[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 

                RELATED AGENCIES APPROPRIATIONS FOR 2014
_______________________________________________________________________



                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS

                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                  ROBERT B. ADERHOLT, Alabama, Chairman
 TOM LATHAM, Iowa
 ALAN NUNNELEE, Mississippi
 KEVIN YODER, Kansas
 JEFF FORTENBERRY, Nebraska
 THOMAS J. ROONEY, Florida
 DAVID G. VALADAO, California       SAM FARR, California
                                    ROSA L. DeLAURO, Connecticut
                                    SANFORD D. BISHOP, Jr., Georgia
                                    CHELLIE PINGREE, Maine

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Martin Delgado, Tom O'Brien, Betsy Bina,
                     Pam Miller, and Andrew Cooper,
                            Staff Assistants
                                ________

                                 PART 2
                                                                   Page
 USDA Food Safety and Inspection Service..........................    1
 USDA Food and Nutrition Service..................................   83
 USDA Inspector General...........................................  267





                  U.S. GOVERNMENT PRINTING OFFICE
82-566                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001




                     COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\
 FRANK R. WOLF, Virginia
 JACK KINGSTON, Georgia
 RODNEY P. FRELINGHUYSEN, New Jersey
 TOM LATHAM, Iowa
 ROBERT B. ADERHOLT, Alabama
 KAY GRANGER, Texas
 MICHAEL K. SIMPSON, Idaho
 JOHN ABNEY CULBERSON, Texas
 ANDER CRENSHAW, Florida
 JOHN R. CARTER, Texas
 RODNEY ALEXANDER, Louisiana
 KEN CALVERT, California
 JO BONNER, Alabama
 TOM COLE, Oklahoma
 MARIO DIAZ-BALART, Florida
 CHARLES W. DENT, Pennsylvania
 TOM GRAVES, Georgia
 KEVIN YODER, Kansas
 STEVE WOMACK, Arkansas
 ALAN NUNNELEE, Mississippi
 JEFF FORTENBERRY, Nebraska
 THOMAS J. ROONEY, Florida
 CHARLES J. FLEISCHMANN, Tennessee
 JAIME HERRERA BEUTLER, Washington
 DAVID P. JOYCE, Ohio
 DAVID G. VALADAO, California
 ANDY HARRIS, Maryland
   
 ----------
 1}}Chairman Emeritus    NITA M. LOWEY, New York
                                    MARCY KAPTUR, Ohio
                                    PETER J. VISCLOSKY, Indiana
                                    JOSE E. SERRANO, New York
                                    ROSA L. DeLAURO, Connecticut
                                    JAMES P. MORAN, Virginia
                                    ED PASTOR, Arizona
                                    DAVID E. PRICE, North Carolina
                                    LUCILLE ROYBAL-ALLARD, California
                                    SAM FARR, California
                                    CHAKA FATTAH, Pennsylvania
                                    SANFORD D. BISHOP, Jr., Georgia
                                    BARBARA LEE, California
                                    ADAM B. SCHIFF, California
                                    MICHAEL M. HONDA, California
                                    BETTY McCOLLUM, Minnesota
                                    TIM RYAN, Ohio
                                    DEBBIE WASSERMAN SCHULTZ, Florida
                                    HENRY CUELLAR, Texas
                                    CHELLIE PINGREE, Maine
                                    MIKE QUIGLEY, Illinois
                                    WILLIAM L. OWENS, New York

               William E. Smith, Clerk and Staff Director

                                  (ii)


   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 

                RELATED AGENCIES APPROPRIATIONS FOR 2014

                              ----------                              

                                         Wednesday, March 13, 2013.

                       DEPARTMENT OF AGRICULTURE
                   FOOD SAFETY AND INSPECTION SERVICE

                               WITNESSES

ELISABETH HAGEN, UNDER SECRETARY, FOOD SAFETY, UNITED STATES DEPARTMENT 
    OF AGRICULTURE
ALFRED V. ALMANZA, ADMINISTRATOR, FOOD SAFETY AND INSPECTION SERVICE

                       Introduction of Witnesses

    Mr. Aderholt. Good morning. I want to welcome all the 
members of the subcommittee to the first of several hearings 
that we will conduct oversight for the agency and programs 
under our jurisdiction of this Subcommittee. I want to 
emphasize that I look forward to working with each and every 
member of the subcommittee as we move through our hearings, and 
then into this year's appropriations process later on in the 
spring.
    The USDA's Food Safety and Inspection Service work to 
ensure that our nation's supply of meat, poultry, and processed 
eggs are safe, wholesome, and correctly packaged and labeled. I 
want to welcome back to the subcommittee Dr. Elisabeth Hagen, 
USDA's Under Secretary for Food Safety, and Mr. Al Almanza, the 
administrator for the Food Safety and Inspection Service.

                           Opening Statement

    When we have had you before this Subcommittee in the past, 
it has been to review the President's budget request for the 
Food Safety and Inspection Service. The President has indicated 
that his budget submission is late and may not be delivered 
until April the 8th. Having said that, we still have oversight 
responsibilities to carry out. And given the state of play on 
current budget issues, we are in a position to discuss with our 
panel the activities of the Food Safety and Inspection Service.
    Dr. Hagen, the work that you and all the men and women of 
FSIS perform on a daily basis on the behalf of consumers and 
taxpayers is unquestionably some of the most important work of 
the Federal Government across the spectrum.
    Mr. Almanza, you started as an inspector, so you have seen 
firsthand the importance of the work that FSIS performs. I want 
to thank both of you for your work, for all the FSIS employees, 
their work that keeps the nation's food supply safe and 
wholesome.
    At this time I would like to recognize the ranking member, 
Mr. Farr, and see if you have any opening comments.
    Mr. Farr. Well, thank you very much, Mr. Chairman. 
Congratulations on your chairmanship and your first reign of 
this Committee, we look forward to these hearings.
    We are all faced with sequestration. We are having a lot of 
questions about it. I guess the real impact I would like to 
hear you tell us is what needs to be done to give you a little 
more flexibility. Will that happen? I know that 80 percent of 
the cut is in salaries. I mean 80 percent of your budget is 
salaries and benefits. So you do not have a lot of wiggle room. 
But is there anything Congress can do--we have just given a lot 
of wiggle room to the Defense Department, and we ought to be 
able to give some room to the Ag Department, particularly for 
first responders, which is what your ag inspectors, meat 
inspectors, poultry inspectors, are.
    So, everybody is saying you have to live with this 
sequestration, however, it is just a decision. That is a wrong 
decision. We made it and we can change it. So if you have some 
ideas of how we can improve it, I would appreciate that. That 
is all.
    Mr. Aderholt. Thank you. Under Secretary Hagen, before I 
turn the microphone over to you, I would like to say there is a 
lot of debate surrounding sequestration, as Mr. Farr had just 
mentioned. I do not agree with the position that the Secretary 
staked out on the issue as he has been traveling across the 
country. And FSIS budget has increased by nearly $75 million 
since 2008 to over $1 billion. And while I realize this is a 
salary-intense agency, I hope that there is a reasonable and 
responsible way to meet the challenges of sequestration, while 
at the same time minimizing the impact on frontline inspectors 
and the industry alike.
    With that, I will turn it over to you, Dr. Hagen, and then 
to Administrator Almanza. And so, without objection, the text 
of your full statements will be included in the record. Dr. 
Hagen.

                           Opening Statement

    Ms. Hagen. Thank you. Mr. Chairman, Ranking Member Farr, 
and members of the subcommittee, I am Dr. Elisabeth Hagen, 
Under Secretary for Food Safety. With me today is Al Almanza, 
the Administrator for USDA's Food Safety and Inspection 
Service. We thank you for the opportunity to discuss the 
agency's policies and programs.
    When I appeared before this Subcommittee last March, I 
discussed the FSIS strategic plan, which set specific goals for 
fiscal year 2011 through 2016, including annual benchmarks for 
reducing illnesses from meat and poultry. However, before 
highlighting some of our progress, I would like to outline our 
efforts to mitigate the effects of sequestration on consumers, 
industry, and the regulated industry and employees.
    Although the final funding levels for fiscal year 2013 are 
not yet determined, the projected FSIS sequestration amount is 
estimated to be $52.8 million, based on OMB assumptions. By 
law, FSIS is required to examine and inspect all livestock and 
poultry slaughtered and processed for food. At the end of 
fiscal year 2012, our frontline team included more than 8,600 
dedicated employees and more than 6,200 establishments 
nationwide. Eighty percent of total FSIS funding is applied 
towards salaries and benefits, primarily for frontline 
personnel. An additional 15 percent is allocated to frontline 
travel, fixed support costs, and other inspection services.
    Given this formula, and given the advanced stage in the 
fiscal year, furloughs are unavoidable under a $52.8 million 
sequestration scenario. I would like to make clear that 
furloughs will affect all FSIS employees, not just inspectors. 
Furloughing only non-frontline personnel would not produce a 
large-enough cut to meet the sequester requirement. Therefore, 
the current plan is for an across-the-board furlough for all 
employees for 11 days. In order to minimize the impact on our 
employees and the marketplace, we intend to apply the furloughs 
on non-consecutive days, to the extent possible.
    USDA and FSIS have taken extraordinary measures to reduce 
expenditures, including big cuts in conference and travel 
spending. While these measures have produced noteworthy 
results, they simply are not enough to meet the sequester 
requirements.
    Despite funding challenges, FSIS continues to meet current 
and new statutory obligations. For example, we implemented an 
important part of the last farm bill when we signed our first 
cooperative interstate shipment agreement with Ohio last year 
and agreements with North Dakota and Wisconsin earlier this 
year.
    In addition to meeting our statutory obligations, we are 
always asking ourselves how we can better protect consumers. We 
know from CDC reporting that foodborne Salmonellosis rates have 
remained stagnant for years. And despite important steps and 
promising trends in FSIS data, Salmonella illness estimates 
from meat and poultry reflect this trend.
    These numbers tell us that we must better align our 
activities with risk in order to reduce illness burden. That is 
why, this past December, we set new requirements for 
establishments to reassess their HACCP plans for ground poultry 
products to account for several recent Salmonella outbreaks 
caused by these products. This action will improve companies' 
ability to identify hazards and better prevent illness.
    We are also developing a raw chicken parts baseline in 
order to collect data on the prevalence of key pathogens in the 
poultry products most commonly purchased by consumers.
    In order to better align our activities with identified 
risks, we have proposed to modernize poultry slaughter 
inspection in a way that focuses our inspection activities and 
our workforce on those things that matter most for public 
health protection. Currently, many FSIS plant personnel are 
focused on looking for visible defects, despite the fact that 
we know that it is the pathogens they cannot see that are the 
true risk to consumers.
    Under this new proposed system, FSIS would focus on 
critical food safety tasks. The tasks related to quality 
assurance would be turned over to the company. FSIS would 
continue to inspect every carcass, as required by law. We 
estimate that the new poultry inspection system would prevent 
at least 5,000 illnesses per year.
    The need for modernizing our food safety system is evident. 
As our scientific knowledge of what causes foodborne illness 
evolves, we must ensure that our regulatory tools correspond 
with that current knowledge. Our proposal will help the agency 
respond to these challenges with greater efficiency. We 
estimate that taxpayers will save approximately $90 million 
over the next 3 years, and that industry and consumers will 
enjoy a shared benefit of $250 million annually.
    The implementation of the Public Health Information System 
also provides us with another important tool to do our work 
better. This system supports a comprehensive, data-driven 
approach to inspection, allowing us to identify food safety 
threats more rapidly and more accurately.
    We must also ensure that our in-commerce activities best 
align with risk. For example, FSIS is developing a proposed 
rule to require retail operations to maintain accurate grinding 
records, which would greatly improve our ability to trace 
contaminated product from retail to its source.
    While our primary focus is ensuring that industry produces 
safe food, we can also prevent foodborne illness by 
collaborating with our federal and state partners and educating 
consumers. In this past year we have worked with federal 
partners and stakeholders on issues of pre-harvest food safety 
and consumer education, and we have sought opportunities to 
leverage resources when possible.
    In one visible example, FSIS, HHS, and the Ad Council have 
continued our work on the Food Safe Families campaign, which 
educates consumers about the risk of foodborne illness, and how 
to prevent it. For an investment of $2.8 million, the Ad 
Council has run a national, multi-media campaign worth an 
estimated $46 million.
    We are using many different tools to prevent foodborne 
illness in the most effective and efficient ways possible. 
Government can and should deliver more than people expect, and 
we are committed to doing so.
    Thank you for the opportunity to appear before you today, 
and we look forward to your questions.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.001
    
    [GRAPHIC] [TIFF OMITTED] 82566A.002
    
    [GRAPHIC] [TIFF OMITTED] 82566A.003
    
    [GRAPHIC] [TIFF OMITTED] 82566A.004
    
    [GRAPHIC] [TIFF OMITTED] 82566A.005
    
    [GRAPHIC] [TIFF OMITTED] 82566A.006
    
    Mr. Aderholt. Thank you. Mr. Almanza.
    Mr. Almanza. I do not have prepared remarks; I'll just 
submit them for the record.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.007
    
    [GRAPHIC] [TIFF OMITTED] 82566A.008
    
    [GRAPHIC] [TIFF OMITTED] 82566A.009
    
    [GRAPHIC] [TIFF OMITTED] 82566A.010
    
    [GRAPHIC] [TIFF OMITTED] 82566A.011
    
    [GRAPHIC] [TIFF OMITTED] 82566A.012
    
    [GRAPHIC] [TIFF OMITTED] 82566A.013
    
    [GRAPHIC] [TIFF OMITTED] 82566A.014
    
    [GRAPHIC] [TIFF OMITTED] 82566A.015
    
    Mr. Aderholt. We will proceed with the hearing under a 
five-minute rule. Members will be recognized for five minutes 
in order of seniority at the dais at the beginning of the 
hearing, and then in order of appearance, alternating between 
the majority and the minority.
    We may have several rounds of questioning to allow ample 
time for everyone. So I would ask that everyone in the room, if 
you do have an electronic device, if you could cut that off or 
put it on silent so that it will not disrupt the proceedings as 
we move through the Q&A.

