    [Senate Hearing 109-488]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-488

          NOMINATIONS OF CHARLES R. CHRISTOPHERSON AND JAMES M. ANDREW

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

                                    HEARING

                                   before the

                           COMMITTEE ON AGRICULTURE,
                            NUTRITION, AND FORESTRY

                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                   __________

                               NOVEMBER 10, 2005

                                   __________

                           Printed for the use of the
               Committee on Agriculture, Nutrition, and Forestry

      Available via the World Wide Web: http://www.agriculture.senate.gov

                                     ______

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               COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

                       SAXBY CHAMBLISS, Georgia, Chairman

    RICHARD G. LUGAR, Indiana            TOM HARKIN, Iowa
    THAD COCHRAN, Mississippi            PATRICK J. LEAHY, Vermont
    MITCH McCONNELL, Kentucky            KENT CONRAD, North Dakota
    PAT ROBERTS, Kansas                  MAX BAUCUS, Montana
    JAMES M. TALENT, Missouri            BLANCHE L. LINCOLN, Arkansas
    CRAIG THOMAS, Wyoming                DEBBIE A. STABENOW, Michigan
    RICK SANTORUM, Pennsylvania          E. BENJAMIN NELSON, Nebraska
    NORM COLEMAN, Minnesota              MARK DAYTON, Minnesota
    MICHEAL D. CRAPO, Idaho              KEN SALAZAR, Colorado
    CHARLES E. GRASSLEY, Iowa

                Martha Scott Poindexter, Majority Staff Director

                    David L. Johnson, Majority Chief Counsel

                  Steven Meeks, Majority Legislative Director

                          Robert E. Sturm, Chief Clerk

                    Mark Halverson, Minority Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing(s):

    Nominations of Charles R. Christopherson and James M. Andrew.....    01

                                  ----------

                          Wednesday, November 10, 2005
                        STATEMENTS PRESENTED BY SENATORS

    Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman,
      Committee on Agriculture, Nutrition, and Forestry..............    01
    Crapo, Hon. Mike, A U.S. Senator from Idaho......................    02

                                   WITNESSES

    Christopherson, Charles R. Jr., of Texas, to be Chief Financial
      Officer, U.S. Department of Agriculture........................    04
    Andrew, James McRae, of Georgia, to be Administrator of the Rural
      Utilities Service, U.S. Department of Agriculture..............    06
                                  ----------

                                    APPENDIX

    Prepared Statements:
        Christopherson, Charles R....................................    16
        Andrew, James Andrew.........................................    19
    Document(s) Submitted for the Record:
        Christopherson, Charles R. (Biographical Information)........    22
        Andrew, James Andrew (Biographical Information)..............    46
    Questions and Answers Submitted for the Record:
        Harkin, Hon. Tom.............................................    77
        Salazar, Hon. Ken............................................    79

          NOMINATIONS OF CHARLES R. CHRISTOPHERSON AND JAMES M. ANDREW

                                  ----------

                          WEDNESDAY, NOVEMBER 10, 2005

                                  United States Senate,
             Committee on Agriculture, Nutrition, and Forestry,
                                                         Washington, DC
        The committee met, pursuant to notice, at 9:02 a.m., in
    Room 328A, Russell Senate Office Building, Hon. Saxby
    Chambliss, chairman of the committee, presiding.
        Present or submitting a statement: Senators Chambliss,
    Thomas, Crapo, Harkin and Salazar.

    STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM GEORGIA,
      CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

