[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
____________________________________________________________________________
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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.
    [The information referred to follows:]

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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.
    [The information referred to follows:]

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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.]

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