- AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1999

[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]

AGRICULTURE, RURAL DEVELOPMENT, FOOD
AND DRUG ADMINISTRATION, AND RELATED
AGENCIES APPROPRIATIONS FOR 1999

========================================================================

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND 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, John J. Ziolkowski, Martin Delgado, and Joanne L.
Orndorff, Staff Assistants
________

PART 1

AGRICULTURAL PROGRAMS
Page
Secretary of Agriculture......................................... 1
Office of the Chief Economist.................................. 99
Office of Budget and Program Analysis.......................... 130
Office of the Inspector General.................................. 291
Departmental Administration...................................... 501
Office of the Chief Information Officer........................ 593
Office of the Chief Financial Officer.......................... 690
Office of Communications....................................... 728
Office of the General Counsel.................................. 741
National Appeals Division...................................... 771
________

Printed for the use of the Committee on Appropriations
________

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47-526 WASHINGTON : 1998
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For sale by the U.S. Government Printing Office
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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 ESTEBAN EDWARD TORRES, California
HENRY BONILLA, Texas NITA M. LOWEY, New York
JOE KNOLLENBERG, Michigan JOSE E. SERRANO, New York
DAN MILLER, Florida ROSA L. DeLAURO, Connecticut
JAY DICKEY, Arkansas JAMES P. MORAN, Virginia
JACK KINGSTON, Georgia JOHN W. OLVER, Massachusetts
MIKE PARKER, Mississippi ED PASTOR, Arizona
RODNEY P. FRELINGHUYSEN, New Jersey CARRIE P. MEEK, Florida
ROGER F. WICKER, Mississippi DAVID E. PRICE, North Carolina
MICHAEL P. FORBES, New York CHET EDWARDS, Texas
GEORGE R. NETHERCUTT, Jr., Washington ROBERT E. (BUD) CRAMER, Jr., Alabama
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 1999

----------

Thursday, February 12, 1998.

SECRETARY OF AGRICULTURE

WITNESSES

HON. DAN GLICKMAN, SECRETARY OF AGRICULTURE
RICHARD ROMINGER, DEPUTY SECRETARY
KEITH COLLINS, CHIEF ECONOMIST
STEPHEN B. DEWHURST, BUDGET OFFICER

Opening Remarks

Mr. Skeen [presiding]. We're in session and on the record.
Well, good morning, and it's again an honor for the
subcommittee to have the distinguished Secretary of
Agriculture, the Honorable Dan Glickman, who's a good friend
and former colleague, appearing before us. The purpose of this
hearing is to discuss the fiscal year 1999 budget request for
the Department of Agriculture.
The Secretary should be well prepared, as he appeared
before the Senate just 2 days ago for the same purpose. And I
know, Dan, that as a former member of the House, that you
consider that to be a mere rehearsal for what you're going to
go through today. But we're here for the really big show.
I think the record shows a great deal of cooperation from
our committee, both Republicans and Democrats, to get you the
money that you've needed for critical programs. We never have
enough money to go around, but I believe that we agree with you
and almost all your priorities. We have no allocation yet, but
I'm going to do my very best and everything possible this year
to help you out, and I appreciate the cooperation that you and
Rich Rominger, and the rest of your colleagues provide to us.
And I particularly want to mention to Rich, we appreciate the
help we had with the 3 foot of snow we had in New Mexico,
around Christmas. We still got the snow on the ground, however
we've got it piled a little bit.
And now for the bad news. I thought we had a budget
agreement last year, but for the fiscal year 1999 the
Administration is asking Congress to authorize about $800
million in user fees to pay for activities funded by this
subcommittee; and this is simply because you want to spend more
money than was in the caps provided by the Budget Agreement,
and in order to avoid the caps you created a new Federal
revenue, all user fees, and I believe this violates the Budget
Agreement. Those user fees require passage of about a dozen
separate pieces of legislation, and if you can't get the
legislation passed to sign into law, we have to come up with
the money for those activities that don't get funded.
By far, the worst case here is user fees for meat and
poultry inspection, $573 million of fees that need to be
authorized in the face of opposition, not only from the
authorizing committees themselves, but from the industry and
the consumer groups as well. And if that authorization doesn't
happen this year, we have to come up with several hundred
million, or Federal inspection will not take place.
And where are we going to get the money? WIC, food stamps,
low income housing. You couldn't make that choice, and that's
why you proposed user fees. But user fees legislation won't
pass, and we'll be left with making that choice that you have
avoided.
Now, I want to make it clear that this is not about whether
or not user fees are a good idea, and I think that we
understand that; we've had that understanding for many months.
This is about the Office of Management and Budget--OMB, risking
one of the most important programs in the entire Federal budget
with a phony accounting scheme, and OMB ought to know better.
Now, Mr. Secretary, one of the burdens of high office like
yours, and one of the reasons that you make the really big
money is----[Laughter.]
They're laughing about it. While OMB lies low, you have to
come up here and make the case for them; and we're sorry to
have to lean on you like this, but OMB ought to get its act
together down there. They know better than this. They're good
number crunchers, but they don't understand the process.
Now, they're lying low and you have to come up here to make
this case for them, and I want to tell you that when the Food
and Drug Administation--FDA--is here in 2 weeks I think we
should ask them to investigate OMB as a menace to public
health.
Anyhow, we have a lot of other important issues to talk
about today, the consolidation of various USDA activities,
exports to Asia, civil rights, nutrition programs, and if
you're lucky, maybe someone will ask you a question about milk
marketing orders. I'm sure that you're all primed for that.
Your distinguished colleagues at the table are all well
known and respected here, but I'll let you introduce them. But
before we get to that and your opening statement, I'll ask our
distinguished ranking members, who are here, we'll start with
Jay Dickey.
Just say howdy.
Mr. Dickey. Howdy.
Mr. Skeen. Go ahead.
Mr. Dickey. Good morning, Mr. Secretary. Welcome. Thank you
for your good work on the Conservation Reserve Program--CRP--
and the Pacific Northwest; I'll have some questions soon.
Thanks to all of you for being here.
Mr. Skeen. Mr. Nethercutt.
Mr. Nethercutt. Howdy. Thank you.
Mr. Skeen. Mr. Secretary, there's no love lost between us.
We know what the problems are, and you know what you have to
do, and we know what we have to do, and we'll get it done.

Statement of the Secretary

Secretary Glickman. Thank you.
Mr. Skeen. Welcome.
Secretary Glickman. Howdy.
Mr. Skeen. Howdy.
Secretary Glickman. First of all, thank you very much for
your courtesy, for you, Mr. Chairman, members of the committee,
Tim Sanders, we appreciate the good working relationship. Most
of you know--of course, you've mentioned Deputy Secretary
Rominger, who worked diligently on the disaster problem that
you had in your State.
Mr. Skeen. He certainly did, and we appreciate that.
Secretary Glickman. And you of course know our esteemed
budget officer, Mr. Dewhurst, who we think is the best in
government.
Mr. Skeen. Not only the best; we don't operate unless he's
here.
Secretary Glickman. And Mr. Keith Collins, our chief
economist, who we also believe is the best in government.
Mr. Skeen. And he's very famous for this as well.
Secretary Glickman. We have an awful lot of talented people
who are sitting behind me, who are ready to help answer the
questions when I'm not able to do it.
Mr. Skeen. I'm glad that you brought them along.
Secretary Glickman. Thank you.
Let me just make a couple of quick comments. One is that,
I'm going to try to keep these remarks to less than 10
minutes----
Mr. Skeen. That's fine.
Secretary Glickman. I have as full statement for the
record. I think that there are a couple of good things
happening that I need to mention. The fact of the matter is,
that because of the strength of the national economy, we have
the lowest interest rates in a very long period of time, and
that has been a tremendous help to agriculture all over the
country; agriculture being the most interest-sensitive part of
the U.S. economy. Those lower interest rates have helped
farmers expand and finance their operations. It has also
allowed us to have more room in the budget for some of the
rural development lending programs.
The President's commitment to a balanced budget and
submission of a balanced budget I think reflects the strength
of the economy; it also reflects the decisions that have been
made in the past few years by both Congress and the President.
If you look at the charts you will see that our outlays are
down by a projected 14 percent from $63 billion in 1993 to $54
billion in 1999, and our numbers of employees are down about
20,000.
The outlays are down for many reasons. One of them of
course has to do with the Agricultural Marketing Transition
Act--AMTA--payments, provided for in the 1996 Farm Bill. Those
numbers will continue to come down as the farm program payments
continue to come down. Outlays are also down to a large extent
because of the welfare entitlement programs and food stamps.
The numbers of people on the programs are down considerably and
the dollars are down as well.

basic issues

So saying that, I want to talk to you a little more about
some of the basic issues that we think need to be in the
budget. The first item I'll talk about is enhanced economic and
trade opportunity. Because of the program, the Freedom to Farm
program, managing risks for agriculture is more important than
ever when we're in a market economy that's more volatile than
it has been before. We believe that maintenance of a strong set
of risk management tools is necessary, and that's why our
budget provides for full funding of the Crop Insurance Program.
We will propose legislation to shift funding of certain crop
insurance, delivery expenses to mandatory funding to ensure
maintenance of this vital program.

crop insurance

Now, I will admit to you, crop insurance works better in
some parts of the country than it works in others. Where you
have repeated disasters, crop insurance has become a problem
for utilization, and I think it is appropriate for us to,
again, re-examine the substantive nature of the Crop Insurance
Program to make sure that it actually operates nationwide
effectively as a good risk management program.

credit access

Farmers and ranchers also need access to credit to succeed.
The 1999 budget provides more funding for farm loans. We are
proposing doubling direct farm ownership loans to $85 million
and increasing guaranteed loans. Under our budget almost 3,500
beginning and small farmers will be able to acquire or save
their farms. The budget keeps direct and guaranteed farm
operating loans at $2.4 billion, to serve some 28,000 limited
resource farmers. This budget proposes full funding for our
Small Farmer Outreach and Technical Assistance Program to help
limited resource farmers boost their bottom line. We had a
National Commission of Small Farms that emphasized credit and
related activities, and some of these proposals relate to that
Commission's report.
In addition, I want to present one item to you, which is a
legislative item, but I think it's important that we talk about
it. The 1996 Farm Bill has a categorical ban on loans to
farmers who've ever had a government debt forgiveness in the
past. We will soon be sending Congress emergency legislation to
address this problem. I believe the Farm Bill goes too far,
potentially denying good, solid, family farmers the credit they
need to stay on the land, hurting small farmers and minority
farmers especially hard.
The result is that we disenfranchise people who've ever had
a debt write down, notwithstanding that for the last 10 years
they may have been in good operating condition. This is much
worse than any banks would do in the private sector. We really
need to deal with that problem, and still protect the taxpayers
in the process, and you can do that. I would ask that we work
together on that particular problem.
Exports are critical to the American economy; not only
opening new markets. Concerning the Asia situation, we just met
with Secretary Rubin and Alan Greenspan over in the Agriculture
Committee. We talked about the need to deal with the
International Monetary Fund--IMF issue. We also need to fight
unfair trade barriers, unnecessary, sanitary, and phyto-
sanitary restrictions. These are things that are basically the
highlight of our efforts to provide a safety net.

trade related activities

For Fiscal Year 1999 we have proposed spending nearly $6.4
billion for trade-related activities, including a projected
$4.6 billion for export credit guarantees to protect sales to
Asia. I would point out, however, that if we believe we need
more credits than that we will move in that direction. There is
no cap on the amount of credits, GSM credits, we can provide.
To the best of my knowledge, we're only limited by the budget
exposure, which would be there in case there is a default. So
obviously it is an internal situation to determine if more
money is needed, we've got to come up with some of those monies
within the budget. But there is no cap on that, and we will do
our best to protect against the lost of market share, and in
fact try to expand U.S. market access in Asia and other parts
of the world.
It's the most important priority we have now. I just might
mention we've provided an additional $2 billion worth of GSM
credits so far. We have been told our credits to Korea have had
amarked impact, particularly in the livestock area, and we
continue to work on other areas as well. The budget also proposes a
flexible multi-year authorization for the export enhancement program,
to allow us to carry over, rather than losing unused funds, to the next
fiscal year. The fact is we haven't used the program in the last couple
of years. Congress has reduced the appropriation for it, but we may
need to use it in the future, and the ``use it or lose it'' history of
this we don't think is very suitable, given the changing nature of the
subsidy arrangements in other parts of the world.

rural development programs

Our rural development programs are significant to us. Our
rural development budget will support about $9.8 billion in
loans, loan guarantees, grants, and technical assistance; $300
million more than 1998, and $1.8 billion more than 1997, to a
large extent because of lower interest rates. The budget
supports our Water 2000 initiative, home ownership initiatives,
infrastructure for electric, telecommunications, and
empowerment zone funding.

research

Research is critical to the future growth of agriculture.
Driven by publicly-funded research, agriculture productivity
has grown at an annual average rate of 1.8 percent over the
past 45 years; and there is no question, in addition to
exports, research is the other part of the safety net. The
budget increases--the work we are supporting to identify and
develop a better understanding of genes that are important to
agriculture production and crop file diversity. We also intend
to increase our competitiveness in the global market production
efficiency, and other areas as well.
I must tell you from a parenthetical perspective, I wish
our research budget were much more than it is right now. If you
look at the history of our research budget, in real terms there
has not been any growth, in real terms in the last several
years. There's a budget problem. It is something that we need
to identify ourselves and communicate much better than we have
done in the past, as to what the impact of ag research is on
people's lives. And, if we do that, I think that we will be in
a position to augment our research budget in future years.
The budget request that we have also increases funding for
pest detection, disease prevention, border inspections, the
projects that I talked about before, and I think these are very
important.

food safety

In the area of a healthy, safe, affordable food supply, the
budget includes $46 million, which is roughly one half of a
government-wide increase of $101 million for the President's
food safety initiative. That initiative will focus on the
safety of imported and domestic fruits and vegetables, food
safety education, modernizing our meat and poultry inspection
systems, and related tools.
As you know, we are in the process of modernizing our 90-
year-old meat and poultry inspection system. Just last month
300 of the largest slaughter and processing establishments,
producing 92 percent of meat and poultry went into the new
HACCP system approach. Firms are now using the latest science
to identify and correct food safety hazards.
For 1999, we propose boosting food safety spending by $34
million to a program level of $710 million. The additional
resources will allow us to maintain a frontline inspection
workforce, and provide rigorous science-based inspection. To
support this work, as the chairman indicated in the beginning,
we will be proposing legislation to recover the costs of
providing inspection services.
Now, we can argue this point, and this is an issue that's
been brought before this committee almost every year for the
last 10, 12 years, in different perspectives. My only point is
that, as our budget continues to be flat we can for about 1
cent a pound, provide the consumers the confidence their meat
and poultry is safe; otherwise, we have to take these funds out
of other priority issues, such as research, conservation, and
other kinds of things.
I recognize the meat and poultry industry by and large--I
don't want to speak for everybody--has an ideological aversion
to fees, inspection fees. We have fees in our government in a
lot of different areas; banks, securities, and a lot of other
areas, we have fees in our government to protect the public
interest. The industry has opposed fees for a very long period
of time.
I understand that. I'm just saying that the other side of
the coin is, safe food sells. The public will buy food if they
believe it's safe. We have the safest food in the world; I want
to keep it that way. And based upon the budget constraints that
we're under, we will have to take large chunks of money out of
other parts of this budget. We will of course work with you if
there are other options there.

food assistance program

In addition, I would like to talk for a moment about our
food assistance program. The budget requests full funding for
the food stamp, child nutrition, and WIC programs. In addition
to that, our budget includes a new $20 million food recovery
initiative to provide community-based grants to help
neighborhoods recover edible food. I call this our Gleaning and
Food Rescue Initiative. This has kind of been a pet project of
mine. Twenty-five percent of the food that's prepared every day
in America is thrown away; 25 percent; hotels, hospitals,
restaurants, institutional servings of food; and schools. So
this is a kind of a cheap way to save food from being thrown
away. Because Congress passed the Bill Emerson Good Samaritan
Act last year, this donation can take place without fear of
liability; it's one of the few areas that that can take place.
So we're trying to encourage food recovery, food rescue efforts
all over the country through the private sector food banks;
that kind of thing.

natural resources

In the area of our natural resources, we're asking for $825
million for the NRCS. That will support their base duties and
responsibilities, contribute to the administration's clean
water initiative, and we will improve and strengthen the
leadership capacity of local conservation districts through
competitive partnership grants to help meet our program.
We're making considerable progress in our land conservation
and cost-year programs funded through the Commodity Credit
Corporation (CCC). Last year was a pivotal one for the CRP, the
Conservation Reserve Program that Congressman Nethercutt
mentioned, when we held our first sign-ups under the new rules.
We have just completed another sign-up. We made some mistakes
on the first sign-up; by and large it did well, but we made
some mistakes that we, I think, have remedied in the second
sign-up. I am pleased to report that in one year we have
doubled the environmental benefits of CRP, while at the same
time saving taxpayers hundreds of millions of dollars.
In conjunction with the CRP, the Wetlands Reserve Program
will continue to restore and protect America's wetlands,
andwe're proposing an additional 164,000 acres in 1999 in that program.
Another popular program established by the 1996 Farm Bill
and funded through the CCC is the EQIP program, the
Environmental Quality Incentives Program. The budget includes a
$300 million number for EQIP, which is a one-third increase of
$100 million over the 1998 funding level. We think that is very
important. Our budget also requests $10 million for an
interagency climate change technology initiative for research
to minimize the adverse effects of agriculture production
practices on climate change.

customer service

On customer service, I place high priority on improving
customer service and program delivery, streamlining, continuing
the downsizing. We now have about 2,775 field offices now,
going down to 2,554, which is our goal. In addition to that, we
are consolidating the administrative functions that support the
county-based agencies. In the old days when you would go into a
county office, and you'd have a Xerox machine for NRCS, and a
Xerox machine for FSA, and a Xerox machine for rural
development, and neither twain shall meet. And that perhaps is
a hyperbolic way of saying that there can be a coordination of
administrative functions in each State, and we're moving in
that direction. We think that will enhance customer service.
We have contracted with an independent consultant to
examine what further steps, if any, we can take to improve
coordination and efficiency of our farm and rural program
delivery system.

inspector general's office

The budget also requests an additional $22 million to
support a presidential initiative for our inspector general to
crack down on abuse in our nutrition, rural development, and
other programs. We have an excellent IG. He's done a great job
of dealing with reducing fraud, waste, and abuse, and we think
these dollars are very effective.
And let me just finally say--you mentioned the area of
civil rights. It is a high priority to deal with civil rights
issues, particularly to make sure that limited resource farmers
are eligible for our programs, whether they are programs in the
Farm Service Agency or other agencies of the department. We
have requested funds to try to deal with this.
So, I think that what you will find is a budget which
reflects the priorities of the Department at a time of change
in agriculture, particularly at a time when we're in the midst
of the AMTA payment situation. We have a commission on 21st
Century Agriculture, Mr. Chairman; its goal is to look at what
happens after this farm bill is over. And obviously, those are
issues that we're going to be looking at very carefully, as
well. But in the meantime, we thank you for your cooperation,
and look forward to working with you on these issues.
[Clerk's Note.--The Secretary's written statement appears
on pages 187 through 228. Biographical sketches appear on pages
183 through 186. The Office of the Secretary's budget
justification appears on pages 254 through 263.]
Mr. Skeen. Ms. Kaptur, your welcoming remarks.

welcoming remarks

Ms. Kaptur. Mr. Chairman, I just wanted to welcome the
Secretary, and to say how much we look forward to receiving the
full weight of your testimony, being able to ask you questions
this morning, and to say that we deeply appreciate the
enthusiasm and the effort that you put into your work, on
behalf of the people of our country. I think I've been very
impressed with your international travel, as well as your
domestic travel. You basically just don't sit in that building;
you're on the move all the time. And I'm very anxious to be
able to ask questions, but we look forward to working with you
and to doing the best we can to meet several of your budget
requests. We know the Department of Agriculture has done more
to reduce staff levels and to meet the budget requirements of
this particular decade, than almost any other department, with
perhaps the exception of the Department of Defense. I know that
that hasn't been easy; with all the consolidations at the State
levels, the local levels.
You have been a part of that, and I think we still have a
department, that is functioning well, and has focused missions.
That's a real credit to you and to the administration. And
frankly, to this Congress and this committee.
So, we thank you very much for that, and it has been
certainly my pleasure to work with you.
Secretary Glickman. Thank you.
Ms. Kaptur. Thanks, Mr. Chairman.

disaster

Mr. Skeen. Thank you, Ms. Kaptur.
Speaking of disaster, you know the big problems we had in
the southwest during Christmas, and also the big freeze in the
Northeast. Thousands of cattle, sheep, and livestock, perished
in both of these weather systems.
Will you submit a supplemental to help the farmers and
ranchers over those losses?
Secretary Glickman. We're assessing the needs now. It may
require a supplemental--if it does, we will ask for additional
money.

user fees

Mr. Skeen. Thank you.
One question on user fees, can you guarantee the committee
today that the legislation will be sent up on a date certain,
and that the administration will push for its passage, or are
we going to have to come up with several hundred million
dollars in conference to make sure that the meat and poultry
inspection is adequately funded?
Secretary Glickman. Well, we're going to send up
legislation?
Mr. Skeen. Are you?
Secretary Glickman. Yes. Now, can I promise you it's going
to pass? No, I can't promise that. But we're going tosend it
up, and we intend to fight for it.
Mr. Skeen. Well, I hope so. Because we were going to have
it sent up last year, and it didn't show up. We'd appreciate
having it.
Secretary Glickman. I can't speak for previous times----
Mr. Skeen. I understand.
Secretary Glickman [continuing]. We need to send it up.
Mr. Skeen. I just want to be sure that we're dedicated to
getting this thing done. I appreciate that.
Ms. Kaptur.
Ms. Kaptur. Yes, Mr. Chairman.

child nutrition programs

I wanted to ask the Secretary, in your budget you are
requesting $1 billion, I think, additional for the child
nutrition programs, if I'm reading your testimony correctly.
Secretary Glickman. Yes, I think that's correct.
Ms. Kaptur. It's there somewhere.
Secretary Glickman. Yes.
Ms. Kaptur. My basic question would be, is that because of
increase in food costs or is that because of increasing levels
of enrollment?
Secretary Glickman. Part of that is to have full enrollment
in WIC. But, Steve, do you have the numbers for this?
Mr. Dewhurst. Sure, it's a little bit of both.
What is happening in the child nutrition programs, is that
more and more children are coming in and applying for the free
lunch and free breakfast portions of the program, for which the
government pays the full cost. So for instance, in 1997 we have
13 million children on the free lunch program; but in 1999 the
estimate is 13.6 million. In other words, an additional 600,000
children will qualify for free lunches.
The same is true with free breakfast. We have 5.5 million
children in this country on the free breakfast program. In 1999
the estimate is about 6.3 million children. But we have more
kids from lower income families showing up, and asking to be on
those programs, and that's essentially what's driving the cost.
They also get a cost-of-living increase, so that the
price--for instance, we pay for a free lunch, which this year
is $2.05. It goes up to about $2.09 in fiscal 1999, so there's
a little bit of cost growth in there too. But it's mostly the
additional kids on the free meals.

gleaning initiative

Ms. Kaptur. Mr. Secretary, we want to make sure every child
in America is well fed, and that they have nutritious food. I'm
very pleased to see in your budget proposal this time your
gleaning initiative. Because one of the concerns that has been
growing on my part--and I spend a lot of time in the schools on
occasion during breakfast and lunch time, and I am appalled at
what is thrown away.
Now, the first time I saw it, I gasped. Then when I saw it
more than once, I realized it was a pattern. And you know, when
you talk to people, they give you excuses. Why does this
happen? Well, it happens because maybe the food and nutrition
staff don't pick the right foods. The kids only like to eat
chicken nuggets, and you know, on this particular day they
served peaches, and they don't each peaches, so they throw it
out.
But there is a serious problem in the waste across school
districts in this country, and I think to be developing a value
in a child at an early age that you throw it away, is a very
bad value. And it's happening coast to coast. I'm not talking
about any particular income level of district. I'm not sure
where the answer lies. I don't think the answer lies in cutting
back the cost per meal, but I do think that there's a problem
in the selection of items at the local school district level. I
guess if you fed kids pizza every day, they'd be happy; but
that wouldn't necessarily be a balanced diet. There's
definitely a problem in menu planning.
One of the staff mentioned to me, well, another problem is
that in too many local school districts they say, well, kids
only have 10 minutes to eat, and so therefore a lot of food is
thrown away because the kids don't have enough time to eat it.
That's not a problem you can solve. But as you get into this
gleaning initiative, I hope that part of that will involve an
assessment, on a statistical basis, of what is going on across
this country; and to get some of these local administrators and
the governors, and their administrators at the State level,
more conscious, I mean, of the volumes that are merely going
from the kitchen into the waste basket.
And when you sit on this committee, and you vote for these
programs, and then you go back, and you see what happens at
home, you get really upset, and you want to go in there and
manage it yourself, because you're so mad at what you see
happening. But I know the men here don't cook, so you probably
don't worry about going in the kitchen, right? Oh, I'll get a
real reaction there; just waiting for it. But it is just really
troubling. [Laughter.]

food waste

Secretary Glickman. Actually, if I just may say, I agree
with you, and the subject of food waste is a monumental
problem. We need to analyze in depth the amount of food waste
in the school lunch program now. The school lunch people say
there's less food waste there than there is in other areas. It
may be true just because of the way that they're operating; and
most of them of course operate under State law, and State
authority. But I have heard the anecdotal cases myself, and the
fact that they're public programs means that they have an extra
special responsibility to manage those resources well. I think
your point is a good point.
Ms. Kaptur. A lot of people say, you know, USDA only lets
us purchase these items. But somebody needs to look at this,
starting at the receiving end, not the giving end. They ought
to be at the grassroots, looking at what's happening, a cross
section of school districts.
Related to that, some of the money that is needed in that
program for expansion, coverage, obviously, when we met with
the inspector general, we were given a real insight on some of
the abuse attendant to feeding programs relating to daycare.
And I suggested also that he look very seriously at the
Headstart programs across this country, and to make sure that
those nutrition programs, and the way that they are applied for
and administered, are being done properly. I think you will be
amazed at what you will find there.
And also, because of welfare reform at the local level in
places like Ohio, some of our public feeding kitchens, run by
nongovernmental groups, are receiving almost over 40 percent
increases over this winter in the demand for food. So when I
see food being thrown away in one place, and I see a need
somewhere else, I think you have really hit on something here,
and I desire to help you in any way that I can.

meat concentration

To move on to another subject. There was a commission on
small farms that reported back in January, and my question to
you is--I think you know my concerns. In many markets, whether
it's beef, or pork, or even grain, the delivery mechanisms in
this country are extremely concentrated, and the average
farmers has more limited opportunities every year to have
market access. So there's a gatekeeper system that is really
developing in this country. Some people can make it to market;
other people can't make it to market.
What, in your judgment--what can USDA do in your budget, to
implement some of the recommendations of that small farmer
commission?
Secretary Glickman. Well, in the first place, we have put
together a team under the leadership of the Deputy Secretary to
manage this effort, so not to let that report die. There was an
initial report done by Secretary Bergland in 1980, and this is
a follow-up report. There is a myriad of recommendations in
this report, all the way from fully funding the Grain
Inspection, Packers and Stockyards Administration, to making
sure they can enforce anticompetitive practices in the law.
Some of that is reflected in our budget here; to a more
extensive use of cooperatives, farmers' markets, organic
agriculture, etc.
I mean, there are a whole litany of suggestions to
facilitate small farm agriculture in America. We really intend
to make a conscientious effort to implement those across the
board. But, we do have to enforce our own laws, which is
basically the Packers and Stockyards Act. Because, quite
honestly, we're about the only agency in government that
enforces those particular provisions as it relates to the
livestock industry.

usda enforcement of antitrust laws

Ms. Kaptur. Why have you not been able to do that? Do you
not have sufficient staff there? What's the problem inside the
program?
Secretary Glickman. Well, we have enforced the law. In
fact, we filed suit 2 years ago against the largest meat
packing company in the world for preferential pricing
practices, in terms of feed lots--I mean packing houses and
preferred feed lots. They have--my notes tell me--completed one
comprehensive investigation of major steer and heifer slaughter
plants in Kansas, and are currently conducting similar
investigations in Texas. There's a southern Minnesota hog
procurement investigation; it's ongoing right now.
Our budget reflects $4.7 million to correct unfair
deceptive and discriminatory practices. How does that relate to
last year's budget?
Mr. Dewhurst. It repropose last year's request which wasn't
funded by Congress.
Ms. Kaptur. Are these attorneys? That $4.7 million in----
Secretary Glickman. Some are, but a lot of them are
investigators.
Mr. Dewhurst. They are investigators and economists.
Secretary Glickman. Yes. Economists too. Some of these are
complex economic issues as well.
Ms. Kaptur. Is this housed in one place in the Department,
or is it in different places?
Secretary Glickman. Generally, it's housed in the Grain
Inspection, Packers, and Stockyards Administration in one
administrative entity.
They have some field offices, as well, around the country
that they operate out of. And, you know, they get the help from
our Chief Economists and other people as well. But they are a
separate enforcement agency.
That law, the Packers and Stockyards Act, is kind of the
USDA's version of the Robinson-Patman Act--Federal antitrust
laws. And, you know, I don't think there's any question that
we've got to have adequate resources, however, to go out and
actually investigate these cases. It takes a lot of time and
effort.
Ms. Kaptur. That's what I'm concerned with; you have
sufficient resources in order to do that.
Secretary Glickman. It's a 25 percent increase we've asked
for in packers and stockyards enforcement.
Ms. Kaptur. All right. Thank you very much.

low pork prices

On pork prices, I wanted to ask, in view of the fact that
many farmers are concerned about low pork prices, is there
anything the Department is intending to do to encourage
exports, or to purchase for meals programs, lunch programs, et
cetera?
Secretary Glickman. Yes, all of the above. In terms of
exports our credit package has focused on livestock exports
largely to Korea, and then we also are doing purchases of pork
under Section 32 for our commodity programs.
Mr. Collins, do you have any other comments on that?
Mr. Collins. We've recently done some Section 32 purchases
for the child nutrition and food assistance programs. We have
another large potential package for pork purchases under review
right now that the Secretary will decide on shortly.
Secretary Glickman. The pork producers nationally have
written me, asking me to take all steps I can in this area. The
biggest part of this, I will have to tell you, is the export
side in Asia, which has a great potential in terms of livestock
purchases, but pork particularly has been somewhat threatened
by the currency crisis. But that's why we've tried to use our
export credits as aggressively as we can; to sell more of that
product over there.

cooperative development

Ms. Kaptur. Mr. Secretary, I want to just ask one more
question, then I'll save additional ones for the second round.
But could you, or one of the other representatives of the
Department, in more detail talk about how much you are asking
for this year for a cooperative development, as opposed to last
year? I think it's level funding. And what your focus is in
this area; how important it is to the Department?
Secretary Glickman. It is very important. The numbers on
our rural business cooperative service--what are those numbers
compared to last year, do we know?
Mr. Dewhurst. We have about $1.7 million in base funding
for the cooperative services within the Department. We have a
$2 million increase above that to increase the research we do
with cooperatives to help folks establish new cooperatives, or
branch out existing cooperatives into new lines of business. We
have a substantial percentage of our business and industry
financing program dedicated to cooperatives, about $200 million
of that billion dollar program is in effect, targeted to
cooperatives.
So essentially, there's a lot of money in the Department
for cooperatives. I wouldn't want to mislead you. It's not a
substantial increase over this year, but the $2 million
research program is a new proposal, and a new program. The
credit dedication under the B and I programis increasing a
little bit each year.
Ms. Kaptur. Thank you.
Mr. Skeen. Thank you. Mr. Walsh.

welcoming remarks

Mr. Walsh. Thank you, Mr. Chairman. Mr. Secretary, thank
you. I'm sorry I missed your testimony; I had a legislative
hearing that I hurried out of as quickly as I could, because
what is being discussed here is very important.
I'd also like to thank you for coming up to Central New
York last year to visit one of our dairy farms, and meet with
farmers. I think it gave you a pretty good idea of the level of
concern and frustration within the industry, but it was great
that you were there. It was meaningful to--certainly to myself,
and Congressman Boehlert, and to the farmers. And the farmer
whose home we visited is delighted, and I'm sure he'll remember
that, and his kids will remember that the rest of their lives.
We've since had, as you know, an ice storm that,
fortunately for my constituents, didn't affect our district,
but it did severely affect Congressman McHugh's and Solomon's,
and on into Vermont and Maine also, and I would like to
associate myself with the comments of the chairman, regarding
disaster relief, and hope that we would be able to reach out,
and help those farmers out who suffered that terrible damage.
Just to give you an idea of the scale of the storm; there
were 30,000 telephones and telephone poles down in that part of
the country, 30,000. I'll suspect it'll help the southern
yellow pine industry though.
Mr. Dickey. So what's wrong with that?
Mr. Walsh. That's okay.

dairy issue

Just to hone in, if I may, on this dairy issue, because it
is of such importance, and it is very timely. As you know,
there are a number of court cases going on right now. I'd like
to first of all thank you for the effort that you and your
staff have put into this, consolidating the market orders, and
trying to hone in on this issue of differentials, and just ask
you if I might--you've made it pretty clear that you favor
Option 1B. That's the preferred option as opposed to Option 1A.
Secretary Glickman. There are two options in the proposal,
1A and 1B, but you're correct.
Mr. Walsh. You made fairly clear that that's the case.
Can you describe your rationale for designating Option 1B
as the preferred option?
Secretary Glickman. Well, let me kind of give you a little
bit of background, because this is an awfully complicated
issue.
This issue's been around the Department for a long period
of time, and we've had milk marketing orders for a long period
of time. For milk, the differential is generally based on
distance from Eau Claire, Wisconsin, based upon historical
needs to ensure an adequate production of fluid milk all over
this country. That's been the kind of the principle for about
40 or 50 years, I've asked the folks to look at it, to see if
that principle is still as applicable as it was before, and
whether modern transportation, and other kinds of techniques
require us to take a more modern look at that particular issue.
So, we looked at this whole issue, and it struck us that
there were two primary ways that you could go on this. Well,
there are three primary ways. One, you could just get rid of
the whole thing, which we thought that wouldn't make any sense,
given the fact that we think there are reasons to have some
differentials, and certainly to have marketing orders.
The second way is status quo; no change in the area. Things
would be exactly as they were in the 1940s and 1950s. The way
we transport and move milk, and other products, would be
unchanged, and you could still price basically from one basing
point. We said, all right, that's a possibility, and quite
honestly, an awful lot of people want that approach.
And the third way is to look at the system, and determine
basically from an economic model, what does the modern world
need to ensure an adequate supply of fluid milk in each region,
taking into account modern transportation and other factors.
That's basically what we did in Option 1B.
Now, let me tell you this, I haven't done this without
knowing that the dairy industry is one of the hardest hit of
any in agriculture. But I would have to tell you, the number of
dairy farmers has been reduced 50 percent each decade since
1950.
The current system hasn't probably helped some people stay
in business. You can't argue that it's been the salvation for
dairy farmers all over the country.
So what we decided to do, is to follow what Congress
ordered us to do--modernize the systems, and reduce the number
of orders. We changed the way we computed the basic formula
price, and that will stabilize the price of milk a little bit.
Mr. Walsh. It averages it out.
Secretary Glickman. It averages it out over a longer period
of time. If we're going to move to a slightly more market-
oriented system, we have to provide some transition as we did
for wheat, corn, cotton, and rice. Dairy has had no transition
assistance compared to the other commodities.
So we have provided options. If we went to Option 1B, then
there could be a bump-up in the price over two or three years
so that people in the short-term would not suffer any harm,
regardless of where they're located.

dairy issue

Mr. Walsh. And you can do that administratively?
Secretary Glickman. We can do that administratively.
In addition to that, I propose on a separate track,
flooring the BFP until such time as we finish this milk-
marketing order reform to give people some additional
stability.
Mr. Walsh. You can do that also administratively?
Secretary Glickman. I can. It requires rulemaking, but I
can do that administratively. And that's on a separate kind of
track.
Now, I'll have to tell you that this thing is a regional
problem, as you can well imagine.
Mr. Walsh. I'm aware of that.
Secretary Glickman. I doubt that you and Mr. Obey have
exactly the same views on these particular issues. And he's not
a 100 percent thrilled with what we did either; I can tell you
that. But I've had to try to do my best.
But what I've had to try to do, is to come up with a
rational system that can meet the tests of modern agriculture,
and also meet the tests of people who will challenge it,
bothfrom the courts as well as the political system. Now we have the
debate that's out in the open. I hope to have a genuine debate on these
issues from the public; a national debate. We'll have plenty of time.
We'll extend the comment period if we need to do it, in order to get
people talking about this kind of thing. That's about the best that I
an can tell you right now.
Mr. Walsh. And so the idea was to make it more market-
oriented, so you consolidate the market orders, and then you
get down to this issue of differentials, and prices.
Is it your feeling that both Option 1A and 1B are market-
oriented options?
Secretary Glickman. Well, I guess my feeling is Option 1B
is more of a market-oriented option than Option 1A.
Mr. Walsh. Could you explain why you feel that way?
Secretary Glickman. Because the differentials will be set
based upon a kind of quantifiable national economic factors. I
might ask Mr. Collins to talk a bit about this.
Mr. Collins. Yes. I think under Option 1A essentially what
happens is the mandated minimum price, the regulatory minimum
price, is going to be up much closer to the current market
price, whereas under 1B it's going to be a little bit below
that. So, therefore, under 1B there's a little more scope for
the forces of supply and demand to operate, and determine the
price, rather than have it being determined by the regulatory
administered price of the order system.
Secretary Glickman. I've seen some numbers which indicate
that in certain parts of the country milk is going to come down
in price, but because of a blended price, you may actually see
some increases in other parts of the country.
Mr. Walsh. Well, you mentioned that it is going to affect
the nation regionally, and there are some studies available
that would point out that's exactly right, and that all areas
under Option 1B--all areas of the country, except for one,
which is the upper Midwest, lose. In fact, $365 million gone
from the farmer's paycheck nationwide.
Secretary Glickman. That's the Agrimark Study.
Mr. Walsh. That's correct.
Secretary Glickman. Yes, we're taking a look at it now. I
have to tell you, I don't want to characterize it as absolutely
wrong; I think that its an advocacy study, but we are meeting
with the Agrimark people. We think that study's just wrong. I
hope it is.
Mr. Collins. Well, I won't say that it's wrong--economists
can differ on these things--but I would say that that study
ignores a few important factors. First of all, it ignores the
fact that what we're proposing is phased in over 5 years; it
just looks at the year 2003 after full phase-in. It doesn't
take account of any changes in manufacturing milk prices, which
we think will increase under this proposal. It doesn't take
account of any of the effects of the formulas for the Class 3
price and Class 4 price, which we think over time will raise
milk prices as well.
So we think it's an incomplete study, and our estimate for
the effect on gross revenues for farmers over the entire phase-
in period is a decline of $83 million.
Mr. Walsh. Over 5 years?
Mr. Collins. That's $83 million per year, on average over 5
years, as opposed to Agrimark's analysis which shows $365
million; that's quite different.
Mr. Walsh. Well, the result is that there will be less on
farm income in the dairy industry, pretty clearly.
Mr. Collins. Well, somewhat less----

diary issue

Mr. Walsh. Regardless of the region. If you take the whole
country, there's going to be less on farm income in dairy.
And let me just refer you to a study, the National
Commission on Small Farms, I believe Congresswoman Kaptur
mentioned, the Department recently released this report, and
the report states that, ``Having gone through the process of
developing this report, we are now even more convinced of the
necessity to recognize the small farmer's a cornerstone of
agricultural and rural county. The Secretary should fully
support passive of legislation that will make the viability and
competitiveness of small and medium-size dairy operations a
priority issue.''
It's clearly a contradiction in this study on small farms
and your recommendation on this policy.
Secretary Glickman. Let me just make a couple comments. The
Small Farms Report is one of reasons why we need to get the
public input on the issue.
But look, Congress in 1996 said we had to move towards a
more market-oriented farm policy. We may not like it--you may
not like it in your area, but I think that most economists will
agree that 1B is more market-oriented than 1A. Now 1A preserves
and protects the price. In certain parts of the country it does
that; I understand that. But I got the clear impression from
reading the 1996 Farm Bill that we were to move generally to
more market-oriented farm policy. But at the same time, dairy
has never had the kind of transition assistance that the other
farm commodities have had.
It may be that this creates such regional conflict, that
you all decide legislatively that there's another avenue to go
here, but we were ordered to modernize the milk-marketing order
system, and we did the best that we could. And I would also
point out that we still had two options there, even though one
is preferred. I could have gone with one option only, and I
didn't do that.
Mr. Walsh. Well, my colleagues all have important
questions. I don't want to monopolize the time, but I'd just
like to end with this. And that is that, in the review--in your
review of the Federal milk-marketing order system both the
recommendations of independent analysis that your Department
asked for from Cornell and from Texas A&M, their dairy
economists, as well as the career experts within the dairy
division of USDA, recommended Option 1A. However, when these
recommendations moved up the chain of command to top levels of
USDA, the objective recommendations were overruled by your
higher level political deputies.
What does this say about the validity of the decisionmaking
process and the analysis of objective outside observing?
Secretary Glickman. Well, I never knew that you or anybody
else put full faith in career bureaucrats to make final
decisions for the United States of America. The fact is, I was
given the choice of trying to decide what was best for the
country as a whole. I could have gone the status quo, Jim. You
know, I could have said, no change; we're just going to keep it
as it is. But I had to do my best under thecircumstances to
create a national debate. And I'm going to make this point----
Mr. Walsh. You've done that.
Secretary Glickman [continuing]. Let me tell you, that is
critical for these issues. Because the only people that ever
seem to talk about dairy issues are basically people in the
dairy industry only, and they usually prefer exactly what they
have, except it hasn't been working very well.
I have visited dairy farms out there. I'm thinking to
myself a lot of these people are just struggling; how do they
hang on? And you have small dairy farmers in Mr. Obey's State.
Then you have a regional change in dairy production.
Listen, we used to produce the most milk in this country in
the upper Midwest and northeast. Now California's the biggest
dairy-producing State, and they've got massive, mega dairies;
5, 6, 7,000 cows producing milk. And that's true in other parts
of the country as well.
I'm looking, and I'm wondering, does our current dairy
pricing system encourage people to build mega dairies around
the country, and hurt the little guy as well. That went into my
thinking, in terms of getting this subject out for general
debate.
But look, if I were you, I'd be arguing the same thing,
because I know that people obviously want to keep the price
higher, and move it as high as they possibly can. And that's
why we proposed transition assistance, which actually over the
next few years gives people higher dairy prices, in every part
of the country than they have right now.
Mr. Walsh. I appreciate that very much. And also the fact
that you've offered to extend this comment period for as long
as we might need to get a decision. This is very difficult.
We've never been able to get a national dairy policy, maybe we
never will. But I appreciate the effort; I just disagree with
your conclusion.
Mr. Skeen. Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman. Thank you, Mr.
Secretary for joining us today.
Mr. Skeen. We're gonna try and limit this to about 5
minutes each, then we'll go around again if we have to.
Mr. Serrano. Starting with me? [Laughter.]
You know, I was going to ask a question about civil rights.
Mr. Skeen. We'll let you be the last of the Little
Mohicans.
Mr. Serrano. Thank you very much. I'll abide by the time,
of course.
Let me just for the record, Mr. Chairman--and the only
disagreement I've ever had with Ms. Kaptur--say that pizza is a
balanced meal, but only if it comes from New York. I've tasted
some in this country where you can't tell the difference
between the pizza and the cardboard box it came in. [Laughter.]
Wait until we get to the chicken industry.

food waste

There is a concern that I have on a comment that Ms. Kaptur
spoke about, and that is that, there is, not only in the
schools in this nation, but in society in general, such a waste
of food. And we know that, we've discussed this forever. And
I'm sure there are people in the audience, like I do, who
remember times in our lives when the availability of foods was
not that easy for ourselves as a family.
We've had success in this country at alerting people to the
dangers of certain things, encouraging them to do something
early about the detection of breast cancer, and HIV, and
tobacco, and other things.
Why can't we have a national plan--why, your Department for
instance, to alert people to the fact that we are a wasteful
society when it comes to food, and that we should be thankful
for what we've got, and try to protect it in many ways, and one
of them is not to waste.
Now, of course my question--my being naive--is that bad for
business, to suggest that we should not waste food in this
country, and can we start that at the national level, and
spread it?
Secretary Glickman. Absolutely. In fact, Mr. Serrano, we
had a national conference on food rescue and gleaning last fall
to deal with this issue. There are private groups all over the
country, led by Second Harvest, which is one of the largest
charities in the United States. They basically are the umbrella
organization for all the food banks in America, and they, and
us, and others are working on this problem right now.
The National Restaurant Association. They've got 700,000
restaurants, just published a book for their members on how to
save food, and keep it from being thrown away, and how to
donate that food.
Major American corporations, 7-Eleven, Pizza Hut, Marriott,
other hotel chains, are now engaged in this effort to try to
deal with not dumping food in the garbage, but donating it to
those who need it.
The liability law change made a big difference, because
people no longer have to be worried about being sued unless
they're grossly negligent or engage in willful misconduct. So
we do have a major effort going to try to educate people as to
what they can do legitimately.
The biggest waste is in prepared food. Canned and boxed
foods are easier to donate. The biggest problem is how to
recover food after it's been prepared, and that requires
logistics, transportation, refrigeration, working with health
departments; you still got to make sure the food is safe.
Mr. Serrano. Mr. Secretary, that is good, but you're
speaking also on the larger volume level. Are we stepping over
a line if we begin a national campaign to suggest to Mr. and
Mrs. Smith or Rivera, that you can not ignore everything that
you put in the fridge over the last 4 days. We do waste a lot
at home.
We're always talking about values for our children. One of
the things we're teaching children in this country is that you
can waste food. You know, I had recently to meet with about six
individuals from six Latin American countries, including Cuba,
and I asked them, tell me what impresses you the most about our
country. And of course, we expected them all to talk about our
election system. They said the abundance of food in your
country. One of them said, you're the only country we know who
hires people in stores to keep fruits and vegetables back on
the bins, because you have so much it falls on the floor, and
there people who go around picking it up and putting it back on
the bins. That's a luxury and a blessing you have no
understanding of.
So I would hope that we could really do something at the
personal level also.

civil rights

Mr. Secretary, an article in the March 1, 1997 edition
of``The Washington Post'' discussed the claims of minority farmers
across the country. The USDA officials unfairly discouraged, delayed,
or rejected applications for Federal loans and subjected them to
stifling standards when loans were approved.
In this article--column--written by you, you state clearly
there's a problem. I've heard stories, I've read reports, I've
seen the numbers. Since much of the rural development budget
requests relate to appropriations for loans and grants, what
measures have been considered to ensure that civil rights
violations to not occur in program delivery? Specifically, does
the direct loan origination and servicing system address civil
rights concerns, and if so, how is this problem being
addressed?
Secretary Glickman. Okay. Several things. Number one, I
created a civil rights action team last year, largely because
of the concerns of a lot of minority farmers. Grievances were
filed. Nobody ever called them back to find out what was going
on with them. To be perfectly honest with you, there are parts
of this Department that I'm not particularly proud of, in terms
of how we've treated our customers and our employees over the
years.
So we created this effort to try to deal with these
problems, and I appointed a long-term career civil servant to
lead the effort, and he prepared an implementation report that
does a lot of things.
Now, let me first tell you about all these old grievances
filed by minority farmers. In the mid-1980s our independent
investigative unit was disbanded, so these cases just sat
there. We have reestablished that unit; we're in the process of
trying to settle as many of these cases that we can responsibly
settle, and try to deal with the existing complaints. I mean,
that's justice delayed, it's justice denied. We've got to work
on these cases as best as we possibly can. It's not an easy
matter. There are legal problems with some of the cases, but
we're doing our best to make sure that people know that their
claims will be heard.
In terms of the operation of the Department, we've changed
our personnel evaluation systems to ensure that civil rights
performance is as important in how people are evaluated as is
program performance. And that is a total change of culture and
circumstances for the Department of Agriculture, which I think
is important.
In terms of our loans, in terms of our technical
assistance, we have about $250 million total in program funding
in the budget that is geared towards small, limited resource
farmers and other civil rights issues. But I did mention a
problem to you that we've got. The 1996 Farm Bill says, if
you've ever gotten a write-down, ever gotten a write-down from
the government, you're no longer eligible; absolutely disbarred
from ever getting government financing again. That's a standard
that no bank in America has. And we're sending up legislation
to try to correct that problem, and still do it in a way that's
taxpayer friendly, because quite frankly, there were some
people that abused the system, and those aren't the people that
we're talking about helping.
We have Employee Training and New Outreach programs. We
have a Commission on Small Farms, that is dealing with a lot of
these particular issues. But I think most people who look at
USDA honestly believe that a revolution is taking place, and
that we are focused for the first time on trying to improve the
way we deal with our employees, as well as our customers.
Mr. Serrano. Just very briefly. Those claims amounted to
how many, do you know?
Secretary Glickman. Since January 1997, about 13 months, we
have settled or closed 203 of the 1,088 program discrimination
complaints in the backlog. Some of these cases date back to the
mid-1980s. We are in the process--now that we have a full
investigative unit--of trying to accelerate these particular
cases. I would have to tell you the Department is a defendant
in a class action case filed in Federal district court here in
D.C. on these particular issues, so some of the matters are
getting resolved through the courts, and some are getting
resolved administratively. But we are doing our best in trying
to get rid of this old backlog.

civil rights

Mr. Serrano. And I know that you are in constant touch with
activists of both the Black Congressional Caucus, and other
folks that you're dealing with on a regular basis on these
issues.
Secretary Glickman. That's correct. The big focus in
addition to settling the cases, however, is to try to ensure
that there's appropriate access to credit, that our USDA system
of county offices is run fairly. As you know, the employees in
our county offices are not Federal employees, even though
they're paid for by the Federal Government. This is an anomaly
in the law. Over the years there has been some concern that the
accountability of these employees is not as direct as it would
be if they were Federal employees. We believe all those
employees should be made Federal employees, because they get
their paychecks from Uncle Sam. We're working on that
legislation as well. But even though it hasn't been passed yet,
we are seeing very significant improvements in those
operations.
We have appointed more minorities to our State committees
that run our farm programs--African Americans, Hispanics, and
women, Native Americans, and so this is a total effort to try
to make sure that USDA is what Lincoln called the People's
Department.
Mr. Serrano. Thank you. Thank you, Mr. Chairman.
Mr. Skeen. Mr. Dickey.
Mr. Dickey. Mr. Secretary, you and I have had our
differences over the years, and one in particular is your
insistence on calling your State Kansas, when it should be
``Can Saw.'' The other is that you talk so much that our 5
minutes is taken up.
Now, I'd like to--if we could get an agreement, that you'll
just keep your answers to yes or no, if you possibly can. Can
you do that?
Secretary Glickman. I'll try.

aquaculture

Mr. Dickey. I'm not through with the question.
We have in our little State of Arkansas, a problem in our
aqua culture with the bird called the Cormarant. The
Cormarant--it is a fish-eating bird, and it comes in, and just
takes over our catfish farms, and eats the smaller fish, and
actually injures the heavier fish, but they can't swallow
those.
So, we're having a problem--is that we don't know what to
do with it. It's protected by some kind of Japanese Treaty,
we've been told. We go from one department to the next. Is
there any way that you could assume jurisdiction? Justanswer
yes or no. [Laughter].
Secretary Glickman. Yes, of course.
Mr. Dickey. Can you assume jurisdiction over this issue?
Secretary Glickman. I don't know very much about the issue,
but we'll see what we can do. Do you know who else has been
working on it?
Mr. Dickey. Well, we're trying to get Don Young.
Take your 5 minutes.
Mr. Walsh. I'd just be real brief. I believe Fish and
Wildlife enforces the Endangered Species Act regarding this
species, and it is a huge problem in New York State too, and I
don't think they're endangered anymore.
Mr. Dickey. It's a problem--it really has to do with the
catfish production, and I wish you would look into it.

wic budget

I've got a problem with the WIC budget. Last year we had, I
think, $92 million in surplus from the previous year, and you
all ask for $76 million in addition to that. And we ask--and I
may be wrong on this, Mr. Secretary, but we asked for
documentation as to why we were looking at an increase in the
WIC usage, or actually the beneficiaries.
Can you explain that to me, why with a $92 million surplus,
you asked and got $76 million, I believe, in additional
appropriations?
Secretary Glickman. Well, I'd ask Steve to answer after me,
but 7.5 million participants is our full participation funding
target, and we're not there yet. So the budget presumes 7.5
million, and that adds up to most of what we're talking about.
There were 11.1 million women and infant children who were
income eligible for WIC, and that is higher than what is
currently served. Most of the WIC program growth is occurring
among children 1 through 4, which is a group not accorded top
priority until we reach full funding levels. So, the best I can
tell you is that that participation level is what motivated the
increase. Is that correct?
Mr. Dewhurst. Yes, sir, that is correct.
The program, as you know, is run by the States, and we
allocate money to the States; we give each State an amount of
money for the WIC program. We know historically that States do
not ultimately use all that money, because they don't want to
overspend their budgets. So they're pretty cautious about that.
And, when all is said and done, out of a $4 billion program, we
usually end up the year with about $100 million in carryover,
simply because that's the sort of the shock absorber the States
establish to prevent any overobligation of the money.
So, when we try to estimate what new money we need for
these programs, we always have to operate in the knowledge that
the States are going to be a little short of the spending
targets we have given them just by the way they carry out the
program now. And so last year we did have a carryover, roughly
$100 million, and we will probably have that carryover in the
future. It's just sort of inherent in the way they run the
program.
Mr. Dickey. Well, can you justify that when we're looking
at a budget problem, and you all are cutting staff years off,
and we can't give minority farmers the benefits we want, and so
forth?
Mr. Dewhurst. Well, we have carryover balances in many of
our programs. You tend to get them any time you take a budget--
say you have $100 budget for a given program, and you allocate
it to 40 or 50 people to run. And, if each one of them spends
$99 of the $100 you've given them, you end up with a carryover.
We see that in the Natural Resources Conservation Service, we
see that in some of the farm programs, and we certainly see it
in WIC.
You know, to the extent the money is not spent, it carries
over into the following year.
Mr. Dickey. Okay, let me ask you another way. Excuse me.
If you have money left over, then how can you ask for an
increase the next year? Would you give me that answer?
Mr. Dewhurst. Because we know that we will also have the
same carryover at the end of the coming year, so we have $100
million we're carrying over from 1998 into 1999, and we know at
the end of 1999 we will also have $100 million because the same
people are running the program.
Mr. Dickey. But last year you asked for $76 million more.
Now just centered on that increase, why would you ask for an
increase, if in fact the year before--of $76 million, and you
couldn't support it, and you're now anticipating--well, maybe
you could, excuse me. But at any rate, you're now anticipating
that that $76 million was to provide and allow for a $100
million surplus in that year.
Now what I'm asking is how can you ask for increases in
that environment?
Mr. Dewhurst. I understand your question; I don't know that
I'm doing a very good job of answering it.
Secretary Glickman. I think the answer is because we're
focusing on getting additional people into the program, and
that's where the increase comes from. I understand your point
quite well.
Mr. Dickey. I have no further questions.
Mr. Skeen. Thanks. Mr. Obey.
Mr. Obey. Thank you, Mr. Chairman. I'm going to ask the
indulgence of the Chair, because I need to ask several
questions, and I'm not going to be here for the second round,
because I have to get to some other subcommittees yet.

dairy issue

Let me just, Mr. Secretary, get back to the dairy issue.
And I hadn't intended to do this, but with Mr. Walsh's
defending his section of the country, I need to explain the
problems in my section.
We've been operating under these milk-marketing orders
since 1938. I have not voted for a farm bill in the last 15
years, because I think they have all discriminated rampantly
against my part of the country. And let me explain why I think
the Secretary needed to go in fact further than you've gone in
adjusting these milk-marketing orders.
The way the milk-marketing order system works is that you
start with Eau Claire, which is Ron Kind's district, and I
represent one ward of Eau Claire. And then you set prices,
based on how far from Eau Claire you are across the nation.
That may have made sense in 1938, when we didn't have any
decent transportation; we didn't have refrigeration. In our
judgment it certainly doesn't make any sense today.
What people--I think if the consumers understood that the
law requires farmers in some sections of the country to be paid
amounts which are very much higher for the same amount of milk
than they're paid in other sections of the country, I think
they'd go bananas; they'd think that's no market system at all.
They'd think that's a political fix. And let me explain it.
Right now the law says, if you're a farmer living in
Florida, the law requires that farmer be paid almost $3 moreper
100 pounds of milk than if you're a farmer in Wisconsin. If you're in
New York, the law requires that the farmer be paid $2 more per 100
weight than he's paid if that farmer produces the same quality milk in
Wisconsin.
I find it ironic that at a time we were promoting free
trade, and level playing fields internationally, we have got
this jury-rigged system of prosperity barriers within our own
country.
Now what your plan did is to make some very small changes
in that imbalance in my view, at least your Option 1B. If you
take your multiple component pricing plan, and you combine it
with what you're doing on the changes in milk-marketing orders,
what you do, for instance, is to suggest that Texas farmers
will still be able to retain about two-thirds of the additional
price that they get for their milk. In Florida you've reduced
the differential by about 2 percent in some counties, and
actually expanded in other counties. And in Georgia, Georgia
still keeps on average about 85 percent of the additional
amount that they get for the same 100 pounds of milk, the same
quality of milk. And North Carolina, they still get to keep 70
percent of the additional price.
I hardly think that you've been radical in changing this
outmoded, mossbacked, 60-year-old milk-marketing order system.
In fact, the way we see it in our region of the country, we
didn't expect that you'd be able to hit a home run, given all
the other pressures on you. We were hoping for a double; we
think we got a bunt.
Secretary Glickman. Better than a foul ball.

dairy issue

Mr. Obey. We appreciate the fact that you've tried to make
some adjustment, recognizing your national responsibilities to
be fair to all regions, but I think we need to understand when
people think that only the Midwest benefits by what you've
done, they have to understand that we're getting absolutely
hammered by the existing law, because the law requires that our
farmers be paid $2 and $3 for 100 pounds of milk weight less
than farmers are paid in other regions. And what your
suggestion does is to simply reduce that existing injustice by
a small percentage. Now that's what you've done, and we thank
you for small favors on the 1B option. I wish it were the only
option.
But then you mitigate what you've done by doing the
temporary increase in the base price, and what happens there is
that the mitigation means that farmers in my section of the
country get about 15 or 20 cents temporary increase, but the
farmers in Florida get a very large increase; farmers in
northeast get a very large increase. In some cases, for the
first 2 or 3 years that means the difference of what my farmers
are paid and their farmers are paid actually broadens.
So I don't think that you have been able to do any huge
favors for the upper Midwest at the expense of the rest of the
country, and I think it needs to be put in perspective. In
fact, I want to just ask you a question, based on an assessment
I got this morning.
With respect to the temporary proposal that you're talking
about, the transition proposal, the Upper Midwest Dairy
Coalition has put out a statement, essentially being opposed to
that portion of your recommendation.
Secretary Glickman. We're talking about the transition
proposal in the marketing order reform, not the BFP flooring.
Are you talking about the BFP flooring?
Mr. Obey. No, I'm talking about the BFP flooring?
Secretary Glickman. BFP flooring, okay.
Mr. Obey. Because, let me simply read what they say.
``Whereas the proposed price floor will greatly insulate
producers and high Class----'' and let me back up to explain
this further.
In Wisconsin, first of all, your adjustments apply only to
Class 1 and Class 2; that's milk that goes into fluid. In
Wisconsin only 15 percent of our milk goes into fluid; 85
percent of our milk goes into Class 3 and others, which means
that they don't even get the benefit of those changes for the
bulk of the milk they produce.
Now what, reading from this memo, it says, ``Whereas the
proposed price floor will greatly insulate producers and high
Class 1 and utilization markets from the pain of falling milk
prices. Producers in low Class 1 and 2 utilization markets,
such as the upper Midwest, will directly suffer from the
negative impacts of price declines.''
And then they go on to say that the price floor, which is
being examined--they go on to say about that, ``It is currently
estimated that placing a price floor of $13.50 under Class 1
and 2 milk will result in an increase of about a $1 to $1.20
per 100 weight in the wholesale price of Class 1 and 2 milk.
This increased price will stimulate milk production,
particularly in high Class 1 and 2 utilization markets.'' And
they see that creating more product, which in turn will depress
the prices which we get for 85 percent of the milk we produce.
Secretary Glickman. Can I just make a comment on that?
Mr. Obey. Yes, after I've gotten one other sentence off my
chest.
In my view that means that there is really very little that
is being done to mitigate the economic crunch on our farmers;
and I think that other regions of the country who are
suggesting that you have driven them to the wall, are in fact
crying crocodile tears, because they're already two or three
steps up the economic ladder than our farmers are because of
the built-in wackiness of the existing system. And I would urge
you, not only to stick to what you've done in the 1B option,
but to go even further. And I would point out that your agency
is not considering pooling, which they say they can't under the
law. I think there ought to at least be pooling if we're going
to have any kind of arrangements like this.
But now go ahead, please. Feel free to respond.

dairy issue

Secretary Glickman. Okay. I'll ask Mr. Collins to respond
on the pooling issue. But let me just tell you, on this
flooring issue, just so that you know, that is a formal
rulemaking. There is a hearing next week, February 17th, so you
need just to make sure your comments are in. The $13.50 number
is the proposal by one group, but we didn't say that that's
what we were looking at. So that matter is open, and I'm
conscious of not wanting to interfere excessively in the
marketplace. The other thing is, that's a temporary measure as
well.
On the pooling issue--do you want to comment on it?
Mr. Collins. You characterized it correctly. The law
requires us to have at least 10 orders, and our General Counsel
has advised us that we can only pool within orders, which means
we have to have at least 10 pools, not one national pool.
Mr. Obey. Well, that's why we'd hope that you would at
least expand the geographical region of the upper Midwest, so
that broader pooling would result.
Mr. Secretary, let me just--because of the time, I don't
want you to take your time now responding, but I just want to
ask you these questions, and you can respond for the record.
First of all, I understand that USDA is working on a dairy
options pilot program, which is intended to allow farmers using
fluid markets to give them greater risk management strategies.
I understand that you've proposed to have pilot programs in
six States and in six counties within those States. I would
strongly urge you to consider Marathon County as one of those
test sites. That is the largest dairy county in Wisconsin, and
there's considerable interest in that county in participating,
even though I have my doubts about how useful in the end that's
going to be.
Secondly, I would ask that your agency take a look at the
devil of a time pork producers and ginseng producers are
experiencing in overcoming trademark barriers in countries like
Korea, Taiwan, and the Philippines. They're not practicing what
they preach on trade.
And I would just like to ask, what has been--organic meat
producers in Wisconsin feel that Food Safety and Inspection
Service is dragging its feet, with respect to allowing the
labeling of organic meat, and that it's costing them a lot of
money in sales. I'd like to know why the case of the slow is on
that?
Secretary Glickman. I would mention to you on organic
certification--there's two issues here. One is the actual
inspection issue; the other is that we have proposed these new
organic rules that have created an avalanche, as well as a
firestorm, of a response. We've extended the public comment
period for 45 days. But I'll check the issue on the inspection
side as well.
Mr. Obey. Thank you, Mr. Chairman.
Mr. Skeen. Mr. Nethercutt.
Mr. Nethercutt. Thank you, Chairman. Welcome, Secretary,
gentlemen.

