    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                                  AGRICULTURAL PROGRAM AUDIT

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

                                    HEARINGS

                                   BEFORE THE

                               SUBCOMMITTEES ON:
                            GENERAL FARM COMMODITIES
                              AND RISK MANAGEMENT;

                      CONSERVATION, ENERGY, AND FORESTRY;

                          NUTRITION AND HORTICULTURE;

      RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

                 DEPARTMENT OPERATIONS, OVERSIGHT, AND CREDIT;

                                      AND

                         LIVESTOCK, DAIRY, AND POULTRY

                                     OF THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   ----------

                                    JUNE 24;
                        JULY 7, 13, 14, 20, 21, 27, 28;
                             SEPTEMBER 8, 13, 2011

                                   ----------

                               Serial No. 112-20

              Printed for the use of the Committee on Agriculture
                             agriculture.house.gov

                           AGRICULTURAL PROGRAM AUDIT

                           AGRICULTURAL PROGRAM AUDIT

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

                                    HEARINGS

                                   BEFORE THE

                               SUBCOMMITTEES ON:
                            GENERAL FARM COMMODITIES
                              AND RISK MANAGEMENT;

                      CONSERVATION, ENERGY, AND FORESTRY;

                          NUTRITION AND HORTICULTURE;

      RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

                 DEPARTMENT OPERATIONS, OVERSIGHT, AND CREDIT;

                                      AND

                         LIVESTOCK, DAIRY, AND POULTRY

                                     OF THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                    JUNE 24;
                        JULY 7, 13, 14, 20, 21, 27, 28;
                             SEPTEMBER 8, 13, 2011

                                   __________

                               Serial No. 112-20

              Printed for the use of the Committee on Agriculture
                             agriculture.house.gov

                                   ----------
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                            COMMITTEE ON AGRICULTURE

                       FRANK D. LUCAS, Oklahoma, Chairman

    BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota,
        Vice Chairman                    Ranking Minority Member
    TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
    STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
    RANDY NEUGEBAUER, Texas              LEONARD L. BOSWELL, Iowa
    K. MICHAEL CONAWAY, Texas            JOE BACA, California
    JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
    JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
    GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
    THOMAS J. ROONEY, Florida            JIM COSTA, California
    MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
    BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
    AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
    SCOTT R. TIPTON, Colorado            WILLIAM L. OWENS, New York
    STEVE SOUTHERLAND II, Florida        CHELLIE PINGREE, Maine
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JOE COURTNEY, Connecticut
    MARTHA ROBY, Alabama                 PETER WELCH, Vermont
    TIM HUELSKAMP, Kansas                MARCIA L. FUDGE, Ohio
    SCOTT DesJARLAIS, Tennessee          GREGORIO KILILI CAMACHO SABLAN,
    RENEE L. ELLMERS, North Carolina     Northern Mariana Islands
    CHRISTOPHER P. GIBSON, New York      TERRI A. SEWELL, Alabama
    RANDY HULTGREN, Illinois             JAMES P. McGOVERN, Massachusetts
    VICKY HARTZLER, Missouri
    ROBERT T. SCHILLING, Illinois
    REID J. RIBBLE, Wisconsin
    KRISTI L. NOEM, South Dakota

                                     ______

                               Professional Staff

                          Nicole Scott, Staff Director

                         Kevin J. Kramp, Chief Counsel

                     Tamara Hinton, Communications Director

                    Robert L. Larew, Minority Staff Director

                                      (ii)

          Subcommittee on General Farm Commodities and Risk Management

                      K. MICHAEL CONAWAY, Texas, Chairman

    STEVE KING, Iowa                     LEONARD L. BOSWELL, Iowa, Ranking
    RANDY NEUGEBAUER, Texas              Minority Member
    JEAN SCHMIDT, Ohio                   MIKE McINTYRE, North Carolina
    BOB GIBBS, Ohio                      TIMOTHY J. WALZ, Minnesota
    AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JAMES P. McGOVERN, Massachusetts
    MARTHA ROBY, Alabama                 DENNIS A. CARDOZA, California
    TIM HUELSKAMP, Kansas                DAVID SCOTT, Georgia
    RENEE L. ELLMERS, North Carolina     JOE COURTNEY, Connecticut
    CHRISTOPHER P. GIBSON, New York      PETER WELCH, Vermont
    RANDY HULTGREN, Illinois             TERRI A. SEWELL, Alabama
    VICKY HARTZLER, Missouri
    ROBERT T. SCHILLING, Illinois

                   Matt Schertz, Subcommittee Staff Director

                                     ______

               Subcommittee on Conservation, Energy, and Forestry

                     GLENN THOMPSON, Pennsylvania, Chairman

    BOB GOODLATTE, Virginia              TIM HOLDEN, Pennsylvania, Ranking
    MARLIN A. STUTZMAN, Indiana          Minority Member
    BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
    SCOTT R. TIPTON, Colorado            WILLIAM L. OWENS, New York
    STEVE SOUTHERLAND II, Florida        MIKE McINTYRE, North Carolina
    MARTHA ROBY, Alabama                 JIM COSTA, California
    TIM HUELSKAMP, Kansas                TIMOTHY J. WALZ, Minnesota
    RANDY HULTGREN, Illinois             CHELLIE PINGREE, Maine
    REID J. RIBBLE, Wisconsin            MARCIA L. FUDGE, Ohio
    KRISTI L. NOEM, South Dakota         GREGORIO KILILI CAMACHO SABLAN,
                                         Northern Mariana Islands

                   Brent Blevins, Subcommittee Staff Director

                                     ______

                   Subcommittee on Nutrition and Horticulture

                         JEAN SCHMIDT, Ohio, Chairwoman

    STEVE KING, Iowa                     JOE BACA, California, Ranking
    THOMAS J. ROONEY, Florida            Minority Member
    STEVE SOUTHERLAND II, Florida        CHELLIE PINGREE, Maine
    ERIC A. ``RICK'' CRAWFORD, Arkansas  GREGORIO KILILI CAMACHO SABLAN,
                                         Northern Mariana Islands

                    Matt Perin, Subcommittee Staff Director

                                     (iii)
    ?

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                                  Agriculture

                     TIMOTHY V. JOHNSON, Illinois, Chairman

    GLENN THOMPSON, Pennsylvania         JIM COSTA, California, Ranking
    MARLIN A. STUTZMAN, Indiana          Minority Member
    AUSTIN SCOTT, Georgia                HENRY CUELLAR, Texas
    RANDY HULTGREN, Illinois             PETER WELCH, Vermont
    VICKY HARTZLER, Missouri             TERRI A. SEWELL, Alabama
    ROBERT T. SCHILLING, Illinois        LARRY KISSELL, North Carolina

                    Mike Dunlap, Subcommittee Staff Director

                                     ______

          Subcommittee on Department Operations, Oversight, and Credit

                      JEFF FORTENBERRY, Nebraska, Chairman

    TIMOTHY V. JOHNSON, Illinois         MARCIA L. FUDGE, Ohio, Ranking
    STEVE KING, Iowa                     Minority Member
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JAMES P. McGOVERN, Massachusetts
    KRISTI L. NOEM, South Dakota         JOE BACA, California

                   Brandon Lipps, Subcommittee Staff Director

                                     ______

                 Subcommittee on Livestock, Dairy, and Poultry

                      THOMAS J. ROONEY, Florida, Chairman

    BOB GOODLATTE, Virginia              DENNIS A. CARDOZA, California,
    STEVE KING, Iowa                     Ranking Minority Member
    RANDY NEUGEBAUER, Texas              DAVID SCOTT, Georgia
    K. MICHAEL CONAWAY, Texas            JOE COURTNEY, Connecticut
    TIM HUELSKAMP, Kansas                TIM HOLDEN, Pennsylvania
    SCOTT DesJARLAIS, Tennessee          LEONARD L. BOSWELL, Iowa
    CHRISTOPHER P. GIBSON, New York      JOE BACA, California
    REID J. RIBBLE, Wisconsin            KURT SCHRADER, Oregon
    KRISTI L. NOEM, South Dakota         WILLIAM L. OWENS, New York

                  Michelle Weber, Subcommittee Staff Director

                                      (iv)

                                 C O N T E N T S

                                  ----------
                                                                       Page

     Subcommittee on General Farm Commodities and Risk Management, Friday,
                                 June 24, 2011

    Boswell, Hon. Leonard L., a Representative in Congress from Iowa,
      opening statement..............................................     4
    Conaway, Hon. K. Michael, a Representative in Congress from
      Texas, opening statement.......................................     1
        Prepared statement...........................................     3
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
      opening statement..............................................     5
        Prepared statement...........................................     6

                                    Witness

    Murphy, William J., Administrator, Risk Management Agency, U.S.
      Department of Agriculture, Washington, D.C.....................     7
        Prepared statement...........................................     9
        Supplementary information....................................    35
        Questionnaire................................................    37

    Subcommittee on Conservation, Energy, and Forestry, Thursday, July 07,
                                      2011

    Holden, Hon. Tim, a Representative in Congress from Pennsylvania,
      opening statement..............................................    47
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
      opening statement..............................................    48
        Prepared statement...........................................    49
    Thompson, Hon. Glenn, a Representative in Congress from
      Pennsylvania, opening statement................................    45
        Prepared statement...........................................    46

                                   Witnesses

    Nelson, Bruce, Administrator, Farm Service Agency, U.S.
      Department of Agriculture, Washington, D.C.....................    50
        Prepared statement...........................................    51
        Submitted questions..........................................    99
    White, Dave, Chief, Natural Resources Conservation Services, U.S.
      Department of Agriculture, Washington, D.C.....................    55
        Prepared statement...........................................    60
        Submitted questions..........................................   103

                               Submitted Material

    Huntley, Mark G., President, Irrigation Association, submitted
      letter.........................................................    97
    U.S. Department of Agriculture, questionnaire....................   112

      Subcommittee on Nutrition and Horticulture, Thursday, July 07, 2011

    Baca, Hon. Joe, a Representative in Congress from California,
      opening statement..............................................   198
        Prepared statement...........................................   199
    Schmidt, Hon. Jean, a Representative in Congress from Ohio,
      opening statement..............................................   195
        Prepared statement...........................................   197
    Southerland II, Hon. Steve, a Representative in Congress from
      Florida, prepared statement....................................   200

                                   Witnesses

    Pegg, Rayne, Administrator, Agricultural Marketing Service, U.S.
      Department of Agriculture, Washington, D.C.....................   201
        Joint prepared statement.....................................   204
    Bech, Rebecca, Deputy Administrator for Plant Protection and
      Quarantine, Animal and Plant Health Inspection Service, U.S.
      Department of Agriculture, Washington, D.C.....................   203
        Joint prepared statement.....................................   204
        Supplementary material.......................................   225

                               Submitted Material

    U.S. Department of Agriculture, questionnaire....................   234

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                      Agriculture, Thursday, July 13, 2011

    Costa, Hon. Jim, a Representative in Congress from California,
      opening statement..............................................   265
    Johnson, Hon. Timothy V., a Representative in Congress from
      Illinois, opening statement....................................   263
        Prepared statement...........................................   264

                                   Witnesses

    Heinen, Suzanne, Acting Administrator, Foreign Agricultural
      Service, U.S. Department of Agriculture, Washington, D.C.......   267
        Prepared statement...........................................   268
        Supplementary material.......................................   297
        Submitted questions..........................................   298
        Questionnaire................................................   304
    Lindborg, Nancy, Assistant Administrator, Bureau for Democracy,
      Conflict and Humanitarian Assistance, U.S. Agency for
      International Development, Washington, D.C.....................   275
        Prepared statement...........................................   277
        Supplementary material.......................................   297
        Submitted questions..........................................   298
        Questionnaire................................................   345

    Subcommittee on Department Operations, Oversight, and Credit, Thursday,
                                 July 14, 2011

    Fortenberry, Hon. Jeff, a Representative in Congress from
      Nebraska, opening statement....................................   441
        Prepared statement...........................................   442
    Fudge, Hon. Marcia L., a Representative in Congress from Ohio,
      opening statement..............................................   443

                                    Witness

    Nelson, Bruce, Administrator, Farm Service Agency, U.S.
      Department of Agriculture, Washington, D.C.; accompanied by Jim
      Radintz, Assistant Deputy Administrator, FSA, USDA.............   444
        Prepared statement...........................................   445
        Supplementary material.......................................   459
        Submitted questions..........................................   464
        Questionnaire................................................   464

    Subcommittee on Conservation, Energy, and Forestry, Wednesday, July 20,
                                      2011

    Fudge, Hon. Marcia L., a Representative in Congress from Ohio,
      prepared statement.............................................   488
    Holden, Hon. Tim, a Representative in Congress from Pennsylvania,
      opening statement..............................................   487
    Thompson, Hon. Glenn, a Representative in Congress from
      Pennsylvania, opening statement................................   485
        Prepared statement...........................................   486
        Submitted article............................................   529

                                   Witnesses

    Tidwell, Thomas, Chief, U.S. Forest Service, U.S. Department of
      Agriculture, Washington, D.C...................................   489
        Prepared statement...........................................   492
    Canales, Judy, Administrator, Rural Business-Cooperative Service,
      U.S. Department of Agriculture, Washington, D.C................   497
        Joint prepared statement.....................................   501
    Garcia, Juan, Deputy Administrator, Farm Service Agency, U.S.
      Department of Agriculture, Washington, D.C.....................   499
        Joint prepared statement.....................................   501

                               Submitted Material

    U.S. Department of Agriculture, response to submitted questions..   530
    U.S. Department of Agriculture:
        Forestry Questionnaire.......................................   556
        Energy Questionnaire.........................................   584

      Subcommittee on Nutrition and Horticulture, Thursday, July 21, 2011

    Baca, Hon. Joe, a Representative in Congress from California,
      opening statement..............................................   620
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
      opening statement..............................................   621
    Schmidt, Hon. Jean, a Representative in Congress from Ohio,
      opening statement..............................................   617
        Prepared statement...........................................   619

                                    Witness

    Rowe, Audrey, Administrator, Food and Nutrition Service, U.S.
      Department of Agriculture, Washington, D.C.....................   622
        Prepared statement...........................................   625
        Submitted questions..........................................   661
        Questionnaire................................................   663

                               Submitted Material

    Davis, Lisa, Vice President of Public Policy, Feeding America,
      submitted statement............................................   655
    Stone, Sam, Vice President, Government Relations, Dairy Farmers
      of America, Inc., submitted letter and statement...............   659

         Subcommittee on General Farm Commodities and Risk Management,
                            Wednesday, July 27, 2011

    Boswell, Hon. Leonard L., a Representative in Congress from Iowa,
      opening statement..............................................   693
        Prepared statement...........................................   695
    Conaway, Hon. K. Michael, a Representative in Congress from
      Texas, opening statement.......................................   689
        Prepared statement...........................................   689
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
      opening statement..............................................   690
        Prepared statement...........................................   692
    McGovern, Hon. James P., a Representative in Congress from
      Massachusetts, prepared statement..............................   697
    Peterson, Hon. Collin C., a Representative in Congress from
      Minnesota, prepared statement..................................   696

                                    Witness

    Nelson, Bruce, Administrator, Farm Service Agency, U.S.
      Department of Agriculture, Washington, D.C.; accompanied by
      Juan M. Garcia, Acting Deputy Administrator for Farm Programs,
      FSA, USDA......................................................   698
        Prepared statement...........................................   699
        Submitted questions..........................................   727
        Questionnaire................................................   727

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                      Agriculture, Thursday, July 28, 2011

    Costa, Hon. Jim, a Representative in Congress from California,
      opening statement..............................................   791
    Johnson, Hon. Timothy V., a Representative in Congress from
      Illinois, opening statement....................................   789
        Prepared statement...........................................   790

                                   Witnesses

    Knipling, Dr. Edward B., Administrator, Agricultural Research
      Service, U.S. Department of Agriculture, Washington, D.C.......   793
        Prepared statement...........................................   795
        Questionnaire................................................   832
    Jacobs-Young, Ph.D., Chavonda, Acting Director, National
      Institute of Food and Agriculture, U.S. Department of
      Agriculture, Washington, D.C...................................   800
        Prepared statement...........................................   801
        Questionnaire................................................   879
    Clark, Dr. Cynthia, Administrator, National Agricultural
      Statistics Service, U.S. Department of Agriculture, Washington,
      D.C............................................................   804
        Prepared statement...........................................   806
        Questionnaire................................................   929
    Unnevehr, Ph.D., Laurian J., Acting Administrator, Economic
      Research Service, U.S. Department of Agriculture, Washington,
      D.C............................................................   809
        Prepared statement...........................................   810
        Questionnaire................................................   935

                               Submitted Material

    Biotechnology Industry Organization, submitted statement.........   826
    Van Arsdall, R. Thomas, Executive Director, National Coalition
      for Food and Agricultural Research, submitted statement........   823
    U.S. Department of Agriculture, response to submitted questions..   828

    Subcommittee on Livestock, Dairy, and Poultry, and Foreign Agriculture,
                          Thursday, September 08, 2011

    Baca, Hon. Joe, a Representative in Congress from California,
      prepared statement.............................................   944
    Cardoza, Hon. Dennis A., a Representative in Congress from
      California, opening statement..................................   942
        Prepared statement...........................................   943
    Peterson, Hon. Collin C., a Representative in Congress from
      Minnesota, prepared statement..................................   943
    Rooney, Hon. Thomas J., a Representative in Congress from
      Florida, opening statement.....................................   941
        Prepared statement...........................................   942

                                   Witnesses

    Garcia, Juan M., Acting Deputy Administrator for Farm Programs,
      Farm Service Agency, U.S. Department of Agriculture,
      Washington, D.C.; accompanied by Larry Salathe, Ph.D., Senior
      Economist, Office of the Chief Economist, USDA.................   944
        Prepared statement...........................................   946
        Submitted questions..........................................   973
        Questionnaire................................................   997
    Coale, Dana, Deputy Administrator for Dairy Programs,
      Agricultural Marketing Service, U.S. Department of Agriculture,
      Washington, D.C.; accompanied by Larry Salathe, Ph.D., Senior
      Economist, Office of the Chief Economist, USDA.................   949
        Prepared statement...........................................   950
        Submitted questions..........................................   973
        Questionnaire................................................  1011

                               Submitted Material

    National Milk Producers Federation, submitted report.............   974
    Supplementary material submitted by the USDA.....................   971

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                    Agriculture, Tuesday, September 13, 2011

    Costa, Hon. Jim, a Representative in Congress from California,
      opening statement..............................................  1021
    Johnson, Hon. Timothy V., a Representative in Congress from
      Illinois, opening statement....................................  1019
        Prepared statement...........................................  1020

                                   Witnesses

    Adelstein, Hon. Jonathan S., Administrator, Rural Utilities
      Service, U.S. Department of Agriculture, Washington, D.C.......  1023
        Prepared statement...........................................  1025
        Questionnaire................................................  1073
    Canales, Judith A., Administrator, Rural Business-Cooperative
      Service, U.S. Department of Agriculture, Washington, D.C.......  1026
        Prepared statement...........................................  1028
        Supplementary material.......................................  1055
        Submitted report.............................................  1056
        Questionnaire................................................  1101
    Trevino, Tammye H., Administrator, Rural Housing Service, U.S.
      Department of Agriculture, Washington, D.C.....................  1032
        Prepared statement...........................................  1034
        Questionnaire................................................  1117

                              Submitted Questions

    U.S. Department of Agriculture, response to submitted questions..  1065

                           AGRICULTURAL PROGRAM AUDIT

              (EXAMINATION OF THE FEDERAL CROP INSURANCE PROGRAM)

                                  ----------

                             FRIDAY, JUNE 24, 2011

      Subcommittee on General Farm Commodities
                           and Risk Management,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:02 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. K.
    Michael Conaway [Chairman of the Subcommittee] presiding.
        Members present: Representatives Conaway, Neugebauer,
    Schmidt, Austin Scott of Georgia, Crawford, Roby, Huelskamp,
    Gibson, Hultgren, Hartzler, Schilling, Stutzman, Lucas (ex
    officio), Boswell, McIntyre, Walz, Kissell, David Scott of
    Georgia, Courtney, and Peterson (ex officio).
        Staff present: Tamara Hinton, Kevin Kramp, Matt Schertz,
    Pelham Straughn, Suzanne Watson, Bart Fischer, Liz Friedlander,
    Clark Ogilvie, Anne Simmons, John Konya, and Jamie Mitchell.

    OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
                         IN CONGRESS FROM TEXAS

        The Chairman. We will call the hearing to order. This
    hearing of the Subcommittee on General Farm Commodities and
    Risk Management entitled, Agricultural Program Audit:
    Examination of Federal Crop Insurance Programs, will come to
    order. We are pleased to have before us today the Administrator
    of the Risk Management Agency Bill Murphy. It is appropriate
    that our first farm bill audit hearing focuses on the Federal
    Crop Insurance program, because crop insurance has evolved over
    73 years to become a cornerstone of U.S. farm policy. It is as
    important now as ever. Farmers across the country are dealing
    with wild fires, droughts, and I am told, extra water in
    Minnesota, floods. It is also important to observe why the
    Federal Government is involved in crop insurance. That is
    because without Federal involvement, America's farmers quite
    simply would not have crop insurance. Without crop insurance,
    lenders would not likely make loans to producers. After all,
    producers are borrowing more money in a single year than many
    Americans borrow in a lifetime. So if there is ever a role for
    Federal involvement in what would ordinarily be a private
    market activity, this is a prime example.
        Still, as essential that Federal crop insurance is to most
    producers, it has been a long road to get to where we are, and
    we have not yet reached our final destination. Three events
    helped farm crop insurance become what it is today. First, 100
    percent private sector delivery through a strong agent
    workforce; second, the 2000 reform bill that increased producer
    access to high levels of coverage at more affordable prices;
    and third, the approval of revenue products that help producers
    cope with production losses and better market their crops,
    while dealing with price volatility. This last improvement was
    also a private sector innovation.
        With these innovations, participation has more than doubled
    over the past 20 years, and total liabilities protected has
    increased over 600 percent, reaching an expected total of over
    $100 billion in 2011. We have witnessed an increase in risk
    management tools available to producers, most notably the
    revenue products now on the market.
        Despite these successes, there are areas where Federal crop
    insurance must move forward to meet the risk management needs
    of U.S. producers, and this is especially true in the current
    budget climate. Federal crop insurance must be built upon, or
    it will wither and die because it will fall behind producer
    needs. For example, it is great that we have producers covered
    at the 70 to 85 percent coverage levels, meeting deductibles
    ranging from 30 down to 15 percent. These high deductibles grow
    even larger when coupled with artificially low actual
    production histories, or APHs, that further shrink insurable
    yields. But for many producers, only low levels of coverage are
    cost effective. This is true, despite the introduction of
    enterprise units in the farm bill that help producers buy up
    higher levels of coverage.
        Unfortunately, a lot of time has already been lost. Over
    the last 4 years, the Risk Management Agency has taken its
    focus off the task at hand in order to implement cuts to the
    Federal Crop Insurance program, first made in the 2008 Farm
    Bill, roughly a $6 billion reduction. And then in the
    renegotiation of the Standard Reinsurance Agreement, which
    reduced CBO baseline for ag spending by another $6 billion, all
    of which went to deficit reduction. While I was comfortable
    with the farm bill, I was not sold on the wisdom behind the
    SRA. In any case, we do not yet know the full impact of the
    farm bill and SRA will have on crop insurance. This has created
    great uncertainty and has preoccupied the time of RMA, and thus
    agents and companies, with issues that are not the primary goal
    of Federal crop insurance, which is to serve producer risk
    management needs. RMA and the industry must pick up where they
    left off and focus on meeting the needs of farmers and
    ranchers.
        In short, this public-private partnership is necessary. The
    farmer must pay to play. Risk management tools under Federal
    crop insurance are tailored to producer price and production
    risks. Lenders require and the Federal crop insurance has
    contributed to deficit reduction, and fully complies with the
    WTO. This is a good deal for the farmer, the agents, the
    companies creating private sector jobs, and economic activity,
    and good for the taxpayer.
        I look forward to hearing from Administrator Murphy on how
    we can make things better.
        [The prepared statement of Mr. Conaway follows:]

      Prepared Statement of Hon. K. Michael Conaway, a Representative in
                              Congress from Texas
        We are pleased to have before us the Administrator of the Risk
    Management Agency, Mr. Bill Murphy.
        It is appropriate that our first farm bill audit hearing focuses on
    Federal Crop Insurance because crop insurance has evolved over 73 years
    to become a cornerstone of U.S. farm policy. It's as important now as
    ever. Farmers across the country are dealing with wildfires, droughts,
    and floods.
        It is also important to observe why the Federal Government is
    involved in crop insurance: it's because without Federal involvement
    America's farmers quite simply would not have crop insurance. And
    without crop insurance, lenders would likely not make loans to
    producers. After all, producers are borrowing more money in a single
    year than most Americans will borrow in a lifetime.
        So, if there was ever a role for Federal involvement in what would
    ordinarily be a private market activity, this is a prime example.
        Still, as essential as Federal Crop Insurance is to most producers,
    it has been a long road to get to where we are--and we have not yet
    reached our final destination.
        Three events helped Federal Crop Insurance become what it is today:
    First, 100% private sector delivery through a strong agent workforce;
    second, the 2000 reform bill that increased producer access to higher
    levels of coverage at more affordable prices; and third, the approval
    of revenue products that help producers cope with production losses and
    better market their crops while dealing with price volatility. This
    last improvement was also a private sector innovation.
        With these innovations, participation has more than doubled over
    the past 20 years and total liabilities protected has increased by over
    600%, reaching an expected total of over $100 billion in 2011, and we
    have witnessed an increase in the risk management tools available to
    producers, most notably ``revenue'' products.
        Despite these successes, there are areas where Federal Crop
    Insurance must move forward to meet the risk management needs of U.S.
    producers, and this is especially true in the current budget climate.
    Federal Crop Insurance must be built upon or it will wither and die
    because it will fall behind producer needs. For example, it is great
    that we have producers covered at the 70% to 85% coverage levels,
    meaning deductibles ranging from 30% down to 15%. These high
    deductibles grow even larger when coupled with artificially low actual
    production histories, or APHs, that further shrink insurable yields.
    But for many producers, only low levels of coverage are cost effective.
    This is true despite the introduction of ``enterprise units'' in the
    farm bill that helped producer's buy-up higher levels of coverage.
        Unfortunately, a lot of time has already been lost. Over the last 4
    years, the Risk Management Agency has taken its focus off of the task
    at hand in order to implement cuts to Federal Crop Insurance, first
    made in the 2008 Farm Bill--roughly a $6 billion reduction--and then in
    the renegotiation of the Standard Reinsurance Agreement, which reduced
    the CBO baseline for agriculture by another $6 billion, all of which
    went to deficit reduction.
        While I was comfortable with the farm bill, I was not sold on the
    wisdom behind the SRA. In any case, we do not yet know the full impact
    the farm bill and the SRA will have on Crop Insurance. This has created
    great uncertainty and has preoccupied the time of RMA, and thus agents
    and companies, with issues that are not the primary goal of Federal
    Crop Insurance, which is to serve producer risk management needs. RMA
    and the industry must pick up where they left off and focus on meeting
    the needs of our farmers and ranchers.
        In short, this private-public partnership is necessary. The farmer
    must pay to play. Risk management tools under Federal Crop Insurance
    are tailored to producer price and production risks. Lenders require
    it. And, Federal Crop Insurance has contributed to deficit reduction
    and fully complies with the WTO. This is a good deal for the farmer,
    the agents and the companies creating private sector jobs and economic
    activity, and for the taxpayer. I look forward to hearing from
    Administrator Murphy on how we can make a good thing even better.
        But first I would yield to the Ranking Member of the Subcommittee,
    Mr. Boswell, for any opening remarks he may have.

        The Chairman. I would like to yield to the Ranking Member
    of the Subcommittee, Mr. Boswell, for any comments he may make.

    OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE
                         IN CONGRESS FROM IOWA

        Mr. Boswell. Well, thank you, Mr. Chairman, and I
    appreciate you having this hearing. I certainly concur with
    much of what you have just said. Pay to play, that is a pretty
    good little term, and I think it rings very true. We will
    probably talk about some of that.
        I also would like to thank everybody for joining us here
    today, as I look around the gallery and see who is here and the
    interest level seems to remain high. Mr. Murphy, welcome back,
    too. We have had a few conversations. It has been a little
    while, so maybe this is a chance for us to catch up.
        But anyway, I come from a state where we have, as you know,
    92,000 farms and more than 30 million acres in production. It
    sounds like we are having an interruption, doesn't it? I
    understand challenges of farmers and those in agricultural
    business face today. It is high risk, as you well know.
        When I retired from the Army and returned home to farm, I
    quickly realized that farming had greatly changed over the 20
    years that I was away. Back then, I had always said that in
    order to farm, a producer needs to have access to a bank and a
    place to buy and sell product, and the inputs. Of course, we
    have gotten much more sophisticated over the last years. I got
    caught right in the farm crisis of the late 1970s, early 1980s.
    After surviving it, which I did, and I also was chairing my
    local place to buy and sell, the cooperative, I realized how
    important a good crop insurance agent was to help me manage my
    risk. I worked with my agent, sure that I was never put in the
    position that I was during the 1980s farm crisis, because I had
    an opportunity to do it.
        I share that story because I understand the importance of
    the crop insurance industry, not only in the State of Iowa, but
    across the country. In 2010, 255 million acres were enrolled in
    crop insurance. Sign up and buy up levels for crop insurance
    have proven that farmers appreciate having additional options
    to help them manage risks; however, certain regions and certain
    crops are underrepresented, we have found. Looking ahead, we
    need to see how we can make the program work for more
    producers.
        Additionally, I have to say that I am opposed to cutting
    funding to the program. Budgets are tight, but tight budgets do
    not mean we must jeopardize the risk management tools that we
    have today, or put in question when improvements can be made in
    the future.
        On that note, this Committee has gone a long ways in
    previous years to address sound fiscal management, and the USDA
    has decreased costs through the renegotiation of the Standard
    Reinsurance Agreement, SRA. I have been concerned with these
    cuts and the effects this negotiation may have on the
    relationship between farmers and their agents. We must
    acknowledge that the crop insurance industry is a business, and
    both the companies and the agents need to make a reasonable
    profit in order to stay in the market.
        Just yesterday, I had an unexpected conversation with a
    senior agent in a small town surrounded by agriculture. I won't
    name the place, but I could if we have a conversation about it.
    He is concerned. It is time to start thinking about passing the
    business on, and with all the questions, whether it is to
    family or somebody, to keep, it is a vital part. It is as
    important as having the bank and the place to buy and sell.
    That agency is important in that community, is my point.
        So with that in mind, at this hearing I will be submitting
    a question when we get into question time to you, Mr. Murphy,
    with the request for a written response on this issue. The
    renegotiation of the SRA has left insurance agents in my state
    and many others perplexed, worried sick, I guess, by a direct
    cap in the SRA on commissions private companies are allowed to
    provide. To me, this is arbitrary and neglects the principle of
    a free market and the expertise and hard work of insurance
    agents our farmers rely on. So I look forward to the response
    and working with you to further enhance the crop insurance
    industry so it provides maximum benefits to producers and
    consumers alike.
        One of the many farm programs we support are highly valued
    crop insurance and must be structured to ensure a free
    marketplace for insurers and agents across the nation. We are
    making great strides to help the American farmer, and I look
    forward to hearing more about the crop insurance program today.
    I thank you again for your testimony, which will be an
    essential means for us to continue to move forward on the next
    farm bill.
        So thank you, Mr. Chairman. I yield back.
        The Chairman. Thank you, sir. I recognize the Chairman of
    the full Committee for any comments he might have.

     OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
                         CONGRESS FROM OKLAHOMA

        Mr. Lucas. Thank you, and I would like to thank the
    Chairman and the Ranking Member for holding this first in a
    series of audit hearings to examine programs authorized in the
    farm bill.
        My goal with these hearings is two-fold. First, I want the
    Department to present a spending snapshot of farm programs. Our
    Subcommittees will examine spending trends, confirm whether the
    purposes and goals of the programs we authorize are being met
    successfully. We will look for duplication within issue areas
    to determine program overlap. We will also examine program
    eligibility and whether those eligibility criteria meet the
    needs of our constituents. We will scrutinize waste, fraud, and
    abuse, and look for ways to build on the success the Department
    has already achieved in this area of program integrity. In
    essence, this is what I mean by an audit of farm programs.
        The second purpose of these audits is educational in
    nature. I think it is important that our Committee learn just
    how many programs we authorize in the farm bill, and the amount
    of money we dedicate in each area. I want the Members of our
    Committee to have a holistic view of farm policy before we move
    forward. Too often in the past, Congress has considered a
    piecemeal approach to farm programs, adding layer upon layer
    while not looking at the overall picture to see how these
    programs interact. We are starting with comprehensive audits so
    we can examine each program within the broader context of farm
    policy. These audits ensure that we are operating from the same
    base of knowledge. We represent states ranging from Alabama to
    Oregon, and the diverse constituencies that come with that, so
    we all have unique priorities for farm policy. But while our
    priorities may differ, our facts cannot. So these audits give
    all of us the same data to use in decision making.
        Having the best available data will help us better
    understand farm programs so we can navigate the tough, and I
    mean tough, road ahead. I hope that today we can start a
    dialogue on how to root out inefficiencies so we can continue
    supporting our farmers and ranchers while spending, yes, fewer
    taxpayer dollars.
        It is also important for all of us to understand our
    priorities from the last two farm bills. Before we move forward
    with new policies, we should understand how we got to where we
    are today. Some of the circumstances that shaped past farm
    bills are still relevant today. Others have changed. We all
    know that this farm bill will be developed under a very
    different fiscal climate than the 2008 Farm Bill. The simple
    truth is, we must make some difficult decisions. There are no
    sacred cows, so to speak, and during these tough fiscal times,
    every program, every title will be on the table. This farm bill
    gives the Committee an excellent opportunity to prioritize the
    programs that are working, fix the programs that are broken,
    eliminate the programs that are duplicative. We will make these
    determinations with the help of these audits, along with the
    input from our constituents. We will start this process today
    by taking a serious look at crop insurance to ensure that our
    funds are utilized economically, and the program delivery is
    efficient for farmers and ranchers.
        As we begin the process of developing the 2012 Farm Bill, I
    know the challenge of doing more with less will be foremost in
    our minds. I believe that we can meet this challenge and
    develop thoughtful policies to keep American agriculture
    productive and competitive in the 21st century.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Lucas follows:]

    Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
                                 from Oklahoma
        Good morning.
        I'd like to thank Chairman Conaway for holding the first in a
    series of audit hearings to examine programs authorized in the farm
    bill.
        My goal with these hearings is two-fold. First, I want the
    Department to present a spending snapshot of farm programs.
        Our Subcommittees will examine spending trends and confirm whether
    the purpose and goals of the programs we authorize are being met
    successfully.
        We will look for duplication within issue areas to determine
    program overlap. We will also examine program eligibility and whether
    those eligibility criteria meet the needs of our constituents.
        And we will scrutinize waste, fraud and abuse, and look for ways to
    build on the success the Department has already achieved in this area
    of program integrity. In essence, this is what I mean by an ``audit''
    of farm programs.
        The second purpose of these audits is educational in nature. I
    think it is important for our Committee to learn just how many programs
    we authorize in the farm bill and the amount of money we dedicate to
    each area.
        I want the Members of our Committee to have a holistic view of farm
    policy before we move forward. Too often in the past, Congress has
    taken a piecemeal approach to farm programs, adding layer upon layer
    while not looking at the overall picture to see how these programs
    interact.
        We are starting with comprehensive audits so that we can examine
    each program within the broader context of farm policy.
        These audits ensure that we are operating from the same base of
    knowledge. We represent states ranging from Alabama to Oregon--and the
    diverse constituencies that come with that--so we all have unique
    priorities for farm policy. But while our priorities may differ, our
    facts cannot. So these audits give all of us the same data to use in
    decision making.
        Having the best available data will help us better understand farm
    programs so that we can navigate the tough road ahead.
        I hope that today, we can start a dialogue on how to root out
    inefficiencies so we can continue supporting our farmers and ranchers
    while spending fewer taxpayer dollars.
        It is also important for all of us to understand our priorities for
    the last two farm bills. Before we move forward with new policies, we
    must understand how we got where we are today.
        Some of the circumstances that shaped past farm bills are still
    relevant today. Others have changed. We all know that this farm bill
    will be developed under a very different fiscal climate than the 2008
    Farm Bill.
        The simple truth is that we must make some difficult decisions.
    There are no ``sacred cows,'' so to speak, and during these tough
    fiscal times, every program, in every title, will be on the table.
        This farm bill gives the Committee an excellent opportunity to
    prioritize programs that are working, fix programs that are broken, and
    eliminate programs that are duplicative. We will make those
    determinations with the help of these audits, along with input from our
    constituents.
        We will start that process today by taking a serious look at crop
    insurance to ensure that our funds are utilized economically and
    program delivery is efficient for our farmers and ranchers.
        As we begin the process of developing the 2012 Farm Bill, I know
    that the challenge of doing more with less will be foremost in our
    minds.
        I believe that we can meet this challenge and develop thoughtful
    policies to keep American agriculture productive and competitive in the
    21st century.

        The Chairman. Thank you, Mr. Chairman. We have one vote,
    and I thought we would just try to do a rolling vote, but it
    came quicker than I thought it was going to. After--do you have
    any comments, Ranking Member? Okay.
        Why don't we take a quick break, run across the street,
    vote, and come back? Then all of us will have access to hear
    you talk, and it won't be as disruptive that way. So we will
    take--the meeting will recess, subject to call of the chair.
        [Recess.]
        The Chairman. I have one piece of administrative duty, the
    gentleman from Indiana, Mr. Stutzman, is not a Member of the
    Subcommittee, but has joined us today or will join us in a
    moment. I have consulted with the Ranking Member, and am
    pleased to welcome him in joining in questioning of the
    witness.
        So at this point in time, Mr. Murphy, you have the floor
    for your opening comments. Thank you for being here.

    STATEMENT OF WILLIAM J. MURPHY, ADMINISTRATOR, RISK MANAGEMENT
                       AGENCY, U.S. DEPARTMENT OF
                     AGRICULTURE, WASHINGTON, D.C.

        Mr. Murphy. Chairman Conaway, Ranking Member Boswell,
    Members of the Subcommittee, as Administrator of the Risk
    Management Agency, I am pleased to meet with you today to
    discuss the latest developments in RMA, and the progress and
    challenges of the Federal Crop Insurance Program. Along with
    Secretary Vilsack's leadership, I have the goal to administer
    the Federal Crop Insurance Program in a manner that provides
    effective risk management services to all farmers and ranchers,
    regardless of their location or the size of their operation.
        The Secretary and I are aware that in today's economy, it
    is important that the program be cost effective and give a fair
    value for taxpayers' dollars. I am proud that I can confidently
    say that we are doing just that.
        Crop insurance has become an integral part of the business
    life of the large majority of American farmers and ranchers.
    They would find it difficult, if not impossible, to continue
    without the protection provided by this part of the farm safety
    net. Many lenders now require crop insurance coverage in order
    to make operating loans to crop and livestock producers. Many
    producers use crop insurance as collateral for loans, as well
    as provide support for forward pricing their crop.
        Today, over 250 million acres of farms and ranches are
    covered by Federal crop insurance, for an overall participation
    rate exceeding 80 percent for the major crops. The value of
    insured crops is at a record high. In 1994, program liability
    was less than $14 billion. This year, it will exceed $100
    billion. More producers buy higher levels of insurance now, and
    more specialty crop producers participate in the program than
    ever before.
        Our unique and successful relationship with our private
    partners, 15 insurance companies, and the agents who deal
    directly with farmers and ranchers is the foundation of this
    program. Producers purchase crop and livestock insurance from
    an insurance agency operating and living in their communities.
    This relationship levers the respective strengths of the public
    and private sectors. The 2011 crop year, with widespread
    flooding in some areas and record drought in others, has been a
    true test to the crop insurance program. My staff and I are
    closely watching all developments to ensure that producers get
    all the protection provided by their policies.
        The preventive planning coverage available in most policies
    has been of extreme importance this year in areas where
    standing water and water-logged soils have prevented producers
    from getting into their fields. In drought-stricken areas, the
    compensation provided for reduced yields will be extremely
    important in helping producers to survive until next year. In
    years like this one, the value of this critical safety net is
    made clear.
        The $6 billion in savings credit created through the
    renegotiated Standard Reinsurance Agreement in 2010 went
    towards reducing the Federal deficit and supporting high
    priority risk management and conservation programs. By
    containing program costs, these changes also ensure the
    sustainability of the crop insurance program for American
    farmers and ranchers for years to come.
        RMA's Comprehensive Information Management System, CIMS, is
    of clear importance to producers. Working with the Farm Service
    Agency, RMA began in 2007 to provide access to over 12,000
    users of RMA, FSA, and crop insurance companies as the single
    source of RMA and FSA program information for producers, crop
    acreage, and production. The next stage of this information
    sharing is now underway, and the Department's efforts with
    cross functional representation from RMA, FSA, NRCS, and NASS
    one-stop reporting for farmers, and standardizing programs
    across the Department is our goal.
        As those of you acquainted with the dairy farmers may be
    aware, the Livestock Gross Margin dairy plan of insurance ran
    out of funding this year. Congress makes $20 million available
    a year for all livestock programs, and the popularity of a
    newly-designed dairy program exhausted these funds in March,
    halfway through the fiscal year. We look forward to again
    funding LGM dairy in the new fiscal year.
        RMA continues to make significant progress in preempting
    fraud, waste, and abuse through the expanded use of data
    mining. RMA, FSA, and the crop insurance companies have
    preempted tens of millions of dollars of improper payments
    through quality control, data mining, and other measures. RMA
    is constantly identifying ways to balance competing needs to
    make our product less susceptible to fraud, while seeking to
    provide responsive, useful risk protection tools for farmers.
        Again, thank you for the opportunity to participate in this
    important hearing. I look forward to discussing the Crop
    Insurance Program with you, and to responding to any questions
    you may have.
        [The prepared statement of Mr. Murphy follows:]

    Prepared Statement of William J. Murphy, Administrator, Risk Management
            Agency, U.S. Department of Agriculture, Washington, D.C.
        Chairman Conaway, Ranking Member Boswell, and Committee Members, I
    am pleased to meet with you today to discuss the latest developments in
    the Risk Management Agency (RMA), the progress and challenges of the
    Federal crop insurance program, and the status of the Standard
    Reinsurance Agreement (SRA) and its benefits to the agricultural
    community and the American taxpayer. My staff and I work daily to
    validate the utility of current insurance products--making certain we
    offer the best risk management protection possible for all of America's
    farmers and ranchers. The agency, along with our fifteen approved crop
    insurance companies, provide risk management tools that are compatible
    with international trade commitments, create products and services that
    are actuarially sound and market driven, harness the strengths of both
    the public and private sectors, and reflect the diversity of the
    agricultural sector.
        Crop insurance is a vital part of the farm safety net and has
    become an integral part of business life for a large majority of
    American farmers and ranchers. They would find it difficult to continue
    providing the United States and the world with an abundant supply of
    food, fiber and fuel without the protection provided by this part of
    the farm safety net. Many lenders now require crop insurance coverage
    in order to make operating loans to crop and livestock producers, and
    many producers use crop insurance as collateral for the loans.
        There is a unique and successful relationship between RMA and our
    private partners, the 15 approved insurance companies, and the agents
    who deal directly with farmers and ranchers. Producers purchase Federal
    crop or livestock insurance from insurance agents operating in their
    communities, who sell the insurance on behalf of the 15 insurance
    companies. This relationship leverages the respective strengths of the
    public and private sectors. The insurance companies provide Federal
    crop insurance under reinsurance agreements with the Federal Crop
    Insurance Corporation (FCIC), administered by RMA.
        The 2011 crop year, with widespread flooding in some areas
    accompanied by severe drought in other areas, has been a test of the
    crop insurance program. My staff and I are closely watching all
    developments to insure that producers get the protection provided by
    their policies. The Prevented Planting coverage available in most
    policies has been of extreme importance this year in areas where
    standing water or waterlogged soil prevented producers from getting
    into their fields until past the time for planting. In drought stricken
    areas, the compensation provided for reduced yields will be extremely
    important in helping producers to survive. In years like this one, the
    value of this critical safety net is made clear.
    Brief History
        Participation in the crop insurance program increased significantly
    following changes enacted in 1994 by Congress. For example, fewer than
    100 million acres of farmland were insured under the program in 1994.
    Today, over 250 million acres of farm and ranch lands are covered by
    Federal crop insurance, for an overall participation rate exceeding 80
    percent for the major crops.
        As the amount of insured acreage has increased, so too has the
    liability, or value of the insurance in force. In 1994, program
    liability was less than $14 billion. Industry estimates suggest 2011
    program liability could exceed $100 billion. The crop insurance program
    has seen sustained growth as demonstrated by the increasing proportion
    of acres insured at buy up levels over the last decade. Today, over 90
    percent of all policyholders purchase buy-up levels of coverage. Of
    note is the significant level of participation by specialty crop
    producers. The overall participation rate for specialty crop producers
    is about 75 percent, which is fairly comparable to the 83 percent
    participation rate for the major program crops. Important fruit, nut
    and vegetable states California (71%), Florida (91%), and Washington
    (68%) each score well in Federal crop insurance program participation.
        This growth has been accomplished in an actuarially sound manner as
    required by Congress and the program is working well. Over the last 2
    decades, premiums (producer premiums added to premium subsidies) have
    been sufficient to cover the indemnities paid to producers plus a
    reasonable reserve, as directed by the Federal Crop Insurance Act.
        In 2000, Congress enacted the Agricultural Risk Protection Act
    (ARPA) that expanded the role of the private sector allowing entities
    to participate in conducting research and development of new insurance
    products and features. With the expansion of contracting authority, RMA
    can enter into contracts for research and development of new and
    innovative insurance products. Private entities may also submit
    unsolicited proposals for insurance products to the FCIC Board of
    Directors (Board) for approval. If approved by the Board, these
    unsolicited insurance products are eligible to receive reimbursement
    for research, development and maintenance costs, in addition to any
    approved premium subsidies and reinsurance.
        ARPA also removed restrictions on the development of insurance
    products for livestock. Authority was added to allow the Board to
    create an expert review panel to provide assistance to the Board and
    RMA in evaluating proposed insurance products for feasibility and
    actuarial soundness. Premium subsidies to farmers were increased to
    encourage producers to purchase higher insurance coverage levels and to
    make the insurance program more attractive to prospective producers.
    Throughout all of this, RMA has implemented many innovations to keep up
    with industry advances as well as customer demands.
    Standard Reinsurance Agreement
        On June 10, 2010, USDA released the new reinsurance agreement and
    announced that $6 billion in savings were created through this action.
    Two-thirds of this savings went toward paying down the Federal deficit,
    and the remaining \1/3\ was used to support high priority risk
    management and conservation programs. By containing program costs,
    these changes also ensure the sustainability of the crop insurance
    program for America's farmers and ranchers for years to come.
    CIMS & ACRSI
        The 2002 Farm Bill required the Secretary of Agriculture to develop
    a Comprehensive Information Management System (CIMS) to be used by the
    Farm Service Agency (FSA) and RMA in the farm programs they administer.
    CIMS was made available for use in September 2007. It provides access
    for over 12,000 users from RMA, FSA and the crop insurance companies as
    a single source of RMA and FSA program information for producers, crop
    acreage and production. The next stage of information sharing is now
    underway with the Acreage/Crop Reporting Streamlining Initiative
    (ACRSI). This is a Departmental effort with cross functional
    representation from RMA, FSA, Natural Resources Conservation Service,
    andNational Agricultural Statistics Service.
        The objective of ACRSI is to establish a common USDA framework for
    producer commodity reporting in support of USDA programs and to
    establish common data standards of information used for producer
    commodity reporting. ACRSI and CIMS will facilitate `one-stop'
    reporting of producer information and greater data sharing of data
    among government agencies. This will provide for greatly improved
    integrity and accuracy of the data collected and reported to USDA. RMA
    and FSA will be able to efficiently identify discrepancies, cases of
    misreporting, and potential fraud, waste, and abuse, thus reducing the
    potential for improper payments. Furthermore, these efforts will save
    time and money for the government, producers and companies by reducing
    reporting and data management burdens.
    Livestock Products
        ARPA authorized RMA to offer insurance products for livestock
    producers and provided $20 million in funding to cover administrative
    and operating (A&O) and premium subsidy costs for pilot livestock
    insurance plans each fiscal year. RMA currently reinsures eight
    livestock products, all of which were developed and submitted by
    private parties through the authorities contained in Section 508(h) of
    the Federal Crop Insurance Act. There are two basic insurance models
    used to offer livestock insurance: Livestock Risk Protection (LRP) and
    Livestock Gross Margin (LGM). LRP provides protection against
    unexpected declines in the price of certain livestock--feeder cattle,
    fed cattle, lamb, and swine. LGM provides protection to livestock
    producers against unexpected increases in feed costs or unexpected
    declines in prices for the insured livestock product. Gross margin is
    the market value of the insured livestock product minus feed costs. As
    we have noted previously, the $20 million in annual funding for all
    livestock programs was exhausted in March because of the increased
    popularity of LGM-Dairy. Thus, none of the livestock programs are
    currently available. They will be offered again in Fiscal Year 2012
    when an additional $20 million in funding becomes available.
    Program Integrity and Data Mining
        In conjunction with the improved quality control requirements in
    the new SRA, RMA Compliance has revised its work plans to reflect a
    more balanced approach between quality assurance and investigating
    program abuses. In a time of declining resources and increased
    responsibilities, effective internal controls provide a significant
    cost-benefit compared to identifying and prosecuting program abuse
    alone. RMA is reviewing company operations and internal controls to
    determine the success of their efforts to address crop insurance
    program vulnerability concerns.
        RMA continues to make significant progress in preempting fraud,
    waste and abuse through the expanded use of data mining. ARPA directed
    RMA to employ data mining technologies to program compliance and
    integrity efforts, and provided the funding necessary to support these
    activities. ARPA also provided a role for FSA to assist RMA in further
    program compliance and integrity. RMA subsequently entered into a
    contract with the Center for Agribusiness Excellence (CAE) at Tarleton
    State University to develop and maintain appropriate data warehousing
    and data mining capabilities. Annually, CAE produces a spot-check list
    of producers engaging in questionable behaviors which is provided to
    FSA for further investigation. With the assistance of FSA offices, RMA
    and the insurance companies conduct growing season spot checks to
    ensure that claims for losses are legitimate.
        These efforts have been highly successful as the cumulative cost
    avoidance from data mining and related activities from 2001 through
    2010 is estimated to be almost $840 million, based on our analysis of
    the changes in loss experience for those people placed on the spot-
    check list. In light of the success of the spot-check program, the new
    SRA broadens the use of data mining to help direct company efforts at
    detecting and investigating suspect behaviors. We believe the targeted
    company reviews enabled by data mining will be more effective and
    efficient than the random review process of previous years.
        While RMA, FSA and the crop insurance companies have preempted tens
    of millions of dollars of improper payments through quality controls,
    data mining, and other measures, RMA is constantly identifying ways to
    balance competing needs to make our products less susceptible to fraud
    while seeking to provide responsive, useful risk protection to farmers.
    We still have work to do and improvements to make, but we are making
    good progress in our fight against waste, fraud and abuse in the
    Federal crop insurance program.
    Premium Rates
        One of the most important considerations for the Federal crop
    insurance program is the premium cost for producers. If premium rates
    are too high, producers will not participate in the crop insurance
    program. If premium rates are too low, actuarial performance will
    deteriorate. RMA continually seeks to improve its premium rating
    methodology and maintain actuarial balance. RMA recently commissioned a
    comprehensive review of its rating methodology by a panel of outside
    experts. A preliminary draft of the review was posted for public
    comment. The final draft, as well as the response to public comments,
    is available on RMA's website. The review supported RMA's overall
    approach to generating premium rates based on historical loss
    experience, and provided a number of recommendations for potential
    improvements that RMA is pursuing. The most critical of these
    recommendations is for RMA to determine if all historical losses should
    be given the same weight in determining current premium rates. Work on
    the reweighting of historical loss experience is currently ongoing.
    Concept Proposals
        The 2008 Farm Bill provided an alternative for producers and
    private entities to submit to the FCIC Board, proposals for insurance
    coverage for agricultural commodities not traditionally served, and to
    improve current insurance coverage. Private entities are authorized to
    submit Concept Proposals for plans of insurance to the Board for
    approval of an advance payment of up to half of their estimated
    research and development costs to assist them in developing a completed
    508(h) insurance product. Completed 508(h) products receive
    reimbursement of the balance of their research and development costs
    and up to 4 years of maintenance expenses if approved by the Board. To
    date, the Board has received 23 Concept Proposals and approved 11 for
    advance payments totaling approximately $1.7 million.
    Combination Policies (COMBO)
        On March 30, 2010, RMA published the final rule for the Common Crop
    Insurance Policy, commonly known as the COMBO policy, to be effective
    for the 2011 crop year. The COMBO policy combines five plans of
    insurance into a single plan of insurance. This new policy makes risk
    management decisions simpler for the producer and enhances program
    efficiency by reducing inconsistencies, duplication, and paperwork.
    Furthermore, by combining the previous five plans of insurance into a
    single plan RMA eliminated a primary source of confusion and error in
    the administration of the Federal crop insurance program. Another
    benefit of the COMBO policy is the use of a single rating and pricing
    component so all coverage is consistent in terms of protection and
    cost. Similar efforts are underway to combine RMA's area-based programs
    (Group Risk Plan--GRP, and Group Risk Income Protection--GRIP) into a
    single plan of insurance.
    Information Technology Modernization
        The Information Technology Modernization (ITM) project, RMA's
    technology reengineering initiative, began in earnest in FY 2008, based
    on funding received in the farm bill. Phase I was completed in FY 2010,
    and included significant achievements to deploy the majority of the
    actuarial tools required to generate 2011 insurance offers and provide
    for validation of detailed policy data received from crop insurance
    companies that is used as the basis for calculation of expense
    reimbursement and risk sharing between RMA and the companies in
    accordance with the SRA. Accepted data is also used for future rating
    and publicly generated reports. Rollover of the 2011 crop year
    actuarial data was accomplished and the first filing for the 2012 crop
    year took place on April 30, 2011.
        Phase II development continues and focuses on corporate reporting
    providing data reporting and analysis capabilities. On-demand analysis
    and standardize reporting will be available on multiple years of
    actuarial, policy, and financial data. The analytical environment has
    been set up and development has begun on standardized reports. ITM
    Phase II also includes Regional Office Exceptions (ROE) written
    agreement processing. ITM Phase II is progressing towards scheduled
    operations in July 2011. Enhancements to the ITM production system have
    been implemented for actuarial processes, policy processing, premium
    calculations, and other Phase I capabilities.
        RMA supports many information technology functions using private
    contractors. The contract for IT services is generally for 5 years and
    is due to expire in 2011. In January 2011, RMA competitively awarded a
    new contract for IT services until 2015. Accounting and other corporate
    reporting capabilities will be implemented in the new system as part of
    this contract, and is scheduled to be complete at the end of the
    calendar year.
    Organic Crops
        RMA continues to move forward in improving crop insurance coverage
    for organic producers so they will have viable and effective risk
    management options like many of the conventional crop programs.
    Consistent with the 2008 Farm Bill, RMA contracted for research into
    whether or not sufficient data exists upon which RMA could determine a
    price election for organic crops, and if such data exists, to develop a
    pricing methodology using that data. Also included in the contract was
    research into the underwriting, risk and loss experience of organic
    crops as compared with the same crops produced in the same counties
    during the same crop years using nonorganic methods. Three reports have
    been completed from this study.
        The first report outlined research into data that exists today that
    could support price elections for various organic crops. The second
    report outlined a proposed methodology for development of a price
    election for organic cotton, corn and soybeans. The third report
    presented the results of the contractor's comparative analysis of loss
    experience for organic crops and conventional crops that were produced
    in the same counties during the same crop years.
        RMA intends to establish dedicated price elections for organic
    crops where supported by data and sound economic pricing principles.
    The first of these organic price elections became available for the
    2011 crop year. In addition, RMA will continue to capitalize on
    improved data collection and sharing of organic production and price
    data occurring throughout USDA, an initiative to better leverage the
    resources of all of our agencies to address this important segment of
    agriculture.
        RMA will continue to evaluate the loss experience of both organic
    and conventional practices to ensure that premium rating is
    commensurate with the level of risk for each. This includes revising
    surcharges for those areas or situations that merit such consideration.
    Quality Adjustment
        Another area of continued challenge to the program involves
    providing coverage for reduced quality in a harvested crop. RMA
    provides quality adjustment for many crops, based primarily on
    standards contained in the Official United States Standards for Grain,
    such as test weight, kernel damage, etc. Wheat, for example, is
    eligible for quality adjustment when poor quality results in a grade
    worse than U.S. No. 4. While producers and the crop insurance companies
    have been generally supportive of RMA's quality adjustment provisions,
    in some instances producers would like to see quality adjustment begin
    when their grain quality loss is not as severe as current rules
    require. Additionally, producers contend that quality adjustments in
    the program do not always reflect what they are actually discounted in
    the market place. This is most often heard earlier in the harvest
    season when the extent of poor quality is not fully known and grain
    buyers tend to have more severe discounts.
        One of the challenges for RMA's organic program is to assure that
    the availability of Federal crop insurance does not inappropriately
    affect market dynamics, such as buyers imposing larger quality
    discounts and relying on Federal crop insurance to make producers
    whole. Similarly, crop insurance is not meant to provide coverage for
    the marketing errors of producers or for a general deterioration in
    market conditions--unless, of course, such deterioration is a covered
    cause of loss. RMA continually strives to provide standard quality
    discounts that apply to all producers nationwide so everyone is treated
    equitably and the crop insurance program does not promote or become
    subject to abusive market practices. RMA has continued to work with
    grower associations and others to continually improve the effectiveness
    of its quality adjustment provisions.
              * * * * *
        Mr. Chairman, this concludes my statement. Thank you for the
    opportunity to meet with you today. We look forward to working with you
    and Committee Members and will be pleased to provide whatever
    assistance you may request. I would be pleased to answer any questions
    you and other Members of the Committee may have.

        The Chairman. Well thank you, Mr. Murphy, being under the
    wire at the 5 minute mark. I appreciate that.
        The chair reminds Members they will be recognized for
    questioning in order of seniority of Members who were here at
    the time of the start of the hearing. After that, Members will
    be recognized in order of arrival. I appreciate Members
    understanding.
        I will now recognize myself for 5 minutes. In my opening
    statement, and Mr. Boswell, in yours as well, you talked about
    the importance of the private-public partnership for delivery
    of crop insurance. From time to time, we hear rumors of--that
    partnership may need to go just totally public, and with the
    public delivery of the system. Are you and your staff committed
    to this public-private partnership, because it sure looks like
    it works to us.
        Mr. Murphy. Yes, indeed. In fact, the Secretary reiterated
    that when meeting with one of the trade groups a couple weeks
    ago in his office. There is no doubt in my mind that we are
    enjoying this participation level today, due to that unique
    relationship with private agents and their companies.
        The Chairman. All right. You mentioned the importance of
    your information technology improvements. Will you be able to
    finish all of that under the existing budget authorities?
        Mr. Murphy. We will do the best we can, sir. It is moving
    along. We are having some very good success. I am glad to see
    we had it up and running. We were able to bring the COMBO
    product up this year. So it is functioning. I am concerned for
    the out-years. Next year, we don't have the funding anymore
    that was provided in the farm bill. I am sure I will be up here
    asking for additional funding for that project, but that is of
    great concern to us.
        The Chairman. Well, I think it is going to be important,
    Mr. Murphy, that you lay that out for us specifically because
    we have choices to make, and those need to be informed choices.
    That information has an impact on that, and the Committee needs
    to understand that.
        Mr. Murphy. I would like to add that also the more complex
    our programs become, we really need that IT capacity in order
    to deliver these programs to farmers.
        The Chairman. Well, also the impact on this budget on FSA
    and their ability to deliver their side of the house is in the
    same way impacted by that.
        At one point in time, speaking of data mining, there were
    some barriers between RMA and FSA data so that the folks at
    Tarleton could not fully exploit everything available. Have
    those barriers been taken down? Is there anything left that we
    need to do?
        Mr. Murphy. No, actually we are making a lot of progress.
    There are--continues to be problems between the data between
    RMA's data and FSA's. We are actually working through the SURE
    Program. We are fixing a lot of that data. I think as CIMS
    comes up and running, it will be extremely helpful in
    identifying where we have differences between the two
    programs----
        The Chairman. But in terms of legal barriers?
        Mr. Murphy. Oh, no, we are working through that. In fact,
    FSA is just about prepared to publish their new rule, which
    will provide us the flexibility we need.
        The Chairman. Okay. So there is something in that regard to
    fully exploit that, it benefits all of us.
        Mr. Murphy. Right.
        The Chairman. Can you walk us through a little bit about
    how the 508(h) program is working, and maybe some examples
    currently in the pipeline?
        Mr. Murphy. Okay. Actually, we have three different ways
    that we can develop programs. One of them is that we can go out
    and contract ourselves for the development. The other way is
    where the private sector actually comes into the board of
    directors and presents a program. They can go the 508(h) route,
    which is that they bring a fully developed program to the board
    of directors for approval. Another route with the last farm
    bill was the concept proposals where folks can actually come
    into the board of directors, explain what they would like to
    develop, and then we can get partial funding for that
    development, and then it follows the 508(h) procedure after
    that.
        It seems we are getting new programs out in the street.
    That seems to be working well to that effect. There are some
    issues or some concerns being raised about some other programs
    that are higher priority that should be done first, but that is
    just the way the system is established. But we are working
    along at it.
        The Chairman. All right. The Members know that there is a
    questionnaire that asks about each of the major components. You
    sent yours in. I would like to go to the question on page 5,
    number 10. It says Utilization (Participation) Data. If you
    could walk us through that, the number of policies stayed
    exactly the same for 10 years. Can you just walk across that--
    those columns and help us understand what each one of them
    means?
        Mr. Murphy. Okay. I think--actually, I think the next chart
    is much better for looking at the changes over years.
        The Chairman. Well just tell us what that means. What is
    the--we talked about $100 billion in coverage out there, but
    that bottom line for--just says $71 billion.
        Mr. Murphy. Okay, yes. Well that's actually in 2010 it was
    in the $70 billion range, $78 billion I think is what it is at
    right now. But with the increase in commodity prices between
    2010 and 2011 is where we expect to see the increase to over
    $100 billion.
        The Chairman. Well, we have talked about participation, but
    the number of policies has stayed dramatically the same for
    that----
        Mr. Murphy. No, it is actually--well, there hasn't been a
    lot of variation since 2001.
        The Chairman. Okay. And then the loss ratio and the loss
    cost columns, can you explain them to us real quick?
        Mr. Murphy. Okay. Loss ratio is just the experience of the
    program. That is the ratio of premiums to indemnities paid. The
    good story here is that you can see the 10 year average, we are
    at .837. That means for every dollar in premium, we pay out
    83 cents, so that the program is actually performing very
    soundly at this time. In fact, if you go back 20 years, you are
    still under a dollar loss ratio. So we are very proud of the
    changes in that.
        Loss cost ratio is just a measure of how much of the
    indemnity--how much of the liability is being used by the
    indemnity. We actually use both of these ratios in order to
    come up with the rates for the program.
        The Chairman. All right, thank you, and I will yield back.
    Mr. Boswell, 5 minutes.
        Mr. Boswell. Thank you.
        Again, going to our continuing or running conversation, Mr.
    Murphy. We found, in our hearings across the country a month
    ago, what we need out there, available to our producers, is
    affordable, and viable crop insurance. I think you are trying
    very hard to do that. I am not--this is extremely important.
    You think of the high cost inputs, and out in cotton country,
    wheat country, and so on, but you know, they like to talk about
    the price per bushel of corn when it is doing well. You never
    hear any conversation about the cost of input, and I think it
    has become important for all of us on this Committee that we
    ought to be making an issue of that. The public out there
    doesn't really get the idea of what it costs to put that crop
    in. It is capital intensive and this crop insurance is terribly
    important.
        So anyway, I want to ask you this question that we referred
    to, and then I will leave it with you. The Risk Management
    Agency has redefined the definition of agent compensation
    relative to the release of the 2011 Standard Reinsurance
    Agreement. The restrictions outline the acquisition section of
    the manager's bulletin on agent compensation are very troubling
    because they restrict an agent's ability to sell his agency or
    her agency at the full market value. In many instances, the
    sales of these family-owned crop insurance agencies are relied
    upon for retirement income and for future financial planning.
    In addition, such restrictions will also hinder a company's
    ability to grow. The only option for company expansion will be
    through the acquisition process, which favors large companies
    over small companies, and will lead to less choice for
    consumers.
        So how does the agency acquisition provision in the 2011
    SRA improve the Federal Crop Insurance Program and strengthen
    the safety net for farmers and is the RMA willing to revisit
    this provision to address these concerns? I will give you this
    in writing as well after this is over with, but I would like
    for you to comment on it.
        Mr. Murphy. Actually, that provision is not in the SRA
    itself. That provision is actually in follow-up procedures that
    we provided after the----
        Mr. Boswell. Well, let us address the point then.
        Mr. Murphy. Right. There is nothing in there that restricts
    the sale of an agency. What they are talking about there, and
    where this becomes an issue is if a company buys an agency and
    then employs the principle of that agency and continues to pay
    the agents--all we are saying there is that that sale, if the
    principle stays involved in that agency as it becomes part of
    the company, is that that counts toward compensation. There is
    a great concern that that particular scheme was being utilized
    to evade the caps on each commission.
        So you know, I want to make clear that there is nothing
    that restricts it.
        Mr. Boswell. Well, at least----
        Mr. Murphy. Okay, that----
        Mr. Boswell. It limits----
        Mr. Murphy. It limits potential sales. You could say that.
        Mr. Boswell. Okay.
        Mr. Murphy. You could say that. Now this is in a procedure
    that we actually got--we just finished getting comments from
    the agents. We sent it out to the agents to get their comments
    as well. We are incorporating all of that now. We have not
    issued it yet as a final procedure, but----
        Mr. Boswell. I hope we can have some conversation on that.
    I would look forward to that. Seriously, when I share with you
    the person that I talked to, I didn't call him. He called me. I
    talked to him for--at any other time during this whole process
    we have not had conversations.
        Mr. Murphy. I am sure it is because of----
        Mr. Boswell. But anyway, he comes in with this concern, and
    coming from this individual, as I am sure many others, it is a
    genuine concern and we need to talk to him about. So I would
    trust you to do that, and if you might give us a few points on
    how--what you might have to say about the pilot program,
    concerning livestock.
        Mr. Murphy. The livestock programs?
        Mr. Boswell. Yes.
        Mr. Murphy. Actually, the big news has been the dairy gross
    margin coverage. Historically, we get $20 million a year for
    the livestock program since ARPA, since 2000. We have actually
    only been spending about--of that $20 million, about $3 or $4
    million a year. What changed this year is that the dairy
    industry requested through the developer of that program to
    make two changes. One of them, to provide a subsidy, which was
    not in there before and is not really in any livestock
    programs. We do have a small one in some of the others, but
    that is just to offset some additional costs. So there is no
    true subsidy like we see in the crop programs. They requested a
    subsidy and they also requested that the premium payment be
    changed from the beginning of the insurance period to the end,
    like the rest of the Crop Insurance Program. The developers
    agreed to that and we sent it--we put it out just 4 months ago.
    Growers were extremely interested in the program. Like I said,
    they have used up all of the funding that we had available for
    dairy, which was about 75 percent of that $20 million.
        Mr. Boswell. Thank you. I will do a follow-up later.
        I yield back.
        The Chairman. Thank you, Mr. Boswell.
        Mr. Neugebauer, 5 minutes.
        Mr. Neugebauer. Thank you, Mr. Chairman.
        Administrator Murphy, this will come of no surprise to you.
    I want to talk about something that has been a big concern of
    mine for a number of years, and that is shallow losses. For
    some of my colleagues that are new to the Committee, basically
    a lot of producers can purchase an APH policy and get 65, 70
    percent coverage, but in many cases if they want to buy up that
    coverage, when you get above that level, the premium becomes
    extremely expensive. In fact, it is almost a 1:1, a dollar of
    premium for a dollar of benefit. Obviously that makes the
    economics--so what in many cases can happen for our producers,
    they can have anywhere from a 25 to 30, 35 percent loss, and
    not receive any coverage from their policy. You know, obviously
    there are very few businesses I know that can sustain a 30, 35
    percent loss in their margin and be profitable.
        So there are a lot of potential solutions to that out
    there, and some have said to offer additional premium support
    for APH to make it more cost effective to buy up. Others have,
    as you know, I have a plan that would provide a supplemental
    opportunity, based on area yield or county yield.
        So what are your thoughts? Do we stick with the APH, or do
    we look at some of these supplemental opportunities?
        Mr. Murphy. Well, I know the SURE Program that was
    instituted with the last farm bill was actually supposed to
    address that, and basically utilizing the crop insurance
    indemnity for an additional payment under--as a disaster
    payment. I have not gotten too involved in SURE. Anecdotally I
    understand there are concerns in different parts of the
    country, whether it is achieving what it was intended to do.
    You know, how it is actually working day-to-day, I really am
    not the best person to talk to, but I would be very happy to
    work with you towards the farm bill and look for some----
        Mr. Neugebauer. Yes, I think part of the SURE Program is it
    is triggered on a state-wide basis, and you know, Texas is a
    pretty big state, and so you can have one condition in one area
    of our state and others. Well, I think that is going to be an
    important part of that, because I think as we begin to look at
    the basket of safety net for producers, price, it doesn't do
    you any good to have any price safety net if you don't produce
    a crop.
        Mr. Murphy. I think also it requires a disaster declaration
    in the county and the adjacent counties. So if only a small
    percentage of farmers gets hit with a problem, it potentially
    is not going to trigger the county.
        Mr. Neugebauer. Absolutely, and I want to go on to another
    area. I know that Plains Cotton Growers initiated an effort on
    cotton seed, pilot program, and I guess this was the first year
    of that program. Can you kind of give us a little thumbnail of
    how that program has worked and the results of that?
        Mr. Murphy. We haven't gotten the acreage information in
    yet. That is probably going to be another couple months away,
    but I can tell you anecdotally from our offices down there and
    the companies there, it is extremely popular. This is something
    that those growers are very interested in. That seed is
    becoming--especially when the prices drop, that seed becomes a
    bigger part of their revenue for the year. So it is critical to
    not only have the lint, but the seed as well, get the offset
    for the seed.
        So from what I understand, the growers are very happy with
    it. We worked with the developers and we actually made it
    extremely simple to administer the program, so I think the
    agents are happy with it. So overall, I think it has been a
    success.
        Mr. Neugebauer. You know, recently when they renegotiated
    the SRA, I think RMA kind of divided the country into three
    groupings. Group one was Illinois, Indiana, then group two was
    Alabama, soon to be some of the other states, and group three
    was kind of the hodge podge, all the way from Alaska to Nevada
    to Vermont.
        Can you kind of give me some perspective of how those were
    grouped?
        Mr. Murphy. Okay. The reason we had done that--and that was
    something new we introduced for the first time with this array.
    In the past, the underwriting--the ability to make underwriting
    gains or loss were equal across the country. What we tried to
    do this time, as an effort to try to get that same high level
    of service we see in the Midwest and other parts of the
    country, we reduced the company's ability to make underwriting
    gains in the five--what normally are referred to as the I
    States in the Midwest. Actually, we increased the opportunity
    to make underwriting gains in other parts of the country, and
    what--so we just--for the first year in 2011 we are going
    through it. I think, from the modeling we have so far, it seems
    to be working. We have talked to agents who were saying that
    actually in some of the parts that historically had low
    commissions--that this is actually making it--more companies
    are becoming interested in getting into these other parts of
    the country, and that is what we wanted to do. So we wanted to
    spread that competition as well.
        Mr. Neugebauer. Were the premiums different in the
    groupings?
        Mr. Murphy. Pardon?
        Mr. Neugebauer. Were the premiums different in those----
        Mr. Murphy. Only by nature of whatever the experience was
    for those crops, yes.
        Mr. Neugebauer. Nothing to do with groups?
        Mr. Murphy. No, not from the grower's standpoint. No, no
    difference at all.
        Mr. Neugebauer. Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. Mr. Courtney, from
    Connecticut.
        Mr. Courtney. Thank you, Mr. Chairman. Thank you for
    holding this hearing.
        Mr. Murphy, I wanted to go back to the dairy pilot program
    that you were talking about earlier. Obviously, the high demand
    is an interesting signal that the interest is there. You know,
    one of the farms in my district that was one of the subscribers
    to the insurance was sharing with me his experience with it,
    which you know, he has a moderate-sized herd farm. He signed up
    for it kind of as a test run, because looking out on the
    horizon, it is pretty clear that risk insurance is going to be
    part of the world of that industry.
        His concern obviously was cost, a little bit, which I think
    a lot of the smaller farms are nervous about, but the other
    issue was the complexity of the product. I mean, he was
    describing to me the system for calculating the monthly
    premiums, and you know, we are pretty comfortable in
    Connecticut with insurance products----
        Mr. Murphy. Right.
        Mr. Courtney.--as you can imagine, but this one was pretty
    sophisticated. The message was that they got to run a farm. I'm
    trying to sort of calculate what their payments are. It took
    some fairly difficult and time consuming efforts.
        I wonder if you could walk through about whether that is a
    complaint that you are hearing, and whether there are ways to
    address it. You know, simplicity is always a good thing.
        Mr. Murphy. Yes, indeed. You know, I haven't heard too many
    complaints about that, but it does not surprise me, because it
    is a great Gilmore complex and our normal Crop Insurance
    Program for corn or soybeans or something like that. Because
    what you are actually doing, you are looking forward into the
    next 11 months and you are comparing the prices of the feed
    versus the price of the milk itself using the futures contract,
    and that is what makes the margin. So you are insuring that
    margin month to month in the out-years.
        So instead of looking at--if I was a corn grower, I am
    looking at one insurance period. When you are actually a dairy
    farmer, you are looking at potentially 11. They have to go out
    there, so it has a great deal of complexity.
        The program has not been evaluated yet. That will probably
    occur within the next couple years. What I encourage is they
    can either send comments in to us and we can share them with
    the developer, or we can get the address of the developer and
    the grower can go directly to them. But like I said, these--
    they instituted a major change just this year, so I believe
    they will be open to looking at comments that growers might
    have, but I think the very nature of that type of a program is
    going to be more complex than something like the corn the guy
    probably insures already.
        Mr. Courtney. I mean, is it too soon to say whether people
    have been actually filing claims?
        Mr. Murphy. Yes, it is.
        Mr. Courtney. Okay.
        Mr. Murphy. Yes, it is too soon now, definitely. But I
    think it certainly shows their concern with the volatility that
    they have been seeing in pricing for the product. And I
    understand that the industry has put forward something very
    similar, something that they would like to see potentially in
    the farm bill. I have not seen what they are suggesting, but I
    know they have been working on a product.
        Mr. Courtney. Right. Thank you, Mr. Chairman. I yield back.
        The Chairman. I thank the gentleman. Before we move to our
    side, the Ranking Member of the full Committee has slipped in.
    Do you have any comments?
        Mr. Peterson. Yes, thank you, Mr. Chairman.
        I guess what I would like to know, we made these
    significant changes in the farm bill and the SRA. When are you
    going to have solid information about how this actually sorted
    out? You probably don't have that yet, I assume.
        Mr. Murphy. No, no. We are already seeing some of the
    effects, Congressman, especially in the area of agent
    compensation. This has been a bit tricky for the companies who
    try to get through. We are doing it new for the first time at
    cap and how it is implemented. We are exceeding the cap, as no
    surprise for 2011, with the way the commodity prices are going.
    We are seeing areas like California, where commissions had
    dropped a good deal more than we thought they would. The
    industry, the companies themselves have expressed some concern
    here, so we are going to take a look at that to try to even out
    the pain of reducing the A&O overall in the program. Some of
    the companies are interested in having that discussion.
        On the underwriting gains side, all I have seen is some
    studies that have been done on the new underwriting gain
    potential, underwriting loss potential, and they have not been
    bad at all, especially with the prices we are seeing this year.
    Now we are getting off to a bad start, and so I guess--I
    imagine that has the companies nervous. But it is probably
    going to be, I would say, November or December before we have a
    good handle on what the impacts would be on underwriting, gains
    or losses.
        Mr. Peterson. Okay. And then how about on the agent
    situation, the same timeframe?
        Mr. Murphy. Yes, we are already hearing the concerns from
    the agents on it, and we are already talking to some agents.
    They are coming up with some ideas. We are getting questions,
    can anything be done since this is sort of locked in place?
    Basically, as long as we don't increase the costs, we do have
    some flexibility, all right, but it would require all the
    companies to agree to make the change. And those discussions
    will probably just get started within the next couple months.
        Mr. Peterson. So you know, depending on when we actually
    write the farm bill, but say it is next year, we will probably
    have pretty good information?
        Mr. Murphy. Certainly on the A&O side, yes, the
    administrative and operating expense side that would provide
    the companies, and we will have some preliminary information on
    the underwriting gain potential, underwriting loss potential as
    well.
        Mr. Peterson. Okay. Thank you, Mr. Chairman.
        The Chairman. Thank you, Mr. Peterson.
        Mr. Austin Scott, of Georgia, for 5 minutes.
        Mr. Austin Scott of Georgia. Thank you, Mr. Chairman, and
    Administrator Murphy, thank you for joining us today.
        Thinking back to when I was a child, I can remember quite
    vividly my grandfather, who was a producer, telling me that he
    thought the insurance program was the most important thing that
    the Federal Government did for the farmer, and was, quite
    honestly, maybe the only thing that we would have to do for the
    farmer if we had it right. I also majored in risk management
    and insurance at the University of Georgia, which is the best
    school on the face of the Earth, I might add.
        But my question gets back to this. One is I would say, and
    you can check these numbers, while the average loss ratio is
    83.7 percent, the total loss ratio over 10 years is even a
    little better and closer to 77 percent, is that----
        Mr. Murphy. Yes.
        Mr. Austin Scott of Georgia. So our total loss ratio is
    even a little better than our average loss ratio, because of
    the years where we got hit so hard. I also remember my
    grandfather talking about people who had learned to game the
    insurance system, if you will, and so as we work forward with
    this insurance program, I want to make sure that we have the
    best program possible for the good farmer. It gets back to
    something you have talked about a little bit before and I would
    like you to expand on. Is somebody whose claims ratio--and I
    know you have talked about it more from the standpoint of a
    discount for consistently good producer----
        Mr. Murphy. Right.
        Mr. Austin Scott of Georgia.--but virtually every insurance
    product out there in America is risk-adjusted, based on the
    conduct of the individual. And so, as we go forward with that,
    would you talk with us about your ideas for having somebody who
    makes multiple claims versus somebody who is not making those
    claims, someone whose loss ratios are out of line, if you will,
    consistently. How do you intend to handle them paying more into
    the system, the risk adjustment there?
        Mr. Murphy. Okay. Overall, first I will just say that from
    a standpoint of integrity, it is actually imbedded in every
    function for the program. It is critical that we continue to
    try to do the best we can to combat fraud, waste, and abuse. We
    have some very advanced tools, data mining, which has been very
    successful, which has helped us identify schemes going on. We
    have some very large cases occurring right now with tobacco in
    North Carolina as a result of the findings of data mining. That
    is an important tool, so that will help us, but you are
    absolutely right. When you get down to the county level of this
    program, if somebody is abusing that program, that county is
    paying for it. The neighbors are paying for it. We rate on a
    crop county basis in this program, and so as a result, next to
    data mining, probably the most important tool that we have in
    identifying and fighting fraud are neighbors who do not want to
    see their premiums go up because of something somebody is
    doing.
        We keep working more and more. We work very closely with
    FSA on a spot-check list that we use to identify anomalies
    through data mining. FSA spot-checks those through the year.
    That has been extremely effective. And so I think as long as we
    try to keep up with the new schemes, because as you tighten
    things up, a certain group of people will always look for ways
    to get money for doing little. We will keep addressing that,
    going forward.
        Mr. Austin Scott of Georgia. I think you are right, I mean,
    with what you said. I think my FSA agents could probably
    predict for you who was going to file the claim.
        Mr. Murphy. Who you need to watch.
        Mr. Austin Scott of Georgia. And so could the majority of
    the farmers in the community. And so I guess I hope that we
    will work towards an adjustment in that, and make sure that we
    are creating the program that works for the good producer. And
    I understand that a good producer is going to have some losses.
    That is just the facts of life, but I just hope that you will
    keep moving down that path and keep us informed. And I do,
    again, want to point out the importance, I believe, in the
    private-public partnership here where we are the insurer, but
    we have private agents out there actually handling the
    insurance product.
        Thank you, I yield back the rest of my time.
        The Chairman. Thanks, Mr. Scott.
        Mrs. Roby for 5 minutes.
        Mrs. Roby. Thank you, Mr. Chairman, and thank you, Mr.
    Murphy, for being with us today.
        Just to build upon what Mr. Scott was talking about, in
    preparation for this hearing we heard from our folks back home
    who shared similar concerns, that we should be rewarding
    farmers for good performance history with crop insurance,
    either through lower premiums or increased coverage levels.
    More consideration needs to be given to the individual
    experiences that would not disadvantage good producers in a bad
    county experience situation.
        I want to ask you a specific question about the group risk
    insurance program. It was very, very popular throughout the
    South and was used pretty heavily in Alabama. And the RMA stops
    the program in many counties, due to insufficient data. So I
    want to know is RMA currently exploring any avenues that would
    allow reintroduction of this program, or a similar program in
    areas that previously lost access to those products?
        Mr. Murphy. Right. I think there is a two-part answer. One
    of them is I think NASS is working harder with farm groups,
    realizing the importance of getting this data into NASS. So I
    think there is an emphasis on growers of making sure that
    everybody in the county reports to NASS the correct numbers.
        The second thing we are doing is we are looking at our
    group risk plan, as well as a few other changes to the actual
    production history basis of the program. One of the things we
    will be looking at is perhaps having area group plan
    participants provide their yields every year, that way we would
    be able to use our own data instead of having to rely on NASS's
    program alone. So we are looking at that as a way to address
    that.
        Another thing we could do is look at combining districts.
    That gets a little tricky if you have a lot of changes in the
    geography of the area, but that is another thing we can take a
    look at. But we are very aware of that and we are looking at
    ways that we can bring the program back into those counties, as
    well as expand into other counties.
        Mrs. Roby. Good. Thank you for that.
        I just want to make this as a comment. You can respond if
    you want, but right now under the current rules, in some
    situations a farmer is required to carry a failed crop to
    harvest, and you know, this comes from our groups back home, so
    they spend more money to actually harvest the crop than the
    crop is going to bring. I just want to point that out, that
    that needs to be addressed. It is detrimental in some
    situations.
        But I want to go back and--let me see, I have a little bit
    more time. You mentioned in your testimony that lenders now
    require crop insurance coverage in order to make operating
    loans, and many producers use collateral for loans. Can you
    tell us why crop insurance has become so important to the
    producers in securing financing?
        Mr. Murphy. I think it is because the grower knows up front
    what his protection is going to be, and the banker knows up
    front that the production is there. It is not only their
    knowledge of the crop insurance, but bankers have become
    extremely knowledgeable of the actual mechanics of the
    programs, and so they will suggest certain types of products
    that they want the grower to purchase.
        Another thing that they can do is that they can have the
    indemnity sent to the bank, or make the indemnity payable to
    both the bank and the grower. Now the grower does not always
    like that, but if it helps secure a loan, I think it is a good
    thing. So it has just become something the bank can depend on.
    Now with the advance of revenue coverage as well as yield
    coverage, I mean, for a grower to be able to go into a banker
    and say I am guaranteed to make this much money per acre, that
    is pretty powerful source of collateral for that bank. So I
    believe that is why it has become--we don't need Congress to
    take any action during the year. We don't need the Secretary to
    take action. The program just works, and if a grower has a
    loss, he gets paid.
        Mrs. Roby. Thank you so much, Mr. Chairman. I yield back.
        The Chairman. I thank the gentlelady.
        Mr. Schilling for 5 minutes.
        Mr. Schilling. Thank you, Mr. Chairman.
        What I wanted to just address--thank you for coming out--
    duplication and overlapping of services, basically. One of the
    concerns about the duplication of the acreage reporting,
    including the cost of administering and the frustration that it
    causes our producers. Given that many of the producers have
    multiple farms with differing acres and crop rotations on each
    farm, it seem the process drastically increases the margin of
    error and creates twice as many opportunities for the mistakes.
    Why can't we just avoid--I think you know where I am going with
    that.
        Mr. Murphy. Yes, I understand your point exactly, sir, and
    I am very pleased to tell you we are making progress in this
    area. Through the Comprehensive Information Management System,
    the CIMS Program, we are pulling together the acreage reporting
    dates for both FSA and RMA. I think next year, spring crops
    2012, will see the first dates of that, and they will be in the
    northern tier of the country. That has always been a source of
    angst to growers out there.
        We are working toward, through that same project, a single
    port reporting. If the farmer wants to go to his FSA county
    office and report, why can't the agent download that
    information and use it himself, and vice versa? If it is a
    rainy Thursday afternoon, why can't the grower sit and certify
    at home and have it sent to both programs? That is the end goal
    of the CIMS project. Under Secretary Scuse is the primary
    proponent of it in the Department, and I am happy to say that
    we are moving very quickly toward that.
        Mr. Schilling. Very good. And then just my last--have there
    been any issues in reconciling a crop insurance reduction? We
    talked a little bit about that, so I am going to pass on that.
    One of the things I am a big proponent, like Mr. Scott had
    indicated, is the public-private partnerships. I think those
    are huge. One of the things in the Illinois 17th District where
    I am from, that is the one thing I continue to hear from the
    farmer is leave our insurance alone. But with that, I
    appreciate your time, sir.
        Mr. Murphy. Thank you.
        The Chairman. I thank the gentleman.
        Mr. Crawford, from Arkansas, for 5 minutes.
        Mr. Crawford. Thank you, Mr. Chairman, and thank you, Mr.
    Murphy, for being here.
        Can you provide any insight into differences in
    participation rates between crops and/or regions? For example,
    in 2010, according to RMA data about 68 percent of rice,
    particularly in Arkansas, acres were insured. By contrast,
    nearly all of Texas cotton acres were insured. Are there unique
    concerns with certain crops or regions?
        Mr. Murphy. Actually, there is indeed. I am happy to report
    that we are seeing increases. One of the concerns we often get
    is between major program crops and specialty crops. We are at
    83 percent participation on the major program crops. We have
    come up to 75 percent for specialty crops, so we are seeing
    progress there.
        I think the introduction of the additional subsidy for
    enterprise units has also been extremely helpful, especially in
    your area, for both rice and cotton down there. It reduces the
    premium tremendously. Growers have flocked to those programs
    and we are seeing increases there. That alone is not going to
    solve it. We are seeing probably Arkansas, Mississippi,
    Alabama, that area is where we are seeing lower participation
    than other parts of the country. We are actively working with
    commodity groups down there to try to improve the programs. We
    are looking at the dates in the program to make sure that they
    are the correct dates we should or should not be using, such as
    planting dates, reporting dates, end of insurance dates. We are
    taking a look at that. We are even getting into the policies
    themselves. We have been having great meetings with the rice
    growers and working at some additional coverage the growers
    would like to see for downed rice, which results when
    hurricanes come through the area and they have to deal with the
    additional costs of harvest. Hopefully that is going to see
    some progress in the next couple years. It has been very
    successful work between us and the group down there.
        So we are using multiple ways to do it. I think it is
    slowly coming along, I just think we have to keep working with
    it. Program integrity is another big issue. There have been
    issues with program integrity in the past. Farmers have to be
    convinced that their premium dollars that they are paying out
    is going only to the legitimate losses. Our compliance office
    is putting extra effort into that area to show that.
        So we are doing a number of things, going forward, and as
    we get into the farm bill, I would be more than happy to work
    with you and your staff in additional ways we could look at
    increasing participation.
        Mr. Crawford. Excellent. I have just got half of my time
    left here, so let me ask you this. Is that flooding that has
    resulted from the Army Corps of Engineers breaching levies
    along the Mississippi and Missouri Rivers an insurable cause of
    loss under the Federal Crop Insurance Program?
        Mr. Murphy. Yes, it was, and there was some consternation
    at the beginning when the Corps first had decided to
    intentionally breach some of those levies. We worked with the
    Corps. They provided us with some information of what would
    happen if they did not breach the levies where they did.
    Additional damage would occur to crops downstream, uncontrolled
    damage where they couldn't tell us what additional damage would
    occur, especially in the northern part, the Missouri levy. The
    water was actually topping the plugs at the point that they
    blew them. If a levy is topped, the integrity of that structure
    is compromised severely and will probably fail anyway. As we
    moved further down along the Mississippi, the Corps was able to
    show that actually if they did not breach those levies where
    they did, the potential for the levies alongside with more
    intensive cropping, higher value cropping would be compromised.
    We were able to make the determination up and down the
    Mississippi River that they were insurable events. The
    companies have been informed. They tell me that they are moving
    loss adjusters in now to start working with the growers there.
        Yes, we were able to address all those concerns.
        Mr. Crawford. Excellent. Okay. Real quick, back to rice.
    You covered that pretty well, but I just want to ask, what is
    the current participation rate of rice and buy-up coverage and
    levels of protection, and how does this participation rate
    compare to other major crops like corn, soybeans, wheat, and
    cotton?
        Mr. Murphy. I don't have that information right with me. I
    can tell you it is lower than you see in the major crops. I
    will get that to you, though.
        [The information referred to is located on p. 35.]
        Mr. Crawford. Any ideas what we can do to increase that?
        Mr. Murphy. Again, I think it is working with the growers
    and seeing how we can improve that program. I mean, it was the
    development of revenue coverage that brought in the corn and
    soybean growers to the levels we have seen, so program
    improvements will bring in growers, once they believe their
    risks are being addressed by our programs. So I think it is a
    matter of just continuing to work until we get it right.
        Mr. Crawford. Excellent. Thank you, Mr. Murphy. I
    appreciate it, and I yield back.
        The Chairman. I thank the gentleman.
        Mr. Huelskamp, for 5 minutes.
        Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate your
    appearance here today, Mr. Murphy, and I come from a fairly
    large district, and doing town halls across the district, you
    learn not to complain about certain things. You complain about
    water, in my area it is a drought, and in the other end of the
    district it is flooding. We had both of those. But here
    consistently is the important piece, crop insurance and the
    product you produce and we will be watching that very closely.
        As one proponent noted, that given the situation, this is
    really going to test the program and we are really going to
    have to perform like we never have before.
        With that in mind, particularly with the--not only the
    currently higher but much more volatile commodity prices, how
    does that impact, in your mind, and how do you adjust for that
    and maintain the solvency of a program with the type of changes
    we have seen and are likely to see in the next 6 months.
        Mr. Murphy. Right. Actually, there is a lot of data
    available for us to go back and stress test our rates against
    historic results of the futures market, which we do. In 2008, I
    think we saw the biggest drop ever for the major commodities on
    the futures market from the beginning of the year to the end of
    the year. We actually ended up with a positive loss ratio
    nationwide, even though the companies probably did a claim on
    just about every corn or soybean policy out there that had
    revenue. And so we ended up with a positive price.
        We continue to work with--have others review our actuarial
    rating methods, so we have outsiders look at what we are doing
    and validate or suggest changes, which is done and we
    incorporate the changes. It is a constant work in progress, and
    I am very happy that it has been successful to date. With the
    commodity prices we are seeing today, if a farmer goes ahead
    and forward contracts his price, he has a massive risk and crop
    insurance is just necessary to protect that grower in the event
    that the price is to drop or go considerably higher.
        Mr. Huelskamp. I appreciate that. How much room for margin
    of error do you have? I mean, there are suggestions out there
    with the current economic environment with items--whether it is
    in this building or the Federal Reserve, that impact
    volatility. How much margin of error--I mean, 2008 was a year,
    2011 might be one for the books as well.
        Mr. Murphy. Yes, indeed. We take volatility into account
    when doing the rating of the program. That is what--in 2008,
    that is what led to such large premium bills for farmers. It
    wasn't the yield portion of the risk, it was the volatility
    factor associated with the revenue portion of the risk that
    they saw. So I think we have well-addressed the margin of
    error. Only experience will let us know, but like I said, we
    have a lot of data we can go back and take a look at, and
    again, stress test the program, which we do.
        Mr. Huelskamp. I appreciate that, and 2008 is a good year--
    an appropriate year to talk about. I think 2011 might be one we
    talk about for many years as well.
        The second question would be--and I had looked through the
    materials closely and didn't see this--but as far as taxpayer
    costs and other programs, how does that vary across the crops,
    and is that in the information you provided us?
        Mr. Murphy. We can provide more information on that. The
    taxpayer costs of the program changes dramatically on the
    experience that we have for that year. For the last 10 to 20
    years, except for a little blip in 2002, we have had positive
    loss ratios, so I think the program is well worth the money.
    The subsidy--the premiums are subsidized and average between 60
    or 70 percent--60 and 65 percent. So if we have $10 billion in
    premium this year, well the subsidy is going to be up about $6
    billion in the program. So the cost goes along with the
    commodity prices as well. There are a lot of variables in the
    program, the loss ratio, the losses that the companies pick up
    versus the government, so----
        Mr. Huelskamp. And the high cost over the last decade would
    have been how much in what year?
        Mr. Murphy. As far as the total cost of the program? I
    would have to pull that together for you. I can do that, the
    last 10 years.
        [The information referred to is located on p. 35.]
        Mr. Huelskamp. Okay, I appreciate that.
        Thank you, Mr. Chairman. I yield back my time.
        The Chairman. Thanks, Mr. Huelskamp.
        Mr. Gibson, 5 minutes.
        Mr. Gibson. Thanks, Mr. Chairman, and I appreciate, Mr.
    Murphy, you being here today.
        I represent a district in upstate New York, and your agency
    enjoys a good reputation up there for how quickly you process
    claims and--so given the current climate, the natural disasters
    that have hit across the country, including in my district, we
    have had flooding along the Hudson River. It mentioned in your
    assessment whether or not you will be able to keep up with the
    timeliness of the pay-outs and is there something about that
    program that I should carry back? I am about ready to meet with
    all my farmers; I have a quarterly panel. So if you want to
    give me some assessment as to how you think that is going to
    go, and if there are any best practices that you think I should
    carry back, I would welcome them.
        Mr. Murphy. Okay. Because of the nature of the losses we
    are seeing this year, just about every part of the country is
    dealing with something this year. I don't think I have ever
    seen anything like it, and I have been with the program for 30
    years. A lot depends on how the rest of the year goes, the
    total amount of claims that will have to occur. I have talked
    to the companies. They feel very confident that they have an
    adequately trained workforce. They are moving people around the
    country, which they routinely do to be able to address
    situations like this. I do believe we will be able to make the
    30 day turnaround required, once the insured signs the claim to
    the payment of the claim. The companies have told me that they
    feel good about it, so I am confident going through we will be
    able--the companies will be able to provide that same level of
    service that growers have become accustomed to.
        Mr. Gibson. That is encouraging. Is there anything that in
    this period that would be helpful for me to convey to the
    farmers in terms of best practices?
        Mr. Murphy. If they have a loss, notify their company
    immediately. That is probably the most important thing you
    could bring back. You don't want to get into a situation where
    the company is notified late in the year and they don't have
    the ability to look at that crop. That becomes extremely
    problematic, so I would say stay in touch with your company,
    stay in touch with your agent.
        Mr. Gibson. Thanks very much.
        The second area I would like to cover is, like every place
    else around the country, our dairy farmers and beef farmers,
    the beef industry in the 20th, we are having issues with input
    costs. I am curious to get your assessment as the ongoing
    activities in the Senate with regard to ethanol. Your
    assessment, how significantly that would impact input costs?
        Mr. Murphy. Okay. Again, that is a little bit out of my
    area of expertise. I usually look toward economists for their
    advice on it, and I will continue to do so. I am happy to
    report that we do have programs for livestock that are gross
    margin. Basically you are insuring that margin between the
    price of the finished product and the price of the input cost.
    It has been a slower uptake in cattle than we have seen in
    dairy, but it is an excellent program for times like these, so
    I would encourage growers to take a look at that, if they are
    concerned about both input and future price for their
    commodity.
        Mr. Gibson. Thanks very much, Mr. Murphy, and I appreciate
    your being here.
        I yield back.
        The Chairman. I thank the gentleman.
        Mrs. Hartzler, for 5 minutes.
        Mrs. Hartzler. Thank you, Mr. Chairman. Thank you, Mr.
    Murphy, and I would like to echo the comments that have already
    been said here by my farmers. Your part of the farm bill is
    probably the most popular part, and everyone, all of us--I am a
    farmer, too--appreciate what you do.
        I wanted to ask regarding the cost--of course, we are
    looking at budget issues now. In Fiscal Year 2010, it says the
    crop insurance costs were $4.7 billion. I just wondered, can
    you give me kind of a rough breakdown of how much of that went
    to claims and how much went to the administrative costs and
    operating costs?
        Mr. Murphy. Actually, we are a very small agency. We have
    less than--we have about 500 employees overall, so when you are
    talking discretionary costs of the program, we are only talking
    $78 million to $80 million being the overall cost of the
    program of discretionary.
        The major costs that we see in the program are the
    producer's subsidy that they get paid, the potential
    underwriting gains that the companies can make on a good year,
    and then the administrative and operating expense that we
    provide to the companies in order to deliver the program. Crop
    insurance, unlike private property and casualty insurance, you
    don't--the farmers don't pay that in their premium bill. We
    provide a separate payment to the companies to deliver the
    program for it. In the negotiation of the Standard Reinsurance
    Agreement, we actually reduced both the potential underwriting
    gains for the companies, as well as the administrative and
    operating costs provided to the companies, so we are certainly
    going to see a reduction. Probably the wildcard in the whole
    thing is the premium subsidy, going forward. Like I said, as we
    have seen these record commodity prices, that brings up the
    producer premium subsidy payment.
        Mrs. Hartzler. But in Fiscal Year 2010, how much money for
    those various things, or maybe you could get that to me later?
        Mr. Murphy. I can provide that to you on a year basis. I
    will break it out for 2010 and get that up to your office.
        The information referred to is located on p. 36.]
        Mrs. Hartzler. Yes, that would be fine.
        Another question, we have about an 80 percent crop
    insurance participation, right, on your major crops, and Fiscal
    Year 2009, about $79 billion worth of crops were insured, but
    yet, the overall value of crops in the U.S. that year was $169
    billion. So in other words, about 53 percent of the value of
    crop production was actually insured. So how does that
    reconcile that 80 percent participation rate, and given the
    price volatility and extreme weather, does that concern you?
        Mr. Murphy. Yes, it always concerns me. There are quite a
    few crops we haven't reached yet. That is a priority with the
    Agency, to figure out how we can expand coverage to the
    remaining crops out there. Another thing to keep in mind is
    that our yield guarantees are based on a 10 year average, all
    right, so that basically makes the APH guarantee lower than
    expectations. If you have seen some of the modeling on how
    yields have been increasing, especially over the last 10 years,
    so you are going to see a lag with the guarantee compared to
    what expectations of the crops are today. I think that adds a
    lot to it.
        Mrs. Hartzler. Definitely, that is true. Your testimony
    states there is only $20 million available annually to cover
    administrative and operating costs and premium subsidy costs
    for the pilot livestock insurance plans, so can you tell me a
    little bit about that? Are there pilot livestock insurance
    plans generally available, are they limited geographically now?
    How are they--given the finite resources, are they based on a
    first come, first served principle to sign up? How much would
    livestock insurance plans cost the government if it was widely
    available, given its popularity? Three questions there.
        Mr. Murphy. Well, I think there are a couple issues
    available here. I wouldn't look at livestock programs that we
    have, such as the revenue programs and the dairy program being
    the only--we have a pasture range land forage program out there
    now, that is widely available. We are expanding it as we have
    the funding to do so. That is something I think livestock folks
    generally participate in. A lot of livestock farmers also grow
    corn, alfalfa, soybeans. They can insure those.
        We only got the authority to actually start insuring
    livestock in the ARPA Act in 2000, so it has been a slow ramp-
    up. I think Congress wanted to limit how much we wrote until
    they could see the experience of the programs. I think that
    impacts--that is why they limited it to $20 million. That is
    something I think I would be very interested in discussing with
    the Committee as we get into the farm bill, taking a look at
    that and seeing if that is realistic anymore.
        I think cattle guys have been slow to come into the program
    overall. Cattle folks are very independent, as I am sure you
    are aware, if you work with cattle guys out there. It is a
    different breed. I think that is maybe a barrier as well.
        Mrs. Hartzler. Okay. Thank you very much.
        Thank you, Mr. Chairman.
        The Chairman. Thanks, Mrs. Hartzler.
        Mrs. Schmidt, 5 minutes.
        Mrs. Schmidt. Thank you, Mr. Chairman, and thank you, Mr.
    Murphy, for coming today.
        In the last few years of higher commodity prices, and given
    the flooding and drought across the country this year,
    including the flooding in my own district, how do you ensure
    that farmers claims are adjusted, processed, and reviewed in a
    timely manner, and are there ways to speed up that process?
        Mr. Murphy. Well, the companies themselves who reentered
    into the reinsurance agreement, they are responsible for that
    part of the program. They keep a core of well-trained
    individuals in claims adjusting on board. When we have a year
    like this, they bring others in the community who have worked
    in the past on loss adjustment, have been farmers themselves or
    farm managers. They bring them on to help to bring their
    numbers up, and they get it done. Rarely do I hear, even in
    2008, do I hear concerns that it has taken too long to get a
    claim paid.
        There are some concerns that the audits that have to go on
    in some of these claims, that has been voiced in the past. What
    I do to address that is I do what I can to inform farmers that
    this whole program is predicated on you having records to
    support your yields. Please make sure you have those together,
    and that way the audit will go quicker in the event that the
    grower is chosen.
        So I think overall the industry is well geared up to
    address these challenges across the nation. I think things will
    go smoothly, as they have in the past.
        Mrs. Schmidt. Thank you. Along the same lines, I understand
    that risk sharing between the USDA and the private insurance
    companies is spelled out in the Standard Reinsurance Agreement.
    However, can you please give a general explanation of the risks
    borne by the government and those borne by the insurance
    companies, and do you think the current arrangement is an
    appropriate balance of risk sharing?
        Mr. Murphy. Yes, I can do my best. We take a look at, of
    course, the lower the loss ratio of the year, the lower the
    claims, the more the companies assume the risks; the higher it
    gets, the more the government assumes the risks. That is why
    the government is involved in this program. If there wasn't a
    need, we would not be here. The industry would be able to
    handle the problem. They are concerned that such a systemic
    loss would occur in the Midwest and the high plains that they
    would not be able to address it, that is why we are here. So
    that is where we put the majority of our protection on the
    higher levels, once you get above $1.20 loss ratio where we are
    paying $1.20 for every dollar we get in.
        What we have seen over the last 10 years, the companies
    have been picking up most of those losses because it has been
    very good loss ratios nationwide. It is a very complex formula
    in the program, but I think generally as the higher the loss
    ratio is, the more the government assumes, the more risk the
    government assumes.
        I think it is also important that the private reinsurance
    market worldwide participates in this program by taking some of
    that residual risk after it passes through the SRA, so we
    actually have some of that being sent off into the worldwide
    international market.
        Mrs. Schmidt. Thank you. For several crops, while a large
    percentage of planted acres are insured, they are insured at a
    minimum CAT or buy-up coverage levels. Cotton and rice are good
    examples of this. What can be done to increase coverage for
    these crops?
        Mr. Murphy. Yes. I think, especially if you look at
    geographical areas, that is where you see the lower amount of
    coverage. Rice growers, especially in the central South, they
    have wells to get their water so they are always going to be
    able to get water. It is a perception of risk. Their big
    concern is hurricane or disease that comes through, and how
    often that occurs? It is all in perception of risk. I think it
    is just continuing working with the growers, that is what we
    can do? We have not always had high participation in corn,
    soybeans and wheat. It is only by making changes to the
    program, ensuring that the program addresses their risks that
    they have to deal with that we have seen the participation
    increase. I think it is the same with these other crops. It is
    just constantly working with them.
        Mrs. Schmidt. Thank you, and one final--and this is more a
    personal view. Some of the critics back home that are fiscal
    hawks think that all of this is nonsense and it is not needed.
    How would you address that?
        Mr. Murphy. I think this year is an excellent example of
    how important the farm safety net is to farmers out there. Food
    security is a priority with this country. I would say all these
    programs are extremely important.
        Now, I agree the cost of government has gotten high. I
    think everybody does. We are looking for ways to become
    efficient and ways to reduce the costs to taxpayers, but the
    farm safety net is critical. I would hate to be put in a
    position where we do not have these programs available, and
    there would be widespread losses across the country.
        Mrs. Schmidt. Excellent answer, thank you.
        The Chairman. I thank the gentlelady.
        Mr. Murphy, on the statutory loss ratio is one, I guess,
    which would mean we lose a dollar for every dollar of a premium
    we put in. Right now, it comes to average 83 cents on every
    dollar. If we push that 83 cents up to a dollar, do you think
    that would increase--would that have an impact on
    participation, getting other people into the program by
    lowering the costs?
        Mr. Murphy. You mean if you get----
        The Chairman. Lower the premium down to that 83 cents----
        Mr. Murphy. Yes, I think once you get under--our target
    loss ratio now over time is $1. Once you start getting below
    that as your target, it starts getting very complex.
        The Chairman. How do you push it up? How do you get to that
    dollar?
        Mr. Murphy. You--there are a number of different ways,
    participation, working with the rate itself. Now, we also have
    a reserve in there, okay, because the law requires we keep a
    reserve. So even though the 83 cents is there, that means we
    have a 20 cents reserve for future years.
        The Chairman. Well, let me ask if the--I get that, because
    you are going to have a year like 2 years ago when it was
    $1.40. If your loss ratio was closer to the dollar, would you
    have greater participation in the program because the premiums
    would be lower?
        Mr. Murphy. Yes, I think generally you can say that.
        The Chairman. Okay.
        Mr. Murphy. But again, you have to look at the length of
    time you are looking at to do that analysis. When we do rate
    making, we actually use about 30 to 35 years of data.
        The Chairman. Okay. The reserve is pegged at what?
        Mr. Murphy. The reserve is just required by statute that we
    have so much money----
        The Chairman. How much? Is that per----
        Mr. Murphy. It doesn't actually say in the law. We try to
    stay around 10 to 20 percent.
        The Chairman. Of premium?
        Mr. Murphy. Of premium reserve in there, yes. That means
    you want to be around 90 cents loss ratio. Once you start
    getting up above 90 cents, then we would be concerned that we
    had the correct----
        The Chairman. All right. You never ever hardly hear about
    actual production histories, I bet. What are you doing to try
    to--given how long it takes those to move and the impact it
    has, and continued droughts in our part of the world, pushing
    those down. What is on the table?
        Mr. Murphy. Okay. We are doing a number of different
    things. We are taking a look at the rating itself, and how we
    weight the years. Like I said, we use 30 years of data to rate
    the program. There has been a big issue we have had, especially
    with soybean and corn growers, is how you rate those individual
    years. I think we all now are on the same page, and that is
    probably the most recent years need to be weighted more than
    the earlier years. We are working in that direction. We are
    trying to adjust the yield drag on individual yields. If I am a
    corn grower in Illinois, 10 years ago my yield and my APH, is
    that really relative to what the expectations are this year? We
    have movement going on in that, and hopefully growers will see
    some of that progress in 2012.
        So we are doing things like that to try to address it. We
    are also working with growers, manufacturers, how we can
    incorporate some of this GPS technology to improve some of the
    efficiencies in the program. For instance, as a farmer is
    planting, why can't that information not be sent directly to
    the agent and start populating the acreage database? As I am
    harvesting and I have a loss, why can't that data start
    populating a claims form for me? So it is looking at
    efficiencies like that in the program to make it more--a better
    product for farmers out there.
        The Chairman. This may sound a little self-serving. Earlier
    Mr. Scott made some unfounded specious comments about some
    small university in Georgia. Tarleton State has the data mining
    program. Do you know off the top of your head what that value
    gets pushed back to the taxpayers as a result of that work?
        Mr. Murphy. Sure. We are looking at cost avoidance, since
    the inception, to now of about $840 million.
        The Chairman. Versus the cost of----
        Mr. Murphy. Probably--we are $4 million a year, probably
    $40 million at the most.
        The Chairman. Okay. I guess the point being that as we move
    into these austerity programs, I am hopeful that programs that
    actually--I don't want to say make money--you say cost
    avoidance.
        Mr. Murphy. Exactly.
        The Chairman. Exactly. Most of the folks out there want to
    do it right, and there are a few that don't. And so as you--as
    we trim your budget, so to speak, I am hopeful that the data
    mining issue is one that we see value in. It won't score that
    way necessarily, because of the way our complex rules work, but
    that data mining program, wherever it is, is fully exploited,
    not only in this part of the farm bill, but I suspect there is
    some applications in food stamps or SNAP and other programs in
    which that data mining concept could be used and exploited.
        Mr. Murphy. Yes, indeed.
        The Chairman. Mr. Boswell, do you have any further
    questions?
        Mr. Boswell. No further questions.
        The Chairman. Mr. Murphy, thank you. This is one of those
    rare circumstances where we actually got the entire hearing
    done in a reasonable time, in spite of a vote. I have some
    official words to read here somewhere.
        All right. Before we go on, I want to ask the Ranking
    Member if he wanted to say anything. Under the rules of the
    Committee, the record of today's hearing will remain open for
    10 calendar days to receive additional materials, supplementary
    written responses, a couple of questions that were asked, from
    the witness to the questions posed by a Member.
        This hearing on the Subcommittee on General Farm
    Commodities and Risk Management is adjourned.
        [Whereupon, at 11:38 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

     Supplementary Material Submitted by William J. Murphy, Administrator,
             Risk Management Agency, U.S. Department of Agriculture
        During the June 24, 2011 hearing entitled, Agricultural Program
    Audit: Examination of Crop Insurance Programs, requests for information
    were made to William J. Murphy. The following are the information
    submissions for the record.
    Insert 1
              Mr. Crawford. Excellent. Okay. Real quick, back to rice. You
            covered that pretty well, but I just want to ask, what is the
            current participation rate of rice and buy-up coverage and
            levels of protection, and how does this participation rate
            compare to other major crops like corn, soybeans, wheat, and
            cotton?
              Mr. Murphy. I don't have that information right with me. I
            can tell you it is lower than you see in the major crops. I
            will get that to you, though.

        For information on program participation by crop, see spreadsheet
    entitled, Largest Crops Insured by Federal Crop Insurance, Reinsurance
    Year 2010, follows.

                         Largest Crops Insured by Federal Crop Insurance, Reinsurance Year 2010
    ----------------------------------------------------------------------------------------------------------------
                                            Share of                        Share of                      Share of
           Crop           Liablilty        Liability         Premium         Premium        Subsidy        Subsidy
    ----------------------------------------------------------------------------------------------------------------
             Corn      $31,673,245,782         41%       $2,854,569,648         38%     $1,748,845,970        37%
         Soybeans      $17,968,268,248         23%       $1,746,840,208         23%     $1,068,744,370        23%
            Wheat      $6,426,634,955           8%       $1,123,672,475         15%     $685,193,684          15%
           Cotton      $2,986,974,144           4%       $488,627,636            6%     $319,399,594           7%
          Nursery      $2,310,476,269           3%        $49,806,802            1%      $40,080,416           1%
           Citrus      $2,053,384,518           3%        $64,728,939            1%      $44,317,648           1%
             Rice      $1,226,342,119           2%        $69,298,862            1%      $50,108,540           1%
           Grapes      $1,049,323,716           1%        $46,628,400            1%      $33,311,279           1%
         Potatoes      $962,357,453             1%        $81,774,552            1%      $54,825,864           1%
            Other      $10,949,219,926         14%       $1,066,169,977         14%     $663,500,752          14%
                      ----------------------------------------------------------------------------------------------
      Total All Crops  $77,606,227,130                   $7,592,117,499                 $4,708,328,117
    ----------------------------------------------------------------------------------------------------------------

    Insert 2
              Mr. Huelskamp. I appreciate that, and 2008 is a good year--an
            appropriate year to talk about. I think 2011 might be one we
            talk about for many years as well.
              The second question would be--and I had looked through the
            materials closely and didn't see this--but as far as taxpayer
            costs and other programs, how does that vary across the crops,
            and is that in the information you provided us?
              Mr. Murphy. We can provide more information on that. The
            taxpayer costs of the program changes dramatically on the
            experience that we have for that year. For the last 10 to 20
            years, except for a little blip in 2002, we have had positive
            loss ratios, so I think the program is well worth the money.
            The subsidy--the premiums are subsidized and average between 60
            or 70 percent--60 and 65 percent. So if we have $10 billion in
            premium this year, well the subsidy is going to be up about $6
            billion in the program. So the cost goes along with the
            commodity prices as well. There are a lot of variables in the
            program, the loss ratio, the losses that the companies pick up
            versus the government, so----
              Mr. Huelskamp. And the high cost over the last decade would
            have been how much in what year?
              Mr. Murphy. As far as the total cost of the program? I would
            have to pull that together for you. I can do that, the last 10
            years.

        See worksheet ``Program Expenditures Table'' that follows. As
    regards program costs by crop, in general those would be roughly
    proportionate to their share of program liability/premium/subsidy, as
    provided in the worksheet ``Largest Crops Table.'' It is otherwise
    difficult number to obtain as only premium subsidy is calculated and
    directly available on a by-crop basis. We do not directly calculate A&O
    by crop. Underwriting gains/losses are based solely on a state's
    underwriting performance, not on that of any individual crop.

              Other Program Expenditures, Fiscal Years 2001 to 2010
    ------------------------------------------------------------------------
                                          ARPA & FCIA       Interest & Other
      Fiscal Year        RMA A&O          Initiatives              *
    ------------------------------------------------------------------------
                                (Million Dollars)
    ------------------------------------------------------------------------
          2001           $65.60             $43.78               $0.00
          2002           $73.73             $40.68               $0.95
          2003           $70.22             $48.61               $0.00
          2004           $70.99             $46.22              $35.59
          2005           $70.48             $45.23               $0.00
          2006           $75.94             $37.51               $0.00
          2007           $75.44             $39.61               $0.00
          2008           $75.17             $47.79               $0.00
          2009           $76.83             $53.37               $0.00
          2010           $79.99             $53.05               $0.00
       2011 **           $78.84             $68.50               $0.00
    ------------------------------------------------------------------------
    * Related to the dissolution of American Growers Insurance Company.
    ** Estimated.

    Insert 3
              Mrs. Hartzler. Thank you, Mr. Chairman. Thank you, Mr.
            Murphy, and I would like to echo the comments that have already
            been said here by my farmers. Your part of the farm bill is
            probably the most popular part, and everyone, all of us--I am a
            farmer, too--appreciate what you do.
              I wanted to ask regarding the cost--of course, we are looking
            at budget issues now. In Fiscal Year 2010, it says the crop
            insurance costs were $4.7 billion. I just wondered, can you
            give me kind of a rough breakdown of how much of that went to
            claims and how much went to the administrative costs and
            operating costs?
              Mr. Murphy. Actually, we are a very small agency. We have
            less than--we have about 500 employees overall, so when you are
            talking discretionary costs of the program, we are only talking
            $78 million to $80 million being the overall cost of the
            program of discretionary.
              The major costs that we see in the program are the producer's
            subsidy that they get paid, the potential underwriting gains
            that the companies can make on a good year, and then the
            administrative and operating expense that we provide to the
            companies in order to deliver the program. Crop insurance,
            unlike private property and casualty insurance, you don't--the
            farmers don't pay that in their premium bill. We provide a
            separate payment to the companies to deliver the program for
            it. In the negotiation of the Standard Reinsurance Agreement,
            we actually reduced both the potential underwriting gains for
            the companies, as well as the administrative and operating
            costs provided to the companies, so we are certainly going to
            see a reduction. Probably the wildcard in the whole thing is
            the premium subsidy, going forward. Like I said, as we have
            seen these record commodity prices, that brings up the producer
            premium subsidy payment.
              Mrs. Hartzler. But in Fiscal Year 2010, how much money for
            those various things, or maybe you could get that to me later?
              Mr. Murphy. I can provide that to you on a year basis. I will
            break it out for 2010 and get that up to your office.

        See worksheet Program Expenditure table.

                       Federal Crop Insurance Program Expenditures, Reinsurance Years 2001 to 2010
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Company
                 A&O+LAE Paid     Premium     Cost Share     Premium         Program        Share of    Cost of Crop
    Reins. Year     to AlPs       Subsidy      Subsidy      Discount      Underwriting      Gains &      Insurance
                                                                         Gain or Loss *      Losses       Program
    ----------------------------------------------------------------------------------------------------------------
                                                    (Million Dollars)
    ----------------------------------------------------------------------------------------------------------------
        2001       $635.87     $1,781.22        $0.42         $2.81         ^$10.99        $346.00     $2,755.33
        2002       $625.89     $1,737.94        $0.38         $0.00       $1,150.42        ^$47.31     $3,467.33
        2003       $733.66     $2,044.94        $0.37         $0.00        ^$174.68        $377.85     $2,982.15
        2004       $889.42     $2,472.26        $4.22         $0.00        ^$893.62        $689.43     $3,161.71
        2005       $829.25     $2,334.66        $4.11         $0.00      ^$1,604.41        $914.97     $2,478.58
        2006       $958.58     $2,779.01        $0.00         $0.00      ^$1,167.48        $818.85     $3,388.95
        2007     $1,332.53     $3,812.23        $0.00         $0.00      ^$3,082.33       $1,572.47    $3,634.89
        2008     $2,009.25     $5,678.56        $0.00         $0.00      ^$1,112.57       $1,095.14    $7,670.38
        2009     $1,618.51     $5,424.16        $0.00         $0.00      ^$3,732.14       $2,297.77    $5,608.30
      2010 *     $1,367.74     $4,708.61        $0.00         $0.00      ^$3,409.89       $1,930.38    $4,596.84
    ----------------------------------------------------------------------------------------------------------------
    Reinsurance Year = July 1 to June 30 of following year.
    * Negative number = program underwriting gain, positive number = program underwriting loss.

                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        The Federal crop insurance program is managed by the Risk
    Management Agency (RMA) which is under the Farm and Foreign
    Agricultural Services mission area of the United States Department of
    Agriculture.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        FCIC was created in 1938, under the Federal Crop Insurance Act
    (Act), to carry out the crop insurance program to help agriculture
    recover from the combined effects of the Great Depression and the Dust
    Bowl. The program was started as an experiment and was delivered by the
    FCIC until 1980. During the formative years of the program,
    participation was low and crop insurance activities were limited to
    major crops in the main producing areas.
        The crop insurance program continued to evolve and the Federal Crop
    Insurance Act of 1980 expanded the program and introduced the public-
    private partnership whereby private insurance companies would sell and
    service Federal crop insurance policies reinsured by FCIC. To encourage
    participation in the expanded crop insurance program, the Act
    authorized a premium subsidy be paid on behalf of insured producers. In
    1994 the Federal Crop Insurance Reform Act of 1994 was enacted, which
    introduced the catastrophic risk protection (CAT) level coverage.
    Producers did not pay a premium for CAT coverage and instead paid a
    small per crop, per county administrative fee. The Federal Crop
    Insurance Reform Act of 1994 introduced the concept of linkage within
    the program. Linkage required a producer to purchase crop insurance at
    least the CAT level of coverage in order to qualify for the benefits of
    another farm safety net program in an effort to increase participation
    and eliminate the need for competing ad hoc disaster programs. The
    linkage requirement was eliminated after 2 years, though there have
    since been numerous ``linkage'' requirements for disaster assistance or
    other farm safety net programs. The Federal Crop Insurance Reform Act
    of 1994 also introduced higher subsidy rates for ``buy-up'' coverage
    (insurance coverage above the CAT level for which producers pay some
    portion of the premium), as well as providing authority for revenue
    insurance products. Further, the Federal Crop Insurance Reform Act of
    1994 expanded the role of the private sector, allowing entities to
    participate in research and development of new insurance products and
    features. A process was also created to allow private entities to
    submit unsolicited proposals for insurance products to the FCIC Board
    of Directors (Board) for approval. This allowed the introduction of the
    first revenue products.
        In 1996, the Risk Management Agency (RMA) was created to administer
    FCIC programs and other non-insurance-related risk management and
    education programs that help support U.S. Agriculture. In 2000,
    Congress enacted legislation that allowed private entities to be
    eligible for reimbursement of research, development and operating costs
    for their private submitted products approved by the Board. This
    legislation also removed restrictions on the development of insurance
    products for livestock; provided authority for the FCIC Board to create
    an expert review panel to assist the Board in evaluating new insurance
    products for feasibility and actuarial soundness; and significantly
    increased premium subsidies, by more than 50 percent, to encourage
    producers to purchase higher insurance coverage levels, and to make the
    insurance program more attractive to prospective producers.
    4. Purpose/Goals
        Federal crop insurance serves America's agricultural producers
    through effective, market-based risk management tools and solutions to
    strengthen the economic stability of agricultural producers and rural
    communities and provides world class agricultural risk management
    products, tools, education, and outreach.
    5. Success in Meeting Programmatic Purpose/Goals
        In the 2010 crop year, Federal crop insurance was available for
    approximately 350 commodities, in over 3,141 counties, covering all 50
    states and Puerto Rico. Insured acreage in the program exceeded 256
    million acres. As the amount of insured acreage has increased, so too
    has the liability, or value of the insurance in force. In 1994 program
    liability was less than $14 billion. Industry estimates suggest that
    for 2011 program liability could exceed $100 billion. Of special
    significance is the level of participation in specialty crops programs.
    Seventy-five percent of producers are participating, which compares
    well to the 83 percent participation levels for the major program
    crops. Important fruit, nut and vegetable states like California (71%),
    Florida (91%), and Washington (68%) each score well in Federal crop
    insurance program participation.
        Many banks now require or at least encourage crop insurance
    coverage in order to make operating loans to producers. Federal crop
    insurance has become a fact of life for many farmers--without which
    American farmers would find it difficult to continue providing America
    and the world with an abundant supply of food, fiber and fuel. The crop
    insurance program has seen sustained growth as demonstrated by the
    increasing proportion of acres insured at buy up coverage levels over
    the last decade to a record-high of 90 percent.
        The type of coverage being purchased is also shifting to the more
    comprehensive revenue coverage. In 2010, revenue coverage accounted for
    65 percent of the insured acres, compared to just 33 percent in 2000.
    In addition, the average coverage level (percent of the total crop
    covered) for buy up insurance has increased to approximately 73 percent
    for 2010, compared to 68 percent in 2000. Improvements to the program
    have been accomplished in an actuarially sound manner. Over the last 2
    decades, premiums (producer premiums added to premium subsidies) have
    been sufficient to cover the indemnities paid to producers plus a
    reasonable reserve. For example, the program's loss ratio from 1994
    through 2010 has averaged about 0.82.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                                     (dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
              FY               2002          2003         2004         2005         2006         2007         2008         2009         2010         2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                     A&O        $74,232      $70,248      $71,001      $71,468      $76,278      $76,658      $76,121      $77,177      $80,325      $78,842
               FCIC Fund     $2,820,926   $2,910,966   $3,366,433   $2,242,167   $3,295,458   $4,379,256   $4,145,091   $6,765,663   $6,898,215   $6,992,896
                          ----------------------------------------------------------------------------------------------------------------------------------
      Total Authority....    $2,895,158   $2,981,214   $3,437,434   $2,313,635   $3,371,736   $4,455,914   $4,221,212   $6,842,840   $6,978,540   $7,071,738
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    The FCIC fund includes Budget Authority only. It does not include carryover balances or offsetting collections.

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                                     (dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
              FY               2002          2003         2004         2005         2006         2007         2008         2009         2010         2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                     A&O        $83,801      $75,849      $71,482      $66,739      $73,824      $79,091      $76,254      $72,799      $78,002      $82,000
               FCIC Fund     $2,946,551   $3,254,184   $3,197,568   $2,883,272   $3,371,615   $3,471,225   $4,074,814   $7,888,892   $4,706,125   $6,989,000
                          ----------------------------------------------------------------------------------------------------------------------------------
      Total Outlays......    $3,030,352   $3,030,033   $3,269,050   $2,950,011   $3,445,439   $3,550,316   $4,151,068   $7,961,691   $4,784,127   $7,071,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Outlay amounts differ from Budget Authority due to timing. The general rule of thumb for FCIC outlay spend rates (current year/past year) is 90/10 for
      ARPA, Delivery Expenses, and Underwriting Gains/Losses and 35/65 for Indemnities. For the A&O Account, RMA currently estimates a 90/10 split.

    8. Annual Delivery Cost (FY 2002-FY 2011)
        See [following tables] from Explanatory Notes provided to the
    Congress in recent years as part of the President's annual budget
    proposal. The pages provided display information on program costs
    including costs associated with program delivery. Note that in each
    case, the earliest fiscal year shown is an actual amount and the other
    2 years are estimates.

    Explanatory Notes, President's Budget Proposal for RMA (FY 2009), p. 22-
                                       25
                             Risk Management Agency
                        Full Cost By Strategic Objective

     Strategic Objective 2.3: Provide Risk Management and Financial Tools to
     Farmers and Ranchers
                                        FY 2007       FY 2008      FY 2009
                                         ($000)       ($000)        ($000)Program
                 Program ItemsFederal Crop Insurance
     Corporation Fund      Research and Development        $40,000       $40,000      $40,000
           Program
          Pilot Programs                  $21,000       $21,000      $21,000
          Policy Consideration and         $3,500        $3,500       $3,500
           Implementation
          Premium Program              $2,727,720    $3,846,559   $4,100,446
          A&O Expenses/Delivery        $1,110,750    $1,479,566   $1,471,876
           Expenses
          Risk Management Assistance       $5,000        $5,000       $5,000
           Program
          Excess Crop Losses             $466,286  ($1,250,534)     $936,123
                                     ---------------------------------------
              Total                    $4,374,256    $4,145,091   $6,577,945Administrative and Operating
     Expenses        Administrative Costs          $58,369       $62,332      $63,461
             (direct)
            Information Technology         17,075        13,716       13,716
                                     ---------------------------------------
              Total                       $75,444       $76,048      $77,177        Performance measure:
           Increase the normalized
           value of FCIC risk
           protection coverage
           provided through FCIC
           sponsored insurance (in
           billions)        Performance target:             $50.7         $53.7        $54.8
            Unit Cost:                        N/A           N/A          N/A
                                     =======================================
                Total Program          $4,449,700    $4,221,139   $6,655,122
                Total FTEs                    488           553          553

    Explanatory Notes, President's Budget Proposal for RMA (FY 2010), p. 19-
                                       22
                             Risk Management Agency
                        Full Cost By Strategic Objective Strategic Objective 2.3: Provide Risk Management and Financial Tools to
     Farmers and Ranchers
                                        FY 2008      FY 2009       FY 2010
                                         ($000)       ($000)       ($000)Program
                 Program ItemsFederal Crop Insurance
     Corporation Fund      Agricultural Risk               $42,791      $68,500       $68,500
           Protection Act
           Initiatives
          Premium Program              $4,377,350   $6,892,983    $8,837,530
          A&O Expenses/Delivery        $1,994,615   $1,621,679    $1,545,767
           Expenses
          Risk Management Assistance       $5,000       $6,000        $6,000
           Program
          Excess Crop Losses           $1,577,759     $967,415      $914,732
                                     ---------------------------------------
              Total                    $7,997,515   $9,556,577   $11,372,529Administrative and Operating
     Expenses        Administrative Costs          $61,863      $63,606       $66,754
             (direct)
            Information Technology        $13,303      $13,571       $13,571
                                     ---------------------------------------
              Total                       $75,166      $77,177       $80,325        Performance measure:
           Increase the normalized
           value of FCIC risk
           protection coverage
           provided through FCIC
           sponsored insurance (in
           billions)        Performance target:             $53.7        $54.8         $50.7
            Unit Cost:                        N/A          N/A           N/A
                                     =======================================
                Total Program          $8,072,681   $9,633,754   $11,452,854
                Total FTEs                    480          553           568

    Explanatory Notes, President's Budget Proposal for RMA (FY 2011), p. 23-
                                       24
                             Risk Management Agency
                        Full Cost By Strategic Objective Department Strategic Goal: USDA will assist rural communities to create
     prosperity so they are self sustaining and economically thriving.
                                       FY 2009       FY 2010       FY 2011
                                       Amount        Amount        Amount
                                       ($000)        ($000)        ($000)Program
                Program ItemsFederal Crop Insurance
     Corporation Fund      Agricultural Risk              $47,371       $68,500       $68,500
           Protection Act
           Initiatives
          Premium Program             $8,416,173    $7,669,250    $9,040,243
          A&O Expenses/Delivery       $1,601,807    $1,567,145    $1,683,633
           Expenses
          Risk Management                 $6,000        $6,000        $6,000
           Assistance Program
          Excess Crop Losses          $1,962,597    $1,167,759    $1,204,771
          Projected Savings from              --            --     ^$782,000
           Negotiations of SRA
                                   -----------------------------------------
              Total Costs            $12,033,948   $10,478,654   $11,221,147Administrative and Operating
     Expenses        Administrative Costs         $63,606       $66,754       $67,493
             (direct)
            Information Technology       $13,571       $13,571       $15,571
                                   -----------------------------------------
              Total Costs                $77,177       $80,325       $83,064
              FTEs                           481           568           568        Performance measure:
           Increase the normalized
           value of FCIC risk
           protection coverage
           provided through FCIC
           sponsored insurance (in
           billions)        BY Performance                 $53.7         $54.8         $50.7
            Cost per measure (unit           N/A           N/A           N/A
             cost)
    ------------------------------------------------------------------------
                      Total for Department Strategic Goal 1
    ------------------------------------------------------------------------
          Total Costs for            $12,111,125   $10,558,979   $11,304,211
           Department Strategic
           Goal
          FTEs                               481           568           568

    Explanatory Notes, President's Budget Proposal for RMA (FY 2012), p. 23-
                                       24
                             Risk Management Agency
                     Full Cost By Department Strategic Goal Department Strategic Goal: Assist Rural Communities to Create Prosperity
     so They Are Self-Sustaining, Repopulating, and Economically Thriving.
                                       FY 2010       FY 2011       FY 2012Program
                Program ItemsFederal Crop Insurance
     Corporation Fund (FCIC)      Premium Subsidy             $4,089,811    $4,600,900    $3,082,875
          Delivery Expenses           $1,567,145    $1,325,000            --
          Underwriting Gains          $1,167,759      $999,496            --
          Federal Crop Insurance         $74,500       $68,500       $59,500
           Act Initiatives
          Other Authority           ($2,352,096)            --            --
           Withdrawn
                                   -----------------------------------------
              Total Costs             $4,547,119    $6,993,896    $3,142,375Administrative and Operating
     Expenses        Administrative Costs         $66,045       $66,045       $66,045
             (direct)
            Information Technology       $14,280       $14,280       $16,280
                                   -----------------------------------------
              Total Costs                $80,325       $80,325       $82,325
              FTEs                           501           568           568        Performance Measure:
           The normalized value
           of:          BY Performance             Dollars       Dollars       Dollars
              Cost per measure             $51.9         $52.4         $52.9
               (unit cost)
    ------------------------------------------------------------------------
                            Total for Strategic Goal
    ------------------------------------------------------------------------
      Total Costs for Priority        $4,627,444    $7,074,221    $3,224,700
       (program, direct, indirect)
      FTEs                                   501           568           568
    9. Eligibility Criteria
        In general, anyone producing a crop or livestock for which premium
    rates have been published in the counties actuarial documents is
    eligible to purchase crop insurance. Basic requirements such as legal
    competency and being of legal majority apply. The person purchasing
    crop insurance must also have an insurable interest in the crop and
    must provide the required identification number and other required data
    to the agent from whom the policy was purchased.
        Any farmer or rancher can become ineligible to participate in the
    program. Circumstances that may cause a person to become ineligible
    include having a delinquent debt, such as unpaid premium or failure to
    timely repay an indemnity that was overpaid. That person again becomes
    eligible when the debt is resolved. Persons who are disqualified,
    suspended, or debarred under the Act and applicable regulation, are
    ineligible for crop insurance for the period of disqualification,
    suspension or debarment. Any person who is convicted of violating the
    controlled substance provisions of the Food Security Act of 1985, as
    amended, is ineligible for crop insurance from the beginning of the
    crop year of conviction and the 4 subsequent consecutive crop years.
        There are no carve-outs in the Federal crop insurance program.

                                                              10. Utilization (Participation) Data
                                                                    Additional Coverage Only
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              Number of
      Reinsurance Year         Policies        Insured Acres    Liability (Value)       Premium        Claims Payments       Loss Ratio         Loss Cost
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                  2001         1.1 million      170.5 million      $30.1 billion       $2.7 billion       $2.9 billion              1.069             0.097
                  2002         1.1 million      176.6 million      $30.5 billion       $2.7 billion         $4 billion              1.485             0.131
                  2003         1.1 million      183.8 million        $34 billion       $3.2 billion       $3.2 billion              1.003             0.095
                  2004         1.1 million        189 million      $39.5 billion         $4 billion       $3.2 billion              0.811             0.081
                  2005         1.1 million      217.7 million      $37.2 billion       $3.7 billion       $2.3 billion              0.609             0.061
                  2006           1 million      213.7 million      $45.4 billion       $4.4 billion       $3.5 billion              0.782             0.077
                  2007           1 million      243.3 million      $59.8 billion       $6.3 billion       $3.4 billion              0.544             0.057
                  2008           1 million      242.2 million      $81.1 billion       $9.5 billion       $8.6 billion              0.909             0.107
                  2009         1.1 million      242.5 million      $71.6 billion       $8.6 billion       $5.2 billion              0.597             0.072
                  2010         1.1 million      236.2 million        $71 billion       $7.3 billion       $4.1 billion              0.565             0.058
               Maximum         1.1 million      243.3 million      $81.1 billion       $9.5 billion       $8.6 billion              1.485             0.131
               Minimum           1 million      170.5 million      $30.1 billion       $2.7 billion       $2.3 billion              0.544             0.057
      Ten-year average         1.1 million      211.6 million        $50 billion       $5.2 billion         $4 billion              0.837             0.084
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                   Catastrophic Coverage Only
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              Number of
      Reinsurance Year         Policies        Insured Acres    Liability (Value)       Premium        Claims Payments       Loss Ratio         Loss Cost
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                  2001             236,669         41 million       $6.9 billion     $247.7 million      $48.9 million              0.197             0.007
                  2002             208,563       38.2 million       $6.8 billion     $229.5 million      $78.7 million              0.343             0.012
                  2003             175,393       33.7 million                          $227 million      $44.1 million              0.194             0.007
                  2004             156,004       31.7 million                        $241.3 million        $95 million              0.394             0.013
                  2005             138,464       28.1 million                        $236.4 million      $81.3 million              0.344             0.012
                  2006             125,786       28.3 million                        $261.2 million      $64.5 million              0.247             0.007
                  2007             120,100       28.3 million                        $268.4 million      $50.6 million              0.188             0.007
                  2008             120,405         30 million                        $332.7 million      $80.4 million              0.242             0.010
                  2009              93,099       22.3 million                          $305 million      $59.3 million              0.194             0.008
                  2010              79,687       20.3 million                        $262.2 million      $39.6 million              0.151             0.006
               Maximum             236,669         41 million                        $332.7 million        $95 million              0.394             0.013
               Minimum              79,687       20.3 million                          $227 million      $39.6 million              0.151             0.006
      Ten-year average             145,417       30.2 million                        $261.1 million      $64.2 million              0.249             0.009
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        The public-private partnership between RMA and private crop
    insurance companies for the delivery of subsidized crop insurance is
    unique. The Federal crop insurance program is different from disaster
    funding because farmers are contributing to the costs of the program
    through the payment of premium for an actuarially sound program.
    12. Waste, Fraud and Abuse
        Waste--The crop insurance program is currently reporting a 4.7
    percent average error rate in accordance with the Improper Payments
    Information Act. This rate is consistent with the program's
    historically reported error rates of between four to six percent. While
    the goal is to continue to reduce crop insurance program errors, the
    closely related private Property and Casualty lines of insurance
    typically report error rates of all types, intentional and
    unintentional, between 15 and 20 percent. RMA recently renegotiated the
    Standard Reinsurance Agreement (SRA) to include targeted quality
    control reviews to assist in identifying and correcting individual and
    program errors. RMA also is completing an Information Technology
    Modernization project that has new built in internal controls and
    checks of data to identify and correct data errors before indemnities
    are paid. Advances in technology will continue to provide opportunities
    to improve the way we assign insurance guarantees and assess loss
    events that will continue to improve RMA's ability to limit program
    errors.
        Fraud and Abuse--RMA is in its eleventh year of conducting annual
    spot checks of producers identified through Congressionally authorized
    data mining as being anomalous when compared to their neighbors. Once
    identified, these producers are notified that they will be checked
    during the year by the Farm Service Agency (FSA). RMA has documented
    that this effort reverses the observed anomalous behavior resulting in
    a reduction of expected indemnity payments of almost $840 million to
    date. The 2011 SRA includes an expansion of this effort to include
    checks of an additional tier of producers by their insurance company.
        RMA also dedicates significant resources to assisting USDA's Office
    of Inspector General (OIG) in investigating and prosecuting criminal
    program violations and imposing administrative sanctions when
    indicated. Although RMA continues to believe the percentage of
    producers engaged in criminal behavior is relatively small, these
    producers create a negative impression of the program with the public
    and as such RMA believes the aggressive identification and prosecution
    of those who abuse the program is essential to maintaining program
    integrity. Currently, RMA is assisting OIG and the Department of
    Justice with identifying violations in the tobacco insurance program
    that includes criminal activity by a significant number of producers,
    agents, and loss adjusters across several states. The termination of
    the tobacco quota program created vulnerabilities in the tobacco
    marketing system that left the insurance program exposed to abuse. RMA
    is working to correct these vulnerabilities, while identifying those
    who have taken advantage of them in the interim and prosecuting and
    sanctioning those persons to the fullest extent of the law.
    13. Effect of Administrative PAYGO
        In 2005, the Office of Management and Budget released Memorandum M-
    05-13 (``Budget Discipline for Agency Administrative Actions'')
    requiring that for ``any proposed discretionary agency administrative
    action that would increase mandatory spending, the agency must include
    one or more proposals for other administrative actions to be taken by
    the agency that would comparably reduce mandatory spending''. This is
    commonly referred to as ``PAYGO.''
        There have been a number of Administrative PAYGO actions in the
    crop insurance program. For example, last year's renegotiation of the
    Standard Reinsurance Agreement generated a significant amount of
    budgetary savings, $2 billion of which was applied to Administrative
    PAYGO (the remainder was applied to debt reduction). Conversely, a
    number of crop insurance products have been added or expanded, like the
    Pasture, Rangeland, and Forage product--a critical product for
    livestock producers--using Administrative PAYGO offsets.

                           AGRICULTURAL PROGRAM AUDIT

                     (EXAMINATION OF CONSERVATION PROGRAMS)

                                  ----------

                             THURSDAY, JULY 7, 2011

     Subcommittee on Conservation, Energy, and
                                      Forestry,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:04 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. Glenn
    Thompson [Chairman of the Subcommittee] presiding.
        Members present: Representatives Thompson, Goodlatte,
    Gibbs, Southerland, Roby, Huelskamp, Hultgren, Ribble, Noem,
    Lucas (ex officio), Holden, Schrader, Owens, McIntyre, Walz,
    Pingree, Fudge, and Peterson (ex officio).
        Staff present: Brent Blevins, Tamara Hinton, Josh Maxwell,
    Debbie Smith, Lauren Sturgeon, Suzanne Watson, Nona S. Darrell,
    Liz Friedlander, Anne Simmons, John Konya, and Jamie Mitchell.

     OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        The Chairman. Well, good morning, everyone. This hearing of
    the Subcommittee on Conservation, Energy, and Forestry
    entitled, Agricultural Program Audit: Examination of
    Conservation Programs, will come to order. I will start out
    with my opening statement.
         I want to welcome everyone to this Subcommittee hearing to
    examine the farm bill conservation programs. This is one of a
    series of hearings the six Subcommittees of the House
    Agriculture Committee will be holding to audit farm bill
    programs in advance of writing the next farm bill. Though the
    current farm bill doesn't expire until September of 2012, it is
    important that we begin the review process now. I believe it is
    imperative that we have a sound knowledge base from which to
    make responsible decisions as we address these programs.
        Now, I don't think I need to remind anyone in this room
    that we face many challenges in drafting the next farm bill. In
    the current fiscal environment, we will be faced with some
    difficult decisions regarding the fate of programs in all parts
    of the farm bill, including Title II. Moreover, Title II
    programs, including the Wetlands Reserve Program and the
    Grasslands Reserve Programs do not have a budget baseline
    beyond the expiration of the current farm bill. Given the
    challenging decisions ahead of us and a number of new faces on
    the Subcommittee, I think this is an excellent opportunity for
    everyone to ask questions about specific programs, as well as
    general program delivery and familiarize themselves with
    programs under the Subcommittee's jurisdiction.
        Congress offered the first conservation programs for
    farmers and ranchers in the 1930s and we have seen a tremendous
    growth in programs since then. The conservation title was first
    introduced in the farm bill in 2002 and the Title was further
    revised and expanded in the 2008 Farm Bill.
        Today, USDA offers more than 20 separate active land and
    land retirement programs that account for billions in spending
    annually. This hearing gives us the chance to hear directly
    from those at USDA who are responsible for the implementation
    of conservation programs, and we have a chance to learn about
    these programs and to ask questions about how they are
    implemented and in what manner we could improve the delivery in
    the future. When the time comes to make decisions about
    conservation programs, we will all be better placed to do so if
    we have a thorough understanding of how each program operates.
        Our witnesses today will provide information about these
    various programs that we need to move forward in a legislative
    process. We will learn about basic information about the amount
    of money that is being spent on each program, program
    participation, as well as examples of duplication with other
    programs, and examples of waste, fraud, and abuse.
        I want to welcome Chief Dave White of the NRCS and Mr.
    Bruce Nelson, the Administrator of FSA. It is good to see you
    both. I am certainly eager to hear your testimony on these
    programs. And I look forward to working with you both in the
    months ahead to draft aa conservation title that fulfils its
    core goals while utilizing taxpayer dollars in a responsible
    manner.
        [The prepared statement of Mr. Thompson follows:]

    Prepared Statement of Hon. Glenn Thompson, a Representative in Congress
                               from Pennsylvania
        Good morning. I want to welcome everyone to the Conservation,
    Energy, and Forestry Subcommittee hearing to examine farm bill
    conservation programs.
        This is one of a series of hearings the six Subcommittees of the
    House Agriculture Committee will be holding to audit farm bill programs
    in advance of writing the next farm bill.
        Though the current farm bill does not expire until September of
    2012, it is important we begin the review process now.
        I believe it is imperative we all have a sound knowledge base from
    which to make responsible decisions in how we address these programs.
        I don't think I need to remind anyone in this room that we face
    many challenges in drafting the next farm bill.
        In the current fiscal environment, we will be faced with some
    difficult decisions regarding the fate of programs in all parts of the
    farm bill, including Title II.
        Multiple Title II programs, including the Wetlands Reserve Program
    and the Grasslands Reserve program, do not have a budget baseline
    beyond the expiration of the current farm bill.
        Given the challenging decisions ahead of us and the number of new
    faces on this Subcommittee, I think this is an excellent opportunity
    for everyone to ask questions about specific programs as well general
    program delivery and familiarize themselves with programs under the
    Subcommittee's jurisdiction.
        Congress offered the first conservation programs for farmers and
    ranchers in the 1930s and we have seen a tremendous growth in programs
    since then.
        The conservation title was first introduced to the farm bill in
    2002. The title was further revised and expanded in the 2008 Farm Bill.
        Today, USDA offers more than 20 separate active land and land
    retirement programs that account for billions in spending annually.
        This hearing gives us the chance to hear directly from those at
    USDA who are responsible for the implementation of conservation
    programs.
        We will have a chance to learn about these programs and to ask
    questions about how they are implemented and in what manner we could
    improve their delivery in the future.
        When the time comes to make decisions about conservation programs,
    we will all be better placed to do so if we have a thorough
    understanding of how each program operates.
        Our witnesses today will provide information about these various
    programs that we need to move forward in the legislative process.
        We will learn basic information about the amount of money that is
    being spent on each program, program participation, as well as examples
    of duplication with other programs and examples of waste, fraud and
    abuse.
        I want to welcome Chief Dave White of NRCS and Mr. Bruce Nelson,
    Acting Administrator of FSA. It is good to see you both and I am eager
    to hear your testimony on these programs.
        I look forward to working with you both in the months ahead to
    draft a conservation title that fulfills its core goals while utilizing
    taxpayer dollars in a responsible manner.
        I now yield to my friend, the Ranking Member from Pennsylvania, Mr.
    Holden, for his opening statement.

        The Chairman. And I will yield to my friend, the Ranking
    Member from Pennsylvania, Mr. Holden, for his opening
    statement.

       OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        Mr. Holden. Thank you, Mr. Chairman. I would like to thank
    our witnesses and guests for being here this morning.
        This hearing presents an important and timely opportunity
    for Members of this Subcommittee to review the state of USDA
    conservation programs. The Natural Resources Conservation
    Service and the Farm Service Agency, through the authority of
    this Committee and the farm bill, currently administer over 20
    programs to assist producers and landowners who wish to
    practice conservation on agricultural lands.
        These conservation practices have expanded over the years
    from early efforts to reduce high levels of soil erosion and
    address water quality and quantity issues to address other
    natural resources concerns such as wildlife habitat, air
    quality, wetlands restoration and protection, and energy
    efficiency. As the economic and regulatory pressures have
    increased in recent years, agriculture producers and private
    forest landowners have come to rely on these farm bill
    conservation programs to help them stay in business.
        I am concerned that recent reductions in conservation
    program funding is resulting in USDA having to deny producers
    the tools they need to combat these burdens effectively due to
    insufficient funding. Lack of assistance to meet regulatory
    requirements imposes an unfunded mandate on producers and harms
    our landowners' ability to run their businesses and efficiently
    implement conservation practices on their land.
        Bottom line, access to funds is vital and so is the
    delivery of these funds. Whether it is through FSA, NRCS, or a
    technical service provider, a consistent message we are hearing
    across the country is that more people are needed in the field
    to assist producers in making land-management decisions and
    implementing conservation practices.
        As we focus on deficit reduction and the streamlining of
    Federal programs, it is important that we ensure USDA remains
    able to deliver effective conservation programs with fewer
    resources and respond to the demand for those landowners who
    depend on them. Farmers and ranchers have always been the
    original stewards of the land and continue to be the best
    advocates for research conservation.
        I look forward to today's expert testimony and the
    opportunity to listen and learn and ask questions of those
    responsible for ensuring that that remains true in the future.
        Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. We are also joined in
    the hearing by the Chairman of the Agriculture Committee. I now
    recognize Chairman Lucas for an opening statement.

     OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
                         CONGRESS FROM OKLAHOMA

        Mr. Lucas. Thank you, Chairman Thompson and Ranking Member
    Holden for holding today's hearing to examine conservation
    programs.
        During the past two farm bills, I served as Chairman and
    Ranking Member respectively of the Subcommittee with
    jurisdiction over the Conservation Title. My, aren't free
    elections a wondrous thing? Both in 2008 and in the 2002 Farm
    Bill saw exponential growth in conservation programs. In 2002,
    we increased conservation spending in the 2002 Farm Bill by $17
    billion over 10 years, an 80 percent expansion that created one
    of the greenest farm bills in history. This legislation
    increased our commitment to important programs like CRP, EQIP,
    and helped multiply participation in conservation practices.
        In the 2008 Farm Bill, we built upon the historic
    Conservation Title by adding $4 billion over 10 years. That
    Conservation Title included new regional and cooperative
    partnership programs, as well as reauthorization and increased
    funding for existing programs. These programs have created many
    new ways for producers and conservation organizations to
    achieve shared goals. Farmers and ranchers, with the assistance
    of these programs, have worked voluntarily to help reduce soil
    erosion, increase wetlands, improve water quality, and preserve
    farmland and wildlife habitat.
        However, as we work towards the next farm bill, this
    Committee will be faced with a very different budget situation.
    Not only will the Agriculture Committee have to do our part
    within the overall deficit situation, but as all of us know, we
    literally have dozens of programs, as has been alluded to by
    the Chairman and the Ranking Member, with no baselines, many
    under the umbrella of conservation. Conservation is an
    important element of farm policy. Farmers and ranchers make
    their living off the land and they are committed to preserving
    and protecting it for future generations.
        As lawmakers, we have a responsibility to ensure that
    conservation policy is effective without being duplicative or
    too costly. This is especially important in the current fiscal
    environment. Today's audit will help us evaluate our current
    policy so that we can determine what is working, what needs to
    be adjusted, and what can be eliminated. This is a critical
    step in the process of developing the next farm bill.
        I thank all of you for being here and participating today,
    and I can only say that I have the greatest of confidence in
    the gentlemen from Pennsylvania when we make those tough
    decisions in the coming days, months, and year.
        I yield back the balance of my time, Mr. Chairman.
        [The prepared statement of Mr. Lucas follows:]

    Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
                                 from Oklahoma
        Good morning.
        I'd like to thank Chairman Thompson for holding today's hearing to
    examine conservation programs.
        During the past two farm bills I served as the Chairman and Ranking
    Member, respectively, for the Subcommittee of jurisdiction for the
    conservation title. Both the 2008 and 2002 Farm Bills saw exponential
    growth in conservation programs.
        In 2002, we increased conservation spending in the 2002 Farm Bill
    by $17 billion over 10 years--an 80 percent expansion that created the
    greenest farm bill in history. This legislation increased our
    commitment to important programs like CRP and EQIP and helped multiply
    participation in conservation practices.
        In the 2008 Farm Bill, we built upon the historic conservation
    title by $4 billion over 10 years. That conservation title included new
    regional and cooperative partnership programs as well as the
    reauthorization and increased funding of existing programs.
        These programs have created new ways for producers and conservation
    organizations to achieve shared goals. Farmers and ranchers, with the
    assistance of these programs, have voluntarily worked to help reduce
    soil erosion, increase wetlands, improve water quality, and preserve
    farmland and wildlife habitat.
        However, as we work towards the next bill, this Committee will be
    faced with a very different budget situation. Not only will the
    Agriculture Committee have to do our part within the overall deficit
    situation, but as all of us know, we literally have dozens of programs
    with no baselines, many under the umbrella of conservation.
        Conservation is an important element of farm policy. Farmers and
    ranchers make their living off the land, and they are committed to
    preserving and protecting it for future generations. As lawmakers, we
    have a responsibility to ensure that conservation policy is effective
    without being duplicative or too costly. That is especially important
    in the current fiscal environment.
        Today's audit will help us evaluate our current policy so that we
    can determine what is working, what needs to be adjusted, and what can
    be eliminated.
        This is a critical step in the process of developing the next farm
    bill, and I thank you all for being here today to participate in that
    process.

        The Chairman. Thank you, Mr. Chairman.
        We are also joined by the Ranking Member for the full
    Agriculture Committee. Mr. Peterson, any opening remarks, sir?
    Okay. Very good.
        The chair requests that the other Members submit their
    opening statements for the record so that the witnesses may
    begin their testimony and ensure that there is ample time for
    questions.
        And I am very pleased to welcome our panel of witnesses to
    the table today. And we have Mr. Dave White, Chief of the
    Natural Resource Conservation Services, Department of
    Agriculture; and Administrator Bruce Nelson, Administrator of
    Farm Service Agency with the Department of Agriculture.
    Gentleman, you are the only two witnesses for this panel, so I
    encourage you to take the time that you need. We are not going
    to be using any lights today for your testimony, so I encourage
    you to take the time that you need to cover the information so
    that we will all benefit.
        And Mr. Nelson, please begin when you are ready.

    STATEMENT OF BRUCE NELSON, ADMINISTRATOR, FARM SERVICE AGENCY,
            U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Mr. Nelson. Mr. Chairman, thank you very much. I am new to
    this so I have to learn how to punch the buttons.
        Mr. Chairman, Ranking Members, Members of the Subcommittee,
    thank you for the opportunity to discuss the conservation
    programs administered by the Farm Service Agency here today. My
    testimony will focus on FSA's conservation programs and our
    collaboration with our conservation partners in ensuring high-
    quality, cost-effective program delivery. And I am especially
    glad to be here on my first occasion with Dave White, who did
    an outstanding job as State Conservationist in my home State of
    Montana before becoming Chief of NRCS.
        Let me begin by talking about FSA's largest conservation
    program, the Conservation Reserve Program, or CRP. CRP is a
    voluntary program that provides a cost-effective means to
    address conservation concerns on environmentally sensitive
    lands. Currently, CRP contains more than 31 million acres and
    FSA issues about $1.7 billion annually in rental payments to
    CRP participants.
        USDA recently announced the results of general Signup 41,
    which was held this past spring. Of the 3.8 million acres
    offered, 2.8 million acres were accepted. With 4.4 million
    acres of contracts expiring on September 30 this year,
    enrollment is anticipated to total 29.9 million acres on
    October 1.
        The Conservation Reserve Enhancement Program, or CREP, is a
    component of the CRP continuous signup and is a partnership
    among USDA, the tribes, states, and in some cases, private
    groups. CREP agreements address high-priority conservation
    issues, and in total, FSA has 45 CREP agreements in 33 states.
        Another newer component of CRP is a Transition Incentives
    Program. TIP provided $25 million through 2012 to provide
    additional CRP payments for retiring owners or operators who
    transition land to beginning farmers or socially disadvantaged
    producers. In turn, the new operator must return some or all of
    the land to production using sustainable farming techniques. As
    of June 30, there were 506 approved TIP contracts accounting
    for nearly 73,000 acres. I would note for the Committee that
    those numbers are an update from my testimony submitted for the
    record because 20 additional contracts were established in the
    last 3 weeks of June.
        FSA works closely with NRCS to administer the Emergency
    Conservation Program, which provides emergency cost-share
    funding and technical assistance to farmers and ranchers to
    rehabilitate damaged farmland. Approximately $90 million has
    been allocated nationwide under ECP for this fiscal year, about
    $2 million remains available to fulfill an anticipated $134
    million in requests, leaving a projected shortfall of $132
    million. This estimate is also a minor update from my testimony
    submitted for the record.
        FSA also administers several other new conservation
    programs that were created in the 2008 Farm Bill. The Voluntary
    Public Access and Habitat Incentive Program provides grants to
    states and tribal governments to encourage private landowners
    to make their land available for recreation. Earlier this
    month, USDA announced additional grants under this program,
    bringing in the total number of states and tribes participating
    to 26.
        FSA and NRCS also jointly administer a Grassland Reserve
    Program, or GRP. GRP participants limit cropping while
    retaining the right to conduct grazing practices and
    operations. Applications may be filed with either NRCS or FSA.
    Generally, FSA implements rental contracts and NRCS administers
    the easement program. Currently, 1.1 million acres are enrolled
    in GRP at an annual cost of approximately $10 million.
        FSA and NRCS are working hard together to make sure farmers
    know their options and have the right technical assistance. I
    am proud to report that the average government cost per
    enrolled acre in inflation-adjusted terms is significantly
    lower now than in the late 1980s, while at the same time, more
    environmental and conservation benefits are being generated. We
    have streamlined tasks and reduced signup costs by about 30
    percent per contract for general signup and 18 percent per
    contract for continuous signup.
        In closing, we are committed to ensuring that our
    conservation program benefits the agricultural sector as
    intended by Congress. And we look forward to working closely
    with you to ensure sustainable conservation for agriculture in
    rural areas. Mr. Chairman, this concludes my statement, and I
    would be happy to answer any questions you or Members of the
    Subcommittee might have. Thank you very much.
        [The prepared statement of Mr. Nelson follows:]
    Prepared Statement of Bruce Nelson, Administrator, Farm Service Agency,
                U.S. Department of Agriculture, Washington, D.C.
        Mr. Chairman, Ranking Member, and Members of the Subcommittee,
    thank you for the opportunity to discuss the conservation programs
    administered by the Farm Service Agency (FSA).
        FSA's largest conservation program, the Conservation Reserve
    Program (CRP), which was first authorized by the 1985 Farm Bill, has a
    long record of accomplishment. CRP is a voluntary program that provides
    a cost-effective means to address many conservation concerns on
    environmentally-sensitive lands (such as clean air, clean water, and
    wildlife habitat). Currently, CRP contains more than 31 million acres
    of grass, trees, riparian buffers, filter strips, restored wetlands,
    and high-value wildlife habitat. The experience of the 1930's and
    economic and societal impacts of the ``Dust Bowl'' demonstrates the
    importance of protecting our nation's most environmentally sensitive
    lands.
        The Transition Incentives Program (TIP) provides up to two
    additional CRP annual rental payments to a retired or retiring owner or
    operator of land under an expiring CRP contract if the land is sold or
    leased to a beginning or socially disadvantaged farmer or rancher for
    the purpose of returning some or all of the land to production using
    sustainable methods.
        FSA also implements several programs that provide emergency
    conservation assistance to producers. For example, the Emergency
    Conservation Program (ECP)--which has been in existence for several
    decades--provides emergency funding to farmers and ranchers to
    rehabilitate farmland damaged by natural disasters and for carrying out
    water conservation measures in periods of severe drought.
        FSA administers several new programs created by the 2008 Farm Bill.
    For example, the Voluntary Public Access and Habitat Incentive Program
    (VPA-HIP) provides grants to states and tribal governments to encourage
    owners and operators of privately held farm, ranch, and forestland to
    voluntarily make their land available for public access for hunting,
    fishing, and other wildlife-dependent recreation. These grants provide
    funds to programs administered by state and tribal governments
        FSA and the Natural Resources Conservation Service (NRCS) jointly
    administer the Grassland Reserve Program (GRP), which is a voluntary
    conservation program that emphasizes support for grazing operations,
    enhancement of plant and animal biodiversity, and protection of
    grassland under threat of conversion to other uses.
        FSA also implements non-Conservation Title programs that have
    conservation effects such as the Biomass Crop Assistance Program (BCAP)
    and the Emergency Forest Restoration Program (EFRP) both of which
    require that participants have a conservation plan.
        For FSA's conservation programs, the agency relies on technical
    assistance from NRCS, the Forest Service, the Fish and Wildlife
    Service, state fish and wildlife agencies, state Forestry agencies,
    state agricultural and environmental departments, conservation
    districts, non-governmental organizations, and the private sector.
    These partners help us with numerous activities, including technical
    determinations, conservation plan development, engineering design,
    outreach to farmers and ranchers, and monitoring the impacts of
    conservation programs.
        Today, I will not only discuss these conservation programs in more
    detail, but will also discuss how we work with our many conservation
    partners, and indicate how we are moving forward to ensure high-
    quality, cost-effective program delivery.
    Conservation Reserve Program
        CRP was authorized by the 1985 Farm Bill with a strong commodity
    supply control connection. CRP has evolved into a conservation program
    that increasingly targets environmental need by ranking offers in a
    general signup according to their environmental benefit and through a
    continuous signup that focuses on relatively small acreages that
    protect much larger areas such as buffer strips, riparian buffers and
    grass waterways.
        CRP also created the Conservation Reserve Enhancement Program
    (CREP) which leverages scarce Federal dollars with state and non-
    government organization funds to better meet local environmental needs.
    Under CREP, CRP helps to protect the Chesapeake Bay, salmon in the
    Pacific Northwest, Mammoth Cave in Kentucky and Hawaiian coral reefs.
    More recently, CRP has targeted enrollment of lands to achieve the
    goals of initiatives focused on the conservation of priority fish and
    wildlife resources such as wetlands, quail, ducks, and longleaf pine.
        CRP provides cost-share assistance and annual rental payments to
    farmers and ranchers to establish long-term (10 to 15 years)
    conservation cover (such as grass or trees) on eligible farmland.
    Numerous conservation practices are available including filter strips,
    riparian buffers, wetland restoration and high-value wildlife habitat.
    Annual rental payments are based on the agricultural rental value of
    the land, and cost-share assistance is provided for up to 50 percent of
    the participant's costs in establishing approved conservation
    practices. FSA issues about $1.7 billion annually in rental payments to
    CRP participants.
        USDA recently announced the results of Signup 41, which was held
    this past spring. Of the 3.8 million acres offered, 2.8 million acres
    were accepted. Signup 41 acceptances have no impact on this year's
    crop; accepted land currently in crops can be harvested normally. For
    next year, the price impacts of Signup 41 enrollment on the price of
    corn, soybeans, and wheat are estimated to be very modest. With 4.4
    million acres expiring on September 30, 2011, enrollment is anticipated
    to total 29.9 million acres on October 1, 2011 (contracts for the
    recently-accepted 2.8 million acres begin on that date).
        A Fiscal Year (FY) 2012 general signup is assumed in the
    President's Budget; however, no signup dates have been announced. The
    Secretary is committed to a strong CRP program and feels the best way
    to keep it strong is to accept acres with the highest environmental
    benefit.
        A conservation plan is required for each CRP contract. FSA partners
    with NRCS which makes certain technical eligibility determinations and
    develops conservation plans. FSA is responsible for all program
    activities, makes compliance determinations, and consults with other
    Federal agencies such as the U.S. Fish and Wildlife Service. FSA also
    partners with the Forest Service to provide conservation planning for
    participants installing tree practices under CRP and also the Emergency
    Forestry Conservation Reserve Program (EFCRP).
        The environmental benefits of CRP are substantial. Since the
    beginning of the program, USDA estimates CRP has reduced soil erosion
    by more than 8 billion tons, including an estimated 325 million tons in
    2010. On fields enrolled in CRP, nitrogen and phosphorus losses were
    estimated to be reduced by 607 million pounds and 122 million pounds,
    respectively, in 2010. In addition, CRP acreage reduces the impacts of
    downstream flood events and recharges groundwater aquifers.
        There are two primary ways for farmers and ranchers to participate
    in CRP: the general signup provisions, such as Signup 41, and
    continuous signup provisions. Under the general signup, producers
    compete nationally for enrollment during specified periods. Under
    continuous signup, landowners and operators with eligible lands may
    enroll certain high priority conservation practices, such as restored
    wetlands, filter strips, and riparian buffers, at any time during the
    year without competition. In addition to annual soil rental payment and
    cost-share assistance, many continuous practices are eligible for
    additional annual and one-time up-front financial incentives.
    Continuous Signup
        The Conservation Reserve Enhancement Program (CREP) is a component
    of CRP continuous signup and is a partnership among USDA, tribes,
    states and, in some cases, private groups. Partners (generally states)
    generally provide 20 percent of estimated total project costs. CREP
    agreements address high-priority conservation issues of both local and
    national significance, such as impacts to water supplies, loss of
    critical habitat for threatened and endangered wildlife species, soil
    erosion and reduced habitat for fish populations such as salmon.
    Enrollment in a state is limited to specific geographic areas and
    practices. In total, FSA has 45 CREP agreements with its partner states
    and organizations spanning areas in 33 states.
        Most CREP agreements are designed to target assistance toward a
    critical need or issue. Iowa's CREP agreement, for example, focuses on
    constructed wetlands in the Mississippi River basin. These constructed
    wetlands reduce nitrogen loadings in watersheds dominated by tile-
    drained cropland. They consist of a treatment pool and grass buffer,
    and range in size from 16-70 acres. Monitoring data from the Iowa
    project indicate that these wetlands remove 40-90 percent of the
    nitrate flowing into the wetlands. The cost to reduce nitrogen load by
    a pound in such situations is projected to be less than $1.38 per year
    for 50 years.
        As another example, we have CREP agreements with all the states
    that drain into the Chesapeake Bay watershed. Pennsylvania's CREP
    agreement, which has the most acreage enrolled, provides financial and
    technical assistance to voluntarily restore wetlands, riparian areas,
    and grasslands; reduce erosion; and prevent sediment, nitrogen, and
    phosphorus from reaching the Chesapeake Bay. The Conservation Effects
    Assessment Program (CEAP) of the Chesapeake Bay estimates that nitrogen
    loss is reduced by 79 pounds per acre per year from acreage enrolled in
    CRP.\1\
    ---------------------------------------------------------------------------
        \1\ United States Department of Agriculture, Natural Resources
    Conservation Service. 2011. Assessment of the Effects of Conservation
    Practices on Cultivated Cropland in the Chesapeake Bay Region. Final
    Draft. http://www.nrcs.usda.gov/technical/nri/ceap/chesapeake_bay/
    index.html.
    ---------------------------------------------------------------------------
    Farmable Wetlands Program
        The Farmable Wetlands Program (FWP) is another component of CRP
    that is designed to restore up to one million acres of farmable
    wetlands and associated buffers by improving the land's hydrology and
    vegetation. Eligible producers in all states restore wetland benefits
    by planting long-term, resource-conserving covers to improve the
    quality of water, control soil erosion, and enhance wildlife habitat.
    Participants must agree to restore the hydrology of the wetlands and to
    establish vegetative cover, which may include planting bottomland
    hardwoods, cypress and other appropriate tree or wetland species. FWP
    practices receive the same benefits as other continuous practices such
    as filter strips and riparian buffers.
    CRP Initiatives
        CRP further targets limited Federal funds by focusing on specific
    goals such as wetlands, longleaf pine, or wildlife. CRP initiatives
    include:

       Wetlands Initiative. This initiative was created to restore
            wetlands located within the 100 year floodplain, restore playa
            lakes and wetland complexes located outside the 100 year
            floodplain, and restore floodplains by establishing bottomland
            hardwood trees. The initiative provides vital habitat for many
            wildlife species, filters runoff, improves water quality, and
            reduces downstream flooding.

       Quail Initiative. This initiative was created because
            Northern bobwhite quail populations have declined due to
            habitat loss. The 350,000 acre initiative creates early
            successional grass buffers along agricultural field borders in
            the 35 states that encompass the historic ranges of the
            bobwhite quail. The buffers also benefit many other species,
            such as, grasshopper sparrow, dickcissel, and Henslow's
            sparrow.

       Longleaf Pine Initiative. The 250,000 acre longleaf pine
            initiative was developed to address the decline of longleaf
            pine in the Southeast. Its goal is to re-establish longleaf
            pine stands to benefit wildlife species and protect water
            quality.

       Duck Nesting Habitat Initiative. This 150,000 acre
            initiative was designed to restore wetlands and wetland
            complexes that are located outside the 100 year floodplain in
            the Prairie Pothole Region. It will provide critical habitat
            and nesting cover for ducks, sandhill cranes and other wildlife
            species, while filtering runoff, and reducing downstream
            flooding.

       State Acres for Wildlife Enhancement. This 850,000 acre
            initiative is designed to target high priority wildlife
            objectives on a state and/or regional level. The projects were
            targeted to create habitat for threatened and endangered
            species, species of special concern, and species of economic
            interest such as sage-grouse, lesser prairie-chicken, and ring-
            necked pheasant.
    Transition Incentives Program
        Another component of CRP is TIP which was created in the 2008 Farm
    Bill and provides $25 million through 2012 to promote the transition of
    expiring CRP land from a retired or retiring owner or operator to a
    beginning or socially disadvantaged farmer or rancher to return some or
    all of the land to production using sustainable farming techniques.
    Under TIP, the retired party is eligible to receive annual rental
    payments for up to 2 additional years beyond the contract expiration
    provided that the land is not transitioned to a family member. Certain
    conservation and land improvement work may begin on the transitioned
    land during the last year of the CRP contract.
        A retired or retiring CRP participant may apply for TIP beginning
    one year before the date of the expiration of the CRP contract through
    the end of the contract. TIP sign-up began on May 17, 2010, and as of
    June 9, 2011, there were 486 approved TIP contracts accounting for
    nearly 73,000 acres for expected outlays of $6.5 million.
    Emergency Conservation Program
        The Emergency Conservation Program (ECP) provides emergency cost-
    share funding (generally, up to 75 percent) and technical assistance to
    farmers and ranchers to rehabilitate farmland damaged by natural
    disasters and for carrying out emergency water conservation measures in
    periods of severe drought. For land to be eligible the natural disaster
    must create new conservation problems that, if untreated, would impair
    or endanger the land or materially affect the land's productive
    capacity and for rehabilitation matters must be unusual damage for
    which Federal assistance is required to return the land to productive
    agricultural use. County FSA committees determine land eligibility
    based on on-site inspections of damage. Funding for this program is
    appropriated by Congress.
        Timing of ECP assistance is critical to producers facing disasters
    and FSA and NRCS employees work closely at the state and county level
    to provide efficient and timely service. For instance, FSA and NRCS
    employees in Alabama are working to provide assistance to farmers
    affected by recent tornados. Approximately $67 million has been
    allocated under ECP in FY 2011. FSA currently has approximately $9
    million available with more than $167 million in pending or soon to be
    submitted requests.
        FSA provides technical assistance regarding debris removal, fence
    restoration, and grading and shaping of damaged land and FSA has an
    agreement with NRCS for it to provide technical assistance for
    practices requiring greater conservation expertise, including
    restoration of conservation structures and installations as well as
    drought emergency measures. FSA also has an agreement with the Forest
    Service to provide technical assistance for hurricane disasters that
    affect tree stands.
    Voluntary Public Access_Habitat Incentive Program
        VPA-HIP provides grants to states and tribal governments to
    encourage owners and operators to voluntarily make land available for
    public access for wildlife-dependent recreation. Funding may be used to
    expand existing, or create new, public access programs, or provide
    incentives to improve wildlife habitat on enrolled lands. USDA
    announced additional participating states earlier this month, bringing
    the total number of states participating in the program to 25 (plus the
    Yakima Nation). With the expanded participation in FY 2011, the program
    is expected to have a total cost of $50 million.
    Grassland Reserve Program
        FSA and NRCS jointly administer GRP. GRP participants voluntarily
    limit future development and cropping uses of the land while retaining
    the right to conduct grazing practices and operations related to the
    production of forage and seeding, subject to certain restrictions
    during nesting seasons. Applications may be filed for a rental contract
    or an easement with NRCS or FSA. Generally, FSA implements rental
    contracts and NRCS administers easements. NRCS provides all on-the-
    ground technical assistance for easements and rental contracts.
    Currently, 1.1 million acres are enrolled in GRP, at an annual cost of
    approximately $10 million.
    Moving Forward
        As you can see, FSA's programs cover a wide variety of conservation
    and other related needs that have evolved over time. For example, CRP
    has been very effective at enhancing habitat for lesser prairie-chicken
    and sage-grouse both of which are candidate species for listing under
    the Endangered Species Act. CRP also helps producers comply with
    regulatory actions such as the Chesapeake Bay's total maximum daily
    load requirements. CRP participation not only promotes the protection
    of environmentally-sensitive land, but can also help reduce the need
    for additional regulatory burdens on agricultural producers.
        We are committed to ensuring that conservation programs benefit the
    agricultural sector as intended and protect land, improve water and air
    quality, and promote wildlife habitat. We are also committed to
    ensuring that we efficiently and effectively manage stewardship over
    our natural resources. In addition, we work with our partners including
    NRCS and the Forest Service, to ensure compliance with the law by
    thoroughly reviewing producer and land eligibility and needs.
        We are working hard to innovate and improve program efficiency. The
    average government cost per enrolled acre, in inflation-adjusted terms,
    is significantly lower now than in the late 1980's while, at the same
    time, more environmental benefits are being generated. Further, FSA and
    NRCS have significantly reduced technical assistance costs over the
    past 10 years. We have made changes that allow the automation of
    eligibility determinations and further streamlined the tasks necessary
    to implement technical assistance for CRP. Because of these changes,
    the costs of signup activities have been reduced by about 30 percent
    per contract for general signup and 18 percent per contract for
    continuous signup.
        We are also committed to evaluating CRP outcomes to ensure that we
    best target assistance as we move forward. We undertake monitoring and
    evaluation work with Federal, state, university, and other partners,
    which provides the sound science to effectively administer CRP and
    other conservation programs. These analytical results have been used to
    develop new conservation initiatives and resulted in the Iowa CREP
    findings noted earlier. These results are also used to develop
    environmental goals for the FSA strategic plan and to guide other USDA
    decision-making.
    Final Thoughts
        In an era of reduced resources, we look forward to working closely
    with Congress to identify and meet critical conservation needs. We also
    look forward to working more closely with not only our inter-agency
    partners within USDA, but also with the private sector and other
    government agencies. By doing so, we aim to better leverage resources,
    share ideas, and deliver programs that ensure sustainable conservation
    activities and programs for agriculture and rural areas.

        The Chairman. Thank you, Mr. Nelson.
        Chief White, begin when you are ready.

    STATEMENT OF DAVE WHITE, CHIEF, NATURAL RESOURCES CONSERVATION
                      SERVICES, U.S. DEPARTMENT OF
                     AGRICULTURE, WASHINGTON, D.C.

        Mr. White. Thank you, Mr. Chairman, Mr. Ranking Member, Mr.
    Lucas, Mr. Peterson, Mr. Goodlatte, distinguished Members of
    this Subcommittee. I am starting to feel a little bit
    intimidated. I wasn't expecting quite this many Members here.
        Anyway, you have asked me to talk about 15 programs, and I
    have to tell you, I have been studying like a first-semester
    freshman right before the exam time. Fifteen of them, I am
    going to break them down into three categories for you. One, we
    are going to have the mandatory-funded cost-share programs;
    then, we will have a group of four, the mandatory easement
    programs; and then we will have three discretionary.
        So the eight mandatory cost-share programs, we will just
    call this the big eight. The first one is EQIP, Environmental
    Quality Incentives Program. This is the workhorse. This is the
    big kid on the block. This is the most lushly funded. This is
    the main bricks-and-mortar conservation cost-share program we
    have in the United States of America. Since 2005, about \1/4\
    million contracts have been written with farmers, ranchers, and
    forest landowners in the United States of America--\1/4\
    million since 2005. It has several components to it, some of
    them I am going to address separately. So EQIP is really the
    biggest program we have.
        The Conservation Stewardship Program is the up-and-coming
    kid. The Conservation Stewardship Program can enroll 12.7
    million acres a year. We have had two enrollments. We are in
    the tail end of the third enrollment. As of yesterday, the CSP
    now has about 35 million acres. We are probably going to get
    another 3 million acres in there. So it is going to be 38
    million acres here in a month or so. So it is now
    geographically the largest program. It is a completely
    different program from the one it replaced, the Conservation
    Security Program; Stewardship has a nationwide signup. It has a
    focus on additionality.
        Third cost-share program in the big eight, Wildlife Habitat
    Incentive Program, $85 million a year baseline, frankly, it is
    very, very similar to EQIP in how we operate it. It does have a
    couple of distinct differences. One, it allows you to have a
    higher cost-share rate for long-term enduring contracts. And
    the second thing that is somewhat unique about it is that it
    has a specific directive in there where we are to prioritize
    the funding for state and national strategic objectives and
    which we have done. And I will probably go into that later on.
        Fourth program in the big eight, the Agricultural
    Management Assistance, this was actually in part of the credit
    title. It is only in 16 states. Sixteen states that have
    historically low participation in crop insurance is where AMA
    is offered. Again, it is very similar to EQIP. It does have a
    couple of differences that I would bring forward to your
    attention. This is a program that is really targeted towards
    smaller specialty crop organic farmers. It has a baseline. It
    is not in the Conservation Title, but it has its own baseline.
    The funding is statutorily split between three agencies. Ten
    percent of the funding goes to the Agricultural Marketing
    Service, and they use that to help pay to transition to organic
    farming. Forty percent of the funding goes to the Risk
    Management Agency. They use that funding to help specialty
    crops small farmers pay for crop insurance. Fifty percent comes
    to NRCS and we help develop on-farm conservation systems. Two
    things it does that really are fairly unique: one, you can use
    the funding to install new irrigation systems, which is rather
    unique; and second, you can use the funding to build irrigation
    reservoirs, which, if you are in a drought, it is a pretty big
    thing.
        Fifth team in the big eight conference is the Agricultural
    Water Enhancement Program, fondly called AWEP. AWEP is a
    component of EQIP. It has its own distinct, separate baseline,
    which at the end of the farm bill will be $60 million. AWEP is
    focused on water conservation, water quality. There are some
    specific instructions in the manager's report that gives us
    targeted areas like the Ogallala Aquifer, Red River, Upper
    Mississippi, Eastern Snake Plain Aquifer in Idaho, Bay Delta,
    California, Puget Sound. And we have put funding in all of
    those areas. A unique thing at AWEP is if you are in like an
    exceptional drought area--I think that is a D3/D4--you can use
    AWEP funds to build irrigation reservoirs. And some of you may
    remember Mr. Everett from Alabama, that was a provision that he
    really wanted to see in this 2008 Farm Bill.
        Number six in the big eight, Conservation Innovation
    Grants, this is a subcomponent of EQIP that does not have a
    separate funding stream. All funding for this comes out of the
    overall EQIP allocation. There are two components to
    Conservation Innovation Grants. CIG A, which is really a grant
    program, a 50 percent matching grant program, and it is
    designed to take a research finding that is found in the lab
    that shows promise and how do you get that to on-the-ground
    application in a practical manner for farmers and ranchers.
    This divide between discovery and application is called Death
    Valley. So the Conservation Innovation Grants, Section A, is
    designed to help you bridge that Death Valley and take
    promising research results and put them on on-the-ground,
    reasonable, technical applications that farmers can use around
    the country.
        The second part of CIG, Section B is air quality: $37.5
    million is designated for this subsection and it is to be used
    around the country in areas in air quality attainment areas.
    There are several of them. I was detailed to Senator Harkin in
    the 2008 Farm Bill process. This was brought forward on the
    Senate side by Senators Boxer and Feinstein. Members of this
    Committee, some of you may remember, Mr. Costa, Mr. Cardoza
    brought it forward. This is designed to help producers
    upgrade--part of it was to upgrade their engines. And when I
    first heard about it, I scoffed at it. I mocked it. I laughed
    at it. I thought this was the goofiest thing I have ever heard
    of. And then I saw how it was working and I was wrong. I was
    dead, flat, slap wrong.
        I have been to California where the bulk of this funding
    has gone. Central Valley, California, there is not one area in
    the United States of America where farmers are more regulated
    than they are in the Central Valley. And if you like peaches,
    plums, grapes, raisins, broccoli, carrots, onions, lettuce, it
    is very important for us to keep those producers in business.
    The Central Valley is like a big bowl. Everything that comes in
    there stays in there. Their air quality concerns are huge. And
    these guys are going out of business. I was on a producer's
    farm. His name was Don Cameron, and he had 30 irrigation pumps
    lined up right behind his barn, 30 of them. Every single one of
    them had a hole cut in the block. I was looking at a million
    dollars of irrigation pumps that could maybe be sold for scrap
    metal because they were too polluting for the California Air
    Resources Board. And with this particular section of EQIP, we
    are able to cost-share on a 50-50 basis. They are going from
    Tier 0 to Tier 3 engines in the last 2 years. This is
    astounding.
        And farmers, they are putting in this money, too, where we
    have done about 40 in EQIP; they have done about 40. It has
    reduced emissions with the net effect of removing over 400,000
    cars from the road in California every single year. We may be
    at the point if we carry this on for a couple more years, we
    will obviate the need for any further regulation of these guys
    in the Central Valley.
        Number seven in the big eight, Chesapeake Bay Watershed
    Program, $50 million baseline, I had been up here before
    talking about it. Many of you are extremely familiar with that.
    Chesapeake Bay is ground zero for agriculture and regulation.
    This is often viewed as the canary in the coal mine. I am much
    more bullish on our chances than other people, and the
    Chesapeake Bay Watershed Program is really equipping us with
    some of the resources we need in this critical area.
        Rounding out the big eight is not really a program per se,
    but it is a mechanism. It is the Cooperative Conservation
    Partnership Initiative. It is an authority which allows us to
    use three different programs--EQIP, the Wildlife Habitat
    Incentive Program, and the Conservation Stewardship Program--
    for outside entities like universities and agricultural groups
    and other partners to designate areas where they identify a
    problem and we focus EQIP, WHIP, and CSP resources to solve
    that identified problem. Right now, we have about 164 projects
    around the country. There is a statutory limitation of no more
    than six percent of EQIP, WHIP, and CSP that can be used in
    CCPI. We are right now at 5.9 percent. So there probably won't
    be a whole lot more. So that rounds out the big eight.
        Now, the big 12, these are all four easement programs. The
    big kid on the block is the Wetlands Reserve Program. In my
    opinion, it is the single biggest reason this country has
    achieved no net loss of wetlands. If you remember George
    Herbert Walker Bush, Bush I, he announced it was going to be
    the policy of the United States, no net loss of wetlands. This
    program is one of the main reasons why that has occurred. There
    are over 2 million acres right now. It is mostly marginal crop
    land that guys have a hard time making money on anyway. And
    that is one, Mr. Chairman, that you mentioned does not have a
    baseline, going forward.
        Second one is the Farm and Ranch Lands Protection Program.
    I know that that is critical to Mr. Holden and other Members of
    this Committee. This is a working lands easement program.
    Essentially, you are purchasing development rights. So this
    farm, this ranch is going to stay in agriculture forever. It is
    not going to be an airport; it is not going to be subdivided;
    it is not going to be little ranchettes. It is going to be in
    agriculture. A lot of changes made in 2008 that have made this
    program better, it will have a baseline of about $200 million,
    going forward.
        Third program, Grassland Reserve Program, this is kind of a
    hybrid. It blends a little bit of WRP and a little bit of FRPP,
    but again, it is a working lands program. Mr. Nelson very ably
    described that, so I won't go into it. And it is jointly
    administered between our two agencies.
        Number 12 of the big 12 is the Healthy Forests Reserve
    Program. This is actually located in the Forestry Title. It is
    a permanent easement program--30 year contract for tribes--to
    aid in the recovery of threatened and endangered species. What
    is different about this is no-year money. We have to work with
    Fish and Wildlife Service to get people who enrolled into Safe
    Harbor Agreements. This is really focused on recovery of
    endangered species. Very small, $10 million a year for the last
    3 years and will not have a baseline, going forward.
        All right. That leaves us with three more programs you
    wanted me to talk about. That would take us to 15. I couldn't
    think of a sports analogy for that so I am going to give you a
    bonus program to take us to the Sweet 16 shifting from football
    to basketball.
        Number 13 is Resource Conservation and Development created
    in the early 1960s. RC&D really created 501(c)(3) nonprofit
    organizations whose mission was rural development broadly--
    natural resource-based rural development. I worked with them
    all of my career. I have a lot of respect for them. They have
    done some tremendous work around the country. In the last Bush
    Administration, OMB made an analysis and said it was
    duplicative, and the last few years of the Bush Administration,
    the Administration recommended it be zeroed out. That was
    carried forward in the Obama Administration and Congress
    adopted it this year. There is zero funding for this program.
    We are in the process of doing an orderly closeout of that. It
    is a very good program, but I recognize the necessity of the
    hard choices that are being made.
        Number 14 is the Small Watershed Program, which actually is
    two other programs--P.L. 78-534 and P.L. 83-566. These date
    from the 1940s and 1960s. Over that period of time, essentially
    these were flood-control structures. There is also water
    supply. These are the dams that are really flood control. There
    have been about 1,800 projects over that amount of time, over
    11,000 structures have been built. Now, when you go back to the
    1940s and 1950s, fast-forward to today, we are in a bit of a
    fix. These dams, structures if you will, most of them were
    built with a 50 year life-span. That is not to say that at 51
    years they fall down. They are perfectly good but they had a
    design life of around 50 years. These structures are reaching
    the end of their design life. In fact, every day for the next
    20 years somewhere in the United States of America a watershed
    dam will reach the end of its design life. That is not to say
    that they are bad at that point in time; it just to say their
    design life is over.
        Which leads me into number 15, which is the Watershed
    Rehabilitation Program. And I will give a nod to Chairman
    Lucas, who has recognized this and acted very forcefully to
    establish this particular program. What do you do with these
    structures? These structures are providing about $2 billion in
    prevented damages every year across America. What do you do
    when they reach the end of their design life? What do you do
    when they need rehabilitation? What do you do when there is a
    safety issue? And this is a mechanism where we can go in and
    fix these older structures. And they don't have to be at the
    end of their design life either. In this country, urban
    development has occurred where we have put a little dam out in
    a farm field. It might be in a city now. A good example of that
    is Atlanta. We have several watershed projects and Atlanta, as
    of 2011, is not the Atlanta of 1950.
        So when something like that occurs, we go in and we upgrade
    those structures to high-hazard classifications so adding in
    those extra safety features. There is not one earmark in this
    program. This program is a cost-share 65-35. And NRCS has a
    little criteria where we decide where to work. Number one on
    the list is human health and safety. This had $100 million in
    the farm bill and I think it has $18 million, going forward, in
    this particular ag budget.
        Bonus program number 16 is another easement program. This
    is a discretionary easement program. This falls under the
    Emergency Watershed Protection Program. It is for flood plain
    easements. It allows us after a flood to go in and purchase
    easements on these flood plains where guys are getting washed
    out all the time. Actually, if you look at it, it really saves
    us a lot of money because you are not paying disaster
    assistance on that land or crop insurance year after year. And
    if there is flooding in the future, the water can spread out,
    be filtered, ground water recharged, good for wildlife. There
    is a lot going for that program.
        I have talked enough. One thing I would ask you, this is
    your watch. This is going to happen under your control. Forty
    years from now, nine billion new people will be in this world.
    I have seen all kinds of projections for what it is going to
    take. I have seen 50 percent increase of production, 70
    percent, double production. Any way you slice it, we are going
    to have to increase production. And conservation is one of the
    key ways that we can ensure the future that those little
    Americans who come after us will have the same bounty that we
    enjoy today.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. White follows:]
    Prepared Statement of Dave White, Chief, Natural Resources Conservation
           Services, U.S. Department of Agriculture, Washington, D.C.
        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to appear before you today to discuss conservation programs
    administered by the Natural Resources Conservation Service (NRCS).
        The NRCS conservation portfolio contains a broad mix of authorities
    providing programs for conservation technical assistance, environmental
    improvement, stewardship, easements, and water resources. These
    conservation investments, designed by Congress and implemented by USDA,
    have a proven track record. They are good for farmers, ranchers and
    private forest landowners and they work for all Americans--helping to
    secure a high quality environment in concert with food security for our
    nation and the world.
        Last year we celebrated 75 years of service to the nation's
    farmers, ranchers, and other land owners and managers, we looked back
    at the landmark achievements, and continued to make some history of our
    own. Before providing the Subcommittee with details about our
    conservation programs, I would like to share a few of the benefits that
    these programs delivered through our long, strong partnership with
    America's farmers, ranchers, and private forest landowners.
        Last year (Fiscal Year 2010) was a record year in conservation
    program delivery. Of special note is the Wetlands Reserve Program
    (WRP). A nationwide emphasis on wetlands conservation resulted in a
    record-setting WRP enrollment of nearly 273,000 acres, exceeding the
    next-highest yearly total by more than 58,000 acres and nearly doubling
    our average annual enrollment. And while much work remains to be done
    in completing restoration work associated with these record
    enrollments, more than 129,000 acres of wetlands were created, restored
    or enhanced in FY 2010. While acreage numbers are impressive, the more
    important outcome is that these wetlands are now providing essential
    habitat for at-risk species, such as the threatened Louisiana Black
    Bear and the endangered Whooping Crane. The better job we do in
    assisting in keeping candidate and other at-risk species off the List
    of Endangered and Threatened Wildlife, the greater flexibility our
    producers have in providing food, feed, and fiber for the nation and
    the world.
        Voluntary conservation on private lands works! USDA established the
    Conservation Effects Assessment Project (CEAP) in 2003 to develop a
    scientific understanding and methodology for estimating the
    environmental effects of conservation practices on agricultural
    landscapes at national, regional, and watershed scales. CEAP is built
    on partnerships and working collaborations involving Federal agencies
    inside and outside of USDA, land-grant universities, state agencies,
    and nonprofit organizations.
        The first CEAP assessments of the effects of conservation practices
    on cultivated cropland were released in FY 2010. Two of the planned 14
    regional reports, the Upper Mississippi River Basin (UMRB) and the
    Chesapeake Bay Region CEAP Cropland Reports, quantify the great
    progress farmers have made in reducing sediment and nutrient losses
    from cropland, while emphasizing a continuing need for conservation
    efforts to focus on nutrient management. A few key highlights from the
    UMRB assessment include:

       Voluntary, incentive-based conservation works. Reduced
            tillage is used on 95 percent of the cropland--sediment losses
            are reduced by an estimated 69 percent as compared to a
            scenario where full conventional tillage is used.

       Nutrient management is the greatest need. Much can be done
            through expanded adoption of existing practices. About 60
            percent of the cropland needs improved nutrient management;
            Timing, rate and method of application are important factors in
            managing nutrient application.

       Targeting can greatly enhance program effectiveness.
            Treating the most critical acres can have three to five times
            the effect on sediment and nutrient reduction as compared with
            treating acres with less serious problems.

       Comprehensive conservation planning is essential. Suites of
            practices that address multiple resource concerns are more
            effective than single practices.

        In FY 2010, NRCS used landscape-scale initiatives to address
    priority resource concerns in working landscapes and watersheds
    nationwide. Two of these initiatives began prior to FY 2010--the
    Chesapeake Bay Watershed Initiative, supported by the statutory
    Chesapeake Bay Watershed Program in the farm bill and the Great Lakes
    Restoration Initiative, supported by financial assistance transferred
    from the U.S. Environmental Protection Agency and the Great Lakes
    Restoration Action Plan. The other initiatives are the Sage-Grouse, the
    Longleaf Pine, California Bay-Delta, Lesser Prairie-Chicken,
    Mississippi River Basin Healthy Watersheds, New England Forestry, and
    the Migratory Bird Habitat. These initiatives reflect a common
    objective of using targeted conservation assistance in addressing
    priority natural resource concerns that are broader than a single state
    and that will help to keep working lands working.
        The Sage-Grouse Initiative (SGI) is a great example of how
    landscape-scale conservation delivers broad benefits for agriculture.
    SGI focused conservation delivery within habitat core areas to help
    maintain large and intact grazing lands--important for the sage-grouse
    and for the rancher. NRCS identified practices that can be implemented
    through the Environmental Quality Incentives Program, the Wildlife
    Habitat Incentive Program, the Grassland Reserve Program and the Farm
    and Ranch Lands Protection Program to increase and protect grouse
    habitat and populations on 640,000 acres in 11 western states. In FY
    2010, NRCS contracted with 223 ranching operations for a total $18.5
    million in financial assistance to remove sage-grouse threats and help
    sustain working ranches. As a result, over 180 miles of high-risk
    fencing near breeding sites were marked or removed, which prevented an
    estimated 800 to 1,000 mortalities through fence collisions in just the
    first year.
        The SGI also resulted in a landmark agreement that provides
    regulatory certainty to ranchers who take actions to improve sage-
    grouse habitat on their land. In early 2010, the U.S. Fish and Wildlife
    Service (FWS) determined sage-grouse to be a ``candidate'' species
    under the Endangered Species Act (ESA), which means listing is
    warranted but precluded by higher listing priorities and positive
    management actions that address threats to the species need to be taken
    to prevent listing. NRCS and FWS negotiated a first-of-its kind
    regional agreement that lets landowners know the investments they make
    today to benefit this declining species and the sustainability of their
    ranching operation by implementing NRCS conservation practices
    according to the SGI Conference Report can continue should sage-grouse
    be listed at a future date.
        This new conservation approach prioritizes assistance to ensure
    that the best conservation practices are implemented in the right
    landscapes for a positive sage-grouse population-level response. The
    SGI is a perfect example of how conservation programs can respond to
    critical natural resource issues by merging science and program
    delivery, and targeting practices and geography to make a real
    difference on the landscape for natural resources and for America's
    farmers and ranchers.
    NRCS Conservation Programs
        This testimony provides an overview and status for 15 of NRCS'
    conservation programs and authorities:
    Environmental Quality Incentives Program
        The Environmental Quality Incentives Program (EQIP) provides
    financial and technical assistance on working lands to help producers
    address environmental challenges. To meet these challenges, EQIP
    provides incentives for the application of farming and other land use
    practices that maintain or improve the condition of soil, water, air,
    and other natural resources. The program assists agricultural and
    forestland users in identifying natural resource issues and
    opportunities to improve their agricultural operations and provides
    technical and financial assistance to address them in an
    environmentally beneficial and cost-effective manner. EQIP-promoted
    practices meet a variety of environmental and natural resource
    challenges.
        In FY 2010, EQIP financial assistance obligations by states reached
    almost $840 million in 36,500 contracts covering an estimated 13
    million acres. In addition to regular EQIP projects, these funds also
    supported projects in resource based initiatives such as air quality,
    on-farm energy audits, migratory bird habitat, and the Mississippi
    River Basin Initiative, and projects that emphasize environmental
    protection and agricultural production as compatible goals such as
    organic production and seasonal high tunnels.
        In FY 2010, NRCS provided $37.5 million in financial and technical
    assistance to 12 states through the national Air Quality Initiative to
    help producers meet requirements of the Clean Air Act. Through this
    initiative, NRCS provides assistance to farmers and ranchers to reduce
    air pollution generated from agricultural operations in areas
    designated by the U.S. Environmental Protection Agency as non-
    attainment areas for ozone and particulate matter. During FY 2010, over
    950 contracts supported some 3,800 practices on more than 220,000
    acres. In the Central Valley of California alone, we estimate that
    these air quality projects over the past 2 years have had the
    equivalent impact of removing the NOX emissions from 400,000
    vehicles from the area's roads each year.
        In FY 2010, NRCS worked to provide financial assistance to more
    than 240 producers for on-farm energy audits by offering the
    Agricultural Energy Management Plan through EQIP. In partnership with
    the private sector and other organizations, NRCS is developing
    technical tools and training to evaluate and reduce agricultural energy
    consumption through implementation of on-farm energy audit
    recommendations and to help producers adapt plans and practices for
    better energy efficiency and on-farm energy production.
        The Organic Initiative is a nationwide special initiative within
    EQIP to provide assistance to organic producers as well as producers in
    the process of transitioning to organic production. In FY 2010, NRCS
    obligated nearly $24 million in financial assistance to treat 148,000
    acres in organic production or in transition to organic production. The
    most often recommended practices include nutrient management, cover
    crop, pest management, conservation crop rotation, and prescribed
    grazing.
        The FY 2012 President's budget includes $1.408 billion in mandatory
    funding for financial and technical assistance for the Environmental
    Quality Incentives Program.
    Agricultural Water Enhancement Program
        The Agricultural Water Enhancement Program (AWEP) is a component of
    EQIP. The purpose of AWEP is to promote improved ground and surface
    water conservation and water quality by leveraging the Federal
    Government's investment in natural resources conservation with services
    and resources of other eligible partners. The AWEP program was
    specifically created to address serious surface and ground water
    shortages as well as water quality concerns in many agricultural areas.
    The security of the nation's food supply is dependent upon the
    continued delivery of clean, reliable irrigation water to farms and
    ranches.
        This is the second year in which AWEP has been implemented and
    interest from the agricultural sector has remained steady. In FY 2010,
    NRCS obligated $60.8 million in 1,489 new contracts to implement
    conservation practices on nearly 271,000 acres of agricultural land.
    The ability to leverage funding through partnership agreements has also
    remained strong. Partners provided approximately $50.5 million in
    technical and financial assistance in FY 2010, nearly matching NRCS'
    AWEP investment. Through AWEP, the agency approved 28 new partner
    project areas during FY 2010, and continued to provide support for 63
    existing project areas approved during FY 2009. Over \1/2\ of the
    projects approved in FY 2010 are located in the high-priority water
    quantity concern areas, where conservation practices will be applied to
    conserve scarce water resources.
        The FY 2012 President's budget includes $60 million in mandatory
    funding for financial and technical assistance for the Agricultural
    Water Enhancement Program.
    Conservation Innovation Grants
        Conservation Innovation Grants (CIG) is a component of the
    Environmental Quality Incentives Program (EQIP) that is intended to
    stimulate the development and adoption of innovative conservation
    approaches and technologies while leveraging Federal investment in
    environmental enhancement and protection, in conjunction with
    agricultural production. CIG provides grants of up to 50 percent of the
    total project cost on a competitive basis to non-Federal governmental
    or non-governmental organizations, federally-recognized Indian tribes,
    or individuals. Applicants must provide non-Federal funding for at
    least 50 percent of the project cost, of which up to \1/2\ (25 percent
    of the total project cost) may come from in-kind contributions.
        CIG has two major components: National and State:

        (1) The National Component emphasizes projects that have a goal of
            providing benefits over a large geographic area. These projects
            may be watershed based, regional, multi-state, or nationwide in
            scope.

        (2) The State Component provides flexibility to NRCS State
            Conservationists to target CIG funds to individual producers
            and smaller organizations that may possess promising
            innovations, but may not compete well on the larger scale of
            the national grants competition.

        Funding for CIG is announced each year through a funding notice.
    CIG funds single- or multi-year projects, up to 3 years in length.
        CIG projects have resulted in new technologies and opportunities
    for producers. A 2005 grant helped to demonstrate that precision
    feeding of dairy cows could facilitate reductions in the protein
    (nitrogen) and phosphorus being fed to dairy animals while maintaining
    or even improving milk production and possibly improving animal health.
    Based on the findings from these feeding trials, the Pennsylvania State
    University Cooperative Extension developed the ``Dairy Tool'' to help
    farmers identify the greatest opportunities to improve profitability on
    their farms.
        In FY 2010, NRCS received 388 applications requesting more than
    $221.8 million. NRCS obligated about $18 million through 61 agreements
    representing 43 states and U.S. territories of the Pacific. Grant
    recipients provide matching funds to CIG bringing the total value of
    the approved projects to more than $35 million.
    Wildlife Habitat Incentive Program
        The Wildlife Habitat Incentive Program (WHIP) provides assistance
    to improve upland and wetland habitats to benefit priority wildlife
    species, including threatened, endangered and other at-risk species.
    Focused efforts on habitat for fish and wildlife also contribute to
    more sustainable use of resources. By prioritizing specific geographic
    areas through various efforts at the state level, WHIP is able to
    target financial and technical assistance funds to benefit habitats for
    specific declining wildlife species such as the sage grouse. For
    example, WHIP funds helped to support a project in Somerset County,
    Maine, to rebuild a wildlife and nature preserve. Following a dam
    breach in 2000, the landowner committed to reclaiming the land. The
    project is improving the forest stand, planting cover crops, installing
    nesting boxes, among other practices to create open space and nesting,
    brooding, and rearing habitat for the American woodcock, a species of
    concern, as well as 50 other important wildlife species.
        In FY 2010, NRCS obligated almost $63 million in financial
    assistance in more than 4,700 agreements to enroll over one million
    acres in WHIP. Sixty-eight of these contracts valued at over $3.7
    million are with American Indian and Alaskan Natives participants to
    benefit habitat for culturally important species. Since the program
    began in 1998, national enrollment has included almost 37,000
    agreements on over 6.5 million acres.
        The FY 2012 President's budget includes $73 million in mandatory
    funding for financial and technical assistance for the Wildlife Habitat
    Incentive Program.
    Agricultural Management Assistance
        NRCS administers the conservation provisions of the Agricultural
    Management Assistance (AMA) program, which provides financial
    assistance to agricultural producers to address water management, water
    quality, and erosion control issues by incorporating conservation into
    their farming operations. AMA is available in 16 states where
    participation in the Federal Crop Insurance Program is historically
    low: Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts,
    Nevada, New Hampshire, New Jersey, New York, Pennsylvania, Rhode
    Island, Utah, Vermont, West Virginia, and Wyoming.
        With AMA funds, producers may construct or improve water management
    structures or irrigation structures; plant trees for windbreaks or to
    improve water quality; and mitigate risk through production
    diversification or resource conservation practices, including soil
    erosion control, integrated pest management, or transition to organic
    farming. AMA may provide producers a first-time opportunity to address
    natural resource concerns on their lands. For instance, producers that
    cannot meet Environmental Quality Incentives Program (EQIP) irrigated-
    land criterion may receive AMA assistance to install irrigation.
        In FY 2010, $6 million was obligated into 429 contracts covering
    11,102 acres.
        The FY 2012 President's budget includes $2.5 million in mandatory
    funding for the Agricultural Management Assistance program.
    Chesapeake Bay Watershed Program
        The Chesapeake Bay Watershed Program (CBWP) helps agricultural
    producers improve water quality and quantity, and restore, enhance, and
    preserve soil, air, and related resources in the Chesapeake Bay
    Watershed through the implementation of conservation practices. These
    conservation practices reduce soil erosion and nutrient levels in
    ground and surface water; improve, restore, and enhance wildlife
    habitat; and help address air quality and related natural resource
    concerns. CBWP encompasses all tributaries, backwaters, and side
    channels, including their watersheds, draining into the Chesapeake Bay.
    This area includes portions of the states of Delaware, Maryland, New
    York, Pennsylvania, Virginia, and West Virginia.
        NRCS implements CBWP through the various natural resources
    conservation programs authorized by subtitle D, Title XII of the Food
    Security Act of 1985. In FY 2010, NRCS implemented CBWP through the
    Environmental Quality Incentives Program (EQIP) and the Wildlife
    Habitat Incentives Program (WHIP).
        In FY 2010, nearly 2,900 agricultural producers submitted
    applications to NRCS to participate in CBWP. NRCS approved more than
    950 contracts for more than $33.5 million of financial assistance to
    treat an estimated 156,700 acres of high priority agricultural land.
    The balance of CBWP funds authorized in FY 2010 supported technical
    assistance for the program.
        The FY 2012 President's budget includes $50 million in mandatory
    funding for financial and technical assistance for the Chesapeake Bay
    Watershed Program.
    Cooperative Conservation Partnership Initiative
        The Cooperative Conservation Partnership Initiative (CCPI) enables
    the use of certain conservation programs along with resources of
    eligible partners to provide financial and technical assistance to
    owners and operators of agricultural and nonindustrial private
    forestlands. CCPI is designed to encourage investment in natural
    resource conservation by non-Federal sources, foster coordination with
    other partners, and achieve high-priority natural resource objectives.
        Under CCPI, NRCS enters into multi-year agreements with eligible
    partner organizations. Partners eligible to enter into a CCPI agreement
    with NRCS include federally recognized Indian Tribes, state and local
    units of government, farmer cooperatives, producer associations,
    institutions of higher education, and other non-governmental
    organizations with a history of working cooperatively with producers to
    address conservation priorities related to agriculture and
    nonindustrial private forestland.
        In order to receive CCPI financial assistance, owners and operators
    of agricultural and nonindustrial private forestlands must participate
    within a project area defined in an approved CCPI agreement and enroll
    in the Environmental Quality Incentives Program (EQIP); Wildlife
    Habitat Incentive Program (WHIP), or the Conservation Stewardship
    Program (CSP).
        In FY 2010, about $42.3 million was obligated in 279 contracts with
    producers to implement conservation practices on nearly 1.2 million
    acres of agricultural lands. Through CCPI, NRCS approved 51 new partner
    project areas in FY 2010, and continued to support 110 projects
    approved during FY 2009.
        CCPI does not receive specific funding. By statute, funding is
    limited to no more than six percent of available program funds (EQIP,
    WHIP) or acres (CSP). NRCS manages resources and allocations between
    all three programs to assure obligations through CCPI will not exceed
    funding authority.
    Conservation Security Program
        The Conservation Security Program was a voluntary program that
    provided financial and technical assistance for the conservation,
    protection, and improvement of natural resources on tribal and private
    working lands. It provided payments for producers who practice good
    stewardship on their agricultural lands and provided incentives for
    those who wanted to do more. Under the 2008 Farm Bill, NRCS is not
    authorized to enter into new Conservation Security Program contracts
    but continues to make payments to producers with 5 to 10 year contracts
    from prior years.
        The FY 2012 President's budget includes $197 million in mandatory
    funding for the Conservation Security Program.
    Conservation Stewardship Program
        The Conservation Stewardship Program (CSP) encourages agricultural
    and forestry producers to adopt new conservation measures and maintain
    existing conservation activities on their operations. CSP provides
    opportunities to recognize excellent stewards and deliver valuable new
    conservation. The program helps producers identify natural resource
    problems in their operation and provides technical and financial
    assistance to go beyond existing conservation and deliver new
    environmental benefits in an environmentally beneficial and cost-
    effective manner. CSP has helped participants take additional steps in
    conservation, adopting new efficient technologies and generating
    additional environmental benefits. A Pennsylvania dairy farm was able
    to enhance their existing soil improvement efforts based on cover
    crops, diversions, waterways, and strip cropping to incorporate a
    simple yet effective cover crop mix enhancement to further their
    benchmark level of conservation. Their next step was to upgrade to a
    high residue vertical tillage implement that will increase surface
    residue and further reduce soil erosion. All of these improvements--
    increased plant diversity and improved erosion control were made
    possible through participation in CSP.
        CSP is a voluntary program available through a continuous sign-up
    process, with announced cut-off dates for ranking and funding
    applications. Applications are evaluated relative to other applications
    addressing similar priority resource concerns to facilitate a
    competitive ranking process.
        In FY 2010, CSP supported conservation by obligating more than $320
    million in financial assistance funding. These funds will be used to
    treat 25,164,328 acres leading to more productive working lands,
    improved water quality and energy efficiency. These are among the many
    benefits of addressing the natural resource concerns of agricultural
    and forestry producers.
        The FY 2012 President's budget includes $788 million in mandatory
    funding for financial and technical assistance for the Conservation
    Stewardship Program to enroll 12 million acres.
    Wetlands Reserve Program
        The Wetlands Reserve Program (WRP) provides technical and financial
    assistance to enable eligible landowners to restore, protect and
    enhance valuable wetland ecosystems, including associated habitats such
    as uplands, riparian areas, and forestlands. The goal of WRP is to
    achieve the greatest wetlands functions and values, along with optimum
    wildlife habitat, on every acre enrolled in the program. WRP addresses
    wetland, wildlife habitat, soil, water and related natural resource
    concerns on private lands in an environmentally beneficial and cost-
    effective manner. The program achieves solutions to local community
    issues related to farms, ranches, rural lands, and other areas by
    establishing easements and long-term agreements on eligible farmlands
    and by establishing 30 year contracts on Tribal lands. This unique
    program offers landowners an opportunity to establish, at minimal cost,
    long-term conservation and wildlife habitat enhancement practices and
    protection.
        During FY 2010, NRCS enrolled a total of 272,762 acres in WRP in
    1,414 projects. Of these, the majority were in easements (206,094 acres
    in 951 permanent easements and 61,935 acres in 30 year easements). Also
    during FY 2010, NRCS restored and enhanced 129,082 acres of wetlands
    that are part of WRP easements and contracts in prior years.
        The FY 2012 President's budget includes $785 million in mandatory
    funding for financial and technical assistance for the Wetlands Reserve
    Program and NRCS expects to enroll 271,158 acres.
    Farm and Ranch Lands Protection Program
        The Farm and Ranch Lands Protection Program (FRPP) protects the
    nation's highly productive agricultural lands by providing matching
    funds to keep productive farm and ranch lands in agricultural uses.
    Farm and ranch lands enrolled in FRPP are protected from threats of
    conversion to non-agricultural uses, and remain productive and
    sustainable sources of food, fiber, and feed for the nation. Keeping
    land in agricultural use reduces the amount of urban pollution
    (nitrogen, phosphorus and sedimentation) from land that would otherwise
    be converted to lawns and impervious surfaces.
        FRPP is helping to achieve landscape scale conservation objectives.
    In FY 2010, nearly 19,000 acres of historic agricultural land, critical
    wildlife habitat and iconic views in Sublette County, WY were protected
    through an FRPP agreement. The Sommers-Grindstone Conservation Project
    includes four separate conservation easements and public fishing access
    on nearly 5 miles of the Green River. The agreement is a partnership
    among landowners, the Wyoming Game and Fish Commission, the Wyoming
    Stock Growers Agricultural Land Trust, and an extensive list of public
    and private funders, including NRCS. The easement will allow the land
    to remain undeveloped--benefitting cattle and wildlife--and will ensure
    that the ranch passes to another generation of ranchers. The cattle
    ranches are comprised of hay meadows, riparian areas, a diversity of
    trees, sage-brush, high-grass prairie, and wetlands. The conservation
    easements are held by the Wyoming Stock Growers Agricultural Land
    Trust, and the ranches remain under the ownership and management of the
    landowners. Additionally, FRPP supports the President's America's Great
    Outdoors initiative by preserving the natural landscape features of
    non-urbanized areas and encouraging the continued agricultural uses of
    the lands.
        In FY 2010, over 170,000 acres were enrolled in FRPP in 35 states.
    The average size easement enrolled in FY 2010 was 423 acres.
        The FY 2012 President's budget includes $200 million in mandatory
    funding for financial and technical assistance for the Farm and Ranch
    Lands Protection Program.
    Grasslands Reserve Program
        The Grasslands Reserve Program (GRP) helps landowners and operators
    restore and protect rangeland, pastureland, and other grassland while
    maintaining the land's suitability for grazing. Participants
    voluntarily limit future development and cropping uses of the land
    while retaining the right to conduct common grazing practices and
    operations related to the production of forage and seeding.
        Limiting development and providing habitat needed by threatened,
    endangered, and other at-risk species, preserves agricultural heritage
    and green space, provides for recreational activities and ensures the
    nation's ability to produce its own food. For example, five GRP
    projects in Phillips County, MT have protected nearly 30,000 acres
    since 2009. These projects are preserving rural ranching operations
    while protecting critical wildlife habitat for sage-grouse and other
    grassland birds. More than 80 percent of the acres in the five ranches
    are prime habitat for sage-grouse.
        During FY 2010, the program obligated and committed $90.3 million
    of the financial assistance funding allocated to the states and
    enrolled 335,332 acres in the program. Of the funding provided,
    approximately 60 percent enrolled GRP easements and 40 percent enrolled
    rental contracts.
        The FY 2012 President's budget includes $67 million in mandatory
    funding for financial and technical assistance for the Grasslands
    Reserve Program to enroll an estimated 203,515 acres.
    Healthy Forest Reserve Program
        Healthy Forest Reserve Program (HFRP) assists landowners in
    restoring, enhancing, and protecting forest ecosystems to: (1) promote
    the recovery of threatened and endangered species; (2) improve
    biodiversity; and (3) enhance carbon sequestration.
        HFRP provides financial assistance for specific conservation
    actions completed by the landowner. As funds are made available, NRCS
    solicits project proposals State Conservationists have developed in
    cooperation with partnering organizations. States selected for funding
    provide public notice of the availability of funding within the
    selected area.
        During FY 2010, NRCS received 164 applications in the 13 states
    with approved projects. Fourteen landowners were enrolled, encompassing
    5,583 acres, with financial assistance obligations valued over $6
    million.
        The FY 2012 President's budget includes $9.75 million in mandatory
    funding for the Healthy Forest Reserve Program.
    Watershed Rehabilitation Program
        The purpose of the Watershed Rehabilitation Program is to extend
    the service life of dams and bring them into compliance with applicable
    safety and performance standards or to decommission the dams so that
    they do not pose a threat to life and property. NRCS may provide
    technical and financial assistance for the planning, design, and
    implementation of rehabilitation projects that may include upgrading or
    removing the dams.
        Eleven dam rehabilitations were completed in FY 2010, and there are
    23 dam rehabilitation projects currently under construction. There is
    one dam that is being decommissioned. Additionally, there were 650
    ongoing assessments of high hazard dams that provided communities with
    technical information about the condition of their dams and
    alternatives for rehabilitation for dams that do not meet Federal dam
    safety standards.
        The FY 2011 Final Continuing Resolution provided for $18 million in
    Watershed Rehabilitation funding. The FY 2012 President's budget does
    not include funding for the Watershed Rehabilitation Program,
    reflecting the many difficult choices that were made in the budget
    prioritizing process this year.
    Watershed and Flood Prevention Operations Program
        The Watershed and Flood Prevention Operations program authorizes
    the Secretary of Agriculture to provide technical and financial
    assistance to entities of state and local governments and Tribes
    (project sponsors) for planning and installing watershed projects. The
    Watershed Protection and Flood Prevention Program is available
    nationwide to protect and improve watersheds up to 250,000 acres in
    size. Currently there are approximately 300 active small watershed
    projects throughout the country. The Flood Control Act of 1944 is
    available only in areas authorized by Congress; and these areas cover
    about 38 million acres in 11 states.
        The FY 2011 Final Continuing Resolution did not include funding to
    carry out the Watershed and Flood Prevention Operations program for the
    remainder of the fiscal year. Further, the FY 2012 President's budget
    does not include funding for the Watershed and Flood Prevention
    Operations Program, including the Watershed Operations (P.L. 78-534)
    and Small Watersheds (P.L. 83-566). NRCS is in the process of
    conducting an orderly close-out of these programs, ensuring to the
    maximum extent possible that the highest priority projects are
    completed with the limited remaining funds.
    Resource Conservation and Development
        The Resource Conservation and Development (RC&D) Program objective
    is to encourage and improve the capability of state and local units of
    government and nonprofit organizations in rural areas to plan, develop,
    and implement programs for resource conservation and development. NRCS
    provided program administration and assistance to RC&D areas and their
    volunteer nonprofit RC&D Councils.
        The FY 2011 Final Continuing Resolution did not include funding to
    carry out the Resource Conservation and Development program for the
    remainder of the fiscal year. Further, the FY2012 President's budget
    does not include funding for the Resource Conservation and Development
    program. NRCS is in the process of conducting an orderly close-out of
    its RC&D program operations. The elimination of funding, however, does
    not eliminate RC&D Councils, which may continue to operate and compete
    for assistance from state, local, and other Federal agencies, private
    organizations, and foundations to carry out specific projects.
    Conclusion
        In conclusion, conservation programs play an essential role in the
    nation's food security. Conservation helps to make farms and ranches
    more resilient to risks--whether from pests, disease, floods, or
    drought--and helps producers adapt to the challenges. Our farmers and
    ranchers know better than anyone the value of clean water, clear air
    and healthy soil for agricultural production. They know that land
    stewardship secures the future, and they have made incredible strides
    to protect the land they rely on. Through programs such as the
    Environmental Quality Incentives Program and the Conservation
    Stewardship Program, NRCS builds partnerships with farmers, ranchers,
    and forestland owners to make their operations more sustainable. These
    conservation efforts improve soil fertility and reduce soil erosion,
    improve fertilizer use and water use efficiency, reduce energy use, and
    enhance overall productivity.
        These investments in private lands conservation are good for
    farmers, ranchers, and forestland owners-reduced input costs directly
    help the bottom line, while improved soil and water quality help
    maintain and even enhance long-term productivity while minimizing
    regulatory pressures. These same investments in conservation work for
    all Americans, by contributing to healthy landscapes, healthy
    communities, and to the food security of our nation and the world.
        Thank you for the opportunity to be here today to discuss the work
    of NRCS. I am happy to answer any questions from the Subcommittee
    Members.
                                                                    NRCS Cost-Share Programs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                           Agricultural                                              Cooperative                          Environmental
                            Management         Agricultural       Conservation       Conservation      Chesapeake Bay        Quality        Wildlife Habitat
    Program/Initiative  Assistance Program  Water Enhancement     Stewardship        Partnership     Watershed Program      Incentives     Incentive Program
                               (AMA)          Program (AWEP)     Program (CSP)    Initiative (CCPI)        (CBWP)         Program (EQIP)         (WHIP)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Purpose or Goal     Provides cost-      Provides           Encourages         CCPI is a          Provides           Provides           Provides
                         share assistance    financial and      producers to       conservation       financial and      financial and      financial and
                         to agricultural     technical          address resource   initiative that    technical          technical          technical
                         producers to        assistance to      concerns in a      enables the use    assistance to      assistance to      assistance to
                         address issues      agriculture        comprehensive      of certain         agricultural       agricultural       develop fish and
                         such as water       producers in       manner by          conservation       producers to       producers to       wildlife habitat
                         management, water   approved project   improving,         programs along     help plan and      help plan and      on private
                         quality, and        areas to           maintaining, and   with resources     implement          implement          agricultural
                         erosion control     implement water    managing           of eligible        conservation       conservation       land,
                         by incorporating    enhancement        existing           partners to        practices that     practices that     nonindustrial
                         conservation into   activities on ag   conservation       provide            improve water      address natural    private
                         their farming       land for the       activities; and    financial and      quality and        resource           forestland, and
                         operations.         purpose of         undertaking        technical          quantity and       concerns and for   Tribal lands.
                                             conserving         additional         assistance to      restores,          opportunities to   All private or
                                             surface and        conservation       owners and         enhances, and      improve soil,      Tribal
                                             ground water and   activities.        operators of       preserves soil,    water, plant,      agricultural
                                             improving water                       agricultural and   air and related    animal, air, and   land is
                                             quality.                              nonindustrial      resources.         related            eligible, unless
                                                                                   private                               resources on       it is currently
                                                                                   forestlands.                          Tribal land,       enrolled in CRP,
                                                                                                                         agricultural       WRP, HFRP, WBP,
                                                                                                                         land, and          EWPP, GRP or a
                                                                                                                         nonindustrial      similar program.
                                                                                                                         private
                                                                                                                         forestland. The
                                                                                                                         program does not
                                                                                                                         include land
                                                                                                                         enrolled in CRP,
                                                                                                                         WRP, or GRP.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Length of           1-10 years          1-10 years         5 years            Partners enter     1-10 years         1-10 years         1-10 years, or a
     agreement/                                                                    into multi-year                                          minimum of 15
     contract                                                                      agreements.                                              years for
                                                                                  Project start and                                         agreements for
                                                                                   end dates (not                                           essential plant
                                                                                   to exceed a                                              and animals.
                                                                                   period of 5
                                                                                   years)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acreage enrollment  11,102              270,667            25,164,327         1,193,967          156,704            13,034,363         1,054,095
     level in FY 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cost of the         FY 2011 $7.5 m      FY 2011 $74m       FY 2011 $600.8 m   Funded from EQIP,  FY 2011 $72 m      FY 2011 $1.24 b    FY 2011 $85 m
     program            FY 2012 $2.5 m per  FY 2012 $60 m      FY 2012 $787.6 m    WHIP, CBWP, and   FY 2012 $50 m      FY 2012 $1.41 b *  FY 2012 $73 m **
                         President's                            per President's    CSP
                         budget                                 budget
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    FY 2010 Backlog of  767                 1,724              6,322              Included in        1,355              39,028             3,788
     applications                                                                  individual
                                                                                   program totals
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Eligible land       AMA is available    All private or     All private or                        All private or     Private and        All private or
                         in 16 states        Tribal land in     Tribal                                Tribal land in     Tribal             Tribal
                         where               agricultural       agricultural                          agricultural       agricultural       agricultural
                         participation in    production is      land and                              production is      land, including    land is
                         the Federal Crop    eligible.          nonindustrial                         eligible.          cropland,          eligible, unless
                         Insurance Program   Includes           private                               Includes           grassland, and     it is currently
                         is historically     cropland,          forestland is                         cropland,          nonindustrial      enrolled in CRP,
                         low.                grassland, and     eligible unless                       grassland, and     private            WRP, HFRP, WBP,
                                             nonindustrial      it is enrolled                        nonindustrial      forestland but     EWPP, or GRP.
                                             private            in CRP, WRP, or                       private            does not include   Participants
                                             forestland.        GRP.                                  forestland, but    land enrolled in   must have
                                                                                                      does not include   CRP, WRP, or GRP   control of land
                                                                                                      land enrolled in                      for the duration
                                                                                                      CRP, WRP, or                          of the contract.
                                                                                                      GRP.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Does funding        Yes                 Yes                Yes                Yes                No-year            Yes                Yes
     expire October 1,
     2012
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Payments            Up to 75% or up to  Up to 75% or up    Annual payment                        Financial          Financial          Up to 75% for
                         90% for             to 90% for         based on level                        assistance to      assistance to      contracts with a
                         historically        historically       of conservation                       participants for   participants for   duration of 10
                         underserved         underserved        stewardship;                          the estimated      the estimated      years or less;
                         participants        participants       supplemental                          costs incurred     costs incurred     up to 90% for
                                                                payment for                           for performing     for performing     historically
                                                                participants                          or implementing    or implementing    underserved
                                                                that adopt a                          conservation       conservation       participants;
                                                                resource                              practices. Up to   practices. Up to   and up to 90%
                                                                conserving crop                       75% and up to      75% and up to      for contracts
                                                                rotation.                             90% for            90% for            having a
                                                                National average                      historically       historically       duration of at
                                                                cost not to                           underserved        underserved        least 15 years.
                                                                exceed $18/ac.                        participants.      participants.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Producer            Develop and follow  Develop and        Implement a        In order for a     Develop and        Develop and        Develop and
     Responsibilities    a plan that         follow a plan      conservation       producer to be     follow a plan      follow a plan      follow a plan
                         describes the       that describes     stewardship plan   considered for     that describes     that describes     for high quality
                         conservation and    the conservation   that encourages    financial          the conservation   the conservation   fish or wildlife
                         environmental       and                producers to       assistance         and                and                habitat.
                         objectives to be    environmental      address resource   through a CCPI     environmental      environmental      Contribute to
                         achieved.           objectives to be   concerns in a      partner            objectives to be   objectives to be   the installation
                         Contribute to       achieved.          comprehensive      agreement, the     achieved.          achieved.          costs and
                         installation        Contribute to      manner by          land associated    Contribute to      Contribute to      perform
                         costs.              installation       installing and     with a program     installation       installation       operation and
                                             costs.             adopting           application must   costs and          costs and          maintenance
                                                                additional         be located         perform            perform            during the
                                                                conservation       within an          operation and      operation and      lifetime of the
                                                                activities and     approved CCPI      maintenance        maintenance        installed
                                                                improving,         project area.      during the         during the         practices.
                                                                maintaining, and   Only producers     lifetime of the    lifetime of the
                                                                managing           who are eligible   installed          installed
                                                                existing           for EQIP, WHIP,    practices.         practices.
                                                                activities.        CBWP, or CSP may
                                                                                   receive
                                                                                   financial
                                                                                   assistance.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Appeals Process     Non-Title XII       Title XII          Title XII          Title XII          Title XII          Title XII          Title XII
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Participants are    Adjusted Gross      Adjusted Gross     Adjusted Gross     Adjusted Gross     Adjusted Gross     Adjusted Gross     Adjusted Gross
     subject to:         Income              Income             Income             Income             Income             Income             Income
                         limitations.        limitations.       limitations.       limitations.       limitations.       limitations.       limitations.
                        Reporting           Reporting          Reporting          Reporting          Reporting          Reporting          Reporting
                         requirements of     requirements of    requirements of    requirements of    requirements of    requirements of    requirements of
                         the Federal         the Federal        the Federal        the Federal        the Federal        the Federal        the Federal
                         Funding             Funding            Funding            Funding            Funding            Funding            Funding
                         Accountability      Accountability     Accountability     Accountability     Accountability     Accountability     Accountability
                         and Transparency    and Transparency   and Transparency   and Transparency   and Transparency   and Transparency   and Transparency
                         Act of 2006         Act of 2006        Act of 2006        Act of 2006        Act of 2006        Act of 2006        Act of 2006
                                            Highly erodible    Highly erodible    Highly erodible    Highly erodible    Highly erodible    Highly erodible
                                             land and wetland   land and wetland   land and wetland   land and wetland   land and wetland   land and wetland
                                             compliance.        compliance.        compliance.        compliance.        compliance.        compliance.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * EQIP funding authorized in the farm bill is $1.59 b for FY 2011 and $1.75 b for FY 2012.
    ** WHIP funding authorized in the farm bill for FY 2012 is $85 m.

                                                                     NRCS Easement Programs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Emergency Watershed
     Program Characteristic   Wetlands Reserve Program    Program--Flood Plain        Grassland Reserve       Farm and Ranch Lands    Healthy Forest Reserve
                                                                Easement                   Program             Protection Program         Program (HFRP)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Purpose or Goal           Restore, protect, or      Restore, protect,         Restore and protect       Assists with the         Restore, protect and
                               enhance wetlands on       maintain and enhance      rangeland, pastureland    purchase of              enhance forest
                               eligible lands. The       the functions of the      and other grassland       conservation easements   ecosystems to promote
                               goal is to achieve the    floodplain; conserve      while maintaining the     to protect               the recovery of T&E
                               greatest wetlands         natural values            land's suitability for    agricultural             species; improve
                               functions and values,     including fish and        grazing. Program          productivity and         biodiversity; and
                               along with optimum        wildlife habitat, water   emphasis is on            related conservation     enhance carbon
                               wildlife habitat on       quality, flood water      supporting grazing        values of the land.      sequestration.
                               every acre enrolled in    retention, ground water   operations, plant and
                               the program. The          recharge and open         animal biodiversity,
                               program accepts           space; reduce long-term   and grassland and land
                               eligible wetlands and     Federal disaster          containing shrubs or
                               associated habitats       assistance; and           forbs under the
                               such as uplands,          safeguard lives and       greatest threat of
                               riparian areas, and       property from floods,     conversion.
                               forestlands.              drought, and the
                                                         products of erosion.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Length of easement/       Easements: Permanent and  Permanent easements.      Easements: Permanent and  Permanent, unless state  Easements: Permanent,
     contract                  30 years and maximum                                maximum duration under    law prohibits a          30 year, and maximum
                               allowed under state                                 state Law.                permanent easement.      allowed under state
                               Law.                                               Contracts: 10 year, 15                              law; 30 year contracts
                              Restoration cost-share                               year, and 20 year                                  with Tribes; 10 year
                               agreements: generally                               rental contracts.                                  cost-share agreements.
                               10 years; 30 year
                               contracts with Tribes.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acreage enrollment level  2,347,128                 187,876                   1,206,953                 809,098                  691,860
     Numbers through FY10
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cost of the program FY09  $1,065,850                EWP-FPE: $62,567          $147,766                  $268,662                 $10,143
     and FY10 obligations     FY11 projection:          Recovery: $156,480
     (in thousands FA and      $611,312
     TA)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Backlog of applications   2,715 applications        2,194 applications        401 applications          184 applications         150 applications
     as of June 10, 2011      251,915 acres             215,920 acres *           209,058 acres             92,365 acres             24,565 acres
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Land valuation            Lowest of Geographic      Geographic Area Rate      Lowest of Geographic      Appraisals--Fair market  Appraisals--Before and
                               Area Rate Cap,            Cap, appraisals or        Area Rate Cap,            value less               After appraisal
                               appraisals (seldom        market analysis.          appraisals conducted by   agricultural value.      method.
                               used) conducted by                                  certified, general real
                               certified, general real                             property appraisers or
                               property appraisers, or                             landowner offer. Value
                               landowner offer.                                    based on fair market
                                                                                   value less grazing
                                                                                   value.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Landowner eligibility     Must be a landowner to    Must be a landowner to    Must be a landowner for   Program is implemented   Must be the landowner
                               participate in the        participate in the        easement participation    through eligible         of eligible land for
                               program. Landowners       program.                  or be a landowner or      entities. Eligible       which enrollment is
                               must comply with Highly  Landowner does not need    have control of           entity requirements      sought.
                               Erodible Land and         to comply with Highly     eligible land for         found in 7 CFR part     Landowner does not need
                               Wetland Conservation      Erodible Land and         rental contract           1491.                    to comply with Highly
                               provisions of FSA of      Wetland Conservation      participation.           Must be a landowner to    Erodible Land and
                               1985.                     provisions of FSA of     Must comply with Highly    sell an easement to an   Wetland Conservation
                              Adjusted gross income      1985.                     Erodible Land and         eligible entity.         provisions of FSA of
                               provisions apply.        Registration and           Wetland Conservation      Participating            1985.
                              Registration and           reporting requirements    provisions of FSA of      landowners must comply  Registration and
                               reporting requirements    of the Federal Funding    1985.                     with Highly Erodible     reporting requirements
                               of the Federal Funding    Accountability and       Adjusted gross income      Land and Wetland         of the Federal Funding
                               Accountability and        Transparency Act of       provisions apply.         Conservation             Accountability and
                               Transparency Act of       2006.                    Registration and           provisions of FSA of     Transparency Act of
                               2006.                                               reporting requirements    1985                     2006.
                              7 year ownership                                     of the Federal Funding   Adjusted gross income
                               requirement.                                        Accountability and        provisions apply.
                                                                                   Transparency Act of      Registration and
                                                                                   2006.                     reporting requirements
                                                                                  GRP has an option where    of the Federal Funding
                                                                                   easements can be          Accountability and
                                                                                   acquired through          Transparency Act of
                                                                                   eligible entities         2006.
                                                                                   similar to FRPP.
                                                                                   Criteria for
                                                                                   determining whether an
                                                                                   entity is ``eligible''
                                                                                   can be found in 7 CFR
                                                                                   part 1415.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Land Eligibility          Marginal, frequently      Any floodplain lands      Grassland, land that      Must be privately owned  Eligible land includes
                               flooded agriculture       damaged by flooding at    contains forbs or         land on a farm or        private land that
                               lands and associated      least once within the     shrubland where grazing   ranch and contain at     contributes to the
                               uplands.                  previous calendar year,   is the predominant use;   least 50 percent         restoration and
                              Note, the term             or that have a history    or land located in an     prime, unique,           enhancement of habitat
                               agriculture lands do      of repeated flooding      area that has been        statewide, or locally    or otherwise increase
                               include wooded lands.     (i.e., flooded at least   historically grassland,   important farmland,      the likelihood of
                                                         twice within the          forbs, or shrubland,      unless otherwise         recovery for a
                                                         previous 10 years).       and the land could        determined by NRCS;      selected species under
                                                         While NRCS normally       provide habitat for       contain historical or    section 4 of ESA,
                                                         purchases floodplain      animal or plant           archaeological           candidate species,
                                                         easements on              populations of            resources; furthers a    state listed species
                                                         agricultural lands, on    significant ecological;   state or local policy    or one identified by
                                                         a case-by-case basis      contains historical or    consistent with the      the Chief for special
                                                         NRCS may purchase         archeological             purposes of the          consideration.
                                                         floodplain easement in    resources, or would       program; and is
                                                         rural residential areas   address issues raised     subject to a pending
                                                         in lieu of traditional    by state, regional, and   offer by an eligible
                                                         EWP recovery work if a    national conservation     entity;
                                                         sponsor is acquiring      priorities.              (2) Must be cropland,
                                                         the underlying land                                 rangeland, grassland,
                                                         rights and the cost of                              pastureland, or
                                                         the recovery work would                             forestland that
                                                         exceed the easement                                 contributes to the
                                                         acquisition costs. In                               economic viability of
                                                         such situations, any                                an agricultural
                                                         structures are then                                 operation or serves as
                                                         demolished or removed                               a buffer to protect an
                                                         from the easement area.                             agricultural operation
                                                                                                             from development; Must
                                                                                                             not include forestland
                                                                                                             on greater than \2/3\
                                                                                                             of the easement area.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Payments                  For easement: provides    Provides acquisition      For easement: provides    Provides cost-share      For easement: provides
                               acquisition costs;        costs; administrative     acquisition costs;        assistance to eligible   acquisition costs;
                               administrative costs      costs associated with     administrative costs      entities to acquire an   administrative costs
                               associated with           acquiring an easement,    associated with           easement.                associated with
                               acquiring an easement,    and restoration costs.    acquiring an easement,   Single payment or up to   acquiring an easement,
                               and restoration costs.   Easement payments are      and restoration costs.    five installment         and restoration costs.
                              For 30 year contracts:     made as a single         Easement payments are      payments; first         For 30 year contracts:
                               provides contract         payment                   generally a single        payment at closing       provides contract
                               payment.                                            payment however;          followed by four         payment.
                              Easement payments are                                landowners may request    annual payments.        Easement and contract
                               generally a single                                  payment for up to 10                               payments may be made
                               payment but may be made                             years in equal or                                  in a single payment or
                               in annual payments for                              unequal amounts.                                   for no more than ten
                               no more than 30 years.                             For rental contracts:                               annual payments of
                              For restoration cost-                                provides annual rental                             equal or unequal size.
                               share agreement:                                    payment. If restoration                           For restoration cost-
                               provides restoration                                efforts are necessary,                             share agreement:
                               cost-share assistance.                              participant can receive                            provides restoration
                                                                                   cost-share assistance                              cost-share assistance.
                                                                                   through a restoration
                                                                                   agreement.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Special provisions for    30 year contract          None                      None                      None                     30 year contracts
     Indian Tribes             enrollment option
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Does funding expire       Expires--annual funds     No-year funds except for  Expires--annual funds     Expires--annual funds    No-year funds
     October 1, 2012                                     ARRA funds which are 2
                                                         year funds
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Appeals process           Title XII                 Non-Title XII             Title XII                 Title XII                Non-Title XII
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * Data is still undergoing quality assurance review.

                                  Attachment 2

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. I thank the gentleman. Thank you both for
    your testimony.
        The chair would like to remind Members that they will be
    recognized for questioning in order of seniority for Members
    who were here at the start of the hearing. After that, Members
    will be recognized in order of arrival. And I appreciate
    Members understanding. I am going to reserve my time for
    questioning.
        I now recognize the Chairman of the Agriculture Committee,
    Mr. Lucas, for 5 minutes.
        Mr. Lucas. Thank you, Mr. Chairman.
        And I do appreciate the presentation you gentlemen have
    given. The challenge this Committee faces as we sit here in
    preparation for a farm bill next year or perhaps if the grand
    discussions between the President and the leadership of both
    the House and the Senate come about, a rather quicker process
    where the budget realities are going to come to bite very
    challengingly. And clearly, it is not just going to be the
    Commodity Title. It will be Conservation. It will be all the
    programs. So I ask my questions in light of the Committee's
    preparation to make some tough, tough decisions.
        Administrator, how much are we going to spend on CRP this
    year, round numbers?
        Mr. Nelson. Congressman, it is $1.7 billion annual rental
    payments.
        Mr. Lucas. Chief, how much are we going to spend on CSP
    this year?
        Mr. White. Around $600 million.
        Mr. Lucas. Six hundred million dollars. How much on WRP?
        Mr. White. About $611 million.
        Mr. Lucas. Six hundred eleven million dollars dollars?
        Mr. White. Yes.
        Mr. Lucas. Okay. And I would take note the Chief is exactly
    right. The Dam Rehabilitation Program is one of those designed
    to be administered strictly on a priority basis established by
    the Department after review of all the structures, no earmarks,
    no silly games from Congress, a very straightforward way to do
    things. And it has been implemented in that way.
        Chief, could you explain to the Committee for just a moment
    about EQIP and the difference between the approach in EQIP and
    CSP?
        Mr. White. Mr. Lucas, I kind of think of them in two
    different ways. EQIP I think is your bricks and mortar. That is
    your pipeline. That is your animal facility. That is your
    fence. That is your filter strip. That is your terrace. It is
    things you put on the ground. The Conservation Stewardship
    Program is more of management-related. It is going to be taking
    nutrient management and going to precision nutrient management.
    It is going to be taking prescribed grazing and advancing that.
    So it is more of the management. That is the way I kind of look
    at them, sir.
        Mr. Lucas. So from the perspective of the countryside on
    CRP, if you want to participate in the program, you have to
    participate within the guidelines. If you are accepted, you are
    signed up for 10 years. In CSP it is not so much just putting
    your property into the program. You have to adjust your
    practices to fit the goals of CSP?
        Mr. White. Well, there are priority resource concerns that
    vary around the country. Each state kind of, with their state
    technical committee and local workgroups, will design those.
    CSP is a 5 year contract. It is renewable for another 5 years.
    And to get in you have to be meeting a resource concern like
    soil erosion, water quality, and you have to agree to do
    another one. There is a lot of additionality. In fact, in the
    20,000 contracts we had at the end of last year, Mr. Lucas, we
    had about 78,000 to 79,000 new practices in there that the
    producers self-select. So there are things they want to do.
        Mr. Lucas. And I would note to my friends on the
    Subcommittee that as we work through the next farm bill, we
    also have obligations under WTO, CRP being green-box compliant.
    CSP, because it requires certain practices, it falls in a
    different category. Just for a moment back to the cost of the
    various programs, at a $1.7 for CRP, $600 million approximately
    for CSP, and you said $550 million for the Wetlands Reserve
    Program?
        Mr. White. Yes, let me double-check that.
        Mr. Lucas. Please. And the simple reason I bring that, in
    times of tighter budgets, that looks like a pretty interesting
    dollar figure per acre on WRP compared to the other two.
        Mr. White. It has been averaging about $2,000 an acre.
        Mr. Lucas. Averaging $2,000 an acre?
        Mr. White. But that is long-term protection as well.
        Mr. Lucas. And we signed up for how many years on the WRP?
    The length of contract on the WRP?
        Mr. White. WRP is permanent easements, which is the bulk of
    them. It could be 30 year. There is also a provision that was
    put in in 2008 for 30 year tribal contract. And then there is
    one that is not used very much for restoration only, 10 year
    contracts.
        Mr. Lucas. Six hundred thirty million dollars on 10 million
    acres.
        Mr. White. Sorry.
        Mr. Lucas. I will send you some more questions later about
    that.
        Mr. White. Thank you, sir.
        Mr. Lucas. And I see my time is about to expire. I would
    just note to the Committee that the challenges we face--the
    conservation programs are the most popular. They do the most
    good. They are the legacy programs, as our friends here have
    stated. But the budget situation and the grand negotiations
    going on are going to be so tough. We are going to have to make
    some extremely tough decisions in all areas of the farm bill in
    a lot of things we have done historically such as helping our
    California friends meet their emissions standards brings
    questions to light: Is it appropriate? How much should the
    Federal Government spend to meet state standards in comparison
    to what it does in the rest of the country?
        With that I yield back the time I don't have. Thank you,
    Mr. Chairman.
        The Chairman. I thank the Chairman. I now recognize the
    Ranking Member of the full Agriculture Committee, Congressman
    Peterson, for 5 minutes.
        Mr. Peterson. Thank you, Mr. Chairman.
        First of all, Mr. White, I was having a discussion back
    home this last week about CSP, and according to them, the way
    this is rolled out that there is not flexibility for the states
    to set their own priorities, that according to them, they are
    having to follow national priorities, which do not work in
    northwest Minnesota. And I heard you say that the state
    technical committees were making these decisions and so forth,
    but these are from local folks that are on the ground saying
    that the way this has been put together does not work for them.
    There are 25 practices that you can choose from to get
    qualified and only three of the 25 actually work in that part
    of the country. And so they were asking for more flexibility
    for the states. So, if you would check into it, I don't know
    what is going on exactly. Maybe the state made this decision
    and they didn't recognize what was going on. I don't know.
        Mr. White. There are about 80 or 90 enhancements, there are
    some national priorities, but we do try to fit it so I will
    have to get back to you.
        Mr. Peterson. Well, for whatever reason, they claim there
    is only like three things on that list that actually work in
    that part of the world. So whatever.
        And Chairman Lucas, you have to, when you go to sign up,
    you have this list of all of these practices that you can pick
    and some of them are worth more than others, but, supposedly,
    there is flexibility there to make it work on your farm.
        And I would also say on the CRP, I hope that everybody
    recognizes what is going on. There has been talk out there
    about CRP. But as we go through these signups, we are sorting
    this out. We had 4.1 million acres come out this year, 4.4,
    million acres something like that. Pardon?
        Mr. Nelson. Congressman, that is 4.4 million acres of
    contracts expiring this year.
        Mr. Peterson. Right. And they only signed back up 2.9
    million acres.
        Mr. Nelson. Well, 2.8 million acres, yes.
        Mr. Peterson. Oh, 2.8 million acres. And I think the number
    was like you had to have 279 EBI or something to get qualified,
    so this is significantly higher than what it has been, and so
    there is a lot of this land out there that is coming back into
    production just as we go through this process. Next year, there
    are going to be 6 million acres coming out. We will probably
    see a similar kind of situation where only \1/2\ of that is
    going to get back in.
        I think we have a process set up here that is sorting out
    the land that should be farmed, the land that shouldn't be
    farmed, and I hope we don't go off on some tangent where we are
    doing some meat-ax thing where we end up putting a bunch of
    land back in production that is going to cost us crop insurance
    and disasters and other things. So that is just an editorial
    comment.
        The other thing I am concerned about is with these budget
    deals that were made in the CR and so forth, there has been
    talk out there that I read in news articles that you are not
    going to be able to honor contracts. I just want to make sure
    that you have enough money to--any contract that has been
    signed that there is sufficient money to actually pay that
    contract. Is that the case?
        Mr. White. Mr. Peterson, that is the case. We will have
    enough money to fund all of the contracts.
        Mr. Peterson. But you probably have had to cut back on how
    many additional contracts you couldn't offer because of this?
        Mr. White. Not at this point.
        Mr. Peterson. Well, I thought they cut back on your
    appropriation. Didn't they?
        Mr. White. The biggest cutback we had was in the
    discretionary amounts like RC&D, the Watershed Program, there
    were reductions in mandatory but they were just kind of the
    normal CHIMPs. They were from the authorized levels. No program
    actually got less. There was maybe some cut in WRP but a cut
    from the authorized level, we still saw an increase in the
    actual, at least for EQIP.
        Mr. Peterson. So you weren't spending your authorized
    level? I mean just because it has been CHIMPed every year.
        Mr. White. For programs like EQIP, it has generally been
    CHIMPed.
        Mr. Peterson. So because they have been CHIMPing it every
    year, you guys just don't spend what was authorized?
        Mr. White. No, sir. We can only spend what is appropriated.
    And this year it will be about $1.4 billion. And I think your
    authorized level this year is $1.588.
        Mr. Peterson. Well, I thought they CHIMPed some other
    programs, too?
        Mr. White. Yes, but I don't think that anything that is
    going to result in a reduction in contracts to people.
        Mr. Peterson. So that didn't change anything out there in
    terms of----
        Mr. White. No. The biggest cuts we are dealing with are for
    discretionary with the RC&D Program, the Watershed, trying to
    close those two. They affect about 400 people, 500 people. We
    are offering a buyout, early-out offers. No one has lost their
    job, and for this year at least I think we are okay. I guess
    the biggest thing is WRP was capped at 202,000 acres. Last year
    we enrolled like 270,000 acres, but that was an unbelievable
    year. That was the biggest enrollment year in the history of
    the program.
        Mr. Peterson. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. I recognize myself for
    5 minutes for questions.
        Both of you mentioned the positive impacts conservation
    programs are having on restoration efforts in the Chesapeake
    Bay. Does NRCS have specific data on how much nitrogen,
    phosphorus, and sediment has been reduced in recent years, and
    are there projections for future reductions?
        Mr. White. Yes, sir. Yes, sir, we do. We embarked on this
    project called the Conservation Effects Assessment Project,
    CEAP. We have done one in the Chesapeake Bay and it looked at
    2003, 2004, 2005. So that is kind of the baseline. And I can
    tell you that voluntary incentive-based conservation is having
    huge reductions in nitrogen, phosphorus and sediment going into
    the Bay. If you look at that 2005-06 baseline and you look at
    just the conservation we put on since that time, we have had
    like a 15 percent further reduction in phosphorus, like a 17
    percent reduction in nitrogen, and I cannot remember the figure
    for sediment, but we can get that to you. That has just
    occurred since 2006. So farmers and ranchers really are making
    huge strides in the Chesapeake Bay.
        The Chairman. Very good. I hear a lot from aspiring young
    farmers. Some of these folks, frankly, didn't grow up in a farm
    family, which is very impressive, somebody that wants to go
    into farming. And one of the concerns that I often hear--and I
    have heard this in different parts of the district is that
    there are often times USDA, the programs we are talking about
    today offers a higher reimbursement or rental rates per acre to
    put something into a conservation program than what those same
    acres would fetch in an open market. And frankly, I had one
    farmer that actually had to rent fields a long distance from
    his home when there was adjoining property that his business
    plan he put together, he couldn't compete with the government
    was the bottom line. Is this something that you have heard
    before? Is this something that we look at, that we monitor the
    impact of?
        Mr. Nelson. Mr. Chairman, I will learn how to use that talk
    button yet, sir.
        Mr. Chairman, with respect to the CRP program, the 2008
    Farm Bill, as you know, now requires that the National
    Agricultural Statistics Service do a survey of cash rental
    rates in counties around the country, and that is used as a
    basis for setting the CRP rental rates. And so we now have a
    more solid statistical basis for defending those rates than we
    might have had in the past.
        And just to give you some anecdotal evidence putting CRP
    rental rates in perspective, I come from Chouteau County,
    Montana, dry land wheat farmer out there, hometown is Fort
    Benton. And I was on the farm back in the 1980s when the CRP
    program got started. And the rental rates at that time were
    about $45 an acre. That is the biggest wheat-producing county
    in the state and we still enrolled about 240,000 acres in CRP.
    So $45 back in 1986. In the latest Signup 41 in Chouteau
    County, the average rental rate in county was about $39. And if
    you take into account the consumer price index that a dollar is
    worth about half now what it was back in 1986, that means that
    the real cash rental rates for my friends and neighbors there
    in Chouteau County who participate in CRP, the real CRP rental
    rate is about half now what it was. And I think part of that,
    again, is that because we have a statistic service doing that
    survey out there that we are pegging the CRP rental rates
    closer to the market than perhaps they were in the past.
        The Chairman. Very good. Thank you. My time has expired. I
    am thinking we will probably get an opportunity for a second
    round.
        So I now recognize the gentleman from Pennsylvania, Mr.
    Holden, for 5 minutes.
        Mr. Holden. Thank you, Mr. Chairman.
        Chief White, you mentioned in your opening statement the
    Chesapeake Bay Program, and you know Mr. Goodlatte and I worked
    hard on the last farm bill with the other Members of this
    Subcommittee and the full Committee to get that program into
    the farm bill. Has the 2011 CR, which cut mandatory spending by
    $673 million hindered the ability to implement that program as
    we envisioned it, due to the regulatory burdens that they were
    facing. We thought it was so important to give them a little
    extra investment to deal with what was coming down from EPA.
    Have you been able to do what we asked you to do despite the
    cuts in 2011?
        Mr. White. Yes, sir. As part of that, the Chesapeake Bay
    was fully funded. It was not CHIMPed or reduced.
        Mr. Holden. We have no idea where the 2012 Appropriation
    Bill is going to end up but we know what the House did. If it
    ends up being around $1 billion in reductions in conservation,
    do you think that will affect the Bay program?
        Mr. White. Yes. Basically, what you will have, Mr. Holden,
    is fewer contracts, less conservation on the land, probably
    fewer people to do that.
        Mr. Holden. And finally, Chief White, you mentioned
    farmland preservation, and how important it is to the
    Commonwealth of Pennsylvania. In the 2008 Farm Bill, as you
    mentioned, we had to make some changes because we though there
    were some administrative problems in Pennsylvania specifically.
    And I was hearing everything was going fine, but I have one
    county in my district, Lebanon County, who was complaining
    about the ability to enter into contracts, that there seems to
    still be some red tape. So this really isn't a question. If you
    could have you or your staff look into it, is there still a
    problem with getting someone in your agency to approve
    contracts or what the exact problem is?
        Mr. White. It is a problem, Mr. Holden. I take full
    responsibility for it. We have not been as fast as we should
    have been in getting that certified entity process out there.
    We have advanced how we are looking at with Pennsylvania in
    particular so we hopefully have taken care of that problem. But
    the root cause lies with me and hopefully in the next 30 days
    we will get those rules out there for certified entities, which
    will greatly streamline the process across the country.
        Mr. Holden. And you don't need anything further from us?
        Mr. White. No, sir.
        Mr. Holden. All right. Thank you.
        Mr. White. I have to assume blame for that one.
        Mr. Holden. Thanks, Mr. Chairman.
        The Chairman. I thank the gentleman. I recognize the
    gentleman from Florida, Mr. Southerland, for 5 minutes.
        Mr. Southerland. Thank you, Mr. Chairman.
        Mr. White, I find your testimony refreshing, very honest.
    You are passionate about what you do and thank you. And you as
    well, Mr. Nelson. I know that regarding the issues that I am
    concerned with, it just seems that, Mr. White, you seem to be
    speaking about quite a bit of the things that interest me.
        But I wanted to ask you regarding Longleaf Pine
    Restoration. I am from North Florida----
        Mr. White. Yes.
        Mr. Southerland.--and obviously Longleaf Pine restoration
    is something that is a great concern to a lot of our landowners
    there, as well as our National Forest there. I understand that
    the Florida NRCS and the Wildlife Habitat Incentive Program has
    been used to assist landowners, increasing planting of Longleaf
    Pine. Can you just elaborate to me? I am still learning about
    the program. Please elaborate a little bit on USDA efforts and
    the services you are providing for these private landowners.
        Mr. White. Thank you, sir. That is a great one. I love the
    longleaf pine. When this nation was settled, we had 90 million
    acres of longleaf pine. It is a gorgeous plant. It is more like
    a savannah grass underneath, a tree that grew up under frequent
    fire regimes. And now we are down to like 3 million acres. And
    your area from Mr. Goodlatte's area to yours and swinging
    across the Texas is where the longleaf were.
        We are trying to work with the Forest Service, other
    agencies outside of USDA, private landowners to try to restore
    that particular forest. And we are using mostly the Wildlife
    Habitat Incentive Program. And when I talked a little bit about
    WHIP, I said the unique thing, one of the really cool things
    about it is we have a directive there to use the funding for
    state and national initiatives. This longleaf pine really came
    from the bottom up. It wasn't from me down. It came from those
    various states saying we need to do something about this. And
    we are very pleased to cost-share with producers to plant
    trees.
        Another big thing is getting rid of the invasives like an
    Alabama cogongrass and there is just a gob of invasive species
    out there. Well, you know that being from Florida. You are like
    ground zero for that. So it is helping with invasives and
    helping to reestablish this tree. This tree built Williamsburg.
    It kept the wooden ships afloat, built Savannah, straight,
    long-grain, rot-resistant, a fabulous--it provides habitat for
    I don't know how many hundreds of different creatures. It is
    amazing.
        Mr. Southerland. Well, thank you. I am going to move on to
    Everglades restoration, a little bit farther down from my neck
    of the woods, but still the Everglades is an important part of
    our state. And I know that WRP is a popular program in Florida,
    but tell me just a little bit because it is farther down, so
    you understand more about that than I do even thought I still
    have constituents in my neck of the woods who still reach out
    to my office.
        Share with me, though, and the Committee how the WRP
    Wetland Restoration Program, it works down with the--and I know
    that there are private landowners in and around the Everglades
    working with you. Can you shed a little light on that? And,
    again, I am asking because I don't know as much about the
    program as I perhaps need to.
        Mr. White. Right. I have to be careful what I say here. The
    Everglades is a very, very ecologically important area and a
    lot of different entities have done a lot of talk about how
    important it is to restore it and we are doing something about.
    And this is just private lands, working with ranchers, last
    year, Mr. Southerland, we enrolled the largest contiguous block
    of land ever enrolled at the WRP and it was in the northern
    Everglades in a place called Fisheating Creek. It is going to
    have a huge, huge positive impact on Lake Okeechobee and the
    Everglades water system. The ranchers are going to work to
    restore the natural hydrology. We are going to work with them
    to control the invasive species. We are going to work with them
    under compatible use to make sure there is still some
    production. We need that land grazed periodically. There were I
    can't remember how many landowners in this 26,000. It was just
    very few. They were large landholders----
        Mr. Southerland. Right.
        Mr. White.--but a few years ago, this land probably would
    have been in subdivisions. And now it is going to be restored.
    The landowners keep the land. They control access to it. I
    think it is going to be a big, big win for the Everglades. And
    stay tuned for Part two.
        Mr. Southerland. Thank you very much.
        Mr. White. Yes, sir.
        Mr. Southerland. Mr. Chairman, I yield back.
        The Chairman. I thank the gentleman. I now recognize Ms.
    Pingree for 5 minutes.
        Ms. Pingree. Thank you, Mr. Chairman.
        Well, thank you very much for your interesting testimony
    this morning. As one of the new Members of the Committee, I
    feel like much of this is a tutorial for me. And I look forward
    to continuing to learn more about these programs.
        Perhaps my only editorial comment really is sort of meant
    for us generally. I understand the chair of the Committee when
    he talks about the need to make cuts. The deficit issues that
    we are facing in this country and the importance of tightening
    our budget everywhere that we can. But considering that my
    other committee happens to be the House Armed Services
    Committee where we rarely think about making cuts and spend far
    more money on what is an essential services, of course,
    defense, but we also have to think about the security around
    our food systems in this country. And as you mentioned earlier
    this morning, our population is only increasing. The needs that
    we are going to have for food produced in this country I think
    are only going to grow. And much of what you do in the programs
    that you administer are very critical to that.
        So I thank you for your work, and I certainly will be doing
    all I can as a brand new, highly junior Member of this
    Committee to support many of these programs. And I do hear
    about them in my home state. One question I want to bring
    forward to you is really how one of the programs is
    administered. And I apologize. I am reading off my phone so my
    lettering is a little strong.
        But in the 2008 Farm Bill, Congress recognized the
    importance of making conservation programs accessible to all
    farmers, including organic producers and conventional producers
    interested in transitioning to organic. I represent the State
    of Maine. Organic farming has been growing there for a long
    time but increasingly is of great interest on the part of the
    producers and consumers and is one of the areas where farmers
    have been able to increase their profits, which is a wonderful
    thing for all of us. We have managed to increase the amount of
    farmland in our state, and the average age of the farmer is
    going down. So that also is bucking a national trend and I
    think showing that we can do more to produce our food locally.
        But I want to talk about the EQIP program. It has a
    specific provision to ensure that the program can be accessed
    by organic and transitioning farmers in recognition of both the
    conservation opportunities here, and I think also because of
    the historic lack of participation of organic producers in the
    conservation programs. So I am very supportive of the
    implementation of this provision through the Organic
    Initiative. As I said, it has been popular in Maine with over
    $700,000 provided in the fiscal assistance to Maine producers
    in Fiscal Year 2010, which in our small state is actually
    great.
        But while it has been popular, there have been some
    barriers to implementation. And I hear about this not just in
    Maine but with other producers I talk to about it to around the
    country. One of these barriers includes the unfamiliarity with
    NRCS with organic systems. Can you talk to me a little bit
    about the training and educational efforts to overcome this and
    other barriers? And to be a little more specific, I have heard
    that sometimes when a transitioning farmer visits a field
    office, they will find that the person that they are dealing
    with isn't well trained in making that transition, doesn't
    necessarily know how to help them make that, that the field
    guide recommends some pesticides that wouldn't be qualified
    under organic certification. And again, where I see both the
    environmental but also great economic benefits to farmers who
    have been able to make this transition, get a higher price for
    their products, and also do good conservation work alongside,
    it seems like an important initiative. So can you fill me in on
    that?
        Mr. White. Ms. Pingree, you are absolutely right. I
    encountered this when I was in Montana. We are a traditional ag
    agency and this has moved us outside of our comfort zone, and
    it is going to take us a while to become more familiar with the
    organic. I mean, we are heck on wheels when it comes to corn,
    cotton, wheat, soybeans, cows, sheep, stuff like that, but then
    all of a sudden you are talking organic, you go, ``Oh my
    gosh.'' So we are doing training for our people. We are making
    some changes at headquarters that is going to streamline it and
    make it more accessible to organic producers.
        What Ms. Pingree is talking about is a section of EQIP that
    has organic the Secretary shall provide us. It is not a
    ``may,'' it is not a ``maybe,'' it is ``shall,'' and we are
    trying to have the training and to equip ourselves to do a
    better job.
        I had mentioned the Conservation Innovation Grants. We did
    one a couple years ago to a group of sustainable ag organic
    producers who are to look at all our standards and to make sure
    that we have adequately incorporated them. We have put our
    standards out there to try and take care of those kinds of
    issues. So we are trying to make some steps to that.
        As far as funding goes, I set a $50 million limit for that.
    For $50 million, we are using about half of it. The rest is
    rolled back into other stuff. But you also need to think you
    are an AMA state, ag marketing, which has some organic in it
    and also the Conservation Stewardship Program has some organic
    sections in it. In fact, if you look at that 35 million acres--
    twice the size of the State of Maine--enrolled in a
    conservation program. Pretty cool.
        Ms. Pingree. That is great. Well, thank you for your
    comments.
        I will yield back the time I don't have.
        The Chairman. I thank the gentlelady.
        And I now recognize the gentleman from Wisconsin, Mr.
    Ribble, for 5 minutes.
        Mr. Ribble. Good morning. I appreciate your testimony this
    morning. And I have a question, actually, for each of you, but
    I will start with Mr. White.
        I represent Wisconsin's 8th Congressional District, which
    is one of the largest dairy-producing districts in the United
    States. And Wisconsin dairy farmers rely pretty heavily on EQIP
    and use it pretty regularly. I am wondering if you can just
    talk about the current funding allocation for livestock. Do you
    feel that funding is appropriate and necessary? And then as a
    follow up, are there structural changes that need to be made to
    the program to ensure that a wide range of producers can
    benefit from the program?
        Mr. White. Mr. Ribble, Wisconsin?
        Mr. Ribble. Yes.
        Mr. White. I got to tell you, when you go to Wisconsin, it
    does your heart good if you are a conservationist, all of those
    beautiful strip crop fields, those small little dairy farms. It
    is just a fabulous part of the world. We do a lot of work with
    dairy. EQIP has a statutory requirement in it that 60 percent
    of the funds have to go to livestock operations. And we have
    never had a problem meeting that. And frankly, most of that
    money is beef production and dairy, followed by poultry, then
    swine. I think that it is widely available in your state. I
    know we do a lot of work with animal feeding operations, water
    quality aspects. I have been there. I have seen some of the
    stuff. I don't know of any access problems that we have.
        Ms. Pingree mentioned the age of farmers are dropping in
    her state. This Committee actually put into EQIP where five
    percent of the funds have to go to beginning farmers and
    ranchers and five percent has to go to socially disadvantaged
    producers. So from that standpoint, we are trying to make it as
    broadly applicable as possible, sir.
        Mr. Ribble. Are there formulas between larger and smaller
    producing dairies?
        Mr. White. No, sir.
        Mr. Ribble. No, okay. So the size of the dairy doesn't
    matter?
        Mr. White. Size-neutral.
        Mr. Ribble. Okay. Very good. Thank you.
        Mr. Nelson, as you know, farmers nationwide are facing an
    ever-increasing regulatory burden, particularly from EPA, and I
    hear quite a bit from them regarding EPA. Could you maybe give
    some insight into what USDA programs in your view provide the
    best assistance for producers as they strive to meet those
    demands?
        Mr. Nelson. Congressman, I appreciate that question because
    our programs aren't necessarily always thought of in that
    context. I think they should be because, look, I am a farmer
    myself, and I think it is always good when we have the
    opportunity as ag producers to have a variety of conservation
    programs out there that we can tailor to our individual needs
    on our farms and ranches. And if we can achieve compliance with
    other regulations at the national or state level in that
    manner, that is great. And so I think the approach of a
    partnership between Federal Government, in some cases state
    government, and individual farmers and ranchers out there on a
    voluntary basis to achieve goals like preventing nitrates into
    the Mississippi river or the Chesapeake Bay, that is a great
    approach and is the kind of public-private partnerships that
    are good for all of us.
        Mr. Ribble. Are those partnerships available? Are you
    working in a collaborative effort with producers around the
    country?
        Mr. Nelson. Yes. Virtually all of the programs that both
    Chief White and I have talked about here today are
    collaborative efforts. In some cases, Chief White's agency
    works with organizations and larger entities. Farm Service
    Agency, we work with individual agricultural producers on their
    individual farms. And, for example, the Conservation Reserve
    Enhancement Program, the first area we talked about Chesapeake
    Bay a little bit before and what NRCS is doing there. FSA has a
    Conservation Reserve Enhancement Program area that goes right
    along, works hand-in-hand with NRCS that gives individual
    producers the opportunity to enroll on a continuous basis on
    CRP in that area. And that prevents the leaching of nitrates
    into the Bay that is so problematic.
        As a matter of fact, as Mr. White talked about earlier, the
    assessment that they did earlier that we in FSA worked together
    with them on shows that that effort alone has resulted in
    reducing the levels of nitrogen off every acre down about 79
    pounds an acre. And I tell you, 79 pounds of nitrogen an acre
    would grow one heck of a lot of winter wheat out in Montana. So
    it is significant.
        Mr. Ribble. All right. Thank you very much.
        The Chairman. I thank the gentleman.
        I recognize Ms. Fudge from Ohio.
        Ms. Fudge. Thank you very much, Mr. Chairman. And thank you
    both, gentlemen, for your testimony today.
        Chief White, I do want to follow up on a question that was
    just asked by my colleague. Under EQIP, the 2008 Farm Bill
    authorized increased payments for socially disadvantaged
    farmers, ranchers, and beginning producers. There were also
    incentives for organic operations. At that time there was a lot
    of discussion, obviously, about these incentives which some may
    have even called preferences at the time as best I can glean
    from that. I wasn't on the Committee. I am a new Member.
        A couple of questions. Was there some projection at the
    time as to how many producers would take advantage of these
    incentives and do you know to date how many socially
    disadvantaged and beginning producers have, in fact, taken
    advantage of the incentives?
        Mr. White. Thanks, Ms. Fudge. I can get you those numbers
    on how many are doing it. I can tell you we blow away that five
    percent every year, far beyond, both beginners and socially
    disadvantaged. And what it essentially means is if you are a
    beginning farmer/rancher, socially disadvantaged, you can get
    up to 90 percent cost-share or 15 percent above whatever the
    prevailing rate is because rates vary, but a maximum of 90
    percent. I can tell you it is very popular. You may know
    Secretary Vilsack has embarked on his ``strike force'' where we
    are trying to do specific, more targeted outreach to make sure
    we reach our underserved communities. We are participating in
    that. My personal feeling is it has been extraordinarily
    successful, ma'am.
        Ms. Fudge. So then, in fact, you do believe that there has
    been a very positive impact with these programs?
        Mr. White. Oh, yes, ma'am.
        Ms. Fudge. And is there something that you think we should
    consider changing that would make it--that there would be more
    participation--which at this point I am not sure that you
    really need--or include other groups? Do you think there needs
    to be some change in it?
        Mr. White. No, because we view that five percent as a
    floor, not a ceiling.
        Ms. Fudge. Okay. Thank you.
        Mr. Nelson, Section 2101 of the 2002 Farm Bill provided for
    use of Conservation Reserve Program, CRP, land to be used to
    grow biomass or place wind turbines on that acreage. Businesses
    in my district are working to place wind turbines and to
    develop other renewable energy solutions. As you know,
    renewable energy is important for job creation and to sustain
    our environment. Have businesses and other organizations
    approached NRCS about using this land to grow biomass or to
    place wind turbines? Do you know?
        Mr. Nelson. I am sorry, ma'am. I wasn't quite sure your
    question, but we have implemented the provision of the farm
    bill with respect to the placement of wind turbines on
    Conservation Reserve Program acreage, and what we do in that
    case is essentially the footprint of the wind turbine would be
    penalty-free take-out of the CRP program. So we have
    implemented that.
        Ms. Fudge. All right. So have people taken advantage of it?
        Mr. Nelson. Yes. Yes. And we will provide you with some
    specific figures on that.
        Ms. Fudge. Okay.
        Mr. Nelson. Be more than happy to.
        Ms. Fudge. Thank you. I look forward to it. Thank you.
        Mr. Nelson. Thank you.
        Ms. Fudge. Mr. Chairman, I yield back.
        The Chairman. I thank the gentlelady and I recognize Mr.
    Hultgren from Illinois for 5 minutes.
        Mr. Hultgren. Thank you, Mr. Chairman.
        Thank you. I apologize. It is a busy day with a lot of
    committees going on, but I appreciate you being here,
    appreciate the work that you're doing.
        Question for you: I wonder if I could get a response from
    both of you. Farmers and ranchers continue to face
    environmental regulations that increase costs and can drive
    producers out of business. We all know that. What program
    provides the most benefit to producers to assist with these
    mounting regulations?
        Mr. Nelson. Well, with respect to Farm Service Agency, it
    is a Conservation Reserve Program which is our largest program.
    And that gives individual producers the opportunity to
    participate in things like the continuous signup practices of
    buffer strips and other practices where you enroll very highly
    environmentally sensitive land that is actually protecting
    larger acreages. And that helps with the individual producer's
    compliance with other regulations. And I believe that any time
    an individual farmer or rancher has the opportunity to enter
    into a partnership with the Federal Government or state or
    local agencies through, again, a voluntary program and achieve
    not only the benefits of that program but compliance with other
    environmental regulations, that is a good thing for all of us.
        Mr. White. Mr. Hultgren, from my perspective, four letters:
    EQIP, Environmental Quality Incentive Program. We have a
    statutory provision in there that says one purpose of the
    program is to help producers meet or avoid the need for
    regulation. And with that statement, you have stood NRCS as the
    shield arm between the regulatory agencies and our producers.
    And you have arrayed the strategic forces of 11,000 or 12,000
    highly trained technical people with billions of dollars at
    their disposal to help producers meet or avoid regulation. And
    I don't mean this in a pejorative sense, but we take that very
    seriously. And I could die a happy person if I could turn the
    regulatory community into the Maytag Repairman.
        Mr. Hultgren. One of the things that we know is there is a
    lot of overlap and some duplication in programs. I just wonder,
    with overlap and duplication in conservation programs, does it
    produce any challenges for producers who may participate in
    multiple programs?
        Mr. White. In a word, yes. But go ahead.
        Mr. Nelson. Well, I think there is some duplication but
    there are also complementary programs. And we will look forward
    to working with you as you get into the farm bill and our
    technical folks will provide you with all of the information
    that we can and assistance that we can with respect to the
    administration of programs and our experience working with
    producers.
        But one of the things that I would like to emphasize--and
    again, this is coming from a producer point of view--is that it
    is a good thing to have a lot of different alternatives out
    there, alternatives that will work as well in Montana as they
    will in Florida or in Illinois because some programs that work
    in some parts of the country don't work in other parts of the
    country. And the more alternatives that individual producers
    have to voluntarily participate in these programs, the more you
    can tailor and shape them to your individual farming operation.
    And that gives us a better chance of getting more conservation
    on the land, which is what the whole thing is about.
        So again, we look forward to working with you and providing
    you with any information that we can that will help you in
    those deliberations, but we also want to make sure that we
    continue to give the full range of options to producers in
    every part of the country to increase the amount of
    conservation on the land.
        Mr. White. I will just briefly add to that. I agree with
    what Administrator Nelson has said. It is good to have a full
    toolbox. But that said, in each of your packets, we have
    provided you with a matrix, and in that matrix it shows side-
    by-side all the easement programs and it shows side-by-side all
    the cost-share programs. If you are a field person, you have to
    know the rules for all of them. You have to know which you need
    AGI for, which are HEL-compliant, which don't need it, which
    are no-year funds, which are one year--you can see the
    differences across this matrix and it makes it very complex for
    our people. It makes it complex for our producers. The matrix
    will speak for itself, sir. And I think that while we need that
    toolbox where you have enough implements in there, I don't know
    that we need as many as we have.
        Mr. Hultgren. Well, thank you both. My time is up but I do
    appreciate you being here. I appreciate your answers to
    questions. I look forward to continuing this discussion as we
    go forward in the farm bill. I do think it is important for us
    to be looking at. I think it has been kind of a piecemeal
    approach in the past on this, but there are ways we can find
    more of an understandable and easier-to-navigate process that
    works. I am hoping we can get there with that.
        I yield back. Thank you.
        The Chairman. I thank the gentleman and I recognize Mr.
    Schrader, from Oregon, for 5 minutes.
        Mr. Schrader. Thank you, Mr. Chairman. Well, I really
    appreciate Mr. White's final comments there because to the
    uninitiated or relatively uninitiated, even though I am a
    farmer, this is a pretty complex arena with multiple programs.
    And I have never seen an agency yet or a program yet that
    didn't think it was pure and important in and of itself and
    does something terribly distinct and different than the other
    program that is very similar and almost duplicative to it. So I
    appreciate the emphasis on that.
        I guess my challenge to both of you, both FSA and NRCS
    would be to look at the outcomes. I mean instead of we as
    legislators tend to come up with brilliant new programs that
    are going to fit in a variety of areas, usually ours, and get
    us great results, but I think to get past that sort of
    multiplicity of management schemes and the duplication that is
    evident there, maybe we should focus on outcomes. Which of
    these different programs give us the biggest bang for the buck?
    What is the cost per acre of each of these different programs?
    What relative level of nitrates or phosphates are prevented
    from going in the rivers and streams given the different types
    of programs? What sediment doesn't occur or does occur as a
    result? That would give us a much more informed input as to
    which programs are the biggest bang for the buck in these tough
    times and doing great work.
        There are probably some other intangible concerns we also
    want to know, but I guess I would really hope this Committee
    would focus on helping the agency develop outcomes that we can
    measure so that all the variety of programs--I don't care what
    program you use if you get good results. You can go to Tahiti
    for 2 weeks, I don't care, as long as the air quality and the
    water quality gets a little better as a result of what you are
    doing. So I just would challenge you in that regard.
        A series of comments that I don't need answers to right now
    but would like at some point a response. The TIP subprogram as
    part of the CRP program, what is the management overlay or
    duplication or whatever in that regard? It would seem that the
    ECP program could be duplicative of other disaster relief
    programs. I just need information as to how it is not, why we
    need this particular one for farm and forestland. The VPA-HIP
    program, while a nice program and I am a big fan of hunting and
    fishing, too--I am not sure, given our budget limitations, that
    is one I would put a whole heck of a lot of money in, but I
    stand to be corrected on that. And the idea of having both NRCS
    and FSA manage the Grassland Reserve Program seems a little
    cumbersome to me, so I would be curious as to why we have
    gotten into that area.
        On the positive side, it is nice to see that some of the
    programs that were enacted in the 1930s, 1940s, 1950s, and
    1960s are transitioning away, not that they are not important
    but perhaps less important than some of the programs that we
    have identified for the 21st century. I think that is important
    but hope that both agencies would continue to look at that.
        I guess the big question I have is--I come from Oregon and
    half my state is forestland. And 40 percent of that is private
    forestland. And I think we are missing the mark on our
    forestland programs. The information I have, only six percent
    of EQIP funding goes to forestland, despite increases recently.
    I recognize the increases. Only six percent with the emphasis
    on carbon sequestration, air quality, wildfires, invasive
    species ruining one of our greatest natural resources that
    built this country, that has me greatly concerned. And the
    Beginning Farmer and Rancher Development Program, only three
    percent is dedicated towards forest stewardship and new
    forestry.
        So I am just very, very concerned that forestry is getting
    a real short end of the stick in these conservation programs in
    the Agriculture Department and Natural Resources Conservation
    Service. I would hope that we would look at that a little more
    closely and beef those programs up as we get rid of some of the
    duplication in other areas.
        So with that, I yield back, Mr. Chairman.
        The Chairman. I thank the gentleman.
        And I wanted to take the opportunity for a second round for
    anyone that has questions. I exercise that liberty first for 5
    minutes.
        Chief White, you have expressed an interest in having more
    employees on the farm rather than behind a desk at NRCS
    offices. Can you give us an update on where you are in this
    process?
        Mr. White. Two items I will cover with you briefly, Mr.
    Chairman, that I can think of off the top of my head is the
    Conservation Delivery Streamlining Initiative. We are looking
    at our whole business processes. The outcome goal, we want to
    eliminate 80 percent of the administrative clerical tasks from
    our field office and free up 75 percent of their time for
    direct working with farmers. If we can pull this off, Mr.
    Chairman, it is the equivalent of adding more than a thousand
    people to our workforce. It is going to free up that much time.
        The second thing I would add is that I have recently
    challenged our State Conservationists. Hugh Hammond Bennett
    created this agency back in the 1930s. When he retired in 1952,
    90 percent of the Soil Conservation Service employees were in
    direct field positions. And by golly, if Hugh Hammond Bennett
    could do it, why can't we? So I asked the State
    Conservationists, what are you going to have to do in Florida,
    in Pennsylvania, or wherever you may be if we want 90 percent
    of our technical staff be in direct service to producers? And
    they came back with all kinds of cool ideas. We are going to
    start implementing them, and my hope is that despite any budget
    cuts we can actually end up with more people on those front
    lines providing direct service to producers.
        The Chairman. Well, I congratulate you for your efforts. I
    think there is many of us that when you are successful, we may
    want to replicate that process across all parts of the Federal
    Government.
        Mr. White. I am not running for President yet.
        The Chairman. Okay. And this is just my observation and I
    may be incorrect, but it seems like the last farm bill, in
    terms of the balance between direct technical assistance at
    what I would call boots on the ground in programs, there was an
    emphasis more primarily on programs. And I am concerned that
    perhaps we skewed too far and I just see a lot of value of
    those boots on the ground, those folks that provide the
    technical assistance to help the farmers make the right
    decisions, to be that present resource.
        And just to both panelists, I just want to get your
    perspectives on that as we approach the next farm bill. Do you
    see the 2008 Farm Bill kind of skewed in that direction, more
    programs, less technical assistance, and should that be
    something that we should move back if not a 50-50 at least more
    technical assistance?
        Mr. White. Well, I agree with you. And I think the 2008
    Farm Bill made some clarifications in technical assistance we
    are finding very valuable now. And technical assistance, I mean
    we talk about it, but what does it really mean? There are some
    books here that I brought just in case somebody would ask about
    TA. Those two books at the end are for one animal confined
    feeding operation, the technical documents it took for the
    design specifications. This right here is a 29 head dairy
    lining a pond, and a separator. This is the construction of a
    5.3 mile pipeline for a rancher. This is converting a flood
    irrigation system to a sprinkler.
        And if you look at the technical drawings that are
    throughout this, it is absolutely vital that we keep those
    highly trained men and women out there on the land. I have been
    in this business for a long time. I have yet to see a Keebler
    elf come out and help us with this. This is done by highly
    trained men and women. We need to keep them there. We need more
    boots on the ground. But I will also say this, Mr. Chairman. I
    don't care whose foot is in that boot. And if we can make
    arrangements with state agencies, conservation districts,
    nonprofit groups, ag organizations to get the feet in those
    boots, that is what we will do. This past year we took $20
    million--you may have heard of this Strategic Watershed Action
    Teams--we leveraged it, that $20 million, turned into $30
    million and it gave us, oh gosh, 450 boots on the ground. They
    are non-Federal, but they are going to be working alongside of
    us.
        The Chairman. Very good. Mr. Nelson, any thoughts on this
    issue?
        Mr. Nelson. Well, yes, I think one of the interesting
    things about this discussion is that is points out there are
    some differences between Farm Service Agency and NRCS. NRCS is
    a technical agency. And as Chief White said and I think
    everybody would like to have, their folks do best when they are
    out in the field. They arrange conservationists and engineers
    who are out in the field and not in the offices doing
    paperwork. And so we have already had discussions about how we
    at FSA, which tends to be an administrative agency that is more
    paperwork-oriented, can actually support and help that effort,
    because in these times when we are tightening our belts, we are
    all going to have to be more efficient in the way we do things.
        The challenge for us in FSA is to how we can
    technologically get to the point where we need to be. As you
    know, we are going through a terrible transition from 1970s and
    1980s computer technology to 21st century computer technology,
    and that has been very difficult not only on our employees, but
    it is actually difficult on the producers as well.
        I was privileged a couple of weeks ago to come up here and
    be part of a demonstration for folks of a project, a long-
    overdue project in the Agency to update our computer systems
    and our software so that we are actually into the 21st century
    with this MIDAS project. And I appreciated everybody's
    participation in that because it is going to make us a lot more
    efficient. And it is going to make us not only better able to
    serve producers but produce information in response to requests
    from you folks because I can tell you right now that in putting
    together the answer to these audit questionnaires because of
    all of the different computer systems we are working with in
    FSA, we had to put word out literally to our county offices
    across the country in some cases to put this information
    together. That doesn't make any sense.
        And so this move, like I say, is not only going to be a big
    help to the Agency, it is going to be a big help to you and to
    our producers as well. So we have to operate more efficiently
    and we have to get to a point where we do more online with our
    producers so that they can sit at home and do their work with
    not only Farm Service Agency but NRCS and other USDA agencies
    as well, because our producers are in the 21st century but we
    are not. And so we have to catch up with them in this case. And
    we are working hard on that. And again, we really appreciated
    the opportunity to come up here and visit with you about it and
    look forward to the future opportunities to do that. And all of
    that will help both of our agencies.
        Mr. White. Can I respond one more time? I would like to put
    to rest an old canard about the animosity or the conflict or
    the turf battles that occur between NRCS and FSA. We really
    don't have time for that. Mr. Nelson and I have talked on how
    we can work better together, and our commitment to you is that
    we will do that. And not only are we going to work better
    together but we are going to work better together for the
    benefit of the American producer and for the American taxpayer.
        The Chairman. And I know we all appreciate that.
        I now recognize the gentlelady from Alabama for 5 minutes
    of questioning.
        Mrs. Roby. Thank you so much, Mr. Chairman. Thank you both
    for being here.
        Just last Thursday, we held a 2 hour listening session with
    farmers in Alabama, and I did it in conjunction with our
    Agriculture Commissioner John McMillan, and the number one
    issue that kept coming up over and over again was CRP. And this
    isn't the first time I have heard it. And for Alabama, this
    program was definitely useful in the beginning, taking marginal
    lands out of production, but as time has gone on and more and
    more viable land is being shifted out of production into
    longleaf pine. And one of the issues that has been discussed is
    Alabama, it would be much more valuable to have to option of
    grass, which would make it easier to move that land back into
    production if needed.
        Another issue is that farmers are competing against the
    Federal Government in finding land to rent and oftentimes, the
    presence of the government causes the prices of land to
    increase drastically. And interestingly enough, one of the
    farmers who participated in our listening session last week
    that brought up and had concerns about the CRP was a timber
    owner, and he said that the conversion of cropland to longleaf
    pine has hurt him because it impacts, of course, the price of
    the timber produced. And so my question to both of you is
    whether Alabama is unique in seeing the usefulness of CRP
    diminishing? Or has CRP served its purpose and is no longer
    needed? And what changes might we make to CRP to ensure that
    much-needed land stays in productive agriculture?
        Mr. Nelson. Well, I appreciate the question because we
    just, as you know, finished with CRP general Signup 41, and I
    think it is important to note that even in this time of high
    commodity prices that producers voluntarily around the country
    offered 3.8 million acres into that program. And so in response
    to your question, I think the producers have shown that there
    is still great interest in participation in CRP, at least
    around the country.
        Mrs. Roby. But the people operating the land are not
    necessarily producers because there is so much land that our
    farmers rent or lease to produce, and it is up to the landowner
    to shift that into the CRP program and thus takes that
    property, then, out of production for those farmers who just
    want to farm.
        Mr. Nelson. Congresswoman, we would be more than happy to
    visit with you further about this and to provide you with the
    information about the CRP participation in Alabama. And I think
    it is important to note one other thing, too, that could be
    affecting this, and that is that there was established down in
    the Gulf Coast and Atlantic Coast region and including Florida
    a national conservation priority area for longleaf pine. It
    does, in fact, give producers additional environmental benefits
    index points when they go to enroll land in the Conservation
    Reserve Program. And certainly, before we will go forward with
    another general signup, the question of whether these
    conservation priority areas are one that I am sure you will
    look at in Congress and we will certainly look at within the
    Farm Service Agency. So I would look forward to talking further
    with you about that.
        Mrs. Roby. Well, as the Ranking Member pointed out, he said
    there is what, 4.1 million acres coming out, but the problem is
    is that it is very, very costly to then convert that property
    back into productive farm use. And so that is a tremendous
    concern in my State of Alabama because of this program.
        Mr. White, do you have anything to add?
        Mr. White. Earlier, when you were out, we had a discussion
    about how wonderful longleaf pines were. NRCS is certainly
    working with producers on cost-share programs, working lands
    programs on a voluntary basis for producers who want to do
    that. Certainly, Alabama is in the belt where those trees were
    from.
        I guess I hear this from time to time but the beautiful
    thing about voluntary conservation programs, if you don't want
    to do it, you don't have to. And I would not want to take the
    right of someone else away to enter into a voluntary
    conservation program of which the CRP certainly is one.
        Mrs. Roby. And my time is expired but I just would add to
    that that it is for our farmers, the concern is because of the
    existence of the program, maybe its usefulness has run out
    because we do need to provide for all of those, as you
    referenced, millions----
        Mr. White. Yes, ma'am.
        Mrs. Roby.--of mouths that are going to need to be fed. So
    that is the point of my question. And I appreciate both of you
    being here. And Mr. Chairman, I yield back.
        The Chairman. I thank the gentlelady.
        I recognize the gentleman from Florida for any additional
    questions.
        Mr. Southerland. Just to kind of follow up on that
    statement, I think one of the challenges of the longleaf pine,
    as you know, the woodpecker issue down there in our area--so
    when you have one agency that is trying to encourage you to
    come in and help restore--and I agree with everything you said,
    Chief, about the longleaf pine and how beautiful it is, and I
    think we are doing some incredible things down in North
    Florida, especially with the Tall Timbers organization down
    there. When you assist in helping us plant longleaf pine only
    to have the redheaded woodpecker come in, then you will never
    be able to harvest your timber because of regulations. So if
    they are identified on your property, please believe me, there
    are many that say as a result of them coming here and making
    them your home, you can't cut. But that is just a follow-up
    comment to Mrs. Roby.
        I want to ask a couple questions. I know regarding CRP, you
    know--and again I am learning these programs--but what
    penalties does a landowner face if he opts out of CRP contract
    and what flexibility is currently available, if any, to allow
    landowners out of a CRP contract?
        Mr. Nelson. Well, I appreciate that question because CRP,
    again, we just went through a general signup, and so the issue
    has been in front of the Department and the country. And the
    Secretary does have the authority to do penalty-free early-
    outs----
        Mr. Southerland. Okay.
        Mr. Nelson.--under CRP. The policy at the present time is
    that if a producer wants to voluntarily opt out of the program
    that they would have to pay back the rental payments that they
    had received and there would be liquidated damages of 25
    percent on the rental payments they had received and 25 percent
    liquidated damages on any cost-share assistance they had
    received and possibly interest as well. So that is the current
    policy.
        Mr. Southerland. That sounds like that was designed by the
    IRS.
        Mr. White. Mr. Southerland, can I address that?
        Mr. Southerland. Sure.
        Mr. White. I am going to take you back a little bit. The
    guys we are cost-sharing with for longleaf pine, they are going
    to cut that thing or projected in, what, 20, 30 years?
        Mr. Southerland. No, it is longleaf pine you are looking at
    closer to 50 years.
        Mr. White. Okay. Well----
        Mr. Southerland. And that is another issue. You know, there
    are some other crops, certainly, that one could say obviously
    we need to address longleaf pine but maybe some other species
    that we can also plant in order to return an investment for the
    landowner.
        Mr. White. But I am going to check on that, whether you can
    cut them or not, because I think you can.
        Mr. Southerland. Well, I know this. I know that we have a
    National Forest down there and the National Forest because of
    the woodpecker has been turned into basically a national park.
    And in the rural county where having logging operations in
    these rural counties has been shut down because of the
    woodpecker, and they basically have taken a National Forest and
    made it a national park, it is creating economic damage to
    these communities. And so it something very near and dear to my
    heart. And so I think some flexibility there would be good
    because I do believe that the longleaf pine is worth pursuing.
    I mean it is a great thing. But, yes, anything you can check on
    that, that would be good.
        Mr. White. I will get back to you, sir.
        Mr. Southerland. Thank you.
        And my follow-up question, what programs have wildlife
    components--hold on. My question here is messed up. Let me
    shift here. What percentage of funding under EQIP makes it to
    the producer?
        Mr. White. About 75 percent. About 20--the numbers vary
    from year to year, sir, but it is normally--the technical
    assistant generally runs from 20 to 25 percent.
        Mr. Southerland. Okay.
        Mr. White. And that is what buys these books that I just
    showed.
        Mr. Southerland. I got you. And last, on just a statement
    on the budget cuts, I appreciate your can-do attitude because
    the American people are given a dollar amount that they have to
    live within and they have a can-do attitude that they are going
    to make it work. And I have heard you display that this morning
    and it is refreshing. And so I just want to tell you how much I
    appreciate the way both of you have testified before us this
    morning. Thank you very much.
        Mr. White. Listen, I am an American. I am not going to
    crawl up in a fetal position and cry myself to sleep.
        Mr. Southerland. Well, that is not how this country was
    founded and----
        Mr. White. I am going to try to do what I can do.
        Mr. Southerland.--and I don't believe you would. So thank
    you very much. I yield back.
        The Chairman. The gentleman yields back. And I recognize
    the gentleman from Illinois for any additional questions.
        Mr. Hultgren. Thank you, Mr. Chairman, just a couple.
        I wondered if you could explain the Conservation Innovation
    Grants. Tell me a little bit more what they are, and also let
    me know, if you would, the success rate for these innovation
    projects eventually becoming adopted conservation practices?
        Mr. White. Yes, sir. I am assuming you are referring to the
    one that is supposed to bridge Death Valley, to take promising
    research and try and figure out how it can be broadly applied
    to the land. We have had some spectacular successes and we have
    had some spectacular failures. I can get you more of a rundown
    on which is which on that, but I think in the area of feed
    management, we have seen some extraordinary results from the
    University of Washington. Odor control, I think that was
    Wisconsin Department of Agriculture did some wonderful work on
    how to do better odor control, precision agriculture, water
    quality. We have had some really good stuff, but we have also
    had some things that just did not work out. And I am trying,
    frankly, to get my arms wrapped around it better and I will
    have to get back to you on some of this, sir.
        Mr. Hultgren. Is your sense that most of them are working,
    most of them not working, just to kind of gauge a success rate?
    Is it possible to do that? And again, it is for the
    Conservation Innovation Grants.
        Mr. White. Maybe 75-25.
        Mr. Hultgren. Working to not working?
        Mr. White. Yes, and that is kind of an estimate. So can I
    revise and extend my remarks?
        Mr. Hultgren. Yes.
        Mr. White. Okay.
        Mr. Hultgren. That would be good. Yes, and if you can let
    us know if there is more feel to that. For me my concern is
    money that is being spent, is it being useful?
        Mr. White. Exactly.
        Mr. Hultgren. So it is not numbers of success but dollars
    being spent leading to real innovation that is actually being
    used out in the field.
        Mr. White. Got you.
        Mr. Hultgren. Switching over to the Conservation
    Stewardship Program, what percentage of funds for the
    Conservation Stewardship Program are used to pay for things
    farmers already have done and how much is used to encourage new
    practices?
        Mr. White. Okay. The law says you will pay to maintain
    existing and to create additional. We have put an emphasis on
    the additional. Right now, that annual payment is roughly split
    60-40, 60 percent for new stuff, 40 for the maintenance of
    existing.
        Mr. Hultgren. Okay. Kind of wrapping up and getting back to
    the first round of questions. I guess I would like to just get
    some thoughts from you. We talked a little bit about going into
    the farm bill and really looking for ways--certainly, we want
    options out there, but at the same time we don't want to be
    tripping over options and having it with limited resources
    where we are not being as effective as we possibly can be. So I
    wondered, do you think is there a more comprehensive way to
    provide environmental benefits to our farmers and ranchers
    instead of the piecemeal approach that Congress has provided
    over the last 25 years? If you think there is, give me some
    sense of what that would be.
        Mr. White. You go first.
        Mr. Nelson. Well, I think again, as I said earlier, the
    challenge here is to look at all of these programs and figure
    out ways which we absolutely need to do to both operate them
    more efficiently and make them more effective to farmers. But
    as I also talked about earlier, to do that in a way that we
    don't take alternatives away from farmers and ranchers around
    the country so that, again, a farmer in my State of Montana,
    your State of Illinois, they are not going to need exactly the
    same thing.
        So it isn't an easy thing to do, but we need to figure out
    a way to do it because like it or not, we are facing budget
    challenges here. We have had to tighten our belts. You know, I
    had to do that back on the farm. I had to do that when I was in
    the Governor's office back in Helena. And we are going to have
    to do it. So, again, the challenge is to figure out a way to
    become more efficient in the administration of programs, make
    them more effective for the individual producers, and not take
    alternatives away so that we can continue to make sure our
    producers in every area in the country have the full range of
    options. And I think all of the programs need to be on the
    table that both agencies are involved with, and we are
    certainly looking forward to working with you on that and
    providing you our technical assistance and our experience in
    administration of the programs and working with producers on
    the best ways to do that.
        Mr. White. I think Mr. Nelson said that very well. One of
    the things that we all have to recognize is every program is
    there for a reason. And they have all done some great work and
    they all have a constituent base and we need to respect that as
    we move forward. But your challenge is, in this budget climate,
    how do you increase the efficiency? How do we do a better job
    and still provide the producers with what they need in the area
    of conservation.
        Mr. Hultgren. Yes, just in closing, I do think that is our
    challenge. I think recognition that we want to see results for
    money that is being spent, especially with limited dollars.
    Programs that made sense 10 years ago may not make sense any
    longer. And I get concerned when the focus is more on agenda
    rather than on real results. And so, anyhow, I look forward to
    working with you. I know this is just a first step of a long
    process that is coming forward. Thank you both.
        I yield back.
        The Chairman. I thank the gentleman. I thank all Committee
    Members. And Administrator Nelson, Chief White, thank you so
    much for your service and your testimony here today. Your
    preparation coming in, very well prepared. I think this hearing
    was very informative. Frankly, we have a lot of work to do as
    we continue down the road of preparing for this next farm bill.
    And as has been mentioned many times, these are challenging
    times with the debt and the fiscal situation we are in, but we
    never should forget that as Americans we enjoy, frankly, the
    most affordable, highest-quality, and safest food supply of
    anywhere in the world. And the biggest threat to our national
    security by far would be at whatever point we would rely on a
    foreign country to provide that for us. So we are blessed not
    to be in that position.
        I certainly appreciate the work of FSA and NRCS and the
    fact that you work together, collaboratively. And certainly we
    look forward to working with you as we continue forward in this
    process. So thank you all so much.
        Under the rules of the Committee, the record of today's
    hearing will remain open for 10 calendar days to receive
    additional material and supplementary written responses from
    the witnesses to any question posed by a Member. This hearing
    of the Subcommittee on Conservation, Energy, and Forestry is
    adjourned.
        [Whereupon, at 11:56 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

     Submitted Letter by Mark G. Huntley, President, Irrigation Association
    July 18, 2011

    Hon. Glenn Thompson,
    Chairman,
    Subcommittee on Conservation, Energy, and Forestry
    House Committee on Agriculture,
    Washington, D.C.;

    Hon. Tim Holden,
    Ranking Minority Member,
    Subcommittee on Conservation, Energy, and Forestry
    House Committee on Agriculture,
    Washington, D.C.

        Chairman Thompson and Ranking Member Holden:

        On behalf of the members of the Irrigation Association, thank you
    for the opportunity to offer our perspective on USDA's conservation
    programs. Our industry appreciates your focus and leadership on this
    issue, as we believe that the conservation title of the farm bill is
    important to the long-term viability of U.S. agriculture and meeting
    the demands of our current and future generations, as well as a sound
    and sustainable environment.
        The Irrigation Association is a trade association representing
    approximately 2,000 member companies in the irrigation industry. Our
    members include irrigation product manufacturers, dealers,
    distributors, contractors and end users in the agricultural and
    landscape industries. The mission of the Irrigation Association is to
    promote efficient irrigation technologies, products and services, and
    our expertise lies in ensuring every drop of water applied to a crop is
    done so in an efficient manner, thus leading to more agricultural
    output per unit of input.
        I would like to begin by discussing the USDA's Environmental
    Quality Incentives Program. As you know, EQIP is a voluntary
    conservation program, which provides financial and technical assistance
    to farmers and ranchers who face threats to soil, water, air, and
    related natural resources on their land. Through EQIP, the NRCS
    develops contracts with agricultural producers to implement
    conservation practices, which address on-farm environmental natural
    resource opportunities and challenges. Even though this program is an
    incentive program for agricultural producers, this is first and
    foremost an environmental quality program. For example, if an
    agricultural producer were to invest in more efficient irrigation
    technologies and products; not only would that producer see a decrease
    in the amount of water used to produce the same amount of yield, the
    producer will also see a decrease in run-off (leading to an increase in
    water quality) and an increase in energy efficiency (using the energy
    embedded in the water used for irrigation in an efficient manner),
    among other recognized environmental benefits. It is our belief that
    the further investment in this environmental quality program is much
    more effective than increased regulations placed on U.S. agricultural
    producers.
        From 1997 to 2010, EQIP has been a strong supporter of promoting
    efficient irrigation technology and products. During this time, three
    of the top ten projects funded by EQIP have been focused on irrigation:
    Top 10 EQIP Funded Projects (1997-2010)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Source: NRCS.

        Specific to irrigation projects, EQIP works with the producer,
    through the technical service provider program, to determine the best
    technology, design and practices to ensure that every drop of water is
    being used in the most efficient way possible, while ensuring that the
    investment makes financial sense for the producer. In fact, the
    Irrigation Association works collaboratively with the NRCS through a
    Memorandum of Understanding that qualifies our certified irrigation
    designers to participate in the TSP program.
        Through these investments in efficient irrigation technologies and
    products, the effects on the environment have been very positive, as
    we've seen documented through the USDA's Conservation Effects
    Assessment Program.
        Next, I would like to spend a moment discussing some of the
    challenges currently facing American agriculture.
        According to the Global Harvest Initiative, the global population
    is expected grow to more than nine billion people by 2040, an increase
    of nearly 50 percent from today's level. In this same time period,
    global agriculture will be required to double its productivity in the
    face of limited water resources.
        Feeding more than nine billion people will require substantial
    increases in agricultural output and productivity. Irrigation is one of
    the most powerful levers of agricultural productivity, so it is no
    surprise that irrigation comprises a significant proportion of the
    country's overall water use (37 percent of total water withdrawals
    according to the U.S. Geological Survey 2005 Water Use Report). As more
    farmers seek to leverage the productivity benefits of irrigation,
    irrigated acreage in the United States will continue to grow. Irrigated
    acreage in the United States has more than doubled from 25 million
    acres in 1950 to over 60 million acres in 2005. At the same time
    farmers are irrigating more acres, they are using less water for
    irrigation. Water use for irrigation has dropped back to 1970 levels
    (Source: NRCS Farm and Ranch Irrigation Survey 2008). The Irrigation
    Association joins the USGS and the Department of the Interior in
    attributing these decreases in irrigation water use to significant
    increases in on-farm irrigation efficiency.
        As the population continues to increase, regulations and aging
    infrastructure are affecting the amount of water available for
    irrigation. American farmers are among the most productive and
    innovative in the world. Yet, if United States agriculture is to meet
    this challenge, we must sustain, improve and expand efficiently
    irrigated agriculture. The Irrigation Association recognizes that
    United States agriculture will need to continue increasing productivity
    to meet the future needs of the growing global population, while
    optimizing the efficient use of natural resources.
        As I mentioned earlier, fostering the adoption of efficient
    irrigation technologies and practices is an effective way to improve
    agricultural productivity, overall water-use efficiency and water
    quality, thus sustaining water resources for future generations.
        In conclusion, the irrigation industry highly values the variety of
    benefits achieved with efficient on-farm water use. We've enjoyed our
    historic partnership with the NRCS and look forward to working with the
    Congress and the NRCS for years to come in promoting efficiencies in
    agricultural production.
        As the House Committee on Agriculture continues the audit of the
    USDA, we encourage you to review EQIP, note the positive attributes of
    the program and continue the promotion of the efficient use of water in
    agricultural production.
        If you have any questions regarding EQIP or any other irrigation-
    related issue, please contact IA's Federal Affairs Director John Farner
    at [Redacted] or [Redacted]. Thank you again for the opportunity to
    submit comments.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mark G. Huntley,
    John Deere Water,
    President, Irrigation Association.
                                     ______

                              Submitted Questions
    Response from Bruce Nelson, Administrator, Farm Service Agency, U.S.
            Department of Agriculture
    Questions Submitted By Hon. Frank D. Lucas, a Representative in
            Congress from Oklahoma
        Question 1. How many different conservation programs does FSA
    administer?
        Answer. FSA administers five primary conservation programs
    including the:

       Conservation Reserve Program (including Conservation Reserve
            Enhancement Program, Farmable Wetlands Program and Transition
            Incentives Program);

       Emergency Conservation Program (ECP);

       Grassland Reserve Program (GRP);

       Grass Roots Source Water Protection Program; and

       Voluntary Public Access and Habitat Incentive Program (VPA-
            HIP).

        FSA also administers programs under other Titles that support
    conservation goals and purposes including:

       Emergency Forest Restoration Program (EFRP) under the
            Forestry Title;

       Biomass Crop Assistance Program (BCAP) under the Energy
            Title;

       Conservation Loan Program under the Credit Title; and

       Debt for Nature under the Credit Title.

        Question 2. Do the current criteria to determine the Environmental
    Benefit Index (EBI) for CRP eligibility ensure that the most productive
    land stays in production and the environmentally sensitive land, or
    highly erodible land, is enrolled?
        Answer. The EBI is used to rank and select offers for enrollment in
    the general signup component of CRP which includes about 26 million
    acres of the CRP's 32 million acre enrollment authority. The general
    signup accepts land based on eligibility criteria defined in the CRP
    statute and the EBI ranking. Before any cropland may be considered for
    general signup enrollment, it must have a recent cropping history and
    meet other eligibility requirements which can be any of the following:

       Highly erodible cropland (i.e., have an erodibility index of
            8 or greater);

       Located in a conservation priority area; or

       Under an expiring CRP contract.

        Each general signup offer is ranked with the EBI which uses data
    collected for five environmental factors (wildlife benefits, water
    quality benefits, soil conservation benefits, air quality benefits, and
    enduring benefits) and a cost factor. There is no prohibition on
    enrolling productive land in the CRP and certainly some lands in the
    program are productive, but must have significant environmental
    benefits to qualify. The productivity of the lands in the CRP is
    reflected in the soil rental rates of the lands enrolled. For CRP
    general signup, the higher the rental rate requested, the lower the EBI
    points for the cost factor, as illustrated in the chart below.
    Relationship Between Rental Rate and Cost Factor EBI Score

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        For general signup, the cost factor serves to discourage enrollment
    of more productive lands, but if the environmental benefits are
    sufficiently high, they may be accepted. For example, an offer with a
    rental rate of $150 per acre would get 40 points for cost, while an
    offer with a rental rate of $30 per acre would get 108 points. Thus,
    the points for the five environmental factors of offers of the more
    productive land ($150 per acre land) would have to be at least 68
    points higher than the scores of land with lower productivity ($30 per
    acre land) to be ranked higher.
        Regarding keeping environmentally sensitive or highly erodible land
    enrolled, the CRP is implemented using two basic approaches: the
    competitive general signup discussed above and the continuous signup.
    An assessment of the environmental sensitivity of the lands enrolled
    under general signup begins with the erodibility index (EI).
        Of the general signup acres currently enrolled, 19.9 million acres
    are categorized as HEL (EI%8) based on the weighted average of the EI
    of the soils on the contracted fields. The remaining 6.3 million acres
    are non-HEL. However, ``environmental sensitivity'' is not based solely
    on EI. Many non-HEL general signup CRP lands may be adjacent to
    wetlands or streams, overlay at-risk groundwater, or are providing
    significant wildlife benefits, and would be considered environmentally
    sensitive.
        Continuous signup specifically targets the most environmentally
    sensitive lands and, includes the Conservation Reserve Enhancement
    Program (CREP),\1\ wetland, conservation buffer, and wildlife
    initiatives. There are about 5.1 million continuous signup acres
    currently enrolled.
    ---------------------------------------------------------------------------
        \1\ CREP agreements leverage Federal funding with funding provided
    by state and local partners whose primary purpose is to target acres
    for enrollment that will address environmental concerns specific to the
    state. The outcome is that environmental sensitive lands of special
    significance are enrolled in a CREP project area.

        Question 3. What percentage of acres enrolled in CRP currently have
    an EBI that is low enough that the land could be farmed productively
    without significant environmental impact?
        Answer. It is likely that much of the land enrolled in CRP can be
    farmed productively because most were used for crop production prior to
    enrollment; however, whether that land can be farmed without
    significant environmental impact in not clear. HEL lands brought back
    into production will need a conservation plan (to maintain eligibility
    for commodity program payments). Even with a plan, however, many
    environmental benefits would be lost including air and water quality,
    sediment, carbon sequestration, and wildlife habitat. In addition, as
    noted in the response to Question 2, many non-HEL lands are providing
    significant environmental benefits, many of which would be lost if
    returned to cropping.
        In addition to HEL lands enrolled, non-HEL and continuous signup
    enrollment currently includes:

       2.0 million acres of conservation (streamside) buffers

       2.2 million acre of wetland restoration practices

       4.2 million acres of Prairie Pothole grass plantings

       2.6 million acres in state conservation priority areas

       165,000 acres of Longleaf Pine plantings

       252,000 acres of volcanic or organic soils highly
            susceptible to blowing

       934,000 acres of grass plantings in 1930's Dust Bowl
            counties

        Since 1990, USDA has ranked the quality of general signup offers
    using an EBI. Doing so helps USDA achieve environmental benefits in a
    cost-effective manner. The EBI is a numeric score resulting from the
    summation of five environmental indices \2\ and a cost factor which is
    a function of the rental rate requested by the producer. As discussed
    in Question 2, the lower the rental rate requested, the higher the cost
    factor score. At the time general signup offers were selected, a
    determination was made that the land was of sufficient environmental
    sensitivity to be enrolled in CRP.
    ---------------------------------------------------------------------------
        \2\ The environmental factors are wildlife, water quality, soil
    erosion, air quality benefits, and the likelihood of benefits enduring
    after the contract ends.
    ---------------------------------------------------------------------------
        The EBI is used to rank CRP offers and provides a numeric score
    that serves as a qualitative measure of environmental benefits relative
    to cost. It provides information about whether one offer is likely to
    provide more environmental benefits than another. The score provides an
    indication of environmental sensitivity; however, it does not address
    whether lands could be farmed productively without significant
    environmental impact.
        CRP is designed as a reserve program to safeguard the nation's
    natural resources and is a major contributor to increased wildlife
    populations in many parts of the country because enrolled acreage is
    planted to resource-conserving vegetative covers. CRP also protects
    groundwater and helps improve the condition of lakes, rivers, ponds,
    and streams by reducing water runoff and sedimentation. Another benefit
    is the protection of millions of acres of topsoil from erosion. In
    addition, CRP sequesters more carbon on private lands than any other
    federally-administered program.
        Secondary objectives include protecting the nations' long-run
    capability to produce food and fiber, curbing production of surplus
    commodities, and providing income support for farmers. If it is in the
    public interest, such as times of emergency, the Secretary may
    authorize CRP acreage to be used for the production of agricultural
    commodities.

        Question 4. Do you think the goals of the Farmable Wetlands Program
    (FWP) are consistent with the overall goals of the CRP program? Are the
    eligibility criteria for FWP the same as the overall program? Where do
    we see the most land being enrolled for FWP?
        Answer. FWP is a voluntary program to restore up to one million
    acres of farmable wetlands and associated buffers by improving the
    land's hydrology and vegetation. Eligible producers in all states may
    enroll eligible land in the FWP through the Conservation Reserve
    Program (CRP). The majority of the land enrolled in the FWP is located
    in Iowa, Minnesota, Mississippi, North Dakota, and South Dakota,
    although enrollment is throughout the nation.
        FWP is consistent with the overall goals of the CRP to improve the
    quality of water, control soil erosion, and enhance wildlife habitat.
    CRP wetland restoration practices utilize multiple buffer-to-wetland
    ratios and size requirements due to the differing underlying purposes
    of the wetland restoration. Buffer-to-wetland ratios and wetland or
    tract size requirements differ not only within FWP practices but also
    with other CRP wetland restoration practices.
        For example, under the CRP Duck Nesting Habitat wetland restoration
    practice the buffer-to-wetland ratio is 6:1 with no wetland or tract
    size limitations; however, under the FWP Flooded Prairie wetland
    restoration practice the buffer-to-wetland ratio is 4:1, and there is a
    statutory limitation of 20 acres for the size of the wetland and 40
    acres for the size of the tract.
        Land eligibility and cropping history requirements are also
    different under FWP. Land enrolled under CRP wetland restoration
    practices must be cropland with a cropping history of 4 out of the
    previous 6 years. For FWP, cropland enrolled has different cropping
    history requirements and for certain practices the land may be marginal
    pastureland.

        Question 5. How much flexibility is allowed for haying and grazing
    activities? Could CRP take on some of the same goals as the Grasslands
    Reserve Program (GRP)?
        Answer. The CRP authorizing legislation generally prohibits any use
    of the forage including haying and grazing except for managed
    harvesting, haying or grazing or other commercial use in response to a
    drought or other emergency, routine grazing, or prescribed grazing for
    the control of invasive species. The annual rental payment is reduced
    by an amount commensurate with the economic value of the activity which
    is generally 25 percent. Any haying or grazing must be conducted with
    an appropriate cover management plan. By contrast, the GRP authorizing
    legislation generally requires that a rental contract or an easement
    permit common grazing practices and haying, mowing or harvesting for
    seed production.
        For CRP to take on some of the same goals as GRP, certain
    provisions of the CRP authorizing legislation would need to be reviewed
    including:

       Land eligibility,

       Permissible activities for haying and grazing of the land
            subject to a GRP management plan,

       Enrollment terms with longer contracts and/or easements, and

       Landlord tenant provisions.

        Question 6. How successful has the Transition Incentive Program
    (TIP) been under CRP? Is this program being utilized and do you believe
    this is a successful approach to getting workable land back into
    production?
        Answer. The regulation for the Transition Incentives Program (TIP)
    was published May 14, 2010. The farm bill authorized $25 million for
    TIP through fiscal year 2012.
        FSA has implemented this program including a TIP Net website which
    provides a web-based tool to connect interested retired or retiring
    land owners or operators with interested beginning or socially
    disadvantaged farmers or ranchers.
        As of July 31, 2011, there are 575 approved TIP contracts with
    85,956.6 acres enrolled. Currently, $7,580,705 in CRP annual rental
    payments will be issued over the next 2 years for TIP to retired/
    retiring farmers or ranchers.

        Question 7. How much is being spent on cost-share assistance for
    tree thinning activities?
        Answer. As of July 7, 2011, FSA had 64 contracts with total
    payments of $11,366 for the CRP tree thinning practice.

        Question 8. How does the split administration of GRP work, do you
    think this is the best way to administer this program?
        Answer. National leadership for GRP is provided by the Chief, NRCS,
    and the Administrator, FSA, and their designees. Specific agency
    responsibilities are detailed in a Memorandum of Understanding.
        NRCS and FSA at the national level jointly develop and evaluate
    program policy and direction, monitor program implementation, ensure
    that GRP information is made available to the public, formulate
    budgets, and coordinate national GRP funding allocations to achieve
    national program objectives. Obligations are tracked at the national
    level to ensure 60 percent of the funding supports easements and 40
    percent of the funding supports rental contracts over the life of the
    farm bill.
        FSA has lead responsibility for rental contract administration and
    financial activities. FSA also provides all of the producer eligibility
    determinations and implements the rental contract enrollment options.
    NRCS has lead responsibility on conservation planning, technical
    assistance to owners and operators, and easement administration.
    National ranking criteria guide the development of state ranking
    criteria to ensure GRP funds are focused on projects that support
    grazing operations, protect grassland from conversion to other uses,
    enhance plant and animal biodiversity, leverage non-Federal funds and
    address that state's program priorities. Priority is given to expiring
    Conservation Reserve Program (CRP) grasslands.
        While shared administration responsibilities for GRP does create
    some challenges, the agencies have worked together to implement this
    program as efficiently as possible. The Department is always interested
    in exploring more efficient and effective ways to implement our
    programs and would welcome the opportunity to work with you and others
    to achieve that end.

        Question 9. What steps do your respective agencies take to ensure
    that conservation practices are truly effective? Can you describe the
    process you use, for example, to ensure that measures to prevent
    streambank erosion are working?
        Answer. We take a number of steps to ensure that conservation
    practices are working--from our science-based technical standards and
    conservation planning process to oversight for practice installation
    and follow-up to validate performance.

       The planning process used by USDA is site specific and our
            technically trained staff works with the customer to identify
            the resource problems and plan the right suite of science-based
            practices to fix the problem (in this case it would likely be
            our shoreline and streambank protection practice).

       Conservation practices are developed by technical experts
            and undergo thorough peer and public review before being
            finalized and published through a Federal Register notice.

       Practices are designed and installed to specifications by
            technically qualified professionals (could be NRCS, State
            Forester, a third party, or the landowner); where engineering
            is involved there are additional review and approval
            requirements and authorities.

       Once installed, USDA follows up to ensure that the practice
            was installed correctly and completely and that it is
            performing as expected for the intended purpose and lifespan.

        USDA implements a number of conservation practices that reduce
    streambank erosion and modify the vegetation and hydrology to enhance
    streambank stability. There are numerous examples and case studies that
    demonstrate that conservation practices and systems can improve
    streambank stability and improve water quality. A recent example is
    Peacheater Creek-Northeast Oklahoma. The area is characterized by
    poultry and cattle production and the downstream Illinois River and
    Lake Tenkiller had been placed on the 303(d) list for elevated
    phosphorus levels. Riparian area protection along with in-field
    conservation practices and farmstead improvements were applied.
    Measured decreases in streambank erosion were among the results, which
    also included reductions in phosphorus and nutrient loading and
    improved fish communities.
        In addition to the technical requirements to ensure conservation
    practice integrity, USDA collects natural resource trend data and
    conducts short- and long-term analyses of the conservation benefits of
    USDA conservation practices. The National Resources Inventory (NRI),
    for example, provides statistically sound data on natural resource
    status and trends on non-Federal lands, including trends in soil
    erosion, land use change, and wetlands, among others.
        USDA's Conservation Effects Assessment Project (CEAP) is a multi-
    agency effort to quantify the environmental effects of conservation
    practices and programs and develop the science base for managing the
    agricultural landscape for environmental quality. CEAP literature
    reviews and assessments document the effects of conservation practices
    and related environmental benefits.
        Monitoring and evaluation of conservation practice effectiveness in
    all 43 CREP Projects also document the effectiveness of conservation
    practices applied and the public the societal benefits. Another data
    set developed in partnership with the U.S. Geological Survey has
    quantified the benefits of conservation plantings and habitat
    development to many grassland and waterfowl species in over 12 Great
    Plain States.
    Response from Dave White, Chief, Natural Resources Conservation
            Services, U.S. Department of Agriculture
    Questions Submitted By Hon. Frank D. Lucas, a Representative in
            Congress from Oklahoma
        Question 1. We have three different easement programs, two without
    a baseline going into the new farm bill. Can you help me understand the
    differences between the three and is it possible to look at ways of
    combining any of them? Can consolidation be beneficial for program
    delivery?
        Answer. NRCS administers three easement programs under Title XII of
    the Food Security Act of 1985, as amended, which include the Farm and
    Ranch Lands Protection Program (FRPP), the Wetlands Reserve Program
    (WRP), and the Grasslands Reserve Program (GRP). NRCS categorizes GRP
    and FRPP as ``working lands'' programs and the WRP as an
    ``environmental restoration and protection'' program.

       FRPP is used to assist eligible entities to purchase
            conservation easements that prevent conversion of agricultural
            land to non-agricultural uses. Easements are held by the entity
            and USDA has a ``right of enforcement'' should the entity be
            unable to fulfill its responsibilities associated with
            enforcing the terms of the easement.

       GRP is used to assist to landowners and operators to protect
            grazing uses and conservation values by conserving and
            restoring grassland resources on eligible private lands through
            rental contracts, easements, and restoration cost-share
            agreements. GRP prohibits non-agriculture uses of the enrolled
            land and the conversion of grazing lands or grassland to
            cropland. The U.S. Government holds the GRP easements but GRP
            also offers an option where an eligible entity can either
            assume title to the GRP easement or receive financial
            assistance toward the purchase an easement under an arrangement
            similar to FRPP.

       WRP is used to restore, protect, and enhance wetlands and
            associated habitats on eligible farmlands through easements
            (permanent and 30 year), 30 year contracts with Tribes, and
            restoration cost-share agreements. Compatible uses, such as
            haying and grazing, may be permitted if they further the
            purposes of the easement. For example, grazing may be
            authorized if it was a natural part of the ecosystem or is
            necessary to control invasive species. The United States
            Government holds the WRP easements.

        NRCS welcomes the opportunity to work with you in exploring
    opportunities to consolidate programs to achieve efficiencies, while
    preserving the natural resource conservation objectives that these
    programs were designed to achieve.

        Question 2. Could you tell us to your best of your ability what
    percentage of time and funds are used simply on program administration
    and do you think Congress could help the Department out on the
    administrative side of things by combining like programs?
        Answer. While the administrative tasks associated with the farm
    bill conservation programs represent a marginal workload for our field
    and state offices, these tasks are inextricably linked with the
    successful delivery of these programs. Examples of the program
    administration tasks include establishing a case file, developing
    participant notifications and issuing correspondence, managing
    contracts and agreements, and performing effective oversight of
    contracts with producers. For customer service and program delivery to
    be most successful, the technical aspects of program delivery must be
    interconnected and coordinated with the administrative activities.
        Recognizing the need to reduce the amount of staff time expended in
    performing administrative tasks and the need to strengthen program
    coordination, NRCS is implementing a Conservation Delivery Streamlining
    Initiative to more cost-effectively deliver our programs and increase
    the time our field staff has to work with farmers and ranchers. The
    agency is also identifying opportunities to realign workload and
    structure to increase the proportion of our staff that is in direct
    field service delivery.

        Question 3. What unique purpose does the Agricultural Management
    Assistance Program (AMA) program serve and does it share any goals/
    purposes with other programs? What assistance does the AMA provide to
    producers that other conservation programs do not?
        Answer. AMA provides assistance to agricultural producers to manage
    risk and voluntarily address issues such as water management, water
    quality, and erosion control by incorporating conservation practices
    into their farming operation. Many of these practices are also
    available through the Environmental Quality Incentives Program (EQIP).
    Even so, AMA provides assistance to producers who have small-acreage or
    specialty-crop farming operations that do not meet the land eligibility
    guidelines for participation in other programs. For example, AMA
    provides cost-share assistance for irrigation-related practices that
    may be implemented on land that does not have an irrigation history,
    whereas EQIP will only provide assistance for irrigation-related
    practices on land that has an irrigation history. By helping to
    mitigate the risks associated with these kinds of agricultural
    enterprises, AMA helps agriculture remain a valuable segment of local
    economies.

        Question 4. What programs have wildlife components and what makes
    the WHIP program different than these other programs? Are there ways to
    incorporate those differences into the other programs currently
    authorized to build on wildlife habitat success?
        Answer. While many programs have wildlife components, the Wildlife
    Habitat Incentive Program (WHIP) is the only conservation program that
    focuses solely on wildlife habitat on private agricultural,
    nonindustrial private forest, and tribal lands. WHIP is also the only
    conservation program that addresses a wide range of aquatic wildlife
    habitat resource concerns. WHIP is directed by statute to prioritize
    projects that would address issues raised by state, regional, and
    national conservation initiatives, such as State Wildlife Action Plans
    or similar wildlife-oriented initiatives. While less direct than WHIP's
    authority, the following conservation programs also have wildlife
    components or contribute to wildlife-related resource concerns:

       The Environmental Quality Incentives Program (EQIP). EQIP
            participants may adopt practices for the benefit of fish and
            wildlife-related resource concerns on working agricultural
            lands. While EQIP eligibility requires lands to be in
            agricultural use, WHIP focuses on habitat development. Although
            projects on publicly owned land are not eligible for WHIP,
            under certain conditions, such projects may be eligible for
            EQIP. WHIP has a $50,000 annual payment limitation while EQIP
            has a $300,000 contract and payment limitation.

       The Conservation Stewardship Program (CSP). CSP offers 31
            enhancements that benefit wildlife to provide improvements to
            cover, food, habitat connectivity and access to water for
            terrestrial and aquatic wildlife including rare and declining
            habitats. In comparison, WHIP provides basic self-sustaining
            prioritized habitats by the implementation of various
            conservation practices. After the implementation of a complete
            WHIP conservation plan the land is then eligible to participate
            in CSP to further enhance the land for wildlife. CSP would have
            to add the component of first developing the land for fish and
            wildlife habitat and then enhance the lands.

       The Wetlands Reserve Program (WRP). WRP provides for long-
            term restoration and protection of valuable wetland and
            associated upland habitat through permanent and 30 year
            easements, 30 year contracts, and restoration cost-share
            agreements. However, WHIP land eligibility is much broader than
            WRP providing for habitat development benefiting species beyond
            those associated with wetland habitats. While WHIP allows for
            contract periods of up to 15 years for certain projects, it
            does not provide an easement option and only provides cost-
            share assistance.

       The Healthy Forest Reserve Program (HFRP). HFRP provides for
            long-term protection and restoration of forestland habitat
            resources through permanent and 30 year easements, 30 year
            contracts, and restoration agreements in order to benefit
            species with special status such as those listed as threatened
            or endangered under the Endangered Species Act (ESA), proposed
            or candidate species for ESA listing, or species of special
            concern within the state. HFRP is primarily confined to the
            restoration and protection of forest land resources while WHIP
            eligibility is much broader, providing for habitat development
            benefiting species beyond those associated with forestland
            habitats. Unlike the various HFRP enrollment options, WHIP can
            only provide long term cost-share contracts.

       The Grassland Reserve Program (GRP). GRP provides for long-
            term protection of grazing uses and related conservation values
            through conservation easements, rental contracts, and
            restoration agreements. GRP emphasizes support for working
            grazing operations, enhancement of plant and animal
            biodiversity, and protection of grassland under threat of
            conversion to other uses. WHIP eligibility is much broader and
            provides for habitat development benefiting species beyond
            those associated with grassland habitats. While WHIP provides
            for long-term contracts (15 years), it does not contain rental
            agreement or easement enrollment options.

       The Conservation Reserve Program (CRP). Under CRP, FSA
            enters into contracts with agricultural producers to retire
            highly erodible and other environmentally sensitive land.
            During the 10 to 15 year contract period, eligible land is
            converted to grass, trees, wildlife cover, or other
            conservation uses to improve soil, air, and water quality and
            improve wildlife habitat. Participants receive annual rental
            payments and half the cost of establishing conservation covers
            CRP enrolls land to create wildlife habitat. All of the lands
            eligible for CRP could be enrolled in WHIP if they fall within
            the WHIP priority areas but not all lands eligible for WHIP
            could be enrolled in CRP. While WHIP allows for contract
            periods of up to 15 years for certain projects, it does not
            provide a rental contract option and only provides cost-share
            assistance.

        USDA welcomes the opportunity to work with the Committee in
    evaluating opportunities to incorporate the unique elements of WHIP
    into other programs that have wildlife components, while preserving the
    natural resource conservation objectives that those programs are
    designed to achieve. Features of WHIP that are lacking in other
    programs include: broader land use eligibility; emphasis on wildlife
    habitat development; ability to undertake aquatic-related habitat
    measures; and priority for projects that support state, regional, and
    national initiatives.

        Question 5. EQIP funding has grown exponentially over the last 10
    years, can you talk about the backlog and do you think the Department
    is able to effectively manage the program as the funding has increased?
        Answer. The farm bill increased funding for EQIP by 337 percent
    from its authorized level of $400 million in 2002 to $1.75 billion
    authorized for 2012. With this increased level of funding, program
    participation also increased dramatically. In FY 2002, producers
    enrolled 19,682 EQIP contracts at an average contract value of $15,700.
    In FY 2010, we added 36,499 new EQIP contracts at an average contract
    value of $23,000, resulting in about 150,000 active EQIP contracts.
    Despite the increase in participation, demand for program assistance
    remains high. The number of unfunded applications for EQIP at the end
    of FY 2010 was 7,777.
        While farm bill program participation has increased significantly,
    the number of staff years available to support these programs has not
    followed suit. Since FY 2002, the amount of financial assistance
    administered by NRCS has increased by 390 percent across all programs
    while the staff years available to deliver this assistance increased by
    10 percent (see following chart).
        The increase in program delivery workload for the field office has
    created challenges. We recognize that in order to deliver conservation
    services NRCS needs to have adequate ``boots on the ground'' and we are
    taking aggressive steps to address the increased program workload.
    These steps include:

       Making improvements to the farm bill technical service
            provider (TSP) provision that will increase the number of
            technical experts available to assist producers with their
            conservation planning and implementation.

       Implementing a Conservation Delivery Streamlining Initiative
            (CDSI) that will reduce the number of administrative tasks
            performed by field staff and allow them to be working in the
            field up to 75 percent of the time, and

       Initiating a process to increase the proportion of agency
            technical staff in direct field service delivery positions.
    Change in Program Funding and Staff Years Since 2002

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Question 6. What percentage of EQIP funding is carved-out by set
    asides or subprograms?
        Answer. The 2008 Farm Bill requires the following funding set
    asides for the Environmental Quality Incentives Program for each of
    fiscal years 2009 through 2012:

       Socially Disadvantaged Farmers and Ranchers--5 percent

       Beginning Farmer and Ranchers--5 percent

       Cooperative Conservation Partnership Initiative--6 percent

       Air Quality--$37.5 million

       Organic--Payments are authorized to assist organic or
            transition to organic production, but there is no specified
            minimum. The NRCS Chief has set aside $50,000,000 annually.

       Conservation Innovation Grants--Competitive grants are
            authorized to stimulate innovative approaches to leveraging the
            Federal investment in environmental enhancement in concert with
            agriculture, but there is no specified amount. Since 2008, NRCS
            has set aside between $20 and $30 million annually for national
            CIG awards.

       Livestock--60 percent of EQIP must be obligated to practices
            related to livestock production.

        Question 7. I am concerned that while EQIP receives fewer funds
    than authorized every year, these subprograms do not receive the same
    cuts. Can you explain if these cuts to mandatory spending have any
    further impact on subprograms?
        Answer. Where the subprograms are provided a percentage of the
    available funds, they receive proportionally the same reductions as the
    overall program. For subprograms where the statute requires a specific
    amount of funding, such as the $37.5 million set aside for air quality
    (1240H(b)), an overall reduction in EQIP funding is absorbed by the
    general program and may potentially impact other EQIP priorities. For
    subprograms that are authorized, but no specific funding is set aside,
    such as for the organic initiative, NRCS has discretionary authority to
    adjust the amount of funding as appropriate, so as to avoid adverse
    impacts to other EQIP program priorities.

        Question 8. The 2008 Farm Bill included ``bidding down'' language
    like that in the EQIP program which states: ``If the Secretary
    determines that the environmental values of two or more applications
    for payments are comparable, the Secretary shall NOT assign a higher
    priority to the application only because it would present the least
    cost to the program.'' Does this seem like language that makes sense in
    this fiscal environment?
        Answer. The ``bidding down'' language was incorporated in the 2002
    Farm Bill to address concerns from agricultural stakeholders that
    wealthier landowners whose main income was from non-agricultural
    sources were out-competing farmers and ranchers for conservation
    program contracts because they could afford to take less Federal cost-
    share for the installation of practices. As a result, farmers and
    ranchers had a harder time successfully getting in to EQIP.
        NRCS implements this provision in a manner that ensures
    applications are evaluated and prioritized on the least-cost
    alternative to achieve the highest environmental benefits and thus NRCS
    is able to make cost-effective project selections. The ``bidding down''
    requirement allows EQIP to select projects that achieve the highest
    environmental benefit and treat all applicants in a fair and equitable
    manner regardless of their financial status.

        Question 9. How much money has come out of EQIP to fund the CCPI
    program?
        Answer. As directed by the 2008 Farm Bill, no more than six percent
    of the funds made available for the Environmental Quality Incentives
    Program (EQIP) are used for the Cooperative Conservation Partnership
    Initiative (CCPI). EQIP funds made available through CCPI go to
    producers participating in the project, delivered in accordance with
    the EQIP authorities. The following amounts were obligated in contracts
    with producers participating in CCPI projects in:

       FY 2010: $70,800,000

       FY 2011: $74,280,000 (estimated)

        Question 10. How has the Department used the EQIP program in
    regards to organics and do you think the money used for that purpose is
    an effective use of conservation dollars. What are the comparative
    environmental benefits?
        Answer. The 2008 Farm Bill included a provision within EQIP
    intended to assist organic producers as well as producers in the
    process of transitioning to organic production. In FY 2010, NRCS
    obligated $24 million in contracts with producers to treat 148,000
    acres in organic production or in transition to organic production.
        The most commonly used practices included:

       Nutrient Management

       Cover Crop

       Pest Management

       Conservation Crop Rotation

       Prescribed Grazing

       Seasonal High Tunnel (interim conservation practice)

        Assisting organic producers and those in the transition to organic
    farming with conservation practices furthers EQIP purposes with this
    new and growing segment of the agricultural sector. While many
    observers interpret organic production alone to be the most sustainable
    form of farming, NRCS has found that there are many conservation needs
    in the organic sector. Helping these operators to integrate
    conservation approaches in their production system ensures that
    critical environmental benefits are realized by helping organic growers
    remain economically viable so that they may sustain the natural
    physical, biological, and chemical properties of the soil and other
    natural resources, which is vital to organic production.

        Question 11. Congress created the Conservation Security Program
    (CSP) in the 2002 Farm Bill. This program was then replaced with the
    Conservation Stewardship Program in the 2008 Farm Bill. Can you discuss
    the changes that were made to the new CSP?
        Answer. The Conservation Stewardship Program reflects many changes
    from its predecessor, the Conservation Security Program. Overall the
    changes made the program more accessible and accountable and include:

       Providing continuous nationwide enrollment.

       Establishing an enrollment cap of 12.769 million acres each
            fiscal year at an average cost of $18/acre/year.

       Making nonindustrial private forestland (NIPF) eligible for
            enrollment while establishing a limit of 10 percent of total
            acres per year.

       Ensuring that a minimum of 5 percent of acres are dedicated
            to assist Beginning Farmers or Ranchers and a minimum 5 percent
            of acres are dedicated to assist Socially Disadvantaged Farmers
            or Ranchers.

       Requiring contract offers to include all eligible land under
            the effective control of the producer.

       Limiting the contract length to 5 years with an opportunity
            for one renewal for a 5 year term.

       Allowing producers to initiate organic certification during
            the contract period.

       Allowing for annual and supplemental payments.

       Limiting each person or legal entity to $40,000 per year.
            Contract limitations for formal joint operations are $400,000
            for the contract period and from $40,000 to $80,000 per year.

        Question 12. A major issue with CSP was paying farmers for the
    status quo? How much more environmental benefit have we seen from the
    implementation of the new CSP program? What does the new CSP program
    offer that other working lands programs cannot provide?
        Answer. The Conservation Stewardship Program (CSP) is resulting in
    agricultural producers applying thousands of additional conservation
    activities on enrolled lands in conjunction with maintaining existing
    stewardship levels, generating sizable environmental benefits to the
    public. For example, under the 20,567 contracts enrolled during FY
    2010, participants will apply and maintain an additional 78,947
    conservation activities--an average of 3.8 additional activities per
    contract over all land uses in the contract. Additionally, CSP requires
    a participant to apply at least one additional activity for each land
    use, such as cropland and pasture, in order to be eligible to receive
    payment for the enrollment of that particular land use. An individual
    contract often has more than one land use, and thus an average of 2.8
    additional activities will be applied per land use across all land
    uses.
        The purpose of other programs is to meet conservation standards
    while CSP focuses on achieving an additional, higher level of
    management. This higher level of conservation management is achieved
    through a comprehensive approach to working lands conservation where
    all of a participant's eligible land must be enrolled. Of the enrolled
    land, CSP encourages the participant to implement additional
    conservation activities while maintaining existing conservation
    activities.

        Question 13. What is the Administration's position on the situation
    with WRP having no baseline and what priority does the Administration
    put on the continuation of the program. Where should Congress look to
    fund this program?
        Answer. Demand for WRP continues to be high and WRP has proven
    itself to be a valuable program for meeting the nation's objectives
    related to protecting and restoring wetlands on private lands. Over the
    last 20 years, more than 11,000 private landowners have voluntarily
    enrolled in WRP to restore, protect and enhance wetlands and wildlife
    habitat on over 2.3 million acres nationwide. Through WRP, NRCS,
    landowners, and many partners work together to achieve long-term
    benefits on a landscape scale that will ensure our wetland resources
    are available for future generations.
        NRCS welcomes the opportunity to work with the Committee in
    exploring opportunities to achieve efficiencies that would allow
    funding of WRP while preserving the full array of natural resource
    conservation objectives that the broader suite of conservation programs
    are intended to achieve.

        Question 14. In terms of environmental benefits, do you see working
    lands or easement programs providing the biggest bang for the buck?
        Answer. Both program approaches deliver their intended
    environmental benefits. With a variety of program approaches, it is
    possible for participants to find a conservation path that fits their
    personal economic situation and environmental objectives. Working land
    programs offer a valuable tool for assisting producers to address
    natural resource concerns that affect the viability and productivity of
    their operations. For example, working lands programs can provide
    technical and financial assistance needed to help producers meet or
    eliminate the need for regulatory requirements on their operations.
    These investments--voluntarily shared by the program participant--also
    provide a public benefit such as better water, air, or habitat quality.
    Some working lands programs, such as the Grasslands Reserve Program or
    Farm and Ranch Lands Protection Program, offer easements, but ensure
    that enrolled lands will remain in agricultural uses over the long
    term--retaining important agricultural lands is a critical component
    for ensuring food security for the nation.
        Other easement programs emphasize the retirement of sensitive or
    environmentally significant lands. These conservation easements
    recognize the rights reserved to private landowners, compensate these
    landowners for the rights they voluntarily forego, and create valuable
    enduring environmental benefits for society. For example, establishing
    easements that protect and improve essential habitat can help to
    prevent a candidate species, like the sage-grouse, from being listed.
    These protections need to be in place for the long-term which an
    easement program can provide.
        Program approaches also can be used in tandem. For example, land
    retirement easements and working lands programs are valuable tools for
    addressing hypoxia in the Gulf of Mexico. Working lands programs can
    help producers improve nutrient management and reduce potential losses
    of nutrients into the riverine system, while land retirement easement
    programs can restore and protect wetlands and floodplain areas in
    strategic areas that best trap the nutrients that have left the farm
    prior to reaching the Gulf. Using program approaches together can
    achieve the landscape-scale transformation needed to address larger
    conservation challenges such as hypoxia or candidate species
    protection.

        Question 15. Do you think the benefit outweighs the cost to the
    Federal Government when acquiring permanent easements on lands at huge
    costs during this fiscal environment?
        Answer. Conservation easements provide significant and enduring
    benefits. These benefits are increased by ensuring that project
    location and purpose are part of the selection process. NRCS ranks and
    selects projects based upon several resource concern factors that
    consider the resource potential of the site itself and its location in
    the watershed. These factors are key to identifying valuable
    opportunities as the quality of any easement project will depend on its
    location as well as its intrinsic attributes.
        While initial easement acquisition costs may appear high, they
    should be considered in the context of the enduring public benefits.
    For example, based on the Benefit Cost Analysis for WRP, the estimated
    value of benefits per acre of permanent wetland was $10,935 and the
    estimated cost was $3,000. This means that the program has a cost
    benefit ratio of 3.6. This indicates that the value of estimated
    benefits from wetlands is considerable.
        Easements may also provide benefits through avoided costs. For
    example, for frequently flooded lands where producers routinely lose
    crops, the producer typically receives crop insurance or disaster
    payments. Retiring these lands through floodplain easements eliminates
    the insurance and disaster payments, reduces overall damages downsteam
    from flooding; and improves water quality.

        Question 16. Do the carve-outs in the law for certain groups get
    fully used or do you often have to roll those funds back in?
        Answer. The set asides for socially disadvantaged and beginning
    farmers and ranchers, as authorized under the 2008 Farm Bill for the
    Environmental Quality Incentives Program (EQIP) and the Conservation
    Stewardship Program (CSP), are fully used. Each year we have exceeded
    the funding target goals. In 2010, the funding for these certain groups
    was:

       EQIP--$57,736,481 or 6.9 percent of total funds obligated in
            2,109 contracts for socially disadvantaged farmers and ranchers

       EQIP--$ 134,944,240 or 16 percent of total funds obligated
            in 5,450 contracts for beginning farmers and ranchers

       CSP--1,695,890 acres or 6.7 percent of acres in 378
            contracts for socially disadvantaged farmers and ranchers.

       CSP--1,038,269 acres or 4.1 percent of acres in 1,496
            contracts for beginning farmers and ranchers

        Question 17. How does regional equity affect the way you run the
    conservation programs and are they a hindrance to getting money to the
    places that need it the most?
        Answer. Regional equity ensures that each state receives an the
    opportunity for a minimum level of $15 million in aggregate funding
    under subtitle D programs, excluding the Conservation Reserve Program,
    Wetlands Reserve Program, and Conservation Security Program. The intent
    is to ensure that states are able to meet producers' needs and address
    priority natural resource concerns. The provision allows that funds not
    obligated in contracts by April 1st of each year may be recalled by the
    Chief to meet demand in other states. While ensuring that a minimum
    level of funding is provided to all states is an important
    consideration, the establishment of a fixed level may create disharmony
    should overall program funding be reduced. Establishing a proportion of
    funding rather than a fixed number could create a more balanced
    approach to ensuring that all states receive the mandatory resources
    needed to achieve conservation objectives.

        Question 18. What is the Administration's opinion on priority areas
    and do you think they match with the priorities of the Administration?
    Do you feel that funds go to these priority areas solely because of
    their inclusion in the law?
        Answer. Focusing scarce resources on priority issues is an
    effective method for accelerating progress. NRCS' Conservation Effects
    Assessment Project (CEAP) reports have documented that risks to natural
    resource quality may be concentrated in specific areas and treating
    those can generate disproportionate benefits. The 2008 Farm Bill
    identified a number of priorities:

       geographically based (e.g., Agriculture Water Enhancement
            Program's (AWEP) Eastern Snake Plain Aquifer, Puget Sound,
            Ogallala Aquifer, Sacramento River watershed, Upper Mississippi
            River Basin, Red River of the North Basin, and the Everglades;
            Chesapeake Bay Watershed Program; and Conservation Reserve
            Program priority areas);

       production-oriented (EQIP and CSP organic initiatives);

       producer-focused (Conservation Access for beginning and
            socially disadvantaged producers); and

       resource-specific (EQIP air quality initiative, AWEP's water
            quality and quantity focus).

        These farm bill priorities align well with Administration
    priorities for conservation and strengthening rural America. For
    example:

       The emphasis on serving historically underserved communities
            mirrors USDA's Strike Force initiative;

       the Administration's Chesapeake Bay Executive Order further
            emphasizes the priorities outlined in the Chesapeake Bay
            Watershed Program;

       USDA's focus on strengthening rural economies is supported
            by priorities for assisting beginning farmers and ranchers in
            their conservation needs.

        While funds go to these farm bill priorities because of statutory
    direction, they are nonetheless areas of considerable conservation need
    and deserving of conservation funding irrespective of their
    establishment as priority areas within the statute.

        Question 19. How does the split administration of GRP work, do you
    think this is the best way to administer this program?
        Answer. National leadership for GRP is provided by the Chief, NRCS,
    and the Administrator, FSA, and their designees. Specific agency
    responsibilities are detailed in a Memorandum of Understanding.
        NRCS and FSA at the national level jointly develop and evaluate
    program policy and direction, monitor program implementation, ensure
    that GRP information is made available to the public, formulate
    budgets, and coordinate national GRP funding allocations to achieve
    national program objectives. Obligations are tracked at the national
    level to ensure 60 percent of the funding supports easements and 40
    percent of the funding supports rental contracts over the life of the
    farm bill.
        FSA has lead responsibility for rental contract administration and
    financial activities. FSA also provides all of the producer eligibility
    determinations and implements the rental contract enrollment options.
    NRCS has lead responsibility on conservation planning, technical
    assistance to owners and operators, and easement administration.
    National ranking criteria guide the development of state ranking
    criteria to ensure GRP funds are focused on projects that support
    grazing operations, protect grassland from conversion to other uses,
    enhance plant and animal biodiversity, leverage non-Federal funds and
    address that state's program priorities. Priority is given to expiring
    Conservation Reserve Program (CRP) grasslands.
        While shared administration responsibilities for GRP does create
    some challenges, the agencies have worked together to implement this
    program as efficiently as possible. The Department is always interested
    in exploring more efficient and effective ways to implement our
    programs and would welcome the opportunity to work with you and others
    to achieve that end.

        Question 20. What steps do your respective agencies take to ensure
    that conservation practices are truly effective? Can you describe the
    process you use, for example, to ensure that measures to prevent
    streambank erosion are working?
        Answer. We take a number of steps to ensure that conservation
    practices are working--from our science-based technical standards and
    conservation planning process to oversight for practice installation
    and follow-up to validate performance.

       The planning process used by USDA is site specific and our
            technically trained staff works with the customer to identify
            the resource problems and plan the right suite of science-based
            practices to fix the problem (in this case it would likely be
            our shoreline and streambank protection practice.

       Conservation practices are developed by technical experts
            and undergo thorough peer and public review before being
            finalized and published through a Federal Register notice.

       Practices are designed and installed to specifications by
            technically qualified professionals (could be NRCS, State
            Forester, a third party, or the landowner); where engineering
            is involved there are additional review and approval
            requirements and authorities.

       Once installed, USDA follows up to ensure that the practice
            was installed correctly and completely and that it is
            performing as expected for the intended purpose and lifespan.

        USDA implements a number of conservation practices that reduce
    streambank erosion and modify the vegetation and hydrology to enhance
    streambank stability. There are numerous examples and case studies that
    demonstrate that conservation practices and systems can improve
    streambank stability and improve water quality. A recent example is
    Peacheater Creek-Northeast Oklahoma. The area is characterized by
    poultry and cattle production and the downstream Illinois River and
    Lake Tenkiller had been placed on the 303(d) list for elevated
    phosphorus levels. Riparian area protection along with in-field
    conservation practices and farmstead improvements were applied.
    Measured decreases in streambank erosion were among the results, which
    also included reductions in phosphorus and nutrient loading and
    improved fish communities.
        In addition to the technical requirements to ensure conservation
    practice integrity, USDA collects natural resource trend data and
    conducts short- and long-term analyses of the conservation benefits of
    USDA conservation practices. The National Resources Inventory (NRI),
    for example, provides statistically sound data on natural resource
    status and trends on non-Federal lands, including trends in soil
    erosion, land use change, and wetlands, among others.
        USDA's Conservation Effects Assessment Project (CEAP) is a multi-
    agency effort to quantify the environmental effects of conservation
    practices and programs and develop the science base for managing the
    agricultural landscape for environmental quality. CEAP literature
    reviews and assessments document the effects of conservation practices
    and related environmental benefits.
        Monitoring and evaluation of conservation practice effectiveness in
    all 43 Conservation Reserve Enhancement Program (CREP) Projects also
    document the effectiveness of conservation practices applied and the
    public the societal benefits. Another data set developed in partnership
    with the U.S. Geological Survey has quantified the benefits of
    conservation plantings and habitat development to many grassland and
    waterfowl species in over 12 Great Plain States.
    Questions Submitted By Hon. Martha Roby, a Representative in Congress
            from Alabama
        Question 1. Representative Terry Everett, who held my seat from
    1993-2009 and during his tenure on this Committee, was very active in
    regards to irrigation. During the last farm bill, Representative
    Everett worked tirelessly in the creation of the Agricultural Water
    Enhancement Program under EQIP. This program has provided technical and
    financial assistance for agricultural water enhancement activities on
    farms. In particular, on-site off-stream reservoir was an initiative
    that many of our farmers were excited about participating in when it
    was passed into law.
        Unfortunately, the implementation of the program has been difficult
    to access in Alabama due to the requirement that the pond should be on
    high ground which much of our farm land is flat.
        Additionally, Alabama has had difficulty in accessing USDA's
    irrigation programs due to the traditional lack of historical
    irrigation. Many of our farmers do not own the land that they are
    farming and therefore it is not cost-effective to build irrigation
    system. In a recent survey conducted by a team of Alabama Agricultural
    Experiment Station researchers at Auburn University, six out of ten
    farmers without irrigation in the state said they would be more likely
    to install or improve irrigation systems if a cost-share or subsidized
    loan program were available.
        What can we do to improve EQIP to ensure that farmers are able to
    find assistance in irrigation?
        Answer. The agency has authority through EQIP and AWEP to provide
    financial and technical assistance to producers for improvements to
    existing irrigation systems that address water conservation or water
    quality resource issues. Such assistance may include development of
    irrigation storage reservoirs, ponds, and in-ground dugouts for new
    sources of water. Although water storage facilities on high ground are
    more ideal as these practices allow for use of less expensive efficient
    gravity flow irrigation, this is not the only alternative that may be
    available. For locations with relatively flat topography, EQIP and AWEP
    can be used to install water storage facilities along with pumping
    systems to transport the water to area for application of irrigation
    water. Under AWEP, the 2008 Farm Bill encourages development of
    irrigation storage facilities for areas experiencing drought in
    accordance with applicable EQIP program rules and on eligible on-farm
    agricultural land. This includes assistance to establish on-farm
    irrigation storage practices, which may be off-stream, but still on
    eligible land that is either owned or under the control of the
    producer.
        According to the statute, financial assistance through EQIP and
    AWEP many only be provided to achieve a measurable water conservation
    or water quality environmental benefit. Correspondingly, there is a
    requirement that EQIP and AWEP program applicants demonstrate
    irrigation history on cropland as a condition for approval of
    irrigation system improvements. This standard is in place to help meet
    the statutory requirement to validate a resulting environmental
    benefit. Demonstration of irrigation history, however, is not limited
    to evidence of in-field irrigation equipment. Producers that may be
    using other, transportable means to irrigate may document those methods
    as evidence of irrigation history.

        Question 2. As a report that the American Forest Foundation
    recently produced highlights, Alabama is spending quite a bit of its
    EQIP funds, roughly 17% and about 33% of WHIP funds on family forest--
    this is great, given how heavily forested my state is and given many of
    the forest health and fire challenges we are dealing with. What do you
    think is the reason for my state's focus on forests, as compared with
    other states, that average about 4% spending on forests?
        Answer. The focus of program assistance on forest related issues in
    your state is reflective of the locally-led process where conservation
    partners and producers provide recommendations to the agency for the
    kind and scope of assistance needed. Through local work groups and
    State Technical Committee's, the State Conservationist is provided
    latitude to focus program assistance to identified priority natural
    resource concerns. This flexibility allows each State Conservationist
    to prioritize funding on those geographic locations which have
    significant need for assistance to address resource concerns.
                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        Conservation Reserve Program (CRP).
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        FSA enters into contracts with agricultural producers to retire
    highly erodible and other environmentally sensitive land. During the 10
    to 15 year contract period, eligible land is converted to grass, trees,
    wildlife cover, or other conservation uses to improve soil, air, and
    water quality and improve wildlife habitat. The program was initially
    authorized by the 1985 Farm Bill and amended by every subsequent farm
    bill.
        FSA is responsible for overall implementation and has entered into
    agreements for technical assistance with the Natural Resources
    Conservation Service (NRCS), the Forest Service acting on behalf of
    State Foresters, and other technical service providers. Participants
    receive annual rental payments and half the cost of establishing
    conservation covers.
        Since the 1985 Farm Bill, CRP has evolved from a program with a
    commodity supply control component to a conservation program that has
    increasingly focused or targeted limited program resources.

        General Signup

        Producers may offer land for CRP general sign-up enrollment during
    designated signup periods and all offers compete and are ranked against
    all other offers nationwide using an Environmental Benefit Index (EBI)
    which is used to rank offers based on a number of environmental factors
    and cost.

        Continuous Signup

        Continuous signup targets environmentally-desirable land which
    could be devoted to conservation practices such as filter strips, grass
    waterways, and other practices that protect larger acreages. Offers may
    be made at any time.

        Conservation Reserve Enhancement Program (CREP)

        CREP is a state and Federal partnership to address environmental
    issues of importance to the state and nation. CREP combines state and
    Federal dollars with funding from nongovernment sources and provides a
    framework for USDA to work closely with state, tribal, and local
    governments to address specific environmental issues and goals.

        Farmable Wetlands Program (FWP)

        FWP is designed to restore up to one million acres of farmable
    wetlands and associated buffers by improving the land's hydrology and
    vegetation. This includes constructed wetlands developed to receive
    flow for row-crop agriculture drainage systems for the purpose of
    providing nitrogen removal; land that was devoted to commercial pond-
    raised aquaculture; and cropland that was subject to the natural
    overflow of a prairie wetland.

        Transition Incentive Program (TIP)

        TIP is designed to facilitate the transition of expiring CRP land
    from a retired or retiring owner or operator to a beginning or socially
    disadvantaged farmer or rancher to return the land to production for
    sustainable grazing or crop production. TIP provides annual rental
    payments for up to 2 additional years after the expiration of the CRP
    contract to facilitate this transition.

        Emergency Forestry Conservation Reserve Program (EFCRP)

        EFCRP was designed to help restore and enhance forest resources
    that were damaged by the 2005 hurricanes. By planting trees, such as
    longleaf pine and bottomland hardwoods, landowners and operators could
    enhance wildlife habitat and improve the ability of at-risk land to
    withstand future storms. Enrollment for EFCRP ended in January 2009.

        Wetland Restoration Floodplain Initiative

        This initiative was designed to restore the functions and values of
    wetland ecosystems that have been devoted to agricultural use. This
    500,000 acre initiative enrolls wetlands and buffers within a 100 year
    floodplain. These wetlands prevent degradation of the wetland area,
    increase sediment trapping efficiencies, improve water quality, prevent
    erosion and provide vital habitat for waterfowl and other wildlife.

        Wetland Restoration Non-Floodplain Initiative

        This initiative restores wetlands and playa lakes, which are
    shallow, depressional wetlands that are located outside a 100 year
    floodplain. This 250,000 acre initiative provides vital habitat for
    many wildlife species, filters runoff, recharges groundwater supplies
    and sequesters carbon.

        Bottomland Hardwood Initiative

        This initiative is designed to restore flood plains through the
    restoration of primarily bottomland hardwoods. This 250,000 acre
    initiative improves air and water quality and provides carbon
    sequestration benefits through reduction of greenhouse gases as well as
    increasing wildlife habitat.

        Quail Initiative

        This 350,000 acre initiative is designed to create habitat for the
    northern bobwhite quail and other grassland dependent birds. Bobwhite
    populations have declined with their habitat disappearing due to
    urbanization, increased grassland cultivation, and succession. This
    initiative provides successional grass buffers along agricultural field
    borders.

        Longleaf Pine Initiative

        This 250,000 acre initiative is designed to restore and re-
    establish longleaf pine stands that benefit wildlife species and
    protect water quality.

        Duck Nesting Habitat Initiative

        This 150,000 acre initiative is designed to restore wetlands
    located outside the 100 year floodplain in Iowa, Minnesota, Montana,
    North Dakota, and South Dakota. Restoring these wetlands will provide
    nesting ducks with critical habitat, nesting cover, security from
    predators, and food.

        State Acres for Wildlife Enhancement Initiative (SAFE)

        SAFE is an 850,000 acre initiative designed to target high priority
    state and regional wildlife objectives. SAFE provides the flexibility
    to meet the specific needs of high-value wildlife species in a
    participating state or region by targeting the restoration of vital
    habitat.
    3. Brief History
        Title XII of the Food Security Act of 1985, as amended (1985 Farm
    Bill), authorized CRP to enroll 40 to 45 million acres by 1990 with a
    primary goal of reducing soil erosion on highly erodible cropland.
    Secondary objectives included protecting the nation's long-run
    capability to produce food and fiber, reducing sedimentation, improving
    water quality, fostering wildlife habitat, curbing production of
    surplus commodities, and providing income support for farmers.
        The Food, Agriculture, Conservation, and Trade Act of 1990 (1990
    Farm Bill) extended CRP through 1995 and expanded the types of land
    eligible for enrollment to include lands that could reduce on-site or
    off-site threats to water quality if removed from production. Following
    1990 Farm Bill enactment, FSA adopted new rental rates based on soil-
    specific productivity and developed an EBI to rank offers.
        The Federal Agriculture Improvement and Reform Act of 1996 (1996
    Farm Bill) re-authorized CRP enrollment through 2002 and set a maximum
    enrollment of 36.4 million acres. After 1996 Farm Bill enactment, FSA
    modified the EBI to include a wildlife benefits component. To better
    target the program, FSA began enrollment of selected practices such as
    filter strips and riparian buffers on a continuous basis without
    competition which included an incentive payment to encourage
    enrollment. In 1997, FSA created CREP which furthered targeting through
    state-Federal conservation partnerships that address specific state and
    nationally significant water quality, soil erosion, and wildlife
    habitat concerns related to agriculture. Additional incentives are
    generally provided. An up-front signing payment and a practice
    incentive payment were established in 2000 to further enhance
    continuous enrollment, including CREP.
        The 2001 agriculture appropriations act authorized FWP which
    provided for non-competitive enrollment under continuous sign-up
    provisions and incentives for up to 500,000 acres of small non-flood
    plain wetlands and adjacent uplands in six states (Nebraska, Iowa,
    Minnesota, North Dakota, South Dakota, and Montana). Enrollment was
    limited to 100,000 acres per state.
        The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
    extended CRP enrollment authority through 2007 and increased the
    enrollment cap by 2.8 million acres to 39.2 million acres. An
    administrative requirement that cropland must have been recently
    cropped was added by the 2002 Farm Bill to require that cropland must
    have been cropped or considered cropped in at least 4 of the 6 years
    preceding enactment. The 2002 Farm Bill also generally authorized
    managed harvesting of forage, expanded FWP from the original six states
    to all states, and raised the enrollment cap to 1 million acres while
    keeping the 100,000 acre state maximum.
        During 2006, FSA offered CRP participants the opportunity to re-
    enroll or extend contracts set to expire between 2007 and to 2010 on
    about 28 million acres. FSA ranked the acreage based on the EBI score
    when the land was enrolled. The highest ranked were offered new 10 or
    15 year contracts. Lower ranking contracts were offered extensions of
    2-5 years depending upon the relative ranking. This preserved farmers'
    ability to protect America's most sensitive agricultural lands. Holders
    of about 82 percent of expiring contract acres were approved for re-
    enrollment or extension.
        The 2006 supplemental emergency appropriations act authorized the
    EFCRP to provide assistance to timberland damaged by the 2005
    hurricanes. Acreage enrolled does not count against the CRP enrollment
    cap.
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    extended CRP enrollment authority through September 30, 2012, and
    required that enrollment be no more than 32 million acres beginning
    October 1, 2009. Other changes included:

       Expansion of practices under FWP;

       50 percent cost-share for tree thinning activities;

       New payment limitation applicability and adjusted gross
            income eligibility criteria;

       Updated cropping history to 4 of 6 years between 2002 and
            2007;

       Added new routine grazing authority;

       Added TIP; and

       Added authority to exclude continuous and CREP acreage from
            the 25 percent county cropland enrollment limit.
    4. Purpose/Goals
        CRP's purpose is ``to assist owners and operators of land to
    conserve and improve the soil, water, and wildlife resources of such
    land and to address issues raised by state, regional, and national
    conservation initiatives.''
    5. Success in Meeting Programmatic Purpose/Goals
        CRP environmental benefits include:

                               Total Land Enrolled and Land Enrolled in Certain Categories
    ----------------------------------------------------------------------------------------------------------------
                                                                             Fiscal Year (FY)
             Measure                   Unit         ----------------------------------------------------------------
                                                         2006         2007         2008         2009         2010
    ----------------------------------------------------------------------------------------------------------------
    Total Land Enrolled       million acres                 36.0         36.8         34.6         33.8         31.3
    In Buffers                million acres                 1.84         1.90         2.00         2.01         2.02
    Wetlands                  million acres                 2.01         2.06         1.98         1.98         2.05
    HEL 1                     million acres                 25.2         25.5         23.6         22.8         20.5
    ----------------------------------------------------------------------------------------------------------------
                                Reductions (not leaving field or intercepted by buffers)
    ----------------------------------------------------------------------------------------------------------------
    Sediment                  million tons                   210          216          219          220          220
    Nitrogen                  million lbs                    607          623          616          611          607
    Phosphorus                million lbs                    121          124          123          123          122
    ----------------------------------------------------------------------------------------------------------------
                             Greenhouse Gas Reduction (Carbon Dioxide (CO2) equivalent/Year)
    ----------------------------------------------------------------------------------------------------------------
    CO2 sequestered           million metric tons             51           50           48           47           44
    Energy and Fertilizer     million metric tons              9            9            9            8            8
                                                    ----------------------------------------------------------------
      Total                   million metric tons             60           60           57           55           52
    ----------------------------------------------------------------------------------------------------------------
    1 HEL means highly erodible land.

        CRP improves water quality.

       CRP reduces the nitrogen and phosphorus leaving a field by
            runoff and percolation. Using models developed by the Food and
            Agricultural Policy Research Institute (FAPRI), in FY 2010, 607
            million pounds less nitrogen and 122 million pounds less
            phosphorus left fields due to CRP, which accounted for 95 and
            86 percent reductions, respectively, as compared to cropped
            land conditions in 2005/2006.

       Grass filters and riparian buffers (partial field
            enrollments) intercept sediment, nutrients, and other
            contaminants before they enter waterways. FAPRI's model
            estimates that in 2010, 356 million pounds of nitrogen and 72
            million pounds of phosphorus were intercepted by 2.0 million
            acres of CRP buffers, nationally.

       In 2010, grass and tree plantings reduced nitrate loss by
            109 million pounds. Nitrate is a form of nitrogen that is
            biologically available to algae. Excess nitrate contributes to
            the formation of hypoxic zones in the Gulf of Mexico,
            Chesapeake Bay, and other waters.

       Wetlands restored and constructed by CRP improve water
            quality by converting nitrate/nitrogen into benign atmospheric
            nitrogen. In 2010, Iowa's 65 CREP constructed wetland projects
            on 1,808 acres reduced nitrate runoff by nearly 650,000 pounds.

        CRP enhances wildlife habitat. The 31.3 million acres of grass,
    trees, and wetlands established by CRP benefit numerous wildlife
    species. Several independent studies have identified benefits to
    multiple bird populations including:

       Prairie Pothole Ducks--Researchers from the U.S. Fish and
            Wildlife Service (USFWS) estimated that the CRP contributed to
            a net increase of about two million additional ducks per year
            (30 percent increase in duck production) since 1992 in North
            Dakota, South Dakota, and Northeastern Montana. Populations
            fluctuate on a year-to-year basis due to differences in
            precipitation patterns.

       Ringed-Neck Pheasants--Western EcoSystems Technology, Inc.,
            found that, in prime pheasant habitat, a four percent increase
            in CRP herbaceous vegetation was associated with a 22 percent
            increase in pheasant counts.

       Sage Grouse--The Washington Department of Natural Resources
            found that CRP enrollment was associated with halting a decline
            (25 percent between 1970-1988) in sage grouse populations. The
            study found that a region without substantial CRP enrollment
            had continued sage grouse population decline.

       Northern Bobwhite Quail--Mississippi State University found
            that quail observations were positively related to CRP
            enrollment. The quail population response varies by cover and
            region.

       Grassland Birds--The CRP was identified as a ``Reason for
            Hope'' for grassland birds in the 2009 ``State of the Birds''
            report, which documented serious declines in grassland birds.
            Researchers from the United States Fish and Wildlife Service,
            U.S. Geological Survey, and the University of Montana found
            that CRP had a large impact on grassland bird populations,
            including two birds designated as species of continental
            importance by Partners in Flight.

        CRP sequesters carbon. CRP sequesters more carbon on private lands
    than any other federally administered program. In 2010, CRP resulted in
    the equivalent of a 52 million metric ton net reduction in carbon
    dioxide (CO2) from CO2 sequestration, reduced
    fuel use, and nitrous oxide emissions avoided from not applying
    fertilizer. Carbon sequestration helps offset the release of greenhouse
    gases (GHG) into the atmosphere. GHG have been associated with
    anthropogenic climate change.
        CRP protects and enhances soil productivity. CRP conservation
    covers reduce erosion and protect soil productivity. By targeting
    fragile cropland and placing these lands into protective conservation
    covers, the CRP greatly reduces sheet, rill, and wind soil erosion.
    Each year since 2002, CRP reduced soil erosion by 325 million tons or
    more from pre-CRP levels. Since 1986, CRP has reduced more than 8
    billion tons of soil erosion. (Note: Erosion rates and total sediment
    provided at the beginning of this section are not comparable
    measurements because erosion includes the rate of soil loss through
    wind and water erosion.)
        CRP reduces downstream flood damage. CRP lands reduce downstream
    flood damage by helping to reduce peak flows after storm events by
    holding and slowly releasing the storm water.
        FSA is using CRP enrollment data, the USDA soils and natural
    resource inventories, and cooperative agreements with Federal, state,
    and other partners to refine these performance measures and to estimate
    the benefits from CRP. For more information see: http://
    www.fsa.usda.gov/FSA/webapp?area=home&subject=
    ecpa&topic=nra.
        Other sources of information related to the topics discussed above
    include the following:

    http://www.fsa.usda.gov/Internet/FSA_File/factsheet_crp_bennies.pdf
    http://www.fsa.usda.gov/FSA/webapp?area=home&subject=ecpa&topic=nra
    http://www.fsa.usda.gov/Internet/FSA_File/duck_report.pdf
    http://www.fsa.usda.gov/Internet/FSA_File/pheasant_study.pdf
    http://www.fsa.usda.gov/Internet/FSA_File/sage_grouse.pdf
    http://www.fsa.usda.gov/Internet/FSA_File/quail_study.pdf
    http://www.fsa.usda.gov/Internet/FSA_File/grassland_birds_fws.pdf
    http://www.stateofthebirds.org/2009/habitats/game-birds
    http://www.fsa.usda.gov/Internet/FSA_File/fyannual2009.pdf
    http://www.fsa.usda.gov/Internet/FSA_File/606586_hr.pdf

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Conservation Reserve Program     $1,784,665  $1,788,852  $1,798,522  $1,863,004  $1,930,723  $1,948,248  $1,990,178  $1,933,660  $1,910,630   $1,997,496
    Emergency Forestry Conservation           0           0           0           0       5,500       6,060       9,944       9,881       8,297        9,291
     Reserve Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
    ---------------------------------------------------------------------------------------------------------------------------------------------------------
        CRP is funded by Commodity Credit Corporation (CCC). Budget authority for CCC programs is based on obligations. Funds that are obligated in one
     fiscal year may not be disbursed until a succeeding fiscal year or fiscal years.

                                                                 FY 2002 Through FY 2011 Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Conservation Reserve Program     $1,785,059  $1,789,258  $1,800,675  $1,828,470  $1,895,872  $1,963,161  $1,990,867  $1,916,468  $1,910,630   $1,997,496
    Emergency Forestry Conservation           0           0           0           0       5,500       6,060       9,524       9,846       8,297        9,291
     Reserve Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Ensure our National Forests and private working lands are conserved, restored,
     and made more resilient to climate change, while enhancing our resources.

     Program
                 Program ItemsConservation      Conservation Reserve               974,124       1,990,178       1,872,881       1,910,630       1,997,496
           Program
          Grassroots Source Water              1,856           3,687           5,000           5,000           5,000
           Protection Program
          State Mediation Grants 1               526           1,092           1,092           1,092           1,092
          Direct Conservation Loans                0               0               0             114           1,065
           1
          Guaranteed Conservation                  0               0               0               1             278
           Loans 1
          Other Conservation                   4,600           3,247              46              ^4          33,334
           Payments 2
                                     -------------------------------------------------------------------------------
            Administrative Costs             107,118         240,070         256,932         278,940         278,825
             (direct)
            Indirect costs                     9,773          82,642          63,352          68,779          72,804
                                     -------------------------------------------------------------------------------
              Total Costs                  1,097,997       2,320,916       2,199,303       2,264,552       2,389,894
              FTEs                             1,228           3,023           2,015           2,928           2,885

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining,
     repopulating, and economically thriving.

     Program
                 Program ItemsIncome Support and Disaster
     Assistance      Emergency Conservation          149,727.00      128,456.00            0.00       92,459.00       39,719.00
           Program 3
          Administrative costs            776,465.00      683,795.00      694,980.00      744,303.00      753,934.00
           (direct)
          Indirect costs                   47,548.00      234,633.00      226,905.00      242,967.00      246,299.00
                                     -------------------------------------------------------------------------------
            Total Costs                   973,740.00    1,046,884.00      921,885.00    1,079,729.00    1,039,952.00
            FTEs                            8,905.00        8,620.00        9,528.75        8,355.00        8,140.00Conservation      Emergency Conservation                   0               0      153,044.00               0               0
           Program 3
          Administrative costs                     0               0        8,344.00               0               0
           (direct)
          Indirect costs                           0               0               0            0.00               0
                                     -------------------------------------------------------------------------------
            Total Costs                         0.00            0.00      161,388.00            0.00            0.00
            FTEs                                0.00            0.00            0.25            0.00            0.001 FSA has programs related to supporting the conservation goal that are not part of the specific request.
    2 Grassland Reserve Program (GRP) payments are reported by NRCS for budget purposes. FSA administrative costs
      related to GRP and Voluntary Public Access and Habitat Incentive Program are included.
    3 The information related to the Emergency Conservation Program (ECP) is reported as an emergency program under
      Goal 1. We have broken out the program information but the administrative costs relate to all programs for the
      Income Support and Disaster Assistance Goal.

    9. Eligibility Criteria
        Eligible Producers

        An eligible producer must have owned or operated eligible land for
    at least 12 months prior to enrollment. In cases where the land was not
    acquired to enroll in the CRP, a waiver may be authorized.

        Eligible Land

        Land that may be offered includes cropland that is planted or
    considered planted to an agricultural commodity 4 of the 6 crop years
    from 2002 through 2007, and is physically and legally capable of being
    planted in a normal manner to an agricultural commodity.
        For continuous signup, land may be certain marginal pasture land.

        Additional Cropland Requirements

        In addition to cropping history, for general signup, cropland must
    meet one of the following:

       Have a weighted average erosion index of 8 or greater;

       Be expiring CRP acreage; or

       Be located in a national or state CRP conservation priority
            area.
    10. Utilization (Participation) Data

       Total enrollment of 31.31 million acres in 750,000 contracts
            on 416,000 farms.

       Consists of 26.2 million acres in 338,000 contracts on
            222,000 farms in general signup enrollment and 5.0 million
            acres in 412,000 contracts on 239,000 farms.

                                        CRP Enrollment by State as of April 2011
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Annual Rental  Payments
             State               Number of      Number of Farms        Acres      ----------------------------------
                                 Contracts                                             ($1,000)          ($/Acre)
    ----------------------------------------------------------------------------------------------------------------
                    U.S.            749,913           415,953        31,213,510         1,720,354            55.12
                 Alabama              9,108             6,488           398,166            18,286            45.93
                  Alaska                 45                28            19,037               671            35.25
                Arkansas              5,956             3,289           250,780            14,971            59.70
              California                506               390           124,510             4,712            37.84
                Colorado             12,744             6,125         2,251,395            74,324            33.01
             Connecticut                 16                13               163                13            78.44
                Delaware                666               349             6,850               754           110.13
                 Florida              1,318             1,067            56,382             2,262            40.12
                 Georgia              9,069             6,440           318,782            14,973            46.97
                  Hawaii                  9                 9               167                10            57.64
                   Idaho              5,200             2,960           668,317            29,619            44.32
                Illinois             82,044            44,833         1,035,931           118,474           114.36
                 Indiana             38,168            21,360           286,447            31,196           108.91
                    Iowa            106,489            53,422         1,673,364           214,169           127.99
                  Kansas             47,139            26,794         2,738,960           109,973            40.15
                Kentucky             17,649             9,459           360,295            40,039           111.13
                        Louisiana     5,036             3,210           327,661            20,172            61.56
                   Maine                679               472            17,972               931            51.83
                Maryland              6,427             3,518            79,041            10,891           137.78
           Massachusetts                  4                 4                15                 3           172.53
                Michigan             15,185             8,695           229,140            20,198            88.15
               Minnesota             63,002            33,112         1,640,921           110,574            67.39
             Mississippi             19,808            12,458           850,134            40,870            48.07
                Missouri             36,459            21,063         1,364,524           101,211            74.17
                 Montana             15,257             5,982         2,863,105            92,025            32.14
                Nebraska             28,306            15,872         1,081,185            65,850            60.91
           New Hampshire                  5                 5                58                 3            55.46
              New Jersey                275               194             2,449               170            69.29
              New Mexico              1,978             1,283           453,819            15,221            33.54
                New York              2,866             2,032            53,136             3,713            69.87
          North Carolina              8,076             5,263           117,457             8,049            68.53
            North Dakota             34,254            16,766         2,650,455            95,825            36.15
                    Ohio             38,008            21,227           343,596            40,952           119.19
                Oklahoma              7,500             5,074           861,360            28,902            33.55
                  Oregon              4,279             2,253           551,279            28,710            52.08
            Pennsylvania             12,115             7,625           220,750            22,729           102.96
             Puerto Rico                 19                19             2,032               130            63.93
          South Carolina              7,649             4,323           159,731             6,129            38.37
            South Dakota             31,613            14,790         1,165,373            65,084            55.85
               Tennessee              7,321             4,883           205,282            13,775            67.10
                   Texas             22,107            16,234         3,465,165           124,839            36.03
                    Utah                875               543           167,952             5,206            31.00
                 Vermont                384               271             2,875               288           100.18
                Virginia              5,839             4,464            63,416             3,760            59.29
              Washington             12,406             5,168         1,453,510            81,116            55.81
           West Virginia                447               363             5,840               431            73.73
               Wisconsin             24,642            15,107           400,679            32,064            80.02
                 Wyoming                965               653           224,020             6,087            27.17
            Not Reported                  1                 1                28                 2            82.00
    ----------------------------------------------------------------------------------------------------------------
    Note: ``Not Reported'' includes a contract with a data anomaly.

    11. Duplication or Overlap with Other Programs
        CRP is not a duplicate of other USDA conservation programs. Certain
    programs may share some common eligibility, but each program provides
    producers a unique set of options for the short and long-term
    management of the farm or ranch. Generally, the same parcel of land
    cannot be enrolled in more than one program at the same time. These
    programs are complementary because they provide choices for producers
    in how they voluntarily protect their land and provide conservation
    benefits to their community and beyond.
        CRP enrolls land to create wildlife habitat. All of the lands
    eligible for CRP could be enrolled in Wildlife Habitat Incentive
    Program (WHIP) if they fall within the WHIP priority areas but not all
    lands eligible for WHIP could be enrolled in CRP.
        CRP and WRP address the restoration and long term conservation of
    wetland resources. However, CRP is directed primarily to cropland and
    marginal pastureland, and many CRP participants with wetland resources
    are unwilling to have an easement placed on the land.
        In the case of Grasslands Reserve Program (GRP), most of the land
    is either native sod or pasture but some cropland may be enrolled into
    easements or long-term contracts. There is some potential overlap of
    eligible acres in riparian areas near streams or rivers, but this gives
    producers the flexibility to enroll in the program that best suits
    their needs.
        CREP targets specific resource concerns in a state CREP project
    area while providing additional incentives for enrollment above and
    beyond what is available under continuous CRP and Initiatives. These
    additional incentives are made possible through USDA and state
    government partnerships.
        Initiatives and continuous CRP are available nationwide or in
    certain selected geographic areas.
        Both Environmental Quality Incentives Program (EQIP) and CRP
    address natural resource concerns, the land uses on which the practices
    are applied generally are distinct. There could be minimal overlap
    where CRP enrolls windbreaks, shelterbelts and shallow water
    impoundments for wildlife.
        There are many examples of FSA and NRCS programs working together
    to achieve conservation goals. For example, in the Chesapeake Bay,
    combinations of land retirement and conservation practices/systems are
    used to achieve nutrient, sediment and other resource objectives.
    12. Waste, Fraud and Abuse
        There has been no extensive Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of the program during the past 5
    years. Although occasional cases of producer misconduct may have been
    identified and addressed through investigations in the past, we do not
    have a current audit that indicates on-going systemic waste, fraud or
    abuse. FSA conducts its own internal investigation through its county
    office review process and through its internal review audit process. In
    2008, 2009 and 2010 the amount of improper payments for CRP was .77
    percent, 1.2 percent, and 1.77 percent, respectively.
    13. Effect of Administrative PAYGO
        Exhibit 1 shows the costs and savings related to USDA's
    Administrative PAYGO Scorecard.
                                     ______

    1. Program Name
        Emergency Conservation Program (ECP).
        Prepared by USDA's FSA.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        ECP was authorized by the Agricultural Credit Act of 1978, as
    amended, to provide financial assistance to agricultural producers to
    rehabilitate farmlands damaged by natural disaster when new
    conservation problems have been created that: (1) if not treated, will
    impair or endanger the land; (2) materially affect the productive
    capacity of the land; (3) represent damage that is unusual in character
    and is not the type that would recur frequently in the same area; and
    (4) will be so costly to rehabilitate that Federal assistance is or
    will be required to return the land to productive agricultural use.
    Funding is appropriated by Congress. ECP generally is funded through
    periodic supplemental appropriations that remains available until
    expended.
    4. Purpose/Goals
        ECP provides emergency funding and technical assistance for farmers
    and ranchers to rehabilitate farmland damaged by natural disasters and
    for carrying out emergency water conservation measures in periods of
    severe drought.
    5. Success in Meeting Programmatic Purpose/Goals
        ECP successfully provides financial assistance to agricultural
    producers to rehabilitate farmlands damaged by natural disasters. In FY
    2010, nearly $54 million was allocated to help producers throughout the
    country address damage from drought, floods, hurricanes, wildfire,
    tornados and other disasters. As of June 20, 2011, in FY 2011, nearly
    $65 million (see 2011 allocations table below) has been allocated to
    assist with similar disasters, including the devastating tornados that
    have hit states such as Alabama, Arkansas, Alabama, Georgia, North
    Carolina, Pennsylvania, Virginia and others, and floods in Arkansas,
    California, Colorado, Iowa, Kentucky, Oregon, Minnesota, New York,
    North Carolina, Tennessee, Virginia, Wisconsin and other states. If
    funds allocated to a state are not used within a reasonable period of
    time, the funds are withdrawn and reallocated to meet ECP needs
    elsewhere.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Emergency Conservation Program            0           0     $11,929    $150,000    $161,800     $18,000    $204,413           0           0            0
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        The Emergency Conservation Program (ECP) receives no-year discretionary appropriations. Actual ECP cost-share outlays are made when practices are
     completed.

                                                                 FY 2002 Through FY 2011 Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Emergency Conservation Program      $32,365     $46,980     $23,100     $57,123     $88,311     $72,166     $27,730     $71,084     $76,879      $71,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Ensure our National Forests and private working lands are conserved, restored,
     and made more resilient to climate change, while enhancing our resources.

     Program
                 Program ItemsConservation      Conservation Reserve               974,124       1,990,178       1,872,881       1,910,630       1,997,496
           Program
          Grassroots Source Water              1,856           3,687           5,000           5,000           5,000
           Protection Program
          State Mediation Grants 1               526           1,092           1,092           1,092           1,092
          Direct Conservation Loans                0               0               0             114           1,065
           1
          Guaranteed Conservation                  0               0               0               1             278
           Loans 1
          Other Conservation                   4,600           3,247              46              ^4          33,334
           Payments 2
                                     -------------------------------------------------------------------------------
            Administrative Costs             107,118         240,070         256,932         278,940         278,825
             (direct)
            Indirect costs                     9,773          82,642          63,352          68,779          72,804
                                     -------------------------------------------------------------------------------
              Total Costs                  1,097,997       2,320,916       2,199,303       2,264,552       2,389,894
              FTEs                             1,228           3,023           2,015           2,928           2,885

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining,
     repopulating, and economically thriving.

     Program
                 Program ItemsIncome Support and Disaster
     Assistance      Emergency Conservation          149,727.00      128,456.00            0.00       92,459.00       39,719.00
           Program 3
          Administrative costs            776,465.00      683,795.00      694,980.00      744,303.00      753,934.00
           (direct)
          Indirect costs                   47,548.00      234,633.00      226,905.00      242,967.00      246,299.00
                                     -------------------------------------------------------------------------------
            Total Costs                   973,740.00    1,046,884.00      921,885.00    1,079,729.00    1,039,952.00
            FTEs                            8,905.00        8,620.00        9,528.75        8,355.00        8,140.00Conservation      Emergency Conservation                   0               0      153,044.00               0               0
           Program 3
          Administrative costs                     0               0        8,344.00               0               0
           (direct)
          Indirect costs                           0               0               0            0.00               0
                                     -------------------------------------------------------------------------------
            Total Costs                         0.00            0.00      161,388.00            0.00            0.00
            FTEs                                0.00            0.00            0.25            0.00            0.001 FSA has programs related to supporting the conservation goal that are not part of the specific request.
    2 Grassland Reserve Program (GRP) payments are reported by NRCS for budget purposes. FSA administrative costs
      related to GRP and Voluntary Public Access and Habitat Incentive Program are included.
    3 The information related to the Emergency Conservation Program (ECP) is reported as an emergency program under
      Goal 1. We have broken out the program information but the administrative costs relate to all programs for the
      Income Support and Disaster Assistance Goal.

    9. Eligibility Criteria
        County FSA committees determine land eligibility based on on-site
    inspections of damage, taking into account the type and extent of
    damage. For land to be eligible, the natural disaster must create new
    conservation problems that, if untreated, would:

       impair or endanger the land;

       materially affect the land's productive capacity;

       represent unusual damage which, except for wind erosion, is
            not the type likely to recur frequently in the same area; and

       be so costly to repair that Federal assistance is or will be
            required to return the land to productive agricultural use.

