[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
THE DEPARTMENT OF AGRICULTURE: WHAT MUST BE DONE TO RESOLVE USDA'S
LONGSTANDING FINANCIAL MANAGEMENT PROBLEMS?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY,
FINANCIAL MANAGEMENT AND
INTERGOVERNMENTAL RELATIONS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MAY 8, 2001
__________
Serial No. 107-54
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
77-919 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida DANNY K. DAVIS, Illinois
DOUG OSE, California JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky JIM TURNER, Texas
JO ANN DAVIS, Virginia THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida WM. LACY CLAY, Missouri
CHRIS CANNON, Utah ------ ------
ADAM H. PUTNAM, Florida ------ ------
C.L. ``BUTCH'' OTTER, Idaho ------
EDWARD L. SCHROCK, Virginia BERNARD SANDERS, Vermont
------ ------ (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations
STEPHEN HORN, California, Chairman
RON LEWIS, Kentucky JANICE D. SCHAKOWSKY, Illinois
DAN MILLER, Florida MAJOR R. OWENS, New York
DOUG OSE, California PAUL E. KANJORSKI, Pennsylvania
ADAM H. PUTNAM, Florida CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Earl Pierce, Professional Staff Member
Grant Newman, Clerk
Mark Stephenson, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on May 8, 2001...................................... 1
Statement of:
Viadero, Roger C., Inspector General, U.S. Department of
Agriculture, accompanied by James R. Ebbitt, Assistant
Inspector General for Audit; and Patricia Healy, Acting
Chief Financial Officer, U.S. Department of Agriculture.... 3
Letters, statements, etc., submitted for the record by:
Healy, Patricia, Acting Chief Financial Officer, U.S.
Department of Agriculture:
Information concerning accounting measures............... 50
Information concerning employees at USDA................. 49
Information concerning loans............................. 34
Prepared statement of.................................... 20
Viadero, Roger C., Inspector General, U.S. Department of
Agriculture, prepared statement of......................... 6
THE DEPARTMENT OF AGRICULTURE: WHAT MUST BE DONE TO RESOLVE USDA'S
LONGSTANDING FINANCIAL MANAGEMENT PROBLEMS?
----------
TUESDAY, MAY 8, 2001
House of Representatives,
Subcommittee on Government Efficiency, Financial
Management and Intergovernmental Relations,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:30 p.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Putnam and Schakowsky.
Staff present: J. Russell George, staff director and chief
counsel; Bonnie Heald, director of communications; Earl Thomas
Pierce, professional staff member; Grant Newman, clerk; Alex
Hurowitz, intern; Mark Stephenson, minority professional staff
member; and Jean Gosa, minority assistant clerk.
Mr. Horn. A quorum being present, this hearing of the
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations will come to order.
We're here today to continue our examination of how the
executive branch departments and agencies in the Federal
Government account for the billions of tax dollars they spend
each year. This morning we examine financial issues at one of
the government's largest agencies, the Department of Defense,
and one of its smaller agencies, the Agency for International
Development. This afternoon, we'll focus on the financial
issues at the Department of Agriculture.
The Department of Agriculture, along with the Department of
Defense, is cited as being one of the primary reasons the
Federal Government is unable to prepare reliable financial
statements. Similar to the Department of Defense and the Agency
for International Development, the Department of Agriculture
received a failing grade on the subcommittee's financial
management report card for fiscal year 2000. The Department's
Inspector General reported that significant financial problems
continued to plague the agency in fiscal year 2000. In addition
to its inability to appopriately value its loans, the
Department of Agriculture was unable to support its cash
balances with the Department of the Treasury and the amounts it
reported as property, plant and equipment.
The Inspector General also found that the Department's
internal controls and antiquated financial systems were
ineffective. These systems will not be fully corrected until
fiscal year 2003 at the earliest, when replacement systems are
fully deployed in all of Agriculture's agencies. These ongoing
problems prevent the agency from using financial data in its
day-to-day management or for the preparation of its financial
statements.
The Department of Agriculture manages a wide spectrum of
programs that affect millions of people, from making loans to
farmers, to administering major nutrition programs such as food
stamps. The Department's net cost of operations for fiscal year
2000 was reported to be $75 billion, more than $32 billion of
which was spent for nutritional programs.
In addition, the Department administers $124 billion in
loans and loan guarantees. In many cases, it is the lender of
last resort or loan guarantor for businesses and families
involved in agriculture.
Agriculture's loan portfolio is valued at about $70 billion
after allowances for loan losses are taken into account.
Unfortunately, the Department is unable to reasonably estimate
its loan losses. Therefore, the government does not know the
true cost of these programs. Furthermore, the government does
not maintain a cost accounting system and has no plans to
institute one, yet how can the Department effectively control
the cost of its operations without such basic accounting
information and systems?
Now we have a new administration which we hope will focus
close attention on the Department of Agriculture's continuing
inability to address its longstanding financial management
problems. We welcome our witnesses today, the Honorable Roger
C. Viadero, Inspector General, U.S. Department of Agriculture,
and Patricia Healy, Acting Chief Financial Officer, U.S.
Department of Agriculture. We look forward to your testimony,
your insight, your recommendations toward ending this
intolerable financial situation at the Department of
Agriculture.
Now, some of you know how we conduct this thing, and when
we have you in the agenda here, and we simply go down the line
on that, and we have, for example, Mr. Viadero, the Inspector
General. He's accompanied by Mr. Ebbitt, Assistant Inspector
General for Audit; and the Acting Chief Financial Officer,
Patricia Healy. Your full text will be put immediately in the
hearing record after I call you in accord with the agenda.
No. 2, we'd like you to not read your statement. That's in.
We know about it. But summarize it for us, somewhere between 5
minutes and 10 minutes; 10 minutes, let's say, today. And what
we want to do is get the key things on the record besides the
whole text already being in the record. And, No. 2, what we're
interested in is the chance for questioning, either between the
Chief Financial Officer or the Inspector General or simply with
the Members here. So we would like to spend most of our time
this afternoon on the questions and answers.
So if you'll stand and raise your right hands, we'll swear
you into office here for the testimony.
[Witnesses sworn.]
Mr. Horn. The clerk will note that all three witnesses
affirmed the oath. And now we begin with the Inspector General,
the Honorable Roger C. Viadero.
STATEMENTS OF ROGER C. VIADERO, INSPECTOR GENERAL, U.S.
DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY JAMES R. EBBITT,
ASSISTANT INSPECTOR GENERAL FOR AUDIT; AND PATRICIA HEALY,
ACTING CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF AGRICULTURE
Mr. Viadero. Thank you, Mr. Chairman, and members of the
committee. I'm more than pleased to be here to provide
testimony about the Department of Agriculture's financial
management. With me today is James Ebbitt, the Assistant
Inspector General for Audit.