                               FURLOUGHS

    I would like to cut through some of the rhetoric that has 
surrounded FSIS furlough issue, and really try to figure out 
what the whole story is here, as it relates to frontline 
employees and the mandatory work that they perform in order to 
assure, as you mentioned, that America's meat, poultry, and egg 
products continue to be the safest in the world.
    Secretary Vilsack traveled the countryside, telling folks 
that furloughs could last up to 15 days, that many of those 
dates would be consecutive, and the economic loss to the 
economy could be upward to $10 billion. More recently, however, 
the Secretary told the House Ag Committee on the authorizing 
side that the furloughs could now be 10 to 11 days.
    You are, of course, the under secretary for FSIS. Could you 
tell the subcommittee what your assessment of the furlough 
situation would be?
    Ms. Hagen. Mr. Chairman, at this point the correct answer 
is that we are looking at 11 days. Now, that number has some 
flexibility. As we look for continued opportunities to save 
money as we put hard hiring restrictions in place, it is 
certainly possible that we could see that number get a little 
bit smaller. But 11 days is what we are looking at here.
    Mr. Aderholt. Could you clarify for the committee? Will 
these furloughs be consecutive? Will they spread out over a 
period of time? And what is the period of time that you are 
anticipating these furloughs to occur.
    Ms. Hagen. Sure. Thank you, Mr. Chairman. At this point it 
is absolutely our intent to try to make these non-consecutive 
days. We want to minimize the impact on the marketplace, we 
want to minimize the impact on our employees. This is very 
difficult to absorb for anybody.
    And so, to the extent that we are able, we intend to spread 
these furlough days out over non-consecutive days. As we 
discussed when we met in your office, we do have some 
constraints when it comes to our collective bargaining 
agreements, requirements that we have in terms of 
notifications, in terms of the right to oral conferences, 
things like this, that put us in a bit of a different position 
than some other agencies. But at this point in time, that is 
what we are looking at: eight, hopefully non-consecutive days. 
And we think that this would likely start mid-summer some time.
    Mr. Aderholt. When a furlough day occurs, will the entire 
FSIS workforce who are anticipating in the furlough have to 
take the same day, or will you be able to manage furloughs in a 
responsible manner that will stagger USDA operation, and so 
that would minimize the impact?
    Ms. Hagen. At this point we are looking at furloughing 
everybody on the same days. We actually think that is the most 
responsible and we think it is the most equitable. It is hard, 
when you look at how integrated inspection is in this day and 
age, all the support that is required for frontline inspection, 
to think about furloughing administrative staff at a different 
time from frontline inspectors, or trying to roll the furloughs 
throughout the country, it is hard to think of how we would 
have an equitable impact on the regulated industry. If we were 
to do it by just class or establishment size or geographic 
location, someone is going to get the short end in that deal.
    Mr. Aderholt. As you mentioned in your comments, the 
furloughs would begin, you say, somewhere mid-July? Some time 
in July?
    Ms. Hagen. That is what we are anticipating, Mr. Chairman, 
based on the requirements that we have in our collective 
bargaining agreement. It is just an estimate, and things could 
always happen sooner if we are able to move through that 
process more quickly. But that is what we are estimating.

                      FURLOUGH DAYS FOR INSPECTORS

    Mr. Aderholt. Correct me if I am wrong, but if we are 
talking primarily about people who make somewhere in the range 
of $32,000 to $40,000 per year, if this is the case, then how 
many days per pay period will inspectors have to be furloughed?
    Ms. Hagen. At this point we are looking at two days per pay 
period. Is that right? One day per week.
    Mr. Aderholt. One day per week. Can you give the 
subcommittee a scenario in which FSIS could move through the 
furlough days earlier in the fiscal year to minimize the impact 
that it would have, both to the inspector and also to the 
industry?
    Ms. Hagen. Is it all right if I ask Mr. Almanza to take 
that?
    Mr. Aderholt. Please.
    Mr. Almanza. So as we move through the process, we have a 
bargaining agreement that we have to comply with. And in that 
time we have already notified the union of the notice to 
bargain. That would be 15 days in which we come to an agreement 
as to when the bargaining would occur. We have not been 
notified as to whether we will bargain or not. The union has 
not notified us of that.
    We are anticipating bargaining to occur, if they request 
bargaining, some time in April. So, if that comes to an 
agreement rather quickly, then we could expedite the 
notification of our employees, which is a 30-day period. We 
notify all our employees of what the agreement with the union 
is. And then we start with the oral conferences of the 
employees that request them.
    Mr. Aderholt. Mr. Farr.

                        FURLOUGH IMPACT ON TRADE

    Mr. Farr. Mr. Chairman, I have to say that walking in this 
building, this whole process of sequestration just infuriates 
me. It was totally unnecessary, it is a partisan tool, it was 
picked up, and now we are implementing. We had people waiting 
in line to get into this building, trying to come in here to 
petition their government, and they can't get in. They have to 
wait a half-hour. It is like waiting for voting. This country 
is just falling apart with this cut, squeeze, and trim 
mentality that we have in this House--right now.
    And here we are, with this key requirement in our country 
that meat and poultry has to be inspected before people can 
consume it, a great thing. And we are talking about how do we 
lay these people off.
    It seems to me that the consequences are, just like the 
lines outside, you are going to have a scarcity of resources--
you are not going to have as much meat processed and poultry 
processed. Therefore, price is going to go up. Supply and 
demand.
    Is this going to put a greater pressure on imports? Are the 
imported product going to be able to come in a lot cheaper 
because they don't have to wait in line to get the inspections? 
We have some great concerns about imports, and Ranking Member 
Rosa DeLauro is chairing her own committee right now. She beat 
on the Chinese chicken to the point that it would infuriate 
you.
    But I just think that what frustrates me is that this isn't 
necessary, and that as we learn the problems we can make 
corrections. I come from a state that went through this because 
of partisan gridlock, took a two-thirds vote to make any 
decision. The state couldn't get those votes, went into 
furloughs. Have you learned any lessons from California? I mean 
they have a lot of first responders.
    And does this furlough affect those states with equivalency 
agreements--in a few states you have your meat inspection 
contractor through the state. Isn't that correct? I mean you 
have given the authorities for the states to run the federal 
program. So what happens to those states in furloughs? You have 
a contract with them. Are they exempted?
    Again have we learned? What happened in California, 
politically, is that people got so fed up with it they threw 
all the Republicans out of office and they--went out and voted 
for taxes by statewide ballot. And so I think some day we are 
going to get over this, too.
    But I am concerned--as you know, as this Committee's 
Ranking Member, which is responsible for the budgets of the 
USDA and FDA, we are here talking about how we are going to 
manage food safety through a lot of uncertainty and chaos, 
which has got to create market disruption and all kinds of 
unintended consequences, like possibly states that are going to 
be severely affected by it.
    So, if you could answer those questions, I would appreciate 
it.
    Ms. Hagen. Thank you, Mr. Ranking Member. I think the 
points that you wanted us to address were imports and how 
states would be affected and whether we had learned any lessons 
from a state like California.
    Import inspection will be affected, just as domestic 
inspection will be affected. So I think there will be market 
disruptions, and I can't speculate on whether there will be a 
desire to bring more food into the country. But import 
inspections will be impacted as well, because those inspectors 
will also be furloughed.
    As far as have we learned anything from California----
    Mr. Farr. So does that reduce the amount of imports?
    Ms. Hagen. It means that I-Houses will be shuttered on the 
same days that--or that our activities will not be able to be 
performed in those I-Houses on the same days that other 
establishments will not be operating.
    Mr. Farr. Does that have some treaty issues and treaty 
violations? Are we going to now, like we did with that damn 
cotton in Brazil, have to pay--what was it, $150 million a year 
to offset WTO violations?
    Ms. Hagen. I would have to take that question back to our 
colleagues at the Department. But I can tell you that import 
inspections will be impacted. Just as domestic products cannot 
leave establishments without the mark of inspection, imported 
product cannot leave those import houses without having gone 
through our system and having been looked at by our inspectors.
    Regarding your question about whether we have learned any 
lessons from California, this is a blunt instrument. We don't 
have the flexibility to be able to do things differently than 
we are doing them. We have taken just really unbelievable 
number of steps in order to reduce our spending and to just do 
things more effectively and efficiently at FSIS.
    We reduced our fiscal year 2013 budget allocations. We have 
dramatically reduced conference and travel spending. We have 
eliminated positions at headquarters. We have, you know, put a 
hard hiring freeze on. We have done all kinds of things. But 
that is not going to give us the money that we do not have 
under sequester. That is not going to give us any kind of 
flexibility to be able to do what we cannot do.
    And the last thing, I wanted to address your question about 
whether it impacts states. Absolutely, this will impact states. 
And when we have to cut every line item across the board, we 
will be impacting our support to state programs.
    [The information follows:]

                       Furlough Impact on Imports

    As I stated in my testimony, given FSIS' budget allocations, 
furloughs would be unavoidable under a sequestration scenario. In turn, 
furloughs would affect FSIS import inspections and limit available meat 
and poultry coming into our country. It is possible that an impact on 
meat and poultry imports due to furloughs may be construed as an 
international trade issue.

    Mr. Farr. Are there legal liabilities for doing that?
    Ms. Hagen. Our legal team has looked at these issues 
repeatedly and feels that our interpretation of the statutes is 
correct.
    Mr. Farr. So the states cannot sue for you not living up to 
your contract obligations?
    Ms. Hagen. To your specific question, Mr. Ranking Member, I 
would have to take that back and get an answer. But certainly 
our legal team has looked at these issues from multiple 
different perspectives.
    [The information follows:]

                       Furlough Impact on States

    The authorization language for the primary cooperative state meat 
and poultry inspection program authorizes FSIS to reimburse ``up to'' 
50 percent of approved state expenses. FSIS could therefore legally 
reimburse state costs at a lesser percentage than 50 percent.

    Mr. Aderholt. Mr. Latham.

                          SEQUESTRATION IMPACT

    Mr. Latham. Thank you, Mr. Chairman, and congratulations on 
your new position here, and the ranking member. Welcome.
    You know, when the President insisted upon sequestration 
and the Budget Control Act, were you notified? Were you told to 
make any preparations? Did they consult with you to find out 
what the ramifications were going to be?
    Ms. Hagen. Did the President personally consult with me?
    Mr. Latham. Did anyone from the White House consult with 
you as to what was going to happen when his policy went into 
place?
    Ms. Hagen. Certainly, Congressman, everybody in the 
Administration has been aware that there was the threat of 
sequestration for some time now. And, as I just outlined, we 
have taken a lot of steps to be able to prepare, not just with 
the threat of sequestration, but just to manage our fiscal 
house better than we have, you know, in years and decades past. 
So certainly, people were prepared that this could happen. But 
I think no amount of preparation can put us in a position to be 
able to absorb $53 million in cuts 6 months into a fiscal year.
    Mr. Latham. Have you been told to make it as painful as 
possible, like other parts of the USDA?
    Ms. Hagen. Absolutely not. Absolutely not.
    Mr. Latham. Because, you know, the statement was that, 
well, it is going to be all this terrible stuff out here. We 
want to make sure that it is as bad as possible. Have you ever 
been told that?
    Ms. Hagen. I am not aware that any statements like that 
have been made within USDA. And certainly no statements like 
that have been made to me. As I have told the members of the 
subcommittee this morning, we simply don't have the flexibility 
to do anything else at this point.
    Mr. Latham. When there was a threat of a government 
shutdown, Mr. Almanza said that what would happen--because if 
the government shut down--I am quoting--``would impact 
business. We are making plans for an orderly shutdown, but food 
safety will continue in the absence of appropriations.''
    Is--there is no contingency plan out there. There was no--
and if you have an emergency, is there a plan?
    Ms. Hagen. Congressman, there is absolutely a plan, but it 
is a completely different scenario when we are talking about a 
lapse in appropriations, where we expect that eventually 
funding will be provided and people can be reimbursed. In this 
situation we are looking at mandatory, permanent cuts.
    Mr. Latham. Right.
    Ms. Hagen. And we are prohibited by law from spending money 
that we don't have. We also can't have people work for free.
    Mr. Latham. When did you start making decisions as to when 
these policies were going to be put in place?
    And I still do not understand why you cannot have rolling 
furloughs that you would not disrupt inspections.
    Ms. Hagen. So we have been doing as much financial planning 
as we can.
    Mr. Latham. Since when?
    Ms. Hagen. Really since Mr. Almanza and I have been a team 
in the Office of Food Safety. For the last three years we have 
been trying to manage things in a conservative fashion.
    Mr. Latham. Having to deal with sequestration?
    Ms. Hagen. As I said, no amount of financial planning could 
prepare us to be able to absorb $52.8 million in cuts 6 months 
through a fiscal year.
    Mr. Latham. Have you talked to the White House, why they 
insisted on it?
    Ms. Hagen. I have not personally talked to the White House. 
I think that Congress can solve this problem.
    Mr. Latham. But the President proposed and insisted it be 
in the Budget Control Act, but you haven't talked to him about 
the ramifications.
    Ms. Hagen. I think the President is well aware of the 
ramifications.
    Mr. Latham. But you haven't talked to him?
    Ms. Hagen. I have not spoken to the President personally 
about this, no, Congressman.