        The Chairman. This hearing will come to order, and good
    morning.
        We are here today to hear testimony from two nominees for
    important posts at the U.S. Department of Agriculture: James
    Andrew, nominee for the position of Administrator of Rural
    Utilities Service; and Charles Christopherson, nominee for the
    position of Chief Financial Office.
        It is with great pleasure that I welcome Jim Andrew to the
    committee. Jim has been a businessman, a community leader in
    Georgia for many years. I am pleased that he is willing to come
    to Washington and engage in public services at the Federal
    level.
        The Rural Utilities Service provides important services in
    rural America, including electrification, telecommunications,
    drinking water and waste disposal systems, broadband access,
    telemedicine and distance learning. Millions of rural Americans
    have better lives because of these programs, and we are
    fortunate that people like Jim Andrew are willing to give of
    themselves in service to our country to improve the lives of
    our fellow citizens.
        I appreciate that Jim shares my love for golf, and more
    importantly, that he shares my commitment to continue to make
    our country a better place for all Americans, especially for
    those in our rural areas.
        And on a personal note I would say that I have known Jim
    for, gee whiz, longer than either one of us want to remember at
    this point in time, but we have been friends through the years.
    Jim is from Jenkins County, Georgia, near a little town called
    Millen, and Jim grew up in the rural electrification industry
    in our State, and the fact that he is from Millen, Georgia, and
    the fact that he was employed by the George Electric Membership
    Corporation early, is a sign of how significant a contribution
    he has made to the rural utility industry in Georgia,
    particularly the Georgia Electric Membership Corporation,
    because I was involved in that industry for 25 years
    representing a co-op in my hometown, and because Jim is from
    Millen, he was selected by the godfather of the Electric
    Membership movement in Georgia, Mr. Walter Harrison.
        That says an awful lot about you, Jim, because knowing Mr.
    Walter like I did for so many years, knowing his love for rural
    America and for the electric utility system, the fact that he
    chose you to go to work at GEMC says an awful lot about your
    commitment to rural America, and your commitment to the
    electric utility industry, so needless to say, I am very
    pleased that you have decided to, at this stage in your life,
    to move to a different level and come to Washington to serve
    your country in a different capacity. And as a Georgian and as
    a personal friend, I am very, very proud to have you here this
    morning.
        I also welcome Chuck Christopherson, and am pleased that he
    is willing to take on the task of being Chief Financial Officer
    of USDA. If the Department of Agriculture were a private
    enterprise, it would be the sixth largest company in the United
    States. USDA has over 100,000 employees, 14,000 offices and
    field locations, $128 billion in assets, and provides
    approximately $100 billion in loan guarantees and insurance.
    Obviously, it is a major job to oversee the finances of such a
    large organization, and I am grateful that Chuck Christopherson
    is willing to take on this important responsibility to ensure
    that USDA performs its duties commensurate with the standards
    that American taxpayers deserve and expect.
        My colleague Senator Harkin is here. Tom, I will be happy
    to recognize you for any opening comments you wish to make.
        The Chairman. All right.
        The Chairman. I would like to turn to Senator Mike Crapo
    for any opening comments you wish to make, Senator.

        STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM IDAHO

        Senator Crapo. Thank you very much, Mr. Chairman. I
    appreciate your holding this hearing, and I especially
    appreciate the opportunity to make a personal introduction of
    Mr. Charles Christopherson. Those that submit themselves to the
    confirmation process deserve our respect, and we owe it to them
    and the public to consider their nominations in a timely
    fashion, and I appreciate the fact that we are doing that
    today.
        Today we consider two important positions at the Department
    of Agriculture. The Chief Financial Officer plays an important
    role in instituting the processes that promote the sound
    stewardship of taxpayer dollars. The Rural Utilities Service
    Administrator manages many of the programs that are so vital to
    our rural communities. Both positions require strong managers,
    and in both cases the President and Secretary Johanns have made
