable interpretations. Finding No. 3:--NAD needs to update its policies and procedures. Recommendation 3a:--Implement a formal policies and procedures system by combining the current hearing officers manual and various ``NAD Notes'' into a numbered and dated manual. Recommendation 3b:--Update NAD guidelines to clarify policies and procedures. Finding No. 4:--NAD's Management Information System (MIS) needs improvement. Recommendation 4:--Update the MIS in order to provide necessary information to ensure NAD provides appellants timely determinations and complies with legislation time frames, and to provide reports with relevant information to measure the Agencies performance. Finding No. 5:--Training for NAD and FSA could be improved. Recommendation 5a:--Provide training to review and hearing staff which is directed toward teaching and reinforcing basic skills needed to conduct hearings and reviews and issue appropriate determinations, and focuses on explaining differences between the authorities of NAD and those granted to the agencies. Recommendation 5b:--Establish a quality assessment review system. A copy of the executive summary follows: [Pages 702 - 704--The official Committee record contains additional material here.] object class 23.3 communications, utilities, and misc. charges Mr. Skeen. Why is object class 23.3, communications, utilities, and misc. charges, projected to increase from $410,000 in fiscal year 1997 to $868,000 in fiscal year 1998? Response. The increase of $458,000 between fiscal year 1997 and fiscal year 1998 is for estimated e-mail accounts, technical support, maintenance costs, and line usage for our network systems. We also expect our costs to increase after we begin implementing the tracking system, automated precedent system, and training program detailed in our budget submission. These networks will allow NAD personnel to work and communicate with other Department-level officials, program participants, agency representatives, and regional offices. object class 25.2, other services Mr. Skeen. Provide a detailed breakout of object class 25.2, other services, for fiscal years 1996, 1997, and 1998. [The information follows:] ------------------------------------------------------------------------ Service 1996 1997 1998 ------------------------------------------------------------------------ Contractual services--ADP and others.......................... $250 $258 $265 Training......................... 14 36 563 Repair/maintenance of equipment, furniture or structures......... 60 62 62 Other services................... 16 17 17 Miscellaneous services (office space, typing, and transcription services, telephone equipment).. 40 42 42 Total, OC 25.2............... 380 415 949 ------------------------------------------------------------------------ object class 31, equipment Mr. Skeen. Also provide a detailed breakout of object class 31, equipment for fiscal year 1998. [The information follows:] ------------------------------------------------------------------------ Equipment 1998 ------------------------------------------------------------------------ NASTRACK ADP and Software............................... $555 Video and Teleconference Equipment...................... 457 Equipment Upgrades...................................... 49 Total, OC 25.2...................................... 1,061 ------------------------------------------------------------------------ tracking system Mr. Skeen. You are requesting an increase to either modify the current system for tracking participant appeals or purchase a new system. The current system was placed in production to only track requests for the former Farmers Home Administration. How did the other agencies track their requests? Response. The current tracking system (NASTRACK) was developed to track appeals of the former Farmers Home Administration (FmHA). The other agencies' appeal requests were logged and tracked on systems, some manual, which are not now being used as a result of the reorganization. We would like to put in place a single tracking system for all our cases. system location Mr. Skeen. Where is this system located? Response. The current tracking system (NASTRACK) is located on the USDA mainframe computer in Kansas City. automated precedent system Mr. Skeen. You are also requesting $25,000 for an automated precedent system. Will this system be a part of the tracking system? Response. No, this will be a stand alone system as a management tool to provide decisional information on prior NAD cases. This system will act as a database of decisions to be used by Hearing Officers as a resource in making their determinations. This system would be critical in ensuring consistent determinations, to the extent NAD decides the factual matter of whether an Agency complied with applicable laws and regulations in rendering an adverse decision. As expressed in the preamble to the NAD Interim Rule, it is not the intention of USDA to implement NAD as a formal legal system based on large bodies of case law, but a Hearing Officer should not issue a contrary factual determination regarding the same appellant in a different matter where that factual determination was directly addressed in the other matter. hearing and review officer qualifications Mr. Skeen. What are the qualifications for a hearing and review officer? Response. Public Law 103-354 did not establish statutory qualifications for hearing and review officers. The hearing and review officer series (GS-930) has no grade level criteria, therefore, the position was compared to the general attorney series (GS-905) because both are in the legal and kindred group, and common processes and terminology apply. The Hearing officer position requires a knowledge of laws, regulations and policies governing several agencies and the ability to analyze and evaluate case records, conduct appeal hearings, determine the credibility of witnesses, apply agency rules and exercise sound judgment in arriving at decisions. The Review Officer position requires a general knowledge of the legal system and thorough knowledge of applicable laws, regulations and program operation of all agencies whose decisions are adjudicated by NAD. The incumbent must be skilled in review and analysis, and in identifying issues, analyzing facts and arguments, and presenting rulings and conclusions. quasi-judicial courses Mr. Skeen. Where would the quasi-judicial courses be taken by these officers? Response. There are a variety of sources including, but not limited to, local colleges or junior colleges, the USDA Graduate School, the National Judicial College, the National Association of Administrative Law Judges, and the National Association of Hearing Officials. video area network Mr. Skeen. Briefly describe how the video area network would be used to train employees. Response. A video area network would be used to train our employees who are geographically dispersed across the United States, using satellite broadcasts from a central location. We expect this system will aid in reducing our management travel and training costs. adp equipment Mr. Skeen. How much has been spent to date on ADP equipment including hardware, software, and support services? Response. According to the March 1997 National Finance Center's accounting reports, we have spent $5,709 on ADP equipment in fiscal year 1997. adp plan Mr. Skeen. The budget request includes $49,000 for equipment purchases. Describe your ADP plan and the total amount needed to achieve your goals. Response. Our ADP plan consists of four broad goals that address our current and future needs in fulfilling our mission. They consist of: 1) data management; 2) equipment upgrades; 3) communications; and 4) training. Our objectives for fiscal year 1998 are the precedent system, an appeal tracking system, and video and teleconferencing system. The total amount needed to fulfill our objectives in fiscal year 1998 is $1,061,000 in equipment and $445,000 in communication expenses. pre-hearing teleconference Mr. Skeen. Briefly describe what occurs during a pre-hearing teleconference and the impact it has on the hearing process. Response. The pre-hearing teleconference includes the Hearing Officer, Appellant, and the Agency representative. This conference provides an opportunity to narrow the