                        FURLOUGH IMPLEMENTATION

    Mr. Latham. Why cannot you have rolling?
    Ms. Hagen. Well, there are a number of reasons. When you 
look at the complexity of what we do in the scheduling of 8,600 
people in 6,200 establishments nationwide, ensuring--at this 
point we are not concerned about the safety----
    Mr. Latham. So you are going to shut them all down at once, 
rather than to roll through it so that they can continue 
operations?
    Ms. Hagen. Well, if I may explain a bit of our reasoning 
behind that, at this point we are not worried about the safety 
of these products, and that is one thing that will protect 
producers and protect packers and processors, because the 
product cannot go out the door without the mark of inspection 
on it. So we are not worried about the safety of the product.
    When we begin moving people around to assignments that they 
have not had, training them for assignments that they don't 
normally work in, when we have to expend money on travel to 
move people to cover something like that, then we start to 
worry about food safety, and then we are looking at spending 
even more money that we do not have.
    But the main concern driving that is being fair and 
equitable, so that if we start in one part of the country or we 
start in one particular product class, or one type of 
establishment, and that particular sector gets impacted, if 
this gets worked out at some point along the way someone has 
taken a hit that someone else isn't going to take. So there was 
no way to produce a fair and equitable impact by rolling this 
across the country. So it is really those two issues----
    Mr. Latham. So shutting down everything is fair and 
equitabler; working through it would not be.
    Ms. Hagen. This is not a situation that we ever wanted to 
find ourselves in. And so we are trying to manage it to the 
best extent that we can and in the fairest way possible. And 
part of doing that is doing non-consecutive days so that we can 
keep animals moving through the animal pipeline, albeit slower. 
We think that is a lot better than shutting down everything for 
consecutive days or consecutive weeks.
    Mr. Latham. I am out of time. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.

                   SEQUESTRATION MANDATE/FLEXIBILITY

    Mr. Bishop. Thank you very much. Dr. Hagen and Mr. Almanza, 
I certainly appreciate the tremendous challenge that your 
agency faces with regard to food safety. But what you are doing 
is really in compliance with the directive from Congress under 
the Budget Control Act. Is that correct?
    Ms. Hagen. That is correct, sir.
    Mr. Bishop. And what the Office of Management and Budget 
and what the President has undertaken is really compliance with 
the mandate from Congress. Is that correct?
    Ms. Hagen. That is correct, sir.
    Mr. Bishop. So it is really not the President's sequester, 
it is the responsibility that the--or the mandate that the 
congress has placed upon the executive branch to implement 
these cuts, these painful cuts, the cuts that may very well 
cause some real problems for the consuming public.
    You talked about the fact that in the implementation of the 
sequester the--you did not have the flexibility that would 
allow you to do it in a less painful manner. Are you familiar 
with the continuing resolution that the Senate has adopted, 
which includes the agriculture appropriations bill? Does that--
as compared to the CR that passed the House, does that provide 
any additional flexibility, were the Senate version to become 
law? Does it give you any more flexibility than the CR that 
came out of the House?
    Ms. Hagen. At this point, Congressman, we don't feel that 
we do have more flexibility. I understand there are discussions 
about ways in which that could be achieved, but no.
    Mr. Bishop. What I am asking is the bill that has been 
drafted in the Senate, as I understand it, includes 
Agriculture, among other agencies, which the House maintained 
the same level of funding for Agriculture as it did in, I 
think, 2012.
    Ms. Hagen. That is correct.
    Mr. Bishop. Prior to the implementation of the sequester. 
But for military construction and for defense some flexibility 
was given to reprogram some of the accounts which the 
agencies--those two agencies--indicated would be very, very 
helpful to them, although they would still experience pain. But 
it would give them a little bit more leeway to deal with what 
they had to do.
    And what I am asking is the Senate apparently is moving on 
a track and they have developed a CR which the Senate 
Appropriations Committee has taken up which includes 
Agriculture, and which, obviously, would include your agency. 
Would that piece of legislation that they are working on and 
the concepts that they are working on, would that give you more 
flexibility, since you mentioned in your testimony the lack--in 
response to the questions--the lack of flexibility, will that 
give you a little more flexibility than--not necessarily all 
that you would like to have, all the resources that you would 
like to have, but would it give you more flexibility to deal 
with the impending exigencies that you are faced with?
    Ms. Hagen. My understanding of that, of the Senate version 
of the CR, Congressman, is that it would not give us additional 
flexibilities. The funding levels are different, but it would 
not give us additional flexibilities. If I am incorrect in that 
interpretation, we will certainly correct that for the record.

                           PROPOSED USER FEES

    Mr. Bishop. All right. Let me go back to the fiscal year 
2013 budget. There was a proposal to generate approximately $13 
million in new user fees--that was the submission from the 
Administration--as well as in the two previous budgets, which 
included a user fee to be collected from the establishments for 
additional inspections due to failure in performance by the 
covered establishment, and a food safety services user fee that 
would recover part of the cost for providing the FSIS services 
at the establishments and the plants.
    Are you--should we expect a similar proposal this year?
    Ms. Hagen. As you know, Congressman, I cannot comment on 
what is contained in the President's 2014 proposal. But you are 
correct, we have put up user fee proposals in previous years.
    Mr. Bishop. I am sorry?
    Ms. Hagen. You are correct that we have put up user fee 
proposals in previous years, but I cannot comment on what is in 
the 2014 request.
    Mr. Bishop. Were you to have the additional user fees, 
would that help your situation?
    Ms. Hagen. I don't see how user fees would help the 
situation, no.
    Mr. Bishop. Well, how would they have helped in the 
previous budgets that were submitted?
    Ms. Hagen. User fees were submitted--we had two different 
types, but the type I think that folks are most familiar with 
would be sort of a for-cause user fee, where if a plant was 
involved in an outbreak or an investigation and it required 
additional taxpayer-funded resources in order to solve the 
problem, solve the outbreak, that the plant could be charged 
back. Those user-fee proposals have never been approved by 
Congress.
    But that is not what we are--that is not the need that we 
are talking about for--here, when we talk about sequestration.
    Mr. Aderholt. Mr. Rooney.

                               FURLOUGHS

    Mr. Rooney. Thank you, Mr. Chairman. I think that, you 
know, before I ask you a question, I think that this idea that 
we are getting into a back-and-forth over, placing or trying to 
infer that there is a blame game with sequester and the 
implications, I think that we can all agree that it is bad. 
None of us up here want to go through what we are talking 
about. And now we are trying to figure out the best way forward 
to deal with the situation.
    You know, we can drive ourselves crazy trying to figure out 
whose idea it was or who the blame should rest on, but the fact 
of the matter is that the people I think that are not only in 
this room but who are interested in this hearing would like to 
know how we are going to move forward.
    So with that I will just say or ask, if I could, during the 
past government shutdowns and preparations for shutdowns, FSIS 
declared inspectors ``essential employees,'' who would remain 
on the job, despite furloughing other positions. The Agency 
never indicated the inspection system would be incapable of 
operating in this manner for a short period. Moreover, the 
Agency routinely provides inspectors for weekends and overtime 
shifts.
    That being said, I think you sort of addressed some of this 
already, why does FSIS take the position that the inspection 
system cannot function temporarily without all supporting 
operations running at full capacity?
    Ms. Hagen. Thank you for your comments and your questions, 
Congressman.
    In the past we have designated or identified employees as 
being essential or excepted from a shutdown scenario. We are 
not talking about a shutdown scenario, we are not talking about 
a lapse in appropriation. We are talking about permanent 
mandatory cuts. We cannot--we are prohibited by fiscal law from 
spending money that we do not have. We do not have enough money 
to do the work. And we cannot ask people to work for free. So 
this is a different situation than we are in when we have a 
shutdown.
    And I think the second part of your question was about 
overtime. We are not aware of any mechanism by which inspectors 
could be paid in an overtime fashion because they are not 
considered to be in overtime status until they have worked 40 
hours. So this is something that we have been asked, it is 
something that we have looked at, and it is the opinion of our 
legal team that that is not something that can be done.
    Mr. Rooney. Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.

                             SEQUESTRATION

    Ms. Pingree. Thank you, Mr. Chair. Congratulations on being 
the new chair, and thank you for welcoming me to your Sub-
committee. I am very pleased to be here and I was very pleased 
to visit your home state of Alabama. I did not expect I would 
coincidentally get to see your home state. It was nice, it was 
a great trip.
    So, thank you very much for being here today, and it is a 
pleasure to hear some of your testimony and some of the 
challenges that you are facing. I did not intend to weigh in on 
the sequester, and I appreciate how you have laid out, you 
know, what has got to be a very challenging situation. When you 
think about the essential needs of food safety and the 
importance to our country of having this food inspection 
system, and how you figure out going about those cuts, I do not 
have any better suggestions for you.
    And the only thing I would say to some of my colleagues--
and I appreciated Mr. Rooney saying this--you know, and I think 
it is appropriate to just try to figure out who is to blame, 
here. Congress voted for this act. I am actually very proud to 
say I did not vote for this. I did not believe that the Budget 
Control Act was the way that the Congress should conduct its 
business. And I think, like many Members of Congress, we had 
been hoping that we would come to a completely different 
solution, as in people would come to their senses about a right 
way to go about cutting our deficit, and we are not there yet.
    And it is, I know, an extreme burden on budgets across 
state government, and an issue that many of us are dealing with 
in our home states. So I am sorry you have to be in this 
situation. I see how dramatically different it is from a 
government shutdown. These are permanent, long-term cuts. And 
if we are going to care about the future of food safety in this 
country and some of the huge challenges that do mean life or 
death and how to handle them appropriately, we are going to 
have to pay a lot of attention to how we handle this in the 
future.
    I really want to use this opportunity to ask some 
substantive questions about the work you do. It is my first 
opportunity to really get to know your department better. And 
coming from the state of Maine, as many people do, we have lots 
of issues in our home state and are interested in how we 
interact with FSIS.

                          SALMONELLA OUTBREAK

    We talked to you about this a little bit in December 2011. 
We had a pretty serious outbreak of Salmonella. They are all 
serious, but this one garnered a lot of attention in a grocery 
chain in our state, and affected several individuals in Maine 
and dozens around the country. Now, you conducted a thorough 
investigation of the outbreak and determined that, because of 
the current grinding rules in place, and because they were 
voluntary, there wasn't enough complete information to 
determine the origin of the contaminated beef.
    I found people who talked to me about this situation, in 
fact, were shocked, given our current system of food safety, 
that information wasn't available, and that, in fact, you could 
say to someone, ``We really just don't know where it came 
from.'' I know you brought this up today, and I know we are in 
the rulemaking process. I am very supportive of the idea that 
you are working on those rules, and I have also brought forward 
to the USDA some of the concerns I have of how you do this in a 
way that also treats the small retailers in a way that they are 
not unable to continue doing business.
    So, can we talk a little bit about this? I would love an 
update. I get asked all the time about when this rule is going 
to be finished. It is 15 months since that outbreak. And back 
in my home state people are saying, ``Hey, did you ever fix 
that problem? Does it require another piece of legislation?'' 
Where are we with that?
    Ms. Hagen. Thank you for your question, Congresswoman. Yes, 
we think this is important. For some time we have been aware of 
what an impediment poor record-keeping can be to solving an 
outbreak. It is a problem for public health investigators in 
order to--so we have people get sick associated with a retail 
chain. If we don't know what went into that product, we can't 
tell what the ultimate source is, we can't mitigate the scope 
of the impact to the extent that we would like to. It also is a 
problem for the retailer, because they end up with the 
liability from those illnesses and that contaminated product. 
So we do think it is important to have accurate record-keeping. 
We have been working with the regulated industry for some time 
to try to find ways that we can do this voluntarily. We think 
that it is time that a requirement be codified.
    And to your concern or question about doing this fairly 
with different size establishments, I think that the proposed 
rule that we will eventually put forward will take that into 
account, and will set forth what we think is important in 
accurate record-keeping, why we think it is important, and will 
allow flexibility on how different size and types of 
establishments get there.
    Ms. Pingree. Well, I appreciate that, and I will certainly 
be following that closely, since we have a variety of everyone, 
from large, international retailers based in our state to 
people who like to sell directly to the consumers who follow 
clean and healthy practices, but need to be able to continue 
that, and consumers who really want to have that opportunity.
    Again, given that it is 15 months since that outbreak, and 
in conversations that we had at that point, we gave our 
constituents the sense that, you are working on this. Can you 
give me just a little more of the timeline of the rule-making 
process, or where you are with developing a rule?
    Ms. Hagen. Sure. It is always hard to give a firm timeline, 
but this is a priority piece of policy for us. And we hope to 
have a proposal ready to head over to the Office of Management 
and Budget in the next few months. That is probably the best I 
can tell you.
    Ms. Pingree. Great. Well, we will certainly be staying in 
touch. And thank you very much. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Fortenberry.