In order for government managers to administer their
responsibilities, they must have reliable financial information
at their fingertips, just as corporate leaders must have. One
can readily imagine how long any company would stay in business
if it did not know its level of cash, how much money it owed,
or how much it was owed, or what its asset base was. Yet this
is the environment in which USDA has operated.
In the absence of shareholders demanding accountability,
the deep-seated financial weaknesses in the Department have
persisted throughout the years. Financial data do not represent
meaningless numbers on some obscure statements examined only by
a few. It represents the information needed to direct
activities. Accurate and timely financial information serves as
the steering mechanism by which programs can be managed in an
effective, efficient and economical manner. Without this
capability, the course cannot be navigated. The vessel may be
propelled in circles and drift aimlessly.
We issued a disclaimer of opinion on the Department's
financial statements for fiscal year 2000. The disclaimer in
this case means the information needed to conduct the audit was
not provided to us so that we could conduct sufficient work to
determine the reliability of the $124 billion in assets and
other amounts on the USDA financial statements. In addition,
the extent of internal control weaknesses in the Department's
financial systems and operations means the amounts presented
are highly questionable.
The timeliness of the data is as important as the accuracy
of the data. Reliability of information is needed in real time
to manage effectively, not 6 months after the end of the fiscal
year. Whereas corporate America fundamentally closes its books
daily, the Forest Service provided us with draft financial
statements in November. Then they continued to modify them
until February. Financial information that changes so
frequently is of little utility. Similarly, the Commodity
Credit Corp. [CCC], was unable to provide us with auditable
statements until April 25th of this year. The Comptroller
General recently testified before this subcommittee on this
very crucial issue. Audit opinions are not the be all and end
all. Viable systems which produce timely and reliable financial
information are, though.
I do need to emphasize that although in the past things
have been bleak, we do have a brightening future. In fact, it's
rather bright. The most positive news we have is that the
Central Accounting System [CAS], is in its next to last year of
phase-out. Fiscal year 2001 will still be negatively impacted,
however, in that a potentially material percentage of the
Department's administrative payments will still be processed
through CAS.
The problems with CAS have been well chronicled. This
system is so inherently flawed that the books cook themselves.
Starting with the next fiscal year, October 1, 2001, the
culmination of a strategy launched in 1993 will be achieved
with the implementation of a new system. The new system,
entitled the Foundation Financial Information System [FFIS],
will be operational for all of the agencies' administrative
payments. The implementation of FFIS has not been without
problems. A critical decision at the outset of the
implementation of FFIS, to retain the legacy of feeder systems,
has hindered implementation.
Two USDA agencies, the Forest Service and CCC, committed
Antideficiency Act violations in fiscal year 2000. The Forest
Service obligated $274 million in excess of available funds to
fight fires. The violation occurred primarily due to incurring
obligations without inputting the data into the system. CCC
represented to us it had disbursed $50,000 more than it had
appropriated for the livestock indemnity program. These
violations of law are examples of the negative impact the
absence of reliable accounting systems and/or operational
weaknesses can have.
Another long-standing, highly complex and very material
encumbrance to the Department's efforts to secure a clean
opinion has been its implementation of the credit reform
legislation. USDA has a portfolio of loans totaling nearly $97
billion that is subject to credit reform. It is the largest
direct lender in the entire Federal Government.
The Department has launched an aggressive corrective action
plan to overcome the noncompliance with credit reform
requirements that we first reported in 1994. Whereas initial
actions by the individual agencies were inadequate at best,
under the leadership of the Chief Financial Officer, a task
force including representatives of my office was formed to
redirect the sideways movement. A series of cash-flow models
have been devised to capture and analyze the necessary elements
to yield meaningful subsidiary estimates and reestimates.
Legislative requirements impacting cash-flows have now been
identified, and calculation methodologies have been developed.
Achievements in the area of credit reform have been
significant, to include the development of two new cash-flow
models for Rural Development's nonhousing direct loans and
guaranteed loans. If actions planned are taken in an efficient
and effective manner, we believe this problem area, which
impacts both the departmental and governmentwide financial
statements, can be corrected.
Another long-standing and major encumbrance to a clean
opinion is the Forest Service's accounting for real property.
As of September 30, 2000, the Forest Service reported about
$4.7 billion in real property assets. About 55 percent of this
dollar value or $2.6 billion, is attributable to what is
referred to as pooled assets, primarily roads. The remainder
represents individual assets such as buildings.
An extraordinary breakthrough occurred this year in this
area. For the first time, the agency was able to reasonably
estimate the value of its pooled assets. Due to the absence of
historical cost data, a strategy was needed to estimate cost.
Forest Service and OIG partnered to develop such a strategy.
The Forest Service compiled the inventory data and the best
cost information available and then computed a reasonable
balance.
A significant problem persists in the valuation of the
individual real property assets. Audit tests disclosed the
values of about 24 percent of the assets examined were
overstated, 5 percent understated, and 7 percent did not have
any documentation to support any valuation whatsoever.
The cumulative errors were too high to allow us to project
the total variances, but nonetheless, we were unable to obtain
assurance regarding the fairness of the balance of the line
item as presented on the statements.
Now, let me address what the Department needs to do to
strengthen its financial management and obtain an upgraded
audit opinion. First, FFIS must be fully functional and not
beset by significant weaknesses.
Second, credit reform remains an obstacle to an improved
audit opinion because of the breadth and complexity of the
issue. Although some of the cash-flow models have progressed to
the point where data verification procedures can be performed,
others, frankly, have not. While the Department's plans call
for the problems to be resolved by the next fiscal year, much
remains to be accomplished. An intensive commitment from all
affected agencies is needed to ensure the impact on the
financial statements will be eliminated as soon as possible.
Third, Forest Service real property is another very
difficult matter. Considerable resources will be needed to
compile valuation data, and controls must be put in place to
verify the amounts as supportable.
Last, the Forest Service and CCC must strengthen their
financial processes to ensure they are capable of producing
timely and reliable data.
Despite these extraordinary encumbrances, the Department is
making headway and deserves a significant amount of credit for
their efforts and accomplishments to date.
Mr. Chairman, this ends my oral statement. I appreciate
your time, and any questions you may have.
[The prepared statement of Mr. Viadero follows:]
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Mr. Horn. We thank you for that presentation, and we now
turn to Patricia Healy, the Acting Chief Financial Officer for
the U.S. Department of Agriculture. Ms. Healy.
Ms. Healy. Thank you, Chairman Horn.
Chairman Horn and members of the committee, I appreciate
the opportunity to talk with you today about the progress we
have made in financial management at USDA in fiscal year 2000
and about how we plan to address our remaining issues that keep
us from obtaining a clean audit opinion.
Over the last year, my colleagues and I have been working
very hard with the General Accounting Office, the Office of
Management and Budget and the Inspector General to tackle some
of the larger issues facing the Department. We've made
significant progress on many fronts to address the underlying
problems affecting the data reported on our financial
statements.