issues, develop the presentation of evidence, review procedures, identify to parties' the responsibilities, and clarify the burden of proof and relevancy of evidence to be presented. Ordinarily, the pre-hearing conference significantly reduces the extent of the evidentiary hearing and the time necessary to conduct the hearing. civil rights hearing requests Mr. Skeen. How many civil rights hearing requests did you receive in fiscal years 1995, 1996, and to date in fiscal year 1997? How many have been resolved? Response. The National Appeals Division does not adjudicate civil rights hearings. Our hearings are limited to adverse Agency decisions relating to participation in or receipt of program benefits under any program of an agency. national training conference Mr. Skeen. Where was the national training conference held in fiscal year 1996 and how many were in attendance? Response. The fiscal year 1996 training conference was held in St. Louis, Missouri. One hundred sixteen National Appeals Division employees were in attendance. nad privacy act Mr. Skeen. Have the NAD Privacy Act regulations been published? Briefly describe these regulations in further detail. Response. The NAD Privacy Act regulations have not been published. They are in the final stages of clearance. These regulations identify and contain the name and location of the system of records maintained by NAD; the categories of individuals contained in the system; the routine uses of records; agency's policies concerning the records, including storage, retrieval, access, retention, and disposal; the person, including title and address, responsible for the system; the method used to notify individuals how to gain access to records about themselves; and the source of records in the system. director review determinations Mr. Skeen. Describe the requirement for Director Review Determinations in further detail. Response. An appellant or head of an agency may request in writing a review of the hearing officer determination. The Director conducts a review to decide whether substantial evidence supports the decision. The appellant must submit to the Director a written request, not later than 30 days after receipt of the hearing officer determination, to be entitled to such a review by the Director. The head of the Agency has 15 business days from receipt of the hearing officer determination to request a Director's review. Either party requesting such review must provide specific reasons why the determination is wrong. The Director issues a review determination that either upholds, reverses, or modifies the determination of the Hearing Officer. The Director may remand all or part of the determination to the Hearing Officer for further proceedings, to complete the hearing record or to hold a new hearing. The Director ordinarily will complete the review and either issue a final determination or remand the determination not later than: (1) 10 business days after receipt of a request for review of our Agency head; and (2) 30 business days after receipt of a request for review by an appellant. quality assurance program Mr. Skeen. The agency began drafting a quality assurance program in fiscal year 1996. What is the status of this initiative? Response. NAD's quality assurance program has initiated two projects and planned for several more. Some 36 cases that were decided in fiscal year 1996 are being reviewed and rated using a newly created Quality Assurance Test package. The results of this initial review will be used to refine the Test Package and establish a baseline for quality control operations and training for the upcoming year. The NAD fiscal year 1998 Annual Performance Plan includes a commitment to perform 48 reviews, and increasing numbers are anticipated in future years. The second current quality assurance project is a detailed analysis of all recent Director Review cases in which the determination of the hearing officer was reversed. The results of this review will be used in planning and training activities. Future quality assurance projects will include surveys of parties to NAD appeals to gauge customer satisfaction and a cost-of-appeals study to identify variations in appeals processing and eventual adoption of efficiencies to reduce Division costs. Implementation of the Government Performance and Results Act (GPRA) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The NAD Strategic Plan has been completed and delivered to the Office of the Chief Financial Officer. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. NAD has identified no conflicting goals. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. NAD is concerned that the Federal budget cuts and other issues may reduce both appropriations and staff levels. Staff level reductions reflected in the current glidepath are slow but steady; objectives reflect responses to this expectation by increasing the number of cases handled per FTE in regional offices and the number of cases assigned to each hearing officer. NAD's performance metrics in its Annual Performance Plans will be adjusted to reflect the impact of reduced resources. We intend to hold employees accountable to strict adherence to statutory time frames, quality, and number of cases adjudicated as outlined in their performance elements and standards. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. NAD has drafted fiscal year 1997 and 1998 Annual Performance Plans. We are confident that the annual goals are directly linked to, and support accomplishment of, the goals laid out in the Strategic Plan. General goal number 2 in the strategic plan states that NAD will ``enhance high-quality, rational, timely decision making that recognizes the rights of program participants and promotes the lawful operation of the agency programs.'' The annual performance goal states that NAD will ``increase productivity and ``on-time'' performance while decreasing the number of requests for review and cases reversed and remanded through quality assurance and surveys.'' Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. NAD's Strategic Goals and those in the Annual Performance Plans are consistent with the President's budget which is only one activity line. We do not anticipate that any modifications in the activity structure will be needed. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. Because NAD's sole legislative mandate is to hear and decide appeal cases within certain time constraints, developing easy- to-interpret, result-oriented metrics was not difficult. Measurements reflect numbers and of cases handled, on-time percentages, and similar concerns. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. NAD was not a GPRA pilot agency. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. NAD's primary stakeholders include: four statutorily- defined client agencies (Farm Service Agency, Rural Development, Natural Resources Conservation Service, and Risk Management Agency) potential appellants (including all participants in programs administered by Farm Service Agency, Rural Development, Natural Resources Conservation Service, Risk Management Agency and applicants for such programs) and advocacy groups that represent appellants. Because NAD is a relatively new agency, its proposed rules of practice recently were published in the Federal Register for public comment. Significant public comment was received concerning many aspects of NAD's management and operations. This input was considered and used in the development of the Strategic Plan and Annual Performance Plans. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. NAD is unique with the Department of Agriculture. In creating NAD, Congress divested NAD's client agencies of their appeal activities and vested the responsibility for appeals arising from those agencies' program operations in NAD. Because of this, there can be no overlap between NAD's statutory responsibilities, reflected in the Strategic and Annual Performance Plans, and those of other USDA agencies. NAD has not contacted Federal agencies outside the Department in the preparation of its GPRA plans. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA mission areas/agencies have prepared draft strategic plans which are currently being reviewed by the Senior Policy Staff and the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the strategic plan to relevant Congressional Committees, Thereafter, we will look forward to meeting with members or staff to discuss our strategic plan and to solicit your input and advice on refinements to that plan. We plan to provide copies of the Department Strategic Plan to the following committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. NAD has made no changes in program policy, organization structure, program contents and work process at this time. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. Performance plans for both managers and staff will be revised to reflect responsibility under GPRA. Most GPRA-related activities will be critical elements of the performance plans. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. Annual Performance Plan targets will be reflected in the performance plans of employees whose work relates to a given performance metric. Accountable employees will be rated on their success in achieving the Annual Plan--linked performance standards. Office of Small and Disadvantaged Business Utilization Government Performance and Results Act (GPRA) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. We have completed a draft strategic plan. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. At this point, none have been identified. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. The OSDBU budget is primarily salaries and expenses. In light of this, OSDBU manages its available resources to perform its duties in the most effective manner possible. Since resources are essentially salary based, there is little discretion, OSDBU must alter its outreach effort through increased use of automation, decreased use of printed materials, and decreased participation in procurement conferences outside the headquarters area. With decreased participation in conferences, OSDBU will rely on personnel from USDA organizations located in the conference area to provide information to the small business community. We will also concentrate our efforts on creating partnerships with organizations and associations representing the small business community's concern. We are anticipating that OSDBU will maintain its existing level of resources and that the automation of information transferred to the small business community will be cost effective and user friendly. If resources decline, we will determine what activities yield the greatest results, i.e., reaches the greatest number of small businesses for the least cost and redirect resources to these areas while severely restricting or eliminating resources that are earmarked for less productive activities. If resources decline significantly, we would join other USDA or other Federal agencies having a need to reach the small business community and pool resources to fund an activity that would meet the mutual needs of all participating parties. As the use of the Internet increases among the small business community the level of information transfer contracting opportunities at the Department of Agriculture (USDA) should improve and be more timely and useful. This should maintain OSDBU's goals to increasing small business participation in USDA contracting activities. OSDBU selects activities and projects that will reach the greatest number of small businesses. Activities are prioritized as to impact and funded in rank order (from most effective to least effective activity). If resources are severely restricted the same principle would apply as far as funding activities. However, OSDBU would revisit its goals and objectives and redefine them to be within its current resource structure. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. OSDBU can measure the effectiveness of its activities in the accomplishment of its goals. One of OSDBU's objectives is to identify business opportunities that can be directed to small, small disadvantaged and women-owned businesses. The percent of fiscal year contracting opportunities made available for small business participation and the percentage of the number of contracts and contract dollars awarded to small, small disadvantaged, and women-owned businesses will be equal or greater than that offered the previous fiscal year. Contracting opportunities will be measured by percent of contracts/dollars awarded current fiscal year and percent of contracts/ dollars awarded previous fiscal year. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. OSDBU has only one activity in the President's budget, so we don't anticipate to change or modify our program activity. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. All OSDBU activities address the goal of increasing the participation of small businesses in the U.S. Department of Agriculture's (USDA) contracting activities. This is accomplished through making more small businesses aware of USDA contract requirements and by increasing the number of contract opportunities set-aside for small businesses. The performance indicator for these activities is percentage of contract dollars awarded to small businesses in any fiscal year will be equal to or greater than that awarded in the prior fiscal year. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. We did not participate in the pilot phase. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, amount others. Who do you consider your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. USDA mission agencies, the small business community, and the Small Business Administration, are OSDBU's primary stakeholders. OSDBU has worked with these stakeholders to put into place activities that will provide timely and useful information to its mission agencies and the small business community. These activities are also designed to meet the requirements levied by Congress and the Small Business Administration. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. We have worked with the Small Business Administration to ensure that our goals and activities are designed to meet the requirements of Congress and the Small Business Administration. OSDBU coordinates its efforts with the Small Business Administration to accomplish USDA's procurement preference goals. Our activities to accomplish USDA's procurement preference goals are unique to the USDA contracting environment and in no way duplicates the efforts of other agencies to accomplish their respective procurement preference goals. Our goals complement and support SBA's overall procurement preference goals for the Federal government. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA mission areas/agencies have prepared draft strategic plans which are currently being reviewed by the Senior Policy Staff and the Secretary and later by OMB. Upon completion of the review, the Department plans to provide copies of the strategic plan to relevant Congressional Committees. Thereafter, we will look forward to meeting with members or staff to discuss our strategic plan and to solicit your input and advice on refinement to that plan. We plan to provide copies of the Department Strategic Plan to the following committees: House Agriculture Committee. House Appropriations Committee. House Economic and Educational Opportunities Committee. House Government Reform and Oversight Committee. House Resources Committee. Senate Agriculture, Nutrition, and Forestry Committee. Senate Appropriations Committee. Senate Energy and Natural Resources Committee. Senate Governmental Affairs Committee. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. OSDBU has automated, through the use of the Internet, most of the information it provides to the small business community. We are also in the process of developing an automated centralized vendors list that will allow small businesses to register once with USDA and have access to all contracting officials within the Department. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. Managers are held accountable for their accomplishments through performance ratings of their accomplishments as they relate to the accomplishment of the agency's goals. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. The agency measures the effectiveness of its activities in the accomplishment of its goals and implements changes in the activity where warranted. Additionally, the agency redirects resources from activities that are ineffective to activities that provide greater outcome in the accomplishment of its goals. The creation of an Internet data base will allow small businesses to register with the Department. This data base will then be used by all contracting officers to identify small businesses, to provide goods and services, and to provide solicitations via e-mail if a procurement is a small business or 8(a) set aside. Directing more OSDBU resources to those USDA agencies that fail to reach their small business preference goals while reducing resources dedicated to those agencies that exceed their goals. In the latter case OSDBU would only monitor agency activity to ensure accomplishment rate does not increase. [Pages 713 - 942--The official Committee record contains additional material here.] W I T N E S S E S ---------- Page Beauchamp, C.L................................................... 263 Collins, Keith................................................... 1 David, I.T....................................................... 429 Dewhurst, S.B.................................................... 1,429 Ebbitt, J.R...................................................... 263 Gillam, C.D...................................................... 429 Glickman, Dan.................................................... 1 Kaplan, Dennis................................................... 263 Reed, A.F.T...................................................... 429 Reed, Pearlie.................................................... 429 Rominger, Richard................................................ 1 Thornbury, D.R................................................... 263 Viadero, R.C..................................................... 263 I N D E X ---------- Secretary of Agriculture Page Adequate Funding for Research.................................... 63 Animal Growth Hormones........................................... 74 Animal and Plant Health Inspection Service....................... 149 Biographies: Secretary Glickman........................................... 196 Mr. Rominger................................................. 196 Mr. Collins.................................................. 197 Mr. Dewhurst................................................. 197 CCC Export Credit Guarantee Program.............................. 90 Census of Agriculture............................................ 139 Child Nutrition.................................................. 157 Civil Rights.....................................................10, 29 Class I Differential Price Structure Report...................... 17 Class I Differentials........................................ 18 Codex Alimentarious.............................................. 130 Committees: Advisory Committees.......................................... 124 County Committees......................................25, 145, 147 County Committees and Loan Problems.......................... 146 Statutory Advisory Committees, Panels, Task Forces, Commissions, Etc........................................... 124 Congressional Liaison............................................ 79 Conservation Programs: Conservation................................................. 8 Conservation Reserve Program (CRP)........................... 127 CRP Competitive Bid Process.................................. 136 CRP Rental Rates............................................. 136 New Mandatory Conservation Programs.......................... 138 Crop Insurance Delivery Expenses................................. 136 Discretionary Spending........................................... 3 Direct Farm Loans/Beginning and Socially Disadvantaged Farmers Ranchers....................................................... 135 Economic and Trade Opportunities................................. 4 Electronic Benefits Transfer (EBT)..............................14, 118 Emergency Fund................................................... 136 Empowerment Zones and Enterprise Communities..................... 106 European Union................................................... 27 Explanatory Statement of the Office of the Secretary............. 225 Export Enhancement Program (EEP)............................64, 85, 132 EEP/MAP...................................................... 72 Export Markets................................................... 26 Chicken Exports to Russia.................................... 27 Exports...................................................... 68 Farm Service Agency: FSA Federal Staffing......................................... 21 FSA Field Office Staffing.................................... 20 Field Office Closings....................................12, 24, 60 Reeves County FSA Office..................................... 58 Office Closings.............................................. 145 FSA County Employees......................................... 146 Farm Program Workload and Staff Reductions................... 148 Federal Disaster Emergency Program............................... 56 Food Assistance for North Korea.................................. 131 Food Program..................................................... 7 Food Quality Protection Act: The Act.....................................................70, 140 Implementation............................................... 151 Food Recovery Foundation......................................... 138 Food Safety: Administration's Food Safety Initiative...................... 7 Food Safety.................................................. 157 Food Safety and Inspection Service (FSIS).................... 150 FSIS User Fees............................................... 130 Food Stamps...................................................... 157 Four Fundamental Priorities...................................... 2 Fund for Rural America..........................................71, 128 Green Bay Cheese Exchange........................................ 19 Hazard Analysis and Critical Control Program: HACCP System................................................. 158 Implmenting the HACCP System................................. 6 Income Eligibility............................................... 67 Information Technology......................................61, 63, 155 Inforshare Program............................................... 62 Impact of Reduction in Delivery Expenses......................... 155 Karnal Bunt................................................46, 127, 139 Loan Resolution Task Force......................................98, 100 Limiting Response to Natural Disasters........................... 131 Market Access Program............................................ 137 Market News...................................................... 133 Mexican Hass Avocados............................................ 139 NAFTA Expansion to Include Chile................................. 11 NRCS Flood Assistance............................................ 70 Opening Remarks.................................................. 1 Options Pilot Program............................................ 106 Pilot Program for Peaches........................................ 150 P.L.-480 Program: Cargo Preference Act......................................... 127 Tonnages..................................................... 132 Private Counsel.............................................. 127 Production Flexibility Contracts................................. 135 Programs in Urban Areas.......................................... 28 Proposed Legislation............................................. 131 Public Affairs................................................... 75 Questions Submitted for the Record: Chairman Skeen............................................... 75 Mr. Walsh.................................................... 140 Mr. Dickey................................................... 147 Mr. Kingston................................................. 149 Mr. Latham................................................... 150 Ms. DeLauro.................................................. 157 Rural Community Advancement Program.............................. 130 Rural Development................................................ 