                        SEQUESTRATION BACKGROUND

    Mr. Fortenberry. Thank you, Mr. Chairman, for conducting 
this important hearing. And as our first official hearing under 
your leadership I want to say I look forward to serving with 
you and appreciate your willingness to be so generous in 
welcoming me to the committee.
    Dr. Hagen and Mr. Almanza, thank you for appearing today.
    I think it is important to back up and have a little bit of 
a history lesson here on the sequestration process. Over a 
year-and-a-half ago we bumped up against a debt ceiling which, 
in the past, has been a routine measure in which Congress 
undertakes to raise the amount of borrowing authority that the 
Administration can have. But given the fact at that time we 
were around $16 trillion in debt, the overall size of the 
output of the economy--this year we will probably approach $17 
trillion--the debt ceiling became a focal point, an important 
focal point of a debate about the fiscal future of this 
country.
    And so, I voted to increase that debt ceiling. But there 
was a deal that was put in place that we were only going to 
increase it by an amount that was less than the amount of 
spending reductions that went into effect.
    The second negotiated point was that there was going to be 
a supercommittee, which was charged with the task of trying to 
break through the Administration's and the legislative branch's 
logjam on how do we properly reform our tax code, as well as 
undertake constructive spending reductions to get this fiscal 
house in order.
    The third part of that agreement was if the--to give an 
incentive to the supercommittee to act, and the rest of 
Congress, we would entertain a sequestration process, which is 
a big, fancy Washington word for automatic spending cuts, which 
were supposed to be so distasteful to everyone involved because 
they disproportionately affect military and military 
infrastructure, but your work as well as all the other what we 
call discretionary, non-defense discretionary components of the 
government, that there was going to be a real motive to get 
this done.
    Well, the supercommittee failed, and here we are. So we are 
having to deal with, yes, a clumsy way in which to go about the 
necessary reductions in spending, and we wish that were not so, 
and we will continue to look for a more appropriate way to get 
the fiscal house in order with the proper amount of flexibility 
to reduce spending in the right way. But we are where we are.
    So I think it is important that we all understand where 
this came from. It was the President's original idea, supported 
by Congress. So we are in full partnership on this.

                            FURLOUGH IMPACT

    With that said, if you shut down your inspections on a 
continuous basis, will that disrupt the nation's food supply 
and undermine the food safety of our nation?
    Ms. Hagen. Thank you for your question, Congressman. I 
think it potentially will disrupt the nation's food supply. I 
cannot tell you to what extent, but I think there could 
certainly be shortages.
    We differ from FDA in terms of our statutory obligations 
for inspection. We are required to be in every slaughter and 
processing facility every single day. And for establishments 
that slaughter livestock and poultry, we have to be there for 
the entire duration of operations.
    So, this is an enormous economic impact if we have to 
furlough our entire workforce. We do not think that this is 
going to have a food safety impact, because the product still 
has to be inspected and passed. It cannot leave establishment, 
it cannot be slaughtered, it cannot be processed, and it cannot 
get the mark of inspection on it without our people there.
    So at this point I think what we are looking at is an 
enormous economic disruption, not only to the regulated 
industry, but to the people who work for that industry and to 
the consuming public.
    Mr. Fortenberry. All right. So, you have broken up the 
answer into two parts. Yes, safe food, but a disruption, 
potentially, on supply.
    So, with that said, why this format for dealing with the 
reductions that have been proposed to your agency?
    Ms. Hagen. We don't have any other format available to us, 
Congressman. We have--88 percent of our workforce is frontline 
workforce. And we have--80 percent of our budget goes to 
salaries and benefits, 15 percent of the budget on top of that 
goes to other fixed costs. That leaves us about five percent 
money to do operating expenses and supplies. We are halfway 
through a fiscal year. We are talking about nearly $53 million. 
There is no other way to come up with that kind of money, other 
than to furlough our workforce.
    Mr. Fortenberry. Now, if you did not do this continuous 
reduction or shutdown of inspections, and you asked--I think 
this gets into what you were inferring, Mr.--I am sorry, I am 
going to look at your name again--Almanza?
    Mr. Almanza. Yes.
    Mr. Fortenberry. In terms of union negotiations. What other 
flexibility do you have, in terms of overtime, which, as I 
understand it, would then be picked up by the industry?
    Ms. Hagen. We don't think that we have any other 
flexibility.
    Mr. Fortenberry. Well, that is kind of why we are here, to 
hear what other options there are. Because the twofold purpose 
of the agency, obviously, is safe food supply but an adequate 
food supply, as well.
    Ms. Hagen. If we thought there were other options we would 
have pursued them. We don't think there are any other options 
on the table.
    Again, when you look at how our budget is structured, and 
you look at where we are in the fiscal year and how large of a 
target we have to meet, these are mandatory, permanent cuts. We 
don't see any other way forward.

                            BUDGET INCREASES

    Mr. Fortenberry. What is the increase of your budget that 
you have received over the last five years?
    Ms. Hagen. I would have to bring that number back to you. I 
don't have it with me.
    Mr. Fortenberry. It is substantial?
    Ms. Hagen. I don't know if I would call it substantial, no. 
But it has actually come down since 2010.
    Mr. Fortenberry. You have an answer to the question?
    Ms. Hagen. We don't have a strict percentage increase, but 
we can certainly get that for you, for the record.
    Mr. Fortenberry. Five years I would like to see, if you 
would, please.
    Ms. Hagen. Sure, we can do that.
    [The information follows:]

                              FSIS Budget

    FSIS' budget has increased approximately $74 million, or 8 percent 
over the last 5 years (2008-2012). These increases are directly related 
to rising salary and benefit cost ($50 million) due to Federal pay 
raises and mission related increases which include but are not limited 
to the takeover of inspections for New Mexico; strengthening of humane 
handling; implementing the Cooperative Interstate Shipment program; 
integration of the Public Health Information System (PHIS), improving 
telecommunications and meeting cyber security mandates; and increased 
Food Safety Assessments.

    Mr. Fortenberry. Thank you, Mr. Chairman. I yield back. 
Thank you.
    Mr. Aderholt. Ms. DeLauro.

                       EQUIVALENCY DETERMINATIONS

    Ms. DeLauro. Thank you, Mr. Chairman. I apologize, we are 
all running between various hearings, so--and I understand that 
the impact of sequestration has been discussed, it may continue 
to be discussed, so--but let me make a point before my 
questions. I continue to be concerned about the process used to 
announce changes to the equivalency of verification process. 
And so what I would like to do is to get a complete response to 
each question from the November 20, 2012 and the January 2013 
letters, and that they be included in the record of this 
hearing.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.016
    
    [GRAPHIC] [TIFF OMITTED] 82566A.017
    
    [GRAPHIC] [TIFF OMITTED] 82566A.018
    
    [GRAPHIC] [TIFF OMITTED] 82566A.019
    
    [GRAPHIC] [TIFF OMITTED] 82566A.020
    
    [GRAPHIC] [TIFF OMITTED] 82566A.021
    
    [GRAPHIC] [TIFF OMITTED] 82566A.022
    
    [GRAPHIC] [TIFF OMITTED] 82566A.023
    
    [GRAPHIC] [TIFF OMITTED] 82566A.024
    
                   MECHANICALLY TENDERIZED BEEF RULE

    Ms. DeLauro. So, moving on, I was very, very delighted to 
see FSIS finally sent a proposed rule to OMB to label 
mechanically tenderized beef products. When do you expect the 
proposed rule to be published, in which quarter of this year? 
And I am going to ask you to answer quickly, because they only 
give me five minutes, so----
    Ms. Hagen. Thank you----
    Ms. DeLauro. Yes, when do you expect the rule?
    Ms. Hagen. It is nice to see you, and thank you for your 
questions. The rule has been at OMB since September, and we 
don't control how quickly it comes out of the OMB review 
process. They have asked for an extension. This is a high 
priority for us. We will keep trying to get this done. So I 
can't give you an estimate of when it will come out----
    Ms. DeLauro. In this year? Which quarter of in year?
    Ms. Hagen. Yes, that was our intention.
    Ms. DeLauro. Okay. Okay, well, we will see what we can do 
in that respect, as well, to try to get that rule to be 
published.

                  POULTRY SLAUGHTER MODERNIZATION RULE

    Second, the status of the proposed rule on poultry 
slaughter. Are you moving forward? And, if so, when will a 
final rule be published? Many of the public comments submitted 
to date raise serious food safety and worker safety issues. Can 
you address those concerns? And do you anticipate making 
substantial changes to the proposal, based on the public 
comments?
    Ms. Hagen. Thank you for your question. As you know, we did 
receive quite a few comments on the proposed rule, and it has 
taken us some time to get through all those comments. We are 
still in the process of comment review, and incorporating 
information that we did receive through the public process into 
what would be a final rule. I really can't speculate on how 
quickly something might move through the process. We don't 
control all the steps of notice and comment rulemaking.
    But to your--did you want to say something?
    Ms. DeLauro. Yes. Well, I am--again, do we have a time 
frame in which there will be a final rule published?
    Ms. Hagen. Well, we are still working on the final version 
of the rule at the Department. When it goes to the Office of 
Management and Budget, they then have 90 days to review it, 
coordinate interdepartmental review. They can ask for an 
extension. So that is the part of the process that we do not 
control.
    Ms. DeLauro. And what about substantial changes to the 
proposal, based on public comment?
    Ms. Hagen. As with any notice and comment rulemaking 
process we get some information that is really helpful, as we 
go forward and think about what the final version of a rule 
should be. So some of it has been incorporated. All of it will 
be addressed. Whether it will impact the final regulatory text 
or not is not something I can really talk about.

                 POULTRY SLAUGHTER RULE--WORKER SAFETY

    Ms. DeLauro. You know, it is--well, anyway, the proposed 
rule indicates one facility would participate in a NIOSH study 
that is not complete. Will FSIS wait until that study is 
complete before moving forward? And are you amenable to 
including a requirement that is similar to that from SIP that 
plants that opt into this modernization open their doors to 
NIOSH?
    Ms. Hagen. Well, we are happy to be working with NIOSH, and 
we are happy to be consulting with OSHA on the worker safety 
concerns. As I think the subcommittee probably well knows, our 
statutory authority does not extend to rulemaking for worker 
protection. So we are happy to be working with the entities 
within the executive branch that have the ability to do that, 
and have the expertise to study the issue----
    Ms. DeLauro. But my question is are you amenable to a 
requirement that plants who opt into this modernization of the 
increased speed lines, that they open their doors to NIOSH?
    Ms. Hagen. We don't think that we have the authority to 
require any non-food-safety--to place non-food-safety 
requirements on the----
    Ms. DeLauro. What if we gave you the authority?
    Ms. Hagen. We do what Congress gives us the authority to 
do.
    Ms. DeLauro. But you don't have a view as to whether we 
ought to take a look at what is happening with these increased 
speeds?
    Ms. Hagen. We absolutely--that is why we have been working 
with NIOSH. We are delighted that they are started on their 
study. We have been consulting with OSHA for the better part of 
the last nine months about what we can do within the limits of 
our authority to ensure that this rule doesn't have unintended 
consequences.
    I will say that, you know, I spent my entire professional 
life trying to figure out how to reduce risk and protect 
people. And I would never put forward a rule that I thought 
would increase risk or reduce protections for anybody.
    Ms. DeLauro. That is what my hope is. And without the 
opportunity to be able to get a sense of what is happening--
there are all kinds of views that it is not going to do 
anything with regard to worker safety, that workers are not 
going to be in jeopardy, and yet there appears to be, 
potentially not on your part, but an unwillingness to allow for 
any evaluation, observation process by which, in fact, we 
changed these efforts, that we are going to see increased risk 
for workers.
    There are--it would just seem to me that there would be an 
openness to a process that allows for some structured 
evaluation of the outcome of a change in any kind of a rule. 
Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Valadao.