Providing effective financial management for an
organization as large and diverse as USDA is a tremendous
challenge. If USDA were a corporation, the Department's
spending would make it the country's sixth largest corporation
and one of its largest banks. USDA is the government's largest
direct lender, holding about one-third of the government's
outstanding direct loans. USDA employees and facilities are
spread throughout the United States and in many countries,
providing benefits to nearly 70 million individuals a year.
Managing financial and administrative operations is made even
more challenging by the fact that staffing levels within the
Department have declined while demands for USDA programs have
not.
I also want to emphasize that although there are problems
remaining, the top priority for financial managers at USDA is
safeguarding taxpayers' money against fraud, waste and abuse.
We've made progress on several fronts during this past
year, including the accelerated implementation of the
Foundation Financial Information System [FFIS], which is the
cornerstone of financial management and administrative systems
improvements at USDA. The success of USDA in implementing the
system according to the aggressive schedule that we committed
to in fiscal year 1999, led us to accelerate the implementation
for fiscal year 2000. As a result, on October 1, 2001, all but
two of our agencies will be using FFIS.
We also have clean opinions on three of the six stand-alone
statements produced by USDA agencies. The agencies with clean
opinions are the Food and Nutrition Service, which is the USDA
agency with the largest budget; the Rural Telephone Bank; and
the Federal Crop Insurance Corp. The remaining three agencies
with stand-alone statements, Rural Development, the Forest
Service and the Commodity Credit Corp., have made significant
progress in improving their audit results. Rural Development
has a qualified opinion for fiscal year 2000.
Mr. Chairman, while progress has been made, we recognize
that we still have much to do. We recognize that receiving a
clean audit opinion will be a hollow victory if we do not put
in place the systems and processes necessary to produce a
sustainable process that will provide accurate, reliable, and
useful financial information that can be used by program
managers at USDA. We are committed to sustainable improvement
as we address the challenges before us.
The following are highlights of our major challenges and
plans for improvement. In the area of credit reform, there are
two USDA agencies affected: Farm Service Agency, including the
programs funded by the Commodity Credit Corp., and Rural
Development. As a response to audit findings in 1999, USDA
formed a working group comprised of USDA credit agencies, CFO,
OMB, and OIG representatives, to develop the needed cash-flow
models and documentation. GAO assisted the group by providing a
standard ``best practices'' methodology to implement credit
reform.
During fiscal year 2000, USDA's Credit Reform Working Group
made significant progress toward resolving credit reform
issues. All USDA credit agencies revised a portion of their
credit models during the past year to improve budget and
financial statement estimates for loan allowances. Several data
validity reviews performed as a partnership with the OIG and
GAO concluded that the integrity of the data used to develop
the credit models is sound. Agencies also improved
documentation supporting the models and worked to revamp their
accounting procedures.
During fiscal year 2001, USDA plans to complete the credit
reform models and finalize procedures that will address most of
the remaining OIG concerns related to credit reform financial
statement line items. We will also continue to address the
challenge to ensure sufficient staff is available to support
credit reform activities.
Old, legacy administrative ``feeder'' systems of USDA have
also caused numerous financial management problems for the
Department and the FFIS implementation. These problems include
issues that affect our ability to reconcile our cash accounts
with Treasury and to provide current online access to
information for our managers in a timely manner.
In fiscal year 2000, the Chief Financial Officer, working
with the Chief Information Officer and the Assistant Secretary
for Administration, led a Corporate Administrative Systems
Executive Committee tasked with developing a corporate strategy
for dealing with the administrative and financial feeder
systems. The systems in the corporate strategy and their
priorities for implementation are: accounting and budget
execution, telecommunications infrastructure and security,
procurement, payroll, human resources, travel, property, and
budget formulation.
We plan to complete the necessary implementation of these
systems within 5 years. A constraint in our ability to
implement the entire corporate strategy has been the
availability of funding. We are grateful to Congress for the
language provided in last year's Agricultural Appropriations
Act, allowing the Secretary of Agriculture, with the
Appropriations Committees' approval, to transfer unobligated
balances of appropriated funds to the Working Capital Fund to
assist with the acquisition of needed financial,
administrative, information technology services. We will be
providing a plan to the committee shortly to seek this
approval.
Reconciling our fund balances with the Treasury progressed
well in fiscal year 2000. Mr. Chairman, I want to stress that
the out-of-balance condition was due to reporting differences
to Treasury that had not been corrected in a timely manner. The
differences did not result in a loss of taxpayer money.
We are continuing to work on resolving the remaining issues
affecting our ability to reconcile our cash accounts with
Treasury's fund balance in a timely manner and have been
working with staff at the National Finance Center and the
agencies to implement a sustainable process for reconciling
cash.
The major component of the general property, plant and
equipment line item in USDA's financial statements is the
Forest Service real property, consisting of pooled assets, for
example, road costs; and individual real property assets, for
example, buildings. During fiscal year 2000, the Forest Service
initiatives with property began to show results. The OIG has
accepted support for $2.57 billion of their 381,000 miles of
roads. In fiscal year 2001, the Forest Service plans to revise
its inventory instructions for the field for the remaining real
property assets and provide additional training with a goal of
ensuring that all their real property assets will pass the
audit tests for fiscal year 2001.
Mr. Chairman, these issues from the audit combine for an
extensive list of management and audit challenges. I am pleased
to share both our accomplishments today and our plans to remedy
outstanding issues that are preventing USDA from achieving an
unqualified audit opinion.
Mr. Chairman, I would be happy to respond to any questions
that you or your colleagues may have. Thank you for arranging
this forum to discuss the financial management issues at USDA.
Mr. Horn. Thank you very much, Ms. Healy.
[The prepared statement of Ms. Healy follows:]
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Mr. Horn. The ranking member has come in. If you would like
to have your statement at the beginning and go to questions,
you're certainly free to. We'll submit it into the record right
after my own statement. Without objection.
So let me move, then, to the 10-minute period that each of
us will have, including Mr. Putnam.
Mr. Viadero, if I heard you correctly, two of the
Department of Agriculture's agencies, the Forest Service and
the Commodity Credit Corp., spend more money than was provided
by Congress; is that true?
Mr. Viadero. Yes, sir.
Mr. Horn. How do you think that happened?
Mr. Viadero. I think it happened, sir, because of poor
accounting systems, not on the part of the CFO, but what we
were discussing, that CAS system, the Central Accounting
System, and the transition into the new updated, streamlined,
soup-to-nuts Foundation Financial Information System, which is
struggling by itself. Again, as I mentioned--and there was no
play on words--the CAS system sort of cooks its own books as it
goes along. Between the lack of timeliness of the data and the
unreliability of the data, that just caused the train wreck
here.