5 Safety Net....................................................... 4 Savings to Taxpayers............................................. 9 School Lunch Program............................................. 16 Service Centers for Home Loans................................... 131 Socially Disadvantaged Farmers................................... 5 Staff Year Reductions............................................ 133 Statement of the Secretary.......................................2, 198 Status of AMTA Implementation.................................... 133 St. Petersburg Model Farm........................................ 90 Sugar: Program...................................................... 31 Sugar Cap.................................................... 54 Texas State Office............................................... 60 Trade Areas...................................................... 5 Trade Situation.................................................. 73 Tobacco: Tobacco Activities........................................... 102 Tobacco Program.............................................. 47 Under Secretary/Assistant Secretary Offices...................... 111 USDA Americorps Activities....................................... 109 USDA Computerization............................................. 14 User Fees........................................................57, 58 Women, Infant, and Children (WIC): WIC Eligibles Estimate....................................... 118 WIC Program..............................................47, 53, 66 WIC Month to Month Participation............................. 122 Written Testimony of Secretary Glickman.......................... 198 1998 Budget...................................................... 144 Office of the Chief Economist Biography of Keith J. Collins.................................... 197 Cattle Initiative................................................ 174 Conservation Reserve Program..................................... 180 Commission on 21st Century Production Agriculture: Commission................................................... 169 Funds to Support............................................. 169 Object Class Table........................................... 170 Staff Time Support........................................... 169 Dairy Policy..................................................... 175 Environmental Consequences of Agricultural Production and Agricultural Policy............................................ 169 EQIP: HACCP/Pathogen Reduction Regulations........................178-180 Implementation of............................................ 180 Explanatory Statement............................................ 236 Famine: Countries Potentially Threatened by.......................... 181 In North Korea............................................... 181 Government Performance and Results Act (GPRA): Implementation of...........................................184-186 Performance Indicators......................................165-166 Hazard Identification Baseline Contract with UVA................. 183 Hearings Where Chief Economist Testified........................159-160 Impacts of Welfare Reform on Farm Labor.......................... 178 Karnal Bunt Compensation Protocol...............................175-176 Livestock and Railroad Industries...............................176-177 Long-Term Projections...........................................181-183 Object Class Explanation: 21, Travel................................................... 170 23.1, Rent................................................... 170 24, Printing and Reproduction Costs.......................... 172 25.1, Consulting Services.................................... 172 25.2, Expenditures........................................... 172 25.3, 26, and 31, Expenditures..............................173-174 OBPA and OCE Responsibilities Related to Oversight of USDA Policies and Programs.........................................163-164 OCE 1996 Performance............................................166-169 Questions Submitted for the Record: Chairman Skeen............................................... 159 Risk Assessment: Risk and Benefit-Cost Analyses Differences..................164-165 Rule Making.................................................161-162 Staff Time..................................................162-163 Sustainable Development: Activities................................................... 161 Policy......................................................160-161 Weather: Services Terminated by the National Weather Service.......... 171 Weather Information Needs.................................... 171 Winter Vegetables and Competition with Mexico...................177-178 Office of Budget and Program Analysis Biography of Mr. Dewhurst........................................ 197 Breakout of Resources for OBPA's Responsibility.................186-187 Code of Federal Regulations...................................... 189 Department of Buyouts for 1997..................................189-190 Explanatory Statement............................................ 254 Government Performance and Results Act (GPRA)...................194-195 Legislative Proposals............................................ 189 Object Class Explanation: 25.2 Other Services.......................................... 189 25.3 Purchases of Goods and Services from Government Accounts 189 Organization Chart..............................................187-188 Personnel Compensation and Benefits.............................. 189 Questions Submitted for the Record: Chairman Skeen............................................... 186 Staff Year Reductions and the 1996 Farm Bill....................190-193 The USDA Budget Summary.......................................... 194 Office of Inspector General 1993 Ad Hoc Disaster Assistance Program.......................... 313 1994 Ad Hoc Disaster Assistance Programs--Losses................. 313 1996 Audit and Investigations Results............................ 308 AARC Program..................................................... 319 ADP.............................................................. 315 Agricultural Market Transition Act (AMTA)......................271, 309 Allegations of Discriminatory Lending............................ 272 Alternate Agriculture Research and Commercialization Center...... 314 APHIS: Animal Cases--Legislation...................................276-277 Animal Treatment............................................. 269 Amounts Spent on Outside Public Accountants...................... 303 Annual Audit Plan................................................ 291 Attempts to Circumvent Payment Limitations....................... 309 Audit Training................................................... 316 Audits: CCC Financial Audits......................................... 303 FCS Financial Statement...................................... 288 Financial Statement Audits................................... 302 NS Discrepancies Disclosed in Audit.......................... 288 InfoShare.................................................... 323 WIC Program.................................................. 324 Backlog........................................................289, 324 Banco National Scandal........................................... 296 Biography--Roger C. Viadero, Inspector General................... 325 Biography--James R. Ebbitt....................................... 326 Biography--Craig L. Beauchamp.................................... 327 Budget: Additional Staff............................................. 316 FTE's........................................................ 295 Request...................................................... 309 Closing Remarks.................................................. 297 Confidential Funds............................................... 305 Controls Over Production Flexibility............................. 308 Convictions...................................................... 319 Credit Reform.................................................... 304 Crop Insurance Program: Abuse/Summary................................................ 306 GAO Report................................................... 