                         SEQUESTRATION PLANNING

    Mr. Valadao. Thank you, Mr. Chair. Dr. Hagen, you mentioned 
earlier--well, a couple of times today--that the 52.8 million 
is a lot to handle this late in the game. Most of my 
constituents in different agencies in my district have all 
planned in advance for sequestration, planned their budgets 
accordingly. I'm curious, did you plan for this? Did you budget 
for this accordingly, or did you wait for the last minute and 
kind of take a wait-and-see approach?
    Ms. Hagen. Thank you for your question, Congressman. There 
are certain things that we couldn't do until the Act went 
through, until the President signed the order. We couldn't talk 
about furloughs with our employees. They certainly knew this 
was a possibility, but we couldn't give a notice to bargain, 
and things like that. So this is--you know, this is five 
percent of our budget six months into the fiscal year. So I 
think to characterize it as not having planned for it is not 
accurate and isn't fair. We have been taking a very aggressive 
approach to managing our spending, really, for the last three 
years, at least during the time that I have been in this job.
    And, as I mentioned already, we took a lot of proactive 
steps. We have reduced travel spending by 16 percent to the 
tune of $5.4 million from fiscal year 2011 to fiscal year 2012. 
We reduced conference spending by 33 percent. The Administrator 
and I directed that the fiscal year 2013 allocations for the CR 
be decreased because we knew that this was potentially coming. 
We have had hiring restrictions in place for our non-frontline 
staff for several years. We have actually eliminated over 150 
positions at headquarters. We have had process improvements 
from everything from how we do sampling in the laboratories to 
how we educate consumers. We have been holding frontline 
vacancies, we have been doing non-permanent hires. We have been 
taking, I would say, very aggressive steps to prepare for this. 
But no amount of preparation can put us in a position to still 
be able to get the work done with this kind of a hit at this 
point in the fiscal year.
    Mr. Valadao. Well, the cuts are permanent, unless something 
changes here in Congress, obviously. How do you plan on 
handling this in the future?
    Ms. Hagen. Well, we will obviously be having a lot of 
discussions about this. But as we have discussed already this 
morning repeatedly, plants cannot operate if we are not there. 
We have to be able to pay our people to do their work. We 
cannot compromise food safety. So this is going to take a lot--
these are tough decisions that we are going to have to make.
    Mr. Valadao. All right. Thank you.
    Mr. Aderholt. Mr. Yoder.

                           EFFICIENT SPENDING

    Mr. Yoder. Thank you, Mr. Chairman. Dr. Hagen, I appreciate 
you coming here today. Certainly Americans are very concerned 
about the result of some of the pending sequester changes here 
in Washington, D.C. And so it is important that we have an open 
conversation about the best way to implement what is federal 
law in a way that is least impactful on our constituents.
    And I would like to follow up a little bit on the questions 
that Mr. Valadao was asking related to how we implement these 
changes.
    I guess, first of all, do you believe that there are any 
wasteful uses of resources in your department?
    Ms. Hagen. As I have just outlined, we have been very 
aggressive about taking a look at everything that we do, from 
not just an operations standpoint, but from a policy 
standpoint. I have--people have heard me say hundreds and 
hundreds of times, ``We need to do things better than we have 
done them before,'' and that means the way that we spend money, 
and that means the way that we achieve results for the people 
that we are here to serve.
    So, we have found just innumerable opportunities to be able 
to do our business better than we have done it before. And even 
though these have gotten us a lot of results--and, in fact, we 
have been able to cut the number of necessary furlough days 
almost in half because of the work that we have been doing over 
the last year--it still doesn't get us to where we need to be 
at this point in the fiscal year to be able to absorb this.
    Mr. Yoder. You described some of the steps you have taken 
in your testimony today, travel, various items. Can you 
describe other things you have done, hiring freezes, those 
sorts of things? How many folks have you hired in the last 
year?
    Ms. Hagen. Sure. And actually, if I can have Mr. Almanza 
help me with this, because he really manages the day-to-day for 
the agency, but I will say that for the last couple of years we 
have very conservatively managed hiring, particularly what we 
call non-frontline, or headquarters personnel, and eliminated 
over 150 positions. We have always hesitated to put any kind of 
a hiring freeze on frontline employees, for obvious reasons.
    I don't know if you want to give some more details.
    Mr. Almanza. One of the steps that I have taken is that any 
position above the front line, it is kind of very structured in 
that I have to approve it. And I realize that--and, quite 
frankly, it takes a lot of time having to have people explain 
to me why that job is important, and we have eliminated a 
number of jobs. Probably over the last three years, somewhere 
closer in the neighborhood of 230 non-frontline jobs. We closed 
five district offices as well. That realized us a bit of 
savings, as well.
    So, yes, it is a little bit backwards in that me having to 
approve positions as they are filled, but we just felt that we 
were taking every step that we could to try to eliminate our 
overhead.
    Mr. Yoder. So your testimony, then, would be that we have 
taken, just to use your words, every step that we could to 
eliminate overhead, to reduce costs, and essentially, that the 
budget in your agency is operating at essentially the minimal 
amount necessary to carry out its functions?
    Mr. Almanza. Well, there is always room for trying to 
improve, and that is why we are looking at a number of 
different ways of--even in our headquarters staff--of 
reorganizing our headquarters staff, and looking at 
streamlining some of our program areas, possibly even 
eliminating some program areas, and looking at how we can do 
things more efficiently.
    But yes, we are always looking for those efficiencies, sir.
    Mr. Yoder. I note that in fiscal year 2009, the FSIS spent 
approximately $10.6 million for 1,525 vehicles and in fiscal 
year 2013 the request was nearly $14 million for 2,147 
vehicles. And yet the amount of facilities that the FSIS 
inspects has been relatively flat over those years. Are there 
other areas of your budget that have gone up over those years? 
I know this question was asked earlier by Mr. Fortenberry in a 
more broad sense. Are there specific areas of your budget 
beyond the vehicles that have gone up dramatically over those 
several years, while facilities have remained flat?
    Ms. Hagen. Well, I would point out that the fleet is used 
for frontline travel, so we have inspectors traveling around, 
inspecting products.
    I mean there are always ups and downs in every budget. And 
one of the things that has been really important to us for the 
last few years is to make sure that we always have offsets for 
anything that we want to do that is new. So you really haven't 
seen our budget increase very much at all over the last couple 
of years.
    We have spent money on implementation of the Public Health 
Information System, because we think we need to do things in a 
modern way if we are going to have a modern system. That is one 
example. So, yes, there are places where we have spent more 
money. And, to the extent possible, we have always tried to 
offset it with savings somewhere else.
    Mr. Yoder. Well, I guess if I might just conclude, Mr. 
Chairman, I think the American people are very concerned that 
the implementation of the sequester is being done in a way that 
is a greater impact on the daily lives of our citizens, as 
opposed to a way that might reduce the cost of an agency that 
is less impactful: reducing vehicles, reducing positions that 
are not frontline. And I think there is a healthy dose of 
skepticism in our country that a five percent reduction in any 
agency would result in the types of reductions that would have 
such a potential dramatic impact on the daily lives of 
citizens.
    And so I guess it is my hope that you could provide us with 
additional alternatives and look long term at how we can 
implement these reductions in a way that have less of an impact 
on the American people. Thank you, Mr. Chairman.

                           FURLOUGH TIMELINE

    Mr. Aderholt. Mr. Almanza, let me follow up. We were 
talking about the furloughs a little bit earlier. Of course 
mentioned that the unions were, of course, looking out for 
their members. Would they want to start the furloughs earlier 
in the fiscal year, or would they want to move that back to 
later in the fiscal year?
    Mr. Almanza. Well, I certainly cannot speak for the unions, 
Mr. Chairman. I would say that it really depends on whether 
they decide to engage in bargaining or not. And that will 
either move the time frame up for the notification of 
employees, or delay it, depending on what--how long the 
bargaining sessions are.
    Mr. Aderholt. But one would think they would probably want 
to start the furloughs earlier than later, would be my 
assumption.
    Mr. Almanza. I would assume that, but I certainly would not 
want to speak for them.

                      FURLOUGH IMPACT ON INDUSTRY

    Mr. Aderholt. The impact of the furloughs alone has been 
estimated somewhere around $10 billion. I don't want to 
minimize the impact to the industry, but certainly not being an 
economist, could you give us some idea of how you came up with 
the $10 billion figure and how that was derived?
    Ms. Hagen. We can certainly give you a more detailed 
explanation for the record. But as I understand it, we looked 
at, you know, what we would be losing in production on a daily 
basis, and we went from there. I think the regulated industry 
would have an even more accurate estimate of what the impacts 
may be, since they are the ones that are really keeping track 
of their production.
    Mr. Aderholt. If you could submit that for the record, it 
would be helpful----
    Ms. Hagen. Sure.
    [The information follows:]

                      Furlough Impact on Industry

    FSIS utilized published data from the Census Bureau's 2011 Annual 
Survey of Manufacturers to determine the annual dollar value of the 
meat industry ($192.2 billion). The activities included in the dollar 
value are: meat slaughtering, meat processing, poultry slaughtering and 
processing, and meat byproduct processing. The estimated impact on the 
meat industry was calculated by dividing the estimated annual value of 
the meat industry ($192.2 billion) by the 260 workdays in a year, times 
the number of projected furlough days (11-13 workdays). This equals $8 
billion to $10 billion.

    Mr. Aderholt [continuing]. For us to know that, exactly how 
you come up with that number.

                  POULTRY SLAUGHTER MODERNIZATION RULE

    Mrs. DeLauro had asked about the poultry slaughter 
modernization rule. We--there are several Members that are new 
to the committee this year. If you could, just maybe go--just 
briefly do a little bit of outline and discuss about the 
poultry slaughter modernization rule and just the impact that 
is, and just give a little bit--a quick overview.
    Ms. Hagen. Sure, thank you for the question. As I said, as 
our knowledge evolves about what makes people sick, our tools 
have to evolve to keep up with that. And we have a lot of 
people in the field working very hard, but looking for visible 
defects in poultry. We know that it is what you cannot see that 
actually makes people sick.
    So, this rule is about focusing the bulk of our resources 
in poultry slaughter inspection on those things that are most 
likely to impact public health. This is a very well-supported 
piece of rulemaking. I think that this is a win for 
stakeholders across the board. When you look at the number of 
illnesses that we can--at a minimum, we think we are going to 
reduce illnesses by 5,000 per year. When you look at the 
savings for taxpayers, $90 million saved over the course of 3 
years because of the way that we are going to manage our 
resources, and when you look at the savings and the flexibility 
that the regulated industry will gain and will be able to pass 
on to consumers in the form of lower prices, we really think 
that this is a win across the board.
    Mr. Aderholt. Last December you reported to the committee 
that you would have to negotiate with the unions and work with 
the industry to arrange a conversion of the plants to this new 
system. And the date I think was mentioned--April 2013, which 
is upon us. Has FSIS started negotiating with the union and 
working with industry to arrange this conversion to the new 
system?
    Ms. Hagen. We don't have a final rule yet. And so we would 
not be able to implement a new system until we have a final 
rule. And we are not at that point yet.
    Do you want to add anything?
    Mr. Aderholt. So once that rule is--you get the new rule, 
then you will start working on those negotiations. Is that 
correct?
    Ms. Hagen. That is correct.
    Mr. Aderholt. Mr. Farr.

                           STAFFING SHORTAGES

    Mr. Farr. Thank you, Mr. Chairman. I wanted to follow up an 
observation the OIG made, kind of shocking, that they found out 
that you had gaps in inspections--inspections were missed, 
nationwide, on a daily basis--that they had to tell us, rather 
than the Department telling us, or admitting it.
    And then, also with the fact that you have a vacancy rate 
as high as, say in Chicago, of nine percent. If you are going 
to have a hiring freeze, what do you do about filling those 
vacancies in areas where you have a high percentage of vacancy?
    And then I want to add on to that. I want to talk to you 
about what you are doing in adding a new requirement, a new 
workload, in approving application for a New Mexico horse 
slaughter plant. But I will--if you could answer the first 
part, I want to ask more questions on the horse slaughter.
    Ms. Hagen. I am going to ask Mr. Almanza to address the 
vacancy issue, and either one of us can talk about the horse 
slaughter.
    Mr. Almanza. The vacancy issue is one that fluctuates, and 
there are some parts of the country that just have higher 
vacancy rates. But they fluctuate. And certainly we try to do 
everything to fill those jobs. In fact, the only jobs we have 
posted in USA Jobs are frontline positions. And we do 
everything that we can. It is just simply getting qualified 
available applicants to apply for those positions. We have 
absolutely no hold or freeze at all on any frontline positions 
within the Chicago district or any other district.
    Mr. Farr. Are a lot of those positions required to be 
doctors of veterinary medicine for inspection purposes?
    Mr. Almanza. No, sir. The vacancies that we currently have 
are CSI, consumer safety inspector, positions. We actually are 
having a lot of success with veterinary hires right now. And we 
are just not--we are not seeing a whole lot of vacancies in 
that area.
    Mr. Farr. So when the OIG pointed out this problem, of 
missed inspections and--which is another problem that they can 
see--but you think you have plugged--are you on top of that?
    Mr. Almanza. Yes, sir.