Mr. Horn. I'm curious. Where is the Chief Information
Officer? I would think they would appear at a situation like
this. Ms. Healy, does he report to you or she report to you
or----
Ms. Healy. The Chief Information Officer?
Mr. Horn. Right. CIO.
Ms. Healy. No. They do not report to me.
Mr. Horn. To whom do they report?
Ms. Healy. The Chief Information Officer at USDA reports to
the Secretary.
Mr. Horn. Directly to the Secretary?
Ms. Healy. Yes; not the Forest Service one, the Chief
Information Officer for USDA.
Mr. Horn. OK. And to whom do you report?
Ms. Healy. The Secretary.
Mr. Horn. The Secretary?
Ms. Healy. Yes.
Mr. Horn. OK. So there's a chance for the Secretary to get
the two of you in the chairs, at least, to get you working
together. It seems to me if you can solve this problem, you've
got to get the CIO, the CFO----
Ms. Healy. Uh-huh.
Mr. Horn [continuing]. And all of them to get on the same
team.
Ms. Healy. And we are. The Corporate Administrative Systems
Committee that we had last year was a combined effort of the
Chief Financial Officer, the Chief Information Officer, and the
Assistant Secretary for Administration, and we had a number of
the agencies in there as well, recognizing that we have to work
together to solve these problems, that we all have a piece of
them, and that the CIO needs to come to the table and provide
the critical infrastructure. We need to get the systems out to
where people are, the functional people have to be able to
write good requirements, and ensure that all of our systems are
not developed the way they were in the past in a stovepipe
manner so they don't talk to each other. They make running the
agencies extremely difficult if we can't get corporate
information.
And so what came out of that was corporate strategy for the
systems that will work together with FFIS to give us the
information that we need to manage the agency. That strategy
coupled with a financial data warehouse that we're also
building at the same time, will allow us to combine financial
information, program information and any other information the
agency wants to combine together in this warehouse so that we
can get the corporate information. We have the plan. We have
the strategy, and the Appropriations Committees this year
finally gave us a mechanism to get the funding. That has really
been what has been holding us back.
So we have the plan together. It's undergoing internal
review, and as soon as we can get it up to the committees, once
we get those dollars, we are going to work closely together
with the same parties monitoring how this money is spent, how
these projects are going, and to implement the most critical
ones. These are the telecommunications and security, which
safeguard the assets, and the procurement system, which is the
main system that feeds into the accounting system and keeps
track of our purchases.
Mr. Horn. Ms. Healy, is it correct that the Commodity
Credit Corp. and Forest Service have spent more money than were
provided by Congress?
Ms. Healy. I do know for sure about the Forest Service. I
just became aware of the Commodity Credit Corp. today, and I
think it was a small amount of $50,000 that I think they
believe they have internal authorities to cover. I don't have
the details on that. I'd have to get someone from the agency to
give you the information.
With respect to the Forest Service, that is true.
Mr. Horn. So it is true on the Forest Service?
Ms. Healy. Yes, sir.
Mr. Horn. And how much did they overspend?
Ms. Healy. $274 million.
Mr. Horn. $274 million?
Ms. Healy. Yes.
Mr. Horn. And you're saying Commodity Credit is $50,000?
Ms. Healy. Yes.
Mr. Horn. Is it true that you maintain two sets of books,
one for reporting the value of loans for the financial
statements and another for reporting on the budget? How does
that system work? I'm just curious.
Ms. Healy. Well, I think it isn't two sets in the
traditional sense. It refers to the way that we're required to
do loans for country valuations. This is for the foreign loans,
and we look at the default rates for the countries and how to
value the subsidy costs for the foreign loans. This is based on
a subsidy rate established by the ICRA system at OMB, and when
we look at it with our auditors, we're looking at reestimating
the subsidy on an annual basis, as I understand it. There are
some differences in how we have to present the figures; but the
loans are the same no matter which way you go. It's just a
matter of which way you want to look at the subsidy cost.
Mr. Horn. But essentially, in order to help the Department
along, I take it you've got two sets of books; is that right?
Ms. Healy. Yes. For that small portion, for the foreign
loans.
Mr. Horn. And it's just the foreign loans?
Ms. Healy. Yes, as I understand it.
Mr. Horn. How would you define that in relation to the
other loans that--say the Commodity Credit Corp. puts out
loans. Now, are those typically foreign loans, or are they all
in the United States to farmers here?
Ms. Healy. I really don't know. I'd have to check on that.
Mr. Horn. OK. Could you? And without objection, that will
be entered at this point in the record with a letter from the
Chief Financial Officer.
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Mr. Horn. It just seems to me that double bookkeeping is
sort of what somebody is trying to do to get away from the IRS
or something. One set of books----
Ms. Healy. Uh-huh.
Mr. Horn [continuing]. That is for the family, and one set
of books is for the IRS. So how do we get this corporation, the
agency, and the Secretary in the Department to get it so that
it's one system that people can find for either management
purposes or finance purposes? What is it that the CFO will do,
having listened to all the Inspector Generals comments, and
what's your plan so we don't go through this again?
Ms. Healy. Well, with respect to the data that we're
getting in from CCC with the financial statements and for the
loans, what we need to do with respect to estimating the loans
for CCC is get the Office of the Inspector General and OMB to
agree on the same way that we estimate the subsidy. That's one
thing. And we will work on that.
With respect to the systems and the data needed to do the
financial statements, we are setting up a system to try to get
the data that comes into the financial systems from the
individual systems put into one place in order to easily
produce financial statements and be able to trace the data back
to the originating systems. We're never going to redo all the
various program systems, etc., that we have in the Department,
not at least in the short term. So what we have to make sure of
is that the data that we're getting in from the systems, loan
systems, etc., is good, valid data. That's what we've been
working on with the credit reform--making sure that the data is
good, then making sure we have a place where there is a good
repository, so that we can do good regular reporting with what
everybody can agree are the same numbers, and that the numbers
are traceable back to their source.
That is what we're working on. We're trying to make sure
that the fundamental data is correct first; that we then have a
tool in which to put the data, which is this financial
statement warehouse that we're also developing; and that we can
use that with the auditors and then with other people in the
agencies as well to produce reports that they can use to manage
operations. But the key is first making sure that we
concentrate on getting good, solid data at the base and
that's----
Mr. Horn. Do you feel you have that now?
Ms. Healy. I think we're very close. I think what's----
Mr. Horn. And that's based on seeing the last train wreck?
In other words, you've got better tracks, better cars, better
locomotives? Is that--do you have a budget that you can use, or
is it in the CIO's----
Ms. Healy. Well, the budget for the financial systems
resides with the CFO organization. We get it through the
Working Capital Fund. So we do have control of that. And with
the unobligated balances, we will set up a special fund in the
Working Capital Fund so that we will have that.