Research

Mr. Secretary, I'm impressed. I've been on this
subcommittee 3 years, and every time I've heard you come before
us, I've been impressed that you have emphasized research, and
the importance of it, that USDA does and can do in funds for
the benefit of agriculture. And as you said today, it's
critical to the future growth of agriculture. Every statement
that I've seen in testimony and otherwise has stole the virtues
of research, and I agree with you.
You've also testified here before about your support for
export and export enhancement, as well as, I think a year ago,
regulatory relief.
I agree with you on your priority setting for the
Department, and I agreed with you the last year, and we had
testimony from you about the logic of eliminating the Prosser
Research Station in my State, not in my district, but in my
State. And also the North Dakota station, which I think were
the only two that were eliminated a year ago. This committee
put them back in. I would argue, not for partisan purposes at
all, but for the substance of research that is done in those
stations. And Earl Palmeroy's a Democrat, and speaks as
passionately about his, as I do about the one in our State.
As you may know, the Prosser Station does research,
primarily potatoes, peas, and lentils, and other commodities--
up to 100 commodities actually, and it's a very valuable
station. In fact the public/private partnership exists in that
station, and the Potato Commission in our State spent $400,000
on the basis that there would be a station. They put in private
money to improve it.
I was frustrated to see this year that it has now come out
again. I don't know if that's a function of OMB or your
Department, but I would appreciate having some explanation.
Secretary Glickman. The administration has proposed four
labs and work sites in the country to be closed. One is the
Mandan, North Dakota site, which was on the list last year; one
is the Prosser Washington site, and those projects would be
largely transferred to Pullman, Washington, part of Washington
State University or facilities there. There's a site in Royal
Lake, California, an irrigation research station, and there's a
site in Maine, a Northeast Plant, Soil, and Water Laboratory.
The administrations propose those. I'm well aware of what
you did last year--and all I can tell you is that the budget
based upon the full review of all of the different research
facilities.
Now, we do have a commission. In fact, we're meeting today.
Is called the Strategic Planning Task Force on Facilities,
headed by a fellow named Bruce Andrews, who's with Purdue
University. One of their jobs is to look--it's not a base
closure kind of thing, but it is to look at all these different
facilities we have to make sure that within the limited budget
that we have, that there's some sense to all of this. So, I'm
sure that this will be a part of that particular effort. But
George, that's about the best I can tell you right now.

Closing Four Research Stations

Mr. Nethercutt. I understand. And I noticed in your
testimony that the administration's position is to take out
these four stations. I won't put you on the spot and ask you if
the Department is in agreement. I have had some sense that
maybe the Department sees the value of these stations, at least
the two that I'm speaking of from last year, and I haven't
researched the other two.
But I would just argue to you, researchers are difficult to
buy. You can't just go buy one off the shelf and say, we need a
researcher this year. It's a four, and five, and six--it's a
longer term project that needs good people, good scientists to
come into these stations. And I think there's a great morale
reducer when there's this ``in one year, out the next''.
Congress puts it in; now it's back out again. And again, it has
a chilling effect I think on the private sector, and their
commitment to put in private money.
The wheat research facility in Pullman, Washington, which
is in my district, was a collaboration of Federal, State, and
local money; $2 million from the Wheat Commission, and I think
$3 million or $4 million from our State, and $3 million or $4
million from our Federal. That's a good combination, good
partnership.
So, I'll just to say to you, I'm going to fight for this
one, and I respect the work you do, but I think you're wrong on
this one; you, meaning the administration. And I'll say it's
the other guys, and not you folks. Because I think it's really
worthy of looking at very carefully, especially given this
recent influx of private money, and an investment that
ostensibly is going to be gone.
Two other things I want to mention to you. I'm anadvocate
of diabetes research and a cure for diabetes. I've had consultation
with Indian tribes across the country. I think the Department ought to
look carefully at the food programs that exist, as they relate to
Native Americans, and the potential consequences to Native Americans on
the health side, by virtue of the food and the kinds of foods that are
distributed to Native Americans.
Obesity is a significant problem for Native American
populations. It then leads to diabetes, which then leads to
terrible health costs, and consequences to that segment of our
population. I don't know if the Department has thought that
much about the content of food that may be going to Native
Americans, but I'd say it advisedly, I think it's worth looking
very carefully at, because it has a terrible detrimental effect
downstream.
Secretary Glickman. I think it's an excellent point. I
think our Food and Nutrition Service is looking at the WIC
package, and how it effects Native Americans.
I would have to tell you--and I don't know if you ever
visit these labs--the primary work that's done in human
nutrition research is done by USDA--we have six major
laboratories. One is at Tufts University, one's at Baylor
Medical School in Houston, part of the Texas Medical Center,
which is the largest medical complex in the world, I think.
One's in--San Francisco, and one in Grand Forks, North Dakota.
While NIH gets all the discussion of health research, virtually
all of the research on eating and content of food, we do.
I think the point that you raise is an interesting point.
There is some very exciting work being done at these other
laboratories. For example, how to get mineral absorption faster
in food for children. Diabetes actually causes heart disease,
as you know. So I think it's a very good suggestion.
Mr. Nethercutt. I just think there should be good
coordination.
One final point, because I know Henry's waiting.

National Food Gleaning Initiative

The National Food Gleaning Initiative, $20 million. With
all due respect, I was impressed with your comments about all
the private, and volunteer, and private sector efforts there
are to save wasted food.
Secretary Glickman. Right.
Mr. Nethercutt. It's--my judgment is--and again, it
reflects my philosophy a little bit--is that if we can
encourage the private sector, and the private sector is
encouraged to do its work to solve that problem, is it really
necessary, perhaps at the expense of the Prosser Station--which
does good research that provides an ability to grow better food
and so on, and others--is it advisable to start an initiative
like this for $20 million where it's being done very
effectively in the private sector? Again, with all respect to
the government effort, I just think it--in tight budget times
where we're squeezing research--and you'd like to spend more--I
just think that it is unadvisable. I think that it ought to be
very carefully thought out.
Secretary Glickman. Well, I would like to respectfully
disagree. You go to the food banks around the country, and you
ask them--and they are all privately run--you ask them what are
their needs. And they say, ``Mr. Glickman, we don't have
refrigerated trucks----''
Mr. Nethercutt. Right.
Secretary Glickman [continuing]. ``And we don't have the
systems available to make sure that the food is properly
cooled, heated, or chilled.'' Those are largely what we're
talking about. It's to facilitate them--it's not to run their
programs. In bigger cities you might get a big company to do
this. But in smaller towns, you don't have those kind of
resources available. So, the main thing is to help them,
facilitate their effort.
I would also point out that we have an awful lot of hungry
people who are not served through our traditional programs, and
there's a giant gap there, and this is a fairly inexpensive
way--when you consider that 25 percent of the food is being
thrown away in the garbage every single day, it is a pretty
small drop in the bucket. Hopefully it doesn't come out of the
Prosser Washington Center. I understand the tie that you are
talking about there. But this encourages these volunteer
organizations in America that have the resources to be able to
do the job better.
Mr. Nethercutt. I've been in those food banks. I've been in
one in Spokane. I've been in a little one in Walla Walla. They
are anxious for a better refrigerated system. They're going to
move fairly soon.
My point is, is the $20 million for grants? Is it
administrative?
Secretary Glickman. No, it's grants----
Mr. Nethercutt. How much administrative money is there in
it, would you say?
Secretary Glickman. It's grants. It's all grants.
Mr. Nethercutt. All grants?
Secretary Glickman. Yes. And we'll make sure that it is
administered within the operations of the budget. The idea is
grants.
Mr. Nethercutt. Alright. Well, that makes a difference. I
just get worried about new initiatives when we're struggling to
meet the Department's obligations as they exist today.
So, thanks for your work.
Thank you, Mr. Chairman.
Mr. Skeen. Mr. Bonilla?
Mr. Bonilla. Thank you, Chairman.
Secretary, gentlemen, welcome. It is always good to see you
and work with you. I'm still learning a lot on this
subcommittee. It's my second year on the job here, and you all
have helped me tremendously in learning the details of the
programs you oversee. I also want to say, for whatever it's
worth, Secretary, that there's a great feeling among producers
in my State that you have their best interests at heart. You
are a good man, and you are doing a good job, and we appreciate
what you are doing in Texas for all of the producers.

Farm Service Agency Reeves County Operation

I have a question to start out that relates directly to the
FSA operation in Reeves County. We talked about this last year.
I brought it up with the Inspector General when he was here
just a few days ago. Last year, if you will recall, I brought
up this issue, and because a lot of the farmers were waiting
for the--payment and to find out what was going to happen with
the office. There's a lot of uncertainty. Payments were finally
made last year, in September, but there still continues to be a
lot of uneasiness and uncertainty among my 122 farmers in that
county because the IG investigationcontinues, and although Mr.
Viadero came here a few days ago and said that--he is committed about a
two-to-three-week time period to complete the work in Reeves county, we
want to make sure that everything is done right. I'm not suggesting at
all that we move faster than what we need to to complete the
investigation. But I'm just asking if you can provide me with a
timeline or a schedule as well for the FSA to complete its work and to
make final decisions on the future of this Reeves county office to
settle some of the uneasiness that I hear from my producers there.
Secretary Glickman. Congressman, the latest news that I
have is that representatives from Roger Viadero's office, the
IG's office, and FSA will be meeting later this month to
further review any evidence of fraud. To date, it is my
understanding that no instances of fraudulent activity have
been found. But anyway, I will advise you when a final decision
is reached. They are meeting later this month, however.
Mr. Bonilla. I appreciate that. As you can identify with a
Member of Congress when you go back to your district they have
a lot of concerns, so they ask me questions about this all the
time, and I would like to bring them some good news before too
long.

american heritage rivers initiative

I'd like to move now to the American Heritage Rivers
Initiative. As you probably know, at least in our part of the
country, farmers and ranchers are overwhelmingly opposed to
this initiative because of concerns that this may spill over
into more restrictions on private-property rights.
Related to that, I was very disturbed to see that USDA,
NRCS spent $94,000 in Fiscal Year 1997, and $225,000 in Fiscal
Year 1998 on this initiative and used staff time on a program
that does not even have congressional approval. And while it
may not seem like a lot of money, it is still taxpayer money,
and it should always be spent in the most responsible manner.
How do you justify, Mr. Secretary, taking money away from
other congressionally-approved initiatives and programs to
spend money on the American Heritage Rivers Initiative no
matter how small or great the amount? Many questions remained
unanswered and the true benefits of this program are still in
question.
I have gone to countless meetings in my congressional
district, Mr. Secretary, where farmers and ranchers have come
from miles around because of their great concern of what this
program can mean to them, and they are very troubled to hear
that USDA is involved in this program, I know that this is a
small amount of money, but--one of the things I talk about in
my speeches--back home, is how spending has gone down in
agriculture--and in the military as--yet we seem to find money
to work on a project that a lot of farmers and ranchers are
adamantly opposed to.
Secretary Glickman. Well, first of all, let me tell you, my
judgement, in going around the country, is that as a general
proposition, this is a very popular project in the country. I'm
not saying that there aren't some farmers and ranchers that
don't like it. But my judgement, as I travel, is that it is
quite popular, and I think that there is a lot of rhetoric out
there which indicates that it is the end of private-property
rights which just isn't true, because we wouldn't be
participating in it if that were true.
Now, this is a high priority of the President. And I do not
know the specific numbers of what you are talking about, but my
assumption is that there's probably been some staff time at
NRCS associated with looking at proposals and working with the
other agencies of the government. Steve, is that right?
Mr. Dewhurst. I would assume so. We have people in our
watershed programs who would actually be involved in a river-
based initiatives.
Secretary Glickman. Yes, I would guess there's probably
been some technical assistance from watershed-related people
into the project as part of their general work in dealing with
watershed development. But I'm not too familiar with
specifically where the dollars that you came up with are from.
Mr. Bonilla. Maybe you could research that, Mr. Secretary,
and get back to me on that because it is a hot issue--not just
in my congressional district but throughout the State of Texas.
[Clerk's note.--Secretary Glickman provided additional
information via seperate letter. A copy of this letter appears
on pages 33-35.]
I've also received materials that CEQ has published that
suggest ways that the American Heritage Rivers Initiative can
help communities. In their literature, it specifically
addresses targeting the Environmental Quality-Incentives
Program to areas of designated rivers. The program is designed
to allow State technical committees to set priority areas for
each State. This is to allow for the most local input possible,
and to get the money into areas where it is needed the most.
Does this mean that we can expect Federal input into State-
priority areas or changes in the way the program is
administered at the Federal level? I also have to wonder how
you will target EQIP money when it is a cost-share program; the
producer has to be interested in participation in the program
in the first place.
Secretary Glickman. I think that I need to get back with
you on that specific question. I can't answer it.
[Clerk's note.--Secretary Glickman provided additional
information via seperate letter. A copy of this letter appears
on pages 33-35.]
Mr. Bonilla. I appreciate that, Secretary.

funding new rc&d projects

Let me close with one more question here on another issue.
I understand that you have the opportunity to fund 25new RC&D's
this year with the $5 million increase that this subcommittee provided
for Fiscal Year 1998. In Texas, there are nine RC&D's that have not
been funded, and five are in my congressional district. I've been
informed that some of the proposals for my district are excellent. I'd
like to know what standards and priorities are used by USDA when you
select any of these proposals for funding.
Secretary Glickman. Yes, the process is basically peer
reviewed, there is a ranking system. I don't personally, as a
general rule, get involved in picking those projects. They are
generally picked--they appear on a list with points given. Does
either Steve or the deputy know anymore about it?
Mr. Rominger. That's correct. There are a number that are
on a waiting list to be funded, and they are ranked by the
program folks each year, and we are able to fund a few more
each year. The goal is to fund them all eventually.
Secretary Glickman. We'll check on your Texas projects to
make sure they are being considered.
[Clerk's note.--Secretary Glickman provided responses on
three separate issues to Congressman Bonilla via letter. A copy
of that letter follows.]

[Pages 33 - 35--The official Committee record contains additional material here.]

Mr. Bonilla. My excellent proposals, you'll check on those?
Secretary Glickman. Yes.
Mr. Bonilla. I appreciate it very much, gentlemen, thank
you.
Thank you, Chairman.
Mr. Skeen. Mr. Secretary, we have a vote on, as you well
recognize, but what I think we're going to do is help
agriculture and give us about a 30-minute break and we'll take
it up again at about a quarter to one. If anybody would like to
catch a bite to eat, why----
Secretary Glickman. Okay, we'll go downstairs, then.
Mr. Skeen. That will work all right?
Secretary Glickman. Yes.
Mr. Skeen. Then we'll come back, and we'll start again in
about 15 minutes or so.
Secretary Glickman. Alright.
Mr. Skeen. Thank you.
[Recess.]
Mr. Skeen. Okay, we're back on record.
Mr. Latham?
Mr. Latham. Thank you very much, and Dan, thank you for
being here. It is always a pleasure, to have you with us.

dairy policy

I just have to say--I think you have been visiting a little
bit about dairy policy. And last July, apparently you sent a
letter to the leaders of the Agriculture Committee discussing
dairy policy. And in that letter, you said, and I quote, ``I
believe that establishing a price floor under the Federal milk-
marketing orders would be inconsistent with congressional
intent.'' And I see now that you have called an emergency
hearing next week to discuss flooring. What's changed your
mind?
Secretary Glickman. That was then, and this is now.
[Laughter.]
No, that's not a very good answer.
I think that what happened was that there was a lot of
interest in us establishing a permanent price floor, and I did
not think that I could do that. But in the context of milk-
marketing order reform, a price floor is a temporary measure to
expire upon the final date of the milk-marketing order system.
We basically view it as legal, and we can do it.
So, I think that the honest answer is that I view this as
transition and not any kind of a permanent role.
Mr. Latham. You don't think that it is now inconsistent
with congressional intent?
Secretary Glickman. No. But I recognize that it is--I
understand that with the letter we said it. And, my impression
back then was that we were under great pressure to establish to
a permanent-price floor, and I didn't think that we could do
that.
But we have to have a hearing, I haven't established this.
It can't be done without evidence, so I haven't established the
floor itself. One of the dairy groups had asked for a floor at
$13.50, so we're taking evidence on that.
Mr. Latham. Okay.

information technology

To a different subject that has become near and dear to my
heart on the information technology. I'll probably sound like a
broken record, but discuss a little bit the budget, and what
have you done to rectify the problems of the past?
Secretary Glickman. Well, let me tell you a little bit
about budget, and then I would ask both the Deputy Secretary
and Steve to talk about it.
As I understand it, our budget for technology is
approximately $1.25 billion in this budget across the various
mission areas. And to give you a breakdown, that includes $253
million for equipment, $74 million for software, $343 million
for services and supplies, and $280 million for personnel. And
then--as I'm reading from material given to me by my staff--
$447 million is budgeted for intra-government payments which
include funds provided to the States for the technical
infrastructure that support the food-stamp program.
We have a Chief Information Officer, and she basically
establishes the budgets overall. Her name is Ann Reed. We also
have a departmental executive information technology review
board which has to approve all of those expenditures. Because
of the year 2000 problem--which, by the way, Mr. Raines at OMB
is probably more focused on than almost anything else. We have
to comply in dealing with that. The chief information officer
has to approve all information technology expenditures over
$25,000. The Deputy actually put that policy in effect in order
to ensure that we weren't inconsistent with the year 2000
focus.
Mr. Latham. Are you familiar with the fact--it is my
understanding that the Chief Financial Officer just bought a
computer system that was not 2000 compatible.
Secretary Glickman. I'm aware of that. I became aware of
that allegation yesterday, and we are looking into it. We
actually have a new Chief Financial Officer. Just so you know,
the Chief Financial Officer has been a vacant position. That's
been an acting role until last night. The Senate confirmed the
new CFO for the Department.
But I am not aware of anything more specific than that. I
heard it. I don't know if it is true or not. If it is true, it
is irritating. But we're going to check it out, and we will get
back with you.
For example, there was a rumor that the Rural Utility
Service had purchased computer equipment that is not year 2000
compliant, and I understand that that is not true.
Mr. Latham. You don't know about the chief financial
officer?
Secretary Glickman. I don't know about the CFO purchase. I
heard that yesterday.

common computing environment

Mr. Latham. What's the new initiative, the common computing
environment. Does Ann Reed have authority to do anything over
there?
Secretary Glickman. I have so many papers on this.
Mr. Latham. Twenty-nine smokestacks.
Secretary Glickman. Let's start and ask either the Deputy
or Steven to talk about that. But the answer to your question
is, yes, she has the authority, and in subcabinet meetings, I
have emphasized that to the other mission areas. She is in
charge of the computer acquisition and monitoring and oversight
over computer purchases.
Mr. Latham. You are saying that if this was true about the
chief financial officer that she would have been aware of this.
Secretary Glickman. She should have been, but I don't know
whether she was--it happened before she was appointed? So, you
know about the purchase then? [Laughter.]
What do we know about this in order to get the right
answer?
When did the purchase take place that would have triggered
this? Is this a recent purchase?
Mr. Kaplan. It was purchased in 1994.
Mr. Dewhurst. It was a commitment that was made sometime
ago. Some of the equipment and software is just arriving, so
they have been running tests to see what works, and they have
recently discovered that some of it is not 2000-compliant. I am
not aware of the exact magnitude of the problem, but if we fix
it, I'm told that the Chief Financial Officer and Ann Reed are
involved in looking at this to see what exactly the problem is.
Secretary Glickman. I think that we need to get the facts
to you as quickly as possible. I just--I don't know enough to
tell you anymore about it.
[The information follows:]

[Pages 39 - 40--The official Committee record contains additional material here.]

Mr. Latham. Outside of this, you think that you do have a
handle on the 2000 problem?
Secretary Glickman. Let me put it to you like this----
Mr. Latham. This does not instill confidence, shall we say?
Secretary Glickman. Well, okay, except that I was just made
aware of this yesterday. But the implications in your question
is that they had just gone out and bought equipment that was
not compliant. I don't think that's accurate. That's why there
was some hesitancy here.
Frank Raines has told us that of everything that we do in
our respective departments, year 2000 compliance is the number
one management task that we have, each of us. As far as I'm
concerned if our agencies and offices don't do this one well,
then that is a chief judge of their performance--as well as for
the CIO. I get reports weekly on compliance under the year 2000
work, and what they are doing, how much they are spending in
order to make sure that our systems are compliant.
Mr. Rominger. The latest report from the Chief Information
Officer was that 40 percent of our systems are compliant now,
and that we're on track to have all of them compliant in time
for the year 2000.
Mr. Latham. Okay. I don't know how we are on time here, Mr.
Chairman.

conservation reserve program

In the Inspector General audit, the CRP program found that
there was a 47 percent error rate in calculating the
environmental-benefit index. Are you comfortable with that
accuracy rate?
Secretary Glickman. Well, there was some difference in
opinions within the mission areas as to the specifics of the
error rate as you would extrapolate Nation wide. There were
error-rate problems, and, as a matter of fact, there have been
management and personnel actions taken in at least one State
where errors occurred as a result of the computation of the
EBI. So, that report did cause us to both take a personnel
action as well as to ensure that it did not happen again.
Mr. Latham. And I'll just tell you--I mean it was very,
very frustrating last year with the sign up, and I know that I
made it clear to you personally, I think--and other people in
the Department--but you really have to question what motivation
there was as far as some of the judgements that were made. In a
State like Iowa where my district represents one-third,
geographically, of the State, of the 15 sign up, I got 3
percent of the acres in the State of Iowa. Another member of
the other party got 74 percent of the acres with a smaller
district by far. Obviously--you know I probably would not want
to change the level of the quality of farmland, but obviously
we were penalized greatly because we have very environmentally-
sensitive ground that should be in CRP which happens to be,
say, in the same county or close to higher-valued land. And,
obviously, when you have the environmental-benefit index wrong.
You could flip a coin and do as well, obviously, at 47
percent--it has real concern, as far as I'm concerned, as to
the equity in the program and who is making those type of
judgements and on what basis.
Secretary Glickman. Well, first of all, let me say that in
terms of the IG report, the Farm Service Agency has taken a
position that is contrary to the IG report. They have filed
their comments. And, while I think that the IG made some good
suggestions, I wouldn't want to say that all of their findings
were accepted by a lot of folks on the ground as being entirely
accurate.
But, second of all, I will tell you that the 15th sign up
for a new CRP was a first attempt for us to change the CRP
after it had operated in exactly the same way for a long period
of time. I think the 16th sign up is probably more to your
liking because it reflected, again, a re-review of how we did
these decisions. And we'll have future sign-ups and hopefully
with each one we'll learn from those mistakes.
Mr. Latham. But, in knowing that, according to the
Inspector General who is unbiased and it is not their office
that did the indexing--has there been any effort by you to go
back and look to see if there were inequities in the 15th sign
up to try and correct that inequity?
Secretary Glickman. Well, there were appeals made at each
sign up, and there was additional acreage offered, a rather
substantial amount.

CRP error rate

Mr. Latham. But it had to come from the producer? It did
not happen by the Department who made 47 percent errors.
Secretary Glickman. Well, first of all, I don't accept that
there's been 47 percent error rate.
Mr. Latham. Well, the Inspector General doesn't have a dog
in this fight.
Secretary Glickman. No, I understand that--and, by the way,
we have one of the best Inspector Generals in the entire
government, but a lot of technical people in the Department
disagreed with his findings on this matter. The Inspector
General files hundreds, if not thousands, of reports every
year, and then he gives the opportunity for the agency to give
their comments and response. It doesn't mean that he is
absolutely accurate on every single report. I would have to say
that he is right most of the time. Mr. Collins, do you have a
comment?
Mr. Collins. I might say----
Mr. Latham. Before you start, what is your Department? What
do you say, then, was the error rate?
Secretary Glickman. I don't have a number, a specific
number on that particular error rate right now.
Mr. Collins. We don't have a number, it is a question of
what you call an error. There can be an error where you just
simply add up all the components wrong and that is an error. In
other cases there were judgements that were made about the
quality of the bid based on records in the office, and later on
it turned out that farm--the producer had changed the cover
crop on the land, for example, which was not recorded in the
office, and therefore, the score that was awarded for that
piece of land was, in fact, inaccurate because the farmer had
made some changes in the way he protects his lands, and the
office didn't know about it. That's an error. Those are the
kinds of things that we corrected through the appeals process.
We originally accepted 16.2 million acres, I believe in the
15th sign up. Then, we adjudicated all the appeals. And after
we offered contracts to individual producers, some of those
producers chose not to follow through on the contract. When
those two sets of factors, both the appeals and those producers
chose not to follow through on the contract--when all was said
and done, we accepted 16.8 million acres.
Secretary Glickman. So an additional 600,000 acres? And a
lot of those changes would have been due to a variety of things
that could have been called errors. Look, I acknowledge that in
Washington State where Mr. Nethercutt was involved, there were
problems that his people would call errors, but the fact is
that we went back in and said, ``You know what, we have to re-
evaluate how we compute this EBI because there are other
factors that we needed to take into account,'' and we did that.
But that wasn't classically an ``error.''
I'm not sure that's what the Inspector General was talking
about, either. I think that the Inspector General was talking
about, let's say, the species that weren't there that the
government said were there. Those kinds of things.
And we attempted to go back in each State and look at that
particular issue, and that's one of the reasons why we added an
additional 600,000 acres.
But it wasn't perfect, I'll admit that to you.
Mr. Latham. I agree. [Laughter.]
We agree, Dan.
Secretary Glickman. Okay.
Mr. Latham. If I can have another chance later, I'll----
Mr. Skeen. Go ahead.
Mr. Latham. You are really kind today, Mr. Chairman. As
always.
Mr. Skeen. Well, you know that when a field is fertilized
it will keep growing.
Mr. Latham. Okay. [Laughter.]

crop insurance

The Department put together a plan to move the cost of
administration reimbursements for crop insurance from
discretionary to mandatory. When will the Department be
submitting the legislative language to the authorizing
committee?
Mr. Dewhurst. I don't know a date. The legislation is
largely drafted. We have some clearances to go through within
the executive branch, but I would expect the legislation to
come up here pretty quick.
Mr. Latham. You don't have a date--why?
Mr. Dewhurst. I can't do that because I can't control the
other folks who review the proposal.
Mr. Latham. Okay. I think I'm through now, Mr. Chairman.
Thank you.
Mr. Skeen. Mr. Fazio.
Mr. Fazio. Thank you, Mr. Chairman.
Mr. Secretary, nice to see you and all of your associated
staff, including my friend and constituent, Rich Rominger.
I apologize that I haven't been here earlier, and I hope
that I don't double back over anything that we've talked about.

national research initiative

The one thing I did want to ask about, Danny, is the
research initiative, the NRI, which I know you are quite proud
of, and I think it is a significant issue and certainly
something that we would hope that we could support. But I'm
concerned about the erosion of other aspects of research within
USDA's budget. The formula funds seem to be in trouble. The
Hatch Act funds severely decrease some 15 million, McIntyre
Stennis, the forestry program is decreased, Smith Lever
extension activities cut by $10 million, payments to the
historically black agriculture schools are only held steady.
So, it seems that we are reducing research in general by
taking another approach which seems to highlight an increase at
the same time we're making a series of reductions.
Do you want to comment on where you think we're going and
what the rationale behind that approach was?
Secretary Glickman. Well, it is number-driven to some
extent. Now, there are some increases, including the
President's food safety initiative and the national food genome
strategy that are considered high priorities. And there are
some other enhancements, for exampleagricultural management
decision practices under some of the conservation areas.
But, as I've said before--the agriculture-research budget
in real terms is coming down, not going up. I've been thinking
a lot about this. The problem with the agriculture-research
budget is that it is so decentralized, it's agriculture
experiment station driven, land grant driven. It is often
driven based upon who is in which building located where. And
then a project takes on a life of its own. I know that. I had
that in my own district.
That strategy I don't think is very productive for the big
picture of getting increases. You know, we have all these
massive problems in agriculture. For example, pest resistance,
insect resistance. We have erosion, sustainability. We have
feeding the hungry. We have human nutrition. And what we don't
seem to do is put these categories in a way that are easily
understood by the public. When you look at the big increases in
research in this budget--I'm talking about the general budget--
a lot of them are important, and I obviously will support
them--cancer research, health research, the NIH budget, the
National Cancer Institute budget. Those are easily identifiable
by the public.
What we have got to figure out is how to articulate the
mission of agriculture research so that it becomes something
that is positive and accepted nationally as important to the
country beyond just our own discussion in agriculture circles
so that we can start getting some augmentations where we need
them.
Now, saying that, I think that we will be able to basically
take care of our needs within this budget even with the changes
that you talk about. But it can't go on forever like this.
Mr. Fazio. Well, I know the debate rages on between
competitive grants and formula grants, and I'm certainly not
going to weigh in just on the formula side because I tend to
agree that competition is healthy in research, and certainly
I'm not worried that the institution I represent is doing well
under that approach. But I know that many of our land-grant
institutions really look to the formula side to underwrite some
of the costs of doing business, the overhead, in a sense. And
if we're not careful, we're going to have this inflationary
erosion and make it harder and harder for these very valuable
institutions to make their overall contributions.
Rich?
Mr. Rominger. Yes, I would just add that we agree that we
would like to have more money in our budget, but when we have
the numbers that we had to work with, we made some choices, and
we said that we do want to put more money in the NRI, and we
also put more money into integrated PEST management. Most of
the funds in both of those programs go through the land-grant
universities and the only way to increase those was to take a
little bit out of the formula funds.
Mr. Fazio. I know--I had a chance to chat earlier and the
OMB pass back--almost caused the Department to pass out. It was
difficult for the Department, I know, to absorb this year. I
think we're all running into that in a lot of different
departmental budgets.

hazard analysis critical control point system

Initiatives are very important. We need them, but we've
paid the price for them in other parts of all our budgets.
I'd like to ask about HACCP and the implementation so far.
Can you tell us what we've encountered? Anything evident to us
that we didn't anticipate with the implementation of our new
food-safety approach?
Secretary Glickman. By and large, I think it's been pretty
successful. The implementation started with respect to 300 of
the largest plants last month. That is about 92 percent of the
meat and poultry in the country. I don't think that we have
found any major catastrophes out there. I think industry, by
and large, is working through this very successfully. There
have been a few problems, a few plants that haven't set up
critical control points to determine contamination as much as
we would like, but we're working with them. We began testing--
you know we're doing salmonella testing, the industry is doing
generic e-coli testing.
So, I would say from the food-safety folks, they think it's
going fine.

food safety initiative

Mr. Fazio. As you know, I've introduced the Safe Food Act
which is designed to create an independent food safety agency.
It was our experience recently when we asked for a briefing on
the food-safety initiative, we had 24 officials from FSIS, ARS,
CSREES, ERS, AMS, APHIS, FDA, EPA, CDC. The transportation
costs alone in getting that group to come over and brief us is
one of our underlying problems in eroding the administrative
budget.
What do you think? Is there a chance the administration
might try to make more rational the way we deal with this ever-
growing public concern about food safety?
Secretary Glickman. Well let me--first of all say that the
National Academy of Sciences is currently doing a study on
this----
Mr. Fazio. This committee----
Secretary Glickman. You asked for that.
Mr. Fazio [continuing]. Generated that, yes.
Secretary Glickman. And so, I think that it is useful. And
I'm not going to pre-judge it, nor am I going to tell you that
I think it is inherently a bad idea.
I would tell you that if you did it now, you would create
absolute chaos. You have 7,500 inspectors out there who are
currently in the process of going through the most major change
in meat and poultry inspection since the 1920's. If we were to
overlay this right now with creating a single food agency, I'm
convinced that you would probably have a revolution out there,
and it would be a very bad thing and nobody's food would be
made safer in that process.
So, I think that we've got to let this HACCP system go
forward.
And by the way, we do work very well with FDA. The
cooperation with FDA and CDC is probably better now than it has
been in a very long time.
But, you know, if you were starting this from ground zero
would the system look like this that we've got now? Probably
not. And so, I don't want to pre-judge at some point in time
that we may want to make improvements in the system, but I
would say now is not the time to do it.
Mr. Fazio. Well, I appreciate your concern about
jumpstarting something. If we were to agree to do this,
obviously we would have to do it over time. We would have to
make the whole system more rational, but we would have to do it
effectively and gradually would probably be the meansto do
that.
But, we have a kind of crazy quilt of approaches where we
put a lot more emphasis on meat products, for example, than we
do for a lot of other things that the public consumes, and I
don't think they are quite aware to the degree which we do make
more or less effort in a wide variety of areas.
Secretary Glickman. Well, the President's Food Safety
Initiative does make an effort to begin the process of
seriously augmenting the Federal inspection role on fresh
produce, fresh fruits and vegetables. It is true, we hardly
inspect anything that comes in across the border in fresh
fruits and vegetables. I think that people are somewhat
comfortable that the meat and poultry is inspected, but I think
they are quite shocked to know that there is virtually no
inspection--and that is one of the things--on fresh fruits and
vegetables--and that's one of the things--or even seafood which
is somewhere in between----
Mr. Fazio. Sure.
Secretary Glickman. The Food Safety Initiative is
attempting to deal with that issue.
Mr. Fazio. Let me ask you, in this regard. FDA is seeking
authority to expand its surveillance of food growing and
manufacturing practices to include visits to producers in
foreign countries. Do you think that the Department would
expect that those visits to foreign producers would require a
reciprocity? That is, foreign governments sending their
inspectors here to our producers who intend to export our
products overseas?
Secretary Glickman. Well, you know, I can only tell you
right now we have our own USDA inspectors in foreign meat and
poultry plants to ensure that they meet equivalent standards.
By the way, they have the right to look at our plants as well.
I don't know how many of them actually have people in our
plant. But I do not believe that our farmers and ranchers,
certainly, would like to have regulators from Europe come to
their farms and look at their practices.
Mr. Fazio. Probably somewhere deep in the recess of my mind
that's why I asked that question.
Secretary Glickman. Yes, I think that would not be very
well tolerated and shouldn't be.
Mr. Fazio. Well, I mean, I think we have to think twice
about advocating certain things that bring about concomminant,
reciprocal arrangements, and because we don't really import
that much meat product--I think probably more lamb than
anything else, to the chagrin of the chairman--we probably
haven't begun to estimate what the impact would be on our
produce industry because we export a tremendous amount of
orchard and nut-crop products, and I just thought I would be
interested in the Department's response on that.
I don't want to take any more time, Mr. Chairman.

reciprocity on pork and chicken

Mr. Skeen. For reciprocity on pork and chicken and things
of that kind, we'll leave their little wheat pocket in
Southeast Asia alone. That was why, I think, that question was
in there about whether or not we're really getting reciprocity
as far as the inspections were concerned for our shipments out
of the country.
Secretary Glickman. Well, for example, in Australia, they
have been irritated because we haven't given them reciprocity
on meat. We're working with them on that, but--I don't want to
give them any market, even their little market in the Far East.
I don't think that we should just accept the fact that certain
parts of the world are their markets. I mean, right now we're
using GSM credits overseas, especially focused on Korea and
Indonesia, and the Undersecretary, Gus Shumacher, just came
back from a trip where he was called an ``avaricious looter''
by the members of the Australian government for our attempt to
come in and use our credits which are perfectly legal under the
GATT agreement. These are not subsidizes, they are commercial
bank credits, and I think that we ought to continue to use
them.
Mr. Skeen. But it caused a little tremor that runs up and
down his spinal cord--I thank the gentleman for yielding.
Mr. Fazio. I just want to say, in passing, I really
appreciate the Market Access Program being fully funded in the
budget this year. That's very important to a lot of people that
I represent.

commodity purchase program

I had a question about the commodity-purchase program.
We've historically had a small-business preference there. I
understand that USDA has recently required 100 percent set
aside for specific school-lunch program purchases. The effect
it has, however, is on co-ops which are, you know, kind of an
amalgam of a lot of small businesses. They might be excluded
from being able to participate in the bidding on those
commodity purchases. I wonder if the Department has thought
that through?
Mr. Rominger. It is a concern, and I think that we want to
review that because we did make some changes in the program,
and we've made similar changes in other programs, but in those
cases we did include co-operatives along with small businesses.
So, I think in this program we do need to review that.
Mr. Fazio. Is that an administrative decision that could be
adjusted? Or is that something that you need to hear from us
on?
Mr. Rominger. I think that is an administrative decision,
and we need to review it.
[The information follows:]

Federal Acquisition Regulations developed by the Federal
Acquisition Regulations Council require the use of small
business in certain circumstances and in other circumstances
they provide agencies the discretion to utilize small
businesses. Our review of USDA commodity purchases indicates
that USDA has a policy to use small businesses whenever
possible, consistent with FAR. However, in making those
commodity purchases, USDA is required to utilize definitions
for small business developed by the Small Business
Administration (SBA). SBA does not distinguish agriculture
cooperatives from other forms of business in their definitions
of small business. Should an agricultural cooperative meet the
SBA definition for small business they may compete on contracts
set aside for small business.

Mr. Fazio. Well, I would just as soon urge you to be
consistent and allow co-operatives to participate as
smallbusinesses.

organic standards

On organic standards, as you know, that is a particularly
important issue for my State. We have 1,200 producers, and
50,000 acres in production. It is an $85 million industry in
California, which is small in the larger context of, what, a
$16 billion industry. But it is a significant and growing one.
It seems that our rules are a good deal more stringent now
than those that have been adopted at the Federal level, and our
concern is that we still work towards national standardization.
I know that there were some issues that were sort of left
out there for further resolution. I wonder if you could comment
on the proposed rule and some of the factors that have been
involved in thinking through some of the more contentious
issues that weren't really resolved fully. And I know that we
were pressuring you to get the regs out, so you did the best
you could.
Secretary Glickman. Well, first of all, we've extended the
comment period for an 45 additional days. We've received
thousands of comments on the Internet and in other ways as
well.
There are three unresolved issues. There are others that
are differences of opinion, but the three major unresolved
issues are: Should we allow genetically-engineered crops to be
certified as organic or not? Should we allow irradiation to be
used on crops and call that organic? There is also the use of
sludge, which is a kind of treated sewage in the fertilizer
context which is in some places conventional and allowed to be
called organic.
We didn't deal with that in the rule because the comments
were coming in so significantly that we decided that we would
leave that part of the record open.
The organic community, frankly, took our decision not to
comment to mean we were going to include that in the rule. And
I've made it clear that is not, in fact, the case. We haven't
made that judgement yet.
So, right now this is nationwide about a $3.5 billion
industry. It is growing by leaps and bounds.
Mr. Fazio. Right.
Secretary Glickman. World-wide this is one of the biggest
possible markets because the Europeans and the Japanese, among
others, love organic food. It offers a nice niche to small and
medium-sized farmers as well. Now you can see some of the big
companies are getting involved with it.
Mr. Fazio. Sure. I see Fresh Fields full every time I go
by.
Secretary Glickman. That's right.
The organic community wants this as a selling tool, a
marketing tool. When you label something organic, people will
know what it is. It is not a food-safety issue at all. Organic
doesn't necessarily mean safer, period. It is just a marketing
tool.
And they are upset because we haven't resolved all of the
issues, and we're just going to keep that record open for a
longer period.
Mr. Fazio. But they are going to be resolved in some
timeframe?
Secretary Glickman. They will be resolved.
I don't think--without pre-judging the issue, I doubt that
we're going to come down with a rule that the organic community
detests. You know, they are the ones that asked for it.
Mr. Fazio. On the other hand, they are a group that does
tend to differ even among themselves.
Secretary Glickman. Well, and the other thing is they are
not the only people who should have an impact on this rule.
Mr. Fazio. Exactly.
Secretary Glickman. I mean, I've got to look at the world
as a whole as well.
Mr. Fazio. And you do allow the States to be more stringent
if they wish to, although there may be, with the national
standards, some desire on those States to conform, otherwise
they may be disadvantaging their own grower community.
Mr. Rominger. What the Secretary also said in that
announcement where the comment period will close now, April 30,
was that we'll review all those comments and then put out a
proposed rule. But they will have another chance to comment
when we re-propose the rule.
Mr. Fazio. Well, I can see this is not an issue that will
be resolved easily or quickly, but I do congratulate you on
stepping up to it. It needed to be dealt with even though it
wasn't going to be simple.
Secretary Glickman. It had been seven years, and it could
have been seven more years.
Mr. Fazio. I understand. That's why I raised it a year ago,
and I'm taking all the credit for having moved you to----
Secretary Glickman. It's not substantively what we said----
[Laughter.]
Mr. Fazio. I want to thank you, Mr. Chairman, for giving me
the time. I will put the rest of my questions in the record,
and I simply want to say how pleased I am with the way my good
friend and colleague Mr. Glickman with his staff has been
running the Department. I think he's--particularly on food
safety--been a real breath of fresh air and deserves a lot of
credit.
Mr. Skeen. Thank you.
Mr. Nethercutt?
Mr. Nethercutt. Thank you, Mr. Chairman. Thank you, sir.

asian financial crisis

Mr. Secretary, I agree with Vic's comments about the
Market-Access Program and export enhancements and so on, and
your's certainly. What is your sense of the impact that the
Asian financial-problem crisis will have on American
agriculture? Have you all quantified that yet? What are your
projections?
Secretary Glickman. Yes, this morning, Secretary Rubin and
Mr. Greenspan, and I gave a briefing to the House Agriculture
Committee. As a part of that, we prepared a fact sheet, a USDA-
fact sheet which I'm going to give you because it is one of the
best things that can give you a summary of this.
But let me just quickly tell you a couple of things. Asia
is 40 percent of our exports and about half of our export
growth in the last decade. So, this is a big market, and our
initial estimates are for our exports to fall at least by $500
million this year, but it could be more. We'll have a forecast
on the 23rd of February. Probably somewhere between 3 and 6
percent reduction could occur for each of the next two years
from what otherwise would have been--so that could be about $2
billion in Fiscal Year 1998.
It was interesting today. Mr. Greenspan, in arguing for the
IMF funding said the following, ``the currency crisis, in
addition to reducing the purchases of our products, has another
affect. It's had the effect of weakening the Canadian and
Australian currencies which makes their products cheaper than
ours and they are picking up some market share over us as
result of this crisis as well and that is, of course, having a
bearish affect on our markets for grains and livestock
products.''
So, you know, Korea and Indonesia have been the big hits,
but we have put out about $2 billion in credits. It's had
impact in Korea, no question about it. We have kept markets
because of the quick use of those GSM credits.
And the other thing is, these markets have been somewhat
restricted to us. However, Indonesia now has reduced their
tariffs on our products from 20 percent to 5 percent, and part
of that is because of the international-IMF requirements there.
So, all I can say is that it is going to have some impact.
At this stage it is impossible to determine the magnitude. The
crisis seems to have moderated a bit, stabilized a bit, but you
don't know where things are going. And, quite frankly, I will
make a pitch for this. I think that the IMF issue is totally
different than other trade-related issues. We are such an
export-dependent country in agriculture that--if, in fact, the
crisis worsened, it would have a monumentally bearish affect on
American agriculture.

asian crisis impact on exports

Mr. Nethercutt. If you, in your discussion today--or
Secretary Rubin or Mr. Greenspan--have you looked at the
different commodities that are affected either proportionally
or disproportionately? Has that analysis been done? If it has,
great, I'd like to see it. If it hasn't, maybe that is
something to look at too.
Mr. Collins. What I might say is, we forecast U.S.
agricultural exports four times a year. As the Secretary
mentioned, the last official forecast was in December in which
we foresaw a $500 million drop due to Asia. Since then we have
created an Asian-currency crisis team to look at this and track
it on a daily basis.
In mid-January, our snapshot was that we foresaw a 3 to 6
percent decline in exports--that's the $2 billion decline--due
to Asia alone. When we produce our next quarterly forecast,
that will be an export estimate due to all factors. We are
actually increasing exports of some commodities such as
soybeans and soybean products.
There has been a serious drought in Malaysia, Indonesia.
World palm-oil production is going down. Soybean-oil prices are
going up. There are tremendous export opportunities for soybean
oil. So, there are a lot of factors going back and forth here.
But to get to the answer to your question, the largest
impacts will be for meat and poultry products. Generally we are
talking about a 5 to 6 percent decline in U.S. exports of those
products. The next largest impacts would be horticultural
products, roughly a 4 percent decline. The least affected would
be grain because they are used as an input. The consumer
doesn't face those prices directly. They are a smaller
proportion of the consumer price.
So there are those commodity-type effects.
Mr. Nethercutt. That's very helpful, and I thank you. And I
really support the GSM credit emphasis. I think that it is
great that you are emphasizing GSM credits and are thinking of
it very carefully as well as export enhancement.
How much money did we use last year? None, zero?
Secretary Glickman. None.
Mr. Nethercutt. Okay. Alright, at least you are aware that
that is a tool.
Secretary Glickman. We used the dairy export-incentive
program----
Mr. Nethercutt. Yes, right.

integrated pest management

I just--a couple of quick questions. I noticed in your
testimony, Mr. Secretary, the goal of the IPM, the
IntegratedPest Management program, is--I think it is 75 percent
coverage by 2002. Do you know how many acres are currently using or
have taken advantage of IPM? Has that been decided yet?
Secretary Glickman. Do you know?
Mr. Rominger. No, we have not taken a look at it lately.
Mr. Nethercutt. Will you be doing that in the normal course
of your activity this year so that you know whether you are
going to reach your goal or not?
Mr. Rominger. That's right.
Mr. Nethercutt. Okay.

PL-480 Program

One final question--and I've written you about this, Mr.
Secretary, with regard to the PL-480 program and the terms that
the Department specifies Tenders. I guess really the shipper
has to bear the risk of the commodity getting from producer to
the port. And if the railroad, for example, doesn't get
commodities to port on time and the opportunity is missed, the
loss is borne by the producer rather than the railroad. And I
know--I have some sense of how the PL-480 program works. And
I've written you a letter on it.
I'm just wondering to what extent you have had a chance to
even focus on it? And if not so much, when you might?
Secretary Glickman. I'll get you a response sometime next
week.
[The information follows:]

[Pages 53 - 54--The official Committee record contains additional material here.]

Mr. Nethercutt. That's great.
I'm--the purpose of my letter was not to complain, but--
other than to raise the problem and complain about the
circumstances that affect the farmer, but also to look at
whether the Department might want to work with us or other
Members of Congress as to how there can be some solution that
doesn't seemingly so disproportionately affect the farmer as
opposed to the transporter, the railroad. The ownership doesn't
change hands until it gets to port, and if it gets to port
late, then the producer is stuck with--bears the loss as
opposed to--a disruption in the railroad industry, for example,
that may cause that delay in getting it to port and off to PL-
480 recipients.
Thank you.
Mr. Skeen. Mr. Kingston.
Mr. Kingston. Thank you, Mr. Chairman. Since this hearing
started, I went to another hearing, I met with my staff, I went
to lunch and I also gave a speech. Mr. Secretary, I hope they
let you go to the bathroom.
Secretary Glickman. Twice, and also to lunch for 15
minutes.
Mr. Kingston. Well, that's good.
Secretary Glickman. Twenty or 30 minutes, I'm sorry, 30
minutes.

proposed tobacco settlement

Mr. Kingston. Mr. Secretary, on this proposed tobacco
settlement is the U.S.D.A. at the table?
Secretary Glickman. Yes.
Mr. Kingston. In a big way? Are you an afterthought or----
Secretary Glickman. No, we're at the table in the context
that we have a team that is actively engaged on the legislative
side of the picture as it relates to what the tobacco farmers'
involvement would be in any settlement process.
I don't have any language for you right now. I do know that
the White House has repeatedly called upon our team. It's
Charlie Rawls, who was the Executive Assistant to the Deputy
Secretary, who is now our acting General Counsel; Deputy
Undersecretary Dallas Smith, from North Carolina, who knows
more about the tobacco program than anybody else around.
The President has committed that dealing with the farmer
will be a linchpin of any settlement. We're not going to sign
off on any legislation without that. There is obviously some
difference of opinion within tobacco country as to what this
ought to look like. But we are at the table.
Mr. Kingston. Will that definitely mean a buyout? Are we
moving in the direction of a buyout? Are we moving in the
direction of maybe a special--and I hate to use the word
subsidy, but a special kind of investment subsidy for the
farmers to get involved with alternative crops.
Secretary Glickman. Well, it's hard to say where we are,
except that my guess is that both of those concepts are being
seriously considered. But, you know, I've talked to the
President about this and other people in the Domestic Policy
Council. I think there's the clear belief that Capitol Hill is
going to have a great impact into what this proposal looks
like.

meat and poultry inspection

Mr. Kingston. Switching gears, on the inspection of meat
and poultry, and other agri-type businesses where you have an
inspection component to it, many of the producers in our area
have become increasingly concerned about the power of a
U.S.D.A. inspector to close down a food processing plant for
the day. Five hours down time is just a huge problem.
And they're concerned that it might not have been
accurately closed down. For violating the law, fine, close it
down. But if you have an inspector who's made a mistake, to
quote one processor, he told me, he said, can you imagine, you
have a business with $100 million in receipts, you have 600
employees, you have deadlines to get the food out to grocery
stores and so forth, and one U.S.D.A. guy can make a mistake
and close you down for 10 hours and you could potentially even
be out of business for that.
Just tell me where the balance is.
Secretary Glickman. Okay, but first of all, let me say that
we are doing a lot of training right now. Most of our
inspectors don't want to close down a plant. I mean, it puts
people out of work. It's just not a power you'd like to use
willy-nilly.
We are doing an extensive amount of training, particularly
with all the new HACCP rules. An inspector alone can't close
down a plant. There's a process that they have to go through
and there's a district manager and the issue works its way up
through a process.
I don't personally get involved in decisions that like--you
know, these are professional decisions that are made to close
down a plant. But there is a process in the Food Safety and
Inspection Service, so you just can't have one inspector come
in and say, ``You're closed.'' That would be pretty problematic
if that happened.
One other thing I would tell you. I have asked for
additional authorities here. The industry doesn't like it. But
I don't like the idea that the only authority I have is to shut
down a plant. That's what I call the atomic bomb authority.
Nobody wants to put 700 people out of work.
If you have serious food safety problems, fecal material,
or other terrible things that are happening and the product is
going out, maybe there's no other option.
I'd like to have civil fine authority, which is what the
FAA has, which is what the bank examiners have so that there is
some intermediary authority other than shutting a plant down.
We'll see if Congress decides to give us that kind of
authority.
The other thing is the new HACCP rules. The old way we used
to do business is that if you had a problem--let's say you saw
something on a piece of meat that shouldn't have been there--
the inspector would say, ``Aha, deficiency.'' There was never
really a process to look at the plant systematically to see if
it was operating in a clean way.
And so what we never really did was to ensure the plant and
U.S.D.A. were working together to develop systems to make sure
the plant itself is clean. Now you've got testing and you've
got a science-based system with trained inspectors. I think
we're going to have a lot better operation, and a plant will
know earlier on if they have a problem.
And that's the whole idea. Most people don't want to serve
dirty food or dirty meat. But the other system really didn't
encourage you to deal with the problems early on. And I think
this new system will do that.

haccp

Mr. Kingston. One thing that we may need to think about is
how can a food processor disclose their concern without being
worried about revenge of the individual inspector. I think
inspectors are far more open and less vengeful than a food
processor would believe, but at the same hand, it seems like
the food processor is very, very much afraid to come forward
and say, look, I have a problem right here on this floor, I'm
not sure what to do, and can you help me, give me some
technical assistance.
But instead, they don't want to do that, because they're
afraid that the inspector will say, okay, that's it, everybody
out of the pool, the gig's up for the day and we're going to
get this problem fixed.
We need to think of a way that a food processor can--
instead of coming to me as a member of Congress and saying,
hey, we have this problem and I trust you and I'm telling you
about it; but I would never come forward and tell U.S.D.A.
about it because they'll shut me down for revenge.
It seems like there ought to be some way that we could
encourage maybe a little more open dialogue.
Secretary Glickman. Well, the new HACCP system is basically
geared towards each plant setting up its systems and then they
have critical control points where you're likely to have the
problem on the cutting room floor or wherever else it is.
The whole idea is for the inspectors and the plants to work
together on a systems-based approach to make sure that those
systems are clean and working. They'll also be testing there
and that kind of thing. So it is really geared towards
collaboration.
The old system was based on a deficiency slap you with a
deficiency notice, and you know, you can't keep your plant open
unless you fix that. They would fix it and they would move on.
I don't know how many inspectors are viewed that way by
food processors. But our goal is to make sure that they are
talking to each other.
The other thing I would have to tell you, though, is that
the new system means there's a lot more responsibility on the
company, the plants, to set up systems and do it the right way.
And, it means the top management of these plants have to be
engaged. I suspect that has not been universally true in a lot
of plants in the country.
Mr. Kingston. Thank you, Mr. Secretary. Mr. Chairman.
Mr. Skeen. Thank you. Mr. Latham, last shot before we wind
her up.

user fees

Mr. Latham. A couple of things, very briefly. You've got in
the budget, I think, $10 million each of user fees for the FSA
and the NRCS. What are you going to be charging farmers for?
They basically only deal directly with farmers.
Mr. Dewhurst. The intention is not to charge farmers. Both
of those agencies gather information in the course of their
business. A lot of times they gather information from the
farmer. Soil survey information in the case of the NRCS, or
acreage information in the case of the Farm Service Agency.
There are folks who have access to that information and use
that information. Insurance companies, to some extent; private
developers who use soil survey kinds of information. The
intention is simply where you have someone who's in business
for profit making, you ought to be able to charge a fair charge
for that sort of information, and not have taxpayers continue
to pay for it.
But the point is not to levy some kind of new charges on
the producers who are providing the information in the first
place, but only on those up the line who are, in fact, making
use of that information for their own purposes.
Mr. Latham. And you've someway come about the amount of $10
million in each agency that that's what people are going to pay
from the outside for these reports. Is there any basis? I'm
curious. I mean, you've obviously just plugged numbers in here.
Mr. Dewhurst. I think I'd have to say that we don't really
know how much money we'd be able to recover. The Department
feels in principle we ought to be able to do some of this, but
we don't really have a solid number. So the number in the
budget is essentially a placeholder.

clean water

Mr. Latham. Well, that's very nice of you to say. I just
want to make you aware, of a situation and compliment you,
because you're not the real problem. In my district, we have
agriculture drainage wells, which were punched into the bedrock
back 40, 50, 60, 70 years ago for drainage.
And if you remember back in 1995, we tried to pass the
Clean Water Act, which would have given U.S.D.A. authority over
agricultural wetlands and not with EPA and Fish and Wildlife
and the Army Corps, that you would have been able to solve this
problem.
What we have is a situation of concentration of primarily
hog feeding facilities, and the concern is, obviously, that
we're going to have the manure go down into the aquifer
directly. What we have is a typical bureaucratic Washington
infighting going on where, when you recognize agricultural
wetlands, Fish and Wildlife does not, and then the Army Corps
comes in, and then the EPA comes in and they all have a
different set of requirements.
And what we're facing is an environmental and ecological
disaster, because this is the aquifer that my kids drink water
out of, Thousands of people in my district drink out of it. I
would welcome anything that you could do to resolve this problem.
The state of Iowa has put millions of dollars into it.
There is EQIP money that's usable for this situation. But what
we have is just the bureaucratic infighting here in Washington
and everyone is ready to go, but we can't get the bureaucrats
to agree.
And we're going to have a disaster which is going to
pollute the aquifer, the Ogallala aquifer, if we don't get
something done. Any kind of cooperation to stave off this
pending disaster, would be very helpful.
Secretary Glickman. I'm not going to say you're preaching
to the choir, but----
Mr. Latham. Fine. I know.
Secretary Glickman. We are also very cognizant of this
problem.
Mr. Latham. Right. Well, and it's very frustrating to me,
because, you know, we tried to address this when I was on
Transportation in the last Congress. We tried to resolve this
as far as agricultural wetlands, so that you folks or some one
agency would have jurisdiction that we could get an answer. And
now we still have four agencies fighting each other. In the
meantime, we're going to pollute the aquifer. And it's nothing
more than bureaucratic infighting.
Thank you, Mr. Chairman, on that high note. Thank you, Mr.
Secretary. I very much appreciate your help.
Mr. Skeen. Thank all of you. Ms. Kaptur.

crop insurance

Ms. Kaptur. Yes, Mr. Chairman. Before Mr. Latham leaves, I
wanted to follow up on his questioning regarding crop
insurance, and to ask the Secretary in your budget, you
indicate that your proposal is fully offset under pay-go.
And can you tell us the source of those offsets, because,
as we read the submission, the budget justifications only note
a partial pay-go offset resulting from program changes that
don't take effect until Fiscal Year 2000.
And there appear to be shifting of funds occurring here and
maybe someone could, if you cannot do it now, provide it to us.
Secretary Glickman. Steve, do you want to comment?
Mr. Dewhurst. Sure. We can provide you with the detail. But
essentially what's happening here is that you're going to
receive a proposed piece of legislation and it is going to have
some items in it that increase costs on the mandatory side of
the budget. The crop insurance item we've discussed is one of
them.
There is also a proposal to increase the size of the
environmental quality incentives program. There is a proposal
to fund some additional enterprise zones in rural areas. And
there is a proposal to provide some additional funds to state
and local governments out of the Forest Service.
All of those items will be in one legislative proposal, and
then there will be a series of offsets in order to meet pay-go
requirements. Those offsets will include some tightening up of
the crop insurance program, particularly with respect to
profits that companies are permitted to make from that program.
There'll be some reductions. There is a cotton step two
proposal that saves some government money. There are some
changes in the EEP program that saves some money. So in order
to produce a total package that meets the total budget
requirement, you have to put all these things together in one
vehicle and send them up to the Congress at one time. And we'll
be doing that in the very near future.
Ms. Kaptur. All right. We'll look forward to receiving
that. We would appreciate clarification there.
[The information follows:]

[Pages 61 - 62--The official Committee record contains additional material here.]