                            HORSE SLAUGHTER

    Mr. Farr. Okay. Now, if there is a hiring freeze, and there 
is a shortage, and we are going to have to furlough people, 
what the hell are we doing approving an application for a New 
Mexico horse slaughter plant with Valley Meats, that has had an 
incredibly bad history of environmental animal welfare 
offenses, when 80 percent of Americans oppose horse slaughter? 
What are we going back into this business for?
    Ms. Hagen. Well, first, I will clarify that we have not 
approved any grant of inspection application for any facility 
at this point. The hiring burden would not be significant if we 
were to move forward with the resumption of horse slaughter 
inspection in the United States. We are talking about a handful 
of inspectors. So I don't think it is so much the resource 
burden.
    But we have a statutory obligation. Horses are considered 
to be livestock under the FMIA, the Federal Meat Inspection 
Act. There was an appropriations ban on the use of our budget 
for years. We could not inspect horse slaughter. That ban was 
lifted. We have an obligation to uphold the law. So we are 
moving forward with trying to develop a program that would 
protect public health to the greatest extent possible if we 
find ourselves in that position once again.
    Mr. Farr. And where does the meat from horse slaughter go?
    Ms. Hagen. Currently, most of that meat goes to Europe.
    Mr. Farr. And do we have a requirement under that, that we 
do the drug testing, like we have to do for cattle and 
chickens?
    Ms. Hagen. Well, again, there is no--currently there is no 
domestic slaughter of horses for food in this country. But we 
would take into account every public health concern that would 
be associated with this type of product. And it is part of what 
we have been doing for the last year, is developing 
methodologies for an extensive array of drug use, of drug 
residues.
    Mr. Farr. Well, that leads me to a concern I have--in this 
situation there are horses coming from different situations 
than just operational cattle ranches. You have horses coming 
from pets, you have horses coming from show horses, from racing 
horses, from draft horses, working horses. You have all kinds 
of different handling practices and medication given to those 
horses, particularly race horses, show horses.
    Have you and FDA developed protocols to determine what kind 
of tolerance levels for all the different medicines and drugs 
that could be used in horses in those different scenarios?
    Ms. Hagen. Well, any inspection program that we would begin 
for domestic horse slaughter would take into account all the 
public health hazards that we feel could occur. And, as you 
correctly point out, the main concern from a public health 
standpoint with horse slaughter is drug residues, as opposed to 
pathogens.
    I think you are correct, and----
    Mr. Farr. Have you identified those drugs? Is that your 
responsibility, or FDAs?
    Ms. Hagen. Well, the national residue program together 
looks at drugs of concern that we think should be targeted and 
identified in food for human consumption. But we have developed 
a pretty extensive array of testing methodology, or of--I 
shouldn't say an extensive array. We have developed testing 
methodology for quite a number of potential drug residues that 
could be found.
    Mr. Farr. So those protocols are in place if you licensed 
the horse slaughter plant?
    Ms. Hagen. We are just about finished, but we have been 
working on validating not only the methods that we had used 
previously when we ran a horse slaughter program prior to the 
2006 appropriations ban, but adding quite a number of 
additional drugs that we would have the capability to test for, 
as well. We wouldn't move forward with the program until we 
were ready with those methods.
    Mr. Farr. And I guess, lastly, how can you afford to do 
that if you are--if you cannot--if we don't have the personnel, 
with hiring freezes, as you have indicated, and furloughs? Why 
are we opening up a whole new line of inspections and 
requirements?
    Ms. Hagen. Again, this is work that has largely already 
been done. We have a statutory obligation to consider here. It 
is not something that we are advocating, it is something that 
we have a mandate to do, to inspect horse slaughter.
    I will say you are correct in that public opinion and 
perception has changed, I think considerably since 1906. The 
public level of discomfort about horse slaughter is 
significant. And the Administration recognizes that and thinks 
that that is a point of view that Congress should hear. But we 
are also very respectful of the fact that only Congress can 
change the law, and we intend to uphold the law if that is what 
we need, if we need to move forward with the program.
    Mr. Farr. Thank you.
    Mr. Aderholt. The gentleman from Nebraska.

                             BUDGET HISTORY

    Mr. Fortenberry. Thank you, Mr. Chairman. Dr. Hagen, you 
had kindly offered to get the last five years of budgets, but I 
have since obtained that information. I know you have got a lot 
going on, and so I don't want to overburden your agency, but 
let me just review this with basically some rough calculations 
that I have made.
    If you look at a 10-year baseline, your budget has 
increased approximately 30 percent over 10 years ago. Five 
years ago it is approximately eight percent. The last three 
years it has actually gone down. So that, I think, should give 
us all some perspective on where we are.

                            FURLOUGH OPTIONS

    I do want to return to your earlier comment that--regarding 
a complete shutdown for a certain period of days is the only 
way that you could accommodate these reductions while meeting, 
to the best of your ability, the twofold goal of safety, as 
well as uninterrupted supply.
    Talk to me about the flexibility that you have between 
slaughter and processing. It is my understanding that you are 
consistently present for slaughter; processing, you have more 
flexibility. And I think that goes to your earlier comment as 
to where you have tried to creatively, in the past, look at 
reducing certain types of budgeting. I am just trying to unpack 
this for you.
    We all have the obligation here to try to meet that dual 
goal of the uninterrupted supply that is delivered in a safe 
manner. So speak to that possibility as one area of flexibility 
that you have to implement these reductions.
    Ms. Hagen. I am not sure I understand the question, I am 
sorry. So you----
    Mr. Fortenberry. The distinction between your mandate 
regarding slaughter and processing----
    Ms. Hagen. Correct, that is correct.
    Mr. Fortenberry. You have to be present for slaughtering.
    Ms. Hagen. Yes.
    Mr. Fortenberry. You don't have to be present for--or you 
can manage that----
    Ms. Hagen. We need to be there once per shift. And 
processing inspectors generally work on patrols, where they go 
to a number of different establishments in the same day.
    Mr. Fortenberry. But again, you are the experts here. We 
are trying to unpack the best way in which we can meet multiple 
objectives that are held in tension, a reduction of budgets 
without the disruption of food supply. Are there options there 
that would allow, again, the food supply to continue without 
the disruption that you referred to earlier?
    Ms. Hagen. Well, I think it is important to remember that 
all of these things are related. So what happens in slaughter 
impacts what happens at processing. That impacts the flow of 
live animals through the system. It impacts what happens in 
further processing and retailing. So simply tweaking one part 
doesn't necessarily have the desired impact on the remainder.
    I will tell you that we have examined--this is the last 
thing we want to be doing. The last thing we want to be doing 
is having all of our employees out of work for 11 days and 
having the regulated industry impacted in this way. This is not 
something that--it is not a position we ever wanted to find 
ourselves in. I think we have looked at all of the options, and 
I think we have come up with, really, the only viable set of 
options for us.
    We are going to continue to look for additional savings. If 
there is any way that we can reduce that number of days, we are 
going to do our best. But I think that we have really examined 
this from multiple different perspectives, and this is where we 
are.
    Mr. Fortenberry. It is my understanding that you had 
previously developed contingency plans for the potential 
reduction of--or a 5 percent potential reduction, 10, or even 
15 percent reduction. Are those plans available?
    Ms. Hagen. I would have to take your request back to the 
Department.
    Mr. Fortenberry. That is my understanding. So if they are, 
we would like to see that, if possible.
    Ms. Hagen. I will certainly take that request back.
    [The information follows:]

                        FSIS Reduction Scenarios

    FSIS looked, and continues to look for additional ways to reduce 
costs, and attempted to develop 5 and 10 percent reduction strategies. 
However, FSIS' options to reduce costs at these levels are limited due 
to statutory requirements for FSIS to be present at all times for 
livestock and poultry slaughter operations and once per shift per day 
for meat and poultry processing operations. Given these statutory 
obligations, to ensure food safety and fairness to industry, funding 
reductions at the levels in the Budget Control Act would have required 
furloughs across the board. Only the number of furlough days would have 
varied.

                            CHINESE POULTRY

    Mr. Fortenberry. Let me change the subject a little bit and 
talk about overseas inspections.
    Ms. Hagen. Sure.
    Mr. Fortenberry. I would just like to learn exactly how 
that--not exactly, but in broad terms--how that process works, 
and your level of confidence that the products under your 
jurisdiction that are being imported in the United States are 
safe. In specific regard, what are your plans in terms of 
opening up inspections of poultry in China?
    Ms. Hagen. So the way that we handle import safety is 
through a three-part, three-component system. First, a 
country's system has to be determined to be equivalent. And 
that takes quite some time. That can take a year or more, 
because we have to ensure that the statutory and regulatory 
framework allow for the safe production of food in an 
equivalent fashion to what we do here, in the United States.
    We then have reinspection of product at the border, both 
physical, organoleptic inspection, and we have reinspection 
testing of a certain percentage of the products that come 
through at the border. And, as well, we do repeat audits of 
countries, once their initial equivalence has been determined. 
So, we are confident in our system, we think that this is a 
good way to approach it.
    We have been in the process of looking at whether China can 
have equivalency for processed poultry for some time now. 
Actually, for several years we have produced regular reports to 
Congress about our progress there. We actually have an audit 
team in China right now. They started their audit on March the 
5th, looking at processed poultry for equivalency.
    Mr. Fortenberry. This would only be food safety. It 
wouldn't be other environmental standards, labor standards, 
basic business structure.
    Ms. Hagen. This is food safety.
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.

                            FURLOUGH OPTIONS

    Mr. Bishop. Thank you very much. I would like to go back to 
where Mr.--the line of questioning Mr. Fortenberry was 
exploring with regard to the lack of other options. I think I 
am understanding that you are saying that it is fairer and it 
will produce, in the long run, more safety to furlough all of 
the employees on a particular day, and just have less 
production in the overall system than it would be to try to 
keep it going and reassign individuals who may or may not be 
well trained for that particular job, because that could, in 
all likelihood, compromise safety.
    Could I just get you to just sort of slowly walk through 
why that is the best option or the only option, as opposed to 
doing it sequentially or any other way? The other options that 
you eliminated. I think you kind of said, ``Well, we have been 
through the options and we have looked at it and this is the 
only viable option.'' But can you kind of just go through that 
reasoning process, you know, for--I think I am following why 
you are doing that, but can you sort of go through that 
reasoning, step by step?
    Mr. Almanza. Sure, I----
    Ms. Hagen. You know, I am going to let Mr. Almanza take a 
crack at it, in case I haven't been clear enough. A little tag 
team here.
    Mr. Almanza. So just for example, I will just kind of 
highlight one of the bigger plants that we have staffing of, 
say, 38 employees that are on the slaughter line. So we have 
half of them on the day shift, half of them on the night shift.
    So, if we chose to shut that plant down, we simply do not 
have 38 inspectors just to plug right in behind them. And so, 
if we start at any one part of the industry, I think, say the 
poultry industry or the beef industry, and try to replace the 
number of folks that are currently assigned to those 
assignments, we simply do not have the resources to do that, 
and never mind if we had to travel people. First of all, I do 
not know where we would get those people, but even traveling 
them would incur----
    Mr. Bishop. Expense.
    Mr. Almanza. Yes, quite an expense.
    Ms. Hagen. I mean I would agree, and I just think that 
there is an essential fairness issue here for the regulated 
industry about who gets the hit first, or----
    Mr. Bishop. What about the safety?
    Ms. Hagen. And I think once you start--as I said before, 
when we are shut down and nothing is getting the mark of 
inspection, this is a huge economic hit, but we are not 
concerned about the safety, because we believe in the integrity 
of our mark of inspection.
    I do have concerns, once you start moving people around 
into assignments they are not familiar with, product classes 
that they may not be familiar with, about whether we are really 
doing the best that we can do. And I think we start to worry 
about compromising our mark.