With respect to the program systems, the loan systems,
etc., the individual agencies get money in their budgets to
correct those. They work with the CIO. We do have a capital
planning process that we go through to make sure that the money
is well spent. So we do try to complete the whole to make sure
that we're giving money to systems that make sense, that are
going to correct problems, and that we monitor how the systems
are moving along.
With respect to the administrative side and the S&E
accounts and the systems at the National Finance Center, we've
made a tremendous amount of progress with FFIS. We basically
retooled that project in fiscal year 1999, and by October 1,
2002, we will have all the agencies of USDA up, which is 17
individual applications in 4 years. This is a phenomenal amount
of progress. Together with that we're continuing to work on
these corporate systems. When we get the money for corporate
systems we're ready to launch with our procurement system.
We're ready to look at some approaches for our payroll systems.
I think we're very well positioned to move forward.
Mr. Horn. Now, do you have that money now, or is it in the
current fiscal year, or is it waiting for the next fiscal year?
Ms. Healy. We will get it once we get the plan--the
approval from the Appropriations Committees, House and Senate,
then we should get that money this year, and it will become
basically, as I understand it, available until expended in the
Working Capital Fund.
Mr. Horn. What are we talking about in numbers; how much?
Ms. Healy. Right now the preliminary plan we've developed
for the administrative systems was about $160 million, to the
best of my knowledge. And then there was one of the commodity
systems that was about an additional $90 million.
Mr. Horn. What programming money do you have that you can
utilize and get this show on the road?
Ms. Healy. I'm not entirely sure what is available.
Mr. Horn. Usually in an agency budget, they give
reprogramming authority.
Ms. Healy. Oh, I see.
Mr. Horn. That the Secretary could signoff on.
Ms. Healy. Right.
Mr. Horn. And that the ranking member and the majority
Chair----
Ms. Healy. Right.
Mr. Horn [continuing]. Could sign it off. That would save
you a lot of going through this drudgery of budgets and
appropriations at all. And that's what we told them to do on
the Y2K thing. I don't know if you were around then.
Ms. Healy. No, I wasn't.
Mr. Horn. But that was the way a lot of agencies solved the
problem, and that's what they ought to be doing with money at
the end of the year, not just waste it, but put it to good use.
Ms. Healy. Well, I think part of the constraint here is
that in the CFO's office, we only have an appropriated budget
of about $5 million. So there really isn't money budgeted there
for the administrative financial systems. The money comes from
the Working Capital Fund, and what we do is we go before a
Working Capital Fund committee to justify the expenditures, and
then basically we get the money from the individual agencies
into the Working Capital Fund.
The struggle has been and remains, that their budgets have
been declining, there has not been a lot of extra money around
to fund this, and we did have FFIS ongoing, presenting a large
expense to the agencies. So that's why we did ask for this
authority to try to tap into unobligated balances so we could
go across agency lines, which we really can't do now in the
Chief Financial Officer's office.
Mr. Horn. I'm going to my 10-minute mark, so I'm yielding
to the ranking member here, Ms. Schakowsky, to ask questions.
Ms. Schakowsky. I'm new to this subcommittee and relatively
new to this Congress, and I have to tell you, I'm pretty
astonished by the differences. One would think that there might
be some best practices that then get adopted by not only
agencies within the Department, but between agencies. So that
it seems like when we--in the three hearings that we have had
on Defense and USAID and now Agriculture, that--everybody sort
of starting from ground zero and trying to figure out--you have
the new FFIS system. Someone else has Phoenix, an off-the-shelf
system, and everybody has to figure it all out from scratch.
Did I just hear you say that agencies within the Department
have not been able to cross-communicate? I'm just trying to
understand these--what seem to be fundamental inefficiencies
that happen, if they're just historical, and how soon--I guess
for the bottom-line, how soon do you think that you'll be able
to have--receive an opinion on your financial statements?
Ms. Healy. Well, I didn't say that the agencies didn't
cooperate. It's the money that can't be transferred across the
agency boundaries. But I think one good thing is I've been at
USDA a little less than 3 years, and before that I was in the
Department of Treasury, and before that I was at the National
Institutes of Health. There are a lot of common problems across
the government, and I think one of the things that was
encouraging here at USDA is that they have centralized a lot of
their administrative and financial processes, at least for the
S&E accounts, which is really good, at the National Finance
Center. The problem is there is not a funding source that was
readily available to keep those systems upgraded and well
funded, to keep them new and working well, and to provide good
internal controls in order to move with the times.
The National Finance Center is fully funded by
reimbursements from agencies. They get no appropriation, and
what this means is that all the users, through the fees that
they're charged, pay for the services. But there is not a good
mechanism for providing capital money to the National Finance
Center to upgrade systems, etc. So, when you go to do these
systems, these huge systems that need to be done, you go out to
the agencies and you start trying to ask them for money that
they have there. Although they have budgeted for programs, they
haven't necessarily budgeted for these systems, because in many
respects, they're not there before them. They're looking at
their own systems and program areas. They're not looking at
what we might need for the centralized systems. So, if there's
a flaw in how this was designed it is that there was no
sustaining source of capital money to make improvements to NFC.
Now, realizing that, last year we worked very hard with all
the people in USDA to get a proposal to the Hill, and with the
agencies to talk to OMB and to work with the committees to ask
to be able to use these unobligated balances that probably
won't be used. If we can tap into those balances, we can get
this desperately needed capital money to upgrade these systems.
I think you'll find throughout the government that one of
the problems is just trying to fuse capital money into things
for administrative operations. Also, over the last number of
years, particularly over at USDA, we have lost a considerable
amount of administrative staff, and it promises to get worse as
the retirements that you hear about and you've been reading
about in the papers and that Mr. Walker is concerned about come
on the horizon.
So we are facing the problem. We think we have a plan to
address it, but funding and resources is key, and also being
able to attract new people into the government to fill our
shoes. A lot of us are getting old, gray and rickety, and there
aren't people behind us, and that troubles me more than
anything. When we try to hire people to come in to get the
institutional knowledge, and you have to have some, they're
simply not there.
Ms. Schakowsky. Well, so how soon do you think that we will
be able to--I mean, I understand all these problems, but,
nonetheless, the U.S. taxpayers will want to be able to look
and see that the agency is run efficiently and that the money
is being spent well. When do you think that we will be able to
have an auditable opinion on the financial statements?
Ms. Healy. I am hopeful that the opinion for the fiscal
year 2001 statements will be an improved opinion. I think the
key is we're getting FFIS up. That's going to take care of a
major material weakness. We have major efforts that have been
completed and efforts that are promising to be completed in the
next number of months before the end of the fiscal year in
credit reform.
The Forest Service has worked very, very hard on correcting
their financial management deficiencies, particularly in the
area of property. And property is material to the USDA
consolidated statements. They already have the roads taken care
of, which is 57 percent of their real property. They're working
with their field now to get the rest of the real property.