Mr. Secretary, as you know, the Farmland Protection Program
expires at the end of this year. Do you expect to send up
legislation for its reauthorization?
Mr. Dewhurst. We are working on this in the same piece of
legislation that I just discussed. We are trying to work into
that legislation an increase for that program.
Frankly, we're not sure we're going to be able to do it at
this point, because we're not sure all the numbers balance. But
it looks like we'll be able to do it. So we want to extend that
program and we're trying to find a way to get it done within
the budget.
Ms. Kaptur. There's quite a bit of support up here on the
Hill for that, so we would--I wish you good luck in trying to
incorporate that in the proposals that ultimately arrive here.
Mr. Dewhurst. We agree that's a good program.

contract growing

Ms. Kaptur. On contract growing, let me ask Mr. Secretary
the Department's position on strengthening the ability of
ordinary farmers, who may not have the capital of a ConAgra or
a Hormel, to ban together to be represented in a negotiating
posture vis a vis the processing company that may be located
near those farmers.
Which commodity areas might you be looking at? One
indication----
Secretary Glickman. Poultry.
Ms. Kaptur. Only. What about beef?
Secretary Glickman. Yes, poultry is the primary one.
Ms. Kaptur. What about eggs? What about fruits and
vegetables? What about the other areas where farmers are--
hogs--farmers facing tremendous market pressure out there now,
economic pressure there, buckling. They're having to get
themselves into relationships that truly are at odds with what
the Commission on Small Farms recommended.
And also, in relation to which areas you're looking at,what
about enforcement authority? Is the Department going to actually help
these farmers assume a negotiating posture around a table?
Secretary Glickman. I know you're interested in this issue.
I think we have sent up legislation on co-ops, giving co-ops
additional authority in the bargaining area.
Ms. Kaptur. But there's no enforcement, Mr. Secretary.
Secretary Glickman. But this is one of the issues the Small
Farms Commission talked about, I've particularly heard from
poultry growers, let's say, in Arkansas and in Oklahoma, some
of these areas.
You know, Mike Dunn, who's the Assistant Secretary for
Marketing and Regulatory Programs, talked about this. His shop
is working on the issue now. I know this is a great interest of
yours. Keith, Do you know something----
Mr. Collins. I want to say as part of our response to the
1996 Secretary's Committee on Agricultural Concentration, we
did make a series of legislative proposals. Among those there
was one that would increase the Secretary's enforcement
authority under the Agricultural Fair Practices Act, which does
involve bargaining. Unfortunately, I can't remember the details
of that proposal, but we can certainly get it to you.
Ms. Kaptur. Yes. And I think--you know, you should look at
the--the Department should really look at the economic
relationship that is being forced upon, forced upon many of
these farm families. And who's assuming the risk vis a vis how
much capital is being invested?
And I think, you know, whether you're talking Iowa or Ohio
or wherever you're located, you'd be surprised at what's
happening to these farmers out there. You've got to have run
into them as you've traveled across the country. So this is an
area of extreme importance to Ohio, and I know many other
states.
So I'm glad to hear you're looking into it. We would love
to work with you on it, to provide you with names around the
country of people who've even come to our offices on this.
Secretary Glickman. We'll get you a copy of the bill that--
this market concentration that he talked about.
[The information follows:]

[Pages 65 - 72--The official Committee record contains additional material here.]

Ms. Kaptur. All right, thank you. Let me ask, Mr.
Secretary, you talked about the stellar export performance in
agriculture for our country, $56 billion. Congratulations. We
are very aware that no trade deficit accrues because of
agriculture.

imports versus exports

What is the level of imports from this past fiscal year
that has come into the country? Because one of the
relationships I look at is the imports versus exports and the
rate of growth.
Secretary Glickman. I think it's about $20 billion to $30
billion.
Mr. Collins. For Fiscal Year 1997, it was $35.8 billion.
Ms. Kaptur. All right. One thing I would appreciate, if the
Department would provide me with a chart going back maybe 15
years, because I am looking at Freedom to Farm and a lot of
other things that are happening here.
Show me the rate of growth of both exports and imports over
a period of time, because I don't sense that the lines will
look like this. I think they're going to look like this over a
period of time.
Mr. Collins. Well, I think what happened was--actually, you
are referring to the net trade balance, whether--agriculture
has always had a surplus. That surplus actually grew and
reached a peak of $27 billion in 1996.
Ms. Kaptur. Two years ago. I know that.
Mr. Collins. Two years ago, and now it has come back down.
The import growth over the last couple of years has exceeded
the export growth.
Ms. Kaptur. I know that that's true, but I'm interested in
the rate over a period of time.
Secretary Glickman. We'll get you the figures.
[The information follows:]

[Pages 74 - 84--The official Committee record contains additional material here.]

Ms. Kaptur. Thank you. Mr. Secretary, I also wanted to ask
you how you feel about the fact that when that strawberry
outbreak occurred in Michigan and other places, that we could
never trace back to a source where those strawberriesactually
came from, as I understand it.
Do you think that we need a better kind of trace authority
on food labeling in this country?

contaminated strawberries

Secretary Glickman. Well, we've really never been able to
trace the source of contamination. That is, the strawberries
came in and then were distributed around the country and there
was only an outbreak basically in one place, or maybe in two
places. We knew where the strawberries came from, but we do not
know the source of the outbreak.
So one of the things that was so disturbing about this is
that we don't know if the outbreak was a result of handling in
Michigan or was because of contaminated strawberries coming
into the country in the first place.
We know that since the outbreak only occurred in one place
in the United States, it makes you kind of think it was the
former rather than the latter, but we don't know for sure on
that. We do know that the people who bought the strawberries
for our school lunch program had gone through a variety of law
enforcement procedures because they violated the law in
purchasing nondomestically grown strawberries.
I do think that the President's food safety initiative is
geared, Marcy, towards increasing inspection of fruits and
vegetables, both at the border, as well as domestically. This
is an area where, as a general proposition, we do not do a very
good job.

food labeling

Ms. Kaptur. I appreciate your sensitivity on that one. I
know we had talked earlier about the importance of labeling--
that happens to be a very major concern of my own--including
the origin of meat and poultry, especially in this new blended
hamburger stuff that we're getting on the shelves now, or in
the coolers in many of our meat markets around the country,
certainly in Ohio.
I think we have a right to know where that meat comes from.
And my father used to own a meat business. He was very proud to
put our family name on what he manufactured. Why are we moving
into an age of anonymity in labeling? I find it a very
troubling development as a society.
Finally, Mr. Secretary, my last question. I hope this is a
pleasurable question for you. I know that you've had a chance
to travel a lot in your work and you've traveled to the former
Soviet Union, you've gone through several republics.

agricultural observations of former soviet union

Would you reflect a little bit on what you have observed in
terms of the agricultural future for those nations and any
conclusion, or just observations, you want to make.
Secretary Glickman. Well, in the first place, we have
people who are more expert than I in the Department who I
should have brief you on that. By and large, though, it has not
been a tremendously bullish--because of a lot of long-time
historic practices and lack of credit.
And as you know, I believe in Russia, you cannot transfer
fee title to land. And because of that, you cannot borrow. And
if you can't borrow in agriculture, you're dead. Of course
you're dead if you do borrow, too.
So that's where we've been trying to promote the use of
cooperatives where possible, because that's a good transition
for them in light of what their history has been, and involving
American private voluntary organizations.
We have an emerging democracy fund where we have provided
some of this technical assistance, and I don't think it's
working as well as it should overall. But we have had some
successes. We've had some joint ventures, for example, in some
agribusiness poultry processing where there's been some
success.
But in the raw ownership of land and production
agriculture, we probably need to augment those efforts.
Ms. Kaptur. Well, you know, I think that the--I am
concerned in some of those nations, their ability to produce
food sometimes has gone down by as much as 85 percent. And
their traditional export markets have dried up.
I am very concerned about political instability in that
part of the world, and I think initially it certainly will go
back to food and the ability of people to feed themselves,
especially when their incomes are so low.
And I would very much like to work with the Department,
particularly on suggestions you might have, in order to try to
help them feed themselves as they transition to this new
system, whatever it might be. And, of course, each one of those
nations is different.
But I find the agricultural instability and the ability of
people to feed themselves very troubling, and the caloric
intake diminishing, as opposed to increasing in many of those
countries. It isn't talked about much. It isn't even in the
newspapers here very much.
And I know we're focused on Asia right now, an area of the
world not known to have any democratic leanings at all, or much
of a history there. But I would be very interested in meeting
with people who have spent some time there, any of their
observations.
Secretary Glickman. I will tell you that the Vice President
has a commission, Gore-Chernomyrdin Commission with Prime
Minister Chernomyrdin. That commission is meeting in this
country in March, and their ag minister usually comes in at
that time period. Can't tell you when, but that's a good
opportunity to further explore this.
Ms. Kaptur. All right. I thank you very much. Thank you,
Mr. Chairman.
Mr. Skeen. Thank you, Ms. Kaptur. Mr. Secretary, thank you
so much for your patience.
Secretary Glickman. Thank you.

closing remarks

Mr. Skeen. Let me wind up by saying only two percent of our
entire population is involved in agricultural production, and I
think Marcy is talking about what world peace--what it depends
on, what is most important, being able to feed oneself.
We're one of the few countries in the world that can feed
ourselves and probably could feed all the rest of the world,
except for the fact that we're going to have an extended
elevation of population here within the next 10 to 15 years.
What bothers me is research. You've got some of the finest
research elements going on in agriculture, than anyplace else
I've ever crossed in my entire life. And since I've been
Chairman of this committee, we've traveled extensively and
looked into your research facilities. Now, the President's
budget is seeking to cut off $60 million in current research.
And I think that ought to be looked at with an awful lot of
care, because I haven't found a bummer in the bunch yet, and
I've been to a lot of your research facilities. You've got some
of the finest people with the finest objectives and they're not
replicating each other. They're not poaching on one another's
fields.
You've got some of the most knowledgeable people working in
the Department today in the research sector. And I certainly
don't want to see us cutting back our emphasis on research in
agriculture, particularly, because I think it's vital for us as
a world leader, and it's going to keep us in that lead.
I don't mean to preach at you, but $60 million is a big
hole out of that budget, and I know you may have your reasons
for doing it. I'm not going to press you for all that, because
a lot of it maybe felt like it was unnecessary or a duplicate
or whatever, but I think I'd be very careful with making that
judgment.
Thank you all for being the kind of people that really make
us proud that we've got a good agricultural division.
Secretary Glickman. Thank you.
Mr. Skeen. Thank you, Dan.
[Clerk's Note.--The following questions were submitted to
be answered for the record:]

Water 2000

Mr. Skeen. The 1980 Census estimated that about 2.1 million
Americans lacked a source of clean, running water in their homes. The
1990 Census placed this number at about 1.1 million. What impact have
Water 2000 projects had in eliminating the remaining population of
residents lacking clean, running drinking water?
Respondent. We estimate that the Water 2000 projects funded since
inception through FY 1997 will serve just under 2 million people
including 280,000 that will receive water from public sources for the
first time.

FSIS User Fees

Mr. Skeen. The authorizing committee has opposed user fees
consistently. User fees are widely opposed by both industry and
consumer groups. How do you expect to get this legislation passed by
October 1?
Respondent. The Administration will be submitting a legislative
proposal for consideration by Congress in the near future. At that
time, we will work with appropriate committees in Congress to brief
them on fee structures, the impact of the fees on consumers and
producers, and present a regulatory strategy that shows how the fees
can be assessed by October 1, 1998.

User Fees

Mr. Skeen. Let's assume that authorizing legislation gets passed
and signed into law. How much time would the Department need to write
and put into effect the necessary regulations?
Respondent. We would need a number of months to issue regulations,
afford the public an opportunity to comment, and put the administration
systems in place to collect the fees. The timing of passage would
determine the appropriate course of action to ensure an October 1,
1998, implementation date.

Milk Prices

Mr. Skeen. I have had numerous conversations concerning the Milk
Marketing Order Reform proposal and considerable input on the Options
1A and Option 1B. To put it simply, producers in my district, the
Southwest and many other regions of the country are strongly opposed to
Option 1B. In fact, I have seen a study which shows that Option 1B
would cost dairy farmers $365 million per year. One region increases
its income under Option 1B and its location surprises almost no one,
the Upper Midwest. Considering that a referendum to ratify Option 1B
would require a two-thirds approval and it is apparent that a large
number of the new regions are either strongly opposed or neutral at
best, wouldn't you agree that Option 1B is essentially dead on arrival?
Respondent. No, I do not believe that Option 1B is dead on arrival.
Option 1B is the Department's preferred alternative because it
establishes more market-oriented pricing, in line with the general
trend in agricultural policy. As with all major Federal order
amendments, the newly consolidated Federal milk orders will require
approval by two-thirds of the dairy producers or by producers
representing two-thirds of the volume of milk associated with the newly
consolidated market to become effective. The producers will be voting
on the order as a whole unit and not on the individual provisions
contained within an order. We would like to hear from producers in your
district and elsewhere as to their concerns with the proposed rule.
Mr. Skeen. In the interest of saving time I will submit the
remainder of my questions on this issue. However, I must reassert that
I have serious questions as to the survivability of Option 1B and its
potentially drastic effects on the dairy industry, in my district and
elsewhere. In the past, the USDA has stated the use of the competitive
B series in the basic formula captured the elements of the availability
and cost of feeds. Now that the reform proposal has no competitive
price in the formula, how is the cost of feeds being considered in the
proposed minimum prices?
Respondent. The costs of feeds and the various other factors stated
in the supply and demand criteria of the 1937 Act are reflected through
the commodity prices used in the proposed basic formula price proposal.
These commodity prices are based on a competitive marketplace and
reflect the supply and demand for those products, Class III and IV,
that utilize approximately 50 percent of the Grade A milk supply.
Mr. Skeen. When basic formula prices have climbed in the past,
higher consumer prices for Class I followed. With the proposed
enhancement of Option 1B, (1) do you expect the consumer prices to
climb correspondingly, (2) will Government purchases for milk increase,
and (3) will the initially high prices reduce demand for milk?
Respondent. The potential impacts of the options are analyzed in
the Preliminary Regulatory Impact Analysis. With respect to retail
prices and the impact on consumers the estimated impact is less certain
than the impacts on other sectors of the dairy industry. However,
retail prices are estimated to decrease in the long-term under Option
1B. The analysis assumed that the Government purchases for milk would
not be affected by the proposal. It is further projected that for the
period of 1999-2004, consumption of fluid milk products actually will
increase under either of the Option 1B transitional phase-in programs.
Mr. Skeen. The Department has scheduled a hearing next week to
discuss increasing the floor price for Class I and Class I fluid milk.
Would that increase raise the price of milk for consumers and
government feeding programs?
Respondent. The preliminary cost-benefit analysis states that in
addition to increasing volume to dairy producers, adoption of a BFP
floor would also result in increased prices of fluid milk products to
consumers. The purpose of the hearing is to obtain evidence supporting
or opposing such findings. Once the hearing record evidence is
analyzed, a final cost-benefit analysis will be completed that will
provide a further indication of the projected effects of flooring the
basic formula price on consumers and government feeding programs.
Mr. Walsh. Option 1B, your preferred Class I pricing option, has
been estimated by economists to lower farm milk prices in ever region
of the country with the exception of the Upper Midwest. The direct loss
in dairy farmer income is estimated to be $1 million per day or $365
million per year.
Given the volatile nature of milk prices recently, the very low
prices that dairy farmer have received in the past year, and the
financial distress already being felt by farmers across the country--
why do you want to reduce dairy farmer income even further?
Respondent. Option 1B is a more market-oriented approach to
pricing, and one that allows producers and cooperatives to take a more
active role in bargaining for milk prices. The Department proposes two
methods of transition to the Option 1B differentials. One would replace
the lost revenue while the other would enhance revenue over the 4-year
period by $498.8 million. Specific regional impacts are set forth in
the Preliminary Regulatory Impact Analysis. The volatile nature of milk
prices is a concern of many in the industry and is addressed by the
proposed rule suggestion to utilize a 6-month declining average of
surplus milk prices to establish minimum Class I prices under the
orders. We invite comments on the use of such a Class I price mover,
and all other aspects of the proposed rule.
Mr. Walsh. Having made the decision that you prefer Option 1B over
Option 1A, do you feel that you fully understand the potential economic
and social impacts of Option 1B on the dairy industry and dairy farmers
in various regions of the country as well as the rural economies of
these regions overall?
Respondent. Although USDA provides an estimate of the economic
consequences of the alternatives on producers, processors and consumers
through the Preliminary Regulatory Impact Analysis, the industry and
the public have specifically been invited to address the consequences
of the alternatives as well as the economic analysis presented.
Mr. Walsh. Would you describe for the Committee what you believe
those potential impacts to be?
Respondent. Aside from the immediate estimated impacts outlined in
the RIA, the longer run impact of Option 1B is to move the dairy sector
to more market-oriented pricing, in tune with the current trend in
agricultural policy. As such, an impact of Option 1B is that producers
will have a more active role in pricing, and the Government will reduce
its presence in milk pricing.
Mr. Walsh. In particular, would you provide what you believe to be
the probable impact of Option 1B on the Northeast and Southeast regions
of the country?
Respondent. The estimated impact on cash receipts of Option 1-B in
the northeast and southeast are contained in the Preliminary Regulatory
Impact Analysis. For the period 1999 through 2004, the estimated
average yearly impact on cash receipts for the northeast and southeast
markets relative to cash receipts expected under the Department's
baseline is as follows:

CHANGE IN CASH RECEIPTS
[In millions of dollars--6-year Average]
----------------------------------------------------------------------------------------------------------------
1-B with
1-B phased-In 1-B with additional
assistance assistance
----------------------------------------------------------------------------------------------------------------
New England..................................................... -$.5 $2.4 $5.8
NY-NJ........................................................... +5.3 11.7 19.0
Middle Atlantic................................................. -26.2 -22.8 -19.0
Carolina........................................................ -15.2 -10.7 -6.5
Southeast....................................................... -12.5 -3.4 5.1
----------------------------------------------------------------------------------------------------------------

Mr. Walsh. Please include the estimated amount of the dairy farm
income lost annually, the approximate number of dairy farms that would
go out of business, and any plans the Department has to deal with the
economic disruption that will result?
Respondent. Estimated impacts contained in the Preliminary
Regulatory Impact Analysis are based on estimated supplies of milk that
would be marketed. There are no estimates of the approximate changes in
farm numbers that may occur with any option or provision of the
proposed rule. The final rule, once it is developed with the assistance
of comments from the public and the industry, and if approved by
producers, must adhere to the requirements of the 1937 Act to
``establish and maintain orderly marketing conditions.'' To the extent
that marketing conditions change in the future, further amendment
proceedings can be initiated as the need arises.
The Department recently released the National Commission on Small
Farms Report. ``A Time to Act.'' In this report, it states that
``Having gone through the process of developing this report, we are now
even more convinced of the necessity to recognize the small farm as the
cornerstone of our agricultural and rural economy.'' The report goes on
to say that ``The Secretary should fully support passage of legislation
that will make the viability and competitiveness of small and medium
size dairy operations a priority mission.''
At the same time, however, you state in the proposed rule that ``By
lowering the differentials in most of the United States, marketing
practices would have a greater impact on class I values.'' The proposed
rule goes on to say that ``Less efficient small business could be
disadvantaged because of the lack of resources and knowledge necessary
to effectively negotiate and maintain necessary price levels.'' The
proposed rule also states that the level of Class I differentials under
Option 1B are such that ``small businesses, particularly producers
would experience significant economic impacts.'' It also states that
``all producers'' with the exception of the Upper Midwest would face
``reduced income'' due to lower Class I prices and that producers in
the Northeast and Southeast would experience the greatest decrease.
Mr. Walsh. Mr. Secretary, would you please explain this clear
contradiction in the Department's policies and priorities?
Respondent. The Department does not believe there is a
contradiction in its policies and priorities. It is important to
emphasize that milk orders as required by the 1937 Act, are intended to
establish and maintain orderly marketing conditions and establish
minimum prices based on supply and demand conditions that will bring
forth an adequate supply of milk and dairy products. The 1937 Act does
not specify by whom or where such milk should be produced.
Nevertheless, we have attempted to articulate the probable regulatory
impacts of the proposed rule on small businesses and have requested
public input on these impacts. These comments will assist the
Department indeveloping a final rule to carry out the requirements of
the 1996 Farm Bill.
Mr. Secretary, In the Introduction to the Department's National
Commission on Small Farms Report ``A Time to Act'' you state that:
``Conclusions and policies which focus on the large and super-large
farms as an inevitable result of economic progress may be ignoring the
small farm as the most vital component of all food production.'' The
Introduction goes on to state that: ``The `get big or get out' policy
drives of the past fail to recognize the real cost of this kind of
`economic progress' This perspective does not consider the loss of
market competition when production is concentrated in a monopoly
market. It does not consider the cost of potential environmental
consequences of concentrating a large number of animals in limited
areas. It does not consider the risk to the security of our milk supply
should disease or natural disaster strike these few megafarms. It does
not consider the cost of increased use of fossil fuels to ship milk
across the country. It does not consider the increase in bacteria when
water is extracted. Contrary to popular belief, large farms do not
produce agricultural products more efficiently than small farms,
especially when real costs are taken into account.''
Mr. Walsh. Mr. Secretary, were the National Small Farms
Commission's concerns identified above part of the analysis and
decisionmaking process which led you to arrive at your decision that
your preferred option is Option 1B--an option which would appear to
favor large farms over small farms, which would put many farmers out of
business, and which would most likely result in more concentrated areas
of milk production and increased shipping of milk across the country?
Respondent. Theproposed rule recognizes the potential impacts on
small farmers and small businesses, and asks for comments on all
aspects of the proposed consolidated orders including the price
structure alternatives. Phase-in alternatives for Option 1B have been
suggested to provide farmers the opportunity to become more efficient
and effective in operating in a more market-oriented environment. The
Small Farms Commission concerns were published too late to be
accommodated explicitly in the proposed rule.
Mr. Walsh. If so, would you explain the Department's analysis of
Option 1B as it regards the concerns of the National Small Farms
Commission and the Department's conclusions in this regard? If not, why
weren't these issues considered in making the decision that you prefer
Option 1B?
Respondent. The report issued by the National Small Farms
Commission was published too late to be explicitly incorporated into
the proposed rule. As a result, the specific findings addressed in that
report were not included in the development of the proposed rule.
However, as part of the Small Business Regulatory Enforcement Fairness
Act of 1996, the impact of the proposed rule on all small businesses,
both producers and processors, has been evaluated and is included in
the Regulatory Flexibility Analysis contained in the proposed rule.
Mr. Secretary, in the proposed rule, you state that your preferred
Class pricing option is Option 1B and that this option is ``more
market-oriented.'' It is my understanding that Option 1B does not take
into consideration important regional and local market factors in
determining Class I milk prices for a given location while Option 1A
does take into consideration these important factors.
Mr. Walsh. Would you please explain why you believe Option 1B to be
``more market-oriented'' than Option 1A?
Respondent. Option 1B would move the dairy industry into a more
market-oriented system by establishing differentials on the basis of
optimal milk movements based on the most recent estimated costs of
transporting milk, allowing market conditions to play a greater role in
determining class prices. Option 1B places more emphasis on
negotiations by dairy farmers and processors to determine actual class
prices.
Mr. Walsh. Would you also provide the Committee with a precise
definition of the term ``more market-oriented'' as you understand it in
this context?
Respondent. More market-oriented means less dependence on
governmental regulation and more reliance on supply/demand conditions
to determine a greater portion of Class I differentials. More market
orientation is consistent with the policy course set by the Congress in
the 1996 Farm Bill.
Mr. Walsh. Mr. Secretary, since the proposed rule recommends both
Option 1A and Option 1B, should we not assume that you believe both of
these options are consistent with legislation and meet all of the
requirements of the 1937 Act and the 1996 Farm Bill?
Respondent. Yes, it is correct to assume that the Department
regards both Option 1A and Option 1B to be consistent with legislation
and meet all of the requirements of the 1937 Act and the 1996 Farm
Bill.
Mr. Walsh. That being the case, would you please define for the
Committee precisely what evaluative criteria were used by you and the
Department in determining that Option 1B is preferred over Option 1A
and how these criteria were determined?
Respondent. Nine evaluation criteria were used to evaluate every
pricing option considered in the proposed rule. These pricing criteria
reflect both regulatory objectives and limitations of the 1937 Act.
These criteria established an initial framework for analysis of the
class/pricing options. Other factors such as the overall intent of the
1996 Farm Bill and movement toward less Government involvement in
agricultural markets were also considered.
Mr. Walsh. Mr. Secretary, would you please explain to the Committee
what you believe to be the primary objective of the 1937 Act and the
Federal Milk Marketing Order system?
Respondent. The primary objective of the 1937 Act and the Federal
Milk Marketing Order system is to establish and maintain orderly
marketing conditions and establish minimum prices based on supply and
demand conditions that will bring forth an adequate supply of milk and
dairy products.
Mr. Walsh. Mr. Secretary, would you please explain why the Federal
Milk Marketing Order system is not and should not be considered or
treated as a price support program?
Respondent. The Federal Milk Marketing Order program is a voluntary
program that requires the approval of producers in a given area to
maintain orderly marketing conditions and establish minimum prices. A
Federal order is designed, as required in the 1937 Act, to allow supply
and demand conditions within a given marketing area to impact the
actual price that producers receive. Because supply and demand
conditions determine the actual price producers receive, the prices to
producers vary throughout the United States. Moreover, the Federal
order program establishes minimum prices that dairy farmers receive for
milk used in fluid consumption. Fluid milk utilization represents less
than half of all milk produced nationally, with the larger proportion
of milk being used in storable, manufactured products. Milkavailable
for manufacturing purposes serves as both a residual supply for fluid
needs and as the residual use for milk not needed for fluid purposes.
As such, the only practical way to provide price support to the daily
industry is through support of prices received by dairy farmers for
milk used in manufactured products.
Mr. Walsh. Mr. Secretary, would you agree that, if the ``market''
does not allow individuals dairy farmers to effectively represent
themselves and achieve fair and reasonable prices for fluid milk for
both the producer and the consumer, it is the role of the Government to
step in and regulate the ``market'' to ensure that farmers are treated
fairly in the ``market'' and that the Nation has as adequate supply of
fresh fluid milk available to all regions of the country at a
reasonable price?
Respondents. I would agree that there can be a role for the
Government to step in and regulate the market to ensure that farmers
are treated fairly in the market and that the Nation has an adequate
supply of fresh fluid milk available to the extent provided for in the
1937 Act, as amended, and the 1996 Farm Bill.
Mr. Walsh. Mr Secretary, I would like to give you an example of
what Option 1B could mean to a small (65 cow) family farm operation.
Under Option 1B, an operation of this size would lose about $5,000 in
income at a time when most of these operators already work 10-12 hours
a day 7 days a week. Do you believe the Department should select Option
1B knowing that this option will further reduce the income of these
farmers and probably put them out of business?
Respondent. The Department recognizes that Option 1B involves
changes in both the level of Class I differentials and the method for
establishing them. Because of these changes, Option 1B is proposed to
be implemented utilizing one of three possible transitional programs, a
20 percent phase-in per year, a phase-in with offsetting assistance, a
phase-in with additional assistance. The use of a phase-in program
would provide daily farmers and processors the opportunity to adjust
marketing practices to adapt to more market-determined Class I prices.
The proposed rule specifically asks questions of all interested parties
to obtain input regarding the implementation and ramifications of
Options 1A and 1B.

Agricultural Research Service (ARS)

The mission of ARS research is to develop new knowledge and
technology which will ensure an abundance of high quality agricultural
commodities and products at reasonable prices to meet the increasing
needs of an expanding economy and to provide for the continued
improvement in the standard of living of all Americans.
ARS is an Excellent program which provides for necessary research
funds.
Unfortunately, this year we have seen some reductions in the base
funding for programs. Levels of funding that were established in the FY
99 appropriations bill have been decreased, and this is of great
concern to me.
Using AR research facilities as an example, the people at home rely
on consistent funding trends from ARS in order to best equip their
facilities. In particular are areas of staffing.
For example, in FY 98, ARS provided several hundred thousand
dollars to fill research staff positions for a facility in AR. However,
your proposal for FY 99 eliminates that funding and proposes FY 99
funding at FY 97 levels.
In essence, the federal government gave the authority for the
research facility to hire new staff, but then pulled the rug from under
their feet after only one year. This takes away from the ability of the
research facilities to hire ``around'' federally funded positions so as
not to duplicate positions and greatly diminishes the trust
relationship that the states have developed with ARS over the years.
Mr. Dickey. Can you explain the reasoning behind your method in
this case?
Respondent. The FY 1999 Federal budget submitted by the President
recommends a number of new initiatives to address changing priorities
facing agriculture and the American consumer. The research budget
proposed for ARS reflects an increase of $32 million over the current
year. However the Department is focusing on many priority agriculture
issues that must be addressed now by our research scientists. This
requires that ARS terminate some ongoing projects and reallocate these
resources to the new or expanded initiatives as recommended by the
President.
Mr. Dickey. How does this make ARS a more effective program or the
USDA a more efficient agency?
Respondent. While proposals to discontinue ongoing work can be
stressful to those who are directly affected, in the long-run change is
required to ensure that research resources are employed to address the
most pressing national issues. The broad consensus within the Congress
and the executive branch on the necessity for constraints on
discretionary spending, which we fully share because of the enormous
benefits for a balanced budget for the agriculture sector--leads us to
propose selective reductions in ongoing work to accommodate proposals
for national initiatives. For example with Congressional support for
the budget as proposed there would be reductions in aquaculture and
rice genetics, but there would also be larger increases in human
nutrition.

Research Extension Formula Funding and The Hatch Act

You have proposed a decrease in the Smith-Lever Formula of
$10,740,000 for extension-related base funding for FY 99.
As a justification, your propose that states have maximum
flexibility to fund specific programs through formula funds, thus the
proposed decrease should have the least impact in those areas States
identify as high priority.This flexibility will be enhanced if the
Administration's recommendation that the States be given discretionary
authority to use up to 10% of their formula funds for either research
or extension activities is enacted in the reauthorization of the
research title.
However, even if the States have the 10% flexibility, there is
still a net loss for research and extension activities.
Likewise, you have proposed roughly a 9% decrease in the Hatch Act.
With the proposed decrease in these areas, I have seen what appears
to be a corresponding increase in the National Research Initiative
Competitive Grants Program (NRI). This is a concern to me based on some
information that was recently brought to my attention.
While I am a supporter of the competitive bidding process, I am
particularly concerned with the USDA's ability to scientifically and
fairly evaluate grant applications.
On one particular situation, two almost identical grants were
submitted to the NRI program. The two grant applications were submitted
by two institutions in an effort to receive a grant in cooperation.
Unfortunately their lines of communication broke down and submitted
similar applications at separate times.
After the peer review was conducted for both institutions, they
received contradicting responses.
Mr. Dickey. How could two applications that were almost identical
receive such dramatically different peer reviews under your system?
Could this be a common occurrence under your system of competitive bid
peer review?
respondent. Without knowing the specifics of the situation, it is
difficult to comment on any particular grant application. However, it
may help to clarify NRI policies.
Applicants are barred from submitting duplicate or substantially
overlapping proposals to the NRI. Thus, an applicant may not submit a
proposal to one NRI program area and subsequently submit it to another
program at a later date. However, on rare occasion, applicants from
more than one institution who are collaborating on a proposal, submit
an identical proposal from each institution. These are called
``companion'' proposals. In most cases, the applicants are trying to
reduce the overhead that would normally be charged on a single proposal
that has a subcontract to a second institution. In the case of a single
proposal with a subcontract, the originating institution charges 14%
indirect costs on the entire grant, then the subcontracted institution
charges an additional 14% on their portion. In order to avoid this
practice of double overhead, collaborating applicants submit identical
proposals, each from their own institution. These proposals only differ
in the cover page and the budget. The budget includes a 14% indirect
cost rate on only that portion that is going to the submitting
institution.
Companion proposals are considered as one proposal throughout the
review process. They are sent together to reviewers, and are discussed
as a single proposal in panel. When panels recommend proposals for
funding, it often happens that certain proposal objectives are viewed
as highly meritorious while other objectives are viewed less so. If
recommended for funding, with a budget cut, budgets are cut accordingly
to reduce the scope of the project (because of the large number of
highly meritorious proposals, most applicants do not receive the amount
of funds they originally request, and most budgets are cut to enable
more applicants to be funded). When a budget is cut, the applicant is
asked to reduce the scope of the proposal by eliminating some of the
objectives. In the case of recommended companion proposals, if the
objectives which are designated to be eliminated all are within the
responsibility of one investigator who is at a different institution,
then it is possible that the recommendation be to not support the
companion institution. It is then the responsibility of the
investigators involved to work out the logistics of the final funding
recommendation and to submit the revised objectives.
It should be noted that the NRI no longer accepts companion
proposals because of the administrative complications that may arise.
When they were accepted, no more than 3-8 of these type of proposals
were submitted out of the over 3000 proposals received in any given
year.
The NRI peer review policies are designed to give applicants an
equitable and high quality review of scientific research. The practices
of the NRI have their basis in practices established 20 years ago.
However policies and practices have constantly evolved to improve the
overall quality of the review so that the NRI in now viewed as one of
the most equitable peer review systems in the Federal Government. It
has also served as a model for other agencies who are establishing or
trying to improve their peer review processes.

Decreasing Funding Formulas And Increasing Competitive Bids

Both the Hatch and Smith Lever formulas are vital in empowering
States to determine what are critical areas of funding and it is my
opinion that the States are better in determining what is important to
their industries that is the federal government.
Each State has its own wants and needs and it is imperative that
they have the ability to address them.
Mr. Dickey. Why would the USDA propose to go in the exact opposite
direction by decreasing some formulas and increasing competitive grants
that are determined here in Washington? In order words, is Washington
better at determining the needs of AR than the State of Arkansas?
Respondent. The Administration supports a broad range of funding
mechanisms in support of university-based agricultural research,
education, and extension. These mechanisms, including formula programs,
competitive grants, special grants and projects, and other programs
(such as Smith Lever 3(d)), are interdependent and jointly contribute
to the success of our knowledge-based system of agriculture.
Mr. Dickey. Do you think that this policy will diminish the
existing relationship between States and the federal government?
Respondent. The priorities which define Federal support for
programs in agricultural science and education are developed through a
collaborative, States/Federal process of consultation with
stakeholders, mutual planning, and in almost all cases, joint
investment.
Mr. Dickey. Is it your opinion that the NRI program is a more
adequate system of determining what should and should not be funded
than State agencies?
Respondent. The Administration's budget does not suggest that the
Federal partner in this cooperative system is better able to determine
what should be done than are States. In fact, within the mandates of
laws authorizing Federal formula programs and in keeping with the
Government Performance and Accountability Act, States determine how to
utilize Hatch, Smith-Lever, and other allocations to address critical
issues facing agriculture in their States, region, and the Nation.
Further, competitive grant programs support research initiated through,
and peer reviewed by, university, industry and agency scientists from
every state.
Mr. Dickey. In other words, is Washington better at determining the
needs of AR than the State of Arkansas?
Respondent. Arkansas receives Federal funds through a number of
agricultural research and education programs administered by CSREES. In
fiscal year 1997 Arkansas received $10.8 million, of which $3.1 million
supported agricultural research under Hatch Act formula funds and $1.9
million supported research and higher education activities under
competitive research and education grants.

Food Quality Protection Act Implementation

Mr. Bonilla. Commodity groups and general farm organizations are
becoming increasingly concerned that USDA is not fully fulfilling its
responsibility under the Food Quality Protection Act (FQPA). There has
been a widely held belief that the Department has not been engaged with
EPA as EPA develops policies and proposed action plans to implement
FQPA.
How has USDA been involved with EPA as FQPA policy issues are being
considered by the Agency? How may USDA employees are dedicated to
working on FQPA issues? What analysis has USDA performed regarding the
potential impacts to agriculture from the policies and approaches being
considered by EPA, particularly as applied to the first group of
tolerances to be released by August 1999? Has USDA considered the
impacts on the potential sourcing of agricultural commodities with
EPA's implementation of FQPA?
Respondent. USDA has been collaborating with EPA on a number of
issues related to implementing FQPA policies. USDA's newly established
Office of Pest Management and Policy (OPMP) leads the Department's
effort of FQPA implementation and coordination with EPA. There is also
a cross-cutting team representing various agencies, including CSREES,
ARS, AMS, and ERS that lend support at the program level.
A total of eight employee contribute a significant part of their
effort to issues related to the FQPA implementation. Staffing plans
call for a total of 10 full time positions OPMP.
Until EPA resolves a number of scientific, policy, and resource
issues, it is not possible to analyze the impacts of FQPA. Certainly,
there is the potential for major economic dislocation. We hope to
minimize serious disruption in agriculture by working with EPA to
develop ``transition strategies''. Such strategies would allow
continual crop production while alternative pest management tools are
developed.
Mr. Bonilla. How will USDA insure resources are fully directed to
FQPA implementation?
Respondent. OPMP will serve as a focal point for pesticide
regulatory issues, and improve coordination between the Department and
EPA and farmer organizations. USDA and EPA have signed a Memorandum of
Understanding that commits the two agencies to work together when
regulatory action by EPA would reduce farmer competitiveness, limit
producers ability to adopt practices such IPM, and ensure consumers a
safe, abundant, high quality of food and other agricultural products.
The 1999 budget includes $26 million for NASS pesticide use date;
ARS dietary intake surveys; and AMS pesticide residue testing. IPM is
an essential tool in mitigating the existing risks associated with
excessive pesticide exposure. The budget includes $34 million for IPM
research and extension activities to support a number of areawide
demonstration projects, research and extension IPM implementation
projects, and to enhance the efforts of PMAP in finding alternative to
higher risk pesticides currently under regulatory review. The budget
also provides $23 million for programs that directly support IPM
implementation, including minor-use pesticide registration, analysis of
the economic benefits and consequences of pesticide use, and training
conducted to limit the level of pesticide exposure.

FQPA Implementation

These programs represent a comprehensive response to the needs
resulting from implementation of FQPA that includes determining what
tactics will remain and how efficacious they are, what alternative
tactics are in the developmental pipeline or in the registration
process, identifying pest management systems that are vulnerable to
FQPA implementation, and conducting research and extension programs to
develop solutions to pest management problems and assist growers in
implementing them.
CSREES and its land-grant university partners have been directing
resources from several programs to begin providing science-based
solutions to the challenges presented by FQPA. IR-4 is also collecting
data needed for petitions submitted to EPA in support of minor or
specialty uses of pest management tactics (chemical and biological),
and is advancing its research and registration efforts for biological
and reduced risk pesticides which are important to IPM and resistance
management programs.
Specific CSREES efforts are as follows: NAPIAP is providing data
and analysis on pesticide use patterns and the benefits of pesticide
use, and is conducting analyses of the economic impacts of FQPA on
American agriculture. The Pest Management Information Decision Support
System is linking informational databases to provide decision-makers
with ready access to pest management information so that critical needs
can be identified and prioritized. The Pesticide Applicator Training
Program is conducting educational programs that help mitigate pesticide
risks through education and training. PMAP is developing alternative
pest management tactics to replace those lost through EPA cancellation
or voluntary withdrawal as a result of FQPA implementation. IPM is
developing holistic pest management approaches to help growers deal
with critical pest problems resulting from FQPA.
The Department is aware of the potential problem resulting from the
withdrawal of pesticides for minor-use crops and will make every effort
to maintain domestic production of minor-use crops.

Dairy Options Pilot Program

Mr. Latham. USDA's Risk Management Agency has announced its
intention to implement a pilot options program for dairy under the
authority in section 191 of the 1996 farm bill that requires that
trades under the pilot program ``shall be carried out on commodity
futures and options markets designed as contract markets under the
Commodity Exchange Act.''
There is at least one futures exchange that is advocating that
dairy producers' choices of a trading venue under the pilot program
should be limited to a single futures exchange, in effect creating a
government-dictated monopoly in trading.
It seems to me that dairy producers would benefit most from this
program if they are free to choose the options products and the futures
exchange that best fits their marketing and risk management plans. I
would also expect that it is more likely that producers will receive
better service at lower costs in markets governed by competition, not
monopoly.
Do you agree with this analysis, or do you see some overriding
benefit to limiting producers' freedom in this regard?
Respondent. We agree that dairy producers should be in position to
choose the options products and the futures exchange that best fits
their needs. However, RMA has received comments suggesting that the
availability of multiple contracts on the BFP will create unnecessary
confusion in the minds of novice traders such as the DOPP participants.
The decision should be forthcoming within the next month.

Water 2000

Mr. Serrano. Through the Water 2000 initiative, the Department of
Agriculture targets resources to the estimated 2.5 million rural
Americans which have some of the Nation's most serious drinking water
availability and quality problems. According to the 1990 Census, over
400,000 rural households lack complete plumbing.
What answers will the Department's Water 2000 program provide for
the shocking public health concerns? Please provide this panel with
specific examples of approaches to solving these problems.
Respondent. The Department over the past three years has invested
$1.3 billion to construct Water 2000 projects that will serve just
under 2 million rural residents, including 280,000 of the 1.1 million
identified by the Census as not having clean running water in their
homes. The objective of Water 2000 is to attempt to provide all rural
residents with running water in their homes by the year 2000. Some of
these residents live in some of the most remote, geographically
challenging areas of the nation and a large percentage of them have
incomes below the poverty level, making the attempts to achieve the
objective very difficult.

Urban Resources Partnership

Mr. Serrano. I have had the pleasure of visiting Urban Resources
Partnership (URP) sites many times in my District. I am always
impressed by what a small amount of URP funding is able to accomplish
when it brings together the expertise of Federal agencies with locally
based groups. The environmental restoration and river clean up work
that you have participated in at the Phipps Beacon School next to the
Bronx River has made a significant improvement in my District, and I
know that this is just one example of the positive changes in urban
communities that result from URP sponsored initiatives. Can you explain
to the Committee what role USDA and specifically, the Natural Resources
Conservation Service, has played in URP?
Respondent. Early in 1994, USDA spearheaded the Urban Resources
Partnership which is a cooperative effort among six federal, natural
resource-related agencies, including NRCS. URP provides technical,
financial and educational assistance to urban communities in 13 major
cities and metropolitan areas. The approach relies on local community
leaders and representatives to identify natural resource concerns and
to design projects to deal with them with an emphasis on improving
natural resource conditions in low income and minority urban
neighborhoods. Projects range from working with youth to restore
natural habitat on a forest preserve to enhancing urban wildlife
habitats. NRCS provides natural resource-related information and
technical assistance to support the overall urban planning process that
this program relies on.

Civil Rights

Mr. Serrano. During the hearing the Secretary did a great job of
detailing ongoing problems and initiatives associated with
discrimination and civil rights in the Department of Agriculture.
However, since much of the Rural Development budget requests relate
to appropriations for loans and grants, what measures have been
considered to ensure that civil rights violations do not occur in
program delivery?
Specifically, does that Direct Loan Origination and Servicing
(DLOS) system address civil rights concerns, if so, how is the problem
being addressed?
Respondent. I have communicated to all USDA employees that
violations of civil rights statutes, regulations or policies will not
be tolerated. The Under Secretary for Rural Development has also
communicated the same message to all Rural Development employees. In
addition, Rural Development has provided extensive customer service
training. If all of our customers are treated as they should be, then
we should eliminate civil rights program complaints. Rural Development,
like the rest of the Mission Areas, is also scheduling extensive
training in civil rights and equal opportunity policies.
Regarding DLOS addressing civil rights concerns, civil rights is
not one of the primary purposes of DLOS but it does have an effect in
that the servicing of housing loans is now consistent throughout the
country rather than subject to individual interpretation throughout the
country. All borrowers are treated equally and I think this is a
positive step and one that should eliminate some civil rights problems.

Supplemental Nutrition Program for Women, Infants, and Children (WIC)

Ms. DeLauro. Secretary Glickman, the WIC program currently serves
approximately 7.5 million people. In your testimony, you focus on
efforts to improve management of the program and to reduce the overall
costs of WIC food packages. In streamlining management and reducing
costs, how is the quality of the program guaranteed?
Respondent. Our efforts to improve WIC management and to reduce
food package costs are expected to help improve the overall quality of
WIC. Many States have achieved notable successes in efficient and
effective management, and as their practices are adopted and adapted by
other States, program quality will improve along with cost
efficiencies. WIC is a mature program and simply needs some fine
tuning. If we can keep food costs low we can serve more participants
with the same money. That is our strategic goal.

Food Safety

Ms. DeLauro. Secretary Glickman, in your testimony, you mention
food-related illnesses due to the pathogen Cambylobacter. In recent
years, we have heard about the many people who have experienced
illnesses due to the E. coli bacteria. Could you explain how the new
Food Safety Initiatives will address these threats to the safety of our
food supply?
Respondent. Campylobacter and E. coli 0157:H7 pose a significant
health threat to consumers. The implementation of the Pathogen
Reduction/Hazard Analysis and Critical Control Point Systems rule and
the President's Food Safety Initiative are expected to contribute to
the reduction of foodborne illness in the United States. The HACCP rule
provides for microbial testing and targets pathogens for reduction. The
President's Interagency Food Safety Initiative addresses food safety
hazards from farm-to-table. Key components include expansion of the
Federal food safety surveillance system, improved coordination between
Federal, State, and local health authorities, improved risk assessment
capabilities, increased inspection, expanded research, consumer
education, and strategic planning. Expansion of the FoodNet
surveillance system will provide more accurate information on the
number of foodborne illnesses due to Campylobacter, E. coli 0157:H7,
and Salmonella, and other contaminants. Funding for Campylobacter-
related activities would increase from $2.6 million in 1998 to $4.7
million in 1999.
Ms. DeLauro. What are the carrots that will encourage voluntary
compliance with the Food Safety Initiatives?
Respondent. The President's Food Safety Initiative contains a
number of activities for improving the safety of the United States food
supply. One facet of this initiative is the implementation of the
President's directive to ensure the safety of imported and domestic
fruits and vegetables. Representatives from USDA and the Department of
Health and Human Services have held numerous meetings across the
country to discuss ways to implement the plan. We are currently working
on identifying what measures that can be taken to facilitate the
adoption of practices that will lead to a safer food supply and
maintain consumer confidence in the safety of the food supply. In
addition, we will be working closely with animal producers to develop
voluntary measures that producers can use to address food safety
hazards on the farm.
Ms. DeLauro. What are the mandatory measures that States and
individuals must comply with?
Respondent. USDA and the Department of Health and Human Services
are developing guidance materials that the producers could utilize to
ensure the safety of fruits and vegetables. Nothing in the proposal
would require the adoption of mandatory measures to accomplish the goal
of a safer food supply. Activities planned for meat and poultry
producers will be for educational purposes. In order to ensure that
hazards are addressed from farm-to-table, we must work closely with
producers to provide them the information necessary for them to
voluntarily address the food safety hazards they may encounter.
Ms. DeLauro. Last week, the Australian government announced that
the United States agreed to accept meat from Australia that was
inspected using private plant employees, not Government inspectors.
Would your clarify the USDA's decision to rely on private plant
inspectors?
Respondent. Unfortunately, recent media releases inaccurately
indicated that USDA has accepted the Australian meat inspection plan
that would have utilized private plant employees to inspect meat. USDA
has not agreed to accept meat from Australia under this plan. We are
continuing to work with Australia to ensure that any future plans meets
U.S. requirements for inspected meat.
Ms. DeLauro. The Jack-in-the Box company has been using an
intensive microbial testing system to check for hazardous bacteria in
all hamburger intended for sale in its restaurants. The percentage of
hazardous bacteria has declined dramatically in the 4 years that the
program has been in operation. Is the USDA considering instituting a
similar program for all ground beef processors?
Respondent. Microbial testing is a critical component of the
Pathogen Reduction/Hazard Analysis and Critical Control Point (HACCP)
Systems rule. One year ago, on January 27, 1997, the HACCP systems rule
required all slaughter establishments to begin testing products for E.
coli to ensure process control for the prevention and removal of fecal
contamination. Just recently, on January 27, 1998, 300 of the largest
meat and poultry slaughter and processing establishments, producing 92
percent of Federally inspected products, implemented HACCP plans for
identifying and controlling food safety hazards in their
establishments. The remaining establishments will phase in the use of
HACCP over the next 2 years. As establishments phase in the use of
HACCP plans, the Food Safety and Inspection Service is testing and
monitoring carcasses and raw ground product for Salmonella. At that
time, establishments are required to achieve performance standards for
Salmonella contamination.
fund for rural america
Mr. Fazio. I want to check on the status of funding for the Fund
For Rural America grants. We've got an important wheat research grant
at UC-Davis that the department had appeared to give the go-ahead to
only to be told that a decision was still pending. As you know, some of
the FRA money was rescinded last year for the emergency supplemental,
but the reason, in part, was that the department decided to perform a
separate RFP for it. My understanding is that FY 1997 funds still are
not out the door.
What is the status of both the Fund for Rural America research
component and the particular grant application from UC-Davis concerning
wheat?
Respondent. the first round of awards under the Fund for Rural
America was made in September, 1997 for Planning Grants totaling
$880,000. In February 1998, we will began making the standard awards
that will commit the remainder of the funds that became available
January 1, 1997. The nature of competitive research grants is such that
long lead times are involved in announcing a program, soliciting
proposals, preparing applications, evaluating proposals, and making
final awards. This is particularly true in the first year of a new
program. Pending receipt of all requested administrative information,
the UC-Davis grant will be awarded by the end of March.
Mr. Fazio. Do you intend to continue performing a separate RFP for
FRA research grants or have you given consideration to using current
NRI evaluation methods to streamline this process?
Respondent. The decision to announce a separate Request For
Proposals was made initially based on the unique nature of the work
that we hoped to support with the competitive grant component of the
Fund. I would contend that this rationale is still valid. The Fund
emphasizes short to intermediate problem-solving via the direct linking
of applied research, education, and extension activities. The Fund is
also to afford the highest priority to initiatives that address
problems cutting across agriculture, the environment, and rural
development. Priority is also to be given to initiatives that build
partnerships across the physical, biological, and social sciences and
between grantees and the clients and stakeholders to be served by their
activities. These special emphases required a separate RFP.
However, after our first year's experience, we have identified
several modifications that will speed up the process. For example, we
plan to evaluate all grant applications in a particular subject area at
one time rather than evaluating planning grants, standard grants, and
center grants in individual panels.
NRI evaluation techniques are used to evaluate Fund proposals to
the extent that technical/scientific merit and relevance are critical
criteria. The NRI model of peer panel review is also used. However, the
Fund's special emphases identified above make it critical that we
review scientific and technical merit in the context of factors
including short to intermediate term impact, partnerships, and impact
across subject areas.
Mr. Fazio. What is the official method of notification by USDA that
an entity has received a grant and the money has been obligated?
Respondent. While procedures vary somewhat from program to program,
the typical process within the Cooperative State Research, Education
and Extension Service is as follows. After review is done and final
selections are made by program staff, administrative staff review and
finalize awards. The program and administrative review often involve
contacting grant applicants for added information needed before a grant
can be finalized. Institutions and investigators who have experience in
grant programs recognize that such contact is an indication that the
probability of award is high, but not certain. When an award has been
documented, reviewed, and signed by the agency, funds are obligated.
The appropriate Congressional office is notified and announcement of
the award follows.
The confusion you alluded to in the UC-Davis case related to an
inquiry by program staff prior to recommending an award for
administrative review and processing. This inquiry was interpreted by
the university as a formal award. We have modified our procedures to
insure that this confusion will not happen again, particularly in
programs such as the Fund where a broader range of institutions, some
without past grant experience, are likely to be involved.
For other grant programs within the Fund which are not administered
by the Cooperative State Research, Education and Extension Service,
notification procedures are similar. For the Outreach for Socially
Disadvantaged Farmers program and the Rural Development grants,
recipients are notified by letter that a grant has been awarded and
funds have been obligated.

Conservation Reserve Program

Mr. Fazio. I have expressed my concern to you about opportunities
to increase California's participation in the Conservation Reserve
Program (CRP). California officials are now in the process of
developing the State's initial Conservation Reserve Enhancement program
(CREP) proposal. Last year, Jim Walsh and I encouraged you to allocate
about 8 million acres under the CRP for buffer strip enrollments and
CREP proposals. You indicated support for such an allocation.
What is the current status of overall CRP enrollments, and do you
believe the remaining acreage is sufficient for the purposes we
support?
Respondent. As of December 1997, 28.8 million acres were enrolled
in the CRP. Given the 5.9 million acres we recently accepted under
signup 16 less the 4.8 million acres under contracts that will expire
on September 30, 1998, there will be 29.9 million acres under contracts
on October 1, 1998.
We will reserve at least 5.5 million acres for practices covered by
the continuous CRP sign-up process, the Conservation Reserve
Enhancement Program (Federal/State enhancement agreements), the
Conservation farm Option program, and other initiatives. These CRP
components are key to the success of the USDA conservation buffer
initiative. This figure is based upon USDA analysis of the acreage
authority needed to ensure successful operation of these initiatives in
the future. We will continue to monitor enrollment levels and producer
interest and adjust this reserve if necessary.
Mr. Fazio. On rental rates, we need to ensure flexibility
particularly for California and the Northeastern States. In
California's case it is important to reflect the value of irrigated
land.
Respondent. CRP rental rates are established for each cropped soil
type at the local level to reflect the dryland agricultural-value cash
or cash equivalent rent adjusted for relative productivity. We
recognize that the value of predominantly irrigated lands generally
exceeds dryland values. Although there are concerns regarding paying
irrigated values and water saved from CRP acreage would likely be
reprogrammed for other uses, we intend to work closely with
representatives of irrigated States and others to fully explore this
issue. Our review should be completed before the next general CRP
signup.
Mr. Fazio. Do you believe you have the required flexibility on
rental rates, and do you believe rental rate flexibility will be
sufficient with regard to California's CREP?
Respondent. Consistent with the Manager's Report to the Federal
Agriculture Improvement and Reform Act of 1996, CRP rental rates are
based on the local cash or cash equivalent value. We have not adjusted
any rental rates from the dryland agricultural value although we intend
to further study the development of CRP rental rates based on irrigated
values. Under CREP, rental rates cannot be arbitrarily adjusted;
however, we may make additional incentive payments (as an adjustment to
the rental rate) to achieve desired program goals.