306 Raisin Crop Insurance......................................305, 318 Delinquent Loans................................................. 311 Electronic Data Sharing on Conservation Plans.................... 308 Equipment........................................................ 314 Error Rates...................................................... 297 Explanatory Statement............................................ 393 FCS (FNS): Electronic Benefit Transfer (EBT): Card Cost................................................ 300 Card Safeguard........................................... 300 Cards Security........................................... 299 Contractor Operating Controls............................ 299 Fraud.................................................... 299 Losses................................................... 280, 290............................................... Nationwide............................................... 279 Number of States......................................... 284 Questionable Transactions................................ 298 Retailer Tracking System................................. 300 Savings.................................................. 280 Statutes of States Systems............................... 286 Women, Infant and Children (WIC):........................ 274 Food Stamps: Cases.................................................... 275, 300............................................... Certification Process.................................... 297 Compliance............................................... 282 Electronic Benefits Transfer............................. 324 Fraud.................................................... 291 Ineligible Recipients.................................... 294 Legislation.............................................. 298 Reducing Food Stamp Fraud................................ 300 Resources................................................ 298 Women, Infant and Children (WIC): Eligibility.............................................. 283 Monitoring Funding....................................... 301 Program.................................................. 302 Vendor Activity.......................................... 292 Financial Statements--Internal Controls.......................... 289 Food and Assistance to the Russian Federation.................... 318 Forest Service: Airtankers................................................... 277 Funding...................................................... 269 Forfeiture: Proceedings.................................................311-312 Program...................................................... 294 FSIS's Controls Over Imported Meat and Poultry................... 313 Government Performance and Results Act (GPRA).................... 321 Hotline Complaints............................................... 305 Implementation of the Government Performance and Results Act (GPRA)........................................................321-322 Indictments, Convictions, and Suits.............................. 307 Infoshare Project................................................ 304 Insurance and Indemnities........................................ 314 Integrity Cases.................................................. 289 Law Enforcement Retirement Benefits.............................. 314 Leased Vehicles.................................................. 314 List and Type of Firearms........................................ 309 Loan Resolution Task Force....................................... 316 Minority Enterprise Financial Acquisition Corporation (MEFAC).... 317 Non-Insured Assistance Program................................... 307 OIG Realignment.................................................. 315 Olympic Security...............................................278, 317 Opening Remarks.................................................263-268 Payment limitations.............................................. 270 Prepared Statement--Roger C. Viadero............................. 328 Questions Submitted for the Record: Chairman Skeen............................................... 297 Mr. Latham................................................... 323 Mr. Fazio.................................................... 324 Reception and Representation Activities.......................... 314 Recipient Fraud.................................................. 298 Reimbursements................................................... 303 Retailer Eligibility--Non EBT States............................. 299 Rolling Stores................................................... 300 Rural Community Advancement Program.............................319-320 Rural Development................................................ 304 Rural Housing Service............................................ 311 Rural Housing Service's Corrective Action........................ 319 Rural Renting Housing Program.................................... 319 State Mediation Program.......................................... 316 Texas Agricultural Mediation Program............................292-293 Texas Tech Mediation Program..................................... 316 Tracking and Monitoring of Proposed Savings...................... 314 Unsanitary Poultry and Beef Products............................. 273 Use of Audit Resources by Agency, Fiscal Year 1996............... 310 Use of Investigations Resources by Agency, Fiscal Year 1996.....309-310 Welfare Reform Act............................................... 302 White Collar Crime............................................... 295 Written Statement of the Inspector General....................... 328 Departmental Administration/Chief Financial Officer/Chief Information Officer Administrative Process, Modernization of: MAP Costs...................................................472-473 Modernization of Administrative Processes...................471-472 Procurement Reform..........................................473-474 Re-Engineering Business Processes............................ 473 Telecommunications Within MAP................................ 471 Time and Attendance Reporting System......................... 476 Advisory Committees: Advisory Committee Staff Costs............................... 496 Advisory Committees Funded From Other Accounts..............498-499 Commodity Distribution....................................... 502 Cost To Department for Maintaining Advisory Committies......496-497 Current Advisory Committees.................................499-502 Explanatory Notes...........................................796-814 Reports and Recommendations of Advisory Committees........... 502 Research, Education, and Economics........................... 502 Status of Program...........................................456-457 Unobligated Balance.......................................... 498 Agriculture Buildings and Facilities: Air Quality.................................................505-506 Beltsville Project..........................................504-505 Explanatory Notes...........................................785-795 Funding for Renovation of South Building and Construction of Beltsville Building........................................ 504 Operation and Maintenance of Facility.......................457-458 Relocation Expenses.........................................490-495 South Building Renovation.................................... 504 South Building Modernization................................. 490 Strategic Space Plan........................................503-504 Window Restoration Program................................... 506 Aircraft, Distribution of........................................ 483 Biographies: Pearlie S. Reed.............................................. 713 Anne Thomson Reed............................................ 714 Irwin T. David............................................... 716 Ira L. Hobbs................................................. 718 Blake Velde.................................................. 719 Civil Rights: Accountability..............................................460-461 Affirmative Action........................................... 447 Alternative Discipline Plan.................................. 470 Blue Ribbon Task Force....................................... 