                             WORKER SAFETY

    Mr. Bishop. Okay. Let me go back to--thank you very much--
go back to the conditions. I think that was a study by the 
Southern Poverty Law Center about conditions at the poultry 
plant. I think it is called ``Unsafe at These Speeds,'' which I 
think Ms. DeLauro referred to. And while worker safety is under 
the jurisdiction of OSHA, don't you have a very, very vital 
role to play in identifying potential problems? Because, as I 
understand it, because of the consequences of some of the speed 
at some of these processing plants, there is some 
contamination, some tuberculosis, staph infections for workers, 
which obviously could bleed over into the product.
    So, I mean, do you not really have to be on top of that, 
and won't this, the sequester, impair your ability to do that?
    Ms. Hagen. Well, thank you for raising the report by the 
Southern Poverty Law Center. I think that the report points out 
something that we all know and we need to be reminded of, that 
the conditions are tough, that these are very difficult jobs in 
the poultry industry, and we do not dispute that.
    We do not think that our modernization of poultry slaughter 
will make those conditions worse. I think that there is an 
incorrect assumption about individual worker pace and what will 
happen under this proposal. We have been doing this in 25 
plants for over a dozen years, and our experience has been that 
plants handle the opportunity for increased line speeds through 
either staffing or through increased automation.
    So--and as you point out, we do not have the authority to 
set worker safety standards, but we are working with OSHA, we 
have been consulting with them, we have taken their advice, 
tried to incorporate it to the extent possible. In the final 
version of the rule that we are doing we are trying to increase 
training for our own employees to be able to recognize 
workplace hazards. We are very happy about the study that NIOSH 
is doing to look at the impact of line speed on worker safety.
    But I would point out that we are talking about line speeds 
at slaughter here. And most of the data cited in numerous 
reports has to do with line speeds in processing, which is not 
impacted by this proposed rule.
    Mr. Bishop. Thank you. I think my time has expired.
    Mr. Aderholt. Mr. Yoder.

                            FURLOUGH OPTIONS

    Mr. Yoder. Thank you, Mr. Chairman. Dr. Hagen, if Congress 
were to pass legislation that would say that no frontline meat 
inspectors could be furloughed as part of the--what is it, 
9,000--how many employees are in your----
    Ms. Hagen. Right now we are looking at furloughing 9,212 
employees.
    Mr. Yoder. How many of those are considered meat 
inspectors, or frontline employees?
    Ms. Hagen. That number, I have it written down just so I 
did not get it wrong today, I want to make sure that I gave you 
consistent numbers.
    Mr. Yoder. That that might come up?
    Ms. Hagen. Right, 8,136 is the number that we are using 
currently.
    Mr. Yoder. That are frontline?
    Ms. Hagen. That are frontline employees, yes.
    Mr. Yoder. The inspectors.
    Ms. Hagen. Not just meat inspectors. That includes people 
who run the samples at the lab, investigators who go out and 
are in commerce, folks that make sure that product is under 
compliance in commerce. So those are all frontline people. No 
administrative staff, no office workers, et cetera.
    Mr. Yoder. If Congress were to tell you that those 
individuals could not be furloughed, or that you had to--let me 
ask this question a different way--you had to continually 
operate meat inspection, regardless of the 95 percent budget 
that you are facing, roughly, going forward, how would you do 
that?
    Ms. Hagen. Well, we would have to have the resources to do 
it, first of all. And if Congress told us this is something 
that we would have to do, we would do what----
    Mr. Yoder. You would have to do it with existing resources. 
Let's say that is what Congress passed legislation, signed by 
the President--or, let's say the President comes in and says, 
``Dr. Hagen, we cannot have meat processing facilities backing 
up, we cannot have the flow of meat not being processed in a 
timely manner, this is going to cause untold, you know, 
unforeseen consequences in the economy, you have to figure out 
a way to do this,'' how would you do it?
    Ms. Hagen. So I will just remind you we still cannot spend 
money that we don't have, so we still have to operate within 
fiscal law.
    Mr. Yoder. So you have got 95 percent of your budget, and 
you are told you have to figure out a way to do it. What would 
your response be to the President or to Congress?
    Ms. Hagen. If Congress tells us that we have to do 
something, we do what we are authorized to do. I would 
certainly remind everybody that it is 2013 and we have an 
integrated system. So inspectors are not out there just working 
on their own without the support of policy and scheduling and 
administrative staff and, you know, scientific interpretation 
and sampling and all these other things that have to be done.
    Mr. Yoder. Sure.
    Ms. Hagen. So it is not----
    Mr. Yoder. It is a complicated process.
    Ms. Hagen. Yes, one part does not--cannot operate without 
the other. But, you know, I would have to look at what was 
proposed. I don't really want to speculate on how exactly we 
would address the proposal----
    Mr. Yoder. Well, I think it is, obviously, a very relevant 
question, because we are trying to determine how to move 
forward. And if this is the new reality, which is going forward 
the--you know, FSIS has to operate at a 95 percent budget while 
doing 100 percent of the facilities it used to do, and if 
Congress, you know, passed legislation that said those 
operations have to continue, how would you do that?
    Ms. Hagen. We would have to figure that out, I suppose.
    Mr. Yoder. Yes. What sort of things would you do?
    Ms. Hagen. At this point in the fiscal year, I don't know 
what else we would do. I think giving us the opportunity to 
plan--and that is one of the things that is so hard about this 
scenario, is, you know, given enough time, you can absorb this 
kind of a hit more easily. So, given enough time to plan, we 
would have to come up with a way to handle that.

                         SEQUESTRATION PLANNING

    Mr. Yoder. Is it your testimony that when this passed in 
August of 2011 that there was some thought it might occur, but 
there was sort of a hope that Congress would somehow resolve 
this prior to the sequester being imposed, and so we were not 
operating as if it was a matter of fact?
    Ms. Hagen. I do not think it is just my testimony, I think 
it was everybody's hope that this would get resolved. I think 
everybody in America hoped that this would get resolved, and we 
would not find ourselves in the position that we are in now.
    So, if you are asking if we had our fingers crossed and 
just, you know----
    Mr. Yoder. Right, sure.
    Ms. Hagen [continuing]. Hoped this wasn't going to happen, 
we still believe that there can be a solution to this problem. 
We still believe that Congress can solve this problem. We can 
plan, we can reduce, we can cut to the bare bones. But in the 
end, we have to have the money to be able to do our work. And 
we have to be able to pay our employees to do our work.
    So, as I have said, you know, no amount of planning and 
process improvement and cost efficiencies can prepare us to be 
able to handle something like this six months into a fiscal 
year.
    Mr. Yoder. Well, I know it is a foreign concept that we are 
in a position where we are actually dealing with less resources 
in one year than the next in an agency. It is different to the 
Federal Government. I will tell you that in state governments, 
city governments, we have had folks in our office all week from 
municipalities that have figured out a way to reduce spending 
and live within their budgets. And for some reason in 
Washington, D.C. that is a foreign concept. So, it doesn't 
surprise me that yourself and others have been assuming that 
this would never actually occur.
    Knowing that it has occurred, and knowing that it might be 
the law of the land that FSIS operates on 95 percent of its 
expected resources going forward, what are the long-term 
solutions to make your agency work more effectively and more 
efficiently so that you can continue to operate and provide the 
services the American people expect in a more cost-effective 
manner?
    Ms. Hagen. Well, I think that it is really hard to know 
where to begin with that. It is certainly not that we did not 
anticipate that this might happen. It is one thing to plan and 
to be fiscally responsible and to assume that budgets are going 
to get tighter and tighter. And I think what I outlined in my 
testimony is that I believe and Mr. Almanza believes that 
government can deliver more, and can deliver better, and do a 
better job for the American people than it has done before. So 
we certainly have taken that attitude all along.
    In terms of long-term planning, I think it has to do with 
some of this kind of phase two planning that Mr. Almanza 
outlined before, looking at whether we are really structured 
the way we need to be structured, and whether all the jobs that 
we have are jobs that need to be done, and whether there are 
nice-to-haves that can be eliminated. And we have really--we 
have been engaged in that process for the better part of three 
years. We will continue to engage in that process. But I don't 
have a specific, long-term plan to lay out for you today, but I 
would be happy to work with you on any ideas that you have.
    Mr. Yoder. Be happy to work with you on that, as well. 
Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair. Thank you again to the 
panelists.
    I would say one of the tragic consequences of the unplanned 
sequester, or the sequester that is not the best way to go 
about cutting our deficit, is that we spend a relentless amount 
of time trying to figure out, now what should we do, and how to 
do it better, and how did we get to this position without 
planning.
    And I have to reinforce this. This was a bad way for 
Congress to go about doing it, and I, with all due respect to 
my colleagues, just am disappointed how much time we have to 
spend, as Members of Congress generally, or here in this 
Subcommittee, on something that now appears to be inevitable. 
And I appreciate how hard it is to figure out how to run a 
vital service like the food safety inspection without the 
resources that you were anticipating.
    I personally want to ask some of the questions that have 
been critically important to the farmers and the processors in 
my state and in New England, and I just want to ask you about a 
couple more. And I look forward to continuing the dialogue, 
even outside of this Committee.

                COOPERATIVE INTERSTATE SHIPMENT PROGRAM

    As I think I have mentioned to you earlier, I am very 
interested in the interstate sale of meat, and what some of the 
complications are in making that possible. On the one hand, so 
many of our food safety issues and some of the poultry rules 
you are updating reflect what goes on in, really, the big 
facilities and some extremely serious concerns that have to be 
dealt with, so that the majority of the meat supply in this 
country is safe and dependable.
    But I also see enormous growth in the number of people who 
want to buy food from a farmer who lives down the road, a 
farmer who lives down the road who wants to have processing 
facilities, huge shortages in small facilities and a lack of 
infrastructure in many places to adequately process that meat. 
So I know you are working on a lot of things around the rules 
and promotion of more of that.
    But I am interested in this concept of the interstate sale 
of meat, because it seems to be met with so much resistance, 
even when there is oversight by FSIS of state inspection, there 
seem to be ways to go about doing it, but I continually hear 
about how complicated it is. And even under the current 
program, there are very few states who are able to do it.
    So, can you just, with what time I have available, talk 
with me a little bit more about it, and I will engage in some 
other concerns I have?
    Ms. Hagen. Sure. As I mentioned in my testimony, we did 
sign agreements in the past year with Ohio, North Dakota, and 
Wisconsin. And we think this is a good program. I think that 
the major impediments--well, at least as we perceive it--is 
that states have to be not only on an equal-to, but at a same-
as status as the federal program. And that can be a big burden 
for some states, because it costs money to be able to do that, 
particularly when it comes to lab capacity and other kind of 
infrastructural details.
    So, you know, we hope that the states that have opted to 
participate will share their experience and share their 
knowledge with other states that are interested. I know that 
Maine has expressed some interest in participating in the 
interstate program. This is a real win for processors, for 
slaughterers and processors in these states, because they get 
to open up entire new marketplaces by being able to ship their 
products across a state line with a federal mark of inspection. 
So anything that we can do to help facilitate that process, we 
are happy to talk. We have a whole office of outreach that is 
available to states and to processors in these areas to be able 
to look at what it takes to comply with the program.

                 FEDERAL/STATE INSPECTION REQUIREMENTS

    Ms. Pingree. I am sure we can take an opportunity to dig in 
a little further on this and this whole issue, the complexity 
of equal-to and same-as.
    So, I mean, one thing that was brought forward to me is 
that a federally-inspected product only has to be equal to. And 
I would project that perhaps it is harder to determine what 
comes in federally. But we have different compliance with 
states. So why would we have that difference, when you can 
bring something in from a foreign country that is equal-to, but 
a state has to be same-as?
    Ms. Hagen. Because that is what the law says. That is how 
the provision was written into the farm bill.
    Ms. Pingree. Well, that is--okay. And similarly, you--just 
in thinking about what the future of that is, there is a lot of 
oversight already of how state inspection works. So it is not 
as if states are operating without a considerable amount of 
USDA and FSIS oversight on how they currently operate.
    Ms. Hagen. Correct.
    Ms. Pingree. Got it. All right. I will yield back. Thanks.
    Mr. Aderholt. Ms. DeLauro.

                             BUDGET HISTORY

    Ms. DeLauro. Thank you, Mr. Chairman. I would just like to 
say one word about sequestration and FSIS. I have a long 
experience with FSIS, having served on this Committee for at 
least 16 years, and I have never known the FSIS budget to be a 
padded budget. In fact, I would just say that, quite frankly, I 
think the budget has not been adequately--has had adequate 
resources to carry out its mission, in terms of protecting our 
domestic food supply and the amount of product that we get in, 
with regard to meat and other products, from overseas.
    So, I think that, while agencies have to live and deal with 
the effects of sequestration, quite frankly, I think that 
Congress ought to re-evaluate the madness of sequestration, and 
the havoc that it is wreaking on the American people. It is not 
about our ideology; it is about what are the services that we 
provide to the American people, and keeping a food supply safe. 
We don't talk here about roads and bridges. We talk about life 
and death issues.

                      BEYOND THE BORDER INITIATIVE

    With that, let me ask you about--because you know that this 
is a very big concern of mine--the status of the Beyond the 
Border pilot program. What food safety purpose does the 
initiative serve?
    Quite frankly--and you know this, that I do not see why the 
agency would seek to reduce or change an import inspection 
program that appears to be working, for the most part. It was 
import inspection at the border that found the E. coli in the 
product from XL Foods that, in fact, led to the largest meat 
recall in Canadian history. What is the status and the purpose 
that it serves? And I have a couple of other questions with 
regard to that.
    Ms. Hagen. Thank you for your question. The Beyond the 
Border initiative is a larger initiative. Food safety has a 
small part in that. It is looking at ways to streamline all 
kinds of operations that go on between Canada and the United 
States.
    So the Beyond the Border initiative, as it pertains to food 
safety, has to do with a pilot in which we would have one beef 
and one pork establishment on either side of the border that 
would be allowed to ship product essentially directly between 
those two establishments and complete the reinspection at the 
border inside of the United States.
    The status of the pilot is that it has not started yet. We 
are still in the process. We have identified one pork plant, 
but we have not started. We have not even identified the beef 
plants. It will be a pilot. And our role at FSIS in all of 
these discussions is to make sure that food safety stays front 
and center as we talk about the potential opportunities here.

