[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
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
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