OFFICE OF THE CHIEF ECONOMIST

Hearings Where Chief Economist Testified

Mr. Skeen. Please provide a list of the Congressional hearings
where the Chief Economist testified in fiscal year 1997.
Respondent. The Chief Economist testified during fiscal year 1997
at the following hearings:
Principal USDA witness, February 25, 1997, Farm Tax Issues, Before
Senate Committee on Agriculture, Nutrition, and Forestry;
Panel witness supporting Secretary Glickman, February 26, 1997,
Before House Committee on Appropriations, Subcommittee on Agriculture,
Rural Development, Food and Drug Administration, and Related Agencies;
Panel witness supporting Secretary Glickman, February 27, 1997,
Before Senate Committee on Appropriations, Subcommittee on Agriculture,
Rural Development and Related Agencies;
Panel witness supporting Secretary Glickman, March 13, 1997, NCE
Prices in Administrative Federal Milk Marketing Order Program, Before
Senate Committee on Appropriations, Subcommittee on Agriculture, Rural
Development and Related Agencies;
Panel witness supporting Secretary Glickman, March 18, 1997,
Outlook for Agricultural Trade into the 21st Century, Before the House
Committee on Agriculture;
Panel witness supporting Lon Hatamiya, Administrator, AMS, May 15,
1997, Marketing Orders & Dairy/Cheese Industry, Before House
Subcommittee on Livestock, Dairy, and Poultry; and
Principal USDA witness, July 29, 1997, Volatility in Agriculture
Markets, Before Senate Committee on Agriculture, Nutrition, and
Forestry.

Sustainable Development Policy

Mr. Skeen. The responsibility for developing and coordinating USDA
sustainable development policy and programs resides with the Director
of Sustainable Development who is located in the Office of the Chief
Economist. Please provide the committee with a status report on USDA
activities associated with sustainable agriculture.
Respondent. Sustainable Development is defined by the President's
Council on Sustainable Development as development that allows people to
meet the needs of the present without compromising the ability of
future generations to meet their own needs. The 1990 Farm Bill defines
sustainable agricultural systems as integrated systems that: (1)
Satisfy human food and fiber needs; (2) enhance environmental quality
and the natural resource base upon which the agricultural economy
depends; (3) make the most of nonrenewable resources and on-farm
resources, and integrate, when appropriate, natural biological cycles
and controls; (4) sustain the economic viability of farm operations;
and (5) enhance the quality of life for farmers and society as a whole.
In general, the Director of Sustainable Development leads and
coordinates sustainable development activities in USDA and works to
integrate and institutionalize the concepts of sustainable development
within USDA policy and programs.
The USDA Council on Sustainable Development, chaired by the
Director, has established several working groups, two of which focus on
sustainable agriculture activities; a sustainable agriculture learning
initiative to help remove or remedy credit and crop insurance obstacles
that are unnecessarily hindering the expansion of sustainable
agricultural enterprises and practices, including helping to educate
bankers in sustainable agriculture; and a research working group to
identify specific research needs for USDA agencies in sustainable
development, including sustainable agriculture.
The Director of Sustainable Development also acts as liaison to the
President's Council on Sustainable Development--PCSD--and maintains
liaison and communication with other Government agencies and outside
groups. The City of Tulsa, Oklahoma and the Kerr Center for Sustainable
Agriculture sponsored the September 1997 PCSD meeting. A regional foods
banquet and a farm tour and discussion on sustainable agriculture
practices and their link to water quality for the Tulsa watershed is
one of the top issues for the Mayor of Tulsa. In addition, activities
of the Metropolitan and Rural Strategies Task Force of the PCSD, will
include follow-up actions on sustainable agriculture issues. The rural
working group of this task force is chaired by USDA.
During 1997, the Director of Sustainable Development also served as
chair for the Civil Rights Implementation Team. The Team was charged
with establishing a National Commission on Small Farms and worked with
the Office of the Secretary to establish the Commission as a formal
advisory committee. The Team also choose membership for the Commission,
taking into account regional, ethnic, gender and agricultural
perspective diversity. In addition, the Director has helped to make
sustainable agriculture a key part of the development of the domestic
and international discussion papers that will serve as the basis for
the U.S. Action Plan on Food Security in response to the World Food
Summit.
The Director of Sustainable Development represents USDA on the
United States delegations to the United Nations--U.N.--Commission on
Sustainable Development--UNCSD--and other related international fora,
negotiations and discussions, including, for example, the Summit of the
Americas. In 1997, these sessions included the U.N. General Assembly
Special Session on Sustainable Development; U.S. participation included
President Clinton. As part of participation in UNCSD, USDA holds, when
needed, informal briefings and consultations for agricultural non-
Governmental organizations interested in sustainable agriculture.
Working in an open and participatory manner with other Federal,
international, and non-Governmental organizations, USDA has started to
prepare for the year 2000 meetings of the UNCSD. The focus will be on
integrated landresources, including sustainable agriculture, and
developing an agenda for action for sustainable agriculture.

Budget Support

Mr. Skeen. What budget support did other USDA agencies provide to
the Office of the Chief Economist in fiscal year 1997?
Respondent. The Office of the Chief Financial Officer provided
direct budget formulation and execution support for the program
activities in the Office of the Chief Economist. The Office of Budget
and Program Analysis provided general budget guidance and oversight, as
is provided to all USDA agencies. Departmental Administration provided
general support on human resources and space issues.

Risk Assessment Rule Making

Mr. Skeen. Please provide the Committee with examples of how risk
assessment has improved rule making at USDA?
Respondent. The risk assessments for the Conservation Reserve
Program and the Environmental Quality Incentives Program were performed
to accompany regulatory impact analyses of these major rules. The
Office of Risk Assessment and Cost-Benefit Analysis--ORACBA--provided
the technical guidance, review, and other assistance to the agencies
performing the analyses. The urgency and statutory guidance for
publishing the proposed rules for these programs resulted in many
program decisions being made prior to the completion of the risk
assessments. However, the Environmental Quality Incentive Program--
EQIP--risk assessment proved to be very useful in identifying those
agricultural areas in the United States subject to the cumulative
effects of hazards identified in the risk assessment. Information about
cumulative hazards can aid in the identification of conservation
priority areas and the allocation of program resources. It should be
noted that the risk assessments for the Conservation Reserve Program
Analysis--CRP--and EQIP programs were the first national level
ecological risk assessments which examined the effects of multiple
hazards on multiple endpoints over a broad range of ecosystems, and
were unique and complex. The EQIP and CRP risk assessments were found
to be extremely useful sources of information for subsequent agency
analyses and decisions concerning these programs. In addition, the
agencies promulgating these rules have made substantial progress in
incorporating risk analysis methods into ongoing agency program
analysis activities. From ORACBA's perspective, substantial progress
has been made by these agencies in using risk assessment information
for regulatory development. ORACBA also initiated an interagency team
for developing guidance on ecological risk analysis and plans to work
with relevant USDA agencies in evaluating the implementation of EQIP
and CRP.
ORACBA participated in the interagency reviews of a number of
significant regulatory proposals and reports. ORACBA provided technical
guidance and support in EPA's National Ambient Air Standards for Ozone
and Particulate Matter, EPA's Mercury Report to Congress, the
President's National Interagency Food Safety Initiative--NFSI--and the
FDA Fruits and Vegetables Initiative. In regard to NSFI, ORACBA helped
formulate the role of risk assessment in the interagency strategy to
prevent food borne disease. ORACBA continues to advise the newly
created Joint Institute for Food Safety and Applied Nutrition,
established under NSFI, on risk assessment issues through its work with
the Risk Assessment Consortium. ORACBA's participation on the
interagency review of the EPA Mercury Report resulted in the removal of
language raising undue concerns about fish as a food, due the lack of
scientific evidence, and resulted in the development of a risk
communication effort to better inform consumers about the benefits of
fish consumption versus the limited risk of mercury exposure for most
people.
ORACBA was a member of the interagency team responsible for the
development of a plan to manage broilers and other animals that may
have dioxin contamination resulting from a clay anti-caking agent in
soybean meal as used in animal feedstuffs. ORACBA provided technical
support and guidance for the assessment of dioxin in animal feed,
leading to USDA guidance for testing exposed animals before they or
their products are marketed and sound information indicating no
immediate health hazard to consumers. The information brought by ORACBA
resulted in studies which indicate that no anthropogenic origin of
dioxins can explain the mix of dioxins and distribution in the clay in
situ. Therefore, a natural but unknown source is presumed.
ORACBA worked with the Animal and Plant Health Inspection Service--
APHIS--of USDA to develop a policy for the animal health
Regionalization Regulation which provides greater flexibility for other
countries to export their products to the U.S., but with safeguards for
U.S. livestock by relying on science-based risk assessments. APHIS has
requested that ORACBA review all risk assessments for all imports
brought into the country using the Regionalization Regulation. ORACBA's
participation helps assure the safety of such products to U.S.
consumers and ecosystems.
ORACBA reviewed the risk assessment for the importation of Haas
avocados from Mexico into the U.S., a position supported by the risk
assessment. Consequently, an industry group funded a conference at
Harvard University to evaluate the risk assessment. The findings at
this conference supported those of ORACBA. The first avocados were
imported to the U.S. from Mexico November 1997 and ended February 28,
1998.
In response to an increasing number of human illnesses attributed
to egg consumption, an interagency effort was established to develop a
plan of action. ORACBA assisted in the conceptualization of a plan for
a comprehensive risk assessment that examined the farm to table risk of
food borne illness due to Salmonella in eggs. The risk assessment has
identified target areas for risk reduction, compared to public health
benefits of alternative strategies, and is guiding future research. The
risk assessment, now in draft, along with a cost-benefit analysis will
lead to an integrated risk reduction strategy in a series of regulatory
initiatives for eggs and egg products.
ORACBA provided technical guidance in the interdepartmental Animal
Feeding Operation Strategy Working Group, part of the Vice President's
Clean Water Action Plan Initiative in the areas of cooperation in
regulatory development, monitoring and evaluation, and initiatives for
the action plan.
ORACBA served on the President's Initiative on Fruit and Vegetable
Safety by identifying how risk assessment can provide information
identifying the most significant risks and effective guidance for
mitigating those risks. It is expected that the risk assessment efforts
promoted by ORACBA will lead to a systematic evaluation which
identifies the hazards, the sources of food safety risk, and the most
effective and efficient means of prevention. ORACBA continues to work
toward the development of a plan assuring the safety of fruits and
vegetables from both domestic and international sources.
ORACBA reviewed the Agricultural Marketing Services regulation on
labeling organic foods. Though ORACBA had no statutory requirement to
review this labeling regulation, some problems were recognized in the
original regulation. ORACBA contacted the Agricultural Research Service
and the Centers for Disease Control to assure review by competent
infections disease microbiologists and the subsequent draft of the
regulation was modified to show concerns about these issues.
ORACBA has been working closely with USDA's Food Safety and
Inspection Service and Animal and Plant Health Inspection Service to
develop a risk assessment based strategy for safeguarding U.S.
consumers and livestock industry from bovine spongiform
encephalopathies--BSE--and transmissible spongiform encephalopathies--
TSE. ORACBA was called upon to develop a USDA-based plan concerning
BSE/TSE in the U.S. which is based on a risk assessment of the adequacy
of current safeguards. ORACBA also coordinated a risk communication
training course on BSE/TSE issues for USDA personnel. ORACBA was also
involved in the planning of the International Workshop on TSE conducted
by the Joint Institute on Food Safety and Applied Nutrition--JIFSAN,
created by the President's Food Safety Initiative.
In order to ensure that there are scientifically trained staff in
USDA to perform needed risk assessments to support implementation of
regulations, ORACBA began two courses, a beginning and an advanced, in
1996 to hep train personnel. After the Food and Drug Administation--
FDA--requested places in these courses, USDA and FDA joined with USDA
Graduate School to offer these two courses and develop others which
would also support good risk assessment development. Financial
resources from JIFSAN are sponsoring the development of 6-8 more
courses which would be taught as part of a summer institute for JIFSAN,
at the University of Maryland as regular semester courses, and through
the USDA Graduate School on an as-needed basis. Tuskegee University
will be participating in the development of these courses and will use
them to form the core of their Master's Degree Minor in Risk Analysis.
The USDA Graduate School will be giving a Risk Analysis Certificate to
students who successfully complete a minimum of 6 courses in this
series.
ORACBA has encouraged land-grant and 1890's universities to engage
in risk analysis activities by providing seminars, teaching sessions,
and faculty consultations for universities who request such service--
University of Illinois, Iowa State University, Michigan State
University, University of California Davis, Tuskegee University,
University of Arkansas Pine Bluff. In addition, ORACBA has worked with
the Cooperative State Research, Education, and Extension Service to
develop language and appropriate reviewing of multi-disciplinary
research proposals in risk analysis.

Risk Assessment Staff Time

Mr. Skeen. How much staff time has been devoted to risk assessment
by your office and by the agencies that performed the risk assessment?
Respondent. The Office of Risk Assessment and Cost Benefit Analysis
provided the training, technical support, coordination and review of
the risk assessments mentioned above. About three full-time equivalents
from ORACBA staff were devoted to these activities in fiscal year 1997.
We are unable to estimate the staff time devoted risk assessment
activities by other USDA agencies to risk assessment.

Risk and Benefit-Cost Analyses Differences

Mr. Skeen. In addition to risk analyses for rule making, agencies
are required to perform cost-benefit analyses. Please describe for the
Committee how risk and cost-benefit analyses differ and how each
contributes to rule making.
Respondent. The primary purpose of a risk assessment is to identify
the hazards to human health, human safety, or the environment, the
likelihood of their occurrence, and the magnitude of the consequences.
Within the context of regulatory analysis, a risk assessment provides a
basis for examining the effects of alternative programs on ecological
or human health relationships and consequently their performance in
reducing human health or environmental hazards. Stated differently, a
risk assessment identifies the potential human health or environmental
benefits of a proposed regulatory action.
A cost-benefit analysis evaluates the economic impacts of
alternative program actions to achieve regulatory objectives. Cost-
benefit analyses attempt, within the limits of reasonably available
economic information and the capacity of economic models, to identify,
quantify, and estimate the monetary value for all costs and benefits of
rule making. These benefits include the human health and environmental
risk reduction effects identified in an ecological risk assessment--
e.g., degree of compliance with water quality criteria--are translated
into economic terms in the cost-benefit analysis--e.g., days of
recreational fishing, reduced water treatment costs. Risk assessment
and cost-benefit analysis provide agency program managers, policy
officials, and the public with valuable information with which to
evaluate regulatory actions and guide the rule making process toward
effective, balanced actions.

Commission on 21st Century Production Agriculture

Mr. Skeen. Has the President made any appointments to the
Commission on 21st Century Production Agriculture?
Respondent. The President has named three persons to serve on the
Commission. They are Mr. Jim DuPree, a producer from Newport, Arkansas;
Mr. Ralph Paige, executive director of the Federation of Southern
Cooperatives, East Point, Georgia; and Mr. Leland Swenen, president of
the National Farmers Union, Aurora, Colorado.

Support for Commission on 21st Century Production Agriculture

Mr. Skeen. How much staff time will be required from USDA agencies
to support the Commission?
Respondent. Up to now and for the foreseeable future, the USDA
staff time to assist the Commission is expected to be minimal. The
Office of the Chief Economist--OCE--is serving as the Secretary's
liaison to the Commission and will be represented at Commission
meetings, which have been infrequent. OCE is also providing budget
oversight and administrative support, which mainly involves assisting
the Commission with the payment of their bills. The Commission has not
requested assistance from USDA in preparing their mandated reports.
However, we expect the Commission will use USDA analyses and research
that has been done since 1996 and future work that would be done
regardless of the existence of the Commission.

Funds To Support Commission

Mr. Skeen. What lower priority activities would be curtailed if
USDA redirects funds to support the Commission?
Respondent. USDA has not redirected funds from agencies to support
the Commission and does not expect to. The Secretary has provided that
the Commodity Credit Corporation--CCC--could make available up to
$50,000 for fiscal year 1998 to support the Commission's activities.
This funding will not affect the operation of the programs supported by
the CCC. The Secretary has directed that the $50,000 will be counted as
part of the $1 million limit on spending of appropriated funds for
advisory committees, task forces, etc. Therefore, the funding of the
Commission curtails in a very limited way the activities of the other
advisory committees subject to the $1 million limitation.

Object Class Table for Commission

Mr. Skeen. Please provide a separate object class table for the
Commission.
[The information follows:]

COMMISSION ON 21ST CENTURY AGRICULTURE OBJECT CLASS TABLE
[Dollars in thousands]
------------------------------------------------------------------------
Fiscal year Fiscal year
Object class 1998 1999
------------------------------------------------------------------------
Salaries................................ .............. 137
Benefits................................ .............. 38
Travel.................................. 45 100
Rent, Communications, and Utilities..... 1 35
Printing and Reproduction............... .............. 25
Other Services.......................... 4 15
-------------------------------
Total............................. 50 350
------------------------------------------------------------------------

Salary Costs for Commission and Staff

Mr. Skeen. Please provide a breakdown of the total salary costs for
Commissioners and staff.
Respondent. The total salary cost for Commissioners and staff is
$137,000, consisting of expenses for a staff director and secretarial
support.

Impacts of Welfare Reform on Farm Labor

Mr. Skeen. Has OCE studied the impacts of welfare reform on the
availability of farm labor?
Respondent. OCE has not conducted formal studies of the impact of
welfare reform on the availability of farm labor. However, we have
closely followed reports and anecdotal information as it has become
available. OCE staff has worked closely with a consortium of welfare
agencies, community based organizations, and farmers in several rural
counties of California who are establishing a ``Welfare-To-Farm-Work''
program intended to provide jobs for welfare recipients and workers to
meet agricultural labor needs. At this point, it is too early to
determine the level of success of the program.

Implementation of EQIP

Mr. Skeen. What was the result of the analysis by the Office of
Risk Assessment and Cost Benefit Analysis of risk management options
for implementing EQIP?
Respondent. As stated in the final rule for the EQIP program, one
year after the promulgation of the final rule the Natural Resources
Conservation Service--NRCS--is responsible for conducting an economic
analysis based on a risk management assessment of EQIP. Upon
consultation with ORACBA, NRCS has stated that such a study is not
practicable at this time because of the complexity of the ecological
relationships affected by the program, the lengthof time between the
introduction of an EQIP conservation plan and environmental result, and
other factors. However, NRCS is currently cooperating with ORACBA in
developing case studies to better understand manure management
alternatives available through EQIP. The case study consists of
conducting a risk assessment, a cost-benefit analysis of manure
management alternatives, and establishing a plan for monitoring the
performance of the program as implemented. Such a study would
demonstrate the agency's adaptation of risk assessment and cost-benefit
analysis into program and regulatory development. Such analyses, of
which the mature management study is the first example, is consistent
with and accomplishes the intent of the risk management assessment
called for in the final rule.

Conservation Reserve Program

Mr. Skeen. What was the result of the analysis by the Office of
Risk Assessment and Cost Benefit Analysis of the Conservation Reserve
Program?
Respondent. As is also stated in the Conservation Reserve Program
final rule, one year after the promulgated of the final rule the Farm
Service Agency--FSA--is responsible for conducting an economic analysis
based on risk management assessment of the CRP. Such as assessment is
currently underway. The report will be delayed somewhat as the agency
will incorporate the results of the most recent--16th--sigh-up for the
program. The FSA is also conducting a case study similar to that
identified for NRCS and is a reflection of the progress of FSA in using
risk assessment, cost-benefit analysis, and monitoring in program and
regulatory development.

Relationship of Price Discovery to Weather and Climate Data

Mr. Skeen. What is the relationship of price discovery, as
mentioned on page 8-8 of the budget justifications, to weather and
climatic data?
Respondents. Facilitating efficient price discovery in agricultural
markets refers to the delivery of relevant and timely information and
data and affect the price of agricultural products and livestock.
Prices react to the delivery of market information, including
information about weather and climate. The fuller and more complete the
information the better market price represents supply and demand
fundamentals. Weather and climate affects virtually all phases of crop
cycles and all phases of commodity storage and transportation. As such,
weather and climate are primary inputs used by USDA to generate the
World Agricultural Supply and Demand Estimates report. This information
is provided to policy officials and the public. Some reactions are
immediate, such as a freeze event during a crucial blooming stage of
fruit trees. Others, such as a developing drought episode, affect the
market more gradually and over a longer period of time.

Two New Staff Persons

Mr. Skeen. What will the proposed two new staff persons do in
regard to the activities mentioned in section ii on page 8-8?
Respondent. The staff will be tasked with managing the operation of
the newly installed hardware and software, maintaining the integrity of
the data network, and utilizing a sophisticated Geographic Information
System--GIS--package to ensure near real time availability of the data
to all operational sites, including the data collection site at
Stoneville, Mississippi. More comprehensive access to weather and
climate information in rural areas, away from the warming influence of
urban weather stations, will provide more accurate information that
relates to agriculture. During periods of unfavorable weather, GIS
tools will be used to delineate more precisely the most vulnerable
agricultural areas. Further, the incumbents will focus on transferring
technologies innovations and data to the research community and the
private sector.

Program Increases in Weather and Climate Data

Mr. Skeen. Please provide some specific examples of how your
proposed program increases in weather and climate data would provide
information to agricultural areas in the United States that are not
provided through the private sector or other government agencies?
Respondent. There is a significant lag in availability of critical
data from rural areas through the Cooperative Observer network--COOP.
In addition, many data networks presently in place are fragmented and/
or not readily accessible by prospective users, including ``value-
added'' vendors in the private sector. Others, while available locally,
are not available at the national level. USDA's program will identify
key COOP stations through agricultural areas and establish a protocol
for timely access to those reports throughout USDA for USDA use in
making assessments and for delivery of the data to the private sector.
USDA will then establish new weather and climate observing stations in
important farming and rural areas that do not currently have stations.
The goal is to extent coverage in citrus and field crop areas. USDA
will use also GIS technology to identify river drainage systems and the
most suitable COOP stations for operational assessments.

Reallocations

Mr. Skeen. What reallocations (section 3, page 8-9) have affected
the World Agricultural Outlook Board?
Respondent. One example is the recent announcement by the Economic
Research Service that it is reducing by half its commodity situation
and outlook reports and is reallocating resources from monitoring
short-run conditions to the conduct of research on market fundamentals.
While this shift should increase the Department's potential to
understand longer term developments, it is expected to reduce
information on short-and medium-term events. In addition, other
agencies have found it increasingly difficult to meet program analysis
needs with limited budgets with supporting short-end medium-term
analysis. The World Agricultural Outlook Board has the primary
responsibility for advising the Secretary on the causes and
consequences of near-term market developments. In order to respond to
increasing demands in a more globally and market-oriented world and to
plug short-term information gaps, the Board is seeking additional
resources. To maintain the analytic underpinnings needed for
Department-wide forecasts, and to be able to better answer questions
concerning short-to medium-term developments in the farm sector.

Explanation of Acronyms

Mr. Skeen. Pages 8-8 and 8-9 of the budget justifications use more
acronyms per page than any other U.S. Government publication. Please
provide a brief explanation of the following: AWIPS, NOAAPORT, UCAN,
NAWON, COOP, SNOTEL, SNOpack TELemetry, and FS RAWS.
Respondent. Acronyms include:
AWIPS, the Advanced Weather Interactive Processing System is part
of the National Weather Service modernization effort. AWIPS will serve
as the nerve center of operations for all modernized forecast offices.
It will be capable of receiving, processing, and analyzing huge amounts
of data including, satellite, radar, and other land based systems.
AWIPS is primarily a data-crunching server--computer--and working
stations, connected to a communication network. The communications
linkage will include a high-speed data network for point-to-point
networking and a one-way point-to-multi-point broadcast service called
NOAAPORT.
NOAAPORT is the technical name for the National Weather Service
method for delivering a continuous stream of weather and climate
information to multiple sites via satellite uplink and distributed
downlinks.
UCAN, the Unified Climate Access Network, is a network on the
Internet which provides public access to weather and climate data sets
collected by many Federal, State, and county agencies. UCAN is a
collaborative effort between the NOAA Regional Climate Centers, USDA's
Natural Resources Conservation Service, and the National Climatic Data
Center.
NAWON, National Agricultural Weather Observing Network, is the name
of USDA's proposal to collect weather and climate data from rural
areas, either by accessing data and information from sites already
established by other Federal agencies or State and local agencies that
are not now being routinely made available to USDA or by establishing
weather and climate observing sites in agricultural areas where weather
and climate data would be useful to Federal and private meteorologists.
COOP, the Cooperative Observer Network, is a National Weather
Service--NWS--network of volunteer observers located in many urban and
rural areas of the United States. The NWS provides instruments to
volunteer observers who make and report weather and climate readings
each day.
SNOpack TELemetry--SNOTEL--is USDA's Natural Resources Conservation
Service snow reporting network. It is an automated snow telemetry
system for hydrologic stream flow estimations.
RAWS, the Remote Automated Weather System, is the Forest Service's
network of automated weather and climate stations located in forested
areas throughout the West.

Improved Risk Assessment Methods for Foodborne Pathogens

Mr. Skeen. How would the Office of the Chief Economist help develop
improved risk assessment methods for foodborne pathogens? Isn't that
the business of FDA, FSIS, and CDC?
Respondent. Comprehensive, ``farm to fork'' risk assessments for
foodborne pathogens require the expertise of people from several
agencies with diverse experiences. Knowledge ranging from on-farm
environments to home preparation practices is necessary. Due to its
diverse experiences in risk assessment and lack of affiliation with a
particular rule-making agency, ORACBA is in a unique position to bring
these people together to participate in risk assessment model
development for food safety. ORACBA continues to coordinate the
Interagency Food Safety Risk Assessment Group to share data and develop
models for risk assessments. The group actively engages in projects.
Current members include representatives from the Agricultural Research
Service, Economic Research Service, Food Safety and Inspection Service,
Animal and Plant Health Inspection Service, Cooperative, State,
Research, Education, and Extension Service, Food and Drug
Administration Center for Food Safety and Applied Nutrition, Food and
Drug Administration Center for Veterinary Medicine, and Environmental
Protection Agency. As a result of these ORACBA-sponsored interagency
activities, food safety risk assessments will be more complete and food
safety issues will permeate other areas of analyses, such as
environmental analyses and manure management.

Analysis of Tobacco Settlement

Mr. Skeen. Please provide a copy of the OCE analysis of the tobacco
settlement.
[The information follows:]

[Pages 108 - 1--The official Committee record contains additional material here.]

Analysis of El Nino on World Grain Production

Mr. Skeen. Please summarize OCE's most recent analysis of the
effects of EL Nino on world grain production.
Respondent. The effects of the current El Nino event on world grain
production has been mixed and perhaps more unpredictable than expected
based on historical comparisons. In spite of reduced planted acreage in
anticipation of drought, Australian wheat output is expected to be the
fifth highest on record, despite historical correlations of extreme
drought in that country's wheat areas. Late arriving rains in Indonesia
allowed uncontrolled fires, but the arrival of timely rains is boosting
rice output above last year and possibly the highest on record. Past El
Nino's have brought drought to northwest India, but near-normal rains
during the current season have resulted in record rice production. In
South Africa, El Ninos typically diminish corn production. While
planted area there had been reduced in anticipation of drought, crop
yields are estimated at near trend levels because of timely and
favorable rains in late December and January. Grain yields are expected
to be below average in Central America, but abundant rains have boosted
corn output in Argentina.

OFFICE OF BUDGET AND PROGRAM ANALYSIS

Breakout of Resources for OBPA'S Responsibility

Mr. Skeen. Please update the table that appears on page 186 and 187
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 years 1998 and 1999 estimates.
[The information follows]:

U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF BUDGET AND PROGRAM ANALYSIS
[Dollars in Thousands]
----------------------------------------------------------------------------------------------------------------
Key ares SY FY 1997 SY FY 1998 SY FY 1999
----------------------------------------------------------------------------------------------------------------
Program review/policy analysis......................... 28 $2,246 27 $2,335 26 $2,297
Budget preparation, presentation and execution......... 25 2,068 24 2,035 24 2,116
Legislative reporting and regulatory analysis.......... 9 709 9 778 9 786
Administrative management and automated systems........ 11 886 10 838 10 846
--------------------------------------------------------
Total............................................ 73 5,909 70 5,986 69 6,045
----------------------------------------------------------------------------------------------------------------

Organization

Mr. Skeen. Provide a tree chart that shows the organization of the
office.
[The information follows:]

[Page 131--The official Committee record contains additional material here.]

Object Class 25.2, Other Services

Mr. Skeen. Please provide a sub-object class breakout for object
class 25,2, other services, for fiscal years 1997, 1998, and 1999.
[The information follows:]

U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF BUDGET AND PROGRAM ANALYSIS
[Dollars in Thousands]
------------------------------------------------------------------------
1998 1999
Service 1997 Actual Estimate Estimate
------------------------------------------------------------------------
Contractual Services and
Agreements...................... $10 $14 $14
Equipment/Software Maintenance... 40 42 42
Training......................... 15 23 19
Other Services................... 19 4 3
--------------------------------------
Total...................... 84 83 78
------------------------------------------------------------------------

Legislative Proposals

Mr. Skeen. How many legislative proposals were sent to Congress in
fiscal years 1996 and 1997? How many were enacted into law?
Respondent. USDA has sent to Congress a total of 5 legislative
proposals in fiscal years 1996 and 16 legislative proposals in fiscal
year 1997. Our records indicate two proposals were enacted into law in
fiscal year 1996, PL 104-307, Wildfire Suppression Aircraft Transfer
Act of 1996 and PL 104-127, Federal Agriculture Improvement and Reform
Act of 1996. In fiscal year 1997, PL 105-113, Census of Agriculture was
enacted into law.

Code of Federal Regulations

Mr. Skeen. Do you still expect to complete your work on the Code of
Federal Regulations in 1999?
Respondent. USDA is fully committed to this initiative and we are
72 percent complete.

1998 Buyouts

Mr. Skeen. What is the status of buyouts at the Department for
fiscal year 1998?
Respondent. As of January 1998, the Department used a total of
1,958 buyouts, which is approximately 69 percent of the number of
buyouts proposed in the Department's Buyout Plan. Details of the
Department's buyouts follow:

Farm Service Agency............................................ 437
Rural Development.............................................. 90
Forest Service................................................. 1,262
Natural Resources Conservation Service......................... 127
Food Safety and Inspection Service............................. 7
Economic Research Service...................................... 19
Grain Inspection, Packers and Stockyards Administration........ 14
Office of Communications....................................... 2
------

Total, USDA............................................ 1,958

Staff Year Reductions and the 1996 Farm Bill

Mr. Skeen. Please provide your 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.
Respondent. The plating flexibility provisions and multi-year
contract provisions of the farm bill have substantially reduced
workload requirements of the Farm Service Agency--FSA--at the field
office level. For example, the fiscal year 1997 budget estimates
prepared in January 1996 before enactment of the farm bill included
non-Federal county workload staffing needs of 13,224 full time
equivalent--FTE--employment for fiscal year 1996. Following passage of
the farm bill in April 1996, FSA performed an internal workload
analysis that showed lower staffing needs for fiscal year 1996, down to
an estimated 12,835 county office FTE's. The analysis showed further
reductions for fiscal year 1997, down to 11,946 county office FTE's.
The actual levels of county office FTE's supported by appropriations
action for fiscal years
1996 and 1997 were respectively 12,738 and 11,399. These lower staffing
levels have been achieved through a combination of buyouts, reductions-
in-force, and attrition. The 1999 budget estimates of additional
reductions in non-Federal county office of FTE's, to 10,835 in fiscal
year 1998 and 9,980 in fiscal year 1999, reflect further efforts by the
Administration to increase efficiency and reduce costs. Federal county
staff years will also be reduced as showm in the table that follows.
[The information follows:]

FSA WORK-DAYS BY PROGRAM/FUNCTION IN COUNTY OFFICES, FISCAL YEARS 1996 To 1999
[Work-days and staff years in thousands]
----------------------------------------------------------------------------------------------------------------
Inital estimates-- Actual and current estimates--
---------------------------------------------------------------------
Program delivery functions 1996w/o 1996 w/ 1997 w/ 1996 1997 1998 1999
AMTA AMTA AMTA actual actual estimate estimate
----------------------------------------------------------------------------------------------------------------
Conservation and related programs......... 199 284 547 255 398 424 406
Wool and mohair........................... 10 10 0 11 0 0 0
Commodity loan activity................... 176 129 142 114 119 150 165
Compliance................................ 529 458 398 373 389 386 347
Yield and base establishment.............. 11 140 600 77 18 17 15
Commodity program payments................ 275 258 156 353 316 290 258
Basic farm records........................ 382 420 260 381 305 318 286
Peanut quotas and mktgs................... 17 20 19 17 24 25 22
Tobacco allotments and mktgs.............. 61 61 61 53 66 65 59
Referenda................................. 1 1 1 1 0 3 3
Administration............................ 878 784 753 902 709 666 559
Committee elections....................... 76 76 31 36 22 22 20
Miscellaneous............................. 172 171 166 206 161 67 59
Automation coordinators................... 15 15 15 20 174 171 153
Reinsured companies and NAP............... 87 181 179 125 91 99 89
Credit, nonfederal county................. 78 78 130 70 22 53 105
Credit, federal county.................... 608 608 608 540 561 578 578
Measurement service....................... 120 46 46 98 62 56 48
Catastrophic insurance.................... 252 204 142 220 86 5 0
Undistributed wkload reduction............ 0 0 0 0 na na na
---------------------------------------------------------------------
Federal county work-days.................. 608 608 608 540 561 578 578
Non-Federal county work-days.............. 3,438 3,337 3,106 3,312 2,964 2,817 2,595
---------------------------------------------------------------------
Total county level work-days........ 4,047 3,945 3,714 3,852 3,525 3,395 3,173
Federal county staff years................ 2,340 2,340 2,340 2,076 2,160 2,224 2,224
Non-Federal county staff years............ 13,224 12,835 11,946 12,738 11,399 10,835 9,980
---------------------------------------------------------------------
Total county level staff years...... 15,564 15,175 14,286 14,814 13,559 13,059 12,204
----------------------------------------------------------------------------------------------------------------

The USDA Budget Summary

Mr. Skeen. What is the cost to print and distribute the USDA budget
summary document? How much of these costs are recovered through fees?
Respondent. The cost to print the USDA 1999 Budget Summary was
approximately $8,200. None of the costs are recovered through fees.

Travel, Supplies, and Materials and Equipment

Mr. Skeen. Your proposed fiscal year 1999 budget shows significant
percentage reductions in travel, supplies and materials and equipment
from the two previous years. Are these expenses being charged to other
agencies?
Respondent. None of these costs are charged to other agencies.

Legislative Proposals

Mr. Skeen. Please list all the legislative proposals to be
submitted in support of the fiscal year 1999 budget. Please indicate
the cost of each and whether that cost is derived from mandatory or
discretionary funding or from user fees.
[The information follows:]

[Pages 134 - 137--The official Committee record contains additional material here.]

Professional and Clerical Staff

Mr. Skeen. Please update the table that begins on page 76 of last
year's hearing record, showing the number of professional and clerical
staff from each agency assigned to the public affairs activities and
the cost by agency, to include 1999 data.
Respondent. Yes, I will provide that information for the record.
[The information follows:]

[Pages 139 - 141--The official Committee record contains additional material here.]

Congressional Relations

Mr. Skeen. Please update the table that begins on page 80 of last
year's hearing record showing a breakout of congressional relations
activities to include fiscal year 1999.
Respondent. Yes, I will provide that information for the record.
[The information follows:]

[Pages 143 - 147--The official Committee record contains additional material here.]

Farm Loan Programs

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. Please provide the status of both
the Task Force and the number of delinquent loans and update the
information provided on pages 99 and 100 of last year's hearing record?
Respondent. The Loan Resolution Task Force was dissolved on
September 30, 1996. The responsibility for collection and resolution of
delinquent million-dollar accounts now lies with the Deputy
Administrator for Farm Loan Programs and State Executive Directors.
The number of outstanding delinquent million-dollar accounts
dropped from 502 on September 30, 1996, to 431 on September 30, 1997, a
net decline of 71. From September 30, 1997, through December 31, 1997,
we experienced a net decline of 17 additional accounts, resulting in a
remaining portfolio of 414 delinquent million-dollar accounts.
Of the 414 accounts, 306 or 74 percent are in some form of
litigation involving foreclosure, bankruptcy, or some means of
settlement. The remaining accounts are being serviced under the
requirements of the 1987, 1990 and 1996 Acts.
The 414 remaining delinquent million-dollar accounts represent only
2 percent of Farm Loan Program delinquent accounts but are responsible
for about 32 percent of all delinquent dollars outstanding
($649,058,930 for delinquent million dollar accounts while the entire
delinquent portfolio is $2,008,442,181). Therefore, collection and
resolution of delinquent million dollar accounts will remain an FSA
priority.
Most delinquent million-dollar accounts are being resolved by
liquidation. Where other income or assets are available, offsets and
deficiency judgements are being pursued. Collection efforts are
terminated on delinquent million-dollar accounts only when no
reasonable possibility of collection exists and only when ordered by
judicial decree or approved by the FSA National Office or the Civil
Division of the Department of Justice.
The status of the 414 remaining delinquent million-dollar accounts
follows:

[Pages 149 - 150--The official Committee record contains additional material here.]

Mr. Skeen. What is the current error rate in processing loan
applications?
Respondent. For FY 1997, according to a national internal review,
of the 1,266 cases reviewed, 87 percent of all servicing actions were
in compliance with the Agency's statutory, regulatory and servicing
quality requirements, resulting in a 13 percent error rate.

Tobacco Table

Mr. Skeen. Please provide a copy of the most recent updated tobacco
table that shows the related administrative expenses for carrying out
the tobacco program.
Respondent. Yes, I will provide a copy of the most recent updated
table on the administrative expenses associated with carrying out the
tobacco program.
[The information follows:]

[Pages 152 - 154--The official Committee record contains additional material here.]

USDA AmeriCorps Activities

Mr. Skeen. Please update the table that appears on page 110 of last
year's hearing record on USDA AmeriCorps activities.
Respondent. USDA's participation in the AmeriCorps program ended
after FY 1996. No funding for the program was provided in FY 1997, and
none will be provided in FY 1998 or FY 1999.

OSEC Staff in Current Offices

Mr. Skeen. Provided tables similar to the ones on pages 112 through
117 of last year's hearing record that list 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 1997 and 1998. Also, please
list by name each staff and those that are used by OSEC and costs that
are paid by agencies.
Respondent. Yes, I will provide updated tables concerning OSEC
staffing and associated costs.
[The information follows:]

[Pages 156 - 163--The official Committee record contains additional material here.]

EBT Food Stamp Benefits

Mr. Skeen. What percentage of food stamp benefits are currently
being delivered by EBT?
Respondent. Currently, about 35 percent of food stamp benefits are
delivered by EBT.

Supplemental Nutrition Program for Women, Infants, and Children (WIC)

Mr. Skeen. Please submit a copy of the Department's most recent
estimate of WIC eligibles for the record.
Respondent. Yes, I will provide this for the record.
[The information follows:]

[Pages 165 - 167--The official Committee record contains additional material here.]

Mr. Skeen. Update the table that appears on page 123 of last year's
hearing record showing the monthly participation levels of the WIC
program to include fiscal year 1997, and to date in fiscal year 1998.
Respondent. The information follows.

[Page 169--The official Committee record contains additional material here.]

Advisory Committees, Panels, Task Forces and Commissions

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, and commissions. 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. Also list each advisory committee, panel,
task force and commission that you propose to operate in FY 1998 and
the proposed budget for each.
Respondent. 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. Final decisions have not been
made with regard to funding for each advisory committee in FY 1998. I
will provide the total allocation for each mission area at this time
and we will submit further cost estimates by committee when they become
final.
[The information follows:]

[Pages 171 - 172--The official Committee record contains additional material here.]

Outside Private Counsels Hired

Mr. Skeen. Were any outside private counsels hired by the
Department in fiscal year 1997? Does the Department plan to hire any
private outside counsel in fiscal year 1998? If so, please provide the
name and firm of the counsel with a brief description of the nature of
the work that they are performing for the Department and the amount
spent for this service.
Respondent. Private outside counsel were under contract to various
agencies of the Department in fiscal year 1997 and agencies of the
Department have continued with this practice into fiscal year 1998.
This practice has provided substantial value to agencies of the
Department in more expeditious service and lower costs.

------------------------------------------------------------------------
Name Firm
------------------------------------------------------------------------
Edward M. Tsuji........................... (Sole practitioner)
Neal Young................................ (Sole practitioner)
John Murphy............................... Dunlap and Murphy
(Firm)................................ Golson and Associates
Christopher McQuarrie..................... Hicks and McQuarrie
(Firm)................................ Annis, Mitchell, Cockey,
Edwards, and Roehn
Gregory deKeyser.......................... (Sole practitioner)*
(Firm)................................ Canova and Delahye
William O'Regan III....................... (Sole Practitioner)*
(Firm)................................ McGlinchey, Stafford and
Lang
H. James Lossin, Sr....................... (Sole practitioner)
D. O'Regan, III........................... (Sole practitioner)
(Firm)................................ Tillery and Tillery
(Firm)................................ Winchell and Dougan*
(Firm)................................ Horne, Hollingsworth and
Parker
Richard L. Cox............................ (Sole practitioner)
(Firm)................................ Dyke, Henry, Goldsholl and
Winzerling
(Firm)................................ Wilson and Associates, P.A.
Donnie Floyd.............................. (Sole practitioner)*
Richard Rozanski.......................... (Sole practitioner)*
Kaliste Saloom, III....................... (Sole practitioner)*
Ann B. McIntyre........................... (Sole practitioner)
(Firm)................................ Twilley & Street
(Firm)................................ McIntire, Johnson, Levin and
Weeb, LLC
(Firm)................................ Broderick and Broderick
(Firm)................................ Mattleman, Weinroth and
Miller
(Firm)................................ Robert H. Green, PC
Kent Cooper............................... Cooper, Kretek and
Associates
Elizabeth Losee........................... (Sole practitioner)
Elizabeth Mason........................... Elizabeth Mason, P.C.
Susan Wooley.............................. Shapiro and Meinhold
William Santiago Sastre................... Melendez, Perez, Moran, and
Santiago
Stephen D. Miles.......................... (Sole practitioner)
(Firm)................................ Rieger, Spencer, Carpenter
and Daugherty
(Firm)................................ Robert Tremaine Associates,
P.C.*
(Firm)................................ Scheuerle and Zitta*
Kenneth William Jost...................... Jost Law Office
Duncan Delhey............................. Gray and End
Marvin V. Daniel.......................... (Sole practitioner)
Samuel R. Cari............................ Heywood and Carey, S.C.
Robert Winter, Sharon Taylor, Stevenson Arnold and Porter**
Parker.
Michael Zimmer, Deborah DeMasi............ Reid and Priest**
George J. Martin, Jr., David J. Schmidt... Coudert Brothers**
John Vogel, George J. Schutzer, Robert Patton Boggs, L.L.P.**
Hager.
Guy Morley, Lori Ann Bean................. Winston and Strawn**
Filberto Agusti........................... Steptoe and Johnson**
------------------------------------------------------------------------
Firms marked with a double asterisk (**) were placed under contract to
provide expert legal advice to the Rural Utilities Service. The fees
were paid by the utility involved and the services were provided at no
cost to the Government under section 18(c) of the Rural
Electrification Act of 1936.
Firms marked with a single asterisk (*) were placed under contract to
the Farm Service Agency to provide services relating to foreclosure
under farmer loan programs of the agency. Most of these firms were or
are also under contract to the Rural Housing Service to provide
foreclosure services under section 502 of the Housing Act of 1949. The
amount expended by the Farm Service Agency in fiscal year 1997 for
foreclosure services totaled approximately $51,300. Contracts are
authorized under section 331(c) of the Consolidated Farm and Rural
Development Act.
Firms not designated, as explained above, performed foreclosure services
for the Rural Housing Service. Amounts expended during fiscal year
1997 as payment under contracts to private attorneys equaled
approximately $1,265,330.00. Contracts are authorized under section
510(d) of the Housing Act of 1949.

Conservation Reserve Program

Mr. Skeen. Update the table that appears on page 127 of last year's
hearing record showing the total cost of the CRP program since its
inception to include fiscal year 1997 actuals and fiscal year 1998
estimates.
Respondent. 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................................................... 1,732,343 -237 1,732,106
1996................................................... 1,732,194 \1\ 50 1,732,144
1997................................................... 1,690,960 \2\ -44 1,690,916
1998................................................... 1,860,408 (\3\) 1,860,408
--------------------------------------------------------
Total............................................ 17,208,290 1,150,992 18,359,282
----------------------------------------------------------------------------------------------------------------
\1\ Outlays in FY 1996 include funds from the appropriated account ($1.730 billion) and the CCC account ($1.946
million).
\2\ Outlays in FY 1997 include funds from the appropriated account ($20.3 million) and the CCC account ($1.671
billion).
\3\ Outlays in FY 1998 include funds from the appropriated account ($62.5 million) and the CCC account ($1.798
billion).

6602Note.--The Federal Agriculture Improvement and Reform Act of 1996 changed the funding source for CRP from
direct appropriation to the Commodity Credit Corporation Fund.

Karnal Bunt

Mr. Skeen. What is the status of the Karnal Bunt issue?
Respondent. Through our Karnal Bunt (KB) Emergency Program, we have
prevented the presence of KB in the United States from crippling the
$5.9 billion wheat export market. Exports were not significantly
affected because the disease did not reach the major wheat-producing
areas of the United States.
Our intensive National KB Survey of 1996-97 have provided ample
evidence that KB is not present at detectable levels in unregulated
U.S. wheat production regions and is not a production or quality
problem in our system.
On January 27, 1998, APHIS proposed a rule to allow commercial seed
to move from KB-restricted areas. We expect this rule to take effect
this spring. Also, we recently finalized a rule to compensate growers
and seed companies for the loss in value of wheat seed and straw in the
1995-1996 crop season. Currently, APHIS is finalizing a proposal to
compensate growers and seed companies for the loss in value of wheat
seed and straw in the 1996-1997 crop season. These compensation
payments are necessary to reduce the economic impact of the KB
regulations on affected wheat growers and other individuals. The
proposed rule for the 1996-1997 crop season should be completed
sometime this spring.
In June 1998, the Food and Agriculture Organization in Rome will be
convening an expert panel, including an APHIS representative, to pursue
international consensus on how minor diseases like KB should be
regulated. We hope that the panel will conclude that KB does not need
to be regulated as a quarantine pest, but only as a quality issue.
Ideally, this panel will be able to reach agreement on an international
framework for dealing with minor diseases--including but limited to
KB--before significant regulatory problems arise.
Mr. Skeen. How much has been spent to date on Karnal Bunt
compensation?
Respondent. Since the program's inception in March 1996, APHIS has
obligated approximately $21.2 million to pay compensation claims for
the 1995/1996 crop season (mostly to millers, farmers, and grain
handlers).
Mr. Skeen. What are your projections for the future?
Respondent. In FY 1998, we have $10.8 million available to
compensate certain growers and seed companies for the loss in value of
wheat seed and straw in the 1995-1996 crop season. At this point, we
cannot precisely predict the amount we will actually spend. In addition
to this amount, we anticipate spending approximately $400,000 for
owners of KB-positive grain in restricted areas during the 1996/1997
crop season.

Fund for Rural America

Mr. Skeen. Please provide a table showing the levels of funding,
both program level and budget authority, for the activities of the Fund
for Rural America to date.
Respondent. I will be pleased to provide that information for the
record.
[The information follows:]

FUND FOR RURAL AMERICA FY 1997 FUNDING
[Dollars in Thousands]
------------------------------------------------------------------------
Program Budget authority Program level
------------------------------------------------------------------------
Rural Development Activities:
Rural Housing Service:
Section 502 Housing Loans. $15,500 $109,309
Farm Labor Housing Loans.. 569 1,191
Farm Labor Housing Grants. 1,431 1,,431
-------------------------------------
Total, Rural Housing
Service................ 17,500 111,931
=====================================
Rural Utilities Service:
Direct Water and Waste
Disposal Loans........... 381 4,224
Direct Water and Waste
Disposal Grants.......... 4,219 4,219
Distance Learning and
Medical Link Grants...... 6,500 6,500
-------------------------------------
Total, Rural Utilities
Service................ 11,100 14,943
=====================================
Rural Business Service:
Rural Business Enterprise
Grants................... 6,600 6,600
Cooperative Development
Services................. 1,100 1,100
EZ/EC Technical Assistance 600 600
-------------------------------------
Total, Rural Business
Service................ 8,300 8,300
=====================================
Alternative Agricultural
Research and
Commercialization Corporation
Natural Resources Conservation
Service:
Outreach for Socially
Disadvantaged Farmers.... 4,500 4,500
Farm Service Agency:
Beginning Farmer Loan
Program.................. 2,000 9,510
Total, Rural Development
Activities............. 43,900 49,684
=====================================
Research, extension and Education
Grants:
Core Initiative............... 26,100 26,100
Secretary's Initiative........ 7,800 7,800
Telecommunications
Infrastructures Research..... 2,200 2,200
-------------------------------------
Total, Research,
Extension and Education
Grants \1\............. 36,100 36,100
=====================================
Total....................... 80,000 $185,784
------------------------------------------------------------------------
\1\ $34 million of the research funding, available for two years, was
carried into 1998.

Note: No funding is authorized for the Fund in 1998.

FSIS User Fees

Mr. Skeen. Did you consult with industry and consumer groups before
developing the plan for user fees in the FSIS budget?
Respondent. Last year we held meetings with interested parties to
gain input on the user fees for meat, poultry, and egg products
inspection proposed in the 1998 budget. We have not held any meetings
since then.
Mr. Skeen. Implementation of the FSIS user fees requested by the
Administration will require authorization. What is the Administration's
plan for securing authorization and what will be your role in that
plan?
Respondent. We will be submitting a legislative proposal for user
fees to Congress shortly. I will ensure that the fees are designed to
be fair and equitable, promote accountability and efficiency, and
minimize the impact on the competitive balance among affected
industries.

Codex Alimentarius Activities

Mr. Skeen. What is the total Department budget for activities of
the Codex Alimentarius?
Respondent. We expect to spend a total of $0.6 million on Codex
Alimentarius activities in FY 1998.

Staff Year Reductions

Mr. Skeen. Please update the table on page 134 of last year's
hearing record that shows, by fiscal year and agency, the staff year
reductions that have occurred, including how much has been spent
through the use of early outs and buyouts.
Respondent. The estimated amount that has been spent for fiscal
years 1997 and 1998 on buyouts that were authorized by Section 727 of
P.L. 104-180 for the Department is $44.2 million. This represents one-
time costs for Voluntary Separation Incentive Payments and additional
contributions to the retirement system. Even with these costs, use of
the buyouts resulted in first year savings of over $11 million in 1997.
The updated table that appeared on page 134 of last year's hearing is
provided for the record.
[The information follows:]

[Page 177--The official Committee record contains additional material here.]

Funding for Beginning and Socially Disadvantaged Farmers

Mr. Skeen. What is the level of direct farm credit loans that will
be targeted to beginning and socially disadvantaged farmers and
ranchers under the proposed FY '99 budget?
Respondent. In FY 1999, the percentage of funds which will be
targeted for beginning farmers by loan program is as follows:

Percent
Direct Operating............................................... 35
Guaranteed Operating........................................... 40
Direct Farm Ownership.......................................... 70
Guaranteed Farm Ownership...................................... 25
The percentage of funds which will be targeted for minority and
women farmers by loan program is as follows:

Percent
Direct Operating............................................... 11
Guaranteed Operating........................................... 11
Direct Farm Ownership.......................................... 18
Guaranteed Farm Ownership...................................... 18

Management

Mr. Skeen. There is a plan for consolidating management at the
Department called administrative convergence. Could you describe
briefly the scope and schedule of that program?
Respondent. Administrative convergence is the consolidation of
administrative functions at headquarters and in the field of the three
county based organizations; Farm Service Agency, Natural Resources and
Conservation Service, and Rural Development. The impetus for this
effort came from the realization that future budget trends,
particularly on salaries and expense accounts, mandate that we make
every effort to reduce the impact on program staffs or our ability to
deliver the programs would be jeopardized. Further, with our efforts to
collocate the three agencies it made little sense to maintain three
separate administrative support units. Consolidations of these
functions will provide the flexibility needed to continue to support
the program staffs and ensure effective program delivery. I plan to
have a single administrative support unit in place in headquarters and
the state offices by October 1, 1998.

Rural Housing

Mr. Skeen. The rural housing budget has a small increase this year,
mainly in guarantees, by comparison, the HUD budget has a $1.8 billion
increase. Did the Department request significant increases in rural
housing programs for FY '99?
Respondent. The Department's 1999 budget requests for the rural
housing programs were developed in accordance with a very tight ceiling
on discretionary spending and therefore did not include significant
increases over the levels appropriated by Congress in prior years.

Discrimination

Mr. Skeen. Last year the Department testified that it hoped to send
up a legislative package for civil rights in the first session of
Congress. I don't believe that package was ever sent. Can we expect to
see any legislation this year?
Respondent. Yes, you can expect to see legislation this year. It
will complement the issues that were addressed in H.R. 2185 by
Congresswoman Eva Clayton of North Carolina.
Mr. Skeen. Does the Department have specific goals or targets dates
to resolve the backlog of discrimination complaints both from employees
as well as applicants for loans and other assistance programs?
Respondent. Our plan is to address the backlog of program
complaints by July 1, 1998, and we believe we can achieve this goal
barring unforeseen problems. We also plan to resolve any new cases
within 180 days of filing. There is a similar time line and goal to
resolve employee complaints through mediation that includes contractor
investigations and through improved inhouse investigations.
Mr. Skeen. When USDA settles cases of discrimination with a cash
payment, does this money come from USDA funds?
Respondent. USDA funds are used to settle cases that are settled
under the USDA administrative process. Otherwise, the case settlements
may be funded from the Department of Justice's Judgement Fund.

Dairy Options Pilot Program

Mr. Skeen. How much does the Department expect to spend in
administration, subsidies and other costs on the Dairy Options Pilot
Program in its first year of operation?
Respondent. Funding for the Dairy Options Pilot Program (DOPP)
funding is expected to be approximately $10 million annually for fiscal
years 1998 through 2000. This estimate may increase or decrease
slightly depending upon the level of participation, the likelihood of
variations in options premiums, and the number of producers who choose
to purchase fewer that the maximum number of options available under
the program. The program will be funded from the Commodity Credit
Corporation, in accordance with Section 191 of the Federal Agriculture
Improvement and Reform Act of 1996.

Dairy Options

Mr. Skeen. The Committee understand that there is a debate about
whether to limit trading under the Dairy Options Pilot Program to a
single futures exchange. What are the Department's views on this issue
and when do you expect to make a decision and begin the program?
Respondent. RMA published an advance notice of availability for the
Dairy Options Pilot Program last month and is still in the process of
reviewing public comments on the matter. The decision should be
forthcoming within the next month.

CCC Reimbursement of Net Realized Losses

Mr. Skeen. On page 2 of your testimony you say that farm programs
are more market-oriented which significantly lowers outlays. However,
the budget this year requires an increase of $8 billion for CCC. What
is the need for the increase?
Respondent. The increase in the FY 1999 request for reimbursement
of CCC net realized losses has nothing to do with the level of CCC net
outlays. Net outlays or net expenditures measure ``cash flow'' which is
the principal measure of overall Government fiscal and financial needs
for a given fiscal year. On the other hand, net realized losses
represent the nonrecoverable expenses that CCC incurs, including
expenses such as production flexibility contract payments, conservation
program payments, and the market access program.
The reason that the 1998 request for reimbursement was low ($783.5
million) relative to the 1999 request ($8.549 billion) is that the 1998
request made last year asked only for reimbursement of the balance of
fiscal year 1996 actual unrestored losses and did not include any
estimated losses as in the past. Prior to the 1998 request, requests
for appropriations to reimburse the CCC for net realized losses have
been based on estimated losses. The estimate could exceed or fall short
of the actual amount of loss. Last year, in response to OIG
recommendations, the request for appropriations to reimburse CCC for
net realized losses covered only the remaining actual amount of the
unreimbursement until actually recorded on the books of CCC. Fiscal
year 1998 was a transition year to the new policy and only $783.5
million of actual 1996 losses remained unreimbursed. The 1999 budget
requests $8.439 billion for the balance of actual 1997 losses.
Appropriations to reimburse CCC for net realized losses incurred in
1998, currently estimated to total $8.5 billion, will be requested in
the 2000 budget, and will represent the actual losses recorded in CCC's
books.

DLOS

Mr. Skeen. What part of the projected $250 million in savings from
the establishment of the DLOS center in St. Louis is reflected in the
FY 99 budget and in which accounts are the savings to be found?
Respondent. The FY 1999 budget includes savings attributable to
DLOS of about $95 million, of which $64 million is in mandatory
accounts and $31 million is in discretionary accounts. The $31 million
is due primarily to the reduction of 600 FTEs that occurred in FY 1997.
The mandatory savings is a result of savings on vouchering of property
taxes and reduced default and foreclosure costs.

Export Enhancement Program

Mr. Skeen. The Administration is proposing multi-year funding for
the Export Enhancement Program (EEP) with the funding in individual
years to be set by USDA. Please provide a list of the annual maximum
level of export subsidy funding allowable for each year of the GATT/WTO
agreement.
Respondent. That information will be provided for the record. The
maximum expenditure levels will be provided separately for dairy
products and non-dairy products, because the former are programmed
under the Dairy Export Incentive Program while the latter are
programmed under EEP.