        Conservation problems existing prior to the applicable disaster are
    ineligible for ECP assistance.
        ECP program participants receive cost-share assistance of up to 75
    percent of the cost to implement approved emergency conservation
    practices, as determined by county FSA committees. Socially-
    disadvantaged producers may be eligible for up to 90 percent cost-share
    assistance.
        Individual or cumulative requests for cost-sharing of $50,000 or
    less per person, per disaster are approved at the county committee
    level. Cost-sharing from $50,001 to $100,000 is approved at the state
    committee level. Cost-sharing over $100,000 must be approved by FSA's
    national office. Further, there is a payment limitation of $200,000 per
    person or legal entity per disaster.
    10. Utilization (Participation) Data
        Since 1978, ECP has provided assistance to help producers on
    between 2,000 to nearly 38,000 farms a year. The wide range of
    assistance stems from the fact that ECP is an appropriated program that
    is only utilized when needed by farmers and ranchers after disasters
    strike.
        As of June 20, 2011, about $167 million is estimated in unmet ECP
    needs primarily related to recent natural disasters including flooding,
    tornadoes, drought, and wildfires.
    11. Duplication or Overlap with Other Programs
        Although the Emergency Watershed Protection Program (EWP) and ECP
    have similar goals, generally, ECP is farm level, and EWP is watershed
    level. Through ECP, USDA works directly with farmers to cost-share on
    practices to restore land and return it to production after a natural
    disaster. Under EWP, USDA works with states, counties, or other local
    sponsors to provide financial assistance to address problems caused by
    natural disasters that affect area wide issues. Sponsors must provide a
    share of the resources to support the project.
        ECP also works in concert with the Emergency Forest Restoration
    Program (EFRP), authorized by the 2008 Farm Bill, Forestry Title, to
    address all eligible private agricultural land after a natural
    disaster. EFRP addresses the critical need to restore nonindustrial
    private forestland after a natural disaster such a hurricane or
    tornado.
    12. Waste, Fraud and Abuse
        Although occasional cases of producer misconduct may have been
    identified and addressed through investigations in the past, no current
    systemic waste, fraud or abuse has been identified related to this
    program. Due to the nature of ECP funding, ECP has been audited often.
    Most recently, following appropriations under the 2008 supplemental
    appropriations act and the 2008 disaster relief and recovery
    supplemental appropriations act as well as transfer authority provided
    in the 2009 supplemental appropriations act, OIG conducted the
    following audits:

        a. Review of Emergency Disaster Assistance for 2008 Disasters:
            Emergency Conservation Program, (Audit 03702-1-TE). This audit,
            which focused on ECP assistance to address damages from
            Hurricanes Ike and Gustav, did not find many significant
            issues.

        b. Review of Emergency Disaster Assistance for the 2008 Natural
            Disasters: Emergency Conservation Program (Audit 03702-1-TE).
            This audit, which focused on ECP assistance to address damage
            from the 2008 Midwest Floods, had a number of findings, which
            could only be addressed with additional funding and staff
            salary.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Voluntary Public Access and Habitat Incentive Program (VPA-HIP).
        Prepared by USDA's Farm Service Agency.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        VPA-HIP is a competitive grant program authorized by the 2008 Farm
    Bill. Up to $50 million is available through FY 2012. Funding is
    limited to state and tribal governments establishing new public access
    programs, expanding existing public access programs, and/or enhancing
    wildlife habitat on lands enrolled in public access programs.
    4. Purpose/Goals
        The primary objective of the VPA-HIP is to encourage owners and
    operators of privately-held farm, ranch, and forestland to voluntarily
    make that land available for access by the public for wildlife-
    dependent recreation, including hunting or fishing, under programs
    implemented by state or tribal governments. VPA-HIP will provide
    environmental, economic and social benefits including, but not limited
    to, enhanced wildlife habitat, improved wildlife populations, increased
    revenue for rural communities, and expanded opportunities for re-
    connecting Americans with the great outdoors.
    5. Success in Meeting Programmatic Purpose/Goals
        Funding was first obligated under VPA-HIP in 2010. It is too soon
    to assess the success in meeting programmatic goals.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Voluntary Public Access and               0           0           0           0           0           0           0           0     $11,756      $21,578
     Habitat Incentives Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                                 FY 2002 Through FY 2011 Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Voluntary Public Access and               0           0           0           0           0           0           0           0           0      $33,334
     Habitat Incentives Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Ensure our National Forests and private working lands are conserved, restored,
     and made more resilient to climate change, while enhancing our resources.

     Program
                 Program ItemsConservation      Conservation Reserve               974,124       1,990,178       1,872,881       1,910,630       1,997,496
           Program
          Grassroots Source Water              1,856           3,687           5,000           5,000           5,000
           Protection Program
          State Mediation Grants 1               526           1,092           1,092           1,092           1,092
          Direct Conservation Loans                0               0               0             114           1,065
           1
          Guaranteed Conservation                  0               0               0               1             278
           Loans 1
          Other Conservation                   4,600           3,247              46              ^4          33,334
           Payments 2
                                     -------------------------------------------------------------------------------
            Administrative Costs             107,118         240,070         256,932         278,940         278,825
             (direct)
            Indirect costs                     9,773          82,642          63,352          68,779          72,804
                                     -------------------------------------------------------------------------------
              Total Costs                  1,097,997       2,320,916       2,199,303       2,264,552       2,389,894
              FTEs                             1,228           3,023           2,015           2,928           2,885

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining,
     repopulating, and economically thriving.

     Program
                 Program ItemsIncome Support and Disaster
     Assistance      Emergency Conservation          149,727.00      128,456.00            0.00       92,459.00       39,719.00
           Program 3
          Administrative costs            776,465.00      683,795.00      694,980.00      744,303.00      753,934.00
           (direct)
          Indirect costs                   47,548.00      234,633.00      226,905.00      242,967.00      246,299.00
                                     -------------------------------------------------------------------------------
            Total Costs                   973,740.00    1,046,884.00      921,885.00    1,079,729.00    1,039,952.00
            FTEs                            8,905.00        8,620.00        9,528.75        8,355.00        8,140.00Conservation      Emergency Conservation                   0               0      153,044.00               0               0
           Program 3
          Administrative costs                     0               0        8,344.00               0               0
           (direct)
          Indirect costs                           0               0               0            0.00               0
                                     -------------------------------------------------------------------------------
            Total Costs                         0.00            0.00      161,388.00            0.00            0.00
            FTEs                                0.00            0.00            0.25            0.00            0.001 FSA has programs related to supporting the conservation goal that are not part of the specific request.
    2 Grassland Reserve Program (GRP) payments are reported by NRCS for budget purposes. FSA administrative costs
      related to GRP and Voluntary Public Access and Habitat Incentive Program are included.
    3 The information related to the Emergency Conservation Program (ECP) is reported as an emergency program under
      Goal 1. We have broken out the program information but the administrative costs relate to all programs for the
      Income Support and Disaster Assistance Goal.

    9. Eligibility Criteria
        Only states and tribal governments are eligible for Federal VPA-HIP
    funding. States and tribal governments may propose to use VPA-HIP grant
    funding to expand existing public access programs, create new public
    access programs, and/or provide incentives to enhance wildlife habitat
    on lands enrolled in state or tribal government public access programs.
    10. Utilization (Participation) Data
        States and tribal governments participating in VPA-HIP are Arizona,
    California, Colorado, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas,
    Kentucky, Michigan, Minnesota, Montana, Nebraska, New Hampshire, North
    Dakota, Oregon, Pennsylvania, South Dakota, Texas, Utah, Virginia,
    Washington, Wisconsin, Wyoming and the Confederated Tribes and Bands of
    the Yakama Nation.
    11. Duplication or Overlap with Other Programs
        VPA-HIP is unlike any other USDA program as it specifically targets
    public access. Incentives for enhancing wildlife habitat under VPA-HIP
    are limited to those private land owners and operators who make land
    available for public access. The Department of Interior Federal Aid in
    Wildlife Restoration Act makes funds available from an 11 percent
    excise tax on sporting arms and ammunition through the Secretary of
    Interior to states. Activities eligible under the Landowner Incentive
    Program (LIP) of the USFWS for such funding include acquisition and
    development of access and improvement of wildlife habitat. VPA-HIP has
    proven complementary to state public access program initiated as a
    result of LIP funding.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Grass Roots Source Water Program (Source Water).
        Prepared by USDA's Farm Service Agency.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Source Water is a grant program implemented for State Rural Water
    Associations and is designed to help prevent source water pollution in
    states through voluntary practices installed by producers and other
    landowners at the local level.
        Source Water uses onsite technical assistance capabilities of each
    state rural water association that operates a source water program in
    the state. State rural water associations deliver assistance in
    developing source water protection plans within watersheds for the
    common goal of preventing the contamination of drinking water supplies.
        Source water is surface and ground water that is consumed by rural
    residents. According to the National Rural Water Association, ground
    water is the primary source of drinking water for some 44,000
    communities in the United States. Through the program, state rural
    water associations hire, for every participating state, a full-time
    source water specialist who possesses knowledge and experience in rural
    issues. The technician works with FSA's state and county leadership,
    NRCS technicians, local leaders, and communities to create operating
    plans that identify priority areas where local pollution prevention
    efforts are needed most in their respective states.
        This collaboration is intended to result in the development of a
    source water protection plan that outlines voluntary measures for
    farmers, ranchers, and local communities that can be installed on their
    lands to prevent source water pollution. Voluntary measures may range
    from storing herbicides, pesticides, or other substances in more secure
    containers to relocating waste lagoons. By working at the grassroots
    level, local team members inform and educate participants about source
    water protection measures that benefit their neighbors and communities.
    Additionally, the plans also establish steering committees to evaluate
    voluntary practices that have been implemented. FSA monitors the
    overall performance of the program.
    4. Purpose/Goals
        Source Water's goal is to implement source water protection plans
    in each state by assisting small and rural communities in protecting
    their drinking water resources. There are source water protection plans
    in 43 states. The ultimate goal of the project is to assist public
    water utilities and the agricultural community in coordinating efforts
    by taking a proactive approach to maintain and/or improve water quality
    within their source water protection planning areas.
    5. Success in Meeting Programmatic Purpose/Goals
        Between October 1, 2009, and September 30, 2010, source water
    protection plans were completed in 119 communities which provide
    protection measures for 470 public drinking water sources (415 wells
    and 55 surface water intakes).

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Grassroots Source Water                  $0          $0          $0          $0      $3,713      $3,713      $3,687      $5,000      $5,000       $3,577
     Protection Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                                 FY 2002 Through FY 2011 Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                       FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                       Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Grassroots Source Water                  $0          $0          $0          $0      $3,713      $3,713      $3,687      $5,000      $5,000       $4,242
     Protection Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Ensure our National Forests and private working lands are conserved, restored,
     and made more resilient to climate change, while enhancing our resources.

     Program
                 Program ItemsConservation      Conservation Reserve               974,124       1,990,178       1,872,881       1,910,630       1,997,496
           Program
          Grassroots Source Water              1,856           3,687           5,000           5,000           5,000
           Protection Program
          State Mediation Grants 1               526           1,092           1,092           1,092           1,092
          Direct Conservation Loans                0               0               0             114           1,065
           1
          Guaranteed Conservation                  0               0               0               1             278
           Loans 1
          Other Conservation                   4,600           3,247              46              ^4          33,334
           Payments 2
                                     -------------------------------------------------------------------------------
            Administrative Costs             107,118         240,070         256,932         278,940         278,825
             (direct)
            Indirect costs                     9,773          82,642          63,352          68,779          72,804
                                     -------------------------------------------------------------------------------
              Total Costs                  1,097,997       2,320,916       2,199,303       2,264,552       2,389,894
              FTEs                             1,228           3,023           2,015           2,928           2,885

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining,
     repopulating, and economically thriving.

     Program
                 Program ItemsIncome Support and Disaster
     Assistance      Emergency Conservation          149,727.00      128,456.00            0.00       92,459.00       39,719.00
           Program 3
          Administrative costs            776,465.00      683,795.00      694,980.00      744,303.00      753,934.00
           (direct)
          Indirect costs                   47,548.00      234,633.00      226,905.00      242,967.00      246,299.00
                                     -------------------------------------------------------------------------------
            Total Costs                   973,740.00    1,046,884.00      921,885.00    1,079,729.00    1,039,952.00
            FTEs                            8,905.00        8,620.00        9,528.75        8,355.00        8,140.00Conservation      Emergency Conservation                   0               0      153,044.00               0               0
           Program 3
          Administrative costs                     0               0        8,344.00               0               0
           (direct)
          Indirect costs                           0               0               0            0.00               0
                                     -------------------------------------------------------------------------------
            Total Costs                         0.00            0.00      161,388.00            0.00            0.00
            FTEs                                0.00            0.00            0.25            0.00            0.001 FSA has programs related to supporting the conservation goal that are not part of the specific request.
    2 Grassland Reserve Program (GRP) payments are reported by NRCS for budget purposes. FSA administrative costs
      related to GRP and Voluntary Public Access and Habitat Incentive Program are included.
    3 The information related to the Emergency Conservation Program (ECP) is reported as an emergency program under
      Goal 1. We have broken out the program information but the administrative costs relate to all programs for the
      Income Support and Disaster Assistance Goal.

    9. Eligibility Criteria
        States are selected based on a formula that ranks states based on
    total maximum daily loads, impaired waters, total farm acres, and total
    toxic discharges.
    10. Utilization (Participation) Data
        States participating in Source Water include: Alaska, Alabama,
    Arizona, Arkansas, California, Colorado, Connecticut, Delaware,
    Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana,
    Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
    Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina,
    North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
    Carolina, Texas, Utah, Vermont, Virginia, Washington, West Virginia,
    Wisconsin, and Wyoming. The 43 participating states were chosen based
    on objective technical criteria relating to water quality and
    population.
    11. Duplication or Overlap with Other Programs
        There is no overlap with Rural Development (RD) programs which
    provide support grants and loans for water and wastewater treatment,
    distribution, and collection systems.
        The FSA source water program is not a duplication but is
    complementary of the Environmental Protection Agency's (EPA) source
    water initiatives. The EPA source water program is targeted to
    compliance of community water supplies with Safe Drinking Water Act
    regulations. FSA authorized source water efforts focuses incorporating
    the agriculture community into prevention of contamination in source
    waters through FSA programs such as the CRP and education of the
    agriculture community and non-governmental entities.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Grassland Reserve Program (GRP).
        Prepared by USDA's NRCS and FSA.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        GRP was authorized in section 2401 of the 2002 Farm Bill and was
    reauthorized by section 2403 of the 2008 Farm Bill. NRCS and FSA
    jointly administer this program. Both agencies share policy
    development, NRCS administers the easements, and FSA implements the
    rental contracts. Funding for GRP comes from the Commodity Credit
    Corporation (CCC).
        Legislative Changes. The 2008 Farm Bill:

       Increased the acreage that may be enrolled in the program by
            1.2 million acres during the years 2009 through 2012.

       Provided priority for enrollment of expiring acreage from
            the Conservation Reserve Program (CRP), limited to ten percent
            of the total acres enrolled in any year.

       Authorized eligible lands to be enrolled into either a
            permanent easement (or maximum allowed under state law); or a
            10, 15, or 20 year rental contract.

       Authorized restoration agreements on lands, enrolled under a
            either a rental contract or an easement, to receive up to 50
            percent cost-share.

       Expanded the definition of eligible to include land that
            contains historical or archeological resources and land that
            addresses state, regional, or national conservation priorities.

       Required a grazing management plan for GRP participants.

       Required that valuation of an easement be at the lower of
            either an appraisal or market survey, a rate set by the
            Secretary of Agriculture, or the landowner's offer.

       Defined ``eligible entities'' as units of state, local, or
            tribal government or nongovernmental organizations that have a
            charter describing a commitment to conserving ranchland,
            agricultural land, or grassland for grazing and conservation
            purposes.

       Allowed that easements may now be acquired by eligible
            entities based on a 50 percent cost-share with the Federal
            Government.

       Established an annual payment limitation of $50,000 for both
            rental and restoration agreements.

       Waived a minimum acreage limitation for enrollment.

       Excluded land from the GRP if it is currently enrolled in
            another conservation program or is already protected by an
            existing easement, contract or deed restriction or is owned by
            a conservation organization.

       Allowed interested landowners to submit applications under a
            continuous sign-up.
    4. Purpose/Goals
        The purpose of the Grassland Reserve Program (GRP) is to assist
    landowners and operators in protecting grazing uses and related
    conservation values by conserving and restoring grassland resources on
    eligible private lands through rental contracts, easements, and
    restoration agreements. The program emphasizes support for working
    grazing operations; enhancement of plant and animal biodiversity; and
    protection of grassland and land containing shrubs and forbs under
    threat of conversion.
    5. Success in Meeting Programmatic Purpose/Goals
        Montana: GRP Enrollments Support Agency Commitment to Sage Grouse
    Habitat. In Phillips County, Montana, five GRP projects enrolled in the
    last 2 years protect 29,485 acres. These projects help preserve rural
    ranching operations while providing critical wildlife habitat for sage
    grouse and other grassland birds. The USFWS announced this species as a
    candidate for listing on the Endangered Species List. NRCS is taking
    proactive steps to protect and improve habitat in order to prevent
    listing of this bird in significant decline. More than 80 percent of
    the acres in these five ranches are prime habitat for of sage grouse.
    These ranchers have embraced management activities that continue to
    provide food, clean water, and habitat for mule deer, elk, pronghorn,
    and a multitude of neo-tropical grassland birds and one of the
    healthiest populations of sage grouse in the nation.
        Pennsylvania: GRP Helps Landowners Manage for Conservation.
    Conservation-minded landowners are interested in protecting and
    improving pastures for grazing management, while maintaining wildlife
    habitat for ground nesting birds. These landowners see the GRP program
    as a good fit for their management goals. These conservation easements
    protected nearly 400 acres of grasslands in areas subject to increasing
    development pressure.
        Wyoming: A 2,412 acre GRP easement was placed on land in central
    Wyoming, adjacent to the Medicine Bow National Forest. The upper
    meadows are used by an elk herd. Cows and calves graze during late
    spring and stay all summer. Good feed and water nourish both domestic
    animals and wildlife, with escape cover on the west end of the pasture.
    During fall and winter, elk cows and bulls spend days on the pasture.
    Pronghorn antelope and mule deer are often seen in the lower
    elevations. Approximately 25 to 35 sage grouse forage in the lower
    elevation habitat.
        Sage-Grouse Recovery: USDA provided $2.5 million in GRP financial
    assistance to five western states for Greater Sage-Grouse conservation
    and recovery on lands identified by state wildlife agencies as
    containing critical sage grouse habitat. The funds were used for
    enrollment of GRP easements on private lands in California, Colorado,
    Montana, Utah and Wyoming, with technical assistance and additional
    financial assistance provided through state and local partnerships.
        Conservation on the Ground--GRP in Kansas. Kansas has very
    productive native grasslands. During FY 2007, ranchers in Kansas signed
    47 GRP conservation easements that will protect 22,600 acres of the
    state's native grassland. GRP conservation easements are one way to
    prevent the destruction of the Kansas tall-grass prairie. And, Kansas
    ranchers have demonstrated a keen interest in the program by enrolling
    22,600 acres in GRP easements that will forever remain in tall-grass
    prairie.
        Washington State protecting historic grazing lands. The Colvin
    family has ranched on their 530 acres family homestead along Scatter
    Creek in Washington State since Ignatius Colvin arrived over the Oregon
    Trail in the 1850's. GRP easements allow the current generation of the
    Colvin family to keep the land as a working ranch in perpetuity. Urban
    development pressures in western Washington make maintaining large
    tracts of grazing lands very difficult. By granting GRP easements, the
    entire 530 acres grazing area soon will be protected. The contiguous
    easements were funded through Fiscal Year 2004, 2005, and 2009
    allocations. The Colvin family's grazing management plan, developed
    with NRCS, maintains and enhances native prairie habitat.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                  $85
                                2004                                 $115
                                2005                                 $128
                                2006                                  $54
                                2007                                  $16
                                2008                                   $3
                                2009                                  $48
                                2010                                 $101
                                2011                                  $79
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                  $34
                                2004                                  $55
                                2005                                  $71
                                2006                                  $27
                                2007                                  $29
                                2008                                   $3
                                2009                                  $46
                                2010                                  $93
                                2011                                  $80
    ------------------------------------------------------------------------

        NRCS GRP financial assistance (FA) funds support eligibility
    determinations, rental contracts, easement acquisition, and monitoring.
    FA for easement acquisition is obligated when the acres to be placed
    under easement are enrolled but are not expended until the easement has
    been perfected which is a process that may take over a year. Technical
    Assistance (TA) funds obligated in a given year are used for workload
    generated by the enrollment of new acres and acreage already enrolled.
    The majority of TA funding usually is expended in the year of
    obligation. FA funding represents the majority of program budget
    authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)     Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:    Annual delivery cost for NRCS includes:
     Grassland Reserve Program      Conservation Planning and              453             155           2,021           2,047           5,880
           Technical Consultation
          Conservation                           330             203             835             846           2,430
           Implementation
          Financial Assistance--               1,079             445           3,240           3,281           9,425
           Program Administration
          Indirect Costs                       1,282             200             520             526           1,512
                                     -------------------------------------------------------------------------------
            Sub-total Technical                3,144           1,003           6,616           6,700          19,247
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost           9,843           1,810          41,042          93,408          98,126
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                       12,987           2,813          47,658         100,108         117,373
            FTEs                                  21               7              30              28              55Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Annual delivery cost for FSA includes:    Department Strategic Goal: Ensure our National Forests and private working lands are conserved, restored,
     and made more resilient to climate change, while enhancing our resources.

     Program
                 Program ItemsConservation      Conservation Reserve               974,124       1,990,178       1,872,881       1,910,630       1,997,496
           Program
          Grassroots Source Water              1,856           3,687           5,000           5,000           5,000
           Protection Program
          State Mediation Grants 1               526           1,092           1,092           1,092           1,092
          Direct Conservation Loans                0               0               0             114           1,065
           1
          Guaranteed Conservation                  0               0               0               1             278
           Loans 1
          Other Conservation                   4,600           3,247              46              ^4          33,334
           Payments 2
                                     -------------------------------------------------------------------------------
            Administrative Costs             107,118         240,070         256,932         278,940         278,825
             (direct)
            Indirect costs                     9,773          82,642          63,352          68,779          72,804
                                     -------------------------------------------------------------------------------
              Total Costs                  1,097,997       2,320,916       2,199,303       2,264,552       2,389,894
              FTEs                             1,228           3,023           2,015           2,928           2,885

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)    Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining,
     repopulating, and economically thriving.

     Program
                 Program ItemsIncome Support and Disaster
     Assistance      Emergency Conservation          149,727.00      128,456.00            0.00       92,459.00       39,719.00
           Program 3
          Administrative costs            776,465.00      683,795.00      694,980.00      744,303.00      753,934.00
           (direct)
          Indirect costs                   47,548.00      234,633.00      226,905.00      242,967.00      246,299.00
                                     -------------------------------------------------------------------------------
            Total Costs                   973,740.00    1,046,884.00      921,885.00    1,079,729.00    1,039,952.00
            FTEs                            8,905.00        8,620.00        9,528.75        8,355.00        8,140.00Conservation      Emergency Conservation                   0               0      153,044.00               0               0
           Program 3
          Administrative costs                     0               0        8,344.00               0               0
           (direct)
          Indirect costs                           0               0               0            0.00               0
                                     -------------------------------------------------------------------------------
            Total Costs                         0.00            0.00      161,388.00            0.00            0.00
            FTEs                                0.00            0.00            0.25            0.00            0.001 FSA has programs related to supporting the conservation goal that are not part of the specific request.
    2 Grassland Reserve Program (GRP) payments are reported by NRCS for budget purposes. FSA administrative costs
      related to GRP and Voluntary Public Access and Habitat Incentive Program are included.
    3 The information related to the Emergency Conservation Program (ECP) is reported as an emergency program under
      Goal 1. We have broken out the program information but the administrative costs relate to all programs for the
      Income Support and Disaster Assistance Goal.

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Land is eligible if it is privately owned or Tribal land and it is: (1) grassland that contains forbs or shrubs (including rangeland and
     pastureland) for which grazing is the predominant use; or (2) located in an area that has been historically dominated by grassland, forbs, or shrubs.
     The land must also have potential to provide habitat for animal or plant populations of significant ecological value if the land is retained in the
     current use or restored to a natural condition.

                                                              10. Utilization (Participation) Data
                                                                    Contract Fiscal Year 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Rental Contracts                          Easements
                                                     ------------------------------------------------------------------------------
                                                                                                                       Obligations    Dollars
                                                                                                                         for Due     Allocated    Technical
                                                        Number 1     Acres 1    Obligations    Number 1     Acres 1     Diligence       for       Assistance
                                                                                                                        and Market   Easements
                                                                                                                         Analysis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total                                                     424      273,516  $29,288,185          144       95,907   $3,232,610  $52,318,210   $3,437,072
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1 Numbers currently reported in National Easement Staging Tool (NEST) are undergoing an intense quality assurance review. Numbers are subject to change
      during this process.

    11. Duplication or Overlap with Other Programs
        GRP provides for the long-term conservation/preservation of
    critical grassland resources that are under pressure from conversion.
    Other long-term conservation programs such as CRP, WRP, and Farm and
    Ranch Land Protection Program share the common objective to enhance and
    improve the grassland resources through short-term (10+ year
    contracts--CRP) or through the purchase of easements under FRPP.
    Generally, the same parcel of land cannot be enrolled in more than one
    program at the same time. These programs are complementary because they
    provide choices for producers in how they voluntarily protect their
    land and provide conservation benefits to their community and beyond.
        These programs share a common goal of restoring and protecting the
    natural resources benefits of grassland ecosystems to provide wildlife,
    water quality erosion and other natural resource benefits. In some
    cases, the restoration of the grassland resources requires the
    development of grassland habitat or the development of the
    infrastructure (fences, springs etc.) that will enable the long-term
    management of these resources. In the cases where infrastructure or
    management changes are needed, there may be some overlap with EQIP,
    Stewardship, and/or WHIP.
        Some of the practices offered through Stewardship to meet the
    minimum threshold at the end of the contract are also offered through
    other programs such as EQIP. Utilizing Stewardship for this purpose
    increases the additionality intent and uniqueness of the program.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Chesapeake Bay Watershed Program (CBWP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The CBWP was authorized by section 2602 of the 2008 Farm Bill. The
    Chief of NRCS may implement CBWP in the watersheds of all tributaries,
    backwaters, and side channels draining into the Chesapeake Bay. These
    areas include lands in Delaware, Maryland, New York, Pennsylvania,
    Virginia, and West Virginia.
        As of 2010, CBWP participants have enrolled nearly 270,000 acres in
    about 1,800 agreements in the Chesapeake Bay watershed.
    4. Purpose/Goals
        The purpose of CWBP is to assist producers in implementing
    conservation activities on agricultural lands in the Chesapeake Bay for
    the purposes of (1) improving water quality and quantity in the
    Chesapeake Bay watershed and (2) restoring, enhancing, and preserving
    soil, air, and related resources in the Chesapeake Bay watershed.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010:

       NRCS enrolled over 950 agreements on over 156,000 acres.

       The value of the contracts was over $33.5 million.

       The average agreement size is 164 acres.

       On average, NRCS agreed to reimburse participants
            approximately $35,000 for each long-term agreement.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                                   --
                              2009 1                                  $23
                                2010                                  $43
                                2011                                  $72
    ------------------------------------------------------------------------
    1 Chesapeake Bay Watershed Program funding began in FY 2009. Prior to
      this time, discretionary funds were received through Congressionally
      designated projects.

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                                   --
                              2009 1                                   $3
                                2010                                  $23
                                2011                                  $41
    ------------------------------------------------------------------------
    1 Chesapeake Bay Watershed Program funding began in FY 2009. Prior to
      this time, discretionary funds were received through Congressionally-
      designated projects.

        CBWP FA funds are obligated the year a contract is entered into,
    and this initial obligation is applicable to the entire multi-year span
    of the contract. As the years pass, FA for contracted practices is not
    expended until the practices are installed and inspected for quality
    control by NRCS personnel. For this reason, FA funds tend to outlay for
    multiple years after obligation. TA funds obligated in a given year are
    used for workload generated by the enrollment of new contracts and
    workload generated by prior year contract implementation. The vast
    majority of TA funding tends to outlay in the year of obligation. FA
    funding represents the majority of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Chesapeake Bay Watershed Program      Conservation Planning and               --              --             209             676           1,234
           Technical Consultation
          Conservation                            --              --           1,083           3,501           6,393
           Implementation
          Financial Assistance--                  --              --             727           2,350           4,292
           Program Administration
          Indirect Costs                          --              --           1,228           3,970           7,251
                                     -------------------------------------------------------------------------------
            Sub-total Technical                   --              --           3,247          10,497          19,170
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost              --              --          18,595          33,539          52,830
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                           --              --          21,842          44,036          72,000
            FTEs                                  --              --              25              85             172Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2009 and 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Congress provided the authority to deliver CBWP funds through
    applicable programs in the Chesapeake Bay. Since the purpose of CBWP is
    similar to the purpose of the Environmental Quality Incentives Program
    (EQIP), CBWP is administered using the same programmatic rules as EQIP.
        To participate in CBWP, both the land and the applicant must be
    eligible. Eligible land includes cropland, rangeland, pastureland,
    private nonindustrial forestland, and other farm or ranch lands in the
    Chesapeake Bay watershed. The land must have an identified natural
    resource concern that poses a serious threat to soil, water, air, or
    related resources by reason of land use practices, soil type, terrain,
    climatic conditions, topography, flooding, saline characteristics, or
    other natural resource factors or natural hazard. Publicly-owned land
    is eligible only if: (1) the land is under private control for the
    contract period; (2) is included within the participant's operating
    unit; and (3) must have written authorization from the government
    agency that owns the land to apply conservation practices. For
    irrigation-related practices, the land must have a history of actively
    irrigating the land unit for 2 out of the last 5 years.
        Applicants must be an agricultural producer, have control of the
    land for the life of the contract, be in compliance with farm bill
    provisions (highly erodible land, wetland conservation, protection of
    tenants and sharecroppers), be within appropriate program payment
    limitations and adjusted gross income requirements, and develop an EQIP
    plan of operations. Applications are accepted year round at local USDA
    Service Centers, but there are application cut-off dates that vary from
    state to state.
    10. Utilization (Participation) Data
        CBWP Application/Contract Status data include:

    ------------------------------------------------------------------------
                        Number of Active      Financial
        Fiscal Year       and Completed      Assistance       Total Treated
                            Contracts         Obligated           Acres
    ------------------------------------------------------------------------
              2009                 826       $18,592,739           110,327
              2010                 953       $33,517,624           156,704
                       -----------------------------------------------------
      Total...........           1,779       $52,110,363           267,031
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        CBWP is a mechanism for focusing funding for maximum impact, is
    delivered through existing programs such as the EQIP, and is focused in
    the Chesapeake Bay watershed and on priorities related to controlling
    nutrient and sediment and habitat conservation.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Watershed Operations Program (Small Watershed).
        Prepared by USDA's NRCS.
    2. Subprogram/Department Initiatives
        None.
    3. Brief History
        The Watershed Operations programs operate under Public Law 83-566,
    the Watershed Protection and Flood Prevention Act of 1954, as amended
    (P.L. 83-566); and Public Law 78-534, the Flood Control Act of 1944
    (P.L. 78-534). Both of these laws authorize the Secretary of
    Agriculture to install watershed improvement measures to reduce
    flooding, sedimentation, and erosion damage; and improve the
    conservation, development, utilization, and disposal of water; and
    advance the conservation and proper utilization of land.
    4. Purpose and Goals
        The program sets out to develop Watershed Project Plans, with
    specific actions and schedules that will meet local sponsor and
    resource concerns and that are physically, environmentally, socially,
    and economically defensible. The three general purposes set out in P.L.
    83-566 include: (a) Preventing damage from erosion, floodwater, and
    sediment; (b) Furthering the conservation, development, utilization,
    and disposal of waters; and (c) Furthering the conservation and proper
    utilization of land. The general purposes set out in P.L. 78-534 are
    (a) Run-off and water-flow retardation and (b) Soil-erosion prevention.
    NRCS provides technical and financial assistance to install watershed
    improvement measures through three means: technical assistance, land
    treatment measures, and easement and construction measures.
        These programs (P.L. 83-566 & P.L. 78-534) provide for cooperation
    between the Federal Government and the states and their political
    subdivisions for purposes of:

        Agricultural   Watershed        Water Quality
     Water                    Protection               Management
        Management   Fish and       Flood            Municipal &
     Wildlife                 Prevention--Flood        Industrial Water
                              Damage Reduction         Supply
       Public
     Recreation
    5. Success in Meeting Programmatic Purpose/Goals
        Program Benefits. Estimates of flood prevention and other annual
    benefits to the environment and communities from P.L. 83-566 and P.L.
    78-534 that occurred in FY 2010 are shown below.
        Monetary Benefits. Benefits include:

       Agricultural Benefits (not related to flood control): $404
            million. Benefits associated with erosion control, animal waste
            management, water conservation, water quality improvement,
            irrigation efficiency, change in land use, etc.

       Non-Agricultural Benefits (not related to flood control):
            $899 million. Benefits associated with recreation, fish and
            wildlife, rural water supply, water quality, municipal and
            industrial water supply, and incidental recreation uses, etc.

       Agricultural Flood Protection Benefits: $320 million. This
            value includes all crop and pasture damage reduction benefits
            as well as all other agricultural damage reduction benefits.

       Non-Agricultural Flood Protection Benefits: $434 million.
            Non-agricultural flood damage prevented to roads, bridges,
            homes, and other structures that exist in the floodplain.

        Natural Resources Benefits include:

       Acres of nutrient management: 674,283

       Tons of animal waste properly disposed: 4,801,640

       Tons of soil saved from erosion: 90,038,700

       Miles of streams and corridors enhanced, or protected:
            54,190

       Acres of lakes and reservoirs enhanced, or protected:
            2,518,613

       Acre-feet of water conserved: 1,842,813

       Acres of wetlands created, enhanced, or restored: 279,326

       Acres of upland wildlife habitat created, enhanced, or
            restored: 9,149,776

        Social and Community Benefits:

       Number of people: 48,316,354

       Number of farms and ranches: 181,248

       Number of bridges: 61,678

       Number of public facilities: 3,650

       Number of businesses: 46,583

       Number of homes: 610,983

       Number of domestic water supplies: 27,857

                  6. Annual Budget Authority (FY 2002-FY 2011)
       (Watershed and Flood Prevention Operations, P.L. 78-534, and Small
                             Watershed, P.L. 83-566)
    ------------------------------------------------------------------------
                     FY                      Appropriation ($ in millions)
    ------------------------------------------------------------------------
                                2002                                 $106
                                2003                                 $109
                                2004                                  $86
                                2005                                  $75
                                2006                                  $74
                                2007                                   $9
                                2008                                  $30
                                2009                                  $24
                                2010                                  $30
                                2011                                   --
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
       (Watershed and Flood Prevention Operations, P.L. 78-534, and Small
                             Watershed, P.L. 83-566)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $85
                                2003                                  $80
                                2004                                  $73
                                2005                                  $86
                                2006                                  $81
                                2007                                  $78
                                2008                                  $44
                                2009                                  $42
                                2010                                  $19
                                2011                                  $15
    ------------------------------------------------------------------------

        Watershed Operations program TA funds generally outlay in the year
    the funds are obligated. The only exception to this is when TA funds
    are obligated through an architecture and engineering services contract
    to provide planning, design or quality assurance inspection during
    construction. FA funds are obligated after permitting and/or land
    rights are obtained. Outlays for these funds are generally expended
    over a fiscal year, but can extend over multi-years for a complex
    watershed operations project or for a project whose contract was
    awarded toward the end of the fiscal year. Given the nature of
    construction projects, it is possible for outlays to carryon for
    multiple years after the initial appropriation or obligation of the
    funds. Watershed Operations program funds are no-year funds.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Watershed and Flood Prevention
     Operations      Conservation Planning and              771           1,027           3,802             824             824
           Technical Consultation
          Conservation                         2,514           4,654          18,130           3,827           3,827
           Implementation
          Financial Assistance--                 271             337           1,326             280             280
           Program Administration
          Indirect Costs                       1,779           4,715          11,876           3,133           3,133
                                     -------------------------------------------------------------------------------
            Sub-total Technical                5,335          10,733          35,134           8,064           8,064
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost           3,540          19,057         134,155          21,936          21,936
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                        8,875          29,790         169,289          30,000          30,000
            FTEs                                 139              90              94              28             120Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual appropriations; Fiscal Year 2011 is an estimate from
      the Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.
    Fiscal year 2009 includes $145 million in budget authority and associated FTE from the American Recovery and
      Reinvestment Act of 2009.

    9. Eligibility Criteria
        Sponsor: All watershed projects must have at least one outside
    sponsor which must be a state or local organization/agency (i.e.,
    state, city, town, conservancy district, tribal) that has legal
    authorities to acquire and hold land rights, condemn land if necessary,
    and perform continuing operations and maintenance. The sponsor(s) must
    also be able to raise, expend, and publicly account for funds as these
    projects have a local match or share required.
        Project/Structures: Watershed projects involving an estimated
    Federal contribution in excess of $5 million for construction, or
    construction of any single structure having a capacity in excess of
    2,500 acre-feet of water storage require authorization by Congressional
    Committee. Watershed projects are limited to 250,000 acres and cannot
    include any single structure which provides more than 12,500 acre-feet
    of floodwater detention capacity, or more than 25,000 acre-feet of
    total capacity. The Chief of NRCS authorizes the use of Watershed
    Operations funds for all other projects.
        Federal financial assistance may be applied to installation costs
    when land treatment measures are installed primarily to achieve
    environmental and public benefits such as surface and ground water
    quality improvement, water conservation, and flood mitigation. The
    Federal share may not exceed the rate of assistance for similar
    practices under other USDA conservation programs.
        Land treatment measures are installed through project agreements
    with local sponsoring organizations or through long-term contracts
    between the landowner and NRCS. In the first case, the local sponsors
    arrange for and accomplish the work by contract or force account and
    NRCS makes payments to the local sponsoring organizations as the land
    treatment measures are installed. In the second case, NRCS contracts
    directly with landowners.
    10. Utilization (Participation Data)
        At the end of FY 2010, of the 1,757 projects authorized by the
    Watershed Protection and Flood Prevention Act, NRCS has assisted
    sponsors complete implementation on over 1,066 watersheds and are
    implementing works of improvement in 300 active watershed projects.
    11. Duplication or Overlap with Other Programs:
        The program was not funded under the 2011 Full-Year Continuing
    Appropriations Act. The Agency is in the process of closing out
    operations.
        Watershed Operations program payments cannot be applied to payments
    on land for the same conservation purposes funded through other USDA
    conservation programs.
    12. Waste, Fraud and Abuse:
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        The Watershed Rehabilitation Program.
        Prepared by USDA's NRCS.
    2. Subprogram/Department Initiatives
        None.
    3. Brief History
        The Watershed Rehabilitation Program (P.L. 106-472) is administered
    by NRCS to assist project sponsors with rehabilitation of aging project
    dams. Only dams installed under P.L. 83-566, the Pilot Watershed
    Program, P.L. 78-534, or Resource Conservation and Development (RC&D)
    Programs are eligible. This program provides technical and financial
    assistance to watershed project sponsors in rehabilitating aging dams
    in their communities.
    4. Purpose/Goals
        The purpose of P.L. 106-472 is to extend the service life of dams
    and meet applicable safety and performance standards. Priority is given
    to those structures that pose the highest risk to life and property.
    Projects are eligible when hazard to life and property increases due to
    downstream development and when there is need for rehabilitation to
    extend the planned life of a structure. Watershed Rehabilitation
    Program work can consist of repairing or replacing deteriorated
    components, repairing damages from catastrophic events, upgrading the
    structure to meet state dam safety laws, or to decommission a
    structure.
    5. Success in Meeting Programmatic Purpose/Goals
        The Natural Resources Conservation Service has authorized the
    rehabilitation of 162 of these high hazard dams in 22 states as of the
    end of FY 2010. Many of these structures were originally set in rural
    areas and designed and constructed as ``low hazard'' structures. As a
    result of land use change and downstream development, many of these
    dams now represent a ``high hazard'' to surrounding communities. These
    rehabilitated structures are constructed to high hazard standard which
    provide millions of dollars of flood protection. Through this program,
    NRCS is making sure that the rehabilitation of these dams will not only
    ensure that these watershed dams remain safe and protect the lives of
    people, property, and infrastructure, but continue to provide flood
    control, recreation and wildlife habitat to the citizenry and
    communities for an additional 50 to 100 years.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Appropriation ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $10
                                2003                                  $30
                                2004                                  $30
                                2005                                  $27
                                2006                                  $31
                                2007                                  $31
                                2008                                  $20
                                2009                                  $40
                                2010                                  $40
                                2011                                  $18
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $6
                                2003                                  $10
                                2004                                  $19
                                2005                                  $21
                                2006                                  $21
                                2007                                  $22
                                2008                                  $31
                                2009                                  $24
                                2010                                  $32
                                2011                                  $17
    ------------------------------------------------------------------------

        The Watershed Rehabilitation Program TA funds are generally
    expended in the year the funds are obligated. The only exception to
    this is when TA funds are obligated through a services contract to
    provide planning, design or quality assurance inspection during
    construction. FA funds are obligated after permitting and/or land
    rights are obtained. These funds are generally expended over a fiscal
    year, but can extend over multi-years for a complex dam rehabilitation
    project or for a project whose contract was awarded toward the end of
    the fiscal year. Given the nature of constructions projects, it is
    possible for outlays to carryon for multiple years after the initial
    appropriation or obligation of the funds. Watershed Rehabilitation
    Program funds are no-year funds.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Watershed Rehabilitation Program      Conservation Planning and            2,573             845           4,739           1,994           1,368
           Technical Consultation
          Conservation                         2,799           2,972          16,667           7,008           4,805
           Implementation
          Financial Assistance--               1,193             342           1,918             806             553
           Program Administration
          Indirect Costs                      10,460           3,135          17,581           7,392           5,070
                                     -------------------------------------------------------------------------------
            Sub-total Technical               17,025           7,294          40,905          17,200          11,796
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost          14,284          12,566          49,095          22,961          28,365
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                       31,309          19,860          90,000          40,161          40,161
            FTEs                                 113              65              72              82              71Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual appropriations; Fiscal Year 2011 is an estimate from
      the Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.
    Fiscal year 2009 includes $50 million in budget authority and associated FTE from the American Recovery and
      Reinvestment Act of 2009.

    9. Eligibility Criteria
        A dam must be under proper and active maintenance, and only dams
    installed under P.L. 83-566, the Pilot Watershed Program, P.L. 78-534,
    or RC&D Programs are eligible.
        Each project requires a local cooperating sponsor that works
    closely with NRCS to complete the rehabilitation of each dam. Each
    sponsor must provide thirty-five (35) percent of the costs to
    rehabilitation a dam. Through several means, sponsors in these
    communities contribute their funds through the collection bonds, County
    budgets, state appropriations, state park division, Municipal taxing
    authority, Watershed taxing authority, and through In-kind technical
    services.
    11. Duplication or overlap with other programs
        There is no duplication or overlap with other USDA conservation
    programs.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Healthy Forests Reserve Program (HFRP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Title V of the Healthy Forests Restoration Act of 2003 (Public Law
    108-148) authorized the establishment of the Healthy Forests Reserve
    Program (HFRP) which was reauthorized by the 2008 Farm Bill.
        HFRP provides financial assistance for specific conservation
    actions completed by the landowner. As funds are made available, the
    NRCS Chief solicits project proposals State Conservationists have
    developed in cooperation with partnering organizations. States selected
    for funding provide public notice of the availability of funding within
    the selected area. HFRP offers four enrollment options:

       10 year restoration agreement for which the landowner may
            receive 50 percent of the average cost of the approved
            conservation practices;

       30 year contract (equivalent to the value of a 30 year
            easement) for which the landowner may receive 75 percent of the
            easement value of the enrolled land plus 75 percent of the
            average cost of the approved conservation restoration
            practices. This option is available to Indian Tribes only;

       30 year easement for which the landowner may receive 75
            percent of the easement value of the enrolled land plus 75
            percent of the average cost of the approved conservation
            practices; or

       Permanent easement for which landowners may receive 100
            percent of the easement value of the enrolled land plus 100
            percent of the average cost of the approved conservation
            practices.
    4. Purpose/Goals
        HFRP assists landowners in restoring, enhancing, and protecting
    forest ecosystems to: (1) promote the recovery of threatened and
    endangered species; (2) improve biodiversity; and (3) enhance carbon
    sequestration. HFRP supports the NRCS Mission Goal of Healthy Plant and
    Animal Communities.
    5. Success in Meeting Programmatic Purpose/Goals
        The following provides examples of HFRP results:
        Oregon: Partnership Protects Working Forest and Enhances Habitat.
    In FY 2010, NRCS partnered with the USFWS and the Oregon Department of
    Forestry (ODF) to provide private landowners the opportunity to create
    a northern spotted owl (NSO) habitat while maintaining a working
    forest. NSO habitat in the Pacific Northwest is an important criterion
    for defining healthy forests, making HFRP an excellent vehicle for this
    effort. NRCS developed HFRP long term management requirements and
    sideboards as a supplement to the ODF Forest Stewardship Plan on 11
    properties being offered for permanent easements.
        The supplements specify the long term management requirements and
    sideboards of each individual property; some properties opted for even-
    age stand management and others for the uneven-age stand management
    regime. The FSP-HFRP supplement recognizes the requirements of a State
    of Oregon Stewardship Agreement and will require that the landowner
    intends to meet or exceed all Oregon Forest Practices Act standards
    current at the time of approval including provisions for Riparian
    Management Areas. The information contained in the supplement provides
    guidance and requirements to reach landowner and program goals and
    objectives. The supplements include area regulation timelines and
    overall forest management practices for thinning, patch cuts, planting,
    canopy cover requirements and specific management regimes for each
    property.
        NRCS worked closely with USFWS and ODF to ensure consistency among
    agencies' requirements while developing the supplements. The
    supplements use forest management to enhance future NSO habitat and
    maintain existing habitat. NRCS, USFWS, and ODF entered into a
    programmatic Safe Harbor Agreement to provide assurances to the
    landowner if they manage the property according to the Forest
    Stewardship Plan supplement. NRCS develops conservation plans and
    landowner conservation program contracts to implement the conservation
    practices necessary for restoration, enhancement, and management for
    NSO as planned in the Forest Stewardship Plan supplement. NRCS has
    completed the supplement plans for 11 properties in western Oregon
    totaling 1,852 acres of valuable habitat for the endangered NSO on
    these potential permanent easements. The HFRP work has been an
    excellent demonstration of one-on-one conservation planning resulting
    in detailed landowner decisions while allowing management flexibility
    for plans that will stretch into perpetuity. This has been an excellent
    model for all nonindustrial forest planning.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                                           Appropriation/Apportionment ($ in
                     FY                                millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   $2
                                2007                                   $2
                                2008                                   $2
                                2009                                  $10
                                2010                                  $10
                                2011                                  $10
    ------------------------------------------------------------------------
    Note: FY 2006 through 2008 is Discretionary appropriations. FY 2009
      through 2011 is the Mandatory apportionments.

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                                   $1
                                2009                                   $1
                                2010                                   $3
                                2011                                   $6
    ------------------------------------------------------------------------
    Note: FY 2006 to 2008 is Discretionary funding and Mandatory funding
      from 2009 to 2011.

        HFRP FA funds support easement acquisition and restoration. Funds
    are expended when the easement is perfected or the practices necessary
    for restoration are installed and verified by NRCS personnel, both
    processes which may take over a year to complete. TA funds obligated in
    a given year are used for workload generated by the enrollment of new
    easements and workload generated by easements enrolled in prior years.
    The vast majority of TA funding tends to be expended in the year of
    obligation. FA funding represents the majority of program budget
    authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Healthy Forests Reserve Program      Conservation Planning and               19              12             180             187             301
           Technical Consultation
          Conservation                            21              15             382             398             641
           Implementation
          Financial Assistance--                   9              58             459             478             770
           Program Administration
          Indirect Costs                          78              66             314             328             529
                                     -------------------------------------------------------------------------------
            Sub-total Technical                  127             151           1,335           1,391           2,241
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost           2,349           1,835           1,191           6,226           7,509
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                        2,476           1,986           2,526           7,617           9,750
            FTEs                                   1               2               5               6              23Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 and 2008 are the discretionary appropriations. The 2009 and 2010 are actual mandatory
      obligations; and Fiscal Year 2011 is an estimate from the Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Only privately held land, including acreage owned by an Indian
    Tribe, is eligible for enrollment in HFRP. In addition, to be eligible,
    the landowner must commit to restoring, enhancing, or measurably
    increasing the likelihood of recovery of a threatened or endangered
    species or candidates for the Federal or state threatened or endangered
    species list, and must improve biological diversity or increase carbon
    sequestration. Land enrolled in HFRP must have a restoration plan that
    includes practices necessary to restore and enhance habitat for species
    listed as threatened or endangered or species that are candidates for
    the threatened or endangered species list. NRCS provides technical
    assistance to help owners comply with the terms of their HFRP
    restoration plans.
        Landowners may receive safe harbor assurance for land enrolled in
    the HFRP who agree, for a specified period, to protect, restore, or
    enhance their land for threatened or endangered species habitat. In
    exchange, landowners avoid future regulatory restrictions on the use of
    that land under the Endangered Species Act.

                      10. Utilization (Participation) Data
                            Contract Fiscal Year 2010
    ------------------------------------------------------------------------
                                         10 Year
                                       Restoration    30 Year     Permanent
                                        Agreements   Easements    Easements
    ------------------------------------------------------------------------
    Number 1                                     1            2            9
    Acres 1                                  2,747        1,416        1,472
    Dollars Obligated                     $599,988     $882,139   $4,994,249
    ------------------------------------------------------------------------
    1 Numbers currently reported in NEST are undergoing an intense quality
      assurance review.

    11. Duplication or Overlap with Other Programs
        To the extent that these programs each allow for 10 year
    restoration agreements to improve wildlife habitat, there is
    duplication and overlap with the WHIP program and the 10 year
    restoration agreement portion of HFRP.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Conservation Security Program (Security).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The 2002 Farm Bill authorized the Security. Except for existing
    program contracts, it was replaced by the Conservation Stewardship
    Program (Stewardship) by the 2008 Farm Bill.
        Security is a voluntary program that provides financial and
    technical assistance through 5 to 10 year contracts to promote the
    conservation and improvement of soil, water, air, energy, plant and
    animal life, and other conservation purposes on Tribal and private
    working lands.
        The Chief of NRCS was authorized to implement Security in all 50
    states, the Caribbean Area, and the Pacific Basin area. The program
    provides equitable access to benefits to all producers, regardless of
    size of operation, crops produced, or geographic location.
    4. Purpose/Goals
        Security's goal is to identify and reward those farmers and
    ranchers who are meeting the highest standards of conservation and
    environmental management on their operations and to support ongoing
    stewardship of private agricultural lands by providing payments for
    maintaining and enhancing natural resources.
    5. Success in Meeting Programmatic Purpose/Goals
        In Fiscal Year 2011, a total of $180,292,191 was expended to cover
    the obligations of 15,031 prior year contracts (2004-2008).

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   $4
                                2004                                  $41
                                2005                                 $202
                                2006                                 $259
                                2007                                 $297
                                2008                                 $379
                                2009                                 $283
                                2010                                 $234
                                2011                                 $204
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                  $38
                                2005                                 $186
                                2006                                 $263
                                2007                                 $294
                                2008                                 $309
                                2009                                 $276
                                2010                                 $220
                                2011                                 $205
    ------------------------------------------------------------------------

        Security's FA funds are obligated separately for each year of the
    contract with the producer. They are expended during the year of
    obligation. TA funds obligated for a given year are used for workload
    generated by prior year contract implementation. The vast majority of
    TA funding also are expended in the year of obligation. FA funding
    represents the majority of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Conservation Security Program      Conservation Planning and            2,033           2,228           1,264             941             990
           Technical Consultation
          Conservation                         2,348           2,920           1,657           1,233           1,297
           Implementation
          Financial Assistance--              17,204          11,714           6,647           4,947           5,205
           Program Administration
          Indirect Costs                       4,321          27,728          20,315          15,120          13,446
                                     -------------------------------------------------------------------------------
            Sub-total Technical               25,906          44,590          29,883          22,241          20,938
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost         268,451         272,461         246,121         199,928         182,468
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                      294,357         317,051         276,004         222,169         203,406
            FTEs                                 200             367             220             154             132Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
       Applicants must have submitted an application applied prior
            to Oct. 1, 2008.

       Eligible applicants include an individual producer,
            partnership, association, corporation, estate, trust, other
            business or other legal entities controlling eligible lands.
            The term producer means an owner, operator, landlord, tenant or
            sharecropper that shares in the risk of producing any crop or
            livestock; and must be entitled to share in the crop or
            livestock available for marketing from an agricultural
            operation.

       An applicant must be in compliance with highly erodible land
            and wetland conservation provisions, and average adjusted gross
            income requirements.

       Working lands include cropland, grassland, prairie land,
            improved pasture, and range land, as well as forested land that
            is an incidental part of an agriculture operation.
    10. Utilization (Participation) Data
        Security Dollars Obligated on Active/Completed Contracts data
    include:

    ------------------------------------------------------------------------
                               Financial Assistance    Technical Assistance
                                     Obligated               Obligated
    ------------------------------------------------------------------------
                Total           $199,927,828.26          $16,985,614.49
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        Because Security is available only for contracts that were entered
    into prior to the enactment date of the 2008 Farm Bill, a producer who
    receives Security payments cannot also receive payments under the
    Stewardship.
    12. Waste, Fraud and Abuse
        In July 2009, OIG issued an audit report on the Conservation
    Security Program. They noted potential improper payments made to
    participants that were ineligible and participants that received
    payments for more than one Security contract at a time. The audit
    involved review of 20,653 contracts. Of those contracts, 37 percent
    (7,666) contained errors, mostly minor or technical in nature. Three
    contracts (less than one percent of all the contracts) were found to be
    fraudulent. Corrective actions were taken on all errors and were
    completed by December 31, 2009.
        To recover the improper payments that were made, NRCS sent demand
    letters and bills to participants. For certain participants, liquidated
    damages have also been assessed. NRCS has recovered $4.618 million to
    date as result of these corrective actions. To remediate the situation,
    updated procedures were issued to require field verifications prior to
    funds being obligated. NRCS continues to work to recover all improper
    payments made.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Conservation Stewardship Program (Stewardship).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The 2008 Farm Bill authorized Stewardship with an enrollment of
    12,769,000 acres for each fiscal year (FY) for the period beginning
    October 1, 2008, and ending on September 30, 2017.
        The Chief of NRCS makes Stewardship available to all producers,
    regardless of operation size or crops produced, in all 50 states, the
    District of Columbia, and the Caribbean and Pacific Island areas.
        Since it was first funded in 2008, Stewardship has enrolled 20,567
    contracts on over 25.1 million acres.
    4. Purpose/Goals
        The purpose of Stewardship, as a voluntary program, is to encourage
    agricultural and forestry producers to address resource concerns by:
    (1) undertaking additional conservation activities; and (2) improving
    and maintaining existing conservation systems. Stewardship provides
    financial and technical assistance to help land stewards conserve and
    enhance soil, water, air, and related natural resources on their land.
        Stewardship participants receive payments for conservation
    performance--the higher the performance, the higher the payment. It
    provides two possible types of payments. An annual payment is available
    for installing new conservation activities and maintaining existing
    practices. A supplemental payment is available to participants who also
    adopt a resource conserving crop rotation. Through 5 year contracts,
    NRCS makes payments as soon as practical after October 1 of each fiscal
    year for contract activities installed and maintained in the previous
    year.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010:

       NRCS enrolled 20,567 contracts on 25,164,327 acres.

       The value of the contracts is $320,399,890.

       The average contract size is 1,224 acres.

       On average, NRCS agreed to reimburse participants $15,578
            for each contract.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                                   --
                                2009                                  $10
                                2010                                 $469
                                2011                                 $601
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                                   --
                                2009                                   $5
                                2010                                  $51
                                2011                                 $389
    ------------------------------------------------------------------------

        Stewardship's FA funds are obligated separately for each year of
    the 5 year contract for installing new or maintaining existing
    conservation activities. FA funds are expended one year after
    obligation, after NRCS personnel perform a field visit to site-verify
    that the conservation activities are installed and maintained to
    specifications. TA funds obligated in a given year are used for
    workload generated by the enrollment of new contracts and workload
    generated by prior year contract implementation. The vast majority of
    TA funding tends to be expended in the year of obligation. FA funding
    represents the majority of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Conservation Stewardship Program      Conservation Planning and               --              --             398           2,939           3,356
           Technical Consultation
          Conservation                            --              --             520           3,849           4,397
           Implementation
          Financial Assistance--                  --              --           2,086          15,440          17,645
           Program Administration
          Indirect Costs                          --              --           6,374          47,187          45,581
                                     -------------------------------------------------------------------------------
            Sub-total Technical                   --              --           9,378          69,415          70,979
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost              --              --              --         320,398         529,855
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                           --              --           9,378         389,813         600,834
            FTEs                                  --              --              75             496             540Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2009 and 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
       Eligible land includes cropland, grassland, prairie land,
            improved pastureland, rangeland, nonindustrial private
            forestland, and agricultural land under the jurisdiction of an
            Indian tribe.

       Eligible applicants include individuals, legal entities,
            joint operations, or Indian tribes. Applicants must be the
            operator of record in the USDA farm records management system
            for the eligible land being offered for enrollment and have
            effective control of the land for the term of the proposed
            contract.

       Applicants must be in compliance with the highly erodible
            land and wetland conservation provisions requirements and
            adjusted gross income provisions prior to receiving program
            payments.

        Stewardship contract provisions provide:

       A person or legal entity may have more than one Stewardship
            contract but, for all Stewardship contracts combined, may not
            receive more than $40,000 in any year or more than $200,000
            during any 5 year period.

       The contract limit is the same as the payment limit except
            in the case of joint operations, for which the contract limit
            is $80,000 per fiscal year and $400,000 over the term of the
            contract period.
    10. Utilization (Participation) Data
        2010 Stewardship Application/Contract Status data includes:

    ------------------------------------------------------------------------
                      Number of
                      Active and     Financial        Total       Technical
                      Completed      Assistance      Treated     Assistance
                      Contracts      Obligated        Acres       Obligated
    ------------------------------------------------------------------------
           Total          20,567   $320,397,871     25,164,327   $59,940,382
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        Some of the practices offered through Stewardship to meet the
    minimum threshold at the end of the contract are also offered through
    other programs such as EQIP. Utilizing Stewardship for this purpose
    increases the additionality intent and uniqueness of the program.
    12. Waste, Fraud and Abuse
        In an effort to implement lessons learned from the 2009
    Conservation Security Program OIG audit, NRCS undertook an independent
    inquiry of FY 2010 Conservation Stewardship Program Contracts. The
    agency reviewed ten random contracts from 15 selected states after all
    states completed a ``Checklist to Address Conservation Stewardship
    Program O&E Review Findings.'' The results of the review showed
    inconsistencies in the calculation of additional activity points. To
    address these matters NRCS has undertaken an extensive follow-up regime
    with all states providing additional guidance, training, written
    directives and net conferences to alleviate the problem. Finally, each
    new contract entered into must now have a NRCS conservationist field
    review the operation's on-the-ground compliance prior to enrollment.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Wetlands Reserve Program (WRP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Congress first authorized WRP in the 1990 Farm Bill and has
    reauthorized it with little change in the three farm bills since. WRP
    is a voluntary program that provides technical and financial assistance
    to enable eligible landowners to address wetland, wildlife habitat,
    soil, water and related natural resource concerns on private lands in
    an environmentally beneficial and cost effective manner. The program
    achieves solutions to local community issues related to farms, ranches,
    rural lands and other areas by establishing easements and long-term
    agreements on eligible farmlands and establishing 30 year contracts on
    Tribal lands. Over the last 20 years, WRP's voluntary, private lands
    approach has made it the Federal Government's private lands wetland
    restoration and conservation program. Year after year, WRP has
    delivered benefits to both the individuals participating and the
    American public benefitting from the services the WRP wetlands provide.
    4. Purpose/Goals
        The primary purpose of WRP is the restoration, protection and
    enhancement of wetlands and associated habitats for the benefit of
    wetland-dependent wildlife, with an emphasis on migratory birds and
    special status species. The WRP goal is to achieve the greatest wetland
    functions and values, along with optimum wildlife habitat, on every
    acre enrolled in the program. WRP is most suited for frequently flooded
    agricultural lands, where restoration will maximize habitat for
    migratory birds and other wildlife, and improve water quality. WRP
    focuses on:

       Enrolling marginal lands that have a history of crop
            failures or low production yields;

       Restoring and protecting wetland values on degraded
            wetlands;

       Maximizing wildlife benefits;

       Achieving cost-effective restoration with a priority on
            benefits to migratory birds;

       Protecting and improving water quality; and

       Reducing the impact of flood events.
    5. Success in Meeting Programmatic Purpose/Goals
        WRP has become the preeminent Federal private lands program for
    protecting and restoring wetlands. Over the last 20 years, WRP has
    helped more than 11,000 private landowners voluntarily restore, protect
    and enhance wetlands and wildlife habitat on over 2.3 million acres
    nationwide. Currently, about 30 percent of those acres are in the
    restoration process and will require continued conservation assistance
    in order to reach full restoration. WRP has proven to be a program
    under which NRCS, landowners and many various partners can work
    together to achieve truly cooperative conservation resulting in long-
    term benefits on a landscape scale that will ensure our wetland
    resources are available for future generations.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                 $275
                                2003                                 $306
                                2004                                 $280
                                2005                                 $273
                                2006                                 $273
                                2007                                 $283
                                2008                                 $184
                                2009                                 $571
                                2010                                 $675
                                2011                                 $611
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                  $98
                                2004                                 $231
                                2005                                 $205
                                2006                                 $234
                                2007                                 $154
                                2008                                 $249
                                2009                                 $131
                                2010                                 $278
                                2011                                 $348
    ------------------------------------------------------------------------

        WRP TA funds support staff time needed to conduct eligibility
    determinations, finalize easement transactions, complete restoration
    designs, develop management and maintenance plans, and conduct
    monitoring of wetlands under easement. WRP FA funds support the
    easement costs paid to the landowner, restoration costs paid for
    implementation of restoration design, and implementation costs for
    maintenance and repairs on existing easements. FA for easement
    acquisition is obligated when the acres to be placed under easement are
    enrolled but is not expended until the easement is perfected, a process
    that may take years. FA for restoration is obligated when contracts are
    developed based on final restoration designs but is not expended until
    the installation of practices used to restore the wetlands is complete
    and verified by NRCS personnel, which also may occur over several
    years. TA funds obligated in a given year are used for workload
    generated by the enrollment of new acres and workload generated by
    acquisition, restoration, and monitoring of prior year enrollments
    which requires the majority of the TA funds obligated in a given year.
    FA funding represents the majority of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Wetlands Reserve Program      Conservation Planning and            4,346           2,363           2,191           2,558           3,807
           Technical Consultation
          Conservation                        21,771          12,719          11,791          13,764          20,482
           Implementation
          Financial Assistance--              17,382          11,186          10,370          12,106          18,015
           Program Administration
          Indirect Costs                      16,599           6,923           6,418           7,492          11,148
                                     -------------------------------------------------------------------------------
            Sub-total Technical               60,098          33,191          30,770          35,920          53,452
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost         187,757         149,758         404,941         594,219         672,647
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                      247,855         182,949         435,711         630,139         726,099
            FTEs                                 190             225             191             217             343Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Owners of private and tribal lands are eligible to participate in the WRP. WRP offers a perpetual easement, 30 year easement, or 10 year restoration
     cost-share agreement available to all private and tribal landowners and a 30 year contract option for tribal landowners only. Land is eligible if it
     contains wetlands that have been degraded primarily as a result of agricultural use and have a high likelihood of successful restoration that will
     maximize wildlife benefits and wetland functions and values taking cost into consideration. Associated habitats and lands functionally related to the
     eligible wetlands may also be enrolled if they will contribute significantly to the wetland functions and values or practical administration of the
     enrolled area.

                                                                                  10. Utilization (Participation) Data
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
        During the 2008 Farm Bill, WRP has enrolled an average of approximately 215,000 acres on 1,200 projects each year. Since its inception in 1992, WRP has enrolled over 2.3 million acres on
     over 11,000 projects. The majority of enrollments, over 77 percent are perpetual easements, 16 percent are 30 year easements and 30 year contracts with tribes, and the remaining six percent
                                                                   are restoration cost-share agreements.                                  2010 WRP Number of Agreements and Dollars Obligated data includes:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                      30 Year Contracts     30 Year Easements   Permanent  Easements    Restoration Cost      Total Agreements
                   --------------------------------------------                          Share Agreement   ----------------------   Financial     Technical
                                                               --------------------------------------------                        Assistance    Assistance
                      Acres      Number     Acres      Number     Acres      Number     Acres      Number     Acres      Number     Obligated     Obligated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         Total         1,761          4     60,154        425    206,692        954      4,155         31    272,762      1,414   $592,562,106  $28,910,632
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Numbers currently reported in NEST are undergoing an intense quality assurance review. Numbers are subject to change during this process.

    11. Duplication or Overlap with Other Programs
        There is some potential overlap of the restoration cost-share
    agreement enrollment option of WRP with WHIP. Because the restoration
    cost-share agreement enrollment option does not have an associated
    easement, it provides technical and financial assistance in the form of
    a cost-share agreement for the implementation of wetland restoration.
    The wetland restoration practices implemented through the WRP
    restoration cost-share agreements would potentially be eligible for
    cost-share under WHIP. The primary benefit of the WRP restoration cost-
    share agreement that sets it apart from WHIP is the length of the
    agreement. The WRP agreements require the restoration to be maintained
    for a longer period of time--a minimum of 10 years after the date the
    last practice is installed and, in contrast, WHIP agreements can be for
    one year to a maximum of 10 years. Thus, the WRP restoration cost-share
    agreements provide for a longer term protection of the public
    investment and realization of the public benefits resulting from the
    restored wetlands.
        CRP land eligibility criteria is more narrow than WRP. The nature
    of the agreements with landowners is also vastly different. Although
    there may be some overlap of eligible land with the CRP, WRP does not
    offer enrollment options similar to CRP.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Farm and Ranch Lands Protection Program (FRPP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        FRPP was last reauthorized in 2008 Farm Bill. This legislation
    expanded the purpose of the Farm and Ranch Lands Protection Program
    from ``protecting topsoil'' to ``protecting agricultural use and
    related conservation values of the land.'' The program now allows for
    long term agreements with cooperating entities. Such agreements may be
    5 years in duration for certified entities and 3 years for eligible
    entities that are not certified. The 2008 Farm Bill defines a
    ``certified entity'' as an eligible entity with a proven record of
    acquiring and monitoring conservation easements. Entities may submit
    proposals to protect farm and ranch lands throughout the term of the
    agreement.
    4. Purpose/Goals
        FRPP is a voluntary program that helps farmers and ranchers keep
    their land in agriculture. The program provides matching funds to
    state, Tribal, or local governments and non-governmental organizations
    with existing farm and ranch land protection programs to purchase
    conservation easements.
    5. Success in Meeting Programmatic Purpose/Goals
        The following is an example of the benefits of FRPP:
        The 180 acre Carpenter Farm and the 142 acre Sparks Farm in Salem
    County were protected from development with funding from the State
    Agriculture Development Committee (SADC), Garden State Preservation
    Trust, and FRPP. The Carpenter Farm has been in agriculture for more
    than 300 years. Wheat and soybeans are the primary crops cultivated on
    the Sparks Farm. In addition to protecting rich, fertile farmland and
    investing in the agricultural economy of the region, preserving these
    lands also provides a significant environmental benefit. The resulting
    land and waterscape is one of the top areas in the state for waterfowl
    diversity and has been designated an Important Bird Area by New Jersey
    Audubon.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $50
                                2003                                 $100
                                2004                                 $112
                                2005                                 $112
                                2006                                  $74
                                2007                                  $74
                                2008                                  $97
                                2009                                 $121
                                2010                                 $150
                                2011                                 $175
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                                  $15
                                2004                                  $54
                                2005                                  $63
                                2006                                  $59
                                2007                                  $91
                                2008                                  $73
                                2009                                  $74
                                2010                                 $102
                                2011                                  $97
    ------------------------------------------------------------------------

        FRPP FA funds are obligated the year parcels are enrolled in the
    program but not expended until easements are closed, which may take
    several years. TA funds obligated in a given year are used for workload
    generated by the enrollment of new parcels and workload generated by
    parcels enrolled in prior years. The vast majority of TA funding tends
    to be expended in the year of obligation. FA funding represents the
    majority of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Farm and Ranch Lands Protection
     Program      Conservation Planning and              N/A             325             336             336             460
           Technical Consultation
          Conservation                           N/A              17              18              18              25
           Implementation
          Financial Assistance--                 958           3,704           3,828           3,830           5,248
           Program Administration
          Indirect Costs                       2,185           1,615           1,669           1,670           2,289
                                     -------------------------------------------------------------------------------
            Sub-total Technical                3,143           5,661           5,851           5,854           8,022
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost          69,940          90,520         112,915         144,042         166,978
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                       73,083          96,181         118,766         149,896         175,000
            FTEs                                  24              29              34              29              44Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Individual landowners must apply to and be accepted by the eligible
    state, tribe, or local government or nongovernmental programs to
    participate in FRPP. As a Title XII program, these individual
    landowners must meet farm bill payment eligibility requirements for
    adjusted gross income, wetland conservation, and highly erodible land
    conservation. The land to be enrolled in FRPP must meet one of three
    criteria to qualify for consideration: (1) have at least 50 percent
    prime, unique, or important farmland soil; (2) have historic or
    archeological resources; or (3) support the policies of a state or
    local farm and ranch lands protection program.
        To qualify, farmland must: be part of a pending offer from a state,
    tribe, or local farmland protection program; be privately owned; have a
    conservation plan for highly erodible land; be large enough to sustain
    agricultural production; be accessible to markets for what the land
    produces; have adequate infrastructure and agricultural support
    services; and have surrounding parcels of land that can support long-
    term agricultural production. Depending on funding availability,
    proposals must be submitted by the eligible entities to the appropriate
    NRCS State Office during the application window.
    10. Utilization (Participation) Data
        2010 FRPP Number of Parcels and Dollars Obligated data includes:

    ------------------------------------------------------------------------
                                                  Financial
                                                  Assistance      Technical
                     Number of      Acres 1     Obligated for    Assistance
                     Parcels 1                     Easement       Obligated
                                                 Acquisition
    ------------------------------------------------------------------------
           Total            403       170,412     $144,041,755    $4,425,878
    ------------------------------------------------------------------------
    1 Numbers currently reported in NEST are undergoing an intense quality
      assurance review. Numbers are subject to change during this process.

    11. Duplication or Overlap with Other Programs
        GRP also offers long-term and permanent easements to protect
    grazing lands from conversion to other uses. Lands eligible for GRP are
    generally eligible for FRPP; however, FRPP is more broadly applicable
    to include cropland or other lands that may not be eligible for GRP.
    12. Waste, Fraud and Abuse
        NRCS has uncovered few instances of entity misuse of landowner
    contributions in acquiring easements through FRPP. However, a 2005 OIG
    audit found that the entity coerced landowners into returning some of
    the proceeds of the sale of the easement to the entity, who had claimed
    these as part of their non Federal match. As a result, the entity did
    not pay the required 25 percent of the purchase price for the FRPP
    easement. In response, NRCS terminated the agreement with the eligible
    entity and arranged for parcels to be included in a subsequent
    agreement with another eligible entity. Internal controls have been
    instituted that require landowners to sign a ``Confirmation of Matching
    Funds'' to ensure that cooperating entities do not use landowners'
    proceeds from the easement acquisition to cover the entities'
    contribution. In addition NRCS State Office staff interview landowners
    to be certain that they are not being forced to provide the entity cash
    match.
        In Wisconsin, the eligible entity misrepresented the source of its
    funds by certifying that it had not obtained the money from landowners
    when it had. This resulted in NRCS overpaying on these easements. The
    Office of General Counsel is currently reviewing legal options. As a
    result of this case, changes were made to FRPP policy requiring NRCS
    State office staff to visit every FRPP parcel and interview every
    landowner, inform them of FRPP regulations, and confirm the estimated
    easement value, Federal contribution, entity contribution, landowner
    donation, and recommended contribution to stewardship funds before a
    cooperative agreement is signed.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Resource Conservation and Development (RC&D).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        RC&D was initiated under the Soil Conservation and Domestic
    Allotment Act, (16 U.S.C. 590a-590f), the Bankhead-Jones Farm Tenant
    Act (16 U.S.C. 1010 and 1011), and the Food and Agriculture Act of
    1962, and is authorized under subtitle H, title XV of the Agriculture
    and Food Act of 1981, (16 U.S.C. 3451-3461), as amended. Through the
    program, RC&D areas establish or improve coordination systems in rural
    communities, and build rural community leadership skills to more
    effectively use Federal, state, and local programs for the communities'
    benefit. The 2002 Farm Bill permanently authorized the program. The
    2008 Act further strengthened the relationship between USDA and RC&D
    councils. The program began with ten pilot areas and grew to 375 areas
    designated by the Secretary of Agriculture.
        A RC&D area is a locally defined multi-county area, sponsored and
    directed by a RC&D Council that carries out the program encouraging
    natural resource conservation and utilization, accelerated economic
    development, and/or improvement of social conditions where needed to
    foster a sound local economy. The RC&D Council consists of sponsors
    from the public and private sector that represent a diverse cross-
    section of community interests. Sponsors include county and city
    governments, soil and water conservation districts, sub-state
    districts, Tribal governments, and other interested private
    organizations in the area. The RC&D program is based on grassroots
    involvement and decision-making. From public meetings to identify
    community concerns, needs, and problems, the RC&D Council develops an
    area plan that details the goals, objectives, and action items needed
    to address the local communities' priorities and concerns. The RC&D
    Council then collects data about identified problems, develops
    alternatives, and recommends solutions. Implementation of an action
    item may include one step or a full range of steps, such as problem
    identification, development of alternatives, plan development, and
    funding.
    4. Purpose/Goals
        The purpose of the RC&D program is to--

        (i) Develop and carry out area plans and projects in designated
            areas in order to conserve, develop, and improve the use of
            land.

        (ii) Develop natural resources.

        (iii) Improve and enhance the social, economic, and environmental
            conditions in primarily rural areas of the United States.

        (iv) Encourage and improve the capability of state and local units
            of government, Indian Tribes, nonprofit organizations, and
            councils.

        The mission of the RC&D Program was to make the financial,
    administrative, educational, and technical resources of USDA and other
    public and private partners available to increase the ability of
    communities to meet their regionally identified resource conservation
    and economic development needs.
    5. Success in Meeting Programmatic Purpose/Goals
        The program has been successful in meeting its purpose and goals.
    Each year RC&D Councils and their partners, with technical assistance
    from NRCS, help to create, retain, and expand businesses and the
    formation of cooperatives. RC&D Council projects create and retain
    jobs. Each RC&D Council brings in external grant funds for direct
    project implementation into their area.
        RC&D Councils assist farm or ranch operations with agri-tourism
    activities and direct marketing from the field to the consumer via
    Community Supported Agriculture groups (CSAs), restaurants, commercial
    stores, or public access farmers markets.
        Efforts to improve natural resources within RC&D areas result in
    the improvement of wildlife habitat, lakes and other water bodies, and
    streams. RC&D Councils assist animal agricultural operations with water
    quality projects; assist the construction or rehabilitation of flood
    control structures; and preserve or protect agricultural land. Over the
    last 5-8 years, RC&D Councils have begun implementing renewable energy
    projects.
        RC&D Councils hold workshops, tours and seminars nationwide on
    agriculture, aquaculture, forestry and wildlife; and training sessions
    on leadership development, grant writing, business development,
    nonprofit management and environmental education. These educational
    projects have helped people develop new skills.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Appropriation ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $48
                                2003                                  $51
                                2004                                  $52
                                2005                                  $51
                                2006                                  $51
                                2007                                  $51
                                2008                                  $51
                                2009                                  $51
                                2010                                  $51
                              2011 1                                   --
    ------------------------------------------------------------------------
    1 The 2011 Appropriations Act provided no funding for this program.
      Based on authority provided through multiple short-term continuing
      resolutions, a total of $27 million was available for this program
      through April 15, 2011.

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $49
                                2003                                  $49
                                2004                                  $51
                                2005                                  $51
                                2006                                  $51
                                2007                                  $52
                                2008                                  $52
                                2009                                  $51
                                2010                                  $50
                                2011                                  $22
    ------------------------------------------------------------------------

        RC&D primarily funded the support of RC&D Coordinators. Given the
    nature of this expense, outlays generally occurred in the year of
    appropriation and obligation. Prior to FY 2009, RC&D funds were no-year
    funds.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Resource Conservation and
     Development      Conservation Planning and           27,693          21,364          21,364          21,364          21,364
           Technical Consultation
          Conservation                        21,495          19,355          19,355          19,355          19,355
           Implementation
          Financial Assistance--                 N/A             N/A             N/A             N/A             N/A
           Program Administration
          Financial Assistance--Cost             N/A             N/A             N/A             N/A             N/A
           Share & Monetary
           Incentive
          Indirect Costs                       1,900          10,011          10,011          10,011          10,011
                                     -------------------------------------------------------------------------------
            Total Costs                       51,088          50,730          50,730          50,730          50,730
            FTEs                                 453             440             412             403             423Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual appropriations; Fiscal Year 2011 is an estimate from
      the Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Eligible entities for the RC&D program are nonprofit entities that
    are established by volunteers or representatives of states, local units
    of government, Indian tribes, or local nonprofit organizations
    specifically to participate in the RC&D program. They apply to the
    Secretary of Agriculture to be designated as a USDA RC&D area. The size
    and configuration of an area must be based on an assessment of rural
    development needs, institutional arrangements, and the natural
    resources of the region. Boundaries of an RC&D area are established on
    a multi-jurisdictional basis to make the most efficient use of area
    plans relating to land conservation, land management, community
    development, and environmental enhancement. Commonality of existing
    needs and opportunities are important aspects relating to the
    geographic boundaries of the area. The Secretary selects designated
    areas for assistance on the basis of the elements of the RC&D Council's
    area plan.
    10. Utilization (Participation) Data
        There are 375 RC&D areas serving 2,696 counties in every state, the
    Caribbean, and the Pacific Basin. Designated areas continue to serve
    over 85 percent of U.S. counties and more than 77 percent of the U.S.
    population. There are 39 applicant areas covering 236 additional
    counties that have applied for the designation by USDA.
    11. Duplication or Overlap with Other Programs
        The Federal support for the program was not funded under the FY
    2011 Full-Year Continuing Appropriations and agency technical support
    for the program is being closed out. RC&D councils may continue to
    compete to participate in other programs.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Environmental Quality Incentives Program (EQIP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        Agricultural Water Enhancement Program.
        Conservation Innovation Grants (CIG).
        Organics.
        Air Quality Initiative.
    3. Brief History
        EQIP was established in the 1996 Farm Bill and was reauthorized in
    the 2002 and 2008 Farm Bills. The Chief of NRCS may implement EQIP in
    any of the 50 states, the District of Columbia, the Commonwealth of
    Puerto Rico, Guam, the Virgin Islands of the United States, American
    Samoa, and the Commonwealth of the Northern Mariana Islands.
    4. Purpose/Goals
        NRCS is charged with carrying out EQIP in a manner that optimizes
    environmental benefits and provides:

       Flexible technical and financial assistance to farmers and
            ranchers that face the most serious threats to soil, water,
            air, and related natural resources;

       Assistance to farmers and ranchers in complying with
            Federal, state, and local environmental regulatory
            requirements;

       Assistance to farmers and ranchers in making beneficial,
            cost-effective changes to cropping systems, grazing management,
            manure, nutrient, pest, or irrigation management, land uses, or
            other measures needed to conserve and improve soil, water, air,
            and related natural resources; and

       For the consolidation and simplification of conservation
            planning and implementation to reduce the administration burden
            on producers.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010:

       NRCS enrolled almost 36,500 agreements on over 13,000,000
            acres.

       The value of the contracts was over $839 million.

       The average agreement size is 357 acres.

       On average, NRCS agreed to reimburse participants
            approximately $23,000 for each agreement.
    6. Annual Budget Authority (FY 2002-FY 2011)
        EQIP supports CCPI and CIG. These are not appropriated separately
    or tracked separately in the NRCS financial system.

    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                 $200
                                2003                                 $695
                                2004                                 $975
                                2005                               $1,000
                                2006                                 $995
                                2007                                 $996
                                2008                               $1,200
                                2009                               $1,067
                                2010                               $1,180
                                2011                               $1,238
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                 $185
                                2003                                 $626
                                2004                                 $859
                              2005 1                                ^$531
                                2006                                 $771
                                2007                                 $815
                                2008                                 $953
                                2009                                 $943
                                2010                               $1,059
                                2011                               $1,171
    ------------------------------------------------------------------------
    1 Prior to FY 2005, NRCS advanced funding for the EQIP program to FSA.
      In FY 2005 all obligations from FY 2005 and prior and the remaining
      funding to pay those obligations came back to NRCS. The negative
      outlays meant there was additional cash available to pay for the EQIP
      obligations that came back to NRCS.

        EQIP FA funds are obligated the year of contract enrollment for the
    entire multi-year span of the contract. As the years pass, FA for
    contracted practices is not expended until the practices are installed
    and inspected for quality control by NRCS personnel. For this reason,
    FA funds tend to be expended over multiple years after obligation. TA
    funds obligated in a given year are used for workload generated by the
    enrollment of new contracts and workload generated by prior year
    contract implementation. The vast majority of TA funding tends to be
    expended in the year of obligation. FA funding represents the majority
    of program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Enironmental Quality Incentives
     Program      Conservation Planning and           27,928          17,315          19,132          20,429          22,277
           Technical Consultation
          Conservation                       119,171          89,704          99,117         105,837         115,411
           Implementation
          Financial Assistance--              80,152          60,221          66,540          71,051          77,479
           Program Administration
          Indirect Costs                      15,460         101,729         112,404         120,025         130,883
                                     -------------------------------------------------------------------------------
            Sub-total Technical              242,711         268,969         297,193         317,342         346,050
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost         750,140         924,221         757,389         856,697         833,950
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                      992,851       1,193,190       1,054,582       1,174,039       1,180,000
            FTEs                               2,171           2,313           2,395           2,407           2,872Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        To participate in EQIP, both the land and the applicant must be
    eligible. Eligible land includes cropland, rangeland, pastureland,
    private nonindustrial forestland, and other farm or ranch lands. The
    land must have an identified natural resource concern that poses a
    serious threat to soil, water, air, or related resources by reason of
    land use practices, soil type, terrain, climatic conditions,
    topography, flooding, saline characteristics, or other natural resource
    factors or natural hazard. Publicly owned land is eligible when the
    land is under private control for the contract period, and is included
    in the participant's operating unit, and must have written
    authorization from the government agency to apply conservation
    practices. For irrigation-related practices, the land must have a
    history of actively irrigating the land unit for 2 out of the last 5
    years.
        Applicants must be an agricultural producer, have control of the
    land for the life of the contract, be in compliance with farm bill
    provisions (highly erodible land, wetland conservation, protection of
    tenants and sharecroppers), be within appropriate program payment
    limitations and adjusted gross income requirements, and develop an EQIP
    plan of operations.
        Organics--The Organic Initiative is a nationwide special initiative
    within EQIP to provide assistance to organic producers as well as
    producers in the process of transitioning to organic production.
        Air Quality Initiative--The Air Quality Initiative is a nationwide
    special initiative within EQIP to provide assistance to farmers and
    ranchers to reduce air pollution generated from agricultural operations
    in areas designated by the EPA as non-attainment areas for ozone and
    particulate matter.
    10. Utilization (Participation) Data
        EQIP Application/Contract Status data includes:

    ------------------------------------------------------------------------
                        Number of Active      Financial
            FY            or Completed       Assistance       Total Treated
                            Contracts         Obligated           Acres
    ------------------------------------------------------------------------
              2005              49,406      $792,091,721        18,080,499
              2006              41,190      $784,849,667        21,115,275
              2007              41,700      $781,954,270        17,104,234
              2008              48,116      $943,407,338        16,944,359
              2009              31,960      $731,099,112        12,003,583
              2010              36,499      $838,985,212        13,034,363
                       -----------------------------------------------------
      Total...........         248,871    $4,872,387,320        98,282,313
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        EQIP is one of the program structures through which CBWP is
    delivered. CBWP has more focused priorities by concentrating on water
    quality and quantity and only in the Chesapeake Bay watershed.
        Although similar to EQIP, WHIP has expanded priorities to support
    fish and wildlife.
        Although similar to EQIP in implementation, Agricultural Management
    Assistance (AMA) is limited to 16 statutorily-designated states that
    have low participation in Federal Crop Insurance Programs. There are
    some practices that can be installed through AMA but not EQIP
        Although similar to EQIP, Agricultural Water Enhancement Program
    (AWEP) focuses on ground and surface water conservation and water
    quality, and is a component of EQIP.
        Both EQIP and CRP address natural resource concerns, the land uses
    on which the practices are applied generally are distinct. There could
    be minimal overlap where CRP enrolls windbreaks, shelterbelts and
    shallow water impoundments for wildlife.
    12. Waste, Fraud and Abuse
        An audit by the OIG revealed that participant contracts for the
    Migratory Bird Habitat Initiative in one Louisiana Parrish received an
    increased payment rate for the socially disadvantaged designation
    although those participants were not actually in a socially
    disadvantaged group. It was identified by OIG that staff inadvertently
    selected an incorrect payment schedule. It was recommended to adjust
    the agency's business tools so that the socially disadvantaged
    designation indicated by the participant would automatically provide
    the correct payment rate without staff having to manually select
    various payment schedules for each application. For the improper
    payments, the agency provided each participant with the option to
    either return the overpayment amount or to receive a reduction in
    future scheduled payments.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Conservation Innovation Grants (CIG).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        First authorized in the 2002 Farm Bill and reauthorized by each
    subsequent farm bill, CIG is a voluntary program intended to stimulate
    the development and adoption of innovative conservation approaches and
    technologies while leveraging Federal investment in environmental
    enhancement and protection, in conjunction with agricultural
    production. Under CIG, EQIP funds are used to award competitive grants
    to non-Federal governmental or non-governmental organizations, Tribes,
    or individuals.
        CIG enables NRCS to work with other public and private entities to
    accelerate technology transfer and adoption of promising technologies
    and approaches to address some of the nation's most pressing natural
    resource concerns. CIG will benefit agricultural producers by providing
    more options for environmental enhancement and compliance with Federal,
    state, and local regulations.
    4. Purpose/Goals
        CIG provides grants on a competitive basis to stimulate the
    development and adoption of innovative conservation approaches and
    technologies while leveraging Federal investment in environmental
    enhancement and protection, in conjunction with agricultural
    production.
        NRCS expects to incorporate innovative technologies and approaches
    which result from CIG into NRCS technical manuals, guides, activities,
    and references, and to transfer these innovations to others in the
    public sector. CIG projects target innovative on-the-ground
    conservation, including pilot projects and field demonstrations.
    5. Success in Meeting Programmatic Purpose/Goals
        The following provides examples of CIG project results:

        (a) In 2005, the Washington State University was awarded a CIG
            grant to implement the project titled ``Development and
            Integration of a National Feed Management Education Program and
            Assessment Tools into a Comprehensive Nutrient Management Plan
            (CNMP)'' in Washington. The intend of the project was to
            develop a two-tier tool for assessing the impacts of feed
            management practices on whole farm nutrient balance for animal
            nutritionists and NRCS staff and TSP advisors; develop the
            content of a Feed Management chapter for the NRCS Agricultural
            Waste Management Field Handbook (AWMFH), and develop and
            implement an education program targeting integration of feed
            management into a CNMP.

        At the end of the project in 2008, the Washington State University
            (WSU) developed educational materials that are applicable at
            the national level and provided training for NRCS staff,
            agricultural professionals, and technical service providers
            (TSP's) in feed management concepts and practices that minimize
            import of nutrients to the farm. WSU provided training in the
            use of computer models and software for strategic ration
            balancing, whole farm nutrient balance, and nutrient excretion
            estimates based upon feed and animal performance inputs, and
            developed a chapter for the NRCS Agricultural Waste Management
            Field Handbook (AWMFH) on Feed Management. Education materials
            were used to assist with the understanding of the conservation
            practice standard (CPS) code 592 Feed Management, feed
            management plan development and implementation tools, and a
            decision aid tool were developed (Feed Nutrient Management
            Economics software--FNMP$).

        Workshops have been conducted in the States of Washington,
            California, Texas, Maryland, Nebraska, Pennsylvania, and
            Wisconsin. Collaborating states with these trainings included:
            Idaho, Oregon, Virginia, Indiana, Iowa, and Minnesota. In
            addition, the national CNMP training program led by Iowa State
            has incorporated our Feed Management project material into
            their curriculum. Approximately 70 individuals have become
            certified through the American Registry of Professional Animal
            Scientists organization to be feed management planners.

        While the funding for this project has ended, the interest and
            implementation activities are continuing. The project team is
            available to work with individual states with adoption of CPS
            592 Feed Management. In addition, the American Registry of
            Professional Animal Scientists continues to provide the exam
            process for certifying that a nutritionist is qualified to
            develop a nutrient management plan.

        The Feed Management chapter for the AWMFH was completed by
            September 2008. In addition, NRCS is converting a decision aid
            tool called Feed Management Nutrient Planning Economics (FNMP$)
            from Excel to an Access data base format. Efforts to provide
            training for nutritionists and TSPs will continue.

        (b) The World Wildlife Fund, Inc. (WWF), received a CIG grant in
            2005 for a project titled ``Market-Based Program for
            Environmental Services on South Florida Ranch Lands.'' The main
            goal of the project was to engage ranchers, public agencies,
            and public interest groups to design, establish, and install a
            market-based incentive program for phosphorous reduction in the
            Lake Okeechobee (Northern Everglades) region; monitored and
            evaluate the environmental benefits (Phosphorous load
            reduction) achieved by the water management alternatives
            installed by the livestock producer participants; and design a
            scaled-up version of the pilot incentive program for use on a
            broader scale and communicated results of the field tests
            through field days, journal articles, workshops, and
            conferences.

        When the project was completed in 2006, eight (8) ranching
            operations located within the Northern Everglades--Lake
            Okeechobee region in south Florida were contracted by WWF to
            developed Water Management Alternatives (WMA's) on formerly
            drained wetlands that had been converted to pasturelands in an
            effort to retain surface waters and nutrients. Each rancher had
            different circumstances for which to implement practices and to
            demonstrate surface water retention/water quality benefits.
            Sizes of the rancher WMA's ranged from very small in-pasture
            systems of 49 acres to two large systems involving 3,748 and
            2,500 acres respectively. The average size of the eight WMA
            project areas was 1,092 acres.

        This CIG project has successfully established a foundation for a
            Payment for Environmental Services (PES) program that is
            locally accepted among livestock producers, and local, state
            and Federal agencies. The eight pilot projects WMA's
            demonstrated an average of 3 metric tons of phosphorous
            retained on-site from 0.5-2.24 acre-feet of water retained
            within their CIG project areas. As a result of this CIG
            project, the first effective PES program was generated on a
            large regional scale to benefit a globally recognized imperiled
            ecosystem, the Everglades, and will do so by maintaining
            agriculture as part of the solution. The CIG PES Program
            offered a previously unrecognized environmental benefit from
            the installation of conservation practices for farm bill
            participants located within the Northern Everglades--Lake
            Okeechobee region.

        The project titled ``Wisconsin's Dairy and Livestock Air Emission/
            Odor Project'' from Wisconsin Department of Agriculture, Trade,
            and Consumer Protection (ATCP) was funded in 2005 to implement
            best management practices to establish the connection between
            agricultural ambient air concentrations and odor and evaluate
            various best management practices installed on dairy and other
            livestock operations to reduce odor, ambient air
            concentrations, and overall environmental impacts; and to test
            the odor standards developed as part of the administrative rule
            to implement Wisconsin's Livestock Siting Law.

        Wisconsin Department of Agriculture developed and implemented a
            plan to evaluate the odor standards in ATCP 51 LIVESTOCK
            FACILITY SITING, Wisconsin Administrative Code through odor
            measurements and the relationship with measured ambient air
            concentrations on six to eight dairy/livestock farms.
            Evaluation installation of a manure digester to produce methane
            for production of electricity was completed. An evaluation of
            post implementation impacts on ambient air concentrations,
            odors, and water quality was conducted. And results were
            communicated through the Wisconsin Agricultural Stewardship
            Initiative (WASI).

        This project provided actual air sampling data associated with the
            implementation of practices on dairies in the Midwest U.S. This
            data verified that impermeable covers are extremely effective
            at controlling odors and permeable covers are considerably
            effective at controlling odors. This data also emphasized the
            importance of proper design and operation (proper retention
            time, operational reliability, and addition of substrate
            material) for anaerobic digesters and that storage lagoons
            receiving digested manure may require additional management for
            odors and ammonia. Solids separation with aeration does appear
            to reduce odors (about 25 percent) and hydrogen sulfide, but
            may increase ammonia emissions. Overall, the project provided
            some much-needed data regarding the effectiveness of certain
            odor control practices. Although the data set is somewhat
            limited, it does provide some trends and identification of
            areas for further study.

        (c) In 2005, the Chesapeake Bay Foundation received a CIG grant for
            a project titled ``Precision Dairy Feeding to Reduce Nutrient
            Pollution in Pennsylvania's Waters and the Chesapeake Bay'' to
            demonstrate to dairy producers that precision feeding of dairy
            cows could facilitate reductions in the protein (nitrogen) and
            phosphorus being fed to dairy animals while maintaining or even
            improving milk production and possibly improving animal health.

        A total of 66 diverse farms were enrolled in the precision dairy
            feeding program and received technical assistance from the
            University of Pennsylvania. Forage, feed, and feces samples
            were collected quarterly from these farms and analyzed to
            adjust their rations to more precisely meet the nutrient needs
            of the dairy herds. An additional 33 farms had their forage,
            feed, and feces sampled and received technical assistance
            through nutritionists and veterinarians who were trained to
            precisely balance dairy rations by the University of
            Pennsylvania. Dairy producers with their nutritionists
            regularly adjusted rations to maintain and improve production
            while minimizing manure nutrients.

        Based on the finding from these feeding trials, the Pennsylvania
            State University Cooperative Extension developed the ``Dairy
            Tool'' to help farmers identify the greatest opportunities to
            improve profitability on their farms. Feed management is an
            essential component of this assessment. In addition, several
            publications related to feed management were prepared by the
            project participants in August 2008. Further the findings from
            the CIG project were presented at various conferences through
            display of posters and booths. Also, the Chesapeake Bay
            Foundation created and distributed a brochure entitled ``Feed
            Efficiency: Improving Dairy Production while Cutting Feed
            Costs'' to introduce precision to 13,000 dairy producers who
            were not participants in the program. Further several workshops
            and training sessions were conducted in Pennsylvania to present
            the findings and benefits of precision dairy feeding to dairy
            farmers throughout Pennsylvania.

        Widespread application of the ``precision dairy feeding''
            techniques that were demonstrated and analyzed in this project
            could be most valuable to NRCS in achievement of lower
            phosphorus and nitrogen loading rates to receiving streams and
            water bodies. This could make an especially beneficial
            contribution to improved water quality in many watersheds with
            high concentrations of dairy animals. Further this feeding
            technology could aid development acceptable alternatives in
            development of CNMP's. In addition, improvements in animal
            health through precision dairy feeding would contribute towards
            addressing health issues related to the animal resource.

        The findings through this project relating to the evaluation and
            promotion of ``precision dairy feeding'' could the s
            significant value to NRCS in assisting dairy producers with the
            development and implementation of resource management systems
            and the achievement of water quality pollutant loading limits.
    6. Annual Budget Authority (FY 2002-FY 2011)
        CIG is not appropriated as a separate program. CIG is an initiative
    within the Environmental Quality Incentives Program and is reported in
    the immediately preceding Questionnaire.
    7. Annual Outlays (FY 2002-FY 2011)
        CIG is a sub-program of EQIP. Budget Authority and Outlays for CIG
    are reported as part of EQIP. Since 2004, $125.9 million has been
    awarded to CIG grant recipients.
    8. Annual Delivery Cost (FY 2007-FY 2011)
        CIG is not appropriated separately. It is a subprogram of the EQIP.
    The program delivery costs for CIG are included in the total EQIP
    delivery cost and are reflected in the EQIP table.
    9. Eligibility Criteria
        CIG is available to all eligible applicants in the 50 states,
    Caribbean Area (Puerto Rico and the Virgin Islands), and the Pacific
    Islands Area (Guam, American Samoa, and the Commonwealth of the
    Northern Mariana Islands).

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
               FY             Number of Applications     Number of Grants
    ------------------------------------------------------------------------
                 2004                      148                       40
                 2005                      175                       54
                 2006                      199                       63
                 2007                      194                       50
                 2008                      260                       56
                 2009                      391                       52
                 2010                      388                       58
                 2011                      411                      TBD
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        There is no duplication or overlapping with USDA conservation
    programs. Because the purposes and functions of CIG are unique, CIG
    payments do not overlap with other USDA conservation payments.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Agricultural Water Enhancement Program (AWEP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        AWEP was authorized by the 2008 Farm Bill as a CCC-funded program
    within EQIP. The Chief of NRCS may enter into AWEP partnership
    agreements with eligible partners who compete through the Request for
    Proposals process in any of the 50 states, the District of Columbia,
    the Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United
    States, American Samoa, and the Commonwealth of the Northern Mariana
    Islands.
    4. Purpose/Goals
        The purpose of the AWEP is to promote ground and surface water
    conservation and water quality by helping producers implement
    agricultural water enhancement activities. NRCS is charged with
    carrying out AWEP in a manner that optimizes environmental benefits and
    encourages the following activities with respect to agricultural land:

       Development of a water quality or water conservation plan,
            including resource condition assessment and modeling;

       Water conservation restoration or enhancement projects,
            including conversion of dryland farming or to producing
            commodities that are less water intensive;

       Water quality or quantity restoration or enhancement
            projects;

       Irrigation system improvement and irrigation efficiency
            enhancement;

       Activities designed to mitigate the effects of drought; and

       Related activities that the Secretary of Agriculture
            determines will help achieve water quality or water
            conservation benefits on agricultural land.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010, NRCS obligated approximately $60.8 million in 1,489 new
    contracts to implement conservation practices on nearly 271 thousand
    acres of agricultural lands. Partners provided approximately $50.5
    million in technical and financial assistance. Through AWEP, the agency
    approved 28 new partner project areas during FY 2010, and continued to
    provide support for 63 projects approved during FY 2009.
        Approximately 54 percent of the projects approved in FY 2010 are
    located in the designated high-priority water quantity concern areas.
    Socially disadvantaged producers received 2.8 percent of all contracts
    under the program.
        For FY 2011 eight new projects in seven states were approved for a
    total of $4.7 million. Producer enrollment currently underway for FY
    2011 projects.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $0
                                2003                                   $0
                                2004                                   $0
                                2005                                   $0
                                2006                                   $0
                                2007                                   $0
                                2008                                   $0
                                2009                                  $73
                                2010                                  $73
                                2011                                  $74
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $0
                                2003                                   $0
                                2004                                   $0
                                2005                                   $0
                                2006                                   $0
                                2007                                   $0
                                2008                                   $0
                                2009                                   $7
                                2010                                  $48
                                2011                                  $70
    ------------------------------------------------------------------------

        AWEP FA funds are obligated the year of contract enrollment for the
    entire multi-year span of the contract. As the years pass, FA for
    contracted practices is not expended until the practices are installed
    and inspected for quality control by NRCS personnel. For this reason,
    FA funds tend to outlay for multiple years after obligation. TA funds
    obligated in a given year are used for workload generated by the
    enrollment of new contracts and workload generated by prior year
    contract implementation. The vast majority of TA funding tends to
    outlay in the year of obligation. FA funding represents the majority of
    program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Agricultural Water Enhancement
     Program      Conservation Planning and               --              --           1,264           1,257           3,757
           Technical Consultation
          Conservation                            --              --           4,390           4,367          13,052
           Implementation
          Financial Assistance--                  --              --           3,091           3,075           9,190
           Program Administration
          Indirect Costs                          --              --           2,661           2,648           7,914
                                     -------------------------------------------------------------------------------
            Sub-total Technical                   --              --          11,406          11,347          33,913
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost              --              --          60,397          60,813          40,087
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                           --              --          71,803          72,160          74,000
            FTEs                                  --              --              66              65             223Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2009 and 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Eligible partners include: Federally recognized Indian Tribes,
    states, units of local government, agricultural or silvicultural
    associations or other groups of such producers such as an irrigation
    association an agricultural land trust, or other nongovernmental
    organizations with experience working with agricultural producers.
        The Managers' Report to the 2008 Farm Bill provides direction for
    the Secretary to give priority to producers in six priority areas: The
    Eastern Snake Plain Aquifer region, Puget Sound, the Ogallala Aquifer,
    the Sacramento River watershed, Upper Mississippi River Basin, the Red
    River of the North Basin, and the Everglades.
    10. Utilization (Participation) Data
        Approximately 46 percent of valid applications were funded during
    FY 2010. Funding the remaining 54 percent of valid applications would
    require an additional $70.4 million. For FY 2011, requirements for
    continued funding of previous-year projects will significantly impact
    the number of new projects awarded and increase the percentage of
    unfunded applications. This condition is expected to continue to impact
    the number of new applications funded in future years.
        AWEP Application/Contract Status data includes:

    ------------------------------------------------------------------------
                            Active or         Financial
            FY              Completed        Assistance        Total Acres
                            Contracts         Obligated
    ------------------------------------------------------------------------
              2009               1,704       $60,385,278           488,380
              2010               1,489       $60,813,288           270,667
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        The Agricultural Management Assistance (AMA) also focuses on ground
    and surface water conservation and water quality. Although similar to
    AMA in implementation, AWEP is available nationwide. There are some
    practices that can be installed through AMA but not AWEP.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Cooperative Conservation Partnership Initiative (CCPI).
        Prepared by USDA's Natural Resources Conservation Service.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 2707 of the 2008 Farm Bill authorized the CCPI as a CCC-
    funded program. The Chief of NRCS may enter into CCPI partnership
    agreements with eligible partners who compete through the Request for
    Proposals process in any of the 50 states, the District of Columbia,
    the Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United
    States, American Samoa, and the Commonwealth of the Northern Mariana
    Islands.
    4. Purpose/Goals
        The purposes of the CCPI are to:

       Address conservation priorities involving agriculture and
            nonindustrial private forestland on a local, state, multi-
            state, or regional level;

       Encourage producers to cooperate in meeting applicable
            Federal, state, and local regulatory requirements related to
            production involving agriculture and nonindustrial private
            forestland;

       Encourage producers to cooperate in the installation and
            maintenance of conservation practices that affect multiple
            agricultural or nonindustrial private forest operations; or

       Promote the development and demonstration of innovative
            conservation practices and delivery methods, including those
            for specialty crop and organic production and precision
            agriculture producers.

        NRCS may make EQIP, Wildlife Habitat Incentive Program (WHIP), and
    Stewardship program resources available to owners and operators of
    agricultural and nonindustrial private forestlands who are located in
    an approved CCPI project area.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010, NRCS obligated approximately $42.3 million in 279 new
    contracts to implement conservation practices on nearly 1.2 million
    acres of agricultural lands. Through CCPI, the agency approved 51 new
    partner project areas during FY 2010, and continued to provide support
    for 110 projects approved during FY 2009.
        For FY 2011 51 new projects were approved for a total of $20
    million. Producer enrollment currently underway for FY 2011 projects.
    6. Annual Budget Authority (FY 2002-FY 2011)
        CCPI is not appropriated as a separate program. CCPI is a provision
    for delivering up to six percent of the resources within the WHIP,
    EQIP, and Stewardship.
    7. Annual Outlays (FY 2002-FY 2011)
        CCPI is not appropriated as a separate program. CCPI is an
    initiative within WHIP, EQIP, and Stewardship resources.
    8. Annual Delivery Cost (FY 2007-FY 2011)
        CCPI is not appropriated separately. It is a provision through
    which several existing programs may be delivered, including the
    Environmental Quality Incentives Program, Conservation Stewardship
    Program, and Wildlife Habitat Incentive Program. The program delivery
    costs for CCPI are included in the delivery costs for EQIP,
    Stewardship, and WHIP and are reflected in the tables for those
    programs.
    9. Eligibility Criteria
        Eligible partners include: Federally recognized Indian Tribes,
    states, units of local government, agricultural or silvicultural
    associations or other groups of such producers such as an irrigation
    association an agricultural land trust, or other nongovernmental
    organization with experience working with agricultural producers.
    10. Utilization (Participation) Data
        Approximately 42 percent of valid applications were funded during
    FY 2010. Prior year project were funded to approximately 90 percent of
    the original request.
        2010 CCPI--EQIP Application/Contract Status data includes:

    ------------------------------------------------------------------------
                        Number of Active      Financial
                          and Completed      Assistance       Total Treated
                            Contracts         Obligated           Acres
    ------------------------------------------------------------------------
             Total               1,188       $23,234,738         1,080,901
    ------------------------------------------------------------------------

        2010 CCPI-WHIP Application/Contract Status data includes:

    ------------------------------------------------------------------------
                        Number of Active      Financial
                          and Completed      Assistance       Total Treated
                            Contracts         Obligated           Acres
    ------------------------------------------------------------------------
             Total                 106          $654,375            12,549
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        CCPI is a provision that is delivered through existing programs,
    including EQIP, Conservation Stewardship Program, and WHIP. CCPI is a
    way for partners to identify target areas where program funds will be
    spent.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Wildlife Habitat Incentive Program (WHIP).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        WHIP was first authorized in the 1996 Farm Bill and was
    reauthorized in the 2002 and 2008 Farm Bills. The Chief of NRCS may
    implement WHIP in any of the 50 states, the District of Columbia, the
    Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United
    States, American Samoa, and the Commonwealth of the Northern Mariana
    Islands.
    4. Purpose/Goals
        The purpose of WHIP is to help participants develop fish and
    wildlife habitat on private agricultural land, nonindustrial private
    forestland, and Indian land.
        In order to provide direction to the state and local levels for
    implementing WHIP and achieving its objective, NRCS has established the
    following national priorities:

        (i) Promote the restoration of declining or important native fish
            and wildlife habitats.

        (ii) Protect, restore, develop, or enhance fish and wildlife
            habitat to benefit at-risk species.

        (iii) Reduce the impacts of invasive species on fish and wildlife
            habitats.

        (iv) Protect, restore, develop, or enhance declining or important
            aquatic wildlife species' habitats.

        (v) Protect, restore, develop, or enhance important migration and
            other movement corridors for wildlife.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010

       NRCS enrolled over 4,700 agreements on over 1,000,000 acres.

       The value of the contracts was almost $63 million.

       The average agreement size is 223 acres.

       There were 68 contracts valued at over $3.7 million with
            American Indian and Alaska Native Lands.

       On average, NRCS agreed to reimburse participants
            approximately $13,000 for each long-term agreement.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                  $15
                                2003                                  $30
                                2004                                  $42
                                2005                                  $47
                                2006                                  $43
                                2007                                  $43
                                2008                                  $85
                                2009                                  $85
                                2010                                  $85
                                2011                                  $85
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $2
                                2003                                   $9
                                2004                                  $14
                                2005                                  $21
                                2006                                  $27
                                2007                                  $31
                                2008                                  $44
                                2009                                  $53
                                2010                                  $58
                                2011                                  $63
    ------------------------------------------------------------------------

        Please explain changes between budget authority and outlays:
        WHIP FA funds are obligated the year of contract enrollment for the
    entire multi-year span of the contract. As the years pass, FA for
    contracted practices is not expended until the practices are installed
    and inspected for quality control by NRCS personnel. For this reason,
    FA funds tend to outlay for multiple years after obligation. TA funds
    obligated in a given year are used for workload generated by the
    enrollment of new contracts and workload generated by prior year
    contract implementation. The vast majority of TA funding tends to
    outlay in the year of obligation. FA funding represents the majority of
    program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Wildlife Habitat Incentives
     Program      Conservation Planning and            1,310           3,554           2,770           2,733           2,769
           Technical Consultation
          Conservation                         3,410           7,563           5,895           5,817           5,893
           Implementation
          Financial Assistance--               3,688           9,086           7,083           6,989           7,080
           Program Administration
          Indirect Costs                       1,919           6,220           4,849           4,785           4,846
                                     -------------------------------------------------------------------------------
            Sub-total Technical               10,327          26,423          20,597          20,324          20,588
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost          32,131          57,080          52,146          62,602          64,412
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                       42,458          83,503          72,743          82,926          85,000
            FTEs                                  77             150             128             126             150Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        To be eligible for WHIP, the land must be:

       Private agricultural land including cropland, grassland,
            rangeland, pasture, and other land determined by NRCS to be
            suitable for fish and wildlife habitat development.

       Nonindustrial private forestland including rural land that
            has existing tree cover or is suitable for growing trees.

       Indian land.

         An exception may be made by the Chief in the case of
                land allotted by the Bureau of Indian Affairs or Indian
                land where there is sufficient assurance of control.

        Applicants are subject to adjusted gross income provisions and must
    provide NRCS with written evidence of ownership or legal control of the
    land.
        WHIP plays an important role in implementing a number of NRCS
    special initiatives.

       Longleaf Pine Initiative. In Alabama, Florida, Georgia,
            Louisiana, Mississippi, North Carolina, South Carolina, Texas,
            and Virginia, WHIP improved the health and extent of the
            longleaf pine forest ecosystem in ways that benefited both the
            health of the plant community and wildlife habitat. During FY
            2010, NRCS enrolled over 33,000 acres of longleaf pine forest
            in almost 400 contracts valued at nearly $4.65 million.

       Lesser Prairie Chicken Initiative. WHIP enrolled land in
            Colorado, Kansas, New Mexico, Oklahoma, and Texas to keep this
            candidate species from being listed as threatened and
            endangered under the Endangered Species Act, while also
            improving grazing and wildlife habitat. During FY 2010, NRCS
            enrolled over 98,000 acres in these states in 138 WHIP
            contracts valued at more than $3.8 million.

       New England-New York Forestry Initiative. WHIP expanded
            stewardship opportunities for forestlands and wildlife in the
            New England States of Connecticut, Maine, Massachusetts, New
            Hampshire, New York, Rhode Island, and Vermont. During FY 2010,
            NRCS enrolled over 48,500 acres in these states in more than
            300 WHIP contracts valued at more than $4.6 million.

       Sage-Grouse Initiative. In 11 states (California, Colorado,
            Idaho, Montana, Nevada, North Dakota, Oregon, South Dakota,
            Utah, Washington, and Wyoming) WHIP implemented conservation
            practices that will reduce threats to sage-grouse habitat;
            these practices are designed both to keep this candidate
            species from being listed as threatened and endangered and to
            provide grazing land for ranches. During FY 2010, NRCS enrolled
            almost 90,000 acres in these states in 37 WHIP contracts valued
            at more than $3.8 million.
    10. Utilization (Participation) Data
        Approximately 56 percent of valid applications were funded during
    Fiscal Year 2010. Funding the remaining 44 percent would require an
    additional $44 million.
        WHIP Application/Contract Status data includes:

    ------------------------------------------------------------------------
                        Number of Active      Financial
            FY            and Completed      Assistance       Treated Acres
                            Contracts         Obligated
    ------------------------------------------------------------------------
              2005               3,333       $33,246,702           454,091
              2006               2,717       $31,464,158           324,954
              2007               2,107       $31,494,465           357,699
              2008               3,495       $57,221,029           646,491
              2009               3,706       $51,998,722           812,497
              2010               4,731       $62,862,480         1,054,095
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        WHIP provides for developing, restoring, and enhancing wildlife
    habitats which can also be done under EQIP. EQIP has one national
    priority in regard to at-risk species habitat conservation as does
    WHIP. However, WHIP has four additional priorities for fish and
    wildlife.
        EQIP is agriculturally support based while WHIP is fish and
    wildlife habitat support based. EQIP requires lands to be in production
    agriculture to be eligible. Lands can be in agriculture or have the
    potential to be in agriculture to be eligible for WHIP. Public lands
    connected with eligible lands are eligible for EQIP but not for WHIP.
        CRP enrolls land to create wildlife habitat. All of the lands
    eligible for CRP could be enrolled in WHIP if they fall within the WHIP
    priority areas but not all lands eligible for WHIP could be enrolled in
    CRP.
    12. Waste, Fraud and Abuse
        An audit by the Office of Inspector General (OIG) revealed that
    participant WHIP contracts for the Migratory Bird Habitat Initiative in
    one Louisiana Parrish received an increased payment rate for the
    socially disadvantaged designation although those participants were not
    actually in a socially disadvantaged group. It was identified by OIG
    that staff inadvertently selected an incorrect payment schedule. It was
    recommended to adjust the agency's business tools so that the socially
    disadvantaged designation indicated by the participant would
    automatically provide the correct payment rate without staff having to
    manually select various payment schedules for each application. For the
    improper payments, the agency provided each participant with the option
    to either return the overpayment amount or to receive a reduction in
    future scheduled payments.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Agricultural Management Assistance (AMA).
        Prepared by USDA's NRCS.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        AMA was originally authorized under the Agricultural Risk
    Protection Act of 2000, Title I, Section 133, Public Law 106-224, on
    June 22, 2000. This title was amended by the 2002 Farm Bill and the
    2008 Farm Bill.
        AMA is available in 16 states where participation in the Federal
    Crop Insurance Program is historically low: Connecticut, Delaware,
    Hawaii, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New
    Jersey, New York, Pennsylvania, Rhode Island, Utah, Vermont, West
    Virginia, and Wyoming.
    4. Purpose/Goals
        AMA provides financial assistance payments to agricultural
    producers to voluntarily address issues such as water management, water
    quality, and erosion control by incorporating conservation practices
    into their farming operations. The Agricultural Marketing Service (AMS)
    is responsible for using AMA funding for organic certification
    assistance, and the Risk Management Agency (RMA) is responsible for
    using AMA funds for mitigation of financial risks through assisting
    producers to purchase risk insurance. Funding is authorized at $15
    million for FY 2008-2012 and of the funding made available each fiscal
    year, not less than 50 percent is to be provided to NRCS, 40 percent to
    RMA, and 10 percent to AMS.
    5. Success in Meeting Programmatic Purpose/Goals
        AMA currently has over 660 contracts in implementation and a
    continuing backlog of applications that indicates strong support among
    producers for the program. At the end of FY 2010, AMA had a backlog of
    767 applications, with an estimated contract value of $5.1 million,
    covering over 9,500 acres.
        AMA provides many producers a first-time opportunity to address
    natural resource concerns on their lands. For instance, many producers
    have not been able to participate in EQIP because they do not meet the
    eligibility criterion that land must have been irrigated for 2 of the
    previous 5 years to receive EQIP funding. A number of these EQIP-
    ineligible producers are small-acreage or specialty-crop farming
    operations that provide high dollar value products to the general
    public. By helping to mitigate the risks associated with these kinds of
    agricultural enterprises, AMA helps agriculture remain a valuable
    segment of local economies.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                      Apportionment ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $0
                                2003                                   $0
                                2004                                  $14
                                2005                                  $14
                                2006                                   $5
                                2007                                   $5
                                2008                                   $8
                                2009                                   $8
                                2010                                   $8
                                2011                                   $8
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                                2002                                   $0
                                2003                                   $0
                                2004                                   $2
                                2005                                   $7
                                2006                                   $6
                                2007                                   $7
                                2008                                   $5
                                2009                                   $5
                                2010                                   $6
                                2011                                   $6
    ------------------------------------------------------------------------

        AMA FA funds are obligated the year of contract enrollment for the
    entire multi-year span of the contract. As the years pass, FA for
    contracted practices is not expended until the practices are installed
    and inspected for quality control by NRCS personnel. For this reason,
    FA funds tend to outlay for multiple years after obligation. TA funds
    obligated in a given year are used for workload generated by the
    enrollment of new contracts and workload generated by prior year
    contract implementation. The vast majority of TA funding tends to
    outlay in the year of obligation. FA funding represents the majority of
    program budget authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011Agricultural Management
     Assistance      Conservation Planning and              458             147             150             147             212
           Technical Consultation
          Conservation                         2,386             457             465             457             659
           Implementation
          Financial Assistance--                 940             433             441             433             624
           Program Administration
          Indirect Costs                         775             457             141             165             238
                                     -------------------------------------------------------------------------------
            Sub-total Technical                4,559           1,494           1,197           1,202           1,733
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost              --           5,756           6,181           6,048           5,767
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                        4,559           7,250           7,378           7,250           7,500
            FTEs                                  27               9               9              12              33Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual obligations; Fiscal Year 2011 is an estimate from the
      Fiscal Year 2012 President's Budget submission.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Applicants must own or control the land within an identified AMA
    state and comply with adjusted gross income limitation provisions.
    Eligible land includes cropland, rangeland, grassland, pastureland,
    nonindustrial forestland, and other private land that produces crops or
    livestock where risk may be mitigated through operation diversification
    or change in resource conservation practices.
    10. Utilization (Participation) Data
        Approximately 36 percent of valid applications were funded during
    FY 2010. Funding the additional remaining 64 percent of valid
    applications would require an additional $5.1 million. The FY 2010
    funded applications covered over 11,000 acres.
        AMA Application/Contract Status data includes:

    ------------------------------------------------------------------------
                        Number of Active      Financial
        Fiscal Year       and Completed      Assistance       Treated Acres
                            Contracts         Obligated
    ------------------------------------------------------------------------
              2005                 766        $9,578,046            74,255
              2006                 275        $3,718,549            13,328
              2007                   0                $0                 0
              2008                 276        $5,756,087            33,202
              2009                 214        $6,179,956            13,875
              2010                 426        $6,048,438            11,102
                       -----------------------------------------------------
      Total...........           1,957       $30,942,815           145,762
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        The priorities of AMA are the same as for EQIP. There are some
    practices that can be implemented under AMA that cannot be under EQIP.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.

                           AGRICULTURAL PROGRAM AUDIT

                    (EXAMINATION OF SPECIALTY CROP PROGRAMS)

                                  ----------

                             THURSDAY, JULY 7, 2011

    Subcommittee on Nutrition and Horticulture,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 2:52 p.m., in
    Room 1300 of the Longworth House Office Building, Hon. Jean
    Schmidt [Chairwoman of the Subcommittee] presiding.
        Members present: Representatives Schmidt, Southerland,
    Crawford, Baca, Pingree, and Costa.
        Staff present: Patricia Barr, John Goldberg, Pam Miller,
    Mary Nowak, Matt Perin, Debbie Smith, Keith Jones, John Konya,
    and Jamie Mitchell.

      OPENING STATEMENT OF HON. JEAN SCHMIDT, A REPRESENTATIVE IN
                           CONGRESS FROM OHIO

        The Chairwoman. I would like to thank our witnesses. I am
    sorry for the delay, but at least we got the first set of votes
    out of the way.
        First off, I just want to say thank you to everybody for
    your patience, and especially to our witnesses for the USDA's
    Agricultural Marketing Service, and to the Animal and Plant
    Health Inspection Service, or APHIS, for joining us. I look
    forward to your insight and to your testimony. I also want to
    thank my good friend, Ranking Member Joe Baca, who got an
    exciting gift from a friend of his today. He actually bought
    the baseball, but--can I brag for you? Well, Hank Aaron signed
    his baseball. Is that like the coolest thing in the world?
    Sorry I had to steal your thunder, but I just am really
    impressed. So obviously, this is a big day for Mr. Baca. But,
    thank you for joining me in this hearing, it is well known that
    a certain degree of bipartisanship exists in this Committee. It
    is one of the best committees to actually be on because we
    fight about regional issues, not about Republican versus
    Democratic. I am really glad that he is my friend throughout
    this whole process.
        As we approach the next farm bill, I look forward to
    hearing from the farming community, the producers, the
    handlers, everyone from around the country. And as Chairman
    Lucas said and has continued to say, that there has to be a
    firm understanding of the programs within the framework of the
    farm bill, because as he has said, everything is on the table.
    So I look forward to hearing from APHIS and AMS with a general
    snapshot of the spending of each program that they administer.
        I just want to say to Ms. Pegg, I understand you are
    leaving, so I won't bother you with any leafy green issues
    today. But we will be looking at your testimony and asking
    questions. We will study the financial aspects of these
    programs and consider whether or not the program's goals are
    being met, and whether the programs are financially prudent. We
    will join the other Subcommittees in looking for instances of
    program overlap, as well as examples of waste, fraud, and
    abuse.
        An additional benefit to examining programs and their
    operation is the education that members will receive. Many of
    us do not have firsthand knowledge of how each program is
    administered on a daily basis. I appreciate the opportunity to
    learn what you all do, and I am excited to hear your testimony.
        It is our hope that this process of evaluation and
    education will give Members a clear picture of the farm bill as
    a whole and see how well programs are being administered before
    engaging in policy discussions before the next farm bill.
    Today's audit hearing is focused specifically on specialty crop
    programs found in Title X of the farm bill, as well as the
    administration of Section 32 of the Act of August 24, 1935.
    While many programs that affect the specialty crop industry are
    found throughout the farm bill, we will do our best to stay
    focused on Title X.
        USDA's Agricultural Marketing Service and APHIS are the
    agencies charged with administering most of the Title X
    programs. AMS also administers a series of grant programs,
    including the Specialty Crop Block Grant Program, which is
    designed to enhance the competitiveness of fruits and
    vegetables, tree nuts, dry fruits, horticulture, floriculture,
    and nursery crops. These grants are widely used throughout the
    states in a variety of ways. I know many in Ohio are
    beneficiaries of and like the flexibility that Specialty Crop
    Block Grant Program provide.
        Creating technical assistance programs throughout the Ohio
    Produce Marketing Agreement has been helpful and beneficial.
    Last July, a grower from a neighboring district appeared before
    our Subcommittee. In his testimony, he stated ``In states like
    Ohio, we do not have existing support programs and systems of
    technical assistance similar to what other states enjoy. The
    Specialty Crop Block Grant Program is one of the few tools we
    have to support our growers and better realize our specialty
    crop opportunities.'' Further, AMS administers research and
    promotion programs, as well as marketing orders and agreements
    to help stabilize markets for specific commodities. One
    marketing agreement that has received a considerable amount of
    attention is the National Leafy Green Marketing Agreement that
    AMS is considering, and that is currently open for public
    comment. I look forward to learning how AMS is administering
    Section 32 funds which have supported agricultural commodities
    like fruits, vegetables, and meats, which are not typically
    covered by mandatory price supports. AMS has the responsibility
    of administering a wide range of programs, including the
    National Organic Program, which oversees the labeling of
    products as organic.
        In addition to AMS testifying, APHIS will detail their
    responsibilities in administering the pest and disease
    programs, including the National Clean Plant Network, which
    propagates pest and disease-free nursery stocks for the
    industry. As we approach the next farm bill, it is imperative
    that we hear directly from the Department so we can fully
    understand from your firsthand experience what is working and
    what is not working. Some of the decisions on program
    authorizations and funding levels will be difficult, but with
    proper evaluation, I am confident that we can put together a
    farm bill that meets the goals of food safety and security,
    rural prosperity, and nutritional well-being.
        Again, I look forward to the panel, and to the witnesses
    from the Department and for Ms. Bech and Ms. Pegg for joining
    us today.
        [The prepared statement of Mrs. Schmidt follows:]

     Prepared Statement of Hon. Jean Schmidt, a Representative in Congress
                                   from Ohio
        Thank you all for coming to this hearing to review specialty crop
    programs to help us prepare for the next farm bill. I thank our
    witnesses from USDA's Agricultural Marketing Service and Animal and
    Plant Health Inspection Service for joining us today. I look forward to
    hearing your insightful testimony.
        I also want to thank my friend, Ranking Member Baca, for joining me
    in holding this hearing today. It is well known that a certain degree
    of comity or bipartisanship exists here on the Agriculture Committee
    and I look forward to working with my friend as we go through this farm
    bill process.
        As we approach the next farm bill, I look forward to hearing from
    producers and handlers from around the country. But before we begin
    that process, I agree with Chairman Lucas that Members need to have a
    firm understanding of the programs within the framework of the farm
    bill.
        I look forward to hearing from APHIS and AMS with a general
    snapshot of the spending of each program that they administer. We will
    study the financial aspects of these programs and consider whether or
    not the programs' goals are being met and whether the programs are
    financially prudent.
        We will join the other Subcommittees in looking for instances of
    program overlap as well as examples of waste, fraud, and abuse.
        An additional benefit to examining programs and their operation is
    the education that Members will receive. Many of us, do not have
    firsthand knowledge of how each program is administered on a daily
    basis. I appreciate the opportunity to learn as much about individual
    programs before the farm bill hearings begin.
        It is our hope that this process of evaluation and education will
    give Members a clear picture of the farm bill as a whole and see how
    well programs are being administered before engaging in policy
    discussions before the next farm bill.
        Today's audit hearing is focused specifically on specialty crop
    programs found in Title X of the farm bill as well as the
    administration of Section 32 of the Act of August 24,1935. While many
    programs that affect the specialty crop industry are found throughout
    the farm bill, we will do our best to stay focused on those in Title X.
        USDA's Agricultural Marketing Service (AMS) and Animal and Plant
    Health Inspection Service are the agencies charged with administering
    most of the Title X programs.
        AMS also administers a series of grant programs including the
    Specialty Crop Block Grant Program which is designed to enhance the
    competitiveness of fruits and vegetables, tree nuts, dried fruits,
    horticulture, floriculture and nursery crops. These grants are widely
    used throughout the states in a variety of ways.
        I know many of my Ohio constituents like the flexibility that the
    Specialty Crop Block Grant Program provides producers, creating
    technical assistance programs through the Ohio Produce Marketing
    Agreement. Last July, a grower from near my district appeared before
    our Subcommittee. In his testimony, he stated ``In states like Ohio, we
    do not have existing support programs and systems of technical
    assistance similar to what other states enjoy. The block grant program
    is one of the few tools we have to support our growers and better
    realize our specialty crop opportunities.''
        Further, AMS administers research and promotion programs as well as
    marketing orders and agreements to help stabilize markets for specific
    commodities. One marketing agreement that has received a considerable
    amount of attention is the National Leafy Green Marketing Agreement
    that AMS is considering and that is currently open for public comment.
        I also look forward to learning how AMS is administering Section 32
    funds, which have supported agricultural commodities like fruits,
    vegetables, and meats, which are not typically covered by mandatory
    price supports.
        AMS has the responsibility of administering a wide range of
    programs including the National Organic Program which oversees the
    labeling of products as organic.
        In addition to AMS testifying, APHIS will detail their
    responsibilities in administering the Pest and Disease programs
    including the National Clean Plant Network which propagates pest and
    disease-free nursery stock for the industry.
        As we approach the next farm bill, it is imperative that we hear
    directly from the Department so we can fully understand from your
    first-hand experience what is working and what is not working. Some of
    the decisions on program authorizations and funding levels will be
    difficult, but with proper evaluation, I am confident that we can put
    together a farm bill that meets the goals of food safety and security,
    rural prosperity, and nutritional well-being.
        Again, I would like to thank the witnesses from the Department, Ms.
    Bech and Ms. Pegg, for joining us today. I look forward to your
    testimony and today' s discussion.

        The Chairwoman. Now I will turn this over to the Ranking
    Member, my good friend, Joe Baca.

        OPENING STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Baca. Good afternoon, and thank you, Madam Chairwoman
    Schmidt for holding this important hearing to examine programs
    that are contained within Title X of the 2008 Farm Bill. I
    appreciate your bipartisanship in working with these issues. I
    appreciate the little bit of stealing the thunder of Hank Aaron
    signing this autographed ball. As you know, he broke Babe
    Ruth's record and still holds the record for most home runs
    right now. Some of us who play in the Congressional game, hope
    we can hit a home run.
        The Chairwoman. Can I just add that the Cincinnati Reds
    could use some help. Do you think you could come help?
        Mr. Baca. Some of us are willing to come out of retirement.
    Maybe even to play for the Reds. I do appreciate that. Thank
    you very much, Madam Chair.
        Let's get back to the original topic here. The 2008 Farm
    Bill was historic legislation that included the fundamental
    improvements to the USDA nutrition and farm conservation
    programs, but perhaps none more important that its recognition
    of specialty crops and organic agriculture.
        Specialty crops now represent nearly 50 percent of the farm
    gate value of the plants based in U.S. agriculture. Organic
    fruits and vegetables now account for over 11 percent of all
    fruits and vegetable sales in the United States. The
    availability of fruits, vegetables, and other specialty crops
    are critical to the health of the American consumer, especially
    as we look at obesity and other health-related problems that
    are impacting us. If we don't deal with that, the additional
    taxpayer costs will be roughly around $197 billion. As we look
    at alternative fruits and vegetables, we need to focus on
    American products. Let me state that again, we need American
    products grown by American farmers to better ensure the
    economic well-being of our citizens.
        The specialty crops and organic sector were recognized in
    the 2008 Farm Bill because they looked to the future in areas
    like research, conservation, pests and disease management, and
    expansion of market opportunities. Congress responded to this
    forward thinking with a nearly $3 billion in investment in the
    future of specialty crops and organic producers. This
    investment is vital to farms across the nation.
        My home State of California is blessed as the nation's top
    producer of many fruits, tree nuts, and other crops. California
    also leads the nation in the amount of certified organic
    cropland with over 430,000 acres. As we now know, the 2012 Farm
    Bill will be written during a time of unprecedented fiscal
    challenges. The question of how to wisely use American's hard-
    earned tax dollars will never be far from us. We must not lose
    sight of the fact that any farm bill, at its core, is about
    good public policy. If we are smart, the 2012 Farm Bill can
    save money, improve health and nutrition, and strengthen our
    economy.
        I am convinced that we are on the right policy track with
    the programs that we will be reviewing today. I look forward to
    working with my colleagues to ensure that the down payment made
    on behalf of specialty crops and organic producers does not go
    to waste in 2012. Again, I want to thank the panelists for
    their patience in waiting for our votes to conclude. I want to,
    again, thank the Chairwoman for holding this hearing.
        With that, I yield back the balance of my time.
        [The prepared statement of Mr. Baca follows:]

    Prepared Statement of Hon. Joe Baca, a Representative in Congress from
                                   California
        Good afternoon. Thank you Chairwoman Schmidt for holding this
    important hearing to examine programs that are contained within Title X
    of the 2008 Farm Bill.
        The 2008 Farm Bill was historic legislation that included
    fundamental improvements to USDA nutrition and farm conservation
    programs.
        But perhaps no policy change was more vital than the recognition of
    specialty crops and organic agriculture.
        Specialty crops now represent nearly 50 percent of the farm gate
    value of plant based U.S. agriculture.
        Organic fruits and vegetables now account for over 11 percent of
    all fruit and vegetable sales in the U.S.
        The availability of fruits, vegetables, and other specialty crops
    is critical to the health of America's consumers.
        And we need American products--grown by American farmers--to better
    ensure the economic well-being of our citizens.
        The specialty crop and organic sectors were recognized in the 2008
    Farm Bill--because they looked to the future in policy areas, like:

       Research and conservation;

       Pest and disease management; and

       Expansion of market opportunities.

        Congress responded to this forward thinking with a nearly $3
    billion investment in the future of specialty crop and organic
    producers.
        This investment is vital to farmers across the nation.
        My home State of California is blessed as the nation's top producer
    of many fruits, tree nuts, and other crops.
        California also leads the nation in the amount of certified organic
    crop-land--with over 430 thousand acres.
        As we all know--the 2012 Farm Bill will be written during a time of
    fiscal challenges.
        We must not lose sight of the fact that any farm bill--at its
    core--is about good public policy.
        If we are smart--the 2012 bill can save money, improve health and
    nutrition, and strengthen our economy.
        I am convinced that we are on the right policy track with the
    programs that we will be reviewing today.
        I look forward to working with my colleagues to ensure the down
    payment made on behalf of specialty crop and organic producers does not
    go to waste in 2012.
        Again--I want to thank the Chairwoman for holding this hearing--and
    thank our witnesses for taking the time to help us better understand
    these programs. I yield back.

        The Chairwoman. Thank you very much. The chair would
    request that other Members submit their opening statements for
    the record so the witnesses may begin their testimony in a
    timely manner, since we already are an hour delayed.
        [The prepared statement of Mr. Southerland follows:]

     Prepared Statement of Hon. Steve Southerland II, a Representative in
                             Congress from Florida
        I welcome the opportunity to reauthorize Federal agricultural
    policies affecting American agricultural production in the development
    of the 2012 Farm Bill. As a significant contributor to U.S. farm
    receipts and balance of trade, it is extremely important that the
    issues affecting specialty crops play a meaningful role in the farm
    bill. Specialty crops, including fruits, vegetables, nuts,
    horticultural crops and others, represent over \1/3\ of gross
    agricultural cash receipts in the U.S., and hence have a significant
    stake in our nation's agricultural policy.
        Florida ranks among the top ten states in the nation in
    agricultural crop value and second in the specialty crop production
    with a wide variety of fruit, vegetable and nursery crops grown through
    the state. The farm bill 5 year farm policy measure should continue and
    strengthen its emphasis on key areas such as pest and disease,
    research, as well as giving states the flexibility needed to better
    address environmental challenges and ensuring critical resources are
    available to respond to the unique needs of specialty crops in most
    budget efficient manner possible.
        Historically, many Florida agricultural producers--and specialty
    crop growers throughout the country--have chosen to base their economic
    decisions on the marketplace and have not relied on Federal farm price
    support programs. However, these markets can be very volatile and the
    industry faces extreme and somewhat unique pressures including ever
    increasing environmental challenges, labor and production costs beyond
    that of our competitors, subsidized foreign market competition. In
    addition, unprecedented exposure to pests and disease and state-of-the-
    art agricultural research needs tailored to the needs of fruit and
    vegetable production is also vital.
        Florida is listed by the USDA as the number two high risk state
    second only to California regarding exotic pest and disease
    introductions pressure. According to the Florida Department of
    Agriculture, costs to combat pests and diseases affecting Florida
    farmers, have easily exceeded $1 billion over the last decade.
        Specialty crop farm bill measures such as the such Pest and Disease
    Management Program ``Section 10201'', the Specialty Crop Block Grants,
    the Specialty Crop Research Initiative, and well as marketing,
    nutrition, and other programs provide valuable opportunities for
    Florida and U.S. specialty crop industry in American farm policy.
        Mindful of the fiscal constraints facing our Federal budget and
    increasing national debt, we must be vigilant within this Committee and
    working with the U.S. Department of Agriculture to focus valuable
    Federal resources in those areas with the most effective impact to
    sustain and strengthen specialty crop and agricultural production in
    our nation. I look forward to working with my colleagues toward that
    end as we consider reauthorization of the 2012 Farm Bill.

        The Chairwoman. I am going to begin with introducing our
    first panelist, Ms. Rayne Pegg, who is the Administrator,
    Agricultural Marketing Service, U.S. Department of Agriculture,
    Washington, D.C., and Ms. Rebecca Bech, Deputy Administrator
    for the Plant Protection and Quarantine, Animal and Plant
    Health Inspection Service, U.S. Department of Agriculture,
    Washington, D.C.
        Ms. Pegg, we will let you begin.

                STATEMENT OF RAYNE PEGG, ADMINISTRATOR,
    AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Ms. Pegg. Thank you very much, Chairwoman Schmidt, Ranking
    Member Baca, and Members of the Subcommittee. Thank you for
    inviting me to appear before you today to provide a
    comprehensive picture of the activities authorized in the
    Organic Agriculture Title X of the farm bill, as well as the
    activities under Section 32. It is our hope that this
    examination of specialty crop, organic, pest and disease
    management and Section 32 provisions from the last farm bill
    will prove helpful as you begin the next farm bill discussions.
        USDA Agricultural Marketing Service and the Animal and
    Plant Health Inspection Service are the primary agencies with
    the responsibility for implementing Title X. Rebecca Bech from
    APHIS is here with me today to answer any APHIS-specific
    questions that you might have.
        As you mentioned earlier, AMS administers two grant
    programs that were reauthorized and amended in the 2008 Farm
    Bill. Specialty Crop Block Grant Program provides funding to
    states and U.S. territories to enhance the competitiveness of
    specialty crops. Specialty crops are defined as fruits and
    vegetables, tree nuts, dried fruits, horticulture, and nursery
    crops, including floriculture.
        The 2008 Farm Bill provided the following funding levels
    for the block grants program from CCC funding: $10 million in
    2008, $49 million in 2009, $55 million for 2010 through 2012.
    In Fiscal Year 2010, approximately $55 million was awarded for
    54 grants, which funded a total of 822 different projects. This
    year's application deadline is July 13.
        The Farmers Market Promotion Program is another AMS grant
    program covered under Title X. This works to help improve and
    expand domestic Farmers Markets, roadside stands, community-
    supported agricultural programs--sorry, agriculture tourism
    activities, and other direct producer to consumer market
    opportunities. The 2008 Farm Bill extended the Farmers Market
    Promotion Program through 2012, and provided a total of $33
    million in CCC funding. In 2008, that funding was at $3
    million, 2009, $5 million, and in 2010, it was still $5
    million, and for 2011 and 2012, we are going up to $10 million
    in funding. In 2010, with the $5 million funding, we funded a
    total of 81 awards that went to 35 different states. In 2011,
    we have notified--we published notice of funding availability
    in June of 2011, and the deadline for applying for those funds
    was last Friday, July the 1st.
        AMS's Market News disseminates detailed information on
    marketing conditions for hundreds of agricultural commodities
    at major domestic and international wholesale markets,
    production areas, and ports of entry. Using direct contacts of
    salespersons, suppliers, brokers, buyers, Market News reporters
    collect, validate, analyze, and organize unbiased data on
    price, volume, quality, and condition, making it available
    within hours of collection. In the 2008 Farm Bill, there was
    specialty crop market news allocation which authorized $9
    million for each fiscal year, starting in 2008 through 2012.
    Although funding was not appropriated, AMS continues to carry
    out specialty crop Market News activities as the agency
    collects information on current supply, demand, and price for
    nearly 400 domestic and 700 international fruits, vegetables,
    nuts, ornamental and specialty crops.
        Title X also directed USDA to collect data on production,
    pricing, and marketing of organic agricultural products,
    provided $5 million in CCC funds, available until expended. Of
    the $5 million, $3.5 million was directed specifically to AMS.
    AMS is working to enhance Market News systems to expand
    reporting of organic market prices. By the end of 2009, AMS
    Market News had expanded the daily reporting of organic
    commodities to include a total of 234 items.
        Marketing orders and agreements serve as tools to help
    fruit and vegetable growers work together to solve marketing
    problems that they cannot solve independently. These programs
    are designed to help balance the availability of quality
    product with the need of adequate returns to producers and
    demand of consumers. There are currently 32 active specialty
    crop marketing orders and agreements that the agency oversees.
        Authorized by Federal legislation, research and promotion
    programs, often referred to as check-off programs, are designed
    to strengthen the position of the industry in the marketplace,
    and to maintain and expand domestic and foreign markets. The
    programs are fully funded by the industry. Board members are
    nominated by the industry and appointed by the Secretary. AMS
    oversees the activities of boards and approves their budgets in
    order to ensure compliance with the legislation.
        There were two research and promotion provisions in the
    2008 Farm Bill. The first made a number of amendments to the
    Honey Research Promotion and Consumer Information Act. As a
    result of those amendments, a Honey Packers and Importers
    Program became effective in 2008. A final research and
    promotion provision in the last farm bill allowed for the
    development of a program for good agricultural practices and
    good handling practices under the Mushroom Promotion Research
    and Consumer Information Order, as well as reapportioned the
    membership of the Mushroom Council to reflect the shifts in the
    industry.
        To support organic agriculture, the 2008 Farm Bill
    authorized funding for the National Organic Program at $5
    million for Fiscal Year 2008, $6.5 million for 2009, $8 million
    for 2010, $9.5 million for 2011, and $11 million for 2012. For
    the Fiscal Year 2010, Congress appropriated $6.9 million, and
    the 2011 budget for the program is $6.91 million. In addition
    the National Organic Certification Cost-share Program makes
    funds available to states and U.S. territories that are
    interested in providing cost-share assistance to organic
    producers and handlers certified under the National Organic
    Program. The 2008 Farm Bill provided $22 million in CCC funding
    for cost-share activities. It also increased the amount of
    reimbursement from $500 to $750. Of the $22 million for the
    program, $6.5 million remains for the Fiscal Year 2011 and 2012
    to be spent.
        To support domestic producers, Section 32 of the Act of
    August 24, 1935, authorizes the appropriation for each fiscal
    year of an amount equal to 30 percent of the gross receipts
    from duties collected under Customs laws of the United States
    during the preceding calendar year. These funds are
    specifically used to encourage domestic consumption of non-
    price supported perishable commodities and reestablish farmers'
    purchasing power through a variety of activities. These
    activities include purchasing commodities, removal of surplus
    commodities from the marketplace for distribution to our
    Federal nutrition programs, including those programs that
    support the National School Lunch Program as well as food
    banks, diversion programs that bring production into line with
    demand to assist producers, and disaster assistance. AMS
    annually purchases approximately $1 billion worth of
    commodities for distribution through various nutrition
    assistance programs. The 2008 Farm Bill authorized a spending
    cap for AMS purchases that has since been modified through
    subsequent appropriations.
        In addition to the 2002 Farm Bill which established that
    there be a minimum of $200 million used for the purchases of
    fruits and vegetables, the 2008 Farm Bill established
    additional fruit and vegetable purchases for each subsequent
    year. The minimum purchase requirement for the 2011 year for
    fruits and vegetables is a total of $403 million. To make up
    this purchase, entitlement purchases, Department of Defense
    purchases, and bonus buys can make up the total requirement for
    meeting the minimum fruit and vegetable purchasing requirement
    under the farm bill.
        AMS and APHIS undertake numerous activities to facilitate
    the competitive and efficient marketing of the U.S.
    agricultural products, as well as to protect and promote U.S.
    agricultural health. I hope that this testimony and subsequent
    questions and answers will prove useful to the Subcommittee as
    you undertake your work on the next farm bill.
        I want to introduce Rebecca Bech, who will add some
    additional comments regarding APHIS's administration of Title X
    of the farm bill.

       STATEMENT OF REBECCA BECH, DEPUTY ADMINISTRATOR FOR PLANT
     PROTECTION AND QUARANTINE, ANIMAL AND PLANT HEALTH INSPECTION
       SERVICE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Ms. Bech. Well, thank you for inviting me to join
    Administrator Pegg today to talk to you about the specialty
    crop provisions from the 2008 Farm Bill that APHIS continues to
    implement.
        The Animal and Plant Health Inspection Service is charged
    with protecting American agriculture from foreign pest and
    disease introductions, and within APHIS, I head up the Plant
    Protection Quarantine Program, which focuses on both plant
    pests and diseases that can harm our specialty crops, but also
    our forests and natural resources, as well as traditional
    crops.
        To accomplish that mission, APHIS has developed a robust
    agricultural safeguarding system, which consists of a set of
    comprehensive interlocking programs that work together to
    protect our agricultural resources.
        The 2008 Farm Bill created two programs that take these
    measures further by targeting specific segments of agriculture
    and activities that particularly benefit the specialty crops,
    and I would like to thank the Committee for its continued
    support for these crucial programs. Both the programs, the
    Plant Pest and Disease Management and Disaster Prevention
    Program, and the National Clean Plant Network, have proven to
    be highly effective and widely supported by stakeholders and
    industry. Through the Plant Pest and Disease Management and
    Disaster Prevention provision, which we refer to as Section
    10201 of the farm bill, APHIS is partnered with numerous
    states, tribes, universities, and other community partners to
    strengthen and expand the scope of APHIS's pest and disease
    prevention activities. Under the program, which is funded
    through the Commodity Credit Corporation, APHIS is allocated
    $50 million in Fiscal Year 2011, and as of today, we have
    funded 317 projects this year with over 100 cooperators. The
    agency provided $45 million in Fiscal Year 2010, along with $12
    million in Fiscal Year 2009. This program has been hugely
    successful and well-supported as we continue to see the
    positive impact of the various 2009, 2010, and 2011 projects.
        Because of this influx of farm bill funding, we have been
    able to work with states and industry to eradicate the plum pox
    virus in Pennsylvania, enhance California's ability to detect
    dangerous pests entering through mail and freight. We have
    eradicated 13 separate Mediterranean fruit fly outbreaks
    without the use of emergency funding, and we work with states
    across the country to survey for pests so that we can respond
    to any pest issues swiftly.
        These are just a few of the success stories that we have
    seen through this effort, but the net effect of these efforts
    and the many partnerships is a demonstrated improvement in
    USDA's ability to detect and respond to a plant pest or disease
    outbreak. Detecting and responding to a plant pest or disease
    in the early stage of an introduction is a significant cost
    saving for taxpayers, and can help minimize the potentially
    devastating impact on agriculture.
        The second farm bill program that helps address plant pest
    and diseases is Section 10202, the National Clean Plant
    Network. The network is a partnership of APHIS, the
    Agricultural Research Service, and the National Institute of
    Food and Agriculture. The network works to develop and produce
    clean propagative material, so that should a plant pest or
    disease strike, clean plant material is available to states,
    private nurseries, and the producers. Essentially, it is like
    an insurance policy that guarantees that there will be fresh
    stock of disease-free plants. The network is currently
    comprised of clean plant networks for fruit trees, grapes,
    citrus, berries, and hops. It includes 18 supported clean plant
    centers and associated programs located in 14 states. We
    continue to see broad support within the specialty crop
    industry, and also interest from other commodity groups in
    becoming part of this program.
        I would like to thank you again for the opportunity to
    testify today, and we look forward to working with the
    Subcommittee as you develop the next farm bill.
        Thank you.
        [The prepared statement of Ms. Pegg and Ms. Bech follows:]

      Joint Prepared Statement of Rayne Pegg, Administrator, Agricultural
        Marketing Service; Rebecca Bech, Deputy Administrator for Plant
    Protection and Quarantine, Animal and Plant Health Inspection Service,
                U.S. Department of Agriculture, Washington, D.C.
        Chairwoman Schmidt, Ranking Member Baca, and Members of the
    Subcommittee, thank you for inviting me to appear before you today to
    provide a comprehensive picture of the activities authorized in the
    Horticulture and Organic Agriculture Title of the Food, Conservation,
    and Energy Act of 2008 (2008 Farm Bill), as well as the activities
    under Section 32 of the Act of August 24, 1935 (Section 32). It is our
    hope that this examination of the specialty crop, organic, pest and
    disease management, and Section 32 provisions from the last farm bill
    will prove helpful as you begin work on the next farm bill.
        The Horticulture and Organic Agriculture Title (Title X) of the
    2008 Farm Bill represents the first time that a farm bill title was
    devoted exclusively to these two sectors. The U.S. Department of
    Agriculture's (USDA) Agricultural Marketing Service (AMS) and the
    Animal and Plant Health Inspection Service (APHIS) are the primary
    agencies with responsibility for implementing Title X. APHIS Deputy
    Administrator Bech is here with me today to answer any APHIS-specific
    questions that you might have.
        The economic vitality of rural America and the U.S. economy at
    large depends on a competitive, efficient, and productive agricultural
    system. In order to increase prosperity and sustainability in our
    nation's agricultural system and rural communities, AMS conducts
    oversight activities designed to protect producers from unfair
    competition and business practices. AMS assists producers in management
    and marketing through the development and oversight of national
    standards for the production and handling of agricultural products.
    Under the National Organic Program (NOP), the agency also develops and
    oversees the standards of products labeled as organic. AMS also
    supports producers by providing market trend analysis and business and
    marketing tools to cover hundreds of commodities every day and
    producing information that impacts billions of dollars in agricultural
    products each year.
    Grant Programs
        The Specialty Crops Competitiveness Act of 2004, as amended by the
    2008 Farm Bill, defines specialty crops to include fruits and
    vegetables, tree nuts, dried fruits, horticulture and nursery crops,
    including floriculture. Using this definition, specialty crops
    accounted for about 20 percent of the $283 billion in U.S. farm cash
    receipts in 2009. Yet, only about three percent of total crop acres in
    the U.S. are devoted to specialty crops.
        AMS administers two grant programs that were reauthorized and
    amended in the 2008 Farm Bill. The Specialty Crop Block Grant Program
    provides funding to states and U.S. territories to enhance the
    competiveness of specialty crops. The agency, commission, or department
    responsible for agriculture within each of the 50 states, the District
    of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the
    U.S. Virgin Islands, and the Commonwealth of the Northern Mariana
    Islands is eligible to apply for these grant funds from USDA. The
    minimum base grant each state or U.S. Territory is eligible to receive
    is equal to the higher of $100,000 or \1/3\ of 1 percent of the total
    amount of funding made available for that fiscal year (FY).
        The 2008 Farm Bill provided the following funding levels for the
    Specialty Crop Block Grant Program from the Commodity Credit
    Corporation (CCC): $10 million in FY 2008, $49 million in FY 2009, and
    $55 million for each Fiscal Year 2010 through 2012. In Fiscal Year (FY)
    2010, approximately $55 million was awarded for 54 grants that funded
    827 projects, an approximate ten percent increase in the number of
    projects funded the previous year. The application deadline for FY 2011
    awards is July 13, 2011.
        The last farm bill also amended the definition of specialty crop to
    include horticulture, and added Guam, American Samoa, the U.S. Virgin
    Islands and the Commonwealth of the Northern Mariana Islands to the
    list of ``states'' eligible to apply for grants. These changes required
    AMS to undertake rulemaking that was completed on March 27, 2009, with
    the publication of the final rule in the Federal Register.
        The other AMS grant program reauthorized and amended in Title X of
    the 2008 Farm Bill is the Farmers Market Promotion Program (FMPP). This
    program seeks to improve and expand domestic farmers markets, roadside
    stands, community-supported agriculture programs, agri-tourism
    activities, and other direct producer-to-consumer market opportunities.
    The 2008 Farm Bill extended the FMPP through 2012 and provided $33
    million in CCC funds: $3 million in FY 2008, $5 million in each Fiscal
    Years 2009 and 2010, and $10 million in each Fiscal Years 2011 and
    2012.
        The farm bill specified statutorily the categories of farmer-to-
    consumer direct marketing activities eligible for funding under the
    program. It also required that not less than ten percent of the funds
    used to carry out the program in a fiscal year are to be used to
    support the use of Electronic Benefits Transfers (EBT) at farmers'
    markets. The 2010 awards were announced in October 2010, and totaled
    approximately $4.3 million (81 awards in 35 states). A proposed rule
    that established eligibility and application requirements, the review
    and approval process, and grant administration procedures, was
    published in the Federal Register on June 1, 2011. The 2011 Notice of
    Funding Availability (approximately $10 million) was published on June
    3, 2011, with a deadline of July 1, 2011 for submission of grant
    proposals.
    Market News
        AMS' Market News disseminates detailed information on marketing
    conditions for hundreds of agricultural commodities at major domestic
    and international wholesale markets, production areas, and ports of
    entry. Using direct contacts with salespeople, suppliers, brokers, and
    buyers, Market News reporters collect, validate, analyze, and organize
    unbiased data on price, volume, quality and condition, making it
    available within hours of collection.
        In the 2008 Farm Bill, there was a Specialty Crops Market News
    allocation which authorized $9 million for each Fiscal Year 2008
    through 2012, to remain available until expended. Although recent
    appropriations have not specified specialty crops, AMS continues to
    carry out specialty crops Market News activities as the agency collects
    information on the current supply, demand and prices on nearly 400
    domestic and 70 international fruits, vegetables, nuts, ornamental and
    specialty crops.
        Title X also directed USDA to collect data on the production,
    pricing, and marketing of organic agricultural products and provided $5
    million in CCC funds, available until expended. Of the $5 million
    provided in FY 2008, $3.5 million was directed to AMS. In addition, the
    bill required a report to Congress within 180 days of enactment on the
    progress made implementing these activities and identifying additional
    production and marketing data needs. The report was delivered to
    Congress on December 29, 2008. AMS is working to enhance Market News
    systems to expand reporting of organic market prices. By the end of
    2009, AMS Market News had expanded the daily reporting of organic
    commodities to include 234 items. AMS Market News also added an
    additional section on the advertised specials on organic products to
    the weekly National Fruit and Vegetable Retail Report.
    Marketing Orders and Agreements
        Marketing orders and agreements serve as tools to help fruit and
    vegetable growers work together to solve marketing problems that they
    cannot solve individually. These programs are designed to balance the
    supply of quality product with the need for adequate returns to
    producers and the demands of consumers. There are currently 32 active
    specialty crop marketing orders and agreements.
        Marketing orders are typically initiated by producers who have an
    active role in the development of program provisions. Before any
    program is implemented or amended, approval by a \2/3\ or larger
    majority by number or volume represented in a referendum is required.
    Local committees of farmers and handlers--appointed by the Secretary of
    Agriculture--administer the orders.
        Marketing orders are binding on all individuals and businesses
    classified as ``handlers'' in the geographic area covered by the order.
    As defined by most agreements and orders, a handler is anyone who
    receives the commodity from producers, grades and packs it, transports,
    or places the commodity in commercial channels. However, this
    definition is ultimately defined by an individual program. Marketing
    orders are distinguished from marketing agreements, in that the
    agreements are binding only on handlers who are signatories of the
    agreements. Handlers must comply with the grade, size, quality, volume,
    and other requirements established under the specific program.
        In the 2008 Farm Bill, Congress directed USDA to add clementines to
    the list of products in Section 8e of the Agricultural Marketing
    Agreement Act of 1937. Section 8e provides that whenever a specified
    domestically produced commodity is regulated under a Federal marketing
    order, imports of the commodity must meet the same or comparable
    product standards as the domestic commodity. However, this provision
    has not been implemented as the industry has not pursued establishing a
    Federal clementines marketing order.
        Also, Title X provided for an expedited marketing order for Hass
    avocados relating to grades and standards. The order would become
    effective within 15 months of the date that the Department began the
    procedures for determining if the order should proceed. To date, AMS
    has not received an industry proposal.
    Research and Promotion
        Research and promotion programs, often referred to as ``check-
    offs'', are designed to strengthen the position of the industry in the
    marketplace and to maintain and expand domestic and foreign markets.
    The programs are all fully funded by industry assessments and are
    authorized by Federal legislation. Board or council members are
    nominated by the industry and officially appointed by the Secretary of
    Agriculture. In order to ensure compliance with the legislation, AMS
    oversees the activities of the boards or councils and approves their
    budgets.
        There were two research and promotion provisions in the 2008 Farm
    Bill. The first made a number of amendments to the Honey Research,
    Promotion, and Consumer Information Act. It directed AMS to consider a
    national research and promotion program for honey packers and
    importers. AMS received a proposal for the packers and importers
    program, and conducted a referendum on that proposal from April 2-16,
    2008. In the referendum, 78 percent of those voting, representing 92
    percent of the volume of referendum voters, approved the program. The
    program became effective on May 22, 2008, one day after the final rule
    was published in the Federal Register. The first board meeting took
    place on September 4, 2008. With the approval of this new program, the
    collection of assessments under the Honey Research, Promotion and
    Consumer Information Order--authorized under the Honey Research,
    Promotion and Consumer Information Act--was suspended. A termination
    order for that program was published in the Federal Register on April
    17, 2009.
        Furthermore, USDA was directed to consider establishing a research
    and promotion program for domestic honey producers. On July 14, 2009,
    AMS published a proposed rule and solicited comments for a domestic
    honey producer program. The rule and referendum procedures were
    published on April 12, 2010. The referendum was held May 17-June 4,
    2010, and resulted in the producers rejecting the domestic research and
    promotion program.
        Another research and promotion provision in the last farm bill
    allowed for the development of a program for Good Agricultural
    Practices and Good Handling Practices under the Mushroom Promotion,
    Research and Consumer Information Order, as well as reapportioned the
    membership of the Mushroom Council to reflect shifts in domestic
    mushroom production. AMS published the final rule implementing these
    provisions in the Federal Register on October 2, 2009.
    Organics
        The Organic Foods Production Act (OFPA) of 1990 required USDA to
    develop national standards for organically produced agricultural
    products and to assure consumers that agricultural products marketed as
    ``organic'' meet consistent and uniform standards. The National Organic
    Program (NOP) is a marketing program administered by AMS.
        The 2008 Farm Bill authorized funding for the NOP at $5 million for
    FY 2008, $6.5 million for FY 2009, $8 million for FY 2010, $9.5 million
    for FY 2011, and $11 million for FY 2012. For FY 2010, Congress
    appropriated $6.96 million while the FY 2011 funding for NOP is $6.91
    million.
        The National Organic Certification Cost-Share Program makes funds
    available to states and U.S. territories that are interested in
    providing cost-share assistance to organic producers and handlers that
    are certified under the NOP. The 2008 Farm Bill provided $22 million in
    CCC funds, to remain available until expended, for organic cost-share
    activities, and increased the cost-share reimbursement from $500 to
    $750 annually. Also, USDA was directed to submit an annual report to
    Congress, by March 1 of each year, that describes requests by,
    disbursements to, and expenditures for each state during the current
    and previous fiscal years, including the number of producers and
    handlers served. The program made approximately $4.8 million available
    for FY 2010 and approximately $5.2 million is available for FY 2011.
    Section 32
        Section 32 of the Act of August 24, 1935 authorizes the
    appropriation for each fiscal year of an amount equal to 30 percent of
    the gross receipts from duties collected under customs laws of the
    United States during the previous calendar year. These funds are used
    to encourage domestic consumption of non-price supported perishable
    commodities and to re-establish farmers' purchasing power through a
    variety of activities, including: purchases of commodities and removal
    of surplus commodities from the marketplace for distribution to Federal
    nutrition assistance programs such as the National School Lunch Program
    and diversion programs that bring production in line with demand to
    assist producers. AMS annually purchases approximately $1 billion in
    commodities for distribution to various nutrition assistance programs.
    Section 32 funds are also used to finance the administrative costs
    associated with the purchase of commodities and the development of
    specifications used for food procurement throughout the Federal
    Government.
        The 2008 Farm Bill directed USDA to make Section 32 specialty crop
    purchases of (in addition to the $200 million required in the 2002 Farm
    Bill): $190 million for FY 2008, $193 million for FY 2009, $199 million
    for FY 2010, and $203 million for FY 2011, and $206 million for FY 2012
    and each fiscal year thereafter. AMS purchased $390.3 million in
    specialty crops in FY 2008, $472.8 million in FY 2009, $511 million in
    FY 2010, and plans to purchase $403 million in FY 2011.
        The 2008 Farm Bill also required USDA to arrange for an independent
    study and evaluation of the purchasing processes principally devoted to
    perishable agricultural commodities provided in Section 32. The report
    was released on May 13, 2010.
    Pest and Disease Management
        The mission of protecting American agriculture from foreign pests
    and disease introduction is among USDA's most critical. To accomplish
    that mission, APHIS has developed a robust agricultural safeguarding
    system. While APHIS' efforts benefit all of agriculture, its programs
    are of particular importance to specialty crops, as foreign pest and
    disease introductions could potentially devastate them.
        The agricultural safeguarding system that APHIS has developed is a
    set of comprehensive, interlocking programs that work together to
    protect agriculture. While the border inspection function--which was
    transferred to the Department of Homeland Security's Customs and Border
    Protection in 2003--is a critical component, it is but one part of the
    layered system in place, which has programs that begin well before
    products or people reach the border, and continues after their entry.
        The system relies on APHIS' strength as a science and risk based
    regulatory agency, and the many measures the Agency has developed,
    including:

       Sound regulatory policies based upon strong science and
            thorough risk assessments;

       Pre-clearance inspections of commodities in overseas
            countries before shipment to the United States;

       Extensive pest surveillance activities, both here and
            abroad;

       Inspection of living plants imported through USDA-operated
            plant inspection stations;

       Supervision of fumigation and other pest mitigation
            treatments when protocols require; and

       Robust emergency response activities in the event of
            significant pest or disease introductions.

        Together, these multi-faceted activities serve as a safety net that
    allows all agriculture to succeed.
        APHIS has two programs that take these measures further, by
    targeting specific segments of agriculture and activities that
    particularly benefit specialty crops. Both programs, which were created
    in the 2008 Farm Bill, have proven to be highly effective, and widely
    supported by stakeholders and industry.
        The first, section 10201 of the farm bill, Plant Pest and Disease
    Management and Disaster Prevention, is a new program that allows APHIS
    to partner with numerous states, Tribes, universities, and other
    community partners to strengthen and expand the scope of APHIS' pest
    and disease prevention activities.
        Under the program, which is funded through the CCC, APHIS allocated
    $50 million in FY 2011 to fund 270 projects with over 100 cooperators
    that prevent the introduction or spread of plant pests and diseases.
    This follows $45 million in FY 2010 and $12 million in FY 2009.
        Projects originate as suggestions from hundreds of cooperators
    throughout the country. These projects aim to improve the six key goals
    of the program:

        1. Enhancing plant pest analysis and survey

        2. Targeting domestic inspection activities at vulnerable points

        3. Enhancing threat identification tools and technology

        4. Developing programs to safeguard nursery production

        5. Enhancing outreach and education to increase public awareness
            and support of plant pest and disease eradication and control
            programs

        6. Enhancing mitigation capabilities

        Projects are evaluated based on how well they align with these
    goals, the expected impact of the project, and their technical
    approach.
        The program provides strong protection to America's agricultural
    and environmental resources, and helps nursery and specialty crop
    growers flourish. Over the last 2 years, Section 10201 projects have
    played a significant role in many USDA successes, such as including the
    eradication of plum pox in Pennsylvania, minimizing the effect of a
    Mediterranean fruit fly outbreak in Florida, survey work for European
    grapevine moth in California, national surveys for honeybee pests, and
    methods development work to combat citrus pests.
        The net effect of these efforts and the many partnerships is a
    demonstrated improvement in USDA's ability to detect and respond to a
    plant pest or disease. Detecting and responding to a plant pest or
    disease in the early stages of an introduction is a significant cost
    savings for taxpayers, and can help minimize the potentially
    devastating impact on agriculture.
        The second farm bill program that helps address plant pests and
    disease is Section 10202, the National Clean Plant Network (NCPN). The
    NCPN is a partnership of three USDA Agencies: APHIS, the Agricultural
    Research Service and the National Institute of Food and Agriculture. It
    aims to develop and produce clean propagative plant material. Should a
    plant pest or disease strike, the network could then provide clean
    plant material to states for certified clean plant programs and to
    private nurseries and producers. Essentially, it is an insurance policy
    that guarantees that there will be fresh stock of disease-free plants.
        NCPN is comprised of commodity-based networks. Commodities that
    have developed a clean plant network under the auspices of the program
    are fruit trees, grapes, citrus, berries and hops. These five networks
    include 18 supported clean plant centers and associated programs
    located in 14 states. There has been broad support within the specialty
    crop industry, and other commodities have expressed interest in the
    program as well. The NCPN national stakeholder database has about 500
    people enrolled who expressed specific interest in the program, which
    includes nursery and grower industries, scientists, state regulatory
    officials, and educators. The program has been funded with $5 million
    in CCC funding each fiscal year from 2009 to 2012, to remain available
    until expended.
    Miscellaneous
        The 2008 Farm Bill provided country of origin labeling requirements
    for honey that bears any official certificate of quality, grade mark or
    statement, continuous inspection mark or statement, sampling mark or
    statement or any combination of the certificates, marks, or statements
    of USDA. An interim rule, which became effective October 6, 2009,
    established a new regulation addressing country of origin labeling for
    packed honey bearing any official USDA mark or statement and added a
    new cause for debarment from inspection and certification service for
    honey. The final rule was published on January 4, 2011, with an
    effective date of February 3, 2011.
        It should be noted that USDA did not implement the 2008 Farm Bill's
    Food Safety Education Initiatives provision or the Grant Program to
    Improve Movement of Specialty Crops as no funding was provided by
    Congress.
    Conclusion
        AMS and APHIS undertake numerous activities to facilitate the
    competitive and efficient marketing of U.S. agricultural products, as
    well as to protect and promote U.S. agricultural viability. These
    efforts support the overall mission of USDA, which is to protect and
    promote food, agriculture, natural resources and related issues. I hope
    that this testimony and the subsequent questions and answers will prove
    useful to the Subcommittee as you undertake your work on the next farm
    bill.

        The Chairwoman. Thank you so much for your testimony, and I
    will remind the Members that just came in, that if you have any
    written statements, you have 5 calendar days to bring them to
    the Committee, and that we will begin questioning in order of
    who came and then by seniority, and so I will begin.
        I would like to start with Specialty Crop Block Grants,
    probably to Ms. Pegg.
        Ms. Pegg, in Fiscal Year 2010, approximately 13 percent of
    block grant funding was used for research. How do states or the
    USDA ensure that there are not duplicative research projects
    funded with both block grants and other research projects?
        Ms. Pegg. This is a good question, because not only
    regarding research projects but also with the Farmers Market
    Promotion Project, we need to keep this in mind when people
    make applications. There are two tracks that occur. If a
    project applies for a Farmers Market Promotion Grant or another
    research grant throughout the Department, when that project
    comes in it is shared with the other agencies and divisions to
    look at if they are receiving block grant funds, therefore it
    may be disqualified. Regarding block grant applications, they
    will come in and we will review them, and they will have to
    justify if they are receiving other grant funds, what is the
    benefit, why do they need this funding, and why do they
    specifically need it for this one component?
        So they have to create a justification or not receive the
    funding at all for that, and that is part of our review
    process.
        The Chairwoman. Thank you. Can you elaborate on what
    activities are considered allowable marketing and promotion
    activities, and allowable education activities under the block
    grant program?
        Ms. Pegg. There are a number of educational activities. It
    must be for the benefit of specialty crops defined under the
    farm bill, so if it is a marketing program, it must
    specifically demonstrate that it is going to promote specialty
    crops and not other commodities that are not defined. We want
    to ensure that is the case when handing out the dollars,
    awarding the dollars to each of the recipients. So it can vary
    from a specific commodity being promoted. Education can be, for
    instance, in Ohio they have done a number of projects regarding
    food safety training for their producers, creating food safety
    manuals and practices that are specific for their specialty
    crop industry as well as their region.
        So those are some examples there that they have focused on.
        The Chairwoman. Thank you. When the block grants are made
    to states, how much funding is being used by the states for
    administration or overhead costs to run the program, and are
    states required to disclose this information when they are
    applying for the funding?
        Ms. Pegg. Yes, there is already a ten percent cap that they
    can use for administration costs for each state. They must also
    provide--we go in and do site visits of the states as well as
    financial audits that they provide to the program, and so they
    will supply that to demonstrate that they are meeting that cap.
        The Chairwoman. Thank you. Can you talk about the process a
    project must undergo to be approved for a grant?
        Ms. Pegg. The process initially starts with a state--each
    state administers it according to what is best for their
    program, whether they have a pool of people that are reviewing
    the grants and then grading them and then making the
    determination, but the state makes the initial determination.
    They send those recommendations to USDA. We review those to
    make sure that they are in compliance with the statute, that
    they do support specialty crops specifically, and that there is
    no other conflicts that may occur regarding other funding that
    may be received before giving the final approval for the award
    funds to go out to the state.
        The Chairwoman. And is the program set up to favor one type
    of project over another?
        Ms. Pegg. No, not at all.
        The Chairwoman. Okay. In Section 32, the DOD Fresh Program
    uses Section 32 funds to purchase fresh fruits and vegetables
    for child and other nutrition programs. I understand there has
    been concern over DOD's administration of this program. Do you
    think it is cost effective and efficient for DOD to make these
    purchases as opposed to AMS that makes the other Section 32
    fruit and vegetable purchases?
        Ms. Pegg. This is a question that a number of people have
    been discussing. DOD is effective in certain parts of the
    United States, and we really look to our FNS, our Food and
    Nutrition Service counterpart as well as those Food Service
    directors that are dealing directly with DOD to see the
    effectiveness. However, we have been discussing with our
    counterparts regarding if it is not effective, are there some
    other alternatives in which AMS could either administer or the
    Food Service directors could administer directly.
        So we are looking at other alternatives. We would love to
    continue the conversation with the Committee at looking at
    other options for schools. We do think that the DOD model is
    effective for some schools, but we are also open to looking at
    some other alternatives where it may not be as effective.
        The Chairwoman. Thank you so much. I will allow Mr. Baca at
    this time to question the panel.
        Mr. Baca. Thank you, Madam Chair.
        Ms. Pegg, we appreciate your insight as we look to
    determine the best policies for specialty crops and organic
    agriculture in the next farm bill. Since first serving on the
    House Agriculture Committee, one of my greatest passions in
    Congress has been the work of the Committee to improve and
    expand the nutrition programs. Specifically, I am proud of the
    progress we have made with the SNAP Program in the 2008 Farm
    Bill. Not only did we increase the benefit level, but we also
    went a long way to remove the stigma associated with food
    stamps by changing the name of the program and switching to
    debit cards.
        That said, can you update the Subcommittee on AMS's efforts
    in working with Food and Nutrition Service to ensure the
    farmers markets accept SNAP benefits through debits as a form
    of payment? Another question, do you have any specific data on
    the number of farmers markets that currently can accept the
    SNAP benefits?
        Ms. Pegg. Regarding your question, this has been an
    important topic and one that both my agency as well as Food and
    Nutrition Service have been working on collaboratively to
    determine what are the hurdles that people are facing in terms
    of getting more SNAP benefits into farmers markets. There are a
    couple programs that are working to increase EBT at farmers
    markets, the accessibility of EBT at farmers markets. That is
    the Farmers Market Promotion Program, of course. That grant
    program provides for ten percent of the funds. However, in
    2010, we saw 30 percent of the dollars in the Farmers Market
    Promotion Program go to support EBT transactions in farmers
    markets.
        We are also working directly with Food and Nutrition
    Service to look at the hurdles. We have developed a handbook to
    help farmers markets, individual stalls in order to help them
    put in EBT machines, how to administer that effectively, how to
    make it cost effective, looking at some of those hurdles and
    providing a handbook that gives them some additional tools for
    making it simpler, so that these things are more accessible in
    more markets.
        We have increased the number of EBTs at farmers markets to
    1,600, and we really hope to improve that over the years as we
    look at some of these issues that they are facing and find new
    ways to address them, so that we are creating more access in
    more markets throughout the United States.
        Mr. Baca. Thank you.
        In the 2008 Farm Bill, we established a minimum of ten
    percent set aside with FMPP funds to cover electronic benefit
    transfer equipment. This allows folks participating in SNAP to
    use their benefits at farmers markets. I understand since
    adding this set-aside for the program demands for these debit
    funds has far exceeded the supply. Are you finding this to be
    the case? How many applications have you received that included
    EBTs, and how many have been funded?
        Ms. Pegg. Well, I don't have the 2011 numbers yet, but when
    we saw the $5 million in funding of the Farmers Market
    Promotion Program, we saw 30 percent of those funds going to
    support EBT in farmers markets. So that is a clear indication
    now we are dealing with $10 million in the 2011 year. So we are
    hopeful that once we review all of those applications that we
    received on July 1, we will actually see an increase in the
    number of applicants for those supporting EBT transactions at
    farmers markets, CSAs, food hubs, and so forth. And you are
    seeing a lot of various entities throughout the nation
    recognize the need for providing this to their constituency,
    whether it is Detroit's food hub, that they recognize that they
    are doing $30,000 a month in sales just for food stamp
    recipients every month, that they need to be providing this
    service at their food hub. It is one that people are
    recognizing the need for, and therefore they are utilizing
    Farmers Market Promotion dollars----
        Mr. Baca. Let me follow up with another question since you
    mentioned that. Beyond FMPP, what else could we in Congress do
    to ensure that fruit and vegetable farmers selling directing to
    SNAP and WIC customers, can afford to do so. That has been the
    problem. Can they afford to? Costs are going up, the debit card
    amounts have not. The costs of fruits and vegetables is a lot
    higher.
        Ms. Pegg. Well, this is one that a lot of nonprofits are
    also addressing, whether they are providing the benefit of
    double dollars specifically to go for fruit and vegetable
    purchases. A lot of nonprofits have been focused on those pilot
    programs. I think we have to be creative. It is not only those
    programs within AMS, but whether it is Rural Development or
    other programs throughout USDA in terms of how to address this
    very specific need in creating more access of foods for those
    that are underserved.
        Mr. Baca. Our schools are now doing a lot of the fresh
    fruits and vegetables. That costs a lot. With our school lunch
    facilities downsizing and a lack of funding for these efforts,
    a lot of needy children who need fresh fruits and vegetables,
    aren't receiving them.
        Ms. Pegg. Yes, it is a very critical issue that we need to
    think about how these different programs can be used to benefit
    a lot of these difficult times and difficult struggles that a
    lot of local entities are facing right now.
        Mr. Baca. Right. I know that my time has run out. Hopefully
    in the second round I can ask Ms. Bech some questions.
        The Chairwoman. Thank you, and now, Mr. Southerland, you
    have 5 minutes.
        Mr. Southerland. Thank you, Madam Chair. Ms. Bech, I wanted
    to ask--you may not be aware, but I am from Florida and so
    obviously in Florida, we have an enormous number of specialty
    crops. I just want to ask you some questions regarding the
    Specialty Crop Research Initiative, if I could read a brief
    statement here. ``Florida, as many other specialty crop regions
    of the country, are fighting an extremely dangerous threat due
    to citrus greening''--which I am sure you are familiar with--
    ``represents an immediate threat to the entire $12.2 billion
    citrus industry in Florida, California, Alabama, Louisiana, and
    Texas. The specialty crop disease has the ability to kill
    citrus trees and their fruit within a few short years,
    literally placing the future of citrus production in this
    nation at risk. Citrus ranks nearly first in the nation among
    crop value, among fruit and vegetable specialty crops,
    according to the USDA's National Agricultural Statistics
    Services. Timely research on citrus greening and its vector,
    the Asian citrus psyllid, is absolutely essential to ensuring
    the future of citrus production in this country.'' As you know,
    Congress authored the Specialty Crop Research Initiative under
    the farm bill in an effort to meet the critical needs of the
    specialty crop industry by developing and disseminating
    science-based tools to address needs of specialty crops,
    including pest and disease management, resistance to pest, and
    diseases and management strategies in an effort to identify and
    address threats from pests. This is the type of research need
    for which Congress intended to address through the SCRI, and it
    would be difficult to identify a specialty crop of such major
    national significance that faces more of a devastating risk to
    the future of its existence. Recognizing this dire challenge,
    domestic citrus growers have self-funded more than $39 million
    in research annually over the past 4 years. Please explain, if
    you would, why the USDA has declined to fund over the last 3
    years this devastating disease through Specialty Crop Research
    Initiative Program, as I have stated, designed by Congress and
    intended specifically for the purposes such as these.
        Ms. Bech. Well, we certainly share your concern. Citrus
    Greening is a very devastating disease. The Specialty Crop
    Research Program is administered underneath the National
    Institute of Food and Agriculture, which is not my program, and
    we can get you some information about the administering of that
    particular program.
        For APHIS, I would like to say that we have a Citrus Health
    Response Program in which part of that funding we set aside for
    research, and we have worked very closely with the growers and
    the industry down in Florida as well as the rest of the citrus
    industry to try to address the concerns about citrus greening.
        Mr. Southerland. I think--and that would be helpful. I will
    tell you, having been there and been on the ground there, no
    country that has ever faced this has ever solved it. It
    literally wipes out the citrus industry. This is an enormous
    problem, and having met the farmers that are there that are
    funding this, and perhaps not getting the assistance that I
    think some of the funds were set up to aid is bothersome. So I
    would appreciate that. Thank you very much.
        Ms. Pegg, I want to ask a quick question. The Specialty
    Crop Block Grants provide Florida flexibility to meet the
    unique farming challenges of our state, targeting specialty
    crops including fruits and vegetables and nursery to support
    projects and marketing research innovation, education, pest
    disease management, and other things. Florida, as I stated, is
    the second largest recipient based on specialty crop
    production, receiving $24.3 and $4.9 million annually.
        Please comment, just with the time I have remaining, on
    this block grant program which gives the states flexibility to
    address their unique agricultural needs.
        Ms. Pegg. Well, I think you have raised a lot of the points
    that are important to this program. It really is one of the
    programs that is very beneficial to each state and the growers
    in that state and what they are facing. What the projects that
    Florida may be focused on, whether it is food safety or finding
    new tomato varieties or looking at methyl bromide's
    alternatives are really specific to those needs of that
    industry versus what Ohio or even California will focus on,
    which I think is really the success of this program, is it is
    really meeting the unique needs of whatever those producers are
    facing. I think that is why it has been such a successful
    program and why people really do feel that they are seeing the
    benefits of those dollars.
        Mr. Southerland. Madam Chair, I see that I am out of time
    so I will yield back what time I don't have.
        The Chairwoman. Thank you. Why don't we go to Mr. Crawford,
    5 minutes, and then we will go to round two on questions.
        Mr. Crawford. All right, thank you, Madam Chair.
        Last fall, USDA announced that Section 32 funds would be
    used to fund $630 million in disaster assistance. Ms. Pegg, can
    you cite the authority that the Department used to establish
    such a disaster assistance program under Section 32 funds?
        Ms. Pegg. You know, it is really important under Section 32
    to look at all the clauses which give us the authority for the
    different activities that we do. So Clause 1 is encourage
    exportation of agricultural products. Clause 2 is encourage
    domestic consumption. Clause 3 is reestablish farmer's
    purchasing power by making payments in connection with normal
    production of agricultural commodities. In addition, the
    Secretary also has the authority to direct Section 32 funds to
    be used for special disaster assistance programs, and this is
    the authority that we used to provide that funding. We provided
    a total of $270 million in support for those that were
    experiencing the excessive moisture flash flooding disaster in
    the Midwest.
        It is important to note that this authority has not only
    been used in recent years, but you know, in 2007 it was used to
    help hog producers with the melamine poisoning. It was also
    used in 2006 to help citrus growers with citrus canker in
    Florida. So it has been a tool that many Secretaries have used
    over the years to help those producers that are struggling.
    There is a number of tools under Section 32, not only providing
    disaster assistance, but whether that be bonus buys and so
    forth.
        Mr. Crawford. Okay. I understand the Commodity Credit
    Corporation funds were to be used to make up for this shortfall
    in Section 32 funds. How much CCC funding has been used to make
    commodity purchases that would have normally been bought with
    Section 32 funds?
        Ms. Pegg. So just to back up a little bit, initially it was
    announced that $550 million would be used to provide support.
    We didn't use all of that $550 million; only $270 million was
    actually used in support. So there is roughly, $160 million
    still available to provide, whether it be bonus buy assistance
    or disaster assistance under the Section 32 account. So there
    are still funds available to meet the needs, should anything
    occur in the remainder of the fiscal year.
        Mr. Crawford. Okay. I understand CCC has a line of credit
    with the Treasury that has to be paid back. Will future Section
    32 funds have to be used to reimburse the CCC?
        Ms. Pegg. Well, there is the authority to use Section 32
    CCC funds if we need to, and there--we can consider if we need
    to, to reimburse CCC funds. That has not yet been determined if
    that is necessary at this time.
        Mr. Crawford. Okay. I yield back. Thank you. Thank you, Ms.
    Pegg.
        The Chairwoman. I would now like to look at pest and
    disease issues, and probably Ms. Bech would be better suited
    for this, but feel free to chime in.
        What is the main conclusion that can be drawn from the 2009
    Annual Pesticide Data Report you just released this spring?
    That would be you, Ms. Pegg.
        Ms. Pegg. Sorry about that, we were--yes. The Pesticide
    Data Report is I think the one you are referring to regarding
    the residues, and this is a really important report because it
    is really showing us the historical trends in terms of
    pesticide use throughout the United States. It looks at
    pesticide usage for all the different commodities primarily
    consumed in the marketplace.
        So what it is indicating is it is indicating that we are
    seeing that pesticide use over time is reducing. There is a
    changing in trends in terms of pesticide use. Producers are
    moving to softer chemicals, as well as overall, our annual
    report shows that pesticide residues found on foods tested at
    levels below tolerances established by EPA. So you know, as we
    are always encouraging people to eat more fruits and vegetables
    and to wash them before you do, and I think this age-old rule
    still applies.
        The Chairwoman. What do you believe the purpose of the 2009
    annual report is, and what value was derived from it, do you
    believe?
        Ms. Pegg. Pardon, what was the second question?
        The Chairwoman. What was the value of the program shown in
    the report?
        Ms. Pegg. Well, there are a lot of purposes for it. I mean,
    not only does it help inform EPA in terms of trends that we are
    seeing in terms of usage, there is also value in it in that it
    is also used in discussions with foreign countries when they
    ask about pesticide usage for various commodities to set
    maximum residue limits. What we are seeing the trends is that
    overall usage is changing, and we are using softer chemicals
    and transitioning from some of the older chemicals that were
    used in previous years. So you are seeing some developments in
    terms of that science and technology, and the products that are
    available in the marketplace.
        The Chairwoman. When consumers hear about residue, they
    might get concerned. I think you have answered the question you
    tell them to wash the fruit, but what advice is there for
    consumers who are still troubled by the newspaper stories
    warning of the consumption of produce based in this report?
        Ms. Pegg. Well, once again our annual report shows that
    overall pesticide residues found on foods tested are at levels
    below the tolerance established by EPA, and it also shows us to
    continue eating fruits and vegetables, and wash them before you
    do.
        The Chairwoman. All right, and then to go back to Section
    32 again. Does the Department have the ability to operate the
    DOD Fresh Program, or would legislative language be needed for
    you to operate it?
        Ms. Pegg. We do have the authority to operate that program,
    should it be necessary.
        The Chairwoman. Okay. In your testimony outlines, the
    required Section 32 specialty crop purchases for each fiscal
    year, and that AMS plans to purchase $403 million in Fiscal
    Year 2011. Can you tell me how much of this you have spent so
    far?
        Ms. Pegg. Yes. There is the total requirement for fruit and
    vegetable purchases of the $403 million that you mentioned, and
    so far we have purchased $232 million in fruit and vegetable
    purchases. So we will have to meet that minimum before the end
    of the fiscal year.
        The Chairwoman. Last fall, the USDA announced that Section
    32 funds would be used to fund $630 million in disaster
    assistance. What authority did the Department use to establish
    such a disaster assistance program using Section 32 funds?
        Ms. Pegg. The authority that we used is the Secretary also
    has the authority to direct Section 32 funds to be used for
    special disaster assistance programs is the authority that we
    used. And we used a total of $270 million to provide that
    assistance to sweet potato, rice, soybean, cotton farmers that
    were experiencing crop loss.
        The Chairwoman. Has the Department used this authority
    before?
        Ms. Pegg. Yes, we have used this authority a number of
    years. In 2006, we used it for Florida growers dealing with
    citrus canker. We have used it for the melamine incident with
    pork producers. So we have used it on a number of occasions.
        The Chairwoman. Okay. And now since I am about out of time,
    first off, Mr. Costa has joined the dais. Do we have unanimous
    consent that he can ask questions of the panel? Is there
    agreement? Fine. And I think the next 5 minutes goes to the
    Ranking Member, Mr. Baca, and then Mr. Southerland and then Mr.
    Costa.
        Mr. Baca. Thank you, Mrs. Schmidt. With a constant threat
    of invasive species like the Asian citrus psyllid, and the
    European grapevine moth, pest and disease management is
    critical to agriculture in my home State of California. Because
    of this, I am very interested in the implementation of Section
    10201 of the 2008 Farm Bill. While I am pleased to know that
    the pest prevention project in California has received
    approximately $12 million in funding for the Fiscal Year 2011,
    I am concerned regarding APHIS prohibition from funding the
    administration costs associated with these projects. Congress
    has now acted on three separate occasions, the Recovery Act,
    the Agriculture Appropriation Bill for 2011, and the
    Agriculture Appropriation Bill for 2012, to provide technical
    correction that allows APHIS to move forward with the
    administrative funding needed. Do you have any recommendations
    for how these issues can be permanently resolved so that
    constant funding for the program may continue?
        Ms. Bech. Yes, well we share the concern and first, we
    appreciate Congress passing the temporary fixes. We agree that
    there needs to be a permanent fix, and we believe that the
    permanent fix can be achieved either through the farm bill or
    another law. We would look forward to working with you with
    language.
        Mr. Baca. Okay. Can you please provide the Subcommittee in
    writing of the USDA's Office of General Counsel's opinion on
    the current prohibition and their recommendation as to how to
    best resolve it?
        Ms. Bech. Well, we would be happy to work with our Office
    of General Counsel to address your request about the opinion,
    and I am no lawyer, but I would be happy to talk a little bit
    about it.
        We know that according to USDA's General Counsel and the
    Department of Justice that the statute provided that the
    Secretary can use the funds, facilities, and authorities of CCC
    to carry out a particular program or activity. However, the
    funding cap on administrative expenses of the CCC Charter Act
    continues to apply, so we can work with our Office of General
    Counsel to address your requests.
        [The information referred to is located on p. 225.]
        Mr. Baca. Okay, thank you. In 2009, APHIS released a pest
    and disease risk assessment update for 50 states. This update
    mentioned specific challenges and identified risks and
    suggestions that included county level data that would be
    helpful in better identifying the risks moving forward. Has the
    Department released an updated risk assessment analysis since
    October of 2009? If not, can you tell me how APHIS plans to
    refine its interpretation of the pest finding and trends, and
    how would these changes impact partnership among the Federal,
    state, and industry cooperators?
        Ms. Bech. Well, we initially characterized the states' risk
    by applying certain criteria, and we looked at different things
    such as the susceptibility of the state to invasive species,
    the number of ports that they have, as well as things like the
    impact and the agricultural commodities that are grown in the
    state. And while we did that with consulting our National Plant
    Board, as well as working with the Specialty Crops Farm Bill
    Alliance, you can imagine when we came out with the assessment
    that there was some concern about how different states ranked.
    But we used that--it is not a formula-based method that we used
    to establish the funding of the project, so this is only one
    aspect that we used. But because there was some concern, what
    we have done is we have authorized the use of funds for some of
    the projects working with states to redefine what that
    assessment process would look like, and we funded two projects
    with that. We are hoping that they will be completed this year.
    By the end of the year, we hope to reassess the assessment for
    the risk ranking of the states, and we would be able to then
    look at how that would be implemented.
        So the actual impact on it right now I think it really
    shows that we have to work together and that we can employ all
    the different interests to come together to administer the
    funds. I think it would actually support a stronger team-
    building effort.
        Mr. Baca. Thank you. I know that my time has run out, are
    there any duplicated services that can be consolidated in
    trying to implement this?
        Ms. Bech. The specific risk----
        Mr. Baca. Yes, are there duplicated services that we might
    want to consolidate to reduce our costs, and yet still provide
    these important services?
        Ms. Bech. Well, I think that the risk assessment as well as
    the other things that we look at, and the transparency in which
    we go about looking at the projects and the funding list have
    served us well, and it shows a coordinated effort, especially
    because a lot of the projects that we fund cross multiple
    states and we look at regional approaches as well. So it is
    really looking at it nationally as well as individually.
        Mr. Baca. Thank you. I know my time has run out, Madam
    Chair.
        The Chairwoman. Mr. Southerland?
        Mr. Southerland. Thank you, Madam Chair.
        Mrs. Bech, I apologize for asking you a question outside of
    your purview here, but obviously we will track that down,
    because citrus greening is terribly important to all of those,
    especially the Florida delegation.
        Moving over to APHIS, could you explain to me, as a new
    Member, just--and this will be very simple as my only
    question--just elaborate how the USDA assesses risk. Help me
    understand: I know 4\1/2\ minutes is not a long time, but give
    me kind of a kindergartner's understanding of how that--how it
    works. How do you go after it?
        Ms. Bech. Well, that is a good question, and we can provide
    you with some additional information after this hearing about
    it.
        Mr. Southerland. Okay.
        Ms. Bech. But one of the things we have done is we have
    really created a very collaborative approach with working with
    the states, as well as the industry groups to look at the risk,
    and as I mentioned earlier, we had a risk assessment that was
    done, looking at the different risks of the states and looking
    at the kinds of commodities, the impacts, the kinds of invasive
    species that are coming through, such as citrus greening and
    the Asian----
        Mr. Southerland. So they are the ones that--I apologize for
    interrupting, but you are basically put on notice from the
    states because they have obviously--something has been
    triggered and they see it, so they are doing basically R&D for
    you?
        Ms. Bech. Well, what the states are doing is we are working
    together to survey and to look at the pests that are coming in,
    and so we are working as a team to address the threats as they
    come in.
        Mr. Southerland. Okay.
        Ms. Bech. And we have been enhancing the surveys that the
    states do, as well as providing traps and lures, things like
    that. So it is really a real partnership.
        Mr. Southerland. Collaborative effort. Is that--and part of
    your assessment, obviously when you have aid that you can send
    to the states, I mean, is there--do you always take into
    account the economic impact if those diseases or insects would
    go unhampered? I mean, as far as being able to prioritize,
    okay, because obviously you have a finite resource and you have
    so many problems. I mean, do you prioritize based upon the
    impact economically, because that is a jobs issues to many
    states.
        Ms. Bech. Yes. Well, we do look at economics but there are
    other factors that weigh in as well, and we try to look at the
    impact--like you are a citrus-producing state. Certainly the
    problems that you are facing in Florida impact the other
    citrus-producing states as well, so we take many things into
    consideration and the impact on the commodity itself, yes.
        Mr. Southerland. Very good, thank you. And if you could
    give me information, maybe provide it to our office, I would
    welcome that. I would love to learn more about how you go about
    assessing. So thank you.
        I yield back.
        The Chairwoman. Thank you. Now, Mr. Costa from California.
        Mr. Costa. Thank you very much, Madam Chairperson, for
    allowing me to participate with the Subcommittee this
    afternoon. It is an important issue, and I look forward to
    questioning the witnesses.
        For my colleague from Florida, what we tend to do is look
    at this in terms of risk assessment versus risk management.
    Your ability to manage the risk is based upon your ability to
    assess the various aspects of risk. Then with state agencies
    and local ag commissioners in California, you make a
    determination on what resources should be placed on the
    management of the risk, based upon the risk assessment that has
    taken place.
        I would like to ask this question as it relates to APHIS.
    As you know, over the 16 year period from 1995 to 2010, as it
    relates to our ability to export our products abroad, we have
    had 312, World Trade Organization SPS trade concerns that have
    been raised. Of these, 212 trade concerns, I understand, remain
    unresolved. California, is at the tip of this spear. California
    uses over 500,000 phytosanitary export certificates to access
    those markets.
        My question to you is how APHIS works with all Federal
    agencies in trying to deal with this backlog? How does it
    assist the USTR on these SPS trade concerns? Ms. Bech, can you
    address that quickly, because I have some other questions.
        Ms. Bech. Okay. Well, I will try to address what APHIS has
    done, but of course, our USTR and others take the lead in----
        Mr. Costa. I know, but I want to understand APHIS's role.
        Ms. Bech. Yes, so we provide technical support on that, we
    do bilateral agreements with the----
        Mr. Costa. But how well are you helping USTR deal with
    those 212 trade concerns? You haven't been able to come up to
    speed on the risk management side to provide those export
    certificates.
        Ms. Bech. Well, the export certificates are to meet the
    trade obligations for the others, and what we do is provide the
    assessments. I believe that might be what you are talking
    about. However, I would like to clarify that there is no
    backlog of export certificates.
        Mr. Costa. Right.
        Ms. Bech. And we have certainly worked very carefully in
    shortening the risk assessment, categorizing it into a tiered
    process to look at the priorities to address that----
        Mr. Costa. Can you clarify the link between the pest and
    the disease challenges, how in working with your partners in
    USDA possible trade disruptions and the potential economic
    losses that would occur to our agricultural producers are
    addressed and hopefully minimized?
        Ms. Bech. Well, I think if I can clarify, if I might ask a
    clarifying question. Are you asking what we are doing with the
    other USDA agencies in addressing the disease impacts on the
    economics? Then we are providing, again, the assessments that
    go into that economic analysis and working with our Foreign
    Agriculture Service to address those issues.
        Mr. Costa. Do you have any explanation as to why only \1/3\
    of the SPS certificates or trade concerns have been addressed?
        Ms. Bech. Well, I could get further information on it.
        [The information referred to is located on p. 234.]
        Mr. Costa. Let me, move quickly because my time is
    expiring. I would like your agency to respond to our folks who
    really rely upon you in their ability to get those trade
    certificates expedited so that we can access international
    markets.
        Ms. Bech. Yes, sir.
        Mr. Costa. Thank you.
        Ms. Pegg, enjoying Washington?
        Ms. Pegg. Yes, very much so.
        Mr. Costa. Good. She is a former Californian. We used to
    interact in the old days.
        The Chairwoman and the Ranking Member were asking you on
    your agency's various efforts on the USDA school lunch and
    breakfast programs. How to expand the commodity purchases. You
    talked about the amount of money left in this fiscal year. How
    would you, with your previous experience and background,
    suggest improvements to get healthy fruits and vegetables, and
    better diets into our schools. How would you assess our
    efforts, thus far, since the 2008 Farm Bill, both in California
    and here in Washington?
        Ms. Pegg. Well, I think the 2008 Farm Bill, because it
    established those minimums--you know, in previous years, we
    have exceeded the minimum amount, whether it was the minimum,
    $399 million, we have purchased in the $400 to $500 million
    amount. This year, we are seeing a slightly different situation
    because we aren't getting a number of bonus buy requests
    because people aren't having oversupply in the marketplace. So
    that does impact some of the products supplied to schools and
    food banks.
        I think not only is it the collective work of our
    purchases, it is also the food and nutrition standards that
    they establish, and then to schools and what they do with that.
    I mean, you are seeing a lot of schools that are really
    recognizing how they can change their menus to provide more
    variety, healthier choices for their students, and that is not
    just--it is both including bonus buy, pork buy that we may
    deliver to them, as well as complementing that with a local
    orange to make a citrus pork dish. I mean, really schools are
    being creative to provide more variety in their menus, and I
    think we are also developing a lot more programs to assist them
    in that, whether it is through more training, different
    services to those food service directors, as well as looking at
    the menu of items that we purchase directly from our Section 32
    account.
        Mr. Costa. Madam Chairperson, my time has expired. I
    appreciate the answer. Madam Chairperson, knowing how health
    conscious you are and how many marathons you run, and having a
    good healthy diet, this is an area that is a constant source of
    frustration. We see obesity continuing to increase among our
    young people. Our efforts with regard to a better healthy
    nutrition program in our schools is a step in the right
    direction. I am just not sure if this Subcommittee can continue
    to examine some new efforts on how we can do a better job. We
    grow the healthiest, most abundant food products anywhere in
    the world. Our farmers, our dairymen, our ranchers, excel in
    doing this. Trying to get those products--those healthy food
    products in our school lunch and breakfast programs is
    essential to our children
        The Chairwoman. We are going to have a hearing on that in
    the future, and I invite you to come back, but before we
    adjourn, I do have just two more questions, and looking at the
    Members here, Mr. Baca may have one, and maybe Mr. Costa so we
    may get out here in a quick dash.
        But I want to talk a little bit about block grants. State
    departments of agriculture have expressed frustration with the
    timeliness of the notice of funds available being published by
    the Office of Management and Budget, the OMB. Any delay in this
    notice creates pressure on state grant processes, which can
    discourage grants to non-state operated grant requests. What
    needs to happen to expedite this process?
        Ms. Pegg. Well, we recognize those concerns. Unfortunately,
    because of the delay in the appropriations bill which gave us
    the authority to use the funds for administrative functions,
    that was the delay in getting out that notice. So there was
    part of the reason why we had the concern. It also delayed the
    notice for the farmers market promotion and the result of
    basically a month turnaround in receiving applications. So that
    is one of the issues that we ran into this year. We need to
    look at some solutions in coming years to resolve that more
    quickly so we can be more timely in our announcements and
    getting those dollars out.
        The Chairwoman. Thank you. It is our understanding that
    states are required to submit state performance reports after
    an annual agreement is completed. The reports are supposed to
    detail the performance, outcomes, and results of the state
    block program projects. What is the status of these reports,
    and have states been submitting them in a timely manner, and if
    not, do you know why?
        Ms. Pegg. I can get you a number of how many reports we
    have received. I think one of the important things to know of
    this is that because some projects go over a 3 year period, we
    have staggering of reports so some reports we are still waiting
    for because the project has not yet been completed with the 3
    year period that a project may go on for. But I think we are
    current, but I will get you a final number of what we currently
    have and what is still left to be received. There are currently
    121 reports available.
        The Chairwoman. Thank you. Mr. Baca, do you have any
    questions?
        Mr. Baca. I do, just a quick question. Earlier, Ms. Pegg,
    you talked about the deadline of July 1st for anyone to submit
    their SCBGD grants. It seems that state departments of
    agriculture have expressed some frustration with the publishing
    timeline for the notice of funds availability. Any delays in
    this announcement creates pressure on the states, which can
    discourage grant applications. What needs to happen for this
    process to be expedited?
        Ms. Pegg. Well, just to kind of mention it, what occurred
    this year is the appropriations process, because Congress did
    not act as quickly as needed. We had initially expected but
    finally reached an agreement. We needed language in the
    appropriations bill that would allow us for issuing those funds
    and using those funds for administrative costs, so that was the
    delay until the budget for 2011 was approved. That was the
    delay in getting out the notice. So we can talk with you about
    some options and some language that could be included in future
    pieces of legislation that would assist in getting more timely
    notices out.
        Mr. Baca. We would love to hear suggestions. Hopefully we
    can work on possible improvements.
        Ms. Pegg. We would be happy to work with you on that.
        Mr. Baca. Just one more question. Several grants supporting
    the farmers market project have been approved under the SCBGP,
    even though the farm bill provides for farmers market promotion
    programs. How are these programs being coordinated? Shouldn't
    projects related to farmers markets be considered by the
    farmers market promotion program?
        Ms. Pegg. Yes, and this very important that we don't have a
    duplication or double-dipping when people are applying. So what
    occurs is when there is an application for a farmers market
    under the block grant program, in reviewing that application we
    also send that to those that administer the farmers market
    promotion program, the FISNIT Program, if it is a Rural
    Development program, to ensure that they are also not receiving
    funds under those grant projects. If they are receiving funds,
    then they must then demonstrate what is the need for why they
    must receive block grant funds. So that is part of our review
    process to ensure that there is no double-dipping.
        Mr. Baca. Does USDA have a follow-up mechanism for state
    oversight to make sure that there is no double-dipping? What
    are the consequences for those that are double-dipping?
        Ms. Pegg. We do have follow-up in terms of the site visits
    that we do to the states, the audits that they are required to
    provide. There are no penalty provisions that I am aware of for
    the double-dipping, but we would be happy to discuss that with
    you.
        Mr. Baca. Thank you. Maybe penalties is something to
    consider. If there are no penalties, if I can get away with it,
    I will get away with it.
        Ms. Pegg. Well, we hope that our process does protect from
    that ever occurring, and we hope that--yes, hopefully. We hope
    that the process is stringent enough where both programs are
    catching something, should an entity try to apply for all
    funds. And I do see those--when every grant comes to my desk, I
    do see the response of every agency, whether they have applied
    for MAP or TASC funds, FMPP, Rural Development funds, every
    grant application is reviewed upon those and there is a
    response specific to that grant application.
        Mr. Baca. Okay, thank you. With that, I have exhausted my
    time so I yield back.
        The Chairwoman. Thank you. Mr. Costa, do you any other
    questions? Thank you.
        Well, I want to thank the panelists, Ms. Pegg and Ms. Bech,
    for being here today, and I wish you luck.
        Ms. Pegg. Thank you.
        The Chairwoman. This hearing is over. Thank you.
        [Whereupon, at 4:08 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

    Supplementary Material Submitted by Rebecca Bech, Deputy Administrator
    for Plant Protection and Quarantine, Animal and Plant Health Inspection
                    Service, U.S. Department of Agriculture
        During the July 7, 2011 hearing entitled, Agricultural Program
    Audit: Examination of Specialty Crop Programs, requests for information
    were made to Rebecca Bech. The following are the information
    submissions for the record.
    Insert 1
              Mr. Baca. Okay. Can you please provide the Subcommittee in
            writing of the USDA's Office of General Counsel's opinion on
            the current prohibition and their recommendation as to how to
            best resolve it?
              Ms. Bech. Well, we would be happy to work with our Office of
            General Counsel to address your request about the opinion, and
            I am no lawyer, but I would be happy to talk a little bit about
            it.
              We know that according to USDA's General Counsel and the
            Department of Justice that the statute provided that the
            Secretary can use the funds, facilities, and authorities of CCC
            to carry out a particular program or activity. However, the
            funding cap on administrative expenses of the CCC Charter Act
            continues to apply, so we can work with our Office of General
            Counsel to address your requests.

        Please see attached memorandum.

    December 22, 2008

    Memorandum for W. Scott Steele, Director, Office of Budget and Program
        Analysis

    From:

    Marc L. Kesseman,
    General Counsel.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Subject:

    Opinion re: Use of Commodity Credit Corporation Funds for Salaries and
    Expenses

    Issue:
        This memorandum sets forth the opinion of the Office of the General
    Counsel regarding when Commodity Credit Corporation (``CCC'') funds may
    be used to pay for the costs of Federal and state agencies with respect
    to the implementation of CCC programs.
        This opinion has been prepared in response to recent requests for
    the apportionment of CCC funds for the Healthy Forests Reserve Program
    (``HFRP'') and the Agricultural Management Assistance Program
    (``AMAP''). In reviewing these requests, it has become apparent that
    clear legal guidance would benefit Department officials confronting the
    question of when CCC funds may be expended for the salaries and related
    administrative costs associated with the implementation of programs
    that Congress has directed to be funded by CCC.
        As a result of amendments to section 11 of the Commodity Credit
    Corporation Charter Act made by section 161(b)(2) of the Federal
    Agricultural Improvement and Reform Act of 1996 (the ``1996
    Amendment''), there are significant limitations on the ability of CCC
    to use its funds for the payment of costs incurred by state and Federal
    agencies in the administration of CCC programs.\1\ Generally, as a
    result of the 1996 Amendment, CCC may annually use not more than
    $56,102,727 to reimburse Federal and state agencies for costs they
    incur in the administration of CCC programs.
    ---------------------------------------------------------------------------
        \1\ The current text of section 11 is attached as Appendix 1.
    ---------------------------------------------------------------------------
        The Farm Security and Rural Investment Act of 2002 (the ``2002
    Act'') authorized the use of CCC funds to pay for the salaries and
    related expenses incurred in the delivery of a number of specified
    programs. In response to a request by the Office of Management and
    Budget (``OMB''), the United States Department of Justice (``DOJ'')
    opined on the application of section 11 of the CCC Charter Act to
    specific conservation programs authorized by the 2002 Act. We conclude
    that the analysis of the 2003 DOJ opinion \2\ applies with full force
    to the question presented here.
    ---------------------------------------------------------------------------
        \2\ Appendix 2.
    ---------------------------------------------------------------------------
        As noted in the 2003 DOJ opinion, the mere reference to the use of
    CCC to carry out a program does not supersede the limitations in
    section 11 of the CCC Charter Act. The enactment of the Food,
    Conservation, and Energy Act of 2008 (the ``2008 Act'') again raises
    the question of the extent to which funds of CCC can be used to pay
    salaries and expenses in carrying out programs where the statute
    authorizing the program provides that CCC funds or authorities will be
    used with respect to such programs. Appendix 3 sets forth a
    comprehensive list of the provisions of the 2008 Act that implicate the
    use of CCC funds in the conduct of programs.
        My office has consulted with OMB before issuance of this opinion
    and OMB concurs with our conclusions.
    Discussion:
    I. 2002 Act
        After enactment of the 2002 Act, a question arose with respect to
    the propriety of using CCC funds to pay for the technical assistance
    costs of the Natural Resources Conservation Service relating to several
    CCC-funded conservation programs.
        Section 1241(a) of the Food Security Act of 1985 (the ``1985 Act'')
    had been amended by the 2002 Act to authorize the Secretary to ``use
    the funds, facilities, and authorities of the Commodity Credit
    Corporation to carry out'' seven listed conservation programs. As noted
    at page 4 of the 2003 DOJ opinion, although these seven programs
    provided for the use of CCC funds for program activities, the provision
    of technical assistance using CCC funds was limited by section 11 of
    the CCC Charter Act:

            We believe that section 1241(a) does not confer on the CCC a
            source of authority, independent of section 11, for funding
            technical assistance to the programs listed in section 1241(a).

        Subsequently, Congress amended the 1985 Act to specify that the use
    of CCC funds to pay for technical assistance, as defined in section
    1201(a)(25) of that Act would not constitute ``an allotment or fund
    transfer from the Commodity Credit Corporation for purposes of the
    limit on expenditures for technical assistance imposed by section 11 of
    the Commodity Credit Corporation Charter Act (15 U.S.C. 714i)'' \3\
    with respect to seven programs listed in section 1241(a) of that Act:
    ---------------------------------------------------------------------------
        \3\ Section 1241(c) of the 1985 Act.

    ---------------------------------------------------------------------------
        1. The Conservation Reserve Program;

        2. The Wetlands Reserve Program;

        3. The Conservation Security Program;

        4. The Farmland Protection Program;

        5. The Grassland Reserve Program;

        6. The Environmental Quality Incentives Program; and

        7. The Wildlife Habitat Program.

        The 2008 Act added the Conservation Stewardship Program to section
    1241(a), and it is therefore treated the same as the seven programs
    originally enumerated. As a result of this Congressional action, CCC
    funds have been made available to pay salary and related costs in the
    administration of these eight programs.
    II. 2008 Act
        The 2008 Act contains approximately 30 references to programs that
    use CCC funds in their implementation (see Appendix 3). While the
    majority of the 2008 Act provisions that authorize the use of CCC funds
    are not independent of section 11, the following sections of that Act
    do provide such independent authority and, therefore, CCC funds may be
    used for administrative costs without regard to the limitations in
    section 11:

        1. Section 1622--Section 1601 provides that the funds, facilities
            and authorities of CCC shall be used to carry out Title I of
            the 2008 Act and section 1622 further directs the Secretary of
            Agriculture to make available $50 million to the Farm Service
            Agency to carry out such title.

        2. Section 2510--This section amends Title XII of the 1985 Act by
            adding a new section 12401 to authorize the establishment of
            the Agricultural Water Enhancement Program. Section 1240I(b) of
            the 1985 Act specifically provides that an agricultural water
            enhancement program shall be established ``as a part of the
            environmental quality incentives program [EQIP].'' Because EQIP
            is one of the eight programs subject to section 1241(c) of the
            1985 Act, CCC funds may be used to pay for technical assistance
            expenses.

        3. Section 2605--This section amends Title XII of the 1985 Act by
            adding a new section 1240Q to authorize the establishment of
            the Chesapeake Bay Watershed Program (the ``CBWP''). Section
            1240Q(c) of the 1985 Act provides that: ``The Secretary shall
            deliver the funds made available to carry out this section
            through applicable programs under this subtitle. . . .'' The
            reference to ``applicable programs under this subtitle''
            includes those eight programs listed above. Because the CBWP is
            not an independent program but simply an authorization to use
            additional funds of CCC to carry out delineated programs in the
            Chesapeake Bay Watershed, to the extent the CCC funds are used
            to carry out one of the seven listed conservation programs, CCC
            funds may be used to pay for technical assistance expenses.

        4. Section 3106--This section amends section 3107 of the 2002 Act
            to provide that $84 million of CCC funds shall be used to
            administer the McGovern-Dole International Food for Education
            and Child Nutrition Program. Section 3107(l)(3) of the 2002 Act
            provides that funds made available to carry out the program may
            be used to pay related administrative expenses.

        5. Section 7410--This section amends section 7405 of the 2002 Act
            to provide that $18 million of CCC funds shall be used to carry
            out the Beginning Farmer and Rancher Development Program in FY
            2009 and $19 million in each of the 2010 through 2012 Fiscal
            Years. Section 7405(c)(7) of the 2002 Act provides that not
            more than four percent of the funds made available to carry out
            this program may be used for administrative expenses.

        6. Section 9001(a)--This subsection completely revises Title IX of
            the 2002 Act. Included in this revision of Title IX is a new
            section 9008, containing the authorization for the Biomass
            Research and Development Board and the associated grant
            program, which is funded by CCC. The new section 9008(f)(3) of
            the 2002 Act specifically authorizes the Secretary to use not
            more than four percent of the funds made available to carry out
            this program, including the CCC funds, for the administration
            of the authorized activities.
    III. Other Statutory Provisions
        Four additional statutory provisions pre-dating the enactment of
    the 2008 Act also warrant reference in this opinion:

        1. Section 1469(a)(3) of the National Agricultural Research,
            Extension, and Teaching Policy Act of 1977;

        2. Section 10417 of the Animal Health Protection Act;

        3. Section 442 of the Plant Protection Act; and

        4. Section 7405(c) of the 2002 Act.

        We have determined previously that these four provisions provide
    authority independent of section 11 of the CCC Charter Act to use CCC
    funds for salaries and related expenses, and we do not amend that
    determination here.
        Section 1469(a)(3) of the National Agricultural Research,
    Extension, and Teaching Policy Act of 1977 authorizes the Secretary to
    retain up to four percent of amounts made available for agricultural
    research, extension, and teaching assistance programs under any Act for
    the administration of those programs. A similar provision is set forth
    in section 7405(c) of the 2002 Act, as amended by section 7410 of the
    2008 Act, with respect to the Beginning Farmer and Rancher Development
    Program. Section 10417 of the Animal Health Protection Act and section
    442 of the Plant Protection Act provide for the transfer of funds
    otherwise available to the Secretary, including CCC funds, for use in
    eradicating animal and plant pests.
    Conclusion
        With respect to the HFRP and AMAP, although CCC funds may be used
    to pay for salaries and related expenses, the use of CCC funds for
    these expenses would be subject to the limitations of section 11 of the
    CCC Charter Act.
        Based upon the foregoing analysis, and consistent with the 2003 DOJ
    opinion, CCC funds may be used to pay for salaries and related expenses
    attendant to programs carried out by Federal and state agencies
    independent of section 11 only with respect to activities authorized
    by:

        1. Section 1469(a)(3) of the National Agricultural Research,
            Extension, and Teaching Policy Act of 1977;

        2. Section 10417 of the Animal Health Protection Act;

        3. Section 442 of the Plant Protection Act;

        4. Section 1241(a) of the 1985 Act;

        5. Section 1240I of the 1985 Act;

        6. Section 1240Q of the 1985 Act.

        7. Section 3107 of the 2002 Act;

        8. Section 7405(c)(7) of the 2002 Act;

        9. Section 9008 of the 2002 Act; and

        10. Section 1622 of the 2008 Act.

        This list is, of course, subject to change by Congress; but cannot
    be amended by regulation or other Administrative action.
    Legislative Changes
        If the relevant policymakers decide to seek a legislative change,
    we stand ready to assist with drafting language similar to that adopted
    in 2003 by Congress to authorize the use of CCC ``program'' funds for
    technical assistance costs associated with the seven listed programs in
    section 1241(a) of the 1985 Act. I have attached Appendix 4 as one
    example of an amendment that could be enacted to address this matter.
                                   appendix 1
        Sec. 11. Cooperation With Other Government Agencies.--The
    Corporation may, with the consent of the agency concerned, accept and
    utilize, on a compensated or uncompensated basis, the officers,
    employees, services, facilities, and information of any agency of the
    Federal Government, including any bureau, office, administration, or
    other agency of the Department of Agriculture, and of any state, the
    District of Columbia, any territory or possession, or any political
    subdivision thereof. The Corporation may allot to any bureau, office,
    administration, or other agency of the Department of Agriculture or
    transfer to such other agencies as it may request to assist it in the
    conduct of its business any of the funds available to it for
    administrative expenses. The personnel and facilities of the
    Corporation may, with the consent of the Corporation, be utilized on a
    reimbursable basis by any agency of the Federal Government, including
    any bureau, office, administration, or other agency of the Department
    of Agriculture, in the performance of any part or all of the functions
    of such agency. After September 30, 1996, the total amount of all
    allotments and fund transfers from the Corporation under this section
    (including allotments and transfers for automated data processing or
    information resource management activities) for a fiscal year may not
    exceed the total amount of the allotments and transfers made under this
    section in Fiscal Year 1995.
                                   appendix 2
    January 3, 2003

    Memorandum for Philip J. Perry, General Counsel, Office of Management
        and Budget

    Re: Funding for Technical Assistance for Agricultural Conservation
    Programs

        You have asked us to examine the sources and limits on funding for
    technical assistance provided for agricultural conservation programs
    listed in amended section 1241(a) of the Food Security Act of 1985. See
    16 U.S.C.A. 3841(a) (West, WESTLAW through Pub. L. 107-313). That
    provision instructs the Secretary of Agriculture to ``use the .funds,
    facilities, and authorities of the Commodity Credit Corporation
    [(`CCC')] to carry out,'' these programs. You have asked us to
    determine (1) whether expenditures on technical assistance for these
    programs are subject to the annual limit that Congress has placed on
    aggregate transfers of CCC funds to other components of the Department
    of Agriculture (``USDA'') under section 11 of the Commodity Credit
    Corporation Charter Act (``CCC Charter Act''), 15 U.S.C. 714i (2000),
    and (2) whether the Secretary of Agriculture may draw upon USDA's
    appropriation for Conservation Operations (``CO'') to fund technical
    assistance for these programs.
        Your Office has concluded that the section 11 cap applies to
    technical assistance expenditures for the conservation programs listed
    in section 1241(a) and that the Secretary of Agriculture may draw upon
    USDA's CO appropriation to fund technical assistance for these
    programs.\1\ USDA has concurred in your conclusions on both points.\2\
    The Congressional Budget Office, addressing only the first point, has
    also concurred.\3\ The General Accounting Office (``GAO''), however,
    has reached contrary conclusions: it has determined that the section 11
    ceiling does not apply and that the CO appropriation is not
    available.'' \4\
    ---------------------------------------------------------------------------
        \1\ See Letter for Susan A. Poling, Associate General Counsel,
    General Accounting Office, from Philip J. Perry, General Counsel,
    Office of Management and Budget (Sept. 16, 2002).
        \2\ See Letter for Susan A. Poling, Associate General Counsel,
    General Accounting Office, from Nancy S. Bryson, General Counsel, U.S.
    Department of Agriculture (Sept. 16, 2002).
        \3\ See Letter for Senator Tom Harkin, Chairman, Senate Comm. on
    Agriculture, Nutrition and Forestry, from Nancy S. Bryson, General
    Counsel, U.S. Department of Agriculture (Sept. 24, 2002) (quoting
    electronic message communicating the Congressional Budget Office's
    conclusion that the section 11 ceiling remains ``applicable to the
    transfers under section 1141(a)'').
        \4\ See Letter for Senator Herb Kohl, Chairman, Subcom. on
    Agriculture, Rural Development, and Related Agencies, Senate
    Appropriation Comm.; Senator Thad Cochran, Ranking Minority Member,
    Subcom. on Agriculture, Rural Development, and Related Agencies, Senate
    Appropriation Comm.; and Representative Henry Bonilla, Chairman,
    Subcom. on Agriculture, Rural Development, FDA & Related Agencies,
    House Appropriations Comm. from Anthony H. Gamboa, General Counsel,
    U.S. General Accounting Office, Re: Funding for Technical Assistance
    for Conservation Programs Enumerated in Section 2701 of the farm bill,
    No. B-29124l (Oct. 8, 2002) (available at http://www.gao.gov) (``GAO
    Letter'').
    ---------------------------------------------------------------------------
        For the reasons set forth below, we conclude that the section 11
    cap applies to technical assistance expenditures for the conservation
    programs listed in section 1241(a) and that the Secretary of
    Agriculture may draw upon USDA's CO appropriation to fund technical
    assistance for these programs.
    I.
        We first address whether the section 11 cap applies to technical
    assistance expenditures for the conservation programs listed in section
    1241(a).
    A.
        In legislation enacted earlier this year, Congress substantially
    revised section 1241 of the Food Security Act of 1985 concerning the
    use of funds transferred from the Commodity Credit Corporation (CCC) to
    finance agricultural conservation programs. See Farm Security and Rural
    Investment Act of 2002, Pub. L. No. 107-171,  2701, 116 Stat. 134, 278
    (``2002 Farm Bill''), codified at 16 U.S.C.A. 3841 (West. WESTLAW
    through Pub. L. 107-313). Revised section 1241(a) instructs the
    Secretary of Agriculture, during Fiscal Years 2002 through 2007, to
    ``use the funds, facilities, and authorities of the Commodity Credit
    Corporation to carry out [seven specified conservation programs] under
    subchapter IV [of title 16, chapter 58] (including technical
    assistance).'' 16 U.S.C.A. 3841(a). For three of the seven specified
    programs, this authorization to spend CCC funds is not subject to any
    specific dollar limitation, although acreage and eligibility
    restrictions place some limit on potential spending.\5\ The remaining
    four, in contrast, are subject to annual spending limits specified in
    section 1241(a).\6\
    ---------------------------------------------------------------------------
        \5\ Subsections 1241(a)(1)-(3) instruct the Secretary to use CCC
    funds, without any dollar-denominated limit, to carry out the
    Conservation Reserve Program (``CRP''), 16 U.S.C.A. 3831-3835a (West,
    WESTLAW through Pub. L. 107-313); the Wetlands Reserve Program
    (``WRP''), id. 3837-3837e; and the Conservation Security Program
    (``CSP''), id. 3838-3838c.
        \6\ Subsections 1241(a)(4)-(7) instruct the Secretary to use CCC
    funds, up to prescribed annual limits, to carry out the Farmland
    Protection Program (``FPP''), 16 U.S.C.A. 3837h-3837j (West, WESTLAW
    through Pub. L. 107-313); the Grassland Reserve Program (``GRP''), id.
    3838n-3838q; the Environmental Quality Incentives Program (``EQIP''),
    id. 3839aa-3839aa-9; and the Wildlife Habitat Incentives Program
    (``WHIP''), id. 3839bb-l.
    ---------------------------------------------------------------------------
        The 2002 Farm Bill also revised section 1241 to add an express
    reference to the section 11 limit on the use of CCC funds to meet
    administrative expenses. Revised. section 1241(b) provides that nothing
    in the new provisions respecting CCC funding ``affects the limit on
    expenditures for technical assistance imposed by section 714i of Title
    15 [i.e., section 11 of the CCC Charter Act].'' 16 U.S.C.A. 3841(b)
    (West, WESTLAW through Pub. L. 107-313).
        The limit on expenditures that is explicitly preserved in this
    portion of section 1241(b) restricts USDA uses of CCC funds. The CCC, a
    Federal corporation that is located within the USDA and managed by a
    Board of Directors under the supervision of the Secretary of
    Agriculture, is empowered to obtain funds through borrowing (under a
    $30 billion line of credit) as well as through direct appropriations
    from Congress.\7\ Section 11 of the CCC Charter Act authorizes the CCC
    to allot or transfer ``to any bureau, office, administration or other
    agency of the Department of Agriculture . . . any of the funds
    available to [the CCC] for administrative expenses.'' 15 U.S.C. 714i,
    including funds that the CCC raises through borrowing. In particular,
    the section 11 cap provides that:
    ---------------------------------------------------------------------------
        \7\ See 15 U.S.C. 714b(i) (authorizing CCC to borrow to finance its
    programs, subject to $30 billion limit on indebtedness). Borrowing from
    the United States Treasury under authority of section 714b(i)
    represents the principal source of CCC funding. The CCC repays the
    loans, thereby restoring its borrowing authority, using programmatic
    revenues (such as loan repayments by commodity producers) and annual
    appropriations. See e.g., Agriculture, Rural Development, Food and Drug
    Administration, and Related Agencies Appropriations Act, 2002, Pub. L.
    No. 107-76, 115 Stat. 704, 716-17, 729 (appropriating ``such sums as
    may be necessary to reimburse the Commodity Credit Corporation for net
    realized losses sustained, but not previously reimbursed'' and specific
    amounts for overhead expenses of the commodity export guarantee
    program). Direct appropriations for certain CCC programs, made
    available through the annual Congressional appropriations process,
    provide a secondary source of funding. See generally, U.S. General
    Accounting Office, Commodity Credit Corporation: Information on the
    Availability, Use, and Management of Funds, Rep. No. GAO/RCED-98-114,
    at 1-2 (April 1998) (CCC Funds Report) (describing CCC's use or ''line-
    of-credit'' financing and direct appropriations).

            After September 30, 1996, the total amount of all allotments
            and fund transfers from the Corporation under this section
            (including allotments and transfers for automated data
            processing or information resource management activities) for a
            fiscal year may not exceed the total amount of the allotments
    ---------------------------------------------------------------------------
            and transfers made under this section in Fiscal Year 1995.

    Id. According to OMB's figures, section 11 allotments and transfers for
    administrative expenses during Fiscal Year 1995 totaled $56 million.
    B.
        Your Office and GAO have offered competing textual analyses of the
    question whether the section 11 cap applies to technical assistance
    expenditures for the conservation programs listed in section 1241(a).
    You both agree that the section 11 cap applies only to allotments and
    fund transfers made by CCC under its section 11 authority. The pivotal
    point on which your Office and GAO disagree is whether section 1241(a)
    gives CCC a source of authority, independent of section 11, for funding
    technical-assistance to these programs. GAO maintains that section
    1241(a) provides CCC independent authority; that the technical
    assistance that CCC funds for the conservation programs listed in
    section 1241(a) is pursuant to this independent authority; and that the
    section 11 cap therefore does not come into play. Your office, by
    contrast, maintains that section 11 is the sole source of authority for
    the CCC to fund technical assistance by USDA entities for farm
    conservation programs.
        We believe that section 1241(a) does not confer on the CCC a source
    of authority, independent of section 11, for funding technical
    assistance to the programs listed in section 1241(a). We note in
    particular that section 1241(a) states that ``the Secretary shall use
    the funds, facilities, and authorities of the [CCC] to carry out''
    these programs. Rather than vesting new authority in CCC, section
    1241(a) thus states plainly that the Secretary of Agriculture shall use
    the CCC's existing ``authorities'' to provide technical assistance to
    these programs. Beyond invoking section 1241(a), GAO does not allege
    any other authority that CCC has, apart from section 11, for funding
    technical assistance to farm programs. Nor are we aware of any such
    authority that would operate separately from section 11. We therefore
    determine that insofar as the Secretary is using CCC's authorities to
    fund such technical assistance, she is relying on CCC's section 11
    authority.
        Our textual analysis is reinforced by section 1241(b), which
    provides that ``[n]othing in [section 1241] affects the limit on
    expenditures for technical assistance imposed by [section 11]. '' 16
    U.S.C.A.  1241(b). Before the 2002 Farm Bill was enacted, the section
    11 cap indisputably applied to technical-assistance funds provided to
    at least two of the programs (CRP and WRP) now listed in section
    1241(a).\8\ If, as GAO contends, the effect of section 1241(a) were to
    remove technical-assistance funding of these two programs from the
    section 11 cap, it would be highly peculiar to describe this escape
    from the section 11 cap merely as not ``affect[ing] the limit on
    expenditures for technical assistance imposed by [section 11].'' It
    would be far more natural and straightforward for any reference to the
    section 11 cap to state simply that expenditures for technical
    assistance under section 1241 are not subject to the section 11 cap.
    ---------------------------------------------------------------------------
        \8\ We are advised by your Office that under the statutory scheme,
    including the predecessor version of Section 1241, in effect before the
    2002 Farm Bill was enacted, OMB and USDA were of the view that (or at
    least acted as if) transfer of CCC funds for technical assistance for
    EQIP and WHIP was independently authorized. Whether or not such a view
    was permissible under the previous statutory scheme, we do nor believe
    that that view should affect our construction of the revised section
    1241. It is true that under one canon of construction ``Congress is
    presumed to be aware of an administrative . . . interpretation of
    statute: and to adopt that interpretation when it re-enacts a statute
    without change.'' Lorillard v. Pons, 434 U.S. 575, 580 (1978), but that
    canon plainly does not apply where, as here, a statute has been revised
    rather than merely re-enacted. Further, we note that one critical
    respect in which section 1241 has been revised is the specification
    that the Secretary shall use the ``authorities'' of the CCC.
    ---------------------------------------------------------------------------
        By contrast, section 1241(b) is sensibly phrased under our reading
    of section 1241(a). With respect to four of the seven programs that it
    lists, section 1241(a) sets forth specific amounts, totaling in the
    hundreds of millions of dollars each fiscal year, that the Secretary is
    to spend. Because section 1241(a) makes clear that the funds expended
    may be for purposes ``including the provision of technical
    assistance,'' section 1241(a), read in isolation, might suggest that,
    irrespective of section 11, any portion of these hundreds of millions
    of dollars could be used for technical assistance. Section 1241(b)
    instead succinctly makes clear that the section 11 cap continues to
    apply.
        We therefore conclude that the section 11 cap applies to technical
    assistance expenditures for the conservation programs listed in section
    1241(a).\9\
    ---------------------------------------------------------------------------
        \9\ GAO argues that the legislative history of the 2002 Farm Bill
    supports its reading of section 1241(a). Because we do not believe that
    GAO's reading is permitted by the text of section 1241(a), we need not
    consider its account of the legislative history. See, e.g., Barnhill v.
    Johnson, 503 U.S. 393, 401 (1992).
    ---------------------------------------------------------------------------
    II.
        We now consider whether the Secretary of Agriculture may draw upon
    USDA's CO appropriation to fund technical assistance for the programs
    listed in section 1241(a).
    A.
        Public Law 107-76 contains the Fiscal Year 2002 appropriation for
    the CO account. It provides in relevant part:

            ``For necessary expenses for carrying out the provisions of the
            Act of April 27, 1935 (16 U.S.C. 590a-f), including preparation
            of conservation plans and establishment of measures to conserve
            soil and water (including farm irrigation and land drainage and
            such special measures for soil and water management as may be
            necessary to prevent floods and the siltation of reservoirs and
            to control agricultural related pollutants); operation of
            conservation plant materials centers; classification and
            mapping of soil; dissemination of information; acquisition of
            lands; water, and interests therein for use in the plant
            materials program by donation, exchange, or purchase at a
            nominal cost not to exceed $100 pursuant to the Act of August
            3, 1956 (7 U.S.C. 428a); purchase and erection or alteration or
            improvement of permanent and temporary buildings; and operation
            and maintenance of aircraft, $779,000,000, to remain available
            until expended (7 U.S.C. 2209b), of which not less than
            $8,515,000 is for snow survey and water forecasting, and not
            less than $9,849,000 is for operation and establishment of the
            plant materials centers, and of which not less than $21,500,000
            shall be for the grazing lands conservation initiative. . . .''

    115 Stat. at 117. This same authority for the CO appropriation applies
    to the continuing appropriations for Fiscal Year 2003. See Pub. L. 107-
    229,  101(l), 103, 116 Stat. 1465-66 (providing continuing
    appropriations for Fiscal Year 2003); Pub. L. 107-294, 116 Stat. 2062
    (extending continuing appropriations through January 11, 2003).
    B.
        GAO maintains that the CO appropriation identifies the specific
    programs that it is available to fund and that it does not include the
    programs listed in section 1241(a). It also argues that section
    1241(a)'s directive that ``the Secretary shall use the funds,
    facilities, and authorities of the [CCC] to carry out the [listed]
    programs'' should be read to preclude the Secretary from using other
    funds in support of these programs. GAO contends that both a Senate
    floor colloquy on the 2002 Farm Bill and the history of funding of the
    WRP support its position. See GAO Letter, at 8-11.
        Your Office maintains instead that the CO appropriation is
    sufficiently broad to authorize funding technical assistance for the
    conservation programs listed in section 1241(a). You argue further that
    the legislative history of the CO appropriation supports your reading.
    See OMB Letter, at 2-4. You find further support in what you
    characterize as USDA's ``longstanding regular practice of using the CO
    account to fund conservation technical assistance.'' Id. at 4.
        We believe that the CO appropriation may be used to fund technical
    assistance for the conservation programs listed in section 1241(a). The
    CO appropriation provides funds ``for carrying out the provisions of
    the Act of April 27, 1935 (16 U.S.C. 590a-f).'' Although the programs
    listed in section 1241(a) are not specifically identified in 16 U.S.C.
     590a-590f (2000), section 590a(3) ``authorizes the Secretary to
    cooperate or enter into agreements with, or to furnish financial or
    other aid to, any agency, governmental or otherwise, or any person,
    subject to such conditions as he may deem necessary, for the purposes
    of this chapter [(chapter 3B)].`` Id.  590a(3) (emphasis added).
    Further, the express purposes of chapter 3B include ``(1) preservation
    and improvement of soil fertility; (2) promotion of the economic use
    and conservation of land; (3) diminution of exploitation and wasteful
    and unscientific use of national soil resources; (4) the protection of
    rivers and harbors against the results of soil erosion in aid of
    maintaining the navigability of waters and water courses and in aid of-
    flood control; . . . [and] (6) prevention and abatement of
    agricultural-related pollution.'' Id.  590g(a) (``declar[ing] . . .
    the purposes of this chapter''). Therefore, insofar, as the Secretary
    determines that providing technical assistance for the conservation
    programs listed in section 1241(a) would serve any of these purposes,
    she may use the CO appropriation to fund such technical assistance.
        We do not read section 1241(a)'s directive that ``the Secretary
    shall use the funds, facilities, and authorities of the [CCC] to carry
    out the [listed] programs'' to foreclose the Secretary from using the
    CO appropriation to fund technical assistance for these programs.
    Section 1241(a) does not state that the Secretary shall use only the
    funds, facilities, and authorities of the CCC to carry out these
    programs. In short, we see no statutory bar to the Secretary's using
    other funds, in addition to the CCC's, to carry out these programs.
        Because we believe that the text of the CO appropriation clearly
    authorizes the Secretary to use the CO account to provide technical
    assistance for the conservation programs listed in section 1241(a) to
    promote any of the purposes of chapter 3B, we need not address the
    competing legislative-history arguments that your Office and GAO
    present. Likewise, we see no reason to explore the conflicting accounts
    of the history of funding of the listed programs: even if GAO is
    correct in its assertion that the WRP was not funded out of the CO
    appropriation before the predecessor version of section 1241 was
    enacted in 1996, that would not bear meaningfully on the question
    whether the CO appropriation could have been used to fund WRP.
              * * * * *
        In sum: The section 11 cap applies to technical assistance
    expenditures for the conservation programs listed in section 1241(a).
    The Secretary of Agriculture may draw upon USDA's CO appropriation to
    fund technical assistance for these programs.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    M. Edward Whelan III,
    Principal Deputy Assistant Attorney General.
                                   appendix 3
    Title I--Commodity Programs

        Sec. 1601. Administration Generally.
        Sec. 1622. Implementation.

    Title II--Conservation

        Sec. 2101. Extension of Conservation Reserve Program.
        Sec. 2201. Wetlands Reserve Program.
        Sec. 2301. Conservation Stewardship Program.
        Sec. 2401. Farmland Protection.
        Sec. 2403. Grasslands Reserve Program.
        Sec. 2501. Environmental Quality Incentives Programs.
        Sec. 2510. Agricultural Water Enhancement Program.
        Sec. 2605. Chesapeake Bay Watershed Program.
        Sec. 2606. Voluntary Public Access and Habitat Incentive Program.
        Sec. 2706. Delivery of Technical Assistance.
        Sec. 2801. Agricultural Management Assistance Program.
        Sec. 2803. Small Watershed Rehabilitation Program.

    Title III--Trade

        Sec. 3016. Food for Peace.
        Sec. 3101. Export Credit Guarantee Program.\4\
    ---------------------------------------------------------------------------
        \4\ While funds to cover the losses incurred under this program
    come directly from the Treasury of the United States, expenses related
    to the administration of the program are within the provisions of
    section 11 of the CCC Charter Act.
    ---------------------------------------------------------------------------
        Sec. 3102. Market Access Program.
        Sec. 3104. Cooperator Program.
        Sec. 3105. Food for Progress.
        Sec. 3106. McGovern-Dole International Food for Education and Child
    Nutrition Program.
        Sec. 3203. Technical Assistance for Specialty Crops.
        Sec. 3204. Emerging Markets.
        Sec. 3206. Local and Regional Food Aid Procurement Projects.

    Title IV--Nutrition

        Sec. 4231. Senior Farmers' Market Nutrition Program.
        Sec. 4307. Survey of Food Purchased by School Food Authorities.
        Sec. 4406. Re-Authorization of Federal Food Assistance Programs.

    Title VI--Rural Development

        Sec. 6022. Rural Micro Entrepreneur Assistance Program.
        Sec. 6029. Funding of Pending Rural Development Loan and Grant
    Applications.
        Sec. 6202. Value-Added Agricultural Market Development Program
    Grants.

    Title VII--Research and Related Matters

        Sec. 7206. Organic Agriculture Research and Extension Initiative.
        Sec. 7311. Specialty Crop Research Initiative.
        Sec. 7410. Beginning Farmer and Rancher Development Program.

    Title VIII--

        Sec. 8205. Healthy Forest Reserve Program.

    Title IX--

        Sec. 9001. Biobased Markets Program.
                             Biorefinery Assistance.
                             Repowering Assistance.
                             Bioenergy Program for Advanced Biofuels.
                             Biodiesel Fuel Education Program.
                             Rural Energy for America Program.
                             Biomass Research and Development.
                             Feedstock Flexibility Program for Bioenergy
                            Producers.
                             Biomass Crop Assistance Program.

    Title X--

        Sec. 10106. Farmers' Market Promotion Program.
        Sec. 10109. Specialty Crop Block Grants.
        Sec. 10201. Plant Pest and Disease Management and Disaster
    Prevention.
        Sec. 10202. National Clean Plant Network.
        Sec. 10301. National Organic Certification Cost-Share.
        Sec. 10302. Organic Production and Market Data Initiatives.
        Sec. 10404. Market Loss Assistance for Asparagus Producers.

    Title XI--

        Sec. 11009. National Sheep Industry Improvement Center.

    Title XII--

        Sec. 12034. Fisheries Disaster Assistance.\5\
    ---------------------------------------------------------------------------
        \5\ This provision mandated a one time transfer of funds to the
    Department of Commerce from CCC on May 1, 2008. Accordingly, once
    transferred, these funds lost their identity as funds of CCC and are
    subject to the provisions otherwise applicable to section 312(a) of the
    Magnuson-Stevens Fishery Conservation and Management Act.

    Title XIV--
        Sec. 14004. Outreach and Technical Assistance for Socially
    Disadvantaged Farmers or Ranchers.
        Sec. 14012. Determination on Merits of Pigford Claims.
                                   appendix 4
    Sec. 11. Cooperation With Other Government Agencies.--

        (a) In General.--

              (1) Acceptance of services.--Subject to the limitations under
            paragraphs (2) and (4), and excluding subsections (b) and (c),
            the Corporation, on behalf of an agency of the Department of
            Agriculture (Department), may accept and utilize, on a
            compensated or uncompensated basis, services, information,
            facilities, officers, or employees provided by--

                      (A) another bureau, office, division, agency, or
                    mission area of the Department of Agriculture;
                      (B) another agency of the Federal Government; or
                      (C) a political unit such as a state, the District of
                    Columbia, a territory or possession, or a political
                    subdivision of such political unit.

              (2) Prior authorization.--Prior to receiving funding or other
            assistance under this subsection, an agency of the Department
            shall have statutory authorization to receive services,
            information, facilities, officers, or employees covered under
            paragraph (1) through the Corporation.
              (3) Administrative expenses.--The Corporation may transfer
            funds of the Corporation to any unit of Federal Government or
            political unit to assist the governmental unit with
            administrative expenses incurred in the conduct of its
            assistance to the Corporation. The total amount of funds that
            may be transferred under this section (including transfers for
            automated data processing or information resource management
            activities) for a fiscal year may not exceed $57,000,000.

        (b) Transfers.--Notwithstanding subsection (a), the Secretary may,
    transfer funds of the Corporation in accordance with:

              (1) A plant or pest emergency under section 442 of the Plant
            Protection Act (7 U.S.C. 7772);
              (2) A livestock emergency under section 10417 of the Animal
            Health Protection Act (7 U.S.C. 8316);
              (3) Section 1469(a)(3) of the National Agricultural Research,
            Extension, and Teaching Policy Act of 1977 (7 U.S.C. 3315);
              (4) Section 1240I of the Food Security Act of 1985 (16 U.S.C.
            3839aa-9);
              (5) Section 1240Q of the Food Security Act of 1985 (16 U.S.C.
            3839bb-4);
              (6) Section 1241(a) of the Food Security Act of 1985 (16
            U.S.C. 3841(a));
              (7) Section 7405(c)(7) of the Farm Security and Rural
            Investment Act of 2002 (Pub. L. 107-171);
              (8) Section 9008 of the Farm Security and Rural Investment
            Act of 2002 (Pub. L. 107-171); and
              (9) Section 1622 of the Food, Conservation, and Energy Act of
            2008 (Pub. L. 110-246).

        (c) Administrative Expenses.--Funds made available under subsection
    (b) may, to the extent authorized in such provisions, be used to pay
    expenses incurred in the administration of such activities.
    Insert 2
              Mr. Costa. Can you clarify the link between the pest and the
            disease challenges, how in working with your partners in USDA
            possible trade disruptions and the potential economic losses
            that would occur to our agricultural producers are addressed
            and hopefully minimized?
              Ms. Bech. Well, I think if I can clarify, if I might ask a
            clarifying question. Are you asking what we are doing with the
            other USDA agencies in addressing the disease impacts on the
            economics? Then we are providing, again, the assessments that
            go into that economic analysis and working with our Foreign
            Agriculture Service to address those issues.
              Mr. Costa. Do you have any explanation as to why only \1/3\
            of the SPS certificates or trade concerns have been addressed?
              Ms. Bech. Well, I could get further information on it.

        APHIS does work closely with its Federal partners in addressing any
    SPS issues that arise. The U.S. Trade Representative publishes an
    annual ``Report on Sanitary and Phytosanitary Measures'' that describes
    significant barriers to U.S. food and farm exports arising from
    measures that foreign governments apply on the grounds that they are
    necessary to protect human, animal, or plant life or health from risks
    arising from the entry or spread of pests, from plant- or animal-borne
    pests or diseases, or from additives, contaminants, toxins, or disease-
    causing organisms in foods, beverages, or feedstuffs.
        APHIS and our Federal partners will continue to work with
    colleagues from across the U.S. Government, as well as interested
    stakeholders, to encourage governments around the world to remove their
    unwarranted SPS rules to ensure a level playing field abroad for U.S.
    ranch and farm products.
                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        Specialty Crop Block Grant Program.
    2. Subprograms/Department Initiatives
        Not applicable.
    3. Brief History
        The Specialty Crops Competitiveness Act of 2004 (P.L. 108-465; 7
    U.S.C. 1621 note) authorized appropriations for Fiscal Years 2005-09 to
    provide assistance for specialty crops to all 50 states, the District
    of Columbia, and the Commonwealth of Puerto Rico. Specialty crop block
    grant funds are meant to enhance the competitiveness of specialty
    crops. Specialty crops were defined as fruits and vegetables, tree
    nuts, dried fruits, and nursery crops (including floriculture).
        From FY 2006 through FY 2008, the program was funded through
    appropriations which were made available until expended and awarded in
    the year subsequent to the appropriation. The FY 2008 appropriation
    made $8.44 million available until expended for Specialty Crop Block
    Grants, which were awarded in FY 2009. After all the eligible states
    submitted their applications by the established deadline of March 5,
    2009, fifty-two U.S. states and territories were awarded SCBGP funds.
        The FY 2008 Farm Bill, Sec. 10109, extended the Specialty Crop
    Block Grant program (SCBGP-FB) through FY 2012 and provided Commodity
    Credit Corporation funding at the following levels: $10 million in FY
    2008, $49 million in FY 2009, and $55 million for each of Fiscal Years
    2010-2012. These funds are available on an annual basis and must be
    obligated in the current year. The Act also amended the definition of
    specialty crops by adding horticulture; and added Guam, American Samoa,
    the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana
    Islands to the list of ``states'' eligible to apply for grants. State
    grants for each fiscal year are a minimum of $100,000 or \1/3\ of 1
    percent of the total amount of available funding. AMS completed
    rulemaking on these farm bill changes with publication of the final
    rule in the Federal Register on March 27, 2009. The final rule requires
    state departments of agriculture to describe their outreach efforts to
    specialty crop producers, including socially disadvantaged and
    beginning farmers; and to describe their efforts to conduct a
    competitive process to ensure maximum public input and benefit.
    4. Purpose/Goals
        The purpose of the Specialty Crop Block Grant Program (SCBGP) is
    solely to enhance the competitiveness of specialty crops. Specialty
    crops are defined as ``fruits, vegetables, tree nuts, dried fruits,
    horticulture, and nursery crops (including floriculture).''
    5. Success in Meeting Programmatic Purpose/Goals
        To date, the grant program has awarded over $110 million to fund
    2,500 projects that benefit the specialty crop industry in all 50
    states, the District of Columbia, American Samoa, Guam, the
    Commonwealth of Puerto Rico, and the Commonwealth of the Northern
    Mariana Islands. These projects have particularly enhanced specialty
    crop efforts in education, research, marketing and promotion,
    production, pest and plant health, and food safety.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                                  No-Year Budget         Farm Bill Budget
           Fiscal Year            Authority ($ in         Authority ($ in
                                    thousands)              thousands)
    ------------------------------------------------------------------------
                 2006                    $6,930                      --
                 2007                     6,930                      --
                 2008                     8,400                 $10,000
                 2009                        --                  49,000
                 2010                        --                  55,000
                 2011                        --                  55,000
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                               Appropriated No-Year      Farm Bill Annual
          Fiscal Year          Annual Outlays ($ in        Outlays ($ in
                                    thousands)              thousands)
    ------------------------------------------------------------------------
                 2006                       --                       --
                 2007                   $5,147                       --
                 2008                    8,412                       --
                 2009                    7,744                   $3,358
                 2010                       44                   14,404
             2011 YTD                      103                   19,511
    ------------------------------------------------------------------------

        Funds are expended over the lifetime of the grant, typically around
    3 years, as the grantee incurs costs on the projects.
    8. Annual Delivery Cost (FY 2002-FY 2011)

              SCBG Farm Bill Funds--Delivery Costs ($ in thousands)
    ------------------------------------------------------------------------
                                                                   FY 2011
                            FY 2008      FY 2009      FY 2010        Est.
    ------------------------------------------------------------------------
     Program Oversight             --         $328         $637         $667
           Staff Years             --            3            4            4
    ------------------------------------------------------------------------

        Program oversight for Specialty Crop Block Grants was not tracked
    separately until FY 2009.
    9. Eligibility Criteria
        The agencies commissions or departments responsible for agriculture
    within the 50 states, the District of Columbia, the Commonwealth of
    Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the
    Commonwealth of the Northern Mariana Islands are eligible to apply for
    grant funds directly to the USDA. States may have specific or
    additional application requirements such as: funding priorities,
    deadlines, applicant eligibility criteria, project duration, funding
    restrictions and maximum and minimum grant awards.
    10. Utilization (Participation) Data
        The Specialty Crop Block Grant Program is authorized to distribute
    funds to the 56 eligible entities. In FY 2010, all 50 states, the
    District of Columbia, the Commonwealth of Puerto Rico, Guam, and the
    U.S. Virgin Islands applied for and received funding for 825 projects
    meant to enhance the competitiveness of specialty crops.
    11. Duplication or Overlap with Other Programs
        The purpose of the Specialty Crop Block Grant Program is to enhance
    the competitiveness of specialty crops (fruits, vegetables, tree nuts,
    floriculture and horticulture). A grant program that has a similar
    purpose is the Specialty Crop Research Initiative, which was
    established to solve critical specialty crop industry issues through
    research and extension activities.
        Each project submitted to the USDA is reviewed to avoid duplication
    with other Federal and state grant programs. In the event that a
    project has been submitted to other Federal and/or state grant
    programs, the Specialty Crop Block Grant Program requires that the
    project indicate how Specialty Crop Block Grant Program funding will
    supplement and not duplicate or overlap the purpose of the other
    funding.
    12. Waste, Fraud, and Abuse
        No reports or findings of waste, fraud and abuse have occurred or
    been published.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        National Organic Program (NOP).
    2. Subprogram/Department Initiative
        Not applicable.
    3. Brief History
        The Organic Foods Production Act (OFPA) of 1990 required USDA to
    develop national standards for organically produced agricultural
    products to assure consumers that agricultural products marketed as
    organic meet consistent, uniform standards. Farms and handlers of
    organic foods must be certified by a state or private agency that has
    been accredited by USDA. All agricultural products sold, labeled, or
    represented as organic in the United States must be in compliance with
    these regulations. The NOP's objective is to enforce the mandated
    requirements.
        To comply with statutory requirements, and meet industry demands,
    NOP activities consist of the following:

       Develop new standards to accommodate requests from the
            organic industry;

       Enforce compliance and conduct audits to maintain labeling
            credibility;

       Operate and update website content, to keep certifying
            agents and consumers informed with the latest developments;

       Respond to public requests for information in a timely
            manner;

       Provide accreditation of certifying agents;

       Oversee the certifying agents, including foreign-based
            agents;

       Ensure uniform regulatory decisions by the certifying
            agents; and

       Investigate complaints of organic standard violations

        NOP is responsible for ensuring that organically produced products
    meet consistent standards. To accomplish that, NOP accredits and
    ensures the compliance of 100 domestic and foreign Accredited
    Certifying Agents (ACAs). Theses ACAs certify that organic operations
    are in compliance with USDA standards (regulations). Proper training is
    essential for certifying agents to ensure that regulatory decisions are
    uniform regarding the correct application of the standards.
    4. Purpose/Goals
        The NOP develops, implements, and administers national production,
    handling, and labeling standards in accordance with the Organic Foods
    Production Act (OFPA) of 1990 and regulations in Title 7, Part 205 of
    the Code of Federal Regulations. OFPA gives NOP the authority to
    respond to site-specific conditions by integrating cultural,
    biological, and mechanical practices that foster cycling of resources,
    promote ecological balance, and conserve biodiversity.
    5. Selected Examples of Recent Progress
       On February 17, 2010, the NOP published the long-awaited
            access to pasture rule to clarify feed and living conditions
            for livestock production that would qualify their milk and meat
            for USDA organic certification. The rule establishes
            enforceable pasture practice standards to satisfy consumer
            expectations that ruminant livestock animals graze on pasture
            during grazing season and are not confined.

       In March 2010, the Office of Inspector General (OIG)
            published an audit report on the NOP which recommended that the
            program further improve administration and strengthens
            management controls to ensure more effective enforcement of
            program requirements. The report indicated the need to
            strengthen oversight of certifying agents and organic
            operations to ensure that organic products are consistently and
            uniformly meeting NOP standards. The NOP has completed 13 out
            of 14 corrective actions identified in the OIG audit.

       The NOP developed a quality management system and a Quality
            Manual to align the program's accreditation program with
            international requirements outlined in ISO 17011. Furthermore,
            the program initiated a peer review process to have its
            accreditation program assessed by the National Institute of
            Standards and Technology for compliance with ISO 17011.

       On September 1, 2010, the NOP published the inaugural
            edition of the NOP Program Handbook, designed for those who
            own, manage, or certify organic operations by providing
            guidance about the national organic standards and instructions
            that outline best program practices.

       In October 2010, the NOP published draft guidance on compost
            and vermicompost in organic crop production; wild crop
            harvesting; outdoor access for organic poultry; commingling and
            contamination prevention in organic production and handling;
            and use of chlorine materials in organic production and
            handling.

       The NOP published a number of rules on the National List of
            Allowed and Prohibited Substances including materials
            sunsetting in 2012; adding tetracycline and sulfurous acid to
            the National List; and other National List substances.

       The NOP developed new training seminars on liquid
            fertilizers, access to pasture, adverse actions procedures,
            labeling, certification, complaint handling, wine labeling, and
            enforcement procedures. The NOP provided training in Germany,
            Ghana, California, Colorado, Georgia, New York and Wisconsin.

       The NOP recently held public meetings of the National
            Organic Standards Board in Davis, California and Madison,
            Wisconsin.

       The NOP established a complaint database to improve the
            handling of complaints to ensure they are handled in an
            effective and timely manner.

       Conducted on-site reviews of recognition agreements
            currently in place with the governments of Denmark and Israel.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                 Fiscal Year               Budget Authority ($ in thousands)
    ------------------------------------------------------------------------
                                2002                               $1,640
                                2003                                1,494
                                2004                                1,969
                                2005                                1,975
                                2006                                1,993
                                2007                                2,001
                                2008                                3,127
                                2009                                3,867
                                2010                                6,967
                                2011                                6,919
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                 Fiscal Year               Budget Outlays  ($ in thousands)
    ------------------------------------------------------------------------
                                2002                               $1,384
                                2003                                1,341
                                2004                                1,918
                                2005                                1,990
                                2006                                1,807
                                2007                                1,549
                                2008                                2,871
                                2009                                3,298
                                2010                                5,736
                            2011 YTD                                3,375
    ------------------------------------------------------------------------
    Explanation: The budget authority may be different from outlays due to
      timing of payments and the accounting process.

                                                   8. Annual Delivery Cost (FY 2002-FY 2011) ($ in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                    FY 2011
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010      Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    National Organic Program               1,493       1,413       1,983       1,955       1,883       1,897       3,000       3,575       6,244       6,387
    Indirect Costs                           134         111         156         157         159         160         250         309         517         532
                                     -----------------------------------------------------------------------------------------------------------------------
      Total Costs                          1,627       1,524       2,139       2,112       2,042       2,057       3,250       3,884       6,761       6,919
                                     -----------------------------------------------------------------------------------------------------------------------
      Staff Years                             11          13          13          11          13          13          14          19          28          32
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Program Indirect costs as reported in the Explanatory Notes.

    9. Eligibility Criteria

        Not applicable to this program.

    10. Utilization (Participation) Data

        Certified Organic Operations:

         27,000 worldwide

         Approximately \2/3\ of USDA certified organic operations are located in the U.S.; \1/3\ are located in other countries

        Acreage: reporting of organic acreage is currently not required by regulations. The USDA Economic Research Service estimated that U.S. producers
     dedicated approximately 4.8 million acres of farmland--2.7 million acres of cropland and 2.1 million acres of rangeland and pasture--to organic
     production systems in 2008.

    11. Duplication or Overlap with Other Programs

        There is no duplication with other programs. Certifying agents accredited by the National Organic Program certify eligible agricultural processing
     and handling activities, both domestically and internationally, upon request.

    12. Waste, Fraud and Abuse

        NOP's Compliance & Enforcement Division (C&E) is responsible for processing and investigating complaints alleging violations of NOP regulations;
     conducting proactive compliance and outreach activities; and enforcing organic production, handling, and labeling standards.

        The NOP is increasing enforcement activities here in the United
    States and monitoring recognition agreements with foreign countries.
    The NOP conducted assessments in Egypt, Israel, Hungary, Denmark, China
    and Ghana. AMS auditors have also conducted organic audits in
    Argentina, Mexico, Costa Rica, Guatemala, Australia, Italy, Germany,
    and Bolivia. Certified organic operations that are found in
    noncompliance of the NOP organic standards may have their certification
    suspended or revoked. Civil penalties of up to $11,000 per violation
    are being used for willful violations of the standards.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        National Organic Certification Cost-Share Program.
    2. Subprogram/Department Initiative
        National Organic Program/2008 Farm Bill.
    3. Brief History
        The National Organic Certification Cost Share Program (NOCCSP) is
    open to all state agencies in all 50 states, the District of Columbia
    and the Commonwealth of Puerto Rico, Guam, American Samoa, the United
    States Virgin Islands, and the Commonwealth of the Northern Mariana
    Islands.
        The NOCCSP is authorized under 7 U.S.C. 6523. The 2002 Farm Bill
    provided $5 million for this program. Funding was exhausted before the
    2008 Farm Bill made additional funds available. Section 10301 of the
    Food, Conservation and Energy Act of 2008 mandated $22 million for the
    program from CCC funding available until expended. The Act authorizes
    the Department to provide certification cost-share assistance to
    producers and handlers of organic agricultural products in
    participating states who receive certification or continuation of
    certification from a USDA accredited certifying agent. Assistance is
    provided through participating states.
    4. Purpose/Goals
        Funds under this program are made available to all 50 states, all
    U.S. Territories, the District of Columbia, and Puerto Rico to assist
    producers and handlers of agricultural products in obtaining
    certification under the Organic Foods Production Act of 1990. Payments
    are limited to 75 percent of an individual producer or handler's
    certification costs up to a maximum of $750 annually.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010, nearly $4.8 million was allocated to states to
    partially reimburse producers and handlers for the cost of organic
    certification through the National Organic Certification Cost Share
    Program. The state agencies are responsible for dispersing the
    allocated funds to producers and handlers. We estimate that these funds
    can assist over 8,000 certified organic operations. Recent efforts by
    the NOP to increase outreach and training have resulted in significant
    growth, with at least ten states requesting additional funds to meet
    their unexpected demand.
    6. Annual Budget Authority (FY 2002-FY 2011)
       $5 million authorized by the 2002 Farm Bill

       $22 million authorized by the 2008 Farm Bill

    ------------------------------------------------------------------------
                 Fiscal Year               Budget Authority ($ in thousands)
    ------------------------------------------------------------------------
                                2002                               $5,000
                                2003                                   --
                                2004                                   --
                                2005                                   --
                                2006                                   --
                                2007                                   --
                                2008                              $22,000
                                2009                                   --
                                2010                                   --
                                2011                                   --
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                 Fiscal Year               Budget Outlays  ($ in thousands)
    ------------------------------------------------------------------------
                                2002                                   --
                                2003                               $1,820
                                2004                               $1,415
                                2005                                 $222
                                2006                                 $967
                                2007                                 $342
                                2008                                   --
                                2009                               $3,446
                                2010                               $4,182
                            2011 YTD                               $3,412
    ------------------------------------------------------------------------
    Explanation of Variance: To ensure the availability of resources through
      2012, a portion of this one-time no-year funding has been made
      available each fiscal year.

           8. Annual Delivery Cost (FY 2002-FY 2011) ($ in thousands)
    ------------------------------------------------------------------------
                                                                   FY 2011
                            FY 2008      FY 2009      FY 2010        Est.
    ------------------------------------------------------------------------
     Program Oversight             --         $149         $136         $223
           Staff Years             --            1            1            1
    ------------------------------------------------------------------------
    For FY 2002-2007 program oversight was not tracked separately.

    9. Eligibility Criteria
        Producers and handlers who have received certification or a renewal
    of certification from an accredited certifying agent (ACA) are eligible
    to participate.
        Certification is the process where a producer or handler is
    approved by an Accredited Certifying Agent as being in compliance with
    the NOP regulations and is then authorized to sell, label, or represent
    products as being ``certified organic''.
    10. Utilization (Participation) Data
        NOCCSP:

       2008: 4,966 participants

       2009: 5,436 participants

       2010: 6,128 participants

       2011 year to date: 1,341 participants

         (final figures will not be available until January
                2012; \2/3\-\3/4\ of participants usually sign up in the
                fourth quarter of the fiscal year)
    11. Duplication or Overlap with Other Programs
        The U.S. Department of Agriculture (USDA) administers two cost-
    share programs to defray the costs of organic certification. The
    programs are administered by the USDA Agricultural Marketing Service
    (AMS) National Organic Program (NOP).
        The AMA Program authorizes cost-share assistance to producers of
    organic agricultural products in states that have a historically low
    participation rate in the Federal Crop Insurance Program: Connecticut,
    Delaware, Hawaii, Maine, Maryland, Massachusetts, Nevada, New
    Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Utah,
    Vermont, West Virginia, and Wyoming. Conversely, the NOCCSP is open to
    state agencies in all 50 the District of Columbia and the Commonwealth
    of Puerto Rico, Guam, American Samoa, the United States Virgin Islands,
    and the Commonwealth of the Northern Mariana Islands. In addition, the
    NOCCSP provides cost-share assistance to both producers and handlers.
        The NOCCSP and the AMA are the only Federal programs which provide
    financial assistance to defray the cost of organic certification. To
    reduce possible overlap between AMA and NOCCSP, producers participating
    in the AMA program are not eligible to participate in the producer
    portion of the national program.
    12. Waste, Fraud and Abuse
        No reports or finding of fraud or abuse have occurred or been
    published.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Farmers Market Promotion Program (FMPP).
    2. Subprograms/Department Initiatives
        Not applicable.
    3. Brief History
        The Farmers Market Promotion Program was created by the 2002 Farm
    Bill (Section 10605) which amended the Farmer-to-Consumer Direct
    Marketing Act of 1976 (7 U.S.C. 3005). This program provides non-
    construction grants that target improvements and expansion of domestic
    farmers' markets, roadside stands, community-supported agriculture
    programs, agri-tourism activities, and other direct producer-to-
    consumer market opportunities. That Act authorized appropriations for
    the program but did not provide funding. From Fiscal Year (FY) 2006 to
    2008, appropriations of $1 million were made available each year for
    this program. The 2008 Farm Bill further amended the Farmer-to-Consumer
    Direct Marketing Act of 1967 and provided funding from Commodity Credit
    Corporation (CCC) for Fiscal Years 2008-2012: $3 million in FY 2008, $5
    million for each of FYs 2009 and 2010, and $10 million each year of FYs
    2011 and 2012.
    4. Purpose/Goals
        The primary objective of the FMPP program is to help eligible
    entities improve and expand domestic farmers markets, roadside stands,
    community-supported agricultural programs, agri-tourism activities, and
    other direct producer-to-consumer market opportunities. Eligible
    entities include agricultural cooperatives, producer networks, producer
    associations, local governments, nonprofit organizations, public
    benefit corporations, economic development corporations, regional
    farmers' market authorities, and tribal governments.
    5. Success in Meeting Programmatic Purpose/Goals
        In the past 3 years, incoming applications for FMPP grants have
    increased with available funding. In Fiscal Year 2011, $10 million is
    available for the grant program. Some of the program's accomplishments
    include the following:
        2010 Accomplishments:

       Approximately 28% of the FY 2010 awards offer further
            professional development opportunities for farmers to
            strengthen their business management skills, including training
            in risk management, certification, and good agricultural
            practices.

       AMS received 509 requests in 2010 from all 50 states and the
            District of Columbia. The program awarded a total of 81 grants
            to 35 states for a total of $4,099,897.

        2009 Accomplishments:

       Provided $4.5 million in competitive grants to nonprofit
            corporations, regional farmers market authorities, Tribal
            governments, local governments, agricultural cooperatives,
            economic development corporations to expand direct farmer-to-
            consumer sales.

       Eighty-six projects from 49 states were selected for funding
            out of the 225 proposals received from 37 states throughout the
            United States.

        2008 Accomplishments:

       Awarded $3,445,000 in support to 85 projects across the
            country, including $385,375 to 18 projects for establishment/
            expansion of EBT capability.

        2007 Accomplishments:

       Provided support to 23 projects across the country with
            $900,000 in funding, including $328,652 to eight projects for
            establishment/expansion of EBT capability.

        2006 Accomplishments:

       Awarded $900,000 in support to 20 projects across the
            country, including $202,480 to four projects for establishment/
            expansion of EBT capability.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                 Fiscal Year               Budget Authority ($ in thousands)
    ------------------------------------------------------------------------
                              2006 *                               $1,000
                              2007 *                               $1,000
                              2008 *                               $4,000
                                2009                               $5,000
                                2010                               $5,000
                                2011                              $10,000
    ------------------------------------------------------------------------
    Note: * indicates budget authority from annual appropriations. FY 2008
      includes both a $1 million annual appropriation and $3 million 2008
      Farm Bill funding.

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                 Fiscal Year               Budget Outlays  ($ in thousands)
    ------------------------------------------------------------------------
                                2006                                   --
                                2007                                 $300
                                2008                                 $772
                                2009                               $2,549
                                2010                               $3,244
                            2011 YTD                               $2,789
    ------------------------------------------------------------------------
    Funds are expended over the lifetime of the grant, typically around 3
      years, as the grantee incurs costs of the project.

                               8. Annual Delivery Cost (FY 2002-FY 2011) ($ in thousands)
    ----------------------------------------------------------------------------------------------------------------
                               FY 2006        FY 2007        FY 2008        FY 2009        FY 2010      FY 2011 Est.
    ----------------------------------------------------------------------------------------------------------------
      Program Oversight              --             --           $175           $437           $682           $776
            Staff Years              --             --              1              3              4              4
    ----------------------------------------------------------------------------------------------------------------
    For FY 2006 and 2007 program oversight was not tracked separately.

    9. Eligibility Criteria
        Eligible entities under FMPP are agricultural cooperatives,
    producer networks or associations (added under 2008 Farm Bill); local
    governments; nonprofit corporations; economic development corporations;
    regional farmers' market authorities; and Tribal governments. All
    entities must be owned, operated, and located within one of the 50 U.S.
    or the District of Columbia.
    10. Utilization (Participation) Data
        FMPP has awarded grants for 285 projects. As of June 2011, the
    Farmers Market Promotion Program is currently monitoring 157 active
    grant awards.
    11. Duplication or Overlap with Other Programs
        Within USDA, there exists a small pool of grant opportunities that
    are used heavily by small farmers and ranchers due to capacity and
    other constraints that prevent them from participating in many other
    programs. Among these are the (1) Farmers Market Promotion Program,
    administered by the Agricultural Marketing Service, (2) the Community
    Food Projects program administered by the National Institute of Food
    and Agriculture (NIFA, formerly CSREES), and (3) the Risk Management
    Education and Outreach Partnerships Program, administered by the Risk
    Management Agency.
        FMPP applicants are often consumers of other USDA programs that
    appear similarly situated, including the Community Food Projects
    Competitive Grant Program (CFPCGP), administered by National Institute
    of Food and Agriculture. Since 1996, the CFPCGP has promoted self-
    sufficiency and food security in low-income communities through
    community food projects and training and technical assistance projects
    (T&TA). CFPs unite the entire food system, assessing strengths,
    establishing linkages, and creating systems that improve self-reliance
    over food needs. T&TA helps successful applicants carry out and
    evaluate their projects. The CFPCGP is designed to: meet the needs of
    low-income people by increasing access to fresher, more nutritious food
    supplies; increase the self-reliance of communities in providing for
    their own food needs; promote comprehensive responses to local food,
    farm, and nutrition issues; meets specific state, local, or
    neighborhood food and agricultural needs for infrastructure improvement
    and development; plans for long-term solutions; and create innovative
    marketing activities that benefit both agricultural producers and low-
    income consumers. These one-time grants require a dollar-for-dollar
    match in resources.
        Another program frequently used by FMPP stakeholders is the
    Education and Outreach Partnerships Program housed within the Risk
    Management Agency. This program combines the former ``Commodity
    Partnerships for Small Agricultural Risk Management Education
    Sessions'' and the `Community Outreach and Assistance Partnerships
    Program.'' The purpose of this combined cooperative partnership
    agreements program is to deliver crop insurance education and risk
    management training to U.S. agricultural producers to assist them in
    identifying and managing production, marketing, legal, financial and
    human risk. The program gives priority to: (1) educating producers of
    crops currently not insured under Federal crop insurance, specialty
    crops, and underserved commodities, including livestock and forage; and
    (2) providing collaborative outreach and assistance programs for
    limited resource, socially disadvantaged and other traditionally
    underserved farmers and ranchers.
    12. Waste, Fraud and Abuse
        No reports or findings of waste, fraud or abuse have occurred or
    been published.
    13. Effects of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Section 32.
    2. Subprograms/Department Initiatives
        Specialty crop purchase requirements, Fresh Fruit and Vegetable
    Program.
    3. Brief History
        Section 32 of the Act of 1935 (P.L. 74-320), amended through 7
    U.S.C.  612(c), allocated the equivalent of 30% of annual customs
    receipts to the Secretary of Agriculture. Much of these funds are
    subsequently transferred to the Food and Nutrition Service (FNS) and
    become part of the budget for USDA's Child Nutrition Programs; with a
    smaller transfer to Commerce as directed by the Fish and Wildlife Act
    of 1956 (16 U.S.C. 742a).
        Funding Availability: The 2008 Farm Bill established an amount to
    be retained for Section 32 activities each year beginning in 2009 at
    $1.173 billion and increasing gradually to $1.322 billion in 2017 and
    thereafter. The subsequent annual appropriations bills have limited the
    Section 32 availability to levels lower than authorized in the farm
    bill. AMS was also directed to transfer all funds in excess of the
    amount identified (after the required transfer to Commerce) to FNS.
        Specialty Crop Purchases: The 2002 Farm Bill established a
    requirement to purchase at least $200 million in fruits and vegetables,
    including at least $50 million in fresh fruits and vegetables. These
    purchases were incorporated into entitlement purchases for the National
    School Lunch Program. The 2008 Farm Bill established a requirement to
    purchase additional fruits, vegetables, and nuts (specialty crops) each
    year beginning in 2008 at $190 million and increasing gradually to $206
    million in 2012 and thereafter. These additional commodities are
    distributed through any of USDA's domestic food assistance programs.
        Fresh Fruit and Vegetable Program: The 2008 Farm Bill also required
    the use of Section 32 funds for the Fresh Fruit and Vegetable Program.
    Under this program, FNS distributes funds to schools to purchase fresh
    produce.
    4. Purpose/Goals
        The purpose is principally to alleviate surplus supplies of
    commodities by diverting them from normal channels of trade and
    commerce and increasing utilization by low income groups. Most of the
    funds retained by AMS to carry out Section 32 are used to purchase non-
    price supported commodities to meet entitlement needs of the child
    nutrition programs; to purchase additional fruits, vegetables, and nuts
    for use in domestic nutrition assistance programs; and to relieve
    market surpluses to support agricultural producers. All commodities
    purchased under Section 32 are distributed by FNS through USDA's
    domestic food assistance programs.
        Child Nutrition Entitlement Purchases: AMS purchases non-price
    supported commodities to help meet the requirements of USDA child
    nutrition programs.
        Surplus Commodities: AMS purchases non-price supported commodities
    under Section 32 authority based on economic analysis of production
    costs and market supply. Demand for this support fluctuates with market
    conditions.
        Disaster Relief: In the event of Presidentially-declared disasters,
    Section 32 funds may be used to provide commodities or replace
    entitlement commodities.
    5. Success in Meeting Programmatic Purpose/Goals
        AMS has successfully met all Section 32 requirements, including
    specialty crop purchases mandated by the 2002 and 2008 Farm Bills.

                                                6. Annual Budget Authority (FY 2002-2011) (dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                    FY 2011
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010      Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Budget Authority:
      Section 32 Total Budget             995,714  1,460,006   1,287,849   1,180,858   1,523,470   1,463,888   1,095,069     963,530   1,098,000   1,065,000
       Authority
    Specialty Crop Requirements:
      2002 Farm Bill Specialty Crop       200,000    200,000     200,000     200,000     200,000     200,000     200,000     200,000     200,000     200,000
       minimum
      2008 Farm Bill Specialty Crop                                                                              190,000     193,000     199,000     203,000
       minimum
                                       ---------------------------------------------------------------------------------------------------------------------
        Total Specialty Crop              200,000    200,000     200,000     200,000     200,000     200,000     390,000     393,000     399,000     403,000
         requirement
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                     7. Annual Outlays (FY 2002-2011) (dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                    FY 2011
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010      Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Outlays:
      Specialty Crops                     239,874    279,675     304,712     233,557     246,115     232,391     390,292     472,780     511,128     411,600
      Other                               675,671    999,237     565,847     618,185   1,079,244     467,161     349,399     475,545     575,065     653,400
                                       ---------------------------------------------------------------------------------------------------------------------
        Section 32 Total Outlays          915,545  1,278,912     870,559     851,742   1,325,359     699,552     739,691     948,325   1,086,193   1,065,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Section 32 program obligations are outlayed entirely in the current year. Reconciliation upon contract delivery can result in prior year recoveries
      which impact total outlays in this account.

                                                   8. Annual Delivery Cost (FY 2002-FY 2011) ($ in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                    FY 2011
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010      Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Annual Delivery Cost:
      Commodity Purchases Service a         6,906     11,199      10,266      10,848      28,866      31,146      32,595      31,092      22,276      27,110
      FTE's                                    43         45          38          39          45          47          51          49          54          50
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    a Beginning in FY 2006, costs for WBSCM, a USDA procurement system, are included.

    9. Eligibility Criteria
        AMS purchases commodities under authority of Section 32 and on
    behalf of FNS to meet other entitlement needs. The qualification
    requirements requested as part of the application package for a
    prospective contractor (commodity vendor) are a reexamination and
    revalidation of established qualification requirements as required by
    the Federal Acquisition Regulations (FAR) Part 9 and are necessary for
    AMS to carry out its procurement mission. A prospective vendor must be
    determined to be qualified by the Contracting Officer prior to
    submitting offers under an AMS solicitation. There are 142 vendors
    selling product to USDA. This includes Small, Small Disadvantaged,
    8(a), HUBZone, Service-Disabled Veteran-Owned, and Women-Owned
    Businesses.
    10. Utilization (Participation) Data
        Commodities purchased with Section 32 funding are delivered to
    recipients through FNS' domestic assistance programs, including the
    National School Lunch Program, the Emergency Food Assistance Program,
    the Food Distribution Program on Indian Reservations, the Commodity
    Supplemental Food Program, and the Nutrition Services Incentive
    Program.
    11. Duplication or Overlap with Other Programs
        AMS closely coordinates with FNS and FSA to avoid overlap or
    duplication.
    12. Waste, Fraud, and Abuse
        No reports or findings of waste, fraud or abuse have occurred or
    been published.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        APHIS Plant Protection and Quarantine Program (PPQ)--Specialty Crop
    Pest and Disease Programs (General).
    2. Subprograms/Department Initiatives
        European Grapevine Moth (EGVM), Light Brown Apple Moth (LBAM),
    Fruit Fly Exclusion and Detection Programs (FFED), Phytophthora
    ramorum, Citrus Health Response Program (CHRP), Pale Cyst Nematode
    (PCN), Golden Nematode (GN), Plum Pox Virus (PPV) and Glassy-winged
    Sharpshooter (GWSS). Please Note: All of the programs listed above,
    except for EGVM, were funded through the annual appropriations process
    or access to emergency funding (Commodity Credit Corporation or Section
    32) and not through the farm bill.

        3. Brief History

        APHIS' Plant Protection and Quarantine (PPQ) has been safeguarding
    agriculture and natural resources from the risks associated with the
    entry, establishment, or spread of animal and plant pests and noxious
    weeds to ensure an abundant, high-quality, and varied food supply for
    more than 30 years.
    4. Purpose/Goals
        APHIS-PPQ safeguards agriculture and natural resources--including
    specialty crops--from the risks associated with the entry,
    establishment, or spread of animal and plant pests and noxious weeds.
    Fulfillment of its safeguarding role ensures an abundant, high-quality,
    and varied food supply, strengthens the marketability of U.S.
    agriculture in domestic and international commerce, and contributes to
    the preservation of the global environment.
    5. Success in Meeting Programmatic Purpose/Goals

        European Grapevine Moth (EGVM)

        APHIS is working closely with affected counties, industry, the
    University of California, and other stakeholders to control EGVM which
    is a significant pest of grapes and other specialty crops that is
    threatening California's $3 billion wine/grape and stone fruit
    industry. In 2010 the program was successful in mitigating all grape
    export crop losses experienced in 2009 due to EGVM. Populations have
    been significantly reduced in 2011 as compared to 2010; however,
    several new detections in 2011 have resulted in the addition of new and
    expanded quarantine areas.

        Light Brown Apple Moth (LBAM)

        The LBAM program focuses on the suppression and management of the
    moth therefore reducing its impact on agriculture production and trade
    of several specialty crops located in California. The program has
    successfully maintained millions of dollars worth of specialty crop
    exports to Mexico and Canada due to regulatory requirements that assure
    our trade partners of pest free commodities.

        Fruit Fly Exclusion and Detection Programs (FFED)

        The FFED program protects the health and value of American
    agricultural resources threatened by the establishment of exotic fruit
    fly populations through (1) detection, exclusion, and emergency
    response activities in the United States; (2) prevention of the spread
    of Mediterranean fruit flies north of Chiapas, Mexico and eventually
    the United States; and (3) eradication of the Mexican fruit fly in the
    Lower Rio Grande Valley in Texas, Florida, and California. The market
    value of exotic fruit fly host commodities protected by FFED activities
    totaled about $6.5 billion in the United States in 2007, with
    approximately $5.65 billion of that grown in California and $612
    million in Florida.

        Phytophthora ramorum (Sudden Oak Death)

        The goal of the Sudden Oak Death Program is to prevent long-
    distance human assisted spread of Phytophthora ramorum in nursery stock
    and other commodities and preventing the establishment of Sudden Oak
    Death beyond its current range. Program certification of nursery stock
    has reduced Phytophthora ramorum in the nursery trade by 97 percent
    (140 detections in 2004 to less than four in 2010), thereby
    safeguarding the domestic and international trade in nursery stock, as
    well protecting the forest products industry.

        Citrus Health Response Program (CHRP)

        APHIS established the Citrus Health Response Program (CHRP) to
    sustain the citrus industry in the United States, to maintain growers'
    continued access to export markets, and to safeguard citrus growing
    states against a variety of citrus diseases and pests. The CHRP works
    closely with regulatory officials in citrus-producing states, industry
    stakeholders, university scientists, and other Federal agencies to
    provide focus to citrus health research, provide domestic citrus
    industries with production guidelines and best practices for fruit and
    nursery stock production, and identify/implement appropriate survey,
    diagnostic, and mitigation measures to reduce spread of citrus pests/
    diseases. The implementation of the CHRP program has allowed APHIS and
    stakeholders to facilitate safe movement of host plants, interstate
    commerce, and international trade. During the 2007-08 citrus shipping
    seasons, 17.6 million bushel cartons of fresh citrus fruit moved to
    non-citrus states, while 14.7 million bushel cartons were exported
    outside the United States. Citrus pests threaten just over 1 million
    commercial acres (137 million trees) with an annual production value
    for citrus fruit of $2.88 billion (packinghouse door equivalent--2010
    NASS Citrus Fruits Summary) not taking into account backyard citrus
    trees that also are affected.

        Pale Cyst Nematode (PCN)

        The goal of the PCN program is to detect and eradicate cyst
    nematodes that cause significant damages along with impact the export
    of U.S. potatoes from Idaho. The PCN program protects potato farmers
    and farmland in 36 producing states--1 million acres growing 43 billion
    pounds worth over $3 billion ($753 million in Idaho) and export markets
    of $1 billion in potatoes and related products.

        Golden Nematode (GN)

        The goal of the GN program is to detect and control the movement
    cyst nematodes that cause significant damage and impact the export of
    U.S. potatoes from New York. The GN program protects potato farmers and
    farmland in 36 producing states--1 million acres growing 43 billion
    pounds worth more than $3 billion. APHIS has effectively removed areas
    quarantined for GN in areas of New York through a cooperative effort
    with growers to perform treatments and restrict the movement of
    potentially infested machinery and growing media.

        Plum Pox Virus (PPV)

        The program's goal is to eradicate PPV which is a damaging disease
    of stone fruit. APHIS, in coordination with the state and growers of
    Pennsylvania, successfully eradicated PPV from the state in late 2009.
    PPV is now located only in New York. APHIS is working with New York
    state and growers to survey and place regulatory controls in place that
    will stop the spread and lead to eradication. The U.S. stone fruit
    industry is valued at an estimated $1.4 billion. PPV is considered one
    of the most economically serious virus diseases of stone fruit
    worldwide. Many varieties of peach, plum, apricot and nectarine produce
    unmarketable fruit or prematurely lose their crop when infected with
    PPV. Commercial stone fruit is the primary host of economic importance
    but a number of alternate hosts have been reported including ornamental
    Prunus and some herbaceous weeds and garden plants.

        Glassy-winged Sharpshooter (GWSS)

        The highly cooperative GWSS Program has successfully prevented
    spread of the pest to valuable wine-growing regions of California, and
    the program's rapid response methods have been very successful in
    eliminating outlier outbreaks. Due to program control and regulatory
    activities preventing further spread, the nearly 800,000 acres of grape
    production in California is maintained in spite of the GWSS being
    established in 10 of 58 counties. With GWSS present, the vine killing
    Pierce's disease threatens California's wine grape, table grape and
    raisin grape industries, valued at approximately $3 billion, and with
    annual economic impacts of more than $61 billion to California's
    economy, and more than $120 billion to the U.S. economy.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                                          Commodity Credit
       Fiscal Year        Appropriated       Corporation       Section 32
                             Funds              Funds
    ------------------------------------------------------------------------
                              (Dollars in thousands)
    ------------------------------------------------------------------------
              2002            $59,631            $45,953
              2003           $108,430            $59,531
              2004           $121,686            $47,298
              2005           $127,704           $122,094
              2006           $129,500            $14,433          $400,000
              2007           $129,921            $22,827          $100,000
              2008           $137,841            $69,539
              2009           $140,360                 $0
              2010           $150,380                 $0
              2011           $150,078            $16,922
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
           Fiscal Year              Obligations               Outlays
    ------------------------------------------------------------------------
                                          (Dollars in thousands)
    ------------------------------------------------------------------------
                              Appropriated Funding
    ------------------------------------------------------------------------
                 2002                   $64,295                 $53,155
                 2003                  $107,276                 $88,268
                 2004                  $119,714                $122,906
                 2005                  $134,785                $128,384
                 2006                  $127,731                $108,424
                 2007                  $130,141                $126,561
                 2008                  $141,526                $125,647
                 2009                  $154,423                $141,505
                 2010                  $172,048                $165,761
                 2011           (est.) $146,221         (est.) $124,288
    ------------------------------------------------------------------------
                          Commodity Credit Corporation
    ------------------------------------------------------------------------
                 2002                   $86,259                 $58,082
                 2003                   $48,292                 $50,794
                 2004                   $46,023                 $32,706
                 2005                  $105,827                 $49,647
                 2006                   $17,406                 $52,724
                 2007                   $29,403                 $21,112
                 2008                   $53,044                 $49,657
                 2009                    $5,903                 $11,161
                 2010                   $22,207                 $30,317
                 2011             (est.) $5,615           (est.) $5,053
    ------------------------------------------------------------------------
                                   Section 32
    ------------------------------------------------------------------------
                 2006                  $376,731                $376,731
                 2007                  $107,105                $105,970
                 2008                      $237                    $238
    ------------------------------------------------------------------------

        APHIS has authority to utilize three different sources of funding.
    Annual appropriations acts provide appropriations funding as well as
    access to Commodity Credit Corporation funding. Section 32 funding
    authority, under the Agricultural Marketing Service, was established by
    Congress to restore farmers' purchasing power in times of natural
    disaster, either through direct payments to farmers or through the
    Federal Government's purchase of surplus agricultural commodities.
    APHIS used this authority to make payments to commercial citrus
    producers who were negatively affected by the spread of citrus canker
    that resulted from a series of hurricanes that hit Florida in 2004 and
    2005.
        Many of the programs included in the Specialty Crop Pests group
    have no-year budget authority. In some years, obligations and outlays
    may exceed the new budget authority for the year due to carryover
    availability. These programs are cooperative efforts with state, local,
    and industry partners; APHIS provides funding to these entities through
    cooperative agreements to conduct a portion of the program activities.
    Program partners usually have one year from the date the agreement was
    signed to spend the funds. For this reason (and depending on the timing
    of the agreement), outlays of obligated funds may occur in the next
    budget year.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                Annual Delivery Cost by Department Strategic Goals (Rev.)
                                            (On basis of appropriated funds)
                                                 (dollars in thousands)

        Strategic Goal 4--Ensure that all of America's children have access to safe, nutritious, and balanced meals.

                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011         FY 2012

    Program
            Program
           Items--Di
           scretiona
               ry

    Fruit Fly
     Exclusion and
     Detection

          Indirect             4,778           4,824           4,986           5,034           5,024           4,794
           Costs
          Program              5,972           6,030           6,232           6,292           6,279           5,992
           Operation
           al Costs
          FTEs                   479             553             453             529             443             455
                     -----------------------------------------------------------------------------------------------
    Plum Pox

          Indirect               176             175             176             176             176             170
           Costs
          Program                220             218             220             221             220             212
           Operation
           al Costs
          FTEs                     5               5               5               5               5               5
                     -----------------------------------------------------------------------------------------------
    Golden Nematode

          Indirect                65              64              65              66              66              66
           Costs
          Program                 81              80              82              83              83              83
           Operation
           al Costs
          FTEs                     7               7               7               7               7               7
                     -----------------------------------------------------------------------------------------------
    Citrus Health
     Response
     Program

          Indirect             2,916           2,825           2,831           3,572           3,565           3,572
           Costs
          Program              3,646           3,531           3,539           4,466           4,457           4,466
           Operation
           al Costs
          FTEs                   125             125             125             125             125             125
                     -----------------------------------------------------------------------------------------------
    Glassy-winged
     Sharpshooter

          Indirect             1,930           1,841           1,836           1,839           1,835           1,622
           Costs
          Program              2,413           2,301           2,295           2,298           2,294           2,028
           Operation
           al Costs
          FTEs                    16              16              16              16              16              16
                     -----------------------------------------------------------------------------------------------
    Phytophthora
     ramorum/Sudden
     Oak Death

          Indirect               245             423             424             428             427             406
           Costs
          Program                306             529             531             535             534             507
           Operation
           al Costs
          FTEs                    19              19              19              19              19              19
                     -----------------------------------------------------------------------------------------------
    Light Brown
     Apple Moth

          Indirect                 0              79              80              81              80             881
           Costs
          Program                  0              99             100             101             101           1,101
           Operation
           al Costs
          FTEs                     0               0               5               5               5               5
                     -----------------------------------------------------------------------------------------------
    Pale Cyst
     Nematode

          Indirect                 0             763             664             666             665             497
           Costs
          Program                  0             953             829             833             831             622
           Operation
           al Costs
          FTEs                     0              15              15              15              15              15
                     -----------------------------------------------------------------------------------------------
    Critical
     Invasive Pest
     Response/
     Miscellaneous
     Pests

          Indirect               284              34             167             168             168             168
           Costs
          Program                355              42             209             210             210             210
           Operation
           al Costs
          FTEs                    11               4               8               8               8               8

    9. Eligibility Criteria
        Not applicable.
    10. Utilization (Participation) Data

        European Grapevine Moth (EGVM)

        APHIS is working closely with affected counties, industry, the
    University of California, and other stakeholders to control EGVM which
    is a significant pest of grapes and other specialty crops that is
    threatening California's $2.7 billion wine/grape and stone fruit
    industry. Initial treatment efforts reduced the detections of moths in
    affected areas from 66,000 in April 2010 to just 20 moths in August
    2010.

        Light Brown Apple Moth (LBAM)

        The LBAM program works with the state and growers of several
    specialty crops located in California. The program has successfully
    maintained millions of dollars worth specialty crop exports to Mexico
    and Canada due to regulatory requirements that assure our trade
    partners of pest free commodities. The LBAM program did not receive
    funding from the FY 2011 Farm Bill. This program measures performance
    by tracking LBAM spread beyond the generally infested area. In FY 2010,
    the program found three isolated populations, compared to five in FY
    2009.

        Fruit Fly Exclusion and Detection Programs (FFED)

        The FFED program protects the health and value of American
    agricultural resources through working with Florida, California,
    Arizona, and Texas to assure citrus crops are protected from these
    pests. In FY 2010, APHIS' long-term performance measure for the number
    of exotic fruit flies outbreaks in the United States had a target of
    two severe outbreaks per year. A severe outbreak is one that spreads
    beyond its initial area. The program experienced three of these
    outbreaks in FY 2010, but will have them eradicated by October 2011.

        Phytophthora ramorum (Sudden Oak Death)

        The goal of sudden oak death program is to prevent long-distance
    human assisted spread of Phytophthora ramorum in nurserystock through
    working with states that are affected such as California, Washington,
    and Oregon along with states who might receive potentially infested
    nursery stock. APHIS works with officials in the three states to
    establish quarantines and require nursery inspections before host
    plants may be shipped interstate. In FY 2010, the program worked with
    the nursery industry to reduce the presence of the disease in the
    nursery system. It detected 22 infested nurseries in California,
    Oregon, and Washington, helping to prevent the spread of the disease.
    APHIS is continuing to support the development, communication, and
    implementation of best management practices in nurseries to reduce the
    risk of P. ramorum introduction and establishment.

        Citrus Health Response Program (CHRP)

        APHIS works with the entire U.S. citrus industry sustain the citrus
    industry in the United States while managing pest and disease threats.
    APHIS works with the citrus mutuals, California, Texas, Arizona, and
    Florida to ensure safe citrus and maintain foreign trade markets.
    During the 2009-2010 shipping season, 12.4 million bushel cartons of
    fresh citrus fruit were exported to foreign markets and 17.9 million
    bushel cartons were shipped within the United States,

        Pale Cyst Nematode (PCN)

        The PCN program works with Idaho State and growers in the state to
    detect and eradicate cyst nematodes that cause significant damages
    along with impact the export of potatoes from Idaho. In FY 2010, the
    program achieved a 90 percent reduction in viable PCN populations as a
    result of eradication activities.

        Golden Nematode (GN)

        The GN program works with New York State and growers to detect and
    control the movement cyst nematodes that cause significant damages
    along with impact the export of U.S. potatoes from New York perform
    treatments and restrict the movement of potentially infested machinery
    and growing media. Surveys conducted through 2010 allowed from the
    release of 43,000 acres from regulation, while continuing to prevent
    the spread of the pest.

        Plum Pox Virus (PPV)

        The PPV program works with New York State and growers to assure
    market access for stone fruit is maintained and mitigate the spread to
    previously infested areas. In FY 2010, the program addressed outbreaks
    in New York and continued monitoring for the disease in Pennsylvania
    and Michigan, after declaring eradication in both states in 2009.

        Glassy-winged Sharpshooter (GWSS)

        The GWSS program works with specialty crop growers and state
    officials in California particularly the grape and wine industry to
    mitigate the damages and maintain foreign trade markets. This program
    has contained GWSS within ten California counties where it is
    established and conducted area-wide management programs in major
    citrus-producing areas to suppress the pest. These programs were highly
    successful at suppressing GWSS populations and maintaining citrus
    shipments out of the regulated areas. In FY 2010, six GWSS
    interceptions occurred on nursery shipments, with five egg masses, one
    nymph, and one adult found among the shipments. This data compares to
    23 interceptions in FY 2009 with 25 egg masses. These interceptions and
    egg mass finds prevent the GWSS establishment in non-infested areas,
    where mitigation efforts would be costly and time-consuming.
    11. Duplication or Overlap with Other Programs
        In instances when APHIS and another agency find it within their
    mission to address a particular pest, APHIS will meet with the other
    agency to determine the most effective combination of skills to address
    the pest. For instance, APHIS coordinates its Phytophthora ramorum with
    the Forest Service as the introduction of the disease into the National
    Forest system would be highly disruptive to the Forest Service mission.
    12. Waste, Fraud and Abuse
        USDA's Office of Inspector General recently published an audit,
    USDA Payments for 2005 Citrus Canker Tree Losses, March 2011, which
    raised concerns over payments through the Canker Lost Production
    Program and Citrus Canker Tree Replacement Program. APHIS is currently
    working with OIG to address the concerns raised in the report.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Farm Bill Section 10201, Plant Pest and Disease Management and
    Disaster Prevention.
    2. Subprograms/Department Initiatives
        Not applicable.
    3. Brief History
        The Plant Pest and Disease Management and Disaster Prevention
    Program was authorized in the 2008 Farm Bill and has been implemented
    by APHIS from 2009 through 2011. It is funded annually with Commodity
    Credit Corporation (CCC) funding. Funding was set at $12 million in FY
    2009, $45 million in FY 2010, and $50 million in FY 2011 and beyond.
    4. Purpose/Goals
        The purpose of the Pest and Disease Management and Disaster
    Prevention Program is for APHIS to partner with states, industry,
    universities, and other interested groups to prevent the entry of high-
    consequence plant pests, quickly detect those that may enter into the
    United States, and enhance our emergency response capabilities. The
    program provides strong protection to America's agricultural and
    environmental resources, and helps nursery and specialty crop growers
    flourish.
        Projects are organized around six goal areas: enhancing plant pest
    analysis and survey; targeting domestic inspection activities at
    vulnerable points in the safeguarding continuum; enhancing and
    strengthening threat identification and technology; safeguarding
    nursery production; enhancing mitigation capabilities; and conducting
    outreach and education about these issues.
    5. Success in Meeting Programmatic Purpose/Goals
        Over the last 2 years, Section 10201 projects have played a
    significant role in many USDA and partner successes to protect American
    agriculture and educate the public about the threat of invasive
    species. These successes include, among many others, the eradication of
    plum pox virus in Pennsylvania and a recent Mediterranean fruit fly
    outbreak in Florida, surveys for European grapevine moth in California,
    the 2010 national survey of honey bee pests and diseases, the
    monitoring of high-risk international and domestic pathways for
    invasive species, applied research to combat citrus pests, and the
    exploration of the feasibility of an audit-based certification system
    to prevent the movement of infested nursery stock.
        Selection was based on project alignment with Section 10201 goals,
    the expected impact of the project, and the technical approach. In
    addition, the reviewers considered how the suggestions would complement
    ongoing USDA programs and other Section 10201 projects. APHIS made a
    concerted effort to engage external stakeholders, such as the National
    Plant Board, Specialty Crops Farm Bill Alliance and USDA's National
    Institute of Food and Agriculture, Agricultural Research Service and
    U.S. Forest Service, in designing the evaluation criteria for the
    suggestions.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                                             Budget Authority (dollars in
                 Fiscal Year                          thousands)
    ------------------------------------------------------------------------
                                2009                              $12,000
                                2010                              $45,000
                                2011                              $50,000
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
           Fiscal Year              Obligations               Outlays
    ------------------------------------------------------------------------
                                          (dollars in thousands)
    ------------------------------------------------------------------------
                     2009                  $11,989                  $2,340
                     2010                  $44,881                 $11,267
                     2011           $50,000 (est.)          $15,000 (est.)
    ------------------------------------------------------------------------

        Most Section 10201 projects are carried out by APHIS' partners
    through cooperative agreements. Most cooperators have one year from the
    date the agreement is signed to spend the funds so the funds are not
    outlaid in full until the following fiscal year.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                Annual Delivery Cost by Department Strategic Goals (Rev.)
                                            (On basis of appropriated funds)
                                                 (dollars in thousands)

        Strategic Goal 4--Ensure that all of America's children have access to safe, nutritious, and balanced meals.

                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011         FY 2012

    Program
            Program
           Items--Ma
            ndatory

    Farm Bill:
     10201--Plant
     Pest & Disease
     Mgt. & Disaster
     Prevention

          Indirect               N/A             N/A             582           1,401           2,425           2,425
           Costs
          Program                N/A             N/A           2,947          11,099          12,575          12,575
           Operation
           al Costs
          FTEs                   N/A             N/A               1              37              37              37

    9. Eligibility Criteria

        A 10201 evaluation team made up of government and non-government, stakeholders, and scientific members evaluate the technical factors of the
     individual suggestions using the evaluation criteria described below. If a suggestion does not address a factor, it will be evaluated as ``Low.''
        Strengths, weaknesses, deficiencies, and reviewer questions will be documented for each suggestion. At the conclusion of the independent review
     period, the entire evaluation team will meet and discuss each technical evaluation factor and agree on a consensus rating for each suggestion.
        FY 2011 suggestions have been rated in the following areas:

        Criteria 1: Alignment with Section 10201 Goals:

        The suggestion should clearly identify the goal area to be addressed and explain how the project will further the goals of the farm bill.
     Suggestions should not list more than one of the six goal areas:

          1. Enhance plant pest analysis and survey.

        2. Target domestic inspection activities at vulnerable points in
            the safeguarding continuum.

        3. Enhance and strengthen threat identification and technology.

        4. Safeguard nursery production.

        5. Conduct outreach and education to increase public understanding,
            acceptance, and support of plant pest and disease eradication
            and control efforts.

        6. Enhance mitigation capabilities.

        Criteria 2: Impact:

        The suggestion should clearly address the potential benefits from
    the proposed activities or deliverables. Emphasis should be placed on
    projects that will affect high-risk states/areas, address pests of
    regulatory significance, and/or benefits specialty crop producers and
    minority or underserved communities.

        Criteria 3: Technical approach:

        The suggestion should discuss the technical approach to be
    employed, including a description of methodology and a summary of the
    various tasks to be undertaken. The suggestion should also highlight
    the cooperators (states, universities, and others) that will be working
    together to complete the project and the role each will play.
    10. Utilization (Participation) Data
        In FY 2009, APHIS provided funding for 63 projects in 21 states.
        In FY 2010, APHIS provided funding for more than 270 projects.
        In FY 2011, APHIS is providing funding for more than 270 projects
    with over 100 cooperators in 50 states. Note: In FY 2011, Section 10201
    funding was not available until April, but APHIS is working diligently
    to finalize and implement the spending plan. As a result, we anticipate
    that participant numbers may change.
    11. Duplication or Overlap with Other Programs
        APHIS' Pest Detection program is funded through an annual budget
    appropriation. It supports APHIS' goal of safeguarding U.S.
    agricultural and environmental resources by ensuring that new
    introductions of harmful plant pests and diseases are detected as soon
    as possible, before they cause significant damage. These efforts engage
    the scientific community, government entities, states, tribes,
    universities, the public, nonprofit entities, and industry. The
    Cooperative Agricultural Pest Survey (CAPS) program is the principle
    means of providing funds to all states and other cooperators to survey
    for pests that are not known to be in the U.S., as well as some that
    are of limited distribution and of regulatory concern. Pest-free
    regions are identified that allow the continued export of commodities
    from particular areas of the country.
        Farm Bill Section 10201 complements the Pest Detection program and
    expands upon it by specifically providing funds and technical
    assistance to specialty crop growers, organizations representing
    specialty crop growers, and state and local agencies working with
    specialty crop growers and organizations for the development and
    implementation of audit-based certification systems and nursery plant
    pest risk management systems, in collaboration with the nursery
    industry, research institutions, and other entities to address plant
    pests. This Section also provides funds for a threat identification and
    mitigation program to determine and address threats to the domestic
    production of crops. Risk assessments are being prepared of the
    potential threat to the agricultural industry of the United States from
    foreign sources, in collaboration with the National Plant Board, and
    are implementing action plans for high consequence plant pests and
    diseases.
    12. Waste, Fraud and Abuse
        The program is fairly young as it was created in the 2008 Farm
    Bill. Auditing agencies, such as the Office of the Inspector General or
    the Government Accountability Office, have not conducted audits to
    date. The program is not aware of any instances of waste, fraud, or
    abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Farm Bill Section 10202, National Clean Plant Network (NCPN).
    2. Subprograms/Department Initiatives
        The National Clean Plant Network is coordinated jointly by three
    USDA Agencies: the Animal and Plant Health Inspection Service (APHIS)
    (quarantine programs), Agricultural Research Service (research
    activities), and National Institute of Food and Agriculture (outreach
    initiatives). In March 2009, the three USDA Agencies signed a
    Memorandum of Understanding laying the foundation for the NCPN at the
    national level and providing direction and guidance for newly forming
    NCPN specialty crop networks.
    3. Brief History
        The National Clean Plant Network was first provided dedicated
    funding in the 2008 Farm Bill. The farm bill provides NCPN with $5
    million each year (FY 2009-2012) for a total of $20 million over 4
    years. The NCPN currently funds 18 clean plant centers in 14 states
    focusing on supporting existing state infrastructures. In FY 2010/2011,
    five specialty crops were covered including fruit trees, grapes,
    citrus, berries, and hops. Several new crops are under consideration
    for the program including potatoes, sweet potatoes, olives, garlic,
    roses, and other ornamentals.
    4. Purpose/Goals
        NCPN is a collaborative venture, composed of diagnostic,
    therapeutic and horticultural expertise. NCPN's goal is to ensure the
    availability of high quality propagated plant material that is free of
    plant pests, helping to ensure the global competitiveness of specialty
    crop producers. The NCPN promotes pest- and disease-free specialty
    crops, the rapid and safe introduction of new varieties from foreign
    sources, and hygienic U.S. products for export.
    5. Success in Meeting Programmatic Purpose/Goals
        Over the past 2 years, the NCPN has built national, regional and
    crop-specific NCPN governing bodies composed of governmental,
    University, and industry representatives nationwide. Due to this
    initiative Clean Plant Centers were revitalized and foundation
    plantings of clean nursery stock expanded. The NCPN is currently
    supporting Clean Plant Network Centers for five specialty crops in
    multiple states including:

       Fruit Tree (Pomes and Stone Fruits): California, South
            Carolina, and Washington.

       Grape: California, Florida, Missouri, New York, and
            Washington.

       Citrus: Alabama, Arizona, California, Florida, Louisiana,
            and Texas.

       Berries (Strawberries, Blueberries, Cranberries, and Cane
            Fruit): Arkansas, North Carolina, and Oregon.

       Hops: centered out of Washington State.

        Due to the efforts of these centers, clean plants were provided to
    nurseries and growers to ensure planting sustainability and
    productivity, and quality of products. In 2009, the initial year of
    funding alone, 161 clean plant accessions consisting of fruit tree and
    grape varieties were released. NCPN continues to contribute to the
    economy by working with U.S. specialty crop producers to generate
    desirable planting stock, increase yields of healthy, high quality
    crops, and encourage competitive standards for domestic and
    international trade.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                                             Budget Authority (dollars in
                 Fiscal Year                          thousands)
    ------------------------------------------------------------------------
                                2009                               $5,000
                                2010                               $5,000
                                2011                               $5,000
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
           Fiscal Year              Obligations               Outlays
    ------------------------------------------------------------------------
                                          (dollars in thousands)
    ------------------------------------------------------------------------
                     2009                   $3,334                    $252
                     2010                   $6,271                  $2,281
                     2011            $5,300 (est.)           $3,000 (est.)
    ------------------------------------------------------------------------

        The Farm Bill of 2008, Section 10202 provides that NCPN funding is
    --available until expended' (no-year) since it is understood that a
    certain `ramp-up' was anticipated for this program in its early years.
    Additionally, the program uses a cooperative agreements process with
    time built into the calendar for applicants to receive feedback from
    APHIS to enhance their proposals. The program announces recipients and
    signs the agreements near the end of the fiscal year, resulting in
    outlays that lag behind obligations.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                Annual Delivery Cost by Department Strategic Goals (Rev.)
                                            (On basis of appropriated funds)
                                                 (dollars in thousands)

        Strategic Goal 4--Ensure that all of America's children have access to safe, nutritious, and balanced meals.

                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011         FY 2012

    Program
            Program
           Items--Ma
            ndatory

    Farm Bill:
     10202--National
     Clean Plant
     Network

          Indirect               N/A             N/A           242.5             243             243             243
           Costs
          Program                N/A             N/A             258             508             508             508
           Operation
           al Costs
          FTEs                   N/A             N/A               1               2               2               2

    9. Eligibility Criteria
        Parties eligible to receive NCPN program funding include Land-Grant
    Universities, Non Land-Grant Colleges of Agriculture, State
    Agricultural Experiment Stations, State Governments, and Federal
    Agencies.
        The following criteria are also considered when providing program
    support:

       Target Crops: Specialty crops, especially those considered
            highly restricted due to pest pressures

       Clean Plant Centers or Programs: Extant to the extent
            practicable

       Core Mission: Diagnostics, therapeutics, foundation
            plantings

       Secondary Mission: Networking and education/outreach

       Performance Goals: Industry focus and consultation
    10. Utilization (Participation) Data
        In FY 2011, NCPN will be focusing its efforts on five specialty
    crop groups (fruit trees, grapes, berries, citrus, and hops)
    represented by 18 supported clean plant centers or associated programs
    located in 14 states. Additionally, the NCPN national stakeholder
    database has about 500 persons enrolled as expressing specific interest
    in the program. This includes nursery and grower industries,
    scientists, state regulatory officials, and educators.
    11. Duplication or Overlap with Other Programs
        We are not aware of any other program with a sufficiently similar
    mission.
    12. Waste, Fraud and Abuse
        The program is fairly young as it was created in the 2008 Farm
    Bill. Auditing agencies, such as the Office of the Inspector General or
    the Government Accountability Office, have not conducted audits to
    date. The program is not aware of any instances of waste, fraud, or
    abuse.
    13. Effect of Administrative PAYGO
        None.

                           AGRICULTURAL PROGRAM AUDIT

           (EXAMINATION OF FOREIGN AGRICULTURE AND FOOD AID PROGRAMS)

                                  ----------

                            WEDNESDAY, JULY 13, 2011

            Subcommittee on Rural Development,
          Research, Biotechnology, and Foreign
                                   Agriculture,
                      Committee on Agriculture,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:06 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. Timothy
    V. Johnson [Chairman of the Subcommittee] presiding.
        Members present: Representatives Johnson, Stutzman, Scott,
    Hultgren, Hartzler, Schilling, Costa, Cuellar, Sewell, Kissell,
    and McGovern.
        Staff present: Mike Dunlap, Tamara Hinton, John Porter,
    Debbie Smith, Suzanne Watson, Andy Baker, Liz Friedlander, John
    Konya, and Jamie Mitchell.

    OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE
                       IN CONGRESS FROM ILLINOIS

        The Chairman. This hearing of the Subcommittee on Rural
    Development, Research, Biotechnology, and Foreign Agriculture
    entitled, Agricultural Program Audit: Examination of Foreign
    Agriculture and Food Aid Programs, will now come to order.
        Good morning, and welcome to this hearing to examine our
    trade, food aid and agricultural development programs operated
    by USDA's Foreign Agricultural Service and the U.S. Agency for
    International Development. This hearing is part of a series of
    farm program audits to help us prepare for the next farm bill.
    When we are finished here, I hope that we will all have a
    better understanding of trade and food aid programs both
    individually and as part of the broader picture of foreign
    policy. Having detailed knowledge of these programs will help
    us make better policy decisions when the time comes.
        Today's hearing builds upon a discussion this Subcommittee
    had on April 7th of this year where we looked at five export
    programs in great detail. At that hearing, we reviewed how the
    programs are being implemented and how our ag policy has
    enabled the programs to expand our export of U.S. agricultural
    products.
        Along with learning more about our trade programs, we will
    hear testimony describing how our humanitarian assistance is
    meeting acute needs in the areas of crisis. As the largest
    donor of food aid in the world, the United States has been at
    the forefront of humanitarian assistance. Part of these efforts
    include agricultural developmental programs which provide
    technical assistance and training to help communities graduate
    from reliance on food aid.
        In our discussion this morning, we will take a close look
    at the administrative side of our programs, carefully reviewing
    the delivery costs and progress toward meeting the goals and
    objectives set by the Committee. One of the objectives we have
    to keep in mind for the next farm bill is reducing overall
    spending while maintaining an effective level of support for
    critical programs. In every corner of government, we are
    looking for opportunities to streamline processes, ensure
    Federal programs are delivered with maximum impact and with the
    least cost possible. It is incumbent on the agencies to
    effectively deliver each program in the most efficient manner
    possible. And it is the purview of this Committee to ensure
    that the agencies are fulfilling their responsibility. The
    current economic and fiscal environment adds urgency to this
    Committee's oversight responsibilities because it helps
    prioritize limited funds to address our most important needs.
        With us this morning, we have the operational leaders in
    the agencies in charge of implementing our trade, food and
    development programs. The two agencies represented here today
    have unique capabilities but must act in concert to achieve
    their objectives. We look forward to hearing how they are
    coordinating their efforts around the world. From the Foreign
    Agricultural Service, we are joined by Acting Administrator
    Suzanne Heinen, and with us from USAID is the Assistant
    Administrator for the Bureau for Democracy, Conflict and
    Humanitarian Assistance. We appreciate all the efforts the
    agencies have put into compiling a clear outline of how the
    programs are being implemented. I anticipate that the
    conversation this morning will be the beginning of a very frank
    discussion that will continue throughout the development of the
    next farm bill.
        Thank you both for being here and I look forward to your
    testimony.
        [The prepared statement of Mr. Johnson follows:]

      Prepared Statement of Hon. Timothy V. Johnson, a Representative in
                             Congress from Illinois
        Good morning, and welcome to this hearing to examine our trade,
    food aid, and agricultural development programs operated by USDA's
    Foreign Agricultural Service and the U.S. Agency for International
    Development.
        This hearing is part of a series of farm program audits to help us
    prepare for the next farm bill. When we are finished here, I hope that
    we will all have a better understanding of trade and food aid programs
    both individually and as part of the broader picture of farm policy.
    Having detailed knowledge of these programs will help us make better
    policy decisions when the time comes.
        Today's hearing builds upon a discussion this Subcommittee had on
    April 7th of this year, where we looked at five export promotion
    programs in great detail. In that hearing, we reviewed how the programs
    were being implemented, and how our agricultural industry has been able
    to utilize the programs to expand U.S. agricultural exports.
        Along with learning more about our trade programs, we will hear
    testimony describing how our humanitarian assistance is meeting acute
    needs in areas of crisis. As the largest donor of food aid in the
    world, the U.S. has been at the forefront of humanitarian assistance.
    Part of these efforts includes agricultural development programs which
    provide technical assistance and training to help communities graduate
    from a reliance on food aid.
        In our discussion this morning we will take a close look at the
    administrative side of our programs, carefully reviewing the delivery
    costs and progress towards meeting the goals and objectives set by this
    Committee.
        One of the objectives we must keep in mind for the next farm bill
    is reducing overall spending while maintaining an effective level of
    support for critical programs. In every corner of government we are
    looking for opportunities to streamline processes and ensure Federal
    programs are delivered with maximum impact and with the least cost
    possible. It is incumbent upon the agencies to effectively deliver each
    program in the most efficient manner possible. And it is the purview of
    this Committee to ensure the agencies are fulfilling this
    responsibility.
        The current economic and fiscal environment adds urgency to this
    Committee's oversight responsibilities because it helps prioritize
    limited funds to address our most important needs.
        With us this morning we have the operational leaders of the
    agencies in charge of implementing our trade, food aid, and development
    programs. The two agencies represented here today have unique
    capabilities, but must act in concert to achieve their objectives. We
    look forward to hearing how they are coordinating their efforts around
    the world.
        From the Foreign Agricultural Service we are joined by Acting
    Administrator Suzanne Heinen. With us from USAID is the Assistant
    Administrator for the Bureau for Democracy, Conflict and Humanitarian
    Assistance.
        We appreciate all of the effort the agencies have put into
    compiling a clear outline of how the programs are being implemented. I
    anticipate that the conversation this morning will be the beginning of
    a very frank discussion and will continue throughout the development of
    the next farm bill. I thank both of you for being here today, and look
    forward to your testimony.

        The Chairman. I would then recognize the Ranking Member,
    Mr. Costa, for whatever statement he would like to make.

       OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Costa. Thank you very much, Mr. Chairman. I think that
    our efforts this morning to focus on the rural development
    research, biotechnology and foreign agriculture assistance is
    key as we continue to focus on expanding our exports for
    agricultural trade as well as our efforts to deal with food aid
    and development in different parts of the world.
        This hearing, Chairman Johnson, I think is appropriate
    given the timing. The audit hearings are an important part of
    Members' ability in the Subcommittee to focus on the United
    States Department of Agriculture's programs that I think as any
    good subcommittee we need to provide a regular review on.
        Today, the programs that we are looking at, the Foreign
    Agricultural Service which develops export markets for U.S.
    agricultural products, is important. I think there are a number
    of reasons why this program, as I have seen it implemented in
    various parts of the world, is important. One, it connects
    America and ag producers and value-added ag businesses of all
    sizes and varieties to the world markets. I believe my
    colleagues here on the Subcommittee who come from various parts
    of the country feel similarly, that nobody does it better, to
    take a title of a song, than our American farmers, ranchers and
    dairymen in terms of the production of high-quality foods and
    fibers at very abundant levels and of the safest level for
    consumers.
        But it also helps open those markets for long term while
    working to expand new markets. It helps promote a free and fair
    global trading system. I support free trade as long as it is
    fair trade, that meaning a level playing field. Certainly in
    the global economy, it gives us better access to those markets.
    It also helps us to resolve non-tariff trade barriers,
    particularly when other countries are trying to use sanitary
    and phytosanitary standards. I believe this has been nothing
    more than leverage to try to foster trade in a direction that
    would be more favorable to them, and we all know numerous
    examples. In the specialty crops, we see that having occurred
    historically.
        The five market development programs under Title III of the
    farm bill, we will be discussing today, they have unique goals.
    I would like to hear the witnesses explain to us how we are
    reaching those goals and how well they complement each other.
    Obviously we all have different interests from the agricultural
    regions we represent in the country. Mine is fairly well known,
    the specialty crops in California, some 300, are so much of
    what we able to export, last year almost $38 billion a year at
    the farm gate in California, farm gate being the gross receipts
    to farmers, ranchers and dairymen.
        So we have a lot of issues that we are focusing on. We know
    we have tight budgets. We know the 2012 Farm Bill will be
    smaller in funding than the 2008 Farm Bill, and so whether it
    is with the FAS program or other related programs, we are going
    to have to figure out how we can be as cost-effective as we
    possibly can to ensure that we get the best bang for our buck.
        So as we look at that, as we look at examining food aid and
    development programs also administered by the Foreign
    Agricultural Service and USAID. A couple years ago I was in
    Sudan and Darfur. There are a lot of places around the world
    where America's best foot forward and our ambassadorial efforts
    is to provide that aid to those most in need. You know, it is
    estimated by the U.N. that over 700 million people every night
    go to bed hungry and we lose 10,000 children a week as a result
    of malnutrition. So the USAID program I think is really a good
    effort.
        In conclusion, for over 55 years the United States has
    provided food for emergency food relief to support
    international developments, and I think we need to talk about
    how we can build on that goodwill that we have been able to
    provide. I am also reminded when we look at the Federal Food
    Aid Assistance Program of one our Presidents, Ronald Reagan,
    who once said that, and I am paraphrasing, that you can give a
    person a fish to eat and they will be fed for the day, but if
    you teach them how to fish, and I think that analogy holds
    forward in the food assistance services efforts, then they can
    sustain themselves, and certainly that is a lot of what that
    program, in my view, is all about.
        So I thank you. We look forward to the testimony and the
    questions from this panel.
        The Chairman. Thank you, Mr. Costa.
        The chair would request that other Members submit their
    opening statements for the record so the witnesses can begin
    their testimony to ensure that there is adequate time for
    questions.
        We would then welcome our first and only panel of witnesses
    to the table. Our first witness is Ms. Suzanne Heinen, Acting
    Administrator, Foreign Agricultural Service, USDA, Washington.
    You may proceed.

      STATEMENT OF SUZANNE HEINEN, ACTING ADMINISTRATOR, FOREIGN
         AGRICULTURAL SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Ms. Heinen. Thank you, Mr. Chairman.
        Mr. Chairman, Members of the Subcommittee, I am very
    pleased to appear today before you to discuss the trade, food
    aid and capacity-building programs authorized by Congress and
    administered by USDA's Foreign Agricultural Service. As
    requested, my written testimony discusses the goals of each
    program, how the program funds are allocated and how the goals
    for each program are being met.
        FAS attaches around the globe, bolstered by cooperative
    public-private partnerships, have assisted U.S. farmers and
    ranchers in achieving record agricultural export sales and have
    increased food security for some of the poorest around the
    world. In Fiscal Year 2011, we expect U.S. agricultural exports
    to reach a record $137 billion and support over one million
    American jobs. We expect to feed more than 5.2 million hungry
    people and to build agricultural capacity in dozens of
    countries around the world. Over numerous farm bills, Congress
    has authorized and refined an effective combination of
    programs. Allow me to expand on how Congress, FAS and the U.S.
    agricultural community complement each other in delivering
    effective results.
        The largest market development program operated by FAS is
    MAP, the Market Access Program. MAP forms partnerships between
    nonprofit agricultural trade organizations, cooperatives,
    nonprofit State Regional Trade Groups and small businesses to
    share the costs of overseas marketing and promotional
    activities. The 2008 Farm Bill makes available $200 million for
    MAP in 2011. That amount is more than matched with industry
    contributions. FAS allocates MAP funds through a competitive
    process which allows applicants to request funding for various
    FAS programs through a single strategically coordinated
    proposal. This process allows for efficiencies in program
    delivery while taking full advantage of the complementary
    nature of the programs provided by Congress. In 2011, MAP
    resources are being used to expand markets for food grains,
    meat and poultry, seafood, dairy, horticultural products and
    processed products in markets in every corner of the globe.
        In addition to generic promotions, MAP has a brand
    promotion component that provides funding to over 600 small
    companies and agricultural cooperatives annually. For example,
    WildRoots, a small healthy snack food company with two
    production facilities in Illinois and one in Nebraska, matched
    MAP funds to market their products in Canada. Export sales rose
    from zero in 2008 to over $4 million in 2010. This company buys
    blueberries from Michigan, corn and soy products from Illinois,
    oats from Nebraska, cranberries from Massachusetts and almonds
    from California. According to WildRoots, ``without the branded
    program, we simply would never have been able to compete
    internationally. It has moved our business to a new level and
    has promoted U.S.-based agricultural products, creating jobs in
    an economy that desperately needs them.''
        The economic impact of the MAP and Foreign Market
    Development programs, our second-largest market development
    program, is striking. A recent cost-benefit analysis concluded
    that for every dollar invested by government and industry,
    exports increased by $35.
        One of our most compelling challenges in the world is
    eradicating chronic hunger and malnourishment. The food aid and
    development programs administered by USDA and USAID are making
    a difference in the lives of poor and hungry people. The
    McGovern-Dole school feeding program was established to carry
    out preschool and school food for education programs in foreign
    countries to improve food security, reduce the incidence of
    hunger and improve literacy and primary education, particularly
    for girls, while also providing maternal, infant and child
    nutrition programs for pregnant women, nursing mothers and
    infants. This year, McGovern-Dole will provide benefits in 15
    countries including Nepal, Haiti, Guatemala, Burkina Faso and
    Senegal. Since 2003, the program has supported projects in 41
    countries and fed up to five million schoolchildren each year.
    USDA and implementing organizations developed graduation plans
    and we have moved one program into full graduation in Moldova
    and we have progress towards graduation in Kenya, Laos and
    Guinea-Bissau.
        As Administrator of FAS, I am very proud of our efforts in
    administering the farm bill authorized programs. We look
    forward to providing any support we can as Congress works on
    the next farm bill.
        This concludes my statement, and I look forward to
    answering your questions.
        [The prepared statement of Ms. Heinen follows:]

      Prepared Statement of Suzanne Heinen, Acting Administrator, Foreign
     Agricultural Service, U.S. Department of Agriculture, Washington, D.C.
        Mr. Chairman, Members of the Subcommittee, I am pleased to appear
    before you today. I welcome the opportunity to discuss trade, food aid,
    and capacity building programs authorized by Congress and administered
    by the Foreign Agricultural Service (FAS) of the U.S. Department of
    Agriculture (USDA). As you requested, I am pleased to discuss the goals
    of each program, outline how the program funds are allocated, and
    describe how the goals for each program are being met. The efforts of
    FAS personnel around the globe, bolstered by cooperative public-private
    partnerships, have assisted U.S. farmers and ranchers in achieving
    record agricultural export sales and have increased food security for
    some of the poorest around the world. In Fiscal Year 2011, we expect
    U.S. agricultural exports to reach a new record of $137 billion, we
    expect to feed more than 5.2 million hungry people, and we expect to
    build agricultural capacity in dozens of countries around the world.
        We do much of our work in very close coordination with the U.S.
    Agency for International Development (USAID). USAID plays an important
    role in the countries in which we work.
    Linking U.S. Agriculture to the World
        FAS is USDA's lead agency for addressing the challenges and
    opportunities of the dynamic global marketplace by expanding foreign
    market access for U.S. products, building new markets, improving the
    competitive position of U.S. agriculture, and addressing food security
    and capacity building in foreign countries. FAS has the primary
    responsibility within USDA for international market development and
    export financing, trade agreements and negotiations, and the analysis
    and dissemination of vital international market intelligence and data
    to agricultural producers and exporters. FAS also administers food aid
    programs and mobilizes USDA's unique resources and expertise in
    agricultural development activities.
        FAS relies on its global network of agricultural economists, market
    development experts, negotiators and trade specialists in Washington,
    DC, and its approximately 100 international offices that cover 156
    countries. FAS' agricultural counselors and attaches serving at U.S.
    Embassies are our eyes and ears around the world, providing the
    agricultural expertise to identify and seize opportunities, by
    capturing real-time information on emerging trade and market
    development issues, and averting problems before they become trade
    barriers that impede U.S. exports.
    Complementary Market Development Efforts
        Over numerous farm bills, Congress has authorized and refined an
    effective combination of agricultural market development programs.
    These programs that are designed to develop markets, facilitate
    financing of overseas sales, and resolve market access barriers
    dovetail with the FAS mission. We must open, expand, and maintain
    access to foreign markets, where 95 percent of the world's consumers
    live. Participants from all corners of the U.S. agricultural community
    utilize FAS-administered trade programs to reach these consumers,
    complementing Administration efforts to open and maintain markets
    through trade negotiations, diplomacy, and enforcement of trade
    agreements.
    Market Access Program
        The largest market development program operated by FAS is the
    Market Access Program (MAP). The program originally known as the
    Targeted Export Assistance Program was first authorized by Congress in
    the 1985 Farm Bill. The 1996 Farm Bill renamed the program the MAP and
    established the current statutory prohibitions on the use of MAP funds
    to promote the products of large companies.
        MAP is a cost-share program that uses funds from USDA's Commodity
    Credit Corporation (CCC) to aid in the creation, expansion, and
    maintenance of foreign markets for U.S. agricultural products. MAP
    forms partnerships between nonprofit U.S. agricultural trade
    organizations, U.S. agricultural cooperatives, nonprofit State Regional
    Trade Groups, and small-sized U.S. commercial entities to share the
    costs of overseas marketing and promotional activities, such as
    consumer promotions, market research, and trade show participation. The
    2008 Farm Bill makes available $200 million of CCC funds for MAP in FY
    2011; that amount is matched with industry contributions. Applicants
    submit MAP proposals to USDA as part of a competitive Unified Export
    Strategy (UES) process, which allows applicants to request funding for
    various USDA foreign market development programs through a single,
    strategically coordinated proposal. One strength of the UES process is
    that utilizing the complementary nature of the various market
    development programs is emphasized.
        In addition to generic promotions, MAP has a brand promotion
    component that provides export promotion funding to over 600 small
    companies and agricultural cooperatives annually. To conduct branded
    product promotion activities, individual companies must provide at
    least 50 percent of funding. Most small companies and agricultural
    producer cooperatives access market development programming through one
    of the four State Regional Trade Groups (SRTGs)--Food Export
    Association of the Midwest USA, Food Export USA Northeast, Southern
    United States Trade Association, and Western United States Agricultural
    Trade Association. The SRTGs work closely with the State Departments of
    Agriculture in their respective regions to identify eligible company
    participants and export opportunities, and then bring the two together.
    In that effort, SRTGs provide small companies with export readiness
    training and organize trade missions, as well as branded programming
    opportunities to directly access MAP funds for individual company
    promotions and trade show participation.
        WildRoots, a small healthy snack food company, with two production
    facilities in Illinois and one in Nebraska, matched MAP branded funds
    to market their products in Canada. Export sales soared from zero in
    2008 to over $4 million in 2010. The company buys blueberries from
    Michigan, corn and soy products from Illinois, oats from Nebraska,
    cranberries from Massachusetts, and almonds from California. According
    to a WildRoots' cofounder, ``Without the branded program, we simply
    would never have been able to compete with Canadian producers. It has
    moved our business to a new level and has promoted U.S.-based
    agricultural products, creating jobs in an economy that desperately
    needs them.''
    Foreign Market Development Program
        The Foreign Market Development (Cooperator) Program (FMD) had its
    first participants (known as Cooperators) in 1954. FMD is currently
    authorized by Title VII of the Agricultural Trade Act of 1978, which
    directs the Secretary of Agriculture to ``establish and, in cooperation
    with eligible trade organizations, carry out a foreign market
    development cooperator program to maintain and develop foreign markets
    for United States agricultural commodities and products . . .'' Funding
    for FMD was most recently reauthorized by Congress in the 2008 Farm
    Bill.
        FMD is a cost-share program that aids in the creation, expansion,
    and maintenance of long-term export markets for U.S. agricultural
    products. The current farm bill makes available $34.5 million of CCC
    funds for FMD this year. The program fosters a market development
    partnership between USDA and U.S. agricultural producers and processors
    who are represented by nonprofit commodity or trade associations known
    as Cooperators. Under this partnership, USDA and each Cooperator pool
    their technical and financial resources to conduct overseas market
    development activities that are generic in nature. Activities must
    contribute to the maintenance or growth of demand for U.S. agricultural
    commodities and generally address long-term foreign import constraints
    and export growth opportunities. Programs focus on matters such as
    reducing infrastructural or historical market impediments, improving
    processing capabilities, modifying codes and standards, and identifying
    new markets or new applications or uses for the agricultural commodity
    or product in the foreign market. Twenty-one organizations representing
    a broad sample of U.S. agriculture, including peanuts, sunflower,
    soybeans, livestock genetics, dry beans, wheat, poultry, and rice,
    benefited from receiving a total of $34.15 million in Fiscal Year 2010
    through the FMD program.
        Through the FMD program, U.S. sunflower producers' activities in
    Spain are paying dividends. To increase awareness of confectionary
    sunflower seed and build demand in Spain, the National Sunflower
    Association (NSA) used FMD funding to create and implement an
    integrated and highly successful marketing program of trade
    advertisements, newsletters, trade shows, seminars, and trade missions.
    Through this work, U.S. sales to Spain reached nearly $270 million,
    making Spain the top market for U.S. confectionary sunflower seeds, and
    generating jobs in top sunflower producing states including Colorado,
    Kansas, Minnesota, North Dakota, Oklahoma, South Dakota, and Texas.
    Economic Impact of MAP and FMD Programs
        The economic impact of the MAP and FMD programs is striking. USDA's
    Foreign Agricultural Service commissioned a cost-benefit analysis in
    March 2010 that concluded the programs effectively leveraged private
    and public sector resources in a unique partnership to increase U.S.
    food and agricultural exports. The analysis concluded for the time
    period 2002 through 2009 that U.S. food and agricultural exports
    increased by $35 for every dollar invested by government and industry
    on market development. Additionally, U.S. agricultural exports in 2009
    were $6.1 billion higher than they would have been without the
    increased investment in market development. The study also found that
    an estimated 47 percent of the programs' total trade impact accrued to
    commodities not receiving market development assistance--a phenomenon
    known as the ``halo'' effect. In other words, non-promoted U.S.
    commodities benefited from increased promotion of other U.S.
    commodities in the same market.
    Emerging Markets Program
        The Emerging Markets Program (EMP) provides funding for technical
    assistance activities intended to promote exports of U.S. agricultural
    commodities and products to emerging markets in all geographic regions,
    consistent with U.S. foreign policy. The program is authorized by the
    Food, Agriculture, Conservation, and Trade Act of 1990, as amended,
    through the end of the current 2008 Farm Bill. Funding is set by
    Congress at $10 million each fiscal year from the Commodity Credit
    Corporation.
        EMP was specifically designed by Congress to improve market access
    and develop or promote exports of U.S. agricultural commodities and
    products to low and middle income emerging markets through cost-share
    assistance to eligible applicants for approved technical assistance
    activities. For this program, Congress defined an emerging market as
    any country that ``is taking steps toward a market-oriented economy
    through the food, agriculture, or rural business sectors of the economy
    of the country,'' and ``has the potential to provide a viable and
    significant market for United States agricultural commodities or
    products of United States agricultural commodities.'' EMP resources may
    be used to support exports of U.S. agricultural commodities and
    products only through generic activities, not specific brands. The EMP
    statute provides that the Secretary establish a private sector advisory
    committee to provide information and advice to USDA in developing
    strategies for providing technical assistance and enhancing markets for
    U.S. agricultural products in developing markets. More specifically,
    EMP Committee members review, from a non-governmental perspective,
    qualified proposals submitted for funding assistance. The Secretary of
    Agriculture appoints members to the Committee for 2 year terms. For
    Fiscal Year 2010, the EMP program supported 83 agricultural export
    promotion projects with funding totaling $8.3 million.
        In 2010, EMP assisted Wisconsin ginseng growers battle
    counterfeits. For more than a decade, the Ginseng Board of Wisconsin
    (GBW) has struggled with Chinese counterfeiters selling fake Wisconsin
    Ginseng. With 90 percent of its exports going to China, the GBW moved
    aggressively to regain control of its brand. Using EMP, GBW initiated
    research to develop a technique to detect trace elements of ginseng's
    valuable root to Wisconsin or where it was grown originally; initial
    findings are promising.
    Technical Assistance for Specialty Crops Program
        The Technical Assistance for Specialty Crops Program (TASC) was
    authorized by Congress in the Farm Security and Rural Investment Act of
    2002. The 2008 Farm Bill reauthorized the Technical Assistance for
    Specialty Crops (TASC) Program and provided mandatory Commodity Credit
    Corporation (CCC) funds for the program. In FY 2010 the program was
    funded at $8 million and for FY 2011 and FY 2012 program funding is set
    at $9 million. Congress authorized the TASC program to assist U.S.
    organizations by providing funding for specialty crops projects that
    address sanitary, phytosanitary and related technical barriers that
    prohibit or threaten the export of U.S. specialty crops. Using TASC,
    USDA has successfully helped U.S. exporters regain market access for
    millions of dollars of products from almonds to spinach. Examples of
    project activities include seminars and workshops, study tours, field
    surveys, pest and disease research, and pre-clearance programs. TASC
    proposals are accepted from U.S. nonprofit trade associations,
    universities, agricultural cooperatives, private companies, U.S.
    Government agencies and state government agencies. FAS, which
    administers the program, provides grant funds as direct assistance to
    U.S. organizations. Applicant contributions are not required, but are
    strongly encouraged.
        Last year, TASC was instrumental in assisting the U.S. potato
    exporters in overcoming a Thai phytosanitary protocol that was
    preventing U.S. exports from certain states. Following several months
    of negotiations between the Thailand Department of Agriculture and
    USDA, the U.S. Potato Board (USPB) used TASC to arrange for Thai
    officials to visit the U.S. and review U.S. seed certification
    procedures, seed cultivation practices and phytosanitary mitigation
    measures. Following this activity, Thailand agreed to additional market
    access that more than doubles--to fourteen--the number of states
    eligible to export seed potatoes to Thailand. Seed potatoes from
    Colorado, Maine, Michigan, Minnesota, Montana, Nebraska, New York,
    North Dakota, Wisconsin and Wyoming may now be exported to Thailand.
    FAS estimates sales of $250,000 to $500,000 during the first year of
    Thai market access, while the USPB estimates that expanded market
    access could boost exports to Thailand to $1 million in 3 to 5 years.
        Another example is U.S. hops exports to Canada. Canada buys more
    than $18 million in U.S. hops, which makes it the fifth largest export
    market for U.S. hops producers. In response to limited pesticide
    tolerances in Canada that potentially threatened trade, TASC funds
    supported U.S. hop industry efforts to work with regulators in Canada
    in establishing five new hops-related maximum residue levels in Canada
    for pesticides critical to U.S. hop production. The Canadian tolerances
    were set at safe levels that allow U.S. hop growers to apply essential
    U.S. crop protection tools that significantly reduce the risk of
    shipping hops to Canada. Given that over half of U.S. hop production is
    exported, the setting of pesticide tolerances in one of the industry's
    most crucial export markets has been vital for this industry.
    Export Credit Guarantee Program
        Starting in 1981, the Export Credit Guarantee Program (GSM-102) was
    originally administered under the Commodity Credit Corporation Charter
    Act. In the 1990 Farm Bill GSM-102 became specifically authorized
    under, and subject to the provisions of, the Agricultural Trade Act of
    1978, as amended. It has been continuously authorized since that time,
    but funding levels under the program were most recently authorized in
    the 2008 Farm Bill. The GSM-102 program was developed to expand U.S.
    agricultural exports by making available payment guarantees to
    encourage U.S. private sector financing of foreign purchases of U.S.
    agricultural commodities on credit terms. The payment guarantee issued
    under GSM-102 is an agreement by CCC to pay the exporter, or the U.S.
    financial institution that may take assignment of the payment
    guarantee, specified amounts of principal and interest in case of
    default by the foreign financial institution that issued the letter of
    credit for the export sale covered by the payment guarantee. By
    providing credit guarantees of up to 3 years to cover up to 100 percent
    of loan principal and a portion of the interest, the financial risk to
    U.S. lenders of foreign banks is greatly diminished. As Congress
    intended, the reduced risk in financing under GSM-102 increases export
    opportunities for U.S. exporters. This reduction in risk is most
    important for exports to developing countries, where the lack of credit
    often impedes a U.S. exporter's ability to sell and the buyer's ability
    to purchase U.S. agricultural commodities. GSM-102 is an effective
    response to the short windows of opportunity that U.S. agricultural
    exporters face when financing trade based on market-based prices and
    slim margins.
        Applicable law mandates that CCC make available for each fiscal
    year an amount of credit guarantees equal to the lesser of (a)
    $5,500,000 or (b) an amount of guarantees that CCC can make available
    using budget authority for an underlying subsidy amount of the sum of
    $40 million per year plus any unobligated budget authority from prior
    fiscal years. For the last 2 years, the program has operated at a
    ``negative subsidy,'' meaning that the cash flow into the program has
    exceeded the funds needed to provide for expected losses.
        From its inception in the early 1980's through June 2011, exports
    facilitated through the use of GSM-102 have reached a total of more
    than $100 billion. In FY 2010, guarantees covered $3.10 billion in
    sales that ran the gamut from corn to Costa Rica to soybeans to
    Indonesia and from wheat to Nigeria to wood chips to Turkey. During the
    financial crisis of 2008 and 2009, FAS received a record number of
    applications for GSM-102, attesting to the success of the program in
    facilitating trade finance in times of tightened liquidity. In FY 2011,
    USDA expects to make available the full farm bill-mandated allocation
    of $5.5 billion in GSM-102 guarantees. These guarantees will facilitate
    targeting by U.S. agricultural exporters of sales to over 100 eligible
    country destinations.
    Facility Guarantee Program
        Authorized by Congress under the Food, Agriculture, Conservation
    and Trade Act of 1990, the Facility Guarantee Program (FGP) was
    designed to meet the financing needs for the establishment or
    improvement of facilities in emerging markets that would benefit U.S.
    agricultural exporters. By providing credit guarantees, FGP is intended
    to reduce the financial risk to U.S. lenders of default by foreign
    banks serving as borrowers, thus improving the ultimate buyer's ability
    to acquire the agricultural-related infrastructure or services that
    will enhance U.S. export sales. Emerging markets often lack the
    infrastructure to support increased trade volume. Export sales of U.S.
    equipment or expertise to improve ports, loading and unloading
    capacity, refrigerated storage, warehouse and distribution systems, and
    other related facilities may qualify for facility guarantees, as long
    as these improvements are expected to increase opportunities for U.S.
    agricultural exports.
        From its inception, through June 2011, only one transaction has
    been guaranteed under FGP. Prior to the amendments to the statutory
    authority made in the 2008 Farm Bill, FGP required U.S. content on any
    goods guaranteed. The 2008 Farm Bill allows for a waiver of the U.S.
    content requirement, if such goods are unavailable or the use of such
    goods is impracticable. FAS is currently reviewing how to implement
    this provision. FGP operates as a subset of the GSM-102 Export Credit
    Guarantee Program and under that authority is subsumed within the same
    overall limitations on the amount of credit guarantees that CCC may
    make available.
    Dairy Export Incentive Program
        The Dairy Export Incentive Program (DEIP) was enacted by Congress
    under the Food Security Act of 1985 and most recently reauthorized in
    the 2008 Farm Bill. The program provides a bonus or subsidy on a bid
    basis to exporters of dairy products. By providing a subsidy on exports
    of dairy products, Congress intended the DEIP to bridge the gap between
    world market prices and U.S. domestic prices. Commodities eligible
    under the DEIP are milk powder, nonfat dry milk, butterfat, and various
    cheeses. The authorizing legislation for the DEIP provides that the
    subsidy may be paid in cash or in commodities held by the CCC. As CCC
    inventories diminished, the DEIP evolved into the sole use of cash
    payments for the subsidy. The DEIP is subject to U.S. export subsidy
    reduction commitments under the World Trade Organization's Uruguay
    Round Agreements, and is therefore capped by both subsidy level and
    quantity in accordance with those commitments.
        The DEIP has helped to meet the needs of U.S. exporters and
    expanding markets for U.S. dairy products when world prices are
    depressed due to the application of subsidies by other nations,
    particularly the European Union. Agricultural economists at FAS
    continuously monitor the world dairy situation and have the
    responsibility for recommending issuing allocations under the DEIP as
    world dairy prices dictate. Since 2002, world dairy prices have
    warranted issuing allocations under the DEIP five times. DEIP bonuses
    were last awarded in Fiscal Year 2010 in an amount of $2.37 million. In
    2010, the DEIP was used to facilitate U.S. dairy exports around the
    globe, including mozzarella cheese to China and butter to Saudi Arabia.
    International Food Assistance and Development
        One of the most significant and compelling challenges the world
    faces is eradicating chronic hunger and malnourishment. The food aid
    and development programs administered by USDA's Foreign Agricultural
    Service are making a difference in the lives of poor and hungry people.
    These programs support international assistance and development
    activities that alleviate hunger and improve nutrition, education, and
    agriculture in some of the world's poorest countries.
    McGovern-Dole Program
        The McGovern-Dole International Food for Education and Child
    Nutrition Program (McGovern-Dole Program) is authorized by the Farm
    Security and Rural Investment Act of 2002. Congress established the
    McGovern-Dole Program to carry out preschool and school food for
    education programs in foreign countries to improve food security,
    reduce the incidence of hunger, and improve literacy and primary
    education, particularly among girls; and maternal, infant, and child
    nutrition programs for pregnant women, nursing mothers, infants, and
    children who are 5 years of age or younger. Under this program, USDA
    donates U.S. agricultural products and provides financial and technical
    assistance for school feeding and maternal and child nutrition projects
    in low-income, food-deficit countries that are committed to universal
    education. The 2002 Farm Bill provided $100 million of CCC funds for
    the program and authorization of appropriations through 2007. This
    authorization of appropriations has been extended through FY 2012. In
    FY 2011, Congress appropriated $199.5 million for the program. In FY
    2011, the McGovern-Dole Program will provide benefits to beneficiaries
    in 15 countries, including, Nepal, Haiti, Guatemala, Burkina Faso, and
    Senegal.
        Since 2003, the McGovern-Dole Program has supported projects in 41
    countries and has fed up to five million schoolchildren each year. USDA
    enters into agreements with implementing organizations to carry out
    activities under the program. In progress reports, implementing
    organizations provide information about the number of children being
    fed, the increases in attendance, and other benefits that lead to
    improved literacy, better diet, and graduation of the programs.
    Organizations frequently report gains in attendance of ten percent or
    more in participating schools. USDA and the implementing organizations
    develop graduation plans to ensure that progress is being made toward
    the goal of having a local entity assume responsibility for the
    program. The McGovern-Dole Program graduated a school feeding project
    in Moldova, and the Government of Moldova has continued much of the
    program since the U.S. funding ended. School feeding programs in Kenya,
    Laos, and Guinea-Bissau are nearing full graduation.
        USDA is implementing improvements in program management that will
    allow for more intensive monitoring of results. In FY 2011, USDA
    released a results framework for implementing organizations that
    outlined the objectives for the program. Organizations will begin
    reporting against these frameworks in FY 2012, and USDA will review the
    results closely to keep organizations on track. The improvements
    address a recent GAO recommendation for an improved monitoring process,
    which we agree with and had recognized as appropriate.
    Food for Progress Program
        Authorized by Congress through the Food Security Act of 1985, the
    Food for Progress Program (FFPr) provides commodities on credit terms
    or on a grant basis to developing countries and emerging democracies to
    assist in the introduction of elements of free enterprise into the
    countries' agricultural economies. CCC may purchase commodities for use
    in Food for Progress if the commodities are currently not held in CCC
    inventory. The 2008 Farm Bill extends authority for the program through
    2012.
        Under FFPr, commodities are provided on a donation basis to foreign
    governments, private voluntary organizations, nonprofit organizations,
    cooperatives, or intergovernmental organizations. The implementing
    organizations request commodities and USDA purchases those commodities
    from the U.S. market. USDA donates the commodities to the implementing
    organizations and pays for the freight to move the commodity to the
    recipient country. In meeting the statutory requirements of the
    program, USDA considers proposals for all developing countries and
    territories with priority consideration given to proposals for
    countries with: per capita income at lower or lower-middle income
    standards (using World Bank statistics); greater than 20 percent
    prevalence of undernourishment as a proportion of the total population
    (World Health Organization (WHO) of the United Nations data); and
    positive movement toward freedom, including political rights and civil
    liberties (as defined by Freedom House). Depending on the agreement,
    the commodities donated through FFPr may be sold in the recipient
    country, and the proceeds used to support agricultural, economic, or
    infrastructure development programs. Assistance is provided through
    foreign governments, PVOs, nonprofit organizations, cooperatives, and
    intergovernmental organizations.
        The FFPr allocations for FY 2011 include more than 232,000 metric
    tons of U.S. rice, wheat, vegetable oil, soybean meal, soybean oil, and
    corn valued at more than $143 million. The commodity value for FFPr is
    not limited, however the statute limits the amount UDSA can pay for
    non-commodity costs to no more than $40 million annually. These
    donations will reach more than 1.6 million beneficiaries in ten
    countries, including Haiti, Bangladesh, Uganda, Malawi, and Honduras.
    For example, in FY 2010, Land O'Lakes received an FFPr grant to improve
    commercial milk production, processing and marketing in Tanzania. By
    the end of the program, the gross value of milk produced in Tanzania is
    projected to increase by $2.1 million. The project will also create 180
    new dairy sector-related jobs in private sector enterprises.
    P.L. 480 Title I Program
        The P.L. 480 Title I program was authorized by Congress in 1954 to
    allow concessional sales of U.S. agricultural commodities to developing
    countries. It is now authorized under the Food for Peace Act.
    Commodities provided under this program may be sold in the recipient
    country, and the proceeds may be used to support agricultural,
    economic, or infrastructure development projects in such country. The
    primary goals of the Title I program are to provide economic assistance
    and promote food security. Priority is given to countries coping with
    limited foreign exchange reserves, chronic food shortages, poverty, and
    underdevelopment in the agricultural sector. Past Title I programs have
    targeted countries with food insecurity, countries with limited foreign
    exchange, and countries working to alleviate poverty and develop their
    agricultural economies.
        Over the program's history, USDA made concessional sales in
    response to requests from foreign governments. Concessional sales were
    made to governments that were facing food insecurity or economic
    problems or that were working to alleviate poverty and promote economic
    development. Since Fiscal Year 2006, new funding has not been requested
    or appropriated because demand for food assistance using credit
    financing has fallen and grant programs have become a more appropriate
    tool for providing food assistance.
    Borlaug Fellowship Program
        The Borlaug Fellowship Program (BFP) was initiated in March 2004 by
    FAS in honor of the late Nobel Laureate Dr. Norman E. Borlaug, an
    agronomist, humanitarian, and the father of the Green Revolution.
    Congress provided statutory authorization for the program in the Food,
    Conservation, and Energy Act of 2008. The BFP provides fellowships for
    scientific training and research in the United States to potential
    agricultural leaders with the goal of promoting food security and
    economic growth.
        Since its inception in 2004, the Borlaug Fellowship Program has
    provided agricultural scientific training in the United States for 539
    Fellows from 64 countries in sub-Saharan Africa, the Middle East, the
    former Soviet Union, Asia and Latin America. Collaborative-research and
    training have spanned such fields as the plant and animal sciences,
    food safety, agricultural biotechnology, environmental sciences,
    climate change, and food security. Women agriculturalists receive
    priority consideration in the program and now comprise nearly 50
    percent of participants. During FY 2011 it is anticipated that the
    Borlaug Fellowship Program will sponsor approximately 34 individuals
    from 26 countries.
        The program has facilitated the adoption of modern agricultural
    practices in targeted countries by strengthening human and
    institutional capacity through U.S.-based training. The Borlaug
    Fellowship Program periodically conducts surveys to gather information
    from alumni about the impact of the fellowship program on their work.
    Responses from Borlaug alumni received in Fiscal Year 2010
    overwhelmingly reported that their fellowship had a positive impact on
    one or more aspects of their work. Of the 100 surveys received, the
    Fellows specifically reported that participating in the Borlaug
    Fellowship Program positively impacted their research (92 percent),
    teaching (74 percent), and policy objectives (14 percent), including
    the adoption of one or more new techniques or technologies (52 percent)
    in their home institutions.
    Local and Regional Food Aid Procurement Pilot Project
        The Local and Regional Food Aid Procurement Pilot Project is a 5
    year, $60 million pilot project authorized and funded by Congress in
    the 2008 Farm Bill. Congress authorized the pilot project for the
    purpose of examining the timeliness and efficiency of local and
    regional procurement (LRP) as a tool to enhance U.S. Government food
    assistance programs. The 2008 Farm Bill established four requirements
    that USDA has met or is on track to meet in regard to the pilot
    project. First, a study of prior local and regional purchase programs
    was required. USDA submitted this study to Congress in January 2009.
    Next, in light of the study, USDA was tasked to develop project
    guidelines. The guidelines were completed in FY 2009. A third
    requirement was to implement field-based projects during FY 2009-FY
    2011. During this period, six private voluntary organizations and one
    international organization received funding to undertake 23 field-based
    projects in 19 different countries. A sample of projects supported by
    this program include: school feeding in Burkina Faso, relief for
    drought-affected households in Niger, and income-generating
    opportunities for women in Mali. At this time, all the available
    funding for the field-based projects has been obligated and
    implementation of the projects will be completed by September 30, 2011.
    The LRP pilot project's fourth and final requirement, an independent
    evaluation, is moving forward on time. USDA has a contract with an
    independent evaluator to begin work on the LRP project evaluation and
    deliver it to Congress as required in May 2012.
    Conclusion
        As Administrator of USDA's Foreign Agricultural Service, I am proud
    of our efforts in administering the farm bill authorized trade, food
    aid, and development programs of the U.S. Department of Agriculture. We
    look forward to providing any support we can as Congress works on the
    next farm bill.
        This concludes my statement. I look forward to answering any
    questions you may have. Thank you.

        The Chairman. Thank you, Ms. Heinen.
        We will proceed then to Ms. Nancy Lindborg, Assistant
    Administrator for the Bureau of Democracy, Conflict, and
    Humanitarian Assistance, U.S. Agency for International
    Development, Washington, D.C.
        Let me point out that with unanimous consent, unless I hear
    otherwise, the gentleman from Massachusetts, Mr. McGovern, who
    is not a Member of this Subcommittee, has joined us today. I
    have consulted with the Ranking Member, and we are pleased to
    welcome him in joining the questioning of witnesses.

                 STATEMENT OF NANCY LINDBORG, ASSISTANT
    ADMINISTRATOR, BUREAU FOR DEMOCRACY, CONFLICT AND HUMANITARIAN
                      ASSISTANCE, U.S. AGENCY FOR
              INTERNATIONAL DEVELOPMENT, WASHINGTON, D.C.

        Ms. Lindborg. Thank you, Chairman Johnson and distinguished
    Members of the Subcommittee. I appreciate very much the
    opportunity to be here today to talk about the important
    subject of food aid programs and those under Title II of the
    Food for Peace Act in the farm bill.
        For over 57 years, USAID Food for Peace programs have
    allowed the United States to offer a helping hand to those in
    need. Original recipients of food assistance include countries
    like France and Belgium in the post-World War II era and more
    recent graduates like India, who are now our friends, allies
    and trading partners. With Congress assistance, we have built
    over the years an enduring legacy that reflects the generosity
    of the American people and recognizes the importance of food
    security to our national security.
        Through the years, I have encountered many individuals from
    around the world, as I am sure you have, whose lives have been
    profoundly altered by offering that important assistance at a
    critical time in their lives. I remember well the farmer I met
    in southern Serbia who greeted me warmly with thanks for the
    Truman eggs he had received or my senior colleague at USAID who
    grew up in India with food assistance.
        The USAID's Office of Food for Peace provides assistance as
    part of the Food for Peace Act and is responsible for both
    emergency relief and development food aid programs using
    donated U.S. agricultural commodities. These programs allow us
    to provide emergency assistance in response to both natural
    disasters, such as droughts or floods, as well as in complex,
    protracted crises like Sudan. In 2010, these Title II emergency
    programs enabled us to provide critical assistance to 46.5
    million people in need in 27 countries around the world,
    helping us to alleviate malnutrition and hunger. In Pakistan,
    as you recall, epic flooding that began last year put millions
    of people in danger. We were quickly able to move U.S.
    commodities from pre-positioned warehouses, able to move our
    shipping routes, and allow our NGO and U.N. partners to borrow
    from Title II commodities already in the region. As a result,
    we were able to provide urgently needed food assistance to
    flood survivors quickly.
        Similarly, in the aftermath of the Haiti earthquake, we
    were able to get food to more than three million people
    desperately in need. In those critical early days, we moved
    food that was already on the ground in Haiti. We purchased
    3,000 tons of American rice and we dispatched over 14,000 tons
    of food aid from pre-positioned stocks in Texas to reach
    earthquake survivors in one day.
        Today, we are looking at a very serious drought in the Horn
    of Africa. We have the lowest levels of rainfall in that region
    in 60 years. This has resulted in severe food insecurity, water
    shortages, failed crops, and dying livestock, with 11 million
    people estimated to be in need. Of particular concern are the
    800,000 Somali refuges arriving at camps in Ethiopia and Kenya
    with global acute malnutrition rates well above the emergency
    threshold. We were alerted about this impending drought last
    fall through our early warning systems. We began pre-
    positioning food stocks and have since been able to move food
    into the region to reach an estimated 4.2 million people. We
    remain very concerned about this drought, are working with our
    international partners, but make no mistake that our food aid
    has made a critical difference in the lives of millions.
        The Horn is one of the best illustrations of why we are
    also focusing on helping people move from food aid to more
    sustainable productivity. We can't stop droughts and floods
    from happening but we can enable farmers to be more productive
    and people to be more resilient. We do that with our
    development food aid, also part of Title II, which focuses on
    the most food-insecure countries where stunting rates are the
    highest and where people live on less than $1.25 per day. We
    know that getting the right nutrition to children under 2 can
    make the difference in a lifetime of a well-developed brain and
    the kind of opportunities that they deserve, and we know that
    agricultural productivity can help families sustainably provide
    for themselves.
        We work with U.S. non-governmental organizations, the World
    Food Programme and other U.N. partners to implement development
    food aid programs in 21 countries to assist eight million
    people, address chronic malnutrition, boost agricultural
    productivity and build resiliency. Globally, the Presidential
    Feed the Future Initiative has a mission to sustainably reduce
    hunger and poverty and ultimately enable people to move from
    food assistance to long-term food security. Our Title II
    programs complement and reinforce this initiative. Working
    across the U.S. Government and in close partnership with USDA,
    we are working to build the resiliency of vulnerable
    populations and to enable people to move into the sustainable
    productivity that will help them feed themselves. The Horn of
    Africa is a good example of where we are working to bring all
    of our resources to bear in meeting the challenges of repeated
    drought through both our emergency, our development and our
    Feed the Future resources.
        Our food aid has never been more important. As mentioned,
    somewhere between 700 million and a billion people go to bed
    hungry every night, and 3.5 million children each year die from
    malnutrition. The impacts of climate change, the severe weather
    events that we are seeing combined with densely populated urban
    centers are making people ever more vulnerable. At the same
    time, we are seeing rising food prices. We are working hard to
    increase effectiveness and efficiency and improving the quality
    of our food products. As you hold farm bill discussions where
    budgets are tight, food is more scarce and prices are high, we
    are seeking maximum flexibility to ensure that we can make the
    strategic choices for maximum impact.
        Thank you again for the support from this Committee, and we
    are very proud to have played a part in the extraordinary story
    of Title II food aid. Thank you.
        [The prepared statement of Ms. Lindborg follows:]

     Prepared Statement of Nancy Lindborg, Assistant Administrator, Bureau
     for Democracy, Conflict and Humanitarian Assistance, U.S. Agency for
                  International Development, Washington, D.C.
    Introduction
        Thank you Mr. Chairman and distinguished Members of the Committee.
    I appreciate the opportunity to be here today to address the important
    subject of food aid programs in Title II of the Food for Peace Act. I
    will discuss the programs administered by the U.S. Agency for
    International Development (USAID), the importance of the programs to
    U.S. national security and to our moral values, some of the major
    accomplishments of the programs, and the challenges and concerns we
    face today.
        For over 57 years, the USAID Food for Peace program has allowed the
    United States to live up to our historic mission to help alleviate
    hunger around the world. With Congress's assistance, we have fed
    billions of the world's neediest people--perhaps the largest and
    longest-running expression of humanity ever seen in the world. Some of
    the countries that have received Title II assistance have become self-
    sufficient or even food exporters and international donors themselves.
    While we can look back on this unique American achievement with pride,
    we must also look forward and address the challenges facing us in this
    century. There are many.
        Under the Food for Peace Act, USAID has responsibility to
    administer Titles II, III, and V of the Trade portion of the farm bill.
    The Office of Food for Peace is tasked with managing programs under
    Title II of the Food for Peace Act, which consists of donating U.S.
    agricultural goods for emergency relief and development. It is
    administered through grants to U.S. nongovernmental organizations and
    the United Nations World Food Program.
    Emergency Response
        Title II emergency programs aim to address two forms of
    emergencies--natural disasters such as floods or droughts, and complex
    emergencies characterized by a combination of natural disaster,
    conflict, and insecurity.
        In FY 2010, Title II emergency programs helped 46.5 million food-
    insecure people in 27 countries by alleviating malnutrition and hunger.
    In FY 2010, our emergency programs accounted for over \3/4\ of our base
    funding.
        In Pakistan, when epic flooding first began last year, Food for
    Peace sourced U.S. commodities from prepositioned warehouses, altered
    shipping routes, and allowed partners to borrow from Title II
    commodities already in the region to assure a timely response.
        In the aftermath of the Haiti earthquake, we were able to pull over
    6,500 tons from food aid already on the ground, purchased over 3,000
    tons of American rice, and dispatched over 14,000 tons of food aid from
    prepositioned stocks in Texas to reach survivors.
        In FY 2011, USAID has already provided significant food assistance
    to the drought emergency affecting the Horn of Africa, particularly
    Ethiopia and Somalia, where more than ten million people require
    emergency assistance. This prolonged drought has resulted in severe
    food insecurity conditions, water shortages, and acute malnutrition
    rates above emergency thresholds, particularly among Somali refugees
    arriving at camps in Ethiopia and Kenya. The rate of new arrivals has
    significantly increased in recent weeks, with thousands of Somali
    refugees arriving weekly at refugee camps along the border, including
    the Dadaab refugee camp in northeastern Kenya. Humanitarian agencies
    operating in border areas and camps report that individuals are
    arriving in dire condition, requiring immediate life-saving support.
    The situation will deteriorate further without increased international
    attention. Even as we have provided more than $300 million in four
    countries to respond to the drought, we are working with other donors
    to help secure their contributions. Make no mistake, however, the Title
    II program, with the American flag prominently displayed, is making a
    difference for refugees and drought-affected populations in the Horn
    today.
        U.S. food aid has been critical in supporting millions of displaced
    persons in Darfur and Sudanese refugees in Chad and elsewhere, as well
    as saving lives, protecting livelihoods, and promoting the
    reintegration of returning populations in South Sudan.
        These are just a few of the examples of the live-saving work of our
    emergency response program.
    Development Food Aid
        We are also focusing our development food aid programs in the most
    food insecure countries, where stunting rates are highest and people
    live on less than $1.25 per day. We have reduced the number of
    countries we work in with development food aid by 25 percent since 2008
    in order to focus and concentrate our resources for greater impact. The
    programs address chronic malnutrition, boost agricultural productivity
    and incomes, and help build resiliency. Targeted to disaster-prone
    areas, the program helps people to withstand the next drought or flood
    so they do not have to rely on emergency aid in the future.
        In FY 2010, our U.S. nongovernmental organization (NGO) partners
    implemented development food aid programs in 21 countries to benefit
    some eight million people.
        In Bangladesh, a country of 156 million people, 45 percent of the
    population does not meet the minimum food requirements. Approximately
    37 percent of children under five are underweight, and over 48 percent
    suffer from stunting. Three Title II partners aim to assist over
    580,000 households in some of the poorest and most marginalized
    communities over the course of their multi-year development programs.
    One program has already reduced stunting by 28 percent in targeted
    communities. They have also provided business training for more than
    6,000 female entrepreneurs and increased incomes by 128 percent, among
    other successes.
        Globally the President's Feed the Future initiative has a mission
    to sustainably reduce hunger and poverty. It aims to link highly
    productive geographic zones to more vulnerable areas, helping to
    increase labor opportunities for households, strengthen value chains,
    and increase rural jobs. Our Title II development programs complement
    and reinforce this initiative. Through these programs, and in
    combination with USAID's other governance, development, and disaster
    mitigation programs, we aim to build the resiliency of the vulnerable
    populations we serve.
    Title III--Food for Development
        USAID also has responsibility for Food for Development (Title III),
    although funds have not been requested or appropriated for this program
    for more than a decade. USAID is authorized to donate agricultural
    commodities to a recipient country and to fund the transportation to
    the point of entry in the recipient country. These commodities may be
    monetized in least-developed countries' domestic markets and the
    revenue generated from their sale used to support and implement
    economic development and food security programs in those countries.
    Title V--Farmer to Farmer Program
        The John Ogonowski and Doug Bereuter Farmer-to-Farmer Program
    (Title V) provides voluntary technical assistance to farmers, farm
    groups, and agribusinesses in developing and transitional countries to
    promote sustainable improvements in food security and agricultural
    processing, production, and marketing. The program relies on the
    expertise of volunteers from U.S. farms, land-grant universities,
    cooperatives, private agribusinesses, and nonprofit farm organizations
    to respond to the local needs of host-country farmers and
    organizations.
        In FY 2010, implementing agencies fielded 522 volunteers from 48
    states and the District of Columbia. Volunteer assignments focused on
    technology transfer, organizational development, business and
    enterprise development, financial services, and environmental
    conservation. Volunteers worked at various levels of the commodity
    production and marketing chain, including rural services and input
    supply, on-farm production, storage and processing, and marketing.
    Trends and Concerns
        Tonight, nearly one billion people will go to bed hungry and 3.5
    million children will die this year of malnutrition. And unfortunately,
    these numbers may only get worse. Food prices are projected to remain
    high for at least the next several years. Thus, the U.S. commodities
    that are at the heart of our food aid programs--wheat, corn, sorghum,
    beans, vegetable oil--are projected to become more valuable over the
    next few years. It is difficult to predict where commodity prices will
    go in the long term.
        The impacts of climate change and other extreme weather events,
    combined with the growth of densely populated urban centers in areas
    vulnerable to natural disasters, are increasing the risk of large-scale
    displacement, damage and death due to natural disasters. In addition,
    the number of people displaced from conflict or violence has increased
    from 17.4 million in 1997 to 27.5 million in 2010, and displacements
    are increasingly prolonged.
        As Title II costs per metric ton have tripled, from a low of $390
    per ton in 2001 to a current high of $1,180 per ton for FY 2011, we
    expect to ship and program less Title II food aid in Fiscal Year 2011
    than we did during Fiscal Years 2009 and 2010 for equivalent amounts of
    funding.
        In this regard, we are strongly concerned about the Fiscal Year
    2012 Title II budget of $1.03 billion passed by the House. At this
    funding level, approximately $590 million of Title II would be
    available for emergency programs in FY 2012, given the requirement to
    provide a minimum level of Title II funding for development food aid
    programs, which must increase by $25 million each year (regardless of
    appropriations levels). In FY 2012, the development food aid
    requirement is $450 million. The House cut for Title II would require
    reductions in the largest emergency food aid programs, to include
    Ethiopia, Sudan, Haiti, Somalia, Afghanistan, and Pakistan.
        It should be underscored that Title II food assistance is extended
    to people in need regardless of the political regime they live under
    and the actions of their countries' leaders, provided that adequate
    access and monitoring of the food aid is allowed. Such a policy is a
    long and proud American tradition that spans Administrations and one
    that the Administration continues.
    Monetization
        While Title II provides funds for transport and distribution of
    commodities, our partners also need cash to fund other components of
    development food aid programs. Private voluntary organizations often
    monetize the Title II development food aid, selling locally and using
    the proceeds to implement activities that are part of the broader Title
    II program, such as training agricultural extension workers. But there
    are limits to the extent this can be done, and as recently recommended
    by the Government Accountability Office (GAO), we need to be very
    careful that monetization does not have negative effects on local
    markets and production.
        We have taken note of the recent GAO report on monetization. As
    food assistance is becoming an increasingly precious resource, we need
    to make sure that every food aid dollar counts in a world where hunger
    is increasing. The use of monetization has to be targeted more
    effectively.
        As part of the Feed the Future Initiative, the Administration has
    requested cash to fund integrated community development efforts that
    would otherwise be resourced through Title II via monetization. The
    community development fund would be especially useful when monetization
    is not an appropriate tool.
        We recognize that monetization practices can be improved, and we
    will consider ways to continue to improve market analyses and
    monitoring and evaluation of monetization as well as the returns we get
    on monetized food.
        In this regard, USAID continues to manage a project to help ensure
    Title II programs comply with the Bellmon Amendment, which requires
    that adequate storage facilities be available in a recipient country
    upon arrival of a commodity to prevent spoilage or waste, and that
    distribution of the commodity in the recipient country will not result
    in substantial disincentive or interference with domestic production or
    marketing in that country. The Bellmon Estimation for Title II (BEST)
    Project is conducting independent market analyses to ensure that these
    requirements are met. Studies have already been completed for a number
    of countries, which are posted on the USAID public website.
        My colleague from the U.S. Department of Agriculture (USDA) will be
    sharing with you information on their programs. We work closely with
    USDA on programming and commodity procurement. We are working to assure
    that we regularly exchange solicitations for future activities, that
    field-based staff increase collaboration, and that our monetization
    activities are well coordinated.
    More Efficient and Effective Food Assistance
        Let me also mention several other measures we have taken to make
    Title II assistance more effective and efficient to assist the most
    vulnerable populations overseas.
        For more effective decision making on emergency food aid
    allocations, and to better link early warning and response to
    emergencies, we developed a new Famine Early Warning System Network
    resource (FEWS NET)--the Food Assistance Outlook Briefing--which
    provides warning of food assistance needs 6 months in the future. These
    predictions are critical because of the time required to purchase and
    ship in-kind food aid from the United States. Already this system has
    allowed us to preposition commodities near the Eastern Horn of Africa
    to provide quick delivery of commodities in response to severe
    droughts.
        Globally, we have expanded our prepositioning to six sites,
    allowing us to maintain a continuous flow of vital food aid and in some
    cases reduce our response time significantly.
        As you know, Administrator Rajiv Shah has embarked on a USAID
    Forward reform effort that prioritizes evidence-based programming. As a
    reflection of our commitment to understand and improve impact we are
    undertaking a number of steps including:

       Adding monitoring and evaluation technical experts to our
            field team;

       Offering workshops and training to partners on monitoring
            and evaluation;

       Refining indicators to better measure our effectiveness; and

       Conducting research to better capture and summarize results
            and make recommendations for improved programming.
    Food Aid Quality
        Looking ahead, I want to mention a new initiative underway to
    improve the overall quality of our in-kind food aid.
        Just 3 months ago, in partnership with Tufts University, we
    released a 2 year food aid quality review produced in close
    consultation with private sector stakeholders, nongovernmental
    organizations, and leading nutritionists. We recognize and are grateful
    to Congress for their support in this effort. The review identified
    several ways to better match the nutritional quality of the food USAID
    provides to help children reach their maximum potential. Nutrition
    science now tells us that if a child does not receive certain basic
    nutritional requirements in the first 1,000 days of life his or her
    brain will never fully develop and he or she can never reach his or her
    full intellectual potential.
        We are targeting young children and their mothers in our food
    programs, and we will now have a panoply of products better suited to
    meet their nutritional needs. We will improve the micronutrient
    fortification of vegetable oil and milled grains and are working on
    development of a new blended product for preventing malnutrition in
    children from 6 months to 2 years. New products will also include new
    emergency bars, biscuits, and pastes that can quickly be distributed to
    displaced, malnourished populations. Together with our partners in
    academia, industry and other stakeholders, we are developing the next
    generation of food aid commodities.
        At the International Food Aid and Development conference in June,
    we had an opportunity to discuss in detail the findings of the report
    and to continue the exchange with both our domestic and international
    food aid partners about how we can move forward together on this
    important agenda.
    Broader Food Aid Reform
        As expressed earlier, to allow us to address these challenges we
    will need to continue to seek improvements in the effectiveness and
    efficiency of the food aid systems, as well as broader reform. The farm
    bill represents the greatest opportunity to address the need for
    broader food aid reform, to enable us to be more responsible stewards
    of this important national resource.
        The multiple legislative mandates for Title II in the Food for
    Peace Act create a number of operational difficulties and hinder the
    effectiveness of Title II. For example, 75 percent of development
    commodities must be processed, fortified or bagged. It is very
    difficult to meet this requirement, forcing USAID to make less than
    optimal product selections--leading to supply- rather than demand-
    driven programming. Other mandates instruct USAID to:

       Monetize at least 15 percent of development food aid;

       Increase by $25 million per year the value of development
            programs, up to no less than $450 million in Fiscal Year 2012;

       Provide no less than 1.875 million metric tons of
            development food aid annually. (This is an unrealistic sub-
            minimum that would require close to the full Title II annual
            budget to meet.)

        There are other technical requirements that are distinct and
    separate from the Title II food aid program, including cargo preference
    and the ``Great Lakes'' set-aside statutory requirement, where
    clarifying language in legislation would allow Title II to be free from
    such restrictions.
        Congress will hold the forthcoming farm bill discussions in a
    context where budgets are tighter than ever, food is scarcer, and
    prices are high. In light of these challenges, we will be seeking
    maximum flexibility to assure that we can make strategic choices that
    yield maximum impact. We seek your support to reduce the complex and
    inefficient directives that hamper our programming choices and minimize
    our flexibility.
    Conclusion
        Food aid programs are complex, and the problems and issues that
    Title II food aid must address are increasingly complex. USAID believes
    that the area for greatest convergence of our interests is in ensuring
    what we have long held as a basic principle: that the right food should
    get to the right people at the right time, while doing no harm. As we
    look ahead, let me assure you that USAID remains committed to its role
    in supplying food aid to vulnerable people. With the support from
    Congress, we have fought and won many battles in the fight against
    hunger and malnutrition. Our programs have fed billions of the world's
    neediest people, averted famines, and helped countries lift themselves
    out of poverty and dependence.
        Assisting in this effort are our partners. USAID has forged
    tremendously important partnerships with private voluntary
    organizations, as well as the UN World Food Program, to meet the food
    assistance needs of people around the world. Their teams have carried
    out their mission successfully and often at great personal risk. We
    recognize both their commitment and their sacrifice, including the many
    humanitarian aid workers who have lost their lives while assisting
    others. Those partnerships are strong, and continue into the future.
        We would also like to acknowledge our important partners in the
    agriculture sector--the farmers (businessmen), grain elevator
    operators, truckers, bargemen, freight forwarders, port operators,
    carriers, and others--who form an unbroken chain of humanity stretching
    from this country's fertile fields to hungry families half a world
    away.
        As we reflect back on the enduring legacy that Food for Peace has
    had over the last 57 years, we should be proud of the impact we have
    had on those we have assisted and those who remember the American food
    that helped them and their families in times of need.
        I would again like to thank you for the support the Agriculture
    Committee has given to assist USAID in addressing food security needs
    abroad, demonstrating to the world the great heart of the American
    people. We should all be proud to have played a part in the
    extraordinary story of Title II food aid. Thank you.

