    [Senate Hearing 112-281]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-281

                           FARM BILL ACCOUNTABILITY:
                          THE IMPORTANCE OF MEASURING
                         PERFORMANCE, WHILE ELIMINATING
                             DUPLICATION AND WASTE

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

                                    HEARING

                                   before the

                           COMMITTEE ON AGRICULTURE,
                             NUTRITION AND FORESTRY

                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 23, 2011

                                   __________

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

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

                                    _____

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                COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

                     DEBBIE STABENOW, Michigan, Chairwoman

    PATRICK J. LEAHY, Vermont            PAT ROBERTS, Kansas
    TOM HARKIN, Iowa                     RICHARD G. LUGAR, Indiana
    KENT CONRAD, North Dakota            THAD COCHRAN, Mississippi
    MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
    E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
    SHERROD BROWN, Ohio                  MIKE JOHANNS, Nebraska
    ROBERT P. CASEY, Jr., Pennsylvania   JOHN BOOZMAN, Arkansas
    AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa
    MICHAEL BENNET, Colorado             JOHN THUNE, South Dakota
    KIRSTEN GILLIBRAND, New York         JOHN HOEVEN, North Dakota

                 Christopher J. Adamo, Majority Staff Director

                  Jonathan W. Coppess, Majority Chief Counsel

                        Jessica L. Williams, Chief Clerk

                  Michael J. Seyfert, Minority Staff Director

                    Anne C. Hazlett, Minority Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing(s):

    Farm Bill Accountability: The Importance of Measuring
      Performance, While Eliminating Duplication and Waste...........     1

                                  ----------

                            Thursday, June 23, 2011
                        STATEMENTS PRESENTED BY SENATORS

    Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
      Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1
    Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........     2
    Conrad, Hon. Kent, U.S. Senator from the State of North Dakota...     4
    Grassley, Hon. Charles E., U.S. Senator from the State of Iowa...     3

                                    Panel I

    Concannon, Hon. Kevin, Under Secretary, Food, Nutrition, and
      Consumer Services, U.S. Department of Agriculture, Washington,
      DC.............................................................    11
    Leonard, Hon. Joe, Jr., Ph.D., Assistant Secretary for Civil
      Rights, U.S. Department of Agriculture, Washington, DC.........    12
    Scuse, Hon. Michael, Acting Under Secretary, Farm and Foreign
      Agricultural Services, U.S. Department of Agriculture,
      Washington, DC.................................................     9
    Sherman, Hon. Harris, Under Secretary, Natural Resources and
      Environment, U.S. Department of Agriculture, Washington, DC....    10
    Tonsager, Hon. Dallas, Under Secretary, Rural Development, U.S.
      Department of Agriculture, Washington, DC......................     8

                                    Panel II

    Blankenship, Brett, Blankenship Brothers, Washtucna, Washington..    32
    Fong, Phyllis, Inspector General, U.S. Department of Agriculture,
      Washington, DC.................................................    30
    Omar, Masouda, Manager of Business Finance Loan Production,
      Colorado Housing and Finance Authority, Denver, CO.............    34
                                  ----------

                                    APPENDIX

    Prepared Statements:
        Casey, Hon. Robert, Jr.......................................    44
        Chambliss, Hon. Saxby........................................    45
        Thune, Hon. John.............................................    46
        Blankenship, Brett...........................................    49
        Fong, Phyllis................................................    57
        Omar, Masouda................................................    74
    Testimony was Submitted Collectively from USDA for the Following
      Witnessess:
    Hon. Kevin Concannon, Hon. Joe Leonard, Jr., Hon. Michael Scuse,
      Hon. Harris Sherman, Hon. Dallas Tonsager......................    79
    Document(s) Submitted for the Record:
    AcMoody Farms, Union City, Michigan,on behalf of the American
      Fruit and Vegetable Processoers and Growers Coalition, prepared
      statement......................................................   102
    U.S. Government Accountability Office (GAO), prepared statement..   105
    Center for Agribusiness Excellence, Tarleton State University,
      prepared statement.............................................   119
    Question and Answer:
    Stabenow, Hon. Debbie:
        Written questions to Hon. Kevin Concannon....................   133
        Written questions to Phyllis Fong............................   157
        Written questions to Hon. Joe Leonard........................   162
        Written questions to Hon. Michael Scuse......................   243
        Written questions to Hon. Harris Sherman.....................   259
        Written questions to Hon. Dallas Tonsager....................   278
        Written questions to U.S. Department of Agriculture..........   300
    Baucus, Hon. Max:
        Written questions to Masouda Omar............................   241
        Written questions to Hon. Dallas Tonsager....................   288
    Brown, Hon. Sherrod:
        Written questions to Brett Blankenship.......................   130
        Written questions to Hon. Kevin Concannon....................   141
        Written questions to Hon. Joe Leonard........................   163
        Written questions to Hon. Michael Scuse......................   251
        Written questions to Hon. Dallas Tonsager....................   290
    Casey, Hon. Robert, Jr.:
        Written questions to Hon. Kevin Concannon....................   146
    Chambliss, Hon. Saxby:
        Written questions to Hon. Kevin Concannon....................   153
        Written questions to Phyllis Fong............................   160
        Written questions to Hon. Harris Sherman.....................   271
        Written questions to Hon. Dallas Tonsager....................   294
    Grassley, Hon. Charles:
        Written questions to Hon. Joe Leonard........................   163
        Written questions to Hon. Michael Scuse......................   256
    Klobuchar, Hon. Amy:
        Written questions to Hon. Kevin Concannon....................   147
    Lugar, Hon. Richard G.:
        Written questions to Hon. Kevin Concannon....................   150
        Written questions to Hon. Michael Scuse......................   251
    Nelson, Hon. E. Benjamin:
        Written questions to U.S. Department of Agriculture..........   301
    Thune, Hon. John:
        Written questions to Brett Blankenship.......................   132
        Written questions to Hon. Kevin Concannon....................   155
        Written questions to Phyllis Fong............................   160
        Written questions to Hon. Joe Leonard........................   163
        Written questions to Masouda Omar............................   241
        Written questions to Hon. Michael Scuse......................   257
        Written questions to Hon. Harris Sherman.....................   277
        Written questions to Hon. Dallas Tonsager....................   297
    Blankenship, Brett:
        Written response to questions from Hon. Sherrod Brown........   130
        Written response to questions from Hon. John Thune...........   132
    Concannon, Hon. Kevin
        Written response to questions from Hon. Debbie Stabenow......   133
        Written response to questions from Hon. Sherrod Brown........   141
        Written response to questions from Hon. Robert Casey, Jr.....   146
        Written response to questions from Hon. Amy Klobuchar........   147
        Written response to questions from Hon. Kirsten Gillibrand...   148
        Written response to questions from Hon. Richard G. Lugar.....   150
        Written response to questions from Hon. Saxby Chambliss......   153
        Written response to questions from Hon. John Thune...........   155
    Fong, Phyllis:
        Written response to questions from Hon. Debbie Stabenow......   157
        Written response to questions from Hon. Saxby Chambliss......   160
        Written response to questions from Hon. John Thune...........   160
    Leonard, Hon. Joe
        Written response to questions from Hon. Debbie Stabenow (with
          attachments)...............................................   162
        Written response to questions from Hon. Sherrod Brown........   163
        Written response to questions from Hon. Charles Grassley.....   163
        Written response to questions from Hon. John Thune...........   163
    Masouda Omar:
        Written response to questions from Hon. Max Baucus...........   241
        Written response to questions from Hon. John Thune...........   241
    Scuse, Hon. Michael
        Written response to questions from Hon. Debbie Stabenow (with
          attachments)...............................................   243
        Written response to questions from Hon. Sherrod Brown........   251
        Written response to questions from Hon. Richard G. Lugar.....   251
        Written response to questions from Hon. Charles Grassley.....   256
        Written response to questions from Hon. John Thune...........   257
    Sherman, Hon. Harris
        Written response to questions from Hon. Debbie Stabenow......   259
        Written response to questions from Hon. Saxby Chambliss......   271
        Written response to questions from Hon. John Thune...........   277
    Tonsager, Hon. Dallas
        Written response to questions from Hon. Debbie Stabenow......   278
        Written response to questions from Hon. Max Baucus...........   288
        Written response to questions from Hon. Sherrod Brown........   290
        Written response to questions from Hon. Saxby Chambliss......   294
        Written response to questions from Hon. John Thune...........   297
    U.S. Department of Agriculture:
        Written response to questions from Hon. Debbie Stabenow......   300
        Written response to questions from Hon. E. Benjamin Nelson...   301

                           FARM BILL ACCOUNTABILITY:
                          THE IMPORTANCE OF MEASURING
                         PERFORMANCE, WHILE ELIMINATING
                             DUPLICATION AND WASTE

                                  ----------

                            Thursday, June 23, 2011

                                  United States Senate,
              Committee on Agriculture, Nutrition and Forestry,
                                                         Washington, DC
        The Committee met, pursuant to notice, at 9:31 a.m., in
    Room G50, Dirksen Senate Office Building, Hon. Debbie Stabenow,
    Chairwoman of the Committee, presiding.
        Present: Senators Stabenow, Conrad, Nelson, Brown,
    Klobuchar, Bennet, Gillibrand, Roberts, Cochran, Chambliss,
    Grassley, and Thune.

    STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
     OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
                              AND FORESTRY

        Chairwoman Stabenow. The meeting will come to order of the
    Senate Agriculture, Nutrition and Forestry Committee and we
    welcome everyone today. We welcome all of our witnesses. We
    appreciate your efforts and the time to be here.
        We are focused this morning on accountability, making sure
    that taxpayers are getting their money's worth and that we are
    making sure that the USDA services are efficient and effective
    for the farmers, the ranchers, the families that they serve.
        In my state of Michigan with the economy as it has been,
    every dollar is hard-earned, and I am sure my colleagues can
    say the same in their states. Taxpayers have every right to
    expect that their money is being used wisely and effectively.
    We know, because of the recession, there are families who have
    paid taxes all of their lives, who never thought in their
    wildest dreams they would need help putting food on the table,
    who now need food assistance. And that is even more of a reason
    to make sure that we are stopping fraud and abuse and managing
    every dollar as responsibly as possible.
        So as we look at the Farm Bill, I believe we need to ask
    questions like, Are we getting the right results? Are we being
    cost-effective? Are we eliminating waste, fraud, and abuse?
        We have two great panels here today. We have the four Under
    Secretaries of the Department of Agriculture as well as the
    Assistant Secretary for Civil Rights who will make up our first
    panel. We also have USDA's Inspector General and two
    individuals who will talk about their personal experiences
    working with the Department.
        I have asked our panels to be thinking about three things
    today as we look at accountability. The first is measuring
    performance and efficiency. How are we measuring whether
    programs are getting results and being cost- effective? Workers
    in my state get annual performance reviews and they have a
    right to apply the same standard or expect us to apply the same
    standard to our Government.
        We also need to be carefully looking at how we stop fraud
    and abuse. Last week we saw great work of the Inspector General
    cracking down on fraud related to the SNAP program in my home
    state of Michigan.
        As I indicated, so many families in Michigan never imagined
    they would be in a situation where they would need food help,
    and we, with dollars tight, cannot afford to have even one
    dollar go to fraud or even one person abusing the system. We
    put a number of requirements into the last Farm Bill and I am
    eager to see how those are working.
        The second issue is eliminating duplication. In Michigan,
    we have a proud history of making wheels, but we do not need to
    reinvent them. Where do we have programs that are overlapping
    or working at cross-purposes?
        Where do we have people wasting time and money doing work
    that somebody else is already doing? How can we bring that
    together and do it better? We need to be thinking about ways
    that we can streamline services. We are offering to make them
    not only more effective, but also cost- effective for
    taxpayers.
        And finally, we need to look at customer service. How well
    is the USDA providing services to our farmers, our ranchers,
    our foresters? I would like for us today to be thinking about
    how we can cut down on the red tape, the paperwork that our
    producers need to worry about and make USDA services more
    accessible and user-friendly for all of our constituents.
        We have two great witnesses today who will talk about their
    personal experiences working with the Department, and I am
    really looking forward to their perspective as well. So again,
    welcome to an important hearing as we begin to discuss and
    debate as we move forward on Farm Bill policy important for our
    country, important for jobs, and we welcome all of your input
    today.
        I would now turn to my colleague and friend, Senator
    Roberts.

     STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
                                 KANSAS

        Senator Roberts. Well, thank you, Madam Chairwoman. First
    of all, I want to thank you for these new digs. This is, of
    course, appropriate in regards to the mission and the goals and
    the efforts of the always powerful Senate Agriculture Committee
    and I thank you for this. We are going to have to talk to
    members of the Rules Committee, of which I am one, to make this
    a permanent hearing room.
        Madam Chairwoman, Senator Lugar could not be here today due
    to another commitment. He has asked me to submit comments from
    the American Fruit and Vegetable Processors and Growers
    Coalition in his absence, so I ask unanimous consent that these
    comments may be part of the record at this point.
        Chairwoman Stabenow. Without objection, so ordered.
        [The information can be found on page 102 in the appendix.]
        Senator Roberts. Madam Chairwoman, I know that Senator
    Grassley has an important committee meeting on the Senate
    Judiciary Committee. At this time, I am going to suggest that
    we recognize Senator Grassley and then obviously would move
    over to Senator Conrad. Welcome back, Senator Conrad. And then
    you can recognize me for any sterling words of truth that I may
    have to make.
        Chairwoman Stabenow. We will wait with bated breath for
    that moment. But thank you. And we do want to turn to Senator
    Grassley, who I know cares about these issues and has to leave.
    We welcome your opening statement.