MAXIMUM ANNUAL EXPORT SUBSIDY EXPENDITURES FOR THE UNITED STATES
[Dollars in millions]
------------------------------------------------------------------------
Non-Dairy
Fiscal year Dairy products products
------------------------------------------------------------------------
1996.................................... $185.6 $982.6
1997.................................... 171.8 881.6
1998.................................... 158.0 780.6
1999.................................... 144.2 679.6
2000.................................... 130.4 578.7
2001.................................... 116.6 477.8
------------------------------------------------------------------------

Fund for Rural America

Mr. Skeen. How many FTE equivalent positions are required to
administer the Fund for Rural America?
Respondent. Currently, eight full time permanent staff with the
Cooperative State Research, Extension and Education Service (CSREES)
administer the research portions of the Fund for Rural America. These
include six persons who conduct the scientific and programmatic aspects
of the Fund (a Deputy Administrator, a scientist, and four support
staff) and two positions in the Office of Extramural Programs to handle
the substantially increased workload in proposal services and grants
management. In addition, several temporary and part-time employees
including Panel Managers, students and two employees on reimbursable
detail to CSREES from the Forest Service and Rural Development assist
in the implementation of the Fund A critical and substantial
contribution to the Fund's implementation comes from CSREES
professional staff with responsibilities for other programs of the
agency. They have served as Fund program managers responsible for
developing program plans and the Request for Proposals, selecting
reviewers and leading peer panel review of proposals, and negotiating
and recommending awards.
Mr. Skeen. What percentage of the Fund is used for administrative
costs versus program costs?
Respondent. Of the total $36.1 million available for research
within the Fund in fiscal years 1997 and 1998, four percent or $1.444
million is retained for administrative costs.

P.L. 480 Title I Program

Mr. Skeen. The Administration is again requesting a very large cut
in the P.L. 480 Title I program. Is this due to a lack of opportunity
in Title I activities or to higher priorities in other programs?
Respondent. The proposed reduction in P.L. 480 Title I in 1999 is
due to the tight budget situation and the stringent targets for
discretionary spending that were established in conjunction with
efforts to balance the Federal budget. In developing our budget
proposals, difficult choices had to be made among programs in order to
meet those spending targets, and P.L. 480 Title I is one of the
programs for which reduced funding has been proposed.

Computers

Mr. Skeen. Is it true that the Office of the Chief Financial
Officer recently purchased new accounting software that was not Year
2000 compatible?
Respondent. As you know, the National Finance Center provides
financial services to USDA agencies as well as to a large number of
other Government agencies. It therefore a operates number of complex
financial management systems. The Office of the Chief Financial Officer
has been working to upgrade these systems as part of the Department's
overall effort to improve its financial management. The heart of this
upgrade is the Foundation Financial Information System.
The Foundation Financial Information System is based on an off-the-
shelf software program which was purchased by the Chief Financial
Officer in 1994. The first phase of deployment occurred this past
October with the installation of the system in two regions and an
experiment station of the Forest Service. While the initial deployment
was, in fact, a non-compliant version of the software, work is underway
to assure that the system is compliant by the end of this summer. I
have advised the Chief Financial Officer that there should be no
further deployment of this system until Year 2000 compliance is
achieved.
Mr. Skeen. What is USDA's latest estimate of the amount it will
spend to correct the Department's Year 2000 problems in fiscal Year
1998 and 1999? Please provide, for the record, a breakdown of these
costs by agency.
Respondent. USDA plans to spend about $58 million this fiscal year
and about $27 million in fiscal year 1999 to fix the Year 2000 problem.
As requested, I will provide the cost estimate by agency for the
record.
[The information follows:]

[Cost in thousands]
------------------------------------------------------------------------
FY 1998 FY 1999
------------------------------------------------------------------------
Agency:
Foreign Agricultural Service........ $170 $170
Farm Service Agency--KC............. 6,190 1,580
Farm Service Agency--HQ............. 200 200
Risk Management Agency.............. 380 380
Farm and Foreign Agricultural
Services........................... 6,940 2,330
Food and Nutrition Service.......... 2,200 670
Food, Nutrition and Consumer
Services........................... 2,200 670
Food Safety and Inspection Service.. 400 200
Food Safety......................... 400 200
Agricultural Marketing Service...... 1,500 790
Animal and Plant Health Inspection
Service............................ 7,407 3,962
Grain Inspection, Packers and
Stockyards Administration.......... 1,100 300
Marketing and Regulatory Programs... 10,007 5,052
Forest Service...................... 11,700 3,500
Natural Resources Conservation
Service............................ 7,849 8,611
Natural Resources and Environment... 19,549 12,111
Agricultural Research Service....... 1,521 1,171
Cooperative State Research,
Education and Extension Service.... 0 0
Economic Research Service........... 260 260
National Agricultural Statistics
Service............................ 120 60
Research, Education and Economics... 1,901 1,491
Rural Development................... 1,950 1,000
Support Programs.................... .............. ..............
Departmental Administration
Includes: Administrative Law
Judges, Board of Contract Appeals,
Civil Rights, Human Resources,
Office of the Judicial Officer,
Operations......................... 540 500
-------------------------------
Subtotal.......................... 540 500
===============================
Offices:
National Appeals Division........... 0 0
Office of the Chief Financial
Officer--NFC....................... 8,980 1,000
Office of the Chief Information
Officer--NITC...................... 5,942 2,490
Office of Communications............ 50 200
Office of the Chief Economist....... 3 4
Office of the Inspector General..... 0 0
Office of Budget and Program
Analysis........................... 0 0
Office of the General Counsel....... 0 0
-------------------------------
Subtotal.......................... 14,975 3,694
===============================
Totals.................................. 58,462 27,048
------------------------------------------------------------------------

Mr. Skeen. What will be the cost for each fiscal year from 1998 to
2002 of providing one-stop shopping for the Department's Field Service
Centers? Can you quantify the financial and other benefits that will
result from these information technology investments.
Respondent. We estimate that the Department will spend about $95
million in FY 1998 to continue the implementation of the Service Center
information technology initiatives. This will be accomplished within
the available funds of the partner agencies. The FY 1999 budget
includes about $100 million. This includes a $30 million increase
requested under the salaries and expense account of the Farm Service
Agency. These funds will cover the initial phase of the Common
Computing Environment (CCE) acquisition for the Service Centers. In
addition, approximately $250 million will be needed over the following
two years to complete the acquisition of the CCE epuipment and software
for the Service Centers. The funding sources for future years have not
been determined at this time.
In terms of benefits, the county-based field offices are being
restructured into Service Centers to improve customer service. At the
core of this initiative is a shared information system built on a CCE
that will provide Service Center staffs access to customer, program,
technical, and administrative information, regardless of the agency
they represent. The CCE is based on identified business needs and will
provide the enabling technology for implementing reengineered business
processes to provide one-stop service to customers.
In light of the fact that the Department has far fewer people in
the field, the reengineering of the business processes and the
replacement of the aging information technology systems are imperative
in order for us to continue to provide service to our customers and
certainly to improve our service to customers. The CCE will enable USDA
to: optimize the data, equipment, and staff sharing opportunities at
the service centers; overcome the extreme limitations of the current
legacy systems; and enhance customer service into the 21st Century.

Water 2000

Mr. Skeen. A recent Department report indicated that, over the past
3 years, about $1.3 billion in loans and grants have been committed to
Water 2000 projects. Can you explain how these projects differed from
your normal water and waste disposal program activity, in other words,
what defined them as Water 2000 projects?
Respondent. The Water 2000 projects are those that either provide
water service to residents for the first time, those that eliminate
significant problems resulting from poor quality drinking water or a
significantly diminished supply, or those that require a significant
amount of grant funds because of the income levels of the residents.

[Pages 183 - 290--The official Committee record contains additional material here.]

Wednesday, February 4, 1998.

OFFICE OF THE INSPECTOR GENERAL

WITNESSES

ROGER C. VIADERO, INSPECTOR GENERAL
JAMES R. EBBITT, ASSISTANT INSPECTOR GENERAL FOR AUDIT
JON E. NOVAK, ACTING ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
DELMAS R. THORNSBURY, DIRECTOR, RESOURCES MANAGEMENT DIVISION
STEPHEN B. DEWHURST, BUDGET OFFICER, UNITED STATES DEPARTMENT OF
AGRICULTURE

Opening Remarks

Mr. Skeen. Mr. Viadero, let me welcome you here today. We
always like to kick off our hearing schedule with your
testimony because you are involved with all agencies and
programs at the Department and can provide the subcommittee
with valuable information as we get ready for agency budget
hearings.
For the first time in recent memory, we may be asking you
some budget questions since you are seeking a major increase in
your account.
Before you begin, I want to welcome back our returning
members to the subcommittee: Ms. Kaptur, our ranking member;
Mr. Walsh from New York; Mr. Dickey from Arkansas; Mr. Kingston
from Georgia; Mr. Nethercutt from Washington; Mr. Bonilla from
Texas; Mr. Latham from Iowa; Mr. Fazio from California; Mr.
Serrano from New York; and Ms. DeLauro from Connecticut. The
distinguished Chairman of the Appropriations Committee, Mr.
Livingston from Louisiana, and the distinguished ranking member
of the Appropriations Committee, Mr. Obey from Wisconsin, are
also returning members.
With that, I turn over the microphone to you, Roger. I
would ask you to be as brief as possible in your opening
remarks. I know you are modest and you would not mind doing
this, and we will have every word of your statement printed in
the record. In your opening remarks, but if you would highlight
it, we would appreciate it because our backside cannot take an
awful lot of this sitting.
We have tried to read your statement, but this is the
longest statement we have received in recent memory. Despite
the cost to get this thing printed in the record, it will be
published in its entirety.
We are delighted to have you today and you are the first
up. We welcome you and you may begin your testimony.
Mr. Viadero. Thank you, Mr. Chairman. As always it is a
pleasure to be here before you.
Good afternoon, both Mr. Chairman and members of the
subcommittee. I am pleased to have this opportunity to visit
with you today to discuss the activities of the Office of
Inspector General.
Before I begin, I would like to introduce members of my
staff with me today. James Ebbitt, Assistant Inspector General
for Audits. The Acting Assistant Inspector General for
Investigations, Jon Novak. Del Thornsbury, Director of our
Resources Management Division. And I am indeed privileged to
introduce, on our side of the table, the esteemed Director of
the Office of Budget Policy, OBPA is easier to say, Mr. Steve
Dewhurst.
Mr. Skeen. We cannot operate this thing without Mr.
Dewhurst.
Mr. Viadero. I reiterate that, we cannot operate without
Mr. Dewhurst, that is correct.
I want to thank the committee for the support it has shown
me and the agency during the nearly three-and-a-half years
since my appointment as Inspector General. We have tried to
work closely with you and I hope we have been able to address
some of your concerns.
I am proud to say that in fiscal year 1997 we continue to
more than pay our way. In the audit arena, we issued 255 audit
reports and obtained management agreement on 1,392
recommendations. Our audits resulted in questioned costs of
$900 million. Management also agreed, as a result of our audit
work, to recover $19 million and put $267 million to better
use.
Additionally, our investigative staff completed 958
investigations and obtained 703 convictions. Investigations
also resulted in $83 million in fines, restitutions and other
recoveries and penalties during this period.
Before I move to our special law enforcement initiative,
which is the bulk of our budget increase request, and other
specific audit and investigative activities, I would like to
give to you and the committee an update on our progress in
implementing the Results Act and our forfeiture authority.
We have made significant progress in implementing the
Results Act in the Office of Inspector General. We haveprepared
a five year strategic plan that describes our mission and sets forth
our general goals and objectives through fiscal year 2002.
We have completed our first annual performance plan under
the Results Act which contains specific performance goals and
objectives for the fiscal year. We have also developed
performance measures to assess our progress in achieving these
goals and objectives under the plan, so that we might make
adjustments to maximize our effectiveness.
On the forfeiture front, as I described last year, with the
committee's support we are now authorized to receive proceeds
from forfeiture actions arising from our investigations. While
over $11 million in assets has been seized for possible
forfeiture to the Government as a result of our investigative
actions since the Office of Inspector General was provided with
the authority in November, 1995, to date this agency has only
received approximately $100,000 from these proposed
forfeitures.
We are continuing to work with the Department, the Office
of Management and Budget, and the Departments of Treasury and
Justice to ensure OIG receives its appropriate share of
proceeds from the proposed forfeiture of assets, as you
approved our authority to accept the funds. However, after more
than two years, the Department of Justice still has not signed
a memorandum of understanding with this agency.
Mr. Chairman, at this time I would like to discuss our
special law enforcement initiative included in the 1999 budget.
This initiative will be a major undertaking for the agency and
we ask your support and the support of this committee to
provide the resources necessary for it. I have provided each of
you with a handout on the initiative, highlighting our need and
what we expect to achieve from this effort.
This special law enforcement initiative is to provide
funding for this office to crack down on fraud and abuse in the
Food Stamp Program and other nutrition programs, as well as
assistance programs such as Rural Rental Housing and disaster
and health and safety programs mandating an immediate response
from this organization.
Health and safety of food from production to consumer is of
special concern because of such highly visible emergencies as
contaminated strawberries in the School Lunch Program and
tainted meat in the food distribution chain which resulted in
the recall of 25 million pounds of ground beef.
Also this office's recent pilot effort, we code-named
Operation Talon, in 24 metropolitan areas around the country,
has been extremely successful, resulting in the arrest of more
than 2,200 fugitive felons and the potential savings of
millions of dollars to the United States treasury. This
initiative is to allow the agency to expand these efforts
nationwide.
The Department of Agriculture estimates that in excess of
$50 million a year in food stamps go illegally to fugitive
felons and inmates. Prior to the passage of the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996,
also known as Welfare Reform, which the Congress passed for us,
the exchange of information between law enforcement and state
social service agencies was not allowed.
However, welfare reform provided many useful tools to the
law enforcement community, such as making fugitives and people
who are violating conditions of probation and parole ineligible
for food stamps.
Additionally, the Welfare Reform legislation made it
possible for state social service agencies to provide law
enforcement authorities certain identifying information from
their files pertaining to fugitives.
We initiated Operation Talon, as a result of the tools
provided by welfare reform, a law enforcement initiative led by
this office and carried out in conjunction with other law
enforcement agencies and state social service agencies across
the country.
Under this initiative, law enforcement agencies' fugitive
records are matched by social service agencies with their food
stamp recipient records. Information on the fugitives is shared
with OIG and other law enforcement officials who use it to
locate and apprehend fugitives.
As of January 13th this year, Operation Talon has resulted
in 2,235 arrests of fugitive felons, the vast majority of whom
were food stamp recipients or former recipients. These
fugitives included numerous violent and dangerous offenders who
were wanted for murder, child molestation, rape and kidnapping.
This is Gail Jackson, we call her Vanna.
We have a map that identifies the 24 locations where we
conducted our pilot investigative work. An example of the type
of individuals we arrested is a fugitive for selling a large,
very large, quantity of marijuana. He was arrested at a sting
site in Chicago, Illinois. The individual came to the site
believing he had an appointment to discuss his food stamp
benefits.
Mr. Skeen. You lured him with food stamps?
Mr. Viadero. Yes, sir. Wherever the money is, that is where
the bad guys would be.
When he was confronted by a Cook County sheriff's deputy,
the fugitive attempted to flee, running down a small corridor
where an OIG agent and a local police officer tackled him and
subdued him.
This fugitive later threatened to burn down the Cook County
detention facility and kill the police officers andthe agents.
This picture we have now shows the weaponry this one person was
carrying, eight knives, 11 assorted lengths of steel pipe, two
screwdrivers, one wrench.
Mr. Skeen. He must have been a pretty healthy individual to
carry that much hardware around.
Mr. Viadero. In addition to that, he also had the materials
for the Molotov cocktails he was threatening to use.
Interesting fellow.
Operation Talon is a success story. I say this not only for
OIG but also for state and local law enforcement agencies whom
we helped to locate and arrest these fugitive felons. Even more
importantly, Operation Talon is a success for the American
people, who know that their communities are indeed safer, now
that these people wanted for murder, rape, drug dealing, child
molestation, are off their streets and dangerous criminals have
been removed from the streets, and that food stamp benefits go
only to those who need them.
By this operation, we took money back in, by preventing it
from going out illegally.
On December 18, 1997, Vice President Gore publicly
announced Operation Talon during a press conference at the
White House. Also present at this announcement were members of
state and local law enforcement agencies whom we worked with
during the operation.
Another area we are looking at in our initiative is the
Child and Adult Care Feeding Program, also known as day care.
The objective of the day care program is to ensure that
children and adults are being cared for in participating day
care homes and centers and receiving nutritious meals.
But we are finding that the delivery of nutritious meals is
not always the goal of some of the sponsors. For example, in a
day care investigation in California, four executives of a non-
profit child care sponsoring organization are awaiting
sentencing in March after they pled guilty to mail fraud in
connection with their participation in the day care program.
The organization oversaw in excess of 60 day care centers
and 175 day care homes in Los Angeles and Orange County,
California. Our investigation disclosed that through various
fictitious names and bogus identities two of the executives
fraudulently obtained and diverted approximately $2,300,000 in
day care funds for personal and non-program related expenses,
including the purchase of this $1,500,000 residence located
just outside of Los Angeles.
The payment of their children's college related expenses
were just some of the other benefits these people derived.
The other two executives claimed and received in excess of
$60,000 in child care funds for non-existent day care home
providers.
Due to the significant problems found, we have included
this work in our nationwide initiative to identify abusive
sponsors. These efforts will include sweeps, unannounced
targeted visits of sponsors and providers, conducted jointly by
Office of Inspector General auditors and investigators with the
assistance of FNS and state agency personnel. Because the
sweeps place a large cadre of reviewers at selected onsite
locations simultaneously and without warning, they will provide
an authentic snapshot of day care operations in the targeted
area.
Those sponsors found to be abusing the program will be
removed from sponsorship, ineligible payments recovered and, if
warranted, prosecuted.
Yet another area we plan to emphasize in our initiative is
monitoring of electronic benefits transfer, EBT, systems that
deliver program benefits. This office remains the lead agency
under an agreement with the President's Council on Integrity
and Efficiency, to review EBT systems that deliver state
administered programs.
While the majority of Food Stamp Program benefits are still
distributed in the form of paper coupons, electronic
distribution of benefits is growing rapidly and currently
distributes approximately 27 percent of local food stamp
benefits.
Currently, 26 states have operational online food stamp EBT
systems with eight of the states operating state-wide systems.
Two states have operational offline systems, using smart cards,
with one of those states using its system for the Women,
Infants and Children program. Many of the remaining states have
selected EBT vendors and are at various stages of awarding
contracts. The welfare reform legislation mandates EBT for all
states by 2002.
While EBT has an impressive impact in identifying
individuals and retailers who are committing fraud in the
program, trafficking of benefits has not been eliminated by
EBT, but we believe the number of individuals involved in
street trafficking has been reduced.
EBT benefits are less negotiable on the street and thus,
less likely to be used as a second currency. We have not found,
to any significant extent, the exchange of EBT benefits for
illegal drugs, a common occurrence with coupons. Instead, the
individuals now exchanging cash and non-food items with
recipients are generally retailers or those working with them.
As an example, a significant EBT investigation was
completed recently in Baltimore. Maryland was the first state
to implement EBT state-wide. In this case, eight people pled
guilty in Federal court to a variety of money laundering,
conspiracy, and food stamp trafficking charges for their roles
in a conspiracy that defrauded the program of $2,300,000.
The group used eight stores, both authorized and
unauthorized, to purchase and then redeem EBT benefits. In the
unauthorized stores, ring members obtained the account and
personal or PIN numbers from recipients and then relayed the
information over the telephone to members in an authorized
store. The authorized store had EBT machines which were used to
access the recipient's accounts and remove the benefits. The
recipient was then paid a reduced amount of cash.
In addition, other ring members purchased benefits on the
street and used mobile telephones to call in recipient
information. I have a chart showing the break down of the
recipients that were disqualified.
This case is also useful in demonstrating how EBT data can
identify traffickers. During analysis of EBT data during
another trafficking investigation in Baltimore our agencies
identified the earlier mentioned conspiracy. We used the system
to follow recipients with suspicious transactions to the second
group of stores.
We also followed recipients from the second group of stores
to yet another trafficking operation in Baltimore. Members of
all three trafficking operations were prosecuted.
OIG's highest priority is the investigation of criminal
activity which poses a threat to the general health and safety
of the public. Because of the high-profile cases in this area
during the past year, and our belief that thesecases are only
examples of possible threats to the health and safety of the public, we
have included health and safety as part of our special initiative which
must be enhanced.
Among these crimes are violations involving the processing
and sale of adulterated meat, poultry and egg products,
criminal tampering with food products consumed by the public,
and product substitution, adulteration, or other
misrepresentation of food products which are regulated or
purchased by USDA.
Office of Inspector General investigations in the health
and safety area have traditionally focused, almost exclusively,
in the red meat industry. OIG agents traditionally investigated
meat packers who clandestinely slaughtered diseased cattle and
supplied the meat for public consumption, and processors who
surreptitiously mixed tainted meat with wholesome meat, which
was sold to the public.
The financial incentives for those who commit this type of
crime remain so high, that this office expects to continue
responding to these types of criminal activity far into the
future.
While OIG continues to conduct these traditional health and
safety investigations, recent investigations of health-related
criminal activity involving the inspection programs, and other
USDA programs, have identified an increasing need for OIG
attention.
Last spring, this office immediately responded and took
control of an investigation surrounding an outbreak of
Hepatitis A in Michigan. This outbreak sickened 190 school
children, and was believed to have been spread through eating
of strawberries served in USDA's School Lunch Program.
The president of a San Diego-based food processing company,
his company, and the former sales manager, pled guilty to
conspiracy in regard to substituting Mexican-grown strawberries
for U.S. domestic strawberries in this case.
Sentencing for all defendants has been scheduled for next
month. The company, through three brokers, supplied 1,700,000
pounds of frozen strawberries to the School Lunch Program for
which the Department paid in excess of $900,000. The
Department's contract called for frozen strawberries that were
100 percent grown and processed in the United States.
The company's president certified to USDA that all of the
1,700,000 pounds of product were domestically produced and
processed, when in fact at least 99 percent of the product
supplied to USDA was grown in Mexico. Also during this past
year, OIG was called upon to investigate the circumstances
surrounding another life-threatening emergency, this time
involving the often deadly bacteria, E. coli.
Knowing this to be the same type of outbreak which had
caused fatalities in previous occurrences, we immediately
dispatched an emergency response team to the Nebraska meat
processing plant which prepared the ground beef patties
identified by State health department officials as the source
of the bacteria.
While our criminal investigation into this matter
continues--and it would be inappropriate for me to discuss our
findings at this time--this is a perfect example of how OIG
must react--say again--must react to emergency situations
involving USDA-regulated matters and the type of activity we
plan to expand as part of our special law enforcement
initiative.
We also plan to place special emphasis on the Rural Rental
Housing Program, Section 515 of the Rural Development Statute,
as part of this initiative. A recent legislative change
provided a new weapon to this office and to the Rural Housing
Service for use in the fight against program fraud and
hazardous living conditions in the Nation's 16,300 rural multi-
family housing projects.
With these new criminal sanctions, the agencies can take
aggressive action to identify and eliminate the worst
offenders--those who convert tenant rental proceeds and Federal
assistance to personal use, while neglecting the physical
condition of the deteriorating properties.
Owners, agents, or managers convicted of equity skimming or
diversion of project's assets can be fined up to $250,000, or
imprisoned for not more than five years in jail, or both.
Using automated audit techniques, and in consultation with
Rural Housing staff, we will identify Rural Rental Housing
projects that have certain risk factors attendant to them, such
as chronically underfunded reserve accounts that may point to
financial irregularities, and threats to tenants' health and
safety.
A team comprised of an auditor, an investigator, and an RHS
employee will make visits to high-risk projects. We will follow
up with detailed audit and investigative work where indications
of fraud or unsafe living conditions are identified.
To the extent necessary, local officials such as fire
marshals and building inspectors may be involved to further
corroborate any problems and to provide additional impetus for
improving substandard living conditions.
I have a chart showing the dollars involved in the Rural
Rental Housing program to highlight the amount of money in this
program that must be looked at.
Although the appropriation for fiscal 1998 is approximately
$600 million, it goes to support a loan portfolio in excess of
$12 billion, a large hunk of change. I also have some pictures
depicting some of the problems we've uncovered in a sample
sweep.
Exposed electrical wiring problems. Those wirings are
exposed to the elements, including large amounts of moisture in
the form of rain and snow. Deteriorating siding on a house,
with its numerous--pestilence and other forms of rat
infestation, and deteriorating siding on a house and a doorway.
This is what we paid for.
Mr. Chairman, these are just some of the areas I wanted to
highlight regarding our initiative. Successful as they are,
activities such as Operation Talon, and other areas in our
initiative, are not without price. As of January 13th, 1998,
116 OIG agents had expended nearly 2,500 staff days on
Operation Talon alone, and that was just the pilot.
We can continue to recover and save money for the taxpayers
only if we have the resources needed to perform our mission.
Adequate funding and staffing for OIG makes good sense because
we help create a Government that works better, produces
positive results, and saves the taxpayers a whole bunch of
money.
We believe the success demonstrated through our pilot work
in Operation Talon, and the other areas of our special
initiative provide outstanding examples of what can be
accomplished if the necessary resources are made available to
the agency to perform this critical work.
In addition to these examples of our activities, my written
statement also includes additional examples of theresults of
many of the other audits and investigations of the Department's varied
programs.
This concludes my presentation, Mr. Chairman, and I would
be very pleased to respond to any questions you or the
committee may have.
[Clerk's note--Inspector General Viadero's written
testimony appears on pages 348 through 440. Biographical
sketches appear on pages 344 through 347. The Office of the
Inspector General's explanatory statement appears on pages 445
through 499.]
Mr. Skeen. Roger, let me start off by saying that this
committee has always been very supportive of the Inspector
General's Office as long as I have been a Member. In many
cases, we have tried to increase your budget, when most of the
agencies were not receiving any increase.
In addition, we have tried to help you out, including
language in the last three appropriation acts to allow your
agency to retain funds transferred through forfeiture
proceedings.
Now the administration is seeking $22 million for a special
initiative, and $3 million in other increases, almost a 40
percent increase to your budget for fiscal year 1999, and you
have stated that the Department of Justice is holding you up on
receiving funds through forfeitures, and that Justice, after
more than two years, has not signed a Memorandum of
Understanding with your agency. They must have a reason for not
signing the memorandum.
What is going on? Why will not the Department of Justice
sign the Memorandum of Understanding with you?

asset forfeiture

Mr. Viadero. The best I can determine, sir, it is a control
issue, both control of turf, and control of the monies.
Mr. Skeen. Well, is there any condemnation done on the
efficiency with which you have done your job, and so forth, or
is this some kind of an idea, an in-house thing, that they will
not sign a forfeiture agreement with you?
Mr. Viadero. At this juncture, sir, it appears to be an in-
house thing. I sent a letter, last night, to several Members,
and as an attachment to the letter I put a time-line, showing
all that we have done. I really do not know what else we can
do. I did have a chat, the other day, with the Deputy Attorney
General. He was not aware of this issue. He is a recent
appointee.
Mr. Skeen. Well, is there any faint hope of getting this
thing resolved?
Mr. Viadero. I hope to hear back from him very shortly,
sir.
Mr. Skeen. Well, it seems like you are all on the same
team.
Mr. Viadero. That was my question. Since we are all on the
same team, and he only wants to be injured by this, quote,
unquote, ``bad guys.'' We stated in our legislative initiative
for that money it was a deterrent to crime. But, we also have
other issues, for instance, with the Petitions for Remission,
where we did receive funds from one petition. We received 40
percent of the funds from the Petition for Remission, when,
technically, under the law, we should have gotten 100 percent,
and the Department of the Treasury kept 60 percent of the money
and gave us forty.
I am still trying to figure--I am the CPA. I cannot figure
that one out and I can get two and two to be anything you want.
Mr. Skeen. Well, maybe that agency was having a little
trouble with its own accounting.
Mr. Viadero. I am not qualified to pass on that one, Mr.
Chairman.
Mr. Skeen. He is not here to defend himself, so we will not
get into that. But according to your statement, over $11
million has been identified for possible forfeitures as a
result of the work that you and your crew has been doing, and
also, your testimony has stated that you have only received
about $100,000.
Mr. Viadero. And we understand that part of that was in
error. To be quite honest, Mr. Chairman, one of the people from
Justice, out in one of their regions, said, ``Oh, okay, they
are on a list, they can get it.'' They sent us a check.
Mr. Skeen. For $100,000?
Mr. Viadero. Yes. And the sad part about that is the people
back here in Washington do not know that we got the hundred
thousand yet, so we expect them to petition us to give them
back the $100,000.
Mr. Skeen. How much of this $11 million should have been
received, if you had a forfeiture agreement?
Mr. Viadero. Approximately 80 percent of it, sir.
Mr. Skeen. About 80 percent?
Mr. Viadero. Yes, sir. A handsome chunk of change to this
agency.
Mr. Skeen. Well, I would like to hear some of the answers
from some of those folks over there about why they have not
signed the forfeiture agreement, because you certainly have
done your work.
Mr. Viadero. Well, in fact it would make two of us that
would like to hear some response from the people that refuse to
sign.
Mr. Skeen. Ms. Kaptur.
Ms. Kaptur. Yes. Thanks, Mr. Chairman, very much, and we
welcome the Inspector General, and all of your colleagues. Glad
to have you here today. I wanted to follow up on the questions
dealing with the forfeiture issue.
Did you mention in your testimony the amount of money that
has been recovered from the forfeiture fund, or, to date, how
much do you view as having been sent there, and never having
returned? Is there a total figure you can give us?
Mr. Viadero. Yes. Approximately $11 million.
Ms. Kaptur. It is $11 million. I wanted to ask, in your
view, knowing this subcommittee, what would be the best we
could to help you out? Do you want to take a stab at that? This
is your time to shine.
Mr. Skeen. We know what we could do. We could just holdup
their appropriation. [Laughter.]
Mr. Viadero. Whatever the Chairman sees fit, sir. I
concurred with the esteemed Chairman's position before. We are
at an absolute standstill.
Ms. Kaptur. All right.
Mr. Viadero. We call over. We respond to every request. For
instance, on Petitions for Remission, within one month they
changed the sample Petition for Remission three times for us,
yet other agencies--quite honestly, I have seen prisoners when,
believe it or not--I was still an agent in the street--
petitions go to the Department of Justice written on toilet
paper from a prison with a pencil, and those petitions were
accepted.
Yet we now have to have these petitions sworn to by the
agent who was involved in the case. The rules keep changing.
There are ever-evolving rules, and they appear to be evolving
rules at the Department of Justice. I just do not know what
else to say, Ms. Kaptur.
Ms. Kaptur. Are they receiving funds from other Cabinet
level departments as well?
Mr. Viadero. I understand they are getting it--HHS through
FDA. FDA has forfeiture authority as does Fish and Wildlife.
Ms. Kaptur. Okay. I am not on that subcommittee so I do not
really know exactly which fund we are talking about or how it
gets money and who contributes to that fund. What level of
Justice you are communicating with, or is the fund at Treasury?
Mr. Viadero. The fund is at Justice. My counsel informs me
that the fund is at Justice. Yes?
Ms. Kaptur. All right.
Mr. Viadero. Yes, the funds are at Justice.
Ms. Kaptur. Okay. So they must be receiving money, through
forfeiture, from several entities of the Government of the
United States.
So one of my questions as an appropriator is how much is
it, and then what are they using the money for?
I mean, do they take the money and then transfer it over to
Treasury, or do they use it for internal accounts within
Justice's purview? Do you know?
Mr. Viadero. The legislation that you folks passed for us
two years ago was as an equitable share, which means that the
fund would receive its operating cost, which statutorily is 20
percent. So if we take $100, the fund would keep 20 percent,
and then 80 percent would be disbursed to the agencies that did
the work.
For instance, if we did a joint operation with the FBI, the
FBI would get 40 percent, we would get 40 percent, an equitable
share based upon the amount of work you put in.
Ms. Kaptur. What work do they do at Justice?
Mr. Viadero. We routinely have joint operations with other
entities, other law enforcement entities.
Ms. Kaptur. I see.
Mr. Viadero. Due to our size, we need help out there.
However, Justice said they will not do an equitable share with
us. They will only allow us in as a participating agency, which
means they set the amount of funds that we get at the end of
the year. There is a percentage that is given out and that
percentage could be 2 percent. That percentage could be 1
percent of what we put in. We have no say over that as a
participating agency. The bulk of the money does go to the
larger enforcement agencies--DEA, FBI, agencies of that size.
But we have no say as to how much money we get, and we even
agreed to sign as a participating agency, but they even reneged
on that with us. The MOU is just not signed.
Ms. Kaptur. Well, I might respectfully suggest to the
Chairman, this might be an interesting area for us to probe
into a little bit.
Mr. Skeen. You can bet on it.
Ms. Kaptur. Yes. It would be nice to know what happens to
the money. Anybody on that subcommittee here?
Mr. Latham. If I may, I can assure you that we will be
looking into and questioning Justice on this, and making sure
that they are held at the same accountability that other
agencies or departments are.
Mr. Viadero. Thank you, sir.
Mr. Latham. Certainly. Or the idea of holding back their
appropriation sounds reasonable also.

operation talon

Ms. Kaptur. I wanted to move on and we will be happy, on
this side of the aisle, to try to be helpful there. I wanted to
ask you, on Operation Talon, you said that more than $50
million in the Food Stamp Program goes to convicted felons and
prison inmates, and that as of January 13th, over 2,000 arrests
had resulted in over two dozen cities.
Do you have an estimated dollar savings from the arrests
made thus far?
Mr. Viadero. From the arrests made thus far, I would
think--to date, Mr. Novak informs me, approximately 600 people
were removed from the program.
However, if we took all 2,235 and calculated their
contribution there, their estimated earning of about $150 a
month for those people, then it is between $3-4 million.
Ms. Kaptur. That is a huge amount.
Mr. Viadero. That is if we keep them off for the year. So
if we add that--and I think the surprising part is as we go
through and do our State by State jail matches, with people
that are in prison and still receiving food benefits, which, to
me, is ludicrous, yet we run into people calling us and saying
prisoners have a right to eat, and I thought that the dietician
at the individual Department of Correction is capable of giving
them food.
I do not know where they are going to go at 8:00 o'clock at
night, if they are going to run to the 7-11 and use a couple of
the stamps. [Laughter.]
To me, it is absolutely ludicrous, but people will keep
them on there because, needless to say, that does impact the
families' amount of food stamps, food benefit that's in there.
I mean, we have documented instances--again, EBT is a wonderful
tool--it is a wonderful tool--and to be quite honest with you,
as it rolls out nationwide by 2002, it is imperative that we
stay on top of EBT.
If EBT gets away from us, ladies and gentlemen, we have
lost the parade, and it is very important, especially to
everybody in this room, because by 2002, all of our pensions
will be on EBT. So we want to insure that this system works
properly. We have found instances where a person was sitting in
jail in Maryland and his EBT card was being used. So we know it
is out there. We know what is happening. That cost with the
inmates alone is in excess of--if we get the inmate, we suspend
those benefits for a year, we take a 12 monthperiod, that's in
excess of $24 million. That is a lot of money. That is a direct savings
that this operation has to the public. We prevent $24 million from
going out there.

fns--child and adult care food program

Ms. Kaptur. Might I move on to the child and adult care
food program, 1,200 sponsors, 195,000 children nationwide.
Mr. Viadero. That is 195,000 homes.
Ms. Kaptur. 195,000 homes?
Mr. Viadero. Yes, ma'am.
Ms. Kaptur. So we are talking about several million?
Mr. Viadero. Yes, ma'am.
Ms. Kaptur. Several million children?
Mr. Viadero. Yes, ma'am.
Ms. Kaptur. Do you think that the Food and Nutrition
Service has sufficient staff to oversee the number and volume
of programs it manages?
Mr. Viadero. Well, if I can digress a bit, the Food and
Nutrition Service has approximately 50 compliance officers.
There are approximately 200,000 authorized food stamp retailers
which they have to go out and check, that 50 people are
responsible for, or about 4,000 sites each, per year. That is
an awful lot to put on 50 people.
And some of the neighborhoods, to be more than honest with
you, when we did our food stamp sweep, as you will recall back
in 1995, I hesitated to send two agents in with guns into some
of these neighborhoods, much less just one compliance officer
walking down a street going in to ensure that some of these
homes are proper.
And as an example of some of the things we found, we found
22 children in a room, 10 foot by 15 foot, 22 children in a
room that is 150 square feet, with no windows and no smoke
detectors. It was in a basement. And that was the day care
home. That is almost inhumane. It is a little bit more than 6
square foot a child.
Ms. Kaptur. Have you made recommendations to the Food and
Nutrition Service on what they might do to improve the
situation and have they followed up on any of your
recommendations?
Mr. Viadero. Well, happily, and very happily, I would like
to say, I report that the Under Secretary, Shirley Watkins, in
FNS, and Under Secretary Jill Long-Thompson in Rural
Development, have jointly signed a memo to the Secretary,
signed a memo with me and them, to support IG's intervention
into their programs, to go in and put the big ``I'', integrity,
back into the programs. I have provided you copies of these
memos with my testimony.
Of course, quite honestly, I think unless we get some
integrity back in these very, very important programs, we are
going to lose them. Somebody has got to go out there--and we
have identified the areas of immediate concern, and both of the
Under Secretaries concur with that.
That is why they signed a memo with us and we went forward
with it to the Secretary. So no longer are we viewed as, quote,
unquote, the big bad wolf out there.
These two Under Secretaries see the need for us to come in,
because we have the ability to put integrity back in these
programs.
Ms. Kaptur. Do you think that the changes that would
improve can be achieved, administratively, or do you think it
will require legislation?
Mr. Viadero. I think perhaps a mix. Mr. Ebbitt seems to
have some views on this one.
Mr. Ebbitt. Well, probably a mix, I would expect, Ms.
Kaptur, but I think essentially the legislation, and the
regulations are there. What we are trying to do, initially, is
identify the worst of the worst offenders, and we are working
with the State agencies on this, because State agencies have a
big role in administering these programs, and frequently they
know where the problems are.
But either because of staffing or other issues, they cannot
get to them either.
In the California example, it did not work because the
person who had that house worked for the State agency
administering the program. So you had some internal problems
associated with that particular issue.
But they know where the problems are. So we want to
identify, again, the worst of the worst and go out and get them
out of the program. You know, get them off the program, stop
the flow of the money, and then deal with it from a criminal
aspect, if that is what is involved.
Ms. Kaptur. This places a lot of responsibility on the
State, does it not? On the State?
Mr. Ebbitt. This program is essentially a State-
administered program.
Ms. Kaptur. Yes. My thought there is that--I only speak for
my own State--there has to be oversight on the State, too, and
as you develop recommendations--I am thinking of my years on
the Banking Committee where we had camel rating systems for all
the banks, and that we ought to consider something like that
for the various programs that the States administer. I mean,
put them up on the boards for public scrutiny as well.
You do that internally, but where there is 10 percent or
more fraud and abuse in the nutrition programs, let us say,
whether it be those that are in day care centers, or people in
prisons, I mean, that is a huge amount of money.
The public is telling us lots of things, that they do not
like these programs, and they probably, in their anecdotal
experience, come up against different aspects of this. But I do
not completely trust the States. So there ought to be a way of
holding them up to public scrutiny as well.
Mr. Viadero. Well, as part of our review, we noted that the
States received approximately $88 million in funds from USDA to
audit these programs, of which some States returned up to $24
million, to the Department because the States did not use the
money----
Ms. Kaptur. $24 million out of $80 million?
Mr. Viadero. $24 million was returned by States because
they did not do it or they did their review in conjunction with
another program and they did not want to double-bill us, if you
will. So that is $64 million out there and we are finding, as
we go through, instances where the States have done nothing. So
now we are beginning to enter into negotiation with the State,
saying, well, you did not spend it, it is our money, how about
giving it back to us?
We are starting a billing process, for lack of a better
term, and there is a huge cry that everybody should forgive
this money.
Well, money was appropriated for a specific purpose, and it
was not used for that purpose. Therefore, we would like our
money back.
Ms. Kaptur. I know there are other questions that Members
have, and I will suspend my questioning at this point. I thank
you very much.
Mr. Viadero. Thank you.
Mr. Skeen. Mr. Kingston.
Mr. Kingston. Thank you.

personnel breakdown of initiative areas

Do you have a breakdown of the number of people that you
have in each of these inspection divisions? It may be in here.
I have been unable to find it, but how many people do you have
in Operation Talon? How many people do you have in the rural
rental housing investigation unit, and what is the budget for
each of those departments? And how much money do you bring in
in terms of real money, and how much do you stop in the name of
fraud?
Mr. Viadero. Well, let me try and back into this question
for you and answer all your points.
First of all, this was not a funded operation. I just
thought it was time, from a management point, to be much more
proactive than the typical knee-jerk reactive type activity
that this office had undergone in the past.
In order to maintain this proactive process, I said, Where
are we at risk? All right. And FNS is at risk. All of the
nutrition programs are at risk, both the special feeding
programs and the Food Stamp Program.
So we decided to run a pilot project. Operation Talon, sir,
is a pilot project. We diverted resources from other
investigations in each region, and said let us just see what we
are going to come up with on this first go-around.
We ran a pilot project in two very small, very rural
counties of Kentucky and we came out with approximately 85
people. We ran that in conjunction with the two district
attorneys, the United States attorney, and the State attorney
general. It was very, very fruitful.
So we decided, well, let us see where else we are going to
go with this. And again, it is a very costly operation, travel
and per diem costs, so we fundamentally picked locations where
we had at least suboffices at, because of these costs.
Mr. Kingston. But you are asking for money for it
specifically now?
Mr. Viadero. Yes, sir, because I tried it as a pilot. It is
so successful as a pilot, and there are in excess of 20,000
fugitive felons out there, that we believe are also on food
stamps, we need money to go rockin' and rollin' across the
country.
Mr. Kingston. Here is my question. Do you have a breakdown
of what that would be in terms of funds and personnel, and,
say, the same thing for food and health, safety, and so forth,
like that? Is that kind of a breakdown possible?
Mr. Viadero. Yes. We can provide that for you, sir.
Mr. Kingston. That would be useful.
[The information follows:]

1999 LAW ENFORCEMENT INITIATIVE
[Based on OMB allowance]
------------------------------------------------------------------------
Dollars
Initiative area (in FTE's
millions)
------------------------------------------------------------------------
Food stamp fraud.................................. 8.6 69
Child nutrition................................... 2.8 23
Rural rental housing.............................. 4.9 39
Emergency responses............................... 3.8 30
Farm, export and natural resources backlog........ 1.1 9
Technical equipment/surveillance vehicles......... .5 0
---------------------
Total....................................... 21.7 170
------------------------------------------------------------------------

misconduct cases

Mr. Kingston. Now also, switching gears, I am alarmed to
see that 21 members of the USDA have been convicted of crimes,
67 personnel actions. Should this committee be alarmed about
this USDA, or is that normal for all USDA, and is that normal
for Government programs? I think that is 21 convictions, USDA
employees, is alarming, and I assume that does not mention the
73 who were mishandling their credit cards, because that is
mentioned on a different page.
And is there something that this committee needs to be
concerned about?
Mr. Viadero. In answer to your question whether the
committee should be concerned, I think not, and I will tell you
why.
In my former job, I was the agent in charge of auditing,
and chief auditor for the Federal Bureau of Investigation. That
is all internal work, and fortunately, or unfortunately, the
darker side of that job was doing integrity investigations, and
that is an agency of approximately 20,000. Their numbers exceed
this, and that is the FBI. I think we have something to be
proud of within USDA as to the overall integrity of employees.
Mr. Kingston. So cases like this FSA employee embezzling
$945,000 in Texas, those are rare and unusual circumstances?
Mr. Viadero. I think it is an aberration; yes, sir.
Mr. Kingston. And we do not have a big corruption problem
in USDA?
Mr. Viadero. No, sir, and we handle those--basically, if we
get an allegation of one, we handle those immediately.
Mr. Kingston. Okay. The credit card misuse. I am very
ashamed, as an American, that Federal Government employees
would be misusing their credit cards in such a manner. Do you
feel that the controls that you have recommended will be
implemented and will that stop the problem?
I was particularly bothered that three former employees had
kept their credit cards and used them. Has that stopped? And
again let me ask you: Is that typical of Federal Government
agencies? Or is that something that----
Mr. Viadero. I think when you look at the total numbers of
approximately 100,000 USDA employees, what we are looking at is
minuscule, if you put it in scale with other departments and
the integrity investigations that are being run there. So far
as the credit cards go, we continue to work with the department
to strengthen the controls. To that end, we recently had
briefed every State director on the Farm Service Agency side
and every State director on the Rural Development side, when
they came back for training, as to what we, in the Inspector
General's office, are looking for, and what our powers are.

americorp

Mr. Kingston. Okay. Another question. I see that the USDA
entered into a contract with Americorp, which, as youknow, is
under a lot of controversy always for spending, and I see that the USDA
experience with Americorp was what other people have found, that they
had inadequate control systems, that they did not comply with audits,
they did not do the work that was required, and, in effect, Americorp
now owes USDA $290,000. Is that correct?
Mr. Viadero. That is correct; yes.
Mr. Kingston. How can we help USDA recover that, because
that is money that could be going to food safety and protection
of people, and so forth, and for another Government agency to
be ripping off one agency is ridiculous.
You know, we are always hearing these Americorp stories,
and this is one more of them.
Is there something, that you could make a recommendation as
to what we could do to make sure that that money is recovered?
Mr. Viadero. Yes, sir. We will send you our recommendation.

convicted felons and inmates

Mr. Kingston. Thank you. Thank you, Mr. Chairman.
Mr. Skeen. Before I go to Mr. Nethercutt, let me ask you,
again, how many of those convicted felons and prison inmates
did you say, sir? 30,000?
Mr. Viadero. There are about 20,000 fugitive felons out
there and approximately 16,000 inmates, presently incarcerated.
Mr. Skeen. So you have got 36,000?
Mr. Viadero. There are about 36,000, sir.
Mr. Skeen. Is that not wonderful?
Mr. Nethercutt.
Mr. Nethercutt. Thank you, Mr. Chairman.

ebt system

Welcome, gentlemen. It is always good to have you here.
I was struck by your testimony, Roger, regarding the EBT
system, and the data collected so far. We have to remind
ourselves, that was a welfare measure, that really came up this
last couple years, and I think it is going to prove to be a
good way to look at fraud, and decide, you know, what the true
efficiencies are in some of these programs.
I looked at page 19 of your testimony on the Baltimore,
Maryland experience regarding fraud and abuse, and if I am
reading that correctly, it looks like 8.3 percent of all
Baltimore households receiving benefits have been disqualified
from FSP based on EBT data.
And then you look at another 11,000 plus households. 18.2
percent of the total households receiving benefits are in
various stages of administrative action.
First of all, I assume that is accurate, that those figures
and the percentages are accurate, and if I add those up, it is
roughly 25 percent?
Mr. Viadero. Yes, sir.
Mr. Nethercutt. How representative of the country is the
Baltimore experience? And, you know, maybe you have a number
that we are looking at, nationwide, that we can be fairly
assured would be ineligible, or would be essentially ripping
off the system.
Perhaps I have missed it in your testimony, but I would
like to have it restated, if you can.
Mr. Viadero. I think it would be unfair to project a
national figure based upon our Baltimore experience. The State
of Maryland was the first State to go statewide on EBT, and I
must say, we enjoy an excellent working relationship both with
the vendor who handles the EBT system, the State IG, the State
Department of Human Resources, and us.
It is a pretty nice relationship wherein if any of, or
either of the four involved find a new twist to what is going
on, they notify everybody else. So that, we are staying pretty
much on top of.
The best we can determine, there has never been a survey
conducted--nobody has had time to do a survey as to the fraud.
But I think, as I testified last year, that the food stamp
fraud and abuse nationwide is approaching $3 billion, which
would be about 12 percent of the program.
Mr. Nethercutt. The ineligibility under the EBT data would
constitute fraud. Are you including all that in there? That is
fraud as you see it?
Mr. Viadero. Yes, sir, because they had to physically go
and get the card.
Mr. Nethercutt. Got it.
Mr. Viadero. This is not part of the error rate.
Mr. Nethercutt. And that is real money, obviously, that we
are looking at.
Mr. Viadero. Yes, sir.
Mr. Nethercutt. I think the faster we can get that system
deployed nationwide, the better off we are.
Mr. Viadero. That is why, in my statement, I said we have
to stay on top of this, because if this one--EBT--gets away
from us--we went into Houston, Texas, a few years ago. EBT went
in on February 1st, three years ago, and by February 6th
questionable transactions were first noticed. We made our first
arrests about a month later. It took us some time to locate
them, so they were up and running within a few days after the
system.

conservation reserve program (crp)

Mr. Nethercutt. I do not have a lot of time but just a
couple of more quick questions.
In your testimony, you state that 47 percent of the CRP
worksheets for the last sign-up, the 15th sign-up for CRP, you
verified--the worksheets that you verified contained errors and
inconsistencies.
There were a lot of appeals filed with FSA regarding that
15th sign-up. My State was particularly hard-hit, and we did
our best to bring that to everybody's attention.
It is my understanding--and this is anecdotal--but from
what I can tell, the misinformation and the miscalculations
appeals have been just denied, even though perhaps some of
those appeals may have been justified.
Did your investigation reveal anything relative to the
propriety of what we see as a blanket denial of this
misinformation and miscalculation appeals?
Mr. Latham. Mr. Nethercutt, could I reiterate those facts.
Mr. Nethercutt. Surely.
Mr. Latham. 47 percent of them were wrong. I mean, a 3-
year-old flipping a coin could have almost gotten that close,
couldn't they?
Mr. Nethercutt. Yes. That is why I am going on Mr.
Viadero's testimony, and that is 47 percent of the CRP
worksheets for the 15th sign-up contained errors and
inconsistencies. At least the ones you verified.
Mr. Viadero. I am going to ask Mr. Ebbitt to respond to
you.
Mr. Ebbitt. We worked in approximately 17 States, in both
the 15th and the 16th sign-up, and you are absolutely right. I
mean, when we were out there in FSA county offices looking at
these sheets, all kinds of errors, just loads of errors, and
one of the basic problems--and we have been telling FSA this
for several sign-up periods--is that eachState, with perhaps
some justification, is asked to come up with a scoring plan based on
environmental concerns and land use issues for each of your individual
States, and that probably makes some sense.
But in doing that, it creates, automatically, some scoring
differences from State to State, and frequently, county to
county.
In Washington State, for example, Mr. Nethercutt, in the
15th sign-up, we looked specifically at Oregon and Washington.
As you are well aware, many more acres in Oregon came into the
program in 15 than happened in Washington State.
Mr. Nethercutt. 80 percent, roughly, versus 20 percent.
Mr. Ebbitt. That was primarily because----
Mr. Nethercutt. Border to border in some cases.
Mr. Ebbitt. Absolutely. But that was primarily because the
scoring decisions were made by State officials within
Washington State, and also in Oregon.
What we were pointing out to FSA is that, for example, what
happened in Washington and Oregon did not make any sense.
Absolutely did not make any sense. And we are trying to push
FSA to come up with a scoring process that would be more
uniform, that would avoid the county border issue, State to
State issue, that we saw in Washington and Oregon.
And by the way, I might add that we have a specific report
on Washington and Oregon, that we are going to have ready for
you very soon.

wic program

Mr. Nethercutt. Yes, sir. I knew that was required and that
is great. I am glad to hear that.
Let me just ask one final question, if I could have a
moment, Mr. Chairman.
This subcommittee has been very concerned, I think, to a
person, about the oversight of the WIC Program. I think we are
supportive of the WIC Program. We want it to work well, it has
a good reputation, and so on.
But we are wondering, and we are trying to get a handle on
whether it is mismanaged out there in the real world and
whether we are losing money by overcharging by WIC vendors,
whether, you know, you have had an adequate time, or been given
adequate instruction, or jurisdiction to go out and look at the
WIC program, and see to what extent it is properly managed, so
that we are not wasting money. It is a huge number.
We will have more pressure this year. You know, everyone
wants to help kids and wants to help nutrition with young kids.
But just if you have not done an investigation to the extent
that you want to, tell us. If you have some observations about
what your sense of the program is and the propriety of its
management, let us know that so we can get a handle.
And third, would you accept an instruction, or an
assignment to dig into the WIC Program and determine whether it
is meeting the needs of the program, whether it is serving the
country properly, the taxpayer as well as the recipient.
I have asked you a lot of questions, but do your best.
Mr. Viadero. Well, to start, understand that most
authorized WIC retailers are also authorized food stamp
retailers, and because of the legislation, again, that we got
through back in 1996, and you folks passed for us, when a store
is suspended because of food stamp fraud, and they are also a
WIC store, they are automatically suspended from WIC.
If they are suspended from WIC, they are automatically
suspended from food stamps. So that was a large disincentive
right off the bat.
However, when we get down to a prosecutive case on WIC,
this is where we start running into the minimum, the
prosecutive guidelines of the individual judicial district--
what do we have?--92 Federal districts in the country, and the
basic WIC voucher is approximately $30. So a United States
attorney will not accept--if they have a prosecutive threshold
of $100,000, that is a whole bunch of WIC vouchers before we
can get through the door.
The best we can do is refer those cases, as we find them,
to FNS, and we have the sentiments of you, totally. We would
also like to highlight where there is an excellent WIC program
going on, and that is in the city of Chicago, where the city of
Chicago has taken and opened up basically a supermarket for
just WIC, and people are getting bargains there because the
city of Chicago is buying in quantity. That is a real dollar
savings, and we might want to take another look at that and
visit the Chicago experience and see if maybe we want to
recommend that nationwide, which is almost like the old welfare
issue, because I thought, as a kid, I was always called by my
family because I was exceptionally good-looking, but I was the
kid that had to bring back the 10 pounds of flour and 5 pounds
of cheese every month from the welfare center. But I did get an
ice cream cone. And maybe we should go back to that, but we
would be happy to meet with you and address it.
Mr. Nethercutt. All right. Thank you very much.
Mr. Skeen. Ms. DeLauro.

ebt

Ms. DeLauro. Thank you very much, Mr. Chairman.
Thank you very much, Mr. Viadero, and the other members
here, thanks for the great job that you are doing, and I offer
my congratulations. I read through your Operation Talon book,
and you really are doing a job that is very critical and very
important, in an effort to try to look at who should and who
should not be receiving food stamp benefits.
To follow up on a question of my colleague, Mr. Nethercutt,
if we--and I think it was Mr. Nethercutt--we clearly know the
benefits of the electronic benefits transfer program. EBT
works. We have known that for as long as I have served on this
committee. Every time we have these hearings, we talk about
EBT, and it is working.
What has always been a mystery to me is why that in fact,
since we know that it works, we know that it can get done,
that, nationally, we cannot have this program implemented.
Would it make sense--and I have heard that what we do not
do here is to provide States with the wherewithal, if you will,
to set up such a system, or even--I hate to use the word--a
mandate to do such a thing, and then if you do that it is an
unfunded mandate.
The long and the short of my question on this issue is,
should we, in the Congress, do more than encourage the States
to implement EBT. Say we are going to do this, nationally, and
in fact we are going to match your effort or provide some
effort to do something with you, so that in fact we get you on
line, and we then can attack the problem nationwide, instead of
``hit or miss.''
Give us some advice about what we should do here.
Mr. Viadero. Well, first of all, on the welfare reform,
every State has to be online by 2002.
Ms. DeLauro. Are they getting any assistance from the
Federal Government to do that?
Mr. Viadero. They get matching money from this Department.
Our bigger issue is to get the controls on it. But the States
have to find their own vendor. That is where many of the States
have created alliances, because they feel that they can go in
this with other States, in a joint venture, so to speak. It
spreads the costs out. That is fine.
From our point of the controls, we cannot understand why
the people that--and this goes back to Treasury now--do not go
for the card specs, the increased card specs on the individual
EBT card.
For instance, a basic EBT card, just a plain vanilla EBT
card, with no controls, costs $1.70 on average. That is per
household.
An EBT card with whistles and bells, state of the art fraud
controls, state of the art fraud profiles being built into the
computer systems that run these in the States, costs $1.92.
For 22 cents, less than the cost of a first-class stamp, of
which the State will only pay 11 cents because USDA funds the
other 11 cents. We cannot get that through. I think that is
where you all could really give us a hand, on card specs, the
security specs on EBT.
Ms. DeLauro. Okay.
Mr. Viadero. Because the better the specs, the higher the
quality of the fraud profile that we develop with the vendor.
These companies can kick us out a fraud profile on anybody.
For instance, Mr. Thornsbury here received a call that I was
making calls from Ohio to Lyons, France, on my calling card, my
AT&T calling card. I was in New York the week before, and I was
at Penn Station, and somebody took my PIN number off the card.
Now AT&T has my number in there. I call two numbers,
basically. I call the office and I call my house when I am on
the road. That is it. And they are saying that this guy is,
first of all, he was just in New York. Now he is in Washington.
What is he doing calling France from Ohio the same day? Pretty
good catch.
Mr. Thornsbury will say, we had a great deal of discussion,
because he called, and said, ``Did you give your number to
anybody?'' A great deal of discretion, I would like to say.
Ms. DeLauro. He was careful. It was a smart way to phrase
the question. [Laughter.]
Mr. Viadero. We could not work without him. But there is an
example of how when business is involved and it is business
money, they watch it, because AT&T ate those calls. Actually,
we all ate those calls because I am sure they passed it on to
every one of us.
Ms. DeLauro. Well, and what is it? 2002, or 2000?
Mr. Viadero. 2002, ma'am.
Ms. DeLauro. 2002. We will go back. You know, sometimes we
are penny-wise and pound-foolish here. We certainly do know the
system works, and again, I sat on this committee, not the last
session, but prior to that time, and all these years and when
we know that something is working and it can be working
effectively, I don't know why we have to wait another four
years to get EBT on line across the country.