    good choices.
        Clearly Mr. Andrew is well qualified. His background shows
    a devotion to rural America and the experience to succeed at
    RUS. He will be administering programs of great importance to
    the communities in my State, and I look forward to supporting
    his confirmation and working with him when he is confirmed. I
    should warn you, however, Mr. Andrew, that I have a keen
    interest in many of the RUS programs and will probably be in
    touch frequently.
        I want to take a moment now to introduce Charles
    Christopherson, who has been nominated to serve as the
    Department of Agriculture's Chief Financial Officer. As CFO he
    will have responsibility over USDA's financial management
    functions. Although he now lives in Texas, Mr. Christopherson
    has deep roots in Idaho. Mr. Christopherson's family is from
    Twin Falls, Idaho. Twin Falls sits on the Snake River in the
    center of Southern Idaho in an area known as Magic Valley.
        By the way, my mother was born in Kimberly, which is just a
    little town a couple of miles outside of Twin Falls, and I
    spent a lot of my years there visiting my grandparents. So even
    though I live in Idaho Falls, Twin Falls is a very special
    place to me and the Magic Valley is a special part of my
    childhood.
        The Magic Valley has long been home to strong agricultural
    industry. Mr. Christopherson's connections to this important
    part of Idaho will serve as a good reminder of the impact that
    USDA's policies have in our own communities.
        I am also confident that his education and business
    experience will be a great asset to the Department. I do want
    to point out that Mr. Christopherson is a graduate of Brigham
    Young University's Marriott School of Management. While I have
    a little bias in his college selection, because I too am a
    graduate of BYU, the accounting program is nationally
    recognized.
        Mr. Christopherson's business experience demonstrates his
    ability to thrive at every level and to apply his experiences
    effectively to each succeeding endeavor. He has had success in
    financial management, integrating controls in operations and
    finance, and working to turn around companies that are in
    difficult financial situations. But one thing that has
    impressed me is the fact that as a consultant he went into
    well-established, well-performing companies and made a
    difference.
        Mr. Christopherson has demonstrated the tools to be an
    effective CFO for the Department of Agriculture, and I support
    the President's nomination of him, and look forward to working
    with him, and recommending him to my colleagues.
        Thank you.
        The Chairman. Thank you, Senator Crapo.
        Senator Thomas, do you have any opening comments you wish
    to make?
        Senator Thomas. Not really, Mr. Chairman. I just want to
    thank you for having this. I think it is important that we move
    these offices to fill them, and certainly I am impressed with
    the nominees we have. I guess I have to admit some particular
    interest in the rural electric aspect of it, having spent a
    good deal of my career in that area, but I think they are very
    important, both of them, for the future of agriculture, and as
    rural electric responsibilities and service areas change, we
    are going to see a lot of changes there. So I certainly am
    supporting them.
        Thank you for having this hearing.
        The Chairman. Senator Salazar, any comment you wish to
    make?
        Senator Salazar. I would only say, Mr. Chairman, thank you
    for holding this hearing. Thank you as well for holding the
    hearing yesterday on fuel costs and agriculture, and Senator
    Harkin, thank you as well.
        And to Mr. Christopherson and Mr. Andrew, I look forward to
    working with you on issues relating to agriculture, and matters
    relating to utilities and making sure that the parts of America
    that are sometimes forgotten are not forgotten in your minds or
    in the minds of this committee or this country. I look forward
    to supporting your nominations.
        The Chairman. Gentlemen, before I ask you to present any
    opening statements, would you both raise your right hand? Do
    you solemnly swear the testimony you're about to give before
    this hearing today will be the truth, the whole truth and
    nothing but the truth, so help you God?
        Mr. Andrew. I do.
        Mr. Christopherson. I do.
        The Chairman. To each of you, do you agree that if
    confirmed you will appear before any duly constituted committee
    of Congress if asked?
        Mr. Andrew. Yes.
        Mr. Christopherson. Yes.
        The Chairman. Mr. Christopherson, we will turn to you first
    for any opening statement you wish to make