I went out with them last year to look at what their
problems were. They are addressing them and putting resources
to these problems. They are taking it very seriously.
With respect to one other item, the cash reconciliation, we
put in a major effort at the National Finance Center into
reconciling our fund balances with Treasury. In March, I was at
a meeting with all of the agencies and with the National
Finance Center to identify the last items that we need to
address to take care of the old items and to stop the problems
going forward, and we have identified those things. We have an
action plan, and we intend to put in a sustainable process and
to watch this and to make sure that we do not slip backward.
We're always going to have timing issues with respect to
cash, but we just want it to be timing issues and then we want
to be able to address those timing issues and to try to
reconcile cash as soon as possible. So I think we have a very
good shot at at least a qualified opinion next year. I don't
like to promise an opinion. It is Roger's opinion. It's not
mine. But I do think we have a very good shot at it.
There's a lot of people working very hard, very diligently,
taking this very seriously. I can assure you we do not want to
be sitting out here with a disclaimer, and we want sustainable
processes. I do not want to have one of these heroic efforts
that every year we kill people to get to a number, then next
year we've got to kill people again. So that's what we've been
focusing on, fixing the core problems; and I think if we get
these corporate administrative systems that will help us fix
another core problem that will stop feeding us bad data into
our ledgers.
Ms. Schakowsky. Let me ask another question that you
actually may have answered before I came in. I know that you've
dealt with the Federal credit issues, but the Federal credit
agencies have been required to estimate the cost of their loan
programs in accordance with the requirements of the Federal
Credit Reform Act since 1992. And USDA is currently the largest
direct lender in the Federal Government that is not capable of
reasonably estimating the cost of its credit programs. These
requirements are over 8 years old. Why has it taken so long to
address this issue?
Ms. Healy. As I said, I've only been here a little over
2\1/2\ years, so I am not entirely sure of the history. I do
know in 1999, recognizing that this was not moving forward, the
Chief Financial Officer at the time did convene a working group
with all the agencies involved, with the IG, GAO, and OMB to
address the issues and to get it on track, and it is on track
now.
Ms. Schakowsky. OK. Thank you very much. I would yield
back.
Mr. Horn. Gentleman from Florida, Mr. Putnam, for
questions.
Mr. Putnam. Thank you, Mr. Chairman. I appreciate your
having this hearing. I happen to serve on the Agriculture
Committee and on the Budget Committee. So I feel like we've
kind of come full circle. We gave them the money. We have some
sense of how we're instructing them to spend it, and now we're
addressing the consequences of that.
Ms. Healy, I understand the difficulties of trying to put
together a perfect financial statement, particularly for an
agency like forestry, where you have millions of acres and
roads and barns and tractors and equipment and everything else.
So I can understand the inherent difficulty in managing that.
But $274 million? I mean, that's more than forgetting to
include the pool barn in the Black Water National Forest in the
Panhandle of Florida. I mean, this is of criminal proportions,
the extent to which there is neglect or lack of accountability.
Could you give us some estimate of the amount of overpayments
or improper payments that your vendors received in the course
of doing business with the Department of Agriculture, perhaps
payments for goods and services that aren't received, things of
that nature?
Ms. Healy. The $274 million was not for improper
overpayments. What caused that was really a manifestation of
the fire season last year. That was an extraordinary fire
season. It was a late fire season, and what happened was people
did not put obligations into the financial system in a timely
manner so people could do good estimates about what they
thought the fire was going to cost. As I understand it, Forest
Service has internal authority to move money around and did not
realize how much money would have to be moved in a timely
manner to move it by September 30th.
The $274 million are legitimate obligations that they did
incur as a result of fire. There were obligations with various
States, with vendors, etc. The Forest Service did take this
seriously and have formed a group. I can also assure you that
the Secretary of Agriculture takes it seriously. Many people
have been involved in looking at what happened, why it
happened, and how we can stop it from happening again.
There will be fires every year. We have to have good
processes in place, and some of these processes are not
systems. They're simply having good procedures and policies in
place out in your organization so the people know what to do,
when to do it, and how to do it.
I think part of--you had the fire season. You had them just
up that year on the new accounting system, learning things. I
think one of the things we have to make sure we do very well is
make sure that people out in the field clearly understand how
to do their jobs with the new system, how to get things in
there in a timely manner, how to get these things to the right
place so they can be entered, and what the communication lines
are.
I think, coupled with bringing up a new financial system
and having an extraordinary fire season, I think some of the
things simply just got lost. Not lost in that they were
misplaced but that people just didn't get them there in a
timely manner. They were able to quantify that, though, within
a matter of time, how much it was, but they were too late to
save the September 30th day.
Mr. Putnam. Outside of the $274 million, though, do you
have an estimate on instances and totals of improper payments
or payments for goods and services not received? Does that ever
happen in----
Ms. Healy. I am not aware of any audit findings related to
improper payments with our administrative and financial
systems.
Mr. Putnam. Not even in the food stamp or nutrition
program?
Ms. Healy. In food stamps I think there may have been some
things, but I don't know all the details on the food stamp----
Mr. Putnam. Isn't that part of the USDA?
Ms. Healy. Yes, it is.
Mr. Putnam. And you're the Chief Financial Officer of USDA?
Ms. Healy. Yes, sir, I am.
Mr. Putnam. Now, does the Inspector General have an
estimate on overpayments or improper payments in that area?
Mr. Viadero. On food stamps we estimate it at about $1.2
billion. That's money that the States and individuals owe us.
It's a combination of excessive payments to recipients and
payments to the States that were offered certain administrative
payments and didn't do their job.
Mr. Putnam. $1.2 billion. Is that----
Mr. Viadero. Yes, sir.
Mr. Putnam. It's about that every year?
Mr. Viadero. Yes. Although it has been decreasing to some
extent over the past few years.
Mr. Putnam. Now, are there any other glaring areas within
the Department that have a higher than usual number of improper
payments or accounting problems?
Mr. Viadero. Mr. Putnam, I'd ask Mr. Ebbitt to join me on
this.
Mr. Ebbitt. Mr. Putnam, the food stamps are probably the
most measurable--it's the most measured. They have a regular
system--a quality control system in place that actually
measures the rate of error. While that number is exceptionally
high, there's no doubt about it, when you're talking in terms
of gross dollars, the rate is actually down.
The last report from the Food and Nutrition Service brings
that rate of overpayment down--I just talked to the folks last
week. It was down around 6 percent, 6 percent overpayment rate.
You factor in a certain amount of underpayment rate, that
pushes that rate up to 8 or 9 percent across the country, and
you come up with roughly $1.3 billion.
There are no similar measurement systems currently in
place. For example, in the National School Lunch Program that
feeds all of our Nation's children throughout the country,
there is not a similar process to measure overpayments within
that program. So, I mean, the USDA has about 300 programs that
operate, and food stamps would come out--would stick out as the
most--as I indicated, the most measured as far as overpayments
are concerned.