waste and fraud

Let me ask another question. Some of my colleagues have
brought several programs up where we appear to have some
defrauding or opportunities to look at how we can cut back on
waste and fraud.
Is your mandate, in terms of examining some of the areas
that this committee deals with, stretched to crop insurance,
rural housing, commodity programs, and are you providing us
with information about those programs, and the level and the
dollar amounts of fraud, or, if you will, returned to the
Federal Government?
I recall a program, again, in this committee, several years
ago--I think it is the Rural Housing Program--where we
discovered that in fact $11 billion is owed to the Federal
Government from loans that were made many years ago, if you
will, and the rest in the Midwest, and that at the time the
stipulation was, in terms of the return, to come from non-farm
income.
Well, there were a number of folks out there who were
sitting with millions and millions of dollars--the returns were
supposed to come from farm income. They were sitting with
millions and millions of dollars in non-farm income and used
the view that they could not pay the Federal Government back
those billions of dollars because, technically speaking, they
needed to do that only from farm income.
My point is that we are dealing with a whole variety of
programs and what I frankly would like--again, I would love to
have the opportunity to sit down and talk with you about: crop
insurance and eligibility and how we may be being defrauded
there, the commodity programs in the same way, and in the rural
housing area.
You clearly have done a great job in looking at some of
these areas and have the capacity and the will to really go
after some of this stuff and I think it would be very useful
information to this committee. I, in particular, would like to
have that, so that we can in fact get a sense of the scale of
fraud that is going on out there in the wide range of programs
that we have jurisdiction over.
Mr. Viadero. Well, of course we'd be more than happy to
meet with you and any other Member of the committee on any
issue involving this really great Department. This really is a
great Department, Agriculture.
We have identified some of these; however, I do not want to
sound that my cup is empty. Actually, I was going to ask that
OIG be put on the combined Federal campaign list.
However, even with the funding, if we were to receive all
this funding, that would only bring our staffing up to what it
was in 1993.
I think it is important to note, over the last two years,
we have dropped 135 bodies just through budgetary restraints.
Ms. DeLauro. Right.
Mr. Viadero. And I guess what I am saying is I think we
have demonstrated just through our pilot projects of what we
are capable of doing.
Ms. DeLauro. Right.
Mr. Viadero. To me, it just puts integrity back in, not
only for the Department, and not only for Government in
general, but also to the guy and the gal who is picking the
bill up on the street, that they are getting a better shake for
their tax dollar.
That somebody really cares, and is watching for them, and I
think that is what our job is.
Ms. DeLauro. Yes, and as I say, I watch. Again, it is years
ago, and I would be happy to get an update on thatprogram--
there was a 60 Minutes special, or something, there was a gentleman--
and I do not know where he was from--he collected airplanes, old
airplanes, and it was very startling. You know, you are trying to get
yourself ready for the next day, and trying to kind of chill out. I was
watching this. He was sitting there with his airplanes in the back of
him, explaining how he could not pay the Federal Government back,
because technically, he could pay back out of farm income.
He had millions and millions of dollars in non-farm income,
and he was collecting airplanes, and the Federal Government was
taking the hit, and that person on the street was taking a hit
for doing that.
So what I want to do is take a look at what we need to do
here to be able to recapture some of this money that is out
there, that in fact this committee could use to do some other
things, because we usually get short-changed in the process on
this committee, when it comes to the budget, and we ought to be
able to collect some of that dough that is out there.
I thank you very, very much. I have several other
questions. I will submit them for the record, in terms of what
we can do in food and safety with the expansion of what you are
doing on the E. coli. Thanks very, very much for your work.
Mr. Viadero. Thank you, ma'am.
Mr. Skeen. Mr. Bonilla.
Mr. Bonilla. Thank you, Mr. Chairman.
Roger, I would like to point out, as you and I have
discussed before, I really like the way you point out the
savings that your office produces, whether it is through an
audit or through a particular operation like Operation Talon
and the funds recovered. I think it is important for us to
continue on this subcommittee to understand how you are almost,
not really, a revenue producer for USDA and that is very
important for all of us, I think, to keep out in front of us
for us to understand how we get a good bang for the bucks that
we put into your office.
You are doing a good job and from the first day of being on
this subcommittee, it is only my second year of doing this, it
has been very enlightening every time we have had a meeting on
this.

food assistance programs

I would like to follow-up on something that has come up
before already with the child and adult care feeding programs.
Since that first came to light with all the fraud and abuse
that the program is experiencing nationally, I went back and
checked with our State and the Texas Department of Human
Resources it turns out, we learned, is going above and beyond
even the USDA guidelines to try and ensure that those are the
sponsors and the contractors are legitimate.
According to the information of the State as a result of
their actions I have some figures here: 37 day care home
sponsors have been declared seriously deficient; 389 day care
homes have been declared seriously deficient by their sponsors;
six sponsors and 77 day care homes have been referred to the
District Attorney for suspicion of fraud.
The question is, have you had the opportunity to review the
actions taken by the State of Texas and, if so, do you think
they are sufficient to guarantee the integrity of the program
at least in the State of Texas? And if States are taking
proactive stances like this to try to ensure that the program
is clean, is your office working with proactive States on
initiatives like this?
Mr. Viadero. Well, in fact, we always deal with 20 percent
of America, the great State of Texas. We have a regional office
down there and the Regional Inspector General for Audit has met
with the Texas Department of Human Resources and Education who
has oversight of these committees.
We have a great working relationship all the way around,
both food stamps with the IG, and the different sheriff's
offices. As noted in Talon, we did work up in Ft. Worth and in
Dallas. We do not, at this time, have any issues with the State
of Texas because the State of Texas seems to have a handle on
it.
And, again, it is due to, shall we say, trust and a good
working relationship between us and the State. I think the
State of Texas and this office and this Department share a
common goal, provide a quality level of service to the people,
to the constituents.
And in line with that, when Texas has an issue that does
belong rightfully to the Feds, they pick up the phone, they
call us and likewise. So, we have a good working relationship.
We do not have any horror stories we can share with you about
the Lone Star State.
Mr. Bonilla. That is good to hear considering the suspicion
of fraud and abuse and I know you are, obviously, looking hard
into this program right now nationally. What is your view on
the proposal by the Administration to increase funding for this
program with all these pending questions that are out there
right now about fraud and abuse?
Mr. Viadero. Well, this particular program is not part of
the President's initiative as I understand it. We are only
looking at it from USDA, Food and Nutrition Services, and
basically as I understand it, this is funded out of the
education committee of the Senate.
We thought something was wrong. We took a selection of 12
in a sample. Eleven of the 12 were just absolutely abysmal.
Four of those are under criminal investigation. We expanded the
sample to look at another 12 or another 1 percent and so far
just for Fiscal Year 1998, we are up to 21 criminal cases,
active. So, this is just mushrooming.
There is only one State that does not use the sponsor
system and that is the State of Virginia. The State administers
the program, itself.
And we did a limited review in certain day care centers
that came in through a hot-line, if you will, a complaint and
we looked at those and we found some minor administrative
things, nothing of any criminal intent. Sloppy bookkeeping,
wrong type of fruit served or whatever, goes with the
particular meal but we did not find anything large.
Mr. Bonilla. Now, the numbers we have seen in the budget,
Roger, do call for an increase in funding. Is it your view that
this should be considered, an increase, while you are looking
into the depth of the fraud and abuse across the country?
Mr. Viadero. Well, based upon what we are finding, sir, we
are doubting, we are questioning of the $1.7 billion, we are
questioning $1.7 billion. And that this is sort of like being
the grim reaper. We are not the good news guys, so to speak. It
is like being a professional mourner. We just have not found
any ones that are working yet. I mean that is the bottom line
to be quite honest with you.
Again, we are selecting those based upon our developed and
statistically valid, fraud profile. So, we are only picking the
players that we think are bad. And so far, we are 100 percent
on the bad players. Actually we are better than 100 percent.
Mr. Bonilla. Moving now to the food stamp program and
operation Talon, tell me what you think of the finger imaging
system? I am not sure exactly how that would work. If you could
explain it and tell me what you think about it I would
appreciate it.
Mr. Viadero. Yes. The finger imaging system they were
thinking--on the card again, this goes back to the card specs--
of having an image reader which would--for identification
purposes in a criminal case you need a minimum of ten points of
identification on a print.
They were thinking of three to five. And that
classification, that particular code would be imprinted in a
card. So, when the individual goes to the store the card goes
through the machine at which time the person would take a
finger and put the finger on a card reader.
Now, it is not enhanced like, you know, criminal justice
information system in Clarksburg that the Bureau runs, but it
would be sufficient to have that card, if you will, match the
print of the person or the person match the print on the card.
The issue there comes, how do we--let us say it is your
grandmother's card, you send your grandson for food, it is not
going to match. And then that would get into, you know, how
well the person is known with the retailer.
Also, Los Angeles is looking at it and it has helped them
on duplicate participation such as L.A. County and Orange
County, looking at the matches there.
Mr. Bonilla. The technology is good enough though to be
accurate with reading that finger?
Mr. Viadero. Yes. Well, I mean they are only looking at
three to five points. So, at least they rough it down to the
nearest billionth of a person, if you will. I mean it would not
hold up for a criminal case. You would need the full set of ten
prints and at least ten points on each finger of the count.
But, yes, it would help. Again, it is the amount of money
that we want to invest in it. The dollars seem to always be the
trade-off on it.

State Mediation Grants

Mr. Bonilla. Well, I guess we will be hearing more about
that in the future in terms of cost and how to implement it.
Roger, my last question is about something that is of
concern to a Texas member, as well, on the authorizing
committee and it is about State mediation grants that you have
been investigating. As you know, the Texas program was not
recertified this year based on your recommendations and the
ongoing investigations in your office. And we all understand
that that needs to be done but this has been going on for some
time now.
My question is, do you have a time-line of when you expect
to have your investigations complete? You have also included
five recommendations to FSA in your testimony for improving the
program. Can you expand on these recommendations? Tell us if
the States are in compliance already, with any of the five
recommendations? And if any of this has been resolved by FSA?
Mr. Viadero. Okay. I am going to ask Mr. Ebbitt to join in,
in a second here.
One of the people subject to mediation raised an appeal to
the court of appeals and it presently sits in the Fifth Circuit
Court of Appeals.
That is where that sits. So, everything is at a standstill
until the Fifth Circuit rules on it, but it is still an active
case being covered in the----
Mr. Bonilla. There is no speculation on the time-line,
then?
Mr. Viadero. No, sir.
Mr. Bonilla. It is in their hands?
Mr. Viadero. I never speculate on time-lines that a circuit
court would do. No, sir. On the recommendations maybe Mr.
Ebbitt can fill us in.
Mr. Ebbitt. One of the primary recommendations, Mr.
Bonilla, was for FSA to more clearly define what is mediation?
Because what is happening is that one State defines it one way
and will offer mediation services and bill the Department when,
in fact, if you read Webster it is not mediation. It is
providing financial advice to a farmer that might come in; it
is helping the farmer fill out the application form when, in
fact, that is what the USDA county office employee is supposed
to do.
So, it is differences from State-to-State and one of our
primary recommendations was to get them to clarify that. What
are you going to pay for so, that States will be consistent in
their claims. They are working on the regulation. They are not
working as fast as I think we would like to see them but they
have some draft regs but they need to get them out.
Mr. Bonilla. I appreciate that. And my closing comment I am
just going to bring up again as I brought up before, Roger, the
situation in my district and Reeves County--we are hoping that
in a couple of weeks you will complete your work, maybe you can
give me a smile if you think that is going to happen.
Mr. Viadero. I think in a couple of weeks we can get back
to you and I also thank you for your note the other day.
Mr. Bonilla. Thank you very much.
Thank you, Mr. Chairman.

Rural Housing

Mr. Skeen. Roger, last year when we had this bill on the
House floor and again in conference, we spent an awful lot of
time on the rural housing program, particularly in Gault,
California.
And we asked for an audit of the rural housing program in
Gault. Have you found any violations of the law in the program
and tell us what you have found, first of all, and then maybe
we can get an editorialization out of this thing. Should we
continue to try to provide the type of housing in Gault?
Mr. Viadero. Well, sir, we went in and we reviewed the
policies and the procedures that the Department has and
compared them to the vendor, this was the Gault issue. And we
did not find any issues in the policies and procedures that
were followed.
I am going to ask Mr. Ebbitt again, he has taken a beating
today, I am going to ask Mr. Ebbitt again to join in because he
is very familiar with this one--but some of them have to do
with the Mello-Roos tax.
In California, by nature, is a different entity, if you
will, tax-wise, than many other States.
Mr. Skeen. Yes, we found them to be quite different.
Mr. Viadero. And if you take a plot of land in this case
for $35,000 and add on their mandatory Mello-Roos tax of
$27,000, before you can lay a brick or clear a tree off the
property you already have $62,000 invested in the project. And
that is an issue.
Mr. Ebbitt. Well, Mr. Chairman, we have met with the mayor
of Gault several times. We have talked to the California State
Director for Rural Development, rural housing and there is a
night and day difference between their positions. If you talk
to the mayor you get one story, if you talk to the Rural
Director you get another story.
I am not really sure what the answer is. We are still there
looking at it.
Mr. Skeen. You got some good stories, though.
Mr. Ebbitt. We got some excellent stories. It is a real
contentious issue, as you are well aware. And as Roger
indicated, we are talking about sweat-equity. This is a process
where the individual, the project is designed to bring people
into good, decent housing where they do not have a down payment
to get in. It is a great program.
And you have got the self-help project that tries to help
these people and run it. And then the borrowers come in and
they actually help build the house. And that is their capital
investment into the project.
But, as Roger indicated, when you start with a lot that
costs $35,000, when you add onto that a local taxing situation
of $27,000 so the project starts at $62,000, the house ends up
costing approximately $110,000, $120,000. Half of the
investment is in the lot and the tax.
It raises some questions, at least in our minds, as to the
economic feasibility of the concept of what we are doing there
on a sweat-equity project.
And I do not know what the answer is. Again, if you talk to
the State Director in California he will give you a lot of
reasons as to why all this makes sense. On the other hand, if
you talk to the mayor and the community you are going to hear a
lot of reasons from the city's standpoint as to why it does not
make sense.
But, again, what we are really looking for is that you have
legislation, you have a regulatory package that says this is
what the Department should do in considering these applications
and in making the approval. So far we have not found a
violation of either legislation or the regulatory package. But
I guess the quandary that everyone is having here, including
the auditors that are on-site, is, you know, does this make
sense?
And I think what we are going to try and do is make some
comparisons of the cost of other projects like this, plus,
compare that to the regular 502 program and see what those
costs are and lay them out on a sheet of paper and, I think
everyone is going to have to make their own judgments.
Mr. Skeen. As I gather, you have found a very extraordinary
situation.
Mr. Ebbitt. Yes, sir, we have.
Mr. Skeen. It goes way beyond the bounds. We had no idea
that it would ever occur because it is unique to a place like
California.
Mr. Viadero. But, again, we do have this open door, if you
will, with the Under Secretary in Rural Development. And once
again, Jill Long-Thompson jointly signed a memo for all the
programs for us to look at them. I guess what I am trying to
say, folks, is that in the three-and-a-half years we are here,
at least we have a dialogue with all of the major mission areas
within the Department. Something that when I came in here, we
did not have. And it is due to the fine work of everybody that
is attending from this office, and not necessarily the speaker
here. But these guys and gals have really done a super job
here.
And without them, this whole Department would be a worse
place.
Mr. Skeen. I think you all are all to be commended for the
work you have done. It gives us some kind of security that we
have at least some way to find out what is going on with the
program, how well they are administered. You have done
outstanding work and you have got an outstanding team, too, to
work with and we cannot do an awful lot but we appreciate it.
Mr. Viadero. We loved it.

USDA Operations Status

Mr. Skeen. Ms. Kaptur.
Ms. Kaptur. Thank you, Mr. Chairman.
Mr. Chairman, I just wanted to ask Mr. Viadero several
other questions. You have been I.G. for three-and-a-half years?
Mr. Viadero. Yes, Ma'am.
Ms. Kaptur. Comparing the way the Department operates today
in your area versus five, six, seven years ago, is it my sense
that perhaps the IG's office was extremely busy but responding
to individual emergency situations? If there was a red meat
plant that you got word of and you would dispatch someone?
Was it more of an ad hoc operation versus today where, in
addition to that, you have tried to identify certain
comprehensive initiatives that are nationwide?
You are trying to get at fraud and abuse through such means
as Operation Talon, for example. And perhaps that kind of
comprehensive initiative might not have gone on in past years?
I am trying to hear what you have said during this hearing so
that I properly understand what happened. I like history, so I
like to understand where we have come from and where we are
going. Is that a correct characterization of what is happening?
Mr. Viadero. Yes. What we have tried to do here at the
management level is to make this a more proactive organization,
get a better bang for the buck, right? Not work better. These
folks have always worked very fine. But work smarter. Use the
computers, use the tools that we have, the EBT, our own
systems, our own computer systems, which I would also like to
say already meet the year 2000 requirement, thank goodness. So,
we are compliant.
But in line with the red meat issue, the only thing I would
say is if there is any food problem we drop everything and we
respond to that food problem. During our Hudson Packing
situation, FSIS had their SWAT team out there which consisted
of two individuals. I had 16 agents and auditors out there.
As a matter of fact, we are still out there conducting
active investigtions throughout the Midwest and the West on
that particular case. So, we cannot say too much on it because
of the court action.
But we are the bulk of the Department's response team when
we go out there.
Ms. Kaptur. And how many total personnel do you have
nowversus four years ago?
Mr. Thornsbury. We have 732 permanent employees on board
right now. We had almost 900 then.
Mr. Viadero. We have taken the cuts--and again, I do not
want to say how great they are or anything, but these men and
women here really, I think are, they are out there, they are
riding the road and I think they are bringing the toll money
back in here.

food assistance programs

Ms. Kaptur. I wanted to ask you on the child and adult care
food program, I appreciate your bringing that to our attention.
And in looking at page 13 of the testimony where you say you
reviewed 12 sponsors in ten States, and 11 of the 12 were
seriously deficient. Then you said you picked another dozen
this year and it appears as though it is equally problematic?
Did I hear you say that?
Mr. Viadero. That dozen is not as strong as the 21 criminal
investigations.
Ms. Kaptur. The first dozen or the----
Mr. Viadero. No, the second dozen.
Ms. Kaptur. The second dozen?
Mr. Viadero. Yes, Ma'am. So, it has blossomed from 12
sweeps and we already have 21 open criminal investigations. So,
again, meeting our fraud profile now--I mean I do not want to
give a blanket condemnation of every day child care center in
the country but those that meet our fraud profile far exceed
even our greatest expectations.
Ms. Kaptur. One of the questions I have of you in this area
of child care and adult programs, and even to some extent some
of the work you have done on food stamps, is it your sense that
as somebody who worked over at the FBI that some of this fraud
is not just local in nature but rather there are networks of
people that are connected at either the regional, State or
perhaps national level that are involved in fraud? Or is it
largely a lot of petty thieves at the local level?
To the extent that you have gotten into it thus far, what
is your sense of what is out there?
Mr. Viadero. On the food stamp cases, it would be unfair of
me to talk about the day care center since we are still wading
a fight into these investigations ourselves.
On the food stamp issue we have some major investigations
ongoing that due to various court proceedings we cannot talk
about, that go through many States. And that there is a system
there, there is a network.
Ms. Kaptur. You are talking billions of dollars.
Mr. Viadero. And again, unless--if we took the historic
view of going out and just doing a person who is dealing food
stamps on the street, that is historically what was done. And
it was a good case because if you were on the street you saw an
immediate response. But now that we have the computers, we have
the technology and we now have the ability to sit back, if you
will, and follow these people from one site to another site.
In other words, go up the chain. There are food stamp
cartels, if you will, if this was a drug case.
Ms. Kaptur. I was reading about this fellow that was
arrested in Chicago and with all those weapons. He had come in
for a food stamp investigation. Why would someone who is
trafficking in drugs, and obviously making money off of it,
fully loaded with weapons, come into an office about food
stamps? I mean this seems like such a little fly on the carcass
of an elephant. Why would anybody in that situation come in to
talk about food stamps unless it were connected to something
beyond himself? That is my question.
Mr. Viadero. Well, I always use a quote. You know, I used
to teach the budgeting course at the FBI Academy and I used to
tell the students it is not the money, it is the money and that
really holds true. These are all crimes of greed.
And we find that although these felons, these fugitives
will not necessarily give their correct name, date of birth or
address to the constabulary, to the law enforcement agencies,
they are always going to give them the correct name and
definitely the correct address to those who are giving them
money.
And this is why we really applaud the efforts of everybody
up on the Hill here in passing welfare reform. Because this
allowed us to compare the fugitive records against the
recipient records and now we have the correct address.
The Chicago scenario was simple. We sent out letters. We
have cheated you. You are owed more money, come on in and see
us. And, you know, what? A bunch of them came in and saw us.
And we are very happy about that.
We are also very happy that in another case we have a
serial murderer that we just convicted this week in a state
court also wanted for the homicide of a police officer and he
is going to be returned to the State of Florida. And, Ma'am, we
cannot tell you how many homicides this individual has done but
we were able to do this strictly through the legislation that
you folks crafted here.
So, from the cops and robbers side of OIG, we thank you
because we get some really bad people off the street. I mean
just in that sweep we got 10 child molesters off the street,
that is important especially for those of us who are parents.
That is a heavy one.
Ms. Kaptur. The crime rates are going down so we,
obviously, have to credit the Department of Agriculture and the
OIG's office with that.
Mr. Viadero. And not modestly either I would like to say.
[Laughter.]
Mr. Skeen. We are an equal opportunity employer.
Ms. Kaptur. I want to make sure that I have heard this
correctly. You do not have to go at length in answering it but
within the USDA with Jill Long Thompson you have talked about
some type of memorandum, with the Food and Nutrition Service.
Do you feel confident that whatever that is, that memo, that we
are going to be able to get the kind of oversight investigation
in the Food and Nutrition Service programs that we need? Or are
we going to have to give them additional staff beyond the 50
that they have?
Mr. Viadero. I did not say.
Ms. Kaptur. Did you not say that you had a memo?
Mr. Viadero. I have a memo of understanding where----
Ms. Kaptur. Does that take care of the problem?
Mr. Viadero. No, Ma'am. Where the understanding is that FNS
says we have a problem in these programs, we want you to look
at them.
And until we had Ms. Watkins, and Ms. Keeffe,
herpredecessor who was the Acting Undersecretary, we were not
necessarily welcome at FNS.
Ms. Kaptur. Okay. All right.
Do you know whether the Head Start programs across this
country, if the Food and Nutrition Service makes them eligible
for receipt of meals? Are Head Start programs like some of the
child care programs, do they apply for meal service?
Mr. Ebbitt. I do not directly know the answer to that
question. I suspect they are though. I mean we have Head Start
operating in various locations and I suspect very much so that
they are getting USDA meals.
Ms. Kaptur. I would only ask that you check into that and
let me know. You do not have to make it part of the record but
if it is such that you do find that they are eligible and they
fall into this Food and Nutrition Service I think you should
take a look at it.
I do not know who looks at these folks.
Mr. Viadero. Well, you know, we would also like to say that
by moving the calendar up it is most beneficial for us on this
side of the table because we have our semi-annual audit
planning conference where we bring in all the regional
Inspectors General, all the desk officers from the various
audit units and we discuss exactly where we are at the mid-year
and what is coming up for the second half. Because we are going
to have to adjust some priorities. And I think we will address
that at that time, too.
Ms. Kaptur. If you are doing work with the Food and
Nutrition Service and that might be a sub-component somewhere
down the road through linkages it has with HHS, do not forget
it.
I cannot even imagine how many sites there are around the
country there. There is 195,000 sites for child and adult?
Mr. Viadero. Yes. That is just the individual homes. We
have about 230,000 sites if you include the centers. So, it is
a bunch of locations out there. It boggles the mind.

rural rental housing

Ms. Kaptur. On the rural rental housing you talked about
17,000 projects and I am curious what percent of the projects
have you investigated to date? You have pulled up some of the
examples here, but of the whole portfolio what percent and from
that percent, what have you recovered in misused funds? I am
trying to get a sense of the context here.
Mr. Viadero. On the investigative side for Fiscal Year 1996
to 1997 we did 16 investigations.
Ms. Kaptur. Sixteen, okay.
Mr. Viadero. Yes, Ma'am. We had 12 indictments and received
12 convictions and recovered through monetary results, fines,
et cetera, et cetera, $6.4 million.
So, that is about a half-a-million-dollars a case recovery.
However, this initiative that we are talking about, we are just
going out as we speak. We are having a planning conference in
two weeks and Jill Long-Thompson is attending it.
We just finished the day care people, our folks that are
doing that review. And that we had a planning conference in
August on, for this present go-around that we are doing right
now.
The rural rental housing one is scheduled for two weeks
from now in Chicago and Ms. Long-Thompson will be attending the
conference. She thought it was important to meet the auditors
and the investigators. And her personnel will also be in it and
she and I will be out there giving them, let us do this one for
the Gipper, if you will, you know, the pump-them-up speech and
tell them what we expect of them and what we would like to
find.
In line with that, we have targeted 12 States and
approximately 43 projects in each State.

waste and fraud

Ms. Kaptur. Of these programs you are looking at, whether
it is the nutrition programs, whether it is this housing
program, do you have a ballpark judgment as to which might be
more subject to fraud?
Mr. Viadero. I cannot give you that. That would just be----
Ms. Kaptur. Because the nutrition programs you are saying
at least 10 percent.
Mr. Viadero. On average, that is what we are finding.
Ms. Kaptur. And the housing, in the 515 housing program?
Mr. Viadero. I really do not know yet, but as soon as find
out and get a handle on it, I will be happy to report to you.
Ms. Kaptur. Because you know in the banking industry we
would always say, well, if they get over 1.5 percent defaulted
loans we got a problem. But here you are talking 10 percent.
These are pretty significant numbers for publicly managed
programs.
Mr. Viadero. Well, if you were to take a quote from the
National Crime Information Center, NCIC, and the book that,
again, my former employer publishes on the crime statistics,
white collar crime is historically reported at about 10 percent
in the programs. So, if we use the 10 percent figure it is
still a large amount of money. And that would just be using the
industry standard, if you will, of 10 percent.

food safety and inspections

Ms. Kaptur. I have two brief questions.
Mr. Viadero. Yes, Ma'am.
Ms. Kaptur. One deals with the food safety issue and any
recommendations you might have on ways we could improve our
inspection systems to assure that our food supply is safe?
You were kind enough to inform the committee when that
strawberry investigation was going on and we very much
appreciate that. And we have had, you talked this morning about
the Hudson meat situation as well. If we were to try harder as
a country to inspect what comes over our borders for those
items that are imported, as well as inspect better what we have
inside the country.
Do you have any suggestions, first, on the imported side of
the equation? In fruits and vegetables should we adopt, for
example, what they do in the meat packing industry for imported
items? What advice can you give us there based on what you now
know?
Mr. Viadero. Well, again, I would like to give a big tip of
the hat to our friends in APHIS, Animal Plant Health Inspection
Service at the Department. We work exceptionally well with our
APHIS folks.
And we get a sense that if we took the inspection
standards, for instance, where we are now importing 20,000
carcasses in from Argentina and Uruguay, if we took the
inspection standards and take it from the meat side of the
house and place it on the vegetables, let us say, Guatemala,
who, I think it was FDA that said with the cyclospora coming up
on raspberries out of there, perhaps they should be pre-
inspected down there or perhaps we can provide training or
Guatemala can send their people up here to be trained by us as
to what to look for. Because I am not speaking for the
Guatemalan Government at all but I am sure they do not want
this to happen either because it really impacts their economy.
I mean that is the only place you are going to get
raspberries at this time of the year, I guess. So, if we want
them as consumers I think it is incumbent upon us to perhaps
increase this type of activity, either train them or have them
pre-inspected somehow.
Ms. Kaptur. Does pre-inspection involve one of our
inspectors going down there, is that what happens in the case
of Argentinean beef?
Mr. Ebbitt. Well, with fruits and vegetables pre-inspection
you have going on now in Mexico but not with beef. With meat
products you are depending upon an equal to service being
provided by the foreign government, equal to U.S. inspection
processes and procedures. With then some testing of certain
samples as they come into the United States.
Ms. Kaptur. I will tell you, for the record, I would really
appreciate it if you could get back to me on this point because
I really do care deeply about this for our country and for the
integrity of our food supply.
And if you could walk me through it. I have not spent time
as an inspector. So, I do not really know exactly
administratively what happens with each type of item that is
brought into the country. And if there is a difference on the
fresh fruits and vegetables side or frozen fruits and
vegetables or meat. I mean you know all the different
categories. If you could tell me if I wanted to strengthen the
system, how would I do it? Will it require more staff? If so,
where? Does it require more training money? If so, where? I
would like to know that.
And my final question deals with concentration. On page 66
of your report, you talk about the Grain Inspection Packers and
Stockyards Administration are lacking. Some of their
investigative techniques are lacking for anti-competitive
practices.
And I am wondering, knowing that about three firms control
the majority of the red meat that reaches our tables, to your
knowledge, does GIPSA have any type of effort to restructure or
to retrain to handle this new initiative?
Mr. Ebbitt. Well, Grain Inspection and Packers and
Stockyards is looking at some reorganization. They have some
studies underway in-house to look at that. We suggested that
they need to do several things. First of all, you have to have
the right kind of trained professionals to do these kinds of
investigations. It takes attorneys, it takes lawyers, it takes
economists and it takes program people working together to make
these cases.
They are very tough, very complex cases but you have to
have that body of talent to be able to make the case.
The Department has the talent. Right now you have
economists in the economist office, you have got, of course,
attorneys and General Counsel. We are not suggesting
necessarily you push all those together but that they need to
bring those elements to the investigation when the
investigation is occurring.
It really takes a good economic viewpoint when you are
making those cases and that is what they need to do.
Mr. Skeen. Let me interrupt here. We have got a second bell
and I would like to have Mr. Nethercutt wind this up.
Ms. Kaptur. That was my last question, Mr. Chairman.

food and nutrition service

Mr. Nethercutt. Thank you, Mr. Chairman.
Very quickly, gentlemen. The last few years the old Food
and Consumer Service is now the Food and Nutrition Service has
had tremendous accounting problems. You brought it to our
attention. Are those satisfied or solved to your satisfaction?
Are they having any deficiencies that recur or can you help us
with this?
Mr. Viadero. Yes. If you refer to two years ago, I issued a
disclaimer of opinion on FNS. They could not find $18 billion.
Mr. Nethercutt. Exactly.
Mr. Viadero. The issue right now is jointly shared by FNS
and the States and that is the amount of receivables that the
States still owe FNS. So, in essence, they will more than
probably get a qualified opinion again because of that
recurring receivable problem. They are aware of it, and we are
working with them to go through it.
But in certain parts of that issue, it is the States.
Mr. Nethercutt. You are not finding any polling groups or
Lion King commercials or any of that stuff that we were so
critical of in the last, you know, two years ago in Food and
Nutrition Service at this point?
Mr. Viadero. No, sir, not that we are aware of.

food safety

Mr. Nethercutt. The second question, quickly. What
percentage of, shall I say, adulterated seafood do you find
versus adulterated beef, for example, or other kinds of food?
In other words, as a percentage of the total, is this a big
problem, seafood contamination?
Mr. Viadero. Well, I am not qualified to answer. That comes
under a different department. Agriculture does not handle that
one. That comes under Commerce.
Mr. Nethercutt. Thank you.
Mr. Viadero. Yes, sir.

disaster assistance

Mr. Nethercutt. One final one. You mentioned in your
written statement that you folks spent some time in the Pacific
Northwest after our flooding. What do you look forin those
situations? Did you find any irregularities in anything that I need to
worry about in terms of the Pacific Northwest?
Mr. Viadero. Well, in fact, we noted and using again, a
proactive stance when there is a disaster for emergency
distribution of commodities or emergency distribution of food
stamps or replacement of food stamps, we wanted it limited to
the immediate affected area.
And I got a call from the Governor of Oregon because he
wanted it to go county-wide. And FNS would not approve it
until, because we beat up on them pretty bad on that one. And
the Governor called me and I chatted with him and he said,
well, you are apparently an East Coaster, and I said, yes, sir.
And he said, understand that there are more people in your town
than I have in a county. He said and a lot of them are wage
earners.
And that is the type work we went out and did there. We did
the same in the State of Washington and the State of Idaho. And
what did we end up with, 30 families I think in Washington and
17 families in Idaho. It was minimis, but the point was that
everybody knew that we were on-site doing this because in
Georgia by us being on-site 4,100 families would have been
eligible under the county system but we reduced it to 1,600
families in the immediate area. So, we saved a bunch of bucks
there. Just a proactive view.
Mr. Skeen. Thank you, Roger.
We appreciate very much what you are doing and how well you
are doing it and we appreciate the testimony you have given us
today.
Mr. Viadero. Thank you, Mr. Chairman.
[Clerk's note.--The following questions were submitted to
be answered for the record.]

Office of the Inspector General

special law enforcement initiative funding
Mr. Skeen. In your proposal for a special law enforcement
initiative, you cite three primary areas of focus: Fraud and abuse in
the food stamp nutrition programs; rural rental housing; and health and
safety programs requiring immediate response. How much of the special
initiative funds would go to each of these areas? How many staff years
would be devoted to each? Would any of the funding go to any other
programs or areas within OIG?
Respondent. I will provide the information for the record.
[The information follows:]

------------------------------------------------------------------------
Dollars
Initiative areas (in FTE's
millions)
------------------------------------------------------------------------
Food stamp fraud.................................. 8.6 69
Child nutrition................................... 2.8 23
Rural rental housing.............................. 4.9 39
Emergency responses............................... 3.8 30
Farm, export, and natural resources backlog....... 1.1 9
Technical equipment/surveillance vehicles......... .5 0
---------------------
Total....................................... 21.7 170
------------------------------------------------------------------------

additional staffing
Mr. Skeen. The special law enforcement initiative calls for an
additional 170 staff years. At what grade level do you anticipate
recruiting?
Respondent. We anticipate recruiting the additional staff-years at
entry level positions, such as GS 5/7/9, from colleges and through
media advertisements.
personnel compensation
Mr. Skeen. In reviewing personnel compensation in the object class
breakout, you show an increase of $16.5 million. After adjusting out
$1.461 million for pay cost and $325,000 for other audits, the average
cost per staff year averages over $86,000. Why is the cost per average
staff year so high?
Respondent. The agency's current object class II costs for salary
are approximately 68 percent of our costs. The requested funding level
for the FY 1999 initiative is at the same level. Although this may
appear to be a higher average staff year cost when estimated for the
projected budget year, historically our actual costs have demonstrated
that agency's expenditures will be incurred at approximately this
percentage level. Our projected costs were, therefore, estimated at
this higher amount.
staffing timeline
Mr. Skeen. If the special initiative were approved, please provide
a timeline that shows how you would bring 170 people on board in one
year.
Respondent. The agency would use open continuous recruitment
announcements and special Government hiring authorities to recruit
nationwide for the special initiative staffing. This effort would begin
immediately upon approval with announcements being issued no later than
the first 2 months of the fiscal year and actual hiring to follow. Most
hiring would then be accomplished during the second quarter of the
year. Since the new staff will be mostly auditors and special agents
spread throughout our offices across the country, we believe that
overall assimilation of the new staff into the agency's individual
offices and organizations can be accomplished without a major impact on
the agency because of the overall small number of individuals to be
hired per office.
staffing distribution
Mr. Skeen. For the record, provide the rationale for each State in
your geographic distribution table receiving equal increases in funding
(39 percent) and each State receiving equal increase in staff years (23
percent).
Respondent. The areas to be addressed by our special initiative
affect many of the Department's programs nationwide. There is no one
specific field area or location in which we would concentrate these
activities more than any other. Because of this, we expect to
distribute our staff for the new initiative evenly across all of our
offices nationwide to handle these efforts.
travel costs
Mr. Skeen. You are proposing an increase of $2 million for fiscal
year 1999 in travel costs, which is a 36% increase. What would cause
such an increase?
Respondent. OIG is a staff intensive agency, and our auditors and
agents must travel to the field locations where the Department's
programs operate. We are proposing a $2 million increase in travel
funds to adequately handle the travel costs associated with the
staffing increase of 175 positions for FY 1999 for these auditors and
agents to travel to these Department program field operation sites. We
anticipate such an increase in travel costs due to the staffing needs
involved in the special law enforcement initiative which will address
the issue of fraud and abuse in the food stamp and other nutrition
programs, rural rental housing, and disaster and health and safety
programs.
transportation of things
Mr. Skeen. Object class 22, transportation of things, shows an
increase of $161,000. What is the reason for the increase? Are you
planning on paying any relocation costs for the 170 additional staff
years in your special initiative?
Respondent. The increase of $161,000 for object class 22,
transportation of things, is for two primary areas, relocation costs
and vehicle rentals. Our current estimate for the overall FY 1999
relocation costs is projected to be $800,000, compared to $633,000 for
FY 1997, due to an increase of employees relocating. The increase will
include expenses in object class 2210, change of official duty station,
which involves shipment of household goods. Also, with the
implementation of major operations, such as Operation Talon, under our
special law enforcement initiative there will be a need to increase our
existing fleet of 4x4's and minivans.
advisory and assistance services
Mr. Skeen. Why does object class 25.1, advisory and assistance
services, show an estimated $47,000 for fiscal year 1998 when no funds
were obligated in this object class for fiscal year 1997. Please
describe what services you are planning to use. Why does this increase
to $60,000 in fiscal year 1999?
Respondent. The advisory and assistance services estimated for FY
1998 and FY 1999 are to provide the agency needed expertise in
management and professional support services that are currently
unavailable within the agency. For example, in the past we have used
these services to provide OIG with specialized expertise and advice to
assist the agency in carrying out such legislative mandates as the
Chief Financial Officers Act to audit financial statements of the
Department's agencies. These funds would provide similar services in FY
1998 and FY 1999 as needed.
equipment increase
Mr. Skeen. Why does object class 31, equipment, increase by
$350,000 in fiscal year 1999?
Respondent. The additional funds would be utilized to purchase
necessary ADP, furniture, and specialized law enforcement equipment for
our requested staff increase.
child and adult care food program review
Mr. Skeen. In the Child and Adult Care Food Program facet of the
budget justification, you discuss adopting a systematic approach to
review over 14,000 sponsors. Please describe how systematic works? How
do you review 14,000 sponsors?
Respondent. Our current effort is focused on judgmentally selected
sponsors from approximately 1,200 sponsors of day care homes. The
sponsors we arereviewing were selected from those identified by OIG,
FNS, or State agencies as potential ``problem'' sponsors or sponsors
about which they have concerns. Our systematic approach to cover the
remaining sponsors is to use a statistical sampling approach.
error rate--illinois
Mr. Skeen. How does the rest of the country compare to the 19
percent error rate you found in your review of the Illinois School
Lunch and School Breakfast Program? Is the Illinois program an
aberration?
Respondent. FNS does not require States to assemble and report
error rates found as a result of verifications school food authorities
perform. We therefore have no data from other States against which
Illinois may be compared. However, in our discussions with FNS
officials, they are of the opinion that similar error rates may exist
in other States.
operation talon
Mr. Skeen. How much money did Operation Talon save American
taxpayers? What was the cost of Operation Talon?
Respondent. As Operation Talon is a relatively recent event, many
of the States have neither calculated the savings nor completed the
administrative process required to take action against the food stamp
recipients who illegally received benefits. We have been in contact
with officials at FNS who are in communication with the States
concerning administrative action. Such actions may include suspending
food stamp benefits, establishing claims for repayment, and determining
a cost avoidance figure. We have been told by FNS and by some State
officials that many States intend to take action on the fugitive felons
identified during Operation Talon.
To date, Operation Talon expenses have totaled approximately $1.5
million in personnel costs and related travel expenditures.
food stamp rolls
Mr. Skeen. How many convicted felons and prison inmates do you
estimate are on food stamp rolls? What are the estimated savings if
they all were removed from the food stamp rolls?
Respondent. We project that there are in excess of 20,100 fugitive
felons and about 16,600 inmates who are on the food stamp rolls
nationwide. We further estimate these people to be illegally receiving
approximately $50 million in annual food stamp benefits.
resources used to monitor the food stamp program
Mr. Skeen. Please update the table that appears on page 298 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 1997 actuals
and fiscal year 1998 and 1999 estimates.
Respondent. I will provide the information for the record.
[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.................................................... 16,914,000
1998.................................................... \1\ 16,900,000

\1\ Estimated.
---------------------------------------------------------------------------
questionable ebt transactions
Mr. Skeen. Your office assisted the Food and Nutrition Services in
the development of a computer package to assist in identifying EBT
traffickers. The nationwide system became operational in the Fall of
1996. In last year's hearing record you indicated that you had not
begun an evaluation of this system. Have you started the evaluation
yet?
Respondent. The Anti-fraud Locator EBT Redemption (ALERT) system is
now in use by FNS nationwide with the deployment to FNS' Western
regional office in February 1997. We have not begun an evaluation of
the system; however, we have consulted with and provided comments to
FNS on the implementation and operation of this system.
unobligated balance
Mr. Skeen. At the end of fiscal year 1997, you had an unobligated
balance of over $900,000. In light of your predicament to get people
trained, purchase new equipment, or fund other one-time purchases, why
do you show such a large amount of unspent funds?
Respondent. The $900,000 is overstated. The agency's internal
records indicated the agency's balance was approximately $375,000 at
the end of the fiscal year. The National Finance Center was contacted
at the close of the fiscal year to confirm the unobligated balance, at
which time a balance of approximately $390,000 was given. It was not
until after the end of the fiscal year, in early November, that OIG was
notified the official unobligated balance had changed to over $900,000.
representation expenses
Mr. Skeen. You are once again requesting appropriations language
for representation expenses. Last year, you indicated that any such
expenditures incurred must be paid out of pocket by the Inspector
General. What level ofexpenditures were incurred in fiscal year 1997?
Is specific authority needed to carry out representation?
Respondent. Specific authority is needed for the agency to pay for
representation expenditures. This authority would allow the agency to
pay for hosting official functions for organizations such as the
International Criminal Police Organization, the International
Association of Chiefs of Police, the President's Council on Integrity
and Efficiency, and similar organizations, as well as provide tokens of
appreciation to International, State, or local law enforcement
organizations that assist the agency in joint law enforcement
operations and activities. Currently, because such expenditures cannot
be paid by the agency and must be paid out of pocket by the Inspector
General or other agency employees, and agency declines to host many of
these events or provide tokens of appreciation although it is customary
practice to do so, especially in the law enforcement arena. Since the
events and practices are currently very limited and are considered
personal expenditures, no actual records are kept of the actual costs,
although the agency estimates employees spent about $1,000-$1,500
during FY 1997 on such activities.
confidential fund increase
Mr. Skeen. You are requesting an increase of $30,000 for
confidential operations. Since your limitation was raised to $95,000 in
1994, the highest level of expenditures was $83,995 and the average
expenditure level since 1994 is about $78,000. Why is an increase
needed when you have not spent close to your present limitation?
Respondent. OIG is requesting an increase in budget authority from
$95,000 to $125,000 for confidential funds because the current $95,000
limitation is insufficient to provide funds for all of our planned and
ongoing nationwide undercover investigative operations. Conducting an
undercover law enforcement operation is a highly unpredictable activity
which sometimes requires large amounts of ``seed'' money up front, in
which the demands on this authority have increased each year. For the
past few years, some cases have been delayed until funds could be moved
from other regions. Also, our various special law enforcement
initiatives will involve extensive undercover operations as we expand
them nationwide.
Moreover, OIG recently published our new informant policy, which
will be the cornerstone of our new informant program. The goal of this
program is to ensure adequate informant coverage in program areas,
which are an investigative priority. The program is also designed to
provide a better intelligence base nationwide. Intrinsic to this is the
development of confidential informants, cooperating witnesses, and
sources of information in strategic areas. The development of
informants requires funds to pay them and to finance related
investigative operations to address burgeoning areas of crime in a
proactive and efficient manner. As a result, there will be an increased
demand for confidential funds as the program goes into operation this
fiscal year and beyond.
service center initiative oversight
Mr. Skeen. Please tell us what you are doing in terms of oversight
of the Service Center Initiative?
Respondent. We have a survey planned this fiscal year in which we
will determine if the partner agencies have identified their long-range
computer processing plans to facilitate the effective planning for
Departmental sharing of information resources. Areas of concentration
will include information technology, business process reengineering,
and change management.
disaster food stamp handbook recommendations
Mr. Skeen. What was your recommendation to FNS on proposed changes
to the Disaster Food Stamp Handbook? What is the status of
implementation of the recommendations?
Respondent. We recommended that FNS revise the handbook to furnish
guidance for determining the amount of replacement allotments in
various situations. Replacements should be prorated based on the date
of the disaster in relation to the time regular benefits were last
issued, when the next issuance is scheduled, whether losses primarily
affected perishable food due to power outages versus catastrophic
losses. FNS agreed to an alternative to amending the handbook. As each
disaster response is developed, FNS will work closely with the State
agency involved to ensure that the most equitable response to the
disaster victims (ongoing recipients and new households) is developed.
employment and training program audits
Mr. Skeen. Is the Welfare Reform Act the primary reason for the
Employment and Training Program costs increasing from $75 million in
fiscal year 1996 to an estimated $138.6 million in fiscal year 1997? In
light of the increase are you planning more audits of the program?
Respondent. According to FNS, the increase was necessary to provide
the additional 100 percent Federal funding required by the Welfare
Reform Act for matching funds for participants' reimbursement and State
administrative costs to carry out the Employment and Training Program.
We are currently performing a review of the program in Ohio.
ebt processor operation audits
Mr. Skeen. You initiated a President's Council on Integrity and
Efficiency working group to develop standards for audits of EBT
processor operations. Tell us how your efforts are coordinated between
Federal, State and public accounting representatives.
Respondent. When the project was first conceived, invitations to
participate in developing audit procedures to be undertaken at EBT
processors were made to various organizations which were involved with
EBT and its development and implementation, professional auditing and
accounting organizations, and audit groups who had EBT audit experience
or would be expected to audit EBT operations. These various
organizations included Offices of Inspector General for the U.S.
Departments of Treasury and Health and Human Services;the Social
Security Administration; the U.S. General Accounting Office; the Office
of Management and Budget; the National Association of State Auditors,
Comptrollers and Treasurers; the State Auditors Association; the
American Institute of Certified Public Accountants; the General
Services Administration, Card Technology Division; the Food and
Nutrition Service; the National Automated Clearing House Association;
the EBT Council Fraud Committee; the U.S. Department of Treasury,
Financial Management Services; and various State and private audit
organizations. The majority of the organizations have participated in
the project.
Various meetings were held to lay out the need for the project and
its objectives, to develop areas that needed audit coverage at EBT
processors, and to make assignments to draft the audit procedures for
the identified areas. The various procedures, by area, have been
drafted, and we are now consolidating them into one document which will
be circulated among the working group for review and comment. Once the
draft is agreed on, it will be circulated to various professional
associations and audit groups for review and comment before it is
published in final form.
food stamp cases
Mr. Skeen. Provide a table similar to the one that appears on page
301 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 1997.
Respondent. I will provide the information for the record.
[The information follows:]

U.S. DEPARTMENT OF AGRICULTURE--OFFICE OF INSPECTOR GENERAL FOOD STAMP
PROGRAM REFERRALS--FY 1997
------------------------------------------------------------------------
Cases Referred Accepted
State issued to DOJ by DOJ
------------------------------------------------------------------------
Alabama................................. 5 3 2
Arizona................................. 6 2 0
Arkansas................................ 4 1 0
California.............................. 66 18 10
Colorado................................ 10 2 0
Connecticut............................. 9 6 2
Delaware................................ 7 7 6
District of Columbia.................... 8 8 4
Florida................................. 20 4 3
Georgia................................. 9 6 4
Hawaii.................................. 4 3 1
Illinois................................ 14 9 8
Indiana................................. 11 6 6
Iowa.................................... 3 2 2
Kansas.................................. 2 2 2
Kentucky................................ 1 1 1
Louisiana............................... 15 13 3
Maine................................... 1 1 1
Maryland................................ 22 13 8
Massachusetts........................... 3 2 2
Michigan................................ 9 7 6
Minnesota............................... 3 2 2
Mississippi............................. 19 7 6
Missouri................................ 17 14 8
Nevada.................................. 2 0 0
New Jersey.............................. 31 26 11
New Mexico.............................. 1 0 0
New York................................ 58 27 13
North Carolina.......................... 60 49 32
North Dakota............................ 1 1 1
Ohio.................................... 39 11 3
Oklahoma................................ 16 1 0
Oregon.................................. 3 0 0
Pennsylvania............................ 41 18 3
Puerto Rico............................. 1 0 0
Rhode Island............................ 11 6 3
South Carolina.......................... 6 6 2
Tennessee............................... 2 2 1
Texas................................... 44 18 0
Virginia................................ 11 7 2
Washington.............................. 2 1 0
Wyoming................................. 1 1 0
-------------------------------
Total............................. 598 313 158
------------------------------------------------------------------------

state mediation program
Mr. Skeen. Bring us up to date on the State Mediation Program. Are
the same problems in existence today that were with us at this time
last year?
Respondent. Together, FSA and OIG have made significant strides to
resolve the problems that were with us last year. For example, the FSA
Administrator requested the State-administrated Mediation Programs to
identify the names and addresses of mediation participants, the issue
accepted for mediation, and the results of the mediation for USDA
program participants involved in mediation. Each State has provided a
list of these USDA participants and the number of non-USDA participants
involved in mediation. Working from the lists of USDA program
participants, we have completed limited evaluations of the impact of
mediation on USDA programs in Alabama, Arkansas, Michigan, and North
Dakota. We concluded in each State that the mediation program appeared
to be an effective tool to help resolve USDA-related issues. We are
continuing to review FSA's January 14, 1998, response to OIG Evaluation
Report No. 03801-23-Te, State-Administered Mediation Programs Need
Strengthening.
state mediation program recommendations
Mr. Skeen. In your testimony you cite five recommendations you made
to FSA regarding the mediation program. What is the status on the
implementation of the recommendations.
Respondent. Our first recommendation was to withhold grant funds
from the four States visited until records are made available--the FSA
Administrator requested three of four State-Administrated Mediation
Programs to identify the name and addresses of mediation participants,
the issue accepted for mediation, and the results of the mediation for
USDA program participants involved in mediation. Each State has
provided a list of these USDA participants and the number of non-USDA
participants involved in mediation. OIG agreed that the three States
were compliant and concurred with the FSA decision to continue funding
the grant programs.
The second recommendation was to amend regulations to specify what
costs can be claimed for reimbursement--FSA is currently revising their
regulations. The last version that FSA shared with us did more clearly
specify what costs can be claimed for reimbursement. However, those
changes are subject to further amendment. We continue to work with FSA
to reach management decision on this issue.
We also recommended that FSA recover $1.2 million in questionable
and unsupported costs, reduce the cost per case for the State mediation
program, and stop obligating more grant funds in a fiscal year than are
appropriated by Congress--we continue to work with FSA to resolve these
issues.
federal matching funds
Mr. Skeen. On page 37 of your testimony you highlight a case where
$15.3 million in Federal matching funds from FNS was approved for the
costs of continuing a U.S. Department of Health and Human Services jobs
programs whose normal allocations had run out. In addition, you
indicate that reimbursement of these transferred costs could constitute
a violation of appropriations laws and may need to be refunded to FNS.
Were these funds made available to a particular State? If so, what
State? Has a determination been made if this transfer was a violation
of appropriations law? If it was determined that the transfer was a
violation of appropriations law have the funds been refunded to FNS?
Respondent. FNS agreed to provide Federal funds to cover expenses
originally allocated to Wisconsin's operation of the U.S. Department of
Health and Human Services' JOBS Program. We considered these costs as
questionable since Wisconsin did not provide adequate evidence of its
eligibility for matching funds under the Employment and Training (E&T)
Program and because JOBS Program participants are not generally
eligible to participate in the E&T Program. It was FNS' position that
the cost incurred by the State agency were eligible for Federal
matching funds, and OIG recommended that FNS obtain an opinion from
USDA's Office of General Counsel (OGC) on whether the transfer of funds
constituted a violation of applicable appropriation laws. OGC rendered
an opinion that transfer of the funds were appropriate.
audits of marketing and regulatory programs
Mr. Skeen. You are requesting an increase of $325,000 and five
staff years for audits of marketing and regulatory programs. Where
would these auditors be located?
Respondent. Most marketing and regulatory activities take place at
various locations around the country. The additional staff will,
therefore, be assigned to OIG's field operations to reflect where the
greatest marketing and regulatory activities occur.
backlog of complaints
Mr. Skeen. You reported that your review of the backlog of
complaints made by disadvantaged and minority farmers increased from
530 to 984 as of August 1997. What are the major reasons for this
increase.
Repsondent. There are several reasons for the increased backlog.
The major reason is the failure of FSA's State and county offices to
forward discrimination complaints to the national office. After we
issued our Phase I report on February 27, 1997, the Acting Assistant
Secretary for Administration sent a memorandum to all agencies
requesting that they forward all complaints held at the State and
county offices to the office of Civil Rights.
In addition, a number of complaints were registered through the
civil rights listening sessions held by the Department's Civil Rights
Action Team. Also, the added publicity concerning the African American
farmer and discrimination issues resulted in additional farmers coming
forward and filing complaints which resulted from situations occurring
several years ago.
year 2000 update
Mr. Skeen. Provide an update on the work you are doing to review
the Year 2000 initiative.
Respondent. We have recently completed a review of the Department's
performance of the first two phases (awareness and assessment) of the
Year 2000 conversion process prescribed by the Office of Management and
Budget and the U.S. General Accounting Office. We found that the
Department needed to expedite its activities to provide assurance that
the entire effort would be consummated prior to the turn of the
century. Our audit of the subsequent phases (renovation, validation,
and implementation) is ongoing, and will continue to assist the
Department in meeting the critical due date.
Mr. Skeen. In your testimony, you indicate that 10 USDA agencies
purchased $31.6 million of computer equipment that was Year 2000
incompatible. What agencies were involved? From what department-wide
contract were these computers procured?
Respondent. The agencies involved in the contract were the Animal
and Plant Health Inspection Service, Forest Service, National
Agricultural Library, Office of the Chief Financial Officer, Office of
the Chief Information Officer, Natural Resources Conservation Service,
Office of Inspector General, Office of the Secretary, and what was then
the Farmers Home Administration andthe Office of Advocacy and
Enterprise. The computers were procured from Micro Star Co., Inc.,
under contract No. 54-3142-3-1151.
Mr. Skeen. Your audit report of the Year 2000 initiative is
scheduled to be issued in early 1998. Please provide a copy for the
record.
Respondent. We will provide a copy of the report upon release. We
anticipate issuance by March 31, 1998.
[Clerk's note.--A copy of the report has been provided to the
committee, however it is too lengthy to be included in the hearing
record. A copy of the report will be maintained in the subcommittee
office.]
financial statement audits
Mr. Skeen. Please update the table that appears on page 302 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 1997 actuals and fiscal year 1998
estimates.
Respondent. I will provide the information for the record.
[The information follows:]

------------------------------------------------------------------------
Method of Fiscal year
Audited agency performance 1997 cost
------------------------------------------------------------------------
FCIC.............................. Contract............ $\1\ 183,000
RTB (part of RUS)................. In-house............ 272,000
CCC............................... In-house............ 850,000
FCS (now FNS)..................... In-house............ \2\ 1,382,000
FS................................ In-house............ \3\ 155,000
RD................................ In-house............ \4\ 1,040,000
Consolidated...................... In-house............ \3\ 238,000
------------------------------------------------------------------------
\1\ Contract amount plus other costs incurred by OIG.
\2\ The cost to audit FNS during FY 1997 was $105,000 less than FY 1996.
Additional efforts were needed during FY 1996 to adjust and validate
FNS' financial information so that its statements for the year ending
September 30, 1995, could receive an unqualified opinion.
\3\ 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. Due to the scope
limitation, less financial statement audit work was needed during FY
1997, and when compared to the cost of audit work performed during FY
1996, our costs were approximately $815,000 and $180,000 less,
respectively, for the FS and the consolidated statements.
\4\ The cost to audit RD during FY 1997 was $135,000 more than FY 1996.
Due to the cyclical coverage of operations needing detailed control
testing, additional fieldwork was required during FY 1997 to audit RD
operations not tested during the previous fiscal year.

Except for the FS's financial statements and USDA's consolidated
statements, costs should not vary significantly for audit activity
during FY 1998. FS will be producing auditable financial statements for
the year ending September 30, 1997. We estimate that the cost to audit
FS during FY 1998 will be $1,206,000. Similarly, we will be able to
perform more complete audits of USDA's consolidated statements at an
estimated cost of $448,000. Also, during FY 1998, OIG began auditing
the financial statements for Alternative Agricultural Research and
Commercialization Corporation (AARCC), a corporation within USDA. We
estimate that the first year audit will cost approximately $60,000
during the fiscal year.
rolling stores
Mr. Skeen. Have you conducted a follow-up audit to identify what
action FNS has taken on ``rolling stores.''
Respondent. As a result of our 1995 audit of ``rolling stores,''
FNS followed through and removed a number of ``rolling stores'' from
program participation in Atlanta, Los Angeles, and Hawaii. During 1997,
we reviewed ``rolling store'' activity in four Louisiana parishes.
These parishes had 29 authorized ``rolling stores'' of which we
selected 12 for review. We could only locate 4 of the 12 selected, and
none of the 4 could provide financial and related records to support
their food coupon redemptions. FNS investigated these for trafficking
and removed those found to be trafficking from the program. FNS is in
the process of reviewing other ``rolling stores'' to terminate
participation for those that cannot be found and determining if others
are needed for participating households to purchase food.
wic program
Mr. Skeen. Bring us up to date on all the audit and investigation
work you are doing in the WIC Program.
Respondent. During this fiscal year, we will perform audits of the
WIC Program in three of our regions. Our audits will (1) evaluate the
controls over the receipt, distribution, and reconciliation of WIC
vouchers in Minnesota; (2) review operations in each State in the
Southeast Region and focus on problem areas unique to individual
States; and (3) determine whether vendor monitoring in Maryland and
Virginia is adequate and claims are established as required.
On the investigative side, we currently have two open unreported
WIC Program investigations. During FY 1997, we obtained 10 indictments
and $150,000 in monetary results. WIC violations are also often
discovered during our investigations of food stamp trafficking and are
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 identify WIC Program statistics
from these cases.
ccc financial audits
Mr. Skeen. What was your cost of performing audits of CCC financial
statements in fiscal year 1997? What was the reimbursement from CCC?
What is the reason that the reimbursement to perform audits of CCC
financial statements are not fully reimbursed? Can't the CCC adjust its
reimbursement to OIG after the actual costs are known?
Respondent. Our in-house cost to perform audits of CCC's financial
statements during FY 1996 cost $981,000 or $168,000 more than the
$795,000 reimbursement. For FY 1997, the reimbursement was increased to
$842,000 to better reflect the cost of audit activity. Our audit costs
for CCC totaled $850,000 during FY 1997--only $8,000 greater than the
reimbursement. Accordingly, we believe there was no need for any
significant adjustment. Financial statement audit work involves the
cyclical coverage of operations needing detailed control testing, and,
as familiar areas are re-
visited, audits are performed more efficiently. Consequently, needed
fieldwork varies and actual audit costs can fluctuate from one year to
the next. For FY 1998, our reimbursable agreement with CCC is $842,000.
Similar to FY 1997, we anticipate the reimbursement to closely reflect
the actual cost of audit activity during the year.
reimbursements
Mr. Skeen. Please update the table that appears on page 303 of last
year's hearing record showing the reimbursement received, and the
actual cost of the audit for CCC, FCIC, and RUS, to include 1997.
Respondent. I will provide the information for the record.
[The information follows:]

------------------------------------------------------------------------
Fiscal Inhouse/
Audited agency year contract cost ^{1 Reimbursement
------------------------------------------------------------------------
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
1997 850,000 842,000
FCIC/RMA.................... 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
1997 183,000 170,000
RTB/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
1997 272,000 170,000
------------------------------------------------------------------------
^{1 Contract amounts, as appropriate, plus other costs incurred by OIG.