     STATEMENT OF CHARLES R. CHRISTOPHERSON, JR., OF TEXAS, TO BE
        CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF AGRICULTURE

        Mr. Christopherson. Thank you, sir.
        Mr. Chairman, Senator Harkin, and distinguished members of
    the committee, I am grateful and honored to be here today as
    the President's nominee for the Chief Financial Officer of the
    U.S. Department of Agriculture.
        With me today are my wife, Colleen, and my eldest daughter,
    Chelsey. We have three other children at home in Texas. We have
    Alexa, age 8, Chase, age 4, and Caleigh, age 2. I apologize
    that they cannot join us today. However, if Caleigh and Chase
    were here, I believe that they would be much more entertaining
    than my opening statement.
        I am humbled to be considered for a position with the
    Department of Agriculture. The myriad programs of the USDA
    affect the lives of all Americans, and they have affected mine.
    I was born in the farming community of Twin Falls, Idaho. The
    majority of my family, including grandparents, father, brother,
    uncles, aunts and cousins, still live in the greater Twin Falls
    region. When I was young, my grandfather managed the largest
    tractor repair facility in the area. At certain times of the
    year, which was planting and harvesting, we would get calls in
    the evenings or on weekends, and we would climb into the pickup
    truck and head out to the farm to repair a tractor. So you can
    say fairly young in my career I was already serving the farmer.
        I have been exposed to the broad scope of the USDA
    programs. Growing up, my parents were in the forest products
    industry, and so therefore, they worked with the U.S.
    Department of Agriculture's Forest Service. In my career I
    became familiar with the USDA's Rural Development Agency while
    I was employed with one of the largest rural telecommunications
    carriers in the United States.
        This telecommunications company provided a strong
    foundation for my executive career. At this company the
    executive management team mentored the managers and the
    managers mentored their teams. The teams worked hard and the
    culture accepted no less than the best performance. In this
    environment, our small financial team implemented new
    technology and reorganized processes to exceed current best
    practice standards for a financial close. These adjustments
    automated key processes that increased integrity of the
    information. Reporting timelines were reduced from
    approximately 20 days to 4 business days. We used cutting edge
    technology to report information to the desktop computers of
    our executives. The improvements also provided other benefits,
    including a reduction in audit fees, quicker audit opinions and
    fewer audit notes. Almost 15 years ago this was a remarkable
    accomplishment for a public corporation and it was an honor to
    manage this team.
        Since that time I have had the opportunity to consult and
    lead teams in the structuring of business processes,
    information reporting, budgeting and management systems. Our
    clients were several of the largest corporations in retail,
    equipment manufacturing, mining, oil and gas, electric,
    construction, telecommunications and government. I have held
    executive management positions in corporate operations and
    finance. I have served as an officer and director with the
    titles of Chief Operating and Chief Financial Officer. Some of
    these positions were in companies with added complexities due
    to the blending of cultures of a new industry consolidation or
    the resource management of a turnaround.
        I fully understand that the USDA is one of the largest
    entities in the United States with a financial structure and
    support systems that have been perpetually modified since the
    days of President Lincoln. This is a large and highly complex
    organization. It has its challenges, but has a tremendous
    workforce with experienced professionals.
        It is my understanding that since 2002 we have received
    unqualified clean opinions, and for the last year, for 2004, we
    did so while meeting the accelerated November 15th due date.
    This is a great testament to the financial team at the
    Department of Agriculture. Also, I would be remiss if I did not
    take the opportunity to publicly commend the employees of the
    National Finance Center for their performance. Despite the
    devastation of Hurricane Katrina and the deployment of
    employees to backup sites, employees were able to process a
    payroll for more than 560,000 Federal employees, and they did
    this on time.
        That said, there are challenges ahead and opportunities for
    improvement. If confirmed by the Senate I will use my
    experience to help the more than 1,700 members of the financial
    team to find the processes that will increase the accuracy and
    timeliness of information. My philosophy is that with better
    information faster, we can address problems sooner and at a
    lower cost. I believe that for any weakness in the systems and
    controls we can find short-term solutions to minimize the
    financial risk and find long-term economical solutions to fix a
    problem permanently. In addition, not only should we measure
    the performance of this financial organization against other
    Government entities, but we should also measure it against the
    business practices in the private sector.
        This is a great opportunity to serve the United States. I
    fully understand that the financial management of this
    organization is no small task, and if confirmed, the
    responsibility will not be taken lightly.
        Thank you for your consideration, and I welcome your
    questions.
        [The prepared statement of Mr. Christopherson can be found
    in the appendix on page 4.]
        [The biographical information of Mr. Christopherson can be
    found in the appendix on page 22.]
        The Chairman. Thank you.
        Mr. Andrew?