     STATEMENT OF HON. CHARLES E. GRASSLEY, U.S. SENATOR FROM THE
                             STATE OF IOWA

        Senator Grassley. I am Ranking Member on the Judiciary
    Committee and so that is why I will not be able to be with you
    for the whole hearing, and I did ask for special exemption to
    make a statement because, number one, to thank the Chairwoman
    because she responded to a request that I asked her to include
    civil rights as an issue, along with other things.
        And I also think it is very important that I be here, being
    a farmer and the start of the Farm Bill. So thank you for your
    consideration. I am going to leave some questions for answer in
    writing, and I would like to have that be accomplished as well.
        The focus of today's hearing is timely as we consider what
    policies to set in the next Farm Bill. We have to make sure
    Farm Bill programs are implemented the way we intended. If they
    are not being properly administered, we need to fix the
    problems.
        And I want to thank all the Under Secretaries and Assistant
    Secretaries for being here today. Many farmers are probably
    eager to hear the Department's comments regarding crop
    insurance because crop insurance is very crucial to the
    operations of most farms today. The crop insurance program has
    had a reduction in funds, so it is more important than ever
    that we hear what the Department is doing to guarantee the
    program is effectively accomplishing the goals of risk
    management.
        I am also eager to hear from the Department what they are
    doing to ensure individuals applying for farm program payments
    who are truly, according to the legal language, being actively
    engaged in farming.
        I am also particularly pleased that Secretary Leonard is
    here and that the Chairwoman responded to my request to bring
    up issues of civil rights. I made this request back in March
    and I am very thankful that she is holding this hearing,
    including that issue. I will note, I also made the same request
    to two Chairs of the Agriculture Committee as well in the past,
    so this has been a very important issue for me.
        I am glad that Mr. Leonard is here today, and I want
    everybody to know that I believe that civil rights and
    discrimination issues facing the Department are a big concern
    that this Committee needs to monitor the issue regularly. I do
    hope that you will consider conducting a separate hearing on
    civil rights and discrimination some time.
        As for today's hearing, Mr. Leonard, I hope that you will
    shed some light on how the Department is handling some of the
    problems that I think are still plaguing us over the years, and
    a long time before you were involved. Specifically, I would
    like you to speak on what the Department is doing to address
    complaints made by employees.
        I continue to hear from USDA employees that they have to
    wait a long time to have their complaints heard and processed.
    I have also received reports about retaliatory behavior by
    managers after complaints are made. So that is a very important
    thing, that we address that issue.
        I am not passing judgment on the validity of any of the
    employees' particular claims. My concern is that their claims
    be considered in a timely and appropriate manner because that
    is what they deserve. I hope the Department will provide us
    with some idea on how that is turning out.
        I will leave my questions, Madam Chairwoman, and thank you
    for the privilege of addressing the Committee, even as a less
    senior member of the Committee.
        Chairwoman Stabenow. Well, thank you, Senator Grassley. You
    certainly are not a junior member when it comes to knowledge
    and experience on this Committee and we are very glad that you
    are a member of this Committee and will be part of writing the
    Farm Bill, as you have in the past.
        I should mention to my colleagues, we went down a road here
    of Senator Grassley needing to leave early and allowed him to
    make an opening statement. I believe Senator Conrad is in the
    same position. I am now opening this up, so I would ask the
    discretion from my colleagues. We certainly will not say no if
    someone wants to make a brief opening statement, but we do want
    to get to the witnesses. But I will turn to Senator Conrad who
    also is going to have to leave and is another senior member we
    are so lucky to have on this Committee.

     STATEMENT OF HON. KENT CONRAD, U.S. SENATOR FROM THE STATE OF
                              NORTH DAKOTA

        Senator Conrad. Thank you, Madam Chairman. Thank you very
    much for holding this hearing. I think it is a critically
    important one in the circumstances we confront. Before I just
    briefly talk, I would like to draw the attention of my
    colleagues to a disaster that is unfolding in my state. In
    Minot, North Dakota, more than 11,000 people have been
    evacuated since yesterday, and we face the worst flood in
    recorded history in my state.
        We are now anticipating a flood that would be eight feet
    higher than the last flood of record in our state, and so, as
    soon as we are done voting here today, I will be going home,
    along with the rest of the delegation, to meet with our
    Governor and the emergency officials in charge of flood
    response.
        Senator Roberts. Would the Senator yield at this point?
        Senator Conrad. Yes, I would be happy to yield.
        Senator Roberts. I want to thank the Senator for his past
    efforts in behalf of his state. When you incur these-- I do not
    know what we have done to Mother Nature, but she sure has not
    been treating us very well. In Kansas, we are burning up in the
    western part of our state, and then we are seeing the first
    surge that you have already experienced.
        I do not know what it was today or this morning. I did not
    get a chance to check. But it is rolling down Iowa and now into
    Kansas at about 160 cubic feet per second. That is about, as
    you take a snapshot right there in time, that is the same
    amount of water as goes over the Niagra Falls. And you got the
    brunt of it starting up from the mountain snow pack and then
    the snow pack you have and then the incredible rain you had on
    top of that.
        I have given you a little bit of static in the past about
    play the lakes and other things, but this is a very serious
    thing. It is the worst flood, I think, the Corps has told me,
    since 1898. And so, I wish you well and all of the states that
    are involved here. At least we had a little bit of advanced
    information, but I do not know what you do with a flood that is
    eight-foot over the last flood. It is going to be an incredible
    situation.
        Madam Chairman, we are going to have to do something on
    this Committee in this regard, and for that matter, the
    Congress is as well. But at any rate, I empathize with the
    Senator and thank you.
        Senator Conrad. I thank the Senator very much for his
    comment. This is unprecedented. On Saturday morning, we were
    given reports that looked as though we had dodged the bullet.
    Within 48 hours, they increased the flood forecast in terms of
    the depth of water coming through Minot by 11 feet. And there
    is simply no way to respond.
        And at that point, it was evacuate people, build secondary
    defenses to try to protect critical infrastructure, and prepare
    for a long, slow slog because this is going to be unlike any
    flood in history in our state. The water is not going to come
    and go. The water is going to come and stay.
        The chief flood fighter for the Corps of Engineers told me
    they now anticipate that there will be high water in our state
    through the middle of July. So these are homes that are going
    to be under water for an extended period of time. My own cousin
    has had to move all of their furniture to their attic because
    they are going to have seven feet of water on their main floor.
    And that is a story repeated many times throughout this
    community.
        So I did want to say, Madam Chairman, with respect to this
    hearing, how important I believe it to be, because when we are
    borrowing as a nation 40 cents of every dollar we spend, no
    taxpayer can be wasted and no program can be abused. And I want
    to salute the Inspector General to have identified $256 million
    in potential savings, going after over-payments, going after
    recording errors.
        I look at the Food Stamp Program, the lowest error rate now
    ever. That is a significant accomplishment. When I look at what
    is happening in terms of our exports, exports doubling, a
    dramatic increase there. And I look in program after program.
    USDA has gotten the message. USDA has gotten the message,
    reducing travel, canceling bad loans, renegotiating the basic
    agreement on crop insurance.
        I am not going to go further, just to say, Madam Chair, I
    hope that where these negotiations are being conducted on our
    future budget, that people understand, Yes, Agriculture is
    ready to participate and have more savings, significant savings
    in the billions of dollars.
        But it is also true that there are some who are pushing an
    agenda that would absolutely cripple production agriculture
    which is one of the true bright spots we have in exports for
    the United States, a $28 billion increase over last year. So
    let us not kill the baby in the crib, and that message needs to
    go to the people who are negotiating with the Vice President.
    Let us not kill the baby in the crib.
        You could cripple production agriculture in this country,
    which is one of the real bright spots. I thank the Chair.
        Chairwoman Stabenow. Well, thank you very much. I could not
    agree more with your comments, Senator Conrad, and our whole
    Committee stands ready to help you and your state, as I know
    the Department does, and I know the Secretary does and we wish
    you well today.
        I am going to turn back to our Ranking Member who deferred
    to Senator Grassley and Senator Conrad because they have to
    leave early. Then after that, unless there is a burning desire
    to say something, we are going to move to the witnesses. And
    so, we start down the road of allowing a couple of members to
    give opening comments, but we do want to get to the witnesses,
    and I will turn this back to our Ranking Member.
        Senator Roberts. Thank you, Madam Chairwoman, and I would
    like to associate myself with the remarks by the distinguished
    Senator who is doing everything he can to be of help to his
    state during difficult times. That water will come down to the
    Missouri to the Mississippi and it will be clear into the end
    of August until we are able to see all that take place.
        Our Constitution created a unique relationship between
    Congress and the Administration and I want to thank all of our
    witnesses here for taking valuable time out of your schedule to
    come up and testify before us.
        We in Congress identify issues affecting the daily lives of
    our constituents, and when appropriate, we develop programs
    through legislation to address those issues. And in this
    Committee, much of that work is done in the Farm Bill. We grow
    attached to farm bills here. Perhaps it is because we spend so
    much time working together to find the right balance for a bill
    that is national in scope, and yet responsible to taxpayers.
        More especially it is because of the work that we do in
    this Committee has a direct impact on our constituents' ability
    to produce the food and the food and fiber necessary to keep
    our economy running and our people fed, and that also means a
    troubled and hungry world.
        After the agreements have been made and in the case of the
    last Farm Bill, the vetoes have been overridden, those programs
    we crafted are handed off to the USDA for implementation and
    these are the folks who do it. So today, I look forward to
    hearing how well the Administration is carrying out the laws
    passed by Congress, not only in the Farm Bill, but also in the
    Child Nutrition Bill. Are they delivering the programs
    effectively, efficiently, fairly, and as intended by this
    Committee?
        Madam Chairwoman, soon I am going to have to leave in order
    to testify before the Homeland Security and Government Affairs
    Committee. I apologize to you for that, but I have introduced a
    bill that codifies the President's Executive Order of January
    18, and they have asked me to walk them through it and I am
    going to do exactly that.
        I would like to tell the Committee and you that the bill
    follows the President's order to require agencies to review
    regulations and hold them up to a cost benefit yardstick just
    like these folks do. It sounds like a very good idea to me.
        If our businesses, large, medium and small, and our farmers
    and ranchers and growers are required to comply with
    regulations, our Government should at least be required to
    fully understand the impact of those regulations before
    imposing them. I am still taking co-sponsors if anybody is
    interested and if anybody would like to raise their hand, I
    would be happy to add them as a co-sponsor.
        I hope to return in time to ask questions, but if not, I
    will submit written questions for the record and I want to
    thank Secretary--well, he could be a Secretary some day, who
    knows--Senator Chambliss for standing in for me while I go to
    the DHS hearings. Thank you very much.
        Chairwoman Stabenow. Thank you very much, Senator Roberts,
    and we will now proceed to the witnesses. Again, I had opened
    it up to a couple of our colleagues, but if there is not a
    burning comment to be made, we are going to proceed to the
    witnesses. All right.
        Let me first introduce and welcome Under Secretary of Rural
    Development, Dallas Tonsager. Mr. Tonsager grew up on a dairy
    farm in South Dakota where he eventually served as USDA State
    Director for Rural Development. Much of his career has been
    focused on economic opportunities for rural communities; worked
    as the team that reinvented the Rural Business Guarantee Loan
    Program in the late '90s. Prior to rejoining USDA, served on
    the Board of Directors for the Farm Credit Administration
    promoting rural investment. Welcome.
        Michael Scuse--I never get your name right, so I want to
    make sure I am doing this right.
        Mr. Scuse. Michael Scuse.
        Chairwoman Stabenow. Scuse. That is what I thought. I
    wanted to make sure I had this right. It is good to see you
    again. By the way, appreciate your efforts as it relates to the
    weather disasters and what has been happening. So Michael Scuse
    is the Acting Under Secretary of Farm and Foreign Agricultural
    Services. He comes from Delaware where he and his brother have
    had a successful grain operation for over 35 years.
        Mr. Scuse knows agriculture from both a local and national
    perspective, having been the Secretary of Agriculture in
    Delaware from 2001 to 2007, and Deputy Under Secretary for FFAS
    for the past two years.
        We also want to welcome Harris Sherman as Under Secretary
    for Natural Resources and Environment, Mission Area, and we
    welcome you. Overseeing both the Forest Service and the Natural
    Resources Conservation Service, Mr. Sherman has dedicated his
    career to protecting our country's natural resources.
        As a practicing lawyer, he specialized in environmental
    law, and more recently, has served as Executive Director of
    Colorado's Department of Natural Resources.
        Under Secretary for Food, Nutrition, and Consumer Services,
    Kevin Concannon, welcome as well. He oversees, among other
    things, the Supplemental Nutrition Assistance Program. Over a
    25-year career in public service, Mr. Concannon has been the
    Director of State Health and Human Services in Maine, Oregon,
    and Iowa.
        And last, but certainly not least, we will hear from Dr.
    Joe Leonard, the Assistant Secretary for Civil Rights at the
    USDA where he oversees USDA's civil rights programs and ensure
    that programs are compliant with applicable Federal civil
    rights laws. Prior to joining USDA, he was the Executive
    Director of the Congressional Black Caucus, and before that,
    Executive Director of the Black Leadership Forum.
        We welcome each of you and we will now turn first to Under
    Secretary Tonsager for your testimony. Welcome.

       STATEMENT OF HON. DALLAS TONSAGER, UNDER SECRETARY, RURAL
      DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC

        Mr. Tonsager. Thank you, Madam Chairman. Please forgive me.
    Thank you, Madam Chairman, and thank you, Ranking Member
    Roberts. Members of the Committee, I am pleased to present you
    Rural Development's accomplishments and activities to ensure
    accountability of resources provided through the 2008 Farm
    Bill.
        As stewards of more than 40 Farm Bill programs, our mission
    is to help rural America grow and thrive as it captures the
    emerging opportunities of the 21st century. From creating jobs
    to funding facilities and infrastructure, and connecting them
    all through the deployment of new technology, the 2008 Farm
    Bill has equipped us with remarkable tools and maximizing these
    resources, Rural Development continues to review and modify
    goals, objectives, and performance measures.
        We pay close attention to outcomes and results that inspire
    businesses to incubate and grow. Rural Development is also
    engaged in a regulatory review process that is intended to
    streamline program requirements and practices.
        President Obama established a goal to deploy the next
    generation of high speed broadband services. Nearly seven
    million rural residents, 364,000 businesses and 32,000 anchor
    institutions will gain new or improved access to high speed
    Internet through broadband.
        The 2008 Farm Bill recognized that providing loans in both
    unserved and under-served areas may be necessary to bring
    broadband to the under-served. Because of over- building
    concerns that stem from the 2002 Farm Bill, broadband funding
    was limited to areas with three or few service providers.
        The 2008 Farm Bill also featured several energy programs
    designed to advance biomass and biofuel production, which holds
    the potential to create and save jobs and reduce the country's
    consumption of fossil fuels. Program delivery methods have been
    streamlined and revised to provide greater consistency to our
    stakeholders.
        For example, an example of refocusing and realigning and
    streamlining is a Comprehensive Loan Program initiative. CLP is
    an automation enhancement which retires legacy accounting
    systems and replaces them with updated accounting systems. We
    also are taking actions that will assist communities to invest
    in local and regional priorities. In rural America, communities
    have realized that working collaboratively creates
    opportunities and growth.
        Looking ahead, we are committed to working with Congress in
    a continued effort to streamline what is practical and to
    provide our customers easier access to our programs. The 2012
    Farm Bill will be a great tool to help complement these efforts
    and we look forward to your questions.
        [The prepared statement of the USDA can be found on page 79
    in the appendix.]
        Chairwoman Stabenow. Thank you very much.
        Mr. Scuse, welcome.