        The Chairman. Thank you for your testimony.
        Let me ask first of Ms. Heinen, what is the total amount,
    total dollar amount that FAS has spent on salaries and expenses
    out of the CCC since Fiscal Year 2009?
        Ms. Heinen. I would say approximately $3 million. In the
    last year, we were given permission to use the program money
    instead of the CCC funds. I am trying to make a distinction
    here between the CCC Section 11 money and the program funds,
    and in the last 2 years we have used some program funds, a
    small amount. Previous to that we used about $2 million a year
    out of Section 11 funds.
        The Chairman. How does that figure in Fiscal Year 2009
    compare to the figure 2 years before, Fiscal Year 2007?
        Ms. Heinen. In Fiscal Year 2007, I believe we were able to
    cover our expenses for running the programs out of our
    appropriated salaries and expenses.
        The Chairman. Both the Fiscal Year 2011 Continuing
    Resolution and our Fiscal Year 2012 appropriation bill give
    authority for FAS to use mandatory program funds for salaries
    and expenses. Could you detail for this Committee how much of
    the program funds are being used for costs including, not
    exclusive but including technical assistance, salaries,
    expenses for the program which receive mandatory funding and
    are operated by FAS?
        Ms. Heinen. In the MAP program, I believe we have used
    about $2 million a year out of the program funds since we had
    permission to use program funds, about $300,000 under the FMD
    program, and even smaller amounts for the smaller programs,
    TASC, EMP.
        The Chairman. Would you acknowledge that that is a fairly
    unique, not totally unique but a fairly unique arrangement in
    terms of funding?
        Ms. Heinen. In our food assistance programs, we also use
    that authorization, type of authorization to fund the salaries
    of people who we use to administer the programs, so it is
    unique for us in the last couple of years but looking across
    programs in the U.S. Government, we do not believe that this is
    unique.
        The Chairman. Well, in the structure of how you are funding
    various objectives, what are you doing, what are you
    specifically doing to save money for the United States
    Government?
        Ms. Heinen. One way that we think is effective in saving
    the government money is our unified export strategy. We have
    one program, an electronic system that we have put in place
    where program participants apply for any of the programs that
    they want to use through one single entry point. This saves us
    time in evaluating between programs, and it also minimizes the
    number of people that we need to administer the programs
    because each program, each proposal and each program is matched
    with the most appropriate program that Congress has authorized
    for us to use. In our food aid programs, we have also gone to
    electronic-type systems to expedite and provide more
    transparency to the program delivery.
        The Chairman. Let me just ask quick question of Ms.
    Lindborg. In your agency's response to the annual delivery cost
    for Public Law 480, Title II, you gave us a figure of about
    $730 per metric ton. This number doesn't really tell us very
    much about the cost of implementing that program, Public Law
    480. Could you describe in the limited time that you have in a
    little more detail the individual elements of this figure such
    as how much of the program delivery cost is salaries, how much
    is administrative expenses, indirect costs, shipping, storage
    and monitoring?
        Ms. Lindborg. Mr. Chairman, I would be delighted to get you
    that information in a written form. It is a complex list. It
    does include our ocean freight, inland freight, internal
    shipping and handling in our Section 202(e) funds. We do
    continually seek to find the most effective way possible to
    ship our food. As you may be aware, there was an independent
    study done recently Cornell University that indicated that the
    taxpayers pay an extra $140 million a year because of some of
    the commodity cargo preferences approaches.
        [The information referred to is located on p. 297.]
        The Chairman. I have a few more philosophical questions
    later but I defer to the distinguished Ranking Member from
    California, Mr. Costa.
        Mr. Costa. Thank you again, Mr. Chairman.
        Ms. Lindborg, as you know, current law requires the
    submission of the international aid report by the USDA and
    USAID by April 1st. It is my understanding that that
    information has not been provided on the type and the impacts
    of the programs that have been conducted from the previous
    year, and I would like to know when we are going to get it and
    what has been the delay.
        Ms. Lindborg. Thank you, and our apologies for the delay.
    It is in its final stages, and I understand you will be
    receiving it very, very soon.
        Mr. Costa. All right.
        Ms. Heinen, the first question deals with the Technical
    Assistance for Specialty Crops, which as I noted in my opening
    statement is very important to those who grow specialty crops
    around the country but certainly in California. The 2008 Farm
    Bill authorized funding at $4 million in Fiscal Year 2008,
    increasing incrementally, as I understand it, for 2011 and
    2012. How has this increased funding been allocated?
        Ms. Heinen. As I mentioned, we have one portal for
    administering our funds but we do have a special assistance for
    the specialty crops of $9 million. We take applications from
    cooperators who work with us----
        Mr. Costa. Can you give us some idea of which countries,
    which commodities, which examples have worked best?
        Ms. Heinen. Probably any kind of horticultural crop that
    you can name has applied for these funds. Anyone who applies
    and meets the criteria does receive funds, and we work with
    applicants to ensure that they have the proper applications.
        Mr. Costa. I mentioned earlier how sometimes phytosanitary
    standards are used. Has TASC been effective in breaking down
    technical food or animal restrictions?
        Ms. Heinen. Absolutely. Just yesterday, I was talking with
    the Almond Board, and they told me that they use their TASC
    funds to change some standards that were going to impede their
    access to the Indian markets, saving them about $250 million in
    exports. We have used them to face problems with changing
    sanitary standards in countries around the globe--Mexico,
    China, pretty much everywhere.
        Mr. Costa. Well, I want to go on to some other questions,
    but you did hit my sweet spot. Someone must have tipped you
    off. I grow almonds.
        A recent economic analysis conducted by Global Insight, I
    am told, incorporating the multi-year impact of market
    development expenditures from these programs from 2002 to 2009
    indicated that for every dollar invested, there were $35 in
    agricultural export gains. I think that is a significant
    statistic, and 13 times greater than the average savings that
    the taxpayers would see from funding the program. The Market
    Access Program that you spoke of in your comments has a number
    of areas that I think are very important that I would like to
    continue in the reauthorization of the farm bill. It is under
    question by some the need to have both the Foreign Market
    Development Program and the Market Access Program. Some are
    arguing that they are both branded generic commodities while
    one program only promotes generic commodities. Why do we need
    to have two programs? Can we combine them?
        Ms. Heinen. Both programs I think serve different functions
    really. The Foreign Market Development really looks at more
    long-term things like trade servicing, which is necessary when
    you are trying to----
        Mr. Costa. But we have tight budgets and I think you are
    going to have to----
        Ms. Heinen. I understand.
        Mr. Costa.--think out of the box, because this will be
    something that the full Agriculture Committee will have to
    consider next year.
        The food assistance effort to promote market development
    efforts by the private sector, how does the USDA ensure that
    Federal funds for market promotion are not displacing these
    funds?
        Ms. Heinen. How does market promotion funds not displace--
    --
        Mr. Costa. From the private sector that otherwise would be
    spent for overseas promotion.
        Ms. Heinen. We match funds with the private sector. Our----
        Mr. Costa. Can we leverage better?
        Ms. Heinen. Can we leverage better? The private sector is
    spending more than $1.50 for every dollar we put in now and in
    some cases and in some industries much more than that. Can we
    ask them to do more? Yes, we could ask them to do more. In some
    cases, it may be difficult for new entrants into programs but I
    think that they have shown their commitment to investing their
    own funds and their own time into this effort.
        Mr. Costa. Mr. Chairman, my time has expired, but I have
    some additional questions that I am going to want to focus with
    the panel as it relates to a host of our trade-related
    assistance efforts. I think there is really value added for all
    the reasons that were stated before, and as we look at the
    reauthorization of the farm bill, I think we need to make sure
    that when we talk about fair trade and giving American
    agriculture the ability to access these markets, that we need
    to ensure that we are as effective as we possibly can.
        The Chairman. Thank you, Mr. Costa.
        I would recognize then the gentleman from Indiana,
    Congressman Stutzman.
        Mr. Stutzman. Thank you, Mr. Chairman, and thank you,
    ma'am, both of you ladies for being here today. I will direct
    my questions first of all to Ms. Heinen.
        Secretary Vilsack has said that record agricultural exports
    should help support more than one million jobs across the
    country. Does FAS have any statistics on how many private
    sector jobs are created due to trade promotional programs?
        Ms. Heinen. Yes, Congressman. Our research indicates that
    for every billion dollars in exports, 8,400 jobs are generated
    in the United States. So we believe that it is very important
    to the rural economy especially.
        Mr. Stutzman. Okay. Very good. A recent press release by
    the USDA stated that overseas shipments of agricultural
    products have totaled $75 billion in the first 6 months of the
    fiscal year. Do you know what is the percentage of trade
    promotion programs within the $75 billion?
        Ms. Heinen. It is difficult to exactly say which ones but
    we do know where we have interceded in markets that have made a
    difference. We have recently concluded some programs in
    Algeria, for example, that opened up $43 billion in dairy
    exports or possibility for dairy exports. We recently concluded
    agreements with, or met the standards using some of these funds
    and partnership with agricultural community to meet a deadline
    that would have prohibited about $150 million worth of our
    trade and plant products into Vietnam. The combination of our
    program, our partnership with the ag community and our
    agricultural attaches overseas, we can trace and we can give
    you some information later if you would like to see some of the
    activities and programs that we know have made a significant
    difference in the export numbers.
        Mr. Stutzman. Sure, I would be very interested in that.
        [The information referred to is located on p. 297.]
        Ms. Lindborg, what is the total amount spent on ocean
    freight for food aid before the MARAD reimbursements?
        Ms. Lindborg. We spend--the annual delivery cost is about
    $730 per metric ton, and that is inclusive of a variety of
    costs including the internal transport shipping and handling
    and the 202(e) costs, and we are happy to give you a more
    detailed breakout.
        Mr. Stutzman. Okay. Yes, that would be helpful as well. And
    then also, could you describe the number of countries you are
    focusing on with your development programs and then also how do
    you choose which countries you are focused on?
        Ms. Lindborg. Sure. As I mentioned, our development
    programs, we work with our NGO partners in those countries that
    have the people who live on less than $1.25 per day, and we are
    working in 21 countries right now to assist about eight million
    people, and we focus particularly on those who are most in need
    and address chronic malnutrition, particularly in children
    under 2, and seek to improve agricultural productivity to
    create pathways out of the need for continued assistance.
        Mr. Stutzman. How do you choose which development project
    should move forward? I mean, if you see a malnutrition program,
    I mean, there are a variety of places that you could obviously
    be involved. How do you--is it people that approach you, you
    approach them?
        Ms. Lindborg. Obviously we can't be everywhere in the world
    with the needs globally. We choose our countries on the basis
    of where there are unmet needs, where we are able to make a
    difference with the communities and populations we are serving
    and where we have a trusted partner who is able to demonstrate
    results.
        Mr. Stutzman. And could you elaborate on some of those
    locations?
        Ms. Lindborg. On where we are currently doing those
    programs?
        Mr. Stutzman. Yes.
        Ms. Lindborg. Certainly. And another criteria that we are
    increasingly looking at is, are there ways that with that
    program we can leverage our other assistance programs, either
    through the Feed the Future Initiative or other of our aid
    programs. So, for example, in countries like Sudan, we are
    currently working, as that new nation is born, to work with
    farmers and women to improve their ability to move from what
    has been several decades of food assistance to growing crops
    that can feed the families and sustain them more productively.
    Oftentimes there are also components of increased water
    sanitation that are so important, so one important aspect of
    these programs is that they are able to work across a variety
    of sectors in a particular community.
        Mr. Stutzman. Thank you.
        Mr. Chairman, I yield back.
        The Chairman. Thank you.
        The chair would recognize the gentleman from North
    Carolina, Congressman Kissell.
        Mr. Kissell. Thank you, Mr. Chairman, and we certainly do
    welcome our witnesses here today.
        Ms. Heinen, I read today where our trade deficit is
    approaching a 3 year high, so we obviously welcome exports of
    any kind, especially in agriculture. As the Ranking Member
    said, nobody does it better than what we do. I asked this
    question in a previous hearing where we were also talking about
    agriculture exports. We know food prices are rising worldwide,
    and we are not immune from that ourselves here in the United
    States, and it does affect our families. So what are some
    internal controls that we might use as we try to increase the
    exports that we are not in some way creating supply and demand
    problems that would cause our prices to go up here in and our
    families to suffer for something that maybe we could use
    internally that we don't have to export?
        Ms. Heinen. Congressman, thank you for the question. We
    believe--we monitor the market very closely but we believe that
    we can satisfy both markets. Currently, our agricultural
    industry does depend largely on exports. Twenty-five to 30
    percent of our crop is exported. And in some cases, some
    industries are even more dependent on the export market where
    95 percent of the consumers are located. We work hard in
    agriculture to increase productivity so that we can continue to
    feed our own people at reasonable prices, prices that they have
    come to expect. We think it is important to look outside as
    well to ensure that our farmers have outlets for their product,
    and we don't have to spend a lot to support prices in this
    country. So we are in kind of a new epoch where the prices are
    much higher but we think it is important to continue to raise
    our productivity and to be a reliable supplier for our
    important customers overseas.
        Mr. Kissell. Well, I appreciate that and very much support
    the export aspect of agriculture. It is very important that we
    have these markets and the things you are doing there. We
    appreciate also just keeping an eye on the supply and demand at
    home to kind of balance that too. You are talking about the
    need to increase our productivity, and there is another hearing
    this Committee had recently on biotech, and we haven't made a
    lot of progress in the last few years in introducing new
    products. Ms. Lindborg, as we look to move some of our product
    overseas, do we find resistance in terms of some of the
    genetically altered foods that we are growing here with great
    success and the seeds that would offer solutions to some of the
    drought areas and other problem areas? Are we finding
    resistance to these moves?
        Ms. Lindborg. Different countries have different policies,
    as you know, regarding the GMO crops. We are clearly concerned
    about ensuring that our food can reach those who need it the
    most in a timely manner, and believe that we are able to
    consistently do that by focusing where we can make the most
    difference.
        Mr. Kissell. Well, one of the things our hearing pointed
    out once again is that in the last few years, we haven't been
    able to get many of these new ideas moved forward but we have a
    pretty clean history in terms of these genetically altered
    materials being proven to be safe. I know different parts of
    the world are resistant to this but hopefully this is something
    we can also use these needs and demands to translate to more of
    these foods being available and helping these folks with
    drought-resistant seeds and things like this solve their own
    problems as you talked about. Mr. Chairman, I yield back.
        The Chairman. Thank you.
        The chair would recognize the gentleman from Georgia, Mr.
    Scott.
        Mr. Scott. Thank you, Mr. Chairman, and I will be asking to
    be excused shortly because of an Armed Services Committee
    meeting, so I will be brief.
        Ms. Heinen, Ms. Lindborg, thank you for joining us today,
    and I will stick to one question and one comment, if you will,
    one promotion, maybe. What can you tell me about the
    President's outlook for trade and the role that the USDA will
    play in that? I mean, one of my primary concerns is that USDA
    will not have the role in agricultural trade relationships
    going forward that it currently does if we follow through with
    his initiative. Can you speak to that briefly?
        Ms. Heinen. Sure. As you know, OMB is in charge of this
    process to look at efficiencies in government, but we did meet
    with them and we did explain our programs and why we exist as
    we do. Of course, we want to be helpful and we want to find
    efficiencies but in going through the process, which I did
    myself, I was more and more convinced of the importance of
    having the Department of Agriculture maintain this role. We
    work very close with our regulatory partners in USDA to solve
    some of the SPS and some of the other kinds of unique issues
    with agriculture. There are certification issues, there are
    port regulatory--there are just a whole range of issues.
        In addition, our reporting overseas is really critical to
    our baseline products of supply and demand all around the
    world, and that is part of a process every month that we go
    through to determine where the needs are, where the markets
    are, and it is important to supporting our farm community here.
    We think that we have found one agency that can do a great deal
    in all the different aspects of trade and so we would like to
    maintain those efficiencies as we have. Of course, also our
    legislation, our trade programs are all centered with CCC,
    which is with the Secretary of Agriculture, so that is another
    issue that we would have to look at if we were going into a
    combined trade agency. The report, as we hear now, is
    probably--or suggestions from the report due in September, so
    we will wait to evaluate the suggestions that they have come up
    with at that time.
        Mr. Scott. My experience has been that if you are not from
    the farm, you really don't understand agriculture. My fear is
    that we have somebody outside of the USDA handling the trade
    for agriculture, that we simply won't get an effective trade
    agreement.
        Ms. Lindborg, I am going to leave this for you. This is a
    product that I came across. It is a mother-administered
    nutrition aid, and UNICEF is using this. It is essentially a
    peanut butter paste for malnourished children, and they are
    headed out of North Carolina. It is manufactured in Fitzgerald,
    Georgia. It is a charitable organization put together by
    missionaries but it is three packs a day for a malnourished
    child. It is packaged in a manner so that it would last for 2
    years no matter what the climate it is in. I will have a staff
    member bring you the information, the fact sheet on it, but if
    you don't mind, I would appreciate if you would look at it and
    just speak with me at your convenience over the next couple of
    weeks about this product and see if we can establish a
    relationship. I think it would be a very cost-effective way for
    you to help achieve some of your goals. Thank you.
        Ms. Lindborg. Thank you, Congressman. I would just note
    that improving the food quality is one of our number one goals
    to ensure that the right kind of nutritional foods are
    available to those critical first thousand days, so I look
    forward to talking to you further.
        Mr. Scott. That is what it is designed for. Thank you.
        The Chairman. The chair would recognize the gentleman from
    Massachusetts, Mr. McGovern.
        Mr. McGovern. Well, thank you, Mr. Chairman. I want to
    thank you and the Ranking Member for allowing me to sit in on
    this Subcommittee hearing. My interest for being here is that I
    care very deeply about our food aid programs, and I appreciate
    very much both USDA and USAID for a lot of the incredible work
    that you are doing as we speak. I think the Feed the Future
    Initiative is a good initiative because it connects all the
    dots and comes up with a comprehensive plan to not only deal
    with the issue of hunger but to deal with the issue of
    sustainability. Too often in this country, we are expending
    billions and billions of dollars responding to emergencies that
    probably could have been prevented or could have been better
    prepared for. And so in the long run, that will save us a great
    deal of money.
        But I was concerned during the debate on the ag
    appropriations bill that a lot of these programs like the
    McGovern-Dole program--and I should state for the record that I
    am not the McGovern in the McGovern-Dole program, although I am
    one of the primary authors of the bill. It is George McGovern
    and Robert Dole. But programs like that, which are designed to
    make sure that every child in the world gets at least one
    nutritious meal a day in a school setting, and Food for Peace
    came under attack. I realize that we are in tough budgetary
    times but I think a lot of my colleagues on both sides of the
    aisle don't quite appreciate the benefits of these programs.
    Yes, none of them are perfect and they could be better run. I
    cosponsored a request to GAO to do an audit and analysis of
    both McGovern-Dole and Food for Peace with Don Payne of New
    Jersey. There are some suggestions there that I know both USDA
    and USAID have enthusiastically embraced, which is good because
    we are always trying to improve the program. But there are
    American jobs that are created as a result of these programs,
    not just in farms but in trucking and in inspection, and on and
    on and on and on. But I also think it also fulfills a moral
    obligation we have to be proud of this global effort to end
    hunger. I am worried because hunger is one of those things that
    doesn't seem to be getting better. We are getting to the point
    where there is close to a billion people in the world who are
    hungry, and I am worried that in the Fiscal Year 2011
    Continuing Resolution and in the appropriations bill, we have
    made some cutbacks. Obviously we are making some tough choices
    but I don't see that as saving money because it creates a whole
    bunch of other problems--more refugees, more health costs, more
    emergencies. And this is more than a humanitarian issue, it is
    a national security issue. I always remind people that
    protesters in Egypt that were protesting, food was one of the
    reasons why they were protesting.
        And so I would appreciate if you could help me with a
    couple questions. One, the impacts of cutting back on these
    programs, even though we have tough budgetary times, what are
    the costs? The other thing is, some of the recommendations in
    some of the reports that have been requested talk about putting
    greater emphasis on better nutrition, which costs a little bit
    more. How do you deal with that dilemma of trying to increase
    the standards in terms of nutrition for hungry people around
    the world but at the same time dealing with the costs?
        But I think we need to do a better job of helping quantify
    for Members of Congress that a little bit of investment up
    front saves you a lot in the future. The one final thing is,
    what are we doing to try to encourage our global partners to
    step up to the plate and be as generous as we are on some of
    these issues?
        Ms. Lindborg. First of all, I thank you for your tireless
    advocacy for the hungry around the world. It makes an
    extraordinary difference, and please know that we very much
    share your concern, both with ensuring that we are able to
    continue to play the leadership role that we do in providing
    food to those who are most in need, doing it in the most cost-
    effective way and doing it in partnership with others. We have
    worked closely to encourage emerging donors such as Brazil to
    be able to join us in provision of food where the needs are far
    greater than any one nation can do alone, in particular in
    places like the Horn where we have 11 million currently in
    need. We have indeed looked hard at how to improve our
    effectiveness and efficiency of how we provide food assistance
    as well as improving our monitoring and evaluation systems, and
    continue to appreciate good suggestions on how to improve that.
        On the food quality issue, thanks to the support of this
    Committee, we have spent 2 years working with Tufts University
    to look very closely at what is the nutritional composition
    that most meets the needs of children under 2. When I was in
    Kansas City at the International Food Aid Conference about a
    month ago, we launched that study. We are working in
    partnership with industry, shippers, growers and our NGO
    partners to look not just at what is the composition, what is
    the nutritional elements of the food, but how do we target that
    more effectively. We believe that that is ultimately the most
    cost-effective thing, cost-effective approach that we can take
    in ensuring that in those critical 2 years, children are able
    to get the nutrition they need. Thank you.
        The Chairman. The chair would recognize the gentleman from
    Illinois, Mr. Schilling.
        Mr. Schilling. Thank you, Chairman.
        I guess this could be for both of you or just one. I also
    have to excuse myself because I need to go after this question
    to the House Armed Services Committee meeting. Many of our
    programs utilize public and private partnerships with nonprofit
    organizations to implement individual projects. What is the
    process your agency uses to evaluate and approve the
    administrative costs for each project? How often does your
    agency reevaluate these guidelines? What is the average
    indirect support cost allowed as a percentage of the grant or
    agreement?
        Ms. Heinen. We have a number of programs, I think 13 under
    this title, so we have some different criteria. Under our
    market promotion programs, we have an open opportunity each
    year for cooperators and those who want to participate to put
    in proposals. We evaluate those and allocate the funds through
    a single process. In the case of our food assistance programs,
    each year we meet with the private voluntary organizations of
    interest. We explain to them what we will be looking for in
    programs including what are our priority countries are for that
    year, which change. That is because we can't hit all the
    countries all the years. We give them guidelines for what we
    want in the way of proving and results, and we continue to
    refine this process each year to try to make it more efficient
    and more effective.
        Mr. Schilling. Very good.
        Ms. Lindborg. We have, with our NGO partners, particularly
    working on development food aid programs, we have an open
    competitive process and we work very closely in advance of the
    guidelines being issued with our NGO partners, and then review
    with some very specific guidelines and goals of the proposals
    when we receive them. Through the course of those projects, we
    have people on the ground or visiting those programs to do
    close monitoring and evaluation, again in processes that we
    develop in partnership with the NGOs.
        Mr. Schilling. Very good. Thank you very much. With that, I
    yield back.
        The Chairman. The Chairman would recognize the lady from
    Alabama, Ms. Sewell.
        Ms. Sewell. Thank you, Mr. Chairman. I wanted to welcome
    our witnesses here today.
        I guess my question has to do with an industry that is very
    dear and near to my heart and to the district that I represent
    in Alabama, and that is catfish. I wanted to just ask you, Ms.
    Heinen, if you could tell me a little bit about what I could
    expect as far as future opportunities when it comes to catfish
    in foreign markets. Specifically, as you know, the Food Safety
    Inspection Service actually asked for comments on definition of
    what is catfish. I personally, like most of my catfish farmers,
    want a broader definition of catfish to ensure that we don't
    have any fraudulent markets of catfish. Could you please speak
    to what has been done by FAS to help ensure that catfish
    farmers and growers like those located in my district are able
    to tap into new foreign markets and expand their market share?
        Ms. Heinen. Yes. As you probably know, the comment period
    has closed now on the catfish definition, so we await FSIS's
    answers on those. The Catfish Institute is one of our
    cooperator groups that we work with every year to try to
    develop markets. I think this year they received MAP funds in
    excess of $300,000. Primarily, we look to the industry to give
    us what they think are their primary market issues and primary
    forward-looking markets, but we also use our people overseas to
    try to find markets and opportunities for different products
    that may be in demand.
        I think our greatest success with catfish has been close to
    home in Canada, which is true for many of our agricultural
    commodities. Canada is our second largest market now, but we
    are definitely working with them to try and look at new
    opportunities. One of the things that we encourage is that
    different cooperators work together to find ways that they
    might have synergies that they can help the other entrants in
    new markets where they have complementary products. So we are
    in close contact. We also have a regional trade organization in
    the South, so they work also with some of the individual
    smaller companies that might be involved in the catfish
    industry.
        Ms. Sewell. I know that you are quite aware that the
    President signed a Executive Order recently for government
    reform and reorganization, and I really wanted to talk to you a
    little if you could speak to the pros and cons of any type of
    reorganization within FAS and how that would impact farmers.
        Ms. Heinen. Well, certainly if we can find efficiencies,
    that is an advantage for the taxpayer. It is possible in a
    broader trade agency, maybe we would get more funding. On the
    other hand, we are a little bit afraid that we would be
    overwhelmed by larger agencies that might take more of the
    funding. We are concerned that we would lose a lot of our
    analysis capability that we think it is important both for
    supporting farm programs in the United States and for informing
    our farmers about what are the market opportunities overseas.
    We believe very much that our attaches provide a unique service
    to America's farmers and ranchers because agriculture exports
    is more than just promoting agriculture, it is port entry, it
    is knowing the people, it is having insights into the
    regulations and knowing when they are going to change and
    knowing how that minor word might destroy an opportunity for a
    U.S. product because of the way our industry might be
    structured and things like that. So we see some downside risks
    with really having a close cooperator partnership with the
    industry and one that can really inform us well of when things
    are changing overseas that might have impact and have to weigh
    that heavily against what efficiencies might be gained by
    having a single agency for trade.
        Ms. Sewell. Thank you.
        The Chairman. I would now call on the Ranking Member, Mr.
    Costa, who has a follow-up question or so.
        Mr. Costa. To both our witnesses, I would like to refocus
    on some comments that were made earlier regarding the Doha
    round proposal. There is discussion about putting some of the
    items developed during the Doha round into a Harvest Plus
    package. I hope you are familiar with that. That would be
    agreed upon by World Trade Organization members at the December
    ministerial meeting. Among those identified for inclusion of
    this package is the export competition pillar, I am told, for
    agriculture in the 2008 draft modalities, which includes food
    aid. That is why I think both of you I would like to have
    respond. For the USDA, Ms. Heinen, what would the impact be of
    the December 2008 draft food aid tax for the Food for Progress
    Program under these circumstances?
        Ms. Heinen. Thank you, Congressman. Well, in general at
    this point, I don't think that we see a package for early
    harvest that we think would be advantageous to the United
    States but of course we are open to continuing that discussion.
        Mr. Costa. I am told that under point 12 of the proposal
    that the language is a problem and it is not acceptable. Do you
    concur?
        Ms. Heinen. On the monetization issue, we think that we
    would have to make some significant changes in our program,
    yes.
        Mr. Costa. And what would be the impact, Ms. Lindborg, of
    the 2008 language on the Food for Peace programs? Are you
    familiar with that?
        Ms. Lindborg. Yes, I am. We are working closely with USTR
    and of course USDA to ensure that our emergency food aid
    programs are not unduly constrained. As it is currently
    framed----
        Mr. Costa. As it is currently framed, the monetization, I
    am told, to support ag development activities that support
    mother nutrition programs would be impacted.
        Ms. Lindborg. Monetization would be constrained. Emergency
    food aid under the U.N. is currently protected, and we want to
    ensure that NGOs are as well in their ability to deliver
    assistance.
        Ms. Heinen. If I might add, we do not think that the
    McGovern-Dole program would be affected at this point.
        Mr. Costa. I share my colleague, Congressman McGovern's
    concern because as I said, anecdotally, I think all of us have
    traveled abroad and seen the impact and the benefits of these
    programs. We are also mindful of the fact that there are
    challenges to getting the food to those who need it most, and
    clearly this is something that I want to work with my
    colleague, Congressman McGovern, and others on as we address
    the 2012 Farm Bill.
        Let me finally ask one more question, Ms. Heinen. The
    Subcommittee held a hearing in April examining the export
    programs. I referred to in my earlier questions, the Market
    Access Program in particular. I suggested to the USDA at that
    time, but I also think it is worth revisiting again today based
    upon the comments that some have made regarding the Market
    Access Program. Some have criticized it as a subsidy or
    corporate welfare. Those of us who are familiar with the
    program I think have a different view. Could you please explain
    to the Subcommittee Members your own take on the benefits of
    the Market Access Program?
        Ms. Heinen. Yes, Congressman. When the program was
    originally authorized by Congress, there were not constraints
    on the size of companies and I think that there were some
    recipients that people thought didn't need the assistance, but
    that has been changed in subsequent farm bills and so that now
    the monies go to nonprofit organizations, cooperatives that
    benefit the whole range of farming who represent a broad group
    of farmers.
        Mr. Costa. And give us a greater opportunity to access
    those markets to establish that fair trade that isn't always a
    two-way street.
        Ms. Heinen. Absolutely. They use these monies to look at
    barriers, sanitary, phytosanitary barriers, many communication
    barriers, all sorts of things, getting even on shelves in
    supermarkets, the kinds of things that can make the difference
    for consumers' choice.
        Mr. Costa. Thank you.
        The Chairman. Mr. McGovern, do you have a second round of
    questions?
        Mr. McGovern. Briefly, Mr. Chairman, because my commentary,
    my question was so long, Ms. Heinen, I didn't get a chance to
    allow you to respond, but just to clarify a couple things for
    the record, in terms of administrative costs for the programs
    we are talking about in terms of food aid, I mean, are they
    higher than other administrative costs in other agencies or are
    they about the same? I mean, how would you classify the
    administrative costs of some of these programs?
        Ms. Lindborg. We continually seek the flexibility that
    enables us to make the most cost-effective choices in moving
    the food because we do think it is so important that we have
    the ability to provide emergency food assistance to those in
    need.
        Mr. McGovern. My understanding is that these programs are
    pretty well run by independent analysis, and sometimes there is
    this perception out there that all we need to do is cut more
    overhead here and staff here. I mean, part of the reason why
    you need adequate staff is because we are asking for you to do
    more monitoring and to deliver things more effectively, and
    that does require additional oversight and additional staff.
        Ms. Lindborg. Absolutely, and we take the monitoring and
    evaluation very seriously, and you had asked earlier about how
    to quantify the impact, and I would say that we are very
    concerned that at a time where the needs are rising around the
    world, some of the projections for next year would leave us
    with less than half of the funding that we currently have to
    meet the needs of emergency food aid.
        Mr. McGovern. Which means that thousands or tens of
    thousands or millions of people will not be able to get food?
        Ms. Lindborg. Yes. Since 2008, we have served 140 million
    people globally. The average varies from year to year but it
    would be in the magnitude of 11 million people who we would not
    be able to reach.
        Mr. McGovern. Go ahead.
        Ms. Heinen. If I could just add that we are working closely
    with USAID and we are coordinating more to try and find
    efficiencies, but this is kind of an inherently risky
    proposition in many places that you are providing food aid, so
    those costs do go up. We are also working hard with the
    industry in the United States, which we think has a very
    important part to play in the provision of food aid and in
    helping us find better ways to package, better ways to deliver,
    better ways to serve the hungry of the world.
        Mr. McGovern. Let me just say with regard to the McGovern-
    Dole program, I mean, again, I was one of the primary authors
    of that program although I am not related to the guy that it is
    named after, but that is a program that I really have been
    impressed with in terms of its ability to respond to some of
    the suggestions, whether it is through internal audits or
    whether it is through the Government Accountability Office to
    try to find ways to continue to improve and to be more
    effective and more cost-effective, if you will, but to reach
    more people. I think both within USAID and within USDA, I mean,
    that has been the case, and we need to make it clearer to
    people as to why these programs are so important and why they
    save us money, why they save lives, and why they are in our
    national security interest. I mean, there is not an actual
    constituency out there to tell Members, please continue to vote
    for a robust food aid budget for international food aid
    programs. So I appreciate your efforts in both agencies and I
    want to continue to work with you and make them even better. I
    think we need to do a better job of lifting this issue up and I
    think USAID and the Secretary of State and Secretary Vilsack
    have done a really good job with Feed the Future. People need
    to know more about that. I thank you both.
        Thank you, Mr. Chairman.
        The Chairman. Let me just conclude by a specific and a
    general question and then we will bring the hearing to a close.
        Ms. Heinen, in regard to the Borlaug Fellowship Program,
    you have highlighted that that program has provided training
    opportunities for participants from a number of countries, I
    think you said 64 countries in areas like biotechnology. Could
    you expand for us on what types of training the Borlaug fellows
    receive and how that training can be utilized to build
    regulatory capacity in their home countries?
        Ms. Heinen. Yes, Congressman. The Borlaug Fellowship
    Program, of course named after the Nobel Laureate, Norman
    Borlaug, is helping to bring science to countries that have not
    invested in science in the past, and we have good examples of
    bringing scientists here for 4 or 5 months and they go back and
    they bring new technologies to their countries. We have
    examples where they have passed new laws that can provide for
    pilot technology, where they can do better testing for
    aflatoxins; that ruins crops and poisons people in some of
    these developing countries. So we find it to be a very
    effective program to bring our science to the developing world
    so that they can participate in feeding their people.
        The Chairman. Let me just ask one concluding question that
    is neither intended as either mean-spirited or politically
    correct, and I am sure every district in the country, in my
    district, people in Taylorville, Illinois, will ask me, we have
    a fiscal crisis, huge national debt, and we have hungry people
    here at home. How do these programs that the two of you
    implement and analogous programs in our government not only
    benefit the people for whom they are intended but how do they
    benefit people here in Taylorville, Illinois, or in Boston,
    Massachusetts?
        Ms. Heinen. We have of course two kinds of programs. We
    think directly our programs that help exports are bringing jobs
    to those communities, bringing new opportunities to those
    communities, and so we think there is a very direct benefit. As
    far as our food assistance programs and helping countries
    overseas, as they can take care of themselves better, we think
    our costs for conflict and our costs for feeding the rest of
    the world will be reduced. As we make our farmers more
    efficient, we keep food prices down for our consumers here at
    home, so in those three ways I believe our programs are very
    helpful to your communities.
        The Chairman. Well, thank you, Members of the Committee.
    Thank you, Mr. McGovern, in particular for your courtesy of
    being with us today. We greatly enjoyed and benefited from your
    presence.
        Under the rules of the Committee, the record of today's
    hearing will remain open for 10 calendar days to receive
    additional material and supplementary written responses from
    the witnesses to any questions posed by a Member.
        This hearing of the Subcommittee on Rural Development,
    Research, Biotechnology, and Foreign Agriculture is adjourned.
        [Whereupon, at 11:23 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

          Supplementary Material Submitted by Suzanne Heinen, Acting
        Administrator, Foreign Agricultural Service, U.S. Department of
                                  Agriculture
        During the July 13, 2011 hearing entitled, Agricultural Program
    Audit: Examination of Foreign Agriculture and Food Aid Programs, a
    request for information was made to Suzanne Heinen. The following is
    the information submission for the record.
    Insert
              Mr. Stutzman. Okay. Very good. A recent press release by the
            USDA stated that overseas shipments of agricultural products
            have totaled $75 billion in the first 6 months of the fiscal
            year. Do you know what is the percentage of trade promotion
            programs within the $75 billion?
              Ms. Heinen. It is difficult to exactly say which ones but we
            do know where we have interceded in markets that have made a
            difference. We have recently concluded some programs in
            Algeria, for example, that opened up $43 billion in dairy
            exports or possibility for dairy exports. We recently concluded
            agreements with, or met the standards using some of these funds
            and partnership with agricultural community to meet a deadline
            that would have prohibited about $150 million worth of our
            trade and plant products into Vietnam, so the combination of
            our program, our partnership with the ag community and our
            agricultural attaches overseas, we can trace and we can give
            you some information later if you would like to see some of the
            activities and programs that we know have made a significant
            difference in the export numbers.
              Mr. Stutzman. Sure, I would be very interested in that.

        We recently examined the impact and effectiveness of foreign market
    development programs administered by FAS. In 2010, Global Insight,
    Inc., a private economic and financial analysis research firm, updated
    a cost-benefit analysis of two cost-share programs (the Market Access
    Program [MAP] and Foreign Market Development Program [FMD]). The
    analysis showed that for every dollar that the government and industry
    invested on market development activities an additional $35 of U.S.
    food and agricultural exports was generated. Global Insight's report
    concluded that U.S. agricultural exports in 2009 were $6.1 billion--or
    six percent--higher than they would have been without the increased
    investment in market development.
        Market development program investments can pay immediate dividends,
    such as new sales at trade shows and on trade missions as I discussed
    in my testimony. The investments can also build markets that result in
    years of sustained sales. For example, in Nigeria, a 10 year combined
    U.S. Wheat Associates and USDA investment of MAP and FMD funds
    exceeding $2.5 million resulted in increased U.S. wheat sales of over
    $750 million in FY 2010--a 265 percent increase over 2001 sales.
    Through close public-private partnerships, USDA and American producers
    can achieve real increases in market share and exports.
                                     ______

         Supplementary Material Submitted by Nancy Lindborg, Assistant
        Administrator, Bureau for Democracy, Conflict and Humanitarian
             Assistance, U.S. Agency for International Development
        During the July 13, 2011 hearing entitled, Agricultural Program
    Audit: Examination of Foreign Agriculture and Food Aid Programs, a
    request for information was made to Nancy Lindborg. The following is
    the information submission for the record.
    Insert
              The Chairman. Let me just ask quick question of Ms. Lindborg.
            In your agency's response to the annual delivery cost for
            Public Law 480, Title II, you gave us a figure of about $730
            per metric ton. This number doesn't really tell us very much
            about the cost of implementing that program, Public Law 480.
            Could you describe in the limited time that you have in a
            little more detail the individual elements of this figure such
            as how much of the program delivery costs is salaries, how much
            is administrative expenses, indirect costs, shipping, storage
            and monitoring?
              Ms. Lindborg. Mr. Chairman, I would be delighted to get you
            that information in a written form. It is a complex list. It
            does include our ocean freight, inland freight, internal
            shipping and handling in our Section 202(e) funds. We do
            continually seek to find the most effective way possible to
            ship our food. As you may be aware, there was an independent
            study done recently Cornell University that indicated that the
            taxpayers pay an extra $140 million a year because of some of
            the commodity cargo preferences approaches.

        Table containing information follows:

     FY10 Title II Food for Peace Title II Associated Costs (to date) for FY
                                      2010
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Commodities                                $798,162,595            37.5%
    Ocean Freight                              $431,097,863            20.3%
    Inland Freight                             $196,838,908             9.2%
    Section 202(e)                             $221,143,220              10%
    Internal Transport, Shipping, Handling     $445,827,166              21%
    Personal Service Contractors                $12,057,640               1%
    Miscellaneous                               $23,523,963               1%
                                           ---------------------------------
      Total                                  $2,128,651,355             100%
    ------------------------------------------------------------------------
    Note: Amounts reflect obligated to date. Miscellaneous includes
      technical assistance, Famine Early Warning System (FEWS), office
      space, International Food Relief Partnership (IFRP), information
      technology (IT), etc.

                                     ______

                              Submitted Questions
    Response from Suzanne Heinen, Acting Administrator, Foreign
            Agricultural Service, U.S. Department of Agriculture *
    ---------------------------------------------------------------------------
        * There was no response from the witness by the time this hearing
    went to press.
    ---------------------------------------------------------------------------
    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois
        Question 1. Ms. Heinen, your testimony states that applicant
    contributions are not required in the Technical Assistance for
    Specialty Crops program when the grant funds are awarded, but
    contributions are strongly encouraged. What percentage of approved
    projects provide contributions? What type of contributions are
    generally provided? Do you think it would be helpful to require
    applicants to provide a contribution?
        Question 2. USDA has announcement changes in the Market Access
    Program and Foreign Market Development Program, yet we have not seen
    any revisions in proposed changes. Have you heard from cooperators
    about those proposed changes? Do you plan to put forward an updated
    proposal after hearing from market participants' recommendations?
        Question 3. Ms. Heinen, could you please elaborate for the record
    the unique characteristics and functions of each of our export
    promotion programs, and the distinct role each program plays in the
    creation, expansion, and maintenance of international markets for U.S.
    agricultural products? Do you see any overlap or duplication in what
    these programs are designed to achieve?
        Question 4. How much funding will be used this year from all
    sources for purchasing commodities from local or regional suppliers for
    food aid with U.S. program funds? What are your primary food safety and
    quality challenges when purchasing locally?
    Question Submitted By Hon. Collin C. Peterson, a Representative in
            Congress from Minnesota
        Question. How has USDA/FAS participated in the OMB-directed study
    related to trade reorganization of the Federal Government? How would
    USDA administered programs for market development and export credit
    guarantees be affected if they were merged into a larger, more broadly
    focused trade agency?
    Response from Nancy Lindborg, Assistant Administrator, Bureau for
            Democracy, Conflict and Humanitarian Assistance, U.S. Agency
            for International Development
    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois
        Question 1. How much funding will be used this year from all
    sources for purchasing commodities from local or regional suppliers for
    food aid with U.S. program funds? What are your primary food safety and
    quality challenges when purchasing locally?
        Answer. The Emergency Food Security Program (EFSP) was launched in
    April 2010. It is managed by USAID's Office of Food for Peace (FFP).
    EFSP provides grants for the local or regional procurement of food
    commodities, or the use of cash or vouchers for the purchase of food in
    response to an emergency overseas. In fiscal year 2011, $300 million in
    International Disaster Assistance appropriated through the State,
    Foreign Operations Appropriations Act was used for the Emergency Food
    Security Program. As stated in the USAID International Emergency Food
    Assistance Annual Program Statement (APS), locally and regionally
    procured commodities under the EFSP must meet safety and quality
    standards. For local and regional procurement, bulk grains, legumes,
    and pulses must meet recipient country food safety standards. If the
    recipient country does not have food safety guidelines for grains,
    legumes, and pulses, then awardees must adhere to the Codex
    Alimentarius Recommended International Code of Practice. All other food
    products, including processed foods, fortified blended foods, and
    enriched foods, also must comply with the Codex Alimentarius
    Recommended International Code of Practice. Since the Emergency Food
    Security Program was started, USAID has not received any complaints
    regarding commodity safety or quality.

        Question 2. Ms. Lindborg, in your testimony you mentioned the $450
    million set-aside for development funds. Could you provide additional
    details on how this provision may impact your ability to meet
    humanitarian needs?
        Answer. Under the Food for Peace Act, USAID must provide a minimum
    level of Title II funding for development food aid programs, which must
    increase by $25 million each year (regardless of appropriations
    levels). In FY 2012, this development food aid requirement is $450
    million. The House-passed FY 2012 agriculture appropriations bill
    contained $1.032 billion for Title II, which would include the $450
    million requirement for development food aid. USAID would have
    approximately $580 million remaining for emergency programs in FY 2012.
    Compared to the FY 2012 Title II emergency request of $1.240 billion,
    this would be a cut of $660 million in emergency food aid. During FY
    2008-2010, USAID programmed approximately $1.8 billion annually in
    Title II emergency resources.

        Question 3. Ms. Lindborg, the 2008 Farm Bill provided additional
    authorities for prepositioning food aid to address urgent needs and
    reduce costs. How much have you spent on these warehousing sites? Is
    there a cost difference if the warehouse is empty?
        Answer. Since FY 2008, USAID has spent a total of approximately
    $12.9 million for overseas pre-positioning of Title II commodities. The
    pre-positioned warehouses only cost money when USAID has cargo situated
    within them. USAID does not hold leases on these warehouses. Rather,
    USAID is billed for usage.

        Question 4. Ms. Lindborg, your testimony mentioned your policy to
    swiftly respond to any instances of fraud, waste, and abuse. Do you
    feel the monitoring and evaluation of programs by your agency staff is
    adequate to avoid instances of fraud in the first place?
        Answer. USAID's Office of Food for Peace (FFP) is fully committed
    to Administrator Shah's USAID Forward reforms that promote improved
    monitoring, evaluation, and transparency of food assistance programs.
    In part thanks to the additional flexibility provided in the 2008 Farm
    Bill, FFP has increased the number of monitoring and evaluation field
    staff stationed throughout the world to provide increased oversight and
    monitoring assistance to Title II awardees. Awardees report quarterly
    on lost and damaged commodities; and FFP is currently implementing a
    series of commodity management workshops to ensure that Title II
    awardees appropriately monitor the receipt and distribution of Title II
    food aid.

        Question 5. For FY 2010, could you please elaborate on the specific
    cost components under P.L. 480 Title II, including:
        The average cost and range of costs per delivered metric ton (MT)
    for emergency food aid.
        Answer. The average costs per delivered MT for Title II emergency
    food aid during FY 2010 was $954. This includes awards made to both
    U.S. non-governmental organizations (NGOs) and the World Food Program
    (WFP). The figure includes commodity costs, shipping costs, and awardee
    implementing costs, such as internal transport, storage, and handing
    (ITSH), and section 202(e) administrative costs.

        Question 5a. How much of P.L. 480 Title II funding was implemented
    by the World Food Program (WFP), and how much was implemented by U.S.
    non-governmental organizations (NGO)?

        Answer. USAID awarded WFP $1,224,533,600 of Title II emergency
    resources in FY 2010. A combination of U.S. based and non-U.S. based
    NGOs were awarded $298,017,200 of Title II emergency resources. USAID
    also awarded NGOs $401,015,000 for the implementation of Title II
    development food assistance programs.

        Question 5b. Is there a difference in the delivered cost per metric
    ton between what the WFP implemented and that which NGOs implemented?
    What criteria does USAID use to determine whether to provide funding
    through WFP or an NGO?
        Answer. WFP's global average delivered cost per metric ton is
    $145.88 higher than NGO implemented programs. This variation is
    primarily a factor of commodity and freight price volatility, program
    locations, and programming considerations (ration mix, beneficiary
    targeting, distribution timing and methodology), rather than a measure
    of the operational efficiency of WFP or NGO partners.
        While each country context is different, the main factors
    considered when making funding decisions are:

      b Timing--When must the food be called forward in order to reach
            beneficiaries on time? Will there be significant pipeline
            breaks at critical periods (such as the hunger season) that
            require assistance be sent now?

      b Nature of the needs--What are the main factors indicating a food
            security emergency (acute malnutrition rates, significant crop
            losses, etc.)? What is the extent or severity of the emergency/
            food insecurity in the country or area in question?

      b Appropriateness--Which or what combination of tools/resources
            (i.e., EFSP or Title II) are most appropriate to address the
            needs?

      b Constraints--Are there other factors (e.g., host government
            policies, implementing partner capacity, or USG policy
            concerns) that should influence USAID support?

      b Operational Capacity--Is the organization that submitted the appeal
            or proposal to USAID capable of carrying out the program?

        Question 5c. For the WFP emergency programs, please show a breakout of average cost per metric ton of the following components: commodity, ocean
     freight, inland transportation, storage, handling, direct costs, any other specified costs, and the 7% overhead allowed for WFP indirect support costs.
     Do these costs include all costs associated with delivering the food to the recipient, as well as reporting and monitoring?
        Answer.

                                                                 FY 2010 WFP Emergency Programs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                MT      Total Emergency  Commodity Price   Ocean freight    Inland freight        ITSH            202(e)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total                                    1,283,900   $1,224,533,700     $458,435,400     $188,087,700     $106,131,300     $367,167,100     $104,712,200
    Average                                                     $953.76          $357.06          $146.50           $82.66          $285.98           $81.56
    Percent of Total Cost                                                            37%              15%               9%              30%               9%
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The above table breaks down the cost of Title II emergency programs implemented by WFP into the following components: commodity price; ocean
     freight; inland freight; internal transportation, storage, and handling (ITSH); and section 202(e). Cost does include monitoring and evaluation. Please
     note that commodity and freight prices fluctuate throughout the year, and that not all programs incur inland freight costs. Section 202(e) funds
     include direct and other specified costs as described in the Food for Peace Act. WFP's direct support costs and other direct operational costs are
     covered through both ITSH and section 202(e) funds. The seven percent overhead allowed for WFP indirect support costs are reflected in the 202(e)
     expense category.

        Question 5d. When NGOs partner with WFP to deliver food aid to particular populations, do NGOs bear some of those costs?
        Answer. WFP establishes sub-agreements with its NGO partners, which may include what costs may be reimbursed as a result of these partnerships.

        Question 5e. Could you explain how the WFP seven percent overhead rate was determined?
        Answer. WFP's financial regulations are governed by its Executive Board. Comprising 36 State Members of the United Nations or Member Nations of the
     Food and Agriculture Organization, including the United States, the Executive Board establishes the overhead rate.

        Question 5f. For the NGO-implemented emergency programs, please show a breakout of average cost per metric ton of the following components:
     commodity, ocean freight, inland transportation, storage, handling, direct costs, any other specified costs, and the negotiated indirect cost recovery
     (NICRA).

                                                                     NGO Emergency Programs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                MT      Total Emergency  Commodity Price   Ocean freight    Inland freight        ITSH            202(e)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total                                      368,890     $297,888,100     $120,412,400      $51,400,500      $27,830,400      $63,413,800      $34,831,000
    Average                                                     $807.53          $326.42          $139.34           $75.44          $171.90           $94.42
    Percent of Total Cost                                                            40%              17%               9%              21%              12%
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The above table breaks out the cost of NGO implemented emergency programs into the following components: commodity price; ocean freight; inland
     freight; internal transportation, storage, and handling (ITSH); and section 202(e). Please note that commodity and freight prices fluctuate throughout
     the year, and that not all programs incur inland freight costs. Section 202(e) funds include direct and other specified costs as described in the Food
     for Peace Act. Indirect costs, determined by each NGO's negotiated indirect cost rate agreement (NICRA), are included in section 202(e) funds.

        Question 5g Could you please explain how NICRA is determined? Do these costs include all costs associated with delivering the food to the recipient
     and reporting and monitoring? Does it include any other activities beyond food distribution?
        Answer. Each NGO negotiates its indirect cost rate with one government agency that has been assigned cognizance. Usually the cognizant government
     agency is that agency which has the largest dollar volume of contracts with the firm or organization. The resulting NICRA is binding on the entire
     government. The NICRA contains both final rates for past periods and provisional (billing rates) for current and future periods. The Office of Food for
     Peace (FFP) does not apply NICRA rates to ITSH costs, equipment purchases, or sub-awards valued at greater than $25,000. Some examples of indirect
     costs are office space rental, utilities, and clerical and managerial staff salaries.

        Question 5h What was the average cost per metric ton for the Title II non-emergency programs? Could you please show a breakout of the average cost
     per metric ton of the following components: commodity, ocean freight, inland transportation, storage, handling, direct costs, any other specified
     costs, and the associated NICRA?

                                                               FY10 Title II Development Programs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Total
                                                MT        Development    Commodity Price   Ocean freight    Inland freight        ITSH            202(e)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total                                      500,150     $401,015,000     $171,694,400      $78,582,600      $27,466,800      $52,347,100      $70,924,100
    Average                                                     $801.79          $343.29          $157.12           $54.92          $104.66          $141.81
    Percent of Total Cost                                                            43%              20%               7%              13%              18%
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The above table breaks out the cost of NGO implemented development programs into the following components: commodity price; ocean freight; inland
     freight; internal transportation, storage, and handling (ITSH); and section 202(e). Please note that commodity and freight prices fluctuate throughout
     the year, and that not all programs incur inland freight costs. Section 202(e) funds include direct and other specified costs as described in the Food
     for Peace Act. Indirect costs, determined by each NGO's NICRA, are paid through section 202(e) funds.

                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--U.S.
                           Department of Agriculture
    1. Program Name
        P.L. 480 Title I.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The P.L. 480 Title I program was authorized in 1954 to allow
    concessional sales of U.S. agricultural commodities to developing
    countries. It is now authorized under the Food for Peace Act. The U.S.
    Department of Agriculture and the recipient country enter into an
    agreement, which may provide that the commodities may be re-sold by the
    recipient country and the proceeds used to support agricultural,
    economic, or infrastructure development projects. Since Fiscal Year
    2006, new funding has not been requested or appropriated because demand
    for food assistance using credit financing has fallen and grant
    programs have been a more appropriate tool.
    4. Purpose/Goals
        Title I provides for government-to-government sales of agricultural
    commodities to developing countries under long-term credit
    arrangements. The primary goals of the Title I program are to provide
    economic assistance and promote food security. Priority is given to
    countries coping with limited foreign exchange reserves, chronic food
    shortages, poverty, and underdevelopment in the agricultural sector.
    Past Title I programs have targeted countries with food insecurity,
    countries with limited foreign exchange, and countries working to
    alleviate poverty and develop their agricultural economies.
    5. Success in Meeting Programmatic Purpose/Goals
        The Title I program account has not received funding since 2006.
    Over the program's history, USDA made concessional loans in response to
    requests from foreign governments. Concessional loans were made to
    governments that were facing food insecurity or economic problems or
    that were working to alleviate poverty and promote economic
    development.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                 $146
                           2003                                 $140
                           2004                                 $132
                           2005                                 $117
                           2006                                  $64
                           2007                                   $3
                           2008                                   $3
                           2009                                   $3
                           2010                                   $3
                           2011                                   $3
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                Outlays a
    ------------------------------------------------------------------------
                           2002                                 $182
                           2003                                  $88
                           2004                                 $121
                           2005                                 $116
                           2006                                  $66
                           2007                                  $60
                           2008                                  $27
                           2009                                  $25
                           2010                                $17.4
                           2011                                  $16
    ------------------------------------------------------------------------
    a Does not include subsidy reestimate.

        Not all payments (outlays) are made during the year in which budget
    authority is made available. Outlays could be made up to 5 years after
    the appropriation is received. Most payments are made by the third
    fiscal year after the appropriation. For most sales agreements under
    Title I, CCC will pay ocean freight charges only to the extent of the
    difference between U.S.-flag rates and foreign-flag rates when U.S.-
    flag vessels are required to be used in order to meet cargo preference
    requirements. The difference in rates is known as the ocean freight
    differential and those costs are included the outlays above.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ----------------------------------------------------------------------------------------------------------------
                                                                                       FTEs
                 FY                       Annual Cost        -------------------------------------------------------
                                                                          FTE                    Tech. Assist.
    ----------------------------------------------------------------------------------------------------------------
                       2007                         $3.4                       0.166                       3.373
                       2008                         $2.7                           0                       2.680
                       2009                         $2.7                           0                       2.736
                       2010                         $2.8                           0                       2.812
                       2011                  $2.8 (est.)                           0                       2.806
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Title I does not have a strict set of eligibility criteria, which
    allows the program to be flexible and to provide needs-based
    assistance. Although Title I concessional sales may be made to private
    entities, the vast majority have been made to sovereign governments.
    When making funding decisions, USDA considers food security, economic,
    and financial needs.
    10. Utilization (Participation) Data
        In 2006, USDA funded two Title I concessional sales to two
    sovereign governments (Peru and the Philippines).
    11. Duplication or Overlap with Other Programs
        The Food for Peace Act contains several titles, including Title II
    (administered by the U.S. Agency for International Development).
    However, Title I and Title II avoid overlap because they have distinct
    missions and goals. Title II programs target highly vulnerable
    populations in very poor countries through food security interventions
    and humanitarian assistance (including direct distribution). Title I,
    on the other hand, assists sovereign governments with broader economic
    needs and agricultural development.
    12. Waste, Fraud and Abuse
        FAS is proactive in monitoring Title I for any indications of
    waste, fraud or abuse. FAS has not found any systemic problems in Title
    I.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        McGovern-Dole International Food for Education and Child Nutrition
    Program.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The McGovern-Dole International Food for Education and Child
    Nutrition Program (McGovern-Dole Program) was authorized by the Farm
    Security and Rural Investment Act of 2002. Named in honor of Ambassador
    and former Senator George McGovern and former Senator Robert Dole for
    their efforts to encourage a global commitment to school feeding and
    child nutrition, the program replaced the pilot Global Food for
    Education Initiative, which fed nearly seven million children during
    2001-2002. Since 2003, the McGovern-Dole Program has supported projects
    in 41 countries and fed 4-5 million children each year. The 2002 Farm
    Bill provided $100 million of Commodity Credit Funds for the program
    and an authorization of appropriations through 2007. This authorization
    of appropriations has been extended through FY12. In FY 2011, Congress
    appropriated $199.1 million for the program.
    4. Purpose/Goals
        Congress established the McGovern-Dole Program to carry out
    preschool and school food for education programs in foreign countries
    to improve food security, reduce the incidence of hunger, and improve
    literacy and primary education, particularly with respect to girls; and
    maternal, infant, and child nutrition programs for pregnant women,
    nursing mothers, infants, and children who are 5 years of age or
    younger. Under this program, the U.S. Department of Agriculture (USDA)
    donates U.S. agricultural products and financial and technical
    assistance for school feeding and maternal and child nutrition projects
    in low-income, food-deficit countries that are committed to universal
    education.
    5. Success in Meeting Programmatic Purpose/Goals
        USDA enters into agreements with implementing organizations to
    carry out projects under the McGovern-Dole Program. In progress
    reports, implementing organizations provide information about the
    number of children being fed, the increases in attendance, and other
    benefits that lead to improved literacy, better diet, and graduation of
    the programs. Organizations frequently report gains in attendance of
    ten percent or more in participating schools. Teachers indicate that
    children are more attentive, have more energy, and will attend school
    for the whole day.
        One example is a program with International Partnership and Human
    Development in Guinea-Bissau. Activities include the provision of
    nutritious meals, nets and medicines to reduce malaria, and furniture
    for the schools. Infrastructural improvements are also underway for the
    school buildings and water and sewage systems. IPHD is focused on
    graduating or transferring responsibility for the program and is
    providing training and other support to build the country's capacity.
    The program contributed to a 15 percent increase in school enrollment
    and an 11 percent reduction in absenteeism and dropout rates during the
    first 2 years. The children have more incentive and desire to attend
    school. Parents and local community members are realizing the benefits
    of education, and PTA participation is on the rise. The government has
    taken notice of IPHD's successful strategy, and the Ministry of
    Education has stationed one of its top officials in its offices.
        USDA and the implementing organizations develop graduation plans to
    ensure that progress is being made toward the goal of having a local
    entity assume responsibility for the program. The projects in 41
    countries are at different stages in achieving graduation. The
    McGovern-Dole Program graduated a school feeding project in Moldova,
    and the Government of Moldova has continued much of the program since
    the U.S. funding ended. School feeding programs in Kenya, Laos, and
    Guinea-Bissau are nearing full graduation.
        USDA is implementing improvements in program management that will
    allow for more intensive monitoring of results to ensure that
    implementing organizations are contributing to the desired results. In
    FY 2011, USDA released results frameworks that outlined the objectives
    for the program and the desired results. Organizations will begin
    reporting against these frameworks in FY 2012, and USDA will review the
    results closely to keep organizations on track or to make course
    corrections.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                   $0
                           2003                                 $100
                           2004                                  $50
                           2005                                  $87
                           2006                                  $98
                           2007                                  $99
                           2008                                  $99
                           2009                                  $85
                           2010                                 $210
                           2011                               $199.5
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                   $0
                           2003                                 $100
                           2004                                  $43
                           2005                                  $93
                           2006                                  $91
                           2007                                  $96
                           2008                                  $91
                           2009                                 $104
                           2010                                  $83
                           2011                                   $2
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which budget
    authority is made available. Outlays could be made up to 5 years after
    the appropriation is received. Most payments are made by the third
    fiscal year after the appropriation
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
               FY                   Annual Cost                 FTE
    ------------------------------------------------------------------------
                 2007                    $1.000                       8
                 2008                    $1.500                      12
               2009 a                    $3.000                      13
               2010 a                    $2.300                      13
               2011 a             $3.500 (est.)               13 (est.)
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.

    9. Eligibility Criteria
        By statute, eligible entities are ``private voluntary
    organizations, cooperatives, intergovernmental organizations,
    governments of developing countries and their agencies, and other
    organizations.'' Under regulations, to be eligible to participate in
    the McGovern-Dole Program an organization must have the capacity to
    implement, monitor, and report on an award; experience working in the
    targeted country; an adequate financial framework to carry out the
    program; representation in the United States; and an operating
    financial account in the proposed target country. In addition, USDA
    publishes an annual list of McGovern-Dole priority countries in order
    to focus its resources where they are most needed. Priority countries
    must have a per capita income below $3,945; have a child growth
    stunting rate greater than 20 percent; have adult literacy rates below
    80 percent; have government commitment to education; be free of civil
    conflict; and have USDA post coverage (to facilitate monitoring).
    10. Utilization (Participation) Data
        In FY 2010, the McGovern-Dole Program provided $174.1 million to 23
    organizations to implement school feeding and nutrition programs,
    assisting 4.3 million beneficiaries in 18 countries. Approximately $3.5
    million was used to cover administrative costs and an additional $10
    million was allocated to fund the Micronutrient Fortified Food Aid
    Products Pilot, as required by Congress. The remaining $21.9 million
    was rolled into FY 2011 to support programs in Haiti and Afghanistan,
    which were announced October 1, 2010.
        In FY 2011, the McGovern-Dole Program will provide $198 million to
    eight organizations in 15 countries to implement school feeding and
    nutrition programs, assisting 3.59 million beneficiaries. A detailed
    table of the FY 2011 is attached.
    11. Duplication or Overlap with Other Programs
        The McGovern-Dole Program's purpose and goals do not overlap with
    those of other USDA food assistance programs. The U.S. Agency for
    International Development's Title II program also provides school
    feeding in emergency situations. The McGovern-Dole Program provides
    school feeding over a longer period with a goal of graduating the
    program by having the government or other entities in the recipient
    country assume responsibility for the program.
    12.Waste, Fraud and Abuse
        The Foreign Agricultural Service (FAS) closely monitors the
    McGovern-Dole Program to ensure that participating organizations carry
    out agreements in accordance with program regulations. In recent years,
    financial, programmatic and compliance controls have been strengthened
    to identify and address any problematic issues or potential violations.
    FAS has also increased monitoring at the field level and invested in
    information systems to better implement program controls. Where any
    indications of waste, fraud and abuse have been found, FAS has been
    aggressive in pursuing corrective action, including criminal
    prosecution, to secure the recovery of funds and prevent recurrence.
    However, vigorous monitoring and oversight procedures have kept such
    indications to a minimum, and FAS has not found any systemic problems
    in the McGovern-Dole Program. The FAS Compliance staff routinely
    reviews McGovern-Dole Program agreements to document compliance and to
    ensure the effectiveness of FAS's internal controls. The McGovern-Dole
    Program also is frequently audited by both the USDA Office of Inspector
    General and the Government Accountability Office, each of which
    provides detailed reports and recommendations for improvement. The most
    recent GAO report was released on May 19, 2011 (GAO-11-544). Finally,
    the McGovern-Dole Program is included in the Commodity Credit
    Corporation's annual audit, and is subject to additional government-
    wide oversight and reporting requirements as well, including the
    Improper Payments Information Act of 2002.
    13. Effect of Administrative PAYGO
        None.
                                   attachment
    Fiscal Year 2011

       Fiscal Year 2011 McGovern-Dole International Food for Education and
                         Child Nutrition (McGovern-Dole)
          McGovern-Dole Program: Approved Fiscal Year 2011 Allocations
    ------------------------------------------------------------------------
                       Participant/Commodity                    Est. Value
         Country                 *             Beneficiaries    (Million $)
    ------------------------------------------------------------------------
    Bangladesh        World Food Program/            350,000           $30.0
                       Wheat
    Burkina Faso      Catholic Relief                130,000           $13.5
                       Services/Bulgur,
                       Cornmeal, Lentils,
                       Vegetable Oil
    Congo             International                  110,000           $14.0
                       Partnership for Human
                       Development/Beans,
                       Dehydrated Potatoes,
                       Milled Rice,
                       Vegetable Oil
    Guatemala         SHARE/Beans, Milled            160,000           $23.0
                       Rice, Soybean Meal,
                       Vegetable Oil
    Guinea-Bissau     International                  110,000           $16.0
                       Partnership for Human
                       Development/Beans,
                       Dehydrated Potatoes,
                       Milled Rice,
                       Vegetable Oil
    Laos              World Food Program/            250,000           $10.0
                       Corn Soy Blend,
                       Milled Rice,
                       Vegetable Oil
    Mali              Catholic Relief                180,000           $18.0
                       Services/Milled Rice,
                       Peas, Vegetable Oil
    Nepal             World Food Program/            270,000            $6.0
                       Vegetable Oil, Wheat
    Nicaragua         Food for the Poor/             100,000           $12.5
                       Beans, Nonfat Dry
                       Milk, Milled Rice,
                       Textured Soy Protein,
                       Vegetable Oil
    Afghanistan       World Vision/Milled             80,000           $11.9
                       Rice, Peas, Vegetable
                       Oil
    Haiti             Haiti Vision/Beans,             30,000            $4.5
                       Milled Rice,
                       Vegetable Oil
    Haiti             World Food Program/            250,000            $6.0
                       Lentils, Milled Rice,
                       Vegetable Oil
    Kenya             World Food Program/            650,000            $9.4
                       Bulgur, Corn Soy
                       Blend, Peas,
                       Vegetable Oil
    Liberia           World Food Program/            350,000            $6.4
                       Bulgur, Peas,
                       Vegetable Oil
    Malawi            World Food Program/            300,000            $8.3
                       Corn Soy Blend
    Senegal           Counterpart                    270,000            $8.5
                       International/Bulgur,
                       Lentils, Vegetable
                       Oil
                                             -------------------------------
      Total           McGovern-Dole Program        3,590,000          $198.0
                       Allocations
    ------------------------------------------------------------------------

                                     ______

    1. Program Name
        Local and Regional Food Aid Procurement Projects.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The USDA Local and Regional Food Aid Procurement Pilot Project
    (USDA LRP Project) is a 5 year, $60 million pilot authorized and funded
    by Congress in Section 3206 of the Food, Conservation, and Energy Act
    of 2008 (Farm Bill) for the purpose of examining the timeliness and
    efficiency of local and regional procurement (LRP) as a tool to enhance
    U.S. Government food assistance programs. The LRP pilot provides cash
    grants for the purchase of food from surplus-producing areas in the
    country or region to respond to a natural disaster or other food
    crisis.
    4. Purpose/Goals
        The goal of the USDA LRP Project is to produce an independent
    evaluation of field based LRP projects, which will help inform
    Congressional discussions regarding the future use of local and
    regional procurement in U.S. Government food assistance programming.
    The evaluation is specifically to examine: the benefits to local
    agriculture; the impact on markets and consumers; the period of time
    required for procurement and delivery; quality and safety assurances;
    and implementation costs.
    5. Success in Meeting Programmatic Purpose/Goals
        To achieve the goal of the USDA LRP, the authorizing law
    established four objectives that have been met or are on course to be
    met.. The first objective required a study of prior local and regional
    purchases, which USDA completed and submitted to Congress in January
    2009. The second objective called for development of project
    guidelines, and these were completed in FY 2009. The third objective
    concerned implementing field-based projects during FY 2009-2011. All
    available funding for the projects has been obligated, and
    implementation will be completed by September 30, 2011. The fourth
    objective called for an independent evaluation of the project to be
    completed by June 2012. USDA has contracted with Management Services
    International has to conduct the evaluation.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                   $0
                           2003                                   $0
                           2004                                   $0
                           2005                                   $0
                           2006                                   $0
                           2007                                   $0
                           2008                                   $0
                           2009                                   $5
                           2010                                  $25
                           2011                                  $25
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                   $0
                           2003                                   $0
                           2004                                   $0
                           2005                                   $0
                           2006                                   $0
                           2007                                   $0
                           2008                                   $0
                           2009                                   $0
                           2010                                   $1
                           2011                                  $39
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the project is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                            Annual Cost                       FTE
                  ----------------------------------------------------------
                     Section 11 &
          FY           General       Prog. Funds
                    appropriations   for Admin.        FTE       Tech Assist
                     Admin. Cost       Support
    ------------------------------------------------------------------------
            2007
            2008
          2009 a                             $.3             1             1
          2010 a                            $1.0             2             1
          2011 a              $0            $1.6      2 (est.)             1
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    This program began in FY 2009.
    Beginning in FY 2009, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempts program funds used to pay authorized
      administrative costs from counting against the CCC section 11 cap. In
      FYs 2010 and 2011 Appropriations Act provisions continued to allow
      program funds to be used for administrative costs.

    9. Eligibility Criteria
        By statute, private voluntary organizations and international
    organizations are eligible.
    10. Utilization (Participation) Data
        During FY 2009 to FY 2011, six private voluntary organizations and
    one international organization (the World Food Program) received
    funding. The participants implemented 23 projects in 19 different
    countries. About 1.7 million beneficiaries received assistance.
    11. Duplication or Overlap with Other Programs
        While the pilot aspect of the USDA LRP Project is unique the
    individual emergency response field-based projects funded under the
    USDA LRP Project can be similar to projects funded by USAID's Food for
    Peace Office (FFP) under the Emergency Food Security Program. The USDA
    LRP Project team actively shares information, and collaborates, with
    FFP to avoid duplication or overlap with their programs. In addition to
    the emergency response projects, the USDA LRP Project allows for
    funding of projects that focus on the development of suppliers in
    recipient countries. USAID's program funds emergency response projects
    only.
    12. Waste, Fraud and Abuse
        None identified.
    13. Effect of Administrative PAYGO
        None.

                                                       attachment
                      USDA Local and Regional Procurement Project Funding Allocations FY 2009-2011
    ----------------------------------------------------------------------------------------------------------------
                                  Recipient  Program                      Funding                          Total
         FY        Organization    Country     Type       Awards         Available        Admin.        Unobligated
    ----------------------------------------------------------------------------------------------------------------
        1  2009   WFP            Mali        Develop      $1,049,752
                                              ment
        2  2009   WFP            Malawi      Develop      $1,700,001
                                              ment
        3  2009   WFP            Tanzania    Develop      $2,000,185
                                              ment
                 ---------------------------------------------------------------------------------------------------
                           FY 2009 Sub-total              $4,749,938      $5,000,000        $250,062              $0
                 ---------------------------------------------------------------------------------------------------
        4  2010   Mercy Corps    Niger       Emergen      $4,577,747
                                              cy
        5  2010   Land O'Lakes   Bangladesh  Develop      $2,619,919
                                              ment
        6  2010   CRS            Guatemala   Emergen      $1,751,205
                                              cy
        7  2010   CRS            Mali        Develop        $106,098
                                              ment
        8  2010   CRS            Benin       Develop      $1,278,694
                                              ment
        9  2010   CRS            Burkina     Develop        $985,965
                                  Faso        ment
       10  2010   IRD            Cambodia    Develop        $710,138
                                              ment
       11  2010   Land O'Lakes   Zambia      Develop      $3,624,017
                                              ment
       12  2010   WFP            Mali        Develop      $1,104,906
                                              ment
       13  2010   Fabretto       Nicaragua   Develop        $675,147
                                              ment
       14  2010   WFP            Congo,      Emergen      $2,449,128
                                  Republic    cy
                                  of
       15  2010   WFP            Cameroon    Emergen        $819,885
                                              cy
       16  2010   WFP            Chad        Emergen      $3,107,000
                                              cy
                 ---------------------------------------------------------------------------------------------------
                           FY 2010 Sub-total             $23,809,851     $25,000,000      $1,178,000         $12,149
                 ---------------------------------------------------------------------------------------------------
       17  2011   World Vision   Uganda      Develop      $3,965,025
                                              ment
       18  2011   WFP            Cameroon    Emergen      $2,180,808
                                              cy
       19  2011   UMCOR          Zimbabwe    Emergen      $1,623,177
                                              cy
       20  2011   WFP            Mozambique  Emergen      $3,498,791
                                              cy
       21  2011   WFP            Pakistan    Emergen      $5,719,963
                                              cy
       22  2011   CRS            Niger       Emergen      $4,465,632
                                              cy
       23  2011   World Vision   Kenya       Emergen      $1,871,750
                                              cy
                 ---------------------------------------------------------------------------------------------------
                           FY 2011 Sub-total             $23,325,146     $25,000,000      $1,573,000        $101,854
                 ===================================================================================================
                             Total Funded                $51,884,934     $55,000,000      $3,001,062        $114,004
    ----------------------------------------------------------------------------------------------------------------

                                     ______

    1. Program Name
        Food for Progress.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Food for Progress (FFPr) program was authorized by the Food for
    Progress Act of 1985. Most recently, it was reauthorized through 2012
    in the 2008 Farm Bill. Since 1985, FFPr has provided donated U.S.
    agricultural commodities to developing countries and emerging
    democracies committed to introducing and expanding free enterprise in
    their agricultural sectors. Donated commodities are typically
    ``monetized'' (or sold on the local market), and the proceeds are used
    to support agricultural development activities.
    4. Purpose/Goals
        The FFPr program uses the food resources of the United States to
    support market-based agricultural development to improve agricultural
    productivity and to expand trade of agricultural products in food-
    deficit developing countries and emerging democracies.
    5. Success in Meeting Programmatic Purpose/Goals
        During FY 2010, the FFPr program funded 12 programs in 11
    countries. These programs are reaching approximately 3,985,000
    beneficiaries through agricultural development activities including
    construction of irrigation systems, agricultural production training,
    microfinance, and dairy value chain development. For example, Land
    O'Lakes received an FFPr grant to improve commercial milk production,
    processing and marketing in Tanzania. By the end of the program, the
    gross value of milk produced in Tanzania is projected to increase by
    $2.1 million. The project will also create 180 new dairy sector-related
    jobs in private sector enterprises.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                 $126
                           2003                                 $137
                           2004                                 $138
                           2005                                 $122
                           2006                                 $131
                           2007                                 $147
                           2008                                 $155
                           2009                                 $216
                           2010                                 $146
                           2011                                 $192
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                 $202
                           2003                                 $203
                           2004                                 $113
                           2005                                  $93
                           2006                                 $154
                           2007                                 $120
                           2008                                 $219
                           2009                                 $155
                           2010                                 $117
                           2011                                 $189
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the program is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                            Annual Cost                       FTE
                  ----------------------------------------------------------
                     Section 11 &
          FY           General       Prog. Funds
                    appropriations   for Admin.        FTE       Tech Assist
                     Admin. Cost       Support
    ------------------------------------------------------------------------
            2007            $2.1                             3          4.62
            2008              $0                             0          4.62
          2009 a                          $0.009             1          4.62
          2010 a                            $2.1             2          4.62
          2011 a              $0     $3.4 (est.)             5          4.62
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    For FY 2009 and FY 2010, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempted CCC program funds used to pay
      authorized administrative costs for FFPr from counting against the cap
      on CCC funds used to pay for salaries and administrative costs imposed
      by Section 11 of the CCC Charter Act. The Department of Defense and
      Full-Year Continuing Appropriations Act of 2011 continued the
      exemption from the CCC section 11 cap for CCC funds used to pay
      authorized administrative costs of FFPr.

    9. Eligibility Criteria
        Consistent with CFR 1499.3, to be eligible to participate in the
    FFPr program an organization must have: the capacity to implement,
    monitor, and report on an award; experience working in the targeted
    country; an adequate financial framework to carry out the program;
    representation in the United States; and an operating financial account
    in the proposed target country. Additionally, USDA publishes an annual
    list of FFPr priority countries in order to focus its resources where
    they are most needed. Priority countries must: have a per capita income
    below $3,945; have a malnutrition rate greater than 20 percent; be
    ranked free or partly free by Freedom House; and have USDA post
    coverage (to facilitate monitoring).
    10. Utilization (Participation) Data
        In FY 2011 the FFPr program will fund 13 projects reaching
    approximately 1,678,000 beneficiaries. A table of the FY 2011
    allocations is attached.
    11. Duplication or Overlap with Other Programs
        Food for Progress is similar in scope to the Multi-year Assistance
    Programs (MYAPs) funded under Title II of the Food for Peace Act
    (administered by USAID). Both programs monetize agricultural
    commodities to support development activities. However, these programs
    complement and do not duplicate one another because of their difference
    in mission. Title II programs target highly vulnerable populations in
    very poor countries through food security interventions. FFPr, on the
    other hand, works to promote private sector agricultural development in
    emerging democracies. Additionally, these programs further avoid
    overlap by coordinating closely to ensure that their different
    activities complement and do not duplicate one another.
    12. Waste, Fraud and Abuse
        FAS closely monitors all food aid programs to ensure that
    participating organizations carry out agreements in accordance with
    program regulations. In recent years, financial, programmatic and
    compliance controls have been strengthened to identify and address any
    problematic issues or potential violations. FAS has also increased
    monitoring at the field level and invested in information systems to
    better implement program controls. Where any indications of waste,
    fraud and abuse are found, FAS has been aggressive in pursuing
    corrective action, including criminal prosecution, to secure the
    recovery of funds and prevent recurrence. However, vigorous monitoring
    and oversight procedures have kept such indications to a minimum, and
    FAS is not aware of any systemic problems in FFPr. The FAS Compliance
    staff routinely reviews FFPr agreements to document compliance and to
    ensure the effectiveness of FAS's internal controls. In FY2010
    Compliance reviewed $330,471,030 across all FAS programs and disallowed
    $227,159, which was returned by participants. The FFPr program also is
    frequently audited by both the USDA Office of Inspector General and the
    Government Accountability Office, each of which provides detailed
    reports and recommendations for improvement. Finally, FAS programs are
    subject to the same oversight and documentation requirements common to
    all USDA programs, including the Improper Payments Information Act.
    13. Effect of Administrative PAYGO
        None.
                                   attachment
    Fiscal Year 2011

                    Fiscal Year 2011 Food for Progress (FFPr)
                 Food for Progress: Fiscal Year 2011 Allocations
    ------------------------------------------------------------------------
                       Participant/Commodity                    Est. Value
         Country                 *             Beneficiaries    (Million $)
    ------------------------------------------------------------------------
    Bangladesh        Small Enterprise                13,200           $17.5
                       Assistance Funds/
                       Wheat
    Bangladesh        Winrock International/         411,600            $4.3
                       Wheat
    Benin             Partners for                    30,000            $5.5
                       Development/Soybean
                       Oil, Rice
    Burkina Faso      International Relief           213,840            $8.6
                       and Development/Rice
    Haiti             FINCA International/           148,500            $6.1
                       Wheat
    Haiti             Inter-American                    126            $8.5
                       Institute for
                       Cooperation on
                       Agriculture/Soybean
                       Oil, Wheat
    Honduras          Government of Honduras/         36,000           $11.0
                       Corn, Wheat, Soybean
                       Meal
    Kenya             TechnoServe/Wheat               10,090           $14.8
    Liberia           Land O'Lakes/Rice,              11,650           $16.6
                       Vegetable Oil
    Malawi            Land O'Lakes/Wheat,            564,542           $18.1
                       Soybean Oil
    Philippines       Catholic Relief                 64,648           $13.9
                       Services/Soybean Meal
    Uganda            Mercy Corps/Wheat               83,200           $11.2
    Uganda            National Cooperative            90,215           $12.0
                       Business Association/
                       Soybean Oil
                                             -------------------------------
      Total                                        1,677,611          $148.1
    ------------------------------------------------------------------------
    * Commodities and tonnages are subject to change, pending negotiation of
      food aid agreements with program participants.
     Grant will improve inspection facilities, estimated to benefit six
      million people in the agricultural sectors of Haiti and the Dominican
      Republic.

                                     ______

    1. Program Name
        Bill Emerson Humanitarian Trust (BEHT).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The trust was originally authorized by the Agricultural Act of 1980
    as the Food Security Wheat Reserve and the BEHT was later established
    in 1998 by the Bill Emerson Humanitarian Trust Act. The 2002 Farm Bill
    extended the authority through 2007, and the 2008 Farm Bill extends the
    authority through Fiscal Year 2012. The BEHT complements the
    traditional P.L. 480 food aid programs, particularly Title II. The
    trust can be replenished only through open market purchases (requiring
    either appropriations or transfer of P.L. 480 funds as reimbursement
    for prior releases) or by designation of Commodity Credit Corporation
    stocks of eligible commodities. Cash held in the BEHT may be used to
    purchase commodities to meet emergency food needs overseas. By statute,
    the funds and commodities held in the trust shall be made available on
    a determination by the USAID Administrator that funds available for
    emergency needs under Title II for a fiscal year are insufficient to
    meet emergency needs. The trust has undergone significant
    transformation over the years and has evolved from being an all-wheat
    reserve to an all-cash reserve today. The trust currently holds $311
    million in cash.
    4. Purpose/Goals
        The purpose of the trust is to meet humanitarian food needs in
    developing countries by using BEHT assets during periods of tight
    supply to meet unanticipated emergency food aid needs.
    5. Success in Meeting Programmatic Purpose/Goals
        Assets from the BEHT are used to meet unanticipated emergency food
    aid needs on an as-needed basis. They were used most recently in 2008
    to avoid famine in the Democratic Peoples' Republic of Korea (North
    Korea).

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                 $175
                           2003                                 $212
                           2004                                   $0
                           2005                                 $377
                           2006                                   $0
                           2007                                   $0
                           2008                                 $266
                           2009                                   $7
                           2010                                   $0
                           2011                                   $0
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                 $175
                           2003                                 $212
                           2004                                   $0
                           2005                                 $377
                           2006                                   $0
                           2007                                   $0
                           2008                                 $188
                           2009                                  $83
                           2010                                   $0
                           2011                                   $0
    ------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
               FY                   Annual Cost                FTEs
    ------------------------------------------------------------------------
                     2007                      $.1                       1
                     2008                      $.1                       1
                     2009                      $.1                       1
                     2010                       $0                       0
                     2011                       $0                       0
    ------------------------------------------------------------------------

    9. Eligibility Criteria
        Any country in need of P.L. 480 title II emergency food aid from
    the United States is eligible. USAID requests the release of BEHT
    assets.
    10. Utilization (Participation) Data
        There are currently no countries (or beneficiaries) that are
    receiving food under the BEHT.
    11. Duplication or Overlap with Other Programs
        The BEHT is the only emergemny food reserve program of the U.S.
    Government for international assistance.
    12. Waste, Fraud and Abuse
        There have not been any instances of waste, fraud, or abuse,
    including overpayments, which USDA or other government agencies have
    determined to be problems.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Export Credit Guarantee Program, GSM-102.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        Currently authorized by Congress under section 202 of the
    Agricultural Trade Act of 1978, as amended, the GSM-102 program of the
    Commodity Credit Corporation (CCC) was developed to expand U.S.
    agricultural exports by making available payment guarantees to
    encourage U.S. private sector financing of foreign purchases of U.S.
    agricultural commodities on credit terms. The program has been in
    continuous operation since 1981.
    4. Purpose/Goals
        By providing credit guarantees of up to 3 years that cover 98
    percent of loan principal and a portion of the interest, the financial
    risk to U.S. lenders (banks or exporters) of foreign banks is greatly
    diminished. This reduced risk in financing increases export
    opportunities in primarily developing countries, where the lack of
    credit impedes an exporter's ability to sell and a buyer's ability to
    acquire U.S. agricultural commodities.
    5. Success in Meeting Programmatic Purpose/Goals
        From inception through June 2011, exports facilitated through the
    use of the program have reached $100 billion. During the financial
    crisis of 2008 and 2009, the program experienced record applications,
    attesting to its value in facilitating trade finance in times of
    tightened liquidity.

    ------------------------------------------------------------------------
                 Fiscal Year                Guarantees Issued ($ billions)
    ------------------------------------------------------------------------
                           2002                                 $2.93
                           2003                                 $2.54
                           2004                                 $2.93
                           2005                                 $2.17
                           2006                                 $1.36
                           2007                                 $1.44
                           2008                                 $3.12
                           2009                                 $5.36
                           2010                                 $3.10
                           2011                               * $5.4
    ------------------------------------------------------------------------
    * Full year (est.).

    6. Annual Budget Authority (FY 2002-FY 2011)
        Applicable law mandates that CCC make available for each fiscal
    year an amount of credit guarantees equal to the lesser of (a)
    $5,500,000 or (b) an amount of guarantees that CCC can make available
    using budget authority for an underlying subsidy amount of the sum of
    $40 million per year plus any unobligated budget authority from prior
    fiscal years. For the last 2 years, the program has operated at a
    ``negative subsidy,'' meaning that the cash flow into the program has
    exceeded the funds needed to provide for expected losses.
    7. Annual Outlays (FY 2002-FY 2011)
        Under Credit Reform legislation, budget authority is reflective of
    the ``subsidy'' or estimated level of yearly funding provisioned to
    cover the expected losses incurred by the government on issuance of a
    direct loan or guarantee--not the dollar value of the loans disbursed
    or guaranteed. Since 2010, the GSM-102 program has operated with a
    negative subsidy--meaning that the cash flows into the program are in
    excess of the funds needed to provision for expected losses.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.
         A separate appropriation of $6.8 million (FY 2011) is used to
    cover the salaries and other administrative costs of the program (S&E).
    An additional $1.6 million (FY 2011) of Commodity Credit Corporation
    funds is used to maintain the program's information technology support
    for web interface, system of records and database to preserve claims
    status and pursue recoveries from defaulting parties.
    9. Eligibility Criteria
        Please explain who is eligible for participation in this program.
    Also list any special considerations (for example priority areas or
    carve-outs for certain eligible producers).
         All potential participants--exporters, U.S. financial
    institutions, foreign banks and countries can participate--provided
    they are not suspended, debarred or otherwise prohibited from
    participation in U.S. Government programs. In addition, exporters must
    have an office in the United States; U.S. financial institutions must
    be regulated; and foreign banks are subject to extensive individual
    financial review to determine creditworthiness. By law, credit
    guarantees cannot be issued to any country that cannot adequately
    service the debt associated with particular export sales.
    10. Utilization (Participation) Data
        Please provide the number of participants in the program. If there
    is a backlog, please explain that as well. Where appropriate, please
    include additional information, such as the number of acres enrolled in
    the program.
        At this time, 159 foreign banks have approved credit lines and 52
    U.S. banks are approved for participation. Exporters who have been
    issued guarantees by year are shown below.

    ------------------------------------------------------------------------
                                                Number of  Participants
                 Fiscal Year                          (exporters)
    ------------------------------------------------------------------------
                           2002                                116
                           2003                                110
                           2004                                 90
                           2005                                 91
                           2006                                 74
                           2007                                 64
                           2008                                 59
                           2009                                 77
                           2010                                 77
                           2011                                 76
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        If the purpose/goals or mission of this program are similar to
    those of other programs, please list those other programs along with an
    explanation.
         In establishing guidelines for the program, Congress saw the need
    to offer U.S. Government supported finance options that are responsive
    to the financing needs of exporters of U.S. agriculture and the unique
    way their products are traded on international markets. GSM-102 evolved
    to respond efficiently and quickly to the short windows of opportunity
    available on products traded on market-based prices and slim margins as
    compared to industrial and other goods. GSM-102 is a niche program that
    complements other U.S. Government trade finance programs.
    12. Waste, Fraud and Abuse
        Please provide examples of waste, fraud, and abuse including
    overpayments that the Department or other government agency has
    determined is a problem and how the Department is combating such
    problems.
        USDA is proactive in reviewing this program and its participants.
    Where there is any indication of waste, fraud and abuse, the Department
    is aggressive in investigating those incidents. At this time we have no
    confirmed evidence of waste, fraud and abuse under GSM-102. This
    program has fully implemented, documented and tests at least annually
    its internal controls in accordance with both, OMB Circular A-123,
    which implements requirements of the Federal Managers' Financial
    Integrity Act of 1982, and the Improper Payments Information Act of
    2002 (IPIA).
    13. Effect of Administrative PAYGO
        See PAYGO table attached.

                                                                           attachment
                                                                 Administrative PAYGO Scorecard
                                                                    (In Millions of Dollars)

                                                   2006       2007       2008       2009       2010       2011       2012       2013       2014       2015

    Savings:
      GSM-102 implementation of risk based        (139.0)    (139.0)    (139.0)    (139.0)    (139.0)
       approach (FAS/GSM)
      RMA Terminations not previously counted                                        (4.6)     (23.0)     (23.4)     (23.7)     (24.1)
       (RMA/Crop Ins.)
      Forest Service Increase Timber and           (51.0)
       Payment to State Receipts (FS/KV)
      2008 $2 CRP Maintenance Reduction--                                            (0.1)      (0.6)     (24.6)     (28.7)     (31.6)
       present & future (FSA/CRP)
      2009 Reduction in CRP Maintenance                                             (43.6)      (1.5)
       payments (FSA/CRP)
      2010 CRP Modification (Duck, Quail, SAFE/                                                   0.0        0.0        0.0        0.0        0.0      (2.9)
       Reduction in bottomland hardwood) (FSA/
       CRP)
      Crop Insurance Standard Risk Agreement                                                (2,000.0)
       (RMA/Crop Ins.)
    Costs:
      Title XIX Treatment Facilities (FNS/            3.0        4.0        6.0        6.0        6.0
       SNAP)
      Forest Service Change in K-V Trust Fund          51         18
       Spending (FS/KV)
      Factor Removal (RMA/Crop Ins.)                                        0.4        2.7        8.3
      RMA Crop Expansions (RMA/Crop Ins.)                                              0.6       12.8
      CCC Section 4 Limit (FSA/CCC)                   7.5       10.8        6.9        5.3
      Food Aid Commodity Swaps (FSA/CCC)                        77.0       60.0      111.0       67.0
      Federal Base Acre reinstatement (FSA/                                            5.0
       Direct and Countercyclical)
      Wetlands Incentives (FSA/CRP)                                                    7.8       14.6       17.3       19.2       20.8
      CREP Incentives (FSA/CRP)                                                        0.7        2.3        7.3        9.5       10.8
      ACRE Sign-up extension (FSA/ACRE)                                                          30.0
      2009 CRP extensions (FSA/CRP)                                                   19.0
      July 2009 Increase in minimum dairy                                              7.0
       prices (CCC/Dairy Product Price
       Support)
      RMA--PRF-RI in MT (Board Approved) (RMA/                                         4.6       23.0       23.4       23.7       24.1
       Crop Ins.)
      CRP Initiatives (FSA/CRP)                                                                 500.0
      Crop Insurance Initiatives (FSA/Crop                                                    1,500.0
       Ins.)
                                               -------------------------------------------------------------------------------------------------------------
        Available Savings                         (128.5)     (29.2)     (65.7)     (17.6)      (0.0)        0.0        0.0      (0.0)        0.0      (2.9)

                                     ______

    1. Program Name
        Market Access Program.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Market Access Program (MAP), previously known as the Market
    Promotion Program, is administered by the Foreign Agricultural Service
    and uses funds from the Commodity Credit Corporation (CCC). The
    Targeted Export Assistance Program was originally authorized in the
    Food Security Act of 1985 and was subsequently reauthorized and renamed
    as the Market Promotion Program in the 1990 Farm Bill. The 1996 Farm
    Bill renamed the program as MAP and established a prohibition on the
    use of MAP funds to promote the products of large companies. Today,
    only small companies and agricultural cooperatives may promote their
    brands with MAP funding. MAP funding was re-authorized through 2012 by
    the 2008 Farm Bill.
    4. Purpose/Goals
        Goals of the MAP are to encourage the creation, expansion, or
    maintenance of foreign agricultural export markets. Under the MAP, the
    CCC enters into agreements with eligible participants to share the cost
    of certain overseas marketing and promotion activities. MAP helps
    United States commercial entities conduct brand promotion activities
    including advertising, trade shows, in-store demonstrations, and trade
    seminars. Under MAP, program participants are reimbursed for their
    expenses in carrying out approved promotional activities.
    5. Success in Meeting Programmatic Purpose/Goals
        MAP applications undergo a competitive review process based on
    criteria as specified in the MAP regulations and an annual Federal
    Register announcement. Funds are awarded to applicants that demonstrate
    effective performance based on a clear, long-term strategic plan. FAS
    also considers the extent to which a proposed project targets markets
    with the greatest growth potential. The FAS allocates funds in a manner
    that effectively supports the strategic decision making initiatives of
    the Government Performance and Results Act (GPRA) of 1993. In 2007, FAS
    commissioned a cost-benefit analysis of USDA's market development
    programs with an independent economic analysis firm, Global Insight
    Inc., and recently received the results of an update of that study. The
    study reported that U.S. agricultural exports were $6.1 billion higher
    in 2009, compared to what they would have been without the increased
    investment in market development. Every dollar of increased investment
    in the MAP and FMD resulted in $35 in exports.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                 $100
                           2003                                 $110
                           2004                                 $125
                           2005                                 $140
                           2006                                 $200
                           2007                                 $200
                           2008                                 $200
                           2009                                 $200
                           2010                                 $200
                           2011                                 $200
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                  $97
                           2003                                 $103
                           2004                                 $124
                           2005                                 $139
                           2006                                 $158
                           2007                                 $184
                           2008                                 $179
                           2009                                 $219
                           2010                                 $202
                           2011                                 $207
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the project is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                             Annual Cost                      FTE
                   ---------------------------------------------------------
          FY                        Prog. Funds
                      Section 11     for Admin.        FTE       Tech Assist
                     Admin. Cost      Support
    ------------------------------------------------------------------------
            2007              $2                             5             1
            2008              $2                             5             1
          2009 a              $0          $1.75              5             1
          2010 a              $0          $2.10              5             1
          2011 a              $0    $2.1 (est.)              5             1
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    For FY 2009 and FY 2010, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempted CCC program funds used to pay
      authorized administrative costs for MAP from counting against the cap
      on CCC funds used to pay for salaries and administrative costs imposed
      by Section 11 of the CCC Charter Act. The Department of Defense and
      Full-Year Continuing Appropriations Act of 2011 continued the
      exemption from the CCC section 11 cap for CCC funds used to pay
      authorized administrative costs of MAP.

    9. Eligibility Criteria
        To participate in the MAP, an applicant must be a nonprofit U.S.
    agricultural trade organization, a nonprofit state regional trade group
    (SRTG), a U.S. agricultural cooperative, or a state government agency.
    In addition, small-sized U.S. commercial entities may receive MAP
    funding to promote their branded products. To conduct branded product
    promotion activities, individual companies must provide at least 50
    percent of funding. For generic promotion activities, trade
    associations and others must meet a minimum ten percent match
    requirement.
    10. Utilization (Participation) Data
        For FY 2011 there were 70 applicants competing for $200 million in
    program funding. Attached is a chart of FY 2011 Market Access Program
    allocations.
    11. Duplication or Overlap with Other Programs
        MAP is complementary to other FAS/USDA market development programs
    whereby funding is made available to address priority, market-specific
    issues or to undertake activities not already serviced by or unsuitable
    for funding under other FAS marketing programs, such as the Foreign
    Market Development Program, the Emerging Market Program, the Technical
    Assistance for Specialty Crops Program, and the Quality Samples
    Program.
    12. Waste, Fraud and Abuse
        FAS is proactive in monitoring its programs for any indications of
    waste, fraud and abuse. Where such indications are found, FAS has been
    aggressive in pursuing corrective action, including criminal
    prosecution, to secure the recovery of funds and prevent recurrence.
    For example, in 2006 an incarceration and ongoing restitution payments
    were secured for fraud involving MAP funds. However, vigorous
    monitoring and oversight procedures have kept such indications to a
    minimum, and FAS is not aware of any systemic problems in MAP. The FAS
    Compliance staff routinely reviews MAP agreements to document
    compliance and to ensure the effectiveness of FAS's internal controls.
    FAS programs also are audited by both the USDA Office of Inspector
    General and the Government Accountability Office, each of which
    provides detailed reports and recommendations for improvement. Finally,
    FAS programs are subject to the same oversight and documentation
    requirements common to all USDA programs, including the Improper
    Payments Information Act.
    13. Effect of Administrative PAYGO
        None.
                                   attachment

                                Fiscal Year 2011
        Fiscal Year 2011 Market Access Program Program Allocations (MAP)
    ------------------------------------------------------------------------
                       MAP Participant                        Allocation
    ------------------------------------------------------------------------
    AHEC, APA, SEC, SFPA *                                        $8,568,725
    Alaska Seafood Marketing Institute                            $4,326,996
    American Biomass Trade Cooperative                              $145,000
    American Peanut Council                                       $2,414,321
    American Seed Trade Association                                  $90,419
    American Sheep Industry Association                             $381,466
    American Soybean Association                                  $4,465,558
    Blue Diamond Growers/Almond Board of California               $3,079,916
    Brewers Association Inc.                                        $385,015
    California Agricultural Export Council                          $993,079
    California Asparagus Commission                                 $114,709
    California Cherry Advisory Board                                $743,127
    California Cling Peach Board                                    $353,475
    California Fresh Tomato Growers/Florida Tomato                  $505,603
     Committee
    California Kiwifruit Commission                                 $184,268
    California Pear Advisory Board                                  $378,267
    California Prune Board                                        $3,339,658
    California Strawberry Commission                                $789,070
    California Table Grape Commission                             $3,494,622
    California Tree Fruit Agreement                               $2,053,685
    California Walnut Commission                                  $4,614,261
    Cherry Marketing Institute                                      $259,988
    Cotton Council International                                 $20,234,954
    Cranberry Marketing Committee                                 $1,767,921
    Distilled Spirits Council                                       $211,127
    Florida Department of Citrus                                  $4,937,966
    Food Export Association of the Midwest USA                   $10,919,428
    Food Export USA Northeast                                     $8,152,605
    Georgia Pecan Growers                                           $200,000
    Ginseng Board of Wisconsin                                      $209,597
    Hawaii Papaya Industry Association                              $173,027
    Hop Growers of America                                          $177,301
    Intertribal Agriculture Council                                 $741,009
    National Association of State Departments of                  $2,750,562
     Agriculture
    National Confectioners Association                            $1,685,845
    National Hay Association                                         $32,445
    National Potato Promotion Board                               $4,870,824
    National Renderers Association                                  $831,676
    National Sunflower Association                                $1,218,250
    National Watermelon Promotion Board                             $254,406
    New York Wine and Grape Foundation                              $376,215
    Northwest Wine Promotion Coalition                              $805,130
    Organic Trade Association                                       $435,293
    Pear Bureau Northwest                                         $3,632,830
    Pet Food Institute                                            $1,601,375
    Raisin Administrative Committee                               $2,677,594
    Southern United States Trade Association                      $5,831,384
    Sunkist Growers, Inc.                                         $3,107,359
    Texas Produce Export Association                                 $95,654
    The Catfish Institute                                           $335,605
    The Popcorn Board                                               $319,607
    U.S. Apple Export Council                                       $685,480
    U.S. Dairy Export Council                                     $4,529,746
    U.S. Dry Bean Council                                         $1,150,793
    U.S. Grains Council                                           $8,621,582
    U.S. Hide, Skin & Leather Association                           $140,228
    U.S. Livestock Genetics Export, Inc.                          $1,097,601
    U.S. Meat Export Federation                                  $16,261,732
    U.S. Wheat Associates                                         $6,798,051
    USA Dry Pea and Lentil Council                                $1,122,955
    USA Poultry and Egg Export Council                            $5,461,208
    USA Rice Federation/U.S. Rice Producers Association           $3,758,042
    Washington Apple Commission                                   $5,199,788
    Washington State Fruit Commission                             $1,192,087
    Welch Foods, Inc.                                               $907,824
    Western Pistachio Association/Cal-Pure Pistachios               $770,497
     Inc.
    Western United States Agricultural Trade Association         $10,859,171
    Wine Institute                                                $5,585,230
                                                         -------------------
      Reserve                                                     $5,589,768
                                                         ===================
        Total Available FY 2011 Funding                        $200,000,000
    ------------------------------------------------------------------------
    * American Hardwood Export Council, APA--The Engineered Wood
      Association, Softwood Export Council, Southern Forest Products
      Association.

                                     ______

    1. Program Name
        Technical Assistance for Specialty Crops (TASC).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Farm Security and Rural Investment Act of 2002 authorized the
    TASC program and authorized the use of $2 million of Commodity Credit
    Corporation (CCC) resources in each fiscal year (FY) from 2002 through
    2007. The Food, Conservation, and Energy Act of 2008 continued the TASC
    program through 2012. The 2008 Farm Bill authorized the TASC program at
    $4 million in FY 2008, $7 million in FY 2009, $8 million in FY 2010,
    and $9 million for FY 2011 and FY 2012.
    4. Purpose/Goals
        The legislation calls for the TASC program to assist U.S.
    organizations by providing funding for projects that address sanitary,
    phytosanitary (SPS) and related technical barriers that prohibit or
    threaten the export of U.S. specialty crops.
    5. Success in Meeting Programmatic Purpose/Goals
        The TASC review and allocation process is especially thorough with
    each proposal undergoing both a sufficiency check for adherence to
    program regulations and policy and content review by three reviewers
    from different divisions. Further, FAS has several application and
    reporting requirements to assure program effectiveness. When submitting
    proposals, applicants must include performance measures and objectives
    in their applications as evaluation criteria. FAS also requires
    quarterly and final project reports and a final financial report that
    fully describes and analyzes the effectiveness of each project. Future
    awards are contingent upon successful completion of the project and
    acceptance of performance and financial reports. The TASC program has
    successfully funded research for developing pest mitigations, technical
    visits by foreign officials to observe industry export practices, and
    export preclearance programs that have assisted in addressing SPS
    barriers to trade. Many of these projects would not likely have taken
    place without TASC program assistance.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                   $2
                           2003                                   $2
                           2004                                   $2
                           2005                                   $2
                         2006 a                                   $2
                           2007                                   $1
                           2008                                   $4
                           2009                                   $7
                           2010                                   $8
                           2011                                   $9
    ------------------------------------------------------------------------
    a An additional $0.6 million was made available through FAS direct
      appropriations.

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                   $0
                           2003                                   $1
                           2004                                   $2
                           2005                                   $2
                           2006                                   $2
                           2007                                   $1
                           2008                                   $1
                           2009                                   $2
                           2010                                   $3
                           2011                                   $7
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the project is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                             Annual Cost                      FTE
                   ---------------------------------------------------------
          FY         Section 11 &   Prog. Funds
                       General       for Admin.        FTE       Tech Assist
                     Admin. Cost      Support
    ------------------------------------------------------------------------
            2007             $.1                             1           .29
            2008             $.1                             1           .29
          2009 a              $0           $0.1              1           .29
          2010 a              $0           $.03              1           .29
          2011 a      $.2 (est.)     $.4 (est.)              1           .29
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    For FY 2009 and FY 2010, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempted CCC program funds used to pay
      authorized administrative costs for TASC from counting against the cap
      on CCC funds used to pay for salaries and administrative costs imposed
      by Section 11 of the CCC Charter Act. The Department of Defense and
      Full-Year Continuing Appropriations Act of 2011 continued the
      exemption from the CCC section 11 cap for CCC funds used to pay
      authorized administrative costs of TASC.

    9. Eligibility Criteria
        Any U.S. organization, including, but not limited to, U.S.
    Government agencies, state government agencies, nonprofit trade
    associations, universities, agricultural cooperatives, and private
    companies are eligible to receive TASC funding. The term ``specialty
    crop'' is defined as all cultivated plants and the products thereof
    produced in the United States except wheat, feed grains, oilseeds,
    cotton, rice, peanuts, sugar, and tobacco.
    10. Utilization (Participation) Data
        To date, for Fiscal Year 2011, funding has been allocated to 26
    organizations for 32 TASC projects. In a typical year, between 25 and
    35 projects are funded. Attached is a chart of FY 2010 TASC Program
    allocations.
    11. Duplication or Overlap with Other Programs
        TASC does not duplicate other programs. TASC is an excellent tool
    that facilitates USDA and the horticultural industry working in
    partnership with USDA to resolve sanitary and phytosanitary barriers
    and successfully maintaining and increasing export market opportunities
    for U.S. horticultural products.
    12. Waste, Fraud and Abuse
        FAS is not aware of any examples of waste, fraud, and abuse in this
    program, including overpayments that the Department or other government
    agency has determined is a problem. FAS program areas closely monitor
    all agency agreements to ensure that participants carry out activities
    in accordance with program regulations. In addition, the FAS Compliance
    staff routinely reviews FAS agreements agency-wide to document
    compliance, and to ensure that FAS maintains sufficient internal
    controls. Further, FAS programs are audited by both the USDA Office of
    Inspector General and the Government Accountability Office, each of
    which provides detailed reports and recommendations for improvement.
    Finally, FAS programs are subject to the same oversight and reporting
    requirements common to all USDA programs, including testing of
    transactions under the Improper Payments Improvement Act. Together
    these internal and external monitoring and evaluation practices serve
    to catch and correct instances of waste, fraud, and abuse before they
    result in loss of public funds.
    13. Effect of Administrative PAYGO
        None.
                                   attachment

                                Fiscal Year 2011
    Fiscal Year 2010 Technical Assistance for Specialty Crops (TASC) Program
                                   Allocations
    ------------------------------------------------------------------------
             Participant                  Project Title             Amount
    ------------------------------------------------------------------------
    Almond Board of California    European Union Health and          $24,750
                                   Port Authorities Seminar and
                                   Tour
    Bryant Christie, Inc.         Maximum Residue Level             $450,662
                                   Database Funding for
                                   Specialty Crops and Hawaiian
                                   Papayas
    California Citrus Quality     California Navel Valencia         $124,562
     Council                       Exports to Korea Program,
                                   Korea Inspectors' Visit
    California Department of      Minimizing Trade Barriers         $500,000
     Food and Agriculture          through Field Surveys for
                                   the European Grapevine Moth
    California Dried Plum Board   Retaining Export and Food       $1,458,772
                                   Security of U.S. Specialty
                                   Crops: Low-Emission Methyl
                                   Bromide Fumigation for
                                   Quarantine and Pre-Shipment
                                   Uses
    California Fig Advisory       Encourage Japanese Government     $100,000
     Board                         To Allow Potassium Sorbate
                                   Treatment on High-Moisture
                                   Figs
    California Grape and Tree     To Develop Efficacy Data           $54,388
     Fruit League                  Through a Pilot Systems
                                   Approach for Peach Twig
                                   Borer for U.S. Stone Fruit
                                   to Australia
    California Pistachio Export   Improve Navel Orange Worm       $1,195,500
     Council                       Control in Pistachios To
                                   Overcome Sanitary and
                                   Phytosanitary Barriers in
                                   Major Export Markets
    California Specialty Crops    Global Maximum Residue Levels      $98,000
     Council                       Engaging Specialty Crops in
                                   Priority Setting, Planning,
                                   and Compliance
    California Strawberry         Spotted Wing Drosophila            $46,989
     Commission                    Impacts in Strawberry
                                   Exports
    California Table Grape        Post-Harvest Control of Light      $90,000
     Commission                    Brown Apple Moth on Fresh
                                   Grapes
    California Table Grape        Australian Phytosanitary          $150,000
     Export Association            Preclearance Program
    California Walnut Commission  Development of Technical           $66,836
                                   Brochures
    Citrus Research Board of      Mortality of Asian Citrus         $216,303
     California                    Psyllid, Diaphorina Citri,
                                   in California Citrus During
                                   Packaging and Export to
                                   Australia
    Florida Citrus Packers        Determination of Canker           $489,447
                                   Survival and Transmission
                                   via Canker-Blemished Fruit
                                   Relative to International
                                   Market Access
    Florida Fruit and Vegetable   Management, Maintenance, and      $389,464
     Association                   Expansion of the U.S.-Canada
                                   Pesticide Harmonization
                                   Database
    Georgia Peach Council/South   Export of Fresh, Systems-         $240,000
     Carolina Peach Council        Protected Georgia and South
                                   Carolina Peaches to Mexico
    Indian River Citrus League    Best Post-Harvest Handling        $120,000
                                   Practices to Assure Canker-
                                   Free Fresh Citrus Fruit
                                   Exports
    Northwest Horticultural       Changing India's                   $66,060
     Council                       Phytosanitary Access
                                   Requirements for Pacific
                                   Northwest Cherries; OFM
                                   Monitoring and Verification
                                   at Origin Program for the
                                   Export of Peaches and
                                   Nectarines to Mexico; Study
                                   of Potential Health Effects
                                   Associated with the Use of
                                   Wax Coatings on Produce
    Rutgers University, IR-4      Actions To Facilitate Global      $627,199
     Project                       Maximum Residue Levels for
                                   Priority Use on Specialty
                                   Crops
    U.S. Apple Export Council     Apple Maggot and Other Pests      $158,122
                                   of Concern--Identification
                                   Treatment Methodologies and
                                   Data Collection
    USDA, Agricultural Research   Classical Biological Control      $155,710
     Service                       of the Invasive White Peach
                                   Scale on Papaya in Hawaii;
                                   Phosphine Fumigation
                                   Treatment for Post-Harvest
                                   Inspect Control on Lettuce;
                                   Evaluating the Efficacy of
                                   Systems Approach Components
                                   for the Western Cherry Fruit
                                   Fly
    USDA, Animal and Plant        Development of Irradiation        $175,000
     Health Inspection Service     Treatment for High-Impact
     (APHIS)                       Invasive Species and
                                   Evaluation of Commodity
                                   Tolerance to Irradiation
                                   Treatments
    USDA, APHIS, Center for       Development of Infrastructure     $165,000
     Plant Health Science and      and Capacity for U.S. Export
     Technology (CPHST)            Specialty Crops Irradiation
                                   Treatments
    USDA, APHIS, Plant            A Prototype Electronic            $133,907
     Protection and Quarantine     Identification Resource To
     and CPHST                     Support Agricultural
                                   Commodity Trade: California
                                   Table Grapes
    Washington State Department   Establishment of Japan             $38,000
     of Agriculture                ``Import Tolerance'' Maximum
                                   Residue Level for Bifenezate
                                   in Red Raspberries
                                                                ------------
      Total                                                       $7,334,671
    ------------------------------------------------------------------------
    Foreign Agricultural Service (November 2010).

                                     ______

    1. Program Name
        Emerging Markets Program (EMP).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The original 1990 legislation authorized an annual program to
    promote U.S. agricultural exports by providing technical assistance to
    emerging democracies. The program, which was referred to as the
    Emerging Democracies Program, initially focused on central and eastern
    Europe and the former Soviet Union. In 1996, legislation refocused the
    program on all emerging markets (defined as countries that USDA
    determines have the potential to provide viable and significant markets
    for U.S. agricultural products). Funding is made available for
    programming through three channels: (1) the Central Fund, the principal
    means of funding, made available through a public announcement; (2) the
    Technical Issues Resolution Fund (TIRF), to address technical barriers
    to those issues that are time sensitive and are strategic areas of
    longer term interest; and (3) the Quick Response Marketing Fund (QRMF),
    to assist with short-term time-sensitive marketing opportunities.
    4. Purpose/Goals
        EMP helps improve market access and develop or promote exports of
    U.S. agricultural commodities and products to emerging markets. Through
    cost-share assistance to eligible applicants, EMP funds may be approved
    for generic technical assistance activities and projects that assess
    the food and rural business systems needs of such markets and identify
    and carry out specific opportunities and projects to enhance the
    effectiveness of those systems. Emerging markets are defined as those
    individual target countries or regional country groupings with per
    capita income of less than $11,115 (the current ceiling on upper middle
    income economies as determined by the World Bank) and populations
    greater than one million. The program is not intended for projects
    targeted at end-user consumers.
    5. Success in Meeting Programmatic Purpose/Goals
        The EMP review and allocation process is especially thorough with
    each proposal undergoing both a sufficiency check for adherence to
    program regulations and policy and content review by no less than five
    reviewers. Further, FAS has several application and reporting
    requirements to assure program effectiveness. When submitting
    proposals, applicants must include performance measures and objectives
    in their applications as evaluation criteria. FAS also requires a final
    project report and financial report that fully describes and analyzes
    the effectiveness of each project. The final 15 percent of a
    participant's funding is withheld until an acceptable final report is
    approved by FAS. Future awards are contingent upon successful
    completion of the project and acceptance of performance and financial
    reports. The EMP program has successfully funded assessments of the
    food and agricultural business systems of emerging markets for many
    agricultural commodities including vitamin-enriched rice in El Salvador
    and seed potatoes in Egypt. Further, EMP funds have been used to train
    emerging market importers or provide technical assistance on the use
    and high quality nature of U.S. agricultural products. These projects
    would not likely have taken place without EMP program assistance.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                  $10
                           2003                                  $10
                           2004                                  $10
                           2005                                  $10
                           2006                                  $10
                           2007                                   $4
                           2008                                  $10
                           2009                                  $10
                           2010                                   $9
                           2011                                  $10
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                   $2
                           2003                                  $14
                           2004                                   $5
                           2005                                   $6
                           2006                                  $10
                           2007                                   $9
                           2008                                  $17
                           2009                                   $3
                           2010                                   $9
                           2011                                   $7
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the project is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                             Annual Cost                      FTE
                   ---------------------------------------------------------
          FY         Section 11 &   Prog. Funds
                       General       for Admin.        FTE       Tech Assist
                     Admin. Cost      Support
    ------------------------------------------------------------------------
            2007            $0.6                             2          0.39
            2008            $0.6                             2          0.39
          2009 a              $0           $0.1              2          0.39
          2010 a              $0           $0.3              2          0.39
          2011 a            $0.4    $0.8 (est.)              2          0.39
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    For FY 2009 and FY 2010, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempted CCC program funds used to pay
      authorized administrative costs for EMP from counting against the cap
      on CCC funds used to pay for salaries and administrative costs imposed
      by Section 11 of the CCC Charter Act. The Department of Defense and
      Full-Year Continuing Appropriations Act of 2011 continued the
      exemption from the CCC section 11 cap for CCC funds used to pay
      authorized administrative costs of EMP.

    9. Eligibility Criteria
        Any U.S. private or public entity with a role or interest in the
    exports of U.S. agricultural commodities or products is eligible to
    participate in the Emerging Markets Program. Preference is given to
    proposals indicating significant support and involvement by private
    industry. Proposals are considered from research and consulting
    organizations only as long as they can demonstrate evidence of
    substantial participation by U.S. industry. For-profit entities are
    also eligible, but may not use program funds to conduct private
    business, promote private self-interests, supplement the costs of
    normal sales activities, or promote their own products or services
    beyond specific uses approved for a given project.
    10. Utilization (Participation) Data
        For FY 2011 to date, FAS has evaluated 59 proposals from the
    private sector and 72 proposals from the public sector. Through the
    course of eight tranches, FAS has approved funding for 41 private
    sector and 34 public sector projects obligating $9,923,737. In a
    typical year, between 75 and 100 projects are awarded funded. Attached
    is a chart with a complete list of FY 2010 EMP allocations.
    11. Duplication or Overlap with Other Programs
        EMP is complementary to other USDA/FAS market development programs
    whereby funding may be approved to address priority, market-specific
    issues or to undertake activities not already serviced by or are
    unsuitable for funding under other FAS market development programs,
    such as the Foreign Market Development Program (FMD) and Market Access
    Program (MAP).
    12. Waste, Fraud and Abuse
        FAS is proactive in monitoring its programs for any indications of
    waste, fraud and abuse. Where such indications are found, FAS has been
    aggressive in pursuing corrective action, including criminal
    prosecution, to secure the recovery of funds and prevent recurrence.
    However, vigorous monitoring and oversight procedures have kept such
    indications to a minimum, and FAS is not aware of any systemic problems
    in EMP. The FAS Compliance staff routinely reviews EMP agreements to
    document compliance and to ensure the effectiveness of FAS's internal
    controls. FAS programs also are audited by both the USDA Office of
    Inspector General and the Government Accountability Office, each of
    which provides detailed reports and recommendations for improvement.
    Finally, FAS programs are subject to the same oversight and
    documentation requirements common to all USDA programs, including the
    Improper Payments Information Act.
    13. Effect of Administrative PAYGO
        None.
                                   Attachment

                                Fiscal Year 2011
           Fiscal Year 2010 Emerging Markets Program Allocations (EMP)
    ------------------------------------------------------------------------
              Market                    Activity Title              Amount
    ------------------------------------------------------------------------
    Bangladesh                 Cotton USA Technical Assistance      $200,000
                                Initiative in Bangladesh for
                                the Cotton Council
                                International
    Brazil                     Brazil Craft Beer School              $30,000
                                Seminars for the Brewers
                                Association
    Brazil                     Market Feasibility Study of           $15,041
                                Brazil for the Alaska Seafood
                                Marketing Institute
    China                      Food Consumption in China's          $468,600
                                Second-Tier Cities: The New
                                Frontier for U.S. Agricultural
                                Export Opportunities for the
                                University of Florida
    China                      Exporting U.S. Dairy Genetics to     $277,632
                                China for Cooperative Resources
                                International
    China                      Hotel, Restaurant, and               $212,000
                                Institutional Sector
                                Development for USDA/Foreign
                                Agricultural Service/Chengdu
    China                      Distributor Development Program      $183,000
                                for Emerging City Markets for
                                USDA/Foreign Agricultural
                                Service
    China                      Global Food Safety Forum: China      $174,431
                                Exchange for the GIC Group
    China                      Phase Three of the China Moon        $120,000
                                Cake Project for the California
                                Agricultural Export Council
    China                      Fresh Produce in China:              $101,011
                                Identifying Logistic
                                Constraints and Consumer Trends
                                for SIAM Professionals, LLC
    China                      Turkey Market Development in          $90,000
                                China--Expanding Demand for
                                U.S. Turkey in China by
                                Increasing its Use in Local
                                Cuisine for the Minnesota
                                Department of Agriculture
    China                      China Familiarization Tour of         $90,000
                                Organic Farms, Retail, and
                                Processors for the Organic
                                Trade Association
    China                      China Pecan Project for the
                                Georgia Pecan Growers
                                Association$70,800
    China                      Implementation of Science-based       $52,560
                                Principles in Risk Management
                                for USDA/Foreign Agricultural
                                Service
    China                      Assessment of Exports of Hawaii       $79,818
                                Fresh and Processed
                                Agricultural Products to China
                                Markets Under a Memorandum of
                                Understanding with the Chinese
                                Ministry of Commerce, Beijing
                                International Brand Management
                                Center for the Hawaii
                                Department of Agriculture
    China                      China Beer Distributors               $35,000
                                Education Program for the
                                Brewers Association
    China                      China Food Safety Law Training        $27,406
                                for USDA/Foreign Agricultural
                                Service
    China                      Reverse Trade Mission of Chinese      $14,400
                                Tanneries for the U.S. Hide,
                                Skin and Leather Association
    Egypt                      Food and Drug Administration           $4,690
                                Middle East and North Africa
                                Food Safety Workshop for
                                Regulators for USDA/Foreign
                                Agricultural Service
    El Salvador                U.S. Rice Market Research for         $31,000
                                the U.S. Rice Producers
                                Association
    Ghana                      Ghana Lake Volta Soy in               $96,475
                                Aquaculture Program for the
                                American Soybean Association
    Global Emerging Markets    Exploratory Market Research To       $259,000
                                Identify Opportunities and
                                Launch Preliminary Trade
                                Servicing, Education, and/or
                                Promotional Activities in
                                Emerging Markets for the U.S.
                                Apple Export Council
    Global Emerging Markets    Exporting Genomic-Proven U.S.        $206,100
                                Dairy Genetics, Enhancing
                                Producer Product Knowledge,
                                Demonstrating U.S. Genomic Sire
                                Proofs and the New Generation
                                of Dairy Sires for Cooperative
                                Resources International
    Global Emerging Markets    Global Pesticide Tolerance           $196,770
                                Initiative for U.S. Specialty
                                Crops: Technical and Policy
                                Guidance to Emerging Markets
                                for USDA/Foreign Agricultural
                                Service
    Global Emerging Markets    Technical Support for U.S. Seed      $195,000
                                Potato Exports, Introduction of
                                Cut Seeds to Foreign Markets
                                for the National Potato
                                Promotion Board
    Global Emerging Markets    Foreign Country Audits of U.S.       $184,400
                                Red Meat Facilities for the
                                U.S. Meat Export Federation
    Global Emerging Markets    Worldwide Market Development for      $60,000
                                the Northwest Wine Promotion
                                Coalition
    Global Emerging Markets    Access and Benefit Sharing for        $55,566
                                Genetic Resources Used in U.S.
                                Food and Agriculture Exports
                                for USDA/Foreign Agricultural
                                Service
    Global Emerging Markets    Translations of Foreign World         $52,000
                                Trade Organization Sanitary and
                                Phytosanitary and Technical
                                Barriers to Trade Notifications
                                for USDA/Foreign Agricultural
                                Service
    Global Emerging Markets    Advancing U.S. Positions on            $9,880
                                Pesticide Regulatory Standards
                                for USDA/Foreign Agricultural
                                Service
    Guatemala                  U.S. Rice Market Research for         $31,000
                                the U.S. Rice Producers
                                Association
    India                      India Food Safety Seminars for        $89,175
                                USDA/Foreign Agricultural
                                Service
    India                      Reverse Trade Mission for             $75,438
                                Retailers and Wholesalers from
                                India for the Produce Marketing
                                Association
    India                      India Export Market Opportunity       $75,000
                                Assessment and Familiarization
                                Tour for the Organic Trade
                                Association
    India                      India Retail Education                $60,000
                                Activities Reverse Mission
                                Retail Training Seminars for
                                the Pear Bureau Northwest
    India                      India Pecan Project for the           $55,200
                                Georgia Pecan Growers
                                Association
    Indonesia                  Indonesia-U.S. Partnership:           $51,000
                                Agricultural Technology and
                                Investment Forum for the Texas
                                A&M Norman Borlaug Institute
    Indonesia                  Technical Assistance for the          $41,014
                                Republic of Indonesia's
                                National Agency for Drug and
                                Food Control to Better
                                Understand the U.S. System To
                                Ensure the Safety of Processed
                                Foods for USDA/Foreign
                                Agricultural Service
    Indonesia                  Product Introduction, Care and        $14,000
                                Handling, and Merchandising
                                Technique Seminars for Fresh
                                Sweet Cherries for the
                                Washington State Fruit
                                Commission
    Iraq                       Trade Mission to Iraq for USDA/      $137,352
                                Foreign Agricultural Service
    Jamaica                    U.S. Technical and Regulatory         $17,676
                                Orientation for Jamaican Food
                                Import Authorities for USDA/
                                Foreign Agricultural Service/
                                Dominican Republic
    Malaysia                   Agricultural Biotechnology           $130,535
                                Outreach to Malaysian Officials
                                for USDA/Foreign Agricultural
                                Service/Kuala Lumpur
    Malaysia                   Technical Workshop on Coated          $56,086
                                Foods Applications for the USA
                                Dry Pea and Lentil Council
    Mongolia                   2010 Microbiology and                 $21,650
                                International Residue Training
                                Seminars for International
                                Government Laboratory Officials
                                for USDA/Foreign Agricultural
                                Service/Beijing
    Mongolia                   Food Safety and Inspection            $21,650
                                Service Meat and Poultry
                                Inspection Seminar for USDA/
                                Foreign Agricultural Service/
                                Beijing
    Nigeria, Senegal,          Increasing Access to U.S. Soy        $250,000
     Cameroon                   Products in Nigeria, Senegal,
                                and Cameroon for the American
                                Soybean Association
    Pakistan                   U.S. Soy Food Product Promotion      $152,224
                                in Pakistan for the American
                                Soybean Association
    Pakistan                   Opening Pakistan to U.S. Dairy       $111,755
                                and Genetics for World Wide
                                Sires, Ltd.
    Philippines                Philippines Agricultural              $63,584
                                Biotechnology Regulatory
                                Outreach for USDA/Foreign
                                Agricultural Service/Manila
    Poland                     Second Phase of Market               $100,000
                                Development in Poland for
                                California Almonds for the
                                Almond Board of California
    Regional: Asia-Pacific     APEC High-Level Policy Dialogue      $153,936
     Economic Cooperation       Workshop on Approaches and
     (APEC)                     Tools To Promote Investment in
                                Agricultural Biotechnology for
                                USDA/Foreign Agricultural
                                Service
    Regional: APEC             APEC Export Certification            $108,800
                                Roundtable for USDA/Foreign
                                Agricultural Service
    Regional: APEC             APEC High-Level Policy Dialogue      $187,174
                                on Agricultural Biotechnology
                                for USDA/Foreign Agricultural
                                Service
    Regional: Caribbean Basin  Central American Microbiological     $142,356
                                Standards Program for USDA/
                                Foreign Agricultural Service
    Regional: Caribbean Basin  Maintaining Access for U.S.           $96,270
                                Exports to the Caribbean for
                                USDA/Foreign Agricultural
                                Service
    Regional: Caribbean Basin  Caribbean Food Safety Program         $93,300
                                for USDA/Foreign Agricultural
                                Service
    Regional: Central America- Food Safety Standard-Setting          $97,400
     Dominican Republic Free    Training for Participants in
     Trade Agreement (CAFTA-    CAFTA-DR for USDA/Foreign
     DR)                        Agricultural Service
    Regional: Latin America    Furthering Approvals of              $413,785
                                Genetically Engineered Plants
                                Through Promotion of Data
                                Transportability for the
                                International Life Sciences
                                Institute Research Foundation
    Regional: Latin America    U.S. Outreach Effort To              $157,378
                                Influence Negotiation by
                                Parties to the Cartagena
                                Protocol for Biosafety for USDA/
                                Foreign Agricultural Service
    Regional: Latin America    Inter-American Institute for          $72,140
                                Cooperation on Agriculture
                               Workshop for Latin America
                                Countries on the Annex (LLP
                                Annex) to the Codex Guideline
                                for the Conduct of Food Safety
                                Assessment of Foods Derived
                                from Recombinant-DNA Plants for
                                USDA/Foreign Agricultural
                                Service
    Regional: Latin America    Promotion of Consumer-Oriented        $56,462
                                Agricultural Products for Latin
                                America through the
                                International Supermarket
                                Management Class for IGA
                                International, Inc.
    Regional: Latin America,   Western Hemisphere Codex             $103,310
     Caribbean Basin            Delegates' Colloquium for USDA/
                                Foreign Agricultural Service
    Regional: Latin America,   Enhancing Latin American and         $100,000
     Caribbean Basin            Caribbean Participation in
                                Codex for USDA/Foreign
                                Agricultural Service
    Regional: Southeast Asia   Southeast Asia Fruit and             $223,218
                                Vegetable Consumer Trends,
                                Preferences Research for the
                                Washington Apple Commission
    Regional: Southeast Asia   Increasing Understanding of U.S.     $137,850
                                and International Flavor Safety
                                Evaluation Processes for the
                                Flavor and Extract
                                Manufacturers Association
    Regional: Southeast Asia   Baking with Pea Flour in              $63,573
                                Southeast Asia for the USA Dry
                                Pea and Lentil Council
    Regional: Southeast Asia   Nutritional and Technical             $46,820
                                Information on Dry Beans for
                                Southeast Asian Buyers for the
                                U.S. Dry Bean Council
    Regional: Southeast Asia   Second Phase of U.S. Dairy in         $37,667
                                Selected Asian Bakery Markets
                                Project for the California Milk
                                Advisory Board
    Russia                     Review of U.S. Poultry Slaughter     $120,000
                                and Cold Storage Facilities for
                                the USA Poultry and Egg Export
                                Council
    Russia                     Russia Retail Education               $87,200
                                Activities Reverse Mission
                                Retail Training Seminars for
                                the Pear Bureau Northwest
    Russia                     Research To Identify                  $70,000
                                Opportunities and Launch Trade
                                Servicing, Education, and
                                Promotion in Russia for the
                                California Prune Board
    Russia                     U.S.-Russia Bilateral                 $26,342
                                Consultative Mechanism on
                                Biotechnology Technical
                                Exchange Meeting for USDA/
                                Foreign Agricultural Service
    South Africa, Mauritius,   Southern Africa Biotechnology        $109,265
     Zimbabwe, Mozambique       Outreach for South Africa,
                                Mauritius, Zimbabwe, and
                                Mozambique for USDA/Foreign
                                Agricultural Service/Pretoria
    Sri Lanka                  Prospecting for U.S. Feedstuff        $84,206
                                and Soymeal Sales in Sri Lanka
                                for the Iowa Soybean
                                Association
    Sri Lanka                  Biotechnology Training for             $5,000
                                Senior Level Sri Lankan
                                Officials for USDA/Foreign
                                Agricultural Service
    Thailand                   Thailand Importer Developer          $185,535
                                Program for the Southern United
                                States Trade Association
    Thailand                   Technical Support to U.S. Frozen      $84,235
                                Potato Tariff Reduction Efforts
                                in Thailand for the National
                                Potato Promotion Board
    Thailand                   Restrictive Labeling                  $36,450
                                Requirements for Alcoholic
                                Beverages to Thailand for USDA/
                                Foreign Agricultural Service
    Turkey                     Biotech Speakers for Istanbul         $38,680
                                Seminar and Public Outreach for
                                USDA/Foreign Agricultural
                                Service/Ankara
    Turkey                     U.S. Dairy Genetics to Turkey,        $22,551
                                Overcoming Unjustifiable
                                Regulatory Barriers for the
                                National Association of Animal
                                Breeders
    Turkey                     Expanding Indiana Hardwood            $20,900
                                Exports in Turkey for the
                                Indiana State Department of
                                Agriculture
    Vietnam                    Vietnamese Wet Blue Buyers Team       $32,450
                                to the United States for the
                                Leather Industries of America
                                                                ------------
      Total                                                       $8,361,172
    ------------------------------------------------------------------------
    Foreign Agricultural Service (November 2010).

                                     ______

    1. Program Name
        Foreign Market (Cooperator) Development Program.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Foreign Market (Cooperator) Development Program (FMD), also
    known as the Cooperator program, is administered by the Foreign
    Agricultural Service and uses funds from the Commodity Credit
    Corporation (CCC). FMD's first participants entered into agreements
    with FAS in 1954 The program is currently authorized by Title VII of
    the Agricultural Trade Act of 1978. Funding for FMD was reauthorized
    through 2012 by the 2008 Farm Bill.
    4. Purpose/Goals
        The purpose of the program is to create, expand, and maintain
    foreign markets for U.S. agricultural commodities and products through
    cost-share assistance. FMD benefits U.S. farmers, processors, and
    exporters by assisting their organizations in maintaining or increasing
    market share in existing markets by addressing long-term foreign market
    import constraints and by identifying new markets or new uses for the
    agricultural commodity or product in the foreign market. Overseas
    promotions focus on generic U.S. commodities, rather than brand-name
    products, and are targeted toward long-term development. Projects under
    the Cooperator Program are jointly funded by the U.S. Government and
    industry groups.
    5. Success in Meeting Programmatic Purpose/Goals
        FMD applications undergo a competitive review process based on
    criteria as specified in the FMD regulations and an annual Federal
    Register announcement. Funds are awarded to applicants that demonstrate
    effective performance based on a clear, long-term strategic plan. The
    FAS also considers the extent to which a proposed project targets
    markets with the greatest growth potential and a program effectiveness
    time line against which results can be measured at specific intervals
    using quantifiable product or country goals. The FAS allocates funds in
    a manner that effectively supports the strategic decision making
    initiatives of the Government Performance and Results Act (GPRA) of
    1993. In 2007, FAS commissioned a cost-benefit analysis of USDA's
    market development programs with an independent economic analysis firm,
    Global Insight Inc., and recently received the results of an update of
    that study. The study analyzed the impact of the increase in foreign
    market development investment that took place under the 2002 Farm Bill
    through 2009. The study reported that U.S. agricultural exports were
    $6.1 billion higher in 2009, compared to what they would have been
    without the increased investment in market development. Every dollar of
    increased investment in the MAP and FMD resulted in $35 in exports.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                  $34
                           2003                                  $34
                           2004                                  $34
                           2005                                  $34
                           2006                                  $34
                           2007                                  $34
                           2008                                  $34
                           2009                                  $34
                           2010                                  $34
                           2011                                  $34
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)

        Please explain changes between budget authority and outlays.

    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                  $31
                           2003                                  $32
                           2004                                  $37
                           2005                                  $36
                           2006                                  $36
                           2007                                  $36
                           2008                                  $33
                           2009                                  $36
                           2010                                  $32
                           2011                           $37 (est.)
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which the
    program agreement is entered into. Outlays could be made up to 5 years
    after the project is implemented. Most payments are made by the third
    fiscal year.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
                            Annual Cost                       FTE
                  ----------------------------------------------------------
                     Section 11 &
          FY           General       Prog. Funds
                    Appropriations   for Admin.        FTE       Tech Assist
                     Admin. Cost       Support
    ------------------------------------------------------------------------
            2007            $0.3                             1          0.29
            2008            $0.3                             1          0.29
          2009 a            $0.3                             1          0.29
          2010 a              $0            $0.3             1          0.29
          2011 a              $0            $0.4             1          0.29
    ------------------------------------------------------------------------
    a Source: Explanatory Notes Available Funds Table. Includes direct
      administrative costs but does not include miscellaneous indirect
      costs.
    For FY 2009 and FY 2010, Section 103 of the American Recovery and
      Reinvestment Act (ARRA) exempted CCC program funds used to pay
      authorized administrative costs for FMD from counting against the cap
      on CCC funds used to pay for salaries and administrative costs imposed
      by Section 11 of the CCC Charter Act. The Department of Defense and
      Full-Year Continuing Appropriations Act of 2011 continued the
      exemption from the CCC section 11 cap for CCC funds used to pay
      authorized administrative costs of FMD.

    9. Eligibility Criteria
        To participate in the FMD program an applicant must be a nonprofit
    U.S. trade organization. An applicant must agree to contribute
    resources to its proposed promotional activities. The contribution must
    be at least 50 percent of the value of resources provided by CCC for
    activities conducted under the project agreement.
    10. Utilization (Participation) Data
        For FY 2011 there were 22 applicants competing for $34.5 million in
    appropriated funding. Attached is a chart of FY 2011 Foreign Market
    Program Development allocations.
    11. Duplication or Overlap with Other Programs
        FMD is complementary to other FAS/USDA market development programs
    whereby funding to address priority, market-specific issues or to
    undertake activities not already serviced by or unsuitable for funding
    under other FAS marketing programs, such as the Market Access Program,
    the Emerging Market Program, the Technical Assistance for Specialty
    Crops Program, and the Quality Samples Program.
    12. Waste, Fraud and Abuse
        FAS is not aware of any examples of waste, fraud, and abuse in this
    program, including overpayments that the Department or other government
    agency has determined is a problem. FAS program areas closely monitor
    all agency agreements to ensure that participants carry out activities
    in accordance with program regulations. In addition, the FAS Compliance
    staff routinely reviews FAS agreements agency-wide to document
    compliance, and to ensure that FAS maintains sufficient internal
    controls. Further, FAS programs are audited by both the USDA Office of
    Inspector General and the Government Accountability Office, each of
    which provides detailed reports and recommendations for improvement.
    Finally, FAS programs are subject to the same oversight and reporting
    requirements common to all USDA programs, including testing of
    transactions under the Improper Payments Improvement Act. Together
    these internal and external monitoring and evaluation practices serve
    to catch and correct instances of waste, fraud, and abuse before they
    result in loss of public funds.
    13. Effect of Administrative PAYGO
        None.
                                   attachment

                                Fiscal Year 2011
            Fiscal Year 2011 Foreign Market Development Program (FMD)
    ------------------------------------------------------------------------
                         Cooperator                           Allocation
    ------------------------------------------------------------------------
    AHEC, APA, SEC, SFPA *                                        $2,796,545
    American Peanut Council                                         $628,631
    American Seed Trade Association                                 $219,486
    American Sheep Industry Association                             $161,354
    American Soybean Association                                  $6,648,054
    Cotton Council International                                  $4,532,356
    Leather Industries of America                                   $135,224
    Mohair Council of America                                         $8,808
    National Hay Association                                         $80,110
    National Renderers Association                                  $837,791
    National Sunflower Association                                  $252,192
    North American Millers Association                               $23,833
    U.S. Dairy Export Council                                       $595,464
    U.S. Dry Bean Council                                           $103,611
    U.S. Grains Council                                           $4,386,866
    U.S. Hide, Skin and Leather Association                          $98,092
    U.S. Livestock Genetics Export, Inc.                            $670,213
    U.S. Meat Export Federation                                   $1,612,357
    U.S. Wheat Associates                                         $5,033,535
    USA Dry Pea and Lentil Council                                  $157,319
    USA Poultry and Egg Export Council                            $1,262,021
    USA Rice Federation                                           $1,457,865
                                                         -------------------
      Reserve                                                     $2,798,273
                                                         ===================
        Total Available FY 2011 Funding                         $34,500,000
    ------------------------------------------------------------------------
    * American Hardwood Export Council, APA--The Engineered Wood
      Association, Softwood Export Council, Southern Forest Products
      Association.

                                     ______

    1. Program Name
        Facility Guarantee Program.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        Authorized by Congress under section 1542 of the Food, Agriculture,
    Conservation and Trade Act of 1990 to meet the financing needs for the
    establishment or improvement of facilities or the provision of services
    in emerging markets that would primarily benefit the export of U.S.
    agricultural commodities.
    4. Purpose/Goals
        By providing credit guarantees consistent with the Organisation for
    Economic Co-operation and Development's (OECD) ``Arrangement on
    Officially Supported Export Credits'', for loan tenors of up to 10
    years, the financial risk to U.S. lenders (banks or exporters) of
    foreign banks is greatly diminished. This reduced risk in financing
    increases export opportunities in those emerging markets where the lack
    of credit impedes an exporter's ability to sell and a buyer's ability
    to acquire agriculture-related infrastructure or services that will
    primarily enhance sales of U.S. agricultural commodities.
    5. Success in Meeting Programmatic Purpose/Goals
        From inception through June 2011, only one transaction has been
    guaranteed. Prior to the 2008 Farm Bill statutory amendments, FGP
    required U.S. content on any goods guaranteed. The 2008 Farm Bill,
    however, allowed for a ``waiver'' of U.S. content requirement if such
    goods were unavailable or the use of such goods is not practicable. The
    program also requires a determination of downstream benefit to the
    export of U.S. agricultural commodities. As the FGP program is required
    to adopt a premia structure consistent with the OECD Arrangement on
    Officially Supported Export Credits, capital goods programs offered by
    the U.S. Export-Import Bank were more attractive, as exporters did not
    need to develop rational trade arguments for the downstream benefits to
    U.S. agriculture. In light of the waiver provision for U.S. content, we
    are reviewing ways to use such authority with as little impact on U.S.
    manufacturing concerns as possible. FGP operates as a subset of the
    GSM-102 Export Credit Guarantee Program and under that authority is
    subsumed within the same overall limitations on the amount of credit
    guarantees that CCC may make available, which is now effectively capped
    in each fiscal year at $40 million of annual budget authority for
    ``subsidy.'' FGP subsidy estimates, because of much longer average loan
    tenors, have been historically higher than those of the GSM-102
    program, which in turn requires an evaluation of the best way for USDA
    to satisfy immediate demand for credit guarantees.
    6. Annual Budget Authority (FY 2002-FY 2011)
        Applicable law mandates that CCC make available for each fiscal
    year an amount of credit guarantees (both GSM-102 and FGP) equal to the
    lesser of (a) $5,500,000 or (b) an amount of guarantees that CCC can
    make available using budget authority for an underlying subsidy amount
    of the sum of $40 million per year plus any unobligated budget
    authority from prior fiscal years.
    7. Annual Outlays (FY 2002-FY 2011)
        N/A.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.
         FGP delivery costs fall under the separate appropriation of $6.8
    million (FY 2011) used to cover the salaries and other administrative
    costs (S&Es) of the Export Credit Guarantee Program (GSM-102). The
    program's information technology support for web interface, system of
    records and database are included in the overall costs to maintain the
    Export Credit Guarantee program information technology.
    9. Eligibility Criteria
        Please explain who is eligible for participation in this program.
    Also list any special considerations (for example priority areas or
    carve-outs for certain eligible producers).
         All potential participants--exporters, U.S. financial
    institutions, foreign banks and countries--can participate provided
    they are not suspended, debarred or otherwise prohibited from
    participation in U.S. Government programs. Loan terms will be in
    accordance with OECD guidelines. In addition exporters must have an
    office in the United States, U.S. financial institutions must be
    regulated and foreign banks are subject to extensive individual
    financial review to determine creditworthiness. By law, credit
    guarantees cannot be issued to any country that cannot adequately
    service the debt associated with particular export sales.
    10. Utilization (Participation) Data
        Please provide the number of participants in the program. If there
    is a backlog, please explain that as well. Where appropriate, please
    include additional information, such as the number of acres enrolled in
    the program.
        From inception through June 2011, only one transaction has been
    guaranteed.
    11. Duplication or Overlap with Other Programs
        If the purpose/goals or mission of this program are similar to
    those of other programs, please list those other programs along with an
    explanation.
        The Export Import Bank offers very similar programs--but is
    absolutely limited to the guarantee of U.S. origin capital goods and
    U.S. services Ex-Im's primary mission is to expand the export of the
    U.S. capital goods or services, while the primary mission of the FGP is
    to enhance the export of U.S. agricultural commodities.
    12. Waste, Fraud and Abuse
        Please provide examples of waste, fraud, and abuse including
    overpayments that the Department or other government agency has
    determined is a problem and how the Department is combating such
    problems.
        USDA is proactive in reviewing this program and its participants.
    Where there is any indication of waste, fraud and abuse, the Department
    is aggressive in investigating those incidents. This program when
    operational will fully implement, document and test at least annually
    its internal controls in accordance with both, OMB Circular A-123,
    which implements requirements of the Federal Managers' Financial
    Integrity Act of 1982, and the Improper Payments Information Act of
    2002 (IPIA).
    13. Effect of Administrative PAYGO
        N/A.
                                     ______

    1. Program Name
        Dairy Export Incentive Program (DEIP).
    2. Subprograms/Department Initiatives
    3. Brief History
        Authorized by Congress under Sec. 153 of the Food Security Act of
    1985, the program provides a bonus or subsidy on a bid basis to
    exporters of eligible dairy products (butterfat, nonfat dry milk, whole
    milk powder and various cheeses). The payments may be made in cash or
    in commodities held by the Commodity Credit Corporation (CCC).
    Initially, the program provided the bonuses ``in-kind'' from surplus
    stocks of dairy products held by CCC. This `in-kind' payment was
    replaced by the issuance of ``generic certificates'' redeemable for any
    inventory held by the CCC. As inventories diminished, the program
    evolved into the sole use of cash payments for the subsidy. As this
    program provides an export subsidy, it is subject to the subsidy
    reduction commitments of the United States under the Uruguay Round
    Agreements of the World Trade Organization (WTO). The program is
    therefore subject to both budget and quantity limits in accordance with
    those reduction commitments.
    4. Purpose/Goals
        By providing a subsidy on exports of eligible dairy products, an
    amount intended to bridge the gap between world market prices and the
    U.S. domestic price, DEIP enables exporters to meet the lower world
    market prices, often influenced by the application of subsidies by
    other exporting countries--primarily the European Union (EU).
    5. Success in Meeting Programmatic Purpose/Goals
        The program has been very successful in meeting the needs of
    exporters and expanding markets for U.S. dairy products when world
    prices are depressed due to the application of subsidies by other
    countries. This was most evident leading up to and during the
    implementation period of the Uruguay Round subsidy reduction
    commitments. At that time, the EU was aggressively subsidizing dairy
    exports. Almost 250,000 metric tons of dairy products were exported
    under DEIP in Fiscal Year 1995 and $162 million in bonus payments were
    committed under DEIP in Fiscal Year 1993.
    6. Annual Budget Authority (FY 2002-FY 2011)
        This is a mandatory program with spending capped by our commitments
    under the WTO Uruguay Round Agreements. These are product specific and
    follow:

    ------------------------------------------------------------------------
            Dairy Product         Budgetary Cap ($Mil)    Quantity Cap (MT)
    ------------------------------------------------------------------------
           Nonfat dry milk                  $82.46                68,201
                 Butterfat                  $30.49                21,097
                    Cheese                   $3.63                 3,030
    Other (whole milk powder)               $0.021                    34
                                 -------------------------------------------
      Total.....................          $116.601                   N/A
    ------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011)
        Please explain changes between budget authority and outlays:

    ------------------------------------------------------------------------
                                     Subsidy Awarded
             Fiscal Year                 ($Mil)             Quantity (MT)
    ------------------------------------------------------------------------
                      2002                  $54.62                86,473
                      2003                  $32.52                86,155
                      2004                   $2.68                48,498
                      2005                       0                     0
                      2006                       0                     0
                      2007                       0                     0
                      2008                       0                     0
                      2009                  $18.89                50,886
                      2010                   $2.37                 4,811
                      2011                       0                     0
    ------------------------------------------------------------------------

        The budget authority is restricted to the budgetary limits of our
    subsidy reduction commitments under the Uruguay Round Agreements. DEIP
    is designed to meet, not set, world market prices. Years where there
    has been limited use of DEIP reflect the United States' competitiveness
    in the world market without the need for a subsidy. This condition
    exists today.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.
        Delivery costs are a function of collateral duty when the program
    is operating. When not operating, program delivery costs are estimated
    at 0.10 FTE--largely a function of closing outstanding performance
    issues. When operational, USDA estimates that no more than two FTE
    equivalents are utilized to operate the program. In fiscal 2010, the
    program operated for one month and estimated delivery costs were under
    $40,000. In 2011, estimated delivery costs are under $10,000. The
    software costs for the program are under $1,000 per year.
    9. Eligibility Criteria
        Please explain who is eligible for participation in this program.
    Also list any special considerations (for example priority areas or
    carve-outs for certain eligible producers).
         All potential exporters of U.S. dairy products can participate
    provided they have an agent in the United States and they are not
    suspended, debarred or otherwise prohibited from participation in U.S.
    Government programs.
    10. Utilization (Participation) Data
        Please provide the number of participants in the program. If there
    is a backlog, please explain that as well. Where appropriate, please
    include additional information, such as the number of acres enrolled in
    the program.
         To date 115 exporters of dairy products have participated in DEIP
    since inception.
        The following is a list of the number of participants for the
    period 2002-2011:

    ------------------------------------------------------------------------
                 Fiscal Year                         Participants
    ------------------------------------------------------------------------
                          2002                                    17
                          2003                                    12
                          2004                                     4
                          2005                                     0
                          2006                                     0
                          2007                                     0
                          2008                                     0
                          2009                                    17
                          2010                                    12
                          2011                                     0
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        If the purpose/goals or mission of this program are similar to
    those of other programs, please list those other programs along with an
    explanation.
        None.
    12. Waste, Fraud and Abuse
        Please provide examples of waste, fraud, and abuse including
    overpayments that the Department or other government agency has
    determined is a problem and how the Department is combating such
    problems.
        USDA is proactive in reviewing this program and its participants.
    Payments are not made until the exporters provide appropriate export
    documentation that is reviewed for compliance with program
    requirements. Where there is any indication of waste, fraud and abuse,
    the Department is aggressive in investigating those incidents. At this
    time we have no confirmed evidence of waste, fraud or abuse under DEIP.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        The Cochran Fellowship Program.
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Cochran Fellowship Program was established in September 1984
    and was authorized in section 1543 of the Food, Agriculture,
    Conservation, and Trade Act of 1990, as amended. The program provides
    short-term agricultural fellowships in the United States for senior and
    mid-level specialists and administrators working in such areas as
    agricultural trade and policy, agribusiness development, management,
    animal, plant, and food sciences, extension services, and agricultural
    marketing. Since its start the Cochran Fellowship Program has trained
    over 14,300 international participants from 123 countries.
    4. Purpose/Goals
        The purpose of the Cochran Fellowship Program is to provide
    agricultural fellowships to individuals from middle-income countries,
    emerging markets and emerging democracies. By statute, the goals are
    for participants to gain knowledge and skills through training that
    will: ``(1) assist eligible countries to develop agricultural systems
    necessary to meet the food and fiber needs of their domestic
    populations; and (2) strengthen and enhance trade linkages between
    eligible countries and agricultural interests in the United States.''
    5. Success in Meeting Programmatic Purpose/Goals
        The more than 14,000 Cochran alumni comprise an impressive network
    of agricultural specialists that have both enhanced food security in
    their home countries and strengthened trade linkages with the United
    States. Alumni include the current President of Albania and several
    Ministers of Agriculture from different regions of the world. The
    Cochran Fellowship Program can play an important role in resolving
    agricultural trade issues. For example, in March 2011 the Minister of
    Agriculture in Iraq lifted the import ban of U.S. livestock genetics
    shortly after a Cochran training demonstrated the quality of U.S.
    bovine genetics to three Iraqi agricultural specialists. A Cochran
    Fellow from China trained in U.S. food retailing practices in 1996 now
    runs a high-end supermarket chain in Shanghai that carries nearly 3000
    American products with annual sales of $44 million.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                           2002                                   $4
                           2003                                   $5
                           2004                                   $4
                           2005                                   $4
                           2006                                   $4
                           2007                                   $4
                           2008                                   $3
                           2009                                   $5
                           2010                                   $5
                           2011                                   $3
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                           2002                                   $4
                           2003                                   $4
                           2004                                   $5
                           2005                                   $3
                           2006                                   $4
                           2007                                   $5
                           2008                                   $4
                           2009                                   $3
                           2010                                   $5
                           2011                            $3 (est.)
    ------------------------------------------------------------------------

        Not all payments (outlays) are made during the year in which budget
    authority is made available. Outlays could be made up to 5 years after
    the appropriation is received. Most payments are made by the third
    fiscal year after the appropriation.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        To the best of the Department's ability, please outline costs
    associated with delivery of program, including FTE's, technical
    assistance, software, etc.

    ------------------------------------------------------------------------
               FY                   Annual Cost                FTEs
    ------------------------------------------------------------------------
                     2007                      5.2                      14
                     2008                      4.0                      12
                     2009                      2.6                      12
                     2010                      4.9                      12
                     2011               4.5 (est.)               13 (est.)
    ------------------------------------------------------------------------

        These funds not only support personnel cost, but participants'
    travel and training cost.
    9. Eligibility Criteria
        The Cochran Fellowship Program is open to the staff of
    agribusinesses, government departments, universities, and other
    agricultural organizations. In their own countries, applicants may be
    private agricultural producers, managers, technicians, scientists,
    specialists, professors, administrators, and/or policy makers from both
    the public and private sectors. Country eligibility includes middle-
    income countries, emerging democracies, and emerging markets.
    10. Utilization (Participation) Data
        Between 2002 and 2010 the program provided fellowships to 5835
    individuals from 107 countries. During FY 2011 it is anticipated that
    the Cochran program will sponsor approximately 425 individuals from 60
    countries. The yearly totals are as displayed below:

    ----------------------------------------------------------------------------------------------------------------
                       Year                      2002   2003   2004   2005   2006   2007   2008   2009   2010   2011
    ----------------------------------------------------------------------------------------------------------------
    Number of Cochran Fellows                     969    853    864    501    551    706    520    395    476    425
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        The Cochran Fellowship Program distinguishes itself from 1031 other
    project grants listed in the Catalog of Federal Domestic Assistance
    through its targeted audience, scope of training, approach and goals.
    Fellows from middle-income and countries in transition are
    strategically targeted, based on self-identified agricultural needs in
    their own countries and the priorities of FAS's strategy. Candidates
    are often mid-level professionals--from both the public and private
    sector--and receive specialized training related to trade capacity or
    market access needs. Cochran's short-term training for 2 to 3 weeks
    differs from other fellowship programs that are year-long (or longer)
    programs (Fulbright, Humphrey, USAID-sponsored development assistance
    scholarships) or targeted to academia (Borlaug, Faculty Exchange
    Program, Agricultural Research & Development (AWARD) Fellowship
    Program--USAID).
    12. Waste, Fraud and Abuse
        All funding for the Cochran Fellowship Program is obligated
    according to FAS agency-wide fund control procedural and policy
    guidance. Obligations are recorded on a timely basis in agency and
    departmental financial systems to ensure that program implementation
    can proceed in order to meet program objectives over the required
    timeline. A separate accounting code is established for each discrete
    Cochran training, ensuring that all expenditures are tied to a specific
    country and/or training focus. Each training budget is reviewed and
    modified by program staff to ensure that the amounts expended are
    appropriate. In addition, Federal travel guidelines are adhered to
    regarding lodging and per diem, as well as daily salary rates. Federal
    regulatory requirements relating to administration, cost principles and
    audits are included with each cooperative agreement. Reconciliation of
    all obligations and expenditures is performed at various intervals to
    be sure official accounting records are accurate. Timely reviews of
    unliquidated balances are performed based on OMB Circular A123,
    Management and Accountability Act.
        FAS is proactive in monitoring the Cochran program for any
    indications of waste, fraud and abuse. FAS has not found any systemic
    problems in the Cochran Program.
    13. Effect of Administrative PAYGO
        N/A.
                                     ______

    1. Program Name
        The Borlaug International Agricultural Science and Technology
    Fellowship Program (Borlaug Fellowship Program).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Borlaug Fellowship Program (BFP) was initiated in March 2004 in
    honor of the late Nobel Laureate Dr. Norman E. Borlaug, an agronomist,
    humanitarian, and the father of the Green Revolution. Congress provided
    statutory authorization for the program in the Food, Conservation and
    Energy Act of 2008 (7 U.S.C. 3319j). The BFP provides fellowships for
    scientific training and research in the United States to potential
    agricultural leaders from eligible countries to promote food security
    and economic growth. Since its inception in 2004, the BFP has enhanced
    the scientific, regulatory and agribusiness knowledge and skills of
    over 500 Borlaug Fellows from 64 developing countries.
    4. Purpose/Goals
        The Borlaug Fellowship Program helps developing countries
    strengthen food security and improve agricultural productivity by
    providing U.S.-based scientific training and collaborative research
    opportunities to visiting scientists, policymakers, and university
    faculty. Training for Borlaug Fellows increases their scientific
    knowledge and promotes long-term collaboration with mentors at U.S.
    land-grant universities, USDA and other government agencies, and
    international research centers. The program also strives to help
    developing countries strengthen agricultural practices through the
    transfer of new science and agricultural technologies, including those
    related to production, processing and marketing; addresses obstacles to
    the adoption of technology, such as ineffective policies and
    regulations; and promotes the extension of knowledge gained by Fellows
    to ``users and intermediaries in the marketplace.''
    5. Success in Meeting Programmatic Purpose/Goals
        The program has facilitated the adoption of modern agricultural
    practices in targeted countries by strengthening human and
    institutional capacity through U.S.-based training. The Borlaug
    Fellowship Program periodically conducts surveys to gather information
    from Borlaug alumni about the impact of the fellowship program on their
    work. Responses from Borlaug alumni received in Fiscal Year 2010
    overwhelmingly reported that their fellowship had a positive impact on
    one or more aspects of their work. Of the 100 surveys received, the
    Fellows specifically reported that participating in the Borlaug
    Fellowship Program positively impacted their research (92 percent),
    teaching (74 percent), and policy objectives (14 percent), including
    the adoption of one or more new techniques or technologies (52 percent)
    in their home institutions. For example, A 2008 African Woman in
    Science Borlaug Alumnus trained in dairy management and nutrition
    reported that her training resulted in significant increases in milk
    production and calf births at the Kakoma Estate, a medium size Malawian
    dairy cooperative enterprise, where she is managing director. A Borlaug
    Alumnus from Romania with the University of Agricultural Science in
    Timisoara, Romania, reported that the lab experience he gained through
    his 2006 Fellowship allowed him to spearhead a research program at his
    home institution in applied microbiology and biofuels.

          6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                   BA
    ------------------------------------------------------------------------
                      2004-2006                                   $2
                           2007                                   $2
                           2008                                   $2
                           2009                                   $2
                           2010                                   $2
                           2011                                 $1.5
    ------------------------------------------------------------------------

               7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
                     FY                                 Outlays
    ------------------------------------------------------------------------
                      2004-2006                                   $2
                           2007                                   $2
                           2008                                   $2
                           2009                                 $2.3
                           2010                                 $2.1
                           2011                          $1.5 (est.)
    ------------------------------------------------------------------------

            8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
    ------------------------------------------------------------------------
               FY                   Annual Cost                FTEs
    ------------------------------------------------------------------------
                     2007                   $1.400                       4
                     2008                    $.974                       6
                     2009                   $1.625                       6
                     2010                   $1.785                       8
                     2011            $1.500 (est.)                8 (est.)
    ------------------------------------------------------------------------

        These funds support personnel cost and participants' travel and
    training cost such as training at Texas A&M University and Prairie View
    A&M University.
    9. Eligibility Criteria
        Individuals, who specialize in agricultural education, research and
    extension, from the public and private sectors in developing countries
    that are eligible for U.S. economic assistance.
    10. Utilization (Participation) Data
        Since 2004, the Borlaug Fellowship Program has trained Fellows from
    64 countries in sub-Saharan Africa, the Middle East, the former Soviet
    Union, Asia and Latin America to receive scientific agricultural
    training in the United States. Collaborative-research and training have
    spanned such fields as the plant and animal sciences, food safety,
    agricultural biotechnology, environmental sciences, climate change, and
    food security. Women agriculturalists receive priority consideration in
    the program and now comprise nearly 50 percent of participants. During
    FY 2011 it is anticipated that the Borlaug Fellowship Program will
    sponsor approximately 34 individuals from 26 countries. The yearly
    totals are displayed below:

    ------------------------------------------------------------------------
               Year             2004-2006   2007   2008   2009   2010   2011
    ------------------------------------------------------------------------
    Number of Borlaug Fellows         268     94     66     63     48     34
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        There is no duplication or overlap with other Federal programs.
    12. Waste, Fraud and Abuse
        All funding for the Borlaug Fellowship Program is obligated
    according to FAS agency-wide fund control procedural and policy
    guidance. Obligations are recorded on a timely basis in agency and
    departmental financial systems to ensure that program implementation
    can proceed in order to meet program objectives over the required
    timeline. A separate accounting code is established for each discrete
    Borlaug training, ensuring that all expenditures are tied to a specific
    country and/or training focus. Each training budget is reviewed and
    modified by program staff to ensure that the amounts expended are
    appropriate. In addition, Federal travel guidelines are adhered to
    regarding lodging and per diem, as well as daily salary rates. Federal
    regulatory requirements relating to administration, cost principles and
    audits are included with each cooperative agreement. Reconciliation of
    all obligations and expenditures is performed at various intervals to
    be sure official accounting records are accurate. Timely reviews of
    unliquidated balances are performed based on OMB Circular A123,
    Management and Accountability Act.
    13. Effect of Administrative PAYGO
        None.
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--U.S.
                      Agency for International Development
    1. Program Name
        Food for Peace Act/USAID Title II, III, and V.
    2. Subprograms/Department Initiatives
        A. Title II: Emergency and Private Assistance Programs

        Under Title II, USAID provides emergency food aid to address needs
    arising from natural disasters, such as floods or droughts, and complex
    emergencies often characterized by insecurity and population
    displacement. USAID also provides development food aid as part of
    multi-year, development (non-emergency) programs integrated with USAID
    strategies to address the underlying causes of chronic food insecurity.

        B. Title III: Food for Development

        Title III is a USAID-administered program for enhancing food
    security and supporting long-term economic development in least-
    developed countries. USAID is authorized to donate agricultural
    commodities to a recipient country and funds the transportation to the
    point of entry in the recipient country. These commodities may be sold
    on the domestic market and the revenue generated from their sale is
    used to support and implement economic development and food security
    programs. Funds have not been requested or appropriated for Title III
    for more than a decade.

        C. Title V: Farmer to Farmer Program

        The John Ogonowski and Doug Bereuter Farmer-to-Farmer Program
    provides voluntary technical assistance to farmers, farm groups, and
    agribusinesses in developing and transitional countries to promote
    sustainable improvements in food security and agricultural processing,
    production, and marketing. The program relies on the expertise of
    volunteers from U.S. farms, land-grant universities, cooperatives,
    private agribusinesses, and nonprofit farm organizations to respond to
    the local needs of host-country farmers and organizations.
    3. Brief History
        On July 10, 1954, President Dwight D. Eisenhower signed the
    Agricultural Trade Development Assistance Act--or Public Law (P.L.)
    480--into law. Since that day, the lasting benefits President
    Eisenhower envisioned have come to pass. The more than 120 million
    metric tons of American food the United States has sent overseas over
    the past 57 years under Title II, the largest part of P.L. 480, have
    kept billions of people overseas from hunger, malnutrition, and
    starvation.
        Early in his Administration, President John F. Kennedy underlined
    the importance of P.L. 480 to the United States--and the rest of the
    world--by renaming it ``Food for Peace'' and placing it in the newly
    created U.S. Agency for International Development. ``Food is strength,
    and food is peace, and food is freedom, and food is a helping hand to
    people around the world whose good will and friendship we want,''
    Kennedy said. Since its inception, Food for Peace has adapted several
    times to accommodate changing needs around the world. Programs
    currently focus primarily on sub-Saharan Africa and Asia. Despite these
    changes, the objectives have remained the same: fighting hunger and
    malnutrition and promoting sustained economic growth and development.
        For over 57 years, the Food for Peace program has brought hope and
    nourishment to the hungry corners of the world. Over three billion
    people in over 150 countries have benefited directly from our food.
        Upon reaching its destination, the food is used in a variety of
    ways, and always for the people most vulnerable to the effects of
    hunger: children under age 5, pregnant women, the elderly, and the
    poorest families in a community. During an emergency in which people
    face threat of imminent starvation, food--wheat, sorghum, corn and
    other commodities--are distributed to save their lives. If the symptoms
    of extreme malnutrition have already appeared, a nutritionally
    fortified ration with blended, fortified, and processed food is
    provided. In less dire circumstances, food can be used to compensate
    people for work, such as building roads or repairing water and
    irrigation systems. In turn, these projects help protect communities
    from future hunger by providing them access to local markets for their
    produce, keeping them healthy, and improving their harvests.
        Title II programs have an immediate impact of protecting lives and
    maintaining consumption levels, while also contributing to longer-term
    impacts, including enhancing community and household resilience to
    shocks, helping people build more durable and diverse livelihood bases
    (enhancing assets, resources, and infrastructure), and enhancing the
    capabilities of individuals through improvements in health, nutrition
    and education.
        Title V, the Farmer-to-Farmer Program, exemplifies this U.S.
    helping hand in food aid. Since the program's inception in 1985, over
    12,000 volunteer assignments have been completed in over 80 countries.
    Over one million farmer families (representing about five million
    people) have directly benefitted from the Farmer-to-Farmer Program.
    Volunteers help host individuals and organizations build local
    institutions and linkages to resolve local problems and have provided
    direct hands-on training to over 80,000 people. Approximately 43
    percent of all individuals trained by Farmer-to-Farmer volunteers are
    women. Under the current program, 15 organizations are providing
    volunteer services in 25 core countries. Current programs field
    approximately 600 volunteers per year.
    4. Purpose/Goals
        The Food for Peace Act, as the statute has been renamed, states the
    following with respect to the programs authorized under the Act:

            It is the policy of the United States to promote its foreign
            policy by enhancing the food security of the developing world
            through the use of agriculture commodities and local currencies
            accruing under this Act to:

                    (1) Combat world hunger and malnutrition and their
                    causes;
                    (2) Promote broad-based, equitable and sustainable
                    development, including agricultural development;
                    (3) Expand international trade;
                    (4) Foster and encourage the development of private
                    enterprise and democratic participation in developing
                    countries; and
                    (5) Prevent conflicts.

        The Farmer-to-Farmer Program goal is to help promote agricultural
    sector growth and food security in developing countries and to increase
    international understanding of the United States and U.S. development
    programs by involving American citizens in people-to-people exchanges
    for work on agricultural development.
    5. Success in Meeting Programmatic Purpose/Goals

        Title II: Emergency and Private Assistance (Development) Programs

        Administered by the USAID Office of Food for Peace in the Bureau
    for Democracy, Conflict, and Humanitarian Assistance, in FY 2010, Title
    II programs (emergency and development (non-emergency)) provided more
    than 2.1 million tons of commodities, with a program cost of
    approximately $1.9 billion, to assist approximately 55 million people
    in 46 countries.
        For more information on Food for Peace Title II program
    accomplishments, please see attached text from the FY 2010
    International Food Assistance Report (Attachment B), as well as the FY
    2007-2009 International Food Assistance Reports (attached).

        Title V: Farmer to Farmer Program

        The USAID Bureau for Food Security administers this program. In FY
    2010, implementing agencies fielded 522 volunteers from 48 states and
    the District of Columbia. The top five states providing volunteers
    were: California (58 assignments), Wisconsin (50 assignments), North
    Carolina (28 assignments), Florida (25 assignments), and Minnesota (19
    assignments). Of these assignments, 433 were completed by men (83
    percent) and 89 by women (17 percent). In FY 2010, 522 volunteer
    assignments focused on technology transfer (68%), organizational
    development (12%), business/enterprise development (17%), financial
    services (2%), and environmental conservation (1%). Volunteers worked
    at various levels of the commodity production and marketing chain,
    including: rural services and input supply (35%), on-farm production
    (40%), storage and processing (14%), and marketing (11%).
        See attached examples (Attachment C) of the program's successes in
    meeting the goals and purposes.
    6. Annual Budget Authority (FY 2002-FY 2011)
        For USAID's annual budget authority (FY 2002-2011), please see
    Attachment A.
    7. Annual Outlays (FY 2002-FY 2011)
        For USAID's annual Title II outlays (FY 2002-2011), please see
    Attachment A.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        The annual average Title II delivery cost (FY 2002-FY2011) is $730
    per metric ton.
    9. Eligibility Criteria
        Those eligible for Title II emergency resources are:

       A private voluntary organization or cooperative that is, to
            the extent practicable, registered with the USAID
            Administrator, or

       A Public International Organization (PIO), such as the U.N.
            World Food Program.

        Pursuant to section 402 of the Food for Peace Act, this includes
    U.S. and non-U.S. nonprofit organizations.
        Title V, the Farmer-to-Farmer Program, is implemented by U.S.
    private voluntary organizations, cooperatives, and universities. During
    FY 2010, eleven private voluntary organizations and four universities
    participated in the program.
    10. Utilization (Participation) Data
        Food for Peace (Title II) assisted the following number of
    beneficiaries in FY 2008 through FY 2010:

    ------------------------------------------------------------------------
               FY                    Emergency              Development
    ------------------------------------------------------------------------
                     2008             37.9 million             7.6 million
                     2009               55 million             7.1 million
                     2010             46.5 million             7.9 million
    ------------------------------------------------------------------------

        During FY 2010, the Farmer to Farmer Program (Title V) provided
    assistance to 455 local organizations (cooperatives, farmer groups,
    agribusinesses, rural financial organizations and others), directly
    assisting 34,080 people. The program provided training to 16,853
    people.
    11. Duplication or Overlap with Other Programs
        Food for Peace Title II is the largest USG international food aid
    program and the only program with a primary responsibility for
    emergency food assistance. Title II development programs are integrated
    into country level strategic plans and as such are designed to
    complement other mission development objectives. Emergency food aid
    complements food security programs by addressing the most vulnerable
    populations.
        At the country level, the Farmer-to-Farmer Program (Title V)
    generally works with and through partners' programs. Frequently, these
    partners' programs are other on-going USAID agricultural and rural
    development projects. Implementing private voluntary organization
    country program arrangements and USAID country Missions collaborate to
    ensure coordination with national development efforts and on-going
    programs. Coordination and sustainability are ensured through working
    closely with local host organizations on their farm and business
    development efforts.
    12. Waste, Fraud and Abuse
        The USAID Office of Food for Peace works aggressively to avoid
    waste, fraud, and abuse, and works closely with the USAID Office of
    Inspector General (OIG) to review Title II, III or V audit findings and
    respond accordingly with management decisions and actions, as
    applicable.
    13. Effect of Administrative PAYGO
        N/A.

                                                                          attachment a
                                                             Budget Authority and Outlays--Title II
                                                                   Total Funding Availability
                                                                      (in Hundred Millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010   FY 2011 To
                                          Final      Final       Final       Final       Final       Final       Final       Final       Final       Date
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Appropriations                          958.8    1,809.6     1,185.0     1,413.0     1,488.5     1,664.7     2,060.9     2,320.9     1,840.0     1,497.0
      Base Enacted                          863.8    1,192.2     1,185.0     1,173.0     1,138.5     1,214.7     1,210.9     1,225.9     1,690.0     1,497.0
      Supplemental Appropriations            95.0    * 617.4         0.0       240.0       350.0       450.0       850.0     1,095.0       150.0         0.0
                                       ---------------------------------------------------------------------------------------------------------------------
        Outlays **                          922.0    1,063.0     1,535.0     1,339.0     1,294.0     2,550.0     2,618.5     2,013.0     1,639.0         N/A
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * $69 million was legislated to be transferred to the Bill Emerson Humanitarian Trust.
    ** as reported in the President's annual budget appendix.

                                  attachment b
    Excerpts from FY 2010 International Food Assistance Report
    U.S. International Food Assistance Overview
        U.S. international food assistance has long played a critical role
    in responding to global food insecurity. This tradition continued in FY
    2010, with the USG providing more than 2.5 million metric tons (MT) of
    commodities to more than 65 million beneficiaries in 73 countries
    worldwide. Current U.S. international assistance programs stretch from
    sub-Saharan Africa to the former Soviet Union and from Latin America
    and the Caribbean to south Asia. These programs have been adaptable and
    flexible as food needs have evolved around the world.
    Expanded Prepositioning of Commodities
        USAID announced a major expansion of its global food aid
    prepositioning system in Fall 2010. USAID awarded contracts for six
    prepositioning sites, in the United States (Texas), Sri Lanka,
    Djibouti, Kenya, South Africa, and Togo.
        USAID's prepositioning system operates as part of a modern supply
    chain management system. When food aid is needed somewhere, USAID first
    uses commodities from the global prepositioning system--either in
    warehouses or in transit to them--and then reorders commodities to
    replace them. This process allows USAID to maintain a continuous flow
    of vital food aid in response to emergencies. Food aid supplies are
    stockpiled in or near regions of the world with historically high
    emergency food aid needs. This system allowed USAID to respond to the
    floods in Pakistan, for example, by dispatching food aid from its
    prepositioning warehouse in Djibouti.
    Response to Disasters in Haiti and Pakistan
        The continued need for humanitarian food assistance was
    demonstrated throughout FY 2010, particularly in response to the
    earthquake in Haiti and the floods in Pakistan.
        After the devastating earthquake in Haiti in January, USAID was the
    driving force in rapidly expanding the food aid response to assist
    Haitians in need.
        USAID's abilities to divert over 6,500 tons of food aid already on
    the ground as part of ongoing programs, as well as to purchase 3,564
    tons of commercial rice of U.S. origin in Haiti with assistance from
    USDA, were critical to jump-starting the large-scale distributions.
    USAID also dispatched 14,550 tons of food aid from USAID prepositioned
    stocks in Texas. After the initial emergency food response, USAID
    transitioned to more targeted distributions to vulnerable groups (e.g.,
    women and children under 5) assisting approximately three million
    beneficiaries.
        After the July floods in Pakistan, USAID dispatched peas and
    vegetable oil from USAID's prepositioning site in Djibouti and
    contributed approximately $130 million of Title II and Emergency Food
    Security Program (EFSP) resources to the World Food Program (WFP) to
    ensure food distributions at the start of the floods. With an
    additional USAID contribution of $90 million at the end of 2010, WFP
    worked to assist more than seven million flood-affected people.
    Contribution of Food Aid to Feed the Future
        USAID and USDA continue to improve the management of the food aid
    programs and to link the programs to the Feed the Future Initiative.
    USAID and USDA have increased coordination at both the headquarters and
    field levels to ensure that the programs supported country-led
    strategies and a whole-of-government approach. Both USAID and USDA have
    required applicants for development food aid programs to demonstrate
    how proposed projects would support country-led investment plans.
        Monitoring and evaluation (M&E) are an increasingly important
    component of program management. USDA and USAID continue to review and
    update indicators so that, where appropriate, results of food aid
    programs can be reported against the Feed the Future Strategic Results
    Framework.
    Bellmon Estimation for Title II (BEST) Project
        The USAID BEST Project continues to conduct independent market
    analyses to ensure that USAID complies with the Bellmon Amendment,
    which requires that adequate storage facilities be available in a
    recipient country upon arrival of a commodity to prevent spoilage or
    waste, and that distribution of the commodity in the recipient country
    will not result in substantial disincentive or interference with
    domestic production or marketing in that country. The USAID BEST
    Project has conducted 13 independent market analyses to ensure that
    these requirements are met. Studies can be found at http://
    www.usaid.gov/our_work/humanitarian_assistance/ffp/bellmonana.html.
    New Famine Early Warning Tool
        To better link early warning and response to emergencies, USAID
    developed a new Famine Early Warning System Network (FEWS NET)
    resource--the Food Assistance Outlook Briefing--which provides warning
    of potential food assistance needs 6 months in the future. These
    predictions are critical because of the time required to purchase and
    ship in-kind food aid from the United States. This tool also creates
    evidence-based analysis that is useful to USAID and national decision-
    makers as they take measures to respond to potential food insecurity.
    This monthly outlook can be found at www.fews.net.
    USAID's Famine Early Warning Systems Network (FEWS NET)
        USAID's Famine Early Warning Systems Network exemplifies the U.S.
    commitment to anticipating and responding to humanitarian
    vulnerabilities and crises. Using interagency agreements with the U.S.
    Geological Survey, National Aeronautics and Space Administration,
    National Oceanic and Atmospheric Administration, and USDA, FEWS NET
    continues to monitor, collect and analyze, and disseminate critical
    data and information on conditions of food availability and access in
    the most food insecure countries. FEWS NET provides decision-makers in
    the U.S. Government, host country governments, and a variety of other
    regional and international partners timely, unbiased, and insightful
    early warning and vulnerability information. FEWS NET information
    products can be found at www.fews.net.
        In response to rising needs for more and better food security
    monitoring information in countries not covered by a FEWS NET presence,
    and where global drivers of food security are ever more present, USAID,
    through FEWS NET, defined, tested, and is currently implementing an
    innovative non-presence-based ``remote monitoring'' strategy. This
    strategy uses FEWS NET partners to assist in the identification and
    early warning of significant changes in food availability and food
    access that might potentially lead to a food security crisis. Sectoral
    monitoring priorities for remote monitoring include weather and
    climate, crop condition and output, food markets and trade, and
    livelihoods. Data to monitor these priority areas is gathered from FEWS
    partners NOAA, NASA, USDA and the USGS, as well as satellite imagery
    and in-country sources.
        FEWS NET also uses remote monitoring for some countries where
    direct monitoring does not occur. This light form of monitoring has
    already provided important evidence for decision-making in Yemen, where
    it challenged the accuracy of nutritional surveys in the north, and in
    Tajikistan where it provided important context for understanding the
    limited food security implications of a drop in remittances to the
    country.
    Monitoring and Evaluation (M&E)
        In 2010, through its cooperative agreement with the Food and
    Nutrition Technical Assistance project (FANTA), USAID's Office of Food
    for Peace launched Discussion-TIIME, a free e-mail listserv and website
    where Food for Peace Title II monitoring and evaluation practitioners
    can learn from each other and have access to technical expertise. The
    listserv and website are geared especially to those practitioners in
    the field working on USAID Title II development and emergency
    assistance programs. The goals of Discussion-TIIME are to promote the
    professional development of development and emergency food assistance
    M&E staff; to help introduce new staff to Title II M&E and to keep
    experienced staff abreast of emerging issues; and to improve the
    quality of Title II M&E.
    Food Aid Quality
        In December 2010, USAID's Office of Food for Peace issued a draft
    report with recommendations for public comment from a 2 year Food Aid
    Quality Review (FAQR). The review, a collaborative effort undertaken
    with Tufts University Friedman School of Nutrition, and in consultation
    with industry, PVOs, technical experts, UN agencies, and others, aimed
    to identify ways to better match the nutritional quality of Title II
    food aid with the nutritional requirements of vulnerable populations
    overseas.
        Given new understandings in nutrition science and the importance of
    nutrition during the 1,000 days between a child's conception and 2
    years of age, the review identified the need to focus on the
    nutritional requirements of older infants, young children, and pregnant
    and lactating women. The recommendations focused on:

       Reformulating fortified, blended foods by enhancing
            micronutrient content and adding animal protein to improve both
            absorption and growth;

       Improving both composition and use of fortified vegetable
            oil;

       Improving fortified cereals used in general food
            distributions;

       Using ready-to-use products when appropriate;

       Modifying programming guidance so that the quality
            improvements can be used more cost-effectively to achieve
            specific nutritional outcomes; and

       Changing the processes used to approve new products, develop
            specifications, procure, and monitor the use of food aid
            commodities.

        The final report will be issued in April 2011. The implementation
    of these recommendations should dramatically enhance the nutritional
    impact of food aid rations in both emergency and development settings.
    Technical Capacity Building
        In 2010, USAID awarded a Technical and Operational Performance
    Support (TOPS) Program to advance networking among Title II emergency
    and development partners through training and information sharing on
    best practice and lessons learned. The near term priorities of TOPS are
    commodity management, nutrition and food technology, social and
    behavior change, and gender equity. TOPS works closely with and
    complements the work of FANTA, which is engaged in a number of
    important research studies on issues such as household dietary
    diversity and developing exit strategies that will inform future
    programming guidance.
    Gender
        During 2009-2010, USAID, with the support of the FANTA, led a
    process to develop a framework that will enable Food for Peace to
    enhance its focus on gender integration into Title II programs. The
    review and consultative process, as well as recommendations that
    emerged, are summarized in Occasional Paper #7 Gender Integration in
    USAID/DCHA Office of FFP Operations. This Occasional Paper is located
    at www.fantaproject.org. Some key recommendations include developing
    comprehensive guidelines specific to gender and food security for
    effective monitoring and evaluation of Title II programming,
    strengthening staff competencies on gender integration in food
    security, and supporting pilot efforts to determine how best to empower
    women in food assistance programming.
    Program Descriptions and Fiscal Year 2010 Accomplishments
        2. Title II: Emergency and Private Assistance (Development)
    Programs:

        Administered by the USAID Office of Food for Peace in the Bureau
    for Democracy, Conflict, and Humanitarian Assistance (DCHA), in FY
    2010, Title II programs (emergency and development) provided more than
    2.1 million MT of commodities, with a program cost of approximately
    $1.9 billion, to assist approximately 55 million people in 46
    countries.
        Title II programs focus to reduce food insecurity in vulnerable
    populations and improve resiliency to shocks--an essential first step
    toward household self-sufficiency and economic independence. In support
    of this approach, Title II development programs incorporate many
    activities to strengthen local capacity to respond to natural
    disasters.

        a. Title II: Emergency Programs:

        Title II emergency programs aim to address two forms of
    emergencies: natural disasters, such as floods or droughts, and complex
    emergencies characterized by a combination of natural disaster,
    conflict, and insecurity. All of these elements pose substantial
    programmatic and operational challenges in responding effectively to
    the needs of food-insecure populations.
        In FY 2010, Title II emergency programs provided more than 1.6
    million MT of emergency food aid, with a program cost of more than $1.5
    billion, to help alleviate malnutrition and hunger in 27 countries. In
    all, Title II emergency programs reached approximately 46.5 million
    food-insecure people in 27 countries in FY 2010.

        Food for Peace Title II: Emergency Program Highlights:

        Ethiopia: Throughout the first 9 months of 2010, most regions
    experienced normal to above normal rainfall, thus improving the overall
    food security situation, even resulting in suspension of emergency
    distributions in the south as of September. However, in parts of the
    Amhara, Afar, Oromiya, Tigray, Gambella, and Somali regions the rains
    also brought devastating floods and related mudslides that destroyed
    crops and displaced people, requiring emergency food rations. In FY
    2010, the bulk of Title II assistance, totaling more than $319 million,
    was in the form of relief food assistance to flood victims, primarily
    distributed through WFP and a relief consortium led by Catholic Relief
    Services (CRS).
        USAID also continued its support of the Government of Ethiopia's
    Productive Safety Net Program (PSNP), by providing approximately $132
    million of food assistance through PVO partners to chronically food
    insecure populations. In exchange for food (or cash) transfers,
    beneficiaries of the PSNP engage in public works projects such as soil
    and water conservation, water development, and rural feeder road
    construction and maintenance, in order to address the underlying
    factors for food insecurity in the beneficiary communities--mainly lack
    of availability, access to, and utilization of food resources. As one
    example, CRS undertook public works projects for water development,
    including excavation of more than 27,000 m3 for ponds, 88 km of
    irrigation canals, and more than 7,000 km of trenches for pipelines.
    Programs also included crop and livestock management training, training
    community focal persons on child malnutrition, and training in
    agribusiness skills, among others.
        Niger: Due to severe drought, Niger's 2010 harvest could meet less
    than a quarter of the country's annual food requirements. A Niger
    household food security survey in early 2010 estimated that 3.3 million
    people in Niger, representing approximately 22 percent of the overall
    population, would be highly or extremely food insecure and require
    emergency food assistance to meet basic food needs through September
    2010. As a result, in 2010 the Government of Niger launched a large
    humanitarian intervention to prevent the worst effects of the food
    crisis.
        Beginning in November 2009, based on early warning of the crisis,
    USAID ordered U.S. food aid for a FY 2010 total of $48.8 million, or
    approximately 46,000 MT, which it distributed through WFP and two PVOs.
        In addition, USAID made three awards, totaling $26.8 million, under
    the EFSP to complement the Title II assistance already given. These
    grants helped assist 1.7 million individuals affected by drought by
    providing beneficiaries with locally purchased food and vouchers for
    the purchase of food in local markets. This EFSP program gave USAID and
    its partners the flexibility to fill a critical food aid gap in
    response to emergency food aid needs in Niger.
        Continued food assistance will be needed in 2011 in order to
    address the high acute malnutrition rates and to build capacity within
    Niger's agricultural sector to be able to prevent and respond to future
    crises.

        b. Title II: Private Assistance Programs (Development):

        In FY 2010, 16 awardees implemented 42 Title II development food
    aid programs in 21 countries. Approximately 500,000 MT of food
    assistance, valued at more than $400 million, was used to support
    programs that benefited more than 7.9 million people.

        Food for Peace Title II: Development Program Highlights:

        Guatemala: Guatemala has the highest national level of chronic
    malnutrition in the Western Hemisphere and one of the highest in the
    world. Food insecurity is most severe in the highlands and some areas
    in the east where drought is recurrent and many people eke out a living
    on non-irrigated subsistence agriculture.
        The USAID Guatemala Food Security Program is one of the largest
    Title II food security programs in the Western Hemisphere. It
    coordinates with other USAID programs in health, local governance,
    enterprise and trade as well as with Government of Guatemala entities,
    international organizations and PVOs to reduce food insecurity among
    at-risk Guatemalans.
        In target municipalities with the highest chronic childhood
    malnutrition, the program integrates income generation and maternal/
    child health interventions that reduce food insecurity while improving
    the family's livelihood and health. USAID implementing partners use
    food aid rations for targeted supplementary feeding for 6 to 36 month
    old children and pregnant/lactating women, while they work with
    families to improve and diversify agricultural production (i.e., soil
    management and conservation practices), micro-enterprise, and marketing
    activities that augment farm income sources. In just one program
    implemented by SHARE, more than 450 farmers were supported with micro-
    loans, technical assistance, and commercial relationships in order to
    develop their market access. Using food for work, activities are
    underway to improve infrastructure in food insecure areas, to ease
    communities' access to markets, and to lower business transaction
    costs. Through these initiatives, USAID reaches approximately 400
    communities and helps 56,000 families each year.
        Liberia: Seven years after the end of the conflict in Liberia, the
    country is on the road to recovery. Yet threats remain to Liberia's
    food security, including residual effects of the war, population
    displacement, limited infrastructure, and poor sanitation and water
    quality. Countrywide, 30 percent of children are stunted, and 19
    percent are underweight. With its agricultural capacity severely
    diminished by the conflict, Liberia is working to rebuild its
    agricultural sector, with the aim to transition from food aid to
    market-driven development.
        Building upon the successes of the Catholic Relief Services-led
    Liberia Integrated Assistance Program supported by USAID, which ended
    in 2010, USAID awarded ACDI/VOCA $40 million over 5 years to implement
    the Liberian Agricultural Upgrading, Nutrition and Child Health
    (LAUNCH) project to reduce food insecurity. The project will build the
    technical and business management skills of Liberian farmers, as well
    as work to prevent malnutrition through interventions at the household,
    community and facility levels. This will be complemented by
    Opportunities Industrialization Centers International's (OICI) program
    Health, Agriculture and Nutrition Development for Sustainability
    (HANDS) in two of the most food insecure counties of Liberia, Grand
    Geddeh and River Ghee. Combined, these projects aim to assist over
    300,000 Liberians in the first year of the awards.
        Uganda: The hunger situation in Uganda has generally improved over
    the last several years. However, hunger challenges remain in distinct
    areas, with the northeastern Karamoja region considered the most food
    insecure. The combination of frequent natural disasters, gun violence,
    severe environmental degradation, extreme poverty, poor hygiene, and
    other factors has eroded people's capacity to cope with repeated
    shocks. One particular population vulnerable to food insecurity is
    displaced persons returning to their land, who may not have the
    agricultural inputs necessary to begin farming again.
        To respond to the chronic food insecurity, USAID has given multi-
    year development awards to ACDI/VOCA and Mercy Corps. In 2010, USAID
    allocated $25 million to assist more than 320,000 individuals.
        Projects undertaken in 2010 have included improving agricultural
    yields, creating food producer groups and women's gardening groups,
    improving sanitation and hygiene through construction of latrines and
    water wells, and opening of access roads to assist farmers in taking
    their products to market. As just two examples, in 2010 Mercy Corps
    established 95 new producer groups in the Kitgum and Pader districts,
    and 54 km of road were constructed in these same districts using food
    for work. Together with other initiatives, these projects take a
    holistic approach to addressing food insecurity.
        In addition, USAID awarded $15 million of emergency assistance to
    WFP in 2010 for drought-stricken areas and refugee assistance.
        Bangladesh: In a country of 156 million people, 45 percent of the
    population does not meet their minimum food requirements. Approximately
    37 percent of children under 5 are underweight, and over 48 percent
    suffer from stunting.
        In 2010, USAID contributed $42 million of Title II development
    funds, amounting to 94,340 MT of food aid, to develop the agricultural
    sector, improve maternal and child health and nutrition, strengthen
    livelihoods and entitlements, empower women, increase disaster
    preparedness, and other initiatives. Three Title II partners in
    Bangladesh--CARE, ACDI/VOCA, and Save the Children--aim to assist over
    580,000 households in some of the poorest and most marginalized
    communities over the course of their multi-year development programs.
    As one example, CARE's Strengthening Household Ability to Respond to
    Development Opportunities (SHOUHARDO) program has already reduced
    stunting by 28 percent in targeted communities. It has also provided
    business training for over 6,000 female entrepreneurs, and increased
    income by 128 percent, among other successes.

        c. International Food Relief Partnership:

        In November 2000, the U.S. Congress passed the International Food
    Relief Partnership (IFRP) Act. The law, which was renewed and extended
    under the 2008 Farm Bill, enables USAID to award grant agreements to
    eligible U.S. nonprofit organizations to produce and stockpile shelf-
    stable, prepackaged commodities. Through the IFRP program, commodities
    are made available to eligible nonprofit U.S. organizations and
    international organizations for transportation, delivery and
    distribution in emergency food aid relief programs.
        In FY 2010, FFP awarded approximately $8.9 million in Title II IFRP
    production and distribution grants. Over the course of the FY, 24 IFRP
    distribution grants were awarded to 17 U.S.-based nonprofit
    organizations. IFRP awardees distributed commodities to over 312,415
    beneficiaries in 17 countries.
        The organizations that received grants in FY 2010 to transport and
    distribute the commodities were: Food for the Hungry, ADRA, Amigos
    Internacionales, Batey Relief Alliance, Church of Bible Understanding,
    CitiHope International, Counterpart International, Cross International,
    Evangelical International Ministries, International Partnership for
    Human Development, International Relief Teams, Medical Missionaries,
    Nascent Solutions, Planet Aid, Project Concern International, Resource
    and Policy Exchange, and World Help.

     Appendix 4: USAID Title II Emergency Activities: Summary Budget, Commodity, Recipient, and Tonnage--Fiscal Year
                                                          2010
    ----------------------------------------------------------------------------------------------------------------
                                                                             Recipients                  Total Cost
           Country           Awardee                 Commodity                 (000s)      Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burundi                        WFP  Cornmeal, Corn Soy Blend,                      3         3,240      $3,578.1
                                         Vegetable Oil, Yellow Peas
    Cameroon                       WFP  Rice                                          81         3,350      $4,550.1
    Central African                WFP  Cornmeal, Corn Soy Blend, Yellow           1,538         3,830      $5,953.1
     Republic                            Split Peas
    Chad                           WFP  Cornmeal, Corn Soy Blend, Rice,            5,614        70,310     $98,217.6
                                         Sorghum, Vegetable Oil, Wheat,
                                         Wheat Flour, Yellow Split Peas
    Democratic Republic            WFP  Cornmeal, Corn Soy Blend,                    445        59,280     $85,699.3
     of the Congo (DRC)                  Vegetable Oil, Yellow Split Peas
    Djibouti                       WFP  Corn Soy Blend, Rice, Wheat Flour,           365         2,040      $2,128.7
                                         Yellow Peas
    Ethiopia                      CARE  Vegetable Oil, Wheat, Yellow Split            31           290        $125.2
                                         Peas
                                   CRS  Corn Soy Blend, Sorghum, Vegetable            24       227,870    $126,796.9
                                         Oil, Wheat, Yellow Split Peas
                                  REST  Vegetable Oil, Wheat, Yellow Split           696        45,730     $23,544.6
                                         Peas
                                   SCF  Vegetable Oil, Wheat, Yellow Split           215        11,080      $9,027.6
                                         Peas
                                   WFP  Corn Soy Blend, Pinto Beans                  644       324,200    $230,048.1
                                         Vegetable Oil, Wheat, Yellow
                                         Split Peas
    Kenya                          WFP  Cornmeal, Corn Soy Blend, Sorghum,         2,121       109,840    $101,975.4
                                         Vegetable Oil, Wheat Flour,
                                         Yellow Split Peas
    Madagascar                     WFP  Sorghum, Yellow Peas, Yellow Split         1,501         5,630      $4,511.6
                                         Peas
    Niger                          CRS  Bulgur, Corn Soy Blend, Great                194         8,060      $8,909.9
                                         Northern Beans, Lentils,
                                         Vegetable Oil
                                   CPI  Corn Soy Blend, Rice, Vegetable               42         2,310      $2,851.9
                                         Oil
                                   WFP  Bulgur, Corn Soy Blend, Lentils,              13        20,340     $36,974.5
                                         Rice, Sorghum, Vegetable Oil
    Republic of Congo              WFP  Rice, Vegetable Oil, Yellow Split            195         2,980      $4,793.8
                                         Peas
    Rwanda                         WFP  Corn, Cornmeal, Corn Soy Blend,              537         2,980      $4,167.2
                                         Pinto Beans, Vegetable Oil
    Somalia                        WFP  Corn Soy Blend, Sorghum, Vegetable             4        18,650     $15,002.6
                                         Oil, Yellow Split Peas
    Sudan                          NPA  Lentils, Sorghum, Vegetable Oil              123         2,660      $5,493.0
                                   WFP  Corn Soy Blend, Lentils, Sorghum,             49       315,840    $270,162.3
                                         Vegetable Oil, Yellow Split Peas
    Tanzania                       WFP  Cornmeal, Corn Soy Blend, Green              198         5,950      $6,051.2
                                         Split Peas, Vegetable Oil
    Uganda                         WFP  Corn Soy Blend, Cornmeal, Pinto            3,837        15,530     $15,334.5
                                         Beans, Sorghum, Vegetable Oil,
                                         Yellow Split Peas
    Zimbabwe                       CRS  Bulgur, Pinto Beans, Vegetable                --         6,460     $22,713.9
                                         Oil, Yellow Split Peas
                                   WFP  Bulgur, Sorghum, Vegetable Oil,               11        24,470     $38,428.8
                                         Yellow Peas, Yellow Split Peas
                                  WVUS  Unspecified Commodities                       --            --     $18,308.3
                         -------------------------------------------------------------------------------------------
      Sub-Total Africa                                                            18,481     1,292,920  $1,145,348.2
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                    WFP  Wheat, Wheat Flour, Vegetable Oil             29        43,810     $42,630.3
    Algeria                        WFP  Great Northern Beans, Lentils,               125         6,550      $6,212.6
                                         Rice, Vegetable Oil, Wheat Flour
    Laos                           WFP  Rice                                         175         3,280      $3,342.7
    Nepal                          WFP  Garbanzo Beans, Rice, Vegetable              549         4,620      $4,130.3
                                         Oil, Yellow Split Peas
    Pakistan                       WFP  Rice, Vegetable Oil, Wheat Flour,             43       110,210     $96,850.8
                                         Yellow Split Peas
    Philippines                    WFP  Rice, Vegetable Oil                            3        15,200     $15,757.8
    Sri Lanka                      WFP  Lentils, Vegetable Oil, Wheat,                 4        22,230     $17,821.5
                                         Wheat Flour, Yellow Split Peas
    Yemen                          WFP  Great Northern Beans, Pinto Beans,           995        13,880     $12,699.7
                                         Vegetable Oil, Wheat, Wheat
                                         Flour, Yellow Split Peas
                         -------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     1,923       219,780    $199,445.7
    ----------------------------------------------------------------------------------------------------------------
                                                      Central Asia
    ----------------------------------------------------------------------------------------------------------------
    Tajikistan                     SCF  Lentils, Vegetable Oil, Wheat                 90         5,970      $9,817.1
                                         Flour
                         -------------------------------------------------------------------------------------------
      Sub-Total Central Asia                                                          90         5,970      $9,817.1
    ----------------------------------------------------------------------------------------------------------------
                                                Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Colombia                       WFP  Pinto Beans, Rice, Vegetable Oil,          1,590         8,260      $9,057.8
                                         Wheat Flour
    Ecuador                        WFP  Lentils, Vegetable Oil, Wheat                 19           820        $814.3
                                         Flour
    Guatemala                      CRS  Corn Soy Blend, Pinto Beans, Rice,           207         4,440      $7,404.4
                                         Vegetable Oils
                                   SCF  Corn Soy Blend, Pinto Beans, Rice,            10         3,190      $7,436.7
                                         Vegetable Oil
                                   WFP  Black Beans, Corn Soy Blend,                 470         2,090      $2,572.1
                                         Vegetable Oil
    Haiti                    ACDI/VOCA  Bulgur, Corn Soy Blend, Yellow               150         2,430      $3,184.3
                                         Peas
                                   CRS  Bulgur, Corn Soy Blend, Green                128        18,000     $19,563.6
                                         Peas, Pinto Beans, Vegetable Oil
                                   WFP  Black Beans, Corn Soy Blend, Pinto             6        64,490     $85,066.8
                                         Beans, Rice, Vegetable Oil,
                                         Yellow Peas
                                  WVUS  Bulgur, Corn Soy Blend, Lentils,              10        30,400     $32,839.8
                                         Pinto Beans, Vegetable Oil
                         -------------------------------------------------------------------------------------------
      Sub-Total Latin America/Caribbean                                            2,590       134,120    $167,939.8
                                                                           =========================================
        Worldwide Total                                                           23,084     1,652,790  $1,522,550.8
    ----------------------------------------------------------------------------------------------------------------
    Source: Metric tonnage and total cost values derived from FFP Final Budget Summary Report, January 11, 2011.
      Awardees listed as approved in cooperative agreements. Commodity types and recipients derived from Food for
      Peace Information System report, January 3, 2011. Recipient values are reflective of commodity rations and are
      derived separately from program beneficiary totals. Recipient values reported as zero or low typically are due
      to either monetization of commodities (thus no recipients), or the late distribution of commodities carried
      over from the previous fiscal year that prevented reporting.
    Table does not include IFRP awardees. See page 14 for a list of awardees and page 38 for the country list.

    Appendix 5: USAID Title II Development Activities: Summary Budget, Commodity, Recipient and Tonnage--Fiscal Year
                                                          2010
    ----------------------------------------------------------------------------------------------------------------
                                                                             Recipients                  Total Cost
           Country           Awardee                 Commodity                 (000s)      Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso                   CRS  Bulgur, Cornmeal, Lentils, Rice,             103         8,920     $12,957.5
                                         Vegetable Oil
    Burundi                        CRS  Bulgur, Cornmeal, Corn Soy Blend,            430        12,690      $7,510.8
                                         Vegetable Oil, Wheat, Yellow Peas
    Chad                      Africare  Bulgur, Wheat Flour Bread                     27         4,840      $5,675.0
    Democratic Republic           ADRA  Cornmeal, Green Peas, Wheat                   20        12,660      $4,991.1
     of the Congo
                                   FHI  Cornmeal, Vegetable Oil, Wheat                24        12,310      $5,577.2
                                   MCI  Cornmeal, Vegetable Oil, Wheat,               87        10,150      $5,006.1
                                         Yellow Split Peas
    Ethiopia                      CARE  Lentils, Vegetable Oil, Wheat,               185        18,490     $13,072.0
                                         Yellow Peas
                                   CRS  Bulgur, Corn Soy Blend, Rice,                224        25,040     $14,981.8
                                         Vegetable Oil, Wheat, Yellow
                                         Split Peas
                                   FHI  Vegetable Oil, Wheat, Yellow Peas            187        18,840     $11,662.6
                                  REST  N/A                                           --            --      $3,239.4
                              SCF-UK *  Lentils, Vegetable Oil, Wheat,               557        32,660     $19,159.1
                                         Yellow Peas
    Liberia                       ACDI  Bulgur, Corn Soy Blend, Rice,                106         8,150      $8,427.4
                                         Vegetable Oil, Wheat, Yellow
                                         Split Peas
                                  OICI  Rice, Soybeans, Soy Flour, Wheat             208         7,100      $6,572.8
                                         Flour
    Madagascar                     CRS  Corn Soy Blend, Rice, Sorghum,               260        14,340     $17,111.0
                                         Vegetable Oil
    Malawi                         CRS  Corn Soy Blend, Crude Vegetable               29        17,190     $18,000.1
                                         Oil, Pinto Beans, Wheat,
                                         Vegetable Oil
    Mali                      Africare  Bulgur, Vegetable Oil                         32         1,650      $2,434.5
                                   CRS  Bulgur, Corn Soy Blend, Green                 72         4,800      $7,806.1
                                         Split Peas, Vegetable Oil
    Mauritania                     CPI  Bulgur, Corn Soy Blend, Lentils,              62         7,820      $5,000.1
                                         Vegetable Oil, Wheat
    Mozambique                    ADRA  Wheat                                         --        10,000      $4,042.8
                                   FHI  Wheat                                         --         8,820      $3,413.6
                                   SCF  Wheat                                         --        17,480      $7,309.0
                                  WVUS  Wheat                                         --        12,740      $4,789.9
    Niger                     Africare  Bulgur, Corn Soy Blend, Red Beans,            40         4,510      $4,054.6
                                         Rice
                           Counterpart  Corn Soy Blend, Rice, Vegetable                5         3,380      $3,754.1
                                         Oil
                                   CRS  Bulgur, Rice                                  16         7,260      $7,191.3
    Sierra Leone             ACDI/VOCA  Corn Soy Blend, Rice, Vegetable               10        10,800     $11,999.9
                                         Oil, Wheat Flour
    Sudan                         ADRA  Lentils, Vegetable Oil                        47         2,030     $30,293.1
    Uganda                   ACDI/VOCA  Corn Soy Blend, Wheat, Vegetable             504        20,010     $16,046.4
                                         Oil
                                   MCI  Corn Soy Blend, Cornmeal, Green                8        10,170      $8,953.6
                                         Split Peas, Wheat, Vegetable Oil
    Zambia                         CRS  Bulgur, Lentils                               10           930      $7,254.2
                         -------------------------------------------------------------------------------------------
      Sub-Total Africa                                                             3,253       325,780    $278,287.1
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                   WVUS  Rice, Vegetable Oil, Wheat Flour,          2,233        10,290     $15,500.0
                                         Yellow Peas
    Bangladesh               ACDI/VOCA  Lentils, Vegetable Oil, Wheat                 45        19,270      $9,000.0
                                  CARE  Wheat                                         --        57,010     $23,000.0
                                   SCF  Vegetable Oil, Wheat, Yellow Split           174        18,060     $10,000.1
                                         Peas
    India                          CRS  Bulgur, Vegetable Oil                        125         7,000      $3,733.7
                         -------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     2,577       111,630     $61,233.8
    ----------------------------------------------------------------------------------------------------------------
                                                Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Guatemala
                                   CRS  Corn Soy Blend, Crude Vegetable               26         5,760      $5,773.5
                                         Oil, Pinto Beans, Rice, Vegetable
                                         Oil
                                   MCI  Corn Soy Blend, Crude Vegetable              102         9,490      $9,458.8
                                         Oil, Pinto Beans, Rice, Vegetable
                                         Oil
                                   SCF  Corn Soy Blend, Crude Vegetable               12         4,890      $4,733.1
                                         Oil, Pinto Beans, Rice, Vegetable
                                         Oil
                                 SHARE  Corn Soy Blend, Crude Vegetable               16         4,960      $5,034.4
                                         Oil, Pinto Beans, Rice, Vegetable
                                         Oil
    Haiti                    ACDI/VOCA  Bulgur, Corn Soy Blend, Wheat                 43         8,040     $10,125.2
                                         Flour, Vegetable Oil, Yellow Peas
                                   CRS  Bulgur, Corn Soy Blend, Green                 90        11,610     $10,498.7
                                         Peas, Vegetable Oil, Wheat Flour
                                  WVUS  Bulgur, Corn Soy Blend, Lentils,             127        17,990     $15,870.4
                                         Vegetable Oil, Wheat Soy Blend
                         -------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                        416        62,740     $61,494.1
                                                                           =========================================
        Worldwide Total                                                            6,246       500,150    $401,015.0
    ----------------------------------------------------------------------------------------------------------------
    Source: Metric tonnage and total cost values derived from FFP Final Budget Summary Report, January 11, 2011.
      Awardees listed as approved in cooperative agreements. Commodity types and recipients derived from Food for
      Peace Information System report, January 3, 2011. Recipient values are reflective of commodity rations and are
      derived separately from program beneficiary totals. Recipient values reported as zero or low typically are due
      to either monetization of commodities (thus no recipients), or the late distribution of commodities carried
      over from the previous fiscal year that prevented reporting.

                                  attachment c
    Farmer to Farmer Program Examples of Success in Meeting Programmatic
            Purpose/Goals
        Mr. El-Feki's wife, Neamat, who milks the cows and cares for the
    calves, is also following the recommendations to produce clean milk.
    The income from the milk production is used to purchase all the grocery
    needs for the family. Neamat is now confident that her family and
    especially her grandchildren now always have access to clean, healthy
    milk.
    Volunteer Unites Two Agribusiness Groups
        The Carrot Growers Association (CAGA) is an organization of
    vegetable producers at Ashanti-Mampong in the Sekyere West District of
    the Ashanti Region of Ghana. The association was established in 2007
    with a membership of 50 farmers. CAGA members produce 5,000 bags of
    carrots each week and market their produce in 50 kg bags in the retail
    market. Oftentimes the members are exploited with low prices from the
    market women. The leadership of the association lacked adequate
    knowledge of how associations should operate to function as a business
    entity. An organizational development volunteer, Diana Lilla, worked
    with CAGA to develop a strategic business plan with step-by-step
    implementation procedures for the association. Diana also trained the
    leadership on methods to improve services rendered to their members.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                          Diana Lilla with members of CAGA.

        With the lobbying efforts of the volunteer, CAGA was able to secure
    100 acres of land from the local chief, Nana Osei Bonsu, for the
    farmers to expand their activities. Diane also succeeded in uniting
    CAGA with a sub association, the carrot marketing association, to form
    the Carrot Growers and Marketers Association. This combination will
    further increase services available to members of the new association.
    The increased opportunity to access services through the association
    enticed more farmers to enroll as members of the group, and the
    membership has grown from 50 to 211 farmers.
    Volunteer Introduces a New Product to Improve Children's Health and
            Nutrition in Rural Mali
        Malnutrition threatens the life of many Malian children. With 72%
    of the country living off of less than $1/day, many families do not
    have access to nutritious food to feed their children. In turn, these
    children are underweight and lethargic, and some even face the
    inevitable--death.
        In order to provide nourishment for Malian people and to cut the
    import costs on milk and dairy products, the Government of Mali sought
    to develop local milk production and collection points. The government
    accomplished this by creating milk centers throughout the country to
    produce higher concentrations of fresh milk and to meet the demand for
    fresh milk during the dry season. While this venture was very
    successful, producers and retailers were faced with the problem of
    spoilage due to the short shelf life of fresh milk. For this reason,
    the FtF program created a volunteer assignment for the Women's Local
    Milk Stockist Cooperative and recruited Dr. Poul Hansen for his first
    visit in September 2009. Hansen introduced new technologies, which
    enabled the cooperative to handle excess milk and develop new products.
        Returning to Mali just one year later in August 2010, Hansen was
    asked to focus on infant yogurt to supplement infant milk for newborn
    orphans and infants who are in need of alternative feeding. Hansen
    visited with many of the women members of the Women's Local Milk
    Stockist Cooperative around the city of Bamako to assess their
    potential and provide a tailor-made, hands-on, technical training. He
    taught the co-op members how to process clean and safe regular yogurt,
    infant yogurt, as well as Indian ``paneer'' cheese using a thermometer,
    particular yogurt cultures, and an incubator. Hansen also talked with
    the co-op members about necessary hygiene and sanitation measures. He
    went door-to-door to see many of the members at work in their own
    households, to determine if they were putting what they learned into
    practice. Now, the members of the cooperative are able to produce the
    yogurt on their own and can supplement their children's diet with this
    important source of nutrition.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Dr. Hansen provides hands-on training to women processors in
            the hygiene and sanitation measures of preparing child.

        Hansen's assignment received extensive radio and TV coverage for
    everyone to follow. At the end of the training sessions, the President
    of the Cooperative, Dana Niangadou, proclaimed, ``This is what we've
    been talking about--some new ideas to make a difference! Now with this
    new infant formula, the nutrition and health status of our children in
    need will change for the better, as will the income of women
    processors.''
        ``We wasted a lot of resources on many different training modules
    and, so far, none of them compares to the hands-on Volunteer Technical
    Assistance we received thanks to the USAID funded Farmer-to-Farmer
    Program,'' notes coordinator Moussa Diabate during the closing
    ceremony.
        Dr. Hansen's last words to Mr. Diabate just before departing Mali
    summed up his commitment to the FtF Program, ``This is, with no doubt,
    the best assignment I've ever had in all my life, and I would
    appreciate Winrock/Mali recruiting me once more to transfer some other
    important technologies wherever needed.''
    Reducing Post Harvest Losses and Increasing Food Security
    Nigerian Farmers Learn to Make New Nutritional Products
        Fifty percent of the population in Kaduna State, Nigeria is living
    in poverty. Many farmers depend on crops such as yam as both an income
    source as well as an important nutrition source for their families.
    Nevertheless, despite reasonable productivity, many families still
    struggle to feed their children.
        During the dry season, fresh yams do not last long. Without proper
    post harvest processing and preservation techniques, farmers face the
    double consequences of having to discard leftover yam and living with
    food insecurity during several months of the year.
        Fortunately, for a group of farmers in Kaduna State, this is no
    longer a problem.
        After identifying the need for post-harvest processing and
    preservation training, Land O'Lakes, engaged international agriculture
    and food science expert, Dr. Ramana Govin, to provide assistance. Dr.
    Govin worked with Nehemiah Foundation International, a local service
    provider working with 5,250 farmers in four Nigerian states, and a
    selected group of 65 farmers in Kaduna, to provide training and
    technical assistance on yam processing. He demonstrated methods for
    washing, slicing, drying, and pounding the yam into flour. He also
    showed the farmers how to apply the same techniques to cassava.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Farmers in Kaduna State practice making yam flour for the first
            time.

        These techniques reduce post-harvest losses and increase the number
    of months that families have a reliable food source. Instead of leaving
    leftover yam to rot, farmers can process the yam into flour, which can
    be used throughout the year. Immediately after the training, farmers
    already started realizing the benefits of what they had learned. After
    the first day of the training, one farmer went home, dug some yams, and
    processed the yams to make flour, just as Dr. Govin had demonstrated.
    He brought the flour to the workshop the next day and stated, ``I never
    believed it was possible because of how simple the method seemed, until
    I tried it myself.''
        Emmanuel Nehemiah of the Nehemiah Foundation states, ``Dr. Govin's
    assignment was successful. Before he came, the farmers did not have any
    method of processing and preserving yam. The methodologies used are so
    simple yet the farmers didn't know about it before now. It has been
    very effective for them and beneficial. Many of them are right now
    processing and preserving their yams with the new method and they are
    happy about it.''
        The impacts of this assignment go beyond the 65 farmers who
    directly participated. Immediately after Dr. Govin's training, the
    farmers met with Nehemiah Foundation and decided to appoint trainers
    who will go out and train others in nearby villages. One month later,
    25 of these trainers are now branching out into rural communities and
    offering instruction in indigenous languages on Dr. Govin's techniques
    to additional farmers, enabling even more people to improve their
    family's food security.
                                attached reports
          U.S. International Food Assistance Report 2007_January 2008
        Under Public Law 480, Section 407(f), ``the President shall prepare
    an annual report concerning the programs and activities implemented
    under this law for the preceding fiscal year.'' As required, this
    report is hereby submitted to Congress.

        This Report May Be Ordered From:

    USAID Development Experience Clearinghouse
    8403 Colesville Road, Suite 210
    Silver Spring, MD 20910-6368
    Telephone: (301) 562-0641
    Fax: (301) 588-7787
    URL: http://www.dec.org/
    Table of Contents
    Executive Summary
    Introduction
    I. Food Security
    II. U.S. International Food Assistance

      A. Public Law 480

        P.L. 480 Title I: Trade and Development Assistance
        P.L. 480 Title II: Emergency and Non-Emergency Assistance
        P.L. 480 Title III: Food for Development
        P.L. 480 Title V: John Ogonowski Farmer-to-Farmer Program

      B. Section 416(b) of the Agricultural Act of 1949: Surplus
            Commodities
      C. Food for Progress
      D. McGovern-Dole International Food for Education and Child Nutrition
            Program
      E. Bill Emerson Humanitarian Trust

    III. Appendices

      Appendix 1: List of Abbreviations
      Appendix 2: List of Partner Organizations
      Appendix 3: USDA Title I Program: Food for Progress Grants--Fiscal
            Year 2007
      Appendix 4: USAID Title II Emergency Activities: Summary Budget,
            Commodity, andTonnage--Fiscal Year 2007
      Appendix 5: USAID Title II Non-Emergency Activities: Summary Budget,
            Commodity,Recipient, and Tonnage Tables--Fiscal Year 2007
      Appendix 6: USDA Food for Progress Program--CCC-funded Grants--Fiscal
            Year 2007
      Appendix 7: McGovern-Dole International Food for Education and Child
            Nutrition Program--Fiscal Year 2007: Donations by Country and
            Cooperating Sponsor
      Appendix 8: Public Law 480 Title II Congressional Mandates--Fiscal
            Year 2007
      Appendix 9: Countries with Approved U.S. Food Assistance Programs--
            Fiscal Year 2007
    Executive Summary
        The United States is committed to the goal of global food security
    through its international food assistance and other foreign assistance
    programs. In Fiscal Year (FY) 2007, the United States provided more
    than $2.1 billion of food aid to 78 developing countries, reaching tens
    of millions of people worldwide. The following summary shows U.S. food
    assistance allocated by legislative authority for FY 2007.\1\
    ---------------------------------------------------------------------------
        \1\ All costs represent commodities plus freight and distribution.

    ------------------------------------------------------------------------
                                                              U.S. Dollars
                  Program                  Tonnage (MT)        (Millions)
    ------------------------------------------------------------------------
    P.L. 480 Title II *                         2,127,804             $1,870
    ------------------------------------------------------------------------
      Subtotal P.L. 480 Title II                2,127,804             $1,870
    ------------------------------------------------------------------------
    Food for Progress:
      Title I-funded                               23,210                $17
      CCC-funded                                  240,630               $113
    ------------------------------------------------------------------------
      Subtotal Food for Progress                  273,840               $130
    ------------------------------------------------------------------------
    Section 416(b) **                               5,000                $20
    ------------------------------------------------------------------------
      Subtotal 416(b)                               5,000                $20
    ------------------------------------------------------------------------
    Food for Education                            103,230                $99
    ------------------------------------------------------------------------
      Subtotal Food for Education                 103,230                $99
    ------------------------------------------------------------------------
    Bill Emerson Humanitarian Trust                    --                 --
    Farmer-to-Farmer (FTF)                             --                $10
    ------------------------------------------------------------------------
      Subtotal Bill Emerson and FTF                    --                $10
                                       =====================================
        Grand Total                             2,509,874             $2,129
    ------------------------------------------------------------------------
    * Values provided for P.L. 480 Title II include $25 million in 202(e)
      for WFP, $16 million in general contribution to WFP, $20 million in
      freight overruns. These costs are offset by $201 million in funding
      adjustments ($192.3 million of carry-in and $9.6 million in MARAD
      reimbursements).
    ** Commodities shipped in FY 2007 were associated with prior year
      agreements on an ``as available'' basis. There was no new 416(b)
      programming approved in FY 2007.

        Over the course of FY 2007, USAID and USDA international food
    assistance programs have proven increasingly responsive to global
    efforts at reducing food insecurity and targeting those most in need.
    By responding to assessment and situational information, focusing on
    reducing risk and vulnerability, targeting the poorest of the poor, and
    better integrating individual programs into larger--often
    international--efforts, the U.S. Government aims to improve the
    effectiveness of aid and to reach global targets for reducing hunger,
    malnutrition and poverty.
        This aid is essential in emergency situations, including the
    ongoing crisis in Sudan. In FY 2007, more than 354,630 MT of USAID
    Title II commodities, valued at $356 million, were provided to an
    estimated 6.4 million beneficiaries in Sudan alone. Meanwhile, in
    Zimbabwe, 88,900 MT of emergency food assistance helped almost 700,000
    people cope with the dual burdens of a deteriorating economic situation
    and poor agricultural performance. Finally, recognizing the importance
    of linking development opportunities within a relief setting,
    Ethiopia's Productive Safety Net Program continued to implement
    activities that targeted both chronic and acute malnutrition, to the
    benefit of over seven million individuals. In all, over 32 million
    people benefited from emergency food aid activities provided through
    Title II.\2\
    ---------------------------------------------------------------------------
        \2\ Updated as of April 21, 2008.
    ---------------------------------------------------------------------------
        At the same time, USAID non-emergency programs continued to focus
    on increasing agricultural production, and supporting programs to
    address health, nutrition, HIV and others aimed at investing in people.
    Special emphasis is placed on combating the root causes of hunger and
    malnutrition, and interventions are often multi-sectoral in nature as a
    result. Over the course of the year, more than 8.6 million people in 26
    countries benefited from USAID Title II non-emergency food assistance.
        USDA Title I, 416(b), and Food for Progress programs provided
    commodities to food-insecure populations through The World Food
    Programme (WFP), private voluntary organizations (PVOs) and foreign
    governments. These resources supported a variety of food security
    objectives in developing countries, such as humanitarian assistance,
    HIV mitigation, and agricultural and rural development. In FY 2007,
    USDA continued the McGovern-Dole International Food for Education and
    Child Nutrition Program, providing commodities for school feeding as
    well as nutrition programs for mothers, infants, and children under 5,
    positively impacting the lives of more than 3.3 million beneficiaries.
    Introduction
        Since the passage of P.L. 480 in 1954, U.S. international food
    assistance programs have evolved to address multiple objectives. The
    most recent changes came with the Farm Security and Rural Investment
    Act of 2002. The `2002 Farm Bill' restated the objectives that guide
    U.S. food assistance programs. These objectives are:

       Combat world hunger and malnutrition and their causes;

       Promote broad-based, equitable, and sustainable development,
            including agricultural development;

       Expand international trade;

       Develop and expand export markets for U.S. agricultural
            commodities;

       Foster and encourage the development of private enterprise
            and democratic participation in developing countries; and

       Prevent conflicts.
    U.S. International Food Assistance
        The U.S. international food assistance program is established by
    several legislative authorities implemented by two Federal agencies.
    USAID administers Titles II, III, and V of P.L. 480. USDA administers
    Section 416(b) of the Agricultural Act of 1949, Title I of P.L. 480,
    Food for Progress, and McGovern-Dole International Food for Education
    and Child Nutrition. The list below provides a brief description of
    each activity.

        1. P.L. 480: Agricultural Trade Development and Assistance Act of
            1954 (Food for Peace)--the principal mechanism for U.S.
            international food assistance.

           P.L. 480 Title I: Trade and Development Assistance--
                concessional sales of U.S. agricultural commodities to
                developing countries and private entities.

           P.L. 480 Title II: Emergency and Development
                Assistance--direct donation of U.S. agricultural
                commodities for emergency relief and development.

           P.L. 480 Title III: Food for Development--government-to-
                government grants of agricultural commodities tied to
                policy reform.

           P.L. 480 Title V: Farmer-to-Farmer (FTF) Program--
                voluntary technical assistance to farmers, farm groups and
                agribusinesses.

        2. Section 416(b) of the Agricultural Act of 1949--overseas
            donations of surplus food and feed grain owned by the USDA
            Commodity Credit Corporation (CCC).

        3. Food for Progress Act of 1985--commodity donations available to
            emerging democracies and developing countries committed to the
            introduction or expansion of free enterprise in their
            agricultural economies.

        4. McGovern-Dole International Food for Education and Child
            Nutrition Program (authorized in the 2002 Farm Bill)--donations
            of U.S. agricultural products, as well as financial and
            technical assistance, for school feeding and maternal and child
            nutrition projects in low-income countries.

        5. Bill Emerson Humanitarian Trust (originally authorized by the
            Agricultural Trade Act of 1980)--food reserve administered
            under the authority of the Secretary of Agriculture. This
            reserve is available to meet emergency humanitarian food needs
            in developing countries, allowing the United States to respond
            to unanticipated food crises.
    I. Food Security
    Defining a Long-Term Global Strategy
        U.S. international food assistance has long played a critical role
    in responding to global food insecurity. This tradition continued in FY
    2007, with the U.S. Government providing over 2.5 million metric tons
    of commodities. The implementing programs have also evolved to reflect
    greater understanding of (and a focus on addressing) the causes of
    famine, food emergencies, and large-scale hunger around the world. In
    the 1990 Farm Bill, for example, food security was narrowly defined as
    dependent primarily on the availability of food at the national level.
    It was broadened in a 1992 policy paper to begin to address
    distribution and nutritional quality, calling for ``all people at all
    times [to] have both physical and economic access to sufficient food to
    meet their dietary needs for a productive and healthy life.'' \3\ This
    definition includes three elements judged essential to achieving food
    security, and forms the basis for much of the U.S. Government's
    international food assistance activity:
    ---------------------------------------------------------------------------
        \3\ USAID Policy Determination Number 19, April 1992.

       Food availability: sufficient quantities of food from
            household production, other domestic output, commercial imports
    ---------------------------------------------------------------------------
            or food assistance.

       Food access: adequate resources to obtain appropriate foods
            for a nutritious diet, which depends on income available to
            households and on the price of food.

       Food utilization: a diet providing sufficient calories and
            essential nutrients, potable water and adequate sanitation, as
            well as household knowledge of food storage and processing
            techniques, basic principles of nutrition and proper child care
            and illness management.

        In recent years, attention has focused on the continued challenges
    that hamper efforts at reducing global food insecurity. Progress has
    been uneven across the developing world, with some countries in all
    regions gaining and others losing ground. International food assistance
    programs also face increasingly frequent and severe natural and man
    made disasters with growing humanitarian demands on both U.S. and
    international humanitarian assistance resources.
    Improving the Efficiency and Effectiveness of International Food
            Assistance
        In April 2007, the Government Accountability Office (GAO) issued a
    report entitled ``Foreign Assistance: Various Challenges Impede the
    Efficiency and Effectiveness of U.S. Food Aid.'' \4\ This report
    captured the results of extensive assessments of U.S. Government
    international food assistance programs and contained recommendations
    for USAID and USDA to improve the efficiency and effectiveness of their
    food aid programs. Since the document was released, USAID and USDA have
    taken a number of steps to address the issues highlighted in the
    report. These include:
    ---------------------------------------------------------------------------
        \4\ ``Foreign Assistance: Various Challenges Impede the Efficiency
    and Effectiveness of U.S. Food Aid'' (GAO-07-560) (April 2007).

       expanding monitoring of food aid in the two largest, most
            complex emergency programs (Sudan and Zimbabwe) and formally
            requesting that Congress provide authority to use Title II to
    ---------------------------------------------------------------------------
            support monitors for non-emergency programs;

       reviewing how to improve food aid logistics by awarding a
            contract for an independent review of various logistics options
            and exploring long-term maritime service contracts;

       improving assessments by collecting and starting to index
            PVO assessment tools to expand utility; and

       updating food aid specifications by issuing a solicitation
            for an independent review of the nutritional quality and cost
            effectiveness of food aid commodities.

        FY 2007 saw increased inter-agency cooperation between USAID and
    USDA in several critical actions. In an effort to make the Food Aid
    Consultative Group (FACG) more consultative, USDA and USAID spearheaded
    the creation of an Executive Committee (EXCOM), providing leadership
    for the overall agenda and critical discussion points for FACG members.
    EXCOM is composed of two representatives from USAID, USDA, the
    commodities industry and PVOs, plus observers from the transportation
    industry.
        USAID and USDA also began collaborating on a comprehensive review
    of food aid specifications and products, including: a thorough
    initiation of contracting procedures; an evaluation of USDA product
    specifications; and a review of options on nutritional quality and cost
    effectiveness of commodities currently provided as food aid, in order
    to ensure that the food meets the nutritional requirements necessary to
    address beneficiaries' needs.
    USAID's Famine Early Warning System (FEWS NET)
        Saving lives and preventing famine are key objectives of the U.S.
    Government. FEWS NET is a USAID-funded activity that collaborates with
    international, national and regional partners to monitor, collect and
    disseminate critical data on conditions of food availability and
    access, as well as the environmental and socioeconomic hazards that
    lead to food insecurity and famine. The goal of FEWS NET is to inform
    efforts to manage the risk of food insecurity through the provision of
    timely and analytical early warning and vulnerability information, so
    that decision makers have ample time to prepare and take preventive
    action. In 2007, FEWS NET had 23 offices that covered 25 countries.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        FEWS NET exemplifies the U.S. commitment to anticipating and
    responding to humanitarian vulnerabilities and crises. FEWS NET has
    interagency agreements with U.S. Geological Survey (USGS), National
    Aeronautics and Space Administration (NASA), National Oceanic and
    Atmospheric Administration (NOAA) and USDA that provide information to
    the U.S. Government, local governments and a variety of other regional
    and international partners to assist in averting famine.
    Food for Peace's Institutional Capacity Building Grants
        FFP's Institutional Capacity Building grants (ICBs) give PVOs funds
    to build their organizational capacity. This pertains to both
    headquarters and field management of Title II programming. ICB grants
    allow groups to enrich their knowledge, enhance their Title II program
    management and practices, and better serve their communities.
    Currently, the funds are used for training, travel, workshops,
    assessments, equipment, tool development and activities that enable
    each organization to strengthen itself from within and also to mentor
    and to partner with other Title II PVOs and/or sub-recipients. The 14
    participating organizations began their programs in FY 2004 and will
    conclude at the end of FY 2008.\5\
    ---------------------------------------------------------------------------
        \5\ ACDI/VOCA, Adventist Development & Relief Agency International
    (ADRA), Africare, American Red Cross, CARE, Catholic Relief Services
    (CRS), Counterpart International (CPI), Food for the Hungry (FHI), Land
    O'Lakes, Inc. (LOL), Mercy Corps International (MCI), Opportunities
    Industrialization Centers International (OICI), Project Concern
    International (PCF), Save the Children Federation (SCF) and World
    Vision, Inc. (WV).
    ---------------------------------------------------------------------------
        To capitalize on positive achievements and capture projects already
    in development, FFP has encouraged the grantees to focus on exit
    strategies and how to preserve the results of their success.
    Additionally, FFP created an index that captures all of the tools that
    have been developed by the PVOs using ICB funds. The index will be
    distributed to the PVOs and be posted in two online databases.
        In FY 2007, FFP conducted extensive reviews of the grantees' mid-
    term evaluations, annual performance reports, annual work plans and
    plans for a final evaluation. Following these reviews, the findings,
    common themes and suggested areas for greater focus and attention in
    the future were noted and shared with grantees. For example, grantees
    were encouraged to prioritize their ICB activities and increase
    linkages to Title II programs for greater impact. In addition, the
    findings stressed the importance of capturing lessons learned and
    success stories, to both enhance and foster program performance and
    innovation.
    A Conceptual Framework for Integrating Food Aid and HIV Programs
        In many countries, there is a complex interface between chronic
    food insecurity and HIV. While there is already close collaboration
    between FFP P.L. 480 Title II food aid and the President's Emergency
    Plan for AIDS Relief (PEPFAR) programs, in mid-FY 2007, FFP and PEPFAR
    developed a Conceptual Framework to establish and facilitate a
    programmatic continuum to address the nutrition, dietary
    supplementation and food security needs of HIV-infected and -affected
    populations.\6\ The Conceptual Framework, to be implemented in 2008,
    provides guidance to target Title II food aid and to increase
    collaboration and joint programming with PEPFAR where possible. For
    example, FFP and PEPFAR are mapping program locations so as to identify
    priority areas, gaps, and develop a clearer vision of coverage needs,
    and working to determine standardized eligibility and exit criteria.
    ---------------------------------------------------------------------------
        \6\ This report is available at http://www.usaid.gov/our_work/
    humanitarian_assistance/ffp/pepfar_conceptual.pdf.
    ---------------------------------------------------------------------------
    II. U.S. International Food Assistance Program Descriptions and Fiscal
            Year 2007 Accomplishments
    A. Public Law 480
        The primary mechanism of U.S. international food assistance is the
    Agricultural Trade Development and Assistance Act of 1954 (P.L. 480),
    commonly known as Food for Peace.

        1. P.L. 480 Title I: Trade and Development Assistance

        The P.L. 480 Title I authority provides funding for both a
    concessional sales program, supporting Trade and Development, and for
    the Food for Progress grant program, supporting Agricultural
    Development in emerging democracies. In FY 2007, no new concessional
    sales agreements were made.
        The USDA-administered Food for Progress Program, authorized under
    the Food for Progress Act of 1985, assists developing countries,
    particularly emerging democracies ``that have made commitments to
    introduce or expand free enterprise elements in their agricultural
    economies through changes in commodity pricing, marketing, input
    availability, distribution, and private sector involvement.'' The
    program authorizes the Commodity Credit Corporation (CCC) to carry out
    the sale and exportation of U.S. agricultural commodities on credit
    terms or on a grant basis, with the use of either CCC financing or P.L.
    480 Title I funds. Grants under the Food for Progress program are
    awarded to governments or PVOs, nonprofit agriculture organizations,
    cooperatives, intergovernmental organizations or other private
    entities.

          a. P.L. 480 Title I: Food for Progress Highlights

        In FY 2007, P.L. 480 Title I funding provided 23,210 MT in Food for
    Progress assistance, with an estimated value of $17 million. The
    summaries below provide examples of Title I-funded Food for Progress
    agreements signed in FY 2007.

       Afghanistan: USDA donated 8,210 MT of soybean oil to the
            Government of the Islamic Republic of Afghanistan. The
            government will sell the oil and use the proceeds to finance
            agricultural and rural development activities with the
            objective of alleviating poverty, creating employment and
            promoting economic and agricultural development. This will be
            accomplished through support for higher education, rural
            extension services, plant and animal disease diagnostics and
            control, food safety and natural resource management.

       Ethiopia: USDA donated approximately 15,000 MT of wheat to
            the Government of Ethiopia to replenish the grain stocks of the
            Ethiopian Food Security Reserve Agency, which provides
            assistance to food-insecure Ethiopians in times of crisis.

        2. P.L. 480 Title II: Emergency and Non-Emergency Assistance

        More than 85% of U.S. international food aid is used to respond to
    emergency situations and to implement development projects under Title
    II, administered by the USAID Office of Food for Peace in the Bureau
    for Democracy, Conflict, and Humanitarian Assistance.\7\ In FY 2007,
    approximately $1.87 billion, or 2.13 million MT of commodities, was
    administered under Title II. In the process, FFP partnered with
    cooperating sponsors (CSs) to implement activities in 64 countries
    worldwide. These programs benefitted over 40 million people.\8\
    ---------------------------------------------------------------------------
        \7\ Total value equivalent. Metric tonnage equivalent is 84%.
        \8\ Updated as of April 21, 2008.
    ---------------------------------------------------------------------------
        The focus of Title II programs is to reduce food insecurity in
    vulnerable populations. This focus on vulnerability to food insecurity
    targets improving resiliency to shocks, an essential first step for
    household self-sufficiency and economic independence. In support of
    this strategy, as well as USAID's overarching goal of saving lives and
    reducing suffering, many Title II emergency programs encompass a number
    of development-relief transition activities. Similarly, the non-
    emergency development portfolio incorporates activities to strengthen
    local capacity to respond to famine, natural disasters and complex
    emergencies, as well as to provide safety nets in some cases.

          a. P.L. 480 Title II: Emergency Programs

        Title II emergency programs aim to address two forms of
    emergencies: natural disasters, such as floods or droughts; and complex
    emergencies characterized by a combination of natural disaster,
    conflict and insecurity, a collapse in civil society and/or political
    stability. All of these elements pose substantial program and operating
    challenges in responding effectively to the needs of food-insecure
    populations.
        In FY 2007, Title II emergency programs provided 1.5 million MT of
    emergency food aid, at a cost of $1.4 billion, to help alleviate
    malnutrition and hunger in 30 countries.\9\ In all, Title II emergency
    programs reached approximately 32.2 million food-insecure people in FY
    2007.\10\
    ---------------------------------------------------------------------------
        \9\ Does not include IFRP programming. See page 11 for details.
        \10\ Updated as of April 21, 2008.

    ---------------------------------------------------------------------------
        P.L. 480 Title II: Emergency Program Highlights

        C-SAFE/Zimbabwe:

        C-SAFE is the Consortium for the Southern Africa Food Security
    Emergency, and includes the PVO organizations World Vision, CARE and
    Catholic Relief Services (CRS). During FY 2007, the Consortium operated
    under exceedingly difficult circumstances that included crop failure,
    drought, the world's highest rate of inflation and extreme logistical
    difficulties. Although the food security situation in Zimbabwe
    continued to deteriorate, C-SAFE worked to prevent a further decline of
    the nutritional situation among its 688,000 beneficiaries.
        In FY 2007, FFP provided 88,900 MT of food to C-SAFE for
    distribution in Zimbabwe. Utilizing six distinct feeding programs, C-
    SAFE carried out short-term food transfers through interventions
    including food for assets (FFA), safety net feeding, food support for
    the chronically ill, supply of subsidized food to urban markets,
    emergency school-based feeding and institutional feeding.

        WFP/Sudan:

        As in previous years, Title II emergency activities played a key
    role in the prevention of famine in Darfur, Sudan. In FY 2007, FFP
    provided 50 percent of WFP's Sudan appeal, representing more than 67
    percent of all contributions received by WFP from all donors. Sizable
    and timely contributions from FFP ensured that WFP was able to meet 100
    percent of its prepositioning targets for Darfur and Southern Sudan in
    2007. This achievement prevented WFP from having to airlift any
    commodities to the region, lowering program cost and ensuring timely
    commodity deliveries during the most critical time of the year. In
    total, WFP reached more than 3.1 million people in Darfur with food
    assistance during the critical hunger gap from July-September 2007, and
    met, on average, more than 92 percent of its monthly target caseload in
    Darfur throughout all of 2007--despite rampant insecurity and regular
    attacks on humanitarian staff.
        Additionally, Title II emergency assistance was provided to more
    than 170,000 newly displaced persons fleeing violence in Eastern Chad
    in 2007, while continuing to meet the needs of over 232,000 refugees
    from Darfur.

        Productive Safety Net Program/Ethiopia:

        Working in one of the world's most food-insecure countries,
    Ethiopia's Productive Safety Net Program (PSNP) represents an
    innovative approach toward combating both chronic and acute
    malnutrition. Taking into account the short- and long-term challenges
    faced by food-insecure households, the program attempts to
    simultaneously stabilize incomes--thus preventing the sale of assets
    during hunger periods--and to increase community productivity through
    public works projects such as soil and water conservation.
        In FY 2007, donor coordination with the Government of Ethiopia
    (GOET) continued to be a vital part of the success of the PSNP. The
    program reached approximately 7.3 million beneficiaries in chronically
    food-insecure households. These beneficiaries received food (45 percent
    of beneficiaries) or cash (55 percent of beneficiaries) in return for
    participating in public works programs in their communities during the
    6 months of the year between harvest and planting season. Results to
    date have been promising.
        During the year, work centered on establishing graduation criteria
    for the 2008 PSNP cycle and discussions on an increase of the wage
    rate. Donor/GOET working groups have also established guidelines for
    pilot PSNP programs for pastoralist areas that will roll out in 2008 in
    Afar, parts of Oromiya, and selected zones of Somali Region. In FY
    2007, USAID contributed 244,310 MT worth--to eight cooperating sponsors
    implementing the PSNP: CARE, CRS, FHI, Relief Society of Tigray (REST),
    SCF, SCF-UK, WV and WFP.

          b. P.L. 480 Title II: Non-Emergency Programs

        The P.L. 480 Title II development (non-emergency) food aid program
    constitutes the single largest source of USAID funding in promoting
    long-term food security in such areas as:

        1. Agriculture and Natural Resource Management activities.

        2. Health and household nutrition activities.

        3. Education, Humanitarian Assistance, and Microenterprise.

        In FY 2007, 16 cooperating sponsors implemented 78 Title II non-
    emergency activities in 26 countries. Approximately 594,840 MT, valued
    at $348 million, of food assistance was used to support programs that
    benefited an estimated 8.6 million people.

        P.L. 480 Title II: Non-Emergency Program Highlights

        The examples below illustrate the breadth of Title II non-emergency
    food resources implemented by cooperating sponsors as well as how these
    activities have helped in allaying food insecurity and fostering self-
    sufficiency.

        World Vision/Uganda:

        World Vision's Development Assistance Program for Gulu and Kitgum
    districts of northern Uganda combats high rates of food insecurity
    prevalent in that region. In FY 2007, two main areas of programming
    were health and nutrition monitoring and agricultural technology and
    practices. Activities included 82 nutritional and hygiene-focused
    training sessions, with almost 2,500 beneficiaries, mothers and foster
    parents participating. Additionally, using improved seeds and
    technology, a total of 228,335 tree seedlings were raised at central
    demonstration nurseries and community tree planting groups. The
    community nurseries scaled up production by 150 percent compared with
    FY 2006.

        Catholic Relief Services (CRS)/Malawi:

        In Malawi, CRS aims to reduce food insecurity of vulnerable
    populations by improving agricultural techniques and practices. In FY
    2007, the Improving Livelihoods through Increased Food Security (I-
    LIFE) DAP program focused on improving program quality and scale by
    fine-tuning strategies and realigning interventions based on lessons
    learned over its first 2 years of implementation. The program delivered
    13,360 MT of commodities and achieved success across all indicators and
    results beyond set targets. For example, agricultural production
    increased due to improved agriculture practices, use of quality seeds
    and increased uptake of winter cropping through small-scale irrigation.
    As a result, almost 95 percent of beneficiaries planted improved crop
    varieties, representing an impressive (91 percent increase from almost
    50 percent last year) adoption of sound agricultural practices. The
    value of agricultural production per vulnerable household for the 2
    seasons was equivalent to $402.87--a 113 percent increase in income per
    vulnerable household from the previous fiscal year.

        Save the Children Federation (SCF)/Bangladesh:

        During FY 2007, SCF's Jibon-O-Jibika program assisted more than 2.8
    million beneficiaries in the Division of Barisal, Bangladesh. Focusing
    on enhancing household food security, the program matches critical
    health and nutrition interventions alongside activities such as
    homestead gardening, vulnerability mapping, emergency preparedness
    planning and basic health education services. Some of the greatest
    impact was demonstrated in the health sector: Jibon-O-Jibika pioneered
    one-stop service delivery to ensure antenatal care, expanded program
    for immunization (EPI) and growth monitoring and promotion (GMP) in
    combined outreach sessions through joint planning with the Ministry of
    Health and PVOs. Combining immunization and growth monitoring
    interventions resulted in outcomes that often exceeded program targets:
    GMP sessions reached 100 percent coverage (101 percent of goal
    achieved) and EPI coverage went up from 87 percent in FY 2005 to 99
    percent during FY 2007 (115 percent of goal achieved). SCF delivered
    65,440 MT at an approximate value of $10 million.

    ------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Food Assistance in the Fight against HIV

        HIV-affected populations often cite food as one of their greatest
     needs. HIV can cause and worsen food insecurity and malnutrition among
     infected and affected populations, including orphans and vulnerable
     children (OVCs). In particular, the infection affects metabolism and
     causes wasting, especially in more advanced stages and in the absence
     of anti-retroviral therapy (ART). Food insecurity can also lead people
     to adopt livelihood strategies that increase the risk of HIV
     transmission. During FY 2007, there was increased recognition of the
     interrelationship between food and nutrition security and HIV. During
     the year, FFP partners continued to provide support to HIV-infected and
     -affected food-insecure families in a number of countries including
     Ethiopia, Ghana, Kenya, Rwanda, Uganda and Malawi. In addition, FFP and
     the PEPFAR collaborated on a conceptual framework for joint work in HIV
     and Food Security.
        Beginning a new program focusing on the reintegration of Internally
     Displaced Persons in Northern Uganda, ACDI/VOCA worked with The AIDS
     Service Organization to develop a client eligibility survey for direct
     food support. In the first year of this effort, 13,400 beneficiaries
     were identified to receive food supplements designed to support their
     care. A number of these beneficiaries have since improved their health
     enough to be incorporated into agricultural activities and \2/3\ of
     these families no longer need to receive food supplementation.
        During FY 2007 programming in Malawi, the I-LIFE consortium reached
     more than 9,000 households who hosted orphans or had chronically ill
     household members. With the inclusion of these vulnerable households in
     a range of development activities such as home gardening, irrigation
     and Village Savings and Loans groups, beneficiaries were able to
     improve their livelihood capacities to a level where they could
     graduate from food assistance. In a partnership with PEPFAR and UNICEF,
     meanwhile, I-LIFE supported home-based care for the chronically ill,
     and staff were trained to improve program quality.
    ------------------------------------------------------------------------

          c. International Food Relief Partnership
        In an effort to expand and diversify P.L. 480's sources of food aid
    commodities and FFP's current base of implementing partners, the U.S.
    Congress created the International Food Relief Partnerships (IFRP)
    Initiative in November 2000. This initiative enables USAID to award
    grant agreements to eligible U.S. nonprofit organizations to produce
    and stockpile shelf-stable, pre-packaged commodities. Through the IFRP
    program, commodities are made available to eligible nonprofit U.S.
    organizations and international organizations for transportation,
    delivery, and distribution in emergency food aid relief programs.

        In FY 2007, the Office of Food for Peace awarded approximately $7
    million in Title II IFRP supplier and distribution grants. The
    program's primary supplier, Breedlove Dehydrated Foods, produced a
    micronutrient-fortified, dried vegetable soup mix which is used as a
    meal supplement for humanitarian relief operations overseas. Over the
    course of the year, 32 nonprofit U.S.-based organizations distributed
    the commodity to beneficiaries in 32 countries.\11\ A list of these
    countries is provided in Appendix 9.
    ---------------------------------------------------------------------------
        \11\ Represents IFRP organizations with program agreements in FY
    2007. These organizations include: Amigos Internacionales, Batay Relief
    Alliance, Bless the Children, CRS, Center for International Health,
    Child Life International, Church of Bible Understanding, CitiHope
    International, Convoy of Hope, Coprodeli, Evangelistic International
    Ministry, Fabretto Children's Foundation, Family Outreach, Feed the
    Children, Haiti Vision, Healing Hands International, Hope Education
    Foundation, International Crisis Aid, International Partnership for
    Human Development, International Relief and Development, Inc.,
    International Relief Teams, Legacy World Missions, Medical
    Missionaries, Nascent Solutions, NOAH Project, OICI, PCI, Project Hope,
    Resource & Policy Exchange, Salvation Army World Service, Share Circle
    and Uplift International.

    ---------------------------------------------------------------------------
        3. P.L. 480 Title III: Food for Development

        The P.L. 480 Title III program is a USAID-administered tool for
    enhancing food security and supporting long-term economic development
    in the least-developed countries. The U.S. Government donates
    agricultural commodities to the recipient country and funds their
    transportation to the point of entry in the recipient country. These
    commodities are sold on the domestic market and the revenue generated
    from their sale is used to support and implement economic development
    and food-security programs. Funds were not appropriated for Title III
    in FY 2007.

        4. P.L. 480 Title V: John Ogonowski Farmer-to-Farmer Program

        The Farmer-to-Farmer (FTF) Program provides voluntary technical
    assistance to farmers, farm groups and agribusinesses in developing and
    transitional countries, in an effort to promote sustainable
    improvements in food processing, production and marketing. The program
    relies on the expertise of volunteers from U.S. farms, land-grant
    universities, cooperatives, private agribusinesses and nonprofit farm
    organizations to respond to the local needs of host-country farmers and
    organizations. In general, these volunteers are not overseas
    development professionals, but rather individuals who have domestic
    careers, farms and agribusinesses, or are retired persons who want to
    participate in development efforts. Typically, volunteers spend about
    20 to 30 days in the host country.
        The FTF Program was initially authorized by Congress in the 1985
    Farm Bill and funded through Title V of Public Law 480. It was re-
    authorized by the 2002 Farm Bill to operate from FY 2004 until FY 2008.
    The Program has been renamed the John Ogonowski Farmer-to-Farmer
    Program to honor the pilot on American Airlines Flight 11 that crashed
    into the World Trade Center in New York City on September 11, 2001.

        P.L. 480 Title V: FTF Highlights

        During FY 2007, USAID provided $10.1 million for FTF programs of
    eight cooperating sponsors. The FTF programs funded 734 volunteer
    assignments (up from 690 volunteers in FY 2006) in 37 countries.
    Volunteers provided developing country organizations with technical
    assistance services which directly benefited over 148,700 women and men
    in FY 2007. The following examples illustrate the types of activities
    undertaken by the program:

        Improving Quality of Products for Export/El Salvador:

        In order to assist El Salvadoran dairy farmers and processors with
    preparing their products to market abroad, a FTF volunteer with more
    than 50 years of experience in processing cheeses in Wisconsin,
    traveled to El Salvador to share his knowledge with local cheese
    industries. Working with managers, technicians, and owners of various
    cheese factories, the volunteer helped demonstrate improved cheese and
    yogurt formulations and processes. Such techniques will enable cheese
    manufacturers to develop new high-value products and reinvent
    traditional ones for high-end markets abroad. Manufacturers in
    Agrosania, for example, have improved the flavor of their Monterey Jack
    cheese, while in La Salud they are now using bean gum to improve their
    cream cheese and fresh cheese.

        Introduction of New Products and Techniques/Moldova:

        In Moldova, a FTF volunteer introduced the idea of growing seedless
    watermelons to the ``AgroAccess'' Vegetable Marketing Cooperative, and
    a survey confirmed the market viability of the unique product.
    Cooperative members were trained in appropriate soil mixes, tray
    preparation, seeding, and optimal conditions for greenhouse growing of
    healthy seedlings. Even though hail in July 2007 affected 50 percent of
    the planned yield, local farmers plan to expand cultivation of seedless
    watermelons to 15,000 (an increase from 1,200) seedlings and a drip-
    irrigation system. New crops and progressive production methods are
    creating new opportunities and generating higher incomes for many hard-
    working farmers.

                 Farmer-to-Farmer Volunteer Assignments: FY 2007
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                                           Angola                   6
                                         Ethiopia                  26
                                            Ghana                  24
                                           Guinea                   6
                                            Kenya                  13
                                           Malawi                  13
                                             Mali                   9
                                       Mozambique                  10
                                          Nigeria                  17
                                     South Africa                  30
                                           Uganda                  25
                                           Zambia                  13
                                                       ---------------------
      Subtotal Africa.................................            192
                                                       ---------------------
                                          Bolivia                   4
                                      El Salvador                  22
                                        Guatemala                  20
                                           Guyana                  25
                                            Haiti                  23
                                         Honduras                  30
                                          Jamaica                  22
                                        Nicaragua                  12
                                             Peru                   3
                                                       ---------------------
      Subtotal Latin America/Caribbean................            161
                                                       ---------------------
                                          Armenia                  17
                                       Azerbaijan                  19
                                          Belarus                  16
                                          Georgia                  19
                                          Moldova                  27
                                           Russia                  92
                                          Ukraine                  35
                                                       ---------------------
      Subtotal Europe/Eurasia.........................            225
                                                       ---------------------
                                       Bangladesh                   9
                                            India                  16
                                        Indonesia                   8
                                       Kazakhstan                  22
                                       Kyrgyzstan                  41
                                            Nepal                  22
                                       Tajikistan                  25
                                     Turkmenistan                  11
                                          Vietnam                   2
                                                       ---------------------
      Subtotal Asia/Near East.........................            156
                                                       =====================
        Total.........................................            734
    ------------------------------------------------------------------------

    B. Section 416(b) of the Agricultural Act of 1949: Surplus Commodities
        The Agricultural Act of 1949 authorizes the donation by USDA of
    surplus food and feed grain owned by the CCC. Section 416(a) authorizes
    surplus food assistance to be distributed domestically, and surplus
    food shipped to developing countries for assistance programs is covered
    under Section 416(b). Surplus commodities acquired by the CCC as a
    result of price-support operations may be made available under Section
    416(b) if they cannot be sold or otherwise disposed of without
    disrupting price-support programs or at competitive world prices. These
    donations are prohibited from reducing the amounts of commodities
    traditionally donated to domestic feeding programs or agencies, from
    preventing the fulfillment of any agreement entered into under a
    payment-in-kind program, or from disrupting normal commercial sales.

        1. Section 416(b): Surplus Commodities Highlights

        During FY 2007, USDA provided approximately 5,000 MT of non-fat dry
    milk and associated freight, valued at $20 million. All of these
    shipments were associated with prior year agreements whereby USDA would
    provide milk in FY 2007 only if surplus commodity became available.
    There was no new programming in FY 2007 under this program.
    C. Food for Progress
        The USDA-administered Food for Progress Program, authorized under
    the Food for Progress Act of 1985, assists developing countries,
    particularly emerging democracies ``that have made commitments to
    introduce or expand free enterprise elements in their agricultural
    economies through changes in commodity pricing, marketing, input
    availability, distribution, and private sector involvement.'' The
    program authorizes the CCC to carry out the sale and exportation of
    U.S. agricultural commodities on credit terms or on a grant basis, with
    the use of either CCC financing or P.L. 480 Title I funds. Agreements
    for Food for Progress are awarded to governments or PVOs, nonprofit
    agriculture organizations, cooperatives, intergovernmental
    organizations or other private entities.
        The 2002 Farm Bill extended the authority for the Food for Progress
    Program to provide assistance in the administration and monitoring of
    food assistance programs to strengthen private-sector agriculture in
    recipient countries through FY 2007. The CCC is authorized to use $15
    million for administrative costs under the grants and $40 million for
    transportation expenses.

        1. CCC-funded Food for Progress Highlights

        In FY 2007, CCC funding financed the purchase and shipment of
    250,630 MT of commodities to 13 countries, with an estimated value of
    $113 million. The summaries below provide examples of CCC-funded Food
    for Progress agreements signed in FY 2007.

       Bolivia: USDA donated 11,500 MT of wheat to Food for the
            Hungry International (FHI), for use in Bolivia. FHI will sell
            the wheat and use the proceeds to establish: supply chains for
            higher value agricultural products; develop commodity-producer
            associations and micro-enterprises; increase agricultural
            productivity and post-harvest system efficiency; improve access
            to financial services; and, create strategic alliances with
            public and private sector organizations in Bolivia. The program
            will directly benefit 2,500 farmers and 2,500 households
            indirectly.

       Mozambique: USDA donated 21,060 MT of wheat to TechnoServe
            (TS), a private voluntary organization, for use in Mozambique.
            TS will sell the wheat in Mozambique and use the proceeds to
            carry out development work in the poultry industry. TS will
            expand capacity for poultry farmers, train poultry industry and
            related government agencies in bio-security and disease
            prevention, and provide matching grants to large-scale
            processors to help upgrade facilities. TS will also provide
            marketing services to promote improved market access and work
            with government ministries to improve analysis of policy,
            regulatory and administrative issues impacting the poultry
            industry.

       Niger: USDA donated 5,600 MT of agricultural commodities,
            including rice and soy-fortified bulgur to International Relief
            and Development, Inc. (IRD) for use in Niger. IRD will sell the
            rice in Niger and use the proceeds to help pastoralists
            reconstitute goat herds, expand water sources for animals,
            develop pasture reserves, increase vegetable production, and
            build capacity of local NGOs. This program also includes a food
            for work (FFW) component, in which 1,600 MT of soy-fortified
            bulgur will be distributed to workers participating in the
            water source expansion and pasture development activities.

       Nicaragua: USDA donated 15,000 MT of wheat and 1,000 MT of
            crude degummed soybean oil to FINCA International for use in
            Nicaragua. FINCA will sell the commodities and use the proceeds
            over a 3 year period to increase loan capital and microfinance
            services to micro-entrepreneurs in agriculture-related
            businesses. This program will directly benefit 8,415 farmers
            and indirectly benefit 37,867 family members.
    D. McGovern-Dole International Food for Education and Child Nutrition
            Program
        An estimated 120 million children around the world do not attend
    school, due in part to hunger or malnourishment. The majority of them
    are girls. Following the success of the Global Food for Education
    Initiative, created in July 2000, the United States has demonstrated
    its continued commitment to education and child nutrition with the 2002
    Farm Bill's authorization of the McGovern-Dole International Food for
    Education and Child Nutrition Program (FFE) through FY 2007.
        Modeled on the U.S. Government's school meals program, the program
    is named in honor of former Senators George McGovern and Robert Dole
    for their tireless efforts to promote education and school feeding. The
    FFE program uses U.S. commodities and financial assistance to provide
    incentives for children to attend and remain in school, as well as to
    improve child development through nutritional programs for women,
    infants and children under 5. In its inaugural year, FFE provided
    119,320 MT of commodities, worth $93.1 million, to support programs
    implemented by WFP and PVOs in 20 countries. In FY 2007, the FFE
    program provided more than 103,000 MT of commodities to support child
    nutrition and school feeding programs in 15 countries, the total value
    of which was over $98 million. The following are examples of new FFE
    programs that were funded in FY 2007:

       Mozambique: USDA donated 23,670 MT of corn-soy blend and
            rice to Joint Aid Management (JAM) for a child education
            program in Mozambique. From 2007 to 2009, JAM will implement
            school feeding for 220,000, 242,000 and 271,000 beneficiaries
            respectively, construct 610 school warehouses and kitchens, and
            provide a tri-annual take-home incentive ration for 16,000,
            19,000 and 21,000 girls, respectively, and 20,000 orphans and
            vulnerable children. Complementary projects under this program
            include water and sanitation improvements, the provision of 180
            water wells, and a school gardens initiative in 45 schools. All
            of these projects include community and student education
            activities on nutrition, sanitation and health.

       Liberia: USDA donated 600 MT of vegetable oil, rice and
            beans to Visions in Action (VIA) for a school feeding program
            in Liberia. During 2007 and 2008, VIA will use the resources in
            a comprehensive program which covers many aspects of education.
            VIA will improve the quality of the primary school education
            environment in community schools in underprivileged areas by:
            paying teachers supplemental salaries; providing needed school
            supplies, benches and textbooks; building new schools in
            underserved areas; and, providing seeds and tools for school
            gardens. The program aims to increase student continuation and
            promotion by providing monthly take-home rations to students
            with high attendance levels, and to improve the overall quality
            of education by establishing a teacher training certificate
            program for primary school teachers at centers run by the
            Ministry of Education. Finally, the program includes the goal
            of improving student nutrition and health through educational
            posters, the organization and implementation of nutrition
            workshops, and a take-home ration to teachers who incorporate
            health and nutrition into the school curriculum.

       Cambodia: USDA donated 11,130 MT of commodities to the WFP
            for a school feeding program in Cambodia. WFP will use the
            vegetable oil and peas as part of a larger, internationally-
            sponsored program that provides hot lunches at schools with the
            aim of increasing school enrollment and attendance rates and
            reducing dropout rates in primary schools. The program also
            provides take-home rations to girls during the last three
            grades of primary school, to encourage parents to keep their
            daughters in school until completion. WFP's school feeding
            program also provides community support to women's groups,
            Parent Teacher Associations and School Canteens Management
            Committees.
    E. Bill Emerson Humanitarian Trust
        Although the Bill Emerson Humanitarian Trust (BEHT) is not a food
    aid program, it is a valuable resource that can be used to respond to
    unforeseen humanitarian food crises in developing countries. The
    Emerson Trust is a food reserve of up to 4 million MT of wheat, corn,
    sorghum, and rice administered under the authority of the Secretary of
    Agriculture. When an unanticipated emergency arises that cannot be met
    with P.L. 480 resources, the Secretary of Agriculture may authorize the
    release of commodities from the reserve in order to meet those
    immediate needs. Each year, 500,000 MT may be released, plus up to
    another 500,000 MT that was not released in prior years.
        The reserve was originally authorized by the Agricultural Trade Act
    of 1980 as the Food Security Wheat Reserve and was later broadened to
    include a number of other commodities. In 1998 the reserve was renamed
    the Bill Emerson Humanitarian Trust and was reauthorized through 2007
    under the 2002 Farm Bill. In FY 2007, the Emerson Trust held 900,000 MT
    of wheat; however, no commodities were released.
    III. Appendices

                        Appendix 1: List of Abbreviations
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                       BEHT   Bill Emerson Humanitarian Trust
                        CCC   Commodity Credit Corporation
                         CS   cooperating sponsor
                     C-SAFE   Consortium for Southern Africa Food Security
                               Emergency
                        DAP   Development Assistance Program
                        EPI   Expanded Program for Immunization
                      EXCOM   Executive Committee (for the FACG)
                        FAC   Food Aid Convention
                       FACG   Food Aid Consultative Group
                   FEWS NET   Famine Early Warning System Network
                        FFA   food for assets
                        FFE   McGovern-Dole International Food for Education
                               and Child Nutrition Program (formerly Global
                               Food for Education Initiative)
                        FFP   Office of Food for Peace (USAID)
                      FFP/W   Food for Peace Washington Office
                        FFW   Food for work
                        FTF   Farmer-to-Farmer Program of P.L. 480, Title V
                         FY   fiscal year
                        GAO   Government Accountability Office
                        GMP   Growth monitoring promotion
                        HBC   Home-based care
                        HIV   Human Immunodeficiency Virus
                        ICB   Institutional Capacity Building
                       IDPs   Internally Displaced Persons
                       IFRP   International Food Relief Partnership
                         I-LIFImproving Livelihoods through Increased Food
                               Security
                      MARAD   Maritime Administration
                         MT   metric ton
                       NASA   National Aeronautics and Space Administration
                        NGO   non-governmental organization
                       NOAA   National Oceanic and Atmospheric
                               Administration
                        OVC   Orphans and Vulnerable Children
                         P.L. U.S. Public Law 480
                     PEPFAR   President's Emergency Plan for AIDS Relief
                          PLWHPeople Living with HIV
                       PSNP   Productive Safety Net Program (Ethiopia)
                        PVO   private voluntary organization)
                         UN   United Nations
                      USAID   U.S. Agency for International Development
                       USDA   U.S. Department of Agriculture
                       USGS   U.S. Geological Survey
                        WFP   United Nations World Food Programme
    ------------------------------------------------------------------------

                    Appendix 2: List of Partner Organizations
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
        The following organizations implemented U.S. Government food
            assistance programs in Fiscal Year 2007:
    ------------------------------------------------------------------------
                  ACDI/VOCA   Agriculture Cooperative Development
                               International/ Volunteers in Overseas
                               Cooperative Assistance
                       ADRA   Adventist Development and Relief Agency
                               International, Inc.
                   Africare   Africare
                         AI   Amigos Internacionales
                        ARC   American Red Cross
                        BRA   Batay Relief Alliance
                         BC   Bless the Children
                    Caritas   Caritas
                       CARE   Cooperative for Assistance and Relief
                               Everywhere, Inc.
                        CBU   Church for Bible Understanding
                        CIH   Center for International Health
                   Citihope   Citihope International
                          CLI Child Life International
                         CH   Convoy of Hope
                  Coprodeli   Coprodeli
                        CPI   Counterpart International
                        CRS   Catholic Relief Services
                      EFSRA   Ethiopian Food Security Reserve Agency
                        EIM   Evangelistic International Ministry
                        FCF   Fabretto Children's Foundation, Inc.
                         FO   Family Outreach
                        FHI   Food for the Hungry International
                      FINCA   FINCA International
                        FTC   Feed the Children
                       GOAF   Government of Afghanistan
                        GOB   Government of Bangladesh
                       GOET   Government of Ethiopia
               Haiti Vision   Haiti Vision
                        HHI   Healing Hands International
                        HEF   Hope Education Foundation
                        ICA   International Crisis Aid
                       IPHD   International Partnership for Human
                               Development
                        IRD   International Relief and Development, Inc.
                        IRT   International Relief Teams
                        JAM   Joint Aid Management
                           LOLLand O'Lakes
                           LWMLegacy World Missions
                         MM   Medical Missionaries
                        MCI   Mercy Corps International
                    Nascent   Nascent Solutions
                       NOAH   NOAH Project
                        NPA   Norwegian People's Aid
                       OICI   Opportunities Industrialization Centers
                               International
                        PCI   Project Concern International
                         PH   Project Hope
                     PRISMA   Asociacion Benefica PRISMA
                       REST   Relief Society of Tigray
                        RPX   Resource & Policy Exchange
             Salvation Army   Salvation Army World Service
                        SCF   Save the Children Federation
                     SCF-UK   Save the Children UK
               Share Circle   Share Circle
                      SHARE   SHARE Guatemala
                       TASO   The AIDS Service Organization
                         TS   TechnoServe
                     Uplift   Uplift International
                        VIA   Visions in Action
                        WFP   United Nations World Food Programme
                         WS   World Share
                        WVI   World Vision International, Inc.
                       UNDP   United Nation Development Program
                     UNICEF   United Nations Children's Fund
    ------------------------------------------------------------------------

     Appendix 3: USDA Title I Program: Food for Progress Grants_Fiscal Year
                                      2007
                                Title I Programs
                            Food for Progress Grants
    ------------------------------------------------------------------------
                                                                   Tonnage
               Country                        Sponsor                (MT)
    ------------------------------------------------------------------------
                                     Africa
    ------------------------------------------------------------------------
    Ethiopia                       GOET                               15,000
                                  ------------------------------------------
      Subtotal Africa                                                 15,000
    ------------------------------------------------------------------------
                                    Near East
    ------------------------------------------------------------------------
    Afghanistan                    GOAF                                8,210
                                  ------------------------------------------
      Subtotal Near East                                               8,210
                                                                ============
      Total                                                           23,210
    ------------------------------------------------------------------------

        Appendix 4: USAID Title II Emergency Activities: Summary Budget, Commodity, and Tonnage_Fiscal Year 2007
    ----------------------------------------------------------------------------------------------------------------
                        Cooperating                                       Recipients *                   Total Cost
        Country           Sponsor                Commodities                 (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso                   WFP  Corn Soy Blend, Veg. Oil                   668.5         2,500      $2,280.9
    Burundi                        WFP  Cornmeal, Corn Soy Blend,                    2.5        11,380     $10,071.5
                                         Veg. Oil, Yellow Peas,
                                         Yellow Split Peas
    Cameroon                       WFP  Bagged Corn, Corn Soy Blend,                30.0           970        $797.8
                                         Red Beans, Veg. Oil
    Central African                WFP  Corn Soy Blend, Cornmeal,                  204.0        14,860     $14,149.0
     Republic                            Green Peas, Veg. Oil, Yellow
                                         Split Peas
    Chad                           WFP  Corn Soy Blend, Soft White               1,000.1        37,270     $37,735.6
                                         Wheat, Sorghum (bulk),
                                         Sorghum (bagged), Veg. Oil,
                                         Yellow Split Peas
    Congo                          WFP  Rice (bagged), Veg. Oil,                   308.5         1,220      $1,196.8
     (Brazzaville)                       Yellow Split Peas
    Congo (DRC)                    FHI  Corn Soy Blend, Cornmeal,                     --         5,350      $6,175.4
                                         Green Peas, Veg. Oil
                                   WFP  Corn Soy Blend, Cornmeal,                3,368.3        28,470     $31,662.2
                                         Lentils, Veg. Oil, Yellow
                                         Peas, Yellow Split Peas
    Cote d'Ivoire                  WFP  Cornmeal                                   922.5         6,810      $5,000.1
    Djibouti                       WFP  Corn Soy Blend, Lentils,                    57.2         1,350        $994.9
                                         Wheat Flour
    Ethiopia                      CARE  Corn Soy Blend, Hard Red                   545.3        25,280     $12,700.4
                                         Winter Wheat, Veg. Oil
                                   CRS  Bulgur, Corn Soy Blend, Hard               449.9        17,480      $9,375.7
                                         Red Winter Wheat, Lentils,
                                         Rice (Bagged), Veg. Oil
                                   FHI  Green Peas, Green Split Peas,              802.9        17,110      $8,945.6
                                         Hard Red Winter Wheat, Veg.
                                         Oil, Yellow Peas
                                   WFP  Corn Soy Blend, Hard Red                     7.0       195,940    $101,916.5
                                         Winter Wheat, Veg. Oil,
                                         Yellow Peas, Yellow Split
                                         Peas
                                  REST  Green Peas, Hard Red Winter                952.6        67,610     $33,453.5
                                         Wheat, Veg. Oil
                                   SCF  Hard Red Winter Wheat                       89.1         3,970      $1,684.3
                                SCF-UK  Green Peas, Hard Red Winter                835.8        19,270      $9,472.8
                                         Wheat, Lentils, Yellow Peas,
                                         Yellow Split Peas
                                    WV  Corn Soy Blend, Hard Red                   210.3         6,880      $3,988.2
                                         Winter Wheat, Veg. Oil,
                                         Yellow Peas
    Guinea                         WFP  Bulgur, Veg. Oil, Yellow                 1,234.7         1,760      $1,519.4
                                         Split Peas
    Kenya                          WFP  Bulgur, Corn Soy Blend,                    961.1       112,429     $80,870.0
                                         Cornmeal, Green Split Peas,
                                         Veg. Oil, Wheat Flour,
                                         Yellow Split Peas
    Lesotho                         WV  Cornmeal, Pinto Beans, Veg.                138.7        12,040     $14,605.0
                                         Oil, Yellow Peas, Yellow
                                         Split Peas
    Liberia                        WFP  Bulgur, Corn Soy Blend, Veg.             1,330.7        10,700      $9,146.7
                                         Oil, Yellow Split Peas
    Madagascar                     WFP  Green Peas, Pinto Beans, Rice              337.5         6,460      $4,563.0
                                         , Sorghum
    Mali                           WFP  Cornmeal, Veg. Oil, Yellow                 740.0         4,390      $4,138.9
                                         Split Peas
    Mauritania                     WFP  Corn Soy Blend, Hard Red                   254.0         4,890      $3,510.9
                                         Winter Wheat, Soft White
                                         Wheat, Soy-Fortified Sorghum
                                         Grits, Wheat Soy Blend, Veg.
                                         Oil
    Niger                          WFP  Corn Soy Blend, Veg. Oil                     2.9         6,890      $5,763.1
    Rwanda                         WFP  Corn Soy Blend, Cornmeal,                1,085.0         3,260      $2,996.3
                                         Veg. Oil, Yellow Peas
    Somalia                       CARE  Corn Soy Blend, Lentils,                   460.0        13,250     $10,289.2
                                         Sorghum, Veg. Oil
                                   WFP  Corn, Corn Soy Blend, Hard                   4.3        36,740     $25,016.8
                                         Red Winter Wheat, Sorghum,
                                         Veg. Oil, Yellow Peas,
                                         Yellow Split Peas
    Southern Africa                WFP  Black Beans, Bulgur, Corn Soy            5,534.0       122,915    $102,601.3
     Region                              Blend, Cornmeal, Kidney
                                         Beans, Lentils, Pink Beans,
                                         Pinto Beans, Red Beans,
                                         Sorghum, Veg. Oil, Yellow
                                         Peas, Yellow Split Peas
    Sudan                         ADRA  Lentils, Sorghum, Veg. Oil                  83.5           780        $774.0
                                  CARE  Corn Soy Blend, Lentils,                   164.3         3,550      $2,625.6
                                         Sorghum, Veg. Oil
                                   WFP  Corn Soy Blend, Lentils,                    12.2       341,070    $339,805.9
                                         Sorghum, Veg. Oil
                                   NPA  Lentils, Sorghum, Veg. Oil                 196.8         9,230     $12,938.7
    Tanzania                       WFP  Corn Soy Blend, Cornmeal,                  580.0        14,210     $11,731.3
                                         Pinto Beans, Veg. Oil,
                                         Yellow Split Peas
    Uganda                         WFP  Black Beans, Corn Soy Blend,                10.5        64,210     $44,413.7
                                         Cornmeal, Kidney Beans,
                                         Pinto Beans, Sorghum, Veg.
                                         Oil, Yellow Split Peas
    Zambia                         WFP  Sorghum                                     67.0         1,330        $795.0
    Zimbabwe                        WV  Bulgur, Cornmeal, Great                     10.0        88,920     $95,800.7
                                         Northern Beans, Sorghum,
                                         Veg. Oil
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                          23,661.8     1,322,744  $1,065,506.7
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                    WFP  Green Peas, Soft White Wheat,                6.6        89,250     $59,996.0
                                         Veg. Oil
    East-Timor                     WFP  Corn Soy Blend, Red Beans,                 165.0         2,290      $2,171.6
                                         Veg. Oil
    Lebanon                        WFP  Red Hard Winter Wheat                         --           700        $444.2
    Nepal                          WFP  Garbanzo Beans, Lentils,                   333.2         6,470      $6,056.3
                                         Rice, Veg. Oil
    Sri Lanka                      WFP  Lentils, Soft Red Winter                 1,423.9        24,200     $14,085.9
                                         Wheat, Veg. Oil, Wheat Flour
    Syria                          WFP  Lentils, Rice, Veg. Oil                     30.0           820        $644.2
    West Bank/Gaza                 WFP  Garbanzo Beans, Veg. Oil,                  665.0        27,090     $19,487.7
                                         Wheat Flour
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                 232,623.7     23150,820  23$102,885.9
    ----------------------------------------------------------------------------------------------------------------
                                                      Latin America
    ----------------------------------------------------------------------------------------------------------------
    Colombia                       WFP  Green Peas, Lentils, Veg. Oil              725.0         4,830      $4,858.4
    El Salvador                    WFP  Pinto Beans, Veg. Oil                      470.0           160        $176.9
    Guatemala                      WFP  Pinto Beans, Veg. Oil                      470.0           240        $263.0
                                    WS  Corn Soy Blend, Pinto Beans,                58.8         1,100      $1,057.7
                                         Rice, Veg. Oil
    Honduras                       WFP  Pinto Beans, Veg. Oil                      470.0           260        $286.9
    Nicaragua                      WFP  Pinto Beans, Veg. Oil                      470.0           210        $229.5
                    ------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                    2,663.8         6,800      $6,872.4
                                                                      ----------------------------------------------
      Unallocated Preposition plus Unallocated                                        --        52,600     $36,501.2
                                                                      ----------------------------------------------
      Pending Approval                                                                --            --    $183,233.8
                                                                      ----------------------------------------------
      Funding Adjustments (IFRP, PSCs, Prepositioning and CSB                         --            --     $42,000.0
       Mitigation)
                                                                      ==============================================
      Worldwide Total                                                           28,949.3     1,532,964  $1,437,000.0
    ----------------------------------------------------------------------------------------------------------------
    Source: Tonnage, Values and 202(e) totals derived from FFP Preliminary Final Budget Summary Report, January
      2008. Commodities and Recipients derived from Food for Peace Information System report, January 9, 2008.
    Note: Values include commodities plus freight. Recipients listed as approved in cooperative agreements.
    * Recipient values are reflective of commodity rations and are derived separately from program beneficiary
      totals.
    Table does not include International Food Relief Partnership activities. See page 11 for specific details.

         Appendix 5: USAID Title II Non-Emergency Activities: Summary Budget, Commodity, Recipient, and Tonnage
                                                 Tables_Fiscal Year 2007
    ----------------------------------------------------------------------------------------------------------------
                        Cooperating                                       Recipients *                   Total Cost
        Country           Sponsor                Commodities                 (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso              Africare  Defatted Soy Flour, Pinto                    7.0         5,710      $4,914.3
                                         Beans, Potato Flakes, Rice,
                                         Soy-Fortified Bulgur, Veg.
                                         Oil
                                   CRS  Lentils, Soy-Fortified                     356.8        14,760     $11,693.9
                                         Bulgur, Soy-Fortified
                                         Cornmeal, Rice, Veg. Oil
    Chad                      Africare  Rice, Wheat Flour                             --         4,120      $3,722.4
    Ghana                         ADRA  Soy-Fortified Bulgur                     2,667.0           400      $1,926.0
                                   CRS  Corn Soy Blend, Northern                   204.8        22,070     $12,075.8
                                         Spring Wheat, Soy-Fortified
                                         Bulgur, Soy-Fortified
                                         Sorghum Grits, Veg. Oil,
                                  OICI  Northern Spring Wheat, Soy-                  4.0         9,580      $4,107.3
                                         Fortified Bulgur, Soy-
                                         Fortified Sorghum Grits,
                                         Veg. Oil, Wheat Soy Blend
    Guinea                        OICI  Green Peas, Soy-Fortified                   10.7         2,330      $2,494.9
                                         Cornmeal, Veg. Oil
    Kenya                         ADRA  Corn Soy Blend, Green Peas,                 79.1         7,120      $2,569.6
                                         Hard Red Winter Wheat, Soy-
                                         Fortified Bulgur, Veg. Oil
                                  CARE  Corn Soy Blend, Hard Red                     4.5         5,960      $2,145.0
                                         Winter Wheat, Veg. Oil,
                                         Yellow Split Peas
                                   FHI  Corn Soy Blend, Green Split                  8.8         6,960      $2,844.5
                                         Peas, Hard Red Winter Wheat,
                                         Soy-Fortified Bulgur, Veg.
                                         Oil
    Liberia                        CRS  Bulgur, Hard Red Spring                     17.9         9,170      $6,998.4
                                         Wheat, Lentils, Rice, Veg.
                                         Oil, Wheat Flour
    Madagascar                    ADRA  Corn Soy Blend, Crude De-                   12.4         8,620      $4,707.7
                                         Gummed Veg. Oil, Hard Red
                                         Winter Wheat, Rice, Veg. Oil
                                  CARE  Corn Soy Blend, Crude De-                   68.2        11,700      $6,607.4
                                         Gummed Veg. Oil, Great
                                         Northern Beans, Rice, Veg.
                                         Oil
                                   CRS  Corn Soy Blend, Crude De-                   65.4         8,870      $5,494.5
                                         Gummed Veg. Oil, Great
                                         Northern Beans, Hard Red
                                         Winter Wheat, Rice, Veg. Oil
    Malawi                         CRS  Corn Soy Blend, Cornmeal,                   21.4        13,360     $15,000.1
                                         Crude De-Gummed Veg. Oil,
                                         Pinto Beans, Veg. Oil
    Mauritania                     CPI  Corn Soy Blend, Hard Red                    25.3         9,510      $3,849.5
                                         Winter Wheat, Veg. Oil,
                                         Yellow Split Peas
    Mozambique                    ADRA  Hard Red Winter Wheat,                        --         5,290      $1,967.1
                                         Northern Spring Wheat
                              Africare  Hard Red Winter Wheat,                        --         3,230      $1,187.6
                                         Northern Spring Wheat
                                  CARE  Hard Red Winter Wheat,                        --         7,720      $2,743.2
                                         Northern Spring Wheat
                                   FHI  Hard Red Winter Wheat,                        --         5,920      $2,143.6
                                         Northern Spring Wheat
                                   SCF  Hard Red Winter Wheat,                        --         4,720      $1,841.9
                                         Northern Spring Wheat
                                    WV  Hard Red Winter Wheat,                        --        22,970      $8,177.1
                                         Northern Spring Wheat
    Niger                     Africare  Rice, Soy-Fortified Bulgur                  19.0         3,280      $3,334.3
                                   CRS  Rice, Soy-Fortified Bulgur                  40.5         6,040      $4,650.6
    Rwanda                   ACDI/VOCA  Corn Soy Blend, Soy-Fortified                2.0         2,930      $4,337.5
                                         Bulgur, Veg. Oil
                                   CRS  Bulgur, Corn Soy Blend, Veg.                26.9         2,940      $3,101.2
                                         Oil
                                    WV  Corn Soy Blend, Soy-Fortified                5.9         2,760      $4,015.8
                                         Bulgur, Veg. Oil
    Senegal                        CPI  Corn Soy Blend, Lentils,                    44.1         6,560      $4,832.1
                                         Potato Flakes, Rice, Soy-
                                         Fortified Bulgur, Veg. Oil
    Sierra Leone                  CARE  Bulgur, Hard Red Winter                     30.4        14,290      $9,734.4
                                         Wheat, Kidney Beans, Rice,
                                         Veg. Oil
    Uganda                   ACDI/VOCA  Corn Soy Blend, Hard Red                    21.2        14,650      $9,579.2
                                         Winter Wheat, Veg. Oil
                                   SCF  Corn Soy Blend, Hard Red                     4.9         4,800      $3,534.5
                                         Winter Wheat, Lentils, Soy-
                                         Fortified Cornmeal, Veg. Oil
                                    WV  Hard Red Winter Wheat                         --         2,510      $1,262.3
    Zambia                         CRS  Bulgur, Hard Red Winter                      5.3         8,410      $6,807.7
                                         Wheat, Lentils, Sorghum
                                   LOL  Northern Spring Dark Wheat                    --         4,500      $3,044.3
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           3,753.6       263,760    $167,445.7
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Bangladesh                    CARE  Hard Red Winter Wheat, Soft                129.7        65,440     $25,567.4
                                         Red Winter Wheat, Soft White
                                         Wheat, Veg. Oil, Yellow
                                         Split Peas
                                   SCF  Hard Red Winter Wheat, Soft                160.0        24,760     $10,040.0
                                         White Wheat, Veg. Oil,
                                         Yellow Split Peas
    India                         CARE  Green Peas, Veg. Oil                          --        22,060     $16,531.4
                                   CRS  Bulgur, Veg. Oil                           718.0        21,410     $14,506.4
    Indonesia                     CARE  Green Split Peas, Northern                  15.3         1,870      $1,837.8
                                         Spring Dark Wheat, Veg. Oil
                                   CRS  Corn Soy Blend, Lentils,                    93.0         2,940      $1,568.8
                                         Northern Spring Dark Wheat,
                                         Veg. Oil
                                   MCI  Green Split Peas, Northern                  26.1         3,670      $3,322.2
                                         Spring Dark Wheat, Veg. Oil
                                   SCF  Northern Spring Dark Wheat,                 52.0         3,430      $2,895.0
                                         Veg. Oil
                                    WV  Green Split Peas, Hard White                37.2         2,580      $1,327.5
                                         Wheat, Northern Spring Dark
                                         Wheat, Veg. Oil
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                   1,231.1       148,160     $77,596.5
    ----------------------------------------------------------------------------------------------------------------
                                                      Central Asia
    ----------------------------------------------------------------------------------------------------------------
    Tajikistan                    CARE  Lentils, Veg. Oil, Wheat                    47.6         5,660      $8,477.6
                                         Flour
                    ------------------------------------------------------------------------------------------------
      Sub-Total Central Asia                                                        47.6         5,660      $8,477.6
    ----------------------------------------------------------------------------------------------------------------
                                                      Latin America
    ----------------------------------------------------------------------------------------------------------------
    Bolivia                       ADRA  Corn Soy Blend, Green Peas,                 17.7         6,330      $4,079.4
                                         Lentils, Soy-Fortified
                                         Bulgur, Wheat Flour
                                  CARE  Corn Soy Blend, Green Peas,                  7.9         8,320      $5,391.3
                                         Lentils, Soy-Fortified
                                         Bulgur, Wheat Flour
                                   FHI  Corn Soy Blend, Green Peas,                 15.8         8,960      $5,704.1
                                         Lentils, Soy-Fortified
                                         Bulgur, Wheat Flour
                                   SCF  Corn Soy Blend, Green Peas,                 31.6         7,520      $4,874.2
                                         Lentils, Wheat Flour
    Guatemala                      CRS  Corn Soy Blend, Crude De-                   84.0         5,220      $3,971.8
                                         Gummed Veg. Oil, Pinto
                                         Beans, Rice, Veg. Oil
                                   SCF  Corn Soy Blend, Crude De-                   12.7         4,630      $3,534.4
                                         Gummed Veg. Oil, Pinto
                                         Beans, Rice, Veg. Oil
                                    WS  Corn Soy Blend, Crude De-                   12.7         5,940      $4,488.8
                                         Gummed Veg. Oil, Pinto
                                         Beans, Rice, Veg. Oil
    Haiti                         CARE  Hard Red Winter Wheat,                      46.2        11,316      $5,048.3
                                         Lentils, Soy-Fortified
                                         Bulgur, Veg. Oil, Wheat Soy
                                         Blend
                                   CRS  Cornmeal, Crude De-Gummed                  227.5        21,421     $12,008.0
                                         Veg. Oil, Hard Red Winter
                                         Wheat, Lentils, Soy-
                                         Fortified Bulgur, Veg. Oil,
                                         Wheat Soy Blend
                                   SCF  Hard Red Winter Wheat,                     127.1        12,567      $5,787.4
                                         Lentils, Soy-Fortified
                                         Bulgur, Veg. Oil, Wheat Soy
                                         Blend
                                    WV  Hard Red Winter Wheat,                      53.1        24,036      $9,514.9
                                         Lentils, Soy-Fortified
                                         Bulgur, Veg. Oil, Wheat Soy
                                         Blend
    Honduras                      ADRA  Corn Soy Blend, Northern                    10.9         9,220      $3,835.0
                                         Spring Wheat, Red Beans,
                                         Rice, Veg. Oil
                                  CARE  Corn Soy Blend, Red Beans,                   1.5           120         $86.3
                                         Rice, Veg. Oil
                                   SCF  Corn Soy Blend, Northern                     5.3         8,555      $3,637.3
                                         Spring Wheat, Red Beans,
                                         Rice, Veg. Oil
                                    WV  Corn Soy Blend, Kidney Beans,                8.4        10,555      $5,169.0
                                         Northern Spring Wheat, Red
                                         Beans, Rice, Veg. Oil
    Nicaragua                     ADRA  Corn Soy Blend, Lentils,                     1.9         8,500      $3,490.8
                                         Northern Spring Wheat, Rice,
                                         Veg. Oil
                                   CRS  Corn Soy Blend, Lentils,                     8.5         6,650      $2,672.9
                                         Northern Spring Wheat, Rice,
                                         Veg. Oil
                                   PCI  Corn Soy Blend, Lentils,                    11.0         6,440      $2,490.5
                                         Northern Spring Wheat, Rice,
                                         Veg. Oil
                                   SCF  Corn Soy Blend, Cornmeal,                    6.4         6,520      $2,584.5
                                         Crude De-Gummed Veg. Oil,
                                         Lentils, Northern Spring
                                         Wheat, Rice, Veg. Oil
    Peru                          ADRA  Crude De-Gummed Veg. Oil                      --         1,630      $2,131.1
                                PRISMA  Crude De-Gummed Veg. Oil                      --           410      $3,138.2
                          Caritas Inc.  Crude De-Gummed Veg. Oil                      --         2,400      $3,138.2
                    ------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                      690.2       177,260     $94,273.3
                                                                      ----------------------------------------------
      Pending Approval                                                                --            --        $706.9
                                                                      ==============================================
        Worldwide Total                                                          5,722.6       594,840    $348,500.0
    ----------------------------------------------------------------------------------------------------------------
    Source: Tonnage, Values and 202(e) totals derived from FFP Preliminary Final Budget Summary Report, January
      2008. Commodities and Recipients derived from Food for Peace Information System report, January 9, 2008.
    * Recipient values are reflective of commodity rations and are derived separately from program beneficiary
      totals.
    Note: Values include commodities plus freight. Recipients listed as approved in cooperative agreements.

    Appendix 6: USDA Food for Progress Program_CCC-funded Grants_Fiscal Year
                                      2007
    ------------------------------------------------------------------------
                                           Cooperating      Tonnage Donated
                  Country                    Sponsor              (MT)
    ------------------------------------------------------------------------
                                     Africa
    ------------------------------------------------------------------------
    Kenya                                             LOL             25,000
                                                    WOCCU             26,610
    Liberia                                          ACDI             10,000
    Madagascar                                        LOL             12,450
                                                      CRS              6,190
    Malawi                                            PAI             10,000
    Mozambique                                         TS             21,060
                                                      PAI             10,000
                                                     GOMZ              4,500
                                                      IRD              5,600
    Niger                                            GONI             17,000
    Tanzania                                        FINCA             20,000
                                       -------------------------------------
      Subtotal Africa                                                168,410
    ------------------------------------------------------------------------
                               Europe and Eurasia
    ------------------------------------------------------------------------
    Armenia                                           WFP                920
                                                      ATG              2,500
    Azerbaijan                                        VRF             10,800
    Georgia                                           IRD             15,000
                                       -------------------------------------
      Subtotal Europe and Eurasia                                     29,220
    ------------------------------------------------------------------------
                         Latin America and the Caribbean
    ------------------------------------------------------------------------
    Bolivia                                          FFTH             11,500
    El Salvador                                      GOEL             15,500
    Nicaragua                                       FINCA             16,000
                                       -------------------------------------
      Subtotal Latin America and the Caribbean                        43,000
                                                          ==================
        Worldwide Total                                              240,630
    ------------------------------------------------------------------------

      Appendix 7: McGovern-Dole International Food for Education and Child
    Nutrition Program_Fiscal Year 2007: Donations by Country and Cooperating
                                     Sponsor
    ------------------------------------------------------------------------
                                           Cooperating      Tonnage  Donated
                  Country                    Sponsor              (MT)
    ------------------------------------------------------------------------
                                     Africa
    ------------------------------------------------------------------------
    Benin                                             CRS                480
    Congo (Brazzaville)                              IPHD              6,300
    Guinea                                            WFP             11,460
    Guinea-Bissau                                    IPHD              4,710
    Kenya                                             WFP             14,350
    Liberia                                            VA                600
    Madagascar                                       CARE              3,190
    Malawi                                            WFP              8,280
    Mali                                              CRS              7,380
    Mozambique                                      JAMGT              5,890
    Senegal                                           CPI              3,240
                                       -------------------------------------
      Subtotal Africa                                                 65,880
    ------------------------------------------------------------------------
                                      Asia
    ------------------------------------------------------------------------
    Cambodia                                           SM              1,750
    Cambodia                                          WFP             11,130
    Pakistan                                          WFP              7,170
                                       -------------------------------------
      Subtotal Asia                                                   17,300
    ------------------------------------------------------------------------
                         Latin America and the Caribbean
    ------------------------------------------------------------------------
    Guatemala                                        FFTP             10,060
    Guatemala                                       SHARE              6,500
    Nicaragua                                        GLIM                740
                                       -------------------------------------
      Subtotal Latin America and the Caribbean                        20,050
                                                          ==================
        Grand Total                                                  103,230
    ------------------------------------------------------------------------

                       Appendix 8: Public Law 480 Title II Congressional Mandates_Fiscal Year 2007
    ----------------------------------------------------------------------------------------------------------------
                                                                                                    Bagged in United
                            Minimum           Subminimum        Monetization       Value-added           States
    ----------------------------------------------------------------------------------------------------------------
    FY 2007 Target             2,500,000          1,875,000              15.0%              75.0%              50.0%
    Status September           2,573,215            682,353              74.3%              44.8%              54.8%
     2007
    ----------------------------------------------------------------------------------------------------------------
    Minimum: Total approved metric tons programmed under Title II. Metric ton grain equivalent used to report
     against target.

    Subminimum: Metric tons for approved non-emergency programs through PVOs and community development organizations
     and WFP. Metric ton grain equivalent used to report against target.

    Monetization: Percentage of approved Title II programs that are monetization programs.

    Value-added: Percentage of approved non-emergency programs that are processed, fortified, or bagged.

    Bagged in U.S.: Percentage of approved non-emergency bagged commodities that are whole grain to be bagged in the
     United States.
    ----------------------------------------------------------------------------------------------------------------
    Source: USAID Bureau for Democracy, Conflict, and Humanitarian Assistance, Office of Food for Peace, FY
      2007Preliminary Budget Summary Overview, January 9, 2008.

    Appendix 9: Countries with Approved U.S. Food Assistance Programs_Fiscal
                                    Year 2007

    ------------------------------------------------------------------------
                              Title I (0 countries)
    ------------------------------------------------------------------------
                             Title III (0 countries)
    ------------------------------------------------------------------------
                   CCC-Funded Food for Progress (13 countries)
    ------------------------------------------------------------------------
    Armenia            Azerbaijan         Bolivia           El Salvador
    Georgia            Kenya              Liberia           Madagascar
    Malawi             Mozambique         Nicaragua         Niger
    Tanzania
    ------------------------------------------------------------------------
                 Title I-Funded Food for Progress (2 countries)
    ------------------------------------------------------------------------
    Afghanistan        Ethiopia
    ------------------------------------------------------------------------
                            Title II * (64 countries)
    ------------------------------------------------------------------------
    Afghanistan        Angola            Armenia  **      Azerbaijan
    Bangladesh         Benin              Bolivia           Burkina Faso
    Burundi            Cambodia  **      Cameroon         Cape Verde
    Central African    Chad               Colombia          Congo
     Rep.                                                   (Brazzaville)
                                                              **
    Congo (DRC)       Cote d'Ivoire      Djibouti          Dominican Rep.
                                                             **
    East Timor         Ecuador  **       El Salvador  **  Ethiopia
    Gambia             Ghana             Guatemala        Guinea
    Haiti             Honduras          India            Indonesia
    Kenya             Kosovo  **        Kyrgyzstan  **   Lebanon
    Lesotho            Liberia            Madagascar        Malawi
    Mali               Mauritania         Mozambique        Nepal
    Nicaragua         Niger              Peru             Philippines  **
    Romania  **       Rwanda             Senegal           Sierra Leone
    Somalia            South Africa  **  Sri Lanka         Sudan
    Swaziland         Syria              Tajikistan  **   Uganda
    Uzbekistan  **    West Bank/Gaza     Zambia           Zimbabwe
    ------------------------------------------------------------------------
                        Food for Education (15 countries)
    ------------------------------------------------------------------------
    Benin              Cambodia           Congo             Guatemala
                                           (Brazzaville)
    Guinea             Guinea-Bissau      Kenya             Liberia
    Madagascar         Malawi             Mali              Mozambique
    Nicaragua          Pakistan           Senegal
    ------------------------------------------------------------------------
                         Farmer-to-Farmer (37 countries)
    ------------------------------------------------------------------------
    Angola             Armenia            Azerbaijan        Bangladesh
    Belarus            Bolivia            El Salvador       Ethiopia
    Georgia            Ghana              Guatemala         Guinea
    Guyana             Haiti              Honduras          India
    Indonesia          Jamaica            Kazakhstan        Kenya
    Kyrgyzstan         Malawi             Mali              Moldova
    Mozambique         Nepal              Nicaragua         Nigeria
    Peru               Russia             South Africa      Tajikistan
    Turkmenistan       Uganda             Ukraine           Vietnam
    Zambia
    ------------------------------------------------------------------------
    * Represents Title II programs with commodities approved in FY 2007, or
      that remain active with resources allocated in the prior fiscal year.
     Represents IFRP programs with commodities approved in FY 2007, or that
      remain active with resources allocated in the prior fiscal year.
    ** Title II countries served by IFRP programming only.

                                     ______

                 U.S. International Food Assistance Report 2008
        Under Food for Peace Act Section 407(f)(1)(A), ``Not later than
    April 1 of each fiscal year, the Administrator [of USAID] and the
    Secretary [of Agriculture] shall jointly prepare and submit to the
    appropriate committees of Congress a report regarding each program and
    activity carried out under this Act during the prior fiscal year.'' As
    required, this report is hereby submitted to Congress.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            USAID-supported school feeding program for refugee children
            from Cote d'Ivoire in Liberia, October 2007. Photo by Anne
            Shaw, USAID.

        This Report May Be Ordered From:

    USAID Development Experience Clearinghouse
    8403 Colesville Road, Suite 210
    Silver Spring, MD 20910-6368
    Telephone: (301) 562-0641
    Fax: (301) 588-7787
    URL: http://www.dec.org/
    Table of Contents
    Executive Summary
    Introduction
    I. Food Security
    II. U.S. International Food Assistance

      A. Food for Peace Act

        Food for Peace Title I: Trade and Development Assistance

        Food for Peace Title II: Emergency and Private Assistance Programs

        Food for Peace Title III: Food for Development

        Food for Peace Title V: John Ogonowski and Doug Bereuter Farmer-to-
            Farmer Program

      B. Section 416(b) of the Agricultural Act of 1949: Surplus
            Commodities
      C. Food for Progress
      D. McGovern-Dole International Food for Education and Child Nutrition
            Program
      E. Bill Emerson Humanitarian Trust

    III. Appendices

      Appendix 1: List of Abbreviations
      Appendix 2: List of Grantees
      Appendix 3: USDA Title I Program: Food for Progress Grants--Fiscal
            Year 2008
      Appendix 4: Food for Peace Title II Emergency Activities: Summary
            Budget, Commodity and Tonnage--Fiscal Year 2008
      Appendix 5: Food for Peace Title II Non-Emergency Activities: Summary
            Budget, Commodity, Recipient and Tonnage Tables--Fiscal Year
            2008
      Appendix 6: Bill Emerson Humanitarian Trust: Summary Budget,
            Commodity, Recipient and Tonnage Tables--Fiscal Year 2008
      Appendix 7: USDA Food for Progress Program--Commodity Credit
            Corporation-funded Grants by Country and Commodity--Fiscal Year
            2008
      Appendix 8: McGovern-Dole International Food for Education and Child
            Nutrition Program--Fiscal Year 2008: Donations by Country and
            Commodity
      Appendix 9: Food for Peace Title II Congressional Mandates--Fiscal
            Year 2008
      Appendix 10: Countries with Approved U.S. Food Assistance Programs--
            Fiscal Year 2008
    Executive Summary
        The United States is committed to the promotion of global food
    security through its international food assistance and other foreign
    assistance programs. In Fiscal Year (FY) 2008, the United States
    provided more than $2.8 billion from U.S. food aid programs to
    developing countries, reaching tens of millions of people worldwide.
    The following summary shows U.S. food assistance allocated by
    legislative authority for FY 2008.\1\
    ---------------------------------------------------------------------------
        \1\ All costs represent commodities plus freight and distribution.

    ------------------------------------------------------------------------
                 Program                  Metric Tons      Total Cost (000)
    ------------------------------------------------------------------------
        Food for Peace Title II             2,306,110        $2,350,693.3
    Bill Emerson Humanitarian Trust           323,820          $265,781.5
              Food for Progress               220,890            $166,000
                 Section 416(b)                    --                  --
             Food for Education                86,860             $99,000
               Farmer-to-Farmer                    --             $10,000
                                     ---------------------------------------
      Grand Total...................        2,937,680        $2,891,474.8
    ------------------------------------------------------------------------

        Over the course of FY 2008, the United States Agency for
    International Development (USAID) and the United States Department of
    Agriculture (USDA) international food assistance programs have proven
    increasingly responsive to global efforts at reducing food insecurity
    and targeting those most in need. By responding to assessment and
    situational information, focusing on reducing risk and vulnerability,
    targeting the poorest of the poor and better integrating individual
    programs into larger--often international--efforts, the U.S. Government
    aims to improve the effectiveness of aid and to reach global targets
    for reducing hunger, malnutrition and poverty.
        This aid is essential in emergency situations, which in FY 2008
    included a regional drought in the Horn of Africa, exacerbated by
    conflict in Somalia and Kenya; an ongoing crisis due to conflict and
    displacement in Sudan and the Democratic Republic of the Congo; drought
    in Afghanistan; hyperinflation and poor harvests in Zimbabwe;
    hurricanes in Haiti; and a cyclone in Burma. In all, approximately 43
    million people in 38 countries benefited from emergency food aid
    activities provided through Food for Peace Title II programs.
        At the same time, USAID non-emergency programs continued to focus
    on increasing agricultural production and supporting programs to
    address health, nutrition, HIV and others aimed at investing in people.
    Special emphasis is placed on combating the root causes of hunger and
    malnutrition. Over the course of the year, more than 7.2 million people
    in 28 countries benefited from USAID Title II non-emergency food
    assistance.
        Food for Progress and McGovern-Dole International Food for
    Education and Child Nutrition programs, both implemented by USDA,
    provided commodities to food-insecure populations through the World
    Food Program (WFP), private voluntary organizations (PVOs) and foreign
    governments. These resources supported a variety of food security
    objectives in developing countries, such as agricultural sector
    development, rural development, humanitarian assistance, HIV mitigation
    programs, school feeding and maternal and child health programs. In FY
    2008, USDA's McGovern-Dole International Food for Education and Child
    Nutrition Program provided commodities for in-school feeding, take-home
    rations to keep girls enrolled in school, as well as nutrition programs
    for mothers, infants and children under age 5, positively impacting the
    lives of more than 2.6 million beneficiaries.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Student eating U.S.-provided school lunch in Kyrgyzstan. Photo
            by Mercy Corps.
    Introduction
        Since the passage of Public Law 480 (the Agricultural Trade
    Development and Assistance Act of 1954, renamed the Food for Peace Act
    in 2008), U.S. international food assistance programs have evolved to
    address multiple objectives. The most recent changes came with the Food
    for Peace Act of the Food, Conservation, and Energy Act of 2008.
    Commonly known as the 2008 Farm Bill, the Food, Conservation, and
    Energy Act of 2008 restated the objectives that guide U.S. food
    assistance programs. These objectives are:

       Combat world hunger and malnutrition and their causes;

       Promote broad-based, equitable and sustainable development,
            including agricultural development;

       Expand international trade;

       Foster and encourage the development of private enterprise
            and democratic participation in developing countries; and

       Prevent conflicts.
    U.S. International Food Assistance
        The U.S. international food assistance program was established by
    several legislative authorities implemented by two Federal agencies.
    USAID administers Titles II, III and V of the Food for Peace Act. USDA
    administers Section 416(b) of the Agricultural Act of 1949, Title I of
    the Food for Peace Act, Food for Progress, and McGovern-Dole
    International Food for Education and Child Nutrition Program. The list
    below provides a brief description of each activity.

        1. Food for Peace Act (formerly the Agricultural Trade Development
            and Assistance Act of 1954)--the principal mechanism for U.S.
            international food assistance.

           Title I: Economic Assistance and Food Security--
                concessional sales of U.S. agricultural commodities to
                developing countries and private entities.

           Title II: Emergency and Private Assistance Programs--
                direct donation of U.S. agricultural commodities for
                emergency relief and development.

           Title III: Food for Development--government-to-
                government grants of agricultural commodities tied to
                policy reform.

           Title V: John Ogonowski and Doug Bereuter Farmer-to-
                Farmer (FTF) Program--voluntary technical assistance to
                farmers, farm groups and agribusinesses.

        2. Section 416(b) of the Agricultural Act of 1949--overseas
            donations of surplus food and feed grain owned by the USDA
            Commodity Credit Corporation (CCC).

        3. Food for Progress Act of 1985--commodity donations available to
            emergingdemocracies and developing countries committed to the
            introduction or expansion of freeenterprise in their
            agricultural economies.

        4. McGovern-Dole International Food for Education and Child
            Nutrition Program--donations of U.S. agricultural products, as
            well as financial and technical assistance, for school feeding
            and maternal and child nutrition projects in low-income
            countries.

        5. Bill Emerson Humanitarian Trust--food reserve administered under
            the authority of the Secretary of Agriculture. This reserve is
            available to meet emergency humanitarian food needs in
            developing countries, allowing the United States to respond to
            unanticipated food crises. Under the 2008 Food for Peace Act,
            the Administrator of USAID oversees release and use of these
            funds.

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            A USAID-supported World Food Program initiative in eastern Sri
            Lanka assisted these conflict-affected children in FY 2008.
            Photo by Kathryn Schein, USAID.
    I. Food Security
    Defining a Long-Term Global Strategy
        U.S. international food assistance has long played a critical role
    in responding to global food insecurity. This tradition continued in FY
    2008, with the U.S. Government providing more than 2.8 million metric
    tons (MT) of commodities. The programs have also evolved to reflect
    greater understanding of--and a focus on addressing--the causes of
    famine, food emergencies and large-scale hunger around the world. In
    the Food, Agriculture, Conservation, and Trade Act of 1990, for
    example, food security was narrowly defined as dependent primarily on
    the availability of food at the national level. It was broadened in a
    1992 policy paper to begin to address distribution and nutritional
    quality, calling for ``all people at all times [to] have both physical
    and economic access to sufficient food to meet their dietary needs for
    a productive and healthy life.'' \2\ This definition includes three
    elements judged essential to achieving food security and forms the
    basis for much of the U.S. Government's international food assistance
    activity:
    ---------------------------------------------------------------------------
        \2\ USAID Policy Determination Number 19, April 1992.

       Food availability: sufficient quantities of food from
            household production, other domestic output, commercial imports
    ---------------------------------------------------------------------------
            or food assistance.

       Food access: adequate resources to obtain appropriate foods
            for a nutritious diet, which depends on income available to
            households and on the price of food.

       Food utilization: a diet providing sufficient calories and
            essential nutrients, potable water and adequate sanitation, as
            well as household knowledge of food storage and processing
            techniques, basic principles of nutrition and proper child care
            and illness management.

        In recent years, attention has focused on the continued challenges
    that hamper efforts at reducing global food insecurity. International
    food assistance programs also face increasingly frequent and severe
    natural and manmade disasters with growing humanitarian demands on both
    U.S. and international humanitarian assistance resources.
    Food Price Crisis Response
        In FY 2008, prices of major food commodities increased
    significantly worldwide, pushing an estimated 40 million more people
    into hunger, according to the United Nations Food and Agriculture
    Organization. This brought the total population of undernourished
    people to an estimated 963 million in 2008. Multiple factors
    contributed to higher food prices, including low world grain stocks,
    poor harvests in traditional exporting countries and food export
    controls.
        In response, President George W. Bush in April 2008 directed the
    Secretary of Agriculture to draw down on the Bill Emerson Humanitarian
    Trust, a U.S. food reserve of up to 4 million MT of commodities, to
    meet emergency food aid needs abroad. With this action, USAID provided
    emergency food aid to Afghanistan, Ethiopia, Kenya and Zimbabwe.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Unloading corn-soy blend at the port in Djibouti for delivery
            to Ethiopia, January 2008. Photo by Suzanne Poland, USAID.

        In addition, President Bush in May 2008 asked Congress for $350
    million in supplemental FY 2008 funding for Title II emergency food
    aid. Congress in June 2008 appropriated $850 million in the
    Supplemental Appropriations Act of 2008 for additional Title II
    emergency food aid for FY 2008. On June 30, 2008, President Bush signed
    the Supplemental Appropriations Act. Within days, USAID and USDA
    collaborated to expedite commodity procurement procedures to ensure
    rapid arrival of lifesaving assistance where it was needed most. This
    significant U.S. Government response to the food price crisis enabled
    delivery of substantial and timely food aid.
        The Supplemental Appropriations Act of 2008 included $200 million
    in development assistance funding in FY 2009 to help developing
    countries address the international food crisis. As required under the
    Act, the Secretary of State submitted a report to the Committees on
    Appropriations within 45 days of enactment on the proposed uses of the
    funds. As noted in that report, U.S. Government strategy targets
    increasing food productivity in sub-Saharan Africa--where the world's
    food needs are greatest--focusing on countries where significant
    expansion of food production is feasible and then reducing barriers to
    the movement and procurement of food throughout sub-Saharan Africa.
        The development assistance funds are being used largely to support
    urgent agricultural and trade measures to address high food prices.
    These include actions to increase agricultural productivity; alleviate
    transportation, distribution and post harvest supply-chain bottlenecks;
    and promote sound market-based principles. Development assistance funds
    are also being used to support local and regional procurement of food
    simultaneously to meet emergency humanitarian needs and address urgent
    measures to improve markets for African smallholder farmers.
    USAID Food Security Task Force
        In April 2008, then-USAID Administrator Henrietta H. Fore
    established a USAID Food Security and Food Price Increase Task Force
    responsible for coordinating USAID policy and new programs, developing
    a new USAID food security strategy and interacting with interagency and
    multilateral groups and initiatives related to the impact of global
    food price increases on the most vulnerable.
        In addition to coordinating additional emergency assistance in
    response to the global food price increases, the Task Force served as a
    coordination point for information sharing and joint planning among
    USAID bureaus and with other government agencies on food security and
    food price increase impacts.
    Title II Food Security Programming Frameworks
        Title II non-emergency food aid programs are increasingly being
    initiated with development of a comprehensive framework indicating how
    Title II resources could be targeted, programmed and integrated with
    other resources to reduce food insecurity among vulnerable populations.
    These Food Security Programming Frameworks define objectives,
    approaches, geographic foci and institutional partnerships for
    effective use of U.S. Government resources to reduce food insecurity.
    The frameworks inform country-specific guidance to grant applicants
    developing new non-emergency proposals, and support integration of
    various U.S. Government resources dedicated to reducing food
    insecurity.
    Local and Regional Procurement of Food Aid
        The ability to procure food aid commodities locally (in the country
    where the food aid is needed) and regionally (in a country in the same
    region where food aid is needed) offers an exceptional opportunity to
    meet humanitarian needs in an efficient and timely fashion, fill
    pipeline gaps prior to the arrival of food shipped from the United
    States and increase the total amount of lifesaving food aid U.S.
    assistance resources can provide.
        Local and regional procurement also has the potential to strengthen
    and expand commercial markets, stimulate local and regional food
    production and economies, and ultimately, reduce emergency food aid
    requirements.
        For several years, the Administration has requested from Congress
    the authority to use up to 25 percent of Title II funds for the local
    or regional purchase of food aid commodities to assist people
    threatened by a food security crisis.
        The 2008 Food for Peace Act authorized and directed the Secretary
    of Agriculture to implement a 5 year, $60 million pilot local and
    regional purchase program for food aid.
    Improving the Effectiveness and Efficiency of International Food
            Assistance
        In August 2008, Food for Peace (FFP) issued a Request for
    Information (RFI) on Increasing the Effectiveness and Efficiency of
    Title II Food Aid Program Management. The RFI sought information from
    potential grantees as to their interest, priorities and capacities to
    participate in or undertake Cooperative Agreements to increase the
    effectiveness and efficiency of Title II food aid programs. The purpose
    of the Cooperative Agreements is to improve the FFP program technical
    and operational procedures and to promote best practices through
    coordination and delivery of capacity building and technical assistance
    for current and prospective Title II food aid grantees and programs
    worldwide.
        The principal objectives of the proposed Cooperative Agreements
    are:

        1. Identify best practices in FFP program management and capacity
            building;

        2. Design and undertake training in best practices in program
            management and capacity building;

        3. Communicate and disseminate information on best practices in
            program management and capacity building; and

        4. Strengthen the coordination and collaboration among current and
            prospective Title II grantees.
    Monitoring and Oversight
        The 2008 Food for Peace Act gave FFP the flexibility and the
    mandate to improve oversight of non-emergency programs. As a result,
    FFP is implementing a number of steps, including increasing food aid
    staff levels in the field, with 12 additional staff in chronically
    highly food-insecure countries. This will enhance monitoring capability
    to anticipate emergency needs.
        FFP is helping Missions and governments to plan and implement in-
    depth food security assessments as they relate to the programming of
    Title II non-emergency resources. Working with Missions, governments
    and other stakeholders, FFP is applying assessment results to prepare
    food security strategies that define objectives, approaches and
    institutional partnerships for effective use of Title II non-emergency
    resources to reduce food insecurity.
        In addition, FFP is expanding the Layers monitoring system, which
    uses hand-held computers to collect and analyze program information
    from a random sample of program sites. Once the data are collected,
    Layers generates a report on the performance of grantees in
    implementing Title II programs. A wide variety of issues can be
    evaluated, ranging from the conditions of storage in commodity
    warehouses and record keeping for commodity losses, to the quality of
    services delivered by Title II grantees. Layers is currently utilized
    in Ethiopia, Haiti and Madagascar, and will be expanded to other
    countries that receive Title II non-emergency assistance, including
    Guatemala, Mali and Uganda.
        FFP is also analyzing lessons learned when programs end. Factors
    that lead to success in sustaining program benefits after Title II non-
    emergency food assistance has ended are being examined, with the goal
    of deriving recommendations for effective Title II non-emergency exit
    strategies.
        FFP has launched a 3 year pilot project to help USAID comply with
    the Bellmon Amendment, which requires that adequate storage facilities
    would be available in a recipient country upon arrival of a commodity
    to prevent spoilage or waste, and that distribution of the commodity in
    the recipient country will not result in substantial disincentive or
    interference with domestic production or marketing in that country. The
    Bellmon Estimation for Title II (BEST) Project is conducting
    independent market analyses to ensure that these requirements are met.
    Studies have already been completed and published for Malawi and
    Madagascar, and more are underway.
        Finally, FFP is offering training in the field on monitoring and
    evaluation for non-emergency program grantees to help them harmonize
    impact and output indicators and design baseline assessments.
    USAID's Famine Early Warning Systems Network
        Saving lives and preventing famine are key objectives of the U.S.
    Government and the international community. The Famine Early Warning
    Systems Network (FEWS NET) is a USAID-funded activity that collaborates
    with international, national and regional partners to monitor, collect
    and disseminate critical data on conditions of food availability and
    access, as well as the environmental and socioeconomic hazards that
    lead to food insecurity and famine. The goal of FEWS NET is to manage
    the risk of food insecurity through the provision of timely and
    analytical early warning and vulnerability information, so that
    decision makers have ample time to prepare and take preventive action.
        In 2008, FEWS NET covered 20 countries in Africa, Central America,
    Central Asia and the Caribbean. Its reporting products, maps, data and
    satellite imagery are posted to the website www.fews.net, which
    receives an average of approximately 20,000 page hits per month.
        To more closely track changes in food prices, FEWS NET in FY 2008
    launched a monthly ``Price Watch'' publication that reports on staple
    food prices in key markets in urban and town centers in food-insecure
    countries. This price information provides advance warning to better
    target U.S. food aid resources to the most vulnerable.
        FEWS NET exemplifies the U.S. commitment to anticipating and
    responding to humanitarian vulnerabilities and crises. FEWS NET has
    interagency agreements with the U.S. Geological Survey, National
    Aeronautics and Space Administration, National Oceanic and Atmospheric
    Administration and USDA that provide information to the U.S.
    Government, host country governments and a variety of other regional
    and international partners to assist in averting famine.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            A demonstration garden in Lira District, northern Uganda, where
            VEDCO, a local partner of USAID grantee ACDI/VOCA, instructs
            farmers on improving agricultural production practices. Photo
            by Anne Shaw, USAID.
    A Conceptual Framework for Integrating Food Aid and HIV Programs
        FFP and the Office of the U.S. Global AIDS Coordinator, which leads
    implementation of the President's Emergency Plan for AIDS Relief
    (PEPFAR), continued to work together during 2008, increasing their
    coordination to address the links between nutrition and HIV. In Uganda,
    for example, USAID supported a proposal to develop a food-by-
    prescription policy (supplementary or therapeutic food is provided
    according to clinical assessment) that included FFP grantees with a
    focus on the most food-insecure areas in the country. In Haiti, USAID
    has developed a proposal for umbrella funding to support organizations
    that work to reduce food insecurity among HIV-affected families. This
    strategy, developed by the health team, working together with FFP and
    other offices within the mission, provides the possibility of a best
    practice and will offer PVOs access to funds for livelihood activities
    to support HIV-affected families.
    Food Aid Quality Review
        Over the last 15 years, USAID has conducted a number of reviews of
    its processed and fortified foods, making some adjustments in the
    formulations. Recently, USDA has also looked at the foods on the FFP
    commodity list and is in the process of updating its specifications and
    quality control for those foods.
        Continuing emphasis in the Food for Peace Act on the importance of
    micronutrients and FFP's experience with the use of foods in preventing
    malnutrition in children under age 2 have encouraged a much deeper
    review of the food aid basket.
        FFP issued a Request for Proposals (RFP) in FY 2008 to review the
    role of food aid commodities in meeting beneficiaries' nutritional
    needs. In FY 2009, FFP awarded a contract to carry out this review,
    which will examine the nutritional needs of FFP's current beneficiary
    populations and the commodities currently available to meet those
    needs. In addition, the contract will use a consultative process to
    reach out to the many FFP grantees in order to arrive at a consensus on
    needed reformulations and/or the development of new foods not currently
    available. As part of this contract, any recommendations for
    reformulation or new foods will be accompanied by the description of
    the process necessary to test and evaluate the efficacy and
    effectiveness of these foods.
    II. U.S. International Food Assistance
    Program Descriptions and Fiscal Year 2008 Accomplishments
    A. Food for Peace Act
        The primary mechanism of U.S. international food assistance is the
    Agricultural Trade Development and Assistance Act of 1954 (P.L. 480,
    renamed the Food for Peace Act in 2008).

        1. Title I: Trade and Development Assistance

        The Title I authority provides funding for both a concessional
    sales program, supporting Trade and Development and for the Food for
    Progress grant program, supporting agricultural development in emerging
    democracies. In FY 2008, no new concessional sales agreements were
    made.
        The USDA-administered Food for Progress Program, authorized under
    the Food for Progress Act of 1985, assists developing countries,
    particularly emerging democracies ``that have made commitments to
    introduce or expand free enterprise elements in their agricultural
    economies through changes in commodity pricing, marketing, input
    availability, distribution and private sector involvement.'' The
    program authorizes the Commodity Credit Corporation (CCC) to carry out
    the sale and exportation of U.S. agricultural commodities on credit
    terms or on a grant basis, with the use of either CCC financing or Food
    for Peace Title I funds. Grants under the Food for Progress program are
    awarded to governments or PVOs, nonprofit agriculture organizations,
    cooperatives, intergovernmental organizations or other private
    entities.

          a. Title I: Food for Progress Highlights

        In FY 2008, Food for Progress Title I funding provided 10,900 MT in
    assistance, with an estimated value of $13 million. The summaries below
    provide examples of Title I-funded Food for Progress agreements signed
    in FY 2008.

       Tajikistan: USDA donated 6,570 MT of wheat flour and 300 MT
            of vegetable oil to WFP for use in its Protracted Relief and
            Recovery Operation. In Tajikistan, WFP works to prevent hunger
            among chronically food-insecure households in marginalized
            geographic areas during the lean period through vulnerable
            group feeding and food for work activities; to promote
            education through the provision of hot meals in primary schools
            and take-home rations for girls in secondary schools; to
            rehabilitate malnourished children and pregnant and lactating
            women through the provision of supplementary food and to meet
            the basic food needs of tuberculosis patients; and to support
            government capacity building in managing national food
            assistance programs.

       East Timor: USDA donated approximately 1,600 MT of corn-soy
            blend, 850 MT of kidney beans, 900 MT of rice and 260 MT of
            vegetable oil to WFP for use in its Protracted Relief and
            Recovery Operation. In East Timor, WFP is carrying out three
            main activities: maternal and child health, school feeding and
            emergency preparedness and response. These activities aim to
            improve the nutritional status of the most vulnerable
            population groups during critical times of their lives; the
            potential for agricultural production; and the access to and
            utilization of schools as a means for human capacity
            development.

        2. Title II: Emergency and Private Assistance Programs

        In FY 2008, more than \3/4\ of U.S. international food aid was used
    to respond to emergency situations and to implement development
    projects under Title II, administered by the USAID Office of Food for
    Peace in the Bureau for Democracy, Conflict, and Humanitarian
    Assistance. In FY 2008, Title II programs (emergency and non-emergency)
    and contributions from the Bill Emerson Humanitarian Trust provided
    more than 2.6 million MT of commodities, with a program cost of more
    than $2.6 billion, to assist approximately 56 million people in 49
    countries worldwide.
        The focus of Title II programs is to reduce food insecurity in
    vulnerable populations. This focus on vulnerability to food insecurity
    targets improving resiliency to shocks, an essential first step for
    household self-sufficiency and economic independence. In support of
    this strategy, the non-emergency development portfolio incorporates
    some activities to strengthen local capacity to respond to natural
    disasters.

          a. Title II: Emergency Programs

        Title II emergency programs aim to address two forms of
    emergencies: natural disasters, such as floods or droughts, and complex
    emergencies characterized by a combination of natural disaster,
    conflict and insecurity. All of these elements pose substantial program
    and operating challenges in responding effectively to the needs of
    food-insecure populations.
        In FY 2008, Title II emergency programs and contributions from the
    Bill Emerson Humanitarian Trust provided more than 2.2 million MT of
    emergency food aid, with a program cost of more than $2.2 billion, to
    help alleviate malnutrition and hunger in 39 countries. In all, Title
    II emergency programs reached approximately 43 million food-insecure
    people in FY 2008.

        Food for Peace Title II: Emergency Program Highlights

        Horn of Africa

        Approximately 19 million people in Ethiopia, Somalia, Kenya and
    Djibouti needed emergency food assistance in FY 2008 because of a
    regional drought, with several conflicts in the Horn of Africa. FFP
    responded with more than 1 million MT of food aid, valued at nearly
    $853 million, which helped to avert a humanitarian catastrophe.
        This response included 735,140 MT of food aid for Ethiopia, valued
    at $561.5 million; 211,320 MT for Somalia, valued at $197.4 million;
    87,300 MT for Kenya, valued at $91.3 million; and 2,360 MT for
    Djibouti, valued at $2.7 million.
        In Somalia, despite sustained periods of drought and civil
    conflict, the robust food aid response by FFP helped to stave off
    significant mortality and mass migration.

    ------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Emergencies in Urban Settings

        While the majority of the world's food-insecure population resides
     in rural areas, low-income urban populations are vulnerable to market-
     induced food security shocks, as occurred in 2008 with the rise of food
     prices worldwide. The urban poor are particularly vulnerable to price
     increases because such a large portion of their income goes to
     purchasing food.
        In 2008, FFP published Emergencies in Urban Settings: A Technical
     Review of Food-Based Program Options. This review, which emerged from a
     workshop with private voluntary organizations and World Food Program
     experts, is a programming manual that will improve targeting and
     delivery of food aid to those most impacted by rising food prices. It
     compares program options when food aid is determined to be an
     appropriate response to an emergency--including targeted household food
     distribution, food for work, food for training, ``wet'' feeding, and
     community-based management of acute malnutrition programs.
    ------------------------------------------------------------------------

        In Ethiopia, donors including USAID are working with the Government
    of Ethiopia to mitigate the effects of recurrent cycles of drought and
    food shortages through the innovative Productive Safety Net Program
    (PSNP), which targets 7.2 million of the country's most food-insecure
    people. These recipients receive cash and/or food transfers on a
    predictable basis that allow them to withstand the worst periods of
    food shortages without selling their assets. In return, they provide
    labor for local public works projects during the 6 months of the year
    between harvest and planting season. These projects have resulted in
    the development and protection of thousands of water sources, such as
    springs, hand-dug wells and water harvesting structures, making water
    available for human and animal consumption as well as irrigation. They
    have also provided 33,000 kilometers of rural access roads and the
    construction of community facilities such as farmer training centers,
    health posts and schools. PSNP participants withstood the effects of
    the 2008 drought much better than non-beneficiaries who might have
    received aid, but on a less predictable basis.
        In Kenya, FFP provided nearly 55 percent of WFP emergency resources
    that assisted up to one million Kenyan marginal farming and pastoralist
    families affected by drought as well as approximately 300,000
    internally displaced Kenyans during calendar year 2008. The United
    States is the single largest donor to WFP for its emergency operation
    in Kenya.

        Sudan

        USAID continues to be the world's leading donor of food assistance
    to Sudan, having provided more than $1.5 billion in food assistance
    since the Darfur crisis began in 2004. The United States contributed
    approximately half of WFP's Sudan appeals for 2008 and 2009, by far the
    largest contribution from any donor. Timely contributions from FFP
    helped WFP ensure a continued flow of assistance during the critical
    hunger period from June to September. Despite rampant insecurity, WFP
    met, on average, more than 93 percent of its monthly target caseload in
    Darfur throughout 2008.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Loading USAID food in Port Sudan for World Food Program
            distribution in Sudan, May 2008. Photo by Tyler Beckelman,
            USAID.

          b. Title II: Private Assistance Programs (Non-Emergency)

        The Food for Peace Title II development (non-emergency) food aid
    program constitutes one of the largest sources of USAID funding in
    promoting long-term food security in such areas as:

        1. Agriculture and Natural Resource Management activities;

        2. Health and household nutrition activities; and

        3. Education, Humanitarian Assistance and Microenterprise.

        In FY 2008, 20 grantees implemented 92 Title II non-emergency
    activities in 28 countries. Approximately 341,280 MT of food
    assistance, valued at more than $354 million, was used to support
    programs that benefited more than 7.2 million people.

    ------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Preventing Malnutrition in Children Under Two Approach (PM2A)

        The USAID-funded Food and Nutrition Technical Assistance (FANTA)
     grantee and its partners, the International Food Policy Research
     Institute and Cornell University, together with FFP grantee World
     Vision, recently completed the evaluation of a new approach to
     supplementary feeding in Haiti.
        Instead of providing food only as part of the recuperation of
     malnourished children, the PM2A targets all children from 6 to 24
     months with food supplementation and provides mothers with a supplement
     as well from pregnancy until the baby is 6 months old. Receipt of the
     food requires the mother's participation in improved health and
     nutritional services, which include a Behavior Change Communications
     program oriented toward improving family nutritional status and how the
     infant and young child is cared for. A careful evaluation in Haiti
     documented that the PM2A was both successful and cost effective in
     reducing chronic malnutrition (stunting), wasting and underweight in
     Haiti when compared with a similar maternal and child health and
     nutrition program that used the traditional food aid approach of
     providing supplementary feeding only to already malnourished children
     as part of their recuperation.
        As a result of this study, World Vision and the other two grantees
     in Haiti are scaling up the use of the PM2A approach to the entire
     population of Haiti benefiting from FFP non-emergency support. World
     Vision has also incorporated the use of the PM2A approach into its new
     multi-year program beginning in FY 2008 in Afghanistan.
        See: Marie T. Ruel, et al. ``Age-based Preventive Targeting of Food
     Assistance and Behavior Change and Communication for Reduction of
     Childhood Malnutrition in Haiti: A Cluster Randomized Trial.'' The
     Lancet 371 (Feb. 16, 2008): 588-595.
    ------------------------------------------------------------------------

        Food for Peace Title II: Non-Emergency Program Highlights

        The following examples illustrate the breadth of Title II non-
    emergency food resources implemented by grantees as well as how these
    activities have helped in allaying food insecurity and fostering self-
    sufficiency.

        Burkina Faso

        Africare, a USAID grantee, was awarded the Government of Burkina
    Faso's highest honor in 2008 for the achievements of its Zondoma Food
    Security Initiative, which reached all 104 villages in the northern
    province of Zondoma, a highly food-insecure region. Africare was the
    only PVO to receive the award, Chevalier de l'Ordre National. Funded
    through Title II of the Food for Peace Act, the initiative benefited
    160,000 people by promoting diversified crop production and employment
    opportunities, improving household nutrition, educating about HIV/AIDS
    prevention and providing nutritional support to HIV/AIDS-affected
    households. Food security in Zondoma province is threatened by factors
    including low rainfall, high levels of infant morbidity and out-
    migration of workers.

        Bangladesh

        USAID contributed 64,500 MT of commodities valued at $47.8 million
    to non-emergency Title II programs in Bangladesh in FY 2008.
        Save the Children Federation has been implementing a Title II
    development program called Jibon-O-Jibika (Life and Livelihoods) in
    three coastal districts of south-central Bangladesh since October 2004.
    The program includes interventions to increase household food
    availability and access, enhance maternal and child health and
    nutrition and improve community disaster preparedness. The selected
    costal areas are considered highly vulnerable due to high malnutrition
    rates and their geographical location in the cyclone belt of
    Bangladesh, which means they are constantly threatened by natural
    disasters. An assessment of disaster preparedness and response
    conducted in the Jibon-O-Jibika areas of operation in FY 2008 found
    that cyclone warning awareness has increased substantially during the
    course of the program's activities. Nearly 100 percent of inhabitants
    in the areas had received cyclone warning messages prior to Cyclone
    Sidr in November 2007, a significant improvement from 2005, when a
    baseline assessment showed that warnings were reaching only 19 to 51
    percent of households in the targeted communities. As a result of
    improved cyclone warning, many households successfully evacuated before
    Cyclone Sidr, and some were able to use cyclone shelters in their
    communities.
        A 5 year program implemented by CARE--Strengthening Household
    Ability to Respond to Development Opportunities (SHOUHARDO)--is
    reaching more than 407,000 vulnerable households in 2,205 villages and
    137 urban slums with activities aimed at sustainably reducing chronic
    and transitory food insecurity. One significant SHOUHARDO activity is a
    flood early warning system called the Climate Forecast Application in
    Bangladesh, which is being developed by a consortium including the
    Georgia Institute of Technology, the National Center for Atmospheric
    Research and the Asian Disaster Preparedness Center. The first tier of
    this system, which provides a 10 day warning of impending floods, was
    completed, tested and handed over to the Bangladesh Water Development
    Board in FY 2008. Test results indicated a reliability level of more
    than 90 percent.

        Haiti

        USAID contributed 44,400 MT of Title II non-emergency food aid
    valued at $34.2 million to Haiti in FY 2008. USAID's grantees in Haiti
    work with the poorest of the poor to increase food production, improve
    health and nutrition, increase livelihoods and household incomes, and
    provide a food safety net for the most vulnerable people in the
    population. FFP's non-emergency programs were critical in a year when
    Haiti was hit by dramatic food and fuel price increases and three
    hurricanes in quick succession.
        In addition to providing support for agricultural activities and
    emergency food distribution following the hurricanes, ACDI/VOCA
    developed an early warning system to monitor slow-onset disasters in 34
    communities in southeastern Haiti, collecting rainfall and food price
    data in order to mitigate the effects of drought and price shocks.
        Catholic Relief Services trained 525 farmers in soil and water
    conservation techniques and nursery management, and helped farmers
    establish 36 demonstration plots in southwestern Haiti to evaluate
    improved varieties of bean, corn and cassava.
        Non-emergency programs in Haiti also included activities that
    promoted maternal and child health. World Vision fully vaccinated
    nearly 7,500 children under age 5, provided prenatal and postnatal
    health services for more than 6,500 women, and provided an average of
    nearly 22,000 monthly food rations to approximately 88,000 children,
    pregnant and lactating women, and people living with AIDS.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Primary school students Jayrin Munoz Videa, left, and Carla
            Antonieta Maradiaga, right, eating lunch provided by
            International Food Relief Partnership grantee Fabretto
            Children's Foundation at Mama Margarita School in Somoto,
            Nicaragua. Photo: Rafael I. Merchan, Fabretto Children's
            Foundation.

          c. International Food Relief Partnership

        In November 2000, the U.S. Congress passed the International Food
    Relief Partnership (IFRP) Act. This law enables USAID to award grant
    agreements to eligible U.S. nonprofit organizations to produce and
    stockpile shelf-stable, pre-packaged commodities. Through the IFRP
    program, commodities are made available to eligible nonprofit U.S.
    organizations and international organizations for transportation,
    delivery and distribution in emergency food aid relief programs.
        In FY 2008, the Office of Food for Peace awarded approximately $8
    million in Title II IFRP supplier and distribution grants. The
    program's primary supplier, Breedlove Dehydrated Foods, produced a
    micronutrient-fortified, dried vegetable soup mix which is used as a
    meal supplement for humanitarian relief operations overseas. Over the
    course of the year, 30 IFRP distribution grants were awarded to 27
    nonprofit U.S.-based organizations, which distributed the commodity to
    beneficiaries in 30 countries. A list of these countries is provided in
    Appendix 2, List of Grantees.

        3. Title III: Food for Development

        The Food for Peace Title III program is a USAID-administered tool
    for enhancing food security and supporting long-term economic
    development in the least-developed countries. The U.S. Government
    donates agricultural commodities to the recipient country and funds
    their transportation to the point of entry in the recipient country.
    These commodities are sold on the domestic market and the revenue
    generated from their sale is used to support and implement economic
    development and food-security programs. Funds were not appropriated for
    Title III in FY 2008.

        4. Title V: John Ogonowski and Doug Bereuter Farmer-to-Farmer
            Program

        The John Ogonowski and Doug Bereuter Farmer-to-Farmer (FTF) Program
    provides voluntary technical assistance to farmers, farm groups and
    agribusinesses in developing and transitional countries to promote
    sustainable improvements in food processing, production and marketing.
    The program relies on the expertise of volunteers from U.S. farms,
    land-grant universities, cooperatives, private agribusinesses and
    nonprofit farm organizations to respond to the local needs of host-
    country farmers and organizations. Volunteers are recruited from all 50
    states and the District of Columbia. In general, these volunteers are
    not overseas development professionals, but rather individuals who have
    domestic careers, farms and agribusinesses or are retired persons who
    want to participate in development efforts. Typically volunteers spend
    about 20 to 30 days in the host country.
        The FTF Program was initially authorized by Congress in the Food
    Security Act of 1985 and funded through Title V of the Agricultural
    Trade Development and Assistance Act of 1954. The U.S. Congress
    authorized the current FY 2009-2013 phase of the FTF Program in the
    2008 Food for Peace Act, designating it the ``John Ogonowski and Doug
    Bereuter Farmer-to-Farmer Program'' in honor of Ogonowski, one of the
    pilots killed on September 11, 2001, and former Congressman Bereuter,
    who initially sponsored the program.

        Title V: FTF Highlights

                 Farmer-to-Farmer Volunteer Assignments: FY 2008
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                                Angola                                5
                              Ethiopia                               22
                                 Ghana                                6
                                Guinea                                7
                                 Kenya                               14
                                Malawi                               11
                                  Mali                                5
                            Mozambique                                6
                               Nigeria                                1
                          South Africa                               37
                                Uganda                               22
                                Zambia                               12
                                              ------------------------------
      Subtotal Africa........................                       148
                                              ------------------------------
                               Bolivia                                1
                           El Salvador                                8
                             Guatemala                                7
                                Guyana                               17
                                 Haiti                               25
                              Honduras                               13
                               Jamaica                               32
                             Nicaragua                                4
                                  Peru                                1
                                              ------------------------------
      Subtotal Latin America--Caribbean......                       108
                                              ------------------------------
                               Armenia                               18
                            Azerbaijan                               16
                               Belarus                               17
                               Georgia                                8
                               Moldova                               31
                                Russia                               81
                               Ukraine                               49
                                              ------------------------------
      Subtotal Europe-Eurasia................                       220
                                              ------------------------------
                            Bangladesh                                9
                                 India                                4
                             Indonesia                                2
                                 Nepal                                5
                            Kazakhstan                               20
                            Kyrgyzstan                               33
                            Tajikistan                               21
                          Turkmenistan                               18
                               Vietnam                                1
                                              ------------------------------
      Subtotal Asia-Near East................                       113
                                              ==============================
        Total................................                       589
    ------------------------------------------------------------------------

        During FY 2008, USAID provided $9.8 for FTF programs of eight
    implementing agencies. The FTF programs funded a total of 589 volunteer
    assignments in 37 countries. Volunteers provided developing country
    host organizations with technical assistance services with an estimated
    value of more than $6.3 million. Volunteer efforts helped hosts
    mobilize $11.3 million in grants and loans. In addition, volunteers
    provided direct formal training to 22,822 beneficiaries (of which 45
    percent were women). The following examples illustrate the types of
    activities undertaken by the FTF program:

        FTF volunteer Larry Swalheim helps strengthen the cooperative and
    lifts members' spirits:

        In April 2008, FTF volunteer Larry Swalheim visited the Farmer
    Cooperative in Ukraine to work with its members on cooperative service
    development. As the Chief Executive Officer of Landmark Cooperative in
    Wisconsin, Mr. Swalheim is very familiar with a diverse set of products
    and services, including animal feed production, petroleum marketing and
    sales of fertilizer and seeds. During his work with the Farmer
    Cooperative, Mr. Swalheim was able to draw on his extensive experience
    to teach the cooperative's members methods of strengthening their
    organization and improving services to farmer members. During his
    assignment, Mr. Swalheim conducted seven seminars in six towns.

        FTF Volunteer Strengthens Broiler Processing Value-chain in
    Bangladesh:

        Bangladesh Broiler Processing Center (BBPC), an agro-enterprise of
    BRAC, the largest PVO in Bangladesh, was established as a semi-
    automatic broiler processing facility in 2003 in Tongi/Gazipur, near
    Dhaka. BBPC faced numerous challenges--lack of hygienic processing;
    lack of adequate freezing, storage and transportation facilities; and
    inefficient cooling and refrigeration systems.
        In May 2005 and September 2006, the FTF Program fielded Dr. Omar
    Oyarzabal, a highly experienced broiler processing specialist, to help
    improve BBPC's processing facilities and upgrade staff technical and
    management capabilities. Based on his recommendations, BBPC instituted
    many important modifications to the plant's technical facilities to
    bring about tangible improvements in the entire broiler processing
    value chain. Notable among them were:

       Installed a new blast freezing system to significantly
            enhance carcass freezing efficiency;

       Improved air-conditioning of the processing and grading
            spaces to maintain room temperatures below 15 Celsius;

       Upgraded freezer and chiller rooms to allow more space to
            hold the processed products before refrigeration; and

       Improved maintenance of chill tanks and made changes in the
            practices of carcass storage.

        In 2008, an analysis was conducted to determine the impact of the
    FTF volunteer assistance. It was found out that as an outcome of these
    important improvements, production of processed broiler meat has
    increased by 63 percent (from 80 MT/month to 130 MT/month) as of August
    2008; monthly gross value of sales has increased by 128 percent (from
    $148,235 to $338,382); and monthly average net income has increased by
    97 percent (from $16,471 to $32,500).
    B. Section 416(b) of the Agriculture Act of 1949: Surplus Commodities
        The Agricultural Act of 1949 authorizes the donation by USDA of
    surplus food and feed grain owned by the CCC. Section 416(a) authorizes
    surplus food assistance to be distributed domestically and surplus food
    shipped to developing countries for assistance programs is covered
    under Section 416(b). Surplus commodities acquired by the CCC as a
    result of price-support operations may be made available under Section
    416(b) if they cannot be sold or otherwise disposed of without
    disrupting price-support programs or at competitive world prices. These
    donations are prohibited from reducing the amounts of commodities
    traditionally donated to domestic feeding programs or agencies, from
    preventing the fulfillment of any agreement entered into under a
    payment-in-kind program or from disrupting normal commercial sales.
        In FY 2008, no commodities were made available by CCC, and
    consequently, no donations were made under the program.
    C. Food for Progress
        The USDA-administered Food for Progress Program, authorized under
    the Food for Progress Act of 1985, assists developing countries,
    particularly emerging democracies ``that have made commitments to
    introduce or expand free enterprise elements in their agricultural
    economies through changes in commodity pricing, marketing, input
    availability, distribution and private sector involvement.'' The
    program authorizes the CCC to carry out the sale and exportation of
    U.S. agricultural commodities on credit terms or on a grant basis, with
    the use of either CCC financing or Food for Peace Title I funds.
    Agreements for Food for Progress are awarded to governments or PVOs,
    nonprofit agriculture organizations, cooperatives, intergovernmental
    organizations or other private entities.
        The 2008 Farm Bill extended the authority for the Food for Progress
    Program to provide assistance in the administration and monitoring of
    food assistance programs to strengthen private-sector agriculture in
    recipient countries through FY 2012. The CCC is authorized to use $15
    million for administrative costs under the grants and $40 million for
    transportation expenses.

        1. CCC-funded Food for Progress Highlights

        In FY 2008, CCC funding financed the purchase and shipment of
    199,600 MT of commodities to 15 countries, with an estimated value of
    $162 million. The summaries below provide examples of CCC-funded Food
    for Progress agreements signed in FY 2008.

       Afghanistan: USDA donated 12,500 MT of wheat to Roots of
            Peace (ROP), a PVO, for use in Afghanistan. ROP will use
            proceeds from the sale of the wheat in Afghanistan to assist
            approximately 14,400 farmers expand horticultural production in
            Afghanistan. ROP aims to accomplish this by helping plant new
            orchards and providing extension support for fruit and nut tree
            farmers; expanding grape production by establishing grape vine
            nurseries, upgrading vineyards through trellising and providing
            extension support for grape farmers; providing post-harvest
            training, services and facilities to farmers; providing
            training to farmers in literacy, numeracy, business, marketing
            and financial management; and establishing a line of credit
            with a local financial institution to provide loans to eligible
            farmers and merchants. Fruits and nuts are among the most
            valuable agricultural exports of Afghanistan. The opportunity
            to expand horticultural production by converting existing
            irrigated grain fields into high market-value fruit and nut
            production represents the most practical way of increasing farm
            incomes and focusing production away from illicit crops.

       Ethiopia: USDA donated 20,000 MT of wheat to ACDI/VOCA, a
            PVO, for use in Ethiopia. Proceeds from the sale of the wheat
            will be used to develop the animal feed industry, thereby
            increasing profitability for smallholder livestock owners and
            pastoralists. Activities include feed formulation and
            manufacturing, feedlot management and forage production and
            strengthening the feed distribution channel. The program will
            benefit more than 72,000 livestock owners, including 53,300
            cooperative member farmers and 19,300 pastoralists.
            Approximately half of Ethiopia's population lives in poverty,
            while another 15 percent is extremely susceptible to poverty as
            a result of drought and other shocks. With an estimated 40.9
            million cattle and 37 million sheep and goats, the livestock
            sector is one of Ethiopia's key agricultural industries,
            contributing 30 to 35 percent of agricultural gross domestic
            product and 15 to 18 percent of total export earnings and
            employs a third of Ethiopia's rural population.

       The Gambia, Guinea-Bissau and Senegal: USDA donated 4,500 MT
            of vegetable oil to International Relief and Development, Inc.
            (IRD), a PVO, for use in The Gambia, Guinea-Bissau and Senegal.
            Lying within the drought-prone Sahel region, these countries
            have fragile ecosystems and unstable climates and the regional
            effects of protracted civil conflict increases vulnerability to
            food insecurity. IRD will sell the vegetable oil in The Gambia
            and use the proceeds to assist cashew farmers in The Gambia,
            southern Senegal and northern Guinea-Bissau. Activities include
            capacity building of cashew farmer associations, increasing the
            productivity and quality of cashews, adding value through
            processing and increasing local consumption of cashews. IRD
            seeks to increase yield by 60 percent and farmer income by 50
            percent; 100,000 farmers will benefit from this program.

       Honduras: USDA donated 8,800 MT of soybean meal to
            TechnoServe, a PVO, for use in Honduras. TechnoServe will sell
            the commodity in Honduras and use the proceeds to assist 750
            smallholder farmers diversify production by integrating
            jatropha with other high-value products like fine cocoa, roots
            and tubers and dairy. The program will help agribusinesses
            access export markets, raise incomes for smallholder farmers,
            reforest degraded lands, rehabilitate soils and reduce erosion
            and supply the demand for raw materials to produce
            competitively priced biodiesel. Over 3 years, small producers
            in the program will earn $3 million in incremental annual
            sales, improving living standards for 4,000 rural poor. Despite
            the fact that Honduras has made important gains in liberalizing
            its economy (it is ranked as having one of the most open
            economies in Central America and has favorable year-round
            growing conditions) Honduran agricultural producers remain
            mired in poverty, with nearly 70 percent of the rural
            population engaged in subsistence farming. Per capita income is
            $1,121 and 63 percent of the population lives in poverty.

       Niger: USDA donated 2,410 MT of vegetable oil to Catholic
            Relief Services (CRS), a PVO, for use in Niger. CRS will sell
            the commodity and use the proceeds over 3 years to carry out a
            program to increase production, processing and marketing of
            sesame, okra, onion and other vegetables in approximately 60
            villages, all in the western region of the country. The project
            will enhance private sector development and give producers the
            ability to support their financial needs through the sale of
            locally grown agricultural commodities in national and
            international markets. The project will assist 8,000 recipients
            directly and benefit another 32,000 indirectly.
    D. McGovern-Dole International Food for Education and Child Nutrition
            Program
        An estimated 120 million children around the world do not attend
    school, due in part to hunger or malnourishment. The majority of them
    are girls. Following the success of the Global Food for Education
    Initiative, created in July 2000, the United States has demonstrated
    its continued commitment to education and child nutrition with the 2008
    Farm Bill's re-authorization of the McGovern-Dole International Food
    for Education and Child Nutrition Program (FFE) through FY 2012.
        Modeled on the U.S. Government's school meals program, the FFE
    program is named in honor of former Senators George McGovern and Robert
    Dole for their tireless efforts to promote education and school
    feeding. The FFE program uses U.S. commodities and financial assistance
    to provide incentives for children to attend and remain in school, as
    well as to improve child development through nutritional programs for
    women, infants and children under age 5. In FY 2008, the FFE program
    provided more than 125,500 MT of commodities to support child nutrition
    and school feeding programs in 17 countries, the total value of which
    exceeded $99 million. The following are examples of new FFE programs
    that were funded in FY 2008:

       Bangladesh: Bangladesh has the third-highest number of
            hungry poor in the world after India and China. The estimated
            gross enrollment rate of pre-primary children (aged 4-5 years)
            in Bangladesh is 23 percent for boys and 26 percent for girls,
            which is low in comparison to other Asian countries in the
            region. Additionally, economic hardship forces parents to keep
            their children at home for domestic and paid work. To increase
            relief in this region, USDA signed an FFE agreement with WFP to
            donate 30,000 tons of wheat. WFP will directly distribute the
            wheat in the form of fortified biscuits to 350,000 students. In
            addition to direct feeding, this program will include
            activities to enhance awareness of nutrition and education
            issues among children, parents, teachers and School Management
            Committees; de-worming; hygiene, sanitation and nutrition
            counseling; and HIV/AIDS education.

       Ethiopia: Food insecurity is very prevalent in Ethiopia and
            is demonstrated by widespread chronic malnutrition resulting
            from inadequate dietary intake, inadequate health
            infrastructure and limited access to education. As a result,
            Ethiopia has one of the most nutritionally deprived populations
            in the world and the large number of children not in school is
            linked to physical and psychological impairments resulting from
            malnutrition in early childhood. Though improvement has been
            observed in the past in regard to enrollment, the enrollment
            rate in emerging pastoralist regions such as Somali and Afar is
            still very low, with 30.3 percent and 21.9 percent
            respectively, compared to the national average gross enrollment
            rate of 85.8 percent. To help ease this situation, USDA donated
            7,020 MT of corn-soy blend and 1,600 MT of vegetable oil to
            WFP, which will use the food to feed 160,000 students in
            pastoralist regions.

       Guatemala: Guatemala is a post-conflict, poor, multi-ethnic
            nation with a population of 12 million. According to UNICEF,
            31.5 percent of the adult population is illiterate, rising to
            73 percent in the rural Mayan highlands where Asociacion SHARE
            deGuatemala (SHARE) will implement an FFE program. USDA donated
            280 MT of vegetable oil, 560 MT of dark-red kidney beans, 560
            MT of milled rice and 2,400 MT of soybean meal for use in
            Guatemala. SHARE will sell the soybean meal locally and use the
            remainder of commodities to provide daily meals for 72,300
            teachers and children. Take-home rations will benefit another
            18,000 students. In addition to food provisions, the program
            will provide training for teachers, educational materials and
            infrastructure improvements. SHARE will also support
            approximately 300 schools with the supplies and training
            necessary to implement school gardens. The harvest from these
            gardens will provide additional complementary and nutritious
            foods for the daily school snack and will teach students the
            importance of caring for the environment and working as a team.

       Laos: The United States is committed to helping Laos end the
            threat posed by unexploded ordnance and improve education for
            Laotian children in the districts of Mahaxy, Boualapha and
            Ngommalat and in Khammouane Province. Since 2006, with the
            assistance of the Humpty Dumpty Institute (HDI) and IRD, USDA
            has provided 1.3 million nutritious mid-morning snacks of corn
            soy blend and more than 45,000 take-home rations to the
            children and teachers who maintain a monthly school attendance
            rate of 80 percent. As a result of this school-feeding program,
            school enrollment is up 21 percent for girls and 13 percent for
            boys. Over 450 teachers have received training and 110 schools
            have implemented vegetable gardens, rehabilitation projects,
            health-education programs and school kits (pencils and
            notebooks) distributions. In addition, the Mines Advisory Group
            removed more than 2,220 items of unexploded ordnance and
            cleared approximately 200,000 square meters of land and roads.
            This land is now safe for agriculture and travel for school
            children and the community.

       Kyrgyzstan: With Kyrgyzstan's independence after the fall of
            the Soviet Union in 1991 came the collapse of most social
            services, including the education system. Nationwide, primary
            school enrollment has dropped ten percent since 1991. Further,
            many families cannot afford the unofficial costs of a primary
            or preschool education, such as school meals and textbooks and
            elect to send only their sons, not their daughters, to school.
            As a result, school attendance for girls has dropped to nearly
            ten percent lower than for boys. USDA and Mercy Corps
            International (MCI) signed an FFE agreement for 200 MT of wheat
            flour, 150 MT of rice and 150 MT of soybean oil to implement a
            12 month school feeding program in all 40 rural regions of the
            Kyrgyz Republic. The program's goal is to empower communities
            and government toward sustained, improved educational
            achievement in schools in the most underserved educational
            institutions, through food distribution to 30,000 students.
            Additionally, MCI will undertake school infrastructure projects
            and provide educational grants to school children.

       Mozambique: Mozambique has more than 1.5 million orphans,
            close to 400,000 of whom are AIDS orphans. Many of these
            children face grave difficulties in surviving, often making
            school attendance impossible because they are needed for income
            generation, food production or care for their siblings. USDA
            signed an FFE agreement with Joint Aid Management (JAM), a PVO,
            for the donation of 2,100 MT of corn-soy blend and 3,790 MT of
            milled rice. JAM will use the commodities to provide a daily
            nutritional meal to 113,000 students and take-home rations to
            16,000 girls and 2,200 cooks. JAM's program also includes
            training seminars and infrastructure development, as well as
            the establishment of school gardens.

       Rwanda: Chronic food insecurity, frequent drought and
            structural poverty seriously reduce opportunities for children
            in many parts of Rwanda to complete primary education. Lack of
            food prevents many children from enrolling in school, forces
            them to be frequently absent and reduces their learning ability
            and academic performance. Although primary net enrollment has
            increased from 73 percent in 2002 to 92 percent in 2005, pupil
            to teacher ratios have increased and the availability of
            teaching and learning materials and infrastructure has not kept
            pace with enrollment. As a result, examination pass rates have
            declined and the primary completion rate has stagnated. To
            combat this, USDA signed an FFE agreement with WFP to donate
            18,360 MT of cornmeal, 4,860 MT of beans and 1,620 MT of
            vegetable oil. WFP will directly distribute these commodities
            to 300,000 students in 12 food-insecure, drought-prone
            districts in the eastern and southern provinces of Rwanda that
            show low overall rates of primary enrollment and low attendance
            of schoolchildren. WFP will also conduct school infrastructure
            projects and supply kitchen equipment, health related equipment
            and agricultural tools to schools.
    E. Bill Emerson Humanitarian Trust
        The Bill Emerson Humanitarian Trust (BEHT) is a food reserve
    designed to hold up to 4 million MT of wheat, corn, sorghum and rice
    administered under the authority of the Secretary of Agriculture. When
    an unanticipated emergency arises that cannot be met with Food for
    Peace Act resources, the Secretary of Agriculture may authorize the
    release of commodities from the reserve in order to meet those
    immediate needs. Each year, 500,000 MT may be released, plus up to
    another 500,000 MT that was not released in prior years.
        The reserve was originally authorized by the Agricultural Trade Act
    of 1980 as the Food Security Wheat Reserve and was later broadened to
    include a number of other commodities. In 1998, the reserve was renamed
    the Bill Emerson Humanitarian Trust.
        In FY 2008, USDA converted wheat in the trust into cash.
    III. Appendices

                        Appendix 1: List of Abbreviations
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                       BBPC   Bangladesh Broiler Processing Center
                       BEHT   Bill Emerson Humanitarian Trust
                        CCC   Commodity Credit Corporation
                        CSB   Corn Soy Blend
                   FEWS NET   Famine Early Warning System Network
                        FFE   McGovern-Dole International Food for Education
                               and Child Nutrition Program (formerly Global
                               Food for Education Initiative)
                        FFP   Office of Food for Peace (USAID)
         Food for Peace Act   U.S. Food for Peace Act (formerly P.L. 480)
                        FTF   Farmer-to-Farmer Program of Food for Peace
                               Act, Title V
                         FY   Fiscal year
                        HIV   Human Immunodeficiency Virus
                       IFRP   International Food Relief Partnership
                         MT   Metric ton
                     PEPFAR   President's Emergency Plan for AIDS Relief
                       PM2A   Preventing Malnutrition in Children Under Two
                               Approach
                        PSC   Personnel Services Contract
                       PSNP   Productive Safety Net Program (Ethiopia)
                        PVO   Private voluntary organization
                        RFI   Request for Information
                        RFP   Request for Proposal
                     UNICEF   United Nations Children's Fund
                      USAID   U.S. Agency for International Development
                       USDA   U.S. Department of Agriculture
                        WFP   United Nations World Food Program
    ------------------------------------------------------------------------

                          Appendix 2: List of Grantees
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
        The following grantees implemented U.S. Government food assistance
                       programs in Fiscal Year 2008:
    ------------------------------------------------------------------------
                  ACDI/VOCA   Agriculture Cooperative Development
                               International/Volunteers in Overseas
                               Cooperative Assistance
                       ADRA   Adventist Development and Relief Agency
                               International, Inc.
                   Africare   Africare
                       CARE   Cooperative for Assistance and Relief
                               Everywhere, Inc.
                       CNFA   Citizens' Network for Foreign Affairs
                        CPI   Counterpart International
                        CRS   Catholic Relief Services
                       FFPI   Food for the Poor, Inc.
                        FHI   Food for the Hungry International
                Florida A&M   Florida A&M University
                        GoA   Government of Afghanistan
                          GLIMGlobal Impact, Inc.
                        HDI   The Humpty Dumpty Institute
                       IPHD   International Partnership for Human
                               Development
                        IRD   International Relief and Development, Inc.
                           LOLLand O'Lakes
                           LWMLegacy World Missions
                        MCI   Mercy Corps International
                       NOAH   NOAH Project
                        NPA   Norwegian People's Aid
                       OICI   Opportunities Industrialization Centers
                               International Partners of the Americas
                        PCI   Project Concern International
                        PFD   Partners for Development
                       REST   Relief Society of Tigray
                        ROP   Roots of Peace
                        SCF   Save the Children Federation
                     SCF-UK   Save the Children UK
                      SHARE   SHARE Guatemala
                       TAMU   Texas A&M University
                         TS   TechnoServ
                      UMCOR   United Methodist Committee on Relief
                        VSU   Virginia State University
                        WFP   United Nations World Food Program
                    Winrock   Winrock International
                       WVUS   World Vision US
    ------------------------------------------------------------------------
        The following organizations served as grantees with the Title II-
     Funded International Food Relief Partnership in Fiscal Year 2008:
    ------------------------------------------------------------------------
                        ACT   ACTS International
                         AI   Amigos Internacionales
                        BRA   Batay Relief Alliance
                         BC   Bless the Children
                        CRS   Catholic Relief Services
                        CIH   Center for International Health
                        CBU   Church for Bible Understanding
                   Citihope   Citihope International
                         CH   Convoy of Hope
                  Coprodeli   Coprodeli
                        CPI   Counterpart International
                        EIM   Evangelistic International Ministry
                        FCF   Fabretto Children's Foundation
          Feed the Children   Feed the Children
               Haiti Vision   Haiti Vision
                        IRD   International Relief and Development/Cambodia
                        IRT   International Relief Teams
                        JAM   Joint Aid Management
                         MM   Medical Missionaries
                    Nascent   Nascent Solutions
                         PA   Planet Aid
                        PCI   Project Concern International
                         PH   Project Hope
             Salvation Army   Salvation Army World Service
                       SERV   Serv Ministries
                        RPX   The Resource and Policy Exchange
                     Uplift   Uplift International
                         WH   World Help
    ------------------------------------------------------------------------

                       Appendix 3: USDA Title I Program: Food for Progress Grants_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                         Beneficiaries                   Total Cost
        Country           Grantee                 Commodity                  (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Tajikistan                     WFP  Vegetable Oil, Wheat Flour                    65         6,870        $7,998
    East Timor                     WFP  Vegetable Oil, Rice, Beans,                 36.2         3,610      $4,987.3
                                         Corn Soy Blend
                                                                      ----------------------------------------------
      Sub-Total Asia/Near East                                                     101.3        10,480     $12,985.3
                                                                      ==============================================
        Worldwide Total                                                            101.3        10,480     $12,985.3
    ----------------------------------------------------------------------------------------------------------------

         Appendix 4: USAID Title II Emergency Activities: Summary Budget, Commodity and Tonnage_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                        Recipients *                    Total Cost
        Country          Grantee                 Commodity                 (000s)        Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso                  WFP  Corn Soy Blend, Vegetable                 1,337         2,160       $2,599.80
                                        Oil
    Burundi                       WFP  Corn (bagged), Yellow Peas,                 2.7         7,380       $8,241.20
                                        Vegetable Oil
    Central                       WFP  Cornmeal, Corn Soy Blend,                   597         7,490      $10,122.40
     African                            Vegetable Oil, Yellow Split
     Republic                           Peas
    Cameroon                      WFP  Cornmeal, Corn Soy Blend,                    85         4,830       $5,136.70
                                        Red Beans, Vegetable Oil
    Chad                          WFP  Cornmeal, Corn Soy Blend,              1,590.10     49,970.00      $60,925.90
                                        Rice (bagged), Sorghum
                                        (bulk), Vegetable Oil,
                                        Yellow Split Peas
    Democratic                    FHI  --                                           --            --    ** $2,041.50
     Republic of
     the Congo
                                  WFP  Cornmeal, Corn Soy Blend,                  13.4        42,940      $68,969.10
                                        Green Peas, Green Split
                                        Peas, Pinto Beans,
                                        Vegetable Oil, Yellow Split
                                        Peas
    Djibouti                      WFP  Corn Soy Blend, Lentils,                  137.2         2,360       $2,735.00
                                        Vegetable Oil, Wheat Flour
    Ethiopia                     CARE  Hard Red Winter Wheat,                    904.8        36,620      $29,309.40
                                        Lentils, Sorghum (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
                                  CRS  Bulgur, Corn Soy Blend, Hard              615.9       116,570         $83,563
                                        Red Winter Wheat, Rice
                                        (bagged), Sorghum (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
                                  FHI  Green Peas, Hard Red Winter               580.3        37,890      $28,482.30
                                        Wheat, Sorghum (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
                                 REST  Hard Red Winter Wheat,                 1,767.40       100,270      $75,147.90
                                        Sorghum (bulk), Vegetable
                                        Oil, Yellow Peas, Yellow
                                        Split Peas
                                  SCF  Green Split Peas, Hard Red                254.6         9,150       $8,056.50
                                        Winter Wheat, Vegetable Oil
                               SCF-UK  Hard Red Winter Wheat,                    863.2        54,800      $42,364.20
                                        Lentils, Sorghum (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
                                  WFP  Corn Soy Blend, Green Peas,                 350       266,960     $202,638.40
                                        Hard Red Winter Wheat,
                                        Lentils, Sorghum (bulk),
                                        Vegetable Oil, Wheat Flour,
                                        Yellow Peas, Yellow Split
                                        Peas
                                 WVUS  Hard Red Winter Wheat,                    200.9        10,660       $8,692.60
                                        Vegetable Oil, Yellow Peas
    The Gambia                    WFP  Rice (bagged)                              13.5           680         $577.00
    Kenya                         WFP  Bulgur, Cornmeal, Corn Soy             1,357.00     61,230.00      $64,633.30
                                        Blend, Vegetable Oil, Wheat
                                        Flour, Yellow Split Peas
    Liberia                       WFP  Bulgur, Vegetable Oil                       767         1,460       $1,741.60
    Mali                          WFP  Corn Soy Blend                              210         1,540       $1,647.40
    Mauritania                    WFP  Corn Soy Blend, Hard Red                  678.8        11,620      $11,552.30
                                        Winter Wheat, Soft Red
                                        Winter Wheat, Vegetable Oil
    Mozambique                    WFP  Cornmeal                                    5.5         3,190       $2,793.40
    Niger                         WFP  Cornmeal, Corn Soy Blend,                   5.8        11,080      $13,060.80
                                        Rice (bagged), Vegetable
                                        Oil
    Rwanda                        WFP  Cornmeal, Corn Soy Blend,              1,627.50         3,340       $3,830.40
                                        Kidney Beans, Pinto Beans,
                                        Vegetable Oil
    Somalia                      CARE  Corn Soy Blend, Lentils,                  369.6        81,030      $70,606.00
                                        Sorghum (bulk), Vegetable
                                        Oil, Yellow Peas
                                  WFP  Corn Soy Blend, Green Peas,                17.8       130,290     $126,793.80
                                        Green Split Peas, Lentils,
                                        Sorghum (bulk), Vegetable
                                        Oil, Yellow Peas, Yellow
                                        Split Peas
    Sudan                        ADRA  Lentils, Sorghum (bagged),                 44.1           730         $994.80
                                        Vegetable Oil
                                 CARE  Lentils, Sorghum (bagged),                   14         1,500       $1,466.90
                                        Vegetable Oil
                                  CRS  Corn Soy Blend, Lentils,                  146.3         3,950       $5,782.20
                                        Sorghum (bagged), Vegetable
                                        Oil
                                  NPA  Lentils, Sorghum (bulk),                  208.2         7,140       $9,795.90
                                        Vegetable Oil
                                  WFP  Lentils, Sorghum (bulk),                   49.6       395,090     $494,876.80
                                        Vegetable Oil, Yellow Split
                                        Peas
    Tanzania                      WFP  Cornmeal, Corn Soy Blend,                 733.8        16,900      $14,562.10
                                        Green Peas, Sorghum
                                        (bagged), Soy Fortified
                                        Cornmeal, Yellow Peas
    Uganda                        WFP  Corn Soy Blend, Cornmeal,                  10.9        47,850      $46,283.30
                                        Pinto Beans, Sorghum
                                        (bagged), Sorghum (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
    Zambia                        WFP  Green Split Peas, Sorghum                    91         3,090       $2,806.10
                                        (bagged), Sorghum (bulk),
                                        Yellow Split Peas
    Zimbabwe                      WFP  Bulgur, Green Peas, Pinto              2,234.50     47,900.00      $58,603.80
                                        Beans, Sorghum (bulk),
                                        Vegetable Oil, Yellow Peas
                                 WVUS  Bulgur, Cornmeal, Sorghum                  10.1     42,010.00      $45,261.30
                                        (bulk), Vegetable Oil,
                                        Yellow Peasv
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                       17,894.50     1,621,670   $1,616,695.10
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                   WFP  Green Split Peas, Hard Red                 44.6    141,930.00     $144,843.20
                                        Winter Wheat, Soft White
                                        Wheat, Vegetable Oil, Wheat
                                        Flour, Wheat Flour Bread,
                                        Yellow Peas
    Algeria                       WFP  Corn Soy Blend, Yellow Split                125         5,940       $6,816.10
                                        Peas, Vegetable Oil, Wheat
                                        Flour Bread
    Bangladesh                   CARE  Hard Red Winter Wheat,                       39         9,290       $5,967.10
                                        Yellow Split Peas,
                                        Vegetable Oil
                                  SCF  Hard Red Winter Wheat,                     17.5         8,810       $7,948.90
                                        Yellow Split Peas,
                                        Vegetable Oil
                                  WFP  Soft Red Winter Wheat                      38.9     22,350.00      $17,295.60
                                        (bulk), Vegetable Oil, Rice
                                        (bagged), Rice (bulk),
                                        Yellow Split Peas
    Burma                         WFP  Corn Soy Blend, Garbanzo                  1,749        23,640      $28,063.00
                                        Beans, Rice (bagged),
                                        Vegetable Oil
    East Timor                    WFP  Rice (bagged), Vegetable Oil                105         1,040       $1,150.00
    Iraq                          WFP  Navy Beans, Vegetable Oil,                1,500        17,500      $23,761.60
                                        Wheat Flour
    Nepal                         WFP  Garbanzo Beans, Lentils,                  328.4        15,830      $18,832.80
                                        Rice (bagged), Vegetable
                                        Oil, Yellow Split Peas
    Pakistan                      WFP  Soft Red Winter Wheat,                      132         2,450       $2,551.20
                                        Vegetable Oil
    Sri Lanka                     WFP  Hard Red Winter Wheat                       5.7        31,360      $28,562.90
                                        (bulk), Lentils, Soft White
                                        Wheat (bulk), Vegetable Oil
    Syria                         WFP  Bulgur, Lentils, Navy Beans,              1,086        11,520      $14,031.60
                                        Vegetable Oil
    Yemen                         WFP  Green Peas, Hard Red Winter               115.5      2,540.00       $2,201.30
                                        Wheat, Kidney Beans, Rice
                                        (bagged), Wheat Flour
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                5,286.60       294,200     $302,025.30
    ----------------------------------------------------------------------------------------------------------------
                                                      Central Asia
    ----------------------------------------------------------------------------------------------------------------
    Tajikistan                    WFP  Wheat Flour                               590.8           180         $173.30
                   -------------------------------------------------------------------------------------------------
      Sub-Total Central Asia                                                     590.8           180         $173.30
    ----------------------------------------------------------------------------------------------------------------
                                                     Latin America
    ----------------------------------------------------------------------------------------------------------------
    Colombia                      WFP  Green Peas, Lentils, Pinto                2,315         7,680      $10,628.60
                                        Beans, Vegetable Oil, Wheat
                                        Flour
    Ecuador                       WFP  Hard Red Winter Wheat                      11.7         1,020         $892.90
                                        (bagged)
    Haiti                         CRS  Corn Soy Blend, Cornmeal,                   765         7,880      $10,327.70
                                        Lentils, Sorghum (bagged),
                                        Soy Fortified Bulgur,
                                        Vegetable Oil, Yellow Peas
                                  WFP  Corn Soy Blend, Pinto Beans,                1.4        20,060      $25,001.80
                                        Rice (bagged), Vegetable
                                        Oil, Yellow Peas
                                 WVUS  Cornmeal, Corn Soy Blend,                   294         8,720      $10,002.20
                                        Lentils, Soy Fortified
                                        Bulgur, Vegetable Oil,
                                        Yellow Peas
    Nicaragua                     CRS  Corn Soy Blend, Red Beans,                    5           660       $1,699.40
                                        Rice (bagged), Vegetable
                                        Oil
                                  WFP  Corn Soy Blend, Rice                         80         2,760       $3,294.50
                                        (bagged)
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                 3,472.10        48,780      $61,847.10
                                                                    ------------------------------------------------
      Funding Adjustments (IFRP, PSCs, Prepositioning and CSB                       --            --      $15,664.20
       Mitigation)
                                                                    ================================================
      Worldwide Total                                                           27,244     1,964,830   $1,980,740.80
    ----------------------------------------------------------------------------------------------------------------
    Source: Tonnage, Values and Section 202(e) totals derived from FFP Preliminary Final Budget Summary Report,
      March 11, 2009. Commodities and Recipients derived from Food for Peace Information System report, February 16,
      2009.
    Note: Values include commodities plus freight. Recipients listed as approved in cooperative agreements.
    * Recipient values are reflective of commodity rations and are derived separately from program beneficiary
      totals.
    ** Some programs receive Section 202e and/or ITSH funds without receiving commodities in the same FY. Table does
      not include IFRP activities. See page 18 for specific details.

          Appendix 5: USAID Title II Non-Emergency Activities: Summary Budget, Commodity, Recipient and Tonnage
                                                 Tables_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                        Recipients *                    Total Cost
        Country          Grantee                 Commodity                 (000s)        Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso             Africare  Potatoes (flakes), Rice                     0.8         2,850        $2,929.8
                                        (bagged)
                                  CRS  Lentils, Rice (bagged), Soy               253.4         7,620          $7,094
                                        Fortified Bulgur, Soy
                                        Fortified Cornmeal,
                                        Vegetable Oil
    Burundi                       CRS  Corn Soy Blend, Soy                        58.4         5,510        $4,947.6
                                        Fortified Bulgur, Soy
                                        Fortified Cornmeal, Hard
                                        Red Winter Wheat (bulk),
                                        Vegetable Oil
    Chad                     Africare  Soy Fortified Bulgur, Wheat                20.5         3,410        $4,454.7
                                        Flour Bread
    Democratic                   ADRA  Cornmeal, Hard Red Winter                  14.4         4,910          $3,490
     Republic of                        Wheat (bulk), Vegetable Oil
     the Congo
                                  FHI  Cornmeal, Hard Red Winter                   2.8         3,650        $3,108.3
                                        Wheat (bulk), Vegetable Oil
                                  MCI  Cornmeal, Hard Red Winter                     5         3,180        $3,192.1
                                        Wheat, Vegetable Oil
    Ethiopia                     CARE  Hard Red Winter Wheat,                     24.9         3,210        $3,627.1
                                        Vegetable Oil, Yellow Split
                                        Peas
                                  CRS  Bulgur, Corn Soy Blend, Hard                 45         5,610        $6,314.4
                                        Red Winter Wheat, Lentils,
                                        Rice (bagged), Vegetable
                                        Oil
                                  FHI  --                                           --            --         ** $500
                                 REST  --                                           --            --         ** $768
                                  SCF  Green Split Peas, Hard Red                 76.3         3,650        $4,639.8
                                        Winter Wheat, Vegetable Oil
                               SCF-UK  Hard Red Winter Wheat,                     53.7         6,370        $7,372.4
                                        Vegetable Oil, Yellow Split
                                        Peas
    Ghana                         CRS  Corn Soy Blend, Soy                       223.5         5,650        $4,736.7
                                        Fortified Bulgur, Soy
                                        Fortified Sorghum Grits,
                                        Vegetable Oil
                                 OICI  Soy Fortified Bulgur, Hard                  2.5         2,840        $2,209.5
                                        Red Winter Wheat (bulk)
    Guinea                       OICI  Cornmeal, Green Peas,                       4.3         1,850        $2,992.8
                                        Vegetable Oil
    Kenya                        ADRA  Corn Soy Blend, Dark                       50.3         4,280        $3,571.9
                                        Northern Spring Wheat
                                        (bulk), Vegetable Oil
                                 CARE  Corn Soy Blend, Dark                          5         3,590        $3,096.8
                                        Northern Spring Wheat
                                        (bulk)
                                  FHI  Corn Soy Blend, Dark                       10.6         3,210        $2,753.4
                                        Northern Spring Wheat
                                        (bulk), Green Split Peas,
                                        Soy Fortified Bulgur,
                                        Vegetable Oil
    Liberia                       CRS  Bulgur, Lentils, Vegetable                 36.5         2,730        $7,672.5
                                        Oil
    Madagascar                   ADRA  Corn Soy Blend, Rice                        9.9         1,540        $5,615.8
                                        (bagged), Vegetable Oil
                                 CARE  Corn Soy Blend, Great                        14         1,550        $5,766.5
                                        Northern Beans, Rice
                                        (bagged), Vegetable Oil
                                  CRS  --                                           --            --       ** $368.8
    Malawi                        CRS  Cornmeal, Corn Soy Blend,                   8.3        17,120       $17,874.4
                                        Hard Red Winter Wheat
                                        (bulk), Pinto Beans,
                                        Vegetable Oil
    Mali                     Africare  --                                           --            --         ** $990
                                  CRS  --                                           --            --       ** $989.7
    Mauritania                    CPI  Corn Soy Blend, Hard Red                   32.3         7,610        $4,962.2
                                        Winter Wheat (bulk),
                                        Lentils, Vegetable Oil
    Mozambique                   ADRA  Hard Red Winter Wheat (bulk)                 --         6,440        $4,039.5
                                  FHI  Hard Red Winter Wheat (bulk)                 --         5,430        $3,359.4
                                  SCF  Hard Red Winter Wheat (bulk)                 --        11,580        $7,502.4
                                 WVUS  Hard Red Winter Wheat (bulk)                 --         7,490        $4,964.6
    Niger                    Africare  Corn Soy Blend                             11.5           480        $3,024.5
                                  CPI  --                                           --            --     $2,534.0 **
                                  CRS  --                                           --            --     $7,262.1 **
    Rwanda                  ACDI/VOCA  Corn Soy Blend, Soy                         2.6         1,930        $3,396.3
                                        Fortified Bulgur, Vegetable
                                        Oil
                                  CRS  Bulgur, Corn Soy Blend,                      26         2,370        $3,143.3
                                        Vegetable Oil
                                 WVUS  Corn Soy Blend, Soy                        22.8         2,910        $4,810.5
                                        Fortified Bulgur, Vegetable
                                        Oil
    Senegal                       CPI  Corn Soy Blend, Lentils,                   33.3         5,160        $4,070.2
                                        Rice (bagged), Soy
                                        Fortified Bulgur, Vegetable
                                        Oil
    Sierra Leone                 CARE  Bulgur, Green Peas,                        32.4         3,450        $6,948.5
                                        Vegetable Oil
    Uganda                  ACDI/VOCA  Corn Soy Blend, Hard Red                     42        23,350       $17,576.6
                                        Winter Wheat, Vegetable Oil
                                  CRS  --                                           --            --         ** $350
                                  MCI  Cornmeal, Corn Soy Blend,                   2.4         3,740        $3,498.2
                                        Hard Red Winter Wheat,
                                        Vegetable Oil
                                  SCF  Corn Soy Blend, Hard Red                    4.5         3,980        $3,423.5
                                        Winter Wheat, Lentils, Soy
                                        Fortified Cornmeal,
                                        Vegetable Oil
                                 WVUS  Hard Red Winter Wheat                        --         2,100        $1,517.4
    Zambia                        CRS  Bulgur, Lentils, Sorghum                     15         1,710        $5,431.5
                                        (bulk)
                                  LOL  Hard Red Winter Wheat                        --         3,760        $3,689.2
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                        1,144.90       187,820      $206,580.9
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                  WVUS  Rice (bagged), Vegetable                   11.5         6,820        $9,886.1
                                        Oil, Wheat Flour
    Bangladesh                   CARE  Hard Red Winter Wheat, Hard               103.3        50,740       $36,857.9
                                        Red Winter Wheat (bulk),
                                        Soft White Wheat, Soft
                                        White Wheat (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
                                  SCF  Hard Red Winter Wheat, Hard                 113        13,760       $10,961.5
                                        Red Winter Wheat (bagged),
                                        Soft White Wheat (bulk),
                                        Vegetable Oil, Yellow Split
                                        Peas
    India                        CARE  --                                           --            --     ** $6,872.8
                                  CRS  Bulgur, Vegetable Oil                     555.1         6,730        $6,611.0
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                   782.9        78,050       $71,189.3
    ----------------------------------------------------------------------------------------------------------------
                                                      Latin America
    ----------------------------------------------------------------------------------------------------------------
    Bolivia                      ADRA  --                                           --            --     ** $1,905.3
                                 CARE  --                                           --            --       ** $300.0
                                  FHI  Corn Soy Blend, Green Peas,                47.4           770        $3,215.4
                                        Lentils, Soy Fortified
                                        Bulgur
                                  SCF  Corn Soy Blend, Green Peas,                39.4           780        $3,564.7
                                        Lentils
    Guatemala                     CRS  Corn Soy Blend, Pinto Beans,                 66         3,470        $4,625.7
                                        Rice (bagged), Vegetable
                                        Oil
                                  SCF  Corn Soy Blend, Pinto Beans,               12.8         3,500        $4,628.3
                                        Rice (bagged), Vegetable
                                        Oil
                                SHARE  Corn Soy Blend, Pinto Beans,               16.4         3,810        $4,627.3
                                        Rice (bagged), Vegetable
                                        Oil
    Haiti                   ACDI/VOCA  Corn Soy Blend, Hard Red                      2         6,380        $5,050.5
                                        Winter Wheat, Lentils, Soy
                                        Fortified Bulgur, Vegetable
                                        Oil
                                  CRS  Corn Soy Blend, Hard Red                   35.2        16,175       $11,729.8
                                        Winter Wheat (bulk),
                                        Lentils, Soy Fortified
                                        Bulgur, Vegetable Oil
                                 WVUS  Corn Soy Blend, Hard Red                    202        21,845       $17,456.8
                                        Winter Wheat (bulk),
                                        Lentils, Soy Fortified
                                        Bulgur, Vegetable Oil
    Honduras                     ADRA  Corn Soy Blend, Northern                   45.1         3,770        $3,532.1
                                        Spring Wheat (bulk), Red
                                        Beans, Rice (bagged),
                                        Vegetable Oil
                                  SCF  Corn Soy Blend, Northern                      5         3,660        $3,265.2
                                        Spring Wheat (bulk), Red
                                        Beans, Rice (bagged),
                                        Vegetable Oil
                                 WVUS  Corn Soy Blend, Red Beans,                  8.7         2,250        $3,352.9
                                        Rice (bagged), Vegetable
                                        Oil
    Nicaragua                    ADRA  Corn Soy Blend, Lentils,                   26.3         2,200        $2,268.2
                                        Northern Spring Wheat
                                        (bulk), Rice (bagged),
                                        Vegetable Oil
                                  CRS  Corn Soy Blend, Lentils,                    7.1         2,290        $2,385.3
                                        Northern Spring Wheat
                                        (bulk), Rice (bagged),
                                        Vegetable Oil
                                  PCI  Corn Soy Blend, Lentils,                      4         2,310        $2,363.0
                                        Northern Spring Wheat
                                        (bulk), Rice (bagged),
                                        Vegetable Oil
                                  SCF  Corn Soy Blend, Northern                     34         2,200        $2,247.6
                                        Spring Wheat (bulk)
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                    551.4        75,410       $76,518.1
                                                                    ------------------------------------------------
        Worldwide Total                                                       2,479.20       341,280      $354,288.3
    ----------------------------------------------------------------------------------------------------------------
    Source: Tonnage, Values and Section 202(e) totals derived from FFP Preliminary Final Budget Summary Report,
      March 11, 2009. Commodities and Recipients derived from Food for Peace Information System report, February 16,
      2009.
    * Recipient values are reflective of commodity rations and are derived separately from program beneficiary
      totals.
    ** Some programs receive Section 202(e) and/or ITSH funds without receiving commodities in the same FY.
    Note: Values include commodities plus freight. Recipients listed as approved in cooperative agreements. Some
      programs received Section 202e and/or ITSH funds without receiving commodities.

           Appendix 6: Bill Emerson Humanitarian Trust: Summary Budget, Commodity and Tonnage_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                          Recipients *                   Total Cost
        Country           Grantee                 Commodity                  (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Ethiopia                       WFP  Corn Soy Blend, Sorghum                      3.8        83,380      59,982.1
                                         (bulk), Vegetable Oil
    Kenya                          WFP  Cornmeal, Corn Soy Blend,                    1.2        14,990      17,246.5
                                         Vegetable Oil, Yellow Split
                                         Peas
    Zimbabwe                       WFP  Green Peas, Pinto Beans,                 2,232.2        12,510      18,155.8
                                         Vegetable Oil
                                  WVUS  Bulgur, Cornmeal, Sorghum                    4.1        49,080      54,275.9
                                         (bulk), Vegetable Oil,
                                         Yellow Peas
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           2,241.3       159,960     149,660.3
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                    WFP  Hard Red Winter Wheat,                       6.6        15,590      22,405.3
                                         Vegetable Oil, Yellow Peas
    North Korea                    MCI  Corn (bulk), Corn Soy Blend,               941.2        38,000      23,583.6
                                         Soy Beans (bulk), Vegetable
                                         Oil
                                   WFP  Corn (bulk), Soft White Wheat                5.7       110,270      70,132.3
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     953.5       163,860     116,121.2
                                                                      ==============================================
        Worldwide Total                                                          3,194.8       323,820     265,781.5
    ----------------------------------------------------------------------------------------------------------------
    Source: Tonnage, Values and Section 202(e) totals derived from FFP Preliminary Final Budget Summary Report,
      March 11, 2009. Commodities and Recipients derived from Food for Peace Information System report, March 20,
      2009.
    Note: Values include commodities plus freight. Recipients listed as approved in cooperative agreements.
    * Recipient values are reflective of commodity rations and are derived separately from program beneficiary
      totals.

                          Appendix 7: USDA-CCC Funded_Food for Progress Grants_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                      Beneficiaries *                   Total Cost
        Country          Grantee                 Commodity                 (000s)        Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Ethiopia                ACDI/VOCA  Wheat                                      72.6        20,000       $12,656.1
    The Gambia                    IRD  Vegetable Oil                               800         4,500         $10,000
     Regional
    Malawi                         PA  Wheat                                     252.2        10,000          $5,590
    Mozambique                     PA  Wheat, Textured Soy Protein               145.5        20,070        $9,161.1
                                   TS  Wheat                                        12        10,530        $3,832.9
                                  LOL  Wheat                                     787.2        15,600       $11,883.1
    Liberia                        MC  Soybean Oil                                28.5         2,360        $5,321.8
    Niger                         IRD  Soy Fortified Bulgur                       92.4         1,000          $6,841
                                       Vegetable Oil                                           2,500
                                  CRS  Vegetable Oil                              10.5         2,410        $5,836.2
    Senegal                       CPI  Vegetable Oil                               194         4,260        $7,427.1
    Tanzania                      PFD  Wheat                                        36        15,750       $13,210.5
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           2,431       108,980       $91,759.9
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                   ROP  Wheat Flour                               101.4        12,500       $10,233.8
                                  GoA  Soybean Oil                                  --         5,500       $10,312.5
    Mongolia                      MCI  Wheat                                   1,594.6        25,000         $13,750
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                   1,696        43,000       $34,296.3
    ----------------------------------------------------------------------------------------------------------------
                                                         Europe
    ----------------------------------------------------------------------------------------------------------------
    Armenia                     UMCOR  Soybean Meal                              126.5         6,000        $4,402.5
                   -------------------------------------------------------------------------------------------------
      Sub-Total Europe                                                           126.5         6,000        $4,402.5
    ----------------------------------------------------------------------------------------------------------------
                                                      Latin America
    ----------------------------------------------------------------------------------------------------------------
    Bolivia                       PCI  Lentils                                    50.8           500        $9,418.2
                                       Peas                                                      500
                                       Wheat                                                  15,370
    Guatemala                    TAMU  Soybean Meal                               25.4        15,000          $9,975
    Honduras                       TS  Soybean Meal                                4.1         8,800          $5,588
    Nicaragua                     PCI  Wheat                                      24.5        12,340        $6,771.4
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                    104.7        52,510       $31,752.6
                                                                    ================================================
        Worldwide Total                                                        4,358.2       210,490      $153,050.2
    ----------------------------------------------------------------------------------------------------------------
    * Beneficiary figures are both direct and indirect.

         Appendix 8: McGovern-Dole International Food for Education and Child Nutrition Program_Fiscal Year 2008
                                           Donations by Country and Commodity
    ----------------------------------------------------------------------------------------------------------------
                                                                         Beneficiaries                   Total Cost
        Country           Grantee                 Commodity                  (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Cameroon                       CPI  Beans, Milled Rice, Vegetable                 25         1,130        $3,900
                                         Oil
    Chad                           WFP  Cornmeal, Vegetable Oil                    194.2         4,290        $4,800
    Democratic                    IPHD  Rice, Pinto Beans, Soybean                  70.2         3,970          $600
     Republic of                         Oil
     the Congo
    Ethiopia                       WFP  Corn Soy Blend, Vegetable Oil              160.4         3,910        $4,300
    Kenya                          WFP  Bulgur, Corn Soy Blend, Green              1,100        10,700        $9,900
                                         Split Peas, Vegetable Oil
    Malawi                         WFP  Corn Soy Blend                             437.2         6,280        $6,500
    Mozambique                     JAM  Milled Rice, Wheat Soy Blend                 281         8,510        $6,800
    Rwanda                         WFP  Pinto Beans, Corn Meal,                      300         8,280        $8,300
                                         Vegetable Oil
    Senegal                        CPI  --                                            --            --       ** $100
    Sierra Leone                   CRS  Bulgur, Corn Soy Blend,                     29.5         1,260        $2,900
                                         Lentils, Vegetable Oil
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           2,597.5        48,330       $54,400
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Bangladesh                     WFP  Bulk Wheat                                   350        11,500        $7,800
    Cambodia                       IRD  Small Red Beans, Soybean Oil,               25.6           620        $1,300
                                         Canned Salmon, Corn Soy
                                         Blend
    Laos                           HDI  Black Turtle Beans, Canned                  13.4           660        $3,700
                                         Salmon, Corn Soy Blend,
                                         Milled Rice, Vegetable Oil
                                   WFP  Canned Salmon, Corn Soy                       50         2,240        $3,100
                                         Blend, Rice, Vegetable Oil
    Pakistan                       WFP  Vegetable Oil                              259.0         4,690        $9,900
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     698.0        19,710       $25,800
    ----------------------------------------------------------------------------------------------------------------
                                                      Central Asia
    ----------------------------------------------------------------------------------------------------------------
    Kyrgyzstan                     MCI  Milled Rice, Soybean Oil,                   30.0           500        $2,500
                                         Wheat Flour
                    ------------------------------------------------------------------------------------------------
      Sub-Total Central Asia                                                        30.0           500        $2,500
    ----------------------------------------------------------------------------------------------------------------
                                                      Latin America
    ----------------------------------------------------------------------------------------------------------------
    Guatemala                    SHARE  Corn Soy Blend, Dark Red                    82.8         7,240        $7,600
                                         Kidney Beans, Milled Rice,
                                         Soybean Meal, Vegetable Oil
                                  FFPI  Rice, Light Red Kidney Beans,              210.0        10,200        $7,800
                                         Textured Soy Protein,
                                         Soybean Oil, Buckwheat
                                         Groats, Yellow Corn, Nonfat
                                         Dry Milk, Canned Salmon
    Nicaragua                     GLIM  Small Red Kidney Beans, Corn                13.0           880        $1,200
                                         Meal, Milled Rice
                    ------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                      305.8        18,320       $16,600
                                                                      ==============================================
        Worldwide Total                                                          3,631.3        86,860        99,300
    ----------------------------------------------------------------------------------------------------------------
    ** Senegal CPI--provision of cash in FY 2008 to support multi-year agreement. Commodities were supplied in
      previous year.
    Source: Commodities, Tonnage and Values derived from McGovern-Dole Food for Education signed agreements and
      final budgets.
    Note: Values include commodities plus freight. Beneficiaries listed as approved for direct distribution in
      cooperative agreements.

                       Appendix 9: Food for Peace Title II Congressional Mandates_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                                                    Bagged in United
                            Minimum           Subminimum        Monetization       Value-added           States
    ----------------------------------------------------------------------------------------------------------------
    FY 2008 Target             2,500,000          1,875,000              15.0%              75.0%              50.0%
    Status as of               2,695,133            379,029              66.3%              47.6%              27.2%
     September 2008
    ----------------------------------------------------------------------------------------------------------------
    Minimum: Total approved metric tons programmed under Title II. Metric ton grain equivalent used to report
     against target.s0

    Subminimum: Metric tons for approved non-emergency programs through PVOs and community development organizations
     and WFP. Metric ton grain equivalent used to report against target.

    Monetization: Percentage of approved Title II programs that are monetization programs.

    Value-added: Percentage of approved non-emergency programs that are processed, fortified, or bagged.

    Bagged in U.S.: Percentage of approved non-emergency bagged commodities that are whole grain to be bagged in the
     United States.
    ----------------------------------------------------------------------------------------------------------------
    Source: USAID Bureau for Democracy, Conflict and Humanitarian Assistance, Office of Food for Peace, FY 2008
      Preliminary Budget Summary Overview, March 11, 2009.

            Appendix 10: Countries with Approved U.S. Food Assistance
                            Programs_Fiscal Year 2008

    ------------------------------------------------------------------------
                              Title I (0 countries)
    ------------------------------------------------------------------------
                 Title I--Funded Food for Progress (2 countries)
    ------------------------------------------------------------------------
    East Timor         Tajikistan
    ------------------------------------------------------------------------
                   CCC-Funded Food for Progress (15 countries)
    ------------------------------------------------------------------------
    Afghanistan        Armenia            Bolivia           Ethiopia
    The Gambia         Guatemala          Honduras          Liberia
    Malawi             Mongolia           Mozambique        Nicaragua
    Niger              Senegal            Tanzania
    ------------------------------------------------------------------------
                           Title II  * (48 countries)
    ------------------------------------------------------------------------
    Afghanistan        Algeria            Bangladesh        Bolivia
    Burkina Faso       Burma              Burundi           Cameroon
    Central African    Chad               Colombia          Democratic
     Republic                                                Republic of the
    Congo              Djibouti           East Timor        Ecuador
    Ethiopia           The Gambia         Ghana             Guatemala
    Guinea             Haiti             Honduras         India
    Iraq               Kenya             Liberia           Madagascar
    Malawi            Mali               Mauritania        Mozambique
    Nepal              Nicaragua         Niger             Pakistan
    Rwanda             Senegal           Sierra Leone      Somalia
    Sri Lanka          Sudan              Syria             Tajikistan
    Tanzania          Uganda            Yemen             Zambia
    Zimbabwe
    ------------------------------------------------------------------------
      Title II-Funded International Food Relief Partnership (26 countries)
    ------------------------------------------------------------------------
    Angola             Bolivia            Cambodia          Cameroon
    Democratic         Congo *            Dominican         El Salvador
     Republic of the                       Republic
    Ethiopia *         Georgia            Guatemala         Haiti
    Honduras           India              Indonesia         Kenya
    Kyrgyzstan         Malawi             Nicaragua         Peru
    Philippines        Senegal            South Africa      Tajikistan
    Tanzania           Uganda             Zimbabwe
    ------------------------------------------------------------------------
                             Title III (0 countries)
    ------------------------------------------------------------------------
                    Title V--Farmer-to-Farmer (37 countries)
    ------------------------------------------------------------------------
    Angola             Armenia            Azerbaijan        Bangladesh
    Belarus            Bolivia            El Salvador       Ethiopia
    Georgia            Ghana              Guatemala         Guinea
    Guyana             Haiti              Honduras          India
    Indonesia          Jamaica            Kazakhstan        Kenya
    Kyrgyzstan         Malawi             Mali              Moldova
    Mozambique         Nepal              Nicaragua         Nigeria
    Peru               Russia             South Africa      Tajikistan
    Turkmenistan       Uganda             Ukraine           Vietnam
    Zambia
    ------------------------------------------------------------------------
                  Bill Emerson Humanitarian Trust (5 countries)
    ------------------------------------------------------------------------
    Afghanistan        Ethiopia           Kenya             North Korea
    Zimbabwe
    ------------------------------------------------------------------------
                        Food for Education (17 countries)
    ------------------------------------------------------------------------
    Bangladesh         Cambodia           Cameroon          Chad
    Congo, Republic    Ethiopia           Guatemala         Kenya
     of the
    Kyrgyzstan         Laos               Malawi            Mozambique
    Nicaragua          Pakistan           Rwanda            Senegal
    Sierra Leone
    ------------------------------------------------------------------------
     Represents Title II programs with commodities approved in FY 2008, or
      that remain active with resources allocated in the prior fiscal year.
    * Represents IFRP programs with commodities approved in FY 2007, or that
      remain active with resources allocated in the prior fiscal year.