460 Civil Rights Enforcement Regional Centers...................437-439 Civil Rights Problems.....................443-445, 451-453, 459-460 Complaint Backlog............................................ 460 Complaint Reviews and Investigations..................461, 465, 480 Debt for Nature Program...................................... 462 EEO Complaints............................................... 462 Field Service Centers........................................ 467 Foreclosures................................................. 461 Legislative Package.......................................... 461 Mediation Services........................................... 467 Minority Farmers Forced Off Farms By Federal Employees....... 460 Minority Farmers Forced Off Farms By Non-Federal Employees... 460 Offices Reporting to Assistant Secretary for Administration.. 466 Processing Time of Complaints................................ 466 Property Transfers To 1890 Land-Grant Institutions........... 469 Satellite Offices............................................ 462 Service Centers Needed on Indian Tribal Lands...............462-464 Settlements.................................................. 461 Special Emphasis............................................. 475 Transfer of EEO Counselors................................... 466 USDA/1890 National Scholars Program.......................... 470 Violations................................................... 461 Colleges and Universities: Competitive Grants..........................................489-490 Historically Black Colleges and Universities................484-485 Land Grant Universities.....................................486-488 Collocation Projects: Kansas City and Davis Collocation Project.................... 482 Credit Card Holders.............................................. 481 Credit Card Savings.............................................481-482 Department Administration: Agricultural Acquisition Regulation.......................... 480 Advisory and Assistance Services............................475-476 Decreases in Object Classes.................................. 476 Explanatory Notes...........................................761-784 Funding and Staff Years.....................................467-468 Government Performance and Results Act......................547-548 Purchase Cards and Third Party Drafts.......................470-471 USDA Employment Reduction...................................477-479 USDA Reorganization.......................................... 477 Disabilities, Targeted........................................... 482 Disaster Assistance.............................................454-455 Financial Information System Vision and Strategy (FISVIS): Financial Information System Vision and Strategy............642-643 Financial Information System................................643-644 Financial Management Review.................................. 642 Financial Management Systems at NFC.......................... 644 Foundation Financial Information System.....................644-645 Hazardous Waste Management Questions: Amounts Spent By Other USDA Agencies......................... 514 Audit on Abandoned Mines....................................509-510 CCC Grain Storage Site......................................543-546 Compliance Docket............................................ 543 Compliance With State Laws................................... 513 Environmental Justice..................................447, 464-465 Explanatory Noted...........................................815-822 Foreclosures Requiring Cleanup............................... 514 Funding for CERCLA, RCRA and PPA............................512-513 Object Class 25.2--Other Services............................ 546 Performance Goals...........................................510-511 Role of Hazardous Waste Management..........................445-456 Salaries and Benefits........................................ 513 Sites Requiring Cleanup.....................................515-542 Underground Storage Tanks...................................512-513 National Finance Center: American Management Systems.................................. 645 Cross-Servicing.............................................. 641 Direct Deposit/Electronic Funds Transfer..................... 650 Increase For Thrift Savings Plan............................. 639 NFC Staff Years.............................................647-649 Request for Additional Funds................................638-639 Metrification.................................................... 467 Office of Administrative Law Judges.............................480-481 Office of the Chief Financial Officer: Administrative Functions..................................... 473 Collection of Tax Refund Offsets............................645-646 Cost-Benefit Analysis of the Software Systems Contract......650-653 Cost Accounting.............................................458-459 Explanatory Notes...........................................833-846 Government Performance and Results Act......................651-653 Impact of the Farm Bill...................................... 650 Implementation of the CFO Act of 1990........................ 646 Performance Results.........................................636-637 Request for Additional Funds................................635-636 Requirements of the CFO Act.................................646-647 Staffing..................................................... 642 Strategic and Performance Plan............................... 636 Stove Piping Among USDA Agencies............................. 636 Supplemental Nutrition Program for Women, Infants, and Children................................................... 653 Travel Management............................................ 642 Worker's Compensation Costs.................................. 480 Office of the Chief Information Officer: Appointment of Permanent Chief Information Officer........... 550 Appropriated and CCC Funds..................................579-581 Authority for ADP Systems.................................... 445 Automation Priorities.......................................631-632 Business Process Improvement Projects.......................632-633 Capital Planning Improvement Process........................446-447 CCC Funds...................................................599-600 CCC Report of ADP Expenditures..............................600-623 Clinger-Cohen Act...........................................439-440 Consolidation of IRM Staff................................... 582 Contractor Support Services.................................. 582 Current Market Technologies and Costs........................ 627 Executive Controls on Computer Acquisition..................630-631 Explanatory Notes...........................................823-832 Fixed Asses Plan and Justifications.......................... 599 Goals of Improving Use of Technology........................549-550 Government Performance and Results Act......................633-635 Implementation of Clinger-Cohen Act.......................... 549 Information Technology Budgets..............................448-450 IRM Budget..................................................551-578 IRM Support Service Contracts...............................582-598 LAN/WAN/Voice Installation................................... 625 LAN/WAN/Voice Investment Suspension.........................624-625 Managing Information Technology.............................. 551 Moratorium................................................... 624 National Finance Center.....................................441-443 Performance Measures for Technology.......................... 550 Positions in the CIO Office.................................629-630 Procurement Moratorium......................................445-446 Revising Work Processes...................................... 550 Service Center Implementation Team........................... 633 Shared Benefits of IT Investments...........................626-627 Staff........................................................ 550 Staff Years for Information System Support................... 630 Technology Investment Review Board........................... 