     STATEMENT OF HON. MICHAEL SCUSE, ACTING UNDER SECRETARY, FARM
         AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF
                      AGRICULTURE, WASHINGTON, DC

        Mr. Scuse. Madam Chairwoman, Ranking Member, members of the
    Committee, I want to thank you for the opportunity to testify
    today.
        At the Farm and Foreign Agricultural Services, we are
    streamlining our programs, processes, and procedures to make
    them more accountable and more efficient and more effective.
    The Farm Service Agency continues to move forward with business
    and technology modernization initiatives that provide critical
    services to our nation's farmers and ranchers, while at the
    same time achieving cost efficiencies, improving security and
    accountability, and further reducing unnecessary burdens on our
    customers.
        FSA has implemented new systems to incorporate adjust gross
    income qualifications, program payment limitations, and direct
    attribution, and has incorporated actively engaged policy into
    program administration. FSA has launched the Midas Initiative
    to modernize price support, conservation, production
    assistance, and emergency assistance programs.
        Midas will improve the delivery of farm programs to our
    customers by modernizing information technology systems and
    business practices. Since its launch, Midas has already
    improved service delivery and reduced error rates. FSA mission
    area will further reduce burdens on program participants
    through the consolidation of required participant information.
        For an example, a developing pilot program called the
    Average Crop Reporting Streamlining Initiative will allow
    producers to report common information at their first point of
    contact with USDA, whether it is at the FSA service center or
    with an improved insurance provider, or even online at home.
    This effort will allow for common data to be reported on time,
    thereby reducing burdens on producers and ensuring data
    consistency across all of our USDA programs.
        USDA Foreign Agricultural Service annually assesses and
    aligns overseas offices to be serve agricultural export
    interests and minimize cost. FAS's presence in regions and
    countries with high operating costs have been reduced and
    allocated to countries where growing middle classes and trade
    agreements present the very best opportunities.
        Our leaner FAS overseas presence remains as effective as
    ever, contributing to a record level of agricultural exports in
    the calendar year 2010 of $115.8 billion. FAS also improved the
    performance and efficiency of its foreign market development
    programs by implementing a 21st century Web-based system that
    simplifies the application process, reduces grant award time,
    and enhances program evaluation.
        Madam Chairwoman, members of the Committee, I look forward
    to answering your questions. Thank you very much.
        Chairman Stabenow. Thank you.
        Mr. Sherman, welcome.

      STATEMENT OF HON. HARRIS SHERMAN, UNDER SECRETARY, NATURAL
      RESOURCES AND ENVIRONMENT, U.S. DEPARTMENT OF AGRICULTURE,
                             WASHINGTON, DC

        Mr. Sherman. Thank you, Madam Chairwoman, and members of
    the Committee. I am pleased to give you a brief snapshot of a
    few of the recent NRCS and Forest Service efforts to improve
    program effectiveness and to eliminate duplication and waste.
    Our goal is to position both of these agencies as leaders in
    21st century conservation and management.
        First, how are we improving delivery of our conservation
    programs? Our conservation programs cannot work without a
    strong partnership with farmers, ranchers, and private forestry
    owners, so we need to make participation in USDA's conservation
    programs easier and less complex.
        To that end, NRCS recently initiated a five-year
    Conservation Delivery Streamlining Initiative. We call it CDSI.
    This initiative will integrate our scientific and business
    tools to significantly reduce the amount of time our technical
    experts are spending in the office, and increase the time that
    they are spending in the field. This will be accomplished by
    deploying nimble and mobile wireless 21st century technology to
    support our work with producers.
        We estimate that full implementation of CDSI will allow our
    field technical staff to spend as much as 75 percent of their
    time in the field working directly with clients, compared to
    the 20 to 40 percent that is currently taking place. And
    perhaps most importantly, CDSI will revolutionize the way our
    customers interact with us and participate in our programs.
        NRCS and our clients will finalize in the field
    conservation planning, document the expected environmental
    benefits, and accelerate payments to the producers, and allow
    24/7 access so that customers can check their plans and
    contracts at their convenience.
        Second, it is important that we measure our performance and
    we improve efficiency. Conservation programs, like all other
    Federal programs, are facing significant budget constraints, so
    we must better focus our conservation investments and clearly
    demonstrate the resulting benefits.
        One of our key tools to accomplish this is the Conservation
    Effects Assessment Projects, CEAPs, which are designed to
    estimate the effects of conservation practices on the
    landscape. The CEAP crop assessment combines comprehensive
    surveys and detailed soil information with edge of field and
    in-stream modeling to produce scientifically-based estimates of
    the effects that conservation is having on crop land.
        The first two of 14 regional CEAP crop land reports for the
    Upper Mississippi River Basin and the Chesapeake Bay have
    reported on great progress farmers are making in reducing
    sediment and nutrient losses. While at the same time it has
    revealed the need for a more comprehensive nutrient management
    program and continued targeting of our financial and technical
    resources.
        The Forest Service is also involved in a variety of ways to
    prioritize resources and work with states and local governments
    to improve the health of our nation's forests. I would be happy
    to answer any questions you might have about these and other
    ongoing efforts. Thank you, Madam Chairman.
        Chairwoman Stabenow. Thank you very much.
        Mr. Concannon, we welcome you as well.

       STATEMENT OF HON. KEVIN CONCANNON, UNDER SECRETARY, FOOD,
         NUTRITION, AND CONSUMER SERVICES, U.S. DEPARTMENT OF
                      AGRICULTURE, WASHINGTON, DC

        Mr. Concannon. Thank you very much, Madam Chairwoman and
    Ranking Member, Senator Roberts, and members of the Committee
    for this opportunity for me to testify before you today.
        May I begin by expressing my appreciation to all of you for
    the bipartisan approach this Committee has taken over the years
    in working with USDA and, specifically, with the Food and
    Nutrition Service to address program integrity. And as members
    are undoubtedly are aware, we are living through a period of
    time in this country where these nutrition programs have never
    been as urgently needed as they are today.
        Americans deserve excellence from their Government, and we
    understand that at USDA, when it comes to accountability. We
    know that the mission of the Nutrition Assistance Programs,
    which serve millions of Americans, is inseparable from the
    responsible stewardship of Federal funds. Waste and abuse draw
    away resources from the low-income children, individuals and
    families who need them the most. And our ability to continue to
    serve these families requires public confidence that benefits
    are used appropriately and go only to those who qualify.
        Most notably, last week Secretary Vilsack announced that
    SNAP's national payment error rate fell to 3.81 percent in the
    fiscal year 2010. This is the fourth consecutive year of record
    low error rates and the continuation of a decade-long
    improvement trend. And this is a success story for which all of
    us, Congress, the USDA, our state partners which administer
    SNAP, share both the responsibility and the credit.
        But beyond payment accuracy, accountability also entails a
    commitment to ensure that benefits are used properly. The sale,
    purchase, or exchange of SNAP benefits for cash, what we refer
    to as trafficking, is illegal and punishable by criminal
    prosecution.
        Over the last 15 years, FNS has aggressively sought to
    reduce trafficking in SNAP from what extended over a period of
    years during the era of paper coupons, roughly 4 percent
    trafficking was typical during that period of time, to its
    current level of 1 percent of the SNAP Program.
        But we have not rested on the success of this reduction.
    All available resources, from state of the art data mining
    technology, to undercover investigations, to criminal
    prosecutions are used to ensure that recipients and retailers
    alike, who misuse benefits, are held accountable.
        In conclusion, we recognize that effective accountability
    in the Nutrition Assistance Programs takes long-term sustained
    effort working closely with our program partners. My team and I
    are seeking every opportunity to build on our success with new
    strategies to tackle the challenges that remain before us.
        I believe we can improve performance and accountability
    without compromising service to those in need. I look forward
    to working with you in this regard. Thank you again for the
    opportunity to be here today.
        Chairwoman Stabenow. Thank you very much.
        Dr. Leonard, welcome.

     STATEMENT OF HON. JOE LEONARD, ASSISTANT SECRETARY FOR CIVIL
         RIGHTS, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC

        Mr. Leonard. Thank you, Madam Chair. Chairwoman Stabenow,
    Ranking Member Roberts, and members of the Committee, thank you
    for the opportunity to bring testimony today on the progress of
    civil rights activities at the Department of Agriculture. Let
    me state that since my confirmation in April 2009 as Assistant
    Secretary for Civil Rights, the Office of the Assistant
    Secretary for Civil Rights has made progress in creating a new
    era of civil rights at USDA.
        I entered the Department on the heels of the 2008 GAO
    report and the 2008 Farm Bill report, and used them both as a
    blueprint on how the office should function in order to
    succeed. GAO has historically audited the civil rights
    functions within USDA. In 2010, after responding to an informal
    GAO audit, our office was not listed on the high risk list and
    our implementation efforts were rated as in progress by GAO.
        As you may be aware, the Office of the Assistant Secretary
    of Civil Rights was reorganized in 2009 to streamline its
    operations and to conform to the 2008 Farm Bill. That
    reorganization allows us to focus on our mission, to provide
    leadership and direction for the fair and equitable treatment
    of all USDA employees and customers while ensuring the delivery
    of quality programs and enforcement of civil rights laws.
        We have been consistently processing complaints with a
    focus on not letting the statute of limitations expire for
    program discrimination complaints.
        To address recommendations of the GAO report, we have
    increased our staffing in the program investigation and
    adjudication to levels not seen in over a decade, and our
    program investigators are now conducting on-site investigations
    versus the telephonic interviews that were standard in the
    past.
        From 2001 to 2008, there was only one program complaint
    finding of discrimination issued by the Office of the Assistant
    Secretary of Civil Rights. In 2010, there were three findings,
    and to date, in 2011, there are five. Our employment numbers
    are something the Secretary can be proud of. The number of EEO
    complaints filed by USDA employees has dropped significantly
    since 2007, and the number of merit findings of discrimination
    has increased.
        The efforts of the Office of the Assistant Secretary of
    Civil Rights to ensure USDA employees are aware of their rights
    is evidenced in these numbers.
        In fiscal year 7, there were 562 complaints that were filed
    and there were three findings of discrimination. In fiscal year
    0, there were 461 complaints that were filed with 22 findings
    of discrimination. And for fiscal year 1, as of yesterday,
    there are 343 complaints that have been filed to date and we
    project there will be between 450 and 475 for the year, and we
    have 17 findings of discrimination and project there will be
    between 25 and 30.
        This is a short synopsis regarding the essential functions
    of the Office of the Assistant Secretary of Civil Rights. Thank
    you for the opportunity to come before you and describe how
    this Administration is addressing USDA civil rights progress
    and the importance of it measuring performance while
    eliminating duplication and waste.
        Chairwoman Stabenow. Thank you very much to each of you.
        Let me start the questioning with Under Secretary
    Concannon. We, again, appreciate your being here, and as was
    indicated last week, the Inspector General's office announced
    it had successfully pursued 80 convictions in the SNAP fraud
    cases and returned about $8 million of taxpayer money in the
    last six months.
        Going forward, could you talk about what more we need to do
    in terms of looking at the next Farm Bill and the ratio of
    dollars we have invested in terms of enforcement and money
    back? And then the final thing I would ask is, could you speak
    about what the Administration is doing to encourage states to
    be more active in pursuing fraud, especially discussing some of
    the authorities that the states have as well to be able to
    crack down?
        Mr. Concannon. Thank you very much, Madam Chair, for that
    question. First of all, I should thank the Committee for the
    enhanced authorities that the Agriculture Committee granted
    through the 2008 Farm Bill to the USDA and the Food and
    Nutrition Service for imposing penalties for traffickers, and
    we are in the midst of internally working on proposals in that
    very regard.
        I want to mention that as I stated in my opening remarks,
    we are very encouraged by the fact that we now have record low
    numbers of improper payments. That incorporates either over
    payment or under payments to recipients. But I think the
    Chairwoman's question focuses more on the issues of
    trafficking.
        Since we have moved to the electronic benefit cards, or
    plastic cards, happily, I can speak to my state experience in
    this regard. It has had a dramatic effect on reducing
    trafficking. But nonetheless--and that number now runs about 1
    percent, but even that 1 percent concerns me greatly because it
    is 1 percent of a larger number now.
        The numbers of persons in the United States depending on
    the SNAP program now are in excess of 44.5 million Americans,
    reflecting largely, by intent, what is going on in the American
    economy. So we need to be particularly vigilant on making sure
    that we are doing all we can to both identify trafficking, but
    also to pursue traffickers.
        When I was in the state of Ohio earlier this week, there
    was a report that appeared in one of the newspapers of again a
    network of traffickers in one area of the state. I should point
    out that what we are doing, in terms of trafficking, is we are
    particularly deploying not only undercover investigators--last
    year, the Food and Nutrition Service was involved in 5,000
    undercover investigations across the country.
        There are now 233,000 licensed vendors in the SNAP program.
    Again, that number has increased tremendously. About 85 percent
    of the benefits go through supermarkets, and about 15 percent
    of the benefits go through smaller stores. And invariably, when
    trafficking occurs, it is the rarest occurrence that may
    involve a supermarket. It is much more typically a small store.
        What we are using, both post-2007 GAO report, that directed
    or urged FNS to take more aggressive steps around trafficking,
    we have enhanced our electronic data mining and we now have
    daily streamed information to us. When people process benefits,
    whether it is in Mississippi or in Miami or up in the state of
    Maine, we have electronic monitors that are tracking for
    trends. We also have high at-risk identified areas where there
    have been historic problems.
        And we are working closely not only with the Office of the
    Inspector General, but with state law enforcement agencies
    across the country as well as FNS itself. I am very troubled
    when it occurs because I know it is an improper use of a
    benefit that has been stated earlier by the Chair. Taxpayers
    have worked hard to provide these benefits to us. I believe
    that represents the greatest threat to this program in terms of
    public confidence when the public experiences or learns of a
    trafficking issue.
        So we are deploying our resources that way, but also, in
    response to the Chair's question, just as recently as this
    week, I sent a letter to every state commissioner of health and
    human services, something I did myself for many years, urging
    them to pay particular attention to this issue of trafficking.
        The Food and Nutrition Service, the Federal Government, we
    particularly track redemptions processed through vendors across
    the country. That is the monitoring side we are responsible
    for. State agencies across the country are more directly
    responsible for the individual consumers in their respective
    states. And I urged, in that letter, based on again these
    recent stories first out in the state of Washington and then
    more recently in several other locations, that states need to
    redirect their attention to issues of trafficking.
        As I mentioned right at the outset of this response, we are
    examining the opportunities that the 2008 Farm Bill gave to us
    as to what we can do to strengthen the penalties that are
    involved for vendors, because for trafficking, you cannot do it
    solely. You have got to have somebody conspiring with you.
        Chairwoman Stabenow. And we look forward to working with
    you on that. In the interest of time, I am going to have to
    move to my colleagues, but we are very anxious to follow up
    with you as it relates to the issues around penalties and so
    on, as well as what can we be doing and what you are doing in
    terms of states' ability to address individuals and so on.
        Mr. Concannon. Thank you.
        Chairwoman Stabenow. So we thank you very much. I have a
    lot of other questions, but in the interest of time, I am going
    to turn now to Senator Chambliss.
        Senator Chambliss. Thanks very much, Madam Chair.
        Under Secretary Tonsager, you recently announced that Rural
    Development will use REAP funds to install blender pumps at gas
    stations, and I have got a couple of concerns about the
    announcement.
        First, as you might recall, this proposal was considered
    during the 2008 Farm Bill process and was rejected during our
    conference with the House. The REAP program was not designed
    for this purpose and is already over-subscribed. So what we are
    doing now is adding a new competitor to an already over-
    strapped, over-subscribed program.
        My second concern is that the Department of Energy is
    already using the Clean Cities Program to fund ethanol
    infrastructure including E85 fueling stations. In fact, the
    Stimulus Act provided several projects to agricultural
    associations for that very same purpose.
        Did USDA understand that REAP would be duplicative of
    existing U.S. Government programs for funding ethanol
    infrastructure and if so, why did we proceed with the final
    rule on REAP knowing that other programs are already delivering
    funds for blended pumps, and how will the agency ensure that
    other important goals and purposes of the REAP program are not
    crowded out by grants for blended pumps?
        Mr. Tonsager. We did closely review to make sure that it
    was an eligible purpose, and we have a clear understanding from
    our general counsel that it is an eligible purpose to be using
    REAP for that purpose. REAP has proven to be extraordinarily of
    interest to people. It has been used for a number of energy-
    related products and has been done so successfully.
        We stepped forward with this because we believe that it is
    enormously important, as the evolution of the ethanol industry
    and the biofuels industry goes forward, to make sure that there
    is the opportunity for consumers to use biofuels in as many
    places as possible.
        So we have reached out not just on biofuels, but also to
    make sure the program is used widely across America. In recent
    years, it has been generally concentrated in the northern
    plains in the Midwest, so we are trying to move the program
    very broadly.
        We do understand that there was other agencies that have
    the funds that could be used for biofuels projects, but there
    was only recently a clarification by the Department of Energy
    to the states regarding the use of that program. That only
    occurred a few months ago when the opportunity was expressed
    clearly to the state energy offices that they could use the
    program. And we also encouraged the groups that we have worked
    with to seek out those funds as well.
        There has, unfortunately, been a limited number of E85
    pumps made available across the country. There has been some
    demonstrations by states. My home state of South Dakota, for
    example, has committed some resources to the use of E85 pumps,
    and we focused on that a good bit as a model about how we might
    help expand the availability of those pumps.
        So in short, sir, we believe it is an eligible purpose. We
    think that it is important. We made a decision to go forward
    with the use of the program for that purpose.
        Senator Chambliss. Well, I would simply respond to your
    answer by saying that if there is a market for E85, the private
    sector ought to be where the funding comes from to meet that
    demand because that is where the profits are going to go. And
    it does concern me greatly that we are going to be crowding out
    some other very worthwhile programs in REAP to spend money on
    something that the private sector should take care of.
        Next, Mr. Tonsager again, in 2005, USDA's Inspector General
    completed its first review of the Broadband Loan program and
    generally found USDA was awarding grants and loans even though
    applications were incomplete, applicants had previously
    defaulted on government loans, and that grant funds were being
    used for inappropriate purposes.
        Specifically, the IG found USDA had not maintained a focus
    on rural communities lacking pre-existing service. For example,
    IG found that out of $485 million in grants and loans, $103
    million to 64 communities near large cities. The IG also found
    that USDA was using a significant portion of the program to
    support competitive service in areas with pre-existing
    broadband access, rather than expanding service to areas
    without service.
        The IG also found that 159 of the 240 communities
    associated with the loans already had service. In 2009, IG
    revisited the broadband programs and found that USDA had not
    taken corrective action on eight of its 14 recommendations.
    From 2005 to 2009, USDA continued to make loans to providers
    near very large cities or in areas with pre-existing service.
        I understand that USDA has recently released an interim
    final rule that will address some of these problems. Why,
    almost ten years after these problems were identified and
    millions of dollars had been spent, in such a reckless manner?
    If USDA cannot address waste within their own agency, how can
    the taxpayers have faith in President Obama's newly created
    Rural Council chaired by the Secretary of Agriculture?
        In regards to the President's Rural Council, how does USDA
    plan to implement, coordinate, and involve stakeholders in the
    decision-making process? So I am very concerned about this and
    I would appreciate your comments.
        Mr. Tonsager. We agree there were significant problems with
    this and we have aggressively pursued addressing those
    problems. We believe the new rule will help significantly with
    that. During the period of the Recovery Act when we were
    implementing the broadband process, we used that as an
    opportunity to learn from the shortcomings of the previous
    program.
        We do believe that the Recovery Act money, while
    contentious, we believe we have made significant progress there
    and we took those lessons to learn them. There will be and are
    plans for a significant outreach to stakeholders. I believe
    there is a stakeholders meeting scheduled soon to begin that
    process.
        The Rural Council, which we are extremely excited about,
    bringing a new focus on rural America and the programs that
    USDA helps provide, particularly the programs that I have the
    opportunity to oversee. I think there is great opportunity in
    that.
        We believe we have acted to address most of the issues
    associated with the standing program and we believe the rule
    will help respond to that.
        Senator Chambliss. Well, this has been a very controversial
    program, particularly as we went through the last Farm Bill,
    and I am sure, as we come to next year, it is going to continue
    to be in the public eye. And while I look forward to the next
    IG report, I hope that that report comes forward with
    significant improvements being made and the people in rural
    areas who need broadband, just like people in more populated
    areas, are getting the kind of service that the Farm Bill
    intended for them to get. So we will look forward to that.
        Mr. Tonsager. Yes, thank you.
        Chairwoman Stabenow. Thank you very much. Senator Brown.
        Senator Brown. Thank you, Madam Chair. A couple of
    comments. Secretary Concannon, thank you for your testimony and
    for your recent visit, I think, this week to Columbus and to
    the Mid-Ohio Food Bank. You pointed out rightly that demands
    for all kinds of food assistance, from food banks to emergency
    funding for food, or SNAP, are unprecedented and the demand has
    grown.
        You understand, of course, as your testimony and as your
    visit there, the difference between making ends meet and coming
    up short and why the work that all of you do at USDA, but you
    particularly, why that work matters so much. I want to
    emphasize what you had said about the national error rate
    reported for SNAP. Combining states' over- payments and under-
    payments to program participants has declined some 56 percent
    in the last 10 years from 9-plus to 4-plus percent.
        I also appreciate what you said about trafficking being the
    biggest threat to this program. You mentioned an article from
    an Ohio newspaper, the Dayton Daily News, pointed out a variety
    of things that are of concern. We also know there are
    newspapers, as there was today, the Wall Street Journal,
    newspapers have never much liked the whole idea of food stamps
    and helping citizens who have less privilege than the people
    that sit on that editorial board have, and may or may not have
    grown up with, but have now.
        We expect those kind of criticisms, but as you pointed out,
    trafficking is, in fact, the biggest threat to this program and
    it is so important that you double-down, if you will.
        I want to move on to Mr. Tonsager because I have a couple
    specific questions for him, but I just would like to outline
    some questions to you that you could impart, in response to
    Chairwoman Stabenow, get to us in writing about what you are
    doing, how the USDA is keeping track of how it counts and how
    it keeps track of fraud and abuse, what you are doing to ensure
    program integrity, what can be done to further improve
    management and administration of these programs, how do these
    EBT cards work.
        If I have your card, can I use it and what are the
    penalties if I--what are the steps of how that would happen,
    how often are they replaced, do they have to be decertified, do
    you have tools, do you have sufficient tools to track and
    prosecute fraud? If we are going to have the number of
    inspectors, have a relatively low number of inspectors, as I
    think the Wall Street Journal editorial today pointed out, I
    believe that is where I read it, is that enough to go after the
    fraud in this program? So I know you understand all that, but I
    would like to see some specific answers.
        Mr. Tonsager, my questions for you, USDA Rural Development
    is so, so important, but I frequently hear two things in
    criticism. In Washington, I hear how USDA rural development
    programs are duplicative or inefficient or not that different
    from what EDA and HUD do.
        In Ohio, I hear that the application process can be so
    cumbersome that far too many people and too many entities in
    rural Ohio have just given up on using existing loan and grant
    programs under USDA that USDA RD administers.
        So my question, and I am a strong supporter and want to
    continue to be of these rural development programs, discuss
    what you are doing to reduce that duplication, to answer those
    questions that I hear in this town, and what you are doing to
    make the system more modern, efficient, and accessible for
    people in Ohio and Michigan and Nebraska and Mississippi and
    Georgia and South Dakota when groups or individuals are
    applying to be part of this.
        Mr. Tonsager. Sure. Thank you, Senator, and we do
    appreciate your support. I would just like to offer a few
    general thoughts to try and offer our perspective. The USDA
    Rural Development really was created to be a mini version of
    the entire Federal Government in a lot of ways, specifically
    for rural America.
        We have a very broad tool set, some 40 programs to do that,
    and the reason I think it exists this way is because we have
    that focus on rural. You know, 80 percent of the landmass, of
    course, United States is rural, and it takes, I think, the
    access for people to get to that program by having this special
    rural emphasis on it.
        We do recognize that many of our programs are very similar
    to other programs throughout the Federal Government, and we try
    very specifically to work with them. We have an agreement with
    SBA, for example. We believe their tool for business lending
    works better than ours, in many cases in rural areas, so we
    emphasize that to people. Quite often, our loan guarantee
    program works well for larger loans, maybe not so much for the
    smaller kinds of loans.
        But I would also like to say that in an efficiency context,
    we have a $150 billion loan portfolio at this time with less
    than a 2 percent delinquency rate overall on that, and we think
    that is important. Our proposed budget by the Administration
    was $2.4 billion this year. We make that into $36 billion.
        Our largest programs are at zero budget cost. So we have to
    work very hard with people in making sure projects work well.
    And that is a success story for everybody when you do that. It
    takes a lot of work and sometimes it becomes complex,
    especially on larger loan projects.
        So we think that having our rural field structure is
    important. We recognize that there are people that are
    challenged by our process and we have some work to do. We
    believe our new consolidated loan program, over the long term,
    is going to really make that much more efficient because it
    will make the forms less duplication so you do not fill out the
    same thing three or four times as we go forward.
        So I believe we can continue to address some of the
    challenging parts of our process, and we know that those
    challenges exist. But we believe we are efficient and effective
    because it is a very large amount of leveraging we are doing,
    and we think we have to keep the performance of those programs
    in a very high quality state in order to come to you all to ask
    for the money and the authorities to do it.
        But we will continue to look very hard at those processes
    and we do believe we are making some steps to address those.
    And we take it as our goal, when we look at every other Federal
    program, if we cannot do it, we will go after their money to
    get it into rural areas. So we do recognize there is some
    duplication. We think the field structure we have to help get
    access is important. And we take it as our responsibility, if
    we cannot figure out how to do it, we are going to go after
    somebody else to help try and figure out how to do a project.
        Chairwoman Stabenow. Thank you very much. Senator Cochran.
        Senator Cochran. Madam Chairman, let me join you and the
    other members of the Committee in welcoming this distinguished
    panel to our Committee. We appreciate the work you do to
    administer the agriculture programs, not only those designed to
    help improve conservation programs, to safeguard natural
    resources, and the production of food and fiber in our country.
        My observation is, over the years, that we have made
    substantial progress in a lot of areas that have long been
    concerns of the general public and taxpayers as well. There
    have also been a lot of attention focused on integrity of the
    programs, the honesty and integrity of those who apply for and
    receive benefits of one kind or another, farm payments, program
    payments, crop insurance back when the Government basically ran
    the crop insurance, and food and nutrition assistance programs.
        I think a lot of progress has been made in all of these
    areas. I was particularly impressed with Mr. Concannon's
    comments about the challenges that his office has faced and how
    they are going about identifying fraud and abuse and
    eliminating it. I sensed an attitude of ``can-do.'' It is not
    something to apologize for, but to do something about it. I
    think that is what I hear from the testimony that we have heard
    this morning, and that is encouraging.
        I do not have any particular specific complaints just to
    cite in my questions of you, but I think the Chairwoman ought
    to be commended, too, for the oversight of the Department. This
    hearing is a good example of that and I think we can all
    benefit from it.
        The Food Stamp program has been under a close inspection
    process for a long time, but some of the other programs in
    nutrition areas I wonder about. I know there are a lot of
    mistakes made, probably some of them innocent mistakes, but
    there are school lunch program activities which have been found
    to have been abusive and errors made, intentional or not. I do
    not know.
        But I wonder if there is a program at the Department to
    ensure that payments are going to eligible participants in
    those programs, whether at schools, other organizations that
    dispense a lot of benefits to program participants. Citing
    eligibility is one question.
        I know Under Secretary Michael Scuse may be the person to
    answer that. In your area of responsibility, what programs are
    there underway and what are the steps taken by the leadership
    at the Department to see that they are producing benefits in
    recapturing wrongfully paid or mistaken paid benefits to those
    who are not entitled to them?
        Mr. Scuse. Well, thank you, Senator. I appreciate the
    opportunity to answer that question because as you are well-
    aware, there has been criticism over the years about some of
    the Farm Service Agency and Risk Management Agency programs and
    payment eligibility. We take it quite seriously at the Farm
    Service Agency and USDA to make sure that program participants
    that are entitled to money actually receive that funding.
        There are several things that we do at the Farm Service
    Agency. All of our producers who are receiving payments must
    fill out a form to give the IRS permission to view their tax
    returns to make sure that they are within the adjusted gross
    income levels for participation in the Farm Service Agency
    programs.
        There is another form, CCC Form 902, that our producers
    also have to sign to be active to verify that they are actively
    engaged in agriculture and in production through management,
    through providing land, equipment, capital, and some other
    areas as well. And that form is reviewed by the accounting
    committee and if there are discrepancies, it is elevated to the
    state and to the Federal level.
        Through the Risk Management Agency, the CIMS project, the
    Comprehensive Information Management System, we have been doing
    data mining to make sure that the program is being run
    properly, that those producers that should be receiving
    payments, crop insurance payments, actually do.
        In the last ten years, Senator, we have been able to have a
    cost avoidance of $840 million. So we have put things into
    place to make sure that there are no improper payments. One
    improper payment is one too many, and we will continue to do
    the very best job that we can to make sure that we take care of
    any improper payments being made.
        Senator Cochran. Thank you. I appreciate your response to
    that question. One specific program was brought to my attention
    in farm payment programs. There had been an inordinate number
    of people paid who had died, and there were no records to
    reflect that at the Department of Agriculture.
        The information that I was given said that from 1999
    through 2005, USDA paid $1.1 billion in farm payments in the
    names of 172,801 deceased individuals. Of this total, 40
    percent went to those who had been dead for three or more
    years; 19 percent to those who had been dead for seven or more
    years. That is kind of shocking.
        What is the response that you could make to that to let us
    know what is being done to ensure that we are not making
    payments to deceased individuals?
        Chairwoman Stabenow. And I am going to ask that you do that
    quickly at this point, because we have a time limit. But please
    answer that important question.
        Mr. Scuse. Yes, Madam Chair. We have an agreement with the
    Social Security Administration. The Farm Service Agency does
    quarterly re-review those deceased individuals to make sure
    that they are, in fact, entitled to payments. If you sign up
    and participate in a program and you pass away during the
    course of that year, Senator, you still or your estate is still
    entitled to that program. But we are looking to make sure that
    yes, in fact, those people are entitled to that payment.
        Senator Cochran. Thank you very much.
        Chairwoman Stabenow. Thank you very much, Senator. Senator
    Bennet was next, but I do not see him here and so we will turn
    to Senator Nelson.
        Senator Nelson. Thank you, Madam Chairman, and again, as my
    colleagues have congratulated you, I want to congratulate you
    on setting this hearing on extremely important issues and
    giving us the opportunity to meet with Department officials on
    accountability on program delivery. We spend an awful lot of
    time talking about what programs we would like to have.
    Probably not nearly enough time on accountability. So this
    gives us a chance to do that.
        It gives us a chance to focus on performance, management
    programs, and to get a better sense of how real the impact of
    improper payments, fraud, and abuse of programs can be.
        Certainly everybody agrees that better accountability
    should be sought for in every Government program, and I hope
    this hearing will highlight the positive studies and strides