                 U.S. International Food Assistance Report 2009

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Cover photo: USAID.
    Transmittal to Congress
        Under Food for Peace Act Section 407(f)(1)(A), ``Not later than
    April 1 of each fiscal year, the Administrator [of USAID] and the
    Secretary [of Agriculture] shall jointly prepare and submit to the
    appropriate committees of Congress a report regarding each program and
    activity carried out under this Act during the prior fiscal year.'' As
    required, this report is hereby submitted to Congress.
    April 2010

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            A USAID-supported World Food Program initiative in eastern Sri
            Lanka. USAID.

        This report may be found online:

    USAID Development Experience Clearinghouse
    Telephone: (202) 712-0579
    URL: http://www.dec.org/ and at http://www.usaid.gov
    Table of Contents
    Executive Summary
    Introduction
    I. U.S. International Food Assistance

      A. Bellmon Estimation for Title II (BEST) Project
      B. Title II Non-emergency Food Security Country Frameworks
      C. USAID's Famine Early Warning Systems Network (FEWS NET)
      D. Monitoring and Evaluation (M&E)
      E. Food Aid Quality
      F. Food and Nutrition Technical Assistance (FANTA) Project
      G. Preventing Malnutrition in Children Under Two Approach (PM2A)

    II. Program Descriptions and Fiscal Year 2009 Accomplishments

      A. Food for Peace Act

        1. Title I: Economic Assistance and Food Security
        2. Title II: Emergency and Private Assistance Programs
        3. Title III: Food for Development
        4. Title V: John Ogonowski and Doug Bereuter Farmer-to-Farmer (FTF)
            Program

      B. Section 416(b) of the Agricultural Act of 1949: Surplus
            Commodities
      C. Food for Progress
      D. McGovern-Dole International Food for Education and Child Nutrition
            Program
      E. Bill Emerson Humanitarian Trust (BEHT)
      F. Local and Regional Food Aid Procurement Pilot Project (PPP)

    III. Appendices

      Appendix 1: List of Abbreviations
      Appendix 2: List of Awardees
      Appendix 3: USDA Title I Program: Food for Progress Grants--Fiscal
            Year 2009
      Appendix 4: USAID Title II Emergency Activities: Summary Budget,
            Commodity, Recipient and Tonnage--Fiscal Year 2009
      Appendix 5: USAID Title II Non-Emergency Activities: Summary Budget,
            Commodity, Recipient and Tonnage--Fiscal Year 2009
      Appendix 6: USDA-CCC Funded--Food for Progress Grants--Fiscal Year
            2009
      Appendix 7: McGovern-Dole International Food for Education and Child
            Nutrition Program--Fiscal Year 2009 Donations by Country and
            Commodity
      Appendix 8: Bill Emerson Humanitarian Trust: Summary Budget,
            Commodity, Recipient and Tonnage--Fiscal Year 2009
      Appendix 9: Local and Regional Procurement Pilot Program--Fiscal Year
            2009
      Appendix 10: Food for Peace Title II Congressional Mandates--Fiscal
            Year 2009
      Appendix 11: Countries with U.S. International Food Assistance
            Programs under the FFP Act--Fiscal Year 2009
    Executive Summary
        The United States is committed to the promotion of global food
    security through its international food assistance and other foreign
    assistance programs. In Fiscal Year (FY) 2009, the United States
    provided more than $2.9 billion of food assistance to developing
    countries approximately 2.8 million metric tons, reaching over 70
    million people worldwide. The following summary shows U.S. food
    assistance, by legislative authority, for FY 2009.\1\
    ---------------------------------------------------------------------------
        \1\ All costs represent commodities, freight, and distribution.
    Beneficiary totals for USAID represent beneficiaries reached in FY
    2009. Beneficiary totals for USDA represent planned beneficiary totals
    associated with the FY 2009 award.

    ------------------------------------------------------------------------
                 Program                  Metric Tons      Total Cost (000)
    ------------------------------------------------------------------------
      Food for Progress Title I                14,300           $22,000.0
        Food for Peace Title II             2,396,314        $2,552,061.6
    Food for Development Title III                 --                  --
    Farmer-to-Farmer Program Title                 --           $12,500.0
                              IV
                 Section 416(b)                    --                  --
          Food for Progress CCC               274,230          $215,816.6
                  McGovern-Dole               126,523          $168,414.8
      Procurement Pilot Project                    --            $4,750.0
    Bill Emerson Humanitarian Trust            21,000            $5,638.4
                                     ---------------------------------------
      Grand Total...................        2,832,367        $2,981,181.4
    ------------------------------------------------------------------------

        More than one billion people--nearly \1/6\ of the world's
    population--suffer from chronic hunger. It is a crisis with devastating
    and far-reaching effects. Hunger weakens immune systems and stunts
    child development. Half of all child deaths in the developing world are
    related to undernutrition. Chronic hunger and undernutrition primarily
    result from poverty--people who are poor often simply cannot afford to
    buy food. Hungry families spend over half their income to buy the food
    they need to survive. Food often cannot travel from surplus to deficit
    regions within and across countries because of poor roads, barriers at
    borders and checkpoints along the way. Without enough food, adults
    struggle to work and children struggle to learn, making sustainable
    economic development difficult to achieve.
        Ensuring global food security will only become more challenging in
    the future as demand for food is projected to increase by 50 percent
    over the next 20 years. Increased demand will come primarily from
    population growth in the developing world and income growth in middle-
    income countries. Growth in agricultural productivity, which is already
    lagging globally, also faces increasing threats from climate change,
    scarce water supplies, and competition for energy resources from
    industry and urbanization.
        Addressing these issues will require a whole-of-government
    approach, and the U.S. Agency for International Development (USAID) and
    the U.S. Department of Agriculture (USDA) have been working closely
    with the U.S. State Department and other U.S. Government agencies to
    develop the Administration's new Global Hunger and Food Security
    Initiative, ``Feed the Future.'' The focus and coordination promoted in
    this initiative will strengthen all U.S. Government (USG) food security
    programming, including USG food assistance. By targeting the poorest of
    the poor and better integrating food aid programs into larger--often
    multilateral--efforts, USAID and USDA food assistance programs are
    aiming to improve the effectiveness of food aid and increase its
    contribution to global targets for reducing hunger, malnutrition and
    poverty.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Children receiving USAID-supported food aid in Sudan. USAID.
    Introduction
        Since the passage of Public Law 480 or the Agricultural Trade
    Development and Assistance Act of 1954, U.S. international food
    assistance programs have evolved to address multiple objectives. The
    most recent changes came with the Food for Peace Act of the Food,
    Conservation, and Energy Act of 2008. Commonly known as the 2008 Farm
    Bill, the Food, Conservation, and Energy Act of 2008 restated the
    objectives that guide U.S. food assistance programs. These objectives
    are to:

       Combat world hunger and malnutrition and their causes;

       Promote broad-based, equitable and sustainable development,
            including agricultural development;

       Expand international trade;

       Foster and encourage the development of private enterprise
            and democratic participation in developing countries; and

       Prevent conflicts.
    U.S. International Food Assistance.
        The U.S. international food assistance program was established by
    several legislative authorities and is implemented by two Federal
    agencies. USAID administers Titles II, III and V of the Food for Peace
    Act. USDA administers Section 416(b) of the Agricultural Act of 1949,
    Title I of the Food for Peace Act, Food for Progress, the McGovern-Dole
    International Food for Education and Child Nutrition Program, and the
    Local and Regional Food Aid Procurement Pilot Project. The list below
    provides a brief description of each activity.

        1. Food for Peace Act.

         Title I: Economic Assistance and Food Security--
                concessional sales of U.S. agricultural commodities to
                developing countries and private entities.

         Title II: Emergency and Private Assistance Programs--
                direct donation of U.S. agricultural commodities for
                emergency relief and development.

         Title III: Food for Development--government-to-government
                grants of agricultural commodities tied to policy reform.

         Title V: John Ogonowski and Doug Bereuter Farmer-to-Farmer
                (FTF) Program--voluntary technical assistance to farmers,
                farm groups and agribusinesses.

        2. Section 416(b) of the Agricultural Act of 1949--overseas
            donations of surplus food and feed grain owned by the USDA
            Commodity Credit Corporation (CCC).

        3. Food for Progress Act of 1985--commodity donations or
            concessional financing available to emerging democracies and
            developing countries committed to the introduction or expansion
            of free enterprise in their agricultural economies.

        4. McGovern-Dole International Food for Education and Child
            Nutrition Program--donations of U.S. agricultural products, as
            well as financial and technical assistance, for school feeding
            and maternal and child nutrition projects in low-income
            countries.

        5. Bill Emerson Humanitarian Trust--food reserve administered under
            the authority of the Secretary of Agriculture. This reserve is
            available to meet emergency humanitarian food needs in
            developing countries, allowing the United States to respond to
            unanticipated food crises. Under the 2008 Food for Peace Act,
            the Administrator of USAID oversees the release and use of
            these funds.

        6. Local and Regional Food Aid Procurement Pilot Project (PPP)--
            local and regional purchase of commodities to help meet urgent
            food needs due to food crises and disasters. This program was
            authorized as a 5 year pilot program under the 2008 Farm Bill.

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Beneficiaries of a USAID-supported food aid activity in Malawi.
            USAID.
    I. U.S. International Food Assistance
        U.S. international food assistance has long played a critical role
    in responding to global food insecurity. This tradition continued in FY
    2009, with the USG providing more than 2.8 million metric tons (MT) of
    commodities to more than 70 million beneficiaries and 73 countries
    worldwide.
        In recent years, attention has focused on the continued challenges
    that hamper efforts at reducing global food insecurity. The
    Administration's new Global Hunger and Food Security Initiative, ``Feed
    the Future,'' has been designed to begin to address these challenges,
    including those faced in our food assistance programs. Starting in FY
    2010, coordinated efforts promoted by the initiative will strengthen
    all USG food security programming. USAID and USDA have already made
    significant improvements to better target and monitor their food aid
    programs through a series of new initiatives. USAID's Food for Peace
    (FFP) office's recent 3 year pilot Bellmon Estimation for Title II
    (BEST) Project collects and analyzes data and information from USAID,
    USDA, and other sources to better inform the need, targeting, and
    potential use of food aid commodities. FFP's recent adoption of the
    Preventing Malnutrition in Children Under Two Approach (PM2A) builds on
    research-based successes from targeting this beneficiary category, and
    improves the cost effectiveness, design and content of such programs.
    The recent hiring of additional FFP nonemergency (development) food aid
    program field monitors, meanwhile, increases FFP's ability to analyze,
    monitor and respond to food security and food aid concerns. FFP and
    USDA are also funding efforts aimed at improving the nutritional
    quality and content of food aid to better serve and respond to the
    specific needs of food aid beneficiaries.
    A. Bellmon Estimation for Title II (BEST) Project
        The BEST Project conducts independent market analyses to ensure
    that FFP complies with the Bellmon Amendment, which requires that
    adequate storage facilities be available in a recipient country upon
    arrival of a commodity to prevent spoilage or waste, and that
    distribution of the commodity in the recipient country will not result
    in substantial disincentive or interference with domestic production or
    marketing in that country. The BEST Project is conducting independent
    market analyses to ensure that these requirements are met. Using the
    results of these analyses, FFP, USDA, and other food aid partners are
    better able to target food aid most fully to those countries and
    beneficiaries in need. A number of studies have already been completed
    and can be found at http://www.usaid.gov/our_work/
    humanitarian_assistance/ffp/bellmonana.html.
    B. Title II Nonemergency Food Security Country Frameworks
        In FY 2009, FFP continued to develop Food Security Programming
    Frameworks (FSPF) that define objectives, approaches, geographic foci
    and institutional partnerships for effective use of Title II
    nonemergency resources to reduce food insecurity. The FSPFs provide
    country-specific guidance to partners developing new Title II multi-
    year nonemergency assistance proposals (MYAPs). During FY 2009, FFP and
    respective Regional Bureaus and Missions developed FSPFs for
    Bangladesh, Burkina Faso, Liberia and Sierra Leone. The FSPFs provide a
    broad overview of contextual factors and cross-cutting issues that
    promote or constrain food security programming in the country; identify
    the determinants of food insecurity and the geographic distribution of
    food insecurity and malnutrition, including areas of greatest food
    insecurity, risks and vulnerabilities; describe existing policies,
    strategies, initiatives, and programs related to reducing food
    insecurity in the country; and identify priority objectives, program
    areas, activities, partners, and geographic foci for Title II food
    security programs. A number of FSPFs have already been completed and
    can be found at http://www.usaid.gov/our_work/humanitarian_assistance/
    ffp/countryspec.html.
    C. USAID's Famine Early Warning Systems Network (FEWS NET)
        USAID's Famine Early Warning Systems Network (FEWS NET) exemplifies
    the U.S. commitment to anticipating and responding to humanitarian
    vulnerabilities and crises. Using interagency agreements with the U.S.
    Geological Survey, National Aeronautics and Space Administration,
    National Oceanic and Atmospheric Administration and USDA, FEWS NET
    continues to monitor, collect and disseminate critical data on
    conditions of food availability and access. FEWS NET provides decision
    makers in the USG, host country governments, and a variety of other
    regional and international partners timely and analytical early warning
    and vulnerability information. FEWS NET information products can be
    found at www.fews.net.
        In response to rising needs for more and better food security
    monitoring information in additional countries where food security
    could become a significant problem, in FY 2009 USAID, working with FEWS
    NET, defined and tested a nonpresence-based monitoring strategy,
    referred to as the ``remote monitoring'' initiative. This strategy
    prioritizes the identification and early warning of significant changes
    in food availability and food access that might potentially lead to a
    food security crisis. Sectoral monitoring priorities for the remote
    monitoring include weather and climate, crop condition and output, food
    markets and trade, and a livelihood food security framework for each
    country.
        Using a minimal number of on-the-ground visits and focusing heavily
    on FEWS NET's existing global monitoring resources and building and
    sustaining collaborations and partnerships with organizations already
    established in each country, FEWS NET developed methods, tools and
    agreements that promote a continuous stream of monitoring data from
    three remote monitoring pilot countries: Yemen, Tajikistan and Burundi.
    D. Monitoring and Evaluation (M&E)
        The renewed Monitoring and Evaluation (M&E) emphasis within FFP
    ensures that Title II resources are being used effectively and
    efficiently to achieve the best possible food security outcomes, and
    that food aid program staff continually learn from past experiences to
    improve program implementation.
        In this regard, FFP continued its practice of delivering 4 to 5 day
    M&E workshops to newly awarded Multi-Year Assistance Program (MYAP)
    partners in order to improve the quality of Title II M&E data, as well
    as USG staff charged with monitoring those programs. The workshops help
    improve the design of program results frameworks, baselines, and M&E
    plans, and ensure that required indicators from FFP and Missions are
    included in partner M&E plans and that data are collected in a
    consistent manner. The workshops also strengthen Mission and partner
    knowledge of Title II programs and reinforce their understanding of M&E
    procedures. Workshops have now been held in Mali and in Mozambique (for
    16 newly awarded MYAPs), as well as in Ethiopia, Madagascar, and
    Malawi. Additional workshops will be held as new MYAPs are awarded in
    FY 2010, for Bangladesh, Burkina Faso, Liberia, Sierra Leone and South
    Sudan.
        FFP also released updated guidance that describes the key M&E
    responsibilities of MYAP awardees and potential awardees, providing
    additional detail to existing M&E policies. This guidance can be found
    at http://www.usaid.gov/our_work/humanitarian_assistance/ffp/
    ffpib.html. In addition, during FY 2009, FFP held a technical
    assistance workshop on food aid commodity management for Title II
    awardees. Held in the field, in Maputo, Mozambique, the workshop
    provided a hands-on component that included observations of commodity
    management activities at a seaport. Participants also learned the
    general tenets of Title II commodity management from a field
    perspective. The training strengthened the capacity of Title II
    partners to properly manage commodities within their own programs, and
    to improve commodity management practices among local sub-awardees.
        USDA initiated efforts in FY 2009 to improve results-oriented
    management for its food aid programs. USDA has worked with grantees and
    results-oriented specialists to develop specific objectives and
    measures for the programs. Grant agreements completed in FY 2009
    included more specific measures to gauge the success of the programs.
    USDA is continuing work in this area to define objectives and to
    develop monitoring and evaluation procedures that will be used in
    administering the programs. USDA plans to fully incorporate results-
    oriented management in the programs by FY 2011.
    E. Food Aid Quality
        In FY 2009, FFP awarded Tufts University's School of Nutrition a
    contract to examine the nutritional needs of food aid beneficiaries and
    the commodities currently available to meet those needs in the context
    of total available food resources. The beneficiaries studied include
    orphans and vulnerable children, pregnant and lactating women, students
    in grades K-8, food-insecure adolescents and adults, and people living
    with HIV.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            A mother and child with their food aid ration in Ghana. USAID.

        As part of their study, technical briefing papers will be produced
    on the following topics:

       Review of past recommendations and their implementation to
            date;

       Enrichment and fortification in USAID activities and in
            Title II commodities;

       Recommendations to improve Title II enrichment and
            fortification formulations; and

       Food aid and nutritional support for people living with HIV.

        A final report will include an expanded executive summary of the
    findings and recommendations of all four briefing papers, and
    recommendations for next steps and implementation of these
    recommendations. It will also include a description of a process for
    periodic and ongoing review of the nutritional quality of Title II food
    aid commodities.
        Furthermore as part of this review, FFP and Tufts developed and
    maintain a public, interactive website (www.foodaidquality.org) to
    serve as a general space for information about the Food Aid Quality
    Review project, including summaries of meetings and presentations, as
    well as draft documents and preliminary recommendations for comment. On
    the site, there is also a discussion forum on topics related to the
    Food Aid Quality Review project, where those in the community are
    invited to participate by commenting on or starting their own
    discussion topic.
    F. Food and Nutrition Technical Assistance (FANTA) Project
        Under the USAID supported FANTA Project-2, FFP continued to publish
    a number of Title II relevant publications, guides and tools to support
    Title II partners and USAID and USDA staff in strengthening knowledge
    in food security and nutrition activities. A list of the publications
    can be found at www.fantaproject.org/focus/foodaid.shtml.
        One of the persistent challenges to Title II nonemergency programs
    is to assure that the impacts they achieve are sustained after the
    program has ended. All Title II nonemergency programs are now required
    to incorporate an ``exit strategy'' that aims at sustaining program
    impact. However, little guidance exists on how to implement successful
    exit strategies. To address this gap, FFP, with the help of Tufts
    University through FANTA Project-2, is developing guidance on the
    design of such strategies. For that purpose, a set of studies is being
    conducted in several countries where Title II nonemergency programs are
    ending.
        Each country study protocol calls for a review of Title II
    awardees' planned exit strategies and their implementation of that
    strategy during the final MYAP year, followed by a qualitative review
    one year after the MYAP has ended, as well as in-depth qualitative and
    quantitative assessments 2 years after exit to assess the extent to
    which the impacts of the MYAP were maintained or improved, and to
    understand factors of success or failure in the specific exit
    strategies that were used.
    G. Preventing Malnutrition in Children Under Two Approach (PM2A)
        The Preventing Malnutrition in Children Under Two Approach (PM2A)
    is a food-assisted program aimed at reducing the prevalence of child
    malnutrition by targeting a package of health and nutrition
    interventions to all pregnant women, mothers of children 0-23 months
    and children under 2 in food-insecure program areas, regardless of
    nutritional status. Because they are the most nutritionally-vulnerable
    members of the population, the program targets everyone in these groups
    to protect children from malnutrition and its long-term consequences,
    including diminished psychomotor skills, work capacity, intelligence
    and income. PM2A integrates best practices in maternal and child health
    and nutrition (MCHN) programming and combines them with food
    assistance. USAID now strongly encourages Title II partners that submit
    MYAP proposals to design their MCHN intervention on the basis of
    preventive actions. In FY 2009, utilizing Title II resources, USAID
    awarded PM2A MYAPs for Guatemala and Burundi.
    II. Program Descriptions and Fiscal Year 2009 Accomplishments
    A. Food for Peace Act

        1. Title I: Economic Assistance and Food Security

        The Title I authority of the Food for Peace Act provides funding
    for both a concessional sales program, supporting trade and development
    and for the Food for Progress grant program, supporting agricultural
    development in emerging democracies. The primary objective of the
    concessional sales component is to provide food assistance to targeted
    developing countries in order to promote economic growth. By gradually
    reducing the concessionality of support and eliminating ocean freight
    financing, the program is intended to assist in the recipient country's
    transition from aid to commercial trade. There were no Title I-funded
    concessional sales programs active in FY 2009.
        Title I resources were used to support the Food for Progress grant
    program in FY 2009, providing 14,300 MT in assistance to two countries,
    Burundi and the Central African Republic, with an estimated value of
    $22 million. Additional information on Title I-funded activities is
    included in the Food for Progress section of this report.

        2. Title II: Emergency and Private Assistance Programs

        More than \3/4\ of U.S. international food aid was used in FY 2009
    to respond to emergency situations and to implement development
    projects as part of the Title II program. Administered by the USAID
    Office of Food for Peace in the Bureau for Democracy, Conflict, and
    Humanitarian Assistance (DCHA), in FY 2009, Title II programs
    (emergency and nonemergency) provided more than 2.3 million MT of
    commodities, with a program cost of approximately $2.6 billion, to
    assist approximately 61 million people in 61 countries.
        The focus of Title II programs is to reduce food insecurity in
    vulnerable populations, and improving resiliency to shocks is an
    essential first step toward household self-sufficiency and economic
    independence. In support of this strategy, the nonemergency development
    portfolio incorporates many activities to strengthen local capacity to
    respond to natural disasters.

          a. Title II: Emergency Programs

        Title II emergency programs aim to address two forms of
    emergencies: natural disasters, such as floods or droughts, and complex
    emergencies characterized by a combination of natural disaster,
    conflict, and insecurity. All of these elements pose substantial
    programmatic and operational challenges in responding effectively to
    the needs of food-insecure populations.
        In FY 2009, Title II emergency programs provided more than 1.9
    million MT of emergency food aid, with a program cost of more than $2.1
    billion, to help alleviate malnutrition and hunger in 38 countries. In
    all, Title II emergency programs reached approximately 54 million food-
    insecure people in FY 2009.

        Food for Peace Title II: Emergency Program Highlights

        Pakistan: With fighting between government forces and militants in
    Pakistan's North-West Frontier Province on the rise, the number of
    internally displaced persons (IDPs) increased exponentially in early
    2009, with estimated figures growing from several hundreds of thousands
    to over two million in mere months. As the number of IDPs grew--
    reaching as many as 2.2 million by the end of May 2009--so did the
    level of Title II assistance. In all, FFP provided 62,730 MT of food
    aid to the World Food Program (WFP) in FY 2009, valued at $55 million,
    to help meet the needs of Pakistan's IDP population. Importantly, FFP
    was able to meet the demands of a rising IDP population by using
    prepositioned commodities (see box on following page) and ship
    diversions to expedite the transport, arrival, and distribution of U.S.
    food aid. Moreover, as security conditions improved and IDPs began to
    return to their places of origin, FFP continued to provide assistance
    to IDPs and returnees, serving as an important safety net until their
    livelihoods could be restored.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            U.S. food aid being prepared for distribution at an IDP camp in
            Pakistan. USAID.

        Ethiopia: In FY 2009, FFP continued to support the Government of
    Ethiopia's Productive Safety Net Program (PSNP) by providing an
    estimated $120 million of food assistance through its nongovernmental
    organization (NGO) partners to chronically food insecure beneficiaries.
    In exchange for food (or cash) transfers, beneficiaries of the PSNP
    carry out public works projects such as soil and water conservation,
    community road construction and rehabilitation, small-scale irrigation,
    and school and health post renovation and construction, among others.
    The food and cash transfers prevent the depletion of household assets
    (such as the sale of livestock or the eating of the next season's
    seeds), and the public works projects create community assets, such as
    roads and health posts.

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            Beehives being distributed to a youth group in Ethiopia as part
            of an income generating activity. FHI.

        In addition to support for the PSNP, Food for Peace provided over
    $266 million of relief food assistance through WFP and Catholic Relief
    Services (CRS) to drought-affected beneficiaries. These people can
    normally meet their own food requirements. However, because of
    successive seasons of insufficient rain and inadequate harvests, they
    required emergency food assistance.

    ------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Prepositioning Warehousing
        USAID's warehouse program supports the strategic prepositioning of
     Food for Peace commodities by increasing the number of warehouses from
     two up to five in regions that show historic need or are situated along
     trade routes. Under the new program, the Agency expects to store
     packaged and bulk food commodities, as needed, in at least five
     warehouses throughout Africa, in South Asia, and within the United
     States.
        Prepositioning warehouses are an integral part of USAID's food aid
     program. They offer USAID the capability to significantly reduce
     transit times of food commodities in the midst of a crisis.
        USAID uses prepositioning sites to maintain a continuous flow of
     vital food aid. The Agency stores commonly needed commodities in the
     prepositioning warehouses and, as needs arise, ships the food directly
     from the warehouse to the region in need.
        Expansion of the USAID prepositioning program was made possible by
     new authorities provided by Congress in the 2008 Farm Bill.
    ------------------------------------------------------------------------

          b. Title II: Private Assistance Programs (Nonemergency)

        The Food for Peace Title II development (nonemergency) food aid
    program constitutes one of the largest sources of USAID funding in
    promoting long-term food security in such areas as:

       Agriculture and Natural Resource Management activities;

       Health and household nutrition activities (e.g., MCHN
            including PM2A); and

       Education, Humanitarian Assistance, and Microenterprise.

        In FY 2009, 19 awardees implemented 78 Title II nonemergency
    programs in 31 countries. Approximately 474,350 MT of food assistance,
    valued at more than $370 million, was used to support programs that
    benefited more than seven million people.

        Food for Peace Title II: Nonemergency Program Highlights

        Guatemala: High levels of malnutrition are especially harmful for
    children under the age of 2, who can experience life-long impairments
    in their physical and cognitive development. In the northern department
    of Alta Verapaz in Guatemala, more than 60 percent of children under 5
    are chronically malnourished, while infant and maternal mortality rates
    are among the worst in the country. To improve food security in Alta
    Verapaz, FFP provided Mercy Corps International (MCI) 3,370 MT of food
    aid in FY 2009, valued at $7.6 million, to implement a program using
    the Preventing Malnutrition in Children Under Two Approach. Working in
    tandem with government health counterparts and FANTA for operations
    research support, MCI provided food assistance to 227,000 Guatemalan
    children under 2 and malnourished children under 5, as well as nursing
    and pregnant mothers in the Alta Verapaz, Peten and Quiche regions. In
    addition, by the end of the PM2A program in Guatemala in FY 2013,
    health providers will have increased their capacity to plan for
    community health needs, and program beneficiaries are expected to have
    improved their nutritional status and access to sustainable, quality
    health care.
        Liberia: While Liberia continues on its path to recovery and
    development after decades of poor governance and civil war, high rates
    of chronic malnutrition persist. As part of the U.S. President's Food
    Security Response Initiative (PFSRI), FFP allocated 4,860 MT of food
    aid commodities in FY 2009, valued at $6.3 million, for nonemergency
    assistance in Liberia. Using these resources, CRS and over a dozen
    international and domestic NGOs are working with 35,380 beneficiaries
    in 24 districts to improve agricultural production, infrastructure and
    emergency preparedness. The program also aims to improve the management
    of childhood illnesses, rehabilitate malnourished children, and provide
    life skills education for children and adolescents impacted by HIV.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            A father and son bringing home their USAID food aid ration in
            Tajikistan. USAID.

        Focusing on building the capacity of local NGOs to manage food
    security activities and interventions, CRS's program made significant
    achievements in FY 2009. One activity in the remote area of Nyor-
    Diaply--rehabilitating community fish ponds left dormant due to the war
    and providing associated training--led to the rehabilitation of 21 fish
    ponds by seven community-based organizations. Eleven of the ponds
    produced 1,084 kg of tilapia and catfish, from which community members
    were able to feed themselves and sell the rest for a profit of USD
    $650. The fish farming groups involved plans to save a portion of the
    profits and expand their fish farming activities in the community.
        Uganda: Following decades of civil insecurity and successive
    seasons of poor rains and harvests, northern and northeastern Uganda
    remain highly food insecure. As part of a Title II-funded MYAP, ACDI/
    VOCA and its sub-grantees are implementing activities in 17 rural
    districts in northern and eastern Uganda. Using 19,850 MT in food aid
    in FY 2009, valued at $12.7 million, ACDI/VOCA provided over 116,000
    beneficiaries with food assistance, agricultural training and support,
    income generation services and grants, and activities in health,
    nutrition, and hygiene. Using the support provided, the 1,955 farmer
    savings groups formed under the program amassed a cumulative savings of
    $162,668 in 2 years. In addition, the program focuses extensively on
    People Living with HIV/AIDS (PLWHA). In addition to food aid provided,
    in FY 2009, 96,970 PLWHAs, including their families, were provided with
    income generating grants, agricultural support, and other support
    services upon graduation from direct food distributions.

          c. International Food Relief Partnership

        In November 2000, the U.S. Congress passed the International Food
    Relief Partnership (IFRP) Act. The law, which was renewed and extended
    under the recent farm bill, enables USAID to award grant agreements to
    eligible U.S. nonprofit organizations to produce and stockpile shelf-
    stable, prepackaged commodities. Through the IFRP program, commodities
    are made available to eligible nonprofit U.S. organizations and
    international organizations for transportation, delivery and
    distribution in emergency food aid relief programs.
        In FY 2009, FFP awarded approximately $8.6 million in Title II IFRP
    production and distribution grants. As part of the production grant,
    Breedlove Dehydrated Foods produced a vitamin-fortified, dried
    vegetable soup mix that is prepared and used as meals, predominantly in
    institutional settings. Over the course of the FY, 30 IFRP distribution
    grants were awarded to 23 nonprofit U.S.-based organizations. IFRP
    awardees distributed the commodity to over 90,000 beneficiaries in 23
    countries.
        The organizations that received grants in FY 2009 to transport and
    distribute the commodities were: ACTS International; Amigos
    Internacionales; Batey Relief Alliance; Catholic Relief Services;
    Center for International Health; Children's Hunger Fund; Church of
    Bible Understanding; CitiHope; Convoy of Hope; Coprodeli USA;
    Counterpart International; Cross International; Evangelistic
    International Ministries; Fabretto Children's Foundation; Feed the
    Children; Food for the Hungry; Haiti Vision; International Partnership
    for Human Development; International Relief and Development;
    International Relief Teams; Nascent Solutions; Project Concern
    International; Resource and Policy Exchange; and World Help.

        3. Title III: Food for Development

        The Food for Peace Title III program is a USAID-administered tool
    for enhancing food security and supporting long-term economic
    development in the least-developed countries. The USG donates
    agricultural commodities to the recipient country and funds their
    transportation to the point of entry in the recipient country. These
    commodities are sold on the domestic market and the revenue generated
    from their sale is used to support and implement economic development
    and food-security programs. Funds were neither requested nor
    appropriated for Title III in FY 2009.

        4. Title V: John Ogonowski and Doug Bereuter Farmer-to-Farmer (FTF)
            Program

        The John Ogonowski and Doug Bereuter FTF Program provides voluntary
    technical assistance to farmers, farm groups, and agribusinesses in
    developing and transitional countries to promote sustainable
    improvements in food processing, production, and marketing. The program
    relies on the expertise of volunteers from U.S. farms, land-grant
    universities, cooperatives, private agribusinesses, and nonprofit farm
    organizations to respond to the needs of host-country farmers and
    organizations. Volunteers are recruited from all 50 states and the
    District of Columbia. In general, these volunteers are not overseas
    development professionals but rather individuals who have domestic
    careers, farms, and agribusinesses or are retired persons who want to
    participate in development efforts. Typically, volunteers spend about
    20 to 30 days in the host country.
        The FTF Program was initially authorized by Congress in the Food
    Security Act of 1985 and funded through Title V of the Agricultural
    Trade Development and Assistance Act of 1954. The U.S. Congress
    authorized the current FY 2009-2013 phase of the FTF Program in the
    2008 Food for Peace Act, designating it the ``John Ogonowski and Doug
    Bereuter Farmer-to-Farmer Program'' in honor of Ogonowski, one of the
    pilots killed on September 11, 2001, and former Congressman Bereuter,
    who initially sponsored the program.
        During FY 2009, USAID provided $12.5 million for FTF programs. Over
    approximately 6 months of active implementation during the fiscal year,
    218 volunteer assignments were completed in 23 countries, strengthening
    163 host organizations--cooperatives, farmer associations,
    agribusinesses, and NGOs--and directly assisting 10,533 persons,
    including training 5,951 persons. Approximately 35 percent of FTF
    beneficiaries were female. Importantly, new FTF programs were
    implemented in 20 core countries, developing 5 year work plans for 41
    country projects, focusing on agricultural productivity and value-chain
    development for dairy, horticulture, staple food crops, aquaculture,
    and other commodities. Four special projects were launched, involving
    new implementing organizations and targeting special issues such as
    avian influenza prevention, organic coffee production, and food
    security.

                 Farmer-to-Farmer Volunteer Assignments: FY 2009
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                                     Africa
    ------------------------------------------------------------------------
                                           Angola                   4
                                            Egypt                  18
                                         Ethiopia                   1
                                            Ghana                  13
                                            Kenya                  16
                                           Malawi                  15
                                             Mali                   5
                                       Mozambique                  12
                                          Nigeria                  13
                                         Tanzania                  12
                                           Uganda                  10
                                                       ---------------------
      Sub-Total Africa................................            119
    ------------------------------------------------------------------------
                             Latin America/Caribbean
    ------------------------------------------------------------------------
                                          Bolivia                   1
                               Dominican Republic                   4
                                           Guyana                   5
                                            Haiti                   7
                                          Jamaica                   7
                                        Nicaragua                  12
                                             Peru                   2
                                                       ---------------------
      Sub-Total Latin America/Caribbean...............             38
    ------------------------------------------------------------------------
                                 Europe/Eurasia
    ------------------------------------------------------------------------
                                          Belarus                   5
                                          Georgia                  23
                                          Moldova                  15
                                                       ---------------------
      Sub-Total Europe/Eurasia........................             43
    ------------------------------------------------------------------------
                                 Asia/Near East
    ------------------------------------------------------------------------
                                                 Lebanon           16
                                       Tajikistan                   2
                                                       ---------------------
      Sub-Total Asia/Near East........................             18
                                                       =====================
        Worldwide Total...............................            218
    ------------------------------------------------------------------------

        Title V: FTF Program Highlights

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            FTF-supported green pepper producer women's group in El
            Salvador. USAID.

        Egypt: The Four Thousand Tons per Day Program, a USAID Global
    Development Alliance (GDA) activity in Egypt, targets over 8,000
    smallholder farmers to help them to become reliable and profitable
    suppliers for both local processors and export markets. FTF volunteers
    provide invaluable technical and training assistance through the
    program. For example, in FY 2009, volunteers provided technical
    assistance to farmer groups in the Nubariya region, and introduced new
    technologies for managing soil fertility, irrigation water use, and
    seedling production. One of the beneficiaries, a smallholder tomato
    producer in the region, almost doubled his yield from the previous year
    as well as his net income, in part from savings incurred from lower
    production costs. Using some of the proceeds generated, his household
    plans to purchase small livestock and rent additional land to increase
    the area under cultivation next season.
    B. Section 416(b) of the Agricultural Act of 1949: Surplus Commodities
        The Agricultural Act of 1949 authorizes the donation by USDA of
    surplus food and feed grain owned by the CCC. Section 416(a) authorizes
    surplus food assistance to be distributed domestically, and surplus
    food donated to developing countries for assistance programs is covered
    under Section 416(b). Surplus commodities acquired by the CCC as a
    result of price-support operations may be made available under Section
    416(b) if they cannot be sold or otherwise disposed of without
    disrupting price-support programs at competitive world prices. In FY
    2009, no commodities were made available by CCC for use in the 416(b)
    program and, consequently, no donations were made under the program.
    C. Food for Progress
        The USDA-administered Food for Progress Program, authorized under
    the Food for Progress Act of 1985, assists developing countries,
    particularly emerging democracies ``that have made commitments to
    introduce or expand free enterprise elements in their agricultural
    economies through changes in commodity pricing, marketing, input
    availability, distribution and private sector involvement.'' The
    program authorizes the CCC to carry out the sale and exportation of
    U.S. agricultural commodities on credit terms or on a grant basis, with
    the use of either CCC financing or Title I funds. Agreements under the
    Food for Progress Program are awarded to governments or private
    voluntary organizations (PVOs), nonprofit agricultural organizations,
    cooperatives, intergovernmental organizations or other private
    entities.
        The 2008 Farm Bill extended the authority for the Food for Progress
    Program to provide assistance in the administration and monitoring of
    food assistance programs to strengthen private-sector agriculture in
    recipient countries through FY 2012. The CCC is authorized to use $15
    million for administrative costs under the grants, and $40 million for
    transportation expenses.
        In FY 2009, CCC funding financed the purchase and shipment of
    274,230 MT of commodities to 14 countries, with an estimated value of
    $216 million. In total, the Food for Progress Program--through CCC and
    Title I funding--provided over $238 million in food assistance in FY
    2009, which supported the purchase and shipment of 288,530 MT of
    commodities.

        Food for Progress Program Highlights

        Afghanistan: As part of the USG's long-term commitment to help
    Afghanistan rebuild after years of war, USDA provided 25,000 MT of
    monetized wheat--valued at $12.1 million--to Shelter for Life
    International (SFL) to implement programs that combat food insecurity.
    SFL is rehabilitating irrigation systems, building storage facilities,
    facilitating information sharing, and extending credit to local
    farmers. Through training and the technical support provided, increases
    are expected in agricultural productivity, local markets will be made
    more accessible, and grain mills will be improved.
        Bangladesh: Although having made great strides in meeting the food
    needs of its growing population, Bangladesh remains among the poorest
    and most densely populated countries in the world. Approximately 50
    percent of the total population live in poverty, 34 percent live on
    less than $1 per day, and over 52 percent of children under 5 years of
    age face severe malnutrition. To combat these problems, Cornell
    University is using the proceeds from 4,850 MT of monetized crude
    degummed soybean oil--valued at $10.5 million--to implement programs
    that fight poverty in the region. Specifically, Cornell is providing
    training and micro-loans to small farmers to enhance agricultural
    production technology in liming, bedding, and arsenic management. It is
    also improving the capacity of national agricultural institutions,
    NGOs, and input suppliers to provide technical support and
    infrastructure development to farmers. The goals of the program are to
    increase crop productivity of the farms assisted by Cornell's program
    by 40 percent and expand incomes of local farmers by 25 percent.
        Burundi: Burundi has a high population density and very limited
    natural resources, with 90 percent of Burundians dependent on
    subsistence farming. Despite recent improvements in the political and
    security landscapes, food insecurity persists after more than a decade
    of civil war. High food prices are also impacting vulnerable people in
    both rural and urban areas. To mitigate food security challenges, Food
    for Progress funding was provided to WFP to support the recovery
    process in six provinces characterized by high levels of food
    insecurity. Using 3,500 MT of corn, 2,250 MT of yellow split peas, and
    1,500 MT of vegetable oil, WFP provided general food distribution and
    support for vulnerable groups, carried out school feeding, and
    implemented activities aimed at asset creation, skills training, and
    improved nutrition. These activities reached approximately 65,000
    beneficiaries in 2009.
        Dominican Republic: Food insecurity and malnutrition are most
    widely seen in the underserved sugar cane farming communities (bateyes)
    in the Dominican Republic where access to farming and agricultural
    production is limited. The Batey Relief Alliance (BRA) is implementing
    programs designed specifically to address the pressing needs of
    millions in the Dominican Republic, especially in the bateyes. BRA is
    monetizing 1,250 MT of crude degummed soybean oil and is using the
    proceeds to implement program activities that address some of the
    country's food needs. Using $2 million in Food for Progress resources
    over the life of the program, BRA is improving the region's
    agricultural productivity by establishing new agricultural cooperatives
    where BRA will provide credit and train local farmers in agricultural
    management. Through a Food for Work program, farmers and farm families
    will assist in the construction of storage facilities and irrigation
    systems for improved crop management, help repair roads for improved
    market access, and assist with repairs to latrines, schools, and homes
    for improved sanitary and health conditions among agricultural
    populations. The objectives of the program are to increase agricultural
    production by 20 percent and decrease crop losses by 20 to 25 percent.
    Income and food sales are planned to increase by 20 percent, and
    beneficiary access to markets is expected to increase by 35 percent.
    Finally, the program may provide 1,400 people with access to potable
    and clean water.
        Ethiopia: Ethiopia is among the most underdeveloped countries in
    the world, ranking 171 of 177 countries in the 2009 United Nations
    Human Development Index. Malnutrition is rampant, affecting an
    estimated 50 percent of the population. The World Council of Credit
    Unions (WOCCU) is using proceeds from 23,000 MT of monetized hard red
    winter wheat provided through the Food for Progress program to
    implement activities that address food insecurity in the areas of
    Tigray, Amhara, and Oromia. The program, valued at $13.8 million, is
    developing a supportive commercial environment for agriculture by
    providing technical assistance on productivity, post-harvest handling,
    and marketing strategies to farmer members of existing rural credit
    unions. Infrastructure such as storage facilities, irrigation systems,
    access roads, bridges, basic sanitation facilities, and other support
    projects will improve through the support of community self-help
    activities. Finally, WOCCU is strengthening community-based
    agricultural credit unions in order to expand credit and micro-loans to
    local farmers. These activities are hoped to increase output, yields,
    and income for local farmers by 30 percent by the end of the 4 year
    program.
        Malawi: Over \1/2\ of Malawi's 13.6 million inhabitants live in
    poverty, with 30 to 50 percent of the population at risk of food
    insecurity. To support sustainable economic and agricultural
    development, USDA provided the Foundation for International Community
    Assistance International (FINCA) 10,000 MT of hard red spring wheat to
    implement programs aimed at reducing food insecurity. The total value
    of FINCA's grant for FY 2009 equaled $8.5 million. Using the proceeds
    from the monetization of the wheat, FINCA is expanding microfinance
    services to agribusiness entrepreneurs in rural areas as well as
    conducting social and economic assessments to determine the influence
    of loans on household welfare and agriculture-related businesses.
    Moreover, training and support is provided to local farmers to promote
    long-term sustainable agricultural growth. These activities will
    contribute toward the following objectives: increase individual
    business sales and income for loan recipients by ten percent annually
    and increase access to tools, equipment, inputs, marketing
    opportunities, and financial services for rural clients by 15 percent.
        Philippines: While experiencing a period of economic growth and
    decreasing poverty rates nationwide, poor agricultural practices,
    natural disasters, and conflict have prevented sustainable development
    in the Mindanao provinces of the Philippines. In response, USDA
    provided a Food for Progress grant valued at $5.7 million to CRS in FY
    2009. CRS is monetizing 9,000 MT of soybean meal provided through the
    program and will use the proceeds to implement activities aimed at
    increasing food production and reducing poverty in selected Mindanao
    provinces. The program will focus on: enhancing technical support to
    farmers; increasing post-harvest capacity; improving post-harvest
    practices; increasing crop diversification for cash crops; and linking
    farmers to financial institutions and markets. This agreement will
    build upon the successes of CRS/Philippines' ongoing USDA-assisted
    Small Farms and Marketing Program, which has been implemented in five
    pilot sites throughout Mindanao. CRS's objectives are to increase farm
    incomes of resource-poor farmers by an average of 50 percent, provide
    agricultural extension and marketing services for 10,000 farmers, and
    increase rice, cacao, and coffee production.
        Senegal: To combat high rates of poverty and malnutrition in
    Senegal, USDA provided a Food for Progress grant in FY 2009 to the
    National Cooperative Business Association (NCBA) totaling $8.3 million.
    NCBA is using proceeds from 4,200 MT of monetized crude degummed
    soybean oil to implement programs aimed at strengthening producer
    organizations, enhancing millet production, improving market linkages,
    and increasing access to financial services. Training programs include
    financial management, efficient production and processing methods,
    marketing strategies, and business development. NCBA is also
    distributing improved seeds locally, promoting conservation farming,
    establishing information systems for farmers, and providing a range of
    financial services and financial training opportunities for producer
    groups and processors. Over 9,000 people are benefiting from this
    assistance.
    D. McGovern-Dole International Food for Education and Child Nutrition
            Program
        An estimated 120 million children around the world do not attend
    school, due in part to hunger or malnourishment. The majority of them
    are girls. Following the success of the Global Food for Education
    Initiative, created in July 2000, the USG has demonstrated its
    continued commitment to education and child nutrition with the 2008
    Farm Bill's reauthorization of the McGovern-Dole International Food for
    Education and Child Nutrition Program (McGovern-Dole Program) through
    FY 2012.
        Modeled after the USG's school meals program, the McGovern-Dole
    Program is named in honor of former Senators George McGovern and Robert
    Dole for their tireless efforts to promote education and school
    feeding. The McGovern-Dole Program uses U.S. commodities and financial
    assistance to provide incentives for children to attend and remain in
    school, as well as to improve child development through nutritional
    programs for women, infants, and children under age 5. In FY 2009, the
    McGovern-Dole Program provided more than 126,523 MT of commodities to
    support child nutrition and school feeding programs in 18 countries,
    the total value of which exceeded $168 million.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Schoolgirls taking part in a McGovern-Dole-supported WFP
            program in Bangladesh. USDA.

        McGovern-Dole Program Highlights

        Cambodia: Decades of war and internal strife continue to impede
    Cambodia's economic growth. Low per capita Gross Domestic Product (GDP)
    in combination with high inflation in recent years has had major
    implications for the country's largest economic sector--agriculture--
    where poor farming practices, inadequate irrigation systems, and
    unfavorable market conditions already hamper development, with negative
    impacts on food security and nutrition. In response, International
    Relief and Development (IRD) is using 1,930 MT of USDA-donated
    commodities to meet the following goals: increase school enrollment by
    29 percent, expand attendance by 20 percent, and raise the continuation
    rate to 86 percent in 51 schools in Kampong Chhanang Province over the
    3 years of the program. IRD will provide nutritious on-site meals and
    take-home rations to girls, to students who complete the sixth grade,
    and to high performing teachers. Program activities will reach 31,100
    students, 200 teachers, and 1,300 families. In addition to meals
    provided, each targeted school will have active health and nutrition
    education programs to combat the province's high malnutrition rates
    more effectively.
        Guatemala: While the country suffers from high rates of
    malnutrition nationwide, high rates are especially pronounced in rural
    areas. In areas such as the central and northwestern highlands, they
    run as high as 80 percent. With the goal of increasing the nutritional
    and educational status of children in targeted areas of the rural Mayan
    highlands, the McGovern-Dole Program donated 13,780 MT of commodities
    to Asociacion SHARE de Guatemala (SHARE) in FY 2009. Targeting
    approximately 385 schools in these areas, SHARE's program includes
    direct feeding, the provision of take-home rations, establishing and
    training members of Parent Teacher Associations (PTAs), developing
    school infrastructure, promoting capacity building of indigenous
    organizations, and establishing school gardens for educational and
    nutritional purposes. Through this program, SHARE will directly reach
    over 70,000 students and 2,300 teachers each year. The program's
    targets are to increase enrollment by 17 percent and attendance by 19
    percent. In addition, the promotion rate is expected to rise to 79.5
    percent.
        Liberia: With a fractured economy and few services available
    following years of civil war and poor governance, Liberia remains one
    of the poorest countries in the world. Upwards of 40 percent of
    children under 5 years old suffer from malnutrition and more than \1/3\
    of the population lives on less than $1 per day. Life expectancy is a
    mere 45 years, and the adult literacy rate is 52 percent. With the
    Government of Liberia's renewed focus on economic development and food
    security, IRD is implementing a 3 year McGovern-Dole Program-funded
    program in five counties in Liberia: Montserrado, Grand Bassa,
    Maryland, Grand Kru, and River Gee. Each year, program activities will
    directly benefit 30,000 students and 600 teachers, and indirectly reach
    25,000 families through a combination of direct feeding, health/
    nutrition activities, HIV/AIDS education, school resource and
    infrastructure improvements, and the building of sustainability through
    PTAs, school farms, and youth clubs. The program also provides school
    supplies and printed materials that support literacy and numeracy to
    targeted schools. The program is focused on increasing total enrollment
    by 30 percent and attendance by 44 percent.
        Pakistan: Nutrition and education remain priorities in Pakistan,
    where malnutrition rates average 37 percent for children under 5 and
    the national literacy rate is 55 percent. The McGovern-Dole Program has
    been providing assistance to WFP since 2005, offering female
    beneficiaries in targeted food-insecure districts access to development
    opportunities through three primary activities. The first focuses on
    improving enrollment, attendance, and retention rates among girls at
    targeted primary schools. The second focuses on pregnant mothers, who
    are provided with quality health services during pre- and post-natal
    periods. Lastly, WFP supports asset creation and livelihood improvement
    activities to improve the socioeconomic condition of rural women and
    their families. WFP has reached over 6.4 million Pakistanis since 2005
    and received $7 million in McGovern-Dole Program support in FY 2009.
    During that year, WFP continued to build upon program successes that
    included an increase in the completion rate of 22 percent for females
    in targeted schools and an increase in enrollment of over 450 percent
    for females in targeted schools between 2005 and 2008. In that same
    time period, deliveries by trained birth attendants increased from 51
    percent to 93 percent and in 2008, 234,066 women received routine
    health services. Furthermore, the number of families with access to
    clean drinking water increased by ten percent in 2008.
        Uganda: The Karamoja region of Uganda is one of the country's most
    vulnerable areas, where malnutrition and lack of education remain
    pressing issues. Only 18 percent of men and six percent of women are
    literate and only an estimated 33 percent of children are enrolled in
    school, based on 2007 statistics. In FY 2009, the McGovern-Dole Program
    granted WFP 5,680 MT of commodities, a donation valued at $19 million,
    for 3 years of support to assist the government in improving the
    cognitive performance of primary school children in the region. WFP
    provided school meals to students in both day and boarding schools and
    allocated take-home rations to girls achieving 80 percent attendance
    per term. The objectives of the program are to increase total
    enrollment by 30 percent and attendance for girls and boys by 23
    percent and 11 percent, respectively, above 2008 levels. Importantly,
    the Government of Uganda plans to gradually integrate itself into
    program administration and activities to ensure program sustainability.
    E. Bill Emerson Humanitarian Trust (BEHT)
        The Bill Emerson Humanitarian Trust (BEHT) is a reserve of
    commodities and cash that is used to meet unanticipated food aid needs.
    The BEHT can hold wheat, rice, corn, and sorghum in any combination,
    but the only commodity ever held has been wheat. USDA has recently sold
    the remaining wheat in the trust (about 915,000 MT) so that currently
    the BEHT holds only cash--$315 million. The cash would be used by USDA
    to purchase U.S. food products when USAID determines it is needed for
    emergency food aid.
        The 2008 Farm Bill reauthorizes the BEHT through FY 2012 and allows
    the Secretary of Agriculture to invest the funds from the trust in low-
    risk, short-term securities or instruments so as to maximize its value.
        FFP used $5.6 million of BEHT resources in FY 2009, which was
    converted into 21,000 MT of food aid commodities, to respond to
    declining food security conditions in North Korea.
    F. Local and Regional Food Aid Procurement Pilot Project (PPP)
        The USDA Local and Regional Food Aid Procurement Pilot Project
    (PPP) was authorized as a pilot program under the 2008 Farm Bill. The
    primary objective of the project is to use local and regional purchase
    to help meet urgent food needs due to food crises and disasters
    quickly. The goal is to protect against a decline in food consumption,
    save lives, and reduce suffering. In FY 2009, $4.75 million was
    allocated for programming in three countries, of which $2.73 million
    was used for local and regional procurement of commodities and $2.02
    million for associated costs including inland transportation and
    storage and handling. All three pilot programs in FY 2009 in Malawi,
    Mali, and Tanzania were implemented by WFP.

        PPP Program Highlights:

        Malawi: Ranking 160 of 177 countries in the United Nations 2009
    Human Development Index, with half of its 12 million citizens living
    below the poverty line and 20 percent of the population extremely poor,
    Malawi proved an ideal candidate for PPP assistance in FY 2009. USDA
    provided WFP with funding support from the PPP to address the food
    needs of households that are at risk of hunger and poverty. In addition
    to providing food to vulnerable groups, WFP specifically focuses on
    procuring food including cereals, pulses, and corn-soy blend, from
    smallholder farmer groups through pro-smallholder tendering practices.
    Through this process, WFP hopes to strengthen the engagement of
    smallholders and small/medium-scale traders in the markets, stimulate
    agricultural production and cohesion within smallholder farmer
    organizations, and raise smallholder/trader income levels. Support
    provided through the PPP in Malawi will provide food to 24,999
    households, or an estimated 124,995 beneficiaries, for approximately 3
    months.
        Mali: A landlocked Sahelian country with a poverty rate of over
    59.3 percent, Mali suffers from high levels of food and nutritional
    insecurity that is most pronounced in rural areas. As part of PPP, USDA
    provided almost $1.1 million to WFP to assist with their Country
    Program and Protracted Relief and Recovery Operation (PRRO). Under
    these programs, WFP provides support for basic education, rural
    development, and food security. Specifically, the programs include
    nutrition interventions among children aged 6 to 59 months, food
    assistance for vulnerable groups, and communication activities on
    nutritional information. Support provided through the PPP in Mali will
    provide food to 28,000 pregnant and lactating women for 6 months and to
    15,000 people through food for work/food for training activities for 3
    months.
        Tanzania: While Tanzania is one of Africa's more politically stable
    countries, the country is categorized as a low-income and food-deficit
    country, with almost 80 percent of its total population dependent on
    subsistence agriculture for their livelihood. In FY 2009, USDA provided
    WFP $2 million in PPP resources to assist with their Country Program
    and PRRO in Tanzania. Under the Country Program, WFP provides support
    to HIV/AIDS-affected households, implements food for asset creation
    activities, and provides supplementary feeding to vulnerable children
    and lactating and pregnant women. The PRRO, meanwhile, provides basic
    food needs to refugees and the most vulnerable Tanzanians living in
    northwestern Tanzania. Activities under this program enable poor
    communities to acquire livelihood skills to build resilience to future
    shocks and support education, health care, and agricultural services.
    Support provided through the PPP in Tanzania will provide food to over
    125,000 beneficiaries, including refugees, for one to 5 months.
    III. Appendices

                        Appendix 1: List of Abbreviations
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                        BCC   Behavior Change Communication
                       BEHT   Bill Emerson Humanitarian Trust
                        CCC   Commodity Credit Corporation
                        CSB   Corn Soy Blend
                      FANTA   Food and Nutrition Technical Assistance
                   FEWS NET   Famine Early Warning System Network
                        FFP   Office of Food for Peace (USAID)
                       FSPF   Food Security Programming Framework
                        FTF   Farmer-to-Farmer Program of Food for Peace
                               Act, Title V
                         FY   Fiscal year
                        GDA   Global Development Alliance (USAID)
                        GDP   Gross Domestic Product
                      GHFSI   Global Hunger and Food Security Initiative
                        GOE   Government of Ethiopia
                        HIV   Human Immunodeficiency Virus
                       HPSC   Health Practices, Strong Communities
                        IDP   Internally Displaced Person
                       IFRP   International Food Relief Partnership
                       ITSH   Internal Transportation, Storage and Handling
                        M&E   Monitoring and Evaluation
                       MCHN   Maternal and Child Health and Nutrition
                        MDG   Millennium Development Goal
                         MT   Metric ton
                       MYAP   Multi-Year Assistance Program
                        NGO   Nongovernmental Organization
                     PEPFAR   President's Emergency Plan for AIDS Relief
                      PFSRI   President's Food Security Response Initiative
                          PLWHPeople Living with HIV/AIDS
                       PM2A   Preventing Malnutrition in Children Under Two
                               Approach
                        PPP   Procurement Pilot Project
                       PRRO   Protracted Relief and Recovery Operation
                       PSNP   Productive Safety Net Program
                        PTA   Parent Teacher Association
                        RFI   Request for Information
                        RFP   Request for Proposal
                     UNICEF   United Nations Children's Fund
                      USAID   U.S. Agency for International Development
                       USDA   U.S. Department of Agriculture
                        USG   U.S. Government
                        WFP   World Food Program
    ------------------------------------------------------------------------

                          Appendix 2: List of Awardees
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
        The following awardees implemented U.S. Government food assistance
                       programs in Fiscal Year 2009:
    ------------------------------------------------------------------------
                  ACDI/VOCA   Agriculture Cooperative Development
                               International/Volunteers in Overseas
                               Cooperative Assistance
                       ACTS   ACTS International
                       ADRA   Adventist Development and Relief Agency
                               International, Inc.
                   Africare   Africare
                         AI   Amigos Internacionales
                        BRA   Batey Relief Alliance
                       CARE   Cooperative for Assistance and Relief
                               Everywhere, Inc.
                    Caritas   Caritas
                        CBU   Church of Bible Understanding
                         CH   Convoy of Hope
                        CHF   Children's Hunger Fund
                      CHOUF   Cooperative Housing Foundation
                        CIH   Center for International Health
                   Citihope   Citihope International
                  Coprodeli   Coprodeli USA
                        CPI   Counterpart International
                      Cross   Cross International
                        CRS   Catholic Relief Services
                         CU   Cornell University
                        EIM   Evangelistic International Ministries
                        FCF   Fabretto Children's Foundation
          Feed the Children   Feed the Children
                       FFTP   Food for the Poor
                        FHI   Food for the Hungry International
                      FINCA   Foundation for International Community
                               Assistance International
                        GDR   Government of the Dominican Republic
                      GIROA   Government of the Islamic Republic of
                               Afghanistan
                       GoPK   Government of Pakistan
                         HV   Haiti Vision
                       IPHD   International Partnership for Human
                               Development
                        IRD   International Relief and Development
                        JAM   Joint Aid Management
                           LOLLand O'Lakes
                        MCI   Mercy Corps International
                    Nascent   Nascent Solutions
                       NCBA   National Cooperative Business Association
                        NPA   Norwegian People's Aid
                       OICI   Opportunities Industrialization Centers
                               International
                        PAI   Planet Aid International
                        PCI   Project Concern International
                     PRISMA   Asociacion Benefica Prisma
                       REST   Relief Society of Tigray
                         RI   Relief International
                        ROP   Roots of Peace
                        RPX   Resource and Policy Exchange
                        SCF   Save the Children Federation
                     SCF-UK   Save the Children UK
                         SFL  Shelter for Life International
                      SHARE   Asociacion SHARE de Guatemala
                        TNS   TechnoServ
                      UMCOR   United Methodist Committee on Relief
                         WH   World Help
                        WFP   World Food Program (United Nations)
                      WOCCU   World Council of Credit Unions
                       WVUS   World Vision US
    ------------------------------------------------------------------------

                       Appendix 3: USDA Title I Program: Food for Progress Grants_Fiscal Year 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                         Beneficiaries                   Total Cost
        Country           Grantee                 Commodity                  (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burundi                        WFP  Corn, Vegetable Oil, Yellow                   65         7,250     $10,000.0
                                         Split Peas
    Central African                WFP  Cornmeal, Corn Soy Blend,                     65         7,050     $12,000.0
     Republic                            Vegetable Oil, Yellow Split
                                         Peas
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                               130        14,300    $22,000.0
                                                                      ==============================================
        Worldwide Total                                                              130        14,300     $22,000.0
    ----------------------------------------------------------------------------------------------------------------

      Appendix 4: USAID Title II Emergency Activities: Summary Budget, Commodity, Recipient and Tonnage_Fiscal Year
                                                          2009
    ----------------------------------------------------------------------------------------------------------------
                                                                        Recipients *                    Total Cost
        Country          Grantee                 Commodity                 (000s)        Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burundi                       WFP  Cornmeal, Corn Soy Blend,                     2         3,720        $4,101.7
                                        Vegetable Oil, Yellow Peas
    Cameroon                      WFP  Cornmeal, Vegetable Oil,                    170         4,690        $4,868.5
                                        Yellow Peas
    Central                       WFP  Cornmeal, Corn Soy Blend,                   367         3,430        $5,431.4
     African                            Kidney Beans, Rice,
     Republic                           Vegetable Oil
    Chad                          WFP  Cornmeal, Corn Soy Blend,                 1,746       100,950      $138,482.2
                                        Sorghum, Vegetable Oil,
                                        Yellow Peas, Yellow Split
                                        Peas
    Cote d'Ivoire                 WFP  Cornmeal, Corn Soy Blend,                     2         4,980        $6,608.1
                                        Pinto Beans, Vegetable Oil
    Democratic                    WFP  Cornmeal, Corn Soy Blend,                   328        72,080      $111,654.1
     Republic of                        Pinto Beans, Vegetable Oil,
     the Congo                          Yellow Split Peas
    Ethiopia                     CARE  Vegetable Oil, Wheat, Yellow                202        19,180       $13,188.5
                                        Split Peas, Lentils
                                  CRS  Corn Soy Blend, Peas,                        26       168,790       $92,987.3
                                        Sorghum, Vegetable Oil,
                                        Wheat
                                  SCF  Vegetable Oil, Wheat, Yellow                161        21,230       $17,887.6
                                        Split Peas
                               SCF-UK  Lentils, Vegetable Oil,                     628        46,170       $30,230.8
                                        Wheat, Yellow Split Peas
                                  WFP  Corn Soy Blend, Pinto Beans,                587       249,410      $173,740.5
                                        Sorghum, Vegetable Oil,
                                        Wheat, Yellow Split Peas
    Kenya                         WFP  Cornmeal, Corn Soy Blend,                 3,910       125,610      $133,722.8
                                        Green Split Peas, Vegetable
                                        Oil, Wheat Flour, Yellow
                                        Split Peas
    Rwanda                        WFP  Cornmeal, Pinto Beans,                      705         2,430        $2,932.9
                                        Vegetable Oil, Corn Soy
                                        Blend
    Somalia                      CARE  Corn Soy Blend, Vegetable                   123        14,200       $11,195.5
                                        Oil, Sorghum
                                  WFP  Corn Soy Blend, Lentils,                     17       142,440      $112,242.0
                                        Sorghum, Vegetable Oil,
                                        Yellow Peas, Yellow Split
                                        Peas
    Sudan                      ADRA *  --                                           --            --          $332.7
                                  CRS  Corn Soy Blend, Lentils,                    243         5,130        $8,678.4
                                        Sorghum, Vegetable Oil
                                  NPA  Lentils, Sorghum, Vegetable                 197         2,860        $6,234.0
                                        Oil
                                  WFP  Lentils, Sorghum, Vegetable                  47       476,360      $532,202.5
                                        Oil, Yellow Split Peas
    Tanzania                      WFP  Cornmeal, Corn Soy Blend,                   512         9,480        $9,718.7
                                        Pinto Beans, Vegetable Oil
    Uganda                        WFP  Corn Soy Blend, Cornmeal,                 1,943        19,520       $18,546.1
                                        Pinto Beans, Sorghum,
                                        Vegetable Oil, Yellow Peas,
                                        Yellow Split Peas
    Zimbabwe                      WFP  Bulgur, Pinto Beans,                          9        96,340       $92,487.3
                                        Sorghum, Vegetable Oil,
                                        Yellow Peas
                                 WVUS  Bulgur, Cornmeal, Sorghum,                    4        92,370       $73,397.0
                                        Vegetable Oil, Yellow Peas
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                          11,928     1,681,370    $1,600,870.6
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                   WFP  Corn Soy Blend, Green Peas,                  16        62,190       $59,509.7
                                        Wheat, Vegetable Oil
    Algeria                       WFP  Beans, Corn Soy Blend, Rice,                125         6,470        $6,880.3
                                        Vegetable Oil, Wheat Flour
    Georgia                       WFP  Kidney Beans, Vegetable Oil,                100         1,550        $1,840.9
                                        Wheat Flour Bread
    Nepal                         WFP  Lentils, Rice, Vegetable                    550         7,450        $8,793.0
                                        Oil, Yellow Split Peas
    Pakistan                      WFP  Vegetable Oil, Wheat Flour,               1,207        62,730       $55,386.7
                                        Yellow Split Peas
    Philippines                   WFP  Rice                                          2         1,480        $1,855.0
    Sri Lanka                     WFP  Lentils, Vegetable Oil,                   2,352        38,550       $28,727.8
                                        Wheat
    West Bank/Gaza                WFP  Garbanzo Beans, Vegetable                 1,030        21,430       $20,715.4
                                        Oil, Wheat Flour
    Yemen                         WFP  Beans, Wheat                                 72         3,900        $2,432.0
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                   5,454       205,750      $186,140.8
    ----------------------------------------------------------------------------------------------------------------
                                                      Central Asia
    ----------------------------------------------------------------------------------------------------------------
    Tajikistan                    SCF  Vegetable Oil, Wheat Flour,                  70         4,090        $6,091.1
                                        Yellow Peas
                   -------------------------------------------------------------------------------------------------
      Sub-Total Central Asia                                                        70         4,090        $6,091.1
    ----------------------------------------------------------------------------------------------------------------
                                                 Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Colombia                      WFP  Green Peas, Lentils, Pinto                1,590         8,660       $11,046.4
                                        Beans, Vegetable Oil, Wheat
                                        Flour
    Haiti                        CARE  Lentils, Bulgur, Vegetable                   49           870        $1,495.5
                                        Oil
                                  CRS  Bulgur, Vegetable Oil,                       14           910        $2,478.0
                                        Yellow Peas
                                  WFP  Corn Soy Blend, Pinto Beans,              1,603        16,110       $21,253.4
                                        Rice, Vegetable Oil, Yellow
                                        Peas
                                 WVUS  Bulgur, Corn Soy Blend,                      52         2,000        $3,040.0
                                        Lentils, Vegetable Oil,
                                        Yellow Peas
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America/Caribbean                                          3,309        28,550       $39,313.3
                                                                    ------------------------------------------------
      Funding Adjustments (Program Support Costs, Prepositioning,                   --            --      $333,553.4
       and Unallocated Resources)
                                                                    ================================================
      Worldwide Total                                                           20,760     1,919,760    $2,165,969.2
    ----------------------------------------------------------------------------------------------------------------
    Source: Metric tonnage and total cost values derived from FFP Preliminary Final Budget Summary Report, November
      24, 2009. Awardees listed as approved in cooperative agreements. Commodity types and recipients derived from
      Food for Peace Information System reports, December 4, 2009 and November 13, 2009, respectively. Recipient
      values are reflective of commodity rations and are derived separately from program beneficiary totals.
    * Some programs receive Section 202(e) and/or ITSH funds without receiving commodities in the same FY.
    Table does not include IFRP awardees. See page 14 for a list of awardees and page 38 for the country list.

          Appendix 5: USAID Title II Non-Emergency Activities: Summary Budget, Commodity, Recipient and Tonnage
                                                 Tables_Fiscal Year 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Total Cost
        Country          Grantee                 Commodity           Recipients (000s)   Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Burkina Faso             Africare  Bulgur, Pinto Beans, Rice,                   21         2,390        $3,498.1
                                        Soy Flour, Vegetable Oil
                                  CRS  Bulgur, Cornmeal, Lentils,                  214         8,460        $9,807.8
                                        Rice, Vegetable Oil
    Burundi                       CRS  Bulgur, Corn Soy Blend,                      59        20,900       $16,013.8
                                        Vegetable Oil, Wheat,Yellow
                                        Peas
    Chad                     Africare  Bulgur, Wheat Flour Bread                    99         5,680        $8,110.5
    Democratic                   ADRA  Cornmeal, Green Peas,                        21         5,410        $4,654.5
     Republic of                        Vegetable Oil, Wheat
     the Congo
                                  FHI  Cornmeal, Vegetable Oil,                      3         5,100        $4,465.7
                                        Wheat
                                  MCI  Cornmeal, Vegetable Oil,                      3         6,020        $5,223.1
                                        Wheat, Yellow Split Peas
    Ethiopia                      CRS  Bulgur, Corn Soy Blend,                     192        25,080       $17,066.5
                                        Rice, Vegetable Oil, Wheat,
                                        Yellow Split Peas
                                  FHI  Green Peas, Wheat                           195        19,690       $12,368.4
                                 REST  Vegetable Oil, Wheat, Yellow                755        46,070       $25,485.7
                                        Peas
                             SCF-UK *  --                                           --            --        $3,526.8
    Ghana                        OICI  Bulgur, Vegetable Oil, Wheat                  7         4,990        $4,500.0
    Guinea                       OICI  Cornmeal, Green Peas,                        14         1,400        $2,500.9
                                        Vegetable Oil
    Liberia                       CRS  Rice                                         --         4,860        $6,300.9
    Madagascar                   ADRA  --                                           --            --           $71.2
                                  CRS  Corn Soy Blend, Rice,                       135         3,640       $16,186.1
                                        Sorghum, Vegetable Oil
    Malawi                        CRS  Corn Soy Blend, Pinto Beans,                 34        25,230       $18,963.0
                                        Wheat, Vegetable Oil
    Mali                     Africare  Bulgur, Vegetable Oil                        37         1,600        $2,821.2
                                  CRS  Bulgur, Corn Soy Blend,                      63         5,120        $8,755.2
                                        Green Split Peas, Vegetable
                                        Oil
    Mauritania                    CPI  Bulgur, Corn Soy Blend,                      99         7,140        $5,000.1
                                        Lentils, Vegetable Oil,
                                        Wheat
    Mozambique                   ADRA  Wheat                                        --         8,830        $3,974.9
                                  FHI  Wheat                                        --         8,640        $3,654.2
                                  SCF  Wheat                                        --        16,550        $7,454.8
                                 WVUS  Wheat                                        --        11,540        $4,968.0
    Niger                    Africare  Red Beans, Rice                              14         3,400        $4,486.7
                          Counterpart  Corn Soy Blend, Rice,                        12         3,400        $3,038.5
                                        Vegetable Oil
                                  CRS  Bulgur, Rice                                 23         6,340        $6,568.7
    Rwanda                  ACDI/VOCA  Bulgur, Corn Soy Blend,                       3         1,010        $1,415.8
                                        Vegetable Oil
                                  CRS  Bulgur, Corn Soy Blend,                      26         1,810        $2,130.3
                                        Vegetable Oil
                                 WVUS  Bulgur, Corn Soy Blend,                      49         2,570        $3,815.5
                                        Vegetable Oil
    Senegal                       CPI  Bulgur, Corn Soy Blend,                      43         3,600        $3,355.1
                                        Lentils, Potato (flakes),
                                        Rice, Vegetable Oil
    Sierra Leone                 CARE  Bulgur, Vegetable Oil,                       27         9,460        $7,850.5
                                        Wheat, Yellow Split Peas
    Uganda                  ACDI/VOCA  Corn Soy Blend, Wheat,                       42        19,850       $12,748.6
                                        Vegetable Oil
                                  MCI  Corn Soy Blend, Cornmeal,                     8        10,170        $8,446.1
                                        Green Split Peas, Wheat,
                                        Vegetable Oil
    Zambia                        CRS  Bulgur, Lentils                              15         1,710        $8,002.2
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           2,212       307,660      $257,229.4
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                  WVUS  Rice, Vegetable Oil, Wheat                  138         8,190       $13,500.0
                                        Flour, Yellow Peas
    Bangladesh                   CARE  Vegetable Oil, Wheat, Yellow                228        50,100       $21,582.9
                                        Split Peas
                                  SCF  Vegetable Oil, Wheat, Yellow                180        18,320        $8,445.4
                                        Split Peas
    India                      CARE *  --                                           --            --        $6,000.0
                                  CRS  Bulgur, Vegetable Oil                       422         8,200        $7,465.5
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     968        84,810       $56,993.8
    ----------------------------------------------------------------------------------------------------------------
                                                 Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Guatemala                     CRS  Corn Soy Blend, Pinto Beans,                 85         4,310        $4,556.2
                                        Rice, Vegetable Oil
                                  MCI  Corn Soy Blend, Pinto Beans,                 16         3,370        $7,614.7
                                        Rice, Vegetable Oil
                                  SCF  Corn Soy Blend, Pinto Beans,                 12         5,540        $5,534.7
                                        Rice, Vegetable Oil
                                SHARE  Corn Soy Blend, Pinto Beans,                 17         4,110        $4,337.6
                                        Rice, Vegetable Oil
    Haiti                   ACDI/VOCA  Bulgur, Corn Soy Blend,                      44        17,710        $8,679.6
                                        Wheat, Vegetable Oil,
                                        Yellow Peas
                                  CRS  Bulgur, Corn Soy Blend,                      91        13,930       $10,297.9
                                        Green Peas, Vegetable Oil,
                                        Wheat
                                 WVUS  Bulgur, Corn Soy Blend,                     107        31,490       $16,522.5
                                        Lentils, Vegetable Oil,
                                        Wheat,
    Honduras                     ADRA  Corn Soy Blend, Red Beans,                   36           330        $1,310.1
                                        Rice, Vegetable Oil
                                  SCF  Corn Soy Blend, Red Beans,                    5           650        $2,451.9
                                        Rice, Vegetable Oil
                                 WVUS  Corn Soy Blend, Rice,                         4           440        $2,008.8
                                        Vegetable Oil
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America                                                      418        81,880       $63,314.0
                                                                    ================================================
        Worldwide Total                                                          3,597       474,350      $377,537.2
    ----------------------------------------------------------------------------------------------------------------
    Source: Metric tonnage and total cost values derived from FFP Preliminary Final Budget Summary Report, November
      24, 2009. Awardees listed as approved in cooperative agreements. Commodity types and recipients derived from
      Food for Peace Information System report, December 4, 2009. Recipient values are reflective of commodity
      rations and are derived separately from program beneficiary totals.
    * Some programs receive Section 202e and/or ITSH funds without receiving commodities in the same FY.

                          Appendix 6: USDA-CCC Funded_Food for Progress Grants_Fiscal Year 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                        Beneficiaries *                  Total Cost
        Country           Grantee                 Commodity                  (000s)        Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Ethiopia                     WOCCU  Wheat                                         37        23,000     $13,750.0
    Malawi                       FINCA  Wheat                                         21        10,000      $8,520.0
                                   PAI  Wheat                                        325        30,000     $26,620.0
    Mozambique                     PAI  Wheat                                        145        20,000      $8,746.0
    Niger                        IRD *  --                                            --            --        $416.7
                                 CRS *  --                                            --            --        $255.7
    Senegal                       NCBA  Soybean Oil                                    9         4,200      $8,330.0
                              Africare  Soybean Meal                                  15        16,500      $9,830.0
    Uganda                       FINCA  Wheat                                         25        15,000      $9,200.0
                    ------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                               577       118,700     $85,668.4
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Afghanistan                GIROA *  --                                            --            --         $73.7
                                   SFL  Wheat                                         30        25,000     $12,100.0
                                ROP **  Wheat Flour                                   14            --      $4,472.8
                                 GIROA  Soybean Oil                                   70        10,600     $17,500.0
    Bangladesh                      CU  Soybean Oil                                  829         4,850     $10,490.0
    Mongolia               MCI/CHOUF *  --                                            --            --      $1,703.5
    Pakistan                   WFP ***  --                                            --   --$13,283.0
                                  GoPk  Wheat                                      2,700        50,000     $30,800.0
                                        Soybean Oil                                   --         6,800            --
    Philippines                    CRS  Soybean Meal                                  10         9,000      $5,660.0
                             ACDI/VOCA  Soybean Meal                                  23        13,200     $10,500.0
                                   LOL  Soybean Meal                                  22         9,730      $8,699.9
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     3,698       129,180    $115,283.0
    ----------------------------------------------------------------------------------------------------------------
                                                         Europe
    ----------------------------------------------------------------------------------------------------------------
    Armenia                      WFP *  --                                            --            --         $15.6
                               UMCOR *  --                                            --            --        $143.2
                    ------------------------------------------------------------------------------------------------
      Sub-Total Europe                                                                 _             _        $158.8
    ----------------------------------------------------------------------------------------------------------------
                                                 Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Bolivia                      PCI *  --                                            --            --      $1,216.5
    Dominican                      BRA  Crude Vegetable Oil,                           8         1,350      $1,990.0
     Republic                            Vegetable Oil
                                   GDR  Wheat                                         --        25,000     $11,500.0
                    ------------------------------------------------------------------------------------------------
      Sub-Total Latin America/Caribbean                                                8        26,350     $14,706.5
                                                                      ----------------------------------------------
        Worldwide Total                                                            4,283       274,230    $215,816.6
    ----------------------------------------------------------------------------------------------------------------
    * Represents prior year agreements with costs incurred in FY 2009.
    ** Represents part of an FY 2008 award billed in FY 2009.
    *** Represents internal distribution costs only, no commodity costs.

         Appendix 7: McGovern-Dole International Food for Education and Child Nutrition Program_Fiscal Year 2009
                                           Donations by Country and Commodity
    ----------------------------------------------------------------------------------------------------------------
                                                                       Beneficiaries                    Total Cost
        Country          Grantee                 Commodity                 (000s)        Metric Tons      (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                         Africa
    ----------------------------------------------------------------------------------------------------------------
    Angola                        JAM  Corn Soy Blend                              200        14,400       $29,500.0
    Cameroon                      CPI  Beans, Rice, Vegetable Oil                   28         1,130        $2,850.0
    Chad                          WFP  Cornmeal, Vegetable Oil                     104         4,440        $5,504.1
    Ethiopia                      WFP  Corn Soy Blend, Vegetable                   160         3,910        $5,343.2
                                        Oil
    Guinea-Bissau                IPHD  Beans, Dehydrated Potatoes,                 105         9,020       $18,300.0
                                        Rice, Vegetable Oil
    Kenya                         WFP  Bulgur, Rice, Vegetable Oil,              1,100        11,900        $9,488.7
                                        Yellow Split Peas
    Liberia                       IRD  Soy Flour, Soy Protein                      135         7,260        $8,800.0
                                        Isolate, Wheat
                                  WFP  Beans, Rice, Vegetable Oil                    3           243          $170.4
    Malawi                        WFP  Corn Soy Blend                              400         5,520        $6,084.8
    Mozambique                    JAM  Rice, Wheat Soy Blend                       271         9,270        $7,800.0
    Niger                          RI  Corn Soy Blend, Rice,                        25         9,600       $13,200.0
                                        Vegetable Oil
    Rwanda                        WFP  Beans, Cornmeal, Vegetable                  300         8,020        $8,832.3
                                        Oil
    Sierra Leone                  CRS  Bulgur, Corn Soy Blend,                      55         1,330        $2,850.0
                                        Lentils, Vegetable Oil
    Uganda                        WFP  Corn Soy Blend, Cornmeal,                   245         5,680       $19,000.0
                                        Vegetable Oil
                   -------------------------------------------------------------------------------------------------
      Sub-Total Africa                                                           3,131        91,723      $137,723.5
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    Bangladesh                    WFP  Wheat                                       350        14,490        $5,315.5
    Cambodia                      IRD  Beans, Canned Salmon, Corn                   25         1,260        $1,230.0
                                        Soy Blend, Soybean Oil
    Laos                          WFP  Canned Salmon, Corn Soy                     100         2,010        $2,886.6
                                        Blend, Rice, Vegetable Oil
    Pakistan                      WFP  Vegetable Oil                               300         5,410        $7,000.0
                   -------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     775        23,170       $16,432.1
    ----------------------------------------------------------------------------------------------------------------
                                                 Latin America/Caribbean
    ----------------------------------------------------------------------------------------------------------------
    Guatemala                    FFTP  Beans, Corn, Rice, Salmon,                  260         3,660        $6,000.0
                                        Soybean Oil
                                SHARE  Beans, Corn Soy Blend, Rice,                 72         7,970        $8,259.2
                                        Soybean Meal, Vegetable Oil
                   -------------------------------------------------------------------------------------------------
      Sub-Total Latin America/Caribbean                                            332        11,630       $14,259.2
                                                                    ================================================
        Worldwide Total                                                          4,238       126,523      $168,414.8
    ----------------------------------------------------------------------------------------------------------------

     Appendix 8: Bill Emerson Humanitarian Trust: Summary Budget, Commodity, Recipient and Tonnage_Fiscal Year 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Total Cost
        Country           Grantee                 Commodity            Recipients (000s)   Metric Tons     (000s)
    ----------------------------------------------------------------------------------------------------------------
                                                     Asia/Near East
    ----------------------------------------------------------------------------------------------------------------
    North Korea                    MCI  Corn                                       941.2        21,000     $5,638.40
                    ------------------------------------------------------------------------------------------------
      Sub-Total Asia/Near East                                                     941.2        21,000     $5,638.40
                                                                      ==============================================
        Worldwide Total                                                              941        21,000      $5,638.4
    ----------------------------------------------------------------------------------------------------------------
    Source: Metric tonnage and total cost values derived from FFP Preliminary Final Budget Summary Report, November
      24, 2009. Awardees listed as approved in cooperative agreements. Commodity types and recipients derived from
      Food for Peace Information System report, December 4, 2009. Recipient values are reflective of commodity
      rations and are derived separately from program beneficiary totals.

      Appendix 9: Local and Regional Procurement Pilot Program_Fiscal Year
                                      2009
    ------------------------------------------------------------------------
                  Country                    Awardee       Total Cost (000s)
    ------------------------------------------------------------------------
    Malawi                                            WFP             $1,700
    Mali                                              WFP             $1,050
    Tanzania                                          WFP             $2,000
                                       -------------------------------------
      Sub-Total Africa                                               $4,750
                                                          ==================
        Worldwide Total                                               $4,750
    ------------------------------------------------------------------------

                      Appendix 10: Food for Peace Title II Congressional Mandates_Fiscal Year 2008
    ----------------------------------------------------------------------------------------------------------------
                                                                                                    Bagged in United
                            Minimum           Subminimum        Monetization       Value-added           States
    ----------------------------------------------------------------------------------------------------------------
    FY 2009 Target             2,500,000          1,875,000              15.0%              75.0%              50.0%
    Status as of               2,824,033            535,195              58.1%              53.9%              25.9%
     November 2009
    ----------------------------------------------------------------------------------------------------------------
    Minimum: Total approved metric tons programmed under Title II. Metric ton grain equivalent used to report
     against target.

    Subminimum: Metric tons for approved nonemergency programs through PVOs and community development organizations
     and WFP. Metric ton grain equivalent used to report against target.

    Monetization: Percentage of approved Title II programs that are monetization programs.

    Value-added: Percentage of approved nonemergency programs that are processed, fortified, or bagged.

    Bagged in U.S.: Percentage of approved nonemergency bagged commodities that are whole grain to be bagged in the
     United States.
    ----------------------------------------------------------------------------------------------------------------
    Source: FFP Preliminary Final Budget Summary Report, November 24, 2009.

     Appendix 11: Countries with U.S. International Food Assistance Programs
                       under the FFP Act_Fiscal Year 2009

    ------------------------------------------------------------------------
                              Title I (0 countries)
    ------------------------------------------------------------------------
                 Title I-Funded Food for Progress (2 countries)
    ------------------------------------------------------------------------
    Burundi            Central African
                        Republic
    ------------------------------------------------------------------------
                             Title II (54 countries)
    ------------------------------------------------------------------------
    Afghanistan        Algeria            Bangladesh        Bolivia *
    Burkina Faso       Burma *            Burundi           Cameroon
    Central African    Chad               Colombia          Cote d'Ivoire
     Republic
    Democratic         Djibouti           Ecuador *         Ethiopia
     Republic of the
     Congo
    Gambia *           Georgia            Ghana             Guatemala
    Guinea             Haiti              Honduras          India
    Indonesia *        Iraq *             Kenya             Lesotho *
    Liberia            Madagascar         Malawi            Mali
    Mauritania         Mozambique         Nepal             Nicaragua *
    Niger              Pakistan           Peru *            Philippines
    Rwanda             Senegal            Sierra Leone      Somalia
    Sri Lanka          Sudan              Syria *           Tajikistan
    Tanzania           Uganda             West Bank/Gaza    Yemen
    Zambia             Zimbabwe
    ------------------------------------------------------------------------
      Title II-Funded International Food Relief Partnership (23 countries)
    ------------------------------------------------------------------------
    Bolivia *          Cambodia           Cameroon          Central African
                                                             Rep.
    Dominican          El Salvador        Ethiopia          Georgia
     Republic
    Guatemala          Haiti              Honduras          Kenya
    Kyrgyzstan         Laos               Lesotho           Malawi
    Namibia            Nicaragua          Peru              Senegal
    Tajikistan         Uganda             Uzbekistan
    ------------------------------------------------------------------------
                             Title III (0 countries)
    ------------------------------------------------------------------------
                    Title V--Farmer-to-Farmer (23 countries)
    ------------------------------------------------------------------------
    Angola             Belarus            Bolivia           Dominican
                                                             Republic
    Egypt              Ethiopia           Georgia           Ghana
    Guyana             Haiti              Jamaica           Kenya
    Lebanon            Malawi             Mali              Moldova
    Mozambique         Nicaragua          Nigeria           Peru
    Tajikistan         Tanzania           Uganda
    ------------------------------------------------------------------------
                   CCC-Funded Food for Progress (14 countries)
    ------------------------------------------------------------------------
    Afghanistan        Armenia            Bangladesh        Bolivia
    Dominican          Ethiopia           Malawi            Mongolia
     Republic
    Mozambique         Niger              Pakistan          Philippines
    Senegal            Uganda
    ------------------------------------------------------------------------
                        Food for Education (18 countries)
    ------------------------------------------------------------------------
    Angola             Bangladesh         Cambodia          Cameroon
    Chad               Ethiopia           Guatemala         Guinea-Bissau
    Kenya              Laos               Liberia           Malawi
    Mozambique         Niger              Pakistan          Rwanda
    Sierra Leone       Uganda
    ------------------------------------------------------------------------
                   Bill Emerson Humanitarian Trust (1 country)
    ------------------------------------------------------------------------
    North Korea
    ------------------------------------------------------------------------
                     Procurement Pilot Project (3 countries)
    ------------------------------------------------------------------------
    Malawi             Mali               Tanzania
    ------------------------------------------------------------------------
    * Active program(s) funded in previous fiscal year(s).

                           AGRICULTURAL PROGRAM AUDIT

                    (EXAMINATION OF USDA FARM LOAN PROGRAMS)

                                  ----------

                            THURSDAY, JULY 14, 2011

        Subcommittee on Department Operations,
                         Oversight, and Credit,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 2:00 p.m., in
    Room 1300, Longworth House Office Building, Hon. Jeff
    Fortenberry [Chairman of the Subcommittee] presiding.
        Members present: Representatives Fortenberry, Crawford,
    Fudge, McGovern, Baca, and Owens.
        Staff present: Tamara Hinton, Brandon Lipps, Josh Maxwell,
    John Porter, Debbie Smith, Pelham Straughn, Heather Vaughan,
    Liz Friedlander, Anne Simmons, Suzanne Watson, John Konya, and
    Jamie Mitchell.

    OPENING STATEMENT OF HON. JEFF FORTENBERRY, A REPRESENTATIVE IN
                         CONGRESS FROM NEBRASKA

        The Chairman. The Subcommittee on Department Operations,
    Oversight, and Credit hearing entitled, Agricultural Program
    Audit: Examination of USDA Farm Loan Programs, will come to
    order.
        I would like to welcome our guests. Good afternoon. Thank
    you for joining us here at the fifth farm bill audit hearing.
    These audits help Members of the Agriculture Committee gather
    data on farm programs so that we can evaluate each of them for
    effectiveness and efficiency. Having accurate and comprehensive
    information on current farm policy will help us develop the
    next farm bill in an integrated fashion so we can best serve
    America's farmers and ranchers.
        We are joined today by Bruce Nelson. Mr. Nelson is the
    Administrator of the Farm Service Agency. The Farm Service
    Agency administers several loan programs that ensure that
    farmers, ranchers and rural businesses have access to the
    credit they need to purchase and maintain their operations.
        It is difficult to imagine an industry that is more reliant
    on credit and access to capital than farming and ranching. Farm
    equipment can run upwards of $\1/2\ million. Combines cost more
    than most homes, especially here on Capitol Hill. And the cost
    of land can be prohibitive in and of itself. For beginning
    farmers with no credit history, obtaining a loan can be
    impossible.
        My district is home to a growing community of farmers who
    raise food specifically for local farmers markets and other
    emerging food retailers. With little historical data on farmers
    producing for new markets, commercial credit institutions are
    sometimes reluctant to offer them credit. Farm Service Agency
    loan programs ensure that new farmers have access to the credit
    they need to get started.
        It isn't only the new farmers that need access, however.
    All farmers operate in a risky environment subject to volatile
    swings in both weather patterns as well as commodity prices.
    The swings and the effect on farm income can cause commercial
    credit markets to tighten. The Farm Service Agency loans ensure
    that farmers don't lose access to credit during such difficult
    times.
        Today we will hear how the Farm Service Agency administers
    its loan programs and how these programs are received in the
    countryside.
        I don't think I need to remind anyone here that we are
    operating in a challenging fiscal environment. Today's audit
    will help us prioritize the programs that are most valuable to
    America's farmers and ranchers while making the most efficient
    use of the taxpayer dollar.
        Mr. Nelson, thank you for joining us today, and I look
    forward to hearing your testimony and learning how we may
    actually improve our loan programs.
        [The prepared statement of Mr. Fortenberry follows:]

       Prepared Statement of Hon. Jeff Fortenberry, a Representative in
                             Congress from Nebraska
        Good afternoon. Thank you all for joining us here today at the
    fifth farm bill audit hearing.
        These audits help Members of the Agriculture Committee gather data
    on current farm programs so that we can evaluate each of them for
    effectiveness and efficiency. Having accurate and comprehensive
    information on current farm policy will help us develop the next farm
    bill in an integrated fashion, so that we can better serve America's
    farmers and ranchers.
        We are joined today by Bruce Nelson, the Administrator of the Farm
    Service Agency.
        The Farm Service Agency administers several loan programs that
    ensure farmers, ranchers and rural businesses have access to the credit
    they need to purchase and maintain their operations.
        It's difficult to imagine an industry more reliant on credit and
    access to capital than farming and ranching. Farm equipment can run
    upwards of $\1/2\ million. Combines cost more than most homes. It's
    cheaper to buy a house on Capitol Hill than it is to buy certain cotton
    pickers. And the cost of land can be prohibitive in and of itself.
        For beginning farmers with no credit history, obtaining a loan can
    be impossible. My district is home to a growing community of farmers
    who raise food specifically for local farmers' markets and other
    emerging food retailers. With little historical data on farmers
    producing for new markets, commercial credit institutions are sometimes
    reluctant to offer them credit. Farm Service Agency loan programs
    ensure that new farmers have access to the credit they need to start
    farming.
        It isn't only new farmers that need access to credit; however. All
    farmers operate in a risky environment, subject to volatile swings in
    both weather patterns and commodity prices. These volatile swings and
    the effect on farm income can cause commercial credit markets to
    tighten. The Farm Service Agency loans ensure that farmers don't lose
    access to credit during difficult times.
        Today we will hear how the Farm Service Agency administers its loan
    programs and how these loans are received in the countryside.
        I don't think I need to remind anyone here that we are operating in
    a challenging fiscal environment. Today's audit will help us prioritize
    the programs that are most valuable to America's farmers and ranchers,
    while making the most efficient use of taxpayer dollars.
        Mr. Nelson, thank you for joining us today. I look forward to
    hearing your testimony and learning how we might improve our loan
    programs.

        The Chairman. With that, I would also like to recognize our
    Ranking Member, Ms. Fudge, from Ohio, for any opening
    commentary she might have.

    OPENING STATEMENT OF HON. MARCIA L. FUDGE, A REPRESENTATIVE IN
                           CONGRESS FROM OHIO

        Ms. Fudge. Thank you very much, Mr. Chairman, and thank you
    for holding this hearing to review the Farm Service Agency
    credit programs. This hearing is a good complement to the
    information we gathered during the April hearing on national
    credit conditions. The testimony offered and questions asked
    today will help move us a step closer to understanding and
    addressing credit concerns for producers in the next farm bill.
        So I am pleased to have the opportunity to both listen to
    and ask questions of Mr. Nelson again. Thank you, sir.
        As I mentioned in April, I represent Cleveland and many of
    its eastern suburbs. So there are not a lot of farms in my
    district. However, the farmers who grow food close to my
    district are very important to me. Like many urban communities,
    Cleveland is one of the largest food deserts in the nation.
    Fresh fruits and vegetables are not plentiful or affordable in
    my district. Many of my constituents depend on food banks, and
    my food banks depend on locally grown produce.
        Thankfully, farmers markets and urban gardening are
    becoming more prevalent. Many people are struggling to make
    ends meet during these hard economic times, so these outlets
    are vital considering the high cost of fruits and vegetables.
        With that said, I am concerned about the soundness and
    adequacy of the credit extended to farmers by the FSA and how
    that affects the affordability and availability of food in
    urban areas like Cleveland.
        Additionally, I look forward to learning how agricultural
    lenders are responding to some of the developments I see in our
    cities and suburban areas like the increased interest in
    locally produced foods and the real problem of food deserts. I
    want to ensure that FSA is meeting the needs of young and
    innovative producers who can fill these gaps.
        Finally, I want to make sure that FSA is reaching out to
    minority farmers with adequate and equal credit. This has been
    a difficult and ongoing problem at USDA, and although progress
    appears to have been made, it is our responsibility to ensure
    that both the structure and the implementation of FSA programs
    is fair. Sufficient and unbiased access to credit is critical
    for successful farming and ranching operations of all sizes in
    all states and locales.
        So again, welcome to our witness. I look forward to hearing
    your testimony.
        Thank you very much, Mr. Chairman. I yield back.
        The Chairman. We are also joined today by the gentleman
    from New York, Mr. Owens, who is not a Member of this
    Committee, but who in consultation with the Ranking Member, we
    are happy to have on the panel for questions later.
        Mr. Owens. Thank you very much. I appreciate it, Mr.
    Chairman.
        The Chairman. We move now to our witness. Mr. Bruce Nelson
    is the Administrator of the Farm Service Agency, and he is
    accompanied by Mr. Jim Radintz, the Assistant Deputy
    Administrator of the Farm Service Agency.
        Mr. Nelson, please begin.

    STATEMENT OF BRUCE NELSON, ADMINISTRATOR, FARM SERVICE AGENCY,
     U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.; ACCOMPANIED
                            BY JIM RADINTZ,
               ASSISTANT DEPUTY ADMINISTRATOR, FSA, USDA

        Mr. Nelson. Mr. Chairman and Members of the Committee,
    thank you for the opportunity to discuss credit conditions in
    rural America. I am Bruce Nelson, Administrator of the Farm
    Service Agency, and today I look forward to giving you an
    overview and an update of FSA's farm loan programs.
        Farmers and ranchers who are unable to obtain commercial
    credit can turn to FSA's Farm Loan Program. While we have been
    known as the lender of last resort by some, we have really
    become the lender of first opportunity to many in rural
    America. FSA assists farmers through both direct and guaranteed
    loan programs. Direct loans are made and serviced by FSA
    employees, and direct loans are not intended to be a permanent
    source of credit; rather, they are intended to help borrowers
    transition to commercial credit. Guaranteed loans are made and
    funded by a commercial lender. FSA guarantees up to 95 percent
    of the loan principal and interest, and guaranteed lenders are
    then accountable for loan servicing under this guarantee.
        FSA farm loan programs are discretionary programs funded
    through annual appropriations, and because the vast majority of
    these loans are repaid, FSA loans carry a low cost for the
    taxpayer. Last year, for example, $155 million in
    appropriations supported over $5.2 billion in loans, and as of
    June 30 of this year, $124.8 million in Fiscal Year 2011
    appropriations have supported more than $3.9 billion in
    lending.
        As in recent years, demand for loans has remained quite
    high. While higher commodity prices have benefited some
    producers, rising input costs such as feed, fuel, and
    fertilizer have remained high. In addition, as land prices
    continue to rise, commercial lenders in many regions are
    maintaining tight credit standards in general. All of these
    factors contribute to continuing demand for FSA loans.
        Term limits on FSA loans have also affected credit
    availability. Federal statute presently limits borrowers with
    guaranteed operating loans to 15 years of eligibility. This has
    been suspended in the past, but the latest suspension expired
    on December 31 of last year, making about 4,500 guaranteed loan
    borrowers ineligible for further guaranteed loans as a result.
        We at FSA are always working to improve the way we
    administer and service loans. In Fiscal Year 2010, I am proud
    to report that the loss rate in the Direct Loan Program fell to
    1.2 percent, its second lowest level since 1986. The direct
    loan delinquency rate stood at 5.6 percent in Fiscal Year 2010,
    its lowest point in 2 decades. And the direct loan foreclosure
    rate stood at just \1/10\ of 1 percent last year.
        While working to keep trouble loan numbers low, we are also
    able to graduate more than 2,000 direct loan borrowers to a
    guaranteed loan last year. This is a very important progress
    because helping farmers build relationships with their
    community lenders is a key step in establishing their future
    success in agriculture.
        We are also processing loans more quickly than ever before.
    This improvement is largely due to modernized IT systems which
    help our field office staff to deliver our programs more
    efficiently. Support in Congress for these critical
    infrastructure improvements has made these great strides and
    service possible, and I am grateful for that support.
        Finally, I would like to speak on the issue of equal access
    to our loans.
        Secretary Vilsack has been extremely clear that improper
    treatment of those that USDA and FSA serve will not be
    tolerated. Under this Secretary's leadership, FSA has improved
    processing of civil rights complaints, and we have requested an
    external analysis of our field office program delivery. Our
    team here in Washington and across the country shares my
    commitment and Secretary Vilsack's commitment to equal access
    and opportunity for all those customers that FSA serves.
        Mr. Chairman and Members of the Subcommittee, again thank
    you for allowing me to share this snapshot of FSA loan
    activities with you, and I am available to answer your
    questions now or at anytime in the future.
        Thank you very much.
        [The prepared statement of Mr. Nelson follows:]

    Prepared Statement of Bruce Nelson, Administrator, Farm Service Agency,
                U.S. Department of Agriculture, Washington, D.C.
        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to appear before you to provide an update on the credit
    conditions rural America now faces and the current status and
    operations of the farm loan programs at the Farm Service Agency (FSA).
    Credit Conditions
        The farm economy strengthened in 2010. However, farm income,
    especially net farm income, is very unevenly distributed. Much of the
    improvement in farm economic conditions is driven by higher commodity
    prices. While higher prices have been beneficial for some crop
    producers, they have also resulted in higher feed costs which are
    squeezing profits among livestock and dairy producers.
        A combination of higher commodity and energy prices is
    significantly increasing the amount of capital required to finance
    agricultural production. Crop-related expenses grew 77 percent between
    2002 and 2008, and are expected to rise by 9.5 percent in 2011.
    Livestock expenses increased by 64.4 percent between 2002 and 2008, and
    are forecast to increase by 6.8 percent in 2011. These higher
    production costs increase the demand for operating credit, increase
    financial leverage, and strain liquidity.
        Recent Federal Reserve Surveys indicate commercial lenders in most
    regions are continuing to maintain stringent credit standards.
    Concerned that a combination of factors may be pushing farmland values
    quite high, the Federal Deposit Insurance Corporation has issued
    guidance to its examiners to scrutinize farm loans more rigorously,
    particularly in financial institutions with a concentration of farm
    lending. The combination of high feed and other input costs, increased
    operating capital needs, and a continued high level of loan scrutiny by
    lenders means some farmers are still being denied commercial credit.
        FSA Farm Loan Programs. Family farmers who are denied commercial
    credit due to lender standards, but are otherwise creditworthy, can
    turn to the farm loan programs administered by FSA. The Agency assists
    farmers through direct and guaranteed farm loans. Direct loans are made
    and serviced by FSA; agency employees provide supervision and technical
    assistance to direct loan borrowers. Direct loans are not intended to
    be a permanent source of credit and borrowers agree to obtain
    commercial credit and refinance their FSA debts when they are able to
    do so.
        Guaranteed loans are made, funded and serviced by a commercial
    lender. FSA typically guarantees up to 90 percent of the loan principal
    and interest. FSA employees must evaluate and make a credit decision on
    all guaranteed loans. Guaranteed lenders must retain at least the non-
    guaranteed portion of the loan in their portfolio and are accountable
    for loan servicing under the FSA guarantee.
        Funding. FSA farm loan programs are discretionary programs funded
    through annual appropriations. In accordance with the Federal Credit
    Reform Act of 1990 (as amended), appropriations for FSA farm loans are
    based on the projected total cost of loans when they are made. Federal
    budget resources are able to be significantly leveraged through the
    loan programs. In Fiscal Year (FY) 2010, for example, $155.3 million in
    appropriations supported $5.29 billion in direct and guaranteed FSA
    loans.
        Loan Demand. Activity in FSA's farm loan programs indicates that a
    significant number of farmers continue to be unable to obtain
    commercial credit under current conditions. Farm loan program demand is
    usually a reflection of financial conditions in the farm economy: when
    the over-all farm economy is strong, farm loan activity declines;
    during times of financial stress in the farm economy, demand for FSA's
    loans rises. This makes sense, since a basic requirement to qualify for
    the loan programs is to be unable to meet the criteria for commercial
    credit.
        In early FY 2009, loan demand surged to levels that had not been
    seen since the early 1980s. Demand for farm loan program assistance in
    FY 2009 and FY 2010 reached its highest levels since FY 1985. Demand
    has continued at, and in some programs increased above, those near-
    record FY 2009 levels (Chart 1). Use of the guaranteed farm ownership
    program in FY 2010 reached an all-time high. FY 2010 direct operating
    and farm ownership obligations nearly doubled compared to FY 2008
    levels. Application activity in FY 2011 reflects demand levels similar
    to the higher levels of FY 2009 and FY 2010. The demand for new loans
    in FY 2011 is in addition to the credit provided through the $7.97
    billion in direct loans and $10.35 billion in guaranteed loans
    outstanding in the FSA portfolio at the beginning of the fiscal year To
    manage the increase demand, FSA has proposed shifting budget authority
    from the guaranteed operating loan interest assistance program, where
    demand is down, to the direct operating loan program and the guaranteed
    farm ownership loan program, where a shortfall is expected. On June 27,
    2011 Secretary Vilsack signed letters to the Chairmen and Ranking
    Members of the appropriate Appropriations Subcommittees of the House
    and Senate, advising them of the proposed transfer. The planned
    transfer will fund the approved and pending applications for direct
    operating loans and provide adequate guaranteed ownership funding for
    the remainder of FY 2011. Some, but not all of the unfunded direct
    ownership loans will be funded from other transfers that are required
    by law in August and September.
        Over the past 2 years, an unusually high number of direct operating
    loan applications have been received from new customers. Normally,
    about 20 percent of direct operating loan applications in any given
    year are from farmers who do not have FSA loans. Since 2009, over 40
    percent of direct operating loan applications have been from farmers
    who are not FSA borrowers. As of July 7, 2011, 44 percent of the direct
    operating loans made in FY 2011 were to customers who did not have
    existing FSA operating loans.
    Performance and Portfolio Conditions
        Farm loan programs continue to emphasize the importance of
    processing applications in a timely manner. Between FY 2001 and FY
    2011, farm loan programs reduced its direct loan application processing
    timeframes by 11.5 days (31 percent), and reduced guaranteed loan
    processing timeframes by 2 days (ten percent). As of March 30, 2011,
    the average time from application receipt to final decision for direct
    loans was 27.8 days, and for guaranteed loans, 9.4 days. It is
    remarkable that even though loan demand has surged, there has not been
    a noticeable deterioration in application processing time. This is a
    testament to the dedication of FSA field staff and the effectiveness of
    the Information Technology (IT) solutions farm loan programs has
    deployed.
        As of June 30, 2011, the FSA direct loan portfolio consisted of
    $8.14 billion owed by 70, 937 borrowers, while the guaranteed portfolio
    consisted of $10.86 billion owed by 34,832 borrowers. The quality of
    our portfolio has continued to improve, with foreclosure and loss rates
    falling while borrower ``graduation'' to commercial loans has
    increased.
        Loss Rates. In FY 2010, losses in the direct loan program fell to
    their second lowest level since 1986--just 1.2 percent (Chart 2).
    Losses for FY 20l0 in the guaranteed loan program were 0.6 percent,
    (Chart 2).
        Delinquency Rates. As with losses, the direct loan delinquency
    rates have been at historic lows for the past 2 decades at 5.9 percent
    for FY 2010 (Chart 3). This is the result of steady and dramatic
    decreases, from a 23.8 percent delinquency rate in FY 1995. The
    decrease was facilitated by expanded authority, since 1996, to offset
    delinquent borrowers' loan obligations with their Federal payments,
    salaries and income tax refunds. In the guaranteed program, the FY 2010
    delinquency rate was 1.69 percent, the second lowest since 1995 (Chart
    3).
        Foreclosures. Foreclosure rates continue to be very low in the
    direct loan program. In 2010, FSA completed 64 foreclosures. This
    represents less than \1/10\ of 1 percent of the agency's direct loan
    caseload of 70,905 (as of September 30, 2010). The extremely low
    foreclosure rate is the result of the use of all available servicing
    tools and a structured review process to ensure that all options to
    assist the borrower have been exhausted before a foreclosure action is
    started.
        Inventory Properties. Inventory farm properties those that have
    come into government ownership through voluntary conveyance or
    foreclosure are also at historic lows, with just 86 farms totaling
    10,900 acres in FY 2010 (Chart 4). In 1995, FSA held nearly 1,800 farms
    totaling 598,000 acres. Many of those inventory properties were sold to
    established and beginning farmers, providing those individuals with
    prime opportunities to expand or create new operations.
        Graduation Rates. Federal law requires FSA to ``graduate'' its
    borrowers to commercial credit when they have made sufficient progress
    to be able to qualify for loans from other lenders. They are assisted
    by the agency in refinancing their direct loans with FSA guaranteed
    loans from commercial lenders. Some 2,221 direct loan borrowers were
    able to graduate in FY 2010.
    Equitable Treatment and Participation
        Secretary Vilsack has been extremely clear that improper and
    inequitable treatment of individuals the United States Department of
    Agriculture (USDA) and FSA serve will not be tolerated. On April 21,
    2009, the Secretary announced several actions in a comprehensive
    approach to ensure fair and equitable treatment of USDA employees and
    constituents. These actions included an initiation of several
    improvements in processing civil rights complaints, requesting an
    external analysis of program delivery by USDA service center agencies,
    and 90 day suspension of FSA farm foreclosures, which has provided us
    time to ensure that all producers have received their statutory
    protections. In FY 2010, while FSA received more than 48,000 loan
    applications, more than 4,000 loan servicing requests, and tens of
    thousands of applications for various farm commodity, support, and
    disaster programs, the Assistant Secretary for Civil Rights received
    only 37 civil rights complaints related to FSA programs. While this is
    the lowest number of FSA civil rights complaints received since records
    have been kept, it is our goal to further reduce this number.
        I, along with all members of the FSA management team, remain fully
    committed to providing to equal access and opportunity for all those
    FSA serves. I will closely monitor the operations of farm loan programs
    and all other FSA programs to assure that our producers, program
    applicants, and employees receive fair and equitable treatment. I want
    to update you on a few key activities dealing with these important
    issues.
        Program participation. An examination of the composition of FSA's
    loan portfolio indicates that FSA finances socially disadvantaged
    farmers at a much higher rate than that groups' proportion of the farm
    population (Chart 5). FSA has significantly increased the amount of
    loan funds provided to socially disadvantaged applicants. Between 1995
    and 2010, the FSA direct loan caseload for socially disadvantaged
    borrowers increased from 3,260 to 14,840. Between 1997 and 2010, the
    FSA guaranteed loan caseload for socially disadvantaged borrowers
    increased from 1,730 to 2,998.
        In the 2008 Farm Bill, Congress re-affirmed the focus for FSA
    programs on beginning farmers and ranchers. FSA continues to strive to
    reach more beginning farmers and ranchers and has increased the amount
    of loan funds provided to beginning farmers and ranchers. The FSA
    direct loan caseload for beginning farmers increased from 3,474 in 1995
    to 27,111 borrowers in 2010. Guaranteed caseloads for beginning farmers
    and ranchers were first reported in 1997. The FSA guaranteed loan
    caseload for beginning farmers increased from 3,617 in 1997 to 9,477
    borrowers in 2010.
        IT Modernization. Farm loan programs has also implemented modern,
    Web-based systems to manage the loan application, approval and funding
    process. This system provides real-time management data on application
    activity and allows the Agency to better cope with funding problems and
    act quickly when necessary. For example, when the Agency received
    supplemental funding in the American Revitalization and Recovery Act,
    over 2,000 farmers were waiting for desperately needed direct operating
    loans to pay 2009 planting and other farming expenses. When funds were
    made available to FSA, the Agency was able to process obligations
    overnight, and funds began flowing into farmers' bank accounts only 3
    days later. I am proud to say that FSA was one of the first agencies in
    the government to get recovery dollars flowing to those who desperately
    needed it. The modern, web-based IT systems in place for farm loan
    programs, such as the Direct Loan System (DLS) and the Program Funds
    Control System (PFCS), were a key factor in our ability to provide such
    timely service.
        This past year we have completed the final phase of moving all
    automated farm loan systems to the Web. With the completion of this
    project, duplicate data collection is eliminated and farm loan services
    are being delivered even more efficiently This project allows our
    employees to conduct USDA business from any location where there is
    broadband, WiFi or dial-up Internet access. This allows us to conduct
    business with producers at locations and times convenient to them.
    Additionally, this information is stored on a centralized server
    allowing employees to quickly access portfolio information and provide
    real time management reports. FLP staff no longer relies on antiquated
    operating environments for program delivery.
        In addition to the business plan and loan accounting systems, other
    IT systems have been developed and implemented which also enhance the
    efficiency of FSA employees. Agency appraisers have recently been
    provided state of the art agricultural software that allows collateral
    valuations to be done more expeditiously, which facilitates faster
    access to capital for loan applicants. Automated Web-based systems have
    been developed for program oversight, including Farm Loan Programs Risk
    Assessment (FLPRA) and the District Director Oversight System (DDORS),
    which help to ensure the integrity of FSA's farm loan programs.
    Conclusion
        Through modernization efforts, maintaining focus on program
    objectives, and the hard work and dedication of FSA employees, FSA farm
    loan program staff has made great strides in improving program
    performance. Loan failures and losses have declined which is a strong
    indication that the program mission of helping farmers become
    successful is being accomplished. At the same time, increased
    assistance to small, beginning, and socially disadvantaged farmers,
    reflects remarkable success as well.
        However, we continue to face challenges. Government resources are
    increasingly limited and the agriculture production landscape is
    changing. It will require every bit of innovation, management
    expertise, and determination that we can muster to maintain the
    efficiency and efficacy of farm loan programs over the next several
    years.
        We are experiencing a unique set of conditions in the credit and
    banking sectors, and to a large extent, in agriculture. These changes
    pose significant barriers and challenges to the groups that FSA farm
    loan programs are intended to assist. These issues create major
    challenges for the agency as well, since the success of the program
    depends on those whom the programs are intended to serve. To keep pace
    with these changes, we look forward to working with you to continue
    efforts to modernize our delivery systems, and to refine and adjust
    program requirements and operations to maximize the opportunities for
    our nation's small, beginning, and socially disadvantaged farmers and
    ranchers.
        Because of our rural delivery system and experienced loan officers,
    FSA's farm loan programs staff is well positioned to continue providing
    high quality delivery of existing programs and new initiatives to
    assist small, beginning, and socially disadvantaged family farmers. We
    look forward to working with this Subcommittee to address the
    challenges we face in accomplishing this worthwhile mission to
    strengthen family farmers and rural America.
        Thank you for allowing me to share our Department of Agriculture
    perspective as you seek to address this important issue. I am available
    to answer your questions now or at any time in the future.
                                     Charts
    Chart 1
    Total All Loans
    Comparison of Obligations
    (in Billion Dollars)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chart 2
    Farm Loan Programs Loss Rates
    10 Year Trend

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chart 3
    Farm Loan Programs Dollar Delinquency Rate
    10 Year Trend

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chart 4
    Farm Loan Programs Inventory Property

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                                         Chart 5
                                           FY 2010 Borrower Case Load by Race
                                          (As Compared to 2007 Ag Census Data)
    ----------------------------------------------------------------------------------------------------------------
                                                                   Percent of                          Percent of
                            Percent of 2007   Percentage of FY  Population being  Percentage of FY  Population being
                               Ag  Census       2010  Direct      served by FSA    2010 Guaranteed    served by FSA
                               Population         Caseload         Direct Farm        Caseload       Guaranteed Farm
                                                                      Loans                               Loans
    ----------------------------------------------------------------------------------------------------------------
                White               96.45              89.15              2.99             95.53              1.56
                Black                1.40               3.10              7.18              0.53              0.60
        Asian/Hawaiin                0.57               0.89              5.00              2.21              6.05
    Amer Ind./AI Nat.                1.58               3.46              7.07              1.58              1.57
           Hispanic *                 N/A               3.31               N/A              0.11               N/A
                Other                 N/A               0.10               N/A              0.04               N/A
    ----------------------------------------------------------------------------------------------------------------
    Hispanic Americans are not a separate category within the 2007 Census of Agriculture; therefore, no reliable
      comparison can be established.

        The Chairman. Thank you, Mr. Nelson.
        Let me begin with the questions, then I will turn to our
    Ranking Member.
        Let's talk about this issue of the term of the guaranteed
    loan. There seems to be--let's just unpack that further as to
    the policies that led to the 15 year term, and suspension of
    the term so that it could be extended into much longer periods
    of time. Yet that has to be held in comparison with wanting
    people to move actually away from this type of product, this
    type of guarantee, particularly if they are in a successful
    situation.
        So what do you anticipate emerging in this regard?
        Mr. Nelson. Mr. Chairman, I really appreciate your question
    because it gives an opportunity not only to talk about the
    issue of possibly extending the term limits, but it gives me an
    opportunity to emphasize that the vast majority of FSA
    borrowers do stay within the term limits.
        For example, for our operating loans, the average time of
    participation of our borrowers is between 5\1/2\ and 6 years.
    And for the farm ownership loans, it is about 12 years. So
    again, I think it is important to have on the record the fact
    that, again, the vast majority of the borrowers stay within the
    term limits.
        But I am a farmer from out in Montana. My family has been
    there for about 100 years on the place that my grandparents
    homesteaded. And like a lot of families, most of the farmers
    and ranchers around the country are in business for 40 or 50
    years, and it is likely that in that 40 to 50 year period that
    you are going to have 10 or 15 or 20 bad years because of, for
    example, low commodity prices or disaster situations that are
    beyond the control of the individual producer.
        Now, we have recognized, as you mentioned in your opening
    statement, that there are inherent risks in agriculture that
    are beyond the control of individual producers, and it is why
    the ag safety net was created in the first place. And we have
    also realized that if you have enough hard years that affect
    enough producers, you can actually affect the food security of
    the nation.
        So what I would ask you to consider on term limits is some
    flexibility so that we at FSA can look at the individual
    borrower on a case-by-case basis and determine whether or not
    the fact that that producer may need to have a term extension
    is because of factors beyond their control, again because of
    low commodity prices or disaster situations, or whether it was
    something that was within the producer's control. And in the
    case where it was something that happened to them because of
    situations beyond their control or factors beyond their
    control, we ought to have the flexibility to look at extending
    the term, but where it was something that was clearly within
    the producer's control, then we probably shouldn't.
        The Chairman. How is this balanced with the dual
    responsibility the agency has to graduate farmers to the
    commercial loan market?
        Mr. Nelson. Well, I believe that always ought to be our
    objective and, as I mentioned in my statement, we were proud to
    graduate over 2,000 borrowers last year, and that needs to
    become the intention and continue to be the intention.
        The Chairman. What percent is that of the overall program?
        Mr. Nelson. We have about 70,000, I believe, borrowers in
    the Direct Loan Program. So that was 2,000 of 70,000, and we
    will make sure that we clarify those numbers if I don't have it
    right, Mr. Chairman.
        The Chairman. Okay. With that, I will turn to our Ranking
    Member for any questions she may have.
        Ms. Fudge. Thank you very much, Mr. Chairman. I have just a
    few quick questions.
        Mr. Nelson, in the district I represent, instead of having
    the traditional farmers obviously, we have young innovators and
    creative entrepreneurs who are growing gardens on rooftops or
    on abandoned lots and turning them into thriving farms. And
    there are many who garden indoors because we have very harsh
    winters in Ohio, which I am sure you know. And we encourage
    this kind of gardening.
        So while they aren't your garden variety farmers, they do
    consider themselves farmers and do need financial assistance.
    Under your rules, are these producers qualified for FSA loans?
        Mr. Nelson. That is another good question because again,
    there is an impression out there that because our loan program
    is agricultural in nature that that means it is strictly rural
    in nature. That is not the case because our agricultural loans
    are available for producers whether they are in the middle of a
    city, or in the suburbs, or out in the rural countryside.
        And so this is a good opportunity to help get the word out
    about that because we do have examples in the Farm Service
    Agency of having made loans around the country for just the
    type of roof-type gardens that you are talking about, for small
    apiaries that are in or near cities, and also for community-
    sponsored agriculture, CSA, so that we can help local producers
    create the food networks to supply food to food deserts like
    your hometown of Cleveland.
        Now, the Department of Agriculture has started on a ``Know
    Your Farmer--Know Your Food'' Program and I like that, as a
    dryland wheat farmer from Montana, because that helps get the
    word out to the American people about the importance of
    agriculture. It is a program designed to make them understand
    and appreciate farmers and ranchers. But also in the situation
    you are talking about, it is a program designed to help link up
    those local producers with local markets.
        Now, one thing I will say, though, is we are pretty new to
    urban areas, and so we could certainly use some help from you
    folks in terms of how better to serve the agricultural
    producers in our cities.
        Ms. Fudge. And I appreciate that because you are saying to
    me that you are trying to find ways to work with the very
    people that we are talking about. And I would like to at some
    point talk to you further about that because I think it is very
    important. And I am glad to see that you are taking the
    initiative to find ways to work with that particular population
    of farmers. So I thank you.
        My last question is can you give us just a brief update on
    how the reduced funding in the Continuing Resolution will
    affect credit programs. And specifically, how has FSA been able
    to weather the cuts to the Agriculture Credit Insurance Fund of
    some $430 some odd million and to the Farm Assistance Fund of
    another $44 million.
        Mr. Nelson. Under the 2011 Appropriations Act, and I am
    going to turn this over to Jim in a minute, we were given the
    authority to transfer funds. And so pursuant to that authority,
    back on June 27 Secretary Vilsack did notify the appropriators
    of our intention to transfer funds from the Guaranteed Interest
    Assist Program, where there wasn't as much demand, into the
    Direct Operating Loan Program. And we anticipate that if that
    transfer goes through, which we haven't heard any issues that
    the appropriators have had with it, that we will be able to
    cover our direct operating loan demand.
        We also do have a backlog on the farm ownership side, and
    there are target designations that will come off some of our
    loans in August and September that will free up those funds to
    hopefully cover our farm ownership approved loans out there.
        Jim, do you have anything to add to that.
        Mr. Radintz. I just would clarify that while we will be
    able to use some of those transfers late in the year to address
    some of the backlog, there will be some folks with approved
    direct ownership loans that won't be funded until fiscal 2012
    because even with the transfers we just have more demand than
    we will be able to have funding for.
        Ms. Fudge. Thank you so much. Mr. Chairman, I yield back.
        The Chairman. I thank the Ranking Member. I should inform
    the Members of the Committee that votes have been called. I
    think if we can all aggressively manage time we might be able
    to get through, each Member will have a question if it is kept
    at about 2 minutes. So with that I will turn to Mr. Crawford.
        Mr. Crawford. Okay. Real quick. Mr. Nelson, I understand
    that by law emergency loans offered by the SBA are not
    available to farmers although they once were back in the 1980s
    and that change was made in 1986 because some viewed that as a
    degree of overlap. At this time, the loan structure of SBA
    loans is actually a lot more favorable than FSA, giving SBA
    borrowers lower interest rates, longer periods of maturity and
    higher loan amounts. I am wondering if there is any way we can
    model the FSA emergency loans after the SBA loans to get those
    more favorable rates and terms.
        Mr. Nelson. Congressman Crawford, I am going to turn that
    over to Mr. Radintz because my experience in history with Farm
    Service Agency lending program is that we work together with
    the Small Business Administration. And so in emergency
    situations, if there is a Secretarial designation, FSA
    emergency loans are triggered for farmers and ranchers along
    with SBA assistance to the Main Street businesses that are also
    adversely affected by the natural disaster.
        If you are suggesting modeling the Farm Service Agency Loan
    Program more after SBA, we would be happy to look at that and
    advise you, our technical experts, within FSA during your
    consideration of the farm bill debate and see where we may be
    able to improve things.
        By the way, Congressman, I did appreciate the opportunity
    to come up and visit with you about the Farm Storage Facility
    Loan Program that day. Thank you again for the invitation.
        Mr. Crawford. You bet.
        Mr. Radintz. Regarding the Emergency Loan Program and
    comparing it with Small Business Administration disaster
    recovery loans, there are a couple of factors. We could lower
    the interest rates. That is a decision that the Secretary would
    need to make. But of course any change in the interest rates of
    the loan programs would have some budgetary impact for us.
        The other conditions, rates and terms and so forth, would
    require some statutory modification, and that is something that
    we could certainly work with the Committee on.
        Mr. Crawford. Gentlemen, thank you. I yield back.
        The Chairman. Thank you.
        Mr. McGovern is recognized.
        Mr. McGovern. Thank you, and I will be brief.
        I am new to the Agriculture Committee, but I have a
    district similar to Ms. Fudge. I represent a primarily urban-
    suburban district. And I am particularly interested in, as I
    mentioned to your predecessor, who was here not too long ago,
    that I am particularly interested in reaching out to smaller
    and medium-sized farms and smaller producers as well as
    speciality crop producers.
        And I assume that you think that in most regions of the
    country there continues to be a need for the FSA to provide
    credit.
        And then my second question is how does participation in
    your programs vary across types of producers as well as in
    various areas of the country? Are there certain parts of the
    country where FSA plays a bigger role than commercial credit?
        Where I am from, what I hear constantly from these farmers,
    who I didn't know existed until I got on the Agriculture
    Committee, is that it is a challenge for them to access credit
    because of their proximity to an urban area.
        And I would just appreciate your comments on those.
        Mr. Nelson. Well, Congressman, I appreciate that, again in
    response to Congressman Fudge's question earlier, we are
    challenged in the Farm Service Agency with going beyond our
    traditional customers out there. And we look forward to working
    with you to better reach folks in urban areas and around urban
    areas because, again, this is an agricultural program. It is
    not a rural program. It is supposed to serve agricultural
    producers everywhere in the country. And with respect to
    smaller producers, in fact most of our borrowers are on the
    small end of the spectrum. If you look at the gross sales and
    the equity positions and the net income positions of our
    borrowers, we loan primarily to folks on the small end of the
    producer spectrum. And that makes sense because those are with
    the emphasis on beginning farmers, for example, most people
    aren't going to start out big.
        And so again we would look forward to working with you to
    try to develop ways to reach folks out there. And I look
    forward to those conversations and, during your consideration
    of the farm bill, what we can do in that to help.
        Mr. McGovern. I appreciate it. Just my final point, are
    there certain parts of the country where FSA plays a bigger
    role than commercial credit?
        Mr. Nelson. If your question is do we play a bigger role
    than commercial credit, I will have to get back to you on that.
    I can answer the question about where we historically have our
    most loans, and that is we have our most loans in the most
    intensely agricultural parts of the country, which is the
    Midwest primarily over to the Missouri River. And again, our
    challenge is to reach out beyond those traditional
    constituencies.
        So I would turn it over to Mr. Radinitz to see if he has
    anything to add. And we would look forward to providing you
    with more detailed information.
        [The information referred to is located on p. 459.]
        Mr. McGovern. I appreciate your offer to work with us and I
    look forward to working with you. It sounds like the issue is
    that we just need to get to know each other better rather than
    there is any kind of barrier from getting help.
        Mr. Nelson. No barriers. Looking forward to it.
        Mr. McGovern. Thank you.
        The Chairman. Mr. Owens, you are recognized.
        Mr. Owens. Mr. Nelson, first I want to thank you obviously
    for being here today, but you also were a great deal of help to
    me in a conversation we had about 2 weeks ago regarding the
    potential for SBA loans for people in my district affected by
    dramatic flooding.
        I want to ask, in your testimony there was appended several
    graphs and one is entitled, Farm Loan Programs Loss Rates 10
    Year Trend. Very interesting to me because we are looking at
    direct loan loss rates and guaranteed loan loss rates. When
    they blend together they are about .9 percent.
        Would it be fair to say that you compare quite favorably
    with commercial bank loan loss rates?
        Mr. Nelson. I am going to have to defer that question to
    Mr. Radintz because I don't know of the commercial loss rates,
    Congressman.
        Mr. Owens. Thank you.
        Mr. Radintz. In our Guaranteed Loan Program, the loss rates
    are somewhat marginally higher than commercial rates but again
    these are loans made by commercial lenders with an FSA
    guarantee, so the rates are somewhat close. The loss rates in
    the Direct Loan Program are somewhat higher. I would say
    probably maybe double. But again we are talking about the
    difference between maybe \3/4\ of a percent for commercial
    lender versus 1\1/2\ to 2 for a direct loan, and remember these
    are borrowers that direct lenders won't even take the risk. So
    they are very high-risk borrowers, and we are still able to
    keep our loss rates fairly comparable, at least tracking with
    commercial lenders.
        Mr. Owens. Thank you very much. I yield back.
        The Chairman. Mr. Baca of California.
        Mr. Baca. Thank you very much, Mr. Chairman.
        Let me ask this question. I am pleased that Secretary
    Vilsack and President Obama are committed to turning the page
    when it comes to civil rights at USDA. Unfortunately, the loan
    discriminations of the past are still often associated with
    USDA today. Can you please speak to the Subcommittee a little
    bit more regarding the Farm Service Agency's effort to
    eliminate discrimination once and for all in all U.S. loan
    programs?
        And I am going to ask a second question. Given the
    discrimination suits of various groups such as the African
    Americans, Latinos, Native Americans, and female farmers, is
    there more that Congress can do when we look at the next farm
    bill to ensure equitable access to credit for everyone in rural
    America?
        Mr. Nelson. Well, I appreciate that comment and question,
    Congressman, because it gives me the opportunity to reemphasize
    not only----
        The Chairman. Mr. Nelson, if you could suspend for one
    moment. There are 2 minutes left in the vote, just to inform
    you all. I will continue the hearing for another moment or two,
    and then we may proceed afterward but if you need to leave it
    is okay.
        Mr. Nelson.--to the President and Secretary's commitment to
    making sure that we are serving everyone, and I believe that
    the Farm Loan Program numbers of Farm Service Agency since 1995
    to 2010 bear out with, for example, we are--in the Direct Loan
    Program since 1995, we have increased the number of direct loan
    SDA borrowers from 3,260 to almost 15,000. That is a 4\1/2\-
    fold increase. In the Guaranteed Program, we have more than
    doubled them.
        And I want to emphasize that overall those are good loans
    because those folks are keeping up their end of the bargain and
    in that period of time----
        Mr. Baca. I don't think I am questioning the good loans. I
    just wanted to make sure there is no discrimination, that there
    is an equitable distribution.
        Mr. Nelson. I appreciate that, Congressman. And that is
    absolutely what we are committed to. Absolutely.
        Mr. Baca. Thank you.
        The Chairman. Mr. Baca, do you think you need to proceed
    with further questioning after the vote?
        Mr. Baca. No, Mr. Chairman. Thank you.
        The Chairman. Well, gentlemen, you have come at an awkward
    time, but it is always awkward up here. I apologize.
        Under the rules of the Committee the record of today's
    hearing will remain open for 10 calendar days to receive any
    additional supplementary material and written responses from
    you from any questions posed by the Members.
        The hearing of the Subcommittee on Department Operations,
    Oversight, and Credit is adjourned.
        [Whereupon, at 2:35 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

     Supplementary Material Submitted by Bruce Nelson, Administrator, Farm
                 Service Agency, U.S. Department of Agriculture
        During the July 14, 2011 hearing entitled, Agricultural Program
    Audit: Examination of USDA Farm Loan Programs, a request for
    information was made to Bruce Nelson. The following is the information
    submission for the record.
    Insert
              Mr. McGovern. . . . Just my final point, are there certain
            parts of the country where FSA plays a bigger role than
            commercial credit?
              Mr. Nelson. If your question is do we play a bigger role than
            commercial credit, I will have to get back to you on that. I
            can answer the question about where we historically have our
            most loans, and that is we have our most loans in the most
            intensely agricultural parts of the country, which is the
            Midwest primarily over to the Missouri River. And again, our
            challenge is to reach out beyond those traditional
            constituencies.
              So I would turn it over to Mr. Radinitz to see if he has
            anything to add. And we would look forward to providing you
            with more detailed information.

        While overall the total share of debt provided through direct and
    guaranteed programs is less than 10%, there are localized regions where
    farmers are more dependent on FSA loan programs.
        Specifically, regions where FSA loan programs are more important
    include the Mississippi Delta, Southeastern Coastal Plains, New
    England, Southern & Northern High Plains, and the Inter-mountain west
    (see Attachment 1).
        In many of the counties within these regions, FSA appears to serve
    over half of the indebted farmers through either the direct or
    guaranteed credit programs.
        Since FSA tends not to be the primary credit source in most
    situations (i.e., Provides <50% of an individual farmer's credit), the
    share of farmers served provides a better picture of FSA's market
    presence than the market share of total debt.
        The share of farmers served can be examined by comparing the number
    of FSA borrowers with the number of indebted farmers. The Census of
    Agriculture provides data on the number of farmers with interest
    expense by county. In developing this measure, farmers with less than
    $500 of interest expense per year were excluded, as it was judged that
    these observations likely represented interest expense on accounts
    payable and not loans. The number of FSA borrowers was determined based
    on year-end 2010 to reflect the most recent data.
        Thus, market penetration by county was estimated as:

      No. of farmers with either a direct or Guaranteed FSA loan in 2010
    ----------------------------------------------------------------------------------------------------------------
      No. of farmers with over $500 of interest expense in 2007 (Census of Ag)

        Since the numerator and denominator represent two different time
    periods, this is a proxy rather than a measure for market penetration.
    The Census of Agriculture is collected only once every 5 years and is
    the only county-level data available on farm indebtedness. Still, debt
    levels do not change dramatically from year-to-year, and counties with
    high numbers of indebted farmers in 2007 are likely to have high
    numbers of indebted farmers in 2010. Note that if a farmer held both a
    direct and guaranteed loan, they were counted only once.
        There were 222 counties with over 100 borrowers through either the
    direct or guaranteed loan programs. Most were in Wisconsin (19),
    Oklahoma (18), Minnesota (17), Louisiana (15), Nebraska (14), Iowa
    (13), Texas (12), and North Dakota (12) (see Attachment 2).
        There were 147 counties where the number of Farm Loan Program (FLP)
    borrowers in 2010 was over half the number of indebted farmers in 2007.
    Many of the borrowers were either in Texas or the Mississippi Delta,
    with Louisiana holding the highest (21) number of borrowers, followed
    by Arkansas (14), Texas (14) and Tennessee (5) (see Attachment 3).
        There are also areas with few farmers, but FSA tends to be a
    relatively important source of credit. This includes West Virginia,
    northern Michigan, northern Wisconsin, Long Island, and areas of New
    England.
                                  attachments
    Attachment 1
    Total FSA Loan Program Borrowers (2010)/Total No. of Farms With >$500
            of Int. Exp (2007)

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Attachment 2

                Counties With 100 or More FSA Farm Loan Borrowers
    ------------------------------------------------------------------------
                                                                     FSA
         County, State      FSA Financed      County, State        Financed
                              Farmers *                           Farmers *
    ------------------------------------------------------------------------
    Lafayette, Wisconsin            504   Merced, California             126
    Grant, Wisconsin                406   Morehouse, Louisiana           126
    LeFlore, Oklahoma               316   Washita, Oklahoma              126
    Yakima, Washington              285   Tripp, South Dakota            126
    Seneca, Ohio                    276   Dodge, Wisconsin               126
    Marshall, Minnesota             263   Nemaha, Kansas                 125
    Green, Wisconsin                261   Avoyelles, Louisiana           125
    Hale, Texas                     260   Pointe Coupee,                 125
                                           Louisiana
    Polk, Minnesota                 252   Cedar, Nebraska                125
    Franklin, Louisiana             250   Cuming, Nebraska               125
    Conway, Arkansas                247   Ward, North Dakota             125
    Washington, Arkansas            234   Jackson, Oklahoma              125
    Wood, Ohio                      234   Dunklin, Missouri              124
    Delaware, Iowa                  229   Bottineau, North               124
                                           Dakota
    Hancock, Ohio                   224   Crawford, Ohio                 124
    Richland, Louisiana             221   Haywood, Tennessee             124
    West Carroll,                   219   Shawano, Wisconsin             124
     Louisiana
    Otter Tail, Minnesota           217   Clay, Minnesota                123
    Vernon, Wisconsin               217   Brookings, South               123
                                           Dakota
    Sanilac, Michigan               214   Vermilion, Illinois            122
    Clinton, Iowa                   212   Renville, Minnesota            122
    Vermilion, Louisiana            212   Custer, Oklahoma               122
    McCurtain, Oklahoma             212   Day, South Dakota              121
    Dubuque, Iowa                   209   Desha, Arkansas                120
    Manitowoc, Wisconsin            209   Pondera, Montana               120
    Lancaster,                      208   Crockett, Tennessee            120
     Pennsylvania
    La Salle, Illinois              203   Wharton, Texas                 120
    Clark, Wisconsin                202   Graves, Kentucky               119
    Lincoln, Nebraska               201   Sibley, Minnesota              119
    Clayton, Iowa                   195   Holt, Nebraska                 119
    Buchanan, Iowa                  195   Chautauqua, New York           119
    Huron, Michigan                 193   Okanogan, Washington           119
    Malheur, Oregon                 189   Faribault, Minnesota           117
    Aroostook, Maine                183   Beadle, South Dakota           117
    Gage, Nebraska                  182   Swisher, Texas                 117
    Putnam, Ohio                    179   Emery, Utah                    117
    Caddo, Oklahoma                 178   Colusa, California             116
    Monroe, Wisconsin               177   Morrow, Ohio                   116
    Sutter, California              175   Cross, Arkansas                115
    St. Landry, Louisiana           175   Labette, Kansas                115
    Walsh, North Dakota             174   Duplin, North                  115
                                           Carolina
    Lonoke, Arkansas                173   Craig, Oklahoma                115
    Tuscola, Michigan               173   Hockley, Texas                 115
    Stearns, Minnesota              171   Terry, Texas                   115
    Addison, Vermont                168   Acadia, Louisiana              114
    Kittson, Minnesota              165   Shiawassee, Michigan           114
    Traill, North Dakota            163   Thayer, Nebraska               114
    Jackson, Iowa                   162   Washington, New York           114
    Phillips, Arkansas              161   Sanpete, Utah                  114
    Pembina, North Dakota           161   Grady, Oklahoma                113
    Grant, North Dakota             159   Rockingham, Virginia           113
    Carroll, Iowa                   158   Marion, Oregon                 112
    Charles Mix, South              158   Matagorda, Texas               112
     Dakota
    Sandusky, Ohio                  157   Weld, Colorado                 111
    Marathon, Wisconsin             155   Warren, Illinois               111
    Fond Du Lac, Wisconsin          154   Fayette, Iowa                  111
    Hancock, Illinois               153   Catahoula, Louisiana           111
    Hillsdale, Michigan             151   Sheridan, Nebraska             111
    Grant, Washington               151   Shelby, Illinois               110
    Bingham, Idaho                  150   Pulaski, Kentucky              110
    Murray, Minnesota               150   Richland, Illinois             109
    Cavalier, North Dakota          150   Stephenson, Illinois           109
    Parmer, Texas                   150   Kiowa, Oklahoma                109
    Lubbock, Texas                  150   Meade, South Dakota            109
    Jefferson Davis,                149   Polk, Wisconsin                109
     Louisiana
    Roseau, Minnesota               149   Sumner, Kansas                 108
    Lyon, Iowa                      148   Nowata, Oklahoma               108
    Hopkins, Texas                  148   Lamb, Texas                    108
    Franklin, Vermont               148   Mississippi, Arkansas          107
    Knox, Nebraska                  147   Grant, Indiana                 107
    Dodge, Nebraska                 147   Richland, Montana              107
    Minidoka, Idaho                 146   Cass, North Dakota             107
    Harmon, Oklahoma                146   Umatilla, Oregon               107
    Iowa, Wisconsin                 146   Union, South Dakota            107
    Hutchinson, South               145   Orleans, Vermont               107
     Dakota
    Sauk, Wisconsin                 145   Trempealeau,                   107
                                           Wisconsin
    Sioux, Iowa                     144   Lee, Arkansas                  106
    Garfield, Oklahoma              143   Meeker, Minnesota              106
    Dawson, Nebraska                142   Stoddard, Missouri             106
    Oconto, Wisconsin               142   Kay, Oklahoma                  106
    Buena Vista, Iowa               141   Dane, Wisconsin                106
    Reno, Kansas                    139   Colquitt, Georgia              105
    Haskell, Oklahoma               139   Carroll, Arkansas              104
    East Carroll,                   138   Poinsett, Arkansas             104
     Louisiana
    Madison, Louisiana              138   Knox, Illinois                 103
    Chicot, Arkansas                137   Adams, Illinois                103
    Stanislaus, California          137   Harrison, Kentucky             103
    Okmulgee, Oklahoma              136   Barry, Missouri                103
    Saluda, South Carolina          136   Otoe, Nebraska                 103
    Mitchell, Georgia               134   Stutsman, North                103
                                           Dakota
    Greene, Illinois                134   Hawaii, Hawaii                 102
    Concordia, Louisiana            134   Winneshiek, Iowa               102
    Spink, South Dakota             134   Ottawa, Ohio                   102
    Washington, Kansas              133   Beckham, Oklahoma              102
    Grand Forks, North              133   Bryan, Oklahoma                102
     Dakota
    Douglas, South Dakota           133   Nacogdoches, Texas             102
    Franklin, Washington            132   Falls, Texas                   102
    Tensas, Louisiana               131   Twin Falls, Idaho              101
    Gratiot, Michigan               131   Lyon, Minnesota                101
    San Joaquin,                    130   Nobles, Minnesota              101
     California
    Hardin, Ohio                    130   Scotts Bluff,                  101
                                           Nebraska
    Barron, Wisconsin               130   Butler, Nebraska               101
    Iowa, Iowa                      129   Herkimer, New York             101
    Lenawee, Michigan               129   Emmons, North Dakota           101
    Lac Qui Parle,                  129   Fulton, Illinois               100
     Minnesota
    St. Lawrence, New York          129   Christian, Kentucky            100
    Cassia, Idaho                   128   Plymouth,                      100
                                           Massachusetts
    Breckinridge, Kentucky          128   Norman, Minnesota              100
    Redwood, Minnesota              128   Custer, Nebraska               100
    Fresno, California              127   Choctaw, Oklahoma              100
    Morton, North Dakota            127   Outagamie, Wisconsin           100
    ------------------------------------------------------------------------
    * Total Number of Farmers With Either a Direct or Guaranteed FSA Loan in
      FY 2010.

    Attachment 3

                    Counties Highly Dependent on FSA Lending
                    (50%+ of all farmers using FSA financing)
    ------------------------------------------------------------------------
                                                                  Percent of
                   FSA       Percent of                 FSA          all
     County,     Financed   all  Farmers   County,    Financed     Farmers
      State     Farmers *    Financed by    State    Farmers *   Financed by
                               FSA **                               FSA **
    ------------------------------------------------------------------------
    Graham,             29       54.72%   Daniels,           76       50.00%
     Arizona                               Montana
    Phillips,          161      100.00%   Nance,             90       53.89%
     Arkansas                              Nebrask
                                           a
    Chicot,            137      100.00%   Dawes,             97       53.01%
     Arkansas                              Nebrask
                                           a
    Lee,               106      100.00%   Frontier           76       51.70%
     Arkansas                              ,
                                           Nebrask
                                           a
    Desha,             120       94.49%   Hayes,             63       51.22%
     Arkansas                              Nebrask
                                           a
    Conway,            247       88.21%   Hidalgo,           32       50.00%
     Arkansas                              New
                                           Mexico
    St.                 83       72.81%   Martin,            71       78.02%
     Francis,                              North
     Arkansas                              Carolin
                                           a
    Lonoke,            173       72.69%   Bertie,            66       67.35%
     Arkansas                              North
                                           Carolin
                                           a
    Cross,             115       72.33%   Tyrrell,           17       65.38%
     Arkansas                              North
                                           Carolin
                                           a
    Monroe,             64       70.33%   Northamp           74       60.66%
     Arkansas                              ton,
                                           North
                                           Carolin
                                           a
    Prairie,            99       69.72%   Sioux,             80       78.43%
     Arkansas                              North
                                           Dakota
    Ashley,             77       62.60%   Traill,           163       66.80%
     Arkansas                              North
                                           Dakota
    Woodruff,           63       58.88%   Pembina,          161       64.14%
     Arkansas                              North
                                           Dakota
    Mississip          107       54.87%   Grant,            159       63.60%
     pi,                                   North
     Arkansas                              Dakota
    Poinsett,          104       54.45%   Steele,            86       56.95%
     Arkansas                              North
                                           Dakota
    Martin,             84       88.42%   Seneca,           276       62.73%
     Florida                               Ohio
    Baker,              54       96.43%   Hancock,          224       59.89%
     Georgia                               Ohio
    Mitchell,          134       79.76%   Wood,             234       57.07%
     Georgia                               Ohio
    Pulaski,            33       70.21%   Sandusky          157       55.67%
     Georgia                               , Ohio
    Terrell,            44       65.67%   Ottawa,           102       54.55%
     Georgia                               Ohio
    Lee,                42       63.64%   Harmon,           146      100.00%
     Georgia                               Oklahom
                                           a
    Calhoun,            36       54.55%   Greer,             87       50.58%
     Georgia                               Oklahom
                                           a
    Colquitt,          105       53.57%   Haskell,          139       50.18%
     Georgia                               Oklahom
                                           a
    Marion,             25       52.08%   Saluda,           136      100.00%
     Georgia                               South
                                           Carolin
                                           a
    Miller,             48       50.00%   Barnwell           67       94.37%
     Georgia                               , South
                                           Carolin
                                           a
    Butte,              64       68.09%   Marlboro           59       92.19%
     Idaho                                 , South
                                           Carolin
                                           a
    Minidoka,          146       59.35%   Dillon,            59       88.06%
     Idaho                                 South
                                           Carolin
                                           a
    Cassia,            128       51.00%   Clarendo           93       75.00%
     Idaho                                 n,
                                           South
                                           Carolin
                                           a
    Greene,            134       63.21%   Williams           82       72.57%
     Illinois                              burg,
                                           South
                                           Carolin
                                           a
    Saline,             59       51.75%   Lee,               58       63.74%
     Illinois                              South
                                           Carolin
                                           a
    Grant,             107       53.77%   Darlingt           58       50.43%
     Indiana                               on,
                                           South
                                           Carolin
                                           a
    Logan,              60       54.55%   Douglas,          133       70.00%
     Kansas                                South
                                           Dakota
    Pratt,              86       51.19%   Bennett,           83       60.14%
     Kansas                                South
                                           Dakota
    Fulton,             41       65.08%   Jackson,           86       59.31%
     Kentucky                              South
                                           Dakota
    Hickman,            65       56.52%   Shannon,           53       58.89%
     Kentucky                              South
                                           Dakota
    Richland,          221      100.00%   Custer,            53       56.99%
     Louisian                              South
     a                                     Dakota
    Vermilion          212      100.00%   Potter,            57       55.34%
     ,                                     South
     Louisian                              Dakota
     a
    West               219      100.00%   Jones,             39       54.17%
     Carroll,                              South
     Louisian                              Dakota
     a
    Concordia          134      100.00%   Haakon,            76       51.35%
     ,                                     South
     Louisian                              Dakota
     a
    Madison,           138      100.00%   Crockett          120      100.00%
     Louisian                              ,
     a                                     Tenness
                                           ee
    Pointe             125      100.00%   Haywood,          124       90.51%
     Coupee,                               Tenness
     Louisian                              ee
     a
    East               138      100.00%   Tipton,            97       70.80%
     Carroll,                              Tenness
     Louisian                              ee
     a
    Tensas,            131      100.00%   Dyer,              80       50.63%
     Louisian                              Tenness
     a                                     ee
    St.                 47       95.92%   Lake,              13       50.00%
     Martin,                               Tenness
     Louisian                              ee
     a
    St.                175       88.83%   Hale,             260       95.94%
     Landry,                               Texas
     Louisian
     a
    Morehouse          126       88.73%   Baylor,            58       75.32%
     ,                                     Texas
     Louisian
     a
    Acadia,            114       86.36%   Parmer,           150       73.17%
     Louisian                              Texas
     a
    Jefferson          149       86.13%   Swisher,          117       73.13%
     Davis,                                Texas
     Louisian
     a
    Iberia,             55       82.09%   Wilbarge           95       67.38%
     Louisian                              r,
     a                                     Texas
    Franklin,          250       78.86%   Terry,            115       64.25%
     Louisian                              Texas
     a
    Caldwell,           44       74.58%   Reeves,            29       61.70%
     Louisian                              Texas
     a
    Catahoula          111       70.25%   Refugio,           29       61.70%
     ,                                     Texas
     Louisian
     a
    Avoyelles          125       63.78%   Briscoe,           46       54.12%
     ,                                     Texas
     Louisian
     a
    Evangelin           70       61.95%   Hockley,          115       53.49%
     e,                                    Texas
     Louisian
     a
    lberville           26       57.78%   Crosby,            68       51.91%
     ,                                     Texas
     Louisian
     a
    St. Mary,           18       56.25%   Matagord          112       50.91%
     Louisian                              a,
     a                                     Texas
    Aroostook          183       72.33%   Dawson,            86       50.00%
     , Maine                               Texas
    Hancock,            18       64.29%   Cottle,            36       50.00%
     Maine                                 Texas
    Presque             33       52.38%   Garfield           37       94.87%
     Isle,                                 , Utah
     Michigan
    Kittson,           165       70.51%   Piute,             52       83.87%
     Minnesot                              Utah
     a
    Mahnomen,           76       57.14%   Emery,            117       82.39%
     Minnesot                              Utah
     a
    Humphreys           77       90.59%   San                53       79.10%
     ,                                     Juan,
     Mississi                              Utah
     ppi
    Jasper,             95       84.07%   Wayne,             46       64.79%
     Mississi                              Utah
     ppi
    Calhoun,            90       66.67%   Beaver,            50       59.52%
     Mississi                              Utah
     ppi
    Sunflower           86       61.43%   Carbon,            27       50.94%
     ,                                     Utah
     Mississi
     ppi
    Quitman,            49       59.76%   Addison,          168       63.88%
     Mississi                              Vermont
     ppi
    Tallahatc           76       58.02%   Franklin          148       58.73%
     hie,                                  ,
     Mississi                              Vermont
     ppi
    Webster,            30       56.60%   Nicholas           29       63.04%
     Mississi                              , West
     ppi                                   Virgini
                                           a
    Washingto           76       56.30%   Monroe,            94       57.67%
     n,                                    West
     Mississi                              Virgini
     ppi                                   a
    Newton,             76       51.01%   Roane,             64       50.79%
     Mississi                              West
     ppi                                   Virgini
                                           a
    Dunklin,           124       59.05%   Lafayett          504       77.90%
     Missouri                              e,
                                           Wiscons
                                           in
    Pemiscot,           67       53.17%   Ashland,           35       66.04%
     Missouri                              Wiscons
                                           in
    Richland,          107       54.04%   Bayfield           60       57.69%
     Montana                               ,
                                           Wiscons
                                           in
    Pondera,           120       51.50%
     Montana
    ------------------------------------------------------------------------
    * Total Number of Farmers Indebted for Either a Direct or Guaranteed FSA
      Loan in 2010.
    ** As share of farmers in the county with >$500 int. in 2007 Census.

                       States with FSA Dependent Counties
    ------------------------------------------------------------------------
                    State                              Counties
    ------------------------------------------------------------------------
                               Louisiana                          21
                          Texas                                   14
                       Arkansas                                   14
                    Mississippi                                    9
                        Georgia                                    9
                   South Dakota                                    8
                 South Carolina                                    8
                           Utah                                    7
                      Tennessee                                    5
                           Ohio                                    5
                   North Dakota                                    5
                 North Carolina                                    4
                       Nebraska                                    4
                      Wisconsin                                    3
                  West Virginia                                    3
                       Oklahoma                                    3
                        Montana                                    3
                          Idaho                                    3
                        Vermont                                    2
                       Missouri                                    2
                      Minnesota                                    2
                          Maine                                    2
                       Kentucky                                    2
                         Kansas                                    2
                       Illinois                                    2
                     New Mexico                                    1
                       Michigan                                    1
                        Indiana                                    1
                        Florida                                    1
    ------------------------------------------------------------------------

        For additional explanation of rationale behind development of these
    tables, please refer to document fsaconcentration.docx.
                                     ______

                              Submitted Questions
    Response from Bruce Nelson, Administrator, Farm Service Agency, U.S.
            Department of Agriculture
    Questions Submitted By Hon. Collin C. Peterson, a Representative in
            Congress from Minnesota
        Question 1. On the term limits for guaranteed borrowers issue, can
    you provide us a breakdown of how many producers have been using the
    program for more than 15 years and how many borrowers for each year
    beyond the 15th?
        Answer. FSA currently has 4,558 borrowers who have received loans
    through the guaranteed operating loan program or a combination of the
    direct and guaranteed operating loan programs for more than 15 years.
    An additional 1,503 borrowers will only be able to utilize the program
    for one more year and another 2,189 borrowers will only be able to
    utilize the program for two more years.

        Question 2. The 2008 Farm Bill reestablished a separate
    conservation loan program at FSA. Can you tell us how much interest
    there was in the program before the funding for FY11 got cut in the
    continuing resolutions? Did you get any money out the door?
        Answer. Since the implementation of the Conservation Loan program
    in August 2010, FSA has approved and funded 231 direct conservation
    loans totaling $16,351,101 and three guaranteed loan requests totaling
    $703,500.
    Question Submitted By Hon. William L. Owens, a Representative in
            Congress from New York
        Question. As you may know, two types of business structures that
    are increasingly common among family farms do not qualify for loans
    through FSA. Today many family farms have both a farm ownership LLC and
    farm operating LLC to facilitate ownership of multiple family members.
    This may be done for liability protection and to facilitate the
    transfer of a farm business between generations. However, because the
    operator of the farm does not own the farm, the farm is not eligible
    for a loan. Farms operating with an embedded entity structure to
    facilitate estate planning are also currently ineligible for an FSA
    guarantee. In your view, is access to credit through FSA for family
    farms with these business structures an issue that needs to be
    addressed?
        Answer. Current statute prevents operators with multiple or
    embedded entities from receiving a loan guarantee through FSA. Removing
    this statutory restriction would allow FSA to assist family farms using
    more complex organizational structures, such as multiple or embedded
    entities. USDA is available to provide technical assistance to Members
    on this or any other statutory matter.
                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        Farm Ownership Loan (FO).
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        Through its nationwide network of service centers, often in
    geographically isolated areas with few private or commercial lenders,
    FSA provides agricultural financing to small and family size farmers
    and ranchers for farm ownership purposes, including costs associated
    with acquiring or enlarging a farm or ranch or to make a down payment
    of a farm or ranch; make capital improvements to a farm owned by the
    applicant, for construction, purchase or improvement of farm dwellings,
    service buildings or other facilities and improvements essential to the
    farming operation; promote soil and water conservation and protection;
    pay loan closing costs; and to refinance a bridge loan under specific
    and limited conditions.
        FO loans are sub-categorized by targeted funding type, i.e.,
    regular interest rate eligible; limited resource rate; Socially
    Disadvantaged Applicant; and Beginning Farmer and/or Beginning Farmer
    Socially Disadvantaged Applicant. There is no limited resource
    Guaranteed FO loan.
        In addition to the aforementioned FO loan types, FSA offers two
    other subprograms under the main FO umbrella: Participation FO and
    Beginning Farmer Down Payment loans. Each of these sub-categories are
    further identified by targeting Socially Disadvantaged FO loan
    applicants by ethnicity and gender to broaden and ensure availability
    of limited appropriations for all members of the agricultural
    community. For example, an FO loan application can be funded as
    ``Direct FO--Beginning Farmer Down Payment--Socially Disadvantaged--
    Gender.''

        Direct FO--Participation

        A Direct FO Participation loan is made as part of a joint financing
    arrangement and the amount of FSA's loan does not exceed 50 percent of
    the total amount financed. In such arrangements, an applicant may
    obtain financing from a commercial lender, a state program, or the
    seller of a farm. The other lender's portion of the loan may be
    guaranteed by FSA. Utilization of this program allows FSA to extend
    credit to more farmers than the Agency would be able to finance if the
    farmer relied solely on FSA Direct or Guaranteed loan funding.

        Direct FO--Beginning Farmer Down Payment

        Down Payment FO loans are used to partially finance the purchase of
    a family farm by an eligible Beginning Farmer or Socially Disadvantaged
    Applicant. This is the only FSA loan program that requires the loan
    applicant to provide a minimum downpayment of five percent of the
    purchase price of the farm. Additional limitations specific to the
    Beginning Farmer Down Payment FO loan is that the maximum FSA loan
    amount is not tied to the statutory limitations. Rather, Down Payment
    loans may not exceed 45 percent of the lessor of: (1) the purchase
    price; (2) the appraised value of the farm to be acquired; or (3)
    $500,000. Financing provided by FSA and all other creditors must not
    exceed 95 percent of the purchase price. Any financing provided by
    eligible lenders may be guaranteed by FSA.

        Direct FO--Socially Disadvantaged Applicant (SDA)

        A Socially Disadvantaged loan applicant is not a program type;
    rather it distinguishes a specific funding source. Therefore, the loan
    process and all loan requirements are identical for SDA applicants to
    those for non-SDA applicants. To be eligible for SDA loan
    consideration, the applicant must belong to a socially disadvantaged
    group whose members have been subject to racial, ethnic or gender
    prejudice, which includes American Indians or Alaskan Natives, Asians,
    Blacks or African Americans, Native Hawaiians or other Pacific
    Islanders, Hispanics, and women. Loan applicants must voluntarily
    provide his or her ethnicity, race and gender on the loan application.
    If an applicant does not voluntarily provide this information, targeted
    funding will not be available. Direct FO assistance for SDA applicants
    is available for all FO purposes and authorities.

        Guaranteed FO

        An FSA Guaranteed FO loan is a contract between the loan applicant
    and commercial lender that allows for the extension of financial credit
    for a period not to exceed 40 years. FSA guarantees the loan against
    possible loss up to 95 percent principal and interest.

        Guaranteed--Beginning Farmer/Rancher

        Beginning farmer loans are targeted to loan applicants who have not
    operated a farm or ranch for more than 10 years and do not own real
    farm property, directly or indirectly, which does not exceed 30 percent
    of the median acreage of the farms in the county where the property is
    located. FSA guarantees the loan against possible loss up to 95 percent
    of principal and interest.

        Guaranteed--Socially Disadvantaged Applicant

        A Socially Disadvantaged loan applicant is not a program type;
    rather it distinguishes a specific funding source. To be eligible for
    SDA loan consideration, the applicant must belong to a socially
    disadvantaged group whose members have been subject to racial, ethnic
    or gender prejudice, which includes American Indians or Alaskan
    Natives, Asians, Blacks or African Americans, Native Hawaiians or other
    Pacific Islanders, Hispanics, and women. FSA issues a guarantee that
    protects the lender against possible loss up to 95 percent of principal
    and interest.

        3. Brief History

        The Farm and Rural Development Act, as amended, Subtitle B,
    Sections 311-317, Public Law 92-419, 7 U.S.C. 1942 enabled operators of
    not larger than family farms, through the extension of credit and
    supervisory assistance, to make efficient use of their land, labor, and
    other resources, and to establish and maintain financially viable
    farming and ranching operations.
        Title III of the Agricultural Act of 1961, The Consolidated Farm
    and Rural Development Act (CONACT), as amended, through Public Law 109-
    171, Feb. 8, 2006, provided a major overhaul and expansion of farm
    lending authorities.
        The 1978 Agriculture Credit Act changed existing programs by
    authorizing farm loans to family corporations, cooperatives, and
    partnerships as well as to individuals; changed the interest rate for
    farm ownership loans so that the rate is now based on the cost of
    borrowing to the government; and limited resource farmers and limited
    resource rates were identified and established.
        The Food Security Act of 1985 (December 23, 1985) made major
    changes in farm loan eligibility and provided protections for borrowers
    undergoing serious financial difficulty. Loan eligibility was expanded
    to include ``joint operators'' and persons related by blood or
    marriage.
        Targeted participation rates for Direct and Guaranteed FO loans are
    found in the Agricultural Credit Act of 1987 (January 6, 1988), Section
    355 of the CONACT.
        FO Down Payment loans were authorized through the Agricultural
    Credit Improvement Act of 1992 (October 29, 1992), Section 310E of the
    CONACT. Section 246(b)(2) of this same Act contains the authorities for
    targeted funds to beginning farmers. This Act also provided for the
    inclusion of women in the definition of Socially Disadvantaged
    Applicants.
        Through the Federal Agriculture Improvement and Reform (FAIR) Act
    of 1995 (April 4, 1996), Public Law 104-127, farm lending programs were
    reauthorized, placing new restrictions on loan purposes and the length
    of time borrowers are eligible for new credit assistance. This law also
    established the targeted funding for beginning farmers.
        In Fiscal Year 1988, FSA was given authority to offer FO-SDA loans.
    4. Purpose/Goals
        The basic objective of the FO loan program is to provide credit and
    management assistance to eligible farmers and ranchers to become owner-
    operators of family-sized farms or to continue such operations when
    credit is not available elsewhere. FSA's farm ownership loan assistance
    enables family-farm operators to procure land and to improve their
    living and financial conditions so that they can graduate fully to
    commercial credit.
        FSA direct loans facilitate the provision of credit, which can help
    support low farm family incomes, assist minority and beginning farmers,
    or help farmers adopt new technology that will make their farming
    operations more economical. FSA has the responsibility of providing
    credit counseling and supervision to its direct borrowers by making a
    thorough assessment of the farming operation. The Agency helps
    applicants evaluate the adequacy of the real estate and facilities,
    machinery and equipment, financial and production management, and the
    farmer's goals. FSA assists the applicant in identifying and
    prioritizing areas needing improvement in all phases of the operation.
    An FSA official then works one-on-one with the farmer to develop and to
    help strengthen the identified areas that ultimately result in the
    farmer's graduation to commercial credit.
         Because special skills may be needed to evaluate farm loans, and
    because much farm production occurs in geographically isolated areas
    that have few lenders, some farmers may face less competitive markets
    for their loans that can result in higher rates, less favorable terms,
    and/or no access to loan funds. Farmers may have trouble demonstrating
    their credit worthiness to lenders because of the economic
    uncertainties of production agriculture as well. This can be
    particularly true for beginning farmers, women, and minorities, as they
    typically operate smaller farms, have less equity, or lack a sufficient
    credit or production histories. To address these issues, each year FSA
    allocates a share of loan funding for use by beginning farmers and
    socially disadvantaged, including racial, ethnic minorities, and women
    farmers, who by statute are deemed more likely to have problems
    accessing needed credit than other high-risk family-sized farm
    borrowers.
        The Guaranteed Loan Program plays an important role in facilitating
    the extension of credit to farmers, not only through collaboration with
    partner lenders but also with FSA's Direct Loan Program. Often times a
    borrower's credit needs are met through a combination of a Guaranteed
    loan and an FSA direct loan. For example, a Farm Ownership loan will be
    made by a commercial lender with an FSA guarantee to purchase farmland
    and the borrower will also obtain a direct operating loan from FSA to
    cover annual operating expenses.
        The ``credit gaps'' which farm loan guarantees are designed to fill
    are associated with farm businesses that usually have debt burdens and/
    or repayment capacities that do not meet private sector lending
    standards. These high-risk farms might fail to meet industry standards
    due to a lack of production or credit history, limited equity, being a
    start-up business, defined as 10 or less years of farming experience,
    or by being able to offer only single purpose collateral. Another
    factor limiting access to capital is that some farm production occurs
    in geographically isolated areas that tend to have fewer lenders
    specializing in agricultural lending. As a result, farmers may face
    limited competition loans in these areas, which can result in higher
    interest rates, unfavorable loan terms, and/or a shortage of loan
    funds. By reducing the lenders' exposure to risk, the 90 to 95 percent
    guarantee provided lenders on eligible farm loans allows farmers to
    obtain loans to finance annual operating expenses, equipment,
    livestock, and farmland purchases and improvements.
    5. Success in Meeting Programmatic Purpose/Goals
        FSA has been very successful in accomplishing its long-term
    performance goals for the Farm Ownership Loan Program. Loss rates,
    delinquency rates, and lending to beginning farmers, minorities, and
    women have all shown significant long-term progress.
        Reduce First Year Delinquency Rates on New Loans: The 1st year
    delinquency rate is calculated based on the number of new loans issued
    in the previous calendar year and is primarily and indicator of credit
    quality. The formula is the total number of delinquent first year loans
    plus any first year loans restructured divided by the total number of
    loans issued in the previous calendar year. Note: Data reported is for
    all Direct FO and Operating Loans (OL) loans, Guaranteed loans are not
    included.

    ------------------------------------------------------------------------
                 Fiscal Year                      Actual Performance
    ------------------------------------------------------------------------
                           2007                                 7.4%
                           2008                                 6.2%
                           2009                                10.5%
                           2010                                 9.2%
                           2011
    ------------------------------------------------------------------------

        Increase Lending to Minorities, Woman, and Beginning Farmers and
    Ranchers: FSA establishes annual performance goals to increase its
    lending to beginning and socially disadvantaged farmers. Performance is
    measured by calculating the percentage of total loan obligations in a
    given fiscal year that are issued to farmers in the targeted groups.
    Note: Data reported is for all Direct and Guaranteed FO and OLs.

    ------------------------------------------------------------------------
                 Fiscal Year                      Actual Performance
    ------------------------------------------------------------------------
                           2007                                40.7%
                           2008                                43.2%
                           2009                                41.0%
                           2010                                37.7%
                           2011
    ------------------------------------------------------------------------

        Reduce the Average Processing Time for Direct and Guaranteed Loan
    Applications: A core component of FSA's mission is to provide an
    economic safety net for America's farmers and ranchers. Therefore, it
    is important that financial assistance is provided timely when the need
    arises. The average processing time is calculated from the date of
    application receipt until the date a loan decision is made. Note: Data
    reported includes the average processing time for FO and OL loans.

    ------------------------------------------------------------------------
        Program Category            Fiscal Year          Actual Performance
    ------------------------------------------------------------------------
                Direct FO                      2007               27.0 days
                                               2008               27.8 days
                                               2009               29.9 days
                                               2010               30.8 days
                                               2011
    ------------------------------------------------------------------------
            Guaranteed FO                      2007               12.6 days
                                               2008                8.6 days
                                               2009               8.75 days
                                               2010              10.24 days
                                               2011
    ------------------------------------------------------------------------

        Decrease Delinquency Rates for Direct and Guaranteed Loans: A low
    delinquency rate indicates that borrowers are experiencing greater
    success in meeting their financial obligations, which is an indicator
    of greater financial strength and viability. The Direct Delinquency
    rate is calculated by dividing the amount delinquent by the unpaid
    principal plus unpaid interest held by all Direct loan borrowers. The
    loan delinquency rate performance measure for FSA Guaranteed loans is
    calculated by taking the total amount past due, as reported by lenders
    nationwide on form FSA-2248, ``Guaranteed Farm Loan Default Status
    Report'', divided by the total amount outstanding on all guaranteed
    loans nationwide.

    ------------------------------------------------------------------------
        Program Category            Fiscal Year          Actual Performance
    ------------------------------------------------------------------------
                Direct FO                      2007                    7.1%
                                               2008                    6.5%
                                               2009                    6.3%
                                               2010                    5.9%
                                               2011
    ------------------------------------------------------------------------
            Guaranteed FO                      2007                   1.32%
                                               2008                   1.18%
                                               2009                   1.69%
                                               2010                   1.69%
                                               2011
    ------------------------------------------------------------------------

        Decrease the Loss Rate for Direct and Guaranteed Loans: Low loss
    rates indicate that borrowers are experiencing greater success in
    meeting their financial obligations, which is an indicator of financial
    strength and economic viability. The Direct Loss rate is calculated by
    dividing the amount of losses processed during the fiscal year by the
    amount of unpaid principal at the beginning of the fiscal year. The
    Guaranteed Loss rate is calculated by dividing the amount of losses
    processed during the fiscal year by the amount unpaid principal at the
    beginning of the fiscal year.

    ------------------------------------------------------------------------
        Program Category            Fiscal Year          Actual Performance
    ------------------------------------------------------------------------
                Direct FO                      2007                    2.3%
                                               2008                    1.6%
                                               2009                    0.8%
                                               2010                    1.1%
                                               2011
    ------------------------------------------------------------------------
            Guaranteed FO                      2007                   0.30%
                                               2008                   0.33%
                                               2009                   0.39%
                                               2010                   0.58%
                                               2011
    ------------------------------------------------------------------------

    6. Annual Budget Authority (FY 2002-FY 2011)
        See Attachment 1.
    7. Annual Outlays (FY 2002-FY 2011)
        See Attachment 2.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        See Attachment 3.
    9. Eligibility Criteria
        The eligibility criteria for all FO loan applicants include the
    following:

       Have no disqualifying convictions for controlled substances,
            including drug trafficking and possession;

       Possess the legal capacity to incur the obligation of the
            loan

       Be a citizen of the United States, a United States non-
            citizen national, or a qualified alien under applicable Federal
            immigration laws;

       Have an acceptable credit history demonstrated by debt
            repayment;

       Have not caused the Agency a loss by receiving debt
            forgiveness;

       Have not received debt forgiveness or incurred a loss to the
            government relating to a guaranteed loan loss;

       Have the inability to obtain credit elsewhere, with or
            without an FSA guarantee;

       Not be in delinquent status on any Federal debt, excluding
            debt under the Internal Revenue Code of 1986 at the time of
            loan closing;

       Have no outstanding unpaid judgments obtained by the United
            States in any court, excluding those filed as a result of
            action in the United States Tax Courts;

       May not be ineligible due to disqualification resulting from
            Federal Crop Insurance violation(s) according to 7 CFR 718;

       Have sufficient farm managerial ability as demonstrated by a
            combination of education, on-the-job training, and farming
            experience;

       Must agree to meet borrower training requirements, if FSA
            determines the training to be necessary for success; and

       Be the owner-operator or tenant-operator of a family farm or
            ranch.

        The loan eligibility criterion for an FO loan to a Socially
    Disadvantaged Applicant, including women, includes all general
    eligibility requirements outlined above. As stated previously, a
    Socially Disadvantaged loan only specifies a funding source. Therefore,
    the loan process and all loan requirements are identical for SDA
    applicants to those for non-SDA applicants. Loan applicants must
    voluntarily provide his or her ethnicity, race, and gender on the loan
    application to qualify for the targeted funding.
        Specific to the Direct FO loan program is the requirement that the
    applicant, or one or more members constituting a majority interest of
    an entity applicant, must have participated in the business operations
    of a farm or ranch for at least 3 years out of the 10 years prior to
    the date the application is submitted. The factors to determine
    participation in the business operations of a farm are similar to those
    for determining adequate farming experience necessary to ensure a
    reasonable prospect of success.
        The Direct FO program also has term limits attached to it. To meet
    the program-specific eligibility requirement, the loan applicant must:
    (1) meet the definition of a beginning farmer; (2) have not had a
    Direct FO loan outstanding for more than a total of 10 years prior to
    the date the new FO loan is closed; or (3) have never received a Direct
    FO loan.
    10. Utilization (Participation) Data

                                      Program Loan Funds Use (dollars in millions)
    ----------------------------------------------------------------------------------------------------------------
                                FY 2007            FY 2008           FY 2009           FY 2010          FY 2011 *
    ----------------------------------------------------------------------------------------------------------------
            Direct FO                 303                382               560               702               425
        Guaranteed FO                 949              1,170             1,272             1,605             1,456
    ----------------------------------------------------------------------------------------------------------------
    * As of June 30, 2011.

    11. Duplication or Overlap with Other Programs
        FSA Guaranteed Farm Loan Program serve separate purposes and are
    generally not duplicative with other Federal and state credit programs.
    While other Federal or state credit programs are available to family
    farm businesses, these programs lack national scope, are focused on
    narrow market segments, and are not specifically designed to serve
    high-risk farm businesses. FSA's Direct Farm Loan Program serves high-
    risk farmers with similar purposes, but this program is designed to
    assist even less creditworthy borrowers; those unable to obtain credit,
    even with a Federal loan guarantee. Studies of the economic profiles of
    both Direct and Guaranteed program participants indicate the two
    delivery systems serve different high-risk borrower segments. In
    addition, the FSA Direct Loan Program is narrower in scope because of
    the more limited funding and is more highly targeted to underserved
    market segments of beginning start-up farm operations and socially
    disadvantaged borrowers.
        Across other Federal agencies, the Small Business Administration
    (SBA), and USDA's Rural Business Service (RBS) provide loan guarantee
    programs that may serve agriculture. The RBS loan guarantee programs do
    not duplicate those of FSA because they serve agribusiness and value-
    added farm enterprises. The SBA programs are not designed to meet
    specialized agricultural needs and participating SBA lenders' program
    delivery is geographically limited. In FY 2007, SBA accounted for only
    3.5 percent of all federally guaranteed loans made to farmers, with FSA
    accounting for the remainder. Many SBA agricultural loan guarantees are
    made to farms that would not meet FSA eligibility requirements. Overlap
    between FSA and SBA was mostly limited to poultry and nursery farms.
        Some state governments also provide farm loan guarantees, but
    funding and geographic coverage for such programs is limited. The
    National Council of State Agricultural Finance Programs indicates that
    only 18 states have an established loan guarantee program. However,
    only four states have programs that are actively providing loan
    guarantees to farmers. State programs typically target specific
    purposes, such as value-added or single-purpose livestock facilities,
    have limited or sporadic funding, or limited geographical availability,
    hence seldom duplicating FSA loan objectives. Again, eligibility
    criteria and intended purposes differ significantly from FSA Direct and
    Guaranteed Loan Programs, and funding can be sporadic. A more common
    type of state financing assistance is provided through ``Aggie Bonds,''
    which are tax exempt bonds, issued by states under specific eligibility
    requirements.
    12. Waste, Fraud and Abuse
        FSA has a robust internal controls program for its farm loan
    programs, which consists of OMB Circular A-123 reviews, Farm Loan
    Program Risk Assessments, the County Operations Review program, Lender
    Reviews, and National Office Loan Origination File Reviews.
    Additionally, farm loan programs are subject to periodic audit and
    review by the Office of Inspector General and the Government
    Accountability Office. No material weaknesses related to fraud, waste,
    and abuse have been identified through these processes for many years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Emergency Loan (EM).
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        Emergency loans may be categorized as being a: (1) real estate
    physical loss; (2) chattel physical loss; or (3) a production loss.

        Real Estate Physical Loss

        EM loan funds for real estate physical losses may only be used to
    repair or replace essential property damaged or destroyed as a result
    of a disaster for purchasing real estate, if authorized; establishing a
    new site for a farm dwelling and service buildings outside of a flood
    or mudslide area; soil and water conservation, land and water resource
    placement and land and water development when existing structures are
    damaged or destroyed during the disaster.

        Chattel Physical Loss

        EM loan funds may be used for chattel physical losses only to
    repair or replace essential property damaged or destroyed as a result
    of a disaster to purchase livestock or farm equipment; repair or
    replace household contents damaged by the disaster; pay the costs to
    restore perennials which produce an agricultural commodity; pay family
    living expenses and farm operating expenses for farmers and ranchers
    suffering from livestock losses or losses to stored crops held for
    sale; or for refinancing farm-related debts caused by the designated or
    declared disaster.

        Production Loss

        Production losses to agricultural commodities are eligible for FSA
    EM loan assistance to pay costs associated with reorganizing the farm
    or ranch; to pay annual operating expenses; pay costs associated with
    Federal or state-approved standards under the Occupational Safety and
    Health Act of 1970 (19 U.S.C. 655 and 667); pay essential family living
    expenses; or refinance farm debt which resulted from the designated or
    declared disaster.
    3. Brief History
        Federal Farm Loan Act of 1916--Emergency crop and seed loans.
        Disaster Loan Act of 1949--Emergency farm loans.
        Rural Development Act of 1972, Section 321 of the CONACT--Emergency
    Loan Program.
        Title III of the Agricultural Act of 1961, The Consolidated Farm
    and Rural Development Act (CONACT), as amended, through Public Law 109-
    171, Feb. 8, 2006.
    4. Purpose/Goals
        EM loans are made to eligible loan applicants who have incurred
    substantial financial losses from a natural disaster or quarantine.
    These disasters may be either Presidential declarations or declared by
    the Secretary of Agriculture.
    5. Success in Meeting Programmatic Purpose/Goals
        Performance in the EM program is consistent with other farm loan
    programs in terms of loan processing timeliness, delinquency rates, and
    losses. These results are especially noteworthy considering the very
    high risk nature of these loans, as they are issued to borrowers who
    have suffered financial losses resulting from natural disaster.
    6. Annual Budget Authority (FY 2002-FY 2011)
        See Attachment 1.
    7. Annual Outlays (FY 2002-FY 2011)
        See Attachment 2.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        See Attachment 3.
    9. Eligibility Criteria
        Emergency loans may be made to farmers and ranchers who:

       Own or operate land located in a county declared by the
            President or designated by the Secretary of Agriculture as a
            primary disaster area or quarantine area. All counties
            contiguous to the declared, designated, or quarantined primary
            counties also are eligible for emergency loans. A disaster
            designation by the FSA administrator authorizes emergency loan
            assistance for physical losses only in the designated and
            contiguous counties;

       Are established family farm operators and have sufficient
            farming or ranching experience;

       Are citizens or permanent residents of the United States;

       Have suffered at least a 30 percent loss in crop production
            or a physical loss to livestock, livestock products, real
            estate or chattel property;

       Have an acceptable credit history;

       Are unable to receive credit from commercial sources;

       Can provide collateral to secure the loan;

       Have repayment ability; and

       Submit applications within 8 months of the county's disaster
            or quarantine designation date.

        In addition to eligibility criteria, FSA loan requirements are
    different from those of other lenders. Some of the more significant
    differences are borrowers must keep acceptable farm records, must
    operate in accordance with a farm plan developed with the local FSA
    staff, may be required to participate in a financial management
    training program, and may be required to obtain crop insurance.
        All emergency loans must be fully collateralized. The specific type
    of collateral may vary depending on the loan purpose, repayment ability
    and the individual circumstances of the applicant. If applicants cannot
    provide adequate collateral, their repayment ability may be considered
    as collateral to secure the loan. A first lien is required on property
    or products acquired, produced or refinanced with loan funds.
        Loans for crop, livestock, and non-real estate losses are normally
    repaid within one to 7 years, depending on the loan purpose, repayment
    ability and collateral available as loan security. In special
    circumstances, terms of up to 20 years may be authorized. Loans for
    physical losses to real estate are normally repaid within 30 years but,
    in certain circumstances, may be extended up to a maximum of 40 years.
    10. Utilization (Participation) Data

                                      Program Loan Funds Use (dollars in millions)
    ----------------------------------------------------------------------------------------------------------------
                                FY 2007            FY 2008           FY 2009           FY 2010          FY 2011 *
    ----------------------------------------------------------------------------------------------------------------
            Emergency                  75               44.9              30.4              35.5                29
    ----------------------------------------------------------------------------------------------------------------
    * As of June 30, 2011.

    11. Duplication or Overlap with Other Programs
        The FSA Farm Loan Programs serves separate purposes and is
    generally not duplicative with other Federal and state credit programs.
    While other Federal or state credit programs are available to family
    farm businesses, these programs lack national scope, are focused on
    narrow market segments, and are not specifically designed to serve
    high-risk farm businesses. FSA's EM program serves an even higher-risk
    farmer who have suffered financial setback resulting from natural
    disasters.
        Some state governments also provide farm loan assistance but
    funding and geographic coverage is limited. Emergency assistance, if
    available, would be only available on an ad hoc basis.
    12. Waste, Fraud and Abuse
        FSA has a robust internal controls program for its farm loan
    programs, which consists of OMB Circular A-123 reviews, Farm Loan
    Program Risk Assessments, the County Operations Review program, Lender
    Reviews, and National Office Loan Origination File Reviews.
    Additionally, farm loan programs are subject to periodic audit and
    review by the Office of Inspector General and the Government
    Accountability Office. No material weaknesses related to fraud, waste,
    and abuse have been identified through these processes for many years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Operating Loan (OL).
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        Through its nationwide network of service centers, often in
    geographically isolated areas with few private or commercial lenders,
    FSA provides agricultural financing to small and family size farmers
    and ranchers for farm operating costs, including costs associated with
    reorganizing a farm to improve its profitability; farm equipment and
    other chattel purchases; family and annual farm operating expenses;
    refinancing farm related debts; land and water development, and other
    farm needs. Federally regulated lenders with experience in agricultural
    lending are eligible to participate in the FSA Guaranteed Farm Loan
    Program as Standard, Certified, or Preferred Lenders, depending upon
    their experience and level of participation.

        Direct OL

        An annual OL is designed to finance farm operating expenses, family
    living expenses, or small purchase costs that are repayable within one
    year or a maximum of 18 months. The maximum number of years a farmer
    may receive annual direct OL assistance is 7 years, which may be
    consecutive or non-consecutive. There is no limit on the number of
    loans closed in a single year. On a case-by-case basis, it is possible
    for farmers and ranchers to be granted a one-time waiver for an
    additional 2 years of direct loan assistance. This limitation is not
    applicable if the farm or ranch is subject to the jurisdiction of an
    Indian tribe.
        A term OL is designed to finance costs associated with reorganizing
    a farm, such as changing enterprises, production practices, marketing
    methods or purchasing shares in value-added processing and marketing
    cooperatives; land and water development; and other similarly related
    farm expenses. Term Operating loans allow for an extended repayment
    period not to exceed 7 years. The maximum number of years a farmer may
    receive term direct OL assistance is 7 years, which may be consecutive
    or non-consecutive. There is no limit on the number of loans closed in
    a single year. On a case-by-case basis, it is possible for farmers and
    ranchers to be granted a one-time waiver for an additional 2 years of
    direct loan assistance. This limitation is not applicable if the farm
    or ranch is subject to the jurisdiction of an Indian tribe.

        Direct OL--Limited Resource

        A limited resource Direct OL is designed to assist family farmers
    and ranchers unable to develop a farm business plan with a positive
    cash flow and reasonable prospects for loan repayment using FSA's
    regular interest rates. A limited resource interest rate is intended to
    reflect an interest rate below FSA's regular interest rate during
    periods of otherwise high interest rates. Limited resource loans are
    available for all OL loan purposes and authorities with repayment
    periods from one to 7 years depending upon the loan purpose, type of
    security and repayment ability. Limited resource farmers and ranchers
    are expected to graduate to FSA's regular rates and terms upon
    achieving stronger financial solvency. The maximum number of years a
    farmer may receive term Direct OL limited resource assistance is 7
    years, which may be consecutive or non-consecutive. There is no limit
    on the number of loans closed in a single year. On a case-by-case
    basis, it is possible for farmers and ranchers to be granted a one-time
    waiver for an additional 2 years of direct loan assistance. This
    limitation is not applicable if the farm or ranch is subject to the
    jurisdiction of an Indian tribe.

        Direct OL--Rural Youth

        Rural Youth loans are utilized to finance modest, income-
    generating, agriculture-related educational projects while
    participating in 4-H Clubs, Future Farmers of America, or similar
    organizations. Applicants must be between the ages of 10 to 20 years.
    Youth loan funds may be used only to pay the expenses associated with
    the approved project. A 4-H club advisor, vocational teacher, county
    extension agent or other organizational sponsor is required for
    supervision and technical assistance, and parental consent must be
    obtained.

        Direct OL--Beginning Farmer/Rancher

        Beginning farmer loans are targeted to loan applicants who have not
    operated a farm or ranch for more than 10 years and do not own real
    farm property, directly or indirectly, which does not exceed 30 percent
    of the median acreage of the farms in the county where the property is
    located. Beginning farmer loan recipients are often required to
    participate in production and financial management training in an
    effort to ensure success of the operation by providing the guidance and
    technical support necessary. Beginning farmer loans are available for
    all OL purposes and authorities with repayment periods from one to 7
    years depending upon the loan purpose, type of security and repayment
    ability. The maximum number of years a beginning farmer may receive
    Direct OL assistance is 10 years. This limitation is not applicable if
    the farm or ranch is subject to the jurisdiction of an Indian tribe.

        Direct OL--Socially Disadvantaged Applicant (SDA)

        A Socially Disadvantaged loan applicant is not a program type;
    rather it distinguishes a specific funding source. Therefore, the loan
    process and all loan requirements are identical for SDA applicants to
    those for non-SDA applicants. To be eligible for SDA loan
    consideration, the applicant must belong to a socially disadvantaged
    group whose members have been subject to racial, ethnic or gender
    prejudice, which includes American Indians or Alaskan Natives, Asians,
    Blacks or African Americans, Native Hawaiians or other Pacific
    Islanders, Hispanics, and women. Loan applicants must voluntarily
    provide his or her ethnicity, race and gender on the loan application.
    If an applicant does not voluntarily provide this information, targeted
    funding will not be available. Direct OL assistance for SDA applicants
    is available for all OL purposes and authorities with repayment periods
    from one to 7 years depending upon the loan purpose, type of security
    and repayment ability. The maximum number of years a farmer may receive
    term Direct OL limited resource assistance is 7 years, which may be
    consecutive or non-consecutive. There is no limit on the number of
    loans closed in a single year. On a case-by-case basis, it is possible
    for farmers and ranchers to be granted a one-time waiver for an
    additional 2 years of Direct loan assistance. This limitation is not
    applicable if the farm or ranch is subject to the jurisdiction of an
    Indian tribe.

        Guaranteed OL

        An FSA Guaranteed Line of Credit is a contract between the loan
    applicant and commercial lender that allows for the extension of
    financial credit where the loan principal may fluctuate throughout the
    term of the contract. The term of the contract may not extend beyond 5
    years. FSA issues a guarantee that protects the lender against possible
    loss up to 95 percent principal and interest.
        An FSA Guaranteed Operating term loan is a contract between the
    loan applicant and commercial lender that allows for the extension of
    financial credit for a period not to exceed 7 years. FSA guarantees the
    loan against possible loss up to 95 percent principal and interest.

        Guaranteed OL--Beginning Farmer/Rancher

        Beginning farmer loans are targeted to loan applicants who have not
    operated a farm or ranch for more than 10 years and do not own real
    farm property, directly or indirectly, which does not exceed 30 percent
    of the median acreage of the farms in the county where the property is
    located. FSA guarantees the loan against possible loss up to 95 percent
    of principal and interest.

        Guaranteed OL--Socially Disadvantaged Applicant

        A Socially Disadvantaged loan applicant is not a program type;
    rather it distinguishes a specific funding source. To be eligible for
    SDA loan consideration, the applicant must belong to a socially
    disadvantaged group whose members have been subject to racial, ethnic
    or gender prejudice, which includes American Indians or Alaskan
    Natives, Asians, Blacks or African Americans, Native Hawaiians or other
    Pacific Islanders, Hispanics, and women. FSA issues a guarantee that
    protects the lender against possible loss up to 95 percent of principal
    and interest.

        Guaranteed OL--Interest Assistance

        FSA's Interest Assistance program is intended to assist family
    farmers and ranchers who have low production or who are suffering the
    effects of a natural disaster or adverse economic conditions. This is
    helpful to beginning farmers who traditionally face difficulties in
    obtaining access to private credit programs. In exchange for
    reimbursing a commercial lender four percentage points on the
    Guaranteed OL, the commercial lender reduces the interest rate charged
    to the farmer by that amount, thus allowing the farmer a greater
    opportunity to accrue farm assets and become financially viable. FSA
    also issues a guarantee that protects the lender against possible loss
    up to 95 percent of principal and interest.
    3. Brief History
        The Farm and Rural Development Act, as amended, Subtitle B,
    Sections 311-317, Public Law 92-419, 7 U.S.C. 1942 enabled operators of
    not larger than family farms through the extension of credit and
    supervisory assistance, to make efficient use of their land, labor, and
    other resources, and to establish and maintain financially viable
    farming and ranching operations.
        Title III of the Agricultural Act of 1961, The Consolidated Farm
    and Rural Development Act (CONACT), as amended, through Public Law 109-
    171, Feb. 8, 2006, provided a major overhaul and expansion of farm
    lending authorities.
        Congressional appropriations are the sole source of funding for
    FSA's Direct loan program. Funding for this program was initially
    authorized through Title III of the Consolidated Farm and Rural
    Development Act of 1961 (CONACT), as amended, and amended by every
    subsequent farm bill.
        The Rural Development Act of 1972 (August 20, 1972), Section
    311(b)(1) of the CONACT, established the use of the guarantee
    provisions for commercial lenders and authorized the Rural Youth loan
    program, and has been amended in every subsequent farm bill. Loan
    authorities provided within this Act initially authorized FSA's
    Guaranteed loan program, which also has been amended by each subsequent
    farm bill.
        The 1978 Agriculture Credit Act changed existing programs by
    authorizing farm loans to family corporations, cooperatives, and
    partnerships as well as to individuals; changed the interest rate for
    farm ownership loans so that the rate is now based on the cost of
    borrowing to the government; and limited resource farmers and limited
    resource rates were identified and established.
        The Emergency Agricultural Credit Act of 1984 (April 10, 1984)
    increased the maximum repayment period for rescheduled or consolidated
    loans and allowed for borrowers to have their loan changed to a limited
    resource loan, if qualified. This Act also permitted interest rates on
    operating loans that are deferred, consolidated, rescheduled or re-
    amortized to be set at the original rate or current rate, whichever is
    lower and required a target of 20 percent of operating funds to be
    targeted to limited resource borrowers.
        The Food Security Act of 1985 (December 23, 1985) made major
    changes in farm loan eligibility and provided protections for borrowers
    undergoing serious financial difficulty. Loan eligibility was expanded
    to include ``joint operators'' and persons related by blood or
    marriage.
        The targeting of direct and guaranteed Operating Loan funds to
    Socially Disadvantaged Applicants was initially authorized in the Food,
    Agriculture, Conservation and Trade Act of 1990 (November 28, 1990),
    Section 355 of the CONACT. The inclusion of women as Socially
    Disadvantaged farmers occurred in the Agricultural Act of 1992, Section
    355 of the CONACT.
        Targeted direct and guaranteed Operating Loan funds to Beginning
    Farmers and Ranchers were authorized through the Agricultural Credit
    Improvement Act of 1992, Section 346(b)(2) of the CONACT, and as
    amended in every subsequent farm bill.
        Through the Federal Agriculture Improvement and Reform (FAIR) Act
    of 1995 (April 4, 1996), Public Law 104-127, farm lending programs were
    reauthorized, placing new restrictions on the purposes for which loans
    can be used and the length of time borrowers are eligible for new
    credit assistance. This law also established the targeted funding for
    beginning farmers.
        Section 806 of the Omnibus Consolidated and Emergency Supplemental
    Appropriations Act, 1999 (Public Law 106-277), amended the maximum
    Guaranteed loan limits for farm operating loans in Section 305 and 313
    of the CONACT. Beginning in Fiscal Year 2000, this cap is adjusted
    annually if the ``Prices Paid by Farmers Index'', as compiled by the
    National Agricultural Statistics Service for the 12 month period ending
    in August of year exceeds the value for the 12 month period ending
    August 31, 1996.
    4. Purpose/Goals
        FSA direct loans facilitate the provision of credit, which can help
    support low farm family incomes, assist minority and beginning farmers,
    or help farmers adopt new technology that will make their farming
    operations more economical. FSA has the responsibility of providing
    credit counseling and supervision to its direct borrowers by making a
    thorough assessment of the farming operation. The Agency helps
    applicants evaluate the adequacy of the real estate and facilities,
    machinery and equipment, financial and production management, and the
    farmer's goals. FSA assists the applicant in identifying and
    prioritizing areas needing improvement in all phases of the operation.
    An FSA official then works one-on-one with the farmer to develop and to
    help strengthen the identified areas that ultimately result in the
    farmer's graduation to commercial credit.
        Because special skills may be needed to evaluate farm loans, and
    because much farm production occurs in geographically isolated areas
    that have few lenders, some farmers may face less competitive markets
    for their loans that can result in higher rates, less favorable terms,
    and/or no access to loan funds. Consequently, farmers may face a
    competitively limited market for their loans that can result in higher
    rates, unfavorable terms, and a shortage of loan funds. Farmers may
    have trouble demonstrating their credit worthiness to lenders because
    of the economic uncertainties of production agriculture as well. This
    can be particularly true for beginning farmers, women, and minorities,
    as they typically operate smaller farms, have less equity, or lack a
    sufficient credit or production histories. To address these issues,
    each year FSA allocates a share of loan funding for use by beginning
    farmers and socially disadvantaged, including racial, ethnic
    minorities, and women farmers, who by statute are deemed more likely to
    have problems accessing needed credit than other high-risk family-sized
    farm borrowers.
        The Guaranteed Loan Program plays an important role in facilitating
    the extension of credit to farmers, not only through collaboration with
    partner lenders but also with FSA's Direct Loan Program. Often times a
    borrower's credit needs are met through a combination of a Guaranteed
    loan and an FSA direct loan. For example, a Farm Ownership loan will be
    made by a commercial lender with an FSA guarantee to purchase farmland
    and the borrower will also obtain a direct operating loan from FSA to
    cover annual operating expenses.
        The ``credit gaps'' which farm loan guarantees are designed to fill
    are associated with farm businesses that usually have debt burdens and/
    or repayment capacities that do not meet private sector lending
    standards. These high-risk farms might fail to meet industry standards
    due to a lack of production or credit history, limited equity, being a
    start-up business, defined as 10 or less years of farming experience,
    or by being able to offer only single purpose collateral. Another
    factor limiting access to capital is that some farm production occurs
    in geographically isolated areas that tend to have fewer lenders
    specializing in agricultural lending. As a result, farmers may face
    limited competition loans in these areas, which can result in higher
    interest rates, unfavorable loan terms, and/or a shortage of loan
    funds. By reducing the lenders' exposure to risk, the 90 to 95 percent
    guarantee provided lenders on eligible farm loans allows farmers to
    obtain loans to finance annual operating expenses, equipment,
    livestock, and farmland purchases and improvements.
        Current program measures and targets, which cover FY 2007-2011,
    were established in FY 2006 by the Farm Loan Programs Goal Working
    Group. The group, which was comprised of FSA senior managers and
    stakeholders, considered numerous factors when developing the
    performance targets, including past program performance and economic
    forecast for the agricultural sector. Out-year targets for the loss and
    delinquency goals may not seem overly ambitious, on the surface, given
    the current performance levels. However, it is important to note that
    both losses and delinquencies are at historically low levels. The
    historical loss rate covers a long-term period and reflects the high-
    risk nature of agricultural operations, where success often depends
    upon circumstances beyond the control of lenders and borrowers. The
    historic loss rate is a more accurate gauge of the cyclical nature of
    agriculture and is a more relevant comparison than measuring against
    the extremely low losses attained in recent years.
        It must be understood that FSA's loan program was designed to
    provide access to capital for those farmers who cannot obtain credit
    with or without a guarantee, equating to an extremely high probability
    of loss. The long-term measures focus on an outcome of keeping losses
    and delinquency low but not so low as to no longer meaningfully reflect
    the purpose of the program. FSA's goals for Fiscal Years 2007 through
    2011 are as follow:
        Loan Making: (1) reduce first year delinquency rates on new loans;
    (2) increase lending to minorities, women and beginning farmers and
    ranchers; (3) reduce the average processing time for direct loans; and
    (4) reduce the average processing time for Guaranteed loans.
        Loan Servicing: (1) decrease the delinquency rate on direct loans;
    (2) decrease the loss rate for direct loans; (3) decrease the loss rate
    on guaranteed loans and (4) decrease the delinquency rate of Guaranteed
    loans.
        Measures for loss and delinquency rates are valuable in two
    respects. First, they are indicators of the financial well being of
    borrowers. Second, they are indicators of the overall quality of the
    FSA underwriting standards and loan servicing.
        Regarding the measure to ``increase the percentage of beginning
    farmers, minorities, and women financed by FSA,'' FSA continues to
    provide increased levels of assistance to these targeted groups.
    Measurement of this goal was revised in 2002 to be a more outcome-
    oriented indicator of FSA success in providing credit assistance to
    these historically underserved groups. This performance is noteworthy,
    given the relatively low numbers of farmers in the targeted groups in
    the U.S. farm sector.
        An external factor that could impact progress and accomplishment of
    these measures includes widespread or prolonged natural disasters that
    can significantly reduce farm production and, therefore, reduce net
    income. Also, substantial inflation in farm expenses or depressed
    commodity prices could have a similar effect. If economic conditions
    deteriorate in the agricultural sector, rural lending institutions
    contract their delivery of capital, which increases demand for FSA Farm
    Loan Programs. Such conditions reduce borrower repayment ability,
    increase delinquencies and losses, and reduce the ability of direct
    borrowers to obtain guaranteed credit. Such an event would also
    dramatically increase workload of Service Center employees, hindering
    the ability to provide needed assistance to producers in a timely
    manner. To mitigate these factors, FSA encourages farmers to use
    various risk management practices such as crop insurance, and marketing
    tools, such as forward contracting.
    5. Success in Meeting Programmatic Purpose/Goals
        FSA has been very successful in accomplishing its long-term
    performance goals for the Operating Loan Program. Loss rates,
    delinquency rates, and lending to beginning farmers, minorities, and
    women have all shown significant long-term progress. (See
    specifications on page 467.)
    6. Annual Budget Authority (FY 2002-FY 2011)
        See Attachment 1.
    7. Annual Outlays (FY 2002-FY 2011)
        See Attachment 2.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        See Attachment 3.
    9. Eligibility Criteria
        The eligibility criteria for the Operating Loan--Annual, Operating
    Loan--Term, Operating Loan--Limited Resource applicants and Beginning
    Farmers is as follows:

       Have no disqualifying convictions for controlled substances,
            including drug trafficking and possession;

       Possess the legal capacity to incur the obligation of the
            loan;

       Be a citizen of the United States, a United States non-
            citizen national, or a qualified alien under applicable Federal
            immigration laws;

       Have an acceptable credit history demonstrated by debt
            repayment;

       Have not caused the Agency a loss by receiving debt
            forgiveness;

       Have not received debt forgiveness or incurred a loss to the
            government relating to a guaranteed loan loss; and

       Have the inability to obtain credit elsewhere, with or
            without an FSA guarantee;

       Not be in delinquent status on any Federal debt, excluding
            debt under the Internal Revenue code of 1986 at the time of
            loan closing;

       Have no outstanding unpaid judgments obtained by the United
            States in any court, excluding those filed as a result of
            action in the United States Tax Courts;

       May not be ineligible due to disqualification resulting from
            Federal Crop Insurance violation(s) according to 7 CFR 718;

       Have sufficient farm managerial ability as demonstrated by a
            combination of education, on-the-job training and farming
            experience;

       Must agree to meet borrower training requirements, if FSA
            determines the training to be necessary for success; and

       Be the owner-operator or tenant-operator of a family farm or
            ranch.

        The loan eligibility criterion for an Operating Loan to a Socially
    Disadvantaged Applicant, including women, includes all general
    eligibility requirements outlined above. As stated previously, a
    Socially Disadvantaged loan only specifies a funding source. Therefore,
    the loan process and all loan requirements are identical for SDA
    applicants to those for non-SDA applicants. Loan applicants must
    voluntarily provide his or her ethnicity, race and gender on the loan
    application to qualify for the targeted funding.
        Rural Youth loan eligibility criteria include all general
    eligibility requirements except a youth loan applicant does not need to
    demonstrate managerial ability, is not subject to borrower training
    requirements, does not need to operate a farm, and is not subject to OL
    term limits for loan assistance.
    10. Utilization (Participation) Data

                                      Program Loan Funds Use (dollars in millions)
    ----------------------------------------------------------------------------------------------------------------
                                FY 2007            FY 2008           FY 2009           FY 2010          FY 2011 *
    ----------------------------------------------------------------------------------------------------------------
             Direct OL                600              629.1           1,226.4           1,242.3               917
         Guaranteed OL                917              1,032             1,235           1,510.1           1,015.2
       (unsubsidized)
         Guaranteed OL                271                175             149.7             181.5              52.1
        (interest as-
            sistance)
    ----------------------------------------------------------------------------------------------------------------
    * As of June 30, 2011.

    11. Duplication or Overlap with Other Programs
        The FSA Guaranteed Farm Loan Program serves separate purposes and
    is generally not duplicative with other Federal and state credit
    programs. While other Federal or state credit programs are available to
    family farm businesses, these programs lack national scope, are focused
    on narrow market segments, and are not specifically designed to serve
    high-risk farm businesses. FSA's Direct Farm Loan Program serves high-
    risk farmers with similar purposes, but this program is designed to
    assist even less creditworthy borrowers; those unable to obtain credit,
    even with a Federal loan guarantee. Studies of the economic profiles of
    both Direct and Guaranteed program participants indicate the two
    delivery systems serve different high-risk borrower segments. In
    addition, the FSA Direct Loan Program is narrower in scope because of
    the more limited funding and is more highly targeted to underserved
    market segments of beginning start-up farm operations and socially
    disadvantaged borrowers.
        Across other Federal agencies, the Small Business Administration
    (SBA), and USDA's Rural Business Service (RBS) provide loan guarantee
    programs that may serve agriculture. The RBS loan guarantee programs do
    not duplicate those of FSA because they serve agribusiness and value-
    added farm enterprises. The SBA programs are not designed to meet
    specialized agricultural needs and delivery by participating SBA
    lenders' program delivery is geographically limited. In FY 2007, SBA
    accounted for only 3.5 percent of all federally guaranteed loans made
    to farmers, with FSA accounting for the remainder. Many of SBA
    agricultural loan guarantees are made to farms that would not meet FSA
    eligibility requirements. Overlap between FSA and SBA was mostly
    limited to poultry and nursery farms.
        Some state governments also provide farm loan guarantees, but
    funding and geographic coverage for such programs is limited. The
    National Council of State Agricultural Finance Programs indicates that
    only 18 states have an established loan guarantee program. However,
    only four states have programs that are actively providing loan
    guarantees to farmers. State programs typically target specific
    purposes, such as value-added or single-purpose livestock facilities,
    have limited or sporadic funding, or limited geographical availability,
    hence seldom duplicating FSA loan objectives. Again, eligibility
    criteria and intended purposes differ significantly from FSA Direct and
    Guaranteed Loan Programs, and funding can be sporadic. A more common
    type of state financing assistance is provided through ``Aggie Bonds,''
    which are tax exempt bonds, issued by states under specific eligibility
    requirements.
    12. Waste, Fraud and Abuse
        FSA has a robust internal controls program for its farm loan
    programs, which consists of OMB Circular A-123 reviews, Farm Loan
    Program Risk Assessments, the County Operations Review program, Lender
    Reviews, and National Office Loan Origination File Reviews.
    Additionally, farm loan programs are subject to periodic audit and
    review by the Office of Inspector General and the Government
    Accountability Office. No material weaknesses related to fraud, waste,
    and abuse have been identified through these processes for many years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Indian Tribal Land Acquisition Program (ITLAP).
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        ITLAP was authorized by 5 U.S.C. 301 and 25 U.S.C.
    4. Purpose/Goals
        Some Indian reservation allotments are co-owned by hundreds of
    people. This is because with the passing of each generation, there are
    an increasing number of heirs who have inherited undivided interests in
    the same allotments. This increase in co-ownership, or fractionation,
    often renders the consolidation of title into one owner nearly
    impossible. There are limited sources of funding to consolidate
    fractionated interest. FSA's ITLAP extends credit to Indian Tribes or
    Tribal corporations which do not qualify for standard commercial loans
    to purchase land within their own reservation or Alaskan community.
    5. Success in Meeting Programmatic Purpose/Goals
        The ITLAP program has been successful in meeting the programmatic
    purpose. The amount appropriated each year limits the program benefits
    because the funding available is insufficient to meet the needs of the
    Tribes interested in participating in the program.
    6. Annual Budget Authority (FY 2002-FY 2011)
        See Attachment 1.
    7. Annual Outlays (FY 2002-FY 2011)
        See Attachment 2.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        See Attachment 3.
    9. Eligibility Criteria
        Native American Tribes must meet the following eligibility
    requirements to be eligible for an ITLAP loan:

       The Tribe must show credit from other sources is not
            available to purchase the real estate.

       The land must be located within the Tribe's reservation for
            use by the members of the Native American tribe or Tribal
            Corporation.

       A feasibility plan for the use of lands and a method of
            repayment of the loan funds must be provided.

       The Tribe must be in good standing with all Federal Agencies
            and not subject to a judgment lien against the Tribe's property
            due to a debt to the United States.

       The Tribe must not have received a write-down on any other
            loans within the past 5 years.

       The amount of the loan funds must not exceed the market
            value of the land determined by the current appraisal.
    10. Utilization (Participation) Data
        Since 2000, seven loans valued at a total of $2.88 million have
    been made through ITLAP.
    11. Duplication or Overlap with Other Programs
        The Bureau of Indian Affairs' Indian Land Consolidation Pilot
    Program, which began in 1999, is a result of Congressional Acts and
    Supreme Court decisions that sought to remedy problems associated with
    fractional land.
    12. Waste, Fraud and Abuse
        There has been no known instance of waste, fraud or abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Boll Weevil Eradication Loan Program.
        Prepared by the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA).
    2. Subprograms/Department Initiatives
        There are no subprograms or department initiatives for the Boll
    Weevil Eradication Loan program.
    3. Brief History
        USDA has been involved with Boll Weevil Eradication since the
    1970's through the USDA Animal and Plant Health Inspection Service
    (APHIS), the Agency that initially funded the program along with the
    member states. The Boll Weevil Eradication Loan Program was authorized
    by 5 U.S.C. 301; 7 U.S.C. 1989 and Public Law 104-180, 110 Stat. 1569,
    to essentially provide the full funding needed to complete the
    eradication of the boll weevil. The first Boll Weevil Eradication Loan
    was made by FSA in 1997, and since that time the boll weevil has been
    successfully eradicated from most states.
    4. Purpose/Goals
        Through the use of FSA's loan authorities, this loan program serves
    two primary objectives: reducing pesticide requirements of cotton
    producers and increasing overall cotton production in the United
    States. The FSA Boll Weevil Eradication Loan program is a supplemental
    program to the USDA/APHIS Boll Weevil Eradication program and differs
    only in that FSA administers a Boll Weevil Eradication Loan program and
    APHIS offers Federal grants as well as provides technical assistance
    and program oversight.
        The goal of the Boll Weevil Eradication Loan Program is to support
    APHIS and farmer eradication efforts at minimal cost.
    5. Success in Meeting Programmatic Purpose/Goals
        The Boll Weevil Eradication Loan program has been very successful
    in meeting its programmatic purpose. The reduction in the number of
    boll weevils has greatly reduced the amount of pesticides used by
    cotton producers. At one time, cotton growers applied more than 41
    percent of all insecticides in agricultural use, regularly spraying
    their cotton as many as 15 times a season. In contrast, since the
    establishment of the Boll Weevil Eradication Loan Program, annual
    pesticide applications have been reduced to nearly zero. The program
    has no delinquent accounts and no losses with minimal administrative
    program cost.
    6. Annual Budget Authority (FY 2002-FY 2011)
        See Attachment 1.
    7. Annual Outlays (FY 2002-FY 2011)
        See Attachment 2.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        See Attachment 3.
    9. Eligibility Criteria
        An eligible applicant must:

       Meet all requirements prescribed by APHIS to qualify for
            cost-share grants;

       Have the appropriate charter and legal authority as a
            nonprofit corporation or state organization specifically
            organized to operate the boll weevil eradication program in any
            state or region (Individual producers are not eligible for
            loans);

       Possess the legal authority to enter into contracts,
            including debt instruments;

       Operate in an area in which producers have approved a
            referendum authorizing producer assessments and in which an
            active eradication or post-eradication program is underway or
            scheduled to begin; and

       Have the legal authority to pledge producer assessments as
            security for loans from FSA.
    10. Utilization (Participation) Data
        Ten states have benefited from the Boll Weevil Eradication Loan
    program; obtaining a total of 49 loans for a total of $992,412,496. At
    present, only two states remain active in this program with a total
    outstanding debt of slightly more than $61,000,000.
    11. Duplication or Overlap with Other Programs
        There is no known duplication with other programs beyond the APHIS
    grant program for Boll Weevil Eradication. As stated earlier the APHIS
    program was supplemented by the FSA loan program in order to provide
    full funding to the eradication initiative.
    12. Waste, Fraud and Abuse
        FSA has a robust internal controls program for its farm loan
    programs, which consists of OMB Circular A-123 reviews, Farm Loan
    Program Risk Assessments, the County Operations Review program, Lender
    Reviews, and National Office Loan Origination File Reviews.
    Additionally, farm loan programs are subject to periodic audit and
    review by the Office of Inspector General and the Government
    Accountability Office. No material weakness related to fraud, waste,
    and abuse have been identified through these processes for many years.
    13. Effect of Administrative PAYGO
        None.

                                                                          Attachment 1
                                          Appendix I: ACIF Historical Program Subsidy Budget Authority and Loan Levels
                                                                         ($ in Millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            2002      2003      2004      2005      2006      2007      2008      2009      2010      2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ACIF
      Annual Subsidy Budget Authority                          190       248       198       144       151       148       153       241       156       155
    Direct Loan Level
      Farm ownership                                           147       169       142       272       275       303       382       560       702       474
      Farm operating                                           611       690       610       556       641       600       629     1,056     1,220     1,049
      Emergency disaster                                        25        96        30        24        51        75        46        30        36        66
      Indian tribe land acquisition                              2         0         2         0         0         0         0         0         0         4
      Boll weevil eradication                                  100        99        98        83        22         6       100       100         0       100
      Indian Highly Fractionated Land                          N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         5        11
      Farm Operating ARRA                                      N/A       N/A       N/A       N/A       N/A       N/A         0       170        22         0
                                                         ---------------------------------------------------------------------------------------------------
        Total Direct Loan Levels                               885     1,054       882       935       989       984     1,157     1,916     1,985     1,704
                                                         ---------------------------------------------------------------------------------------------------
    Direct Loan Appropriated Subsidy
      Farm ownership                                             4        20        31        15        14        13        17        36        29        33
      Farm operating                                            55       119        88        56        64        70        80       125        58        64
      Emergency disaster                                         3        19         4         3         6         9         5         4         1         7
      Indian tribe land acquisition                              0         0         0         0         0         0         0         0         0         0
      Boll weevil eradication                                    0         0         0         0         0         0         0         0         0         0
      Seed cotton                                                0         0       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
      Indian Highly Fractionated Land                          N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
      Farm Operating ARRA                                      N/A       N/A       N/A       N/A       N/A       N/A         0        20         1         0
                                                         ---------------------------------------------------------------------------------------------------
        Total Direct Loan Subsidy                               62       158       123        74        84        92       102       185        89       104
                                                         ---------------------------------------------------------------------------------------------------
    Guaranteed Loan Level
      Farm ownership                                         1,161     1,231     1,103     1,027       949       965     1,171     1,273     1,606     1,906
      Farm operating, unsubsidized                           1,548     1,013       951       885       937       918       946     1,235     1,510     1,498
      Farm operating, subsidized                               511       418       278       283       272       272       135       150       182        65
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         1
                                                         ---------------------------------------------------------------------------------------------------
                                                             3,220     2,662     2,332     2,195     2,158     2,155     2,252     2,658     3,298     3,470
                                                         ---------------------------------------------------------------------------------------------------
    Guaranteed Loan Appropriated Subsidy
      Farm ownership                                             5         9         6         5         5         6         5         4         6         7
      Farm operating, unsubsidized                              54        32        34        27        28        23        23        31        35        35
      Farm operating, subsidized                                69        49        35        38        34        27        23        21        26         9
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
                                                         ---------------------------------------------------------------------------------------------------
                                                               128        90        75        70        67        56        51        56        67        51
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                          Attachment 2
                                                                 ACIF Historical Program Outlays
                                                                           ($Millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            2002      2003      2004      2005      2006      2007      2008      2009      2010      2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ACIF
      Direct Loan Subsidy Outlays
      Farm ownership                                             5        17        30        15        13         9        19        30        28        33
      Farm operating                                            56       109        87        56        61        70        77       107        67        64
      Emergency disaster                                        28        18         4         3         5         7         5         4         1         7
      Indian tribe land acquisition                              0         0         0         0         0         1         0         0         0         0
      Boll weevil eradication                                    0         0         0         0         0         0         0         0         0         0
      Indian Highly Fractionated Land                          N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
      Farm Operating ARRA                                      N/A       N/A       N/A       N/A       N/A       N/A         0        18         2         0
                                                         ---------------------------------------------------------------------------------------------------
        Total Direct                                            89       144       121        74        79        87       101       159        98       104
                                                         ---------------------------------------------------------------------------------------------------
    Guaranteed Loan Subsidy Outlays
      Farm ownership                                             5         9         6         5         4         5         4         4         5         7
      Farm operating, unsubsidized                              48        32        33        28        28        35        23        30        35         9
      Farm operating, subsidized                                63        49        31        37        34        15        18        21        25        35
      Conservation                                             N/A       N/A       N/A       N/A       N/A       N/A         0         0         0         0
                                                         ---------------------------------------------------------------------------------------------------
        Total Guaranteed                                       116        90        70        70        66        55        45        55        65        51
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                          Attachment 3

        Department Strategic Goal: Assist rural communities to create prosperityso they are self-sustaining, repopulating, and economically thriving.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Farm Loans

          Direct Farm Ownership               12,712          16,990          35,560          28,675          26,520
           Loans
          Direct Farm Operating               70,147          79,959         124,545          58,889          47,500
           Loans
          Guaranteed Farm Ownership            5,599           4,955           4,200           5,942           5,559
           Loans
          Guaranteed Farm Operating           27,379          23,341          20,645          25,529          23,902
           Loans
          Guaranteed Farm Operating           22,666          22,908          30,754          35,338          35,126
           Loans, unsub.
          Emergency Disaster Loans             8,891           5,135           4,323           1,314           6,000
          Indian Tribe Land                        0               0               0               0               0
           Acquisition Loans
          Boll Weevil Eradication                114               0               0               0               0
           Loans
          Indian Fractionated Land                 0               0               0               0             793
           Loans
          Direct Conservation Loans                0               0               0               0               0
          Guaranteed Conservation                  0               0               0               0               0
           Loans
          Program Loan Cost Expenses           7,920           7,920           7,920           7,920           7,920
          Individual Development                   0               0               0               0               0
           Account Grants
          Administrative costs               243,993         277,206         305,903         309,848         304,655
           (direct)
          Indirect costs 2                   146,791          23,979           4,214           4,273           8,518
                                     -------------------------------------------------------------------------------
            Total Costs 1                    546,212         462,393         538,064         477,728         466,493
            FTEs                               2,809           2,752           2,923           2,804           2,804

          Performance Measure: Maintain or reduce avg processing time for direct and guaranteed loans.

            Direct Loans (# of                 27.00           27.80           33.50           30.80           32.50
             days):
            Guaranteed Loans (# of             12.60            8.50           13.50           13.25           13.00
             days):
          Performance Measure: Increase % of beginning farmers, racial and ethnic minority farmers, and women
           farmers financed by FSA.

            Percent:                          15.90%          16.22%          17.40%          19.90%          18.00%

    1 For loan programs reflects subsidy budget authority to support loan levels.
    2 Indirect costs include a small amount related to State Mediation Grants.

                           AGRICULTURAL PROGRAM AUDIT

               (EXAMINATION OF USDA ENERGY AND FORESTRY PROGRAMS)

                                  ----------

                            WEDNESDAY, JULY 20, 2011

     Subcommittee on Conservation, Energy, and
                                      Forestry,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 1300, Longworth House Office Building, Hon. Glenn Thompson
    [Chairman of the Subcommittee] presiding.
        Members present: Representatives Thompson, Goodlatte,
    Gibbs, Southerland, Roby, Huelskamp, Hultgren, Ribble, Holden,
    Schrader, Owens, McIntyre, Costa, Walz, Pingree, and Sablan.
        Staff present: Patricia Barr, Brent Blevins, Tamara Hinton,
    Josh Maxwell, Mary Nowak, Debbie Smith, Lauren Sturgeon,
    Heather Vaughan, John Konya, Nona Darrell, Liz Friedlander,
    Anne Simmons, and Jamie Mitchell.

     OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        The Chairman. Good morning, everyone, this hearing of the
    Subcommittee on Conservation, Energy, and Forestry, entitled,
    Agricultural Program Audit: Examination of USDA Energy and
    Forestry Programs, will come to order.
        We will start with opening statements. I want to welcome
    everyone to today's hearing to audit the USDA energy and
    forestry programs.
        Today we will hear from USDA about the farm bill programs
    administered under the energy and forestry titles. As with each
    farm audit we are holding, we will learn basic information
    about programs as well as whether any programs are duplicative.
    The first energy title was created in the 2002 Farm Bill, and
    it was designed to help develop feedstock for renewables fuels
    and to assist farmers and ranchers with energy efficiency.
        The 2008 Farm Bill expanded the energy title and committed
    more than a billion dollars in mandatory funding to help foster
    the development of advanced biofuels.
        Many of these programs, such as the Biomass Crop Assistance
    Program, were created with the purpose of fostering the
    creation of the next generation of advanced biofuels by
    developing dedicated energy crops. Other programs, like the
    Rural Energy for America Program, were expanded to better
    assist rural America's producers and small businesses to
    implement energy efficiency measures and renewable energy
    systems.
        As we consider these programs and to what extent they have
    fulfilled their purpose, we must be aware that we face a
    significant challenge in the next farm bill. Thirty-seven
    programs in the farm bill do not have a budget baseline beyond
    the expiration of the current farm bill, including every
    program in the energy title.
        For those of you who are not familiar with the
    Congressional budgeting process, this means that none of the
    energy title programs have mandatory funding beyond the
    expiration of the 2012 Farm Bill. Therefore, if we wish to see
    any of these programs continue into the future in their current
    form, we will be faced with the challenge of finding funding
    elsewhere.
        Now that will be challenging in these fiscal times as we
    are looking for ways to cut spending and make government more
    efficient. It is not as simple as reallocating funds from one
    title to another when the 37 programs I mentioned previously
    are spread through 12 titles of the farm bill.
        In addition to energy, we will also examine USDA forestry
    programs today. The Committee shares jurisdiction of forestry
    matters with the Natural Resources Committee.
        Our Committee's jurisdictions over forestry is focused on
    state and private forestry and landowner assistance programs,
    forestry research as well as oversight of the Forest Service.
    The forestry title is one of the smaller titles of the farm
    bill but no less important.
        Several Members of the Subcommittee, including me, have
    forestlands in their districts and appreciate the important
    relationship the Forest Service maintains with rural America.
    Though most of the forestry programs have a permanent
    authorization, it is important for us to review these programs
    to ensure that they are being carried out in a manner
    consistent with their purpose.
        I want to welcome our panel of witnesses from USDA. The
    Subcommittee looks forward to hearing your testimony and your
    thoughts on the programs we are examining today, and I look
    forward to working with you all in the future as we craft the
    next farm bill.
        [The prepared statement of Mr. Thompson follows:]

    Prepared Statement of Hon. Glenn Thompson, a Representative in Congress
                               from Pennsylvania
        Good morning. I want to welcome everyone to today's hearing to
    audit USDA energy and forestry programs.
        Today, we will hear from USDA about the farm bill programs they
    administer under the energy and forestry titles.
        As with each farm audit we are holding, we will learn basic
    information about the programs, as well as whether any programs are
    duplicative.
        The first energy title was created in the 2002 Farm Bill. It was
    designed to help develop feedstocks for renewable fuels and to assist
    farmers and ranchers with energy efficiency.
        The 2008 Farm Bill expanded the energy title and committed more
    than $1 billion in mandatory funding to help foster the development of
    advanced biofuels.
        Many of these programs, such as the Biomass Crop Assistance
    Program, were created with the purpose of fostering the creation of the
    next generation advanced biofuels by developing dedicated energy crops.
        Other programs, like the Rural Energy for America Program, were
    expanded to better assist rural America's producers and small
    businesses to implement energy efficiency measures and renewable energy
    systems.
        As we consider these programs, and to what extent they have
    fulfilled their purpose, we must be aware that we face a significant
    challenge in the next farm bill.
        Thirty seven programs in the farm bill do not have a budget
    baseline beyond the expiration of the current farm bill, including
    every program in the energy title.
        For those of you who are not familiar with the Congressional
    budgeting process, this means that none of the energy title programs
    have mandatory funding beyond the expiration of the 2012 Farm Bill.
        Therefore, if we wish to see any of these programs continue into
    the future in their current form, we will be faced with the challenge
    of finding funding elsewhere.
        That will be challenging in these fiscal times, as we are looking
    for ways to cut spending and make government more efficient.
        It is not as simple as reallocating funding from one title to
    another when the 37 programs I mentioned previously are spread through
    12 titles of the farm bill.
        In addition to energy, we will also examine USDA forestry programs
    today.
        The Committee shares jurisdiction of forestry matters with the
    Natural Resources Committee.
        Our Committee's jurisdiction over forestry is focused on state and
    private forestry and landowner assistance programs, forestry research,
    as well as oversight of the Forest Service.
        The forestry title is one of the smaller titles of the farm bill,
    but no less important.
        Several Members of this Subcommittee, including me, have
    forestlands in their district, and appreciate the important
    relationship the Forest Service maintains with rural America.
        Though most of the forestry programs have a permanent
    authorization, it is important for us to review these programs to
    ensure that they are being carried out in a manner consistent with
    their purpose.
        I want to welcome our panel of witnesses from USDA. The
    Subcommittee looks forward to hearing your testimony and your thoughts
    on the programs we are examining today.
        I look forward to working with you all in the future as we craft
    the next farm bill.
        I now yield to the gentleman from Pennsylvania, Mr. Holden, for his
    opening statement.

        The Chairman. I now yield to the gentleman from
    Pennsylvania, Mr. Holden, for his opening statement.

       OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        Mr. Holden. Thank you, Mr. Chairman.
        I would like to thank our witnesses and guests for being
    here this morning. This hearing presents an important
    opportunity for Members of the Subcommittee to review the state
    of USDA energy and forestry programs. The Farm Service Agency,
    Rural Development and U.S. Forest Service, through the
    authority of this Committee, currently administer the energy
    and forestry titles and programs contained in the 2008 Farm
    Bill.
        This bill expanded many of the renewable energy programs
    originally authorized in the 2002 bill and introduced many new
    provisions intended to ensure that agriculture played an
    important role in moving this country towards energy
    independence.
        This Committee crafted a bill to encourage a move toward
    advanced biofuels by promoting research, development and
    demonstration of biomass-based renewable energy and by
    providing over $1 billion in investments needed to show a
    promising but fragile industry that we are committed to
    renewable energy production.
        Implementation of many of these energy title programs,
    however, has been slow, leading to uncertainty in an industry
    we intended to strengthen and support. In addition, the energy
    title does not have mandatory money for these programs after
    the 2008 Farm Bill expires. This leaves this Committee and the
    agencies before us today in a difficult situation during a
    difficult fiscal environment.
        Similarly the forestry title, which impacts forestland
    management in the 155 National Forests and 20 grasslands in the
    National Forest System does not have any mandatory funding. To
    ensure the Forest Service continues to meet the needs of
    present and future generations, we must ensure that forestry
    title policies are efficient and accessible.
        It is important for us to find out today which programs
    have been implemented and are accomplishing our goal of a well-
    managed agency dedicated to forest stewardship. We must all
    work together to make certain taxpayer dollars are being spent
    wisely and as intended if we are to sustain healthy, diverse
    and productive forests and expand domestic production of
    renewable energy to decrease our dependence on foreign oil.
        I look forward to hearing from our witnesses today and
    yield back my time, Mr. Chairman.
        The Chairman. I thank the gentleman.
        The chair would request that other Members submit their
    opening statements for the record so that the witnesses may
    begin their testimony and to ensure there is ample time for
    questions.
        [The prepared statement of Ms. Fudge follows:]

        Prepared Statement of Hon. Marcia L. Fudge, a Representative in
                               Congress from Ohio
        Thank you Chairman Thompson and Ranking Member Holden, for
    convening today's hearing and thank you Mr. Tidwell, Ms. Canales, and
    Mr. Garcia for educating us on energy and forestry provisions of the
    farm bill. As a new Member of this Committee, I appreciate these
    opportunities to learn some substance about the issues that will be
    relevant for the next iteration of the farm bill.
        I am particularly interested in the USDA's renewable energy
    research programs, and specifically, the Biodiesel Fuel Education
    Program. On one hand, the price of commodities like petroleum and oil
    have shot up over the past decade, so it is important for the U.S. as a
    nation to explore cheaper, cleaner, renewable fuel sources. There are
    institutions and organizations in my district that are blazing the path
    for new energy technology and this program represents a great funding
    opportunity for them and similar institutions across the country.
    Moreover, being able to use biomass to produce cleaner, renewable fuel
    will have a positive effect on the economy and make it less expensive
    for food producers to provide the fresh and nutritious foods that
    people depend on both here and abroad.
        I am also interested in the Urban and Community Forestry Program as
    I represent an urban district. Scientific evidence of green spaces has
    been mounting for some time now. For example, One tree can remove 26
    pounds of carbon dioxide from the atmosphere annually, equaling 11,000
    miles of car emissions. Plants have been shown to reduce the urban heat
    island effect, i.e., where buildings, asphalt, and concrete absorb
    solar radiation and then reemit it as heat, causing the air temperature
    of the city to rise, directly by shading heat absorbing surfaces, and
    indirectly through evaporative cooling. Green spaces can also reduce
    noise pollution, by dense screens of trees and shrubs, and can even
    cleanse partially-treated wastewater. I have worked on awareness around
    childhood obesity and youth fitness, so programs that make the outdoors
    safer and more inviting are certainly of interest to me.
        Again, I thank the Chairman for holding today's hearing and I look
    forward to hearing from our witness.

        The Chairman. I am pleased to welcome our panel of
    witnesses to the table today. First, we have Mr. Tom Tidwell,
    Chief of the U.S. Forest Service, U.S. Department of
    Agriculture; Ms. Judy Canales, Administrator of the Rural
    Business Cooperative Service, USDA; and Mr. Juan Garcia, Deputy
    Administrator of the Farm Service Agency.
        Chief Tidwell, begin when you are ready.

            STATEMENT OF THOMAS TIDWELL, CHIEF, U.S. FOREST
                SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Mr. Tidwell. Thank you.
        Mr. Chairman, Members of the Subcommittee, I want to thank
    you for the opportunity to be here in front of you today to
    discuss the forestry title of the farm bill.
        The Forest Service not only manages 193 million acres of
    National Forest, but we also work with our partners across the
    country to help manage over 750 million acres of our nation's
    forests. Two-thirds of our nation's forests, over 500 million
    acres, are in non-Federal ownership. Over ten million families
    own forests.
        Our nation's forests are a primary source of clean water,
    clean air, wildlife habitat and recreational settings. They are
    also the key component of America's rural landscape, supporting
    our healthy rural communities and economies and supporting
    well-paying jobs.
        Forests are a key part of our rural economies. In fact,
    roughly 75 million acres of forests belong to working farms
    with over 900,000 jobs nationwide that rely on our private
    forests. The programs we will talk about today help keep
    America's forests working, keeps them productive, rather than
    having our forests go to some other use, like some form of
    development.
        The Forest Service, primarily through our state and private
    forestry programs, we provide technical assistance and cost-
    share financial assistance to landowners to help conserve and
    enhance the benefits from our nation's forests.
        These programs are delivered by our expanding network of
    partners centered around the state forestry agencies. These
    efforts are a key part of Secretary Vilsack's ``All Lands''
    vision for the nation's forests.
        This Federal investment, it leverages the capacity of our
    state foresters and their partners to manage the state and
    private lands to continue to produce the ecological, social and
    economic benefits that the American people rely on.
        In the 2008 Farm Bill, it placed an increased emphasis on
    forestry and forest landowners. For the first time, the farm
    bill set priorities for private forest conservation to conserve
    and manage our working forest landscapes for multiple values
    and uses, to protect forests from threats and to enhance the
    public benefits from our private forests.
        Furthermore, the 2008 Farm Bill requires each state and
    territory to develop an assessment of the forest resource
    conditions and develop a long-term forest research strategy to
    address the threats and identify the resources that are needed.
        The resulting forest action plans, really a nationwide
    strategy, are a long-term plan for how we should prioritize our
    limited resources to achieve our national conservation goals.
    These action plans address the primary threats facing the
    nation's forests, including changing ownership of private
    forestlands, forest fragmentation, water quality and quantity
    issues, increasing urbanization and increasing amounts of the
    wildland/urban interface that we have to deal with during fire
    seasons, and also addresses the effects from the changing
    climate, wildfire, and invasive species.
        I don't have to have point out what we have been seeing in
    this country this year, as far as the devastating natural
    disasters that have been occurring with the floods, the
    tornadoes and the wildfires and in the drought that this
    country has been experiencing across the entire southern tier
    of this country.
        There are about 325 million acres of private forests that
    are currently at risk from a catastrophic wildfire; 58 million
    acres are at risk of being overtaken by insect and disease and
    invasive species; and urban development could swallow another
    57 million acres of forests by 2030.
        It is essential that we work together, the various
    agencies, our state partners, so that we can help to address
    these issues across not only the public lands but also our
    private forested lands, so that we can ensure that the
    generations to come will have the same benefits that we have
    enjoyed from our nation's forests.
        The Forest Service, we administer a number of programs that
    are authorized by the farm bill. These programs are not
    mandated funding programs, but they do receive discretionary
    appropriations each year. The first is our Forest Health
    Management Program. This is a program that helps to identify
    and project where we are going to see the next insect, disease
    and invasive outbreaks that are going to occur.
        It provides the information that not only we rely on the
    public lands, but also our private landowners rely on this
    information so that they know where we need to be moving
    forward to be able to address the next threat.
        Some of the invasives that we are dealing with are the
    emerald ash borer, the Asian longhorn beetle, dealing with
    sudden oak death and hemlock wooly adelgid.
        Our next program is our Cooperative Fire Assistance, and
    there are two parts of this. The State Fire Assistance, this
    program provides matching Federal assistance for our fire
    management activities with our states, including to help make
    sure that the states are prepared; they have their plans in
    place; they are able to provide the training, not only to their
    personnel but also to our rural volunteer fire departments; and
    then also it provides funding for hazardous fuel treatments.
        The second part is with our Volunteer Fire Assistance
    Program, which is focused on our volunteer fire departments
    across this country, to be able to make sure they have the
    technology and equipment that they need to be able to respond.
        Volunteer rural fire departments, they represent really the
    first line in dealing with wildland fire. They provide nearly
    80 percent of initial attack on wildland fires in the United
    States since almost \2/3\ of all wildland fires in this country
    are on non-Federal lands.
        Our next program is the Forest Stewardship Program. This
    program delivers forestry technical assistance to individual
    forest landowners to help them to be able to develop a
    management plan for their lands. This is focused on the
    individual landowners that not always will have the access to
    the technology, the access to the expertise, to really
    understand what they should be doing, what they need to be
    doing on their lands to make sure that we can sustain the
    forests that are on their lands.
        Since the authorization of this in 1990, the Forest
    Stewardship Program has provided funding for more than 330,000
    forest management plans, covering 38 million acres nationwide
    and has reached more than five million private forest
    landowners.
        Our next program is the Urban and Community Forestry
    Program. With 80 percent of Americans now living in our cities
    and our towns, this program has really made a difference to
    help the communities understand the benefits of having tree
    cover in our urban settings. Some of the things that we are
    doing is with our i-Tree program, which is a Web-based program
    that allows not only cities and communities but also
    individuals to be able to use that program to actually see
    where planting trees on their property, where to place trees on
    their property, will significantly reduce the amount of energy
    that they are using. And also with our communities, we have had
    some great success with the cities using this program to
    actually be able to reduce the costs of having to deal with
    storm water runoff because of an increase in their forest cover
    within their cities.
        Our next program is the Forest Legacy Program. This is a
    program that helps us to protect environmentally important
    private forest areas that are threatened by conversion to non-
    forest or to development. We work with willing landowners to
    provide a conservation easement to ensure that that private
    landowner can stay on their land and that we can continue to
    have productive working forestlands.
        In addition to these programs, the 2008 Farm Bill
    authorized four new programs that are administered by the
    Forest Service. The first is the Community Forest and Open
    Space Conservation Program that allows us to work with our
    tribal governments, local governments and qualified nonprofit
    entities so that they can acquire private forestland that is
    threatened by conversion and non-forest uses and establish
    community forests that provide access and community benefits.
        The next is the Pest and Disease Revolving Loan Fund that
    provides loans to local government to finance the purchase of
    equipment that is needed for management to address disease or
    pest-infested trees.
        Our Community Wood Energy Program provides the states and
    local governments with grants to develop community wood energy
    plans to either acquire or to upgrade community wood energy
    systems. But this is primarily focused on universities, medical
    service areas, that we are trying to encourage expansion of
    biomass plants that deal with much larger areas instead of just
    individual offices or individual schools.
        And then the last is our Forest Biomass for Energy Program
    that directs the Forest Service to conduct a competitive
    research and development program to encourage the use of forest
    biomass for energy.
        In conclusion, sound management of our nation's forestlands
    is important to all Americans. Once again, there are over 500
    million acres of non-Federal forestland in the United States.
    Our recent research has shown that every year, large areas are
    lost to development sprawl. The majority of the acres at risk,
    more than 430 million acres, are owned by individual families.
    And some of these private forest owners, they just lack the
    financial and technical resources to be able to hold on to
    their lands and manage their forests effectively. The farm bill
    programs offer the opportunity for those folks to be able to
    stay on their land, to be able to continue to have productive,
    working forested farms and ranches.
        I want to thank you for the opportunity to be here to
    discuss the Forest Service's farm bill programs, and I am happy
    to answer any questions that you may have today.
        [The prepared statement of Mr. Tidwell follows:]

    Prepared Statement of Thomas Tidwell, Chief, U.S. Forest Service, U.S.
                  Department of Agriculture, Washington, D.C.
        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to appear before you today to discuss the Forestry Title of
    the farm bill.
        The Forest Service not only manages the 193 million acres of
    National Forests, but also works with partners across the country to
    help manage all 750 million acres of our nation's forests. Two thirds
    of our nation's forests, over 500 million acres, are in non-Federal
    ownership. These state, private and tribal forests comprise about 20
    percent of our nation's land base. Management practices on these lands
    impact everyone, both socially and economically, as well as affecting
    the natural environment. The nation's private forests are a key
    component of America's rural landscapes, stimulating healthy rural
    communities and economies, and supporting well-paying jobs.
        The Forest Service, primarily through its State and Private
    Forestry Programs, provides both technical assistance and cost-share
    financial assistance to landowners and resource managers to help
    conserve and enhance the benefits from our nation's forests and protect
    them from harm. These State and Private Forestry Programs are delivered
    by an ever expanding network of partners centered around the State
    Forestry agencies. As a result, we work where Federal, state, and local
    interests intersect. We also work closely with a variety of Federal
    agencies helping them deliver their programs to benefit America's
    forests and the American people. These efforts are a key part of
    Secretary Vilsack's ``All Lands'' vision for our nation's forests. This
    Federal investment leverages the capacity of State Foresters and their
    partners to manage state and private lands and produce ecological,
    social and economic benefits for the American people.
    2008 Farm Bill: State-Wide Assessments and Strategies for Forest
            Resources
        The 2008 Farm Bill contained an increased focus on forestry and
    forest landowners. For the first time, the farm bill set priorities for
    private forest conservation: (1) conserving and managing working forest
    landscapes for multiple values and uses; (2) protecting forests from
    threats; and (3) enhancing public benefits from private forests
    (section 8001). To help ensure success in focusing on these priorities,
    section 8002 of the 2008 Farm Bill required each state and territory,
    by June 2010, to develop an assessment of the forest resource
    conditions within its boundaries and develop a long-term forest
    resource strategy to address threats and describe necessary resources.
    All states and territories submitted these Assessments to the Forest
    Service by the deadline and they now represent the first-ever
    ``strategic plan'' for the nation's forests. The resulting Statewide
    Assessments and Strategies, or Forest Action Plans, provide an analysis
    of forest conditions and trends and delineate priority landscape areas
    in each state and territory. They offer practical, long-term plans for
    focusing state, Federal and other resources on priorities that will be
    most effective in achieving national conservation goals.
        The approach for developing these plans varied widely among states
    and territories, reflecting differences in the way that national,
    state, and local priorities came together, the differing challenges
    each faced, and the resources available to tackle those challenges.
    Many states engaged in wide-ranging stakeholder involvement processes
    and involved a variety of partners in establishing their priorities.
    They used an ``All Lands'' approach that considered all forestland
    within their boundaries, regardless of ownership. The primary trends
    and threats facing the nation's forests, as revealed in the Forest
    Action Plans, include changing ownerships of private forestlands,
    forest fragmentation, water quality and quantity issues, increasing
    urbanization, increasing amounts of Wildland Urban Interface areas, and
    the effects of climate change, wildfire, and invasive species. Each of
    these issues intertwines with the others. Cooperation and coordination
    across jurisdictional boundaries are clearly needed to address these
    issues, most of which can only be addressed meaningfully at a landscape
    level. By focusing on priority outcomes that address landscape-scale
    issues, the Forest Action Plans provide a tool to guide investments
    that will conserve, protect, and enhance our forests.
    2008 Farm Bill: Forestry Programs
        To achieve the priorities of conserving, protecting and enhancing
    the nation's forests, the Forest Service administers a number of
    programs through its State and Private Forestry Deputy Area that are
    authorized by the farm bill. Many of these programs stem from older
    laws, like the 1911 Weeks Act, the 1924 Clarke-McNary Act, and the
    Cooperative Forestry Assistance Act of 1978. However, in recent years,
    these laws have most often been amended in the farm bill and new
    private forestland programs administered by the Forest Service have
    been authorized. Also, Forest Service programs authorized by the farm
    bill are funded through discretionary appropriations each year.
        This testimony provides an overview and status for six of the
    Forest Service programs, as well as the forestry programs housed in the
    Natural Resources Conservation Service and Farm Service Agency.
        Forest Health Management--Federal and Cooperative Lands: The Forest
    Health Management (FHM) program is truly all-lands. It is made up of
    two components: Forest Health Protection on Federal lands and Forest
    Health Protection on Non-Federal lands. Funding for these components
    come in both the State and Private and Wildland Fire Management
    appropriations. The FHM program provides insect, disease, and invasive
    plant survey and monitoring information and technical and financial
    assistance to prevent, suppress, and control outbreaks threatening
    forest resources. FHM utilizes science, active land management, and
    technology transfer expertise to restore and sustain forest
    landscapes--across urban, private, state, Tribal, and Federal forests.
    Recently completed Forest Action Plans have, in many cases, identified
    forest health as a key state priority. These Plans are being used to
    help guide priorities at the national and regional levels. The
    technical and financial assistance that FHM provides help to ensure
    that forests remain healthy and resilient by minimizing impacts of
    native and invasive insects and diseases, and invasive plants.
        The FHM program works collaboratively with other agencies,
    especially the Animal and Plant Health Inspection Service (APHIS), to
    combat several damaging invasive pests, such as emerald ash borer,
    Asian long horned beetle, sudden oak death, and hemlock woolly adelgid.
    FHM also plays an active role in international activities. Many of the
    current forest health issues regarding invasive and exotic insects and
    diseases are directly related to the international arena. During Fiscal
    Year (FY) 2010, FHM specialists were involved in approximately 50
    international-related activities in 17 countries, including biological
    control of invasive insects, providing training in bark beetle
    management and identification, and technology transfer for aerial
    survey detection.
        In FY 2010, FHM received $78 million in funding for this work on
    Federal lands and $60 million in funding for this work on non-Federal
    lands. Over the last 3 years, FHM has protected almost 4 million acres
    of Federal and non-Federal lands from invasive and native pests.
        The President's FY 2012 Budget proposes $118.9 million for Forest
    Health Management.
        Cooperative Fire Assistance--State Fire Assistance: The State Fire
    Assistance (SFA) program provides matching financial assistance through
    partnership agreements to State Foresters for all fire management
    activities including preparedness activities, planning, training,
    hazardous fuel treatments, and the purchase and maintenance of
    equipment. Funds provide financial assistance, technical training, and
    equipment to ensure that Federal, state, and local fire agencies can
    deliver a coordinated response to wildfire. The emphasis is on
    improving fire planning, initial attack capabilities, and use of the
    Incident Command System and wildland fire techniques training for local
    fire agencies. This program also supports programs such as the Smokey
    Bear fire prevention campaign, Firewise, and Ready, Set, Go! Funds are
    provided in both the State and Private and Wildland Fire Management
    appropriations. We emphasize funding in areas that have developed or
    are developing Community Wildfire Protection Plans (CWPPs), FEMA hazard
    mitigation plans, or other collaboratively developed hazard mitigation
    plans. Recipients of SFA funds are required to provide a 50 percent
    cost-share match, which leverages the amount of work that is completed
    with SFA funds.
        In FY 2010, the agency received $110 million in SFA funds for this
    work, which were used, in part, to train almost 15,000 firefighters
    across the county and conduct over 19,000 prevention and education
    programs. In the past 3 years, this program has assisted over 13,000
    communities at risk from wildland fire in developing management plans
    and provided funding for over 660,000 acres of hazardous fuels
    treatments near communities.
        The President's FY 2012 Budget proposes $78.8 million for State
    Fire Assistance.
        Cooperative Fire Assistance--Volunteer Fire Assistance: Originally
    authorized in Title IV of Public Law 921-419, ``The Rural Development
    Act of 1972,'' the Volunteer Fire Assistance (VFA) program provides
    Federal financial, technical, and other assistance to State Foresters
    and other appropriate officials to organize, train and equip fire
    departments in rural communities (population of 10,000 or less) to
    suppress fires. A department may buy fire equipment, pay for training
    or training materials, or cover the cost of department incorporation,
    as long as the funds are matched. Volunteer fire departments receiving
    VFA funds are required to provide a 50 percent cost-share match. Funds
    are provided in both the State and Private and Wildland Fire Management
    appropriations.
        Volunteer fire departments play a major role in suppressing
    wildfires on Federal lands. Rural Fire Departments represent the first
    line of defense in coping with fires and other emergencies in rural
    areas and rural communities. They provide nearly 80% of initial attack
    on wildland fires in the United States. These departments are charged
    with the protection of lives, homes and business investments in rural
    America. Their presence enhances rural development opportunities and
    economic vitality, thereby improving standards of living in rural
    areas.
        The Forest Service and the Department of the Interior land
    management agencies have entered into cooperative agreements with many
    rural volunteer fire departments for the purpose of protection of both
    communities and natural resources. A level of fire protection is
    attained that would be impossible without such cooperation. Interagency
    agreements provide a cost-effective means of enhancing fire protection.
        In FY 2010, the agency received $15.7 million in VFA funds. These
    funds were used to train over 9,000 firefighters in rural areas and
    helped to expand or create 18 fire departments in rural communities. In
    the past 3 years, the program has assisted almost 38,000 volunteer fire
    departments.
        The President's FY 2012 Budget proposes $13.4 million for Volunteer
    Fire Assistance.
        Forest Stewardship Program: The Forest Stewardship Program is the
    only Forest Service program focused on private forestland management.
    The program delivers assistance by leveraging a national network of
    forestry technical assistance providers and programs. Because of this
    unique role--and since most of America's forests are privately owned--
    the Forest Stewardship Program is central to addressing forest resource
    management issues. Individual forest landowners are assisted within the
    context of forest resource management issues that cross boundaries and
    encompass multiple ownerships and jurisdictions. The Forest Stewardship
    Program plays a fundamental role in keeping forests as forests,
    preparing forest landowners for forest products and ecosystem services
    markets, qualifying them for incentive programs, and maintaining jobs
    and diverse forest products markets in rural communities. Since its
    authorization in 1990, the Forest Stewardship Program has provided
    funding for more than 330,000 comprehensive forest management plans
    covering 38 million acres nationwide and has reached more than five
    million private forest landowners through a variety of technical and
    educational assistance programs.
        In FY 2010, the agency received $29.4 million in Forest Stewardship
    funds. These funds were used to conduct landowner education programs
    for almost 230,000 landowners and fund almost 15,000 new or revised
    Forest Stewardship Plans. In FY 2010, over 1.8 million acres of
    nonindustrial private forestland was being managed sustainably under
    Forest Stewardship Management Plans.
        The President's FY 2012 Budget proposes $29.4 million for the
    Forest Stewardship program.
        Urban and Community Forestry Program: The Urban and Community
    Forestry Program (U&CF) fosters the creation of healthier, more livable
    urban environments across the nation by promoting benefits of tree
    cover in urban areas and communities, encouraging maintenance of trees
    and community forests, and expanding research and education efforts
    intended to improve the understanding of trees' economic,
    environmental, social and psychological, and energy conservation
    benefits. With 80% of Americans living in cities, suburbs and towns,
    there are strong environmental, social, and economic cases to be made
    for the conservation of green spaces to guide growth and revitalize
    city centers and older suburbs. The Urban and Community Forestry
    Program is helping to improve the condition and extent of the 100
    million acres of community trees and forests in cities, suburbs, and
    towns where people live, work and play.
        All Americans benefit from the multitude of services that the urban
    tree canopy provides, including improved human health and wellbeing,
    green jobs, energy conservation, improved air and water quality, carbon
    sequestration, recreation, and wildlife habitat. Urban and Community
    Forestry also provides support and funding for cutting-edge
    technologies and information, such as the ``i-Tree'' suite of local
    decision support tools that include urban forest benefits assessment,
    pest detection and storm response protocols.
        In FY 2010, the Forest Service received $30.4 million in Urban and
    Community Forestry funds. These funds were used to assist over 7,000
    communities reaching a total of 177 million people. In the past 3
    years, the program has helped over 21,000 communities.
        In FY 2012 the President's Budget includes $32.4 million for the
    Urban and Community Forestry program.
        Forest Legacy Program: The Forest Legacy Program (FLP) protects
    environmentally important private forest areas that are threatened by
    conversion to non-forest uses. In partnership with participating
    states, private landowners, and other conservation partners the FLP
    works to identify important forestlands and protect them for future
    generations. The FLP provides the opportunity for the continuation of
    traditional forest uses, including forest management activities and
    outdoor recreation. Using conservation easements and fee-simple
    purchases, FLP gives priority to lands that have important scenic or
    recreational values, riparian areas, fish and wildlife values, and
    other ecological values. Family forest owners and timber companies
    currently face increasing pressure to sell, subdivide, and develop
    their land. This program provides financial incentives to help private
    landowners stay on their land to conserve their forests, thereby
    protecting outdoor recreation opportunities, fish and wildlife habitat,
    water quality and resource-based economies. The program operates on a
    ``willing buyer-willing seller'' basis and is a non-regulatory,
    incentive-based land conservation program.
        Funds for the FLP program are provided through the Land and Water
    Conservation Fund. In FY 2010, the agency received $78.96 million in
    FLP funding. Since its inception, the program has protected over 2
    million acres of important forest from conversion.
        In FY 2012, the President's Budget includes $135 million for the
    Forest Legacy program.
        In addition to these programs, the 2008 Farm Bill authorized four
    new programs administered by the Forest Service, which are in various
    stages of implementation.

        1. Community Forest and Open Space Conservation Program: This
            program, authorized under Section 8003 of the 2008 Farm Bill,
            directs the Forest Service to provide grants to Tribal
            governments, local governments, and qualified nonprofit
            entities to acquire private forestland that is threatened by
            conversion to non-forest uses, and establish community forests
            that provide accessible community benefits. The benefits
            include public recreation, improvement of environmental health,
            economic activity, and forest-based educational programs. This
            program received $500,000 in funding in FY 2010 and $1 million
            in FY 2011. The Forest Service is still in the process of
            finalizing the regulations for this program. The agency engaged
            in government-to-government consultation with tribes during a
            145 day period, and conducted a 60 day public comment period,
            which ended on March 7, 2011. The Forest Service analyzed
            comments received during both processes and prepared final
            regulations for the program. The final regulation is planned
            for publication in the Federal Register later this year.

        2. Pest and Disease Revolving Loan Fund: The Pest and Disease
            Revolving Loan program was authorized in section 10205 of the
            2008 Farm Bill. The program is authorized to provide loans to
            local governments to finance the purchase of equipment needed
            for the management of diseased or pest-infested trees. The
            agency has implemented an interim procedure to help address
            pest and disease issues, using its existing grant authorities
            to make grants to the states, which in turn, make grants
            available to local governments.

        3. Community Wood Energy Program: Section 9013 of the 2008 Farm
            Bill directs the Forest Service to establish the Community Wood
            Energy Program. This program authorizes appropriations of $5
            million per year for fiscal years from 2009 through 2012 for a
            grant program to provide state and local governments up to
            $50,000 to develop community wood energy plans. Competitive
            grants could also be available to acquire or upgrade community
            wood energy systems that primarily service public facilities
            owned or operated by the governmental entity and that use woody
            biomass as the primary fuel. To date, this program has not been
            funded.

        4. Forest Biomass for Energy Program: Section 9012 of the 1008 Farm
            Bill directs the Forest Service to conduct a competitive
            research and development program to encourage use of forest
            biomass for energy. The agency's Research and Development
            Deputy Area would administer this program. To date, this
            program has not been funded.

        Biomass Commercial Utilization Grant Program: The agency also
    implements a program, the Biomass Commercial Utilization Grant Program,
    that authorizes grants to an owner or operator of a facility that uses
    biomass for wood-based products or other commercial purposes, to offset
    the costs incurred to purchase biomass. Section 203 of the Health
    Forests Restoration Act provided an authorization of appropriations for
    this program through Fiscal Year 2008. Through appropriations acts, the
    agency has provided $5 million of hazardous fuels funds for the biomass
    utilization grants each year since 2005. From 2005 to 2010, the grants
    have focused on assisting businesses and communities with the
    production, delivery, and utilization of wood residues. The Forest
    Service has provided grants for equipment such as grinders, harvesters,
    new trucking methods, energy production facilities, roundwood
    manufacturing, and production of wood shavings for animal bedding
    markets. In FY 2010, 13 biomass grant awards were made to small
    businesses and community groups in six states. In 2011, the emphasis
    was changed to focus on engineering design, permitting, and other
    preconstruction work for wood energy facilities. Grants for biomass
    utilization have totaled over $30 million to 123 grant recipients in 21
    states since 2005.
    2008 Farm Bill: Cultural and Heritage Cooperation
        Subtitle B, Cultural and Heritage Cooperation Authority applies
    specifically to the Forest Service's interactions and capacity for
    cooperation with federally recognized Indian tribes. Section 8106,
    ``Prohibition on Disclosure,'' exempts certain information received by
    the agency from the Tribes from disclosure under the Freedom of
    Information Act. Other provisions in Subtitle B relate to reburial of
    human remains and cultural items, temporary closures for traditional
    and cultural purposes, and gathering of forest products by Tribes.
        In addition to the Forest Service, USDA's Natural Resource
    Conservation Service (NRCS) and Farm Service Agency (FSA) also have
    forestry programs authorized in the 2008 Farm Bill.
    Natural Resources Conservation Service--Forestry Activities
        USDA's NRCS assists private forest owners in managing the nation's
    nonindustrial private forests through technical and financial
    assistance. NRCS has a long-term combined objective for forestland with
    an expected outcome of healthy forestlands that are productive,
    diverse, resilient, and provide a wide range of ecosystem services.
    During the past 3 years, about 4.7 million acres of private forestland
    have received conservation treatment through NRCS assistance.
        In 2010, the Environmental Quality Incentives Program (EQIP)
    authorized under the Conservation Title of the farm bill, provided
    about $51 million (about six percent of total EQIP funding) to private
    forest owners to improve forest health. This level of assistance has
    steadily increased since enactment of the 2008 Farm Bill. Conservation
    practices funded by EQIP include forest health treatments, tree
    planting and reforestation activities, and plan development to help
    guide the stewardship of forestlands into the future. So far in FY
    2011, EQIP has funded 1,443 new forest management plans. Additionally,
    over 20 percent of the FY 2010 funds under the Wildlife Habitat
    Incentive Program (WHIP) have supported wildlife habitat improvement on
    private forestlands with special emphasis in the Longleaf Pine
    Ecosystem Restoration Initiative in the southeast and the New England/
    New York Forestry Initiative.
        The Conservation Stewardship Program (CSP) takes a different
    approach than other programs by encouraging existing good stewards to
    continue and expand their forest management. In the past 2 years, about
    2.1 million acres of nonindustrial private forestland were enrolled in
    CSP. The most popular CSP forest practices include prescribed burning,
    forest stand improvement, and building shelters and structures for
    wildlife. Additionally the Cooperative Conservation Partnership
    Initiative (CCPI) component of EQIP, WHIP, and CSP program funds were
    leveraged with resources from state and local governments and
    conservation organizations in seven focused forested landscapes with
    projects ranging from restoring salmon spawning grounds to reducing
    sediment loss from timber harvesting operations.
        Through the Healthy Forests Reserve Program (HFRP), NRCS assists
    landowners in restoring, enhancing, and protecting forest ecosystems
    to: (1) promote the recovery of threatened and endangered species; (2)
    improve biodiversity; and (3) enhance carbon sequestration.
    Participants may enroll in HFRP through restoration agreements,
    contracts, and easements depending on their objectives. An FY 2010 HFRP
    project in Oregon is working to increase Northern Spotted Owl habitat
    while maintaining a working forest. The effort is a partnership between
    NRCS, the U.S. Fish and Wildlife Service, the Oregon Department of
    Forestry and 11 private landowners. The project includes long-term
    plans for stand management and provides the landowners with assurances
    that if they manage their property in accordance with the plan, they
    will avoid future regulatory restrictions on the use of that land under
    the Endangered Species Act. In FY 2010, over 5,600 acres were enrolled
    in 13 states for about $6.5 million in financial assistance.
    Farm Service Agency--Forestry Activities
        USDA's Farm Service Agency (FSA) implements the Emergency Forest
    Restoration Program (EFRP), a program that provides payments for
    nonindustrial private forestland to carry out emergency measures to
    restore land damaged by a natural disaster. Funding for EFRP is by
    appropriations. For FY 2010, $18 million was made available by
    supplemental appropriations.
        To be eligible for EFRP, nonindustrial private forestland must have
    existing tree cover (or had tree cover immediately before the natural
    disaster occurred and is suitable for growing trees). EFRP program
    participants may receive financial assistance of up to 75 percent of
    the cost to implement approved emergency forest restoration practices.
    A payment limitation of $500,000 per person or legal entity applies per
    disaster.
        EFRP program participants may implement emergency forest
    restoration practices including emergency measures necessary to repair
    damage caused by a natural disaster to natural resources on
    nonindustrial private forestland and to restore forest health and
    forest related resources on the land.
    Conclusion
        In conclusion, sound management of our nation's forestlands is
    important to all Americans. There are over 500 million acres of non-
    Federal forestland in the United States and recent research has shown
    that every year, large areas are lost to development and sprawl. The
    majority of the acres at risk, more than 430 million acres, are owned
    by families and individuals. Some of these private forest owners lack
    the financial and technical resources to hold on to and manage their
    forests effectively. Farm bill programs offer protection for forests
    and support for these working landscapes by directing technical support
    and resources to these forest landowners--helping to keep working
    forests intact, providing quality jobs in rural America, and keeping
    privately-owned forestlands together for future generations.
        The Forest Service's State and Private Forestry Deputy Area
    administers these programs through robust partnerships with states,
    private landowners, and other partners. These programs and partnerships
    help private landowners and rural communities care for their forests,
    strengthen local economies, and maintain a high quality of life.
        Thank you for the opportunity to be here today to discuss the
    Forest Service's farm bill programs. I am happy to answer any questions
    from the Subcommittee Members.

        The Chairman. Thank you, Chief.
        Administrator Canales, go ahead and proceed whenever you
    are ready. Thank you.

       STATEMENT OF JUDY CANALES, ADMINISTRATOR, RURAL BUSINESS
         COOPERATIVE SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Ms. Canales. Chairman Thompson, Ranking Member Holden, and
    Members of the Subcommittee, thank you for the opportunity to
    review Rural Development's energy programs, accomplishments in
    creating jobs and building a cleaner, more secure, more
    sustainable and domestically produced energy sector for future
    generations.
        The mission of Rural Development's Rural Business Service
    programs is to enhance the quality of life for rural Americans
    by providing leadership in building competitive businesses. We
    provide funding opportunities for the development and
    commercialization of renewable energy sources to change the way
    people power their homes, businesses and industries.
        We meet these goals by providing financial and technical
    assistance to businesses and cooperatives located in rural
    communities and establishing strategic alliances and
    partnerships that leverage public, private and cooperative
    resources to create jobs and stimulate rural economies.
        Through USDA's Rural Business Service, four title IX
    programs are implemented to assist the agriculture sector in
    finding energy solutions and helping rural residents and
    communities access renewable energy systems and to use energy
    more efficiently. These four programs are section 9003, the
    Biorefinery Assistance Program; section 9004, the Repowering
    Assistance Program; section 9005, the Advanced Biofuel Payment
    Program; and section 9007, the Rural Energy for America
    Program, REAP.
        The section 9003 Biorefinery Assistance Program provides
    much-needed assistance in the development of new and emerging
    technologies to develop advanced biofuels.
        My agency, Rural Business Service, is currently reviewing
    ten applications totaling over $1 billion in funding requests.
    Through the section 9004 Repowering Assistance Program, we will
    provide payments to biorefineries who switch from using fossil
    fuels to using renewable biomass to produce heat or power for
    their facilities. We are currently reviewing applications at
    this moment.
        The section 9005 Advanced Biofuels Payment Program provides
    payments to eligible producers to support and expand the
    production of advanced biofuels. To date, almost $30 million in
    assistance payments have been provided to 141 advanced biofuel
    producers. The section 9007 Rural Energy for America Program,
    REAP, is the longest running renewable energy program that
    Rural Business operates. In Fiscal Year 2010, we provided 2,400
    grants and loan guarantees, totaling $159 million in support of
    energy audits and energy efficiency and renewable energy
    projects, including projects, such as windmills, methane
    digesters and geothermal systems.
        REAP provides an immediate impact and engages all types of
    communities.
        For example, the Menard family, a farming couple located in
    New York, received a $31,000 grant for a solar electric
    generating system. The system has already saved this farm and
    this family over $11,000 in electric costs.
        Since the signing of the 2008 Farm Bill, our renewable
    energy programs have invested over $460 million in
    biorefineries and renewable energy and energy efficiency
    systems.
        Through Fiscal Year 2010, over 6,100 awards were made,
    saving or generating enough energy to support 2.3 million
    households for a year. These programs are distinct and unique
    in the Federal Government. There are no other programs that
    solely support cellulosic and advanced biofuel production or
    the conversion of biorefinery power systems to renewable
    energy.
        REAP is also unique, creating a multitude of methods to
    support the energy sector.
        The USDA Rural Business Service, my agency, is the only
    Federal agency that is focused and dedicated to promoting rural
    communities and businesses in rural communities. Our field
    office structure reaches out to the poorest, most rural
    counties in America, providing Federal support to businesses
    who will not receive financial aid from any other source.
        We are the leader in promoting the creation and expansion
    of renewable energy in rural areas.
        Advancing biomass and biofuel production, which has the
    potential to create jobs, is one of the many ways we are
    looking to rebuild and revitalize rural America. By producing
    renewable energy, especially biofuels, America's farmers,
    ranchers and rural communities have the ability to be help
    ensure our nation's energy security, environmental security and
    economic security.
        In conclusion, thank you for your time, Mr. Chairman, and
    Members of the Subcommittee. We at the USDA Rural Business
    Service are committed to promoting renewable energy in rural
    communities through our grants, our loan guarantees and payment
    programs.
        I will be happy to respond to questions from the Committee.
    Thank you.
        The Chairman. Thank you, Administrator.
        Deputy Administrator Garcia, go ahead and proceed whenever
    you are ready.

     STATEMENT OF JUAN GARCIA, DEPUTY ADMINISTRATOR, FARM SERVICE
                       AGENCY, U.S. DEPARTMENT OF
                     AGRICULTURE, WASHINGTON, D.C.

        Mr. Garcia. Chairman Thompson, Ranking Member Holden,
    Members of the Subcommittee, thank you for the opportunity to
    appear before you today. My name is Juan Garcia, Acting Deputy
    Administrator for Farm Programs at the Farm Service Agency. My
    remarks will focus on FSA's energy programs.
        As part of the Energy Policy Act of 2005, Congress created
    the first renewable fuel standard calling for 7.5 billion
    gallons of corn starch ethanol in our national fuel supply by
    2012. When Congress modified the renewable fuel standard in
    2007, it increased the biofuel targets to 36 billion gallons by
    2022.
        It has taken more than 20 years to introduce just over 10
    billion gallons of biofuels, but now the nation must achieve 20
    billion gallons more biofuels in half the time.
        Meeting this goal means growing new crops in greater
    quantities. Some of these crops will take several years from
    establishment to maturity before they can be harvested and will
    be used in facilities that may not yet be completed.
        Producers growing these new crops are subject to greater
    risks in the establishment, production and marketing of the
    biomass crops, as compared to the production of conventional
    crops.
        The 2008 Farm Bill created a program designed to jump start
    the establishment of bioenergy crops and reduce the risk to
    producers. This is a Biomass Crop Assistance Program, BCAP,
    which offers incentives to farmers, ranchers and forest
    landowners to establish, maintain and harvest a dedicated
    energy crop for heat, power, biobased products and fuels.
        Two types of assistance are available under BCAP. First,
    establishment costs and annual payments may be available to
    producers who enter into contracts with FSA to produce eligible
    crops within approved project areas. Participants may receive
    up to 75 percent of the establishment costs for perennial crops
    and annual payments for up to 5 years for non-woody crops or up
    to 15 years for woody crops.
        Second, matching payments may be available to producers for
    the collection, harvest, storage and transport of eligible
    biomass to qualified facilities that produce heat, power,
    biobased products or advanced biofuels from that biomass.
        In July 2009, FSA issued a notice of funds availability for
    the matching payments portion of the BCAP program, issuing the
    first payment in August of 2009. FSA published a proposed rule
    in February of 2010 to implement the full program. After review
    of over 24,000 comments, the final rule for BCAP was published
    on October 27, 2010, and FSA began accepting applications for
    BCAP project areas.
        Earlier this year, FSA began the sign up for Iowa farmers
    seeking matching payments for the delivery of crop residues to
    a qualified biomass conversion facility located in South
    Dakota. FSA also announced the first BCAP project area,
    comprising of 39 contiguous counties in Missouri and Kansas
    that proposed the enrollment of up to 50,000 acres of native
    grasses, including switchgrass from manufacturing into pellet
    fuels. And, last month, FSA announced four more BCAP project
    areas, in Arkansas, Missouri, Ohio and Pennsylvania, designated
    to grow giant Miscanthus, a sterile hybrid warm-season grass
    intended for bioenergy conversion.
        On April 14 of this year, funding for BCAP was
    legislatively reduced from $432 million to $112 million that
    must be obligated by the end of this fiscal year. In order to
    meet this timeframe, FSA announced that BCAP project area
    proposals must be submitted no later than May 27 of this year.
        Interest in BCAP has been significant. FSA received 41
    project proposals from 21 states where project area sponsors
    requested an estimated $1 billion to enroll more than 1.5
    million acres in dedicated energy crops over 5 to 15 years. FSA
    soon will announce a final project area selection for Fiscal
    Year 2011.
        In addition to BCAP, the 2008 Farm Bill also authorizes the
    establishment of the Feedstock Flexibility Program. This
    program was authorized to prevent the accumulation of
    government-held sugar stocks that otherwise can impede price
    recovery, by allowing USDA to sell the surplus sugar to
    bioenergy producers as a fuel feedstock.
        Domestic sugar demand has increased significantly and is
    expected to remain strong relative to supplies in Fiscal Years
    2011 and 2012. USDA does not anticipate an immediate need for
    the Feedstock Flexibility Program.
        Mr. Chairman and Members of the Subcommittee, this
    concludes my remarks. I will be prepared to answer any
    questions that you may have. Thank you.
        [The joint prepared statement of Ms. Canales and Mr. Garcia
    follows:]

    Joint Prepared Statement of Judy Canales, Administrator, Rural Business
     Cooperative Service; Juan Garcia, Deputy Administrator, Farm Service
            Agency, U.S. Department of Agriculture, Washington, D.C.
        Chairman Thompson, Ranking Member Holden, and Members of the
    Subcommittee, our nation today faces pressing challenges to increase
    our energy security, decrease our dependence on imported oil, protect
    and improve our environment, and create new jobs and new opportunities
    that will strengthen our economy. In the face of these challenges,
    renewable energy offers an enormous opportunity for all Americans but
    especially for agriculture and rural America to help build a cleaner,
    more secure, more sustainable, and domestically-produced energy sector
    for future generations. Advancing the development and deployment of
    renewable energy is a high priority for the Obama Administration, as it
    has been for bipartisan champions in Congress for many years. USDA has
    been and remains a proud partner in these efforts. We appreciate the
    opportunity to appear before you today to discuss USDA's energy
    programs which contribute to an energy policy that reduces our
    dependence on imported oil, protects our environment, and promotes jobs
    and economic growth in the United States.
        This testimony will review the Title IX (Energy Title) programs
    from the 2008 Farm Bill and will also provide additional information on
    some of the ways in which other agencies and programs contribute to the
    overall USDA energy portfolio.
    Renewable Energy at USDA
        USDA has a longstanding commitment to supporting the research and
    development and commercialization of renewable energy resources. While
    there are urban and suburban sources of renewable energy, renewable
    energy is largely rural energy--produced in rural areas and moved to
    more urban areas where the majority of the energy users live.
        USDA support for biofuels and bioenergy is an important part of a
    much broader commitment to a cleaner and greener future which has
    included investment in biofuels, biomass to energy, wind, solar,
    geothermal, hydroelectric power and energy efficiency, as well as basic
    scientific research into second and third generation biofuels and
    biomass to power. USDA recognizes that environmentally responsible
    renewable energy and energy conservation provide opportunities for
    economic growth and prosperity across rural America and the nation as a
    whole. We are working to ensure that our programs meet and exceed the
    challenge of promoting sustainable economic growth and prosperity.
        USDA programs support the entire supply chain of renewable energy
    production, from feedstock research and development through to the
    consumer, drawing on the established expertise, funding, and staff from
    a dozen USDA agencies and offices as follows:

       Rural Development            Office of the Chief
                                          Economist
       Farm Service Agency          Departmental Management
       National Institute of        Natural Resources
     Food and Agri-                       Conservation
        culture                              Service
       Agricultural Research        Forest Service
     Service
       National Agricultural        Foreign Agricultural
     Statistics                           Service
        Service                             Agricultural Marketing
                                          Service
       Economic Research
     Service

        USDA is working within the Department and with other Federal
    departments and organizations on furthering renewable energy and energy
    efficiency; efforts include but are not limited to, the following
    intra/intergovernmental agreements, councils, working groups, and
    boards. USDA organizes all energy-related efforts internally through
    the USDA Energy Council to lead the Department in policy development,
    and the USDA Energy Council Coordinating Committee to coordinate
    activities and perform duties assigned by the Secretary and the Energy
    Council. USDA along with the Department of Energy (DOE) co-chairs the
    Biomass Research and Development Board (BR&D Board) which coordinates
    the government-wide research initiative and activities for the purpose
    of promoting the use of biobased products, power and biofuels. Members
    of the board also include the National Science Foundation,
    Environmental Protection Agency (EPA), Department of the Interior,
    Department of Defense, Department of Transportation and the Office of
    Science and Technology Policy. The BR&D Technical Advisory Committee is
    a group of approximately 30 individuals from industry, academia, and
    state government, and is responsible for providing guidance to the BR&D
    Board on the technical focus of the Biomass Research and Development
    Imitative. Additionally, President Obama established the Biofuels
    Interagency Working Group (BIWG) co-chaired by the Secretaries of
    Agriculture and Energy, and the Administrator of the EPA, which works
    closely with the BR&D Board in undertaking its work. The BIWG will
    develop the nation's first comprehensive biofuel market development
    program.
    Farm Bill Energy Programs
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    provided over $1 billion of mandatory funding during a 5 year period to
    support a comprehensive approach to energy efficiency and renewable
    energy development in rural America. The 2008 Farm Bill reauthorized,
    expanded, and/or modified existing programs, and created new programs
    and initiatives to promote advanced biofuels production. The bill
    supports farm, small rural business, and community renewable energy
    systems; promotes production, marketing, and processing of biofuel
    feedstocks other than those using corn starch; and expands research,
    education, and demonstration programs for advanced biofuels. It also
    expanded programs for Federal procurement of biofuels and bio-refinery
    repowering projects and established USDA as the lead agency for
    coordination of Federal biobased energy efforts. The Title IX (Energy
    Title) programs were designed to increase America's energy security,
    improve the environment, and strengthen rural economies through
    development and production of renewable energy and the creation of
    sustainable green jobs. The Obama Administration and USDA are committed
    to these objectives.
    Additional USDA Energy Programs and Efforts
        Outside of the Energy Title programs, USDA has made significant
    progress in assisting farmers, forest landowners, rural businesses and
    communities, rural residents, agricultural producers and the nation
    responding to energy related issues and opportunities. These range from
    fundamental scientific research to the development and
    commercialization of new technologies. They include outreach and
    education, technical assistance programs, financial support for
    infrastructure, and the adoption of biobased and energy-saving products
    and volunteer biobased product labeling by USDA itself. We support more
    energy efficient farming and sustainable feedstock production and
    management techniques; geothermal facilities; solar and wind farms;
    current and advanced bioenergy production supply chains; and
    biochemical and genomics research crucial to furthering the advancement
    of these technologies in the future. USDA also supports modernization
    of the rural electric grid through smart grid technologies, renewable
    energy development, as well as renewable energy transmission to move
    renewable electricity to markets.
    Rural Development
        Rural Development consists of three agencies, the Rural Business
    Service (RBS), the Rural Utility Service (RUS), and the Rural Housing
    Service, with RBS and the RUS managing renewable energy programs.
    Within Rural Development, only RBS operates programs created under the
    Energy Title of the farm bill.
        The mission of Rural Development's Rural Business Service (RBS)
    programs is to enhance the quality of life for rural Americans by
    providing leadership in building competitive businesses including
    sustainable cooperatives that can prosper in the global marketplace. We
    meet these goals by investing financial resources and providing
    technical assistance to businesses and cooperatives located in rural
    communities and establishing strategic alliances and partnerships that
    leverage public, private, and cooperative resources to create jobs and
    stimulate rural economic activity.
        The RBS mission is unique in the Federal Government. There is no
    other Federal agency that focuses only on promoting rural communities
    and businesses. Our field offices reach out to the poorest, most rural
    counties in America, providing Federal support to businesses who might
    otherwise not receive financial aid from any other source.
    Energy Programs
        RBS implements four Energy Title programs to assist the agriculture
    and energy sectors in finding energy solutions and helping rural
    residents, rural small businesses, and communities to access renewable
    energy systems and to use energy more efficiently. We provide funding
    opportunities in the form of payments, grants, and loan guarantees for
    the development and commercialization of renewable energy sources
    including wind, solar, geothermal, hydrogen, ocean waves,
    hydroelectric, biomass, and advanced biofuel (ethanol, biodiesel,
    methane gas, etc.) to change the way people power their homes,
    businesses, and industries. By making renewable energy sources
    commercially viable, we are also helping to create sustainable
    opportunities for wealth, new jobs, and increased economic activity in
    rural America.
        RBS has been a leader in promoting the creation and expansion of
    renewable energy in rural areas. Since the enactment of the 2008 Farm
    Bill, the renewable energy programs authorized under the Energy Title
    have invested over $460 million in biorefineries and renewable energy
    and energy efficiency systems through mandatory funding for grants,
    loan guarantees, and assistance payments. Through 2010, over 6,100
    awards were made, saving/generating close to 28 billion kWh of energy
    or supporting approximately 2.3 million households for a year. These
    programs provide an immediate impact and affect all walks of life. Take
    for example, Gary and Connie Menard, a dairy farming couple in Mooers,
    New York. They received a $31,162 grant from USDA which covered 25
    percent of the cost of a 12.6 kilowatt solar electric generating system
    that featured a system to track the sun for maximum output. The system
    has generated over 85,000 kilowatt-hours of electricity to date and has
    already saved the farm over $11,000 in electric costs.
        The three Energy Title programs that RBS administers for the sole
    purpose of promoting biofuels are distinct and unique in the Federal
    Government. There are no other programs that's sole purpose is to
    support the processing of advanced biofuel production, as is the case
    for the Biorefinery Assistance program and the Advanced Biofuel Payment
    Program respectively. The Repowering Assistance Program is the only
    program of its kind, providing support to biorefineries to convert
    their power systems to renewable energy.
    Rural Energy for America Program (REAP)
        REAP is the longest running renewable energy program that RBS
    operates. Initially authorized under the 2002 Farm Bill, the program
    was reauthorized and expanded in the 2008 Farm Bill. REAP provides
    grants and loan guarantees for renewable energy and energy efficiency
    to support a multitude of methods to support the energy sector in rural
    America. The President's Budget for Fiscal Year (FY) 2012 requested $37
    million to support a program level of $45 million in 2012 in addition
    to the $165 million in mandatory program level funding to support $210
    million in program activity. In FY 2011 RBS has $75 million in
    mandatory and discretionary funding to support a program level of $113
    million in funds which will be awarded to many of the over 3,000
    applications that were received. In FY 2010, the program provided 2,400
    grants and loan guarantees totaling $159 million in support for energy
    audit projects, and energy efficiency and renewable energy projects
    that ranged from biofuels to wind, solar, geothermal, anaerobic
    digesters, hydroelectric, and biomass projects.
        Four categories of program assistance are available through the
    REAP:

        (1) The REAP Renewable Energy Systems/Energy Efficiency Improvement
            Grants Program is designed to assist farmers, ranchers and
            rural small businesses that are able to demonstrate financial
            need. All agricultural producers, including farmers and
            ranchers, who gain 50 percent or more of their gross income
            from the agricultural operations are eligible. Small businesses
            that are located in a rural area can also apply. Rural electric
            cooperatives may also be eligible to apply.

        (2) The REAP Energy Audit and Renewable Energy Development Assist
            Grants Program is available to eligible entities which include
            a unit of state, tribal, or local government; institutions of
            higher education; rural electric cooperatives; or a public
            power entity. The program is designed to assist farmers,
            ranchers, and rural small businesses.

        (3) The REAP Feasibility Study Grants Program is designed to assist
            agriculture producers (including farmers and ranchers) and
            rural small businesses. All agricultural producers who gain 50
            percent or more of their gross income from the agricultural
            operations are eligible. Small businesses that are located in a
            rural area can also apply. Rural electric cooperatives may also
            be eligible to apply.

        (4) The REAP Guaranteed Loan Program has recently established a new
            definition for eligible applicants. All agricultural producers
            or rural small businesses are eligible to apply. Agricultural
            producers must gain 50 percent or more of their gross income
            from their agricultural operations. An entity is considered a
            small business in accordance with the Small Business
            Administration (SBA) small business size standards NAICS code.
            Most lenders are eligible, including national and state-
            chartered banks, Farm Credit System banks and savings and loan
            associations. Other lenders may be eligible if approved by
            USDA.

        This program supports a wide range of small businesses, and
    technologies can range from wind turbines, to methane digesters, to
    geothermal systems. For example, in Altura Minnesota, Pork and Plants
    of Altura was awarded a $16,250 grant to build a renewable energy
    system. The grant provided sufficient incentive to motivate Pork and
    Plants to utilize corn and pellets to provide the heat needed for their
    greenhouses eliminating the need for approximately 40,000 gallons of
    liquid propane gas per year.
    Biorefinery Assistance Program
        The Biorefinery Assistance Program (Section 9003) provides loan
    guarantees to assist in the development of new and emerging
    technologies to develop advanced biofuels. An Interim Rule was
    published on February 14, 2011, the Notice of Funds Available (NOFA)
    was published March 11, 2011, and the application window closed July 6,
    2011. RBS received thirteen applications, requesting over $1.3 billion
    in requested funding. We are currently reviewing the applications and
    identifying loans that may range up to $250 million.
        The Biorefinery Assistance program is the only Federal program that
    provides support exclusively to advanced biofuel biorefineries.
    Eligible applicants include individuals, entities, Indian tribes, units
    of state or local government, farm cooperatives, farmer coop
    organizations, associations of agricultural producers, National Labs,
    Institutions of higher education, rural electric cooperatives, public
    power entities, or various consortia of any of those entities.
    Repowering Assistance Program
        The Repowering Assistance Program (Section 9004) provides payments
    to biorefineries who switch from using fossil fuels to produce heat or
    power from renewable biomass. These biorefineries must have been in
    existence at the time the 2008 Farm Bill was passed. An Interim Rule
    was published on February 11, 2011 and a NOFA was published on March
    11, 2011, and the application window closed on June 9, 2011.
        This program can provide payments to a biorefinery existing before
    June 2008 based on the quantity of fossil fuel the biorefinery is
    replacing, the percentage reduction in fossil fuel used by the
    biorefinery, and the cost effectiveness of the renewable biomass
    system, economic benefit to the community, and the potential to improve
    the quality of life in rural America.
    Bioenergy Program for Advanced Biofuels
        The Advanced Biofuel Payment Program, formerly the Bioenergy
    Program for Advanced Biofuels (Section 9005) provides payments to
    eligible producers to support and expand the production of advanced
    biofuels. Only one producer per refinery is eligible to apply. To date,
    almost $30 million in assistance payments have been provided to 141
    advanced biofuel producers. On February 11, 2011, an Interim Rule was
    published and incorporated a notice of contract proposals (NOCP) for
    the 2010 funding in the amount of $80 million. A second NOCP for $85
    million was published on March 11, 2011 for the FY 2011 funding;
    applications for funding were required to be submitted to RBS by May
    10, 2011. This program is vital in supporting existing biofuel
    infrastructure and a crucial support to help us meet the mandated
    Renewable Fuel Standard (RFS2) which calls for 22 billion gallons of
    advanced biofuels by 2022.
        An example is Indiana Flex Fuels which received $3,600 in FY 2010.
    Though relatively small in capacity--a 5 million gallon a year plant--
    the FY 2010 payment and future payments in FY2011 will provide a
    financial incentive to biorefineries such as this, which will provide
    them with a necessary step towards meeting the nation's renewable
    energy needs.
    Performance
        In 2009 and 2010, USDA assisted nearly 4,000 rural small
    businesses, farmers, and ranchers save energy and improve their bottom
    line by installing renewable energy systems and energy efficiency
    solutions that have the potential of producing or saving a projected
    4.67 billion in kilowatt hours--enough energy to power 390,000 American
    homes for a year. USDA is the among the largest supporters of biofuels
    in the nation and our programs are essential in ensuring a stable
    market structure that creates jobs and meets our nation's energy needs
    and goals.
    Farm Service Agency
    Biomass Crop Assistance Program (BCAP)
        The Energy Title of the 2008 Farm Bill also authorized BCAP which
    is implemented by the Farm Service Agency (FSA). BCAP provides
    financial assistance to owners and operators of agricultural and
    nonindustrial private forestland who volunteer to establish, produce
    and deliver eligible crops for conversion to bioenergy or bio-based
    products. Such Commodity Credit Corporation (CCC) funds as necessary
    were authorized for BCAP. However, subsequent appropriations bills have
    limited the availability of funding.
        There are two types of assistance available under BCAP. First,
    establishment and annual payments may be available to producers who
    enter into contracts to produce eligible crops on lands within approved
    BCAP project areas. Generally, crops that receive payment under the
    Commodity Title (e.g., corn, wheat, rice, soybeans) and noxious weeds
    or invasive species are not eligible for payments. Producers may
    receive up to 75 percent of the establishment costs of a perennial crop
    and annual payments for up to 5 years for non-woody crops or up to 15
    years for woody crops.
        Second, matching payments may be available to producers for the
    collection, harvest, storage and transport of eligible biomass to
    qualified facilities that produce heat, power, bio-based products, or
    advanced biofuels from that biomass. To qualify for payment, the
    biomass must be an eligible material that also is collected or
    harvested directly from the land before transport to the facility, in
    accordance with an approved conservation or forest stewardship plan.
    Woody biomass must not have a previously existing market and must also
    be removed to reduce forest fire threats, disease or insect
    infestation, or to restore ecosystem health.
        In July 2009, FSA issued a NOFA for the matching payments portion
    of the BCAP program and issued the first payment in August 2009. In
    February 2010, the authority for payments under the NOFA ended and FSA
    published a proposed rule to implement the full BCAP program. The final
    rule for BCAP was published in October 2010 and FSA began accepting
    applications for BCAP Project Areas.
        Early this year, FSA began the sign-up period for farmers seeking
    matching payments for the delivery of crop residues to qualified
    biomass conversion facilities located in Iowa and South Dakota. Also
    this spring, FSA announced the first BCAP Project Area comprised of 39
    contiguous counties in Missouri and Kansas for the enrollment of up to
    50,000 acres of native grasses, including switchgrass, for
    manufacturing into pellet fuels. Just last month, FSA announced four
    more BCAP project areas in Arkansas, Missouri, Ohio, and Pennsylvania
    to grow giant Miscanthus which is a sterile hybrid warm-season grass to
    be converted into bioenergy. Any project area, as part of the project
    proposal package, must be compliant with the National Environmental
    Policy Act (NEPA), compliance includes environmental screening,
    reviews, and may include an environmental assessment or impact
    statement at cost to the project sponsor(s).
        The 2011 Full Year Continuing Resolution limited funding for BCAP
    to $112 million. On April 20, 2011, FSA announced that BCAP Project
    Area proposals must be submitted no later than May 27, 2011, to be
    considered for FY 2011 funding. Demand for BCAP funding is significant:
    FSA received 41 project area proposals from 21 states requesting an
    estimated $1 billion to enroll more than 1.5 million acres in dedicated
    energy crops. FSA soon will announce the final project area selection
    for FY 2011.
    Feedstock Flexibility Program (FFP)
        The 2008 Farm Bill also established the FFP. Typically, the CCC
    nonrecourse loan program offers sugarcane and sugar beet growers the
    opportunity to forfeit their sugar loan collateral to CCC as full
    satisfaction of the loan with growers keeping the loan proceeds. CCC
    later dispenses the forfeited sugar into the marketplace by sale or
    donation. FFP was authorized to prevent the accumulation of government-
    held sugar stocks that otherwise can impede price recovery by instead
    allowing CCC to sell the surplus sugar to bioenergy producers as a fuel
    feedstock. Compared to expectations during the 2008 Farm Bill, however,
    domestic sugar demand has increased significantly and is expected to
    remain strong relative to supplies in FY 2011 and FY 2012. While FSA
    does not anticipate an immediate need for FFP during this period, the
    proposed rule to implement this program has been drafted and will be
    published soon.
    National Institute of Food and Agriculture (NIFA)
        As the USDA's extramural research and education arm, NIFA has a
    number of programs that support fundamental and applied research into
    renewable energy and contribute to the USDA role in pursuing our
    nation's energy security.
    Biomass Research and Development Initiative (BRDI)
        The Energy Title of the 2008 Farm Bill reauthorized the BRDI
    competitive grants program which is a joint effort between USDA and the
    Department of Energy (DOE) to support the development of a biomass-
    based industry in the United States. The objectives of the program are
    to promote the development of: (a) technologies and processes necessary
    for abundant commercial production of biofuels at prices competitive
    with fossil fuels; (b) high-value bio-based products to enhance the
    economic viability of biofuels and biopower, to serve as substitutes
    for petroleum-based feedstocks and products, and to enhance the value
    of coproducts produced using the technologies and processes; (c) a
    diversity of economically sustainable domestic sources of renewable
    biomass for conversion to biofuels, bioenergy, and bio-based products.
    Projects supported through this program must take into account a life
    cycle perspective that takes into account the environmental, economic
    and social implications of the proposed technologies. The program has
    been effective in developing multi-institutional and multi-disciplinary
    consortia to increase technology transfer and commercialization.
    Biodiesel Fuel Education Program
        The Biodiesel Education program (Section 9006) was created to help
    the biodiesel industry grow by providing technical information about
    this new fuel to a broad spectrum of U.S. consumers and producers. This
    program is operated through cooperation between the Office of the Chief
    Economist (OCE) and NIFA. Education materials and outreach activities
    deliver information on the environmental benefits of biodiesel, and
    expert guidance is provided on producing biodiesel, maintaining fuel
    quality, and insuring fuel safety. Since the Program began in 2003, the
    U.S. biodiesel industry has grown from just a few firms to over 150
    firms today. Awareness of biodiesel among Americans has increased
    markedly over the past 10 years--consumer awareness of biodiesel has
    grown from 27 percent in 2003 to 86 percent today. At the onset of the
    Program, many engine manufacturers were apprehensive about using
    biodiesel, but now nearly 60% of U.S. manufacturers support the use of
    biodiesel blends in at least some of their equipment. While the Program
    has been a major success, education is needed more than ever, with the
    biodiesel industry ramping-up to meet record production levels, set by
    the RFS2 mandates.
    Agriculture and Food Research Initiative (AFRI)
        AFRI is NIFA's flagship extramural competitive grants program and
    has a Sustainable Bioenergy Challenge Area which seeks to facilitate
    the establishment of regional systems for the sustainable production of
    bioenergy and biobased products. This challenge area funds projects
    that contribute significantly to reducing the national dependence on
    foreign oil; have net positive social, environmental, and rural
    economic impacts; and are integrated with existing agricultural
    systems. The development of regional bioenergy systems will result in
    viable commercial options that can be rapidly deployed to produce
    advanced biofuels as well as value-added co-products to diversify
    product options, reduce risks, and bridge to full scale advanced
    biofuel production. A priority of this challenge area is to foster
    coordinated plans for developing regional systems for the sustainable
    production and distribution of bioenergy and biobased products with net
    positive social, environmental, and economic effects. It is expected
    that the Regional Bioenergy Coordinated Agricultural Projects (CAPS)
    will network with and leverage existing efforts within USDA, university
    research, education, and extension, other Federal agencies, and the
    private sector, and take multidisciplinary and transdisciplinary
    approaches.
        Another priority in the Sustainable Bioenergy Challenge Area is to
    develop the bioenergy workforce. The field of bioenergy and biobased
    products holds potential for new technologies and entrepreneurial
    opportunities that may substantially change regional rural economies.
    This emerging bio economy will demand a new workforce and will
    challenge institutions to produce graduates who have the
    multidisciplinary and problem solving framework to meet this demand.
    This new economy will require a trained and competent skill set that
    meets workforce needs all along the bio-energy value chain encompassing
    a wide range of technical, educational, socioeconomic, and scientific
    competencies. Projects supported through this program are stimulating
    the K-12 and baccalaureate and master's level education system to
    produce students who are science and math based independent thinkers
    and investigators, steeped in interdisciplinary coursework who can
    identify solutions to problems and opportunities, work creatively in
    teams and present solutions in a clear and concise manner, and who have
    an interest in America's bio-energy and bio-based products future.
    Sun Grant Initiative Program (SGI)
        Authorized under the Research Title of the farm bill, SGI began 10
    years ago with support from USDA to harness the capacities of the land-
    grant universities to develop bioenergy and biobased products through
    regional collaboration, coordinated through five regional Sun Grant
    Centers. With support from USDA/NIFA, DOE and the Department of
    Transportation (DOT) the SGI has over 130 field studies on biomass
    feedstocks currently underway with locations in more than 75 percent of
    the states in the nation. SGI research has been a catalyst for
    attracting industry investments that have resulted in formation of new
    businesses and creation of new jobs in the bioenergy sector. For
    example, in the South East SGI Region, SGI supported projects that led
    to the DuPont-Danisco joint venture partnership with the University of
    Tennessee and Genera Energy to open a demonstration scale facility
    producing lignocellulosic ethanol. Over 7,000 acres of switchgrass are
    in production and under contract to support this demonstration
    conversion facility, which is being utilized to develop a commercial
    scale facility by 2013 that has a production capacity of 25-50 million
    gallons of ethanol. In the North Central Region, Sun Grant-supported
    research led to DuPont-Danisco deciding to locate a cellulosic ethanol
    production facility in Iowa. Similar collaborations are underway in
    each SGI Region with Sun Grant-supported research leading to
    commercialization of new feedstock varieties for production of advanced
    biofuels.
    Plant Feedstock Genomics Program
        DOE's Office of Biological and Environmental Research has teamed up
    with NIFA's Agriculture and Food Research Initiative to fund projects
    that accelerate plant breeding programs and improve biomass feedstocks
    by characterizing the genes, proteins, and molecular interactions that
    influence biomass production. DOE and USDA initiated this competitive
    grant program in 2006 to support fundamental research in biomass
    genomics. Ultimately, the research seeks to develop and demonstrate
    environmentally acceptable crops and cropping systems for producing
    large quantities of low-cost, high-quality biomass feedstocks. Specific
    focus areas include: elucidating the regulation of genes, proteins, and
    metabolites to for improved productivity, processing, or growth
    characteristics in marginal environmental conditions, such as drought
    or salt tolerance; developing novel technologies to facilitate the
    analysis and manipulation of cell wall structure and composition for
    both breeding and basic research; using genomic approaches that lead to
    the identification of genetic markers enabling more efficient plant
    breeding or manipulation; and enhancing fundamental knowledge of the
    structure, function, and organization of plant genomes leading to
    improved biomass characterization.
    Agricultural Research Service (ARS)
        ARS is USDA's principal intramural research arm and conducts basic
    research to support the commercial production of dedicated feedstocks
    for the making of advanced biofuels and bioenergy. The research is
    focused on four primary objectives: increase biomass production
    efficiency to improve grower profits and reduce biorefinery transaction
    costs; optimally incorporate biomass and other dedicated feedstocks
    into existing agriculture-based systems; address the uncertainties of
    expanded feedstock production up-front to avoid negative impacts on
    existing markets and ecosystem services; and develop and find new ways
    to utilize value-added coproducts to economically enable commercially
    preferred biorefining technologies. Region-based production systems are
    being developed for dedicated energy crops including perennial grasses,
    oil crops, energy cane, and biomass sorghum.
        ARS bioenergy research is conducted through the regional USDA
    Biomass Research Centers, which include the Forest Service, and is
    coordinated with NIFA's AFRI Sustainable Bioenergy Coordinated
    Agricultural Projects (CAP) grant program, and the USDA-DOE jointly-
    funded BRDI grants. ARS also partners with the DOE Plant Feedstock
    Genomics for Bioenergy competitive grant programs. These combined
    efforts are done in partnerships with universities, other Federal
    agencies, states, and private companies and are designed to help
    accelerate the commercial development of biofuels, biopower, and other
    bio-based products from dedicated feedstocks produced on our nation's
    farms.
    Economic Research Service
        The Economic Research Service (ERS) conducts rigorous and objective
    research on the economic and environmental implications of agriculture-
    based bioenergy production. ERS research on bioenergy focuses on how
    policy and market developments affect commodity markets, land use, the
    environment, rural development, and consumers. Core objectives include:
    examining the relationships between bioenergy production and farm and
    retail food prices; developing long-term projections of domestic and
    international agricultural markets, taking account of changing
    policies, and macroeconomic events that affect markets for biofuels;
    examining the effect of biofuel production on rural employment and
    wealth creation; and analyzing the effect of increased biofuel
    production on environmental quality and use of scarce natural
    resources.
        ERS research on bioenergy is being enhanced by expanding the
    capabilities of in-house economic models, geo-spatial analysis tools,
    budget generators for dedicated energy crops, and by establishing
    partnerships with universities and other Federal agencies. ERS works in
    conjunction with the National Agricultural Statistics Service (NASS) to
    collect and analyze unique data on farm characteristics and production
    practices from the Agricultural Resource Management Survey. NASS data
    on agriculture is essential at every stage of infrastructure
    development, from the initial policies that drive basic research, to
    the establishment of markets and feedstock production needed to sustain
    this new industry.
    Departmental Management
    Biobased Markets Program
        The Energy Title of the 2008 Farm Bill established the Biobased
    Markets Program, known as the BioPreferred' Program, and
    USDA is the lead agency responsible for its implementation. This
    biobased products program helps to create green jobs in rural
    communities, adds value to agricultural commodities, decreases
    environmental impacts, and reduces our dependence on imported oil.
    USDA's goal is to increase Federal procurement of biobased products
    government-wide and develop government and public markets through a
    voluntary labeling program.
        USDA has promulgated BioPreferred' program guidelines
    and six rounds of regulations designating categories of biobased
    products for preferred Federal procurement. As a result, there are now
    50 designated product categories. A seventh designation rule with 14
    product categories should be promulgated later this month. When Round
    seven is published, 64 categories and almost 9,000 products will be
    approved for preferred Federal procurement. USDA initiated a voluntary
    labeling program earlier this year; over 430 products from 150
    companies have been certified to carry the USDA Certified Biobased
    label to date. In FY 2010, 88 percent of all applicable USDA contracts
    included biobased clauses or purchases, up from 80 percent in FY 2008
    and 84 percent in FY 2009. In addition, there are over 20,000 biobased
    products and the number and types of products continue to grow.
    Natural Resources Conservation Service (NRCS)
        NRCS formally identified energy as a resource concern in 2010 and
    substantial efforts are being made to enhance the Agency's capacity to
    work with producers in conserving energy. All of the Agency's
    conservation practice standards were evaluated for their potential
    contribution to address energy resource concerns and many were revised
    to incorporate energy as a purpose for performing the conservation
    practice. Training efforts are underway to ensure that agency employees
    are prepared to assist customers with energy conservation efforts. A
    series of agriculture-focused energy fact sheets have been issued and
    more are under development. In addition, the suite of producer-focused
    web-based Energy Estimators for animal housing, irrigation, nitrogen,
    and tillage are being updated to reflect recent information and
    technologies. These tools provide a simple way for producers to
    evaluate potential savings from implementing energy conservation
    practices.
    Environmental Quality Incentives Program (EQIP)
        The Environmental Quality Incentives Program (EQIP), administered
    by NRCS, has been helping producers in addressing natural resource
    concerns since 1996. Conservation practices and systems implemented
    under EQIP have helped producers to achieve environmental objectives,
    and in some cases to have a beneficial effect on energy resources. For
    example, producers have reduced energy use through conservation
    tillage, which requires fewer passes over a field; irrigation water
    management that conserves water and saves energy; and improved nutrient
    management, which can include adoption of anaerobic digesters. Manure
    from the anaerobic digesters provides a reliable level of nitrogen
    fertilization and can be used to replace commercial fertilizer. When
    stored and handled properly, animal manure loses less nitrogen and can
    be applied with confidence. NRCS can provide information and
    considerations for designing and constructing appropriate manure
    handling facilities. Methane produced by the manure can allow biogas
    generators to produce electricity and heat that producers can use
    onsite. Also, the potential exists to sell the excess electricity to a
    local electric grid.
        The Conservation Title of the 2008 Farm Bill added energy
    conservation as a purpose of EQIP and authorized the NRCS administered
    program to be used for conservation plans that further energy
    conservation and other purposes of the program. The conservation
    practice associated with plan development under this authority is known
    as a ``conservation activity plan'' (CAP). Two Agricultural Energy
    Management Plan (AgEMP) CAPs have been developed for energy
    conservation, one focusing on operation headquarters and one focusing
    on farm landscape energy conservation.
        These AgEMPs for the farm headquarters and farm landscape contain
    the on-farm energy audit that establishes a baseline of total energy
    consumption of the farm or ranch operation and also provides
    recommendations of energy conservation and efficiency measures that the
    producer can prioritize and implement on their agricultural working
    lands. For FY 2011 and as of June 15, 2011, NRCS has planned 364 AgEMPs
    for headquarters and landscape energy audits, obligating $715,761 in
    financial assistance funds. Another 133 AgEMP headquarters audits have
    been completed, with producers receiving $237,489 in financial
    assistance payments.
        The actual benefits from an on-farm energy audit (AgEMP) to the
    producer and the environment are achieved fully when the on-farm energy
    audit recommended measures are implemented. Four states are already
    using conservation practice standard 374 for On-Farm Equipment
    Efficiency Improvements to accelerate implementation. As of June 3,
    2011 there were 20 planned and four completed contracts that included
    this conservation practice standard, totaling nearly $580,000.
    Conservation Stewardship Program (CSP)
        NRCS offers financial assistance to producers to enhance their
    conservation activities, through the CSP including energy conservation.
    In FY 2011, there are seven CSP enhancements for energy, ranging from
    fuel use reduction and renewable energy use to on-farm landscape energy
    audits and variable frequency drive motors. In FY 2010, program
    participants applied fuel use reduction on over 206,000 acres and added
    more than 6,500 systems or units using renewable energy, such as solar
    powered electric fence charging systems and renewable energy powered
    pumping plants.
    Conservation Innovation Grants (CIG)
        NRCS also encourages energy technology innovation and conservation
    through Conservation Innovation Grants (CIG). Through this competitive
    process, NRCS awards grants to demonstrate innovative technologies for
    more effectively managing natural resources while leveraging Federal
    resources. CIG enables NRCS to work with other public and private
    entities to accelerate technology transfer and adoption of promising
    technologies and approaches to address some of the nation's most
    pressing natural resource concerns.
        In FY 2010, over $5.5 million was awarded for 12 projects working
    in 29 states to demonstrate innovative energy technologies or programs
    that range from on-farm energy audits to anaerobic digester
    technologies and sustainable biomass production. Of this, nearly $\1/2\
    million was awarded in two grants for innovative energy conservation
    projects. By comparison, between FY 2004 and FY 2009, there were four
    national CIG grants for innovative energy conservation projects
    totaling $1,361,109.
    Conclusion
        As these USDA programs and efforts show, in addition to its
    environmental, energy security, and national security implications,
    renewable energy is an important source of jobs, economic growth, and
    tax revenue in rural communities across the country. USDA recognizes
    that environmentally responsible renewable energy and energy
    conservation provide opportunities for economic growth and prosperity
    across rural America and the nation as a whole. We are working to
    ensure that our programs meet and exceed the challenge of promoting
    economic growth and prosperity.
        Thank you, again Mr. Chairman and Members of the Subcommittee. With
    your help, we look forward to continuing to create jobs and build a
    cleaner, more secure, more sustainable, and domestically-produced
    energy sector.

        The Chairman. Thank you, Mr. Garcia.
        The chair would like to remind Members that they will be
    recognized for questioning in the order of seniority of Members
    who were here at the start of the hearing, and after that,
    Members will be recognized in order of arrival. I appreciate
    the Members' understanding.
        I am going to proceed with my 5 minutes of questions.
        Now, my first question is directed to Chief Tidwell.
        Chief, the 2008 Farm Bill required each state to conduct a
    state-wide assessment of forest resource conditions, threats,
    trends, priorities to receive Federal forestry assistance
    funds. What is the status of this assessment?
        Mr. Tidwell. Thank you. All of the states and the
    territories have completed their assessments and developed
    their forest action plans.
        The Chairman. And the Forest Service, where are you in
    terms of analysis of that?
        Mr. Tidwell. Well, we are looking at that for a couple of
    opportunities to help establish the priorities about where is
    the best place in this country to be using the funds. And it
    really helps the states that they can identify their priorities
    and where is the best place for us to use our limited funds.
        We are also seeing that we have--we are seeing states
    starting to work together with their neighboring states to be
    able to put together their proposals as to their requests for
    funding.
        The other key part of this, too, is it is going to be, it
    is going to be very beneficial, as we move forward with doing
    the forest planning on our National Forests and grasslands,
    these assessments, these action plans, are going to be a key
    part of the information that we are going to use as we move
    forward with revising our forest plans.
        The Chairman. All right. In your testimony, you have
    identified, obviously, a very important issue, invasive
    species. And one much your predecessors, Chief Bosworth, once
    suggested that invasive species are one of the main threats to
    healthy forests.
        What are your suggestions on altering the structure and
    financing programs related to invasive species in our
    forestlands?
        Mr. Tidwell. Well, with our Forest Health Program, I
    believe it is essential for us to be able to deal with the
    invasives that we have currently and the invasives that are
    going to be coming into this country.
        That program provides the ability for our states to be able
    to conduct the surveys, be able to monitor the infestations so
    we can do the best job that we can to either stop, eradicate
    these infestations or at least be able to deal with them.
    Without this program, I think it would be very difficult for us
    to be able to track and monitor this, especially on a national
    scale. This program allows us to be able to look beyond the
    borders, beyond the private land borders, beyond state borders,
    and I believe provides an efficiency that could not be
    duplicated if, say, each state was having to do this on their
    own.
        The Chairman. I appreciate that.
        Administrator Canales, thanks for your overview on the
    energy titles--and the energy title. Specifically I want to
    look at Section 9003, the Biorefinery Assistance Program. How
    many awards have been made through the Biorefinery Assistance
    Program for the construction of new biofuel facilities and how
    many of these were for commercial cellulosic facilities?
        Ms. Canales. Thank you, Mr. Chairman.
        Our first award was made in 2010, and that project is in
    Georgia. Our second award was made for three separate projects
    during this fiscal year, in January of this year. Those were
    all conditional commitments, and those are involving projects
    to occur in Florida, Mississippi and Alabama. So, those
    projects are not under way at this point in time.
        The Chairman. Just for clarification, because I think that
    is helpful for all of us here as we prepare to look at this
    title within the next farm bill, how does the Biorefinery
    Assistance Program differ from the programs administered by the
    Department of Energy that fund the construction of renewable
    fuel facilities?
        Ms. Canales. They defer--or they differentiate because
    these technologies are all first of a kind. They are not off-
    the-shelf technologies and, most importantly, in regard to
    USDA, there is some element usually of a relationship to
    agriculture. What we are trying to drive at is gaining the
    opportunity to get this loan guarantee to try and drive
    private-sector dollars into the rural communities
    predominantly.
        Each one of those projects all have some sort of feedstock
    that has some agriculture tie, and also, frankly, our
    experience has been in operating a loan guarantee program that
    is different from Department of Energy.
        The Chairman. Okay. Thank you.
        Now I recognize Mr. Holden for 5 minutes.
        Mr. Holden. Thank you, Mr. Chairman.
        Mr. Garcia, as you know, there has been a lot of and
    anxiety regarding the implementation of this BCAP program. Can
    you tell me now that it has been implemented what the process
    was like, how did you approve projects and did you work with
    other agencies during that process?
        Mr. Garcia. Thank you, Mr. Holden.
        I would start off by saying that the BCAP program has been
    a challenge to administer. It is a very new program. It is a
    pioneering program that FSA is charting new territory that we
    had never explored before. FSA historically has been working
    with the conventional crop production, and this new energy
    program we were just not very familiar with. So we did take the
    time to consult with other agencies.
        Mr. Holden. What agencies did you consult with?
        Mr. Garcia. With other USDA agencies, such as Agricultural
    Research Service, Animal and Plant Health Inspection Service,
    that were involved already with some research on these energy
    crops. And, therefore, we started establishing the program
    provisions for this program.
        We have set a structure here a few months ago since we were
    approved for the $112 million that I mentioned earlier. We have
    set a structure, and we have involved expertise from other USDA
    agencies in order to come up with a process to review the
    project proposals at hand. We received over 40 proposals, and
    we expect to make a decision on those proposals within the
    month.
        Mr. Holden. And you have mentioned four projects that have
    recently been approved, and you mentioned one in Pennsylvania.
    What crop is that plant using, and where in Pennsylvania?
        Mr. Garcia. That particular project involves Miscanthus,
    which is a new energy crop. It is planted through rhizomes, and
    it involves over 250,000 acres of establishment in
    Pennsylvania, Ohio, Arkansas and Missouri.
        Mr. Holden. So it is in western Pennsylvania.
        Mr. Garcia. I am sorry?
        Mr. Holden. The location.
        Mr. Garcia. Excuse me, may I confer?
        Mr. Holden. Just curious. That is okay.
        Mr. Garcia. It is in western Pennsylvania.
        Mr. Holden. Thank you.
        Ms. Canales, the Georgia facility, that is operational now;
    correct?
        Ms. Canales. It has been, sir.
        Mr. Holden. And how long was it in operation?
        Ms. Canales. About 3 months.
        Mr. Holden. And what is its feedstock?
        Ms. Canales. Biomass, woody biomass.
        Mr. Holden. And the other projects, I think you said,
    Florida, Mississippi and Alabama, is that correct?
        Ms. Canales. Yes, sir.
        Mr. Holden. You said that was conditional, conditional on
    financing.
        Ms. Canales. Well, conditional commitment is a part of our
    due diligence process and that is the review. And so the part
    about finance is to ensure that their bank, because the
    applicant is actually the bank. The applicant is the bank for
    the loan guarantee, and so, yes, it is the formalization of
    financing.
        Mr. Holden. And what was the exposure on the Georgia
    project for the loan guarantee?
        Ms. Canales. I apologize, I am sorry?
        Mr. Holden. The Georgia project, how much was that project?
        Ms. Canales. Well, $80 million was going to be total, but
    we sent $50 million. It was two phases, $50 million and then
    $30 million would have been the second phase.
        Mr. Holden. Okay.
        Mr. Tidwell, you know from the Energy Independence and
    Security Act, this Committee is very concerned about the
    definition of biomass.
        What types of challenges are you facing on forestlands with
    that definition and several other definitions that are not
    consistent in trying to manage the forestlands?
        Mr. Tidwell. The challenge that we are having in America
    now is to be able to get the restoration work done on our
    National Forests, which includes the removal of not only saw
    logs but also the removal of a lot of smaller diameter material
    to reduce the biomass.
        We need to look for every opportunity we have to be able to
    encourage the use of that material for beneficial use, whether
    it is any type of biomass utilization or for wood energy.
        So, as far as we think about definitions, we want to make
    sure that they are flexible and that they will encourage the
    restoration work that needs to be done on these lands. And so
    that is the thing that we are interested in. It is just having
    a flexibility in there so that this small-diameter material
    that doesn't really have any use, that we can be able to find
    ways to encourage that to be used for beneficial use instead of
    having to pay someone to just pile it up in the woods and then
    burn it and put smoke in the air.
        Mr. Holden. My time has expired, Mr. Chairman.
        The Chairman. I thank the gentleman.
        I now recognize the gentleman from Wisconsin, Mr. Ribble,
    for 5 minutes.
        Mr. Ribble. Thank you, Mr. Chairman.
        And thank you to the panel for spending some time with us
    this morning.
        Chief Tidwell, I am from Wisconsin, and the Chequamegon
    Nicolet National Forest is in my district. But the forest plan
    is not being fully implemented, and it is hurting our local
    communities, particularly small rural communities, particularly
    in northeast Wisconsin, and, quite frankly, our state as a
    whole.
        I am also concerned very much about how it is affecting
    what once was a very vibrant timber industry in Wisconsin.
        What are the barriers to fully implementing your plan?
        Mr. Tidwell. A forest plan lays out the desired conditions
    and lays out the expectation of what can be produced off these
    lands.
        A forest plan itself doesn't establish any targets along
    those lines, so it more is a document that allows. There is no
    question that we need to do more work, not only in your state
    but across the country, to be able to do more restoration work.
    The things that we are focused on to be able to build some
    efficiencies is to be able to look at much larger landscapes.
        We used to look at projects that were sometimes 500 acres,
    maybe 1,000 acre projects. What we are now doing is moving
    forward to be able to look at much larger landscapes, things
    like 50,000 acres, 100,000 acres at a time. Do the analysis on
    that so that we can move forward with the restoration work.
        The other key component of this is to be able to have a
    long-term contract in place so that purchaser knows that not
    only do they have work this year but they are going to have
    work next year and the year after, and that is through our
    Stewardship Contracting Program that I am hopeful we will be
    able to continue to be able to have that program.
        That is going to be a key element, to be able to encourage
    folks to make additional investments and for us to be able to
    actually increase the amount of work that we need to do in our
    forests.
        Mr. Ribble. Okay, thank you. I would encourage you to move
    with as much haste as you possibly can. I mean, it is a
    constant problem for us, and the problem has lasted a long
    time. And at some point, we have to stop saying we are working
    it, we are studying it, we are analyzing it and finally get
    something moving. There is just a lot of frustration back home.
        Along a similar line and staying with our forests here,
    recently the Ninth Circuit Court overturned an EPA regulation
    and ruled for the first time that forest roads are point
    sources and that using them for timber harvesting requires
    Federal permitting.
        Earlier this year, I joined many of my colleagues,
    including my friend, Mr. Schrader, in sending a letter to the
    EPA raising some concerns in response to this decision. Given
    your experience, can you tell us whether or not best management
    practices work or whether or not they are affecting--or whether
    or not they are effective at maintaining water quality?
        Mr. Tidwell. Well, I am definitely aware of the court
    decision that you are referring to.
        You know, our experience with our best management practice
    is that when we followed those, that they do provide the right
    restrictions in place to ensure clean water. There is no
    question that--in fact, I have never met anyone that wasn't
    supportive of providing clean water.
        So I think it is--that is very important.
        You know, the best management practices that we use on our
    National Forest System lands along, with the environmental
    assessments that have to be completed before we do any of our
    work, I do believe that we are doing a good job to be able to
    minimize any impact to clean water.
        It is essential that, as we move forward, that we be able
    to find a way to, of course, provide for clean water, and best
    management practices has been one tool that we have been using
    in the past. It is also my experience that at least every state
    that I have worked in does also have best management practices.
    There is a difference between the states, but it has been a
    very good approach in the past.
        Mr. Ribble. But what is the permitting requirement--what
    type of impact is it going to have on the Department's ability
    to conduct restoration work?
        Mr. Tidwell. Well, we would have to see what process was
    put into place.
        You could design a permitting process that would not
    necessarily have any impact, it would be another step. Until
    that decision is made and we actually see what process would be
    put into place, I probably can't answer that. But I tell you I
    am confident that the work that we are currently doing,
    following the best management practices, will provide for clean
    water.
        And so if there is a permit process in place that we will
    be able to meet that requirement.
        Mr. Ribble. Okay. Thank you very much.
        Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman.
        The chair now recognizes the gentleman from Minnesota, Mr.
    Walz, for 5 minutes.
        Mr. Walz. Thank you, Mr. Chairman, and the Ranking Member
    for holding this audit and this hearing, and thank you all for
    being here with us.
        I would like to talk just a little bit, Ms. Canales, on the
    REAP program, it is obviously very important in Minnesota. I am
    deeply concerned with the zeroing out of this program at a time
    when America's security is dependent on us becoming energy
    independent. I have seen what that program does in Minnesota,
    creating literally thousands of jobs, dozens of large and
    smaller projects, creating energy independence at home.
        And it strikes me that we are caught in a false dichotomy
    here that we are going to figure out how to grow our economy
    either by cuts or by spending increases. And I think the
    problem is we continue to try and divide up that pie as we are
    missing the most obvious answer here is grow the pie. And
    growing the pie on energy is what is happening in southern
    Minnesota.
        So I wanted to ask you just a couple of questions about
    this.
        The critics of REAP claim--and as it was zeroed out--I
    wanted to thank my colleague from Nebraska, Mr. Fortenberry,
    who is also on this Committee, for getting a little bit of
    money back in this program--that it is duplicative, that it,
    once again, we are trying to squeeze efficiencies, which all of
    us agree on.
        Can you explain the unique nature of the REAP program and
    why, at least my constituents, I would argue, consider it to be
    highly effective and a great return on our dollar? If you could
    help me understand that a little bit.
        Ms. Canales. Thank you, sir, and, yes, there has been a
    considerable amount of activity in your State of Minnesota and
    the Rural Energy for America Program, REAP, is a program that I
    believe is the closest to the consumer, that is something that
    I have always put forward because of the fact the that it goes
    back to the fundamentals.
        For us, it is businesses in rural America, and it is also
    producers. They are business owners, farmers are business
    owners. Therefore, it is an opportunity for them to become
    energy efficient. It is an opportunity for them to also
    generate fuel energy. I have seen it myself, a methane
    digester, where a group of dairy farmer operations can come
    together--you have that on the East Coast; you have that
    certainly in your area in middle America, and you have it in
    the West Coast--in which the livestock produces waste, and that
    waste can go towards energy production.
        So this program has also been a growing program because it
    is a business opportunity, and we do not finance the entire
    project. There is a contribution; this is all leveraging.
        So it is a Federal incentive for that private business
    owner to determine whether this makes good business sense for
    me. It has just become something that has gained a lot of
    attraction that has people trying to reduce their energy costs
    for their business purposes.
        Mr. Walz. Well, I would mention that, too. I know that
    looking at the statistics here with Minnesota, trailing only
    Iowa in this, that it is about $5.8 million in grant amounts,
    but that the amount we leverage is over $16 million,
    contributing to $24 million in growth, job creation and all of
    that.
        My question is, if we are trying to go save money in the
    budget, is defunding REAP in your opinion the best way to try
    to figure out how to save money?
        Ms. Canales. Sir, what we have found is that this is a
    program that brings in, draws in, additional funding. So with
    that Federal seed dollar, be it a grant dollar or, also a loan
    guarantee, what we do is try and engage more banks to do
    lending in rural America. So that becomes a very important
    product for that bank.
        Farm Credit Administration and numerous banks throughout
    the United States are seeing that this loan guarantee is an
    attractive product for them. Then they can take on that
    particular loan so that brings in its private financing
    mechanism using that government incentive.
        Mr. Walz. Well, I appreciate that. As my time is winding
    down, I would just, on BCAP and things, as we move to the next
    generation, I am a strong supporter that we are getting there.
    I have a small company called Easy Energy Systems in our
    district that is working on what I think is the future on
    biofuels, not the large 100 million gallon static plants, but a
    mobile 1 million gallon plant that has already been sold to
    India, that we are able to plop down and fuel small villages on
    tapioca remains or whatever the product might be as the
    biomass. And I am just fearful now we are on the cusp of that,
    that this absolute zeroing out and decimating energy, energy
    products, is going to end those types of things.
        Mr. Garcia, I will wait till my time comes back around to
    hear a little on BCAP, so thank you.
        The Chairman. I thank the gentleman. I recognize the
    gentleman from Florida, Mr. Southerland, for 5 minutes.
        Mr. Southerland. Thank you, Mr. Chairman.
        Mr. Tidwell--well, first of all, thank you to all of you
    for appearing before us today.
        My question is regarding, I would like to ask you, Mr.
    Tidwell, tell me, I think I heard just a few moments ago you
    make the statement that a forest plan doesn't establish harvest
    targets; is that correct?
        Mr. Tidwell. That is correct.
        Mr. Southerland. So and I think in your written testimony,
    the Forest Service manages 190 million acres of National
    Forest; is that correct?
        Mr. Tidwell. That is correct.
        Mr. Southerland. And you have no established targets
    established for the National Forest?
        Mr. Tidwell. We have targets every year based on the budget
    that we receive, and that produces--and then we are--we do have
    a target every year.
        Mr. Southerland. Okay. Well, in one particular National
    Forest in my district, we have a six percent mortality rate and
    a 3.5 percent harvest rate. Is that acceptable?
        Mr. Tidwell. No, I believe we need to be doing more work on
    that forest and almost every forest in this country.
        Mr. Southerland. And what kind of work?
        Mr. Tidwell. We need to be able to get in there and do work
    to restore the health of these forests.
        Mr. Southerland. No, wait a second. Restoration, okay if
    you have a mortality rate of six percent and you have wood that
    is rotting----
        Mr. Tidwell. Right.
        Mr. Southerland. Do you need to study that a little more?
        Mr. Tidwell. No, no. We need to do--when I talk about
    restoration, it is actually to go out there and remove the
    biomass from the landscape, whether it is the disease, infected
    trees, to thin out the stands so that they are more resilient
    to be able to deal with the stresses, whether it is insect and
    disease, whether it is an invasive, whether it is fire. Those
    are the things, why we need to be able to do more work on the
    landscape to make sure these forests--we maintain the forest
    health, that these forests are resilient to the stressors that
    we are dealing with today.
        Mr. Southerland. But, sir, what you are telling me is not,
    in reality, happening.
        What you are saying that you need to do, you have forests--
    I mean, you have companies that are dying on a vine that want
    to get in these National Forests that the Services have
    basically turned into national parks now. This Administration
    speaks a lot about helping rural communities. Well, the rural
    communities in my district, they just want to work. They want
    to work.
        And so I hear a lot about restoration. I hear a lot about
    studies. I hear a lot about planning. Just let the people go in
    and do what you just said, under testimony, needs to happen.
    Why is that not happening?
        Mr. Tidwell. Well, actually, over the last year, we treated
    over 3 million acres.
        Mr. Southerland. Three million of 193 million acres that
    you, really, that is like throwing an ice cube at the sun.
        Mr. Tidwell. Well, it is the most that we have treated in
    many years.
        Mr. Southerland. The most, so we have been incompetent for
    many, many, many years.
        Mr. Tidwell. No, I disagree. I respectfully disagree with
    that. I do acknowledge that we need to be doing more work on
    the landscape. We need to be able to find ways so that that we
    can do larger projects, that we can have more long-term
    contracts in place that encourage the infrastructure, to be
    able to do this work.
        So I agree with you we need to be doing more work. That is
    one of the things that we are looking for.
        Mr. Southerland. And that is all the American people, Mr.
    Tidwell, are wanting to do, more work. But I think, and I
    respectfully disagree with you, because I know people that are
    losing everything they have, everything, sir, everything, and
    they don't want to hear about the studying, the analysis, the
    restoration plans; they want to restore.
        Because I also know that if you want to restore a healthy
    forest, you have to go in and you have to thin it. And down in
    the South, we invented controlled burning. We understand fire.
    You talk about burn it and just put smoke in the air; that has
    a good purpose for a healthy forest. And it just bothers me
    that there is stonewalling, I believe, because if you have 193
    million acres and you do not have a harvest plan and a harvest
    target, that tells me that you are not, you are not managing
    properly.
        And the statistics, the data, the raw data supports what I
    just stated.
        Mr. Tidwell. I agree with you we need to be doing more
    work. Every National Forest has a, basically, we do set a cap
    of what is sustainable, about how much biomass can be removed
    off of that National Forest over a 10 year period, that is kind
    of the cap based on the planning. The amount of work----
        Mr. Southerland. For the American people, when you say
    biomass, just for the American people, are you talking about
    wood?
        Mr. Tidwell. Yes.
        Mr. Southerland. Okay, let's just say wood, timber. Okay.
    You don't have to make it go into biomass?
        Mr. Tidwell. No, when I am talking about biomass, it
    includes the saw logs, the material that is used for pulp and
    paper. It is also the smaller residual material that also needs
    to be removed.
        In addition to the prescribed burning that we have to do,
    especially in our southern forests, where we actually do more
    burning there than any parts of the country.
        Mr. Southerland. Well, you can tell I am passionate about
    this, okay, because there is a sense of urgency. Because when I
    go home, okay, and people are losing their jobs and they are
    losing everything they own, I don't see that when I come to
    Washington, D.C., and I represent them, sir. And I just think
    we should be doing better. We do agree on that.
        Mr. Tidwell. I do agree with you.
        Mr. Southerland. I yield back.
        The Chairman. I thank the gentleman.
        I now recognize the gentlelady from Maine, Ms. Pingree, for
    5 minutes.
        Ms. Pingree. Thank you, Mr. Chairman.
        Thank you for your testimony this morning. It has been very
    interesting, and I appreciate the work that you have been doing
    for us and briefing us on all of this.
        Ms. Pingree. Ms. Canales, thank you for your background and
    interesting information.
        I just have a couple of questions from my own district in
    Maine. One is, there seems to be considerable opportunity to
    support development of small-scale, cellulosic-based biofuel
    systems. Such systems could take advantage of waste biomass at
    smaller scales, avoiding the economic dilemma posed by hauling
    low-grade materials long distances and providing a mechanism to
    address local energy needs. The idea is it is just more
    efficient and it could solve some of the problems of areas. How
    might the existing USDA programs be tailored to pursue this
    opportunity?
        Ms. Canales. Thank you, and I have visited your state as
    well, Representative. And indeed between the beauty, you have
    the natural resources that could be utilized for some of these
    programs.
        Of course, your office works very closely with our state
    office and State Director Virginia Manuel, who is there in
    Maine--what I would advise is that for prospective businesses
    who want to engage in these programs is to work very closely
    with our state offices. That is part of our delivery system.
        In regards to what you are describing, you do not have to
    be a large-scale business. In fact, predominantly and certainly
    regarding the Rural Energy for America Program, it is small
    business ownership. And those projects can be $100,000,
    $500,000, a million dollars, just depending on what the needs
    are for that particular business. So I would just offer to you
    that that is part of how we would proceed with what you just
    described.
        The other part to it is that I would advise strongly in
    working with local leadership, we can work with them to do an
    energy assessment. People need to know what do we have
    available? Every community has potential feedstock. That is how
    we also pursue this.
        We have an energy coordinator that is designated in every
    state for rural development; and that energy coordinator is
    also dedicated to working specifically on these programs. The
    next step would be working with you to provide information to
    these business owners to see what best suits their needs.
        Ms. Pingree. Great. Thank you.
        We do enjoy working with Virginia Manuel, and she does a
    great job for our state. And I do think she is very open to
    thinking of ways to help some of our small producers and do
    things that allow people to use the Program in ways that allow
    for less transportation and a variety of things. So I would be
    happy to work with you more on that.
        Mr. Garcia, I just want to talk briefly about the pellet
    industry, which is something that is of interest in our state.
    We have the most oil dependent state in the nation and a lot of
    seniors and a lot of people in rural areas who are very
    interested in renewable energy and who deal every year with our
    cold temperatures and expensive fuel costs, and so we are
    always looking for ways to do more with that. And I have a
    question around that.
        Given that our pellet industry plays a major role in
    reducing heating oil consumption, is the production of wood
    pellets from the removal of excess low-value woody biomass
    being provided adequate support under programs like BCAP for
    the purposes of incentivizing these types of best forest
    management purposes?
        Mr. Garcia. Thank you for your question.
        I may have to get back to you with that to the
    Subcommittee. That will probably take some research on our
    part, but we will be more than happy to provide you with that
    information. I apologize for not having that information
    readily available to answer your question.
        But as far as the Farm Service Agency, we are working
    closely--under the BCAP Program through matching payments--
    through the matching payment portion of the BCAP Program and
    also looking at the particular project proposals that could
    result in the development of fuel pellets to help our energy
    situation out there.
        Ms. Pingree. Great, and I am happy to get together with you
    on that. It is a growing industry in our state; and, obviously,
    wood and wood products and the management of our forests is a
    big issue for us. But this is also a growing fuel product, and
    we want to do everything we can to help our industry and also
    help our residents afford the cost of fuel.
        Thank you for your work.
        I yield back.
        The Chairman. Thank you.
        I recognize the gentlelady from Alabama, Mrs. Roby, for 5
    minutes.
        Mrs. Roby. Thank you, Mr. Chairman, and I apologize for
    jumping up and down.
        Mr. Tidwell, for just a minute, your testimony highlights a
    number of programs that are important to private forest owners,
    like the almost 400,000 family forest owners in my home State
    of Alabama. And while I understand the value of these programs,
    another key program that is incredibly important for both the
    conservation and forest products industry in Alabama is the
    Forest Inventory and Analysis Program; and it helps us
    understand the conditions and the trends in our forests, where
    we have insect and disease threats, how much fiber we have in
    our forest products. Are you making progress with FIA? Have you
    fully implemented this program as directed by the previous farm
    bill?
        Mr. Tidwell. We are making progress. And our FIA Program is
    just essential, especially to the private landowners, to be
    able to understand what is occurring not only on their land but
    throughout their state. It helps industry to be able to make
    decisions about where to make investments. It is really
    essential for us as we, when folks are asking us about is this
    a place for maybe an opportunity for a pellet facility, we have
    that data. We can actually show how much material that needs to
    be removed off of both the private land and also our public
    land. So we are making progress.
        A few years ago, we expanded the frequency--increased the
    frequency of reading the plots here in the eastern part of the
    state because of the level of change that we are seeing. So we
    have made some shifts in the program, and we are close to
    having it fully implemented.
        I expect in the future, though, that there will be more and
    more of a request for us to increase the frequency of reading
    our plots across the entire United States. So that is one of
    the things we are looking at, is how to build more efficiencies
    into this program with an anticipation that is going to be
    probably a need for more current data than we currently
    provide.
        Mrs. Roby. Thank you so much.
        Mr. Chairman, I yield back.
        The Chairman. I thank the gentlelady.
        Now I recognize the gentleman from Oregon, Mr. Schrader,
    for 5 minutes.
        Mr. Schrader. Thank you, Mr. Chairman.
        Mr. Tidwell, how is the Forest Service responding to some
    of the attacks from EPA on the use of woody biomass, the boiler
    MACT fiasco that went down and this Ninth Circuit Court
    decision that Congressman Ribble referred to? How are we
    responding to talk about the good things biomass should and
    could be doing for a healthy forest?
        Mr. Tidwell. We are working with the EPA and all the
    Federal agencies to make sure that everyone understands the
    importance of being able to restore these forests and whether
    it is the saw log material or the small diameter, the residual
    material that needs to be removed. And we want to make sure
    that if there are any procedures or policies that are put into
    place that they actually encourage and allow for that
    restoration work. So whether it is with air quality----
        Mr. Schrader. But EPA is going the opposite way, obviously.
    How aggressive are you in talking to Ms. Jackson and company
    over there?
        Mr. Tidwell. Well, we meet with that staff on a variety of
    issues and--whether it is air quality or clean water concerns--
    to be able to offer options about how we can move forward to
    ensure that--of course, we want clean air and clean water but
    to be able to do it in a way that we can do the restoration
    work that needs to occur to prevent some of the long-term
    impacts to either clean air or clean water.
        For instance, the amount of emissions that occur off of
    these large wildfires. We have so many examples now where when
    we go into a forest and we do the restoration work around our
    communities, to do the thinning, to remove a significant amount
    of the large trees and some of the smaller trees, so that when
    a fire burns through an area--and fires will continue to
    occur--that the severity of the wildfire is much less.
        Mr. Schrader. So if I may--I have a limited amount of
    time--I appreciate that. I just ask you to be more aggressive
    and more public in some of your pronouncements to make sure
    that there is a level playing field here within the
    Administration on what is going on.
        My other point: It would seem to me that AFRI and
    Agricultural Research Service are not getting the same play in
    the President's budget. He talks about innovation, excellence,
    education, out-competing the rest of the world, out-innovating
    the rest of the world. During the Recovery Act, there were lot
    of increases that I approved of and research and development
    projects, but ag seemed to fall short. Why is that?
        Mr. Tidwell. I can respond to what we did though the
    Recovery Act, and we had a significant amount of funds that
    went to doing--restoring the forests, both our National Forests
    and on our private lands through our states.
        Mr. Schrader. I am talking about research. I am talking
    about active research, actually.
        Mr. Tidwell. And even within----
        Mr. Schrader. They didn't see the increase the rest of the
    research budgets did.
        Mr. Tidwell. Yes, well, with our research budget, what we
    are focused on is continuing to do the work, whether it is in
    our wood products lab to develop new products that we can use
    to encourage more utilization of wood, to deal with the
    invasives. We currently have the largest research department,
    when it comes to conservation, in the world. So we are just
    continuing that work.
        And we feel that the budget request that we have submitted
    reflects the work that needs to be done to be able for us to
    continue all of our research programs that are essential to be
    able to deal with the threat, whether it is invasives or to
    develop new use of wood products in this country.
        Mr. Schrader. Thank you. I just, again, urge you to be a
    little more aggressive for your share of the pie, if you will.
        I am a little concerned with the Healthy Forest Reserve
    Program. You referred to Oregon's northern spotted owl habitat
    set-asides as a success. It has been, actually, quite the
    opposite, not just on private land but on our public lands. We
    found that the large set-asides of public lands have not
    improved the sustainability or viability of the northern
    spotted owl; and, in fact, they continue to decline. The
    remarks in the audit that this is a success alarmed me greatly.
        Some of the more recent proposals are to actually set aside
    more land. In other words, it did not work the first time; we
    will just double down on failure and see if we can get the same
    result. There has been a lot of documentation that competition
    with other owls is really the main problem. So I would ask you
    to look at that a little bit.
        And, frankly, on the stewardship program, I would urge you
    to look at that as something you can use within the Forest
    Service itself, on Forest Service land, not just private lands
    but national Forest Service lands. Set-aside trusts, programs
    that you talked about, I think that can actually do a great
    deal to break down the barriers between the environmental
    community and the timber community and have healthy forests at
    the end of the day.
        Mr. Tidwell. Thank you.
        Mr. Schrader. Thank you, sir.
        I yield back.
        The Chairman. I thank the gentleman.
        I just want to make Members aware that we have done so well
    taking the 5 minutes I think we will be able to get, with the
    few folks who are here, another round of questions in, if you
    have such.
        At this point, I recognize the gentleman from New York for
    5 minutes.
        Mr. Owens. Thank you, Mr. Chairman. I will be brief. I have
    a cold, and I am having some trouble speaking.
        I don't have a National Forest in my district, but I have
    the Adirondack Park. And we have a number of businesses that
    are developing biofuels and are attempting to move in that
    direction. What I would like to know is, when you look across
    the spectrum of the programs that the Federal Government
    provides, what would be the three programs that you would
    emphasize and like to see funded to enhance the growth of
    biofuels? And is there anyway in which we can direct biofuels
    growth to local delivery? That is allowing this funding to
    deliver that energy to the local communities. Anybody can take
    a shot at this.
        Ms. Canales. Congressman, indeed, the goal and what the
    President and Secretary Vilsack have put forward is that the
    development of these biorefineries would occur throughout the
    United States. Our goal right now is to do four in the next 2
    years, and we are on our way.
        Again, this is new. You know, I describe it as it has not
    been a silver bullet yet in the sense of where these businesses
    and what is going on in our country. But what you have just
    described is exactly the case in the sense of taking advantage
    of what the feedstock would be.
        For example, the one that I mentioned in Florida, is
    relying on agriculture waste. The one in Georgia is relying
    on--he did not want us to use ``woody'' biomass, but it is
    wood. And that would be something that would be in your area as
    well, too. The notion is that these biorefineries can be
    developed and dispersed throughout the United States and can
    benefit and utilize whatever is derived from that region.
        But, also, the important thing about this is that it brings
    in financing that in the past may not have previously existed.
    Because when you do put these projects together it does
    require, not only this loan guarantee but private equity--
    private investment; and that is an important draw for our rural
    areas.
        Mr. Owens. Thank you.
        Mr. Tidwell. If I could add to that, our Community Wood
    Energy Program provides the assistance and the technology to
    communities so that they understand the benefits and the
    options that they may have to be able to develop a proposal so
    they can pursue. And what we are finding is so essential when
    it comes to utilization of biomass or bioenergy is that it is
    the transportation costs that are often the limiting factor.
    And so that the more of these facilities that we can build
    across the country and scale them for what is needed either for
    that community or for that facility, that is where I think
    where we will really start to see the expansion of this
    infrastructure.
        The other key program that we have is our Forest Biomass
    for Energy Program that directs a competitive process for
    research and development to be able to continue to expand the
    knowledge that we currently have with what is working but also
    to be able to continue to provide more efficiencies and how to
    really convert biomass into energy.
        Those are two key programs that I feel that are very
    beneficial, not only the direct benefits to the community but
    also when it comes to the research. It is just essential that
    we continue to move forward to be able to understand how we can
    make these operations more efficient.
        Mr. Owens. Thank you.
        Ms. Canales. If I may add, on the Rural Energy for America
    Program, section 9007, there is an opportunity for a grant for
    feasibility studies so that the first steps can be taken to
    determine is there that viability for that particular type of a
    business, this biorefinery. So there are initial steps. And
    those are first, important investments so that you can get all
    of your information together, including the financing that I
    mentioned that, of course, is critical.
        Mr. Owens. Thank you.
        Mr. Chairman, may I have one additional question?
        The Chairman. Yes.
        Mr. Owens. I also have Fort Drum in my district. I am
    wondering, are you working with DOD at all to see how biomass
    can be utilized to take military installations off the grid and
    enhance national security in that way?
        Ms. Canales. We have entered--the U.S. Department of
    Agriculture has entered into a Memorandum of Understanding with
    the Department of Navy so that there can be what you have just
    described, an opportunity to put together projects. This one
    happens to be related to Hawaii, but it is not limited only to
    that state. We are seeing the sort of initial steps in that
    direction, but it is geared towards trying to get a project
    that would be able to develop new biorefineries so that it can
    go towards aviation fuel and other types of fuel that are being
    used by the military.
        So there is a definite interest, and there has been
    communication to that effect.
        Mr. Owens. Thank you very much.
        I yield back.
        The Chairman. I thank the gentleman.
        With the witnesses' indulgence--we have been pretty
    efficient with everybody's time--I would like to see if there
    is an opportunity for one more questioning round for the
    Members that remain here. I will take the liberty of starting
    that.
        Chief Tidwell--or any of the witnesses can comment--
    recently, Secretary Vilsack announced a new green building
    initiative responding to several Members of this Committee's
    request whether the USDA was going to start using more wood--
    frankly, the original green building material--in its
    buildings, recognize all credible green building rating
    systems, other than just LEED, and invest in research into the
    better use of wood products.
        Real quick, can you give us some idea of where is this
    initiative and what steps you have taken to date following this
    announcement?
        Mr. Tidwell. Following that announcement, I sent a
    directive out to all of our units that, as we move forward with
    any new building construction, renovating facilities, that we
    look first to using wood. It has always been something that we
    always wanted in our facilities.
        In addition to that, we are making sure that everyone is
    aware of the latest developments that are coming out of our
    forest products lab. For instance, they are working on
    developing more of a laminated beam system that can be used
    with some of the smaller diameter wood so that we can encourage
    construction besides single-family homes using wood. In Europe,
    often, they go four, five stories high with wood construction.
    We want to be able to show folks that that is a good
    construction, it is solid, and to be able to actually move
    forward and develop some mills that can actually produce these
    laminated beams.
        And the other thing is just, to move forward, that we want
    our buildings to be, of course, certified, be energy efficient,
    but to be able to work with the certification programs out
    there so that they fully recognize the benefits of wood. I
    agree with you. It is the original green building material.
        The Chairman. Thank you.
        As I prepare myself for the farm bill, one of the things
    that was created in the 2008 Farm Bill--and I haven't really
    seen anything on it--the Forest Service, as part of the farm
    bill there was a branch created, International Forestry, and I
    really know nothing about that. Can you give us a quick
    snapshot of what that is, what it has become, what it does?
        Mr. Tidwell. Our international program is a relatively
    small staff. But what they do, they work with other countries.
    We are currently working with 88 other countries to help
    countries understand the benefits of sustainable forestry, to
    deal with the illegal logging so that there is less impact on
    our markets, to be able to deal with invasives, to be able to
    make sure that other countries understand the problems with the
    wood material they are shipping to this country or any country,
    about the issue with invasives, to be able to work together.
        The other key program they have is dealing with migratory
    birds, to make sure that countries are providing habitat for
    birds that migrate out of this country, that, no matter what
    habitat we provide here, if the birds head south, for instance,
    and there is no habitat there, we are going to loose those
    populations, and then we will have to continue to deal with
    those issues in this country.
        Those are kind of three of the main programs that we are
    working on right now. The majority of the funding for our
    international programs comes from USAID and through the State
    Department. But it is really just essential work that we are
    doing that really has direct benefits not only to the markets
    but direct benefits to sustainable forestry worldwide.
        The Chairman. That was helpful. Thank you.
        Staying on the international perspective, as part of the
    last farm bill there was a soft wood lumber imports provision
    within the farm bill that looked at establishing an agreement
    implementation that required declaration of lumber imports and
    fees paid. Do you know the status of that initiative?
        Mr. Tidwell. Mr. Chairman, I am not. I will have to get
    back to you on that one.
        The Chairman. That is fine. I would appreciate it if you
    would do that.
        I wanted to--I can't hardly go through a farm bill hearing
    without at least touching on the Allegheny National Forest at
    least once. That is where I am from. I just love the place.
        This one has to do--as you know, the ANF is in the
    district, and oil and gas production was certainly critically
    important to my constituents in the communities well before it
    was a National Forest in 1923. And despite attempts by some to
    block this production over the years, the bottom line is that
    the mineral rights in the forest--I believe it is over 93
    percent, 92 percent--are privately held.
        In recent weeks, I have been hearing a lot of concern from
    my constituents about the unreasonably long periods of time
    before the Forest Service issues notices to proceed. These
    notices should be generated within 60 days, but they have
    grown--and I have actually a quote from an article I will
    submit for the record by a county commissioner--from 4 to 7
    months as one of the county commissioners said.
        [The information referred to is located on p. 529.]
        The Chairman. In addition to the delays, the Forest Service
    has also issued a letter to Shell Western Exploration and
    Production which prohibits any ANF groundwater for the
    company's natural gas drilling and production operations.
        Can you explain the delays of notices to proceed and why
    the Forest Service has taken this change after a pretty good
    partnership since 1923? All of a sudden, in 2011, we have this
    turnaround prohibiting the use of groundwater.
        Mr. Tidwell. With the processing of the permits, we are
    actually making progress. We are not to where we would like to
    be as far as the length of time. But I think even a year or 2
    years ago it was taking more like 5 to 5\1/2\ months. We are
    now down to an average of 4 months. We processed 690 permit
    applications last year.
        One of the things that is occurring is the number of
    applications is significantly increasing. So it is one of the
    things we are going to have to look at to be able to find a way
    to add some more capacity to that force to be able to deal with
    this influx of additional applications.
        The issue with groundwater is not part of the process
    application. It is more of a concern about the groundwater and
    the quality of that groundwater. And so it is one of the things
    we need to continue to move forward with and look at some other
    options, or to make sure that we are providing that there won't
    be impacts to the quality of that groundwater.
        This is a new issue that has recently come forward that we
    weren't dealing with with the previous permits. It is one where
    we are going to have to work with the industry and work with
    the applicants to be able to find a way to be able to move
    forward with those.
        The Chairman. I also encourage you to work with other
    partners and stakeholders, the Department of Environmental
    Protection in Pennsylvania, agencies like the Susquehanna River
    Basin Commission, who I think really have their arms wrapped
    around the water issue and have a lot of confidence in it.
        And, finally, I will close with just a request. This is a
    joint request. My colleague from Florida was going to try to
    make it back, so a joint request from Mr. Southerland and
    myself.
        If you could have some folks at the Forest Service take a
    look at the Apalachicola National Forest and, frankly, report
    back on why that Florida National Forest is only really at what
    appears to be 15 percent of production of the actual forest
    plan for millions of board feet harvesting. I think that would
    be very helpful. I know the gentleman from Florida would
    appreciate it; and, obviously, it is something I would be
    interested in looking at myself.
        And, with that, I recognize the gentleman from Oregon for
    the final line of questioning here.
        Mr. Schrader. I appreciate that, and I will try not to keep
    everyone.
        You mentioned--Chief Tidwell, you mentioned at one point
    the need to do restoration work on a landscape scale to really
    be effective and deal with it, I assume, on a watershed-type
    basis, that sort of thing. And you also mentioned dealing with
    it in terms of long-term contracts to provide, I assume, some
    certainty; and your comments were probably more geared toward
    private landowners.
        Why couldn't we do the same thing on public forestland? Why
    couldn't we have that? Are we pursuing that at all? I would be
    interested in who in your agency deals with that.
        Mr. Tidwell. Yes, we actually are doing that on the
    National Forest to take these--it is more of a landscape scale
    approach. And, ideally, when we even do our assessment, it also
    factors in the work that is being done on adjacent private
    forested lands, to be able to look at it together. But there is
    just no question, we have to look at much larger areas than we
    ever have in the past, and we can have some opportunities
    there.
        You know, in your state--I will use an example down in
    areas of Arizona we have an initiative to look at four forests,
    and we are doing the analysis on 750,000 acres with one
    environmental impact statement. That would allow us to be able
    to go forward and do work over at least the next 10 years. That
    is an example of what we need to do in all of our states and
    across the country.
        And I will tell you today we have the support to do this
    work. A lot of these initiatives are being strongly supported
    by the environmental community. Our conservation groups are
    there with the industry. They recognize that we need to be
    doing more of this work on the landscape.
        That is why I remain optimistic that we are going to be
    able to move forward and do significantly more work on the
    landscape, produce more jobs, produce more wood, not only for
    our mills but also for other biomass uses.
        Mr. Schrader. I appreciate that, and if there is an
    opportunity I would love to get a visit from somebody in your
    office on what you are doing and how we might work with you
    more closely in Oregon on that.
        The last comment, regards outcomes. I am a big outcome
    measure fan. We are spending a lot of money in these budgets. I
    appreciate the level of contacts you are making with different
    private landowners and acres treated and this and that, but I
    would like to see, if it is at all possible, that the Forest
    Service set some targets. Given the amount of money we have, I
    think it is an important criteria. Given the amount of money we
    have or don't have, here is how much land we can effectively
    treat or not treat at any given time.
        And here are our goals: This much reduction in pest
    infestation in an acreage given this amount of money, talking
    about wildfire suppression, doing better in terms of acres
    burned or what have you, given the type of fire severity year
    it might be. For water quality, if we are investing in all of
    these things to reduce runoff, what sort of improvements are we
    getting in these local areas?
        A lot of times I think we concentrate on lots of inputs and
    lots of outputs, but we don't get down to what outcomes we are
    actually trying to get at. And I would be very interested in a
    discussion with your agency about that.
        Mr. Tidwell. We will be glad to come up and visit with you
    and provide not only the scale of the issues we are dealing
    with but also what we expect we can accomplish in Fiscal Year
    2011, what we expect to accomplish in Fiscal Year 2012, and
    also be able to show what we actually accomplished. Because we
    do have targets that we set with all of our programs every
    year. Those are tracked throughout the year, and at the end of
    the year that is how we basically determine our level of
    performance. And we would be glad to show that information to
    you.
        Mr. Schrader. Thank you very much. I appreciate you all
    coming here.
        I yield back.
        The Chairman. I thank the gentleman.
        I want to thank our witnesses for being here, joining us
    today, your preparation and your testimony and, frankly, your
    leadership within the agencies that you lead and your level of
    collaboration and teamwork with this group. We have a lot of
    work ahead of us as we look at the 2012 Farm Bill and the
    specific titles within that farm bill that are within the
    responsibility of this Subcommittee. So thank you so much for
    all of that.
        Under the rules of the Committee, the record of today's
    hearing will remain open for 10 calendar days to receive
    additional material and supplementary written responses from
    the witnesses to any question posed by a Member.
        This hearing of the Subcommittee on Conservation, Energy
    and Forestry is adjourned.
        [Whereupon, at 11:29 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

    Submitted Article by Hon. Glenn Thompson, a Representative in Congress
                               from Pennsylvania
    The Times Observer
    Driller says USFS not living up to ruling
    County commissioners discuss court filing
    July 19, 2011
    By Brian Ferry
        According to oil and gas developers, the U.S. Forest Service is
    taking too long to process proposals for development on the Allegheny
    National Forest.
        In a document filed Friday with the U.S. District Court of Western
    Pennsylvania, the Pennsylvania Independent Oil and Gas Association
    (PIOGA) asked why the Forest Service should not be held in contempt of
    court.
        ``USFS is in violation of this court's Dec. 15, 2009, order
    requiring USFS to process oil and gas development proposals in the ANF
    in accordance with procedures established in United States v. Minard
    Run Oil Co.,'' according to the document. ``USFS has failed to comply
    with the Minard Run procedures and has instead engaged in a pattern of
    interference with the lawful efforts of PIOGA members to develop their
    ANF oil and gas estates.''
        Warren County Commissioner John Bortz offered testimony in the
    hearings that led to Judge Sean McLaughlin's December preliminary
    injunction against a settlement that had the effect of dramatically
    decreasing new drilling on the forest.
        Bortz brought up the new development at the commissioners' work
    session on Monday.
        ``There are already rules on the books as to how this works,''
    Bortz said.
        In the past, the Forest Service set a period of 60 days as a
    reasonable time for addressing areas of concern and issuing notice to
    proceed.
        ``That 60 day period has grown from 4 months to 7 months,'' Bortz
    said Monday. The delay ``impacts the developers' ability to create and
    sustain jobs'' as well as to access the property they have rights to.
        The length of time isn't the only problem PIOGA members are
    claiming.
        ``There has been a long-standing history that oil and gas producers
    would have access to surface water'' necessary for development
    operations, Bortz said.
        ``In addition to the increasingly lengthy delays in USFS's
    processing of drilling proposals, USFS has issued a letter prohibiting
    SWEPI LP (Shell Western Exploration and Production), a PIOGA member,
    from using any ANF groundwater for SWEPI's natural gas drilling and
    production operations,'' according to the document. ``USFS has refused
    to negotiate with SWEPI at all . . . when such water use by oil and gas
    developers has been commonplace for decades in the ANF.''
        The right to ``drill for and use water'' from the property ``for
    the purpose of operating the said premises for oil and gas . . .'' was
    reserved when the title to the mineral estate changed hands, according
    to the document.
        The wells in question are Marcellus Shale natural gas wells,
    according to the document.
        Such wells generally require millions of gallons of water for
    hydraulic fracturing.
        The amount of water is not an issue, according to the document,
    because the ``Kane water-flood operation in the ANF uses, and has used
    for the past 4 decades, 10,000 barrels of water a day, year round, from
    ANF groundwater wells. Such longstanding, large-scale operations
    undermine any USFS assertion that the use of ANF groundwater by mineral
    estate owners is `unprecedented.' ''
        ``Minard Run forbids USFS, the owner of the subordinate surface
    estate, from imposing such a burdensome condition on SWEPI, the owner
    of the dominant mineral estate,'' according to the document. ``Recent
    actions and inactions by USFS have become so egregious that PIOGA is
    compelled to seek further relief from this court.''
        ``USFS has violated this court's order . . . and should be found in
    contempt,'' according to the document.
        ``It's going to be interesting to see how that plays out,''
    Commissioner Terry Hawk said.
        ``The outcome of this does hold in the balance jobs in Warren
    County,'' Bortz said.
                                     ______

                              Submitted Questions
    Response from U.S. Department of Agriculture
    Questions Submitted By Hon. Glenn Thompson, a Representative in
            Congress from Pennsylvania
        Question 1. Rural Energy for America Program (REAP): The Rural
    Energy for America Program (REAP) assists small rural businesses and
    producers with renewable energy and energy efficiency projects.
    Recently, USDA included ethanol blender pumps as an eligible project?
    How do blender pumps fit in with the goals of the program? Can blender
    pumps be financed through other USDA programs?
        Answer. The agency clarified that flex-fuel delivery systems,
    including blender pumps, are one of many eligible purposes under REAP.
    The statute makes it the program's responsibility to promote biofuel
    infrastructure. Blender pumps are a critical part of that
    infrastructure as the final step necessary to reach the consumer. No
    separate funds are designated for flex-fuel projects. REAP is a
    competitive grant and loan guarantee program in which renewable energy
    systems and energy-efficiency improvement projects must compete on
    their own merits against eligible projects for available funds. REAP is
    not the only RBS program that can fund blender pumps; the Business and
    Industry Guaranteed Loan program also has blender pumps as an eligible
    activity.

        Question 2. Rural Energy for America Program (REAP): Most Rural
    Energy for America (REAP) projects seem to be located in the Midwest.
    What challenges are preventing the REAP program from being implemented
    nationally?
        Answer. While the REAP program has been largely utilized by
    applicants in Midwest states, it is a national program. Changes made in
    the NOFAs for 2008, 2009, and 2010 and subsequent REAP Interim Rule
    have modified scoring and project criteria. These changes, as well as
    the implementation of State allocations, were made to increase the
    diversity and geography of the projects selected, and we have already
    seen a positive change in the geographic distribution of REAP awards.
    In the first 3 years of the program, 24 states received awards for
    2003, 27 for 2004, and 32 for 2005. In the most recent 3 years (not
    counting 2011, which is still being processed), 41 states received
    awards for 2008; 49 states as well as Puerto Rico and the Western
    Pacific received awards for 2009; and 48 states and Puerto Rico
    received awards for 2010.

        Question 3. Bioenergy Program for Advanced Biofuels (Section 9005):
    Could you identify what types of feedstocks are being used in the
    biofuels facilities that are receiving payments in the Bioenergy
    Program for Advanced Biofuels?
        Answer. The types of feedstocks used by facilities receiving
    payments for FY 2010 include:

       Agricultural waste seed

       Agricultural crops (sorghum, wheat starch)

       Animal fat

       Dairy waste/manure

       Ethanol (from other than corn kernel starch)

       Fatty acids

       Food processing waste

       Grasses

       Greases (white, yellow)

       Mixed substrates waste

       Municipal waste

       Oils (canola, crude corn, cottonseed, glycerin, palm,
            soybean, sunflower seed, waste or used vegetable, other)

       Poultry fat

       Tress (pine, other)

       Wood waste (sawdust, chips, pallets)

        Question 4. Duplication: During the conservation title audit we
    learned that several conservation programs can fund energy efficiency
    projects. What programs outside of the energy title does USDA
    administer that may fund renewable fuel projects or renewable energy
    and energy efficiency projects?
        For example, can the Business and Industry (B&I) loan program or
    Value-Added Grant program accomplish some of the same goals as many of
    the energy title programs? If not, what changes could be made to
    existing programs outside of the energy title to accomplish the same
    goals?
        Answer. There are four other programs within USDA under which
    certain types of energy projects may be financed. These are the Value-
    Added Producer Grant (VAPG) program, Community Facilities, Business and
    Industry Program, and the Environmental Quality Incentives Program
    (EQIP). FSA farm loans could also be used for some of the projects, and
    Forest Service also has some authorities for energy related projects.
        The project eligibility category related to renewable energy under
    the VAPG program was set by the 2008 Farm Bill and states that a Value-
    Added Agricultural Product is ``a source of farm- or ranch-based
    renewable energy, including E85 fuel.'' Thus, the VAPG program can
    provide funds to a limited set of energy-related projects where an
    agricultural commodity is used to generate renewable energy on a farm
    or ranch owned or leased by the independent producer that produces the
    agricultural commodity. On-farm generation of energy from wind, solar,
    geothermal, or hydro sources are not eligible for VAPG.
        Because of the differences in eligible entities and eligible
    projects, there is little overlap with the Community Facility (CF)
    program. Eligible entities under the CF program are: public bodies
    (e.g., municipalities, counties, districts), nonprofit corporations and
    associations, and Federally recognized Indian tribes in a rural area.
    Eligible projects are generally activities associated with the
    construction, enlargement, extension, or improvement to ``essential
    community facilities providing essential services.'' Essential
    community facilities are ``those public improvements requisite to the
    beneficial and orderly development of a community operated on a
    nonprofit basis.''
        While some entities eligible for the CF program would also be
    eligible under the Section 9003 program, the type of projects funded
    under the Section 9003 program would not likely qualify as an eligible
    CF project. Further, Community Facilities is a grant program, while the
    Section 9003 is a guaranteed loan program, and grants would be an
    insufficient source of funds for the construction of biorefineries.
    Thus, there is little likelihood of overlap between these two programs.
        For the Section 9004 program, the eligible entity must be a
    biorefinery. Further, the types of projects that qualify for the
    Section 9004 program would likely not qualify for the CF program. Thus,
    there is no overlap with the CF program.
        While some entities might be eligible for both the CF program and
    the Section 9005 program, there would be no overlap because the CF
    program would not make any payments for the production of advanced
    biofuels.
        For the Section 9007 Program, for the renewable energy system and
    energy efficiency improvement portion, the eligible entities are
    agricultural producers and rural small businesses. These entities are
    also eligible for renewable energy system feasibility studies. Given
    the difference in eligible entities, there is little, if any, overlap
    with the CF program. For energy audits and renewable energy development
    assistance under Section 9007, eligible entities include units of
    state, tribal, and local governments, land grant colleges and
    universities, rural electric cooperatives, public power entities, and
    instrumentalities of state, tribal, and local governments. Thus, there
    is some overlap in eligible entities. However, it is unlikely that
    energy audits or Renewable Energy Development Assistance (REDA) would
    meet the project eligibility requirements for CF.
        The Business and Industry (B&I) Program provides guaranteed loans
    to a wide range of projects, including energy projects. There have been
    a number of projects financed under the B&I Program that may have been
    able to have been financed under REAP if the assistance requested did
    not exceed 75 percent of eligible project costs.
        The NRCS has traditionally offered financial assistance for a
    variety of conservation practices that also promote energy conservation
    as a secondary benefit, such as reduced tillage. NRCS initially
    expanded these energy efforts offering assistance for on-farm energy
    audits. Currently, NRCS is retooling its conservation practice
    standards and adding new standards with an increased emphasis on energy
    conservation implementation. In 2012, NRCS will offer financial
    assistance for many items identified in the on-farm energy audits such
    as lighting, ventilation, airflow and milk harvesting.
        Beyond these few programs, REAP does not overlap or duplicate of
    any other USDA program.

        Question 5. Biomass Crop Assistance Program: The intent of the
    Biomass Crop Assistance Program (BCAP) is to help producers establish
    dedicated energy crops. To date, how many acres of dedicated energy
    crops have been created from the program? How much has been spent
    through BCAP to date to get these acres?
        Answer. As of August 22, 2011, nine project areas have been
    designated, spanning across 168 counties in 10 states (AR, CA, KS, MO,
    MT, OK, OH, OR, PA, and WA).
        These nine project areas target the sign up of 117,184 acres in FY
    2011 alone. Overall the project sponsors requested that these nine
    project areas target a full-enrollment of 834,000 acres.
        Approximately, 17,000 acres have been signed up since the sign ups
    began on:

       May 9, 2011 (Project Area 1);

       June 20, 2011 (Project Areas 2 through 5); and

       August 8, 2011 (Project Areas 6 though 9).

        In addition, approximately 14,000 acres have been offered and are
    in the phase of having conservation plans developed before approval
    occurs.
        Approximately $82 million has been allocated for the sign up of
    acres in these nine project areas. The $82 million supports production
    over a period of five year for herbaceous crops and nine years for the
    woody crop. The allocations are as follows:

                       Project Area Allocation Break Down

    Project Area 1 (sponsor Show Me Energy Cooperative)          $18 million
    Project Area 2 to 5 (sponsor MFA Oil Biomass &            $18.25 million
     Aloterra Energy)
    Project Area 6 (sponsor Beaver Biodiesel)                   $.37 million
    Project Area 7 (sponsor Abengoa Bioenergy)                  $6.2 million
    Project Area 8 (sponsor AltAir Fuels)                        $20 million
    Project Area 9 (sponsor ZeaChem Inc.)                     $18.82 million
                                                           -----------------
      Total                                                   $ 81.6 million

        The nine project areas target the establishment of four different
    energy crops: native grasses, miscanthus, camelina, and hybrid poplar.
        The intended conversion products are as follows: jet fuel drop-in;
    biobased products; bio-ethanol; biodiesel; and fuel pellets.

        Question 6. Biomass Crop Assistance Program: When creating the BCAP
    program in the 2008 Farm Bill, Congress set two primary components. The
    first was establishment of a new supply of energy crops and annual
    payments to farmers to grow these perennial biomass crops. The second
    allows matching payments to producers and forest landowners to offset
    the costs of collecting, harvesting, storing and transporting of
    eligible biomass materials. From a fiscal standpoint, the program was
    initially scored at $70 million over 4 years, yet the actual spending
    in FY 2010 was over $240 million. Can you talk more on the differences
    in the way the program was initially administered to the way it is
    currently? Has USDA followed the purposes of BCAP that Congress
    initially set forth?
        Answer. USDA's administration of BCAP is in accordance with the
    statutory requirements set forth by Congress. The intent of BCAP is to
    provide a financial incentive to farmers and forest landowners to
    produce new supplies of biomass or to collect existing supplies of
    biomass for the purpose of heat, power, bio-based products or liquid
    biofuels. For new biomass, BCAP provides establishment and annual
    payments to producers. For the collection and delivery of existing
    biomass, BCAP provides matching payments to producers.
        Initial funding for the matching payment component of BCAP began
    with a Notice of Funding Availability (NOFA) operating from June 11,
    2009 to February 3, 2010, which, as directed by statute, provided that:

       ``The Secretary shall make a payment for the delivery of
            eligible material to a biomass conversion facility to a person
            with the right to collect or harvest eligible material . . . at
            a rate of $1 for each $1 per ton provided by the biomass
            conversion facility in an amount equal to not more than $45 per
            ton.'';

       ``The Secretary shall use the funds, facilities and
            authorities of the Commodity Credit Corporation, including the
            use of such sums as are necessary, to carry out this
            section.'';

       ``The term `biomass conversion facility' means a facility
            that converts or proposes to convert renewable biomass into
            heat, power, biobased products or advanced biofuels'';

       ``The term `eligible material' means renewable biomass'';

       ``The term `renewable biomass' means . . . any organic
            matter that is available on a renewable or recurring basis from
            non-Federal land . . . including . . . trees and . . . wood
            waste and wood residues.''

        The NOFA generated important information from stakeholders on
    issues not fully addressed in statute, including when BCAP incentives
    are successful, when they may not be, or when incentives require
    additional policy clarifications. In light of funding limitations
    enacted in July 2010, USDA set tougher restrictions by which materials
    qualify for matching payments. These conditions, outlined in the final
    BCAP regulation on October 27, 2010, are that eligible materials
    qualify for payment based on the sequence of collection, harvest,
    storage, transportation and delivery; meaning the eligible material
    must be collected or harvested directly from the land, before transport
    and delivery (not ``collected or harvested'' after transport and
    delivery by separating from a higher value material); must be collected
    or harvested in accordance with an approved conservation, forest
    stewardship or equivalent plan; and if a woody eligible material
    outside of BCAP project areas it must also be a byproduct of preventive
    treatments removed to reduce forest fire threats, reduce disease or
    insect infestation, or to restore ecosystem health, and cannot have a
    pre-existing market. Of course even if the material is eligible,
    matching payments may not be available if other program needs exhaust
    the available funding.
        As reflected in the cost-benefit analysis conducted by Farm Service
    Agency (FSA) and issued with the publication of the final BCAP
    regulation, these conditions substantially reduce future outlays on
    matching payments compared to the expenditure baseline of FY 2010.

        Question 7. Forest Resource Coordinating Committee: The 2008 Farm
    Bill established the Forest Resource Coordinating Committee (FRCC) to
    coordinate nonindustrial private forestry activities within the
    Department of Agriculture and with the private sector in order to
    effectively address national priorities for private forest
    conservation, clarify individual agency responsibilities and provide
    advice on the allocation of Cooperative Forestry Assistance Act funds.
    Discussions on and off the Hill are underway regarding the next farm
    bill; yet, the FRCC has not yet been established. When does USDA intend
    to stand up the FRCC?
        Answer. To be clear, the 1990 Farm Bill created the FRCC, it has
    been operational in the past, and it was amended by the 2008 Farm Bill.
    Applications have been received to fill vacant positions on the
    committee. Upon completion of background checks, members will be
    appointed to the committee by the end of the calendar year.

        Question 8. Partnering with NRCS on Conservation Programs: Clearly,
    while the USFS and state forestry agencies don't directly implement the
    farm bill's conservation programs, you play an important role in
    providing basic landowner education, outreach, and technical assistance
    that helps landowners implement conservation practices. In your
    opinion, do you think there are areas for improvement, where NRCS could
    work better with the USFS and state forestry agencies to implement
    these programs, especially in light of the fact that forestry is still
    only a small component of many of the conservation programs?
        Answer. Since enactment of the 2008 Farm Bill, with the
    coordination of the Joint Forestry Team, the Forest Service, NRCS,
    State Foresters and Conservation Districts have successfully worked
    together to better assure that landowner assistance program efforts and
    investments are coordinated and complementary. Several states have
    entered into agreements that clearly define complimentary partner
    agency roles and this has resulted in more efficient use of resources,
    better customer service and more impact on the ground. It has become
    especially clear that much more can be accomplished where NRCS
    conservation program cost-share dollars are focused on forest
    management practice implementation, and complemented with Forest
    Stewardship Program forestry expertise and planning assistance
    delivered through state forest agencies and their already existing
    network of partners and cooperators. Through the Forest Stewardship
    Program, state forestry agencies can continue to function as the
    technical experts with respect to forestry, enabling more landowners to
    qualify for and participate in NRCS cost-share programs such as the
    Environmental Quality Incentives Program (EQIP) and assuring quality
    forest management projects are being funded.

        Question 9. Delivery of Technical Assistance: In the last farm
    bill, some changes were made to streamline the delivery of technical
    assistance under the conservation programs, and I believe the intent
    was to allow third-parties, like state forestry agencies and consulting
    foresters, to help with the delivery of technical assistance. Do you
    see progress on this issue? Do you think we are using these foresters
    as much as possible in efforts to improve efficiencies and streamline
    the programs?
        Answer. Much progress has been made on this issue. The 2008 Farm
    Bill recognizes Forest Stewardship Plans as meeting applicant
    management plan requirements for EQIP. By operating under the Forest
    Stewardship Program, state service foresters and private consultants
    are not required to become NRCS Technical Service Providers (TSPs) in
    order to provide forestry planning expertise. In 2011, the Forest
    Service, National Association of State Foresters, NRCS and the American
    Tree Farm System adopted a national Forest Stewardship Plan template
    that is recognized by all parties as fulfilling the management plan
    requirement for forest landowner access to a variety of assistance and
    incentive programs, including internationally recognized third party
    certification. In this way, the network of forestry expertise that is
    supported by the Forest Stewardship Program is more fully leveraged.
    The Forest Stewardship Program is serving increasingly as a ``gateway''
    through which landowners can gain access to a variety of forestry
    assistance and programs including USDA cost-share, state tax abatement,
    forest certification and emerging ecosystem service and renewable
    energy markets.

        Question 10. Beginning Forest Owners: In the last farm bill,
    several programs were included to address the education and assistance
    needs of beginning farmers and ranchers, helping them understand good
    farming practices, how to set up their businesses, etc. Do you see a
    similar need for forest owners? Are there a lot of beginning forest
    owners as well?
        Answer. Of the 11 million forest owners in the U.S., 1.5 million
    are over 75 years of age and control 46.9 million acres of forest. In
    the next 10-15 years, we can expect these 46.9 million acres (20% of
    all the private forest land in the U.S.) to be passed on to heirs, be
    sold to developers, or change hands in some other way. This means that
    beginning landowners will likely increase in number and will continue
    to need help with forest management through programs like Forest
    Stewardship.
        This also means that succession planning is very important.
    However, we still see families struggling to understand tax laws and
    estate planning and it is clear that more continued assistance is
    necessary for this essential planning process. There are a number of
    educational programs that help landowners with potentially difficult
    discussions with their families about passing land to heirs.

        Question 11. Forest Legacy Program: There are several programs that
    have not been funded within the Forest Legacy Program. Given the period
    in which these programs have not been funded, do you see the necessity
    in keeping them or does this give us some leeway in order to
    consolidate programs without interrupting program delivery?
        Answer. The Forest Legacy Program (FLP) is substantially different
    from the other farm bill land easement programs, and consolidation of
    programs, if it included FLP, would substantially alter FLP program
    delivery. FLP has different primary partners, uses different land
    protection tools, uses different financial assistance mechanisms,
    selects projects through a different and nationally consistent process,
    and has different program requirements. In addition, the Forest Service
    has substantial oversight of FLP and it fits very well within the
    mission of the agency.
        FLP is implemented through state agencies, with only governmental
    units holding title to the land or conservation easements. This
    relationship allows the Forest Service to have substantial oversight of
    not just completing projects, but ensuring the forests are conserved
    and well managed.
        Through FLP, land is protected by both fee-simple land acquisition
    and permanent conservation easements. In the other farm bill land
    protection programs, land is protected through short-term contracts or
    permanent conservation easements, and not fee-simple land acquisition.
        FLP projects are selected through a two-step competitive process
    resulting in high quality projects that are supported locally and are
    nationally significant. First, states identify and rank projects
    working with the State Forest Stewardship Coordinating Committees.
    Second, a national panel evaluates and ranks each project based on
    national criteria--importance, threatened, and strategic. The result is
    a list of ranked projects included in the President's budget request.
    Consolidating FLP with other farm bill programs would eliminate this
    well supported, transparent process.
        In the 2008 Farm Bill, states were required to complete state-wide
    forest assessments and resource strategies to identify the important
    forests within the state, and threats to those forests. These forest
    assessments are critical for integrating Cooperative Forestry
    Assistance Act programs as well as focusing the State and Private
    Forestry funding resources into well defined priority areas. Through
    these state assessments, FLP is integrated with the other Cooperative
    Forestry Assistance Act programs. Consolidating FLP with other farm
    bill programs would most likely remove the integration between FLP and
    these forest assessments and the other Cooperative Forestry Assistance
    Act programs.

        Question 12. Mr. Tidwell, as you may be aware, 35 years ago the EPA
    adopted a regulation which defined forest management, including forest
    roads as ``nonpoint'' sources to be managed through state best
    management practices. For 35 years states have worked with stakeholders
    on all sides to develop programs that meet local needs The 9th Circuit
    recently overturned this regulation and ruled for the first time that
    forest roads are point sources and using them for timber harvest
    requires a Federal permit.
        What are the challenges that could arise from a Federal permitting
    program?
        Describe any potential negative environmental effects associated
    with these challenges.
        Answer. There are many unknowns related to the character and
    requirements of a potential ``Federal permitting program ''for forestry
    roads. Depending upon the actual requirements of the permit program,
    obtaining permits could be a substantial burden for the Forest Service
    and other public or private forest landowners. On private working
    lands, new regulatory requirements could increase the cost of forest
    ownership. On National Forest System lands, permitting requirements
    could result in only marginal increases in water quality-related
    benefits due to the current use of Best Management Practices (BMPs) on
    such lands.
        If the regulatory requirements of a new permitting process were
    substantial, increased costs could serve as a disincentive for private
    forest landowners to maintain forest cover and result in loss of
    forests to non-forest uses (e.g., commercial or residential
    development) which have potentially far greater impacts to water
    quality. Additionally, depending on the nature of the regulatory
    system, permitting requirements would require the Forest Service to
    devote personnel time, resources and funds to satisfying permitting
    requirements. This could divert limited resources away from the Forest
    Service's management activities on National Forest System lands.
    Finally, there could be large variations among the permits developed by
    the various permitting authorities, which could mean different
    requirements for both permitting and road management in different
    states. This variability amongst permits would further increase the
    costs and personnel time to the Forest Service of managing forest roads
    and complying with a permit program.
        On public lands, the Forest Service currently implements BMPs and
    associated monitoring to limit the environmental impacts associated
    with logging road utilization, in particular those impacts related to
    water quality. The BMP approach has been successful in addressing water
    quality concerns and controlling the dispersed and relatively low
    impact sources of non-point source pollution associated with forestry
    activities. Any permits developed for forestry roads would likely
    require the implementation of the same BMPs which are already being
    implemented by the Forest Service on National Forest Systems lands.
    Thus, depending on the regulatory regime, permit requirements may not
    provide any additional benefits to water quality nor improve the
    environmental outcomes.
    Questions Submitted By Hon. Tim Holden, a Representative in Congress
            from Pennsylvania
        Question 1. Tidwell: I understand that the programs contained in
    the forestry title of the farm bill have permanent authorizations. Can
    you tell me if there is anything that would need to be done, any
    authority, that would need to be considered for inclusion in the next
    farm bill debate? Or is it your opinion that we would not need to
    include a forestry title in the next farm bill given the permanent
    authorizations?
        Answer. A Forestry Title in the next farm bill could further define
    and strengthen the complementary relationship between the Forest
    Service and NRCS to support successful participation of private forest
    landowners in NRCS and other USDA conservation cost-share programs,
    particularly by reaffirming the important role the Forest Stewardship
    Program plays in facilitating technical assistance for private
    landowners not only in managing their forest lands, but also in
    implementing farm bill conservation programs.

        Question 2. Tidwell: As most of us here know, the Energy
    Independence and Security Act contained a definition of biomass that
    caused many of us here in Congress some concern. That definition does
    not, among other things, allow the removal of woody biomass on Federal
    lands. Are there any studies or reports on how much woody biomass is on
    Federal lands? Do you currently remove woody biomass from Federal
    lands? If so, how much do you remove and how do you do it? Is it an
    invasive process?
        Are there any studies or reports on how much woody biomass is on
    Federal lands?
        Answer. There are several key studies and reports on how much woody
    biomass is on Federal lands as well as other forest lands.

        1. The Forest Inventory and Analysis Program (FIA) of the USDA
            Forest Service (Smith and others 2004). The plot data indicate
            current stand conditions on all timberland, including all
            Federal lands in the U.S. These analyses are based on the
            interim updated FIA inventory of the 2000 Resources Planning
            Act (RPA) projections (USDA Forest Service 2007). The website
            link is: http://fia.fs.fed.us/.

        2. The Department of Energy/USDA Billion-Ton Report examines the
            nation's capacity to produce a billion dry tons of biomass
            resources annually for energy uses without impacting other
            vital U.S. farm and forest products, such as food, feed, and
            fiber crops. The study provides industry, policymakers, and
            agricultural community with county-level data and includes
            analyses of current U.S. feedstock capacity and the potential
            for growth in crops and agricultural products for clean energy
            applications. The biomass resources identified in the report
            could be used to produce clean, renewable biofuels, biopower,
            or bioproducts. USDA Forest Service lands are included in the
            analysis except for biofuel production since it is disallowed
            under EISA, 2007. The website link is:
            http://energy.gov/articles/department-energy-releases-new-
            billion-ton-study-highlighting-opportunities-growth.

        3. The USDA Forest Service has completed 20 coordinated resource
            offering protocol (CROP) studies across the agency. CROP was
            developed by Oregon-based Mater Engineering for the U.S. Forest
            Service to increase investment in Federal forest landscapes in
            bio-based projects through inter-agency coordination and
            levelization of sustainable annual biomass offering. The CROP
            protocol requires Federal resource managers within a defined
            landscape to (a) specifically identify biomass removal they
            believe they can perform each year for the next five years (not
            what's inventoried); (b) coordinate their 5 year resource
            offering with other Federal agencies included in the same CROP
            landscape; and (c) levelize the supply offering within the CROP
            landscape to provide higher risk reduction to both land
            managers and investors. The website is: www.crop-usa.com.

        Do you currently remove woody biomass from Federal lands? If so,
    how much do you remove and how do you do it?
        Answer. Yes, we remove woody biomass from Federal lands. USDA
    Forest Service utilizes the residual woody biomass from forest health
    restoration, hazardous fuels reduction, insect and disease infected
    areas, wildfires, wildlife habitat improvement and watershed
    restoration activities.
        The annual target is 2.7 million green tons, which we have exceeded
    each year. The removal of woody biomass is a mechanical method
    utilizing small to medium sized specialized harvesting equipment
    adapted for small diameter trees. The low to no value of woody biomass
    dictates this type of mechanical treatment for economic efficiency.
    This generally occurs after a timber sale, salvage, stewardship
    contract or pre-commercial thinning operation. (See following table).

                           Table for Annual Woody Biomass Utilization Million Green Ton Target
    ----------------------------------------------------------------------------------------------------------------
                       FY 2004      FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
    ----------------------------------------------------------------------------------------------------------------
           Target           1.7         1.7         1.7         2.7         2.7         2.7         2.7         2.7
             WB-E           1.7         1.7         1.7        2.91        2.34        3.12        3.31
            WB-SC                                                                                  0.74
    ----------------------------------------------------------------------------------------------------------------
    Target--Is the annual national green ton target.
    WB-E--Woody Biomass for Energy Purposes.
    WB-SC--Woody Biomass from Stewardship Contracting.

    Green Tons Accomplishment

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The mechanical treatment of the residual is not an invasive
    process. In general, it actually helps the future of the existing trees
    to have better growing conditions in the form of increased sunlight,
    higher soil moisture, and greater nutrient allowance. Of course, there
    are variations due to local environmental, spatial and temporal
    conditions.

        Question 3. Tidwell: Pest infestation is a common problem for our
    forests. What are you doing to battle pest infestation? Where are the
    biggest problems now? How much, on average, does it cost to treat a
    forest?
        Answer. Battling forest insect and disease infestations involves a
    multi-agency coordinated approach that, depending on the particular
    pest, its status, and resources available, may include one or more of
    the following actions: prevention, monitoring and detection,
    eradication, and control and management. To respond effectively to
    infestations, the Forest Service works in close cooperation with APHIS,
    the agency with overall regulatory responsibility for invasive pests,
    as well as state departments of forestry and agriculture.
        Currently, the Forest Service has activities focused on significant
    pest problems across the country including: western bark beetle
    prevention and safety in the West, gypsy moth--slow the spread and
    eradication in the East, southern pine beetle prevention in the South,
    and invasive plants nationwide. Aerial surveys conducted by the Forest
    Service and state partners indicated that tree mortality occurred on
    over 9.2 million acres in 2010. Most of this mortality was caused by
    bark beetles attacking conifer trees in the western U.S. Other emerging
    pest and disease problems that the Forest Service is addressing
    include: emerald ash borer, thousand cankers disease, Asian longhorned
    beetle, hemlock woolly adelgid, and white pine blister rust.
        The cost to treat a given forest varies greatly depending upon many
    factors including: the size of the infested forest, the response
    approaches employed (listed above), the effective tools and methods
    available, and the biology of the pest.

        Question 4. Tidwell: What programs and authorities do you rely on
    to battle pest infestation and invasive species? How do you fund
    activities related to the removal of pest infestation and invasive
    species?
        Answer. The program and authority that the USDA Forest Service
    relies on to respond to insect and disease infestations is the
    Cooperative Forestry Assistance Act of 1978 (as amended), SEC. 8. [16
    U.S.C. 2104]. Some pests have a specific program to address the issue,
    like the Slow-The-Spread Program for Gypsy Moth. USDA Forest Service
    insect and disease activities are funded through annual appropriations.
    Funds are used to support insect and disease activities on all forested
    lands in the U.S., including National Forest System, other Federal, and
    state and private lands. Activities on state and private lands are
    commonly funded on a cost-share basis with partners to address a
    prioritized response to a particular insect or disease.

        Question 5. Tidwell: Has the FS conducted any analysis on the topic
    of markets for carbon sequestration? If so, what do you think is the
    potential for forest landowners to sell carbon sequestered by their
    forests and forestry projects?
        Answer. Individual Forest Service scientists have participated in
    the development of the FASOM economic model which was used by the EPA
    to model the impacts of the proposed cap-and-trade legislation in 2009
    and 2010 which projected opportunities for carbon offsets. The Forest
    Service will also be projecting future forest carbon changes under
    various scenarios as part of the forthcoming 2010 Resource Planning Act
    assessment. In addition, the forest inventory data collection and
    scientific studies done by Forest Service Research & Development
    program provides the foundational basis for many of the assessments
    done by other agencies and external groups on forest carbon and
    bioenergy opportunities, including the EPA's annual National Greenhouse
    Gas Inventory, and DOE's recently released ``Billion Ton Study
    Update.'' The Forest Service also developed the CVAL tool to evaluate
    the costs and benefits of carbon sequestration contracts for managed
    forests on the Chicago Climate Exchange.
        The potential for forest landowners to sell carbon will be highly
    dependent on the price of carbon, as well as the requirements, rules
    and methodologies used for implementing and reporting forest carbon
    projects. The potential for forest landowners to benefit from a carbon
    market could be minimal or large depending on the program design.
        At this point there are more opportunities for private landowners
    to sell carbon sequestered by their forests and forestry projects in
    the voluntary carbon market than within a regulatory market, although
    the California cap-and-trade program, now scheduled to begin compliance
    obligations in 2013, may create new opportunities.
        Small acreage forest landowners face challenges to participating in
    the voluntary carbon market. While there is no minimum acreage to
    qualify/enroll, start-up and ongoing costs are generally too
    substantial, and revenues too slight, on small parcels to produce an
    economically viable project. The Climate Action Reserve has developed
    ``Guidelines for Aggregating Forest Projects'' with the understanding
    that individual transaction costs on small parcels can make market
    participation untenable, and aggregating projects on smaller
    landholdings can reduce barriers to entry. However, some aggregation
    companies may have their own minimum parcel size requirements.

        Question 6. Tidwell: Currently there are several voluntary markets
    for forest carbon projects. Do you know what forestry practices are
    eligible for market participation and what the carbon price is?
        Answer. All carbon credits purchased outside of an existing
    regulatory compliance obligation are considered part of the voluntary
    carbon market. Within the voluntary carbon market, carbon credits may
    be purchased in an exchange or purchased ``Over-The-Counter'' (OTC)
    through direct buyer and seller exchanges, a broker or retail
    storefront. Voluntary forest carbon projects are governed by a variety
    of carbon offset standards or protocols.
        Eligible forestry practices vary between protocols. Three commonly
    used protocols for voluntary forest carbon projects in the U.S. are the
    Climate Action Reserve (CAR), Verified Carbon Standard (VCS), and the
    American Carbon Registry (ACR).
        Climate Action Reserve (CAR)--
        Eligible Forestry practices:

       Reforestation--A Reforestation Project involves restoring
            tree cover on land that is not at optimal stocking levels and
            has minimal short-term (30 years) commercial opportunities.

       Improved Forest Management--An Improved Forest Management
            Project involves management activities that maintain or
            increase carbon stocks on forested land relative to baseline
            levels of carbon.

       Avoided Conversion--An Avoided Conversion Project involves
            preventing the conversion of forestland to a non-forest land
            use by dedicating the land to continuous forest cover through a
            conservation easement or transfer to public ownership.