          STATEMENT OF JAMES McRAE ANDREW, OF GEORGIA, TO BE
     ADMINISTRATOR OF THE RURAL UTILITIES SERVICE, U.S. DEPARTMENT
                             OF AGRICULTURE

        Mr. Andrew. Mr. Chairman, Senator Harkin, and distinguished
    members of the committee, it is an honor to have been nominated
    by President Bush to serve as Administrator of the RUS in the
    rural development mission area of the United States Department
    of Agriculture. I am further humbled by the experience of
    appearing before this committee. Like you, agriculture has been
    vitally important to my family, my livelihood and my community
    for many years. And, Mr. Chairman, if I might say so, Mr.
    Harrison and my mama would both be proud.
        With me today is my wife, Mary. Next month we will
    celebrate our 41st anniversary. Mary and I have two adult
    children, a son living in Baltimore, a daughter living in
    Atlanta. Mary and I live in rural Jenkins County, Georgia, near
    the town of Millen. We moved there 37 years ago to help
    preserve Mary's family farm after her father became seriously
    ill.
        I was born in Alabama and raised in a small southeastern
    town called Geneva. After high school I left home and attended
    the University of Alabama, where I earned a degree in business
    administration. I also served in the Alabama Army National
    Guard for over 8 years, six months of which I was on active
    duty.
        The value of hard work was instilled in me at an early age.
    As early as age 10, I began helping my father in his small farm
    equipment business, where I worked assembling implements and as
    a mechanic's helper, back then called a ``grease monkey.''
    Since that time I have had very few periods in my life when I
    did not earn a paycheck.
        Over the course of my career I gained experience in the
    corporate world as well as small business owner. My corporate
    experience includes work in sales and management for a large
    electrical distribution equipment manufacturer, and financial
    consultant in a brokerage division of a large insurance
    company. Then after a period as marketing director for the
    Georgia Electric Membership Corporation, I decided to start my
    own business in the nearby town of Waynesboro, Georgia.
        Over 28 years ago I established an agricultural irrigation
    company that specialized in the design, sale, installation and
    service of center pivot irrigation. Over time my business
    expanded to include construction of agricultural and commercial
    steel buildings. While growing my business, I was asked to
    serve on the dealer councils of a steel buildings manufacturer
    and a center pivot irrigation equipment manufacturer. After
    more than 20 years I sold the business, and the new owners
    asked me to remain as a consultant. I continued to consult for
    that company and several other companies until my nomination by
    the President.
        In addition to my endeavors as a small business owner, I
    was also involved in the various community development
    activities in my county and beyond. I was a founding member of
    the board of directors of a community bank, and I was also
    serving as chairman of that board when we sold to a larger bank
    that is dedicated to serving rural communities. I remained on
    the board of the merged holding company until my nomination.
        In 1976 I was elected to serve on the board of my local
    electric cooperative, and I remained on that board for 25
    years. During that time, I served two terms as an officer and
    two terms as president. The board of my local co-op elected me
    to represent the co-op on the board of Georgia Electric
    Membership Corporation. I served as an officer and president of
    that association until the board elected me to represent
    Georgia on the board of the National Rural Electric Cooperative
    Association, NRECA. I served 16 years on that board. Six of
    those years I served as an officer, including two as president.
    As president of NRECA, I served on the board of the National
    Rural Electric Cooperative Finance Corporation, CFC, a
    supplemental finance cooperative owned by the members.
        If confirmed as Administrator of RUS, it will be the
    culmination of my life experiences and my service to rural
    America.
        The Rural Utilities Service and its predecessor agencies
    have earned a unique place in American history. By combining
    Federal resources with the ingenuity of the American people,
    RUS has brought reliable electricity, clear telecommunications
    and safe drinking water to rural America.
        Today our Nation is facing new challenges, and there is
    still much more work to be done. Under the leadership of
    Secretary Johanns and Under Secretary Dorr, I believe USDA
    Rural Development has a unique opportunity to make major
    contributions to the immediate and long-term future of rural
    America. If confirmed as Administrator of RUS, I will use my
    experience as a small business owner and industry leader to
    ensure that RUS delivers its programs as efficiently as
    possible so we can have the maximum impact on the lives of
    rural Americans and communities throughout the country.
        Mr. Chairman, and members of the committee, if I am
    confirmed to this position, I will work with each of you to
    earn your respect and your support as we work together to
    strengthen America.
        Thank you, and I will be happy to answer any questions.
        [The prepared statement of Mr. Andrews can be found in the
    appendix on page 6.]
        [The biographical information of Mr. Andrew can be found in
    the appendix on page 46.]
        The Chairman. I thank both of you gentlemen.
        Just a quick anecdote that my colleagues will appreciate.
    In my conversation with Jim yesterday he was telling me, as
    happens in all rural towns that each of you come from just like
    I do, word spreads pretty quick when somebody is being
    considered for something like this. They already think Jim is
    the Secretary of Agriculture back in Jenkins County. He ran
    into one of his farmer friends the other day in the post
    office. The first thing he said to him was, ``You got to save
    my FAS office.''
        [Laughter.]
        The Chairman. All of us have had that experience.
        Mr. Andrew, the USDA Office of Inspector General published
    a report on September 30, 2005 regarding the lending practices
    of the RUS Broadband Grant and Loan Programs. The report
    outlined areas of concern that suggest the emphasis of the
    program had shifted away from the rural communities that would
    not, without Government assistance, have access to broadband
    technologies. Are you aware of this issue, and can you comment
    on this matter?
        Mr. Andrew. Yes, Mr. Chairman, I'm aware of it. I read the
    report. I also read the response to it, and because I have not