    that have been made by the departments with the agencies with
    those reforms put in place with the 2008 Farm Bill and
    highlight areas were additional accountability and efficiency
    can be found to help reduce costs and ensure producers can
    count on an adequate safety net for the current and the future
    programs.
        I have one question. I know my colleague from North Dakota
    has been in and discussed, to some degree, the flooding in the
    Midwest, and it is with that in mind that I want to ask the
    panel about the coordination between agencies. And among the
    agencies, with the flooding ongoing in Nebraska and all along
    the Missouri waterway, I wanted to focus on the coordination
    between the various agencies providing relief to Nebraska
    farmers and producers impacted by flooding with both the
    Missouri and the Platte Rivers in Nebraska.
        I have to say I was very pleased with Secretary Vilsack's
    visit to Nebraska with me a week ago to meet with those that
    were impacted by the flood firsthand, and assure USDA's support
    to those impacted by the devastation. I am hopeful that the
    Under Secretaries could discuss their individual efforts in
    coordinating their resources between agencies and ensuring that
    Nebraska farmers and those living in rural communities impacted
    by the floods can count on timely and efficient assistance
    throughout the flooding, and perhaps more importantly,
    rebuilding their livelihood after the flood waters recede.
        We asked the other day Director Fugate, Administrator
    Fugate of FEMA, will the flood be over and will we know when it
    is over? Because we are talking about sustained high water for
    a long period of time. Perhaps we could start with you, Mr.
    Tonsager, to what you are looking to do. Yours is a part of
    making certain that the quality of life issues and structural
    economic development issues are being addressed out there.
    Maybe we could start with you.
        Mr. Tonsager. Thank you, Senator. Mr. Scuse and I did
    recently make a trip through the flood areas of the South,
    through Louisiana, Arkansas, Alabama, and Mississippi. To be
    concise, my agency has a clear process to follow up with FEMA.
    We generally do not serve in the lead role, but we want to fill
    in the gaps behind FEMA. And so, we are very studious about
    following their process as they are the lead agency.
        But we do get into financing homes, dealing with water and
    sewer systems that have been inundated and trying to assist
    those. We do work with businesses who have been through the
    inundation to try and help refinance in those cases. So we do
    have some tool sets that help us manage those communities that
    have been inundated and we try and want to be helpful with
    them.
        Senator Nelson. Thank you. Yes, and then your colleague
    there?
        Mr. Scuse. Thank you, Senator. We have been having meetings
    throughout the Mississippi River area now for several months.
    The Farm Service Agency, the Risk Management Agency has been
    working very closely together to make sure that our producers
    are getting the assistance that they, in fact, need.
        During the course of these meetings, we encourage them to
    visit the Farm Service Agency as quickly as possible to look at
    the emergency loan program and emergency conservation program.
    We have also been encouraging our producers to visit with their
    crop insurance agent to make sure that they can start that
    process as quickly as possible.
        We have been touring the areas. Acting Deputy Under
    Secretary Karis Gutter is in Missouri yesterday and today
    looking at some of the flooded areas. We have been providing
    fact sheets to all of our farmers and ranchers to let them know
    what programs are available, and we will be continuing working
    together with the Army Corps of Engineers as well as Under
    Secretary Honsaker and NRCS as well.
        Senator Nelson. Mr. Sherman, and then we can wrap that up.
        Mr. Sherman. Yes. Let me just briefly supplement what has
    been said. NRCS has an Emergency Watershed Protection program,
    so part of what we do is to provide immediate emergency relief,
    and we have provided, I believe, something like $600,000 to 11
    different states that have been affected by this, and we have
    additional resources that can be allocated.
        But let me just say that part of our work is to assess
    flood damage. Part of our work is to remove obstructions to
    watersheds. Part of it is to ensure the stability of certain
    structures. And we have a very active SNOTEL program that
    monitors the amount of snow pack in the mountains which
    ultimately can get to the Mississippi and the Missouri River
    Basins.
        So all of these programs are important. We work carefully
    with the Corps, with the Bureau of Reclamation, with EPA, and
    other Federal agencies.
        Senator Nelson. We appreciate the fact that you do work
    together. I was taken by that sitting with Secretary Vilsack
    who made it clear that internally within the agency, a lot of
    effort was being made to coordinate and make certain that there
    was no underlay or overlap of effort, but that everything was
    being done that could reasonably be done.
        Given the fact that this high waters are going to go on for
    another six weeks or longer, I hope that fatigue does not set
    in within your agency. Certainly it is being felt by an awful
    lot of those who are directed affected, but I hope you will
    avoid fatigue within your agency. It is not going to be easy.
    It is not a typical flood. Thank you very much. Thank you,
    Madam Chair.
        Chairwoman Stabenow. Thank you very much. Senator Thune.
        Senator Thune. Thank you, Madam Chairwoman and Senator
    Roberts. I want to thank you both for holding today's hearing.
    I think this is an important subject given the current fiscal
    and budget and deficit crisis the nation is facing, and
    obviously reducing and eliminating waste, fraud, and
    duplication of services and abuse, not only at USDA, but across
    the entire Federal Government would make a significant dent in
    reducing Federal spending.
        I want to say, Madam Chairwoman, that as we focus today on
    measuring performance in eliminating duplication and waste, I
    believe the Federal Government needs to take a close look at
    our nation's agricultural producers as examples of efficient,
    effective, and streamlined operations and learn how they
    conduct their businesses and operations and follow their
    example.
        When faced with rising operating input costs, farmers began
    utilizing equipment and modifying their operations to make
    certain seeds are planted at consistent depths and distances to
    maximize their growth potential. Today's equipment can also
    place fertilizer, chemicals, and other inputs precisely where
    they need to be without overlap.
        I would just say, Madam Chairwoman, that our farmers have
    learned how to make every seed and every drop of fuel,
    chemicals, fertilizer provide the maximum benefit possible, and
    that is certainly something that the Federal Government must
    likewise do, and that is increase its efficiencies and cost-
    effectiveness of its operations as well. So I think our farmers
    are a great example to us about how we need to be going about
    the process of becoming more efficient.
        I have a question for Mr. Tonsager I would like to ask in
    particular dealing with an issue in my state. And if we have
    time, a couple other questions I would like to ask for the
    record. But, Mr. Tonsager, as you know, there is a project in
    South Dakota called Mni Waste which is a water system that
    received a nearly $10 million grant and a $3.6 million loan
    from USDA Rural Development to build a new raw water intake
    line.
        This is the first phase of what would be a three-phase
    project to complete a new water treatment plan and a water line
    on the Cheyenne River Reservation. Despite the dire need for
    water on the Reservation, USDA Rural Development has indicated
    that only small amounts of funding are going to be possible for
    this project going forward.
        Allowing this project to languish not only means increased
    cost for the Federal Government to finance this project as
    construction costs rise and existing parts of the system fall
    into disrepair before they are even put into use, but there
    also will be increased health care costs through the Indian
    Health Service and there will be increased payouts in
    unemployment insurance, food stamps, and other safety net
    programs as housing projects, livestock taps, and other
    economic development projects are put on hold.
        Could you just explain how giving these small amounts of
    funding to this project which helped provide water to the
    poorest county in the nation is, over the long term, a fiscally
    prudent move?
        Mr. Tonsager. It, of course, is a challenging area that is
    faced with a desperate problem that has a long history and that
    we have explored carefully. Of course, as you well know, the
    restraints on our resources are a major challenge for us and we
    face challenges like this in several of the high poverty areas
    across the country, including places like the Navajo
    Reservation or other reservations across the country where you
    have very widely-dispersed groups of people.
        It saddens us that we cannot proceed more quickly with the
    project. I think the near term solutions would be to work with
    the other Federal agencies, and we do get into the discussion
    about duplications that we have. But we will look closely at
    the other Federal funding sources and see if we can bring
    stronger encouragement with them to participate with us in the
    continued funding of this project. And hopefully, we can then
    possibly make some more faster progress with them under those
    circumstances.
        Senator Thune. I hope you can do that. As you know, it is
    an area of dire need and the consequences of waiting are going
    to be, as I mentioned, pretty profound for the people on the
    Reservation.
        Let me just ask you, in terms of the hurdles that you
    encounter. If you look at trying to become more efficient and
    do away with duplication, what would you say are the biggest
    hurdles that Rural Development has had to overcome in
    administering, for example, the 2008 Farm Bill programs that
    are assigned to your portfolio at Rural Development?
        Mr. Tonsager. Probably the sheer volume of the number of
    new programs, and we, of course, see those as opportunities,
    but we have an enormous number of regulations to get through.
    We took biofuels, for example, or the associated 9000 Series
    programs. We put out NOFAS immediately with those in order to
    implement them fairly quickly, then tried to learn from that
    experience.
        So I think the challenges were to follow the appropriate
    process, to get input, so we did want to get them going
    quickly. We did notices in order to get funds out the door
    quickly, tried to learn from that, and then do the programs. We
    believe we have pretty much fully implemented all of the Farm
    Bill authorities. Did not go as fast as we would like, but boy,
    there was a lot of ground to cover.
        Senator Thune. How is NEPA compliance affected RD's program
    administration delivery?
        Mr. Tonsager. It has taken work certainly. We, of course,
    have an obligation to not only build and finance, but to try to
    make sure it is a quality of life process. So we have
    environmental processes associated with every one of our
    programs. Typically NEPA comes into place when we come with
    very large programs that have very significant impacts. So it
    becomes more of a step to make sure that the compliance is
    there, and we accept NEPA and work closely with it because we
    do want to assure that qualitative component.
        Senator Thune. Thank you. My time is expired. Thanks, Madam
    Chair.
        Chairwoman Stabenow. Thank you very much. Our distinguished
    Ranking Member has returned and I will turn to Senator Roberts.
        Senator Roberts. Thank you very much, Madam Chairwoman.
        Mr. Concannon, the SNAP program conducts employment
    training to help in the job search for SNAP participants who
    may be out of work. The U.S. Department of Labor's Work Force
    Investment Act programs also provide employment and training to
    over 1.6 million participants. Temporary Assistance to Needy
    Families, TANF, program spends $2.4 billion in work activities
    which include education and training.
        GAO recently reported that there are 47--47 Federal
    employment and training programs at an annual cost of $18
    billion. In an effort to avoid duplicity in Government
    programs, can you tell me, is there any reason why SNAP should
    continue to have its own employment and training program? Is
    there any way you could merge some of your efforts in regards
    to the 47 other programs?
        Mr. Concannon. Thank you very much, Senator. Well, if I
    might mention right at the outset, work is a very integral part
    of the SNAP program and has been going back to 1970 or '71. All
    53 SNAP programs across the country, all the states and the
    territories, operate employment and training programs. It is
    part of the effort of the program to make people more self-
    sufficient.
        I can say from my state experience, we work very closely
    with Department of Labor, or one-stop shopping centers, as they
    are referred to, one-stop centers at the state level. The
    advantage on the employment and training program focus to the
    SNAP program is it is particularly-- that person comes through
    the front door applying for assistance.
        We know that they are in a compromised income situation by
    virtue of that. So the program is very tailored at that
    particular population, but we certainly would be happy to work
    on ways to make it even more integrated into the other range of
    labor programs.
        Senator Roberts. Thank you, sir. Mr. Sherman, are we
    creating programs such as CSP that are too complicated for the
    agency to implement? I am concerned about the level of improper
    payments. If producers are providing incorrect information,
    that is one thing. But if agency staff is having difficulty
    implementing the programs we create, is this an accountability
    problem with the agency or complexity in the design of the
    program? Is this our fault up here?
        What changes have been made in the Conservation Stewardship
    Program from the 2008 Farm Bill?
        Mr. Sherman. Thank you for the question, Senator. I think
    we have made some very positive progress concerning the
    Conservation Stewardship Program. As you know, we did have a
    variety of issues and problems with the Conservation Security
    Program, and I think Congress wisely decided to phase out that
    program by 2012 and to bring into focus the Conservation
    Stewardship Program.
        The Conservation Stewardship Program, I believe, is working
    well. NRCS is actively involved in verifying all aspects of
    their program, as opposed to a self-verification system that we
    previously had. So the improper payments that occurred under
    the Conservation Security Program have stopped.
        We are recovering monies that we lost in that program. And
    I think under the Conservation Stewardship Program, it is being
    handled very effectively.
        Senator Roberts. Thank you, sir. Mr. Scuse, we have heard a
    lot of frustration from our producers about ACRE and SURE.
    Specifically we hear complaints that the programs do not allow
    for the timely delivery of assistance, that they use a
    multitude of data points, they are generally confusing for the
    producer.
        The ACRE payment calculation alone requires a producer to
    go through 23 steps. That is about 22 more than necessary. And
    the testimony that Mr. Blankenship will state, he spends 25
    percent of his management time trying to work through the
    requirements for these various Government programs.
        So here you have a very successful producer who is going to
    indicate that one-fourth of his time is simply plowing through
    all of the programs requirements. Have you had similar
    frustrations in implementing the programs that our farmers have
    had using them, short of just going back to the drawing board,
    which some of us might like to do? Short of that, are there
    things you think the USDA or Congress can do to make these
    programs more streamlined, efficient, and user-friendly?
        Mr. Scuse. Thank you, Senator. I think the last Farm Bill
    took a giant step forward in helping our farmers and ranchers
    across the United States with the livestock programs that were
    put into place for losses, and ACRE and SURE are taking another
    step to enhance coverage that they may have on crop insurance
    and provide that additional protection.
        These three programs, they are complex, there is no doubt
    about it. There have been issues from the agricultural
    community about SURE. SURE pays you that payment one year after
    the loss. And that has been an issue that I have heard as I
    have traveled around the United States. But again, that was a
    program designed by Congress that we have implemented.
        ACRE is a complex program, no doubt about it. As you are
    well-aware, technology is an issue for the Farm Service Agency
    when you are dealing with systems that date back to the 1980s.
    So the technology issue has been one that has affected some of
    the program implementation. Some of these complicated programs,
    with SURE for an example, we have had to do manual calculations
    because of the lack of technology.
        So if there is one thing that I believe that we need going
    forward, it is to continue down that path to better technology
    to help our office staff.
        Senator Roberts. As a follow-up--and my time has expired,
    Madam Chairwoman--but you are basically saying you need better
    technology across the board to keep up with this and that that
    would help a bunch, as opposed to a program that has 23 steps
    for a farmer to comply. If you have any suggestions on how we
    can streamline these programs, change these programs, it would
    be extremely helpful.
        You just heard the testimony here from a lot of members
    here about the flood, the historic flood we are going through,
    and the SURE program and--I mean, there are times when you have
    bad situations almost every year up in the northern states. And
    then you go to the SURE program and you do not get paid until a
    year later. That really is a problem.
        Now, you focused on the technology to help you get through
    this, but is there anything from the ability of us to take a
    hard look at the structure of the program that could better
    streamline it?
        Mr. Scuse. Senator----
        Senator Roberts. And if you have those suggestions, you do
    not have to go into them now, but you could certainly submit
    them for the record.
        Mr. Scuse. Madam Chair?
        Chairwoman Stabenow. If you are brief. Yes, thank you. We
    definitely want to go into this more extensively with you.
        Mr. Scuse. Yes, Senator. We here in Washington at USDA, as
    well as all over county offices across the United States, would
    welcome simplified programs, programs that are easier to
    understand and easier to manage, simpler programs, as well as
    the technology. We would be more than willing to work with you
    in coming up with programs that can be easily managed. We
    welcome that opportunity, Senator.
        Chairwoman Stabenow. Thank you very much. Senator
    Klobuchar.
        Senator Klobuchar. Well, thank you very much, Madam
    Chairman, and thank you for holding this important hearing. As
    a former prosecutor, I saw time and again how good meaning
    programs can sometimes be abused if the wrong people get a hold
    of money, so I appreciate all the work that you are doing with
    the oversight, as well as the leadership of Secretary Vilsack
    and all of you to work on this accountability issue.
        One of the things that I was most curious about is just
    what kind of programs do you think lend themselves most--I
    guess I would ask this of you, Mr. Scuse. What are the factors
    that make programs more open to abuse? What additional
    oversight rules should we consider as we look at any
    programmatic changes to the Farm Bill?
        Mr. Scuse. Well, thank you. The sheer complexity and size
    of the programs. Again, I think it goes back to the previous
    question. Programs that are easily understood and easily
    administered are the ones that we would have the best ability
    to do oversight on.
        And again, the technology is a major factor for our offices
    in the field. We need to have the proper tools that will allow
    us to do reviews at the local level. So I think, Senator, those
    two things would be a big help for us going forward.
        Senator Klobuchar. Well, in speaking of technology, the
    Farm Service Agency and the Risk Management Agency require
    farmers to provide data at different times using different
    definitions for the same land. As you work to harmonize the
    data requirements from these two agencies, how are you ensuring
    that the newest GPS field data can be seamlessly incorporated
    into this new system?
        Mr. Scuse. Thank you, Senator. We have started a project
    just ten months ago--it is still in its infancy-- that we hope
    to have a pilot project going in 2012, with full implementation
    in 2013 whereby we are using common information, common data,
    and common terminology, for one of the first times at USDA,
    between NRCS, FSA, RMA, and NAS to make sure that the
    technology is all compatible, as well as our terminology is
    compatible.
        We right now are looking at bringing together the dates
    where we do our certification between RMA and the Farm Service
    Agency, to bring those dates as closely possible together, and
    in some cases, make them one and the same to eliminate some of
    the confusion to our producers out there on when they need to
    certify their crops. So we are taking those steps.
        Senator Klobuchar. Thank you. Mr. Sherman, the conservation
    program, the CSP program, has been especially important in my
    state. However, I know, even though we have had great anecdotal
    in our state, it is sometimes hard to accurately estimate the
    positive impacts of these efforts. How do you know if the
    significant investments that I believe we should make and are
    making, how do you know that the investments in voluntary
    conservation are actually working?
        Mr. Sherman. I had mentioned in my opening statement the
    ongoing Conservation Assessment Effects Program that we have,
    the so-called CAEPs, where we are taking a very careful look at
    the efficacy of these programs. And we are going out into the
    fields, we are doing modeling to see what the benefits are.
        And we are seeing really quite remarkable benefits. For
    example, the no till or reduced till efforts in the Chesapeake
    and the Upper Mississippi, approximately 85 to 90 percent of
    the crop lands there are now engaged in these practices, and we
    are seeing significant reductions in sediment contributions to
    streams and rivers, reductions in nitrogen, reductions in
    phosphorous.
        So we are documenting this very carefully, and as we
    document it, we are becoming more skillful in learning how we
    change practices to focus on this. So, for example, when we
    target areas where the most significant problems are and we
    come in and we focus on those areas, that is where we get the
    greatest benefits.
        And where we apply a suite of conservation practices, as
    opposed to an individual conservation practice, we get greater
    and greater benefits. So we are constantly evaluating this,
    amending how we apply conservation practices, and I think we
    are seeing some very strong and good results.
        Senator Klobuchar. Very good. My last question. Mr.
    Sherman, you also discussed the efforts within the Forest
    Service to improve the integrity of environmental reviews and
    reducing the cost of litigation that the Government faces. How
    do you believe that this initiative will work to help focus
    resources on conservation goals and not courtroom legal
    battles?
        Mr. Sherman. We are very focused with the Forest Service on
    working with our partners in the field, that is with
    communities, with stakeholders, and so forth through
    collaborative efforts. So hopefully, we can arrive at a
    consensus on what is the best way to do restoration.
        We are also very focused on improving the ways in which we
    conduct our need for reviews. We have projects now with the
    Council on Environmental Quality to explore how could we do
    more focused NEPA work, how can we have shorter environmental
    assessments, how can we take programmatic EISs and apply them
    in a way that we can work efficiently on forest restoration
    projects?
        All of these things are helpful and our hope is that we can
    take money that we are spending on environmental reviews and on
    litigation and shift that over to on-the-ground successful work
    in the forests.
        Senator Klobuchar. On the trees and not the legal fees?
        Mr. Sherman. Exactly. Well said.
        Senator Klobuchar. A little rhyme for you. I thought you
    would like that.
        Mr. Sherman. Thank you.
        Senator Klobuchar. Well, anyway, give my greetings to
    Secretary Vilsack, tell him we have been working very hard to
    try to work out this biofuels issue. It is incredibly important
    to the Midwest and also to the deficit reduction, because if we
    can work it out, it could be a win-win to everyone. I am going
    to tell him you guys did not get the memo about seersucker suit
    days.
        [Laughter.]
        Chairwoman Stabenow. Thank you very much, Senator
    Klobuchar, and thank you for your leadership, and I share your
    desire to be able to work this out in a way that makes sense
    for rural America and for jobs.
        As we close this panel, there are many more questions that
    we have that we are going to be submitting to each of you,
    questions regarding areas of where we can consolidate programs.
    We have very important programs that meet very important needs
    for farmers, for communities, for families.
        But, for instance, we have some 20 different conservation
    programs. Do we need 20? Can we create efficiencies? Can we do
    things better in terms of streamlining? And I know that is
    something that you are focused on, but we want to know more
    about that.
        Rural development, 40 different programs. Do we need 40?
    Can we bring them together? Can we create more efficiencies? I
    would suggest that we can, and yet meet some things that are
    incredibly important. Every community outside the major cities
    of Michigan is impacted and needs an effective rural
    development program.
        But we will be following up with you in each of these areas
    as we look at what is being done to combine the acreage
    reporting and data. We know that as you are working on making
    sure that farmers only have to report once, what else can we
    do, as you have talked about, Mr. Scuse, so that--those are the
    kinds of things that we are going to be deeply involved in with
    each of you and, of course, Mr. Concannon, we will continue to
    work with you on that, and Dr. Leonard as well.
        We have very specific questions that we will be asking you
    to respond to. In this time of stretching every dollar, being
    as efficient as possible, cutting out the paperwork, making
    things work, we will look forward as we move forward on the
    Farm Bill and as we explore each area, you will be back, of
    course, with us, which we appreciate as we go in- depth into
    each of the areas you are involved in.
        But this is important work and I want to commend the
    Department in the areas of improvement we have seen based on
    your work and based on the reforms in the 2008 Farm Bill and
    the Secretary's leadership, and we very much appreciate the
    direction in which we are going.
        We think we can do more and we are looking forward to
    working with you as we do, in fact, continue to push ahead on
    ways that we can streamline and create more efficiencies and
    effectiveness in the programs. So thank you very much for being
    with us.
        We will ask our next panel to come forward.
        Well, good morning and thank you very much for your
    patience and for joining us today. Senator Roberts will be
    coming back to join us, as I believe other colleagues will as
    well. So let me introduce our three distinguished members of
    the panel.
        I am pleased to introduce today first Phyllis Fong who is
    the Inspector General at the U.S. Department of Agriculture
    where she promotes USDA efficiency and effectiveness and
    tackles waste, fraud, and abuse, and we appreciate your
    leadership in this important area.
        Prior to her post at USDA, she served as Inspector General
    for the U.S. Small Business Administration and was also elected
    the first Chair of the Council of Inspectors General on
    Integrity and Efficiency.
        Brett Blankenship, welcome. Farms over 10,000 acres of
    spring and winter wheat in Washington. He is the President of
    the Washington Association of Wheat Growers and was a former
    President of the Washington Grain Alliance. And we are so
    pleased to have you here today.
        And Ms. Masouda--I am going to make sure I am doing this
    right--Masouda--am I correct? Masouda Omar?
        Ms. Omar. That is correct.
        Chairwoman Stabenow. Okay, thank you. Is the Manager of
    Business Finance Loan Production at the Colorado Housing and
    Finance Authority in Denver. She works with small businesses on
    a daily basis underwriting loan requests and marketing business
    finance products to a wide variety of partners statewide, and
    we very much appreciate your expertise and experience in being
    here today with us as well. We will start with Ms. Fong.
    Welcome.