        Verified Carbon Standard (VCS)--
        Eligible Forestry practices:

       Afforestation, Reforestation and Revegetation (ARR)--
            Eligible ARR activities are those that increase carbon
            sequestration and/or reduce GHG emissions by establishing,
            increasing or restoring vegetative cover (forest or non-forest)
            through the planting, sowing or human-assisted natural
            regeneration of woody vegetation.

       Improved Forest Management (IFM)--Eligible IFM activities
            are those that increase carbon sequestration and/or reduce GHG
            emissions on forest lands managed for wood products such as
            sawtimber, pulpwood and fuelwood by increasing biomass carbon
            stocks through improving forest management practices.

       Reducing Emissions from Deforestation and Degradation
            (REDD)--Eligible REDD activities are those that reduce net GHG
            emissions by reducing deforestation and/or degradation of
            forests. Deforestation is the direct, human-induced conversion
            of forest land to non-forest land. Degradation is the
            persistent reduction of canopy cover and/or carbon stocks in a
            forest due to human activities such as animal grazing, fuelwood
            extraction, timber removal or other such activities, but which
            does not result in the conversion of forest to non-forest land
            (which would be classified as deforestation).

        American Carbon Registry (ACR)--
        Eligible Forestry practices:

       Afforestation/Reforestation (AR)--defined as activities to
            increase carbon stocks by establishing, increasing and
            restoring vegetative cover through the planting, sowing or
            human-assisted natural regeneration of woody vegetation.

       Improved Forest Management (IFM)--defined as activities to
            reduce GHG emissions and/or enhance GHG removals, implemented
            on lands designated, sanctioned or approved for forest
            management (i.e., production of sawtimber, pulpwood, and
            fuelwood).

       Reducing Emissions from Deforestation and Degradation
            (REDD)--defined as the reduction in GHG emissions from the
            avoided conversion of forest to non-forest use (e.g., to
            cropland, grassland, settlement, or development) or avoided
            degradation of forests remaining as forests.

       Forest Carbon Projects with a Biomass Energy Component--
            Forest carbon activities may include a biomass energy component
            if they provide biomass fuel for electricity generation,
            heating, or transportation fuels.

       Note: Urban forestry activities that meet the forest
            definition could qualify as AR, IFM or REDD depending on the
            specific activity.

        Prices vary between protocol standards and within the standards
    depending on project types. Within the voluntary carbon market in 2010,
    the average price was $6 per metric ton of CO2 equivalent
    (tCO2e).

        Question 7. Tidwell: Funding is a concern for us all these days.
    The Forestry title does not have any mandatory spending, but it is
    mostly all appropriated funds. Is the appropriated money mainly used
    for wildfire management? What percentage of your total appropriated
    dollars is for wildfire? How much does that leave for other forestry
    programs like the Forest Legacy or other important programs? Do you
    think there is a good balance between money spent on wildfire and other
    programs?
        Answer. In FY11, approximately 40% of all appropriated funds for
    the Forest Service support wildland fire programs to include the
    Hazardous Fuels Treatment Program, Preparedness, and Suppression. All
    of the wildland fire programs support the objective of the Forest
    Service to sustain the health, diversity, and productivity of the
    nation's forests and grasslands to meet the needs of present and future
    generations. Fires in recent years have become larger and more
    difficult to control due to a variety of factors, including climate
    change, persistent drought, increasingly hazardous fuels conditions,
    and the increased development in the Wildland Urban Interface. Current
    budget levels for the wildland fire programs are essential to ensure
    adequate resources are available to conduct emergency suppression
    operations while allowing for other critical Forest Service activities
    to continue.

        Question 8. Tidwell: In the 2008 Farm Bill, we made sure that
    forestry was explicitly mentioned in some of the conservation programs
    to ensure forest landowner participation. What is the extent of your
    involvement with these types of programs and do you communicate with
    NRCS on these types of programs?
        Answer. The 2008 Farm Bill has resulted in a much more effective
    working partnership between the Forest Service and NRCS, particularly
    with regards to getting more private forest landowners enrolled in
    conservation programs. Leaders from our agencies and other partners,
    including the National Association of State Foresters and the National
    Association of Conservation Districts, have developed and implemented
    creative strategies to make these programs much more accessible to
    private forest landowners.

        Question 9. Tidwell: In the last farm bill, as you mention,
    Congress set a number of priorities for private forest conservation--
    conserving working lands, protecting forests from threats, and
    enhancing public benefits. In your opinion, how are we doing with each
    of those priorities, are we accomplishing the needed work through the
    programs that the USFS administers?
        Answer. The Forest Service is accomplishing needed work through its
    State and Private Programs in these three priority areas. As of FY
    2011, the agency is in its fourth year of implementing a progressive
    strategy (known as ``Redesign'') to focus and prioritize funds and
    resources to better shape and influence forest land use on a scale, and
    in a way, that optimizes public benefits from trees and forests for
    current and future generations. The Redesign competitive effort focuses
    almost $20 million each year on novel, landscape-scale projects that
    are selected competitively. These projects have accomplished outcomes
    in all three of these priorities--and in FY 2010 leveraged almost $24
    million in partner dollars and in-kind contributions.
        In addition to the competitive projects funded as part of
    ``Redesign'', each State and Private Forestry program area contributes
    to conserving working lands, protecting forests from threats, and
    enhancing public benefits. Since the 2008 Farm Bill was passed, over $2
    billion has been invested by the U.S. Forest Service to address the
    three national priorities (including funding from State and Private
    Forestry; Research; Wildland Fire Management; and funding resulting
    from the American Recovery and Reinvestment Act).
        Since 2008, over 62 million acres were under management plans,
    treated, or protected through FS programs and over two million
    landowners were assisted or educated through FS programs. The work
    accomplished by State Forestry Agencies in developing the Statewide
    Forest Resource Assessments (Forest Action Plans) to identify and
    prioritize national, regional and state forest management goals across
    all ownerships, has become the foundation for agencies and partners to
    work together.

        Question 10. Tidwell: The Southern Forests Futures Project offers
    some long-term, science-based analysis about the future of timber
    production in the Southeast. Using this data, please elaborate on the
    study's conclusion that timber demand is the primary limiting factor in
    expansion of timber markets.
        Answer. The Southern Forest Futures Project (Futures Project)
    examines the history and potential future of timber markets in the
    Southeast using forest inventory and timber market data along with
    projection models. The South is the woodbasket of the United States,
    providing nearly 60 percent of the nation's timber products--the South
    alone produces more timber than any other country in the world. Private
    landowners, who manage nearly 90 percent of the South's timberlands and
    have invested heavily in their forest lands, produce more than 90
    percent of the harvested timber. Strong timber markets bring income and
    jobs to rural areas. Strong markets also provide strong incentive to
    keep working forests intact, thereby protecting other resource values
    including water and wildlife.
        The Futures Project highlights the strong growth in timber
    production that occurred in the region from the 1960s to the late 1990s
    and examines the potential for future growth as well as decline. Timber
    production peaked in the late 1990s and has since declined, signaling
    structural changes in timber markets. These production declines are
    most clearly related to changes in demand. Beginning in 1998, pulpwood
    harvesting for the paper industry declined as paper production capacity
    fell in the South. Beginning in 2007, demand for softwood solid wood
    products fell precipitously due to the housing recession. Solid wood
    products such as plywood and lumber are strongly linked to housing
    markets, and housing starts in 2010 were only 25 percent of their 2005
    values.
        In spite of these declines in demands since 1998, private
    landowners have continued to invest in forest establishment and
    management. Declines in harvests, coupled with this ongoing investment,
    have expanded the potential supply in the region, especially for
    softwood pulpwood. In sum, supply potential has grown while demands for
    timber have declined. The Futures Project's projections of timber
    supply indicate that the region has the capacity to produce as much as
    70 percent more timber than was produced in 2005, in effect, supporting
    a return to market growth rates observed in the 1990s. The key
    uncertainty and the limiting factor in determining the extent of future
    timber markets will be recovery and growth in demand for these
    products. In the near term, demand growth will depend on the recovery
    of the housing market. Long term projections hinge on future demands
    from paper industries and the potential emergence of demands for wood
    in the production of bioenergy.
        While housing has traditionally been a cyclical industry and would
    be expected to recover in the next few years, demands for paper-based
    products are tied to processing capacity and general economic growth.
    Declines in the capacity of the paper industry through mill closures
    may limit the growth potential from this sector. The Futures Project
    concludes that the greatest potential for expansion in timber demand
    would come in the form of new demands for wood in the production of
    bioenergy. These new demands would, in turn depend on the development
    of new technologies and on Federal and state energy policies aimed at
    expanding bioenergy production.
    Roundwood Production in the U.S. South, All Products, 1953 to 2008

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Source: Southern Forest Futures Project.

            The ``other'' category includes hardwood sawtimber and
            fuelwood.
    Real Stumpage Prices in the U.S. South By Product, 1977 to 2008

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Source: Southern Forest Futures Project.

        Question 11. Tidwell: You mention in your testimony the essential
    assistance to private forest owners that is delivered through the
    Forest Stewardship Program--you're only program focused on private
    forestland management. You talk about the accomplishments in FY 2010
    with the program--how does this compare with previous years? Are you
    and your state forestry agency partners reaching more landowners with
    these programs, if so, how many? And are we reaching the same
    landowners or new landowners with this program, since the number of
    family forest owners in the U.S. continues to grow--from 9 million in
    2000 to 11 million owners in 2011.
        Answer. The Forest Stewardship Program has for several years been
    transitioning from a first-come first served approach to a much more
    strategic and place-based approach to delivering technical assistance
    to private forest landowners. This approach began with the Forest
    Stewardship Program Spatial Analysis Project that assisted all states
    in identifying forest resource management priority areas and
    implementing innovative tactics for engaging landowners and communities
    in those places. Tactics include social marketing campaigns targeted at
    landowners that are less inclined to seek assistance.
        More recently, Forest Stewardship Program managers from across the
    country have developed a ``Landscape Stewardship Approach'' that
    includes the development of landscape-scale Forest Stewardship Plans
    for multiple landowners. All of these actions are attempts to have a
    greater cumulative impact on pressing resource management concerns
    while involving more landowners with the same level of investment.
        In 2010, there were 19.7 million acres under current Forest
    Stewardship Plans, of which 89% is being actively managed based on
    monitoring. Approximately 15,000 new Forest Stewardship Plans, covering
    about 1.9 million acres were created that same year. While this level
    of accomplishment has been fairly consistent the past few years, the
    total number of landowners benefitting from a variety of technical and
    educational assistance activities supported by the program has declined
    sharply because of state forestry agency budget constraints.
        All Forest Stewardship accomplishments are tracked spatially with
    respect to priority landscapes and underlying resource management
    concerns.

        Question 12. Canales: There is no more funding for any of the
    energy title programs after the expiration for the 2008 Farm Bill.
    Would you be able to handle some energy title project activity under
    any of the other rural development programs? For example, would the
    Rural Development B&I program be able to fund some types of activities
    currently covered by the REAP program? Please provide a comprehensive
    answer covering each energy title program and whether or not it could
    be covered by another USDA program.
        Answer. None of RBS's energy programs could be fully encompassed by
    currently existing, funded programs. Please see the following
    programmatic breakouts on the 9003, 9004, 9005, and 9007 programs.
        Sec. 9003, Biorefinery Assistance Program: The Biorefinery
    Assistance Program is not a duplicate of any other USDA program. There
    are no other programs that have the sole purpose of funding
    biorefineries involved in advanced biofuel production, and that involve
    the private sector on each transaction. While the eligibility criteria
    for the Business and Industry (B&I) Guaranteed Loan program would allow
    the funding of biorefineries, the maximum loan that can be guaranteed
    under the B&I guaranteed loan program is $25 million, which is
    essentially too small for these types of projects, and thus it is
    unlikely that anyone would seek to utilize the B&I program. The
    Biorefinery Assistance Program can guarantee loans up to $250 million.
        Sec. 9004, Repowering Assistance Program: The Repowering Assistance
    Program is not a duplicate of any other USDA program. There are no
    other USDA programs that could support these types of projects.
        Sec. 9005, Advanced Biofuel Payment Program: The Advanced Biofuel
    Payment Program is not a duplicate of any other USDA program. There are
    no other programs that provide payments to biofuel producers to promote
    advanced biofuels.
        Sec. 9007, Rural Energy for America Program: There are four other
    programs within USDA under which certain types of energy projects may
    be financed. These are the Value-Added Producer Grant (VAPG) program,
    Community Facilities, Business and Industry Program, and the
    Environmental Quality Incentives Program (EQIP).

        Question 13. Canales: In preparation for this hearing we attempted
    to find project information for several programs and we were not
    entirely successful. It appears USDA announces project information to
    the public via press releases, but there is not an online database that
    allows the public to easily access what has been funded and for what
    amount. How does USDA make this available to the public? Can you please
    provide the Committee with a breakdown of what projects have been
    funded under each program, and for how much?
        Answer. At this time, there is no public database. USDA uses press
    releases as the mechanism for making this information available to the
    public, however USDA is working on such a mechanism in the form of an
    energy map which we expect to release in the near future.

               Section 9003--Guaranteed Loan Awards and Obligations
                 (FY 2009 through 2011) (program level amounts)
    ------------------------------------------------------------------------
                                              Fiscal Year
      State      Project  --------------------------------------------------
                                2009 a            2010             2011
    ------------------------------------------------------------------------
    Alabama    Coskata                                         b $87,850,000
    Florida    Ineos                                             $75,000,000
    Georgia    Range           $80,000,000
                Fuels
    Michigan   Freemont                                          $12,750,000
    Mississip  Enerkem                                         b $80,000,000
     pi
    New        Sapphire                         $54,500,000
     Mexico
                          --------------------------------------------------
      Totals                   $80,000,000      $54,500,000     $255,600,000
    ------------------------------------------------------------------------
    a A loan guarantee application for $25 million was approved for SoyMor
      Biodiesel, LLC, Minnesota, on June 10, 2009. However, the $25 million
      was deobligated because SoyMor's lender no longer qualified as an
      eligible lender and SoyMor was unable to obtain a new lender.
    b The agency is working to close the loan.

        Section 9004--Repowering Assistance

        Of the nine applications, seven were selected to participate. These
    seven projects were eligible for approximately $18 million. As of
    August 25, 2011, only one awardee, Lincolnway Energy, LLC, has accepted
    the offer for $1.9 million.

        Section 9005--Advanced Biofuel Payment Program

        All of the projects funded under this program produce an eligible
    advanced biofuel. The following table presents the companies that
    received payments for FY 2009 production, the amount of payment
    received, and the type of advanced biofuel produced. For FY 2009
    production, a total of $30 million was paid. For FY 2010, a total of
    $80 million will be paid within the next several weeks. While some of
    the companies that received payments for FY 2009 production will also
    receive payments for FY 2010 production, there are a number of
    companies that will be receiving payments for FY 2010 that did not
    participate in the program for FY 2009 production.

                  Section 9005 Payments for FY 2009 Production
    ------------------------------------------------------------------------
                                             Amount of
          State             Company           Payment         Biofuel Type
    ------------------------------------------------------------------------
    AL                Athens Biodiesel,         $2,261.11  Biodiesel
                       LLC                                  Mechanical
    AR                Arkansas Soyenergy          $538.63  Biodiesel Trans
                       Group                                Esterification
    AR                Futurefuel              $929,013.18  Biodiesel Trans
                       Chemical Company                     Esterification
    AR                Pinnacle Biofuels        $34,250.89  Biodiesel Trans
                       Inc.                                 Esterification
    AZ                Pinal Energy, LLC     $2,280,865.06  Ethanol
                                                            Production
    CA                American                  $6,753.89  Biodiesel Trans
                       Biodiesel, Inc.                      Esterification
    CA                Energy Alternative        $7,280.20  Biodiesel Trans
                       Solutions, Inc.                      Esterification
    CA                Imperial Valley           $3,409.83  Biodiesel Trans
                       Biodiesel                            Esterification
    CA                Imperial Western         $93,971.09  Biodiesel Trans
                       Products, Inc.                       Esterification
    CA                New Leaf Biofuel,         $4,432.73  Biodiesel Trans
                       LLC                                  Esterification
    CA                Yokayo Biofuels,         $14,168.45  Biodiesel Trans
                       Inc.                                 Esterification
    FL                Agri-Source Fuels,        $12,11347  Biofuel From
                       LLC                                  Waste Products
    FL                Bio Fuel                  $3,418.69  Biofuel From
                       Consultants Of NA                    Waste Products
    FL                G2 Energy                 $3,670.67  Landfill Gas
    FL                Suwannee Farms LLC          $530.94  Anaerobic
                                                            Digester
    GA                Alterra Bioenergy           $905.47  Biodiesel Trans
                       Of Middle Georgia                    Esterification
                       LLC
    GA                American Proteins,       $32,935.57  Anaerobic
                       Inc.                                 Digester
    GA                Down To Earth             $1,062.62  Biodiesel Trans
                       Energy LLC                           Esterification
    GA                Middle Georgie              $159.47  Biodiesel Trans
                       Biofuels                             Esterification
    GA                Nittany Biodiesel       $335,855.02  Biodiesel Trans
                                                            Esterification
    GA                The Edge Group            $8,167.17  Biofuel From
                       Inc.                                 Waste Products
    GA                U.S. Biofuels Inc.      $181,114.96  Biodiesel Trans
                                                            Esterification
    HI                Pacific Biodiesel,       $14,760.78  Biofuel From
                       Inc.                                 Waste Products
    IA                Blackhawk Biofuels      $258,309.90  Biodiesel Trans
                       LLC                                  Esterification
    IA                Central Iowa            $194,810.82  Biodiesel Trans
                       Energy LLC                           Esterification
    IA                Iowa Renewable          $369,351.71  Biodiesel Trans
                       Energy, LLC                          Esterification
    IA                Maple River Energy       $16,613.40  Biodiesel Trans
                       LLC                                  Esterification
    IA                Renewable Energy      $1,422,147.46  Biodiesel Trans
                       Group, Inc.                          Esterification
    IA                Riksch Biofuels          $10,401.22  Biodiesel Trans
                       LLC                                  Esterification
    IA                Sioux Biochemical,       $23,808.92  Biodiesel Trans
                       Inc.                                 Esterification
    IA                Western Dubuque         $432,622.85  Biodiesel Trans
                       Biodiesel, LLC                       Esterification
    IA                Western Iowa            $508,985.44  Biodiesel Trans
                       Energy                               Esterification
    ID                Coeur D'alene           $347,484.17  Pellets
                       Fiber Fuels
    IL                Archer Daniels          $656,639.35  Biodiesel Trans
                       Midland Company                      Esterification
    IL                CNF Holdings Inc.           $466.17  Biodiesel Trans
                                                            Esterification
    IL                Hunter Haven Farms          $633.83  Anaerobic
                       Inc.                                 Digester
    IL                Incobrasa                $205,444.3  Biodiesel Trans
                       Industries, Ltd.                     Esterification
    IL                Nova Biosource          $408,824.32  Biodiesel Trans
                       Fules Inc.                           Esterification
    IL                Valley Energy Inc.           $4,717  Biodiesel Trans
                                                            Esterification
    IN                E Biofuels LLC          $283,043.86  Biofuel From
                                                            Waste Products
    IN                Indiana Flex              $8,806.07  Biofuel From
                       Fuels, LLC                           Waste Products
    IN                Kingsbury Energy            $17,861  Biofuel From
                       Group                                Waste Products
    IN                Louis Dreyfus         $1,431,051.17  Biofuel From
                       Agricultural                         Waste Products
                       Industries LL
    IN                T and M Limited          $52,355.96  Anaerobic
                       Pasrtnership                         Digester
    KS                Arkalon Ethanol,      $1,131,062.87  Ethanol
                       LLC                                  Production
    KS                Bonanza Bioenergy,      $454,050.13  Ethanol
                       LLC                                  Production
    KS                East Kansas Agri-        $58,833.32  Ethanol
                       Energy LLC                           Production
    KS                Emergent Green            $2,900.33  Biofuel From
                       Energy, Inc.                         Waste Products
    KS                ESE Alcohol              $30,163.97  Biofuel From
                                                            Waste Products
    KS                Healy Biodiesel,          $9,005.83  Biofuel From
                       Inc.                                 Waste Products
    KS                Kansas Ethanol,       $1,176,781.75  Ethanol
                       LLC                                  Production
    KS                Nesika Energy LLC       $177,527.30  Ethanol
                                                            Production
    KS                Prairie Horizon       $1,406,332.35  Ethanol
                       Agri-Energy, LLC                     Production
    KS                R-3 Energy, LLC              $19.42  Biofuel From
                                                            Waste Products
    KS                Reeve Agri Energy       $256.471.36  Ethanol
                       Inc.                                 Production
    KS                Trenton Agri            $223,165.92  Ethanol
                       Products LLC                         Production
    KS                Western Plains        $1,447,782.85  Ethanol
                       Energy LLC                           Production
    KY                Griffin                  $29,464.47  Biofuel From
                       Industries, Inc.                     Waste Products
    KY                Owensboro Grain         $401,187.10  Biodiesel
                       Company LLC                          Mechanical
    ME                Corinth Wood            $301,588.30  Pellets
                       Pellets, LLC
    ME                Maine Woods Pellet      $394,417.68  Pellets
                       Company, LLC
    MI                Hillside Farms,           $1,353.14  Anaerobic
                       LLC                                  Digester
    MI                Michigan Biodiesel        $2,340.02  Glycerin
                       LLC
    MI                Scenic View Dairy,       $17,427.01  Anaerobic
                       LLC                                  Digester
    MN                Cargill Inc.            $459,245.09  Biodiesel Trans
                                                            Esterification/
                                                            Anaerobic
                                                            Digester
    MN                Chippewa Valley         $14, 597.35  Ethanol
                       Ethanol Coop LLP                     Production
    MN                Corn Plus, LP           $311,080.39  Ethanol
                                                            Production
    MN                FUMPA Biofuels           $43,985.30  Biodiesel Trans
                                                            Esterification
    MN                MN Soybean              $964,669.83  Biodiesel Trans
                       Processo                             Esterification
    MN                Riverview LLP             $6,810.11  Anaerobic
                                                            Digester
    MN                West River Dairy          $8,312.80  Anaerobic Digeste
                       LLP
    MO                Abengoa Bioenergy       $213,891.03  Ethanol
                       Corporation                          Production
    MO                Global Fuels LLC         $23,444.64  Biodiesel Trans
                                                            Esterification
    MO                Mid-America             $917,614.99  Biodiesel Trans
                       Biofuels, LLC                        Esterification
    MO                Natural Biodiesel        $45,888.35  Biodiesel Trans
                       Plant LLC                            Esterification
    MO                Paseo Cargill           $406,424.07  Biodiesel Trans
                       Energy LLC                           Esterification
    MO                Prairie Pride,          $228,017.78  Biodiesel Trans
                       Inc.                                 Esterification
    MO                Show Me Energy           $75,863.50  Pellets
                       Cooperative
    MS                Greenlight               $31,943.50  Biofuel From
                       Biofuels LLC                         Waste Products
    MS                Scott Petroleum         $181,084.93  Biofuel From
                       Corporation                          Waste Products
    MT                Earl Fisher Bio             $586.66  Biodiesel
                       Fuels LLP                            Mechanical
    MT                Huls Dairy Inc.           $1,041.68  Anaerobic
                                                            Digester
    NC                Blue Ridge                $3,992.71  Biofuel From
                       Biofuels, LLC                        Waste Products
    NC                North American Bio-       $7,076.24  Biodiesel
                       Energies                             Mechanical
    NC                Piedmont Biofuels        $13,148.21  Biodiesel
                       Industrial, LLC                      Mechanical
    NC                Triangle Biofuels        $15,601.05  Biodiesel
                       Industries, Inc.                     Mechanical
    NE                Ag Processing Inc.      $612,434.67  Biodiesel Trans
                                                            Esterification
    NE                Chief Ethanol Fuel    $2,294,606.51  Ethanol
                       Inc.                                 Production
    NE                Kluthe, Daniel W.           $295.10  Anaerobic
                                                            Digester
    NE                Northeast Nebraska        $9,264.65  Biodiesel Trans
                       Biodiesel LLC                        Esterification
    NV                Bently Biofuels          $14,207.54  Biofuel From
                       Company                              Waste Products
    NY                Aurora Ridge                $215.36  Anaerobic
                       Dairy, LLC                           Digester
    NY                MST Production Ltd      $140,533.52  Anaerobic
                                                            Digester
    NY                Sunnyside Farms             $491.81  Anaerobic
                       Inc.                                 Digester
    NY                TMT Biofuels LLC          $2,946.83  Biofuel From
                                                            Waste Products
    OH                American Ag Fuels,          $923.99  Biodiesel Trans
                       LLC                                  Esterification
    OH                Arlington Energy          $2,898.58  Biodiesel Trans
                       LLC                                  Esterification
    OH                Bridgewater Dairy         $3,458.97  Anaerobic
                       LLC                                  Digester
    OK                ECOGY Biofuels LLC       $85,057.55  Biodiesel Trans
                                                            Esterification
    OK                High Plains             $561,818.35  Biodiesel Trans
                       Bioenergy, LLC                       Esterification
    OR                Beaver Biodiesel            $600.36  Biodiesel Trans
                       LLC                                  Esterification
    OR                Green Fuels Of            $1,097.06  Biodiesel Trans
                       Oregon                               Esterification
    OR                Sequential-Pacific       $17,127.18  Biodiesel Trans
                       Biodiesel                            Esterification
    OR                Stahlbush Island          $1,254.23  Anaerobic
                       Farms, Inc.                          Digester
    PA                Lake Erie               $275,742.88  Biodiesel
                       Biofuels, LLC dba                    Mechanical
                       Hero BX
    PA                Middletown               $29,861.04  Biodiesel
                       Biofuels LLC                         Mechanical
    PA                Soyenergy Inc. dba        $5,767.93  Biodiesel
                       Custom Fuels Inc.                    Mechanical
    TN                Sunsoil, LLC               4,794.46  Biodiesel Trans
                                                            Esterification
    TX                Beacon Energy           $118,437.54  Biofuel From
                       (Texas)                              Waste Products
                       Corporation
    TX                Double Diamond           $14,856.36  Biofuel From
                       Energy, Inc.                         Waste Products
    TX                Green Earth Fuels       $509,386.90  Biodiesel Trans
                       Of Houston, LLC                      Esterification
    TX                Levelland/Hockley       $737,202.90  Ethanol
                       County Ethanol,                      Production
                       LLC
    TX                New Energy Fuels,         $9,250.30  Biofuels From
                       LLC                                  Waste Products
    TX                RBF Port Neches,         $99,993.77  Biodiesel Trans
                       LLC                                  Esterification
    TX                Texas Green                 $951.79  Biofuels From
                       Manufacturing LLC                    Waste Products
    TX                White Energy, Inc.    $1,022,026.02  Ethanol
                                                            Production
    VA                Chesapeake Custom        $21,211.41  Biofuel From
                       Chemical                             Waste Products
                       Corporation
    VA                Red Birch Energy         $11,227.32  Biofuel From
                                                            Waste Products
    VA                Virginia Biodiesel       $39,803.87  Biofuel From
                       Refinery LLC                         Waste Products
    VT                Audet's Cow Power         $1,247.45  Anaerobic
                                                            Digester
    VT                Berkshire Cow             $3,594.20  Anaerobic
                       Power LLC                            Digester
    VT                David and Cathy             $999.79  Anaerobic
                       Montagne                             Digester
    VT                Gervais Family              $284.36  Anaerobic
                       Farms                                Digester
    VT                Green Mountain            $1,565.74  Anaerobic
                       Dairy LLC                            Digester
    VT                Neighborhood                $416.51  Anaerobic
                       Energy LLC                           Digester
    VT                Westminster Energy          $445.78  Anaerobic
                       Group LLC                            Digester
    WA                Farm Power                $1,902.09  Anaerobic
                       Rexville LLC                         Digester
    WA                FPE Renewables,          $11,915.35  Anaerobic
                       LLC                                  Digester
    WA                GDR Power LLC            $27,562.43  Anaerobic
                                                            Digester
    WA                Gen-X Energy Group      $363,356.61  Biodiesel Trans
                       Inc.                                 Esterification
    WA                Imperium Grays          $333,674.58  Biodiesel Trans
                       Harbor LLC                           Esterification
    WA                Inland Empire            $13,664.11  Biodiesel Trans
                       Oilseeds LLC                         Esterification
    WA                Qualco Energy             $2,658.18  Anaerobic
                                                            Digester
    WA                Standard Biodiesel        $5,490.93  Biofuel From
                       USA Inc.                             Waste Products
    WA                Whole Energy Fuels       $18,181.28  Biodiesel Trans
                       Corporation                          Esterification
    WI                Badger Biodiesel,       $329,523.89  Biodiesel Trans
                       Inc.                                 Esterification
    WI                Best Biodiesel           $10,486.83  Biodiesel Trans
                       Cashton LLC                          Esterification
    WI                Bio Blend Fuels           $3,369.82  Biodiesel Trans
                                                            Esterification
    WI                Buckeye Ridge            $17,937.12  Anaerobic
                       Renewable Power                      Digester
                       LLC
    WI                Clover Hill Dairy,        $2,338.79  Anaerobic
                       LLC                                  Digester
    WI                Double S Dairy              $759.05  Anaerobic
                                                            Digester
    WI                Gordondale Farms            $581.18  Anaerobic
                                                            Digester
    WI                Green Valley Dairy        $9,777.25  Anaerobic
                       LLC                                  Digester
    WI                Grotegut Dairy            $1,819.40  Anaerobic
                       Farm, Inc.                           Digester
    WI                Holsum Dairies,          $11,752.76  Anaerobic
                       LLC                                  Digester
    WI                Lake Breeze Dairy           $653.16  Anaerobic
                       LLC                                  Digester
    WI                Norm E. Lane, Inc.        $3,862.16  Anaerobic
                                                            Digester
    WI                NORSWISS Digester,       $19,671.00  Anaerobic
                       LLC                                  Digester
    WI                Pagel's Ponderosa         $3,488.53  Anaerobic
                       Dairy, LLC                           Digester
    WI                Quantum Dairy, LLC        $2,931.02  Anaerobic
                                                            Digester
    WI                Stargest Power,          $19,843.11  Anaerobic
                       LLC                                  Digester
    WI                Statz Brothers,           $2,497.90  Anaerobic
                       Inc.                                 Digester
    WI                Sun Power                $15,433.46  Biodiesel Trans
                       Biodiesel, LLC                       Esterification
    WI                Walsh Bio Fuels,         $11,351.95  Biodiesel Trans
                       LLC                                  Esterification
                                         ------------------
                                           $29,999,999.34
    ------------------------------------------------------------------------

        Section 9007--Rural Energy For America Program

        The following tables provide summaries of the funds provided by
    type of project for FY 2009 and FY 2010. The agency is currently in the
    process of making awards for FY 2011, but those have not yet been
    finalized.

                                             Section 9007 Awards for FY 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                      Number of
              Technology              Biomass Type  Description        Projects       Grant Amount     Loan Amount
    ----------------------------------------------------------------------------------------------------------------
    Biomass                                                                     49       $7,431,859      $17,372,569

                                   Anaerobic Digester                           14       $4,117,368       $6,619,198
                                   Biodiesel Production                          7         $674,096       $1,341,692
                                   Solid Fuel Production                         5         $843,936         $754,679
                                   Thermal Conversion                           23       $1,796,459       $8,657,000

    Energy Efficiency                                                        1,099      $27,857,621      $18,252,122
    Geothermal                                                                  47         $881,279         $229,599
    Hybrid                                                                       4         $180,916         $133,996
    Hydropower                                                                   4         $464,432         $600,000
    Solar                                                                      166       $5,994,685       $3,399,253
    Wind                                                                       116       $8,171,188      $17,471,490
                                                                  --------------------------------------------------
      Total                                                                  1,485      $50,981,980      $57,459,029
    ----------------------------------------------------------------------------------------------------------------

                                             Section 9007 Awards for FY 2010
    ----------------------------------------------------------------------------------------------------------------
                                                                      Number of
              Technology              Biomass Type  Description        Projects       Grant Amount     Loan Amount
    ----------------------------------------------------------------------------------------------------------------
    Biomass                                                                     56      $11,006,140      $20,751,392

                                   Anaerobic Digester                           19       $6,042,676      $14,010,621
                                   Biodiesel Production                          6         $830,708       $3,485,000
                                   Ethanol Production                            1         $500,000              $--
                                   Solid Fuel Production                        16       $3,185,031       $2,110,771
                                   Thermal Conversion                           14         $447,725       $1,145,000

    Energy Efficiency                                                        1,830      $47,692,866      $22,280,851
    Geothermal                                                                  40       $1,094,551         $292,000
    Hybrid                                                                       4          $58,817              $--
    Hydropower                                                                   4         $684,849           $5,000
    Solar                                                                      294      $13,296,957       $8,356,177
    Wind                                                                       147      $10,092,796      $21,313,084
                                                                  --------------------------------------------------
      Total                                                                  2,375      $83,926,976      $72,998,504
    ----------------------------------------------------------------------------------------------------------------

        Question 14. Canales: Have you consulted with the DOE in the
    operation of the USDA loan guarantees? How would you say that the USDA
    program differs from the DOE program? Do they overlap?
        Answer. We coordinate with the Department of Energy (DOE) using
    their environmental reviews when available for Biorefinery Assistance
    projects, and we work with DOE grant recipients where we provide
    guarantee loans to build biorefineries that will help to end our
    dependence on foreign sources of petroleum. The USDA works closely with
    DOE to provide the best energy expertise to our field staff and ensure
    that all of our project loans and grants are placed in accordance with
    the highest professional standards.
        There is overlap with DOE's Title 17 program. Title 17 can fund
    biorefineries just like the Section 9003 Program. However, Title 17 can
    be used for any type of energy production, including biorefineries
    producing any type of biofuel, while the Section 9003 Program is solely
    for the purpose of providing support for the creation and expansion of
    advanced biorefinery facilities producing advanced biofuels.

        Question 15. Canales: Can you please give us a breakdown of all the
    projects that have received assistance under this program? Have there
    been any losses to the government associated with this program to date?
    If so, why and for how much?
        Answer. The following table presents all of the advanced biofuel
    biorefineries for which funds have been obligated as of August 22,
    2011. Of these projects, loan note guarantees have been issued for
    Range Fuels, Freemont Community Digester, and Ineos; for the other
    projects, RBS has obligated the funds, but has not yet issued the loan
    note guarantees.

              Section 9003--Guaranteed Loan Awards and Obligations
                 (FY 2009 through 2011) (program level amounts)
    ------------------------------------------------------------------------
                                              Fiscal Year
      State      Project  --------------------------------------------------
                                2009 a            2010             2011
    ------------------------------------------------------------------------
    Alabama    Coskata                                         b $87,850,000
    Florida    Ineos                                             $75,000,000
    Georgia    Range           $80,000,000
                Fuels
    Michigan   Freemont                                          $12,750,000
    Mississip  Enerkem                                         b $80,000,000
     pi
    New        Sapphire                         $54,500,000
     Mexico
                          --------------------------------------------------
      Totals                   $80,000,000      $54,500,000     $255,600,000
    ------------------------------------------------------------------------
    a A loan guarantee application for $25 million was approved for SoyMor
      Biodiesel, LLC, Minnesota, on June 10, 2009. However, the $25 million
      was deobligated because SoyMor's lender no longer qualified as an
      eligible lender and SoyMor was unable to obtain a new lender.
    b The agency is working to close the loan.

        As of August 22, 2011, the agency has not paid a loss, although
    Range Fuels ceased operation in January.

        Question 16. Canales: This was a new program for RD to implement.
    What have been the biggest hurdles to clear during implementation? Do
    you have any recommendations for changes to the program to make it more
    attractive?
        Answer. USDA's Rural Business Service has many different loan and
    grant programs and has had extensive experience creating and
    implementing new programs. Implementing individual programs did not
    pose significant challenges. RBS's largest hurdle was the large number
    of new programs that had to be created in a timely manner utilizing our
    scarce staff resources.
        We do not have any statutory recommendations at this time.

        Question 17. Canales: Did interest in the Repowering program pick
    up after you made changes to the way it operates by recognizing that
    plants weren't able to get credit as easily as when the program and the
    rules were written?
        Answer. Yes, the Repowering Assistance Program received additional
    applications through the most recent NOFA.

        Question 18. Canales: There was a solicitation sent out for
    applications for this program during the spring. When do you think you
    expect to make an announcement or reward?
        Answer. The Rural Business Service is currently in the process of
    reviewing applications. Any announcements will be made in the coming
    months.

        Question 19. Canales: Why was the decision made to use REAP for
    your blender pump initiative when REAP is already oversubscribed? Could
    you have done blender pumps under other RD programs? Or could DOE have
    done them under the Clean Cities Program?
        Answer. The agency made flex-fuel delivery systems one of many
    eligible purposes under REAP. No separate funds are committed
    (designated) for flex-fuel projects. REAP is a competitive grant and
    loan guarantee program in which renewable energy systems and energy-
    efficiency improvement projects must compete on their own merits
    against all others for available funds. As stated in the preamble to
    the Interim Rule for REAP:

            ``The inclusion of flexible fuel pumps that dispense blended
            liquid transportation fuel as an important new component of the
            Federal government's strategy for encouraging the use of
            renewable fuels. Section 9007(a)(2) authorizes the agency to
            fund parts of renewable energy systems as well as renewable
            energy systems in whole. The agency has determined that a
            flexible fuel pump is a uniquely critical aspect of a biofuel
            renewable energy system defined as the conversion of the
            biomass through the dispensing of the biofuel to a vehicle. The
            policy rationale for the agency to include flexible fuel pumps
            in REAP is to address a barrier that the agency has determined
            impedes the broader use of biofuels as a liquid transportation
            fuel in the United States. For example, one major aspect of
            this barrier derives from two scenarios. The first is one of an
            insufficient availability of higher ethanol-blend fuels in the
            market place that discourages Americans from purchasing
            flexible fuel vehicles that can burn such higher ethanol-blend
            fuels and does not provide a sufficient level of higher
            ethanol-blend fuel to supply the existing flexible fuel vehicle
            fleet to fully take advantage of the fleet's ability to consume
            additional biofuel. The second is one of an insufficient number
            of flexible fuel vehicles on the road to encourage fuel station
            owners to expend the capital necessary to install flexible fuel
            pumps in response to market forces. By allowing REAP to provide
            financing through grants and loan guarantees to encourage the
            installation of flexible fuel pumps in rural areas, the agency
            believes it can help overcome this barrier. The agency
            acknowledges that there are other similar biofuel examples,
            including barriers to biodiesel. The agency recognizes that
            REAP is designed to address a variety of renewable energy and
            energy efficiency goals. With the inclusion of flexible fuel
            pumps for REAP funding, the agency will ensure that it will not
            ignore the other important goals and purposes of the program.''

        To create a viable biofuel system, many Federal partners are
    necessary. RBS's efforts do not duplicate the Business and Industry
    Guaranteed loan program or DOE's Clean Cities program, rather it
    compliments them by providing additional support in rural communities
    to expand biofuel infrastructure.

        Question 20. Canales: Can you please give us a breakdown of REAP
    project funding? Please breakdown by state allocations and the kinds of
    projects being funded (i.e., wind, solar, digesters).
        Answer. The following table presents REAP funding for grants and
    guaranteed loans for FY 2010 by state:

    ------------------------------------------------------------------------
            State             Grant Amt.       Loan Amt.          Number
    ------------------------------------------------------------------------
                 Alabama        $1,096,161         $593,791               13
                  Alaska          $254,123              $--               17
                 Arizona          $502,333              $--                7
                Arkansas          $999,604          $44,813               44
              California        $1,417,328         $406,000               28
                Colorado          $474,562          $95,000               12
             Connecticut           $71,745          $63,500                3
                Delaware           $70,293              $--                4
                 Florida          $125,000              $--                2
                 Georgia        $3,319,908       $1,567,179               78
                  Hawaii          $427,891         $232,200                8
                   Idaho          $976,692       $1,500,000               34
                Illinois        $4,266,170       $2,434,970              141
                 Indiana        $3,786,132       $1,531,118              114
                    Iowa       $20,126,175      $24,055,933              559
                  Kansas          $818,573         $148,345               37
                Kentucky        $1,440,948       $1,355,629               46
                        Louisiana $679,276       $1,000,000                6
                   Maine          $534,569       $1,667,781                5
                Maryland          $747,994              $--               13
           Massachusetts          $425,725       $1,588,613               17
                Michigan        $2,194,168         $391,131               60
               Minnesota        $5,799,265       $2,237,408              226
             Mississippi          $666,153              $--               30
                Missouri        $1,986,417       $5,810,917               56
                 Montana          $603,367          $10,200                6
                Nebraska        $2,834,914       $3,031,260              157
                  Nevada          $213,748              $--                5
           New Hampshire          $218,683         $409,997                5
              New Jersey        $1,234,253         $783,887               17
              New Mexico          $340,883         $600,000                2
                New York        $1,780,633       $1,219,487               76
          North Carolina        $2,705,082         $926,000              101
            North Dakota          $718,526         $530,684               22
                    Ohio        $5,461,997       $7,029,505               85
                Oklahoma          $268,938         $136,152               15
                  Oregon        $1,256,736          $81,093               38
            Pennsylvania        $1,647,086         $867,065               25
             Puerto Rico          $159,773              $--                3
          South Carolina          $823,532         $923,521               11
            South Dakota        $1,768,333       $1,629,277               40
               Tennessee        $1,694,612       $1,658,691               43
                   Texas        $1,114,006              $--               24
                    Utah          $172,091              $--                8
                 Vermont        $1,806,685       $3,710,252               41
                Virginia          $759,922              $--                8
              Washington          $676,887       $1,386,500                6
           West Virginia          $355,860         $254,000                8
               Wisconsin        $2,103,224       $1,086,605               69
                          --------------------------------------------------
      Total..............      $83,926,976      $72,998,504            2,375
    ------------------------------------------------------------------------

        The following table provides a summary of the funds provided by
    type of project for FY 2010.

    ----------------------------------------------------------------------------------------------------------------
                                  Biomass Type         Number of                                          Amount
          Technology              Description          Projects      Grant Amount     Loan Amount       Leveraged
    ----------------------------------------------------------------------------------------------------------------
    Biomass                                                    56      $11,006,140      $20,751,392      $78,783,920

                            Anaerobic Digester                 19       $6,042,676      $14,010,621      $34,730,610
                            Biodiesel Production                6         $830,708       $3,485,000      $11,923,618
                            Ethanol Production                  1         $500,000              $--       $4,254,000
                            Solid Fuel Production              16       $3,185,031       $2,110,771      $24,434,653
                            Thermal Conversion                 14         $447,725       $1,145,000       $3,441,040

    Energy Efficiency                                       1,830      $47,692,866      $22,280,851     $131,286,333
    Geothermal                                                 40       $1,094,551         $292,000      $10,729,094
    Hybrid                                                      4          $58,817              $--         $201,106
    Hydropower                                                  4         $684,849           $5,000      $11,956,530
    Solar                                                     294      $13,296,957       $8,356,177      $46,462,233
    Wind                                                      147      $10,092,796      $21,313,084      $25,935,674
                                                    ----------------------------------------------------------------
      Total                                                 2,375      $83,926,976      $72,998,504     $305,354,890
    ----------------------------------------------------------------------------------------------------------------

        Question 21. Canales: An integral part of helping ag producers and
    rural small businesses determine whether there are energy efficiency
    gains to be made in their operations is an energy audit. Can you share
    with the Committee what your agency is doing to ensure that there are
    enough folks available across the country to help carry out energy
    audits in rural areas and on ag operations?
        Answer. REAP provides grants to fund energy audits. The REAP Energy
    Audit and Renewable Energy Development Assistance Grant provides grant
    assistance to entities that will assist agriculture producers and small
    rural businesses by conducting energy audits and providing information
    on renewable energy development assistance. Eligible entities include:
    state, tribal, local government or their instrumentalities, land grant
    colleges, universities and other institutions of higher learning, rural
    electric cooperatives and public power. A Notice of Funds Available for
    $2.4 million in funding to conduct Energy Audits and Renewable Energy
    Development Assistance was published in the Federal Register on May 27,
    2010. To date, REAP has provided approximately $5.3 million in grants
    that have enabled approximately 4,900 energy audits.

        Question 22. Canales: The Appropriations Committee sent you a
    strong message by zeroing out the mandatory farm bill funding as well
    as not providing any discretionary funding for REAP, and the House
    passed bill ended up with $2.3 million as a result of two amendments.
    What do you attribute to the cuts?
        Answer. RBS understands that Congress works to appropriate funding
    based on their priorities and constraints.

        Question 23. Canales: Can REAP continue to be all things to all
    people in terms of doing both energy efficiency as well as renewable
    energy production? Is it better at doing some types of projects than
    others and are there some projects that can't be done anywhere else?
    Bottom line, as we're discussing which energy title programs to
    continue or not, what would you say REAP's role should be, keeping in
    mind the criticisms that have come about how the program has been
    operated?
        Answer. REAP serves both of the important purposes you outline. In
    2010 alone, the REAP program provided $84 million in grants and $73
    million in loans for 2,375 projects. We do not have any recommendations
    to statutory eligibility at this time.

        Question 24. Garcia: Can you explain how FSA works with other
    agencies on program implementation? For example, who else does FSA
    consult in selecting the project areas and making sure the selection is
    in compliance with other regulations? Does FSA work with NRCS or ARS?
    If so, what are the responsibilities of these other agencies?
        Answer. Contributing agencies within USDA include the Natural
    Resources Conservation Service (NRCS), U.S. Forest Service (USFS) and
    State Foresters, Rural Development (RD) Rural Business Services (RBS),
    Agricultural Research Service (ARS), Agricultural Marketing Service
    (AMS), Office of Energy Policy and New Uses, Animal and Plant Health
    Inspection Service (APHIS), Foreign Agricultural Service (FAS),
    National Agricultural Statistics Service (NASS), National Institute of
    Food and Agriculture (NIFA).
        These collaborations allowed FSA to assemble a national review team
    for project area proposals analysis of all aspects related to bioenergy
    production. For example, APHIS and NRCS provide information on crop
    invasiveness and management policy and implementation; NASS provides
    soil survey data for the basis of land rental rates; ARS and USFS
    provides expertise on crops and current USDA energy and measurement
    analysis tools and research; and RD and RBS provides input on
    conversion facility processes and business models.
        Cooperation also was provided by the Department of Interior Bureau
    of Land Management; Department of Energy and its National Laboratories,
    such as the National Renewable Energy Laboratory (NREL), Idaho National
    Laboratory, and Oak Ridge National Laboratory.
    Questions Submitted By Hon. Martha Roby, a Representative in Congress
            from Alabama
        Question 1. Garcia: Alabama Forestry Commission's (AFC) forest
    damage assessment due to the April 2011 tornadoes shows forested acres
    damaged at 204,590, stumpage value for damaged timber at over $266
    million on timber volumes in excess of 12 million tons of wood. To put
    this in perspective, the volume of timber destroyed would provide fiber
    to six medium size pulp and paper mills for one year. Much of this
    volume will not be salvaged resulting in significant reforestation
    costs and extreme risk of catastrophic fires. The AFC requested $66
    million through Farm Service Agency's (FSA) Emergency Forest
    Restoration Program (EFRP) but they will receive 5% or roughly $3.3
    million of what was requested. Mississippi received less storm damage
    but received 11.8% of their original request.
        Alabama's share of EFRP funding needs to be increased, what is
    FSA's plan to make this happen? Can other FSA funds be found and
    shifted to help this state.
        Answer. EFRP requests are processed in the order that they are
    received and allocations are made based on a standard formula.
    Additional funds may be requested; however, no EFRP funds are currently
    available to provide additional EFRP financial or technical assistance
    to states and counties. At this time, FSA does not have any other
    funding sources that can be used to address unfunded EFRP requests,
    which total over $49 million in the following states: Alabama,
    Arkansas, Georgia, Massachusetts, Mississippi, North Carolina, Ohio,
    Tennessee, Texas, and Virginia. The only funding provided thus far for
    EFRP was $18 million under the Supplemental Appropriations Act of 2010.

        Question 2. Garcia: United States Forest Service funding for
    Cooperative State and Private Forestry has steadily declined over the
    past few years. Other State Forestry agency funding sources have seen
    similar declines. As states prioritize focus areas in their Forest
    Action Plans they need enhanced flexibility to shift Federal funding
    between programs?
        What is the USFS's position on this need and what changes could be
    made to provide states with this increased flexibility?
        Answer. The agency understands the key role that Forest Action
    Plans play in providing states the ability to prioritize their use of
    Federal funds. A continued effort to assist states in meeting this need
    can give flexibility. FS has worked with the State Foresters to
    implement State and Private Redesign, in which 15% of the net available
    funds (not including earmarks and national commitments) in the Forest
    Health Management--Cooperative Lands, State Fire Assistance, Forest
    Stewardship, and Urban and Community Forestry programs are distributed
    to states for cross-cutting, high-priority projects.
    Questions Submitted By Hon. Gregorio Kilili Camacho Sablan, a Delegate
            in Congress from Northern Mariana Islands
        Question 1. Canales: I understand it took awhile to implement the
    Rural Energy programs. As a delegate of one of the territories, I am
    concerned that USDA has not been proactive in extending its programs to
    the territories despite its broad authority given by Congress under
    P.L. 96-597. When making energy program allocations for the states, did
    you consider the territories in your allocation plan?
        Answer. Yes. The REAP program allocates funds to the territories,
    as it does every state in the United States. The other three RBS energy
    programs (i.e., Biorefinery Assistance Program, Repowering Payment
    Program, and the Advanced Biofuel Payment Program) do not have state
    allocations. All eligible entities, including those in the territories,
    either compete for funds (Biorefinery Assistance Program, Repowering
    Program) or are eligible for payments (Advanced Biofuel Payment
    Program) if eligible.

        Question 2. Canales: An integral part of helping agricultural
    producers and rural small businesses determine whether there are energy
    efficiency gains to be made in their operations is an energy audit. I
    understand that energy audits are done for mainland producers, can you
    share with the Committee what your agency is doing to ensure that there
    are folks to help carry out energy audits for producers in the
    territories?
        Answer. RBS has an assigned Energy Coordinator who works with the
    western pacific area. REAP provides grants to fund energy audits The
    REAP Energy Audit and Renewable Energy Development Assistance Grant
    provides grant assistance to entities that will assist agriculture
    producers and small rural businesses by conducting energy audits and
    providing information on renewable energy development assistance.
    Eligible entities include: state, tribal, local government or their
    instrumentalities, land grant colleges, universities and other
    institutions of higher learning, rural electric cooperatives and public
    power. A Notice of Funds Available for $2.4 million in funding to
    conduct Energy Audits and Renewable Energy Development Assistance was
    published in the Federal Register on May 27, 2010. To date, REAP has
    provided approximately $5.3 million in grants that enables
    approximately 4,900 energy audits. No applications have been received
    and, thus, no awards for energy audits have been made to Western
    Pacific territories.
    Question Submitted By Hon. Chellie Pingree, a Representative in
            Congress from Maine
        Question 1. Canales: Can REAP be modified to enable more support
    for small scale biomass combined heat and power (CHP) unit
    demonstration projects?
        As you know, the Community Wood Energy Program (CWEP) authorized a
    new program to provide state and local governments with matching grants
    of up to $50,000 to develop community wood energy plans and to fund a
    program of competitive grants to acquire community wood energy systems
    (that use woody biomass as the primary fuel) for public facilities. In
    the 2008 Farm Bill, this program was authorized appropriations of $5
    million annually for FY 2009-12. Do you support CWEP and do you believe
    that the USDA has an important role to play in getting pilot projects
    deployed in heating schools, hospitals, and municipal/county buildings?
        Answer. To the extent that a CHP unit demonstration project meets
    the definition a pre-commercial technology, REAP can assist such
    project. Such projects must compete for available program funds with
    other eligible projects.
        Regarding CWEP, RBS supports this Forest Service program as
    authorized under the 2008 Farm Bill. RBS defers to the Forest Service
    in answering the question concerning the importance of this program
    with regard to pilot projects. Also, the Forest Service supports this
    program, and has requested full funding ($5 million) for this program
    in both FY 2011 and FY 2012. However, no money has been appropriated to
    date.

        Question 2. Garcia/Tidwell: There appears to be considerable
    opportunity to support the development of small scale cellulosic based
    biofuel systems, such as combined heat and power (CHP) units, in homes
    and businesses. Such systems could take advantage of waste biomass at
    smaller scales, avoiding the economic dilemma posed by hauling low
    grade materials long distances and provide a mechanism to address local
    situations. How might existing USDA programs be tailored to pursue this
    opportunity?
        Answer. A lot depends on the availability of funds and competing
    program needs. BCAP matching payments are designed to assist with
    transportation costs of existing biomass that otherwise may be
    uneconomically retrievable. Examples of such biomass include crop
    residues remaining on the field after harvest, or forest residues where
    removal is cost-prohibitive outside of a certain geographic range.
    Collecting these types of biomass may provide additional public policy
    benefits beyond energy purposes alone, such as the removal of invasive,
    diseased, or forest fire fuel materials, providing an alternative
    disposal method to the burning of discarded orchard and forest
    materials, or allowing further improvements to forest ecosystem health.
    In 2009, qualified facilities for BCAP matching payments included more
    than 30 schools and universities that consumed biomass for their CHP
    operations.
        By comparison, BCAP project areas are designed for the development
    of new supplies of biomass. The selection of BCAP project areas
    considers the average distance of a facility from its biomass supply.
    For example, five BCAP project areas support herbaceous materials that
    can be densified through conversion methods such as torrefaction,
    pelletizing, compression or dehydration. The resulting product may be
    either a fuel pellet or briquette that cost-effectively can be
    transported and marketed to smaller scale combined heat and power (CHP)
    operations.
        BCAP project areas also are selected in consideration of certain
    criteria provided by the 2008 Farm Bill, which include the ability of
    the local producer to take ownership in the biomass-to-bioenergy
    operations and the commitment a biomass conversion facility makes to
    the producers in a project area. Several selected BCAP project areas
    involve the cooperation of farmer cooperatives, and facility ownership
    is locally based.
        BCAP complements other Federal and state programs that are aimed at
    increasing renewable sources for heat and power, such as the USFS Fuel
    for Schools Program or State Renewable Portfolio Standards (RPS). BCAP
    allows a diversity of feedstocks to support these programs.
        USDA is very supportive of developing appropriately scaled biomass
    projects to meet the needs of regional and local situations to make
    them economically viable; reducing haul distances is one important
    variable to address. The Secretary's office initiated an effort across
    the multiple agencies in USDA focused on Wood to Energy as part of
    ``Building a Forest Restoration Economy''. Four categories of work
    items have been identified to achieve this goal:

        (a) Supply--Reliability, predictability are crucial; Stewardship
            Contracting is a critical tool for Federal land managers to
            address supply, this authority expires in 2013. Most forestland
            in the USA is owned by ``families'' and there is a critical
            need to be able to coordinated sources across ownerships in a
            geographic area. Support for developing business arrangements
            to assure supply from these diverse landowners is needed.

        (b) Social Infrastructure--this includes having expertise in
            technical, financial, business, workforce and social
            acceptability to implement projects. Integrated program
            delivery needs to recognize the importance and support of all
            of these elements and requires close working relationships with
            private businesses and nongovernmental organizations.

        (c) Agency Culture--Agencies have traditional modes of operation,
            legislative and regulatory direction. Sometimes these create
            barriers to implementing biomass energy systems holistically.
            The Secretary's office is working through these barriers to
            expand wood to energy. Cross training between agencies is being
            carried out as part of this initiative.

        (d) Opportunities--Through the Secretary's focus several areas for
            project development have surfaced and are being developed.
            Examples include the focus on rural businesses, agricultural
            operations dependent upon expensive fuel oil, propane and
            electric energy for heat. Rural Development has programs (RUS,
            REAP, etc.) that are being leveraged against National Forest
            wood supply from stewardship contracting and we are working to
            expand those efforts. Projects that take advantage of economies
            of scale, such as supplying heat and power to food processing
            plants, wood manufacturing, cement and other high energy using
            businesses offer significant opportunities.

        Question 3. Garcia/Canales: How have BCAP and other energy programs
    helped to promote small scale Thermoelectric or thermal energy systems
    that use woody or other biomass? And, are there ways that BCAP, other
    sections of the Energy title, or partnerships with agencies like DOE
    could help promote Thermal energy systems that use woody biomass?
        Answer. BCAP is designed to encourage the production of dedicated
    bioenergy feedstocks to help us meet the goals of the Federal Renewable
    Fuels Standard and state-level renewable electricity standards. Because
    facilities that convert biomass into energy also must demonstrate long
    term feedstock supply commitments to attract private capital
    investment, the risk mitigation provided by BCAP can help bioenergy
    entrepreneurs seeking to leverage public or private financial
    assistance.
        Many of the thermal production units often are retrofits. The
    facility is retrofitted by the installation of a turbine alongside a
    boiler to capture lost heat. The capture of the lost heat enables a
    closed loop system allowing a facility to produce heat and power, often
    in the form of steam. The RD programs can support these retrofits and
    the facilities can apply for BCAP matching payments for their eligible
    waste materials consumed for conversion to thermal power.

        Question 4. Garcia/Tidwell: Given that the pellet industry plays a
    major role in reducing heating oil consumption, is the production of
    wood pellets from the removal of excess low value woody biomass being
    provided adequate support under programs like BCAP for the purposes of
    incentivizing these types of best forest management practices?
        Answer. BCAP matching payments may provide opportunities for the
    manufacture of wood pellets from so-called ``excess low value woody
    biomass,'' but insufficient funds are available for matching payments
    in FY 2011. Also, conditions vary by region and may require further
    review to ensure that incentives are provided to feedstocks not
    otherwise used for existing markets; removed directly from the land in
    accordance to a forest stewardship or equivalent plan; are by-products
    of preventative treatments that are removed to reduce hazardous fuels,
    to reduce or contain disease or insect infestation, or to restore
    ecosystem health; and if harvested or collected on Federal lands, are
    done in accordance with the requirements for old-growth maintenance,
    restoration, and management direction provided by 16 U.S.C. 6512 for
    Federal lands.
        Achieving good forest management practices by providing an economic
    use for the low value material is an important goal, therefore it is
    important to put the use of wood for energy into that broader context.
    Wood pellets are one form of fuel, along with chipped or ground wood;
    they each have an important niche within the energy market place. In
    parts of the country where an integrated wood products industry exists,
    higher value products such as lumber, paper, and wood composites can
    help cover the cost of the forest treatment. The pellet and chip wood
    fuel producers are a component of an integrated industry that can
    effectively use the low value material. They are lacking adequate
    markets/demand for their product more so than enough incentives for
    more production of their product. Therefore the expansion of demand for
    their products is the more important factor. Thus, providing incentives
    to replace heating oil, propane and electric resistance heat would help
    increase the demand.
        In parts of the country without an integrated industry, the need
    for incentives to transport biomass is much higher, along with the
    increased demand for the products. A longer term solution for these
    regions is the need to develop a woody biomass based energy production
    sector. The net result will be better forest management results on the
    land as the wood being removed has an economic value. As an example,
    there are many USDA facilities in remote areas of the U.S. utilizing
    either propane or oil for thermal energy. Some of these facilities are
    leased from General Services Administration (GSA) that develop and
    construct the leased buildings for USDA and other Federal agencies.
    Creating the demand for high efficiency thermal energy could be
    developed at the inception of the leased building. The end result could
    be a constructed building using renewable energy such as pellets or
    chips thus increasing the demand for these products. In addition, this
    would assist the USDA and GSA in meeting Executive Order 13514
    increasing the use of renewable energy.

        Question 5. Canales: Conservation programs are vitally important,
    but if forest owners don't also have markets for their products--
    whether they are traditional wood markets, energy markets, or markets
    for services like water or hunting and fishing--they will have a hard
    time staying on the land and keeping their land forested. What is USDA
    doing on this front to help forest owners participate in existing
    markets and open up new markets? For example, is USDA's biobased
    labeling program adequately supporting the need for creating new
    markets for wood products? And, is there adequate funding to help
    develop, maintain and improve long-term domestic markets for the broad
    range of potential wood-based products?
        Answer. USDA appreciates the opportunity to discuss the role of the
    BioPreferred' program in creating new markets for wood
    products. The legislative history of the BioPreferred program
    authorized under section 9002 of the Farm Security and Rural Investment
    Act of 2002 (FSRIA), as amended by the Food, Conservation, and Energy
    Act of 2008 suggests Congress intended to use this program to speed the
    development of new markets for biobased products, rather than to
    support mature markets for products. As described in the conference
    report accompanying FSRIA, the purpose of the biobased markets program
    ``. . . is to stimulate the production of new biobased products and to
    energize emerging markets for those products.''
        USDA believes that the widespread labeling of mature market
    products could negatively affect the entry of new biobased products
    into market segments in which mature products already have significant
    market shares. The exclusion of mature market products from the
    voluntary labeling program is consistent with the exclusion of such
    products from the Federal procurement preference program. As Senator
    Harkin stated in comments on USDA's proposed labeling rule:

            Clearly, the objectives of the BioPreferred labeling program
            are not served by granting the label to every product that is
            made of biobased materials. For example, paper or wood
            products, such as wood furniture, do not fall within the
            intent, purpose, and goals of the statute creating the
            BioPreferred labeling program because the market for paper and
            wood products is established and functioning, and consumers
            have sufficient information to make buying decisions regarding
            paper and wood products without their being included in the
            BioPreferred labeling scheme.

        However, USDA's BioPreferred program makes every attempt to include
    new wood products (employing technologies coming into existence after
    1972) in this USDA program. The BioPreferred program works in
    cooperation with the U.S. Forest Products Research Lab in Madison,
    Wisconsin to identify and certify new industrial products made from
    wood for both the federally procurement preference and label parts of
    the program. One of the recent products receiving the USDA certified
    biobased product label is a new wood product.

        Question 6. Tidwell/Garcia: Since the major predisposing factor for
    the beetle infestations of the West has been the lack of management and
    resultant overstocked stands, what steps are being taken to address
    this situation and prevent its reoccurrence? And, what is being done to
    develop sustainable markets and delivery infrastructure to prevent such
    problems from occurring elsewhere in the U.S.?
        Answer. BCAP matching payments may provide opportunities for the
    removal of beetle-infected biomass, but insufficient funds are
    available for this programmatic assistance in FY 2011.
        The bark beetle epidemic has affected over 41 million acres from
    1997-2009 in the western U.S. This is a function of several converging
    factors--a multi-year severe drought that weakened trees; years of fire
    suppression which evolved over time as more people moved into remote
    areas, which necessitated protecting property and lives; large expanses
    of relatively homogenous stands of older, mature lodgepole pine,
    created from the intensive harvesting of the 1880s and 1890s for
    railroads and the mining industry providing extensive suitable beetle
    habitat; and warming winters which have allowed beetles to survive
    winters that in the past, reduced population sizes.
        In response to this record outbreak the Forest Service has
    developed a ``Western Bark Beetle Strategy'' focusing on three goals:
    safety (mitigating risk to people and property from falling trees along
    roads and trails), recovery (helping affected forests recover their
    proper ecological function) and resilience (thinning forest stands so
    they are more resilient in the future). The plan was put together to
    outline the importance of the issue. Currently the FS treats about
    250,000 acres per year in beetle country and has the capacity to
    increase this by 2.5 fold. As the epidemic dies down the agency will
    focus on creating more resilient forests and heterogeneous landscapes
    that can sustain bark beetle attacks better in the future.

        Question 7. Tidwell: On Limited Owners with Management Plans: Less
    than 5% of forest owners nationwide have some sort of management plan.
    This is troubling since we know that almost \2/3\ of the nation's
    forests are privately owned, so we rely on these forests to be healthy
    and supply every Americans with clean water, air, wildlife habitat,
    forest products we use every day, and recreational opportunities.
        Do you see this as a problem and if so how are you addressing this
    problem?
        Answer. Yes, this is a major challenge for us. We cannot
    effectively address landscape-scale resource management concerns,
    without getting private forest landowners. We continue, through the
    Forest Stewardship Program, to develop and implement innovative tools
    for reaching and involving more landowners in active forest management.
    Through our Landscape Stewardship Approach, we have begun to develop
    multi-landowner landscape-scale Forest Stewardship Plans that will
    foster landowner communities of interest and create economies of scale
    for traditional forest products and emerging ecosystem service markets.
    We continue to work with states as they implement their State Forest
    Action Plans, to leverage new place and community based partnerships.
        We are also developing SMART--a web-based Stewardship Mapping and
    Reporting Tool. Using this tool, landscape concerns and strategies for
    addressing them are inherited by individual Forest Stewardship Plans.
    In this way, not only will efficiencies be gained in assisting more
    landowners, but these landowners will then, in aggregate, have a more
    significant and lasting impact on some of our most pressing resource
    management concerns including insect pest and disease infestations and
    the threat of wildfire.

        Question 8. Tidwell: Communities in Maine and across New England--
    indeed in places across the country such as Montana and California--
    have embraced acquisition of threatened forestland by local governments
    as a conservation strategy. The 2008 Farm Bill authorized a new 50-50
    matching grant program, the Community Forest and Open Space
    Conservation Program, to help local governments, tribes, and local
    nonprofits to create more of these locally-owned and managed community
    forests. This would seem to fit well into your vision of forest
    protection across all boundaries--Federal, state, local and private.
        But, it seems like the program has been slow to emerge from
    rulemaking and move into actual grant making since passage of the last
    farm bill. Can you provide an update on where this program stands in
    terms of establishment through rulemaking, and how you envision it
    contributing to the agency's forest conservation objectives?
        Answer. I am pleased to report that the final regulation is in its
    last stages of review, and we hope to publish the final regulation this
    Fall. Once published, we will move forward with soliciting
    applications, and grant the available funds (through FY10 and FY11, we
    have $1.5 million of available funds).
        This new program fits well within our nation's forest conservation
    objectives. Through this program, communities and Indian tribes can
    sustainably manage forests community forests for many public benefits,
    including recreation, income, wildlife habitat, stewardship
    demonstration sites for forest landowners, and environmental education.

        Question 9. Tidwell: How could the Healthy Forests Reserve Program
    (HFRP) be structured to achieve the goals of maintaining working
    forests, protecting important public benefits, and compensating private
    landowners for maintaining these public benefits on their land?
        Answer. As currently authorized, the Healthy Forest Reserve Program
    (HFRP) as administered by the NRCS, targets the protection and
    restoration of forests to assist in the recovery of threatened and
    endangered species. If HFRP was broadened to maintain working forests,
    protect important public benefits, and compensate landowners for those
    public benefits, then the program would largely look like the existing
    Forest Service's Forest Legacy Program. Currently, these programs have
    complementary purposes, with limited overlap.
                                     ______

     House Committee on Agriculture Farm Bill Audit Questionnaire--Forestry
    1. Program Name
        Volunteer Fire Assistance Program.
    2. Subprograms/Department Initiatives
        The VFA program is split into two subprograms, VFA-SPVF and VFA-
    SPS3.
        VFA-SPVF funds are focused to address critical preparedness needs
    for firefighter safety, increased initial attack capability, and
    training. An emphasis is placed on funding areas that have developed or
    are developing Community Wildfire Protection Plans, FEMA hazard
    mitigation plans, or other collaboratively developed hazard mitigation
    plans.
        The program allocates funding based on acres of forestland to be
    protected and the number of fire departments serving communities with
    populations under 10,000 in each state. This part of the program is
    funded through State and Private Forestry appropriations.
        VFA-SPS3 funds provide financial assistance, technical assistance,
    training, and equipment to ensure that Federal, state, and local fire
    agencies can deliver a coordinated response to wildfire. The emphasis
    is on improving fire planning, initial attack capabilities, adopting
    the National Incident Management System (NIMS) and wildland fire
    techniques training for local fire agencies
        Funds are allocated on the basis of risk from catastrophic fires to
    communities in the Wildland Urban Interface, the number of acres to be
    protected, and the number of volunteer fire departments serving
    communities of less than 10,000 inhabitants. Forest Service Regions,
    the Northeastern Area, and the International Institute of Tropical
    Forestry receive a fixed percent which they allocate to states and
    Territories. This part of the program is funded through Wildland Fire
    Management appropriations.
    3. Brief History
        VFA (formerly Rural Community Fire Protection) was first authorized
    in 1972 as an amendment to the Rural Development Act and was first
    funded in 1975.
    4. Purpose/Goals
        The VFA program provides Federal financial, technical, and other
    assistance to State Foresters and other appropriate officials to
    organize, train and equip fire departments in rural areas and rural
    communities to suppress fires. A rural community is defined as having
    10,000 or less population. A department may buy fire equipment, pay for
    training or training materials, or cover the cost of department
    incorporation, as long as the funds are matched. VFA funds are granted
    on a 50/50 matching basis.
        Volunteer fire departments also play a major role in suppressing
    wildfires on Federal lands. The Forest Service and the Department of
    the Interior land management agencies have entered into cooperative
    agreements with many rural volunteer fire departments for the purpose
    of protection of both communities and natural resources.
    5. Success in Meeting Programmatic Purpose/Goals
        The VFA program has been highly successful in assisting volunteer
    fire departments in rural areas with training, purchasing equipment and
    building capacity. The assistance provided to these volunteer fire
    departments greatly benefits state and Federal land management agencies
    through their increased capacity and capabilities to assist with
    suppression of wildland fires. Detailed information on the number of
    departments assisted, training provided, and departments created or
    expanded is provided in Question 10.

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Volunteer Fire            5,105    5,478    5,056    5,987    6,409    6,112    6,229    6,404    7,003    6,758
     Assistance
    National Fire Plan--      8,342    8,186    8,222   11,959    9,288    9,285    9,306    9,059    9,026    9,357
     Volunteer Fire
     Assistance
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Volunteer Fire            4,117    3,900    5,120    4,400    8,069    6,776    6,002    5,550    6,248    4,901
     Assistance
    National Fire Plan--      4,619    6,468    7,818    7,471    7,899    6,652    7,498    7,759    8,431    5,953
     Volunteer Fire
     Assistance
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.

                           8. Annual Delivery Cost (FY 2002-FY 2011) Direct and Indirect Costs
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    Volunteer Fire Assistance                                                  0        0        0        0        0
    National Fire Plan--Volunteer Fire Assistance                              0        0        0        0        0
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        The program is limited to volunteer fire departments in rural areas
    with a population of 10,000 or less. Applicants must be able to provide
    a cost-share match of 50 percent of the grant amount.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
                                              FY 2008    FY 2009    FY 2010
    ------------------------------------------------------------------------
    Volunteer fire departments assisted         13,977     10,637     13,235
    Volunteer firefighters trained              23,000     24,000     22,700
    Volunteer fire departments created or          240        500         44
     expanded
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        VFA works in concert with the State Fire Assistance program. The
    Volunteer Fire Assistance program is duplicative of the Department of
    the Interior's Rural Fire Assistance Program. However, the Rural Fire
    Assistance Program has been proposed for termination due to the
    duplication. The Department of Homeland Security also administers
    programs that partially overlap with some VFA activities, including
    training and the purchase of equipment, though DHS programs are
    provided nationwide and not focused on rural communities.
    12. Waste, Fraud and Abuse
        There have been no documented cases of waste, fraud or abuse in
    this program.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Woody Biomass Utilization.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        This grant program started in 2005 to treat hazardous fuels near
    communities threatened by wildland fire. It is not part of the farm
    bill. From 2005-2010 the grants have focused on assisting businesses
    and communities with the production, delivery and utilization of wood
    residues. Projects have ranged from equipment such as grinders,
    harvesters and new trucking methods to energy production facilities, to
    roundwood manufacturing and production of wood shavings for animal
    bedding markets. In 2011 the emphasis was changed to focus on
    engineering design, permitting and other preconstruction work for wood
    energy facilities.
    4. Purpose/Goals
        It has focused on utilization of wood residues from forest
    treatments designed to reduce wildfire hazard.

                                    5. Success in Meeting Programmatic Purpose/Goals
                        Six Year Summary of the Woody Biomass Utilization Grant Program--Table 1
    ----------------------------------------------------------------------------------------------------------------
                                                          Full
                Year              Pre-Applications    Application     Number Funded    States Funded   Tribes Funded
    ----------------------------------------------------------------------------------------------------------------
                         2005                159               44               19               12               1
                         2006                 87               37               16                9               1
                         2007                 93               36               26               13               1
                         2008                 92               35               17                9               1
                         2009                109               43               28               12               1
                         2010                192               34               13                5               1
                                 -----------------------------------------------------------------------------------
      Total.....................             732              229              119               --               5
    ----------------------------------------------------------------------------------------------------------------

                          Total Woody Biomass Utilization Grants Awarded by FS Region--Table 2
    ----------------------------------------------------------------------------------------------------------------
         Region          1          2          3          4          5          6          8        9/NA       10
    ----------------------------------------------------------------------------------------------------------------
    Total 2005-10          13         18         31          9         17         20          5         6         0
    ----------------------------------------------------------------------------------------------------------------
    The Forest Service provided $30.3 million towards the projects.

                             Total Woody Biomass Utilization Grants Accomplishments--Table 3
    ----------------------------------------------------------------------------------------------------------------
                                                                                  % of grants
                  Year                  Dollar Amount      Leveraged Funding      awarded to      Green tons removed
                                          (millions)          (millions)         priority NFs        and utilized
    ----------------------------------------------------------------------------------------------------------------
                             2005                  $4.3                  $16          15/19= 79%              93,856
                             2006                  $4.2                   $9           14/16=88%             120,900
                             2007                  $6.2                   $5           15/26=58%             438,877
                             2008                  $4.2                  $11           12/17=71%             535,017
                             2009                  $7.2                  $10           25/28=89%             283,076
                             2010                  $4.2                   $9          13/13=100%             516,215
    ----------------------------------------------------------------------------------------------------------------

    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        $5 million/yr 2005-2011. Authorization was through the Healthy
    Forest Restoration Act for FY 2005-FY 2008. Since 2008, the program has
    been funded by annual appropriations.
    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        Outlays have been consistent with the authority.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        The program has been delivered through technical assistance
    provided by Forest Service regional program managers and partners
    generally with nonprofit economic development organizations or state
    extension personnel.
    9. Eligibility Criteria
        Businesses, state, tribal and local governments with an emphasis on
    use of woody biomass from National Forest system lands.
    10. Utilization (Participation) Data
        See Table 1 above. To date, 119 grants have been provided to
    approximately 115 grantees.
    11. Duplication or Overlap with Other Programs
        There are other Federal programs that support woody biomass
    development; however, this is the only program focused specifically on
    reducing hazardous fuels and utilizing that biomass material as a
    higher value product. Rural Development's Rural Energy for America
    Program is focused on multiple kinds of renewable energy; it is not
    specific to woody biomass. Rural Development also has the Community
    Facilitates Program. That program provides small grants and guaranteed
    loans for multiple different kinds of community facilities. In limited
    cases, it has been used for community biomass heating systems. FSA's
    Biomass Crop Assistance Program is focused on assisting with the costs
    of transporting materials.
    12. Waste, Fraud and Abuse
        To date, only one ARRA grantee has been identified as problematic
    by an OIG audit. There were some accounting procedures and record
    keeping that was suspect. These issues have been resolved since the
    accounting issues were not accepted as allowable expenses.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Community Forest and Open Space Conservation Program (Community
    Forest Program--CFP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The CFP is authorized by Section 8003 of the Food, Conservation,
    and Energy Act of 2008, which authorizes the Forest Service to provide
    financial assistance grants to Tribal governments, local governments,
    and qualified nonprofit entities to acquire and establish community
    forests that provide public benefits to communities. The CFP program is
    the first funded Forest Service program for which tribes are eligible
    to compete.
        The Forest Service engaged tribes in the regulation making process
    through a 145 day tribal consultation period, which concluded at the
    end of a 60 day public comment period on March 7, 2011. The Forest
    Service analyzed comments received during both processes and prepared
    final regulations for the program. The final regulation is undergoing
    departmental clearance to be published in the Federal Register this
    year.
    4. Purpose/Goals
        The purpose of the program is to assist communities and tribes in
    acquiring forestland that would provide public recreation,
    environmental and economic benefits, and forest-based education
    programs. The program also protects forestland that has been identified
    as national, regional, or local priority for protection.
    5. Success in Meeting Programmatic Purpose/Goals
        Since the program was enacted, the Forest Service has received
    strong support from conservation nonprofit organizations, local and
    state governments, Indian tribes, and private citizens to implement
    this program. The Forest Service believes once the regulations are
    published, the program will be successful in meeting the programmatic
    purposes and goals for this program.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        This program received $500,000 in appropriations in FY 2010 and
    $1,000,000 in FY 2011.
    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        This program has not had any outlays because the agency is still in
    the rulemaking phase. Once the final rule is complete, the agency will
    implement a competitive grant program. When projects are selected to
    receive funding as part of this process, outlays will begin.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        None.
    9. Eligibility Criteria
        A request for applications (RFA) has not yet been issued, but
    according to the statue, grants under this program will be awarded to
    eligible entities to acquire private forestland, to be owned in fee
    simple, that--

        (A) are threatened by conversion to non-forest uses; and

        (B) provide public benefits to communities, including--

          (i) economic benefits through sustainable forest management;

          (ii) clean water and wildlife habitat;

          (iii) benefits from forest-based educational programs, including
                vocational education programs in forestry;

          (iv) benefits from serving as models of effective forest
                stewardship for private landowners; and

          (v) recreational benefits, including hunting and fishing
    10. Utilization (Participation) Data
        Not applicable at this time.
    11. Duplication or Overlap with Other Programs
        This program complements the Forest Legacy Program and the Urban
    and Community Forestry Program. CFP and FLP each engage unique partners
    and utilize different tools for land protection. While a few projects
    may align with the intent of both programs, most projects will qualify
    for only one. Unlike U&CF, CFP is a land protection program, which
    provides another tool to those entities that have demonstrated a
    sustained commitment to community forestry.
    12. Waste, Fraud and Abuse
        There are no examples or occurrences of waste, fraud, and abuse in
    Community Forest Program.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Forest Health Management--Forest Health Protection.
    2. Subprograms/Department Initiatives
        Forest Health--Federal Lands.
        Forest Health--Cooperative Lands.
        Forest Health--National Fire Plan Federal Lands.
        Forest Health--National Fire Plan State Lands.
    3. Brief History
        The Forest Health Management (FHM) program provides insect,
    disease, and invasive plant survey and monitoring information and
    technical and financial assistance to prevent, suppress, and control
    outbreaks threatening forest resources. FHM utilizes science, active
    land management, and technology transfer expertise to restore and
    sustain forest landscapes--across urban, private, state, Tribal, and
    Federal forests. Recently completed State Forest Resource Assessments
    have, in many cases, identified forest health as a key state priority.
    These Assessments are being used to help guide priorities at the
    national and regional levels.
        Prevention, detection, and suppression of native and non-native
    insects, disease, and invasive plant outbreaks make forest landscapes--
    and the communities that depend on them--more resilient to climate
    change and other abiotic factors. The technical and financial
    assistance FHM provides helps ensure that forests remain healthy and
    resilient by minimizing impacts of native and nonnative invasive
    insects and diseases, and invasive plants. Healthy forests which
    maintain their tree cover contribute to carbon sequestration processes.
    They also are a major force in the moderation of local and regional
    climates, as well as the conservation of high quality water and other
    resources. In addition, FHM works on facilitating assisted tree
    migration efforts and gene conservation that involve reforestation and
    afforestation in those areas where species have been identified as
    vulnerable to climate change.
    4. Purpose/Goals
        Protect trees, forests, wood products, and grasslands on Federal
    and state lands from invasive pests, diseases, and plants in
    cooperation with National Forest System, other Federal departments on
    other Federal lands, and with state foresters, or equivalent state
    officials, subdivisions of states, agencies, institutions,
    organizations, or individuals on non-Federal Lands.
    5. Success in Meeting Programmatic Purpose/Goals
        Acres protected on all lands:

                        FY 2008                            1,303,420
                        FY 2009                            1,383,804
                        FY 2010                            1,258,512

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Health--Federal   50,504   54,632   57,776   54,236   57,940   56,279   58,968   59,399   57,282   64,650
     Lands
    National Fire Plan--      9,144    8,783   16,014   14,892   19,249   17,974   16,596   19,899   20,752   23,182
     Forest Health--
     Federal Lands
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Health--          28,499   33,601   52,496   48,428   53,241   51,217   48,567   50,866   48,573   50,142
     Cooperative Lands
    National Fire Plan--      5,100    9,914   10,347   12,007   10,755   10,647   10,586   10,685   11,428   13,003
     Forest Health--
     Cooperative Lands
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Health--Federal   46,009   45,449   54,554   54,085   47,631   52,112   51,473   48,668   52,328   38,119
     Lands
    National Fire Plan--      5,531    5,083   10,303   14,476   13,248   15,520   14,138   13,176   20,755   11,133
     Forest Health--
     Federal Lands
    ----------------------------------------------------------------------------------------------------------------

    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Health--          11,683   18,296   31,407   36,665   46,427   49,748   43,998   46,934   46,377   30,084
     Cooperative Lands
    National Fire Plan--      3,164    2,738    4,788    8,327   12,399    9,414   10,998   11,011    9,630    6,895
     Forest Health--
     Cooperative Lands
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.

                             8. Annual Delivery Cost (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    Forest Health--Federal Lands (Indirect)                                6,943    5,090    4,901    4,985    4,985
    Forest Health--Federal Lands (Direct)                                  6,774    5,850   6,5450    6,592    5,074
    National Fire Plan--Forest Health--Federal Lands (Indirect)            1,075    1,155    1,112    1,229    1,229
    National Fire Plan--Forest Health--Federal Lands (Direct)              3,602    2,896    1,486    1,626    2,770
    Forest Health--Cooperative Lands (Indirect)                              775      723      696      797      797
    Forest Health--Cooperative Lands (Direct)                                756      596      930    1,053    1,192
    National Fire Plan--Forest Health--Cooperative Lands (Indirect)          249      229      221      399      399
    National Fire Plan--Forest Health--Cooperative Lands (Direct)            244      327      295      527      585
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Cooperative Lands and National Fire Plan State Lands funding is
    sent to State Foresters; landowner eligibility is determined by state
    partners.
    10. Utilization (Participation) Data
        The Forest Service does not collect this data.
    11. Duplication or Overlap with Other Programs
        No.
    12. Waste, Fraud and Abuse
        There are no documented cases of waste, fraud or abuse in this
    program. The USDA OIG did complete an audit on the Invasive Species
    program in 2010. The agency is working to implement the OIG's
    Recommendations.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Forest Legacy Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Forest Legacy Program (FLP) was authorized in the Food,
    Agriculture, Conservation, and Trade Act of 1990. Initially only the
    four Northern Forest states (Maine, New Hampshire, Vermont, and New
    York) and Washington were eligible to participate. Congress
    appropriated funds for the program in Fiscal Year 1992.
        Initially, only the Federal Government was authorized to hold title
    to lands or interests in lands. This changed with the 1996 Farm Bill.
    The 1996 Farm Bill amended the Forest Legacy Program, to include the
    State Grant Option. This allowed states as well as the Federal
    Government to acquire FLP tracts and conservation easements. In the 20
    years since authorization, participation in the FLP has expanded to 49
    states and four U.S. territories.
        The Federal Government may fund up to 75% of project costs, with at
    least 25% coming from private, state, or local sources.
    4. Purpose/Goals
        The purpose of the FLP is to protect environmentally important
    private forest areas that are threatened by conversion to non-forest
    uses. In partnership with participating states and the Forest Service,
    FLP works to identify important forestlands and protect them for future
    generations. The FLP provides the opportunity for the continuation of
    traditional forest uses, including forest management activities and
    outdoor recreation. Using conservation easements and fee-simple
    purchases, FLP gives priority to lands that have important scenic or
    recreational values, riparian areas, fish and wildlife values, and
    other ecological values.
    5. Success in Meeting Programmatic Purpose/Goals
        More than 2.2 million acres have been conserved by the FLP.

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Legacy            65,000   69,941   70,813   65,240   70,870   63,746   61,984   60,903   75,960   56,363
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Legacy            29,604   25,730   51,684   54,018   61,989   53,041   53,966   54,252   60,714   47,422
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.
    Also, it often takes multiple years for real estate transactions to close.

                             8. Annual Delivery Cost (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    Forest Legacy (Indirect)                                                 304      297      286      384      384
    Forest Legacy (Direct)                                                   363      372      382      504      363
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        All states and territories of the United States are eligible to
    participate in the Program. To enter the Program states must first
    conduct an analysis and identify areas, known as Forest Legacy Areas
    (FLAs) where the state will target their efforts. Only lands within
    these FLAs are eligible to enter the FLP. In the past, this analysis
    was referred to as the Assessment of Need and was only tied to the FLP.
    Now this analysis is part of the Statewide Forest Resource Assessment
    and Strategy. This document identifies priority areas for all State and
    Private Forestry Programs.
        Each year participating states submit projects to the Forest
    Service for consideration for funding. A panel of six Forest Service
    representatives and four participating state representatives score all
    projects submitted according to National Scoring Guidance. This scoring
    guidance is provided to the states to assist them in developing their
    project applications. The national panel meets in January to finalize a
    prioritized project list. This prioritized project list is then
    submitted to the Office of Management and Budget and is released as
    part of the President's Budget.
    10. Utilization (Participation) Data
        2.2 million acres are now part of the FLP. Not all funds are
    expended in the same year that those funds are appropriated. This is
    because land acquisition is often a lengthy and complicated process.
    Projects are funded through grants to states. These grants have an
    initial 2 year period. This can be extended up to 5 years.
    11. Duplication or Overlap with Other Programs
        There are no other programs with the sole purpose of identifying
    and permanently protecting environmentally important forestlands. The
    FLP differs from the agency's and Department of the Interior's Land
    Acquisition program in that it does not provide for acquisition of
    lands within the National Forest System or on Department of Interior
    lands. It differs from other easement programs, like conservation
    programs funded by the Natural Resources Conservation Service, because
    those are focused on protecting wetlands, wildlife habitat, and highly
    erodible cropland, not forests.
    12. Waste, Fraud and Abuse
        We are not aware of any instances of waste, fraud or abuse. USDA
    OIG did complete a report on the Forest Legacy Program in 2011. The
    agency is working to implement the OIG's Recommendations.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Forest Stewardship Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Forest Stewardship Program was authorized with the 1990 Farm
    Bill to encourage the long-term stewardship of ``nonindustrial''
    private forestland, by assisting landowners to more actively manage
    their forest and related resources. During the program's early years,
    the Forest Service worked through state agency partners to build
    technical assistance delivery capacity and establish related programs.
    In recent years, the Program has employed new geospatial technologies
    and innovative planning tools, to become more focused and strategic,
    enabling the Forest Service to work more effectively on private forests
    and to better coordinate with state as well as National Forest lands.
    These coordinated efforts address pressing landscape-scale resource
    management concerns such as fire, water quality, forest products and
    renewable energy supply.
    4. Purpose/Goals
        The Forest Stewardship Program is the only Forest Service program
    focused on private forestland management. The program delivers
    assistance by leveraging an effective national network of forestry
    technical assistance providers and programs. Because of this unique
    role--and since most of America's forests are privately owned--the
    Forest Stewardship Program is essential to addressing any important
    forest resource management issue. Individual forest landowners are
    assisted within the context of forest resource management issues that
    cross boundaries and encompass multiple ownerships and jurisdictions.
    The Forest Stewardship Program plays a fundamental role in keeping
    forests as forests, preparing forest landowners for forest products and
    ecosystem services markets, qualifying them for incentive programs, and
    maintaining jobs and diverse forest products markets in rural
    communities.
    5. Success in Meeting Programmatic Purpose/Goals
        Since being authorized by the 1990 Farm Bill, the Forest
    Stewardship Program has:

       Served as the primary, most extensive (in reach and scope)
            private forest owner assistance program in the U.S.

       Successfully created and helped sustain a vast, effective
            network of forestry technical assistance providers and
            programs.

       Provided more that 330,000 comprehensive forest management
            plans covering more than 38 million acres nationwide.

       Reached more than five million forest landowners through a
            variety of technical and educational assistance programs.

       Established strong and effective partnerships with State
            Foresters, Conservation Districts and many other partners to
            provide for broader forest landowner participation in USDA
            conservation programs.

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Stewardship       34,128   35,630   34,119   52,988   36,978   42,517   31,667   30,522   29,369   35,941
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Forest Stewardship       33,024   32,398   33,328   35,313   43,604   40,873   38,345   30,103   29,502   20,720
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.

                             8. Annual Delivery Cost (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    Forest Stewardship (Indirect)                                            870    1,066    1,027      914      914
    Forest Stewardship (Direct)                                            1,907    1,230    1,371    1,209    1,123
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Essentially any private forest landowner is eligible to participate
    in the Forest Stewardship Program. However, the program strives,
    through its delivery partners, to reach landowners who might not
    otherwise have access to forest management information and assistance.
    Program outreach and extension activities are also focused on priority
    landscapes, such as those identified in State Forest Action Plans,
    where management is most likely to address pressing resource management
    concerns--or support the growth of local forest dependent markets and
    economies.
    10. Utilization (Participation) Data
        The following table details program utilization and participation
    for the past 3 years:

    ------------------------------------------------------------------------
                                           2008         2009         2010
    ------------------------------------------------------------------------
    Number of landowners receiving         149,260      145,976      132,348
     assistance
    Number of landowner education          723,155      569,968      229,959
     programs conducted
    New or revised Forest Stewardship    1,747,812    2,076,278    1,840,255
     Plans (acres covered)
    New or revised Forest Stewardship       14,231       15,949       14,764
     Plans (number of plans)
    Base NIPF acres in Important       315,309,885  315,220,112  438,202,042
     Forest Resource Areas
    Acres covered by current Forest     18,823,374   18,627,113   19,721,990
     Stewardship Plans (cumulative)
    Acres in Important Forest            8,088,291    8,559,798    9,180,010
     Resource Areas covered by
     current Forest Stewardship Plans
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        This program is not duplicative with others. It is the only Forest
    Service program focused on private forestland management and it often
    works in concert with the USDA Conservation Title programs.
    12. Waste, Fraud and Abuse
        There are no documented cases of waste, fraud or abuse in this
    program.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Urban and Community Forestry.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        For over 30 years, U&CF has provided assistance to cities, suburbs
    and towns, where more than 80% of Americans live, to improve the health
    of our urban and community forests for the benefit of all. The Urban
    and Community Forestry Program (U&CF) has some of the broadest
    authorities and mandates in the Agency to improve trees and forests
    across public and private lands where people live. All Americans
    benefit from the multitude of services that the urban tree canopy
    provides: improved human health and wellbeing, green jobs, energy
    conservation, improved air and water quality, carbon sequestration,
    recreation, and wildlife habitat. Urban and Community Forestry also
    provides support and funding for cutting-edge technologies and
    information, such as the ``i-Tree'' suite of local decision support
    tools that include urban forest benefits assessment, pest detection and
    storm response protocols.
    4. Purpose/Goals
        The Urban and Community Forestry Program promotes the benefits of
    tree cover in urban areas and communities; encourages maintenance of
    trees and community forests; and expands research and education efforts
    intended to improve the understanding of trees' economic,
    environmental, social and psychological, and energy conservation
    benefits. Technology advancements, such as i-Tree, educate communities
    about the local, tangible ecosystem services that trees provide and
    encourage the linkage of urban forest management activities with
    environmental quality and community livability.
    5. Success in Meeting Programmatic Purpose/Goals
        The Urban and Community Forestry Program uses the Community
    Accomplishments Reporting System (CARS) as a database to track state
    performance accomplishments and financial assistance provided to
    communities.

    FY 2008 7,139 communities assisted, 177 million people

    FY 2009 6,853 communities assisted, 173 million people

    FY 2010 7,102 communities assisted, 177 million people

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Urban                    37,908   39,726   39,955   49,607   32,023   31,404   29,063   33,505   30,377   35,225
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    Urban                    33,363   31,504   34,106   35,727   38,208   34,562   39,576   27,529   29,513   22,188
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.

                             8. Annual Delivery Cost (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    Urban (Indirect)                                                         804      677      652      705      705
    Urban (Direct)                                                           958      924      871      931      844
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        The Urban and Community Forestry Program is available to State
    Foresters or equivalent state agencies, interested members of the
    public, private nonprofit organizations and others. All states as well
    as the District of Columbia, Puerto Rico, the United States Virgin
    Islands, the Commonwealth of the Northern Mariana Islands, American
    Samoa and Guam, and other territories and possessions of the United
    States are eligible. To fully qualify for support from the U&CF
    Program, states (including Washington D.C. and the U.S. affiliated
    islands) are required to maintain the following elements: Urban and
    Community Forestry Program Coordinator, Volunteer/Partnership
    coordination, an Urban and Community Forest Council, and state program
    strategic plan (5 year).
        The Program is delivered through a continually expanding
    partnership network of state forestry agencies, local governments,
    nonprofit groups, the private sector, community organizations,
    volunteers, other Federal agencies, and other Forest Service programs.
    State forestry agencies are the primary partner in program delivery of
    financial, technical and educational assistance to communities. Their
    efforts include assisting communities to establish vital, sustainable
    urban forestry programs.
    10. Utilization (Participation) Data
        The Urban and Community Forestry Program uses the Community
    Accomplishments Reporting System (CARS) as a database to track state
    performance accomplishments and financial assistance provided to
    communities. UCF Program performance is measured on an annual basis by
    tracking the percentage of U.S. population living in communities that
    are ``Managing'' or ``Developing'' programs to plant, protect, and
    maintain their urban and community forestry trees and forests (as
    compared to total U.S. population living in communities). Communities
    ``managing'' programs have received state assistance to achieve all the
    following national performance measures: management plans, professional
    staff, ordinances/policies, and a local advisory group. Communities
    with ``developing'' programs have received state assistance to achieve
    at least one, but less than four of the national performance measures.

    FY 2008 7,139 communities assisted, 177 million people

    FY 2009 6,853 communities assisted, 173 million people

    FY 2010 7,102 communities assisted, 177 million people
    11. Duplication or Overlap with Other Programs
        This program is not duplicative with other programs.
    12. Waste, Fraud and Abuse
        There are no documented cases of waste, fraud or abuse in this
    program.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        State Fire Assistance (SFA).
    2. Subprograms/Department Initiatives
        The SFA program is split into two subprograms, SFA-SPCF and SFA-
    SPS2.
        SFA-SPCF funds are used to address critical preparedness needs for
    firefighter safety, increased initial attack capability, and training.
    An emphasis should be placed on funding areas that have developed or
    are developing Community Wildfire Protection Plans (CWPPs), FEMA hazard
    mitigation plans, or other collaboratively developed hazard mitigation
    plans. This is funded in the State and Private Forestry appropriation.
        SFA-SPS2 funds designated for community protection on priority
    landscapes shall only be used on priority landscapes identified in
    state assessments. The funds shall only be used for hazardous fuel
    reduction projects adjacent to communities at risk with an emphasis on
    biomass utilization in locations with existing biomass utilization
    infrastructure. The funds will be allocated 60 percent to the Western
    States, 25 percent to the Southern States, and 15 percent to the
    Northeastern States. This is funded in the Wildland Fire Management
    appropriation.
    3. Brief History
        SFA (formerly Rural Fire Prevention and Control) has been funded
    annually since 1911 to provide technical and financial assistance to
    states to improve wildfire protection capabilities.
    4. Purpose/Goals
        The SFA program provides matching financial assistance through
    partnership agreements to State Foresters for all fire management
    activities including preparedness activities, planning, training,
    hazardous fuel treatments, and the purchase and maintenance of
    equipment. Funding enables state and local fire protection
    organizations to be effective first responders for initial attack on
    wildland fires and to respond effectively to all types of disasters.
    5. Success in Meeting Programmatic Purpose/Goals
        The SFA program has been very successful in meeting its purposes
    and goals. Additional communities at risk have been able to develop
    Community Wildfire Management Plans (CWPPs) and to complete hazardous
    fuels reduction projects. Detailed information on the number of
    communities assisted, acres treated and CWPPs developed in provided in
    the response to Question 10.

                           6. Annual Budget Authority (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    State Fire Assistance    27,106   27,566   36,089   36,077   63,108   34,751   33,846   37,211   39,147   35,891
    National Fire Plan--     57,056   66,252   76,176   57,587   50,007   50,802   50,535   58,452   77,611   69,239
     State Fire Assistance
    ----------------------------------------------------------------------------------------------------------------
    * Excludes Transfers and Recoveries; includes carryover and supplementals.

                                7. Annual Outlays (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
    ----------------------------------------------------------------------------------------------------------------
    State Fire Assistance    23,581   50,194   17,477   36,490   47,860   41,543   35,213   31,723   33,438   25,621
    National Fire Plan--     19,492   34,632   41,477   45,455   44,416   37,061   43,813   47,403   37,924   39,885
     State Fire Assistance
    ----------------------------------------------------------------------------------------------------------------
    Outlays are actual disbursements.
    Funds that are obligated in one fiscal year may not be disbursed (for example, drawn down by a grantee) until a
      succeeding fiscal year or fiscal years. As such, the Outlays shown above are comprised of funds that were
      appropriated in that fiscal year and fiscal years prior. This is a standard practice for grants programs
      because grants generally cover a 5 year period and grantees may draw down that grant over that entire period.

                             8. Annual Delivery Cost (FY 2002-FY 2011): dollars in thousands
    ----------------------------------------------------------------------------------------------------------------
                                                                                                               BFY
                                                                           BFY      BFY      BFY      BFY      2011
                                                                           2007     2008     2009     2010     Est.
    ----------------------------------------------------------------------------------------------------------------
    State Fire Assistance (Indirect)                                         736      648      761      805      805
    State Fire Assistance (Direct)                                           877      839    1,016    1,064      845
    National Fire Plan--State Fire Assistance (Indirect)                      62       45       30       22       22
    National Fire Plan--State Fire Assistance (Direct)                        73       58       40       29       86
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        State Forestry Agencies.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
                                         FY 2008      FY 2009      FY 2010
    ------------------------------------------------------------------------
    Communities directly assisted            5,960        5,565        1,524
     with management plans, risk
     assessments, etc.
    Hazardous fuels reduction or             8,149        6,743        3,499
     mitigation projects conducted
    Acres treated to reduce hazardous      292,804      179,544      156,804
     fuels (direct Federal grant
     only)
    Acres treated to reduce hazardous      165,028      335,055      290,504
     fuels (leveraged through Federal
     funding)
    Communities at Risk covered by           4,629        5,567        5,757
     CWPP or equivalent
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        State Fire Assistance works in concert with the Volunteer Fire
    Assistance Program, which is limited to rural communities of 10,000
    people or less. The State Fire Assistance program is duplicative of the
    Department of the Interior's Rural Fire Assistance Program. However,
    that program has been proposed for termination due to duplication. The
    Department of Homeland Security also administers programs that
    partially overlap with some SFA activities, including training and the
    purchase of equipment, though DHS programs are provided nationwide and
    not focused on rural communities.
    12. Waste, Fraud and Abuse
        There have been no documented cases of waste, fraud or abuse in
    this program.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Healthy Forests Reserve Program (HFRP), prepared by USDA's Natural
    Resources Conservation Service (NRCS).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Title V of the Healthy Forests Restoration Act of 2003 (Public Law
    108-148) authorized the establishment of the Healthy Forests Reserve
    Program (HFRP) which was reauthorized by the 2008 Farm Bill.
        HFRP provides financial assistance for specific conservation
    actions completed by the landowner. As funds are made available, the
    NRCS Chief solicits project proposals State Conservationists have
    developed in cooperation with partnering organizations. States selected
    for funding provide public notice of the availability of funding within
    the selected area. HFRP offers four enrollment options:

       10 year restoration agreement for which the landowner may
            receive 50 percent of the average cost of the approved
            conservation practices;

       30 year contract (equivalent to the value of a 30 year
            easement) for which the landowner may receive 75 percent of the
            easement value of the enrolled land plus 75 percent of the
            average cost of the approved conservation restoration
            practices. This option is available to Indian Tribes only;

       30 year easement for which the landowner may receive 75
            percent of the easement value of the enrolled land plus 75
            percent of the average cost of the approved conservation
            practices; or

       Permanent easement for which landowners may receive 100
            percent of the easement value of the enrolled land plus 100
            percent of the average cost of the approved conservation
            practices.
    4. Purpose/Goals
        HFRP assists landowners in restoring, enhancing, and protecting
    forest ecosystems to: (1) promote the recovery of threatened and
    endangered species; (2) improve biodiversity; and (3) enhance carbon
    sequestration. HFRP supports the NRCS Mission Goal of Healthy Plant and
    Animal Communities.
    5. Success in Meeting Programmatic Purpose/Goals
        The following provides examples of HFRP results:
        Oregon: Partnership Protects Working Forest and Enhances Habitat.
    In FY 2010, NRCS partnered with the USFWS and the Oregon Department of
    Forestry (ODF) to provide private landowners the opportunity to create
    a northern spotted owl (NSO) habitat while maintaining a working
    forest. NSO habitat in the Pacific Northwest is an important criterion
    for defining healthy forests, making HFRP an excellent vehicle for this
    effort. NRCS developed HFRP long term management requirements and
    sideboards as a supplement to the ODF Forest Stewardship Plan on 11
    properties being offered for permanent easements.
        The supplements specify the long term management requirements and
    sideboards of each individual property; some properties opted for even-
    age stand management and others for the uneven-age stand management
    regime. The FSP-HFRP supplement recognizes the requirements of a State
    of Oregon Stewardship Agreement and will require that the landowner
    intends to meet or exceed all Oregon Forest Practices Act standards
    current at the time of approval including provisions for Riparian
    Management Areas. The information contained in the supplement provides
    guidance and requirements to reach landowner and program goals and
    objectives. The supplements include area regulation timelines and
    overall forest management practices for thinning, patch cuts, planting,
    canopy cover requirements and specific management regimes for each
    property.
        NRCS worked closely with USFWS and ODF to ensure consistency among
    agencies' requirements while developing the supplements. The
    supplements use forest management to enhance future NSO habitat and
    maintain existing habitat. NRCS, USFWS, and ODF entered into a
    programmatic Safe Harbor Agreement to provide assurances to the
    landowner if they manage the property according to the Forest
    Stewardship Plan supplement. NRCS develops conservation plans and
    landowner conservation program contracts to implement the conservation
    practices necessary for restoration, enhancement, and management for
    NSO as planned in the Forest Stewardship Plan supplement. NRCS has
    completed the supplement plans for 11 properties in western Oregon
    totaling 1,852 acres of valuable habitat for the endangered NSO on
    these potential permanent easements. The HFRP work has been an
    excellent demonstration of one-on-one conservation planning resulting
    in detailed landowner decisions while allowing management flexibility
    for plans that will stretch into perpetuity. This has been an excellent
    model for all nonindustrial forest planning.

                  6. Annual Budget Authority (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                     Funding (dollars in thousands)
    ------------------------------------------------------------------------
                           2002                                   --
                           2003                                   --
                           2004                                   --
                           2005                                   --
                           2006                                   --
                           2007                                   --
                           2008                                   --
                           2009                               $9,750
                           2010                               $9,750
                           2011                               $9,750
    ------------------------------------------------------------------------
    Note: Healthy Forests Reserve Program began Mandatory funding in 2009.

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
                     FY                         Outlays ($ in millions)
    ------------------------------------------------------------------------
                           2002                                   --
                           2003                                   --
                           2004                                   --
                           2005                                   --
                           2006                                   --
                           2007                                   --
                           2008                                   --
                           2009                                   $1
                           2010                                   $3
                           2011                                   $6
    ------------------------------------------------------------------------
    Note: Healthy Forests Reserve Program began Mandatory funding in 2009.

        HFRP FA funds support easement acquisition and restoration. Funds
    are expended when the easement is perfected or the practices necessary
    for restoration are installed and verified by NRCS personnel, both
    processes which may take over a year to complete. TA funds obligated in
    a given year are used for workload generated by the enrollment of new
    easements and workload generated by easements enrolled in prior years.
    The vast majority of TA funding tends to be expended in the year of
    obligation. FA funding represents the majority of program budget
    authority.

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

                                          FY 2007         FY 2008         FY 2009         FY 2010         FY 2011

    Program
                 Program Items

    Healthy Forests Reserve Program

          Conservation Planning and               19              12             180             187             301
           Technical Consultation
          Conservation                            21              15             382             398             641
           Implementation
          Financial Assistance--                   9              58             459             478             770
           Program Administration
          Indirect Costs                          78              66             314             328             529
                                     -------------------------------------------------------------------------------
            Sub-total Technical                  127             151           1,335           1,391           2,241
             Assistance
                                     -------------------------------------------------------------------------------
          Financial Assistance--Cost           2,349           1,835           1,191           6,226           7,509
           Share & Monetary
           Incentive
                                     ===============================================================================
            Total Costs                        2,476           1,986           2,526           7,617           9,750
            FTEs                                   1               2               5               6              23

    Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual; Fiscal Year 2011 is an estimate from the Fiscal Year
      2012 President's Budget submission. A copy of this section is an addendum to the Questionnaire.
    Financial assistance funding is identified on the line titled, ``Financial Assistance--Cost Share and Monetary
      Incentives.'' Funds associated with technical assistance are on the remaining four lines.

    9. Eligibility Criteria
        Only privately held land, including acreage owned by an Indian
    Tribe, is eligible for enrollment in HFRP. In addition, to be eligible,
    the landowner must commit to restoring, enhancing, or measurably
    increasing the likelihood of recovery of a threatened or endangered
    species or candidates for the Federal or state threatened or endangered
    species list, and must improve biological diversity or increase carbon
    sequestration. Land enrolled in HFRP must have a restoration plan that
    includes practices necessary to restore and enhance habitat for species
    listed as threatened or endangered or species that are candidates for
    the threatened or endangered species list. NRCS provides technical
    assistance to help owners comply with the terms of their HFRP
    restoration plans.
        Landowners may receive safe harbor assurance for land enrolled in
    the HFRP who agree, for a specified period, to protect, restore, or
    enhance their land for threatened or endangered species habitat. In
    exchange, landowners avoid future regulatory restrictions on the use of
    that land under the Endangered Species Act.
    10. Utilization (Participation) Data

                            Contract Fiscal Year 2010
    ------------------------------------------------------------------------
                             10 Year
                           Restoration         30 Year          Permanent
                           Agreements         Easements         Easements
    ------------------------------------------------------------------------
          Number 1                   1                 2                 9
           Acres 1               2,747             1,416             1,472
    Dollars Obligated         $599,988          $882,139        $4,994,249
    ------------------------------------------------------------------------
    1 Numbers currently reported in NEST are undergoing an intense quality
      assurance review.

    11. Duplication or Overlap with Other Programs
        To the extent that these programs each allow for 10 year
    restoration agreements to improve wildlife habitat, there is
    duplication and overlap with the WHIP program and the 10 year
    restoration agreement portion of HFRP.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Emergency Forest Restoration Program (EFRP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Food, Conservation, and Energy Act of 2008 added EFRP which is
    intended to provide emergency disaster assistance for nonindustrial
    private forestland similarly to assistance provided for farm land by
    the Emergency Conservation Program.
    4. Purpose/Goals
        EFRP was authorized by the 2008 Farm Bill to provide financial
    assistance to owners of nonindustrial private forestland to carry out
    emergency measures to restore land that has been damaged by a natural
    disaster.
    5. Success in Meeting Programmatic Purpose/Goals
        A 2010 supplemental appropriation provided $18 million to be
    available until expended. Over $15 million has been allocated which
    reserves funding for errors, omissions, and appeals and technical
    assistance. There are unfunded requests of approximately $23.6 million.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)

        Funding was appropriated by the 2010 Supplemental Appropriations Act. Funding for this program was obligated starting in FY 2011.

                 FY 2002 Through FY 2011 Budget Authority for Farm Service Agency Conservation Programs
                                                 (Dollars in thousands)
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
                             Actual   Actual   Actual   Actual   Actual   Actual   Actual   Actual   Actual    Est.
    ----------------------------------------------------------------------------------------------------------------
    Emergency Forest              0        0        0        0        0        0        0        0   18,000        0
     Restoration Program
    ----------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)

        The EFRP is a discretionary program account.

                 FY 2002 Through FY 2011 Budget Authority for Farm Service Agency Conservation Programs
                                                 (Dollars in thousands)
    ----------------------------------------------------------------------------------------------------------------
                              BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY      BFY
                              2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
                             Actual   Actual   Actual   Actual   Actual   Actual   Actual   Actual   Actual    Est.
    ----------------------------------------------------------------------------------------------------------------
    Emergency Forest              0        0        0        0        0        0        0        0   18,000        0
     Restoration Program
    ----------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2007-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

        Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining, repopulating, and economically thriving.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance

          Emergency Forest                                         0               0               0          18,000
           Restoration Program

                                                                                         9. Eligibility Criteria

        Land that is eligible under EFRP includes NIPF land or which all of the following are true:

           is physically located in a county or portion of a county that has been approved for EFRP

           has existing tree cover (or had tree cover immediately before the natural disaster and is suitable for growing trees)

           has damage to natural resources caused by a natural disaster that, if not treated, would impair or endanger the natural resources on
            the land and would materially affect future use of the land.

    10. Utilization (Participation) Data
        Over $15 million in requests have been funded since the November
    2010 publication of the EFRP rule in the Federal Register.

                                EFRP Allocations
    ------------------------------------------------------------------------
         State       Other--Winds     Wildfire       Tornado        Total
    ------------------------------------------------------------------------
               AL                                   $3,310,000    $3,310,000
              AR                                    $2,000,000    $2,000,000
              GA                                      $844,000      $844,000
              ID         $726,000                                   $726,000
              MN                                      $620,000      $620,000
              MS                                    $6,631,900    $6,631,900
              NH         $551,900                                   $551,900
              OH          $80,000                      $84,000      $164,000
              VT         $140,000                      $34,000      $174,000
                   ---------------------------------------------------------
      Total.......     $1,497,900             $0   $13,523,900   $15,021,800
    ------------------------------------------------------------------------

        There are 33 requests for which funds are not available totaling
    $23.6 million for EFRP as of July 12, 2011. Requests are from Alabama,
    Georgia, Mississippi, North Carolina, Tennessee, and Virginia due to
    April southeastern tornados, and Massachusetts and Ohio for June
    tornados.

                   EFRP Unfunded Requests as of July 12, 2011
    ------------------------------------------------------------------------
                                                                  Amount
        State                      Counties                      Requested
    ------------------------------------------------------------------------
             MS   Attala, Clarke, Monroe, Neshoba, Newton         $1,750,000
             NC   Bertie                                            $500,000
             MS   Choctaw, Noxubee, Webster, Winston              $3,255,741
             NC   Person                                             $15,000
              AL  Elmore, Fayette, Lawrence, Tallapoosa           $1,600,000
             GA   Jasper, Morgan                                    $176,100
             NC   Johnston                                           $10,000
              AL  Limestone                                         $100,000
             MS   Lafayette                                          $50,000
             GA   Bartow, Cherokee, Gordon, Harris, Pickens         $740,000
             GA   Floyd, Polk                                       $600,000
             GA   Catoosa, Dade, Walker                           $1,830,000
             NC   Harnett                                            $50,000
             NC   Cumberland                                        $350,000
             GA   Spalding                                          $500,000
             MS   Alcorn, Tishomingo                                 $55,000
             OH   Fulton                                              $8,250
             TN   Bledsoe                                           $100,000
             NC   Lee                                                $50,000
             AR   Hot Springs                                        $60,000
             NC   Jackson                                            $10,000
              AL  Colbert                                            $75,000
             TN   Marion, Sequatchie                                $600,000
             TN   Greene, Washington                                $125,000
             TN   Johnson                                           $150,000
              AL  Washington                                          $5,000
             TN   Bradley, Hamilton, Rhea                         $5,000,000
             MA   Hampden, Worcester                              $4,400,000
             VA   Smyth, Washington                                 $600,000
             AR   Johnson                                           $250,000
             MS   Lafayette                                         $463,812
             NC   Caldwell                                           $18,500
             TN   McMinn                                             $65,000
                                                             ---------------
      Total.....                                                 $23,562,403
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        There are no other current programs that duplicate or overlap the
    EFRP. The Conservation Reserve Program implemented the Emergency
    Forestry Conservation Reserve Program to restore land impacted by the
    2005 hurricanes. The Emergency Conservation Program restores farmland
    impacted by Natural disaster but does not address nonindustrial
    forestland
    12. Waste, Fraud and Abuse
        No waste fraud or abuse has been documented at this time.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--Energy
    1. Program Name
        Biobased Markets Program (BioPreferred' program--Section
    9002).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 9002 of the Farm Security and Rural Investment Act (2002
    Farm Bill) and Section 9002 of the Food, Conservation, and Energy Act
    (2008 Farm Bill) established a Federal procurement preference and
    voluntary label for biobased products. As defined in the 2008 Farm
    Bill, a biobased product is ``. . . determined by the Secretary to be a
    commercial or industrial product (other than food or feed) that is
    composed, in whole or in significant part, of biological products,
    including renewable domestic agricultural materials and forestry
    materials, or an intermediate ingredient or feedstock.'' Biobased
    products include such industrial products as cleaners, lubricants,
    biopolymers, building materials, insulation, roof coatings, fuel
    additives, and other sustainable industrial materials made from
    agricultural commodities.
    4. Purpose/Goals
        The mission of the BioPreferred' program is to develop
    and expand markets for biobased products through (1) preferred Federal
    procurement of biobased products government-wide and (2) a voluntary
    labeling program to raise consumer awareness and stimulate biobased
    product acquisition in the commercial sector.
    5. Success in Meeting Programmatic Purpose/Goals
        To date, USDA has promulgated BioPreferred' program
    guidelines and six rounds of regulations designating categories of
    biobased products for preferred Federal procurement. As a result, there
    are now 50 designated product categories. A seventh designation rule
    with 14 product categories should be promulgated later this month. When
    Round 7 is published, 64 categories and almost 9,000 products will be
    approved for preferred Federal procurement. USDA promulgated the
    voluntary labeling rule earlier this year; and over 430 products from
    150 companies have been certified to carry the USDA Certified Biobased
    label to date. In FY 2010, 88 percent of all applicable USDA contracts
    included biobased clauses or purchases, up from 80 percent in FY 2008
    and 84 percent in FY 2009. In addition, there are over 20,000 biobased
    products and the number and types of products continue to grow.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    CCC Transfer              1,000,000    1,000,000    1,000,000    1,000,000    1,000,000    1,000,000    1,000,000    2,000,000    2,000,000    2,000,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: $2,000,000 was transferred from CCC annually to Departmental Management beginning in FY 2009 when Departmental Management took over the program
      from the Office of the Chief Economist.

                                                               7. Annual Outlays (FY 2002-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Outlays                 (1,000,000)  (1,000,000)  (1,000,000)  (1,000,000)  (1,000,000)  (1,000,000)  (1,000,000)  (2,000,000)  (2,000,000)  (1,626,015)
    Balance                          --           --           --           --           --           --           --           --           --      373,985
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Outlays as of July 12, 2011

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    OCE BA Transfer             420,000      890,000      900,000      992,000      883,000      850,000      650,000      810,000      657,000      657,000
    Outlays                   (420,000)    (890,000)    (900,000)    (992,000)    (883,000)    (850,000)    (650,000)    (810,000)    (657,000)    (629,563)
                           ---------------------------------------------------------------------------------------------------------------------------------
      Balance                        --           --           --           --           --           --           --           --           --       27,437
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: A one-time transfer of $810,000 in BA was made from the Office of the Chief Economist in FY 2009. Outlays as of July 12, 2011.

    9. Eligibility Criteria
        Private companies ranging from very small businesses to very large
    businesses, which make and/or distribute biobased products, are
    eligible to participate in the BioPreferred' voluntary
    labeling program. Federal agencies are required to participate in the
    Federal procurement preference program.
    10. Utilization (Participation) Data
        Over 1,600 companies currently participate in the
    BioPreferred' program. Approximately 150 companies have
    products certified for the USDA Certified Biobased label.
    11. Duplication or Overlap with Other Programs
        There are no other programs that share the mission of the
    BioPreferred' program.
    12. Waste, Fraud and Abuse
        There have been no Office of Inspector General or Government
    Accountability Office audits of the program conducted on the
    BioPreferred' program in the last 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Biorefinery Assistance Program (Section 9003).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Biorefinery Assistance Program is authorized under Section 9003
    of the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
    as amended by Section 9001 of the Food, Conservation, and Energy Act of
    2008 (2008 Farm Bill). Through the 2008 Farm Bill, the Secretary of
    Agriculture is directed to make available:

       Grants to assist in paying the costs of the development and
            construction of demonstration-scale biorefineries to
            demonstrate the commercial viability of one or more processes
            for converting renewable biomass to advanced biofuels; and

       Guarantees for loans made to fund the development,
            construction, and retrofitting of commercial-scale
            biorefineries using eligible technology.

        Because the 2008 Farm Bill and subsequent appropriations bills do
    not provide any funds for the grant portion of the program, only the
    guaranteed loan portion has been implemented to date.
        As described below, the Biorefinery Assistance Program was
    initially implemented through a series of notices published in the
    Federal Register while a rule was being developed.
        The Agency initiated that Biorefinery Assistance Program with the
    issuance of a Notice of Funds Availability (NOFA) on November 20, 2008.
    This NOFA announced the acceptance of applications for loan guarantees
    and the availability of $75 million of mandatory budget authority in
    Fiscal Year 2009 to support loan guarantees. In response to this
    November 20, 2008, NOFA, a loan guarantee was approved for Sapphire
    Energy for $54.5 million, in conjunction with a $50 million grant from
    the Department of Energy (DOE). In addition, a Loan Note Guarantee was
    issued on July 19, 2011, for a $12.8 million loan guarantee to Fremont
    Community Digester.
        On May 6, 2010, the Agency issued another NOFA requesting
    applications for Fiscal Year 2010 funds of up to $150 million in budget
    authority. In response to this NOFA, the Agency issued three
    conditional commitments to INEOS New Plant Bioenergy, LLC, for $75
    million, Enerkem Corporation for $80 million, and Coskata, Inc., for
    $87.85 million.
        On April 16, 2010, USDA published a proposed rule on which the
    public was afforded the opportunity to comment. Comments were received
    from 42 commenters, yielding 352 individual comments on the proposed
    rule, which were grouped into categories based on similarity.
    Commenters included biorefinery owner/operators, community development
    groups, industry and trade associations, investment banking
    institutions, Rural Development personnel, and individuals. The Agency
    reviewed the comments and based, in part, on those comments developed
    an Interim Rule, which was published on February 14, 2011.
        Following the publication of the Interim Rule, the Agency issued a
    NOFA on March 11, 2011, announcing the availability of approximately
    $129 million in mandatory budget authority for Fiscal Year 2011. This
    level of funding supports $463 million in available program level.
        A NOFA of Application Deadline was published on June 6, 2011,
    extending the period of time for acceptance of applications for Fiscal
    Year 2011 program funds until July 6, 2011. The Agency is reviewing 11
    applications requesting almost $1 billion in loan guarantee support.

        Farm to Fly Project

        In an effort to reach the Renewable Fuel Standard (RFS2) annual
    renewable fuel volume targets, culminating in an overall level of 36
    billion gallons in 2022, USDA is examining air transportation fuel as a
    key component in achieving the mandate. Twenty-one (21) million gallons
    of the RFS2 mandate will come from advance biofuels other than corn
    kernel starch ethanol, which has nearly reached the 15 billion gallons
    allowed under RFS2.
        The purpose of this effort is to support the Administration's plan
    to meet the RFS2 by identifying barriers associated with availability
    of aviation biofuel commercialization and provide recommendations on
    how to best overcome these barriers. The project seeks to develop a
    program to fund and install commercial-scale biofuel production that
    will provide aviation grade fuel.

        USDA/Department of Navy Hawaii Project

        The Department of the Navy (DON) plans to reduce its reliance on
    foreign oil to meet its energy needs and views the use of advanced
    biofuels as an important pathway to reach its energy security goals.
    The USDA and the DON have signed a Memorandum of Understanding (MOU)
    outlining the mutual effort to support the use of advanced biofuels and
    other forms of renewable energy. The State of Hawaii has been selected
    as a pilot for the development of a model for future mutual support for
    accomplishing the DON's energy goals.
    4. Purpose/Goals
        The 2008 Farm Bill identifies the purpose of this program as: ``the
    development of advanced biofuels, so as to--

        (1) Increase the energy independence of the United States;

        (2) Promote resource conservation, public health, and the
            environment;

        (3) Diversify markets for agricultural and forestry products and
            agriculture waste material; and

        (4) Create jobs and enhance the economic development of the rural
            economy.''

        The program also supports Presidential Energy Independence and
    Security Goals:

       To Develop and Secure America's Energy Supplies

       To Provide Consumers with Choices to Reduce Costs and
            Save Energy, and

       To Innovate Our Way to a Clean Energy Future.
    5. Success in Meeting Programmatic Purpose/Goals
        To date, a total of $415.1 million has been obligated in loan
    guarantee authorities to leverage an estimated $1.5 billion in total
    project costs toward the construction and retrofitting of commercial
    scale advanced biofuel facilities.
        When operational, these facilities are expected to produce 113
    million gallons of advanced biofuels, generate 24.6 million kilowatts
    hours of renewable electricity, and reduce green house gas emissions by
    an estimated 0.6 million metric tons of carbon dioxide.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        Funding Levels:
        The 2008 Farm Bill provided $75 million (budget authority) in FY
    2009 and $245 million in FY 2010 for commercial-scale biorefinery loan
    guarantees. The farm bill also authorized discretionary funding of up
    to $150 million per year starting in FY 2009 and continuing through FY
    2012 for both demonstration and commercial scale biorefineries.
    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        The Biorefinery Assistance Program was enacted under the 2008 Farm
    Bill. Thus, there were no annual outlays in Fiscal Years 2002 through
    2008. Annual outlays for Fiscal Years 2009 through 2011 are shown
    below.

    ------------------------------------------------------------------------
         FY 2009 Actual           FY 2010 Actual           FY 2011 Est.
    ------------------------------------------------------------------------
                        0              $27,000,000             $23,000,000
    ------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        As noted above, the Biorefinery Assistance Program was enacted
    under the 2008 Farm Bill. Thus, there were no annual delivery costs in
    Fiscal Years 2002 through 2008. Annual delivery costs for Fiscal Years
    2009 through 2011 are shown below.

    ------------------------------------------------------------------------
                              FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                   (000)           (000)           (000)
    ------------------------------------------------------------------------
    Direct administrative               $474            $261            $261
     costs
    Indirect administrative             $233            $671            $671
     costs
    ------------------------------------------------------------------------

    9. Eligibility Criteria
        Being a guaranteed loan program, the Biorefinery Assistance Program
    has eligibility requirements for both borrower and lenders; it also
    identifies when an otherwise eligible borrower would be considered
    ineligible. Of these requirements, only those for eligible borrowers
    are specified in the 2008 Farm Bill.

        A. Borrower Eligibility

              Eligible borrowers. To be eligible, a borrower must meet the
            requirements the following requirements:

                      (1) The borrower must be one of the following:

                              (i) An individual;
                              (ii) An entity;
                              (iii) An Indian tribe;
                              (iv) A unit of State or local government;
                              (v) A corporation;
                              (vi) A farm cooperative;
                              (vii) A farmer cooperative organization;
                              (viii) An association of agricultural
                            producers;
                              (ix) A National Laboratory;
                              (x) An institution of higher education;
                              (xi) A rural electric cooperative;
                              (xii) A public power entity; or
                              (xiii) A consortium of any of the above
                            entities.

                      (2) Each borrower must have, or obtain before loan
                    closing, the legal authority necessary to construct,
                    operate, and maintain the proposed facility and
                    services and to obtain, give security for, and repay
                    the proposed loan.

              The Biorefinery Assistance Program also identifies certain
            conditions under which a borrower will be considered ineligible
            for a guarantee. These are if the borrower, any owner with more
            than 20 percent ownership interest in the borrower, or any
            owner with more than three percent ownership interest in the
            borrower if there is no owner with more than 20 percent
            ownership interest in the borrower:

                      (1) Has an outstanding judgment obtained by the U.S.
                    in a Federal Court (other than U.S. Tax Court),
                      (2) Is delinquent on the payment of Federal income
                    taxes,
                      (3) Is delinquent on a Federal debt, or
                      (4) Is debarred or suspended from receiving Federal
                    assistance.

        B. Lender Eligibility

                      (1) An eligible lender is any Federal or state
                    chartered bank, Farm Credit Bank, other Farm Credit
                    System institution with direct lending authority, and
                    Bank for Cooperatives. These entities must be subject
                    to credit examination and supervision by either an
                    agency of the United States or a state. Credit unions
                    subject to credit examination and supervision by either
                    the National Credit Union Administration or a state
                    agency, and insurance companies regulated by a state or
                    national insurance regulatory agency are also eligible
                    lenders. The National Rural Utilities Cooperative
                    Finance Corporation is also an eligible lender. Savings
                    and loan associations, mortgage companies, and other
                    lenders as identified in 7 CFR 4279.29(b) are not
                    eligible.
                      (2) The lender must demonstrate the minimum
                    acceptable levels of capital specified in paragraphs
                    (c)(2)(i) through (c)(2)(iii) of this section at the
                    time of application and at time of issuance of the loan
                    note guarantee. This information may be identified in
                    Call Reports and Thrift Financial Reports. If the
                    information is not identified in the Call Reports or
                    Thrift Financial Reports, the lender will be required
                    to calculate its levels and provide them to the Agency.

                              (i) Total Risk-Based Capital ratio of ten
                            percent or higher;
                              (ii) Tier 1 Risk-Based Capital ratio of six
                            percent or higher; and
                              (iii) Tier 1 Leverage Capital ratio of five
                            percent or higher.

                              (NOTE: These three terms have the meaning
                            given them under applicable Federal Deposit
                            Insurance Corporation regulations.)

                      (3) The lender must not be debarred or suspended by
                    the Federal Government.
                      (4) If the lender is under a cease and desist order
                    from a Federal agency, the lender must inform the
                    Agency. The Agency will evaluate the lender's
                    eligibility on a case-by-case basis given the risk of
                    loss posed by the cease and desist order.
                      (5) The Agency, in its sole determination, will
                    approve applications for loan guarantees only from
                    lenders with adequate experience and expertise, from
                    similar projects, to make, secure, service, and collect
                    loans approved under this subpart.
    10. Utilization (Participation) Data
        To date, seven projects have been approved for Biorefinery
    Assistance guaranteed loans. Of the seven approved projects, one
    project entered into servicing and one project was de-obligated:

       Range Fuels, Inc. (cellulosic ethanol)--$80 million
            guaranteed loan approved 1/16/09. Loan closed on 2/10/10. On
            January 3, 2011, Range Fuels failed to make the scheduled
            payment for principal and interest on the Bonds. Range Fuels is
            current on deferred principal/interest only payments and
            working to find additional partners with capabilities of
            financial support. The Agency is reviewing a plan from the
            Lender outlining the potential transfer/sale.

       SoyMor Biodiesel, LLC (waste corn oil/distillers syrup
            from ethanol facilities)--$25 million application approved on
            6/10/09. On September 1, 2010, RD received letter from
            (American Bank) stating the lender no longer qualifies as an
            eligible lender, having fallen below the minimum acceptable
            levels of capital. SoyMor was unable to obtain a new lender.
            The $25 million was de-obligated on 3/2/10.

       Sapphire Energy (algae to advanced aviation fuel)--$54.5
            million guaranteed loan approved 12/03/2009. Agency continues
            to work with Lender to close the loan.

       Freemont Community Digester (anaerobic digester/will
            process community waste, mostly food and beverage; has a
            contractual arrangement to sell waste CO2)--$12.75
            million loan guarantee approved 10/15/2010. Loan closed; Agency
            issued a loan note guarantee on July 19, 2011.

       Enerkem Corporation (Cellulosic Ethanol)--$80 million
            guaranteed loan approved 1/4/2011.

       INEOS New Planet BioEnergy, LLC (Cellulosic Ethanol)--
            $75 million guaranteed loan approved 1/4/2011. Agency continues
            to work with Lender to close the loan.

       Coskata, Inc. (Cellulosic Ethanol)--$87.85 million
            guaranteed loan approved 6/3/2011. Agency continues to work
            with Lender to close the loan.
    11. Duplication or Overlap with Other Programs
        The Biorefinery Assistance Program is not a duplicate of any other
    USDA program. There are no other programs that have the sole purpose of
    funding biorefineries involved in advanced biofuel production, and that
    involve the private sector on each transaction.
    12. Waste, Fraud and Abuse
        The Biorefinery Assistance Program is a new program enacted with
    the 2008 Farm Bill. No Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of the program was conducted in the
    past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Repowering Assistance Program (Section 9004).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Repowering Assistance Program is authorized under Section 9004
    of the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
    as amended by Section 9001 of the Food, Conservation, and Energy Act of
    2008 (2008 Farm Bill). Through the 2008 Farm Bill, the Secretary of
    Agriculture is directed to ``make payments to any biorefinery that
    meets the requirements of this section for a period determined by the
    Secretary.'' The 2008 Farm Bill provided $35 million over the life of
    the 2008 Farm Bill.
        As described below, the Repowering Assistance Program was initially
    implemented through a series of notices published in the Federal
    Register while a rule was being developed.
        The Agency initiated that Repowering Assistance Program with the
    issuance of a Notice of Funds Availability (NOFA) on June 12, 2009.
    This NOFA announced the acceptance of applications and the availability
    of $20 million to make payments for the conversion of biorefinery
    heating and power systems to renewable biomass. On May 6, 2010, the
    Agency issued a NOFA releasing another $8 million in budget authority
    for FY 2010.
        On April 16, 2010, USDA published a proposed rule on which the
    public was afforded the opportunity to comment. Comments were received
    from eight commenters, yielding 30 individual comments, which were
    grouped into similar categories. Commenters included biorefinery owner/
    operators, Rural Development personnel, trade associations, and
    individuals. The Agency reviewed the comments and based, in part, on
    those comments developed an Interim Rule, which was published on
    February 11, 2011.
        Following the publication of the Interim Rule, a NOFA was published
    on March 11, 2011, to announce the availability of approximately $25
    million in assistance payments.
    4. Purpose/Goals
        The purpose of the program as encouraging eligible biorefineries
    that use fossil fuels to produce heat or power to operate the
    biorefinery to replace such fossil fuels with renewable biomass.
        The program also supports Presidential Energy Independence and
    Security Goals:

       To Develop and Secure America's Energy Supplies;

       To Provide Consumers with Choices to Reduce Costs and
            Save Energy; and

       To Innovate Our Way to a Clean Energy Future.
    5. Success in Meeting Programmatic Purpose/Goals
        One applicant, Lincolnway Energy, LLC, received an award of $1.9
    million in response to the FY 2009 funding notice. Two applications,
    which were recently received, are pending with the Agency and total
    $5.5 million. Thus, to date, approximately $7.5 million of the
    available $35 million for the program may be expended. The amount of
    energy that would be replaced at these three projects is: 983,436
    dekatherms; 1,696,678 dekatherms; and 2,050 kilowatt hours per day.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        Funding Levels:
        The 2008 Farm Bill provided $35 million to remain available until
    expended. The 2008 Farm Bill also authorizes additional discretionary
    funding of up to $15 million per year, from FY 2009 through 2012. To
    date, no discretionary funds have been appropriated.

    ------------------------------------------------------------------------
                                                FY 2009 through FY 2011
    ------------------------------------------------------------------------
    Repowering Assistance Payments                        35,000,000
    ------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        The Repowering Assistance Program was enacted under the 2008 Farm
    Bill. Thus, there were no annual outlays in Fiscal Years 2002 through
    2008. In addition, although the Agency has approved one application for
    payment, no outlays in Fiscal Years 2009 through 2011 have yet to be
    made.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        Because they are both Energy Assistance Payments, the Agency tracks
    the Repowering Assistance Program and the Advanced Biofuel Payment
    Program together. Thus, the Agency does not have information on Annual
    Delivery Cost per program. The following table presents the Annual
    Delivery Cost for both program combined. Please note that because these
    two programs were initiated with the 2008 Farm Bill, there are no
    delivery costs from Fiscal Years 2002 through 2008.

                           Energy Assistant Payments:
    Repowering Assistance Payments & Bioenergy Program for Advanced Biofuels
                                    Payments
    ------------------------------------------------------------------------
                                   2009            2010            2011
    ------------------------------------------------------------------------
    Program Level                         $0         $20,503         $85,000
    Budget Authority                       0          20,503          85,000
    Administrative Costs                 418             261             248
     (Direct)
    Administrative Costs                 196             671             639
     (Indirect)
                             -----------------------------------------------
      Total Costs                        614          21,435          85,887
    ------------------------------------------------------------------------
    Note: These numbers are consistent with the published ``Full Cost by
      Secretary's Strategic Priorities'' section of the Explanatory Notes
      for Fiscal Years 2009 through 2012 President's Budget submissions. In
      the table above, Fiscal Years 2007 through 2010 amounts are actual;
      Fiscal Year 2011 is an estimate from the Fiscal Year 2012 President's
      Budget submission.

    9. Eligibility Criteria
        As stated in the authorizing statute: ``To be eligible to receive a
    payment under this section, a biorefinery shall demonstrate to the
    Secretary that the renewable biomass system of the biorefinery is
    feasible based on an independent feasibility study that takes into
    account the economic, technical and environmental aspects of the
    system.'' The Interim Rule requires the applicant to submit a such
    feasibility study that has been conducted by an independent qualified
    consultant, who has no financial interest in the biorefinery.
        The authorizing statute also requires that the biorefinery at which
    the repowering project is to be implemented must have been in existence
    on or before June 18, 2008 (the date of the 2008 Farm Bill).
        The Interim Rule also includes additional criteria for an applicant
    to be eligible for this program, as described below.

          (1) Timely complete application submission. To be eligible for
            this program, the applicant must submit a complete application
            within the application period.
          (2) Multiple biorefineries. Corporations and entities with more
            than one biorefinery can submit an application for only one of
            their biorefineries. However, if a corporation or entity has
            multiple biorefineries located at the same location, the entity
            may submit an application that covers such biorefineries
            provided the heat and power used in the multiple biorefineries
            are centrally produced. For example, a corporation or entity
            may make one application, that application may include multiple
            projects, so long as they are served by one repowering project.
            Example of an acceptable application: Three plants use process
            heat from a single Repowering Project located on the plant
            site. Example of an unacceptable application: Two plants owned
            by the same entity are located 10 miles apart and each is
            powered by a different system in which the applicant proposes
            two separate Repowering Projects to replace the two existing
            systems.
          (3) Cost-effectiveness. The application must be awarded at least
            minimum points (at least five points) for cost-effectiveness.
          (4) Percentage of reduction of fossil fuel use. The application
            must be awarded at least minimum points (at least five points)
            for percentage of reduction of fossil fuel use.
          (5) Full project financing. The applicant must demonstrate that
            it has sufficient funds or has obtained commitments for
            sufficient funds to complete the repowering project taking into
            account the amount of the payment request in the application.

        In addition, a project is not eligible for this program if it is
    using feedstocks for repowering that are feed grain commodities that
    received benefits under Title I of the Food, Conservation, and Energy
    Act of 2008. This ineligibility provision is included to prevent
    payment to a feedstock that is an underlying commodity that received a
    payment under Title I.
    10. Utilization (Participation) Data
        Since the program's inception, the Agency received ten applications
    for repowering assistance. The current disposition of these
    applications is as follows:

       1 applicant has accepted the conditional commitment

       2 applicants are currently under review

       4 applicants were issued conditional commitments, but
            elected to withdraw their applications

       1 applicant accepted, but did not proceed with project
            implementation

       2 applicants were determined to be ineligible
    11. Duplication or Overlap with Other Programs
        The Repowering Assistance Program is not a duplicate of any other
    USDA program. In addition, the Repowering Assistance Program does not
    duplicate any other Federal program, based on our understanding of
    those programs.
    12. Waste, Fraud and Abuse
        The Repowering Assistance Program is a new program enacted with the
    2008 Farm Bill. No Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of the program was conducted in the
    past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Advanced Biofuel Payment Program (Section 9005).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Advanced Biofuel Payment Program is authorized under Section
    9005 of the Farm Security and Rural Investment Act of 2002 (2002 Farm
    Bill) as amended by Section 9001 of the Food, Conservation, and Energy
    Act of 2008 (2008 Farm Bill). Through the 2008 Farm Bill, the Secretary
    of Agriculture is directed to ``make payments to eligible producers to
    support and ensure an expanding production of advanced biofuels.''
        As described below, the Advanced Biofuel Payment Program was
    initially implemented through a series of notices published in the
    Federal Register while a rule was being developed.
        The 2008 Farm Bill provided $55 million in funding for 2009. A
    Notice of Contract Proposals (NOCP) for $30 million to make payments to
    biorefineries for the production of advanced biofuels (other than corn
    kernel starch) was published in the Federal Register on June 12, 2009.
    In December 2009, the Agency made payments to 141 producers totaling
    $14.7 million for FY 2009 awards. A NOCP was published on March 12,
    2010, making the remaining funding from the 2009 NOCP of $15.2 million
    available; the application window closed on June 15, 2010. On August
    18, 2010, the Agency issued another notice in the Federal Register that
    rescinded the March 12, 2010, notice to allow previously excluded
    advanced biofuel producers (i.e., those that did not meet the rural
    area and citizenship requirements) to apply for and receive Fiscal Year
    2009 program funds. Payments for Fiscal Year 2009 were made in August
    and December, 2010.
        On April 16, 2010, USDA published a proposed rule on which the
    public was afforded the opportunity to comment. Comments were received
    from 1,090 commenters yielding over 165 individual comments, which were
    grouped into similar categories. Commenters included Members of
    Congress, Rural Development personnel, trade associations, state
    agencies, universities, environmental organizations, and individuals.
    The Agency reviewed the comments and based, in part, on those comments
    developed an Interim Rule, which was published on February 11, 2011.
        A NOFA was published simultaneously with the interim rule to
    announce $80 million in payment assistance to eligible producers for FY
    2010 production. A second notice was published to extend the
    application deadline until May 6, 2011. A NOFA to announce $85 million
    in payment assistance for FY 2011 was published on March 11, 2011. The
    Agency is currently reviewing the payment requests.
    4. Purpose/Goals
        The 2008 Farm Bill identifies the purpose of the program as
    providing payments to producers to support and expand production of
    advanced biofuels (refined from sources other than corn kernel starch.)
        The program also supports Presidential Energy Independence and
    Security Goals:

       To Develop and Secure America's Energy Supplies

       To Provide Consumers with Choices to Reduce Costs and
            Save Energy, and

       To Innovate Our Way to a Clean Energy Future
    5. Success in Meeting Programmatic Purpose/Goals
        To date, all funds made available under this program have been
    either distributed or are to be distributed once final payment
    calculations have been made.
    6. Annual Budget Authority (FY 2002-FY 2011)
        Funding Levels:
        The 2008 Farm Bill provides mandatory funding of $55 million in FYs
    2009 and 2010, $85 million in FY 2011, and $105 million in FY 2012.
    Additionally, the 2008 Farm Bill authorizes discretionary funds of up
    to $25 million per year, from FY 2009 to 2012.

    ------------------------------------------------------------------------
                                           2009         2010         2011
    ------------------------------------------------------------------------
    Advanced Biofuel Payment Program   $55 million  $55 million  $85 million
    ------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011)
        The Advanced Biofuel Payment Program was enacted under the 2008
    Farm Bill. Thus, there were no annual outlays in Fiscal Years 2002
    through 2008.

    ------------------------------------------------------------------------
                                      2009          2010           2011
    ------------------------------------------------------------------------
    Advanced Biofuel Payment                $0   $18,547,000    $136,000,000
     Program
    ------------------------------------------------------------------------
    Note: Outlays are not a one to one correlation with Budget Authority.
      Some programs disburse over numerous years. Undisbursed balances are
      carried forward for future year outlays.

    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        Because they are both Energy Assistance Payments, the Agency tracks
    the Repowering Assistance Program and the Advanced Biofuel Payment
    Program together. Thus, the Agency does not have information on Annual
    Delivery Cost per program. The following table presents the Annual
    Delivery Cost for both programs combined. Please note that because
    these two programs were initiated with the 2008 Farm Bill, there are no
    delivery costs from Fiscal Years 2002 through 2008.

                           Energy Assistant Payments:
    Repowering Assistance Payments & Bioenergy Program for Advanced Biofuels
                                    Payments
    ------------------------------------------------------------------------
                                   2009            2010            2011
    ------------------------------------------------------------------------
    Program Level                         $0         $20,503         $85,000
    Budget Authority                       0          20,503          85,000
    Administrative Costs                 418             261             248
     (Direct)
    Administrative Costs                 196             671             639
     (Indirect)
                             -----------------------------------------------
      Total Costs                        614          21,435          85,887
    ------------------------------------------------------------------------
    Note: These numbers are consistent with the published ``Full Cost by
      Secretary's Strategic Priorities'' section of the Explanatory Notes
      for Fiscal Years 2009 through 2012 President's Budget submissions. In
      the table above, Fiscal Years 2007 through 2010 amounts are actual;
      Fiscal Year 2011 is an estimate from the Fiscal Year 2012 President's
      Budget submission.

    9. Eligibility Criteria
        As provided in the authorizing statute, to receive a payment under
    this program, the applicant must be an ``eligible producer,'' which
    means a producer of advanced biofuels. In addition, to receive a
    payment under this program, an eligible producer must meet any other
    requirements of Federal and state law (including regulations)
    applicable to the production of advanced biofuels. In addition, the
    Interim Rule states that public bodies and educational institutions are
    not eligible for this program.
        The Interim Rule also has eligibility requirements specific to the
    biofuel. For an advanced biofuel to be eligible, each of the following
    conditions must be met, as applicable. Notwithstanding the provisions
    for biofuel eligibility, flared gases are not eligible.

       The advanced biofuel must meet the definition of advanced
            biofuel and be produced in a state;

       The advanced biofuel must be a solid, liquid, or gaseous
            advanced biofuel;

       The advanced biofuel must be a final product; and

       The advanced biofuel must be sold as an advanced biofuel
            through an arm's length transaction to a third party.

        The Interim Rule also identifies conditions under which an
    otherwise eligible producer will be determined to be ineligible. These
    conditions are, if the producer:

       Refuses to allow the Agency to verify any information
            provided by the advanced biofuel producer under this subpart,
            including information for determining applicant eligibility,
            advanced biofuel eligibility, and application payments;

       Fails to meet any of the conditions set out in this subpart,
            in the contract, or in other Program documents; or

       Fails to comply with all applicable Federal, state, or local
            laws.

        The Agency will determine an applicant's eligibility for
    participation in this Program.
    10. Utilization (Participation) Data
        In FY 2010, 141 payments were disbursed providing $18.5 million in
    advanced biofuel assistance. In FY 2011, 122 payments have been
    disbursed to provide $11.5 million in advanced biofuel assistance. A
    total of $30 million in advanced biofuels payment assistance has been
    disbursed to date.
    11. Duplication or Overlap with Other Programs
        The Advanced Biofuel Payment Program is not a duplicate of any
    other USDA program. In addition, the Advanced Biofuel Payment Program
    does not duplicate any other Federal program, based on our
    understanding of those programs.
    12. Waste, Fraud and Abuse
        The Advanced Biofuel Payment Program is a new program enacted with
    the 2008 Farm Bill. No Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of the program was conducted in the
    past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Biodiesel Fuel Education Program (Section 9006).
    2. Subprograms/Department Initiatives
        Section 9004 of the Farm Security and Rural Investment Act of 2002
    authorized competitive grants to educate governmental and private
    vehicle operators, and the public about the benefits of biodiesel fuel
    use. Section 9001 of the 2008 Farm Bill reauthorized the program and
    renumbered its authorization statute as section 9006 of the 2002 Act.
        The Secretary of Agriculture delegated this authority to the
    Department's Chief Economist, who in turn formed the Biodiesel
    Education Oversight Committee to direct the program. The Committee
    includes members from USDA's Foreign Agricultural Service, Rural
    Development, Office of Energy Policy and New Uses, National Institute
    of Food and Agriculture (NIFA), and the Department of Energy. The
    Committee established the initial guidelines and goals of the Program,
    manages the grant selection process, and monitors the progress of the
    Program.
    3. Brief History
        The 2002 Farm Bill authorized funding of $1 million per year from
    FY 2003 through FY 2007 for competitively awarded education grants.
    With guidance from NIFA, which has extensive experience in implementing
    grant programs and rule making, the oversight committee drafted a
    request for proposals, which was submitted to the Office of General
    Counsel for clearance in January 2003. A notice of request for
    applications and the proposed rule were issued in the Federal Register
    July, 2003. The final rule was issued September, 2003. The oversight
    committee selected a panel of experts from within and outside
    government to review the proposals, identify eligible applicants, and
    make recommendations to awarding officials. Two continuation grants
    were awarded; one to the National Biodiesel Board (NBB) and the other
    to the University of Idaho to implement the Program through FY 2007.
        Funding was reauthorized by Section 9006 of the 2008 Farm Bill for
    each fiscal year from 2008 through 2012. Once again with the help of
    NIFA, the oversight committee drafted a request for applications that
    was posted in August 2008. A panel of expert reviewers was selected by
    the committee to review the applications that were submitted. Two
    continuation grants were awarded; one to the National Biodiesel Board
    (NBB) and the other to the University of Idaho to implement the Program
    through FY 2012.
    4. Purpose/Goals
        The purpose of the Program is to provide education to the public,
    government, and private entities on the benefits of biodiesel use.
    Education raises the awareness of the benefits of using biodiesel,
    resulting in a rise in consumer demand. Increasing the use of biodiesel
    will help the U.S. diversify its transportation fuel supply and develop
    new domestic sources of energy. The program includes the following
    goals:

       Identify and document the benefits of biodiesel, including
            environmental and economic benefits

       Enhance current efforts to collect and disseminate
            information

       Coordinate with other biodiesel programs to avoid redundancy
            and leverage resources

       Create a nationwide networking system that delivers
            consistent information

       Help insure fuel quality, fuel safety, and consumer
            confidence
    5. Success in Meeting Programmatic Purpose/Goals
        Biodiesel production was minimal in the United States when this
    program began in 2003, but thanks to Federal and state policy
    initiatives, including the Biodiesel Education Program, the industry
    has grown rapidly. Awareness of biodiesel among Americans has increased
    markedly since the Biodiesel Education Program began in 2003--consumer
    awareness of biodiesel has grown from 27 percent to 86 percent. Much
    progress has been made over the past several years in garnering auto,
    engine and equipment manufacturers support for the use of biodiesel. At
    the onset of the Biodiesel Education Program, most engine manufacturers
    were apprehensive about using biodiesel, but now nearly 60% of U.S.
    manufacturers support the use of biodiesel blends in at least some of
    their equipment.
        The Program helped the biodiesel industry grow by providing
    information to a broad spectrum of consumers and producers, including
    government fleet managers, truckers, petroleum marketers, automobile
    companies, and health groups. Education materials have been developed,
    including biodiesel technical reports to help users better understand
    the fuel properties of biodiesel, e.g., lower greenhouse gas emissions
    compared to petroleum diesel. In addition, public radio and television
    programs demonstrating the benefits of biodiesel have been broadcasted
    nationally. The current grantees (the National Biodiesel Board and the
    University of Idaho) have become information clearing houses for
    biodiesel and have national reputations in providing expert guidance on
    producing biodiesel, maintaining fuel quality, and insuring fuel
    safety. Program funds have been used for organizing national
    conferences, conducting technical workshops, and developing
    partnerships with stakeholders, such as, biodiesel producers, engine
    manufacturers, health organizations, environmental groups, and State
    Department of Transportation Offices.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Biodiesel Education Program                0  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Biodiesel Education Program                0  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000  $1,000,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011)
        The cost to NIFA for administering the program is $40,000 per year.
    9. Eligibility Criteria
        Eligible entities are nonprofit organizations, institutions of
    higher learning that have demonstrated knowledge of biodiesel
    production, use, and distribution. Qualified entities have demonstrated
    the ability to conduct educational and technical support programs.
    10. Utilization (Participation) Data
        Two continuation grants were awarded in 2003 to conduct the program
    through 2007; and two continuation grants were awarded in 2008 to
    conduct the program through 2012.
    11. Duplication or Overlap with Other Programs
        The Biodiesel Education Program is not a duplicate of other USDA
    programs.
    12. Waste, Fraud and Abuse
        There have been no Office of Inspector General or Government
    Accountability Office audits of the program conducted on the Biodiesel
    Fuel Education Program in the past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Rural Energy for America Program (Section 9007).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 9006, Title IX, of the Farm Security and Rural Investment
    Act of 2002 (2002 Farm Bill) established the Renewable Energy Systems
    (RES) and Energy Efficiency Improvements (EEI) Program. On October 5,
    2004, the Agency proposed a loan and grant program for renewable energy
    systems and energy efficiency improvements under Section 9006 of the
    2002 Farm Bill. Based on comments received, the Agency developed a
    final rule, which was promulgated on July 18, 2005. This rule
    established the RES and EEI program for making grants, loan guarantees,
    and direct loans to farmers and ranchers (agricultural producers) and
    to rural small businesses to purchase renewable energy systems and make
    energy efficiency improvements. Funds were never authorized for the
    direct loan program, such that the Agency never implemented the direct
    loan portion of the program.
        Subsequent to the 2002 Farm Bill, Congress passed the Food,
    Conservation, and Energy Act of 2008 (2008 Farm Bill), which amended
    Title IX of the 2002 Farm Bill. Under the 2008 Farm Bill and Section
    9007 of the amended 2002 Farm Bill, the Agency was authorized to
    continue providing to agricultural producers and rural small businesses
    loan guarantees and grants for the development and construction of RES
    and EEI projects. In addition to the current set of renewable energy
    projects eligible for funding (i.e., bioenergy, anaerobic digesters,
    electric geothermal, direct geothermal, solar, hydrogen, and wind), the
    2008 Farm Bill expanded the program to include two new renewable energy
    technologies: hydroelectric and ocean energy. Further, the 2008 Farm
    Bill authorized the Agency to provide grants specifically for energy
    audits, renewable energy development assistance, and RES feasibility
    studies.
        As provided in the 2008 Farm Bill, the expanded program is referred
    to as the Rural Energy for America Program (REAP), which continues the
    Agency's assistance to the adoption of both renewable energy systems
    and energy efficiency improvements through Federal Government loan
    guarantees and grants.
        REAP has been operating since 2005 under 7 CFR part 4280, subpart
    B, and, since the 2008 Farm Bill, through a series of Federal Register
    notices implementing the provisions in the 2008 Farm Bill for RES
    feasibility studies, energy audits, and renewable energy development
    assistance. For the RES feasibility studies, these notices were
    published on May 26, 2009 (74 FR 24769) and August 6, 2010 (75 FR
    47525).
        A Notice of Solicitation of Applications (NOSA) soliciting
    applications for about $2.2 million in grants for Energy Audits and
    Renewable Energy Development Assistance was published in the Federal
    Register on March 11, 2009. A NOSA for the remaining portion of the $60
    million available for FY 2009 was published in the Federal Register on
    May 26, 2009. This funding was used for guaranteed loans and grants for
    a wide range of energy efficiency improvements and renewable energy
    systems and feasibility studies.
        The Agency published a NOSA to solicit applications for the
    purchase of renewable energy systems and to make energy efficiency
    improvements in the Federal Register on April 26, 2010. A separate
    Notice of Funding Availability (NOFA) for $2.4 million in funding to
    conduct Energy Audits and Renewable Energy Development Assistance was
    published in the Federal Register on May 27, 2010.
        An Interim Rule was published on April 14, 2011. The Interim Rule
    established a consolidated REAP program by including each part of the
    program in a single subpart. The Agency also published on April 14,
    2011, a NOFA announcing the availability of $70 million in mandatory
    budget authority for FY2011 grants and guaranteed loans for renewable
    energy systems (including flexible fuel pumps) and energy efficiency
    improvements. A NOFA announced an additional $5 million in REAP
    discretionary budget authority is pending.

        Flex Fuel Infrastructure Project

        The Rural Business and Cooperative Service (RBS) launched the FY11
    REAP program making Flexible Fuel Pumps Eligible for funding through an
    annual notice of funding availability (NOFA). Dispensers, tanks,
    components and labor are eligible project costs. The application window
    closed for energy programs on June 15th and for feasibility support on
    June 30th.
        The purpose of this effort is to support the investment, and
    infrastructure necessary to implement a nationwide biofuels industry.
    The scope of the project is to establish the necessary infrastructure
    for ethanol fuel by supporting the development and deployment of flex
    fuel pumps to meet increasing demand.

        Anaerobic Digesters/Dairy Innovation Center Initiative

        The Anaerobic Digesters Project Team has, with the help of EPA's
    AgStar, developed a complete list of USDA programs that can be used to
    support the Dairy MOU Agreement.
        The Anaerobic Digester team is currently reviewing Renewable Energy
    System applications and Feasibility grant applications under REAP and
    awards should be delivered in the coming months. The purpose of this
    project is to embark on a campaign to promote the development of
    anaerobic digesters on dairy farms. The scope of the project is to
    focus on applying REAP funding for anaerobic digesters and digester
    feasibility studies to fulfill the 2009 Memorandum of Understanding
    (MOU) between Dairy Innovation Center and USDA.
    4. Purpose/Goals
        The purpose of the renewable energy system and energy efficiency
    improvements portion of the program is to provide financial assistance,
    in the form of loan guarantees and grants, to agricultural producers
    and rural small businesses to purchase and install renewable energy
    systems and make energy-efficiency improvements. REAP funds can be used
    for renewable energy systems including wind, solar, biomass, geothermal
    sources, or that produce hydrogen from biomass or water using renewable
    energy, and ocean and hydroelectric source technologies. Energy-
    efficiency projects typically involve installing or upgrading equipment
    to significantly reduce energy use.
        The purpose of the Energy Audits, and Renewable Energy Development
    Assistance portion of REAP is to provide financial assistance to such
    entities as units of state, tribal, and local governments and land-
    grant colleges and universities, among others, in the form of grants,
    to assist agricultural producers and rural small businesses to become
    more energy efficient; and to use renewable energy technologies and
    resources.
        The purpose of the Feasibility Studies portion of REAP is to
    provide assistance, in the form of grants, to an agricultural producer
    or rural small business to conduct a feasibility study for a project
    for which assistance may be provided under REAP.The program also
    supports Presidential Energy Independence and Security Goals:

       To Develop and Secure America's Energy Supplies

       To Provide Consumers with Choices to Reduce Costs and
            Save Energy, and

       To Innovate Our Way to a Clean Energy Future

                                    5. Success in Meeting Programmatic Purpose/Goals
                  Energy Division, Energy Investments, Fiscal Years 2003-10, with Performance Measures
                                                        7/14/2011
    ----------------------------------------------------------------------------------------------------------------
                                   Combination                                     Energy                     GHG
                       Guaranteed   Guaranteed                Jobs                 Saved/        Btu      Reduced **
     Fiscal  Projects  Loans Only   Loans and   Grant Only   Saved-  Businesses  Generated  Equivalent *    (metric
      Year             (millions)     Grants    (millions)  Created   Assisted     (1,000    (1,000 Btu)    tons of
                                    (millions)                                      kWh)                     CO2)
    ----------------------------------------------------------------------------------------------------------------
      2003       114                               $21.2        736        108     974,320   3,324,517     979,408
      2004       163                               $22.7        411        186     503,645   1,718,507     642,599
      2005       158       $10.1                   $22.2        289        103     589,771   2,012,381     611,455
      2006       412       $24.2                   $21.2      1,357        285     997,133   3,402,359    1,303,951
      2007       436       $47.5        $18.1      $10.8      2,122        331   1,956,390   6,675,479    1,968,525
      2008       764          $0        $30.2      $19.6      1,797        537   2,438,378   8,320,092    2,642,665
      2009     1,557        $8.5        $76.8      $26.6      5,894      2,922   1,407,832   4,803,523    1,589,570
      2010     2,400        $9.7        $98.4      $51.1      2,311      5,107   2,958,404   9,508,310    3,255,490
            --------------------------------------------------------------------------------------------------------
      Total    6,004       $99.9       $223.5     $196.0     14,917      9,579   11,825,87  39,765,167    12,993,664
       s...                                                                              2
    ----------------------------------------------------------------------------------------------------------------
    * 1 kWh = 3,412.1416 Btu.
    ** No CO2 was sequestered with these activities.

                                                  6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)

        Funding Levels:
        The 2008 Farm Bill provides mandatory allocations of $55 million for FY 2009, $60 million for FY 2010, and $70 million for FYs 2011 and 2012. The
     2008 Farm Bill also authorizes additional discretionary funds of up to $25 million per year, from FY 2009 through 2012. The 2010 Appropriation Act
     provided $39 million in funding for grants and loan guarantees in addition to the $60 million of farm bill mandatory funding.

        Funds Available in FY 2011:                                              $70 million in mandatory authority
                                                                                 $5 million in discretionary authority

                                                       7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
              2007 Actual                    2008 Actual                    2009 Actual                    2010 Actual                   2011 Target
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                   $16,416,000                     $16,821,000                    $26,685,000                    $59,578,000                   $76,000,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Actual disbursements percentages based on obligation.

                                                                                8. Annual Delivery Cost (FY 2002-FY 2011)
                                                                                    Business and Cooperative Programs
                                                                                 Full Cost by Department Strategic Goal

        Strategic Goal: Assist Rural Communities to Create Prosperity so They Are Self-Sustaining, Repopulating and Economically Thriving.

                                        2007 Amount     2008 Amount     2009 Amount     2010 Amount     2011 Amount
              Program Items               ($000)          ($000)          ($000)          ($000)          ($000)

    Rural Energy for America Loans
     and Grants

      Program Level 2                        $49,806        $333,644        $524,664         $66,238          $7,877
      Budget Authority                        35,748          60,000         128,130          39,325           4,990
      Administrative Costs (Direct)                                                            1,127           1,172
      Administrative Costs                                                                     2,897           3,014
       (Indirect)
        S&E                                    6,931           8,999           9,782
                                     -------------------------------------------------------------------------------
          Total Costs                         42,679          68,999         137,912          43,349           9,176
          FTEs                                    62              80              84              34              34
                                     -------------------------------------------------------------------------------
      Performance measure:
        mKWH produced (in Millions)
          Target:                                680           1,725           3,029           1,183             148
          Cost per Measure (unit               62.76           40.00           45.53           36.64           62.00
           cost)
    Rural Energy for America Loans
     and Grants--Mandatory
      Program Level 2                                                                        $93,088        $109,200
      Budget Authority                                                                        56,959          70,000
      Administrative Costs (Direct)                                                            1,690           1,758
      Administrative Costs                                                                     4,346           4,521
       (Indirect)
                                     ===============================================================================
        Total Costs                                                                           62,995          76,279

    2 Guaranteed Renewable Energy Loans and Grants funding contingent on farm bill for FY 2009.
    Notes: These numbers are consistent with the published ``Full Cost by Secretary's Strategic Priorities'' section
      of the Explanatory Notes for Fiscal Years 2009 through 2012 President's Budget submissions. In the table
      above, Fiscal Years 2007 through 2010 amounts are actual; Fiscal Year 2011 is an estimate from the Fiscal Year
      2012 President's Budget submission.

    9. Eligibility Criteria
        Under REAP, there are applicant eligibility and project eligibility
    criteria for each of the grant programs, while there are borrower
    eligibility, lender eligibility, and project eligibility for the
    guaranteed loan program.

        Renewable Energy System or Energy Efficiency Improvement Grant

        Applicant Eligibility. As required by the authorizing statute, to
    receive a Renewable Energy System or Energy Efficiency Improvement
    Grant under this subpart, an applicant must be an agricultural producer
    or rural small business.
        Project Eligibility. For a renewable energy system or energy
    efficiency improvement project to be eligible to receive a RES or EEI
    grant under this subpart, the proposed project must meet the following
    criteria, as applicable:

       The project must be for the purchase of a renewable energy
            system or to make energy efficiency improvements. Energy
            efficiency improvements to existing renewable energy systems
            are eligible energy efficiency improvement projects.

       The project must be for a pre-commercial or commercially
            available, and replicable technology.

       The project must have technical merit.

       The facility for which the project is being proposed must be
            located in a rural area in a state if the type of applicant is
            a rural small business, or in a rural or non-rural area in a
            state if the type of applicant is an agricultural producer. If
            the agricultural producer's facility is in a non-rural area,
            then the application can only be for renewable energy systems
            or energy efficiency improvements on integral components of or
            that are directly related to the facility, such as vertically
            integrated operations, and are part of and co-located with the
            agriculture production operation.

       The applicant must have a place of business in a state.

       The applicant must be the owner of the project and control
            the revenues and expenses of the project, including operation
            and maintenance. A third-party under contract to the owner may
            be used to control revenues and expenses and manage the
            operation and/or maintenance of the project.

       Sites must be controlled by the agricultural producer or
            rural small business for the financing term of any associated
            Federal loans or loan guarantees.

       Satisfactory sources of revenue in an amount sufficient to
            provide for the operation, management, maintenance, and debt
            service of the project must be available for the life of the
            project.

       For the purposes of this subpart, only hydropower projects
            with a rated power of 30 megawatts or less are eligible. The
            Agency refers to these hydropower sources as ``small
            hydropower,'' which includes hydropower projects commonly
            referred to as ``micro-hydropower'' and ``mini-hydropower.''

       The project has demonstrated technical feasibility.

        In addition to these requirements, no renewable energy system or
    energy efficiency improvement, or portion thereof, can be used for any
    residential purpose, including any residential portion of a farm,
    ranch, agricultural facility, or rural small business. However, an
    applicant may apply for funding for the installation of a second meter
    or provide certification in the application that any excess power
    generated by the renewable energy system will be sold to the grid and
    will not be used by the applicant for residential purposes.

        Renewable Energy System or Energy Efficiency Improvement Guaranteed
    Loan

        Borrower Eligibility. To receive a Renewable Energy System or
    Energy Efficiency Improvement Guaranteed Loan, a borrower must meet the
    same requirements as for the RES/EEI grant program.
        Project Eligibility. The requirements are the same as for RES/EEI
    grants except that guaranteed loan funds may be used for necessary
    capital improvements to an existing renewable energy system. In
    addition, the grant provision concerning residential purposes does not
    apply.
        Lender Eligibility. An eligible lender is any Federal or state
    chartered bank, Farm Credit Bank, other Farm Credit System institution
    with direct lending authority, Bank for Cooperatives, or Savings and
    Loan Association. These entities must be subject to credit examination
    and supervision by either an agency of the United States or a state.
    Eligible lenders may also include credit unions provided, they are
    subject to credit examination and supervision by either the National
    Credit Union Administration or a state agency, and insurance companies
    provided they are regulated by a state or national insurance regulatory
    agency. Eligible lenders include the National Rural Utilities
    Cooperative Finance Corporation.

        Renewable Energy System Feasibility Study Grants

        Applicant Eligibility. As required by the authorizing statute, to
    be eligible for a renewable energy system feasibility study grant, the
    applicant must be an agricultural producer or a rural small business.
    In addition, the Interim Rule requires the applicant to be the
    prospective owner of the renewable energy system for which the
    feasibility study grant is sought.
        Project Eligibility. Only renewable energy system projects that
    meet the requirements specified in this section are eligible for
    feasibility study grants under this subpart. The project for which the
    feasibility study grant is sought shall:

       Be for the purchase, installation, expansion, or other
            energy-related improvement of a renewable energy system located
            in a state;

       Be for a facility located in a rural area if the applicant
            is a rural small business, or in a rural or non-rural area if
            the applicant is an agricultural producer. If the agricultural
            producer's facility is in a non-rural area, then the
            feasibility study can only be for a renewable energy system on
            integral components of or directly related to the facility,
            such as vertically integrated operations, and are part of and
            co-located with the agriculture production operation;

       Be for technology that is pre-commercial or commercially
            available, and that is replicable;

       Not have had a feasibility study already completed for it
            with Federal and/or state assistance; and

       The applicant has a place of business in a state.

        Energy Audit and Renewable Energy Development Assistance Grants

        Applicant Eligibility. To be eligible for an energy audit grant or
    a renewable energy development assistance grant, the applicant must
    meet each of the following criteria:

       The applicant must be, as required by the authorizing
            statute, one of the following:

         A unit of state, tribal, or local government;

         A land-grant college or university, or other
                institution of higher education;

         A rural electric cooperative;

         A public power entity; or

         An instrumentality of a state, tribal, or local
                government.

       The applicant must have sufficient capacity to perform the
            energy audit or renewable energy development assistance
            activities proposed in the application to ensure success. The
            Agency will make this assessment based on the information
            provided in the application.

       Each applicant must have, or obtain, the legal authority
            necessary to carry out the purpose of the grant.

        Project Eligibility. To be eligible for an energy audit or a
    renewable energy development assistance grant, the grant funds for a
    project must be used by the grant recipient to assist agricultural
    producers or rural small businesses located in a state in one or both
    of the purposes specified in paragraphs (a) and (b), and must also
    comply with paragraphs (c) through (e), and, if applicable, paragraph
    (f).

        (a) Grant funds may be used to conduct and promote energy audits
            that meet the requirements of the energy audit as defined in
            this subpart.

        (b) Grant funds may be used to conduct and promote renewable energy
            development assistance by providing to agricultural producers
            and rural small businesses recommendations and information on
            how to improve the energy efficiency of their operations and to
            use renewable energy technologies and resources in their
            operations.

        (c) Energy audit and renewable energy development assistance can be
            provided only to a facility located in a rural area unless the
            owner of such facility is an agricultural producer. If the
            facility is owned by an agricultural producer, the facility for
            which such services are being provided may be located in either
            a rural or non-rural area. If the agricultural producer's
            facility is in a non-rural area, then the energy audit or
            renewable energy development assistance can only be for a
            renewable energy system or energy efficiency improvement on
            integral components of or directly related to the facility,
            such as vertically integrated operations, and are part of and
            co-located with the agriculture production operation.

        (d) The energy audit or renewable energy development assistance
            must be provided to a recipient in a state.

        (e) The applicant must have a place of business in a state.

        (f) For the purposes of this subpart, only small hydropower
            projects are eligible for energy audits and renewable energy
            development assistance. Per consultation with the U.S.
            Department of Energy, the Agency is defining small hydropower
            as having a rated power of 30 megawatts or less, which includes
            hydropower projects commonly referred to as ``micro-
            hydropower'' and ``mini-hydropower.''
    10. Utilization (Participation) Data
        Since its inception, utilization of REAP has grown each year,
    except in 2008 when fewer funds were made available to the program.
    Program utilization and growth are illustrated in the following figures
    and table.

                    REAP Utilization--Fiscal Years 2003-2010
    ------------------------------------------------------------------------
                                           Combinations
      Fiscal                 Guaranteed     Grants and      Grant     Grant
       Year      Projects    Loans Only     Guaranteed      Only     Totals
                                               Loans
    ------------------------------------------------------------------------
      2003           114                                  $21,707,  $21,707,
                                                              233       347
      2004           163                                  $22,692,  $22,692,
                                                              325       488
      2005           158    $10,100,000                   $22,237,  $32,337,
                                                              267       425
      2006           412    $24,158,882                   $21,209,  $45,368,
                                                              435       729
      2007           436    $47,500,000   $18,114,430     $10,782,  $76,397,
                                                              434       300
      2008           764            $0    $30,172,387     $19,633,  $49,806,
                                                              418       569
      2009         1,557    $8,451,638    $76,782,101     $26,625,  $111,860
                                                              502      ,797
      2010         2,400    $9,675,613    $98,395,192     $51,117,  $159,190
                                                              265      ,470
              --------------------------------------------------------------
     Total         6,004    $99,886,133   $223,464,110    $196,004  $519,361
                                                             ,879      ,125
    ------------------------------------------------------------------------
    Note: All numbers in this table represent Program Level.

    11. Duplication or Overlap with Other Programs
        There are four other programs within USDA under which certain types
    of energy projects may be financed. These are the Value-Added Producer
    Grant (VAPG) program, Community Facilities, Business and Industry
    Program, and the Environmental Quality Incentives Program (EQIP).
        The project eligibility category related to renewable energy under
    the VAPG program was set by the 2008 Farm Bill and states that a Value-
    Added Agricultural Product is ``a source of farm- or ranch-based
    renewable energy, including E85 fuel.'' Thus, the VAPG can provide
    funds to a limited set of energy-related projects--where an
    agricultural commodity is used to generate renewable energy on a farm
    or ranch owned or leased by the independent producer applicant that
    produces the agricultural commodity. On-farm generation of energy from
    wind, solar, geothermal, or hydro sources are not eligible for VAPG.
    Because of the differences in eligible entities, there is little
    overlap with the Community Facility program.
        The Business and Industry (B&I) Program provides guaranteed loans
    to a wide range of projects, including energy projects. There have been
    a number of projects financed under the B&I Program that could have
    been financed under REAP.
        While NRCS also offers energy audits through the EQIP, the agencies
    have entered into an agreement to avoid duplication by cross-checking
    the locations and recipients of energy audits.
        Beyond these few programs, REAP does not overlap or duplicate of
    any other USDA program. The Department of Energy's Energy Efficiency
    and Renewable Energy program offers financial assistance for
    biorefineries, geothermal technologies, hydrogen technologies, solar,
    wind, and hydropower. The focus of these programs is mainly on research
    and development for these technologies (e.g., to improve the efficiency
    of power generated through wind). With regard to biorefineries, USDA/
    RBS through its guaranteed loan program has co-funded several
    biorefinery projects that use DOE grant funds, however these programs
    work in a complementary manner to provide support for this nascent
    industry.
    12. Waste, Fraud and Abuse
        No Office of Inspector (OIG) or Government Accountability Office
    (GAO) audit of the program was conducted in the past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Biomass Research and Development Initiative Program (BRDI).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 9001(a) of the Food, Conservation, and Energy Act of 2008
    (FCEA) (Pub. L. 110-246), re-authorized the Biomass Research and
    Development Initiative (BRDI) competitive grants program by amending
    section 9008 of the Farm Security, and Rural Investment Act of 2002
    (2002 Farm Bill), as amended, (Pub. L. 107-171) (7 U.S.C. 8108).
    Collaboration between DOE and USDA on BRDI is directed under section
    9008(e)(1) of the 2002 Farm Bill, as amended.
    4. Purpose/Goals
        Both DOE and USDA have been given responsibility to support the
    development of a biomass-based industry in the United States. The
    objectives of this responsibility are specified in section 9008(e) of
    FSRIA, as amended, which requires the development of: (a) technologies
    and processes necessary for abundant commercial production of biofuels
    at prices competitive with fossil fuels; (b) high-value bio-based
    products to enhance the economic viability of biofuels and biopower, to
    serve as substitutes for petroleum-based feedstocks and products, and
    to enhance the value of coproducts produced using the technologies and
    processes; (c) a diversity of economically sustainable domestic sources
    of renewable biomass for conversion to biofuels, bioenergy, and bio-
    based products; and (d) use of waste streams to reduce environmental
    footprint or impact, niche, opportunity to improve economics of
    conversion processes and enhance the economic viability of the
    production facility. The 2002 Farm Bill then stipulates several
    programmatic requirements that are intended to help ensure that goals
    (a)-(d) above are accomplished. These requirements include:

       Distribution of funding among three technical areas (minimum
            15% of funds per area):

         Feedstock Development

         Biofuels and Biobased Product Development

         Biofuels Development Analysis

       Cost Share: 20% of total project costs for Research and
            Development and 50% for Demonstration projects

       Multi-institution and multi-disciplinary consortia awards

       Geographic distribution of awards
    5. Success in Meeting Programmatic Purpose/Goals
        USDA has executed the BRDI Program as prescribed by 2002 Farm Bill
    and subsequently the Program is meeting the research, development, and
    demonstration needs of the emerging market. The BRDI Program has always
    maintained the minimum 15% distribution of program funds across the
    three legislated technical areas as shown in Table 1.

          Table 1. Funding Distribution by Technical Area FY 2003-2010
    ------------------------------------------------------------------------
       Technical Area Distribution       Distribution       % Distribution
    ------------------------------------------------------------------------
    Feedstock Development                    $35,625,430                 27%
    Biofuels and Bioproduct                  $73,646,642                 56%
     Development
    Biofuels Development Analysis            $23,241,965                 18%
    ------------------------------------------------------------------------

        The trend in funding distribution, as shown in Figure 1 is toward a
    convergence of emphasis on both feedstock development and appropriate
    conversion technologies. BRDI has the flexibility to allow the balance
    of investment to shift toward technical challenges of increasing
    importance in the market. The availability and densification of biomass
    is key to the growing bioeconomy.
    Figure 1. Trends in Technical Area Investment

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The BRDI Program has also been effective in developing multi-
    institutional and multi-disciplinary consortia awards, as required in
    the legislation, as a means of increasing technology transfer and
    commercialization. Over its 8 year history, BRDI awards have averaged
    over four collaborating organizations per award. In FY 2010, BRDI
    awards averaged over six collaborating organizations as the Program now
    allows larger and more comprehensive grant opportunities. The Program
    also supports a diversity of types of organizations in terms of project
    leaders and project collaborators. Table 2 demonstrates that while BRDI
    project leadership is dominated by Academia and Small Business, the
    Program fosters balanced collaboration among different types of
    organizations, indicating a high level of interdisciplinary work.

      Table 2. Project Lead and Collaborator Type Distribution (2002-2010)
    ------------------------------------------------------------------------
                                       Project Lead Type   Collaborator Type
                                               *
    ------------------------------------------------------------------------
    NGO                                              12%                 17%
    Academia                                         43%                 28%
    Small Business                                   29%                 27%
    Industry                                          9%                 11%
    Federal                                           7%                 13%
    State                                             1%                  4%
    ------------------------------------------------------------------------
    * distribution based on funding amount.
     distribution based on the count of collaborator types.

        BRDI awardees have contributed 32% of total program funding as
    cost-share since the program's inception in 2002. BRDI program funds
    have been used to leverage over $61 M over the life of the Program.
        Program awards have also been geographically diverse. Each year the
    Program touches more than 18 states and in FY 2010 there were three
    states per award. The Program is beginning to be effective in creating
    extremely dynamic regional and national consortia to address our
    nation's energy demand. Figure 2 illustrates the geographic
    distribution of BRDI awards.
    Figure 2. BRDI Geographic Distribution FY 2002-2010
    Biomass Research and Development Initiative
    Geographical Distribution of Grant Awards FY 2002-2010

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Map created by Gregory Sixt, USDA-NIFA.

        Since FY 2009, USDA has placed increased emphasis on technology
    commercialization by offering larger and more comprehensive grants that
    are intended to allow awardees to address challenges throughout the
    life-cycle of their technologies. In the early years of the BRDI
    Program, grants were more focused and intended to address specific
    technical challenges and new product development issues.
        The Program now requires awardees to develop new products and
    technologies in the context of the supply chain and target markets;
    therefore, projects must address all three technical areas.
    Additionally, the program has adopted an overarching theme of
    sustainability, requiring awardees to address the environmental,
    economic and social implications of the technology throughout its life
    cycle. The intent of larger, comprehensive projects is to move
    technologies to commercialization more quickly, and to ensure the
    technologies have a positive impact on markets, the environment, and
    rural development.

        Examples of successful projects:

        Adding Value to Commercial Polymers through the Incorporation of
    Biomass Derived Chemistries (Iowa Corn Promotion Board)

       The BRDI Program supported projects to develop isosorbide-
            based polymers in FY 2002 and again in FY 2006.

       The Iowa Corn Promotion Board has been developing this
            technology not only in collaboration with USDA, but also with
            DOE, General Electric, and others.

       Several major end-users and customers are working to
            commercialize the technology and have had success in developing
            isosorbide as a replacement for bisphenol A, in the epoxy
            market, and as an additive for PET hot fill bottles.

        Biomass Gasification: A Comprehensive Demonstration of a Community-
    Scale Biomass Energy System (University of Minnesota--Morris)

       The project team constructed the Morris Gasification Plant
            to generate combined heat and power for the University and the
            Morris community using locally sourced biomass.

       The project overcame significant technological barriers in
            testing and selecting the appropriate feedstocks to power the
            community. The project tested corn stover, corn cobs, prairie
            grass, soybean residue, wheat straw, and wood each with
            appropriate densification techniques. Corn cobs were determined
            to be the most viable and sustainable feedstock for the Morris
            community.

       Emissions permits and appropriate densification technology
            will be secured by the Fall of 2011 to initiate ongoing
            gasification plant operation.

       The University and its partners developed an extensive
            outreach and education component to the project, which includes
            a web-portal that reports real-time facility performance
            monitoring so that students and the community can access
            information and understand their energy usage on a daily basis.
            The project also generated an undergraduate Renewable Energy
            curriculum, three K-12 modules, 14 student research projects,
            32 conference presentations, and over 200 community and
            regional presentations.

        Evaluation of the feasibility of sustainably achieving President's
    Biofuel production goals (University of California--Santa Barbara)

       University of California-Santa Barbara is designing a
            dynamic tool to evaluate the feasibility of meeting renewable
            fuel production goals in a sustainable manner.

       Tool embodies an innovative combination of scenario
            development, system dynamics modeling, Geographic Information
            System (GIS), Life Cycle Costing (LCC) and Life Cycle
            Assessment (LCA).

       Results have been used to inform the United Nations
            Environmental Program (UNEP), International Panel for
            Sustainable Resources, Biofuel Working Group report, ``Towards
            Sustainable Production and Use of Resources: Assessing
            Biofuels.''

         http://www.unep.fr/scp/rpanel/pdf/
                assessing_biofuels_full_report.pdf

         http://www.unep.org/Documents.Multilingual/
                Default.asp?
                DocumentID=599&ArticleID=6347&l=en&t=long

                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                    FY02      FY03      FY04      FY05      FY06      FY07      FY08      FY09      FY10      FY11
    ----------------------------------------------------------------------------------------------------------------
                    6. Annual Budget Authority *                                          20,000    28,000    30,000

                               7. Annual Outlays

                         8. Annual Delivery Cost
    ----------------------------------------------------------------------------------------------------------------
    * In addition to mandatory funding, $35M/yr is authorized for appropriation FY 2008-2012

        Note: This program has only been operated in its current form
    starting in FY 2009.
    9. Eligibility Criteria
        Eligible entities per section 9008(e)(5) of the 2008 Farm Bill, as
    amended (7 U.S.C. 8108(e)(5)) include: (A) an institution of higher
    education; (B) a National Laboratory; (C) a Federal research agency;
    (D) a state research agency; (E) a private sector entity; (F) a
    nonprofit organization; or (G) a consortium of two or more entities
    described in subparagraphs (A) through (F).
    10. Utilization (Participation) Data
        Since 2003 the BRDI Program has been one of the most competitive
    Federal grant programs. The annual success rate (of applications
    funded) has always been less than 5%, In fact, in FY 2009 USDA and DOE
    received over 800 pre-applications and made nine awards; a success rate
    of 1%. In FY 2010, the Program success rate remained low at 1.6%. While
    the low success rate indicates that there is tremendous demand for
    Biomass energy research, development, and demonstration, the
    competition through NIFA's rigorous peer-review process has ensured
    projects of extraordinary quality.
    11. Duplication or Overlap with Other Programs
        There is no duplication or overlap with other programs. BRDI
    supports projects in the applied/developmental and demonstration phases
    of development.
    12. Waste, Fraud and Abuse
        There have been no Office of Inspector General or Government
    Accountability Office audits of the program conducted on the Biomass
    Research and Development Initiative Program in the past 5 years.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Feedstock Flexibility Program (FFP--Section 9010).
    2. Subprograms/Department Initiatives
        The Feedstock Flexibility (or ``sugar-to-ethanol'') Program (FFP)
    was first authorized under the 2008 Farm Bill. USDA has not implemented
    this program because the sugar market conditions required for its
    operation have not yet occurred. FFP requires the Commodity Credit
    Corporation (CCC) to purchase domestic sugar when U.S. supplies are
    large and forfeitures are threatened under the sugar price support loan
    program. Under the FFP, CCC will sell the surplus sugar to bioenergy
    producers for use as a fuel feedstock. However, the U.S. sugar market
    has been under-supplied since the program was authorized. Domestic
    sugar prices have been significantly above the program support level
    and there has been no threat of price support loan forfeitures,
    preempting program operation. The FFP language also includes a
    prohibition on the sale of CCC sugar for human consumption.
    3. Brief History
        CCC operated a sugar for ethanol program in the early 2000s as one
    of many outlets for the million-ton CCC sugar inventory acquired when
    the sugar market crashed in 2000. FSA sold 10,000 tons of sugar to the
    highest-bidding ethanol producers in multiple auctions. All of the
    purchasers mixed sugar into corn prior to fermentation. Ethanol
    producers only bid an average of 4 cents per pound for the sugar, which
    the CCC had acquired at an average of 22 cents per pound. These ethanol
    producers bid less than the energy value of the sugar, citing the
    experimental nature of the process, the lack of a guaranteed future
    supply, the requirement of a material handling investment and other
    factors. In addition, the CCC sold over a hundred thousand tons for
    human consumption in 2003, when prices were at higher levels, at almost
    no loss to the CCC. (Sales for human consumption are no longer an
    option under the FFP language, as noted above.)
    4. Purpose/Goals
        The purpose of the FFP is to prevent the accumulation of
    government-held stocks of sugar that impede price recovery. This was
    the situation after the sugar market crash of 2000, when ending stocks
    were over 20 percent of annual use, with CCC owning more than half of
    that total. Normal carryover is 14-15 percent of annual use.
    5. Success in Meeting Programmatic Purpose/Goals
        Not applicable, as there has been no need to activate the program.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        Not applicable.
    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        Outlays are zero over the FY 2002-FY 2011 time horizon, for the
    reasons discussed above.
    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        Delivery costs are zero over the FY 2002-FY 2011 time horizon, for
    the reasons discussed above.
    9. Eligibility Criteria
        The FFP regulation is under development.
    10. Utilization (Participation) Data
        The FFP has not been implemented.
    11. Duplication or Overlap with Other Programs
        No overlap anticipated.
    12. Waste, Fraud and Abuse
        The FFP has not been implemented.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Biomass Crop Assistance Program (BCAP--Section 9011).
    2. Subprograms/Department Initiatives
        BCAP has two components:

       Establishment and annual payments for production of new
            biomass crops (Project Areas); and

       Matching payments for the collection, harvest, storage and
            transportation (CHST) of existing biomass.
    3. Brief History
        BCAP was authorized by the 2008 Farm Bill. On June 11, 2009, a
    Notice of Funds Availability (NOFA) was published to make available
    matching payments for the collection, harvest, storage, and
    transportation of eligible material for conversion to bioenergy at
    biomass conversion facilities. The 2008 Farm Bill provides ``such sums
    as necessary'' for BCAP. However, subsequent appropriation acts have
    capped the amount of funding available. The Department of Defense and
    Full-Year Continuing Appropriations Act of 2011, enacted on April 14,
    2011, limits funding for BCAP to $112 million in FY 2011.
        In February 2010, a proposed rule was published in the Federal
    Register which also terminated the NOFA. Over 24,000 comments were
    received.
        On October 27, 2010, a final rule was published and by January
    2011, three qualified biomass conversion facilities were approved and
    matching payments for herbaceous materials were authorized.
        For the project area component of BCAP, proposals could be
    submitted beginning October 27, 2011. With the enactment of funding
    limitations on April 14, 2011, FSA announced on April 20, 2011 that
    project proposals could be submitted no later than May 27, 2011, to be
    considered for FY 2011 funding. Over 40 project area proposals were
    received by the deadline. The proposals outlined projects that would
    support the establishment and production of 1.5 million acres of
    dedicated energy crops requesting more than $1 billion. The range of
    feedstock proposed included camelina, algae, short rotation woody
    crops, grasses, energy cane, kenaf, and sweet sorghum.
        The first approved project area is located in a thirty-nine county
    area in central and western Missouri and eastern Kansas and supports
    the establishment of mixtures of perennial native grasses and forbs,
    such as Switchgrass, Big Bluestem, Illinois Bundleflower and Purple
    Prairie Clover. Additionally, the project allows enrollment of existing
    suitable stands of native grasses, legumes and forbs; existing native
    grass stands can be located on expired Conservation Reserve Program
    (CRP) fields. The target enrollment for 2011 is 20,000 acres of
    cropland and other agricultural land with targeted crops within the
    approved area surrounding the biomass conversion facility. When fully
    enrolled, this project area may have up to 50,000 acres, producing
    roughly 3 tons of biomass per acre per year, or a total of 150,000 tons
    per year from land enrolled in BCAP contracts. FSA has allocated about
    $15 million for implementation of this project area in FY 2011.
        Other project areas will support production of the perennial
    Miscanthus giganteus (Giant Miscanthus) for energy biomass. Only the
    planting of rhizomes of the ``Illinois Clone,'' a sterile cultivar of
    Giant Miscanthus, is authorized for these project areas.
        One of the projects is located within Clay, Craighead, Greene,
    Jackson, Lawrence, Mississippi, Poinsett, and Randolph counties in the
    State of Arkansas. FSA has allocated about $5.2 million for
    implementation of this project area in FY 2011. The target for
    enrollment in FY 2011 is 5,588 acres. This biomass may be used to
    produce pellets that may be co-fired.
        Another project area is located within Audrain, Boone, Callaway,
    Cole, Cooper, Howard, Moniteau, Monroe, and Randolph counties in the
    State of Missouri. FSA has allocated about $3.5 million for
    implementation of this project area in FY 2011. The target for
    enrollment in FY 2011 is 3,000 acres.
        Another project area is located within Barry, Christian, Dade,
    Jasper, Lawrence, Newton, and Stone counties in the State of Missouri.
    FSA has allocated about $5.9 million for implementation of this project
    area in FY 2011. The target for enrollment in FY 2011 is 5,250 acres.
        The remaining project area is located within Ashtabula, Geauga,
    Lake, and Trumbull counties in the State of Ohio, and Crawford, Erie,
    and Mercer counties in the State of Pennsylvania. FSA has allocated
    about $5.7 million for implementation of this project area in FY 2011.
    The target for enrollment in FY 2011 is 5,344 acres.
    4. Purpose/Goals
        BCAP provides financial assistance to owners and operators of
    agricultural and nonindustrial private forestland to establish,
    produce, and deliver biomass feedstocks under two types of assistance:

       Establishment and annual payments to produce eligible
            biomass crops on contract acres within approved BCAP project
            areas, and

       Matching payments for the delivery of eligible material to
            qualified biomass conversion facilities by eligible material
            owners. Qualified biomass conversion facilities produce heat,
            power, biobased products, or advanced biofuels from biomass
            feedstocks.
    5. Success in Meeting Programmatic Purpose/Goals
        BCAP is the only energy program that is dedicated to the expansion
    of the diversity of cellulosic feedstock for commercial conversion. The
    program has demonstrated, through project area proposal submission and
    designations and matching payment distribution, that the demand for
    such diversity and feedstock support exists.
        BCAP made over $250 million in matching payments to eligible
    material owners in FY 2009 and FY 2010 for the supply of biomass to
    over 400 biomass conversion facilities for the generation of heat,
    power, biobased products and advanced biofuels under the NOFA. The
    biomass supply was predominantly woody materials.
        During FY 2011, about $2.65 million has been allocated to help
    support producers who supply herbaceous materials (corn crop residues)
    to three qualified biomass conversion facilities. Additionally, the
    allocation of $35 million for the designated five project areas, will
    support the establishment and production of up to 250,000 acres
    dedicated energy crops for conversion to an advanced biofuel. The
    remaining funding of about $75 million is expected to be allocated by
    September 30, 2011.
        BCAP has generated support and incentives for numerous biomass
    conversion facilities to enhance their bioenergy output, much of which
    has been accomplished through facility retrofits and entrepreneurial
    startups. Project area designations have strengthened numerous
    cooperatives and bioenergy startups and expanded the diversity of
    available long term feedstocks.
        The expansion of project area designations in FY 2011 may assist
    many states in meeting Renewable Electricity mandates. BCAP incentives
    for conversion to liquid biofuels have encouraged the submission of
    proposals for drop-in fuel production and various advanced biofuels.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                     FY 2002 Through FY 2011 Budget Authority for Farm Service Agency Conservation Programs
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                          Actual     Actual     Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Biomass Crop Assistance Program             0          0           0           0           0           0           0      25,015     244,075     112,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                7. Annual Outlays (FY 2002-2011)

        Budget authority for CCC programs is based on obligations. Funds that are obligated in one fiscal year may not be disbursed until a succeeding
     fiscal year or fiscal years.

                                          FY 2002 Through FY 2011 Outlays for Farm Service Agency Conservation Programs
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                          Actual     Actual     Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Biomass Crop Assistance Program             0          0           0           0           0           0           0       2,147     248,202     112,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:

        Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining, repopulating, and economically thriving.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance

      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202       1 199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    1 BCAP funding for Fiscal Year 2011 was subsequently capped at $112 million by the Department of Defense and
      Full-Year Continuing Appropriations Act of 2011, Public Law 112-10.

    9. Eligibility Criteria

        Project Areas and Producers

        Project areas are established based on proposals submitted to FSA by either a group of producers or an entity that converts biomass to heat, power,
     a biobased product or an advanced biofuel.
        Producers within a designated BCAP project area may apply to enroll land into the program and receive assistance to grow eligible biomass crops.
     Biomass must be established, produced and harvested or collected according to an approved conservation, forest stewardship, or equivalent plan to
     ensure that soil, water and other resource concerns are adequately addressed on the enrolled land.

        Matching Payments

        Matching payments provide payments to eligible material owners at a rate of $1 for each $1 per dry ton paid by a qualified biomass conversion
     facility (BCF), in an amount up to $45 per dry ton. An eligible material owner may be a producer of an eligible crop or a person or entity with the
     legal right to collect or harvest eligible material. Matching payments may be made to eligible material owners for a maximum of 2 years.
        To qualify for a matching payment, the biomass must be an eligible material that also is collected or harvested directly from the land before
     transport to the facility, in accordance to an approved conservation or forest stewardship plan, and if woody biomass, must not have a previously
     existing market, and must also be a removal to reduce forest fire threats, disease or insect infestation, or to restore ecosystem health.

    10. Utilization (Participation) Data

        To date, three BCF's have been qualified from the 141 BCF applications submitted for qualification. These three qualified BCF's convert herbaceous
     materials.
        Approximately 105 eligible material owner applications for matching payments have been approved and more than $1.5 million in matching payments have
     been disbursed. FSA has allocated $2.65 million to the states where these eligible material suppliers are located.
        Of the 138 pending BCF applications to become qualified for matching payment purposes, a sample of 47 BCF applications provides evidence of an
     estimated quarterly supply rate of more than 1 million dry tons of woody biomass. The matching payment estimates for the approximate 1 million dry tons
     is over $45 million.
        As of May 27, 2011, project area sponsors have submitted 46 project area proposals:

         Five of the project proposals have been reviewed and approved (see table below); and

         Forty-one project proposals were forwarded from state FSA offices on June 24, 2011, and are under review at the National FSA office.

        Five project areas have been designated as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                  Targeted FY    Targeted    Currently     Acreage
     Project Area      Location      Number of    Eligible Crop   2011 Acreage    Acreage     Enrolled      Offers
         Name                         Counties                    Enrollments      Total      Acreage      Pending
    ----------------------------------------------------------------------------------------------------------------
    Project Area 1       Kansas,           39     Warm season        20,000        50,000     1 7,500      7,000 to
                        Missouri                      grasses                                                 8,000
    Project Area 2      Arkansas            8           Giant         5,588        50,000         (2)           * 0
                                                   Miscanthus
    Project Area 3      Missouri            9           Giant         3,000        50,000         (2)         * 619
                      (Columbia)                   Miscanthus
    Project Area 4      Missouri            7           Giant         5,250        50,000         (2)       * 1,707
                        (Aurora)                   Miscanthus
    Project Area 5         Ohio,            7           Giant         5,344        50,000         (2)         * 219
                    Pennsylvania                   Miscanthus
                   -------------------------------------------------------------------------------------------------
      Totals......                       3 66                        39,182       250,000       7,500        10,545
    ----------------------------------------------------------------------------------------------------------------
    1 Sign up for Project Area 1 began on May 9, 2011 and acreage offers pending are undergoing the development of
      required conservation plans.
    2 Sign up for Project Areas 2 through 5 began on June 20, 2011 and acreage offers pending are undergoing the
      development of required conservation plans.
    3 Four counties in Project Areas 1 and 3 overlap: Boone, Callaway, Cooper, and Howard.

        The total number of acreage targeted for producer signup in the
    five Project Areas:

       39,182 acres for FY 2011.

       250,000 acres at full-production-sign up.

        The estimated yield of biomass, at full project performance:

       Project Area 1 is 3 tons per acre, 150,000 tons annually;
            and

       Project Areas 2 through 5 is 10 to 12 tons per acre, 2.4
            million tons annually.
    11. Duplication or Overlap with Other Programs
        BCAP complements other state and Federal programs that support
    biomass conversion facility infrastructure by supporting the production
    of crops and materials that these facilities convert. In addition, the
    program's achievements help support the Renewable Fuel Standards
    Program by providing states with output to meet state renewable
    mandates and encourage renewable registrations.
    12. Waste, Fraud and Abuse
        Occasional cases of producer misconduct may have been identified
    and addressed through investigations; no current systemic waste, fraud,
    or abuse has been identified related to this program.
        The Office of Inspector General (OIG) in December 2010 provided the
    following recommendations in a Fast Report pursuant to the review of
    BCAP matching payments administered in FY 2009 and FY 2010 in the
    States of California, Maine, Alabama, and Missouri:

       Develop a program handbook setting forth policies and
            procedures governing program administration;

       Develop forms specifically tailored to facilitate day-to-day
            administration and capture relevant program data; and

       Develop a data system with applied edit checks and a
            designed structure to facilitate data validation, management
            reporting, and data analysis.

        BCAP responded to these recommendations and provided the following
    adjustments to the program for FY 2011:

       Release of the 1-BCAP Handbook with a second amendment in
            May 2011;

       Development of the forms BCAP-10 and BCAP-11 which track the
            tracts and fields where harvest and collection occurs and
            conservation, forest stewardship or equivalent plans are
            required via technical service agreements with NRCS and a
            developing agreement with USFS and State Foresters; and

       A web based system was designed to automate the new forms,
            moving away from the previously used System 36 or Conservation,
            Reporting, and Evaluation System (CRES).
    13. Effect of Administrative PAYGO
        None.

                           AGRICULTURAL PROGRAM AUDIT

                  (EXAMINATION OF TITLE IV NUTRITION PROGRAMS)

                                  ----------

                            THURSDAY, JULY 21, 2011

    Subcommittee on Nutrition and Horticulture,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10 a.m., in Room
    1300, Longworth House Office Building, Hon. Jean Schmidt
    [Chairwoman of the Subcommittee] presiding.
        Members present: Representatives Schmidt, King,
    Southerland, Lucas (ex officio), Baca, Pingree, Sablan,
    Peterson (ex officio), and McGovern.
        Staff present: Tamara Hinton, Brandon Lipps, Pam Miller,
    Mary Nowak, Matt Perin, Heather Vaughan, Liz Friedlander, Keith
    Jones, Lisa Shelton, John Konya, and Jamie Mitchell.

      OPENING STATEMENT OF HON. JEAN SCHMIDT, A REPRESENTATIVE IN
                           CONGRESS FROM OHIO

        The Chairwoman. Good morning. Thank you all for being here
    today.
        I especially want to thank Ms. Audrey Rowe, the
    Administrator of the USDA's Food and Nutrition Service, for
    joining us and enlightening me, and I look forward to a great
    working relationship.
        I also want to thank my good friend Ranking Member Baca in
    joining me in holding this hearing today. It is well known that
    a certain degree of comity and bipartisanship exists here on
    the Agriculture Committee, and I look forward to working with
    my friend as we go through this farm bill process.
        This hearing on nutrition programs in Title IV of the farm
    bill is part of a series of audits of farm programs. We are
    holding these audits to gather information and data on each of
    the programs we operate, and to give all the Committee Members
    a chance to learn more about how each program fits into the
    broader picture of farm policy. We will be looking at how
    programs use their funds, how effectively they serve their
    stakeholders, and whether there is duplication or waste that
    can be eliminated.
        These audits are very critical for every farm bill program,
    but perhaps nowhere more so than the nutrition title. The
    USDA's Food and Nutrition Service is the agency charged with
    administering Title IV nutrition programs. Major programs they
    administer are the Supplemental Nutrition Assistance Program,
    commonly referred to as SNAP; the Emergency Food Assistance
    Program, commonly referred to as TEFAP; the Commodity
    Supplemental Food Program, CSFP; the Fresh Fruit and Vegetable
    Program, FFVP; the Senior Farmers Market Nutrition Program,
    SFMNP; and the Food Distribution Program on Indian
    Reservations, FDPIR. FDPIR, if you want to call it that.
        Two weeks ago this Subcommittee heard from AMS and APHIS
    about how they operate Title X Specialty Crop Programs. I
    enjoyed the review of how the programs are being administered
    and operated today. Likewise, I look forward to hearing from
    FNS with a general snapshot of the spending of each program
    that they administer. We will study the financial aspects of
    these programs and consider whether or not the programs' goals
    are being met and whether the programs are financially prudent.
        More than 75 percent of the Agriculture Committee's budget
    goes to nutrition programs, which serve a broad range of people
    throughout our country. The largest of our nutrition programs
    is the SNAP Program. SNAP provides assistance to low-income
    households to supplement food budgets. Although it is
    administered by the USDA's Food and Nutrition Service, each
    state has a great deal of flexibility in how the program is
    implemented. SNAP has become an integral part of our country's
    overall social support system for families in need. It is, in
    fact, the fourth largest needs-tested program in our country.
        The size and scope of SNAP has dramatically increased over
    time. Participation in SNAP has risen by nearly 70 percent,
    from 26 million in 2007 to more than 44 million as of April
    2011, and I think there is a direct correlation with our
    economic recession and this dramatic growth, although there
    might be some other reasons. This increase is due to the
    economy, the stimulus bill, and less strict eligibility
    requirements.
        The SNAP Program is designed to adjust to the needs of our
    population, increasing when more people need food assistance
    and decreasing when the economy improves. However, this
    dramatic growth has strained our resources. The average monthly
    benefit was $226 in 2008. Today it is $289. That is a 27
    percent increase. In total, we spent $33 billion on SNAP in
    2007, but we are on pace to more than double that to more than
    $69 billion in Fiscal Year 2011. Sixty-nine billion dollars is
    a substantial sum, and given our current budget situation, we
    have a responsibility to examine whether we can reduce the
    amount without compromising the integrity of the SNAP Program.
        I look forward to hearing Administrator Rowe's testimony on
    the quality control system that FNS has in place to ensure
    accuracy in payments and target fraud. The program is there to
    help those truly in need, and it is unfortunate when abuses
    like this occur. I plan to look into the program more to see
    how we can stop abuse and fraud in the program. Of particular
    interest to me is how FNS works with other agencies in the
    Federal Government to monitor, investigate, conduct, and
    prosecute those traffickers.
        As I listen to our witness today, I encourage my fellow
    Members to consider how we can find savings in these programs
    while continuing to provide nutrition assistance to our
    families in need.
        Ms. Rowe, I look forward to your testimony, and I hope to
    learn how we can make our nutrition assistance program more
    effective and efficient.
        [The prepared statement of Mrs. Schmidt follows:]

     Prepared Statement of Hon. Jean Schmidt, a Representative in Congress
                                   from Ohio
        Good morning, and thank you all for being here today. I especially
    want to thank Ms. Audrey Rowe, the Administrator of USDA's Food and
    Nutrition Service, for joining us.
        I also want to thank my friend, Ranking Member Baca, for joining me
    in holding this hearing today. It is well known that a certain degree
    of comity or bipartisanship exists here on the Agriculture Committee
    and I look forward to working with my friend as we go through this farm
    bill process.
        This hearing on nutrition programs in Title IV of the farm bill is
    part of a series of audits of farm programs.
        We're holding these audits to gather information and data on each
    of the programs we authorize, and to give all of the Committee Members
    a chance to learn more about how each program fits into the broader
    picture of farm policy.
        We will be looking at how programs use their funds, how effectively
    they serve their stakeholders, and whether there is duplication or
    waste that can be eliminated.
        These audits are critical for every farm bill program, but perhaps
    nowhere more so than the nutrition title.
        USDA's Food and Nutrition Services is the agency charged with
    administering Title IV nutrition programs.
        The major programs they administer are the Supplemental Nutrition
    Assistance Program (SNAP), the Emergency Food Assistance Program
    (TEFAP), the Commodity Supplemental Food Program (CSFP) the Fresh Fruit
    and Vegetable Program (FFVP), the Senior Farmers Market Nutrition
    Program (SFMNP), and the Food Distribution Program on Indian
    Reservations (FDPIR).
        Two weeks ago this Subcommittee heard from AMS and APHIS about how
    they operate title X specialty crop programs. I enjoyed the review of
    how the programs are being administered and operated today.
        Likewise, I look forward to hearing from FNS with a general
    snapshot of the spending of each program that they administer. We will
    study the financial aspects of these programs and consider whether or
    not the programs' goals are being met and whether the programs are
    financially prudent.
        More than 75 percent of the Agriculture Committee's budget goes to
    nutrition programs, which serve a broad range of people throughout the
    country.
        The largest of our nutrition programs is the Supplemental Nutrition
    Assistance Program, or SNAP for short.
        SNAP provides assistance to low-income households to supplement
    food budgets. Although it is administered by USDA's Food and Nutrition
    Service, each state has a great deal of flexibility in how the program
    is implemented.
        SNAP has become an integral part of our country's overall social
    support system for families in need. It is, in fact, the fourth-largest
    needs-tested program in the country.
        The size and scope of SNAP has dramatically increased over time.
    Participation in SNAP has risen by nearly 70 percent--from 26 million
    in 2007 to more than 44 million in April of 20 11.
        This increase is largely due to the economy, the stimulus bill, and
    less strict eligibility requirements. The SNAP program is designed to
    adjust to the needs of our population; increasing when more people need
    food assistance and decreasing when the economy improves.
        However, this dramatic growth has strained our resources. The
    average monthly benefit was $226 in FY 2008. Today it is $289. That's a
    27% increase. In total, we spent $33 billion on SNAP in FY 2007, but
    are on pace to more than double that to nearly $69 billion in FY 2011:
    $69 billion is a substantial sum, and given our current budget
    situation, we have a responsibility to examine whether we can reduce
    that amount without compromising the integrity of the SNAP program.
        I look forward to hearing Administrator Rowe's testimony on the
    Quality Control system that FNS has in place to ensure accuracy in
    payments and target fraud. The program is there to help those truly in
    need, and it's unfortunate when abuses like this occur.
        I plan to look into the program more to see how we can stop abuse
    and fraud of the program. Of particular interest to me is how FNS works
    with other agencies in the Federal Government to monitor, investigate,
    combat, and prosecute traffickers.
        As we listen to our witness today, I encourage my fellow Members to
    consider how we can find savings in these programs while continuing to
    provide nutrition assistance to families in need.
        Ms. Rowe, I look forward to your testimony, and I hope to learn how
    we can make our nutrition assistance more effective and efficient.

        The Chairwoman. And with that, I will now turn to the
    Ranking Member, Mr. Baca, for opening remarks.

        OPENING STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Baca. Thank you very much, and good morning to all of
    you. And thank you, Chairwoman Schmidt, for holding this
    hearing. And thank you, Audrey Rowe, for being here this
    morning. I would also like to welcome our Chairman from the
    Agriculture Committee for being here this morning, Frank Lucas.
        As a legislator, a husband, a father, and a grandfather,
    the effectiveness of Federal nutrition programs is of the
    utmost importance to me. Throughout my years serving on the
    Agriculture Committee, I have worked to build a bipartisan
    record that links the importance of nutrition and health.
        In 2007, we held a hearing that demonstrated the importance
    of food stamp benefits to the overall health and long-term
    success of children. Then in the 2008 Farm Bill, we provided
    record funding for safety net programs like SNAP and TEFAP for
    food banks. We also worked to promote healthy eating by funding
    new pilot programs and expanding the Fresh Fruit and Vegetable
    Snack Program to all 50 states.
        In July of 2008, the Subcommittee heard testimony on the
    economic costs of poor nutrition in the United States. We
    learned that hunger costs our country $90 billion a year in
    lost work productivity. So we have to look at the balance of
    costs and benefits.
        We also learned that poor participation in nutrition
    programs means lost revenues for our local communities and
    counties. When people use the SNAP Program, money and sales tax
    goes right back to the community. With a record number of
    participants-- up from 26 million to 44 million people--it is
    clear that this is a result of the economic situation that we
    are in right now.
        I know many of the individuals who are on the program don't
    want to be on it. They want to be sustaining themselves. I know
    because I personally was on food stamps myself at one point. I
    know there are times when we have no choice; when you have to
    feed your family, and put food on the table.
        So we have established a clear body of evidence linking the
    ties between the Federal nutrition programs, health, and the
    economic well-being of our communities. Make no mistake, in
    these tough times, the Federal nutrition programs are the
    safety net between hunger and health for millions of Americans.
        In my home of San Bernardino County, California, we face an
    unemployment rate of 17 percent countywide. Programs like SNAP,
    WIC, and TEFAP are putting food on the table for many of my
    neighbors.
        Despite economic stress, nutrition programs continue to
    meet the needs of our constituents. This speaks to the basic
    strength of these programs. But nothing is perfect, and
    especially in these difficult times, we must to work to make
    these programs as effective and efficient as possible. And
    there must be accountability so we can stop fraud.
        As we prepare for the 2012 bill, I am committed to working
    with all of my colleagues to strengthen and improve Federal
    nutrition programs.
        I want to thank, again, our witness, Audrey Rowe, for being
    here this morning. I look forward to hearing your testimony.
        I yield back the balance of my time.
        The Chairwoman. Thank you.
        The Chairwoman. And before I ask our Chairman of our
    Agriculture Committee if he would like to have some opening
    remarks, I would like to ask for unanimous consent to have the
    gentleman from Massachusetts, Mr. McGovern, who is not a Member
    of this Subcommittee but has joined us today, to allow him to
    sit here and take part in this process. Do I have unanimous
    consent? Thank you.
        Mr. Lucas.

     OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
                         CONGRESS FROM OKLAHOMA

        Mr. Lucas. Thank you, Madam Chairman, and I would like to
    thank both you, Chairwoman Schmidt, and Ranking Member Baca for
    holding this hearing, and I would also like to welcome
    Administrator Rowe to the Subcommittee today.
        I believe that we would be holding these audits regardless
    of the time period in which we will be writing the next farm
    bill. With 14 separate titles covering a variety of programs
    ranging from nutrition to forestry, it is important for all of
    us to understand why our current policies are structured as
    they are. We also need to know how our separate programs work
    together to form a comprehensive framework to support America's
    farmers, ranchers, and consumers. These audits are meant to
    develop a deeper knowledge of agricultural policy so our
    Committee Members are better able to develop the next farm
    bill.
        But in our current fiscal climate, the audits have taken on
    greater significance. There are proposals for billions and even
    trillions of dollars' worth of cuts to get our fiscal house in
    order. The farm bill programs will not be spared the chopping
    block.
        Considering that farm and nutrition programs together make
    up less than three percent of the national budget--yes, less
    than three percent of the national budget--large cuts will be
    challenging. This Committee is charged with supporting our
    country's agricultural industry and ensuring that our consumers
    have a safe, high-quality, and affordable food supply. To meet
    that responsibility, we must ensure we have well-designed farm
    programs that can function efficiently in the face of budget
    cuts.
        As Chairman Schmidt mentioned, nutrition programs make up
    more than 75 percent of farm bill spending. The SNAP Program is
    the largest of these programs. In 2008, we worked to improve
    the integrity of the nutrition assistance under SNAP, but there
    is still room for improvement. For instance, many states are
    using broad-based categorical eligibility which makes most, if
    not all, households categorically eligible for SNAP if they
    receive any noncash Temporary Assistance for Needy Families
    benefit. And of the 42 states that have adopted broad-based
    categorical eligibility, only one state has imposed an asset
    limit. That means there is no limit on the amount of assets a
    household can hold while still receiving nutrition assistance.
    Categorical eligibility is meant to simplify program
    administration, but I know that it also raises some questions
    about whether we are really targeting the families most in
    need.
        Certainly, we shouldn't be sacrificing the integrity of
    this program for the ease of administration. We all need to
    eat, and when families fall on hard times, SNAP is a valuable
    resource that helps ensure that no one goes hungry. In the
    current economic environment, we need to ensure that SNAP
    benefits are going to those families that truly need support.
        I am concerned that the broad-based categorical eligibility
    increases opportunities for waste, fraud, and abuse. We are
    spending more than twice the amount of SNAP now than we were in
    2007. Program participation has nearly doubled in that time. We
    have a responsibility to ensure that the $69 billion we are
    spending on nutrition assistance is being properly used and is
    helping the people it is meant to help. That is exactly the
    type of information we need to gather in these audits.
        Are the Title IV programs being targeted effectively? Are
    the taxpayers dollars being spent properly? Are there areas
    that we can streamline or eliminate? It won't be easy, but we
    need to find savings throughout all the farm bill programs.
        I look forward to learning more about the Food and
    Nutrition Service's perspective on these challenges,
    Administrator Rowe, and again, I thank you for your testimony
    here today, and yield back the balance of my time, Madam
    Chairwoman.
        The Chairwoman. Thank you, Mr. Chairman.
        And I would ask other Members to submit their opening
    statements for the record so that our witness may begin her
    testimony and that there is great time, ample time for
    questions.
        So, with that, I would like to introduce Ms. Audrey Rowe,
    who is the head of this program. And you come from Connecticut
    via Washington, D.C., so you have great experience. And having
    said that, I want to give you the microphone.

      STATEMENT OF AUDREY ROWE, ADMINISTRATOR, FOOD AND NUTRITION
       SERVICE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Ms. Rowe. Good morning, and thank you, Madam Chairwoman,
    Ranking Member Baca, other Members of the Committee. It is
    indeed an honor and an opportunity to appear here before you
    today to discuss the progress we have made since enactment of
    the Food, Conservation, and Energy Act of 2008, also known as
    the farm bill.
        I want to begin by commending the Committee on the last
    farm bill. This strong legislation, passed by wide margins in
    the House and the Senate, reflects the Committee's long-
    standing bipartisanship. No matter who holds the gavel, you
    have consistently worked across the aisle and with the
    Administration to make nutrition programs successful. USDA
    appreciates this commitment and is committed to administering
    the bill in accordance with the intent and the vision of the
    Congress.
        Achieving ongoing success in the program under your
    jurisdiction is at the heart of reauthorization, an opportunity
    for Congress and the Administration to take stock of the last
    farm bill and find potential improvements to pursue and enact.
        As Administrator of the Food and Nutrition Service, I bring
    20 years of state government and private-sector experience in
    human service policy, fiscal management and accountability,
    program design, and service delivery, with a focus on
    vulnerable populations, low-income, children and youth. That
    background frames my thinking about USDA's nutrition programs
    and their mission to reduce hunger and improve diets.
        Roughly one in four Americans currently participate in
    these programs over the course of a year. The programs work
    together as a safety net to ensure that whatever challenges we
    face due to economic disruption, national disaster, disease, or
    disability, we can meet our basic nutritional needs.
        These programs are vitally important today. Even as signs
    emerge that the economy is beginning to improve, families
    continue to struggle with the aftermath of the worst economic
    downturn since the Great Depression. This dynamic fuels record
    demands for programs like SNAP, with roughly 45 million
    Americans participating as of this past April.
        You may wonder who are these 45 million people. The answer
    may surprise you. In SNAP, half of all clients are our
    children; one in six households have elderly members; one in
    five have one or more disabled people. These are hardworking
    Americans who may be facing furloughs or underemployment, and
    who need resources to put food on their table until they can
    get back on their feet. Again, that mission, the FNS mission,
    has never been more important.
        The farm bill improves access and accountability in the
    Supplemental Nutrition Assistance Program, also known as SNAP;
    the Fresh Fruit and Vegetable Program; the Food Distribution
    Program on Indian Reservations; the Commodity Supplemental Food
    Program; the Emergency Food Assistance Program; the Senior
    Farmers Market Nutrition Program. While my written statement
    addresses each one of these programs, I will focus my oral
    remarks primarily on SNAP, the largest Federal program.
        Formerly known as Food Stamps, SNAP received its new name
    as part of the 2008 Farm Bill. SNAP is our nation's front line
    of defense against hunger, providing low-income individuals and
    families an electronic benefit debit card to buy food at
    authorized stores. Its flexible, responsive structure is
    central to its success.
        When the economy takes a downturn, more families struggle,
    and more tend to become eligible for SNAP. When they apply,
    SNAP responds to make sure they do not go hungry until they get
    back on their feet. As the economy improves, fewer families are
    eligible and apply, and our investment tends to decrease, a
    hallmark of an efficient and an effective program. Congress has
    maintained this key feature throughout many previous farm
    bills.
        As SNAP provides food to participants, it also provides
    economic benefits to communities across the nation. Our
    research shows that for every $5 in new SNAP benefits, it
    generates as much as $9 in economic activity. Every time a
    family uses SNAP to put healthy food on the table, it benefits
    the store, the employees where the purchase was made, the truck
    driver who delivered the food, the warehouses that stored it,
    the plant that processed it, and, of course, the farmer who
    produced the food.
        SNAP's success also extends to integrity, which relies on a
    cooperative partnership between FNS and the states that operate
    the program. SNAP's quality control system is part of a payment
    accuracy approach which uses state bonuses and sanctions to
    achieve continuous and sustained improvement. This approach
    delivers real results for taxpayers.
        Payment accuracy in SNAP has increased to over 96 percent,
    an all-time high, even as participation has increased to record
    levels. Payment errors are less than half what they were 10
    years ago, reducing improper payments by $3.3 billion.
        FNS is also responsible for authorizing the over 200,000
    retailers that accept SNAP and monitoring them for compliance
    with program rules. The program is designed to operate through
    normal channels of trade, and the overwhelming majority of
    businesses and benefits are redeemed in responsible grocery
    businesses that play by the rules.
        That said, the agency takes any noncompliance very
    seriously. We have made major strides in reducing trafficking,
    the sale of SNAP benefits for cash, which is an illegal
    activity punishable by criminal prosecution. Over the last 15
    years, our aggressive surveillance and enforcement have helped
    to reduce the prevalence of trafficking down to about one
    percent. The 2008 Farm Bill provided new anti-trafficking
    tools, including the authority to disqualify recipients for
    such activities as selling food purchased with SNAP benefits or
    dumping contents of returned deposit bottles in order to get
    cash, as well as new sanctions for noncompliant retailers.
        We must also ensure that the program promotes healthy
    eating. The N in SNAP is for Nutrition, and it is essential
    that we make use of its great reach to reduce the risk of diet-
    related disease. Almost every American's diet is in need of
    improvement, and the SNAP-specific nutrition strategies
    mandated by Congress and administered by FNS reinforce efforts
    to foster healthy diets across the general population.
        Let me turn briefly to the Emergency Food Assistance
    Program, TEFAP, which provides food and administrative funds to
    state agencies to local emergency feeding organizations such as
    food banks, soup kitchens, and food pantries. They play a
    critical part in the hunger safety net. The farm bill increased
    funds for TEFAP food to $250 million annually, indexed to
    inflation in future years.
        While USDA provided the authorized funding for SNAP, market
    conditions have limited the availability of surplus food beyond
    this amount in recent years. USDA will provide more surplus
    food to the program should it become available. USDA also
    published a farm bill rule in 2009 to streamline operations by
    making TEFAP state plans permanent.
        Let me conclude by thanking you again for this opportunity
    and reiterating that the nutrition assistance mission has never
    been more important. The Administration is committed to
    maximizing transparency, access, accountability, and integrity,
    and Secretary Vilsack has directed the Department to provide
    all Americans with the excellence they deserve from our
    government. I am personally committed to ensuring that we live
    up to those expectations as we manage these programs to meet
    the needs of eligible families and individuals who rely on them
    during challenging economic times.
        Let me mention in closing that in my career I have never
    held a job at the state level where budgets were not tight, so
    it is not a new experience for me to face an extremely tight
    Federal budget and consideration of significant program
    changes. Reauthorization allows us to carefully assess the
    impact of potential changes so we can preserve our successes
    while meeting new challenges and improving performance, and in
    that light, I am happy to review these programs and answer your
    questions.
        I have with me a number of staff people who I may call on
    from time to time. As I mentioned to some of you, I am in my
    fourth month in the position of Administrator. I want to give
    you the best information that I possibly can, so I have brought
    the resources to make sure we can do that.
        [The prepared statement of Ms. Rowe follows:]

     Prepared Statement of Audrey Rowe, Administrator, Food and Nutrition
           Service, U.S. Department of Agriculture, Washington, D.C.
        Madam Chairwoman, Ranking Member Baca, and Members of the
    Committee, thank you for the opportunity to be here today to discuss
    the United States Department of Agriculture's (USDA) nutrition programs
    and the progress we have made since enactment of the Food, Conservation
    and Energy Act of 2008--the 2008 Farm Bill.
        I want to begin by commending the Committee for its hard work in
    crafting the 2008 Farm Bill. I understand that this Committee had to go
    through a lot of hard-fought battles and make some really tough
    decisions, and the end result was a strong, bipartisan piece of
    legislation that passed by overwhelmingly large margins in both the
    House and Senate. We understand how hard it was to accomplish that
    task, and the Food and Nutrition Service at USDA is strongly committed
    to ensuring that the legislation is administered in accordance with the
    intent and vision of Congress.
        I also want to express my appreciation for the bipartisan approach
    that this Committee has taken over the years when it comes to
    supporting USDA nutrition assistance programs. No matter which party
    holds the gavel, there has always been a shared commitment to working
    across the aisle and with the Administration to ensure that these
    programs are successful.
        The goal of ensuring success in the programs under your
    jurisdiction is at the heart of the 5 year reauthorization cycle for
    farm bill programs, which offers Congress and the Administration a
    great opportunity to take stock of where we are at today, what we did
    in the last farm bill, and what we need to do in this farm bill to get
    where we need to be. Like you all, we in the Administration appreciate
    very much the political and budgetary climate in which we find
    ourselves as the reauthorization process gears up. Federal programs are
    under heightened scrutiny right now. Members of Congress, the public,
    and this Administration all want to know that scarce resources are
    being used wisely.
        I understand that context as the Administrator of the Food and
    Nutrition Service, where I am responsible for the operations of the
    Federal nutrition assistance programs. I bring with me over 20 years of
    experience in both state government and the private sector working in
    human services policy development, fiscal management, program design,
    service delivery and marketing with a particular focus on vulnerable
    populations, low income women, children and youth. That background
    inevitably shapes and guides my thinking about administering USDA
    nutrition programs, which work both individually and in concert with
    one another to reduce and prevent hunger and improve the diets of
    children and low-income households. While about one in four Americans
    currently participate in Federal nutrition programs over the course of
    a year, these programs are a critical safety net for every American,
    designed to ensure that, whatever other challenges they face due to
    economic disruption, natural disaster, or personal challenges such as
    disease and disability, they need not experience food insecurity and
    hunger.
        We see the vital importance of these programs today. Even as signs
    emerge that the economy is beginning to recover, families across the
    country continue to struggle with the aftermath of 3 years of
    recession. The unemployment rate is down substantially from the recent
    peak of 10.1 percent in since October 2009, but remained unacceptably
    high at 9.2 percent as of June. Census Bureau figures shows that the
    poverty rate in 2009 was 14.3 percent, the highest rate since 1994.
    There were 43.6 million people in poverty in 2009--the largest number
    in the 51 years for which poverty estimates are available.
        And demand for the nutrition assistance programs remains extremely
    high. In April 2011, 44.6 million people received SNAP benefits.
    Participation in the school meals programs remains at near-record
    levels, with about 32 million children receiving a meal through the
    school lunch program on an average school day, and two out of three
    served free or at reduced price.
        Who are today's nutrition assistance clients? The answer may
    surprise you. In SNAP, about half of all clients are children, and
    about \3/4\ of benefits go to households with at least one child.
    Nearly \1/3\ of participants are in households that include elderly
    people or people with disabilities. And the SNAP clientele has
    undergone a major shift in its focus from welfare to work over time.
    Many are hardworking families who may be facing furloughs or
    underemployment in these difficult times. All need assistance with
    money for food until they can get back on their feet.
        These sobering statistics underscore the fact that the nutrition
    assistance programs have never been more important to our nation. Title
    IV of the 2008 Farm Bill resulted in changes that improved access and
    accountability in many of these programs, including the Supplemental
    Nutrition Assistance Program (SNAP), the Fresh Fruit and Vegetable
    Program (FFVP), Food Distribution Program on Indian Reservations
    (FDPIR), the Commodity Supplemental Food Program (CSFP), the Emergency
    Food Assistance Program (TEFAP), and the Senior Farmers Market
    Nutrition Program (SFMNP). In my statement I will describe our progress
    in implementing these changes as I review some of the key issues facing
    our programs today.
        I also want to underscore at the outset my strong focus on proper
    management of resources--a fundamental strategy in ensuring both
    program access and integrity. Secretary Vilsack has charged all the
    USDA mission areas to ensure our services are accessible and properly
    administered; to work collaboratively with our partners; and to seek
    opportunities for efficiency and effectiveness in all our programs.
    Additionally, Undersecretary Concannon recently testified before the
    Senate that Americans deserve excellence from their government. That is
    not just a slogan. The leadership team at USDA Food, Nutrition and
    Consumer Services takes that charge seriously when it comes to
    effective accountability in the nutrition assistance programs. We are
    committed to a long-term, sustained effort, working closely with our
    program partners, and my team and I are seeking every opportunity to
    build on our successes with new strategies to tackle the challenges
    that remain. I believe that we can improve accountability without
    compromising service to those in need, and we look forward to working
    with you in this effort.
    Supplemental Nutrition Assistance Program (SNAP)
        Let me begin with SNAP--the largest and most widely used nutrition
    program authorized in the farm bill, the former Food Stamp Program,
    which received its new name as part of the 2008 Farm Bill, supplements
    the food purchasing power of low income individuals and families by
    providing an electronic debit card which is used at authorized stores.
    Benefits are 100 percent federally-financed, while administrative costs
    are shared between Federal and state governments.
        One of the most important aspects of SNAP is that it is structured
    to respond quickly to the needs of the hardest-hit households, based on
    national eligibility standards. Benefits flow into communities as
    economic conditions worsen, providing an economic boost even as they
    meet the nutrition needs of low-income people. Research shows that
    every $5 in new SNAP benefits generates as much as $9 in economic
    activity. Every time a family uses SNAP benefits to put food on the
    table, it benefits the store and the employees where the purchase was
    made, the truck driver who delivered the food, the warehouses that
    stored it, the plant that processed it, and the farmer who produced the
    food.
        I raise this in part to underscore that while this flexible,
    responsive program structure leads the program to expand when need is
    greatest, it also causes program participation, and expenditures, to
    contract as conditions improve and needs lessen. We see this dynamic at
    work in SNAP. When the economy takes a downturn, more families
    struggle, and more families look to SNAP until they can get back on
    their feet. When that happens, the program responds to make sure that
    families do not go hungry. The opposite is also true though. As the
    economy improves, and more Americans find jobs, fewer families need the
    program in the first place. When that happens, our investment tends to
    decrease. This efficient and effective aspect of SNAP is one of the
    keys to its success.
        State agencies are responsible for the administration of the
    program according to national standards set by Federal law and
    regulations. Applicants must meet certain financial, non-financial and
    citizenship or immigration status requirements, including gross and net
    income tests, and resource limits. States have the flexibility to
    modify some of these requirements to align SNAP with their Temporary
    Assistance for Needy Families (TANF) policies. Forty-two state agencies
    have implemented an optional policy called broad-based categorical
    eligibility (BBCE), which allows states to utilize their TANF income
    and resource limits for their SNAP applicants, providing administrative
    simplification for states, and allowing the same gross income and
    resource policy to apply for both programs.
        The SNAP eligibility and certification changes made in the 2008
    Farm Bill were implemented quickly after passage starting on October 1,
    2008 by all states via an implementation memorandum; a proposed rule
    which promulgates these provisions into regulation was published in the
    Federal Register in May, and the comment period closed July 5. A final
    rule is expected to be published by the end of this calendar year.
    These changes were important for program access and integrity.
        With regard to work requirements, able-bodied adults without
    dependents (ABAWDs) between 18 and 50 who do not have any dependent
    children can get SNAP benefits only for 3 months in a 36 month period
    if they do not work or participate in a workfare or employment and
    training program other than job search. This requirement is waived in
    some locations in accordance with unemployment rates and job
    availability triggers determined by the Department of Labor. With some
    exceptions, all adults participating in SNAP between 16 and 60 must
    register for work, accept suitable employment, and take part in an
    employment and training program to which they are referred by the local
    office. Failure to comply with these requirements can result in
    disqualification from the program.
        It is worth noting in this regard that a large proportion of SNAP
    households are working families. In fact, the primary source of income
    among SNAP participants has shifted from welfare to work over time. For
    these working poor households, SNAP provides an important resource to
    see them through tough economic times.
        In cooperation with FNS, each state agency is responsible for
    monitoring and improving its administration of SNAP. As a part of this
    requirement, SNAP's Quality Control System is used to measure the
    accuracy of the states' certification process. The Quality Control
    system is part of a payment accuracy approach which uses bonuses and
    sanctions to encourage states to continuously improve performance. This
    approach has helped to deliver real results, and payment accuracy in
    SNAP is at an all-time high--over the last decade participation among
    eligibles has gone from 57% to 66%, while payment errors have gone from
    8.91% to a record-low of 3.81%. Over 98 percent of those receiving SNAP
    benefits are eligible to receive benefits; the overall payment accuracy
    in FY 2010 was 96.19 percent. Payment error rates are less than half
    what they were 10 years ago, which has reduced improper payments by
    $3.3 billion. That said, any error is too much, and for that reason we
    do not intend to rest on this success. The President's November 2009
    Executive Order directed all agencies to further rein in improper
    payments while making sure that those eligible for government
    assistance continue to have access to these programs, and we are
    working with states to meet his ambitious goals for ongoing
    improvement.
    SNAP Retailer Operations
        Our program responsibilities do not end once the benefits have been
    issued; SNAP must also manage the program so that benefits are used
    effectively and with integrity. FNS authorizes retailers to accept and
    redeem SNAP benefits in accordance with Federal statute and
    regulations, monitors them through ongoing systems analysis and
    undercover on-site investigations, and manages an administrative review
    of those firms that contest a disqualification or civil money penalty.
    Over 220,000 retailers are currently authorized to redeem SNAP benefits
    through electronic benefit transfer (EBT). EBT works like a debit
    transaction--SNAP participants scan their EBT card at the point of sale
    and the funds are deducted from the food account on the card. Eighty-
    three percent of all SNAP transactions happen at super markets, super
    stores, and large grocery stores, while the majority of the stores
    authorized are smaller stores.
        FNS is also responsible for monitoring participating retailers for
    compliance with SNAP rules. The sale or purchase of SNAP benefits for
    cash is called trafficking, an illegal activity punishable by criminal
    prosecution. Over the last 15 years, FNS has aggressively implemented a
    number of measures to reduce the prevalence of trafficking in SNAP from
    about four percent down to its current level of about one percent.
    Despite this significant decline in trafficking USDA continues to
    implement aggressive measures to improve program integrity and to
    detect and stop fraud. SNAP uses a fraud detection system, the Anti-
    Fraud Locator for Electronic Benefit Transfer Transactions (ALERT), to
    monitor electronic transaction activity and identify suspicious retail
    grocers for analysis and investigation. FNS also works closely with its
    state and Federal partners to investigate and prosecute trafficking.
        The 2008 Farm Bill provided some significant tools for SNAP in this
    area including revised definitions of trafficking that provide for
    disqualification of recipients for such activities as selling food
    purchased with SNAP benefits, and dumping contents of return deposit
    bottles in order to get cash; as well as new sanction authority for
    non-compliant retailers. These provisions are in various stages of
    implementation, but all provided strong tools to deal with misuse and
    abuse of program funds.
    SNAP and Food Choices
        We are also charged with ensuring that the program does all that it
    can to promote good nutrition and reduce or prevent obesity among its
    clients. As we all know, the ``N'' in SNAP is for nutrition, and it is
    essential that we make use of its great reach to promote better
    nutrition and reduce the risk of diet-related disease.
        It is important to recognize in this context that almost every
    American's diet is in need of improvement. Virtually all of us eat too
    few whole grains, dark green and orange vegetables, and too much fat
    and added sugar. Our SNAP-specific nutrition strategies must complement
    and reinforce efforts directed to foster healthy diets across the
    general population.
        The 2008 Farm Bill codified nutrition education as a component of
    the program. Recently, the Healthy, Hunger-Free Kids Act (HHFKA) of
    2010 reformed the nutrition education component of SNAP (known as SNAP-
    Ed) to provide for a focus on obesity prevention and nutrition
    education, expanding reach and providing states increased flexibility.
    FNS has spent the months since the passage of the HHFKA meeting with
    state partners, nutrition education providers, public health officials,
    universities, the Health and Human Services' Center for Disease Control
    and Prevention, the White House Task Force on Childhood Obesity, and
    others to get input into the implementation of this important
    provision. A rule is scheduled to be published in January 2012.
        As this Committee knows, some have suggested that SNAP rules should
    restrict the use of benefits so that only ``healthy'' foods can be
    purchased. USDA has long held a preference for strategies to support
    and encourage healthy choices rather than restricting access to
    particular foods. Congress has also preferred this approach, and most
    recently spoke to this issue in the 2008 Farm Bill by authorizing and
    funding a demonstration and rigorous evaluation of the impact of
    financial incentives at the point of sale on purchases of fruits and
    vegetables. We have been working carefully to design and implement this
    project--the Healthy Incentives Pilot--to maximize the chance of its
    success, and to ensure that, whatever the results, the test will
    provide clear evidence that will support policy decisions made by
    Congress and the Administration. Operations will begin in Massachusetts
    later this year.
        The Department is also working to increase the number of farmers'
    markets that accept SNAP benefits. These outlets help introduce low-
    income households to a variety of fresh and nutritious foods, and
    expand opportunities for small farmers. Our goal is to authorize an
    additional 200 farmers or farmers' markets and increase redemptions by
    $750,000 each year. In addition, a number of farmers' market incentive
    projects work in coordination with SNAP by providing privately-funded
    bonus dollars to clients for purchases made with SNAP benefits.
        We think that these positive and proactive strategies are the most
    effective way for USDA and its partners to address the challenges of
    poor diets and obesity. We look forward to working with the Committee
    to advance and strengthen these strategies into the future.
        Let me turn now to the other nutrition assistance programs
    authorized under the farm bill.
    Fresh Fruit and Vegetable Program (FFVP)
        The Fresh Fruit and Vegetable Program (FFVP) provides free fresh
    fruits and vegetables in elementary schools with high percentages of
    children receiving free and reduced price school meal benefits to help
    children develop positive dietary habits during their formative years.
    FFVP began as a pilot program authorized by the 2002 Farm Bill,
    operating in 25 schools in each of four states and seven schools in one
    Indian Tribal Organization (ITOs). Following nationwide expansion under
    the 2008 Appropriations Act, the 2008 Farm Bill permanently authorized
    FFVP and increased its funding from $40 million in 2008 to $150 million
    in 2011. USDA was able to get this increased funding out timely, and is
    working to publish a regulatory proposal on the program in the near
    future. The 2008 Farm Bill also mandated and funded an evaluation to
    assess the impact of the FFVP on fruit and vegetable consumption. The
    project is underway, and we expect the results to be available in 2012.
    Food Distribution Program on Indian Reservations (FDPIR)
        The Food Distribution Program on Indian Reservations (FDPIR) was
    first authorized in 1977 as an alternative to SNAP for low-income
    households living on Indian reservations, and was subsequently expanded
    to include American Indians living in other approved areas near
    reservations or in Oklahoma. The program provides a monthly package of
    USDA Foods, including fresh fruits and vegetables, to participating
    households. Households may not participate in FDPIR and SNAP in the
    same month. FDPIR currently serves about 77,000 individuals each month.
        The 2008 Farm Bill directed USDA to study the nutritional quality
    of the FDPIR food package. Our review concluded that the package
    provides a nutritious variety of foods, and sufficient calories to meet
    the energy needs of most sedentary individuals and many moderately
    active children. While as for American diets in general, there is room
    for improvement in the quantities of fruits, vegetables, low-fat dairy
    products and whole grains, the nutritional content of the package is
    considerable. Individuals consuming FDPIR foods in the quantities
    provided would achieve a Healthy Eating Index score, which measures
    consistency with the Dietary Guidelines, of 81 out of 100, considerably
    better than Americans in general (58 out of 100) and SNAP participants
    (52 out of 100).
        The 2008 Farm Bill also authorized the purchase of bison and
    traditional and locally-grown foods for FDPIR participants, but
    specific appropriations have not yet been made for these items.
    Commodity Supplemental Food Program (CSFP)
        CSFP was first authorized under the Agriculture and Consumer
    Protection Act of 1973 to distribute USDA-purchased food to low-income
    women, infants, and children to supplement their nutritional needs.
    Legislation permitted individuals age 60 or more to participate
    beginning in the 1980s, and with the expansion in available of WIC, the
    program's caseload transitioned so that today, almost 97 percent of the
    over 580,000 individuals that participate in CSFP each month are
    elderly.
        As of 2011, 39 states, two Indian Tribal Organizations (ITOs), and
    the District of Columbia are participating in CSFP. CSFP monthly food
    packages are good sources of the nutrients typically lacking in the
    diets of participants. The 2008 Farm Bill removed the priority status
    for women, infants, and children in receiving CSFP service; USDA
    published a final rule to implement this provision in February 2010.
    The Emergency Food Assistance Program (TEFAP)
        The Emergency Food Assistance Program (TEFAP) began in 1981 as a
    means of reducing stocks of surplus food held by the Federal Government
    by distributing it to households in need. In 1998, Congress authorized
    appropriations for USDA to purchase food specifically for TEFAP.
    Through TEFAP, USDA provides food and administrative funds to state
    agencies which distribute them to local emergency feeding organizations
    such as food banks, soup kitchens and food pantries.
        The 2008 Farm Bill increased funds for TEFAP food purchases to $250
    million annually, indexed to inflation. The 2008 Farm Bill also
    authorized up to $100 million annually for administrative costs and up
    to $15 million annually for TEFAP infrastructure grants. In addition,
    the Secretary has authority to provide food that USDA acquires through
    certain price or market support activities (i.e., bonus food) to TEFAP.
    TEFAP currently operates in all 50 states, the District of Columbia,
    Puerto Rico, the Virgin Islands, Guam, and the Commonwealth of the
    Northern Mariana Islands.
        While USDA has provided the 2008 Farm Bill's increased appropriated
    funding for TEFAP, market conditions have limited the availability of
    surplus food for TEFAP in recent months. USDA will continue to provide
    surplus food to TEFAP should more become available and the President's
    FY 2012 budget requests the authorized level for TEFAP food purchases.
    Legislation provided $6 million in 2010 for TEFAP infrastructure grants
    which USDA awarded to 39 emergency feeding organizations in rural and
    urban areas to help improve their ability to provide food to low-income
    individuals. USDA also published a final regulation in November 2009,
    to implement the 2008 Farm Bill requirement to make TEFAP state plans
    permanent; this rule has streamlined TEFAP operations.
    Senior Farmers' Market Nutrition Program
        The Senior Farmers' Market Nutrition Program (SFMNP) was created as
    a pilot program in FY 2001; it was established by Congress as a
    permanent program through the 2002 Farm Bill, and has been reauthorized
    through 2012 under the 2008 Farm Bill. The program provides low-income
    seniors with coupons that can be used to purchase fresh fruits,
    vegetables, honey and herbs from farmers at authorized farmers' markets
    or roadside stands, or with shares in community supported agriculture
    (CSA) programs for regularly distributed bags or boxes of eligible
    foods. Fifty one state agencies and federally recognized Indian tribal
    governments received grants to operate the SFMNP in FY 2011. Over
    20,000 farmers at 4,600 farmers' markets as well 3,800 roadside stands
    and 163 CSAs participated in the program in FY 2010, enabling over
    844,000 seniors to receive fresh fruits and vegetables during the 2010
    market season.
    Conclusion
        Let me conclude by thanking you all again for this opportunity and
    by reiterating that the mission and the work of the nutrition
    assistance programs have never been more important to our nation. The
    Administration is committed to a more responsible government that
    maximizes transparency, accountability, and integrity. I am committed
    to ensuring that we live up to those expectations as we continue to
    manage these programs to meet the needs of the eligible people who rely
    on them, especially in these times of fiscal and economic challenges.
        I should also mention that I have never come into a job at the
    state level where budgets were not tight, so I guess I should not be
    surprised that in this new Federal role I come together with you all at
    a moment where budgets are extremely tight, and when substantial and
    significant changes are being considered for many Federal programs. As
    the Committee begins its work in writing the next farm bill, it is
    important to recognize that such changes can have both intended and
    unintended consequences. That is what is so valuable about the
    reauthorization process. It allows us to carefully work through and
    consider those impacts before we move forward so that we can preserve
    our successes while moving to meet new challenges and improve
    performance. In that light, I am particularly appreciative of the
    opportunity to join you today and review these programs, and I look
    forward to any questions that you may have.

        The Chairwoman. Thank you.
        The sign of a good Administrator is when they bring their
    team so that they can look really, really smart.
        I would like to remind the Members that they will be
    recognized for questioning in order of seniority for Members
    who were here at the start of the hearing. After that, Members
    will be recognized in order of arrival, and I do appreciate the
    Members' understanding in this. And now I would like to begin
    my own set of questions.
        Ms. Rowe, on the questionnaire, I found it interesting that
    the Department did not offer many details in regards to how
    programs might be duplicative or have overlap. Does this mean
    the Department didn't find any duplication or overlap in the
    farm bill nutrition programs or something else?
        Ms. Rowe. Well, thank you for that question. When we looked
    at the programs, certainly they serve different vulnerable
    populations. They provide a safety net for individuals who may
    not qualify for certain programs, but still need food
    assistance. The Congress, in the past, in its wisdom, has
    undertaken various program initiatives to close some of these
    gaps so that we can have a safety net that provides benefits to
    our youngest, to our seniors, to those who are disabled, and to
    those who face employment challenges.
        The Chairwoman. Okay. It seems you did not find any
    duplication?
        Ms. Rowe. We did not find duplicates. There are individuals
    who may participate in more than one program. For example, you
    may have individuals that benefit from the FDPIR Program, but
    also benefit from the School Lunch Program. So there are
    different populations that benefit for different purposes.
        The Chairwoman. Okay. And in your testimony, you said
    payment error rates are less than half of what they were 10
    years ago, which has reduced improper payments by $3.3 billion.
        Ms. Rowe. Correct.
        The Chairwoman. Could you clarify for me if this is a
    reduction of $3.3 billion over 10 years, 1 year?
        Ms. Rowe. It is over 10 years.
        The Chairwoman. Okay. While I can appreciate the fact that
    the Department has reduced improper payments by $3.3 billion
    over 10 years, I think it is still troubling that the GAO
    reports that there was $2.2 billion in overpayments in Fiscal
    Year 2009 alone. What is FNS doing to rein in improper
    payments?
        Ms. Rowe. We have undertaken a number of strategies. For
    example, in states where there are or there have been improper
    payments, either overpayments or underpayments, to an
    individual, we have provided technical support and assistance
    to those states. We have identified best practices in other
    states that can help a state that is having some challenges in
    those areas, provide a number of additional resources to the
    state so that they can look at how they are administering their
    program, and can target and be strategic in where they need to
    devote their resources to reduce the improper payments. We have
    been very aggressive in working with states to help them
    understand both how to reduce improper payments and the
    importance of continuing to reduce improper payments.
        The Chairwoman. And along that same line, what is the
    process in recovering overpayments made to SNAP participants?
        Ms. Rowe. It is a state function. States can--as a former
    administrator, a state does have the ability to either take an
    action to reduce, if the person is continuing to be on the SNAP
    Program--to reduce their benefits to recoup. There are other
    recoup options that states have before them, and different
    states administer it in different ways.
        The Chairwoman. Following up on that a little bit more, we
    are giving all this money to states to create the program, and
    there might be some problems. Do you think we need to have more
    oversight at the Federal level to make sure that when there are
    bad actors, that the states are doing due diligence to, A, go
    after the bad actors, and, B, get whatever resources they can
    get back from those bad actors?
        Ms. Rowe. Well, when I was on the state side, I would have
    had a different answer, but on the Federal side, I can honestly
    say that we have been very focused in reminding states--Under
    Secretary Concannon, not only in visiting states and meeting
    with Governors and state commissioners and administrators--has
    reiterated again and again the importance of maintaining
    integrity in the various programs. He has sent letters to all
    the states. We have worked with the states to remind them--at a
    time when caseloads are increasing, states are facing fiscal
    challenges--it is not time to take your eye off the mark. We
    have to stay focused.
        And I think states have been very responsive. They have
    sought consultation. They have asked us to send in staff to
    help them manage some of the challenges they have. We do
    management reviews. Our regional office staff go out to the
    states, pull records. We look at information that states have
    available to help us determine how well they are doing.
        The Chairwoman. Thank you.
        And I see that my time has expired, so I am going to ask
    Mr. Baca if he has any questions for this witness.
        Mr. Baca. Yes, I do. Thank you very much, Madam Chair.
        Thank you again, Ms. Rowe, for testifying this morning, and
    I appreciate your efforts to ensure the integrity of SNAP and
    other programs at FNS.
        I will start with a statement. Nutrition education and
    access to healthy food are two key components necessary for
    improving the health of all Americans, especially those who
    rely on SNAP benefits to feed their families. In my district
    there is a huge problem with obesity amongst the Latino
    population, particularly children. The First Lady has done a
    great job in highlighting these problems, but I am also
    encouraged that new data from the Journal of Nutrition
    Education and Behavior showed that California has seen a 37
    percent increase in fruits and vegetable consumption among low-
    income adults. This is the kind of information that helps us
    make good policy decisions. So, with this and other data out
    there, can you tell me about FNS's evaluation of nutrition
    educational efforts?
        Ms. Rowe. Well, yes, certainly, Congressman. As you know,
    the Healthy, Hunger-Free Kids legislation required us to
    rethink and relook at our SNAP Education Program, to engage in
    much more collaboration, to provide additional opportunities
    for states to learn what is going on in another state and how
    effective it has been. The kind of research that you are
    talking about we would disseminate to states so that they can
    see the importance of staying very focused on nutrition.
        We have created within FNS a Latino outreach plan which is
    going to focus not only on California, but on Latino
    communities around the country, making sure that they
    understand the program, what is available to them, the
    importance of nutritious eating, healthy lifestyles, and
    healthy habits.
        We continue to share information. When I was in California
    and had an opportunity to see some of the outreach and SNAP
    education programs there, I immediately grabbed the information
    and brought it back to our other states. We have talked to
    states about what California is doing and encouraged them to
    adopt similar strategies and similar activities.
        Mr. Baca. Okay. As part of a follow-up, how would the
    changes made to SNAP nutrition and in the child nutrition bill
    passed in December 2010 affect these numbers?
        Ms. Rowe. That I am not really sure, Congressman. I would
    like to get back to you on that. I think what we are hoping is
    that it would allow us to do nutrition education in a more
    strategic way, in a more collaborative manner, but the impact
    on numbers, I really can't answer that.
        Mr. Baca. Okay. Thank you.
        And I know you elaborated a little bit on this. Does FNS
    have any specific outreach plans to include nutrition education
    in minority communities?
        Ms. Rowe. Yes. As I had mentioned, we have designed the
    Latino outreach plan. We have been working with a number of
    national organizations, such as the National Urban League and
    others, to have them focus and provide information through
    their networks on nutrition education. We are developing new
    messages, messages that we have developed with focus groups,
    that help to focus individuals and remind individuals of
    nutritious feeding; not only nutritious feeding, but how to
    prepare food. It is one thing to buy the food and bring it into
    your home, but if you don't have the tools and skills to
    prepare the food, so we are doing a number of things to help
    educate individuals.
        Mr. Baca. Thank you.
        I understand that the SNAP national enrollments are at an
    all-time high of 45 million people. Do you have any of the
    latest enrollment numbers for California?
        Ms. Rowe. We do have those, and I certainly can get those
    to you, sir.
        Mr. Baca. Okay. And how has the recession affected the
    sign-ups in states with traditionally low enrollments?
        Ms. Rowe. I beg your pardon, I am sorry?
        Mr. Baca. How has the recession affected sign-ups in states
    with traditionally low enrollments in the SNAP Program?
        Ms. Rowe. Well, we have encouraged states to reach out to
    populations that previously have not participated in these
    programs. We are doing--we have just talked to the Labor
    Department and other Federal agencies to look for ways in which
    we can get information out to individuals who participate in
    their programs about the availability of SNAP. One of the
    things that we find quite often is individuals don't realize
    that they are eligible for a SNAP benefit even while they are
    receiving some level of unemployment compensation.
        Mr. Baca. Okay. I know that my time has run out, but you
    mentioned earlier that trafficking has gone down to about one
    percent.
        Ms. Rowe. Correct.
        Mr. Baca. What else, then, can we do to limit abuse and
    fraud? Is there anything else that we might need to implement
    both at the Federal or state level that would stop abuse and
    fraud that still occurs?
        Ms. Rowe. Well, one of the areas that we are looking at is
    the definition of retailers who can participate in the program.
    We have been able to develop profiles, if you will, on the
    types of businesses that may be prone to have trafficking
    activity, but we also want to make sure that we don't limit
    access. And so that is one of the areas that we may want to
    come back and talk to you about.
        Mr. Baca. I know my time has run out.
        The Chairwoman. Thank you, and I am sure we will have more
    questions on that, so you will get a better clarification, sir.
        I am now going to give 5 minutes to my good friend from
    Iowa, Mr. King.
        Mr. King. Thank you, Madam Chair.
        Administrator Rowe, thank you for your testimony and for
    coming prepared. I would just like to back us up historically a
    little bit and ask you if you could inform us as to what the
    original reason for the nutrition program at its inception?
        Ms. Rowe. For the SNAP Program?
        Mr. King. Well, for the nutrition program all together. I
    could call it food stamps. I think that might be historically
    more accurate.
        Ms. Rowe. Well, the original statutory purpose was to
    alleviate such hunger and malnutrition, which will permit low-
    income households to obtain a more nutritious diet through
    normal channels of trade by increasing purchasing power for all
    eligible households who apply for participation.
        Mr. King. And what year was that policy established?
        Ms. Rowe. 1977.
        Mr. King. And prior to that, we didn't have any Nutrition
    or Food Stamp Program?
        Ms. Rowe. No, and I am leaning back--no, we did have a Food
    Stamp Program, but the policy cited was from 1972.
        Mr. King. Fair enough. I guess I grew up in an environment
    that didn't have this program, and I wasn't aware that it
    didn't exist prior to 1977. So thanks for that information on
    it, and the basis of it would be to alleviate hunger and
    malnutrition.
        Now, then, in the current environment, can you
    statistically identify children that are suffering from
    malnutrition?
        Ms. Rowe. I would like to get you that. We do have that
    information. I did not come with that information available
    today, but I can get you that information in terms of food
    insecurity.
        Mr. King. What about malnutrition? That is two different
    things, isn't it?
        Ms. Rowe. Right, right. And in terms of malnutrition, we
    can certainly talk with our sister agency, the Center for
    Nutrition Policy and Promotion, to see if they have statistics.
        Mr. King. Okay. I would ask you formally to produce that
    data for the Committee to statistically identify children that
    are suffering from malnutrition.
        Mr. King. I think it is important that we anchor ourselves
    on the basis for this program originally, and hunger is another
    statistic that can be measured. I would expect everybody has
    been hungry at one time or another. I don't know how you
    quantify that. If there is a means, I would like to know what
    that data is.
        Ms. Rowe. Well, there is--we do have a study that was
    released last year. I know the Food Research Action Council has
    released studies. We have looked at the food insecurity, and
    that is a data set that we have not only by state, but we can
    give it to you by Congressional districts. We can break down
    the food insecurity population for children and families.
        Mr. King. Okay. And I would just--let us expand this if we
    can, as I focused on children, but as we look at this data, I
    presume it will be also equally available for adults and then
    perhaps seniors separated from that as a group as well. I would
    like to know in percentages of children that are suffering from
    malnutrition, adults, and then senior adults, and maybe perhaps
    three separate categories. And if it gives me some information
    by region, even by Congressional district, that would be
    useful.
        And I say this because I am concerned that we might have
    gotten away from our original mission. In fact, we have gotten
    away from our original mission, because I have heard you say a
    couple of times the words food insecurity, and that is a
    different definition. And I remember the testimony that we had
    here in 2007 about food insecurity, and I happen to have saved
    it in my BlackBerry.
        This is a witness before this Committee March 13, 2007, who
    said, ``There is also mounting evidence that the overweight and
    obesity trends in the United States are due in part to high
    levels of food insecurity.'' That is a bit of a concept that is
    difficult for a lot of my constituents to get their mind
    around, that people are overweight because of food insecurity,
    and presumably if we can resolve the insecurity, we can resolve
    some of the obesity. Do you adhere to that position statement?
        Ms. Rowe. Sir, when people have limited resources, and they
    need to put food on their table, the prevalence is for them to
    buy those foods that are high in starch, that will fill the
    need for hunger, which then increases their tendency to be
    overweight, to have obesity issues, as well as diabetes and
    other health-related issues.
        Mr. King. Thank you. I do know these arguments, and they
    are the ones that I had anticipated. But I just make the point
    that it is hard for taxpayers to understand that more food
    stamps solves obesity. That is a messaging problem; however,
    there might be a basis in it in fact, and I could take issue
    with that.
        I would ask also are illegals--are they eligible for the
    SNAP Program?
        Ms. Rowe. No, they are not.
        Mr. King. And do you have a verification program?
        I would ask unanimous consent for an additional minute.
        The Chairwoman. No, I will give you a chance later, because
    I want everybody to have a good 5 minutes.
        Mr. King. Noting the objection, then I yield back the
    balance of my time.
        The Chairwoman. I hate to be hard about that, but I do want
    to be fair to everybody on the Committee, and I will now give 5
    minutes to Mr. Sablan.
        Mr. Sablan. Thank you, Madam Chair, and to you and the
    Ranking Member for holding this hearing.
        Good morning, Ms. Rowe. My name is Kilili. I am from the
    most remote part of the United States. It takes you a day to
    get there, so you can just imagine how much it costs to ship
    things there, whether it is the chicken from Arkansas or the
    rice from California. Or we should actually ship more apples
    from Washington maybe and less SPAM from Minnesota.
        But I have several questions. Unlike all the other United
    States Territories, the Northern Mariana Islands has no
    statutory mandate to receive nutrition assistance other than
    the Secretary's authority to extend USDA programs at his
    discretion under Public Law 96-597. The Secretary has decided
    it would be in a block grant, and you just testified earlier
    the difficulties of block grants at the time when people are
    having the most difficult time.
        I come from a place where one of the islands I represent,
    it costs $4 a pound for frozen chicken, $4. You can buy a
    chicken at less than a dollar a pound in many of the places
    here in the United States.
        I need to work with you, Ms. Rowe, on this issue, because,
    again, besides the high cost of those products, my government
    in the past 3 years has lost almost 50 percent of its GDP. Many
    people are either laid off--if you are not laid off and lucky,
    you get furloughed, your hours are reduced, and the world
    economic conditions, everything is going up.
        I look at myself and I say, when I go home and I see the
    difficulties, the way for me to console myself is I thank God I
    am not in Haiti, because I can't compare it to any part in the
    United States.
        You said the fundamental mission of FNS is to ensure that
    people have food. Now, we have--they reduced the program, the
    Block Grant Program you have afforded the Northern Mariana
    Islands where an individual gets an average of $111 a month.
    Fifty miles away in Guam, an individual gets $281 a month. We
    have just a couple of months ago reduced by 36 percent the
    benefits to everyone in the program and see an increase of 500
    on the wait list now.
        I need to work with you before I go into my questions,
    really, because you, FNS, review and approve the integrity of
    the programs for the Northern Mariana Islands, and you know all
    of these things that violates what the fundamental mission is,
    and you won't lift a finger to fix it. You should.
        I really need to work--I need your commitment right now,
    Ms. Rowe, that you will work with me on this. We have reached
    out to the Secretary. Mr. McGovern was kind enough to sign the
    letter for us to send to Secretary Vilsack, and I have not even
    received a response, and maybe it is because I don't have a
    vote here.
        I hope that when you look at me, you see an American here,
    because those Americans out there that I live with are going
    hungry, seriously, and I know because I go to their homes. And
    I need your commitment, Ms. Rowe, please, to work with me on
    this. And I will move on to my questions, and hopefully there
    is enough--thank you, thank you. May I have your commitment?
        Ms. Rowe. I was going to say you have my commitment, sir. I
    would----
        Mr. Sablan. Because we have in the past--I will be very
    honest. Under Secretary Concannon has really been gracious to
    us, and we need to address this, get into the food program,
    because I think that is where Americans need the most help. I
    am just trying--there are more details. If you want more
    details, I can share it to you. I am just a little embarrassed
    that I am telling the whole world that Americans in my district
    are not getting enough to eat, because the Americans are
    supposed to carry out the program, fulfill the number one
    reason it exists, approves plans that they know doesn't serve
    the program. That is where I need your commitment. I appreciate
    it, and I yield back.
        The Chairwoman. Now, I would like to give Mr. Southerland
    from Florida, another Member of the Committee, a full 5
    minutes.
        Mr. Southerland. Thank you, Madam Chair. I would like to
    yield as much time as my friend from the Northern Mariana
    Islands needs to finish his point.
        Mr. Sablan. Thank you, Mr. Southerland. I have Ms. Rowe's
    commitment. She will work with me. I shouldn't be airing any
    more of this. I am really grateful that you consider that.
    Thank you. I yield back.
        Ms. Rowe. You have my commitment on the record.
        Mr. Sablan. Thank you very much.
        Mr. Southerland. Ms. Rowe, thank you for appearing today. I
    am going to ask just some basic fundamental questions.
        I am one of the newest Members of the Committee, so I am
    trying to get my arms around all of this. Tell me if you would,
    what is the average length of time SNAP recipients participate
    in the program?
        Ms. Rowe. The average length of time that new recipients
    are participating in the program is about 8 months, 8 or 9
    months.
        Mr. Southerland. Is there a--is there a maximum amount of
    time? Are there any limits on that?
        Ms. Rowe. There are no time limits on participating for
    most eligible people.
        Mr. Southerland. Okay. And tell me about in calculating
    benefits, can you tell me what is excluded from household
    income and what deductions are allowed?
        Ms. Rowe. I am going to need some assistance from----
        Mr. Southerland. That is fine, and I understand.
        Ms. Rowe. Let me just confer with the staff.
        Mr. Southerland. Sure.
        The Chairwoman. Ms. Rowe, if you would like to have one of
    your assistants answer for you, that might be better.
        If you could state your name for the record, and I will
    give you an extra 20 seconds.
        Ms. Shahin. My name is Jessica Shahin, and I am the
    Associate Administrator for SNAP at the Food and Nutrition
    Service.
        I believe your question was around the eligibility
    requirement.
        Mr. Southerland. Yes, it was. In calculating benefits, what
    is excluded from household income, and what deductions are
    allowed?
        Ms. Shahin. Oh, okay. If I could start with the household
    income in the regular program, it is 130 percent of poverty,
    and then to receive benefits you need to get to a net of 100
    percent of poverty. The deductions are around things like if a
    state uses a standard deduction that looks at shelter,
    utilities, those kinds of things. So the deductions are related
    to their household expenses.
        Mr. Southerland. Okay. So those are all deducted. Tell me
    those again. Housing, utilities?
        Ms. Shahin. Shelter deduction, utilities.
        Mr. Southerland. Okay. All right. And what is--I heard--
    what is the average? I see on here that the budget for Fiscal
    Year 2010 was $68 billion. What is the average benefit at any
    given time of the people that are recipients of the program?
    What is the average benefit?
        Ms. Shahin. I think the average benefit for a family of
    four is around--for an individual person, it is around $130.
    You don't multiply that by four people, because you get less
    and less as the family grows.
        Mr. Southerland. Sure. So that would be $100----
        Ms. Shahin. Thiry dollars more per person average.
        Mr. Southerland. Okay. And then finally, I noticed, Ms.
    Rowe, we were talking or discussions earlier about the states.
    What is the incentive for the states to track and prosecute, in
    your term, bad actors? Where is--well, what is the incentive?
    What is the penalty if they don't?
        Ms. Rowe. Well, first of all, states will face a fiscal
    penalty for failing to achieve an error rate at a certain level
    based on the national error rate. You must maintain your error
    rate at or below the national error rate. States receive
    penalties. That is not something that any state wants to have
    to explain to the legislature or to their Governor, that they
    are going to receive a fiscal penalty for failure to perform.
    States also receive bonuses, and it is the bonuses that
    encourage states and--encourage states to not only stay focused
    in this area, but to have additional resources to apply,
    whether it is for additional investigators, additional staff,
    outreach.
        I will tell you, when I was a state administrator both in
    the District of Columbia and for the State of Connecticut, we
    were competitive among our colleagues. We wanted to have as low
    an error rate as possible. We wanted to be able to go to our
    Governors and our legislatures and talk about the efficiency in
    which we were operating the programs. Not only are you here in
    Congress concerned, but legislatures are concerned, and members
    of state legislatures and Governors, about the error rate and
    ensuring that the program is operated efficiently.
        So it is the efficient operation of the program, as well as
    staying very focused on what you need to do to maintain your
    error rate and to continue to have it drop.
        Mr. Southerland. Okay. Thank you, Madam Chair, and I yield
    back.
        The Chairwoman. Thank you.
        And, Mr. McGovern, you are recognized for 5 minutes. And I
    would like to--before the clock begins--to recognize that the
    Ranking Member of the full Committee, Mr. Peterson, is here,
    and because I am a tough nut, you are going to be number 5 on
    the list, but we will give you a chance to make a statement as
    well as a chance to ask questions, sir.
        Mr. McGovern. Well, thank you very much, and thank you,
    Madam Chair, for letting me participate in this hearing. Thank
    you, Administrator Rowe, for being here.
        You know, I just want to say a couple of things. First of
    all, when the Chairman of the full Committee opened up, he
    talked about the fact that we are in tough economic times, we
    all have to make difficult choices, but I would like to state
    for the record that I don't think all programs are equal, and
    certainly programs that provide nutrition and food to people in
    this country to ensure that they don't go hungry I think need
    to be prioritized.
        And the problem we have here, quite frankly, is we still
    have a hunger problem in America. There is not a community in
    this country that is hunger free. What we need is a holistic
    plan that involves, quite frankly, more than just the programs
    in your Department and in USDA, but we need a holistic approach
    to try to eradicate this problem once and for all.
        It was mentioned that we are spending more on the SNAP
    Program than ever before. That is because more people are
    falling into poverty, more people are out of work, more people
    are eligible. If the economy gets better, the amount we spend
    goes down.
        The Chairman of the full Committee also talked about the
    Categorical Eligibility Program, or Cat El, I guess, is what
    they call it, which I think helps make SNAP a more efficient
    program, and I think repealing Cat El would decrease
    participation and make it more difficult and costly for states
    to administer the SNAP Program, and I think would result in
    increased error rates, exactly the opposite of what our goal
    should be. So I guess I don't want to--I hope this Committee
    doesn't go down that road.
        I would appreciate your comments on that. You mentioned how
    the SNAP Program is now more efficient than at any other time
    in its history, and when you compare it to a lot of other
    government programs, it looks really, really efficient. And
    amongst the error rate, is included in that number the number
    of cases of underpayments; in other words, where people who are
    eligible for a benefit don't get the entire benefit?
        Ms. Rowe. Correct.
        Mr. McGovern. I appreciate your comment on that.
        And then finally, there are a lot of people still who are
    eligible who are not in this program, and I would be--I would
    like you to answer the question of how many people are eligible
    but are not participating, and are they senior citizens, or are
    they children, or where does that--you know, where do those
    numbers fall?
        But look, these are really vital programs. I am sorry my
    colleague from Iowa left. I have to tell you, I think all of us
    when we go into our districts, we see people who are in really
    tough situations, who--quite frankly, these are the programs
    that actually put food on the table to allow their kids to have
    enough to eat. So in any event, I will yield to you to answer
    the questions.
        Ms. Rowe. Well, you are absolutely right, the problem is
    hunger. People need to be able to put food on their table, and
    this program allows them to be able to do that; not only to put
    food, but to put healthy food on their table.
        With regard to broad-based categorical eligibility, it just
    allows states the ability to simplify their SNAP administration
    by aligning the income and the resource limits with their TANF
    Program, something I wish I would have had when I was
    administering programs. It is a simplified way of making the
    application process easier for both clients and states.
        I also should mention that the household must still have a
    net income low enough to receive SNAP benefits, so even though
    they are categorically eligible, they still have to have a
    household net income low enough to receive benefits.
        In looking at some of the data, almost 98 percent of those
    receiving SNAP benefits have an income at or below the regular
    SNAP income limit of 130 percent, even in states with broad-
    based categorical eligibility. So it hasn't opened up. What it
    has done is made it easier for people who want to participate
    to understand what is necessary for them to participate, and
    also to support the staff in terms of the administration and
    the application of the program.
        Underpayments and overpayments are all part of that payment
    error. We continuously work to ensure that we have neither
    underpayments nor overpayments, again, something that states
    are very focused on. And there are those who think that we are
    more focused on the overpayments, but my experience is we are
    focused on both. We want the right amount of money to go to the
    family and individual who is participating in the program. So
    we focus a great deal on underpayments and overpayments.
        Those who are eligible who are not in the SNAP Program--and
    I was hoping somebody was pulling that data together and was
    going to hand me a note--but I will make sure, but it is a
    large percentage, and we can give it to you by the percentage
    of elderly and other individuals who are eligible but not
    participating.
        Mr. McGovern. Thank you.
        The Chairwoman. Thank you.
        I would like to now recognize my friend from Maine, Ms.
    Pingree, for 5 minutes.
        Ms. Pingree. Thank you, Madam Chair. I appreciate that, and
    I appreciate both of you holding this hearing today. Thank you
    very much for the work that you do and the way that you help
    some of our most vulnerable citizens. Welcome to your job after
    4 months. I am also new on this job. I am a new Member of the
    Committee and am very pleased to be here.
        This is a tough economy, as many of my colleagues have
    stated, and I appreciate the thinking that my other colleagues
    are putting in on helping you think about how to make sure we
    reduce fraud and abuse in this program. And in tough times I
    think we do have to make sure that all the states are spending
    their money wisely and there is sufficient oversight. So I
    appreciate that discussion.
        I also know in my State of Maine, where we are 38th in per
    capita income, we have lost a tremendous number of
    manufacturing and other natural resource jobs, about 250,000
    residents of our state take advantage of the SNAP Program, and
    that is a lot of people in a state of 1,300,000 people. I also
    know that we do have many vulnerable citizens who do still not
    receive access to the program, so I do appreciate the
    importance of outreach, I think particularly to seniors who
    often don't take sufficient advantage of the program.
        I have a lot of concerns about this, and I will try to get
    a couple of questions out. One of my issues in Maine that you
    have helped us deal with--and we are very appreciative of the
    work that Secretary Concannon did. As you may know, he spent
    some time in Maine, and we think highly of him, and I hope that
    doesn't ruin his reputation in the Department. We really
    struggle with high heating costs and other excessive expenses.
    As I am sure you know, as one of 17 states to obtain a standard
    utility assistance waiver offered by the USDA in 2009, I really
    appreciate the 40,000--on behalf of the 40,000 Mainers who
    benefited from the Administration's decision to extend that
    waiver twice so Mainers could get through the winter, but the
    final adjustment came down to many people losing $20 a week in
    benefits. I know to many people that doesn't sound like a lot
    of money, but I know too many seniors and other very vulnerable
    citizens who are out of work, who have been out of work for a
    long time, have depleted their benefits, they are at the end of
    the line, and that was very difficult.
        I guess one of my questions, which goes counter to some of
    the concerns that people have, is when was the last time we
    updated the SNAP formula, and how does the Department plan to
    deal with assuring adequate nutrition for those people who I
    think in a state like mine where we are the most oil-dependent
    state in the country, we pay high heating oil costs, tough
    winter like the last one, a lot of people just couldn't make
    ends meet, and we didn't feel the cost adjustment was
    sufficient or representative for us?
        Ms. Rowe. Again, I am going to ask Jessica if she would
    join me with regard to the last time that we looked at the
    standard utility allowance and made any updates.
        Ms. Shahin. Actually, yes, ma'am. The standard utility
    allowance is adjusted by states on an annual basis in
    accordance with what their rates are, so it is updated every
    year. Each state does their own methodology, but it does have
    to be approved by FNS as a methodology for determining that
    year's standard utility allowance, and its basis is the cost
    that the state has incurred in the previous year.
        Ms. Pingree. I am sure we will end up having more
    conversation on that over time, but I thank you for that. And I
    just wanted to reiterate that it is a continuing challenge for
    my state, and I am sure in other places as well.
        I want to switch gears here a little in the time I have
    available. One of the things that I am particularly interested
    in is this convergence, particularly being on the Agriculture
    Committee where we think about the interests of farmers. And I
    represent a lot of small farmers in my state, and I know how
    important it is to work as efficiently as possible in your
    Department, but we are very interested and excited about the
    idea that there are many programs in Maine and other states
    that are utilizing the SNAP Program for participants at local
    farmers markets.
        I may have to discuss some of this in my second round, but
    let me just sort of put it out there, and we can follow up on
    it later. It all seems like a win-win idea. To me, it gets into
    this issue of adequate nutrition, how do we make sure that
    people have access to healthy foods. It is good for our
    farmers. They sell more at the markets, and, frankly, many of
    them are excited to see seniors and other people in vulnerable
    populations coming in, buying fresh food, learning how to cook
    them, and a whole variety of other things.
        I do sense that there are some challenges in working with
    the program. There is some overlap in the departments, there is
    some difficulty in getting EBT readers in many of our farmers
    markets, and some of that has to do with what we see as a
    little bit of overlap between FNS and AMS, not to get into too
    many initials.
        I am about to run out of time, so I may just put this out
    there when I get back to my second round, which I assume we are
    going to have a second round probably. I would like to talk
    more about that because that seems like a solvable problem and
    deals with a lot of the things that we are talking about today.
        The Chairwoman. Thank you.
        Now I would like to recognize the Ranking Member of the
    full Committee, Mr. Peterson.
        You may give an opening statement and ask follow-up
    questions if you choose.
        Mr. Peterson. No, Madam Chair. I just have a couple
    questions.
        Ms. Rowe, you proposed regulations for school nutrition
    standards that are supposed to keep the standards current
    within Dietary Guidelines and consider the recent IOM report,
    yet your proposed rule would significantly change the way
    tomato sauce and tomato paste is counted, which would
    substantially increase the cost of serving school lunches and
    generally make pizza uneconomical for schools to serve. As I
    understand it, you are miscounting tomatoes. Apparently there
    is nothing about crediting tomato products in the Dietary
    Guidelines, and there is nothing about it in this IOM report.
    We don't think there is any scientific justification for the
    proposal, so could you explain to me why you proposed a change
    in accrediting tomato products?
        Ms. Rowe. Well, what I can say is that it was--as we looked
    at the standards of the Dietary Guidelines, as well as the
    standards within the IOM recommendations, it was a
    determination by our staff that that was a necessary change to
    make, which is why we included it in our proposal. Now, we did
    receive over 130,000 comments on those proposed rules. Just
    yesterday I received an executive summary of the comments,
    which was about 150 pages. We will be looking very closely at
    that issue as well as other issues that have been raised and
    make some determinations as to how to move forward.
        Mr. Peterson. I don't see what justification there is, and
    if you are going to go ahead with this, then maybe what I will
    propose is we will reduce the funding for this program by
    whatever the increased cost of this is, if that is how people
    want to operate.
        The second thing on the categorical eligibility issue, can
    you tell me how many more people became qualified for this
    program through categorical eligibility?
        Ms. Rowe. As I understand, based on looking at some
    preliminary data, it is about 2 to 2\1/2\ percent.
        Mr. Peterson. So that is--what is it, 44 million people?
        Ms. Rowe. So it is about 2 or 2\1/2\ percent of that
    number.
        Mr. Peterson. But do you have any idea how much cost that
    added to the system, these 2, 2\1/2\ percent? I guess they have
    to go through this benefit formula calculation to figure out
    what they are going to get, like everybody else does, but----
        Ms. Rowe. The comment that my staff is sharing with me is
    it is about one percent of the benefits, so it would be about
    $100 million.
        Mr. Peterson. And we----
        Ms. Rowe. About $600 million, I am sorry.
        Mr. Peterson. We had the IG in here talking about the fraud
    issue. From what I could tell, a lot of the problem are these
    small mom-and-pop operations that only have a cash register and
    a tape. We have had the problem before where they were selling
    these food stamps outside the door for half price. Now
    apparently they are ringing this up and giving whoever has the
    card half of the money, and they keep half the money. Is that,
    in fact, the case? And what are you doing about this? I am not
    even sure we should let people buy food in some of these places
    because it is two or three times as expensive as it is in a
    grocery store.
        Ms. Rowe. Well, in response to your question, we have--that
    is trafficking. We have been looking very carefully, very
    closely at that issue. We do have identification through our
    ALERT system. We identify the stores where we see trafficking
    patterns that may exist. We are looking at our retailer
    definitions, who participates in the SNAP Program. We are
    working with the IG on some investigations. Many of the things,
    investigations and notoriety, that has arrived in the newspaper
    are stores that we already have been looking at. So
    trafficking, understanding what the profile is of stores who
    are trafficking, that are possibly trafficking, who are in the
    program, but also having some understanding of those--sorry,
    applying that knowledge to stores who are interested in
    participating in the program will also address some of the
    challenges that we face in not having stores come into the
    program who we think may very well be coming in, and the end
    result is they would participate in trafficking.
        We are also increasing the penalties for stores who are
    found to be conducting these unethical business practices. We
    have increased our working relationship and our coordination
    with the OIG's office, as I have said. We are looking at
    specialized investigators. We have investigators who are very
    adept at looking at the data that we have, the data mining that
    we are doing. To profile a store, we can go in, we can
    determine through our own undercover investigation whether or
    not this activity is going on. So there is a lot going on.
        Even though we are at one percent, we do not find that
    satisfactory. So we are doing a number of things within the
    agency to continue to take that number down and to target those
    stores who are participating in these unethical practices.
        Mr. Peterson. Could I just follow up?
        The Chairwoman. Since you are the Ranking Member of the
    full Committee, absolutely.
        Mr. Peterson. What percentage of these stores that don't
    have the current technology, are a problem? Is it one percent
    of them or ten percent of them? Do you have any idea?
        Ms. Rowe. I am not quite clear what you mean by the current
    technology.
        Mr. Peterson. Well, I mean they don't have electronic
    scanners.
        Ms. Rowe. The electronic scan card.
        Mr. Peterson. So they just have a tape. And so they don't
    have to ring anything up.
        I was talking to the IG about whether you could set this
    system up so that as they ring up the groceries, the items
    actually are put on the card so you could have an audit trail,
    and one of the answers I received is that some of them don't
    have the technology, so you can't do that.
        I understand all these things that you are doing, but
    errors and fraud are still hard to catch. So the question is,
    are we getting at 95 percent of the problem, or is this much
    bigger? Should we actually look at limiting the ability of some
    retailers to be in the program if you haven't got a way to
    control it? That is the question I have.
        Ms. Rowe. As I understand it, there are very few stores
    that don't have the EBT electronic devices, the point-of-sale
    devices. And those stores that don't have the point-of-sale
    devices would be stores--as I said, we have stores that we set
    up.
        Mr. Peterson. How many are there out of the total? I mean,
    do you have any idea what percentage of the total food stamp
    retailers are that kind of a store?
        Ms. Rowe. We can certainly get back to you on the
    percentage and the number of stores that do not have the point-
    of-sale devices. But I will say that as we look at
    strategically how do you think about managing this program,
    those would be stores that may be a store that is on a high-
    profile alert that we watch more carefully than stores that do
    have the electronic benefit device.
        Mr. Peterson. I would like to have that information if you
    could get it.
        Ms. Rowe. Certainly.
        Mr. Peterson. Thank you.
        Thank you, Madam Chair.
        The Chairwoman. And thank you, sir.
        Now we will go to the second round of questions.
        Ms. Rowe, Administrator Rowe, the 2010 Dietary Guidelines
    for Americans published by the USDA in January of this year
    specifically list four new trains of concern: potassium,
    dietary fiber, calcium, and vitamins. Unfortunately, Americans
    young and old are not getting enough of these important
    nutrients. One medium-sized potato has 18 percent of the daily
    recommendation of potassium and eight percent of dietary fiber.
    For potassium, potatoes are considered to be an excellent
    source, and for dietary fiber they are considered to be a good
    source. Knowing this, do you think potatoes are unhealthy? Yes
    or no.
        Ms. Rowe. Within our program for children who participate,
    no, I don't think potatoes are unhealthy.
        The Chairwoman. Okay. If so, if they are not unhealthy, do
    you think Americans, and kids in particular, should reduce
    their consumption of potatoes as proposed by the USDA's meal
    plan, also issued in January?
        Ms. Rowe. What we have said in that plan in looking at it
    is that children have meals outside of the school meals; that
    they would have access and the opportunity to have sufficient
    potato consumption and consumption of other vegetables that are
    limited under our guidelines. So we do not think that it is
    necessary to have unlimited white potatoes, within our dietary
    guidelines, in our meal pattern guidelines.
        The Chairwoman. Well, I am kind of surprised at that
    assumption, ma'am, because in my city of Cincinnati that I
    represent, there are some kids that the only food they get all
    day long is the School Lunch Program and maybe the School
    Breakfast Program. So to think that they are going to get these
    things outside of going to school is just not going to happen.
        And I really work to try to eradicate poverty in my
    district, and in some cases the only meals they get are when
    they are at school. In fact, I just read a book by Jeannette
    Walls about her issue with poverty, and she now works for
    MSNBC, and she talked about the fact that the only time she
    ever got a hot meal was when she was in school, and she is now
    into her 40s. So it is the school, whether we have had a SNAP
    Program or another nutrition program, that has really been the
    baseline for our children.
        But having said that, some proponents of the current USDA
    proposed meal plan rule believe that other revenue sources
    authorized in the child nutrition reauthorization will offset
    the cost increase contained in the proposed rule. USDA's
    analysis indicates that schools will have to develop innovative
    solutions to the funding gap created by the proposed rule. In
    other words, they are talking about $5 billion over 10 years,
    of which 80 percent of the schools that have to bear that cost
    are the ones in my district that can least afford to do it.
        Does the USDA continue to stand by their estimates of the
    impact of the proposed rule, or do you now believe that
    revenues from paid meals and other administrative changes will
    be sufficient to make schools whole as they attempt to
    implement the proposed rule? And if you continue to believe
    that schools will face a revenue shortfall as they implement
    the proposed rule, do you have any suggestions that I might
    pass on to the schools in my district? And by the way, I have a
    district that has got a lot of poverty.
        Ms. Rowe. Well, let me answer the end of your question
    first. We continue to work with schools to help them identify
    strategies that they can use to meet the meal pattern
    guidelines. There are many schools who, at the time the IOM
    issued their recommendations, started changing their School
    Meal Program to try and meet those guidelines, identifying ways
    in which they could use more farm-to-school products that would
    maybe reduce their food costs. It may have an initial increase
    in their prep costs and their personnel costs, but eventually
    they were able to see some savings and be cost-efficient.
        In addition, by allowing schools to now charge the adequate
    amount for both the paid meals as well as their a la carte, it
    is an additional revenue source that is coming into schools.
        We are prepared to work with schools to ensure that they
    are able to manage the new meal patterns within the budget
    constraints that they face within their schools, and we are
    doing that now. We are working with the National Food Service
    Management Institute. We have been working with a number of
    other organizations, School Nutrition Association, et cetera,
    to help schools think about how they can meet these guidelines
    and still be within their budget constraints.
        The Chairwoman. Okay. And because I am a strict timekeeper,
    I am going to now yield to my good friend Mr. Baca.
        Mr. Baca. Thank you.
        Again, Ms. Rowe, thank you very much for providing us with
    a lot of information. I am intrigued with the statistic
    mentioned, that one percent of the total fraud is trafficking.
    That is quite low, particularly now that there are record
    enrollments. And it seems like we are focusing a lot on this
    number. But, when we stop to look at one percent, consider that
    is less than the rate of fraud in Federal contracts. There is a
    lot more fraud and abuse in contracts. And it seems like we are
    not concentrating on the need to feed people here in the United
    States. We have a lot of people that are abusing our defense
    contracts and monies that are being wasted. If all we care
    about is fraud, we should be focusing a lot more in that area
    than on SNAP.
        But getting back to one of the questions I want to ask,
    what are your thoughts about the recent movement by some
    localities, most notably in the City of New York, to limit the
    choice of food available with SNAP benefits?
        Ms. Rowe. Well, as I said, we are looking at the New York
    waiver that they have submitted. We have it under careful
    review, and we will be making a determination. I would be happy
    to share the outcome of that decision with all of you.
        With regard to the other--your question in terms of the
    dietary behavior of most Americans, most Americans, I know
    myself, do not have a good diet, and we are constantly looking
    for ways to increase information to Americans so that they can
    improve their dietary habits and lifestyles. So I think what we
    see happening in state after state, the states are becoming
    more and more concerned about the diets of their citizens,
    states are taking actions. We are looking for ways to
    incentivize activities within states to reinforce, provide
    incentives that reinforce positive food--positive habits around
    healthy nutrition and healthy lifestyles. That is an approach
    that we have been taking.
        Mr. Baca. Okay. Do you feel that these initiatives will
    either improve health or save money?
        Ms. Rowe. Well, I think the initiatives--and the final
    information is still not available to us, but as we look at
    incentives, we certainly see greater participation in
    individuals who are purchasing fresh fruits and vegetables. As
    we look at availability, farmers markets, et cetera,
    particularly farmers markets where we do have--where they are
    able to use SNAP benefits, or use the Senior Farmers Market
    vouchers, or the WIC vouchers, or any of those programs, we are
    seeing greater consumption and participation in fresh fruits
    and vegetables. We think that does carry over into people's
    buying habits as well.
        Mr. Baca. Thank you.
        One of the programs that I am very much concerned about is
    the Food Distribution Program on Indian Reservations, FDPIR.
    Too many times we ignore that many of these tribes are very
    poor and don't have adequate access to food. What role does
    USDA play in helping tribes reach out to promote FDPIR?
        Ms. Rowe. We work very closely with tribes. One of my first
    visits when I came onboard was to one of the major meetings of
    tribal leaders. We work very closely with them. We have an
    overview work group that looks at the types of foods that are
    distributed. We keep trying to make sure that the foods are
    healthy, but also meet tribal needs and tribal guidelines. We
    have continued to expand, work with the tribes members to
    explain to them the importance of the food package that we have
    available and how healthy that food package can be for
    themselves and for their families.
        Mr. Baca. Okay. I am also curious to know how FDPIR and
    SNAP work side by side, since, as I understand it, no one can
    be enrolled in both programs at the same time. Is FDPIR only
    used in areas that are remote and have little or no access to
    stores? Also, do you know the percentage of reservations that
    contain food stores that accept SNAP benefits?
        I had to throw in both questions because I am running out
    of time.
        Ms. Rowe. With regard to the participation in SNAP and
    FDPIR, it is operating in locations where there is not easy
    access to any other food stores and members who live on Indian
    reservations can participate in. So, yes, it is that
    individuals can participate in SNAP, or they can participate in
    FDPIR. They are not able to participate in both.
        With regard to the second part of your question, the
    availability of stores. That information we can get back to you
    on. I am sorry. The availability of stores. We can get that.
        The Chairwoman. Thank you so much.
        And before I turn it over to Mr. Southerland, I would just
    like to recognize that we have students in the audience from
    the Future Farmers of America in my district at Fayetteville-
    Perry, and they are seeing democracy in action. And I think it
    is very timely that they are here while we are discussing the
    merits of the food safety program--or I mean the food nutrition
    program in the farm bill.
        And so with that I will give 5 minutes to my friend from
    Florida.
        Mr. Southerland. Thank you, Madam Chair.
        I would like to recognize the efforts of Florida
    Partnership to End Childhood Hunger and Florida Impact. Both
    organizations are based in my Congressional district in
    Florida, and I am proud of their efforts to work with over 50
    organizations committed to work collaboratively to address
    childhood hunger and those in need. The partnership leverages
    public and private partnerships and Federal nutrition dollars
    to reach low-income families.
        What is your--and I know you are new in your post here.
    What is, in your opinion, the role between these public and
    private partnerships and what they--how they should work
    together to really address hunger?
        Ms. Rowe. The role of these partnerships is critical,
    particularly as they work together in a state leveraging both
    their resources and their knowledge, being able to target their
    resources, being able to be strategic in thinking through how
    do we reduce, how we move the dial, as I often call it, from
    where it is today to where we want it to be to reduce hunger,
    to improve nutrition.
        We support these partnerships. Many of them, our regional
    offices work closely with them. We provide staff support to
    them. They are an integral part of the work that we do at the
    regional level and at the national level. It is very important
    to have these public-private partnerships.
        Mr. Southerland. I am assuming you have similar
    partnerships around the country in states everywhere and
    communities everywhere?
        Ms. Rowe. We have them around the country, and just for
    summer feeding alone, the partnerships, the work that goes on
    in a state with these major partnerships to get information
    out, to recruit families, to get them involved, but also to
    provide information and data, those partnerships are extremely
    important.
        Mr. Southerland. Very good.
        I also want to mention, I know that our Florida Agriculture
    Commissioner Adam Putnam, a colleague of many of those on this
    panel this past year, I know he has a current pending
    application before USDA Food and Nutrition Service, and it is
    basically the Healthy Schools for Healthy Lives Act, and so I
    just would like on behalf of my state to just ask for your
    consideration in that application.
        Ms. Rowe. Absolutely.
        Mr. Southerland. And I know that we are eager to work to
    make a difference not just in my district, but in the State of
    Florida.
        Madam Chair, I know I have 2\1/2\ minutes, but we want to
    be good stewards of our time, so I don't want to just ramble,
    so I am going to yield back.
        The Chairwoman. Let me now give 5 minutes to my good friend
    who may not feel that he has a vote, but he always has a voice,
    from the farthest part of our Americas, Mr. Sablan for 5
    minutes.
        Mr. Sablan. Thank you very much, Madam Chairman. Thank you
    for your kind words. I say I have a voice right now, but I
    prefer to vote actually eventually.
        Ms. Rowe, again, 4 months on the job, and I am asking you
    so many details about this place that you probably never have
    heard of maybe 4 months ago unless you have been there, right?
        Ms. Rowe. I will tell you that I have heard a lot about it
    since I have been in this position.
        Mr. Sablan. I am sure.
        Anyway, I want to compliment you. WIC is one of the best
    programs that has happened to the Northern Mariana Islands, and
    on behalf of the babies and women and children, it is just a
    wonderful program.
        I have--the School Lunch Program, you see, because we are
    again from the territories, like I said earlier, almost \1/2\,
    a decrease of almost \1/2\, 50 percent of our GDP, increase in
    layoffs, increase in furloughs, but our Census count won't come
    up until the summer of 2012. That is a year away from now. But
    all of these economic conditions have seen an increase of
    students eligible for the School Lunch Program, and I have my
    education people on my back all the time asking for the release
    of the Census because they know, they know that there is an
    increase of eligible students for the school lunch. They also
    know that without that increase in numbers, they can't justify
    to you an increase in the need for increased funding for the
    program. So, again, I would like to ask you to join me again in
    looking into that, and I am just associating this new issue in
    food commitment we have to work together earlier.
        I am also going to ask, if possible, to ask for a response
    to the letter that Mr. Jim McGovern, Mr. Sam Farr, and I wrote
    on June 24th to Secretary Vilsack, and I appreciate that.
        And let me just--let me give you a little information on
    how much attention--and this is not specific to your
    Department, this is to many Federal offices--how much attention
    they have for the Northern Mariana Islands. Yesterday I went to
    your website. I wanted to find out in your public affairs,
    government affairs, who I should talk to. And did you know that
    in your website as of yesterday, I don't know if they made
    changes today, that under Region 9 they are still listed as
    covering the Trust Territory of the Pacific Islands. The Trust
    Territory of the Pacific Islands ceased to exist 25 years ago,
    but it doesn't cover the Northern Mariana Islands, which became
    a part of this nation in 1978, over 30 years ago.
        This, Miss Rowe, with all due respect, and in all
    sincerity, is what I am saying when I say--and you are not the
    only one. Don't think you are exclusive in this. The absence of
    the necessary attention that Federal agencies need to give to
    the territories, and in particular to America's newest
    territory, the Northern Mariana Islands, and those are
    Americans out there. Thirty percent of our high school
    graduates put on a uniform. I don't know if that happens
    anywhere else in America. Thirty percent of our high school
    graduates. And we are talking about a very small population.
    They deserve the attention from Federal Government employees,
    and it breaks my heart.
        And I am the most grateful person from the Northern Mariana
    Islands to all Americans. My gratitude and appreciation for the
    American people has grown exponentially in the little over 2
    years that I have been here. Grateful. I tell my people back
    home, if you see an American taxpayer, by God say thank you,
    and I mean that from the bottom of my heart.
        But Federal offices, I know we are all busy, going through
    this 175 page report and all these statistics that I don't read
    basically. But those are Americans, and they are entitled to no
    less than the attention that we give Americans, we give Members
    of Congress. No less; not more, but no less.
        For that, I yield back, and I thank you for your presence
    here today.
        The Chairwoman. Thank you. And isn't this a powerful voice?
        Ms. Rowe. I was going to say, you have my attention, and
    you have my commitment.
        Mr. Sablan. And you know I love you, Ms. Rowe.
        The Chairwoman. Mr. McGovern, do you have any more
    questions?
        Mr. McGovern. Yes, I do.
        The Chairwoman. Five minutes, sir.
        Mr. McGovern. Thank you.
        Let me first say with regard to a couple things that were
    brought up, this New York waiver, and the suggestion by my
    colleague Mr. Peterson about limiting where SNAP beneficiaries
    can shop, I would urge you to proceed with extreme caution on
    both of those things.
        I was at the press conference with the First Lady yesterday
    dealing with food deserts. There are some people who do not
    have access to supermarkets and stores that provide the kind of
    nutritious food that we all define as nutritious, and while it
    sounds nice to say we are going to make sure people can only
    spend money on good food, we should be thinking about how to
    give people more access as well as the issue of affordability.
    So it sounds good, the New York waiver, but I would urge you to
    proceed with caution.
        I have a few questions, and then--let me get through them
    all, and then you can answer them.
        Following up with the categorical eligibility issue, isn't
    it true that if we cut Cat El, that that would result in
    increasing--it would result in an increase in error rates and
    fewer people receiving SNAP?
        And then on the benefit level, does the SNAP last a full
    month? What happens when someone runs out of their SNAP
    benefit? Where do they turn to for food?
        And then finally, going back to a point I brought from my
    original statement, I do not believe that we have a
    comprehensive or holistic plan to deal with hunger in America,
    and I have been suggesting to the White House and the Secretary
    of Agriculture, and I am going to suggest to you, we should
    have a White House conference on food and nutrition. We need to
    connect the dots because ending hunger is not just about SNAP,
    it is not just about WIC, it is about a whole bunch of other
    things. We need to connect these dots.
        And the President made a pledge that we would end childhood
    hunger in America by 2015. We are not, at the rate we are
    going. And I want to be able to keep that pledge, and I would--
    my follow-up question would be would you agree with me that we
    should do a White House conference on food and nutrition so
    that we can come up with a holistic plan so we all know what
    our assignments are? Again, it falls under the jurisdiction of
    not just what happens in this Committee and not just what
    happens in government, it is the private sector, it is the NGO
    community, it is the faith-based communities. But we don't have
    a plan. We do not have a plan. I would urge you to help me
    convince the President to go ahead with that conference.
        So with that, I will let you answer my questions.
        Ms. Rowe. Well, let me answer the question in terms of any
    reduction in the food stamp program, any changes in categorical
    eligibility or any reductions would result in people having to
    leave the program and not being able to meet their basic needs.
        I think the other part of your question, you and I see it
    all the time, and I am sure others as well, individuals run out
    of benefits sometime toward the--after the middle of the month.
    They spend--and when that happens, they have to turn to food
    pantries. They have to turn to the food pantries in their
    churches, they turn to the food pantries and the food banks
    that are in their communities, so they turn and look for
    resources very quickly.
        Benefits are usually spent in the first 3 weeks. So, the
    last week of the month, that is also in response to the
    question about the obesity issues, because when those benefits
    are spent, that is when individuals turn to foods that will
    fill the stomachs of their children and themselves, which may
    not be the healthy foods, and they may be the foods that lead
    to obesity and other health-related illnesses.
        The broad-based categorical eligibility simplifies and thus
    reduces error rates when you think about how, as a state, we
    apply that program or that rule. So I think if we eliminate it,
    we would find ourselves talking about a different number or
    additional resources being spent to try and maintain the error
    rate that we currently have in place.
        With regard to a comprehensive process for planning, I
    agree with you that we need to have a comprehensive process for
    planning. To the extent that that would be a White House
    conference or some other vehicle, we would--I would certainly
    be prepared to support it.
        Mr. McGovern. I appreciate it. I do have a request in to
    the President calling for a White House conference. I just feel
    it needs to be--this issue needs to be brought up to that
    level, if we are going to be serious about it. I think
    everybody, Republican and Democratic, are all committed to
    trying to end hunger in America, but we don't have a plan. We
    don't have a comprehensive plan, and I don't know any other way
    to get to one where we can hold people accountable other than
    bringing it up to the Presidential level. The First Lady's
    press conference was really good yesterday, but she didn't talk
    a lot about hunger or poverty, and, as you have mentioned,
    hunger is a contributing--food insecurity is a contributing
    factor to obesity. But, anyway, I would appreciate any support
    I can get on this idea. Thank you.
        Ms. Rowe. You are welcome.
        The Chairwoman. Thank you.
        In our final set of questions before we go to two closing
    statements, one by Mr. Baca that will be delivered by Ms.
    Pingree and the final one by myself, and any closing remarks
    that you may have, so I am going to turn it over to Ms. Pingree
    in her role as Ranking Democratic Member for 5 minutes of
    questions.
        Ms. Pingree. Thank you.
        Thank you for persevering here and again for your good
    work, and to our Chairwoman for holding this hearing. I will
    try to be brief here because some of these things I think I
    will just submit to you in writing.
        But just to go back to if you recall 100 questions ago, I
    am very interested around the things in EBTs and farmers
    markets, and one of the things I have heard, we talked to a lot
    of our farmers markets, I know many of them struggle. Some
    don't have Internet access, but sometimes it is just other
    parts of the bureaucracy. I have been told that there is some
    argument that if they were able to combine the work that went
    on at FNS and AMS, and this may be way in the weeds for you at
    this moment, but it could streamline some of the processes, the
    application processes they have to go through. Our only
    interest in the end goal is making sure that more people who
    participate in the SNAP Program are able to buy food from the
    local farmers market. So I am not sure if you have an answer to
    that question, but one of our issues is around that and how to
    make this work better, and I think we could work with the
    Department on that.
        Ms. Rowe. We have started to have meetings with AMS earlier
    year this year before the season opened for farmers markets to
    find ways in which we could be more collaborative in--both in
    financing farmers markets, but also in approving them,
    authorizing them, and getting point-of-sale devices in. I think
    we were a bit better this year. We will continue to work toward
    it. I would be happy to have further conversations with you
    about it as well and members of your staff.
        I became interested in the nutrition area because of my
    involvement in my church's farmers market, and so I saw the
    benefits on the south side of Chicago when people came out and
    had a farmers market where they could make purchases.
        Ms. Pingree. Great. Well, I am glad we are on the same page
    on this. I would be happy to work with you and talk more about
    it. I do think it is one of those things, a few bureaucratic
    hurdles we get out of the way, and we can make this work.
        I just want to bring up one other topic, and I know there
    are many this morning. It is my understanding there are more
    applications from eligible schools for the Fresh Fruit and
    Vegetable Program than there are funds available. Again, this
    is one of the interests in my district. We have seen the huge
    change in schools that are able to provide more fresh foods,
    buy from local farmers. It spurs on the interests of young kids
    in what they are eating. Sometimes they take the information
    home to their families. I have sat next to kids in elementary
    school who are happily gobbling up their kale and Swiss chard.
    I think we deny them the opportunity to eat some very health
    foods when we don't do that.
        So can you give me some background on the number of schools
    or percentage of schools that apply but are denied? And if you
    can't provide that now, that is okay.
        Ms. Rowe. We don't have the breakdown, but I agree with
    you. When I started going out, that was the one thing I heard
    from schools: We would like to be able to participate in this
    program.
        Ms. Pingree. Great. I just want to put it out there again.
    We have seen the changes in our state. Again, it is great for
    local farmers, it creates new markets, but it also allows our
    kids to eat more foods.
        And I will just--in my own end of this, I appreciate the
    work the Chairwoman is doing on behalf of the lowly potato. As
    a potato-raising state, I understand the issues around too many
    carbohydrates and starches in kids' diets, but the benefits of
    an actual potato, the nutritional value, and the importance of
    that is critical, and so I am glad that that is being much
    discussed.
        And I will yield back the balance of my time.
        The Chairwoman. Thank you.
        And now on behalf of Mr. Baca, would you care to give the
    closing statement?
        Ms. Pingree. Thank you, Madam Chair, and as I mentioned to
    you, this makes me a far better pitcher in life. I feel I can
    play baseball again.
        So his closing statement, on behalf of Ranking Member Baca,
    I would like to thank you, Ms. Rowe, for your participation in
    today's hearing and your thoughtful testimony. Your knowledge,
    ideas, and experiences will, I hope, be used by Congress to
    ensure adequate nutrition continues to be available to the
    neediest Americans in the most efficient manner.
        Again, thank you to Chairwoman Schmidt for holding this
    hearing. I know we share an interest in the health and wellness
    of our constituents, and I look forward to working with you
    during this next farm bill to put those interests into
    practice.
        The Chairwoman. Thank you.
        Now for my closing statement. There was so much that I
    could have--I wish I had the opportunity to ask, but I am going
    to combine it in a closing statement.
        I think that most Americans recognize we have an obesity
    problem in the United States, and that we have to find ways to
    tackle it, but I think sometimes we reach wrong conclusions
    when we look at current trends and make a decision that is not
    going to make folks eat more healthy or have trimmer bodies.
    And I look at your agency and others involved in food marketing
    guidelines, and there is--people think, well, the kids are
    getting heavy because they are watching too much TV, and I
    agree. I think the sedentary lifestyle that we have today with
    our children, the fact that they lack as much playground
    activity as I had as a child tends to build a broader
    waistline. But, I think that while we both might believe that
    the TV is the root cause, I think we are reaching the wrong
    conclusions as to why.
        I think that sometimes people say, well, it is the
    advertisement that is going on on the television that is
    helping to broaden those waistlines, and I am just not sure
    that is true, because I had those same advertisements when I
    was a kid, but my mother made me go outside and kick the can.
        Much of the products banned by the Interagency Working
    Group's proposals are the same ones the USDA has recently
    determined to be important in the Special Supplemental
    Nutrition Program for Women, Infants and Children to promote
    healthy children under Title V. I assume that the reason the
    four agencies created a working group on this issue was for
    consistency of the Federal food nutrition recommendations, yet
    looking at the HealthierUS School Challenge criteria, the
    National School Lunch Program proposed rule, the WIC food
    package criteria, and the IOM Competitive Foods Report,
    inconsistencies abound. If the point is to encourage healthy
    food, isn't it important that the Federal Government speak with
    one voice and a consistent voice?
        And I would like to add that it is not always about the
    food, it is about how in many cases the food is prepared.
    Cereal in the morning isn't a bad product if you make sure that
    you are only having \3/4\ of a cup, or \1/2\ cup, or a cup,
    whatever is recommended, and that you are using either a low-
    fat or a skim milk with it and not adding sugar. That is not a
    bad actor. In fact, sometimes healthy cereals with a lot of
    granola and grain can have twice as many calories as, say, Tony
    the Tiger's great cereal. So it is not about the advertising,
    it is about how we prepare the food.
        The war on potatoes, which I am so glad I have a fellow
    lady helping me with this, the potato is one of the best foods
    a person can eat, especially folks that have a modest income,
    because of all the nutrients that are in it. But, if you deep
    fry it, and you put a lot of cheese on it, and you put a lot of
    salt, then maybe it becomes a less attractive animal. But when
    you just eat it as a potato, whether it is mashed and with a
    little skim milk and a little pepper, that is not a bad thing
    to eat. And so I caution arbitrary conclusions based on
    unhealthy ways that we prepare products rather than the food
    group itself.
        I am concerned about recent findings in the Global Insight
    suggesting that the proposal could cause the loss of
    significant number of American jobs. I am concerned that it
    would cost our schools more money for the proposed rules that
    are there when it is not going to make our children thinner, it
    is not going to make them have more healthy foods. And most
    importantly, I am concerned at what will happen to those
    children, especially the at-risk children, when they leave
    school. To think that they are going to get those kinds of
    foods outside the school, that just may not be the case.
        And I am just throwing that out there because I think you
    and I are on the same page. We want to attack obesity, we want
    to make sure our children and our adults are healthy folks, and
    I really think that it is education. It is educating the food
    preparer, whether it is the mother or the father or the aunt or
    the grandmother, on how to prepare the foods in an appropriate
    way. And I know most schools are doing this now.
        So the problem is really not so much inside the school, but
    inside the home, but to arbitrarily think that seeing Toucan
    Sam or Honey Nut Cheerios or Tony the Tiger is making our kids
    fat, I just don't think that is the case.
        So those are my thoughts, and I really thank you, and if
    you have any closing thoughts, I will give you the microphone.
        Ms. Rowe. Thank you so much. And I really do agree, and I
    appreciate your perspective and your passion on this subject.
    It is one that I am equally passionate about, and I am looking
    forward to working with you and Members of the Committee so
    that we can ensure that our future generations are healthy and
    have healthy lifestyles.
        I do want to make two clarifications. I did indicate that
    there was not a Food Stamp Program prior to 1977. I was not
    correct. Food Stamp Act of 1964 did exist, it established the
    program, and then there have been subsequent changes. So I
    wanted to put that clarification out there.
        The other was on time limits. There is a small category of
    individuals, able-bodied, working adults, who participate in
    the program who have a limit of 3 months and 36 months to
    participate in our SNAP Program. So I did want to make those
    two clarifications.
        I want to thank you for giving me and our staff an
    opportunity for being here. As my first foray out before a
    Congressional Committee, I can say that this experience has
    been both learning for me, and I hope I have been able to
    contribute to your thinking as you go forward.
        The Chairwoman. Thank you. And I think it is great, 4
    months on the job, you really have a great deal of information
    and history lessons. That is okay. I make mistakes as well.
        In closing, I would just ask if I can impose on you to
    introduce you to my FFA children, young adults actually,
    because this is their first foray into Washington, and to meet
    the Administrator of the Food and Nutrition Service Program I
    think would really help them with their educational experience.
    So thank you very much.
        Ms. Rowe. My honor.
        The Chairwoman. With that, this meeting is adjourned.
        Ms. Rowe. Thank you.
        [Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
      Submitted Statement by Lisa Davis, Vice President of Public Policy,
                                Feeding America
        Chairwoman Schmidt, Ranking Member Baca, and Members of the House
    Committee on Agriculture, Subcommittee on Nutrition and Horticulture,
    thank you for the opportunity to submit this statement for the record
    on behalf of Feeding America and for holding this hearing.
        Feeding America is the nation's leading domestic hunger-relief
    charity with a network of more than 200 food banks serving all 50
    states through over 61,000 local food assistance agencies, 55% of which
    are faith-based. Feeding America food banks, as well as food pantries,
    soup kitchens and other assistance agencies, rely on a variety of
    public and private funding streams to feed 37 million Americans a year,
    including 14 million children and nearly 3 million seniors.
        During the worst economic downturn since the Great Depression, the
    number of American families struggling to make ends meet has increased
    significantly. With unemployment currently at 9.2 percent, the need for
    food assistance continues to remain high and food banks continue to be
    pressed to meet the need in their communities. Last year, one in eight
    Americans, received emergency food assistance through the Feeding
    America network. This represents an increase of 46 percent since 2006.
    As a result, approximately 5.7 million people per week are now
    receiving emergency food assistance through Feeding America food banks.
        For those individuals facing food insecurity, the nation's Federal
    food assistance programs and emergency food providers provide a
    critical safety net. In April 2011, the last month for which data is
    available, nearly 45 million Americans were participating in the
    Supplemental Nutrition Assistance Program (SNAP), formerly known as
    food stamps. In addition, in FY 2011, the Commodity Supplemental Food
    Program (CSFP) is providing nutritious monthly food boxes to a caseload
    of more than 604,000 people, more than 96 percent of them low-income
    seniors. Moreover, in FY 2011, the Emergency Food Assistance Program
    (TEFAP) is providing more than $350 million worth of nutritious,
    American-grown commodities to help food banks supplement their food
    supplies and feed those in need.
        As the Committee hears testimony from the United States Department
    of Agriculture (USDA) regarding the Title IV Nutrition Program
    contained within the farm bill and the beneficial impact of these
    programs, Feeding America respectfully offers several policy
    recommendations that would further strengthen these programs and could
    provide a more stable and reliable stream of food to the food
    assistance network and to the millions of Americans we serve who are at
    risk of hunger.
    Policy Recommendations
        The Emergency Food Assistance Program (TEFAP) Commodities: TEFAP is
    a means-tested Federal program that provides food commodities at no
    cost to Americans in need of short-term hunger relief through
    organizations like food banks, pantries, soup kitchens, and emergency
    shelters. Healthy and nutritious food commodities provided through
    TEFAP are an essential resource that enables Feeding America food banks
    to meet the need in their communities.
        TEFAP commodities currently account for approximately 25 percent of
    the food moving through Feeding America food banks nationwide. In most
    instances, local food banks supplement TEFAP commodities with privately
    donated foods to extend TEFAP program benefits beyond the budgeted
    amount for the program. As the unprecedented demand for food continues
    at food banks across the country, TEFAP commodities are essential for
    the provision of a steady emergency food supply. However, the level of
    commodities USDA provides is projected to drop off significantly in FY
    2011 and FY 2012.
        In FY 2010, TEFAP provided approximately $655 million worth of
    nutritious foods to low-income Americans. This figure includes
    commodity purchases mandated by the 2008 Farm Bill as well as bonus
    commodity purchases that were appropriated in FY 2010 Agriculture
    Appropriations and those bonus purchases made by USDA when necessitated
    by market conditions.
        Unfortunately, in FY 2011, even as the need remains at
    unprecedented levels, USDA has made no indication that there are plans
    to make any additional bonus commodity purchases beyond those already
    made this fiscal year. Without additional bonus purchases in FY 2011,
    TEFAP spending levels will fall by nearly 44 percent to approximately
    $370 million. This $285 million decrease in TEFAP commodity spending
    for FY 2011 will significantly impact efforts to address the growing
    need for emergency food assistance throughout the country. Without
    additional r commodity purchases, too many Americans may go without
    adequate access to the food they need and food banks face the prospect
    of empty shelves.
        With agriculture commodity markets projected to remain strong in
    the coming years thereby driving a marked decline in the availability
    of bonus TEFAP commodities, Feeding America recommends that the amount
    of annual funding for mandatory TEFAP purchases be increased in the
    2012 Farm Bill. Further, with respect to bonus commodity purchases,
    Feeding America recommends that the committee explore the development
    of an economic, need-based trigger that would prompt Section 32 bonus
    commodity purchases not only when agriculture markets are weak, but
    also when unemployment or other economic factors are driving up the
    demand for emergency food assistance. Last, with respect to the
    inflationary index already attached to mandatory TEFAP purchases, we
    recommend that a floor be placed on this program so that spending
    levels are precluded from being reduced below prior year levels.
        TEFAP Administrative Funding and TEFAP Infrastructure Grants:
    Federal administrative funding helps defray the costs of storing,
    transporting, and distributing TEFAP commodities, helping ensure food
    banks and partner agencies can get emergency food assistance to those
    in need. Recognizing the critical importance of these funds, the 2008
    Farm Bill increased the authorization level to $100 million per year.
    However, despite that recognition, Congress has never provided more
    than $50 million per year in annual Agriculture Appropriations
    legislation.
        Food banks are struggling to respond to a significant increase in
    demand that is likely to continue for some time. Without adequate
    Federal assistance, they will be unable to afford the rising costs
    associated with storing and distributing emergency food commodities.
    While the increase in TEFAP products that require refrigeration or
    freezer capacity has been a welcome addition for clients, these
    products are more costly to store and deliver across large service
    areas. Compounding these challenges are rising fuel costs that in some
    cases have nearly doubled transportation and delivery costs. To help
    address these challenges and ensure that states and emergency food
    providers have the resources needed to store and distribute TEFAP
    commodities, Feeding America recommends that the Committee provide
    mandatory TEFAP Administrative funding of $100 million per year in the
    2012 Farm Bill.
        Similarly, TEFAP Infrastructure Grants are essential to helping
    emergency food providers meet a variety of infrastructure needs and
    ensure the effective and efficient delivery of TEFAP foods to those in
    need. Funding provided through this competitive grant program may be
    used to help emergency food providers implement, improve, and expand
    their infrastructure activities and projects. Specific items that may
    be funded include: developing computerized systems for tracking time-
    sensitive food products; improving the distribution of perishable foods
    (such as fresh fruits and vegetables); rescuing prepared, unserved
    food; identifying donors and eligible recipients; and improving
    facilities and equipment.
        In FY 2010, USDA awarded $6 million in TEFAP Infrastructure Grants
    to 39 emergency food providers, 19 of whom primarily served rural
    areas. However, USDA had at least 4 times as many applicants for these
    grants as they had funding to award, demonstrating there is a great
    demand for these grants. In recognition of the need and demand for this
    funding, Feeding America recommends that this program be reauthorized
    at a level of $15 million per year in the 2012 Farm Bill so that even
    more emergency food providers can benefit from this valuable program.
        Commodity Supplemental Food Program (CSFP): Administered by USDA,
    the Commodity Supplemental Food Program leverages government buying
    power to provide monthly, nutritionally-balanced food packages to more
    than 604,000 low-income participants in 39 states, two tribal
    organizations, and the District of Columbia. More than 96 percent of
    those benefiting from this program are seniors with incomes of less
    than 130 percent of the Federal poverty line (approximately $14,000 for
    a senior living alone). For many of these seniors, CSFP may be the only
    nutrition assistance program readily accessible to them.
        CSFP is an efficient and effective program. While the cost to USDA
    to provide this package of food is, on average, $20 per month, the
    average retail value of the foods in the package is $50. For the
    seniors participating in this program, CSFP provides more than just
    food and nourishment, it also helps to combat the poor health
    conditions often found in seniors who are experiencing food insecurity
    and at risk of hunger.
        According to analysis of data from the 1999-2002 National Health
    and Nutrition Examination Survey, seniors over the age of 60 who are
    experiencing some form of food insecurity are significantly more likely
    to have lower intakes of major vitamins, significantly more likely to
    be in poor or fair health, and more likely to have limitations in
    activities of daily living. CSFP food packages, specifically designed
    to supplement needed sources of nutrients typically lacking in
    participants' diets like protein, iron, zinc, and vitamins
    B6 and B12, can play an important role in
    addressing the nutrition needs of low-income seniors.
        Recognizing the role that this program plays in the lives of our
    nation's most vulnerable seniors, Feeding America recommends that this
    program be reauthorized in the 2012 Farm Bill and expanded to all 50
    states. Additionally, Feeding America recommends that the income
    threshold for seniors wishing to participate in CSFP be raised to 185
    percent of the Federal Poverty Line, bringing it in line with the
    threshold already applied to women and children participating in this
    program.
        Supplemental Nutrition Assistance Program (SNAP): While Feeding
    America food banks and the 61,000 local agencies we support are often
    the first place families turn to for emergency food assistance when
    they fall on hard times, the Supplemental Nutrition Assistance Program
    (SNAP) is the cornerstone of the nutrition safety net, ensuring
    families have adequate resources for food until their household
    economic conditions stabilize and improve. Many of our food banks
    conduct SNAP outreach to inform clients about their potential
    eligibility for SNAP and connect them with the long-term benefits they
    need.
        SNAP is the nation's largest Federal nutrition program, providing
    nearly 45 million participants with monthly benefits in the form of an
    electronic benefit (EBT) card that they can use like cash at most
    grocery stores to ensure access to an adequate diet. Nearly 80 percent
    of SNAP households include either a child or an elderly or disabled
    person.
        One of the most attractive features of SNAP is that benefits can be
    redeemed at any of the more than 200,000 retail stores nationwide that
    are authorized to participate in the program. Almost 80 percent of SNAP
    benefits are redeemed within 2 weeks of receipt, and 97 percent are
    spent within a month. Because the benefits can be quickly and
    efficiently delivered to recipients via EBT cards, and recipients are
    likely to spend the benefits quickly, many economists view SNAP as one
    of the most effective forms of economic stimulus during an economic
    downturn. The United States Department of Agriculture (USDA) estimates
    that every $1.00 spent on SNAP benefits generates $1.79 in local
    economic activity.
        Another critical feature of the SNAP program is its ability to
    respond with additional assistance amidst economic downturns or
    emergencies. SNAP responds quickly to changing economic circumstances,
    whether they occur locally, such as a plant closing, or nationally,
    like a recession. Enrollment increases during such times and then falls
    as need declines. SNAP demonstrated this responsiveness during the
    recent recession by providing millions of newly unemployed families
    with a stable source of money for food, proving it to be one of the
    most effective safety net programs available to families hardest hit by
    the recession. SNAP responds just as effectively to natural disasters.
    During the aftermath of disasters like Hurricanes Katrina and Rita in
    2005, victims of the hurricane were able to have their immediate need
    for food addressed quickly because of SNAP. Similarly, the program is
    responding to immediate need in areas hit by recent flooding or
    tornados.
        Congress made many significant improvements to SNAP in the last
    farm bill. As we move toward consideration of the 2012 Farm Bill, it is
    essential that Congress build upon those improvements and protect the
    integrity of SNAP so that the program can continue to respond quickly
    and effectively as the foundation of the nutrition safety net. As such,
    we offer the following initial recommendations for consideration:
        Benefit Adequacy: Current SNAP benefit levels are often
    insufficient to last a family throughout the month. Over 90 percent of
    SNAP benefits are used up by the third week of the month, leaving many
    SNAP families food insecure for portions of the month. Adequate
    benefits would also provide families with opportunities to access more
    nutritious food.
        Congress approved a temporary boost in SNAP benefit levels in ARRA
    to help families make ends meet during the recession. Congress
    rescinded some of the boost in 2010 by using $2.5 billion of the
    increased benefits to fund the Healthy, Hunger-Free Kids Act and $11.9
    billion to fund the Education jobs and Medicaid funding bill. As a
    result, the remaining increase in benefits is now expected to sunset in
    November 2013.
        Just as concerning as the cut to the ARRA boost itself is how the
    cut would be implemented. Congress carefully crafted the ARRA increase
    to protect families from a ``cliff effect.'' By designing the increase
    to phase out incrementally as food prices rise to catch up with the
    higher benefit, Congress made a promise not to pull the rug out from
    underneath our nation's most vulnerable families. Under the recent
    cuts, this is exactly what would happen. A typical family of four would
    see their monthly benefits abruptly drop by some $54 per month, as
    estimated at the time the cuts were enacted.
        While the ARRA SNAP boost was intended to be temporary, it was also
    desperately needed, and Congress must take steps to permanently improve
    the adequacy of the SNAP benefit. Feeding America strongly urges the
    House Agriculture Committee to restore the ARRA SNAP funds and protect
    the remaining boost to SNAP benefit levels from being used to fund
    other priorities. We also recommend that the Committee look at long-
    term ways to improve benefit adequacy, such as reviewing the Thrifty
    Food Plan as the basis for benefit levels, increasing the standard
    deduction to bring benefit levels in line with where they would be now
    had the inflationary peg not been removed for the period 1996 to 2008,
    and strengthening nutrition and other education to help participants
    maximize nutrition on a limited food budget.
        Improve Access and Participation: The Committee should continue to
    strengthen the SNAP's ability to meet need by breaking down access and
    participation barriers. Not all who are eligible for SNAP participate
    in the program, whether because of stigma, misinformation about
    eligibility and potential benefits, or cumbersome enrollment
    procedures. While SNAP has made steady improvement in participation
    rates over the last several years, still only about \2/3\ of those
    eligible are served. Participation is especially low among certain
    subpopulations, like Latinos and seniors. Continued outreach is needed
    to make sure all who are eligible and in need of assistance are
    informed of and enrolled in the program, especially among under-served
    and vulnerable populations. Congress should take steps to improve
    program education and outreach, streamline the application and
    eligibility-determination process, and increase coordination with SNAP
    across other programs. For example, categorical eligibility has been
    shown to both improve program access while at the same time allowing
    states to reduce administrative costs and simplify administration.
    Congress should strengthen categorical eligibility and encourage states
    to take advantage of the expanded option.
        Congress can also improve access to SNAP among vulnerable
    populations by eliminating or easing specific restrictions on
    subpopulations, including the harsh time limits on jobless adults, the
    5 year waiting period for legal permanent residents, and the permanent
    ineligibility of drug felons:

       Able-bodied adults without dependents (ABAWDs) who are not
            working a minimum number of hours are limited to only 3 months
            of SNAP benefits out of every 3 years, although states with
            unemployment rates above ten percent may request a waiver. The
            time-limit for ABAWDs is too restrictive even when unemployment
            is low, but with unemployment at 9.2 percent nationally and
            many people returning to work forced to accept reduced hours,
            ABAWDs should be allowed to re-apply more frequently and for
            longer durations.

       Adult legal permanent residents are subject to a 5 year
            waiting period before they may participate in SNAP.
            Furthermore, the confusion about eligibility created by this
            policy decreases participation among eligible children of
            ineligible parents. Eligible adult immigrants who are here
            legally, many of whom are on a path to citizenship, should not
            have to wait five years to receive nutrition assistance.

       Federal policy permanently prohibits drug felons from
            participating in SNAP, presenting an additional challenge to
            self-sufficiency for formerly institutionalized persons who
            already face difficulties in re-entering the labor force.
            Recognizing this, 40 states have either lifted the Federal ban
            or modified the ban to make it less punitive. Congress should
            repeal the lifetime prohibition on drug felons participating in
            SNAP.

        Program Integrity: In addition to making further progress to
    strengthen SNAP, Feeding America urges the Committee to protect the
    program from harmful policy changes that have been recently proposed,
    such as converting the program to a block grant, subjecting it to a
    global spending cap, imposing additional work or citizenship
    requirements, or restricting the kinds of groceries participants may
    purchase. Imposing an arbitrary cap on funding would fundamentally
    change the structure of the program and would undermine SNAP's ability
    to respond quickly to changing economic circumstances, whether a
    natural disaster or a recession. SNAP already has strict time
    limitations for unemployed adults and legal immigrants. Adding further
    work or citizenship requirements will eliminate this important source
    of nutrition assistance for vulnerable families, increasing food
    insecurity and shifting more low-income households to the emergency
    food system. Ensuring food choice within the SNAP program allows
    families to make decisions that balance cost, nutrition, and time for
    preparation of meals.
    Reviewing Programs for Duplication and Efficiency
        In light of Congressional attention to the budget deficit, we
    recognize that the next farm bill will be written with limited
    opportunities for new program investments and a commitment to making
    sure existing dollars are being well-spent. While we support the goal
    of eliminating duplication and inefficiencies in Federal nutrition
    programs, we urge you to ensure that any changes are made carefully and
    with the goal of improving service delivery, increasing program access,
    and strengthening benefit levels.
        Our food banks and the clients they serve know all too well the
    importance of stretching a tight budget. Given the extent of hunger and
    food insecurity in our country, it is important that we maximize the
    impact of each dollar spent through our network of emergency food
    providers. Likewise, we believe that Federal tax dollars should be
    spent effectively and efficiently to ensure a strong and responsive
    nutritional safety net.
        We support efforts to eliminate duplication in program delivery.
    However, it is important to keep in mind that programs with overlapping
    eligibility are not per se indicative of duplication. Nutrition
    programs work together to weave a comprehensive safety net and no one
    program is intended to meet the needs of all populations. Federal
    nutrition programs have been developed to respond to identified
    nutritional needs of specific populations or to reach eligible people
    in settings not addressed by other existing programs.
        We also support efforts to eliminate inefficiencies and streamline
    program administration. In many cases, the same changes that would
    result in administrative savings would also reduce barriers to
    enrollment, such as streamlining the application and eligibility-
    determination process.
        As the Committee works to identify opportunities to streamline
    programs and eliminate redundancy, members must ensure that such
    efforts are undertaken with thoughtfulness and careful deliberation.
    Our ultimate goal must be to better deliver benefits more effectively
    to all eligible people. As such, we offer the following principles to
    guide your work:
        Benefit Adequacy: Programs must provide resources sufficient to
    meet the nutritional needs of participants and any savings from greater
    efficiencies should be reinvested in improving benefit adequacy.
        Participation: Programs should be designed and implemented in ways
    that promote participation by all people in need of food assistance and
    savings should not be achieved by reducing eligibility or imposing
    access barriers.
        Coordination: Enrollment in nutrition assistance programs should be
    streamlined and integrated where possible with enrollment in other
    Federal programs serving low-income people, and eligibility rules
    should be consistent across programs.
        Data-Driven: Any changes to nutrition assistance programs,
    including those intended to eliminate duplication and inefficiency,
    must be data-driven and undertaken only after careful study and
    analysis of the potential impact on benefit levels, eligibility, and
    participation.
        Stakeholder Input: Recommendations should be developed in
    collaboration with stakeholder input from the public, private, and
    nonprofit sectors, including those responsible for administering
    programs at the Federal and state level and those providing delivery of
    services and benefits to low-income families at the local level.
    Conclusion
        We greatly appreciate the opportunity to submit testimony today on
    behalf of Feeding America, our over 200 member food banks, and the 37
    million Americans our network fed last year. For these growing numbers
    of Americans, food banks are truly the first line of defense, and many
    times the only resource standing between them being able to put food on
    the family dinner table or going to bed with an empty stomach. However,
    our food banks and the charitable food assistance network cannot meet
    the needs of these families alone. It is only through our public-
    private partnership with Federal government through programs like TEFAP
    and CSFP and sustained support for SNAP and other programs in the
    nutrition safety net that we can make real strides in the fight against
    hunger.
        We are continuing to explore opportunities to enhance support for
    Federal nutrition programs through programmatic or policy innovations,
    and look forward to working with you as you review the Title IV
    Nutrition Programs and begin the work of crafting the next farm bill.

    Lisa Davis,
    Vice President of Public Policy,
    Feeding America.
                                     ______

    Submitted Letter and Statement by Sam Stone, Vice President, Government
                   Relations, Dairy Farmers of America, Inc.
    August 2, 2011

    Hon. Jean Schmidt,
    Chairwoman,
    Subcommittee on Nutrition and Horticulture, House Committee on
        Agriculture,
    Washington, D.C.;

    Hon. Joe Baca,
    Ranking Minority Member,
    Subcommittee on Nutrition and Horticulture, House Committee on
        Agriculture,
    Washington, D.C.

        Dear Chairwoman Schmidt and Ranking Member Baca,

        On behalf of the nearly 16,000 producer-members of Dairy Farmers of
    America, Inc. (DFA), I respectfully submit the attached testimony in
    regards to nutrition programs and the 2012 Farm Bill. We believe that
    milk and other dairy products, provided through Title IV of the farm
    bill, serves an important role in addressing hunger issues for many
    Americans.
        Please do not hesitate to contact me at [Redacted] should you have
    any further questions or need more information.
                Sincerely,

                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Sam Stone,
    Vice President, Government Relations,
    Dairy Farmers of America, Inc.

    CC:

    Hon. Frank D. Lucas, Chairman, House Agriculture Committee;
    Hon. Collin C. Peterson, Ranking Minority Member, House Agriculture
        Committee.
                                   attachment
        Dairy Farmers of America, Inc. (DFA) respectfully submits comments
    in response to the House Agriculture Subcommittee on Nutrition and
    Horticulture's hearing titled ``Agricultural Program Audit: Examination
    of Title IV Nutrition Programs.''
        DFA is a milk marketing cooperative that is owned and governed by
    nearly 16,000 dairy farmers nationwide. Our cooperative's success is
    built on the success of our farmer-owners who raise their dairy herds
    and their families on family farms across the nation. As the House
    Agriculture Committee begins the process of examining Title IV of the
    2012 Farm Bill, DFA encourages the Committee to consider cost-effective
    ideas that can further expose needy families and individuals to milk
    and other nutritious dairy products.
        Historically, nutrition programs authorized under Title IV of the
    farm bill such as the Commodity Supplemental Food Program (CSFP), the
    Supplemental Nutrition Assistance Program (SNAP) and The Emergency Food
    Assistance Program (TEFAP) have played an important role in providing
    millions of Americans with the nutritional assistance needed to lead
    active and healthy lives. DFA strongly supports these programs because
    dairy products have continued to serve as an important component to
    meet the nutritional needs for many individuals.
        We also recognize the budget challenges Members of the House
    Agriculture Committee will face when writing the 2012 Farm Bill. Due to
    growing concerns related to the Federal deficit, we understand that
    drafting the next Farm Bill will be a difficult task due to the current
    budgetary constraints. As Congress continues efforts to address the
    Federal deficit, we have also witnessed attempts to reduce funding for
    several programs administered under Title IV of the farm bill.
        At the same time, the economic outlook for millions of Americans
    across the country remains dire as conditions have not improved since
    the most recent recession. For the month of June, the Department of
    Labor reported that 9.2 percent of America's labor force was
    unemployed. Also, food banks have reported a record number of
    individuals and needy families seeking help through various hunger
    channels including soup kitchens and food pantries.
        Additionally, the U.S. Department of Agriculture (USDA) has
    witnessed a record number of individuals participating in hunger and
    feeding programs like CSFP, SNAP and TEFAP. Based on the latest
    statistics, approximately 45 million Americans are currently seeking
    help through SNAP and other hunger assistance programs. Clearly, people
    are in need during these challenging times.
        With this in mind, DFA has been identifying cost-efficient methods
    that could expand and increase the consumption of milk without
    expanding the size and scope of current nutrition programs. One merited
    idea to consider would be the creation of a milk voucher program to
    provide fluid milk to those who access food banks and food pantries and
    that would be administered under TEFAP.
        Through this program, USDA would issue vouchers similar to those
    currently used in the Women, Infants and Children program to be
    distributed through local food banks and entities food banks support.
    Milk vouchers could be provided to food bank recipients and they could
    be redeemed at local participating grocery stores and be specified to
    fluid milk. It is our understanding that Congress could authorize such
    a program and appropriate funds through TEFAP. As you know, TEFAP
    provides food to food banks around the country, which they distribute
    to shelters, pantries and soup kitchens in their region.
        The use of milk vouchers would enhance the food banks' ability to
    offer additional food and nutrition to their participants without
    requiring any new capital expenditures for refrigeration units or extra
    personnel to handle cases of milk. While we have learned that many food
    banks have upgraded their facilities to include refrigeration units,
    many others have not, do not have enough capacity or are serving
    shelters, pantries and soup kitchens with little to no refrigeration
    capacity.
        In closing, DFA is committed to identifying future programs that
    can address the need for nutritious and wholesome foods, including
    dairy products. It is our hope that implementing the milk voucher
    program through TEFAP will help many Americans currently suffering from
    financial hardship due to today's economic conditions. Please consider
    including this merited program when drafting the 2012 Farm Bill.
                                     ______

                              Submitted Questions
    Response from Audrey Rowe, Administrator, Food and Nutrition Service,
            U.S. Department of Agriculture
    Questions Submitted By Hon. Chellie Pingree, a Representative in
            Congress from Maine
        Question 1. A 2002 USDA report found that $5 in Federal benefits
    generates almost double, $9.20, in economic activity. In Maine we have
    a very innovative and effective program, called the Maine Senior Share
    Program. The state uses the dollars they receive from the Senior
    Farmers' Market Nutrition program to pay farmers at the beginning if
    the season for shares allotted to low-income seniors. This increases
    nutrition to a vulnerable population and supports our struggling local
    agriculture community. Do you see benefit in these programs and if so,
    does the department hope to incorporate similar ideas on a national
    level?
        Answer. The Senior Farmers' Market Nutrition Program (SFMNP) is
    designed to improve the diets of America's low-income seniors by
    providing them with coupons that can be used to purchase fresh,
    nutritious, unprepared, locally-grown fruits and vegetables at farmers'
    markets, roadside stands, and community supported agriculture (CSA)
    programs. The SFMNP also serves to increase the awareness and use of
    farmers' markets, roadside stands, and CSA programs throughout the
    country. The FMNP and the SFMNP are administered through cash grants
    provided to states, United States Territories, federally-recognized
    Indian Tribal Organizations, and the District of Columbia. Federal
    SFMNP regulations give state agencies considerable flexibility in the
    design of the Program's operation, thus enabling them to provide a
    program that best serves the needs of its senior participants as well
    as the farmers who benefit from SFMNP sales. Thus, some state agencies,
    including the Maine Department of Agriculture, have found that
    operating the SFMNP through the use of a CSA program model works best,
    while other state agencies have found it more effective and economical
    to deliver SFMNP benefits through the more traditional check or coupon
    distribution system. The Food and Nutrition Service (FNS) believes that
    each state agency is best qualified to choose the benefit delivery
    model that is appropriate for its individual circumstances. However,
    examples of successful program models are frequently shared among state
    agencies interested in innovative enhancements to their existing SFMNP
    operations, as well as prospective SFMNP state agencies that are in the
    process of choosing the best way to make fresh fruits and vegetables
    more accessible to their low-income seniors.

        Question 2. During the pilot phase of the Fresh Fruit and Vegetable
    Program, around 12% of participating schools sourced their fresh
    produce from local growers. This is a great way to support local
    economies. Are there ways you would recommend that we can support the
    program to expand the percentage of produce that is sourced locally?
        Answer. FNS has undertaken a number of initiatives with the goal of
    increasing local sourcing in all the Child Nutrition programs,
    including the Fresh Fruit and Vegetable Programs (FFVP). On April 22,
    2011, the agency issued the final rule titled Geographic Preference
    Option for the Procurement of Unprocessed Agricultural Products in
    Child Nutrition Programs. This rule allows school districts to apply an
    optional geographic preference in procurement of unprocessed locally
    grown or locally raised agricultural products.
        FNS has taken a number of steps to assist FFVP operators in
    utilizing the geographic preference and other strategies for successful
    local sourcing. The agency has established a Farm to School website to
    provide an online resource to assist schools in expanding Farm to
    School activities; assist in the communication between local producers
    and schools; share information about Farm to School activities across
    the Nation and keep schools informed of the legislative and regulatory
    changes that influence the procurement of local produce. FNS also
    recently issued Q&As for program operators which further explain the
    geographic preference procurement option. Additionally, in the past
    months the agency has conducted webinars on geographic preference for
    state and local program operators.
        FNS plans to continue providing guidance and technical assistance
    such as webinars on geographic preference in order to better inform
    FFVP operators of the program regulations and how to best procure local
    produce within the contours of the program.

        Question 3. Would you update the Committee on efforts within the
    agency to enable further access at farmers markets and CSA's to the
    expanding WIC Cash Value Fruits and Vegetable Voucher Program? There is
    now over $500 million in this key program. I understand the current
    guidance issued by FNS to the states is cumbersome. Simplifying the
    regulations would make it easier for several million WIC mothers and
    their children to shop at farmers market, many now year round, with
    direct benefits to both farmers and WIC families.
        Answer. Under the interim rule governing the food packages offered
    in the Special Supplemental Nutrition Program for Women, Infants and
    Children (WIC), WIC state agencies have the option of authorizing
    individual farmers to accept Cash Value Vouchers (CVVs) issued to WIC
    participants for the purchase of fresh fruits and vegetables at
    farmers' markets. Each woman and child participating in the WIC Program
    receives a voucher in the amount of $10 or $6, respectively, as part of
    the monthly package of supplemental foods issued to all WIC
    participants. At present, 17 WIC state agencies have elected to allow
    CVVs to be used at farmers' markets, although not all state agencies
    have implemented such authorization on a statewide basis; two more
    state agencies will authorize farmers to accept CVVs during Fiscal Year
    (FY) 2012.
        FNS received comments related to authorization of CVVs at farmers
    markets during the public comment period for the interim rule that
    closed February 1, 2010. FNS will address these comments in a final
    rule.

        Question 4. One of the areas that most concerns me in SNAP is that
    there are many needy eligible people who do not participate. This
    problem is most prevalent amongst low-income senior citizens. By USDA's
    own measurement about \2/3\ of eligible seniors do not participate in
    the program. Can you tell me what steps USDA is taking to increase
    participation amongst our nation's greatest generation? And, I'd also
    like to hear from you on how efforts to increase senior participation
    would be affected under a capped spending regime or a block grant?
    Would states have an incentive or a disincentive to connect poor
    seniors who aren't participating to the program under a block grant?
        Answer. The Food and Nutrition Service (FNS) strives to ensure that
    all eligible people, including low income people over 60, have barrier-
    free access to the nutrition benefits of the Supplemental Nutrition
    Assistance Program (SNAP). Elderly individuals who are eligible for
    benefits participate at a rate substantially lower than other eligible
    groups. In 2009, the participation rate for elderly individuals was 34
    percent, compared to 72 among all eligible people.
        SNAP eligibility policies take into account the special
    circumstances faced by seniors. They provide for deduction of medical
    expenses, no gross income limits, a higher asset limit and special
    eligibility status for seniors who receive Supplemental Security Income
    (SSI) because of their age and low income. Seniors may also designate
    authorized representatives to represent their interests during the
    application process to purchase food with SNAP benefits on their
    behalf.
        Special procedural requirements include certification periods up to
    2 years; interviews over the telephone, instead of at the local office;
    the ability to apply for SNAP through the Social Security
    Administration when applying for SSI. A total of 42 states have
    implemented broad based categorical eligibility which can ease the
    asset test. In addition, Combined Application Projects make it easier
    for the elderly and disabled SSI recipients to receive SNAP benefits by
    reengineering the SNAP application process and eliminating the need for
    this population to visit the SNAP local office.
        FNS has also awarded a number of grants to test approaches to
    increasing participation among persons over age 60. SNAP awarded $3.1
    million to three states to increase access and participation in the
    SNAP among low-income seniors, those who receive Medicare's Extra Help,
    also known as the Low Income Subsidy, which helps low-income
    individuals or couples with limited resources pay for their Medicare
    prescriptions. SNAP also awards $5 million annually for projects aimed
    at developing and implementing simplified applications and eligibility
    determination systems and measures to improve access to SNAP benefits
    by eligible households. Over the last 3 years, FNS has awarded six
    grants totaling almost $3.5 million for projects that focus on elderly
    persons or involve entities whose missions are to assist the elderly.
        In addition, FNS engages in numerous outreach efforts to educate
    eligible people over 60 about the nutrition benefits of SNAP and how to
    enroll. For example, SNAP develops and airs radio advertisements that
    target elderly audiences. Radio buys each year include spots
    specifically designed to address myths held by the elderly and air on
    stations with high rating among the elderly. SNAP offers a toll free
    information line in English and Spanish to provide information about
    the program and connect callers to their states for further details.
        Finally, FNS has fostered numerous partnerships with stakeholders
    trusted by the senior population, including the AARP Foundation,
    Catholic Charities, Feeding America, and with fellow Federal agencies
    including the Administration on Aging.
        This country has a long-standing national commitment to food
    security--and SNAP is well designed to respond quickly to economic
    conditions and meet food security needs until clients can get back on
    their feet. A block grant would undermine the program's responsiveness
    to changing economic conditions. States currently have a great deal of
    flexibility provided through state options and waivers that further the
    purpose of the Program without degrading access to food for those in
    need. Block grants tied to past spending levels leave no room to
    address low participation rates among specific populations or ability
    to respond to changes in local economic conditions. A block grant would
    hinder the ability of states to support increased participation unless
    they cut benefits to accommodate increased caseload growth.

        Question 5. While many CSFP participants are also eligible for
    SNAP, there are many components to CSFP that make it more suitable for
    some low-income seniors. CSFP provides a monthly food package with
    commodities that are chosen because they provide nutrients found to be
    lacking in the diets of low-income seniors. The cost of providing the
    same nourishment using SNAP's retail-based structure rather than CSFP's
    commodity-based structure would cost more than twice as much. CSFP
    relies on USDA commodities, which are a great value. It costs the USDA
    $20 to fill the monthly food package but the retail value is about $50
    to the participant, providing a great return on investment to the
    Federal Government. Despite this value however, some have suggested
    that SNAP and CSFP are duplicative programs. Do you see the two
    programs as interchangeable? Or do you see value in continuing to have
    two separate programs.
        Answer. The Commodity Supplemental Food Program (CSFP) was
    authorized by Congress to supplement the diets of low-income women,
    infants, children, and seniors age 60 years and over; today, almost all
    participants are seniors. Both CSFP and the Supplemental Nutrition
    Assistance Program (SNAP) provide valuable supplemental nutrition
    assistance to the clients they serve. Each has aspects of its structure
    and services that may better serve the needs of some clients than
    others. These and other USDA nutrition assistance programs work
    together to create a strong nutrition safety net for those Americans in
    need.
                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        Commodity Supplemental Food Program (CSFP).
    2. Subprograms/Department Initiatives
        CSFP provides supplemental USDA Foods to low-income elderly people
    at least 60 years of age, as well as some pregnant and breastfeeding
    women, other new mothers up to one year postpartum, infants, children
    up to age 6.
    3. Brief History
        CSFP was first authorized under the Agriculture and Consumer
    Protection Act of 1973 to distribute foods to low-income women,
    infants, and children to supplement their nutritional needs. The 1985
    Farm Bill expanded CSFP to include low-income elderly participants, but
    gave priority to eligible women, infants, and children for service. The
    2008 Farm Bill removed the priority status for women, infants, and
    children. Despite beginning as a program for women, infants, and
    children, CSFP now serves mostly elderly individuals, who make up over
    95 percent of current participants.
    4. Purpose/Goals
        CSFP works to improve the health of participants by supplementing
    their diets with nutritious USDA Foods. CSFP monthly food packages are
    good sources of the nutrients typically lacking in the diets of women,
    infants, children, and the elderly. CSFP also supports domestic
    agricultural markets by providing an outlet for products that USDA
    acquires through its agricultural market and price support activities.
    5. Success in Meeting Programmatic Purpose/Goals
        As of 2011, 39 states, two Indian Tribal Organizations (ITOs), and
    the District of Columbia are participating in CSFP.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                           Commodity Supplemental Food Program (CSFP)
                                                                   Budget Authority 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    CSFP                                  $92,813   $113,756     $98,335    $106,854    $111,202    $107,202    $139,715    $160,430    $171,409    $175,697
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                           Commodity Supplemental Food Program (CSFP)
                                                                        Outlays 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    CSFP                                              $89,006    $94,812     $87,927    $100,871    $100,667     $99,868    $133,226    $153,192    $152,768
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)

        Commodity
       Assistance         FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011
     Program Account

    Commodity                112,445         107,828         140,807         164,579         181,892         192,624
     Supplemental
     Food Program
     (CSFP)
    The Emergency             55,655          50,310          49,823          49,500          49,834          49,500
     Food Assistance
     Program (TEFAP)
     Administrative
     Cost
    ARRA TEFAP                                                                25,000          54,609
     Administrative
     Funds
    ARRA TEFAP                                                               100,000
     Commodity Funds
    TEFAP                                                                                      5,956              44
     Infrastructure
     Grants
    Farmers' Market
     Programs:
      Farmers'                23,814          22,109          21,838          20,658          22,089          20,003
       Market
       Nutrition
       Program
      Seniors'                15,844          16,203          21,402          19,865          22,459          20,606
       Farmers'
       Market
       Program
    Commodity                  3,882           2,756           3,736           4,224           5,114           3,883
     Assistance
     (Nuc. Affected
     Isld, Disaster
     Asst., NSIP
     Comm.)
    Nutrition                 15,523          15,561          15,553          15,616          15,923          15,828
     Programs
     Administration
     (Allocation to
     this program)
    Other Program            103,412          90,066         195,628         195,397         366,987         366,987
     Costs 1
                     -----------------------------------------------------------------------------------------------
        Total Cost          $330,575        $304,833        $448,787        $594,839        $724,863        $669,475
        FTEs                      97              95              95             100             112             112
                     -----------------------------------------------------------------------------------------------
    Unit Costs
      CSFP (Total            $361.64         $349.43         $344.72         $394.27         $385.11         $348.09
       Annual Cost
       per
       Participant)
    Performance                463.1           466.1           475.3           473.5           518.9           604.9
     Measure:
     Average monthly
     CSFP
     participation
     (thousands)

    1 Includes bonus commodities for TEFAP, CSFP, Disaster Assistance, Nuclear Affected Island, and other commodity
      assistance.

    9. Eligibility Criteria
        States establish an income limit for elderly participants that is
    at or below 130 percent of the Federal Poverty Income Guidelines.
    States also establish income limits for women, infants, and children
    that are at or below 185 percent of the poverty guidelines, but not
    below 100 percent of these guidelines. Women, infants, and children who
    receive Supplemental Nutrition Assistance Program (SNAP) benefits,
    Temporary Assistance for Needy Families (TANF), Medicaid, or certain
    other public assistance programs, as determined by the state, are
    considered automatically eligible for CSFP.
        Clients must reside in one of the states or on one of the Indian
    reservations that participate in CSFP. States may establish local
    residency requirements based on designated service areas (but may not
    require a minimum period of residency). States may also require that
    participants be at nutritional risk, as determined by a physician or by
    local agency staff.

                                          10. Utilization (Participation) Data
                                       Commodity Supplemental Food Program (CSFP)
                                         National Average Monthly Participation
    ----------------------------------------------------------------------------------------------------------------
                               FY 2005        FY 2006        FY 2007        FY 2008        FY 2009        FY 2010
    ----------------------------------------------------------------------------------------------------------------
             U.S. Total         512,433        462,349        466,075        475,307        466,615        518,838
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        While CSFP was initially designed to serve low-income pregnant
    women, new mothers up to one year postpartum, infants, and children up
    to age 6, such clients now represent less than five percent of total
    caseload. Most CSFP clients are elderly people 60 and over. While some
    CSFP participants receive SNAP, many of them would be eligible for the
    minimum or no benefit due to differences in the program's eligibility
    criteria. Participants may not simultaneously receive WIC and CSFP.
    12. Waste, Fraud and Abuse
        In FNS's FY 2011 improper payment risk assessment conducted and
    forwarded to the Department, the CSFP was determined to have a low risk
    of significant improper payments or fraud. Federal management
    evaluations conducted on this program have not identified significant
    incidents of improper payments.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Fresh Fruit and Vegetable Program (FFVP).
    2. Subprograms/Department Initiatives
    3. Brief History
        Farm Security and Rural Investment Act of 2002 (P.L. 107-171)--
    authorized $6 million for a pilot program to promote children's
    consumption of fresh fruits and vegetables. The pilot was limited to 25
    schools in each of four states and seven schools in one Indian Tribal
    Organization (ITOs).
        Child Nutrition and WIC Reauthorization Act of 2004 (P.L. 108-
    265)--amended the National School Lunch Act making the FFVP a permanent
    program in 11 states and three ITOs and providing $9 million in
    permanent annual funding. The program was authorized in 25 schools in
    each state and 25 schools among three ITOs.
        Agriculture, Rural Development, Food and Drug Administration, and
    Related Agencies Appropriations Act, 2006 (P.L. 109-97)--One time
    appropriation of $6 million, added six states, 25 schools in each
    state.
        Consolidated Appropriations Act 2008 (P.L. 110-161)--expanded the
    program nationwide, and included the District of Columbia. One time
    funding of $9.9 million provided.
        Food, Conservation, and Energy Act of 2008 (P.L. 110-234)--added
    section 19, the FFVP, to the National School Lunch Act which
    establishes a nationwide program with a new structure that increases
    FFVP funding gradually over 4 years, from $40 million in 2008 to $150
    million in 2011. Funding adjusts each July 1 thereafter to reflect
    changes in Consumer Price Index for All Urban Consumers.
    4. Purpose/Goals
        To introduce and provide free fresh fruits and vegetables in
    elementary schools representing the highest percent of children
    receiving free and reduced price school meal benefits and to help
    combat childhood obesity by helping children develop positive dietary
    habits during their formative years.
    5. Success in Meeting Programmatic Purpose/Goals
        The FFVP operates in all 50 states and is highly regarded by
    Members of Congress, nutrition advocates, the health care community,
    parents and students; over 5,000 schools participate in the FFVP.

                  6. Annual Budget Authority (FY 2002-FY 2011)
                  The Fresh Fruit and Vegetable Program (FFVP)
                           Budget Authority 2009-2011
                             (dollars in thousands)
    ------------------------------------------------------------------------
                                    FY 2009        FY 2010        FY 2011
    ------------------------------------------------------------------------
    Fresh Fruit and Vegetable      $56,000         $74,000       $109,000
                   Program
    ------------------------------------------------------------------------
    * Amounts displayed for budget authority reflect transfers authorized on
      July 1st of each fiscal year as modified by the annual appropriations
      bills by a delay of a portion of the transfer from July 1 to the
      following October 1; the total transfers authorized for each FY are as
      follows: FY 2009--$105 million; FY 2010--$101 million; FY 2011--$150
      million.

                       7. Annual Outlays (FY 2002-FY 2011)
         The Fresh Fruit and Vegetable Program (FFVP) Outlays 2009-2011
                             (dollars in thousands)
    ------------------------------------------------------------------------
                                    FY 2009        FY 2010        FY 2011
    ------------------------------------------------------------------------
    Fresh Fruit and Vegetable      $28,910         $56,125       $152,424
                   Program
    ------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        The FFVP is administered as part of the Child Nutrition Programs (CNP) and the administrative costs associated with running this program are not
     specifically allocated within the CNP account. The table below provides the costs associated with the CNP account as a whole.

     Child Nutrition
         Program          FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011

    Child Nutrition
     Programs
      School Lunch        $7,569,757      $7,836,174      $8,365,115      $9,071,783      $9,932,814      10,451,023
       Program
      School               2,086,098       2,228,842       2,393,028       2,633,048       2,895,356       3,115,300
       Breakfast
       Program
      Child and            2,141,088       2,303,732       2,245,195       2,513,852       2,583,232       2,693,384
       Adult Care
       Food Program
      Summer Food            284,224         297,933         312,203         357,984         374,203         375,518
       Service
       Program
      Special Milk            15,155          14,225          15,120          14,941          12,064          12,563
       Program
      State                  156,061         162,844         174,134         178,994         195,532         206,943
       Administrativ
       e Expense
                     -----------------------------------------------------------------------------------------------
        Total, Cash       12,252,383      12,843,750      13,504,795      14,770,602      15,993,201      16,854,731
         Grants to
         States
    Commodities (Sec         480,684         537,057         631,849         741,209         735,782         907,919
     6e Entitlement)
    Child Nutrition           25,619          25,378          30,550          39,128          75,472          59,916
     Program
     Discretionary
     Activities
    ARRA NSLP                                                                100,000
     Equipment
     Grants
    Child Nutrition           36,452          91,069          32,457         172,327
     Program
     Permanent
     Activities (not
     including the
     FFVP)
    Fresh Fruit and           42,993          79,902         134,000
     Vegetable
     Program
    Nutrition                 30,215          30,422          30,383          30,724          36,189          35,972
     Programs
     Administration
     (Allocation to
     this program)
    Other Program            560,965         681,800         575,997         667,645         527,325         527,325
     Costs
                     -----------------------------------------------------------------------------------------------
        Total Cost       $13,349,866     $14,118,407     $14,810,026     $16,483,370     $17,480,328       #########
        FTEs                     392             368             379             393             414             437
                     -----------------------------------------------------------------------------------------------
    Unit Costs
      Child                    $1.57           $1.59           $1.70           $1.82           $1.86
       Nutrition
       Total Cost
       per Meal
       Served ($/
       service)
    Performance                 30.0            30.6            30.9            31.6            31.6            32.1
     Measure: Avg.
     daily NSLP
     participation
     (millions)
    Performance                  9.8            10.1            10.6            11.0            11.6            12.4
     Measure: Avg.
     daily SBP
     participation
     (millions)

    9. Eligibility Criteria

        --Elementary schools with 50 percent or more students certified eligible for free or reduced price meals.

        --Elementary schools with the highest percent of students eligible have priority for selection.

        --All children participating in eligible schools receive free fresh fruits and vegetables outside of school meals.

        --Number of participating elementary school limited by funding.

    10. Utilization (Participation) Data

        Approximately 5,000 schools participated in the FFVP during the 2010-2011 School Year. Although we have no information on the number of children
     served, the level of funding provided would support between approximately 1.5 million and 4.4 million students.

    11. Duplication or Overlap with Other Programs

        FFVP is authorized by section 19 of the Richard B. Russell National School Lunch Act. The Program provides fresh fruits and vegetables to elementary
     schools, targeted to schools with a high percentage of children certified for free and reduced-price school meals. Schools are reimbursed for the cost
     of making fresh fruits and vegetables available to students during the school day outside of the school meals.

    12. Waste, Fraud and Abuse

        The size and nature of this program puts it at a very low risk for improper payments and fraud. FNS is not aware of any issues regarding fraud,
     waste and abuse in the FFVP.

    13. Effect of Administrative PAYGO

        None.

                                     ______

    1. Program Name
        The Emergency Food Assistance Program (TEFAP).
    2. Subprograms/Department Initiatives
        TEFAP provides USDA Foods and administrative support to states,
    which in turn provide these resources to emergency feeding
    organizations such as food banks, soup kitchens and food pantries.
    TEFAP administrative costs help state and local agencies defray costs
    associated with distributing USDA and privately-donated foods. Key
    program components include:
        Food Funds--USDA purchases food for distribution to TEFAP state and
    local agencies.
        Administrative Funds--USDA provides administrative funds to defray
    costs associated with processing, repackaging, storage, and
    distribution of Federal and privately donated food.
        Infrastructure Grants--Provides local emergency feeding
    organizations, such as food banks, food pantries, and soup kitchens,
    with funds to expand and improve their infrastructure, including their
    storage and distribution facilities.
    3. Brief History
        TEFAP was first authorized as the Temporary Emergency Food
    Assistance Program in 1981 to distribute surplus foods to households.
    The name was changed to The Emergency Food Assistance Program under the
    1990 Farm Bill. The program was designed to help reduce Federal food
    inventories and storage costs while assisting the needy. Stocks of some
    foods held in surplus had been depleted by 1988. Therefore, the Hunger
    Prevention Act of 1988 authorized funds to be appropriated for the
    purchase of USDA foods specifically for TEFAP.
        The 2008 Farm Bill increased funds for TEFAP food purchases to $250
    million annually, indexed to inflation. The 2008 Farm Bill also
    authorized up to $100 million annually for administrative costs and up
    to $15 million annually for TEFAP infrastructure grants. In addition,
    the Secretary has authority to provide food that USDA acquires through
    certain price or market support activities (i.e., bonus food) to TEFAP.
    4. Purpose/Goals
        TEFAP helps supplement the diets of low-income Americans by
    providing them with emergency food assistance at no cost. TEFAP also
    supports domestic agricultural markets by providing an outlet for
    products that USDA acquires through its agricultural market and price
    support activities.
    5. Success in Meeting Programmatic Purpose/Goals
        TEFAP currently operates in all 50 states, the District of
    Columbia, Puerto Rico, the Virgin Islands, Guam, and the Commonwealth
    of the Northern Mariana Islands. The allocation of food and
    administrative funds to states is based on a formula that considers the
    states' unemployment levels and the number of persons with income below
    the poverty level.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                          The Emergency Food Assistance Program (TEFAP)
                                                                   Budget Authority 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 FY 2002    FY 2003    FY 2004    FY 2005    FY 2006    FY 2007    FY 2008    FY 2009    FY 2010    FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    TEFAP Commodities                            $140,000   $140,000   $140,000   $140,000   $140,000   $140,000   $190,000   $250,000   $248,000   $247,500
    TEFAP Admin. Costs                             50,000     49,675     49,705     49,600     55,500     49,500     49,650     49,500     49,500     49,401
    TEFAP Commodities--ARRA                                                                                                    100,000
    TEFAP Admin. Costs--ARRA                                                                                                    50,000     28,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                          The Emergency Food Assistance Program (TEFAP)
                                                                        Outlays 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    TEFAP Commodities                                $139,293   $137,106    $137,458    $135,428    $135,422    $137,462    $186,822    $245,466    $242,225
    TEFAP Administrative Costs                         39,467     37,646      36,116      40,916      37,494      37,001      36,352      37,389      38,804
    TEFAP Commodities--ARRA                                                                                                               99,984
    TEFAP Admin. Costs--ARRA                                                                                                              13,629      35,654
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
      The Emergency
     Food Assistance
     Program (TEFAP)      FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011
            1
    ----------------------------------------------------------------------------------------------------------------
    The Emergency            $55,655         $50,310         $49,823         $49,500         $49,834         $49,500
     Food Assistance
     Program (TEFAP)
     Administrative
     Cost
    ARRA TEFAP                                                                25,000          54,609
     Administrative
     Funds
    ARRA TEFAP                                                               100,000
     Commodity Funds
    TEFAP                                                                                      5,956              44
     Infrastructure
     Grants
    TEFAP                    139,832         140,000         189,936         250,000         247,994         247,500
     Entitlement
     Foods
    TEFAP Bonus               67,000          58,200         178,100         373,700         346,639               0
     Foods
                     -----------------------------------------------------------------------------------------------
      TEFAP Total            262,487         248,510         417,858         798,200         705,032         297,044
    ----------------------------------------------------------------------------------------------------------------
    1 Federal cost to administer this program included in the Commodity Assistance Program account.

    9. Eligibility Criteria
        Households receiving food for consumption at home must meet
    eligibility criteria set by the state, including, but not limited to,
    an income standard and state residency. Households receiving prepared
    meals through a soup kitchen or other onsite feeding program are
    presumed to be needy and are not subject to a means test.
    10. Utilization (Participation) Data
        USDA does not collect data on the number of individuals served by
    TEFAP. A recent analysis by Feeding America, a national network of food
    banks, found that 54 percent of affiliated food pantries reported
    receiving TEFAP food.
    11. Duplication or Overlap with Other Programs
        TEFAP targets low-income individuals that seek food through local
    feeding organizations such as food pantries and soup kitchens. These
    individuals are sometimes but not always eligible for SNAP, and an
    individual may receive SNAP and TEFAP concurrently. However, TEFAP's
    more limited eligibility criteria and flexible structure supports its
    specific purpose in getting needed food directly into the hands of low-
    income Americans during times of emergency and natural disasters.
    12. Waste, Fraud and Abuse
        In FNS's FY 2011 improper payment risk assessment conducted and
    forwarded to the Department, TEFAP was determined to have a low risk of
    significant improper payments or fraud. Management evaluations
    conducted by FNS Regional offices have not identified significant
    incidents of improper payments to state agencies, local organizations,
    or individuals. In addition, a comprehensive, ongoing audit conducted
    by OIG has identified no problems with waste, fraud and abuse in the
    Program. In addition, the benefit provided to individuals participating
    in the program is relatively low, so any errors in certification will
    not result in large improper payments program participants.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Food Distribution Program on Indian Reservations (FDPIR).
    2. Subprograms/Department Initiatives
        FDPIR provides a monthly package of USDA Foods, including fresh
    fruits and vegetables, to low-income households living on Indian
    reservations, and to American Indian households residing in approved
    areas near reservations or in Oklahoma. Many households participate in
    FDPIR as an alternative to the SNAP, because they do not have easy
    access to SNAP offices or authorized food stores. Key components
    include:
        Food: USDA purchases food for distribution to Indian Tribal
    Organizations and state agencies administering FDPIR.
        Administrative Funds: FDPIR Indian Tribal Organizations (ITOs) and
    state agencies receive funds for program administrative costs.
        Nutrition Education Grants: Funds projects developed by ITOs and
    state agencies administering FDPIR to enhance the nutrition knowledge
    of FDPIR participants and to foster positive lifestyle changes for
    eligible household members.
        Department initiatives on FDPIR include:
        Food Package Improvements: FNS continuously reviews the FDPIR food
    package, in consultation with program customers, to improve its
    nutritional profile and acceptability. On a regular basis, a work group
    consisting of tribally appointed FDPIR directors, procurement
    specialists from FSA and AMS, nutrition and health experts from the
    Indian Health Service and the Centers for Disease Control and
    Prevention (CDC), and FNS nutritionists and program staff considers
    changes to the food package and makes recommendations to FNS. The work
    group is continuing to focus on ways to reduce saturated fat, sugar,
    and sodium and is also exploring ways to improve the desirability and
    convenience of products in the food package.
        Improved Access to Fresh Fruits and Vegetables: In FDPIR, the Fresh
    Produce Program began as a pilot program in FY 1996 at two sites. This
    initiative, a joint venture with the Department of Defense, provides
    fresh fruits and vegetables that program participants may select in
    lieu of canned goods. In FY 2009, about 91 percent of the FDPIR
    programs were enrolled in the Fresh Produce Program, allowing most
    FDPIR participants to receive a variety of fresh fruits and vegetables
    that would otherwise be very difficult for them to obtain
    3. Brief History
        FDPIR was authorized under the Food Stamp Act of 1977 as an
    alternative to the Food Stamp Program, now the Supplemental Nutrition
    Assistance Program (SNAP), for households living on Indian
    reservations. In 1981, legislation allowed Tribes in Oklahoma that did
    not have traditional reservation boundaries to also participate in
    FDPIR. The program is currently authorized through 2012 under Section
    4(b) of the Food and Nutrition Act of 2008, and Section 4(a) of the
    Agriculture and Consumer Protection Act of 1973.
    4. Purpose/Goals
        FDPIR serves as an alternative to the SNAP for areas that do not
    have easy access to SNAP offices or authorized food stores, and for
    households in designated areas who prefer USDA foods to regular SNAP
    benefits.
    5. Success in Meeting Programmatic Purpose/Goals
        Currently, there are approximately 276 Tribes receiving benefits
    under FDPIR through 100 ITOs and five state agencies.
        Pursuant to the 2008 Farm Bill, USDA conducted a review of the
    nutritional quality of the FDPIR food package, comparing its content to
    scientific standards including the Dietary Guidelines for Americans,
    the Dietary Reference Intakes (DRIs), the Thrifty Food Plan nutrient
    standards and the Healthy Eating Index--2005. It found that:

       The package provides a nutritious variety of foods, and
            sufficient calories to meet the energy needs of most sedentary
            individuals and many moderately active children.

       While as for American diets in general, there is room for
            improvement in the quantities of fruits, vegetables, low-fat
            dairy products and whole grains, the nutritional content of the
            package is considerable.

       Individuals consuming FDPIR foods in the quantities provided
            would achieve a HEI-2005 score of 81 out of 100, considerably
            better than Americans in general (58 out of 100) and SNAP
            participants (52 out of 100).

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                    Food Distribution Program on Indian Reservations (FDPIR)
                                                                   Budget Authority 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 FY 2002    FY 2003    FY 2004    FY 2005    FY 2006    FY 2007    FY 2008    FY 2009    FY 2010    FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    FDPIR                                         $75,800    $82,165    $86,237    $82,200    $79,500    $77,557    $88,477   $114,914   $112,797    $96,958
    Recovery Act:
      FDPIR Equipment                                                                                                            5,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                    Food Distribution Program on Indian Reservations (FDPIR)
                                                                        Outlays 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    FDPIR                                             $69,810    $68,782     $75,195     $72,469     $78,553     $61,535     $79,116    $111,060    $105,012
    Recovery Act:
      FDPIR Equipment                                                                                                                      5,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)

      Supplemental
        Nutrition
       Assistance         FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011
     Program Account

    Supplemental         $32,984,909     $33,198,354     $37,557,661     $49,324,256     $57,820,329     $65,340,734
     Nutrition
     Assistance
     Program (SNAP)
    ARRA SNAP                                                              4,478,246      10,763,853      10,486,716
     Benefits and
     Admin. Funds
    Nutrition              1,517,752       1,551,167       1,622,521       1,760,435       1,746,351       1,744,605
     Assistance for
     Puerto Rico
     (NAP)
    ARRA NAP Funds                                                           240,133         254,217         255,963
    Food                      78,760          77,554          88,339         114,866         112,756          96,958
     Distribution
     Program on
     Indian
     Reservation
     (FDPIR)
    ARRA FDPIR                                                                 3,712           1,367               0
     Equipment Funds
    The Emergency            139,832         140,000         189,936         250,000         247,994         247,500
     Food Assistance
     Program (TEFAP)
     Commodities
    American Samoa                                             4,795           5,219           5,204           7,006
    ARRA American                                                                964           1,021           1,028
     Samoa Benefits
    Program Access/           24,026          23,816          14,852          27,009          38,368          25,792
     Community Food
     Project/CNMI/
     Pilot Projects
    Nutrition                 72,013          72,508          72,416          70,934          69,482          69,066
     Programs
     Administration
     (Allocation to
     this program)
    Other Program                895           2,726           3,918             703             377             377
     Costs
                     -----------------------------------------------------------------------------------------------
        Total Cost       $34,818,187     $35,066,125     $39,554,437     $56,276,477     $71,061,319     $78,275,745
        FTEs                     683             631             613             612             591             618
                     -----------------------------------------------------------------------------------------------
    Unit Costs
      SNAP (Total          $1,236.28       $1,256.97       $1,324.50       $1,597.48       $1,703.50       $1,686.54
       Annual Cost
       per
       Participant)
      FDPIR (Total           $887.65         $928.48       $1,024.98       $1,123.26       $1,077.93         $966.65
       Annual Cost
       per
       Participant)
      Performance             26.736          26.466          28.408            33.7            40.3            45.0
       Measure:
       Average
       monthly SNAP
       participation
       (millions)

    9. Eligibility Criteria
        Low-income American Indian and non-Indian households that reside on
    a reservation and households living in approved areas near a
    reservation or in Oklahoma that contain at least one person who is a
    member of a federally-recognized Tribe, are eligible to participate in
    FDPIR. Households are certified based on Federal income and resource
    standards which are largely the same as those for SNAP. Households may
    not participate in FDPIR and SNAP in the same month.

                                          10. Utilization (Participation) Data
                                Food Distribution Program on Indian Reservations (FDPIR)
                                         National Average Monthly Participation
    ----------------------------------------------------------------------------------------------------------------
                               FY 2005        FY 2006        FY 2007        FY 2008        FY 2009        FY 2010
    ----------------------------------------------------------------------------------------------------------------
             U.S. Total          98,905         89,867         86,629         90,153         95,369         84,577
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        Funds are appropriated by Congress to carry out the FDPIR under
    section 4(b) of the Food and Nutrition Act of 2008. The Program is
    administered locally by either Indian Tribal Organizations (ITOs) or
    other state agencies. USDA purchases and ships FDPIR foods to ITOs
    based on orders from a list of available foods. Many households
    participate in FDPIR as an alternative to SNAP due to availability.
    Households are not allowed to participate in both programs at the same
    time.
    12. Waste, Fraud and Abuse
        The last improper payment risk assessment conducted for FDPIR was
    in FY 2009. It was determined that the Program is at a low risk for
    improper payments or fraud. The benefit level for FDPIR is
    approximately $78 per person per month in FY 2009. Additionally, FDPIR
    benefits from simplified program requirements, regulatory controls and
    a continuous process for reviewing certification actions and taking
    appropriate corrective action to resolve problems with internal
    controls place FDPIR at a low level of risk.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Senior Farmers' Market Nutrition Program (SFMNP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The program was created as a pilot program in FY 2001; it was
    established by Congress as a permanent program in FY 2002, and has been
    reauthorized through 2012 under the 2008 Farm Bill (Public Law 110-
    234).
    4. Purpose/Goals
        The SFMNP provides low-income seniors with coupons that can be used
    to purchase fresh fruits, vegetables, honey and herbs from farmers at
    authorized farmers' markets or roadside stands, or with shares in
    Community Supported Agriculture (CSA) programs for regularly
    distributed bags or boxes of eligible foods. SFMNP seeks to increase
    the consumption of agricultural commodities by expanding, developing,
    or aiding in the development and expansion of domestic farmers'
    markets, roadside stands, and community supported agriculture (CSA)
    programs.
    5. Success in Meeting Programmatic Purpose/Goals
       51 state agencies and federally recognized Indian tribal
            governments received grants to operate the SFMNP in FY 2010.

       20,106 farmers at 4,601 farmers' markets as well 3,861
            roadside stands and 163 community supported agriculture
            programs participated in the program in FY 2010.

       844,999 people received SFMNP coupons in FY 2010.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                        Senior Farmers' Market Nutrition Program (SFMNP)
                                                                   Budget Authority 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 FY 2002    FY 2003    FY 2004    FY 2005    FY 2006    FY 2007    FY 2008    FY 2009    FY 2010    FY 2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SFMNP                                         $10,000    $15,000    $15,000    $15,000    $15,000    $15,000    $20,600    $20,600    $20,600    $20,600
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                        Senior Farmers' Market Nutrition Program (SFMNP)
                                                                        Outlays 2002-2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SFMNP                                              $6,533     $8,599      $8,343     $10,542      $9,979      $9,346     $11,872     $13,264     $12,314
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
        Commodity
       Assistance         FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011
     Program Account
    ----------------------------------------------------------------------------------------------------------------
    Commodity               $112,445        $107,828        $140,807        $164,579        $181,892        $192,624
     Supplemental
     Food Program
     (CSFP)
    The Emergency             55,655          50,310          49,823          49,500          49,834          49,500
     Food Assistance
     Program (TEFAP)
     Administrative
     Cost
    ARRA TEFAP                                                                25,000          54,609
     Administrative
     Funds
    ARRA TEFAP                                                               100,000
     Commodity Funds
    TEFAP                                                                                      5,956              44
     Infrastructure
     Grants
    Farmers' Market
     Programs:
      Farmers'                23,814          22,109          21,838          20,658          22,089          20,003
       Market
       Nutrition
       Program
      Seniors'                15,844          16,203          21,402          19,865          22,459          20,606
       Farmers'
       Market
       Program
    Commodity                  3,882           2,756           3,736           4,224           5,114           3,883
     Assistance
     (Nuc. Affected
     Isld, Disaster
     Asst., NSIP
     Comm.)
    Nutrition                 15,523          15,561          15,553          15,616          15,923          15,828
     Programs
     Administration
     (Allocation to
     this program)
    Other Program            103,412          90,066         195,628         195,397         366,987         366,987
     Costs 1
                     -----------------------------------------------------------------------------------------------
        Total Cost          $330,575        $304,833        $448,787        $594,839        $724,863        $669,475
        FTEs                      97              95              95             100             112             112
                     -----------------------------------------------------------------------------------------------
    Unit Costs:
      CSFP (Total            $361.64         $349.43         $344.72         $394.27         $385.11         $348.09
       Annual Cost
       per
       Participant)
      Performance              463.1           466.1           475.3           473.5           518.9           604.9
       Measure:
       Average
       monthly CSFP
       participation
       (thousands)
    ----------------------------------------------------------------------------------------------------------------
    1 Includes bonus commodities for TEFAP, CSFP, Disaster Assistance, Nuclear Affected Island, and other commodity
      assistance.

    9. Eligibility Criteria
        Low-income seniors, generally defined as individuals who are at
    least 60 years old and who have household incomes of not more than 185%
    of the Federal poverty income guidelines, are the targeted recipients
    of SFMNP benefits.

                                          10. Utilization (Participation) Data
                                    Senior Farmers' Market Nutrition Program (SFMNP)
                                         National Average Monthly Participation
    ----------------------------------------------------------------------------------------------------------------
                               FY 2005        FY 2006        FY 2007        FY 2008        FY 2009        FY 2010
    ----------------------------------------------------------------------------------------------------------------
             U.S. Total         771,285        825,691        803,985        833,026        809,711        844,999
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        The SFMNP was established by the Farm Security and Rural Investment
    Act of 2002. Program grants are awarded to states to provide low-income
    seniors with coupons that can be exchanged for eligible foods at
    farmers' markets, roadside stands, and community supported agriculture
    (CSA) programs. The goals of the SFMNP are to provide resources in the
    form of fresh, nutritious, unprepared, locally grown fruits,
    vegetables, honey and herbs from farmers' markets, roadside stands and
    CSA programs to low-income seniors; increase the domestic consumption
    of agricultural commodities by developing new or expanding existing
    domestic farmers' markets, roadside stands, and CSA programs. The
    Program is similar in design and function to the Farmers' Market
    Nutrition Program, but serves senior citizens rather than WIC
    recipients.
    12. Waste, Fraud and Abuse
        The last improper payment risk assessment for this program,
    conducted for FY 2010, concluded that SFMNP presents a very low risk
    for erroneous payments. Guidelines provided in the SFMNP State Plan
    Guidance consistently require state agencies to provide FNS with
    detailed descriptions of their systems for ensuring that SFMNP benefits
    are issued to and used only by eligible recipients, and that SFMNP
    checks, coupons or vouchers are submitted for payment by authorized
    farmers through appropriate farmers' markets, roadside stands, and/or
    community supported agriculture programs. FNS further requires that all
    SFMNP vouchers be matched to an authorized farmer and recipient before
    payment is made, either by the contracted banking facility or by the
    State Treasurer's office. These controls are more than adequate to
    avoid significant improper payments. There have been no audits or
    management reviews which have identified significant fraud, waste and
    abuse issues.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Supplemental Nutrition Assistance Program (SNAP).
    2. Subprograms/Department Initiatives
        The subcomponents of SNAP include:
        Nutrition Education (SNAP-Ed): The goal of SNAP-Ed is to improve
    the likelihood that persons eligible for SNAP will make healthy food
    choices with in a limited budget and choose physically active
    lifestyles consistent with the current Dietary Guidelines for
    Americans.
        Employment and Training (E&T): States are required to establish an
    E&T program to help able-bodied SNAP recipients find work or gain the
    skills, training, and experience that lead to employment.
        Quality Control (QC): Each state agency is responsible for
    monitoring and improving its administration of SNAP. As a part of this
    requirement, the SNAP QC System is used to determine the accuracy of
    the benefits authorized. The data collected is also used to determine
    areas for program improvement.
        Disaster Supplemental Nutrition Assistance Program (D-SNAP):
    Through D-SNAP, households affected by a disaster receive streamlined
    certification and benefit issuance, speeding assistance to these
    vulnerable disaster victims and reducing the administrative burden on
    state agencies operating in post-disaster conditions. D-SNAP recipients
    usually receive 1 month of benefits. Generally, states may request to
    operate a D-SNAP when the area has received a Presidential disaster
    declaration of Individual Assistance from the Federal Emergency
    Management Agency. Benefits are issued on an EBT card, similar to SNAP
    benefits.
        Retailer Authorization, Reauthorization, and Investigation: FNS is
    responsible for policy and oversight of authorization and
    reauthorization of applicant and licensed retailers; the monitoring of
    retail firms through ongoing systems analysis and undercover on-site
    investigations; and the administrative review of those firms which
    contest a disqualification or civil money penalty.
        Farmers' Markets: USDA is committed to increasing participation by
    farmers' markets in SNAP. At the end of FY 2010, 1,611 direct marketing
    farmers and farmers' markets participated in SNAP which is a 263
    percent increase in the number of authorized farmers and markets over
    the previous 5 fiscal years. Over that same period, SNAP redemptions at
    farmers' markets increased 49 percent.
        Nutrition Assistance for Puerto Rico (NAP): Each year, Puerto Rico
    submits and gains approval for the program plan for its nutrition
    assistance block grant. The plan must assess the food and nutrition
    needs of the island's most needy residents; describe the assistance
    needed; describe how it would be provided to the neediest residents;
    describe the amount of administrative expense needed and meet other
    such requirements as the provided by regulation. In the NAP, 75 percent
    of the nutrition benefits are targeted to the purchase of food while 25
    percent are in cash. During an average month in FY2010, an average of
    1.3 million people were served monthly by the NAP.
        Nutrition Assistance for American Samoa: Each year, American Samoa
    submits a Memorandum of Understanding specifying how the block grant
    will be operated, including the eligibility requirements to stay within
    the capped block grant amount. FNS reviews and approves the annual
    Memorandum of Understanding and monitors program operations to ensure
    program integrity. An average of 3,388 people were served monthly by
    the program in Fiscal Year 2010.
        Nutrition Assistance for the Commonwealth of the Northern Mariana
    Islands (CNMI): CNMI submits a Memorandum of Understanding each fiscal
    year, specifying how the program will be operated, including the
    eligibility requirements to stay within the capped block grant amount.
    FNS reviews and approves the annual Memorandum of Understanding and
    monitors program operations to ensure program integrity. A monthly
    average of 8,922 people were served monthly by the program in Fiscal
    Year 2010.
    3. Brief History
        SNAP has a long history of meeting the nutrition needs of low
    income people. The very first SNAP, then known as the Food Stamp
    Program (FSP), operated from May 16, 1939 to the spring of 1943. It
    included a purchase requirement.
        The FSP began again on May 29, 1961 when President Kennedy's first
    Executive Order called for expanded food distribution. The FSP became
    permanent with the Food Stamp Act of 1964. The Food Stamp Act of 1977
    eliminated the purchase requirement and included a number of important
    access and integrity provisions.
        The late 1980s and 1990s were the dawn of Electronic Benefit
    Transfer (EBT). With EBT pilots spreading across the nation, EBT was
    made mandatory in 1996. At this time, welfare reform also affected the
    policies of the FSP, including establishment of time limits for able-
    bodied adults without dependents and eligibility restrictions for legal
    immigrants.
        Major changes arrived once again with the Farm Bill of 2002. This
    legislation restored benefits for certain legal immigrants, emphasized
    program access, simplified program rules, and offered states a large
    number of options to improve administration of the program. The quality
    control system was also reformed, enhanced funding for performance was
    eliminated, and performance bonuses were established and set at $48
    million total.
        In June 2008, Congress ratified the Food, Conservation, and Energy
    Act of 2008 which reauthorized the program as the Supplemental
    Nutrition Assistance Program (SNAP) under the newly named Food and
    Nutrition Act. This farm bill strengthened integrity, simplified
    administration, maintained state flexibility, and improved access.
    4. Purpose/Goals
        The Food and Nutrition Act statutorily defines the purpose of the
    program as ``to alleviate such hunger and malnutrition, a supplemental
    nutrition assistance program is herein authorized which will permit
    low-income households to obtain a more nutritious diet through normal
    channels of trade by increasing food purchasing power for all eligible
    households who apply for participation.''
        As such, SNAP is the cornerstone of the Federal food assistance
    programs. SNAP supplements the income of low income individuals and
    families by providing an electronic debit card which is used to
    purchase food at authorized stores. SNAP provides crucial support to
    needy households and helps those making the transition from welfare to
    work.
        State agencies are responsible for the administration of the
    program according to national eligibility and benefit standards set by
    Federal law and regulations. Benefits are 100 percent federally-
    financed, while administrative costs are shared between the Federal and
    state governments.
        SNAP is a countercyclical program that expands in tough economic
    times and contracts when the economy improves. SNAP has an economic
    multiplier effect. Every $5 in new SNAP benefits generates as much as
    $9.00 in total economic activity. SNAP uses multiple strategies to
    encourage participants to make healthy food choices and engage in
    active lifestyles. These include nutrition education, encouraging more
    farmers' markets to participate in the program and a demonstration
    project to examine the impact of incentives on participant purchases of
    fruits and vegetables.
        While Americans support helping struggling families put food on the
    table they want to know that taxpayer dollars are being spent wisely.
    USDA actively works on behalf of American taxpayers to protect the
    Federal investment in SNAP and make sure the program is targeted
    towards those families who need it the most. To further this effort,
    FNS focuses on three key areas of oversight: reducing improper payments
    and errors; pursuing recipient fraud; and combating abuse and misuse of
    benefits.
    5. Success in Meeting Programmatic Purpose/Goals
        SNAP helped put food on the table for an average of 40.3 million
    people (or 18.6 million households) per month during Fiscal Year 2010.
    In that year, the average monthly benefit per person was $133.79 and
    the average monthly benefit per household was $289.61. Five years ago,
    in Fiscal Year 2006, SNAP helped put food on the table for a monthly
    average of 26.5 million people (or 11.7 million households). In that
    year, the average monthly benefit per person was $94.75 and the average
    monthly benefit per household was $214.41. SNAP families and
    individuals spend benefits promptly, rather than save them. About 80
    percent of SNAP benefits are used within 2 weeks of receipt and 97
    percent are spent within a month.
        Most SNAP recipients are children or elderly. The most recent
    administrative data (for Fiscal Year 2009) show that nearly half (48
    percent) of recipients were children and another eight percent were age
    60 or older. Working-age women represented 28 percent of the caseload,
    while working-age men represented 16 percent. These figures have not
    changed greatly in the last 5 years. In Fiscal Year 2004, 50 percent of
    participants were children and eight percent were age 60 or older. At
    that time, working age women represented 28 percent of the caseload and
    working age men represented 13 percent.
        Notably, the primary source of income among SNAP participants has
    shifted from welfare to work over time. In 1989, 42 percent of all SNAP
    households received cash welfare benefits and only 20 percent had
    earnings. In 2009, less than ten percent received cash welfare, while
    29 percent had earnings. In Fiscal Year 2009, 40 percent of all SNAP
    participants lived in a household with earnings. For these households,
    earnings were the primary source of income.
        In Fiscal Year 2008, among those eligible for SNAP, the
    participation rate was 66 percent at the national level. In Fiscal Year
    2004, the participation rate among those eligible was 61 percent. Rates
    are consistently lower for some subgroups like the elderly, Latinos and
    working poor. FNS and the states continue to direct outreach efforts to
    these underserved populations to raise their awareness of the nutrition
    benefits of SNAP and how to apply.
        Recent historic growth in the number of households receiving SNAP
    benefits has had a tangible impact on the number of authorized
    retailers. As of September 30, 2010, there were 216,738 firms
    authorized to accept SNAP benefits. The number of SNAP authorized firms
    increased 12 percent within the past year, and 49 percent since 2003
    when just over 145,000 firms were in the Program.
        FNS is committed to working with our state and Federal partners on
    strategies to improve accuracy, as well as to identify and address
    fraud, while ensuring access and customer service. Over 98 percent of
    those receiving SNAP benefits are eligible. Payment accuracy was 96.19
    percent in Fiscal Year 2010, a historic high. The FY10 rate reflects
    the fourth continuous year of improvement and a decade long trend.
    Payment errors are less than half what they were 10 years ago, which
    has reduced improper payments by $3.3 billion in 2010.