I am just trying to think out loud here.
The Secretary in the report that comes up on the semiannual
basis indicates two things. It indicated amounts of claims that
are established throughout the Department and then amounts of
recoveries associated with those claims. I don't know those off
the top of my head, but I know there's information there that
will give you that kind of information.
Mr. Putnam. Is there a mechanism in place to audit or
provide some accountability for not just the food stamp program
but for all of the different commodities programs, the AMTA
payments and things of that sort? Is there some type of an
audit mechanism in those programs?
Mr. Ebbitt. Well, absolutely. That's what we do on a daily
basis with Farm Service Agency.
For example, in AMTA payments, all the payments that occur
to Farm Service Agency, what we want to do is be out there as
soon as the program is announced, as soon as farmers are coming
in to sign up. We want to have the auditors out there working
with Farm Service Agency staff as those applications come in.
So that, if we see a problem early on, we can get it to
management and they can deal with it before the overpayment
occurs.
Hopefully, we either stop overpayments before they're
happening, No. 1, or, No. 2, we make sure that farmers get what
they're deserving of in that particular program. That's where
we're most effective, when we can be onsite doing that kind of
an effort.
And we do that every time. Each year as these new programs
come out, any new emergency programs or whatever, that's when
we want to be out there; and we have a good working
relationship with Farm Service Agency. With Rural Development,
the people that are administering the credit programs, we do
the same kind of thing.
Mr. Putnam. Ms. Healy, one of the reasons that you
attributed to a number of these financial problems was a
reduction in the number of people working in this area. How
many people do work in this area in the financial
administration portion of the Department?
Ms. Healy. Overall in the Department? I don't have the
figure at my fingertips at the moment, but I could get it for
you.
Mr. Horn. Without objection, it will be entered into the
record at this point.
Ms. Healy. OK.
[The information referred to follows:]
Administrative and Financial Management Employees within
USDA: FY 1993 baseline 9,560; FY 2000 actual 7,132; Decrease
2,428.
Ms. Healy. But I do know that overall in the Department
there's been about a 28 percent decline in the number of people
working in those areas.
Mr. Putnam. In what areas?
Ms. Healy. Administrative and financial areas since about
1995.
Mr. Putnam. 28 percent from----
Ms. Healy. Uh-huh.
Mr. Putnam. But you don't know 28 percent from what? 28
percent----
Ms. Healy. I don't have the figure. I know last year this
was one of the issues we were discussing when we were talking
about the administrative and financial systems. Part of the
rationale for how quickly we needed to get them done was that
the administrative and financial people had been cut, and this
has happened throughout the government, too, where they've been
cut in anticipation of systems coming on-line that haven't come
on-line. But I don't know the overall number. I'd have to get
the information for you.
Mr. Putnam. Do you know--I know there's no reason why you
would know this, but do you happen to know, since you're not
the information technology person, what your Department spends
on the information systems to process these types of accounting
measures?
Ms. Healy. Overall, no, I don't. I can get you that figure
as well, too.
Mr. Putnam. I would appreciate that.
Ms. Healy. OK.
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Mr. Putnam. Mr. Chairman, my time is expired.
Mr. Horn. Well, you can continue another 2 minutes.
Mr. Putnam. Thank you, Mr. Chairman.
Ms. Healy, you have worked in a number of different
departments. You said that you worked for Treasury and NIH. In
addition, you worked with Agriculture. Is there something
endemic to government--this isn't unique to USDA. We had the
Pentagon this morning. Y'all just happen to be the biggest,
which means that y'all are the worst. And you haven't produced
a clean statement in 5 years, and who knows before that,
because Congress couldn't produce a clean statement before 5
years ago, and so they probably didn't bother to ask anybody
else to produce one.
But what is it about government that nobody seems to be
able to produce good numbers? Or if they can manage to produce
a clean audit, it's kind of a snapshot. We've got everybody
moving in the same direction and managed to meet the deadline
and got it this year, but we didn't have it last year, and
we're probably not going to get it this year. There's no
system. There's no good accountability at any level. Based on
your experience in a number of different departments of this
government, how can we improve that?
Ms. Healy. Well, I think we are in the process of improving
it, and I think we're very early in the process. It doesn't
seem that way, but in many respects, it is.
When the Chief Financial Officer's Act was passed in 1990,
basically the way the government worked was you got a budget,
you spent your budget, and that was pretty much the results
that people were looking for. Now with the Chief Financial
Officer's Act, there were new requirements that were put out
there about actually having financial statements, much like the
corporate world. And there are differences.
I think part of the struggle you're seeing is that the
government is not a corporation. There are other things we have
to deal with, including budgets, and appropriations language
and a variety of other parameters that are put on us that
aren't out there in the private sector. Plus, we have to deal
with the fact that we don't always choose our customers, and we
have problems that corporations don't have or choose not to
have.
So I do think we're in the early stages of doing this. As
Chief Financial Officer of USDA, I am on the CFO Council. This
is something that we discuss often. When the CFO Council
started, we were trying to work together cross-government to
share ``best practices'' with each other, to look at things
that can be improved, to look at processes that we can work on
together to improve and also to look at the processes that are
out there in the central agencies that could be causing
everyone difficulties. Are we being well served by the Treasury
systems? Are we being well served by other systems that we're
required to use out there?
So I do think we're early in the process, but you have an
awful lot of people who are looking at this and trying to move
forward with it.
I think, with respect to USDA, as I said, we were hampered
by internal resources. Everybody has been to a degree, and
that's why you see heroic efforts. People know what has to be
done. I think we're at a time when the resources are limited.
Also, my personal opinion is we have to take a look at some
of the requirements we're putting out there to say, does this
make sense overall? Will this help us manage the government
better?
Certainly a clean audit opinion is a marker. It says, at a
minimum, your numbers are fairly stated. But you don't use
those financial statements to manage the government. You use
the underlying data. So can we collect the data well? Do we
know what data we need to manage? Do we know what performance
measures are right for us?
I think we're early in that process, too, but a lot of
people are working hard and earnestly to get us there. I think
it will take some time, some iteration. I think we've gone down
some paths that maybe--well, that isn't exactly where we need
to go.
I should also point out that, as we go forward with these
processes of audit, one of the things that I've discovered is
that it's a learning process, not only for those of us in the
financial community but for those in the audit community. The
auditors in the government previously didn't audit financial
statements the way the private sector does, so we're learning
together, and we're learning to figure out what makes sense for
government with some of the problems that we have that you
wouldn't encounter in the private sector.
So, it isn't that we can't do it. We're just new at doing
it. I think we will get to good financial numbers. I think this
is giving us the discipline, these financial statements. I
don't think they're the final answer, but I know that we are on
the track to get there.