     STATEMENT OF PHYLLIS FONG, INSPECTOR GENERAL, U.S. DEPARTMENT
                     OF AGRICULTURE, WASHINGTON, DC

        Ms. Fong. Thank you, Madam Chairwoman and members of the
    Committee. We appreciate the opportunity to be here today to
    testify about our oversight work to help the effectiveness and
    delivery of USDA programs. You have my full written statement
    so I will just offer some brief comments on our work as it
    relates to the subject of the hearing.
        And very briefly, we believe that our audits and
    investigations help USDA, first of all, strengthen
    communication and coordination in its programs; secondly,
    address improper payments; and third, increase program control
    and integrity.
        As you all know, the IG's mission is to help USDA deliver
    its programs as effectively as possible, and the way we do this
    is by performing audits to determine if a program is
    functioning as intended, if payments are reaching the right
    people, and if funds are achieving their intended purpose. We
    also conduct investigations of people who may be abusing the
    programs, and these investigations can result in fines,
    imprisonment, or agency administrative actions.
        So let me spend a moment on communication and coordination
    and the need for stronger coordination between USDA programs.
    Several agencies within the Department provide payments to
    producers for programs that may have interlocking or
    complementary missions, for example, insurance payments for
    crop losses and disaster assistance payments as well.
        And we believe in our work that it is critical that RMA,
    FSA, and RCS work together to create a cohesive integrated
    system of program administration and data. This type of
    coordination is equally important in areas where USDA must work
    with other Federal, state, and local agencies, and with foreign
    countries, for example, in the areas of food safety inspection
    and global trade export programs. My statement gives examples
    of this in the areas of suspension and debarment, the Food
    Emergency Response Network, and the Invasive Species Program.
        Turning to the topic of improper payments, our work in this
    area is intended to save taxpayers money by ensuring that
    programs deliver the correct benefits in the right amounts to
    the right people. We have released a number of reports this
    past year that talk about different aspects of these issues.
        We have looked at FNS's report on improper payment rates in
    the SNAP program. We have also looked at NRCS's Conservation
    Security Program and RD's Single Family Housing Guarantee
    Program. And in all of those programs, we found that the
    Department had made progress, but could also make further
    progress.
        And finally, our investigations of fraud in USDA programs
    had identified many instances where individuals improperly
    received payments to which they are not entitled, and my
    testimony gives examples of that in the SNAP, Child and Adult
    Food Care, and WIC programs.
        So finally, let me say a few words about program control
    and integrity. Our work in this area is designed to help USDA
    managers strengthen program administration. Examples of this
    kind of work include our review of the BCAP program. We did an
    audit of loan collateral in FSA's Direct Loan Program, and we
    currently have work ongoing in the Civil Rights Program.
        Our investigations in this area can address issues of
    employee integrity and also cases involving false claims made
    by those doing business with USDA.
        So in conclusion, our office remains committed to helping
    USDA provide and deliver programs as effectively as
        possible. We look forward to working with this Committee on
    areas of mutual interest, particularly as you start to develop
    a new Farm Bill, and we would be very pleased to provide you
    with any assistance that we can based on our audit and
    investigative work. So thank you, and we welcome your
    questions.
        [The prepared statement of Ms. Fong can be found on page 57
    in the appendix.]
        Chairwoman Stabenow. Thank you very much. Mr. Blankenship,
    welcome again.