        The prevalence of trafficking dropped from approximately four percent in the late 1990s to one percent in the mid 2000s. Over the last 10 years,
     8045 retail stores were permanently disqualified due to trafficking, reflecting our work to root out and eliminate bad actors from the program.

                                      6. Annual Budget Authority (FY 2002-FY 2011)
                                       Supplemental Nutrition Assistance Program 1
                                                 Annual Budget Authority
                                                      (in millions)
    ----------------------------------------------------------------------------------------------------------------
                    2002      2003      2004      2005      2006      2007      2008      2009      2010      2011
    ----------------------------------------------------------------------------------------------------------------
    Regular
     Appropriati
     ons:
      SNAP         $21,390   $24,598   $29,190   $33,422   $38,959   $36,377   $37,705   $51,805   $56,152   $66,782
      Puerto         1,356     1,401     1,419     1,501     1,524     1,557     1,629     1,768     1,753     1,752
       Rico and
       American
       Samoa
      Commonweal         6         8        11         8         8         9        10        12        12        12
       th
       Northern
       Mariana
                 ---------------------------------------------------------------------------------------------------
        Subtotal    22,752    26,006    30,620    34,932    40,492    37,944    39,344    53,584    57,917    68,546
         ,
         Regular
         Appropr
         iations
                 ---------------------------------------------------------------------------------------------------
    Supplemental
     Appropriati
     ons:
      DOD SAE            0         0         0         0         0         0         0         0       400         0
    Recovery
     Act:
      Benefits           0         0         0         0         0         0         0     4,804    10,376    10,487
      Administra         0         0         0         0         0         0         0       145       150         0
       tive
       Costs
      ARRA               0         0         0         0         0         0         0       240       254       256
       Benefits-
       -Puerto
       Rico NAP
      American           0         0         0         0         0         0         0         1         1         1
       Samoa
       Benefits
                 ---------------------------------------------------------------------------------------------------
        Subtotal         0         0         0         0         0         0         0     5,190    10,782    10,744
         ,
         Recover
         y Act
                 ===================================================================================================
          Total     22,752    26,006    30,620    34,932    40,492    37,944    39,344    58,774    69,099    79,290
           Appro
           priat
           ions
    ----------------------------------------------------------------------------------------------------------------
    1 Note: Does not include appropriations for TEFAP or FDPIR.

                                           7. Annual Outlays (FY 2002-FY 2011)
                                       Supplemental Nutrition Assistance Program 1
                                                     Annual Outlays
                                                      (in millions)
    ----------------------------------------------------------------------------------------------------------------
                             FY 2002   FY 2003   FY 2004   FY 2005   FY 2006   FY 2007   FY 2008   FY 2009   FY 2010
    ----------------------------------------------------------------------------------------------------------------
    Regular Program
     Outlays:
      SNAP                   $19,862   $23,072   $26,234   $30,909   $32,820   $33,040   $37,364   $48,883   $58,901
      Puerto Rico and          1,274     1,307     1,329     1,480     1,519     1,587     1,634     1,734     1,750
       American Samoa
      Commonwealth                 5         7         6        11         9        10         9        10        12
       Northern Mariana
                           -----------------------------------------------------------------------------------------
        Subtotal, Regular     21,141    24,386    27,570    32,400    34,348    34,637    39,007    50,626    60,662
         Appropriations
                           -----------------------------------------------------------------------------------------
    Supplemental Outlays:
      DOD SAE                      0         0         0         0         0         0         0         0       126
    Recovery Act Outlays:
      Total Recovery Act           0         0         0         0         0         0         0     4,568    10,968
                           =========================================================================================
        Total Outlays         21,141    24,386    27,570    32,400    34,348    34,637    39,007    55,194    71,756
    ----------------------------------------------------------------------------------------------------------------
    1 Note: Does not include outlays for TEFAP or FDPIR.

    The difference between budget authority and outlays for the SNAP program is usually related to either use or non-
      use of the contingency fund. In 2010, for example, budget authority is shown as $69 billion, whereas outlays
      were $71.8 billion. In that year, over $2 billion in contingency funds carried forward from the previous
      fiscal year were used to fund participation.

                                        8. Annual Delivery Cost (FY 2002-FY 2011)

      Supplemental
        Nutrition
       Assistance         FY 2006         FY 2007         FY 2008         FY 2009         FY 2010         FY 2011
     Program Account

    Supplemental         $32,984,909     $33,198,354     $37,557,661     $49,324,256     $57,820,329     $65,340,734
     Nutrition
     Assistance
     Program (SNAP)
    ARRA SNAP                                                              4,478,246      10,763,853      10,486,716
     Benefits and
     Admin. Funds
    Nutrition              1,517,752       1,551,167       1,622,521       1,760,435       1,746,351       1,744,605
     Assistance for
     Puerto Rico
     (NAP)
    ARRA NAP Funds                                                           240,133         254,217         255,963
    Food                      78,760          77,554          88,339         114,866         112,756          96,958
     Distribution
     Program on
     Indian
     Reservation
     (FDPIR)
    ARRA FDPIR                                                                 3,712           1,367               0
     Equipment Funds
    The Emergency            139,832         140,000         189,936         250,000         247,994         247,500
     Food Assistance
     Program (TEFAP)
     Commodities
    American Samoa                                             4,795           5,219           5,204           7,006
    ARRA American                                                                964           1,021           1,028
     Samoa Benefits
    Program Access/           24,026          23,816          14,852          27,009          38,368          25,792
     Community Food
     Project/CNMI/
     Pilot Projects
    Nutrition                 72,013          72,508          72,416          70,934          69,482          69,066
     Programs
     Administration
     (Allocation to
     this program)
    Other Program                895           2,726           3,918             703             377             377
     Costs
                     -----------------------------------------------------------------------------------------------
        Total Cost       $34,818,187     $35,066,125     $39,554,437     $56,276,477     $71,061,319     $78,275,745
        FTEs                     683             631             613             612             591             618
                     -----------------------------------------------------------------------------------------------
    Unit Costs:
      SNAP (Total          $1,236.28       $1,256.97       $1,324.50       $1,597.48       $1,703.50       $1,686.54
       Annual Cost
       per
       Participant)
      FDPIR (Total           $887.65         $928.48       $1,024.98       $1,123.26       $1,077.93         $966.65
       Annual Cost
       per
       Participant)
    Performance               26.736          26.466          28.408            33.7            40.3            45.0
     Measure:
     Average monthly
     SNAP
     participation
     (millions)

    9. Eligibility Criteria
        To qualify for SNAP, applicants must fill out an application and
    submit it to the local office. Applicants must meet certain financial,
    non-financial and citizenship requirements. Illegal immigrants are not
    eligible for SNAP benefits.
        To qualify, there is a gross income test of 130 percent of the
    Federal poverty guidelines and a net income test of 100 percent of the
    Federal poverty guidelines. SNAP allows for certain deductions from
    gross income like housing and utility costs, child support, medical
    expenses, or child-care costs to calculate net income. Households with
    an elderly person or a person receiving certain types of disability
    payments only have to meet the net income test.
        There is also a resource test. Households may have $2,000 in
    countable resources or $3,000 if at least one person is age 60 or older
    or disabled. In SNAP, examples of countable resources would include
    bank accounts. Certain resources are not counted, such as a home and
    lot, the resources of people who receive Supplemental Security Income
    (SSI), the resources of people who receive Temporary Assistance for
    Needy Families (TANF), certain education savings accounts, and most
    retirement and pension plans.
        Households are also eligible for SNAP through categorical
    eligibility in SSI, General Assistance, and TANF: 42 states have
    adopted TANF broad-based categorical eligibility, a program
    simplification measure allowing states to adjust the gross income test
    up to 200 percent of poverty test and raise or eliminates the resource
    test. States can change the TANF program that confers broad-based
    categorical eligibility to exclude households that receive a large lump
    sum payment or to create a resource limit of some amount.
        In addition, applicants must also meet some non-financial
    requirements, such as citizen/legal immigrant status and work
    requirements in some cases. Generally, Able-Bodied Adults without
    Dependents (ABAWDs) between 18 and 50 who do not have any dependent
    children can get SNAP benefits only for 3 months in a 36 month period
    if they do not work or participate in a workfare or employment and
    training program other than job search. This requirement is waived in
    some locations in accordance with unemployment rates and job
    availability triggers determined by the Department of Labor. With some
    exceptions, all adults participating in SNAP between 16 and 60 must
    register for work, accept suitable employment, and take part in an
    employment and training program to which they are referred by the local
    office. Failure to comply with these requirements can result in
    disqualification from the program.
        Applicants must also provide verification such as pay stubs and
    bank statements, along with their application. In addition, the
    eligibility worker will conduct automated data matches with the Social
    Security Administration and other organizations to verify information.
        Benefits are provided at the household level. In SNAP, a household
    is defined as either an individual living alone or a group of people
    who live together and purchase and prepare meals together. The amount
    of benefits, called an allotment, is based on the Thrifty Food Plan, a
    low-cost model food plan that reflects current nutrition standards, the
    nutrient content and cost of food and consumption patterns of low-
    income families and varies with household size and net income. While
    SNAP has uniform national benefit levels with cost-of-living
    adjustments for outlying states and territories, allotment s vary with
    household size and net income.

                                          10. Utilization (Participation) Data
                                    Supplemental Nutrition Assistance Program (SNAP)
                                      National Level Average Monthly Participation
    ----------------------------------------------------------------------------------------------------------------
                           FY 2005         FY 2006         FY 2007         FY 2008         FY 2009        FY 2010
    ----------------------------------------------------------------------------------------------------------------
              U.S.       25,602,975      26,524,597      26,293,437      28,200,022      33,463,212     40,266,867
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        SNAP is one of 15 nutrition assistance programs administered by
    USDA's Food and Nutrition Service. Programs target the diverse needs of
    different subgroups of low-income persons by providing supplemental
    assistance through a variety of forms and settings.
        The programs are designed to work together to form a nutrition
    safety net to ensure that no American in need goes hungry. For example,
    children from households receiving SNAP benefits or, alternatively, the
    Food Distribution Program on Indian Reservations (FDPIR) are
    categorically eligible to receive free meals at school through the
    National School Lunch and School Breakfast programs without a separate
    household application. This is done through direct certification, which
    typically involves matching SNAP or FDPIR records against student
    enrollment lists, either at the state or school district level.
    12. Waste, Fraud and Abuse
        SNAP has a demonstrated Quality Control system that has been in
    effect since the 1970s. The system includes provisions for state
    liabilities for sustained poor performance and bonuses for states that
    excel. FNS takes seriously its responsibility to make sure that only
    those families who are actually eligible for the program participate,
    and that the correct amount of benefits is provided to them. Over the
    past decade, FNS has made major strides to improve the accuracy of
    SNAP's eligibility determination and benefit payment systems. In Fiscal
    Year 2000, the error rate was 8.91 percent. The Fiscal Year 2010 error
    rate was an all-time low of 3.81 percent, which is 57 percent less than
    the Fiscal Year 2000 error rate. Similarly Payment errors are less than
    half what they were 10 years ago, which has reduced improper payments
    by $3.3 billion in 2010.
        While recipient fraud undermines public confidence and jeopardizes
    the ability of SNAP to serve the tens of millions of struggling
    families who need it, the most recent data suggests that it is
    relatively rare. FNS works through our state partners to investigate
    recipient fraud and hold bad actors accountable, and recipients who
    purposely commit fraud to get benefits are subject to disqualification.
    In Fiscal Year 2010, states conducted 781,000 fraud investigations,
    disqualified 44,408 individuals, and collected $287 million in
    recipient claims. An additional $1.3 billion in delinquent SNAP
    recipient claims has been collected since 1992 via the Treasury Offset
    Program.
        FNS recently sent a letter to all states to encourage them to be
    more active and vigilant in the area of recipient trafficking. FNS is
    in process of contacting each state to engage in a discussion about
    doing more to promote integrity and remove bad actors from the program.
    FNS will work with each state to develop new approaches to fraud
    detection and prevention such as providing additional data to track and
    investigate fraud by recipients and by looking at sensible procedural
    changes and policy options.
        The sale/purchase of SNAP benefits for cash is called trafficking,
    an illegal activity punishable by criminal prosecution. Over the last
    15 years, FNS has aggressively implemented a number of measures to
    reduce the prevalence of trafficking in SNAP from about four percent
    down to its current level of about one percent. FNS also continues to
    work closely with its state and Federal partners to investigate and
    prosecute trafficking.
        Retailers found guilty of trafficking are referred to OIG for
    consideration for criminal prosecution. If OIG accepts the case and the
    store is criminally prosecuted, it may be subject to asset forfeiture
    in addition to administrative penalties levied by FNS. If OIG declines
    a case against a retailer found guilty of trafficking, FNS initiates
    administrative action to permanently disqualify the retailer from
    further SNAP participation. The retailer is barred from future SNAP
    participation, including opening a new store in a different location.
    If a retailer convicted of trafficking sells the store, they are
    assessed a transfer of ownership civil money penalty. If they
    participate in the Special Supplemental Nutrition Program for Women,
    Infants, and Children, they are disqualified from that program as well.
    13. Effect of Administrative PAYGO
        See attached under ``Costs--Title XIX Treatment Facilities.''

                           AGRICULTURAL PROGRAM AUDIT

                 (EXAMINATION OF TITLE I AND THE SURE PROGRAM)

                                  ----------

                            WEDNESDAY, JULY 27, 2011

      Subcommittee on General Farm Commodities
                           and Risk Management,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 1300, Longworth House Office Building, Hon. K. Michael
    Conaway [Chairman of the Subcommittee] presiding.
        Members present: Representatives Conaway, Schmidt, Austin
    Scott of Georgia, Crawford, Huelskamp, Ellmers, Gibson,
    Hultgren, Hartzler, Schilling, Lucas (ex officio), Ribble,
    Boswell, McIntyre, Walz, Kissell, McGovern, David Scott of
    Georgia, Sewell, and Peterson (ex officio).
        Staff present: Matt Schertz, Brandon Lipps, Bart Fischer,
    Heather Vaughan, Tamara Hinton, Debbie Smith, Clark Ogilvie,
    Anne Simmons, Liz Friedlander, John Konya, and Jamie Mitchell.

    OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
                         IN CONGRESS FROM TEXAS

        The Chairman. This hearing of the Subcommittee on General
    Farm Commodities and Risk Management entitled, Agricultural
    Program Audit: Examination of Title I and the SURE Program,
    will come to order.
        We have two witnesses here this morning, both relatively
    new to the FSA top leadership, both of them bring long, long
    credentials to their jobs. We have Bruce Nelson, who is now the
    Administrator of the Farm Service Agency, U.S. Department of
    Agriculture. We have the favorite son from Texas, Juan Garcia,
    the Acting Deputy Administrator for Farm Programs at the Farm
    Service Agency.
        So gentlemen, welcome. Rather than making any kind of long
    winded statement, I am going to recognize our Chairman of the
    full Committee for his opening statement and then the Ranking
    Member for his.
        [The prepared statement of Mr. Conaway follows:]

      Prepared Statement of Hon. K. Michael Conaway, a Representative in
                              Congress from Texas
        As you know, we are performing an extensive audit of all policies
    under the jurisdiction of the House Agriculture Committee. Today, we
    examine Title I of the farm bill, known as the Commodity Title, and
    standing disaster assistance, commonly known as SURE.
        Not long ago, this Subcommittee reviewed Federal Crop Insurance. We
    know that without this public-private partnership, something as basic
    as multiple peril crop insurance would be out of reach for U.S.
    producers. That's something everybody can get their arms around and
    appreciate.
        Less obvious are the reasons behind a commodity title to the farm
    bill and to standing disaster. People understand the production risks
    producers face. But folks are inclined to ask, what is so unique about
    the price risk and market volatility that producers face? Don't all of
    us face this sort of thing?
        Texas Tech University did a good job during the last farm bill of
    helping people understand the market conditions U.S. producers face. I
    would encourage each of my colleagues to get a copy of the ``Foreign
    Subsidies and Tariffs Handbook'' to gain a better sense of the
    distorted global markets in which our producers must compete. I can
    assure you, the kind of dollars we are talking about here today pale by
    comparison to what foreign countries, both developed and developing,
    are providing their producers. In fact, U.S. producers receive only a
    very basic level of support, and our markets are among the most open in
    the world.
        As an accountant, I never faced these distorted global markets. I
    have never woken up one morning to learn that the U.S. has imposed an
    embargo on American accountants doing work for clients living in the
    former Soviet Union, causing a collapse in my prices. I never
    encountered China turning on and off my access to clients in that
    country. I've never had to fight for access to clients in countries
    where the government has a single desk where it buys and sells all
    accounting work. I never had a situation where the government was
    buying my competitors their equipment for them. I never experienced a
    price volatility where what I could charge a client one year was $100,
    and the next year it was $20. And, I never had clients walk into my
    office and tell me the prices I could charge. Are there risks in all
    businesses? Absolutely. Businesses open and close every day. But few
    are dealing with the incredible risks our producers face.
        The question for me, then, is not whether we need a farm policy but
    what it should look like, and how to make it the most effective not
    only for the producers but also for the taxpayer. Agriculture and farm
    policy are too important to our economy and jobs to short shrift.
    President Reagan recognized this in the mid 1980s when he initiated the
    largest ad hoc effort in U.S. history to stop the farm financial
    crisis. A decade later, Congress stepped in to address another farm
    crisis. These ad hoc efforts were very expensive. So, having policies
    in place to not only deal with a crisis but hopefully prevent one is
    the key to being cost-effective for taxpayers and producers.
        There are a few guiding principles that I will apply when working
    with colleagues to develop the farm policy provisions of the 2012 Farm
    Bill and I offer them here to help facilitate a good conversation in
    this audit.

        (1) Does the policy undermine Federal Crop Insurance?

        (2) Is the policy bankable to the producer? In other words, does
            the policy mean anything to the lender?

        (3) Is the policy tailored to producer risk?

        (4) Are the crops covered under Title I treated equitably under the
            policy?

        (5) Can producers--and their lenders--understand the policy?

        With finite resources, we need to be wise in how we invest in U.S.
    farm policy. These are some basic principles we can apply to make sure
    this happens.
        With that, I yield to my friend, the Ranking Member, Mr. Boswell,
    for any opening statement he may have.

        The Chairman. Mr. Lucas.

     OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
                         CONGRESS FROM OKLAHOMA

        Mr. Lucas. Good morning and thank you, Chairman Conaway and
    Ranking Member Boswell, for holding this hearing. I would like
    to thank Bruce Nelson and Juan Garcia for joining us from the
    Farm Service Agency.
        Today's hearing is the eighth audit of farm programs
    conducted by the Agriculture Committee's Subcommittees. We have
    evaluated everything from conservation to nutrition assistance
    so far. We gathered information about which programs are most
    effective and which can be streamlined. Having these facts on
    hand will help us make difficult decisions when we begin
    developing the next farm bill. Each of those audits was
    important in their own right, but I believe today's audit of
    Title I's programs and disaster assistance is particular
    significant.
        Along with crop insurance, Title I programs form the very
    fabric of our farm safety net. They ensure that dramatic swings
    in commodities prices and volatile weather don't put our
    farmers and ranchers out of business. As a rancher I understand
    how difficult it is for producers to invest in a crop and see
    any hope of profit vanish because of factors beyond their
    control.
        Not only are producers engaging in a risky industry, but
    they have to significantly leverage their assets to do so.
    Farmers and ranchers borrow more money each year than most
    Americans will borrow in a lifetime. And in addition to the
    high personal risk and questionable returns farmers accept as
    part of doing business, they also put in the hard labor every
    day.
        I can tell you in these temperatures every chore is that
    much harder. And while we can avoid the heat here in Washington
    by crossing between our offices in the Capitol in air
    conditioned tunnels, our farmers and ranchers have no such
    luxury. There are no tunnels out to the pasture.
        That is why I am so grateful to the men and women who
    choose farming as a career. They work hard every day, braving
    the uncertainties of weather and commodity markets to produce
    high quality food for Americans and consumers around the world.
        While they do the hard work of producing our food, we have
    to do our part to support them. Without a safety net, a few bad
    seasons can put a farm out of business. When we lose that
    source of production, we don't usually get it back. So maybe
    instead of speaking about this as a farm safety net, we need to
    start calling it a food safety net. Perhaps that will get the
    message out that commodity support keeps farmers in business,
    which keeps food on our plates. And that is the message that
    seems to be getting lost.
        When I talk to farmers and ranchers I hear a constant
    refrain, we are not asking for a handout, we just need a floor
    in place when the bottom drops out. That is what crop insurance
    and Title I programs provide, a floor, a safety net for food
    production.
        So when opponents of farm policy start talking about the
    enormous amount of money that can be saved by eliminating this
    safety net, and they truly believe it is an enormous amount of
    money, I wonder what numbers they are using. The cost of losing
    food production surely outweighs the cost of a safety net,
    especially when you consider that many Title I programs don't
    kick in until prices fall below a set trigger.
        I would like to get one thing straight right off the bat.
    There aren't enormous savings to be found from cutting farm
    programs. They comprise less than \1/2\ of 1 percent of the
    Federal budget. That is only 50 cents out of every $100.
        Now these are difficult times and the agriculture community
    is going to have to accept budget cuts. We don't believe that
    we should take a disproportionate hit. We are prepared to
    reduce our spending, however, and these audits help us
    determine the best places to trim our budget and streamline
    programs. We are here to take an honest look at the Title I
    programs to see how they are working in the countryside. Are
    they the helping one group of producers over another? Are they
    more effective in certain regions? Is there duplication?
        We need to evaluate the new programs from the 2008 Farm
    Bill. For instance, are there ways to improve the ACRE program.
    I don't believe the SURE Program has worked the way most of us
    hoped it would. And it does not have a budgetary baseline once
    the 2008 Farm Bill expires. So we need to consider how that
    fits in with both our budget and our safety net.
        We have to look at our legacy programs, too. Should the
    three-legged stool of direct payments, and the countercyclical
    programs and marketing loan assistance be updated to reflect
    the new trends in prices? I think we also need to look at the
    repercussions of eliminating programs. Do we eliminate all
    incentives for producers to participate? And then in turn when
    they do opt out do we lose the conservation compliance that
    comes with program participation? We need to consider the
    potential consequences of any program changes.
        I am pleased that Mr. Nelson and Mr. Garcia are here to
    answer all of these questions. Understanding the true cost and
    benefits of our Title I programs will help us develop a better
    farm bill moving forward.
        I look forward to your testimony, gentlemen, and I thank
    you once again for being here, and yield back the balance of my
    time, Mr. Chairman.
        [The prepared statement of Mr. Lucas follows:]

    Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
                                 from Oklahoma
        Good morning. I'd like to thank Chairman Conaway and Ranking Member
    Boswell for holding this hearing. And I'd like to thank Bruce Nelson
    and Juan Garcia for joining us from the Farm Service Agency.
        Today's hearing is the eight audit of farm programs conducted by
    the Agriculture Committee's Subcommittees.
        We've evaluated everything from conservation to nutrition
    assistance so far. We gathered information about which programs are
    most effective and which can be streamlined. Having these facts on hand
    will help us make difficult decisions when we begin developing the next
    farm bill.
        Each of those audits was important in their own right, but I
    believe today's audit of Title I programs and disaster assistance is
    particularly significant.
        Along with crop insurance, Title I programs form the very fabric of
    our farm safety net. They ensure that dramatic swings in commodity
    prices and volatile weather don't put our farmers and ranchers out of
    business.
        As a rancher, I understand how difficult it is for producers to
    invest in a crop and see any hope of profit vanish because of factors
    beyond their control.
        Not only are producers engaging in a risky industry, but they have
    to significantly leverage their assets to do so. Farmers and ranchers
    borrow more money each year than most Americans will borrow in a
    lifetime.
        In addition to the high personal risk and questionable returns
    farmers accept as part of doing business, they also put in hard labor
    every day.
        I can tell you--in these temperatures every chore is that much
    harder. And while we can avoid the heat here in Washington by crossing
    between our offices and the Capitol in air conditioned tunnels, our
    farmers and ranchers have no such luxury. There are no tunnels out to
    the pasture.
        That's why I'm so grateful to the men and women who choose farming
    as a career. They work hard every day, braving the uncertainties of
    weather and commodity markets to produce high quality food for
    Americans and consumers around the world.
        While they do the hard work of producing our food, we have to do
    our part to support them. Without a safety net, a few bad seasons can
    put a farm out of business. When we lose that source of production, we
    don't usually get it back.
        So maybe instead of speaking about this as a farm safety net, we
    need to start calling it a food safety net. Perhaps that will get the
    message out that commodity support keeps farmers in business, which
    keeps food on our plates.
        That message seems to be getting lost.
        When I talk to farmers and ranchers, I hear a constant refrain:
    we're not asking for a handout; we just need a floor in place for when
    the bottom drops out.
        That's what crop insurance and Title I programs provide: a floor. A
    safety net for food production.
        So when opponents of farm policy start talking about the
    ``enormous'' amount of money that could be saved by eliminating this
    safety net, I wonder what numbers they're using.
        The costs of losing food production surely outweigh the costs of a
    safety net. Especially when you consider that many Title I programs
    don't kick in until prices fall below a set trigger.
        I'd also like to get one thing straight right off the bat: there
    aren't enormous savings to be found from cutting farm programs. They
    comprise less than \1/2\ of 1 percent of the Federal budget. That's
    only 50 cents out of every $100.
        Now, these are difficult times, and the agricultural community is
    going to have to accept budget cuts. But we don't believe that we
    should take a disproportional hit.
        We are prepared to reduce our spending, however, and these audits
    help us determine the best places to trim our budget and streamline
    programs.
        We are here to take an honest look at the Title I programs to see
    how they are working in the countryside. Are they helping one group of
    producers over another? Are they more effective in certain regions? Is
    there duplication?
        We need to evaluate the new programs from the 2008 Farm Bill. For
    instance, are there ways to improve the ACRE program?
        I don't believe the SURE program has worked the way most of us
    hoped it would. And it does not have a budgetary baseline once the 2008
    Farm Bill expires. So we need to consider how that fits in to both our
    budget and our safety net.
        And we have to look at our legacy programs too. Should the three-
    legged stool of direct payments, the countercyclical program, and
    marketing loan assistance be updated to reflect the new trends in
    prices?
        I think we also need to look at the repercussions of eliminating
    programs. Do we eliminate all incentives for producers to participate
    and in turn when they do opt out, do we lose the conservation
    compliance that comes with program participation. We need to consider
    the potential consequences of any program changes.
        I'm pleased that we have Mr. Nelson and Mr. Garcia here to help
    answer all of these questions.
        Understanding the true costs and benefits of our Title I programs
    will help us develop a better farm bill moving forward.
        I look forward to your testimony, and I thank you once again for
    being here.

        The Chairman. Thank you, Mr. Chairman. I now recognize the
    Ranking Member for an opening statement.

    OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE
                         IN CONGRESS FROM IOWA

        Mr. Boswell. Thank you, Mr. Chairman, and I appreciate you
    having this hearing today. I want to thank everyone for joining
    us as we review our farm safety net system. I would especially
    like to thank our witnesses, Mr. Nelson and Mr. Garcia.
        I am one of those around this place who knows my way
    through the FSA office. There have been times when we went
    through what we refer to in the farm business, and I think the
    Chairman has been there too, where we have had to remember the
    farm crisis of the late 1970s, early 1980s. And wow, I
    personally know our director in Iowa, John Whitaker and I thank
    you for his service and for selecting him. He is doing an
    outstanding job and has a great crew.
        As a farmer, as I said I have always considered myself an
    eternal optimist, I used that word once or twice. You kind of
    have to be that way to do what Frank Lucas and Leonard Boswell
    do because you have to believe. No matter how hot it gets or
    how hard it rains or how dry it gets, we hope as much as we can
    that it will get better and our crop will grow and our
    livestock will survive and remain healthy.
        Unfortunately, this is not always the case. Every now and
    then because of Mother Nature, the farmers and ranchers who
    feed our nation feel painful consequences to their operation,
    whether a storm tears down a grain bin or the sun wears down
    our livestock and even in some cases not only stops the
    efficiency of the feeding but causes death. I had farmers
    yesterday come into my office; turkey people as you know, have
    lost thousands of birds and it is not because they did
    something wrong. So if they are not protected, it has the
    impact to dramatically increase the cost of food.
        The heat risks our producers face are happening before us
    across the nation. The news from the past week has shown
    livestock losses in Virginia all the way to Minnesota as well
    as my home State of Iowa and many other places. While those
    losses attribute to the need for a safety net, the ongoing farm
    income is also affected with this kind of weather. Unable to
    cool down, cattle feed less and gain less and in many cases
    die. As well, poor conditions cause a dairy cow to produce
    less, and after years of investment these issues skim profits
    and production off of each and every animal every day.
        A big reason our producers succeed in an industry that
    relies on uncontrollable forces of rain, the sun, the soil, the
    market is because we provide a support system. And in return,
    and I think Chairman Lucas just pointed it out, and I know that
    Chairman Conaway has many times, we give the Americans the most
    abundant, safe and affordable food on this Earth, because we
    all invest in it. Whether you live in downtown New York or LA
    or Miami, we invest in it and that is what we get. And we are
    constantly from the Agriculture Committee telling our
    colleagues that are in these positions that you have an
    investment, you have a vital concern. This is not something you
    are just handing out to the farmers and ranchers. It is to
    protect the safe, affordable, abundant food supply better than
    any place in the world. I am constantly sharing that because we
    have a vested interest in this.
        Programs in Title I, the farm bill, like ACRE, Livestock
    Indemnity, and this is what the turkey farmers were talking
    about yesterday, as you already know, and other disaster
    assistance programs are critical to maintaining our food supply
    and its affordability.
        This Committee under the leadership of Chairman Lucas and
    Chairman Conaway is dedicated to working to ensure that policy
    in D.C. is practical for farmers and ranchers across America.
        So thank you for your being here. And your testimony will
    be essential for us to move forward on the next farm bill I am
    sure. Thank you very much. I yield back.
        [The prepared statement of Mr. Boswell follows:]

      Prepared Statement of Hon. Leonard L. Boswell, a Representative in
                               Congress from Iowa
        Thank you Chairman Conaway. I would like to thank everyone for
    joining us here today as we review our farm safety net system. I would
    especially like to thank our witnesses. Mr. Nelson and Mr. Garcia, my
    colleagues and I look forward to hearing from you and to having the
    opportunity to review these programs with you.
        As a farmer, I have always considered myself an eternal optimist.
    No matter how hot it gets or how hard it rains, I hope as much as I can
    that it will get better--that my crop will keep, and that my livestock
    will survive and remain healthy.
        Unfortunately, that is not always the case. Every now and then,
    because of Mother Nature, the farmers and ranchers who feed our nation
    face painful ramifications to their operation. Whether a storm tears
    down a grain bin or the sun wears down our livestock the inputs and
    investments, if not protected, have the ability to dramatically
    increase the cost of food.
        The heat risks our producers face are happening before us across
    our nation. News from the past week has shown livestock losses in
    Virginia all the way to Minnesota, as well as my home State of Iowa.
    While these losses attribute to the need for a safety net, the ongoing
    farm income is also affected by this kind of weather. Unable to cool
    down, cattle feed less and gain less. As well, poor conditions cause a
    dairy cow to produce less. After years of investments these issues skim
    profit and production off of each animal every day.
        A big reason our producers succeed in an industry that relies on
    uncontrollable forces--the rain, sun, and soil--is because we provide a
    support system. In return, they have given Americans the most abundant,
    safe, and affordable food on the planet. Programs in Title I of the
    farm bill, like ACRE, Livestock Indemnity, and other disaster
    assistance programs are critical to maintaining our food supply and its
    affordability.
        Our Committee is dedicated to working to ensure that policy in D.C.
    is practical for the farmers and ranchers across America. Thank you
    again, your testimony will be essential for us as we continue to move
    towards the next farm bill.

        The Chairman. I thank the gentleman. I will make a couple
    of comments here. Not long ago this Subcommittee reviewed the
    Federal Crop Insurance Program. We know that without this
    public-private partnership something as basic as multi-peril
    crop insurance will be out of reach for most U.S. producers.
    That is something that everybody can get their arms around and
    appreciate.
        Less obvious, however, are the reasons behind a commodity
    title to the farm bill and to standing disaster. People
    understand the production risks producers face, but folks are
    inclined to ask what is so unique about price risk and market
    volatility that producers face? Don't all of our small business
    owners face these sorts of things?
        Texas Tech did a good job during the last farm bill of
    helping people understand the market conditions U.S. producers
    face. I would encourage each of my colleagues to get a copy of
    the Foreign Crop Subsidies and Tariffs handbook to gain a
    better understanding and sense of the distorted global markets
    in which our producers must compete. I can assure you the kind
    of dollars we are talking about here today pale by comparison
    to what foreign countries, both developed and developing, are
    providing their producers. In fact U.S. producers receive only
    a very basic level of support and our markets are among the
    most open in the world. As an accountant, I never faced these
    distorted global markets.
        I never woke up one morning to learn that the U.S. has
    imposed an embargo on American accountants doing work for
    clients living in the former Soviet Union causing a collapse in
    my prices. I never encountered China turning off or on my
    access to clients in that country. I have never had to fight
    for access to clients in countries where the government has a
    single desk where it buys and sells all accounting work. I
    never had a situation where the government was buying my
    competitors their equipment for them. And I never experienced a
    price volatility where I could charge a client one year $100
    and the next $20. I rarely had a client that big. You boys are
    a tough audience. I never had a client walk into my office and
    tell me the prices they would charge.
        Are there risks in all businesses? Absolutely. Businesses
    open and close every day, but few are dealing with the
    incredible risks our producers face. The question for me is not
    whether to have a farm policy but what it should look like and
    how to make it the most effective, not only for producers but
    also for our taxpayers.
        Agriculture and farm policy are too important to our
    economy and jobs to short shrift. President Reagan recognized
    this in the mid-eighties when he initiated the largest ad hoc
    effort in U.S. history to stop the farm financial crisis. A
    decade later Congress stepped in to address another farm
    crisis. These ad hoc efforts are very expensive, so having
    policies in place to not only deal with the crisis, but
    hopefully prevent one is the key to being cost effective for
    taxpayers and producers.
        There are few guiding principles that I would like to apply
    when our colleagues and I develop the farm policy provisions
    for the 2012 Farm Bill. One, does the policy undermine crop
    insurance? Two, is the policy bankable to the banker--to the
    producer? In other words, does the policy mean anything to a
    lender? Is the policy tailored to producer risks? Are crops
    covered under Title I treated equitably under the policy? Can
    producers and their lenders understand the policy? With finite
    resources we need to make wise decisions as we invest in U.S.
    farm policy. These will be some of the guiding principles that
    I hope we can use.
        The Chairman. The chair would request that other Members
    submit their opening statements for the record so that the
    witnesses may begin their testimony and to ensure there is
    ample time for questions.
        [The prepared statements of Mr. Peterson and Mr. McGovern
    follow:]

      Prepared Statement of Hon. Collin C. Peterson, a Representative in
                            Congress from Minnesota
        Thank you Chairman Conaway and Ranking Member Boswell for holding
    today's hearing and continuing this Committee's agricultural program
    audits in preparation for the next farm bill. This is the eighth audit
    hearing, focusing on Title I and the SURE program.
        I have said this many times, but the budget is going to be our
    biggest challenge when we sit down to write a new farm bill. There is
    no doubt that we need to get our fiscal house in order. I have said
    repeatedly that agriculture can, and will, do its part. My concern is
    that we are being asked to cut agriculture spending three to four times
    more than other areas of the budget.
        While only a small portion of farm bill spending comes from Title
    I, folks outside of agriculture have repeatedly targeted these programs
    for cuts, arguing that high commodity prices mean we can dismantle the
    farm safety net. We've been down this road before. In 1995 and 1996, we
    had high prices and a new Congressional majority who didn't like farm
    programs and wanted to cut the deficit. We passed a farm bill, Freedom
    to Farm, which saved a little money right away but we ended up spending
    a lot more when prices collapsed. The environment looks much similar
    now. These prices are not going to last forever and if we don't have an
    adequate safety net in place when prices fall we could screw up the one
    part of the economy that's actually working.
        One Title I program that is of particular concern to my
    constituents in Minnesota is the sugar program. With so much focus on
    the budget, it is important to note that this is a no cost program. The
    sugar program is working as it is supposed to, it is administered well
    and it is something we should not mess with.
        Of course, today's hearing is happening in a very uncertain budget
    climate. At this point, there is a lot of speculation about what will
    ultimately happen. I am hopeful that any cuts to agriculture are
    reasonable and fair compared to other parts of the budget.
        Again, I thank the Chairman for holding today's hearing and look
    forward to hearing from our witnesses.
                                     ______

       Prepared Statement of Hon. James P. McGovern, a Representative in
                          Congress from Massachusetts
        Mr. Nelson, I regret not being able to stay longer at the July 27th
    Subcommittee hearing but I had to leave early due to a scheduling
    conflict. I would like to make a few points that I feel are important
    to keep in mind as we move forward with our work on the next farm bill.
    I have several questions for you and I respectfully request a written
    response.
        On July 21st, I participated in the Subcommittee on Nutrition and
    Horticulture's audit hearing on Title IV Nutrition Programs. One area
    of discussion was eligibility requirements for receiving SNAP benefits,
    including income and asset limits. While I understand SNAP and other
    nutrition programs are administered by the Food and Nutrition Service,
    I am concerned that there is more focus on SNAP benefits and not enough
    on who is receiving farm subsidies.

       Can you tell me how much the average farmer earns per year?

       What is the maximum amount that a farmer can make and still
            be eligible for a Title I programs?

       Can you tell me what share of the annual taxable income does
            a direct payment constitute for the average farmer?

       Is it accurate to say that larger, wealthier farmers tend to
            receive larger benefits from Title I?

        Just for the sake of comparison, the most a family of four can make
    to be eligible to receive benefits under the SNAP program is $28,668.
    The average SNAP benefit is $2,724 per household per year.
        Next, I'd like to get a better sense of how your agency measures
    the accuracy of the benefits that you are paying.
        Over the course of the last few months, many of my colleagues who
    serve on this Committee continue to falsely claim that fraud, waste and
    abuse is rampant in the SNAP program. In fact, many of my colleagues
    continue to misstate the level of overpayments to SNAP recipients. It's
    important to correct the false statements and to state for the record
    that SNAP is not only one of the most efficiently run programs at USDA,
    is one of the most efficiently run programs in the federal government.
    In fact, SNAP error rates are at historic lows and are at levels unseen
    in both the public and private sectors.
        For example, in terms of SNAP oversight and measuring the accuracy
    of benefits paid, my understanding is that the states and federal
    government sample approximately 50,000 SNAP cases each year in order to
    develop a nationally and state-level representative sample of the
    caseload. Each case is reviewed by a state staffer who reviews every
    document in the case record, independent information about clients and
    re-interviews the SNAP client. The Federal Government then re-reviews a
    sample of the state sample in order to verify its accuracy. All states
    are measured against the same standard making it possible to compare
    states to each other and longitudinally. Errors are sorted into
    different categories: client caused and household caused. FNS also
    knows which aspect of the program was the source of the error, such as
    inaccurately calculating income or a certain deduction. Of course, this
    is just the quality control check at the end of a lengthy application
    and eligibility review process that thoroughly scrutinizes each
    household's eligibility.

       Would you please provide more information about how FSA
            measures the accuracy of Title I payments? I'd like to know how
            many cases are sampled, what level of review they undergo,
            whether there is a statistical audit of the accuracy, and where
            that information is published.

       What are the error rates in farm payments/subsides--i.e.,
            how many payments go to deceased farmers?

       What is the level of overpayments going to farmers?

        As we continue moving towards a reauthorization of the farm bill,
    it's important for Members and the public to know that there is a vast
    monetary difference in the amount of money going to wealthy farmers
    versus a poor family of four. It's critical that we not demagogue SNAP
    simply because it's doing the job it was designed to do and, at the
    same time, turn a blind eye to the way our farm payment system is
    structured.
        Thank you for taking the time to review my questions and I look
    forward to working with you and the FSA over the next several months.

        The Chairman. And with that, I now turn to our witness for
    his opening statement. Bruce Nelson, Administrator for Farm
    Service Agency, the floor is yours, sir.

    STATEMENT OF BRUCE NELSON, ADMINISTRATOR, FARM SERVICE AGENCY,
     U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.; ACCOMPANIED
        BY JUAN M. GARCIA, ACTING DEPUTY ADMINISTRATOR FOR FARM
                          PROGRAMS, FSA, USDA

        Mr. Nelson. Mr. Chairman, Ranking Member Boswell, and
    Members of the Subcommittee, thank you for the opportunity to
    discuss Title I and disaster assistance provisions associated
    with the 2008 Farm Bill. My name is Bruce Nelson. I am the
    Administrator of the Farm Service Agency. And I am joined here
    today by FSA Acting Deputy Administrator for Farm Programs,
    Juan Garcia. I would like to briefly address our efforts toward
    efficient and accurate implementation of these important
    programs.
        America's farmers and ranchers are the best in the world,
    providing food, fiber and fuel we depend on to grow our nation.
    Farmers drive our national economy and they are the nation's
    leading stewards of the environment. No matter where we live in
    this country all of us have a stake in the livelihoods of
    farmers.
        A farmer faces many risks inherent to this work. Prices can
    plummet or a natural disaster can destroy a farm. The farm
    safety net exists to help offset this uncertainty and when
    misfortune strikes to help a farmer get back on their feet.
        The Title I and disaster programs authorized under the farm
    bill, along with the farm loan programs I discussed in a recent
    hearing before your colleagues, are the primary tools that we
    use to help at FSA. FSA implements a wide variety of price
    support programs authorized under the 2008 Farm Bill. I
    included an update on these programs in my written testimony.
        One program of note is the Average Crop Revenue Election
    Program. We have worked hard to educate producers regarding
    ACRE, which is not only new but requires producers to do a good
    deal of background research. Those who have participated in a
    direct payment program for many years had to make a complex
    choice on ACRE, which was a major reason we saw modest sign-up
    numbers.
        These price support programs affect a very large number of
    producers. Last year FSA made seven million separate payments
    on Title I. That means one of our biggest responsibilities is
    to be sure we make payments quickly and accurately, and I take
    that responsibility very seriously.
        FSA has a variety of mechanisms in place to prevent
    improper or inaccurate payments. Even one improper payment is
    one too many and when we identify a potential error we address
    it.
        The disaster programs have also proven to be a very
    significant part of the safety net laid out in the 2008 Farm
    Bill. I am pleased to report that over the past 2 years FSA has
    fully implemented these disaster programs and delivered them in
    the field largely due to the commitment of our field staff and
    explaining and calculating complex new programs. Together with
    the 2008 Recovery Act, these programs have delivered more than
    $3 billion in assistance to more than 200,000 farmers and
    ranchers.
        Unlike the Title I programs and most other farm bill
    provisions FSA has implemented, authorization for these five
    major disaster programs is set to expire at the end of this
    fiscal year.
        Our biggest challenge in implementing both disaster and
    price support programs has been our aging IT infrastructure. We
    are very focused on the modernization and innovation of the
    delivery of agricultural systems program, our effort to
    streamline farm program delivery. We are complementing this
    work with an initiative to reduce crop reporting for farmers.
        Recently when I testified regarding farm loan programs I
    had the opportunity to point out the successes we have had with
    modernizing our farm loan delivery. Modernization of our farm
    programs as you know is just as important; it gives us the
    opportunity to serve farmers better and faster using new tools
    to create a more efficient government agency. I am committed to
    seeing these successes carried through on-farm perhaps as they
    have been with farm loans.
        Mr. Chairman, as we move forward toward development of the
    next farm bill I believe it is important that we approach this
    new legislation with an eye toward making a difference across
    rural America, for letting the needs of the American farmer
    drive our priorities.
        I would like to echo Secretary Vilsack's sentiments
    regarding our needs for the next farm bill. We stand ready to
    innovate and adapt in implementing a farm bill that best
    addresses current challenges in rural America and needs faced
    by our agricultural producers. I would ask you and your
    colleagues to identify priorities and let us know what those
    priorities are in the next farm bill. And I would ask that you
    give the USDA the flexibility and the resources to generate
    results.
        Finally, I ask that you work closely with FSA and with USDA
    to make sure we are accountable for getting the job done. My
    team and I at FSA look forward to working with you as this
    process takes hold.
        Mr. Chairman, this concludes my statement, and I would be
    happy to try to provide answers to your questions now or any
    time in the future. Thank you very much.
        [The prepared statement of Mr. Nelson follows:]

    Prepared Statement of Bruce Nelson, Administrator, Farm Service Agency,
                U.S. Department of Agriculture, Washington, D.C.
        Mr. Chairman, Ranking Member, and Members of the Subcommittee,
    thank you for the opportunity to discuss Title I and disaster
    assistance provisions associated with the Food, Conservation, and
    Energy Act of 2008 (2008 Farm Bill). These programs, together with the
    Federal crop insurance program, form the backbone of the farm safety
    net. This hearing provides an opportunity to reflect on the performance
    of these programs under the 2008 Farm Bill, while thinking ahead to the
    upcoming 2012 debate.
        Title I is very broad and covers not only our ``traditional''
    commodity programs, but also the new Average Crop Revenue Election
    (ACRE) program, as well as dairy, sugar, and many other provisions.
    Disaster assistance programs are covered in Titles XII and XV and
    complement the Title I provisions. After discussing our experience with
    these programs, I would like to address our efforts to modernize and
    ensure high-quality, cost-effective program delivery, which is
    benefiting producers and streamlining our internal operations.
    Direct and Counter-Cyclical Payment Program
        The Farm Service Agency (FSA) operates the direct and
    countercyclical payment program, which was first authorized by the 2002
    Farm Bill. Direct payments are made to producers with program crop base
    acres, and do not depend on the crop that is currently planted or on
    current yields or prices. A producer's payment is based on the farm's
    base acres associated with the crop, the farm's (fixed) program yield,
    and a fixed national payment rate established in statute. In total, FSA
    makes approximately $4.9 billion in direct payments annually,
    accounting for about 80 percent of Title I outlays in Fiscal Year (FY)
    2011.
        Like direct payments, countercyclical payments depend on base
    acres, but are made when market prices drop to levels that trigger
    payments. With grain and oilseed market prices at record, or near-
    record levels, countercyclical payments have been modest, and for FY
    2010 and 2011, only producers with cotton and peanut base acres have
    received benefit. FSA will issue about $131.8 million in
    countercyclical payments in FY 2011. In comparison, countercyclical
    payments totaled $4.4 billion in FY 2006 and $3.2 billion in FY 2007,
    when market prices averaged significantly lower.
    Average Crop Revenue Election (ACRE) Program
        ACRE was first authorized by the 2008 Farm Bill, and is based on
    revenue risk rather than price risk. It provides an alternative to
    traditional farm programs and depends on both state- and farm-level
    triggers. Both the state-level and farm-level triggers--which are in
    turn based on historical average yields and national average market
    prices--must be met before a producer receives a payment. Because it is
    an alternative to traditional programs, an ACRE participant forgoes
    countercyclical payments and incurs a 20 percent reduction in direct
    payments and a 30 percent reduction in marketing assistance loan rates
    for all commodities on the ACRE-enrolled farm. Once a farm is enrolled
    in ACRE, that farm is required to stay enrolled in ACRE throughout the
    duration of the 2008 Farm Bill (through 2012).
        Overall, ACRE participation has been strongest for corn, soybeans
    and wheat. In 2009, about 33 million acres of base acres were enrolled,
    including 13 million acres (16 percent) of corn base (over half of that
    total is in Illinois, Iowa, and Nebraska), and about 8 million acres
    (15 percent) of soybean base (Illinois and Iowa were again top states).
    Nearly 10 million acres of wheat base were enrolled in ACRE, about 13
    percent of the total enrolled wheat base. For wheat, expected net
    returns, combined with strong educational efforts, improved ACRE
    participation for the crop, particularly in Oklahoma (2.5 million acres
    enrolled) and North Dakota (1.6 million acres).
        The bulk of enrollment occurred in 2009, the first year of the
    program. An additional 1.2 million acres of base and 6,000 farms (not
    in the program in 2009) were enrolled in ACRE in 2010. In 2011, about
    2,600 more farms have enrolled in ACRE.
        Several reasons likely explain the relatively modest interest in
    this new program. ACRE requires producers to do a significant amount of
    ``homework'' to understand how it would work for their farms. Many
    producers have been participating in some form of direct payment since
    1996 with Production Flexibility Contract payments, and later the
    direct payment program. This is further complicated by operators'
    having to explain to landlords and, at times, bankers, how expected
    ACRE net returns compare to net returns under the traditional programs.
    According to statute, ACRE participation is locked in for a farm
    throughout the remainder of the 2008 Farm Bill once that farm is
    enrolled in ACRE. Because of market uncertainties and without a clear
    understanding of this new program, most producers hesitated to commit
    their farms to a multi-year ACRE agreement. Basically, producers found
    themselves trading off the certainty of existing direct payments with
    the uncertainty of ACRE payouts.
        For the 2009 crop year, about $446.6 million in ACRE payments were
    made. Wheat producers (who experienced both low prices and yield
    losses) accounted for about $310 million of that total, with an
    estimated $100 million paid for corn, $20 million for barley, $10
    million for sunflower seed, and small amounts for several other crops.
    Oklahoma, Washington, Illinois, South Dakota, North Dakota, and Idaho
    received about 80 percent of the payments.
        Because the magnitude of ACRE payments are determined by season
    average prices in any given year, there is a significant time lag
    between the start of a crop year and the issuance of payments. Further,
    the 2008 Farm Bill mandates that payments cannot be made until after
    October 1 of the calendar year following the calendar year of the
    harvest. We expect 2010 crop year payments to total about $24 million
    in FY 2012.
    Marketing Assistance Loans
        Marketing assistance loans provide producers with interim financing
    at harvest time to meet cash flow needs without having to sell their
    commodities. The harvested commodity is used as collateral for the
    loan. The value of marketing assistance loans made totaled about $7
    billion in FY 2011. Market loan repayment provisions specify, under
    certain circumstances, that producers may repay loans at less than
    principal plus accrued interest and other charges.
        Alternatively, producers can apply for a loan deficiency payment in
    lieu of securing a loan. Similar to the situation for countercyclical
    payments, high market prices have greatly reduced marketing loan
    benefits, which are expected to total less than $50 million in FY 2011.
    Ensuring Compliance with Eligibility Requirements
        Each year, FSA makes about seven million separate payments to
    farmers and ranchers. The vast majority of payments are made quickly
    and accurately. Over the past 2 years, FSA has taken a variety of
    actions to help identify and further limit the occurrence of improper
    payments.
        The 2008 Farm Bill redefined eligibility requirements for DCP,
    ACRE, and certain other programs by lowering the average gross income
    (AGI) limit to $750,000 for on-farm income and to $500,000 for non-farm
    income from the previous cap of $2.5 million for all income. To ensure
    that only those participants who comply with AGI requirements receive
    specified farm program benefits, FSA entered into an agreement with the
    Internal Revenue Service (IRS). With the written consent of the program
    participant, the IRS performs a series of calculations using tax return
    data to determine a producer's average AGI values and compares those
    values with the AGI limits. IRS then provides to FSA a report that
    indicates whether or not the participant appears to meet or exceed each
    of the average AGI limitations. AGI compliance reviews for FY 2009 and
    2010 are still underway and we look forward to being able to soon
    verify that producers are fully compliant with the law.
        The 2008 Farm Bill also requires that FSA reconcile data with the
    Social Security Administration (SSA) to address concerns regarding
    payments to deceased persons. Before the 2008 Farm Bill was enacted,
    FSA started a data-matching process that compares program payment
    information to the SSA ``death master file,'' starting with payments
    issued in FY 2007. Review of the data-match report and information on
    file in FSA offices revealed that 121,527 payments in FY 2007, totaling
    $108 million, were disbursed on behalf of deceased persons. However,
    relatively few of these payments warranted further action. The vast
    majority of the payments identified as issued to deceased producers
    were in fact earned or requested prior to death. If a producer is
    enrolled in a program and is due a payment and the producer passes away
    during that year, the payment will be issued to the estate of the
    deceased person. USDA issued a regulation in late 2010 making explicit
    that payments will not be made on behalf of a deceased person unless
    the payment was earned by that person while alive and was requested by
    that person or their authorized representative before or after their
    death.
    Planting Flexibility, 10-Acre Base Provisions
        We recently delivered two reports to Congress mandated by the 2008
    Farm Bill--one on the impacts of the Planting Transferability Pilot
    Program (PTPP) and the other on the effects of provisions eliminating
    payments to FSA farms with 10 or fewer base acres. The Economic
    Research Service provided substantial assistance with these reports,
    which we greatly appreciate.
        PTPP, first authorized in the 2008 Farm Bill, relaxes the planting
    restrictions, in certain FSA programs, placed on vegetables destined
    for processing, and is available in seven upper Midwestern States. PTPP
    emerged in response to claims by Midwestern vegetable processors that
    access to vegetables used for producing pickles, tomato paste, and
    canned beans, among other foods, has been constrained by statutory
    planting restrictions. These statutory fruit and vegetable planting
    restrictions date back to 1990, and were put in place to address
    concerns expressed by the produce sector that payments to farms with
    base acres planted to fruits and vegetables could lead to a significant
    decline in prices, which would be unfair to a sector that received
    relatively modest government support. Prior to PTPP, fruit and
    vegetables could be grown on base acreage if the farm has a history of
    planting fruit and vegetables. In these cases, payments are reduced
    acre-for-acre for each acre of fruit and vegetables planted. PTPP
    places farms with no history of planting fruit and vegetables on the
    same footing as those with a planting history for the select processing
    vegetables. Without PTPP, participating farms with no planting history
    would receive a far greater penalty.
        FSA data for 2009 indicate that 10,215 acres were planted under
    PTPP, about 14 percent of the 75,000 allowable acres in the statute and
    a small share of total processing vegetable acreage. One hundred and
    fifty-five farms participated, with Illinois, Indiana, and Minnesota
    accounting for approximately 85 percent of the farms and acres. Several
    reasons explain the relatively low participation. Stagnant market
    demand and producers' flexibility to expand processing vegetable
    production without PTPP are major reasons. For growers to expand
    acreage, processors must offer attractive contract prices. Growers and
    processors, though, are very well aware that long-run demand for
    processing vegetables is stagnant or declining, and that net returns to
    other crops are often more attractive. Even if markets were more
    favorable, availability of non-base acres and a producer's prior
    vegetable planting history on base acres often provide sufficient
    acreage for expanded plantings.
        Regarding the 10-acre base (base-10) analysis, the 2008 Farm Bill
    eliminates DCP and ACRE payments to FSA farms with 10 or fewer base
    acres. Farms classified as ``limited resource'' and ``socially
    disadvantaged'' are exempt from this provision. About 371,000 FSA
    farms, out of 2.2 million farms with base acres, became ineligible for
    payments as a result of the provision. The dollar amount of payments
    prohibited was $29.1 million, compared to approximately $5.9 billion
    total DCP and ACRE payments in 2009, since the affected farms control
    only 1.6 million, or 0.6 percent, of total base acres. However, the
    actual savings was likely smaller, since not all operators of FSA farms
    enroll in commodity programs in a given year. In 2008, prior to
    implementation of the provision, just 40 percent of base-10 FSA farms
    enrolled in the DCP program. Operators affected by the provision would
    forgo an average of $79 per farm in 2009, compared with the average
    DCP/ACRE payment across all FSA farms of $2,620. For farmers choosing
    not to enroll, the transaction cost of enrolling may outweigh the
    benefits.
        Applying a 40 percent enrollment rate to 2009 data, there are an
    estimated 148,400 farms who no longer receive $11.7 million in
    payments. The administrative cost savings are another estimated $1.5
    million, for a total savings of $13.2 million per year.
        The base-10 provision had little impact in the Corn Belt and Great
    Plains, where FSA farm sizes are relatively large. In contrast, regions
    along or near the East Coast tend to have a high proportion of farms
    with small base acre holdings and have been more affected. For example,
    in the Eastern Upland and Southern Seaboard regions, 35 and 28 percent
    of FSA farms, respectively, became ineligible under the base-10
    provision in 2009.
    Supplemental Revenue Assistance Payments (SURE) Program
        Title XII of the 2008 Farm Bill contains the SURE program, which
    provides assistance to crop producers for eligible losses in times of
    natural disasters. To be eligible for SURE (or any other 2008 Farm Bill
    disaster program except for the Livestock Indemnity Program), producers
    must have Federal crop insurance or Noninsured Crop Disaster Assistance
    Program (NAP) coverage on all their crops and be located in a county
    included in the geographic area covered by a natural disaster
    declaration issued by the USDA Secretary. The Secretarial disaster
    designation is not required if a farmer can prove a whole farm loss of
    more than 50 percent of normal, including farming operations across
    county or state lines.
        As of July 12, 2011, payments for 2008 and 2009 crop losses to date
    total more than $2.6 billion. (Of this amount, about $0.8 billion can
    be attributed to an increase in benefits mandated under the American
    Recovery and Reinvestment Act.) Major recipient states include North
    Dakota ($358 million), Texas ($349 million), and Iowa ($289 million),
    which account for 40 percent of the total. Although these states have
    been key beneficiaries, SURE payments have been critical to helping
    producers in many other states. Twenty-seven states have received over
    $10 million since the inception of SURE.
        SURE differs from previous disaster programs in that SURE losses
    and revenues are calculated based on all of a producer's land,
    including multiple farms combined, compared to ad hoc disaster program
    calculations made on a crop-by-crop basis. As a result of the whole-
    farm focus, a county may receive a Secretarial disaster designation,
    but few producers may be eligible for SURE payments. SURE's whole-farm
    nature and the number of variables used in the calculations make the
    program quite complex.
        A significant lag exists between the timing of crop loss and
    receipt of SURE payment to allow for the calculation of actual farm
    revenue. Farm revenue depends on season average prices reported by
    USDA's National Agricultural Statistics Service, which are usually
    released 13 months after the start of the crop year. Actual farm
    revenue also depends on other data which are not available until well
    after a crop loss occurs, including marketing loan benefits, ACRE
    payments, crop insurance indemnities, and other payments. Producers
    have until July 29, 2011, to apply for assistance for 2009 crop losses
    under SURE. To date, payments for 2009 losses are approximately $465
    million; however, producers have until July 29, 2011, to apply for
    assistance for 2009 crop losses under SURE.
    Other Disaster Programs
        The 2008 Farm Bill also authorizes disaster assistance programs for
    livestock and trees. These programs include the Livestock Indemnity
    Program (LIP), the Livestock Forage Disaster Program (LFP), the
    Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish
    Program (ELAP), and the Tree Assistance Program (TAP).
        The Livestock Indemnity Program (LIP) provides assistance to
    producers who lose livestock due to natural disaster. For 2008-10
    losses, about $110 million has been paid out under LIP as of July 12,
    2011. LIP payments are made for livestock losses (death) above normal
    mortality rates at fixed payment rates per animal. Accordingly, LIP
    payments can be issued soon after a qualifying loss occurs to help
    producers rebuild herds and undertake other activities. These payments
    were particularly helpful to ranchers whose livestock were lost during
    major blizzards in the Northern Plains, as well as during extended heat
    in many Midwestern states during the summer of 2009. Major LIP
    recipient states include South Dakota ($30 million to date) and North
    Dakota ($20 million to date).
        The Livestock Forage Disaster Program (LFP) compensates livestock
    producers for grazing losses due to drought. LFP has provided $380
    million as of July 12, 2011 to ranchers affected by drought. LFP
    payments can typically be made within a few weeks of a county
    qualifying for assistance, which has been particularly helpful to
    ranchers during severe drought events. The major LFP recipient states
    are those that have suffered significant drought losses such as Texas
    ($155 million), North Dakota ($28 million), California ($26 million),
    and Georgia ($18 million).
        The Emergency Assistance for Livestock, Honeybees, and Farm-Raised
    Fish Program (ELAP) provides funds for losses that are not covered by
    other disaster programs. ELAP provides assistance for those livestock
    losses that are not covered by LIP or LFP. Funding is limited by
    statute to $50 million per calendar year. Of the $29 million disbursed
    to date for 2008-10 losses, primary recipient states include South
    Dakota (more than $4 million), Florida ($4 million), and California ($3
    million). ELAP has provided substantial assistance to beekeepers whose
    bees have suffered from Colony Collapse Disorder.
        The Tree Assistance Program (TAP) provides assistance to replace or
    rehabilitate trees, bushes and vines lost or damaged due to natural
    disasters. To date, TAP payments for 2008-10 losses have totaled nearly
    $9 million.
        In addition, the Noninsured Crop Disaster Assistance Program (NAP)
    provides financial assistance to producers of crops where crop
    insurance is not available and when low yields, loss of inventory, or
    prevented planting occur due to natural disasters. NAP payments for
    2008-10 losses have totaled $210 million.
        Per the 2008 Farm Bill, losses incurred under SURE, LIP, LFP, ELAP,
    and TAP are not covered beyond September 30, 2011. Among the disaster
    assistance programs, only NAP losses will be covered beyond September
    30, 2011. In contrast, authority for Title I programs discussed in this
    testimony extend through the 2012 crop year.
    Sugar
        The sugar program has supported grower returns from raising
    sugarcane and sugarbeets at minimal Federal cost since it was
    established in 1981. The sugar program has been a no cost program
    during the tenure of the 2008 Farm bill due to program operation and a
    tight sugar market in the United States and throughout the world. Cane
    and beet growers are supported by several programs that first establish
    a level of support, then provide USDA with supply controls tools to
    maintain the support level. The Sugar Price Support Loan Program
    establishes the support level by providing nonrecourse loans to
    processors of domestically grown sugarcane and sugarbeets based on loan
    rates mandated in farm bills. If market returns are lower than loan
    proceeds at the time of loan maturity, sugarbeet and sugarcane
    processors can fully satisfy their loan obligations by forfeiting sugar
    loan collateral to the Commodity Credit Corporation (CCC). Since sugar
    producers can always receive at least the loan proceeds from their
    crop, the loan rate acts as a floor on the market price of domestic
    sugar. The Price Support Loan Program also provides the beet and cane
    mills the financing to pay beet and cane growers for their crops long
    before they receive the revenue from the sale of their sugar.
        To avoid Federal costs, the farm bill includes tools that permit
    USDA to manage domestic supply so that domestic sugar prices are higher
    than the support price, hence, eliminating forfeiture costs. Domestic
    supply is limited through (1) the Flexible Marketing Allotments for
    Sugar Program, which provides limits for the quantity of sugar that
    domestic sugarbeet and sugarcane processors can market; (2) the
    administration of Tariff Rate Quotas (TRQ) that limit foreign sugar
    imports at the low tier tariff; and (3) a new program, the Feedstock
    Flexibility Program for Bioenergy Producers (authorized under Title IX
    of the 2008 Farm Bill), which requires USDA to purchase expected
    surplus sugar in the marketplace and sell it to producers of bioenergy
    to prevent loan forfeitures under the Price Support Loan Program.
        The enactment of the 2008 Farm Bill coincided with full
    implementation of the North American Free Trade Agreement (NAFTA),
    which allows sweetener trade between the U.S. and Mexico without a
    tariff. Before the 2008 Farm Bill, analysts expected that the U.S.
    would increase shipments of High Fructose Corn Syrup (HFCS), a cheaper
    sweetener than sugar, to Mexico. This situation was expected to
    displace Mexican sugar, production of which was expected to expand in
    response to U.S. sugar support prices that were raised in the 2008 Farm
    Bill. Mexican sugar was expected to flow into the U.S., resulting in
    U.S. prices falling below the Federal price support level, threatening
    sugar forfeitures to the CCC and thereby requiring activation of CCC
    purchases of surplus sugar for sale to bioenergy producers under the
    Feedstock Flexibility Program.
        Compared to these expectations, U.S. sugar demand has increased
    significantly. In fact, greater Mexican imports did not saturate the
    U.S. market, but instead helped maintain adequate U.S. sugar supplies
    in response to the loss of refining capacity due to an explosion at the
    Savannah sugar refinery and a temporary reduction in beet sugar
    production. Even with increased Mexican imports, growing U.S. demand
    prompted USDA to increase the sugar import tariff-rate quota twice in
    both FY 2010 and FY 2011. Despite the almost doubling of sugar prices
    since 2008, sugar is increasingly used in the U.S. to replace other
    sweeteners in food products.
        The sugar market outlook in the near term remains tighter than
    expected in 2008 and USDA does not anticipate forfeitures of sugar to
    the CCC and the activation of the Feedstock Flexibility Program under
    the current Farm bill.
    Farm Storage Facility Loan (FSFL) Program
        The Farm Storage Facility Loan (FSFL) program ensures that eligible
    producers have adequate capacity to store their harvested production
    through low-interest financing that can be used to build a new storage
    facility, upgrade existing storage, or purchase handling equipment. The
    maximum amount that may be borrowed is $500,000 per structure under the
    2008 Farm Bill (increased from $100,000 under the re-establishment of
    FSFL in 2000 as authorized by the CCC Charter Act, and the repayment
    terms are for 7, 10, or 12 years (depending on the size of the loan).
    The 2008 Farm Bill also expanded eligibility for the FSFL program and,
    in addition to grains, low-interest loans are now available for biomass
    and hay facilities as well as cold storage for fruits and vegetables.
        Interest in the FSFL program has increased in recent years;
    applications have increased from 1,717 in FY 2005 to 3,961 in Fiscal
    Year 2010. In FY 2006, the CCC made nearly $100 million in loans, while
    in FY 2010, loans exceeded $296 million. Much of the increased interest
    is on the part of corn producers who store the commodity for delivery
    at a later date to a nearby ethanol plant. Fruit and vegetable growers'
    interest in FSFLs for cold storage is relatively low at this time, and
    moderate interest exists for hay FSFLs.
    Reimbursement Transportation Cost Payment for Geographically
            Disadvantaged Farmers and Ranchers (RTCP) Program
        The RTCP program provides assistance to geographically
    disadvantaged farmers and ranchers in Hawaii, Alaska, and insular areas
    (Guam, American Samoa, Commonwealth of Puerto Rico, Commonwealth of the
    Northern Mariana Islands, Federated States of Micronesia, Republic of
    the Marshall Islands, Republic of Palau, and the Virgin Islands of the
    United States). The program reimburses producers for a portion of the
    transportation cost of their agricultural commodity, or of inputs used
    to produce an agricultural commodity during a fiscal year. Under RTCP
    transportation costs of inputs used to produce an agricultural
    commodity include, but are not limited to, air freight, ocean freight,
    and land freight of chemicals, feed, fertilizer, fuel, seeds, plants,
    supplies, equipment parts, and other inputs as determined.
        This program benefits farms and ranches in geographically
    disadvantaged areas of the U.S. Signup for 2010 RTCP program began Aug.
    2, 2010 and ended on Sept. 10, 2010. Distribution of payments for 2010
    RTCP began on July 20, 2011. In FY 2010, 1,545 geographically
    disadvantaged farmers and ranchers applied to participate in the
    program, and more are expected with the FY 2011 RTCP signup beginning
    July 25, 2011.
    Acreage Crop Reporting Streamlining Initiative (ACRSI)
        FSA requires that producers participating in any Title I program
    report all the cropland acreage on their farm each year to their local
    office. In field hearings, we repeatedly heard from producers that they
    were dismayed by the necessity to report acreage and production data to
    multiple agencies (not only FSA, but also the Risk Management Agency
    and the National Agricultural Statistics Service). To address these
    concerns, we have initiated the Acreage Crop Reporting Streamlining
    Initiative (ACRSI), a system which allows producers to report their
    acreage data only once to USDA.
        We anticipate piloting this effort in four counties in Kansas in
    fall 2011 for 2012 crop wheat plantings. Feedback from this pilot will
    help us move this project forward to a nationwide scale. Over time, our
    ACRSI project will be leveraged to support our ``Modernize and Innovate
    the Delivery of Agricultural Systems'' (MIDAS) effort, which I will
    turn to next.
    MIDAS
        FSA has relied on aging technology which was installed in the mid-
    1980's, as well as segmented web-based IT systems that have created
    inefficiencies and threatened the delivery of Title I benefits. To
    address these issues, FSA has invested in the Modernize and Innovate
    the Delivery of Agricultural Systems (MIDAS) program. MIDAS is an
    integrated business solution based on enterprise resource planning
    (ERP) technology. MIDAS will modernize Farm Programs delivery and will
    provide comprehensive and robust processes and tools to simplify Title
    I, Title II, and disaster program service delivery and improve customer
    service for both agency employees and producers.
        Currently, MIDAS is developing the ``to-be'' global requirements,
    processes, and solution design. Over the longer term, MIDAS will be
    integrated with other initiatives, such as Geospatial Information
    Systems (GIS), the Department's Financial Management Modernization
    Initiative (FMMI), and the Enterprise Data Management (EDM) program.
    MIDAS has already improved service delivery by implementing
    recommendations from the USDA ``Listening Sessions'' and the FSA MIDAS
    Lean Six Sigma field office visits to improve processes. These efforts
    focused on modifying program forms and addressing web time out issues
    for web applications in high usage by field office employees, such as
    reconstitutions. As a result service delivery has been improved and
    opportunities for errors have been reduced.
        Full implementation of MIDAS, which would occur in FY 2014 assuming
    the program is fully funded, will result in improved business processes
    and service delivery to our producers, ranchers and farmers, and USDA
    employees that provide day-to-day service to our customers. Through
    MIDAS, we will be able to adapt to and implement new programs more
    rapidly, with the time between passage of new legislation and program
    delivery to producers substantially reduced. Producer information will
    be collected once, not multiple times for multiple programs or multiple
    times for multiple agencies (through integration of MIDAS with ACRSI).
    Benefits will also be realized internally within FSA. Systems
    integration will result in improved performance and more reliable
    reporting. In addition, the need for manual processes (such as data
    entry) will be greatly reduced. This work is very similar in scope to
    the modernization and streamlining of FSA's farm loan programs--through
    which the agency has realized significantly shorter processing times
    and more efficient service through online business processes.
        The MIDAS Project Office recently conducted a series of
    demonstrations for USDA management, FSA state and county offices, and
    others on the functionality of the ERP software solution. Based on
    initial feedback, the MIDAS demonstration was well received and state
    and county offices have re-confirmed that the software will meet the
    requirements of farm program delivery.
    Working Toward the Next Farm Bill
        Mr. Chairman, as we move forward toward development of the next
    farm bill, it is important that we approach this new legislation with
    an eye toward truly making a difference in the future of the lives of
    millions of rural Americans, while at the same time using scarce
    resources wisely. In the coming months, I look forward to providing
    answers to your questions and helping better frame and move the debate
    toward the topics and issues that are most important to our
    constituents.
        I am happy to respond to any questions. Thank you.

        The Chairman. Thank you, Mr. Nelson. Mr. Garcia, do you
    have an opening statement?
        Mr. Garcia. Good morning, Mr. Chairman. I do not have an
    additional statement at this time, just to thank you and the
    Committee Members for having us here today.
        The Chairman. All right, thank you very much, I appreciate
    that. The chair would remind Members that they will be
    recognized for questioning in order of seniority for Members
    who were here at the start of the hearing. After that Members
    will be recognized in order of arrival. I appreciate my
    colleagues' understanding in that regard.
        Also we have been joined by Mr. Ribble from Wisconsin. I
    ask unanimous consent that even though he is not a Member of
    the Subcommittee that he be permitted to join in the
    questioning of the witnesses. Without objection.
        Mr. Nelson, we made some changes in the 2008 Farm Bill with
    respect to AGI and how that impacts eligibility. You also have
    some agreements with the IRS as to how that gets tracked. There
    were some initial concerns about producers having to share too
    much information with FSA locally and that there are some work-
    arounds for that. Can you walk us through that? And also kind
    of answer that question that gets distorted in the paper, in
    the media a lot is that the bulk of these farm program support
    payments go to large corporations that don't really need it.
    And so if you could walk us through the AGI efforts and how you
    have seen that play out.
        Mr. Nelson. Well, I appreciate that question because as you
    are suggesting, there is a lot of information out there that
    isn't quite as accurate as it could be on this subject. The AGI
    limits that were established under the 2008 Farm Bill are that
    an individual producer can have up to $750,000 of on-farm
    adjusted gross income and $500,000 of off-farm adjusted gross
    income. USDA and FSA were tasked in the farm bill with deciding
    how best to try to ensure compliance with those AGI provisions,
    and basically it was a choice between having farmers bring
    their tax returns into our county offices around the country
    and have them do reviews, or the Department could work as we
    did and as we have now been implementing with the Internal
    Revenue Service on a data sharing process where producers
    authorize the Internal Revenue Service to data match against
    our USDA database. We basically get back an indication with a
    red flag or green flag whether the individual producer is in
    compliance or not. And I actually believe as a farmer, and my
    family has been on our place for about 100 years since my
    grandparents homesteaded, that it is a much preferable way to
    utilizing the Internal Revenue Service's capacity to assist us
    with this than to have farms and ranchers bring their tax
    returns down to local offices. And talking to our folks at
    least in Montana about this who work there, I think they are
    glad that it is being done this way as well.
        Now, I understand there are some things that--some glitches
    along the way. For example, one of the things that I ran into
    out in Montana is that producers had to put the address that
    was on their tax return on the form that was sent into the IRS
    or it might come back to them. And so it took some time and it
    is still taking some time to make sure that producers
    understand what it is that is required for the IRS to accept
    those forms.
        The Chairman. Mr. Nelson, does the IRS communicate directly
    with you or do they send the clearance to the producer and the
    producer brings in something from the IRS that says they are
    good to go?
        Mr. Nelson. As I understand it, Mr. Chairman, we get the
    indication back from the Internal Revenue Service. The good
    news is that after October 1 we are going to eliminate that
    form that producers have had to send in to the Internal Revenue
    Service and we are going to do that authorization as a part of
    their other sign-up papers. We think will be a lot better for
    the producers and ultimately a lot easier on our employees out
    there too. Some offices had had to deal with producers coming
    in saying, ``I don't know why the IRS didn't accept this.'' So
    moving to one form we think will be much better for everybody
    involved.
        The Chairman. Is the turn-around time with the IRS quick
    enough to be able to not delay payments to producers?
        Mr. Nelson. Mr. Garcia, I am going to let you talk about
    payments.
        The Chairman. Mr. Garcia, what is your experience in Texas
    on this style of doing it?
        Mr. Garcia. Well, of course, Mr. Chairman, the individual
    producers that certified to their AGI we will not delay
    payments because it is a certification. After that we will
    review that with the IRS, we will get information on those
    producers that appear questionable. It is very important to
    note that we do not receive any particular income tax
    information from any producer. If a producer that we obtain on
    that list does appear questionable, we will notify the producer
    and ask him to provide to the national office any particular
    information that he has, either IRS records or his statement
    from his Certified Public Accountant, to clear that.
        We want to provide the producer the best opportunity to
    prove to us that he is eligible based on those AGI provisions.
        The Chairman. All right. Thank you.
        Mr. Boswell, for 5 minutes, you are now recognized.
        Mr. Boswell. Thank you, Mr. Chairman. I would be happy to
    defer to Chairman Lucas if he would like to, at this time.
        Mr. Lucas. I appreciate that courtesy, Ranking Member
    Boswell. Thank you very much.
        Mr. Boswell. I will follow behind you.
        Mr. Lucas. Absolutely. Gentlemen, I have several questions.
    As the Chairman alluded to discussing the AGI issues, how many
    farmers have been flagged by the IRS as part of this process as
    having too high of an AGI to qualify?
        Mr. Garcia. Mr. Chairman, at the present time we do have a
    list in producers that we are looking at right now. We have
    sent some initial letters here a couple of months ago. We are
    in the process of sending some additional letters to producers
    to submit their information to us. We have quite a few
    producers that have not yet filed that form--I should not say
    that--they may have filed a form and there could have been some
    errors in filling out the form that are still questionable. We
    just obtained another report this month that we have forwarded
    to our county offices to check with those producers to ensure
    that they did receive a payment. Of course we also obtained
    those AGI forms producers that are getting payment with NRCS to
    the EQIP Program. So we are checking with NRCS to ensure that
    those producers did actually receive a payment. We are working
    on that particular listing and trying to resolve it as soon as
    possible.
        Mr. Lucas. So it is still a while before you can say how
    many farmers have been flagged by this procedure.
        Mr. Garcia. That is right.
        Mr. Lucas. Let's turn to the SURE Program for a moment, one
    of those things that does not have a baseline in the existing
    farm bill, and in a very tight budget as we all looked at these
    things. There have been comments out in the countryside about
    the complexities of signing up and, once you sign up, the
    length of time to receive a benefit when you qualify.
        Gentlemen, would you care to comment on the complexities of
    implementing SURE and what the time or period between
    qualifying and actual payments have been issued, those kind of
    underlying issues?
        Mr. Nelson. Yes, Mr. Chairman, that is a good question
    because I have heard from a lot of folks out in Montana about
    this over the last couple of years. The principal concern is
    with the timeliness of the payments, but it is also a matter of
    the complexity of the calculations that are hard for the folks
    in our county offices. As you know, there are factors within
    the SURE Program that basically dictate that we are not going
    to be able to make the payments until at least a year after the
    disaster occurred. And so this is something that we really look
    forward to working with you on because if we are going to have
    a good food safety net as you suggest out there, I think that
    we need to work on streamlining these provisions and we look
    forward to working with you on those.
        Again, I also think the complexity of the calculations are
    part of the factor here that we need to look at as well to try
    to make it not only easier for folks in our county offices but
    for producers to understand. I talked to farmers in Montana who
    have no idea that they might be eligible for a SURE payment,
    but we got them to go in and apply and sure enough they got a
    SURE payment.
        Mr. Lucas. This is particularly important in Mr. Garcia and
    my part of the world because we are in the most wicked of
    droughts in the Southwest. And literally while there was some
    wheat cut in the northern part of the southern plains there
    will be no row crops this summer. If the weather patterns don't
    change it will be extremely difficult to think that you can put
    a wheat crop in the ground this fall. So this issue is going to
    receive incredible attention in our home region. So if there
    are ways to address that and accelerate it, certainly the
    Committee wants to know. And as we--whether it is a late farm
    bill this year or under regular order my preference is next
    summer in writing the next farm bill, we are going to be left
    working so hard for every penny of baseline money that we have
    to maximize it. So I just ask you to focus on that and I would
    look forward to comments later on in the coming weeks and
    months on this topic.
        With that, I yield back my time and thank the Ranking
    Member for his courtesy.
        The Chairman. Mr. Boswell now for 5 minutes.
        Mr. Boswell. Thank you. I appreciate that discussion, even
    though my operation in southern Iowa we get some of those
    Chinook winds up there and I know something about droughts,
    Chairman Lucas, and I realize you are facing a real tough
    situation. So it will be interesting how this works.
        I would like for you, if you could, just give us some
    update on--you have the personnel to do what you need to do. We
    went through different cycles of that and software, your IT
    staff, where are you at in that part of it in trying to run an
    efficient operation in all the different areas across the
    country. Could you comment on that a little bit?
        Mr. Nelson. Well, thank you for that question because it
    gives me an opportunity to give a pat on the back, especially
    to the people out in our county offices who work very hard
    around the country doing the real work of this agency with
    farmers and ranchers every day, and they do a great job. And in
    2011 with the budget that we have for this fiscal year we are
    able to sustain our staffing levels, as well as our field
    operations. But with the Congressional appropriations process
    for the next fiscal year still incomplete, one thing is pretty
    clear and that is that we will likely have fewer dollars for
    operations in Fiscal Year 2012 than we did this year.
        Again, thanks to the belt tightening folks around the
    country in FSA, we have been able to continue to provide
    quality service to farmers and ranchers within this year's
    constrained overall funding level. In anticipation of what we
    might be facing for next year, I formed a state executive
    director workforce planning task force. And they are looking at
    ideas about how we tackle next year's budget. Our planning is
    also considering the potential for further offering of
    voluntary early retirements within the agency. The Department
    has authorized those for this fiscal year for all agencies,
    including the Farm Service Agency, and we did have a number of
    employees take us up on that offer when it was put out in the
    last month. And I believe the fact that a lot of folks in our
    county offices signed up for the early out is a sign of the
    stress out there in the county offices due to, among other
    things, the budget situation that we are facing in the future.
        So I give our folks terrific high marks for what they have
    been doing. We are looking ahead to the budget for next year,
    trying to plan ahead. And when we get the final numbers we will
    cross that bridge when we get there.
        Mr. Boswell. Just a little follow-up there. I know we had a
    lot of concern in days past about modernizing your computer
    system, the ACRSI we are operating while trying to move
    forward. How is that going? And where do we stand on the
    Modernize and Innovate the Delivery of Agriculture--the MIDAS
    program I guess we call it. Where do we stand on that?
        Mr. Nelson. Congressman, I appreciate the chance to talk
    about this. I will turn it over to my colleague, Mr. Garcia, in
    a minute here. I sat across the desk from virtually every
    county office employee in Montana, and I have seen how hard
    this transition from 1985 computer technology to the modern era
    is. I was privileged several weeks ago to be part of a
    demonstration of this MIDAS project up here. It is important to
    remember that the MIDAS project isn't just about hardware and
    software, that is a big part of it. But a big part of it as
    well is that we are looking at how we do business with FSA in
    order to try to figure out a way to streamline and operate more
    efficiency. We have a Lean Six Sigma business re-engineering
    process that is a key part of MIDAS.
        So look, this is really important for us to get done, as I
    said in my opening statement, because we need to have the same
    kind of efficiencies in our IT systems on the farm program side
    that we have in the farm loan program side. I take the GAO
    report that just came out very seriously, and I am working hard
    and I have already brought the FSA and USDA management teams
    together on this to make sure that we get this project done on
    time and on budget. It is too important for our employees and
    our county employees and farmers and ranchers.
        Mr. Boswell. So you think you are kind of on track?
        Mr. Nelson. We are on track and I am going to push hard if
    we are not on track to get on track.
        Mr. Boswell. Okay, my time is up. Thank you very much,
    thank you.
        The Chairman. I thank the gentleman. Austin Scott, for 5
    minutes.
        Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
    Gentlemen, I want to commend the people who worked at the local
    county offices in my State of Georgia, especially those in
    Turner County and Tift County that I know well. They are
    excellent people from the standpoint of their caliber of
    character and they are excellent employees for you and doing
    their job.
        I don't have a specific question as much as a comment that
    I would kind of like to get your input on. For any business and
    as we work to get this economy to recover it is access to
    capital and regulatory certainty that those businesses need to
    have the comfort to go out and invest and grow those
    businesses. When you add in commodity prices and the volatility
    that we see with commodity prices and the input prices for
    farming, where do you see us today with regard to the risk
    spectrum of investing in agriculture from the farmer's
    standpoint over the years?
        Mr. Nelson. Well, I think that you have brought up a great
    point because historically the principal risks in agriculture
    have been natural disasters and low prices. But you have
    brought up great points here that I think added substantially
    to that risk and put our producers in an increasingly
    vulnerable position out there. And that is the high cost of
    production. In 1975, you could plant and raise an acre of corn
    for $81. That cost today is $286 an acre. And those costs of
    production or trends of corn have been the same for wheat and
    soybeans and the other commodities. The capital investment
    required to get involved in agriculture just between 2002 and
    2008 for the crop production sector went up 77 percent. And in
    the first 9 months of this fiscal year alone the capital
    requirements in the crop production sector have gone up 9.5
    percent. So we created this safety net back in the thirties to
    try to make sure that we didn't ever jeopardize our food
    security in this country. It has been updated in every farm
    bill since. And we look forward to working with you to update
    it this time within what we know are going to be some pretty
    severe budget restraints.
        Mr. Austin Scott of Georgia. Any other comments, Mr.
    Garcia?
        Mr. Garcia. If I can add, Congressman, farm bill programs
    do provide risk management for our producers out there. If the
    prices fluctuate we do have a commodity loan program where they
    can place their commodity into the loan for a period of 9
    months. As prices go up they can repay the loan. Of course
    through crop insurance provisions, and then we have the SURE
    Program that complements crop insurance. The ACRE Program is
    another program where there is some risk management involved
    for those fluctuating prices. We do have those programs
    available that have helped our producers manage that risk.
        Mr. Austin Scott of Georgia. You have ongoing dialogue with
    the Environmental Protection Agency about the uncertainty that
    they create for the farmer and the agricultural community?
        Mr. Nelson. Well, I just would like to say that when I was
    here a few weeks ago talking along with my colleague Dave White
    from NRCS, we both emphasized that achieving environmental
    benefits, environmental protection through voluntary
    conservation programs at USDA is in our minds much preferable
    to the regulatory approach of other government agencies. And so
    I think that is an important thing to keep in mind as you
    approach the farm bill, that those investments in those
    conservation practices that help farmers comply with
    regulations from other government agencies, that they do so
    voluntarily and in a partnership with the government is a great
    way to go.
        Mr. Austin Scott of Georgia. I thank the gentleman. I
    apologize that I will be leaving before the end of the hearing,
    but I appreciate your time and your testimony.
        The Chairman. I thank the gentleman. Mr. Scott from
    Georgia.
        Mr. David Scott of Georgia. Thank you very much, Chairman
    Conaway. And I appreciate the hearing and welcome Mr. Nelson
    and Mr. Garcia to the Committee.
        I think it is no secret that farm incomes are historically
    volatile, they fluctuate widely and often unpredictable and
    quite frankly are as fickle as the weather. And yes, farm
    incomes are relatively high now, but they may not be tomorrow.
    It is the role of the farm bill's Title I programs to provide a
    buffer against these lean times.
        I mention that, Mr. Chairman, because cuts or drastic
    changes to eligibility requirements for these programs are not
    felt equally across all commodities. Different commodities have
    different economies of scale and input or operating costs. And
    so slapping a stringent one-size-fits-all income tax or
    slashing commodity support across the board just makes very
    little economic sense to me.
        We have to remember income does not always equal profit and
    this distinction is especially vital when your income has to be
    reinvested in your operations to keep it up and running.
        So Mr. Nelson, I want to ask you just a simple question
    here and I will forgive you in advance if you say you don't
    know the answer, but I want to get this out here. Mr. Nelson,
    do you know what is the average cost of a new cotton harvester?
        Mr. Nelson. One of the things that I am looking forward to
    in this position is learning about cotton and crops from other
    parts of the country, Congressman. And my friend Juan Garcia is
    going to take me down to Texas in a couple weeks and teach me.
    So I don't know. I am looking forward to finding out. I know
    what a combine costs for our farm back in Montana, about
    $350,000, as much as a really, really, really nice house in
    Montana.
        Mr. David Scott of Georgia. Well, last night in
    anticipation of this hearing I looked up the nearest I could
    find as to what a cotton harvester would cost a farmer. And it
    would cost roughly $600,000 to buy a new cotton harvester from
    John Deere. Not to toot my own horn or anything, but I have an
    MBA from the Wharton School of Finance, I have studied
    economics, I love economics, I try to get into it, but what I
    am not is a banker. So I may be missing something here, but let
    me ask you how on Earth is a farmer going to be able to
    convince a bank to finance the purchase of a machine like the
    cotton harvester which costs over a half million dollars so
    that they can sustain or expand their business when they cannot
    demonstrate a significant stable source of income? Can you
    explain that to me, Mr. Nelson? Do you have any thoughts on
    that?
        Mr. Nelson. What I can say is from my own experience with
    the bankers is that the first question that I always got asked
    when I went in to get our line of credit for our farm of the
    year is have you been to FSA and signed up for the programs?
    And do you have a crop insurance policy? So I think part of the
    answer is that it is the safety net that is created by
    Congress, working together with USDA, that can help give the
    bankers some confidence in making those loans. It is part of
    the answer, it is not the whole answer, because you have a cash
    flow, I found that out, but that is part of the answer. If
    there is a strong safety net there, then the lending
    institutions out there, whether it is commercial private
    lenders or FSA itself, have some basis for thinking farmers are
    going to make it when the tough years that inevitably will come
    along come along.
        Mr. Garcia?
        Mr. David Scott of Georgia. Very good answer.
        Mr. Garcia. Congressman, of course it is very difficult for
    a farmer to purchase a $600,000 cotton harvester out there and
    be able to cash flow. They have to farm quite a few acres in
    order to make that work. I tell the story often with cotton
    prices the way they have been that if you go to the department
    store and pay $50 or $60 for a part of blue jeans, the farmers
    is only getting $0.90 out those $50 or $60 for that pair of
    blue jeans. So what we are seeing and what we have seen in the
    past because of the high cost of equipment, as you mentioned,
    is that many of our producers do not have the harvesting
    equipment and they rely on custom services in order to harvest
    their cotton. So it is very difficult with commercial lending
    the way it is right now. Thank you.
        Mr. David Scott of Georgia. I appreciate that, Mr.
    Chairman. I just wanted to conclude if I may in 10 seconds, and
    I know that America's farmers know we are having a hard time in
    Washington. I do want to make the statement we need to be
    sensitive as we look at these cuts we are engaged in a
    monumental debate how to straighten out our own economy and our
    spending, and I agree and the farmers agree with us that it
    must be done.
        I just want to make this concluding statement. If we as a
    nation want to remain the leader of the world in producing high
    quality, high volume food and fiber at stable prices, then we
    must not balance the budget on the backs of those farmers and
    producers who are engaged in that enterprise. The world's
    population is growing rapidly and soon we will have to feed and
    clothe billions more people, and so we need to be very
    sensitive to the needs of our farmers and cutting these Title I
    programs is just something we have to be careful with.
        Thank you for the time, Mr. Chairman.
        The Chairman. Yes, the gentleman's time has expired. Mr.
    Ribble, from Wisconsin for 5 minutes.
        Mr. Ribble. Thank you very much, Mr. Chairman. And I
    appreciate you allowing me to come this morning to this
    Subcommittee. I do have a couple comments I wanted to make, and
    Mr. Nelson and Mr. Garcia, thank you very much for being here.
    Mr. Nelson, it is good to see you.
        As you know, Title I of the farm bill has a general
    prohibition of growing fruits and vegetables on program acres.
    I understand that this is to ensure that the fresh produce
    industry is not hurt by produce production on subsidized farm
    program acres.
        The 2008 Farm Bill included a Planting Flexibility Pilot
    Program to allow crop producers in Midwestern states like
    Wisconsin to grow fruits and vegetables for processing on some
    of their acres. The USDA Economic Research Service report on
    the pilot concluded that it did not harm the fresh fruit, fresh
    produce industry.
        In your view, is this due to the requirement that fruits
    and vegetables could only be grown for processing?
        Mr. Nelson. Congressman, I don't know that I have an answer
    to your question as to the why, and so that is something that I
    would like a chance to look into.
        Mr. Ribble. Certainly.
        Mr. Nelson.----and get back to you on. I can report that
    there were a little over, as I recall, about--Mr. Garcia, how
    many acres, up to 75,000 acres that was allotted under that
    pilot.
        Mr. Garcia. Yes, we had the--Planting Flexibility Pilot
    Program that was initiated with the farm bill for seven
    Midwestern states, including Illinois, Iowa, Illinois and
    Minnesota, in which we offered that program to assist producers
    that did not have a planting history of fruits and vegetables.
    The way the farm bill program works is that in order for a
    producer to be able to plant fruits and vegetables on what we
    call base acres of a commodity they must either have a planting
    history or be able to double crop that vegetable with that
    other regular commodity.
        So we have had some success in that program, Congressman.
    We had around 150 farms that had participated on that. There is
    some consideration there as far as participation because of the
    demands in the prices of vegetables, but it is a program that
    is available and has produced some participation and we will
    look into it further to see if we can increase that.
        Mr. Ribble. I would appreciate that. I am curious if you
    think that additional planting flexibility allowed for fruits
    and vegetables under contract for processing, would you expect
    that to have an adverse affect on the fresh produce industry?
        Mr. Nelson. We would be happy to look into that. One other
    point that I want to make on that is that it appears that there
    were a number of producers who were able to use non-base acres
    to expand their vegetables production. So that in addition to
    the low demand out there for those particular vegetables are
    what we attributed to the relatively low participation rates at
    this point.
        But again, we will look into your question and get back to
    you.
        Mr. Ribble. I appreciate that.
        And just another kind of different direction here, we are
    expecting it is possible direct payments could be reduced from
    some of the budget pressures that the country is facing.
    Farmers who receive direct payments under current law are
    expected to comply with certain conservation practices. If
    direct payments are reduced or altogether eliminated, do you
    anticipate that producers would continue with various
    conservation practices, and would USDA recommend putting
    centers in place to ensure farmers keep their land production
    for future generations?
        Mr. Nelson. Well, we would look to work with you on
    provisions here, but I think it is important to note that all
    of the other FSA programs that producers might want to
    participate in, as well as the NRCS programs, require
    conservation compliance. So it will be up to individual
    producers whether they weigh the cost, the conservation
    compliance against the benefits. But again we would look
    forward to working with you on that issue as you discuss and
    debate that provision of the farm bill.
        Mr. Ribble. Thank you very much, and thank you, Mr.
    Chairman. I appreciate you letting me be here.
        The Chairman. The gentleman yields back. Ms. Sewell, from
    Alabama, for 5 minutes.
        Ms. Sewell. Thank you, Mr. Chairman, and I thank our
    witnesses for being here today.
        As you may all know, Alabama forest landowners suffered
    tremendous losses during the April tornados that caused such
    great devastation across my district. It has recently come to
    my attention that Alabama's nonindustrial private forest
    landowners will receive a little over $3 million from FSA's
    Emergency Forest Restoration Fund. As it currently stands, the
    funding is totally inadequate to meet our needs and the
    requirements of our state.
        What can be done to aid in the restoration of our forest,
    and in case of inadequate directed funding, and are there any
    FSA accounts that currently have a balance that those funds can
    be shifted to.
        Mr. Nelson. Congresswoman, as I recall the figures--and I
    don't have them with me today--but we are very close to the
    limit on the amount of funds that are available in that
    program, and I would be happy to have Mr. Garcia add to this to
    see if there are any other programs that can assist those
    producers. If those counties do have Secretarial natural
    disaster designations or Presidential designations, then they
    are eligible for emergency loan assistance under our farm loan
    program and there is a provision in there for physical losses
    as well that we need to look at and see whether that might
    apply in this particular situation.
        Mr. Garcia.
        Mr. Garcia. Congresswoman, as you mentioned, we have had
    several disasters throughout the United States. The Emergency
    Forest Restoration Program is a very important program that
    assists producers in rehabilitating their forests. Presently,
    the funding for that program is very challenging. We have
    obligated all our funding. We have several requests from some
    states because of all the disaster situations that have
    occurred. Presently, we do not have any other funding source to
    switch money around.
        The other program that also--that we face a challenge with
    right now is the Emergency Conservation Program, which also
    assists producers in rehabilitating conservation practices, and
    we offer cost-share and assistance for that, also.
        So with all the disasters that we had, the wildfires, the
    tornadoes, the flooding along the Mississippi and Missouri, it
    has posed a great challenge for us, and what we do as far as an
    agency, we allocate funding to certain counties, and as those
    funds are released back to us, for example, they are not used,
    then we can go ahead and approve other requests as they come
    in.
        Ms. Sewell. So right now there is not really any other
    source other than the emergency loan assistance that could aid
    farmers in restoring their forests?
        Mr. Nelson. Congresswoman, we will look into that and get
    back to you, but I believe that is unfortunately right now
    where we stand, but we will get back to you.
        Ms. Sewell. Thank you.
        Now, in these difficult budgetary times, it is very
    important that we analyze the effectiveness of our safety net
    programs, and I would really like to know your opinion as to
    what safety net programs under Title I have been the most
    effective and which ones you think could be better improved.
        Mr. Nelson. Well, I think rather than talk about individual
    programs, what I would like to talk about is an approach for
    your consideration as we look ahead to discussion about that
    title of the farm bill. Again, as I said, in every farm bill
    since the 1930s, the safety net has been updated, and we need
    to do that again. And what I would suggest is that the goal
    here and the priority ought to be that we cover both the crop
    and the livestock sector with our safety net; that we have
    effective safety net programs for all crops around the country;
    and that we treat all regions of the country equitably. Because
    as one of the Members pointed out earlier, there are a lot of
    differences in agriculture around the country, and one size
    doesn't fit all. And so we need to try to make sure when we put
    a safety net package together that it does take into
    consideration that things are very different in Mr. Garcia's
    State of Texas, in your home State of Alabama, and my home in
    Montana, and we have to have the flexibility in the
    administration of these programs to make them work every place.
        Ms. Sewell. Thank you.
        The Chairman. Thank you very much. Mrs. Schmidt for 5
    minutes.
        Mrs. Schmidt. Thank you, Mr. Chairman, and if these have
    already been asked, I apologize. I want to focus a little bit
    on the marketing assistance loans and the loan deficiency
    payments, if I might, and I understand if you don't know all
    these answers, that is okay. You can get back with us.
        But are there scenarios where producers make the use of
    marketing loans, even when the average marketing year price
    ends up exceeding those loan rates?
        Mr. Nelson. Congresswoman, from having taken marketing
    assistance loans on our farm, and my family has done it for
    years, the answer is yes. In anticipation of higher prices, if
    you need cash at harvest time and you have some grain in the
    bin and you can take a loan as that is not normally the optimal
    time in order to market your crop. The marketing assistance
    loans, the bulk of the volume of those are in December and in
    January, and that is clearly because producers are able to use
    the flexibility of that program to take income either at the
    end of a year for tax purposes or the beginning of a year for
    tax purposes.
        So the answer to your question is yes, but it is because it
    buys producers time, in particular if they believe that the
    market is trending up but they need cash at that point.
        Mrs. Schmidt. Thank you. Has the Marketing Assistance Loan
    Program created any unusual market distortions between crops or
    among various classes of a particular commodity? For example,
    USDA has issued loan rates for durum wheat at levels
    significantly higher than other wheat classes, and has that
    affected outlays?
        Mr. Nelson. We would like to look into that a little bit,
    the issue of market distortions, and get back to you, if we
    could for the record, Congresswoman.
        Mrs. Schmidt. Thank you. After the 2008 Farm Bill, the USDA
    began issuing a 30 day posted county price and an alternate
    price. Has that made a difference in the operation of the
    program, and would there be changes you might consider for the
    future or recommend to Congress?
        Now is your chance to give us some recommendations.
        Mr. Garcia. Well, I am trying to think of how to answer
    this. The 30 day posted county price is still in effect, and
    those are the prices, of course, that producers use to
    determine (if they do have their commodity in the loan) when
    they want to take it out of loan. Of course, if you have a
    producer that has a commodity loan, whether it be warehouse
    stored or farm stored, they have to have the market for it.
    They have to have a buyer. So those posted county prices are
    used both by the producer and, of course, the buyers of the
    commodity, and we do have those posted on our website so
    producers are able to look at those particular prices on a
    daily basis. If they are also dealing with their elevator, the
    elevators could look at those on a daily basis and could
    determine that, especially, when to market that commodity and
    get the best price available.
        Mrs. Schmidt. Okay. And is there anything you would like to
    change with the program or improve with the program?
        Mr. Garcia. It is probably something that we will have to
    look at.
        Mrs. Schmidt. You will get back to us?
        Mr. Garcia. I am sorry, it is something we will have to
    look at as we look at the farm bill negotiations for this
    upcoming farm bill.
        Mrs. Schmidt. All right. And ACRE was a new program that
    was brought out in the 2008 Farm Bill and the sign-up generally
    for ACRE programs was considerably lower than anticipated. To
    what do you attribute that response? And you have indicated
    there are regional disparities in the sign-up. But we have also
    heard of some of the counties being particularly well
    represented with ACRE participants due to activity from the
    FSA, and do you think that has enabled the bump-up in it, and
    do you see any changes or improvements to that?
        Mr. Nelson. Congresswoman, I had, right before I came back
    to work for FSA in the summer of 2009, a chance to go back to
    my hometown of Fort Benton, Montana, to an FSA meeting about
    the ACRE program. Chouteau County is the largest wheat
    producing county in the state. There are about 115 producers
    there, most of whom I grew up with and farmed with over the
    years. And the principal reasons that I got out of that and I
    have gotten since for the ACRE sign-up numbers being lower than
    anticipated were, first of all, it was an unknown. For about 13
    years at that point with the production flexibility payments
    and then direct contract payments, producers had been able to
    count on a fixed amount of money, and this was something where
    there was risk as to whether they would make as much as they
    had historically made or not.
        Second thing was, is summertime is a bad time for farmers
    to have to make decisions like this. I mean----
        Mrs. Schmidt. Good point.
        Mr. Nelson. Yes, it is the last thing that producers want
    to be doing is be in our offices or having to make major
    financial decisions about their farming operation when they
    know they ought to be out on a tractor or combine or swather or
    fixing fence.
        And the third thing is at that meeting is a lot of us
    remember the late nineties when prices went down precipitously
    and we all had a lot of LDP payments for the next few years,
    and so there was some concern about the 30 percent reduction in
    the market loan rate as well. I have heard those kind of
    concerns echoed from other producers since, and I would
    attribute that largely, at least in our part of the country, to
    why the sign-up wasn't higher.
        The Chairman. Thank you. The Ranking Member of the full
    Committee, Mr. Peterson, for 5 minutes.
        Mr. Peterson. Thank you, Mr. Chairman. Mr. Nelson, I wanted
    to try to figure out where we are at on this permanent disaster
    program. It is like 2 years after it happened before you can
    actually figure out how much it is, right? I mean, it is--the
    way it is set up, it takes you a long time to figure out the
    actual loss. So at this point you don't even know what you have
    spent for 2010, right?
        Mr. Nelson. Congressman, that is correct because the sign-
    up for the 2010 SURE program actually ends this Friday July 29,
    2010?
        Mr. Peterson. Yes.
        Mr. Nelson. I am sorry, 2009. I was wrong, and so because
    of features within the program, we are looking forward to
    working with you to addressing because the timeliness of
    payments under this program are something that really need to
    be looked at.
        Mr. Peterson. Well, we were trying to deal with CBO and so
    forth and that was part of the problem, but so what I am
    wondering about, is there a limitation of $4 billion or was
    that just the estimate of the baseline? Is there any limitation
    on the program other than it was only 4 years, so it runs out
    this September? So, these folks that have losses this year are
    going to be able to sign up at some point. Is there any kind of
    problem in terms of how much money that costs or was the only
    limitation we put on this just the 4 years and not any
    limitation on the amount that is spent?
        Mr. Nelson. Congressman, as I understand it, and I want to
    have the opportunity to clarify the answer here, it is my
    understanding that these disaster programs, SURE, LFP, TAP and
    LIP were only funded for the period 2008 through September 30
    of this year. There was an estimate on the baseline. You could
    spend whatever needed to be spent out of CCC to meet the
    obligations for the program for that period of time. The
    Emergency Livestock Assistance Program was the only one of the
    five that had a cap on it of $50 million a year.
        So I guess the upshot of my answer is that they are CCC
    funded through September 30 of this year but they are not part
    of the baseline.
        Mr. Peterson. Well, so if I understand how all this works,
    whatever it ends up costing will be the new baseline or I guess
    the baseline expires on this, that is right? This is not an
    ongoing baseline because it was only 4 years so it doesn't make
    any difference. So anyway, the money will be there for anybody
    that has losses through this September 30?
        Mr. Nelson. Correct.
        Mr. Peterson. With the exception of livestock, which may
    get capped or something?
        Mr. Nelson. The Emergency Livestock Assistance Program is
    the only one of the five that has a spending cap. We do have
    the authority to fund all approved applications for the other
    programs through September 30.
        Mr. Peterson. Right. Have you had requests or people
    talking to you about trying to do some kind of ad hoc disaster
    in addition to this?
        Mr. Nelson. I haven't had anybody talk to me about it, but
    I might not necessarily be the one that they would approach,
    Congressman.
        Mr. Peterson. You haven't heard any talk about it? Okay.
    Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. Mrs. Ellmers, from
    North Carolina, for 5 minutes.
        Mrs. Ellmers. Thank you, Mr. Chairman.
        Along the lines of getting just a baseline of where we are
    at, when you are talking with the farmers what are the programs
    that they say that they need the most? What is it that seems to
    be the biggest concern and the biggest focus?
        Mr. Nelson. Well, I can speak best from the part of the
    country that I know which may or may not represent the rest of
    the country, but the principal concern of producers back in
    Montana and our part of the Northern Great Plains are the
    safety net programs. We are a disaster prone region of the
    country. We are heavily participatory in Federal crop
    insurance, as well as FSA programs, and so I would say, again
    from the perspective of Montana and other Northern Great Plains
    States, that the safety net programs are the ones that the
    producers are the most concerned about.
        Mr. Garcia?
        Mr. Garcia. Well, Congresswoman, as far as the Southwest
    area and really throughout the nation, as Administrator Nelson
    mentioned, safety net programs are very important. We have many
    producers that do participate in the commodity loan program. As
    we talked earlier, that is an important program for them, and
    then also the permanent disaster programs, as Ranking Member
    Peterson was talking about, especially in this year where we
    have had so many disasters throughout the nation.
        The Livestock Forage Program has been very beneficial, in
    which we have been issuing payments this year for producers in
    the Sunbelt area, Texas, Oklahoma, Kansas, and now the drought
    is moving back east towards Missouri, Mississippi, Alabama, and
    that area. So those programs have been very important to our
    producers.
        Mrs. Ellmers. Along the lines of the commodity programs,
    given that most of the crops are experiencing high prices right
    now, how does that compare to previous years' prices?
        Mr. Nelson. Well, the programs that are--DCP is a fixed
    cost program, and that is our biggest program. The
    countercyclical payments have gone down substantially. We were
    making over $4 billion of payments just about 3, 4 years ago.
    Now we are down to a little over $140 million of
    countercyclical payments this year for just a couple of
    commodities. And so the high prices have helped there, but on
    the other hand, as Mr. Garcia is pointing out, we are looking
    at a big part of the country this year with tornados, floods, a
    drought that just keeps expanding, and an increasing impact on
    producers out there. And so I anticipate that we are going to
    see substantially higher participation in the safety net
    disaster programs this year than we have seen in the last
    couple of years.
        Mrs. Ellmers. And you mentioned the DCP programs as the
    biggest program that you have. Which of those programs are
    currently making payments to producers right now? I mean, is
    there one that seems to be the----
        Mr. Nelson. I think there are a couple of disaster programs
    that work particularly well. The Livestock Forage Program, for
    example, and the reason that that works well, I believe, is
    there is an automatic trigger tied to the national drought
    monitors. So when a county hits a certain ranking on the
    national drought monitor for X period of time they become
    eligible. The producers can come in and sign up, and again,
    because it is CCC funded, the producer doesn't have to wait for
    the payments like they do on other programs where there is
    limited funding like the Emergency Livestock Assistance
    Program. So that is one of the programs that I think is working
    well for producers right now.
        Livestock Indemnity Program is another one of the safety
    net programs because that is essentially triggered by a natural
    disaster that causes livestock losses. That is the trigger.
    Again, it is CCC funded, so the funds are available for
    producers.
        Mrs. Ellmers. Great. Thank you so much. I yield back the
    remainder of my time.
        The Chairman. The gentlelady yields back. Mrs. Hartzler
    from Missouri.
        Mrs. Hartzler. Thank you, Mr. Chairman. Hello.
        I just was wondering, we talked about direct payments a
    little bit. They are in the news once in a while here lately,
    and just wondered if you could give me sort of an idea of what
    percentage of farmers participate in the direct payments
    program right now.
        Mr. Garcia. Thank you for your question. If I can give you
    some figures on acres, if that might suffice, there is close to
    272 million acres of crop acreage bases in the United States
    that we have for particular commodity crops, cotton, grains,
    sorghum, soybeans, and so forth. Out of that, 222 million are
    enrolled in DCP. Now, I am giving you 2010 figures, Mrs.
    Hartzler.
        Mrs. Hartzler. Okay.
        Mr. Garcia. So and there are 35 million acres that are
    enrolled in the ACRE program in 2010. So we have around 14
    million acres of base that are not currently--that were not
    enrolled in 2010 for either DCP or the ACRE program. So a large
    percentage of the farms do participate in the direct and
    countercyclical program throughout the states.
        Mrs. Hartzler. In your opinion, what would be the impact on
    farmers if direct payments were to be done away with?
        Mr. Nelson. Congresswoman, we would like the opportunity to
    work with you on that during your discussion of the provisions
    of the farm bill.
        Mrs. Hartzler. I am not saying I am proposing it, by the
    way. I just want to clarify that. I just want some information.
        Mr. Nelson. What I would like to do is that there has been
    analysis done by USDA on who gets the payments and of different
    scenarios for the program, and we would be happy to provide
    those analyses to you for your consideration as you look at
    this program during the discussion of that provision of the
    farm bill.
        Mrs. Hartzler. I have read the FAPRI analysis of it and
    just interested in your hearing your perspective on that. Do
    you also have figures showing if cuts were made at different
    levels, the impacts of totally eliminating--I mean various cuts
    at different levels?
        Mr. Nelson. Congresswoman, I can't say for sure that all of
    that is covered in the analysis, but we will get you what we do
    have and we would be happy to follow up with you to see if we
    could get some more information for you.
        Mrs. Hartzler. Okay. Just some other sort of related
    questions. What are farmers' biggest concerns with respect to
    just program delivery right now, given your connection to
    producers in the field?
        Mr. Nelson. Well, again, I am only in a position really to
    speak for the part of the country that I come from at this
    point. Again, I think it is timeliness of payments of some of
    these programs because of the factors within the ACRE and SURE
    program, for example, that mean that it is at least a year
    later before we can begin making payments to producers under
    those provisions. I think that is especially of concern in
    disaster or emergency-related programs that we need to have a
    more timely mechanism for making payments, again, for those
    programs in particular.
        Mrs. Hartzler. Do you have some analysis of over say the
    past 10 years the impact that direct payments have had on the
    percentage of net farm income that they have had? Of course, it
    depends on the price. It depends on how your crops are doing.
    But I am just curious, some years, bad years, I would assume
    the direct payments make a large percentage of the income that
    would come in that year. Other years obviously not. So do you
    have a graph or something showing over time----
        Mr. Nelson. Congresswoman, yes, we do, and so--and again,
    we would be happy to provide that.
        Mrs. Hartzler. Okay. Great. Thank you very much. I yield
    back my time.
        The Chairman. The gentlelady yields back. Mr. Huelskamp, I
    apologize. I took you out of order but you are recognized for 5
    minutes. Sorry about that.
        Mr. Huelskamp. No problem, Mr. Chairman. Thank you. Good to
    be here. I have a few questions to follow up on Representative
    Hartzler's question about key programs in your mind.
        If Members of the Committee had to select one particular
    program as top priority, what would your recommendation be?
        Mr. Nelson. Again, Congressman, I am going to go back to my
    answer that we believe the safety net is critical and rather
    than comment on individual programs, again, I would like to
    talk about that as we work with you to craft the safety net and
    update the safety net that we look at making sure that we have
    both the livestock and the crop sectors covered, that we have
    all crops covered effectively, and that we treat all regions of
    the country equitably. If we keep those goals in mind within
    the budget constraints that we know we are all going to face,
    we look forward to again crafting a safety net that works for
    producers today.
        Mr. Huelskamp. And I appreciate that. That is difficult.
    The answer to the question for my producers is on the crop
    side. It is very clear it is about crop insurance, number one,
    without a doubt. I don't know if that varied or how much it
    varied across the country. One thing I would request is simply
    a list of the safety net programs, those you are considering
    safety net programs, and then everything else. That word gets
    thrown around a lot. I am new to Washington, and I want to know
    exactly what is in that category.
        Speaking of crop insurance, though, I was looking at farm
    prices in my home area of Dodge City this morning. Very nice if
    you had some to sell. Whole crop of wheat is selling at $1.40;
    corn, $7.25; soybeans, $13.16. My concern about a crop
    insurance program is it only deals with--it does not deal with
    the input costs, which are not on the board, and those are
    particularly higher and going higher. Is there any particular
    changes in the crop insurance program that you would suggest to
    deal with that aspect of the cost side versus the revenue?
        Mr. Nelson. Congressman, the crop insurance program is a
    little bit outside of our Farm Service Agency area, but what I
    would suggest is important on our side with respect to crop
    insurance is that we make sure that the SURE program, if it
    continues, is crafted to fit together with crop insurance to
    help fill the kind of gaps that you are talking about that crop
    insurance doesn't cover. That is what they are designed to do,
    is to work together, not be duplicative but to actually
    supplement and complement each other. I think with any
    dimension of the safety net but particularly the SURE program
    in particular, which is the biggest one relating to crops, that
    it is very important that consideration of any future version
    of it again be crafted to fit very closely together to cover
    the gaps that crop insurance doesn't cover.
        Mr. Huelskamp. And is crop insurance in your category of
    safety net programs?
        Mr. Nelson. As a farmer, it would be in my category.
        Mr. Huelskamp. Well, I am not worried about the farmer. I
    am worried about the agency.
        Mr. Nelson. I would have to say yes. It is a critical part
    of the safety net, but it is not the whole safety net.
        Mr. Huelskamp. Understood. The other question would be,
    again, on the revenue side, outside of government, do you have
    any analyses of the potential impact of the proposed free trade
    agreements and its impact on the actual cost to programs and
    the return to farmers?
        Mr. Nelson. You know, Congressman, what I would like to
    suggest on that is that we have our trade team at USDA come up
    and brief you on those issues. We would really look forward to
    that opportunity to do so for you and any other Members and
    staff that would like to get together on that. So that offer is
    on the table.
        Mr. Huelskamp. Thank you. I would love to take you up on
    that. I would also request as well, though, that certain other
    members of the Administration and Members of Congress certainly
    need to hear that briefing, and we can sit and talk about
    programs all day. But, if we can just sell more stuff and we
    got folks out there--we are losing markets every day by
    Washington, whoever's to blame, sitting around and letting
    those markets be taken over by our competitors, and we are
    losing not just today but in the future as well by our failure
    to move. And I am very frustrated by that. Whatever you can do
    and whatever the USDA can do to get that done, I mean, that
    makes this discussion a lot easier when we are able to solve
    that step.
        But I appreciate the responses and look forward to and
    would love to have you in my office to visit about that
    directly.
        Mr. Nelson. Thank you very much.
        The Chairman. The gentleman's time has expired. The
    gentleman from New York, Mr. Gibson, for 5 minutes.
        Mr. Gibson. Thank you very much, Mr. Chairman. I appreciate
    the panelists being here today.
        I represent a district in upstate New York. We have about a
    thousand farms, about half of them dairy, and this is a good
    time for the hundredweight price of milk, but there are
    challenges with input. I am curious if you have any analysis,
    if ethanol subsidies were reduced or eliminated, how would that
    impact the price per bushel?
        Mr. Nelson. Congressman, we are going to need to get back
    to you on that and I just want to make sure that I understand
    what you are talking about is whether or not ethanol subsidies
    and their effect on feed grain prices, the impact that they
    have had on the livestock sector?
        Mr. Gibson. That is correct. I am curious to know what
    analysis that you may have on the elasticity of price if
    these--if we reform the subsidies, various unspectrum
    degradation in terms of stepping them back, also an estimate on
    impact on the market if they were eliminated. And I look
    forward to a response for the record on that.
        Mr. Gibson. The other piece I just want to follow up, I am
    curious to know what your analysts or your subject matter
    experts, what ideas that you may have with regard to crop
    insurance reform. This is a topic that often comes up with my
    farmers, and I would like to be able to share with them the
    latest insight from your experts.
        Mr. Nelson. I am going to turn this over to Mr. Garcia
    because he is actually involved with a project that we are
    working on on crop reporting jointly with crop insurance, and
    let him take this one.
        Mr. Gibson. Thank you.
        Mr. Garcia. Congressman, of course, when we are talking
    about crop insurance reform, as the Administrator mentioned,
    the Farm Service Agency does collaborate with the Risk
    Management Agency, who is in charge of the crop insurance
    provision and we work with them very closely. And what we have
    been working with them on especially after this 2008 Farm Bill
    when the SURE program was approved, we have been working with
    Risk Management Agency to fully understand all the different
    types of policies that are available, whether it is a
    production policy or a revenue policy. We had to spend quite a
    bit of time learning those particular different policies to
    write our regulations for the SURE program.
        So it is very important that the Risk Management Agency and
    the producers talk to their insurance agencies. I do know that
    the crop insurance organizations do constantly have meetings
    throughout the year with their private insurance agents and ask
    for recommendations on how the particular policies should be
    changed.
        Now, the one thing that we are very excited about that we
    are working with the Risk Management Agency right now that will
    help our farmers tremendously, is that our producers will only
    file one acreage report. Right now the farmers have to file an
    acreage report with their private insurance agency and then
    another acreage report with the Farm Service Agency. So we are
    working on a project right now where producers would just file
    one time and we will use that acreage for both agencies.
        Mr. Gibson. Thank you. And I guess the last point, assess
    the EQIP program and your thoughts on perhaps the way forward
    there.
        Mr. Nelson. Well, the EQIP program is an NRCS program, and
    it is the premier conservation program in our CS office, and I
    think there has been a tremendous amount of good work done with
    that program over the years. This is more from an individual
    producer point of view than an FSA Administrator point of view.
    Originally, the program was set up so that it was only long-
    term contracts, and that was beneficial for producers that
    could afford to make the financial commitment to a long-term
    cost-share agreement under EQIP. I think they greatly improved
    the program a few years ago when they started offering annual
    practices, which I believe allows a lot more producers, again
    who aren't in a position to make long-term financial
    commitments to cost-share practices, to participate in that
    program. So I think that was a substantial improvement.
        We don't jointly administer the program within NRCS, but we
    do work closely with them on any number of other programs.
        Mr. Gibson. Thank you very much, and let me just say, Mr.
    Chairman, and I will turn it back, that it is actually one of
    the more popular programs back home. There are some folks who
    have a decided point of view that FSA perhaps could play a more
    active role in it going forward. Maybe we can collaborate on
    that going forward.
        Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. The gentleman yields
    back.
        Mr. Nelson, we want to thank you for being here today. I
    want to thank whoever your team put together the answers to our
    audit questionnaire. I am sure both of you slaved over it
    mightily, but somewhere in your system you put this together
    and thank you very much. It is very helpful to what we are
    trying to do here.
        Couple of quick this and that. In some of the responses,
    you talked about improper payment rates on the various
    programs. They appear to be really good, but what is the
    recovery experience with respect to going after those improper
    payments? Can you give us some sort of thought on how quickly
    the--or what your experience of getting money back had there
    been an improper payment?
        Mr. Nelson. Congressman, I am glad that we do have a chance
    to talk about that because it gives me the opportunity to say
    that FSA last year made seven million correct payments, and I
    think that that is important for the record, but we know with
    that many correct payments, as I said in my opening remarks,
    even one improper payment is one too many, and we find out when
    one may have been improper, we review it and we go back and
    determine whether or not it actually was improper. We have
    implemented a couple of things. We talked about the AGI checks
    with the Internal Revenue Service earlier, but in addition to
    that, four times a year, twice that required by Congress, we do
    check the death master file at the Social Security
    Administration to determine whether or not we are making
    improper payments to producers who have passed away. And again,
    that has been an important step forward, but I think it is
    important to note for the record as well that sometimes a
    payment to a producer who has passed away is a proper payment
    because we had a contract with that producer when they passed
    away and just like any other contract in this country, when
    somebody passes away, we make that payment to the estate.
        The Chairman. But you are actually experiencing
    recovering--the very few payments that are made improperly, you
    are experiencing recovery of those dollars?
        Mr. Nelson. I am sorry if I missed your point a little bit.
    We have pretty good experience with that, but it does involve
    getting in touch with the producer, and they do have appeal
    rights and so they have the opportunity to say, in front of
    first the agency and then the National Appeals Division, hey,
    that payment was proper. We also have the 90 day rule that has
    been in the statutes for quite some time that in some cases
    prevents us from going back and getting the money back from
    producers even if it is established----
        The Chairman. If you don't catch the improper payment
    within 90 days then----
        Mr. Nelson. In certain cases, sir.
        The Chairman. Let me ask you one other real quick one, Mr.
    Nelson. You talked earlier to one of the Members about capital
    cost increases from a certain period through today, 90 percent
    just in this year. What impact does land cost, and can you
    break out those increases by what land--increase in land prices
    have had in your numbers?
        Mr. Nelson. Congressman, I don't have that with me, but we
    would certainly be happy to try to provide that.
        The Chairman. Okay. All right. Mr. Scott, any final
    comments? All right.
        Well, again, gentlemen, thank you both for being here. Look
    forward to working with you in your new roles as leadership at
    FSA.
        Under the rules of the Committee, today's record of the
    hearing will remain open for 10 calendar days to receive
    additional material and supplementary written responses from
    the witnesses to any question posed by a Member.
        This hearing of the Subcommittee on General Farm
    Commodities and Risk Management is adjourned.
        [Whereupon, at 11:36 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                              Submitted Questions
    Response from Bruce Nelson, Administrator, Farm Service Agency, U.S.
            Department of Agriculture *
    ---------------------------------------------------------------------------
        * There was no response from the witness by the time this hearing
    went to press.
    ---------------------------------------------------------------------------
    Questions Submitted By Hon. Eric A. ``Rick'' Crawford, a Representative
            in Congress from Arkansas
        Question 1. Given the current make up of farm safety net programs,
    including the marketing loan, direct and countercyclical program, and
    ACRE do you think it is important for Congress to look at streamlining
    programs in the next farm bill? What would be the impact on your
    agency, the Farm Service Agency, If you were only implementing and
    administering streamlined programs? Would this improve your service and
    support to farmers, and if so how?
        Question 2. What has been the current enrollment level in ACRE
    across all crops and for rice specifically? What is your impression of
    why such a low enrollment level?
        Question 3. Of all the current safety net programs, can you rank
    them by degree of complexity and level of cost/resources to implement
    and administer?
                                     ______

          House Committee on Agriculture Farm Bill Audit Questionnaire
    1. Program Name
        Direct and Countercyclical Program (DCP).
    2. Subprograms/Department Initiatives
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    reauthorizes direct and countercyclical payments, with some changes,
    that were previously authorized under the Farm Security and Rural
    Investment Act of 2002 (2002 Farm Bill). FSA enters into annual
    contracts with agricultural producers to maintain base acres on
    participating farms. During the contract period, eligible land on the
    participating farm, may be planted to any commodity except fruits,
    vegetables (other than mung beans and pulse crops), and wild rice.
        FSA is responsible for overall implementation of DCP. Producers
    enroll and payments are initiated at the FSA County Office
    administratively designated for the farm.

        DCP Direct Payments:

        Direct payments are paid annually and are not based on producers'
    current production choices, but instead are tied to base acres and
    program yields. Direct payments do not provide an incentive to increase
    production of any particular crop and the payments support farm income
    without affecting producers' current production decisions.
        The 2008 Farm Bill continues the direct payments that began under
    the 2002 Farm Bill. Direct payment rates for the eligible DCP
    commodities are statutory and as follows:

       Wheat: $0.52 per bushel

       Corn: $0.28 per bushel

       Grain sorghum: $0.35 per bushel

       Barley: $0.24 per bushel

       Oats: $0.024 per bushel

       Upland cotton: $0.0667 per pound

       Rice, long grain: $2.35 per hundredweight

       Rice, medium/short grain: $2.35 per hundredweight

       Soybeans: $0.44 per bushel

       Other oilseeds: $0.80 per hundredweight

       Peanuts; $36 per ton

        For each commodity, the total direct payment for producers on a
    farm is determined by multiplying 83.3 percent for 2009 through 2011
    and 85 percent in 2008 and 2012 of the farm's base acreage times the
    farm's direct payment yield times the direct payment rate.

        Countercyclical Payments:

        Countercyclical payments provide support counter to the cycle of
    movement of market prices as part of a ``safety net'' in the event of
    low crop prices. Countercyclical payments for a commodity are only
    issued if in a given year, the effective price for a commodity is below
    the target price for the commodity. The countercyclical payment rate is
    the amount by which the target price of each commodity exceeds its
    effective price. The effective price for each commodity equals the
    direct payment rate plus the higher of:

       the national average market price received by producers
            during the marketing year as determined by the USDA Secretary,

       or the national loan rate for the commodity.

        Target prices, as provided by the 2008 Farm Bill, for each
    commodity are as follows:

    ------------------------------------------------------------------------
                   Crop                    2008         2009       2010-12
    ------------------------------------------------------------------------
    Wheat                                 $3.92/bu     $3.92/bu     $4.17/bu
    Corn                                  $2.63/bu     $2.63/bu     $2.63/bu
    Grain sorghum                         $2.57/bu     $2.57/bu     $2.63/bu
    Barley                                $2.24/bu     $2.24/bu     $2.63/bu
    Oats                                  $1.44/bu     $1.44/bu     $1.79/bu
    Upland cotton                       $0.7125/lb   $0.7125/lb   $0.7125/lb
    Rice, long grain                    $10.50/cwt   $10.50/cwt   $10.50/cwt
    Rice, medium/short grain            $10.50/cwt   $10.50/cwt   $10.50/cwt
    Soybeans                              $5.80/bu     $5.80/bu     $6.00/bu
    Other oilseeds                      $10.10/cwt   $10.10/cwt   $12.68/cwt
    Dry peas                                   (*)    $8.32/cwt    $8.32/cwt
    Lentils                                    (*)   $12.81/cwt   $12.81/cwt
    Chickpeas, small (Garbanzo bean,           (*)   $10.36/cwt   $10.36/cwt
     Desi)
    Chickpeas, large (Garbanzo bean,           (*)   $12.81/cwt   $12.81/cwt
     Kabuli)
    Peanuts                               $495/ton     $495/ton     $495/ton
    ------------------------------------------------------------------------
    * Not available.

    3. Brief History
        For crop years 2002 through 2007, pursuant to the 2002 Farm Bill
    (P.L. 107-171), wheat, corn, barley, grain sorghum, oats, upland cotton
    and rice, (the same crops that were previously eligible for fixed
    annual Production Flexibility Contract (PFC) payments for producers
    under the 1996 Farm Bill) oilseed crops, including soybeans, sunflower
    seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe,
    sesame seed, and peanuts were crops eligible for a fixed direct
    payment. (PFC payments were based on historical yields and acreage.
    Direct payments were received whether or not a crop was planted, and
    did not depend on what crop was planted, (except for fruit and
    vegetable restrictions)). The 2008 Farm Bill further authorizes these
    types of direct payments for the 2008 through 2012 crop years, with
    some changes, and adds pulse crops beginning with the 2009 crop year.
        Countercyclical payments (countercyclical payments are similar to
    the deficiency payments authorized under the earlier Acreage Reduction
    Program (ARP), which mandated strict acreage limitations and mandatory
    acreage idling or set-aside requirements) were authorized for the 2002
    through 2007 crop years pursuant to the 2002 Farm Bill for these same
    crops.
        Under the 2008 Farm Bill, peanuts continue to be eligible for
    direct and countercyclical payments, and continue to have slightly
    different statutory requirements than for other crops.
        The 2008 Farm Bill provides that the base acres and program yields
    established by the 2002 Farm Bill that were effective September 30,
    2007, will constitute the base acres and yields for the 2008 through
    2012 crop years. The 2008 Farm Bill, however, requires adjustments to
    base acres for various reasons including, but not limited to, land no
    longer being devoted to agricultural uses.
    4. Purpose/Goals
        The Direct and Counter-Cyclical Program (DCP) provides annual
    payments to eligible producers on farms enrolled for the 2008 through
    2012 crop years. Both direct and countercyclical payments are computed
    using the base acres and payment yields established for each farm.
        The intent of DCP is to provide a safety net for farmers, while
    allowing farmers planting flexibility. The program protects farmers
    from low market prices of program commodities, and helps ensure
    farmer's cash flow needs are met. Roughly 80 percent of all farms with
    base acres are enrolled in DCP.
    5. Success in Meeting Programmatic Purpose/Goals
        DCP has successfully met its programmatic goals.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                         Actual     Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Direct Payments                           $0  $4,151,272  $5,288,646  $5,234,599  $4,962,372  $3,957,175  $4,821,206  $5,222,325  $4,898,085  $4,950,510
    Countercyclical Payments                   0   1,742,999     809,381   2,771,503   4,355,612   3,158,554     359,064     730,918     902,584     131,848
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        This program is funded by Commodity Credit Corporation (CCC). Budget authority for this CCC program is based on actual outlays.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                         FY 2002    FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                         Actual     Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Direct Payments                           $0  $4,151,272  $5,288,646  $5,234,599  $4,962,372  $3,957,175  $4,821,206  $5,222,325  $4,898,085  $4,950,510
    Countercyclical Payments                   0   1,742,999     809,381   2,771,503   4,355,612   3,158,554     359,064     730,918     902,584     131,848
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        Any farm with base acres is eligible to participate in DCP. A
    producer on a farm with base acres is eligible to receive payment if
    the following criteria are met:

       Actively Engaged in Farming provisions.

       Highly Erodible Land and Wetland provisions.

       Average Adjusted Gross Income provisions.

       Conservation Compliance provisions.

       Controlled substance provisions.

       Federal Crop Insurance Corporation fraud provisions.

        Additionally, farms that contain fewer than 10 base acres do not
    earn a payment unless that farm is at least 50 percent owned by a
    socially disadvantaged or limited resource farmer or rancher.
    10. Utilization (Participation) Data
        Under the 2008 DCP, 1.1 million producers enrolled 1.8 million
    farms with 260.9 million base acres. Under the 2009 DCP, 940,000
    producers' enrolled 1.5 million farms with 226.4 million base acres
    (Note that for 2009, 90,000 producers' enrolled 131,000 farms with 33.9
    million base acres in ACRE program). Preliminary 2010 DCP enrollment
    numbers show that 903,300 producers' enrolled 1.6 million farms with
    222.3 million base acres (Note that for 2010, 94,000 producers'
    enrolled 137 thousand farms with 35.1 million base acres in the ACRE
    program). Preliminary reports for the 2011 DCP indicate that the number
    of producers, farms, and base acres will decrease marginally due to a
    slight increase (about 1,000 farms) in ACRE participation.
    11. Duplication or Overlap with Other Programs
        Beginning with the 2009 crop, ACRE payments provide a revenue-based
    safety net that is an alternative to price based countercyclical
    payments. To enroll a farm in ACRE, producers agree to forgo
    countercyclical payments, take a 20 percent reduction in direct
    payments, and a 30 percent reduction in the marketing assistance loan
    rates.
    12. Waste, Fraud and Abuse
        Improper Payments Information Act review was conducted on DCP in
    accordance with Appendix C to OMB Circular A-123. Based on random
    sampling, a 1.77 percent error rate was recorded for 2010 DCP.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Marketing Assistance Loans (MAL) and Loan Deficiency Payments (LDP)
    Program.
    2. Subprograms/Department Initiatives
        Subprograms:

        MAL and LDP:

        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    reauthorizes non-recourse marketing assistance loans (MAL) and loan
    deficiency payments (LDP) and makes them available for the 2008-2012
    crops of wheat, corn, grain sorghum, barley, oats, upland cotton,
    extra-long staple cotton, long grain rice, medium grain rice, soybeans,
    other oilseeds (including sunflower seed, rapeseed, canola, safflower,
    flaxseed, mustard seed, crambe and sesame seed), dry peas, lentils,
    small chickpeas, large chickpeas, graded wool, non-graded wool, honey
    and peanuts.
        MALs and LDPs are marketing tools available to producers beginning
    upon harvest or shearing. The MAL provides cash when market prices are
    typically at harvest-time lows, which allows the producer to delay the
    sale of the commodity until more favorable market conditions emerge.
    Allowing producers to store production at harvest or shearing provides
    for a more orderly marketing of commodities throughout the year.
        MALs for commodities are considered nonrecourse when the MAL can
    either be redeemed by the repayment of the MAL or by delivering the
    pledged collateral to the Commodity Credit Corporation (CCC) as full
    payment for the MAL at maturity. MAL repayment provisions specify,
    under certain circumstances, that producers may repay MALs at less than
    loan rate (principal) plus accrued interest and other charges.
    Alternatively, loan deficiency payment (LDP) provisions specify that,
    in lieu of securing a MAL, producers may elect to receive an LDP.
        LDPs are payments made to a producer who, although eligible to
    obtain a MAL, agrees to forgo the loan in return for a payment on the
    eligible commodity. The LDP payment is the difference between the
    county loan rate and CCC determined value for the applicable commodity
    or class of commodity multiplied by the eligible quantity. LDPs are
    only applicable when the market price or CCC determined value is less
    than the county loan rate.
        MAL repayment and LDP provisions are intended to minimize potential
    delivery of loan collateral to CCC, accumulation of CCC-owned stocks,
    storage costs, discrepancies in marketing loan benefits across state
    and county boundaries, and allow U.S. produced-commodities to be
    marketed freely and competitively. Accumulating CCC-owned stocks tends
    to make U.S.-produced commodities less competitive in world markets and
    can result in substantial storage costs to taxpayers.

        Recourse Loans:

        Recourse loans are commodity loans for which the commodity offered
    as collateral does not meet the specified quality eligibility
    requirements and may not be delivered or forfeited to CCC in
    satisfaction of the loan indebtedness. Recourse loans must be repaid in
    full on or before the loan maturity date at principal plus interest.
    The following are considered recourse loans: high moisture corn and
    grain sorghum, and seed cotton; acquired grain for high moisture corn
    or grain sorghum loans; distress loans on any commodity that is not
    stored in eligible storage; and any commodity otherwise eligible for
    nonrecourse loan but not meeting the quality eligibility requirements
    according to U.S. grading standards.

        Graze-Out Payments:

        Graze-out payments are payments made to eligible producers who
    although eligible to obtain a loan elect to use acreage planted to
    barley, oats, triticale, or wheat for livestock grazing and agree to
    forgo any other harvesting of the commodity on this acreage during the
    applicable crop year. The payment rate is determined by the amount the
    applicable commodity loan rate exceeds the CCC-determined value of the
    commodity for the county where the farm is located. Graze-out payments
    are only applicable when the market price or CCC determined value is
    less than the county loan rate.

        Department Initiatives:

        None.
    3. Brief History
        The Commodity Credit Corporation (CCC) was created on October 17,
    1933, by the CCC Charter Act, and established for the purpose of
    stabilizing, supporting, and protecting farm income and prices. The CCC
    Charter Act gave CCC the authority to carry out price and income
    support activities, and initially made commodity loans available to
    cotton and corn producers.
        The Agricultural Adjustment Act of 1938 (1938 Act) is considered a
    permanent part of agricultural legislation. In the original law.
    Congress enacted the first comprehensive legislation dealing with price
    support, and provided price support loans for wheat, corn, and cotton.
    Price support for peanuts and wool were subsequently added. Currently,
    when current legislation is not renewed, the law reverts back to the
    permanent provisions of the 1938 Act, along with the Agricultural Act
    of 1949 (1949 Act).
        The 1949 Act is permanent legislation of U.S. agricultural policy
    and has been amended by every subsequent farm bill. The 1949 Act made
    commodity loans available to producers of approved commodities at a
    rate established in the legislation, or subsequent amendments. The
    commodities included wheat, corn, cotton, peanuts, rice, honey, honey,
    grain sorghum, barley, oats, rye and soybeans.
        The Food Security Act of 1985 (1985 Farm Bill) authorized producers
    to repay their commodity loans at a level that is the lesser of
    principal plus interest, or at the prevailing market price as
    determined by the Secretary, thus the applicable commodity loans became
    known as Marketing Assistance Loans (MAL). From 1985 until 1990,
    repayments at the prevailing market price were required to be made by a
    negotiable certificate issued by CCC as an in-kind payment.
        The 1985 Farm Bill also introduced the Loan Deficiency Payment
    (LDP) which enabled eligible producers of rice and cotton to forgo
    obtaining a commodity loan and instead receive a payment based on the
    difference between the county loan rate and CCC determined value for
    the applicable commodity or class of commodity times the eligible
    quantity
        The Food Agriculture, Conservation and Trade Act of 1990 (1990 Farm
    Bill) continued MAL and LDP provisions but allowed MAL repayments with
    cash. The 1990 Farm Bill added wheat, feed grains and oilseeds as
    commodities eligible for LDP and also allowed recourse loans for silage
    and high moisture feed grains.
    4. Purpose/Goals
        MALs and LDPs are marketing tools available to producers of
    eligible commodities. The MAL program supports America's farmers and
    ranchers by providing producers with short term interim financing after
    harvest and during the shearing season for wool, and providing
    significant income support for eligible commodities when market prices
    are below statutory loan rates. MALs also facilitate the orderly
    marketing and distribution of all commodities throughout the year,
    giving producers flexibility on when to sell their commodities.
        Producers can settle their loan by either repaying the loan or by
    forfeiting the commodity to CCC as full payment for the MAL at
    maturity. MAL repayment provisions specify, under certain
    circumstances, that producers may repay at less than the loan rate
    (principal) plus accrued interest.
        The LDP program is an alternative to the MAL program. If a producer
    agrees to forgo receiving a MAL and provided there is a rate in effect,
    the producer may obtain an LDP on their harvested commodity. An LDP
    rate is in effect when the alternative repayment rate is below the
    applicable crop year commodity loan rate. Like MALs, LDPs support
    America's farmers by providing price income support to producers and
    giving producers flexibility on when to sell their commodities.
        The intent of MAL repayments and LDP's was to minimize the
    potential delivery of loan collateral to CCC, limit the accumulation of
    CCC-owned stocks, minimize storage costs, stabilize the discrepancies
    in marketing loan benefits across state and county boundaries, and
    allow U.S. produced commodities to be marketed freely and
    competitively. Accumulating CCC-owned stocks tends to make U.S.
    produced commodities less competitive in world markets and can result
    in substantial storage costs to taxpayers.
        When market prices are low, LDP participation tends to increase.
    Likewise when market prices are high, LDPs are not authorized which
    leaves only the MAL option open to producers for providing them the
    influx of cash at harvest.

                                                        5. Success in Meeting Programmatic Purpose/Goals
                                                           Total Number of MALs and LDPs by Crop Year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Crop Years
                        Program                    ---------------------------------------------------------------------------------------------------------
                                                      2002       2003        2004        2005        2006        2007        2008        2009        2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Marketing Assistance Loans                       193,132     132,276     209,997     185,132     158,154      99,828     101,551      74,662      66,507
    Loan Deficiency Payments                         221,545     300,936   1,843,984   1,500,137     180,640      18,864      35,734      33,903      25,500
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        MALs are used by producers of loan commodities who at harvest take advantage of the low interest CCC loans on the commodities they produce to pay
     their crop expenses, and market these commodities later in the year when prices are usually higher. LDPs are only applicable when the current market
     price is below the established commodity loan rate.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Marketing Assistance    $10,130,603  $10,718,057   $9,149,591  $12,619,239  $12,013,778  $11,286,100   $9,509,047   $8,290,909   $7,189,585   $7,014,700
     Loans
    Loan Deficiency           5,344,682      693,390      461,177    3,855,624    4,629,556      173,736        6,036      145,497      191,647       36,565
     Payments
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Budget authority for CCC programs is based on obligations. Funds obligated in one fiscal year may not be disbursed until a succeeding fiscal year or
     fiscal years. In the case of these two programs, obligations, budget authority and outlays are incurred at the same time period.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Marketing Assistance    $10,130,603  $10,718,057   $9,149,591  $12,619,239  $12,013,778  $11,286,100   $9,509,047   $8,290,909   $7,189,585   $7,014,700
     Loans
    Loan Deficiency           5,344,682      693,390      461,177    3,855,624    4,629,556      173,736        6,036      145,497      191,647       36,565
     Payments
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible for MAL or LDP, the producer must comply with
    conservation and wetland protection requirements, submit an acreage
    report to account for all cropland on the farm, have and retain
    beneficial interest in the commodity until the MAL is repaid or CCC
    takes title to the commodity, and meet the applicable adjusted gross
    income limitations.
        Several commodities have been added to the list as eligible for MAL
    and LDP through previous farm bills. Current commodities eligible for
    MAL and LDP include wheat, barley, oats, corn, grain sorghum, soybeans,
    long and medium rice, peanuts, cotton, sunflower seed, rapeseed,
    canola, safflower, flaxseed, mustard seed, crambe, sesame seed, graded
    and nongraded wool, mohair, honey, dry peas, lentils, small chickpeas,
    and beginning with the 2009 crop year, large chickpeas. Hay, silage,
    and unshorn pelts are eligible for LDP only. Mohair was recently
    removed from the list of eligible commodities for both MAL and LDP
    through the remainder of Fiscal Year 2011.
        A person or legal entity with an average adjusted gross non-farm
    income that exceeds $500,000 is not eligible for an LDP or market loan
    gain (MLG). These producers may request an MAL but must repay the MAL
    at principal plus interest. The MLG rate equals the amount by which the
    applicable loan rate exceeds the MAL repayment rate.
    10. Utilization (Participation) Data
        Producer participation in the MAL or LDP program includes producers
    from all fifty states, some to a much larger extent than others.
    Depending on the predominate commodities produced in the state and the
    current market price of these commodities, some years a particular
    state has many MAL and just a few LDPs, and other years both MAL and
    LDP numbers are high.
    11. Duplication or Overlap with Other Programs
        MALs and LDPs are not a duplication of other USDA programs.
    12. Waste, Fraud and Abuse
        To comply with the Improper Payments Information Act of 2002, FSA
    conducts internal investigations through the County Office Review
    Program of high risk programs. MALs and LDPs have been reviewed
    numerous times in the last few years. The error rate for improper
    payments for MALs was 0.52 percent in 2011. For LDPs, the error rate
    for improper payments was 0.44 percent in 2010.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Average Crop Revenue Election (ACRE) Program.
    2. Subprograms/Department Initiatives
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    authorizes annual direct and countercyclical payments, with some
    changes, similar to the direct and countercyclical payments (DCP)
    previously authorized under the Farm Security and Rural Investment Act
    of 2002 (2002 Farm Bill). In addition, the 2008 Farm Bill authorized
    the optional ACRE program as an alternative to the traditional
    countercyclical program. ACRE consists of two payment types, direct
    payments (ACRE direct) and revenue-based countercyclical payments
    (ACRE). Similar to DCP, FSA enters into annual contracts with
    agricultural producers to maintain base acres on participating farms
    and makes direct payments on these base acres (see previous response
    for DCP). In contrast, ACRE's revenue based countercyclical payments
    are made on crops planted on the farm during the current contract year
    as opposed to the historical plantings of DCP. During the contract
    period, eligible land on the participating farm, may be planted to any
    commodity except fruits, vegetables (other than mung beans and pulse
    crops), and wild rice.
        FSA is responsible for overall implementation of ACRE. Producers
    enroll and payments are initiated at the FSA County Office
    administratively designated for the farm.

        ACRE Direct Payments:

        ACRE direct payments are not based on producers' current production
    choices, but instead are tied to base acres and yields. Direct payments
    do not provide an incentive to increase production of any particular
    crop and the payments support farm income without affecting producers'
    current production decisions.
        The 2008 Farm Bill continues the direct payments that began under
    the Farm Security and Rural Investment Act of 2002. Direct payments
    under the ACRE program are identical to those available under DCP
    except that the ACRE direct payment rate is 80 percent of the DCP
    direct payment rate. ACRE direct payment rates for the eligible ACRE
    commodities are as follows:

       Wheat: $0.416 per bushel

       Corn: $0.224 per bushel

       Grain sorghum: $0.28 per bushel

       Barley: $0.192 per bushel

       Oats: $0.0192 per bushel

       Upland cotton: $0.05336 per pound

       Rice, long grain: $1.88 per hundredweight

       Rice, medium/short grain: $1.88 per hundredweight

       Soybeans: $0.352 per bushel

       Other oilseeds: $0.64 per hundredweight

       Peanuts: $28.80 per ton

        ACRE Payments:

        ACRE payments are issued when two conditions are met for a
    commodity. Actual State Revenue falls below the State ACRE Guarantee
    and Actual Farm Revenue falls below the Farm ACRE Guarantee.
        Once it has been determined that both conditions have been met for
    the farm to earn an ACRE payment, the payment is computed for a year by
    multiplying:

       83.3 percent (85 percent in 2012) of the planted and
            considered planted acres on the farm not to exceed the total
            base acres on the farm by

       the farm productivity index by

       the lesser of:

         state ACRE guarantee minus actual state revenue

         state ACRE guarantee times 25 percent

        Note: Similar to DCP, Federal crop insurance or NAP is not required
    for participation in ACRE.
    3. Brief History
        Background:

        The optional ACRE Program is an alternative revenue-based safety
    net to the price-based safety net provided by countercyclical payments
    in DCP for crop years 2009 through 2012. Producers must elect to
    participate in ACRE rather than in the traditional DCP. Producers are
    required to sign-up for ACRE (or DCP) annually. ACRE provides producers
    an option to protect against declines in market revenue. ACRE involves
    state and farm revenue changes from guarantee revenue levels that are
    based on national prices, state planted yields, and farm planted
    yields.
        A decision to participate in ACRE may be made in any of the crop
    years 2009-2012; however, the ACRE election is irrevocable and cannot
    be changed from the time of election through the 2012 crop year.
    Producers may elect the ACRE alternative on a farm-by-farm basis.

        ACRE Tradeoffs:

        Producers who elect and enroll a farm in ACRE agree to: (1) forgo
    DCP countercyclical payments, (2) a 20 percent reduction in their
    direct payments, and (3) a 30 percent reduction in the marketing
    assistance loan rates for all commodities produced on the farm which
    are eligible for ACRE payments.
    4. Purpose/Goals
        The purpose of ACRE is to offer producers an alternative approach
    to managing risk. ACRE provides, payments to producers when farm
    revenues fall below a set threshold. This contrasts with the price
    based protection offered by countercyclical payments. The ACRE program
    provides payments to eligible producers on farms enrolled for the 2009
    through 2012 crop years to partially offset annual reductions in market
    revenue.
    5. Success in Meeting Programmatic Purpose/Goals
        The ACRE program has successfully met its programmatic goals to
    provide a revenue-based countercyclical safety net to producers.
    However, enrollment in ACRE has been lower than expected.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ACRE Payments                     0            0            0            0            0            0            0            0            0     $446,633
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    This program is funded by Commodity Credit Corporation (CCC). Budget authority for this CCC program is based on actual outlays.

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ACRE Payments                     0            0            0            0            0            0            0            0            0     $446,633
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        Any farm with base acres is eligible to participate in ACRE;
    however, to receive an ACRE payment, producers on the farm must plant a
    covered commodity (wheat, corn, grain sorghum, barley, oats, upland
    cotton, rice, soybeans, other oilseeds, dry peas, lentils, small
    chickpeas, and large chickpeas) or peanuts.
        A producer on a farm with base acres is eligible to receive payment
    if the following criteria are met:

       Actively engaged in farming provisions

       Highly Erodible Land and Wetland provisions

       Average (3 year) Adjusted Gross Income not to exceed
            $750,000 for farm income and $500,000 for non-farm income

       Conservation Compliance provisions

       Controlled substance provisions

       Federal Crop Insurance Corporation fraud provisions

        Additionally, farms that contain fewer than 10 base acres do not
    earn a payment unless that farm is at least 50 percent owned by a
    socially disadvantaged or limited resource farmer or rancher.
    10. Utilization (Participation) Data
        Under the 2009 ACRE Program, 90,000 producers enrolled 131,000
    farms with 33.9 million base acres. Preliminary 2010 ACRE enrollment
    numbers, show that, 94,000 producers enrolled 137,000 farms with 35.1
    million base acres. Preliminary reports for the 2011 ACRE Program
    indicate that enrollment will increase by about 1,000 farms.
    11. Duplication or Overlap with Other Programs
        ACRE payments provide a revenue-based safety net that is an
    alternative to price based traditional countercyclical payments. To
    enroll a farm in ACRE, producers agree to forgo traditional
    countercyclical payments, take a 20 percent reduction in direct
    payments, and a 30 percent reduction in the marketing assistance loan
    rates.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified. FSA minimizes the
    risk of improper ACRE payments by working in partnership with the
    Internal Revenue Service to determine whether or not the participant
    appears to meet or exceed AGI limitations.
    13. Effect of Administrative PAYGO
        See Exhibit 1.*
    ---------------------------------------------------------------------------
        * Editor's note: Exhibit 1 is printed at the end of the
    questionnaire.
    ---------------------------------------------------------------------------
                                     ______

    1. Program Name
        Supplemental Revenue Assistance Payments (SURE) Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        SURE is a nationwide crop disaster program authorized by the Food,
    Conservation, and Energy Act of 2008 (2008 Farm Bill) to provide
    assistance to producers suffering production, quality and/or revenue
    losses due to natural disasters. Unlike prior ad hoc disaster programs,
    the 2008 Farm Bill created a Trust Fund during FY 2008-11 to provide
    funding for assistance to producers incurring 2008 through September
    30, 2011 disaster-related losses.
        SURE is based on a producer's entire farming operation in all
    counties (and states) rather than on individual crop losses. Payments
    are calculated in an amount equal to 60 percent of the difference
    between the SURE guarantee and the calculated SURE total farm revenue.
    The SURE guarantee cannot exceed 90 percent of the expected revenue for
    the producer's farming operation.
        The American Recovery and Reinvestment Act of 2009 (ARRA) increased
    2008 SURE program benefits for participants by increasing the guarantee
    calculation for both insurable and noninsurable (NAP) crops.
        SURE is one of five complementary disaster programs authorized by
    the 2008 Farm Bill. The others are Emergency Assistance for Livestock,
    Honey Bees, and Farm-Raised Fish Program (ELAP), Livestock Indemnity
    Program (LIP), the Livestock Forage Program (LFP), and the Tree
    Assistance Program (TAP).
    4. Purpose/Goals
        SURE helps mitigate the impacts of natural disasters on producers
    such as prevented planting, loss of production, loss due to quality,
    and decreases in market prices received. SURE provides a revenue
    guarantee (SURE guarantee) for a producer's total farming interest.
    SURE is a supplement to Federal crop insurance and the Noninsured Crop
    Disaster Assistance Program (NAP) to reduce producers' financial losses
    and cover shallow losses not covered by crop insurance or NAP.
    5. Success in Meeting Programmatic Purpose/Goals
        SURE successfully provides financial assistance to producers who
    suffer qualifying losses due to natural disasters. As of July 19, 2011,
    103,709 producers received approximately $2.1 billion for 2008 crop
    year losses, and to date, 32,273 producers have qualified for
    approximately $485 million for 2009 crop year losses. Crop year 2009
    SURE sign up is scheduled to end on July 29, 2011.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SURE                             $0           $0           $0           $0           $0           $0           $0           $0   $1,195,517   $1,287,000
    SURE Recovery Act                 0            0            0            0            0            0            0            0     $688,805     $171,393
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SURE                             $0           $0           $0           $0           $0           $0           $0           $0     $973,434   $1,287,000
    SURE Recovery Act                 0            0            0            0            0            0            0            0     $578,327     $255,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible for SURE benefits, producers and entities must:

        (1) Obtain crop insurance and/or NAP on all crops of economic
            significance (a crop contributing at least five percent to the
            total farm's expected revenue), unless they qualify as a
            Limited Resource, Socially Disadvantaged, or Beginning Farmer
            or Rancher.

        (2) Have at least one crop of economic significance suffer at least
            a 10% production loss, adjusted for quality, due to a natural
            disaster.

        (3) Have a risk and ownership share in a qualified crop, in a
            Secretarial declared disaster county or contiguous county, or
            if not located in a qualified county, have a 50 percent or
            greater actual production loss for the farm compared with
            normal production for the farm.

        (4) For the 2008 program year, no person as defined and determined
            under provisions in 7 CFR Part 1400 in effect for 2008, may
            receive more than $100,000 total in payments under SURE, ELAP,
            LIP, and LFP combined. For 2009 and subsequent years, no person
            or legal entity, excluding joint venture or general
            partnership, may receive directly or indirectly, more than
            $100,000 total in payments under SURE, ELAP, LIP, and LFP,
            combined.

        (5) Also, in applying the limitation on average adjusted gross
            income (AGI) for 2008, an individual or entity is ineligible
            for payment under SURE if the individual's or entity's average
            adjusted gross income exceeds $2.5 million for 2007, 2006, and
            2005 under the provisions in 7 CFR Part 1400 in effect for 2008
            unless 75 percent or more of their income was from farming,
            ranching or forestry. For 2009 through 2011, the average AGI
            limitation relating to limits on payments for persons or legal
            entities, excluding joint ventures and general partnerships,
            with certain levels of average adjusted gross income will
            apply. Specifically, for 2009 through 2011, a person or legal
            entity with an average adjusted gross non-farm income, as
            defined in 7 CFR Part 1404.3 that exceeds $500,000 will not be
            eligible to receive SURE payments. Direct attribution
            provisions also apply to SURE for 2009 and subsequent years.
            Under direct attribution, any payment to a legal entity--also
            will be considered for payment limitation purposes to be a
            payment to a persons or legal entity with an interest in the
            legal entity or in a sub-entity.

                                          10. Utilization (Participation) Data
    ----------------------------------------------------------------------------------------------------------------
                                   2008 Crop Year                                      2009 Crop Year (to date)
    ----------------------------------------------------------------------------------------------------------------
                 Non-stimulus                            Stimulus
    ----------------------------------------------------------------------------       Total
                                                 Total                              Participants      Total Dollars
    Total Participants    Total Dollars      Participants *     Total Dollars
    ----------------------------------------------------------------------------------------------------------------
              89,831      $1,294,950,257            103,709       $815,381,190             32,273       $485,287,214
    ----------------------------------------------------------------------------------------------------------------

        The 2008 crop year included Stimulus funds. Not everyone qualified
    for Stimulus funds. Producers with high levels of Federal crop
    insurance coverage may not have been able to fully take advantage of
    Stimulus funds because SURE payments are capped at 90 percent of a
    producer's expected revenue.
        The last day to sign-up for 2009 benefits is July 29, 2011. A large
    percentage of 2009 data has not been reported as of this date.
        Acreage data is not available because the SURE application process
    is completed manually, therefore acreage data is not compiled in an
    automated format.
    11. Duplication or Overlap with Other Programs
        SURE assists producers with crop losses and is a supplement to crop
    insurance and NAP. In many instances the producer or entity has already
    received crop insurance indemnities and/or NAP payments and these
    payments are included in determining the total farm revenue to count
    against the SURE guarantee. For the 2009 crop year, counties receiving
    a Secretarial disaster designation due to excessive moisture may have
    had producers qualify for assistance under the Crop Assistance Program
    (CAP) on some crops. However, any Federal Government assistance
    received for crop losses that are covered under SURE during a program
    year are counted as revenue for the farm, thus reducing the total SURE
    payment by the amount of payment received for that loss.
    12. Waste, Fraud and Abuse
        Compliance reviews for SURE are required to ensure accuracy of the
    information provided by producers. If a producer is selected, the
    information is recorded in the National Compliance Review database.
    Additional selections may be required when County Committees, District
    Directors or State Committees have reason to believe inaccurate data or
    certifications were provided. Those found with inaccurate data may have
    to refund the SURE payment or part of the payment.
        When RMA and FSA data does not match or falls outside of acreage
    tolerance rules, FSA notifies RMA of the discrepancy and the two
    agencies work to correct inaccuracies. For instance, FSA may deny RMA
    prevented planting acreage if documented evidence exists that supports
    the lack of prevented planting conditions.
        Currently SURE is in the early stages of being audited by the
    Office of Inspector General. At this time, we do not have any
    indication of on-going systemic waste, fraud, and abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Livestock Forage Disaster Program (LFP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    authorized the Livestock Forage Disaster Program (LFP) to provide
    compensation to eligible livestock producers that have suffered grazing
    losses for covered livestock on land that is native or improved
    pastureland with permanent vegetative cover or that is planted
    specifically for grazing. The grazing losses must be due to a
    qualifying drought condition during the normal grazing period for the
    county. LFP also provides compensation to eligible livestock producers
    that have suffered grazing losses on rangeland managed by a Federal
    agency (public lands) if the eligible livestock producer is prohibited
    by the Federal agency from grazing the normal permitted livestock on
    the public lands due to a qualifying fire.
        The grazing losses must have occurred on or after January 1, 2008,
    and before October 1, 2011.
        LFP is one of five complementary disaster programs authorized by
    the 2008 Farm Bill. The others are Emergency Assistance for Livestock,
    Honey Bees, and Farm-Raised Fish Program (ELAP), Livestock Indemnity
    Program (LIP), the Supplemental Revenue Assistance Payments (SURE)
    Program, and the Tree Assistance Program (TAP).
    4. Purpose/Goals
        Provide compensation to livestock producers that have suffered
    grazing losses for livestock. The grazing losses must be due to a
    drought condition during the normal grazing period for the county or
    the eligible livestock producer must be prohibited by a Federal agency
    from grazing the normal permitted livestock on public lands due to a
    qualifying fire.
    5. Success in Meeting Programmatic Purpose/Goals
        LFP successfully provides immediate financial assistance to
    livestock producers who suffer qualifying grazing losses due to drought
    (on private and public lands) or fire (on public lands). Livestock
    producers received compensation for grazing losses totaling
    approximately $163.9 million for 2008 calendar year losses, $98.1
    million for 2009 calendar year losses, and $32 million for 2010
    calendar year losses. As of July 12, 2011, livestock producers have
    received compensation in the amount of approximately $86.4 million for
    2011 calendar year losses.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    LFP                              $0           $0           $0           $0           $0           $0           $0           $2     $264,664     $524,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    LFP                              $0           $0           $0           $0           $0           $0           $0           $0     $263,263      $50,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        LFP provides compensation to eligible livestock producers that have
    suffered grazing losses for covered livestock on land that is native or
    improved pastureland with permanent vegetative cover or that is planted
    specifically for grazing. The grazing losses must be due to a
    qualifying drought condition during the normal grazing period for the
    county. LFP also provides compensation to eligible livestock producers
    that have suffered grazing losses on rangeland managed by a Federal
    agency if the eligible livestock producer is prohibited by the Federal
    agency from gazing the normal permitted livestock on the managed
    rangeland due to a qualifying fire.
        The grazing losses must have occurred on or after January 1, 2008,
    and before October 1, 2011.
        An eligible livestock producer that owns or leases grazing land or
    pastureland physically located in a county rated by the U.S. Drought
    Monitor as having a:

       D2 (severe drought) intensity in any area of the county for
            at least 8 weeks during the normal grazing period is eligible
            to receive assistance in an amount equal to one monthly
            payment;

       D3 (extreme drought) intensity in any area of the county at
            any time during the normal grazing period is eligible to
            receive assistance in an amount equal to two monthly payments;
            or

       D3 (extreme drought) intensity in any area of the county for
            at least 4 weeks during the normal grazing period or is rated a
            D4 (exceptional drought) at any time during the normal grazing
            period is eligible to receive assistance in an amount equal to
            three monthly payments.

        Eligible livestock are livestock (alpacas, beef cattle, beefalo,
    beefalo, dairy cattle, deer, elk, emus, equine, goats, llamas, poultry,
    reindeer, sheep or swine) that have been or would have been grazing the
    eligible grazing land or pastureland:

       during the normal grazing period for the specific type of
            grazing land or pastureland for the county suffering from
            drought, or

       when the Federal agency excluded the livestock producer from
            grazing the normally permitted livestock on the managed
            rangeland due to fire.

        To be eligible for LFP for the grazing land incurring losses
    because of a qualifying drought or fire for which assistance is to be
    requested, producers must:

       obtain a policy or plan of insurance for the grazed forage
            crop under the Federal Crop Insurance Act (FICA); or

       file the required paperwork and pay the administrative fee
            by the applicable state application closing date for the
            Noninsured Crop Disaster Assistance Program (NAP).

        Note: Eligible farmers and ranchers who meet the definition of
    ``Socially Disadvantaged,'' ``Limited Resource,'' or ``Beginning Farmer
    or Rancher'' does not have to meet this requirement.
        For the 2008 program year, no person as defined and determined
    under provisions in 7 CFR Part 1400 in effect for 2008, may receive
    more than $100,000 total in payments under LFP, the Emergency
    Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program
    (ELAP), Livestock Indemnity Program (LIP) and the Supplemental Revenue
    Assistance Payments (SURE) Program, combined. For 2009 and subsequent
    years, no person or legal entity, excluding joint venture or general
    partnership, may receive directly or indirectly, more than $100,000
    total in payments under LFP, ELAP, LIP, and SURE, combined.
        Also, in applying the limitation on average adjusted gross income
    (AGI) for 2008, an individual or entity is ineligible for payment under
    LFP if the individual's or entity's average adjusted gross income
    exceeds $2.5 million for 2007, 2006, and 2005 under the provisions in 7
    CFR Part 1400 in effect for 2008 unless 75 percent or more of their
    income was from farming, ranching or forestry. For 2009 through 2011,
    the average AGI limitation relating to limits on payments for persons
    or legal entities, excluding joint ventures and general partnerships,
    with certain levels of average adjusted gross income will apply.
    Specifically, for 2009 through 2011, a person or legal entity with an
    average adjusted gross non-farm income, as defined in 7 CFR Part 1404.3
    that exceeds $500,000 will not be eligible to receive LFP payments.
    Direct attribution provisions also apply to LFP for 2009 and subsequent
    years. Under direct attribution, any payment to a legal entity also
    will be considered for payment limitation purposes to be a payment to a
    persons or legal entity with an interest in the legal entity or in a
    sub-entity.
        Producers must provide a completed application for payment and
    supporting documentation to their administrative FSA county office
    within 30 calendar days after the end of the calendar year in which the
    grazing loss occurred.
    10. Utilization (Participation) Data
        72,705 livestock producers have received compensation under LFP
    totaling $380,384,965 for grazing losses due to drought (on private and
    public lands) or fire (on public lands) due to fire that have occurred
    on or after January 1, 2008, and before October 1, 2011.

                             Livestock Forage Disaster Program Payments as of July 12, 2011
    ----------------------------------------------------------------------------------------------------------------
                                 2008 LFP          2009 LFP          2010 LFP          2011 LFP         Total LFP
             State               Payments          Payments          Payments          Payments          Payments
                                 Disbursed         Disbursed         Disbursed         Disbursed        Disbursed
    ----------------------------------------------------------------------------------------------------------------
                      AL        $8,970,452                          $3,436,639        $1,018,350       $13,425,441
                     AK                                                                                         $0
                     AZ           $112,019        $2,881,334        $1,924,860        $1,788,812        $6,707,025
                     AR                                               $223,938        $1,822,648        $2,046,586
                     CA        $10,465,247       $14,349,563        $1,430,587                         $26,245,397
                     CO         $4,274,245           $36,612           $20,314        $1,414,975        $5,746,146
                     CT                                                                                         $0
                     DE                                                                                         $0
                      FL        $2,653,553        $6,079,415           $23,166        $5,722,708       $14,478,842
                     GA        $13,676,692        $2,683,255                          $1,970,068       $18,330,015
                     HI         $2,770,495        $3,246,585        $4,031,805        $2,180,142       $12,229,027
                     ID                                                                                         $0
                      IL                                                                                        $0
                     IN                                               $527,276                            $527,276
                     IA                                                                                         $0
                     KS         $1,280,842                                              $318,273        $1,599,115
                     KY         $6,550,532                            $275,589                          $6,826,121
                       LA                                           $2,164,080        $2,392,366        $4,556,446
                     ME                                                                                         $0
                     MD                                                                                         $0
                     MA                                                                                         $0
                     MI                              $61,486          $265,612                            $327,098
                     MN             $1,703              $813                                                $2,516
                     MS                                             $1,134,122                          $1,134,122
                     MO                                               $803,802                            $803,802
                     MT         $6,310,926          $593,988                                            $6,904,914
                     NE                                                                                         $0
                     NV         $1,222,059          $889,741            $4,290                          $2,116,090
                     NH                                                                                         $0
                     NJ                                                                                         $0
                     NM         $6,674,520        $2,139,308            $4,606        $9,718,946       $18,537,380
                     NY                                                                                         $0
                     NC         $7,379,022                             $72,426                          $7,451,448
                     ND        $28,315,713                                                             $28,315,713
                     OH                                                                                         $0
                     OK         $2,105,355        $3,773,266                         $14,801,107       $20,679,728
                     OR           $761,349          $222,072        $1,134,019                          $2,117,440
                     PA                                                 $1,567                              $1,567
                     PR                                                                                         $0
                     RI                                                                                         $0
                     SC         $4,848,645        $1,127,386                             $24,820        $6,000,851
                     SD            $50,278                                                                 $50,278
                     TN        $12,791,638                                                             $12,791,638
                     TX        $40,073,665       $58,975,944       $12,486,955       $43,263,996      $154,800,560
                     UT           $505,429          $223,403          $288,312                          $1,017,144
                     VT                                                                                         $0
                     VA         $1,217,885                            $380,936                          $1,598,821
                     WA                             $468,451                                              $468,451
                     WV                                               $617,919                            $617,919
                     WI                             $295,234           $50,160                            $345,394
                     WY           $918,932                            $665,722                          $1,584,654
                            ----------------------------------------------------------------------------------------
      Total dollars........   $163,929,493       $98,048,746       $31,969,515       $86,437,211      $380,384,965
      Total Applica-.......         37,340            16,495             6,852            12,018            72,705
        tions..............
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        LFP provides compensation for grazing losses for covered livestock
    due to drought (on private and public lands) or fire (on public lands).
    ELAP covers eligible grazing losses due to other eligible adverse
    weather events and loss conditions not due to drought or fire on
    federally managed lands, as determined by the Secretary. The amount of
    any payment for which a livestock producer may be eligible under LFP
    may be reduced by any amount received by the livestock producer for the
    same or any similar loss from any Federal disaster assistance program.
    12. Waste, Fraud and Abuse
        There has been no Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of LFP. However, FSA conducts its own
    internal investigations through its county office review process and
    through its internal review audit process. These reviews have not
    raised any significant issues of waste, fraud, and abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Livestock Indemnity Program (LIP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    authorized the Livestock Indemnity Program (LIP) which provides
    disaster assistance to livestock owners and contract growers who
    suffered livestock death losses in excess of normal mortality due to
    adverse weather during the calendar year, including losses due to
    hurricanes, floods, blizzards, disease, wildfires, extreme heat, and
    extreme cold.
        Eligible LIP losses must have occurred on or after January 1, 2008,
    and before October 1, 2011.
        LIP is one of five complementary disaster programs authorized by
    the 2008 Farm Bill. The others are Emergency Assistance for Livestock,
    Honey Bees, and Farm-Raised Fish Program (ELAP), Livestock Forage
    Program (LFP), the Supplemental Revenue Assistance Payments (SURE)
    Program, and the Tree Assistance Program (TAP).
    4. Purpose/Goals
        Provide compensation to eligible livestock owners and contract
    growers for eligible livestock deaths in excess of normal mortality as
    a result of an eligible adverse weather event.
    5. Success in Meeting Programmatic Purpose/Goals
        LIP successfully provides financial assistance to livestock
    producers who suffer livestock death losses in excess of normal
    mortality because of eligible adverse weather events. Livestock
    producers received compensation for livestock death losses totaling
    approximately $25.5 million for 2008 calendar year losses, $62.5
    million for 2009 calendar year losses, and $16.3 million for 2010
    calendar year losses. As of July 12, 2011, livestock producers have
    received compensation in the amount of approximately $6.3 million for
    2011 calendar year losses.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    LIP                              $0           $0           $0           $0           $0           $0           $0       $5,761      $89,438      $77,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    LIP                              $0           $0           $0           $0           $0           $0           $0       $2,947      $91,825      $77,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        LIP provides compensation to livestock owners and contract growers
    who suffer livestock deaths in excess of normal mortality caused by
    eligible adverse weather events during the calendar year, including
    losses because of hurricanes, floods, blizzards, disease, wildfires,
    extreme heat, and extreme cold. The livestock death losses must have
    occurred on or after January 1, 2008, and before October 1, 2011. The
    livestock death losses must have also occurred in the calendar year for
    which benefits are being requested.
        Eligible livestock owners must have legally owned the livestock on
    the day the livestock died. Eligible contract growers may receive
    payments for poultry or swine only and must have, on the day the
    livestock died:

       had possession and control of the eligible livestock; and

       a written agreement setting specific terms, conditions and
            obligations of the parties involved regarding production of
            livestock.

        To be eligible for LIP, the owner or contract grower's livestock
    must:

       have died as a direct result of an eligible adverse weather
            event:

         that occurred on or after January 1, 2008, but before
                October 1, 2011;

         no later than 60 calendar days from the ending date of
                the applicable adverse weather event(s); and

         in the calendar year for which benefits are being
                requested.

       have been maintained for commercial use as part of a farming
            operation on the day they died; and

       not have been produced for reasons other than for commercial
            use as part of a farming operation which includes wild free
            roaming animals, pets, or animals used for recreational
            purposes, such as hunting or show.

        For the 2008 program year, no person as defined and determined
    under provisions in 7 CFR Part 1400 in effect for 2008, may receive
    more than $100,000 total in payments under LIP, the Emergency
    Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program
    (ELAP), Livestock Forage Disaster Program (LFP) and the Supplemental
    Revenue Assistance Payments (SURE) Program, combined. For 2009 and
    subsequent years, no person or legal entity, excluding joint venture or
    general partnership, may receive directly or indirectly, more than
    $100,000 total in payments under LIP, ELAP, LFP, and SURE, combined.
        Also, in applying the limitation on average adjusted gross income
    (AGI) for 2008, an individual or entity is ineligible for payment under
    LIP if the individual's or entity's average adjusted gross income
    exceeds $2.5 million for 2007, 2006, and 2005 under the provisions in 7
    CFR Part 1400 in effect for 2008 unless 75 percent or more of their
    income was from farming, ranching or forestry. For 2009 through 2011,
    the average AGI limitation relating to limits on payments for persons
    or legal entities, excluding joint ventures and general partnerships,
    with certain levels of average adjusted gross income will apply.
    Specifically, for 2009 through 2011, a person or legal entity with an
    average adjusted gross non-farm income, as defined in 7 CFR Part 1404.3
    that exceeds $500,000 will not be eligible to receive LIP payments.
    Direct attribution provisions also apply to LIP for 2009 and subsequent
    years. Under direct attribution, any payment to a legal entity also
    will be considered for payment limitation purposes to be a payment to a
    persons or legal entity with an interest in the legal entity or in a
    sub-entity.
        Producers who suffer livestock death losses must submit a notice of
    loss and an application for payment to the local FSA service center
    that maintains their farm records within prescribed deadlines along
    with adequate proof that the eligible livestock death occurred as a
    direct result of an eligible adverse weather event.
    10. Utilization (Participation) Data
        As of July 15, 2011, 15,953 livestock producers have received
    compensation under LIP totaling $110,670,892 for livestock deaths that
    have occurred on or after January 1, 2008, and before October 1, 2011,
    in excess of normal mortality due to eligible adverse weather events.

                                Livestock Indemnity Program Payments as of July 12, 2011
    ----------------------------------------------------------------------------------------------------------------
                                 2008 LIP          2009 LIP          2010 LIP          2011 LIP         Total LIP
             State               Payments          Payments          Payments          Payments          Payments
                                 Disbursed         Disbursed         Disbursed         Disbursed        Disbursed
    ----------------------------------------------------------------------------------------------------------------
                      AL           $37,794          $132,220          $270,584        $1,098,581        $1,539,179
                     AK                                                                                         $0
                     AZ                               $3,197                                                $3,197
                     AR           $412,372          $326,652          $441,513          $107,715        $1,288,252
                     CA            $87,965           $38,347            $2,353            $8,083          $136,748
                     CO         $1,803,635          $196,740          $359,359                          $2,359,734
                     CT                               $9,800                             $26,956           $36,756
                     DE                                                $39,956                             $39,956
                      FL           $63,514           $28,388           $48,592           $24,851          $165,345
                     GA            $41,312          $173,644           $66,297           $69,751          $351,004
                     HI           $169,000           $29,318                                              $198,318
                     ID           $286,351          $368,886          $270,613            $1,008          $926,858
                      IL           $56,063            $2,861            $3,505           $17,773           $80,202
                     IN            $30,081          $121,031           $10,283           $30,290          $191,685
                     IA           $604,067        $1,160,283          $837,663           $94,457        $2,696,470
                     KS            $74,910        $1,388,046        $1,538,042          $498,362        $3,499,360
                     KY         $2,071,058        $1,954,936        $2,771,729          $433,584        $7,231,307
                       LA       $1,297,023           $40,110           $34,287                          $1,371,420
                     ME            $16,199           $10,841                                               $27,040
                     MD                              $13,758           $90,209                            $103,967
                     MA                                                                   $3,999            $3,999
                     MI            $27,239           $29,947                              $8,879           $66,065
                     MN           $319,643          $550,448          $329,553           $92,718        $1,292,362
                     MS            $90,670           $83,258           $59,064           $39,708          $272,700
                     MO           $209,337          $471,998          $606,558          $836,328        $2,124,221
                     MT           $430,213        $3,435,950          $574,825          $298,588        $4,739,576
                     NE           $308,986        $2,856,961        $1,115,303           $12,078        $4,293,328
                     NV             $8,596          $120,063           $32,229                            $160,888
                     NH             $6,900                                                                  $6,900
                     NJ                               $4,759           $61,550                             $66,309
                     NM         $1,365,695        $1,100,770          $378,267          $579,931        $3,424,663
                     NY           $120,086           $38,405           $30,793           $59,642          $248,926
                     NC            $85,748          $153,267          $397,428           $67,256          $703,699
                     ND         $1,363,691       $17,893,403          $319,104          $293,919       $19,870,117
                     OH            $27,600           $48,167           $62,659            $6,748          $145,174
                     OK           $337,903          $835,202          $418,424          $795,186        $2,386,715
                     OR           $106,169          $122,220                             $78,630          $307,019
                     PA                               $1,202          $116,754            $3,435          $121,391
                     PR           $582,249           $16,108            $1,558                            $599,915
                     RI                                                                   $4,590            $4,590
                     SC            $33,206           $20,380            $3,950            $6,650           $64,186
                     SD         $5,102,720       $23,376,238        $1,134,243          $194,328       $29,807,529
                     TN            $66,019           $29,239          $263,840           $36,593          $395,691
                     TX         $6,359,396        $2,527,482          $152,612          $229,014        $9,268,504
                     UT           $725,779          $160,229          $928,773            $1,250        $1,816,031
                     VT                                                                  $23,407           $23,407
                     VA             $6,900           $96,007        $1,300,888          $119,435        $1,523,230
                     WA            $62,141          $118,543              $210                            $180,894
                     WV                              $14,799        $1,007,678           $17,325        $1,039,802
                     WI           $110,654          $160,289          $150,796           $24,691          $446,430
                     WY           $561,493        $2,268,998          $175,901           $13,441        $3,019,833
                            ----------------------------------------------------------------------------------------
      Total dollars........    $25,470,377       $62,533,390       $16,407,945        $6,259,180      $110,670,892
      Total Applica-.......          2,073             7,310             4,567             2,003            15,953
          tions............
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        LIP is not a duplication of other USDA disaster programs. LIP
    covers livestock death losses in excess of normal mortality due to
    eligible adverse weather events. ELAP covers eligible livestock death
    losses, as determined by the Secretary, that are not covered under LIP.
    The amount of any payment for which a livestock producer may be
    eligible under LIP may be reduced by any amount received by the
    livestock producer for the same or any similar loss from any Federal
    disaster assistance program.
    12. Waste, Fraud and Abuse
        There has been no Office of Inspector General (OIG) or Government
    Accountability Office (GAO) audit of the program during the last 4
    years. However, OIG has conducted financial audits of the program which
    have not identified any significant issues. Likewise, internal audits
    conducted by FSA through its county office review process have found no
    significant instances of waste, fraud, and abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Tree Assistance Program (TAP).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
    authorized the Tree Assistance Program (TAP) to provide disaster
    assistance to eligible orchardists and nursery tree growers to replant
    or rehabilitate trees, bushes, and vines that were lost or damaged
    because of an eligible natural disaster. TAP is available to
    orchardists and nursery tree growers who commercially raise perennial
    trees for production of an annual crop and for those nursery tree
    growers who produce nursery, ornamental, fruit, nut, or Christmas trees
    for commercial sale.
        Eligible losses must have occurred on or after January 1, 2008, and
    before October 1, 2011.
        TAP is one of five complementary disaster programs authorized by
    the 2008 Farm Bill. The others are Emergency Assistance for Livestock,
    Honey Bees, and Farm-Raised Fish Program (ELAP), Livestock Indemnity
    Program (LIP), the Supplemental Revenue Assistance Payments (SURE)
    Program, and the Livestock Forage Program (LFP).
    4. Purpose/Goals
        Provide compensation to eligible orchardists and nursery tree
    growers to replant or rehabilitate trees, bushes, and vines that were
    lost or damaged because of an eligible natural disaster. TAP provides
    cost-share on various replanting and rehabilitation practices to assist
    producers in reestablishing a viable orchard or nursery stand.
    5. Success in Meeting Programmatic Purpose/Goals
        TAP successfully provides cost-share assistance to orchardists and
    nursery tree growers who suffer tree, bush, or vine losses or damage
    due an eligible natural disaster. Orchardists and nursery tree growers
    received cost-share amounts totaling $156,736 for 2008, approximately
    $2 million for 2009, and $2.3 million for 2010 calendar year losses.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    TAP                              $0           $0           $0           $0           $0           $0           $0           $0       $2,198       $5,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    TAP                              $0           $0           $0           $0           $0           $0           $0           $0       $1,507       $5,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible for TAP payments, the eligible orchardist or nursery
    tree grower must have:

       planted, or be considered to have planted (by purchasing the
            orchard or nursery prior to the loss of the existing stand)
            trees, bushes, or vines for commercial purposes, or

       a production history on planted or existing trees, for
            commercial purposes.

       suffered loss due to an eligible natural disaster in excess
            of 15 percent mortality or damage, adjusted for normal
            mortality.

       obtained coverage under the Federal Crop Insurance Act or
            Noninsured Crop Disaster Assistance Program (NAP). ``Socially
            Disadvantaged,'' ``Limited Resource,'' and ``Beginning Farmers
            or Ranchers'' do not have to meet this requirement.

        Producers who planted, or are considered to have planted trees they
    are eligible for assistance in the form of:

       replanting and the cost of seedlings or cuttings, for tree,
            bush, or vine replacement the lessor of either of the
            following:

         70 percent of the actual cost of the practice

         total amount calculated using the national rates
                established for that practice.

       rehabilitation and the cost of pruning, removal, and other
            costs incurred for salvaging existing trees, bushes, or vines,
            or in the case of mortality, to prepare the land to replant
            trees, bushes, or vines, the lesser of the following:

         50 percent of the actual cost of the practice

         amount calculated using the national rates established
                for that practice.

        Producers who had a production history on planted or existing trees
    they are eligible for assistance for the cost of pruning, removing
    debris, and other costs incurred for salvaging existing trees or, for
    tree mortality, to prepare the land to replant trees the lessor of the
    following:

       50 percent of the actual total cost of the practice

       total amount calculated using national rates established
            for the practice.

        Eligible applicants qualify for TAP only if the tree, bush, or vine
    mortality in each stand, for each eligible natural disaster, exceeds
    the 15 percent loss threshold, plus normal mortality. The 15 percent
    mortality, adjusted for normal mortality, must be met before damaged
    trees are eligible for payment.
        Eligible losses must have occurred on or after January 1, 2008, and
    before October 1, 2011.
        The cumulative total quantity of acres planted to trees, bushes, or
    vines, where a producer may receive TAP, cannot exceed 500 acres for
    all years, 2008 through 2011.
        For the 2008 program year, no person as defined and determined
    under provisions in 7 CFR Part 1400 in effect for 2008, may receive
    more than $100,000 total in payments under TAP. For 2009 and subsequent
    years, no person or legal entity, excluding joint venture or general
    partnership, may receive directly or indirectly, more than $100,000
    total in payments.
        For the 2009 and subsequent program years, producers or legal
    entities whose average non-farm Adjusted Gross Income (AGI) exceeds
    $500,000 are not eligible. For the 2008 program year, producers are not
    eligible if their average AGI is $2.5 million or greater, unless 75
    percent or more of their AGI is from agriculture. Direct attribution
    provisions also apply to TAP for 2009 and subsequent years. Under
    direct attribution, any payment to a legal entity also will be
    considered for payment limitation purposes to be a payment to a persons
    or legal entity with an interest in the legal entity or in a sub-
    entity.
        TAP applicants who suffer eligible losses must file a Tree
    Assistance Program Application within 90 calendar days from the
    occurrence of the disaster event or the date when the loss become
    apparent to the producer. Upon completion of the practices the producer
    must provide copies of all sales receipts, invoices, canceled checks or
    other documentation necessary to determine cost. Practices must be
    completed within 12 months of an approved application.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
                                             Number of producers receiving
    Number of producers applying for TAP                payment
    ------------------------------------------------------------------------
                      2008--289                                  161
                      2009--194                                   87
                      2010--366                                   74
                      2011--110                                  * 6
    ------------------------------------------------------------------------
    * As of July 19.

    11. Duplication or Overlap with Other Programs
        TAP does not duplicate benefits delivered by other USDA disaster
    assistance programs. It is the only program that provides compensation
    to replant or rehabilitate trees, bushes, or vines that were lost or
    damaged as the result of a natural disaster. The Noninsured Crop
    Disaster Assistance Program (NAP) complements TAP by covering the
    actual loss of fruit or nut production. There is no overlap between
    those programs. Regarding nursery, again TAP pays for the cost of re-
    establishing (seedling or grafts) or rehabilitating the nursery while
    NAP covers the loss of value of the crop at the time the disaster
    occurs.
    12. Waste, Fraud and Abuse
        There has been no extensive Office of Inspector General (OIG) or
    Government Accountability Office (GAO) audit of the program during the
    last 4 years. Currently, we do not have a current audit that indicates
    on-going systemic waste, fraud, or abuse. FSA conducts its own internal
    investigation through its county office review process and through its
    internal review audit process.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish
    Program (ELAP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill)
    established five disaster assistance programs: ELAP, Livestock Forage
    Disaster Program (LFP), Livestock Indemnity Program (LIP), Supplemental
    Revenue Assistance Payments Program (SURE) and the Tree Assistance
    Program (TAP). Sections 12033 and 15101 of the 2008 Farm Bill
    authorized the Secretary to use up to $50 million per year from the
    Agricultural Disaster Relief Trust Fund to provide emergency relief to
    eligible producers under ELAP.
    4. Purpose/Goals
        ELAP provides emergency assistance to eligible producers of
    livestock, honeybees and farm-raised fish that have losses due to
    disease, adverse weather or other conditions, including losses due to
    blizzards and wildfires. ELAP covers losses occurring on or after
    January 1, 2008, and before October 1, 2011 that are not covered under
    any of the other disaster assistance programs established by the 2008
    Farm Bill.
    5. Success in Meeting Programmatic Purpose/Goals
        To date, ELAP has successfully provided over $29 million in
    benefits to eligible livestock, honeybee, and farm-raised fish
    producers for 2008 through 2010 calendar year losses nationwide. The
    following table provides the total benefits disbursed nationwide to
    eligible livestock, honeybee and farm-raised fish producers for the
    calendar year in which the losses occurred.

    ------------------------------------------------------------------------
            Calendar Year of Loss               ELAP Payments Disbursed
    ------------------------------------------------------------------------
                           2008                          $10,779,914
                           2009                          $11,824,366
                           2010                           $6,572,795
                                         -----------------------------------
      Total.............................                 $29,177,076
    ------------------------------------------------------------------------

        ELAP has been particularly beneficial to beekeepers whose bees
    suffered from Colony Collapse Disorder (CCD). The following table
    provides approximate benefits disbursed nationwide to eligible honeybee
    producers due to CCD.

    ------------------------------------------------------------------------
            Calendar Year of Loss               ELAP Honeybee Payments
    ------------------------------------------------------------------------
                           2008                      Over $6 million
                           2009                      Over $7 million
                           2010                      Over $5 million
    ------------------------------------------------------------------------

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ELAP                             $0           $0           $0           $0           $0           $0           $0           $0      $21,460      $50,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ELAP                             $0           $0           $0           $0           $0           $0           $0           $0      $21,413      $50,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria

        General Producer Eligibility:

        To be considered an eligible producer for ELAP, producers must:

         file a notice of loss, no later than 30 calendar days of when the loss is apparent to the producer and file an application for payment by
          the applicable signup deadline.

         have suffered eligible losses of livestock, honeybees, and farm-raised fish because of an eligible adverse weather event or loss condition
          that occurred on or after January 1, 2008 and before October 1, 2011 and in the calendar year for which assistance is being requested.

         have suffered losses that are physically located in the county where the eligible adverse weather or eligible loss condition occurred.

         for every commodity in which the producer has an interest for the relevant program year:

             in the case of an insurable commodity, obtain catastrophic coverage or better under a policy or plan of insurance administered
              under the Federal Crop Insurance Act except this obligation will not include forage crops intended for grazing.

             in the case of a noninsurable commodity, obtain Noninsured Crop Disaster Assistance Program coverage by filing the required pa-
              perwork and paying the administrative fee by the applicable state application closing date, except that this requirement will not in-
              clude forage on grazing land

        There is a $100,000 limitation per crop year that applies to payments received under ELAP, LFP, LIP or SURE. Individuals or entities are ineligible
     for a payment under ELAP for 2008 if their average Adjusted Gross Income for 2005, 2006 and 2007 exceeds $2.5 million. For 2009 through 2011, an
     average adjusted gross non-farm income limitation of $500,000 applies.

        Eligible Losses:

        An eligible loss under ELAP is a loss that an eligible producer or contract grower of livestock, honeybees, or farm-raised fish incurs because of an
     eligible adverse weather event or loss condition including, but not limited to, blizzards and wildfires. To be considered an eligible loss, the loss
     must have occurred:

         during the calendar year for which payment is being requested.

         on or after January 1, 2008, and before October 1, 2011.

         in the county where the eligible adverse weather event or loss condition occurred.

        Eligible livestock losses include livestock death losses and livestock feed and grazing losses that are not due to drought or wildfires on federally
     managed lands, caused by an eligible adverse weather event or loss condition.
        Eligible honeybee losses include the loss of honeybee colonies in excess of normal mortality, honeybee hives, and purchase or produced honeybee feed
     losses caused by an eligible adverse weather event or loss condition.
        Eligible farm-raised fish losses include death losses of eligible bait fish or game fish and purchased or produced farm-raised fish feed losses
     caused by an eligible adverse weather event or loss condition.

    10. Utilization (Participation) Data

        The following table provides the number and amount of ELAP payments disbursed by state for the 2008 through 2010 calendar years.

    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Total ELAP
        State       2008 No. of    2008 ELAP    2009 No. of    2009 ELAP     2010 No. of    2010 ELAP     Payments
                     Payments                    Payments                     Payments                    Disbursed
    ----------------------------------------------------------------------------------------------------------------
               AL            11       $80,808            17        $78,610             5       $34,515      $193,933
              AK              5        $6,084                                                                 $6,684
              AZ              1      $106,000            13       $234,123             5      $162,892      $497,015
              AR              1       $10,008             3       $157,780             4      $127,667      $295,455
              CA             54    $1,206,084            59     $1,380,580            29      $593,593    $3,180,257
              CO              2       $83,522             5        $49,261             8       $60,248      $193,031
              CT                                          1         $3,044                                    $3,044
               FL           187    $2,918,121            14       $272,028           109      $803,963    $3,994,112
              GA             15      $225,720            17       $141,021             9       $55,447      $422,188
              ID             17      $367,022            18       $360,546            15      $384,246    $1,111,814
               IL             5       $21,168             5        $15,876             1        $4,608       $41,652
              IN              2       $30,405             7        $73,409             1        $3,744      $107,558
              IA             15      $210,922            15       $376,150            11      $133,741      $720,813
              KS              8       $82,912             8        $34,801             4       $41,168      $158,881
              KY              5        $2,016             8         $2,916            11      $118,657      $123,589
                LA          136      $775,927            23        $98,768                                  $874,695
              MD                                          4        $11,196             1       $19,008       $30,204
              MA              2      $100,000             4       $102,124             4      $200,504      $402,628
              MI             12   $334,758.29            11       $153,259             6       $67,266      $555,283
              MN             12      $276,836            17    $423,641.64            11      $277,328      $977,806
              MS              3        $9,899            11        $52,258           108      $235,871      $298,028
              MO             10       $36,703             3         $9,285             4       $39,015       $85,003
              MT             21      $329,634           190     $1,132,114            10      $209,485    $1,671,233
              NE             16      $136,990             3        $43,956            23       $97,711      $278,657
              NM              4        $7,602             3        $34,735            93      $305,619      $347,956
              NY              9      $180,562            10       $178,997            15      $203,191      $562,750
              NC             22      $124,397            26        $38,302            14       $71,736      $234,435
              ND             17      $605,980            64       $895,631             8      $283,596    $1,785,207
              OH              6       $24,171            11        $49,392             5       $19,109       $92,672
              OK              1        $7,803            33       $213,427             1          $600      $221,830
              OR             11      $117,754            16       $303,612             7      $114,070      $534,836
              PA              9       $73,962            18       $158,271             9      $173,359      $405,592
              SC              2        $2,196             3         $7,363                                    $9,559
              SD             50    $1,082,515           207     $2,122,966           134    $1,170,655    $4,376,076
              TN              1        $1,584             2         $2,088             3        $5,381        $9,053
              TX             15      $658,553            17    $532,950.19             6      $121,839    $1,313,342
              UT              8      $137,903             5        $61,128            10       $74,540      $273,571
              VA              5       $18,820             7         $5,952            10       $24,946       $49,718
              WA              6      $248,123            16       $482,416             3      $164,628      $895,161
              WV                                                                       1        $1,084        $1,084
              WI             11      $102,645            10        $70,713             9       $66,727      $240,085
              WY              4       $39,805           162  $1,460,342.60            11      $101,038    $1,601,186
                  --------------------------------------------------------------------------------------------------
      Totals.....           721   $10,779,914         1,066    $11,824,366           718    $6,572,795   $29,177,076
    ----------------------------------------------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        There is no overlap or duplication. ELAP is specifically authorized
    to provide assistance for losses not covered under any other disaster
    assistance program established by the 2008 Farm Bill.
    12. Waste, Fraud and Abuse
        There has been no Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of ELAP. FSA conducts its own
    internal investigations through its county office review process and
    through its internal review audit process. These reviews have not
    raised any significant issues of waste, fraud, and abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Noninsured Crop Disaster Assistance Program (NAP).
    2. Subprograms/Department Initiatives
        N/A.
    3. Brief History
        NAP was initially authorized under the Federal Crop Insurance
    Reform and Department of Agriculture Reorganization Act of 1994 (P.L.
    103-354). NAP was reauthorized under Section 196 of the Federal
    Agriculture Improvement and Reform Act of 1996 (P.L. 104-127) which
    also terminated the prior authorities. NAP provides financial
    assistance to producers of noninsurable crops when natural disasters
    occur. The regulations governing NAP are found at 7 CFR Part 1437.
        NAP is a permanent program designed to reduce financial losses that
    occur when natural disasters cause a catastrophic loss of production or
    prevented planting for noninsurable crops by providing coverage
    equivalent to the catastrophic risk protection (CAT) level of crop
    insurance.
    4. Purpose/Goals
        NAP provides financial assistance to producers of noninsurable
    crops when low yields, loss of inventory, or prevented planting occur
    due to natural disasters. NAP is a standing risk tool producers can use
    to mitigate noninsured crop losses similar to crop insurance.
    5. Success in Meeting Programmatic Purpose/Goals
        During 2009, NAP producer enrollment increased by 19.73 percent
    over 2008, in part, because the 2008 Farm Bill requires total farm
    participation in NAP and/or purchase of crop insurance for eligibility
    for other disaster programs (specifically, SURE, TAP, and ELAP).
    Although participation increased, dollars paid out in crop year 2010
    decreased from approximately $89 million for crop year 2009 to $52
    million in 2010. It is important to note that dollars paid are directly
    related to the severity and number of disasters that occur in any given
    crop year.
        NAP continues to provide coverage equivalent to catastrophic (CAT)
    insurance for each commercial crop or agricultural commodity, except
    livestock, for which CAT is not available.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Non-Insured Assistance     $182,199     $237,149     $124,108     $109,619      $66,268     $126,951      $73,989      $62,064      $98,745     $116,873
     Payments
    NAP Fees                    ^16,319       ^8,359      ^12,550       ^9,879       ^9,155       ^7,760      ^11,529      ^23,621      ^19,396      ^29,086
                           ---------------------------------------------------------------------------------------------------------------------------------
      Net Budget Authority      165,880      228,790      111,558       99,740       57,113      119,191       62,460       38,443       79,349       87,787
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Budget authority for CCC programs is based on obligations. Funds obligated in one fiscal year may not be disbursed until a succeeding fiscal year or
     fiscal years. In the case of these two programs, obligations, budget authority and outlays are incurred at the same time period.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Non-Insured Assistance     $182,199     $237,149     $124,108     $109,619      $66,268     $126,951      $73,989      $62,064      $98,745     $116,873
     Payments
    NAP Fees                    ^16,319       ^8,359      ^12,550       ^9,879       ^9,155       ^7,760      ^11,529      ^23,621      ^19,396      ^29,086
                           ---------------------------------------------------------------------------------------------------------------------------------
    Net Outlays                 165,880      228,790      111,558       99,740       57,113      119,191       62,460       38,443       79,349       87,787
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        An eligible producer is a landowner, tenant or sharecropper who has
    an ownership share and shares in the risk of producing an eligible
    crop. Crops must be noninsurable crops and agricultural commodities for
    which the CAT level of crop insurance is not available, and must be any
    of the following commercially produced crops:

       crops grown for food;

       crops planted and grown for livestock consumption,
            including, but not limited to grain and forage crops, including
            native forage;

       crops grown for fiber, such as cotton and flax (except for
            trees);

       crops grown under a controlled environment such as mushrooms
            and floriculture;

       specialty crops, such as honey and maple sap;

       value loss crops, such as aquaculture, Christmas trees,
            ginseng, ornamental nursery and turfgrass sod;

       sea oats and sea grass; and

       seed crops where the propagation stock is produced for sale
            as seed stock for other eligible NAP crop production.

        Producers must apply for NAP coverage and pay the applicable
    service fee at their local Farm Service Agency (FSA) office 30 calendar
    days prior to the beginning of the coverage period. The application and
    service fees must be filed by the application closing date as
    established. The service; fee is $250 per crop or $750 per producer per
    administrative county, not to exceed a total of $1,875 per producer
    with farming interests in multiple counties. Limited resource producers
    may request a waiver of the NAP service fees.
        Producers are required to provide acreage and production reports in
    a timely manner, and in the event a loss occurs, file a notice of loss
    within the earlier of 15 days of the disaster event or when the damage
    becomes apparent to the producer. To finalize a claim producers have
    until the subsequent year's acreage reporting date to submit an
    application for payment
        For 2009 and subsequent years, no person or legal entity, excluding
    joint venture or general partnership, may receive directly or
    indirectly, more than $100,000 total in payments under NAP.
        For 2009 and subsequent years, the average AGI limitation relating
    to limits on payments for persons or legal entities, excluding joint
    ventures and general partnerships, with certain levels of average
    adjusted gross income will apply. Specifically, for 2009 and subsequent
    years, a person or legal entity with an average adjusted gross non-farm
    income, as defined in 7 CFR Part 1404.3 that exceeds $500,000 will not
    be eligible to receive NAP payments. Direct attribution provisions also
    apply to NAP for 2009 and subsequent years. Under direct attribution,
    any payment to a legal entity also will be considered for payment
    limitation purposes to be a payment to a persons or legal entity with
    an interest in the legal entity or in a sub-entity.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
      Number of producers obtaining NAP      Number of producers receiving
                  coverage                              payment
    ------------------------------------------------------------------------
                 2008--53,222 *                               16,509
                 2009--63,724 *                               16,958
                 2010--52,572 *                                9,194
                 2011--52,058 *                    Not yet available
    ------------------------------------------------------------------------
    * If a producer is operating in two counties, the producer would be
      counted twice.

    11. Duplication or Overlap with Other Programs
        By statute, NAP is prohibited from paying multiple benefits for the
    same loss. If the producer is eligible to receive NAP payments and
    benefits under any other program administered by the Secretary for the
    same crop loss, the producer must choose whether to receive NAP
    payments or benefits from any other program. Exceptions to this rule
    include past ad hoc Crop Disaster Programs and recently the
    Supplemental Revenue Assistance Payments (SURE) Program. SURE is a
    supplemental program to crop insurance and NAP coverage and only pays
    on shallow losses. NAP payments are included in total farm revenue when
    SURE payments are calculated.
        NAP works in concert with the Tree Assistance Program (TAP). TAP
    compensates eligible producers of commercial fruit, nut, and nursery
    crops to cover the cost of reestablishing or rehabilitating lost or
    damaged trees, bushes, or vines while NAP covers the actual loss of
    fruit or nut production. Similarly, for nursery losses, TAP pays for
    the cost of re-establishing (seedling or graft) or rehabilitating the
    nursery where NAP covers the loss of value of the crop at the time the
    disaster occurs.
    12. Waste, Fraud and Abuse
        The Department is not aware of any national problems of fraud,
    waste, and abuse. To comply with the Improper Payments Information Act
    of 2002, FSA conducts internal investigations through the County Office
    Review Program of high risk programs. NAP overpayments have decreased
    from 22.94 percent in Fiscal Year 2006 to 11.65 percent in Fiscal Year
    2010. Many of the improper payments are due to complexities of the
    program associated to calculating an approved yield. The National
    Office has developed and enhanced corrective actions each year to
    address IPIA findings and NAP Compliance Overview findings.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Sugar Program.
    2. Subprograms/Department Initiatives
        The sugar program is a collection of Federal programs designed to
    support, at minimal Federal cost, producer returns from growing
    sugarcane and sugarbeets. The programs collectively referred to as the
    Sugar Program include: the Price Support Loan Program, the Flexible
    Marketing Allotments for Sugar Program, the Tariff Rate Quota Program,
    and the Feedstock Flexibility Program for Bioenergy Producers.
        The Price Support Loan Program establishes the support level by
    providing non-recourse loans to processors of domestically grown
    sugarcane and sugarbeets based on loan rates mandated in farm bills. If
    market returns are lower than loan proceeds at the time of loan
    maturity, sugarbeet and sugarcane processors can fully satisfy their
    loan obligations by forfeiting sugar loan collateral to the Commodity
    Credit Corporation (CCC). Since sugar producers can always receive at
    least the loan proceeds from their crop, the loan rate acts as a floor
    on the market price of domestic sugar.
        The remaining programs work to limit the domestic sugar supply to
    result in higher domestic prices than the support price imposed by the
    sugar loan program, and hence, minimize or eliminate forfeiture costs.
    The Department limits domestic supply through (1) the Flexible
    Marketing Allotments for Sugar Program, which provides limits for the
    quantity of sugar that domestic sugarbeet and sugarcane processors can
    market; (2) an imported sugar supply control strategy that includes a
    prohibitively high tariff rate for unrestricted imports and adjustable
    Tariff Rate Quotas (TRQ) that limit foreign sugar imports at the low
    tier tariff; and (3) the Feedstock Flexibility Program for Bioenergy
    Producers, which authorizes USDA to purchase surplus sugar in the
    marketplace and sell it to producers of bio-energy to prevent loan
    forfeitures under the Price Support Loan Program. The Feedstock
    Flexibility Program is authorized under Title IX of the Food,
    Conservation, and Energy Act of 2008 (2008 Farm Bill). To date, the
    Feedstock Flexibility Program has not been needed due to high domestic
    sugar prices. Regulations implementing the Feedstock Flexibility
    Program are currently under development.
    3. Brief History
        Domestic sugar production has been supported by tariffs on imported
    sugar since 1789. The early tariffs were established primarily to
    provide government revenue. However, since 1894, the tariffs were
    created primarily to support the domestic sugar industry. Extensive
    government regulation of the sugar industry began with the Sugar Act of
    1934, which established the domestic sugar market supply control
    strategy still used today. Market shares were assigned for domestic
    beet sugar, domestic raw cane sugar, and imported sugar. The Sugar Act
    was allowed to lapse during the 1974 sugar price spike.
        Sugar loan provisions were first included in the Food and
    Agriculture Act of 1977, and modified to the current non-recourse loan
    program under the Food and Agriculture Act of 1981. By 1984,
    overproduction in the U.S. led to forfeitures costing the U.S. Treasury
    $105 million. In response. Congress inserted the no-cost provision
    requiring program administrators to strongly avoid forfeitures in the
    1985 Farm bill. Tariff-rate quotas (TRQs), which allow a set amount of
    imports with almost no tariff and an unrestricted high tier tariff on
    additional imports, replaced strict import quotas in the late 1980s.
    TRQs are based on each country's share of the U.S. market during 1975-
    81 when imports were relatively unrestricted. The 1990 Farm bill
    reinstated domestic supply controls as the marketing allotment program.
    The 2008 Farm Bill also mandated the Feedstock Flexibility Program.
    4. Purpose/Goals
        The purpose of the sugar program is to support producer returns
    from raising sugarcane and sugarbeets, to the extent practicable, at no
    cost to the Federal budget.
    5. Success in Meeting Programmatic Purpose/Goals
        CCC has been fairly successful in achieving the goals of the sugar
    program. The market value of production of sugarbeets and sugarcane
    increased 14 percent and 40 percent, respectively, between FY 2005 and
    FY 2010. Beet processors forfeited 40,000 tons of 2004-crop beet sugar
    with a loan value of 22.7 cents per pound. CCC sold the sugar inventory
    back to the market for 21.8 cents per pound, for a net realized loss of
    $742,000. Since 2005, the domestic market has tightened and the primary
    sugar program issue has been focused on maintaining adequate supplies.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Outlays              $736,807     $879,856     $871,130     $824,168     $794,209   $1,051,171   $1,237,787   $1,118,371     $875,200     $891,402
    Total Receipts              866,883      964,016      809,865      910,135      783,815    l,026,436    1,272,821    1,118,369      875,200      891,402
                           ---------------------------------------------------------------------------------------------------------------------------------
      Net Expenditures         ^130,076      ^84,161       61,265      ^85,966       10,394       24,735      ^35,034            2            0            0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        These programs are funded by Commodity Credit Corporation (CCC). Budget authority for these CCC programs is based on actual outlays.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Outlays              $736,807     $879,856     $871,130     $824,168     $794,209   $1,051,171   $1,237,787   $1,118,371     $875,200     $891,402
    Total Receipts              866,883      964,016      809,865      910,135      783,815    1,026,436    1,272,821    1,118,369      875,200      891,402
                           ---------------------------------------------------------------------------------------------------------------------------------
      Net Expenditures         ^130,076      ^S4,161       61,265      ^85,966       10,394       24,735      ^35,034            2            0            0
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible for loans, a sugarbeet or sugarcane processor must:
    agree to all the terms and conditions in the loan application, and
    execute a note, security agreement, and storage agreement with CCC.
    Sugar pledged as collateral during the crop year must be processed and
    owned by the eligible processor and stored in a CCC-approved warehouse.
    The loan collateral must have been processed in the United States.
        In order to be pledged as loan collateral, sugar and in-process
    sugar must be dry and free flowing; free of excessive sediment; and
    free of any objectionable color, flavor, odor, or other characteristic
    that would impair its merchantability or that would impair or prevent
    its use for normal commercial purposes.
    10. Utilization (Participation) Data
        Since FY 2000, loan participation has been steady with, on average,
    about 21 percent of the sugarcane crop's annual production placed under
    loan with the CCC. Around 26 percent of the annual sugarbeet crop is
    normally placed under loan. Loans, which are generally placed early in
    the fiscal year once harvest begins, help the processor make advance
    payments to growers upon delivery of their beets to the processor. This
    permits growers to be paid for their beet or cane crop up to 10 months
    earlier than the processor (usually owned by the growers) receives
    revenues from the sale of the sugar made from the crop.
    11. Duplication or Overlap with Other Programs
        The Sugar Program is not duplicative of other commodity programs,
    as it offers unique benefits to the sugar market and its participants.
    However, there is some beneficial overlap with other programs. For
    instance, growers of sugarcane and sugarbeets must be in compliance
    with highly erodible and wetlands regulations in order to protect
    processor eligibility. Likewise, these growers must meet all certified
    acreage reporting requirements.
    12. Waste, Fraud and Abuse
        There has been no extensive Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of the program during the past 5
    years. Although on rare occasion accusations of misconduct have arisen,
    internal FSA review indicated no waste, fraud or abuse. Furthermore,
    the sugar regulation authorizes CCC to require sugarbeet processors,
    sugarcane processors, sugarcane refiners and importers of sugar, as
    selected by CCC, to submit a report prepared by an independent
    Certified Public Accountant that reviews information submitted to CCC
    during the previous crop year. These reports have yet to indicate
    waste, fraud or other abuses.
    13. Effect of Administrative PAYGO
        Exhibit 1 shows the costs and savings related to USDA's
    Administrative PAYGO Scorecard.
                                     ______

    1. Program Name
        Farm Storage Facility Loan (FSFL) Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The FSFL Program was originally authorized by the Commodity Credit
    Corporation (CCC) Charter Act of 1933. Specifically, the CCC Charter
    Act provides that the Corporation may make loans to grain producers
    needing storage facilities and that loans shall be made in areas in
    which the Secretary determines that there is a deficiency of such
    storage.
        The CCC had made loans for storage facilities intermittently since
    1948 and stopped issuing storage facility loans in 1982 based on
    studies that revealed that producers had sufficient storage for their
    crops. However, demand for storage has increased dramatically since
    1995 and storage shortages currently exist in some areas. The net
    decrease in storage capacity from 1996 to 1998 has been about 79.5
    million bushels, or nearly one percent of total capacity. During this
    same period, grain production increased by nearly eight percent, from
    14 billion bushels in 1996 to 15 billion bushels in 1998. As a result,
    it was determined there was insufficient capacity to allow farmers to
    store their grain, forcing farmers to sell at harvest when prices are
    usually at their lowest. Therefore, on February 2, 2000, the Secretary
    announced the availability of financing for on-farm storage and
    handling facilities.
        Section 1614 of the Food, Conservation, and Energy Act of 2008
    (2008 Farm Bill), authorized the Secretary to establish a storage
    facility loan program to producers of grains, oilseeds, pulse crops,
    hay, renewable biomass, and other storable commodities (other than
    sugar), as determined by the Secretary. Accordingly, regulations
    implementing the 2008 Farm Bill added fruits and vegetables as eligible
    commodities for on-farm storage. The maximum loan amount is $500,000
    per structure and depending on the loan amount, the FSFL borrower has
    the option of selecting 7, 10, or 12 year repayment terms for the FSFL.
    4. Purpose/Goals
        The purpose of the FSFL Program is to assist producers with low-
    interest financing for adequate capacity to store their harvested
    production until they sell it on the open market. The FSFL Program adds
    additional storage capacity in deficit areas and producers also benefit
    from the potential for higher market returns on their crops.
    5. Success in Meeting Programmatic Purpose/Goals
        The FSFL Program has been very successful with meeting program
    goals to provide low interest financing for on-farm storage. Since FSFL
    was reestablished in FY 2000, over 27,900 FSFL's have been disbursed
    providing on-farm storage for over 785 million bushels of eligible
    commodities. The FSFL Program has seen increased interest in the past
    several years mainly due to the construction of ethanol plants in the
    Midwest and South. The vast majority of FSFL borrowers make their
    annual installment payments on time as the program has a delinquency
    rate of less than 0.005 percent.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Farm Storage Facility        $3,025       $1,897       $2,322       $1,157       $1,238         $475       $1,540      $12,500          $15           $0
     Loans--Subsidy
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Farm Storage Facility        $1,654         $820       $1,502         $989         $290         $502       $1,135       $4,796       $7,446           $0
     Loans--Subsidy
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    The FSFL Program is a credit reform program. Budget Authority and outlays reflect estimated subsidy costs of disbursing the direct loans in each fiscal
      year.

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan. The administrative costs included in the
     table below are the aggregate costs for all the programs in the table. Costs for individual programs are not available.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        Producers requesting a FSFL must provide information to the FSA
    County Office to support the need for on-farm storage. Specific
    eligibility requirements for applicants are as follows:

       producer of an eligible commodity

       engaged in farming

       has a satisfactory credit rating as determined by CCC

       demonstrates the ability to pay the down payment and repay
            the debt resulting from FSFL

       has no delinquent Federal debt as defined by the Debt
            Collection Improvement Act of 1996

       has not been convicted under Federal or state law of a
            controlled substance violation

       provide proof of insurance requirements, such as:

         multi-peril crop insurance

         all-peril structural insurance

         flood insurance, if applicable

       demonstrates compliance with USDA provisions for highly
            erodible land and wetland provisions

       demonstrates compliance with National Environmental Policy
            Act

       demonstrates compliance with any applicable local zoning,
            land use and building codes for the applicable farm storage
            facility structure.
    10. Utilization (Participation) Data
        The FSFL Program has provided financing for on-farm storage for
    over 785 million bushels of eligible commodities since FY 2000. FSFL
    applications have increased from 1,717 in FY 2005 to 3,961 in FY 2010.
    In FY 2006, the Commodity Credit Corporation (CCC) made nearly $100
    million in FSFLs, while in FY 2010 the loan amount of FSFLs exceeded
    $296 million. To date, in FY 2010, 3,926 FSFLs have been obligated and
    disbursed totaling $291 million. Currently, in FY 2011, 2,110 FSFLs
    have been obligated and disbursed totaling $175 million. Also, in FY
    2011, applications for 93 hay storage structures were received and 55
    have been disbursed, and eight fruit and vegetable applications were
    received and one has been disbursed.
    11. Duplication or Overlap with Other Programs
        The USDA's Rural Development (RD) Mission Area has grants and loans
    for certain energy efficiency improvements under the Rural Energy for
    America Program (REAP). Producers are eligible for certain grants and
    loans to purchase or replace energy efficient equipment in commodity
    storage structures.
        CCC is currently collaborating with RD to identify any cases where
    duplication or overlap of FSFL disbursements may have occurred with the
    grant and loan program offered by RD. If duplication of benefits have
    occurred, CCC is reducing the outstanding FSFL principal by the amount
    of the RD grant or loan. To prevent this from continuing, CCC
    implemented a form that producers sign before their final FSFL
    disbursement. This form provides producer certification that they have
    not applied, been approved for, or received government grants or loans
    on the same structure requested for FSFL. Having this certification
    before the FSFL disbursement will ensure that there is no duplication
    or overlap of benefits under FSFL.
    12. Waste, Fraud and Abuse
        The FSFL Program has been reviewed frequently by County Office
    Reviewers and it has been determined that the program findings are
    insignificant. Additionally, because second party reviews are performed
    by FSA staff and final cost documents are submitted by producers to
    support the cost of the storage structure before all FSFL closings,
    waste, fraud, and abuse would be considered minimal.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Durum Wheat Quality Program (DWQP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 1613 of the Food, Conservation, and Energy Act of 2008 (the
    2008 Farm Bill) authorized up to $10 million to be appropriated for
    each of the 2009 through 2012 Fiscal Years (FY) to compensate producers
    of durum wheat for up to 50 percent of the actual cost of fungicide
    applied to control Fusarium head blight, a fungal disease commonly
    known as ``wheat scab.''
        The Agriculture, Rural Development, Food and Drug Administration,
    and Related Agencies Appropriations Act, 2010 provided $3 million for
    this program in FY 2010. No funding was appropriated for this program
    in FY 2009 or 2011. To date, no funding has been appropriated for this
    program for FY 2012.
        If applications for assistance exceed the funding availability for
    a particular crop year, payment amounts are reduced by a 'national
    payment factor' so that each applicant receives a pro-rata share of the
    available funding. In FY 2010, payments were reduced by a national
    payment factor of 0.9663.
    4. Purpose/Goals
        The purpose of this program is to provide cost-share assistance to
    durum wheat producers for the purchase and application of an eligible
    fungicide used on acres planted to durum wheat to control wheat scab.
    5. Success in Meeting Programmatic Purpose/Goals
        DWQP successfully provided cost-share assistance to durum wheat
    producers for their share of the purchase price of an eligible
    fungicide and the cost of applying the eligible fungicide to durum
    wheat acres. In FY 2011, over $2.8 million was allocated to durum wheat
    producers in Idaho, Minnesota, Montana, North Dakota and South Dakota.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Durum Wheat Quality              $0           $0           $0           $0           $0           $0           $0           $0       $3,000           $0
     Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Durum Wheat Quality              $0           $0           $0           $0           $0           $0           $0           $0           $0       $2,850
     Program
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Of the $3 million appropriated for this program in FY 2010, $150,000 is being held in reserve for possible future appeal cases.

    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        The program has only been available during FY 2010, the portion of
    Agency overhead expenditures allocated to the program during the fiscal
    year have not been captured but are believed to be minimal.
    9. Eligibility Criteria
        Producer Eligibility:

        To be considered an eligible producer, the producer must have a
    share in the treated durum wheat crop planted on eligible acres and in
    the cost of either or both of the following:

       purchasing an eligible fungicide

       applying an eligible fungicide to eligible acres.

        Eligible Fungicide:

        To be considered an eligible fungicide for DWQP, the fungicide must
    be:

       registered with the Environmental Protection Agency (EPA),
            as required under the Federal Insecticide, Fungicide, and
            Rodenticide Act (FIFRA), unless exempt from FIFRA requirements

       compliant with pesticide regulations in the state in which
            benefits are being requested

       used specifically for one fungicide treatment in the
            applicable crop year, to control Fusarium head blight on
            eligible acres.

        Eligible Acres:

        To be considered eligible acres for DWQP, the acres must be planted
    to durum wheat and treated with an eligible fungicide to specifically
    control Fusarium head blight and applied during the flowering stage.
    10. Utilization (Participation) Data
        In FY 2011, over $2.8 million was allocated to 1,020 durum wheat
    producers in Idaho, Minnesota, Montana, North Dakota and South Dakota.
    DWQP provided cost-share assistance to durum wheat producers for
    551,984 acres in the following five states.

    ------------------------------------------------------------------------
                    State                                Acres
    ------------------------------------------------------------------------
                          Idaho                                  150
                      Minnesota                                4,713
                        Montana                               17,362
                   North Dakota                              528,257
                   South Dakota                                1,501
                                         -----------------------------------
      Total.............................                     551,984
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        DWQP does not duplicate or overlap any other USDA program.
    12. Waste, Fraud and Abuse
        There has been no Office of Inspector (OIG) or Government
    Accountability Office (GAO) audit of DWQP. FSA conducts its own
    internal investigation through its county office review process and
    through its internal review audit process. The potential for fraud and
    abuse is minimal since producers are required to show proof of purchase
    and treatment with an EPA approved fungicide.
    13. Effect of Administrative PAYGO
        DWQP is funded through the discretionary appropriations process;
    accordingly, it is not subject to Administrative PAYGO procedures
                                     ______

    1. Program Name
        Reimbursement Transportation Cost Payment (RTCP) Program for
    Geographically Disadvantaged Farmers and Ranchers.
    2. Subprograms/Department Initiatives
        Subprograms--None.

        Department Initiatives--None.
    3. Brief History
        The 2008 Farm Bill authorized the RTCP program to provide
    assistance to geographically disadvantaged farmers and ranchers in
    Hawaii, Alaska, and insular areas (Guam, American Samoa, Commonwealth
    of Puerto Rico, Commonwealth of the Northern Mariana Islands, Federated
    States of Micronesia, Republic of the Marshall Islands, Republic of
    Palau, and the Virgin Islands of the United States). The program
    reimburses producers for a portion of the transportation cost of their
    agricultural commodity, or inputs used to produce an agricultural
    commodity during a fiscal year. Under RTCP transportation costs of
    inputs used to produce an agricultural commodity include, but are not
    limited to, air freight, ocean freight, and land freight of chemicals,
    feed, fertilizer, fuel, seeds, plants, supplies, equipment parts, and
    other inputs as determined. RTCP is subject to appropriated funding.
    The 2010 Agriculture Appropriations Bill authorized $2.6 million and
    the 2011 Defense and Full-Year Continuing Appropriations Act of 2011
    authorized $1.996 million to assist geographically disadvantaged
    farmers and ranchers in accordance with Section 1621 of the 2008 Farm
    Bill.
    4. Purpose/Goals
        The purpose of the RTCP is to assist geographically isolated
    farmers and ranchers to access inputs needed for production (seed,
    fertilizer, pesticides, etc.) and get their product to market. The goal
    of the program is to provide payments to these targeted producers to
    offset a portion of their transportation costs.
    5. Success in Meeting Programmatic Purpose/Goals
        This program benefits farms and ranches in geographically
    disadvantaged areas of the U.S. Signup for 2010 RTCP program began Aug.
    2, 2010 and ended on Sept. 10, 2010. Distribution of payments for 2010
    RTCP began on July 20, 2011. In FY 2010, 1,545 geographically
    disadvantaged farmers and ranchers applied to participate in the
    program, and more are expected with the FY 2011 RTCP signup beginning
    July 25, 2011.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Reimbursement                    $0           $0           $0           $0           $0           $0           $0           $0       $2,600       $1,996
     Transportation Costs
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Annual Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008      FY 2009      FY 2010      FY 2011
                               Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual       Actual     Estimated
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Reimbursement                    $0           $0           $0           $0           $0           $0           $0           $0           $0       $2,600
     Transportation Costs
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011) ($ in Millions)
        The program first received funding in FY 2010, the portion of
    Agency overhead expenditures allocated to the program during the fiscal
    year have not been captured but are believed to be minimal.
    9. Eligibility Criteria
        To be eligible for RTCP program benefits, producers must:

       Be a geographically disadvantaged farmer or rancher
            producing and marketing, including the transportation of an
            agricultural commodity in an approved area;

       Submit an application during the specified period applicable
            for each fiscal year;

       Provide proof of the amount of costs incurred for the
            transportation of the agricultural commodity or input used to
            produce an agricultural commodity;

       Comply with conservation and wetland protection requirements
            on all their land;

       Have an average non-farm income that does not exceed
            $500,000; and

       Be a citizen or a legal resident alien of the United States
            in accordance with 7 CFR Part 1400 for foreign persons.
    10. Utilization (Participation) Data
       A total of 1,545 applicants applied to receive benefits
            under RTCP for FY 2010.

       Signup for FY 2011 RTCP began on July 25, 2011, and will end
            on September 9, 2011.
    11. Duplication or Overlap with Other Programs
        No duplication or overlap with other programs.
    12. Waste, Fraud and Abuse
        Minimal to no waste, fraud, or abuse in the RTCP program because
    verifiable evidence of costs incurred are required to qualify for
    program benefits.
    13. Effect of Administrative PAYGO
        RTCP is funded through the discretionary appropriations process;
    accordingly, it is not subject to Administrative PAYGO procedures.

                                                                            Exhibit 1
                                                                 Administrative PAYGO Scorecard
                                                                    (In Millions of Dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 FY 2006    FY 2007    FY 2008    FY 2009    FY 2010    FY 2011    FY 2012    FY 2013    FY 2014    FY 2015
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Savings
      GSM-102 implementation of risk based        (139.0)    (139.0)    (139.0)    (139.0)    (139.0)
       approach (FAS/GSM)
      RMA Terminations not previously counted                                        (4.6)     (23.0)     (23.4)     (23.7)     (24.1)
       (RMA/Crop Ins.)
      Forest Service Increase Timber and           (51.0)
       Payment to State Receipts (FS/KV)
      2008 $2 CRP Maintenance Reduction--                                            (0.1)      (0.6)     (24.6)     (28.7)     (31.6)
       present & future (FSA/CRP)
      2009 Reduction in CRP maintenance                                             (43.6)      (1.5)
       payments (FSA/CRP)
      2010 CRP Modification (Duck, Quail, SAFE/                                                   0.0        0.0        0.0        0.0        0.0      (2.9)
       Reduction in bottomland hardwood) (FSA/
       CRP)
      Crop Insurance Standard Risk Agreement                                                (2,000.0)
       (RMA/Crop Ins.)
    Costs
      Title XIX Treatment Facilities (FNS/            3.0        4.0        6.0        6.0        6.0
       SNAP)
      Forest Service Change in K-V Trust Fund          51         18
       Spending (FS/KV)
      Factor Removal (RMA/Crop Ins.)                                        0.4        2.7        8.3
      RMA Crop Expansions (RMA/Crop Ins.)                                              0.6       12.8
      CCC Section 4 Limit (FSA/CCC)                   7.5       10.8        6.9        5.3
      Food Aid Commodity Swaps (FSA/CCC)                        77.0       60.0      111.0       67.0
      Federal Base Acre reinstatement (FSA/                                            5.0
       Direct and Counter-cyclical)
      Wetland Incentives (FSA/CRP)                                                     7.8       14.6       17.3       19.2       20.8
      CREP Incentives (FSA/CRP)                                                        0.7        2.3        7.3        9.5       10.8
      ACRE sign-up extension (FSA/ACRE)                                                          30.0
      2009 CRP extensions (FSA/CRP)                                                   19.0
      July 2009 Increase in minimum dairy                                              7.0
       prices (CCC/Dairy Product Price
       Support)
      RMA--PRF-RI in MT (Board Approved) (RMA/                                         4.6       23.0       23.4       23.7       24.1
       Crop Ins.)
      CRP Initiatives (FSA/CRP)                                                                 500.0
      Crop Insurance Initiatives (RMA/Crop                                                    1,500.0
       Ins.)
                                               -------------------------------------------------------------------------------------------------------------
        Available Savings                         (128.5)     (29.2)     (65.7)     (17.6)      (0.0)        0.0        0.0      (0.0)        0.0      (2.9)
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                           AGRICULTURAL PROGRAM AUDIT

                    (EXAMINATION OF USDA RESEARCH PROGRAMS)

                                  ----------

                            THURSDAY, JULY 28, 2011

            Subcommittee on Rural Development,
          Research, Biotechnology, and Foreign
                                   Agriculture,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:05 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. Timothy
    V. Johnson [Chairman of the Subcommittee] presiding.
        Members present: Representatives Johnson, Thompson, Scott,
    Costa, and Kissell.
        Staff present: Mike Dunlap, John Goldberg, Tamara Hinton,
    DaNita Murray, Debbie Smith, Lauren Sturgeon, Suzanne Watson,
    Andy Baker, Nona S. Darrell, Liz Friedlander, Anne Simmons,
    John Konya, and Jamie Mitchell.

    OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE
                       IN CONGRESS FROM ILLINOIS

        The Chairman. This is a hearing of the Subcommittee on
    Rural Development, Research, Biotechnology, and Foreign
    Agriculture entitled, Agriculture Program Audit: Examination of
    USDA Research Programs, will come to order.
        I have an opening statement to make and I think the Ranking
    Member will and then we will proceed.
        Good morning. This hearing is the ninth in a series of
    audits of USDA farm programs. Through these discussions we hope
    to gain a better understanding of how each program is operating
    and what we might do to improve farm policy moving forward.
        As we move forward to write the next farm bill, we have to
    be mindful of current challenges and also anticipate future
    issues. A few perennial challenges for agriculture are that
    farmers and ranchers share all the obstacles that any small
    business faces such as access to credit, market demand, and
    variable input costs. Farmers and ranchers must also rely on
    weather to grow and harvest their crops and in spite of these
    challenges, our farmers and ranchers work hard every day to
    supply our country and consumers around the world with a safe
    and affordable supply of food and fiber.
        In addition to these challenges, we will soon face the
    issues of a dramatically growing population. The United Nations
    predicts that our population will grow \1/3\ by 2050 and
    feeding over nine billion people on the planet would require a
    70 percent increase in ag products. The only way to meet that
    growing demand will be through technological advances. In fact,
    research on new crop varieties, best practices, and
    biotechnology has been one of the most successful methods of
    increasing production to keep pace with demand.
        Continued investment in research can provide the necessary
    foundation to our farmers to remain competitive. The research
    projects conducted through public and private institutions
    touch every area of our lives. From research in food science
    and biotechnology, to integrated pest management, to
    agriculture extension and services, this Committee feels it is
    important to continue finding more efficient methods of
    production. It also includes educating rural and urban
    communities through agricultural extension services and youth
    programs.
        The USDA research mission is divided among four distinct
    agencies, and this morning we will be hearing from the
    administrators of each one. One of the many ways USDA works to
    fulfill the core mission of research, education, and extension
    is through land-grant colleges and universities throughout the
    United States. I might say parenthetically, my own University
    of Illinois being one of the preeminent institutions in the
    country in a lot of regards and specifically in this regard.
        USDA also conducts research in extension through Federal
    research stations located throughout the country and around the
    world. Through the gathering of market and production data, the
    Department of Agriculture also provides statistical information
    on the rural economy and the agriculture industry at large.
    This information is extremely valuable as policy makers work to
    craft agricultural and economic policies for rural America. As
    we consider the next farm bill, we are faced with scarce
    resources, so this Subcommittee has the responsibility to
    improve the administration of research programs to make the
    most efficient and effective use of funds available.
        Some of the areas we would like to address this morning are
    the duplication of programs, research priorities, USDA
    leveraging of Federal resources and the cost of administration
    and research mission area. In each area we are looking for
    opportunities to streamline. And I thank all the witnesses for
    appearing before the Subcommittee and look forward to our
    discussion.
        [The prepared statement of Mr. Johnson follows:]

      Prepared Statement of Hon. Timothy V. Johnson, a Representative in
                             Congress from Illinois
        Good morning. This hearing is the ninth in a series of audits of
    USDA farm programs. Through these discussions we will gain a better
    understanding of how each program is operating and what we might do to
    improve farm policy moving forward.
        As we write the next farm bill, we must not only be mindful of
    current challenges, but anticipate future issues as well.
        There are a few perennial challenges for agriculture. Our farmers
    and ranchers share all of the obstacles that any small business faces,
    such as access to credit, market demand, and variable input costs. But
    farmers and ranchers also must rely on the weather to grow and harvest
    their crops. In spite of these challenges, our farmers and ranchers
    work hard every day to supply our country and consumers around the
    world with a safe, reliable, and affordable supply of food and fiber.
        In addition to these challenges, however, our farmers and ranchers
    will soon bear the burden of supporting a dramatically larger
    population. The UN is predicting that our population will grow by \1/3\
    by 2050. Feeding the 9.1 billion people on the planet would require a
    70% increase in agricultural production.
        The only way to meet that growing demand for food will be through
    technological advances. In fact, research on new crop varieties, best
    practices, and biotechnology has been one of the most successful
    methods of increasing food production to keep pace with demand. Since
    1862, USDA supported research has provided a critical foundation for
    increased production and yields.
        Continued investments in research can provide the necessary
    foundation for our farmers to remain competitive in the global market.
    The research projects conducted through public and private institutions
    touch every area of our lives. From research in food science and
    biotechnology, to integrated pest management, to agricultural extension
    services, this Committee feels it is important to continue finding more
    efficient methods of production.
        This effort also includes educating rural and urban communities
    through agricultural extension services and youth programs. These
    efforts can yield tremendous returns through building and maintaining
    knowledge of agricultural production systems and encouraging our next
    generation to engage in the agricultural industry.
        The USDA research mission is divided among four distinct agencies,
    and this morning we will be hearing from the administrators of each of
    those. One of the many ways USDA works to fulfill the core mission of
    research, education, and extension is through our land-grant colleges
    and universities throughout the United States. USDA also conducts
    research and extension through Federal research stations located across
    the country and around the world. Through the gathering of market and
    production data, USDA also provides statistical information on the
    rural economy and the agricultural industry at large. This information
    is invaluable as policy makers work to craft agricultural and economic
    policies for rural America.
        As we consider the next farm bill, we are faced with scarce
    resources, so this Subcommittee has a responsibility to improve the
    administration of research programs to make the most efficient and
    effective use of the funds available. Part of that process this morning
    will be to hear from USDA and take a close look at how research funding
    is currently being allocated within the agencies.
        Some of the areas we would like to focus on this morning include
    the duplication of programs, research priorities, how USDA is
    leveraging Federal resources, and the cost of administering the
    research mission area. In each area of government we are looking for
    opportunities to streamline processes and ensure that programs are
    delivered as efficiently as possible.
        I thank all of our witness for appearing before the Subcommittee
    today, and I look forward to our discussion.

        The Chairman. And with that, I recognize Mr. Costa, the
    Ranking Member, for his opening statement.

       OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Costa. Thank you very much, Mr. Chairman, for once
    again focusing on our efforts as it relates to the
    reauthorization of the 2008 Farm Bill and the programs that
    provide valuable support for America's agricultural efforts.
        This audit hearing is important for not only Members of the
    Subcommittee but for our new Members who will be for the first
    time looking at the reauthorization of the farm bill.
        Today, we look at the United States Department of
    Agriculture's research, education, and economics program
    authorized under Title XII of the farm bill. Research, for
    those of us who have been involved with the United States
    Department of Agriculture, the USDA, has been part and parcel
    of the Department's efforts really for over 150 years since the
    Department was created. Particularly, through our land-grant
    institutions as the Chairman noted not only at the land-grant
    university in Illinois but throughout the country have really
    been at the bedrock of so much of what is so good about our
    ability to produce food and fiber, not only for the entire
    nation but many in instances throughout the world.
        The research that takes place here is a partnership between
    the USDA and the land-grant institutions. It helps ensure safe,
    abundant, and affordable food and fiber that has allowed
    American farmers and ranchers and dairymen and women to thrive.
    I think it is really unique when you look around the world the
    relationship that we have had with the land-grant universities
    and our agricultural producers. I think it is one of the
    reasons that consumers in America have more faith and
    confidence in our ability to ensure that when we talk about
    risk management and risk assessment in food safety that we are
    doing the very best to ensure the food safety for all American
    consumers. There is this history with our land-grant
    universities, our educational institutions, the research that
    also supports the Food and Drug Administration and other
    regulatory agencies to ensure that we not only produce the
    highest quality food, the highest nutritional food, but also as
    safely as possible.
        But I must also point out that not only land-grant
    universities but other agricultural schools such as my alma
    mater, Fresno State University, and other universities
    throughout the country that have done a great deal in terms of
    agriculture research as well. So I look forward to the efforts,
    as we talked about, the reauthorization of the farm bill, and
    to hear the witnesses here today talk about how we can ensure
    that we get more bang for our buck in terms of competitive
    research dollars; how we can leverage those dollars with
    institutions as well as in the public-private partnerships with
    many of our industries that are directly focused on
    agricultural research as it relates to seed development,
    tolerance, resistance to pesticide, drought. This partnership
    ensures that we can do a better job as we look at the issues of
    risk management and risk assessment.
        The four agencies that we will be listening to this
    morning, Mr. Chairman, comprise the heart and soul of the
    USDA's Research, Education, and Economics mission. I look
    forward to hearing from our witnesses about how we can
    reauthorize the farm bill, realizing that the funding is going
    to be less next year than it was in the 2008 authorization.
    That is just the facts of the fiscal challenges we are dealing
    with here in Washington today.
        But I think that it does not make sense in my opinion as we
    look at how we are going to do more with less that we go into
    the bone marrow of what is so essential in terms of research,
    vital research that the USDA provides, particularly as we look
    at challenges ahead. The Agricultural Research Service works
    across the country to help deal with agriculture problems of
    high national priorities. The National Institute for Food and
    Agriculture was created in the 2008 Farm Bill to help drive
    basic agricultural research through breakthroughs that can
    ensure we are still the most innovative in the world.
        The National Agricultural Statistic Service provides
    valuable data to everyone who is involved at all levels of the
    agricultural community. I use it as well as the entire ag
    economy. Of course, the Economic Research Service helps inform
    decision-making both inside and outside the United States on
    food, farming, natural resources and other developmental
    issues.
        So let me close by saying that I am going to take
    particular focus during the testimony on the area of the
    Specialty Crop Research Initiative. That was something that a
    number of us worked very hard on for the 2008 Farm Bill.
        Our witnesses, I believe, are aware that the mandatory
    funding for this program expires after the year 2012. I would
    be interested to know your thoughts on how the unique needs of
    specialty crops can be addressed in the USDA's research program
    under the current budget environment. Specialty crops--and let
    me underline this--represent approximately \1/2\ the value of
    the U.S. agricultural industry and it has no support under the
    Title I programs: 2008 was the first time that we provided some
    technical assistance, which allows programs like the Market
    Access Program to compete in foreign markets, the research
    programs like the Specialty Crop Research Initiative that are
    important in this effort, as well as the EQIP Program.
        So I look forward to hearing from our witnesses in those
    areas today in how we can maintain and strengthen our vital ag
    research programs in a cost-savings environment that we are
    currently working in today, Mr. Chairman. And I thank you for
    your due diligence and your focus, and I look forward to the
    testimony of our witnesses.
        The Chairman. Thank you, Mr. Costa. And I ask that other
    Members submit opening statements, if any, so that witnesses
    can proceed.
        With that, let me introduce the panel of witnesses. We have
    one panel today, in order of your testimony: Dr. Edward B.
    Knipling, Administrator, Agricultural Research Service, U.S.
    Department of Agriculture here in D.C.; Dr. Chavonda Jacobs-
    Young, Acting Director, National Institute of Food and
    Agriculture; Dr. Cynthia Clark, Administrator, National
    Agricultural Statistics Service; and Dr. Laurian Unnevehr,
    Acting Administrator, Economic Research Service, U.S.
    Department of Agriculture, Washington, D.C.
        So with that, we turn to Dr. Knipling and we are more than
    pleased to hear your comments.

          STATEMENT OF DR. EDWARD B. KNIPLING, ADMINISTRATOR,
    AGRICULTURAL RESEARCH SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Dr. Knipling. Chairman Johnson, Ranking Member Costa, and
    Members of the Subcommittee, good morning. My name is Edward
    Knipling. I serve as Administrator of the Agricultural Research
    Service. Thank you all for your opening comments this morning
    and ARS indeed appreciates the opportunity to discuss our work
    with you.
        The Agricultural Research Service is the Department of
    Agriculture's intramural research agency for the biological and
    other natural sciences. We in essence constitute USDA's Federal
    laboratory network, and as such, a majority of ARS' funding
    remains in-house, that is to employ government scientists and
    support personnel. Our research is broad-based and is
    particularly concerned with problem-solving and pre-commercial
    research of long duration.
        ARS is a multifaceted agency that is spread across the
    country at over 100 locations. We also have four research
    locations in foreign countries. We employ over 8,500 people,
    2,500 of which are Ph.D. scientists. In Fiscal Year 2011, the
    agency has a budget of $1.13 billion.
        The mission of ARS is to conduct research to develop and
    transfer solutions to agricultural problems of high national
    priority and provide information access and dissemination to
    ensure high-quality safe food and other agricultural products,
    assess the nutritional needs of Americans, sustain a
    competitive agricultural economy, enhance the natural resource
    base in the environment, and provide economic opportunities for
    rural citizens, communities, and society as a whole.
        As an organization with national reach, ARS has a broad
    spectrum of users and customers who help define the research
    priorities of the agency. The agency was established nearly 60
    years ago by our current name to, among other things, serve the
    other agencies of USDA that need science information and
    technology to carry out their programs. This remains an
    important purpose of the agency.
        Additionally, the agency is dedicated to serving producers
    of both commodity and specialty crops, as well as private-
    sector entities that depend on public research. Each year, the
    agency on a continuing basis dedicates itself to an extensive
    process of listening to these stakeholders as we determine
    their needs and problems and we use this information for
    setting priorities.
        Research partnerships of all types are very important to
    ARS and a hallmark of the agency is the collaborative nature of
    our work. In addition to our sister agencies represented by my
    colleagues on this panel, of particular importance is our close
    partnership with the land-grant colleges and universities. Of
    ARS' 105 laboratory locations, 60 are located on the campuses
    of a land-grant institution and an additional seven are located
    on other institutions of higher learning.
        For 150 years, the U.S. has built a system for agricultural
    research that has led to more innovation than by any other
    nation in the world. This is a unique system emphasizing
    necessary foundational research for the public good that cannot
    and will not be done by private or commercial enterprises. As
    part of the Research, Education, and Economics mission area,
    ARS and the other three agencies represented here this morning
    conduct joint planning, stakeholder conferences, peer review of
    our projects, complementary allocation of funding, and program
    reviews.
        Like the other agencies, ARS is currently directing special
    research attention to five broad national priorities that are
    deemed of particular importance to society. These include
    adaptation to the changing climate, food safety, children's
    nutrition and health, global food security, and bioenergy,
    particularly biomass production.
        ARS organizes itself to accomplish these and all other
    research goals into four major national program areas. These
    are natural resources and sustainable agricultural systems,
    crop production and protection, animal production and
    protection, and nutrition, food safety, and quality. These
    areas, in turn, are comprised of 20 national programs across
    the country to address specific goals and priorities set out in
    5 year action plans. My full written testimony that is provided
    for the record cites some outstanding recent research
    accomplishments in these program areas.
        Once our research is complete, the agency also takes very
    seriously its responsibility to transfer our research results
    to the public. This is an important facet of our agency and we
    take great pride in being able to provide technologies that
    improve people's lives and producers' businesses. ARS' Office
    of Technology Transfer is assigned this responsibility to
    facilitate and accelerate the delivery of ARS research results
    and innovation to the public benefit to private-sector entities
    that further develop, commercialize, and market publicly
    developed and known technology and----
        The Chairman. If you want to bring your comments to a
    close, we are a minute over. So let us try to stay on track.
        Dr. Knipling. Yes. Well, this in essence completes my oral
    testimony, Mr. Chairman, and we are pleased to answer any
    questions later.
        [The prepared statement of Dr. Knipling follows:]

         Prepared Statement of Dr. Edward B. Knipling, Administrator,
        Agricultural Research Service, U.S. Department of Agriculture,
                                Washington, D.C.
        Chairman Johnson, Ranking Member Costa, and Members of the
    Subcommittee, I am Edward Knipling, Administrator of the Agricultural
    Research Service. Thank you for the invitation here today to discuss
    the work of the ARS and the agricultural science that we pursue on
    behalf of all Americans. I am delighted to share our work with you and
    to have a discussion regarding our programs.
        The Agricultural Research Service is the Department of
    Agriculture's primary intramural scientific research agency. We
    constitute USDA's Federal laboratory network and as such the majority
    of ARS' funding remains ``in-house'' to employ government scientists
    and technicians. Our research is broad-based covering all science
    facets of agricultural and food production and utilization and is
    particularly concerned with problem-solving and pre-commercial research
    of long duration.
        The Agricultural Research Service was officially founded in 1953
    but has precursor agencies that date back as far as 1884 to the Bureaus
    of Animal and Plant Industry. The importance of agricultural research
    performed by the government goes back even farther, to the first work
    done to stem hog cholera outbreaks in 1868. Prior to the formal
    creation of the agency, Congress recognized the need for concentrated
    centers of agricultural research focusing on issues of regional
    importance and, for example, in 1938, appropriated funding to create
    agricultural research laboratories in Peoria, Illinois; Wyndmoor,
    Pennsylvania; Albany, California; and New Orleans, Louisiana; to work
    particularly on utilization of agricultural commodities. These
    locations still exist to this day as major centers of ARS work and
    concentrations of our science. We are proud of this long history of
    government commitment to solving agricultural problems that affect
    every single American in one way or another.
        Today, ARS is a multi-faceted agency that is spread across the
    country at over 100 locations. We also have four research locations in
    foreign countries. We employ over 8,500 people, 2,500 of whom are Ph.D.
    scientists. In Fiscal Year (FY) 2011, the agency has a budget of over
    $1.13 billion. The agency's funding is allocated to two budget lines;
    the Salaries and Expense account and Buildings and Facilities. In FY
    2011, the appropriation rescinded $230 million in balances from prior
    appropriations, and there was no funding received under the Building
    and Facilities line.
        The stated mission of ARS (www.ars.usda.gov) is to conduct research
    to develop and transfer solutions to agricultural problems of high
    national priority and provide information access and dissemination to:

       Ensure high-quality, safe food, and other agricultural
            products;

       Assess the nutritional needs of Americans;

       Sustain a competitive agricultural economy;

       Enhance the natural resource base and the environment; and

       Provide economic opportunities for rural citizens,
            communities, and society as a whole.

        As an organization with national reach, ARS has a broad spectrum of
    users and stakeholders who drive the research priorities of the agency.
    When the agency was officially formed in 1953 it was with the intent to
    create a clearing house for research issues within USDA and to serve
    the other agencies of the Department that need science information and
    technology to carry out their programs. This remains an important
    purpose of the agency. Examples of customer agencies within USDA
    include the Animal and Plant Health Inspection Service, the Food Safety
    and Inspection Service, the Natural Resources Conservation Service, and
    the Food and Nutrition Service. Additionally, the agency is dedicated
    to serving producers of both commodity and specialty crops, as well as
    private sector entities that depend on public research. Each year, the
    agency dedicates itself to an extensive process of listening to these
    stakeholders as we determine their needs and problems and use this
    information in setting priorities.
        As mentioned, most of ARS' research takes place inside of the
    agency and is conducted by our federally employed scientists. However,
    research partnerships of all types are very important to ARS and a
    hallmark of the agency is the collaborative nature of our work. Of
    particular importance is our close partnership with the land-grant
    colleges and universities, as well as other universities. Of our 105
    locations, 60 are located on the campus of a land-grant institution and
    an additional seven are located on other institutions of higher
    learning.
        Our sister agency, the National Institute of Food and Agriculture
    (NIFA), serves to complement ARS by providing grants and other forms of
    extramural funding, largely to the land-grant institutions, which
    enhances the research partnerships at the laboratory, field, and
    scientific levels. Further, ARS scientists are often Co-Principal
    Investigators with our university partners on grants funded by NIFA and
    the National Science Foundation which serve as a source of extramural
    funding for ARS.
        Over the last 150 years the United States has built a system for
    agricultural research that has led to more innovation than any other in
    the world. This is a unique system emphasizing necessary foundational
    research for the public good that cannot and will not be done by
    private or commercial enterprises. ARS and NIFA, as well as the other
    research agencies, broadly coordinate our research programs through
    joint planning, stakeholder conferences, peer review of projects,
    complementary allocation of funding and program reviews.
        As part of the Research, Education, and Economics (REE) Mission
    Area, ARS, like its fellow REE agencies, currently is directing special
    research attention to five broad national priorities that the
    Administration has deemed of particular importance:

       Climate change/adaptation;

       Food safety;

       Children's nutrition and health;

       Global food security;

       Bioenergy.

        To give you a better understanding of the Agricultural Research
    Service and our work on these major priorities, I would like to
    describe highlights and examples of significant accomplishments of our
    work done under four major program areas: Natural Resources and
    Sustainable Agricultural Systems; Crop Production and Protection;
    Animal Production and Protection; and Nutrition, Food Safety and
    Quality.
    Natural Resources and Sustainable Agricultural Systems
        Sustainable agricultural systems produce the agricultural crops and
    livestock needed by society; protect the natural resource foundation
    essential for production, processing, and other uses; and provide
    economic and social value to producers, processors, consumers, and
    communities. Our research creates profitable agricultural systems that
    capitalize on the nation's vast renewable natural resources to preserve
    the fertility and productivity of soils, provide abundant and high
    quality water supply and clean air, maintain healthy agricultural and
    rangeland ecosystems, and offer renewable energy and fuel alternatives
    that form the basis of the U.S. economy and the well being of rural
    America.
        Today, farmers have a wide array of conservation techniques to
    choose from, and the U.S. Government supports many of them through
    cooperative programs. One problem associated with these efforts is
    determining what works and what doesn't. The Conservation Effects
    Assessment Project (CEAP) of the Natural Resources Conservation Service
    answers this question, by determining the effectiveness of USDA
    conservation programs on the environment. ARS plays a significant role
    in this project by analyzing the impact of agricultural practices in
    numerous watersheds across the country. The ARS watershed research
    focuses on the effects of practices such as no till farming, terracing,
    riparian buffers, cover crops, and chemical, fertilizer, and manure
    application on soil erosion and water quality in agricultural
    watersheds. Measurements at some watersheds have been going on for
    decades, allowing tracking of changes in these areas over time and with
    varying conservation scenarios.
        These data have been used to construct models for the accurate
    prediction of the consequences of conservation technologies, allowing
    one to track conservation progress and select conservation
    interventions for the future that work best given the characteristics
    of the region. Examples of ARS contributions include an ARS study that
    found that cattle manure deposited directly into streams contributed
    12% of the phosphorus in water from the studied watershed. Improved
    fencing to limit cattle access to streams solves this problem.
    Scientists from ARS developed a weather advisory system to help farmers
    decide when to apply manure so that nutrient runoff associated with
    rain events could be avoided.
        This research and the resulting models have led to improved
    deployment of conservation practices that have significantly reduced
    soil erosion and improved water quality. Two recent reports regarding
    the Chesapeake Bay region and the Upper Mississippi River basin
    indicate significant reduction in soil loss and nitrogen, phosphorus
    and pesticide runoff. In the Chesapeake Bay region, soil losses were
    reduced by 55%, nitrogen loss was reduced by 31% and phosphorus loss
    was reduced by 41% due to conservation interventions deployed there. In
    the Upper Mississippi River basin, soil loss was reduced by 69%,
    nitrogen loss by 18%, phosphorus loss by 49%, and 51% reduction in
    pesticide loss. This type of long term, large scale agriculturally-
    based conservation research needed to realize these and future
    improvements illustrates a primary strength of ARS in this research
    area.
    Crop Production and Protection
        Crop Production and Protection research programs deliver science-
    based information, genetic resources, and technologies for increased
    crop productivity and quality, protection from plant diseases and
    pests, and economically and environmentally sustainable methods of crop
    production that meet consumers' demands for a ready supply of high
    quality, safe, affordable and nutritious food, the public's desire to
    protect the environment, and the global community's needs for food
    security.
        The ARS response to a new strain of wheat stem rust (Uganda 99 or
    Ug99) illustrates another of the unique capabilities of ARS, its
    disease experts and genetics resources enabled it to respond quickly to
    this urgent agriculture issue. In the early 1900s, wheat stem rust
    caused extensive losses of wheat worldwide, until rust resistant
    varieties could be developed. These were extremely successful at
    reducing the incidence of wheat stem rust for decades. In 1999, a new
    strain of wheat stem rust was discovered in Uganda that had overcome
    the resistance of currently available strains, and ARS disease experts
    were the first to identify it as a new mutant strain called Ug99. Since
    its discovery, this rust has spread across Africa, Asia and parts of
    the Middle East.
        Monitoring programs in the major wheat producing areas of the U.S.
    were strengthened by ARS and others to detect Ug99 or related wheat
    stem rust entry into the country. ARS scientists are also determining
    the mechanisms by which the Ug99 strain was able to overcome the
    disease resistance of commercial varieties. Worldwide surveys of wheat,
    barley and related grasses were undertaken to discover resistance to
    Ug99, and several resistant plants have been discovered. Research is
    currently underway to transfer disease resistance from varieties where
    it was discovered to all commercial forms of wheat grown in the U.S.
    and worldwide. ARS scientists are also developing and studying the use
    of appropriate fungicides to help combat wheat stem rust. Finally, ARS
    scientists are participating in an international consortium that
    monitors the movement of Ug99 from country to country, and supporting
    efforts to provide Ug99 resistant wheat to areas of the world that have
    been stricken with this disease. These interventions are intended to
    prevent the entrance of this disease into the U.S., and mitigate or
    prevent the negative consequences of the disease should it manage to
    become established here.
        Much of the infrastructure needed for U.S. monitoring for wheat
    stem rust was already in place, maintained by ARS. This includes
    scientific expertise in the diseases of cereal grains. Because of this,
    ARS was able to rapidly mount an effective research response to this
    problem.
    Animal Production and Protection
        The mission of the ARS Animal Production and Protection research
    programs is to provide the scientific information and tools to help
    support the U.S. food animal industries to continue to compete
    successfully in worldwide trade, provide the supply of nutritional
    animal products required by the nation, and contribute toward global
    food security. ARS accomplishes this mission by maximizing production
    efficiency and animal health through scientific innovation and the
    discovery and development of new technologies focused on national
    priorities. Strategic public-private partnerships have been established
    to achieve our mission, including support of government action and
    regulatory agencies responsible for trade, bio-defense, and global food
    security.
        The recent success of dairy cattle genomics illustrates a unique
    strength of ARS, the ability to commit to a research topic long enough
    to generate real solutions to complex agricultural problems. In the
    early 1990s, ARS began investing resources in cattle genomics. ARS
    cattle genomics research contributed significantly to early cattle
    genome mapping and ARS leadership organized a successful collaborative
    effort to sequence the bovine genome, which was published in 2009 in
    Science.
        Building from these accomplishments, ARS scientists in
    collaboration with scientists at George Mason University, University of
    Missouri, University of Maryland, University of Alberta and Illumina
    Inc., developed the tool needed to enable dense genotyping on
    individual cattle at a cost that allowed the analysis of enough cattle
    for successful genomic prediction of quantitative traits. Combining
    national production records for dairy cattle available and the ability
    to do dense genotyping provided the opportunity to realize the huge
    potential of genomic analysis for Dairy cattle selection. Subsequent
    analyses by ARS demonstrated that use of genomic prediction in dairy
    cattle substantially improved the accuracy of selection of young dairy
    bulls compared to that derived from trait measurements in the parents,
    and effectively shortened the generation interval. Scientists from ARS
    have further developed genotyping tools, strategies and computer
    analyses to further reduce the cost of genotyping without significantly
    reducing accuracy.
        These innovations have been extensively adopted by the U.S. dairy
    industry. It is estimated that this technology will double the rate of
    genetic progress. To put this in perspective, according to the National
    Agricultural Statistics Service, milk production per cow has increased
    at the rate of 1.6% per year over the last decade. If this rate were
    doubled, the dairy herd in this country could be reduced by 30% in the
    next decade without reducing the milk supply, significantly reducing
    both the cost of producing milk and the demand on feed and natural
    resources used. This success has been possible only through sustained
    ARS commitment and leadership in cattle genetics and genomics.
    Nutrition, Food Safety and Quality
        The Nutrition, Food Safety and Quality research and information
    area exists to lead and coordinate ARS research and information
    dissemination to define the role of food and its components in
    optimizing health for all Americans. Our scientists focus on developing
    tests and processes that keep the food supply safe; reducing and
    controlling pathogens and toxins in agricultural products; and
    improving the economic viability and competitiveness of American
    agriculture by enhancing the quality and utilization of agricultural
    products for the benefit of producers and consumers.
        Unique national resources that are part of this program include the
    National Nutrient Databank and the ``USDA What We Eat in America/
    NHANES'' national food consumption survey. Partnerships with other
    Federal agencies and nonprofit and industry groups allow ARS to
    leverage funds and build upon common research goals. Information
    dissemination programs operated by ARS' National Agricultural Library
    address general and specific human nutrition issues and audiences and
    include general web portals such as www.nutrition.gov for the American
    consumer as well as the targeted web sites for professionals such as
    the Food and Nutrition Information Center.
        The ARS response to E. coli contamination of a variety of foods
    illustrates several distinguishing characteristics of ARS, which
    includes the ability to rapidly respond to public health problems; the
    development of real solutions to those problems; and the ability to
    provide a long-term commitment of resources to a research topic. In
    1993, hundreds were sickened after eating undercooked Jack-in-the-Box
    hamburgers. The culprit was rapidly identified as Escherichia coli
    O157:H7. E. coli is a common bacterium that is resident in the large
    intestine of man and animals and is typically harmless. However,
    O157:H7 E. coli produces toxins, which cause severe illness and death.
    ARS scientists rapidly (within a year) developed tests for bacterial
    contamination of meat that were used by the meat processing industry to
    monitor and control contamination, followed by further tests to
    specifically detect E. coli O157:H7.
        According to the CDC, E .Coli disease has been reduced by 40% over
    the last decade. However, outbreaks continue both in the U.S. and other
    countries in meat and other foods such as fresh produce. Some outbreaks
    have been linked to E. coli O157:H7, but others are due to non-O157 E.
    coli (STEC) strains described as O26, O45, O103, O111, O121 and O145,
    also known as the ``Big Six''. ARS scientists at the request of the
    USDA-Food Safety and Inspection Service (FSIS) recently developed and
    validated tests that can specifically detect and differentiate the
    disease causing non-O157 strains for use in regulatory monitoring of
    the food supply.
        For 17 years, ARS' food safety research program has rapidly and
    uniquely responded to the challenges of pathogenic E. coli
    contamination of foods, and has successfully provided technological
    solutions that have been rapidly adopted by its various stakeholders.
    These technologies have been and will continue to be used to monitor,
    eliminate the entrance, and/or reduce the level of disease causing E.
    coli into the food supply.
    International Research
        ARS operates four laboratories abroad that are dedicated to the
    biological control of invasive species and pests. These labs are
    located in Montpelier, France; Brisbane, Australia; Buenos Aires,
    Argentina; and Beijing, China. The laboratories exist primarily to
    allow ARS scientists to evaluate harmful, non-native species that have
    invaded the United States and to discover beneficial species in their
    native environments that can be used to control the invasive species.
        In addition to these laboratories, the agency's Office of
    International Research Programs serves to promote and enhance the
    research of ARS through mutually beneficial international research
    agreements. We currently have cooperative agreements with researchers
    in dozens of countries across the globe. These agreements cover the
    entire spectrum of research and allow our scientists access to
    information and conditions for their research that would otherwise be
    unattainable.
    Technology Transfer
        ARS's Office of Technology Transfer (OTT) is assigned the
    responsibility to facilitate and accelerate the delivery of ARS
    research results for the public benefit to private sector entities that
    further develop, commercialize, and market publicly developed and owned
    technology and information Further responsibilities of the office
    include protecting intellectual property (IP), and developing strategic
    partnerships with outside organizations, ARS-OTT is centralized for
    patent, license, and cooperative agreement policies and approvals, but
    maintains field offices to provide one-on-one customer service to ARS
    researchers and private sector partners throughout the U.S.
        In addition to OTT activities, technology transfer is accomplished
    through many other mechanisms, such as:

       developing written information for customers and
            stakeholders, including scientific publications, publications
            in trade journals, and reports to stakeholders;

       releasing plant germplasm to the public;

       transferring research materials to scientists outside of
            ARS;

       delivering specific research results to regulatory agencies
            to support their actions;

       participating in meetings with industry organizations and
            universities, workshops and field days; and

       distributing information to the public via the ARS
            Information Staff, the National Agricultural Library, and other
            sources.
    Buildings and Facilities
        As the nation's science based Federal intramural agricultural
    research agency, ARS uniquely owns and manages a large infrastructure
    of modern research laboratories and other real property assets that
    support and sustain the long term USDA science capacity. Collectively,
    this network of over 100 locations spread across the country
    essentially constitutes the national laboratory for agriculture. The
    agency places the management of its physical assets as a high priority
    proactively monitors and reviews the status of those facilities.
    Currently ARS is developing a capital management strategy to take us
    into the future.
        ARS is now completing a number of repair, maintenance, and
    modernization projects that were funded with $176 million made
    available by the American Recovery and Reinvestment Act of 2009. This
    program created jobs and corrected facility deficiencies which allow
    ARS research to be effectively and efficiently conducted at suitable
    facilities. Critical deferred maintenance is work associated with
    critical systems such as HVAC, electric, roofing, exterior closure and
    plumbing and involves maintenance to systems and components beyond
    simple patch and repair tasks. Completion of this work will, in many
    cases, result in improved energy efficiency, reduction in current
    operation and maintenance costs, and arrested further deterioration of
    ARS facilities.
        At the end of FY 2010, ARS obligated approximately $171 million.
    The balance of approximately $5 million was used as a reserve for
    change orders typically expected in construction of this type. As of
    July 2011, ARS has obligated a total of $174 million.
        ARS also owns or leases over 400,000 acres of land across the
    country, on which are more than 3,000 operational buildings with a
    total gross square footage of over 13.5 million. The agency estimates
    the replacement value of all of its real property assets to be $3.64
    billion.
        Mr. Chairman, as you can see ARS is a very active and involved
    agency that is dedicated to solving the world's agricultural problems
    and to delivering the science needed to feed and clothe a growing world
    population. ARS has been focused on these issues for over half a
    century and we are very excited about the next 50 years as well. I
    appreciate this Committee's long-standing support of ARS and I would
    like to again thank you for the opportunity to testify before you
    today. I look forward to answering any questions that you may have.

        The Chairman. Thank you very much.
        Yes, ma'am.

           STATEMENT OF CHAVONDA JACOBS-YOUNG, Ph.D., ACTING
                DIRECTOR, NATIONAL INSTITUTE OF FOOD AND
              AGRICULTURE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Dr. Jacobs-Young. Good morning, Chairman Johnson, Ranking
    Member Costa, and Members of the Subcommittee. I am Chavonda
    Jacobs-Young, and I am acting Director of USDA's National
    Institute of Food and Agriculture, NIFA. I appreciate the
    opportunity to appear before you and tell you about how NIFA is
    serving the needs of the nation and addressing its challenges
    through agricultural science.
        Mr. Chairman, agricultural science is a fundamental part of
    American agriculture from field to table, and NIFA is at the
    intersection of research, education, and extension. By
    supporting extramural agricultural research across the country,
    typically at research universities and colleges, NIFA improves
    agricultural science throughout the nation.
        The 2008 Farm Bill created NIFA in order to coordinate a
    diversity of research programs across functions and funding
    methods. NIFA science institutes support the four main
    priorities aimed at enhancing the impact of food, agriculture,
    and natural resources sciences. These are the Institute of Food
    Production and Sustainability; the Institute of Bioenergy,
    Climate, and Environment; the Institute of Food Safety and
    Nutrition; and the Institute of Youth, Family, and Community.
        Through this reorganization, Congress made a bold step
    toward streamlining agricultural science for the 21st century.
    While only 1\1/2\ years old, NIFA already has a long and
    impressive list of accomplishments. My written testimony,
    submitted for the record, includes many examples of this, but I
    would like to highlight just a few for you here today.
        The Agriculture and Food Research Initiative, AFRI, is
    NIFA's flagship granting mechanism. Among numerous
    accomplishments, AFRI funding has been pivotal in mapping the
    genomes of vital agricultural commodities, including wheat,
    rice, pigs, cattle, and chickens. This science is the gateway
    to fast-tracking improved breeding that helps our agricultural
    producers meet our growing needs for domestic and global
    populations.
        NIFA's investment in AFRI is complemented by the Specialty
    Crop Research Initiative, SCRI. SCRI supports research and
    extension in plant breeding, pest and disease management, and
    production efficiency. Though SCRI is still in its initial
    stages, it promises to deliver significant benefits to growers
    and consumers.
        NIFA funds a variety of capacity-building programs that
    support a wide range of agricultural science initiatives. Some
    of these include minority-serving programs that work with
    underserved communities. NIFA is also helping build the next
    generation of producers through our Beginning Farmer and
    Rancher Development Program. These are just a few of the many
    successful programs from NIFA's first 2 years.
        Going forward, NIFA will continue to make smart
    investments, forge enduring relationships, and engage new
    partners in scientific research, education, and extension
    programs to maximize the public's investment in agricultural
    research. As well, NIFA's investment in agriculture research
    and extension helps support and sustain a highly skilled
    workforce that is critical to the 21st century U.S. economy.
        In addition, NIFA is committed to ensuring Federal dollars
    are well spent through systematic monitoring and evaluation.
    NIFA tracks scientific projects through a centralized database
    to avoid duplication. NIFA and USDA's Agricultural Research
    Service also hold joint stakeholder meetings on scientific
    research to synchronize and coordinate compatible research
    projects.
        NIFA has a promising future, and in collaboration with our
    Congressional partners, we look forward to building on our
    leadership role in national agriculture scientific research,
    education, and extension.
        I appreciate your time and would be pleased to answer any
    questions.
        [The prepared statement of Dr. Jacobs-Young follows:]

      Prepared Statement of Chavonda Jacobs-Young, Ph.D., Acting Director,
         National Institute of Food and Agriculture, U.S. Department of
                         Agriculture, Washington, D.C.
        Good morning Chairman Johnson, Ranking Member Costa, and Members of
    the Subcommittee. Thank you for inviting me here today to participate
    in this timely hearing on farm bill programs as they relate to USDA's
    National Institute of Food and Agriculture (NIFA) of which I am the
    Acting Director. I am pleased to have this opportunity to provide some
    detailed information on our achievements and challenges and look
    forward to learning about your interests.
        Agricultural science is a dynamic system that moves from farm to
    lab to dining table and back again. At USDA when we speak of
    agricultural science we mean all the activities relating to research,
    education, and extension and NIFA is a critical part of this.
        That is why I am pleased to be leading an agency team of about 350
    professionals at a time when both Congress and the Administration
    understand the inherent value of investing in scientific research in a
    smart and efficient way. One of our goals at NIFA is to elevate the
    standing and stature of research, education and extension within the
    Federal science enterprise while being effective stewards of the public
    trust. This is the real challenge that NIFA faces.
    Mandate from 2008 Farm Bill
        It's against such a backdrop that the 2008 Farm Bill (FCEA Act of
    2008) created the National Institute of Food and Agriculture in support
    of extramural agricultural research across the nation. The 2008 Farm
    Bill called for the integration of programs across functions and
    funding methods within the Agency. As such, NIFA is comprised of four
    main institutes. These are the:

        1. Institute of Food Production and Sustainability;

        2. Institute of Bioenergy, Climate, and Environment;

        3. Institute of Food Safety and Nutrition; and the

        4. Institute of Youth, Family, and Community.

        These institutes coordinate a mixed portfolio of competitive and
    capacity building programs all with the aim of enhancing the impact of
    food, agricultural, and natural resource sciences. In reorganizing the
    Federal extramural research efforts in this manner, Congress took a
    21st century approach in the last farm bill in acknowledging the broad
    reach and interdisciplinary nature of agricultural science.
        But NIFA is not operating in a vacuum. NIFA scientists develop
    research partnerships with a diverse group of scientists, farmers,
    private sector investigators, and a wide array of higher learning
    institutions across the nation. In fact, these relationships are key in
    how NIFA identifies its priorities.
        Input from Congress, The National Agricultural Research, Extension,
    Education, and Economics Advisory Board (NAREEEAB), as well as our many
    university, scientific and agricultural partners and stakeholders all
    feed into a decision-making process. NIFA's leadership team takes this
    all into consideration as it establishes broad program priorities and
    goals across the Agency and ensures they are aligned with broad
    strategic goals of the department and the mission area. These goals and
    informed priorities are pursued via competitive programs and capacity
    building programs.
        While only a year and half old, NIFA has already collected a long
    and impressive list of accomplishments, some of which I would like to
    highlight in the next few minutes:
    Agriculture and Food Research Initiative (AFRI)
        NIFA's flagship granting initiative is the Agriculture and Food
    Research Initiative (AFRI). AFRI's competitive grants program supports
    both fundamental science and applied research and education for the
    nation's leading scientists. In particular, AFRI is charged with making
    research, education, and extension grants that address key problems of
    national, regional, and multi-state importance in sustaining all
    components of agriculture. These include farm efficiency and
    profitability, ranching, renewable energy, forestry (both urban and
    agroforestry), aquaculture, rural communities and entrepreneurship,
    human nutrition, food safety, biotechnology, and classical breeding. In
    fact, AFRI funding was pivotal in completing the genome of
    agriculturally important plants and animals like wheat, rice, pigs,
    cattle, and chickens.
        An example of recent success includes the work by a team at the
    University of California-Davis which has used AFRI funding to identify
    genes in wheat that are responsible for the plant's tolerance to
    freezing temperatures. Wheat breeders have long recognized the need to
    produce cultivars with greater resistance to freezing temperatures and
    this discovery may lead to improved crop production.
        Another example comes from scientists in Connecticut who are
    investigating the use of natural plant products to reduce foodborne
    pathogens in broiler chickens. This work will potentially lead to
    decreased bacterial outbreaks, improving public health, and economic
    opportunity for poultry farmers.
    Specialty Crop Research Initiative (SCRI)
        NIFA's investment in AFRI is complemented by another program: the
    Specialty Crop Research Initiative (SCRI). SCRI was created to help
    fund solutions to critical issues of the specialty crop industry. SCRI
    supports research in plant breeding, genetics and genomics to improve
    crop characteristics and appearance, environmental responses and
    tolerances, pest and disease management and production efficiency to
    name a few. SCRI's multi-state, multi-institutional, interdisciplinary
    funding not only requires a non-Federal one-to-one match but also
    requires project proposals to combine research and extension. This
    helps ensure that new products, processes, practices, and tools are
    made available to specialty crop stakeholders. Even though most SCRI-
    funded projects have not yet reached completion, growers and consumers
    are already benefiting from this investment.
        For example, water availability is an issue affecting all
    Americans. SCRI has funded projects to reduce the amount of water
    needed to profitably raise crops. One project in California has the
    potential to reduce water use in grape production by 153 billion to 307
    billion gallons per year. This is enough water to meet the daily
    household water needs of over six million Americans for an entire year,
    or about the equivalent of the populations of Los Angeles and Chicago
    combined.
        Fruit growers must reduce the quantity of fruit on their trees so
    that the remaining fruit reaches marketable size. Until recently, U.S.
    growers did this either with chemicals or manual labor.
        One SCRI-funded project looking at mechanical thinning techniques
    demonstrated $500 to $700 per acre savings in apricots and nectarines
    and $200 to $500 per acre savings in cherries during commercial field
    trials. This led to increasing adoption of this technology across the
    entire country. This will result in local jobs to manufacture and
    service the needed equipment, increased wages for workers who move from
    manual labor to equipment operation, and savings for consumers in the
    grocery store.
        SCRI-funded work on biological control of insect pests (in
    particular, codling moth) in orchards in the Pacific Northwest
    demonstrated that sustainable pest management, which includes
    maintaining natural predators of orchard pests, can reduce annual
    orchard pest management costs of $2,300 by 25 percent.
    Beginning Farmers and Rancher Development Program
        While NIFA scientists are committed to ensuring that the scientific
    pipeline for the next generation of scientists is being filled, NIFA's
    Beginning Farmer and Rancher Development Program aims to support the
    pipeline of our next generation of producers. Training for beginning
    farmers and ranchers includes: webinars, seminars, internships,
    mentorships, and on-farm field days. Other training sessions have
    included face-to-face training events, such a regular non-credit
    courses or workshop sessions at farming conferences. More than 5,300
    new and potential farmers participated in training events.
        For example, The Western Navajo Nation Beginning Farmers and
    Ranchers Project engages, prepares, and supports socially
    disadvantaged, underserved, and limited resource beginning Navajo
    farmers and ranchers in eight communities covering 8,000 square miles
    of the Navajo Nation. The overall goal of the project is to provide
    Navajo community members who wish to begin farming and ranching with
    the skills to effectively launch sustainable agricultural operations
    using traditional and contemporary agricultural techniques in
    conjunction with effective business practices. In the first year, the
    project worked with 13 chapter members through direct agricultural
    training and networking activities that included two roundtables, two
    conferences, and weekly classes in technology, business, or
    introductory farming and ranching to 1,000+ participants. Fifty percent
    of participants are women. Seventy percent have been farming or
    ranching for less than one year, or do not currently farm or ranch. The
    project staff is comprised of four traditional Navajo locals of varying
    ages and educational backgrounds. All are bilingual, fluent in Navajo,
    and culturally sensitive to the target group's history and challenges.
    Serving Minority Communities
        NIFA is also working to ensure that its research and extension
    programs continue to expand its reach into non-traditional, diverse
    communities through its minority serving programs. These programs
    include: Hispanic Serving Institutions Education Grants Program, the
    Tribal Colleges Education Equity Grants Program, and the 1890
    Institution Capacity Grants Program.
        An example of a recent success is at Fort Valley State University
    (FVSU) in Georgia where the 1890 Capacity Building Grant has been
    essential in helping design and implement an Outdoor Forestry
    Classroom/Laboratory Program. One of America's challenges is to attract
    young people from all walks of life to the sciences and in particular
    the agricultural sciences to fill the pipeline for our future. This
    program provides hands-on and experiential learning to forestry course
    students, trains and prepares high school agriculture students for
    various forestry careers through development events, and allows use of
    its facilities for summer workshops for high school agriculture
    teachers throughout the state of Georgia. During Spring 2009, Area 3 of
    district number 4 of Georgia used the site to conduct forestry career
    development events. One hundred and fifty high school students were in
    attendance and had the opportunity to interact and discuss careers in
    the forestry industry with foresters from USDA, the Georgia Forestry
    Commission and Weyerhaeuser.
        Another example includes, the Teaching and Research in
    Environmental Ecology Program at the University of Texas at San Antonio
    which helped recruit, retain, and financially support underrepresented
    undergraduate and graduate students.
    Capacity Building Grant Programs
        Another set of key programs are NIFA programs which build capacity
    for research and extension in cooperation with our university partners.
    These include:

        a. Hatch Act programs which support research at state agricultural
            experiment stations;

        b. McIntire-Stennis Cooperative Forestry Research program which
            funds research related to the use of the nation's forest
            resources;

        c. Evans-Allen Program, created to support agricultural research at
            1890 Colleges; and

        d. the Smith-Lever programs which support not only the national
            Cooperative Extension System but also targeted programs within
            the extension system on subjects like food and nutrition
            education, pest management, and children, youth, and families
            at risk.

        Examples of recent successes made through these capacity building
    programs run across a wide range of NIFA's activities. For instance,
    scientists in North Dakota developed three varieties of barley which
    has been recommended for malting and brewing by the American Malting
    Barley Association. These efforts resulted in an additional $23 million
    in revenue for growers in 2009.
        In another example, researchers at the University of Georgia used
    advanced genomic and proteomic approaches to identify and develop
    strategies to improve pine tree resistance to an invasive wood wasp.
    Conclusion
        These are just a few examples of successes in the first 2 years of
    NIFA's existence. However, the reach and scope of future
    accomplishments are becoming increasingly challenging in a tight budget
    environment. While research outcomes can never be fixed to a certain
    timeline, NIFA is doing its best in this fiscal climate to make smart
    investments, forge enduring relationships, and engage new partners in
    scientific research, education and extension programs.
        In addition, NIFA is committed to maximizing Federal dollars by
    ensuring systematic monitoring and evaluation. While the scientific
    method requires the flexibility to replicate results, NIFA's
    leadership, program managers, and researchers rigorously track
    scientific projects through its Current Research Information System
    (CRIS) to avoid duplication. In addition NIFA and ARS hold joint
    stakeholder meetings on scientific research to pull together research
    projects that are compatible and not duplicative.
        NIFA has a promising future and in collaboration with our
    Congressional partners will continue to build on its leadership role in
    national agricultural scientific research, education, and extension.
        I appreciate your time and would be pleased to answer any
    questions.

        The Chairman. Thank you very much.
        Dr. Clark?

             STATEMENT OF DR. CYNTHIA CLARK, ADMINISTRATOR,
             NATIONAL AGRICULTURAL STATISTICS SERVICE, U.S.
              DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Dr. Clark. Chairman Johnson, Ranking Member Costa, and
    Members of the Subcommittee, I thank you for the opportunity to
    appear before this Subcommittee. My name is Cynthia Clark, and
    I have been an Administrator at the National Agricultural
    Statistics Service, or NASS, since July of 2008. NASS
    administers the U.S. agricultural statistics program, a program
    that began at USDA in 1863 and conducts the quinquennial U.S.
    Census of Agriculture first collected by the Census Bureau in
    1840. Both programs are aligned with the basic mission of
    NASS--to provide timely, accurate, and useful statistics in
    service to U.S. agriculture.
        NASS has 1,050 employees currently located in 46 field
    offices and headquarters with the new operations center opening
    in October 2011 in Overland, Missouri. Additionally, NASS has a
    cooperative agreement with the National Association of State
    Departments of Agriculture to collect agriculture data with a
    core of 3,500 interviewers.
        NASS' annual agricultural estimates reports are critically
    important to assess the current supply and demand in
    agriculture commodities. They are extremely valuable to
    producers, agribusiness, farm organizations, commodity groups,
    economists, public officials, and others who use the data for
    decision-making. The statistics disseminated by NASS support
    fairness in markets ensuring that buyers and sellers both have
    access to the same official statistics at the same preannounced
    time. This prevents markets from being influenced by inside
    information.
        Our program supplies important economic, environmental, and
    demographic data that informs policy decisions. One example is
    the Risk Management Agency relies on NASS annual county
    estimates to administer crop insurance programs that provide
    U.S. farmers a safety net ensuring protection against
    unpredictable growing conditions. The Farm Service Agency
    relies on NASS county-level data to administer the Conservation
    Reserve Program, crop revenue support program, and emergency
    assistance payments.
        As we speak, NASS is undertaking a transformation of its
    business process for collecting processing, analyzing, and
    disseminating agricultural statistics. We are pursuing six
    operational initiatives to improve data quality, create
    business cost efficiencies, improve career opportunities for
    NASS staff, and position the agency to better serve the future
    statistical needs of USDA.
        These efforts include centralizing IT services throughout
    the agency, standardizing systems, using Apple iPads to collect
    data securely in the field and transmit the information in real
    time by a high-speed broadband into NASS systems, centralizing
    telephone data collection, and utilizing video teleconferencing
    for meetings and training.
        The lynchpin of the centralized data collection initiative
    is the new NASS National Operations Center in Missouri. NASS is
    implementing these initiatives without a request for additional
    appropriated funding. Once in place, they will result in
    substantial cost savings to U.S. taxpayers. NASS has also
    embarked on a research program to improve the quality and
    accuracy of its agriculture estimates.
        NASS is preparing now for the 2012 Census of Agriculture
    with an initial mailing to farmers and ranchers in December
    2012. The Census of Agriculture is the only source of
    comprehensive data on farm operations at the national, state,
    and county level. Detailed information at the county level
    helps agricultural organizations, suppliers, handlers,
    processers, and wholesalers and retailers better plan their
    operations. Census demographic information provides a valuable
    database for developing a public policy for rural areas. These
    data have been critical for farm bill discussions.
        The authority to conduct the Census of Agriculture was
    transferred to USDA in 1997. During the past 14 years, NASS has
    made significant strides to improve this vital data series. The
    2007 Census provided the option for electronic reporting,
    dramatically increased coverage of Native American, minority,
    and disadvantaged farm operators, and released data meeting
    newly defined needs for Congressional districts and for
    watersheds. NASS listens to Congress, industry, local and state
    governments, and stakeholders as it identifies emerging data
    needs.
        The 2012 Census will include new sections on organic
    agriculture and on-farm renewable energy. It will have
    additional questions on land-use practices and new questions on
    agroforestry, on-farm packing facilities, and farms that sell
    to intermediary outlets. Having the Census of Agriculture
    within USDA enables the Census to be more responsive to USDA
    and agriculture data needs.
        I appreciate the opportunity to testify and to share with
    your Subcommittee some of the important information that NASS
    provides for public and private decision-making relevant to
    food, agriculture, and rural America. Thank you.
        [The prepared statement of Dr. Clark follows:]

        Prepared Statement of Dr. Cynthia Clark, Administrator, National
        Agricultural Statistics Service, U.S. Department of Agriculture,
                                Washington, D.C.
        Mr. Chairman and Members of the Subcommittee, I appreciate the
    opportunity to submit a statement for this Subcommittee's
    consideration. The National Agricultural Statistics Service administers
    the U.S. agricultural statistics program, which began at the United
    States Department of Agriculture (USDA) in 1863. NASS also conducts the
    quinquennial U.S. Census of Agriculture, first collected by the
    Department of Commerce in 1840. Both programs are aligned with the
    basic mission of NASS to provide timely, accurate, and useful
    statistics in service to U.S. agriculture.
    Agricultural Estimates
        NASS's annual agricultural estimates reports are critically
    important to assess the current supply and demand in agricultural
    commodities. They are extremely valuable to producers, agribusinesses,
    farm organizations, commodity groups, economists, public officials, and
    others who use the data for decision-making. The statistics
    disseminated by NASS support fairness in markets ensuring buyers and
    sellers have access to the same official statistics at the same pre-
    announced time. This prevents markets from being influenced by
    ``inside'' information, which might unfairly affect market prices for
    the gain of an individual market participant. The efficiency of
    commodity markets is enhanced by the free flow of information, which
    minimizes price fluctuations for U.S. producers. Statistical measures
    help the competitiveness of our nation's agricultural industry and have
    become increasingly important as producers rely more on world markets
    for their sales.
        The U.S. food and agricultural sector relies on reliable
    statistical information. The NASS statistical program serves most U.S.
    agricultural commodity data needs and supplies important economic,
    environmental, and demographic data that informs policy decisions that
    impact the livelihood and quality of life of rural residents.
        The Risk Management Agency relies on NASS annual county estimates
    to administer crop insurance programs that provide U.S. farmers a
    safety net ensuring protection against unpredictable growing
    conditions. Additionally, the Farm Service Agency relies on NASS county
    level data to administer the Conservation Reserve Program, crop revenue
    support programs, and emergency assistance payments. Having accurate
    estimates from an unbiased data source, has added fairness and
    transparency to the overall process.
        Additionally, NASS is undertaking a transformation of its business
    process for collecting, processing, analyzing, and disseminating
    agricultural statistics. NASS identified six operational initiatives
    that allow the agency with the opportunity to improve data quality,
    create business cost efficiencies, improve career opportunities to its
    staff, and position the agency to better serve the statistical needs of
    USDA and agricultural data users. These efforts include centralizing IT
    services throughout the agency; standardizing systems; collecting data
    in the field through the use of computer assisted personal interviewing
    that relays the data into the NASS systems in real-time; centralizing
    telephone data collection; and utilizing video teleconferencing in lieu
    of certain travel. As a result of the centralized data collection
    initiative, NASS has opened a National Operations Center in St. Louis,
    Missouri and will begin operations in October. This facility will
    handle questionnaire processing, telephone data collection, training of
    telephone and field enumerators and statisticians and list maintenance
    from one central location. These efforts are being implemented without
    the request for additional appropriated funding and will eventually
    result in cost savings to the U.S. taxpayers.
        NASS has also embarked on a research program to improve the quality
    and accuracy of our estimates. Projects include editing and imputation
    research to make the pre-summary analytical processes more efficient,
    model based estimation and forecasting to make NASS estimates more
    reproducible, and remote sensing measurements to increase the accuracy
    of estimates.
    Census of Agriculture
        NASS is currently preparing for the 2012 Census of Agriculture. The
    initial mail out to the nation's farmers and ranchers will be in
    December 2012. The Census of Agriculture is taken every 5 years and
    provides comprehensive data at the national, state, and county level on
    the agricultural sector. The Census of Agriculture is the only source
    for this information on a local level and is extremely important to the
    agricultural community. These data were used extensively by USDA to
    help answer both internal and Congressional questions during the 2008
    Farm Bill debate and will be as critical for the next farm bill.
    Detailed information at the county level helps agricultural
    organizations, suppliers, handlers, processors, and wholesalers and
    retailers better plan their operations. Demographic information
    supplied by the Census of Agriculture also provides a very valuable
    database for developing public policy for rural areas. In addition to
    the 50 states, the Census of Agriculture programs are conducted in
    Puerto Rico, the Virgin Islands, Guam, and the Commonwealth of the
    Northern Mariana Islands. Results from all of the Censuses are made
    available on the NASS website.
        The authority to conduct the Census of Agriculture was transferred
    to USDA in 1997. During the past 14 years, NASS has made significant
    strides to continually improve this vital data series. For the first
    time in history, respondents had the option of reporting electronically
    through the Internet on the 2007 Census of Agriculture. NASS also
    targeted improved coverage for the 2007 Census of Agriculture by
    working closely with Community Based Organizations and American Indians
    tribes and reservations to increase awareness of the importance of
    being represented. NASS published a report by watershed using data from
    the 2007 Census of Agriculture. Finally, NASS continues to listen to
    Congress and industry on the ever expanding need for additional
    agricultural statistics. For example, the 2012 Census of Agriculture
    includes an entire section on organic agriculture, a new section
    covering on-farm renewable energy, an expanded list of questions on
    land use practices, and sales data collected along-side production
    questions. For the first time, NASS also plans to pick up information
    on agroforestry, on-farm packing facilities, and farms that sell to
    intermediary outlets These are just a few of the improvements and
    successes achieved over the first decade of the Census of Agriculture
    at USDA. Having the Census of Agriculture within USDA enables the
    Census to be more responsive to USDA data needs.
    Major Activities of the National Agricultural Statistics Service
        The ongoing expansion of global markets for U.S. goods and services
    continues to increase the need for modern and reliable statistical
    information. The surveys and Censuses conducted by NASS contribute
    significantly to economic decisions made by policymakers, agricultural
    producers, lenders, transporters, processors, wholesalers, retailers
    and, ultimately, consumers. NASS estimates have proven to provide
    critically important principal economic indicators for the agricultural
    food and fiber industry. Lack of relevant, timely, and accurate data
    contributes to wasteful inefficiencies throughout the entire production
    and marketing system.
        An example of one of the many important surveys conducted by NASS
    is the Agricultural Resource Management Survey (ARMS). This survey is
    conducted in cooperation with the USDA's Economic Research Service and
    is the primary input in developing the nation's farm income statements
    used as one of the nation's principal economic indicators. The ARMS
    provides vitally important information on the financial health of the
    farming sector and is heavily used by program analysts to determine the
    success and future scope of farm policies and programs.
        The need for timely, accurate, and useful statistics on U.S.
    agriculture continues to be emphasized throughout the sector. A few
    examples highlight the importance these data have on the market place
    and agricultural producers ability to manage their operations. The
    importance of accurate agricultural data can be demonstrated through
    the ever expanding use of the NASS county estimates for administering
    farmer safety nets. Specifically, NASS county estimates impact billions
    of dollars insured through the Risk Management Agency's Group Risk
    Program and Group Risk Income Program. The difference of one bushel in
    an average county yield estimate may result in the incorrect decision
    on indemnity payments. Farmers trust and demand that these data be an
    accurate gauge for administering these very important safety nets.
        NASS works cooperatively with each State Department of Agriculture
    throughout the year to provide commodity, environmental, economic, and
    demographic statistics for agriculture. This cooperative program, which
    began in 1917, has served the agricultural industry well and is
    recognized as an excellent model of successful state-Federal
    cooperation. Approximately sixty percent of the NASS staff is located
    in its 46 field offices; 21 of these offices are collocated with State
    Departments of Agriculture or land-grant universities. Working together
    helps meet both state and national data needs while minimizing overall
    costs by consolidating staff and resources, eliminating duplication of
    effort, and reducing the reporting burden on the nation's farm and
    ranch operators. Covering all fifty states and Puerto Rico, NASS
    provides statistical information that serves national, state, and local
    data needs.
        NASS has been a leader among Federal agencies in providing
    electronic access to information. All reports issued by NASS'
    Agricultural Statistics Board are made available to the public at a
    previously announced release time to ensure that everyone is given
    equal access to the information. All national statistical reports and
    data products, including graphics, are available on the Internet, as
    well as in printed form, at the time they are released. Customers are
    able to electronically subscribe to NASS reports and can download any
    of these reports in an easily accessible format using standard
    software. NASS also provides free Rich Site Summary and Podcast feeds
    to interested data users. This technology sends an alert or audio clip
    directly to data users when content of interest is posted to the NASS
    Web site. A summary of NASS and other USDA statistical data are
    produced annually in USDA's Agricultural Statistics, available on the
    Internet through the NASS home page, on CD-ROM disc, or in hard copy.
    All forty-six NASS field offices have home pages on the Internet that
    provide access to special statistical reports and information on
    current local commodity conditions and production.
        The primary activity of NASS is to provide reliable data for
    decision-making based on unbiased surveys and the Census of Agriculture
    to meet the current data needs of the agricultural industry. Farmers,
    ranchers, and agribusinesses voluntarily respond to a series of
    nationwide surveys about crops, livestock, prices, chemical use and
    other agricultural activities. Surveys are conducted during the growing
    season to measure the impact of weather, pests, and other factors on
    crop production. Many crop surveys are supplemented by actual field
    observations in which various plant counts and measurements are made.
    Administrative data from other state and USDA agencies, as well as data
    on imports and exports, are thoroughly analyzed and utilized by the
    agency to supplement survey data. NASS prepares estimates for over 120
    crops and 45 livestock items which are published annually in more than
    500 separate reports.
        NASS's Statistical Research Program is conducted to improve methods
    and techniques used for collecting, processing, and disseminating
    agricultural data. This research is directed toward achieving higher
    quality Census and survey data with less burden on respondents,
    producing more accurate and timely statistics for data users, and
    increasing the efficiency of the entire process. Graphical products
    simultaneously displaying progress and condition were developed to make
    it easier for data users and analysts to see the effects of conditions
    on the crop. Research has also allowed NASS to utilize real-time
    acreage and yield indications based on remote sensing methodology to
    assist in estimating acreage and production for select major corn and
    soybean states. This adds another objective measure to aid in
    accurately forecasting current year crop production. The growing
    diversity and specialization of the nation's farm operations have
    greatly complicated procedures for producing accurate agricultural
    statistics. Developing new sampling and survey methodology, expanding
    modes of data collection, including electronic data reporting, and
    exploiting computer intensive processing technology enables NASS to
    keep pace with an increasingly complex agricultural industry.
        NASS conducts a number of special surveys, as well as provides
    consulting services for many USDA agencies, other Federal or state
    agencies, universities, and agricultural organizations on a cost-
    reimbursable basis. Consulting services include assistance with survey
    methodology, questionnaire and sample design, information resource
    management, and statistical analysis. NASS has been very active in
    assisting USDA agencies in programs that monitor nutrition, food
    safety, environmental quality, and customer satisfaction. In
    cooperation with State Departments of Agriculture, land-grant
    universities, and industry groups, NASS conducts over 200 special
    surveys each year covering a wide range of issues such as farm injury,
    nursery and horticulture, farm finance, fruits and nuts, vegetables,
    and cropping practices. All results from these reimbursable efforts are
    made publicly available.
        NASS provides technical assistance and training to improve
    agricultural survey programs in other countries in cooperation with
    other government agencies on a cost-reimbursable basis. The NASS
    international program focuses on the developing and emerging market
    countries in Asia, Central and South America, and Eastern Europe.
    Accurate foreign country information is essential for the orderly
    marketing of U.S. farm products throughout the world. NASS works
    directly with countries by assisting in the application of modern
    statistical methodology, including sample survey techniques.
        NASS annually seeks input on improvements and priorities from the
    public through the Secretary of Agriculture's Advisory Committee on
    Agriculture Statistics, interaction with producers at major commodity
    meetings, data user meetings with representatives from agribusinesses
    and commodity groups, special briefings for agricultural leaders during
    the release of major reports, and numerous individual contacts. As a
    result of these activities, the agency has made adjustments to its
    statistics program, published reports, and expanded electronic access
    capabilities to better meet the statistical needs of customers and
    stakeholders.
        This concludes my statement, Mr. Chairman. Thank you for the
    opportunity to submit this statement for the record.

        The Chairman. Yes, ma'am. Proceed.

            STATEMENT OF LAURIAN J. UNNEVEHR, Ph.D., ACTING
             ADMINISTRATOR, ECONOMIC RESEARCH SERVICE, U.S.
              DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Dr. Unnevehr. Good morning. Chairman Johnson, Ranking
    Member Costa, and Members of the Subcommittee, I am Dr. Laurian
    Unnevehr, Acting Administrator of the Economic Research
    Service, or ERS. I appreciate this opportunity to discuss our
    agency's programs.
        The mission of ERS is to inform public and private
    decision-making related to agriculture, food, the environment,
    and rural development. The agency's research program is aimed
    at the information needs of USDA policymakers, but ERS
    information and analysis is also used by the media, trade
    associations, public interest groups, and the general public.
    In fact, our research findings improve the quality of the
    market information that guides farmers' production decisions
    and risk management in the agricultural sector.
        ERS is the primary source of statistical indicators that,
    among other things, gauge the health of the farm sector
    including farm income estimates, assess the performance of the
    agricultural sector, and provide measures of food and security
    at home and abroad. ERS is in the Research, Education, and
    Economics mission area within USDA, reflecting its role in
    providing high-quality objective data and analysis.
        As you have heard here this morning, the four REE agencies
    are complementary but each has a distinct mission. For example,
    the National Agricultural Statistics Service conducts surveys
    that reflect facts on the ground. That is, NASS collects
    primary data. ERS, on the other hand, uses data from a variety
    of sources to carry out its research mission. For example, data
    collected by NASS are used by ERS for its farm income
    estimates. ERS also uses other sources of primary data, such as
    the Census Bureau current population survey that provides the
    basis for our domestic food security statistics. Thus, ERS
    draws on primary data from different sources to construct
    statistical indicators that inform our research mission.
        Economic analysis is critical to making progress on
    challenges facing U.S. agriculture, and thus, ERS collaborates
    with ARS in carrying out research that supports the entire
    range of REE mission area goals. ERS also coordinates with NIFA
    regarding extramural funding priorities and in identifying
    promising new areas for research.
        The importance of public agricultural research to U.S.
    agriculture is supported in a recent ERS publication, Public
    Agriculture Research Spending and Future U.S. Agricultural
    Productivity Growth. By 2050, global agricultural demand is
    projected to grow by 70 to 100 percent due to population
    increase, energy demands, and higher incomes in developing
    countries. To meet this demand, agriculture will need to
    produce more output per unit of input--that is, increased
    productivity will be necessary.
        Public agriculture research is the primary source of
    increased productivity, including improved crop varieties and
    animal breeds. ERS simulations indicate that if support for
    U.S. public agricultural research remains constant at current
    nominal levels, then productivity growth will fall and output
    would only increase by 40 percent by 2050, falling short of
    future demand. To meet future demand growth, an increase in
    agricultural research support of 4.7 percent per year, or one
    percent in inflation-adjusted spending would be needed.
        Failing to meet future demand means that more land will be
    put into production, more food would be imported into the
    United States, and food consumers would pay higher prices. This
    ERS analysis shows the importance of investments in public
    agricultural research.
        As documented in the written testimony, ERS carried out
    research on several topics in response to requests related to
    the 2008 Farm Bill. One study in particular on food deserts
    provides the first-ever national assessment of food deserts
    defined by Congress as, ``low-income areas with low access to
    affordable and nutritious food.''
        Our 2009 study and follow-up efforts at ERS to map food
    deserts identified new opportunities for business and
    employment. Two major retail chains, Wal-Mart and SUPERVALU,
    announced last week plans to open more than 250 new stores in
    underserved neighborhoods identified by USDA. This example
    shows how ERS is able to create new information of value to the
    business community.
        We would be happy to brief the Committee Members on the
    results of these or any other research projects. Mr. Chairman,
    this concludes my statement. I will be happy to answer any
    questions you or the Subcommittee may have.
        [The prepared statement of Dr. Unnevehr follows:]

    Prepared Statement of Laurian J. Unnevehr, Ph.D., Acting Administrator,
    Economic Research Service, U.S. Department of Agriculture, Washington,
                                      D.C.
        Mr. Chairman and Members of the Subcommittee, I appreciate this
    opportunity to discuss the Economic Research Service's (ERS) research,
    market analysis, outlook, and data program. The mission of the Economic
    Research Service is to inform and enhance public and private decision
    making on economic and policy issues related to agriculture, food, the
    environment, and rural development. While the agency's research program
    is aimed at the information needs of USDA policy makers and programs,
    ERS information and analysis is also used by the media, trade
    associations, public interest groups, and the general public. Our
    research is widely recognized in the research community for its
    credibility, timeliness, and use of cutting edge data, models, and
    methods.
        Rather than make recommendations, ERS designs its research to
    demonstrate to its users the consequences of taking alternative policy
    or programmatic pathways. Reflecting the arms-length role it plays in
    this regard, ERS is in the Research, Education, and Economics (REE)
    mission area.
        The four REE agencies are complementary and have distinct missions.
    The National Agriculture Statistics Service (NASS) conducts basic
    statistically valid surveys to create a body of data that reflects on-
    the-ground factual information. ERS constructs data series, using data
    from a variety of sources, to inform its program of research and market
    analysis. Data collected by NASS are used by ERS for its farm income
    estimates and research, and in the ERS program of market outlook and
    analysis. Other data and research in ERS, such as the food security
    statistics, rely on survey agreements with other Federal agencies such
    as the Census bureau. ERS provides data, research and analysis that
    support the wide range of program and policy issues of importance to
    USDA.
        ERS provides social science research and analysis to complement the
    other scientific expertise of the REE agencies in multidisciplinary
    research. ERS collaborates with ARS in carrying out research to address
    the needs of U.S. agriculture, including research and data development
    to support rural prosperity, agricultural productivity, global food
    security, food safety, and better diets. ERS coordinates with NIFA
    regarding extramural funding priorities and identifying promising new
    areas for research.
        ERS data, information and analysis meet the information needs of
    USDA policy makers and programs, and are used by the media, trade
    associations, public interest groups, and the general public. Findings
    are useful to inform policymakers and for continuously improving the
    quality of the market information that guides production decisions and
    risk management.
        ERS is also the primary source of statistical indicators that,
    among other things, gauge the health of the farm sector (including farm
    income estimates and projections), assess the current and expected
    performance of the agricultural sector (including trade), and provide
    measures of food insecurity here and abroad. ERS is one of the 14
    Office of Management and Budget (OMB) officially designated Federal
    statistical agencies.
        ERS disseminates its research findings, market information, and
    statistical indicators in a variety of outlets including our website
    (www.ers.usda.gov), our award-winning magazine, Amber Waves, outlook
    reports for specific commodity sectors, ERS research and information
    reports, Oral briefings, written staff analyses, and Congressionally
    mandated studies delivered directly to executive and legislative branch
    policymakers and program administrators, and refereed journal articles,
    which assure the professional credibility of findings.
        There were three research studies requested of ERS in the Food,
    Conservation, and Energy Act of 2008, Pub. L. No 110-246 (2008 Farm
    Bill).
        Study and Report on Grassland to Cropland in the Northern Plains.
    Native grasslands in the U.S. Northern Plains, particularly those
    located in the Prairie Pothole Region, are excellent breeding habitat
    for migratory birds. The conversion of grassland to crop production
    could damage this habitat and affect bird populations. House Report No.
    110-627 accompanying the 2008 Farm Bill, requested the Secretary of
    Agriculture to conduct a study of the conversion of native grasslands
    to crop production. The study examined three questions: (1) How fast
    are grasslands being converted to cropland in the United States and
    especially in the Northern Plains?; (2) Can a temporary (5 year) ban on
    crop insurance purchase for converted grassland slow grassland to
    cropland conversion?; and (3) What has been the role of crop insurance
    and other farm programs in grassland to cropland conversion? The study
    found that: (1) roughly 770,000 acres (one percent) of 1997 rangeland
    acreage in the Northern Plains were converted to cultivated crops by
    2007; (2) a 5 year ban on crop insurance purchase for converted
    grassland could slow but is unlikely to stop grassland to cropland
    conversion; and (3) the benefits of crop insurance, disaster
    assistance, and marketing loans increased cropland acreage by about 2.9
    percent between 1998 and 2007. It is available on the ERS website at:
    http://www.ers.usda.gov/Publications/ERR120/.
        Study and Report on Food Deserts. Concerned that some areas have
    become `food deserts'--areas with limited access to affordable and
    nutritious foods, particularly low-income communities--Congress, in
    section 7527 of the 2008 Farm Bill, requested that the Department of
    Agriculture conduct a study on the topic. ERS took the lead in
    conducting this study, with assistance from FNS and NIFA. The study
    considered the prevalence, causes, and consequences of areas with low
    access to affordable and nutritious food, as well as possible solutions
    to reducing their negative impact on diets and health. The study found
    that (1) according to the 2000 Census about 23.5 million people, or 8.4
    percent of the U.S. population, live in low-income neighborhoods that
    are more than a mile from a supermarket or large grocery store. Of
    that, 11.5 million people, or 4.1 percent of the population who live in
    these areas are also low income (below 200 percent of the Federal
    poverty level). (2) Urban core areas with limited food access have
    higher levels of racial segregation and greater income inequality. In
    small town and rural areas with limited food access, the lack of
    transportation infrastructure is the most defining characteristic. (3)
    Many studies find a correlation between limited food access and lower
    intake of nutritious foods. However, the causal links between access
    and nutritional outcomes are not well understood. (4) The degree of
    access to affordable and nutritious food depends on supply--costs that
    stores face--and on consumer demand. Understanding the market
    conditions that contribute to differences in access to food is critical
    to the design of effective policy interventions. The final report was
    delivered in June, 2009. It is available on the ERS website at: http://
    www.ers.usda.gov/publications/ap/ap036/.
        Study and Report on Animal Manure Bioenergy Operations. Section
    11014 of the 2008 Farm Bill mandated a study to evaluate the role of
    animal manure as a source of fertilizer and its potential additional
    uses. The study included a determination of the extent to which animal
    manure is utilized as fertilizer in agricultural operations by type
    (including species and agronomic practices employed) and size. The
    potential impact on consumers and on agricultural operations resulting
    from limitations being placed on the utilization of animal manure as
    fertilizer was evaluated, along with an evaluation of the effects on
    agriculture production of increased competition for animal manure use
    due to bioenergy production, including as a feedstock or a replacement
    for fossil fuels. The study found that (1) About 15.8 million acres of
    cropland, equivalent to about five percent of all U.S. cropland, are
    fertilized with livestock manure. Patterns of manure use are driven by
    the agronomic needs of crops and by transport costs, which limit the
    distance that manure can be moved and create close links between types
    of livestock and certain crop commodities. (2) Higher commercial
    fertilizer prices also favor the use of manure as fertilizer. However,
    manure is not a complete substitute for commercial fertilizer, and
    farmers who use manure therefore reduce their use of commercial
    fertilizer but rarely eliminate it. (3) Livestock operations can comply
    with nutrient management plans by spreading manure on more of their own
    cropland, by removing manure to other farms for spreading, by altering
    feed mixes to reduce manure production, or by developing herds or
    flocks with reduced manure production. (4) Estimated costs of
    compliance with nutrient management plans vary sharply with the degree
    to which excess manure needs to be disposed of and the willingness of
    nearby farmers to accept manure for application to their cropland. With
    a limited willingness to accept manure, the study finds that production
    costs, including those for manure management, would likely rise by 2.5-
    3.5 percent for large operations. Such increases are unlikely to alter
    the emerging structure of livestock production. (5) Manure-to-energy
    projects are not currently in widespread use; currently, the costs
    generally exceed the revenues that most farmers can receive from
    electricity production. But because such projects use existing
    resources, they could provide society with benefits if manure replaces
    newly mined fossil fuels in energy production, and if methane, a
    greenhouse gas, can be captured. (6) Currently envisioned manure-to-
    energy projects are not likely to impose substantive constraints on the
    use of manure as fertilizer. The final report was delivered in June,
    2009. It is available on the ERS website at: http://www.ers.usda.gov/
    publications/ap/ap037/.
        ERS also co-authored two other studies that were requested in the
    2008 Farm Bill.
        Analysis of the Planting Transferability Pilot Program. Section
    1107 of the 2008 Farm Bill requires the Secretary of Agriculture to
    periodically evaluate the effect of the 2008 Planting Transferability
    Pilot Program (PTPP) authorized in that section, which relaxes the
    planting restrictions placed on vegetables destined for processing.
    This study was produced for the Farm Service Agency (FSA). It provides
    an overview of the market for processing vegetables and uses farm-level
    data from FSA to evaluate PTPP's effect on the supply and price of
    processing vegetables. Using a simulation model representing the
    national market, the study found that the PTPP entices a very modest
    increase in processing vegetable production and a very modest decline
    in processing vegetable prices. The quantity of processing vegetables
    supplied was projected to increase between 0.1 and 0.6 percent, and
    prices decline by 0.3 to 2.8 percent. The study did not find that PTPP
    has an impact on fresh fruit and vegetable markets. It is available on
    the FSA website at http://www.fsa.usda.gov/Internet/FSA_File/
    fv_plantg_rstricts_rpt_120210.pdf.
        Analysis of the Limited Base Provision of the 2008 Farm Bill.
    Section 1101 of the 2008 Farm Bill included a provision to suspend
    payments to farms with 10-base acres or less (base-10 provision).
    Congress included this provision in the 2008 Farm Bill as a cost saving
    measure. Not only would the provision eliminate the payments to farms
    with limited base acres, but also reduce the number of farm payments
    processed. The 2008 Farm Bill mandated that USDA evaluate the effects
    of suspending payments under this provision. At the request of FSA, ERS
    evaluated the impact of eliminating direct and countercyclical and ACRE
    payments to farms with 10-base acres or less as required by the 2008
    Farm Bill. The study examined the number and location of farms impacted
    by the provision, the characteristics of those farms, and the amount
    the government could save due to the suspension of program payments
    under this provision. The evaluation included information about farm
    characteristics and production as well as an assessment of the
    provision on specialty crop producers. The study found that (1) The
    base-10 provision affects a large number of farms but had little effect
    on total payments. In 2009, nearly 371,000 FSA farms became ineligible
    for payments under this provision, with prohibited payments equaling an
    upper bound of $29.1 million. (2) The East Coast is more affected by
    the base-10 provision than the Heartland and West Coast. (3) Adverse
    effects on the fruit and vegetable sector are not expected as a result
    of the base-10 provision. (4) FSA farms for which payments were
    prohibited are generally part of larger operations. (5) Budgetary
    savings would accrue from reducing administrative costs. The study
    estimated $3.5 million in personnel cost savings to FSA and $0.2
    million in mailing and paperwork savings associated with the base-l0
    provision. Combined with the reduction in payment outlays to farms of a
    maximum $29.1 million, the budgetary savings from prohibited payments
    is estimated to total as much as $32.8 million for 2009. The study is
    available on the FSA website
    http://www.fsa.usda.gov/Internet/FSA_File/base_10_rpt_copy_ltrs_
    6744901.pdf.
        The Economic Research Service has also conducted a number of
    studies on programs, policies, and issues raised by the 2008 Farm Bill.
    Among these include the following:

       ERS published the web-based The 2008 Farm bill Side-by-Side
            Comparison--a comparison of the 2008 Farm Bill with previous
            legislation. It offers a time-saving reference to farm bill
            provisions. In addition to key provisions and details by Title,
            the side-by-side includes links to related ERS publications and
            to analyses of previous Farm Acts.

       Economic analyses of commodity programs, including revenue-
            based commodity support, factors influencing the Average Crop
            Revenue Election (ACRE) program enrollment and the effect of
            ACRE program payments on risk reduction.

       Economic analysis of conservation programs, including the
            impacts of regional equity provisions on conservation program
            outcomes, participation in conservation programs by beginning,
            limited-resource, and socially disadvantaged operators, and the
            implications for program eligibility of alternative definitions
            of U.S. agricultures basic unit, the farm.

        We would be happy to brief the Committee Members and staff on the
    results of any of our research projects, as well as our ongoing program
    of research, market outlook, and data analysis.
        Mr. Chairman, this concludes my statement. I will be happy to
    answer any questions that the Subcommittee may have.

        The Chairman. Thank you, all four of you, for your
    testimony. I guess I will start the questions here maybe with
    one for the whole panel and you can selectively take it. I
    guess this is the category of a softball question but it is
    sincerely trying to give an overall perspective.
        Why now has the government been--and you specifically--in
    the business of collecting data? I know that is a generic
    question but maybe one of you would like to address that for
    us. Not adversarial, just inquisitive.
        Dr. Clark. Well, data is very important for public and
    private decision-making. If you don't have complete data
    provided by government, then private organizations collect
    information. It is not complete, it is not comprehensive, it is
    not available for access to all, and it often does not reflect
    reality and the current situation. So if you are basing your
    decision-making on inaccurate data, your decisions are going to
    be flawed.
        Dr. Unnevehr. I would just like to follow up and talk about
    the importance of objective data and information, especially
    for small businesses, small producers. Having a level playing
    field in terms of the market information that is available in
    agriculture means that prices are able to respond more quickly
    to changes in supply and demand. It means that producers are
    able to make informed decisions in response to those prices.
    And without a single objective and timely source of data, the
    market could be subject to manipulation from, well, subjective
    sources controlled by those who have information that is not
    available to all.
        The Chairman. Dr. Unnevehr, how does the mission of your
    agency, what you do daily, differ from what is done in the
    Office of the Chief Economist?
        Dr. Unnevehr. The Chief Economist is the advisor to the
    Secretary on economic issues. He often draws on the data and
    analysis carried out in the Economic Research Service. Because
    we are a research agency, in REE, we carry out research and
    analysis that is objective and informs policymakers of the
    consequences of alternative decisions. And that information is
    available both to the Office of the Chief Economist as well as
    to USDA program agencies for use in their program planning and
    analysis.
        The Chairman. Thank you. And Dr. Young, when Congress
    created your institute, the intent was for a ``independent,
    scientific policy-setting agency for the food and agriculture
    sciences.'' Do you believe that recent awards have been
    consistent with that direction? And specifically, has the
    construct of RFAs been determined by scientific need and merit?
    And finally, has your directorship and peer review panel been
    the sole determinates of those RFAs or have the offices of the
    Under Secretary impacted the process outside the scientific
    realm? I have particular interest in that on behalf of
    universities, but just in general.
        Dr. Jacobs-Young. Chairman Johnson, thank you for your
    question. In addition to my role as acting Director for the
    National Institute of Food and Agriculture, I am also the
    Director for the Office of the Chief Scientist at the
    Department of Agriculture and responsible for leading the
    development of a scientific integrity policy for the
    Department. And that scientific integrity not only applies to
    NIFA but applies to the entire Department preventing or seeking
    to ensure nonpolitical interference in science for the
    Department.
        In the National Institute of Food and Agriculture, our peer
    review process is world renowned. We have taken many
    painstaking efforts to ensure that we are meeting the needs of
    our stakeholders, of our land-grant universities and setting
    priorities. And so I would say that, yes, we are operating a
    program that is a pious level of integrity.
        The Chairman. I don't think we question the integrity. My
    specific question is are those decisions solely based on the
    criterion laid out in the statute, scientific-based, or has
    Secretary Vilsack and the Under Secretary been involved in the
    decision-making process outside that specific direction?
        Dr. Jacobs-Young. Chairman Johnson, my answer is yes up
    front. And second----
        The Chairman. Yes what?
        Dr. Jacobs-Young. Yes, we use a panel of experts from
    across the scientific community to make the decisions and
    recommendations for the funding for our program. So no, there
    is no political interference, and yes, it is based solely on
    science and the merit of the applications that have been
    received.
        The Chairman. I have come to the end of my own time, so I
    would recognize the distinguished Ranking Member, Mr. Costa.
        Mr. Costa. Thank you very much, Mr. Chairman.
        Dr. Jacobs-Young, you are obviously aware that the
    mandatory funding for Specialty Crop Research Initiative
    expires at the end of 2012. As I mentioned at the outset, I
    think it was an important breakthrough in the 2008 Farm Bill.
    What are your thoughts in terms of where we go? It is unclear
    whether or not that commitment is going to be there next year,
    and I would like you to make a case for why the research has
    been effective and plays a unique role if you can.
        Dr. Jacobs-Young. I agree that the specialty crop industry
    is a very important industry to agriculture, a $67 billion
    industry, 46.9 percent of the U.S. crop. The specialty crops
    program of the Specialty Crops Research Initiative that was----
        Mr. Costa. Healthy, nutritional food.
        Dr. Jacobs-Young.--and it is healthy and nutritional.
        The Specialty Crops Research Initiative provides an
    opportunity for us to pay particular attention to breeding and
    genetics and genomes and pest and disease management for that
    industry. Without the Specialty Crop Research Initiative, the
    applicants would need to apply to our general plant-based
    programs in AFRI, in our Hatch programs, in our SBIR programs,
    in our Integrated Pest Management programs, and in those
    programs, they all focus on national needs. And so we could not
    ensure that those projects would rank in the funding range so
    to speak, so we would not be able to pay----
        Mr. Costa. Let me make two observations, then, because I
    have some other questions I want to ask. One, I think you
    should provide the Subcommittee and therefore the full
    Committee with the information on where this research is
    valuable as it relates to providing foods that require less use
    of herbicides, pesticides, other kinds of things that provide
    values to farmers as well as consumers because of the ability
    of the research, things that are less drought-resistant. And
    then the other observation is we probably should change the
    name specialty crops. I think people think, specialty, well
    what does that mean? Specialty crops took on the name
    somewhere, but it is really fruits and vegetables and all the
    other healthy stuff we eat, staples. They are not some exotic
    pear that comes from some different part of the world.
        So anyway, I need to move on here. Dr. Knipling, I hope you
    were briefed with the Agriculture Research Service, which, as
    you stated in your testimony, does good work, but they are
    looking at closures of various facilities. I wrote a letter to
    Secretary Vilsack about the UC Shafter Research and Extension
    Center. Its efforts are important for not only other varieties
    of cotton but pima cotton as well. Are you familiar with this?
    Can you respond to what the department's outlook on this
    particular research center that is in the San Joaquin Valley?
        Dr. Knipling. Yes, I am quite familiar with that issue and
    the Shafter Research Station itself. This is a proposal in the
    President's 2012 budget yet to be acted on by the Appropriation
    Subcommittees and Congress as a whole. The Shafter proposed
    closure is one of ten ARS laboratories that are proposed for
    closure for the general purpose of contributing to deficit
    reduction but also to be able to allocate those resources,
    perhaps, to some of these other priority areas of emphasis that
    I mentioned earlier in my testimony.
        Mr. Costa. Well, to cut to the chase as we say, I know I
    will and I believe Congressman McCarthy will as well look
    toward the response back from the Secretary as to the criteria
    you are using. We are obviously all focused on cost-cutting but
    we want to make sure that the validity and the criteria that
    the Department is using justifies this. I know personally of
    the research that takes place there, and I think it is
    effective.
        Quickly, as my time is running out, Dr. Unnevehr, you
    talked about food deserts and the research that you are doing
    and I was mentioning to the Chairman how the irony is because
    we produce so much aplenty, as you know, in the San Joaquin
    Valley in terms of healthy foods and yet certain areas within
    the Valley have been designated as food deserts. And I think
    that is an irony because when you are producing half the
    nation's fruits and vegetables yet to be qualified a food
    desert, I think you might want to explain in detail how you
    came to that--if the Chairman wants to allow you to answer the
    question because my time now has expired.
        The Chairman. Proceed.
        Dr. Unnevehr. Yes.
        Mr. Costa. Briefly.
        Dr. Unnevehr. Briefly. We worked with the Healthy Food
    Financing Initiative to develop the definition of a food desert
    so we would have national criteria that would identify areas of
    greatest need for the U.S. And the criteria are as follows:
    basically low-income areas--new market tax credit zones as
    defined by Treasury--which is a certain proportion of people
    under a certain level of income--combined with a fairly large
    number of people or proportion of people more than a mile from
    a supermarket in urban areas and more than 10 miles from a
    supermarket in rural areas. So it was a combined criteria of
    low-income areas with a significant number of folks at risk for
    low access. And so that is why there may be food production in
    your district but there may not be food retail outlets.
        Mr. Costa. And so being near a fast-food outlet doesn't
    count?
        Dr. Unnevehr. That is correct.
        Mr. Costa. All right. I just think it is important for the
    Committee to understand how you arrived at that definition of a
    food desert because the irony, of course, is in the case that I
    pointed out is you have a tremendous amount of a wide variety
    of agriculture production taking place, yet the access to that
    same food because of the criteria you explained qualifies it in
    those terms, correct?
        Dr. Unnevehr. Correct.
        Mr. Costa. Okay.
        The Chairman. Thank you, Mr. Costa. I will now turn to the
    gentleman from Pennsylvania, Mr. Thompson.
        Mr. Thompson. Well, thank you to the panel for being here
    and your leadership.
        Dr. Clark, I want to start with you. You mentioned in your
    testimony that NASS will for the first time have specific
    statistics dealing with farm energy and agroforestry. What
    kinds of statistics will this entail?
        Dr. Clark. Well, these will be questions on the 2012
    Census. They will not necessarily be detailed questions. They
    will provide the opportunity to use the 2012 Census as a
    sampling frame to develop a larger questionnaire for a survey
    if that were to be desired. It also allows the opportunity of
    combining that data with the demographic and economic and
    environmental data that is on the Census form. So you get a
    better picture of how an individual question response would
    relate to an agriculture operation.
        Mr. Thompson. Okay. Thank you. Our farmers and agriculture
    in general are not getting the credit they deserve for their
    extensive efforts in restoring the Chesapeake Bay. Dr. Clark or
    Dr. Knipling, since you talked about conservation efforts and
    watershed modeling, what kinds of information do you have on
    the role of agriculture on these restoration efforts in the
    Chesapeake Bay watershed?
        Dr. Knipling. ARS has a number of our research locations
    actually focused on the Chesapeake Bay watershed, one of which
    is at University Park in Pennsylvania on the campus of Penn
    State University. That is our Pasture Research Lab. And in fact
    they have been looking at the upper reaches of the watershed of
    the Susquehanna River and all of the Chesapeake Bay watershed.
    Our Beltsville Agricultural Research Center located quite close
    by is part of that network of laboratories. And we are working
    closely with other Federal agencies, state agencies, various
    environmental groups, producer organizations, and actual
    farmers, producers on their land to monitor agricultural
    practices and to develop such practices that might minimize the
    runoff of fertilizer, nutrients, and pesticides.
        Mr. Thompson. Dr. Clark, any follow up on that particular
    question related to the Chesapeake Bay statistics gathering in
    terms of the efforts in restoring the Bay and information that
    is being collected on the outcomes or the efforts that are made
    in agriculture?
        Dr. Clark. I could speak to a project that has just been
    initiated with the Natural Resources Conservation Service and
    the National Agriculture Statistics Service. We are doing a
    pilot data collection next year in the Chesapeake Bay that
    would collect environmental and agricultural data from those
    states. And I could get you more details on that if you would
    like that.
        Mr. Thompson. That would be great. I look forward to
    visiting the Penn State Pasture Research Lab. I wasn't aware of
    that actually. That is in my backyard for the most part. You
    know, I appreciate within your testimony, Dr. Knipling, in
    particular you talked about the Chesapeake Bay region's soil
    losses reduced by 55 percent, nitrogen loss by 31 percent,
    phosphorus reduced by 41 percent. I appreciate what all of you
    do because obviously to make good decisions you need good data
    to make sound decisions. And I think the data you report really
    shows that we have made great progress within the Chesapeake
    Bay. Frankly, I think it helpful in combating other agencies
    that seem to use a hammer on agriculture such as the EPA.
        Dr. Jacobs-Young, you mentioned the Institute of Bioenergy.
    Can you talk a bit more about that and what it does?
        Dr. Jacobs-Young. Yes. Thank you for the question. So one
    of our five challenge areas is renewable energy, bioenergy. And
    in the Department of Agriculture, including the National
    Institute of Food and Agriculture, we are focusing on the
    feedstock development piece of the supply chain for bioenergy
    production. So the production of biomass in the way that is
    environmentally friendly, that is developed to grow in areas
    where there is drought or flooding or high temperatures or
    salinity. And so much of our research deals with the genomics,
    the genetics, the breeding of feedstock for bioenergy.
        Mr. Thompson. Okay. Thank you.
        Chairman, I think my time is about expired.
        The Chairman. Thank you, Mr. Thompson. And the gentleman
    from North Carolina, Mr. Kissell.
        Mr. Kissell. Thank you, Mr. Chairman, and I welcome the
    panelists today. And I want to get a little bit of a parochial
    statement out of the way but it is much more than talking about
    North Carolina. But in North Carolina we have a North Carolina
    Research Campus. A gentleman, Mr. Murdoch, David Murdoch has
    invested $\1/2\ billion of his own money along with the State
    of North Carolina and local monies into a research campus that
    is in my district. It is an incredible public-private
    investment, research equipment that is almost one-of-a-kind in
    the western hemisphere, is certainly very rare to find but made
    available to various people to come in and seven of our
    universities in North Carolina are there with a major focused
    research. Also there are private entities there and it is an
    agriculture research station there all focused upon food
    nutrition and development. If you are not familiar with it, I
    would love if you got familiar with it and came to visit us
    because it is just an incredible example of what can be done
    when we come together with all resources for research for the
    advancement of the things we are talking about today.
        Moving on to another area, we had a panel not that long ago
    and we were talking about biotech research, and the statement
    was made that it has been several years since we had a major
    advancement in biotechnology that has been approved and brought
    into the commercial arena, which I found to be of concern. When
    we consider the things we are talking about today that if we
    are going to be able to have the food that we need to have for
    the growing populations and recognizing less resources
    available, we have to continue to make these advancements in
    research and bring those ideas forward.
        Just wondering if any of you had any thoughts on why we are
    not able to bring this research forward into viable commercial
    products and what are our problems, what do we need to overcome
    to do this?
        Dr. Knipling. Congressman, I would start the commentary. Of
    course, when you refer to new products coming into the market,
    generally that implies genetically modified organisms, GMOs,
    that actually require regulatory approval.
        Mr. Kissell. And that is what I am talking about. Thank
    you.
        Dr. Knipling. Yes. And yes, there are additional products
    coming on but they are utilizing mostly the crop protectants,
    the protection against herbicides, the protection against
    insects and so forth. And it is, I guess, a significant
    regulatory burden, although I am sure my collegues here could
    cite some statistics of the rapid adoption of genetically
    modified crops throughout the country for some of the major
    agronomic crops.
        I would like to turn the discussion perhaps more to
    biotechnology in the sense of other forms of molecular biology
    that are significantly impacting crop production. That would be
    the use of genomics to understand the genetic traits and how
    those relate to phenotypic characteristics. And this is really
    going to be the future of biotechnology, the use of genomics,
    selective markers to support traditional crop and animal
    breeding with great precision. And we have tremendous examples
    of many species of crops, animals, some of the pathogens that
    affect those, and we can, with precision, start targeting
    genetic improvement through traditional means.
        I would just cite the rapid progress just made in the last
    few years with the dairy industry where using genetic markers
    from high-performing cows, high-performing breeding stock to
    make tremendous----
        Mr. Kissell. I am going to interrupt you just one second. I
    appreciate this tremendously, but my time is on caution right
    now. So the concerns that were expressed in that panel from a
    while back that we are not bringing forth these new products,
    do any of you just flat out disagree or do you share these
    concerns very quickly?
        Dr. Jacobs-Young. Congressman Kissell, we are busy
    providing the science to base the decisions on, but this is a
    very complex issue. In the Department of Agriculture, we are
    producing the data to support three different areas--and we
    talk about coexistence--GE, non-GE, and organics. So we have
    three alternative methods. And so what we are doing at REE is
    providing the data for decision-making. And so we do believe
    that all the regulatory actions should be based on science.
        Mr. Kissell. Okay. And my time is out, but it is very much
    a concern that all the research that takes place at all our
    universities and other places, if we can't bring that forward
    in a timely manner because of, yes, we should have concerns
    about the regulations. But, if that becomes an obstacle in
    itself which was indicated last time, it is something that we
    just need to really work on.
        Thank you, Mr. Chairman.
        The Chairman. I have no other questions. I would turn to
    the Ranking Member to see if you have another round of
    questions? And Mr. Thompson or Mr. Kissell, I would be more
    than happy if you would like. Mr. Thompson?
        Mr. Costa. I have a couple questions. I don't think they
    will take 5 minutes unless the answers are long.
        Dr. Clark, you talked about the important role that you
    play in terms of surveys and information. How good do you
    believe is the information that you are reporting on, whether
    it is on prices, specialty crop surveys, on civil rights, on
    your focus on the organic program surveys? I am always
    wondering when I see this information as how much you attest to
    the validity of it.
        Dr. Clark. I can tell you it is very good information. It
    is probably better than any other information that is out
    there, but it is collected from respondents, and so there is
    always some variability in the data that you collect. It is
    collected through sample surveys primarily. There is
    variability in a sampling estimate. In most cases, you know
    what the variability is and so you can factor that into your
    decision-making. Some of the efforts that we are undertaking at
    NASS will make our data even better than it is right now. Our
    efforts to put in a national operations center will remove a
    lot of the data collection processing efforts from 46 offices
    to one center where we can put in quality-control procedures,
    which are not feasible now in 46 different places.
        So we are working to put more control on our processes,
    which will improve the quality of our data. We are also working
    on more sophisticated estimation procedures, which will also
    improve the quality of our data. We have just begun publishing
    measures on the quality of our data, so that should help you in
    using the data.
        Mr. Costa. So do you ever attempt to provide third-party
    verification if a survey is--I don't know how--let us say a
    typical survey may be on a crop survey. I suspect it is in the
    hundreds if not larger. Do you determine that the information
    that was sent back to the Department was accurately reported?
        Dr. Clark. We don't generally do audits. Occasionally, we
    do re-interview surveys and we measure the discrepancy between
    the initial reported data and a second interview. Those are
    ways to measure different types of error. There are many
    different kinds of error that you could have in a data-
    collection process and we design our processes to minimize
    those errors and to measure them so that we have some
    information on the quality of what we are producing.
        Mr. Costa. Let me ask all of you if you want to comment
    just quickly. When we look at the totality of the ag research
    taking place, and I know that it varies regionally and in terms
    of the tremendous diversity that reflects U.S. agriculture, but
    are we really focusing where we ought to be? I mean can you
    make that judgment within the four different agencies that are
    represented here? Quickly.
        Dr. Knipling. Just quickly, ARS is frequently asked why do
    we have 100 laboratories across the country and that does
    reflect the site specificity of agriculture, the diversity of
    climates, the diversity of customers, users, the diversity of
    our partnerships. And there is a historical previous priority-
    setting basis for why we have all of these activities in the
    places we do.
        Mr. Costa. Would anyone else care to comment?
        Dr. Unnevehr. Well, I will just offer the comment that we
    all set our priorities in consultation with stakeholders, and
    certainly in the case of ERS, our research programs are driven
    by the needs of USDA policies and programs.
        Mr. Costa. But you think the agriculture producers have a
    large say in it in terms of the stakeholders you are speaking
    of?
        Dr. Unnevehr. Absolutely. Although I will say that there
    are food programs for food consumers in USDA, and thus we also
    have research on those issues.
        Mr. Costa. But those are part of the stakeholders as well,
    yes.
        Dr. Unnevehr. Exactly.
        Mr. Costa. But I mean you think that on a regular basis
    they are letting their priorities be known and it is assessed
    within the Department and people feel that the focus is being
    spread throughout the diversity of America's food production
    and its consumption?
        Dr. Unnevehr. We hear from a wide variety of stakeholders
    in all four of the agencies.
        Dr. Jacobs-Young. Yes. And I would just like to add in NIFA
    we have a strong partnership with the land-grant universities,
    as next year we will celebrate our 150th year. And we work very
    closely with the land-grant universities in addition to all of
    the stakeholder groups that support the Department and the work
    that we are doing. And thus far, we have had a very good
    relationship. We are receiving feedback from our stakeholders.
    And each one of our solicitations for applications provides an
    opportunity for our stakeholders to give us feedback on what is
    presented.
        Mr. Costa. Thank you, Mr. Chairman. I have no further
    questions.
        The Chairman. Mr. Thompson?
        Mr. Thompson. Thank you, Mr. Chairman. Thanks for the
    opportunity for a second round.
        An emerging issue in my area--I represent a very rural
    district, 22 percent of the land mass of Pennsylvania, and in
    some of the most rural areas of my district interestingly
    enough is an issue of affordable housing. And it is a direct
    result of the new and certainly booming natural gas industry in
    Pennsylvania. Normally, we had no shortage of affordable
    housing. That has certainly changed. And this is for all the
    panelists. Are there any kinds of work that you are doing
    regarding looking at rural housing? Is that anything that data
    is collected on that you are aware of? I will take that as a no
    at this point. Okay. Like I said, this is new for us as well in
    the past few years. So I will probably be in contact with you.
        Dr. Jacobs-Young. Secretary Vilsack is a part of a rural
    council that was recently announced a couple of weeks ago, and
    that rural council will be looking at those issues. How do we
    improve the vitality of rural communities including providing
    housing for the folks who live there and providing jobs and
    opportunities and creating places where young people want to
    return to and create lives?
        Mr. Thompson. And I will reach out to the Secretary. I am
    proud to say that many parts of my district, the young people
    are finding great opportunities. They are not leaving now, and
    frankly, we have a lot of folks moving into the area. So that
    is more of a blessing than a problem.
        And my final question, Dr. Jacobs-Young, you mentioned
    NIFA's effort in Georgia to attract more students into the
    forestry-related careers, which I think is great. Is NIFA
    working on any similar forestry projects in other states and
    obviously specifically I was interested if there was anything
    going on in Pennsylvania?
        Dr. Jacobs-Young. Congressman Thompson, NIFA participates
    in many different education and training opportunities. Some of
    you may have even been involved in 4-H during your primary
    school years; Ag in the Classroom is a nationwide program. We
    are now offering NIFA fellowships. We heard from our
    stakeholders that they wanted us to do more in support of the
    pipeline for agriculture. And so we are now offering NIFA
    fellowships. We have the Veterinary Loan Repayment Program
    where we want to place those veterinarians in areas where there
    may be a shortage. And the Beginning Farmers and Ranchers
    Program, I believe, supports the Georgia-based program, and
    that is offered nationally. So we have similar programs
    throughout the nation. And in our Youth, Family, and Community
    Institute, we are looking at many different areas for education
    and training, including looking at youth at risk. So, yes, we
    have many programs across the nation. I would be more than
    happy to find out what we have going on in Pennsylvania and
    provide that in a written response.
        Mr. Thompson. I appreciate that. Thank you to all the
    panelists. Thank you, Mr. Chairman, for this hearing.
        The Chairman. Thank you. Before we adjourn, I would ask if
    the Ranking Member, Mr. Costa, has any closing remarks to make?
        Mr. Costa. Just to say thank you again, Mr. Chairman, for
    your due diligence, and we will continue to work together as we
    try to fashion the most responsible 2012 Farm Bill we can put
    together working with all these agencies, including those we
    heard from this morning.
        The Chairman. Well, I thank you, Mr. Costa, and Members of
    the Committee and members of the panel. I appreciate your input
    and your ongoing service to American agriculture and to
    American consumers as represented by your testimony and by your
    jobs.
        Under the rules of the Committee, the record of today's
    hearing will remain open for 10 calendar days to receive
    additional material and supplementary responses from the
    witnesses, with respect to any question posed by a Member.
        So then with that, this hearing of the Subcommittee on
    Rural Development, Research, Biotechnology, and Foreign
    Agriculture is adjourned.
        [Whereupon, at 11:11 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
       Submitted Statement by R. Thomas Van Arsdall, Executive Director,
             National Coalition for Food and Agricultural Research
    July 27, 2011--via e-mail

    Hon. Timothy V. Johnson,
    Chairman,
    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
        Agriculture, House Committee on Agriculture,
    Washington, D.C.;

    Hon. Jim Costa,
    Ranking Minority Member,
    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
        Agriculture, House Committee on Agriculture,
    Washington, D.C.

    RE: Comments on USDA Research Programs

        Dear Chairman Johnson and Ranking Member Costa:

        On behalf of the National Coalition for Food and Agricultural
    Research (National C-FAR), I am pleased to submit these comments for
    the July 28 hearing record, ``Agricultural Program Audit: Examination
    of USDA Research Programs.'' National C-FAR is pleased that the
    Subcommittee is holding this hearing learn how the 2008 Farm Bill
    research title provisions are being implemented, while looking ahead to
    the 2012 Farm Bill reauthorization.
        National C-FAR is a nonprofit, nonpartisan, consensus-based and
    customer-led coalition that brings food, agriculture, nutrition,
    conservation and natural resource stakeholders together with the food
    and agriculture research and extension community, serving as a forum
    and a unified voice in support of sustaining and increasing public
    investment at the national level in food and agricultural research,
    extension and education.
        Entire Farm Bill Dependent on Successful Research Title--The
    Research Title of the farm bill represents the nation's signature
    Federal investment in the future of the food and agricultural sector.
    Other farm bill titles depend heavily upon the Research Title for tools
    to help achieve their stated objectives. Public investment in food and
    agricultural research, extension and education today and in the future
    must simultaneously satisfy multiple needs, including food quality and
    quantity, nutrition, food safety, resource preservation and producer
    profitability.
        Scientific outcomes and tools realized through USDA's research,
    extension and education (REE) mission are needed to help achieve safer,
    more nutritious, convenient and affordable foods delivered to sustain a
    well nourished, healthy population; more efficient and environmentally
    friendly food, fiber and forest production; improved water quality,
    land conservation, wildlife and other environmental conditions; less
    dependence on non-renewable sources of energy; expanded global markets
    and improved balance of trade; and more jobs and sustainable rural
    economic development.
        Societal demands and expectations placed upon the food and
    agricultural system are ever-changing and growing. Examples of current
    and future needs include--strengthened bio-security; food-linked health
    costs; environment and conservation; farm income and rural
    revitalization; biofuels and climate change; the world demand for food
    and natural fiber and improved diets; and biotechnology and genetic
    resources research and public oversight.
        Unsustainable Research Funding Deficit Threatens Future of U.S.
    Agriculture--At the risk of oversimplification, funding is the fuel
    that will fuel the USDA research mission engine and determine how
    effectively the action plan will be implemented. National C-FAR
    believes the nation has a serious food and agricultural science
    deficit, just as the nation has a budget deficit. This food and
    agricultural science funding deficit is serious, long running and
    unsustainable. Failure to address this research deficit will have real
    negative consequences, not just to the agriculture and food system but
    to the entire nation and U.S. economy. If USDA's research mission
    continues to be starved for funds, any action plan is destined to fall
    short of not only its potential but of leading to the outcomes this
    nation needs from the food and agricultural system.
        National C-FAR's support for funding encompasses the entire REE
    mission--both inter- and intra-mural programs--including the National
    Institute of Food and Agriculture (NIFA), the Agricultural Research
    Service (ARS), the Economic Research Service (ERS) and the National
    Agricultural Statistics Service (NASS).
        National C-FAR's strong support for a NIFA and other reforms in the
    Research Title of the 2008 Farm Bill was motivated by the belief that
    such reforms would result in increased funding for food and ag
    research. Unfortunately, that has not been the case.
        By any measure, Federal funding for food and agricultural research,
    extension and education has failed to keep pace with identified
    priority needs. Federal investment in research and development at the
    USDA has declined by about \1/4\ since FY 2003. A continuing deficit in
    terms of a commitment to Federal funding for agricultural research will
    have detrimental effects on human and animal health and the nation's
    economy.
        Recent fundamental changes in the budget process have exacerbated
    the deficit. Agricultural research has historically been more heavily
    `earmarked' than other spending accounts. With the elimination of
    congressionally directed spending from the budget process and failure
    to recapture the funds involved, the critical USDA REE mission has been
    disproportionately impacted.
        Unless sufficient funding is achieved, the best concepts about how
    to organize and conduct research won't be able to deliver the results
    needed by the nation. With the nation and world seeking solutions for
    climate change, sustainable fuel production, ecosystem health, food
    security and nutrition challenges, now is the time to grow investment
    in our nation's agricultural research enterprise.
        Research Business Plan Needed--This quest starts with articulating
    a compelling case to fund unmet needs. National C-FAR recommends that
    this Subcommittee and USDA make it a priority to identify current and
    future challenges to the food and agricultural sector and the REE needs
    and resource requirements to respond to those challenges in the coming
    years in a timely and effective manner.
        USDA has involved stakeholders in the development of a new REE
    Action Plan. Consistent with our stated mission, National C-FAR's input
    focused on how the plan articulates the case for addressing the
    longstanding REE funding deficit and helps lay the groundwork for
    necessary increases in Federal investment.
        National C-FAR recommended that the REE Action Plan include a
    thoughtful and credible ``Research Business Plan,'' either as part of
    the Action Plan, or as a necessary complement. The REE Action Plan is a
    hollow shell unless the resources needed to accomplish stated goals are
    identified and articulated, with a business/action plan to secure the
    necessary resources.
        Such a ``Research Business Plan'' should make the best case
    possible for how much funding is needed to achieve the goals and REE
    programs intended to meet those goals, as well as the likely
    consequences of not providing sufficient funding. For example, an
    evaluation of performance and needs should address the following--

       What is the best estimate of funding needed to accomplish
            stated desired outcomes?

       What is the appropriate food and agricultural science role
            of the public sector versus the private sector? Publicly
            financed REE is a necessary complement to private sector
            research, focusing in areas where the private sector does not
            have an incentive to invest, when (1) the pay-off is over a
            long term; (2) the potential market is more speculative; (3)
            the effort is during the pre-technology stage; and (4) where
            the benefits are widely diffused.

       How will the Action Plan (and outcomes) be impacted by
            different funding levels--for example, current funding, 2X
            funding, funding at a level identified as needed to accomplish
            all stated goals, 0.5X funding?

       How will priorities change based on different funding
            levels? How will outcomes be affected? What priority needs will
            not be addressed due to insufficient funding? Will outcomes
            still be timely to meet identified challenges, like closing the
            productivity gap in time to feed nine billion people?

        Those responsible for making difficult decisions about shaping the
    2012 Farm Bill and future budgets in Congress and the Administration
    arguably don't have even the basic information needed to make informed
    decisions about REE funding levels with the information currently
    available. Those who read the USDA Action Plan should also come away
    with an appreciation of what will and won't be addressed at different
    resource levels.

       While studies touting the high returns on public investment
            are helpful, that doesn't appear to be compelling enough to
            attract additional funding, especially when the trend is to
            during these challenging budget times is to cut spending, not
            increase it.

       National C-FAR recommends that USDA's REE Action Plan--and
            its implementation--should emphasize the current leadership's
            commitment to focusing resources to make a difference rather
            than spreading limited funds a mile wide and an inch deep.

       The Action Plan should articulate choices on what will and
            will not be done [and done well] at different resource scenario
            levels.

        Invest in Research Business Plan--USDA and the Administration
    should base annual budget requests for the REE mission on such a needs
    assessment. The crafting of the research component of the 2012 Farm
    Bill should be shaped around meeting future challenges and needs.
        If ``Research Business Plan'' answers aren't available, then it is
    time to invest additional resources in developing defensible answers--
    even if just through a building block approach, improving the quality
    of information provided to budget decision makers a step at a time so
    they can better understand the rationale of budget requests and likely
    consequences of funding decisions. This is a shared responsibility--of
    USDA, Congress and REE stakeholders--those who authorize and fund the
    programs, those who manage the programs and those who need the
    outcomes.
        For example, a ``productivity gap'' has been identified in tracking
    what will be needed to produce enough food to feed nine billion people.

       What is the commensurate ``research gap'' in developing the
            science and tools to close the productivity gap?

       What are defensible estimates of how much will be needed--
            and when (lead times)?

       What is the appropriate and/or necessary portion/role of
            public sector REE investment?

       How much can leveraging contribute to closing the ``research
            gap?''

       What are the consequences of not committing to adequate
            public investment?

        To the credit of the USDA Economic Research Service, a peer-
    reviewed, new report, ``Public Agriculture Research Spending and Future
    U.S. Agricultural Productivity Growth: Scenarios for 2010-2050,''
    (Heisey, Wang and Fuglie, Economic Report No. EB-17, July 2011, http://
    www.ers.usda.gov/publications/eb17) has just been released that
    provides timely analysis and perspective on the vital linkage between
    investments in research and productivity. In brief:

            ``By 2050, global agricultural demand is projected to grow by
            70-100 percent due to population growth, energy demands, and
            higher incomes in developing countries. Meeting this demand
            from existing agricultural resources will require raising
            global agricultural total factor productivity (TFP) by a
            similar level. The rate of TFP growth of U.S. agriculture has
            averaged about 1.5 percent annually over the past 50 years, but
            stagnant (inflation-adjusted) funding for public agricultural
            research since the 1980s may be causing agricultural TFP growth
            to slow down. ERS simulations indicate that if U.S. public
            agricultural R&D spending remains constant (in nominal terms)
            until 2050, the annual rate of agricultural TFP growth will
            fall to under 0.75 percent and U.S. agricultural output will
            increase by only 40 percent by 2050. Under this scenario,
            raising output beyond this level would require bringing more
            land, labor, capital, materials, and other resources into
            production.''

        National C-FAR recommends utilizing this analysis and related new
    information as a reference point in evaluating USDA's research program
    and moving forward.
        In ``Investing in a Better Future through Public Agricultural
    Research,'' a Commentary released on March 14, 2011 by the Council for
    Agricultural Science and Technology (CAST Commentary QTA2011-1), the
    authors make a number of salient observations that National C-FAR
    believes are germane to the funding debate and the future viability of
    USDA's research program--

       The benefits of past public investments in ag research are
            measurable on multiple fronts. For example, farm productivity
            has increased, and the share of U.S. household income spent on
            food has declined to less than 10%.

       Numerous studies find rates of return on public ag research
            investments of 20 to 80%. Huffman and Evenson (2006) estimate a
            marginal rate of return of approximately 50%. This level is
            approached by few other public sector investments.

       Publicly funded food and ag research in the U.S. has been
            essentially flat over the past 2 decades, while funding of
            other research fields has increased significantly. Public
            funding of agricultural research in the rest of the world
            during the same time period has outpaced investment in the U.S.

       Advances in new science and technologies involve long
            gestation periods, with later advances built on earlier
            successes. Time lags between publicly funded ag research and
            benefits are long, with a delay before any benefits are
            realized.

       There is an important and necessary role for public research
            because the private sector faces weak incentives to undertake
            research in numerous areas of national interest. Most research
            in general, basic and pre-invention sciences occurs in public
            and private universities. Applied research is shared among
            universities, government institutions and private firms.

       Funding for both inter- and intra-mural research is
            important, as is formula funding, given the ``placed-based''
            nature of agricultural science.

       World population continues to grow. Demand for food will be
            much greater, and limited new land is available.

       Agricultural research is a low-cost source of future
            agricultural productivity and output increases, but advances in
            the frontiers of science are difficult and uncertain,
            translating into long lags, typically 15-20 years. Productivity
            cannot be easily jump-started after a long period of stagnant
            investment in public agricultural research.

       With agricultural research funding delays, productivity
            increases are expected to slow, and world food prices will rise
            more rapidly than otherwise projected during the next 40 years.

        Other touchstone issues in evaluating USDA's research program
    include:

       The role of the private versus public sector in committing
            to investments.

       How does our nation invest in the science needed to do our
            part in helping feed a global population that is projected to
            grow to nine billion people in the not too distant future?

       How do we develop the science needed to achieve other goals
            expected and demanded of the food and agriculture sector, like
            biofuels, conservation, nutrition, food safety and
            environmental protection?

       How do we develop the science needed to sustain the natural
            resource base upon which agriculture depends while achieving
            all the other goals?

       What are the top priorities of USDA's research program?
            While USDA's research Action Plan presents a list, it is not
            clear what is most important and how resources are being
            allocated.

        National C-FAR believes it is imperative to lay the groundwork now
    to respond to the many challenges and promising opportunities ahead
    through Federal policies and programs needed to promote the long-term
    health and vitality of food and agriculture for the benefit of both
    consumers and producers. Stronger public investment in food and
    agricultural REE is essential in producing research outcomes needed to
    help deliver beneficial and timely solutions on a sustainable basis.
    The potential payoff is enormous for Americans' health, rural America
    and agriculture and the nation's economy, and world food security. It
    is equally sobering to reflect on the likely negative consequences of
    not making the necessary investments.
        National C-FAR and others in the stakeholder community bear a
    commensurate responsibility in articulating needs and making the case
    for increased funding. It is incumbent on USDA, stakeholders in the REE
    and ``customer'' communities, and the Congress to find the will and a
    way to increase investments in this vital mission area and turn our
    shared hope into an operational reality.
        Thank you for the opportunity to share our views.
                Sincerely,

                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    R. Thomas Van Arsdall, Executive Director.
                                     ______

           Submitted Statement by Biotechnology Industry Organization
        The Biotechnology Industry Organization (BIO) is the world's
    largest biotechnology organization, providing advocacy, business
    development and communications services for more than 1,100 members
    worldwide. BIO members are involved in the research and development of
    innovative healthcare, agricultural, industrial, and environmental
    biotechnology products.
        BIO would like to emphasize the value of agricultural research
    programs within the U.S. Department of Agriculture (USDA), which have
    sparked agricultural innovation and will help to solve the critical
    food and energy security challenges facing a rapidly growing global
    population.
        The United Nations predicts that the global population will rise to
    nine billion in 2050 and over ten billion by 2100. It is predicted that
    global agricultural production will need to double by 2050. Because
    there is a fixed amount of arable land on the planet, to meet these
    challenges, new and existing technologies must provide at least 70
    percent of the necessary increase in food production. Robust
    agricultural research will allow scientists to improve technologies and
    invigorate know-how so that humans can best produce food on a limited
    land base using safe, efficient, and sustainable methods.
        In the 6 decades since 1948, USDA estimates show that U.S. farm
    output increased by an average of 1.58 percent per year, inputs under
    the control of farmers increased by only 0.06 percent per year, and
    agricultural productivity increased by 1.52 percent per year (USDA-ERS,
    2011). Hence, virtually all the increase in U.S. farm output during the
    past 60 years is due to productivity increases and a negligible amount
    is due to increases in conventional inputs. According to the USDA
    Economic Research Service, farm productivity has risen 158 percent
    since 1948. This increase can be attributed to changes in the
    efficiency of farming practices and research and development of
    agricultural technologies. The return on investment of agricultural,
    food, nutrition, and natural resource research and development is $20
    or more to the U.S. economy for every dollar spent (Fuglie et al.,
    2007).
        Growth in agricultural productivity during the last 2 decades of
    the twentieth century, which was sizable in developed countries and in
    some developing countries, was built on previous investments in
    agricultural research. For modern agriculture to fully flourish,
    investments in agricultural research must grow. Today, the United
    States is a leader in agriculture, producing $312 billion in
    agricultural products and exporting $108 billion annually.
        Unfortunately, however, investments in public agricultural research
    in the United States has slowed since 1980 (Huffman and Evenson 2006;
    Pardey et al. 2006).
        In the United States, broadly defined public agricultural research
    expenditures grew by an average of 3.2 percent per year (adjusted for
    inflation) during the 2 decades leading up to 1980. No net growth
    occurred between 1980 and 1990, and net growth averaged only 0.6
    percent per year between 1990 and 2009. Public funding of agricultural
    research in the rest of the world during the last 2 decades has
    outpaced U.S. research investment.
        Meeting the various complex modern agricultural demands of a
    growing global population will require raising global agricultural
    total factor productivity (TFP). The rate of TFP growth of U.S.
    agriculture has averaged about 1.5 percent annually over the past 50
    years, but stagnant (inflation-adjusted) funding for public
    agricultural research since the 1980s may be causing agricultural TFP
    growth to slow down. ERS simulations indicate that if U.S. public
    agricultural R&D spending remains constant (in nominal terms) until
    2050, the annual rate of agricultural TFP growth will fall to under
    0.75 percent and U.S. agricultural output will increase by only 40
    percent by 2050. Under this scenario, raising output beyond this level
    would require bringing more land, labor, capital, materials, and other
    resources into production (Heisey et al., 2011). With mean lags of 15
    to 20 years, agricultural productivity cannot be easily jump-started
    after a long period of stagnant investment in public agricultural
    research.
        BIO supports research funding for technologies that will provide
    fuel for the future, improve agricultural production efficiency, and
    allow us to raise crops in harsher climates. Research in plant and
    animal biotechnology will play a key role not only in improving food,
    feed, and fuel production and reducing the environmental impact of
    agriculture but also in improving models of human disease and producing
    pharmaceuticals for animal and human uses. Agricultural and forestry
    biotechnology also contribute to rural economies and rural job growth.
        BIO supports increased funding for the research programs at the
    Department of Agriculture, including all programs within the Research,
    Education, and Economics mission area: the National Institute of Food
    and Agriculture and its Agriculture and Food Research Initiative, the
    Agricultural Research Service, the National Agricultural Statistics
    Service, and the Economic Research Service and research conducted by
    the Forest Service. Results from these important research programs can
    be leveraged across the research arms of the government to solve
    critical problems that require science-based, cross-cutting and multi-
    disciplinary solutions.
        Through biotechnology, animals can be raised that produce high
    concentrations of readily extractible human antibodies and other
    proteins to treat human diseases and protect military personnel and to
    replace tissues for regenerative medicine. High level research can be
    performed on livestock that have been engineered to accurately develop
    diseases that afflict humans. As agriculture continues to be pressed to
    be ever more productive and economically and environmentally
    sustainable, the targets of research are to increase yields; to develop
    more nutritious and safer foods; to reduce requirements for water,
    nitrogen and other inputs; and to develop disease resistant crops that
    require fewer chemical protectants, crops that are used to produce more
    and better biofuels, and crops that produce useful and valuable
    materials that will fuel the industrial and pharmaceutical sectors of
    the future.
        While biotechnology has been heavily utilized in commodity crops,
    it also shows great promise for specialty crops and in parts of the
    world not already realizing its benefits. Nutrient-enhanced crops and
    those tolerant of sub-standard growing conditions benefit people around
    the world who otherwise would have difficulty getting the proper
    nutrition. Many of these advances will come out the research performed
    within public institutions, such as the USDA. Most research in general,
    basic and pre-invention sciences, occurs in public and private
    universities. Applied research is shared among universities, government
    institutions and private firms.
        Publicly financed Research, Extension, and Education is a necessary
    complement to private sector research, focusing in areas where the
    private sector does not have an incentive to invest, when (1) the pay-
    off is over a long term; (2) the potential market is more speculative;
    (3) the effort is during the pre-technology stage; and (4) where the
    benefits are widely diffused. Public research, extension and education
    help provide oversight and measure long-term progress. Public research,
    extension and education also act as a means to detect and resolve
    problems in an early stage, thus saving American taxpayer dollars in
    remedial and corrective actions.
        The Research Title of the farm bill represents the nation's
    signature Federal investment in the future of the food and agricultural
    sector. Other Farm Bill titles depend heavily upon the Research Title
    for tools to help achieve their stated objectives. Continued authorized
    and appropriated support for public research benefits producers
    domestically and worldwide while preparing for the future of all of
    agriculture.
    References
        Fuglie, K. and P.W. Heisey. September 2007. Economic Returns to
    Public Agricultural Research. EB-10, U.S. Dept. of Agriculture,
    Economic Research Service.
        Heisey, P., S.L. Wang, and K. Fuglie. July 2011. Public Agriculture
    Research Spending and Future U.S. Agricultural Productivity Growth:
    Scenarios for 2010-2050. EB-17, U.S. Dept. of Agriculture, Economic
    Research Service.
        Huffman, W.E. and R.E. Evenson. 2006. Science for Agriculture: A
    Long-Term Perspective. 2nd ed. Blackwell Publishing, Ames, Iowa.
        Pardey, P.B., N.M. Beintema, S. Dehmer, and S. Wood. 2006.
    Agricultural Research: A Global Divide? IFPRI Food Policy Report.
    International Food Policy Research Institute, Washington, D.C.
        U.S. Department of Agriculture-Economic Research Service (USDA-
    ERS). 2011. Agricultural Productivity in the United States, http://
    www.ers.usda.gov/Data/AgProductivity/ (8 February 2011).
                                     ______

                              Submitted Questions
    Response from National Institute of Food and Agriculture; Agricultural
            Research Service; National Agricultural Statistics Service; and
            Economic Research Service, U.S. Department of Agriculture
    Questions Submitted By Hon. Steve Southerland II, a Representative in
            Congress from Florida
        Question 1. Thank you for the U.S. Department of Agriculture's
    ongoing efforts and commitment toward research to sustain and foster
    U.S. agriculture production in our nation. I recognize the critical
    significance of continuation and strengthening of research programs
    authorized in the 2008 Farm Bill to address pressing agricultural
    priorities, particularly for specialty crops, a significant segment of
    the U.S. agricultural industry and in my home state of Florida.
        The 2008 Farm Bill, the Food, Conservation, and Energy Act of 2008
    (P.L. 110-246) strengthened emphasis on research, including
    establishment of the Specialty Crop Research and Initiative (Section
    7311) to address, ``the critical needs of the specialty crop industry
    by developing and disseminating science-based tools to address needs of
    specific crops and their regions, including--

              ``(1) research in plant breeding, genetics, and genomics to
            improve crop characteristics, such as--

                      (A) product, taste, quality, and appearance;
                      (B) environmental responses and tolerances;
                      (C) nutrient management, including plant nutrient
                    uptake efficiency;
                      (D) pest and disease management, including resistance
                    to pests and diseases resulting in reduced application
                    management strategies; and
                      (E) enhanced phytonutrient content;

              ``(2) efforts to identify and address threats from pests and
            diseases, including threats to specialty crop pollinators;
              ``(3) efforts to improve production efficiency, productivity,
            and profitability over the long term (including specialty crop
            policy and marketing);
              ``(4) new innovations and technology, including improved
            mechanization and technologies that delay or inhibit ripening;
            and
              ``(5) methods to prevent, detect, monitor, control, and
            respondto potential food safety hazards in the production and
            processing of specialty crops, including fresh produce.''

        Could you please elaborate on how the Specialty Crop Research
    Initiative (SCRI), aimed by its authors of the House Agriculture
    Committee to meet the critical challenges of specialty crop production
    in this nation--and my home state of Florida--which ranks second in the
    nation in specialty crop value, is serving these ends?
        Answer. NIFA believes that the keys to meeting the critical
    challenges of the specialty crop industries in this country, as
    articulated by the House Agriculture Committee in SCRI, are two-fold:
    (1) engaging stakeholders and incorporating their needs and (2) funding
    the highest quality science to develop the tools that address those
    needs.
        NIFA implements those two keys for an impactful program through
    several mechanisms. First, the Request for Applications (RFA),
    published each year to solicit applications for funding, includes a
    short list of priorities for each of the five focus areas identified in
    the SCRI legislation. These non-exclusionary priorities are written to
    be fairly generic for many specialty crops, as they were gleaned from
    the strategic plans and research roadmaps of many major U.S. specialty
    crops. Each year, NIFA reevaluates those priorities and makes minor
    adjustments as industry needs dictate. Second, from its inception, the
    SCRI program has asked applicants to include stakeholders and
    stakeholder organizations as full participants in their proposed
    projects. This means stakeholder engagement in: identifying project
    objectives, conducting the research and extension activities, and
    evaluating project impacts. Furthermore, each applicant must
    demonstrate that their project addresses an industry need. In the peer-
    review process, each application is evaluated on these elements of
    stakeholder needs and engagement as part of the application's
    ``relevance'' score. Based on the recommendations from a 2011 external
    review of the SCRI program, NIFA has reevaluated the relevance scoring
    and made some modifications for fiscal year 2012. Third, NIFA actively
    seeks to include scientists from specialty crop industries on peer-
    review panels to help ensure that the industry perspective is fully
    considered and appreciated. Fourth, in addition to a possible score for
    relevance, each application receives up to an equal score for
    ``scientific merit.'' Because of the highly competitive nature of the
    SCRI program, only those applications that have demonstrated strong
    industry relevance/need and high scientific merit are eventually
    considered for funding. Finally, most projects funded by the SCRI
    program are required to create, and meet regularly with, an advisory
    board consisting of industry, academia, NGOs, technology providers,
    etc. In most cases, specialty crop stakeholders are the majority, or
    only, members of these advisory boards.
        During the first 3 years of SCRI awards, investigators in Florida
    are participating in 16 different SCRI projects covering a variety of
    specialty crop needs that are important to that State's industries.
        In addition, the following excerpt from the SCRI external review
    report's Conclusion section attests that this NIFA program is meeting
    the intents of the SCRI legislation:

            The Review Panel believes that the SCRI Program is following
            the guidelines mandated by the 2008 Farm Bill. The Panel views
            the SCRI as an essential/critical Program to maintain and
            enhance the competitiveness of the specialty crop industry in
            the U.S. . . . Results from funded projects that are now in
            mid-stream have already demonstrated value to the specialty
            crop industry.

        Question 2. Specifically, within the Specialty Crop Research
    Initiative consideration process is there recognition of the following
    factors:

        a. Crops facing imminent dangers and threats to future production?

        b. Magnitude and significance of the specialty crop in crop value
            nationally?

        c. Awards representational of specialty crop value regionally/
            state, in award distribution?

        d. Priorities of producer organizations and state agricultural
            bodies?

        Answer. Applications to the SCRI program are evaluated by a
    scientific peer-review process based on both relevance to U.S.
    specialty crop industries and scientific merit. These two components of
    the review for each application are weighted equally. Given the
    extremely competitive nature of the program and the overall quality of
    applications received each year, only those applications that score
    very high on both components are considered for funding. Certainly,
    ``imminent dangers and threats to future production'' is something that
    many good applications clearly demonstrate. In general, the quality of
    proposals as determined by review panels is such that NIFA could fund
    twice as many projects each year, if the funds were available to SCRI.
        Unlike the Specialty Crop Block Grant Program, which considers crop
    size in each state as part of funding allocations, a scientific grant
    program like the SCRI is intended to fund the best science,
    irrespective of any crop's magnitude regionally or nationally. While
    scientific merit can be evaluated quite objectively, it is much more
    problematic to impartially assess the needs of one industry/crop versus
    another. So, in the peer-review process, NIFA only asks that the panel
    assess whether stakeholder need has been established, and then let
    scientific merit guide the relative ranking of applications. All things
    being equal among a group of applications, however, the panelists may
    consider the size of the industry in its final ranking.
        One would expect that larger, national industries would have a
    larger, established base of scientific investigators already engaged,
    and so that scientific community would apply to SCRI at a higher rate
    and, all things being equal, receive a commensurate level of SCRI
    funding. In the first two years of the SCRI, NIFA examined the
    geographic distribution of awardees and subcontractors and found that
    maps depicting geographic participation in SCRI awards matched very
    closely maps displaying the intensity of U.S. specialty crop
    production. So, while a scientific grant program does not seek
    geographic proportionality, for the rationale stated above, SCRI
    projects and specialty crop production seem to align geographically.
        In addition to the response already provided regarding stakeholder
    input to the SCRI, each published RFA asks for stakeholder input to the
    program. Also, when preparing for the 2011 external review of SCRI,
    NIFA made a special request for stakeholder input to help inform the
    review team, publishing that request in the RFA and on our agency web
    site.

        Question 3. What are USDA's plan to address the National
    Agricultural Research Extension, Education and Economic Advisory Board
    (NAREEE) Report on Effectiveness of Research, Extension and Economics
    Programs for U.S. Specialty Crops, issued on July 23, 2011, which
    included recommendations and improvements from the specialty crops
    stakeholder community regarding the Specialty Crop Research Initiate?
        Answer. NIFA has received a copy of the NAREEE Board's report. A
    number of the issues raised in that report, with respect to the SCRI,
    are similar to several recommendations made by the SCRI external review
    panel in their report (see response to question no. 1 above). Many of
    that external review report's recommendations have been incorporated
    into the upcoming 2012 Request for Applications. However, for the
    record and to cover any remaining issues, NIFA plans to release a
    response to the NAREEE Board's report shortly.
        Question 4. I would like to formally commend the U.S. Department of
    Agriculture for their July 11 announcement to ``Strengthen Efforts to
    Address Citrus Greening'' through funding of $2 million into research
    through Agricultural Research Service (ARS) and USDA's National
    Institute of Food and Agriculture (NIFA) focusing $9 million in a 3
    year, competitive grants program targeting citrus greening, as well as
    establishment of a Citrus Disease Research and Development Advisory
    Committee These efforts are greatly appreciated and extremely valuable,
    and as is noted in the USDA's announcement:

            Citrus greening is one of the most devastating diseases
            affecting any commercial agricultural crop, according to the
            National Academy of Sciences. Citrus greening threatens to
            destroy over 1 million commercial citrus acres that have an
            annual production value of approximately $3 billion across the
            nation. Yearly losses could reach $10 billion if citrus
            greening is left unchecked.

        Could you please detail how this vital collaborative and research
    initiative to Strengthen Efforts to Address Citrus Greening will be
    carried out? (Agencies of jurisdiction, timeline, collaborative
    stakeholders/research partners?)
        Answer. Under the aegis and leadership of the APHIS Citrus Health
    Research Program, ARS, and NIFA together with the National Citrus
    Mutual representatives from Florida, Texas, and California have formed
    a Science and Technology committee that coordinates research across the
    Citrus Greening research community. This coordination includes keeping
    an active inventory of currently funded research projects and helping
    the research community organize into strategic outcome working groups.
    The strategic outcomes, identified in an industry stakeholder workshop
    are designed to produce short-, medium- and long-term outcomes,
    respectively:

        a. Maintain citrus groves that are already infected with Citrus
            Greening productive and alive (primarily Florida);

        b. Keep Citrus Greening disease from moving into areas that already
            have the disease vector (the Citrus Psyllid)--(Texas, Arizona,
            and California); and

        c. Create new Psyllid management systems and Citrus genetics that
            render Citrus Greening a non-issue.

        Although each of these outcomes have distinct research pathways and
    activities, there are overlaps and feedback among them.
        The Citrus research community has embraced the strategic plan and
    is organized in working groups representing the three outcome areas,
    which meet via teleconference and report to the Science and Technology
    committee monthly.
        The Citrus research community meets biannually and will meet again
    in October, 2011. These meetings facilitate intra- and inter working
    group communications, research gap analyses, and peer and stakeholder
    review of research outcomes. It is expected that this upcoming meeting,
    and future such meetings, will be the genesis of collaborative projects
    leading to participation in NIFA funding opportunities on Citrus
    Greening.
        While the SCRI program has explicitly solicited Citrus Greening
    projects for the past several years, NIFA plans to further strengthen
    that focus in the upcoming 2012 SCRI solicitation. Specific research
    and extension targets in that solicitation will be closely aligned with
    the priorities identified by the Science and Technology committee, as
    noted above.
        Additionally, after receiving input from many stakeholders,
    Secretary Vilsack charged REE to work with the relevant components of
    USDA to devise several other strategies to address this serious threat.
    To this end, REE has been considering all options--from a stand-alone
    committee to an entity within the NAREEE board to broader task forces--
    in the formation of the new committee Citrus Disease Research and
    Development Advisory Committee. While the details of the committee are
    still being worked out, the USDA is committed to ensuring that
    solutions incorporate continued input from producers, industry
    representatives, and the scientific community. As timing and
    flexibility are of utmost importance, REE is working quickly to design
    a mechanism that meets the interests and requirements of the many
    entities involved.

        Question 5. Could you indicate the specific reasons why Citrus
    Greening was not successful in an award through the Specialty Crop
    Research Initiative, for the last 3 years,* in concert with the
    recommendations of the Florida, Texas and California collaborative
    research efforts, given that citrus ranks second in crop value among
    fruit and vegetable crops, according to USDA's National Agricultural
    Statistics Service, and USDA indicates that ``Citrus greening is one of
    the most devastating diseases affecting any commercial agricultural
    crop, according to the National Academy of Sciences''?
    ---------------------------------------------------------------------------
        * Exception Texas ARS award in 2008.
    ---------------------------------------------------------------------------
        Answer. SCRI has funded a number of projects in its first three
    years of existence that are dealing with the Citrus Greening issue. Two
    of these projects (ARS, 2008; Arizona State Univ., 2010) address
    management and control strategies, covering prevention and economics.
    Two other projects (Carnegie-Mellon, 2008; Wash. State, 2009) are
    developing the management technologies for growers to better control
    the disease (precision spraying, early detection of HLB infection) and
    the genetic information for researchers to develop new plant material
    (Citrus genomics database).
        As noted above, the peer-review process equally weights relevance
    and scientific merit in the evaluation of applications. No one disputes
    the relevance of Citrus Greening projects to the needs of the citrus
    industry. However, in a competitive scientific grant program,
    applications must also demonstrate high scientific quality. Many of the
    applications to date dealing with Citrus Greening have lacked the
    necessary scientific merit for peer-review panels to rank them high
    enough for NIFA to consider them for funding. For reasons of
    confidentiality, NIFA only releases to an application's project
    director detailed information (individual reviews and peer-review panel
    summary) regarding why their project was not recommended for funding.

        Question 6. The National Plant Diagnostic Network (NPDN) was
    established in 2002 by legislative mandate to enhance agricultural
    security through plant diagnostic laboratories carried out by National
    Institute of Food and Agriculture (NIFA) and through the collective
    efforts of many individuals representing Land Grant Universities,
    federal agencies, state departments of agriculture, and other
    stakeholders, the NPDN has grown into an internationally respected
    consortium of plant diagnostic laboratories. The specific purpose of
    the NPDN is to provide a nationwide network of public agricultural
    institutions with a cohesive, distributed system to quickly detect high
    consequence pests and pathogens that have been introduced into
    agricultural and natural ecosystems, identify them, and immediately
    report them to appropriate responders and decision makers.
        NPDN Funding is located in the NIFA Budget: National Institute of
    Food and Agriculture President's Proposed Budget for 2011. Funding
    located under Integrated Activities--Item for Food and Agriculture
    Defense Initiative (This item includes both USDA National Animal Health
    Laboratory Network (NAHLN).
        I understand that funding for the National Plant Diagnostic
    Network, has been reduced by roughly 37% from FY 2010 to FY 2011:

            2010--$9.830 million enacted $4,283,386 to NPDN

            2011--$5.988 million reduction Enacted, $2,675,000 to NPDN

        Can you please let me know the Administration's plans and specific
    funding priorities for the National Plant Diagnostic Network program?
        Answer. The specific purpose of the NPDN is to provide a nationwide
    network of public agricultural institutions with a cohesive,
    distributed first detector and laboratory system to quickly detect high
    consequence pests and pathogens that have been introduced into
    agricultural and natural ecosystems, identify them, and immediately
    report them to appropriate responders and decision makers. To
    accomplish this mission, the NPDN has invested in plant diagnostic
    laboratory infrastructure and training, developed an extensive network
    of first detectors through education and outreach, and enhanced
    communication among agencies and stakeholders responsible for
    responding to and mitigating new outbreaks.
        NPDN is in the final year of a 5 year (May 2007-May 2012)
    Cooperative Agreement, and the strategic objectives for the five year
    plan are to:

        1. Maintain a strong diagnostic network through communications,
            evolving standard operating procedures, and diagnostic training
            for high consequence pathogen and pest outbreaks;

        2. Enhance the national database of real-time diagnostic records;

        3. Develop and keep a registry of trained first detectors (field
            scouts, extension agents, certified crop consultants) of high
            consequence pathogens and pests;

        4. Exercise, in every state, communications with regulatory
            officials.

        The work plan for 2011, due to the budget cut, must curtail
    objective three activities, eliminate objective four activities, and
    reduce the number APHIS training sessions that diagnosticians can
    attend. Additionally, the NPDN was to complete the roll-out of a
    Quality Assurance/Quality Control accreditation system by the end of
    the Cooperative Agreement. With reduced funding, the QA/QC system will
    not be implemented.
        The highest order priority for the NPDN is to maintain its network
    of diagnostic laboratories. The NPDN system is currently responding to
    two high-impact outbreaks of regulatory plant diseases.
                                     ______

         House Committee on Agriculture Farm Bill Audit Questionnaire--
                         Agricultural Research Service
    1. Program Name
        Agricultural Research Service (ARS).
    2. Subprograms/Department Initiatives
        Animal Production and Protection

        The mission of the ARS Animal Production and Protection (APP)
    national programs is to provide the scientific information and tools to
    help support the U.S. food animal industries to continue to compete
    successfully in worldwide trade, provide the supply of nutritional
    animal products required by the nation, and contribute toward global
    food security. APP accomplishes this mission by research to maximize
    production efficiency and animal health through scientific innovation
    and the discovery and development of new technologies focused on
    national priorities. Strategic public-private partnerships are
    established to achieve our mission, including support of government
    action and regulatory agencies responsible for trade, biodefense, and
    global food security. Emphasis will be given to genetic improvements of
    traits related to production and production efficiencies and germplasm
    conservation; understanding the mechanisms of disease resistance, and
    the development of tools to prevent, control, or eradicate diseases
    that threaten our food supply and public health; and identifying and
    developing sustainable systems for production of high quality meat,
    fish, milk, and eggs that also ensure animal health and well-being. The
    portion of the program that produces new solutions to the many
    veterinary problems created by arthropod pests and vectors will be
    leveraged to solve related problems affecting human health and the
    well-being of American citizens.

        APP Statistics:

            Total Projects: 108
            Total Locations: 37
            Total Scientists: 295

        The Food Animal Production program conducts research to furnish
    scientific information about biotechnologies and management practices
    that ensure an abundant supply of competitively priced animal products.
    The mission of the Food Animal Production Program is to: safeguard and
    utilize animal genetic resources, associated genetic and genomic
    databases, and bioinformatic tools; develop a basic understanding of
    the physiology of livestock and poultry; and develop information,
    tools, and technologies that can be used to improve animal production
    systems, all to ensure an abundant, safe, and inexpensive supply of
    animal products produced in a healthy, competitive, and sustainable
    animal agriculture sector of the U.S. economy.
        U.S. systems of agricultural animal management and production face
    formidable challenges. One of the most exacting challenges is
    successful adaptation to the accelerating demands of society that
    impact animal productivity and product quality. The demands placed on
    the national system of food animal production by a rapidly changing
    world can only be met by technologies that optimally harness the
    inherent genetic potential of animal and plant germplasm in concert
    with certified industry and food marketing practices. Production
    systems that successfully identify, preserve, and harness that genetic
    potential will maximize profits, secure supply, increase market
    competitiveness, sustain small and mid-sized producers, and maintain
    genetic diversity and consumer confidence.
        This National Program addresses high-priority national needs for:

       Understanding, Improving, and Effectively Using Animal
            Genetic and Genomic Resources

       Enhancing Animal Adaptation, Well-Being and Efficiency in
            Diverse Production Systems

       Measuring and Enhancing Product Quality

            Total Projects: 32
            Total Locations: 17
            Total Scientists: 91

        The Animal Health program aims to deliver scientific information
    and tools to detect, control, and eradicate animal diseases of high
    national priority. The goal of the program is to protect and ensure the
    safety of the nation's agriculture and food supply through improved
    disease detection, prevention, control, and treatment. Basic and
    applied research approaches will be applied to solve animal health
    problems of high national priority. Emphasis will be given to methods
    and procedures to control animal diseases through the discovery and
    development of diagnostics, biotherapeutics, animal genomics
    applications, disease management systems, animal disease models and
    farm biosecurity measures.
        Achieving results in veterinary medical research, which provide
    useful information for problem-solving, often demands an integrated
    approach in which the experimental design may range from knowledge
    development at the molecular level to clinical trials that will lead to
    the development of countermeasures for preventing and controlling a
    disease outbreak in the field. This national program provides the means
    for the integration of research. Major initiatives draw upon relevant
    expertise within the national program, coordinating and integrating
    that expertise to develop a specific useful application of the
    knowledge. Research projects also attract Federal, university, industry
    and international partners. Because a significant number of projects in
    the animal health research portfolio focuses on the discovery of novel
    technologies, intellectual property strategies will be addressed in
    project plans to facilitate technology transfers and the investment by
    the private sector in the development of these technologies.
        This National Program addresses high-priority national needs for:

       Biodefense research

       Animal genomics and immunology

       Zoonotic, respiratory, reproductive, neonatal, enteric and
            parasitic diseases

       Transmissible spongiform encephalopathies

            Total Projects: 40
            Total Locations: 11
            Total Scientists: 103

        The Veterinary, Medical and Urban Entomology program develops more
    effective means to prevent or suppress insects, ticks and mites that
    affect animal and human well being. The program aims to eliminate
    losses to animal production and products caused by arthropod borne
    diseases and arthropod induced trauma; to reduce the risk to humans
    from arthropod borne zoonotic diseases; to enhance the safety of animal
    products and the quality of life for humans; and to increase the value
    and competitiveness of United States agriculture.
        More detailed behavioral studies of certain activities (e.g., blood
    sucking) will result in the association of chemical and other stimuli
    with these behaviors. A new understanding will also present the
    possibility of entirely new tools being developed to alter arthropod
    behavior in such a way that their damage is prevented. Beyond the
    research needed to understand the nature of these behaviors, bioassays
    that accurately measure them will be necessary to find out what
    chemical or physical factors affect them. Before integrating bioassays
    into an evaluation scheme, they should be validated independently to be
    sure that they are measuring what is intended. Electrophysiology is
    another essential part of development, representing a range of
    activities and measurements. Among the organizational products required
    for maximum impact are a standard vocabulary for influences on
    hematophagous arthropods and a standard concept of how to develop
    useful products.
        This National Program addresses high-priority national needs for:

       Medical Entomology for the Public and Military

       Veterinary Entomology of Livestock and Poultry

       Pests that Damage Structures

       Fire Ants, other Invasive Ants, and Household Pests

            Total Projects: 13
            Total Locations: 7
            Total Scientists: 49

        The vision for the Aquaculture program is to support a thriving
    domestic industry based on improved genetic stocks and scientific
    information on biotechnologies and management practices to ensure a
    high quality, safe supply of healthful seafood and aquatic products.
        The U.S. aquaculture industries face formidable challenges. The
    demand for seafood is increasing worldwide, yet the ability for U.S.
    aquaculture producers to meet that demand requires development of
    technologies to reduce the cost of production while maintaining and
    improving product quality. Producers, processors and breeders are in
    need of systems that successfully identify, promote, and harness the
    aquatic animal improvements to maximize profits, secure supply, reduce
    environmental impacts, increase market competitiveness, sustain small
    and mid-sized scale producers, and earn consumer confidence. Research
    in the disciplines of genetics, nutrition, health, and physiology will
    support the biological improvement of animals, while ecology,
    engineering and economics will support the improvement of systems and
    help to ensure sustainability. Our research components strive to
    develop and ensure an abundant, safe, and affordable supply of seafood
    products for the 300 million U.S. consumers produced in a healthy,
    competitive, and sustainable aquaculture sector, a sector supported by
    over 4,300 aquaculture farmers that produced in excess of $1 billion
    worth of goods in 2005 (National Agricultural Statistics Service
    (NASS), 2005 Census of Aquaculture).
        This National Program addresses high-priority national needs for:

       Understanding, Improving, and Effectively Using Animal
            Genetic and Genomic Resources

       Enhancing Animal Performance, Well-being and Efficiency in
            Diverse Production Systems

       Defining Nutrient Requirements, Nutrient Composition of
            Feedstuffs and Expanding Alternative Ingredients

       Improving Health and Welfare of Aquatic Animals

       Improving Production Systems, Developing New Products and
            Enhancing Product Quality

            Total Projects: 23
            Total Locations: 11
            Total Scientists: 52

        Crop Production and Protection

        Crop Production and Protection (CPP) National Programs deliver
    science-based information, genetic resources, and technologies for
    increased crop productivity and quality, protection from plant diseases
    and pests, and economically and environmentally sustainable methods of
    crop production that meet consumers' demands for a ready supply of high
    quality, safe, affordable and nutritious food, the public's desire to
    protect the environment, and the global community's needs for food
    security.

        CPP Statistics:

            Total Projects: 379
            Total Locations: 78
            Total Scientists: 816

        The Plant Genetic Resources, Genomics, and Genetic Improvement
    program provides research that addresses national priorities of genetic
    resource conservation, genomics and genetic improvement. This program
    harnesses the inherent genetic potential of plants. This research
    develops, and effectively applies new knowledge of crop genes, genomes,
    and the control and expression of genes, to accelerate increases in
    productivity and improves the quality of crops; realized via
    traditional and novel plant breeding methods.
        Genetic resources are the foundation of our agricultural future.
    ARS crop genebanks contain the sources of resistance to biotic and
    abiotic stresses and new genes to improve the quantity and quality of
    crops. To ensure that these genes are available for research and
    breeding, ARS continues to acquire and conserve crop genetic resources,
    develop more effective screening methods for identifying superior
    traits, characterize the genetic profiles of genebank holdings, ensure
    that genetic resources are distributed where and when they are needed,
    and safeguard these collections and their associated information for
    future generations.
        New crop genetic improvement methods are incorporating advances in
    genome sequencing and analysis, molecular genetics, computational
    biology, and metabolic engineering. New crop breeding theories and
    strategies are being developed that more effectively capture the
    intrinsic genetic potential of germplasm-especially to improve key
    agronomic and horticultural traits-resulting in crops tailored for
    consumer and producer needs.
        This National Program addresses high-priority national needs for:

       Plant and Microbial Genetic Resource Management

       Crop Informatics, Genomics, and Genetic Analyses

       Genetic Improvement of Crops

       Plant Biological and Molecular Processes

            Total Projects: 179
            Total Locations: 55
            Total Scientists: 360

        The Plant Diseases program delivers research to develop and improve
    ways to reduce crop losses caused by plant diseases. The program
    focuses on developing effective disease control strategies that are not
    environmentally harmful, do not threaten the safety of consumers, and
    are compatible with sustainable and profitable crop production.
        Plant diseases--spread by viruses, viroids, bacteria, phytoplasmas,
    fungi, nematodes or other methods--cause billions of dollars in
    economic losses each year to agriculture, landscape, and forest
    settings in the United States. These diseases reduce yields, lower
    product quality or shelf-life, decrease aesthetic or nutritional value,
    and, sometimes, contaminate food and feed with toxic compounds. Control
    of plant diseases is essential for providing an adequate supply of
    food, feed, fiber and aesthetics. Yet, growers spend millions of
    dollars each year only to partially control the pathogens that attack
    their crops and other plants. Reducing these losses has long been a
    high priority for agriculture and for the Agricultural Research Service
    (ARS). Besides the obvious monetary benefits to producers and
    processors, successful plant health protection is important for
    maintaining and increasing food supplies with minimal increases in land
    under cultivation. Additionally, the knowledge and management of plant
    diseases of quarantine significance are vital, not only for protecting
    our domestic crops from foreign disease, but also for maintaining and
    expanding export markets for plants and plant products.
        This National Program addresses high-priority national needs for:

       Disease diagnosis: Detection, identification and
            characterization of plant pathogens

       Biology, ecology, epidemiology, and spread of plant
            pathogens and their relationships

       Plant disease resistance

       Biological and cultural strategies for sustainable disease
            management

            Total Projects: 69
            Total Locations: 29
            Total Scientists: 141

        The Crop Protection and Quarantine program provides fundamental and
    applied research to develop improved strategies for the cost-effective
    management and control of native and invasive insect, mite, and weed
    pests, while minimizing impacts on the environment and human health.
    The rationale for this National Program is that the development and
    implementation of improved management and control strategies will
    contribute to maintaining the competitiveness and vitality of
    agriculture in America.
        Insects, mites, and weeds have a considerable impact on our
    nation's food and fiber crops, affecting domestic supply and exports
    with economic losses estimated to be in the tens of billions of
    dollars. This program also provides research contributing to greater
    productivity in traditional and organic agricultural and horticultural
    systems by improving and developing new, innovative control strategies,
    by improving existing control methods and by alerting growers and
    producers to problems so informed decisions regarding mitigation can be
    accomplished at the earliest possible time.
        This National Program addresses high-priority national needs for:

       Systematics and Identification (of invasive insects, mites
            and weeds as a threat)

       Protection of Agricultural and Horticultural Crops

       Protection of Natural Ecosystems

       Protection of Post-Harvest Commodities and Quarantine

            Total Projects: 92
            Total Locations: 39
            Total Scientists: 211

        The Crop Production program's research develops economically and
    environmentally sound technologies that improve the production
    efficiency, quality, health and value of America's crops.
        Contemporary U.S. crop enterprises for annual, perennial, and
    greenhouse crop production are complex and depend on access to and
    successful integration of highly diverse components, such as a steady
    stream of superior crop varieties, new strategies for mitigation of
    crop losses from biotic and abiotic stresses, and mechanization and
    automation of undesirable or labor intensive activities. This program
    is developing successful new production systems to sustain or increase
    crop yield and quality by focusing on (1) productive and profitable
    crop management strategies for new and traditional crops that conserve
    natural resources; (2) efficient and effective integrated management
    strategies for multiple pests; (3) mechanization of management
    activities to address labor constraints; and (4) improved crop
    management models and decision aids.
        Pollination is a critical element in agriculture as well, because
    honey bees pollinate more than 130 crops in the United States and add
    $15 billion in crop value annually. Declining honeybee populations and
    honey production due to Colony Collapse Disorder (CCD) require special
    attention. CCD has now increased honey bee mortality to more than 30
    percent. This program provides research to improve honey bee and non-
    apis bee health and well being, better hive management practices for
    more robust pollination, development of emerging technologies to be
    used to address current and future challenges of the bee keeping
    industry, conserving bee biodiversity, and develop pollinators for land
    restoration.