    been in a position to have any input to it, at this point I
    don't think I'm qualified to speculate on a response to it. But
    I can assure you that it is on the front burner of everything
    I'll be looking at, and I'll be glad to work with you when I
    get over--if I get over to the position.
        The Chairman. What particular skills or work experiences do
    you feel would make you uniquely qualified for this position?
        Mr. Andrew. Mr. Chairman, as I said, beginning early on in
    life, everything I've ever done in my life I think has worked
    towards this particular job, both in the rural electrification
    efforts and rural development and things I'm interested in in
    rural development and rural communities. Living in a rural
    community all my life I think prepares me for this.
        The Chairman. Mr. Christopherson, I would imagine that your
    experience in the management and operation of several
    companies, some of them distressed companies, has impressed
    upon you an appreciation for effective financial management.
    Most of the businesses you have been associated with in the
    past are of a much smaller scale than Department of
    Agriculture. Can you comment on how you will provide effective
    management and oversight for such a large institution, and how
    your previous experience qualifies you for the position of
    Chief Financial Officer?
        Mr. Christopherson. Well, Mr. Chairman, there's no doubt
    that this is a very complex organization with over 300
    different programs and to account for those different programs
    is going to be a difficult task. In addition, I don't have a
    lot of exposure to the systems or what's happened necessarily
    in the past, but it will be a very large task.
        First of all, you know, I recognize out the door very
    complex organizations. I've consulted for very large, very
    complex organizations in my past, and gratefully, we were able
    to add a great benefit to many of those companies. The nice
    thing with this position is I'll actually have the chance to
    focus only on the finance side. In my past I've had additional
    responsibilities with these companies in both operations and
    finance as we're moving through a turnaround or through an
    industry consolidation.
        The Chairman. As part of the Improper Payments Information
    Act of 2002 all Federal agencies are required to annually
    identify programs susceptible to improper payments, and to
    implement statistical projections or mitigation plans. The
    Office of Inspector General recently found that the Office of
    Chief Financial Officer did not provide USDA agencies with
    prescriptive and detailed guidance to assess programs and
    activities acceptable to significant improper payments, thus,
    likely limiting OCFO's ability to monitor and limit improper
    payments.
        Could you please comment on the importance of limiting
    improper payments and expenditures and how you would address
    providing agencies with the USDA the necessary guidance to
    assess programs susceptible to improper payments?
        Mr. Christopherson. Well, any time there's improper
    payments, for a financial person--and I'm sure for taxpayers--a
    light goes off on our head and we're all worried about leaks in
    the system or what that could affect. In the battery of the
    information I've actually received over the last couple of
    days, there was a report that came out that was, you know, a
    FSA report that actually talked about this subject, and it
    appeared that the issue was addressing clarity in instruction
    and to be concise. I would expect that with multiple programs
    that you're going to have some issues in that area.
        Upon confirmation, I am happy to look into this area, am
    happy to make sure that the instructions that we give, as
    stewards of the taxpayers' monies, are very concise and that we
    put out report cards and check forms and have the right
    information delivered to our programs so that they can function
    properly.
        The Chairman. As I mentioned to you yesterday in our
    conversation, you have a wealth of experience in the area of
    financial management, but I think what you are going to find at
    USDA, we operate a lot differently from the way the private
    sector operates, and there is going to be a real challenge in a
    number of areas. This is one area, improper payments and
    overpayments, that I think is going to merit a lot of your
    attention, because while we want to do what the farm bill
    requires us to do relative to the payments to our farmers, it
    is always an area that can be abused, so I will hope that you
    will give this primary importance.
        Senator Harkin?
        Senator Harkin. Thank you very much, Mr. Chairman.
        I want to congratulate both of you on your nominations and
    welcome you here today. You are here on a very special day here
    in Washington, D.C. Today is a special day. It is a day noted
    on calendars all across the country. Today is a day celebrated
    in song and verse all over America. Today is a day when the
    people of Georgia and the people of the United States pause to
    give thanks for a very dedicated public servant, for today is
    the birthday of our chairman, Saxby Chambliss.
        [Applause.]
        The Chairman. I think there is some collusion among our
    staffs.
        Senator Harkin. I think so.
        [Laughter.]
        Senator Harkin. I have been told this is the 10th
    anniversary of your 39th birthday. Well, happy birthday, Mr.
    Chairman, and many, many, many more.
        Well, again, welcome. I am sure that you will both get
    through fine. I do not know Mr. Christopherson; I have met
    before maybe in passing, I do not know particularly. I know
    that Mr. Andrew and I have met in the past when you were on the
    NRECA Board for all those years and on the Agricultural
    Committee, so I congratulate you both.
        I just have one thing that I just wanted to cover, Mr.
    Andrew, with you, and that has to do with broadband. In the
    2002 Farm Bill, there is a Section 6103 that we put in, both
    the Senate and the House, we worked together on it. It is in
    the final version of the farm bill. It is law now. It set up a
    loan program for broadband technology in rural areas. We put in
    $2 billion in sort of a revolving loan fund, $2 billion. Our
    goal was to get broadband into rural America as fast and as
    rapidly as possible. Well, not much happened. Things sort of
    dragged along, not much happened.
        In April of 2004 President Bush spoke to a rural
    development conference in Des Moines, Iowa. Senator Grassley
    and I were both there, Congressman Latham, a few others. And in
    his speech the President said that his goal was to have
    broadband to all of rural America by 2007. Well, I applauded
    very loudly for that, as others did. After the speeches and the
    President shook hands with people, then he came behind the