I do think we are limited by resource constraints, and I
would say the thing that is creeping up, that David Walker is
talking about, is the idea of human capital. We need to get
some good talent into government. Even if you contract it out
and if you agree with the concept of contracting out, you need
good people to manage the contractors, who understand what the
programs are about, who have institutional memory, who can
point this out to people.
So I think we need to attend on a variety of fronts if
we're going to be successful moving forward and managing our
departments well.
Mr. Horn. I think that's well said on the matter of human
capital. Both Congress and the executive branch have, frankly,
lagged behind as to what's needed in the next generation, as
some very able people are looking for retirement, and those
slots have to be filled. And particularly it is important for
those in information management and also in the finance
situation. It's a lot more difficult than it is in most private
corporations, and there's also a lot more responsibility when
you get into government.
You'd be sitting around in a lot of corporations for 10
years before you did much. Whereas bright people coming into
government can have a lot of responsibility, and they certainly
do in the services, but we also are doing it in the
nonservices. In the 1930's and 1940's we had a real program of
interns that one could see what's around and see if they want
to stay. I happen to be a big drum beater for interns and being
given responsible positions.
I am going to close with something dear to my heart, which
is the debt collection situation. What processes does the
Department of Agriculture use to identify and recover the
improper payments that have been made at various agencies of
the Department throughout the Department? You have a big center
in New Orleans, how much are we doing to get improper payments
back in control, into the taxpayers' Treasury?
Ms. Healy. Well, what we're doing is referring debt over to
the Treasury offset program for collection, and we're referring
more and more of it, including some of the food stamp debt and
the NFC debt. So, we are sending more for the offset, and,
until the 180-day parameter, we are using our internal
collection procedures to improve our collection activities. We
are working our loan portfolios.
Mr. Horn. Well, are you collecting it yourself, or are you
turning it over to financial management in the Treasury?
Ms. Healy. We're doing both.
I think with respect to the recent waiver that I saw for--
and I may misspeak this, so I may need to be corrected here--
for Rural Development was we didn't want to just have our
program payments offset by Treasury, because it would be using
government money to pay off a government debt. So, some of that
was exempted. But the rest of it we are getting ready to send
off to offset. We haven't done that yet, but we are working to
do that and to make sure that we can use the tools available to
us for debt collection.
Mr. Horn. Well, before you do that, is there a way that the
person that holds the loan or has defaulted on the loan or
whatever you want to call it, does anybody phone them up?
Ms. Healy. Oh, yes.
Mr. Horn. Does anybody send them a letter?
Ms. Healy. Yes. My understanding from when I went out to
the center in St. Louis was that they do make lots of efforts
to get the person who borrowed the money to pay it back. They
work with the individual to restructure the loans if need be.
So they do a significant amount of work in that area.
Mr. Horn. Could you give us an idea of the nutritional
benefit programs? We all know about the food stamp program. We
know about the school lunch program. What else is there?
Ms. Healy. I am afraid I don't know.
Mr. Horn. Well, the Inspector General has a nice neat
plastic clip there, I think, that has all who does what.
Ms. Healy. OK. I don't have one.
Mr. Viadero. I have neat things on this plastic clip, Mr.
Chairman. But if we can get back to a statement you just made.
Mr. Horn. How many have we got--you must know--on all the
nutritional programs?
Mr. Viadero. Oh, quite a few. We have the Child and Adult
Care Feeding program, WIC, the nutrition education program.
Mr. Horn. I would just like--if you could put your heads
together, and let's get it in the record. I'd just like to see
the scope of this.
Mr. Viadero. What I would like to get on the record, Mr.
Chairman, is that Rural Development insofar as getting these
loans paid back, delinquencies and debt recovered, they need to
publish regulations to get this done. They haven't published
any regulations in that venue yet.
Mr. Horn. So where is that? Is that in the Chief Financial
Office of the Chief Information Officer?
Mr. Viadero. That's with the Under Secretray for Rural
Development, and they've known about that for quite a while.
Mr. Horn. How about it, Ms. Healy? Is that something you've
got on your agenda?
Ms. Healy. I will certainly talk to them about it.
Mr. Horn. Yeah. Well, I would hope that when new appointees
are--and I've said that on our transition bit for the
Presidents and their Cabinet, is that they would talk to the
Inspectors General, look at what they have, and also with the
Comptroller General and the General Accounting Office, also
with the budget examiners in OMB. If you hit those three
groups, you would know what you're needed to do in your
particular area, and that's very important.
And I think as the Inspector General and others of your
colleagues, which are very essential in this government, on the
human capital bit, are there papers being put out by the
Inspectors General on where an agency is going and at the trend
line of retirement where the vacancies are going to be?
Mr. Viadero. Well, sir, just in the past 5 years my office
alone has suffered a 24 percent reduction in personnel because
of--well, basically, we got flatlined on the budget. We had
zero growth. And since we have many criminal investigators on
board, their pensions are computed differently.
So when--you know, people come out with an FTE. An FTE is
not a full FTE. If you're a criminal investigator, that's like
a 0.7 of an FTE, if you will. So we keep losing in the FTE camp
as it goes up. We're finding it very, very difficult just to
maintain what we have.
Our staff is very loyal and very dedicated. Of course, Mr.
Ebbitt is leaving us at the end of the month. He's the--Mr.
Mosley's Deputy Inspector General at the end of the month. So
there again, human capital, Agriculture is losing a key player
here.
Mr. Horn. So you're going to AID?
Mr. Ebbitt. Yes, sir.
Mr. Viadero. You can see him next year, too.
Mr. Horn. That's right.
Mr. Ebbitt. Earlier time?
Mr. Horn. Well, anything you'd like to say in summing up
that we haven't said?
Ms. Healy. I'd just like to thank you for giving us this
forum and also to thank the Appropriations Committees for the
opportunity to apply a plan for the unobligated balances which
will be critical for us to move forward. We will keep working
on these issues, Mr. Chairman; and I do hope to have a better
result for you next year.
Mr. Horn. Well, thank you. Both the majority and the
minority will probably have some questions to ask and put in
the record. This will be done without objection at this point
in the record.
Let me thank the people that have been staffing these three
hearings: J. Russell George is right behind me, the staff
director and chief counsel.
Diane Guensberg, on loan from the General Accounting
Office. I am sorry to say that she will be returning to the
General Accounting Office. She has done a great job for us over
the years, and we appreciate it.
Bonnie Heald, director of communications, also back there;
Earl Pierce, professional staff; Grant Newman, assistant to the
committee and the clerk and the sergeant at arms, the whole
works. Alex Hurowitz is a new intern.
And we have the minority staff: Mark Stephenson,
professional staff; and then Jean Gosa, minority clerk; and our
two very good reporters. Our court reporters are Leanne Dotson
and Julie Thomas.
With that, we adjourn and go into a markup.
[Whereupon, at 2:40 p.m., the subcommittee was adjourned.]