        This National Program addresses high-priority national needs for:

       Integrated Sustainable Crop Production Systems

       Bees and Pollination

            Total Projects: 24
            Total Locations: 17
            Total Scientists: 71

        The Methyl Bromide Alternatives program provides research to
    develop alternatives to the agricultural uses of methyl bromide, a
    widely used fumigant and known ozone depletor. Methyl bromide is a
    highly efficacious fumigant that has for a number of decades been used
    on more than 100 crops, in forest and ornamental nurseries, and on wood
    products to control insects, nematodes, weeds, and pathogens, and thus,
    has been critical to important segments of U.S. agriculture. The
    research focuses on strawberry, pepper, tomato, perennial replant,
    field-grown propagative material, and ornamental and cut flower
    cropping systems for pre-plant methyl bromide use, and for processing
    and storage structures, fresh and durable commodities, and quarantine
    for post-harvest use. The ultimate goal of this National Program is to
    make available to the U.S. agriculture community environmentally
    acceptable, practical, economically feasible, and sustainable
    alternatives to methyl bromide.
        The U.S. Department of Agriculture (USDA) has vigorously responded
    to the methyl bromide challenge. It has brought together agricultural
    and forestry leaders from private industry, academia, state
    governments, and the Federal Government to assess the problem,
    formulate priorities, and implement research directed at providing
    solutions to the problems predicted by the methyl bromide phase-out.
    The Agricultural Research Service (ARS) was assigned the lead in this
    process and has emphasized the importance of research on alternatives
    to methyl bromide.
        This National Program addresses high-priority national needs for:

       Pre-plant Soil Fumigation Alternatives

       Post-Harvest Alternatives

            Total Projects: 15
            Total Locations: 10
            Total Scientists: 33

        Natural Resources and Sustainable Agricultural Systems (NRSAS)

        Sustainable agricultural systems produce the agricultural crops and
    livestock needed by societies; protect the natural resource foundation
    essential for production, processing, and other uses; and provide
    economic and social value to producers, processors, consumers, and
    communities. ARS develops scientific knowledge that enhances quality of
    life for all Americans by ensuring safe, affordable, and sustainable
    food, feed, fiber and renewable energy while enhancing natural
    resources and the environment. ARS research creates profitable
    agricultural systems that capitalize on the nation's vast renewable
    natural resources to preserve the fertility and productivity of soils,
    provide abundant and high quality water supply and clean air, maintain
    healthy agricultural and rangeland ecosystems, and offer renewable
    energy and fuel alternatives that form the basis of U.S. economy and
    the well being of rural America.

        NRSAS Statistics:

            Total Projects: 171
            Total Locations: 71
            Total Scientists: 518

        The Water Availability and Watershed Management National Program
    conducts research that helps provide integrated, effective, and safe
    water resource management. There is no substitute for fresh water, nor
    are there replacements for its essential role in maintaining human
    health, agriculture, industry, and ecosystem integrity. ARS scientists
    conduct fundamental and applied research on the processes that control
    water availability and quality and develop new and improved
    technologies for managing agricultural water resources to help ensure
    the health and economic growth of the nation. Results provide the
    technologies to manage and deliver safe and reliable fresh water
    supplies to the agricultural, urban, and industrial sectors of society
    while enhancing the aquatic natural resources of the nation. Results
    are a key part of the USDA's Conservation Effects Assessment Project
    (CEAP), which seeks to determine and improve the effectiveness of farm
    bill conservation practices and programs. Strategic approaches include
    coordination of ARS' infrastructure of experimental watersheds and
    rangelands, located in all major production regions of the nation, as a
    single long-term agroecosystems research network focusing on natural
    resources that provide the foundation for agriculture, especially
    water.
        This National Program addresses high-priority national needs for:

       Effective Water Management in Agriculture

       Erosion, Sedimentation, and Water Quality Protection

       Improving Conservation Effectiveness

       Improving Watershed Management and Ecosystem Services in
            Agricultural Landscapes

            Total Projects: 47
            Total Locations: 30
            Total Scientists: 151

        The Climate Change, Soils, and Emissions National Program conducts
    research to improve the quality of atmosphere and soil resources,
    understand how agriculture and climate affect each other, develop
    strategies to adapt agricultural systems to climate variability,
    mitigate gaseous and particulate emissions, and convert research
    results into decision-support capabilities for end-users.
        The effects of climate change create challenges to agriculture and
    offer new opportunities for production, and these are identified and
    managed through research on crop and livestock responses and resilience
    to abiotic stresses; changing risks related to pests, pathogens, and
    weeds; soil, nutrient, and water management; and carbon sequestration.
    Enhancement of soil productivity is a focus of ARS research and
    together with crop improvement research, offers promise for meeting
    future global agricultural demands. Atmospheric emissions from
    agriculture are under increased scrutiny due to potential negative
    environmental effects and threats to human and animal welfare.
    Emissions contribute to tensions between agriculture and residential
    communities from visibility impairment (haze) and nuisance odors.
    Strategic, coordinated research projects include the nation-wide
    Greenhouse gas Reduction through Agricultural Carbon Enhancement
    network (GRACEnet project); the Renewable Energy Assessment Project
    (REAP) in collaboration with universities; development of models such
    as the Soil and Water Assessment Tool (SWAT), which is used worldwide
    for conservation and land management applications; widely used models
    for assessing and managing wind and water erosion; and leadership in
    the Global Research Alliance on Agricultural Greenhouse Gases.
        This National Program addresses high-priority national needs for:

       Improvements of Air Quality via Management and Mitigation of
            Emissions from Agricultural Operations

       Knowledge and Technologies for Reducing Atmospheric
            Greenhouse Gas Concentrations Through Management of
            Agricultural Emissions and Carbon Sequestration

       Agriculture to Adapt to Climate Change

       Maintaining and Enhancing Soil Resources

            Total Projects: 38
            Total Locations: 29
            Total Scientists: 97

        The Bioenergy National Program conducts research to develop
    technologies to enable sustainable commercial production of biofuels by
    the agricultural sector in ways that enhance our natural resources
    without disrupting existing food, feed, and fiber markets.
        ARS research creates new varieties and hybrids of bioenergy
    feedstocks with optimal traits; develops new optimal practices and
    systems that maximize the sustainable yield of high-quality bioenergy
    feedstocks; develops new, commercially preferred conversion
    technologies; and optimizes both the production of plant feedstocks and
    the biorefining of agricultural materials to bioenergy and value-added
    coproducts. Much of the research is conducted through the USDA Regional
    Biomass Research Centers, emphasizing development of crops and
    sustainable production methods that can be regionally successful.
    Strategic planning tools to identify research, technologies, and
    organizational actions needed to achieve commercial viability of
    biofuels are developed in cooperation with other agencies and industry.
    This research leads to strengthened rural economies, provides knowledge
    for increased supplies of renewable transportation fuel, enhance energy
    security, and supports efforts to improve the U.S. balance of trade.
        This National Program addresses high-priority national needs for:

       Feedstock Development

       Feedstock Production

       Biorefining

            Total Projects: 14
            Total Locations: 6
            Total Scientists: 45

        The Agricultural and Industrial Byproducts National Program
    conducts research to effectively and safely manage and use animal
    wastes and other agricultural and industrial byproducts in ways that
    maximize their potential benefits, while protecting the environment and
    human and animal health.
        Improvements are needed in animal feeding and management regimens
    to increase the proportion of dietary nutrients retained in the animal
    or animal products while decreasing the quantity of dietary nutrients
    excreted and lost to water, air, and soil. Research tracks the fate and
    transport of excreted nutrients in the major soil-crop systems common
    to animal agriculture, providing the foundation for developing Best
    Management Practices. New application methods improve nutrient use
    efficiency and incorporate wastes to conserve nitrogen while
    maintaining adequate crop residue to protect the soil from erosion and
    runoff. These practices, and their associated nutrient management
    plans, are developed from sound understanding of the fate and transport
    of specific nutrients for major soils, hydrologic conditions, and
    cropping systems. Other research addresses pathogen inactivation and
    die-off as well as their potential for regrowth as functions of
    environmental conditions (e.g., temperature, moisture, etc.) during all
    stages of waste management. Technologically sound methods are developed
    for utilizing byproducts that are characterized as beneficial and
    result in products that are commercially sustainable. This includes
    blending, composting, and amending byproducts as well as developing
    land application and management techniques that improve soil, water,
    and air quality in addition to improved plant growth. Much of the
    research is done in collaboration with private sector entities, with a
    strong emphasis on development of useful, safe, commercially desirable
    products from what would otherwise be considered wastes.
        This National Program addresses high-priority national needs for:

       Management, Enhancement, and Utilization of Manure Nutrients
            and Resources

       Manure Pathogens and Pharmaceutically Active Compounds
            (PACs)

       Atmospheric Emissions

       Developing Beneficial Uses of Agricultural, Industrial, and
            Municipal Byproducts

            Total Projects: 17
            Total Locations: 15
            Total Scientists: 54

        The Rangeland, Pasture & Forages National Program develops and
    integrates improved management practices, germplasm, and land-use
    strategies to optimize productivity, economic viability and
    environmental enhancement in managing vegetation, livestock and natural
    resources on private and public grass and forage lands.
        Grazing lands constitute the largest single land use in the United
    States. Their environmental and economic sustainability are essential
    to the nation, yet they are under stresses from many environmental
    factors and land uses. Research to mitigate these problems and
    strengthen their value include: enhancing conservation and restoration
    of ecosystems and agroecosystems through improvements based on the
    application of ecological principles; improving management of fire,
    invasive weeds, grazing, climate change and other agents of change;
    developing grazing-based livestock systems that reduce risk and
    increase profitability in existing and emerging markets; developing
    improved grass and forage legume germplasm for livestock, conservation,
    turf and bioenergy and bioproduct systems; improving the sustainability
    of turf management; and improving decision-support systems including
    improving inventory, monitoring, and assessment tools.
        This National Program addresses high-priority national needs for:

       Rangeland Management Systems to Improve Economic Viability
            and Enhance the Environment

       Pasture Management Systems to Improve Economic Viability and
            Enhance the Environment

       Sustainable Harvested Forage Systems for Livestock,
            Bioenergy and Bioproducts

       Sustainable Turf Systems

            Total Projects: 35
            Total Locations: 25
            Total Scientists: 106

        The Agricultural System Competitiveness and Sustainability National
    Program integrates information and technologies to develop dynamic
    systems that enhance the productivity, profitability, energy
    efficiency, and natural resource management of American farms.
        The program uses interdisciplinary systems research to develop an
    understanding of how different kinds of farm enterprises function, and
    how changing or introducing new technology affect their productivity,
    profitability, energy efficiency, and natural resource stewardship.
    Finding the best combinations of practices helps producers achieve
    their production goals, while enhancing the environmental goods and
    services derived from agricultural lands. Diverse and dynamic
    agricultural systems in development can adjust to changing
    environmental and market conditions to increase the long-term financial
    viability and competitiveness of farms, enhance natural resource
    quality, contribute to the vibrancy of rural communities, and increase
    the food, fiber, and energy security for the nation and the world.
        This National Program addresses high-priority national needs for:

       Agronomic Crop Production Systems

       Specialty Crop Production Systems

       Integrated Whole Farm Production Systems

       Integrated Technology And Information To Increase Customer
            Problem Solving Capacity

            Total Projects: 20
            Total Locations: 18
            Total Scientists: 65

        Nutrition, Food Safety and Quality

        The Nutrition, Food Safety and Quality (NFSQ) research area leads
    and coordinates ARS research and information dissemination to define
    the role of food and its components in optimizing health for all
    Americans; develop tests and processes that keep the food supply safe;
    reduce and control pathogens and toxins in agricultural products; and
    improve the economic viability and competitiveness of American
    agriculture by enhancing the quality and utilization of agricultural
    products for the benefit of producers and consumers.

        NFSQ Statistics:

            Total Projects: 226
            Total Locations: 47
            Total Scientists: 553

        The Human Nutrition program provides the science base to undergird
    U.S. food policy, i.e., the Dietary Guidelines for Americans, thus
    enabling Americans to make nutritious and health-promoting dietary
    choices. The mission of the Human Nutrition Program is to define the
    role of food and its components in optimizing health throughout the
    life cycle for all Americans. Distinctive aspects of this research
    include an emphasis on a food-based approach to improving health; the
    core capability to sustain long-term research; the availability of
    state-of-the-science equipment and facilities for human research across
    the lifecycle; and the conduct of multidisciplinary research to improve
    the nutritional value of the American diet and the food supply.
        This research is focused on maintaining health and preventing
    disease through food-based recommendations. This unique USDA research
    does not duplicate other Federal departments. The research emphasizes
    study of essential nutrients and nonessential health-promoting
    components in foods, evaluating the nutritional value of diets eaten by
    people in America, determining how consumption of specific foods or
    food components can enhance health, and developing strategies to
    improve food choices and lifestyle factors to promote health in
    Americans. Increasingly, research focuses on addressing over-
    consumption and caloric imbalance (obesity related research) with
    incorporation of cutting-edge genomic and metabolomic technologies.
    Unique national resources that are part of this Program include the
    National Nutrient Databank and the ``USDA What We Eat in America/
    NHANES'' national food consumption survey. Partnerships with other
    Federal agencies and nonprofit and industry groups allow ARS to
    leverage funds and build upon common goals. Information dissemination
    programs operated by the National Agricultural Library address general
    and specific human nutrition issues and audiences and include general
    Web portals such as www.nutrition.gov for the American consumer as well
    as the targeted websites for professionals such as the Food and
    Nutrition Information Center.
        This National Program addresses high-priority national needs for:

       Monitoring Nutrient Composition of the Food Supply and
            Consumption by Americans

       Strengthening the Scientific Basis for Dietary Guidance for
            Health Promotion and Disease Prevention

       Developing Strategies for Prevention of Obesity and Related
            Diseases

       Conducting Research on Life Stage Nutrition and Metabolism

            Total Projects: 89
            Total Locations: 9
            Total Scientists: 172

        The Food Safety program protects food from pathogens, toxins, and
    chemical contamination during production, processing, and preparation.
    The safety of the food supply is a highly visible public health issue
    and a national priority for the Federal Government. The continued
    priority is partly due to the diverse and complex system of production,
    processing, and distribution of food in the U.S. and the increasing
    global distribution. Outbreaks of foodborne illness are seen as a major
    cause of morbidity and mortality, and economic costs, both nationally
    and internationally. The full extent of the disease burden is still
    unknown, even with recent Centers for Disease Control (CDC) estimates.
    Foodborne illnesses can be caused by microbial pathogens, parasites,
    viruses and an array of foodborne contaminants such as chemicals or
    toxins. The cause of every outbreak is still unknown, but persistent
    outbreaks of major commodity-specific foods that may directly affect
    public health, regulations, industry, and trade, require our immediate
    attention.
        ARS has developed an integrated approach to food safety, that is,
    food production is seen as a continuous process from production,
    through harvesting and processing, to retail and the consumer. Pre- and
    post-harvest are not separated but considered an integrated production
    system of safe and quality food. Interventions and controls that are
    applied to one phase will ultimately affect the other segments of food
    production and processing. Food safety research has also changed during
    the past decade, having moved past simple, surveillance/prevalence
    studies to asking more complex questions. Consequently, researchers are
    required to think creatively to solve problems, which means considering
    alternate perspectives, exploiting new opportunities and technologies,
    and crossing conventional boundaries. Multidisciplinary collaborations,
    especially between Centers/Institutes, nationally and internationally
    are an absolute necessity.
        ARS provides the intramural infrastructure and expertise to address
    short and long-term needs in food safety. Because of the
    infrastructure, ARS is uniquely poised to respond quickly to emerging
    and critical food safety issues. ARS also collaborates closely with
    Federal regulatory agencies as well as industry, professional, and
    international stakeholders to assist in addressing their specific food
    safety needs.
        This National Program addresses high-priority national needs for:

       Foodborne Contaminants

       Microbial Population Systems

       Systems Biology (Pathogenicity and Virulence)

       Technologies for the Detection and Characterization of
            Microbial Contaminants

       Intervention and Control Strategies to Decrease or Eliminate
            Pathogens

       Predictive Microbiology and Data Acquisition

       Chemical and Biological Contaminants: Detection Methodology,
            Toxicology and Toxinology

            Total Projects: 64
            Total Locations: 14
            Total Scientists: 180

        The Quality and Utilization of Agricultural Products program
    conducts research to enhance the economic viability and competitiveness
    of U.S. Agriculture by maintaining the quality of harvested
    agricultural commodities or otherwise enhancing their marketability,
    meeting consumer needs, developing environmentally friendly and
    efficient processing concepts, and expanding domestic and global market
    opportunities through the development of value-added food and nonfood
    technologies and products, except energy and fuels.
        Research is being conducted on the development of nonfood, nonfuel
    biobased products from agricultural commodities and byproducts.
    Interest in biobased products has increased as consumers and
    governments have sought more environmentally friendly products that
    provide alternatives to petroleum and which do not contribute to
    greenhouse gases. Thus, biobased products can reduce our dependency on
    petroleum and provide a more sustainable technology for the future.
    Biobased products that were once too expensive to commercialize may now
    be affordable. There is some public concern that biobased products
    could contribute to the rising cost of food in the U.S. This program
    seeks opportunities to develop biobased products from agricultural
    feedstocks that do not compete with food, in cooperation with other ARS
    national programs and partners. ARS also supports quality and
    processing research on crop fiber, such as cotton, and animal hides,
    leather and wool. Stakeholders who produce fibers and hides constitute
    an important segment of our rural economy. These industries are
    severely impacted by energy and production costs and have lost market
    share to foreign competition. Technologies that improve fiber quality,
    reduce the energy consumption of processing equipment, and develop new
    products are needed to help the fiber industry to compete in a global
    market.
        This National Program addresses high-priority national needs for:

       Methods and Technologies to Enhance Quality & Utilization of
            Food Crops and Animals

       Methods and Technologies to Enhance Quality & Utilization of
            Agricultural Fibers

       Non-Food, Non-Fuel Biobased Products and Sustainable
            Technologies/Processes

            Total Projects: 73
            Total Locations: 24
            Total Scientists: 201

        ARS International Research Programs

        ARS engages in international collaborations primarily that support
    its mission but may also conduct research under external funding that
    falls within its mission and also supports critical U.S. Foreign Policy
    initiatives. ARS international research collaborations enable an
    economically vibrant U.S. agricultural system by developing
    technologies, knowledge and tools that help U.S. producers be more
    productive, efficient and sustainable. ARS research also support the
    Foreign Agricultural Service's (FAS) mission by providing key research
    that helps FAS project crop production estimates in other countries and
    by engaging in collaborations that underpin food security. The Office
    of International Research Programs (OIRP) is an ARS Headquarters Office
    under the Office of National Programs in Beltsville, Maryland. The OIRP
    maintains a cadre of International Affairs Specialists who: (1) liaise
    with each National Programs; (2) provide special focus on specific
    regions of the world; and (3) oversee a portfolio of programs/projects
    that are important to U.S. foreign policy objectives as well as the
    agency's objectives.
        This Program is currently focused on three major areas:

       Global Food Security

       Biosecurity Engagement

       International Partnerships

        ARS Operates four Overseas Biological Control Laboratories (OBCLs)
    that offer the benefits of international projection of mission,
    training for key personnel, and broadening of potential solutions for
    invasive species. Having operations overseas forms a 365 days per year
    presence for ARS, something that could never be accomplished by
    temporary visits and assignments. As a result of that dedication to
    their missions and host countries, the overseas laboratories have
    established reputations as reliable partners. The flow of information,
    training, and agricultural progress go in both directions. The OBCLs
    are administered out of ARS Headquarters by a Director within the Crop
    Production and Protection (CPP) mission area of the Office of National
    Programs. There are four OBCLs:

       The European Biological Control Laboratory in Montpelier,
            France

       The South American Biological Control Laboratory in Buenos
            Aires, Argentina

       The Australian Biological Control Laboratory in Brisbane,
            Australia

       The Sino-American Biological Control Laboratory in Beijing,
            China

        ARS Technology Transfer Programs

        USDA broadly defines technology transfer as the adoption of
    research outcomes for public benefit. Innovations arising from USDA
    intramural research, such as new or improved technologies, processes,
    products and services, benefit the nation by increasing productivity,
    increasing efficiency (keeping costs low) and enhancing global
    competitiveness for the U.S. agriculture sector. Thus, technology
    transfer functions are critical to accelerating utility of public R&D
    investments, creating economic activity, and in job creation and
    sustainable economic development.
        Principal among the formal instruments of technology transfer are
    Cooperative Research and Development Agreements (CRADAs), patents, and
    invention licenses for commercialization by the private sector, as well
    as material transfer agreements and germplasm releases to industry.
        To assist USDA in transferring technologies to the private sector,
    the Agricultural Research Service (ARS) created the Agricultural
    Technology Innovation Partnership (ATIP) program consisting of ten
    economic development organizations across the U.S. serving as
    ``intermediaries'' to further enhance the likelihood that research
    outcomes would be adopted by the private sector for commercialization.
    ATIP members coordinate regional cosponsored events with ARS,
    showcasing available technologies for licensing, and USDA intramural
    research capabilities available to businesses to assist in solving high
    priority, mission-related issues connected to the agricultural
    industries. Additionally, members provide the current or prospective
    private sector partners of ARS with access to business mentors,
    entrepreneur schools, seed and venture funds, and the Manufacturing
    Extension Partnership programs.
        The Agricultural Research Service (ARS) has been delegated
    authority by the Secretary of Agriculture to administer the patent
    program for ARS, the review of CRADAs and the technology licensing
    program for all intramural research conducted by USDA.
        ARS's Office of Technology Transfer (OTT) is assigned the
    responsibility for protecting intellectual property (IP), developing
    strategic partnerships with outside organizations, and performing other
    activities that effectively transfer ARS research outcomes and
    technologies to the marketplace. ARS-OTT is centralized in policy and
    approval procedures, but maintains field offices to provide one-on-one
    customer service to ARS researchers. To facilitate technology transfer,
    OTT is organized into five sections that include Administrative/
    Headquarters, Patents Licensing, Marketing and Technology Transfer
    Coordinators (TTCs). TTCs are seven highly qualified employees
    stationed across the United States who are responsible for facilitating
    the development and transfer of USDA technologies. They serve as
    liaisons with scientists, ARS managers, university partners, and the
    private sector.
        Technology transfer is accomplished through many mechanisms, such
    as:

       developing written information for customers and
            stakeholders, including scientific publications, publications
            in trade journals, and reports to stakeholders;

       releasing plant germplasm to the public;

       transferring research materials to scientists outside of
            ARS;

       entering into formal partnership agreements, such as CRADAs,
            and other cooperative agreements;

       delivering specific research results to regulatory agencies
            to support their actions;

       licensing IP (patents, Plant Variety Protections
            Certificates, and biological materials);

       participating in meetings with industry organizations and
            universities, workshops and field days; and distributing
            information to the public via the ARS Information Staff, the
            National Agricultural Library, and other sources.

        Enhanced Use Lease Authority

        Enhanced Use Lease (EUL) is provided under the authority of section
    7409 of the Food, Conservation and Energy Act of 2008, Public Law 110-
    246 (112 Stat. 1651), commonly referred to as the 2008 Farm Bill. This
    authority grants the Secretary of the Department of Agricultural (USDA)
    the authority to establish a pilot program at the Beltsville
    Agricultural Research Center (BARC) to lease non-excess property to any
    private or public entities.
        Five calls for proposals were issued by ARS on or about December 4,
    2010, requiring businesses to set forth a Business and Leasing plan, a
    Development plan and a Property Management plan.
        Within the Development plan, businesses are to identify the
    collaborative research in-place or a plan of a potential project
    consistent with the research mission of the USDA. The six calls for
    proposals were directed to (i) use of greenhouse facilities, (ii) 10
    acres for bio-byproduct production, (iii) an under-utilized composting
    facility. (iv) Transgenic greenhouse space; and (v) large animal
    transgenic research space, with screened barn, surgery room, lunch room
    and storage and rest room facilities.
        Four proposals were submitted by small businesses. All of which had
    existing agreements with ARS. Proposals received from Renewable Carbon
    Management, LLC and EnviRemed were uncannily similar and were directed
    to a full scale composting business located at BARC. The two proposals
    were rejected by committee as being deficient in failing to outline a
    research component directed to the mission of ARS-USDA. Both entities
    were advised by letter of the deficiencies in their proposals and no
    reply was received. The existing agreements with these entities have
    expired.
        A Proposal from New Agriculture was received directed to production
    of plant proteins from tobacco for use in plastics manufacture and as a
    nutritional supplement. The proposal was unfocused and New Agriculture
    was invited to tour the facility in which the proposed operation was to
    be housed and to submit a more focused proposal directed to the
    specific space to be occupied. New Agriculture failed to follow-up;
    however a CRADA agreement is still active and is being worked to
    completion with this entity.
        A proposal from Plant Sensory Systems Inc. was received for the
    purpose of leasing two transgenic greenhouses in building 010 at BARC,
    for a total of 1859 ft\2\ for 3 years. The proposal was directed to
    growing transgenic corn for purposes of drought and heat tolerance and
    efficiency of nitrogen use. A lease was successfully negotiated and
    Plant Sensory Systems occupied space on or about May 1, 2011. Today
    both soybean and corn are being grown for the stated research purpose.
    In a direct quote from the company, ``we could not live without the
    space!''
        This EUL project supports the USDA priority of responding to
    climate change and is part of the Climate Change, Soils and Emissions
    (#212).

        Buildings and Facilities

        Because ARS operates at over 100 locations both nationally and
    internationally, a high priority and great degree of focus is placed on
    the maintenance of the agency's facility assets. The Secretary has
    received many requests from Members of Congress for the Administration
    to support budget increases to complete pending ARS capital improvement
    projects. In response, the Administrator of ARS was asked to establish
    an objective process to guide orderly and timely capital investments
    for ARS Laboratory facilities focusing on support to priority programs
    and other long-term requirements of USDA scientific research. The
    agency is also in the process of completing more than $176 million in
    repair and maintenance projects across the country as a result of
    funding from the A summary of those assets and a discussion of the
    agency's developing capital asset strategy are below.
        Land under ARS custody & control:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                               Leased                         10,888
                          Owned                              393,260
                                         -----------------------------------
      Subtotal..........................                     404,148
                                         -----------------------------------
                            MOU                                2,051
                                         ===================================
        Total Acres.....................                     406,199
    ------------------------------------------------------------------------

        Buildings owned/leased (Gross Square Feet):

    ----------------------------------------------------------------------------------------------------------------
                                                                                 Number                  GSF
    ----------------------------------------------------------------------------------------------------------------
                 Owned Buildings               Existing Operational                  3,016            13,565,457
                                                    Existing Excess                    294                80,498
                                      ------------------------------------------------------------------------------
      Subtotal.......................                                                3,310            14,345,955
                                                                         -------------------------------------------
                                Leased Buildings                                       116               495,596
                                                                         ===========================================
        Total........................                                                3,426            14,841,551
    ----------------------------------------------------------------------------------------------------------------

       105 Domestic Locations; 3 Foreign Locations; & 60 worksites.

       Location/Worksites collocated with Land-Grants/Institutes of
            Higher Learning

         Land-Grant Locations--60

         Land-Grant Worksites--14

         Non Land-Grant Locations--4

         Non Land-Grant Worksites--1

       Replacement Value $3.64B

        With the issuance of Executive Order (E.O.) 13327, Federal Real
    Property Asset Management in February 2004, the USDA recognized the
    need to adopt a more consistent, structured, performance-based,
    integrated planning process to better enable the Agency to oversee
    management of its extensive real property portfolio. In October, 2007
    USDA issued the Real Property Capital Programming and Investment
    Process (CPIP). The CPIP was based upon the Office of Management and
    Budget (OMB) Capital Planning and Investment Control (CPIC) guidance
    (OMB A-11 Part 7; Planning, Budgeting, and Acquisition of Capital
    Assets.) An ARS specific CPIP--the ARS Building Block Plan (BBP)--was
    included as an appendix.
        Similar to the USDA Plan, ARS built its process around the OMB CPIC
    guidance; this allowed ARS to evaluate real property investments based
    upon risks and returns throughout their lifecycle while ensuring that
    USDA and ARS' investments are well-conceived, cost-effective, and
    support strategic mission and business goals.
        A key component of the ARS BBP is the use of investment review
    boards as the decision-making body in matters related to real
    property--the Boards are called Asset Management Review Boards (AMRB).
    There are two levels of review; the initial process begins at each of
    the eight Area offices, these eight plans are then consolidated and
    reviewed at the Headquarters level. The AMRB's membership includes
    representation from throughout the ARS and includes program, finance,
    budget, planning, and facilities. This membership ensures a balanced
    approach to investment decisions. The ARS Headquarters AMRB is chaired
    by the Deputy Administrator, Administrative & Financial Management and
    is responsible for:

       Reviewing new Capital investments (includes new
            construction, repair, land purchase, and disposal) using a
            standard set of criteria to ensure proposed projects that will
            support the ARS and Department missions and program delivery
            processes.

       Recommending approving/disapproving all projects over
            $1,000,000. (The ARS AMRB assumes projects under $1,000,000
            have been validated by the Area AMRB's).

       Reviewing opportunities to right-size inventories and
            operations and management costs.

       Ensuring that both the Department's and ARS's criteria and
            performance goals are considered and implemented when making
            Agency investment decisions.

       Assuring that the ARS's Real Property program remains in
            compliance with E.O. and implementing directives.

        As outlined above, once a decision is made on which real property
    assets warrant attention, there is an OMB process for analyzing capital
    investments. The process is generic, and it allows for the analysis of
    various capital investments, not just real property. The guidance
    provided in the USDA and ARS BBP process follows the basic criteria
    outlined within the OMB guidance.
        Informal discussions with NASA and National Institutes of Health
    (NIH) staff have indicated that their Capital Investment Process
    closely follows the OMB guidance. The criteria taken into account
    include the following:

       Does the investment in a major capital asset support core/
            priority mission functions that need to be performed by the
            Federal Government? (How does the project support the
            Secretaries priorities, Congressional mandates, and the
            Department's and agency's strategic goals and objectives);

       Is the investment supported by a Life Cycle analysis?

       Does the investment improve the Real Property Performance
            Measures? (1) Utilization; (2) Condition Index; (3) Mission
            Dependency; and (4) Annual Operation & Maintenance (O&M) costs.

        The challenge for ARS is in identifying those real property assets
    that warrant priority attention and investment to ensure core and
    priority research needs are met. (There will always be a number of
    facilities that require immediate attention due to failing building
    systems and life safety issues; these assets also need to be
    addressed.) ARS has identified the following tasks as necessary to
    complete its capital investment strategy.

        Task 1--Bench mark the ARS BBP against other government and
            industry organizations (General Services Administration (GSA),
            Department of Defense (DOD) activities, NIH, university,
            pharmaceutical, etc.). Include the decision making process,
            investment strategies, business systems and automation systems
            used, and metrics on expenditures for operation, sustainment,
            and recapitalization of similar assets.

        Task 2--Identify funding amounts necessary to raise existing
            facilities to an acceptable condition, sustain facilities at
            that level, and recapitalize facilities.

        Task 3--(concurrent with task 2) Implement processes and procedures
            to improve ARS management of its assets and prioritize
            investment priorities through a decision matrix that aligns and
            relates research program priorities and investment requirements
            with associated infrastructure needs in a systematic way to
            support a rank-ordered priority plan for identifying,
            scheduling, and sequencing existing and out-year capital
            investments needed to address infrastructure improvement
            requirements on a regular and recurring basis consistent with
            facility engineering industry norms. The ranking process will
            consider Congressional directed projects, recent construction,
            and general facilities that need to be accounted for in ranking
            priorities. ARS program priorities will relate both to
            facilities where specific research is conducted and also to
            facilities where the work could be conducted.
    3. Brief History
        The Agricultural Research Service was officially founded in 1953
    but has precursor agencies that date back as far as 1884 to the Bureaus
    of Plant and Animal Industry. The importance of agricultural research
    performed by the government goes back even farther, to the first work
    done to stem hog cholera outbreaks in 1868. In 1938, Congress
    appropriated funding to create agricultural research laboratories in
    Peoria, IL, Wyndmoor, PA, Albany, CA and New Orleans, LA. These
    locations still exist to this day as major centers of ARS work and
    concentrations of our science. We are proud of this long history of
    government commitment to solving agricultural problems that affect
    every single American in one way or another.
    4. Purpose/Goals
        ARS conducts research to develop and transfer solutions to
    agricultural problems of high national priority and provide information
    access and dissemination to:

       Ensure high-quality, safe food, and other agricultural
            products;

       Assess the nutritional needs of Americans;

       Sustain a competitive agricultural economy;

       Enhance the natural resource base and the environment; and

       Provide economic opportunities for rural citizens,
            communities, and society as a whole.

        As part of the Research, Education, and Economics (REE) Mission
    Area, ARS, like its fellow REE agencies, focuses its research on five
    priorities:

       Climate change;

       Food safety;

       Children's nutrition and health;

       International food security;

       Bio-Energy.
    5. Success in Meeting Programmatic Purpose/Goals
        Climate Change

        In an ARS study of the impact of global climate change, crops
    responded positively to future levels of atmospheric carbon dioxide
    (CO2), but soil tillage practices had little effect on this
    response. This first long-term study comparing tillage practices under
    high CO2 levels showed that elevated CO2 caused
    soybean and sorghum plants to increase photosynthesis while reducing
    transpiration, the amount of water the plants release. This resulted in
    increased water use efficiency, whether the crops were grown with no-
    till or conventional tillage.
        ARS scientists have found that using alternative types of
    fertilizers can cut back on greenhouse gas emissions, at least in one
    part of the country, and are examining whether the alternatives offer
    similar benefits nationwide. Nitrogen fertilizers are often a necessity
    for ensuring sufficient crop yields, but their use leads to release of
    nitrous oxide, a major greenhouse gas, into the atmosphere. Fertilizer
    use is one reason an estimated 78 percent of the nation's nitrous oxide
    emissions come from agriculture.
        Current atmospheric ozone levels are already suppressing soybean
    yields, according to ARS scientists' studies of the effect of global
    climate change on crops. The scientists have been working on a project
    called ``SoyFACE''--short for Soybean Free Air Concentration
    Enrichment--to measure how the projected increases in carbon dioxide
    (CO2) and ozone will affect soybean production. The
    scientists found that soybean yields increase by about 12 percent at
    the elevated CO2 levels predicted for the year 2050 (550
    parts per million)--only \1/2\ of what previous studies estimated. They
    also found that increased ozone is quite harmful to soybean yields,
    reducing them by about 20 percent. In addition, current levels of ozone
    are already suppressing soybean yields by up to 15 percent.

        Food Safety

        Innovative studies by ARS scientists are providing new information
    about the impressive array of genes that a major foodborne pathogen,
    Escherichia coli O157:H7, calls into action when attempting to colonize
    leaves of fresh-cut lettuce. The investigation--the first to provide
    extensive details about the biology of E. coli O157:H7 in fresh-cut
    lettuce--could pave the way to new technologies to improve the safety
    of bagged salads.
        ARS scientists have used a type of high-tech imaging called
    ``hyperspectral imaging'' to distinguish the foodborne pathogen
    Campylobacter from other microorganisms as quickly as 24 hours in
    laboratory tests. Campylobacter infections in humans are a major cause
    of bacterial foodborne illness both in the United States and other
    countries throughout the world. Normally, isolation and detection for
    identification of Campylobacter from foods like raw chicken can take
    several days to a week. This ``sensing'' technology, which was nearly
    100 percent accurate with pure cultures of the microorganisms, could be
    used for early detection of presumptive Campylobacter colonies.
        Using a cleansing solution to wash eviscerated chicken carcasses is
    effective in removing bacteria that cause human foodborne diseases,
    according to an ARS study. The findings provide data that may be useful
    to poultry producers in designing practical, non-chlorine-based
    sanitizers. The cleanser, which is composed of lauric acid and
    potassium hydroxide, could be used to sanitize chicken carcasses during
    processing prior to chilling. Since other countries do not use chlorine
    rinses, ARS is looking at alternatives for them and is evaluating the
    most effective rinses against foodborne pathogens in poultry.

        Children's Nutrition and Health

        Aspiring moms are often advised to achieve a healthy weight before
    they become pregnant, and to gain only the recommended amount of weight
    during their pregnancy, and ARS-funded studies could provide new
    insights into those recommendations. The studies focus on how
    influences that occur in the womb--and perhaps during the first few
    months of life--might affect development of a child's ability to
    regulate his or her weight later in life. In fact, the child's body-
    weight-regulating mechanisms might be permanently altered by maternal
    signals associated with the mother's own overweight, the scientists
    say, and such maternal programming of the unborn child could increase
    the risk that the child would become an overweight or obese adult and
    would have a higher risk of obesity-related afflictions.
        Parents of kids age 2 and up can check a handy website every 6
    months to help determine if their children's weight gains or losses are
    heading in the right direction. ARS-funded scientists developed the
    easy-to-use, online resource and based it on growth charts issued by
    the Centers for Disease Control and Prevention. In just a few minutes
    spent at their computer, parents can easily calculate their child's
    BMI, or Body Mass Index, and put it into perspective by viewing the
    youngster's BMI percentile on a helpful graph.
        A collaborative study conducted by ARS scientists and Harvard
    University scientists showed decreased nutritional dietary quality and
    increased caloric intake among U.S. children on days when they consumed
    fast food. The authors analyzed existing dietary intake data from 6,212
    children and adolescents, aged 4 to 19, from a nationally
    representative USDA Continuing Survey of Food Intakes by Individuals,
    1994-1996, and the Supplemental Children's Survey, 1998. The findings
    showed that U.S. children who ate fast food, compared with those who
    did not, consumed more total calories, more calories per gram of food,
    more total and saturated fat, more total carbohydrate, more added
    sugars and more sugar-sweetened beverages, but less milk, fiber, fruit
    and nonstarchy vegetables.

        International Food Security

        ARS scientists have solved a longstanding mystery as to why a
    pathogen that threatens the world's wheat supply can be so adaptable,
    diverse and virulent. It is because the fungus that causes the wheat
    disease called stripe rust may use sexual recombination to adapt to
    resistant varieties of wheat. The scientists showed for the first time
    that stripe rust, caused by Puccinia striiformis, is capable of
    sexually reproducing on the leaves of an alternate host called
    barberry, a common ornamental.
        An international team of researchers co-led by an ARS scientist has
    sequenced the genomes of two fungal pathogens--one that threatens
    global wheat supplies and another that limits production of a tree crop
    valued as a future source for biofuel. The sequencing of the genetic
    codes of wheat stem rust pathogen (Puccinia graminis) and poplar leaf
    rust pathogen (Melampsora larici-populina) is expected to help
    researchers develop control strategies to address worldwide threats to
    wheat fields and tree plantations.
        ARS scientists and their colleagues completed a 4 year effort to
    sequence the genome of corn, an achievement expected to speed up
    development of corn varieties that will help feed the world and meet
    growing demands for using this important grain crop as a biofuel and
    animal feed. The results represent the largest and most complex plant
    genome sequenced to date.

        Bio-Energy

        ARS scientists have found that barley grain can be used to produce
    ethanol, and the leftover byproducts--barley straw, hulls, and dried
    distillers grains--can be used to produce an energy-rich oil called
    bio-oil. The bio-oil could then be used either for transportation fuels
    or for producing heat and power needed for the grain-to-ethanol
    conversion.
        ARS scientists have long-term studies underway to examine growing
    camelina as a bioenergy crop for producing jet fuel for the military
    and the aviation industry. This research supports the recently signed
    memorandum of understanding between the U.S. Department of Agriculture
    (USDA) and the Department of the Navy (DON) and interests of the
    Commercial Airlines Alternative Fuels Initiative (CAAFI). Native to
    Europe, camelina (Camelina sativa) is a member of the plant family
    Brassicaceae and has been grown since ancient times for use as lamp
    fuel, among other things. The seed's high oil content has made it a
    promising candidate as a new source for biofuels.
        ARS scientists have developed a new tool for deciphering the
    genetics of a native prairie grass being widely studied for its
    potential as a biofuel. The genetic map of switchgrass is expected to
    speed up the search for genes that will make the perennial plant a more
    viable source of bioenergy. Interest in using switchgrass as a biofuel
    has intensified in recent years because it can be burned to produce
    electricity and, like corn stalks, can be converted to ethanol. It also
    grows on marginal lands, is adaptable to different regions, and--as a
    perennial--does not need to be replanted each year, which means lower
    energy costs and less runoff.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Salaries and Expenses    Buildings and Facilities
    ------------------------------------------------------------------------
           FY 2002           $978,865            FY 2002          $216,824
           FY 2003         $1,048,906            FY 2003          $228,703
           FY 2004         $1,088,057            FY 2004           $63,434
           FY 2005         $1,108,129            FY 2005          $186,335
           FY 2006         $1,130,128            FY 2006          $149,883
           FY 2007         $1,132,031            FY 2007                $0
           FY 2008         $1,124,992            FY 2008           $51,752
           FY 2009         $1,143,459            FY 2009           $46,752
           FY 2010         $1,179,784            FY 2010           $70,873
           FY 2011         $1,133,230            FY 2011                $0
    ------------------------------------------------------------------------
    Note: In FY 2011, the appropriation rescinded $230 million in balances
      from prior appropriations, and there was no funding received under the
      Buildings and Facilities line.

    7. Annual Outlays (FY 2002-FY 2011) ($ in Millions)
        Aggregate agency outlays are below. See next table for details by
    location.

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                        FY 2002                             $928,330
                        FY 2003                           $1,024,665
                        FY 2004                           $1,076,374
                        FY 2005                           $1,107,953
                        FY 2006                           $1,133,833
                        FY 2007                           $1,099,270
                        FY 2008                           $1,135,728
                        FY 2009                           $1,133,144
                        FY 2010                           $1,169,025
                        FY 2011                           $1,115,892
    ------------------------------------------------------------------------

                     United States Department of Agriculture
                          Agricultural Research Service
                 FY 2011 Estimated Research Funding by Location
                                ($ in thousands)
    ------------------------------------------------------------------------
                                                                 2011 NTL
                            Location                             Estimate
    ------------------------------------------------------------------------
    Alabama, Auburn
      Aquatic Animal Health Research                               2,302,355
      Soil Dynamics Research                                       3,604,375
                                                             ---------------
        Subtotal, Alabama                                          5,906,730
                                                             ---------------
    Alaska, Fairbanks
      Subarctic Agricultural Research Unit                         5,465,003
                                                             ---------------
        Subtotal, Alaska                                           5,465,003
                                                             ---------------
    Arizona, Maricopa--U.S. Arid Land Agricultural Research
     Center
      Aflatoxin Reduction                                            850,435
      Pest Management and Biocontrol Research                      2,897,456
      Plant Physiology and Genetics Research                       3,026,574
      Water Management and Conservation Research                   2,950,663
                                                             ---------------
      Maricopa Subtotal                                            9,725,128
                                                             ---------------
    Arizona, Tucson
      Honey Bee Research                                           1,627,276
      Southwest Watershed Research                                 3,318,636
                                                             ---------------
        Tucson Subtotal                                            4,945,912
                                                             ===============
          Subtotal, Arizona                                       14,671,040
                                                             ===============
    Arkansas, Booneville
      Dale Bumpers Small Farms Research Center                     1,764,605
    Arkansas, Fayetteville
      Poultry Production and Products Safety Research              1,627,547
    Arkansas, Little Rock
      Arkansas Children's Nutrition Center                         6,348,600
    Arkansas, Stuttgart
      Dale Bumpers National Rice Research Center                   3,600,124
      Harry K. Dupree Stuttgart National Aquaculture               3,224,860
       Research Center
                                                             ---------------
        Stuttgart Subtotal                                         6,824,984
                                                             ===============
          Subtotal, Arkansas                                      16,565,736
                                                             ===============
    California, Albany--Plant Gene Expression Center               4,116,816
    California, Albany--Western Regional Research Center
      Bioproduct Chemistry and Engineering Research                3,924,646
      Crop Improvement/Utilization Research                        4,507,709
      Exotic and Invasive Weeds Research                           4,967,546
      Foodborne Contaminants Research                              4,246,950
      Genomics and Gene Discovery                                  2,092,410
      Plant Mycotoxins Research                                    3,007,727
      Processed Foods Research                                     3,855,196
      Produce Safety and Microbiology Research                     5,436,157
                                                             ---------------
        Albany Subtotal                                           36,155,157
                                                             ---------------
    California, Davis
      Crops Pathology and Genetics Research                        2,763,178
      National Clonal Germplasm Repository--Tree Fruit & Nut       1,304,663
       Crops & Grapes
      Western Human Nutrition Research Center:
        Obesity And Metabolism Research                            3,400,766
        Immunity and Disease Prevention Research Unit              3,485,541
                                                             ---------------
        Davis Subtotal                                            10,954,148
                                                             ---------------
    California, Parlier--San Joaquin Valley Agricultural
     Sciences Center
      Commodity Protection and Quality Research                    3,358,348
      Crop Diseases, Pests and Genetics                            5,429,823
      Plant Genetic Resources Conservation                           625,023
      Water Management Research                                    2,363,685
                                                             ---------------
        Parlier Subtotal                                          11,776,879
                                                             ---------------
    California, Riverside
      U.S. Salinity Laboratory:
        Contaminant Fate And Transport Research                    2,114,961
        Water Reuse And Remediation Research                       2,316,566
      National Clonal Germplasm Repository for Citrus              1,142,398
                                                             ---------------
          Riverside Subtotal                                       5,573,925
                                                             ---------------
    California, Salinas
      Crop Improvement And Protection Research                     4,907,345
    California, Shafter
      Western Integrated Cropping Systems Research                 1,455,204
                                                             ===============
        Subtotal, California                                      70,822,658
                                                             ===============
    Colorado, Akron
      Central Plains Resources Management Research                 2,049,276
    Colorado, Fort Collins
      Agricultural Systems Research                                2,132,160
      Plant and Animal Genetic Resources Preservation              4,620,480
       Research Unit
      Soil, Plant And Nutrient Research                            2,782,077
      Sugarbeet Research                                             797,220
      Water Management Research                                    1,819,074
                                                             ---------------
        Fort Collins Subtotal                                     12,151,011
                                                             ===============
          Subtotal, Colorado                                      14,200,287
                                                             ===============
    Delaware, Newark
      Beneficial Insects Introduction Research                     2,069,908
                                                             ===============
        Subtotal, Delaware                                         2,069,908
                                                             ===============
    District of Columbia
      U.S. National Arboretum:
        Education Unit                                             1,328,736
        Floral And Nursery Plants Research Unit                    6,489,013
        Gardens Unit                                               3,594,923
                                                             ===============
          Subtotal, District of Columbia                          11,412,672
                                                             ===============
    Florida, Brooksville
      Beef Cattle Research                                         1,249,875
    Florida, Canal Point
      Sugarcane Production Research                                2,888,264
    Florida, Fort Lauderdale
      Invasive Plant Research Laboratory                           2,552,219
    Florida, Fort Pierce--U.S. Horticultural Research
     Laboratory
      Horticulture and Breeding Research                           4,117,253
      Quality Improvement in Citrus and Subtropical Products       2,644,308
       Research
      Subtropical Insects Research                                 2,964,198
      Subtropical Plant Pathology Research                         4,543,843
                                                             ---------------
        Fort Pierce Subtotal                                      14,269,602
                                                             ---------------
    Florida, Gainesville--Center for Medical, Agricultural
     and Veterinary Entomology
      Chemistry Research                                           3,464,716
      Imported Fire Ant and Household Insects Research             2,120,122
      Insect Behavior and Biocontrol Research Unit                 4,034,501
      Mosquito and Fly Research                                    2,455,817
                                                             ---------------
        Gainesville Subtotal                                      12,075,156
                                                             ---------------
    Florida, Miami
      Subtropical Horticulture Research                            4,569,783
                                                             ===============
        Subtotal, Florida                                         37,604,899
                                                             ===============
    Georgia, Athens
      Southeast Poultry Research Laboratory:
        Endemic Poultry Viral Diseases Research                    1,839,675
        Exotic And Emerging Avian Viral Diseases Research          3,908,077
      Richard B. Russell Research Center:
        Bacterial Epidemiology and Antimicrobial Resistance        3,401,577
         Research
        Egg Safety and Quality Research                            2,200,757
        Poultry Microbiological Safety Research                    2,735,627
        Poultry Processing and Swine Physiology Research           1,721,610
        Quality and Safety Assessment Research                     3,847,038
        Toxicology and Mycotoxin Research                          2,617,726
      Southern Piedmont Conservation Research                      2,659,303
                                                             ---------------
          Athens Subtotal                                         24,931,390
                                                             ---------------
    Georgia, Byron
      Fruit and Nut Research                                       3,650,947
    Georgia, Dawson
      Peanut Research                                              3,878,854
    Georgia, Griffin
      Plant Genetic Resources Conservation Research                2,318,940
    Georgia, Tifton
      Crop Genetics and Breeding Research                          2,205,021
      Crop Protection and Management Research                      4,075,707
      Southeast Watershed Research                                 3,412,954
                                                             ---------------
        Tifton Subtotal                                            9,693,682
                                                             ===============
          Subtotal, Georgia                                       44,473,813
                                                             ===============
    Hawaii, Hilo--U.S. Pacific Basin Agricultural Research
     Center
      Tropical Crop and Commodity Protection Research Unit         5,961,010
      Tropical Plant Genetic Resources and Disease Research        3,583,427
       Unit
                                                             ===============
        Subtotal, Hawaii                                           9,544,437
                                                             ===============
    Idaho, Aberdeen
      Small Grains and Potato Germplasm Research                   6,011,779
    Idaho, Boise
      Watershed Management Research                                2,142,620
    Idaho, Dubois
      Range Sheep Production Efficiency Research                   2,149,498
    Idaho, Kimberly
      Northwest Irrigation and Soils Research                      3,584,719
                                                             ===============
        Subtotal, Idaho                                           13,888,616
                                                             ===============
    Illinois, Peoria--National Center for Agricultural
     Utilization Research
      Bacterial Foodborne Pathogens & Mycology Research            6,453,938
      Bioenergy Research                                           4,215,810
      Bio-Oils Research                                            4,260,469
      Crop Bioprotection Research                                  2,876,133
      Functional Foods Research                                    4,650,895
      Plant Polymer Research                                       5,032,373
      Renewable Product Technology Research                        4,328,884
                                                             ---------------
        Peoria Subtotal                                           31,818,502
                                                             ---------------
    Illinois, Urbana
      Global Change and Photosynthesis Research                    2,959,242
      Soybean/Maize Germplasm, Pathology, and Genetics             2,771,594
       Research
                                                             ---------------
        Urbana Subtotal                                            5,730,836
                                                             ===============
          Subtotal, Illinois                                      37,549,338
                                                             ===============
    Indiana, West Lafayette
      Crop Production and Pest Control Research                    3,514,487
      Livestock Behavior Research                                  1,471,316
      National Soil Erosion Research                               2,766,782
                                                             ===============
        Subtotal, Indiana                                          7,752,585
                                                             ===============
    Iowa, Ames
      Corn Insects and Crop Genetics Research                      6,881,204
      National Animal Disease Center:
        Food Safety and Enteric Pathogens                          5,384,398
        Infectious Bacterial Diseases                              9,413,272
        Ruminant Diseases and Immunology                           7,217,472
        Virus and Prion                                           10,029,973
      Plant Introduction Research                                  3,407,852
      National Laboratory for Agriculture and the
       Environment:
        Soil, Water & Air Resources Research                       3,428,406
        Agroecosystems Management Research                         5,323,618
                                                             ===============
          Subtotal, Iowa                                          51,086,195
                                                             ===============
    Kansas, Manhattan--Center for Grain and Animal Health
     Research
      Arthropod-Borne Animal Diseases Research                     3,133,205
      Engineering and Wind Erosion Research                        2,204,583
      Grain Quality and Structure Research                         2,973,412
      Hard Winter Wheat Genetics Research                          2,712,749
      Stored Product Insect Research                               2,777,678
                                                             ===============
        Subtotal, Kansas                                          13,801,627
                                                             ===============
    Kentucky, Bowling Green
      Animal Waste Management Research                             2,583,864
    Kentucky, Lexington
      Forage-Animal Production Research                            2,635,527
                                                             ===============
        Subtotal, Kentucky                                         5,219,391
                                                             ===============
    Louisiana, Baton Rouge
      Honey Bee Breeding, Genetics, and Physiology Research        2,580,696
    Louisiana, Houma
      Sugarcane Research                                           4,068,690
    Louisiana, New Orleans--Southern Regional Research
     Center
      Commodity Utilization Research                               4,449,989
      Cotton Chemistry and Utilization Research                    3,573,813
      Cotton Fiber Bioscience Research                             1,344,318
      Cotton Structure and Quality Research                        3,535,833
      Food and Feed Safety Research                                4,871,129
      Food Processing and Sensory Quality Research                 4,509,075
      Formosan Subterranean Termite Research                       2,868,331
                                                             ---------------
        New Orleans Subtotal                                      25,152,488
                                                             ===============
          Subtotal, Louisiana                                     31,801,874
                                                             ===============
    Maine, Orono
      Cranberry Research                                             374,250
      National Cold Water Marine Aquaculture Center                  820,496
                                                             ===============
        Subtotal, Maine                                            1,194,746
                                                             ===============
    Maryland, Beltsville
      Animal and Natural Resources Institute:
        Animal Biosciences and Biotechnology Laboratory            6,675,716
        Animal Improvement Programs Laboratory                     2,632,700
        Animal Parasitic Diseases Laboratory                       6,850,965
        Bovine Functional Genomics Laboratory                      6,649,867
        Crop Systems and Global Change Laboratory                  2,673,959
        Environmental Management and By-Product Utilization        5,196,763
         Laboratory
        Environmental Microbial and Food Safety Laboratory         7,773,429
        Hydrology and Remote Sensing Laboratory                    4,861,439
        Sustainable Agricultural Systems Laboratory                4,649,332
      Beltsville Human Nutrition Research Center:
        Diet, Genomics and Immunology Laboratory                   3,796,455
        Food Components and Health Laboratory                      5,636,649
        Food Composition and Methods Development Laboratory        2,585,426
        Food Surveys Research Group                                6,588,506
        Nutrient Data Laboratory                                   3,137,610
      Plant Sciences Institute:
        Bee Research Laboratory                                    2,476,706
        Food Quality Laboratory                                    3,895,437
        Genetic Improvement for Fruits and Vegetables              5,420,857
         Laboratory
        Invasive Insect Biocontrol and Behavior Laboratory         6,261,849
        Molecular Plant Pathology Laboratory                       3,673,159
        National Germplasm Resources Laboratory                    4,309,679
        Nematology Laboratory                                      2,478,053
        Soybean Genomics and Improvement Laboratory                4,169,210
        Sustainable Perennial Crops Laboratory                     4,100,507
        Systematic Mycology and Microbiology Laboratory            1,953,259
        Systematics Entomology Laboratory                          4,736,782
                                                             ---------------
          Beltsville Agricultural Research Center Subtotal       113,184,314
                                                             ---------------
    Maryland, Beltsville--National Agricultural Library           21,184,588
    Maryland, Frederick
      Foreign Disease-Weed Science Research                        5,630,325
                                                             ===============
        Subtotal, Maryland                                       139,999,227
                                                             ===============
    Massachusetts, Boston
      Human Nutrition Research Center on Aging                    15,258,288
                                                             ===============
        Subtotal, Massachusetts                                   15,258,288
                                                             ===============
    Michigan, East Lansing
      Avian Disease and Oncology Research                          3,269,791
      Sugarbeet and Bean Research                                  1,326,766
                                                             ===============
        Subtotal, Michigan                                         4,596,557
                                                             ===============
    Minnesota, Morris
      Soil Management Research                                     2,643,268
    Minnesota, St. Paul
      Cereal Disease Research                                      2,547,162
      Plant Science Research                                       2,493,211
      Soil and Water Management Research                           1,752,683
                                                             ---------------
        St. Paul Subtotal                                          6,793,056
                                                             ===============
          Subtotal, Minnesota                                      9,436,324
                                                             ===============
    Mississippi, Mississippi State
      Crop Science Research Laboratory:
        Corn Host Plant Resistance Research                        2,050,412
        Genetics and Precision Agriculture Research                4,292,462
      Poultry Research                                             2,873,253
                                                             ---------------
        Mississippi State Subtotal                                 9,216,127
                                                             ---------------
    Mississippi, Oxford
      National Sedimentation Laboratory:
        Water Quality and Ecology Research                         3,345,131
        Watershed Physical Processes                               5,169,338
      Natural Products Utilization Research                        5,525,076
                                                             ---------------
          Oxford Subtotal                                         14,039,545
                                                             ---------------
    Mississippi, Poplarville
      Southern Horticultural Research                              5,168,880
    Mississippi, Stoneville
      Biological Control of Pests Research                         5,246,151
      Catfish Genetics Research                                    8,860,750
      Cotton Ginning Research                                      1,428,364
      Crop Genetics Research                                       6,450,422
      Crop Production Systems Research                             5,655,407
      Genomics and Bioinformatics Research                         1,831,962
      Human Nutrition Research                                       273,454
      Southern Insect Management Research                          4,687,200
      Soybean Research                                               778,425
                                                             ---------------
        Stoneville Subtotal                                       35,212,135
                                                             ===============
          Subtotal, Mississippi                                   63,636,687
                                                             ===============
    Missouri, Columbia
      Biological Control of Insects Research                       1,692,322
      Cropping Systems and Water Quality Research                  3,172,521
      Plant Genetics Research                                      4,239,347
                                                             ===============
        Subtotal, Missouri                                         9,104,190
                                                             ===============
    Montana, Miles City
      Range and Livestock Research                                 3,337,966
    Montana, Sidney--Northern Plains Agricultural Research
     Laboratory
      Agricultural Systems Research Unit                           2,563,705
      Pest Management Research Unit                                2,573,427
                                                             ---------------
        Sidney Subtotal                                            5,137,132
                                                             ===============
          Subtotal, Montana                                        8,475,098
                                                             ===============
    Nebraska, Clay Center--U.S. Meat Animal Research Center
      Animal Health Research                                       1,552,861
      Environmental Management Research                            1,957,037
      Genetics and Breeding Research                               4,215,173
      Meats Safety & Quality Research                              5,349,777
      Nutrition Research                                           2,972,038
      Reproduction Research                                        3,537,864
                                                             ---------------
        Clay Center Subtotal                                      19,584,750
                                                             ---------------
    Nebraska, Lincoln
      Agroecosystem Management Research                            3,175,627
      Grain, Forage, and Bioenergy Research                        2,808,228
                                                             ---------------
        Lincoln Subtotal                                           5,983,855
                                                             ===============
          Subtotal, Nebraska                                      25,568,605
                                                             ===============
    New Mexico, Las Cruces
      Cotton Ginning Research                                      1,856,867
      Range Management Research                                    4,174,766
                                                             ===============
        Subtotal, New Mexico                                       6,031,633
                                                             ===============
    New York, Geneva
      Grape Genetics Research                                      1,662,812
      Plant Genetic Resources                                      2,263,266
                                                             ---------------
        Geneva Subtotal                                            3,926,078
                                                             ---------------
    New York, Greenport
      Foreign Animal Disease Research                              3,840,400
    New York, Ithaca
      Biological Integrated Pest Management Research               3,283,196
      Plant, Soil and Nutrition Research                           5,539,605
      Plant-Microbe Interactions Research                          1,771,550
                                                             ---------------
        Ithaca Subtotal                                           10,594,351
                                                             ===============
          Subtotal, New York                                      18,360,829
                                                             ===============
    North Carolina, Raleigh
      Food Science Research                                        1,310,075
      Market Quality and Handling Research                         1,112,911
      Plant Science Research                                       4,922,910
      Soybean and Nitrogen Fixation Research                       2,055,687
                                                             ===============
        Subtotal, North Carolina                                   9,401,583
                                                             ===============
    North Dakota, Fargo--Red River Valley Agricultural
     Research Center
      Animal Metabolism-Agricultural Chemicals Research            2,405,557
      Cereal Crops Research                                        4,104,352
      Insect Genetics and Biochemistry Research                    1,928,232
      Sugarbeet and Potato Research                                2,290,933
      Sunflower and Plant Biology Research                         3,542,935
      Weed Biology Research                                        1,511,423
                                                             ---------------
        Fargo Subtotal                                            15,783,432
                                                             ---------------
    North Dakota, Grand Forks--Grand Forks Human Nutrition
     Research Center
      Dietary Prevention of Obesity-Related Research               4,337,437
      Healthy Body Weight Research                                 5,224,694
                                                             ---------------
        Grand Forks Subtotal                                       9,562,131
                                                             ---------------
    North Dakota, Mandan
      Natural Resource Management Research                         3,442,163
                                                             ===============
        Subtotal, North Dakota                                    28,787,726
                                                             ---------------
    Ohio, Columbus
      Soil Drainage Research                                       1,477,805
    Ohio, Coshocton
      North Appalachian Experimental Watershed Research            1,250,740
    Ohio, Wooster
      Application Technology Research                              3,236,110
      Corn and Soybean Research                                      879,325
      Soft Wheat Quality Research                                    943,096
                                                             ---------------
      Wooster Subtotal                                             5,058,531
                                                             ===============
        Subtotal, Ohio                                             7,787,076
                                                             ===============
    Oklahoma, El Reno--Grazinglands Research Laboratory
      Forage and Livestock Production Research Unit                2,933,754
      Great Plains Agroclimate and Natural Resources               2,427,656
       Research Unit
                                                             ---------------
        El Reno Subtotal                                           5,361,410
                                                             ---------------
    Oklahoma, Lane--South Central Agricultural Research
     Laboratory
      Genetics and Production Research                             1,962,617
    Oklahoma, Stillwater
      Hydraulic Engineering Research                                 938,916
      Wheat, Peanut, and Other Field Crops Research                2,721,669
                                                             ---------------
        Stillwater Subtotal                                        3,660,585
                                                             ---------------
    Oklahoma, Woodward
      Rangeland and Pasture Research                               1,645,398
                                                             ===============
        Subtotal, Oklahoma                                        12,630,010
                                                             ===============
    Oregon, Burns
      Range and Meadow Forage Management Research                  2,726,833
    Oregon, Corvallis
      Forage Seed and Cereal Research                              4,633,549
      Horticultural Crops Research                                 5,741,888
      National Clonal Germplasm Repository                         1,484,276
                                                             ---------------
        Corvallis Subtotal                                        11,859,713
                                                             ---------------
    Oregon, Pendleton
      Soil and Water Conservation Research                         1,961,163
                                                             ===============
        Subtotal, Oregon                                          16,547,709
                                                             ===============
    Pennsylvania, University Park
      Pasture Systems & Watershed Management Research              4,216,231
    Pennsylvania, Wyndmoor--Eastern Regional Research Center
      Biobased and Other Animal Co-Products Research               3,668,679
      Dairy and Functional Foods Research                          4,966,168
      Food Safety and Intervention Technologies Research           5,784,714
      Molecular Characterization of Foodborne Pathogens            6,939,849
       Research
      Residue Chemistry and Predictive Microbiology Research       4,766,582
      Sustainable Biofuels and Co-Products Research                5,416,802
                                                             ---------------
        Wyndmoor Subtotal                                         31,542,794
                                                             ===============
          Subtotal, Pennsylvania                                  35,759,025
                                                             ===============
    South Carolina, Charleston
      Vegetable Research                                           4,434,754
    South Carolina, Clemson
      Cotton Quality Research                                      2,355,935
    South Carolina, Florence
      Coastal Plain Soil, Water and Plant Conservation             4,148,647
       Research
                                                             ===============
        Subtotal, South Carolina                                  10,939,336
                                                             ===============
    South Dakota, Brookings
      Integrated Cropping Systems Research                         2,968,164
                                                             ===============
        Subtotal, South Dakota                                     2,968,164
                                                             ===============
    Texas, Beaumont
      Rice Research                                                1,428,857
    Texas, Bushland--Conservation and Production Research
     Laboratory
      Renewable Energy and Manure Management Research              1,731,850
      Soil and Water Management Research                           5,228,070
                                                             ---------------
        Bushland Subtotal                                          6,959,920
                                                             ---------------
    Texas, College Station--Southern Plains Agricultural
     Research Center
      Areawide Pest Management Research                            3,233,491
      Cotton Pathology Research                                    1,511,849
      Crop Germplasm Research                                      3,363,939
      Food and Feed Safety Research                                5,087,980
                                                             ---------------
        College Station Subtotal                                  13,197,259
                                                             ---------------
    Texas, Houston
      Children's Nutrition Research Center                        13,677,579
    Texas, Kerrville--Knipling-Bushland U.S. Livestock
     Insects Research Laboratory
      Screwworm Research                                           1,023,231
      Tick and Biting Fly Research                                 4,640,802
                                                             ---------------
        Kerrville Subtotal                                         5,664,033
                                                             ---------------
    Texas, Lubbock--Cropping Systems Research Laboratory
      Cotton Production and Processing Research                    1,187,720
      Livestock Issues Research                                    1,157,043
      Plant Stress and Germplasm Development Research              3,635,239
      Wind Erosion and Water Conservation Research                 3,058,531
                                                             ---------------
        Lubbock Subtotal                                           9,038,533
                                                             ---------------
    Texas, Temple
      Grassland, Soil and Water Research Laboratory                3,585,877
    Texas, Weslaco--Kika de la Garza Subtropical
     Agricultural Research Center
      Beneficial Insects Research                                  2,967,672
      Crop Quality and Fruit Insects Research                      1,972,766
      Honey Bee Research                                           1,616,482
      Integrated Farming and Natural Resources Research            3,140,728
                                                             ---------------
        Weslaco Subtotal                                           9,697,648
                                                             ===============
          Subtotal, Texas                                         63,249,706
                                                             ===============
    Utah, Logan
      Forage and Range Research                                    3,931,926
      Poisonous Plant Research                                     3,292,975
      Pollinating Insect-Biology, Management, Systematics          1,784,531
       Research
                                                             ===============
        Subtotal, Utah                                             9,009,432
                                                             ===============
    Washington, Prosser
      Vegetable and Forage Crops Production Research               3,319,128
    Washington, Pullman
      Animal Disease Research                                      6,957,540
      Grain Legume Genetics Physiology Research                      974,874
      Land Management and Water Conservation Research              1,673,928
      Plant Germplasm Introduction and Testing Research            2,735,366
      Root Disease and Biological Control Research                 1,485,447
      Wheat Genetics, Quality Physiology and Disease               2,686,923
       Research
                                                             ---------------
        Pullman Subtotal                                          16,514,078
                                                             ---------------
    Washington, Wapato
      Fruit and Vegetable Insect Research                          4,550,497
    Washington, Wenatchee
      Physiology and Pathology of Tree Fruits Research             2,107,760
                                                             ===============
        Subtotal, Washington                                      26,491,463
                                                             ===============
    West Virginia, Beaver
      Appalachian Farming Systems Research Center                  7,376,867
    West Virginia, Kearneysville--Appalachian Fruit Research
     Laboratory
      Innovative Fruit Production, Improvement and                 7,185,870
       Protection
    West Virginia, Leetown
      Cool and Cold Water Aquaculture Research                     7,157,417
                                                             ===============
        Subtotal, West Virginia                                   21,720,154
                                                             ===============
    Wisconsin, Madison
      Cereal Crops Research                                        2,657,598
      U.S. Dairy Forage Research Center:
        Cell Wall Biology and Utilization Research                 3,019,146
        Dairy Forage and Aquaculture Research                      4,696,175
        Environmentally Integrated Dairy Management                1,781,972
      Vegetable Crops Research                                     3,933,194
                                                             ===============
          Subtotal, Wisconsin                                     16,088,085
                                                             ===============
    Wyoming, Cheyenne
      Rangeland Resources Research                                 2,313,149
                                                             ===============
        Subtotal, Wyoming                                          2,313,149
                                                             ===============
    Puerto Rico, Mayaguez
      Tropical Crops and Germplasm Research                        2,837,405
                                                             ===============
        Subtotal, Puerto Rico                                      2,837,405
                                                             ===============
    Other Countries
      Argentina, Buenos Aires--South American Biological             532,225
       Control Laboratory
      France, Montpellier--European Biological Control             3,078,341
       Laboratory
                                                             ===============
        Subtotal, Other Countries                                  3,610,566
                                                             ===============
          ARS Research Total                                     965,639,582
                                                             ===============
    Repair & Maintenance of Facilities (Arboretum & NAL)           1,553,266
    Office of the Director--WRRC Renovation                          495,096
    Administrator and Immediate Staffs                            54,740,337
    National Programs                                             36,916,510
    Administrtive and Financial Management                        28,557,007
    Research Operations and Management                            16,994,855
    Beltsville Area Office of the Director                         5,936,605
    North Atlantic Area Office of the Director                     3,291,214
    Midwest Area Office of the Director                            3,252,327
    Pacific West Area Office of the Director                       3,751,231
    Northern Plains Area--Office of the Director                   3,276,233
    Southern Plains Area Office of the Director                    2,819,470
    Mid South Area Office of the Director                          2,913,196
    South Atlantic Area Office of the Director                     3,093,069
                                                             ---------------
      Subtotal, Admin                                            165,542,054
                                                             ===============
        Total ARS                                              1,133,229,998
    ------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)
                                                             United States Department Of Agriculture
                                                                  Agricultural Research Service
                                                             Annual Delivery Cost (FY 2007-FY 2011)
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    ---------------------------------------------------------------------------------------------------------------------------------------------------------
        USDA Strategic Goal 1: Assist rural communities to create prosperity so they are self-sustaining, repopulating and economically thriving.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
              Program Items               ($000)          ($000)          ($000)          ($000)          ($000)

    Product Quality/Value Added               95,383          94,310          96,737          99,496          99,950
    Livestock Production                      38,510          38,077          38,830          39,368          39,547
    Crop Production                          114,550         113,262         115,396         107,564         119,763
    National Agricultural Library             21,428          20,843          21,022          21,213          20,010
    Repair and Maintenance                    17,635          17,524          17,491          17,461          17,503
    Collaborative Research Program             2,959           3,824           2,913              --              --
    Miscellaneous Fees                         8,727             554             120             167              --
      Indirect Costs                          28,263          29,000          30,220          29,738          31,030
                                     -------------------------------------------------------------------------------
        Total Costs                          327,455         317,394         322,729         315,007         327,803
        FTEs                                   2,182           2,154           2,114           2,106           2,436
    ----------------------------------------------------------------------------------------------------------------

    Note: Total is from 2012 and was based on the Full Year Continuing Resolution.

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    ---------------------------------------------------------------------------------------------------------------------------------------------------------
        USDA Strategic Goal 2: Ensure our National Forests and private working lands are conserved, restored, and made more resilient to climate change,
     while enhancing our water resources.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
              Program Items               ($000)          ($000)          ($000)          ($000)          ($000)

    Environmental Stewardship                178,547         176,539         179,109         185,975         186,825
      Indirect Costs                          18,699          19,211          19,901          20,664          20,758
                                     -------------------------------------------------------------------------------
        Total Costs                          197,246         195,750         199,010         206,639         207,583
        FTEs                                   2,084           2,058           2,024           2,017           1,709

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    ---------------------------------------------------------------------------------------------------------------------------------------------------------
        USDA Strategic Goal 3: Help America promote agricultural production and biotechnology exports as America works to increase food security.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
              Program Items               ($000)          ($000)          ($000)          ($000)          ($000)

    Livestock Production                      38,510          38,077          38,830          39,368          39,548
    Crop Production                           91,081          90,058          91,880         107,564          96,348
      Indirect Costs                          13,572          13,943          14,523          16,326          15,100
                                     -------------------------------------------------------------------------------
        Total Costs                          143,163         142,078         145,233         163,258         150,996
        FTEs                                   1,079           1,065           1,050           1,056           1,060

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    ---------------------------------------------------------------------------------------------------------------------------------------------------------
        USDA Strategic Goal 4: Ensure that all of America's children have access to safe, nutritious and balanced meals.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
              Program Items               ($000)          ($000)          ($000)          ($000)          ($000)

    Food Safety                               94,818          94,240          95,126          96,837          96,837
    Human Nutrition                           77,545          76,964          76,778          80,761          80,761
    Livestock Protection                      78,528          73,967          74,659          80,825          81,194
    Crop Protection                          178,341         176,334         180,283         184,346         185,140
    H1N1 Transfer                                 --              --              --           1,416              --
      Indirect Costs                          44,952          45,868          47,427          49,197          49,325
                                     -------------------------------------------------------------------------------
        Total Costs                          474,184         467,373         474,273         493,382         493,257
        FTEs                                   3,166           3,130           3,080           3,103           3,077
    ----------------------------------------------------------------------------------------------------------------

    Note: Annual delivery cost is reported consistent with the President's 2012 Budget and the USDA Strategic Plan
      FY 2010-2015.

    9. Eligibility Criteria
        ARS is not a granting agency and as such does not have programs
    that distribute money to outside organizations and thus does not have
    eligibility criteria for its programs.
    10. Utilization (Participation) Data
        In the traditional sense, because ARS is an intramural research
    agency, it does not have direct outside utilization of it programs by
    other individuals or entities through granting. However, the agency
    does execute a large number of extramural agreements with other
    research organizations and does provide funding to aid in the
    completion of these projects by our collaborators. A summary of the
    agency's current extramural agreements is below and a detailed list
    follows. The table below reflects the aggregate of agreements currently
    in force. These agreements may have been entered into and funds
    obligated as early as 2006.

    ------------------------------------------------------------------------
                                               Number of
          Performing Organization Type         Agreements    Dollar Amount
    ------------------------------------------------------------------------
    Other Federal Agency                                1        $150,000.00
    State Agricultural Experiment Station              34     $36,766,986.24
    1862 Land-Grant College                         1,335    $189,618,764.02
    1890 Land-Grant College or Tuskegee               138     $17,860,097.79
     Institute
    Private University or College                      46     $54,664,158.92
    Public University or College (non-land-           114     $53,134,432.50
     grant)
    Private for Profit Organization                    14        $797,632.44
    Private nonprofit Organization                    112     $78,111,607.51
    State or Local Government                           8      $1,642,399.00
    Small Business                                      4        $836,658.35
    Minority-owned Business                             1         $45,000.00
    Female Owned Business                               2         $95,000.00
    Other                                               5      $1,741,095.10
    Individual                                          4        $293,775.00
    Tribal Colleges and Universities                    1        $102,000.00
    Foreign                                            97     $10,610,575.57
                                             -------------------------------
      Total                                         1,916    $446,470,182.44
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
        Type Perf Org                          Number of
         Description        Cooperator Name    Agreements    Dollar Amount
    ------------------------------------------------------------------------
    FR Other Federal      NASA Goddard Space            1        $150,000.00
     Agency                Flight Center
    SA State              Connecticut                   2      $3,950,532.00
     Agricultural          Agricultural
     Experiment Station    Experiment
                           Station
    SA State              Mississippi Agri &           29     $30,708,547.24
     Agricultural          Forestry Exp
     Experiment Station    Station
    SA State              Rutgers-New Jersey            2      $1,976,457.00
     Agricultural          Agricultural
     Experiment Station    Exper Sta
    SA State              Texas Agricultural            1        $131,450.00
     Agricultural          Experiment
     Experiment Station    Station
    LG 1862 Land-Grant    Arizona Board Of              9      $2,296,472.94
     College               Regents
    LG 1862 Land-Grant    Auburn University            10      $5,000,208.94
     College
    LG 1862 Land-Grant    Board of Regents--           14        $913,982.67
     College               Univ of Wisconsin
                           System
    LG 1862 Land-Grant    Board of Trustees             3        $935,280.00
     College               of the Univ of
                           Illinois
    LG 1862 Land-Grant    Clemson University           11      $1,219,728.86
     College
    LG 1862 Land-Grant    Colorado State               25      $2,105,979.45
     College               University
    LG 1862 Land-Grant    Cornell University           53      $7,323,596.03
     College
    LG 1862 Land-Grant    Curators of the              26      $7,473,576.87
     College               University of
                           Missouri
    LG 1862 Land-Grant    Iowa State                   50      $3,090,966.48
     College               University
    LG 1862 Land-Grant    Kansas State                 43      $6,817,111.89
     College               University
    LG 1862 Land-Grant    Louisiana State              18      $8,471,005.47
     College               Univ Agricultural
                           Center
    LG 1862 Land-Grant    Michigan State               37      $3,829,112.74
     College               University
    LG 1862 Land-Grant    Mississippi State             9      $7,676,027.00
     College               University
    LG 1862 Land-Grant    Montana State                 7        $151,474.06
     College               University
    LG 1862 Land-Grant    New Mexico State             21      $2,366,107.72
     College               University
    LG 1862 Land-Grant    North Carolina               55      $3,819,326.99
     College               Agricultural
                           Research Service
    LG 1862 Land-Grant    North Carolina                4        $170,640.00
     College               State University
    LG 1862 Land-Grant    North Dakota State           59      $7,362,212.36
     College               University
    LG 1862 Land-Grant    Ohio State                    1          $4,000.00
     College               University
                           Libraries
    LG 1862 Land-Grant    Ohio State                   14      $2,726,026.25
     College               University
                           Research
                           Foundation
    LG 1862 Land-Grant    Oklahoma State               19        $693,196.24
     College               University
    LG 1862 Land-Grant    Oregon State                 87      $7,425,573.67
     College               University
    LG 1862 Land-Grant    Pennsylvania State           29      $2,779,442.93
     College               University
    LG 1862 Land-Grant    Purdue University            31      $6,867,373.78
     College
    LG 1862 Land-Grant    Regents of the               89     $17,035,168.73
     College               University of
                           California
    LG 1862 Land-Grant    Regents of the               14      $2,796,725.31
     College               University of
                           Minnesota
    LG 1862 Land-Grant    Rutgers, The State            7        $743,699.60
     College               University of New
                           Jersey
    LG 1862 Land-Grant    South Dakota State           17      $2,051,651.23
     College               University
    LG 1862 Land-Grant    Texas A&M                     9        $337,883.00
     College               University
    LG 1862 Land-Grant    Texas A&M                     3         $74,000.00
     College               University-
                           Kingsville
    LG 1862 Land-Grant    Texas AgriLife               34      $5,627,731.56
     College               Research
    LG 1862 Land-Grant    The Board of                  6        $281,745.08
     College               Trustees,
                           University of
                           Illinois
    LG 1862 Land-Grant    The Ohio State               14        $120,464.95
     College               University
    LG 1862 Land-Grant    U of AK--Alaska               2        $113,250.50
     College               Agric & Forestry
                           Exp Sta
    LG 1862 Land-Grant    U of ID--Idaho                2        $140,086.51
     College               Agricultural Exp
                           Sta
    LG 1862 Land-Grant    University of                 6      $2,901,927.79
     College               Alaska
    LG 1862 Land-Grant    University of                 2         $27,401.00
     College               Alaska Museum
    LG 1862 Land-Grant    University of                 4         $73,143.92
     College               Arizona
    LG 1862 Land-Grant    University of                20      $1,240,258.30
     College               Arkansas
    LG 1862 Land-Grant    University of                 3        $112,500.00
     College               California
    LG 1862 Land-Grant    University of                58      $2,126,281.93
     College               California, Davis
    LG 1862 Land-Grant    University of                 8      $5,344,456.98
     College               Connecticut
    LG 1862 Land-Grant    University of                17        $689,161.03
     College               Delaware
    LG 1862 Land-Grant    University of                32      $3,088,401.12
     College               Florida
    LG 1862 Land-Grant    University of                 7        $271,828.00
     College               Georgia
    LG 1862 Land-Grant    University of                23      $7,054,349.38
     College               Hawaii
    LG 1862 Land-Grant    University of                22      $2,404,977.12
     College               Idaho
    LG 1862 Land-Grant    University of                44      $6,211,402.53
     College               Illinois
    LG 1862 Land-Grant    University of                 3        $281,017.72
     College               Kentucky
    LG 1862 Land-Grant    University of                 9      $5,987,369.21
     College               Kentucky Research
                           Foundation
    LG 1862 Land-Grant    University of                 9        $417,891.00
     College               Maine
    LG 1862 Land-Grant    University of                44      $5,265,610.54
     College               Maryland at
                           College Park
    LG 1862 Land-Grant    University of                 1         $41,042.00
     College               Maryland
                           Biotechnology
                           Inst
    LG 1862 Land-Grant    University of                 2         $47,319.00
     College               Massachusetts
    LG 1862 Land-Grant    University of                30      $1,984,057.37
     College               Minnesota
    LG 1862 Land-Grant    University of                31      $5,076,024.35
     College               Nebraska
    LG 1862 Land-Grant    University of                 9        $625,104.00
     College               Nevada
    LG 1862 Land-Grant    University of                 3        $220,062.83
     College               Puerto Rico
    LG 1862 Land-Grant    University of                 1        $106,680.00
     College               Rhode Island
    LG 1862 Land-Grant    University of                19      $3,305,247.57
     College               Tennessee
    LG 1862 Land-Grant    University of                 3         $55,948.80
     College               Texas Medical
                           Branch
    LG 1862 Land-Grant    University of                 3         $54,979.00
     College               Vermont & St
                           Agricultural Col
    LG 1862 Land-Grant    University of                40      $2,419,070.00
     College               Wisconsin--Madiso
                           n
    LG 1862 Land-Grant    University of                 6        $416,685.31
     College               Wyoming
    LG 1862 Land-Grant    Utah State                   16      $2,715,207.87
     College               University
    LG 1862 Land-Grant    Virginia                     14      $4,082,277.28
     College               Polytechnic
                           Institute and
                           State Univ
    LG 1862 Land-Grant    West Virginia                 4      $3,548,993.27
     College               University
                           Research
                           Corporation
    HB 1890 Land-Grant    Alabama A&M                   3        $672,747.22
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Alcorn State                  3      $1,652,469.83
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Delaware State                3        $104,371.11
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Florida A&M                   1        $516,283.00
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Fort Valley State             1          $4,000.00
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    North Carolina                1         $22,000.00
     College or Tuskegee   Agric & Tech
     Institute             State University
    HB 1890 Land-Grant    Southern                      1      $1,262,000.00
     College or Tuskegee   University & A&M
     Institute             College
    HB 1890 Land-Grant    Tennessee State               3      $2,233,030.51
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Tuskegee                      1        $125,358.15
     College or Tuskegee   University
     Inst.
    HB 1890 Land-Grant    University of                 5      $1,261,534.45
     College or Tuskegee   Arkansas at Pine
     Institute             Bluff
    HB 1890 Land-Grant    University Of                 4        $503,000.00
     College or Tuskegee   Maryland/Eastern
     Institute             Shore
    HB 1890 Land-Grant    Virginia State                1         $37,029.00
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    Washington State            109      $8,956,772.52
     College or Tuskegee   University
     Institute
    HB 1890 Land-Grant    West Virginia                 3        $519,502.00
     College or Tuskegee   State Univ Res
     Institute             and Dev Corp
    PR Private            Abilene Christian             1          $5,000.00
     University or         University
     College
    PR Private            Baylor College of             6     $17,670,562.00
     University or         Medicine
     College
    PR Private            Brandeis                      1        $249,447.00
     University or         University
     College
    PR Private            Brigham Young                 1         $30,890.45
     University or         University
     College
    PR Private            Columbia                      2        $256,341.00
     University or         University in the
     College               City of New York
    PR Private            Drexel University             3         $10,000.00
     University or
     College
    PR Private            Duke University               1         $20,000.00
     University or
     College
    PR Private            Eastern Mennonite             1         $15,000.00
     University or         University
     College
    PR Private            Johns Hopkins                 1      $2,798,370.00
     University or         University
     College
    PR Private            Miami University              1        $268,494.00
     University or
     College
    PR Private            Mountain State                1        $725,755.49
     University or         University
     College
    PR Private            Texas Christian               1         $20,000.00
     University or         University
     College
    PR Private            Tufts University             15     $28,151,966.58
     University or
     College
    PR Private            Tulane University             3      $2,596,653.73
     University or
     College
    PR Private            Washington                    3         $81,166.00
     University or         University in St.
     College               Louis
    PR Private            William Carey                 1         $14,883.00
     University or         University
     College
    PR Private            Wilson College                1         $20,000.00
     University or
     College
    PR Private            Wittenberg                    1          $8,000.00
     University or         University
     College
    PR Private            Xavier University             1         $14,674.35
     University or
     College
    PR Private            Yale University               1      $1,706,955.32
     University or
     College
    PU Public University  Arkansas State                2         $82,979.97
     or College (non-      University
     land-grant)
    PU Public University  Board of Trustees,            1        $624,390.00
     or College (non-      Southern Illinois
     land-grant)           Univ
    PU Public University  California State              1         $27,390.00
     or College (non-      Univ Fresno
     land-grant)
    PU Public University  Columbia Basin                1         $10,000.00
     or College (non-      College
     land-grant)
    PU Public University  Florida Atlantic              1      $1,659,942.12
     or College (non-      University
     land-grant)
    PU Public University  George Mason                  1         $30,000.00
     or College (non-      University
     land-grant)
    PU Public University  George Mason                  3        $129,680.00
     or College (non-      University
     land-grant)
    PU Public University  Indiana University            1         $63,631.00
     or College (non-
     land-grant)
    PU Public University  Mississippi Valley            4         $31,276.00
     or College (non-      State University
     land-grant)
    PU Public University  Northern Illinois             2         $61,000.00
     or College (non-      University
     land-grant)
    PU Public University  Ohio State                    1         $54,667.00
     or College (non-      University
     land-grant)           Agricultural Tech
                           Inst
    PU Public University  Southeastern                  1         $11,700.00
     or College (non-      Louisiana
     land-grant)           University
    PU Public University  Southern Illinois             1         $16,000.00
     or College (non-      University
     land-grant)
    PU Public University  Stephen F. Austin             2         $11,000.00
     or College (non-      State University
     land-grant)
    PU Public University  Tarleton State                1          $9,955.96
     or College (non-      University
     land-grant)
    PU Public University  Tennessee Tech                1         $10,800.00
     or College (non-      University
     land-grant)
    PU Public University  Texas State                   8      $2,694,602.00
     or College (non-      University
     land-grant)
    PU Public University  Truman State                  1          $9,756.00
     or College (non-      University
     land-grant)
    PU Public University  University of                 1          $6,600.00
     or College (non-      Akron
     land-grant)
    PU Public University  University of                 1      $1,153,656.00
     or College (non-      Arkansas at
     land-grant)           Little Rock
    PU Public University  University of                 1        $151,847.95
     or College (non-      Central Florida
     land-grant)
    PU Public University  University of Iowa            5        $123,500.00
     or College (non-
     land-grant)
    PU Public University  University of                 1         $33,265.00
     or College (non-      Louisiana at
     land-grant)           Lafayette
    PU Public University  University of                11        $448,046.87
     or College (non-      Maryland
     land-grant)
    PU Public University  University of                 1         $46,628.00
     or College (non-      Memphis
     land-grant)
    PU Public University  University of                15     $25,963,746.17
     or College (non-      Mississippi
     land-grant)
    PU Public University  University of                 5      $1,105,355.00
     or College (non-      Missouri
     land-grant)
    PU Public University  University of New             2         $20,004.00
     or College (non-      Orleans
     land-grant)
    PU Public University  University of                 1          $9,600.00
     or College (non-      North Carolina
     land-grant)
    PU Public University  University of                 8      $6,477,316.47
     or College (non-      North Dakota
     land-grant)
    PU Public University  University of                 2        $431,219.00
     or College (non-      North Texas
     land-grant)
    PU Public University  University of                 1         $59,826.00
     or College (non-      Northern Iowa
     land-grant)
    PU Public University  University of                 1          $3,839.98
     or College (non-      Oklahoma
     land-grant)
    PU Public University  University of                 1         $15,000.00
     or College (non-      Oregon
     land-grant)
    PU Public University  University of                 2         $71,543.00
     or College (non-      Pittsburgh
     land-grant)
    PU Public University  University of                 1      $1,300,000.00
     or College (non-      Southern
     land-grant)           Mississippi
    PU Public University  University of                 4      $2,453,938.77
     or College (non-      Toledo
     land-grant)
    PU Public University  University of                 6        $773,600.64
     or College (non-      Washington
     land-grant)
    PU Public University  University of                 1        $995,206.00
     or College (non-      Wisconsin--Milwau
     land-grant)           kee
    PU Public University  West Chester                  1         $39,991.00
     or College (non-      University of
     land-grant)           Pennsylvania
    PU Public University  West Texas A&M                5        $831,610.00
     or College (non-      University
     land-grant)
    PU Public University  Western Illinois              1         $75,000.00
     or College (non-      University Inc
     land-grant)
    PU Public University  Western Kentucky              3      $5,005,322.60
     or College (non-      University
     land-grant)
    PP Private for        Agriculture                   1        $137,695.00
     Profit Organization   Development
                           Group, Inc.
    PP Private for        Biotechnology                 1        $195,122.00
     Profit Organization   Foundation, Inc.
    PP Private for        Clear Springs                 1         $30,000.00
     Profit Organization   Foods, Inc.
    PP Private for        Craft Technologies            1          $3,240.00
     Profit Organization   Inc
    PP Private for        Duarte Nursery/Dry            1          $5,000.00
     Profit Organization   Creek
                           Laboratories
    PP Private for        Empire Prototype              1        $125,492.44
     Profit Organization   and Product
                           Development, Inc.
    PP Private for        Fabrate, LLC                  1         $20,000.00
     Profit Organization
    PP Private for        ISCA Technologies             1         $50,000.00
     Profit Organization
    PP Private for        Norwalt Design,               1         $59,310.00
     Profit Organization   Inc.
    PP Private for        Pasteuria                     1         $48,519.00
     Profit Organization   BioScience
    PP Private for        Peerbolt Crop                 1         $30,254.00
     Profit Organization   Management
    PP Private for        Smith Helicopters,            1         $55,000.00
     Profit Organization   Inc.
    PP Private for        SPECTIR LLC                   1         $46,000.00
     Profit Organization
    PP Private for        Spectrum Research             1          $7,000.00
     Profit Organization   Inc.
    PP Private for        Tetracam Company,             1          $5,000.00
     Profit Organization   Inc.
    PN Private nonprofit  American Assoc of             1        $165,855.00
     Organization          Botanic Gardens &
                           Arboreta
    PN Private nonprofit  American                      1          $4,000.00
     Organization          Biological Safety
                           Association
    PN Private nonprofit  American Chemical             1          $3,400.00
     Organization          Society
    PN Private nonprofit  American Council              1         $43,000.00
     Organization          for Food Safety &
                           Quality
    PN Private nonprofit  American Indian               1         $20,000.00
     Organization          Science &
                           Engineering
                           Society
    PN Private nonprofit  American                      1         $33,000.00
     Organization          Phytopathological
                           Society
    PN Private nonprofit  American Society              1          $4,000.00
     Organization          for Nutrition,
                           Inc.
    PN Private nonprofit  American Society              1         $39,933.52
     Organization          for Testing
                           Materials
    PN Private nonprofit  AOAC                          1          $2,000.00
     Organization
    PN Private nonprofit  Arkansas                      3     $34,243,929.10
     Organization          Children's
                           Hospital
    PN Private nonprofit  Arkansas                      1      $1,637,550.00
     Organization          Children's
                           Hospital Research
                           Center
    PN Private nonprofit  Audubon Nature                1        $692,046.66
     Organization          Institute
    PN Private nonprofit  Beet Sugar                    1         $58,659.85
     Organization          Development
                           Foundation
    PN Private nonprofit  Biotechnology Res             2      $9,325,847.00
     Organization          & Develop Center
    PN Private nonprofit  Boys, Girls, &                1        $282,500.00
     Organization          Adults Comm Dev
                           Ctr (BGACDC)
    PN Private nonprofit  Brooklyn Botanic              1          $5,000.00
     Organization          Garden
    PN Private nonprofit  Canaan Valley                 1      $1,286,972.00
     Organization          Institute, Inc.
    PN Private nonprofit  Cary Christian                1          $4,000.00
     Organization          Center, Inc.
    PN Private nonprofit  Cold Spring Harbor            1        $548,750.79
     Organization          Laboratory
    PN Private nonprofit  Conference on                 1         $22,500.00
     Organization          Asian Pacific
                           American Leadersh
    PN Private nonprofit  Council for                   1         $20,000.00
     Organization          Agricultural Sci
                           & Tech (CAST)
    PN Private nonprofit  Crow Valley                   1        $258,302.24
     Organization          Livestock Coop
                           Inc
    PN Private nonprofit  Delta Health                  2        $500,268.00
     Organization          Alliance
    PN Private nonprofit  Donald Danforth               1         $50,000.00
     Organization          Plant Science
                           Center
    PN Private nonprofit  Environmental                 1         $96,702.39
     Organization          Resource
                           Coalition
    PN Private nonprofit  Farm Foundation               2         $57,000.00
     Organization
    PN Private nonprofit  FASEB                         1          $5,000.00
     Organization
    PN Private nonprofit  Geisinger Clinic              1        $362,085.57
     Organization
    PN Private nonprofit  Gordon Research               1          $4,000.00
     Organization          Conferences
    PN Private nonprofit  Hawaii Agriculture            1      $1,712,779.00
     Organization          Research Center
    PN Private nonprofit  High Plains RCD               1          $2,500.00
     Organization          Council, Inc.
    PN Private nonprofit  Imperial Valley               1        $180,820.00
     Organization          Cons Res Ctr Com
    PN Private nonprofit  J. Craig Venter               3        $898,755.00
     Organization          Institute
    PN Private nonprofit  Just Food, Inc.               1          $4,900.00
     Organization
    PN Private nonprofit  Malpais                       1         $10,000.00
     Organization          Borderlands Group
    PN Private nonprofit  Marshfield Clinic             1         $66,000.00
     Organization          Research
    PN Private nonprofit  MBI International             1        $962,000.00
     Organization
    PN Private nonprofit  MedStar Health                2        $286,590.00
     Organization          Research
                           Institute
    PN Private nonprofit  Methyl Bromide                1         $40,000.00
     Organization          Alternatives
                           Outreach
    PN Private nonprofit  Michael Fields                1        $624,213.00
     Organization          Agricultural
                           Institute
    PN Private nonprofit  Missouri Botanical            1         $60,000.00
     Organization          Garden
    PN Private nonprofit  Morton Arboretum              2         $34,535.00
     Organization
    PN Private nonprofit  Nat Assoc of Seed             1         $25,000.00
     Organization          and Venture Funds
                           (NASVF)
    PN Private nonprofit  National Academy              1         $50,000.00
     Organization          of Sciences
    PN Private nonprofit  National Center               6      $4,378,850.00
     Organization          for Genome
                           Resources
    PN Private nonprofit  National Cotton               1        $333,836.00
     Organization          Council
    PN Private nonprofit  National Turfgrass            1          $8,000.00
     Organization          Evaluation
                           Program, Inc.
    PN Private nonprofit  Pollinator                    1         $12,927.00
     Organization          Partnership
    PN Private nonprofit  Potato Variety                1         $14,237.00
     Organization          Management
                           Institute
    PN Private nonprofit  Practical Farmers             1        $173,072.00
     Organization          of Iowa
    PN Private nonprofit  Research                      1        $236,735.00
     Organization          Foundation of
                           SUNY
    PN Private nonprofit  Rodale Institute              4        $498,062.00
     Organization
    PN Private nonprofit  Samuel Roberts                2         $11,800.00
     Organization          Noble Foundation
    PN Private nonprofit  Society for Range             3         $69,512.00
     Organization          Management
    PN Private nonprofit  Soil and Water                3         $16,300.00
     Organization          Conservation
                           Society
    PN Private nonprofit  Sugar Processing              1         $86,666.66
     Organization          Research
                           Institute
    PN Private nonprofit  The Conservation              2     $11,339,104.00
     Organization          Fund
    PN Private nonprofit  The Institute for             1         $53,625.00
     Organization          Genomic Research
                           (TIGR)
    PN Private nonprofit  The Research                  1         $11,215.42
     Organization          Foundation of
                           SUNY
    PN Private nonprofit  The Student                   2         $88,608.00
     Organization          Conservation
                           Association, Inc.
    PN Private nonprofit  U.S. Civilian                 1      $4,361,346.00
     Organization          Research &
                           Develop.
                           Foundation
    PN Private nonprofit  University of                 2        $253,193.00
     Organization          Alabama
    PN Private nonprofit  University of                31      $1,494,236.30
     Organization          Georgia Research
                           Foundation
    PN Private nonprofit  Woods End Research            1         $30,000.00
     Organization          Laboratory
    PN Private nonprofit  World Food Prize              2        $477,146.00
     Organization          Foundation
    SL State or Local     Arizona Cotton                1        $158,699.00
     Government            Research &
                           Protection
                           Council
    SL State or Local     Nevada Tahoe                  1          $4,100.00
     Government            Conservation
                           District
    SL State or Local     Oklahoma Water                1        $274,100.00
     Government            Resource Board
    SL State or Local     Pennington                    2      $1,123,500.00
     Government            Biomedical
                           Research Center
    SL State or Local     Soil & Water                  1         $72,000.00
     Government            Conser District
                           Dekalb County
    SL State or Local     Texas Engineering             2         $10,000.00
     Government            Experiments
                           Station
    SB Small Business     Alaska Berries                1          $1,658.35
    SB Small Business     Applied Biomics,              1         $16,188.00
                           Inc.
    SB Small Business     Crystal River                 1         $30,000.00
    SB Small Business     Houma Avionics,               1          $5,000.00
                           Inc.
    SB Small Business     Service                       1        $800,000.00
                           Specialist, Ltd.
    MO Minority-owned     Federal Asian                 1         $45,000.00
     Business              Pacific American
                           Council
    FO Female Owned       ASOMBRO Institute             1         $13,000.00
     Business              for Science
                           Education
    FO Female Owned       Bluewave                      1         $82,000.00
     Business              Microbics, LLC
    OT Other              Akwesasne Task                1         $30,000.00
                           Force on the
                           Environment
    OT Other              Boyce Thompson                2      $1,674,907.10
                           Inst Plant Rsch,
                           Inc.
    IN Individual         Barry Lavine                  1         $12,075.00
    IN Individual         Brent Larson                  1          $8,000.00
    IN Individual         Darrel M. Temple              1        $198,700.00
    IN Individual         Earline Strickland            1         $75,000.00
    TC Tribal Colleges    Cankdeska Cikana              1        $102,000.00
     and Universities      Community College
    FN Foreign            Agricultural                  1         $33,000.00
                           Research Council
    FN Foreign            Agriculture and               1         $85,800.00
                           Agri-Food Canada
    FN Foreign            Al-Qasemi Academic            1         $40,000.00
                           Collage
    FN Foreign            Animal Sciences               1        $243,902.00
                           Institute
    FN Foreign            Azerbaijan                    1          $4,000.00
                           National Academy
                           of Sciences
    FN Foreign            Biotechnology &               3         $40,000.00
                           Biological
                           Control Agency
    FN Foreign            Bioversity                    1        $165,659.00
                           International
    FN Foreign            Bioversity                    1         $32,580.00
                           International--CI
                           AT
    FN Foreign            Cabi BioSciences,             2        $987,808.00
                           U.K.
    FN Foreign            CAPECO                        1        $182,500.00
    FN Foreign            CATIE                         3        $150,659.00
    FN Foreign            Chinese Academy of            1        $464,508.65
                           Agricultural
                           Sciences
    FN Foreign            Chung-Ang                     1         $20,000.00
                           University
    FN Foreign            CIMMYT                        4        $441,403.15
    FN Foreign            CIRAD-BIOS                    2        $160,900.00
    FN Foreign            Cocoa Research                1         $80,000.00
                           Institute of
                           Ghana
    FN Foreign            CONCELLAE, AB                 1         $40,000.00
    FN Foreign            Consultoria                   1          $7,000.00
                           Agropecuaria
                           Junior (CONAPEC
                           Jr.)
    FN Foreign            CORPOINIAP                    1         $87,000.00
    FN Foreign            CSIRO Entomology              1      $1,835,431.00
    FN Foreign            Department of                 1        $269,000.00
                           Animal Health
    FN Foreign            Department of                 1         $13,500.00
                           Veterinary
                           Services
    FN Foreign            Elhawakeer-                   1         $40,000.00
                           Association
    FN Foreign            Far East Forestry             1         $25,000.00
                           Research
                           Institute
    FN Foreign            Federal University            1         $35,000.00
                           of Santa Maria
    FN Foreign            Gyeongsang                    1         $60,309.00
                           National
                           University
    FN Foreign            Honduran                      1          $7,000.00
                           Foundation for
                           Agriculture
                           Research
    FN Foreign            ICARDA                        4         $80,000.00
    FN Foreign            ICIPE--Intl Centre            2        $185,000.00
                           of Insect Physio
                           and Ecol
    FN Foreign            IICA Costa Rica               1          $3,000.00
    FN Foreign            ILIA Chavchavadze             1         $13,370.00
                           State University
    FN Foreign            Indian Council of             1        $453,000.00
                           Agricultural
                           Research
    FN Foreign            INIA                          1         $39,000.00
    FN Foreign            INIAP                         1          $6,150.00
    FN Foreign            INIFAP                        2         $45,500.00
    FN Foreign            INRA Animal                   1          $5,000.00
                           Genetics Division
    FN Foreign            Institute of                  1         $24,000.00
                           Botany
    FN Foreign            Instituto de                  1        $455,000.00
                           Cultivos
                           Tropicales
    FN Foreign            Instituto Nacional            3        $219,890.00
                           de Technologia
                           Agropecuari
    FN Foreign            Instituto UNIEMP              1        $143,080.00
    FN Foreign            International                 4        $216,898.00
                           Institute
                           Tropical
                           Agriculture
    FN Foreign            International                 2        $319,500.00
                           Livestock
                           Research
                           Institute
    FN Foreign            International                 1          $4,500.00
                           Potato Center
                           (CIP)
    FN Foreign            International                 1        $868,730.00
                           Science &
                           Technology Center
    FN Foreign            Kenya Agricultural            2        $257,968.00
                           Research Service
    FN Foreign            Kenya Medical                 1        $250,000.00
                           Research
                           Institute
    FN Foreign            Kyrgyz National               1         $17,490.00
                           Agrarian
                           University
    FN Foreign            Ministry of                   1        $100,000.00
                           Agriculture &
                           Land Reclamation
    FN Foreign            National Genebank             1          $4,000.00
                           of Morocco
    FN Foreign            Natl Ctr for Agr              1         $17,000.00
                           Reseach &
                           Extension (NCARE)
    FN Foreign            Philippine Animal             2        $487,652.00
                           Health Center
                           (PAHC)
    FN Foreign            PICTIPAPA                     1         $12,541.00
    FN Foreign            Plant Research                1          $3,787.28
                           (NZ) Ltd
    FN Foreign            Polish Academy of             1         $16,000.00
                           Sciences
    FN Foreign            Punjab                        1         $80,000.00
                           Agricultural
                           University
    FN Foreign            Rothamsted                    1          $5,000.00
                           Experiment
                           Station
    FN Foreign            Seoul National                2         $20,000.00
                           University
    FN Foreign            Simon Fraser                  2        $115,000.00
                           University
    FN Foreign            South African                 1          $3,000.00
                           Agricultural
                           Research Council
    FN Foreign            Tel Aviv                      2         $33,000.00
                           University
    FN Foreign            The University of             1        $132,000.00
                           Adelaide
    FN Foreign            Universidad                   1          $2,000.00
                           Autonoma de
                           Zacateca
    FN Foreign            University of                 1         $22,000.00
                           Calgary
    FN Foreign            University of                 1         $64,940.00
                           Ottawa
    FN Foreign            University of                 2        $146,265.00
                           Reading
    FN Foreign            University of                 1          $7,000.00
                           Saskatchewan
    FN Foreign            University of                 1         $15,000.00
                           Science and
                           Technology of
                           China
    FN Foreign            University of the             2        $128,574.49
                           West Indies
    FN Foreign            Wuhan Botanical               1         $32,780.00
                           Garden, Chinese
                           Academy Scienc
    FN Foreign            Zentralverband der            1          $4,000.00
                           Deutschen
                           Schweineprodukti
                                             -------------------------------
                                                    1,916    $446,470,182.44
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        ARS research does not duplicate or overlap other programs. REE and
    ARS are committed to maximizing Federal dollars by ensuring systematic
    monitoring and evaluation. While the scientific method requires the
    flexibility to replicate results, ARS and NIFA leadership, program
    managers, and researchers rigorously track scientific projects to avoid
    duplication. In addition NIFA and ARS hold joint stakeholder meetings
    on scientific research to pull together research projects that are
    compatible and not duplicative.
        ARS does play a critical role in providing research relevant to the
    mission of USDA's action and regulatory agencies and other Federal
    departments. Examples include:

       Research on bacterial pathogens in produce and meats is
            relevant to the missions of the Food and Drug Administration
            and the USDA, Food Safety and Inspection Service, respectively.

       Improving conservation practices enhances the environmental
            benefits of farm bill conservation programs and supports the
            mission of the Natural Resources Conservation Service.

       Research on the nutrient needs of children, adults and the
            elderly provides the science base to undergird U.S. food
            policy, the Dietary Guidelines for Americans, essential to the
            missions of USDA (Food and Nutrition Service (FNS), Center for
            Nutrition Policy and Promotion (CNPP), ERS), Health and Human
            Services (Food and Drug Administration (FDA), CDC, NIH), and
            the Department of Defense.

       Determining the effects of biotech products on the ground
            beetle population benefits sustainable agricultural
            productivity and also is relevant to the mission of USDA,
            APHIS, Biotechnology Regulatory Services.

       Long-term assessment of the effectiveness of biotech
            products contributes to maintaining crop disease protection but
            is also relevant to the mission of the Environmental Protection
            Agency.

       Research on tree pathogens benefits fruit tree improvement
            but is also relevant to forest trees and contributes to the
            mission of the Forest Service.

       Research on reducing cereal grain mycotoxins improves grain
            quality but is also relevant to the mission of the Grain
            Inspection, Packers, and Stockyards Administration (GIPSA).

       Research on effective biological control of invasive weeds
            and pests supports sustainable farming systems but is also be
            relevant to protecting the U.S. border and the mission of
            Homeland Security.

       Developing new sorghum and forage grass germplasm with high
            value for animal feed also benefits the mission of the
            Department of Energy to develop biofuels.

       Creation of planning tools for research, development, and
            commercial production of biofuels benefits plans for the
            Department of Defense and the Federal Aviation Administration
            to achieve diverse fuel sources.

       Research contributing to the sound design, maintenance, and
            assessment of dams, levees, and channels for water storage and
            control supports the mission of the Army Corps of Engineers and
            the Federal Emergency Management Agency.

       Development of vaccines, diagnostic tests and other
            countermeasures to control foreign animal diseases in
            coordination with the Department of Homeland Security to help
            the Animal Plant Health Inspection Services to protect the
            United States from these diseases.

       Research to develop and validate novel methods to protect
            United States military deployed abroad from threats posed by
            disease-carrying insects. This program is in support of the
            Department of Defense.

        ARS partners with other Federal agencies in responding to national
    needs and emergencies through cooperation in Task Forces and
    Interagency Working Groups that identify urgent research needs and
    agency roles. Recent examples include interagency task forces and
    working groups to develop and implement action plans to address Soybean
    Rust, Avian Influenza, Childhood Obesity, Antibiotic Resistance, Citrus
    Greening, Ug99 Wheat Stem Rust, Water Resources, and Climate Change.
    These group's national plans clearly identify the specific roles and
    responsibilities of ARS research projects and researchers. Often, ARS
    is responsible for providing unique disease and pest scientific
    expertise, specialized genetic resources and collections, critical
    human nutrition and food safety expertise and resources, natural
    resource management expertise, and nationally coordinated research
    teams.
        ARS partners with the USDA Research, Education and Economics (REE)
    agencies through the leadership of the Under Secretary and Chief
    Scientist. One of the most important of these partnerships is with the
    National Institute of Food and Agriculture (NIFA), which provides
    grants that support universities and also much collaboration between
    universities and ARS. ARS research is funded by Congressional
    appropriations that can support multi-year, long-term research while
    NIFA grants support complementary, shorter-term agricultural research.
    Cooperation and avoidance of duplication is guided through REE
    administrative leadership, budget development, and according to REE
    research priorities. The REE Action Plan identifies important goals for
    the agencies and specifies the role of ARS, NIFA and the other REE
    agencies. Other coordination is provided by multiple working groups,
    committees, and joint customer/stakeholder workshops that insure that
    ARS long-term research is optimally leveraged with NIFA awards and
    research supported by other agencies. These types of partnerships are a
    perfect mesh of interests and collaboration for the public good. The
    list of accomplishments that have come from partnerships between ARS
    and land-grant schools is long and impressive. Examples include:

       The Interagency Working Group on Plant Genomes, guides
            research on plant genome sequencing with NIFA supporting
            sequencing projects and ARS supporting crop genome database to
            curate and distribute the data information to crop breeders and
            other researchers (REE Action Plan, Goal 8).

       ARS manages and safeguards the national genebanks and seed
            collections. NIFA has recently awarded a Triticeae grant to a
            university-led project that will evaluate accessions in the ARS
            small grains collection for weather stress tolerance traits.

       The USDA BioEnergy Science team guides interagency
            cooperative research on bioenergy with ARS researchers
            developing new bioenergy feedstock lines.

       ARS and NIFA national program leaders include their
            counterparts in national program planning workshops including
            some joint workshops such as the 2011 joint ARS-NIFA Animal
            Genomics Workshop.

        In addition to complementing the work of other agencies, ARS
    ensures that duplication and overlap are avoided within its own
    programs by developing nationally coordinated research Action Plans for
    each of the ARS National Programs. The ARS Office of National Programs
    and National Program Leaders provide oversight to guarantee that
    individual ARS project plans are targeted to the problem priorities and
    optimally coordinated to achieve the expected results. The National
    Programs are planned centrally with extensive input with external
    customers, stakeholders, research partners, and ARS scientists. Those
    providing perspectives on problems to be solved and research needs
    include producers, industry and other agricultural processors,
    consumers, Administration officials, representatives of USDA action and
    regulatory agencies, other government agencies, Congress, non-
    governmental groups (e.g., commodity groups and advisory groups), state
    and local governments, national and international trade organizations,
    university scientists, private researchers, and government
    laboratories. Research collaborations among Agency scientists and with
    non-ARS scientists are a frequent outcome of the input and planning
    process, which ensures complementary objectives and approaches,
    prevents redundancies, and leads to research projects and programs that
    have impact for the public. Routinely, the agency's senior line
    managers and field scientists also meet with customers, stakeholders,
    and partners to build a strong understanding of regional and local
    issues.
        Input from these constituencies leads to development of an Action
    Plan that provides the documentation of needs and researchable
    problems, which guides development of individual research project
    plans. Those plans--which include an assessment of related research
    already accomplished or in progress--are reviewed by peer panels who
    have the Action Plan in hand. This rigorous process, developed by ARS
    in response to a mandate in the 1995 Farm Bill, is a further check
    point for ensuring that research will solve problems without wasteful
    programmatic redundancies.
        In an era of limited available funds, there is a strong incentive
    to not repeat what others in the agricultural research arena are doing
    unless there is a stronger public good provision requirement. ARS
    national leaders and scientists participate on over 160 Federal
    interagency working groups, and an uncounted but similarly large number
    of formal and informal professional associations and an even larger
    number of private-academic-ARS scientist work collaborations. As a
    result, ARS prevents redundancies in its programs, complements the
    missions of many other science-based Departments and agencies, and
    achieves much of the value in its research through mission-driven
    responsiveness to customer needs.

        Intra-Agency Duplication

        As an example of how the agency conducts research on important
    issues in multiple locations across the country without duplicating
    itself, the agency would like to highlight three particular programs
    that have multiple scientists collaborating across the country to
    answer complex research questions without unnecessary duplication.

        ARS Watersheds

        The Agricultural Research Service (ARS) operates a network of
    approximately 23 Benchmark Watersheds, Experimental Ranges, and
    associated/related research facilities that collect long-term physical,
    chemical, and biological data on agricultural sustainability, climate
    change, ecosystem services, and natural resource conservation at the
    watershed or landscape scale. Data records extend as far back as 98
    years. The distribution of these sites across the nation gives them
    great value because the interactions of agricultural production systems
    with natural resources are highly environment-dependent. ARS sustains
    this land-based infrastructure for research and environmental
    management testing to enable understanding and forecasting of the
    nation's capacity to provide agricultural commodities and other
    ecosystem goods and services under geographically variable, ever-
    changing environmental and resource-use conditions.
        In addition to supporting high-quality, location-based research,
    these sites provide an unparalleled opportunity to make important
    comparisons between very different environments, across large
    distances. The multi-location approach allows ARS to develop research
    questions that are shared and coordinated across sites; provide the
    capacity to address these large-scale questions across sites through
    shared research protocols; collect compatible data sets across sites;
    provide the capacity and infrastructure for cross-site data analysis;
    and generally facilitate and foster shared engagement in agricultural
    research across the nation's highly diverse environments.
        The watershed/rangeland network is a key infrastructure for the
    research in many ARS National Programs and addresses the needs of other
    USDA agencies, such as the evaluation and improvement of farm bill
    conservation programs through the Conservation Effects Assessment
    Project (CEAP). Collectively, the sites are a platform to support
    multi-organization research and funding efforts; a resource for
    developing and testing regional- and national-scale hypotheses that
    cannot be undertaken by individual locations alone; and a foundation
    for developing long-range, multi-agency/institutional funding plans.
        During the last 10 years, a concept for a Long-Term Agroecosystems
    Research (LTAR) network has been proposed in a number of highly visible
    publications, e.g., the 2003 National Research Council report,
    Frontiers in Agricultural Research, which urged the USDA to adapt a
    strategic, long-term approach to food and agricultural research.
    Creation of a new LTAR network would cost tens of millions of dollars,
    and universities or other organizations could not likely duplicate the
    existing ARS resource and its long-term data records. Two of ARS'
    Experimental Range research sites are already part of the National
    Science Foundation's (NSF) Long-Term Ecological Research (LTER)
    Network; three have been selected to become part of NSF's proposed
    National Ecological Observatory Network (NEON). Thus, the
    geographically distributed LTAR network needed by the scientific
    community already exists in ARS' experimental watershed/rangeland
    network.
        ARS' unique watershed/rangeland resource is widely available for
    partnerships with non-USDA organizations, and research in cooperation
    with university scientists, other Federal agencies, and others is
    widespread within the network.

        ARS Bee Research

        The bee industry is essential for the security of the nation's food
    supply. Pollination is responsible for $15 billion in added crop value;
    bee pollinated crops include important field crops such as alfalfa, and
    many fruits and nuts, major sources of vitamins. The bee industry is
    threatened by invasive mites (varroa and tracheal), predators (small
    hive beetle), diseases (American foulbrood, chalkbrood, viruses),
    insecticide poisoning, Africanization of managed colonies, the
    pressures of migratory beekeeping, and other problems leading to
    decreased colony health and manageability. With the appearance of
    colony collapse disorder in 2007, 30% or more of the nation's colonies
    are now lost annually, an unsustainable situation that threatens the
    entire bee industry and crops such as almond and apple that are totally
    dependent on bee pollination. In response, ARS has the core national
    responsibility for ensuring an adequate force of pollinators, and
    conducts honey bee research at four laboratories, in Arizona,
    Louisiana, Maryland, and Texas. In addition, ARS conducts research on
    other (non-honey bee) pollinating bees in Utah. Each laboratory has a
    unique regional advantage and research role:

       Arizona, Tucson, the ``Bee Health and Nutrition
            Laboratory'': (1) determines nutritional needs of bees and
            develops supplementary diets such as a highly successful
            protein diet now commercialized as MegaBee; (2) determines the
            negative effects of fungicides and bactericides on bee bread,
            the fermented pollen-based protein diet that bees store to feed
            their brood; (3) conducts research for beekeepers that
            transport colonies for pollination, particularly into
            California, where crops pollinated by bees have a value in
            excess of $12.7 billion; (4) identifies new compounds for
            varroa mite control, such as newly commercialized plant beta-
            acids from hops; (5) develops tools to manage the genetics of
            commercial colonies in Africanized areas; (6) and maintains an
            Africanized Honey Bee (AHB) Identification Service.

       Louisiana, Baton Rouge, the ``Bee Breeding Laboratory'': (1)
            focuses uniquely on breeding improved bees, and has developed a
            Southern-based island system for isolation of breeding stocks
            during breeding; (2) selected and commercialized the Russian
            bee for varroa and tracheal mite resistance (and high honey
            production and survival in harsh climates); (3) and is using
            molecular and other techniques to determine genes for
            introgression of resistance traits into bee lines preferred by
            beekeepers for their docility, honey production, and other
            characteristics.

       Beltsville, Maryland, the ``Bee Disease Laboratory'': (1)
            has a Bee Disease Diagnosis Service that works with APHIS to
            prevent introduction of new pathogens and pests; (2) has been
            lead in developing antibiotics for controlling bee bacterial
            diseases and kits for detection of bee viruses for maintenance
            of pure stock; and, (3) is the laboratory leading international
            efforts to exploit the genomes of bees and their parasites and
            pathogens.

       Texas, Weslaco, the ``Bee IPM Laboratory'': (1) conducts
            research in a region that has served as a pathway for invasive
            problems, e.g., Africanized honey bee; (2) is the principal
            laboratory developing systems, including miticide resistance
            management, for control of bee pests; and (3) is working to
            elucidate bee immunity to disease.

       Utah, Logan, the ``Native Bee Laboratory'': (1) is the only
            ARS facility (and only large facility in the world) developing
            alternative species of bees for pollination of crops and for
            land restoration; and, (2) maintains the premier bee
            systematics laboratory.

        ARS Beef Production Research

        Beef cattle research is conducted in the USDA-ARS in three primary
    locations: the U.S. Meat Animal Research Center in Clay Center Nebraska
    (USMARC), Fort Keogh Livestock and Range Research Laboratory in Miles
    City, Montana and the Sub Tropical Agriculture Research Station in
    Brooksville, Florida (STARS). Research and priority for these ARS labs
    is outlined below. In addition, ARS conducts research in forage
    efficiencies, manure management, range and pasture management, parasite
    control, climate change/adaptation and forage toxicology at various
    other locations where cattle and/or sheep serve as experimental units,
    but are not the focus of the primary research objectives.
        USMARC: Research at USMARC is focused on bovine genetic and
    genomics and improvement of beef cattle growth and efficiencies in
    typical corn belt pasture production systems. Beef cattle research is
    specifically focused on improving feedlot nutrient utilization
    efficiency, enhancing reproductive efficiencies, improving meat quality
    and consumer acceptance, combating bovine respiratory disease and
    improving the management and adaptability of feedlot cattle to
    environmental stressors. USMARC also conducts significant research in
    emerging genetic and genomic technologies to improve the rate of
    genetic improvement for numerous traits of economic importance for the
    beef industry.
        Fort Keogh: Research at Fort Keogh in Miles City Montana is focused
    on range cattle production efficiencies particularly on cow-calf
    production and the interface between beef cattle production and range-
    forage management and ecosystem services on open range lands in the
    Western U.S. Specific beef cattle research includes genetic and genomic
    technology development to improve the productivity and efficiency of
    cattle grazing open range and the improvement of reproductive
    efficiencies of cows in typical Western range production environments.
    Additional research is focused on rumen ecology and the relationship
    between the rumen microbiome and beef cattle production efficiencies,
    particularly in cow-calf production systems.
        STARS: Research at STARS in Brooksville Florida is focused on breed
    improvement of cattle adapted to the severe production environments of
    the subtropics which include additional stressors of poorer quality
    forages, extreme heat and humidity, and significantly increased disease
    and parasite infestation challenges than cattle production in the rest
    of the U.S. Beef cattle production in the subtropics of the U.S. is
    largely confined to the cow-calf sector but represents 40% of the total
    U.S. beef cow herd. Specific research is being conducted to improve the
    Brahman (Bos indicus) breed and their crosses to enhance adaptation
    throughout the subtropics and tropics around the world. Brahman cattle
    exhibit adaptive characteristics for these extreme environments but are
    discriminated against for poor dispositions, inferior reproductive
    performance, inferior feedlot performance, and inferior carcass quality
    particularly meat tenderness. To ensure the sustainability and
    competitiveness of beef producers in sub-tropical and tropical
    environments Brahman cattle are being genetically improved to
    consistently demonstrate better performance and efficiency for these
    critical economic traits.
    12. Waste, Fraud and Abuse
        There are currently no fraud, waste, and abuse audits ongoing. The
    agency utilizes various internal procedures to prevent and detect
    fraud, waste, and abuse instances and provide an annual assurance
    statement to the Department of Agriculture Chief Financial Officer with
    our assessment of the effectiveness of our procedures. Over the past
    several years, the assurance statement has not identified any
    exceptions related to fraud, waste, and abuse. Some of the procedures
    that support our assurance statement are as follows:

       Office of Management and Budget Circular A-123 Appendix A
            ``Internal Control over Financial Reporting'' covering
            Financial Reporting, Reimbursable Agreements, Property
            Management, Funds Management, Budgeting, and Human Resources

       Consolidated Assistance, Review, and Evaluations of ARS Area
            offices and Locations

       National Program Reviews

       National Institute of Standards and Technology and Federal
            Information Security Management Act Risk Assessments

       Human Resources Management Evaluations

       Quality Control Reviews of Near Field Communications (NFC)
            Data Elements

       Facilities Contracting and Engineering Management Design
            Review Board and Contract Review Board Meetings

       Safety, Health, and Environmental Management Reviews,
            Evaluations, and Studies

       Procurement and Personal Property Management Reviews

       Purchase Card Audits and Reviews

        Open Audit Summary

        ARS is undergoing several Government Accountability Office (GAO)
    and Office of the Inspector General (OIG) audits. The focus of the
    majority of these audits is how effective and efficient ARS is in
    conducting its research, securing and protecting select agents,
    addressing critical and emerging issues (such as Colony Collapse
    Disorder) and managing its resources. In the table below is a breakout
    of the different types of audits ongoing at ARS.

    ----------------------------------------------------------------------------------------------------------------
                                                              Financial and       Fraud, Waste and
       Audit Entity     Program Audits       IT Audits        Administrative       Abuse Audits/        Total Open
                                                                  Audits           Investigations         Audits
    ----------------------------------------------------------------------------------------------------------------
               GAO                 11                 1                   0                   0                 12
               OIG                  2                 3                   2                   0                  7
    ----------------------------------------------------------------------------------------------------------------

        Open GAO Audit Findings

        There is currently one GAO audit with open findings that ARS must
    address related to Agroterrorism Response and Recovery Efforts. ARS has
    responded to these findings and is awaiting additional instructions. In
    our response, ARS did not disagree with the findings, however the
    agency believes that additional information is required to further
    explain observations made in the report.

        GAO Audits (In Progress)

    120788, DOD Research Facilities and Administration Cost Reimbursement
    311044, Update to the 2005 Wireless Network Security Report
    361174, Quality Assurance of Carbon Offsets in U.S. Climate Change
        Programs
    361177, The USDA Protocols and Standards to Ensure the Safety of Meat
        and Other Food Procured by Schools
    361185, Renewable Energy Initiatives
    361191, Ethanol Blends and Risk
    361204, Agroterrorism Response and Recovery Efforts
    361216, Chesapeake Bay Action Plan
    361223, Antibiotic Use in Food and Animals
    361260, USDA Efforts to Reduce E. Coli
    460612, High Containment Laboratories: GAO Assessment of Commissioned
        Reports on Biosafety and Biosecurity
    460619, Duplication of Federal Inspections of High-Containment
        Laboratories

        OIG Audits (In Progress)

    50401-01-11, Fiscal Year 2011 USDA Consolidated Financial Statements
        Audit
    50501-1-12, USDA's Security over Domain Name Systems Services
    50501-2-12, FY 2011 Federal Information Security Management Act Audit
    50601-01-22, Effectiveness of the Departments Recent Efforts to
        Entrance Agricultural Trade
    50703-01-HQ, Oversight and Control of USDA ARRA Activities
    50099-84-HY, USDA's Response to Colony Collapse Disorder
    50501-01-IT, USDA's Management and Security Over Wireless Handheld
        Devices
    13. Effect of Administrative PAYGO
        None.
                                     ______

    House Committee on Agriculture Farm Bill Audit Questionnaire--National
                       Institute of Food and Agriculture
    1. Program Name
        1890 Institutions Capacity Building Grants Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        This program is authorized by section 1417(b)(4) of the National
    Agricultural Research, Extension, and Teaching Policy Act of 1977, as
    amended (NARETPA) (7 U.S.C. 3152(b)(4)) and pursuant to annual
    appropriations made available specifically for the 1890 Capacity
    Building Program.
        Section 7107 of the Food, Conservation, and Energy Act of 2008
    (2008 Farm Bill) (Pub. L. 110-246) amended the authority for the 1890
    Capacity Building Program to allow for extension capacity building, as
    well as teaching and research. In accordance with the statutory
    authority, subject to the availability of funds, the Secretary of
    Agriculture may make competitive grants, for a period not to exceed 5
    years, to design and implement food and agricultural programs to build
    Teaching, Research and Extension capacity at colleges and universities
    having significant minority enrollments.
    4. Purpose/Goals
        The purpose of the 1890 Capacity Building Program is to support
    research, education, and extension as well as integrated research,
    teaching, and/or extension by awarding grants that address key problems
    of national, regional, and multi-institutional importance in sustaining
    all components of agriculture, including farm efficiency and
    profitability, ranching, renewable energy, forestry (both urban and
    agroforestry), aquaculture, rural communities and entrepreneurship,
    human nutrition, food safety, family and consumer sciences,
    biotechnology, and conventional breeding.
    5. Success in Meeting Programmatic Purpose/Goals
        The 1890 Capacity Building Grant strengthens teaching, research and
    extension programs in the food and agricultural sciences by building
    the institutional capacities of the 1890 Land-Grant Institutions, and
    Tuskegee University. The program supports projects that strengthen
    teaching programs in the food and agricultural sciences in the need
    areas of curriculum design and materials development, faculty
    development, and others. It supports projects that strengthen research
    and extension programs in need areas of studies and experimentation,
    extension program development support systems, and others.
        Examples of success include:
        As a result of the capacity building grant at Kentucky State
    University, the Geospatial Education and Analysis Center provided ESRI
    (a GIS software company) authorized training to faculty, staff, and
    students and to state, regional and local government employees and
    others who use the ESRI suite of software products. The KSU GIS
    Training facility has had 382 students take the Introduction to ArcGIS
    I and II courses taught by KSU staff. Almost ten percent of the total
    number of students that enrolled in the courses were KSU students,
    faculty, and staff. The Center's ESRI Authorized Training courses have
    provided the facility the means to be self-sustaining. The center
    generates funds needed to maintain the equipment, upgrade the facility,
    and invest in new hardware, software, and data needed to meet the needs
    of campus users, as well as local GIS users. The KSU GIS resources have
    been used to produce several map products that are in use by the
    Frankfort/Franklin County Riverfront Development Commission in their
    efforts to create better interaction between citizens and the Kentucky
    Riverfront environment.
        An educational effort at Tennessee State University (TSU)
    collaborates with India's G.B. Pant Agricultural University of
    Agriculture and Technology (GBPUA&T) to internationalize TSU's
    agriculture program, enhance the competitiveness of Tennessee's
    agricultural entrepreneurs, and foster on-going research collaborations
    with GBPUA&T faculty. The new course contents were developed for two
    courses in agribusiness after the interactive meetings with faculty and
    students of the GBPUA&T and other Indian agricultural universities on
    issues related to curriculum in Agribusiness. International content is
    being integrated in several courses at TSU's undergraduate and graduate
    agriculture program. The content has greater examples of real-life
    situations. More interdisciplinary content in courses are being
    designed to include research opportunities for graduate and
    undergraduate students. Scientific information is being made available
    on faculty and student experience with international exchange program,
    and best management practices and lessons learned. Students now have a
    better appreciation and understanding of global problems.
        Fort Valley State University (FVSU) in Georgia has designed and
    developed an Outdoor Forestry Classroom/Laboratory to provide hands-on
    and experiential learning experiences to students enrolled in the
    FVSU's forestry course, to use the Outdoor Forestry Classroom/
    Laboratory to train and prepare high school agriculture students for
    various forestry career development events, and to use the Outdoor
    Forestry Classroom/Laboratory for summer workshops for high school
    agriculture teachers throughout the state of Georgia. During Spring
    2009, Area 3 of district number 4 of Georgia used the site to conduct
    Forestry Career Development Event activities. One hundred and fifty
    high school students were in attendance and had the opportunity to
    interact and discuss careers in the forestry industry with foresters
    from USDA, the Georgia Forestry Commission and Weyerhaeuser. In the
    future this site will be used to train and prepare high school
    agriculture students (FFA) for various forestry career development
    events. Forestry Camps (Workshops) will be conducted to upgrade the
    skills of limited resource forestry, land owners and provide continuing
    education for FFA teachers.
        Participation in global education programs is low and there are
    deficiencies in gathering and managing data for decision-making in
    global education programs. A NIFA-funded project at North Carolina A&T
    State University developed a set of best practices and retool curricula
    to equip faculty and students with the skills needed to function
    smartly around the world in order to strengthen America's leadership in
    international agriculture. As outcome, a 30 percent improvement in
    international content in curricula in agricultural courses; a reported
    increase of 40 percent in participation in study abroad programs among
    students enrolled in schools of agriculture in 1890 institutions; a 40
    percent increase in awareness of and interest in international
    agricultural issues among faculty and students in schools of
    agriculture in 1890 institutions. In the long run the project will
    produce students and faculty capable of working with their counterparts
    in a transnational context to solve complex global agricultural
    problems.

                                                   6. Annual Budget Authority (Fiscal Year (FY) 2007-FY 2011)
                                                                    (in thousands of dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY02         FY03        FY04        FY05        FY06        FY07        FY08        FY09        FY10        FY11
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Annual Budget Authority        $9,479      $11,404      $11,411     $12,312     $12,189     $12,375     $13,592     $15,000     $18,250     $19,336
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                       FY07             FY08             FY09             FY10             FY11
    ----------------------------------------------------------------------------------------------------------------
             Annual Outlays             $1,238           $7,547          $13,246          $14,762          $17,059
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                       FY07             FY08             FY09             FY10             FY11
    ----------------------------------------------------------------------------------------------------------------
       Annual Delivery Cost               $495             $544             $600             $730             $773
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Applications may only be submitted by 1890 Land-Grant Institutions,
    including Tuskegee University and West Virginia State University.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                110              None               344
          Received
    Applications Funded           43              None               118
    ------------------------------------------------------------------------
    Note: FY 2009 funds were awarded collectively with FY 2010 funds.

    11. Duplication or Overlap with Other Programs
        USDA's Research, Education, and Economics (REE) mission area is
    committed to maximizing Federal dollars by ensuring systematic
    monitoring and evaluation. While the scientific method requires the
    flexibility to replicate results, NIFA's leadership, program managers,
    and researchers rigorously track scientific projects through its
    Current Research Information System (CRIS) to avoid duplication.
    Program leadership also holds joint stakeholder meetings and/or
    coordinates with other science agencies (ARS, ERS, others) to ensure
    that programs are complementary, and do not duplicate other science
    programs in USDA and other Federal agencies. The creation and staffing
    of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Agriculture and Food Research Initiative (AFRI).
    2. Subprograms/Department Initiatives
            Foundational Program
            Childhood Obesity
            Climate Change
            Global Food Security
            Food Safety
            Sustainable Bioenergy
            NIFA Fellowship Grant Program
    3. Brief History
        Section 7406 of the 2008 Farm Bill amended section 2(b) of the
    Competitive, Special, and Facilities Research Grant Act (7 U.S.C.
    450i(b)) to authorize AFRI.
    4. Purpose/Goals
        The Foundational Program Request for Application (RFA) focuses on
    building a foundation of knowledge in fundamental and applied food and
    agricultural sciences critical for solving current and future societal
    challenges.
        The Childhood Obesity Prevention Challenge Area RFA focuses on the
    societal challenge to end child obesity through specific program areas
    that are designed to achieve the long-term outcome of reducing the
    prevalence of overweight and obesity among children and adolescents.
        The Climate Change RFA focuses on the societal challenge to
    mitigate and adapt to climate change through specific program areas
    that are designed to achieve the long-term outcome of reducing the use
    of energy, nitrogen, and water in the production of food, fiber and
    fuel, and increase carbon sequestration.
        The Global Food Security RFA focuses on the societal challenge to
    keep American agriculture competitive while ending world hunger through
    specific program areas that are designed to achieve the long-term
    outcome of increasing food availability and decreasing the number of
    food insecure individuals.
        The Food Safety Challenge Area RFA focuses on the societal
    challenge to improve food safety for all Americans through specific
    program that areas are designed to achieve the long-term outcome of
    reducing foodborne illnesses and deaths through a safe food supply.
        The Sustainable Bioenergy RFA focuses on the societal challenge to
    secure America's energy future through specific program areas that are
    designed to achieve the long-term outcome of reducing the national
    dependence on foreign oil through the production of sustainable
    bioenergy.
        The AFRI NIFA Fellowships Grant Program is focused on developing
    technical and functional competence for pre-doctoral students, and the
    research independence and teaching credentials of postdoctoral
    scientists in the food, forestry and agricultural sciences that are
    within NIFA's challenge areas through well-developed and highly
    interactive mentoring and training activities.
    5. Success in Meeting Programmatic Purpose/Goals
        AFRI at the National Institute of Food and Agriculture (NIFA) is
    charged with funding research, education, and extension grants and
    integrated research, extension, and education grants that address key
    problems of national, regional, and multi-state importance in
    sustaining all components of agriculture, including farm efficiency and
    profitability, ranching, renewable energy, forestry (both urban and
    agroforestry), aquaculture, rural communities and entrepreneurship,
    human nutrition, food safety, biotechnology, and conventional breeding.
    Providing this support requires that AFRI advances fundamental sciences
    in support of agriculture and coordinates opportunities to build on
    these discoveries. This will necessitate efforts in education and
    extension that deliver science-based knowledge to people, allowing them
    to make informed practical decisions.
        Examples of success include:
        The AFRI Wheat Coordinated Agricultural Project (WheatCAP) is led
    by the University of California, Davis implemented genetic Marker
    Assisted Selection (MAS) strategies for quality and disease resistance
    traits across the U.S. public breeding programs. The project generated
    approximately 1,000,000 MAS data points that were used to develop 90
    new germplasm lines and cultivars and thousands of improved lines for
    breeding. The WheatCAP provided a stimulating learning environment that
    supported training of 117 undergraduates and 73 graduate students, many
    of which are being hired as breeders in companies and public
    institutions.
        An international team of scientists have mapped the genome of the
    plant pathogen that causes downy mildew disease which causes major
    losses to crops such as corn, grapes, and lettuce. The genome sequence
    of Hyaloperonospora arabidopsidis, the pathogen that causes downy
    mildew disease, is published this week in the journal Science. In the
    paper, researchers compare the sequence of H. arabidopsidis with other
    fully-sequenced genomes of destructive plant pathogens to shed light on
    the differences in the ways microbes interact with their host and how
    those differences evolve. The study could lead to new ways to
    investigate how these pathogens cause plant disease and find new ways
    to prevent plant loss in the future.
        S. Enteritidis and C. jejuni are major foodborne pathogens
    transmitted through poultry products. Many plant-derived antimicrobials
    are natural, generally regarded as safe molecules used to preserve
    foods and enhance food flavor. Preliminary research by Connecticut
    scientists revealed that plant molecules, including trans-
    cinnamaldehyde, carvacrol, thymol, and eugenol were bactericidal on S.
    Enteritidis and C. jejuni in chicken bowel contents in the laboratory.
    Additionally, trans-cinnamaldehyde and eugenol reduced significant
    bowel populations of these pathogens in chickens. The current research
    is investigating the effect of trans-cinnamaldehyde, carvacrol, thymol,
    and eugenol as dietary supplements to reduce colonization of S.
    Enteritidis and C. jejuni in broiler chickens and their safety in
    chickens. The work will potentially lead to decreased outbreaks of
    salmonellosis and campylobacteriosis, thereby improving public health
    and economic opportunities for poultry farmers.
        Scientists at the University of Wisconsin created a Relative
    Antioxidant Index (RACI) which provides standardization of information
    about the antioxidant content of various fruits and vegetables and is
    useful as a ranking tool for use by the food industry, scientists, and
    consumers. The RACI statistically integrates the antioxidant capacity
    values generated using seven different chemical methods and was
    validated using 20 commonly consumed vegetables.
        With funding from NIFA, scientists at the University of California-
    Davis have identified the genes in wheat that are responsible for the
    plant's tolerance to freezing temperatures. This discovery may lead to
    improved crop production since wheat breeders have long recognized the
    need to produce cultivars with greater resistance to freezing
    temperatures, but have had limited success to date.
        NIFA-funded scientists at the University of Missouri in cooperation
    with the Agricultural Research Service developed a new tool for cattle,
    called the Illumina BovineSNP50 Chip. This tool allows scientists to
    examine the animal's entire genome to detect variations in a more
    efficient and economical way. Researchers around the world are using
    the chip to identify regions within the bovine genome that harbor
    variants that cause animals to differ in the outward expression of
    important traits. More importantly, the high resolution of this snip
    chip will allow scientists to predict an animal's total genetic merit
    from its SNP profile. Breeding companies are using the chip to assist
    in the genetic selection process of dairy animals. As a result, the
    industry is saving millions of dollars annually by more efficiently
    prescreening young bulls and streamlining the process of identifying
    elite cows. Producers base these and other decisions on each animal's
    genetic merit, as estimated from their SNP profiles.

                               6. Annual Budget Authority (Fiscal Year (FY) 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget   $120,452  $166,045  $164,02  $179,55  $181,17  $190,22  $190,88  $201,50  $262,48  $264,47
               Authority                            7        2        0        9        3        4        2        0
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                       FY07             FY08             FY09             FY10             FY11
    ----------------------------------------------------------------------------------------------------------------
             Annual Outlays             $9,511          $76,124         $143,464         $198,017         $223,339
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                       FY07             FY08             FY09             FY10             FY11
    ----------------------------------------------------------------------------------------------------------------
       Annual Delivery Cost             $7,609           $7,635           $8,060          $10,499          $10,579
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        AFRI makes awards under two legislative authorities with different
    eligibilities. Depending on Program Area Priorities and the requested
    activities, the authority used, and hence eligibility, may differ
    within a particular Program Area.
        Eligibility is also linked to the project type requested in Program
    Area Descriptions.
        Eligible applicants for Research Projects include:

       State Agricultural Experiment Stations;

       Colleges and universities (including junior colleges
            offering associate degrees orhigher);

       University research foundations;

       Other research institutions and organizations;

       Federal agencies;

       National laboratories;

       Private organizations or corporations;

       Individuals who are U.S. citizens, nationals, or permanent
            residents; and

       any group consisting of two or more entities identified in
            (1) through (8).

        Eligible institutions do not include foreign and international
    organizations.
        Eligible applicants for Integrated Projects include: (1) colleges
    and universities; (2) 1994 Land-Grant Institutions; and (3) Hispanic-
    serving agricultural colleges and universities.
        Eligible applicants for the Research, Education, or Extension
    Projects include: (1) State Agricultural Experiment Stations; (2)
    colleges and universities (including junior colleges offering associate
    degrees or higher); (3) university research foundations; (4) other
    research institutions and organizations; (5) Federal agencies, (6)
    national laboratories; (7) private organizations or corporations; (8)
    individuals who are U.S. citizens, nationals, or permanent residents;
    and (9) any group consisting of two or more entities identified in (1)
    through (8).
        Eligible institutions do not include foreign and international
    organizations.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None             2,417             1,569
          Received
    Applications Funded         None               151               350
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
        A peer review panel verifies that the project described in the
    application is original compared to the published literature; however,
    a search of the CRIS database is also conducted to ensure that the
    program is not unwarrantedly repeating work that is not yet published
    in scientific journals or other outlets. The CRIS search would include
    any work under the name of the Project Director (PD) and a separate
    search for key words associated with the specific investigation
    described in the project application. Search results must be checked
    for the possibility of supporting duplicative work by two different
    investigators or the overlapping support of one investigator from two
    sources for essentially the same work. Should the NIFA National Program
    Leader (NPL) suspect duplication of effort the NPL must contact the PD
    to discuss any potential or suspected overlaps or duplication. The AFRI
    will not fund any project for overlapping objectives receiving funds
    from another USDA program or that is unnecessarily duplicative. The
    search is documented on the Competitive Proposal Recommendation Form
    (Form 3) with the following statement: ``A CRIS search performed on
    (Date) for the PD and using the following key words deemed appropriate
    for this application: (key words). Results confirm that this is
    original work and is not inappropriately duplicative of, or overlapping
    with, other work supported by USDA.''
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Beginning Farmer and Rancher Development Program (BFRDP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 7405(c) of the Farm Security and Rural Investment Act of
    2002 (2002 Farm Bill) (Pub. L. 107-171) (7 U.S.C. 3319f(c)), as amended
    by section 7410 of the 2008 Farm Bill, established a competitive grants
    program for the purpose of providing education, outreach, training and
    technical assistance to benefit beginning farmers and ranchers in the
    United States.
        Section 7405(d) of the 2002 Farm Bill established beginning farmer
    and rancher education teams to develop curricula and conduct
    educational programs and workshops for beginning farmers orranchers in
    diverse geographical areas of the United States.
    4. Purpose/Goals
        The primary goal of BFRDP is to enhance food security by providing
    beginning farmer and rancher producers and their families in the U.S.
    and its territories, with the knowledge, skills and tools needed to
    make informed decisions for their operations, and enhance their
    sustainability.
    5. Success in Meeting Programmatic Purpose/Goals
        Training activities are the cornerstone of almost all the BFRDP
    grantee programs. Types of training included webinars, seminars,
    internships, mentorships, on-farm field days, etc. Face-to-face
    training events, such as regular non-credit courses or workshop
    sessions at farming conferences, were the most frequent types of
    events. More than 5,000 new and potential farmers were counted as
    participants in BFRDP project training events. Most attended face-to-
    face workshops or courses, but many also participated in other types of
    training, including roundtable discussions, hands-on field days, farm
    internships, and working with mentor farmers. This outcome indicates
    that the BFRDP goal to train more than 6,000 beginning farmers and
    ranchers will most likely be met, if not greatly exceeded. Data from
    BFRDP training program participants who responded to surveys shows that
    approximately 17 percent of the 5,339 farmers trained had very little
    or no experience in farming. About 12-16 percent are farm workers,
    females, limited resource, and socially disadvantaged.
        Examples of success include:
        The Northeast Beginning Farmer Coalition is a learning network for
    beginning farmer training programs. Three major strategies to foster
    the network include the delivering of mentoring, training, and program
    development resources; developing evaluation resources and outreach
    strategies to understand and enhance the impacts of training efforts;
    and engaging K-12 teachers and young farmer activists to shift youth
    cultural norms about farming career options. During the coalition's
    first year, it conducted needs assessments of new farm start-ups
    focused on gaps in service. A course to train new instructors reached
    20 farmers, nonprofit, and extension educator participants. Attendees
    developed five new online courses for beginning farmers. The coalition
    also developed and reviewed materials and resources and created
    resources to support teachers at eight schools in New York with
    agriculture education programs.
        The Western Navajo Nation Beginning Farmers and Ranchers Project
    engages, prepares, and supports socially disadvantaged, underserved,
    and limited resource beginning Navajo farmers and ranchers in eight
    communities covering 8,000 square miles of the Navajo Nation. The
    overall goal of the project is to provide Navajo community members who
    wish to begin farming and ranching with the skills to effectively
    launch sustainable agricultural operations using traditional and
    contemporary agricultural techniques in conjunction with effective
    business practices. Utilizing multiple learning methods, the project
    features Navajo language-based instruction, intensive experiential
    education with successful Navajo farmer and rancher mentors, regional
    peer roundtables with expert facilitators, and production experts. The
    project is teaching ancestral traditional ways to introduce
    participants to farming or ranching.
        In the first year, the project worked with 13 chapter members
    through direct agricultural training and networking activities that
    included two roundtables, two conferences, and weekly classes in
    technology, business, or introductory farming and ranching to 1,000+
    participants. Fifty percent of participants are women. Seventy percent
    are farming or ranching less than 1 year, or do not farm/ranch
    currently. The project staff is comprised of four traditional Navajo
    locals of varying ages and educational backgrounds. All are bilingual,
    fluent in Navajo, and culturally sensitive to the target group's
    history and challenges
        The Florida A&M University New and Beginning Farmer Training
    Program encourages farm entry by removing the barriers in four major
    areas that face the next generation farmers: (1) access to training,
    education, and technical assistance; (2) access to land; (3) access to
    capital and credit, and; (4) access to markets. This project uses non-
    traditional approaches in its extension training and assistance
    activities to reach the target African-American audience. These
    opportunities include the Young Farmer Entrepreneur Incubator; a
    business incubator model for agricultural production and marketing
    demonstrations that targets new and beginning farmers under the age of
    25; and a beginning farmer demonstration/training website with various
    alternative enterprises, production management practices, and market
    development models. The demonstration site uses hands-on training
    activities in collard and green bean production and marketing to show
    the viability of alternative market opportunities, including
    institutions, retail, and direct-to-consumer outlets.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                  FY 2007           FY 2008           FY 2009           FY 2010          FY 2011
    ----------------------------------------------------------------------------------------------------------------
                                       (1)               (1)           $18,000           $19,000           $19,000
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided by transfer from Commodity Credit Corporation (CCC).

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                     FY 2007          FY 2008          FY 2009          FY 2010          FY 2011
    ----------------------------------------------------------------------------------------------------------------
                                           (1)              (1)           $1,800          $10,000          $18,550
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided by transfer from Commodity Credit Corporation (CCC).

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                     FY 2007          FY 2008          FY 2009          FY 2010          FY 2011
    ----------------------------------------------------------------------------------------------------------------
                                           (1)              (1)             $720             $760             $760
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided by transfer from Commodity Credit Corporation (CCC).

    9. Eligibility Criteria
        BFRDP program recipients must be a collaborative state, tribal,
    local, or regionally-based network or partnership of public or private
    entities, which may include: a state cooperative extension service; a
    Federal, state or tribal agency; a community-based and nongovernmental
    organization; college or university (including an institution awarding
    an associate's degree) or foundation maintained by a college or
    university; or any other appropriate partner, as determined by the
    Secretary. In accordance with the authorizing legislation, Priority
    will be given to partnerships and collaborations led by or including
    nongovernmental and community-based organizations with expertise in new
    agricultural producer training and outreach.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None               196               122
          Received
    Applications Funded         None                29                40
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Community Food Projects Competitive Grants Program (CFPCGP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        CFPCGP was authorized by Section 25 of the Food Stamp Act of 1977
    (7 U.S.C. 2034), as amended by the Food and Nutrition Act of 2008 and
    reauthorized by Section 4402 of the 2008 Farm Bill.
        Since 1996, CFPCGP has promoted self-sufficiency and food security
    in low-income communities through community food projects (CFP) and
    Training and Technical Assistance (T&TA) projects. CFPs unite the
    entire food system, assessing strengths, establishing linkages, and
    creating systems that improve self-reliance over food needs.
    4. Purpose/Goals
        CFPCGP was established to meet the needs of low-income people by
    increasing access to fresher, more nutritious food supplies; increase
    the self-reliance of communities in providing for their own food needs;
    promote comprehensive responses to local food, farm, and nutrition
    issues; meets specific state, local, or neighborhood food and
    agricultural needs for infrastructure improvement and development;
    plans for long-term solutions; and create innovative marketing
    activities that benefit both agricultural producers and low-income
    consumers. Grants are intended to help eligible private nonprofit
    entities in need of a one-time infusion of Federal assistance to
    establish and carryout multipurpose community food projects.
    5. Success in Meeting Programmatic Purpose/Goals
        Examples of success include:
        The Philadelphia Horticultural Society (PHS) is establishing and
    developing a network of urban entrepreneurial growers in Philadelphia
    that will significantly increase the supply of locally grown fruits and
    vegetables to Philadelphia communities. Over the course of 3 years,
    approximately 66 entrepreneurial growers are being supplied with
    locally grown seedlings as well as soil, tools and all necessary
    materials for sustainable urban food gardening for market. These
    growers are developing skills and experience in areas such as organic
    pest management, season extension, growing for market, crop planning,
    marketing, and networking through five mandatory workshops and on-going
    technical assistance delivered by PHS staff. Marketing and distribution
    opportunities for the growers are being developed by PHS staff (with
    grower input) and includes community farmers markets, mobile purchase
    by a local co-op market, purchase by a local food assistance provider,
    and relationships with 20 wholesale outlets. They are also establishing
    and operating three Neighborhood Green Centers to serve the network of
    growers as well as the surrounding community; and improving food
    security and access to affordable, locally grown produce in targeted
    neighborhoods by establishing three community farmers markets with
    partner organizations to provide 50 market days over the course of 3
    years in targeted areas in which CGA produce can be sold at affordable
    prices. Over 4300 pounds of naturally grown produce was made available
    to local residents during this first year of the project. As additional
    growers are added in years 2 and 3, this annual output will increase.
        The American Friends Service Committee in New Mexico (AFSC) is to
    increasing economic development and food security for low-income
    communities in the South Valley and surrounding areas. They are
    providing direct technical assistance to farmers to develop farm
    infrastructure, increase technical farming skills and entrepreneurial
    capacity; facilitating the development of a network of community-based
    farms with a joint business plan and set up procurement by
    institutional buyers, retail outlets, and wholesale distributors and
    families; (3) documenting training curricula, best practices and
    lessons learned for farmer-to-farmer information sharing and outreach;
    and increasing local food sales and nutritional education in
    Albuquerque Public Schools and among low-income communities in the
    South Valley. The project has met and exceeded expectations in its
    first year, especially in terms of training outcomes (meeting trainee
    learning objectives) and enterprise capacity. Project participants
    experienced market growth, production growth, and increased income,
    notable given the farmers limited to no farming experience or training
    at the beginning of the project. The year one trainees/farmers all have
    ongoing farm enterprises and expect to continue to earn substantial
    parts of their household income from farming into the near future. In
    addition to its market successes, the establishment of ACN promises to
    represent an important advancement in institutionalized organizational
    collaboration in the South Valley.
        World Hunger Year, Inc. (WHY) is working in conjunction with the
    Community Food Security Coalition (CFSC) on ongoing evaluation of the
    Food Security Learning Center (FSLC). These evaluation measures will
    help gain a better understanding of the FSLC audience, what tools and
    resources they need to conduct their work or research and how to take
    action and combat challenges facing our food system. WHY staff is
    currently evaluating the effectiveness of the FSLC. This includes
    determining how the outcomes and outputs of the FSLC can be best
    measured. Finally, WHY will document major initiatives that take place
    as a result of this project through event surveys, meeting minutes,
    photographs and video, etc. These will be used to inform future
    decisions, delegate responsibilities and write final reports.

                               6. Annual Budget Authority (Fiscal Year (FY) 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget     $5,000    $5,000   $5,000   $5,000   $5,000   $5,000     * $0  $10,000   $5,000   $5,000
               Authority
    ----------------------------------------------------------------------------------------------------------------
    * FY 2008 funds were made available to NIFA in FY 2009.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                     FY 2007          FY 2008          FY 2009          FY 2010          FY 2011
    ----------------------------------------------------------------------------------------------------------------
             Annual Outlays                (*)              (*)              (*)              (*)              (*)
    ----------------------------------------------------------------------------------------------------------------
    * Mandatory funding was provided by transfer from the Food and Nutrition Service. Therefore, NIFA does not
      report outlays for the program.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                     FY 2007          FY 2008          FY 2009          FY 2010          FY 2011
    ----------------------------------------------------------------------------------------------------------------
       Annual Delivery Cost               $200               $0             $400             $200             $200
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        A. Community Food Projects (CFP) and Planning Projects (PP)
    Eligibility

        Only private, nonprofit entities, meeting the following three (3)
    requirements are eligible to receive a CFP or PP grant:

              (a) have experience in the area of:

                      (i) community food work, particularly concerning
                    small and medium-size farms, including the provision of
                    sustainably produced food to people in low-income
                    communities and the development of new markets in low-
                    income communities for agricultural producers; or
                      (ii) job training and business development activities
                    for food-related activities in low-income communities;

              (b) demonstrate competency to implement a project, provide
            fiscal accountability, collect data, and prepare reports and
            other necessary documentation; and
              (c) demonstrate a willingness to share information with
            researchers, evaluators, practitioners, and other interested
            parties, including a plan for dissemination of results.

        B. Partners and Collaborators

        Applicants with CFP and PP proposals are encouraged to seek and
    create partnerships with public or private, nonprofit or for-profit
    entities, including links with academic institutions (including
    minority-serving colleges and universities), and/or other appropriate
    professionals, community-based organizations, and local government
    entities. Only the applicant must meet the eligibility requirements.
    Project partners and collaborators need not meet the eligibility
    requirements.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                113               159               171
          Received
    Applications Funded         None                50                27
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        Complainant (an employee of the grantee, Our School of Blair
    Grocery, New Orleans) contacted NIFA alleging that grantee has depleted
    most of the approx. $299,000 award without fulfilling the required
    budgetary items or the programming listed in the proposal. Complaint
    was received March 29, 2011and review is ongoing.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Distance Education Grants for Insular Areas.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The Distance Education Grants for Insular Areas (DEG) program is
    administered under the Provisions of 7 U.S.C. 3362, to strengthen the
    capacity of Insular Area institutions to carry out distance education
    programs in the food and agricultural sciences. This program was first
    funded in FY 2010.
    4. Purpose/Goals
        The purpose of this program is to strengthen the capacity of
    institutions of higher education in Insular Areas to carry out resident
    instruction, curriculum, and teaching programs in the food and
    agricultural sciences through distance education technology. The
    Distance Education Grants Program for Institutions of Higher Education
    in Insular Areas (DEG) is a NIFA-administered competitive grants
    program focused on improving formal, post-secondary agricultural
    sciences education.
    5. Success in Meeting Programmatic Purpose/Goals
        Although this grant program is too new to have any discernable
    success to date examples of expected success include:
        These new funds will strengthen the University of Guam's Distance
    Education for the Consortium of Caribbean and Pacific Island
    institutions (CariPac) and are a key strategy for fulfilling the
    mission. The Caribbean and Pacific Island students contribute to
    sustaining a balanced and healthy society, and provide excellent higher
    education in Agriculture and Food Science, within the Insular Areas, to
    meet the evolving needs of a global society supports the Distance
    Education program goals: (1) to increase the number of graduates with a
    degree in the food and agricultural sciences and (2) helps students
    achieve their career goals and help meet workplace needs by increasing
    the quality of undergraduate instruction. The goals of CariPac are to
    harness research and education to help address local food,
    agricultural, and environmental needs; support local economic growth;
    and to prepare students to achieve their own personal career goals.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)             (1)             (1)            $750            $749
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)             (1)             (1)             $38            $112
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              (1)             (1)             (1)             $30             $30
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

    9. Eligibility Criteria
        Applications may only be submitted by an institution of higher
    education, as defined in section 101(a) of the Higher Education Act of
    1995 (20 U.S.C. 1001(a)), that is located in an Insular Area and that
    has a demonstrable capacity to carry out teaching and extension
    programs in the food and agricultural sciences. Individual land-grant
    colleges and universities, and other institutions that have secured
    land-grant status through Federal legislation, and which are located in
    Insular Areas are automatically eligible for awards under the DEG
    grants program, either as direct applicants or as parties to a
    consortium agreement. The eight insular areas are the Commonwealth of
    Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern
    Mariana Islands, the Federated States of Micronesia, the Republic of
    the Marshall Islands, the Republic of Palau, and the Virgin Islands of
    the United States.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None              None                 1
          Received
    Applications Funded         None              None                 1
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Farm Business Management and Benchmarking Program (FBMB).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The authority for this program is under Section 7208 of the 2008
    Farm Bill which amended the Food, Agriculture, Conservation and Trade
    Act of 1990 by adding section 1672D (7 U.S.C. 5925f) which established
    a competitive research and extension grants program to support improved
    farm management. The FBMB program was newly authorized by the FCEA and
    initially funded in FY 2010.
    4. Purpose/Goals
        The Farm Business Management and Benchmarking (FBMB) Competitive
    Grants Program provides funds to (1) improve the farm management
    knowledge and skills of agricultural producers; and (2) establish and
    maintain a national, publicly available farm financial management
    database to support improved farm management.
    5. Success in Meeting Programmatic Purpose/Goals
        Although this grant program is too new to have any discernable
    success to date examples of expected success include:
        This competitive grants program provides funds to improve the farm
    management knowledge and skills of agricultural producers; and
    establish and maintain a national, publicly available farm financial
    management database to support improved farm management.
        The University of Minnesota is leading the effort by developing and
    maintaining a national, publicly available online farm financial
    database that any U.S. producer can use for benchmarking and improving
    their farm management. The project will improve the profitability and
    competitiveness of small and mid-sized U.S. farms and ranches by
    providing benchmarking resources using high-quality farm financial
    management data. Benchmarking allows producers to compare their
    performance to farms and ranches of similar size that produce the same
    products. The benchmarking database will let producers identify their
    businesses strengths and weaknesses. To develop and expand a national
    benchmarking database of actual farm data, the data will be collected
    by farm business management education programs and associations that
    deliver financial analyses to producers. Data collection and
    aggregation into a national database will be accomplished through
    increased collaboration between state-level farm management education
    programs and associations. A National Farm Management Center is being
    established to develop and maintain the benchmarking database and to
    facilitate collaboration among the many state level programs that will
    partner to implement the database. The national center will coordinate
    development of standardized procedures and training for financial
    analysis and data collection methodologies to ensure the database
    provides uniform benchmarking data. Twelve farm business management
    education programs and associations in eleven states will collaborative
    to implement this project. Several additional programs will be involved
    in a task force to discuss how to expand the database to include more
    states. The national database will be publicly available to all U.S.
    producers. Use of the database for benchmarking will improve producers'
    abilities to successfully manage risk and financial challenges and to
    become more globally competitive.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)             (1)             (1)          $1,500          $1,497
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)             (1)             (1)            $150            $825
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              (1)             (1)             (1)             $60             $60
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2010.

    9. Eligibility Criteria
        Pursuant to 7 U.S.C. 450i(b)(7), eligible applicants means: (A)
    state agricultural experiment stations; (B) colleges and universities;
    (C) university research foundations; (D) other research institutions
    and organizations; (E) Federal agencies; (F) national laboratories; (G)
    private organizations or corporations; (H) individuals; or (I) any
    group consisting of two or more of the entities described in
    subparagraphs (A) through (H).

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None              None                 6
          Received
    Applications Funded         None              None                 1
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Food and Agriculture Defense Initiative (FADI).
    2. Subprograms/Department Initiatives
            National Animal Health Laboratory Network (NAHLN)
            National Plant Diagnostic Network (NPDN)
            Extension Disaster Education Network (EDEN)
    3. Brief History
        Section 1484 (7 U.S.C. 3351) of the National Agricultural Research,
    Extension, and Teaching Policy Act of 1977 (NARETPA), which was amended
    by the 2002 Farm Bill, provides amounts for agricultural research,
    extension, and education. There are also amounts authorized to be
    appropriated for agricultural research, education, and extension
    activities for biosecurity planning and response.
        According to NARETPA of 1977, using any authority available to the
    Secretary, the Secretary shall use funds made available under this
    section to carry out agricultural research, education, and extension
    activities (including through competitive grants) for the following:

        (1) To reduce the vulnerability of the United States food and
            agricultural system to chemical or biological attack.

        (2) To continue partnerships with institutions of higher education
            and other institutions to help form stable, long-term programs
            to enhance the biosecurity of the United States, including the
            coordination of the development, implementation, and
            enhancement of diverse capabilities for addressing threats to
            the nation's agricultural economy and food supply with special
            emphasis on planning, training, outreach, and research
            activities related to vulnerability analyses, incident
            response, and detection and prevention technologies.

        (3) To make competitive grants to universities and qualified
            research institutions for research on counterbioterrorism.

        (4) To counter or otherwise respond to chemical or biological
            attack.
    4. Purpose/Goals
        a. The National Animal Health Laboratory Network (NANLN)--The
            United States Department of Agriculture established the NAHLN
            as part of a national strategy to coordinate and network the
            diagnostic testing capacities of the Federal veterinary
            diagnostic laboratories with the extensive infrastructure
            (facilities, professional expertise, and support) of state and
            university veterinary diagnostic laboratories. This network
            enhances the nation's early detection of, response to, and
            recovery from animal health emergencies, including bioterrorist
            events, newly emerging diseases, and foreign animal disease
            (FAD) agents that threaten the nation's food supply and public
            health. NIFA and the Animal and Plant Health Inspection Service
            cooperatively provide leadership for this network.

        b. National Plant Diagnostic Network (NPDN)--The NPDN mission is to
            quickly detect, diagnose and communicate outbreaks of newly
            introduced and emerging high consequence pests in over 1
            billion acres of forest, pasture, and crop lands of the United
            States of America (please see attached Impact of the NPDN).
            Early detection leads to early response and successful
            remediation.

        c. Extension Disaster Education Network (EDEN)--The Extension
            Disaster Education Network (EDEN) mission is to reduce the
            impact of disasters through extension education. Seventy
            institutions from all 50 states and three U.S. territories
            participate in EDEN. This valuable network of multidisciplinary
            professionals ensures that the cooperative extension system can
            appropriately respond to local, state, regional, and national
            education needs during a crisis. This network and its
            management fit well into the nation's Homeland Security
            framework.
    5. Success in Meeting Programmatic Purpose/Goals
        The National Animal Health Laboratory Network (NAHLN) is a national
    network of non-Federal public animal diagnostic laboratories; under the
    leadership of NIFA, Animal and Plant Health Inspection Service (APHIS),
    and the American Association of Veterinary Laboratory Diagnosticians.
    It has 12 core laboratories who receive NIFA support; which are located
    at Cornell University (New York), Louisiana State University,
    University of Georgia, Texas A&M, University of Wisconsin, Iowa State
    University, Colorado State University, Washington State University,
    University of California at Davis, University of Arizona, North
    Carolina Department of Agriculture and Consumer Services, and Florida
    Department of Agriculture and Consumer Services. In addition to these
    core laboratories, NIFA provides a reduced amount of funding for
    laboratories in 16 other states: Oregon, Utah, New Mexico, Wyoming,
    South Dakota, Nebraska, Kansas, Minnesota, Mississippi, Tennessee,
    Indiana, Michigan, Kentucky, Ohio, Pennsylvania, and New Jersey. Animal
    disease-detection criteria have been developed for the following ten
    high-consequence diseases: Foot-and-Mouth Disease, Exotic Newcastle
    Disease, Classical Swine Fever (or hog cholera), High Pathogen Avian
    Influenza, Low Pathogen Avian Influenza, Bovine Spongiform
    Encephalopathy, Scrapie, Chronic Wasting Disease, Rift Valley Fever and
    African Swine Fever. African Swine Fever, added in Fiscal Year 2010,
    causes swine to have high fevers, reddening of the skin, hemorrhages in
    lymph nodes and internal organs, and occasionally enlargement of the
    spleen. NAHLN is part of a national strategy to coordinate the nation's
    Federal, state and university laboratory resources.
        The National Plant Diagnostic Network (NPDN) is a 50 state network
    of land-grant university based plant diagnostic laboratories. The
    network is led by diagnostic laboratory centers at Cornell University
    (New York), University of Florida, Kansas State University, Michigan
    State University, and University of California at Davis. These
    institutions receive direct funding from NIFA and provide support to
    the other land-grant plant diagnostic laboratories in their region
    through subcontracts, training, and leadership. Because of this, plant
    laboratories in every state receive Federal funding and other support
    from the five NPDN centers. All 50 states and many U.S. territories are
    connected to the NPDN through digital distance diagnostics, used
    throughout the nation to speed early detection of high consequence
    plant pathogens and solve other agricultural problems. This web-based
    diagnostics system allows plant diagnosticians in one location to
    transmit a digital image across the country to someone with special
    expertise. Plant disease (and insect) detection criteria have been
    developed for soybean rust, sudden oak death, Ralstonia stem rot, plum
    pox virus, pink hibiscus mealybug, potato wart, huanglongbing (citrus
    greening), Potato Cyst Nematode, Late Blight and Beet Curly Top. The
    laboratory network partnered with other cooperative extension officials
    to quickly and efficiently conduct a widespread outreach and detection
    campaign on tomato and potato Late Blight, which became a significant
    problem in 2009 for the first time since the network was established. A
    new diagnostic test was implemented for Beet Curly Top, a disease
    spread by insects that affects tomatoes, sugarbeets, table beets,
    beans, and cucurbits.
        The Extension Disaster Education Network (EDEN) is a collaborative
    multi-state effort by extension services across the country to improve
    the delivery of services to citizens affected by disasters. NIFA leads
    this effort. For example, the University of Arkansas Cooperative
    Extension Service assisted communities in the aftermath of severe ice
    storms and tornadoes that tore through Arkansas in the winter and
    spring. Faculty and staff helped residents and community leaders cope
    with disaster, identify and locate sources of assistance, make
    emergency plans, find information on emergency sheltering, manage storm
    damaged trees and debris, and negotiate FEMA regulations

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                               FY04        FY05        FY06       FY07       FY08       FY09       FY10       FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget       $7,953      $8,928     $9,900     $9,900     $9,830     $9,830     $9,830     $5,988
                Authority
    ----------------------------------------------------------------------------------------------------------------

                       7. Annual Outlays (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                          FY06     FY07     FY08     FY09     FY10     FY11
    ------------------------------------------------------------------------
       Annual Outlays               $495   $3,957   $7,397   $9,848   $9,638
    ------------------------------------------------------------------------

                    8. Annual Delivery Cost (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                          FY06     FY07     FY08     FY09     FY10     FY11
    ------------------------------------------------------------------------
      Annual Delivery               $396     $393     $393     $393     $240
                  Cost
    ------------------------------------------------------------------------

    9. Eligibility Criteria
        Although applications may be submitted by universities and
    qualified research institutions for research on counterbioterrorism,
    NIFA makes awards through non-competitive cooperative agreements.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 35                35                36
          Received
    Applications Funded           35                35                35
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Food Animal Residue Avoidance Database Program (FARAD).
    2. Subprograms/Department Initiatives
        There are no subprograms.
    3. Brief History
        Section 604 of the Agricultural Research, Extension, and Education
    Reform Act of 1998 (7 U.S.C. 7642) authorized this program. Section
    7312 of the 2008 Farm Bill authorized appropriations and reauthorized
    the program through FY 2012.
    4. Purpose/Goals
        This funding is used to establish and maintain FARAD, a computer-
    based decision support system designed to provide livestock producers,
    extension specialists, and veterinarians with practical information on
    how to avoid drug, pesticide, and environmental contaminant residue
    problems.
    5. Success in Meeting Programmatic Purpose/Goals
        NIFA administers the funding that establishes and maintains the
    Food Animal Residue Avoidance Databank (FARAD), a computer-based
    decision support system designed to provide livestock producers,
    extension specialists, and veterinarians with practical information on
    how to avoid drug, pesticide, and environmental contaminant residue
    problems. The drugs and pesticides used in modern animal agriculture
    improve animal health and thereby promote more efficient and humane
    production.
        Wherever drugs are used to treat sick animals or prevent disease,
    there is a potential that residues may be incurred. The U.S. Food and
    Drug Administration (FDA), which must approve all drugs meant to be
    marketed for use in animals, establishes tolerances for drug residues
    (similar to speed limits) to ensure food safety. The FDA also
    establishes ``withdrawal times'' or ``withholding periods,'' which are
    times after drug treatment when milk and eggs are not to be used for
    food and during which animals are not to be slaughtered. This allows
    time for the animals to eliminate the drug residues.
        FARAD is a repository of comprehensive residue avoidance
    information. FARAD also is sanctioned to provide these estimates to the
    U.S. Pharmacopeia-Drug Information (USP-DI) Veterinary Medicine
    Advisory Committee. Since 1982, FARAD has been working with producers,
    extension specialists and agents, and veterinarians to help avoid and
    mitigate residue problems. As a cooperative multi-state program, FARAD
    is available nationwide to offer advice about residue avoidance.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)             (1)            $806          $1,000            $998
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)             (1)            $484            $898            $977
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              (1)             (1)             $32             $40             $40
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

    9. Eligibility Criteria
        The Secretary shall offer to enter into a contract, grant, or
    cooperative agreement with one or more appropriate colleges and
    universities to operate the FARAD program.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None                 5                 4
          Received
    Applications Funded         None                 5                 4
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Grants for Youth Serving Institutions (Rural Youth Development
    Grants Program or RYD).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 410 of the Agricultural Research, Extension, and Education
    Reform Act of 1998 (7 U.S.C. 7630) authorized this program.
        Section 7309 of the 2008 Farm Bill reauthorized 7 U.S.C. 7630 and
    also amended to provide additional flexibility in content delivery to
    each organization receiving funds and to allow recipients to
    redistribute all or part of the funds to individual councils or local
    chapters without further need of approval from the Secretary.
    4. Purpose/Goals
        The goals are to support and enhance the goals, objectives, and
    priorities of the eligible youth organizations; Support programs which
    address issues and needs of rural youth; Involve youth in design and
    implementation of their educational activities; Increase knowledge,
    skills, attitudes and behaviors necessary for rural youth to live
    productive, contributing, and fulfilling lives; and Increase economic
    opportunities and sustainability and improve quality of life in rural
    communities through enhanced human, social, civic, natural, financial,
    cultural, and built capital.
    5. Success in Meeting Programmatic Purpose/Goals
        NIFA makes grants available to the Girl Scouts of the United States
    of America, the Boy Scouts of America, the National 4-H Council, and
    the National FFA Organization to establish pilot projects to expand the
    programs carried out by the organizations in rural areas and small
    towns.
        Examples of success:
        The Girl Scouts in Rural Communities (GSRC) project utilizes Girl
    Scouting to facilitate the training and experiences that will empower
    rural girls with the leadership and personal development assets and
    skills to improve their lives and their communities. Funds enable the
    implementation of the ``Challenge and Change: Challenge Yourself,
    Change Your World'', a social entrepreneurship curriculum-based project
    for rural teen girls (ages 14-17) that was launched in FY 2005. Through
    this program the Girls Scouts recruit and train rural girls in social
    entrepreneurship (Challenge and Change Curriculum); provide
    opportunities for rural girls to assess the needs of their rural
    communities; provide opportunities for rural girls to identify, plan
    and lead projects aimed at solving identified needs in their
    communities; recruit and train adults to facilitate girl participation
    and serve as caring adults; and develop partnerships with other
    organizations in their communities to facilitate social
    entrepreneurship projects and the development of rural girls.
        National FFA Organization is providing outreach and dissemination
    of their ``Living to Serve'' materials to over 7,000 chapters serving a
    membership base of approximately 500,000. They deliver tools that
    motivate and mobilize rural youth to partner with adults in joint
    ventures to create change in their communities that address identified
    needs and build capital. This program was the catalyst to move FFA from
    a model of ``community service'' to a much more rich and meaningful
    model of ``service-learning''. The ``Living to Serve'' instructional
    materials provide education on the principles of service-learning.
    These projects have dealt with specific community needs identified by
    the FFA members, plus the overarching goal of civic engagement and
    youth leadership.
        The National 4-H Council implemented the ``Engaging Youth, Serving
    Community'' (EYSC) program that supports land-grant university efforts
    to develop, implement, and evaluate community based issues forums and
    action plans in rural communities. Projects provide youth with adult
    partners and constructive peer interaction through youth-adult
    partnerships and empower youth through meaningful leadership roles and
    life skills development. Youth and adults gain the life skills and
    experience needed to emerge as effective leaders and contributing
    members of society; develop positive attitudes towards the roles of
    youth in communities; improve their abilities to work with diverse
    community members to identify local issues and develop strategies for
    addressing these issues; and provide more opportunities for youth and
    families in rural communities for positive youth development
    experiences during out-of-school time.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget     $8,000    $2,981   $2,667   $2,646   $1,980   $1,980   $1,737   $1,767   $1,784   $1,780
               Authority
    ----------------------------------------------------------------------------------------------------------------
    Note: In FY 2002, Grants for Youth Serving Institutions were funded by transfer to the agency from Commodity
      Credit Corporation funds.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays           $1,188          $1,775          $1,723          $1,761          $1,783
    ----------------------------------------------------------------------------------------------------------------
    Note: In FY 2002, Grants for Youth Serving Institutions were funded by transfer to the agency from Commodity
      Credit Corporation funds.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              $79             $70             $71             $71             $71
    ----------------------------------------------------------------------------------------------------------------
    Note: In FY 2002, Grants for Youth Serving Institutions were funded by transfer to the agency from Commodity
      Credit Corporation funds.

    9. Eligibility Criteria
        Pursuant to 7 U.S.C. 7630(a), only the Girl Scouts of the United
    States of America (GSUSA), the National 4-H Council (4-H), the Boy
    Scouts of America (BSA), and the National FFA Organization (FFA) are
    eligible.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                  3                 3                 4
          Received
    Applications Funded            3                 3                 3
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Healthy Urban Food Enterprise Development Center (HUFED).
    2. Subprograms/Department Initiatives
        There are no subprograms.
    3. Brief History
        The Healthy Urban Food Enterprise Development Center (HUFED)
    legislative authority is located in Section 25(h) (7 U.S.C. 2034(h)) of
    the Food and Nutrition Act of 2008. The HUFED Center program was
    created to respond to the need to redevelop a food enterprise structure
    in the United States in order to make more healthy, affordable food
    available in low-income areas, to improve access for small and mid-
    sized agricultural producers, and to promote positive economic
    activities generated from attracting healthy food enterprises into
    underserved communities.
        Section 4402 of the 2008 Farm Bill provided mandatory funding for
    the HUFED Center and program-specific requirements.
    4. Purpose/Goals
        The purpose of the HUFED Center grant program is to establish and
    support a Healthy Urban Food Enterprise Development Center to increase
    access to healthy affordable foods, including locally produced
    agricultural products, to underserved communities. The HUFED Center
    will provide training and technical assistance for food enterprises and
    award sub-grants to eligible entities for healthy food enterprise
    development.
    5. Success in Meeting Programmatic Purpose/Goals
        The purpose of the this program is to establish and support a
    Healthy Urban Food Enterprise Development Center (HUFED) to increase
    access to healthy affordable foods, including locally produced
    agricultural products, to underserved communities.
        Since the Center started, several high profile Federal initiatives
    interested in food access have emerged: Let's Move; Know Your Farmer,
    Know Your Food; and Healthy Food Financing Initiative. They have been
    actively pursuing news, information, and research to better position
    the Center to take advantage of the direction and interest in food
    access and regional food systems. The Center's understanding of the
    need for funding for healthy food enterprises was significantly
    deepened. They received 538 Letters of Interest (LOIs) within a 4 week
    outreach period. The LOIs spanned across the country, and included 47
    states, as well as the District of Columbia and the U.S. Virgin
    Islands. A preliminary analysis of the applicant database has provided
    further insight on the landscape of food access work, which will inform
    future strategies not only for HUFED, but also for USDA. The
    enterprises for Year 1 grantees are underway and outcomes and impacts
    from their enterprises will be reported in Year 2's Accomplishments
    Report. Due to the new high profiled initiatives, the Center has taken
    a stronger effort in meeting and sharing information with USDA Deputy
    Undersecretaries and Senior Advisors to further link the Center's
    resources and knowledge. After designing and managing the proposal
    process for Year 1, an evaluation was conducted to identify
    efficiencies and areas of improvement for future RFAs. The grant making
    process will be streamlined towards the needs of the applicants, as
    well as the review panel. As the grantees begin the enterprises, HUFED
    is working with the internal evaluator, Kingslow Associates LLC, to
    ensure that metrics and indicators are in place so that the Center as
    well as the individual enterprises, can effectively measure their
    successes and challenges, with the long term goal of documenting best
    practices and lessons learned. The Center is also providing grantees
    guidance, and coaching around evaluation, and assisting with reporting
    and working with government grants, as needed.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)             (1)          $1,000          $1,000          $1,000
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided through direct appropriation from the farm bill.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)             (1)            $100            $550          $1,000
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided through direct appropriation from the farm bill.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              (1)             (1)            $100            $100            $100
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009. Mandatory funding was provided through direct appropriation from the farm bill.

    9. Eligibility Criteria
        Eligible Applicants are nonprofit organizations are eligible to
    apply for and receive awards under the HUFED Center authority (7 U.S.C.
    2034(h)(2)).
        Regarding Eligible Applicants for Subgrants, the term ``eligible
    entity'' for the purpose of subgrants means (A) a nonprofit
    organization; (B) a cooperative; (C) a commercial entity; (D) an
    agricultural producers; (E) an academic institution; (F) an individual;
    and (G) such other entities as the Secretary may designate. Award
    recipients may subcontract to organizations not eligible to apply
    provided such organizations are necessary for the conduct of the
    project.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None                13                 1
          Received
    Applications Funded         None                 1                 1
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Hispanic-Serving Agricultural Colleges and Universities (HSACU).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The authority for this program is under Section 7101 of the 2008
    Farm Bill which amended section 1404 of the National Agricultural
    Research, Extension, and Teaching Policy Act of 1977 to add a
    definition for a new group of cooperating educational institutions
    known as Hispanic-Serving Agricultural Colleges and Universities.
        Additionally, Section 7129 of the 2008 Farm Bill authorizes the
    following five new programs for HSACUs: (1) HSACU Endowment Fund
    (formula-based); (2) HSACU Equity Grants Program (formula-based); (3)
    HSACU Institutional Capacity-Building Grants Program (competitive); (4)
    HSACU Extension Grants Program (competitive); and (5) HSACU Fundamental
    and Applied Research Grants Program (competitive).
        As of FY 2011, none of the five new programs have received an
    appropriation.
    4. Purpose/Goals
        Establishing a process to identify and certify HSACUs supports the
    Federal Government-wide initiative to streamline and standardize all
    Federal assistance processes across the Federal Government. NIFA will
    be able to apply consistent rules used to determine HSACU eligibility
    for Federal assistance programs, including programs created or amended
    by the passage of the FCEA.
        Use of funds from the HSACU Endowment Fund and the resulting
    interest distribution are authorized under the Act of August 30, 1980,
    (commonly known as the `Second Morrill Act') (7 U.S.C. 321 et seq.).
    These funds benefit the HSACUs by supporting teaching programs in the
    food and agricultural sciences in the targeted areas of (1) curricula
    design and instructional materials development, (2) faculty development
    and preparation for teaching, (3) instruction delivery systems, (4)
    student experiential learning, (5) equipment and instrumentation for
    teaching, and (6) student recruitment and retention.
    5. Success in Meeting Programmatic Purpose/Goals
        This program was not funded by appropriation and, therefore, has no
    examples of success in meeting programmatic goals. However, another
    funded program within NIFA, Higher Education--Hispanic Serving
    Institutions has examples of success which include:
        The education program at California State University in Fresno has
    improved and enhanced the capacity of food and agricultural science
    education on organic agriculture for plant science, food science,
    dietetic, and culinology. The grant helped create and facilitate an
    expansion of organic farming for teaching, research, and outreach
    programs. This project has attracted a number of under-represented
    student groups who are interested in learning and working with various
    aspects of healthy farming. CSU-Fresno has been able to establish year-
    round organic vegetable operation, organic greenhouse, organic herb
    garden, compost and vermicompost on campus farm operations for the
    first time which became an outdoor classroom demonstration to various
    classes and interested individuals, community, and local organizations
    such as Fresno City College, 4-H programs, and K-12 schools.
        The function of the TREE (Teaching and Research in Environmental
    Ecology) Program at the University of Texas at San Antonio is to
    recruit, retain and financially support underrepresented undergraduates
    and graduate students. Workshops, training programs and mentorship from
    local community entities have been used to foster and develop the
    student's interest in careers in conservation and natural resources.
    While only three role-model seminars were planned, twenty-eight (28)
    role-model seminars were presented by a USDA research scientist, the
    Endangered Species Grants Coordinator from Texas Parks and Wildlife,
    faculty from the University of Texas at San Antonio, and faculty from
    other universities in the United States. The program has increased the
    number of minority and disadvantaged students participating in
    conservation and natural resource research from one to twelve.
        Through partnerships with USDA Forest Service, University of
    California Riverside and University of California Santa Barbara, Mt.
    San Jacinto College in San Jacinto, California has implemented a
    strategic student recruitment and retention plan to increase diversity
    in the Environmental Studies degree program and facilitate seamless
    transfer to 4 year universities. As a result there have been
    significant increases in enrollment and retention of underrepresented
    groups. There has been a 148% growth in students enrolling and majoring
    in environmental studies during the first year of the project, and a
    205% growth moving into the second year. The Summer Field Institute
    showed a 400% increase in the enrollment of Hispanic and other under-
    represented students, outpacing the 375% growth in overall enrollment
    over the last year. Students mentored under this program have become
    increasingly active on campus and in the local communities, which will
    likely generate future growth as well.
    6. Annual Budget Authority (FY 2002-FY 2011)
        This program has not been funded.
    7. Annual Outlays (FY 2002-FY 2011)
        This program has not been funded.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        This program has not been funded.
    9. Eligibility Criteria
        HSACUs are defined as colleges and universities that qualify as
    Hispanic-serving Institutions (HSIs) and offer associate, bachelors, or
    other accredited degree programs in agriculture-related fields.
        HSACUs do not include 1862 land-grant institutions, as defined in
    section 2 of the Agricultural Research, Extension, and Education Reform
    Act of 1998 (7 U.S.C. 7601).

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None              None              None
          Received
    Applications Funded         None              None              None
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Integrated Research, Education, and Extension Competitive Grants
    Program (Section 406).
    2. Subprograms/Department Initiatives
        A. Water Quality

        B. Food Safety

        C. Regional Pest Management Centers

        D. Crops at Risk *
    ---------------------------------------------------------------------------
        * No funds were provided for this program in FY 2011 or FY 2012
    Budgets

    ---------------------------------------------------------------------------
        E. Risk Avoidance and Mitigation *

        F. Methyl Bromide Transition

        G. Organic Transitions
    3. Brief History
        Section 406 of the Agricultural Research, Extension, and Education
    Reform Act of 1998 (AREERA) (7 U.S.C. 7626), as reauthorized by Section
    7306 of the 2008 Farm Bill and authorized a competitive grants program
    that provides funding for integrated, multifunctional agricultural
    research, extension, and education activities.
        Section 7206 of the 2002 Farm Bill amended section 406(b) of AREERA
    to add the 1994 Land-Grant Institutions as eligible to apply for grants
    under this authority.
        Section 7129 of the FCEA amended section 406(b) of AREERA (7 U.S.C.
    7626(b)), adding Hispanic-serving agricultural colleges and
    universities (HSACUs) as eligible entities for competitive funds
    awarded under this authority.
    4. Purpose/Goals
        The purpose of the Integrated Research, Education, and Extension
    Competitive Grants Program (Section 406) is to provide funding for
    integrated, multifunctional agricultural research, extension, and
    education activities through a research, education, and extension
    competitive grants program. Grants are to be awarded to address
    priorities in United States agriculture that involve integrated
    research, education, and extension activities as determined by the
    Secretary in consultation with the National Agricultural Research,
    Extension, Education, and Economics Advisory Board (NAREEEAB).
    5. Success in Meeting Programmatic Purpose/Goals
        Examples of success include:

        Water Quality Program

        Faculty at the University of Rhode Island are heading up the
    Northeast States and Caribbean Islands (NESCI) Regional Water Program
    which is promoting collaboration, enhancing delivery of successful
    programs, and encouraging multi-state efforts to protect and restore
    water resources. The regional Sustainable Landscaping focus area has
    developed lawn care recommendations specific for northern and southern
    New England and is using these recommendations with residents to
    promote water quality protection. Post-evaluations of private well
    water workshops indicate that workshop participants are adopting
    practices to protect their private well, including: 52% had their well
    water tested; 67% inspected their wellhead; 18% maintained their water
    treatment system; 13% had a water treatment system installed. Moreover,
    Private Wells Nonpoint Education for Municipal Officials (NEMO)
    programs work with communities are resulting in changes to community
    plans, land use regulations, development practices, and the local
    decision making process that include strategies to protect water
    quality.
        The University of Maine has worked with four communities which have
    learned more about groundwater resources, private well water, and water
    quality testing. Training participants expressed increased awareness
    and interest in local groundwater issues and solutions to address
    quality and quantity concerns. To date, the trainings enabled 90
    students and parents to participate in ``GET WET!'' (a K-12
    environmental education program) and private well water screening for
    contaminants. At three different academic conferences, they shared
    preliminary findings regarding (a) social capital production through
    community-based research about groundwater and private wells, and (b)
    the factors that influence private well water testing as a result of
    extension activities, and intergenerational learning between students
    and parents of environmental education content.

        Food Safety Program

        Scientists at the University of Wisconsin are assisting small and
    very small plants in HACCP validation through: (1) development of
    methods for in-plant validation of heating/drying regimes used in
    making ground and formed beef jerky and for in-plant validation of beef
    carcass interventions, using lactic acid bacteria as pathogen
    surrogates; and (2) development of a multi-media outreach program to
    disseminate project results and assist processors and regulators in
    validating Critical Limits. This research showed that methods commonly
    recommended to consumers for drying beef jerky in home-style products
    do not produce a safe product. Recommendations are being prepared to
    share with consumers wishing to make ground-and-formed beef jerky
    safely at home.
        According to the Centers for Disease Control & Prevention, human
    enteric viruses are estimated to cause \2/3\ of the foodborne illness
    in the U.S. each year, with the great majority of those attributed to
    norovirus (NoV). Fruits and vegetables have increasingly been
    implicated as vehicles for NoV gastroenteritis. Researchers in Illinois
    are developing a method which will serve as a foundation for upcoming
    cross contamination studies which will in turn lead to the development
    of a risk assessment model for NoV transfer within the food service
    setting. The methods developed from this project thus far, allowed for
    an assessment of recover methods for viruses. Recovery rates varied
    widely and the project team was able to use the information in method
    selection and refinement to ensure consistent recovery of viruses.

        Regional Pest Management Centers

        The goal of the Regional Integrated Pest Management Centers (IPM
    Centers) is to promote the development and implementation of IPM by
    facilitating collaboration across states, disciplines, and purposes.
    IPM Centers will establish and maintain information networks, build
    partnerships to address pest management challenges and opportunities,
    evaluate the impact of IPM implementation, communicate positive
    outcomes to key stakeholders, and manage funding resources effectively.
    The IPM Roadmap addresses pest management needs for production
    agriculture, natural resources and recreational environments, and
    residential and public areas.
        Examples of success include:
        The Integrated Pest Management Pest Information Platform for
    Extension and Education (ipmPIPE) informs growers about seasonal
    development and spread of Asian soybean rust, a devastating disease of
    legumes. The Regional IPM Centers manage this program that has allowed
    soybean growers to save a conservative estimate of $1 billion or more
    since 2005. Most of the savings derive from the ability by growers of
    98% of the crop to avoid unnecessary fungicide applications. USDA's
    Economic Research Service estimated farmers avoided as much as 0.2lb of
    fungicide per acre per season, which works out to about 74 million
    pounds of fungicide avoided since 2005. Soybean growers in Gulf Coast
    states, where the disease is more prevalent, use the program to
    properly choose fungicides and time applications to protect their crop.
    In a similar program, pecan growers estimated gains of $268/acre from
    the ipmPIPE Pecan system representing a potential benefit of $77
    million for the 288,000 acres in participating states. Another ipmPIPE
    component for vine crops (cucumber, pumpkin, melons, etc.) saved many
    participants 2-3 fungicide sprays in 2009.
        The Regional IPM Centers are collaborating with the EPA Tribal
    Pesticide Program Council (TPPC), USDA Tribal Education Equity and
    Extension Programs, 1994 and 1862 Land-Grant institutions, First
    American Land-Grant College and Organization Network (FALCON), American
    Indian Higher Education Consortium and First Nations to increase IPM
    practices and reduce pesticide usage and risk on reservations. The
    development of culturally sensitive IPM curricula and training modules
    allows for greater acceptance and implementation of IPM practices on
    the 56 million acres of tribal land. The program focuses on developing
    relationships at the state, regional and national levels to share
    knowledge of existing practices and foster adoption of these practices
    by other First Nations.
        The Regional IPM Centers are coordinating ``IPM Training in Public
    Housing,'' a national project to reduce pest-related risks that can
    trigger asthma. This collaborative effort between the Regional IPM
    Centers, U.S. Department of Housing and Urban Development's Healthy
    Homes Initiative, the Environmental Protection Agency, Land-Grant
    institutions, and public housing personnel and residents is
    implementing IPM to reduce human health risks. There are 1.2 million
    public housing units in the U.S. This project addresses many urban pest
    issues including bed bug infestations that are increasing at an
    alarming rate across the U.S. Partnering with the public housing
    personnel and residents will allow this sustainable approach to have
    long-term impacts in reducing asthma and other human health problems
    resulting from pest infestations.

        Crops at Risk

        In December 2008, the invasion of the Mexican rice borer (MRB) was
    discovered in two pheromone traps a few kilometers from the western
    Louisiana state line, in accordance with previously modeled forecasts.
    Annual yield losses of $220 million (sugarcane) and $45 million (rice)
    are forecast when the regions of both industries become fully infested.
    Research at Louisiana State University indicates that management
    techniques to mitigate the infestation which involve irrigation in
    sugarcane can reduce MRB losses up to 29%, use of environmentally
    friendly insecticides can reduce losses up to 53%, and resistant
    cultivars can reduce losses by 24%. The multi-year quarantine on MRB
    movement through the transport of sugarcane into Louisiana is projected
    to save between $1.1 and $3.2 billion (depending on management) during
    the time for complete invasion of both industries.
        The University of California Davis has developed a polymerase chain
    reaction (PCR)-based diagnostic assay to differentiate races one and
    two of Verticillium dahliae, the pathogen that causes Verticillium wilt
    in lettuce. No resistance in lettuce cultivars is currently available
    against race two. This assay has allowed the determination of the
    current distribution of the two races in coastal California. Based on
    these results, the growers have been able to avoid planting lettuce in
    fields that contained race two. These results have been disseminated
    widely to the California Leafy Greens Board that is attended by
    growers, processors, seed company representatives, and everyone
    associated with the lettuce supply chain.

        Risk Avoidance and Mitigation

        Scientists at the University of Georgia developed a method which
    documented high level of resistance to Tomato spotted wilt virus (TSWV)
    in tomato under field conditions. This single tactic provides an
    available, viable means of managing this serious pest problem in
    commercial production systems. Growers were able to view the different
    resistant cultivars in the field so that they could evaluate the plants
    directly. Growers that participated in this project will likely base
    planting decisions on these results in subsequent commercial plantings.
    As early in the project as 2009, scientists were able to demonstrate an
    8-12 fold increase in tomato yield with the resistant lines under heavy
    TSWV infection pressure in the field. The implementation of the use of
    host plant resistant lines and other tactics presented here could save
    growers millions of dollars annually.
        Research by scientists in California is developing integrated pest
    management strategies to control the potato psyllid, a pathogen which
    is causing millions of dollars in damage to crops. As a result of
    research there has been a change in the understanding that many
    pesticides reduce transmission of the bacterial pathogen by the potato
    psyllid through repellency, not simply by killing the psyllid. As the
    result of an aggressive effort to disseminate this information, growers
    are beginning to change their pesticide use patterns from very
    intensive weekly control efforts that relied on large amounts of
    chemical pesticides, to a more sustainable approach using greener
    chemistries and application technique. This more sustainable approach
    also incorporates sampling to eliminate pesticide applications when the
    pest is not present, and to manage the potential development of
    pesticide resistance. As a result fewer pesticide applications are
    made, resulting in reduced costs to the grower and enhanced
    profitability, and as importantly, reduced farm worker and consumer
    exposure to agricultural chemicals.

        Methyl Bromide Transition

        The goal of the Methyl Bromide Transitions (MBT) program is to
    support the discovery and implementation of practical pest management
    alternatives to methyl bromide uses or minimize methyl bromide
    emissions for which the United States is requesting critical use
    exemptions. The program seeks to ensure that economically viable and
    environmentally sound alternatives to methyl bromide are in place and
    available as soon as possible. The program is focused on integrated
    commercial or field scale research that targets short- to medium-term
    solutions and associated extension activity that will foster the
    adoption of these solutions.
        Kansas State University's objective it to show a reduction in
    methyl bromide (MB) usage as a structural treatment in food-processing
    facilities by facilitating adoption of MB alternatives strategies such
    as sulfuryl fluoride (SF), heat treatment and integrated pest
    management (IPM) approaches through pilot and commercial scale
    evaluations. Documenting cost-effectiveness of each strategy is central
    to adoption of MB strategies. The work also involves quantifying
    effects of structure air-tightness and weather conditions on fumigant
    emissions from and dispersion around fumigated structures, an aspect
    useful in defining buffer zones for MB and SF fumigants. Research
    results showed that both methyl bromide and sulfuryl fluoride
    equilibrated throughout the five floors of the 340,000 cubic foot mill
    within 2 hours. Results are encouraging. When 1,250 pounds of sulfuryl
    fluoride was applied in a May application, all life stages of the red
    flour beetle were killed when using forced air heat treatment.
        Virginia ranks third in the U.S. in fresh-market tomato production,
    with the majority of acres grown on plasticulture, utilizing methyl
    bromide (MeBr). Bell peppers are grown using similar production
    practices. Both of these crops are highly susceptible to soilborne
    pests and overgrowth by noxious weeds. The use of MeBr has been the
    primary tool to suppress these pest problems, and tomatoes and peppers
    are listed as MeBr Critical Use Nominations for 2009. Results of
    research at Virginia Tech show that field trials in 2008 and 2009 were
    able to identify a bacterial wilt resistant tomato cultivar (BHN669)
    that produced commercially acceptable fruit and yield. A small acreage
    of BHN669 was commercially produced in 2009 by two tomato producing
    companies and was found to be a suitable cultivar in terms of agronomic
    qualities and was extremely successful at delivering acceptable yields
    with high levels of bacterial wilt resistance. In 2010, full scale
    production using BHN669 was implemented by several producers resulting
    in successful management of bacterial wilt in historically problematic
    fields. Cultivar screens are continuing in small research plots to
    determine if any replacements other than BHN669 are suitable for
    production on the Eastern Shore of Virginia. In addition to the
    favorable results obtained with BHN669, the fumigant dimethyl disulfide
    (DMDS) was discovered to effectively suppress levels of bacterial wilt
    in small plots.

        Organic Transition Program

        Georgia scientists examined the feasibility of using protected
    cultivation in plastic tunnels as a means of producing high quality,
    organic blueberries, blackberries, and raspberries under southeastern
    conditions. As a result, high tunnels were found to speed up vegetative
    and reproductive development of blueberries. Tunnels were effective at
    advancing the spring harvest of highbush blueberries and the summer
    harvest of floricane blackberries and raspberries. Tunnels also
    extended the season of autumn-producing primocane blackberries and
    raspberries. Overall, tunnels advanced spring production and extended
    fall production of blackberries and raspberries, increasing total
    harvest and berry size. Upon completion of the research, the high
    tunnels in Georgia became an integral part of the organic teaching
    program, assuring that students get hands-on experience with high
    tunnels.
        Organic soybean growers have few options for controlling the
    soybean aphid, which can severely depress soybean yields. Scientists in
    Minnesota found that planting a rye winter cover crop prior to soybeans
    can lead to lower densities of soybean aphids and an increase in yield
    when soybean aphid pressure is high. This is an important finding for
    organic farmers that have no reliable insecticides to use against
    soybean aphid.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget    $42,853   $43,942  $39,558  $42,714  $42,286  $42,286  $41,990  $41,990  $45,148  $28,942
               Authority
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays           $2,114         $16,900         $29,451         $40,384         $41,679
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost           $1,691          $1,680          $1,680          $1,806          $1,158
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Colleges and universities (as defined in section 1404 of NARETPA)
    (7 U.S.C. 3103) are eligible to submit applications for the Integrated
    Research, Education, and Extension Competitive Grants (Section 406)
    Programs.
        Section 1404 of NARETPA was amended by section 7101 of the Food,
    Conservation, and Energy Act of 2008 (Pub. L. 110-246), to define and
    include as eligible, Hispanic-serving Agricultural Colleges and
    Universities (HSACUs), and to include research foundations maintained
    by eligible colleges or universities.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                289               375               319
          Received
    Applications Funded           77                95                84
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        McIntire-Stennis Cooperative Forestry Research Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Pub. L. 87-778 (76 Stat.806, 16 U.S.C. 582a, et seq.) signed into
    law on October 10, 1962, is also known as the McIntire-Stennis
    Cooperative Forestry Research Act. This law provides the basis for
    Federal funding in forestry research and graduate education programs at
    state-certified schools of forestry in the United States.
        Funding is provided to the states through a formula-based
    allocation process which depends on several factors. First, a base
    amount (approximately $25,000) is allocated to each state; however,
    this base amount is excluded from the formula. The balance of funding
    to each state is determined through a ranking process and dependent
    upon the following three factors: (1) forty percent of the remaining
    balance is allocated based on the area of non-Federal commercial
    forestland; (2) forty percent is allocated based upon the volume of
    timber cut annually from stock; and (3) twenty percent is allocated
    based on the total expenditures for forestry research from non-Federal
    sources. Funds are then distributed to the eligible state-certified
    Institutions within the state as determined by the Governor's designee.
        Section 7412 of the Food, Conservation, and Energy Act of 2008
    amended section 2 of the McIntire-Stennis Cooperative Forestry Act (16
    U.S.C. 582a-1) to include the 1890 Land-Grant Institutions and made
    this change effective October 1, 2008. On an annual basis, USDA
    contacts the Governors of each state in which an eligible 1890
    institution is located and receives the names of the McIntire-Stennis
    certified institutions and the proportionate amount of the state's
    McIntire-Stennis funding that is to be allocated to each.
    4. Purpose/Goals
        The purpose of this program is to increase forestry research in the
    production, utilization, and protection of forestland; to train future
    forestry scientists; and to involve other disciplines in forestry
    research.
    5. Success in Meeting Programmatic Purpose/Goals
        This program assists all states in carrying out a program of state
    forestry research at state forestry schools and colleges and developing
    a trained pool of forest scientists capable of conducting needed
    forestry research, which should include: (1) ecological restoration;
    (2) catastrophe management; (3) valuing and trading ecological
    services; (4) energy conservation, biomass energy and bio-based
    materials development; (5) forest fragmentation: (6) carbon
    sequestration and climate change; and (7) ways of fostering healthy
    forests and a globally competitive forest resources sector.
        Examples of success include:
        Scientists in Kansas have produced applied knowledge on a series of
    herbicides to eradicate saltcedar, which is an invasive weed tree found
    on the flood plains on the Cimmaron National Grasslands in Kansas. From
    this research, techniques have been developed that result in more
    effective control with reduced labor and herbicides with a resulting
    reduction in costs.
        An invasive insect, the woodwasp Sirex noctilio, has recently
    become established in North American where it poses a significant
    threat to pine forests. The wasp transmits a pathogenic fungus and
    helps the fungus establish lethal infections by injecting a phytotoxic
    mucus into the trees along with the fungus and its eggs. Basic research
    at the University of Georgia is using advanced genomic and proteomic
    approaches to identify the bioactive protein and peptide constituents
    of the wasp mucus that facilitate fungal colonization of the pine
    tissues. Better understanding of the constituents and their mechanisms
    of action will enable development to develop genetic approaches and
    strategies to improve pine resistance to this pest.
        Research at the University of Kentucky on the black bear in both
    Florida and Kentucky have provided important demographic, resource and
    habitat use, and movement data valuable to wildlife and other natural
    resource managers and land stewards. Detailed GPS-based movement data
    are providing a foundation for new analytical approaches that is
    changing the way black bear and other large mammal telemetry data are
    collected and interpreted. These findings continue to inform both
    professional and public findings and perceptions of these ecologically
    and economically important species. Both the black bear and elk have
    the potential to drive a productive recreation-based economy in
    economically challenged southeastern Kentucky. A science-based
    understanding and appreciation for the black bear and elk will strongly
    influence educational efforts and concomitant public perceptions about
    the species in ways that reduce human-wildlife conflict and that
    promotes species viability.
        Research at the University of Illinois developed methods which were
    used to map the flooding regimes and internal drainage of soils in
    newly-acquired Weaver Park in Urbana, Illinois. This information is
    being used to plan the ecological restoration of native forest,
    prairie, and wetland plants in the park. A soil moisture regime map
    with micro-ecosystem level precision and greater accuracy than county
    soil maps was developed and reported in an article in the journal
    ``Restoration Ecology.'' Soil moisture adaptations of plants to be used
    in the ecosystem restoration project are being matched to planting
    sites across a precisely mapped gradient of soil moisture from flooded
    to moderately well-drained. This is being done through a collaboration
    among the University of Illinois Agricultural Experiment Station, the
    Illinois State Geological Survey, and the Urbana Park District.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget    $21,884   $21,742  $21,755  $22,205  $22,008  $30,008  $24,791  $27,535  $29,000  $32,934
               Authority
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays          $27,007         $25,313         $27,261         $28,854         $32,541
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost             $900            $744            $826            $870            $988
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Applications may be submitted by state-certified Schools of
    Forestry as stipulated in accordance with Section 2 of Pub. L. 87-788,
    McIntire-Stennis Act.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 65                65                65
          Received
    Applications Funded           65                65                65
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        New Era Rural Technology Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Section 1405 of the National Agricultural Research, Extension, and
    Teaching Policy Act (NARETPA) of 1977, as amended (7 U.S.C. 3121),
    designates the U.S. Department of Agriculture (USDA) as the lead
    Federal agency for agriculture research, extension and teaching in the
    food and agricultural sciences.
        Section 1473E of NARETPA (7 U.S.C. 3319e), as amended, required the
    establishment of a New Era Rural Technology Competitive Grants Program
    (RTP), which NIFA administers.
        The RTP was authorized by Section 7137 of the 2008 Farm Bill and
    first funded in 2009.
    4. Purpose/Goals
        The New Era Rural Technology Competitive Grants Program will make
    grants available for technology development, applied research, and/or
    training, with a focus on rural communities, to aid in the development
    of a workforce for bioenergy, pulp and paper manufacturing, or
    agriculture-based renewable energy.
    5. Success in Meeting Programmatic Purpose/Goals
        The New Era Rural Technology Competitive Grants Program makes
    grants available to community colleges or advanced technological
    centers, located in a rural area, for technology development, applied
    research, and training necessary to produce graduates capable of
    strengthening the nation's technical, scientific and professional
    workforce in the fields of bioenergy, pulp and paper manufacturing, and
    agriculture-based renewable energy resources.
        Examples of success include:
        North Dakota State College of Science is addressing the workforce
    training needs in emerging technologies through the creation of a
    Regional Bio-fuels Advanced Technological Center (RBATC) The RBATC is
    addressing the educational and technical training needs in the biofuels
    industry in Minnesota, North Dakota and South Dakota by establishing an
    education and training center designed to deliver biofuels industry
    based, educational programs, hands-on skill development and industry
    training. The workforce challenges addressed by the RBATC include: (1)
    availability and capacity of education and training; (2) development of
    entry-level employee skills; (3) enhancement of incumbent employee
    skills; (4) promotion of career awareness and outreach opportunities
    for students and the general public.
        Treasure Valley Community College in Oregon is conducting regional
    agriculture-based renewable energy summit with broad-based
    representation from regional businesses, agencies and education for the
    purpose of providing information for identifying: current agricultural
    renewable energy practices in the rural region, new or expanded
    renewable energy practices planned in the next 3-5 years, workforce
    skills related to renewable energy needed by agriculture-related
    employers where workforce skills are taught in current programs, and
    where revisions or new programs are required. They are developing and
    disseminating a final strategic workforce plan to guide curricular
    improvement, revision and innovation Identify and implement renewable
    energy curricular revision options to in agriculture, natural
    resources, and basic manufacturing.
        An Indian Hills Community College in Iowa project is focusing on
    improving the quality of bioenergy education through professional
    development for instructors and creating opportunities for students to
    gain valuable experiential learning through internships and applied
    research with bioenergy companies. It is improving the students'
    marketable skills and exposing them to industry contacts for future
    employment references and connections. For the industry, this program
    is helping smaller bioenergy companies realize the value of internships
    which is, in turn, creating a sustainable pool of companies for student
    internship opportunities in the future. It is also helping smaller
    bioenergy companies conduct applied research to support specific
    product development projects that they might otherwise have been unable
    to afford.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)             (1)            $750            $875            $873
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)             (1)             $75            $425            $819
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost              (1)             (1)             $30             $35             $35
    ----------------------------------------------------------------------------------------------------------------
    1 Funding began in FY 2009.

    9. Eligibility Criteria
        Applications may be submitted by either: (1) public or private
    nonprofit community colleges, or (2) post-secondary, degree-granting
    advanced technological centers, either of which must:

        a. be located in a rural area (see definition in Part VIII, E.);

        b. have been in existence as of June 18, 2008;

        c. participate in agricultural or bioenergy research and applied
            research;

        d. have a proven record of development and implementation of
            programs to meet the needs of students, educators, business,
            and industry to supply the agriculture-based, renewable energy
            or pulp and paper manufacturing fields with certified
            technicians, as determined by the Secretary; and

        e. have the ability to leverage existing partnerships and
            occupational outreach and training programs for secondary
            schools, 4 year institutions, and relevant nonprofit
            organizations.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None                13                13
          Received
    Applications Funded         None                 6                 5
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Outreach and Assistance for Socially Disadvantaged Farmers and
    Ranchers.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Established by the Food, Agriculture, Conservation, and Trade Act
    of 1990, Section 2501, Public Law 101-624, 7 U.S.C. 2279. In accordance
    with Section 14013 of the 2008 Farm Bill, the Office of Advocacy and
    Outreach was established within USDA and authority to carry out this
    program was transferred to that office.
    4. Purpose/Goals
        The objective of the Outreach and Assistance for Socially
    Disadvantaged Farmers and Ranchers (OASDFR) program is to provide
    outreach, training, education, assistance, and technical assistance to
    encourage and assist socially disadvantaged farmers, ranchers and
    forest landowners in owning and operating farms, ranches and
    nonindustrial forestlands.
        The intent of the competitive grant program is to communicate in a
    linguistically appropriate manner, to socially disadvantaged farmers,
    ranchers and forest landowners about participating equitably in the
    full range of agricultural programs offered by the Department.
    5. Success in Meeting Programmatic Purpose/Goals
        Examples of success include:
        As a result of outreach activities by the University of Arkansas at
    Pine Bluff, approximately 20 individuals were assisted in developing
    financial plans for their farm operations. Eight producers used their
    plans to obtain $763,000.00 in USDA Operating Loans. Six producers were
    assisted in restructuring their debts, and five producers were assisted
    in developing plans to determine the feasibility of adding different
    alternatives to their operation. Many of these producers were assisted
    in determining crop insurance premium cost, breakeven prices, and in
    developing marketing plans for their grain crops. Five individuals were
    assisted in using their local elevators to pre-market portions of their
    crops using forward contracts. Using Conservation Programs--In Central
    Arkansas approximately eight Environmental Quality Incentive Program
    (EQIP) contracts were awarded to Socially Disadvantaged Producers for a
    total of $683,575. Most of this went toward helping producers level
    land to improve drainage and increase irrigation efficiency.
        As a result of outreach activities at Alcorn State University in
    Mississippi, 102 borrowers received structured training to increase
    their knowledge and skills needed to complete a balance sheet, income
    statement and inventory analysis for their farming operations.
    Borrowers have gained knowledge of current farm practices, minimize
    farm risks. Borrowers also met their educational requirement according
    to the USDA-FSA regulation and qualify to receive additional funds from
    USDA and have currently assisted in putting $2.5 million into the
    Mississippi economy. There were a 100 percent passing rate. In
    addition, 176 small farmers now have the knowledge, skills and a
    formulized record keeping system to keep accurate farm records; 72
    small farmers have gained knowledge of legal issues associated with
    family farm operations and the risk management strategies; and 531
    small farmers, ranchers and women and business are knowledgeable of new
    and innovative alternative enterprises that would have a greater return
    with less startup capital or input cost.
        Because of the New Entry Sustainable Farming Project (New Entry)
    which assists immigrants, refugees, and other underserved producers to
    develop commercial farming opportunities across Eastern Massachusetts,
    farmers participating in New Entry since October 2008 have increased
    their technical crop production skills, trained and shared practical
    farm skills with each other, and utilized educational resources on New
    Entry's website. Since October, a total of 29 potential farmers
    enrolled in the Explore Farming classes to assess their farming
    interest and a total of 45 people enrolled in the Farm Business
    Planning Course (FBPC). New Entry graduated total of 23 people from its
    FBPC, representing 19 farm businesses. All graduates completed a
    comprehensive business plan. 12 new graduates are currently
    implementing their business plans on farmland, and another nine New
    Entry farmers graduates began another season of business/production
    plan implementation. New Entry farmers are experiencing an increase in
    production and sales over prior years. A total of 20 New Entry farmers
    have joined together into a cooperative to sell their produce into the
    2009 Community Supported Agriculture (CSA) program. A total of 218 CSA
    shares were purchased by customers (double over 2008). Combined CSA
    revenues for New Entry farmers are projected to be about $67,000 for
    the 2009 season.
        As a result of the Small Farm Program's outreach activities at the
    University of California, small-scale growers, many of whom speak
    Spanish, Hmong, or Chinese as their primary language, have gained
    access to results of applied research on specialty crops, business
    management skills, relevant market analysis, and irrigation/water
    quality management in agriculture. Information was disseminated through
    ongoing personal consultations, workshops, classes, field days, radio
    and printed newsletters and other printed materials. The diversity of
    information delivery means that small-scale producers in the five
    regions covered by the Small Farm Program gained access to one-on-one
    consultation when relevant, and that this information also reached
    wider audiences. Workshops and classes typically attracted between 20
    and 60 producers, while field days and conferences reached 100 or more
    during this period.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget     $3,243    $3,470   $5,935   $5,888   $5,940   $5,940   $6,395  $15,000       $0       $0
               Authority
    ----------------------------------------------------------------------------------------------------------------
    Note: Became a mandatory program in FY 2009; Mandatory funding was provided by transfer from CCC. The program
      was delegated to the Assistant Secretary for Civil Rights, Office of Advocacy and Outreach in FY 2010.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                 FY08               FY09               FY10               FY11
    ----------------------------------------------------------------------------------------------------------------
                      Annual Outlays              $1,500             $8,250            $13,500             $6,750
    ----------------------------------------------------------------------------------------------------------------
    Note: Became a mandatory program in FY 2009; Mandatory funding was provided by transfer from CCC. The program
      was delegated to the Assistant Secretary for Civil Rights, Office of Advocacy and Outreach in FY 2010.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost             $238            $256            $750              $0              $0
    ----------------------------------------------------------------------------------------------------------------
    Note: Became a mandatory program in FY 2009; Mandatory funding was provided by transfer from CCC. The program
      was delegated to the Assistant Secretary for Civil Rights, Office of Advocacy and Outreach in FY 2010.

    9. Eligibility Criteria
        As determined in 7 U.S.C. 2279, eligibility is defined as follows:
    1890 Land-Grant Institutions, including Tuskegee University and West
    Virginia State College, Indian Tribal Community Colleges, Alaska Native
    Cooperative Colleges, Hispanic-serving post-secondary educational
    institutions, other accredited post-secondary educational institutions,
    and Indian tribes providing agricultural education or other
    agriculturally-related services to socially disadvantaged farmers and
    ranchers in their region, and community-based organizations that: (1)
    have demonstrated experience in providing agricultural education or
    other agriculturally related services to socially disadvantaged farmers
    and ranchers in their region; (2) provides documentary evidence of its
    past experience in working with socially disadvantaged farmers and
    ranchers during the 2 years preceding its application for assistance;
    and (3) does not engage in activities prohibited under Section
    501(c)(3) of the Internal Revenue Code of 1986.
        Also eligible are organizations or institutions that received
    funding under 7 U.S.C. 2279(a) before January 1, 1996, but only with
    respect to projects that the Secretary considers are similar to
    projects previously carried out by the organization or institution
    under such subsection.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 57                91              None
          Received
    Applications Funded           15                55              None
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Secondary Education, Two-Year Postsecondary Education, and
    Agriculture in the K-12 Classroom Challenge Grants Program.
    2. Subprograms/Department Initiatives
        There are no subprograms.
    3. Brief History
        Section 1405 of the National Agricultural Research, Extension, and
    Teaching Policy Act of 1977, as amended, (7 U.S.C. 3121) designates the
    U.S. Department of Agriculture (USDA) as the lead Federal agency for
    agriculture research, extension and teaching in the food and
    agricultural sciences. Section 7109 of the Food, Conservation, and
    Energy Act of 2008 (P.L. 110-246) amends authority for this program
    contained in section 1417(j) of the National Agricultural Research,
    Extension, and Teaching Policy Act of 1977 (7 U.S.C. 3152(j)).
        Section 7109 of the 2008 Food, Conservation, and Energy Act (Pub.
    L. 110-246) expanded the eligibility to include other institutions of
    higher education and nonprofit organizations and the objectives to
    support current Agriculture in the classroom programs for grades
    Kindergarten through 12.
    4. Purpose/Goals
        The Secondary Education, Two-Year Postsecondary Education, and
    Agriculture in the K-12 Classroom Challenge Grants (SPECA) program
    seeks to: (a) promote and strengthen secondary education and 2 year
    post-secondary education in agri-science and agribusiness in order to
    help ensure the existence in the United States of a qualified workforce
    to serve the food and agricultural sciences system; and (b) promote
    complementary and synergistic linkages among secondary, 2 year post-
    secondary, and higher education programs in the food and agricultural
    sciences in order to advance excellence in education and encourage more
    young Americans to pursue and complete a baccalaureate or higher degree
    in the food and agricultural sciences.
    5. Success in Meeting Programmatic Purpose/Goals
        Agriculture in the Classroom (AITC) is a partnership of
    agriculture, business, education, government, and volunteers,
    coordinated through NIFA Higher Education Programs, to improve
    agricultural literacy in the nation's secondary schools. AITC
    accomplishes this goal through two mechanisms; projects developed by
    the national office, and projects developed by the individual state
    programs.
        Examples of success include:
        New York has developed school food gardens through the New York Ag
    in the Classroom Kids Growing Food program. Survey data indicates that
    the gardens impacted well over 65,000 students, teachers, and community
    members in 2007 by creating opportunities to make links to agriculture,
    food systems, and good nutrition; increasing student motivation;
    providing opportunities for peer teaching; teaching life skills;
    integrating garden-based learning into the core curriculum; and
    involving the community in the gardens. Moreover, 40,000 elementary age
    students received instruction during New York's Ag Literacy Week
    Program, 150 Educators were trained on the Food, Land and People
    Curriculum, and over 30,000 passed through the Moo Country area at the
    New York State Fair.
        In California Ag in the Classroom (CFAITC), the number of CFAITC
    ambassadors increased by 10.3% in 2010 (13,427 in December 2010
    compared to 12,173 in December 2009), showing significant gains in the
    target audience. CFAITC is represented by Ambassadors in 44% of
    California's schools. The CFAITC website (www.learnaboutag.org)
    received 23% more website hits (2,626,608 in total) in 2010 compared to
    2009, an increase of more than 492,761 website hits. Moreover, 100
    percent of conference attendees agreed that, after attending the
    conference they would implement the materials/ideas received upon
    returning to class.
        In Michigan, Agricultural Literacy activities conducted by
    volunteers, increased across the state by 30 percent in 2010. The
    number of students reached through agriculture in the classroom
    increased by 40 percent in 2010. 80 percent of the volunteers trained
    at the state level conduct AITC lessons at the local level. Volunteer
    involvement in Michigan Agricultural Education programs rose by 25
    percent in 2010. The number of Project RED (Rural Education Day) events
    held across the state has increased by 35 percent to 31 counties, 46
    percent of all the involved counties across the state. Moreover,
    teachers reached through in-service activities increased by 25 percent
    in 2010. Of the teachers trained, 90 percent said they planned to
    continue to integrate agriculture into their existing curriculum.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget     $1,000      $994     $890     $992     $990     $990     $983     $983     $983     $981
               Authority
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              $50            $148            $494            $987            $983
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
         Annual Outlays                                                      $50     $148     $494     $987     $983
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Applications may only be submitted by: (1) public secondary
    schools, (2) public or private nonprofit junior and community colleges,
    (3) institutions of higher education, or (4) nonprofit organizations.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 43                75                66
          Received
    Applications Funded           24                24                24
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Smith-Lever 3(d) Extension Activities Programs.
    2. Subprograms/Department Initiatives
        A. Expanded Food and Nutrition Education (EFNEP)

        B. Pest Management

        C. Farm Safety (aka Assistive Technology Program for Farmers with
            Disabilities or AgrAbility)

        D. New Technologies for Agricultural Extension

        E. Children, Youth, and Families at Risk (CYFAR)

        F. Youth Farm Safety Education and Certification

        G. Sustainable Agriculture (SARE)

        H. Federally Recognized Tribes (formerly Extension Indian
            Reservation or EIRP)
    3. Brief History
        Various Extension Activities are authorized under Section 3(d) of
    the Smith-Lever Act (7 U.S.C. 343(d)); section 1680 of the Food,
    Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 5933).
        Section 7116 of the Food, Conservation, and Energy Act of 2008
    (FCEA) provided several amendments to Section 1425 of the National
    Agricultural Research, Extension, and Teaching Policy Act of 1977
    (NARETPA) (7 U.S.C. 3175); including inserting sec. 1425 Nutrition
    Education Program and the definition of 1862 and 1890 Institutions for
    the Agricultural Research, Extension, and Education Reform Act of 1998
    (7 U.S.C. 7601).
        Section 7403 of the Food, Conservation, and Energy Act of 2008
    (Public Law 110-246) (FCEA) amended section 3(d) of the Smith-Lever Act
    (7 U.S.C. 343(d)) to provide the opportunity for 1862 and 1890 land-
    grant institutions, including Tuskegee University and West Virginia
    State University, and the University of the District Columbia, to
    compete for and receive these funds directly from the Secretary of
    Agriculture. However, section 1425 of the National Agricultural
    Research, Extension, and Teaching Policy Act of 1977 (NARETPA) provides
    a statutory formula for the distribution of funds appropriated for the
    Expanded Food and Nutrition Education program (EFNEP). Section 7116 of
    FCEA amended NARETPA section 1425 to revise this statutory formula
    effective October 1, 2008.
    4. Purpose/Goals
        Expanded Food and Nutrition Education (EFNEP)

        Grants under this program are to assist all states in carrying out
    a program of extension activities designed to employ and train
    professional and paraprofessional aides to engage in direct nutrition
    education of low-income families and in other appropriate nutrition
    education programs.

        Pest Management

        Pest management includes a wide range of programs addressing human
    health, environmental and economic issues related to the management of
    pest populations through a variety of science based technologies.
    Americans want safe, pest and disease-free homes, schools, parks,
    recreational areas, as well as a safe and affordable supply of blemish-
    free food products and a wholesome pesticide-free environment. NIFA
    funds programs and projects which support research, education, and
    extension activities that promote pest management in general, and
    reduced risk pest management in particular. The agency's pest
    management programs are implemented through working partnerships with
    scientists in our nation's colleges and universities, other Federal
    agencies and the private sector.

        Farm Safety (aka Assistive Technology Program for Farmers with
    Disabilities or AgrAbility)

        AgrAbility increases the likelihood that individuals with
    disabilities and their families engaged in production agriculture
    (AgrAbility customers) become more successful. The primary outcome is
    enhanced quality of life for people with disabilities in agriculture.
    The program supports cooperative projects in which State Cooperative
    Extension Services (CES) based at either 1862 or 1890 Land-Grant
    Universities subcontract to private, nonprofit disability
    organizations. Measures of success may include improvements in
    customers' financial stability or access to life activities and the
    capacity of states and regions to deliver services this population
    requires in a timely and satisfying manner. To address the specialized
    needs of AgrAbility's customers, the program builds service capacity on
    national, regional, state, and local levels through education and
    networking. In the absence of capacity, projects provide assistance to
    customers. Projects use marketing to direct the public to initiatives
    in education, networking, and assistance.

        New Technologies for Agricultural Extension

        The purpose of the New Technologies for Ag Extension Program (NTAE)
    is to increase the capacity of each state to contribute expertise and
    content to the development of eXtension, a national web-based
    information and education delivery system that provides direct access
    to science-based educational resources from land-grant and other
    partner institutions about subjects of high importance to the general
    public. This initiative is intended to dramatically change how the CES
    does business with its customers. Applications are being solicited for
    the NTAE to deliver: state of the art technology and software
    applications, high quality leaders and staff, training for an
    exceptional CES workforce, legally binding contractual and financial
    instruments, and comprehensive evaluation, communications and marketing
    activities.

        Children, Youth, and Families at Risk (CYFAR)

        Through an annual Congressional appropriation for the National
    Children, Youth, and Families at Risk (CYFAR) Program, NIFA allocates
    funding to land-grant university extension services for community-based
    programs for at-risk children and their families. Since 1991, CYFAR has
    supported programs in more than 600 communities in all states and
    territories. State and local public and private organizations have
    contributed cash and in-kind resources that match or exceed the Federal
    appropriation. The CYFAR Program is based on research on effective
    programs for at-risk youth and families and on the human ecological
    principle of working across the lifespan in the context of the family
    and community. To assure that critical needs of children and families
    are met, CYFAR supports comprehensive, intensive, community-based
    programs developed with active citizen participation in all phases.
    CYFAR promotes building resiliency and protective factors in youth,
    families, and communities. CYFAR supports collaboration--forming
    lasting partnerships to achieve greater outcomes and to provide a
    support base for sustaining programs for those at risk. CYFAR also
    promotes the use of technology to improve programs, provide efficient
    access to educational resources, and provide essential technological
    skills for youth and adults in at-risk environments.

        Youth Farm Safety Education and Certification

        The Youth Farm Safety Education and Certification Program (YFSEC)
    supports national efforts to deliver timely, pertinent, and appropriate
    training to youth seeking employment or already employed in
    agricultural production. The program has critical ties to the current
    regulations for youth employment in agriculture, especially the
    exemptions provided in 29 CFR Part 570, subpart E-1 for youth under the
    age of 16 employed in some agricultural occupations having obtained
    certification. Significant changes in agricultural production and in
    the agricultural workforce since this regulation took effect in the
    early 1970's have encouraged the USDA to consider training and
    certification innovations along with developing appropriate training
    and restrictions on youth employment in hazardous agricultural jobs.
    YFSEC's funding has appeared under the Smith-Lever 3(d) line for Youth
    Farm Safety Education and Certification since 2001.

        Sustainable Agriculture (SARE)

        SARE works to increase knowledge about--and help farmers and
    ranchers adopt--practices that are profitable, environmentally sound,
    and good to communities. Several types of competitive grants are
    awarded by four regional administrative councils. Research and
    education grants, generally ranging from $60,000 to $150,000, fund
    projects that usually involve scientists, producers and others in an
    interdisciplinary approach. Professional development grants, generally
    ranging from $20,000 to $90,000, offer educational opportunities for
    extension, NRCS, and other agricultural professionals. Producer grants,
    typically between $1,000 and $15,000, go to farmers and ranchers who
    test innovative ideas and share the results with their neighbors.
    Projects address crop and livestock production and marketing,
    stewardship of soil and other natural resources, economics and quality
    of life.

        Federally Recognized Tribes (formerly Extension Indian Reservation
    or EIRP)

        The purpose of this program is to support Extension Agents who
    establish Extension education programs on the Indian Reservations and
    Tribal jurisdictions of Federally-Recognized Tribes. To the extent
    practicable, priorities should reflect the following national critical
    needs areas: (1) Development of sustainable energy; (2) Increased
    global food security; (3) Adaptation/mitigation of agriculture and
    natural resources to global climate change; (4) Reduction of childhood
    and adolescent obesity; and (5) Improved food safety.
    5. Success in Meeting Programmatic Purpose/Goals
        Expanded Food and Nutrition Education Program

        The Expanded Food and Nutrition Education Program (EFNEP) program
    continues to be highly effective in changing participants' behaviors,
    resulting in significant improvements in daily living skills. In 2010
    94 percent of adults reported improvements in their diets including
    consuming the equivalent of nearly one additional cup of fruits and
    vegetables, 84 percent of recent graduates improved food management
    practices, 89 percent improved nutrition practices, and 67 percent
    improved food safety practices. Multiple cost-benefit studies in past
    years show that every dollar invested in EFNEP results in from $3.63 to
    $10.64 in saved health care costs and $2.48 saved in food expenditures.
    State success examples include: Pennsylvania State University's EFNEP
    reported over 96% of the EFNEP adult participants made positive changes
    in one or more food groups including consuming the equivalent of an
    additional \1/2\ cup of fruits and vegetables. Louisiana State
    University's EFNEP survey found that over 96% of EFNEP program
    participants reported positive change in any food group at program exit
    including consuming the equivalent of one additional cup of fruits and
    vegetables. Utah State University's EFNEP reported over 98% of its
    EFNEP families made a positive change in consumption of at least one
    food group including consuming the equivalent of nearly one additional
    cup of fruits and vegetables. The Mississippi State University
    Extension EFNEP reported over ninety-five percent (95%) of the EFNEP
    adult participants made positive changes in one or more food groups.
    The Iowa State University EFNEP survey found that over 98% of EFNEP
    program participants reported positive change in any food group at
    program exit. The University of Missouri reported over 87% of its EFNEP
    families made a positive change in consumption of at least one food
    group.

        Smith-Lever 3(d) Program

        The Smith-Lever 3(d) Renewable Resources Extension Act (RREA) calls
    for ``expanded extension programs for forest and rangeland resources''
    to enhance the sustainability of these renewable natural resources.
    With NIFA funding, 69 land-grant institutions educated private
    forestland and rangeland owners regarding forest and rangeland
    sustainability. As a result of these activities: 937 income-generating
    business were created or expanded, 2,390 new jobs were created, 27,300
    landowners increased their awareness of forest or rangeland resources,
    21,100 landowners implemented at least one new renewable resource
    practice, landowners either earned or saved and estimated $17,810,000,
    loggers either earned or saved $198,571,756 by adopting new harvesting
    technologies, and every RREA dollar leverages from $5-$15 from state,
    county and other resources.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                    FY02      FY03      FY04      FY05      FY06      FY07      FY08      FY09      FY10      FY11
    ----------------------------------------------------------------------------------------------------------------
    Smith-Lever    $32,688   $31,926   $28,563   $28,228   $29,955   $30,979   $31,970   $32,383   $33,199   $33,133
     3(d)
     Extension
     Activities
     Programs
     (excluding
     EFNEP)
    Expanded       $32,688   $31,926   $28,563   $28,228   $29,955   $30,979   $31,970   $32,383   $33,199   $33,133
     Food and
     Nutrition
     Education
     Program
     (EFVEP)
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                         FY07         FY08         FY09         FY10         FY11
    ----------------------------------------------------------------------------------------------------------------
    Smith-Lever 3(d) Extension Activities Programs       $18,587      $30,644      $31,568      $32,531      $33,117
     (excluding EFNEP)
    Expanded Food and Nutrition Education Program        $38,123      $62,843      $64,584      $66,610      $67,899
     (EFVEP)
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                         FY07         FY08         FY09         FY10         FY11
    ----------------------------------------------------------------------------------------------------------------
    Smith-Lever 3(d) Extension Activities Programs        $1,131       $1,278       $1,187       $1,328       $1,325
     (excluding EFNEP)
    Expanded Food and Nutrition Education Program           $341         $422         $446         $522         $517
     (EFVEP)
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Section 7403 of the Food, Conservation, and Energy Act of 2008
    (Public Law 110-246) (FCEA) amended section 3(d) of the Smith-Lever Act
    (7 U.S.C. 343(d)) to provide the opportunity for 1862 and 1890 land-
    grant institutions, including Tuskegee University and West Virginia
    State University, and the University of the District of Columbia, to
    compete for and receive these funds directly from the Secretary of
    Agriculture.
    10. Utilization (Participation) Data
        For Smith-Lever 3(d) Extension Activities Programs (excluding
    EFNEP):

    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                193               269               274
          Received
    Applications Funded          165               223               234
    ------------------------------------------------------------------------

        For Expanded Food and Nutrition Education Program (EFNEP):

    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 74                75                75
          Received
    Applications Funded           74                75                75
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        One OIG Hotline complaint (PS-1399-0071) was investigated alleging
    misuse of Federal funds by the grantee (the University of Hawaii)
    Cooperative Extension Service (CES). The complainant alleged that the
    university did not use NIFA CES program funds to fill the position of
    CES Agent for coffee producers left vacant by the former agent's
    resignation. As a result, the complainant was concerned that CES
    funding to provide assistance to farmers may have been diverted to
    other uses. The USDA OIG and NIFA both investigated the allegations and
    determined that the allegations do not appear to be substantiated, and
    no further review was warranted.
        The funding involved is primarily Smith-Lever 3(b) and (c); and to
    a lesser extent Smith-Lever 3(d) Extension Activities Programs.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Specialty Crop Research Initiative Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        The authority for this program is under Section 7311 of the 2008
    Farm Bill which amended Section 412 to the Agricultural Research,
    Extension, and Education Reform Act of 1998 (7 U.S.C. 7621 et seq.) and
    established the Specialty Crop Research Initiative Program. This
    represents a newly authorized and newly funded program.
    4. Purpose/Goals
        The Specialty Crop Research Initiative (SCRI) Program was
    established to address the critical needs of the specialty crop
    industry by developing and disseminating science-based tools to address
    needs of specific crops and their regions including research in plant
    breeding, genetics, and genomics to improve crop characteristics (such
    as product, taste, quality, and appearance; environmental responses and
    tolerances; nutrient management, including plant nutrient uptake
    efficiency; pest and disease management, including resistance to pests
    and diseases resulting in reduced application management strategies;
    and enhanced phytonutrient content); efforts to identify and address
    threats from pests and diseases, including threats to specialty crop
    pollinators; efforts to improve production efficiency, productivity,
    and profitability over the long term (including specialty crop policy
    and marketing); new innovations and technology, including improved
    mechanization and technologies that delay or inhibit ripening; and
    methods to prevent, detect, monitor, control, and respond to potential
    food safety hazards in the production and processing of specialty
    crops, including fresh produce.
    5. Success in Meeting Programmatic Purpose/Goals
        The Specialty Crop Research Initiative (SCRI) was established to
    solve critical industry issues through research and extension
    activities. SCRI gives priority to projects that are multi-state,
    multi-institutional, or trans-disciplinary; and include explicit
    mechanisms to communicate results to producers and the public. Projects
    must address at least one of five focus areas: research in plant
    breeding, genetics, and genomics to improve crop characteristics;
    efforts to identify and address threats from pests and diseases,
    including threats to specialty crop pollinators; efforts to improve
    production efficiency, productivity, and profitability over the long
    term; new innovations and technology, including improved mechanization
    and technologies that delay or inhibit ripening; and methods to
    prevent, detect, monitor, control, and respond to potential food safety
    hazards in the production and processing of specialty crops.
        Examples of success include:
        The RosBREED project being led by Michigan State University is
    creating a national, dynamic, sustained effort in research,
    infrastructure establishment, training, and extension for applying
    marker-assisted breeding (MAB) to deliver improved plant materials more
    efficiently and rapidly. The Rosaceae family (almonds, apples,
    apricots, blackberries, peaches, pears, plums, sweet cherries, tart
    cherries, strawberries, raspberries, roses and other ornamentals)
    provides vital contributions to human health and well-being, and
    collectively constitutes the economic backbone of many U.S. rural
    communities. Rosaceae genetics and genomics are developing rapidly but
    have not been translated to routine practical application. This project
    will increase the likelihood of new cultivar adoption, enlarge market
    potential, and increase consumption of rosaceous fruits by using
    socioeconomic knowledge of stakeholder values and consumer preferences
    to inform breeding; establish sustainable technical infrastructure for
    an efficient MAB Pipeline in Rosaceae, including crop specific SNP
    genome scan platforms for breeding-relevant germplasm exploiting the
    shared ancestry of Rosaceae crops; integrate breeding and genomics
    resources by establishing a user-friendly U.S.-wide standardized
    statistical framework and breeding information management system;
    implement MAB in core RosBREED breeding programs with a common focus on
    fruit quality traits; and enhance sustainability of cultivar
    development by transferring MAB technologies to the public and private
    community of U.S. Rosaceae breeders through training current and future
    breeders as well as engaging the production, processing and marketing
    sectors, allied scientists, and consumers.
        Carnegie Mellon University is working with the specialty crop
    industry to fulfill its vision of significantly reducing the cost of
    production of U.S. fruit. They are developing, integrating, testing,
    deploying, and assessing a carefully chosen set of information,
    mobility, manipulation and plant science technologies, assessing their
    socioeconomic utility, and transferring results to the end-users via
    commercialization and outreach. Among the numerous preliminary results
    include initial trials with harvest assist system showed ten percent
    improvement in harvesting speed with 5% reduction in bruising;
    management efficiency trials in pilot orchards demonstrated increases
    in efficiency as high as 78 percent; and over 27 percent of
    Pennsylvania producers who attended field days are adopting trellised
    planting systems to increase efficiency and 65 percent plan to make
    this change.
        Washington State University (WSU) is leading a team of scientists
    in the western U.S. to improve the long-term sustainability of the
    apple, pear and walnut industries in the by enhancing biological
    control of pest insects and mites, and synthesize the information
    developed in this project along with existing information to provide
    the outreach tools needed to bring about change in grower practices.
    Preliminary results are encouraging and will be added to the WSU-
    Decision Aid System and University of California UC-IPM web sites for
    easy access and will be very useful to apple, pear and walnut growers
    and pest control advisors. These recommendations will to lead to
    increased biological control in orchards, which should reduce pesticide
    inputs leading to higher grower profits and lower worker safety
    problems.
        Water and nitrogen management in deciduous perennial crops is
    constrained by a lack of information and an inability to provide
    targeted management. Currently, the application of fertilizers and
    water follows standardized practice with little consideration of
    spatial, temporal and crop variability resulting in lost income and
    negative environmental impact. The University of California is
    addressing these needs through a multi-discipline, multi-scale activity
    that integrates remote and local sensing, with modeling and on-farm
    validation to derive grower appropriate management tools and sound
    knowledge to inform policy decisions. Initial activities are being
    conducted in Almond, Pecan, Grape and Pistachio and are being adapted
    to the full range of perennial fruit and nut species through
    collaborative agreements in years 3 through 5 of this project. Thus
    far, the RESET remote sensing model (which measures evaporation and
    transpiration) has been published online, and provides e-mail output to
    users. Researchers in California have tested the model against Almond
    data and have help improved the operation and user interface of the
    model.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
           Annual Budget Authority              (1)         $30,000         $50,000         $50,000         $50,000
    ----------------------------------------------------------------------------------------------------------------
    1 Program was first authorized in 2008.
    Note: Mandatory funding was provided by transfer from CCC.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)          $1,500         $13,000         $30,500         $45,000
    ----------------------------------------------------------------------------------------------------------------
    1 Program was first authorized in 2008.
    Note: Mandatory funding was provided by transfer from CCC.

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              (1)          $1,200          $1,720          $2,000          $2,000
    ----------------------------------------------------------------------------------------------------------------
    1 Program was first authorized in 2008.
    Note: Mandatory funding was provided by transfer from CCC.

    9. Eligibility Criteria
        The Secretary may carry out the SCRI Program through (1) Federal
    Agencies; (2) national laboratories; (3) colleges and universities; (4)
    research institutions and organizations; (5) private organizations or
    corporations; (6) state agricultural experiment stations; (7)
    individuals; or (8) groups consisting of two or more entities described
    in paragraphs (1) through (7).
        In making grants under this section, the Secretary shall provide a
    higher priority to projects that (1) are multi-state, multi-
    institutional, or multi-disciplinary; and (2) include explicit
    mechanisms to communicate results to producers and the public.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                238               265               149
          Received
    Applications Funded           27                92                32
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Sun Grant Program.
    2. Subprograms/Department Initiatives
        There are no subprograms.
    3. Brief History
        The authority for this program is contained in section 7526 of the
    2008 Farm Bill. USDA received its first funding for this program in FY
    2010.
    4. Purpose/Goals
        The purpose of this program is to provide grants to the North-
    Central, Southeastern, South-Central, Western, and Northeastern Sun
    Grant Centers and the Western Insular Pacific Subcenter (as designated
    in section 7526(b)(1)(A)-(F) of the FCEA). The Sun Grant Centers and
    Subcenter will use the majority of grant funds for competitive grants
    and the remainder for research on technology development and
    implementation.
        All activities conducted in this program must seek to (a) enhance
    national energy security through the development, distribution, and
    implementation of bio-based energy technologies; (b) promote
    diversification in, and the environmental sustainability of,
    agricultural production in the United States through bio-based energy
    and product technologies; (c) promote economic diversification in rural
    areas of the United States through bio-based energy and product
    technologies; and (d) enhance the efficiency of bioenergy and biomass
    research and development programs through improved coordination and
    collaboration among the Department of Agriculture, the Department of
    Energy, and land-grant colleges and universities.
    5. Success in Meeting Programmatic Purpose/Goals
        Although this grant program is too new to have any discernable
    success to date examples of expected success include:
        This program is providing grants to the North-Central,
    Southeastern, South-Central, Western, and Northeastern Sun Grant
    Centers and the Western Insular Pacific Sub-center. All activities
    conducted in this program are seeking to enhance national energy
    security through the development, distribution, and implementation of
    biobased energy technologies; promote diversification in, and the
    environmental sustainability of, agricultural production in the United
    States through biobased energy and product technologies; promote
    economic diversification in rural areas of the United States through
    biobased energy and product technologies; and enhance the efficiency of
    bioenergy and biomass research and development programs through
    improved coordination and collaboration among the Department of
    Agriculture, the Department of Energy, and land-grant colleges and
    universities.

                  6. Annual Budget Authority (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
    Annual Budget Authority                  $2,250                 $2,246
    ------------------------------------------------------------------------
    Note: Program was first funded in FY 2010.

                       7. Annual Outlays (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
            Annual Outlays                     $225                 $1,237
    ------------------------------------------------------------------------
    Note: Program was first funded in FY 2010.

                    8. Annual Delivery Cost (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
      Annual Delivery Cost                      $90                    $90
    ------------------------------------------------------------------------
    Note: Program was first funded in FY 2010.

    9. Eligibility Criteria
        Eligible applicants are the five centers that will competitively
    award projects to eligible entities in the states and territories
    within their regions:
        North-Central Center--A north-central sun grant center at South
    Dakota State University for the region composed of the States of
    Illinois, Indiana, Iowa, Minnesota, Montana, Nebraska, North Dakota,
    South Dakota, Wisconsin and Wyoming.
        Southeastern Center--A southeastern sun grant center at the
    University of Tennessee at Knoxville for the region composed of the
    States of Alabama, Florida, Georgia, Kentucky, Mississippi, North
    Carolina, South Carolina, Tennessee and Virginia, the Commonwealth of
    Puerto Rico, and the United States Virgin Islands.
        South-Central Center--A south-central sun grant center at Oklahoma
    State University for the region composed of the States of Arkansas,
    Colorado, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, and Texas.
        Western Center--A western sun grant center at Oregon State
    University for the region composed of the States of Alaska, Arizona,
    California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington and a
    Western Insular Pacific Subcenter at the University of Hawaii for the
    region of Alaska, Hawaii, Guam, American Samoa, the Commonwealth of the
    Northern Mariana Islands, the Federated States of Micronesia, the
    Republic of the Marshall Islands, and the Republic of Palau.
        Northeastern Center--A northeastern sun grant center at Cornell
    University for the region composed of the States of Connecticut,
    Delaware, Massachusetts, Maryland, Maine, Michigan, New Hampshire, New
    Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, and West
    Virginia.
        Funding for the Western Insular Pacific Sun Grant Subcenter at
    University of Hawaii must come from Western Sun Grant Center at Oregon
    State University.
        Eligible applicants for competitively awarded projects within the
    respective regions of the individual Sun Grant Centers and Subcenter
    are: state agricultural experiment stations; colleges and universities;
    university research foundations; other research institutions and
    organizations; Federal agencies; national laboratories; private
    organizations or corporations; individuals; or any group consisting of
    two or more of the entities described in this paragraph.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None              None                 5
          Received
    Applications Funded         None              None                 5
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Tribal Colleges Education Equity Grants Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Authority for this program is contained in the Equity in
    Educational Land-Grant Status Act of 1994 (7 U.S.C. 301 note) as
    amended by the Agricultural Research, Extension, and Education Reform
    Act of 1998 (7 U.S.C. 7601 note). Under this authority, appropriated
    funds are to be awarded to the 1994 Land-Grant Institutions
    (hereinafter referred to as 1994 Institutions) for Education capacity
    building and funds are to be distributed equally among institutions
    that meet eligibility requirements.
        Section 7402 of the 2008 Farm Bill added Ilisagvik College as a
    1994 Land-Grant Institution.
    4. Purpose/Goals
        The purpose of the Tribal Colleges Education Equity Grants Program
    (TCEG) is to provide funding to enhance educational opportunities for
    Native Americans in the food and agricultural sciences. The TCEG
    program is intended to strengthen institutional capacity to deliver
    relevant formal education opportunities. The TCEG is intended to be a
    component of the applicant 1994 institution's land-grant roadmap or
    strategic planning process. To the extent practicable, priorities
    should reflect NIFA's following national critical needs areas: (a)
    Development of sustainable energy; (b) Increased global food security;
    (c) Adaptation/mitigation of agriculture and natural resources to
    global climate change; (d) Reduction of childhood and adolescent
    obesity; and (e) Improved food safety.
    5. Success in Meeting Programmatic Purpose/Goals
        This program provides funding to enhance educational opportunities
    for Native Americans in the food and agricultural sciences; and
    strengthens institutional capacity to deliver relevant formal education
    opportunities.
        Examples of success include:
        As a result of a move of the Equity program to the Math & Science
    Department at Oglala Lakota College in South Dakota, the program has
    had a 300% increase in contact with new and/or potential students for
    the Natural Resource degree plan of study. Two Native American men
    advanced their care goals through hard work earning an Associate of
    Arts or a Baccalaureate of Science degree in either General Agriculture
    or Natural Resource Management. The program has been able to serve a
    larger group of students through instruction of the course Bio 113
    People and the Environment, which is a core course to meet the science
    requirements in the majority of Oglala Lakota College's degree
    programs. Moreover, a current student working for the Bureau of Indian
    Affairs in Pine Ridge South Dakota stated that through the programs
    course content he learned more than he has in any other program,
    especially courses taught by the project director.
        The Omaha Nation and Santee Sioux have epidemic numbers for Health
    Problems, diabetes, obesity, heart disease, and malnutrition. Nebraska
    Indian Community College (NICC) is enhancing the short-term and long-
    term educational opportunities for the Omaha Nation and Santee Sioux
    Nation by strengthening specific instructional programs in the Food,
    Natural Resources, Native Foods and Agricultural Sciences Area. Twenty-
    six students were enrolled in courses with a specific focus in agri-
    science and agribusiness. Other courses incorporated these topics to a
    lesser extent. The impacted students are in a wide-variety of degrees
    (education, science, business, general liberal arts), allowing for
    information to be disseminated to a large constituency in these
    communities.
        A Sinte Gleska University (South Dakota) project developed
    curricula and syllabi in Natural Resources History and Management,
    Tribal Land Management and History, Horticulture and Environmental Law.
    This project also worked on revision of the Tribal Land Management
    degree programs and produced new degree programs. They also developed a
    career guide for students based on available careers on the Rosebud
    Reservation. As a result, one student completed a bachelor's degree in
    Environmental Science; ten students have been recruited to the Tribal
    Lands Management degree program; collaborations have been formed with
    tribal land programs, Federal land programs and with South Dakota state
    extension programs; Career Guide is available for local schools and as
    a recruitment tool; and an advisory committee was formed to provide
    community and stakeholders input into future planning for the USDA
    programs.
        The Turtle Mountain Community College's (North Dakota) formed an
    articulation agreement between the college and a local agricultural
    high school--St. John Public--to provide Equine Science offerings to
    its students as dual credit. They designed and implemented agricultural
    related curriculum in GIS/GPS and NSCA Certified Personal Trainer
    Certificate which will be part of the college's course catalog.
    Moreover, the College enhanced the community's knowledge of animal
    sciences by offering a series of workshops throughout the year and
    provided educational opportunities to youth and adults in a vast array
    of subjects in the areas of health, wellness, community wellness, and
    outreach education. The program has allowed the community to
    participate in a vast number of educational programming in the
    agricultural fields. Participating students are now academically
    prepared to further their education or seek employment in Equine
    Science, GPS/GIS and Certified Personal Training. The program has
    perked the interest of the community to be more actively involved in
    gardening and other agricultural-related disciplines which will in turn
    contribute to better health and fitness. The college's Anishinabe
    Center has become a `One Stop Wellness Center' which actively promotes
    and has integrated the seven pillars of wellness--Social, Emotional,
    Occupational, Spiritual, Physical, Environmental, and Intellectual.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                            FY02      FY03      FY04     FY05     FY06     FY07     FY08     FY09     FY10     FY11
    ----------------------------------------------------------------------------------------------------------------
          Annual Budget     $1,549    $1,689   $1,679   $2,232   $2,228   $3,342   $3,319   $3,342   $3,342   $3,335
               Authority
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays             $167            $500          $1,669          $3,334          $3,330
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
              Annual Delivery Cost               $0              $0              $0              $0              $0
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Tribal colleges and universities designated as 1994 Land-Grant
    Institutions under the Educational Land-Grant Status Act of 1994, as
    amended. This Act, as amended in Section 533(a), requires that each
    1994 Land-Grant Institution be accredited or making progress towards
    accreditation and be recognized as a legal entity. If accreditation is
    being sought, a college must demonstrate its progress towards
    accreditation by a letter from a nationally recognized accreditation
    agency affirming receipt of application for an accreditation site visit
    or other such documentation.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                 30                31                30
          Received
    Applications Funded           30                30                30
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Veterinary Medicine Loan Repayment Program.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        In January 2003, NVMSA was passed into law adding section 1415A to
    the National Agricultural Research, Extension, and Teaching Policy Act
    of 1997. This law established a new Veterinary Medicine Loan Repayment
    Program (7 U.S.C. 3151a)
        Section 7105 of the 2008 Farm Bill amended section 1415A to revise
    the determination of veterinarian shortage situations to consider (1)
    geographical areas that the Secretary determines have a shortage of
    veterinarians; and (2) areas of veterinary practice that the Secretary
    determines have a shortage of veterinarians, such as food animal
    medicine, public health, epidemiology, and food safety. This section
    also added that priority should be given to agreements with
    veterinarians for the practice of food animal medicine in veterinarian
    shortage situations.
    4. Purpose/Goals
        USDA's Veterinary Medicine Loan Repayment Program (VMLRP),
    authorized by the National Veterinary Medical Services Act (NVMSA)
    helps qualified veterinarians offset a significant portion of the debt
    incurred in pursuit of their veterinary medicine degrees in return for
    their service in certain high-priority veterinary shortage situations.
    The National Institute of Food and Agriculture (NIFA) will carry out
    NVMSA by entering into educational loan repayment agreements with
    veterinarians who agree to provide veterinary services in veterinarian
    shortage situations for a determined period of time.
    5. Success in Meeting Programmatic Purpose/Goals
        Veterinarians are critical to the national food safety and food
    security infrastructures, and to the health and well-being of both
    animals and humans; however, major studies indicate significant and
    growing shortages of food supply veterinarians and veterinarians
    serving in certain other high priority specialty areas. A leading cause
    for this shortage is the heavy cost of 4 years of professional
    veterinary medical training, which can average between $100,000 and
    $140,000. Congress established the VMLRP as a way to remedy this
    growing need.
        In Fiscal Year 2010, NIFA made 62 award offers of which 53 were
    accepted for a total of $5,185,970 (includes loan and tax payments)
    with the average award at $97,848 (includes loan and tax payments). The
    average eligible debt for repayment was $98,672. Sixty-five percent of
    recipients received the maximum payment of $25,000 per year (plus
    taxes), and 65 percent of awards went to those who obtained their
    Doctor of Veterinary Medicine within the last 3 years. Thirty-four
    states will fill at least one shortage area through VMLRP:

       Iowa will fill five shortage areas

       Idaho, Kansas and Texas will fill four shortage areas

       Kentucky and South Dakota will fill three shortage areas

        Shortage type breakdown:

       Type 1 (at least 80 percent private practice): 24 awards

       Type 2 (at least 30 percent private practice): 24 awards

       Type 3: (at least 49 percent public practice): 5 awards

        Participants are required to serve in one of three types of
    shortage situations. Type 1 shortage areas are private practice
    dedicated to food animal medicine at least 80 percent of the time. Type
    2 shortages are private practices in rural areas dedicated to food
    animal medicine up to 30 percent of the time. Type 3 shortage areas are
    dedicated to public practice up to 49 percent of the time.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                       FY06          FY07          FY08          FY09          FY10          FY11
    ----------------------------------------------------------------------------------------------------------------
       Annual Budget Authority           $495          $495          $869        $2,950        $4,800       $4,790
    ----------------------------------------------------------------------------------------------------------------
    Note: Funding began in FY 2006.

                                           7. Annual Outlays (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              $50            $310            $909          $2,199          $3,967
    ----------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2007-FY 2011)
                                                (in thousands of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                            FY07            FY08            FY09            FY10            FY11
    ----------------------------------------------------------------------------------------------------------------
                    Annual Outlays              $50             $87            $295            $480            $479
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        To be eligible to apply to the VMLRP, an applicant must: (1) Have a
    degree of Doctor of Veterinary Medicine (DVM), or the equivalent, from
    a college of veterinary medicine accredited by the AVMA Council on
    Education; (2) Have qualifying educational loan debt as defined in 7
    CFR 3431 Section 3; (3) Secure an offer of employment or establish and/
    or maintain a practice in a veterinary shortage situation, as
    determined by the Secretary, within the time period specified in the
    VMLRP service agreement offer; and (4) provide certifications and
    verifications in accordance with 7 CFR 3431 Section 16.

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications                  0                 0               260
          Received
    Applications Funded            0                 0                53
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Women in Minorities in Science, Technology, Engineering and
    Mathematics Fields Program (WAMS).
    2. Subprograms/Department Initiatives
        There are no subprograms.
    3. Brief History
        Section 7204 of the 2008 Farm Bill amended Section 1672 of the
    Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 5925),
    authorizes the Secretary of Agriculture to make competitive grants to
    support research and extension activities to increase participation by
    women and underrepresented minorities from rural areas in the fields of
    science, technology, engineering, and mathematics.
    4. Purpose/Goals
        Purpose/Goals include:

        (1) To support research and extension projects to increase
            participation by women and underrepresented minorities from
            rural areas in science, technology, engineering, and
            mathematics fields related to the food and agricultural
            sciences;

        (2) to improve the economic health and viability of rural
            communities through the development of research and extension
            initiatives focused on new and emerging employment
            opportunities in STEM occupations; and

        (3) to fund projects that address the national challenge to
            increase the number and diversity (i.e., having a food and
            agricultural sciences workforce representative of the nation's
            population) of students entering food and agriculture related
            STEM disciplines.
    5. Success in Meeting Programmatic Purpose/Goals
        Although this grant program is too new to have any discernable
    success to date examples of expected success include:
        An education grant to Twin Cities Public Television in Minnesota
    aims to encourage more girls to consider careers in STEM fields via the
    ``SciGirls'' program. While girls and women have increased their
    representation in many fields of science in recent years, their
    progress is still not keeping pace with the rising demand for skilled
    workers in many STEM fields. Although women make up nearly \1/2\ the
    college-educated workforce, they represent only \1/4\ of the college-
    educated workforce in science and engineering occupations. ``SciGirls''
    will be distributed through PBS Plus to the nation's 350 PBS stations.
    From experience with comparable PBS Plus programs, they project that
    each episode will attract several million viewers over its broadcast
    life, nearly \1/2\ of which will be rural audiences.
        A University of Georgia project is enhancing the readiness of women
    and underrepresented males from Georgia's rural communities to
    successfully transition into careers in STEM in general and food,
    agriculture, natural resources, and related sciences (UFANRRS) in
    particular. In addition to addressing the clogs in the existing
    pipeline of trained women and minorities from high school to
    undergraduate degrees, the project is also including a component that
    introduces middle school students to career options in food and
    agricultural sciences. The innovativeness and significance of this
    project rest on the project's design in building the pipeline to the
    undergraduate pool through increased interest in STEM programs early in
    the education process and recognizing the need to transition students
    from bachelor's to master's STEM programs through better preparation.

                  6. Annual Budget Authority (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
    Annual Budget Authority                    $400                   $399
    ------------------------------------------------------------------------
    Note: Funding began in FY 2010.

                       7. Annual Outlays (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
            Annual Outlays                     $240                   $387
    ------------------------------------------------------------------------
    Note: Funding began in FY 2010.

                    8. Annual Delivery Cost (FY 2007-FY 2011)
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                                        2010                    2011
    ------------------------------------------------------------------------
      Annual Delivery Cost                      $16                    $16
    ------------------------------------------------------------------------
    Note: Funding began in FY 2010.

    9. Eligibility Criteria
        Eligible applicants are: (a) state agricultural experiment
    stations; (b) colleges and universities; (c) university research
    foundations; (d) other research institutions and organizations; (e)
    Federal agencies; (f) national laboratories; (g) private organizations
    or corporations; (h) individuals; or (i) any group consisting of two or
    more of the entities described in subparagraphs (a) through (h).

                      10. Utilization (Participation) Data
    ------------------------------------------------------------------------
        Fiscal Year            2008              2009              2010
    ------------------------------------------------------------------------
     Applications               None              None                13
          Received
    Applications Funded         None              None                 2
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        REE is committed to maximizing Federal dollars by ensuring
    systematic monitoring and evaluation. While the scientific method
    requires the flexibility to replicate results, NIFA's leadership,
    program managers, and researchers rigorously track scientific projects
    through its Current Research Information System (CRIS) to avoid
    duplication. Program leadership also holds joint stakeholder meetings
    and/or coordinates with other science agencies (ARS, ERS, others) to
    ensure that programs are complementary, and do not duplicate other
    science programs in USDA and other Federal agencies. The creation and
    staffing of the USDA Office of the Chief Scientist has bolstered this
    coordination.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    House Committee on Agriculture Farm Bill Audit Questionnaire--National
                        Agricultural Statistics Service
    1. Program Name
        National Agricultural Statistics Service.
    2. Subprograms/Department Initiatives
        Agricultural Estimates and Census of Agriculture:

        i. 2008 Organic Production Survey,

        ii. Cash Rents Survey,

        iii. Prices Survey,

        iv. Specialty Crops Survey, and

        v. Civil Rights Report.
    3. Brief History
        a. 2008 Organic Program Survey: The 2007 Census of Agriculture
            showed more than 20,000 farmers engaged in organic production
            in the United States. As a follow-up to the 2007 Census, USDA
            conducted it first ever, wide-scale survey of organic
            agriculture.

        b. Cash Rents Survey: NASS has been directed through the 2008 Farm
            Bill to collect cash rents data for use by the Farm Service
            Agency (FSA) in program administration. The Food, Conservation,
            and Energy Act of 2008, Section 2110, states,

                            ``The Secretary (acting through the National
                            Agricultural Statistics Service) shall conduct
                            an annual survey of per acre estimates of
                            county average market dry land and irrigated
                            cash rental rates for cropland and pastureland
                            in all counties or equivalent subdivisions
                            within each state that have 20,000 acres of
                            cropland or pastureland.''

                            The Cash Rents Survey is conducted annually by
                            the USDA's National Agricultural Statistics
                            Service (NASS). The Cash Rents Survey obtains
                            annual average cash rental rates by farmers and
                            ranchers for all counties in the U.S. that meet
                            the requirements outlined in the 2008 Farm
                            Bill. This survey provides the basis for
                            estimates of the current year's Cash Rent paid
                            for Irrigated Cropland, Non-irrigated Cropland,
                            and Permanent Pasture. Data collection on the
                            Cash Rents Survey is from February through mid
                            July. The final 2011 Cash Rents estimates will
                            be published on September 9, 2011. Data will be
                            published at the county, district, state, and
                            national level.

        c. Prices Survey: The collection and publication of prices received
            by farmers gained importance with passage of the Farm Security
            and Rural Investment Act of 2002 (2002 Farm Bill) and the
            importance continued with the passage of the Food,
            Conservation, and Energy Act of 2008 (2008 Farm Bill).

        d. Specialty Crops Survey: Issued in November 2009, this is the
            first time NASS has summarized and published the Census of
            agriculture data for specialty crops.

        e. Civil Rights Report: FARM BILL Section 14006 TRANSPARENCY AND
            ACCOUNTABILITY FOR SOCIALLY DISADVANTAGED FARMERS OR RANCHERS
            requires USDA to annually compile program application and
            participation rate data regarding socially disadvantaged
            farmers or ranchers: race, ethnicity, and gender for the entire
            U.S. for each state and county.
    4. Purpose/Goals
        a. 2008 Organic Program Survey: Through the Organic Production
            Survey, USDA's National Agricultural Statistics Service (NASS)
            gathered additional information on how the growth of organic
            farming is changing the face of U.S. agriculture. This survey
            gave organic producers an opportunity to share information
            about their industry and help ensure the continued growth and
            sustainability of organic farming in the United States. The
            survey results can be utilized to help shape decisions
            regarding farm policy, funding allocations, availability of
            goods and services, community development and other key issues.
            In addition, the information can help producers of organic
            agriculture make informed decisions about the future of their
            own organic production operations. The survey looked at organic
            farming during the 2008 calendar year, including:

           Production of field crops, vegetables, fruits, tree
                nuts, berries, livestock and
                  poultry

           Production practices, including pest management, cover
                crops, crop rota-
                  tion, rotational grazing, conservation tillage, water
                management and buffer
                  zones

           Production expenses

           Marketing practices, including wholesale, retail and
                direct-to-consumer
                  sales

           Value-added production and processing

        The survey included not only farm operations that are currently
            engaged in organic production, but those making the transition
            to organic agriculture.

        b. Cash Rents Survey: The Cash Rents Survey provides the per acre
            estimate of county average cash rent paid by farmers. Estimates
            derived from this survey supply basic information needed by
            farmers to make decisions for both short term and long term
            planning. The Cash Rents Report may also be used by individual
            producers in planning expenses for their agricultural operation
            or by Extension or University Staff in developing operating
            budgets for agricultural operations in their locale.

        c. Prices Survey: Farm commodity prices are subject to the market
            forces of supply and demand. However, in times of depressed
            commodity prices the government will make counter cyclical
            payments to producers to assist them. The 2008 Farm Bill
            continued many of the commodity programs introduced in the 2002
            Farm Bill, adjusting payment levels and eligibility while
            introducing the ACRE program. The data showing prices received
            by farmers is collected and published by NASS, and is critical
            to implementing and administering these programs.

        d. Specialty Crops Survey: The 2007 Census of Agriculture Specialty
            Crop publication provides data that supplement the 2007 Census
            of Agriculture, Volume 1. As a service to agricultural and
            economic data users, the 2007 data for specialty crops are
            published at the U.S. and state-level.

        e. Civil Rights Report: As stated in the farm bill ``Using the
            technologies and systems of the National Agricultural
            Statistics Service, the Secretary shall compile and present the
            data compiled under paragraph (1) for each program described in
            the paragraph in a manner that includes the raw numbers and
            participation rates for (A) the entire United States; (B) each
            state; and (C) each county in each state.'' The department will
            use the report to ensure all farm producers are treated
            equitably by departmental service providers.
    5. Success in Meeting Programmatic Purpose/Goals
        a. 2008 Organic Program Survey: Data were collected, edited,
            analysis conducted and results released on February 3, 2010.
            There was an 87 percent response rate and NASS counted 14,540
            USDA certified and exempt organic farms.

        b. Cash Rents Survey: The survey has been conducted each year since
            the 2008 Farm Bill was enacted. Published results have been
            made available to FSA and the general public for 2008, 2009,
            and 2010 as mandated by the farm bill. The 2011 results will be
            published on August 4, 2011.

        c. Prices Survey: NASS has maintained this important data series
            for many years, making this critical data available to FSA and
            the general public. Data are published each month in the
            Agriculture Prices report--a Principal Economic Indicator of
            the United States.

        d. Specialty Crops Survey: A volume was published on this subject
            in November 2009 at the U.S. level and state level. An
            additional volume was published for Outlying Areas including
            Puerto Rico, U.S. Virgin Islands, Guam, and the Commonwealth of
            Northern Mariana Islands.

        e. Civil Rights Report: NASS has participated with the department
            in an ongoing process for several years to fulfill this
            important section of the farm bill: ``(1) Annual requirement.--
            For each county and state in the United States, the Secretary
            of Agriculture (referred to in this section as the 'Secretary')
            shall annually compile program application and participation
            rate data regarding socially disadvantaged farmers or ranchers
            by computing for each program of the Department of Agriculture
            that serves agricultural producers and landowners--

                              (A) raw numbers of applicants and
                            participants by race, ethnicity, and gender,
                            subject to appropriate privacy protections, as
                            determined by the Secretary; and
                              (B) the application and participation rate,
                            by race, ethnicity, and gender, as a percentage
                            of the total participation rate of all
                            agricultural producers and landowners.''

        NASS has created a web-based tool that will provide participation
            rates for every applicable USDA program at the state and county
            level. NASS has worked with other agencies in developing a
            format the agencies can use to submit participation data to the
            database which the web-based tool uses. This software works to
            facilitate data queries for USDA program Agencies who will load
            program application and participation data and will be
            maintained by the Department. As per the farm bill, both
            percentage rate and number of applicants and participants will
            be available. NASS has also summarized the data for total
            agricultural producers at the appropriate levels which will be
            used as the denominator in the participation rate calculation.

                                                          6. Annual Budget Authority (FY 2007-FY 2011)
                                                            National Agricultural Statistics Service
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               FY 2008      FY 2009      FY 2010      FY 2011      FY 2012      Grand Total
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Budget Authority from the Farm Bill
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    a. 2008 Organic Production Survey--Farm bill funds transferred to NASS    $1,000,000                                                          $1,000,000
     through Farm Service Agency (FSA) Commodity Credit Corporation (CCC)
    b. Cash Rents Survey--Reimbursable Agreement with FSA CCC                   $800,000   $4,811,132   $5,700,000   $5,700,000   $4,275,000     $21,286,132
    c. Prices Survey--Reimbursable Agreement with FSA CCC                     $2,486,000   $2,800,000   $2,800,000   $2,800,000   $2,800,000     $13,686,000
    d. Specialty Crops Survey *                                                       --           --           --           --           --              --
    e. Civil Rights Report *                                                          --           --           --           --           --              --
                                                                            --------------------------------------------------------------------------------
      Grand Total                                                             $1,800,000   $4,811,132   $5,700,000   $5,700,000   $4,275,000     $22,286,132
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * The farm bill directed work to be done on Specialty Crops Survey and Civil Rights Report but no funds were given through the farm bill.

                                                               7. Annual Outlays (FY 2002-FY 2011)

        Budget authority is the authority provided by public law to enter into financial obligations that will result in immediate or future outlays of
     funds. Outlays are the issuance of checks, disbursement of cash, or electronic transfer of funds made to liquidate a Federal obligation. Outlays may be
     from unexpended balances of prior-year budgetary resources plus the current budgetary resources.
        For example: The farm bill authorized $1.0 million in 2008 for the Organic Production Survey but most of those funds were obligated and spent in
     2009. The farm bill directed work on Specialty Crops and Civil Rights but no funds were provided in the farm bill. NASS used resources from the Census
     of Agriculture to summarize data needed for the survey and report. This data is considered a special tabulation of the Census, a service provided under
     Census of Agriculture authority.

                                                            National Agricultural Statistics Service
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               FY 2008      FY 2009      FY 2010      FY 2011      FY 2012      Grand Total
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Outlays of Farm Bill Funds
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    a. 2008 Organic Production Survey--Farm bill funds transferred to NASS       $12,355     $987,645           $0           $0           $0      $1,000,000
     through FSA CCC
    b. Cash Rents Survey--Reimbursable Agreement with FSA CCC                   $800,000   $4,811,132   $5,700,000   $5,700,000   $4,275,000     $21,286,132
    c. Prices Survey--Reimbursable Agreement with FSA CCC                     $2,486,000   $2,800,000   $2,800,000   $2,800,000   $2,800,000     $13,686,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Outlays of NASS Funds for Farm Bill Directed Activities
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    d. Specialty Crops Survey *                                                       $0      $15,413       $9,438           $0           $0         $24,851
    e. Civil Rights Report *                                                      $1,512       $4,320       $9,720      $11,448           $0         $27,000
                                                                            --------------------------------------------------------------------------------
      Grand Total                                                               $813,867   $5,818,510   $5,719,158   $5,711,448   $4,275,000     $22,337,983
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * NASS redirected funds to fulfill the farm bill direction. NASS used resources from the Census of Agriculture to summarize data needed for the survey
      and report. This data is considered a special tabulation of the Census, a service provided under Census of Agriculture authority.

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        NASS programs are very integrated; most of the surveys are done from questionnaires with the farmers and ranchers. The questions cover a wide
     variety of crops; farming and ranching practices; operator characteristics (primary occupation, sex, age, race, and Spanish, Hispanic, or Latino
     origin); farm size and type of ownership (family, partnership, corporation, other). NASS produces over 500 reports derived from this data.

                                                            National Agricultural Statistics Service
                                                                     Annual Cost of Surveys
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               FY 2008      FY 2009      FY 2010      FY 2011      FY 2012      Grand Total
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                     a. 2008 Organic Production Survey--Farm bill funds transferred to NASS through FSA CCC
    --------------------------------------------------------------------------------------------------------------------------------------------------------
      Salary expenses Subtotal                                                   $12,355     $987,645           $0           $0           $0      $1,000,000
      FTEs                                                                           0.0          6.2          0.0          0.0          0.0             6.2
                                                                            --------------------------------------------------------------------------------
      2008 Organic Production Survey--funds appropriated to NASS Salary         $174,410     $441,040           $0           $0     $615,450
       expenses Subtotal
        Contracts                                                                     $0     $485,897           $0           $0           $0        $485,897
        Printing                                                                      $0           $0      $45,008           $0           $0         $45,008
        Postage                                                                       $0      $59,947           $0           $0           $0         $59,947
                                                                            --------------------------------------------------------------------------------
          Subtotal                                                                    $0     $720,254     $486,049           $0           $0      $1,206,303
          FTEs                                                                       0.1          4.6          4.1          0.0          0.0             8.8
                                                                            ================================================================================
            Total                                                                $12,355   $1,707,899     $486,049           $0           $0      $2,206,303
            Total FTEs                                                               0.1         10.8          4.1          0.0          0.0            15.0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    b. Cash Rents Survey--Reimbursable Agreement with FSA CCC
    --------------------------------------------------------------------------------------------------------------------------------------------------------
      Salary expenses Subtotal                                                  $800,000   $4,811,132   $5,700,000   $5,700,000   $4,275,000     $21,286,132
      FTEs                                                                           7.4         44.3         52.5         52.5         39.4           196.0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      c. Prices Survey--Reimbursable Agreement with FSA CCC
    --------------------------------------------------------------------------------------------------------------------------------------------------------
      Salary expenses Subtotal                                                $2,486,000   $2,800,000   $2,800,000   $2,800,000   $2,800,000     $13,686,000
      FTEs                                                                          22.9         25.8         25.8         25.8         25.8           126.0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     d. Specialty Crops Survey *--Funds appropriated to NASS
    --------------------------------------------------------------------------------------------------------------------------------------------------------
      Salary expenses Subtotal                                                        $0      $13,313       $4,438           $0           $0         $17,750
      FTEs                                                                           0.0          0.1          0.0          0.0          0.0             0.1
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      e. Civil Rights Report *--Funds appropriated to NASS
    --------------------------------------------------------------------------------------------------------------------------------------------------------
      Salary expenses                                                             $1,512       $4,320       $9,720      $11,448           $0         $27,000
      FTEs                                                                           0.0          0.0          0.1          0.1          0.0             0.2
                                                                            ================================================================================
        Grand Total                                                           $3,299,867   $9,336,664   $9,000,206   $8,511,448   $7,075,000     $37,223,185
        Grand Total FTEs                                                            30.4         81.0         82.5         78.4         65.2           337.4
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    * The farm bill directed work to be done on Specialty Crops and Civil Rights but funds were not given from the farm bill. NASS used resources from the
      Census of Agriculture to summarize data needed for the survey and report. This data is considered a special tabulation of the Census, a service
      provided under Census of Agriculture authority.

    9. Eligibility Criteria
        a. 2008 Organic Production Survey: USDA-certified organic
            producers; Producers exempt from USDA certification; Producers
            transitioning to organic identified from the 2007 Census of
            Agriculture and updated for newly certified, exempt, and
            transitioning farms.

        b. Cash Rents: The population for the Cash Rents Survey is the
            USDA-NASS farm population. It includes ``all operations that
            sold or have the potential to sell at least $1,000 worth of
            agricultural products during the year.'' A sample of farmers/
            ranchers is surveyed that have or could have a cash rental
            agreement.

        c. Prices Survey: All entities that purchase grains, oilseeds,
            pulse crops, peanuts, or cotton directly from farmers are
            eligible to be surveyed, and represent the population. All
            sampled units are visited each year to go over all procedures
            and detailed reporting instructions to ensure that the data is
            accurate and complete.

        d. Specialty Crops Survey: A specialty crop is defined by Section 3
            of the Specialty Crops Competitiveness Act of 2004 (7 U.S.C.
            1621 note; Public Law 108-465) as fruits and vegetables, tree
            nuts, dried fruits, and nursery crops (including floriculture).
            Maple syrup is included because some USDA agencies consider it
            a specialty crop. Data are provided that include and exclude
            maple syrup to accommodate either definition.

        e. Civil Rights Report: The population for the Civil Rights Report
            is the USDA-NASS farm population. It includes ``all operations
            that sold or have the potential to sell at least $1,000 worth
            of agricultural products during the year.''
    10. Utilization (Participation) Data
        a. 2008 Organic Production Survey: The final mail list included
            28,938 farms that met the criteria of which 14,540 farms were
            USDA certified or exempt.

        b. Cash Rents: NASS sampled approximately 220,000 producers and
            strives to get 80% percent response rate.

        c. Prices Survey: NASS strives to achieve an 80% response rate for
            operations surveyed each month.

        d. Specialty Crops Survey: The number of farms producing specialty
            crops totals 247,772.

        e. Civil Rights Report: NASS used already collected data from the
            Census of Agriculture. The Census form was mailed to
            approximately 3.1 million potential farm operations. The 2007
            Census of Agriculture counted 2.2 million farming operations.
            USDA program agencies will load application and participation
            data for their programs. The application and participation
            rates and data will then be available to the general public.
    11. Duplication or Overlap with Other Programs
        a. 2008 Organic Production Survey: No duplication. These data were
            collected from the organic producers themselves and not from
            certifying entities as is published from other agencies.

        b. Cash Rents: No duplication. This is the only source of
            information on farm level cash rent rates for all qualifying
            counties in the United States.

        c. Prices Survey: No duplication. This data series is the only
            available source of prices received by farmers available for
            the U.S.

        d. Specialty Crops Survey: No duplication.

        e. Civil Rights Report: No duplication. This is the only source of
            information for participation and application rate data.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    House Committee on Agriculture Farm Bill Audit Questionnaire--Economic
                                Research Service
    1. Program Name
        Economic Research Service (ERS).
    2. Subprograms/Department Initiatives
        Economic Research and Analysis.
    3. Brief History
        The Economic Research Service (ERS) was established in 1961 from
    components of the former Bureau of Agricultural Economics principally
    under the authority of the Agricultural Marketing Act of 1946 (7 U.S.C.
    1621-1627).
    4. Purpose/Goals
        The mission of ERS is to inform and enhance public and private
    decision making on economic and policy issues related to agriculture,
    food, the environment, and rural development.
        ERS has six strategic goals which correspond to each of the four
    USDA strategic goals. To achieve these goals, ERS enhances the
    understanding of policy makers, regulators, program managers, and those
    shaping debate of economic issues affecting agriculture, food, the
    environment, and rural development. Activities to support ERS' mission
    and goals involve research and development of economic and statistical
    indicators on a broad range of topics, including but not limited to
    global agricultural market conditions, trade restrictions, agribusiness
    concentration, farm and retail food prices, foodborne illnesses, food
    labeling, nutrition, food assistance programs, agrichemical usage,
    livestock waste management, conservation, agricultural productivity,
    technology transfer, and rural employment. Research results and
    economic indicators on such important agricultural, food, natural
    resource, and rural issues are fully disseminated to public and private
    decision makers through published and electronic reports and articles;
    special staff analyses, briefings, presentations, and papers;
    databases; and individual contacts.
    5. Success in Meeting Programmatic Purpose/Goals
        The long-term performance goal for the Economic Research Service is
    the successful execution of the ERS program of economic research and
    analysis to provide policy makers, regulators, program managers, and
    those shaping the public debate on agricultural economic issues with
    timely, relevant, and high quality economic research, analysis, and
    data to enhance their understanding of economic issues affecting food
    and agriculture. The key outcome of the ERS program is informed public
    and private decision-making on economic and policy issues related to
    agriculture, food, the environment, and rural development.
        Central to effective ERS performance is successful completion of
    planned research that enhances understanding by policy makers,
    regulators, program managers, and those shaping the public debate of
    economic issues related to enhancing economic opportunities for
    agricultural producers. ERS research and management practices use many
    methods to ensure that the direction of agency research activities
    reflects current and anticipated needs of ERS stakeholders and
    customers, that research and analysis produced by the agency adheres to
    disciplinary standards to ensure the highest possible quality, and that
    the agency's research products are delivered in a way that is
    accessible to customers.
        ERS interacts with stakeholders and customers in many ways to
    ensure that the research agenda focuses on topics relevant to public
    and private decision makers. ERS regularly convenes workshops,
    stakeholder sessions, or other meetings in which the results of recent
    agency research are discussed, upcoming policy issues are identified,
    and questions for future research are explored.
        ERS strategic planning activities include reviews of progress in
    meeting program plans and implementing revisions as necessary. ERS
    strategic planning includes discussions with customers and stakeholders
    on prospective research projects to meet anticipated needs of policy
    officials. Stakeholder conferences are used to help set priorities for
    ERS extramural funding programs. ERS management regularly discusses
    implementation of research activities with key customers and
    stakeholders including USDA Agencies, other Federal departments,
    Congressional staff and members, and private sector partners to ensure
    continued and improved agency effectiveness. Suggestions and ideas from
    our key customers informs our program planning process to ensure that
    ERS continues to provide the information, data, market outlook and
    analysis needed to inform decision making on economic issues related to
    food, agriculture, and rural America.
        ERS uses independent expert review panels that evaluate the
    effectiveness of the ERS program of economic research and analysis to
    enable better informed decisions on food and agricultural policy
    issues. Over the past 6 years, review panels have assessed major
    segments of the ERS program. In each review, the external panels assess
    the relevance, quality, and performance of program plans, activities,
    and accomplishments. This assessment includes an evaluation using a
    quantitative analysis tool to rate portfolio effectiveness on a multi-
    category scale (excellent, adequate, needs improvement). The panel
    recommendations are used in agency strategic planning and priority
    setting. All past reviews have rated ERS performance as ``Excellent.''
    6. Annual Budget Authority (FY 2002-FY 2011) ($000)
            FY 2002: $67,154
            FY 2003: $68,674
            FY 2004: $70,981
            FY 2005: $74,170
            FY 2006: $75,172
            FY 2007: $75,193
            FY 2008: $77,397
            FY 2009: $79,500
            FY 2010: $82,478
            FY 2011: $81,814
    7. Annual Outlays (FY 2002-FY 2011) ($000)
            FY 2002: $69,892
            FY 2003: $70,262
            FY 2004: $65,543
            FY 2005: $72,847
            FY 2006: $72,778
            FY 2007: $72,760
            FY 2008: $77,707
            FY 2009: $79,719
            FY 2010: $67,927
            FY 2011: $82,000 (est.)

                                                        8. Annual Delivery Cost (FY 2007-FY 2011) ($000)

                                                 FY 2002    FY 2003    FY 2004    FY 2005    FY 2006    FY 2007    FY 2008    FY 2009    FY 2010    FY 2011

    Salaries and Expenses                         $34,157    $32,945    $39,621    $39,675    $40,781    $42,311    $45,080    $48,897    $52,361    $52,400
    Data Acquisition                               $4,000     $6,500     $6,950    $10,450    $10,027    $10,250    $13,116    $16,407    $16,095    $16,199
    Contracts, Agreements, and Grants             $12,859    $11,732     $5,130     $5,899     $6,899     $5,240     $8,750     $8,223     $9,050     $8,634
      Direct costs                                                         $492       $270       $283       $480     $2,176     $1,757     $1,200     $1,200
      Indirect Costs *                            $16,029    $17,243    $18,637    $17,743    $17,015    $16,335     $7,908     $3,606     $3,037     $3,381
                                               -------------------------------------------------------------------------------------------------------------
        Total Cost                                $67,045    $68,420    $70,830    $74,037    $75,005    $74,616    $77,030    $78,890    $81,743    $81,814
        Total FTEs                                    479        462        439        427        400        376        386        388        400        400

    * Variances in Indirect Costs throughout the years are attributed to differences in charging data acquisition, contracts, and agreements to the budget
      object class for categories included in Indirect costs.

    9. Eligibility Criteria
        N/A.
    10. Utilization (Participation) Data
        N/A.
    11. Duplication or Overlap with Other Programs
        The four REE agencies are complementary and have distinct missions.
    The National Agriculture Statistics Service (NASS) conducts basic
    statistically valid surveys to create a body of data that reflects on-
    the-ground factual information. ERS constructs data series, using data
    from a variety of sources, to inform its program of research and market
    analysis. Data collected by NASS are used by ERS for its farm income
    estimates and research, and in the ERS program of market outlook and
    analysis. Other data and research in ERS, such as the food security
    statistics, rely on survey agreements with other Federal agencies such
    as the Census bureau. ERS provides data, research and analysis that
    support the wide range of program and policy issues of importance to
    USDA. ERS data, information and analysis meet the information needs of
    USDA policy makers and programs, and are used by the media, trade
    associations, public interest groups, and the general public. Findings
    are useful to inform policymakers and for continuously improving the
    quality of the market information that guides production decisions and
    risk management.
        ERS provides social science research and analysis to complement the
    other scientific expertise of the REE agencies in multidisciplinary
    research. ERS collaborates with ARS in carrying out research to address
    the needs of U.S. agriculture, including research and data development
    to support rural prosperity, agricultural productivity, global food
    security, food safety, and better diets. ERS coordinates with NIFA
    regarding extramural funding priorities and identifying promising new
    areas for research.
        ERS is the primary source of statistical indicators that, among
    other things, gauge the health of the farm sector (including farm
    income estimates and projections), assess the current and expected
    performance of the agricultural sector (including trade), and provide
    measures of food insecurity here and abroad. ERS is one of the 14 OMB
    officially-designated Federal statistical agencies.
        ERS collaborates with the staff of the Office of the Chief
    Economist and staff economists in USDA program agencies to provide
    data, research findings, and market analysis and outlook to support
    Departmental decision making on program implementation and development.
    12. Waste, Fraud and Abuse
        No such instances have to date been identified.
    13. Effect of Administrative PAYGO
        None.

                           AGRICULTURAL PROGRAM AUDIT

                      (EXAMINATION OF USDA DAIRY PROGRAMS)

                                  ----------

                          THURSDAY, SEPTEMBER 8, 2011

         Subcommittee on Livestock, Dairy, and
                                       Poultry,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 2:15 p.m., in
    Room 1300, Longworth House Office Building, Hon. Thomas J.
    Rooney [Chairman of the Subcommittee] presiding.
        Members present: Representatives Rooney, Goodlatte,
    Neugebauer, Conaway, Huelskamp, DesJarlais, Gibson, Ribble,
    Cardoza, Scott, Courtney, Boswell, Owens, Peterson (ex
    officio), Costa, and Welch.
        Staff present: John Goldberg, Debbie Smith, Lauren
    Sturgeon, Suzanne Watson, Michelle Weber, John Konya, Nathaniel
    B. Fretz, Mary Knigge, and Jamie Mitchell.

    OPENING STATEMENT OF HON. THOMAS J. ROONEY, A REPRESENTATIVE IN
                         CONGRESS FROM FLORIDA

        The Chairman. This hearing of the Subcommittee on
    Livestock, Dairy, and Poultry for the purpose of conducting an
    agricultural program audit; an examination of USDA dairy
    programs will come to order.
        I would like to welcome y'all to today's hearing to review
    the current dairy programs. I would like to begin by thanking
    Ranking Member Cardoza for his help in preparing for today's
    hearing. I would also like to welcome our witnesses and extend
    our gratitude for you making the effort to be here and to share
    your time and expertise with our Subcommittee.
        This hearing is the tenth in a series of audits of USDA
    farm programs. Through these discussions, we hope to gain a
    better understanding of how each program is operating and what
    we might do to improve farm policy, moving forward. Our
    witnesses today will share their knowledge and expertise in
    administering Federal dairy programs.
        The events of 2009 exposed what many have long held to be
    an inadequacy of some of our current dairy programs. While some
    observers may argue that additional funding may improve the
    overall effectiveness of our dairy safety net, our current
    budgetary outlook makes this option a nonstarter. Innovative
    and effective ideas are needed in order to ensure that our
    programs support our producers, facilitate product and market
    development, and continue to ensure the availability of safe,
    abundant, and affordable products for our consumers.
        Our witnesses will provide the Subcommittee with detailed
    information on existing programs, testifying to their current
    conditions, productivity, and possible public policy
    challenges. In this hearing, we hope to gain some perspective
    about the issues we should focus on in greater detail later in
    this Congress.
        I appreciate my colleagues' attendance and interest in this
    hearing and encourage suggestions and recommendations as we
    move forward with our Subcommittee's agenda.
        [The prepared statement of Mr. Rooney follows:]

       Prepared Statement of Hon. Thomas J. Rooney, a Representative in
                             Congress from Florida
        Good afternoon, and welcome to today's hearing to review current
    dairy programs. I would like to begin by thanking Ranking Member
    Cardoza for his help in preparing for today's hearing. I would also
    like to welcome our witnesses and extend our gratitude for making the
    effort to be here and to share their time and expertise with our
    Subcommittee.
        This hearing is the tenth is a series of audits of USDA farm
    programs. Through these discussions we hope to gain a better
    understanding of how each program is operating and what we might do to
    improve farm policy, moving forward. Our witnesses today will share
    their knowledge and expertise in administering Federal dairy programs.
        The events of 2009 exposed what many have long-held to be an
    inadequacy of some of our current dairy programs. While some observers
    may argue that additional funding may improve the overall effectiveness
    of our dairy safety net, our current budgetary outlook makes this
    option a non-starter. Innovative and effective ideas are needed in
    order to ensure that our programs support our producers, facilitate
    product and market development, and continue to ensure the availability
    of safe, abundant and affordable products for our consumers.
        Our witnesses will provide the Subcommittee with detailed
    information on existing programs, testifying to their current
    conditions, productivity, and possible public policy challenges. In
    this hearing we hope to gain some perspective about the issues we
    should focus on in greater detail later in this Congress.
        I appreciate my colleagues' attendance and interest in this hearing
    and encourage suggestions and recommendations as we move forward with
    our Subcommittee's agenda.

        The Chairman. With that, I would like to recognize the
    Ranking Member, Representative Cardoza.

     OPENING STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE
                      IN CONGRESS FROM CALIFORNIA

        Mr. Cardoza. Thank you, Mr. Chairman.
        I very much appreciate your friendship and your
    organizational ability putting this hearing together. I want to
    also thank our witnesses for being with us today. This is a
    vital hearing with regard to our dairy programs at USDA.
        The dairy industry has always faced a rocky road, but the
    past few years have been particularly challenging. In
    California, we produce 21 percent of the country's milk supply,
    producing some of the highest amounts of cheese, milk, butter,
    yogurt, nonfat dry milk than anywhere else in the country.
        Alone, the dairy industry produces $4.5 billion in annual
    sales and generates $63 billion in economic activity. This
    equates to over 443,000 jobs for our country; therefore, it is
    vital that USDA implement programs that keep the industry
    strong and are equitably distributed throughout the country in
    order to keep dairymen and women producing wholesome products
    that we all enjoy and so that parents can provide their
    children with the best available nutrition.
        It is also essential that this Congress enact dairy policy
    reforms that lift up the industry and lay the foundation for
    the future of dairy production. As a country and as a
    Committee, we need to ensure that we lay the long-term
    foundation for a strong industry so that we can continue to
    produce milk and other dairy products at home and not rely on
    imports from other countries. Producing our own food is vital
    to our national security. It is imperative that we protect our
    domestic food production industry, especially the dairy
    industry.
        I look forward to hearing from our witnesses today and
    thank them all for being here. We will use this information to
    craft dairy policies, moving forward, and I appreciate your
    input.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Cardoza follows:]

       Prepared Statement of Hon. Dennis A. Cardoza, a Representative in
                            Congress from California
        Thank you, Mr. Chairman, and thank you to our witnesses for sharing
    with us today the status of the dairy programs at USDA.
        The dairy industry has always faced a rocky road, but the past few
    years have been particularly challenging.
        In California, we produce 21% of the country's milk supply,
    producing some of the highest amounts of cheese, milk, butter, yogurt,
    and nonfat dry milk in the country.
        Alone, the dairy industry produced $4.5 billion in annual sales and
    generated $63 billion in economic activity. This equates to over
    443,000 jobs.
        Therefore, it is vital that USDA implement programs that keep the
    industry strong and are equitably distributed throughout the country,
    to keep dairymen and women producing the wholesome products that we all
    enjoy, and so that parents can provide their children with the best
    available nutrition.
        It is also essential that this Congress enact dairy policy reforms
    that lift up the industry and lay a foundation for the future of dairy
    production.
        As a country and as a Committee, we need to ensure that we lay the
    long-term foundation for a strong industry so that we can continue to
    produce milk and other dairy products at home--and not rely on imports
    from other countries.
        Producing our own food is vital to our national security. It is
    imperative that we protect our domestic food production industry,
    including dairy.
        I look forward to hearing from our witnesses today and thank them
    for being here. We'll use this information to craft dairy policies,
    moving forward, and I appreciate your input. Thank you.

        The Chairman. Thank you, Mr. Cardoza.
        The chair would request that other Members submit their
    opening statements for the record so that the witnesses may be
    able to begin their testimony and ensure that there is ample
    time for questions.
        [The prepared statements of Mr. Peterson and Mr. Baca
    follow:]

      Prepared Statement of Hon. Collin C. Peterson, a Representative in
                            Congress from Minnesota
        Good afternoon. Thank you Chairman Rooney and Ranking Member
    Cardoza for continuing the Agriculture Committee's farm bill audit
    hearings.
        We have known for some time now that our current dairy programs are
    not working. They are not keeping pace with the challenges facing
    today's dairy industry.
        I worry that if we have another situation like we had in 2009 we
    could easily lose half our nation's dairies. Unfortunately, the current
    environment in the dairy sector is becoming very similar to what we saw
    leading up to the 2009 collapse. This is why I believe we need to
    address dairy programs sooner than later.
        I've put forward a draft dairy reform proposal that I hope to
    introduce in the coming weeks. We can discuss the proposal more at
    another time but I do believe that we're on the right track to reaching
    a solution.
        It is also important to note that whatever this Committee decides
    to do, with dairy programs specifically or the farm bill as a whole, we
    will have to make some tough choices to reduce spending.
        Again, I thank the chair for holding today's hearing and look
    forward to hearing from our witnesses.
                                     ______

    Prepared Statement of Hon. Joe Baca, a Representative in Congress from
                                   California
        Chairman Rooney and Ranking Member Cardoza:

        I am pleased to be here today to review the current state of dairy
    programs at USDA--and to discuss what steps, if any, the Federal
    Government should take to stabilize the dairy market in the 2012 Farm
    Bill.
        I thank the Chairman and Ranking Member for convening this hearing
    and hope we will be able to gain valuable insight into this critical
    issue.
        I also want to thank our witnesses for coming here today--and
    taking time from their schedule to help us in Congress better
    understand current dairy policy.
        Everyone in this room understands the important work America's
    dairy farmers do, and the vital need to keep the dairy industry healthy
    and prosperous.
        When agricultural markets fluctuate, there is a direct and
    significant impact on our nation's food supply--and thus the health and
    nutrition of virtually every American.
        In my own Congressional District in the Inland Empire of
    California--dairy is a significant agricultural and economic product.
        We all know the dairy industry has been hit harder than most by the
    recent economic downturn. We also know that our dairy farmers continue
    to see higher levels of production costs.
        As Members of the Subcommittee on Livestock, Dairy, and Poultry, it
    is vitally important that we review the current efficiency and
    effectiveness of dairy programs.
        America's dairy industry must remain strong and secure.
        We must be willing to work together on this issue. The USDA,
    industry groups, the Federal and state governments all play an
    important role in stabilizing our markets.
        I look forward to hearing from our witnesses today and again thank
    the Chairman and Ranking Member for their leadership.
        Thank you.

        The Chairman. I would like to welcome our panel of
    witnesses to the table: Mr. Juan Garcia, Acting Deputy
    Administrator for Farm Programs, Farm Service Agency, U.S.
    Department of Agriculture, accompanied by Dr. Larry Salathe,
    Senior Economist, Office of the Chief Economist, USDA; and Ms.
    Dana Coale, Deputy Administrator for Dairy Programs,
    Agricultural Marketing Service, U.S. Department of Agriculture,
    Washington, D.C.
        Mr. Garcia, please begin when you are ready.

               STATEMENT OF JUAN M. GARCIA, ACTING DEPUTY
      ADMINISTRATOR FOR FARM PROGRAMS, FARM SERVICE AGENCY, U.S.
                       DEPARTMENT OF AGRICULTURE,
     WASHINGTON, D.C.; ACCOMPANIED BY LARRY SALATHE, Ph.D., SENIOR
                     ECONOMIST, OFFICE OF THE CHIEF
                            ECONOMIST, USDA

        Mr. Garcia. Thank you, Mr. Chairman.
        Mr. Chairman, Ranking Member Cardoza, and Members of the
    Subcommittee, thank you for the opportunity to discuss the
    dairy provisions associated with the 2008 Farm Bill. Today, I
    will review dairy programs of the Farm Service Agency, Foreign
    Agricultural Service and Risk Management Agency. I will also
    briefly mention some important dairy assistance programs
    authorized outside the farm bill.
        Dairy production in the United States is marked by
    significant volatility and low market predictability. Our dairy
    producers are the most productive in the world, but their
    livelihood comes with a great deal of uncertainty regarding
    prices and input costs. Given the roller coaster cycle of the
    dairy market, market downturns can have very significant
    impacts very quickly. We saw this unfold in 2009 with the last
    dramatic and rapid decline in dairy prices. The global economic
    recession, the melamine scare in China, and increases in the
    value of the dollar lowered the demand for U.S. dairy products
    in world markets, while grain prices kept feed costs relatively
    high. As you know, this puts tremendous pressure on U.S. dairy
    producers.
        Since 2009, Secretary Vilsack has exercised every authority
    at hand to provide as much relief as possible to dairy
    producers under a variety of programs. Today, I would like to
    mention those programs briefly.
        Since April 2009, FSA has provided more than $900 million
    for producers under the Milk Income Loss Contract Program,
    which makes payments when market prices are low relative to a
    level fixed in statute. Most of those payments went out at the
    height of the crisis in 2009.
        We are also working hard to be sure credit is available for
    dairy producers, in particular during market downturns when
    commercial credit is hard to come by.
        In March 2009, FSA authorized the release of MILC sales
    proceeds for essential family living and farm operating
    expenses and notified borrowers of a wide variety of additional
    loan servicing options.
        Stable markets are crucial to a healthy dairy industry. The
    Commodity Credit Corporation stands ready to buy certain dairy
    products at support levels under the Dairy Product Price
    Support Program. By doing so, the Dairy Product Price Support
    Program helps support market prices. The acquired products are
    largely used to provide assistance to needy families, both in
    the U.S. and overseas.
        The Foreign Agricultural Service, in turn, operates a Dairy
    Export Incentive Program, which provides a bonus on a bid basis
    to exporters of dairy products to bridge the gap between world
    market prices and U.S. domestic prices. Since 2002, world dairy
    prices have warranted issuing allocations under the program
    five times.
        In addition to these authorities under the farm bill, USDA
    has also expedited emergency non-farm bill aid to producers.
    The Fiscal Year 2010 Agricultural Appropriations Act authorized
    $290 million in additional direct payments to dairy producers
    under the Dairy Economic Loss Program, as well as $60 million
    for the purchase of cheese and other products. The $290 million
    was paid in near record time, with payments beginning within 60
    days of legislative passage. We are particularly proud that
    these important payments were made so quickly to the greatest
    possible benefit during a time of crisis for U.S. dairies.
        Finally, insurance makes up an important part of the safety
    net for dairy producers. There are two basic insurance models
    used to provide livestock insurance: the Livestock Risk
    Protection and Livestock Gross Margin. The Livestock Risk
    Protection provides protection against unexpected declines in
    the price of certain livestock, while the Livestock Gross
    Margin provides protection against unexpected declines in the
    gross margin of the insured livestock product for certain
    livestock, which includes milk.
        Mr. Chairman and Members of the Subcommittee, Secretary
    Vilsack and all of us at USDA recognize that volatility and
    market uncertainty affect all producers to a certain extent.
    Market fluctuations can be particularly dramatic in the dairy
    industry, and we have been very diligent in exercising a broad
    range of program authority to help dairy producers across
    America. We look forward to continuing our work with Congress
    on this important issue, providing information or technical
    assistance wherever we can.
        Mr. Chairman, this concludes my remarks and I would be
    happy to answer any questions you may have. Thank you very
    much.
        [The prepared statement of Mr. Garcia follows:]

     Prepared Statement of Juan M. Garcia, Acting Deputy Administrator for
      Farm Programs, Farm Service Agency, U.S. Department of Agriculture,
                                Washington, D.C.
        Mr. Chairman, Ranking Member, and Members of the Subcommittee,
    thank you for the opportunity to discuss the dairy provisions
    associated with the Food, Conservation, and Energy Act of 2008 (2008
    Farm Bill). I will be covering not only the programs associated with
    the Farm Service Agency (FSA), but also those associated with the
    Foreign Agricultural Service (FAS) and the Risk Management Agency
    (RMA). The programs of these agencies provide the backbone of the farm
    safety net for dairy producers. This hearing provides an opportunity to
    reflect on the performance of these programs under the 2008 Farm Bill,
    while thinking ahead to the upcoming farm bill debate.
        The dairy market situation has been extremely volatile in recent
    years, which has greatly affected FSA programs, in particular. I will
    start my discussion with those programs, intertwining information on
    the dairy market situation to highlight our response to the very weak
    economic climate faced by dairy producers in 2009.
    Farm Service Agency Programs and the Dairy Crisis
        Several events converged in early 2009 that caused a dramatic and
    rapid decline in dairy prices, which averaged $12.93 per hundredweight
    (cwt.) for the calendar year, the lowest level since 2003. The global
    economic recession, the melamine scare in China, and increases in the
    value of the dollar lowered the demand for U.S. dairy products in world
    markets. In addition, more normal weather returned to the grass-fed
    dairy industry in New Zealand and Australia, which had been plagued by
    drought in the preceding years. And, at home, the economic crisis
    weakened the demand for dairy products.
        Meanwhile, feed costs remained relatively high in 2009, causing the
    ratio between milk and feed prices to fall to its lowest level in more
    than 25 years. Financial pressure led producers to cull additional
    dairy cows and reduce milk production. The number of milk cows dropped
    from 9.31 million head in January 2009 to 9.08 million head in December
    2009. In 2009, milk production declined by 0.3 percent, the first year-
    over-year decline since 2001.
        Since April 2009, FSA has paid dairy producers more than $900
    million under the Milk Income Loss Contract (MILC) program, which makes
    payments when market prices are low relative to a level fixed in
    statute. The 2008 Farm Bill kept the same basic countercyclical price
    structure for the MILC program as in the 2002 Farm Bill, but also
    included a ``feed cost adjuster,'' which increases the size of the
    payment depending on ration costs.
        Most of these MILC payments occurred in calendar year 2009,
    although a payment of about $15 million was made for April production
    in early June, 2010. Since enactment of the 2008 Farm Bill, MILC
    payments have been made during 11 months; the feed cost adjuster had an
    impact on the payment in 5 of those months.
        The dairy crisis also affected producers' ability to receive
    financing from commercial sources. In March 2009, FSA issued guidance
    on assisting dairy producers with their credit needs. This notice
    announced that FSA Farm Loan Programs (FLP) was authorizing the release
    of milk sales proceeds for essential family living and farm operating
    expenses and notified FLP borrowers of servicing options that could be
    considered by FSA on a case-by-case basis, including extending
    repayment terms for annual operating loans for dairy farmers,
    rescheduling, consolidation, reamortization, and deferral for 1 to 5
    years. We also contacted guaranteed lenders to discuss FSA policies for
    dairy loans and remind them of loan servicing options available under
    the Guaranteed Loan Program that could be considered for certain
    producers.
        USDA also expedited emergency non-farm bill aid to producers during
    the dairy crisis. The Fiscal Year 2010 Agriculture Appropriations Act
    authorized $290 million in additional direct payments to dairy
    producers, as well as $60 million for the purchase of cheese and other
    products. The $290 million was paid in near-record time--with payments
    beginning within 60 days of legislative passage. Under the Dairy
    Economic Loss Assistance Program, eligible farmers received a one-time
    direct payment based on the amount of milk both produced and
    commercially marketed by their operations during the months of February
    through July 2009. A 100 cow dairy farm received payments of roughly
    $6,000; a 200 cow dairy, about $12,000; and operations of 400 cows or
    more, roughly $19,000. (Note that payments did not increase
    proportionately for large operations because of the application of a 6
    million pound production eligibility limitation.)
        In addition, the Commodity Credit Corporation (CCC) stands ready to
    buy certain dairy products at support levels under the Dairy Product
    Price Support Program (DPPSP). By doing so, the DPPSP helps support
    market prices. The acquired products are largely used to provide
    assistance to needy families, both in the U.S. and overseas. In total
    since October 2008, CCC has purchased nearly 270 million pounds of
    nonfat dry milk (NDM) under the DPPSP at a cost of $227 million.
    Expenditures for purchases, handling, transportation, and storage were
    an additional $16 million, bringing total program expenditures to $243
    million. No purchases have occurred since July 2009. Also during this
    time period, CCC purchased about 4.6 million pounds of butter, much of
    it during late 2008 and the first half of 2009. The Secretary announced
    in March 2009 that about 200 million pounds of NDM would be processed
    or bartered into value-added products, such as instantized nonfat dry
    milk, ultra high temperature milk, cheese, and ready-to-eat milk-based
    soups for the National School Lunch Program and the Emergency Food
    Assistance Program. USDA also temporarily increased DPPSP purchase
    prices for cheddar blocks, cheddar barrels, and NDM during August-
    October 2009.
        With the mid-point of the all-milk price forecast to average a
    record of $20.40 per cwt. in calendar year 2011, no MILC payments are
    expected during the remainder of the year, nor are purchases under the
    DPPSP expected. While high feed costs are putting financial pressure on
    dairy producers, milk prices are at high enough levels that MILC
    payments will not be triggered in the foreseeable future. Indeed, no
    payments have been made under MILC for milk produced since April 2010.
        The current strong prices are in part due to strong world dairy
    markets, which are supporting higher U.S. exports and lower U.S.
    imports. Compared to the same period a year ago, March through May
    exports of U.S. dairy products were 36.4 percent higher for cheese,
    65.7 percent higher for butter and 13.7 percent higher for nonfat dry
    milk.
    Dairy Export Incentive Program
        The Dairy Export Incentive Program (DEIP) was authorized under the
    Food Security Act of 1985 and most recently reauthorized in the 2008
    Farm Bill. This program, administered by the Foreign Agricultural
    Service, provides a bonus or subsidy on a bid basis to exporters of
    dairy products. By providing a subsidy on exports of dairy products,
    Congress intended DEIP to bridge the gap between world market prices
    and U.S. domestic prices. Commodities eligible under DEIP are milk
    powder, NDM, butterfat, and various cheeses.
        The authorizing legislation for DEIP provides that the subsidy may
    be paid in cash or in commodities held by the CCC. As CCC inventories
    diminished, DEIP evolved into the sole use of cash payments for the
    subsidy. DEIP is subject to U.S. export subsidy reduction commitments
    under the World Trade Organization's Uruguay Round Agreements, and is
    therefore capped annually by both subsidy value and quantity in
    accordance with those commitments. DEIP has helped to meet the needs of
    U.S. exporters and expand markets for U.S. dairy products when world
    prices are depressed due to the application of subsidies by other
    nations, particularly the European Union. Agricultural economists at
    FAS continuously monitor the world dairy situation and have the
    responsibility for recommending issuing allocations under DEIP as world
    dairy prices dictate.
        Since 2002, world dairy prices have warranted issuing allocations
    under DEIP five times. DEIP bonuses were last awarded in Fiscal Year
    2010 in an amount of $2.37 million, including for sales of mozzarella
    cheese to China and butter to Saudi Arabia.
    Livestock Gross Margin-Dairy (LGM-Dairy) Program
        While not contained in the farm bill, insurance is an important
    part of the safety net for dairy producers. The Agricultural Risk
    Protection Act of 2000 amended the Federal Crop Insurance Act (FCIA),
    providing authority to RMA to offer insurance for livestock products.
    It also provided $20 million in funding to cover administrative and
    operating and premium subsidy costs for pilot livestock insurance plans
    each fiscal year. RMA currently reinsures eight livestock products, all
    of which were developed and submitted by private parties through
    authorities contained in section 508(h) of the FCIA. There are two
    basic insurance models used to provide livestock insurance--Livestock
    Risk Protection (LRP) and Livestock Gross Margin (LGM). LRP provides
    protection against unexpected declines in the price of feeder cattle,
    fed cattle, lamb, and swine. LGM provides protection against unexpected
    declines in the gross margin (difference between the price received and
    feed costs) of the insured livestock product for cattle, dairy (milk),
    and swine.
        The LGM-Dairy insurance product provides protection to dairy
    producers when the gross margin declines. LGM-Dairy uses futures prices
    for corn, soybean meal, and milk to determine the expected gross margin
    and the actual gross margin. LGM Dairy is a private sector pilot
    program owned and maintained by Iowa Agricultural Insurance
    Innovations, LLC (IAII). RMA works actively with this entity, and is
    aware that IAII continues to evaluate areas for potential improvement
    to make the product more effective and attractive for dairy farmers.
        Prior to Fiscal Year 2011, total annual expenditures on all
    livestock insurance products had never exceeded $5 million. For Fiscal
    Year 2011, about $345,523 had been spent to support all livestock
    products through mid-December, 2010, with LGM-Dairy accounting for
    $66,117 of the total. In response to dairy producer concerns, the
    Federal Crop Insurance Corporation (FCIC) Board of Directors approved
    changes to LGM-Dairy, which became effective in December 2010,
    including a shift in the premium due date to after the end of the
    insurance period and the addition of graduated producer premium
    subsidies. These changes, along with promotional efforts led by
    industry groups, resulted in a dramatic and immediate increase in
    sales. For the December 17, 2010 sales period, LGM-Dairy sales
    increased by almost $1.4 million, compared to less than $70,000 during
    all sales periods dating back to the beginning of the fiscal year.
        Subsequently, RMA revised the funding allocation for LGM-Dairy and
    added an additional $5 million to underwriting capacity, using funds
    from other livestock products that, to date, had limited sales. Because
    of continued strong sales of LGM-Dairy, further revisions to the
    funding allocation occurred, and $16 million were eventually allocated
    to LGM-Dairy and $4 million to the other seven livestock insurance
    plans. The $16 million in underwriting capacity ran out during the
    sales period in March 2011 and LGM Dairy sales for the remainder of
    Fiscal Year 2011 ceased at that time.
        As of August 8, 2011, less than $600,000 of funding remained for
    the other livestock insurance products for the remainder of fiscal
    2011. As funding is depleted for each insurance product, sales will
    cease for that product until funds become available again beginning
    with the 2012 Fiscal Year.
    Dairy Industry Advisory Committee
        In response to the dairy crisis, USDA announced in August 2009 that
    nominations would be accepted to form a Dairy Industry Advisory
    Committee. The Secretary of Agriculture appointed 17 representatives
    from the dairy industry to serve in an advisory capacity, including
    producers and producer organizations, processors and processor
    organizations, handlers, consumers, academia, retailers, and others.
    The Committee's charge was ``to review the issues of: (1) farm milk
    price volatility and (2) dairy farmer profitability.'' USDA very much
    appreciates the work of this Committee, which submitted its final
    report to the Secretary in March 2011.
        This final report includes 23 wide-ranging recommendations. USDA is
    currently reviewing other recommendations and considering action as
    appropriate. We look forward to working with Congress to develop
    policies that provide the most efficient and cost-effective protection
    to the dairy sector.
    Working Toward the Next Farm Bill
        Mr. Chairman, as we move forward toward development of the next
    farm bill, it is important that we approach this new legislation with
    an eye toward truly making a difference in the future of the lives of
    millions of rural Americans, while at the same time using scare
    resources wisely. In the coming months, I look forward to providing
    answers to your questions and helping to better frame and push the
    debate toward the topics and issues that are most important to our
    constituents.
        I am happy to respond to any questions. Thank you.

        The Chairman. Thank you, Mr. Garcia.
        The gentleman from California, Mr. Costa, is not a Member
    of the Subcommittee but has joined us today. I have consulted
    with the Ranking Member, and we are pleased to welcome him in
    the questioning of the witnesses.
        Now, we will move to the testimony of Ms. Coale.
        Ms. Coale, please begin when you are ready.

        STATEMENT OF DANA COALE, DEPUTY ADMINISTRATOR FOR DAIRY
     PROGRAMS, AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF
     AGRICULTURE, WASHINGTON, D.C.; ACCOMPANIED BY LARRY SALATHE,
                             Ph.D., SENIOR
             ECONOMIST, OFFICE OF THE CHIEF ECONOMIST, USDA

        Ms. Coale. Chairman Rooney, Ranking Member Cardoza and
    Members of the Subcommittee, thank you for inviting me to
    appear before you today to review the dairy programs
    administered by the Agricultural Marketing Service of the U.S.
    Department of Agriculture.
        I will provide you with an update on the activities
    authorized in the 2008 Farm Bill that I hope will be helpful as
    you examine dairy provisions for the 2012 Farm Bill.
        AMS dairy programs conduct several activities to facilitate
    the competitive and efficient marketing of milk and dairy
    products. I am going to focus my oral statement on the three
    areas specifically identified in the 2008 Farm Bill: Federal
    Milk Marketing Orders; Research and Promotion Programs; and
    Domestic and International Market News.
        The Federal Milk Marketing Order Program has been in
    existence since the 1930s when it was authorized by the
    Agricultural Marketing Agreement Act of 1937. Currently, there
    are ten Orders that represent nearly 65 percent of all milk
    marketed in the United States. Federal Milk Marketing Orders
    are designed to promote orderly marketing by classifying and
    computing a minimum value of milk that is reflective of supply
    and demand conditions. The Order program ensures that
    processors pay producers this minimum value by verifying market
    utilization, delivery weights and component tests.
        Through this verification process, the Federal Order
    program obtains and publishes extensive market information that
    aids producers and processors with marketing decisions. During
    2010, the Federal Order program ensured minimum payments to
    nearly 46,000 producers, totaling approximately $20.4 billion.
        Although Federal Milk Marketing Orders have been in
    existence for over 70 years, they are continually updated
    through the amendatory process. The 2008 Farm Bill made several
    changes to the amendatory process designed to expedite the time
    needed to implement changes. The new time-frames were
    implemented August 20, 2008. These time-frames decrease the
    rulemaking process from over 2 years to less than 12 months
    from the date a hearing is held. USDA has held one national
    proceeding utilizing the new process and successfully met the
    mandated time-frame.
        Based on the 2008 Farm Bill, AMS also established a Dairy
    Forward Pricing Program that allows dairy farmers to enter into
    forward price contracts with processors for non-fluid milk
    uses. The milk under contract is exempt from receiving minimum
    Federal Order prices. Participation in the program has been
    minimal, approximately 300 producers of a possible 10,000 to
    15,000. Low participation rates may be attributed to perceived
    unfavorable price relationships and a limited number of
    processors offering forward contracts.
        Finally, the 2008 Farm Bill authorized the formation of a
    commission to review the Federal Milk Marketing Order program.
    Since this item was not funded, USDA did not appoint a
    commission. However, Secretary Vilsack did appoint an advisory
    committee that reviewed overall dairy policy, including a
    review of Federal Milk Marketing Orders.
        AMS also has oversight responsibility for various research
    and promotion programs. The dairy industry has the two largest
    such programs, both overseen by dairy programs, one funded by
    producers at 15 cents per hundredweight and one funded by
    processors at 20 cents per hundredweight. The 2008 Farm Bill
    required expansion of the producer program to include a
    15 cents assessment on production in Alaska, Hawaii, the
    District of Columbia, and the Commonwealth of Puerto Rico. This
    assessment became effective on April 1, 2011. In addition to
    the expanded producer assessment, a 7.5 cents assessment was
    mandated for imported dairy products. This assessment became
    effective August 1, 2011.
        AMS provides a wealth of market information to dairy
    farmers through our voluntary Domestic and International Market
    News Program. The 2008 Farm Bill directed USDA to establish an
    electronic reporting system for price reporting of four dairy
    commodities: cheddar cheese, butter, dry whey, and nonfat dry
    milk. Since funding was not provided, USDA did not implement
    these provisions. However, the Mandatory Price Reporting Act of
    2010 mandated establishment of the program. AMS issued a
    proposed rule on June 10, 2011, to implement this mandate.
    Seven comments were filed in response to the proposal. A final
    rule is being prepared to implement the program. In addition,
    software programming has begun to develop the electronic format
    that will accommodate the weekly reporting of these dairy
    commodities.
        I hope this testimony and the subsequent questions and
    answers will prove useful to the Subcommittee as you undertake
    your work on the next farm bill. Thank you.
        [The prepared statement of Ms. Coale follows]

        Prepared Statement of Dana Coale, Deputy Administrator for Dairy
          Programs, Agricultural Marketing Service, U.S. Department of
                         Agriculture, Washington, D.C.
        Chairman Rooney, Ranking Member Cardoza, and Members of the
    Subcommittee, thank you for inviting me to appear before you today to
    review the dairy programs administered by the U.S. Department of
    Agriculture (USDA) and to provide a comprehensive picture of the dairy
    activities authorized in the Food, Conservation, and Energy Act of 2008
    (2008 Farm Bill). It is our hope that this examination of these dairy
    provisions will prove helpful as you begin work on the next farm bill.
        The Commodity Title (Title I) of the 2008 Farm Bill covered a wide
    range of dairy issues. USDA's Agricultural Marketing Service (AMS) and
    the Farm Service Agency (FSA) are the primary agencies with
    responsibility for implementing Title I. Mr. Garcia of FSA is here with
    me today to discuss their activities.
        The economic vitality and quality of life in rural America, as well
    as the U.S. economy at large, depend on a competitive, efficient, and
    productive agricultural system. To increase prosperity and
    sustainability in our nation's agricultural system and rural
    communities, AMS conducts oversight activities to protect producers
    from unfair business practices. To assist producers in management and
    marketing, AMS develops and oversees national standards for the
    production and handling of agricultural products. AMS also supports
    producers by providing market information and marketing tools that
    serve as the eyes and ears of American agriculture to cover numerous
    commodities on a daily basis and provides information that impacts
    billions of dollars in agricultural trading each year.
    Federal Milk Marketing Orders
        Federal Milk Marketing Orders (FMMO) are authorized by the
    Agricultural Marketing Agreement Act of 1937, as amended. There are
    currently ten FMMO areas, impacting about 65 percent of all milk
    marketed in the U.S. These ten Orders are administered by eight market
    administrators.
        The objectives of the FMMO system are to stabilize market
    conditions, to benefit producers and consumers by establishing and
    maintaining orderly marketing conditions, and to assure consumers of
    adequate supplies of pure and wholesome milk at all times. The FMMO
    program guarantees dairy farmers a minimum price for their milk while
    assuring that consumers have an adequate supply of milk to meet their
    needs throughout the year.
        FMMOs are initiated and amended based on industry requests that are
    addressed through the formal rulemaking process. This involves
    hearings, briefings, recommended decisions, public comments, final
    decisions, farmer votes, and, ultimately, implementation by USDA.
    Changes in FMMOs are approved by an affirmative vote of \2/3\ of the
    eligible dairy farmers.
        The 2008 Farm Bill had three provisions related to FMMOs. The first
    directed USDA to establish supplemental rules to define guidelines and
    time-frames to improve the timeliness of the Federal Milk Marketing
    Order hearing process. AMS published this final rule on August 20,
    2008.
        Second, the 2008 Farm Bill directed AMS to establish a Dairy
    Forward Pricing Program to allow milk producers and cooperative
    associations to voluntarily enter into forward price contracts with
    milk handlers for milk used for non-fluid purposes. The program exempts
    handlers regulated under the Federal Milk Marketing Order from paying
    producers and cooperative associations the minimum Federal Order price
    for milk under forward contract. AMS published this final rule on
    October 31, 2008.
        Third, the 2008 Farm Bill authorized the Secretary to create a
    Commission to conduct a comprehensive review and evaluation of the
    current Federal Milk Marketing Order system and the other non-Federal
    Milk Marketing Order systems such as California. As no funding was
    provided, the commission was not established. However, on January 6,
    2010, USDA announced the selection of 17 members to the Dairy Industry
    Advisory Committee (DIAC). The activities of the DIAC will be discussed
    by FSA.
    Research and Promotion
        Authorized by Federal legislation, research and promotion programs,
    often referred to as ``checkoffs'', are designed to strengthen the
    position of the industry in the marketplace and to maintain and expand
    domestic and foreign markets. The programs are funded by industry
    assessments. Board members are nominated by the industry and appointed
    by the Secretary of Agriculture. AMS oversees the activities of the
    boards and approves their budgets in order to assure compliance with
    the legislation.
        Dairy Programs oversees two dairy promotion and research programs.
    The Fluid Milk Promotion Act of 1990, as amended (Fluid Milk Act) (7
    U.S.C. 6401 et seq.), authorized the establishment of a national fluid
    milk processor promotion program to develop and finance generic
    advertising programs designed to maintain and expand markets and uses
    for fluid milk products produced in the contiguous 48 states and the
    District of Columbia. The Fluid Milk Order became effective December
    10, 1993. The Secretary appointed the initial National Fluid Milk
    Processor Promotion Board (Fluid Milk Board) on June 6, 1994.
    Processors administer the Fluid Milk Processor Promotion Program
    through the Fluid Milk Board.
        Since August 2002, processors marketing more than 3 million pounds
    of fluid milk per month, excluding those fluid milk products delivered
    to the residence of a consumer, fund this program through a 20 cents
    per hundredweight assessment on fluid milk processed and marketed in
    consumer-type packages in the contiguous 48 states and the District of
    Columbia.
        The second dairy promotion and research program, authorized by the
    Dairy Production Stabilization Act of 1983, is a national producer
    program for dairy product promotion, research, and nutrition education
    to increase human consumption of milk and dairy products. This self-
    help program was funded by a mandatory 15 cents per hundredweight
    assessment on all milk produced in the contiguous 48 states and
    marketed commercially by dairy farmers and administered by the National
    Dairy Promotion and Research Board (Dairy Board).
        For this National Dairy Promotion and Research program, the 2008
    Farm Bill required that dairy promotion and research assessments apply
    to all states, the District of Columbia, the Commonwealth of Puerto
    Rico and dairy product importers. The assessment rate was set at
    15 cents per hundredweight for domestic milk and 7.5 cents per
    hundredweight for imported dairy products. A final rule implementing
    this provision was published March 18, 2011. All provisions became
    effective April 1, 2011, except provisions regarding dairy importer
    assessments which were effective August 1, 2011.
    Market News
        AMS' Dairy Market News provides dairy farmers and their
    cooperatives, processors, buyers and sellers of dairy products, and
    others with timely and accurate market information on milk and dairy
    products that will help them in making current buying and selling
    decisions and in future planning. This information is released through
    reports issued daily, weekly, monthly and annually. These reports are
    available free of charge and the information is easily accessible.
        In collecting market information, reporters cover multiple markets
    that results in over 65 reports by constantly interviewing buyers,
    sellers, and brokers of fluid milk, cream, butter, cheese, condensed
    milk, and dried milk products. Currently, the industry voluntarily
    provides the information.
        AMS and the National Agricultural Statistics Service (NASS) also
    administer a Dairy Product Mandatory Reporting Program, which requires
    persons engaged in manufacturing dairy products to report certain
    information including the price, quantity, and moisture content where
    applicable, of certain dairy products sold by the manufacturer. The
    program also requires persons storing dairy products to report
    information on the quantity of dairy products stored.
        Currently, NASS collects information for the program and AMS
    provides verification and enforcement functions for dairy product price
    information. NASS publishes sales information for block cheddar cheese,
    barrel cheese, butter, dry whey, and nonfat dry milk on a weekly basis.
    Any manufacturer that markets less than 1 million pounds of these dairy
    products per year is exempt from the price reporting requirements.
        The 2008 Farm Bill directed USDA to establish an electronic
    reporting system for price reporting of these dairy commodities. As no
    funding was provided, AMS did not implement this provision. However, in
    September 2010, Congress passed the Mandatory Price Reporting Act of
    2010, mandating the establishment of this electronic reporting system
    (again without funding) while directing AMS to publish the information
    obtained for the preceding week not later than 3:00 p.m. Eastern Time
    on Wednesday of each week, rather than on Friday.
        On June 10, 2011, USDA issued a proposed rule to implement the
    provisions contained in the Mandatory Price Reporting Act of 2010.
    Under the proposed rule, AMS would develop the electronic system and
    collect the data. The comment period closed August 9, 2011, and AMS is
    currently reviewing the seven comments received.
    Other AMS Dairy Activities
        AMS undertakes a number of other activities not referenced in the
    2008 Farm Bill that are of great importance to the dairy industry. AMS
    grading services assist the dairy industry in marketing high-quality
    dairy products by providing buyers and sellers with an impartial
    appraisal of product quality and to provide the consumer confidence in
    buying.
        AMS also provides certification services to assist in the export of
    dairy and related products. These certificates are issued to eligible
    plants which include those dairy plants listed in the Interstate Milk
    Shippers list (IMS list), the Food and Drug Administration maintained
    European Union Dairy Plant Reference list (EU list), and Dairy Plants
    Surveyed and Approved for USDA Grading Service (USDA Approved Plant
    list).
    Conclusion
        AMS undertakes numerous activities to facilitate the competitive
    and efficient marketing of U.S. agricultural products. These efforts
    support the overall mission of USDA, which is to protect and promote
    food, agriculture, natural resources and related issues. I hope that
    this testimony and the subsequent questions and answers will prove
    useful to the Subcommittee as you undertake your work on the next farm
    bill.

        The Chairman. Thank you, Ms. Coale.
        The chair would like to remind Members that they will be
    recognized for questioning in order of seniority for Members
    who were here at the start of the hearing. After that, Members
    will be recognized in order of their arrival. I appreciate
    Members understanding.
        With that, I recognize the Ranking Member, Mr. Cardoza.
        Mr. Cardoza. Thank you.
        I have questions for Mr. Garcia.
        I want to thank you for your work with USDA Industry
    Advisory Committee. The committee recommends that USDA further
    study raising minimum fluid milk nutrition standards
    nationwide. A similar FAPRI study requested by the House Dairy
    Farmer Caucus showed that such a move could return several
    hundred million dollars to producers in just a few years, while
    consumers would pay only about a penny more per glass for milk,
    with up to a third more calcium and protein in that milk
    supply.
        One thing that the committee identified as an issue not
    addressed in the FAPRI study was the potential startup costs to
    processors. Is there a way for the Department to study what
    those processor startup costs might be?
        Mr. Garcia. Thank you, Mr. Cardoza.
        I may have to refer that to Ms. Coale since she has been
    doing some work with the advisory committee.
        Mr. Cardoza. Thank you.
        Ms. Coale.
        Ms. Coale. Thank you, Mr. Cardoza.
        As you know, the advisory committee submitted to the
    Secretary 23 recommendations, one of which did look at adopting
    the California milk solid standards. The Secretary, of those 23
    proposals, has been reviewing them. Over half of them require
    new or additional funding or additional legislative authority
    for the Secretary to take action on that.
        Currently, with regards to the California milk solid
    standards, the Secretary has been reviewing this proposal and
    is aware of an industry interest in looking at the startup
    costs associated with that. At this time, it is still under
    review by the Department.
        Mr. Cardoza. I would like to encourage the Department. I
    see great acceptance of the standards in California. The
    product is more nutritious, and I am a huge fan of increased
    standards.
        To follow up, the MILC Program is a prime example of
    government programs that pick between winners and losers, in my
    opinion. In fact, a USDA study a few years back confirmed that
    the program keeps farm milk prices lower than they would
    otherwise be. Could any of you please tell us what the total
    amount of money producers in each of the top five milk-
    producing states have received from MILC under the farm bill,
    along with the most recent annual milk production figure for
    those states?
        Mr. Garcia. Mr. Cardoza, I don't have that information
    readily available, but we can provide that information as far
    as the top five states under the MILC Program.
        Mr. Cardoza. I would very much like to have that.
        Mr. Garcia. Yes, sir, we can provide that.
        [The information referred to is located on p. 971.]
        Mr. Cardoza. In 2009, Congress appropriated $350 million in
    emergency funds to help dairy farmers through what was then the
    worst economic crisis in at least a generation. This crisis was
    caused by significant decline in U.S. exports due to the
    worldwide financial crisis. Some of us thought that the entire
    $350 million should have gone to the purchase of cheddar cheese
    to donate to food banks which were having trouble keeping up
    with record demand in this country. In the end, only $60
    million went to cheese donations.
        Many have questioned the decision to purchase high-cost
    items, like shredded cheese, with these funds instead of the
    more reasonable and more widely available block cheese. Can you
    tell me what products were purchased and how quickly these
    donations were completed?
        Mr. Garcia. I am going to have to look at that, Mr.
    Cardoza. I think I have that information.
        [The information referred to is located on p. 972.]
        Mr. Cardoza. Please get back to me on that. I think that is
    a very important piece of information the Committee is going to
    need as we move forward not to make mistakes. As everybody
    knows, there is a shortage of dollars available to do these
    kinds of programs, and money is hard to come by, and we want to
    make sure that we get the most bang for the buck.
        Finally, for Ms. Coale, California producers have an
    extensive history in using a small part of their checkoff to
    educate consumers about how farmers care for their animals and
    the environment. AMS has oversight over the dairy checkoff, and
    I want to personally encourage you to continue to allow those
    activities with the intent of Congress for the dairy checkoff.
        Ms. Coale. Thank you. We will take that under advisement.
        Mr. Cardoza. Thank you.
        Thank you, Mr. Chairman. No further questions at this time.
        The Chairman. Thank you, Mr. Cardoza.
        The gentleman from Vermont, Mr. Welch, has also joined us
    and is also not a Member of the Committee.
        I have consulted with the Ranking Member, and without
    objection, we are pleased to welcome him to join in the
    questioning of the witnesses.
        Mr. Welch. Thank you very much, Mr. Chairman.
        The Chairman. With that, we will move to Mr. Conaway from
    Texas.
        Mr. Conaway. Thank you, Mr. Chairman.
        The existing array of programs we have available for milk
    from the 1930s; world distribution and world demand is
    different than it was then. Can you walk us through how that
    existing array helps and/or hurts the milk producers in this
    country be competitive with products they could otherwise
    produce and sell into the world market?
        Dr. Salathe. I will take that question.
        The dairy industry has changed a lot since the 1949 Act,
    which supported the price of milk at parity levels and
    supported milk prices at parity through the late 1970s, and
    then we had a change in programs because our purchases became
    burdensome under the Price Support Program. And after that,
    Congress lowered the purchase price--support price for milk and
    started instituting payment programs to producers to counter
    some of the price volatility or income volatility that they
    faced.
        Back in the 1970s and early 1980s, we were basically a net
    importer of dairy products. We also had import quotas on
    imports of dairy products, and so we were pretty well insulated
    from the international market. And as a result, if we increased
    our prices, we supported the prices to dairy producers, we
    didn't provide an incentive to expand world production of dairy
    products.
        That has changed, of course, under the WTO Uruguay round
    agreement, our market is now pretty open to imports of dairy
    products. We are also now a net exporter of dairy products. We
    are competitive in the world price--world market. We compete
    every day for markets outside our borders, and so it is very
    important to have a dairy policy that reflects that change in
    the market environment that producers and processors face.
        Mr. Conaway. The line here is that we pay producers to
    produce stuff that can't be sold in the world market, and if we
    were to adjust the incentives--and I am just parroting more
    than I understand really what is going on--this argument has
    been made that there is a disconnect between what we incent to
    be produced versus what could be sold to the world market. That
    is what I am trying to get at.
        Dr. Salathe. There has been an argument and continues to be
    an argument that the amount of nonfat dry milk we produce in
    this country has increased higher than it should because of the
    Price Support Program we have. We have a support program for
    nonfat dry milk, a Dairy Product Support Program for nonfat dry
    milk, cheddar cheese, and butter. And so there may be an
    incentive to produce more nonfat dry milk.
        I think over time that incentive probably is being reduced,
    other dairy products are being produced, value-added products,
    whey products, more protein-concentrate products are being
    produced in the U.S.
        Mr. Conaway. Okay. Well, I think I understand. Let's talk a
    little bit about the LGM Program, Ms. Coale, and that it looks
    to be oversubscribed in terms of popularity. I think in
    somebody's testimony or information we have, that we have about
    $20 million appropriated for support of that program. Demand
    looks like we are about $164 million a year versus the $20
    million. Are those numbers anything you guys are familiar with?
    Is the LGM----
        Dr. Salathe. Yes.
        Mr. Conaway.--popular enough that we should look at
    expanding it?
        Dr. Salathe. I think that is--we have a variety of tools to
    help dairy producers through difficult times. That is one of
    the tools we have right now. You are correct; it is limited in
    terms of budget authority at $20 million. That is all risk
    management products for livestock, including dairy are limited
    by that, and that has prevented us from expanding the dairy
    cattle product, Livestock Gross Margin for dairy cattle.
        I think that is a difficult question. That is one that you
    are going to have to wrestle with. It is one of the tools in
    the tool bag we have to help dairy producers, and you have to
    look at all those tools, which ones you want to expand and
    which ones you want to reduce in terms of budget authority.
        Mr. Conaway. Thank you, Mr. Chairman.
        I yield back.
        The Chairman. Thank you, Mr. Conaway.
        The Committee would now like to recognize the Ranking
    Member for the full Committee on Agriculture, Mr. Peterson.
        Mr. Peterson. Thank you, Mr. Chairman. I don't know who
    wants to answer this, but the dairy industry now has a safety
    net that is based largely on price through the Price Support
    Program, as you mentioned, and the MILC program. As you are
    aware, there is significant discussion around moving towards a
    margin-type program as opposed to price. Can you talk about
    dairy farm margins in the past few years and where they are
    likely to head with increased feed costs, and do you believe
    that dairy producers would be better supported if we had a
    safety net that focused on margin versus price?
        Dr. Salathe. I will attempt to the answer that, Mr.
    Peterson. Thank you for that question. It is a very good
    question. I wish we knew where margins were going. I think if
    you look at 2009, margins were very low compared to history. If
    you look at 2010, your average, depending on how you exactly
    calculate feed costs, but in the $8 range. Remember, it fell to
    an average of $4 in 2009 and some of the months were much lower
    than that.
        In 2010, we came pretty close to the average, and so far
    this year, we are pretty close to the historical average,
    despite the high feed costs, because we have had record high
    milk prices this year. Where it will go in the future is
    difficult to say. Obviously there is going to be some
    vulnerability. Over the long term, feed costs and milk prices
    go together, but in the very short term, milk prices may go
    down and feed costs may stay high.
        So, as we look out, it is very difficult to say, but we are
    going to have periods in which the milk margin is going to be
    below average, no doubt about it, because we have seen these
    cycles, and there is no doubt they are going to continue.
        Mr. Peterson. There are some in the industry who are still
    asking for daily price reporting. Can you talk about how much
    that would cost for USDA to administer and if you believe daily
    price reporting for the dairy industry would provide dairy
    producers with better tools than they would have with
    electronic reporting?
        Ms. Coale. Certainly. We are currently in the process of
    implementing weekly mandatory electronic reporting. At this
    particular point in time, we do not have that program
    implemented yet, and we only have estimated costs.
        Mr. Peterson. That is one that we asked you to do in the
    farm bill?
        Ms. Coale. Yes, that is correct. That is the one that was
    also mandated in the Mandatory Reporting Act of 2010. Currently
    that program, the software development costs are in the
    neighborhood of approximately $\1/2\ million. That is being
    taken out of the Fiscal Year 2011 monies that AMS reprioritized
    to be able to implement.
        Looking forward into 2012 as we actually implement that, we
    know that there will be costs associated with managing the
    program, and we are not quite certain exactly what those costs
    will be, although we are estimating them to be about in the
    neighborhood of $500,000 as well in 2012.
        When you look forward to daily reporting, this is an issue
    that has been raised in a rulemaking process that we are
    currently involved with in implementing the mandatory
    reporting. What I can tell you is that in one of the comments
    filed in response to that rulemaking, one of the reporters has
    indicated that daily reporting would be very difficult for the
    reporters to implement and would actually, instead of
    increasing market transparency, could in fact result in more
    misinformation being provided as the reporters would not be
    able to report accurate prices on a daily basis and would be
    submitting significant revisions to the numbers that they
    submit.
        Again, this is addressed in a comment that was filed and at
    this time the Department is reviewing.
        Mr. Peterson. You said a price reporter?
        Ms. Coale. Yes.
        Mr. Peterson. Who was that?
        Ms. Coale. The price reporter issuing that comment was
    Dairy America.
        Mr. Peterson. Was that the only comment you had?
        Ms. Coale. No. We received seven comments in regards to our
    initial proposed rule. All of those comments are available for
    the public on dairy program's website.
        Mr. Peterson. When do you close the comment period and move
    through the process?
        Ms. Coale. Yes. The comment period on the proposed rule,
    which in essence transfers the responsibility for mandatory
    reporting that is currently held by NASS to the Agricultural
    Marketing Service, the comment period ended the beginning--
    first part of August. We are in review of those comments and
    preparing a final rule. The Mandatory Act required we implement
    the program within a year, and we are on schedule to hopefully
    have the program up and running in the first part of 2012.
        Mr. Peterson. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. The chair thanks the Ranking Member.
        We will now move to Mr. Huelskamp.
        Mr. Huelskamp. Thank you, Mr. Chairman.
        I appreciate the opportunity to ask a few questions here,
    and I would like the general thoughts of the witnesses in
    reference to a reform proposal entitled, Foundation for the
    Future, and general thoughts of you all as far as its possible
    effectiveness and what it might do for the dairy industry, and
    so if you could each respond, I would appreciate it.
        Ms. Coale. First and foremost, Secretary Vilsack is on
    record as stating that the draft legislation that has been
    presented, which is based primarily off of Foundation for the
    Future is a good start and it identifies issues that need to be
    addressed by the dairy industry.
        We recognize at the Department that there are numerous
    proposals under consideration, both here at Congress and by the
    industry itself. We look forward to working with you here and
    to working with the industry to provide technical assistance
    and any analysis that would be requested or needed to be able
    to examine and further determine how those programs might be
    implemented and what the effects of those implementations might
    be.
        Mr. Huelskamp. And beyond the administrative issues, what
    do we expect the Administration or the Department to have a
    particular proposal or simply just to provide technical
    expertise as we talk about these changes?
        Ms. Coale. At this particular point in time, the Department
    is more than happy to provide any technical assistance that
    would be needed by you as you are reviewing the farm bill
    proposals and the legislative options that are presented. We do
    not have any intentions at this point of submitting any type of
    legislative language.
        Mr. Huelskamp. Okay. Are there any particular parts of the
    current programs that you would suggest are most effective or
    least effective when we are looking at proposed changes?
        Mr. Garcia. Thank you, Congressman.
        What I would like to do is comment somewhat on the Milk
    Income Loss Contract, the MILC. After the enactment of the 2008
    Farm Bill, it provided for, if I can call it, an improved
    safety net for producers because it included a feed cost
    adjuster to the $16.94 per hundredweight baseline. So if that--
    if that feed cost adjuster did trigger, it would essentially
    add that amount to the $16.94 baseline for the program, thus
    providing additional payments for producers that qualified for
    the payment. So that was an improvement with the 2008 Farm Bill
    that we were able to administer.
        Mr. Huelskamp. And you think the MILC is a successful
    program or those that you would suggest, ``Hey, these are not
    working as we anticipated and could be improved or replaced?''
        Mr. Garcia. Well, as far as our producers are concerned, we
    did pay over $940 million under the MILC Program, especially
    during 2009. Now, there have been some concerns regarding the
    2,985,000 pound cap that is under the program. Now, we also
    have to recognize that as of September 1, 2012, there will be
    some changes in the program. The amount of cap will be reduced
    to 2.4 million pounds, plus other adjustments that will occur
    after September 1, 2012.
        Mr. Huelskamp. I appreciate that. One last question in
    reference to just trying to get to the heart of how we might
    improve the programs. My understanding is New Zealand and other
    countries have been more innovative in new products and the
    suggestion has been perhaps our policies have not promoted that
    innovation. Are there any particular changes that would allow
    us to compete more effectively in international markets or in
    domestic markets with innovative products?
        Dr. Salathe. Well, there are two programs that have been
    pointed to as affecting what we produce here in the United
    States and whether they reduce the incentives to develop new
    products. One is the Price Support Program, which we talked
    about earlier in reference to nonfat dry milk and whether that
    program provides an incentive to produce nonfat dry milk rather
    than other products that would be perhaps sold abroad as well
    as developing new products. There is also some concern about
    the Federal Milk Marketing Order Program doing a similar thing.
        I have not personally, despite being a dairy economist for
    probably 30 years, seen any quantitative assessment of those
    concerns, and so it is hard to say whether those are large,
    small, or medium effects that we should be concerned about.
    Nevertheless, I think those have been concerns that have been
    raised by a variety of people, and they are probably--for that
    reason, there may be legitimate concerns.
        Mr. Huelskamp. Thank you, Mr. Chairman.
        The Chairman. Next we move to Mr. Scott.
        Mr. Scott. Thank you, Mr. Chairman.
        Let me ask the first question to you, Mr. Garcia.
        I am worried that the expansion of the Livestock Gross
    Margin Dairy Program would be extremely limited, especially
    given the tight budgets we are dealing with right now here in
    Congress. Congress simply doesn't have the money to increase
    participation numbers at the current premium subsidy level. So,
    in your opinion, what effect would lowering the premium support
    level have on participation?
        Dr. Salathe. Well, under the program that was offered this
    past year in 2011, with the premium subsidy, we enrolled about
    2.4 percent of total milk production in the U.S. Prior to that,
    the program was very, very small, and we enrolled \1/10\ of 1
    percent of total milk production, in that range, and so if you
    reduce the premium subsidy, we would get, I would say, it is
    likely that you would get something in between that, between .1
    and 2 percent of total milk production would be enrolled in the
    program, so it would still be very small.
        Mr. Scott. So what is the current level, the bare minimum a
    producer or a private insurance company needs in order to
    participate?
        Dr. Salathe. Well, there is--the program that was offered,
    like I said, in 2010, when only very small numbers of producers
    were participating, and so it would--this is a guess on my
    part--that it was still possible to offer the program, even
    though participation was fairly low.
        Mr. Scott. So the current level is the bare minimum?
        Dr. Salathe. The current level of participation, about 2-
    2.5 percent of total milk production enrolled in the program is
    kind of the maximum, kind of the maximum that is allowed under
    the current budget cap on livestock products offered by the
    Risk Management Agency.
        Mr. Scott. Ms. Coale, let me ask you this with respect to
    the Federal Milk Marketing Orders. I think they play a crucial
    role in another risk management tool, and that is hedging, but
    because of their structure, they produce a highly variable
    basis where a more stable basis is needed for accurate and
    useful hedging.
        So let me ask you what changes do you think could be made
    to the Federal Milk Marketing Order pricing system that would
    allow producers to make use of what is a valuable private
    sector risk management tool, hedging?
        Ms. Coale. Thank you. I think there are two areas that I
    would like to explore in response to this question. First and
    foremost, with regards to the Federal Order Program, as you are
    looking forward, one of the areas that the Department have seen
    great consensus in the industry with has to do with the way the
    minimum prices are established under the program. Currently,
    the Department uses a product price formula to establish the
    minimum prices that are used to pay producers for the milk that
    is marketed and pooled within a Federal Marketing Order.
        One of the other areas that the 2008 Farm Bill expanded was
    implementation of the Forward Contracting Program. What we have
    seen upon implementation of the program, that it is available
    to producers for all non-fluid milk that they market, but we
    have seen low participation rates. Primarily, while we have not
    completed any surveys since the pilot program was put in place
    back in 2004, what we believe from the information we obtained
    is that processors have not been offering contracts to their
    producers, and producers are somewhat hesitant to enter into a
    contract with a processor for what they perceive--and it is
    their perception, as it is a voluntary program--that it doesn't
    make economic sense for them to sign a forward contract.
        One of the interesting things to note is that while the
    program in 2009 only had 75 participants, currently there are
    about 300 participants who have signed contracts. So we are
    seeing a slight uptick in the amount that the program is
    utilized.
        Mr. Scott. Mr. Chairman, I did want to be able to ask one
    more.
        The Chairman. Absolutely.
        Mr. Scott. I wanted to ask you about tax liability real
    quickly--thank you, Mr. Chairman--because I know that producers
    like to reinvest their profits into their businesses in order
    to avoid tax liabilities. But, this can lead to an increase in
    supply when, in fact, demand is falling, and that is what has
    exasperated lag time between aligning supply and demand, and
    that has produced in the past a crisis as we have seen in the
    last few years. So if you could each very quickly--do each of
    you think that tax-deferred farm savings accounts are a viable
    method to both avoid tax liability and artificial bumps in
    production?
        Dr. Salathe. Farm savings account, of course, are a way
    to--I don't know if the word ``avoid'' is right--I mean, it is
    a short-run avoidance of tax liability. Obviously, when you
    take the money out, supposedly if there is no reduction in tax
    rate, when you take the money out, supposedly then you are
    going to pay tax when you take the money out. Maybe your income
    is lower, though, so your average tax rate would be lower on
    average.
        I think the question becomes, how many producers and what
    is their demographic makeup of those farmers that actually pay
    taxes? We know a number of farmers don't pay taxes for the
    reasons you indicate. You know, they might put it into their
    business, which may be a great long-term decision for them. For
    those that do that, there are some who would not change that
    decision because they want to expand and want to maintain their
    business. I think it is difficult at this point to say how many
    producers would benefit and what the response, market response,
    would be.
        Mr. Scott. Well, thank you very much.
        Thank you for your generosity, Mr. Chairman.
        The Chairman. Okay. We will move to Mr. Ribble.
        Mr. Ribble. Thank you, Mr. Chairman.
        Mr. Garcia, good afternoon. Thanks for being here today.
        I am from Wisconsin, and some of our smaller producers,
    actually quite a few of our small producers, participate in the
    Milk Income Loss Contract Program, and as Mr. Peterson's line
    of questioning implied, there are some proposals on the table
    to shift to a margin insurance component type of program. What
    is currently the average size of a dairy operation
    participating in the MILC Program, and how much do you expect
    the program to pay out this year?
        Mr. Garcia. If I can address your latter question, we have
    not issued any MILC Programs all year long since the prices
    have remained high. Of course, right now, the prices of milk
    are relatively high. Of course, it is predicted that with
    higher feed costs, we could see lower milk prices toward the
    end of this year or early next year. So there is a possibility
    that the MILC payments could trigger in either late December or
    early January.
        Now, as far as the average herd size of the producers that
    participate in this program, it is hard to tell because, of
    course, this program is available to your--if you would
    categorize your smaller producers in the neighborhood of 300
    cow dairy or your larger producers which--and I am from Texas.
    We have some of both. You know, we have the 160 cow dairy up to
    the 10,000 cow dairy. So, of course, all the producers can
    participate in that particular program.
        Now, the issue is that with the larger producers, that they
    can reach their cap limit of 2.985 million pounds in a month's
    time, where your smaller dairies will have--will take more time
    to reach that cap. So it is hard to come up with an average
    size of dairy producers that participate.
        Mr. Ribble. Is there statistical data available on the size
    of the producers that are using the program? Especially when
    you look back like 2009, when things were pretty rough, is
    there some statistical data that shows how that money was
    distributed by size?
        Dr. Salathe. Yes, I believe so. We have information in
    terms of the size of producers who got payments. All producers
    are eligible for the program. It is whether they hit the
    production limit or not, and so--but we probably do have data
    on the size of producers and what they received or whether they
    participated and got a payment or not.
        [The information referred to is located on p. 972.]
        Mr. Ribble. That would be interesting information for me,
    and if you could get that for me, I would appreciate it.
        Going along, I understand that many stakeholders within the
    dairy industry support the elimination of the Dairy Product
    Price Support Program. I have also talked with several
    operators in Wisconsin about the increasing importance of
    export markets to their farms. I have heard repeatedly from
    producers that they would like to sell their products on the
    world markets without obstacles in the way. What in your view
    should we be doing to expand export opportunities?
        Dr. Salathe. I guess I will take a shot at it by default.
    Honestly, we want to make sure our programs are conducive to us
    exporting abroad, so we want to look at our programs very
    carefully and make sure that they do allow us to export. I
    think free trade agreements are very important. We need to
    reduce the barriers abroad to our dairy products that exist
    now. We need to break those barriers down. There are sanitary
    types of restrictions. There are quotas on imports and things
    of that sort. We need to address those country by country as we
    can. I think those are the most important.
        I strongly agree and I agree with dairy farmers in
    Wisconsin, and I strongly think that our dairy industry is
    competitive and can be very competitive. There are producers in
    Australia we have to compete with. I think the market is big
    enough that we can, and we can have a significant share of the
    world market along with them. I think the future is very bright
    for the dairy industry in terms of expanding the export market.
    I think breaking down barriers is probably the number one thing
    and making our programs, being sure our programs do not
    interfere with us making good, quality dairy products for the
    export market.
        Mr. Ribble. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Mr. Courtney.
        Mr. Courtney. Thank you, Mr. Chairman, for holding this
    hearing.
        And actually before asking my question, I just want to take
    a point of personal privilege in recognizing in the back of the
    room Ms. Marsha Jette, who is the Connecticut FSA
    Administrator. She is in town for a meeting in Washington. She
    has had a pretty amazing year with the record snowstorms that
    destroyed a lot of livestock and dairy buildings in Connecticut
    and, obviously, Hurricane Irene last week, which wiped out a
    lot of silage. And her team is doing a great job helping
    Connecticut farmers deal with those disasters.
        I have to say, when Mr. Huelskamp asked the question about
    where the Administration's position was going to be on the
    Foundation for the Future, that your answer was that you are
    going to supply us with information, I was disappointed with
    that because, Secretary Vilsack when he established the Dairy
    Advisory Committee, I mean, that was a stroke of genius, after
    the agony of 2009, to get people feeling engaged in terms of
    the administration. And they have made a lot of
    recommendations. They have worked hard.
        It is my understanding over 20 recommendations, a lot of
    which are certainly relative to Mr. Peterson's proposal, and
    you know, we could use a little help here. I just feel like you
    have gone to all that extent of soliciting input, and I would
    hope that the Department is going to be more of an engaged
    partner in terms of this Committee trying to come up with a
    solution for this industry. And I just wondered if you could
    maybe give us a little more insight about what you are doing to
    do with the advisory committee's suggestions.
        Ms. Coale. Certainly, I will be happy to provide some more
    information on that.
        As you mentioned, the advisory committee was formed. It
    consisted of 17 individuals that were highly diverse, and they
    represented all facets of the dairy industry. Those individuals
    met and did an extensive amount of work in a very short period
    of time to develop 23 recommendations that they presented to
    the Secretary last spring. The Secretary did not put any
    qualifiers around the recommendations that the advisory
    committee could come forward with. So, therefore, he did not
    put any indicators on budgetary constraints or legislative
    authorities that would need to be considered when they were
    developing the recommendations.
        Consequently, of the 23 recommendations that were presented
    to the Secretary, over half of them requested either new
    funding or higher levels of funding, or requested or would
    require the Secretary to have new legislative authority in
    order to enact those particular recommendations.
        Of the remaining recommendations that exist, the Department
    has been actively working on five of those or has completed
    five of those recommendations. The Department also has three of
    the recommendations that we are working closely with you up
    here on as they do relate to various provisions contained in
    the draft legislation of Congressman Peterson, as well as other
    legislative proposals that have been presented up here.
        So we have taken what the advisory committee, the work that
    they have done, we have been reviewing it, analyzing it,
    providing information up here to help with the technical
    assistance that might be needed when it comes to actually
    determining what policy you want to implement with regards to
    that.
        Mr. Courtney. Well, I appreciate that, and I would hope, at
    some point, the Department would also maybe talk about what
    policy you would like to see implemented as well. I am not
    trying to be a wise guy here, but the purpose of this, is to
    have a dialogue and collaboration to come up with--these are
    tough issues.
        I mean, let me ask one, for example, I know Mr. Peterson's
    draft proposal explores expanding that crop insurance, the risk
    insurance program for dairy.
        What I hear back home is it is too complicated. As a
    product, it is just too unimaginable, particularly for smaller
    guys, let alone cost issues, which Mr. Scott mentioned earlier.
    Is the Department looking at issues like that? Are they trying
    to see if there is a better way to design the product so that
    it becomes more workable, particularly for smaller farmers?
        Dr. Salathe. I guess I am a little bit confused by your
    question. Are you talking about the Peterson draft bill, or are
    you talking about LGM-Dairy?
        Mr. Courtney. Well, obviously, the LGM-Dairy is what is out
    there right now.
        Dr. Salathe. Correct.
        Mr. Courtney. To some degree, the bill sort of tries to
    adopt that model a little bit but doesn't necessarily
    incorporate that specific program, but to me, we are going to
    run into that same issue if the Peterson bill passed, for
    example.
        Dr. Salathe. I think it is safe to say that the Secretary
    is very interested in having a dialogue. He is not interested
    in putting out a very specific proposal that then competes with
    some other proposal. He is not interested in that. The
    Secretary is very interested in dairy policy. I think he wants
    to come to some compromise or conclusion, and he feels very
    strongly that the safety net needs to be improved for dairy
    producers.
        I think, on the other hand, he recognizes that it is very
    difficult to get consensus in the dairy industry, and he also
    recognizes that we are in a very difficult budget situation. So
    he is interested in coming to some conclusion.
        Mr. Courtney. Again, hopefully, he will be an active
    participant in that.
        So I thank you, Mr. Chairman.
        The Chairman. Thank you, Mr. Courtney.
        We move to Mr. DesJarlais.
        Mr. DesJarlais. Thank you, Mr. Chairman.
        And I thank the panel for being here today.
        I had the opportunity to speak with some of our dairy
    farmers in Tennessee's Fourth District over the August recess,
    and they sent me armed with several specific questions, but
    after listening to the testimony today, I agree with Mr.
    Courtney. I think that maybe it is premature to ask some of
    those, considering where we are at in this process, but not
    wanting them to be left out, let me just ask a very broad
    general question, tapping upon your expertise.
        What risk management programs do you feel are particularly
    successful and which ones not so much, and what do we do with
    those, moving forward, as we write the farm bill in Fiscal Year
    2012 to keep the dairy market strong and competitive?
        Dr. Salathe. Very good question. I wish had I an answer.
        I guess, risk management--I assume you are talking broadly
    about dairy programs in general, not about the risk management
    programs in particular?
        Mr. DesJarlais. More narrowly related to risk, go ahead and
    take a shot at either one.
        Dr. Salathe. Okay, thank you. Thank you very much.
        Basically, on dairy, we have four programs. As I see it, we
    have the MILC, Milk Income Loss Contract, program. It is a
    direct payment program. It pays when milk prices are low and
    feed prices are high. We have the Dairy Product Price Support
    Program, if you look at current price levels, milk prices would
    have to fall by about 50 percent before anything would kick in.
    I think most producers say that is too much; it doesn't provide
    enough of a safety net. And we have the Dairy Export Incentive
    Program, which nobody has addressed, which provides an export
    subsidy in certain instances when the world price is above the
    U.S. price. We haven't operated that program very often. We did
    operate all three of those programs in 2009.
        And then you have LGM-Dairy, which has a real problem in
    terms of its budget. The amount of outlays or amount of money
    provided for that program just doesn't, at this point, provide
    for a whole lot of participation.
        So you have--the main driver in this program, set of
    programs that we have, if you look at 2009, was the MILC
    program, which provided over $900 million in direct payments to
    producers. The next most important program was the Dairy
    Product Price Support Program, in which we purchased 276
    million pounds of nonfat dry milk and about 5 million pounds of
    butter in late 2008 and 2009. And DEIP we operated, but the
    quantities were fairly small.
        So that leaves, really, two programs--MILC and DPPSP. And
    those two programs--the National Milk's Foundation for the
    Future will eliminate those two programs and replace it with a
    margin insurance program.
        That is kind of a nutshell. There are, of course--farmers
    can and should think about using the futures market to lock in
    prices, to provide a safety net that way. Obviously, there are
    private-market tools that they can use, from forward
    contracting to some extent, futures markets as well.
        Mr. DesJarlais. Okay. I appreciate that.
        Does anybody have anything to add specifically on the dairy
    programs, the DPPSP or the MILC program, as far as its success
    or failure, moving forward?
        Dr. Salathe. The other thing that I would point out, being
    a trained economist--maybe not so trained, but anyway--that any
    program you put in place has both positive and negative
    impacts. If you provide payments to producers, direct payments
    to offset lower returns, that may keep more producers in
    business and may mitigate the signal to reduce production when
    production should be reduced. And so, on the other hand, it
    does allow some producers to stay in business.
        So there are these positive and negative consequences of
    any type of intervention, and it is very important to be
    cognizant of those.
        Mr. DesJarlais. Okay. Well, thank you for that. And then
    maybe next time around, we will get more into the specific
    questions. But I appreciate your thoughts.
        And I yield back.
        The Chairman. Mr. Costa?
        Mr. Costa. Thank you very much, Mr. Chairman, for allowing
    me to sit in on the Subcommittee hearing.
        My family has been involved in the dairy business for three
    generations, and I guess if I didn't have this job I could get
    a job somewhere milking cows. I do have some redeemable skills
    in that area.
        While you are correct to say in the last 6 months the
    prices have gotten better within the dairy industry, we are
    rebounding from perhaps the most difficult period the industry
    has been in in decades. As a matter of fact, if you look at the
    cycles, in 2000, 2003, 2006, and 2009, some estimate that the
    period between 2008 and 2010, that the industry, nationwide,
    lost anywhere between $15 billion and $20 billion in equity. I
    am talking about the dairy producers.
        And yet, part of it is obvious, why the size of the dairies
    continue to shrink and a growing number of large farms, large
    dairy farms, are still--that is the trend. What factors do you
    think are creating that trend?
        Dr. Salathe. Well, that is a very good question. But, the
    bottom line is that there is just--it is new technology for
    farmers.
        Mr. Costa. Marginal costs.
        Dr. Salathe. Marginal costs. Adoption of new technology
    allows farmers to produce milk at a lower cost. And so, if you
    have----
        Mr. Costa. Do you have the total number--you were taking
    about the MILC program to producers--how much was paid out in
    2009?
        Mr. Garcia?
        Mr. Garcia. It was about $940 million.
        Mr. Costa. And how many producers went out of business in
    2009?
        Mr. Garcia. The information that we have, Congressman,
    based on statistical data from the National Agricultural
    Statistics Service is, between 2008 and 2009, we had around
    three percent of producers that went out of business.
        Mr. Costa. Obviously, the MILC, then, therefore, isn't a
    very effective safety net in that instance, if that is the
    purpose and part for what it is done.
        The last time the Dairy Product Price Support Program
    purchased product, when was that?
        Mr. Garcia. It was in summer of 2009, August of 2009.
        Mr. Costa. How much product did it purchase?
        Mr. Garcia. It bought--really, it was one small purchase
    for back test purposes--well, I am sorry.
        Dr. Salathe, maybe you can help me with that one.
        Dr. Salathe. Well, under the Dairy Product Price Support
    Program, in late 2008 and through about August 2009, we
    purchased 276 million pounds of nonfat dry milk and 5 million
    pounds of butter.
        Mr. Costa. Some of my producers think that the Price
    Support Program takes the U.S. out of the export market and the
    margins based upon per hundredweight on whether or not we are
    in a surplus condition or below. Do you think that is the case?
        Dr. Salathe. Well, when we are purchasing product, we are
    supporting the world price on nonfat dry milk. So, by doing
    that, we are supporting prices to producers in----
        Mr. Costa. Do you think some companies or some co-ops are
    producing nonfat dry milk because of the program that is in
    place and they have a guaranteed purchaser?
        Dr. Salathe. I think you would have to ask them. I really
    don't have----
        Mr. Costa. Not going to tread in that water?
        Dr. Salathe. No.
        Mr. Costa. How much powder does the government currently
    have in storage today?
        Dr. Salathe. I don't believe we have any nonfat dry milk in
    storage.
        Mr. Costa. None?
        Mr. Garcia. I don't believe so. I don't believe there is
    any right now.
        Mr. Costa. Ms. Coale, the AMS has been studying
    alternatives, and you spoke of that, toward pricing formulas.
    What are some of the alternatives are you considering?
        Ms. Coale. We have been actively working with the industry
    to further develop and provide analysis on a different array of
    competitive pay prices that the industry is trying to
    establish. These are looking at primarily what cheese
    manufacturers are paying for their milk. And depending on the
    various proposals, there are different aspects that----
        Mr. Costa. Before my time expires, do you think the current
    four class system curtails market innovation?
        Ms. Coale. I do not believe that it curtails market
    innovation. We have seen that there are new products
    continually entering into the marketplace.
        Mr. Costa. Well, Mr. Chairman, I have other questions. I
    will submit them in writing.
        My time has expired. I appreciate your allowing me to sit
    on the Committee.
        I think that your efforts with the Subcommittee, given the
    volatile nature and the cycles that I referenced--if they
    continue in that pattern, 2000, 2003, 2006, 2009, it will mean
    that the next cycle will be next year. And with all the equity
    that has been lost in the dairy industry in recent years, I am
    not so sure we can survive another cycle as we did the last
    one. And I hope that we will all try to work together on behalf
    of dairy producers in America to avoid a crash, as we have just
    had over the last 2 year cycle, the last bust cycle.
        Thank you.
        The Chairman. Thank you, Mr. Costa. You are very welcome.
        Mr. Gibson?
        Mr. Gibson. Well, thanks, Mr. Chairman.
        And I thank the panelists for being here today.
        So, a comment and then a question, and if there is time,
    perhaps a second question.
        The comment: I want to begin by associating myself with the
    remarks of Mr. Courtney. You know, both of our districts, as
    well as Peter Welch's district, our districts have been hit
    very hard by Hurricane Irene and then the remnants of Lee. And,
    it is clear that the insurance program, the risk management
    tools are just not effective for us, with too many farmers, as
    Mr. Courtney mentioned finding it too complicated to sort
    through. And for other reasons, those risk management tools are
    just not revalent for us.
        And then there are other programs that seem to have a track
    record of effectiveness but yet have no money in them, like the
    Emergency Conservation Program, which helps with debris and
    other removal and replacing of fences and, certainly, trying to
    bring back the farm. From a conservation standpoint, in the
    watershed dimension of the program, helps us get into
    streambeds and not only remediate but also take us to a better
    level where we wouldn't be subject to future floods.
        So I guess that is a comment and perhaps a bit of
    frustration. And, certainly, I am new here, and we are going to
    have to work on this going forward. I look to the farm bill to
    try to do some reforms in insurance. But I guess I would pause
    and see if there is any reaction to that.
        Ms. Coale. If I could take a moment to comment on that.
        The Secretary is very attuned to what has happened in the
    Northeast----
        Mr. Gibson. Yes, he is.
        Ms. Coale.--with regards to Hurricane Irene. And just
    today, earlier this afternoon, he issued a press release on
    some actions that the Department has taken to help alleviate
    the distress that has been caused by the natural disaster.
        One such action that is being taken under the Federal Milk
    Marketing Order program, for those dairy producers whose milk
    has not been able to be picked up by their cooperative due to
    infrastructure damage, the Secretary has determined that we
    will allow that milk to be associated with the Federal Order
    pool as if it had been delivered to the marketplace. That will
    aid those producers in getting the benefit of receiving the
    Federal Order blend price for that amount of milk that they did
    dump.
        So the Secretary is very, very concerned about what is
    happening in the Northeast. And he has also outlined other
    programs, which he has mentioned in the press release, that are
    available to those producers.
        Mr. Gibson. I agree. And, I had a chance to meet with him
    just a few days ago, and I find him very concerned and vigilant
    and diligent to try to help us.
        I think that there is some work on this side that we are
    going to need to do, going forward. And, taking up his advice,
    Senator Gillibrand and I have a bill we just introduced
    yesterday that is looking to put money into those programs,
    those conservation programs, which will be helpful.
        But thank you for the dialogue on that.
        The question: Earlier in the dialogue here with Mr.
    Peterson, you were giving some initial feedback on the weekly
    electronic reporting. I am curious--and you were raising some
    concerns about that, about the potential counterproductive
    nature of it.
        I am curious--no doubt you have policy wonks down there.
    What is the latest thinking in the agency on how we might be
    able to get more dynamic price discovery in a manner that more
    accurately reflects supply and demand dynamics?
        Ms. Coale. To make certain that the record is clear, the
    Department is very supportive of weekly reporting, as is
    currently conducted by the National Agricultural Statistics
    Service, as well as what will be transferred to AMS with the
    Mandatory Price Reporting Act.
        The concerns that we have been hearing with regards to
    daily reporting are ones that the industry has expressed in
    relationship to how accurate that price information will be.
    And while you may be providing data out to producers, is that
    data really accurate and does that provide the information that
    they need to make marketing decisions?
        It is important to note that the dairy industry does
    operate differently than other commodities within agriculture,
    in that producers are paid based off of a monthly price. So
    receiving a daily report of what commodities are trading at
    does not translate directly into a pay price for those
    producers.
        Recognizing that the current system for determining minimum
    prices is based off of product price formulas that use the
    commodities in which we actually report on, we are very open to
    looking at returning to some type of a competitive pay price.
    And the Department did use a competitive pay price within the
    Federal Order system for a number of years, and it worked very
    effectively up until the milk that was being used to determine
    that competitive pay price basically disappeared.
        So there are challenges with how best to return to a
    competitive pay price that is truly going to reflect that value
    for the milk used in manufacturing, and is not going to over-
    inflate the value but be reflective of what is needed to
    maintain supply and demand for the marketplace.
        Mr. Gibson. Interesting. Thank you very much for that
    response.
        I yield back.
        The Chairman. Thank you, Mr. Gibson.
        Mr. Welch?
        Mr. Welch. Again, thank you, Mr. Chairman.
        I have a couple of questions for Mr. Garcia about the Dairy
    Product Price Support Program. It is quite important,
    obviously, to Vermont farmers as well as others.
        You know, my understanding is the floor price for dairy
    created in the program is about $9.90 per farm--the farm gate
    price. And in the last 5 years, has that floor price ever been
    utilized as the actual floor price for dairy products? Or is it
    really fair to say that the floor price is just out of date and
    ineffective?
        Mr. Garcia. Dr. Salathe, can you help me out with that?
        I am sorry, I am going to have to defer to my economist.
        Mr. Welch. All right.
        Dr. Salathe. Well, under the 2008 Farm Bill, we no longer
    support the price of milk. There is no longer a support price
    designated in the farm bill.
        What is designated is minimum purchase prices for butter,
    cheddar cheese in barrels and blocks, and nonfat dry milk.
    Those can be actually reduced if purchases exceed certain
    levels. And there is flexibility, of course, to increase since
    they are minimums to increase purchase prices. But we did--like
    I said, we did buy nonfat dry milk in late 2008 and 2009 to the
    tune of 276 million pounds of nonfat dry milk and 5 million
    pounds of butter.
        Like I said, there is no floor price on milk. There is a
    floor price on the products themselves.
        Mr. Welch. All right. Let me ask my next question.
        In 2009, the Congressional Dairy Caucus, of which many of
    us are Members, asked Secretary Vilsack to raise the floor
    price for dairy products under the program. Secretary Vilsack
    responded and did raise the price, and we obviously thanked him
    for that action.
        However, the increase in the DPPS price support didn't have
    any positive change on the price paid to farmers. From the
    perspective of a Vermont dairy farmer, does the dairy price
    support provide literally any protection in today's market?
        Dr. Salathe. Well, if you go back and you look at when the
    Secretary made those changes--he increased the nonfat dry milk
    purchase price by 12 cents and, I believe, cheddar cheese by
    18 cents. If you look at when that occurred and the immediate
    response, in terms of what happened in terms of wholesale
    prices for those products, you did see an immediate change even
    though no purchases were made.
        So it is a little bit difficult to say that there was no
    effect when there was some effect, immediate effect, on
    wholesale prices when that announcement was made.
        Mr. Welch. All right. Let me ask my last question. I thank
    you.
        I have heard some concerns that the DPPSP price undercuts
    our export abilities. For example, the industry's ability to
    innovate new products, such as MPCs, has been hampered by the
    price support system, or so some people believe.
        Can you speak to that issue? Is there truth to the claim
    that the DPPSP price hinders our dairy exports?
        Dr. Salathe. Well, I think that we are competitive on the
    world market, we are competitive in terms of our dairy
    products. And so, when we do purchase dairy products under the
    Price Support Program, that does stabilize the price here as
    well as abroad. And I do think it probably does undercut our
    exports somewhat. However, I would say it was an important tool
    for us in 2008 and 2009 when milk prices collapsed. Like I
    indicated, we did purchase significant amounts of nonfat dry
    milk during that time.
        And I will reiterate another comment I made earlier, that
    when you intervene in the markets, no matter how you intervene
    in markets, it does have positive and negative ramifications.
    So you have to weigh those positive and negative ramifications.
        Mr. Welch. I yield back.
        The Chairman. Thank you, Mr. Welch.
        I wanted to take this opportunity to thank the witnesses
    for their testimony and for answering the questions from our
    Members; and all the Members that showed up, including a couple
    of special guests.
        I also want to thank the staff for all their hard work in
    preparing this hearing today on the USDA dairy program. We are
    going to look forward to arranging and organizing more meetings
    to continue to work toward solutions for this and all the other
    issues on the Subcommittee.
        So, with that, under the rules of the Committee, the record
    of today's hearing will remain open for 10 calendar days to
    receive additional material and supplementary written responses
    from the witnesses to any question posed by a Member.
        This hearing of the Subcommittee on Livestock, Dairy, and
    Poultry is adjourned.
        [Whereupon, at 3:35 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
       Supplementary Material Submitted by U.S. Department of Agriculture
        During the September 8, 2011 hearing entitled, Agricultural Program
    Audit: Examination of USDA Dairy Programs, requests for information
    were made to the U.S. Department of Agriculture. The following are
    their information submissions for the record.
    Insert 1
              Mr. Cardoza. I would like to encourage the Department. I see
            great acceptance of the standards in California. The product is
            more nutritious, and I am a huge fan of increased standards.
              To follow up, the MILC Program is a prime example of
            government programs that pick between winners and losers, in my
            opinion. In fact, a USDA study a few years back confirmed that
            the program keeps farm milk prices lower than they would
            otherwise be. Could any of you please tell us what the total
            amount of money producers in each of the top five milk-
            producing states have received from MILC under the farm bill,
            along with the most recent annual milk production figure for
            those states?
              Mr. Garcia. Mr. Cardoza, I don't have that information
            readily available, but we can provide that information as far
            as the top five states under the MILC Program.
              Mr. Cardoza. I would very much like to have that.
              Mr. Garcia. Yes, sir, we can provide that.

        See following tables:

                    Milk Income Loss Contract (MILC) Program
                     Top Producers' Payments and Production
                              by State/Fiscal Year
                                as of 01/25/2012
    ------------------------------------------------------------------------
           Row Labels          Values Payment Totals  Paid Production Totals
    ------------------------------------------------------------------------
           California           $104,400,571.98          12,480,259,870
      2009..................     $85,814,553.72           6,959,242,651
      2010..................     $18,586,018.26           5,521,017,219
    ------------------------------------------------------------------------
                Idaho            $22,351,849.09           2,825,504,576
      2009..................     $18,713,813.32           1,602,963,230
      2010..................      $3,638,035.77           1,222,541,346
    ------------------------------------------------------------------------
             New York            $82,550,499.76           7,549,547,304
      2009..................     $73,500,545.34           5,065,859,188
      2010..................      $9,049,954.42           2,483,688,116
    ------------------------------------------------------------------------
         Pennsylvania            $76,248,956.41           6,301,537,139
      2009..................     $69,319,102.01           4,476,854,732
      2010..................      $6,929,854.40           1,824,682,407
    ------------------------------------------------------------------------
            Wisconsin           $195,565,282.93          19,859,501,257
      2009..................    $175,742,332.01          13,671,012,480
      2010..................     $19,822,950.92           6,188,488,177
    ------------------------------------------------------------------------
        Grand Total.........    $481,117,160.17          49,016,350,146
    ------------------------------------------------------------------------

                    Milk Income Loss Contract (MILC) Program
                     Top Producers' Payments and Production
                              by Fiscal Year/State
                                as of 01/25/2012
    ------------------------------------------------------------------------
           Row Labels          Values Payment Totals  Paid Production Totals
    ------------------------------------------------------------------------
                 2009           $423,090,346.40          31,775,932,281
      California............     $85,814,553.72           6,959,242,651
      Idaho.................     $18,713,813.32           1,602,963,230
      New York..............     $73,500,545.34           5,065,859,188
      Pennsylvania..........     $69,319,102.01           4,476,854,732
      Wisconsin.............    $175,742,332.01          13,671,012,480
    ------------------------------------------------------------------------
                 2010            $58,026,813.77          17,240,417,865
      California............     $18,586,018.26           5,521,017,219
      Idaho.................      $3,638,035.77           1,222,541,346
      New York..............      $9,049,954.42           2,483,688,116
      Pennsylvania..........      $6,929,854.40           1,824,682,407
      Wisconsin.............     $19,822,950.92           6,188,488,777
    ------------------------------------------------------------------------
        Grand Total.........    $481,117,160.17          49,016,350,146
    ------------------------------------------------------------------------

    Insert 2
              Mr. Cardoza. In 2009, Congress appropriated $350 million in
            emergency funds to help dairy farmers through what was then the
            worst economic crisis in at least a generation. This crisis was
            caused by significant decline in U.S. exports due to the
            worldwide financial crisis. Some of us thought that the entire
            $350 million should have gone to the purchase of cheddar cheese
            to donate to food banks which were having trouble keeping up
            with record demand in this country. In the end, only $60
            million went to cheese donations.
              Many have questioned the decision to purchase high-cost
            items, like shredded cheese, with these funds instead of the
            more reasonable and more widely available block cheese. Can you
            tell me what products were purchased and how quickly these
            donations were completed?
              Mr. Garcia. I am going to have to look at that, Mr. Cardoza.
            I think I have that information.

        The Fiscal Year 2010 Agriculture Appropriations Act authorized $60
    million for the purchase of cheese and other products. USDA purchased
    approximately 10.2 million pounds of mozzarella cheese and 17.4 million
    pounds of cheddar cheese, at a cost just under $60 million. USDA held
    back just over $200,000 to cover offshore transportation and contract
    administration.
        Based on recipient needs, purchases were made for 10.2 million
    pounds of mozzarella (5.3 million pounds loaves/blocks, 4.9 million
    pounds shreds), and 17.4 million pounds of cheddar (8.8 million pounds
    loaves/blocks, 8.6 million pounds shreds).
        The contract awards were made for $48 million in January 2010, as
    responsive bids were not received for all recipient delivery locations.
    Contract awards for the remaining $12 million were issued in February
    2010. While there was a substantial time lag between the announcement
    of purchases and when donations were made, USDA schedules deliveries
    based on recipient needs and does not make payment to the vendor until
    the cheese is actually delivered, in accordance with procurement
    guidelines.
    Insert 3
              Mr. Ribble. Is there statistical data available on the size
            of the producers that are using the program? Especially when
            you look back like 2009, when things were pretty rough, is
            there some statistical data that shows how that money was
            distributed by size?
              Dr. Salathe. Yes, I believe so. We have information in terms
            of the size of producers who got payments. All producers are
            eligible for the program. It is whether they hit the production
            limit or not, and so--but we probably do have data on the size
            of producers and what they received or whether they
            participated and got a payment or not.

        The Milk Income Loss Contract (MILC) Program is designed to provide
    a direct payment to producers when milk prices fall below an
    established level adjusted for feed costs. Information on herd size is
    not collected by the Farm Service Agency when operations sign contracts
    for the program. Milk sales information is collected only during months
    when there is a payment rate for the program and operations are
    requesting payment, thus information on operation size is not available
    through the data collected under this program. However, data collected
    annually by the National Agricultural Statistics Service (NASS) on the
    distribution of dairy herds by size can be used to provide an
    indication of the distribution of MILC payments during Fiscal Year 2009
    by size of herd. Based on the herd size distribution data collected by
    NASS, we estimate that about 35-40 percent of FY 2009 MILC payments
    were paid to producers with less than 100 cows and 70-75 percent of
    payments were paid to producers with less than 200 cows.
    Distribution of MILC Payments by Herd Size

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

                              Submitted Questions
    Questions Submitted by Hon. Reid J. Ribble, a Representative in
            Congress from Wisconsin
    Response from Juan M. Garcia, Acting Deputy Administrator for Farm
            Programs, U.S. Department of Agriculture, Farm Service Agency
        Question. Mr. Garcia, do you believe that elimination of the Dairy
    Export Incentive Program would significantly impact our participation
    in world markets?
        Answer. The Dairy Export Incentive Program (DEIP) helps exporters
    of U.S. dairy products meet prevailing world prices for targeted dairy
    products and destinations. Under the program and in conformity with
    U.S. obligations under the World Trade Organization, the U.S.
    Department of Agriculture pays cash to exporters as bonuses, allowing
    them to sell certain U.S. dairy products at prices lower than the
    exporter's costs of acquiring them. The major objective of the program
    is to develop export markets for dairy products where U.S. products are
    not competitive due to the use of export subsidies by other countries.
        The United States is currently competitive in world dairy markets
    without the need for the DEIP. At present, no nation--including the
    European Union (EU)--is using export subsidies for dairy products. The
    EU does not have significant stocks of surplus dairy products and is
    not expected to use export subsidies during 2011 or 2012.
        The United States is projected to be a major participant in world
    dairy markets in FY 2011 and FY 2012. Exports from the U.S. for 2011
    are forecast at over 400,000 metric tons of skim milk powder, over
    200,000 metric tons of cheese and over 60,000 metric tons of butter.
    The value of U.S. dairy exports is estimated at a record $4.2 billion
    in FY 2011. For FY 2012, U.S. dairy exports are forecast to remain
    strong at a value of $4.0 billion.
    Response from Dana Coale, Deputy Administrator for Dairy Programs, U.S.
            Department of Agriculture, Agricultural Marketing Service
        Question 1. Ms. Coale, as you are likely aware, several proposals
    are on the table for modifying the Federal Milk Marketing Order system.
    Is it your sense that we in Congress should legislate specific reforms,
    or would the process best be left to USDA with some broad parameters
    from Congress? If the latter, what sort of consensus would you need
    from us? How much agreement do we need to find here in Congress before
    USDA could begin its work?
        Answer. There are several industry proposals that are designed to
    make changes to the Federal Milk Marketing Order program. These
    proposals are focused primarily on making changes to the method
    utilized to establish minimum prices within the Federal Milk Marketing
    Order system. Typically, changes of this significance are determined
    utilizing the administrative formal rulemaking process, a transparent
    process that enhances participation by all interested persons. USDA
    recognizes the desire for Congress to provide specific guidance on how
    these minimum prices are established. We would suggest that Congress
    provide specific parameters on proposals that should be considered as
    alternatives for establishing minimum prices under Federal Milk
    Marketing Orders.