    curtain. And his people came out and asked if I wanted to say
    goodbye to the President. I said, ``Sure.''
        So we went behind the stage, and it was Senator Grassley
    and I were both back there. The President came by and just
    chit-chatted a little bit. I said to the President, I said,
    ``Well, Mr. President, I really appreciate what you said about
    getting broadband out by 2007.'' I said, ``But, you know, you
    might run into a little problem.'' And I sort of smiled at him.
    He said, ``Well, what's that?'' I said, ``Well, there's a
    provision in the farm bill; we put in $2 billion to do that,
    and quite frankly, the Department of Agriculture has been
    dragging its feet.'' At that time--this was April of 2004--we
    had about $1.6 billion, 1.7, that had been unexpended. They
    only expended just a few hundred million at that point. And so
    I told him that. And I said, ``I have been hearing from people
    around Iowa, who want to get these loans, that want to expand
    broadband, and the red tape is just endless.'' Senator Grassley
    chimed in and said, yes, he has been hearing the same thing.
        The President, of course, is very interested. He called
    over his staff and said, ``Get this down and let us look into
    that.'' And so we gave it to some staff person that came over
    and we told him what it was about. That was in 2004, April.
        Now we are in November of 2005. There is now still about
    1.4, 1.5 billion dollars still left in that fund. I have been
    tracking this because I just cannot understand why we cannot
    move a little bit better.
        And so I began asking questions about how we implement and
    how RUS--this is under your jurisdiction, under RUS--how we
    implement it. This is not in the law. These are the rules that
    RUS came up with. One, that the equity and cash requirements
    are too high and unreasonable. RUS requires that companies have
    at least one year's cash balance in the bank to cover the
    entire operations of the company. Even if the company has non-
    broadband stuff, they have to cover that too, so not even the
    broadband, all operations of the company. So it has resulted in
    kind of a situation where a company seeking a $5 million loan,
    a small company seeking a $5 million loan has to have $5
    million in the bank. If they have $5 million in the bank, why
    do they need a loan?
        Further, in determining the cash requirement, RUS does not
    take into account actual revenues of a company. For example,
    you could have a small company that already has 10,000
    customers. They want to extend broadband out, but they cannot
    put down the revenue base from the 10,000 customers as a
    monthly revenue stream. I know it sounds bizarre, but this is
    what is happening.
        Requirements in the application process in terms of how the
    public notice goes out. The public notice goes out, and then
    what happens is it takes 12 months. In fact, I have it here.
    The review applications have been between 6 to 9, even 12
    month, before even hearing back from the Agency on their
    application. In the meantime what happens is a competitor out
    there sees that, knows that they are going to apply for this
    loan, and they sneak in there in front of them.
        I can go on and on. There is a whole bunch of things
    happening on this. A September USDA Inspector General report
    had a number of complaints about the administration of this
    program. Nothing seems to happen. I have been on this thing for
    a year and a half or two now on this, and nothing ever seems to
    happen. I hope I do not sound too cynical, Mr. Andrew, but it
    almost sounds to me like the big cable companies and the big
    telephone companies that are not servicing rural America, but
    like to go downtown, they like to go into our towns of 15,000
    and 10,000, they like to service a downtown area. They like
    that. They get that. But like the old rural electrics, they do
    not want to go out to that farmstead out there. They do not
    want to come to my hometown of 150 people. They do not want to
    do that. But they will go downtown and pick those off like
    that.
        Again, I do not want to sound too cynical, but it almost
    sounds like the cable companies and the big phone companies
    have gotten to somebody, and said, ``We do not want this
    program to work.''
        So, Mr. Andrew, I am hopeful. I know you are down the
    pecking order on this thing, but you are still the head of RUS.
    You have a long history in knowing what rural electric did for
    America.
        We were not risk adverse when we put telephone lines out to
    our farmsteads and our small towns in America. We knew there
    was risk in doing that, but we managed it. RUS manages rusk. It
    is not risk adverse. And that is what I am asking in broadband,
    manage the risk. Do not be so risk adverse that you say, ``We
    cannot give a loan out there because we want to make absolutely
    100 percent certain that the company we give it to will not
    default and will not fail.'' Some of them will. Some of them
    will. Some of them will go under and probably sell off to
    somebody else.
        I just wanted to get that off my chest because I have been
    so frustrated. Now you are going to take over that position
    there, and to the extent that you are in that position, and
    when you come back up here next year or when you appear before
    our Appropriations Committee on Ag Approps, on which is also
    sit, I am going to be asking the same questions. I will not be
    asking it just of you.
        I brought this up with everyone. Mr. Dorr sat here. I will
    not go into all that history, but he sat there and he talked
    about broadband and getting broadband out. Secretary Johanns, I
    have known Secretary Johanns for a long time. He says the same
    thing. When the President of the United States is interested in
    it, I say, well, something is going on, and I do not know what
    it is.
        So I hope that you can take that message back, and I hope
    you can take the wonderful experience you have had, and the
    leadership you have had in NRECA and rural electrics, and say,
    ``This is what we need to do with broadband.'' Broadband to
    rural America today is what rural electric was to rural America
    50, 60, 70 years ago, and we have to get it out to our small
    towns and communities and our farmers.
        Mr. Chairman, thank you for your indulgence. I do not
    really have a question, I guess. Just I hope you will--oh, yes.
        Will you personally work to modify the regulations and
    application process--
        Mr. Andrew. Almost dodged it.
        Senator Harkin. --to get this thing going?
        Mr. Andrew. Almost dodged it. Senator Harkin, let me say
    this. There is a lady sitting behind me that shares your
    concern. There is a gentleman sitting behind me also that once
    introduced me saying that I lived so far in the country you had