549 Telecommunications Savings..................................625-626 Vision for Automation........................................ 630 Year 2000.................................440-441, 453-454, 627-629 Operation, Buildings: Employees Maintaining Buildings.............................507-508 Personnel: Celebration of Excellence Ceremony........................... 475 Classes of Employment........................................ 475 Employee Express Pilot......................................479-480 Paperless Personnel Request System..........................476-477 Performance Management......................................474-475 Personnel Costs.............................................. 475 Summer Interns..............................................483-484 Questions Submitted for the Record: Chairman Skeen.............................................459, 549 GPRA.......................................................547, 662 Mr. Latham................................................... 549 Ms. DeLauro.................................................. 653 Rental Payments: Headquarters Complex Rental Changes.........................504-505 National Capital Region GSA Space............................ 505 Rental Payments & GSA Repair Costs........................... 506 Statements: Acting Chief Financial Officer's Statement..................433-437 Acting Chief Information Officer's Statement................430-433 Acting Assistant Secretary's Statement......................429-430 Vehicles: Acquisition.................................................. 459 Distribution of Motor Vehicles............................... 483 Motor Vehicles..............................................482-483 Working Capital Fund: Amounts Paid into WCF by Current Agency Structure...........639-640 Explanatory Notes...........................................847-868 Object Class 25.4-Operation and Maintenance of Facilities.... 638 Object Class 25.7-Operation and Maintenance of Equipment..... 638 Object Class 31-Equipment.................................... 638 Operating Costs.............................................. 641 Performance Indicator for Video Production..................637-638 Purchase of Computer Equipment and Services.................. 641 Witness Statements: Acting Assistant Secretary for Administration...............720-735 Acting Chief Financial Officer..............................746-760 Acting Chief Information Officer............................736-745 Office of Communications Agriculture Fact Book............................................ 662 Budget Request................................................... 661 Communication Coordinators......................................657-658 Computer Matching and Privacy Act of 1988........................ 660 Conversion of the Photographic Library........................... 660 Credit Alert Interactive Voice Response System................... 661 Director of National Services.................................... 660 Explanatory Notes...............................................869-881 Government Performance and Results Act..........................662-664 Media Services................................................... 658 Object Class 11--Personnel Compensation.......................... 661 Object Class 24--Printing and Reproduction......................661-662 Outreach to Underserved Groups................................... 662 Press Releases Issued............................................ 658 Public Affairs Activities.......................................653-656 Reimbursements from Other USDA Agencies.........................658-659 Resources and Staff Levels....................................... 657 Salary Offset Initiative........................................660-661 USDA Visitor Center.............................................. 660 Attorney: Hours by Agency.............................................. 669 Hours Worked................................................. 667 Locations.................................................... 669 Cases: Before EEO Commission........................................ 697 Civil and Criminal........................................... 670 Civil Rights Action Team Report.................................. 664 Equipment Object Class........................................... 695 Examples of Recent Progress...................................... 685 Explanatory Notes................................................ 882 Forest Service Reimbursement..................................... 694 FY 1998 Budget Request Breakout.................................. 683 Government Performance and Results Act (GPRA).................... 697 Hazardous Waste Management....................................... 696 Law Library...................................................... 683 Legal Workload................................................... 685 Loan Resolution Task Force....................................... 695 New Authorities................................................670, 683 OGC Priorities................................................... 693 Performance Goals, Measures and Indicators....................... 684 Private Counsel.................................................. 669 Questions Submitted for the Record: Chairman Skeen............................................... 664 Reduction in Legal Services...................................... 684 Regulations...................................................... 664 Reorganization................................................... 696 Senior Level Management.......................................... 694 Staffing: Appropriated and Reimbursable................................ 666 Goal......................................................... 684 Reductions................................................... 697 U.S.-Canada Joint Commission..................................... 667 User Fee: AMS Staff Year............................................... 697 Hours by Agency.............................................. 666 Programs..................................................... 665 Work Item Tracking System........................................ 696 National Appeals Division ADP: Equipment.................................................... 706 Plan......................................................... 706 Automated Precedent System......................................705-706 Appeals: Active....................................................... 700 Cost and Average Length...................................... 699 Director..................................................... 700 Civil Rights Hearing Requests...................................706-707 Director Review Determinations................................... 707 Explanatory Notes...............................................921-924 Extensions....................................................... 700 Executive Summary...............................................702-704 Final Rules and Regulations...................................... 699 Government Performance and Results Act (GPRA)...................707-709 Hearing and Review Officer Qualifications........................ 706 Hearing Procedure Handbook....................................... 700 National Training Conference..................................... 707 Object Class Explanation: 23.3 Communications, Utilities, and Misc. Charges............ 705 25.2 Other Services.......................................... 705 31 Equipment................................................. 705 OIG Audit.......................................................700-701 Pre-Hearing Teleconference....................................... 706 Privacy Act...................................................... 707 Quality Assurance Program........................................ 707 Quasi-Judicial Courses........................................... 706 Questions Submitted for the Record............................... 699 Statutory Time Limit............................................. 700 System Location.................................................. 705 Tracking System.................................................. 705 Video Area Network............................................... 706 Office of Small and Disadvantaged Business Utilization Government Performance Results Act..............................710-712