         STATEMENT OF BRETT BLANKENSHIP, BLANKENSHIP BROTHERS,
                         WASHTUCNA, WASHINGTON

        Mr. Blankenship. Thank you, Madam Chairwoman. I will also
    honor Ranking Member Roberts who is here in spirit, and members
    of the Committee as well. Thank you.
        As you introduced me, my name is Brett Blankenship. I am a
    farmer from Washtucna, Washington where I produce soft white
    winter wheat and dark northern spring and spring barley in a
    partnership with my brother, our wives, and my sister.
        As a matter of perspective, this places me in the center of
    the winter wheat growing region of the state of Washington, and
    the gateway to the famous Palous Region, which boasts of the
    highest dryland wheat yields in the world.
        As a state, we are averaging roughly six to five bushels
    per acre on approximately 2.3 million acres of wheat, and this
    places our state approximately fourth in wheat production in
    the United States. As we move forward toward serious
    consideration of the next Farm Bill, there are two other major
    components that are often left out of discussions like this.
        Yes, I am an American farmer, and I rely on the safety net
    aspects of the Farm Bill to produce crops. But I am also an
    American taxpayer and I also shop for groceries just like
    everyone else. So I commend you, Madam Chairwoman, for looking
    at the top of efficiency, just as we do on our farms.
        I will focus the remaining comments on my interactions with
    USDA, and perhaps offer some ideas that might help improve
    those. As background, my partnership operates in two counties,
    and I seem to be fortunate. We manage our interactions with
    USDA through one field office in the county seat of where I
    reside, and it has always been that way.
        I have had other growers complain that multiple counties
    offer them a lot of difficulty, but on my farm, we have been
    able to consolidate in one office and it has worked very well
    for us. I also interact with the NRCS office locally and, of
    course, our crop insurance provider.
        I am a participant in the ACRE program, Conservation
    Reserve Program, Conservation Security Program, and, of course,
    I carry CRC crop insurance. I was also able to participate in
    the SURE Program in 2008 and before--ancient history--
    participated in the DCP program as well.
        As Senator Roberts alluded to, the management time taken to
    coordinate all this often takes 25 percent of our time--not our
    time, but our management time. And I participate in various
    government and quasi-government programs and it is frustrating
    to have so many rules and procedures to comply with, but to
    complicate matters further, often these agencies seem to have
    trouble talking to each other or coordinating with each even
    when they are closer together in some of the buildings, as I am
    to the panel right now.
        My most common interaction is with FSA, and it is the
    easiest office to deal with and the personnel seems to be
    incredibly well-trained and familiar with the actual impact of
    changes to program eligibility, payment limit compliance, and
    they have been very helpful. They seem to have a culture of
    Congress has appropriated these programs, authorized these
    programs. It is our job to provide the service to deliver them
    to you in the best efficient manner possible.
        We also work with NRCS where staff seems to have a
    different culture or not as well trained on payment questions
    or eligibility requirements, and certainly not familiar with
    FSA programs. NRCS has had a different focus in the past
    delivering conservation on the ground. FSA has had their focus
    on administration of the programs. But with different program
    work and different time frames, this has the tendency to create
    some problems.
        I do not have much direct interaction with RMA, but our
    agents do and they often seem confused with changes in
    insurance programs. There also seems to be confusion in the
    proper way to report acreage and yields in a format that
    transfers easily to SURE eligibility.
        We also, of course, work with bankers who largely do not
    have a good understanding of farm programs, other than the
    knowledge that those programs cover their risks as they loan us
    operating money. And to me, that is an important point in the
    Farm Bill debate, is the safety net programs help us secure
    operating capital to minimize our risks.
        All in all, I would say we make ten separate trips of
    several hours each to our FSA office for sign-ups,
    certification of acreage, CRP status checks, SURE eligibility
    questions, and returning paperwork once it is properly
    collected. As an aside, I will also add that that does not
    count if I am called in for an audit, as Ms. Fong alluded to.
        We often have so-called random audits, and unfortunately, I
    seem to get in a random audit almost every year. I do not know
    how it can be random if my name comes up. But that has been one
    of my frustrations. Even the county executive will say, Were
    you not just in here? So it has been an unusual situation.
        So it is no surprise in a rapidly changing agricultural
    economy that we adopt the new technology out in the field quite
    readily. We have adopted computers, data sheets, and readily
    adhere to GPS systems to increase our accuracy, and field
    mapping.
        And it would be wonderful to be able to coordinate that
    better with the agencies that we interact with, rather than
    adding things manually. But my FSA office has eliminated a
    large amount of frustration, declaring planted acreage and
    compliance issues because of the GPS maps that they have
    implemented in Washington, and that has increased our accuracy
    and we are able to use that with ACRE, CRP, CSPN crop
    insurance. However, it took several seasons to work out some of
    the kinks.
        One of the frustrations that can often be traced to the
    SURE program, but it is very difficult to explain why those
    numbers do not seem to line up and why they cannot be
    corrected, because if someone somewhere along the way does not
    fill a form out properly, it throws a wrench into the
    machinery.
        The two major conservation programs which we participate in
    are the Conservation Reserve and the CSP handled by the
    different USDA agencies with dramatically different
    administration experience. Personally, I appreciate the way CRP
    is administered because the agency with the strength in
    administration, Farm Service Agency, relies on the agency with
    their expertise in conservation, NRCS for technical advice and
    compliance, but it is administered with FSA. That has worked
    very well for us.
        Since the implementation of ACRE and SURE, there have been
    several comments about overlap or duplication. I have not found
    that to be the case, not on our farm, because we depend on the
    three different facets of the farm safety net for different
    areas of risk. But often, the interactions and paperwork can
    create the frustration.
        But finally, I would like to just say generally, it would
    be my personal opinion that rules for all Federal programs in
    this nature ought to be the same, and if the program is there
    to support my business's activity, then no matter what agency
    is administering it, the rules ought to apply the same.
        So you can see that the business of being in agriculture
    anymore is not just about cultivating or tending or harvesting
    a crop. It is also protecting the enormous risk and we depend
    on the programs you help us implement to do that. So thank you
    for the opportunity to address you.
        [The prepared statement of Mr. Blankenship can be found on
    page 49 in the appendix.]
        Chairwoman Stabenow. Thank you very much. We appreciate it.
    Ms. Omar, welcome.

      STATEMENT OF MASOUDA OMAR, MANAGER OF BUSINESS FINANCE LOAN
      PRODUCTION, COLORADO HOUSING AND FINANCE AUTHORITY, DENVER,
                                COLORADO