    to go towards town to go hunting. And that's the size of it.
        When she tries to get on the Internet, and she can go and
    start the dishwasher to running before it ever gets up and
    running again, then I hear about it.
        Senator Harkin. Yes.
        Mr. Andrew. So it is not only you who will be asking these
    questions, but so will she.
        [Laughter.]
        Senator Harkin. Good.
        Mr. Andrew. And it's on the front burner, and I guarantee
    you that I will look after it, and I would like to come discuss
    it with you. I would like to discuss ideas that we might come
    before it. Now right now I'm not qualified to have any.
        Senator Harkin. I understand that.
        Mr. Andrew. But I'd like to come forward with some, and I
    know it's an issue with you, and I'd like very much to discuss
    it with you.
        Senator Harkin. You listen to her every day.
        [Laughter.]
        Mr. Andrew. Don't you?
        [Laughter.]
        Senator Harkin. Thank you.
        Mr. Andrew. Thank you, sir.
        The Chairman. Senator Crapo?
        Senator Crapo. Thank you very much, Mr. Chairman. I do not
    really have a question either. I have a comment on another part
    of the farm bill in 2002 that we have not been able to get
    implemented well that is very important and dear to me, and I
    just want to make it something that both of you are aware of
    because I think that both of you may have the ability to help
    us make it a reality.
        It is program that we authorized in the 2002 Farm Bill
    called Project SEARCH. What it is, is a project that focuses on
    helping small communities, communities of less than 2,500
    people, to meet the environmental mandates that they have to
    meet under other laws such as the Clean Water Act, the Safe
    Drinking Water Act and so forth. What we find is that many of
    our rural communities face these mandates under Federal law,
    but the cost of the systems that they are required by Federal
    law to implement are not achievable because they do not have
    the economies of scale that larger population centers have that
    can finance them.
        So these small communities then get fined because they
    cannot come up with the money to meet the mandates of Federal
    law, and it is a never-ending downward spiral for these small
    communities.
        So a number of years ago, about 5 or 6 years ago, I got a
    project for Idaho started, and we called it Project SEARCH. The
    acronym is Special Environmental Assistance for Regulations of
    Communities and Habitat Grants Programs. I do not know how we
    came up with that, except that I guess we liked the acronym and
    we found some words to meet it.
        What it means is we were trying to find some simplified
    ways to get grant monies to small communities so that they
    could get past all the red tape and get down to getting the
    resources to be able to meet some of these Federal mandates,
    and particularly in the infrastructure that they need for clean
    water and safe drinking water. It is similar to broadband. The
    infrastructure that is so critical in our rural communities is
    what will help them participate in the economy of our Nation
    and of our world, and we have to be able to assist them.
        Anyway, we got this in the farm bill, and then we did not
    fund it. It is authorized but not funded. So it is really not
    USDA's fault right now that they are not implementing it
    because Congress has not give the USDA the dollars to do it
    with. However, getting those dollars is not just our task. I
    was also talking to my chairman and our ranking member here to
    help on this program because at some point, and especially as
    we work on the next farm bill and as we work with our
    appropriators, I am going to be asking for your help to try to
    get the funding for this program so that the USDA can implement
    it. It also helps if the USDA is interested in this program and
    helping request in its budget requests for this to be funded so
    that they can implement it.
        I just wanted to raise this to your attention and let you
    know--I will conclude by non-question comment here with this--
    we did get this for the State of Idaho. We got a millon dollars
    about 4 or 5 years ago as a pilot project to see how it would
    work, and it was a phenomenal success. There are communities,
    2,500 and less communities all over Idaho who were literally
    saved. We put together a team that evaluated the requests for
    participation in this grant program. They had way more
    applications for this million dollars in Idaho than there were
    dollars to go out. But the small number of communities that we
    were able to give a little money to, were literally saved,
    sometimes from litigation and from fines, and frankly, they
    were able to implement in their communities the kinds of
    systems and infrastructure that they needed to help improve the
    quality of life and to meet the Federal mandates and to get
    themselves back on course.
        I just wanted to raise your attention to Project SEARCH,
    and I want you to know that I hope to see it coming forward in
    next year's budget requests from the Department, and I will
    commit to help from my end to try and see if we cannot get the
    money in the budget for it.
        Thank you.
        The Chairman. Thank you.
        Well, gentleman, as I said earlier, you have got a real
    challenge ahead of each one of you in these respective
    positions, and I am very confident that based on the
    qualifications of each of you, that you are going to be able to
    meet those challenges, and we as a committee are here to help
    you. I hope you will never hesitate to call on us to work with
    you on any particular issues that you have within your
    respective offices, and we look forward to dialogues with you.
        At this time I would ask unanimous consent that we report
    these two gentlemen out of the committee, these nominations in
    a favorable way, with the understanding that any member of the
    committee who wishes to submit questions can do so by the end
    of today, and that you will respond to them immediately. Is
    there objection?
        [No response.]
        The Chairman. If not, they will be reported out.
        This hearing is concluded. Thank you very much.
        [Whereupon, at 9:44 a.m., the committee was adjourned.]

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                                A P P E N D I X

                               November 10, 2005

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                       DOCUMENTS SUBMITTED FOR THE RECORD

                               November 10, 2005

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                             QUESTIONS AND ANSWERS

                               November 10, 2005

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