Mr. Skeen. Please update the table that appears on pages 303 and
304 of last year's hearing record showing the amount of funds expended
for outside public accountants hired under contract, to include fiscal
year 1997 actuals and fiscal year 1998 estimates. Also, provide an
explanation for the increases which occurred over the years.
Respondent. The information will be provided for the record.
[The information follows:]
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 ³....................................... 162,500
1998 estimated.......................................... 166,500

¹ Includes FNS Child and Adult Care Food Program contract
audits.
² Includes audits of tobacco manufacturers.
³ RTB audit previously contracted out, now being performed
in-house.
---------------------------------------------------------------------------
foreign agricultural services
Mr. Skeen. In the Inspector General's second-half fiscal year 1997
report, you identify a number of problems concerning the operation of
two joint commissions in the former Soviet Union. You made a number of
recommendations including that Foreign Agricultural Services seek to
recover $7 million. According to the report, $6 million was recovered.
Why was the FAS not able to recover the full $7 million?
Respondent. Auditors recommended that the U.S. Embassy issue a
demarche to the Russian Federation to recover 34 billion rubles
(approximately $6.3 million in U.S. dollars) seized by the Russian tax
authorities. On June 4, 1997, a demarche was issued. In August 1997,
the funds were returned to the U.S.-Russian Federation Joint Commission
for Agribusiness and Rural Development.
Contrary to the terms of the donation agreement, the Government of
Kyrgyzstan bartered U.S. donated food valued at approximately $1.3
million in exchange for natural gas from Uzbekistan. FAS determined
that issuing a demarche for repayment of the funds would not achieve a
positive result. In view of the economic conditions of the country,
rather than seeking recovery of the funds, FAS allowed Kyrgyzstan to
retain the $1.3 million to support future agricultural developmental
activities as outlined in the Section 416(b) donation agreement.
confidential operational activities
Mr. Skeen. Update the table that appears on page 305 of last year's
hearing record showing the amount spent for confidential operational
activities, to include fiscal year 1997 actuals and fiscal year 1998
estimates.
Respondent. I will provide the information for the record.
[The information follows:]

------------------------------------------------------------------------
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.......................................... 95,000 79,322
1998.......................................... \1\ 95,000 \1\ 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 though the hotline
in fiscal year 1997?
Respondent. The hotline received 3,806 calls, letters, and walk-ins
in FY 1997.
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?
Respondent. OIG inquired into 157 of the hotline complaints
received in FY 1997, of which 8 were referred to the U.S. Department of
Justice for a prosecutive determination. We referred 3,183 complaints
to the appropriate USDA agency. Of the complaints referred, we
requested a response on 837; 1,748 complaints concerning food stamp
recipients were forwarded to FNS for corrective action with no response
required and 598 were minor violations that required no response back
to us. Of the remaining complaints, 290 were referred to a State agency
for their action, 123 were referred to other law enforcement agencies
for their action, and no action was taken on 53 complaints because they
contained insufficient information.
indictments, convictions, and suits
Mr. Skeen. Please update the table that appears on pages 307 and
308 of last year's hearing record on the number of indictments,
convictions, and lawsuits for fiscal year 1997.
Respondent. I will provide the information for the record.
[The information follows:]

----------------------------------------------------------------------------------------------------------------
Agency Indictments Convictions Suits
----------------------------------------------------------------------------------------------------------------
AMS............................................................. 8 6 0
APHIS........................................................... 6 3 0
ARS............................................................. 1 1 0
CSREES.......................................................... 1 1 0
FAS............................................................. 5 6 0
FNS............................................................. 539 550 30
FS.............................................................. 2 3 0
FSA............................................................. 57 90 18
FSIS............................................................ 20 14 0
NRCS............................................................ 1 2 0
RHS............................................................. 16 15 2
RMA............................................................. 6 11 2
SEC............................................................. 2 1 0
-----------------------------------------------
Total..................................................... 664 703 52
----------------------------------------------------------------------------------------------------------------

1997 audit and investigations results
Mr. Skeen. Please update the table that appears on page 308 of last
year's hearing record showing the number of audit reports,
investigative reports, indictments, convictions, and lawsuits filed, to
include fiscal year 1997.
Respondent. I will provide the information for the record.
[The information follows:]

----------------------------------------------------------------------------------------------------------------
Fiscal year--
--------------------------------------------
1993 1994 1995 1996 1997
----------------------------------------------------------------------------------------------------------------
Audit reports...................................................... 360 261 328 282 255
Investigative reports.............................................. 1,267 1,079 974 956 958
Indictments........................................................ 944 856 967 941 664
Convictions........................................................ 982 886 859 738 703
Suits.............................................................. 61 84 66 106 52
----------------------------------------------------------------------------------------------------------------

agricultural market transition act
Mr. Skeen. Please provide an update on your review of Phases II and
III of the Agricultural Market Transition Act.
Respondent. We issued one report (Audit No. 03601-15-Te) on
September 30, 1997, which provided the results of both our Phase II and
Phase III audits of the Agricultural Marketing Transition Act (AMTA).
We determined that overall controls over compliance activities were
adequate to preclude overpayments, and producers complied with planting
flexibility and agricultural land use requirements applicable to
contract acres. We also determined that farms were generally enrolled
by the individuals or entities that actually controlled the operations.
attempts to circumvent payment limitations
Mr. Skeen. In last year's hearing record, you indicated that OIG
and FSA were working together on appropriate corrective action on the
problem of landowners using combination leases to circumvent payment
limitations. Have corrective actions been taken? Do you have an
estimate of what the circumvention costs?
Respondent. FSA has issued regulations, effective for the 1999 crop
year, that, in effect, make all combination lease arrangements share
leases. This will eliminate producers' advantages created by entering
into a combination lease for payment limitation purposes. As to the
total cost of this circumvention, we do not have information as to the
total number of combination leases and the number of acres covered.
Therefore, we do not have an estimate as to the total cost to the
Government.
list and type of firearms
Mr. Skeen. Please update the table on page 309 of last year's
record showing OIG owned firearms.
Respondent. I will provide the information for the record.
[The information follows:]

OIG owned firearms

Number
Type of firearm:
9mm semiautomatic pistols..................................... 374
.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 request to the
Secretary; the Secretary's request to OMB; and the OMB allowance.
Respondent. Our budget request to the Secretary was for
$157,046,000; the Secretary's request to OMB was $111,568,000; and the
OMB allowance was $87,689,000.
use of investigations and audit resources by agency for fiscal year
1997
Mr. Skeen. Provide tables similar to the ones that appear on page
310 of last year's hearing record showing the breakdown of OIG's
resources and the percent of each that went towards investigations and
audits of each agency under USDA for fiscal year 1997.
Respondent. I will provide the information for the record:
[The information follows:]

USE OF INVESTIGATIONS RESOURCES BY AGENCY--FISCAL YEAR 1997
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Total OIG Investigations
-----------------------------------------------------------------------------
Percentage Percentage
of OIG of OIG
Dollars Staff-years Dollars dollars per Staff-years staff-years
agency per agency
----------------------------------------------------------------------------------------------------------------
RMA............................... $3,292 40 $1,334 41 14 35
FSA............................... 13,226 153 7,423 56 74 48
FAS............................... 628 9 210 33 3 33
FNS-FSP........................... 16,914 177 14,354 85 143 81
FNS-other......................... 6,676 84 1,899 28 19 23
AMS............................... 1,248 15 606 49 6 40
APHIS............................. 1,017 12 615 60 6 50
GIPSA............................. 152 2 25 16 0 0
FSIS.............................. 1,317 13 1,143 87 11 85
ARS............................... 248 4 207 83 3 75
CSREES............................ 313 4 28 9 0 0
ERS............................... 0 0 0 0 0 0
NASS.............................. 0 0 0 0 0 0
RBS............................... 883 12 41 5 0 0
RHS............................... 3,403 40 1,654 49 16 40
RUS............................... 816 10 60 7 0 0
FS................................ 3,693 49 364 10 4 8
NRCS.............................. 498 5 226 45 1 20
OO................................ 95 1 38 40 0 0
HRM............................... 6 0 6 100 0 0
OCFO.............................. 354 5 0 0 0 0
NAD............................... 0 0 0 0 0 0
OIG (internal).................... 85 1 85 100 1 100
Multi-agency...................... 7,213 96 119 2 1 1
Other............................. 945 10 945 100 10 100
OCIO.............................. 6 0 6 100 0 0
-----------------------------------------------------------------------------
Total....................... 63,028 742 31,388 50 312 42
----------------------------------------------------------------------------------------------------------------

USE OF AUDIT RESOURCES BY AGENCY--FISCAL YEAR 1997
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Total OIG Audit
-----------------------------------------------------------------------------
Percentage Percentage
of OIG of OIG
Dollars Staff-years Dollars dollars per Staff-years staff-years
agency per agency
----------------------------------------------------------------------------------------------------------------
RMA............................... $3,292 40 $1,958 59 26 65
FSA............................... 13,226 153 5,803 44 79 52
FAS............................... 628 9 418 67 6 67
FNS-FSP........................... 16,914 177 2,560 15 34 19
FNS-other......................... 6,676 84 4,777 72 65 77
AMS............................... 1,248 15 642 51 9 60
APHIS............................. 1,017 12 402 40 6 50
GIPSA............................. 152 2 127 84 2 100
FSIS.............................. 1,317 13 174 13 2 15
ARS............................... 248 4 41 17 1 25
CSREES............................ 313 4 285 91 4 100
ERS............................... 0 0 0 0 0 0
NASS.............................. 0 0 0 0 0 0
RBS............................... 883 12 842 95 12 100
RHS............................... 3,403 40 1,749 51 24 60
RUS............................... 816 10 756 93 10 100
FS................................ 3,693 49 3,329 90 45 92
NRCS.............................. 498 5 272 55 4 80
OO................................ 95 1 57 60 1 100
HRM............................... 6 0 0 0 0 0
OCFO.............................. 354 5 354 100 5 100
NAD............................... 0 0 0 0 0 0
OIG (internal).................... 85 1 0 0 0 0
Multi-agency...................... 7,213 96 7,094 98 95 99
Other............................. 945 10 0 0 0 0
OCIO.............................. 6 0 0 0 0 100
-----------------------------------------------------------------------------
Total....................... 63,028 742 31,640 50 430 58
----------------------------------------------------------------------------------------------------------------
Reimbursements:
CCC........................... 842 ........... 842 100 ........... ...........
RMA........................... 170 ........... 170 100 ........... ...........
RUS........................... 170 ........... 170 100 ........... ...........
Other......................... 421 ........... 421 100 ........... ...........
-----------------------------------------------------------------------------
Total....................... 1,603 ........... 1,603 100 ........... ...........
----------------------------------------------------------------------------------------------------------------

alternative agricultural research and commercialization corporation
Mr. Skeen. After identifying potential conflicts of interest with
the Alternative Agriculture Research and Commercialization Center board
of directors, you reviewed and approved new policies. Your office had
scheduled a follow-up evaluation for the second half of fiscal year
1997. Did that evaluation occur? If so, what were the results of the
evaluation?
Respondent. We have incorporated the potential conflict of interest
into our financial statement audit of the Alternative Agricultural
Research and Commercialization Corporation. The audit, which is now
underway, will assess management controls over all critical aspects of
the Center's operations, with emphasis on the distribution of funds.
oig field auditors and supervisors
Mr. Skeen. Provide an update of the table that occurs on page 315
of last year's hearing record that shows the number of supervisors and
field auditors at the agency to include fiscal year 1997.
Respondent. I will provide the information for the record.
[The information follows:]

------------------------------------------------------------------------
GS 0511 field Audit supervisors
Fiscal year auditors agencywide
------------------------------------------------------------------------
1997............................ 294 40
1996............................ 293 42
1995............................ 293 138
1994............................ 322 132
1993............................ 334 140
1992............................ 353 145
------------------------------------------------------------------------

fns--program recommendations
Mr. Skeen. Based on the work the OIG is doing in the Child and
Adult Care Food Program and the abuse and mismanagement you are
discovering, have any recommendations been made to FNS to strengthen
the management of the program?
Respondent. Reports are being issued to FNS for each of the audits
of the 12 referenced sponsors. These reports will contain
recommendations to deal with the conditions found at each sponsor,
including addressing any funds which should be returned to the
Government. To date, reports have been issued for nine sponsors. We
also have made recommendations to FNS headquarters during the audit
process such as requiring the State agency to verify all day care
income that is or is not reported for Food Stamp Program eligibility
and establishing a realistic rate that sponsors may retain for
administering the program in day care centers. We will be making
additional recommendations to strengthen the management of the program
upon completion of our current efforts.
environmental benefits index scoring recommendations
Mr. Skeen. Your office reviewed the Conservation Reserve Program
and found significant inconsistencies in the methodologies used by
States when they assigned scores for various conservation factors. As a
result, you recommended that FSA and NRCS provide specific guidance on
criteria for assigning points and to require field offices to review
and correct Environmental Benefits Index scoring. What has been the
result of your recommendations?
Respondent. The agencies implemented our recommendations to provide
specific guidance on criteria for assigning points and to correct EBI
scoring. In many instances, the agencies were able to correct problems
prior to notifying the offerer of acceptance into the Conservation
Reserve Program (CRP). However, there were about 1,000 offers that had
been tentatively accepted which were ultimately not accepted into CRP.
In these cases, USDA offered these producers a one-time, 1-year payment
equivalent to a CRP payment.
risk management agency
Mr. Skeen. Provide an update on your recommendation for the Risk
Management Agency (RMA) to develop a plan to ensure that reinsured
companies comply with program regulations in their management of the
Fresh Market Tomato Crop Insurance Program.
Respondent. This audit report was issued on September 30, 1997. As
of February 12, 1998, RMA had not responded to the audit regarding
corrective actions.
indemnity payments
Mr. Skeen. Your office also recommended to RMA that RMA obtain data
on all cases where there was no commodity loss and to recover any
indemnity payments that should not have been paid. Have either of these
recommendations been implemented? If so, how much in indemnity payments
have been recovered?
Respondent. This audit report was issued on September 30, 1997. As
of February 12, 1998, RMA had not responded to the audit regarding
corrective actions.
new mexico's contract with ebt processor
Mr. Skeen. On page 6g-14 of your explanatory notes, you note that
New Mexico's contract with its Electronic Benefits Transfer (EBT)
processor expires in 1998, and that it does not have a contingency plan
to continue food stamp benefits if it must operate without its existing
EBT processor. What are the implications for the Food Stamp Program?
Respondent. The initial contract between New Mexico and its EBT
processor expired September 30, 1996. New Mexico and the processor
agreed to an extension of the contract through June 30, 1998. The
extension coincides with New Mexico's timetable for selection of a new
vendor but did not allow for any unscheduled delays. FNS informed us
that delays are typical with challengesto the contract awards being a
common problem. This could result in the contract expiring without a
new processor in place ready to deliver benefits. New Mexico either
needed to have a contract modification agreed to which would require
the present processor to continue issuance until a new system is in
place or come up with a contingency plan to ensure benefit delivery
without disruption which may have involved reverting to issuance of
paper food coupons. New Mexico has signed an agreement with its present
EBT processor which obligates the processor to provide EBT services on
a month-to-month basis after June 30, 1998, until a new system is
operational.
overpayment of karnal bunt compensation
Mr. Skeen. The Office of Inspector General identified that payment
procedures resulted in a major grain handler in Arizona receiving over
$900,000 in excess Karnal bunt compensation payments. What payment
procedures were in place that would have resulted in such a large
overpayment? What agencies were responsible for establishing the
compensation payments? Can these costs be recovered?
Respondent. In March 1996, the Secretary declared an
``extraordinary emergency'' that authorized compensation for destroyed
crops for the loss in value of wheat grown in quarantined areas. The
compensation formula developed by APHIS resulted in the grain handler
receiving over $900,000 more than the economic loss in the value of
Karnal bunt positive wheat.
APHIS wanted the compensation to be limited to the loss in value of
wheat due to the quarantine, and the payment procedures were modified
to reduce grower payments when it was discovered that the growers were
selling their quarantined wheat for more than the salvage value.
Compensation for growers with Karnal bunt positive wheat was computed
as the estimated market price or contract price less the higher of the
$3.60 salvage value or actual price received.
Compensation for the grain handlers' Karnal bunt positive wheat was
computed as the estimated market price less the salvage value of $3.60
with a total per-bushel payment limit of $2.50 per bushel. Grain
handlers received the allowed payment of $2.50 regardless of the price
they received for the affected wheat.
We determined that the Arizona handler actually received $4.35 to
$4.50 per bushel for the Karnal bunt positive wheat sold to feedlots.
Although the actual economic loss was $1.85 per bushel (the estimated
market price of $6.13 less the actual price received for the wheat,
which was an average of $4.28 per bushel), this handler was compensated
$2.50 per bushel for his economic loss on 1.4 million bushels. This
resulted in the handler being compensated about $900,000 in excess of
his actual economic loss (($2.50-$1.85) multiplied by 1.4 million
bushels = $910,000).
APHIS, which had the responsibility of compensating handlers for
the losses, entered into a reimbursable agreement with the Farm Service
Agency (FSA) to administer this program through FSA facilities using
CCC checkwriting authority. In regard to the recovery of the funds,
APHIS officials concluded that the handler was paid consistent with
formulas outlined in the regulations of July 5, 1996. While APHIS
agrees the ex-post salvage value has higher than the forecast used in
the regulations, APHIS believes this reflects the success of the
program in preventing a collapse in the wheat market. And, as a result
of the risks borne by this handler in working with the program, APHIS
determined no further action appeared warranted.
agricultural marketing transition act transition payments
Mr. Latham. It is also my understanding that you audited the AMTA
Transition Payments system mandated by the 1996 Farm Bill. What did you
find?
Respondent. We performed the AMTA audit in three phases. The first
phase report (Audit No. 03601-11-Te) was issued on March 30, 1997,
covering AMTA program enrollment. In this report, we gave FSA high
marks in the implementation stage of the program. Considering the
volume of workload, the short timeframe, and the changing instructions,
the number of errors for the counties reviewed was small.
We issued another report (Audit No. 03601-15-Te) on September 30,
1997, which provided the results of both our Phase II and Phase III
audits of AMTA. We determined that overall controls over compliance
activities were adequate to preclude overpayments, and producers
complied with planting flexibility and agricultural land use
requirements applicable to contract acres. We also determined that
farms were generally enrolled by the individuals or entities that
actually controlled the operations.
iowa's child and adult care food program
Mr. Latham. You have testified about fraud and abuse in the Child
and Adult Care Food Program. How is the state of Iowa doing with this
program?
Respondent. We have not performed any audits in Iowa to date.
information technology
Mr. Latham. One of my long-standing concerns with the Department
has been the issue of waste and mismanagement in the Information
Technology budget at USDA. Has your office ever looked into this
sizable portion of the budget (I believe it was more than $1 billion
last year) and if so could you share with the committee any of your
findings?
Respondent. Information technology is a key area of consideration
in our audit planning process. Much of our work has focused on major
systems developed, such as the Foundation Financial Information System
(FFIS) at the National Finance Center. This multimillion-dollar system
will serve as the Department's integrated financial management system.
Our review disclosed, in part, that an integrated project plan to track
critical path tasks was needed, and the validation and conversion of
data from the old accounting system to FFIS needed to be accelerated.
food stamp fraud
Ms. DeLauro. I am pleased to see the efforts to combat food stamp
fraud outlined in the Special Law Enforcement Initiative.
Congratulations on the arrest of over 2,200 fugitive felons and the
successful sweep of 11 fraudulent sponsors of day-care centers. Could
you elaborate on what the $21.7 million increase would enable the IG to
further achieve in FY 1999?
Respondent. In addition to expanding the areas mentioned, the
additional funding will allow us to monitor additional EBT systems as
they are developed and implemented. Given the estimated annual outlays
of some $114 billion to be issued through EBT systems, of which $28
billion is USDA funds, it is imperative that we assure these systems
work and have the necessary controls to protect the Government's
interests. We also have a long-term strategy to continue identifying
and addressing problem Child and Adult Care Food Program sponsors of
day-care homes and centers. The sponsors you referenced, which we found
to be seriously deficient in their administration of the program,
received $20.3 million in FY 1996. At risk in FY 1997 is about $1.7
billion in estimated outlays.
We have also found major problems in the Rural Rental Housing (RRH)
program with use of reserve, operating, and tenant security deposits
for personal gain, and use of ``identity of interest'' companies to
skim project funds. From fiscal years 1990 to 1995, we were only able
to review 329 of 17,106 projects and identified $103 million in misused
funds. Some of the problems have resulted in health and safety issues,
physical deterioration of the properties, and excessive rental
assistance subsidies. The total portfolio value is $11.6 billion with
estimated rental subsidies in FY 1998 of $593 million.
We must also have the necessary resources to respond to disasters
to assure that program benefits are properly and promptly determined
and that the Government's interests are adequately protected. In FY
1997 alone, disasters were declared in 37 States with various forms of
assistance totaling $463 million. Other emergency situations impacting
health and safety issues also occur such as the E. Coli outbreak at
Hudson Foods and allegations of unsanitary conditions at meat plants.
Our work in these areas from fiscal years 1993 through 1997 resulted in
savings to the Government of about $179 million, as well as improved
food safety measures.
The increased funding for OIG will allow us to improve our services
to this Department, to the U.S. Congress, and to the American people.
Our law Enforcement Initiative identifies our plans to increase
enforcement in some of the most vital programs within USDA.
Specifically, our initiative is directed at increasing our activities
in areas such as emergency response to threats to the public's health
and safety, as well as during natural disasters; enforcement of the
food stamp and other nutrition programs, including additional
operations to identify fugitive felons and inmates receiving food
stamps; retailer integrity sweeps and food stamp trafficking
investigations, as well as continued review and unannounced sweeps to
identify mismanagement and criminal activity in child care and school
lunch programs; proactive reviews, including sweeps in the RRH program
to identify fraud within the construction and management of these
multifamily housing units; to continue our investigations in the
Department's all-important Farm, Export, and Natural Resources
programs; and to provide our investigators and auditors with adequate
equipment with which to do their job, such as surveillance equipment,
much of which is up to 15 years old, worn out and unreliable, and which
often poses a safety hazard to our dedicated employees.
health and safety
Ms. DeLauro. I am especially interested in the health and food
safety part of the Special Law Enforcement Initiative and would like to
congratulate you on your office's leadership in investigating the
delivery of contaminated strawberries to school lunch programs and the
outbreak of E-coli 0157 in a meat processing plant. How will the IG
expand and strengthen the health and food safety arm of the Special Law
Enforcement Initiative?
Respondent. OIG's highest priority is the investigation of criminal
activity which poses a threat to the general health and safety of the
public. While OIG is justifiably pleased with its record in the area of
health and safety, we believe we can do more. However, our
investigative resources have been overextended. OIG has never had
sufficient personnel to regularly conduct proactive investigative work
in these areas. If the resources were available, OIG could develop an
intelligence base, thus giving us a better opportunity to detect health
and safety-related criminal activity before hazardous food products
reach the public.
Considering the size of the commitment by the Department to
regulate these industries, it is surprising that the resources
available to combat the criminal activity within it are so small.
Although OIG redirects its resources as necessary to immediately
investigate such activities, our total commitment is still only about 4
percent for the last 2 years. We continue to respond reactively to
health and safety-related criminal activity because our remaining
investigators are committed to investigations of significant criminal
matters in other USDA programs.
backlog of complaints
Ms. DeLauro. An ad hoc team was formed in the spring of 1997 to
eliminate the backlog of discrimination complaints filed by
disadvantaged and minority farmers. However, by August 1997, that
backlog had increased from 530 to 984 complaints and the ad hoc team
was disbanded. Would you comment on what steps will be taken to resolve
this problem?
Respondent. The Director of the Office of Civil Rights found that
the ad hoc team could not determine if discrimination had occurred
based on the information contained in the case files. The complaints
had not been properly investigated. Therefore, the Office of Civil
Rights has contracted with 10 private firms to investigate the
complaints. Also, the Office of Civil Rights has reestablished the
civil rights investigation section and hired investigators to review
all program complaints filed with the Department.
farm service agency
Mr. Edwards. The Farm Bill of 1996 made several changes to the
Farm Service Agency (FSA) loan program. What efforts has your office
made in terms of reviewing guidance set for loan making, loan servicing
and the disposal of farm inventory properties? What results have your
reviews yielded?
Respondent. On March 31, 1997, we issued Audit Report No. 03099-23-
KC, Audit of the Farm Service Agency, Management of Acquired Farm
Property. The audit disclosed that many of the inventory properties
were not sold, or advertised, or leased to qualified parties in
accordance with the FAIR Act. We attributed the cause to a lack of a
transition period for the agency to develop adequate policies and
procedures. We recommended that FSA seek technical adjustments to the
inventory property management provisions of the FAIR Act to accommodate
uncontrollable factors that prevented the Department from complying
with the FAIR Act.
We are continuing field work in our reviews of the 1996 FAIR Act
Provisions Affecting Farm Credit Programs Loan Servicing and 1996 FAIR
Act Provisions Affecting Farm Program Direct Loans.

[Pages 344 - 499--The official Committee record contains additional material here.]

Thursday, March 5, 1998.

DEPARTMENTAL ADMINISTRATION

ADMINISTRATIVE, FINANCIAL, AND COMPUTER

WITNESSES

PEARLIE REED, FORMER ACTING ASSISTANT SECRETARY FOR ADMINISTRATION,
DEPARTMENT OF AGRICULTURE
ANNE F. THOMSON REED, CHIEF INFORMATION OFFICER, DEPARTMENT OF
AGRICULTURE
SALLY THOMPSON, CHIEF FINANCIAL OFFICER, DEPARTMENT OF AGRICULTURE
IRWIN T. DAVID, DEPUTY CHIEF FINANCIAL OFFICER, DEPARTMENT OF
AGRICULTURE
CONSTANCE D. GILLAM, BUDGET OFFICER, OFFICE OF THE CHIEF FINANCIAL
OFFICER, DEPARTMENT OF AGRICULTURE
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

Opening Remarks

Mr. Skeen [presiding]. Good afternoon. We have with us
today three separate agencies covering the administrative,
financial and computer functions at USDA. Anne Reed is the
chief information officer at USDA, and is responsible for all
USDA information technology and computer matters.
I understand that 2000 is going to give us a real bad time
with computers.
Ms. Anne Reed. We have some major challenges, no question
about it.
Mr. Skeen. Ms. Reed, I must note that your testimony
arrived here about two days late, and I hope that you can
assure us that it's not a problem with the computers.
Ms. Anne Reed. It is not. It was not the computers, sir.
Mr. Skeen. A little levity doesn't hurt this thing to start
off with.
Sally Thompson is the chief financial officer, and this is
her first appearance before the subcommittee, and
congratulations, Ms. Thompson, on your appointment, and we're
going to not disappoint you.
Pearlie Reed is here, representing the Departmental
Administration, which he has headed for about one year. Mr.
Reed has just been named Chief of the National Resources
Conservation Service, so he's pulling double duty here today.
Welcome.
I'd like to invite each of you to make a brief statement
for the record, and then we'll go to questions. You may proceed
in whatever order that you wish. So, I turn it over to you.

five observations

Mr. Pearlie Reed. Mr. Chairman----
Mr. Skeen. You're the conductor.
Mr. Pearlie Reed [continuing]. Yes, sir. I am pleased to
appear before you here today. You already have the budget
request and supporting material for the Assistant Secretary for
Administration. However, I have five observations I'd like to
make.
First, it has been a good year for me, serving as the
Acting Assistant Secretary for Administration at USDA, and I
believe we have accomplished a lot.
The second observation is that, I'd like to thank Secretary
Glickman and his leadership team at USDA, including my
colleagues here at the table, for the support over the last
year, especially in dealing with civil rights issues.
You've already mentioned that as of this past Monday, I
entered on duty as the Chief of the NRCS, so of course today
I'm here in the capacity as the former Acting Assistant
Secretary for Administration.
The third point is that I would like to thank the Committee
for your support as expressed in the 1998 appropriations bill.
We could not have made the progress we have made without your
support, and we want to thank you for that Mr. Chairman.
Fourth, civil rights. We have an unprecedented effort
underway to ensure that all employees and customers at USDA are
treated fairly and equitably, with dignity and respect. Last
year our Civil Rights Action Team Report provided a blueprint
to make that happen, and I'm pleased to report to you today
that, on Monday of this week, Secretary Glickman issued a
status report one year later of what we've accomplished, and
we're all proud of that. And I'd like to provide a copy of this
document for the record.
Mr. Skeen. Thank you, Mr. Reed, and it will be done.
[Clerk's note.--The status report is too lengthy to be
printed. A copy will be retained in Committee files.]
Mr. Pearlie Reed. And the fifth thing that I'd like to say
is that, last year when the Secretary asked me to assume this
job, he also asked that I provide the leadership to try and
improve the coordination of department administrative
functions, and I think we've made substantial progress in that
arena as well. And we also would like to say that our budget
request reflects what we think is needed in order to accomplish
what the Secretary would like to do in that arena.
Mr. Chairman, I will close by simply saying, thank you, and
we look forward to your continuing support.
Mr. Skeen. Thank you, Mr. Reed.
Ms. Reed.

introductory statement of ocio

Ms. Anne Reed. Mr. Chairman, I want to thank you for
inviting me here today. I will, with your permission, submit my
testimony for the record, but offer here just a few remarks.
Mr. Skeen. We'll do it just exactly like you ordered it.
Thank you.
Ms. Anne Reed. First, I want to say how pleased I am to
work with Secretary Glickman, whose leadership and commitment
has helped transform USDA into a vibrant and vital force for
the American people and their communities. With the strong
bipartisan support and cooperation of people such as yourself,
USDA is stronger, abler, leaner, and more cohesive, and I
believe we'll better serve our Nation.
Though we have turned the corner on a new path of
efficiency and quality program delivery, we still face many
challenges, such as assuring Year 2000 compliance, and in the
area of implementing new technologies. We recognize that the
challenges come at a time when the Federal Government has fewer
and fewer resources, and we realize that creativity,
innovation, and hard work are needed to assure that we stretch
every dollar in our budget.
Our Secretary has worked long and hard with the White House
to lay out a vision for USDA, and the President's budget seeks
to fund and promote priorities which will expand opportunities
for family farmers in rural communities, make a major
commitment to food safety and in fighting hunger, provide
stewardship of our natural resources, and protect the integrity
of USDA programs. Within each of these priorities lies the
needs for expanded use and integration of new technology
applications.

usda information technology budget

The 1999 budget request for information technology at the
Department is $1.2 billion. This includes approximately $326
million for acquisitions, including equipment and software;
$237 million for commercial support services, $31 million for
supplies; $447 million for intergovernmental payments, such as
transfers to the states and our Federal telecommunication
services; $280 million in personnel costs; and $75 million in
other services. Offsetting these costs are collections from
non-USDA agencies of approximately $146 million.
Now the overall budget request for USDA continues to shrink
in response to greater efficiency and fiscal necessity. The
President's budget singled out the information technology
budget area as one of the few that will experience stability in
funding, so that we can continue to perform the much needed IT
oversight and planning.

systems integration

The Department is making headway in efforts to integrate
systems and expand the applications of new technologies. Our
proposed infrastructure investments include $27 million to
ensure that every USDA system and application is Year 2000
compliant--the $27 million is proposed for Fiscal Year 1999--
$67 million for the common computing environment, a USDA
service center implementation project that will provide a
single computing platform for USDA service centers. Other
proposed technology expenditures include $8.1 million for Rural
Development's, Dedicated Loan Origination and Servicing System,
which provides centralized servicing of housing loans; $150
million in loans and $12.5 million in grants for telemedicine
projects.
All of this is to say that the Department is seeking to use
its resources, including information technology, to provide
better service to the American public and fulfill our mission.

ocio budget request

While I believe that we're turning the corner, it is
important to continue the funding of my office so that I can
help provide the leadership and oversight that is required. My
office's budget request for 1999 totals $7.2 million, an
increase of about $1.7 million over the 1998 level. This
recognizes the Secretary's and the Administration's commitment,
to assuring that we are moving in the right direction as a
department, not just as a collection of individual agencies.
The program increase is comprised of two primary parts:
part for information technology capital planning and investment
process, and part for the development of a technical
architecture and management systems. These will help us make
better decisions about what information technology we need in
the Department, so that we're being more cohesive in the
decisionmaking process and more disciplined about the process.
I believe that this budget does illustrate the Secretary's
challenge to the Department to strengthen our corporate
management of technology. My office has developed a blueprint
or a plan of action, which we have shared with some of your
staff, the actions which we plan to take to fulfill this
responsibility.

it priorities

First among those is assuring Year 2000 compliance. Also
the development of a single information technology
infrastructure, improvement of our telecommunications
management, and furthering the development of policies and
procedures for implementing the Clinger-Cohen legislation.
I cannot emphasize enough that my top priority is Year
2000, however there are additional issues that must be
addressed with our legacy systems, computer security,
interoperability, electronic commerce, management of change and
the skilled labor shortage that we have with information
technology professionals.
There's a growing awareness that only in improved corporate
management of the information technology infrastructure at USDA
can we fully achieve the mission that is intended.
I want to thank you again, and I look forward to answering
any questions that you might have about the work that we're
about.
Mr. Skeen. Thank you, Ms. Reed. We'll turn to Ms. Thompson.

introductory statement of cfo

Ms. Thompson. Mr. Chairman, and Members of the Committee, I
am pleased to be here today to discuss the Fiscal Year 1999
budget of the Office of the Chief Financial Officer. With me
today is the Deputy Chief Financial Officer, Ted David, whom I
might say has served with distinction as the Acting CFO for
USDA for the past two and a half years; and also Connie Gillam,
our Budget Officer.

ocfo budget request

You have my formal statement, which I submitted for the
record, and I'm sure, as you realize, because I was sworn into
the Department as the Chief Financial Officer just this past
Monday, I have not had an opportunity to become fully familiar
with the budget and the program activities of the Office of the
CFO. However, I have become sufficiently familiar with the
responsibilities of that office to conclude that an increase of
$272,000 and 2 staff years is a very modest one, particularly
given that only $121,000 of that is associated with the program
increase. The balance covers salary increases, benefits, and
Civil Service Retirement services. This is a fairly modest
increase.
The increase will support two of the Office of the CFOs
strategic goals; financial management information, advice and
council, and Departmentwide policy and oversight with specific
focus on implementing Government Performance and Results Act--
GPRA.
My formal statement is presented in the context of the
strategic plan for our office. Of course the plan was developed
before my arrival. While at this time I have no reason to
change the plan, I do intend to spend time with my staff, and
with all the staff within the USDA, and our customers, to make
sure that we are heading in the right direction.
I firmly believe in the principles of GPRA: establishment
of strategic plans, development of annual performance plans,
and development of ways to measure output and outcomes of both
the strategic plan and the annual plan. They are the proper
approach to business planning, whether we're in the public
sector or the private sector.
This approach is how I plan to manage the Office of the
CFO, and in my role as GPRA coordinator, and how I intend to
help the agencies and USDA manage their programs.

national finance center

Among my responsibilities is management and oversight of
the National Finance Center.
Mr. Chairman, from all that I have read so far, the
National Finance Center is a crown jewel of franchising and
cross servicing in the Federal Government, and it is my intent
to see that it stays that way. I want to assure you that it
will become Year 2000 compliant; that it will enhance its
personnel, administrative and financial systems; and that it
will expand its businesses, both at USDA and with non-USDA
agencies.

ffis implementation

I understand that we have experienced difficulties in the
implementation of our Foundation Financial Information System,
FFIS, but believe this is something that occurs with such a
large and complex system implementation. I will be monitoring
the FFIS very closely and look forward to the report that we
will have within a few days of the independent validation and
verification study that's been carried out under a contract
with CIO. From what I know at this time, I am confident that
the system will be fully implemented at USDA, but it looks like
it may take longer, and cost more.
I have joined the management team at USDA to work towards
the overall goals of the Department, and will do what I can to
make sure that the activities of our office contribute to the
achievement of USDA's goals. I consider this opportunity an
honor, and an assignment I will take very seriously, and commit
all of my strength and talents to that.

priorities of the cfo

After three days on the job, I can tell you what my top
priorities will be. My first priority is a single integrated
financial management system up and running for all agencies of
the Department of Agriculture, that provides useful management
information reports and cost accounting reports, and results in
a clean audit finding. And, I commit to you that all of these
systems at the National Finance Center will be Year 2000
compliant.
My second priority will be to continue the implementation
of GPRA with this strategic plan and its annual performance
plan.
The third priority is all of the other things that come
under the responsibility of the CFO.
Mr. Chairman, I thank you, and Ted and I will be pleased to
answer any questions that you have.
[Clerk's note.--Mr. Pearlie Reed's written testimony
appears on pages 788 through 798. Ms. Anne Thompson Reed's
written testimony appears on pages 799 through 821. Ms. Sally
Thompson's written testimony appears on pages 822 through 833.
Written testimony of the Office of Communications appears on
pages 834 through 837. Written testimony of the Office of the
General Counsel appears on pages 838 through 858. Written
testimony of the National Appeals Division appears on pages 859
through 863. Biographical Sketches appear on pages 780 through
787. The Departmental Administration's budget justification
appears on pages 864 through 921. The Office of the Chief
Information Officer's budget justification appears on pages 922
through 934. The Office of the Chief Financial Officer's budget
justification appears on pages 935 through 966. The Office of
Communication's budget justification appears on pages 967
through 978. The Office of the General Counsel's budget
justification appears on pages 979 through 1013. The National
Appeals Division's budget justification appears on pages 1014
through 1022.]
Mr. Skeen. Thank you, Ms. Thompson, and I want to tell you
that I'm much impressed with the Finance Center, and I visited
it some years ago, and it was a good guideline at that time for
future operations and futuristic planning, and innovative work
from a governmental entity. And you're to be complimented on
taking that job on, because I think you'll do--if you want a
job done right, get a woman to do it, but men get the last
word, and that's, yes, ma'am, you did it well.
Ms. Thompson. Thank you, sir.
Mr. Skeen. We thank you.

implementing crit recommendations

Let me start with Mr. Reed.
You testified last year that few, if any, of the
Department's previous civil rights reports, including the 1990
Blue Ribbon Task Force, were implemented or taken seriously. Do
we have any guarantee that we're not going to go through this
same exercise again this time?
Mr. Pearlie Reed. Yes, sir.
Mr. Skeen. I thought I'd throw you a soft one.
Mr. Pearlie Reed. Well, I hope that's the last one.
Yes, sir. I'm please to report that we are well underway in
implementing 90 of the 92 recommendations that were in our
Civil Rights Action Team Report that we released about a year
ago today.

civil rights goals

Mr. Skeen. Very good.
There's a lot of new money in the budget identified with
the civil rights initiatives, and I don't know whether money is
going to solve the problems, but I believe that we gave USDA an
additional $1.5 million last year, if I'm not mistaken to
resolve a backlog of cases. And the Inspector General reports
that the caseload has doubled. Is this correct?
Mr. Pearlie Reed. That is correct.
Mr. Skeen. Can you provide us the specific goals that you
have for these investments?
Mr. Pearlie Reed. Yes, sir. I can tell you the reasons why
the caseload seems to have doubled is because our records did
not accurately reflect what the caseload was. As we have gone
about doing those things that we need to do to fix the civil
rights problems at USDA, we have discovered a lot of case
records that had not been filed. We've developed a system so
that we can keep better track of cases as they come in.
The resources that we're asking for in the budget are
either directly in support of civil rights, or indirectly in
support of civil rights. The thing that we've found is that
most of the civil rights problems were due to related
problems--poor personnel management. Our supervisors and
managers, I should say some of our supervisors and managers,
were not doing what needed to be done up front to deal with
problems before they manifested themselves in the system as
formal complaints.
The old-timers tell me that departmental administration has
been on the decline for at least 20 years. As I indicated in my
opening statement, one of the things that the Secretary asked
me to do about a year ago was to turn that around, and in part,
our budget reflects that need.

continuity in civil rights

Mr. Skeen. Well, I'm not picking on you. I do want to make
this observation. I think you walked into a buzzsaw of a
program to take care of. You took on a huge job to begin with,
and you've done very well with it, even though the statistics
do not bear that out. But, you've started us down the road to
doing the right thing.
I recall that you first testified before us a few days
after you took the job, and now you're going back to NRCS. We
want to congratulate you and wish you the best, but who's going
to make sure there is some continuity in the work that you've
done?
Mr. Pearlie Reed. The Secretary, and----
Mr. Skeen. Have you told him yet?
Mr. Pearlie Reed. No, he tells me. Mr. Chairman, the
Secretary has asked a person that I cannot announce today to be
acting until the person that he has selected to go into the job
permanently goes through the confirmation process. We have a
team in place that picked up Monday morning where we left off.
Mr. Skeen. So you've got continuity?
Mr. Pearlie Reed. Yes, sir.
Mr. Skeen. Well, we want to thank you once again for the
work that you've done on it.

year 2000 compliance

Ms. Reed, does your work on the year 2000 problem have a
separate budget or can you tell us what it will cost to fix the
problem?
Ms. Anne Reed. Our current projection for cost for the Year
2000 is about $120 million over the period of years. We have
devoted considerable resources within the Department. I should
tell you that $120 million reflects just what we consider to be
the added cost for this.
Mr. Skeen. Added cost?
Ms. Anne Reed. That is just to address the Year 2000.
Mr. Skeen. To the situation as we have it now. So it's not
new work.
Ms. Anne Reed. If we had already planned to replace a
system for other business reasons, we don't count that cost, if
we are also bringing it into Year 2000 compliance. We want to
capture exactly what cost is due solely to Year 2000. It's
still a very substantial number.
Mr. Skeen. You isolated the problem, but we're not sure
what it's going to cost, but you've got at least some idea.
Ms. Anne Reed. We have a fairly good idea of the cost for
our hardware and software systems. We have a complete inventory
and we've done this total assessment of it. That work is well
underway. I have a lesser degree of confidence in the cost
projections for what we call embedded technology in the
telecommunications equipment and in personal and real property.
We are still in a process of discovery. The industry itself
does not have complete information available about which
systems are compliant, and which are not. There's quite a large
effort underway in that regard.
Mr. Skeen. The Inspector General has pointed out a
potential serious problem in the Risk Management Agency for the
year 2000. And the IG says in his November 1997 report, that
the RMA had not identified mission critical systems, or
developed a conversion strategy. If RMA fails, they can't
deliver crop insurance, and lack of crop insurance could mean a
huge damage to the farm system. What does RMA need to get this
problem fixed?
Ms. Anne Reed. Well, I can assure you that Gus Schumacher,
Under Secretary and Ken Ackerman, Administrator of the Risk
Management Agency--RMA, are now personally and deeply engaged
in this. RMA does have a plan of action. I believe that the
work of the Inspector General for the Risk Management Agency,
and in fact for some of our other agencies, helped them to
fully appreciate and understand the dimensions of the problem.
Resources are now clearly being brought to bear on it.
Mr. Skeen. So if they need help from us, they're going to
be in shape to make it. We're going to get something done.
Ms. Anne Reed. I am informed that they are well underway.

nfc computer purchases

Mr. Skeen. I have a question for Ms. Reed and Ms. Thompson,
either one or both.
The Inspector General reports that the CFO has purchased
about $31 million worth of new computers for the National
Finance Center, and they were purchased from a vendor under a
contract worth more than $100 million. The IG says that some of
the computers are not year 2000 compliant.
Can you give us the details on this, and tell us the status
of the problem, if there is one?
Ms. Thompson. If that's all right with you, Mr. Chairman, I
will let Mr. David answer that.
Mr. Skeen. Certainly.
Mr. David. If I can, sir. I appreciate the question.
The IG report did say there were $31 million of computers
purchased. Of that amount the National Finance Center purchased
less than $1 million. I don't know where the rest of that money
was spent.
Those computers, those PCs, were purchased in 1983 and
1984. They were purchased under a mandatory USDA contract with
an 8(a) vendor. I believe it is the case that NFC was the one
that brought this problem to the attention of the IG. These
computers have now outlived their useful life. We currently
have a plan in place that will replace all of those computers
in a timely fashion.
Mr. Skeen. So, it won't be considered a total loss?
Mr. David. No, they've all been very well used, since they
were purchased in 1993 and 1994. They're several years old as
it is. And, we have a plan in place to replace all that were
purchased by the NFC.
Mr. Skeen. I see.
Mr. David. And, as I say, NFC cost was less than $1 million
of the total amount of the $31 million.
Ms. Anne Reed. Mr. Chairman----
Mr. Skeen. Yes, Ms. Reed?
Ms. Anne Reed. I will add to that, if I might. We were able
to get information out to all of the agencies that purchased on
that contract, so that they have all done a complete evaluation
of the computers that were purchased.
Mr. Skeen. So you've got a pretty good handle on them?
Ms. Anne Reed. Yes, we do. But we certainly appreciated the
knowing that we had to address the problem. The system's
working.
Mr. Skeen. It's not always as bad as you think it might be,
but sometimes it's worse.
Ms. Anne Reed. Too true.

foundation financial management system--ffms

Mr. Skeen. Ms. Thompson, being new gives you disadvantage
in terms of existing problems. Originally, the single
integrated financial management system for the Department, the
Foundation Financial Information System, was to have been
implemented by October 1997, and now it appears that the target
is to be substantially implemented by the year 2000.
What's caused this delay and how much is it going to cost?
Or do we have any idea what it cost? Or let Mr. David----
Mr. David. If I may, sir.
Mr. Skeen. Yes, sir.
Mr. David. We did implement the first agency, the first
part of the Forest Service, as of October 1, 1997. We have
experienced some difficulties, some of which are the natural
consequence of a large system; some that are a little different
than we anticipated. And, we are currently working with all
parties, including the Chief Information Officer, the Forest
Service, and the other agencies to identify the issues and to
recast our implementation plan. We are in the process of doing
that as we speak, and should have a better idea within the next
month or so.
Mr. Skeen. Then, we've got the problem surrounded?
Mr. David. We've got the problem surrounded. I think we
understand what the issues are. We have learned a lot of
lessons. We have a bit of scar tissue to show for it. And, we
have a much better idea about what the overall implementation
will require for that system.
Mr. Skeen. Well, I think it's a premier installation, and
it certainly has been a forerunner and a guide, so you can make
government operations really mean something, other than being
wasteful, and inefficient, all those good things that you hear
time and time again.
I want to compliment all of you, because the quality is
what you're after and that's what you're bringing with you, and
we appreciate it.
Ms. Kaptur.
Ms. Kaptur. Thank you, Mr. Chairman.
I want to welcome you, Mr. Reed and Ms. Thompson, Mr.
David, Ms. Gillam. Mr. Dewhurst has been at every one of our
meetings, so we welcome him back as well. I know, he's got to
be tired after all of this.
I wanted to just ask a few questions for Mr. Reed.

legislation for crat recommendations

Many of the recommendations that were in the Civil Rights
Action Team Report require legislation, and our colleague, Eva
Clayton, has introduced legislation to implement most of those
recommendations.
Do you know whether the Authorizing Committee intends to
take up that legislation, and beyond that what this committee
might do to help you move forward with any of your
recommendations?
Mr. Pearlie Reed. No, I do not know the current intent of
the Authorizing Committee, but I do know that the Secretary has
weighed in formally with the Authorizing Committee on his
position on both the Clayton Bill, as well as the Smith Bill.
The only thing that I can offer at this time that this
Committee can do is to support the Clayton Bill and the
Secretary's position on the Clayton Bill, as well as to support
us with the funding that we need across USDA to correct the
problems that we found and reported out about a year ago.

supplemental for civil rights

Ms. Kaptur. Your testimony indicates that the president has
proposed $4.8 million in supplemental authority, to ensure that
those civil rights recommendations can be sustained during this
fiscal year.
I'd like to ask you, how does this supplemental activity
help you move forward with your work, and also, where are the
offsets for those proposed dollars, please?
Mr. Pearlie Reed. Okay, the question on the offsets I'd
have to refer to Mr. Dewhurst, because I know he has been
working on that. But the purpose of the supplemental is to fund
either direct or indirect activities at the Department of
Agriculture that are necessary to do those management kinds of
things to support the civil rights organization.
For example, our report last year recommended that we
establish an Associate General Counsel for Civil Rights at
USDA, and we have done that. We need resources to fully staff
that office and get it up and operating.
There are other areas that we recommended, such as
establishing a conflict resolution group. There are some
situations dealing with ethics that we haven't been able to
fund in the past. These things and the specifics that we have
listed in our Explanatory Notes, will add up to the $4.8
million that we're asking for and need.

offsets to civil rights supplemental

Mr. Dewhurst. When the president submitted the supplemental
request on the 20th of February, he also submitted a series of
rescission requests, rescind funding in order to offset that
supplemental. Those requests would reduce the salaries and
expenses budgets of a number of our agencies, including the
Forest Service, the Farm Service Agency, and the Rural Housing
Service.
The reductions are allocated to agencies essentially
consistent with what they have to gain through the effective
implementation of the Department's civil rights initiative. So
they're either agencies with large employment levels and
significant EEO problems, or agencies with large programs and
significant program complaint problems. But those rescissions
are all laid out in the President's request.

administrative convergence

Ms. Kaptur. Thank you very much for that.
I wanted to ask, Ms. Thompson, can you highlight where we
are today with the administrative convergence at the county
level, county administrative level, with computing systems?
Ms. Thompson. I'd be a little afraid to say on that.
Mr. David. I am also going to pass. I'd like to ask Mr.
Reed to respond, if I can. [Laughter.]
Ms. Anne Reed. There may be a little bit of confusion here.
My full name is Anne F. Thomson Reed, so you have before you
two Reeds and two Thompsons.
Ms. Kaptur. Yes, this is very confusing.
Ms. Anne Reed. I believe that may be a source of some of
your confusion.
Your question is with respect to the administrative
convergence, particularly with respect to the information
technology in the service centers.
During this year we have launched the first phase of that
project, which is something that we call the LAN/WAN Voice
project. Essentially it brings a telecommunications
infrastructure to those service centers that will support the
platform that we have proposed in our budget for Fiscal Year
1999. Substantial resources have been identified for 1999 to
help us bring in that new platform for those service centers.
Ms. Kaptur. Currently, today you're saying that, there's
really not--as far as the computer systems themselves, there's
a lot of disarray then still at the county level.
Ms. Anne Reed. That's absolutely correct.
As you may well be aware, there's been a long history, with
respect to the effort to bring the new technology into these
service centers.
We spent significant time, based in large part on the
recommendations of GAO, studying what the actual business
requirements would be, how we could better integrate the work
of those agencies so that we would be purchasing the right kind
of technical infrastructure to support a new business process,
a new way of bringing service, so that we can present ourselves
as a single entity to farmers and producers, rather than as
multiple entities. And, it takes time to understand that
business requirement.
Ms. Kaptur. And could you tell us, on the Year 2000
difficulty for software around our country, do you know the
magnitude of the problem, and the cost of this for USDA?
Ms. Anne Reed. We are currently projecting a total of $120
million for the cost across the Department, that's across
multiple years. It would not surprise me for that estimate to
go up as we get further into testing, as we further identify
the embedded systems which may or may not be compliant. We are
working with others across the Federal Government, and with
State and local governments, and with industry to get a much
stronger understanding of what the linkages are going to be,
and what information is available on systems, like
telecommunications systems, and air conditioning systems, and
elevators. This is an enormously complex and pervasive problem
for us.

national finance center

Ms. Kaptur. Thank you.
And finally, Ms. Thompson, even though you've only been in
your position for four days or three days--and perhaps you and
Mr. David might be able just to give me a lay person's
understanding. I have not visited the center, and therefore
don't have a sense of all of the activities that it conducts.
But I understand that a lot--you do serve a financial service
center for many, many agencies.
In layperson's terms, could explain to me how significant
that is in terms of the government of the United States?
Mr. David. Thank you. The National Finance Center provides
administrative and financial computing services to a number of
agencies, including all of the USDA agencies, but also a number
of agencies outside of USDA.
We particularly provide payroll services for a number of
larger agencies. We currently payroll approximately 440,000
people every 2 weeks, which includes the USDA workforce, and
the employees of a number of, non-USDA agencies, such as
Treasury and Justice.
The National Finance Center is also the recordkeeper for
the Thrift Savings Plan, which is the Federal Government's
401(k) plan, where we keep the records for approximately 2.2
million enrollees. We provide other kinds of administrative and
financial services to other agencies.
Ms. Kaptur. Do you select the companies that invest the
money in index funds for that thrift plan?
Mr. David. We do not. The investment management is carried
out by the Thrift Investment Board, which is a separate Federal
agency that manages the way the money is spent, and it also is
our customer. We only provide the recordkeeping services to the
Thrift Investment Board, and receive the contributions from the
employees, and their agencies, and distribute it as the Thrift
Investment Board directs us to.
Ms. Kaptur. Just ballpark, you would accommodate then what
percent of the Federal workforce in the financing accounting
systems? You said 440,000.
Mr. David. In our payroll systems----
Ms. Kaptur. In your payroll.
Mr. David. There are not many users in our accounting
systems. I believe that's probably 25 or 30 percent of the
Federal civilian workforce.
Ms. Kaptur. Thank you. Thank you both, and good luck to
you.
Thanks, Mr. Chairman.
Mr. Skeen. Mr. Latham?
Mr. Latham. Thank you very much, Mr. Chairman, and welcome.
This is confusing. Why don't I call you Anne.
Ms. Anne Reed. That's perfectly acceptable, sir.

nfc computer purchase

Mr. Latham. Welcome. I wish you the best of luck in your
new assignment, Ms. Thompson. And I have a few questions.
Earlier you talked about the delivery or the purchase of a
computer system that was not year 2000 compliant. The first
time you said it was purchased in 1983 or 1984, then you said
it was 1993 or 1994. Which?
Mr. David. Sorry, I misspoke. It was personal computer, not
a system, and they were purchased in 1993 and 1994.
Mr. Latham. When were they delivered?
Mr. David. They were delivered in 1993 and 1994.
Mr. Latham. And as far as you're concerned, they're worn
out by now or they're pretty well obsolete.
Mr. David. Yes, sir.
Mr. Latham. And you also said there was $31 million in
total; that you only used $1 million for that. Where did the
other $30 million go?
Mr. David. The Inspector General reported $31 million. I do
not know where the rest of it was spent. Our agency, the
National Finance Center, spent less than $1 million.
Mr. Latham. Do you know where it went, Anne?
Ms. Anne Reed. I don't have that specifically; however I
will say that we did a significant outreach effort to
everybody. We notified everybody who was participating in that
contract, that they did need to address this. So I can get back
to you, for the record, and tell you exactly what that break
is, but I will tell you that we did go to the effort to make
sure that all of the agencies that purchased under that
contract were aware of the issue.
[The information follows.]

USDA Expenditures With Micro Star Co.