        Question 2. Ms. Coale, I understand that the FMMO system places the
    highest value on fluid milk. In the Upper Midwest, most of our milk is
    used for cheese. Consequently, many producers have talked with me about
    the need to modify this disparity. If we address this as part of the
    dairy reform process, how, in your view, can we push forward this kind
    of change through broad parameters?
        Answer. The Federal Milk Order program establishes minimum prices
    for milk based on the classification of milk according to its use and
    then these values are averaged together based on the individual
    utilization of these milk values. Milk utilized to produce Class I
    products receives the highest value because of the additional costs
    associated with servicing the fluid market. This higher price is
    established utilizing the highest price for manufacturing uses plus a
    Class I differential. These differentials vary from $1.60 per
    hundredweight in the Upper Midwest and Western United States to $6.00
    per hundredweight in Southern Florida. A change to how these values are
    determined could be directed by Congress by providing direction such as
    was provided in the 1996 Farm Bill. In the 1996 Farm Bill, Congress
    authorized the Secretary to review the Class I price structure as part
    of the consolidation of the orders, including the consideration of
    utilization rates and multiple basing points for developing a pricing
    system.
                                     ______

             Submitted Report by National Milk Producers Federation
    National Milk Producers Federation
    Foundation for the Future: Detailed Program Description
    August 2011
    Table of Contents
      Background
      Executive Summary
      Detailed Descriptions of Individual Program Elements

        Replace Current Federal Safety Net Programs
        Dairy Producer Margin Protection Program
        Federal Milk Marketing Order Reform
        Dairy Market Stabilization Program
        Conclusion

      Attachment 1
      Attachment 2
      Attachment 3
      Attachment 4
    Background
        The National Milk Producers Federation (NMPF) created a new roadmap
    for U.S. dairy policy called Foundation for the Future. In June 2009,
    NMPF Chairman Randy Mooney formed the NMPF Strategic Planning Task
    Force aimed at exploring different approaches to dairy policy,
    including options that would work to achieve more effective protection
    for producer margins and stabilization of dairy markets.
        Task force members (Attachment 1) came from within the NMPF and/or
    Cooperatives Working Together (CWT) membership and were charged with
    making policy recommendations to the NMPF Board of Directors for
    further deliberation and subsequent action. The task force was designed
    to include viewpoints from all segments of the NMPF and CWT membership
    and the participants reflected a broad spectrum of demographics and
    affiliations. The task force was further broken down into three
    subcommittees (Attachment 2), each focusing on a specific aspect of
    dairy policy. The subcommittees carried out their specific assignments
    by drawing upon the best professional expertise and informational
    resources available to the industry from both private and public
    sources. Finally, in order to make certain that the demand-building
    programs of Dairy Management, Inc. and the U.S. Dairy Export Council
    were recognized in this important planning process, Tom Gallagher and
    Tom Suber, the respective leaders of these organizations also served as
    advisory members of the task force.
        The overriding purpose of the task force was to build consensus
    across the dairy producer community by identifying the underlying
    factors affecting producer income and examining the ways in which the
    producer community could realistically work to address those factors
    for the betterment of the industry. The specific goal of the task force
    was to analyze and develop a long-term strategic plan for consideration
    by the NMPF Board of Directors, which would have a positive impact on
    the various factors influencing both supply and demand for milk and
    dairy products.
        Through an initial round of listening sessions, the task force
    brought in a number of producer groups (Attachment 3) representing
    different industry segments and dairy producer constituencies all
    across the country to obtain widespread input and access to the best
    ideas circulating throughout the industry. Individual cooperatives were
    also invited to provide proposals to the task force for consideration.
    Following its meetings with the various dairy producer organizations,
    the task force began internal deliberations, to analyze and discuss the
    many proposals and options presented, and develop recommendations for
    the NMPF Board of Directors.
        As a result of this valuable exchange with various dairy
    organizations, NMPF developed Foundation for the Future. As envisioned
    by NMPF, Foundation for the Future offers much-needed change to many
    aspects of current dairy programs, some of which were designed in an
    earlier time to operate in a relatively closed domestic market. Today's
    market for U.S. dairy farmers' milk, however, is influenced to a much
    greater degree by global demand and supply, as the record prices of
    2008--and their disastrous plunge in 2009--have clearly demonstrated.
    Executive Summary
        This Executive Summary provides an overview of the policy changes
    proposed by NMPF. Detailed descriptions of each of the elements
    comprising the Foundation for the Future program are also contained in
    this document. While each element of Foundation for the Future is
    identified separately, they were designed to work together to ensure
    the best possible result for U.S. dairy producers and the U.S. dairy
    industry, in general. It should be emphasized that each element of
    Foundation for the Future interlinks with one or more of the other
    elements to obtain maximum effect. It is therefore imperative that the
    entire package of Foundation for the Future be considered for the
    totality of its impact.
        Just as multiple problems contributed to an unprofitable situation
    for U.S. dairy farms recently, multiple solutions are required to
    achieve a more prosperous future. To meet this need, Foundation for the
    Future offers a multi-faceted approach by: (1) replacing existing
    Federal safety net programs; (2) creating a new Dairy Producer Margin
    Protection Program to protect against both severe and unsustainable
    loss of margin; (3) reforming the Federal Milk Marketing Order system;
    and (4) establishing a Dairy Market Stabilization Program to help
    address periodic imbalances in dairy supply and demand.
    1. Replace Current Federal Safety Net Programs
        Foundation for the Future recommends discontinuing the Dairy
    Product Price Support Program (DPPSP) and the Milk Income Loss Contract
    (MILC) program in the next Farm Bill. Instead, Foundation for the
    Future proposes to convert the budgetary savings in the Federal dairy
    baseline to establish the Dairy Producer Margin Protection Program, as
    described further in this document.

        The Dairy Product Price Support Program (DPPSP) and the Milk Income
    Loss Contract (MILC) program deliver inadequate protection against
    periodic low milk prices and destructively-low margins that occur when
    input costs, especially feed prices, rise rapidly. The DPPSP is
    ineffective as a safety net because it hinders U.S. and world markets
    to adjust to supply-demand signals. It also stifles product innovation.
    The MILC program fails to assist farmers when they need it the most,
    often providing payments to producers when margins were in fact,
    relatively good. The feed cost adjustor in MILC assists only when feed
    costs are very high. In 2008, when producers were severely impacted by
    high feed costs, these programs didn't help them until after the milk
    price crashed at the end of the year.
    2. Dairy Producer Margin Protection Program
        Foundation for the Future  recommends establishing a new program
    entitled the Dairy Producer Margin Protection Program (DPMPP) which is
    intended to support producer margins, not prices. DPMPP is a program
    that is designed to address both catastrophic conditions, which can
    result in the severe loss of equity for dairy farmers, such as those
    witnessed in 2009, as well as long periods of low margins, such as
    those in 2002. Under this program, ``margin'' is simply defined as the
    All-Milk Price minus feed costs. Feed costs are determined using a new
    feed ration that has been developed to more realistically reflect those
    costs associated with feeding the entire dairy farm enterprise,
    including milking cows, heifers, etc. The DPMPP operates on the premise
    of providing a basic level of protection (i.e., insurance coverage) for
    all producers and a voluntary supplemental coverage. The basic coverage
    is fully-subsidized by the Federal Government (as was the case with the
    DPPSP and MILC), while the supplemental coverage is voluntary and
    premiums are partially subsidized by the government, but in a manner in
    which the level of subsidization decreases as the level of coverage per
    hundredweight increases. Consequently, dairy farmers electing to insure
    their operations beyond the fully-subsidized basic level coverage would
    pay the non-subsidized portion of the premium associated with the
    supplemental coverage. The DPMPP is intended to be a Title I program
    operated by the Farm Service Agency (FSA). Since DPMPP is a margin
    insurance program, it is proposed to have no payment limitations based
    on income and/or size of herd.

        In the future, the solvency of dairy farms will depend ultimately
    on margins (the difference between milk prices and overall costs--in
    particular, feed costs) rather than just the milk price alone. The
    economic hardship of 2009 revealed that relatively high prices do not
    guarantee profitability when accompanied by high input costs. A program
    that helps provide income insurance coverage for dairy farmers during
    periods when their margins are low, or even negative, is a key element
    of Foundation for the Future.
        In developing the DPMPP, the following important principles were
    observed:

        (1) Losses caused by either low milk prices or high feed costs need
            to be covered;

        (2) A dairy farmer's cost for the basic level of protection must be
            subsidized by the Federal Government since the DPPSP and MILC
            are being replaced by the DPMPP;

        (3) The level of voluntary supplemental protection should be
            flexible, and producers should be able to purchase additional
            protection to complement the nature of their operations;

        (4) The program should be voluntary, national in scope, and open to
            all dairy farmers, regardless of size without payment
            limitations;

        (5) The program should address both catastrophic conditions and
            long periods of relatively low margins, yet not provide
            incentives to create artificial over-production; and

        (6) The program must be easily accessed by all producers through a
            simple application process or through the assistance of their
            cooperative.
    3. Federal Milk Marketing Order Reform
        Foundation for the Future's revisions to the Federal Milk Marketing
    Order (FMMO) Program address the following fundamental issues
    associated with the current milk pricing system that are of concern to
    both dairy producers and processors. The proposal:

       Replaces end product pricing formulas with a competitive
            milk pricing system

       Incorporates a pricing system for two classes of milk: fluid
            (Class I) and manufacturing (formerly Class II, III and IV
            product uses)

       Maintains the ``higher of'' for establishing the fluid use
            (Class I) minimum base price

       Maintains current Class I differentials

       Maintains the number and basic structure and provisions of
            Federal Orders

        FMMOs have provided an important support system for dairy farmers
    and cooperatives for many years. They have worked to establish
    consistent pricing mechanisms for milk for all uses, provide audited
    data on marketed milk, and help maintain supplies for bottlers and to
    compensate their suppliers. In recent years, however, dairy markets
    have become more complex and current Federal Order provisions have
    experienced difficulty accommodating them. Markets have evolved--from
    regional, to national, and now global. Pricing has become complex and
    linked to markets--including unregulated areas, state marketing orders,
    and international, which are not under the control of FMMO regulation.
        The current end-product pricing formulas set minimum milk prices
    for dairy farmers by fixing a maximum gross margin for manufacturers of
    the benchmark products. This creates winners and losers between
    producers and processors, and even among cooperatives, and has strained
    commercial relationships and distracted from other potentially
    constructive reform efforts. When the end-product pricing formulas
    require adjustment, it is done through a lengthy and, most often,
    divisive FMMO formal rulemaking process. The goal of NMPF's effort is
    to develop a pricing system that compensates producers fairly, reduces
    price volatility, and creates a more dynamic dairy industry. The key in
    doing so is to eliminate the present end-product pricing formulas that
    have been troublesome since their establishment. Another goal is to
    create a timelier and more transparent system in order to avoid
    distorting market signals sent both to producers and processors.
    4. Dairy Market Stabilization Program
        Foundation for the Future  is recommending the establishment of a
    Dairy Market Stabilization Program (DMSP) in order to address extreme
    volatility in dairy producer margins by sending strong and timely
    signals to producers that temporarily reducing milk production by a
    small percentage will have a positive impact on their overall margins.
    As the U.S. dairy industry increases its global participation, exposure
    to greater price volatility is more likely. The DMSP is intended to
    absorb some of the market shocks that this volatility may cause. The
    DMSP is designed to act swiftly, but infrequently, to address brief
    imbalances in the market. The program is also designed to work in
    conjunction with the Dairy Producer Margin Protection Program (DPMPP).

        Key principles of the DMSP include:

        (1) Allow for production growth--The program is intended solely to
            intervene in the market to address temporary imbalances between
            supply and demand. The program will send clear and timely
            economic signals to producers that there is an imbalance in the
            marketplace;

        (2) Reduce margin volatility--The program's ultimate objective is
            to prevent acute imbalances in the marketplace that negatively
            impact producer margins. By encouraging producers to lower
            their milk marketings at appropriate times, prices should rise,
            thus improving margins;

        (3) Minimize government intervention--The legislation will set the
            parameters that trigger the program and USDA's role will be
            limited to calculating the actual margin on a monthly basis
            using data from CME and NASS information; and

        (4) Not encourage imports or discourage exports--Global and U.S.
            markets must maintain a strong correlation. Such correlation
            will allow domestic inventories to clear faster, encourage
            exports, discourage imports, and help assure that market
            downturns are of shorter duration.

        The program will only go into effect when the actual margin
    (determined using the same calculations of the DPMPP) falls below a set
    margin trigger level for two consecutive months. Once DMSP is
    triggered, producers will receive payment for only a certain percentage
    of their base milk marketings. The percentage of milk marketings upon
    which payment will be based shall be determined according to the
    severity of the margin loss. A maximum reduction in milk marketings
    upon which payment will be based will also be established according to
    a predetermined formula. Producers whose milk marketings in a month
    when the program is in effect are less than the set percentage of their
    base milk marketings upon which payment will be based would not be
    subject to a reduction in payment. The program would cease once the
    margin trigger level has been exceeded for two consecutive months. The
    DMSP will cover all producers in all markets. Monies resulting from
    reductions in producer payments will be collected by the Agricultural
    Marketing Service (AMS) using the same framework used to collect the
    dairy promotion monies and will apply to all milk marketed with no
    exemptions. The USDA will announce that the DMSP is being implemented
    30 days in advance of the month in which the program goes into effect.
    Although not effectuate through any decision-making on the part of AMS,
    the DMSP is intended to be a government program administered by that
    agency. The purpose of the monies collected through the DMSP is to
    effectively stimulate the domestic consumption of dairy products
    through contributions to food assistance programs.
    Conclusion
        All of these recommendations and proposed changes will ultimately
    require a new way of thinking about U.S. dairy policy, milk pricing
    systems, and the impact of margin on individual dairy operations. NMPF
    is not underestimating the size of the shift in attitude necessary on
    the part of producers and other sectors of the industry to give these
    proposed programs a fair evaluation. We realize it will take a great
    deal of education and communication as we proceed to gain industry
    consensus on Foundation for the Future. However, if there is a lesson
    to be learned from 2009, it is that the present safety nets are
    inadequate, the present pricing system is not serving the industry
    well, and that change is needed. Foundation for the Future represents
    the timeliest opportunity for changing the direction of dairy policy
    for the future of our dairy farmers by assisting the entry of new
    generations of dairy farmers and helping the entire industry meet the
    challenges of a new global marketplace.
        For more detailed information on Foundation for the Future,
    including video and PowerPoint presentations, go to
    www.futurefordairy.com.
    Detailed Descriptions of Individual Program Elements
    1. Replace Current Federal Safety Net Programs
       Discontinuing the Dairy Product Price Support Program
            (DPPSP) would allow greater flexibility to meet increased
            global demand and shorten periods of low prices by reducing
            foreign competition.

       Shifting resources from the DPPSP and Milk Income Loss
            Contract (MILC) Program towards the new Dairy Producer Margin
            Protection Program (DPMPP) would provide farmers with a more
            effective safety net.

        Discontinuing the Dairy Product Price Support Program

        The DPPSP was created in 1949 as a means to help provide government
    support for farm-level milk prices. During most of its lifespan, the
    program targeted a set milk price, and then established pricing targets
    for key products, such as cheese, butter and non-fat milk powder, that
    would help support that price.
        In the 2008 Farm Bill, the program was altered to support specific
    products, ending its focus on a singular milk price, and targeting
    specific product price levels. Regardless of its function, however,
    NMPF believes it is now time to end the DPPSP and shift resources
    toward a new Federal safety net. Here's why:

        1. It supports dairy farmers all around the world and disadvantages
            U.S. dairy farmers.

        The current program helps balance world supplies by encouraging the
    periodic global surplus of milk products to be purchased by U.S.
    taxpayers. As a result, dairy farmers in other countries, particularly
    the Oceania region, enjoy as much price protection from the DPPSP as
    our own U.S. farmers. Without the USDA's Commodity Credit Corporation
    (CCC), buying up occasional surpluses of dairy proteins in the form of
    nonfat dry milk, a temporarily lower world price would affect America's
    competitors, all of whom would be forced to adjust their production
    downward and ultimately hasten a global recovery in prices.

        2. It reduces total demand for U.S. dairy products and dampens our
            ability to export, while encouraging more foreign imports into
            the U.S.

        The price support program effectively reduces U.S. exports, by
    diverting some of the U.S. milk flow into government warehouses, rather
    than to commercial buyers in other nations. It creates a dynamic where
    it is more difficult for the U.S. to be a consistent supplier of many
    products, since sometimes the domestic industry has products to export,
    and at other times, the domestic industry just sells to the government.

        3. It acts as a disincentive to product innovation.

        The DPPSP distorts what the U.S. produces--for example, too much
    nonfat dry milk, and not enough protein-standardized skim milk powder,
    as well as specialty milk proteins, such as milk protein concentrates--
    that are in demand both domestically and internationally.
        Because the price support program is a blunt instrument that will
    buy only nonfat dry milk and because some plants have been specifically
    built to produce nonfat dry milk, it puts the U.S. at a competitive
    disadvantage with respect to other global dairy vendors.

        4. It isn't effectively managed to fulfill its objectives.

        Although the DPPSP has a standing offer to purchase butter, cheese
    and nonfat dry milk, during the past 12 years, only the last of that
    trio has been sold to the USDA in any significant quantity. In essence,
    the product that the DPPSP really supports is nonfat dry milk. Even at
    times when the cheese price has sagged well beneath the price support
    target, cheese makers have chosen not to sell to the government for a
    variety of logistical and marketing-related reasons. NMPF has tried to
    address these problems, but the USDA shows no inclination toward
    facilitating greater purchases of product by recognizing the additional
    costs required to sell to government specifications. Once purchased,
    powder returning back to the market from government storage also
    presents challenges, dampening the recovery of prices as evidenced in
    Chart 1.
    Chart 1
    U.S. and World Prices--SMP/NFDM

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        5. It seeks to achieve price levels that are no longer relevant to
            farmers.

        Even though the $9.90 per hundredweight target was eliminated in
    the last Farm Bill, the individual price support targets--$1.13 per
    pound for block cheese, $0.85 for powder, and $1.05 for butter--will
    essentially return Class III and IV prices around $10 per
    hundredweight. In an era of higher costs of production, that minimal
    price isn't acceptable in any way, shape or form as the following chart
    so clearly demonstrates. As shown on Chart 2, the effective price
    support level has been considerably less than the cost of production
    for many years. The government is not at all likely to raise the
    support prices (which would have negative consequences both for the
    burgeoning Federal deficit, as well as our trade treaty limitations),
    and even if it did, the industry would likely experience continued
    delays in the recovery of prices when the program is most needed.
    Chart 2
    Price Support Level and Costs of Production, 2006-2011

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Source: USDA Economic Research Service.

        In summary, discontinuing the DPPSP would eventually result in
    higher milk prices for U.S. dairy farmers. By focusing on indemnifying
    against poor margins, rather than on a milk price target that is
    clearly inadequate, the industry can create a more relevant safety net
    that allows for quicker price adjustments, reduces imports and
    facilitates exports. As a result of the present DPPSP, the U.S. has, in
    effect, become the world's balancing plant. As time marches on, so,
    too, must our approach to helping U.S. dairy farmers.

        Discontinuing the Milk Income Loss Contract (MILC) Program

        MILC is a price-based safety net, which is as ineffective for
    today's dairy producers as the Dairy Product Price Support Program. In
    2008 and 2009, MILC proved to be an inconsistent safety net program for
    dairy farmers facing very low, or even negative, operating margins.
    MILC, despite its feed cost adjustor, does not adequately offset high
    feed costs and its price target does not track national farm milk
    prices.
        MILC payments depend on a low milk price. If milk prices are at
    average levels and feed costs are high, farmers can suffer substantial
    losses and still not receive any assistance from MILC. Although a feed
    cost adjustor was added in the 2008 Farm Bill, this program does not go
    into effect until the price of the National Agricultural Statistics
    Service (NASS) standard feed ration reaches $147 per ton (equivalent,
    for example, to $3.75 per bushel of corn, $9.50 per bushel of soybeans,
    and $130 per ton of alfalfa). It also only covers about 30 percent of
    the feed price increase above this high level. This was clearly
    inadequate through most of 2008, when high feed costs overwhelmed
    average milk prices and put most farmers into a deep hole without the
    help of any MILC payments. The current feed ration utilized in the MILC
    has not been sufficiently updated to reflect today's current dairy farm
    feeding practices. On the other hand, the Dairy Producer Margin
    Protection Program recommends utilizing a new feed ration reflective of
    the entire dairy feeding enterprise at the farm level.
        The MILC target price is a Class I price. Class I is currently
    based on the ``higher of'' Class III or IV prices, so when the Class IV
    (butter powder) price or the Class III (cheese) price is high, MILC
    payments can be low or zero, even if producers are facing low margins.
    That is why the whole premise of the Foundation for the Future is
    changing the focus of dairy farmers from price targets to margins.
        The MILC program is inequitable in its treatment of dairy farmers
    and, therefore, ineffective in its objective of providing economic
    relief to dairy farmers in time of need. Requiring producers who market
    more than 2.985 million pounds of milk a year to guess in which of the
    coming twelve months they will most need economic assistance is why it
    is ineffective. Limiting the level of protection to a maximum of 2.985
    million pounds of milk a year provides protection for less than 30
    percent of the total milk produced in the U.S. A basic principle of
    Foundation for the Future is that all farmers should be treated equally
    regardless of size or region.
        As dairy farmers face growing volatility in both their feed costs
    and their milk prices, the milk price-based dairy producer programs are
    no longer adequate or efficient. As evidenced significantly in 2009,
    the MILC program does not provide an effective safety net for dairy
    producers. It is for these reasons that Foundation for the Future
    recommends discontinuing the Dairy Product Price Support Program
    (DPPSP) and the Milk Income Loss Contract (MILC) program in the next
    Farm Bill and using the budgetary savings in the Federal dairy baseline
    to establish the new Dairy Producer Margin Protection Program as
    described next in this document.
    2. Dairy Producer Margin Protection Program
        Foundation for the Future  recommends establishing a new program
    entitled the Dairy Producer Margin Protection Program (DPMPP), which is
    intended to support producer margins, not prices. DPMPP is a program
    that is designed to address both catastrophic conditions, which can
    result in the severe loss of equity for dairy farmers, such as those
    witnessed in 2009 as well as long periods of low margins, such as those
    experienced in 2002. Under this program, ``margin'' is simply defined
    as the All-Milk Price minus feed costs. Feed costs are determined using
    a new feed ration that has been developed to more realistically reflect
    those costs associated with feeding the entire dairy farm enterprise
    including milking cows, heifers, etc. The DPMPP operates on the premise
    of providing a basic level of protection (i.e., insurance coverage) for
    all producers and a voluntary supplemental coverage. The basic coverage
    is fully-subsidized by the Federal Government (as was the case with the
    DPPSP and MILC), while the supplemental coverage is voluntary and
    premiums are partially subsidized by the government, but in a manner in
    which the level of subsidization decreases as the level of coverage per
    hundredweight increases. Consequently, dairy farmers electing to insure
    their operations beyond the fully-subsidized basic level coverage would
    pay the non-subsidized portion of the premium associated with the
    supplemental coverage. The DPMPP is intended to be a Title I program
    operated by the Farm Service Agency (FSA). In terms of U.S. obligations
    as a member of the World Trade Organization (WTO), the program has also
    been designed to fit within the permitted provisions for agricultural
    policies, as well as within the subsidy limits permitted for U.S.
    agriculture. Finally, since DPMPP is a margin insurance program, it is
    proposed to have no payment limitations based on income and/or size of
    herd.

        Background

        Increased volatility in milk and feed markets has driven interest
    in developing a new approach to providing a Federal safety net for milk
    producers. Development of a new margin insurance program for milk
    producers will provide dairy farmers the support they need when their
    margins fall because of low milk prices or high feed costs. The program
    would enable producers to protect or insure their margin (All-Milk
    Price minus feed cost) by enrolling in a margin insurance/protection
    program. The DPMPP will help dairy farmers survive financially
    difficult times by paying them an insurance indemnity (payout) when
    catastrophic or significant losses occur in their dairy operations.

        The New Measure of Feed Costs

        DPMPP requires calculating the margin over feed costs on a dollar
    per hundredweight of milk basis. This is equal to the price received
    per hundredweight of milk minus the total cost of purchased feed needed
    to produce a hundredweight of milk. Other production cost components
    such as labor, energy, depreciation, capital, veterinary services, and
    nutritional supplements vary greatly across individual operations and
    will need to be addressed by producers when determining their desired
    level of coverage. To determine feed costs, DPMPP uses a new measure
    based on a daily ration for lactating cows shown in Table 1. The new
    feed ration was developed by NMPF with the support of a number of
    experts and prominent animal nutritionists (Attachment 4) from all
    across the country. This ration, which is for a cow producing the
    national average of 68.85 pounds of milk per day, uses the four feed
    ingredients shown in that table to capture the changes in dairy
    farmers' feed costs that result from volatile prices in the feed
    commodities markets.

                            Table 1--Daily Quantities of Feed Ingredients for a Lactating Cow
    ----------------------------------------------------------------------------------------------------------------
                                                                           Quantity of
                              Quantity of Dry                               Commercial       Quantity in Commercial
          Ingredient       Ingredient (lbs/day)    Moisture Content      Ingredient (lbs/       Units (units/day)
                                                                               day)
    ----------------------------------------------------------------------------------------------------------------
         Shelled Corn                   15.4                   14%                  17.9        0.319803 bushels
          Corn Silage                   16.0                   65%                  45.7        0.02286 tons
         Soybean Meal                    5.7                   12%                   6.5        0.003238 tons
          Alfalfa Hay                   10.0                   15%                  11.8        0.00588 tons
    ----------------------------------------------------------------------------------------------------------------

        The DPMPP feed cost measure also includes daily rations for all
    milk cows and replacement heifers on a model dairy farm enterprise that
    are not producing milk sold on a given day, but are necessary for the
    milk production enterprise. These include hospital cows, dry cows, and
    replacement calves and heifers of all ages, as shown in Table 2. The
    specific rations for these animals are also based on the same four feed
    ingredients, as shown in that table.

                            Table 2--Daily Quantities of Feed Ingredients for the Entire Herd
    ----------------------------------------------------------------------------------------------------------------
                                                                       Quantity in Commercial Units (units/day)
                                                     Dry Matter  ---------------------------------------------------
                Cow Type               Proportion     Consumed      Shelled                   Soybean
                                         of Herd      (lbs/day)    Corn (bu/   Corn Silage  Meal (tons/  Alfalfa Hay
                                                                      day)      (tons/day)      day)      (tons/day)
    ----------------------------------------------------------------------------------------------------------------
    Milking Cows                            52.49%          47.1       0.3198       0.0229       0.0032       0.0059
    Hospital Cows                            1.05%          47.1       0.3198       0.0229       0.0032       0.0059
    Dry Cows                                 8.82%          24.0       0.0249       0.0172       0.0020       0.0042
    Replacements Heifers:

      Calving within 1 year                 18.53%          23.0       0.0239       0.0164       0.0020       0.0041
      500 lbs. and over                      9.55%          15.0       0.0311       0.0107       0.0013       0.0022
      Less than 500 lbs.                     9.55%           7.0       0.0363       0.0045       0.0006       0.0006
    ----------------------------------------------------------------------------------------------------------------

        The total cost of feed per hundredweight of milk is determined by
    adding the total daily cost of purchasing the four feed ingredients
    used in the amounts shown in Table 2 and dividing the result by the
    daily volume of milk marketed, which is 0.6885 hundredweights for each
    milking cow. Because this feed cost measure is on a per hundredweight
    of milk basis, its calculated value for any set of prices for the four
    ingredients is the same regardless of the actual number of animals that
    make up the model dairy farm enterprise, as long as the animals of the
    various categories are in the proportions shown in Table 2. And because
    the feed cost used in the DPMPP margin calculation captures the total
    cost of feed purchased, it uses a shrink factor of 10 percent between
    the volumes of all feed ingredients purchased and the volumes of those
    ingredients actually consumed by animals.
        Although the new feed cost measure is derived from an analysis of
    daily feed rations, it has the same calculated value for any set of
    prices for the four ingredients regardless of the period of time used.
    For administering the DPMPP, this calculation will be done monthly
    using monthly prices for the four basic feed ingredients. The DPMPP
    feed cost for corn for a particular month will be calculated using the
    Chicago Mercantile Exchange (CME) average daily settlement price for
    every trading day during that month for the corn futures contract
    closest to expiration. The feed cost for soybean meal will be computed
    using the same methodology. The monthly price paid for alfalfa hay, per
    ton, will be the monthly price received by farmers in the U.S. reported
    by USDA's National Agricultural Statistics Service (NASS). The monthly
    price paid for corn silage, per ton, is determined using the monthly
    price paid for corn, as described above, by the formula:

    Price of corn silage, per ton = 10.1  Price of corn, per bushel.

        The DPMPP feed cost measure can therefore be calculated using just
    three prices, for corn, soybean meal and alfalfa hay. The formula for
    this calculation is:

    Feed cost per cwt. of milk = 1.192  Price of corn, per bushel +
        0.00817  Price of soybean meal, per ton + 0.0152  Price of
        alfalfa hay, per ton.

        Historical monthly feed costs since 2000 are shown in Chart 3
    below.
    Chart 3
    Feed Costs Per Cwt, 2000-2011

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The role that feed costs play in the DPMPP is to capture the
    volatility of feed costs paid by dairy farmers, relative to an average
    or expected level. For this purpose, it is important that the measure
    used to calculate feed costs is adequately sensitive to the volatility
    or variability in the markets for feed components, as opposed to the
    actual level of these costs. For the period since 2000, the new DPMPP
    feed cost shows exactly the same level of variability as does the cost
    of feed to produce milk reported by USDA's Economic Research Service
    based on periodic farm survey data.
        The DPMPP milk-feed margin is then determined for each month as the
    difference between the monthly price received by farmers for all milk
    sold in the U.S., the All-Milk Price, reported by USDA/NASS minus the
    monthly feed cost, as determined above. The resulting monthly margins
    are shown in Chart 4 below for the period since 2000, together with the
    monthly All-Milk Price and the feed costs used to determine them.
    Chart 4
    Milk Price, Feed Costs, and Margins, 2000-2011

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Operation of the DPMPP

        The DPMPP will provide two levels of coverage: a Basic Plan and a
    Supplemental Plan (both described below). The DPMPP has been created to
    protect producers from catastrophic or significant losses due to low
    margins, not to set milk prices. Since it is an insurance program, the
    DPMPP is designed to cover all producers regardless of size or region.
    The DPMPP is intended to be a Federal Farm Program run by local Farm
    Services Agencies (FSA), not by private insurance companies. The DPMPP
    will not encourage or provide support for expanded production. Support
    will only be provided based on the producer's historical milk
    production, except for new entrants.
        Under the program, USDA will use historical data to project future
    margins (defined as All-Milk Price minus feed costs). The levels of
    protection under the program will be $4.00 for the Basic Plan and the
    maximum level of coverage under the Supplemental Plan will be the
    lesser of USDA's projected margin or $8.00.
        Producers will sign up for the Basic Plan at no cost. In addition,
    they will have an option to purchase Supplemental margin protection by
    paying a premium that is inversely subsidized as the level of requested
    level margin coverage increases. In other words, as the level of
    requested coverage increases, the percentage of the premium subsidized
    by the Federal Government decreases. The margin guarantees will be
    fixed for the duration of the Farm Bill once the producer has signed
    up.
        USDA will calculate, on a monthly basis, the margin (i.e., the
    actual All-Milk Price for that month minus the feed costs) by using:
    (1) the current formula for determining the All-Milk Price, and (2) the
    feed costs calculated on the basis of the new NMPF ration described on
    p. 16 [sic] in this document. USDA will calculate the average margin
    for each consecutive two month period and compare it to the Basic
    margin which will be set at $4.00 by the authorizing legislation at the
    start of the program, as well as the Supplemental margins for each
    individual producer (determined at the time the producer signed up) and
    calculate whether an insurance payment is necessary to the individual
    producer.

        The Basic Plan

        The Basic Plan is voluntary and is intended to address catastrophic
    losses only. It is, therefore, expected to be triggered rarely. As
    proposed, the Basic Plan margin guarantee will be $4.00 per
    hundredweight for 75 percent of their historic production. Producers
    will have the ability to sign up for the Basic Plan throughout the
    first year of implementation of the next Farm Bill.

        The Supplemental Plan

        The Supplemental Plan is also voluntary and is intended to provide
    additional margin protection beyond the Basic Plan's margin guarantee.
    However, producers will only be able to sign up for additional coverage
    up to an additional $4.00 per hundredweight unless USDA projects the
    average margin for the duration of the Farm Bill less than $8.00.
    Unlike the Basic Plan, producers will be able to cover up to 90 percent
    of their production history under this Supplemental Margin Protection
    Plan. The cost of this optional coverage for an individual producer
    will depend on the level of margin guarantee per hundredweight selected
    by the producer and the volume of milk production to be protected.
        Since this is a new concept, the producer will have a choice under
    the Supplemental Plan to purchase additional coverage throughout the
    first year. The producer will pay a prorated premium for the first year
    based on the date on which the producer purchases the coverage. Once
    the producer signs up, the terms of coverage, the level of additional
    coverage per hundredweight, and the percentage of the production
    history, will be fixed for the duration of the Farm Bill.
        As mentioned previously, the level of subsidy available to help pay
    for the premium under the Supplemental Plan will depend on the level of
    coverage per hundredweight selected by the producer. The higher the
    margin guarantee selected (i.e., the closer to the maximum level
    allowed), the lower the subsidized rate for the coverage.
        Under the Supplemental Plan, a producer will be able to guarantee a
    margin above the Basic Plan (minimum), but only up to the lesser of the
    $8.00 margin level or USDA's projected margin for the duration of the
    Farm Bill. As an example, Table 3 describes the premium rate per
    hundredweight above the margin guarantee under the Basic Plan (at
    $4.00) up to the maximum level of protection of $8.00 per
    hundredweight.

                Table 3--Premium Rates for Supplemental Coverage
    ------------------------------------------------------------------------
        Additional                            Additional
       Supplemental                          Supplemental      Premium Per
      Protection Per    Premium Per Cwt.    Protection Per         Cwt.
           Cwt.                                  Cwt.
    ------------------------------------------------------------------------
             $0.50             $0.015              $2.50            $0.230
             $1.00             $0.036              $3.00            $0.434
             $1.50             $0.081              $3.50            $0.590
             $2.00             $0.155              $4.00            $0.922
    ------------------------------------------------------------------------

        Table 4 is an example of how the premiums for supplemental coverage
    would be calculated using examples of projected margins, feed costs,
    and milk prices. In Example A below, a producer with 200 cows and a
    production history of 4.115 million pounds purchased an additional
    $2.00 of supplemental coverage on 90 percent of his/her production
    history. Under the Basic Plan with a margin guarantee of $4.00, the
    producer would have received ``no-cost'' coverage at a margin of $4.00
    on up to 75 percent of the amount of milk produced.
        The premium for supplemental coverage in this example is $0.155 per
    hundredweight and results in an annual premium of $5,760.00 each year
    for the life of the Farm Bill.

                     Table 4--Premium Calculator (Example A)

    -------------------------------------------------------------------------
    8Farm Data:0

       200 cow dairy

       20,576 lbs./cow

       4.129 million lb. production history

       Wants $2/cwt supplemental on 90% of production history

       Annual Premium Rate 15.5 cents/cwt

       Annual Premium $5,760 per year

    82009 DPMPP Payout:0

       Basic Protection = $27,357

       Net Supplemental Protection = $47,136

       Total Net Payout = $74,492 or Average $1.81/cwt. for the year
    ------------------------------------------------------------------------

        Based on actual market conditions for 2009, the producer in this
    example would have received a payment of $27,357.00 from the Basic
    Plan. In addition, since the producer purchased $2.00 of supplemental
    coverage on 90 percent of his/her production history, the producer
    would have received an additional net payment of $47,136.00 in
    supplemental coverage and his/her total net payment for 2009 would have
    been $74,492.00 or $1.81 per hundredweight. The annual premium payment
    for this producer would have been only $5,760.00.
        Table 5 is an example of the same farm, but in this situation, the
    producer purchased additional margin protection under the Supplemental
    Plan at a $4.00 per hundredweight on 90 percent of his/her production
    history). This example would have a premium of $0.922 per
    hundredweight. and resulted in an annual premium of $34,022.00 each
    year for the life of the Farm Bill.

                     Table 5--Premium Calculator (Example B)

    -------------------------------------------------------------------------
    8Farm Data:0

       200 cow dairy

       20,576 lbs./cow

       4.115 million lb. production history

       Wants $4.00/cwt supplemental on 90% of production history

       Annual Premium Rate 92.2 cents/cwt

       Annual Premium $34,265 per year

    82009 DPMPP Payout:0

       Basic Protection = $27,357

       Net Supplemental Protection = $80,571

       Total Net Payout = $107,928 or $2.62/cwt. for the year
    ------------------------------------------------------------------------

        The Dairy Producer Margin Protection Calculator available at
    www.futurefordairy.com can help farmers calculate base and supplemental
    coverage options on his/her own dairy operations, based on their annual
    milk production.

        Other Important DPMPP Specifics

       Dairy Producer Production History

        The DPMPP will not support new production. Under the DPMPP, farmers
    will be able to insure a percentage of their milk production history.
    Each producer signing up for the program will have a production
    history, which is defined as the year of highest milk production from
    among the 3 years preceding implementation of DPMPP. Any producer
    without at least one year of production history will be allowed to use
    the latest monthly data, extrapolated to a full 12 months prior to the
    implementation of the program.
        The production history is transferable solely with the farm or
    stays with the farmer. If the farm (installation) is sold, the
    production history will be transferable with the farm to the new owner.
    In special situations, where the farmer is moving his entire operation,
    the farmer will be able to keep the production history (with the old
    facility no longer having a production history). Additional parameters
    must be in place to avoid abuses of the ``farm sale/move'' option. The
    production history will be updated every new Farm Bill or 5 years,
    whichever comes first.

       Penalties (for Supplemental Buyers)

        Penalties must be severe to prevent farmers from opting out of the
    program if it is economically convenient to do so. Farmers not
    complying with their obligations will not be eligible to join the
    program again and will be required to pay back any payment received
    during the previous years. Exemptions will include farmer's death or
    full retirement (out of business for at least 7 years).

       New Farmers (Entries)

        Farmers will be allowed to enter the DPMPP only if they have no
    ownership interest in other dairy farms. USDA will use a Tax ID system
    (similar to other government programs) to verify this requirement. New
    entries will have to apply for coverage within 6 months after
    establishing the farm. New farms will be eligible to receive coverage
    under both the Basic Plan and the Supplemental Plan option.

        Economic Analysis of the Dairy Producer Margin Protection Program

        Two separate analyses of the impact the DPMPP program would have
    had on dairy farmer income in 2009--one by Dr. Peter Vitaliano, NMPF
    Vice President of Economic Policy and Market Research, and the other by
    Dr. Scott Brown of the University of Missouri and the Food and
    Agriculture Policy Research Institute (FAPRI)--yielded very similar
    results. Chart 5 below clearly shows the positive impact the DPMPP
    Basic Plan would have had on dairy farmer revenue had it been in place
    in 2009.
    Chart 5
    2009 DPMPP Basic Coverage Payments on 90% of Production History

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Prepared by: National Milk Producers Federation.
    3. Federal Milk Marketing Order Reform
        Based upon extensive deliberation and analysis during the past 12
    months, a proposal for Federal Milk Marketing Order (FMMO) reform has
    been developed for inclusion in Foundation for the Future. This
    proposal addresses the fundamental issues associated with the current
    milk pricing system that are of concern to both dairy producers and
    processors. The proposal:

       Replaces end-product pricing formulas with a competitive
            milk pricing system.

       Incorporates a pricing system for two classes of milk: fluid
            (Class I) and manufacturing (formerly Class II, III and IV
            product uses).

       Maintains the higher of for establishing the fluid use
            (Class I) minimum base price.

       Maintains current Class I differentials.

       Maintains the number and basic structure and provisions of
            Federal Orders.

        The proposed reform program is focused on basic pricing and changes
    in pooling that follow from the suggested revisions to the pricing
    system and recommends the consideration of additional and reformed
    balancing programs. The basic framework of FMMOs--including marketing
    areas, Class I differentials, producer location differentials and plant
    and producer pooling qualifications--are left intact by the proposal.
    That is, it does not propose to review or revise the myriad of Federal
    Order details that have been designed to serve many specific and
    regional needs.

        Introduction

        The Federal Milk Marketing Order system provides substantial
    benefits to producers. These include the equitable pooling of minimum
    Class I revenues, the dissemination of important market information,
    and the third-party audit of milk use in plants.
        Unfortunately, the current end-product pricing formulas used to
    calculate minimum manufacturing milk prices have had some unintended
    consequences since they replaced competitive milk price surveys in
    2000. The make allowances and yield factors built into these formulas
    have become a source of conflict within the industry and have created
    winners and losers. Producers believe that make allowances unfairly
    guarantee a profit to processors and processors insist that the
    formulas don't allow them to capture a fair return on their investment.
    There is also concern that the make allowances negatively impact the
    Dairy Product Price Support Program and put Federal Order processors at
    a competitive disadvantage with unregulated areas and state milk
    marketing orders.
        In addition, the inflexibility of minimum prices based on specific
    product prices can create risk for processors who produce other
    products, when the government requires them to pay a price that doesn't
    match the value of their products.
        There is also concern by both producers and processors that the
    Federal Orders don't adequately address the difficulty and expense of
    balancing fluid milk supplies.
        Consequently, the primary objectives of the Foundation for the
    Future Federal Order Reform proposal, are to:

        (1) Address the inequities and the inadequacies of end-product
            pricing formulas;

        (2) Encourage manufacturers to produce new products resulting in
            higher returns both to themselves and dairy producers; and

        (3) Provide more equitable rewards producers and handlers for
            balancing milk supplies.

        The resulting proposal focuses on adopting competitive pricing for
    manufacturing milk, while maintaining minimum price protection for
    fluid milk, and pursuing new balancing programs in markets where
    needed. Many other elements of the Federal Orders developed over the
    years for many specific reasons, are left as they are, including Class
    I differentials, marketing areas, pool plant definitions, and producer
    pooling qualifications.
        The proposed reform program is more market-oriented while
    preserving the most valuable elements of Federal Orders. The use of a
    competitive pay price as the fundamental basis for pricing milk will
    enhance price discovery and facilitate the ability to export offering
    greater opportunities for U.S. dairy products in the global
    marketplace.

        Two Classes

        This Federal Order reform proposal will improve price discovery and
    the transparency of milk pricing. The key element of the proposal is
    the elimination of the end-product pricing formulas for manufacturing
    milk, including make allowances. All milk used in manufactured dairy
    products will be competitively priced. Consequently, there will be no
    minimum prices manufacturers are required to pay for milk used to
    produce these products.
        There will, in effect, be two classes of milk use:

       Class I_Fluid milk products. Milk used to produce fluid milk
            products will be subject to minimum pricing, plus market-based
            premiums.

       Class II_Manufactured products. Milk used for manufacturing
            (under the current system Class II, III and IV products) will
            be competitively priced in the market.

        Fluid milk (Class I) Price

        Each month, USDA's Agricultural Marketing Service will carry out a
    survey of the competitive price paid by proprietary cheese plants to
    cooperatives and individual producers for milk used to make cheese.
    Proprietary plants (including those with 50 percent cooperative
    ownership or less and managed by the proprietary partner) producing all
    types of cheese will be surveyed if they process a daily average of at
    least 250,000 pounds of milk and are not subject to minimum pricing for
    that milk (under a state order, for instance).
        The data collected by USDA in the survey will include pounds of
    milk and pounds of butterfat, all premiums, component values, hauling
    subsidies, and lab and field service costs where applicable. Forward
    contracted milk would not be included.
        USDA will publish the results of this survey for each of the five
    regions. These regions will correspond to, and expand upon, the current
    Federal Order markets, but are defined for reporting purposes only.
    There will be fewer reporting regions than Federal Order markets to
    ensure that each region has a sufficient volume of manufacturing milk
    use to result in a robust competitive pay price. California would be
    excluded from the survey so long as it continues to set a minimum price
    for cheese milk.
        The basic price determinant or ``price mover'' for fluid milk
    (Class I) nationally will be the higher of the national weighted
    average competitive cheese milk price survey, or the current Class IV
    formula butter powder milk value. The price mover will be announced in
    advance. For example, the Class I mover for April would be the higher
    of: (1) February's national average cheese milk competitive price,
    adjusted with weighted average NASS block and barrel cheese prices for
    the first 2 weeks of March; or (2) an advanced Class IV price as
    currently calculated. The April Class I price mover would be announced
    by the 23rd of March. The minimum price for Class I milk would be this
    national mover plus the current Class I differential at the plant.

        Manufacturing Milk Price

        The price producers are paid for milk in manufactured dairy product
    uses (as currently defined for Class II, III and IV) will be a
    competitive price. There will be no minimum price for manufacturing
    milk.
        Each region's competitive price for milk used to produce cheese, in
    addition to being used in establishing the Class I base price, as
    described above, will be used to determine the butter powder plant pool
    credit and the lowest of the regional competitive cheese milk prices
    will enter into the calculation of the Class I pool contribution. (See
    Pooling below.)

        Pooling

        In order to stabilize pooled values and eliminate most plant de-
    pooling, the Federal Order pool would be a modified pooling of
    differentials, resulting in a producer price differential. That is,
    instead of pooling four class prices, relatively stable price
    differentials and balancing credits would be paid into and out of a
    differential pool, as follows:

       Since the concept of a ``blend price'' will no longer apply,
            individual handlers of Class I milk would contribute to the
            pool the lagged difference between their Class I price and the
            lowest regional competitive price. Both the Class I price and
            the lowest regional competitive price would be announced in
            advance and lagged in the same way. The Class I pool
            contribution would be consistently positive from month to
            month, because it would not depend on a pooling of old and new
            prices, but would only depend on the fixed Class I differential
            and a consistently positive difference between the national
            mover and the lowest regional cheese milk price. In fact, the
            full contribution to the pool per hundredweight of Class I milk
            would be known by the 23rd of the month before.

       Handlers of a subclass of perishable manufacturing milk
            (generally products now in Class II) would contribute a fixed
            differential of $0.30 per hundredweight in the pool.

       Handlers of milk used to make cheese would have no
            contribution or draw.

       Handlers of milk used to produce butter and milk powders
            would receive a payment from the pool when the national value
            of milk used to make powder and butter as calculated using the
            current Class IV formula adjusted for energy costs is less than
            the regional competitive cheese milk price. When the Class IV
            formula is higher than the regional competitive cheese price,
            the Class IV handler shall pay the difference into the pool.
            The payment to those who manufacture butter and milk powders
            will not exceed the funds available in the pool. The blended
            result after the distribution would be a producer price
            differential for all pooled producer milk that would be paid
            directly from the Market Administrator to producers and
            producer cooperatives.

        Balancing and Transportation Credits Addendum

        USDA will be required to hold hearings, either at the national
    level or for individual orders, when requested for the purpose of
    considering and implementing proposals to compensate handlers that
    truly perform balancing services for the Class I market. These hearings
    are to include but not be limited to:

       A plant balancing credit to manufacturing plants that
            provide balancing services to the market.

       Intramarket transportation credits for markets in which
            balancing is based on long shipments of milk from within the
            marketing area.

        How Foundation for the Future's Federal Order Reform Works

        Class I Price Mover and Minimum Price

        The Class I price mover for any given month is the higher of the
    weighted average national competitive cheese milk price from two months
    prior (the base month), or the advance Class IV formula price per
    hundredweight. The competitive cheese milk price will be updated using
    the change in the NASS cheddar cheese price from the first two weeks in
    the base month compared to the price for the first two weeks of the
    month immediately prior to the month for which the Class I price mover
    would be effective. The advance Class IV price is calculated using the
    current formula and the NASS butter and nonfat powder prices for the
    first two weeks of the month immediately prior to the month for which
    the Class I price mover would be effective.
        For example, the Class I price mover for June 2011 would be
    calculated as follows:

    April competitive cheese price = $17.57

    NASS Cheddar Price

       First two weeks April = $1.6768

       First two weeks May = $1.6413

    NASS Butter Price

       First two weeks April = $1.9869

       First two weeks May = $2.0460

    NASS Dry Whey Price

       First two weeks April = $0.4775

       First two weeks May = $0.4915

    NASS NFDM Price

       First two weeks May = $1.6065

    Adjusted April competitive cheese milk price = $17.57 ^ $0.23 = $17.34

    Advanced Class IV Formula Price = $20.32

    June 2011 Class I Price mover (higher of) = $20.32

        Class I handlers must pay their producers a minimum price equal to
    the lowest regional competitive cheese milk pay price in the country,
    adjusted as the mover is above and pay the difference between Class I
    price and the lowest regional competitive cheese milk price into the
    pool. The producer price differential (PPD) will be paid directly to
    producers and cooperatives by the Market Administrator.

        Class II Product Processor Milk Price and Pool Contribution

        Processors of products formerly categorized as Class II will pay
    their producers a competitive price. That is, it is what the processor
    must pay producers to secure a milk supply. There is no minimum price.
    However, the processors of these products shall pay $0.30 per
    hundredweight of milk processed into the Federal Order pool with which
    they are associated. Plant pooling and producer qualification
    requirements are unchanged.

        Cheese and Butter Powder Processors

        Class III and Class IV product processors price to their producers
    will be a competitive price. That is, it is what the processor must pay
    producers to secure a milk supply. There is no minimum price. Plant
    pooling and producer qualification requirements are unchanged. These
    plants make no pool contribution.

        Distribution of the Pool

        The funds in each order's pool shall consist of:

       From Class I handlers:

         The applicable Class I differential.

         The difference between the Class I price mover and the
                lowest regional competitive advanced Class III survey price
                adjusted as described above.

       From soft dairy product (Class II in the current system)
            pool handlers/processors:

         The $0.30 differential.

       From butter powder milk pool handlers:

         Any amount that the butter powder (Class IV in the
                current system) formula price (adjusted for energy costs of
                processing) is above the region's competitive cheese milk
                price.

        If the butter/powder formula price is below the region's
    competitive cheese milk price, the first distribution from an order's
    pool will be to handlers of butter powder milk up to a maximum of the
    total funds available in the pool.
        The remaining pool balance is paid to producers in the Producer
    Price Differential (PPD), subject to location adjustments and other
    pool balancing adjustments, as of today. So that the PPD cannot be
    negative, the draw for butter powder pool handlers cannot exceed the
    available pool balance. The PPD is paid directly to producers and to
    producer cooperative associations, to keep it separate from the
    competitive prices paid to producers by handlers/manufacturers.

        NMPF Five Year Analysis Summary

        The table shows the impact of the proposed Federal Order reforms as
    described above on the producer price differential in each order using
    actual pooled volumes and underlying market values.

                Table 6--Producer Price Differentials, 2006-2010
    ------------------------------------------------------------------------
                                  Current          FFTF         Difference
    ------------------------------------------------------------------------
    Northeast           1              $1.75           $2.01          +$0.26
    Appalachian         5              $2.62           $2.94          +$0.32
    Florida             6              $4.32           $4.72          +$0.40
    Southeast           7              $2.72           $3.03          +$0.31
    Upper              30              $0.29           $0.40          +$0.11
     Midwest
       Central         32              $0.48           $0.71          +$0.24
    Mid-east           33              $0.80           $1.09          +$0.29
    Pacific           124              $0.33           $0.74          +$0.41
     Northwest
    Southwest         126              $1.41           $1.87          +$0.47
    Arizona           131              $0.78           $1.01          +$0.23
    ------------------------------------------------------------------------
    Based on pooling Class IV, snubbed to total value in the pool.

        In Summary

        Foundation for the Future's proposal to revise Federal Milk
    Marketing Orders will provide a number benefits:

       Discover a true market price for milk used in manufactured
            products rather than a price generated by a formula using
            thinly-traded product values and contentious make allowances.

       Reduce price volatility--analysis shows that a competitive
            pricing system results in less volatility than product price-
            driven formulas.

       Encourage product innovation by not locking manufacturers
            into a minimum price based on the value of a dissimilar
            product.

       Provide more equitable compensation to the cooperatives and
            other handlers who do the hard work of balancing fluid markets.

       Maintain the core framework of Federal Milk Marketing
            Orders.

        Federal Orders provide an important support system for processors,
    dairy farmers, and cooperatives through pooling of Class I values,
    providing third-party audits to verify market pricing, and helping to
    maintain supplies for fluid processors by compensating their suppliers.
    Without reform, Federal Orders will be strained to the point that their
    existence comes into question, to the producer's loss.
        The reforms proposed as part of Foundation for the Future will
    accommodate the growing complexity of U.S. and international dairy
    markets while maintaining the basic framework of the FMMO system and
    preserving the elements of the orders that are most important to
    producers and processors. These reforms will promote a milk pricing
    system that compensates producers fairly, reduces price volatility, and
    creates a more dynamic dairy industry.
    4. Dairy Market Stabilization Program
      b Foundation for the Future is recommending the establishment of a
            Dairy Market Stabilization Program (DMSP) to address and
            prevent extreme margin volatility for dairy producers by
            sending strong and timely signals to producers that a small
            percentage of additional milk production may have significant
            consequences on their overall margins. The DMSP is intended to
            absorb some of the market shocks that this volatility may
            cause. The DMSP has been designed to act swiftly, but
            infrequently, to address brief imbalances in the market. The
            program will work in conjunction with the Dairy Producer Margin
            Protection Program (DPMPP). DMSP is compatible with the United
            State's WTO obligations.

        The U.S. dairy industry has been actively increasing its global
    participation. This increased interaction with global markets, will
    likely create more exposure to greater price volatility. Some of the
    key principles that guided the development of the DMSP include:

       Allow for production growth. The program is intended solely
            to intervene in the market to address temporary imbalances
            between supply and demand. The program will send clear economic
            signals to producers that there is an imbalance in the
            marketplace.

       Reduce margin volatility. The program's ultimate objective
            is to restore balance between supply and demand in the
            marketplace for milk. By encouraging producers to lower their
            milk marketings at appropriate times, prices should rise, thus
            improving margins.

       Keep government intervention at a minimum. The legislation
            establishing the program will set the parameters that put it
            into effect. USDA's role will be limited to determine the
            actual monthly margin and to collect potential farmers'
            contributions. It does not require a producer advisory board to
            determine when the program would ``trigger in'' and to what
            extent.

       Not encourage imports or discourage exports. Global and U.S.
            markets must maintain a strong correlation. Such correlation
            will allow domestic inventories to clear faster, encourage
            exports, discourage imports, and help ensure that market
            downturns are of shorter duration.

        Margin as the Trigger Mechanism for DMSP

        As in the case of the DPMPP, the DMSP will be based on margin (All-
    Milk Price minus feed costs). After extensive analysis and review of
    state, regional and national data, it has been determined that the All-
    Milk Price is the most appropriate and accurate measure for use in
    development of the margin. The new feed cost ration developed for the
    DPMPP will also be used in the feed cost formula for this program;
    hence the actual margin will be determined each month using the same
    methodology as the Dairy Producer Margin Protection Program.

        Program Operation

        USDA will calculate the monthly margin for both the DPMPP and the
    DMSP using identical methodology. The margin trigger levels for the
    DMSP will be set as follows:

       When the actual national margin is $6.00 or less for 2
            consecutive months, producers will be paid the higher of 98
            percent of their base milk marketings (definition follows) or
            94 percent of their current milk marketing (definition
            follows);

       When the actual national margin is $5.00 or less for 2
            consecutive months, producers will be paid the higher of 97
            percent of their base milk marketings or 93 percent of their
            current milk marketing;

       When the actual national margin is $4.00 or less in a single
            month, producers will be paid the higher of 96 percent of their
            base milk marketings or 92 percent of their current milk
            marketing.

        As noted above, the DMSP would only take effect when the actual
    margin is equal to or below the margin trigger level for 2 consecutive
    months, except that the program would go into effect if the national
    margin is equal to or below $4.00 per hundredweight in a single month.
    Conversely, when the DMSP is in effect, if the actual national margin
    exceeds the $6.00 trigger level margin for 2 consecutive months, the
    DMSP will be suspended.

        Producers whose milk marketings in a given month are less than the
    required percentage of their base milk marketings serving as the basis
    of payment when the program is in effect would not be subject to a
    reduction in payment. (See examples below.)

        Bases to be Used in the DMSP

        The specified percentage of base milk marketings which will serve
    as the basis of payment when the program is in effect will be
    calculated off the producer's base. The producer's base is defined as
    the 3 month average of the most recent of milk marketings prior to the
    notification from USDA that the margin trigger level has been reached.
    An example of a 3 month average would include the average of marketings
    for January, February, and March for a program to be implemented in
    May. This base would remain fixed at that level until the margin
    exceeds the $6.00 trigger level for 2 consecutive months. To address
    any conditions specific to individual operations (e.g., seasonality or
    grazing), a producer will have the option of choosing the same month in
    the previous year as his/her base for each month the DMSP is in effect,
    making the selection annually.

        Preventing an Influx of Dairy Product Imports

        When domestic prices are significantly higher than world prices,
    conditions are ripe for an influx of imported dairy products.
    Therefore, if either of the U.S. prices for cheddar cheese or skim milk
    powder (SMP) is 20 percent higher than the world price for the
    applicable commodity, DMSP will be discontinued unless the national
    average margin is below $4.00. In this case, conditions would be such
    that even if the world prices for cheddar cheese or SMP are 20 percent
    below the U.S. price, the implementation of the DMSP would continue.
        The following examples explain how the program is intended to work:
        Scenario--The average margin for 2 months, February and March, is
    below the set margin trigger level of $6.00. As a result of the margin
    falling below $6.00 for 2 consecutive months, producers will be
    notified in early April that beginning with the milk marketings for the
    month of May, they will receive payment for the greater of 98 percent
    of their base milk marketings (in this example the average of their
    January through March monthly marketings) or 94 percent of their milk
    marketings for May. For purposes of this example, it is assumed the pay
    price for the month of May is $14.00 per hundredweight.

       Producer A whose 3 month average base milk marketings is
            1,000,000 pounds and markets 1,010,000 pounds in May will be
            paid for 980,000 pounds of milk (1,000,000 pounds  98
            percent). The DMSP deduction from his/her milk check for May is
            30,000 pounds (1,010,000 pounds minus 980,000 pounds)  $14.00
            per hundredweight = $4,200.00.

       Producer B whose 3 month average base milk marketings is
            1,000,000 pounds and markets 1,200,000 pounds of milk in May.
            In this example, 98 percent of his/her base is 980,000 pounds.
            However, 94 percent of his/her current (May) milk marketings is
            1,128,000 pounds. Therefore, the quantity of milk Producer B is
            not paid for is 1,200,000 pounds ^ 1,128,000 = 72,000 pounds.
            The deduction from his/her milk check would be 72,000 pounds
            $14.00 per hundredweight = $10,080.00.

       Producer C also has a 3 month average base of 1,000,000
            pounds and his/her milk marketings are 979,000 pounds in May.
            This producer would have nothing deducted from his/her milk
            check since milk production in May is below the required 98
            percent of his/her base (980,000 pounds), serving as the basis
            of payment. However, if this producer's June marketings were to
            increase to 989,000 pounds, he/she would incur a reduction in
            his/her milk check of $1260.00 (9000 pounds  $14.00 per
            hundredweight), since his/her June marketings exceeded the 98
            percent of base serving as the basis of payment.

       Producer D chooses the option of the same month in the
            previous year. His/her base milk marketings were 1,000,000
            pounds in May of the previous year and 1,010,000 pounds were
            marketed in May of the current year. He/she will be paid for
            980,000 pounds of milk (1,000,000 pounds  98 percent). The
            DMSP deduction from his/her milk check for May is 30,000 pounds
            (1,010,000 pounds ^ 980,000 pounds)  $14.00 per hundredweight
            = $4,200.00.

        Administration of the Program

        The DMSP will cover all producers in all markets and is intended to
    be a government program administered by the Agricultural Marketing
    Service (AMS) of USDA. Monies will be collected by the AMS using the
    same framework as the dairy promotion checkoff monies and will apply to
    all milk marketed with no exceptions. The USDA will announce that the
    DMSP is being implemented 30 days in advance of the month in which the
    reduction in milk payments goes into effect. The trigger mechanism will
    be statutorily mandated to go into effect without USDA sanction when
    certain pre-determined economic conditions occur.

        How the Monies will be Collected and Managed

        The purpose of the monies collected via milk check deductions under
    the DMSP is to effectively stimulate the consumption of dairy products
    domestically. Foundation for the Future proposes that a DMSP board be
    established to oversee and direct the utilization of these producer
    monies into programs that will effectively work to increase the
    consumption of U.S. dairy products.
        The DMSP board shall be appointed by the USDA Secretary. It will
    consist of 24 directors representing the diverse dairy producer
    community throughout the U.S. All board decisions will require a \2/3\
    affirmative vote.
        Utilizing the funds collected through the program, the DMSP board
    will have the authority to direct the purchase of dairy products for
    donations to food banks and other feeding or food aid programs.
        The board will conduct performance reviews of DMSP every two years
    and make recommendations to USDA Secretary for possible consideration
    by the Congress.
        The programs funded by the DMSP should be compatible with, but not
    duplicative of, the programs established by the dairy checkoff program.
    They should adhere to the principle of expanding consumption without
    cannibalizing existing sales. The DMSP board would have the authority
    to contract with a managing entity for execution and implementation of
    its objectives.

        Economic Analysis of the Impact of the Dairy Market Stabilization
    Program

        Dr. Scott Brown (FAPRI) also conducted an independent analysis of
    the DMSP. The full analysis is available online (http://
    www.fapri.missouri.edu/outreach/publications/2011/
    FAPRI_MU_Report_04_11.pdf).
        While the DMSP program does have a cost element to it for dairy
    farmers, the FAPRI analysis clearly demonstrates that the return on
    investment is ten-fold. The analysis assumes that when DMSP is in
    effect, half of the milk produced over the production base will be
    marketed. It also assumes that all producers select the same month in
    the previous year as their base.
        Chart 6 shows the impact the DMSP program would have had on dairy
    farmer margins in 2009. The blue bars represent the actual margins and
    the red bars indicate what the margins would have been with the DMSP in
    effect.
        Chart 7 quantifies the impact DMSP would have had on dairy farmer
    revenue in 2009. It demonstrates that the program would have yielded an
    increase in the average All-Milk Price in 2009 of $1.84 per
    hundredweight. By coupling this program with the DPMPP Basic Plan
    payment (that would have added another $0.10 per hundredweight), it is
    clear that the loss of equity at the farm level would have been
    significantly less severe during that period.
    Chart 6
    2009 Margins With/Without DMSP

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Prepared by: National Milk Producers Federation.
    Chart 7
    DMSP Would Have Raised the Average All-Milk Price $1.84/cwt. in 2009

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Prepared by: National Milk Producers Federation.

        How Margin Protection and Market Stabilization Work Together

        Foundation for the Future is a package of programs designed to work
    together. This is evident when looking at the impact the combination of
    the market stabilization program and the margin production program
    would have had on producers in 2009.
        This review uses the dairy operation in the example under the Dairy
    Producer Margin Protection Program section of this paper: a 200 cow
    dairy; 20,576 pounds per cow; 4,100,000 pounds production history; and
    $2.00 per hundredweight supplemental on 90 percent of production
    history. For this analysis, the producer selects the same month in the
    previous year as his/her production history.
        As seen in Chart 7 above, the DMSP program increases revenue. Chart
    6 above shows that the DMSP program's impact on the margin level
    reduces the duration of the margin protection program and the length of
    time it would have been in effect.
        The following examples using the 200 cow dairy described above. In
    the first, the producer does not reduce production when the DMSP
    program triggers in; in the second, the producer does make the
    reduction.

       Example--Producer 1: Does Not Reduce Production When DMSP Activates

    -------------------------------------------------------------------------
    82009 DMSP Milk Check Reductions:0

       March-May = $7,010

       September-November = $3,174

       Total Taken Off Milk Checks = $10,184

    8Impact on Farm Revenue:0

       Net Increase in milk revenues = +$66,880

       Net Revenue Increase per Hundredweight = $1.63 average for
       the year
    ------------------------------------------------------------------------

           Example--Producer 2: Reduces Production When DMSP Activates

    -------------------------------------------------------------------------
    82009 DMSP Milk Check Reductions:0

       March-May = $0.00

       September-November = $0.00

       Total Taken Off Milk Checks = $0.00

    8Impact on Farm Revenue:0

       Net Increase in milk revenues = +$77,064

       Net Revenue Increase per Hundredweight = $1.87 average for
       the year
    ------------------------------------------------------------------------

                        Example: Impact on Total Revenue

    -------------------------------------------------------------------------
    82009 DPMMP Payout:0

       $2.00/cwt supplemental on 90% of production history

       Supplemental Premium $5,760 per year

       Basic Protection Payment = $3,458

       Net Supplemental Protection Payment = $19,490

       Total DPMPP Net Payment = $22,951, $0.56/cwt.

       Producer 1--No Reduction: DMSP $1.63 + DPMPP $0.56 = Ave.
       +$2.19/cwt.

       Producer 2--Reduced Output: DMSP $1.87 + DPMPP $0.56 = Ave.
       +$2.43/cwt.
    ------------------------------------------------------------------------

    Conclusion
        Working together, the programs of Foundation for the Future protect
    dairy farmer equity, create stability by reducing price and margin
    volatility, and minimize growth restrictions in milk production that
    are needed to provide U.S. dairy products to a growing global market.
    All dairy producers need to do is Rethink What's Possible.
                                  attachment 1

                     2009 NMPF Strategic Planning Task Force

                             Chairman: Randy Mooney*

    Jim Baird, Lone Star Milk Producers  Ralph McNall, St. Albans
                                          Cooperative Creamery, Inc.
    Adrian Boer, Northwest Dairy         Keith Murfield, United Dairymen of
     Association                          Arizona
    Jay Bryant, MD & VA Milk Producers   David Newhouse, Farmers Cooperative
     Coop Assn., Inc.                     Creamery
    Richard Cotta,** California          Ken Nobis,* Michigan Milk Producers
     Dairies, Inc.                        Association
    * Denotes NMPF Officers.
    ** CWT Coop Member Only.
    Rod DeJong,* Northwest Dairy         Doug Nuttelman, Dairy Farmers of
     Association                          America, Inc.
    Clint Fall, First District           Wayne Palla, Dairy Farmers of
     Association                          America, Inc.
    Dave Fuhrmann,* Foremost Farms USA   Neal Rea, Agri-Mark
    Thomas Gallagher, Dairy Management,  Clyde Rutherford,* Dairylea
     Inc.                                 Cooperative, Inc.
    Bobby Hall, Upstate Niagara          Tom Suber, U.S. Dairy Export
     Cooperative, Inc.                    Council
    Pete Kappelman, Land O'Lakes, Inc.   Paul Toft,* Associated Milk
                                          Producers, Inc.
    Cornell Kasbergen,* Land O'Lakes,    John Wilson, Dairy Farmers of
     Inc.                                 America, Inc.
    Mike McCloskey,* Select Milk         Joe Wright, Southeast Milk
     Producers, Inc.

                                  attachment 2
    Foundation for the Future Subcommittees
    Dairy Market Stabilization--Chairman Wayne Palla, DFA

    Adrian Boer, Northwest Dairy Association
    Jay Bryant, MD & VA Milk Producers Coop
    Richard Cotta, California Dairies, Inc.
    Cornell Kasbergen, Land O'Lakes, Inc.
    Gene Paul, National Farmers Organization
    Neal Rea, Agri-Mark
    David Scheevel, Foremost Farms USA
    Tom Suber, U.S. Dairy Export Council

    Dairy Producer Margin Protection--Chairman Ken Nobis, Michigan Milk
        Producers Association

    Clint Fall First District
    Ed Gallagher Dairylea Cooperative, Inc.
    Pete Kappelman Land O'Lakes, Inc.
    Doug Nuttelman Dairy Farmers of America, Inc.
    Tom Thompson United Dairymen of Arizona
    Joe Wright Southeast Milk
    Consultant: Bruce Babcock--Iowa State University

    FMMO--Chairman Dave Fuhrmann, Foremost Farms

    Jim Baird, Lone Star Milk Producers
    Neil Gulden, Associated Milk Producers, Inc.
    Mike McCloskey, Select Milk Producers
    Keith Murfield, United Dairymen of Arizona
    Jim Sleper, Land O'Lakes, Inc.
    Rich Stammer, Agri-Mark
    Jim Wegner, Northwest Dairy Association
    Greg Wickham, Dairylea Cooperative, Inc.
    John Wilson, Dairy Farmers of America, Inc.
                                  attachment 3
    Groups Presenting Proposals/Policy Statements at the NMPF Strategic
            Planning Task Force on July 20-21, 2009 Meeting
    American Farm Bureau Federation
    Dairy Farmers Working Together
    Holstein Association
    Milk Producers Council
    National Farmers Organization
    National Farmers Union
    Western United Dairymen
                                  attachment 4
    List of Industry Feed Ration Experts and Nutritionists
    Development Team:

    Steve Watrin, Land O'Lakes, Inc.
    Ed Gallagher, Dairylea Cooperative, Inc.
    Dr. Gordie Jones, Veterinarian, Farmer, Nutritionist

    Reviewed by:

    Dr. Mary Beth Hall, Ph.D., USDA Forage Center
    Dr. Terry Howard, Ph.D., University of Wisconsin (retired)
    Dr. Mike Hutjens, Ph.D., University of Illinois
    Dr. Randy Shaver, Ph.D., University Of Wisconsin
    National Milk Producers Federation
    2101 Wilson Blvd., Suite 400
    Arlington, VA 22201
    Phone: 703-243-6111
    Fax: 703-841-9328
    info@nmpf.org
    www.futurefordairy.com
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--Farm
                                 Service Agency
    1. Program Name
        Dairy Export Incentive Program (DEIP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Authorized by Congress under Sec. 153 of the Food Security Act of
    1985, the program provides a bonus or subsidy on a bid basis to
    exporters of eligible dairy products (butterfat, nonfat dry milk, whole
    milk powder and various cheeses). The payments may be made in cash or
    in commodities held by the Commodity Credit Corporation (CCC).
    Initially, the program provided the bonuses ``in-kind'' from surplus
    stocks of dairy products held by CCC. This, `in-kind' payment was
    replaced by the issuance of ``generic certificates'' redeemable for any
    inventory held by the CCC. As inventories diminished, the program
    evolved into the sole use of cash payments for the subsidy. As this
    program provides an export subsidy, it is subject to the subsidy
    reduction commitments of the United States under the Uruguay Round
    Agreements of the World Trade Organization (WTO). The program is
    therefore subject to both budget and quantity limits in accordance with
    those reduction commitments.
    4. Purpose/Goals
        By providing a subsidy on exports of eligible dairy products, an
    amount intended to bridge the gap between world market prices and the
    U.S. domestic price, DEIP enables exporters to meet the lower world
    market prices, often influenced by the application of subsidies by
    other exporting countries--primarily the European Union (EU).
    5. Success in Meeting Programmatic Purpose/Goals
        The program has been very successful in meeting the needs of
    exporters and expanding markets for U.S. dairy products when world
    prices are depressed due to the application of subsidies by other
    countries. This was most evident leading up to and during the
    implementation period of the Uruguay Round subsidy reduction
    commitments. At that time, the EU was aggressively subsidizing dairy
    exports. Almost 250,000 metric tons of dairy products were exported
    under DEIP in Fiscal Year 1995 and $162 million in bonus payments were
    committed under DEIP in Fiscal Year 1993.
    6. Annual Budget Authority (FY 2002-FY 2011)
        This is a mandatory program with spending capped by our commitments
    under the WTO Uruguay Round Agreements. These are product specific and
    follow:

    ------------------------------------------------------------------------
          Dairy Product        Budgetary Cap ($Mil)      Quantity Cap (MT)
    ------------------------------------------------------------------------
        Nonfat dry milk                   $82.46                  68,201
              Butterfat                   $30.49                  21,097
                 Cheese                    $3.63                   3,030
      Other (whole milk                   $0.021                      34
                 powder)
                             -----------------------------------------------
      Total.................            $116.601                     N/A
    ------------------------------------------------------------------------

                       7. Annual Outlays (FY 2002-FY 2011)
    ------------------------------------------------------------------------
           Fiscal Year        Subsidy Awarded ($Mil)       Quantity (MT)
    ------------------------------------------------------------------------
                   2002                   $54.62                  86,473
                   2003                   $32.52                  86,155
                   2004                    $2.68                  48,498
                   2005                       $0                       0
                   2006                       $0                       0
                   2007                       $0                       0
                   2008                       $0                       0
                   2009                   $18.89                  50,886
                   2010                    $2.37                   4,811
                   2011                       $0                       0
    ------------------------------------------------------------------------

        The budget authority is restricted to the budgetary limits of our
    subsidy reduction commitments under the Uruguay Round Agreements. DEIP
    is designed to meet, not set, world market prices. Years where there
    has been limited use of DEIP reflect the United States' competitiveness
    in the world market without the need for a subsidy. This condition
    exists today.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        Delivery costs are a function of collateral duty when the program
    is operating. When not operating, program delivery costs are estimated
    at 0.10 FTE--largely a function of closing outstanding performance
    issues. When operational, USDA estimates that no more than two FTE
    equivalents are utilized to operate the program. In fiscal 2010, the
    program operated for 1 month and estimated delivery costs were under
    $40,000. In 2011, estimated delivery costs are under $10,000. The
    software costs for the program are under $1,000 per year.
    9. Eligibility Criteria
        All potential exporters of U.S. dairy products can participate
    provided they have an agent in the United States and they are not
    suspended, debarred or otherwise prohibited from participation in U.S.
    Government programs.
    10. Utilization (Participation) Data
        To date, 115 exporters of dairy products have participated in DEIP
    since inception.
        The following is a list of the number of participants for the
    period 2002-2011:

    ------------------------------------------------------------------------
                 Fiscal Year                         Participants
    ------------------------------------------------------------------------
                           2002                                   17
                           2003                                   12
                           2004                                    4
                           2005                                    0
                           2006                                    0
                           2007                                    0
                           2008                                    0
                           2009                                   17
                           2010                                   12
                           2011                                    0
    ------------------------------------------------------------------------

    11. Duplication or Overlap with Other Programs
        None.
    12. Waste, Fraud and Abuse
        USDA is proactive in reviewing this program and its participants.
    Payments are not made until the exporters provide appropriate export
    documentation that is reviewed for compliance with program
    requirements. Where there is any indication of waste, fraud and abuse,
    the Department is aggressive in investigating those incidents. At this
    time we have no confirmed evidence of waste, fraud or abuse under DEIP.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Milk Income Loss Contract (MILC) Program.
    2. Subprograms/Department Initiatives
        Subprogram--The 2010 Agricultural Appropriations Bill authorized
    $290 million for loss assistance payments under the Dairy Economic Loss
    Assistance Payment (DELAP) Program for eligible producers to receive a
    one-time payment based on the amount of milk both produced and
    commercially marketed by their operation during the months of February
    through July 2009.
    3. Brief History
        The National Dairy Market Loss Program, later named the Milk Income
    Loss Contract Program, was initially authorized by Section 1502 of the
    Farm Security and Rural Investment Act of 2002 (2002 Farm Bill). The
    MILC program supports the dairy industry by providing direct
    countercyclical style payments to milk producers on a monthly basis
    when the Boston Federal Milk Marketing Order Class I price for fluid
    milk falls below the benchmark of $16.94 per hundredweight (cwt.). For
    production marketed during the authorized period, milk producers in
    eligible dairy operations received a payment equal to 45 percent of the
    difference between the benchmark and the Class I price, if this
    difference was positive. This rate was decreased by the Deficit
    Reduction Act of 2005 to 34 percent of the difference between $16.94
    and the Boston Class I Federal Milk Marketing Order price for October
    1, 2005 through August 31, 2007. The MILC program was amended further
    by the Agriculture Reconciliation Act of 2005 to extend the program
    through September 30, 2007, consistent with other farm bill programs
    ending September 30, 2007. The MILC program was last authorized by the
    2008 Farm Bill through September 30, 2012, and also introduced a feed
    cost adjustment to the monthly payment rate calculation. Under the MILC
    program, a dairy operation's monthly payment is based on the quantity
    of milk sold in a month in which a payment rate is in effect, up to a
    maximum of 2.985 million pounds per dairy operation, per fiscal year
    for the period beginning October 1, 2008 and ending August 31, 2012.
    Before October 1, 2008 the maximum eligible production had been 2.4
    million pounds.
        The MILC program replaces previous Dairy Market Loss Assistance
    programs that provided payments to dairy producers from 1997 through
    2000. MILC was implemented soon after authority for the Northeast Dairy
    Compact expired.
    4. Purpose/Goals
        The purpose and goal of the MILC program is to stabilize milk
    producer revenue by compensating dairy producers when domestic milk
    prices fall below a specified level.
    5. Success in Meeting Programmatic Purpose/Goals
        The MILC program has paid out approximately $2.5 billion to dairy
    operations over the first 5 initial years of program administration.
    Annual expenditures when the program was re-authorized for 2006 and
    2007 totaled over $510 million. Expenditures during the period
    authorized by the 2008 Farm Bill, to date, total $938 million. Due to
    the countercyclical nature of the program, the direct payments provide
    a safety net to dairy producers at times when they may struggle most as
    a result of low milk prices. The payments have reduced the financial
    stress on U.S. dairy operations during periods of low milk prices
    helping to sustain the domestic milk supply resulting in consumers
    being able to buy dairy products at lower prices than if the program
    was not operating.

                                                          6. Annual Budget Authority (FY 2007-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                   FY 2002     FY 2003      FY 2004     FY 2005     FY 2006     FY 2007     FY 2008      FY 2009      FY 2010      FY 2011
                                    Actual      Actual       Actual      Actual      Actual      Actual      Actual       Actual       Actual        Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Milk Income Loss Contracts           $0   $1,795,452     $221,126     $9,124     $351,586   $156.598       $2,153     $756,889     $181,527     $173,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Budget Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                   FY 2002     FY 2003      FY 2004     FY 2005     FY 2006     FY 2007     FY 2008      FY 2009      FY 2010      FY 2011
                                    Actual      Actual       Actual      Actual      Actual      Actual      Actual       Actual       Actual        Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Milk Income Loss Contracts           $0   $1,796,452     $221,126     $9,124     $351,586   $156.598       $2,153     $756,889     $181,527     $173,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible for payments, dairy producers must have produced cow
    milk in the U.S., and commercially marketed the milk produced anytime
    during the authorized period. Dairy producers must also be in
    compliance with Highly Erodible Land and Wetland conservation
    provisions and Adjusted Gross Income limitations. Signup for the
    program under the 2008 Farm Bill began December 22, 2008, and extends
    through the conclusion of the program on September 30, 2012. Payments
    are issued based on a start month selection by the producers in the
    dairy operation and are subject to a maximum eligible production limit
    of 2.985 million pounds per dairy operation per fiscal year. Payment
    start month selections must be made on form CCC-580 and submitted to an
    FSA Service Center on or before the 14th of the month before the month
    the dairy operation wants to begin payments. Production evidence for
    each applicable payment month must be provided to FSA before a MILC
    payment can be issued.
    10. Utilization (Participation) Data
        51,975 dairy producers have participated in the MILC program from
    2008 to present, as authorized under the 2008 Act.
    11. Duplication or Overlap with Other Programs
        No duplication or overlap with other programs.
    12. Waste, Fraud and Abuse
        There has been minimal to no waste, fraud, or abuse in the MILC
    program because verifiable production evidence must be provided by the
    producers in an eligible dairy operation to qualify for program
    benefits. During the FY 2010 CORP review for improper payments for MILC
    program, it was determined that MILC improper payment error rates
    increased because of the lack of proper supporting documentation, such
    as eligibility forms, before disbursing a MILC payment. FSA continues
    to make eliminating improper payments a top priority and has
    incorporated the priority into strategic planning and performance
    measures.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Dairy Indemnity Payment Program (DIPP).
    2. Subprograms/Department Initiatives
        Subprogram--none.
        Department Initiatives--none.
    3. Brief History
        The Dairy Indemnity Payment Program was originally authorized by
    Public Law 90-484, the Act of August 13, 1968 (7 U.S.C. 4501), and has
    been extended numerous times. The Food, Conservation, and Energy Act of
    2008, Public Law 110-246, extended the program through 2012. Most
    recently, funds were appropriated for DIPP by the Department of Defense
    and Full-Year Continuing Appropriations Act of 2011, Public Law 112-10.
        DIPP is available to dairy farmers for milk, or cows producing
    milk, and manufacturers of dairy products who, through no fault of
    their own, have been directed to remove their milk or dairy products
    from commercial markets because of the presence of certain chemical or
    toxic residue in the products. Under DIPP, payments are made to dairy
    producers when a regulatory agency directs them to remove their raw
    milk from the commercial market because it has been contaminated by
    pesticides, nuclear radiation, or fallout, or toxic substances and
    chemical residues other than pesticides. Payments are made to
    manufacturers of dairy products only for products removed from the
    market because of pesticide contamination. Dairy producers and
    manufacturers are eligible for indemnification from the date the milk
    was officially removed from the market by a public regulatory Agency
    through the date the milk is officially reinstated to the market by a
    public regulatory Agency, based on the fair market value determined for
    the milk. To apply for DIPP benefits, affected producers and
    manufacturers must meet all eligibility requirements and submit a
    completed FSA-373 to their USDA Service Center or FSA Office no later
    than December 31 following the fiscal year in which the loss occurred.
    4. Purpose/Goals
        The purpose and goal of DIPP is to indemnify dairy farmers and
    manufacturers of dairy products who, through no fault of their own,
    suffer income losses with respect to milk or milk products removed from
    commercial markets because such milk or milk products contain certain
    harmful residues.
    5. Success in Meeting Programmatic Purpose/Goals
        DIPP has successfully allowed dairy producers and manufacturers, to
    recover financial losses suffered from being directed by a public
    regulatory agency to remove their production from the commercial
    market, when removal has been through no fault of their own. This
    financial compensation allows producers to maintain business operations
    and slows the exit of U.S. dairy operations from the dairy business.
    This program also ensures a healthy milk supply for U.S. consumers.

                                                          6. Annual Budget Authority (FY 2007-FY 2011)
                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Dairy Indemnity Payments                $100        $100        $100        $100        $100        $100        $100        $876        $876        $100
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                             FY 2002 Through FY 2011 Budget Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Dairy Indemnity Payments                $124        $393        $601        $349        $132        $181        $144        $651        $162        $200
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                        8. Annual Delivery Cost (FY 2002-FY 2011)

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Income Support and Disaster
     Assistance
      Price Support and Marketing         11,286,100       9,509,047       8,290,909       6,313,263       6,095,604
       Assistance Loans
      Loan Deficiency Payments               173,751           6,036         148,553         191,647          36,565
      Direct Payments                      3,957,175       4,821,206       4,176,795       4,898,085       4,950,410
      Countercyclical Payments             3,158,554         359,064       1,213,300         902,584         131,848
      ACRE Payments                                0               0               0               0         446,633
      Milk Income Loss Contract              157,850           2,153         769,900         181,527         173,000
       Payments
      Tobacco Payments                       955,495         954,817       1,130,095         954,091         960,000
      Other Direct Payments                   25,695          29,768          84,375         103,432          80,504
      NAP Payments                           126,951          73,989          40,700          98,745         116,873
      Crop Disaster Assistance                58,591           1,281         114,828            ^109               0
      Livestock Indemnity Program                198               2           1,716          91,825          77,000
      Emergency Livestock Assistance             664              25           1,926            ^403               0
      Emergency Conservation Program         149,727         128,456               0          92,459          39,719
      Biomass Crop Assistance                                      0               0         248,202         199,000
      Emergency Forest Restoration                                 0               0               0          18,000
       Program
      Tree Assistance Program                  1,973           1,010              68              90               0
      CCC Interest Expenditures              648,627         140,936           2,856          10,426          16,635
      Dairy Indemnity Program                    181             144             651             162             200
      Emergency Forestry                       6,302          12,717           7,854           8,297           9,291
       Conservation Program
      USDA Supplemental Assistance,                0               0          83,814         295,600         295,600
       appropriated
      FSA Disaster Assistance,                     0       2,541,733               0               0               0
       appropriated
      Reforestation Pilot Program                  0             794             794             800             800
      Agricultural Disaster Relief                 0               0           6,000       1,573,278       1,926,134
       Trust Fund
      Aquaculture Grants (123317)                  0               0          48,500          39,942               0
      Farm Storage Facility Loans                548               0          12,500               0               0
        Administrative costs                 776,465         683,795         694,980         744,303         753,934
         (direct)
        Indirect costs                        47,548         234,633         226,905         242,967         246,299
                                     -------------------------------------------------------------------------------
          Total Costs                     21,532,395      19,501,606      17,058,019      16,991,214      16,574,049
          FTEs                                 8,905           8,620           9,529           8,355           8,140

    9. Eligibility Criteria
        To be eligible to receive DIPP payments, the producer must have
    produced whole milk that was removed from the commercial market
    pursuant to the direction of a public regulatory agency, not have been
    responsible for the milk contamination, or not have been indemnified
    for the same loss from another source.
        In addition, the producer must certify to the compliance with
    Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC)
    provisions and submit a complete application to the county Farm Service
    Agency office no later than December 31 following the end of the fiscal
    year in which the loss occurred.
    10. Utilization (Participation) Data
        Participation in DIPP varies from one fiscal year to another. Since
    2008, weather conditions in various regions within the United States
    prompted regulatory agencies to remove dairy producers from marketing
    milk because of aflatoxin found in their milk. Below are the number of
    applications and total dollars paid for DIPP from FY 2008 through FY
    2011.

       FY 2008--14 applicants--$144,388

       FY 2009--22 applicants--$650,788

       FY 2010--18 applicants--$158,951

       FY 2011--22 applicants--$261,256
    11. Duplication or Overlap with Other Programs
        No duplication or overlap with other programs.
    12. Waste, Fraud and Abuse
        Minimal to no waste, fraud, or abuse in the DIPP program because of
    the many eligibility factors that require verifiable evidence from
    official sources that must be provided by the producers in an eligible
    dairy operation to qualify for program benefits. Applications for
    benefits are verified by the County Committee, State Committee, and
    National Office before payment is authorized to a producer.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Dairy Product Price Support Program (DPPSP).
    2. Subprograms/Department Initiatives
        Dairy Economic Loss Assistance Program (DELAP). The 2010
    Agriculture Appropriations bill authorized the purchase of cheese worth
    $60 million for donation to feeding programs.
        2009 expansion of feeding programs--On March 26, 2009 Secretary
    Vilsack announced a disposition plan for inventories of nonfat dry milk
    (NDM) that totaled 232.9 million pounds, which had been purchased by
    the CCC at the NDM support price. The plan was intended to help support
    both low-income families, domestically and internationally, as well as
    dairy farmers challenged by high feed and low dairy prices. Through
    this initiative, CCC donated 30 million lbs of NDM to states for
    further processing to acquire fortified fat-free fluid milk and
    macaroni and cheese for use in the National School Lunch Program
    (NSLP); 40 million lbs was fortified and instantized, placed into
    consumer-sized packages and made available in domestic feeding
    programs; 60 million lbs was bartered for 1% ultra high temperature
    (UTH) milk for use in the Emergency Food Assistance Program (TEFAP); 50
    million lbs were bartered for reduced fat and lite cheese for use in
    the NSLP and TEFAP; and 20 million were bartered for ready-to-eat,
    milk-based soups for use in TEFAP. In addition, 1 million lbs was
    offered for sale on a competitive basis for the production of casein
    and 1.5 million lbs were used to meet food assistance needs overseas.
    3. Brief History
        DPPSP, established by the Food, Conservation, and Energy Act of
    2008 (2008 Farm Bill), is the latest iteration of the milk price
    support program (MPSP) established by the Agricultural Act of 1949
    (1949 Act). The DPPSP requires the CCC to offer to purchase unlimited
    quantities, at fixed announced prices, of cheddar cheese, butter, and
    nonfat dry milk. Since most wholesale milk is priced based on the price
    of these three dairy products, providing a floor on these products
    provides a floor for the farm milk price. Many versions of the support
    to dairy have been tried since 1949 as the Federal Government has tried
    to balance the need for a stable milk supply with the cost of the
    support program. Some programs have tried to tie milk itself to a
    particular price through the use of secondary purchases. Sometimes the
    prices have been tied to parity or purchase levels. Other programs have
    included voluntary supply control schemes--milk diversion programs or
    herd buyouts. Still other programs to address dairy matters have
    included milk assessments; and many surplus dairy product disposal
    schemes.
        For a long time, dairy support was controlled by the basic
    provisions of the Agricultural Act of 1949, as amended, which required
    that the price of milk paid to producers be supported at a level
    between 75 and 90 percent parity to assure an adequate supply of milk,
    reflect changes in the cost of production, and assure a level of farm
    income to maintain productive capacity sufficient to meet future needs.
    However, after October 21, 1981, the support price was established by
    Congress either at specific price levels or by a formula related to
    expected surplus, rather than parity levels. The 2008 legislation takes
    a different approach and does not set a support price for milk, but
    rather sets purchases prices for products.
        The 1996 Federal Agriculture Improvement and Reform Act authorized
    the Milk Price Support Program (MPSP) through December 31, 1999. Due to
    low prices and concerns from the dairy industry, Congress extended the
    MPSP into 2000, 2001, and until May 31, 2002 through the Agriculture,
    Rural Development, Food and Drug Administration, and Related Agencies
    Appropriations Acts of 2000 and 2001. After June 1, 2002, the Farm
    Security and Rural Investment Act of 2002 (2002 Farm Bill) was passed
    authorizing the MPSP program through December 31, 2007 at a rate of
    $9.90 per hundredweight (cwt) for manufacturing milk. Under the old
    program, milk prices were supported through purchases by the government
    of dairy products. The Secretary could adjust the price of NDM or
    butter twice within the calendar year. The DPPSP minimum purchase
    prices in the 2008 Farm Bill were the dairy product prices USDA had
    established under the 2002 Farm Bill. Under the DPPSP, the minimum
    purchase prices can be lowered if CCC removals exceed certain levels.
    4. Purpose/Goals
        The goal of the DPPSP is to support dairy products by providing a
    support price for those products. That support has beneficial effects
    for milk producers.
    5. Success in Meeting Programmatic Purpose/Goals
        The DPPSP has been successful in providing economic support to
    dairy producers when economic conditions have been challenging. This
    program has kept some producers operating through times that would
    otherwise force them out of business thus making industry transition
    less dramatic. However, the industry does continue to adjust, with many
    small operations going out of business and their milk production being
    replaced by fewer and larger operations. Recently, significantly
    increasing feed costs have become a challenge for dairy producers.
    Dairy farm viability is determined by the margin between milk prices
    and feed costs, the dairy farms most significant variable cost. Since
    the DPPSP supports the price of products, and not the milk margin,
    producers have increased their participation in the dairy gross margin
    insurance program as a complement to the DPPSP.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)

        Budget outlays are made the same year that budget authority is granted.

                                                            FY 2002 Through FY 2011 Budget Authority
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Price Support Related               $597,405    $650,102    $308,662     $29,315     $60,307      $2,389     $^2,211    $236,188    $153,011    $124,915
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)

        Annual outlays averaged $216 million over the FY 2002-FY 2011 period, and included average outlays exceeding $600 million during FY 2002-03. Outlays
     for the DPPSP totaled $236.2 million in FY 2009 and $153 million in FY 2010. No purchases have been made in FY 2011.

                                                             FY 2002 Through FY 2011 Budget Outlays
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Price Support Related               $597,405    $650,102    $308,662     $29,315     $60,307      $2,389     $^2,211    $236,188    $153,011    $124,915
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)

        Annual delivery cost is reported consistent with the President's 2012 Budget and USDA's Strategic Plan:
        Department Strategic Goal: Assist rural communities to create prosperity so they are self-sustaining, repopulating and economically thriving.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Commodity Operations
      Cotton User Marketing Payments           9,518               0               0               0               0
      ELS Cotton Competiveness                 1,103          29,839           9,630          27,866               0
       Payments
      Upland Cotton Economic                       0               0          74,661          75,635          65,504
       Adjustment Assistance
      Commodity Purchases and Sales          726,938       1,116,157       1,027,768         853,110       1,626,852
      Storage, Handling,                     133,213          36,329          67,740          73,100          77,475
       Transportation, Processing,
       and Packaging
      CCC Interest Expenditures               70,070          15,660           3,173             791           2,226
      Dairy Price Support                        101             319         226,894          40,597          17,250
        Administrative costs                  33,724          21,340          39,728          24,087          24,364
         (direct)
        Indirect costs                         2,153          49,458          33,697          18,728          18,943
                                     -------------------------------------------------------------------------------
          Total Costs                        976,820       1,269,102       1,483,291       1,113,914       1,832,614
          FTEs                                   458             254             263             256             256

    9. Eligibility Criteria
        All cheddar cheese, butter, and nonfat dry milk made of cow's milk
    produced in the United States and which is located in the United States
    when offered and not previously owned by the CCC is eligible if it
    meets the standards for product quality and packaging as listed in the
    Dairy Product Price Support Program Purchase Announcement Dairy 7 \1\
    (Dairy 7). Further, the dairy product must be manufactured in dairy
    plants in which USDA inspection and grading services are performed
    under 7 CFR Part 58--Grading and Inspection, General Specifications for
    Approved Plants and Standards for Grades of Dairy Products.
    ---------------------------------------------------------------------------
        \1\ The Dairy 7, issued November 17, 2010, provides specific
    contracting information for CCC price support purchases. This
    announcement along with the Dairy Invitations provides the information
    needed to offer and comply with the regulations. This includes
    eligibility, submissions, provisions, product specifications,
    instructions and compliance data.
    ---------------------------------------------------------------------------
    10. Utilization (Participation) Data
        During FY 2004, the CCC purchased a total of 2.911 billion pounds
    of NDM, at costs totaling $2.7 billion or an annual average $536
    million. Stocks exceeded 1 billion pounds for most of 2002 and 2003. In
    2008 and 2009, net removals totaled 359 million pounds of NDM, 3
    million pounds of cheese, and 30 million pounds of butter.
    11. Duplication or Overlap with Other Programs
        DPPSP supports prices received by dairy farmers through the
    purchase of unlimited quantities, at fixed announced prices, of cheddar
    cheese, butter, and nonfat dry milk. No other program supports the
    price of milk in this manner. The MILC program provides countercyclical
    support to dairy producers when the margin (difference between price
    and feed costs) falls below specified levels.
    12. Waste, Fraud and Abuse
        There has been no waste, fraud, or abuse in the DPPSP that USDA is
    aware of. The Farm Service Agency reviews applicant eligibility when
    offers are made, and the Agriculture Marketing Service inspects all
    products offered under DPPSP to ensure that grade and other
    requirements of Dairy 7 are met before products are purchased.
    13. Effect of Administrative PAYGO
        There has been no impact from Administrative PAYGO on the operation
    of DPPSP.
                                     ______

         House Committee on Agriculture Farm Bill Audit Questionnaire--
                         Agricultural Marketing Service
    1. Program Name
        Dairy Product Mandatory Reporting.
    2. Subprograms/Department Initiatives
        AMS Dairy Program.
    3. Brief History
        The Dairy Product Mandatory Reporting Program was established on
    August 2, 2007, on an interim final basis, with final implementation
    effective June 22, 2008. The program: (1) requires persons engaged in
    manufacturing dairy products to provide to USDA certain information
    including the price, quantity, and moisture content, where applicable,
    for cheddar cheese, butter, dry whey, and nonfat dry milk (NFDM) sold
    by a manufacturer on a weekly basis; and (2) requires manufacturers and
    other persons storing dairy products to report to USDA information on
    the quantity of dairy products stored. Any manufacturer that processes
    and markets less than 1 million pounds of the applicable dairy products
    per calendar year is exempt from these reporting requirements.
        For the first requirement, the National Agricultural Statistics
    Service (NASS) currently collects and publishes information for the
    program. AMS provides verification and enforcement functions to ensure
    accuracy of the price information reported to NASS. The second
    requirement is solely a function of NASS. Prior to implementation of
    the Dairy Product Mandatory Reporting Program information was collected
    on a voluntary basis. NASS began publishing cheddar cheese sales
    information in 1997 and began publishing butter, NFDM, and dry whey
    sales information in 1998.
        AMS has established a verification program to verify that sales
    transactions match information reported to NASS and applicable sales
    transactions are not excluded. AMS currently visits larger entities
    accounting for 80 percent of yearly reported product volume of
    specified dairy products at least once annually. AMS visits \1/2\ of
    the entities accounting for the remaining 20 percent at least once
    every other year. During each visit, AMS reviews applicable sales
    transaction records for at least the 4 most recent weeks. In some
    cases, AMS may review sales records for periods of up to 2 years. AMS
    also conducts additional verification procedures on an as-needed basis
    when price information may be questioned.
        The 2008 Farm Bill requires that an electronic system be employed
    to collect information for the Dairy Product Mandatory Reporting
    Program on a more frequent basis subject to the availability of funds.
    The farm bill also requires quarterly audits of program information.
    Funds have not been made available for an electronic reporting system,
    more frequent collection of data, or quarterly audits.
        The Mandatory Price Reporting Act of 2010 requires that the
    Secretary establish an electronic reporting system for manufacturers of
    dairy products to report certain market information for the mandatory
    dairy product reporting program. The amendment further states that the
    Secretary shall publish the information obtained under this section for
    the preceding week not later than 3 p.m. Eastern Time on Wednesday of
    each week.
    4. Purpose/Goals
        The purpose of the program is to provide accurate and timely market
    information for dairy industry participants. Widely available market
    information provides transparency to assist markets in operating
    competitively and fairly. Data collected through the program is used as
    the price discovery mechanism to establish minimum prices for the
    Federal Order system.
        The program will continue reporting dairy commodity sales
    information that is accurate but released a day and a half earlier. The
    electronic system will be designed to minimize the burden on reporting
    entities.
    5. Success in Meeting Programmatic Purpose/Goals
        As required in the 2008 Farm Bill, AMS has successfully implemented
    a verification and enforcement program to ensure the accuracy of
    information provided to NASS for the required dairy product prices. Due
    to continual outreach and education, a significant decline has occurred
    in reporting errors. In 2007, 35 discrepancies were discovered by AMS
    on audit while to-date in 2011 only four discrepancies have been
    discovered by AMS. Since inception of the verification program, a total
    of 91 discrepancies have been found.
        A proposed rule was published on June 10, 2011, which included
    regulatory changes for implementing the provisions of the Mandatory
    Price Reporting Act of 2010 and for transferring data collection
    responsibilities from NASS to AMS. Seven comments were received by
    August 9, 2011, and a final rule is being prepared. Following beta-
    testing, mandatory electronic collection of dairy product prices is
    expected to begin January 1, 2012.
    6. Annual Budget Authority (FY 2002-FY 2011) ($ in Millions)
        Additional budget authority has not been authorized for this
    activity within the Dairy Marketing Agreements & Orders (MA&O) program.
    AMS prioritized the available resource for MA&O in order to allow for
    dairy price verification from 2007-2011. Additional one-time funding
    within current resources was provided in FY 2011 to modify the Agency's
    existing Livestock Mandatory Price Reporting System to accommodate
    selected dairy products. The following legislative timeline identifies
    the evolution of dairy mandatory reporting:

    ------------------------------------------------------------------------
     Fiscal Year                     Legislative Reference
    ------------------------------------------------------------------------
      2000-2001   Dairy Enhancement Act of 2000 (P.L. 106-532)--established
                   mandatory reporting for dairy products
      2002-2007   2002 Farm Bill (P.L. 107-171)--amended above Act to modify
                   the definition of products
      2008-2010   2008 Farm Bill (P.L. 110-246)--develop a system and
                   conduct quarterly audits
           2011   2010 Mandatory Price Reporting Act (P.L. 111-239)--
                   required electronic reporting system and established a
                   publication schedule
    ------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                                         Annual Outlays
                                                                     FY 2002 Through FY 2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Outlays                                   $0          $0          $0          $0          $0        $300        $300        $300        $300        $858
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    (This includes verification expenses 2007-2011 plus 1x IT expense in 2011 to modify the LMR System for DY reporting.)

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)
                                                                      Annual Delivery Costs
                                                                     FY 2002 Through FY 2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Annual Delivery Costs                     $0          $0          $0          $0          $0        $300        $300        $300        $300        $858
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    (This includes verification expenses 2007-2011 plus 1x IT expense in 2011 to modify the LMR System for DY reporting.)

    9. Eligibility Criteria
        As required by law, dairy manufacturers producing and selling 1
    million pounds or more of specific dairy products (cheddar cheese,
    butter, nonfat dry milk and/or dry whey) per calendar year, are
    required to participate in the weekly surveys.
    10. Utilization (Participation) Data
        In 2010, there were 88 dairy product plants that were subject to
    mandatory reporting of sales data for one or more products. Fifty-two
    entities reported data for one or more plants.
    11. Duplication or Overlap with Other Programs
        A final rule will implement the provisions of the Mandatory Price
    Reporting Act of 2010 transfer applicable data collection
    responsibilities from NASS to AMS. During voluntary software beta
    testing NASS and AMS will run parallel programs for about 2 months to
    ensure system is fully operation before eliminating NASS's
    responsibilities.
    12. Waste, Fraud and Abuse
        Not applicable.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Dairy Import Assessment.
    2. Subprograms/Department Initiatives
        AMS Dairy Program.
    3. Brief History
        The U.S. Department of Agriculture has announced a Final Rule that
    amends the Dairy Promotion and Research Order (Dairy Order) and
    implements a dairy import assessment program as required by the Dairy
    Production Stabilization Act of 1983, as amended. The program
    implements the equivalent of 7.5 cents per hundredweight of milk
    assessment on imported dairy products; adds two importer members to the
    National Dairy Promotion and Research board; amends the term ``United
    States'' to mean all states (adding Alaska and Hawaii), the District of
    Columbia and the Commonwealth of Puerto Rico; and extends the mandatory
    15 cents per hundredweight of milk assessment to dairy farmers in
    Alaska, Hawaii, and the Commonwealth of Puerto Rico.
    4. Purpose/Goals
        The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
    mandates that the Dairy Order be amended to implement an assessment on
    imported dairy products to fund promotion and research. The Food,
    Conservation, and Energy Act of 2008 (2008 Farm Bill) specifies a
    mandatory assessment rate of 7.5 cents per hundredweight of milk, or
    equivalent thereof, on dairy products imported into the United States.
    5. Success in Meeting Programmatic Purpose/Goals
        All provisions were effective April 1, 2011, with the exception of
    those regarding importer assessments. Importer assessment provisions
    became effective on August 1, 2011. Importer payments are made directly
    to the U.S. Customs and Border Patrol and are forwarded to the Dairy
    Promotion and Research Board.
    6. Annual Budget Authority (FY 2002-FY 2011)
        Not applicable.
    7. Annual Outlays (FY 2002-FY 2011)
        Not applicable.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        Not applicable.
    9. Eligibility Criteria
        An applicant must be an importer of dairy products into the United
    States as a principle or as an agent, broker, or consignee of any
    person who produces or handles dairy products outside of the United
    States, and who is listed as the importer of record for such dairy
    products. A producer is defined as any person engaged in the production
    of milk for commercial use.
    10. Utilization (Participation) Data
        There are an estimated 2,600 dairy importers that are affected by
    the dairy import assessment and an estimated 350 producers in the added
    areas of Alaska, Hawaii, the District of Columbia and the Commonwealth
    of Puerto Rico.
    11. Duplication or Overlap with Other Programs
        Not applicable.
    12. Waste, Fraud and Abuse
        Not applicable.
    13. Effect of Administrative PAYGO
        Not applicable.
                                     ______

    1. Program Name
        Federal Milk Marketing Orders including Forward Contracting and the
    Formal Rulemaking Process.
    2. Subprograms/Department Initiatives
        AMS Dairy Program.
    3. Brief History
        Federal milk marketing orders (FMMO) are authorized by the
    Agricultural Marketing Agreement Act of 1937, as amended. There are
    currently 10 FMMO areas, impacting about 65 percent of all milk
    marketed in the U.S. These 10 orders are administered by 8 market
    administrators.
        FMMOs are initiated and amended through industry requests that are
    addressed through the formal rulemaking process. This includes
    hearings, briefings, recommended decisions, public comments, final
    decisions, farmer votes, and, ultimately, implementation by USDA.
    Changes in FMMOs are approved by an affirmative vote of \2/3\ of the
    eligible dairy farmers.
        The 2008 Farm Bill directed USDA to establish supplemental rules to
    define guidelines and timeframes to improve the timeliness of the
    Federal Milk Order hearing process. AMS published this final rule on
    August 20, 2008 (73 FR 49085).
        The 2008 Farm Bill also directed AMS to establish a Dairy Forward
    Pricing Program to allow milk producers and cooperative associations to
    voluntarily enter into forward price contracts with milk handlers for
    milk used for non-fluid purposes. The program exempts handlers
    regulated under the Federal Milk Order program from paying producers
    and cooperative associations the minimum Federal Order price for milk
    under a forward contract. AMS published this final rule on October 31,
    2008 (73 FR 64868).
    4. Purpose/Goals
        The objectives of the FMMO system are to stabilize market
    conditions, to benefit producers and consumers by establishing and
    maintaining orderly marketing conditions, and to assure consumers of
    adequate supplies of pure and wholesome milk at all times. The FMMO
    program assures dairy farmers a minimum price for their milk while
    assuring that consumers have an adequate supply of milk to meet their
    needs throughout the year.
    5. Success in Meeting Programmatic Purpose/Goals
        Forward Contracting--Handlers that enter into forward contracts
    with producers are required under 7 CFR Part 1145 to file a copy of the
    contract with a Market Administrator's office. Less than 100 dairy
    farmers have utilized the forward contracting program since 2008.
        Rulemaking Process--Only one hearing has been initiated and
    completed under the new timeframes outlined in the supplemental rules
    of practice for Milk Marketing Orders (see 7 CFR  900.20 through
    900.33). In June 2011, USDA received a request for a hearing to
    consider changes to the Mideast Marketing Area. USDA subsequently held
    a hearing on October 4-5, 2011, in Cincinnati, OH, to consider and take
    evidence on proposed changes to that order (76 FR 55608). The deadline
    for filling corrections to the transcript is October 31, 2011 and the
    deadline for filing post-hearing briefs is November 30, 2011.

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                                     Annual Budget Authority
                                                                     FY 2002 Through FY 2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Budget Authority                      $5,132      $5,528      $5,434      $5,541      $5,736      $6,076      $6,131      $6,301      $6,965      $6,814
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)
                                                                         Annual Outlays
                                                                     FY 2002 Through FY 2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Outlays                               $4,716      $4,663      $4,660      $5,204      $5,428      $5,546      $5,477      $5,837      $6,846      $6,400
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Explanation: The budget authority may be different from outlays due to timing of payments and the accounting process.

                                                            8. Annual Delivery Cost (FY 2002-FY 2011)
                                                                      Annual Delivery Costs
                                                                     FY 2002 Through FY 2011
                                                                     (Dollars in thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 2002     FY 2003     FY 2004     FY 2005     FY 2006     FY 2007     FY 2008     FY 2009     FY 2010     FY 2011
                                        Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual      Actual       Est.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Direct Costs                          $4,275      $4,165      $4,454      $4,797      $4,699      $4,962      $5,202      $5,299      $5,799      $5,703
    Indirect Costs                          $483        $453        $474        $474        $516        $527        $584        $599        $710        $697
                                     -----------------------------------------------------------------------------------------------------------------------
      Total Costs                         $4,758      $4,618      $4,928      $5,271      $5,215      $5,489      $5,786      $5,898      $6,509      $6,400
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    There have been no additional delivery costs in implementation of the expedited rulemaking process.
    The costs associated with the forward contracting program are minimal due to the low participation rate.

    9. Eligibility Criteria
        During 2010, nearly 127 billion pounds of milk was pooled from
    45,918 producers on Federal Milk Marketing Orders. This represents
    about 65 percent of all milk produced in the United States.
    10. Utilization (Participation) Data
        Fewer than 100 farmers have utilized the forward contracting
    program.
    11. Duplication or Overlap with Other Programs
        Not applicable.
    12. Waste, Fraud and Abuse
        Not applicable.
    13. Effect of Administrative PAYGO
        Not applicable.

                           AGRICULTURAL PROGRAM AUDIT

                (EXAMINATION OF USDA RURAL DEVELOPMENT PROGRAMS)

                                  ----------

                          TUESDAY, SEPTEMBER 13, 2011

            Subcommittee on Rural Development,
          Research, Biotechnology, and Foreign
                                   Agriculture,
                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 10:03 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. Timothy
    V. Johnson [Chairman of the Subcommittee] presiding.
        Members present: Representatives Johnson, Thompson,
    Stutzman, Scott, Hartzler, Lucas (ex officio), Costa, Welch,
    Sewell, Kissell, and Peterson (ex officio).
        Staff present: Mike Dunlap, Tamara Hinton, DaNita Murray,
    Mary Nowak, Lauren Sturgeon, Suzanne Watson, Andy Baker, Liz
    Friedlander, John Konya, and Jamie Mitchell.

    OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE
                       IN CONGRESS FROM ILLINOIS

        The Chairman. The Subcommittee on Rural Development,
    Research, Biotechnology, and Foreign Agriculture hearing,
    entitled Agricultural Program Audit: Examination of USDA Rural
    Development Programs, will come to order.
        Let us see. We have a quorum, so we are prepared to
    proceed.
        Welcome to this audit hearing of the USDA's Rural
    Development Programs. This is the third such hearing by this
    Subcommittee and the eleventh overall that the Agriculture
    Committee Subcommittees have held to closely review all the
    programs under our jurisdiction. The continuing discussions in
    Congress on spending, and the budget, will add impetus to what
    we will be discussing today. Through this series of hearings,
    we are assessing how USDA is utilizing the authorities provided
    through this Committee and where scarce resources are being
    allocated. As we approach the next farm bill, it is important
    that we have a clear idea of how programs are being implemented
    as we look for opportunities to streamline and improve those
    programs.
        Rural communities rely on a variety of industries,
    including mining, fishing, forestry, manufacturing, and of
    course farming. The programs we will be discussing today are
    designed to spur innovation and investment and, through the
    provision of farm credits, advancement. The goal of these
    programs is greater economic opportunity to help our rural
    communities to compete in the global market.
        Of particular interest to this Subcommittee is the
    Broadband Loan Program. Reauthorized in the 2008 Farm Bill,
    this program is intended to reach those rural areas without
    access to the economic, education, and healthcare opportunities
    which broadband access can bring rural America. Unfortunately,
    it was only this summer--nearly 3 years after the farm bill was
    signed into law--that USDA finally began accepting applications
    for loans. I hope that the Rural Utilities Service has an
    update for us on how the applications are progressing and what
    we might hope to learn from the program before we begin writing
    the next farm bill.
        The current farm bill also requires USDA to report on the
    various definitions of rural and how those definitions have
    impacted their programs. This report was due 2 years after the
    enactment of the farm bill, and yet we still haven't received
    the report. In February of this year, Deputy Under Secretary
    for Rural Development, Cheryl Cook assured the Committee that
    we would have a finished report in June of 2011, over 3 months
    ago. I hope the USDA can provide an explanation this morning as
    to why this report is not finished, and how long it is expected
    to be delayed.
        Almost a year ago, USDA was required to allocate all the
    remaining funds received through the stimulus bill. We hope the
    analysis provided by the testimony today will have a clear
    picture of how those funds have been disbursed. The stimulus
    bill was an imperfect approach to economic policy, which
    resulted in a mass expansion of government spending. I hope
    that in spite of the rush to spend taxpayer dollars, USDA can
    demonstrate that the benefits to rural communities have
    exceeded the cost.
        With tight budgets, it is incumbent upon our agencies to
    reduce costs and provide the maximum impact possible with
    limited dollars. This morning, we hope to hear how the agencies
    are already streamlining their mission areas and where we can
    work together to streamline our process.
        With us this morning are the Administrators of the USDA's
    three rural development agencies: Jonathan Adelstein with the
    Rural Utilities Service, Judith Canales with the Rural
    Business-Cooperative Service, and Tammye Trevino from the Rural
    Housing Service. I would like to thank each one of you for
    being here this morning. We look forward to your testimony.
        [The prepared statement of Mr. Johnson follows:]

      Prepared Statement of Hon. Timothy V. Johnson, a Representative in
                             Congress from Illinois
        Good morning and welcome to this hearing to audit USDA's rural
    development programs. This is the third such hearing by this
    Subcommittee, and the eleventh overall that the Agriculture Committee
    has held to closely review all the programs under our jurisdiction.
        The continuing discussions in Congress on spending and the budget
    have added impetus to what we will be talking about today. Through this
    series of hearings we are assessing how USDA is utilizing the
    authorities provided through this Committee, and where scarce funds are
    being allocated. As we approach the next farm bill, it is important
    that we have a clear idea of how programs are being implemented as we
    look for opportunities to streamline and improve them.
        Rural communities rely on a variety of industries, including
    mining, fishing, forestry, manufacturing, and of course, farming. The
    programs we will be discussing today are designed to spur innovation
    and investment. Through the provision of credit and financing, the goal
    of these programs is greater economic opportunity and to help our rural
    communities compete in a global market.
        Of particular interest to this Subcommittee is the broadband loan
    program. Reauthorized in the 2008 Farm Bill, this program was intended
    to reach those rural areas without access to the economic, education,
    and healthcare opportunities which broadband access can bring to rural
    America. Unfortunately, it was only this summer, nearly 3 years after
    the farm bill was signed into law, that USDA finally began accepting
    applications for rural broadband loans. I hope that the Rural Utilities
    Service has an update for us on how the applications are progressing
    and what we might hope to learn from the program before we begin
    writing the next farm bill.
        The current farm bill also required USDA to report on the various
    definitions of `rural' and how those definitions have impacted our
    programs. This report was due 2 years after enactment of the farm bill,
    yet we still have not received the report. In February of this year,
    Deputy Under Secretary Cook assured the Committee that we would have
    the finished report in June 2011--over 3 months ago. I hope that USDA
    can provide an explanation this morning for why this report is still
    not finished and how long it is expected to be delayed.
        Almost a year ago USDA was required to obligate all the remaining
    funds received through the stimulus bill. We hope that in the analysis
    provided by the testimony today will have a clear picture for how those
    funds have been disbursed. The stimulus bill was an imperfect approach
    to economic policy which resulted in a massive expansion of government
    and spending. I hope that in spite of the rush to spend taxpayer
    dollars USDA can demonstrate that the benefits to rural communities
    have exceeded the cost.
        With tight budgets, it is incumbent upon our agencies to reduce
    costs and provide the maximum impact possible with the funds provided.
    This morning we hope to hear how the agencies are already accomplishing
    this mission, and where we can work together to streamline our
    programs.
        With us this morning are the Administrators from USDA's three Rural
    Development agencies: Jonathan Adelstein with the Rural Utilities
    Service, Judith Canales with the Rural Business-Cooperative Service,
    and Tammye Trevino from the Rural Housing Service. I would like to
    thank each of you for being here this morning, and we look forward to
    your testimony.

        The Chairman. I would turn the floor over to the
    distinguished Ranking Member, the gentleman from California,
    Mr. Costa.

       OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Costa. Thank you, Mr. Chairman, for calling this
    hearing today. It is the third and final hearing of the audits
    that this Subcommittee is doing to review the U.S. Department
    of Agriculture and setting the stage for the reauthorization of
    the 2012 Farm Bill. The audit hearings are an important
    opportunity for Members of the Subcommittee to reexamine what
    has worked to our satisfaction and, more importantly, what we
    think could be improved or hasn't worked, as we look at tight
    budgets and a farm bill that will be less than the 2008 bill.
        Today's topic, as you noted, is dealing with the Title VI
    of the farm bill. In one form or another, there has been a
    partnership between Washington and rural families and
    communities going back to the Great Depression for various
    purposes. Over the course of those 80 years, the landscape of
    rural America has dramatically changed. We have gone from, at
    the turn of the 19th, 20th century, more of an agrarian society
    to much more of an urbanized and suburbanized society. Yet, our
    rural areas are still, I believe, a vital component of America.
    Manufacturing and service sectors have replaced agriculture in
    many areas as the dominant economic force. As we look towards
    the 21st century with approximately 6.4 billion people on the
    planet and an estimation of over nine billion by the middle of
    this century, we want to maintain our ability to produce the
    food and fiber not only to serve our own domestic needs but
    also to be able to continue to be competitive--which we are--in
    agricultural markets.
        But as we keep those goals in mind, it is important to note
    that in fact there are changes that have occurred. Most of you
    probably think from a person that represents part of California
    that you think of Silicon Valley, you think of Hollywood, you
    think of aerospace, and all of those things are part and parcel
    of California's economy along with tourism. But, for 54 years,
    we have been the number one agricultural state in the nation,
    over $38 billion a year at the farm gate.
        And I have the great honor to serve, along with four of my
    other colleagues, the San Joaquin Valley, which is among the
    richest and most productive agricultural regions in the
    country. The number one agricultural county and number three
    are in my district: Fresno County and Kern County. And while by
    any plain evidence--and I hope to have colleagues of the
    Subcommittee there in my district--you would see it as rural.
    We don't qualify under a lot of our programs in Washington
    under the various rural definitions because we have larger
    urban cities within those Valley counties--the City of Fresno,
    City of Bakersfield, City of Modesto. If you go 45 minutes
    outside of Fresno it is very rural, services are very limited,
    and it is the land of many contrasts. There is a lot of poverty
    that exists in those communities.
        I think that all of our districts, whether you are in the
    Midwest, whether you are in the Northeast, whether you are in
    the South, have similar stories to tell. You have wonderful
    rural areas where Americans do their very best to work hard and
    to contribute, whether it is the agricultural community or
    whether it is other rural industries. But oftentimes, they are
    the part of America that is not well understood or taken into
    account with regards to some of these programs that are no
    longer applicable.
        I think that it is important that we consider, Mr.
    Chairman, as we look at the 2012 Farm Bill the definitions of
    rural and how they are applied to communities through all
    corners of the nation. I think everyone here, and our United
    States Department of Agriculture witnesses included, would be
    hard-pressed to come up with a singular definition that
    accurately portrays what rural is in each state. We think we
    know but we have the practical experience of living in our
    communities and having the honor to represent those
    communities.
        Recent farm bills have tweaked the definitions of rural,
    and so I look forward to hearing our witnesses' thoughts on
    whether or not further reforms should be considered in the next
    farm bill. We have looked at some notions as to whether or not
    we look at an application as opposed to counties' Census tracks
    so that it would take into account those of you who represent
    multiple counties. I know some of you represent 10, 20, and 30
    counties in your respective districts. I represent parts of two
    and one entire county. Our counties are different sizes and
    shapes throughout the country. But maybe we ought to consider
    thinking outside the box as we look toward the application of
    rural definitions. Would they be better served with a different
    set of criteria, different regionally based approach as it
    relates to some things we ought to consider, Mr. Chairman, in
    this Subcommittee for next year's farm bill? I would be
    interested in hearing that testimony.
        So I look forward to hearing our witnesses today from the
    Rural Development agencies, the different benefits that they
    provide, whether we are talking about housing, whether we are
    talking about outreach for rural development, whether we are
    talking about the other challenges that we face with regards to
    infrastructure.
        So with that, I thank you for my opportunity and look
    forward to hearing the witnesses testify this morning.
        The Chairman. Thank you, Congressman Costa. With that, we
    will proceed with the first witness.

                STATEMENT OF HON. JONATHAN S. ADELSTEIN,
              ADMINISTRATOR, RURAL UTILITIES SERVICE, U.S.
              DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

        Mr. Adelstein. Thank you, Mr. Chairman, Ranking Member
    Costa, and Members of the Committee for the opportunity to
    testify this morning.
        USDA's Rural Utilities Service has a long-proven history of
    financing electric, water, and telecom infrastructure in rural
    America dating back to 75 years ago, when the RUS began. We
    have been a model of public-private partnerships, we have
    succeeding in bringing modern utilities to some of America's
    most remote and hard-to-serve areas. We have done so prudently
    while creating jobs and improving the rural quality of life.
    Meeting today's needs, a successful rural electrification model
    is working to provide access to 21st century broadband,
    telemedicine, distance learning, smart grid, renewable energy,
    and safe, clean water to areas that would otherwise be left
    being.
        The RUS programs represent true investments. Our limited
    grant dollars target those areas most in need, but most of what
    we do are loans, and the capital provided for loans are repaid
    by our borrowers. So a very small amount of budget authority
    leverages much greater lending authority to meet the massive
    unmet needs of rural America. For example, $1 budget authority
    could be stretched to $16 of loan investment or even more. Our
    U.S. loan programs have a repayment rate that any private
    banker would envy. Our U.S. portfolio is over $56 billion and
    the current delinquency rate is .21 percent.
        Our agency has achieved record levels of investment over
    the last couple of years. We have successfully obligated the
    Broadband and Water Projects under the Recovery Act, and at the
    same time, we have set consecutive records of investments in
    rural electric infrastructure. In March, the RUS published new
    regulations for the farm bill broadband program. Mr. Chairman,
    as you noted, the new regs streamline the application process
    and target funding toward the most rural areas. This marks the
    first time, under the current Administration, the program is
    open to new applications. We wanted to wait and make sure that
    we had it right. We learned the lessons from the Recovery Act
    program. The new regulations, along with additional steps we
    have taken, fully address concerns raised by USDA's Inspector
    General about the previous administration of the program.
        The traditional Telecommunications Loan Program, which
    originates back from 1949, has achieved enormous success in
    connecting rural America. While much has changed in
    telecommunications technology in the last 60 years, the need
    for a public-private partnership to spur investment in rural
    areas has not. The tremendous number of applications we
    received for the Recovery Act is a real testament to the hunger
    out there for bandwidth in rural areas. We are just as excited
    by the rapid technological change in the electric sector. We
    are working on renewable energy, smart grid technologies,
    energy conservation, as well as generating, transmitting, and
    distributing clean, reliable, affordable power. It makes our
    electric program every bit as relevant to America today as it
    was in the 1930s.
        With affordable financing from RUS, America's rural
    communities are at the forefront of the renewable energy
    movement. Renewable power is a new crop for rural America which
    can help feed the nation's need for clean, affordable,
    homegrown electricity. Due to the strong performance of our
    electric program, no budget authority or taxpayer dollars are
    necessary to deliver about $6 billion in funding annually. As a
    matter of fact, we generate for the taxpayers $100 million.
        The 2008 Farm Bill provided new authority for energy
    efficiency programs, renewable energy and direct lending
    authority for loans that we are now implementing. RUS set a
    goal to finance $250 million for grid modernization during this
    fiscal year. Smart grid technologies give consumers greater
    control to keep their electric bills low and help utilities
    better manage the grid to improve efficiencies.
        When it comes to rural quality of life, few things are as
    fundamental as water. Since 2009, RUS's Water and Waste
    Disposal Program has invested nearly $6 billion in 4,500 water
    and wastewater infrastructure loans and grants to safeguard the
    health of nearly nine million rural residents. These funds
    build upon the $11.5 billion portfolio of investments that we
    have made over the years to help rural communities replace
    aging infrastructure, make necessary repairs, and extend
    service to areas without access to public water and waste
    services.
        RUS's water program maintains a delinquency rate of .24
    percent. Facilitating reliable and affordable access to water
    is necessary for business development. It creates jobs and
    builds the economy. Our water program is the only one
    exclusively focused on rural needs. It safeguards the health of
    rural residents and the environment while ensuring that rural
    water systems can meet growing demands. Projects funding during
    FY 2010 will result in a 28 percent reduction in rural
    residents' exposure to water-borne illnesses.
        The RUS portfolio remains very strong. Thank you for your
    support. I thank the Committee today for the opportunity to
    testify, and I look forward to any questions or comments that
    you have.
        [The prepared statement of Mr. Adelstein follows:]

    Prepared Statement of Hon. Jonathan S. Adelstein, Administrator, Rural
      Utilities Service, U.S. Department of Agriculture, Washington, D.C.
        Chairman Johnson, Ranking Member Costa, and Members of the
    Subcommittee, thank you for the opportunity to provide to you a review
    and accomplishments of the Rural Development's (RD) Rural Utilities
    Service (RUS) authorized through the Food, Conservation, and Energy Act
    of 2008 (2008 Farm Bill).
    Overview
        The Department of Agriculture's RUS is the only Federal agency that
    funds electric, telecommunications, and water and wastewater
    infrastructure for rural areas. Because of RUS investments, many rural
    communities nationwide have reliable, affordable electric power, safe
    water and wastewater facilities, essential telecommunications, and
    broadband capability.
        RUS investments provide more than basic infrastructure services.
    RUS is one of three RD agencies with a mission to facilitate rural
    economic development, foster sustainable job creation, and revitalize
    rural areas.
        RUS achieves its goals by funding projects to help rebuild
    America's infrastructure which is essential to stronger American
    economic growth. Beginning with the creation of the Rural
    Electrification Administration in 1935, RUS has and continues to be a
    prominent lender for rural utility investment.
        Today's RUS portfolio includes Federal financing for electric,
    telecommunications, broadband, and water and wastewater projects. These
    investments enhance community resources, including health care and
    education, and increase the need for skilled labor to meet the needs of
    growing and emerging industries in rural areas. We use the term
    ``investment'' because the capital provided for loans is repaid and
    delivers additional returns in the form of jobs and the types of
    services with the capability of delivering more jobs in our nation's
    rural communities.
        The RUS portfolio is over $56 billion and the current delinquency
    rate is 0.21 percent. We are very proud of our customers' repayment
    history.
    Broadband and Telecommunications Programs
        The broadband program, created under the Farm Security and Rural
    Investment Act of 2002 (2002 Farm Bill) and revised by the 2008 Farm
    Bill, has provided more than $1 billion in financing to improve
    telecommunications by delivering broadband services to rural areas for
    nearly a decade.
        Broadband availability allows business owners to increase
    distribution channels and enables a new generation of entrepreneurs to
    thrive in rural areas. Broadband helps America's farmers and ranchers
    monitor prices, obtain weather forecasts, and find new markets for
    their produce and livestock.
        New regulations published in March 2011 streamlined the application
    process and allowed the program to focus investment to reach rural
    areas with three or fewer broadband service providers. These new
    regulations, along with additional steps RUS has taken, fully address
    USDA's Office of Inspector General findings previously raised about the
    program. The Telecommunications Infrastructure Loan Program is
    authorized under the Rural Electrification Act of 1936, as amended
    (REA), and is the only Federal program that has funded
    telecommunications services for over 60 years. This program funds
    improvements to existing and new broadband infrastructure for rural
    telecommunications service providers or REA Title II borrowers.
        RUS Telecommunications Programs also administers the Community
    Connect Grant Program, which provides funding to establish broadband
    service in rural communities that currently do not have service. Awards
    of $13.4 million in available funding are expected to be announced by
    the end of FY 2011.
        RUS' Distance Learning and Telemedicine Program fund equipment to
    enhance educational and health care services in rural areas. RUS has
    $24.9 million available and expects to announce awards by the end of
    FY2011.
    Electric Programs
        America`s rural communities are on the forefront of the renewable
    energy movement. By increasing the supply of home-grown renewable
    energy, we can meet the growing demands for renewable sources of both
    fuel and power.
        The RUS Electric Program portfolio has over 650 borrowers with an
    outstanding balance of over $41 billion. The Rural Electrification
    Direct and Guaranteed Loan and High Energy Cost Grant Programs are
    authorized under the Rural Electrification Act of 1936; however, the
    2008 Farm Bill provided new program authority, including authorization
    for energy efficiency programs, renewable energy, and direct lending
    authority for loans.
        RUS loan funds may be used to finance generating, transmission, and
    distribution facilities. RUS also finances environmental upgrades,
    energy efficiency, smart grid, demand management and energy
    conservation programs. In FY 2010, RUS approved over $313.3 million in
    loan guarantees for new projects for renewable electric generation.
        RUS has a goal to finance $250 million for grid modernization
    during FY2012. Smart grid technologies give consumers greater control
    over their electric costs and help utilities better manage the electric
    grid to improve operational efficiencies. These investments help rural
    utilities improve their delivery and storage of renewable energy to
    generate electricity and help ensure sustainable economic growth in
    rural communities. For example, in North Carolina and Tennessee, French
    Broad Electric Membership Corporation received a loan guarantee of $20
    million, of which more than $2.4 million is to be used for advanced
    meter infrastructure upgrades that can help utility providers better
    control the use and production of electric energy.
        The demand for electricity in rural areas is growing at two percent
    annually, according to the Energy Information Administration in the
    Department of Energy. During FY 2010, RUS funded $7.1 billion for
    electric system improvements for over nine million rural residents. The
    electric program serves 667 active rural borrowers and grantees in 46
    states, Puerto Rico, American Samoa, and the Republic of the Marshall
    Islands. No other agency funds rural electric infrastructure projects.
        Meeting the growth in demand for electric power generation is
    capital intensive and takes significant time from concept to
    completion. RUS will continue to work to ensure that our projects are
    good for the environment, good for the economy, and good for electric
    consumers.
    Water and Wastewater Funding
        Since 2009, over $6.7 billion invested by the Obama Administration
    in 4,565 water and waste water community infrastructure loans and
    grants has helped safeguard the health of nearly nine million rural
    residents through access to a safe water supply and sanitary sewer
    system. The loans and grants are also expected to create or save
    143,507 jobs in the communities where projects are underway. Almost 4.8
    million customers are being helped through new or improved systems that
    will deliver safe, clean drinking water, or will clean up existing
    waste removal environmental hazards
        These funds will build upon the $11.5 billion portfolio of
    investments that help rural communities replace aging infrastructure,
    make necessary repairs and extend service to areas without access to
    public water and waste service.
        Facilitating reliable and affordable access to water is necessary
    for business development which in turn creates jobs and builds the
    economy. Lack of adequate water and wastewater facilities kept Turrell,
    Arkansas, from competing for a large retail distribution facility that
    would have brought jobs to the rural community. RUS is now working with
    Turrell to build a water and waste plant. Lack of jobs has caused their
    population to drop from 1,000 in 2,000 to 615 today.
        Reliable access to water is essential for rural communities to
    prosper. RUS water programs--the only program exclusively focused on
    rural needs--which safeguard the health of rural residents and the
    environment and ensure that rural water systems meet growing demands.
    Projects funded during FY 2010 will result in a nearly 28 percent
    reduction in rural residents' exposure to water-borne illness. RUS-
    funded circuit riders responded to over 111,000 requests to assist
    rural water systems during FY 2010.
    Conclusion
        The RUS loan portfolio remains very strong. We constantly strive to
    improve program delivery, working with local leaders to deliver funds
    to address critical infrastructure needs which are fundamental to the
    quality of life and economic future of rural America. In closing, I
    would like to thank the Committee for the opportunity to appear before
    you today and look forward to responding to your questions.

        The Chairman. Thank you. Now, we turn to Judith Canales.

     STATEMENT OF JUDITH A. CANALES, ADMINISTRATOR, RURAL BUSINESS-
         COOPERATIVE SERVICE, U.S. DEPARTMENT OF AGRICULTURE,
                            WASHINGTON, D.C.

        Ms. Canales. Thank you, Chairman Johnson, Ranking Member
    Costa, and Members of the Subcommittee for the opportunity to
    discuss the success of Rural Development's Rural Business-
    Cooperative Service programs impacted by the 2008 Farm Bill.
        As you are well aware, the American people are facing
    challenging economic times. However, in the midst of these
    troubling conditions, since 2009, the programs and services of
    the Rural Business-Cooperative Service have or will create and
    save nearly 250,000 jobs, thus directly improving the economic
    climate of rural America.
        The mission of Rural Development's Rural Business-
    Cooperative Service programs is to improve rural economies by
    providing financial and technical assistance to rural
    businesses and cooperatives. Through our national office, and
    our network of 47 state offices, and through our local offices
    located in the heartland of rural America, we have established
    strategic alliances and partnerships that leverage public,
    private, and cooperative resources to create jobs and stimulate
    rural economic activity.
        The Rural Business-Cooperative Service mission is unique in
    the Federal Government. There is no other Federal agency that
    focuses solely on rural businesses. The people who staff our 47
    state offices as well as our local offices live in these rural
    communities. This makes them uniquely qualified to support the
    most rural communities in America providing access to capital
    and credit in areas otherwise ignored.
        Rural Business-Cooperative Service is responsible for five
    Title VI programs that are designed to assist people in rural
    communities in addition to our four Title IX energy programs
    that have provided over $700 million in support since 2009. For
    example, in late 2010, southern Illinois Coal Belt received a
    Rural Microentrepreneur Assistance Program loan of $500,000.
    Since March of this year, they have made loans totaling
    $306,000 assisting seven microenterprises and creating 21 new
    jobs. Six of these seven businesses are startup businesses.
        The Guaranteed Business and Industry Loan Program is our
    flagship program. The B&I Program provides credit support to
    establish, expand, or modernize rural businesses. Since 2009,
    the B&I Program has provided $5.5 billion in loan guarantees to
    community banks at a cost of $3,000 per job and supporting over
    3,000 businesses.
        Rural Business Opportunity Grant Program was authorized
    under Title VI of the farm bill. This program provides training
    and technical assistance for business development,
    entrepreneurs, and assists with economic development planning.
    The Rural Microentrepreneur Assistance Program provides capital
    access and funding for business-based training and technical
    assistance to local micro-development organizations to support
    very small businesses with less than ten employees. The Value-
    Added Producer Grant Program, the lead source in rural
    development for promoting local foods in rural America,
    provides funding for planning activities and working capital,
    for marketing value-added agriculture products, and for farm-
    based renewable energy. We look forward to announcing awards
    very soon of $37 million.
        The Rural Development Cooperative Development Grant Program
    and the Small and Socially Disadvantaged Producer Grant Program
    provides funding to centers and cooperatives to develop new or
    improve existing cooperatives. These business cooperatives in
    turn grow and expand their operations in rural America.
        Mr. Chairman and Members of the Subcommittee, thank you for
    your time. The Rural Business-Cooperative Service is committed
    and, with your help, will continue to promote economic
    prosperity in rural America. Thank you.
        [The prepared statement of Ms. Canales follows:]

      Prepared Statement of Judith A. Canales, Rural Business-Cooperative
           Service, U.S. Department of Agriculture, Washington, D.C.
        Chairman Johnson, Ranking Member Costa, and Members of the
    Subcommittee, thank you for the opportunity to provide a review and
    highlight the accomplishments of Rural Development's (RD) Rural
    Business-Cooperative Service (RBS) programs authorized through Title VI
    of the 2008 Farm Bill. We are still in challenging economic times but
    the programs and services of RBS, in partnership with other public and
    private sector funding, are improving the economic climate of rural
    areas. I appreciate the opportunity to discuss the successes of the
    business programs today.
    Overview
        The mission of RBS programs is to create economic opportunities for
    rural Americans by supporting the creation and growth of viable
    businesses, including cooperatives, that can compete and prosper in the
    global marketplace.
        We meet these goals by investing financial resources and providing
    technical assistance to businesses and cooperatives located in rural
    communities, and establishing strategic alliances and partnerships that
    leverage public, private, and cooperative resources to create jobs and
    stimulate rural economic activity.
        RBS currently operates five programs authorized under the
    Consolidated Farm and Rural Development Act (CONACT) or the
    Agricultural Risk Protection Act of 2000 (ARPA) which were either added
    or amended by Title VI of the Food, Conservation, and Energy Act of
    2008 (2008 Farm Bill). These programs include: the new Rural
    Microentrepreneur Assistance Program (RMAP), Rural Business Opportunity
    Grants (RBOG), the Value-Added Producer Grant (VAPG) Program, the Rural
    Cooperative Development Grant (RCDG) Program, and the Small Socially-
    Disadvantaged Producer Grant (SSDPG) Program. These programs are
    designed to assist people in rural communities and increase economic
    opportunities by improving community infrastructure, environmental
    health, and the sustainability of agricultural production.
        RBS also implements numerous other programs which provide job
    training and business development opportunities for rural residents,
    including cooperative business development, community economic
    development and strategic community planning and faith-based and self-
    help initiatives. While these programs were not amended by the 2008
    Farm Bill they will be included in this testimony to provide the
    Committee a complete picture of the scope of RBS investment in the
    economic opportunities in rural America.
        The RBS mission is unique in the Federal Government. There is no
    other Federal agency that focuses only on promoting rural communities
    and businesses. Our field offices reach out to rural America, including
    the poorest, most rural counties in America, providing Federal support
    to businesses that find it impossible to receive financial aid from any
    other source.
    Administration Priorities
        Secretary Vilsack has directed RBS to expand our reach in rural
    communities. USDA will continue to engage public and private partners
    to revitalize rural communities by expanding economic opportunities and
    creating jobs for rural residents. Administration priorities include:
    capital markets, local and regional food systems, and regional
    innovation.
    Capital Markets
        To increase economic prosperity in rural communities, capital is
    needed to spur business expansion and promote new businesses. RBS
    administers several loan and grant programs that can be used to attract
    investment capital, including loan guarantee programs such as Business
    and Industry loans.
        Our employees are also key tools in creating capital markets,
    providing the skills and expertise to review business plans, identify
    tax incentives, and put together viable loan and grant combinations
    that can be used to spur capital investment in rural areas.
    Local and Regional Food Systems
        RBS actively promotes local- and regionally-produced agricultural
    food products through existing authorities and programs. We have worked
    to elevate the visibility of local foods, identifying and utilizing
    2008 Farm Bill authority that can be used to support this important
    initiative through local and regional food projects, such as the five
    percent reserve in the Business and Industry Guaranteed Loan program
    for projects that support local and regional food systems. We have
    provided approximately $200 million of support for local and regional
    food projects in 2010.
    Regional Innovation
        The key to creating economic growth for many communities is to
    encourage better collaboration on a regional scale. RBS looks for
    opportunities to assist rural communities in breaking down the barriers
    in accessing multi-jurisdictional opportunities and to cut across the
    bureaucratic silos that prevent investment in good ideas. This approach
    increases the prosperity of rural communities by supporting locally-
    led, regional economic strategies. The focus creates strong local and
    regional economies in emerging opportunities such as food systems,
    renewable energy, broadband-based economies, rural recreation, and the
    creation and preservation of wealth in rural America.
    Business Programs
        Business development and job creation are at the foundation of our
    agency mission. This foundation, along with the targeted programmatic
    approach of the Administration's Priorities, makes RBS programs an
    essential tool for rural America.
        In 2010, we invested about $3 billion to ensure America's rural
    businesses maintain a competitive edge in today's global marketplace.
    The vast majority of this funding was provided through guaranteed
    loans. These guarantees leverage funding provided by the commercial
    lending community along with other private sector funding.
        The remaining text discusses our RBS programs and how they impact
    rural America.
    Guaranteed Business and Industry Loans (B&I)
        The B&I program, authorized under section 310B of the CONACT, is
    the largest of the RBS programs and provides protection against loan
    losses so that lenders are willing to extend credit to establish,
    expand, or modernize rural businesses.
        Capital is the lifeline of rural businesses to maintain and create
    rural jobs. The President's Fiscal Year (FY) 2012 Budget requests $53
    million in budget authority to support $823 million in loan guarantees
    for B&I. We will fund $1.387 billion in guarantees this fiscal year; we
    have already obligated $995.36 million though 373 loans. In FY 2010, we
    obligated 1,030 loans totaling over $2.9 billion.
        This program has had proven results and supports a holistic
    economic approach. For example, in 2010 the Brattleboro Food Co-op
    received a $4.2 million guarantee from the RBS B&I program. This
    cooperative has grown from a warehouse storefront in 1979 with a
    volunteer staff into a $17 million operation with 100 employees. The
    cooperative now supplies local and organic food choices to its 5,000
    members located throughout southeastern Vermont.
        To support its long term viability and expand choices for its
    growing consumer membership, the cooperative embarked upon an expansion
    plan. The cost of doubling its space in its downtown location would
    cost $8.8 million. The cooperative raised more than $1 million from its
    members and leveraged those funds with a $4.2 million B&I guaranteed
    loan from Peoples United Bank. The remaining financing came from
    nonprofit, private, and borrower equity. As a result, the cooperative
    is expanding from 17,200 square foot building into an energy efficient
    33,847 square foot building serving as an anchor business in downtown
    Brattleboro.
        The expanded store will add market capacity for the 146 local
    farmers and 46 food producers that it currently supports. Additionally,
    the project will develop 24 units of affordable housing that will be
    owned and operated by the Windham Housing Trust and Housing Vermont.
    The cutting edge, environmentally-friendly building will even recycle
    the grocery store's waste heat from its refrigeration and reuse it to
    heat water for the entire facility.
    Rural Business Opportunity Grant (RBOG)
        Authorized under the CONACT, the 2008 Farm Bill extended the RBOG
    program through FY 2012. The RBOG program promotes sustainable economic
    development in rural communities with exceptional needs through
    provision of training and technical assistance for business
    development, entrepreneurs, and economic development officials and to
    assist with economic development planning. In FY 2010, the RBOG program
    provided funding to seven regions to develop plans focused on
    supporting local food systems, renewable energy, and the utilization of
    natural resources to promote economic development through regional
    planning among Federal, state, local, and private entities. By creating
    a regional focus and increasing collaboration with other Federal
    agencies, and other partners, our resources will have a larger impact,
    enabling greater wealth creation, quality of life improvements, and
    sustainability.
        Leveraging is an essential tool of the RBOG program. For example,
    Ecotrust in Oregon, was awarded a $249,340 grant in FY 2010. Using the
    RBOG funds along with over $1 million in leveraged funds, Ecotrust will
    be able to increase recruitment of producers and buyers in rural
    communities throughout the Pacific Northwest and provide the training
    and assistance necessary to ensure FoodHub, a project of Ecotrust,
    supports their business, procurement, and marketing goals.
        FoodHub (http://food-hub.org/) is an on-line directory and
    marketplace designed to help wholesale food buyers and sellers find
    each other, connect, and do business. FoodHub will help agri-producers
    tap into the consumer demand for local food, help forge more direct
    connections between food buyers and producers, and shorten the supply
    chain between producers and wholesalers. FoodHub has 550 members signed
    up as of June 2010, and schools, bakeries, restaurants, processed
    product manufacturers, hospitals, grocers and wholesalers have already
    reported success in finding new regional suppliers through FoodHub. We
    were pleased to see that Fast Company's included EcoTrust' FoodHub on
    their top ten list of innovative food companies.
    Rural Microentrepreneur Assistance Program (RMAP)
        Newly created in the 2008 Farm Bill, RMAP is authorized under the
    CONACT. RMAP provides capital access, business-based training and
    technical assistance to the smallest of small businesses, employing
    less than ten people. The RMAP purpose is to support the development
    and ongoing success of rural microentrepreneurs and microenterprises.
    Direct loans and grants are made to approved Microenterprise
    Development Organizations (MDO's). The 2008 Farm Bill provided
    mandatory funding of $4 million per year for FY 2009-2011 and $3
    million for FY 2012. In addition, the 2008 Farm Bill authorized further
    discretionary appropriations of up to $40 million per year for FY 2009-
    2012.
        In FY 2010, RBS utilized the mandatory funding available for FY
    2009-10 to provided 73 grants totaling $6.6 million for technical
    assistance. Additionally, 63 rural microloans were made totaling $24.9
    million. In FY 2011 the $4 million in mandatory funding provided by the
    2008 Farm Bill is expected to support 160 businesses through $10.7
    million in grants and loans. To further support this important program,
    the President's FY 2012 Budget requests $5.7 million in discretionary
    funds. This funding request is in addition to the $3.0 million in
    mandatory funds that was provided by the 2008 Farm Bill.
        Though new, this program is already showing results. The Valley
    Small Business Development Corporation located in Fresno, California,
    is preparing to close on their first RMAP loan. The recipient of the
    $50,000 loan will be a custom farm operator in Hanford, California.
    Loan funds will be used to purchase farm equipment and expand this
    micro business.
        Those eligible to apply are MDO's that are located in any area
    outside the boundaries of a city or town with a population of 50,000,
    or more, and the urbanized area contiguous and adjacent to such city or
    town.
    Value-Added Producer Grant (VAPG) Program
        Authorized under ARPA, the VAPG program provides grants for
    planning activities and for working capital for marketing value-added
    agricultural products and for farm-based renewable energy. The program
    encourages farmers and ranchers to add value to the commodities and
    products they produce allowing them to capture a greater percentage of
    the consumer's dollar. Eligible applicants are independent producers,
    farmer and rancher cooperatives, agricultural producer groups, and
    majority-controlled producer-based business ventures. The grants can be
    used for two purposes. The first is for planning activities such as
    conducting feasibility studies and developing business plans. Or,
    grants can be used to establish working capital accounts to pay
    salaries, utilities and other operating costs; to finance inventories;
    and to purchase office equipment, computers, and supplies. The value-
    added program is highly successful and has contributed to the creation
    of more jobs and business opportunities in rural America. The
    President's FY 2012 Budget requests funding VAPG at $20.4 million. This
    level of funding allows RBS to maintain this important program to
    encourage producers to refine or enhance their products thereby
    increasing their value and their returns to producers. During the last
    funding cycle, awards were made to 45 states and Puerto Rico, the
    broadest distribution of awards in the history of this nationally
    competitive program. On June, 28, 2011, $37 million in funds were
    announced through a Notice of Funding Availability which is scheduled
    to close on August 29, 2011. We estimate that this funding will support
    350 businesses.
        On February 23, 2011, a final rule was published in the Federal
    Register incorporating changes made by the 2008 Farm Bill and expanding
    the types of eligible applicants. The programmatic changes associated
    with the regulation provide additional opportunities to beginning and
    socially disadvantaged producers by helping owners of small and medium-
    sized family farms sell their products in local and regional markets
    and reserving ten percent of the total funds available for projects to
    benefit beginning and socially disadvantaged farmers and mid-tier value
    chains.
        Those eligible to apply are independent agricultural producers,
    producer groups, agriculture cooperatives, or majority-controlled
    producer-based business ventures. The revised regulatory language
    reserves ten percent of funds for beginning and socially disadvantaged
    farmers and ten percent for projects that support the use of a mid-tier
    value chain. The eligible area is within the United States.
    Rural Cooperatives
        Cooperatives are an important form of business model that is the
    cornerstone for business development in some rural communities.
    Cooperatives provide rural residents with new job opportunities,
    enhanced educational and healthcare services, and products that enable
    them to compete with their urban and suburban counterparts.
    Opportunities are created locally and revenues are maintained and re-
    circulated locally. The RBS cooperative services staff conducts basic
    research on the cooperative form of business, collect statistics and
    financial data pertaining to cooperatives, and provides technical
    assistance to farmer groups interested in starting a cooperative or
    improve existing cooperatives. In addition, the cooperative services
    staff manage a number of RBS grant programs.
    Rural Cooperative Development Grant (RCDG) Program
        The RCDG program assists nonprofit organizations and institutions
    of higher education to establish and operate cooperative development
    centers to start and establish cooperatives who improve the economic
    condition of rural areas. This program provides support to centers to
    develop new cooperatives and improve existing cooperatives. This
    program complements our national and state office technical assistance
    efforts by increasing outreach and developing feasibility studies and
    business plans for new cooperatives and assisting existing cooperatives
    in meeting the demands of today's ever-changing global economy. Those
    eligible to apply are nonprofit corporations or institutions of higher
    learning. The eligible area is rural areas of 50,000 or less in the
    United States.
    Small Socially-Disadvantaged Producer Grant (SSDPG) Program
        The SSDPG program supports cooperatives or associations of
    cooperatives whose primary focus is to provide assistance to small,
    minority producers and whose governing board and/or membership is
    comprised of at least 75 percent small, socially disadvantaged
    producers. In 2010, awards were made to groups representing African
    American, Asian, Hispanic, Hmong, Native American, Native Hawaiian,
    Pacific Islander, and women producers.
        For example, the Hillside Farmers Co-op of Northfield, Minnesota,
    assists Latino farmers by partnering with established farmers who,
    together, are committed to producing sustainable foods and building
    healthier communities. The cooperative pairs immigrant families with
    established farmers in the area who rent out their land for gardening
    and poultry production. The SSDPG grant awarded in 2010 is helping the
    cooperative conduct a feasibility study, develop a business plan,
    provide training, and help pay for other related expenses in developing
    a coordinated network of local businesses in the free-range poultry
    industry.
        Those eligible to apply for the SSDPG are minority cooperatives or
    minority associations of cooperatives. Eligible areas include areas
    outside towns having a population greater than 50,000 and any adjacent
    urbanized area, or an urbanized area that is nevertheless rural in
    character.
    Other RBS Programs
        In addition to the programs described above, RBS has a number of
    other programs that are not authorized under Title VI of the 2008 Farm
    Bill but are essential programs in the RBS portfolio. These programs
    include: the Intermediary Relending Program, the Rural Business
    Enterprise Grant Program, the Rural Economic Development Loan and Grant
    program, the Biorefinery Assistance program, the Repowering Assistance
    Program, the Advanced Biofuel Payment Program, and the Rural Energy for
    America Program.
    Backlog
        Our RD programs are oversubscribed and in high demand. The B&I
    guaranteed loan program currently has 255 eligible pending
    applications/preapplications totaling $983 million that would receive
    funding if it were available.
        The RMAP program has currently received 78 eligible loan and grant
    applications totaling $12.4 million in funding requests but was only
    provided $4 million for FY 2011, which will support 160 businesses
    through $10.7 million in grants and loans.
        The Rural Business Opportunity Grant program had 424 eligible
    applications totaling $60 million apply in 2010. Only 27 awards could
    be funded totaling $2.6 million.
        The last time funding for the Value-Added Grant Program was
    announced, there were 300 eligible applicants requesting $32.7 million,
    but only 196 projects totaling $22.7 million were awarded.
    Uniqueness
        All of the RBS programs are unique by virtue of their singular
    focus on rural America. Though some of the goals of these programs may
    be similar to SBA, the implementation, technical support, and outreach
    for the programs, eligibility requirements, loan limitations, and
    project expansion are tailored to support rural businesses and
    residents to expand their local economies. In Government Accountability
    Office comparisons of RD programs to the programs of other Federal
    agencies, they found that while similarities exist, RD is the only
    Federal agency with a broad experience base for implementing rural
    programs.
    Unfunded Programs
        There were numerous programs included under Title VI of the 2008
    Farm Bill which no longer receive funding or never received funding.
    These programs include: the Appropriate Technology Transfer for Rural
    Areas program, the Rural Business Investment Program, the Rural
    Collaborative Investment Program, Grants for the Expansion of
    Employment Opportunities for Individuals with Disabilities in Rural
    Areas, and the Agriculture Innovation Center Demonstration Program.
    Councils
        In addition to the RBS programs, we also work as liaisons along
    with the Rural Utilities Service and Rural Housing Service to support
    businesses in the following communities: Rural Economic Area
    partnership zones, Delta Regional Authority, and the Northern Great
    Plains Regional Authority.
    Conclusion
        RBS is committed to promoting economic prosperity in rural
    communities through our grant, loan, and loan guarantee programs. In
    partnership with other public and private sector businesses, RBS
    continues to improve the economic climate of rural areas through the
    creation or preservation of sustainable business opportunities and jobs
    and by helping to close the gap in opportunity for the underserved
    rural areas and populations. With your help, we will continue working
    to bridge the opportunity gap between rural and urban areas. In
    closing, I would like to thank the Subcommittee for the opportunity to
    appear before you today and look forward to responding to your
    questions.

        The Chairman. Thank you for your comments.
        And last on the panel, we have Tammye Trevino of the Rural
    Housing Service. You can go ahead and proceed.

     STATEMENT OF TAMMYE H. TREVINO, ADMINISTRATOR, RURAL HOUSING
                      SERVICE, U.S. DEPARTMENT OF
                     AGRICULTURE, WASHINGTON, D.C.

        Ms. Trevino. Good morning, Mr. Chairman, Ranking Member
    Costa, and Members of the Committee, it is a privilege to
    provide a brief overview of the United States Department of
    Agriculture's Rural Development Rural Housing Service
    activities.
        For over 60 years, the Rural Housing Service, part of the
    Department of Agriculture's Rural Development mission area,
    along with Rural Utilities Service and the Rural Business-
    Cooperative Service has been working to help rural America
    thrive by supporting the housing needs of these communities.
    Rural Development is a collaborative agency. Our programs build
    upon one another ultimately creating efficiencies for the
    taxpayer and the communities that we serve. As part of the
    Rural Development mission area, Rural Housing Service provides
    Single-Family Homeownership Programs, Multi-Family Housing
    Programs, housing loans and grants for repair and
    rehabilitation, and community programs. All are integrated into
    a more holistic approach at rural community and economic
    development.
        We have exceptional staff in local offices across the rural
    landscape working closely with dedicated partners in the for-
    profit and nonprofit sectors. This same staff delivers programs
    for all three agencies across the mission area. By being
    located in rural communities, we are able to cultivate
    important relationship with lenders, realtors, community-based
    organizations, redevelopment authorities, and others. Our
    efficiency is noted in the strategic centralization of a
    significant portion of core operations while leveraging the
    community knowledge of our field structure across all programs.
    For example, staff delivering Rural Housing Services Community
    Facilities Programs to eligible municipalities, tribes, and
    nonprofit organizations also work with these same partners on
    the Rural Utilities Service's Water and Waste Disposal Program.
    The importance of our local staffers cannot be overemphasized.
    They know the needs of their neighbors and their rural
    communities and provide critical support both effectively and
    efficiently.
        In the wake of natural disasters Rural Development programs
    have worked in concert to build communities from the ground up.
    No other department in the Federal family offers rural
    communities the range of financial services available from USDA
    Rural Development and the staff nearby to provide the technical
    assistance.
        At the Rural Housing Service, our mission is to help
    families, individuals, and businesses in rural communities
    thrive by ensuring access to capital for housing and community
    facilities. Utilizing a total budget authority of $1.03
    billion, the Rural Housing Service leveraged a program level of
    approximately $26.3 billion in loans, loan guarantees, grants,
    and technical assistance in Fiscal Year 2010. Our programs are
    provided through the Housing Act of 1949 in combination with
    the consolidated Farm and Rural Development Act.
        Rural Housing Service is a big part of Rural Development's
    overall success and effective program operations. Despite
    doubling our borrowers' numbers over the last 2 years, Rural
    Housing Service's direct and guaranteed loan portfolios
    continue to perform well thanks in large part to our state-of-
    the-art call center, the Centralized Servicing Center in St.
    Louis, Missouri. Rural Housing Service also provides funding
    for essential community facilities. Since the Rural Community
    Programs were authorized by the CONACT in 1972, more than $12.7
    billion has been invested in facilities equipment for
    healthcare, education, public safety, and other services
    essential to the healthy economic and civic environment in
    rural America.
        For Fiscal Year 2012, the CF Direct Loan Program has a
    negative subsidy rate that enabled Rural Development to request
    zero budget authority for a program level of $1 billion, more
    than triple our current level. In the essence of saving time,
    information about delinquencies and accomplishments in the
    Rural Housing Service Program has been provided in written
    form. As stated in the CONACT, rural America has complex needs,
    and at Rural Development, we share an important commitment with
    you to meet those needs. We believe that the mission and
    delivery of programs that Rural Development affords us the
    flexibility to respond to current and changing needs across the
    rural landscape; and lead other public sector and private
    sector, for-profit and nonprofit partners to invest
    strategically in rural people and rural places, particularly
    those who are traditionally underserved by conventional
    financial models and at times where the private sector is
    unable to step in. Rural communities have a unique set of
    challenges that Rural Development is well-suited to address.
        Thank you for the opportunity to appear before you today,
    and I welcome any questions or comments.
        [The prepared statement of Ms. Trevino follows:]

     Prepared Statement of Tammye H. Trevino, Administrator, Rural Housing
           Service, U.S. Department of Agriculture, Washington, D.C.
        Chairman Johnson, Ranking Member Costa, and Members of the
    Committee, it is my privilege today to provide to you a review of the
    United States Department of Agriculture (USDA) Rural Development's (RD)
    Rural Housing Service (RHS) programs and activities. The core mission
    of RHS is to create vibrant, thriving rural communities, a strong
    housing stock, access to safe, decent and affordable rental housing and
    access to high quality essential community infrastructure. RHS
    accomplishes its mission through a number of housing programs
    authorized under the Housing Act of 1949 and the Community Facilities
    (CF) programs authorized under the Consolidated Farm and Rural
    Development Act (CONACT) and amended through farm bill legislation. In
    addition, through the Rural Community Development Initiative (RCDI) RD
    provides technical assistance and training funds to qualified
    intermediary organizations to develop their capacity to undertake
    housing, community facilities, and community and economic development
    projects in rural areas.
    Overview
        The RHS programs are a systematic part of RD's community and
    economic development structure which works to improve the quality of
    life in rural America. We work to improve infrastructure, sustain and
    create jobs, and create economic wealth in rural communities. RD
    programs are locally-led and they work together in a cohesive manner to
    provide all of the necessary services and activities to have
    sustainable and prosperous communities. Housing, community development,
    and technical assistance are at the foundation of our agency's mission.
    This foundation, along with the targeted programmatic approach, makes
    RHS programs an essential tool for rural America.
        In Fiscal Year (FY) 2010, utilizing budget authority of about $1
    billion, RHS supported a program level of approximately $26.3 billion
    in loans, loan guarantees, grants, and technical assistance. The budget
    targeted resources to programs that are most needed and most effective
    in rural communities. RHS programs continually assist USDA's efforts to
    help rural America out-build, out-educate, and out-innovate our global
    competitors while making the tough choices necessary to address
    responsibly the nation's budget deficit. In 2010, RHS assisted nearly
    161,000 rural American families to buy or repair their homes, provided
    safe, decent affordable rental housing to 460,000 individuals, and
    provided financing to assist over 1,000 small communities develop
    essential community buildings and equipment. The remaining text
    discusses our RHS programs, and how they impact rural America.
    CF Program
        The CF program was authorized in 1972 under the CONACT to provide
    funding necessary for the installation or improvement of essential
    community facilities in rural America. Since that time, the CF program
    has provided over $12.7 billion in funding for health care,
    educational, public safety, and other essential community facilities
    and more than 40 percent of the CF program investments have been made
    in rural health care facilities. The local hospital, school system, or
    public safety district is often the largest employer in a rural
    community or region. By providing low-interest loan and grant funding
    for these organizations through the CF program, we directly support
    economic development and job creation.
        The current CF program portfolio consists of about $5.2 billion in
    outstanding loans and grants that have been made to 11,197 facilities
    that received either individually, or in combination, a direct loan,
    guaranteed loan, or grant. Since FY 2009, the CF programs have invested
    over $3.1 billion in 4,207 essential community facilities, estimated to
    directly create 9,996 jobs and save 22,384 jobs. Of that amount, over
    $1.66 billion was invested in 464 rural health care facilities and is
    estimated to create 4,124 jobs and save 10,319 jobs.
    CF Loan Programs
        RHS offers both guaranteed and direct CF loan programs. Direct
    loans are available to those who are unable to obtain commercial
    financing. The maximum term for all loans is limited to the lesser of
    the useful life of the facility, any state law limitation on loan
    terms, or 40 years. Interest rates for direct loans are based on
    current market yields for municipal obligations, although loans for
    facilities impacting prime or unique farmland may require a slightly
    higher rate. Certain other direct loans may qualify for a lower
    interest rate, depending upon the median household income of the
    residents of the community to be served. Guaranteed loans are made and
    serviced by commercial lenders such as banks, savings and loans,
    mortgage companies which are part of bank holding companies, the Farm
    Credit System, or insurance companies. CF programs may guarantee up to
    90 percent of any loss of interest or principal on the loan. The
    entities eligible to apply for loans are public bodies, nonprofits, and
    federally-recognized Indian tribes. The eligible area for both direct
    and guaranteed loans is rural communities with a population up to
    20,000.
        The President's FY 2012 Budget proposes to fund the CF direct loan
    program at $1 billion, more than triple the historic funding level. In
    addition, the budget proposes to eliminate funding for the CF
    guaranteed loan program. The CF guaranteed loan program originated as
    an inexpensive alternative to the direct loan program, designed to
    stimulate additional assistance to moderate income communities in rural
    areas. However, the defaults in the CF guaranteed program have been
    much higher than originally projected, making it more expensive than
    the direct loan program. The CF direct loan program has a negative
    subsidy rate in FY 2012. This means that the $1 billion in CF direct
    loan assistance can be provided without the need to request subsidy
    budget authority. The proposed increase in the CF direct loan program
    will mitigate any effects of ending the guaranteed loan program. This
    is a win-win for taxpayers and rural residents working to strengthen
    their rural communities.
    CF Grant Program
        The entities eligible to apply for grants are public bodies,
    nonprofits, and federally-recognized Indian tribes. The eligible area
    for the program is rural communities with a population up to 20,000.
    The amount of grant assistance depends upon the median household income
    and the population in the community where the project is located. Grant
    assistance may be available for up to 75 percent of project costs.
    Housing Programs
        Title V of the Housing Act of 1949 authorizes loans and grants to
    assist rural families in becoming homeowners and to provide safe,
    decent and affordable rental housing. The major housing programs under
    this legislation are single family housing (Section 502), single family
    housing repair and rehabilitation (Section 504), rural rental housing
    (Section 515), and self-help technical assistance grants (Section
    523),. These programs were carried out by the Farmers Home
    Administration prior to reorganization of the Department in 1994 and
    creation of the Rural Housing Service.
        In 1968, an amendment to Title V of the Housing Act of 1949
    established the interest-credit housing loan program. It enabled some
    low-income families to pay as little as one percent interest and
    provided for subsidized loans to developers of low-priced rental
    housing for low-income families and senior citizens. New programs also
    were enacted in 1968 for rural homesite development loans and for
    grants toward support of ``self-help'' homebuilding group projects.
    Grants of up to 90 percent, as well as loans, were authorized for farm
    labor housing projects.
    Single-Family Housing Programs
        The Single-Family Housing (SFH) programs provide homeownership
    opportunities for rural Americans with very low-to moderate incomes to
    purchase and improve homes through several loan, grant, and loan
    guarantee programs. The programs also make funding available to
    individuals to finance vital improvements necessary to make their homes
    decent, safe, and sanitary. Thus far in FY 2011, USDA through the RHS
    Single Family Housing programs has provided $11.7 billion in direct and
    guaranteed loans to assist 92,786 families to purchase or refinance a
    home, strengthening our rural communities and neighborhoods and helping
    families build equity in their future. In FY 2010, the SFH programs
    provided $18.9 billion to 150,693 families to purchase or refinance a
    home, helping boost rural economies and creating thousands of new jobs
    in rural communities.
        The 2012 budget proposed a $24 billion program level for the SFH
    Section 502 loan guarantees which is anticipated to fully meet demand.
    For FY 2011 and FY 2012, the program has a negative subsidy rate
    because of a low and stable default rate coupled with increased program
    fees. The 2012 fee structure will be a two percent up-front fee and an
    annual fee of 0.3 percent. Single-family housing direct loans and
    housing repair grants are both funded at reduced levels for 2012,
    reflecting the efforts of this Administration to ``tighten our belts''.
    The shift from direct loans and grants to guaranteed loans allows us to
    significantly increase our investment in rural America while
    simultaneously decreasing the burden on taxpayers. The $24 billion
    guaranteed loan level allows RHS to provide the highest level of
    assistance for single family housing in rural areas that has ever been
    provided--and without needing to request subsidy budget authority.
        The collapse in the housing market caused a reduction in lender
    confidence, which has increased demand for the SFH guaranteed program.
    Currently, approximately 2,000 lenders participate in the program. The
    low home mortgage interest rate environment has enabled the guaranteed
    rural housing program to serve low-income families who may have
    previously looked to our SFH direct loan program for assistance.
    However, recognizing that an unserved need may continue to exist for
    very low-income families, the single-family direct loan program's
    reduced funding level will be $211 million and will be targeted to very
    low-income applicants.
    Multi-Family Housing Programs
        The Multi-Family Housing (MFH) budget continues RD's commitment to
    providing affordable housing options to the poorest of the poor in
    rural America. Our existing portfolio provides decent, safe, sanitary,
    and affordable residences for the 460,000 tenant households. The MFH
    Program offers Rural Rental Housing Loans to provide affordable multi-
    family rental housing for very low-, low-, and moderate-income
    families; the elderly; and persons with disabilities. This is primarily
    a direct mortgage program, but funds may also be used to buy and
    improve land and to provide necessary facilities such as water and
    waste disposal systems. In addition, rental assistance is available to
    eligible families.
        The total program level request for MFH programs is $1.06 billion
    of which $907 million is allotted for the MFH Rental Assistance
    contract renewals. The requested rental assistance is sufficient to
    accommodate the renewal of 204,503 expiring rental assistance
    contracts. While the FY 2012 budget request proposes to terminate
    funding for the MFH Revitalization Demonstration Program, it proposes
    to increase the MFH direct loan program from a program level of $69.5
    million to $95 million, ensuring that more affordable rental housing
    opportunities are created for the very-low income tenant base in rural
    America. The direct loan program can be used for repair and
    rehabilitation as well as new construction. So the increase in funding
    should allow property owners to continue to finance revitalization
    efforts even without the demonstration program.
        The FY 2012 budget request proposes $16 million for the Rural
    Housing Voucher Program. The voucher funding will be used to offset
    some of the reductions in rental assistance. If a MFH property offering
    rental assistance leaves the portfolio, vouchers will be offered to all
    low-income tenants that presently receive rental assistance.
        The FY 2012 budget request for MFH Section 514/516 Farm Labor
    Housing is approximately $37.2 million in program level funding.
    Farm Labor Housing
        Funding was not proposed for FY 2012 for the Farm Labor Housing
    program. The program provides loans and grants to build affordable
    rental housing and related facilities for both migrant and year-round
    farm workers. Units may be off-farm housing available to eligible farm
    workers of any farming operation or on-farm housing for farm employees.
    Funds for this program may also be used for repairs of existing program
    units.
    Housing Loans and Grants for Rehabilitation and Repair
        The FY 2012 budget limits or eliminates funding to some very small
    loan and grant programs to allow the agency to focus on the programs
    that most effectively achieve USDA's housing goals through higher loan
    volumes. USDA will provide approximately 2,000 grants to very-low
    income, elderly, rural homeowners in order to make essential repairs to
    their homes to make them safe and to remove health hazards through the
    SFH Housing Repair grant program. This program is designed to help the
    most vulnerable residents in rural America.
        Smaller and more labor intensive programs that are not proposed for
    funding include housing repair loans, self-help housing grants, housing
    assistance grants, and loans to deal with inventory property referred
    to as ``credit sales.'' This shift in the focus of program delivery
    will make USDA leaner, more efficient and will help the agency
    streamline operations and deliver results at a lower cost for the
    American people.
    Technical Assistance
        The RCDI provides technical assistance and training funds to
    qualified intermediary organizations to develop their capacity to
    undertake housing, community facilities, and community and economic
    development projects in rural areas.
        Technical assistance promotes partnerships at the local, regional,
    and state levels to assist communities in advancing their strategic or
    economic development plans. It also encourages coordinated planning
    among RD programs to address specific projects within the context of a
    community or regional strategic plan.
        The entities eligible to apply for RCDI funds are public bodies,
    for profits, private nonprofits and Indian Tribes. Eligible areas
    include outside the boundaries of a city with a population of 50,000 or
    more and its immediately adjacent urbanized area.
    Conclusion
        RHS implements rural housing and CF programs to assist rural
    communities to create a healthy, safe, and prosperous place in which to
    live and work. Rural housing direct and guaranteed loans and grants
    assist rural families in becoming homeowners and provide safe, decent
    and affordable rental housing. CF direct and guaranteed loans and
    grants create jobs in rural America through the development of
    essential community facilities such as hospitals, libraries, day-care
    facilities, fire halls, community centers, and more. In closing, I
    would like to thank the Subcommittee for the opportunity to appear
    before you today and look forward to responding to your questions.

        The Chairman. Thanks to the three of you for your direct
    remarks. They are gratefully received by the Members of the
    Committee.
        Let me start with this question for all three of you. The
    existing farm bill, which we are in the course of actively
    working on a new version, required USDA to report on the
    various definitions of rural and how those definitions impact
    our programs. Obviously, as Ranking Member Costa alluded to in
    his opening remarks, and as I can tell you and Members of the
    Committee on both sides can tell you, this is a critical
    determination in terms of your services and the services to the
    agricultural sector. The report was due 2 years after the
    enactment of the farm bill, and we still haven't received the
    report. I believe in the second or third month of this year,
    Deputy Under Secretary Cook assured the Committee that we would
    have the finished report by June of 2011, over 3 months ago. We
    still haven't received it. Why not?
        Ms. Canales. Mr. Chairman and Ranking Member Costa, both of
    you have a strong interest and of course the entire
    Subcommittee, indeed Deputy Under Secretary Cook did make that
    statement. I do want to say to you that the report is at Rural
    Development. It is a report, as you can well imagine, given
    that the three agencies that are represented here all have
    different standards and different population limits and
    different criteria for how we operate, each one of the programs
    that we are responsible for, given the authorization language
    from these different agencies. So I will say to you that in
    response to your question that the report is being worked on.
    There is a draft. The Deputy did state to us that this is
    something that is very important to provide to the Congress.
        I do want to say to you that certainly within my agency, we
    have had a tremendous amount of experience utilizing the very
    specific criteria that you all authorized regarding the
    definitions of rural and characterizations, which were able to
    utilize them. And those were able to, therefore, gain more
    rural areas. That is a petition that a local community can make
    to Rural Development in order to get a review of their area. So
    the report----
        The Chairman. If I could--I appreciate it. Back to the
    question. I don't mean to be adversarial. I am just asking the
    question. But it has been 3 months and you indicated it is
    under review. Now, when can we expect that? Not generally, in
    the real near future, but specifically when can we expect that
    report. I know the Ranking Member, several others on this
    Committee, and I are going to be in a field hearing where that
    definition in terms of rural broadband has particular
    significance. That is actually in a couple weeks. We would love
    to be able to have some parameters for a variety of reasons so
    we know what way we are operating. Can you, between the three
    of you, give me a date? Like next week?
        Ms. Canales. I could not state that it will be next week.
    You know, we could give you a date----
        The Chairman. When could you say to us that it will be? And
    again I am not trying to be unkind. This is an important
    concept and it was promised a long time ago. I think we can
    legitimately ask the Department to give us a date. So can you
    give us a date? We need to know what we are operating with. Mr.
    Costa has pointed out the tremendous significance in his
    counties, likewise with mine and the Members of the Committee.
    You know, Congressman Schilling's district is very similar to
    mine in terms of limited access to facilities and how the
    definitions affect that. I mean rural America in many parts of
    the country is on the decline. This is critical, critical to
    maintaining or increasing the viability of rural America. And
    we can't just have generic promises. We need to know.
        Ms. Canales. Well, certainly, we agree with you in the
    sense of the need to focus on rural America and each one of our
    agencies has our own definitions that we utilize. But I mean I
    could not give you a date----
        The Chairman. Well, I am going to ask you to anyway. Let me
    ask each one of you to give me a date by which we can expect
    that report. You, sir?
        Mr. Adelstein. I have been told by the Under Secretary's
    office that the report is imminent. If it is possible if I
    could get back to you by the end of today with a date-certain
    that we can get that to you, we will do that.
        The Chairman. Yes, ma'am, you? No, I am asking you, Ms.
    Canales.
        Ms. Canales. The information that I have received in
    regards to the report is as my colleague stated that it is
    imminent, which I reported to you. And so we can respond back
    today and give you more certainty.
        The Chairman. Yes, ma'am?
        Ms. Trevino. I have nothing to add, Mr. Chairman.
        The Chairman. I think if the three members of the panel
    would be willing to communicate with the office of the Ranking
    Member and myself either in writing or otherwise to tell us--
    rather than the end of the day, let's just do it by the end of
    the week, to give you time to deal with it more effectively,
    and give us a date by which we can expect that. I think we can
    make a lot of plans accordingly. But without reiterating the
    obvious, this is a really critical determination and it is a
    lynchpin to a lot of programs.
        Ms. Canales. Absolutely.
        Mr. Adelstein. We will do it, Mr. Chairman. One of the
    reasons that this is so difficult is the importance of it and
    the complexity of it. We have significant impact on communities
    we serve based on that definition.
        The Chairman. That I understand, but if it is difficult,
    then if we were told a year ago that it is difficult, so we
    would not be expecting it and have expectations built around
    June of this year. This isn't a partisan issue. This is just a
    government layer of bureaucracy issue and we need to uncover
    the layers. I think we would all agree with that. All right.
    And I now turn to the distinguished Ranking Member, the
    gentleman from California, Mr. Costa.
        Mr. Costa. Thank you very much, Mr. Chairman. I couldn't
    agree with you more. Ms. Canales, your response was nice but it
    was filled with a lot of ``bureaucratic-ese;'' and it is not to
    be necessarily a reflection on you or the United States
    Department of Agriculture. So much of what frustrates many of
    us and our constituents is the bureaucratic difficulty in
    responding in a fashion that seems to be clear cut and one that
    is expedited. Yes, it is difficult. As the gentleman who just
    responded, Mr. Adelstein, said, ``Look, we are working on this.
    It is taking more time than we thought. We are having problems
    in this area and that area.'' If it is difficult, then you owe
    the Subcommittee, the Members of the Committee a response. But
    I would hope that in the sense of cooperation and collaboration
    that you would get back to the Chairman and myself later today
    and give us a timeline that you think you can follow. And if
    there is a problem with it, let us know, because this is vital
    not only to the field hearing we are holding in 2 weeks in
    Illinois but to a lot of the work the Subcommittee is doing.
        So let me get into a couple questions here. I think it has
    been underlined enough I hope. I talked about the definition
    of, and flexibility to, address the nation's rural communities.
    After all, these are taxpayers' dollars in which our rural
    communities pay to Washington. We want to ensure that we get an
    appropriate share of those taxpayers dollars back to those
    rural communities. Have you thought about utilizing Census
    tracts, Ms. Canales or any of the other two witnesses, and
    would you care to comment as a way of redefining rural?
        Ms. Canales. Ranking Member Costa, absolutely. Census
    tracts has been a point that has been raised among our western
    state directors. You know, going back to----
        Mr. Costa. I have worked with them.
        Ms. Canales. Yes.
        Mr. Costa. Have you considered it?
        Ms. Canales. Yes.
        Mr. Costa. What are the details?
        Ms. Canales. The answer is yes.
        Mr. Costa. What do you think the problems are? Where are
    you on that?
        Ms. Canales. The answer is yes, we are considering Census
    tracts.
        Mr. Costa. Will you get that in terms of response in this
    report or will it not be included? Do you know?
        Ms. Canales. I believe that it will be included, yes, sir,
    as part of the report.
        Mr. Costa. Yes. There is also an announcement by the White
    House, an Executive Order for a Rural Council. I have been
    critical. In previous Administrations they have designated a
    person within the White House to handle rural areas. My friend
    who is on the mend right now, God bless him, Marion Barry from
    Arkansas played that role at the Clinton White House. What has
    happened with this Executive Order? Has the council been named?
    Do you know? Can you add some meat on that bone?
        Mr. Adelstein. The council has been named. The lead of the
    council is Secretary Vilsack. The council is working across the
    Federal Government family to meet the needs of rural America
    and to coordinate between different agencies. So it is similar
    to the function that was previously handled by staff in the
    White House, but now there has been a more formalized way of
    ensuring proper coordination across the Federal Government.
        Mr. Costa. Coordination is fine but stakeholders have to
    understand that they are playing a role and they are
    participating and their comments are going to be taken into
    account. I mean otherwise it just becomes another council for
    illustrative purposes. You have to get by it in a way that
    makes sense.
        Ms. Trevino, you talked about housing and I am very
    concerned. I think we all see the housing crisis around the
    country but it is just as serious in our rural areas. My
    colleague Congressman Cardoza has tried to get the
    Administration's attention on it. Notwithstanding the best of
    intentions, and your intentions are laudable, it seems most of
    the efforts have been ham-fisted and not successful. What about
    Section 502 Single-Family Housing Guaranteed Loan Programs?
    Many private lenders still aren't lending for reasons that we
    are aware of--regulatory means and other situations--can you
    comment on the success of that or where you are at on that?
        Ms. Trevino. Yes, thank you for the question, Congressman.
    The Rural Housing Section 502 Single-Family Guaranteed Program
    has been very successful. We have increased our numbers in the
    last 3 to 4 years by three and four times as much as we were
    producing years ago. Our portfolio has remained stable in terms
    of its performance on delinquencies and foreclosures and so we
    continue to monitor what the lenders are doing. Currently,
    those programs are not as high in terms of numbers as we had
    seen at this time last year in terms of demand, but we are
    continuing to work with our lenders and try to----
        Mr. Costa. My time has expired, but I would like to
    understand how you define success?
        Ms. Trevino. We measure ourselves with the private sector
    and other government-sponsored entities, and currently our
    delinquency and foreclosure rates are below other government-
    sponsored entities.
        Mr. Costa. Thank you, Mr. Chairman, for your time.
        The Chairman. The gentleman from Georgia, Mr. Scott.
        Mr. Scott. Thank you, Mr. Chairman and Ranking Member. To
    those of you on the panel I would just start with a comment. I
    am one of those that is a freshman in Congress and 8 months ago
    I was in the private business sector. I wonder what would have
    happened had I looked at a government agency and said it is
    important, it is complex, I don't know when I will get it to
    you even though it was due 2 years ago. I am not quite sure if
    they would have executed my business with a shotgun or a
    sledgehammer, but I feel quite confident, coming from the
    private sector, that dealing with a government agency had I
    been negligent in providing an audit or some other form or, God
    forbid, miss dotting an ``i'' or crossing a ``t,'' they would
    have been there to shut my business down.
        With that said, I want to go back to USDA Housing, and I
    understand that the President has proposed to move this to HUD.
    Is that correct, the housing aspect of USDA to HUD?
        Ms. Trevino. No, sir, that is not proposal by the
    President.
        Mr. Scott. Who is it a proposal by?
        Ms. Trevino. It is currently a draft discussion by the
    House Financial Services Subcommittee.
        Mr. Scott. What are your thoughts on that?
        Ms. Trevino. We strongly oppose that move.
        Mr. Scott. Okay.
        Ms. Trevino. At Rural Development, as I stated earlier, we
    are a collaborative effort. We believe that we need to look at
    the entire needs of rural America because they are very complex
    as you stated. And every rural American has interrelated needs.
    The communities have other needs, and for us to be able to
    address just the housing needs by moving over to HUD would
    negate all the work that we have done working in synergy with
    our other partners in Business and Utilities. We believe that
    we create efficiencies and cost-effectiveness because of the
    way we operate currently.
        Mr. Scott. Okay. Thank you for that. So it is the House
    Financial Services Committee, and I would just hope that you
    would continue to argue on behalf of the rural communities
    because I know that my housing authorities, even in my
    metropolitan areas, had suggested to me that HUD has indicated
    to them that if they have been run well and have actually
    accumulated reserves, some operating reserves, that HUD has
    some intent of having those housing authorities that are well-
    run turn those monies back over so that they can be
    redistributed to other housing authorities that haven't been
    run as well. So certainly HUD is one of those agencies that I
    do not think is well run in Washington, and there is certainly
    a long list of those. But thank you for continuing to stand up
    for rural America.
        Administrator Adelstein, I would like to speak with you
    about the broadband briefly, and I have about 2 minutes left.
    But what steps are you doing to make sure that when we do
    expand the broadband that we are not overbuilding? In other
    words, are we giving loans to develop broadband in areas where
    there already is access to broadband versus making sure that
    the loans go to areas where there is no access to broadband? I
    would also like for you to speak to that in regard to the
    report that came out about how much money was spent to develop
    broadband to a select few families and whether or not you think
    that those investments going forward with satellite technology
    and other things that are going to make faster communications
    available in the rural areas or good use of taxpayers' dollars?
        Mr. Adelstein. Congressman, our goal is to serve the most
    remote rural areas, to get the funds to those places that have
    no service or inadequate service. And the 2008 Farm Bill is
    designed so we don't finance broadband in areas with service.
    But broadband doesn't always follow neat lines. It doesn't
    shape itself along lines, you can say we are going to serve
    here and not serve there. To bolster the financial feasibility
    of some of these proposals to serve the most difficult-to-serve
    areas, occasionally there is some overlap, but we do focus on
    ensuring that we close the digital divide between those
    underserved and unserved areas. The statute recognizes that.
        When it comes to satellite service, we are technologically
    neutral. We want rural businesses and residents to have first-
    class broadband service no matter where it comes from. We did
    provide for satellite service as part of the Recovery Act, an
    initiative for those who didn't have broadband through any
    other of our awards, that they would have access to low-cost
    satellite service. For some businesses, they have issues that
    satellite is not adequate to their needs, so we try to maximize
    the amount of bandwidth that we can get to rural areas.
        Mr. Scott. My time has expired.
        The Chairman. Thank you, Mr. Scott. That is I guess a good
    segue for the fact that we do have the first field hearing of
    2011, Mr. Costa and I. Other Members of the Committee are
    invited. In fact, we have at least five coming already. I
    realize there are some conflicts along the schedule, but that
    is scheduled for Saturday, the 24th of this month, University
    of Illinois-Springfield specifically on the subject of rural
    broadband services and the future of rural America.
        Let me also mention to all three of you--because I have
    ascertained the names in the meantime--you had indicated you
    would by the end of the week let us know a date by which we can
    expect that definition. In Ranking Member Costa's office, the
    gentleman's name is Nick Choate, and in my office, the
    gentleman's name is Sam Pfister, and we would eagerly await
    your response and hope that you will get that to us and then
    obviously the implementation thereafter.
        I would recognize the distinguished gentlelady from
    Alabama, Ms. Sewell.
        Ms. Sewell. Thank you, Mr. Chairman. I would like to thank
    all of our panelists for being here today and for your
    testimony.
        My question is actually to Mr. Adelstein. I represent a
    very rural part of Alabama, and I, too, am very concerned about
    broadband and access to areas in my district that just don't
    have access. Frankly, my mother and father--they live in Selma,
    Alabama, and it was only last year that we got away from dial-
    up. So it is really important that I reiterate what Congressman
    Scott said as well, that it is very, very important to get it
    to remote areas, broadband access.
        My question is many of the entities that you lend to are
    dealing with regulations and settlements under Federal law,
    including the Clean Air and Clean Water Acts. Have you seen an
    impact on systems that serve rural residents and their ability
    to deal with these regulations?
        Mr. Adelstein. Yes. First, on the broadband, I was thrilled
    we were able to get a Recovery Act award to your district, to
    Butler Telephone Company, and we will continue to work in rural
    Alabama and across the country to get broadband to the most
    remote areas. In terms of impact on our programs, yes, we have
    seen that certainly regulatory requirements do impose costs
    that we need to deal with, and we do deal with as part of our
    efforts to ensure that rural areas can meet requirements for
    the health and safety of their residents. I mean those are
    consistent with what we do. Rural areas do incur costs. The
    impact depends--in the Water Program, for example--on the size
    and type of the treatment facility, on the quality of water
    service and what the regulatory standard might be. It increases
    demand for RUS Loan and Grant Programs. Right now, we have a
    $3.2 billion backlog in our Water Program, and these
    requirements certainly do have an impact.
        We do work with our colleagues in other agencies of the
    government to make sure that they are aware of the impact on
    rural America of the different departments that they do have,
    but we will work with the communities affected to help them
    comply.
        Ms. Sewell. Very good. What programs have been most
    beneficial under your tenure in providing reliable and
    affordable electric power, water, broadband? What programs do
    you think have been the most effective under your agency and
    what programs have yielded disappointing results?
        Mr. Adelstein. Well, we have really been thrilled at the
    impact of our major flagship programs, the Electric Program,
    again $6 billion of investment this past year with no
    requirement of taxpayer dollars to get that done. We have had
    great success with our traditional telecommunications program,
    as well as the Recovery Act broadband programs and getting
    these rural systems up to date.
        I mentioned just briefly that the Water Program is
    oversubscribed. We have some $3 billion backlog attesting to
    the demand. That is after we did over $3 billion in new
    programs under the Recovery Act to deal with the backlog that
    we had.
        There are some small programs we don't think are that
    important. We have a Household Water Well Program that, for
    example, is very small and doesn't do that much. I mean it is
    for individuals to get their own wells improved and with a
    couple million dollars for the whole country, it doesn't really
    have the kind of global impact that our major Water
    Environmental Program has. So there are some programs that we
    can do without in this difficult budget environment, but the
    major programs have done a remarkable job of meeting the needs
    of rural America.
        Ms. Sewell. Thank you.
        The Chairman. I recognize the gentlelady from Missouri,
    Mrs. Hartzler.
        Mrs. Hartzler. Thank you, Mr. Chairman. I wanted to follow
    up some more on the broadband questions. How much total is
    dedicated right now to the broadband program?
        Mr. Adelstein. Right now, the traditional broadband program
    has been authorized by Congress to provide $690 million in
    loans, and we have sufficient funding under the broadband
    program for about $300 million in loans. And then we have a
    couple of smaller grant programs, the Distance Learning
    Telemedicine Program, around $25 million; and the Community
    Connect Grant Program, which provides grants to areas with no
    service, very small, remote, rural communities, about $13
    million.
        Mrs. Hartzler. Okay. Out of that total amount, how much is
    going to the end-of-the-line customers specifically to help
    people who don't have any other access or any other service to
    high-speed versus how much is going to people who already have
    service?
        Mr. Adelstein. Well, all of it is going to either improve
    or provide service to people that don't have it today. So
    generally speaking, we do focus, as I said, our resources on
    areas that have no service, but in many cases what we have, for
    example, in the Telecommunications Loan Program is our existing
    telephone company will be providing improvements to--they may
    be providing broadband to customers today, but they want to
    improve that. They want to, say, go from 1 megabyte per second
    or 768 kilobytes per second to fiber right to the home. So this
    would be the same provider that is upgrading its system. So
    they had broadband under one definition, but that
    telecommunications company, in order to meet the needs of the
    future to provide video, to provide all the current needs of
    rural consumers will upgrade. And again, that program is no
    cost to the taxpayer because they pay us back and our default
    rate is very low.
        Mrs. Hartzler. So do you have an indication of how much is
    upgrade versus how much is new?
        Mr. Adelstein. I don't have an exact number. I mean it is
    very hard to see because broadband doesn't follow neat lines.
    We have requirements in our broadband loan program, which we
    just created that ensures the funds go to the most rural areas
    that don't have adequate broadband as defined by the statute.
    We don't provide funds for overbuilding ourselves under the
    traditional, the $690 million program, but we are finding that
    many of those are upgrades. They are going from old, slow DSL
    to fiber to the farm or to the ranch, which is what a lot of
    rural consumers need, a lot of rural businesses need to compete
    in the 21st century.
        Mrs. Hartzler. How long have these grants been available,
    these loans, and what is the percentage of payback at this
    time?
        Mr. Adelstein. Well, the traditional program has been
    operating since 1949, so we have been doing this for 60 years.
        Mrs. Hartzler. Sure, but I am talking about broadband, not
    rural electric.
        Mr. Adelstein. The broadband program was initiated in the
    Farm Bill of 2002. There were some pilots that had been done
    before that, so over the last decade, we have invested about $1
    billion in broadband infrastructure through the broadband loan
    program, of which we are repaid the vast bulk of that. There is
    a very small default rate. Right now, the Office of Management
    and Budget is giving us a subsidy rate assuming defaults of
    2.58 percent I believe.
        Mrs. Hartzler. Okay, great. I want to switch gears real
    fast with the EPA. And Mr. Adelstein, they have placed a
    significant burden on a lot of small, rural communities with
    new and increasingly stringent regulations. I know I have a
    couple of towns in my district that we have been visiting with
    trying to help. Anyway, many of these cases, these communities
    are faced with no choice but to attempt to take on significant
    debt to finance new water and wastewater systems for homes
    which were previously served by wells, individual drain
    systems. In your view, is the EPA requiring too much from these
    small communities?
        Mr. Adelstein. Well, as I mentioned in the previous
    question, we do see that requirements do incur cost on rural
    systems and we are trying to meet those needs. Some of those
    requirements are for the health and safety of the community.
    For example, in your district I visited Gravois Mills--or
    actually it was Gravois Arm Sewer District----
        Mrs. Hartzler. Yes.
        Mr. Adelstein.--and you are probably familiar with the
    problem there. It is on the Lake of the Ozarks and people had
    built their own septic systems right along the lake and those
    were draining into the lake. And the lifeblood of that
    community, as you know better than I----
        Mrs. Hartzler. Yes.
        Mr. Adelstein.--is the tourism of that lake. And there was
    a time when it has been shut down from swimming and use.
        Mrs. Hartzler. Right.
        Mr. Adelstein. So we provided funding to improve that water
    system. Sometimes EPA will require that these communities come
    up to snuff and not be dumping sewage--sometimes raw sewage
    into a lake that is shared by the entire community like Lake of
    the Ozarks. But we work with the EPA in terms of those
    requirements to make sure that they are understanding what the
    impact is on our program and one of the reasons we have such a
    large backlog.
        Mrs. Hartzler. What is the backlog real quickly?
        Mr. Adelstein. It is $3.2 billion backlog for rural water
    applications.
        Mrs. Hartzler. Okay. My time has expired. Thank you, Mr.
    Chairman.
        The Chairman. The gentleman from Vermont, Mr. Welch.
        Mr. Welch. Thank you very much, Mr. Chairman. I appreciate
    being here. We are pretty proud of the work that you all do in
    Vermont. Molly Lambert has been in charge there and she has a
    lot of experience both in that job and other important jobs
    that she has had in Vermont. And we have had, as you know, this
    terrible flooding in Vermont that is the worst natural disaster
    that we have had since 1927. And roads and bridges, houses,
    small businesses have been destroyed. So we have an immense
    amount of rebuilding to do and we are really going to be
    needing some help to be able to do that. And I just wanted to
    ask a few questions.
        This challenge in Vermont is going to be a long-term
    challenge, and I just want to generally ask Ms. Trevino, is the
    USDA Office of Rural Development in a position to handle the
    long-term effects of the hurricane after FEMA leaves? I mean
    what we have been learning, of course, is that FEMA is there.
    They have been doing a fabulous job, incidentally. The Governor
    is very pleased; people are pleased. But FEMA is not the one-
    stop shop that a lot of people who are under siege think it is.
    We really need you to provide the help that only you can
    provide.
        So this is an open-ended question about whether you have
    the resources you need, what additional resources either
    financial or in waivers or flexibility in order to do your job
    under emergency circumstances would be helpful? And, this would
    affect some of my colleagues, certainly Mr. Owens from New York
    where his folks have been similarly hit. So maybe you could
    respond to that.
        Ms. Trevino. Thank you very much. And we sympathize with
    all the natural disasters that you have had that have affected
    your area. We certainly are ready and prepared to help as much
    as we can. Ms. Lambert has been made aware of the areas that
    are designated as FEMA disaster areas. And once that
    designation is in place, we are able to come in and provide,
    for instance, moratoria on CF facilities and on housing
    homeownership that we currently have financed through our
    systems.
        In addition, we are getting towards the end of our fiscal
    year, so we are running across funding issues when it comes to
    rehabilitation and repair of affected homes, but in terms of
    refinancing and being able to use our Direct Program and
    Guarantee Program in Single-Family Housing, we still have funds
    available for that and we are ready to help wherever we can.
        Mr. Welch. Well, I appreciate that.
        Let me ask a little bit about homeownership. The Rural
    Development Guarantee Program has been extremely helpful in
    Vermont for low- and moderate-income homeownership
    opportunities. We think in Vermont it is crucial that the
    program be continued and fully authorized. The new fee
    structure, as you know, is intended to cover costs of the
    program, but I have heard from some Vermont lenders that it may
    be administratively very difficult for them to collect some of
    these fees. Do you have any thoughts on how we can address
    that? We don't want to make it a hassle for the folks that need
    to be our partners.
        Ms. Trevino. I understand and, again, it has been an issue
    that we have been working on for about a year. One of the
    things that we realized around January of this year was that
    our authority to collect in that front fee is 3.5 percent. In
    order to continue to have a program come October 1, our subsidy
    rate is going to 3.8 percent. Since we do not have the
    authority to go higher than 3.5 percent in an up-front fee, we
    have had to instigate an annual fee to make up the difference
    so that we can continue to have a program at all, because it is
    a subsidy-rate-neutral program----
        Mr. Welch. Yes.
        Ms. Trevino.--therefore, we do not get budget authority to
    run that guarantee.
        Mr. Welch. Okay. And there has been some discussion as
    well--thank you--that Rural Housing Programs could be moved out
    of the jurisdiction of USDA to management by HUD. I wonder
    whether given USDA's unique understanding of the rural issues,
    can you give us some information on how such a move would occur
    while preserving safeguards that are put in place to ensure
    that the rural nature of this program is preserved?
        Ms. Trevino. What I can tell you about the discussion draft
    is that it does not outline how it will do that. We certainly
    believe that it is not a good idea and we believe that it is a
    very premature discussion draft at this time. No studies have
    been made as to the cost-savings for such a move. Simply
    picking up a chess piece and moving it across the board is not
    going to give you a cost-savings. Some of the things that have
    not been considered are the IT needs. We at USDA Rural
    Development run on totally different information technology
    than does HUD, and so that would be, we believe, a significant
    investment. And it would, frankly, upset the synergy with how
    we offer programs in rural America. We are a collaborative
    agency and we work in tandem by looking at the holistic needs
    of the entire community, not just the business needs, not just
    residential needs.
        Mr. Welch. Thank you very much. I yield back.
        Ms. Trevino. You are welcome.
        The Chairman. Thank you, Mr. Welch. The gentleman from
    Indiana, Mr. Stutzman.
        Mr. Stutzman. Thank you, Mr. Chairman. And thank you to the
    panel for being here today.
        I would like to start with Mr. Adelstein, a question
    regarding broadband again. There is a wide range of definitions
    of what constitutes an area which is served by broadband
    access. These definitions can include everything from the
    advertised connection speed, the actual connection speed,
    consumer price, or simply proximity to the nearest connection.
    Could you please clarify for the Committee what you think the
    minimum connection speed should be to justify Federal
    investments, and then how are you monitoring providers to
    ensure the advertised speed matches actual connection speeds
    over these systems built with Federal dollars?
        Mr. Adelstein. Thank you, Congressman. Great question. We
    spent a lot of time considering that and we determined that 5
    megabytes per second combined was what was needed for rural
    economic development. That provides for video streaming. That
    would be, for example, 4 megabytes down, 1 megabyte up. We
    combine both down speed and up. That is one that we put in a
    flexible definition for in the Farm Bill Broadband Loan Program
    because we expect that will continue to go up. As urban areas
    see increases, we want rural areas to be able to keep pace.
        We are not looking at advertised speeds; we are looking at
    actual speeds. We want our borrowers to be able to deliver
    those speeds on the ground. The way we monitor that is we look
    at the application and we have engineers on staff that evaluate
    whether or not the proposed technology actually will deliver
    the actual speeds that are being promised in the application,
    and if they are not, we will not approve the application until
    such time as we are satisfied the technical requirements are
    satisfied. And then as the program is being built out, we have
    in the field general field representatives that are often
    engineers that watch the construction of the project. We have
    the contracts coming in being reviewed by engineers in
    Washington. So as they are building the project, we are
    evaluating them step-by-step, contract-by-contract to make sure
    that it complies with what they put in the loan application
    that it can deliver the levels of speed that they told us that
    they were going to provide.
        Mr. Stutzman. Thank you. I would like to switch gears a
    little bit. The EPA has placed a significant burden on small,
    rural communities with new and increasingly stringent
    regulations. In many cases, those communities are faced with
    very few choices, if any, but to attempt to take on significant
    debt to finance new water and sewer wastewater systems for
    homes which were previously served by wells and individual
    drain systems. In your view, is the EPA requiring too much from
    these small communities?
        Mr. Adelstein. Well, rural communities do incur costs as a
    result of EPA rules and the impact depends on the type and size
    of the treatment plant, the quality of the existing water
    source that they are dealing with depending on the regulatory
    standard. This certainly does increase demand for our programs
    and one of the reasons that we have, as I indicated, a $3.2
    billion backlog are these requirements. We do work with our
    colleagues in EPA and others. I met with EPA to make sure that
    they understand the impact of these proposals on rural areas.
    They are, of course, the expert agency on determining the
    health and safety needs of the public, and we defer to them.
    And in response, we have to deal with financing the
    improvements that are required to comply with EPA rules.
        Mr. Stutzman. What was the backlog number again for water
    and wastewater applications?
        Mr. Adelstein. For water and wastewater applications we
    have a backlog of around $3.2 billion.
        Mr. Stutzman. Billion with a ``b,'' okay.
        Mr. Adelstein. Right.
        Mr. Stutzman. Thank you. All right. And then with 1 minute
    left I would like to ask Ms. Trevino, could you elaborate on
    how funds through the Community Facilities Program are
    dispersed around the country? Just, for instance, if you
    received an application for first responders versus an
    application for a daycare center, how do you decide which to
    fund and which not?
        Ms. Trevino. That is a good question. Thank you,
    Congressman. We have eligibility criteria that is written by
    statute and reinforced in our regulation. We emphasize public
    safety, education, and healthcare. So those applications that
    address those three areas are weighted by score. The
    applications, when they are received in a state office, are
    then scored and funded based on that score. We do hold some
    reserve money in the national office, and at the end of the
    year, any applications that weren't funded in that state then
    are referred to the national office to compete for the reserve
    and we score them, again, the exact same way based on that
    criteria.
        Mr. Stutzman. Okay. Thank you. I yield back, Mr. Chairman.
        The Chairman. The gentleman from Pennsylvania, Mr.
    Thompson.
        Mr. Thompson. Thank you, Chairman. Thanks to the panelists
    for your testimony today.
        Ms. Trevino, I wanted to talk about housing specifically
    with USDA. It looks like a lot of good programs are out there
    that we do. Specifically, I was interested under the farm bill
    and the title that is there, I have a mixed blessing in my
    Congressional district because of the success of natural gas,
    which has been really good for the economy. Unemployment is
    down and prosperity is up for the first time in a very long
    time in parts of the district. We have an affordable housing
    crisis. It is not one that we are used to in rural America.
    Normally, we have plenty of places available and we don't have
    that today. Are there specific programs under the 2008 Farm
    Bill that would assist--as a result, we see property values
    being pushed up, people on a limited or fixed income can't
    afford the rent anymore. Their rent is being increased
    exponentially, which is great for the property owners. I have
    no criticism of that. So are there programs out there in the
    existing farm bill to assist in a situation like that in any
    way?
        Ms. Trevino. They don't currently exist--Congressman, thank
    you--in the CONACT they are given to us through the Housing Act
    of 1949. We have rental assistance for low-income individuals
    who can't find housing, and that rental assistance allows them
    to live in apartments that would be market-rent and we pay the
    difference, anything they pay based on their income. So as long
    as they don't contribute more than 30 percent of their income
    towards their housing needs, we pay the difference to make up
    for it. It is our largest-funded program, the Rental Assistance
    Program. I believe that in your communities what you are
    finding is an absence of housing and not just the market cost.
    Again, one of the things that we have tried to do is work with
    the communities and encourage them to take these companies and
    to ask them to partner with us and to invest in the communities
    either by building temporary housing or by taking existing
    structures and turning them into single-room occupancy homes.
    So we are trying to be creative in working with our state
    directors to determine how we can best meet any lack of the
    housing that we are seeing in those areas.
        Mr. Thompson. Very good. Thank you.
        Ms. Trevino. You are welcome.
        Mr. Thompson. And I look forward to talking more with you
    about that. And actually I put together a work group in the
    Congressional district to bring all the partners to the table,
    the industry and kind of a public-private partnership to
    address that.
        Ms. Trevino. I look forward to it.
        Mr. Thompson. You mention in your written testimony that
    the Community Facilities Program has provided over $12.7
    billion in funding for healthcare, education, public safety,
    and other essential community services, and more than 40
    percent of the Community Facilities Program investments have
    been made in rural healthcare facilities. Can you further
    elaborate on how these dollars have been spent specifically on
    rural healthcare?
        Ms. Trevino. Yes, sir. Mostly what we do is provide money
    for bricks and mortar and equipment. We do not provide money
    for operational cost, so one of the things that we have been
    very good at is collaborating with Health and Human Services
    and with the HRSA Programs in helping critical access hospitals
    access equipment that they need. So we fund their equipment and
    any type of buildings that they need.
        One of the mandates that HHS has right now is that all
    critical access hospitals in rural America must be tied to
    electronic medical records. And in rural America that is a huge
    need to be able to overhaul your IT needs. And we are providing
    the funding that is needed to partner with them.
        Mr. Thompson. All right. Thank you.
        Ms. Trevino. Yes.
        Mr. Thompson. Now, Mr. Adelstein, there was a lot of
    questions on broadband and it is obviously something everybody
    is very interested in. I appreciate the USDA and the agency's
    work in that area. I wasn't familiar with the numbers that we
    had spent a billion dollars, and frankly we have a billion
    dollars over a number of different funds looking to invest. And
    I know the approach that we are taking as sort of looking at
    different vendors who have different proposals, that type of
    thing. Was there ever any consideration of--because I looked at
    the broadband issue in rural America almost similar to the
    electrification of rural America, and the rural electric
    cooperatives are a great model. They are public-based because
    of the constituency that drives it, those volunteer board. Was
    there ever any consideration of perhaps taking that kind of an
    approach or even partnering with the rural electric
    cooperatives who, frankly, have right-of-ways to the end-user,
    the last mile? All those miles are covered with electricity and
    right-of-ways. Was that ever considered in our looking at how
    we address the broadband issue?
        Mr. Adelstein. Yes, we thought about that a lot. As a
    matter of fact, we went to the National Rural Electric
    Cooperative Association and encouraged them to apply for
    broadband. As a matter of fact, a number of them did when
    Consolidated Electric and Ohio's building--they are using smart
    grid, and down in New Mexico the Electric Cooperative, Kit
    Carson is using it. And again, when they do it, they provide
    smart grid also to their consumers. A number of our awardees
    are telephone cooperatives, real old telecommunications
    cooperatives that we have worked with many of them for 60
    years, 50 years that are some of our most reliable borrowers.
    They pay us back year after year, they know what they are
    doing, they are technically on top of it, and we love working
    with our cooperative borrowers because of their competence,
    their dedication to the community. The model really does work
    for rural America. I agree with you.
        Mr. Thompson. Glad to hear that. Thank you. Thank you, Mr.
    Chairman.
        The Chairman. The chair would recognize the distinguished
    Ranking Member, Mr. Costa, for follow-up questions.
        Mr. Costa. Thank you very much. Very quickly here, just to
    get back to that White House Rural Council and the Executive
    Order. Is it simply going to be Federal officials on this or
    are you going to give an opportunity for local and state
    officials and people of expertise to participate in this?
        Ms. Canales. Ranking Member Costa, the opportunity for
    stakeholders is already underway and also has been a strong
    aspect of the outreach that is occurring to date----
        Mr. Costa. Ma'am, I think the work product is going to be
    better if it is from the bottom up as opposed to the top down.
        Ms. Canales. As I was going to state----
        Mr. Costa. And I would like you to provide some information
    to the chair and myself and other Members of the Subcommittee
    on how that is going to take place, okay?
        Ms. Canales. We have held 100 rural roundtables, meaning
    100 locations throughout the United States with stakeholders
    and have reports based on that.
        Mr. Costa. Give a little brief summary on that. I am not
    talking about War and Peace. I would like a brief, two page
    memo, on what those 100 meetings have done, where they are
    around the country, and who has participated. I would like to
    know, for example, how many have taken place in California and
    whether any of them have taken place in the San Joaquin Valley.
    Somehow if that has taken place, it has missed me.
        [The information referred to is located on p. 1056.]
        Mr. Costa. Mr. Adelstein, you mentioned that the new
    authorization was provided in the farm bill for lending energy
    efficient programs as well as renewable energy. Now, this is a
    question not only of my own but Ranking Member Peterson has an
    interest in this. Can you tell what activities or agencies have
    been lending under for these authorities? And I have two other
    quick questions, so please be brief.
        Mr. Adelstein. Yes. Primarily, for retrofitting, we have an
    initiative that we are working on to have rural electric
    cooperatives work with their members to retrofit their homes to
    save electricity, and they----
        Mr. Costa. Could you give us some facts on that later on
    and submit that for Congressman Peterson and myself and other
    Members so that we know the specifics on it?
        Mr. Adelstein. Will do.
        Mr. Costa. Okay. Many of the entities that you lend to are
    dealing with regulations and settlements under various laws,
    and of course, this Administration and many of us have been
    critical of a lot of the regulations being burdensome and
    unnecessary. Those are included but not limited to the Clean
    Air and Clean Water Acts. Have you in your review seen the
    impact on these symptoms as they serve rural residents and
    their ability to deal with these regulatory requirements? And
    does it impact your ability to lend because of the repayment
    concerns?
        Mr. Adelstein. Well, certainly, both our water and electric
    programs have seen a number of regulatory requirements that
    have required compliance that have resulted in major loans
    being committed. Sometimes it is hard to see which upgrades
    they are doing and ones they are doing just for EPA
    requirements, for example, but they do impact our programs.
    They impact our borrowers.
        Mr. Costa. Well, maybe if you were to highlight those and
    suggest where those are problematic, maybe we might work
    together. Although, frankly, these are things that you don't
    need, I think in many cases, Congressional changes. You can do
    it administratively. I would hope there is a review going on
    there as to what is burdensome, what is working, what is not
    working, and why don't we change it?
        Mr. Adelstein. Well, we do work with our colleagues in
    other agencies on regulatory requirements and let them know
    what impact they are having on our programs. They do increase
    demand for our loan programs in both electric and water.
        Mr. Costa. On the electric, do you have any interactions
    with FERC or various ISOs that regulate the grid?
        Mr. Adelstein. Yes, we do. As a matter of fact, there is an
    interagency working group that we are a part of with the White
    House and the Council on Environmental Quality to accelerate
    citing of transmission and the agency has been very involved
    in----
        Mr. Costa. I know Congressman Peterson and I both have
    concerns--I suspect many of our other colleagues as we are
    looking toward generation of wind power and other types of
    energy production--whether or not landowner-controlled wind
    projects have access to transmission lines? Obviously, those
    are oftentimes opposed by utilities in terms of the generation
    of the electrical power in rural areas.
        Mr. Adelstein. Well, we would like to see distributed
    generation happen. You know, our rural electric co-ops are very
    open to it. Of course, they need to upgrade their systems to be
    capable of having the grids smarter in order to be able to take
    those inputs of electricity. I think it can be a really great
    domestic source of energy, something that we are eager to see
    and we have financed a lot of upgrades in the grid--and in
    smart grid that I think could eventually lead towards
    distributed generation.
        Mr. Costa. Is the Department proposing to make
    recommendations to the Congress on changes that might be made?
        Mr. Adelstein. Well, we are working on an interagency basis
    on this. We have worked on an interagency basis on the smart
    grid. There was a report that was issued by the White House on
    the smart grid that would enable distributed generation in
    terms of transmission and the delicate balance between state
    and local governments. Again, we are not the lead agency
    necessarily but we have been involved with DOI and DOE and FERC
    in these discussions in talking about how it impacts rural
    consumers. We want to make sure that USDA is the voice of these
    rural consumers and rural electric cooperatives in these
    interagency discussions.
        Mr. Costa. Thank you very much, Mr. Chairman, and look
    forward to your follow-through on that additional information I
    requested.
        Mr. Adelstein. Will do.
        The Chairman. One concluding question from the chair and
    then we will conclude the hearing. And thanks to all three of
    you and the Members of the Committee for being here.
        I don't remember which one of you made the estimate.
    Regardless, one of the three of you estimated that there have
    been a quarter of a million jobs created as a result of your
    programs. I guess my question is this. According to a recent
    report of the Government Accountability Office, your
    department, the USDA has indicated that agency staff is now
    required to count the actual numbers of jobs created through
    Rural Development Programs rather than the estimation methods
    that you previously used. When you came up with that specific
    figure for us that you created 250,000 jobs, which system did
    you use? The estimation system? Just try to give me a direct
    answer. I mean it is either one or the other. Or the new system
    that the GAO has indicated that your agency is going to be
    using?
        Ms. Canales. Yes, Mr. Chairman. First of all, I want to
    reaffirm with you created and saved. So saved means jobs
    retention. That is in my testimony.
        The Chairman. Again, that goes back to awfully difficult to
    know that, but regardless, that is a political debate we are
    not going to have.
        Ms. Canales. Okay.
        The Chairman. The issue is which of these two systems, the
    old system or the new system did you use in the save or create
    category?
        Ms. Canales. The system that we are using in regards to
    that is a system that is within every single application that--
    it is based on our loan guarantees that we are making with the
    banks----
        The Chairman. Let me be very specific, okay. I am going to
    be as specific as I can be and if you could be specific with me
    in response, I would be really grateful for that. The GAO
    recently reported in their report on duplication among economic
    development programs, they cited a need to count job creation
    more precisely. In that regard, according to that report, the
    USDA indicated that agency staff is now required to count the
    actual number of jobs created--I guess or saved--through Rural
    Development Programs rather than the estimation methods
    previously used. My specific question is when you gave us that
    figure--\1/4\ of a million jobs created or saved--which system
    were you using? The estimation system or the required specific
    count.
        Ms. Canales. We used both.
        The Chairman. So you interpret the GAO's report and USDA's
    implementation to be that they are not required to use one
    versus the other? You continue to use both?
        Ms. Canales. When an application is made with a bank, you
    use both information. You use what is estimated to be created
    but then you also will have jobs that will be saved as well,
    too.
        The Chairman. I don't mean to be argumentative and I won't
    because I don't think it is the appropriate position of the
    chair, but if you would be willing to provide for us your
    specific area, your department, and USDA provide for Mr.
    Dunlap, who is the Subcommittee Staff Director and his
    counterpart on the Democratic side, let us know specifically
    how you came up with those figures and how that juxtaposes with
    the estimates versus the actuality count that I have made
    reference to and GAO made reference to. That would be very,
    very helpful to us.
        Ms. Canales. We will do so, Mr. Chairman.
        [The information referred to is located on p. 1055.]
        The Chairman. With that, I would invite all the Members of
    the Committee to our field hearing on the 24th of September
    focusing on rural broadband in Springfield, Illinois, at the
    University of Illinois. We have already had a number of Members
    say they are going to attend and we certainly welcome your
    attendance at that meeting.
        So under the rules of the Committee, the record of today's
    hearing will remain open for 10 calendar days to receive both
    opening statements and additional material and supplementary
    written responses from any witness to any questions posed by a
    Member. Therefore, this hearing of the Subcommittee on Rural
    Development, Research, Biotechnology, and Foreign Agriculture
    is adjourned. Thank you all for attending, and we appreciate
    your input.
        [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
     Supplementary Material Submitted by Judith A. Canales, Administrator,
       Rural Business-Cooperative Service, U.S. Department of Agriculture
        During the September 13, 2011 hearing entitled, Agricultural
    Program Audit: Examination of USDA Rural Development Programs, a
    request for information was made to Judith A. Canales, Administrator,
    Rural Business-Cooperative Service, U.S. Department of Agriculture. The
    following is the information submission for the record.
    Insert
              The Chairman. Let me be very specific, okay. I am going to be
            as specific as I can be and if you could be specific with me in
            response, I would be really grateful for that. The GAO recently
            reported in their report on duplication among economic
            development programs, they cited a need to count job creation
            more precisely. In that regard, according to that report, the
            USDA indicated that agency staff is now required to count the
            actual number of jobs created--I guess or saved--through Rural
            Development Programs rather than the estimation methods
            previously used. My specific question is when you gave us that
            figure--\1/4\ of a million jobs created or saved--which system
            were you using? The estimation system or the required specific
            count.
              Ms. Canales. We used both.
              The Chairman. So you interpret the GAO's report and USDA's
            implementation to be that they are not required to use one
            versus the other? You continue to use both?
              Ms. Canales. When an application is made with a bank, you use
            both information. You use what is estimated to be created but
            then you also will have jobs that will be saved as well, too.
              The Chairman. I don't mean to be argumentative and I won't
            because I don't think it is the appropriate position of the
            chair, but if you would be willing to provide for us your
            specific area, your department, and USDA provide for Mr.
            Dunlap, who is the Subcommittee Staff Director and his
            counterpart on the Democratic side, let us know specifically
            how you came up with those figures and how that juxtaposes with
            the estimates versus the actuality count that I have made
            reference to and GAO made reference to. That would be very,
            very helpful to us.
              Ms. Canales. We will do so, Mr. Chairman.

        Since 2009, the programs and services of the Rural Business-
    Cooperative Service (RBS) have or will create or save nearly 250,000
    jobs. The Government Accountability Office (GAO) report, Efficiency and
    Effectiveness of Fragmented Economic Development Programs Are Unclear,
    GAO-11-477R, May 19, 2011, refers to two different methods for
    reporting jobs created/save. One method relies on determining actual
    jobs created/saved once an award has been made. The other method is an
    estimation method based on dollars invested.
        RBS is in the process of moving from the ``estimation'' method to
    the ``actual'' method. Because this transition has been occurring since
    2009 and is still underway, the number of jobs indicated in
    Administrator Canales' testimony represents a combination of these two
    different methods for reporting jobs created/saved.
        The ``estimation'' methodology utilized by RBS includes: (1)
    applying our professional judgment as to the number of jobs created or
    saved reported based on the specific project, including any
    observations during a site visit, (2) applying a formula that is based
    on the dollar amount of the project, and (3) applying a formula that
    estimates direct and indirect employment and other socioeconomic
    benefits.
        In the ``actual'' methodology: upon processing the award of a loan,
    grant, or loan guarantee the projected number of jobs to be created or
    saved is obtained from the applicant or borrower and recorded as actual
    jobs in the agency's database.
        RBS is implementing job verification processes to validate
    applicant or borrower job projections. After closing of the loan or
    grant, and completion of the project, the actual numbers of jobs
    created or saved by the business is verified by the agency and recorded
    in our database. Note that in some instances significant time can
    elapse between the job projections at the time of the award of a loan
    or grant and actual job verifications after the completion of the
    project, start-up or expansion of a business and ramp-up to full
    operations. Agency verifications can be 1-2 years after the loan or
    grant is awarded.
        RBS continues to implement and refine its verification process.
    With the exception of the Agency's Intermediary Relending Program RBS
    is using the ``actual'' methodology, described above, for the balance
    of its programs.
                                     ______

     Submitted Report by Judith A. Canales, Administrator, Rural Business-
              Cooperative Service, U.S. Department of Agriculture
    White House Rural Council
    Feedback from Rural America
    Summer 2011
            ``. . . Getting out of Washington and meeting all of you, and
            seeing how hard you're working, how creative you are, how
            resourceful you are, how determined you are, that just makes me
            that much more determined to serve you as best I can as
            President of the United States.''

            --President Barack Obama
              August 16, 2011
              Peosta, Iowa
              White House Rural Economic Forum
    Contents
      Letter from the Secretary of Agriculture
      Introduction
      A Note About the Numbers
      Most Important Issues
        Breakdown of Issues Discussed
        Rural Economic Forum--Peosta, Iowa
      List of Visits
      Additional Resources
    Letter from the Secretary of Agriculture
        On June 9, 2011, President Obama signed an Executive Order
    establishing the White House Rural Council. Over the past few months,
    the Council has had the opportunity to hear from rural communities
    through roundtable discussions and visits across the country. By
    engaging in open dialogue, top Administration officials have been
    hearing about the most important issues on the minds of rural Americans
    and bringing that message back to Washington.
        Since the establishment of the White House Rural Council, President
    Obama, members of his Cabinet, and others senior Administration
    officials have made nearly 200 visits to rural communities. Through
    these visits, the Council has been listening to the voice of rural
    Americans--to their concerns and aspirations, to what they see as the
    challenges that lay ahead and the opportunities open to them.
        This report provides an overview of what we heard during these
    visits. I look forward to working with the Council on addressing these
    issues and ensuring that rural America moves toward a prosperous and
    thriving future.
        Finally, I would like to thank all of those who hosted and attended
    these visits. Your help and participation is truly appreciated as we
    all work together for rural America.
                Sincerely,

                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Thomas J. Vilsack,
    Secretary of Agriculture & Chair of the White House Rural Council.
    Introduction
        On June 9, 2011, President Obama established the White House Rural
    Council to address challenges in rural America and to build on the
    administration's rural economic strategy. Since the establishment of
    the Council, administration officials have traveled to rural
    communities across the country to discuss the important issues facing
    rural Americans.
        Administration officials traveled to rural communities in 46 states
    and met with rural Americans to hear about the unique challenges they
    are facing and the ways in which the Council can most effectively focus
    its efforts. Officials reported back on what they heard during these
    visits and their feedback is shared in this report.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            President Barack Obama, accompanied by Agriculture Secretary
            Tom Vilsack, holds a breakout session at the White House Rural
            Economic Forum at Northeast Iowa Community College in Peosta,
            Iowa, Aug. 16, 2011, as part of his three-day economic bus tour
            of the Midwest. (Official White House Photo by Pete Souza)

        This report begins with a pie chart we developed based upon the
    information shared with us. It is not a scientific poll, but it
    provides a sense of the most important issues that rural Americans are
    facing.
    A Note About the Numbers:
        These discussions and visits were designed as an opportunity to
    facilitate a candid and direct conversation between rural Americans and
    the Obama administration. The numbers presented here were all reported
    by administration officials moderating discussions and are not designed
    to reflect a scientific survey or poll. The numbers we have compiled
    are not designed to be reflective of all rural Americans--just those
    who participated in these conversations and visits. The views presented
    here are representative of those attending the events and do not
    constitute an endorsement by the White House or the President of the
    United States.
    Map of the Rural Visit Locations

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Most Important Issues
        A breakdown of the issues discussed in our conversations in rural
    America:

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Breakdown of Issues Discussed:
       Education

         Encourage vocational training

         Improve rural education

         Costs of higher education/improve financial assistance

         Focus on research

         Reform No Child Left Behind

         Brain-drain: educated individuals moving out of rural
                communities

         Focus on science & technology

         Focus on education geared toward entrepreneurship

       Government programs and regulations

         Increase certainty and flexibility on regulations for
                rural industry and small businesses

         More timely application processing for contracting

         Streamline reporting requirements and applications

         Increase technical assistance for loans and grants

       Infrastructure

         Improve broadband access in rural areas, including in
                tribal communities

         Improve federal assistance in road infrastructure

         Support water storage projects, levees, rivers, locks,
                and dams

         Support water and wastewater treatment facilities

       Access to capital/business incentives

         Improve access to capital for businesses

         Support small business tax credits and/or financial
                support, including micro loan programs and financial
                support for farmers

         Establish a Rural Community Development Fund where
                rural areas can invest in their own communities and have
                government match any private dollars

         Increased access to early stage and growth capital for
                rural entrepreneurs

       Renewable Energy

         Support for biofuels, including woody biomass

         Encourage local wind energy development

         Streamline and ease regulations for green energy
                development

       Economy & Workforce Concerns

         Focus more on domestic manufacturing

         Immigration and workforce concerns

         Rising cost of living and declining income

         Reform unemployment compensation

         Improve immigration policies to encourage highly-
                skilled students to stay in U.S.

         Focus on economic development opportunities in tribal
                communities

       Agriculture

         Improve resources for new and beginning farmers

         Role of agriculture in our national security,
                including natural disasters

       Healthcare

         Need solutions to lower current/projected costs and
                burden on businesses/families

         Support broadband and telemedicine programs for rural
                healthcare

         Targeted substance abuse policy to address challenges
                of rural communities

       Trade

         Improve trade policy and make U.S. competitive in a
                global market

       Quality of Life

         Improve quality of life in rural communities for
                economic growth and job creation

         Continued support for rural public safety

       Conservation and Environmental Concerns

         Rewards for smart farming and land conservation

         Environmental quality of water sources Importance of
                soil conservation

         Growing the outdoor recreation economy

         Collaboration in advancing sustainable natural
                resource economies

       Other issues

         Farm Bill

         Government spending

         Housing market

         Tourism in rural America

         Auto-industry

         Regional cooperation in rural communities
    Rural Economic Forum--Peosta, Iowa
    August 16, 2011
        In August, President Obama embarked on a three-day, three state bus
    tour of the Midwest that included stops in five communities. The Rural
    Forum itself was held at the Northeast Iowa Community College in
    Peosta, Iowa on August 16, 2011. During the Forum, five breakout group
    discussions were moderated by Cabinet members focusing on key issues
    facing rural America. President Obama participated in the first two
    breakout sessions.

    Growing Rural Small Business

      Moderated by Karen Mills, Administrator of the Small Business
        Administration

    Promoting Agricultural Innovation and Renewable Energy Jobs

      Moderated by Tom Vilsack, Secretary of Agriculture

    Strengthening the Middle Class in Rural America

      Moderated by Shaun Donovan, Secretary of Housing and Urban
            Development and Melody Barnes, Chair of the Domestic Policy
            Council

    Creating Jobs through Conservation, Outdoor Recreation, and Tourism

      Moderated by Ken Salazar, Secretary of Interior and Nancy Sutley,
            Chair of the Council on Environmental Quality

    Building Economic Opportunity for Rural Business through Infrastructure
        Investments

      Moderated by Ray LaHood, Secretary of Transportation

        Key Themes and Issues:

       Importance of rural America in contributing to the economic
            health of the country

       Need to attract capital and increase available credit for
            rural communities

       Importance of small business support for rural communities

       Regional planning and development has been successful and
            should continue to be supported

       Importance of continuing to support the innovation occurring
            in renewable energy

       Increased certainty and flexibility on regulations

       Important to attract new, young farmers--reduce barriers to
            getting into farming.

       Broadband is key to providing economic opportunities. The
            ability to telecommute or have access to distance learning and
            telemedicine is extremely important to rural communities.

       Need for increased opportunities and incentives for
            physicians to provide service in rural areas

       Technical assistance on accessing Federal programs is
            important to small, rural communities.

       Modernization of existing federal agriculture subsidies

       Importance of easements in mitigating future flood impacts
            on both private and public lands

       Rewards and incentives for farmers that use good
            conservation practices
    List of Visits:
        Below is the full list of visits that Obama Administration
    officials made to rural America during the summer of 2011. These visits
    included tours of rural communities, businesses and farms as well as
    roundtable discussions with rural Americans.

    June 9, SBA Regional Administrator John Shoraka, Clarksburg, West
        Virginia

    June 10, USDA State Directors Dan Steinkruger and Maxine Moul, Ceresco,
        Nebraska

    June 17, USDA Deputy Secretary Kathleen Merrigan, York, Pennsylvania

    June 20, USDA Under Secretary Dallas Tonsager, Salt Lake City, Utah

    June 22, USDA Deputy Under Secretary Cheryl Cook, Dubuque, Iowa

    June 23, HUD Assistant Secretary Mercedes Marquez and USDA State
        Director Vicki Walker, Redmond, Oregon

    June 24, SBA Regional Administrator Dan Hannaher and USDA State
        Director Derrel Carruth, Casper, Wyoming

    June 26, USDA Under Secretary Ed Avalos, Denver, Colorado

    June 27, White House ONDCP Director Gil Kerlikowske and ARC Co-Chair
        Earl Gohl, Johnson City, Tennessee

    June 28, GSA Regional Administrator Sue Damour, Lower Brule Sioux
        Tribe, SD

    June 29, SBA Regional Administrator Dan Hannaher, Fargo, North Dakota

    June 30, SBA Regional Administrator Calvin Goings, Puyallup, Washington

    July 5, VA Secretary Eric Shinseki, Bismarck, North Dakota

    July 7, VA Secretary Eric Shinseki, Bozeman, Montana

    July 7, VA Secretary Eric Shinseki, Helena, Montana

    July 7, VA Secretary Eric Shinseki, Billings, Montana

    July 8, VA Secretary Eric Shinseki, Billings, Montana

    July 8, USDA Under Secretary Ed Avalos, Billings, Montana

    July 11, USDA Deputy Secretary Kathleen Merrigan, Richmond, Virginia

    July 11, ARC Co-Chair Earl Gohl, Kingsport, Tennessee

    July 12, USDA Administrator Judy Canales, Hidalgo, Texas

    July 12, USDA Under Secretary Michael Scuse, Springfield, Illinois

    July 13, GSA Regional Administrator Sue Damour, Billings, Montana

    July 14, DOI Secretary Ken Salazar, Madison, Wisconsin

    July 14, SBA Administrator Karen Mills, Fairmont, West Virginia

    July 15, DOI Secretary Ken Salazar, Crow Reservation, Montana

    July 15, DOI Secretary Ken Salazar, Ovando, Montana

    July 15, DOI Secretary Ken Salazar, Kalispell, Montana

    July 18, ED Deputy Assistant Secretary John White, Greenville,
        Tennessee

    July 18, USDA Administrator Jonathan Adelstein, Nelsonville, Ohio

    July 18, DOC Under Secretary David Kappos and USDA State Director
        Virginia Manuel, Bangor, Maine

    July 18, State Department Senior Advisor for Innovation Alec Ross,
        Cumberland, Maryland

    July 20, USDA Secretary Tom Vilsack, Annapolis, Maryland

    July 22, ARC Co-Chair Earl Gohl, Oak Ridge, Tennessee

    July 22, HHS Regional Director Joanne Grossi, Wise, Virginia

    July 22, EPA Regional Administrator Jared Blumenfeld, Ibapah, Utah

    July 23, ARC Co-Chair Earl Gohl, Abingdon, Virginia

    July 25, DOE Secretary Steven Chu, Concord, North Carolina

    July 25, GSA Regional Administrator Sue Damour, Jamestown, North Dakota

    July 26, ARC Co-Chair Earl Gohl, Spartanburg, South Carolina

    July 26, USDA Administrator Jonathan Adelstein, Charles City, Iowa

    July 27, SBA Regional Administrator John Shoraka, Lancaster,
        Pennsylvania

    July 27, USDA Under Secretary Harris Sherman, Murfreesboro, Tennessee

    July 28, ARC Co-Chair Earl Gohl and Commerce Deputy Under Secretary
        Nancy Potok, Lewisburg, Pennsylvania

    July 29, ARC Co-Chair Earl Gohl and USDA State Directors Bill Wehry and
        Tom Williams, Williamsport, Pennsylvania

    July 31, HHS Regional Director Herb Schultz, Flagstaff, Arizona

    August 1, HHS Secretary Kathleen Sebelius, Aurora, Missouri

    August 1, HHS Secretary Kathleen Sebelius, Joplin, Missouri

    August 1, USDA Deputy Under Secretary Ann Mills, Thibodaux, Louisiana

    August 1-3, EPA Regional Administrator Karl Brooks, Kansas

    August 2, DOT Deputy Secretary John Porcari and USDA Under Secretary Ed
        Avalos, Groves City, Ohio

    August 2, GSA Regional Administrator Ann Kalayil, Princeton, IL

    August 2, DOT Secretary John Porcari and USDA Under Secretary Ed
        Avalos, Columbus, Ohio

    August 2, HHS Regional Director Herb Schultz, Litchfield, Arizona

    August 2, EPA Regional Administrator Jared Blumenfeld, Loleta,
        California

    August 3, USDA Under Secretary Michael Scuse, Berlin, Vermont

    August 3, SBA Assistant Administrator Ana Harvey, Newton, Iowa

    August 3, EPA Regional Administrator Al Armendariz, Irving, Texas

    August 3, SBA Regional Administrator Calvin Goings and USDA State
        Director Mario Villanueva, Elma, Washington

    August 3, ARC Co-Chair Earl Gohl, Greeneville, Tennessee

    August 3, DRA Federal-Chairman Chris Masingill and USDA State Director
        Bobby Goode, Union City, Tennessee

    August 3, EPA Administrator Lisa Jackson, Lititz, Pennsylvania

    August 3, HHS Regional Director Joanne Grossi, Wheeling, West Virginia

    August 3, HHS Regional Director Susan Johnson, Anchorage, Alaska

    August 4, White House Senior Policy Advisor for Native American Affairs
        Kimberly Teehee and federal agency colleagues, Washington, DC

    August 4, HHS Regional Director Herb Schultz, Fresno, California

    August 4, USDA Secretary Tom Vilsack, West Allis, Wisconsin

    August 4, DOT Deputy Administrator Greg Nadeau, Wilmington, Ohio

    August 4, HUD Assistant Secretary John Trasvina, Lampeter, Pennsylvania

    August 4, ARC Co-Chair Earl Gohl, Morristown, Tennessee

    August 4, DRA Federal-Chairman Chris Masingill, Mayfield, Kentucky

    August 4, FCC Chairman Julius Genachowski, Jeffersonville, Indiana

    August 5, GSA Regional Administrator George Northcroft, Ketchikan,
        Alaska

    August 5, White House OSTP Aneesh Kopra, Blacksburg, Virginia

    August 6, HHS Regional Director Herb Schultz, Pomona, California

    August 8, ED Linda Hall, Spokane, Washington

    August 9, CEQ Chair Nancy Sutley, Grant County, Oregon

    August 9, EPA Regional Administrator Judith Enck and USDA State
        Director Paul Hlubik, Augusta, New Jersey

    August 9, ARC Co-Chair Earl Gohl, London, Kentucky

    August 9, GSA Administrator Sue Damour, Cheyenne, Wyoming

    August 9, ED Linda Hall, Spokane, Washington

    August 10, GSA Administrator Sue Damour, Salt Lake City, Utah

    August 10, ED Secretary Arne Duncan, Nashville, Tennessee

    August 10, HHS Regional Director Christie Hager, Dexter, Maine

    August 10, HHS Regional Director Jaime Torres, Buffalo, New York

    August 10, DOT Administrator Peter Appel, Ames, Iowa

    August 10, CEQ Chair Nancy Sutley, Deschutes County, Oregon

    August 10, ED Deputy Assistant Secretary John White, St. Peters,
        Minnesota

    August 10, SBA Regional Administrator Calvin Goings and USDA State
        Directors Richard Rush and Wally Hedrick, Middleton, Idaho

    August 11, HHS Regional Director Christie Hager, Machais, Maine

    August 11, HHS Regional Director Christie Hager, Lubec, Maine

    August 11, SBA Regional Administrator Calvin Goings, Boise, Idaho

    August 11, DRA Federal-Chairman Chris Masingill and USDA State Director
        Trina George, Clarksdale, Mississippi

    August 11, DOT Administrator Peter Appel, Park City, Utah

    August 11, EPA Regional Administrator Karl Brooks, St. Joseph, Missouri

    August 11, HHS Regional Director Marguerite Salazar, Denver, Colorado

    August 11, HHS Regional Director Herb Schultz, Fresno, California

    August 12, ARC Co-Chair Earl Gohl, Sylva, North Carolina

    August 12, USDA Deputy Under Secretary Karis Gutter, Helena, Arkansas

    August 12, USDA Under Secretary Cathy Woteki, Wamego, Kansas

    August 12, SBA Regional Administrator Jorge Silva-Puras, DOT
        Administrator Karen Rae, USDA State Directors James Barber and Jill
        Harvey, Troy, New York

    August 12, DOT Administrator, David Strickland, Waxahatchie, Texas

    August 12, HHS Regional Director Joanne Grossi, Huntington, West
        Virginia

    August 12, HHS Regional Director Herb Schultz, Petaluma, California

    August 15, President Obama, Cannon Falls, Minnesota

    August 15, President Obama, Decorah, Iowa

    August 15, USDA Deputy Under Secretary Ann Wright and USDA Senior
        Advisor Brandon Willis, Brainerd, Minnesota

    August 15, USDA Administrator Judy Canales, Covington, Louisiana

    August 15, USDA Deputy Under Secretary Janey Thornton, Frankfort,
        Kentucky

    August 16, President Obama, Peosta, Iowa

    August 16, USDA Under Secretary Ed Avalos, Dothan, Alabama

    August 16, USDA Administrator Judy Canales, Marianna, Florida

    August 16, USDA Administrator Audrey Rowe, Newton, Georgia

    August 16, SBA Regional Administrator Dan Hannaher and USDA State
        Director Matt Jones, Kalispell, Montana

    August 16, HHS Regional Director Susan Johnson, Squaxin, Washington

    August 16, USDA Faith Based Director Max Finberg, Dubuque, Iowa

    August 17, President Obama, Atkinson, Illinois

    August 17, President Obama, Alpha, Illinois

    August 17, ARC Co-Chair Earl Gohl, Florence, Alabama

    August 17, VA Secretary Eric Shinseki, Las Vegas, Nevada

    August 17, EPA Regional Administrator Karl Brooks, Des Moines, Iowa

    August 17, EPA Regional Administrator Shawn Garvin and HUD Regional
        Administrator Jane Vincent, Lincoln, Delaware

    August 17, HHS Regional Director Joanne Grossi, Charleston, West
        Virginia

    August 18, ARC Co-Chair Earl Gohl, Walton, New York

    August 18, HHS Regional Director Marjorie Petty, Albuquerque, New
        Mexico

    August 18, HHS Regional Director Marjorie Petty, Los Luna, New Mexico

    August 18, HHS Regional Director Susan Johnson, Bethel, Alaska

    August 18, USDA Under Secretary Dallas Tonsager, Howard, South Dakota

    August 18, DRA Co-Chairman Chris Masingill, Selma, Alabama

    August 18, USDA Administrator Judy Canales, Sedalia, Missouri

    August 19, ARC Co-Chair Earl Gohl, Cortland, New York

    August 19, ED Director Karen Cator, Mooresville, North Carolina

    August 19, HHS Regional Director Marjorie Petty, Espanola, New Mexico

    August 19, HHS Regional Director Marjorie Petty, Moriaty, New Mexico

    August 19, DOI Assistant Secretary Marcilynn Burke, Fairbanks, Alaska

    August 19, USDA Secretary Tom Vilsack, Des Moines, Iowa

    August 19, DOC Under Secretary Jane Lubchenco, Morro Bay, California

    August 19, EPA Regional Administrator Judith Enck, Sanarac Lake, New
        York

    August 19, GSA Regional Administrator Sue Damour, Rapid City, South
        Dakota

    August 19, DOT Secretary Ray LaHood, Springfield, Illinois

    August 19, VA Secretary Eric Shinseki, Omaha, Nebraska

    August 19, EPA Regional Administrator Jim Martin, Douglas, Wyoming

    August 20, DOC Under Secretary Jane Lubchenco, Newport, Oregon

    August 21, USDA Secretary Tom Vilsack, Brooklyn, Michigan

    August 21, USDA Under Secretary Harris Sherman, Sitka, Alaska

    August 22, USDA Secretary Tom Vilsack, Lansing, Michigan

    August 22, USDA Secretary Tom Vilsack, Battle Creek, Michigan

    August 22, USDA Secretary Tom Vilsack, Sparta, Michigan

    August 22, DOI Assistant Secretary Gail Adams, Flat Rock, North
        Carolina

    August 22, HUD Secretary Shaun Donovan, Albuquerque, New Mexico

    August 22, USDA Senior Advisor Janie Hipp, Oklahoma City, Oklahoma

    August 22, DOI BLM Director Bob Abbey, Elko, Nevada

    August 23, DOI Assistant Secretary Anne Castle and USDA State Director
        Alan Stephens, Maricopa, Arizona

    August 23, DOC Under Secretary Jane Lubchenco, Homer, Alaska

    August 23, DOT Administrator David Strickland, Aiken, South Carolina

    August 23, USDA Under Secretary Harris Sherman, Ketchikan, Alaska

    August 23, EPA Regional Administrator Gwen Fleming, Pasco County,
        Florida

    August 23, SBA Regional Administrator John Shoraka, Lewisburg, West
        Virginia

    August 23, USDA Under Secretary Dallas Tonsager and SBA Regional
        Administrator Patricia Brown-Dixon, Grinnell, Iowa

    August 23, USDA State Director Bill Menning, West Union, Iowa

    August 23, DRA Co-Chairman Chris Masingill and USDA Deputy Under
        Secretary Doug O'Brien, Bastrop, Louisiana

    August 23, USDA Under Secretary Cathy Woteki, Greenville, South
        Carolina

    August 23, SBA Regional Administrator Jeanne Hulit and USDA State
        Director Donovan Todd, Orono, Maine

    August 23, SBA Regional Administrator Dan Hannaher, Windsor, Colorado

    August 23, GSA Regional Administrator Shyam Reddy, SBA Regional
        Administrator Cassius Butts and USDA State Directors Vernita Dore
        and Laurie Lawson, Columbia, South Carolina

    August 24, GSA Regional Administrator Martha Johnson, Montpelier,
        Vermont

    August 24, USDA Administrator Jonathan Adelstein, Fairbanks, Alaska

    August 24, SBA Regional Administrator Jeanne Hulit, Exeter, New
        Hampshire

    August 24, DRA Co-Chairman Chris Masingill, USDA Deputy Under Secretary
        Doug O'Brien, DOC Assistant Secretary John Fernandez, Pine Bluff,
        Arkansas

    August 24, SBA Regional Administrator Elizabeth Echols, Fernley, Nevada

    August 24, HHS Regional Director Joanne Grossi, Harrisburg,
        Pennsylvania

    August 25, HUD Chief of Staff Laurel Blatchford, Berkeley Springs, West
        Virginia

    August 25, ARC Co-Chair Earl Gohl, Holly Springs, Mississippi

    August 25, EPA Regional Administrator Al Armendariz, Falcon Heights,
        Minnesota

    August 25, DOC Under Secretary Jane Lubchenco, Barrow, Alaska

    August 25, DOC Under Secretary Jane Lubchenco, Wainwright, Alaska

    August 26, HHS Regional Director Marguerite Salazar, Rifle, Colorado

    August 27, HHS Regional Director Marguerite Salazar, Grand Junction,
        Colorado

    August 29, HHS Regional Director Anton Gunn, Marrianna, Florida

    August 29, HHS Acting Regional Director James Galloway, Lawrence,
        Michigan

    August 29, SBA Regional Administrator Jorge Silva-Puras, Ponce, Puerto
        Rico

    August 30, SBA Regional Administrator Dan Hannaher, Dickinson, North
        Dakota

    August 30, DOT Administrator Anne Ferro, Bismarck, North Dakota

    August 30, DOT Administrator David Strickland, East Liberty, Ohio

    August 30-September 1, EPA Regional Administrator Curt Spaulding and
        USDA State Director Virginia Manuel, Maine

    August 30, GSA Regional Administrator Shyam Reddy, Oxford, Mississippi

    August 31, VA Secretary Eric Shinseki, St. Paul, Minnesota

    September 1, VA Secretary Eric Shinseki and USDA State Director John
        Whitaker, Indianola, Iowa

    September 1, EPA Regional Administrator Shawn Garvin, Timonium,
        Maryland

    September 1, EPA Regional Administrator Jim Martin, Utah

    September 1, USDA Acting Deputy Under Secretary Rebecca Blue, Huron,
        South Dakota

    September 1, USDA Acting Deputy Under Secretary Rebecca Blue,
        Brookings, South Dakota

    September 1, HHS Regional Director Marguerite Salazar, Alamosa,
        Colorado

    September 6, EPA Regional Administrator Dennis McLerran, Yakima,
        Washington

    September 6, ARC Co-Chair Earl Gohl, Prestonsburg, Kentucky

    September 8, EPA Regional Administrator Al Armendariz, Dallas, Texas

    September 9, HHS Administrator Mary Wakefield HHS Administrator Judy
        Baker and USDA State Director Bill Menner, Atlantic, Iowa

                             Department References:

    ARC--Appalachian Regional            GSA--General Services
     Commission                           Administration
    CEQ--Council on Environmental        HHS--Department of Health and Human
     Quality                              Services
    DOC--Department of Commerce          HUD--Department of Housing and
                                          Urban Development
    DOE--Department of Energy            ONDCP--White House Office of
    DOI--Department of Interior           National Drug Control Policy
    DOT--Department of Transportation    OSTP--White House Office of Science
    DRA--Delta Regional Authority         and Technology Policy
    ED--Department of Education          SBA--Small Business Administration
    EPA--Environmental Protection        USDA--U.S. Department of
     Agency                               Agriculture
    FCC--Federal Communications          VA--Veterans Affairs
     Commission

    Additional Resources:
    White House Rural Council
       Stay updated on upcoming announcements and work by the
            Council

         http://www.whitehouse.gov/administration/eop/rural-
                council

       Sign-up for email updates and continue to provide us with
            feedback

         http://www.whitehouse.gov/administration/eop/rural-
                council/about/email
    Rural America and the President's Jobs Plan:
       http://www.whitehouse.gov/blog/2011/09/09/rural-america-and-
            presidents-jobs-plan
    President Obama's Rural Tour:
       http://www.whitehouse.gov/administration/eop/rural-council/
            rural-tour-2011
                                     ______

                              Submitted Questions
    Response from Hon. Jonathan S. Adelstein, Administrator, Rural
            Utilities Service, U.S. Department of Agriculture
    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois
        Question 1. Mr. Adelstein, you highlighted the Community Connect
    Grant Program which provides funding to establish broadband service
    where none exists. Why are you not focusing on completely un-served
    area in ALL of our programs?
        Answer. The Community Connect grant program has been highly
    successful in bringing broadband to single communities where no
    broadband exists. These communities are unserved because private
    companies are unable to make a business case to expand service into
    these areas.
        Our loan programs target such unserved areas, but even with lower
    interest rates, applicants generally cannot develop a business case
    based on the loan product alone. This is why the Recovery Act Broadband
    Initiatives Program (BIP) was so successful--the statute provided RUS
    with the authority to fund projects with grants, loans and loan/grant
    combinations. Through this flexibility, Rural Development could tailor
    a financing package that best serves the needs of the area. This model
    is successfully used in other Rural Development areas such as our Water
    and Environmental programs. This flexibility allows us to customize a
    financing package consistent with the needs and financial resources of
    the community.

        Question 2. Mr. Adelstein, there are several distinct programs
    mentioned today which provide broadband funding. In your view, are
    these programs utilized to achieve basically the same goal? What are
    the most common elements among the programs? How do they specifically
    differ?
        Answer. Our telecommunication programs have differing statutory
    mandates and goals. For example, Community Connect brings broadband to
    a single community that has no broadband service. Our Distance Learning
    and Telemedicine (DLT) finances end-user equipment in rural areas that
    already have broadband, but need assistance to expand education and
    health resources. Our traditional infrastructure loan program
    (authorized under Title II of the Rural Electrification Act) and the
    broadband program (authorized in the Farm Bill) do have similar goals;
    however, they have starkly different statutory requirements. Since the
    same staff administers both programs and shares forms, Information
    Technology (IT) systems, etc., the Agency has already streamlined
    processes to the extent possible.

        Question 3. Mr. Adelstein, would you agree that the importance of
    broadband is to create coverage for all un-served individuals in the
    United States? With the increased budget pressures we are facing, do
    you feel it is in good practice to continue to allow RUS to fund
    broadband services in areas that are already covered? Do you think it
    be more important to invest the tax-payers dollars into areas where
    broadband does not exist, as opposed to continuing to allow funding in
    places that have already achieved the primary goal of broadband access?
        Answer. I believe that rural America deserves the same quality of
    broadband service that is deployed in urban America. Broadband creates
    jobs today and builds the foundation for future economic development
    and job creation.
        The term broadband means different things to different people. Some
    define broadband to include any community with dial-up Internet
    service. Some say a community has broadband where it is available
    within the town limits, but not to the anchor institutions and families
    outside the community's corporate limits. Our broadband programs are
    designed to help communities access the quality of service that meets
    21st Century needs of modern businesses, health care providers,
    emergency responders, educational institutions and others.
        Rural America cannot afford a further deepening of the digital
    divides. Businesses and good-paying jobs will not grow in rural America
    without true high-speed broadband. Further, recent studies report that
    young Americans will leave communities that do not have access to
    broadband.
    Questions Submitted By Hon. Glenn Thompson, a Representative in
            Congress from Pennsylvania
        Question 1. Over the history of the REDLG program, how many total
    loans and grants have been made?
        Answer. Since inception of the program:

       494 REDLG loans totaling $235,205,564

       491 REDLG grants totaling $139,527,701

        Question 2. There are several eligible applicants for REDLG funds.
    To what types of organizations have those grants and loans been made,
    and what are the relative award totals in each category? What is the
    total amount awarded by state?
        Answer. Telephone and electric utilities that serve customers in
    rural areas and that are organized as not-for-profit cooperatives, for-
    profit corporations and public bodies are eligible for Rural Economic
    Development Loans and Grants (REDLGs).
        Total number and amount of loans and grants by Category:

    ----------------------------------------------------------------------------------------------------------------

    ----------------------------------------------------------------------------------------------------------------
                                                        Telephone
    ----------------------------------------------------------------------------------------------------------------
                                          Loans
                                          Grants
                                          Total
    ----------------------------------------------------------------------------------------------------------------
                                  Number        Amount         Number        Amount         Number        Amount
    ----------------------------------------------------------------------------------------------------------------
    Cooperatives                       50      $22,462,492          40       $9,974,099          90      $32,436,591
    Corporations                       30      $12,032,806          22       $5,657,000          52      $17,689,806
    Other                               3         $993,000           1         $300,000           4       $1,293,000
                              --------------------------------------------------------------------------------------
      Subtotal                         83      $35,488,298          63      $15,931,099         146      $51,419,397
    ----------------------------------------------------------------------------------------------------------------
                                                        Electric
    ----------------------------------------------------------------------------------------------------------------
    Cooperatives                      300     $148,101,635         320      $94,270,299         620     $242,371,934
    Corporations                       92      $44,078,944          85      $22,856,303         177      $66,935,247
    Other                              16       $6,836,687          11       $3,020,000          27       $9,856,687
    Public Body                         3         $700,000          12       $3,450,000          15       $4,150,000
      Subtotal                        411     $199,717,266         428     $123,596,602         839     $323,313,868
                              --------------------------------------------------------------------------------------
        Total                         494     $235,205,564         491     $139,527,701         985     $374,733,265
    ----------------------------------------------------------------------------------------------------------------

        The Total number and amount of loans and grants by State:

    ------------------------------------------------------------------------
              State                   Number                  Amount
    ------------------------------------------------------------------------
                Alabama                       41             $14,915,400
                Arizona                        7              $1,894,300
               Colorado                        6              $2,620,000
                Florida                        6              $1,801,660
                Georgia                       26             $13,710,000
                 Hawaii                        3                $900,000
                   Iowa                      193             $61,372,207
               Illinois                       20             $10,410,000
                Indiana                        4              $1,590,000
                 Kansas                      104             $40,201,030
               Kentucky                       35             $15,076,469
                       Louisiana               3              $1,640,000
               Michigan                        8              $3,221,203
              Minnesota                      113             $39,599,568
               Missouri                       38             $16,916,100
            Mississippi                       21             $12,371,687
                Montana                       12              $4,294,805
         North Carolina                       36             $12,060,000
           North Dakota                       36             $12,341,850
               Nebraska                       20              $6,638,000
          New Hampshire                        1                $300,000
             New Mexico                       10              $3,950,000
               New York                        1                $281,666
                   Ohio                        5              $1,316,600
               Oklahoma                       24              $6,745,537
                 Oregon                        5              $2,000,000
           Pennsylvania                        6              $3,020,000
         South Carolina                       25             $14,732,360
           South Dakota                       64             $20,946,000
              Tennessee                       57             $23,356,481
                  Texas                        4              $1,245,000
               Virginia                        7              $9,860,000
                Vermont                        1                $600,000
             Washington                        3                $604,000
              Wisconsin                       36             $11,101,342
                Wyoming                        4              $1,100,000
                             -----------------------------------------------
      Total.................                 985            $374,733,265
    ------------------------------------------------------------------------

    Question Submitted By Hon. Randy Hultgren, a Representative in Congress
            from Illinois
        Question. I understand that the RUS will not lend its money to
    overbuild an area where there is an existing RUS borrower because doing
    so would put the RUS' investment at risk. Doesn't that same logic apply
    to the use of RUS money to overbuild an existing broadband provider
    financed by a local bank? Should the government really be in the
    business of putting private investment at risk?
        Answer. Our goal at Rural Development is to finance broadband
    deployments that create jobs today and lay the foundation for economic
    development and job creation in the future. The last farm bill, enacted
    in 2008, required that 25 percent of the proposed service territory be
    unserved and the remaining 75 percent be served by not more than three
    competitors. The farm bill recognized that competition is healthy and
    often necessary to extend broadband to the most unserved areas in rural
    America. Our regulations implementing the 2008 Farm Bill codified these
    statutory requirements. Further, the new regulations allow for RUS to
    help an existing borrower expand services if the incumbent is not
    providing broadband at enough capacity or speed to meet the needs of
    business.
    Questions Submitted By Hon. Collin C. Peterson, a Representative in
            Congress from Minnesota
        Question 1. You mentioned the new authorization that was provided
    in the 2008 Farm Bill to lend for energy efficiency programs as well as
    renewable energy. Can you tell us what activities your agency is
    lending for under these authorities?
        Answer. Our current obligations (under existing statute and
    regulation) for renewable energy in fiscal year 2011 total $294 million
    in new loans for electric generation and distribution and $7.28 million
    for energy efficiency improvements through RUS programs. This is in
    addition to the significant funding support for energy efficiency and
    renewable energy through Rural Development's suite of Business and
    Cooperative Programs.
        Though minor compared to RUS's total loan portfolio, RUS is working
    to support energy efficiency projects authorized under the 2008 Farm
    Bill. RUS has drafted a regulation proposing a comprehensive retail
    energy efficiency initiative. This regulation is in the final stages of
    internal clearance. The Agency anticipates implementation of this
    regulation in Fiscal Year 2012.
        Since the early 1980's the Rural Utilities Service has allowed
    borrowers (rural electric cooperatives) to defer principal payments for
    up to 84 months and use the funds to assist consumers in implementation
    of energy efficiency improvements to their homes. As of the end of
    August, 2011, 365 rural electric borrowers have used $206 million in
    deferred principal to assist their consumers.
        Last year in support the White House initiative on Recovery through
    Retrofit, USDA Rural Development created the Rural Economic Development
    Energy Efficiency Effort which combines the efforts of the Rural
    Utilities Service, Rural Business-Cooperative Service and the Rural
    Housing Service, working in concert with the electric cooperatives and
    using existing authorities and funding. Under this effort Rural
    Development makes a Rural Economic Development Loan to an electric
    utility, typically a cooperative, which in turn passes the funds to a
    for profit or nonprofit entity to use as working capital to assist
    consumers in making energy efficiency improvements.

        Question 2. Many of the entities that you lend to are dealing with
    regulations and settlements under various Federal laws, including the
    Clean Air and Clean Water Acts. Have you seen an impact on systems that
    serve rural residents, and their ability to deal with these regulatory
    requirements? Does it impact your ability to lend to them because of
    repayment concerns?
        Answer. When rural communities incur costs associated with
    compliance with new and existing regulatory standards, the level of
    financial impact depends on a number of factors.
        For the Water and Environmental Programs (WEP), these factors
    include the type and size of existing treatment facilities and
    infrastructure, the quality of the current water source and the
    regulatory standard itself. As most rural systems are operated on a
    not-for-profit basis by municipalities and water associations, many
    rural communities do not have the additional financial resources needed
    to fully address the systems' needs, including needs related to
    compliance.
        As a result, changes in regulatory standards can be one variable in
    the demand for RD funding. We do our best to work with applicants to
    find a loan/grant package that works for the community, makes the best
    use of RD and leveraged funds, and keeps payments affordable while
    addressing environmental and regulatory requirements.
        RD is also working with our colleagues in regulatory agencies to
    improve their understanding of the impact of new requirements on rural
    systems.

        Question 3. Do you have any interactions with FERC and the various
    ISOs that regulate the movement of electricity on to the grid? Do you
    feel that these entities could be doing more to ensure that distributed
    energy production such as landowner controlled wind projects have
    access to transmission lines as opposed to the large, often out of
    state, utilities?
        Answer. We have had discussions with FERC and serve on committees
    examining these issues. Constantly balancing supply and demand within a
    regional transmission system and attempting to integrate small,
    intermittent loads such as wind resources is challenging, but all
    parties are encouraged that it can be done as the capacity of the grid
    is improved and planning models become more sophisticated.
    Response from Judith A. Canales, Administrator, Rural Business-
            Cooperative Service, U.S. Department of Agriculture

        Question 1. Ms. Canales, RBS administers Rural Cooperative
    Development Grants which are used to provide funds for value-added
    agricultural market development projects (VAPG), small and socially-
    disadvantaged producer grants, and other subprograms and initiatives.
    For those grants which are primarily given to start or expand a
    business, are there other lending or re-lending programs which might be
    suitable to assist farmers? Do you think there may be some
    administrative savings in combining similar programs to reduce overhead
    and confusion among applicants?
        Answer. There are three grant programs funded under the Rural
    Cooperative Development Grant umbrella:

       Value-Added Producer Grant (VAPG),

       Rural Cooperative Development Grant (RCDG), and

       Small, Socially-Disadvantaged Producer Grant (SSDPG).

        VAPG is unique within USDA in that it awards grants to independent
    producers of agricultural commodities for planning activities, such as
    feasibility studies and business plans; and for working capital
    expenses, such as labor, inventory, and advertising. The planning
    grants often provide incentive for producers to find innovative ways to
    market value-added agricultural products and the working capital grants
    provide much-needed cash during the first few years of operation of a
    venture, helping to ensure the venture's success. This program has been
    instrumental in launching numerous new, and often innovative, rural
    businesses and assisting others with expansion. Since its inception,
    VAPG has funded 1,440 projects throughout rural America. In 2010, VAPG
    funded 196 projects across 45 states and Puerto Rico. Over 60 percent
    of awards made in 2010 were made beginning or socially-disadvantaged
    farmers or ranchers and small to medium-sized family farms. Awards for
    project planning activities--feasibility studies, business and
    marketing plans--were made to 72 applicants. Funding for working
    capital--operating costs associated with processing and marketing
    value-added products--was awarded to 124 applicants. Projects included
    local food initiatives linking farmers directly to consumers and local
    institutional buyers such as schools and hospitals; innovative
    technologies for on-farm generation of energy and by-products, as well
    as development of niche markets for specialty products which bring a
    larger share of the consumer dollar back to agricultural producers.
        RCDG and SSDPG are similar in that both focus on providing funding
    for technical assistance and training for rural producers and business,
    rather than direct financial assistance. Specifically, RCDG funds
    centers of cooperative development, which provide assistance related to
    the start-up, expansion and operational improvement of rural
    businesses, especially cooperatives and other mutually-owned
    businesses. The SSDPG program funds technical assistance and training
    specifically for socially-disadvantaged agricultural producers via
    existing cooperatives or associations of cooperatives.
        We do see complementary relationships with some of our lending and
    re-lending programs. Programs like VAPG, RCDG, and SSDPG emphasize
    financing and technical support during the initial stages of new
    business ventures begun by farmers (or other applicants). However,
    grantees cannot use awards made under the Rural Cooperative Grant
    umbrella for purchasing or improving buildings, facilities or
    equipment. Thus, they may need additional project capital as the
    business evolves or expands. Other RBS programs can provide capital for
    facilities and equipment to the applicant's new business venture. We
    strongly encourage all applicants to explore all potential funding
    opportunities available throughout Rural Development.
        RBS staff believes our continuing efforts to streamline programs
    provide the best opportunity to achieve administrative savings and
    deliver support to our stakeholders. If similar programs were combined,
    there may be an opportunity to achieve some incremental savings in
    overhead and administration for the combined programs. In addition, a
    combined program could reduce potential confusion that may exist with
    separate programs.

        Question 2. Ms. Canales, the Rural Micro-entrepreneur Assistance
    Program (RMAP) provides funds to organizations who then relend those
    funds to small businesses. Your supplemental testimony indicated that
    this and two other programs could be combined into existing authorities
    to gain administrative efficiencies. Could you elaborate on where you
    think these programs could be combined? Could you provide more details
    on what savings could be expected from such a move?
        Answer. Combining programs into one comprehensive program and
    regulation will benefit applicants and grantees who utilize more than
    one of the programs reducing their administrative cost as a result of
    time savings because they will not need to learn and understand
    different program regulations, program policies and reporting
    procedures
        The RMAP, Intermediary Relending Program (IRP), and revolving loan
    fund component of the Rural Business Enterprise Grant (RBEG) program
    could be combined into a comprehensive Intermediary program, while
    retaining the intended purposes of each through funds administration.
        By implementing one comprehensive revolving loan fund program
    rather than three separate ones, we would expect to realize incremental
    administrative efficiencies and savings. For example, training staff on
    one program rather than three marginally reduces training costs.
    Incremental savings may also be realized through the maintaining and
    updating of one set of regulations and utilization of fewer forms. Once
    a comprehensive Intermediary program is in place, such savings are
    expected to be relatively small and would be realized over a period of
    time.

        Question 3. Ms. Canales, the Rural Micro-entrepreneur Assistance
    Program (RMAP) provides training for small businesses. Could you give
    the Committee an idea of how many of the training grants have been
    utilized by community colleges and universities?
        Answer. Ten training grants were awarded in FY 2010 of which two
    were made to universities: Ohio State University and Saint Francis
    University, PA. An additional loan and grant was made to Lane Community
    College, OR, to provide microloans and technical assistance to
    borrowers. The FY 2011 awards are not finalized as of 09-20-2011.

        Question 4. Ms. Canales, your supplemental testimony indicated that
    more than $13 million, or 30 percent, for the Rural Micro-entrepreneur
    Assistance Program (RMAP) was not utilized in FY10. Do you have an
    explanation for why so little of the program was utilized in FY10? What
    is your estimate for participation in the program in FY11?
        Answer. RMAP is a new program. In order to get this program
    implemented, we had to (1) address administrative requirements, (2)
    address numerous and detailed public comments, including stakeholders,
    on the proposed rule, and (3) train our State office personnel and
    field staff. As soon as these requirements could be addressed, which
    took a substantial amount of time, the program was implemented in June
    2010 and stakeholders are now fully engaged in the program.
        Funding available in FY 2011 consisted of FY 2010 carryover and FY
    2011 funding, together totaling $7.5 million in budget authority for a
    program level of $20.2 million. We are projecting that $13.5 million in
    loans and $3.6 million in grants will be awarded in FY 2011.
    Joint Response from Mr. Adelstein, Ms. Canales, and Ms. Trevino
    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois
        Question 1. Many counties and development organizations have
    highlighted regional coordination as a way to more effectively utilize
    Federal funds. Could you please describe what your agency is already
    doing to coordinate regional development efforts? What is the role of
    other agencies outside of USDA in your regional efforts?
        Answer. In order to provide better investments and coordination and
    alignment with other agencies, Rural Development is providing support
    to local communities who come together on a multi-county regional basis
    to develop a thoughtful regional economic development strategy. We are
    working to position our programs to support specific eligible project
    applications that are consistent with and supportive of the region's
    comprehensive strategy. This will allow us to direct our limited
    resources toward projects that will support the region's top priorities
    as delineated in its regional economic development strategy. We also
    encourage other Federal agencies to follow our lead in making
    investments in specific projects that will support each region's
    economic development strategy. To support rural regions, we are
    exploring how to better coordinate Rural Development's programs so that
    they can better support regional strategies. For example, we have
    amended NOFA's (including RBOG and RCDI) to make clear Rural
    Development's interest in innovative regional approaches. We are
    considering how to effectively review various grant and loan
    applications so that they can be viewed in light of regional
    strategies.
        As part of an Administration-wide effort, USDA is a supporting
    agency to the Jobs and Innovation Accelerator Challenge, a multi-agency
    effort to support regional innovation clusters. While USDA is not one
    of the funding agencies, we have worked closely with our rural
    constituencies to ensure they knew about the $34 million in funds
    available from the Departments of Commerce and Labor, as well as the
    Small Business Administration. Several of the 20 funded regions include
    substantial rural components (e.g., a regional cluster in northern
    Maine is focused on renewable energy and a cluster in the Finger Lakes
    region of upstate New York concentrates on food processing); USDA will
    support this work in some of these regions. In addition, USDA is
    partnering with the Economic Development Administration in developing a
    second round of the Jobs and Innovation Accelerator Challenge grants;
    this second round will target predominantly rural regions, enabling
    them to take viable economic clusters and make them stronger.
        USDA is also a supporting partner on another key Administration-
    wide initiative: the Partnership for Sustainable Communities, which is
    a collaborative effort among the Departments of Transportation and
    Housing and Urban Development, as well as the Environmental Protection
    Agency. For instance, under this initiative, HUD has funded many
    regions with planning grants; some of these regions include rural
    areas; USDA may be in a good position to fund some projects that will
    be needed for successful plan implementation in such regions.
        In one more example of the work USDA is doing on regional
    strategies, Rural Development and the National Institute of Food and
    Agriculture are working jointly on a pilot initiative called the
    Stronger Economies Together (SET) program. USDA RD is working
    collaboratively with the Extension Service and the four Rural Regional
    Development Centers to design and deliver SET to 30+ regions across the
    country. Under SET, the participating multi-county regions engage in a
    several-month training program where each region explores its assets
    and comparative economic advantages prior to preparing a regional
    economic development strategy. A critical component of SET is the
    provision of expert economic analysis to describe the region's current
    and emerging economic clusters; this targeted information can be used
    by the region to help craft a practical economic development plan.
        USDA believes that the approach described here will help establish
    a locally-driven economic development framework that can enable more
    effective Federal investments, not only by RD, but by all Federal
    agencies.

        Question 2. Technical assistance is almost a necessity for
    applicants in many programs throughout Rural Development. In your view,
    could this be due to the complexity of the application process for
    grants and loans? Does your agency see a need to reorganize or rethink
    the process as a whole? Do you think consolidating and streamlining
    such application processes could address some of the overlap of
    programs within Rural Development?
        Answer. One of RD's major focus is to minimize burdens on
    individuals, businesses, and communities attempting to access programs
    that promote economic growth, create jobs, and protect the health and
    safety of the American people.
        We are developing creative ways to conduct business and make
    changes in structure, program delivery, staffing, or responsibilities
    to improve our efficiency or quality of service.
        Our application process may be challenging to applicants in rural
    areas, which often lack the resources commonly available in urban
    areas. Providing technical assistance to rural applicants has helped
    protect the taxpayers' investment while ensuring that rural utility
    systems are designed to provide affordable reliable service for rural
    residents and businesses.
        RD is interested in more flexible authorities that would provide us
    the ability to serve rural communities with the same types of
    assistance, but with much fewer than the forty programs we now have. We
    are considering merging some of our programs to reach better
    administrative efficiencies and reduce confusion for our customers.
        The following are some examples of our current efforts to
    streamline, simplify and improve program efficiencies, reduce
    administrative and operating costs, and reduce barriers for entry and
    access to USDA programs:

        Regulatory Program Review:

        Rural Development recently began a new retrospective review of
    existing regulations to determine whether any such regulations should
    be modified, streamlined, expanded, or repealed, as called for by
    President Obama in Executive Order 13563. The purpose of this review is
    to make the mission area's regulatory program more effective and
    efficient in order to enhance program administration and delivery.
        Rural Development analyzes and evaluates its existing rules based
    on review and input from internal and external customers, including
    National and State Office staff, lenders, Office of Inspector General
    (OIG), and other stakeholders and partners. Rural Development's
    existing oversight activities include conducting thorough reviews of
    program administration and delivery, and coordinating internal and
    external audits at both the National and State Offices. Through these
    efforts the mission area collects and analyzes data on overall program
    performance/effectiveness and regulatory compliance.
        Both the internal and external reviews provide information that the
    mission area uses when determining the regulatory changes that are
    necessary to minimize risk and enhance program utilization.

        Stakeholder Outreach:

        From July 2011 through September 2011, Rural Development hosted
    webinar based listening sessions and stakeholder meetings in rural
    areas.
        On July 7th, 2011, USEC hosted a webinar with 180 national
    stakeholders to receive public input on our mission area priorities for
    the upcoming fiscal year. Under Secretary Tonsager provided the opening
    presentation and the Administrators from Rural Business Services, Rural
    Housing Services, and Rural Utilities Services discussed their agency's
    role in achieving the objectives of President Obama's Executive Order.
        On July 21st, 2011, USEC hosted a webinar with 82 tribes and tribal
    leaders that included introduction and explanation of our regulatory
    priorities and opening remarks from the Under Secretary and all three
    administrators. There was a productive 90 minute discussion that took
    place that focused primarily on the need for more technical assistance
    and infrastructure challenges unique to tribes.
        On July 14th, 2011, Rural Development launched a website to inform
    stakeholders of the process and to give them the opportunity to submit
    comments. A separate e-mail box was created (rdreform@osec.usda.gov) to
    receive all public comments.
        State Directors hosted webinars and stakeholder meetings across the
    country. Rural Development has received over 100 written comments from
    a broad range of stakeholders, including individuals, regulated
    entities, and trade groups.
        Rural Development will review and reference the public comments
    received in the preamble of our regulations.

        Diversity Hiring and Recruiting:

        In response to the USDA Jackson Lewis study, RD is working to
    improve its hiring diversity. USDA awarded a competitive contract to
    the Jackson Lewis LLP Corporate Diversity Counseling Group to conduct
    an Independent Assessment of the USDA Delivery of Technical and
    Financial Assistance to all Americans. In order to respond to the
    ninety-four recommendations that pertain to RD, we are actively engaged
    with Department and other agencies to take action where appropriate.

        Comprehensive Loan Program (CLP):

        Rural Development continues to transition to a new computing
    environment that provides greater flexibility for management and
    business development. The CLP retires legacy accounting systems and
    replaces them with upgraded accounting systems that can be utilized to
    support business needs of today. Replacing these systems makes it
    easier to maintain, modify and meet new requirements, improves the use
    for internal and external customers, improves the integrity of the
    entire loan portfolio, and improves management reporting and analyzing
    capabilities. No new funding has been requested for this transition and
    all savings realized from reducing infrastructure costs are being used
    to continue the transition. The CLP will enable RD to implement new
    statutory or regulatory provisions in a more timely and effective
    manner

        Question 3. Due to the continuing budget constraints faced by
    Federal, state, and local governments and the consensus to reform and
    consolidate many programs, does your agency have the necessary
    authorities to streamline some of these programs. How is your agency
    working with stakeholders to address the needs of small rural
    communities while addressing budget realities?
        Answer. At USDA, we are focusing on actions to better coordinate
    and streamline Federal program efforts in rural America, and to better
    leverage Federal investments. The collaboration will result in better
    programs and services in rural communities and maximize the benefits of
    those programs.
        As stated earlier, RD is conducting a regulatory review of its
    regulations to determine which application procedures for Business
    Programs, Community Facilities Programs, Energy Programs, and Water and
    Environmental Programs can be streamlined and requirements
    synchronized. RD is approaching this exercise from the perspective of
    the people it serves, specifically by communicating with stakeholders
    on two common areas of regulation that would provide the basis of
    reform. This process will look to have similar requirements for
    programs that are focused on a similar applicant base, such as
    nonprofit, Native American Tribes, and public bodies such as Community
    Facilities and Water and Environmental programs will make an effort to
    have similar requirements.
        To the extent practicable, each reform effort will consist of a
    common application and uniform documentation requirements making it
    easier for constituency groups to apply for multiple programs. In
    addition, there will be associated regulations for each program that
    will contain information specific to each program.
        RD's State and national offices hosted a number of webinars with
    stakeholders from across the nation to discuss existing regulations and
    processes, and seek input on potential changes that would make them
    more customer-friendly and effective.
        We will continue to provide the best service possible to our
    stakeholders by seeking implementable efficiencies to meet this
    commitment and to ensure that awards are made to the highest priority
    projects for which we can obtain the best results for the funds
    expended.
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--Rural
                               Utilities Service
    1. Program Name
        Water and Environmental Programs (WEP).
    2. Subprograms/Department Initiatives
        Rural Development's (RD) Rural Utilities Service (RUS) provides
    loans, grants, and loan guarantees for drinking water, sanitary sewer,
    solid waste, and storm drainage facilities in rural areas and cities
    and towns of 10,000 or less. Public bodies, nonprofit organizations,
    and federally-recognized Indian tribes may qualify for assistance. WEP
    also makes grants to nonprofit organizations to provide technical
    assistance and training to assist rural communities with their water,
    wastewater, and solid waste problems. WEP subprograms include:

    ------------------------------------------------------------------------
                             2008 Farm
          Subprograms           Bill      CONACT Section      U.S. Code 7
                              Section                            U.S.C.
    ------------------------------------------------------------------------
    Water and Waste Loan           6001               306               1926
     and Grant Program
     (Direct)
    Special Evaluation             6002         306(a)(2)          (a)(2)(C)
     Assistance for Rural
     Communities and
     Households Program
     (SEARCH)
    Rural Water and                6006        306(a)(22)        1926(a)(22)
     Wastewater Circuit
     Rider Program
    Water and Waste                            306(a)(24)               1926
     Disposal Programs
     Guaranteed Loans
    Emergency Community            6008              306A            1926(a)
     Water Assistance
     Grants
    Water Systems for              6009              306D            1926(d)
     Rural and Native
     Villages in Alaska
    Household Water Well           6010              306E            1926(e)
     System (HWWS) Grant
     Program
    Interest Rates for             6011         307(a)(3)         1927(a)(3)
     Water and Waste
     Disposal Facilities
     Loans (Direct)
    ------------------------------------------------------------------------

        WEP initiatives include:

    ------------------------------------------------------------------------
                             2008 Farm
          Subprograms           Bill      CONACT  Section     U.S. Code 7
                              Section                            U.S.C.
    ------------------------------------------------------------------------
    Water, Waste Disposal,         6001  306(a)(2)(B)(vii  1926(a)(2)(B)(vii
     and Wastewater                                     )                  )
     Facility Grants
     (Revolving Funds for
     Financing Water and
     Wastewater Projects)
    Technical Assistance           6001     306(a)(14)(A)        1926(a)(14)
     and Training Grant
     (TAT) Program
    Water and Waste                6001              306C            1926(c)
     Facility Loans and
     Grants to Alleviate
     Health Risks (applied
     to Colonias and
     Native American
     tribes)
    Solid Waste Management         6001           310B(b)            1932(b)
     Grant (SWM) Program
    ------------------------------------------------------------------------
    Note: Initiatives are funded through set-asides in the annual
      appropriation for the Water and Waste Loan and Grant Program (Direct).

    3. Brief History
        The origins of the Water and Environmental Programs date to the
    1937 Resettlement Administration. These provisions were later included
    in section 306 of the CONACT (Farm Bill), 7 U.S.C. 1926.
    4. Purpose/Goals
        The purpose and goals of WEP's subprograms include:

        Water and Waste Disposal Direct Loans and Grants Program

        WEP provides loans, grants and loan guarantees for drinking water,
    sanitary sewer, solid waste and storm drainage facilities in rural
    areas and cities and towns with populations of 10,000 or less.

       Water, Waste Disposal, and Wastewater Facility Grants
            (Revolving Funds for Financing Water and Wastewater Projects):
            The WEP Revolving Fund Program (RFP) provides grants to private
            nonprofit organizations to establish a lending program for
            entities eligible under the Water and Waste Disposal Loans
            (direct and guaranteed). As grant recipients, the nonprofit
            organizations set up a revolving loan fund to provide loans to
            finance predevelopment costs of water or wastewater projects,
            or short-term small capital projects not part of the regular
            operation and maintenance of current water and wastewater
            systems.

       Technical Assistance and Training Grant (TAT) Program: The
            TAT Program provides grants to nonprofit organizations to
            provide technical assistance and/or training to associations on
            a wide range of issues relating to delivery of water and waste
            disposal service.

       Section 306C Water and Waste Facility Loans and Grants to
            Alleviate Health Risks: Section 306C loans and grants provide
            water and waste disposal facilities and services to low income
            rural communities whose residents face significant health
            risks. These funds have been set aside for eligible projects
            that benefit members of Federally Recognized Native American
            Tribes and the Colonias area.

       Solid Waste Management Grant (SWM) Program: SWM grants are
            available to both public and private nonprofit organizations to
            help communities identify threats to water resources and reduce
            the solid waste stream. Communities receive assistance from
            eligible organizations to reduce or eliminate pollution of
            water resources, improve planning and management of solid waste
            disposal facilities in rural areas, and enhance operator skills
            in operations and maintenance.

        SEARCH Grants Program

        To provide grants to public bodies, nonprofits, and federally-
    recognized Indian tribes for feasibility studies, design, technical and
    direct or guaranteed water and waste disposal loan application
    assistance. Grants are limited to financially-distressed communities in
    rural areas with populations of 2,500 or fewer inhabitants for water
    and waste disposal projects. Grants are limited to $30,000 per project.

        Circuit Rider--Technical Assistance for Rural Water Systems Program

        Providing technical assistance for the operations of rural water
    systems, RUS contracts with the National Rural Water Association (NRWA)
    to assist rural water systems with day-to-day operational, financial,
    and management support. The assistance may be requested by officials of
    rural water systems or RUS. The program complements RUS's loan
    supervision responsibilities. The NRWA's State Affiliates do the work
    in their states.

        Water and Waste Disposal Programs Guaranteed Loans

        The Water and Waste Disposal Programs Guaranteed Loans provide a
    loan guarantee for the construction or improvement of water and waste
    disposal projects serving the financially needy communities in rural
    areas. This purpose is achieved through bolstering the existing private
    credit structure through the guarantee of quality loans which will
    provide lasting benefits.

        Emergency Community Water Assistance Grants Program

        Assists rural communities that have experienced a significant
    decline in quantity or quality of drinking water due to an emergency or
    when such decline is considered imminent, to obtain or maintain
    adequate quantities of water that meets the standards set by the Safe
    Drinking Water Act. This emergency includes, for example, drought,
    earthquake, flood, tornado, hurricane, disease outbreak or chemical
    spill, leakage, or seepage.

        Section 306E Grants for the Construction, Refurbishment, and
    Servicing of Low or Moderate Income Individual Household Water Well
    Systems

        Provides funds to nonprofit organizations to assist them in
    establishing loan programs from which individuals may borrow money for
    household water well systems.
    5. Success in Meeting Programmatic Purpose/Goals
        In Fiscal Year (FY) 2010, RD invested $1.67 billion in direct and
    guaranteed loans and grants to help rural communities develop water and
    waste disposal facilities.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                             Water and Environmental                               2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of program borrowers' subscribers        Target                          $557,000      $1,380,000      $1,418,000      $1,457,000      $1,394,000
     receiving new improved service from Agency's   Actual                        $1,332,063      $4,361,872      $3,388,089      $3,961,166      $4,292,318
     funded water facilities.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                          Water and Environmental ARRA                             2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of program borrowers' subscribers        Target                               (1)             (1)            $1,900,000                       (1)
     receiving new improved service from Agency's
     funded water facilities.
                                                                                                             --------------------------------
                                                    Actual                               (1)             (1)         769,559         949,646
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1 ARRA funding was only available for FY 2009 and 2010.

        In addition to the regular appropriated funding, RD invested $300
    million in funding provided by the 2008 Farm Bill and a total of $1.8
    billion in American Recovery and Reinvestment Act (ARRA) funding for
    water and waste disposal infrastructure and technical assistance across
    Rural America in FY 2009 and FY 2010.
        The RUS WEP's:

       Brings modern, reliable and affordable water and waste
            services to rural America.

         5.7 million rural customers will benefit from RUS FY
                2010 regular and ARRA investments in water and waste
                disposal infrastructure.

         As a result, rural communities are able to provide
                clean, reliable services at reasonable costs, more
                efficiently manage how and how much water they use, and
                reduce their impact on our nation's waterways through
                improved compliance with regulatory requirements and
                reduced discharge of waste byproducts.

       Reduces health risks to rural residents and protects our
            nation's waterways.

         FY 2010 funded projects will result in a nearly 28
                percent reduction in rural resident's exposure to water-
                borne illnesses.

         Provides access to a public water system to residents
                who obtain their water from contaminated or unreliable
                drinking water wells, or untreated surface sources improves
                public health.

         Replacing failing individual septic tanks reduces
                harmful discharges into lakes, rivers, and other waterways.

       Facilitates sustainable communities.

         With reliable water and waste infrastructure, the
                establishment of core community services is made possible,
                supporting existing residents and attracting new ones. USDA
                helps to ensure the safety, health, and education of rural
                residents by financing the construction of new and improved
                hospitals, schools, fire stations, and other essential
                community facilities--all of which rely on water and waste
                services to operate.

          The presence of reliable water and waste infrastructure
                facilitates business development in rural America, helps
                create jobs, strengthen our nation's economy, and our
                ability to compete in the global marketplace.

       Assists rural water and waste systems with technical issues
            and emergency recovery.

         In FY 2010, circuit riders made more than 111,000
                technical assistance calls to rural systems.

         RUS contract circuit riders provided critical support
                and emergency equipment to rural operators in the aftermath
                of the tornados across the south and the flooding along the
                Missouri and Mississippi Rivers in 2011.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                   FY 2007 through FY 2011 Budget Authority (Enacted)
                                                 (Dollars in thousands)
    ----------------------------------------------------------------------------------------------------------------
                   Program                     2007            2008           2009           2010           2011
    ----------------------------------------------------------------------------------------------------------------
              Water and Environmental         $494,043        $538,767       $538,768       $551,230       $515,968
         Water and Environmental ARRA              (1)             (1)       $734,881       $655,675            (1)
    ----------------------------------------------------------------------------------------------------------------
    1 ARRA funding was only available for FY 2009 and 2010.

                                           7. Annual Outlays (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                Account Name                2007 Actual    2008 Actual    2009 Actual    2010 Actual    2011 Actual
    ----------------------------------------------------------------------------------------------------------------
    Water and Waste Disposal Program 1      2 $650,383        $604,033       $746,706       $980,000     $1,086,000
    ----------------------------------------------------------------------------------------------------------------
    1 Outlays are not a one to one correlation with obligations. Programs disburse over numerous years. Undisbursed
      balances are carried forward for future year outlays.
    2 Outlayed through RCAP.

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                                     2007 Amount  2008 Amount  2009 Amount  2010 Amount  2011 Amount
                        Program                         ($000)       ($000)       ($000)       ($000)       ($000)
    ----------------------------------------------------------------------------------------------------------------
         Direct Water & Waste Disposal Loans, Guaranteed Water & Waste Disposal Loans, Water & Disposal Grants,
        Individually-Owned Water Well System Grants, Grants for Water and Wastewater Revolving Funds, Solid Waste
                        Management Grants, and Emergency & Imminent Community Water Asst. Grants.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                   $1,579,948   $1,822,949     $886,873   $1,660,647   $1,447,422
      Budget Authority                                  $564,174     $666,367     $411,792     $770,362     $551,230
      S&E                                                $59,323      $57,610      $21,716      $65,322      $65,322
                                                    ----------------------------------------------------------------
        Total Costs                                     $549,721     $723,977     $433,508     $835,684     $616,552
        FTEs                                                 542          514          192          551          551
    ----------------------------------------------------------------------------------------------------------------
     Direct Water and Waste Disposal Loan 2008 Disasters Emer. Supp., Water and Waste Disp. Grants May 6, 2007 Emer.
      Supp., Water and Waste Disp. Grants 2008 Disasters Emergency Supplemental, Water and Waste Disp. Grants 2003/
    2004 Hurricanes Emer. Supp., Water and Waste Disp. Grants 2005 Hurricanes Emer. Suppl., Emer. And Imminent Comm.
             Waster Asst. Grants--Emer. Supp., Emer. and Imminent Comm. Water Asst. Grants--2005 Hurricanes.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                      $13,010           $0      $34,203      $10,406           $0
      Budget Authority                                   $13,010           $0      $19,068       $7,054           $0
      S&E                                                     $0           $0           $0           $0           $0
                                                    ----------------------------------------------------------------
        Total Costs                                      $13,010           $0      $19,068       $7,054           $0
        FTEs                                                   0            0            0            0            0
    ----------------------------------------------------------------------------------------------------------------
       Direct Water and Waste Disposal Loans--Stimulus, Water and Waste Disposal Grants--Stimulus, Circuit Rider--
                                 Tech. Assist. Grants for Rural Water Systems--Stimulus.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                          N/A          N/A   $1,581,548   $1,828,627           $0
      Budget Authority                                       N/A          N/A     $734,881     $650,675           $0
      S&E                                                    N/A          N/A      $41,363           $0           $0
        Total Costs                                          N/A          N/A     $776,244     $650,675           $0
        FTEs                                                 N/A          N/A          364            0            0
    ----------------------------------------------------------------------------------------------------------------

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Eligible Areas                                      Funding Limits Per
              Program             Eligibility (Entities)          (Populations)             Eligible Purpose               Request              Loan Terms
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Water and Waste Disposal    Public body, not-for-       Rural areas and towns      Construct and improve      None                       40 years
     Direct Loans and Grants     profit organization, and    with a population of       water and waste
                                 Indian tribes               10,000 or less.            facilities
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Water and Waste Disposal    Public body, not-for-       Rural areas and towns      Construct and improve      None                       40 years
     Guaranteed Loans            profit organization, and    with a population of       water and waste
                                 Indian tribes               10,000 or less.            facilities
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Technical Assistance and    Public, private, and        Rural areas and towns      Provide technical          Pre-determined             N/A
     Training Grant (TAT)        nonprofit organizations     with population of         assistance and training    percentages of annual
     Program                                                 10,000 or less.                                       allocation
    Circuit Rider--Technical    Public, private, and        Rural areas and towns      Provide technical          No Cost                    N/A
     Assistance for Rural        nonprofit organizations     with population of         assistance and training
     Water Systems                                           10,000 or less.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Water and Waste Facility    Colonias and Native         Colonias and tribal lands  Construct or improve       $1 M--Native American      40 years for
     Loans and Grants to         American Indian tribes                                 water and waste            Indian tribes (none for    loans
     Alleviate Health Risks                                                             facilities                 Colonias)
     (applied to Colonias and
     Native American tribes)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Solid Waste Management      Public body, private        Rural areas and towns      Technical assistance to    None                       N/A
     Grant (SWM) Program         nonprofit organizations     with a population of       local and regional
                                 and Indian tribes           10,000 or less.            governments for reducing
                                                                                        or eliminating water
                                                                                        pollution and planning
                                                                                        or mgmt of solid waste
                                                                                        disposal facilities
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Predevelopment and          Rural communities that do   Rural area must be either  Costs associated with the  $15,000 or 75 percent of   N/A
     Planning Grants             not have resources to pay   below the poverty line     development of a           the project costs
                                 predevelopment expenses     or below 80 percent of     complete application       (whichever is smaller)
                                                             the statewide non-
                                                             metropolitan median
                                                             house-hold income.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SEARCH Grants               Rural communities that do   Rural area must be either  Costs associated with the  $30,000 or 75 percent of   N/A
                                 not have resources to pay   below the poverty line     development of a           the project costs
                                 predevelopment expenses     or below 80 percent of     complete application       (whichever is smaller)
                                                             the statewide non-
                                                             metropolitan median
                                                             house-hold income.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Emergency Community Water   Public body such as a       Rural areas with           To fund pre-development    May fund up to 100         N/A
     Assistance Grants           municipal, county,          population of 2,500 or     planning grants for        percent of eligible
                                 district, authority,        fewer inhabitants and      feasibility studies,       costs, not to exceed
                                 state or commonwealth,      must also be financially   design assistance & tech   $30,000
                                 Not for profit              stressed as well as        assistance for water &
                                 organization, and Native    rural                      waste disposal projects
                                 American Tribe
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Section 306D Water and      State of Alaska for rural   Rural or native Alaskan    Development and            None, however 25 percent   N/A
     Waste system Grants for     or native villages          villages                   construction of water      in matching funds from
     Alaskan Villages, incl.                                                            and waste facilities to    State of Alaska from non-
     technical assistance                                                               improve health and         Federal sources
                                                                                        sanitation conditions
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Section 306E Grants for     Private, nonprofit          Projects must be located   Development of revolving   Organization must          N/A
     the Construction,           organizations that are      in rural areas with        loan funds for             contribute ten percent
     Refurbishment and           tax exempt.                 population of 50,000 or    construction,              of grant amount to
     Servicing of Low or                                     less.                      refurbishing, and          capitalize the fund and
     Moderate Income Household                                                          servicing of individual    individual homeowner
     Water Well Systems                                                                 household water well       loans capped at $11,000
                                                                                        systems in eligible
                                                                                        rural areas.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    10. Utilization (Participation) Data
        From 2007-present the Water and Waste Disposal Loan and Grant
    Program has obligated 9,152 loans and grants to rural communities in
    all 50 states.

    ------------------------------------------------------------------------
           Fiscal Year            Number of Loans        Number of Grants
    ------------------------------------------------------------------------
                 2007                       810                     957
                 2008                       895                     926
                 2009                       909                   1,604
                 2010                     1,045                   1,037
               2011 *                       498                     471
                             -----------------------------------------------
      Total.................              4,157                   4,995
    ------------------------------------------------------------------------
    * As of July 29, 2011.

        Approximately 115 Circuit riders have been funded annually since
    2008 through the program and have made 311,509 technical assistance
    calls to rural water and waste systems.
    11. Duplication or Overlap with Other Programs
        RD's Water and Waste Disposal Loan and Grant program provides
    funding for construction of water and waste facilities in rural
    communities of 10,000 or less in population.
        While the GAO report on duplicative programs did not specifically
    address water and waste funding at USDA, there are a number of Federal
    programs that provide financing for water and waste infrastructure.
        Other federally-funded programs that fund water and waste
    infrastructure in rural areas include:

       State Revolving Funds (Environmental Protection Agency (EPA)
            pass-through funding-Clean Water State Revolving Fund and
            Drinking Water State Revolving Fund);

       EPA (State and Tribal Assistance Grants, United States-
            Mexico border, Tribal);

       Department of Commerce--Economic Development Agency can
            assist in financing infrastructure when tied to jobs and
            economic development;

       Department of Housing and Urban Development community
            development block grants (CDBG), Community Investment Funds
            (CIF), Colonias, and Tribal);

       Appalachian Regional Commission (ARC) which is implemented
            through RD;

       Indian Health Service; and

       Delta Regional Authority.

        What sets USDA Apart from other programs?

       WEP is the only program that is exclusively focused on rural
            water and waste infrastructure needs, working only with rural
            areas with populations of 10,000 or less.

       Most RD projects serve areas well below 10,000 in
            population. The average RD project serves fewer than 2000
            equivalent dwelling units.

         In FY 2010, 80 percent of funded projects served
                populations of 5,000 or less;

         65 percent serve communities of 2,500 or less;

         51 percent serve populations below 1,500; and

         43 percent were for projects serving less than 1,000
                people.

       Applicants must demonstrate that they need Federal
            assistance because they cannot obtain credit from commercial
            lenders or investors, and they have urgent needs for water or
            wastewater improvements.

       The program is a needs-based program, where loan and grant
            are combined based on strict underwriting process to keep rates
            reasonable for rural residents.

       Other Federal programs serve both large and small systems.
            Small rural communities must compete with larger projects for
            limited funding.

         For example, in 2009, while 77 percent of the loans
                made by EPA State Revolving Funds for wastewater
                infrastructure upgrades went to communities less than
                10,000 in population, those loans represented only 23
                percent of the total funding available.

         State Administered HUD/CDBG grants are available to
                communities of 50,000 or less population and counties up to
                200,000.

       The program has been recognized by OMB as one of the most
            effective lending programs in the Federal Government.

        Regarding Circuit Rider, there is no overlap with RD programs which
    provide support grants and loans for water and wastewater treatment,
    distribution, and collection systems.
    12. Waste, Fraud and Abuse
        RD's Water and Waste Disposal Loan and Grant programs have
    standardized procedures and guidance, as well as strong internal
    controls to prevent fraud waste and abuse. Vulnerability Assessments
    are conducted annually. In addition, management control reviews and
    State Program reviews are conducted to identify and correct potential
    problem with underwriting and servicing activities. The regular program
    and ARRA funding have been audited twice over the last 2 years by the
    USDA's Office of Inspector General (OIG). No findings of fraud, waste
    or abuse were made in either audit.
        The September 2010 USDA OIG report (OIG Audit Report 09601-1-At,
    Rural Utilities Service Controls Over Water and Waste Disposal Loans
    and Grants) on program delivery stated, ``Generally, we found RUS'
    internal controls to be adequately designed and operating for the
    locations we reviewed.'' Where recommended by OIG, the program enhanced
    guidance to employees to better clarify program regulations.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Distance Learning, Telemedicine, and Broadband Program.
    2. Subprograms/Department Initiatives

    ------------------------------------------------------------------------
                                                Federal
                               2008 Farm      Agricultural
           Description            Bill      Improvement and     U.S. Code 7
                                Section      Reform Act of        U.S.C.
                                              1996 Section
    ------------------------------------------------------------------------
    Distance Learning and            6201                704  950aaa et seq.
     Telemedicine Loans
    Distance Learning and            6201                704  950aaa et seq.
     Telemedicine Grant
     Program
    Distance Learning and            6201                704  950aaa et seq.
     Telemedicine
     Combination Loan-Grant
     Program
    Public Television                6014       CONACT 2005,    P.L. 108-447
     Digital Transition                            Title III
     Grant Program
    Delta Health Care                6025      CONACT  379G           2008u
     Services Grant Program
    Rural Broadband Access           6110       RE Act  601           950bb
     Loan and Loan Guarantee
     Program
    Broadband Initiatives                               ARRA      P.L. 111-5
     Program (STIMULUS)
    Weather Radio                    6021      CONACT  379B    P.L. 108-119
     Transmitter Grant
     Program
    Community Connect Grant          6005                (*)
     Program
    ------------------------------------------------------------------------
    Note: CONACT is the Consolidated Farm and Rural Development Act.
    * Historically appeared as an annual earmark in appropriations bills.

    3. Brief History
        The Rural Broadband Access Loan and Loan Guarantee Program was
    established by the 2002 Farm Bill; the Distance Learning and
    Telemedicine Programs were established by the Federal Agriculture
    Improvement Act of 1996. The farm bill has made changes to these
    provisions.
    4. Purpose/Goals
        Community Connect Grant Program

        This program provides grants to rural communities with populations
    of 20,000 or less that do not currently have access to broadband
    services. The grant provides funding for a Community Center open to the
    public and broadband infrastructure provided to critical facilities in
    the community such as public safety, local government, and educational
    institutions.

        Public Television Digital Transition Grant Program

        This program provides grants to assist public television stations
    serving rural populations in transitioning to digital broadcast
    television transmission. Funds may be used to acquire and install
    facilities and software necessary for the transition. Grant funds may
    also be used for associated engineering and environmental studies.

        Weather Radio Transmitter Grant Program

        This program provides grant funds to finance the installation of
    new transmitters to extend the coverage of the National Oceanic and
    Atmospheric Administration's Weather Radio system (NOAA Weather Radio)
    in rural America. Grant funds are available to facilitate the expansion
    of NOAA Weather Radio system coverage into rural areas that are not
    covered or are poorly covered.

        Delta Health Care Services Grant Program

        The Delta Health Care Services Grant Program is authorized under
    Section 379G of the Consolidated Farm and Rural Development Act to
    provide financial assistance to address the continued unmet health
    needs in the Delta region through cooperation among health care
    professionals, institutions of higher education, research institutions,
    and other individuals and entities in the Delta Region. Grants are
    available to eligible entities in the Delta region serving communities
    of no more than 50,000 inhabitants.

        Rural Broadband Access Program

        This program is designed to provide loans for funding, on a
    technology neutral basis, for the costs of construction, improvement,
    and acquisition of facilities and equipment to provide broadband
    service to eligible rural communities.

        Distance Learning and Telemedicine Program (DLT)

        DLT is designed to bring educational and health care services to
    rural America. Through loans, grants, and loan/grant combinations, RUS
    provides financial assistance for end-user equipment to provide
    enhanced learning and health care opportunities for rural residents.

                                                        5. Success in Meeting Programmatic Purpose/Goals

        Performance measures have been developed for DLT and Farm Bill Broadband Programs as indicators of programmatic success.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                       Distance Learning and Telemedicine                          2007            2008            2009            2010            2011
                                                                             -------------------------------------------------------------------------------
                                                                                         Counties Served
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of counties served by entities           Target                               380             695             400             380             380
     receiving distance learning and telemedicine   Actual                               392             586             754             633             N/A
     funding
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1 Actual is from FY 2010 funds obligated in FY 2011.

        The 2008 Farm Bill required changes to the Rural Broadband Access loan program which was authorized under the 2002 Farm Bill, last revised in 2008.
     An Interim Rule was published on March 14, 2011. The Rural Broadband Access loan program provides funding for broadband infrastructure in communities
     with a population of 20,000 or less.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                             Rural Broadband Access                                2007            2008            2009            2010            2011
                                                                             -------------------------------------------------------------------------------
                                                                                  Borrowers' Subscribers Served
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of borrowers' subscribers receiving new  Target                           190,000         240,000         230,000         350,000         300,000
     or improved service                            Actual                           356,440         775,341         187,399         136,694             N/A
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1 Funding provided under ARRA was flexible (loans, grants and loan/grant combos) and therefore more conducive to bringing broadband to rural America;
      therefore, regular program loans funds were not requested during ARRA. Telecommunications Program data also includes broadband funding under
      traditional infrastructure program authorized by REA.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                           Rural Broadband Access ARRA                             2007            2008            2009            2010            2011
                                                                             -------------------------------------------------------------------------------
                                                                                  Borrowers' Subscribers Served
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of borrowers' subscribers receiving new  Target                               (1)             (1)             (1)             N/A             (1)
     or improved service                            Actual                               (1)             (1)             (1)         847,239
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1 ARRA funding was not available for these years.

        Note: See section at end with all REA Title II programs (Electric and Telecom).

                                      6. Annual Budget Authority (FY 2007-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                   Program                     2007            2008           2009           2010           2011
    ----------------------------------------------------------------------------------------------------------------
                            Distance Learning a$44,486-medicine$54,565        $63,780        $84,691        $68,090
                         and Broadband
                       Broadband ARRA              (1)             (1)             $0     $2,423,536            (1)
    ----------------------------------------------------------------------------------------------------------------
    1 ARRA funding was not available for these years.

        Note: See section at end with all REA Title II programs (Electric and Telecom).

                                           7. Annual Outlays (FY 2002-FY 2011)
                                                 (Dollars in thousands)
    ----------------------------------------------------------------------------------------------------------------
                                               2007            2008           2009           2010           2011
    ----------------------------------------------------------------------------------------------------------------
                            Distance Learning a$46,428medicine $48,542       $134,694        $69,164       $305,143
                    and Broadband Pro-
                                 gram
    ----------------------------------------------------------------------------------------------------------------
    Note: Outlays are not a one to one correlation with obligations. Programs disburse over numerous years.
      Undisbursed balances are carried forward for future year outlays.

        Note: See section at end with all REA Title II programs (Electric and Telecom).

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                                     2007 Amount  2008 Amount  2009 Amount  2010 Amount  2011 Amount
                        Program                         ($000)       ($000)       ($000)       ($000)       ($000)
    ----------------------------------------------------------------------------------------------------------------
                      Treasury Distance Learning Loans, Distance Learning and Telemedicine Grants.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                      $59,400      $43,242      $54,741           $0      $30,255
      Budget Authority                                   $27,691      $30,429      $33,366           $0      $30,255
      S&E                                                 $1,930       $1,875       $2,048       $2,125       $2,125
                                                    ----------------------------------------------------------------
        Total Costs                                      $29,621      $32,304      $35,414       $2,125      $26,974
        FTEs                                                  17           17           18           18           18
    ----------------------------------------------------------------------------------------------------------------
                                 Con Farm & RD Act, Sec 379G Health Care Services Grant.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                                                                  $0       $2,994
      Budget Authority                                                                               $0       $2,994
      S&E                                                                                            $0           $0
                                                    ----------------------------------------------------------------
        Total Costs                                                                                  $0       $2,994
        FTEs                                                                                          0            0
    ----------------------------------------------------------------------------------------------------------------
                  Broadband Telecommunication Loans and Grants, and Public Broadcasting System Grants.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                     $266,252     $459,124     $425,069      $78,924     $343,533
      Budget Authority                                   $20,689      $30,076      $34,681      $10,006      $40,145
      S&E                                                 $7,618       $7,398        $8,85       $8,387       $8,387
                                                    ----------------------------------------------------------------
        Total Costs                                      $28,307      $37,474      $42,766      $18,393      $48,532
        FTEs                                                  70           66           70           71           71
    ----------------------------------------------------------------------------------------------------------------
      Direct Broadband Telecommunications Loans--Treasury Rate--Stimulus, and Broadband Telecommunications Grants--
                                                        Stimulus.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                                                          $3,529,091           $0
      Budget Authority                                                                       $2,423,536           $0
      S&E                                                                                           (a)          (a)
                                                    ----------------------------------------------------------------
        Total Costs                                                                          $2,423,536           $0
        FTEs                                                                                          0           0
    ----------------------------------------------------------------------------------------------------------------
    a RUS is unable to provide a break out of S&E costs for Recovery Act implementation.

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Eligible Areas                                    Funding Limits Per         Loan Terms, if
             Program           Eligibility (Entities)         (Populations)           Eligible Purpose              Request                 Applicable
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Distance Learning and     Public body, Indian       Areas outside             In addition to the DLT    Minimum loan-grant       Loan interest rate is
     Telemedicine Loans        tribe, cooperative,       incorporated or           Combination Loan-Grant    amount: $50,000          the Treasury interest
                               nonprofit, limited        unincorporated cities     Program purposes, loans  Maximum amount: $10       rate at date of
                               dividend or mutual        with population over      may be used for certain   Million                  advance; up to 10 year
                               association,              20,000.                   broadcasting and                                   amortization,
                               municipality,                                       operational costs,                                 determined by useful
                               libraries, corporations                             except salaries and                                life of facilities
                               and other legally-                                  administrative expenses                            financed.
                               organized entities.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Distance Learning and     Public body, Indian       Areas outside             To provide end-user       Minimum grant amount:    15 percent matching
     Telemedicine Grant        tribe, cooperative,       incorporated or           equipment and             $50,000.                 funds required.
     Program                   nonprofit, limited        unincorporated cities     programming that         Maximum grant amount:
                               dividend or mutual        with population over      delivers distance         $500,000.
                               association,              20,000.                   learning and
                               municipality,            Smaller communities        telemedicine services
                               libraries, corporations   receive more points.      into eligible areas.
                               and other legally-
                               organized entities.
                              RUS electric and
                               Telephone Loan
                               borrowers not eligible.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Distance Learning and     Public body, Indian       Areas outside             In addition to the DLT    Minimum loan-grant       Loan interest rate is
     Telemedicine              tribe, cooperative,       incorporated or           Grant Program purposes,   amount: $50,000          the Treasury interest
     Combination Loan-Grant    nonprofit, limited        unincorporated cities     loans may provide DLT    Maximum amount: $10       rate at date of
     Program                   dividend or mutual        with population over      across a single           Million                  advance; up to 10 year
                               association,              20,000.                   facility, may provide                              amortization,
                               municipality,                                       new building space,                                determined by useful
                               libraries, corporations                             including land,                                    life of facilities
                               and other legally-                                  buildings, and building                            financed.
                               organized entities.                                 construction, and
                              RUS electric and                                     telecommunications
                               Telephone Loan                                      transmission
                               borrowers not eligible.                             facilities.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Public Television         Public digital            Areas outside             Grant funds may be used   Maximum amount: $        N/A
     Digital Transition        television stations       incorporated or           to acquire, lease, and/   750,000 per applicant
     Grant Program             that serve rural areas    unincorporated cities     or install facilities     per year
                                                         with population over      and software necessary
                                                         20,000--station           for transition to
                                                         applicants must           digital signal
                                                         demonstrate core rural
                                                         coverage
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Delta Health Care         Consortium of regional    The distinct northwest    The development of        Minimum Grant amount:    N/A
     Services Grant Program    institutions of higher    section of the state of   health care services,     $50,000
                               education, academic       Mississippi, known as     health education
                               health and research       the Delta Region,         programs, health care
                               institutes and economic   consisting of 18          job training programs
                               development entities      counties                  and the development and
                               located in the Delta     Further limited to         expansion of public
                               region                    include only those        health-related
                                                         areas in the Delta        facilities
                                                         Region (a) not included
                                                         within the boundaries
                                                         of any incorporated or
                                                         unincorporated city,
                                                         village, or borough
                                                         having a population
                                                         greater than 50,000 and
                                                         (b) any urbanized area
                                                         contiguous and adjacent
                                                         to a city or town
                                                         described in (a).
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Rural Broadband Access    RUS makes broadband       An eligible rural area
     Loan and Loan Guarantee   loans and loan            means any area, as
     Program                   guarantees to legally     confirmed by the latest
    and                        organized entities        decennial census of the
    Broadband Initiative       providing, or proposing   Bureau of the Census,
     Program (Stimulus)        to provide, broadband     which is not located
                               services in eligible      within
                               rural communities.
                               Types of eligible
                               entities include:
                               cooperative, nonprofit,
                               limited dividend or
                               mutual associations,
                               limited liability
                               companies, Indian
                               tribes and tribal
                               organizations, and
                               commercial
                               organizations.
                               Individuals or
                               partnerships are not
                               eligible.

                                                                                  Finance the               Maximum loan amount:     Interest rates:
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Weather Radio             Public body; an Indian    A single community        To build broadband        Min. $50,000             N/A
     Transmitter Grant         tribe; a cooperative,     outside incorporated or   infrastructure and       Max. $1,000,000
     Program                   nonprofit, limited        unincorporated cities     establish a community    Amounts are published
                               dividend or mutual        with population over      center which offers       in NOFAs and may vary
                               association;              20,000 which does not     free public access to
                               municipality;             have broadband            broadband for 2 years.
                               corporations and other
                               legally organized
                               entities
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Community Connect Grant   Public body; an Indian    A single community        To build broadband        Min. $50,000             N/A
     Program                   tribe; a cooperative,     outside incorporated or   infrastructure and       Max. $1,000,000
                               nonprofit, limited        unincorporated cities     establish a community    Amounts are published
                               dividend or mutual        with population over      center which offers       in NOFAs and may vary
                               association;              20,000 which does not     free public access to
                               municipality;             have broadband            broadband for 2 years.
                               corporations and other
                               legally organized
                               entities
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    10. Utilization (Participation) Data
       DLT: As of September 30, 2010, there were 26 active
            borrowers (no loan funds have been available).

       There are 115 public television digital transition grant
            awardees.

       There have been no Delta Health grant awards to date. Awards
            are expected September 2011.

       For the Broadband Loan and Loan Guarantee Program, as of
            September 30, 2010, there were 71 active borrowers.

       There have been 217 NOAA Weather Radio grant awards.

       There have been 197 Community Connect broadband grant
            awards.
    11. Duplication or Overlap with Other Programs
        We are unaware of other Federal programs that fund distance
    learning and telemedicine services with the same requirements and
    eligibility as the USDA program.
        Funding for emergency communications may also be available from
    other agencies such as NOAA. USDA and NOAA work closely together.
        In 2009-2010, the Department of Commerce was authorized under ARRA
    to provide grant funding for broadband infrastructure. Extensive
    coordination occurred between both Agencies.
        Funding for DLT services may be available from other Federal
    agencies such as FCC and HHS RUS coordinates closely with the Agencies
    and we participate in each other's outreach events.
    12. Waste, Fraud and Abuse
        RUS closely monitors loan performance to ensure that there is no
    fraud, waste, or abuse. If any is suspected, RUS officials work closely
    with the OIG to investigate and, if necessary, prosecute any offender.
    For example, Sequelle Communications, a pilot Broadband Loan Program
    borrower, was referred to the OIG for investigation by RUS. With the
    assistance of RUS, the former CEO of Sequelle was convicted of money
    laundering and conspiracy, sentenced to 18 months in prison, and
    required to pay approximately $848,000 in retribution. In addition,
    another officer of Sequelle and another company pled guilty to money
    laundering, received probation sentences, and were ordered to pay
    restitution of $549,000 and $1.5 million, respectively. RUS is
    beginning to receive some restitution payments and should continue to
    receive them over many years as the court did not impose any deadline
    for when the entire amount should be paid.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Electric Programs.
    2. Subprograms/Department Initiatives
        Subprograms include:

    ------------------------------------------------------------------------
                               2008 Farm
           Description            Bill       RE Act Section     U.S. Code 7
                                Section                           U.S.C.
    ------------------------------------------------------------------------
    Hardship (Direct) Loan           6102          305(c)(1)       935(c)(1)
     Program
    Federal Financing Bank           6102                306             936
     Guaranteed Loan Program
    Renewable Loan Program           6108                317          940(g)
    High Energy Cost Grants
     & Loans Program:

       High Energy                                         918(a)(1)
       Cost Grants

       Denali                                              918(a)(2)
       Commission Grants

       State Bulk                                 19       918(a)(3)
       Fuel Revolving Fund
       Grants

    Bond and Note Guarantee          6106               313A       940(c)(1)
     Program for Publicly
     Issued Securities
    ------------------------------------------------------------------------

    3. Brief History
        The Rural Electrification Direct and Guaranteed Loan Programs and
    the High Energy Cost Grant Program have permanent authorizations under
    the Rural Electrification (RE) Act of 1936 (7 U.S.C. 901 et seq.) and
    are not authorized under the farm bill. However, the farm bill can and
    often does amend the permanent authorities. The bond and note guarantee
    program under section 313A of the RE Act was authorized under the 2008
    Farm Bill and is authorized through September 30, 2012.
        Subtitle B of Title VI of the 2008 Farm Bill modified and added new
    authority under the RE Act as follows:

       Section 6101, Energy Efficiency Programs, amended sections 2
            and 4 of the RE Act to explicitly authorize loans to electric
            borrowers to implement energy efficiency programs, codifying
            long-standing USDA policy.

       Section 6102, Direct Electric Loan Authority, amended
            section 4 of the RE Act reinstating direct lending authority
            for hardship loans and other direct loans. It deleted language
            requiring the Federal Financing Bank (FFB) to make loans to
            electric borrowers under the section 306 guaranteed loan
            program. Funding levels will be set by appropriations. FFB loan
            guarantees are still available as provided by appropriations.

       Section 6103, Deferments for Energy Efficiency and Demand
            Reduction, amended section 12 to allow electric borrowers to
            defer principal and interest payments on direct loans for up to
            60 months to make loans to residential, commercial, and
            industrial customers for energy audits and installation of
            energy efficiency, and/or demand reduction measures and
            devices.

       Section 6104, Definition of Rural Area, amended the section
            13 definition of a ``rural area'' for purposes of electric
            loans eligibility by cross reference to section 343(a)(13)(C)
            of the Consolidated Farm and Rural Development Act (7 U.S.C.
            1991(a)(13)(C)) to mean any area that excludes a city or town
            of 20,000 or more, or is an area within the service area of a
            borrower with an outstanding loan under titles I through V of
            the RE Act. This amendment expands eligibility for electric
            loans for rural areas from the prior limit to non-urbanized
            places of less than 2,500 and codifies the ``once rural, always
            rural'' policy under the RE Act.

       Section 6105, Substantially Underserved Trust Areas,
            provides new authority Secretary to adapt RUS loans and grants
            requirements to facilitate the construction, acquisition, or
            improvement of infrastructure projects in ``Substantially
            underserved trust areas'' defined as Native American trust
            lands where more than 20 percent of population does not have
            electric, telecommunications, broadband, or water service.

       Section 6106, Guarantees for Bonds and Notes Issued for
            Electrification or Telephone Purposes, amended section 313A to
            extend authority to guarantee bonds and notes issued by
            nonprofit cooperative lenders to September 30, 2012 at an
            annual authorization of $1 billion.

       Section 6108, Electric Loans for Renewable Energy, added new
            section 317 providing authority to make loans for electric
            generation from renewable energy resources for resale to rural
            and nonrural residents. Eligible renewable energy resources
            include energy conversion systems fueled from solar, wind,
            hydropower, biomass, or geothermal sources. The interest rate
            for these loans is set at the average tax-exempt municipal bond
            rate of similar maturities. Funding is dependent on
            appropriations.

        Since 2005, the electric loan programs have approved over $34.4
            billion in financing for rural electric systems. In 2010, the
            program approved 174 loans totaling $7.1 billion. The funds
            were used by rural utilities to construct new or improved
            electric distribution, transmission and generation facilities
            to provide electric service in rural areas, supporting economic
            development and modernizing community infrastructure. The
            investment of the electric loan funds creates and maintains
            jobs in rural communities. Interest in financing renewable
            energy and energy efficiency programs through the electric
            programs is growing. In 2010, the program approved over $313.3
            million in loan guarantees for new renewable electric
            generation projects. The electric programs have adopted a
            progressive management approach by enhancing use of automated
            systems to support loan and grant management and innovating new
            products and procedures to support renewable energy
            initiatives. The program continues its commitment to,
            maintaining a workplace that values employees, and provides
            high-quality service to its customers.
    4. Purpose/Goals
        The RE Act authorized assistance for rural electrification and for
    furnishing and improving electric service in rural areas, including the
    construction and operation of generating plants, electric transmission
    and distribution lines, and assisting electric borrowers to implement
    demand side management, energy efficiency and conservation programs,
    and on-grid and off-grid renewable energy systems.
        In support of this purpose, the RE Act authorizes a variety of
    loan, loan guarantee, and grant programs, including the rural
    electrification loan programs (RE Act, sections 4, 305 and 306), the
    nonprofit lender bond and note guarantee program (section 313A), the
    High Energy Cost Grant Program (section 19), and the Renewable Energy
    Loan Program (section 317).

                                                        5. Success in Meeting Programmatic Purpose/Goals

        The RUS electric loan programs have exceeded their targets from FY 2008 to FY 2010. In FY 2010, the electric programs approved 174 direct loans and
     loan guarantees totaling $7.1 billion. USDA approved 160 distribution loans totaling about $3.5 billion, 13 power supply (generation and transmission)
     Federal Financing Bank (FFB) loans totaling about $3.2 billion, and four direct hardship distribution loans totaling $100 million. In addition, USDA
     approved one nonprofit lender bond and note guarantee of $0.5 billion for relending for eligible electric and telephone purposes.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Electric                                       2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of program borrowers' consumers          Target                         2,390,000       7,125,000       6,125,000       7,100,000       6,125,000
     receiving new or improved electric service     Actual                         8,000,000       7,130,000       7,100,000       9,420,832             N/A
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                             Budget Authority (in thousands)
    ----------------------------------------------------------------------------------------------------------------
                   Program                     2007            2008           2009           2010           2011
    ----------------------------------------------------------------------------------------------------------------
                            Electric Loans      $3,614          $119.2             $0             $0           $699
              High Energy Cost Grants          $25,740         $19,860        $17,500        $17,500        $11,976
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                          Account
               Account Name                Number    2007 Actual  2008 Actual  2009 Actual  2010 Actual  2011 Target
    ----------------------------------------------------------------------------------------------------------------
        Rural Electric and Telephone           1230     $160,070      $82,267     $799,017     $606,031     $400,013
                            Program 1
             High Energy Cost Grants           2042      $31,550      $16,422      $22,347      $17,376      $37,000
    ----------------------------------------------------------------------------------------------------------------
    1 Outlays are reported under one account which includes both the Electric and Telephone programs.

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                                     2007 Amount  2008 Amount  2009 Amount  2010 Amount  2011 Amount
                        Program                         ($000)       ($000)       ($000)       ($000)       ($000)
    ----------------------------------------------------------------------------------------------------------------
        Direct Electric Loans, Treasury Electric Loans, Municipal Electric Loans, FFB Electric Loans, Guaranteed
                           Electric Loans and Electric Underwriting Loans for Bonds and Notes.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                   $3,889,764   $7,099,300   $6,600,000   $7,100,000   $6,600,000
      Budget Authority                                    $3,640         $119           $0           $0           $0
      S&E                                                $19,876      $19,300      $21,094      $21,886      $21,886
                                                    ----------------------------------------------------------------
        Total Costs                                      $23,516      $19,419      $21,094      $21,886      $22,585
        FTEs                                                 182          171          185          185          185
    ----------------------------------------------------------------------------------------------------------------
                                                 High Energy Cost Grants.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                      $19,687      $21,260      $37,000      $17,954      $11,976
      Budget Authority                                   $19,687      $21,260      $37,000      $17,954      $11,976
      S&E                                                    (a)          (a)          (a)          (a)          (a)
        Total Costs                                      $19,687      $21,260      $37,000      $17,954      $11,976
        FTEs                                                 (a)          (a)          (a)          (a)          (a)
    ----------------------------------------------------------------------------------------------------------------
    a S&E funds associated with the High Energy Cost Grants program is included in the S&E section for the entire
      electric program.

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Eligible Areas                                    Funding Limits Per         Loan Terms, if
             Program           Eligibility (Entities)         (Populations)           Eligible Purpose              Request                 Applicable
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hardship Loan Program     Corporations, States,     Rural areas outside the   Electric distribution     Not Applicable           Up to 35 years, based
     (Section 305)             Territories, and          boundaries of a city or   and sub-transmission                               on the expected useful
                               Subdivisions and          town of more than         facilities                                         life of the facilities
                               Agencies,                 20,000 population and                                                        financed by the loan
                               Municipalities,           areas served by an
                               People's Utility          existing electric
                               Districts, and            borrower.
                               Distribution
                               Cooperatives, nonprofit
                               and limited-dividend,
                               Or Mutual Associations
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    FFB Guaranteed Loan       Corporations, States,     Rural areas outside the   Electric distribution,    No limit.                Up to 35 years, based
     Program (Section 306)     Territories, and          boundaries of a city or   sub-transmission, bulk                             on the expected useful
                               Subdivisions and          town of more than         transmission, and                                  life of the facilities
                               Agencies,                 20,000 population and     generation facilities,                             financed by the loan
                               Municipalities,           areas served by an        energy efficiency
                               People's Utility          existing electric         investments, and
                               Districts, and            borrower.                 renewable energy
                               Cooperatives, nonprofit                             systems
                               and limited-dividend,
                               Or Mutual Associations
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bond and Note Guarantee   Cooperative or other      None                      Proceeds to be used to    None                     20 years (by
     Program (Section 313A)    lenders organized on a                              make loans for eligible                            regulation)
                               nonprofit basis                                     electric or telephone                             Annual guarantee fee of
                                                                                   purposes, excluding                                30 basis points
                                                                                   electric generation, or                            supports the Rural
                                                                                   to refinance bonds or                              Economic Development
                                                                                   notes previously issued                            Loan and Grant
                                                                                   for such purposes.                                 (REDLEG) program under
                                                                                                                                      section 313(b)(2)(A)
                                                                                                                                      of the RE Act.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Energy Cost Grants
     & Loans Programs:

      High Energy Cost        Persons, For Profit and   Extremely high energy     Energy distribution,      Administrative and       N/A
       Grants                  Not For Profit            cost communities with     transmission and          planning costs may not
                               Businesses, State &       annual average            generation facilities     exceed 4% of funds
                               Local Governments, and    residential energy        (including energy         provided
                               Federally-Recognized      expenditures is 275% of   efficiency & renewable
                               Indian Tribes & Tribal    national average.         energy) serving
                               entities                                            eligible communities
      Denali Commission       Denali Commission         Extremely high energy     Energy distribution,      Administrative and       N/A
       Grants                                            cost communities in       transmission and          planning costs may not
                                                         Alaska                    generation facilities     exceed 4% of funds
                                                                                   (including energy         provided
                                                                                   efficiency & renewable
                                                                                   energy) serving
                                                                                   eligible communities in
                                                                                   Alaska.
      State Bulk Fuel         State Entity existing as  Rural areas where fuel    Establishment of Fuel     Administrative and       N/A
       Revolving Fund Grants   of 11/9/2000              cannot be shipped by      Purchase Revolving Fund   planning costs may not
                                                         surface means                                       exceed 4% of funds
                                                                                                             provided
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    10. Utilization (Participation) Data
        The electric programs services 667 active electric borrowers and
    grantees in 46 states, Puerto Rico, American Samoa, and the Republic of
    the Marshall Islands. During FY 2011, the Agency has approved more than
    $1.9 billion in loan guarantees.
        The High Energy Cost Grant Program's FY 2010 Notice of Funding
    Availability for $15.5 million in competitive grants received over 100
    applications from 18 states and eight eligible insular areas.
    11. Duplication or Overlap with Other Programs
        The Rural Electrification Loan programs are the primary source of
    electric infrastructure financing for rural electric providers in 46
    states. All RUS loans must demonstrate financial feasibility,
    assurances of repayment, and adequate loan security. There is no
    overlap between the electric loan program and other USDA energy loan
    and grant programs because electric infrastructure is not an eligible
    purpose under those programs. The U.S. Department of Energy Loan
    Guarantee Programs are intended to provide incentives for high risk
    technology innovation, advanced nuclear power generation, and advanced
    clean energy technology projects, but does not support loans for
    traditional electric infrastructure.
        The High Energy Cost Grant Program differs from other USDA and
    Department of Energy grant programs in that it is targeted at extremely
    high cost rural communities, includes a broad range of eligible energy
    project activities, including traditional infrastructure, renewable
    energy and energy efficiency, and permits applications from tribes,
    tribal entities, state and local governments, school districts, and
    other for profit and not for profit entities, that are not eligible
    under other loan or grant programs.
    12. Waste, Fraud and Abuse
        The Electric Programs does not have any outstanding issues with
    respect to overpayments, waste, fraud, or abuse identified by the
    Department or other government agency. There are no outstanding audits
    for these programs.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Telecommunications Program.
    2. Subprograms/Department Initiatives

    ------------------------------------------------------------------------
                               2008 Farm
           Description            Bill       RE Act Section     U.S. Code 7
                                Section                           U.S.C.
    ------------------------------------------------------------------------
    Telecom Hardship Loan             N/A                305       935(d)(1)
     Program (Direct)
    Telecom Treasury Rate             N/A          305(d)(2)             935
     Loan Program
    Telecom Guaranteed Loan           N/A                306             936
     Program (FFB)
    ------------------------------------------------------------------------

    3. Brief History
        The Telecommunications Loan Program has permanent authorizations
    under the Rural Electrification Act (REA) of 1936.
    4. Purpose/Goals
        The Telecommunications Program finances the improvement or
    extension of telecommunications service in rural areas through
    telecommunications borrowers. Borrowers can apply for direct (Treasury
    rate) loans at an interest rate which is tied to the government's cost
    of money. Borrowers can also request FFB loans and guaranteed loans.
    Loans at five percent are available to borrowers that further qualify
    under ``hardship'' conditions, which include subscriber density factors
    and net income projections of the borrowers.

                                                        5. Success in Meeting Programmatic Purpose/Goals

        In FY 2010, the telecommunications program approved $690 million in infrastructure program loans. This funding will allow rural telecommunications
     providers to deploy new or improved service to more than 136,694 rural subscribers. For the last 2 years, 90 percent of the loans financed have been
     for fiber-to-the-home projects to provide fiber-optic service to rural homes and businesses.

                                                                     (Dollars in thousands)

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                               Telecommunications                                  2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Number of borrowers' subscribers receiving new  Target                           194,699         194,931         180,000         171,000         120,000
     or improved service                            Actual                           155,135         182,174         175,416         136,694
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Telecommunications includes broadband data. Rural Broadband Access chart also includes broadband data.

                                      6. Annual Budget Authority (FY 2007-FY 2011)
                                             Budget Authority (in thousands)
    ----------------------------------------------------------------------------------------------------------------
                                               2007            2008           2009           2010           2011
    ----------------------------------------------------------------------------------------------------------------
                                                  $605          $3,595           $525             $0             $0
    ----------------------------------------------------------------------------------------------------------------

                                           7. Annual Outlays (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                          Account
               Account Name                Number    2007 Actual  2008 Actual  2009 Actual  2010 Actual  2011 Target
    ----------------------------------------------------------------------------------------------------------------
        Rural Electric and Telephone           1230     $160,070      $82,267     $799,017     $606,031     $400,013
                            Program 1
    ----------------------------------------------------------------------------------------------------------------
    1 Outlays are reported under one account which includes both the Electric and Telephone programs.

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                                     2007 Amount  2008 Amount  2009 Amount  2010 Amount  2011 Amount
                        Program                         ($000)       ($000)       ($000)       ($000)       ($000)
    ----------------------------------------------------------------------------------------------------------------
          Direct Telecommunications Loans, Treasury Telecommunications Loans, and FFB Telecommunications Loans.
    ----------------------------------------------------------------------------------------------------------------
    Program Items:
      Program Level                                     $376,736     $685,170     $690,000     $690,000     $690,000
      Budget Authority                                      $392       $3,594         $525           $0           $0
      S&E                                                 $8,688       $8,431      $11,047       $9,567       $9,567
                                                    ----------------------------------------------------------------
        Total Costs                                       $9,080      $12,026      $11,572       $9,567       $9,567
        FTEs                                                  80           80           97           81           81
    ----------------------------------------------------------------------------------------------------------------

                                                                     9. Eligibility Criteria
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Eligible Areas                                    Funding Limits Per         Loan Terms, if
             Program           Eligibility (Entities)         (Populations)           Eligible Purpose              Request                 Applicable
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Telecom Hardship Loan     For-profit and nonprofit  Areas outside             To build, acquire,        Minimum loan amount:     5 percent fixed
     Program (Direct)          corporations that do or   incorporated or           extend, improve and       $50,000                  interest rate; up to
                               will provide voice and    unincorporated cities     refinance telephone      Maximum loan amount:      35 year amortization,
                               data telecom service      with population over      infrastructure            None                     determined by the life
                                                         5,000                                                                        of facilities
                                                                                                                                      financed.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Telecom Treasury Rate     For-profit and nonprofit  Areas outside             To build, acquire,        Minimum loan amount:     Treasury interest rate
     Loan Program              corporations that do or   incorporated or           extend, improve and       $50,000                  at date of advance; up
                               will provide voice and    unincorporated cities     refinance telephone      Maximum loan amount:      to 35 year
                               data telecom service      with population over      infrastructure            None                     amortization,
                                                         5,000                                                                        determined by the life
                                                                                                                                      of facilities
                                                                                                                                      financed.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Telecom Guaranteed Loan   For-profit and nonprofit  Areas outside             To build, acquire,        Minimum loan amount:     Treasury interest rate
     Program (FFB)             corporations that do or   incorporated or           extend, improve and       $50,000                  plus \1/8\ percent; up
                               will provide voice and    unincorporated cities     refinance telephone      Maximum loan amount:      to 35 year
                               data telecom service      with population over      infrastructure.           None                     amortization,
                                                         5,000.                                                                       determined by useful
                                                                                                                                      life of facilities
                                                                                                                                      financed.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    10. Utilization (Participation) Data
        As of September 30, 2010, there were 481 active borrowers.
    11. Duplication or Overlap with Other Programs
        We are not aware of other Federal programs that provide funding for
    broadband infrastructure with the same requirements and objectives as
    this program. In 2009-2010, the Department of Commerce was authorized
    under the American Recovery and Reinvestment Act to provide grant
    funding for broadband infrastructure. Additionally, funding is provided
    to RUS telecommunications borrowers from the Federal Communications
    Commission (FCC) through the universal service fund. These funds are
    used as revenue and are considered to be part of the RUS borrower's
    ability to repay Federal debt.
    12. Waste, Fraud and Abuse
        We are not aware of any examples of waste, fraud or abuse under
    this program. All previous GAO and OIG recommendations have been
    completed. There are no outstanding audits for these programs.
    13. Effect of Administrative PAYGO
        None.
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--Rural
                          Business-Cooperative Service
    1. Program Name
        Rural Business Opportunity Grants (RBOG).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        RBOG was authorized by Section 306(a)(19)(C)(ii) of the
    Consolidated Farm and Rural Development Act (7 U.S.C.
    1926(a)(19)(C)(ii) and reauthorized by the Food, Conservation, and
    Energy Act of 2008 (2008 Farm Bill), Section 6003 (Pub. L. 110-246).
        In addition to a national pool of funds, the program has
    historically operated two Congressionally Mandated set-asides--one for
    Native Americans and another for Rural Economic Area Partnership (REAP)
    zones.
    4. Purpose/Goals
        RBOG promotes sustainable economic development in rural communities
    with exceptional needs through provision of training and technical
    assistance for business development, entrepreneurs, and economic
    development officials and to assist with economic development planning.
        RBOG is primarily a training and technical assistance program.
    Funds may be provided for development of export markets; feasibility
    studies; development of long term trade strategies; community economic
    development planning; business training and business based technical
    assistance for rural entrepreneurs and business managers; establishment
    of rural business incubators; and assistance with technology based
    economic development. The types of projects that may be funded could
    include identification and analysis of business opportunities that will
    utilize local material and human resources; leadership development
    training to existing or prospective rural entrepreneurs and managers;
    business support centers; centers for training, technology and export
    trade; and, economic development planning.
    5. Success in Meeting Programmatic Purpose/Goals
        In Fiscal Year (FY) 2010, the 27 grants awarded to residents and
    businesses in 17 states totaled $2.6 million and created or saved more
    than 990 jobs. A $249,340 grant was awarded to Ecotrust, an
    organization based in Portland, Oregon, that seeks to create economic
    opportunity, social equity and environmental well-being by
    demonstrating new business models based on economic, social and
    environmental principles, to support their FoodHub initiative, an
    online directory and marketplace that makes it easy for regional food
    buyers and sellers to find each other, connect and do business. The
    grant will aid Ecotrust in increasing recruitment of producers and
    buyers in rural communities and providing the training and assistance
    necessary to ensure FoodHub supports their goals.
    6. Annual Budget Authority (FY 2002-FY 2011)
        RBOG budget authority includes:

                                                          RBOG
                                                (in millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                      2007              2008             2009             2010             2011
    ----------------------------------------------------------------------------------------------------------------
          Budget Authority              $2.97           $2.482           $2.483           $2.483           $2.478
    ----------------------------------------------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011)
        RBOG annual outlays included:

    ------------------------------------------------------------------------
                                                 (in millions of dollars)
                                             -------------------------------
         Account Name        Account Number    2007    2008    2009    2010
                                              Actual  Actual  Actual  Actual
    ------------------------------------------------------------------------
          Rural Business    1902 (RBOG line     $3.1    $4.1    $4.4   $2.9M
              Program Ac-             item)
                   count
    ------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011)
        RBOG annual delivery costs were:

                                                          RBOG
                                                (in millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                      2007              2008             2009             2010             2011
    ----------------------------------------------------------------------------------------------------------------
                  Program Level         $2.97           $2.482           $2.483           $2.483           $2.478
          Budget Authority              $2.97           $2.482           $2.483           $2.483           $2.478
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Rural public bodies, rural nonprofit corporations, rural Indian
    tribes, and cooperatives with primarily rural members that conduct
    activities for the mutual benefit of the membership are eligible
    provided they have sufficient financial strength and expertise to carry
    out the activity to be funded.
    10. Utilization (Participation) Data
        The program is annually over-subscribed (applications received
    exceed available funding). Due to the limited amount of funding
    available, Rural Development has limited the number of applications
    individual states may submit and capped the maximum grant amount
    (applies to the national pool only). In 2010 USDA received 424 eligible
    applications totaling $60 million; only 27 awards totaling $2.6 million
    could be funded.
    11. Duplication or Overlap with Other Programs
        The program is unique in that the focus is on provision of
    technical assistance to priority communities (e.g., persistent poverty
    and economic distress) as well as sponsoring best practices for
    economic development activities that are transferable.
        While the program objective is unique, RBOG complements multiple
    other Rural Development (RD) programs including the Rural Business
    Enterprise Grant, Community Facilities and Rural Community Development
    Initiative programs. Further, the RBOG project activities can be
    leveraged with other community development programs outside of the
    Department.
    12. Waste, Fraud and Abuse
        There are no reports or audits from GAO and OIG on the RBOG
    program.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Rural Cooperative Development Grants (RCDG).
    2. Subprograms/Department Initiatives
            Appropriate Technology Transfer for Rural Areas (ATTRA).
            Cooperative Research Agreements.
            The Small Socially-Disadvantaged Producer Grants (SSDPG).
            Value-Added Agricultural Market Development Grant Program
            (VAPG).
            Agricultural Marketing Resource Center Grants (AgMRC).
    3. Brief History
        RCDG was authorized by section 310B(e) of the Consolidated Farm and
    Rural Development Act (7 U.S.C. 1932(e)). Regulations are found in 7
    CFR part 4284, subparts A and F.
        ATTRA was authorized by P.L. 104-37 and amended by Section 6016 of
    the farm bill. It was first authorized by the 1985 Farm Bill and the
    Department received its first appropriation to start the project in FY
    1987. In FY 1990, ATTRA was transferred to the U.S. Fish and Wildlife
    Service and then in FY 1996 the authority to the Rural Business-
    Cooperative Service (RBS) for administration. ATTRA is located on the
    University of Arkansas campus at Fayetteville, Arkansas, and functions
    as an information and technical assistance center staffed with
    sustainable agriculture specialists accessible nationally by toll-free
    telephone.
        Cooperative Research Agreements were authorized by the Cooperative
    Marketing Act of 1926, (7 U.S.C. 453).
        Formerly known as the Small Minority Producer Grant program, SSDPG
    was authorized by Public Law 109-97 under the rural cooperative
    development grants authorized under 310(b) of the Consolidated Farm and
    Rural Development Act (7 U.S.C. 1932). FY 2006 was the first year this
    program was administered.
        VAPG was authorized by the Agricultural Risk Protection Act of 2000
    and amended by the 2002 and 2008 Farm Bill.
        AgMRC was developed in 2001 and is operated by the Value-Added
    Agriculture Program at Iowa State University Extension and the Arthur
    Capper Cooperative Center at Kansas State University. AgMRC actively
    recruits other institutions, particularly land-grant institutions and
    USDA affiliated institutions for special grant projects or
    subcontracts. More than 22 states have partnered with AgMRC since 2002,
    and a map of those relationships is available.
    4. Purpose/Goals
        The purpose of RCDG is to establish and operate centers for
    cooperative development to improve the economic condition of rural
    areas through the development of new cooperatives and improving
    operations of existing cooperatives. RCDG's improve the economic
    condition of rural areas by promoting a range of cooperative
    development activities.
        Grants are made to nonprofit corporations and institutions of
    higher education to operate centers for cooperative development. The
    centers address rural economic problems in two ways. First, a center
    brings together expertise in cooperative development and cooperative
    business operations that would otherwise be more difficult to obtain.
    Second, these experts in cooperative development facilitate new
    cooperative businesses and improve the operations of existing
    cooperatives through technical assistance and educational programs.
    Consequently, RCDG's promote the creation or retention of jobs in rural
    areas through the development of new rural cooperatives, value-added
    processing and other rural businesses.
        ATTRA provides information to farmers and other rural users on a
    variety of sustainable agricultural practices that include both crop
    and livestock operations. The program encourages agricultural producers
    to adopt sustainable agricultural practices, which allow for them to
    maintain or improve profits, produce high quality food and reduce
    adverse impacts to the environment.
        Cooperative Research Agreements Program is a partnership program
    with the nation's colleges and universities that leverage our financial
    and human resources to conduct research on the problems and
    opportunities for the cooperative form of business. Cooperative
    agreements are awarded to 1862 and 1890 Land-Grant Universities, other
    institutions of higher education, and to nonprofits. Cooperative
    agreements are used to encourage research on critical issues vital to
    the development and sustainability of cooperatives as a means of
    improving the quality of life in America's rural communities.
        SSDPG provides grants to assist small, minority agricultural
    producers in rural areas provides funding for cooperatives or
    associations of cooperatives whose primary focus is to provide
    assistance to such producers, and whose governing board and/or
    membership is comprised of at least 75 percent socially disadvantaged
    members. Grants may be used for developing business plans, conducting
    feasibility studies, or developing marketing plans for farmers,
    ranchers, loggers, agricultural harvesters, and fishermen.
        VAPG enable producers of agricultural commodities to participate in
    the economic returns found in the value-added market. Grants may be
    used to develop business plans and develop strategies for creating
    marketing opportunities. Grants may also be used for feasibility
    studies and to provide capital to establish alliances or business
    ventures allowing producers to better compete in domestic and
    international markets. These grants for expansion, modernization or
    start-up, enhance the local job market mix and improve the local tax
    base. As a result, the overall local rural economy is stimulated, jobs
    are created, and quality of life improves.
        AgMRC answers questions and provides information to media,
    investors, bankers, consultants and agricultural students on specific
    topics.

                                                        5. Success in Meeting Programmatic Purpose/Goals

        RCDG performance includes:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              Performance Measures                                 2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Rural Cooperative Development Grants:
      Number of Cooperatives and prospective cooperative groups assisted                 200             225             195             300             300
      Program Dollars (in thousands)                                                  $6,217          $8,933          $8,765         $14,290         $14,487
    Value-Added Producer Grants (discretionary):
      Proposed, new, or expanded Value-Added businesses assisted                         185             151             142               0             277
      Program Dollars (in thousands)                                                 $21,203         $23,801         $19,389              $0         $37,736
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                          6. Annual Budget Authority (FY 2002-FY 2011)

        Annual budget authority was:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                     RBS Coop Grant Programs (in thousands)                        2007            2008            2009            2010            2011
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Rural Cooperative Development Grants, Appropriate Technology Transfer,            $6,218          $8,934          $8,769         $14,293         $14,487
     Cooperative Research Agreements, and Grants to Assist Minority
     Producers
    Value-Added Agricultural Market Development Grant Program and                    $23,801         $20,333         $20,657         $17,367         $20,367
     Agricultural Marketing Resource Center Grants
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)

        Annual outlays were:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                          Account Name                        Account Number    2007 Actual     2008 Actual     2009 Actual     2010 Actual     2011 Actual
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cooperative Development Grants                                      1900         $31,488         $29,685         $26,955         $33,880         $31,732
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Annual obligations were:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                          Account Name                        Account Number    2007 Actual     2008 Actual     2009 Actual     2010 Actual     2011 Actual
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cooperative Development Grants                                      1900         $29,875         $29,506         $32,399         $15,393         $48,589
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Outlays are not a one to one correlation with Budget Authority. Some programs disburse over numerous years. Undisbursed balances are carried
      forward for future year outlays.

                                        8. Annual Delivery Cost (FY 2002-FY 2011)
    ----------------------------------------------------------------------------------------------------------------
                                                         2007         2008         2009         2010         2011
    ----------------------------------------------------------------------------------------------------------------
       Rural Cooperative Development Grants, Appropriate Technology Transfer, Cooperative Research Agreements, and
                                          Grants to Assist Minority Producers.
    ----------------------------------------------------------------------------------------------------------------
    Program Level                                         $6,218       $8,934       $8,769      $14,293      $14,487
    Budget Authority                                      $6,218       $8,934       $8,769      $14,293      $14,487
    Administrative Costs (Direct)                           $246         $214         $262         $157         $157
    Administrative Costs (Indirect)                          N/A          N/A          N/A         $403         $403
                                                    ----------------------------------------------------------------
      Total Costs                                         $6,464       $9,148       $9,031      $14,853      $15,047
        FTEs                                                   2            2            2            2            2
                                                    ----------------------------------------------------------------
    Performance measure: No. Groups assisted                 187          175          150          300          360
    Cost per Measure (unit cost)                          $34.57       $52.27       $60.21       $49.51       $41.80
    ----------------------------------------------------------------------------------------------------------------
            Value-Added Agricultural Product Market Development Grants & Agricultural Mtng. Res. Center Grants
    ----------------------------------------------------------------------------------------------------------------
    Program Level                                        $23,801      $20,333      $20,657      $17,367      $20,367
    Budget Authority                                     $23,801      $20,333      $20,657      $17,367      $20,367
    Administrative Costs (Direct)                         $1,167       $1,171       $1,311         $468         $468
    Administrative Costs (Indirect)                                                              $1,205       $1,205
                                                    ----------------------------------------------------------------
      Total Costs                                        $24,968      $21,504      $21,968      $19,040      $22,040
      FTEs                                                    11           10           11           11           11
                                                    ----------------------------------------------------------------
    Performance Measure: No. of businesses assisted          151          150          192          127          150
    Cost per Measure (unit cost)                         $165.35      $143.36      $114.42      $149.92      $146.93
    ----------------------------------------------------------------------------------------------------------------

    9. Eligibility Criteria
        Under RCDG, nonprofit corporations and institutions of higher
    education are eligible.
        For ATTRA, farmers and other rural users or anyone with a need for
    agricultural related information are eligible.
        Regarding Cooperative Research Agreements, research proposals are
    solicited from institutions of higher education or nonprofit
    organizations interested in applying for competitively awarded
    cooperative agreements for research related to agricultural and
    nonagricultural cooperatives serving rural communities.
        For the SSDPG, socially disadvantaged persons or 100 percent
    socially-disadvantaged producer-owned entities, including farmers,
    ranchers, loggers, agricultural harvesters, and fishermen, that have
    averaged $250,000 or less in annual gross sales of agricultural
    products in the last 3 years are eligible. A socially-disadvantaged
    producer for SSDPG purposes means individual agricultural producers who
    have been subjected to racial, ethnic or gender prejudice because of
    their identity as members of a group, without regard for their
    individual qualities.
        Under VAPG, eligible applicants are independent producers, farmer
    and rancher cooperatives, agricultural producer groups, and majority-
    controlled producer-based business ventures.
        AgMRC services are available to independent producers, processors,
    and service providers with critical information to build successful
    value-added agricultural enterprises. In order to better serve our core
    audience, the AgMRC website just completed a reorganization and new
    graphical update, giving users a clean, contemporary design and giving
    clear organization to files.
    10. Utilization (Participation) Data
        The last time funding for the Value-Added Grant Program was
    announced, there were 550 applicants requesting $56.4 million, but only
    196 projects totaling $22.7 million could be awarded.
    11. Duplication or Overlap with Other Programs
        The purposes of these programs are unique. RCDG and SSDPG focus on
    providing technical assistance to existing, new, or developing
    cooperative businesses. RBS is the sole provider of research,
    information and technical assistance specifically targeted to support
    cooperatives.
        While these programs are unique, they can complement a number of
    other programs within USDA, most notably, programs administered by
    Agricultural Marketing Service (AMS). The AMS Federal-State Marketing
    Improvement Program (FSMIP), Farmers Market Promotion Program (FMPP)
    and Specialty Crop Block Grant programs can be used in conjunction with
    RCDG programs to enhance or expand the scope or scale of a project.
    Further, programs under RCDG can also compliment a number of other RD
    programs including, but not limited to, the Rural Business Enterprise
    Grant, Business and Industry Guaranteed Loan, Community Facilities, and
    Renewable Energy for America Program.
    12. Waste, Fraud and Abuse
        There have been no reports of such problems with any of the
    programs included under RCDG.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Rural Economic Area Partnership (REAP) Zones.
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        Many rural areas face economic and community development issues of
    a very different character than communities whose needs are mainly
    defined by poverty. Often, the defining features are geographic
    isolation of communities separated by long distances, absence of large
    metropolitan centers, low-density settlement patterns, historic
    dependence on agriculture, continued population loss, out-migration,
    and economic upheaval or economic distress.
        To address these issues, USDA advocated a pilot concept for rural
    revitalization and community development called REAP Zones. The REAP
    Initiative was established to address critical issues related to
    constraints in economic activity and growth, low density settlement
    patterns, stagnant or declining employment, and isolation that has led
    to disconnection from markets, suppliers, and centers of information
    and finance.
        Memoranda of Agreement between the REAP Zones and USDA established
    the RD mission area as the lead Federal Agency to assist the zones in
    the implementation of their programs. In 1995, two REAP Zones in North
    Dakota were initially designated to participate.
        Subsequently, in 1999, two areas in upstate New York were added as
    the third and fourth REAP Zones. In 2000, an area in Vermont was
    designated as the fifth REAP Zone. The North Dakota Zones and the
    Vermont Zone are multi-county in size and the two REAP Zones in New
    York are, for the most part, single counties. Each REAP Zone developed
    a strategic plan for economic revitalization in their respective
    geographic areas.
        A Presidential Memorandum dated August 5, 1993; variously dated
    Memoranda of Agreement; Pub. L. No. 106-387, Agriculture, Rural
    Development, Food and Drug Administration, and Related Agencies
    Appropriations Act of 2001. 2008 Farm Bill, Section 6017 (J) extends
    the current REAP Zones to 2012.
    4. Purpose/Goals
        This pilot project sets up a collaborative and citizen-led effort
    to enhance economic development in the REAP Zones. This effort will
    become the model for building a new rural economy for other rural areas
    with similar problems. The Department of Agriculture has provided
    modest amounts of money to REAP Zones for planning this program. This
    contribution has been augmented by USDA community development technical
    assistance across all areas of REAP Zone endeavor. Further, priority
    consideration is afforded for REAP Zone applications submitted for
    funding through RD.
        A summary of the REAP Zones' locations includes:

    ------------------------------------------------------------------------
                                                                     Status
            REAP Zone          State       Counties Included          Ends
    ------------------------------------------------------------------------
    CONAC                         ND  McHenry, Bottineau,            9/30/12
                                       Rolette, Towner, Pierce
                                       and Benson; and the Indian
                                       reservations of the Turtle
                                       Mountain Chippewa and
                                       Spirit Lake Sioux
    Southwest                     ND  Dunn, Stark, Hettinger,        9/30/12
                                       Adams, Bowman, Slope,
                                       Golden Valley, Billings,
                                       and part of the Fort
                                       Berthold Indian
                                       Reservation
    Sullivan-Wawarsing            NY  Sullivan and the Town of       9/30/12
                                       Wawarsing
    Tioga                         NY  Tioga                          9/30/12
    Northeast Kingdom             VT  Caledonia, Essex, Orleans      9/30/12
    ------------------------------------------------------------------------

    5. Success in Meeting Programmatic Purpose/Goals
        Each REAP Zone developed a strategic community & economic
    development plan with a variety of projects that have been completed or
    are in the process of being implemented. Given a modest amount of money
    to develop a strategic, each of the five REAP Zones have continued on
    in vary degrees with their economic development projects for better
    than 10 years, with the oldest two dating back to 1995.
        Leveraged funds from 1999-2011 include:

    ------------------------------------------------------------------------
    As of: 4/1/2011
      Grant from Designation.................                     0
      State Government.......................           $62,302,055
      Nonprofit..............................            $8,494,877
      Local or Regional Gov't................           $12,053,461
      Federal Gov't..........................          $221,896,363
      Private Sector.........................           $48,184,764
      Tribal Gov't...........................            $6,086,699
      Other..................................            $4,502,286
      REAP Zones.............................                     5
                                              ------------------------------
        Total................................        $3,633,398,005
                                              ==============================
        Per Zone Average.....................           $72,704,101.00
    ------------------------------------------------------------------------

    6. Annual Budget Authority (FY 2002-FY 2011)
        There is no direct budget authority for REAP Zones. Only funding
    references in the budget are specific dollar amounts set aside in three
    RD programs. If funding is not applied for by June 30, the funds are
    returned to the general pool. Set aside funding for REAPS was
    eliminated in FY 2011 for the Rural Business Enterprise and Rural
    Business Opportunity programs, with the only set aside being under the
    Intermediary Relending Program. This funding is in the form of loans.
    7. Annual Outlays (FY 2002-FY 2011)
        There were no outlays for REAP Zones during FY 2007 through FT
    2011.
    8. Annual Delivery Cost (FY 2002-FY 2011)
        There is no direct funding for REAP zones, thus we cannot provide
    delivery cost funding levels. Delivery costs are scattered throughout
    all of the RBS programs; depending on what programs provide funding to
    the areas in a given year.
    9. Eligibility Criteria
        The REAP Initiative is a USDA pilot program targeting areas of
    economic distress not normally addressed by standard RD programs. In
    some cases this included high population loss, and others sharp
    economic downturns due to declining industries.
    10. Utilization (Participation) Data
        The communities and residents of 19 counties and three Indian
    reservations in parts of three states: North Dakota, New York, and
    Vermont.
    11. Duplication or Overlap with Other Programs
        Within RD, there are no other programs with similar purposes.
    Within USDA, there are few programs that promote strategic planning on
    a multi-community or multi-county basis. The closest program to the
    REAP Initiative would be the Resource, Conservation & Development
    Program. It also promotes multi-county strategic planning, but is
    focused on natural resources and resource-based economic development.
    12. Waste, Fraud and Abuse
        Any actions in these areas around REAP Zones are covered by the
    specific programs the Zones may have participated in. There is not any
    direct USDA funding for REAP Zones. For the minimal initial planning
    grants each Zone received, there were not any instances of waste,
    fraud, and abuse.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Rural Business Programs.
    2. Subprograms/Department Initiatives
            Guaranteed Business and Industry Loans.
            Guaranteed Business and Industry Loans 2008 Disasters Emergency
            Supplemental.
            North American Development Bank Guaranteed Business and
            Industry Loans.
            Guaranteed Business and Industry--Stimulus.
    3. Brief History
        The mission of the guaranteed Business and Industry (B&I) loan
    program is to improve, develop, or finance business, industry, and
    employment and improve the economic and environmental climate in rural
    communities. This purpose is achieved by bolstering the existing
    private credit structure through the guarantee of quality loans which
    will provide lasting community benefits. USDA implements its part of
    the Community Adjustment Investment Program under the North American
    Development (NAD) Bank through the B&I Guaranteed Loan Program.
    4. Purpose/Goals
        The B&I loan guarantee program is authorized by Section 310B of
    CONACT [7 U.S.C. 1921]. Access to capital is key to keeping and
    increasing the number and size of businesses operating in rural areas.
    The guaranteed loan program supports financing for business and
    industrial acquisition, construction, conversion, enlargement, repair
    or modernization outside a town or city with a population of less than
    50,000. Loan funds are used to finance the purchase and development of
    land, easements, rights-of-way, buildings, equipment, facilities,
    machinery, supplies and materials, and fund to pay startup costs and
    supply working capital. Individuals, as well as public, private, or
    cooperative organizations, Indian tribes, and corporations are
    eligible. The loan guarantee percentage drops from a maximum of 80
    percent for loans of up to $5 million to 60 percent for loans between
    $10 million and $40 million. The aggregate loan amount available to any
    one borrower under this program is limited to $25 million. An exception
    to the limit is for cooperative organizations when the facility is
    located in a rural area and the facility provides value-added
    processing of an agricultural commodity. The maximum amount in such
    cases is $40 million which must be approved by the Secretary.
    5. Success in Meeting Programmatic Purpose/Goals
        The B&I loan program is RD's flagship job creation and capital
    expansion business program. Through $1.379 billion in annual
    appropriations and $1.561 billion appropriated through the ARRA, more
    than 55,000 jobs were created and saved and 1,332 rural businesses were
    impacted.
        For example, Medora Environmental, Inc. (MEI) and its operating
    company, SolarBee, Inc., manufacture the SolarBee, a solar powered high
    volume water circulating system. The companies received a B&I
    guaranteed loan for permanent working capital of $1,787,100 and
    existing debt refinance in the amount of $1,212,900. The permanent
    working capital allowed the business to supplement its cash needs on a
    contingency basis. This loan also refinanced term debt which will save
    the company approximately $6,700 each month to help retain 67 jobs
    paying wages of approximately $28 per hour.
        Another example is Ocean Classroom Foundation (OCF) which received
    a $2.2 million B&I guaranteed loan on February 1, 2010. This loan
    helped the organization restructure its debt and access much-needed
    working capital. The project also created and saved 14 jobs. OCF is
    located in Boothbay Harbor, Maine. The non-traditional school
    contributes to preserving the state's maritime heritage, while
    expanding students' horizons, by combining academic and nautical
    curriculums with experience at sea. Accredited programs are offered to
    teenaged and young-adult students as a means of providing academic and
    technical training, along with life experiences.
        The B&I Guaranteed Loan program helps create and maintain
    employment and improve the economic climate in rural communities. This
    is accomplished by providing loan guarantees to private lenders of up
    to 80 percent that can be used to fund business and industrial
    acquisition, construction, conversion, enlargement, repair or
    modernization. The number of jobs created or saved in rural communities
    is a key performance measure and a critical element in determining the
    viability of a project for funding.
        Performance data includes:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                              Performance Measures                              2007 Actual     2008 Actual     2009 Actual     2010 Actual     2011 Actual
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Performance Measure No. 1

      a. Jobs created/saved * total

    Guaranteed Business and Industry:

      a. New or saved jobs                                                            12,343          18,703          17,602          21,328          11,705
      b. Program Dollars--Loans                                                     $830,525      $1,390,532        $949,010      $1,322,984        $813,824

    Guaranteed Business and Industry Loans 2008 Disasters Emergency
     Supplemental:

      a. New or saved jobs                                                                 0               0               0               0
      b. Program Dollars--Loans                                                           $0              $0        $246,197              $0              $0

    Guaranteed NadBank Business and Industry:

      a. New or saved jobs                                                                 0               0               0               0               0
      b. Program Dollars--Loans                                                       $3,490              $0              $0              $0              $0

    Guaranteed Business and Industry--Stimulus:

      a. New or saved jobs                                                                 0               0               0               0               0
      b. Program Dollars--Loans                                                           $0              $0         $49,412              $0              $0
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                          6. Annual Budget Authority (FY 2002-FY 2011)
                                                                     (Dollars in Thousands)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Account Name                                  2007 Actual     2008 Actual     2009 Actual     2010 Actual     2011 Actual
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Guaranteed Business and Industry Loans:
      Budget Authority                                                               $36,211         $60,071         $49,350         $70,515         $41,179
      Subsidy Rate                                                                     4.36%           4.32%           4.35%           5.33%           5.06%
      Program Level                                                                 $830,525      $1,390,532        $949,010      $1,322,984        $813,824
    Guaranteed NadBank Business and Industry:
      Budget Authority                                                                  $319              $0            $351              $0              $0
      Subsidy Rate                                                                     9.15%           7.69%          10.36%
      Program Level                                                                   $3,490              $0              $0              $0              $0
    Guaranteed Business and Industry Loans 2008 Disasters Emergency
     Supplemental:
      Budget Authority                                                                    $0              $0         $19,400          $3,046              $0
      Subsidy Rate                                                                                                     4.35%           5.33%
      Program Level                                                                       $0              $0        $445,977         $57,157              $0
    Guaranteed Business and Industry--Stimulus:
      Budget Authority                                                                    $0              $0         $26,100        $125,241              $0
      Subsidy Rate                                                                                                     4.35%           5.33%
      Program Level                                                                       $0              $0      $2,898,851      $1,557,725              $0
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                               7. Annual Outlays (FY 2002-FY 2011)

        Annual outlays were:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                2007 Actual     2008 Actual     2009 Actual     2010 Actual     2011 Actual
                                  Account Name                                    ($000)          ($000)          ($000)          ($000)          ($000)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Guaranteed Business and Industry                                              * $100,400        $119,464        $133,671        $263,067        $244,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Outlays are not a one to one correlation with Budget Authority. Some programs disburse over numerous years. Undisbursed balances are carried
      forward for future year outlays. Also, outlays reflect non-farm bill accounts as well.

                                                                     8. Annual Delivery Cost

                                                                Business and Cooperative Programs
                                                               Full Cost by Department Strategic Goal

        Strategic Goal: Assist Rural Communities to Create Prosperity so They Are Self-Sustaining, Repopulating and Economically Thriving.

                                      FY 2007 Amount  FY 2008 Amount  FY 2009 Amount  FY 2010 Amount  FY 2011 Amount
                                          ($000)          ($000)          ($000)          ($000)          ($000)

    Program
                 Program Items

    Guaranteed Business and Industry
     Loans
      Program Level                         $830,525      $1,390,532        $949,010      $1,322,984        $813,824
      Budget Authority                       $36,211         $60,071         $41,282         $70,515         $41,179
      Admin Costs (Direct)                        --              --              --         $13,637         $12,982
      Admin Costs (Indirect)                      --              --              --         $35,066         $33,381
      Total Admin Costs                      $49,978         $43,523         $47,435         $48,703         $46,363
                                     -------------------------------------------------------------------------------
        Total Costs                          $86,189        $103,594         $88,717        $119,218         $87,542
                                     -------------------------------------------------------------------------------
    Guaranteed NadBank Business and
     Industry Loans
      Program Level                           $3,490              $0              $0              $0              $0
      Budget Authority                          $319              $0            $351              $0              $0
      Admin Costs (Direct)                        $0              $0              $0              $0              $0
      Admin Costs (Indirect)                      $0              $0              $0              $0              $0
      S&E                                         $0              $0              $0              $0              $0
                                     -------------------------------------------------------------------------------
        Total Costs                             $319              $0            $351              $0              $0
                                     -------------------------------------------------------------------------------
    Business and Industry Guaranteed
     Loans--Stimulus
      Program Level                               $0              $0      $2,898,851      $1,557,725              $0
      Budget Authority                            $0              $0        $126,100        $125,241              $0
      Admin Costs (Direct)                        $0              $0              $0              $0              $0
      Admin Costs (Indirect)                      $0              $0              $0              $0              $0
      S&E                                         $0              $0              $0              $0              $0
                                     -------------------------------------------------------------------------------
        Total Costs                               $0              $0        $126,100        $125,241              $0
                                     -------------------------------------------------------------------------------
    Guaranteed Business and Industry
     Loans 2008 Disasters Emergency
     Supplemental
      Program Level                               $0              $0        $445,977         $57,157              $0
      Budget Authority                            $0              $0         $19,400          $3,046              $0
      Admin Costs (Direct)                        $0              $0              $0              $0              $0
      Admin Costs (Indirect)                      $0              $0              $0              $0              $0
      S&E                                         $0              $0              $0              $0              $0
                                     -------------------------------------------------------------------------------
        Total Costs                               $0              $0         $19,400          $3,046              $0

    9. Eligibility Criteria
        In order to issue a guarantee on a particular project, there are
    various levels of eligibility that must be satisfied under the program.
        First, the project must be eligible. A list of eligible projects
    can be found in RD Instruction 4279-B, section 4279.113 and they range
    from small manufacturing plants and hotels to convenience stores and
    biofuels refineries. One of the major advantages of the program is the
    variety of projects that are considered eligible.
        Second, the project must have an eligible lender willing to offer
    financing. An eligible lender is any Federal or state chartered bank,
    Farm Credit Bank, other Farm Credit System institution with direct
    lending authority, Bank for Cooperatives, Savings and Loan Association,
    or mortgage company that is part of a bank-holding company. These
    entities must be subject to credit examination and supervision by
    either an agency of the United States or a state. Eligible lenders may
    also include credit unions provided, they are subject to credit
    examination and supervision by either the National Credit Union
    Administration or a state agency, and insurance companies provided they
    are regulated by a state or national insurance regulatory agency.
        Third, the project must have an eligible borrower. An eligible
    borrower is one that is a cooperative organization, corporation,
    partnership, or other legal entity organized and operated on a profit
    or nonprofit basis; an Indian tribe on a Federal or state reservation
    or other federally recognized tribal group; a public body; or an
    individual.
    10. Utilization (Participation) Data
        Since the program's inception in 1974, the USDA B&I Guaranteed Loan
    Program has guaranteed over 16,000 loans, totaling approximately $24
    billion, promoting business activity and entrepreneurship in rural
    areas.
    11. Duplication or Overlap with Other Programs
        A number of programs serve to stimulate economic development in
    rural communities. These include: the Small Business Administration's
    (SBA) 7(a) and Community Development (504) programs, the Economic
    Development Administration, the Tennessee Valley Authority's Economic
    Development Loan Fund, and other USDA programs that support business
    and community development. For example, an applicant from the
    Appalachian region may apply to programs administered by HUD, USDA, and
    ARC to obtain financing for building construction. In other cases, two
    agencies may explicitly have the same goals and serve similar
    applicants both SBA and USDA measure the number of jobs created.
    However, in some specific cases, programs can be differentiated. For
    example, SBA's 7(a) loan levels are limited to $5 million. Although
    there are a variety of state programs that serve a similar purpose,
    they also vary in degree of funding and rural availability.
    12. Waste, Fraud and Abuse
        Though there have been only a few examples of waste, fraud and
    abuse. All cases are investigated by the Department's Office of the
    Inspector General, and if necessary, the Federal Bureau of
    Investigation.
        The guarantee is supported by the full faith and credit of the
    United States and is incontestable except under the circumstances of
    fraud or misrepresentation of which the lender has actual knowledge at
    the execution of the guarantee or of which the lender participates in
    or condones.
        In the event the state office becomes aware of willful lender
    noncompliance with any provision of the Loan Agreement, Lender's
    Agreement, Loan Note Guarantee, or other similar document, the lender
    is to be notified in writing of the Full Faith and Credit provisions as
    they relate to the enforceability of the Loan Note Guarantee, with a
    copy of the letter to be included in the case file.
        Some examples of the lender noncompliance include:
        Hermitage Tomato Cooperative--fraud and misrepresentation--a total
    of $9.6 million, 90 percent B&I Guaranteed Loans were made to the
    Hermitage Tomato Cooperative Association (Hermitage Tomato). The
    borrower defaulted on the loan payments, and the assets of the
    cooperative were liquidated in October 2002 by the lender, Farmers Bank
    of Hamburg (Farmers Bank). The Agency reduced the loss claim based on
    negligent serving and diversion of funds from the Cooperative.
        Catfish INT, Inc.--negligent servicing--On June 5, 1998, the Agency
    approved a $5 million, 70 percent B&I guaranteed loan for this borrower
    through its lender, Enterprise National Bank of Palm Beach. The lender
    foreclosed on the account on June 4, 2002. The borrower filed
    bankruptcy on May 19, 2000. The Agency discovered that the building
    construction was not to specs as in the Conditional Commitment. The
    Agency issued Adverse Decision Letter to reduce guarantee and OIG
    Investigation was initiated. NAD and Federal Court upheld Agency
    determination to reduce loss claim by $3,030,000.
        Bill Russell Oil--negligent servicing--on June 21, 2000, the Agency
    issued a $3 million Loan Note Guarantee to Business Loan Express, now
    known as Ciena Capital Corporation, for this borrower. The operation
    soon failed with the last payment received from this borrower in
    January 2001. On December 19, 2007, the U.S. Attorney sent a draft
    complaint asserting the False Claims Act and Financial Institution
    Reform Recovery and Enforcement Act. As a result the loss claim was
    reduced and a settlement in the amount of $2.5 million was paid.
        The National Office continues to remind the state offices through
    training sessions, webinars, monthly conference calls, etc., of their
    responsibility to monitor the lender's actions. The Agency will work
    with the Office of the Inspector General in those instances where
    fraud, misrepresentation, or negligent servicing is suspected in an
    attempt to collect from the lender.
        In addition, when the Agency suspects fraud and misrepresentation,
    the Agency consults with the Office of General Counsel and the U.S.
    Attorney's Office as appropriate to pursue matters for the best
    possible outcome for the government and taxpayer.
    13. Effect of Administrative PAYGO
        None.
                                     ______

    1. Program Name
        Rural Microentrepreneur Assistance Program (RMAP).
    2. Subprograms/Department Initiatives
        None.
    3. Brief History
        RMAP is authorized under section 379E of the Consolidated Farm and
    Rural Security Act, as amended by the Food, Conservation, and Energy
    Act of 2008 (2008 Farm Bill). The 2008 Farm Bill provided mandatory
    funding for this program totaling $15 million from FY 2009 through FY
    2012. An interim rule was published for RMAP on May 28, 2010 to
    implement the program. A Notice of Funding Availability (NOFA) was
    published on June 3, 2010, announcing $45.1 million in funding in FY
    2010 for direct loans and grants. This available program level includes
    mandatory and discretionary funding. No funding was provided in FY 2011
    through annual appropriations; however, $4 million in mandatory funding
    is available. The President's 2012 budget requests $5.7 million in
    budget authority for RMAP, in addition to $3 million in mandatory funds
    provided by the 2008 Farm Bill.
    4. Purpose/Goals
        RMAP provides rural microentrepreneurs the opportunity to gain the
    skills necessary to establish new rural microenterprises, gain
    training, and receive continuing technical and financial assistance
    related to the successful operation of rural microenterprises. Loans
    and grants are made to qualified Microenterprise Development
    Organizations (MDO's) for the purposes of: (1) providing microloans to
    rural microentrepreneurs, and (2) providing training and technical
    assistance to current and/or potential micro entrepreneurs to establish
    new or sustain existing micro businesses in rural areas.
    5. Success in Meeting Programmatic Purpose/Goals
        In FY 2010, USDA announced $45.1 million in program level in FY
    2010, this level of funding supported 63 loans and 74 grants; about
    $13.6 million of the announced amount was unutilized in FY 2010 and is
    available for use in FY 2011. RBS continues to accept and fund
    applications from the FY 2010 carryover funding. A NOFA for the FY 2011
    mandatory funding is under development. MDO's are projecting to assist
    574 microentrepreneurs and create or save 1,391 jobs.
    6. Annual Budget Authority (FY 2002-FY 2011)

                        RMAP--Discretionary and Mandatory
                            (in millions of dollars)
    ------------------------------------------------------------------------
                              2007      2008      2009      2010      2011
    ------------------------------------------------------------------------
    Budget Authority             N/A       N/A      $4.0      $4.0      $4.0
     (Mandatory)
    Budget Authority             N/A       N/A        $0      $5.0        $0
     (Discretionary)
    ------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011)

                    RMAP--Discretionary and Mandatory Outlays
                            (in millions of dollars)
    ------------------------------------------------------------------------
                              2007      2008      2009      2010      2011
    ------------------------------------------------------------------------
    Outlays                      N/A       N/A        $0      $9.7      $7.3
    ------------------------------------------------------------------------

    8. Annual Delivery Cost (FY 2002-FY 2011)

                        RMAP--Discretionary and Mandatory
                            (in thousands of dollars)
    ------------------------------------------------------------------------
                              2007      2008      2009      2010      2011
    ------------------------------------------------------------------------
    Program Level                N/A       N/A       N/A   $31,628   $24,961
    Budget Authority             N/A       N/A       N/A    $9,654    $7,346
    Administrative Costs                                      $130      $130
     (Direct)
    Administrative Costs                                      $333      $333
     (Indirect)
                           -------------------------------------------------
      Total Cost                                           $10,117    $7,809
      FTEs                                                       4         4
    ------------------------------------------------------------------------
    Note: Annual delivery costs are presented consistent with the FY 2012
      Budget Explanatory Notes.

    9. Eligibility Criteria
        Loans and grants are provided to MDOs who, in turn, assist rural
    micro enterprises and microentrepreneurs. RMAP applicants are nonprofit
    entities, Indian tribes, and public institutions of higher education
    that, for the benefit of rural microentrepreneurs and microenterprises,
    provides training and technical assistance, makes microloans or
    facilitates access to capital or another related service, and/or has
    demonstrated record of delivering, or an effective plan to develop a
    program to deliver such services.
    10. Utilization (Participation) Data
        The RMAP program was implemented in FY 2010 and made 63 loans and
    74 grants. Applications are accepted throughout the year and to date
    165 loans and/or grants have been awarded.
    11. Duplication or Overlap with Other Programs
        Small Business Administration administers a newly-implemented Micro
    Loan program, which is very similar in nature. As is the case with all
    of the programs operated by RD, RMAP is specifically designed to
    assistance microentrepreneurs in rural areas. The Rural Business
    Service also operates the intermediary relending program and the rural
    economic development program under similar intermediary concepts. While
    these programs utilize the same basic operational platform, each
    program is targeted to a specific group of applicants. Streamlining
    these activities within existing authorizes could generate savings from
    implementation activities.
    12. Waste, Fraud and Abuse
        Not applicable as this is a newly-implemented program and has not
    yet undergone an audit or test of controls
    13. Effect of Administrative PAYGO
        None.
                                     ______

      House Committee on Agriculture Farm Bill Audit Questionnaire--Rural
                                Housing Service
    1. Program Name
        Community Facilities (CF) Programs Direct and Guaranteed Loans and
    Grants.
    2. Subprograms/Department Initiatives
            CF Direct Loans.
            CF Guaranteed Loans.
            CF Grants.
            CF Economic Impact Initiative Grants.
            CF Tribal College and University Grants.
    3. Brief History
        USDA's CF Programs are implemented under Rural Development's Rural
    Housing Service (RHS). The programs provide access to capital for
    critical civic infrastructure investments primarily in the area of
    rural health care, public safety, and educational facilities. These
    investments are creating jobs and economic growth and are also funding
    technology and infrastructure such as health information technology
    that will lay the groundwork for future economic growth.
        In 1972, Congress amended the Consolidated Farm and Rural
    Development Act (CON Act) to authorize the CF direct loan program to
    address the need for an agency devoted to providing essential community
    facilities in rural areas. Other Federal agencies were located in
    metropolitan cities and historically most of their activities were
    within cities with populations far exceeding the size of rural
    communities. Authority to implement the CF Programs was delegated to
    the predecessor to RHS, the Farmers Home Administration, which had an
    established field staff based in rural communities with the capacity to
    address local rural issues and concerns, assist those communities in
    assembling applications and providing supervised credit.
        All applicants must demonstrate that they are unable to obtain
    credit from commercial sources at reasonable rates and terms.
    Applicants are required to be units of government, federally-recognized
    Indian tribes, or nonprofit entities with significant community support
    and ties to the local community, which helps to assure that the
    services are affordable for low- and moderate-income rural Americans.
        In 1990, the CF authority was expanded to include the capability to
    guarantee loans made by commercial lenders. Authority for the CF grant
    program was added in 1997. The direct and guaranteed loan repayment
    terms are limited to the useful life of the facility, state statute, or
    40 years, whichever is less.
        Since its inception, more than 40 percent of RD's CF Programs'
    portfolio is invested in rural health care facilities. Since 2009 to
    June 30, 2011, the CF direct and guaranteed loan and grant programs
    invested over $3.1 billion in 4,207 essential community facilities.
    These investments are estimated to directly create 9,996 jobs and save
    22,384 jobs. Of this amount over $1.66 billion has been invested in 464
    rural health care facilities which is estimated to create 4,124 jobs
    and save 10,319 jobs. The President's FY 2012 Budget proposes to fund
    the CF direct loan program at $1 billion, more than triple the historic
    funding level. In addition, the budget proposes to eliminate funding
    for the CF guaranteed loan program which has had higher defaults than
    projected, making it more expensive than the direct loan program. The
    proposed increase in the CF direct loan program will mitigate any
    effects of ending the guaranteed loan program. The CF direct loan
    program has a negative subsidy rate in FY 2012. This means that the $1
    billion in CF direct loan assistance can be provided without the need
    to request subsidy budget authority. This is a win-win for taxpayers
    and rural residents working to strengthen their rural communities.
    4. Purpose/Goals
        CF Programs direct and guaranteed loans and grants provide
    financing to units of local government, nonprofit organizations, or
    federally-recognized Indian tribes for the development of essential
    community facilities in rural areas. Eligible purposes include:

       Health care facilities;

       Fire, rescue, and public safety buildings, vehicles, and
            equipment;

       Educational and cultural facilities;

       Town halls, community centers, and libraries; and

       Adult and child day care facilities.

       Public buildings and civic infrastructure.
    5. Success in Meeting Programmatic Purpose/Goals
        CF Programs' performance includes:

    ------------------------------------------------------------------------
                              2007      2008      2009      2010      2011
      Performance Measure    Actual    Actual    Actual    Actual    Actual
    ------------------------------------------------------------------------
    Percentage of rural
     population with new
     or improved:

         Health          5.2       5.3       5.4       3.2       3.2
       Care

         Public          2.7       2.8       5.0       3.2       3.2
       Safety

         Education       N/A       N/A       3.5       3.8       3.0
       al facilities

    Program Level (in         $755.0    $672.0    $639.3    $948.4    $488.3
     millions)
    ------------------------------------------------------------------------

    6. Annual Budget Authority (FY 2002-FY 2011)
        Annual budget authority included:

               CF Programs Direct and Guaranteed Loans and Grants
                             (dollars in thousands)
    ------------------------------------------------------------------------
                              2007      2008      2009      2010      2011
    ------------------------------------------------------------------------
    Direct CF Loans          $11,130   $16,369   $16,871    $3,864    $3,856
    Guaranteed CF Loans         $322    $7,596    $6,358    $6,626    $6,613
    CF Grants                $16,714   $20,373   $20,373   $20,373   $14,970
    Rural Community           $8,021    $6,256    $6,256    $6,256    $4,990
     Development
     Initiative
    Economic Impact          $17,123   $13,902   $10,000   $13,902    $6,986
     Initiative Grants
    Tribal College and        $4,592    $3,972    $3,972    $3,972    $3,964
     University Grants
    ------------------------------------------------------------------------

    7. Annual Outlays (FY 2002-FY 2011)
        Annual outlays included:

                                                 (Dollars in thousands)
    ----------------------------------------------------------------------------------------------------------------
                                                    Account                  2008       2009       2010       2011
                     Account Name                   Number   2007 Actual    Actual     Actual     Actual     Target
    ----------------------------------------------------------------------------------------------------------------
    CF Program                                         1951   1 $112,098   $109,417   $235,410   $145,409   $175,000
    ----------------------------------------------------------------------------------------------------------------
    1 Funded through RCAP.
    Note: Outlays are not a one to one correlation with Budget Authority. Some programs disburse over numerous
      years. Undisbursed balances are carried forward for future year outlays. Also, outlays reflect non-farm bill
      accounts as well.

    8. Annual Delivery Cost (FY 2002-FY 2011)
        Annual delivery costs included:

               CF Programs Direct and Guaranteed Loans and Grants
                             (dollars in thousands)
    ------------------------------------------------------------------------
                          2007       2008       2009       2010       2011
    ------------------------------------------------------------------------
    Program Level       $609,103   $640,889   $435,502   $948,423   $488,266
    Budget Authority     $77,397    $78,199    $56,921    $69,455    $41,379
    S&E                 $114,578   $113,299   $117,408   $119,993   $119,993
                      ------------------------------------------------------
      Total Costs       $169,630   $191,498   $174,329   $189,448   $161,372
      FTE                  1,079      1,012        970      1,028      1,028
    ------------------------------------------------------------------------

    9. Eligibility Criteria
        CF Programs can make and guarantee loans to develop essential
    community facilities in rural areas and towns of up to 20,000 in
    population. Loans and guaranteed loans are available to public entities
    such as municipalities, counties, and special-purpose districts, as
    well as to nonprofit corporations and tribal governments.
        CF Programs provide grants to assist in the development of
    essential community facilities in rural areas and towns of up to 20,000
    in population. Grants are authorized on a graduated scale. Applicants
    located in small communities with low populations and low incomes will
    receive a higher percentage of grants. Grants are available to public
    entities such as municipalities, counties, and special-purpose
    districts, as well as nonprofit corporations and tribal governments.
    10. Utilization (Participation) Data
       Number of Loans and Grants

         FY 2011 to date--1,032;

         FY 2010--2,754;

         FY 2009--2,377

         FY 2008--1,840;

         FY 2007--1,766.
    11. Duplication or Overlap with Other Programs
        There are a broad range of essential community facilities which may
    be financed through the CF Programs, and there are other agencies that
    finance some of the same types of community facilities within that
    range that could be located in rural areas. HUD's CDBG grant program is
    the main program that funds similar types of projects, albeit not
    through Federal loans or loan guarantees and not specifically for rural
    areas.
        The RD agencies were created by Congress specifically to serve
    rural communities. In those cases where there are shared interests, RD
    has developed partnerships. We have long standing partnerships with the
    Health Resources and Services Administration, the Economic Development
    Administration, and the Appalachian Regional Commission which have
    included Memoranda of Understanding that set forth the ways in which
    the agencies collaborate and leverage resources to improve access to
    critical health care, education, and public safety facilities.
        At the RD State Office level, we have extensive partnerships with
    the individual state's economic development, health, and water and
    sewage treatment agencies. RD has also developed partnerships over the
    years with organizations representing some of our major constituency
    groups, including lenders, fire fighters, and rural hospitals. Newer
    relationships include those with the Delta Regional Authority and the
    Federal Interagency Partnership on the Southwest Border Region.
    12. Waste, Fraud and Abuse
        There are numerous reviews performed on the CF program, such as
    state internal reviews, management control reviews, improper payments
    risk assessment, OMB Circular A-123 assessment, project reviews and
    reviews by external agencies such as the Office of Inspector General
    and the General Accountability Office. Senior management is also
    required to provide an annual assurance statement which is senior
    management's judgment as to the overall adequacy and effectiveness of
    internal control within the agency. CF has had no significant findings
    in any of the reviews or assessments. Effective internal controls are
    one of the CF program's main objectives to achieve results through
    improved accountability and to ensure the overall success of the
    program.
        CF Programs have established internal controls to ensure that: (1)
    obligations and costs are in compliance will applicable law; (2) funds,
    property, and other assets are safeguarded against waste, loss,
    unauthorized use or misappropriation; and (3) revenues and expenditures
    applicable to agency operations are properly recorded and accounted for
    to permit the preparation of accounts and reliable financial and
    statistical reports and to maintain accountability over the assets.
    These controls are effective in guarding against overspending,
    operational failure, fraud, waste, abuse, or violations of law. They
    provide a reasonable assurance of effectiveness and efficiency of
    operations, reliability of financial reporting, and compliance with
    laws and regulations.
    13. Effect of Administrative PAYGO
        None.