        Ms. Omar. Thank you, Chairwoman Stabenow and members of the
    Committee, thank you for the opportunity to speak with you
    today. It is a privilege to come before you to discuss several
    of rural development programs authorized in the Farm Bill, and
    how Colorado Housing and Finance Authority has utilized these
    programs to support economic development in our state.
        Colorado Housing and Finance Authority, also known as CHFA,
    is a quasi-governmental entity created by the Colorado General
    Assembly in 1973 to increase the availability of affordable
    housing in the state.
        In 1982, the Colorado General Assembly expanded CHFA's
    mission to include business finance for the purpose of
    providing access to capital for economic development across
    Colorado. So it is CHFA's economic development mission that I
    will direct my comments to today.
        CHFA works in partnership with local and regional economic
    development agencies as well as large and small lenders in the
    state to finance business activities. We primarily support real
    estate and equipment purchases for existing businesses to
    expand or improve their operations, and we do this by offering
    fully-amortized, fixed-rate mortgages with lower down payments
    requirements to allow that business to preserve cash and grow
    their operations.
        Since 1982, CHFA's business finance efforts have provided
    nearly $900 million in capital to over 2,200 businesses
    supporting over 37,000 jobs. Historically, over 50 percent of
    our small business loan production has occurred in rural areas
    of Colorado.
        So among CHFA's partners is the USDA Office of Rural
    Development. CHFA has utilized Rural Development programs to
    support our work in Colorado's non-metro areas. During this
    time, we have financed a number of small businesses and non-
    profit organizations using Rural Development's Business and
    Industry Loan Guarantee, and the Community Facilities Loan
    Guarantee, and the Intermediary Re-Lending Program.
        As part of CHFA's partnership with Rural Development, we
    rely heavily on the expertise of their regional offices. There
    are seven regional offices in Colorado, six of which are
    located in rural communities. These offices provide an
    essential service by acting as an intermediary between CHFA and
    the local businesses.
        They are also instrumental in ensuring smooth delivery of
    RD's programs statewide. Our work with the regional office
    really starts from the initial stages of structuring that
    financing, and even after that loan has closed, to help
    maintain a strong relationship with the borrower as we service
    these loans.
        In CHFA's experience, we have found that establishing trust
    with the rural customers is critical to ensuring a successful
    outcome. Rural communities take pride in conducting business
    with someone from the area who is known and reliable, and even
    though CHFA is a local entity with offices in Denver and Grand
    Junction, the day-to-day relationship that Rural Development
    regional offices provide is invaluable to us.
        Rural Development local offices serve as a one-stop shop
    that connect rural communities with resources that generate
    economic opportunities. They take on the responsibility of
    being familiar with other resources, ensuring that they serve
    as a conduit for the business to access help, even if it means
    going outside of RD's programs.
        CHFA's first experience in using Rural Development programs
    was through the Business and Industry Guaranteed Loan. The
    Business and Industry Guaranteed Loan allows CHFA to directly
    originate loans for small businesses. Similar to the SBA
    program, the Business and Industry is a loan guarantee.
        However, it is distinct from SBA in that it allows non-
    traditional lenders such as CHFA to participate. It is also a
    larger loan size than SBA's programs. An example of how CHFA
    was able to use this unique feature of the Business and
    Industry program, is the Durango and Silverton narrow gauge
    railroad.
        Using the Business and Industry program, CHFA was able to
    provide the railroad with a $16.5 million loan and long- term
    financing to replace short-term variable rate debt that was
    coming due. The $16.5 million loan would have exceeded SBA's
    maximum loan size. However, CHFA's ability to assist the
    railroad was an important economic development opportunity for
    our state.
        The railroad is a popular tourist attraction in southwest
    Colorado, attracting over 200,000 visitors to the Four Corners
    area. It provides jobs to over 200 people and is responsible
    for nearly $100 million in economic impact to the area. Small
    businesses such as the Durango and Silverton are the backbone
    of Colorado's economy. Tourism accounts for 25 percent of the
    economy in the Four Corners area, and the railroad is estimated
    to impact 16 percent of the total employment in those two
    communities.
        Another program that I will briefly mention is the
    Community Facilities Guarantee which, as you are aware, is
    similar to the Business and Industry Guarantee program, but it
    is used to finance non-profit organizations. To our knowledge,
    USDA is the only agency that guarantees loans to non-profits,
    which is critical to ensuring that these organizations have
    access to capital.
        Oftentimes, non-profits, due to a higher risk profile, have
    difficulties getting financing through traditional outlets,
    which is why the support through the Communities Facilities
    Program offers solutions to help lenders extend credit.
        Young Tracks Preschool and Child Care Center is an example
    of a project that CHFA financed using the Community Facility
    guarantee. This non-profit is located in Steamboat Springs,
    Colorado, a community of less than 10,000 people whose primary
    industry is tourism.
        Young Tracks was referred to CHFA by a local bank who was
    unable to provide the financing, so CHFA partnered with USDA
    who not only provided a community facility's loan guarantee,
    but also funded a direct loan together which provided the
    necessary dollars to build this new facility.
        Once the permanent financing was arranged, the local bank
    was also able to come in and reach a greater level of comfort
    and provided the borrower with an interim loan to fund the
    construction costs. And this facility has greatly enhanced
    Young Tracks' ability to serve the community. It has allowed
    them to add a new infant care program that was previously not
    available, as well as expanded classroom capacity for their
    programs.
        And still today, they are the only infant/toddler care
    program open to the public for a 27-mile radius. There are
    nearly 100 children enrolled there in their services and their
    clients are primarily low and moderate income households.
        In the interest of time, I am not going to go into some of
    the other remarks. You do have a written copy of my testimony,
    but the other program that I will briefly mention is the
    Intermediary Re-Lending Program, or the IRP program, that also
    benefits rural communities where lenders such as CHFA can
    borrow funds from USDA at a low interest rate and turn around
    and re-lend it to very remote areas of Colorado.
        And we have used these funds to provide low-interest rate
    loans to communities with greatest need based on their level of
    out migration, unemployment, and poverty rates.
        So as you can see, Rural Development programs are valuable
    to Colorado; as such, ensuring their ongoing and efficient
    delivery is critical.
        So thank you again, Chairwoman Stabenow and members of the
    Committee for allowing me to speak with you today. I applaud
    your leadership as you continue your work to support our
    nation's rural communities, and I look forward to answering any
    questions.
        [The prepared statement of Ms. Omar can be found on page 74
    in the appendix.]
        Chairwoman Stabenow. Thank you very much, and thank you to
    all of you.
        Mr. Blankenship, let me ask first, again talking about
    paperwork, I think paperwork is always a very significant
    frustration for farmers who have a lot of work to do and do not
    need to be spending all their time, as you talked about,
    filling out a lot of forms.
        So when you look at the greatest need for streamlining and
    really cleaning up the bureaucracy and the red tape and dealing
    with USDA agencies, you spoke about a number of things, but
    what do you think is the most important area for us to focus on
    from your perspective?
        Mr. Blankenship. I would like to see some kind of
    standardization of the information that is needed that could be
    used in the various different portals among the agencies. It is
    the duplication, and, unfortunately, the culture we have
    created in enforcement or trying to make sure that the right
    folks are getting the right payments, rather than delivering
    the service.
        Sometimes employees have viewed themselves as the great
    defenders of the Federal treasury, and somehow we need to find
    that sweet spot of delivering the service and being responsible
    and accountable as well.
        Chairwoman Stabenow. What is your experience in dealing
    with the technological capabilities of the Department? We have
    heard a lot today on our first panel about improvements in a
    number of areas because of technology. Do you see that, in your
    end? What is the interaction in terms of the use of technology,
    or what could be done better as including technology?
        Mr. Blankenship. My experience is things have gotten a lot
    better. I remember going through programs sign-up before, as a
    much younger person, and we would have to haul out all the maps
    and count all the acres of the fields and measure them
    manually. And it literally took all day.
        And we have recently added the GPS maps at the local
    office, and now that that is reasonably standardized, we know
    how many acres are out there now, as long as no changes have
    happened. It would be nicer to be able to submit a lot of that
    electronically. That would be, of course, the next step.
    Without going into greater detail, that would be a good start,
    standardization.
        Chairwoman Stabenow. Great. Thank you very much. This is an
    area of great interest, I think, to us.
        Ms. Fong, last week your office issued a report detailing
    its fraud prevention efforts in programs under your
    jurisdiction, including the food assistance programs, and there
    were some impressive numbers in terms of what has happened in
    the last six months.
        We have heard 516 arrests for $47.8 million given back to
    taxpayers. And, in fact, in Michigan, I want to congratulate
    you, the OIG, working with the Lansing Police Department, just
    identified a major fraud case at a storefront, J&K General
    Store, and thanks to the record- keeping technology and the
    data analysis, you were able to work in a way to recover half a
    million dollars.
        And so, we appreciate that. I have now seen that up close,
    what you are doing, and how effective it is. But I am
    wondering, as we look at what was given to you in the 2008 Farm
    Bill in terms of new authorities and investments and so on, if
    you could talk a little bit more about what has happened in
    terms of improving efforts to combat fraud and abuse, and what
    we can continue to do to keep a good record going.
        Ms. Fong. Well, thank you, Madam Chairwoman, for your
    comments and we appreciate your support on all of the work that
    we are doing across the board, especially in the SNAP program.
    And as you pointed out, we work very closely with FNS and with
    the state and local jurisdictions to find instances where there
    are problems and to go after them.
        We believe that that relationship is so essential, to have
    very close working relationships with the Department of
    Justice, state and local enforcement, and FNS as well, because
    we all approach these issues from our own perspectives, and
    they tend to reinforce each other.
        And to address your question about the Farm Bill of '08, we
    have been working with FNS. There are a number of provisions in
    there to strengthen the SNAP program. We realize that they have
    just issued a proposed rulemaking that will change some of the
    definitions of trafficking and will give us the ability to
    really pursue some of the instances that involve retailers as
    well as individual recipients. So we think those provisions are
    very helpful.
        Chairwoman Stabenow. And just as a quick follow-up and a
    clarification and a comment in your testimony. If an individual
    is caught trafficking SNAP benefits, what happens to their
    ability to get future benefits from any Federal Government
    program?
        Ms. Fong. Well, that is a very good question. Generally,
    when an individual is found to have improperly trafficked or
    improperly used their benefits, they would be subject to
    prosecution by state and local authorities, and if they are
    convicted, then their eligibility, I think, would be very much
    impaired, shall we say.
        Chairwoman Stabenow. True, in my experience, at least in
    situations we have been involved with, they would just be
    eliminated from eligibility. Is that your understanding?
        Ms. Fong. That is my understanding, that a conviction of
    criminal conduct would make them ineligible.
        Chairwoman Stabenow. Okay. I would certainly hope so.
        Ms. Fong. Yes, exactly.
        Chairwoman Stabenow. If there is a concern there, please
    let us know. But that is my understanding. Please follow up and
    make sure, because that is my understanding, and I am assuming
    unless otherwise if that is the case, if you could let us know.
        I would like to turn now to our Ranking Member, Senator
    Roberts.
        Senator Roberts. Thank you, Madam Chairwoman. Mr.
    Blankenship, there is an awful lot of information out there on
    the Web. My staff is in a continual re-education effort to try
    to get me up to speed. I know it is out there. I just cannot
    find it.
        Are you able to find a lot of the forms, the information
    that you need online? It may be online, but are you able to get
    in a situation where you think you can rapidly find these
    things? Are you simply utilizing the online forms and resources
    that people talk about that are available. Are they available?
        Mr. Blankenship. They may be available, Senator, if you can
    wade through the pages to get to them. But we have found it
    just as easy, since my business partner lives not too far from
    the service agency office, we have just found it easier just to
    go in and then you have the same one there looking for----
        Senator Roberts. So basically you ask Mabel, Will you help
    me?
        Mr. Blankenship. That seems to work the best for us.
        Senator Roberts. I see. I wish you could do it online, but
    I empathize with your situation. I just have another question
    here. You note in your testimony that Farm Bill programs help
    producers obtain their operating capital from the banking
    community. That is an obvious statement.
        Are there specific programs that are more important to
    banks than other programs, in your view? Do banks ask you what
    level of crop insurance you purchase or how much you will
    receive in direct payments. Something that has been discussed a
    lot around here. Do they ask you if you have signed up for
    ACRE? What do they ask you?
        Mr. Blankenship. When I submit my financing budget and my
    plan for the year, they know what line to look for, for either
    the direct payment or the ACRE payment, as the case may be. I
    am in ACRE, so they are looking for that line, and it is very
    important to them.
        The next question is, since they know I am a policy guy,
    they ask me, Where do you think the next Farm Bill is going?
    And then the third question is, Do you have CRC?
        Senator Roberts. I think you are right. The next Farm Bill
    is going. That was very clever of you to turn that right back
    on us, and I wish we knew. Both the Chairwoman and I, we have
    no other higher priority than to try to do the best we can to
    preserve that safety net that that bank asks you. Otherwise,
    you are not going to get your loan that you depend on. What
    about crop insurance? You did not mention that one.
        Mr. Blankenship. I am a participant in CRC. They certainly
    want me to participate in that, to preserve their exposure, and
    my assumptions in financial receipts, CRC does help me cover
    that risk.
        Senator Roberts. So you have got some crop insurance and
    direct payments and ACRE?
        Mr. Blankenship. Yes.
        Senator Roberts. Those are the big three?
        Mr. Blankenship. Yes.
        Senator Roberts. I appreciate that. Thank you.
        Chairwoman Stabenow. Thank you very much. Senator Bennet.
        Senator Bennet. Madam Chair, thank you for holding this
    important hearing, and also thank you for having two Coloradans
    testify and three Coloradans visit. Harris Sherman, who
    testified on the first panel, who used to be our Director of
    Natural Resources in Colorado and has been dedicated to our
    natural resources in particular, fighting the Bark Beetle
    infestation that we have had. It has been very, very important
    to the state.
        And Masouda Omar and Steve Johnson, who are here, the
    Colorado Housing and Finance Authority who have done such great
    work at the local level, and I appreciate your recognition of
    the quality of folks in Colorado by having everybody here.
        Ms. Omar, not the purpose of this testimony, but you
    mentioned the Durango-Silverton Railroad, and I drive by that
    regularly. And I often think, Madam Chair, about the people
    that built that railroad and the people that built the road
    next to that railroad. I blew two tires out on the minivan the
    last time I was on it because of a rock slide. Still very
    treacherous.
        But the cooperation between the private sector and the
    Federal Government that made those things possible, that
    allowed one generation to build something that even now is
    making a huge economic contribution to our state, I think their
    memory is something that we would do well to think about as we
    have the debates that we are having here and trying to drive
    this country forward and build for the next generation.
        But to come to the purpose of today's hearing, I wanted to
    ask Ms. Omar a couple of questions. Thanks for coming all the
    way out here. There was discussion earlier today in reference
    to a GAO study that identified significant duplications in
    Federal economic development programs. I wondered whether, from
    your vantage point, you see duplication? And also, if you could
    talk a little bit more about your interactions with the SBA
    versus USDA and how we should think about that?
        Ms. Omar. Thank you, Senator Bennet. Yes, my experiences
    with USDA is primarily with the Community Facilities, the
    Business and Industry, and then the IRP program. And I can tell
    you that those programs are very distinct and serve very
    different purposes than the SBA program.
        The Community Facility program is the only--to my
    knowledge, it is the only loan guarantee for non-profits, and
    when you have a local non-profit in a rural community, access
    to capital is very difficult. And so these programs serve a
    very important purpose.
        If anything, in terms of improvements to programs, we would
    like to be able to see Federal programs working together,
    greater collaboration, and one program that I will briefly
    mention is the New Markets Tax Credit Program, which is a tax
    credit program that was designed back in 2000.
        And we have some tax credits available in rural areas, and
    it would be nice to be able to combine a USDA guarantee or a
    loan through the New Market Tax Credit structure to be able to
    finance projects in rural communities and very high distressed
    communities within rural areas of our state.
        Senator Bennet. Thank you. I also wanted to follow up on
    the Ranking Member's questions about paperwork with you. You
    have been working for years with Rural Development programs,
    and I know you are familiar with the paperwork. I have heard
    from Coloradans, more than I could possibly represent well
    today, who are so frustrated with the paperwork process for
    everything, from water to business programs.
        I wanted to ask you, if you were going through the USDA RD
    avocation process for the first time, would it be self-
    explanatory to you, do you think?
        Ms. Omar. You know, that is a great question. Yes. We have
    worked with--we have done a number of transactions with, as you
    know, with USDA, and obviously the first time, when you are
    working on a new program or working trying to put together a
    guarantee program, we do look to work closely with the local
    office and help guide us through the process, and they have
    been very helpful.
        The programs or the projects that we have financed, they
    tend to be larger transactions that do require additional due
    diligence. So the way I communicate those expectations to my
    borrowers is that oftentimes, when you are buying that piece of
    real estate, it is the largest investment that company is
    making in their business. And so, we do want to do a little bit
    of additional due diligence, make sure that that asset is a
    quality asset that is being put on their balance sheet.
        But again, in our experience, the USDA staff has been
    available to walk us through the process, answer any questions
    that we might have. Like I said, this is typical with other
    programs that we work with. There is just a little bit more due
    diligence involved.
        Senator Bennet. I would like to see how we might be able to
    streamline some of that because there is a recurrent theme that
    we hear. But I will be after you for your ideas about that.
    Thank you. Thank you, Madam Chair.
        Chairwoman Stabenow. Thank you very much, Senator Bennet.
    This is exactly why we wanted to hold the hearing today, is to
    be able to begin to have that discussion about how we can
    streamline and consolidate and do effectively what needs to be
    done, and there are very important things done through the
    Department of Agriculture for communities, for farmers, for
    families, for ranchers, foresters.
        But there are a lot of ways in which we can streamline and
    do a better job. So that is the reason for the hearing and we
    very much appreciate it. As we come to the close, let me just
    indicate again that we have held the hearing today to make sure
    that there is accountability in the administration of Farm Bill
    programs.
        We need to be confident that we are sound stewards of
    limited taxpayer dollars and that we are cracking down on any
    fraud and abuse that is in these important programs. So we are
    going to be asking a lot of questions as we go forward, and to
    each of our witnesses today, we are going to be asking you to
    continue to be involved with us as we focus on all of these
    areas.
        Have we provided the right tools and invested in an effort
    to catch those who would abuse the systems and, in fact, are we
    catching them? How can we continue to do that? Are we cutting
    down on inefficiencies and waste that lead to mistakes or cause
    frustration by those who use the programs? What can we do to
    consolidate? What can we do to be more effective and efficient?
        I think today it is important to note that the hearing has
    demonstrated that fraud and abuse are not rampant or out of
    control, but we also know that we need to stay focused and that
    we need to look for continual improvement, and that is really
    the job of this Committee.
        We have provided the tools to catch those who would commit
    fraud, and small investments appear to be having major benefits
    as we look to address those issues, all of which are saving
    taxpayer dollars.
        I think it would also serve as an important reminder to
    those who are focused on cutting budgets and spending, that
    misguided cuts can lead to more waste, fraud, and abuse and
    damage the agencies' ability to crackdown on those who abuse
    the programs, and bring them to justice.
        In other words, unwise cuts can lead to more wasteful
    spending. And so, I think we need to be very smart about how we
    are doing things going forward, and that is something we take
    very seriously.
        And finally, I think we have areas where we clearly can
    work to cut down on duplication and unnecessary complexity in a
    whole range of areas so that programs are easier to understand,
    administer, and use, while also improving our ability to ensure
    better accountability. I think it would be our Ranking Member's
    and mine goal, some day to see one form. Our farmers would have
    to fill out one form to be able to know what they qualify for
    and what their options are and so on. We will work towards that
    goal, certainly.
        So we look forward to working with the Department and with
    all of our colleagues, with all of you. We appreciate, Ms.
    Fong, your efforts, and I continue to applaud and encourage you
    in your very important efforts.
        Mr. Blankenship, we hope that we are going to be able to
    address some of those issues that you have raised that are
    frustration to you as you work to be successful for your family
    on your family farm, and we congratulate you for being here.
        Ms. Omar, the same for you. What is done with Rural
    Development programs is incredibly important and we want to see
    what we can do to more effectively give you the tools, or at
    least streamline the process for you to be able to meet the
    needs of communities, both in Colorado, but all over the
    country.
        So thank you very much to everyone. The meeting is
    adjourned.
        [Whereupon, at 11:55 a.m., the hearing was adjourned.]

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                                A P P E N D I X

                                 JUNE 23, 2011

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                       DOCUMENTS SUBMITTED FOR THE RECORD

                                 JUNE 23, 2011

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                             QUESTIONS AND ANSWERS

                                 JUNE 23, 2011

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