Agency Amount
APHIS......................................................... $5,137
FmHA.......................................................... 11,273
FS............................................................ 24,013
NAL........................................................... 3,667
OAE........................................................... 8,025
OFM........................................................... 668,779
OIG........................................................... 40,576
OIRM.......................................................... 32,474
SCS...........................................................30,753,212
SEC........................................................... 61,532
--------------------------------------------------------------
____________________________________________________

Total.....................................................31,608,698

year 2000 compliance at nfc

Mr. Latham. Okay.
And in testimony earlier, I thought it was back 1991 or
1992, I guess, when it was purchased. So it's nice to know at
least when it was.
The CFO oversees the National Finance Center in New
Orleans. You state you've allocated significant NFC resources
to the Year 2000 compliance. How much is included in your
budget, Ms. Thompson, for the compliance?
Mr. David. The National Finance Center is financed through
our working capital fund, so none of the money in our
appropriated budget goes to the Year 2000 compliance. But we do
anticipate that over a 4-year time period, NFC will devote
about $12 to $13 million to the Year 2000 compliant issues.
Mr. Latham. Okay. In your written statement you mention a
target date, established by OMB and the CIO for the National
Finance Center. Do you know what the target date is?
Mr. David. And I would defer to Ms. Reed, but I believe
that OMB's target date for all Y2K compliances, I believe March
of 1999, Anne?
Ms. Anne Reed. That's correct.
Mr. David. And NFC will beat that target date, in terms of
having the NFC systems Y2K compliant.
Mr. Latham. Okay. So when you talked about financial
systems being in compliance long before, you're talking about 9
months before, the bomb goes off.
Mr. David. The systems at NFC will be compliant even long
before that particular date. We are very comfortable.
Mr. Latham. How long before?
Mr. David. We would think by this fall.
Mr. Latham. Okay. I mean, we are getting very close. What
happens if you find out on March 1st that this whole thing's
going to blow up? Do you have nine months? Is that enough time
to straighten it out?
God, I hope it doesn't happen.
Ms. Anne Reed. I need to tell you, I want to appreciate the
support that Mr. David has given this effort. We have, jointly
been meeting with the Chief Financial Officers of all of the
agencies to assure that all of the Department's financial
systems are on track, and that it is the focus not just of the
agency administrator or the Chief Information Officer, but also
the Chief Financial Officer to assure that we've got the right
kind of oversight.
The financial systems are clearly of primary interest to
us. We are looking at contingency plans. Where we had planned
to replace a system, we are now going ahead and making sure,
even though we are on track with the replacement system, which
is Year 2000 compliant, that the current base system compliant
as a hedge because sometimes these projects do take longer to
get in. So that's one kind of contingency we've put in place.
We are beginning to look at what other contingencies are.
GAO just came out with guidelines on how to approach
contingency planning. As you can appreciate, however, with
financial systems, it's going to be a very complex process for
the Department. We will do everything to get our systems
compliant, but we also integrate with a lot of other financial
systems at other Departments. So we're all in this challenge
together.
Mr. Latham. In the National Finance Center, is there a
danger if one department or agency that is paid out of there is
not in compliance, that it somehow will burn up the whole
system?
Mr. David. If I could respond to that, we are working with
each of our client agencies to assure that the information they
provide us is Y2K-compliant and that the information we provide
them meets their needs for Y2K compliancy. We also are going to
be setting up a test facility this summer which will enable our
client agencies to test their systems, the information they
provide to us, and we will be able to test the information we
provide to them. So we will be building those interfaces and
relationships.
Mr. Latham. Is that interagency or inter----
Mr. David. Interdepartment with the other departments that
we service, as well as certain of the agencies with USDA--both.

common computing environment

Mr. Latham. Okay. Anne, I hate to do this.
Ms. Anne Reed. It's quite all right.
Mr. Latham. Speak more formally here, I guess. The FSA and
NRCS and Rural Development Agencies are proposing a project
called the Common Computing Environment. Have you reviewed and
approved this project, and are you comfortable with the plan,
and that it will succeed?
Ms. Anne Reed. Yes, sir, I have reviewed this project. In
fact, I have on my staff a senior executive whose primary
responsibility is the oversight of this project. We have
provided a great deal of quite specific guidance which the
agencies have really supported. One of the things that we have
done, is that we have taken to heart the lessons that were
learned from the InfoShare Project. We've considered the
recommendations of GAO. We've structured a process that invests
in business process re-engineering first, so that the agencies
are working together to define their business processes, and
only after that is done do we identify what the technical
infrastructure should be.
The project is phased, so that we're now in the first phase
with deploying a telecommunications infrastructure which will
support a new technical infrastructure. We're phasing the
development of a technical infrastructure so that we can move
forward, stop, assess that it works, then move forward again.
So we're following what has come to be known, as the Raines
rules for implementing----
Mr. Latham. Raines?
Ms. Anne Reed. Yes, Director Raines of OMB----
Mr. Latham. Oh.
Ms. Anne Reed. He has taken a very strong interest in the
management of major information technology projects, and we've
taken that seriously.

independent verification and validation

Another thing that I have done in the past year is invested
in an ongoing, independent verification and validation process.
I have external expertise that comes in at specific points in
time and evaluates pieces of each of these projects to assure
that we are on track with what the industry norm is. They're
looking at it from a management perspective, as well as from a
technical perspective. We've been able to integrate the
information these technical experts bring into the program as
we move along, and that, we hope, will prevent us from many of
the unfortunate pitfalls that such large projects do
occasionally run into.

authority of cio

Mr. Latham. I think just the makeup of the Department--and
we've visited about this several times--in a project like this
or anything else in USDA, when you've got 29 different
agencies, and you have no one with the ultimate authority to
make anyone do anything, if one of these agencies would decide,
for some reason, maybe in a bit of turf battle, that they think
maybe one side is going to take over the county offices and the
other one isn't, and they decide then that they're going to
kind of drag their feet or not be as cooperative, there really
is no one who has the power to tell that agency to shape up, I
mean as far as the information system. You can't go in right
now and tell an agency exactly what they do. They may listen;
they may not. Isn't that correct?
Ms. Anne Reed. I think that's probably a slight
exaggeration.
Mr. Latham. I mean, historically, you have to----
Ms. Anne Reed. I have managed during the last year to
exercise quite a bit of authority in that respect, and I would
have to say that those agencies are beginning, because they've
been through these trials, to work relatively well together.
They do get a very high degree of oversight from my office,
however, an unusual degree for the Department.
Mr. Latham. But you also need the authority to do something
about it, to take it out of their hands, if they're not in
compliance also, or someone does? Somebody's got to be
responsible someplace, and I don't think it's there now. And
you're well aware of the legislation that Mr. Goodlatte and
myself are putting forth. We visited--was it yesterday or the
day before, I guess, about it----
Ms. Anne Reed. Yes, sir.
Mr. Latham. And I know you have some concerns, but I just
don't see these problems really going away until it's finally
determined at the Department that somebody has the authority to
do something. It's maybe unfortunate, and it may seem extreme
to some people, but we can't continue like the InfoShare
situation, throwing good money after bad; it's just outrageous.
It's just got to stop.
On that happy, I'll thank the chairman and thank you.
Mr. Skeen. Mr. Fazio.
Mr. Fazio. Thank you, Mr. Chairman, and I'd like to welcome
everyone this afternoon here. I want to particularly
congratulate Pealie Reed on this appointment as head of the
Natural Resources Conservation Service.

cultural change in usda

It reminds me a bit of the President. You know, he started
in Arkansas, made a name for himself there, and went to
California and did even better. [Laughter.]
And he comes back here in fine shape, and we're happy to
have him, not only in his new role, but in the role that he's
just completed on the civil rights issues that have already
been discussed.
I also wanted to reference, I think, something that Anne
Reed has talked about, and that is the service center concept
that USDA is putting together that's being pushed by the
Secretary as a way of making one-stop shopping available to the
various clients of the Department.
It strikes me--and maybe you can both comment on this--that
to make USDA a unified entity, and to deal with civil rights
issues, both requiring a cultural change in a large
bureaucracy. I don't mean to say that they're impossible to
accomplish. I'm glad we're working on both of them. But I
wonder if you'd comment on the broader implications of how you
make this kind of permanent change in a bureaucratic agency
that has long done things differently.

framework for civil rights responsibilities

Mr. Pearlie Reed. I'll start by saying, as it relates to
the civil rights issues, Mr. Fazio, we have embarked on a
journey that would take the appropriate management instruments
in place so that the Secretary would have a framework to hold
his sub-cabinet officers and agency heads accountable for doing
the right thing. I think, as we follow through in trying to
implement our strategic plan and do all those things that we
need to do from a management standpoint, and with the
leadership coming from the top, it will take time, but I
honestly believe that we are on the road to victory.
Mr. Fazio. It will have to be consistently applied, though,
ongoing; is that your assumption?
Mr. Pearlie Reed. Yes, and again, as it relates----
Mr. Fazio. No interruption? You know, change your party,
change your President; it can't change; it has to be continued.
Mr. Pearlie Reed. It has to be a continuum, and we
recognize that. Again, I will use an example related to civil
rights. I think recommendation number two in our civil rights
action team report called for the Secretary to lift the
responsibility from the mission areas and have it rest with the
Assistant Secretary for Administration for the next three
years, to rate the agency heads on their civil rights
performance. At USDA that's serious business, especially with
our senior-level people, if somebody gets a score less than
average, then by regulation they could be removed from their
jobs.
Mr. Fazio. Certainly your advancement will be limited. Is
that a correct way to look at it?
Mr. Pearlie Reed. Absolutely. And we're doing that. In
fact, I issued the first report card for the first quarter last
week, and the Secretary is following up with the sub-cabinet,
giving them his views on how they're performing. I think that's
the kind of thing that we're going to have to do in order to
force the system into this change mode.
Mr. Fazio. So your own career, in fact, will be impacted by
what happens on your watch within your staff, which makes you
want to be proactive, not just reactive, because you can't
afford to have a problem occur, even if you had no role in its
creation?
Mr. Pearlie Reed. That is correct. Let me answer that by
saying that we found and documented a year ago, that one of the
big problems that we had at USDA was that a lot of the routine
management issues, the routine problems, that were being
elevated to the Secretary's office were problems that his sub-
cabinet agency heads and the lower-level management structure
should be dealing with. We have fixed that now. The Secretary
is putting the appropriate discipline in the system, and again,
I'm confident that USDA is going to get to where it needs to
be.
Mr. Fazio. That may be a good transition because we all
know that USDA is much more than one agency--a lot of agencies,
all jealously protecting their own prerogatives. It makes one-
stop shopping almost a concept beyond the realm of reason a few
years ago. I mean, I've had the effort of trying to put
together a building for USDA in my area. I found how resistant
people were to have to rent space next to or share a building
with people from the Department, because they were the Farm
Service Agency, or you name it.

it culture change

Ms. Reed, how are we counteracting this long imbued
tendency at this loosely-defined Department of Agriculture?
Ms. Anne Reed. Well, I think you're quite accurate in your
assessment of this as an extraordinary cultural change, and
within the area of information technology, you put that into
the context of moving into the information age with the degree
of change that is enabled by technology. We're able to do
things now that we couldn't even think about doing even five
years ago, and how you position yourself to make the right kind
of technology decisions, which reflect changes in the way you
do business, and that repetivity with which you change creates
fear among the people.
I think that Pearlie was quite accurate when he used the
word ``leadership,'' and that's absolutely central to this. You
have to have leadership, and you have to have vision. It has to
be communicated at all levels of the organization, and then
people need to be held accountable for their actions. It's just
equally true in how you manage information technology as it is
in civil rights.
Mr. Fazio. Well, it strikes me that the experience I've had
in trying to unify the Department's various agencies in one
building is not a bad way to go about breaking down these walls
that seem to separate these----
Ms. Anne Reed. Yes, sir.
Mr. Fazio. I mean, just sharing common equipment or meeting
rooms, or things that would make all of these departments more
efficient perhaps, and perhaps at some point--maybe this is
what's threatening--reduce some overhead that is, at least on
the surface, somewhat duplicative.
Is there a way we can go about making that more the norm
instead of the exception, generated from pressure from the
local Congressmen, which probably may be as much in the other
direction at times as it was in mine?

change management

Ms. Anne Reed. One of the things that the service center
initiative project has done is implement a change management
training program across the Nation, which brings together at
one time in one place all of the employees from these service
centers, from these multiple agencies, to talk about issues
like this. They have gotten enormously positive feedback from
the process of bringing people together, so that you take away
some of the mystery of who you are and what you're trying to
accomplish, and begin, then, to understand how you can work
together. It's not a matter of pitting people against each
other; it's how you pull together. But, it takes some very
conscious effort.
Mr. Fazio. I know in the private sector we often have
within the same company business units that compete with each
other----
Ms. Anne Reed. Yes, sir.
Mr. Fazio [continuing]. For good people, as well as
assignments, missions. Is there any possibility we'd be able to
see career tracks that allow people to move from one agency to
another and not have to stay in line in the agency in which
they somehow found themselves, in order to further the process
of creating the feeling that they're part of a department of
government?
Ms. Anne Reed. You can handle that in some ways. Pearlie,
you may want to address this as well. Agency cultures are very
strong, a lot of times detailing has been used to positive
advantage, where you just give a person an exposure, an
opportunity to participate in another environment, and that can
be very effective.
Mr. Pearlie Reed. Let me just respond to that, Mr. Fazio,
by saying that I mentioned earlier that when the Secretary
asked me to take this job about a year ago, one of the things
that he asked me to do was to provide the leadership to improve
the coordination and the central administration of the
Department of Agriculture. One of the things that would help
this personnel situation that you just mentioned, would be if
the Department of Agriculture had one centralized, well-
coordinated personnel management system that was applicable to
all agencies.
Mr. Fazio. I'm sure the Secretary would love it.
Mr. Pearlie Reed. Yes, and let me just say, following up on
Mrs. Kaptur's question, the supplemental will help us get
there.
Mr. Fazio. You took your opportunity, I saw. [Laughter.]
Maybe we ought to be a little more explicit, though. I
don't know what the chairman's inclination would be, but it
seems to me that we need to continue some of the reorganization
that has begun in this decade, and to try to drive that kind of
a change in a way we, say, handle our personnel. I mean, there
seems to be an information office, a personnel office, a you-
name-it office, in every agency, and sometimes I don't know
that they even know they're working together, because I know
they're not in some cases. It seems to me the Department
doesn't have the tools sometimes to deal with the inclination
of these very subsets to go their own route. You're kind of
there without the tools.
Mr. Pearlie Reed. Yes, and I should say, Mr. Fazio, that we
are in the process really of doing incrementally what you are
espousing. I'd like to call your attention to the
administrative convergence activity that the Secretary has
underway for the so-called ``field-based agencies,'' the NRCS,
the FSA, and Rural Development. There's an effort underway
right now to merge all of those administrative systems, and I'm
sure the Secretary will be providing the Congress with the
appropriate information on that as we proceed.
Mr. Fazio. He has the authority to do that?
Mr. Pearlie Reed. Yes.
Mr. Fazio. And Congress hopefully won't object. That's the
key, I'm sure.
Mr. Pearlie Reed. Yes, sir.
Mr. Fazio. Well, I have some other questions, but I'll put
them in the record. Thank you very much. I appreciate seeing
you all.

thrift savings plan

Mr. David, the sooner you can make sure that the Thrift
Savings Plan operates like most everybody else's 401(k), we'll
all be happy. You know, having the ability to move your
investment decisions overnight, rather than have to wait up to
45 days----
Mr. David. If I could comment on that, sir, that is the
current method. I understand the Thrift Investment Board, which
has that responsibility is now in process of implementing the
systems that will provide that capability in the Year 2000.
Mr. Fazio. Yes, I was pleased to hear that; the year 2000
was what was discordant--[laughter]--but I appreciate the fact
that they are moving in that direction.
Mr. David. They are moving in that direction.
Mr. Fazio. Mr. Walsh and Mr. Serrano, and the rest of us in
the Legislative branch will keep sending you work, so that you
keep doing for us efficiently what we used to do less
efficiently.
Mr. David. We are looking forward to that.
Mr. Fazio. Can we make that a quid pro quo? We'll send you
the work if you'll fix the Thrift Savings Plan? [Laughter.]
Mr. David. We will certainly do our best.
Mr. Fazio. Thank you.
Mr. Skeen. Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman.
Thank you all for coming.
Mr. Chairman, I will just have a couple of questions. Then
I'll submit the rest for the record.

difficulty enforcing civil rights

Mr. Reed, you were quoted as saying in The Washington Post
recently on the difficulty of enforcing civil rights
regulations, ``I am charged with meddling into everyone's
business. When you do that, you're going to make people mad. It
just comes with the territory.''
My question to you at this point is: How mad did you make
people? What was the backlash, if any, and most importantly, as
you depart, do you feel that there is something in place that
will continue the work you're doing, and not just necessarily
the desire of someone else who comes to that position to do it,
but one of the problems with replacing anyone at any time is
that we all have our own way of doing things. In some cases,
when you're dealing with something as sensitive as the civil
rights issue, some other person's great intentions may not fall
in line immediately with the work that you are doing and the
progress you are making.
What was the feeling, and how much did people get upset,
which sometimes is very good, and what's in place to make sure
that some people do keep getting upset?
Mr. Pearlie Reed. Well, the backlash is very subtle, and
you can feel it. The people at USDA are sophisticated enough,
and they're professional enough, to act professionally, you
have differences of opinions, but you don't get the cooperation
that you really need in order to do what the Secretary wants
done.
An example of the kind of meddling and how it makes people
mad, I mentioned in responding to Mr. Fazio's question. I have
issued the first report card on all of the agency heads, and I
didn't give anybody anything better than average. About half of
the USDA agency heads at the end of the year get an outstanding
performance rating, and if their performance doesn't improve
substantially, next year they aren't going to get an
outstanding performance rating, and that makes folks mad. And
that's just one example.
But to respond to your question about institutionally how
we proceed from here, everything that we've done since we
started implementing the Civil Rights Action Team
recommendations was centered around getting things
institutionalized in such a way that it doesn't matter who is
in what particular job. The policies and the procedures require
that certain things be done. People will be graded on what they
do. In order to change things, somebody will have to come back
through and change the policies and procedures.
I feel that, based on the leadership that we have at USDA
right now, and I think leadership that will follow the current
leadership, we will have the appropriate support and discipline
to make sure that things that we should be doing in civil
rights to make sure that all--and I underscore the word
``all''--employees and customers are treated fairly, equitably,
with dignity and respect, is something that we all can work
for. That's what this civil rights issue and this civil rights
implementation effort is all about.

continuation of civil rights

Mr. Serrano. You feel comfortable that, whoever takes over,
there's something in place to just carry you through?
Mr. Pearlie Reed. Yes, and I don't believe that the
Congress nor our customers nor the employees at USDA, the rank-
and-file employees at USDA, will allow us to regress back to
where we were.
Mr. Serrano. Now you make an interesting point on that,
about the Congress. I'll tell you, on the House floor, when we
ever go for a vote, there's always a lot of conversation. It's
a time to speak to one another, and sometimes you don't see
each other unless it's on closed-circuit TV in your office, you
know. Yet, I've noticed in the last couple of years that if
there is conversation about an agency, one of the hot topics
has been about the whole of USDA and the civil rights issues.
And it grew; it grew from, I must say, a couple of years ago,
from just some people having some historical need or experience
which would get them involved in the issue or concerned about
the issue, to a lot of people, perhaps the whole House,
understanding that something is up; some changes were being
made, significant changes were being made, to the point now
where people would get nervous that an interruption in the
leadership would tear that apart or bring it back in some way.
So I'm glad to hear from you, that you're confident that the
work you've done--and believe me, no one wanted to be in your
place a year ago; we respect what you've done.

civil rights investigations

There's also been talk about the lack of people to do the
kind of investigations work that has to be done, and we don't
know if that was just an assignment of staff or a need for new
dollars, which is a bad phrase around here, but can you just
comment on that for a second?
Mr. Pearlie Reed. Yes, it's a sign of both. But the bottom
line is that 15, 20 years ago, somewhere in that timeframe, our
civil rights investigation capability at the USDA was
dismantled, and we didn't even know it. When I say, ``we,''
there were some that knew it. Those who the Secretary put in
charge of fixing the problem discovered that about this time
last year. It meant that all of the backlog that we had, all
the cases that we thought we could come in and deal with, we
had to go back in and investigate those that needed to be
investigated before we could make a decision.
As a result of the 1998 appropriations, I think we have an
appropriate level of funding to do those things that we need to
do to investigate complaints. I'd like to let you know, though,
that right now, as we work to Fiscal Year 1998, in order to
deal with the backlog, in addition to the permanent staff we
have brought onboard, we have 10 investigative firms that we
have contracted with to help us with that backlog, and we hope
to be beyond dealing with the backlog by the end of this Fiscal
Year.

number of backlog cases

Mr. Serrano. And I'm sorry if I missed it before, but the
backlog would be in what neighborhood, what are the numbers?
Mr. Pearlie Reed. There were approximately 1,088 cases that
we were dealing with at the time. Of that universe, we have
closed about 225. So we have about 800 cases right now that are
in some form of the investigation process or the process that
we use to either dismiss a case, investigate, and do everything
else that's needed to bring the issues to closure.
Mr. Serrano. Once again, you feel, then, that the staff
that's in place now for the kind of work that needs to be done
will be able to tackle the remaining 800-odd cases?
Mr. Pearlie Reed. Yes, we do.
Mr. Serrano. All right, thank you once again for the work
you've done, and thank you all.
Thank you, Mr. Chairman.

closing remarks

Mr. Skeen. Well, you folks have done it. You've just about
worn out the time. [Laughter.]
I just wanted you to know how much we do appreciate the
work that you folks do. We come in with these great questions
about what happened to the factory and where did it go wrong,
and so forth; we don't intend to beat you over the head with
it, but we know you are the kind of people that can straighten
it out. We want to help you do your job, and you're helping us
by letting us know what we ought to be doing to back you up.
We're most appreciative of everything that you do and the
great service that you give this country, on a day-by-day
basis.
That financial center has really been, I think, a stellar
installation.
Mr. David. We want to invite you and your colleagues to
join us down there again, sir.
Mr. Skeen. We look forward to that. Thank you, sir.
We'll get the computer situation all worked out. We'll be
down there to take lessons, to see if you can show us how to do
Free Cells on them. [Laughter.]
Anyone else? Ms. Kaptur.
Free Cells--haven't you ever played that? Oh, you're
serious about your computer. [Laughter.]
Thank you all. We're adjourned.
[Clerk's note.--The following questions were submitted to
be answered for the record.]

[Pages 524 - 656--The official Committee record contains additional material here.]

IT Moratorium
Mr. Skeen. USDA's Secretary invoked a moratorium on new information
technology activities in November 1996 so that USDA could improve its
management of information technology. Has the moratorium been lifted?
Respondent. Secretary Glickman has continued the IT acquisition
moratorium to ensure that USDA agencies focus on achieving Year 2000
compliance. In August 1997, Secretary Glickman expanded the criteria
for moratorium waiver requests to include Year 2000 planning and
performance. Agencies must produce an acceptable Year 2000 plan and
demonstrate progress on implementation before requesting any waiver to
the moratorium. OCIO has also tightened the requirements of the
moratorium. Any IT acquisitions over $25,000, rather than $250,000,
need waivers. Waivers are now granted only for Year 2000 compliance or
emergencies.
Exemption to the Moratorium
Mr. Skeen. Please provide a table, by category and amount, of IRM
expenditures exempted from the moratorium in fiscal years 1997 and
1998. Please provide the rationale for each exempted category.
Respondent. OCIO exempted certain categories of IRM acquisitions
from the moratorium, but not specific amounts. The current exemptions
are:
A. Renewals of existing contracts for mission-critical maintenance
and leases, if optional enhancements and/or upgrades which cost in
excess of $25,000 are not involved.
B. Information technology acquisitions by organizations other than
USDA agencies which are funded by USDA grants.
The rationale for the first category 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 Year 2000 conversion,
validation, and implementation is completed.
For the second exempted category, these purchases are for use by
organizations other than USDA agencies, such as State governments for
the Food Stamp Program, and will not be part of the USDA information
technology architecture.
LAN/WAN/Voice Project
Mr. Skeen. In January 1997, USDA suspended LAN/WAN/Voice project
installation except for Direct Loan Origination and Services (DLOS)
system and emergency sites because USDA did not want to install
technology in offices that could close. How many field service centers
will have LAN/WAN/Voice capability installed by the end of fiscal year
1997, 1998, and 1999?
[The information follows:]

LAN/WAN/VOICE INSTALLATIONS
----------------------------------------------------------------------------------------------------------------
Planned Completed Remaining
Fiscal year installations installations installations
----------------------------------------------------------------------------------------------------------------
1997................................................... 426 426 0
1998................................................... 1,643 383 1,260
1999................................................... 485 0 485
--------------------------------------------------------
Total............................................ 2,554 809 1,745
----------------------------------------------------------------------------------------------------------------

LAN/WAN/Voice suspension
Mr. Skeen. Has the LAN/WAN/Voice suspension been lifted at USDA? If
so, how were the issues resolved in order to lift the suspension?
Respondent. In October 1997, the LAN/WAN/Voice suspension was
lifted and associated waivers were granted, based on a number of
conditions including office certifications and other requirements.
Before lifting the suspension, my office engaged a contractor to do an
independent verification and validation (IV&V) on the LAN/WAN/Voice
project in July 1997. Recommendations for project improvements were
provided to the LAN/WAN/Voice Team. The recommendations included
certifying sites for installation based on economic payback, ensuring
Year 2000 compliance, strengthening management systems, and
implementing a measured pipeline process to track the installation
process from start to finish. The recommendations were implemented by
the project team and considered successful in a follow-up IV&V.
LAN/WAN/Voice Installation Costs
Mr. Skeen. Please provide the Committee with a table showing costs
for fiscal year 1996 through fiscal year 1999 to complete the LAN/WAN/
Voice installation.
[The information follows:]

LAN/WAN/Voice Installation Costs

Fiscal year (In thousands)
1996.......................................................... 72,700
1997.......................................................... 10,673
1998.......................................................... 23,370
1999.......................................................... \1\ 9,000
--------------------------------------------------------------
____________________________________________________

Total LAN/WAN/Voice....................................... 115,743

\1\ This includes $4 million to complete the installation phase in
December 1998 and $5 million for the maintenance of equipment already
installed.
---------------------------------------------------------------------------
Telecommunications Recommendations by GAO
Mr. Skeen. Please provide an update on the action USDA has taken on
the telecommunications services recommendations made by GAO in 1995.
Respondent. USDA has taken several actions to specifically address
the cost reduction issues presented by GAO.
USDA Telecommunications Improvements
A. We have completed the USDA optimization/consolidation project--
aggregation network planning, whose purpose is 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 FTS 2000
telecommunications services for USDA agencies and offices to reduce
duplication of FTS 2000 telecommunications services at locations where
agencies are co-located in the same building. The project will: provide
agencies with site specific cost reduction recommendations; track
agencies' decision on recommendations and implementation of
recommendations; validate total cost reductions made as a result of
this project; and train agency personnel in the USDA Network Analysis
Process.
Project Status--Through February 1997, agencies and/or offices have
saved nearly $40,000 per month by implementing the recommendations made
by the Project Team, and approximately $23,000 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 FTS 2000 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 FTS 2000 billing data.
As part of the Departmentwide IT moratorium, the OCIO has
revitalized the optimization and concentration activities. The
following steps were taken:
1. The USDA Network Analysis model has been refreshed with FTS 2000
data reflected through September, 1997.
2. The Telecommunications Network Stabilization and Migration
Program was initiated to stabilize the telecommunications environment
within USDA and move us towards the implementation of an enterprise
network.
3. A waiver from the OCIO is needed before the ordering of all
dedicated telecommunications circuits, services and equipment.
4. The OCIO has utilized the requests for waivers to aggregate and
optimize the services at multi-agency sites. Currently, Atlanta and
Boise are being aggregated and optimized for both data and voice. There
are about twenty other USDA multi-agency sites identified for
optimization in fiscal year 1998.
5. The initial optimization of data circuits in the Washington DC
South Building complex has been completed. A new initiative has been
undertaken, the Washington Metropolitan Area Optimization project--
WAMO--to carry the optimization effort for voice and data to the entire
metropolitan area. This project is in the beginning stages and is
scheduled to be completed by early 1999.
6. Data Set 7 under the optimization/consolidation has been sent to
agency telecommunications control officers. The agency response date
for this data set is February 20, 1998. This data set identifies
approximately $800,000 in additional savings over the remaining life of
the FTS 2000 contract should all recommendations be accepted.
B. FTS 2000 Service Aggregation Billing Disputes--On-Going.
We have filed 49 disputes with AT&T concerning inaccurate service
aggregation point billing for the agencies. The resolved disputes as of
August, 1997, resulted in one-time credit adjustments of $19,920 and a
cost reduction of $41,000 per month or $1,098,027 over the remainder of
the FTS space 2000 contract.
Should the FTS 2000 contract be extended one (1) year, the total
savings would be approximately $1.6 million.
Under the Telecommunications Network Stabilization and Migration
Program, 18 additional disputes were filed with a cost reduction of
$6,825 a month or $103,940 over the remaining life of the FTS 2000
contract. If the contract is extended one (1) year, the savings will be
$185,840.
C. Intra-LATA Discount Tariff Agreements--On-Going.
We would like to share with you information on the implementation
of Departmentwide discount tariff agreements for intra-LATA voice
traffic. Use of the FTS 2000 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. The effort to
implement agreements with AT&T and Local Exchange Carriers has
continued. In areas where there are large concentrations of Federal
Agencies, this is a cost-effective program. However, where there are
few Federal employees or little traffic, this program would yield no
effective savings.
The projected savings from agreements with both US West and AT&T
for FY 1997 is more than $296,000.
We are continuing to pursue implementation of agreements with
various telecommunications companies, as we analyze their discount
plans. A new agreement with US West for the states of Montana and Idaho
has been submitted to USDA. Analysis of those agreements is underway to
determine cost savings.
D. GSA Shared Service Locations--On-Going.
We 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.
We have also notified GSA of actions which 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. We are currently working on this
situation in Boise, Idaho.
We work with GSA Regional Services to improve our management of the
local telecommunications services provided by GSA. We have supported
the Local Service Policy Agreement between the Interagency Management
Council and GSA to promote sharing of telecommunications resources
among government agencies in local communities across the country.
E. Enhance geographic network analysis--On-Going.
In anticipation of the migration to a USDA Enterprise Network, we
have completed a project to identify, develop and document an enhanced
network analysis process. The application resulting from this project
was distributed as an enhancement to the Network Analysis Model as a
part of the TNSMP. This has given agency Telecommunication Mission Area
Control Officers the ability to analyze sharing opportunities within a
10-mile radius of any location in addition to access optimization at a
single location. This project has identified opportunities to share
telecommunications resources in and around many USDA locations across
the United States. These opportunities include reducing the number of
service access requirements within a geographical region or operational
area, and sharing excess or unused capacity.
Telecommunication Savings
Mr. Skeen. How much has USDA saved to date by taking corrective
action on telecommunications services?
Respondent. I have outlined specific savings that total
approximately $5 million.
Information Technology Investments
Mr. Skeen. Please provide an update of your activities 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 under the Clinger-
Cohen Act.
Respondent. In February 1995, a Memorandum of Agreement--MOA--was
signed by the Office of Information Resources Management, 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. As a follow-on to this
agreement and USDA Forest Service participation in DOI's Alaska
Regional Telecommunications Network--ARTNet, the Forest Service and
OCIO representatives attended a DOI's Telecommunications Management
Improvement Program held in Phoenix, AZ in September of 1997. At this
forum, further cost saving opportunities between DOI and USDA were
identified and a commitment obtained from both agencies to aggressively
pursue the implementation of these opportunities. The original MOA of
February 1995 was also updated.
USDA participates in, or leads various cross-cutting information
sharing initiatives across the Federal Government, including 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 served
on the BSRT.
The Natural Resources and Environment mission area and other USDA
agencies have served on, and led, several subgroups of the FGDC. 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 agencies.
Year 2000 Highlights
Mr. Skeen. Please submit for the record and discuss the highlights
of USDA's plan to address the Year 2000 issue to include the most
recent information that is available.
Respondent. I will provide a copy of the most recent USDA Quarterly
Year 2000 Report to OMB, dated February 13, 1998, for the record. This
report highlights USDA's progress in meeting the Year 2000 challenge
and includes the most recent information.

[Pages 661 - 685--The official Committee record contains additional material here.]

Year 2000 Compliance Program Update

Mr. Skeen. Please provide a complete update on USDA's Year
2000 Compliance Program to include an agency by agency status
on the Year 2000 program?
[The information follows:]

[Page 687--The official Committee record contains additional material here.]

Response to GAO and OIG Audits
Mr. Skeen. Briefly describe the findings and recommendations and
actions taken on each GAO and OIG audit listed in the explanatory
notes.
Respondent. The following information outlines the status and
actions taken, or planned to be taken, on the GAO and OIG audits
referenced in the Explanatory Notes.
Office of Inspector General Reports
#58-009-0001-FM--02/26/96: National Computer Center General Control
Review for Fiscal Year 1996.
Status: Action completed on all recommendations and audit closed on
March 13, 1998.
Actions taken: Controls over secure ID's put in place; performed
reviews of mainframe security reports to ensure that violations are
detected; ABORT mode security implemented for CICS production regions;
ensured proper level of restrictions for certain transactions;
strengthened management commitment to implement adequate security
controls; established procedures to review the accesses of ``super''
ID's; eliminated non-cancellable batch ID's without passwords; reviewed
violation reports and eliminated redundant logging; implemented APF
library controls; performed analysis of personnel with console command
capability, and limited access to these functions; limited access to
CA-Automate commands.
#50-099-0007-FM--03/31/97: USDA Access to the Internet.
Status: Actions underway for all recommendations: Internet
addressing plan, security, OCIO oversight. Final actions due to be
completed by the end of September, 1998.
OIG recommendations: Develop Departmental Internet Protocol (IP)
addressing plan; require agencies to establish IP addresses which
achieve planned efficiencies; perform Departmental oversight of
Internet.
#58-600-0002-FM--03/29/95: General Controls at the National
Computer Center.
Status: Action completed on all recommendations and audit closed on
March 13, 1998.
Actions taken: Completed OIG-recommended corrective actions.
Assigned ID and password to jobs currently using the default ID;
eliminated ACF2 option which assigns a default ID to batch jobs.
General Accounting Office Reports
#AIMD-96-59-1996: USDA Telecommunications: More effort needed to
Address Telephone Abuse and Fraud.
Status: Action completed on all recommendations and audit closed on
July 25, 1997.
Actions taken: Telephone waste, fraud and abuse audit completed;
Departmental regulations, procedures and controls changed to minimize
the opportunity for abuse; conducted awareness training for employees;
telephone bills reviewed to identify unauthorized calls, and agencies
advised on appropriate investigative and disciplinary actions; collect
call blocking procedures implemented; disputed bills settled.
#AIMD-97-67-1997: Telecommunications Management: More Effort Needed
by U.S. Department of the Interior and the USDA Forest Service to
Achieve Savings.
Status: Action completed on all recommendations and audit closed on
October 9, 1997.
Actions taken: Determined where USDA and DoI sites are collocated;
USDA Telecommunications Network Stabilization and Migration Program
(TNSMP) started and results in improved coordination; have named a
Forest Service liaison with DoI to implement effective sharing of
telecommunications services and equipment; established Forest Service
moratorium on radio system purchases until DoI and Forest Service
document opportunities for sharing; Forest Service participates on
DoI's ``Strategy for Improving Telecommunications Management'' team.

[Pages 689 - 785--The official Committee record contains additional material here.]

Charles Rawls, Acting General Counsel

Rawls came to USDA in June 1993, serving as executive
assistant to Deputy Secretary of Agriculture Richard Rominger.
In that position he provided the Deputy Secretary and the
Secretary with support and assistance on a wide variety of
policy, management, and administrative matters, including the
Department's annual budget, disaster coordination,
international environmental issues, pesticide policy, and
personnel matters. He was the principle point of contact in the
effort to restructure and reinvent USDA.
Prior to joining USDA, Rawls served as administrative
assistant from 1991 to 1993 and legislative director from 1988
to 1990 for Congressman Martin Lancaster of North Carolina. His
legislative experience also includes five years with the House
Committee on Agriculture where he served as the associate
general counsel from 1985 to 1988, and earlier as counsel to
the House Agriculture Subcommittee on Forest, Family Farms, and
Energy from 1983 to 1985.
Rawls was born in Wilmington, N.C., and grew up in Raleigh.
He is a member of the North Carolina bar, graduating from
Campbell University School of Law in Buies Creek in 1982. He
also holds a B.A. in business management, graduating in 1979
from North Carolina State University in Raleigh.

[Pages 787 - 1022--The official Committee record contains additional material here.]

W I T N E S S E S

----------
Page
Collins, Keith................................................... 1
David, I.T....................................................... 501
Dewhurst, S.D...............................................1, 291, 501
Ebbitt, J.R...................................................... 291
Gillam, C.D...................................................... 501
Glickman, Dan.................................................... 1
Novak, J.E....................................................... 291
Reed, A.F.T...................................................... 501
Reed, Pearlie.................................................... 501
Rominger, Richard................................................ 1
Thompson, Sally.................................................. 501
Thornsbury, D.R.................................................. 291
Viadero, R.C..................................................... 291

I N D E X

----------

Secretary of Agriculture

Page
Advisory Committees, Panels, Task Forces and Commissions......... 170
Agricultural Observations of Soviet Union........................ 85
Agricultural Research Service.................................... 92
American Heritage River Initiative............................... 31
Aquaculture...................................................... 22
Asian Crisis:
Financial Implications....................................... 50
Impact on Exports............................................ 51
Basic Issue...................................................... 3
Biographies:
Secretary Glickman........................................... 183
Mr. Rominger................................................. 184
Mr. Collins.................................................. 185
Mr. Dewhurst................................................. 186
Child Nutrition Programs......................................... 9
Civil Rights............................................20, 21, 96, 178
Clean Water...................................................... 58
Closing Four Research Stations................................... 28
Closing Remarks.................................................. 87
Codex Alimentarius Activities.................................... 176
Commodity Purchase Program....................................... 47
Common Computing Environment..................................... 37
Computers........................................................ 180
Congressional Relations.......................................... 142
Conservation Reserve Program:
CRP Program.................................................41, 174
CRP Error Rate...............................................42, 99
Contaminated Strawberries........................................ 85
Contract Growing................................................. 63
Cooperative Development.......................................... 13
Credit Access.................................................... 4
Crop Insurance................................................4, 43, 59
Customer Service................................................. 7
Dairy:
Issue........................................14, 15, 17, 24, 25, 26
Options.........................................................179
Options Pilot Program.......................................95, 179
Policy...........................................................36
Direct Loan Operations System (DLOS)............................. 179
Disaster......................................................... 9
EBT Food Stamp Benefits.......................................... 164
Export Enhancement Program....................................... 179
Farm Loan Programs............................................... 148
Farm Service Agency Reeves County Operation...................... 30
Food:
Assistance Program........................................... 6
Labeling..................................................... 85
Quality Protection Act Implementation........................94, 95
Safety....................................................6, 45, 97
Waste........................................................11, 19
FSIS User Fees..................................................87, 175
Fund For Rural America.....................................98, 175, 180
Funding New RC&D Projects........................................ 32
Funding for Beginning and Socially Disadvantaged Farmers......... 178
Gleaning Initiative..............................................10, 29
Hazard Analysis and Critical Control Point System................45, 57
Imports versus Exports........................................... 73
Information Technology........................................... 37
Inspector General's Office....................................... 8
Integrated Pest Management....................................... 51
Karnal Bunt...................................................... 174
Low Pork Prices.................................................. 13
Management....................................................... 178
Meat Concentration............................................... 11
Meat and Poultry Inspection...................................... 56
Milk Prices...................................................... 88
National Research Initiative..................................... 44
Natural Resources................................................ 7
Office of the Secretary.......................................... 254
Opening Remarks.................................................. 1
Organic Standards................................................ 48
OSEC Staff in Current Offices.................................... 155
Outside Private Counsels Hired................................... 173
PL-480 Program..................................................52, 180
Professional and Clerical Staff.................................. 138
Proposed Tobacco Settlement...................................... 55
Questions Submitted for the Record:
Chairman Skeen............................................... 87
Mr. Walsh.................................................... 89
Mr. Dickey................................................... 92
Mr. Bonilla.................................................. 94
Mr. Latham................................................... 95
Mr. Serrano.................................................. 96
Ms. DeLauro.................................................. 97
Mr. Fazio.................................................... 98
Reciprocity on Pork and Chicken.................................. 47
Research..........................................................5, 27
Research Extension Formula Funding and the Hatch Act............. 92
Rural Development Program........................................ 5
Rural Housing.................................................... 178
Staff Year Reductions............................................ 176
Statement of the Secretary.......................................2, 187
Trade Activities................................................. 5
Tobacco Table.................................................... 151
Urban Resources Partnership...................................... 96
USDA:
Enforcement of Antitrust Laws................................ 12
Americorps Activities........................................ 155
User Fees.....................................................9, 57, 88
Water 2000..................................................87, 96, 182
Welcoming Remarks.................................................8, 13
Women, Infant, and Children (WIC):
WIC Budget................................................... 22
WIC Supplemental Nutrition Program..........................97, 168

Office of the Chief Economist

Biography of Keith J. Collins.................................... 185
Budget Support................................................... 101
Commission on 21st Century Production Agriculture:
Commission................................................... 103
Funds to Support............................................. 104
Object Class Table........................................... 104
Salary Costs................................................. 104
Staff Time Support........................................... 103
Conservation Reserve Program..................................... 105
El Nino on World Grain Production................................ 130
EQIP; Implementation of.........................................104-105
Explanation of Acronyms.......................................... 106
Explanatory Notes...............................................264-282
Foodborne Pathogens.............................................106-107
Hearings Testified............................................... 99
Questions Submitted for the Record:
Chairman Skeen............................................... 99
Risk Assessment:
Rule Making.................................................101-103
Staff Time................................................... 103
Risk and Benefit Cost Analysis Differences....................... 103
Sustainable Development Policy..................................100-101
Tobacco Settlement..............................................107-129
Weather and Climate Data:
New Staff Persons............................................ 105
Program Increases...........................................105-106
Reallocations................................................ 106
Relationship of Price Discovery.............................. 105
Welfare Reform on Farm Labor; Impacts of......................... 104
Written Testimony of Chief Economist............................229-253

Office of Budget and Program Analysis

Biography of Stephen Dewhurst.................................... 186
Breakout of Resources for OBPA's Responsibility.................. 130
Code of Federal Regulations...................................... 132
Department of Buyouts for 1998................................... 132
Explanatory Notes...............................................283-290
Legislative Proposals......................................132, 133-137
Object Class Explanation:
25.2 Other Services.......................................... 132
Organization Chart..............................................130-131
Questions Submitted for the Record:
Chairman Skeen............................................... 130
Staff Year Reductions and the 1996 Farm Bill....................132-133
The USDA Budget Summary.......................................... 133
Travel, Supplies, and Materials and Equipment.................... 133

Office of Inspector General

1997 Audit and Investigations Results............................ 337
Advisory and Assistance Services................................. 327
Agricultural Market Transition Act............................... 337
Agricultural Marketing Transition Act Transition Payments........ 341
Alternative Agricultural Research and Commercialization
Corporation.................................................... 339
Americorp........................................................ 306
Amount Spent on Outside Public Accountants....................... 335
Asset Forfeiture................................................299-301
Attempts to Circumvent Payment Limitations....................... 337
Audits:
CCC Financial Audits......................................... 334
EBT Processor Operation Audits............................... 330
Employment and Training Program Audits....................... 330
Financial Statement Audits................................... 333
Marketing and Regulatory Programs Audits..................... 332
Backlog of Complaints..........................................333, 343
Biographies:
Roger C. Viadero............................................. 344
James R. Ebbitt.............................................. 345
Jon E. Novak................................................. 346
Delmas R. Thornsbury......................................... 347
Budget:
Additional Staffing.......................................... 326
Request...................................................... 338
Closing Remarks.................................................. 326
Confidential Fund:
Increase..................................................... 329
Operational Activities....................................... 336
Conservation Reserve Program (CRP)............................... 308
Convicted Felons and Inmates..................................... 307
Disaster Assistance.............................................. 325
Equipment Increase............................................... 328
Error Rate--Illinois............................................. 328
Explanatory Statement............................................ 445
Farm Service Agency.............................................. 343
Federal Matching Funds........................................... 332
Food and Nutrition Service:
Child and Adult Care:
Food Program.......................................302-304, 328
Iowa's Child and Adult Care Food Program................. 342
Discrepancies................................................ 325
Electronic Benefits Transfer:
Fraud and Abuse.......................................... 307
New Mexico's Contract with EBT Processor................. 340
Program Implementation..................................310-312
Questionable EBT Transactions............................ 329
Food Stamp:
Cases.................................................... 331
Fraud.................................................... 342
Resources Used to Monitor the Food Stamp Program......... 328
Rolls.................................................... 328
Rolling Stores........................................... 334
Food Assistance Programs...........................314-316, 319-322
Food Safety.................................................. 325
Food Safety and Inspections.................................323-324
Foreign Agricultural Services................................ 335
Health and Safety............................................ 343
Hotline...................................................... 336
Indemnity Payments........................................... 340
Indictments, Convictions, and Suits.......................... 336
Information Technology....................................... 342
List and Type of Firearms.................................... 337
Misconduct Cases............................................. 305
OIG Field Auditors and Supervisors........................... 339
Opening Remarks.............................................291-298
Operation Talon............................................301, 328
Overpayment of Karnal Bunt Compensation...................... 341
Personnel:
Breakdown of Initiative Areas............................ 304
Compensation............................................. 326
Questions Submitted for the Record:
Chairman Skeen............................................... 326
Mr. Latham................................................... 341
Ms. DeLauro.................................................. 342
Recommendations:
Disaster Food Stamp Handbook Recommendations................. 330
Environmental Benefits Index Scoring Recommendations......... 340
FNS--Program Recommendations................................. 340
State Mediation Program Recommendations...................... 332
Reimbursements................................................... 335
Representation Expenses.......................................... 329
Risk Management Agency........................................... 340
Rural Housing...................................................317-319
Rural Rental Housing............................................. 322
Service Center Initiative Oversight.............................. 330
Special Law Enforcement Initiative Funding....................... 326
Staffing:
Distribution................................................. 327
Timeline..................................................... 327
State Mediation:
Grants....................................................... 316
Program...................................................... 332
Transportation of Things......................................... 327
Travel Costs..................................................... 327
Unobligated Balance.............................................. 329
USDA Operations Status........................................... 319
Use of Investigations and Audit Resources by Agency for Fiscal
Year 1997...................................................... 338
Waste and Fraud............................................312-314, 323
WIC Program....................................................309, 334
Written Statement of the Inspector General......................348-444
Year 2000 Update................................................. 333

Departmental Administration/Chief Financial Officer/Chief Information
Officer

Administrative Processes, Modernization of:
Modernization of Administrative Processes Initiatives.......535-536
MAP Costs.................................................... 536
Telecommunications Within Modernization of Administrative
Processes.................................................534-535
Advisory Committees:
Advisory Committee Staff Costs............................... 564
Advisory Committees Funded From Other Accounts..............565-566
Cost to Department for Maintaining Advisory Committees....... 564
Explantory Notes............................................908-921
Agriculture Buildings and Facilities:
Beltsville Occupancy......................................... 561
Beltsville Office Facility..................................558-559
Explanatory Notes...........................................886-899
Employees Maintaining Buildings.............................562-563
Funding...................................................... 560
One-Time Relocation Expenses................................. 555
Strategic Space Plan........................................557-558
Aircraft, Distribution of........................................ 548
Biographies:
Irwin T. David..............................................783-784
Anne F. Thompson Reed........................................ 781
Pearlie S. Reed.............................................. 780
Sally Thompson............................................... 782
Change Management...........................................519-520
Civil Rights:
Accountability............................................... 524
Civil Rights Goals........................................... 507
Civil Rights Investigations.................................522-523
Continuity in Civil Rights................................... 507
Continuation of Civil Rights................................. 522
Cost of Resolving Program Discrimination Complaints.......... 525
Cost of Settlements.......................................... 525
Difficulty Enforcing Civil Rights...........................521-522
Environmental Justice Executive Order........................ 526
Examples of USDA Programs.................................... 528
Framework for Civil Rights Responsibilities.................. 517
Foreclosures................................................. 525
Implementing the CRIT Recommendations........................ 506
Independent Review Group..................................... 525
Legislation on CRAT Recommendations.......................... 510
Minority Farmers Forced Off Land By Federal Employees........ 524
Minority Farmers Forced Off Land By Non-Federal Employees.... 524
Number of Backlog Cases...................................... 523
Number of Complaints......................................... 527
On-site Reviews.............................................. 527
Number of Backlog Cases...................................... 523
Supplemental for Civil Rights................................ 511
Offsets to Civil Rights Supplemental......................... 511
Colleges and Universities:
Competitive Grants Process................................... 553
Historically Black Colleges and Universities................548-549
Land Grant Universities.....................................550-553
USDA 1890 National Scholars Program.......................... 532
Collocation Projects:
Status of Kansas City and Davis.............................. 545
Departmental Administration:
Administrative Law Judge..................................... 554
Agricultural Acquisition Regulation.........................543-544
Commercial Investigative Firms..............................554-555
Contracting Out Administrative Functions..................... 536
Conversion of Non-Federal to Federal Status.................. 553
Estimated Annual Savings....................................544-545
Explanatory Notes...........................................864-885
Legislative Package.......................................... 553
Number of Credit Cards Issued................................ 544
Office of Outreach........................................... 554
Outreach & Assistance to Socially Disadvantaged Farmers &
Ranchers Program..........................................555-556
Procurement Reform..........................................537-538
Program Staff................................................ 554
Property Transferred Under Section 923 of the Farm Bill...... 555
Purchase Cards and Third Party Drafts........................ 533
Questions Submitted for the Record:
Chairman Skeen........................................... 524
Savings In Worker's Compensation Costs....................... 543
Savings Through Credit Cards................................. 544
Small Business Resources..................................... 555
Status of USDA Reorganization...............................539-540
Disabilities, Targeted........................................... 545
Former Assistant Secretary for Administration:
Alternative Discipline Plan.................................. 533
Cultural Change in USDA...................................... 517
Five Observations............................................ 502
USDA Streamlining............................................ 530
Hazardous Waste Management Questions:
Agency Support............................................... 575
CCC Grain Storage Site Status...............................589-592
Compliance Docket............................................ 588
Compliance with State Laws................................... 573
Explantory Notes............................................900-907
Foreclosures Requiring Cleanup............................... 576
Funding for CERCLA, RCRA, and Pollution Prevention..........570-571
Performance Goals...........................................567-569
Salaries and Benefits........................................ 574
Salaries/Benefits and Cleanup Costs.......................... 574
Underground Storage Tanks.................................... 572
USDA Site Cleanups..........................................577-587
National Finance Center:
Agencies Using the Accounting System at NFC.................709-710
Benefits for Providing Payroll Services to Non-Federal FSA
County Office Employees.................................... 710
Cost of the Contract at NFC With American Management Systems. 715
Cross Servicing.............................................719-724
Increase of Funds for the Thrift Savings Plan...............706-707
National Finance Center....................................505, 512
NFC Computer Purchases.....................................509, 513
Request for Additional Funds at NFC.......................... 706
Staff Year Levels at the National Finance Center............. 719
Year 2000 Compliance at NFC.................................. 515
Office of Chief Financial Officer:
Actual FFIS Costs............................................ 678
Agencies Using FFIS.......................................... 678
Amount Spent on FISVIS....................................... 714
CCC Reporting Process........................................ 726
Consolidation of Financial Information Systems in USDA......714-715
Cost of AMS Contract........................................715-716
Cost to Implement the CFO Act of 1990.......................716-719
Department-wide Travel Costs................................. 710
Direct Deposit Electronic Funds Transfer..................... 725
Explanatory Notes...........................................935-947
FFIS Implementation.........................................505-506
FFIS Interfaces.............................................. 678
Financial Information System Vision and Strategy Project..... 710
Foundation Financial Information System-FFIS................. 711
Foundation Financial Management System-FFMS.................. 510
GAO and OIG Audits..........................................726-727
GAO Report on FISVIS........................................711-714
Government Performance and Results Act Performance Plan.....689-700
Impact of the Farm Bill on Commodity Credit Corporation
Expenditures............................................... 725
OCFO Budget Request.......................................... 505
Percent of Employees Using Electronic Funds Transfer......... 725
Priorities of the CFO........................................ 506
Questions Submitted for the Record:
Chairman Skeen........................................... 690
Replacement of Systems in the Foundation Financial
Information System 715
Request for Additional Funds................................. 689
Requirements of the CFO Act.................................716-719
Stovepiping Among USDA Agencies.............................701-702
Thrift Savings Plan.........................................520-521
Office of Chief Information Officer:
Administrative Convergence................................... 511
Authority of CIO............................................. 516
Automation Priorities.......................................673-674
Business Process Improvement Pilot Projects.................675-677
Business Process Reengineering..............................678-680
Capital Planning and Investment Guide........................ 593
CCC IT Obligations..........................................631-632
CCC Quarterly Report........................................632-656
Common Computing Environment................................515-516
Consolidation of IRM Staff................................... 622
Contractor Support Services........................622-623, 684-685
Details to OCIO.............................................. 685
Earned Value Management System............................... 685
Exemption to the Moratorium.................................. 657
Explanatory Notes...........................................922-934
Field Service Centers........................................ 530
Fixed Asset Plans............................................ 631
Former Personnel Payments.................................... 684
FSA Appropriated and CCC Funds..............................621-622
Independent Verification and Validation....................516, 683
Information Technology Investments........................... 659
IRM Budget..................................................595-620
IRM Support Service Contracts...............................623-630
IT Culture Change............................................ 518
IT Moratorium................................................ 657
IT Priorities................................................ 504
LAN/WAN/Voice Project........................................ 657
LAN/WAN/Voice Suspension....................................657-658
OCIO Budget Request.......................................... 504
Performance Measures for Technology.......................... 594
Personnel.................................................... 683
Questions Submitted for the Record:
Chairman Skeen........................................... 593
Response to GAO and OIG Audits............................... 688
Satellite Offices............................................ 525
SCI Members by Agency.......................................680-681
SCIT Team Members and Cost................................... 680
Service Centers Needed on Tribal Lands....................... 526
Service Center Oversight....................................682-683
Spectrum Management.......................................... 683
Systems Integration.......................................... 503
Strengthening Staff.......................................... 594
Technology Investment Preview Board.......................... 593
Telecommunications Recommendations by GAO.................... 658
Telecommunications Savings..................................659-660
Travel Increase.............................................. 684
USDA Information Technology Budget........................... 503
USDA Telecommunications Improvements........................658-659
Vision for USDA Automation..................................672-673
Personnel:
Celebration of Excellence Ceremony........................... 538
Early Out and Buyout Options................................540-543
Plans for Early Out or Buyout Authority...................... 543
Proposed Paperless Personnel Request System.................538-539
Summer Interns............................................... 548
USDA Streamlining...........................................530-531
Questions Submitted for the Record:
Chairman Skeen..............................................524-727
Rental Payments:
Headquarters Complex Rental Charges.........................560-561
Office Space................................................. 561
Rental Payments & GSA Repair Costs........................... 562
Statements:
Statement of OCIO............................................ 502
Statement of CFO............................................. 504
Vehicles:
Distribution of Motor Vehicles............................... 547
Motor Vehicles............................................... 546
Witness Statements:
Former Acting Assistant Secretary's Statement...............788-798
Chief Information Officer's Statement.......................799-821
Chief Financial Officer's Statement.........................822-833
Working Capital Fund:
Amounts Paid Into the Working Capital Fund by Current Agency
Structure.................................................707-708
Explanatory Notes...........................................948-966
Increase in the Working Capital Fund Benefits for Former
Personnel.................................................. 703
Increase in Working Capital Fund Rental Payments to GSA.....703-704
Increase in Working Capital Fund Printing and Reproduction... 705
Increase in Working Capital Fund Equipment................... 705
Increase of Funds for the Thrift Savings Plan................ 706
Requested Increase for Working Capital Fund.................. 706
Total Funding Level for the Working Capital Fund............. 705
WCF Operating Costs.......................................... 709
Year 2000:
Additional Funds for Year 2000............................... 671
Agencies Not Year 2000 Compliant............................. 672
Estimated Cot of Year 2000................................... 671
Impact of Year 2000.......................................... 671
Strategic Approach to Year 2000.............................. 672
Year 2000 Compliance......................................... 508
Year 2000 Compliance Enhancement Act......................... 685
Year 2000 Compliance Enhancement Act Funds Transfer.......... 682
Year 2000 Compliance Enhancement Act Impact on CCE........... 681
Year 2000 Compliance Program Update.........................686-687
Year 2000 Highlights........................................660-670

Office of Communications

Agriculture Fact Book............................................ 739
Biography of Tom Ammontree....................................... 785
Budget Request................................................... 739
Communication Coordinators....................................... 734
Computer Matching and Privacy Act of 1988........................ 738
Conversion of Photographic Library............................... 738
Credit Alert Interactive Voice Response System................... 739
Explanatory Notes...............................................967-978
Media Services................................................... 736
Press Releases Issue............................................. 735
Public Affairs Activities.......................................728-731
Questions Submitted for the Record:
Chairman Skeen............................................... 728
Reimbursements from Other USDA Agencies.........................736-737
Resources and Staff Levels......................................732-733
Salary Offset Initiative......................................... 738
Survey of Knowledge of USDA Services............................. 740
USDA Visitor Center.............................................. 738
Witness Statement...............................................834-837

National Appeals Division

Biograpy of Norman G. Cooper..................................... 787
Administrative Systems........................................... 775
ADP Equipment.................................................... 775
Appeals:
Active....................................................... 771
Cost and Average Length...................................... 771
Director......................................................... 772
Explanatory Notes.............................................1014-1022

Office of the General Counsel

Amex International Inc........................................... 766
Attorney:
Hours by Agency.............................................. 745
Hours Worked................................................. 743
Locations.................................................... 746
Benefits Former Personnel........................................ 767
Biography--Charles Rawls, Acting General Counsel................. 786
Cases:
Before EEO Commission........................................ 766
Civil and Criminal........................................... 746
Civil Rights..................................................... 769
Civil Rights Action Team Report.................................. 741
Equipment Procurement Plans...................................... 769
Examples of Recent Progress...................................... 754
Explanatory Notes................................................ 979
Forest Service Obligations....................................... 766
FY 1999 Budget Request Breakout.................................. 754
Hazardous Waste Management....................................... 767
Law Library...................................................... 753
Loan Resolution Task Force....................................... 765
New Authorities.................................................. 748
Object Class Breakout............................................ 768
OGC Priorities................................................... 765
Private Counsel.................................................. 745
Questions Submitted for the Record:
Mr. Skeen.................................................... 741
Regulations...................................................... 741
Rental Payments.................................................. 769
Staffing:
Appropriated and Reimbursable................................ 742
Increase..................................................... 766
Statement of the Acting General Counsel.......................... 838
User Fee:
Hours by Agency.............................................. 742
Programs..................................................... 741
Year 2000 Compliance............................................. 770
Written Statement--Charles Rawls................................838-858
Final Rules and Regulations...................................... 771
Hearing and Director Review...................................... 772
Hearing and Review Officers Curriculum..........................777-779
Management and Financial Accountability and Control Plan......... 777
Object Class Explanation:
25.1 Advisory and Assistance Service......................... 774
25.2 Other Services.......................................... 774
31 Equipment................................................. 775
OIG Audit.......................................................772-773
Privacy Act...................................................... 777
Quality Assurance Program........................................ 776
Questions Submitted for the Record:
Chairman Skeen............................................... 771
Statutory Time Limit............................................. 772
Survey:
Cost......................................................... 776
Design....................................................... 776
Training Conference.............................................776-777
Tracking System.................................................. 775
Written Testimony of National Appeals Division..................859-863}}