                       CANADIAN EQUIVALENCY AUDIT

    Ms. DeLauro. You have another audit with regard to the 
Canadian food safety, the equivalency audit that was conducted 
by FSIS in December----
    Ms. Hagen. Yes.
    Ms. DeLauro [continuing]. Of 2012. When will that audit 
report be posted on the website?
    Ms. Hagen. The audit was completed in November, and we 
expect to have the report posted within the next couple of 
weeks, I think, next couple of months. I am sorry I do not have 
a specific date for you.
    And then, as you know, there is a 60-day----
    Ms. DeLauro. Weeks or months are we talking about?
    Ms. Hagen. I think months.
    Ms. DeLauro. Was the XL Foods plant that implicated in the 
fall of 2012 in that largest meat recall in Canadian history 
part of the audit?
    Ms. Hagen. Yes.
    Ms. DeLauro. Will, then, the plant's individual audit 
report be posted, as well?
    Mr. Almanza. Yes. The ultimate one, the final one will.
    Ms. DeLauro. The final will have the specifics about --it--
we have so much difficulty with product coming in to the United 
States.
    And the shortage, I understand the shortage of inspectors. 
I have, from day one, wanted to increase the number of 
inspectors, both for domestic purposes and international 
purposes. But to look at a--this Beyond the Border, this pilot 
program, which lessens the opportunity for inspection of a 
supply, when we have information that led to the largest 
Canadian meat recall in history, that we would be looking at a 
way to somehow shortchange this process--and I would--I say it 
because it will be for trade reasons. This is one more time 
where our trade begins to trump our public health interests. 
And I won't go back to Chinese poultry and processing. I have 
spent years at that business. But that is the fact here, is 
that this is about trade, rather than about food safety as a 
part of it.
    Mr. Chairman, I just have one question. I will leave to go 
back to Labor HHS.

                          INTERNATIONAL AUDITS

    I just want to know how many planned in-person 
international audits have been canceled as a result of 
sequestration.
    Ms. Hagen. We plan to complete 14 audits this fiscal year.
    Ms. DeLauro. And how many were you?
    Ms. Hagen. That has been our plan.
    Ms. DeLauro. And you are going to be able, with the 
sequestration, to----
    Ms. Hagen. We think so.
    Ms. DeLauro [continuing]. To deal with the international 
audits? Okay. Thank you, Mr. Chairman.

                           FUNDING ANOMALIES

    Mr. Aderholt. Dr. Hagen, OMB and the Department submitted 
some anomalies to the committee for consideration in the full-
year CR. Those anomalies were submitted to provide some relief 
for certain programs throughout the Department. Just curious. 
Did FSIS submit any anomalies to the Department or to OMB for 
their consideration?
    Ms. Hagen. We did not, Mr. Chairman.
    Mr. Aderholt. Mr. Farr.

                          LOCALLY-SOURCED MEAT

    Mr. Farr. Mr. Chairman, I want to follow up on 
Congresswoman Pingree's questions. There is a movement in this 
country, and particularly in California, to try--where the 
cattle ranchers are raising their own--they are not sending 
them to feed lots. They want to be able to process them 
locally. The problem you have now is the consolidation of 
slaughter plants and package meat wrap are, for economy of 
scale and what other reasons, costs, are very few. And so the 
distance to travel is extremely long and costly.
    We have, with the Department's help, certified a mobile 
slaughter unit. It has not been cost effective to operate 
because we cannot get the inspectors. We have some interest 
with some of the ranchers, being the Hearst Corporation and the 
Packard families, and things like that, who have ranches that 
are now kind of interested in creating an organic market for 
meats with a local slaughter plant.
    And the question is, with sequestration, can we--because we 
have been trying to develop the cost-effectiveness of getting 
an inspector. Obviously, you are going to have to ride circuit. 
But we do have inspections, and I think I, in my district, have 
about a dozen places now where meat is included in a product, 
so they--Monterey Pasta, and things like that--they have to 
have an inspector.
    Is it a different inspector that goes into a facility that 
is adding meat to a product than a slaughter inspection? And 
could--is there a way of working out--because we do not have 
any fees for service in this industry, do we? You do not charge 
user fees like the restaurant--like local governments do for 
inspecting restaurants, and things like that.
    Ms. Hagen. We do not.
    Mr. Almanza. For non-amenable species we do.
    Mr. Farr. For non----
    Mr. Almanza. Non-amenable.
    Ms. Hagen. Things that are not covered under the act.
    Mr. Farr. Mm-hmm.
    Ms. Hagen. But did you realize that is the congressman's 
question?
    Mr. Farr. I am asking this question kind of very broadly 
because it is really part of a rural strategy which I think the 
Secretary has been very interested in trying to take rural 
America and bring business to it, rather than having every 
young person flee because of not having the infrastructure, and 
sort of rebuilding, reinvesting in rural America and I think in 
a way--not that our area is hurting, is a poverty area--but 
what it is trying to create is these new market niches in 
organic.
    My cattle ranchers have said, ``Look, the guy next door is 
growing grapes and putting them in a bottle with is own name on 
it. I grow cows, cattle, and I want to butcher them and wrap 
them. I can serve them on my ranch, but I cannot sell them to 
the customers on my ranch to take home.'' And I want to be in 
that process of being able to have a continuum of kind of local 
meat, just like you have local produce and local wines, and 
things like that.
    Ms. Hagen. You want to address the congressman's question 
about inspector resources there?
    Mr. Almanza. So we have a number of flexibilities with our 
inspection personnel. Basically those are CSI positions, 
consumer safety inspector positions, that can perform both 
processing and slaughter inspection procedures. We have a 
number of them. In fact, some of them that we currently have 
are assigned to the mobile slaughter positions that we have, or 
the facilities that drive around.
    Probably the--one of the things that we have to work with 
the mobile slaughter unit is that where they are going to be on 
a given day and kind of in order for us to use our resources 
appropriately, to be able to plan ahead so that if they are 
going to be in a certain part of the county, then we will have 
an inspector that is available----
    Mr. Farr. Well, that is just scheduling. That is something 
we could work out.
    Mr. Almanza. Yes----
    Mr. Farr. But the problem we are having is just sort of the 
inability to get those inspectors, because it is kind of a 
rural area. It is not in an urbanized setting.
    Mr. Almanza. Oh, I--when I started my career, I started in 
Dalhart, Texas. There is not much more rural than that. I mean, 
so we have them all over the place, in one-man operations and, 
like I said, 38 plant operations. So the rural piece of it, 
that really doesn't matter. We can accommodate those.
    Mr. Farr. All right. Well, I would like to work with you, 
and I know Ms. Pingree is interested in this in the northeast, 
to do the, you know, organic and farmers markets, and things 
like that.
    Mr. Almanza. Sure.
    Mr. Farr. I think it is opening up a new market opportunity 
for business people, and that is what we are all about.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.

                          LOCALLY-SOURCED MEAT

    Ms. Pingree. Thank you, Mr. Chair. I know we are wrapping 
up, so I will just reinforce what the ranking member said, and 
say I would like to follow up with you. I know today has really 
been so focused on, how are you going to deal with the imminent 
cuts and how you are going to just keep surviving and keeping 
food safe during a really complicated financial time.
    But again, going back to the concerns I hear from my 
district, my region of the country, and really from people 
around the country, is this growing new market that USDA, in 
its 2012 ERS report on slaughter processing options and issues 
for locally-sourced meat, said that there is 20 percent growth 
in this market. But, as we know, there is a lot of challenges 
out there for smaller facilities, some of the rules around 
custom processing.
    I would just love to spend a little more time sitting down 
with you and seeing how the Department is assisting with that, 
thinking about ways, we can, to any extent possible, be 
creative, or any of the things I should know that is not 
functional in legislative language, so we can be of assistance 
to those people who want to do it.
    I will leave it there for now, because I think it is time 
to end up for the day. But I appreciate your being here today--
--
    Ms. Hagen. Happy to be here.
    Mr. Aderholt. Thank you. Well, Dr. Hagen, Administrator 
Almanza, thank you for being here today and for your testimony. 
We look forward to working with you. I know there has been some 
request for follow-up on some answers, and we----
    Ms. Hagen. Sure.
    Mr. Aderholt [continuing]. Look forward to getting those as 
we move forward in the process.
    So, again, we appreciate your presence here today and 
shedding a little bit of light on the sequestration and how it 
impacts the food service and inspection service--Food Safety 
and Inspection Service. And again, we appreciate your 
testimony. And so, at this point, the hearing is adjourned.
    [Questions submitted for the record:]
    [GRAPHIC] [TIFF OMITTED] 82566A.025
    
    [GRAPHIC] [TIFF OMITTED] 82566A.026
    
    [GRAPHIC] [TIFF OMITTED] 82566A.027
    
    [GRAPHIC] [TIFF OMITTED] 82566A.028
    
    [GRAPHIC] [TIFF OMITTED] 82566A.029
    
    [GRAPHIC] [TIFF OMITTED] 82566A.030
    
    [GRAPHIC] [TIFF OMITTED] 82566A.031
    
    [GRAPHIC] [TIFF OMITTED] 82566A.032
    
    [GRAPHIC] [TIFF OMITTED] 82566A.033
    
    [GRAPHIC] [TIFF OMITTED] 82566A.034
    
    [GRAPHIC] [TIFF OMITTED] 82566A.035
    
    [GRAPHIC] [TIFF OMITTED] 82566A.036
    
    [GRAPHIC] [TIFF OMITTED] 82566A.037
    
    [GRAPHIC] [TIFF OMITTED] 82566A.038
    
    [GRAPHIC] [TIFF OMITTED] 82566A.039
    
    [GRAPHIC] [TIFF OMITTED] 82566A.040
    
    [GRAPHIC] [TIFF OMITTED] 82566A.041
    
                                          Thursday, March 14, 2013.

                       FOOD AND NUTRITION SERVICE

                                WITNESS

AUDREY ROWE, ADMINISTRATOR

                        Introduction of Witness

    Mr. Aderholt. The subcommittee will come to order. I want 
to welcome everyone to today's hearing. This morning we will 
examine USDA's Food, Nutrition and Consumer Services mission 
area. Our witness is Ms. Audrey Rowe, Administrator for the 
Food and Nutrition Services at USDA. Welcome Ms. Rowe, glad to 
have you here this morning.
    We are pleased to hear from you, but of course, it is 
unfortunate that Under Secretary Concannon could not be here 
due to the decision by the department, but one day when the 
administration gets a budget for fiscal year 2014, we look 
forward to having the Under Secretary testify, but again, we 
are glad to have you here this morning and look forward to your 
testimony.

                           Opening Statement

    It is critical that we conduct oversight to USDA's 
nutrition programs, since this mission area accounts for 77 
percent of the total resources of the agriculture 
appropriations bill. In fiscal year 2012, the Federal 
Government spent over $106 billion to fund and operate the 
nutrition assistance programs. The Supplemental Nutrition 
Assistance Program, better known as SNAP, formerly known as 
food stamps, is a mandatory program. However it is an 
appropriated entitlement program that receives its annual 
allocation through this very bill. In fiscal year 2012, SNAP 
served an average of 46.6 million people per month. SNAP 
program level totaled $80.4 billion as compared to $40 billion 
in fiscal year 2008. This is a 100 percent increase in SNAP 
spending during President Obama's first term and is indicative 
of the Nation's uncontrolled spending on the mandatory side.
    While the administration claims that they are cracking down 
on fraud, waste and abuse in this program, there is a wide 
agreement that much more needs to be done.
    The Special Supplemental Nutrition Program for Women, 
Infants and Children or WIC, accounts for the single largest 
discretionary program in this bill. In fiscal year 2012 WIC's 
program level totaled $6.9 billion and served an average of 8.9 
million participants each month. This program has maintained a 
fairly high level of bipartisan support, but as this program 
continues to consume a larger share of the smaller 
discretionary budget, we need to ensure sufficient oversight at 
the Federal level as eligibility for the program has expanded. 
And States need to be monitored more carefully in their efforts 
to manage the program.
    Child nutrition programs in total are expected to approach 
$20 billion this year. The National School Lunch Program, 
serving over 31 million school children each day, had a fiscal 
year 2012 program level of $11.6 billion. USDA has issued new 
school meal regulations as directed by the Healthy, Hunger-Free 
Kids Act, and more proposed rules are underway. Despite some 
increased flexibility allowed in the program, we continue to 
hear the challenges facing schools in implementing these new 
regulations. We all agree the USDA's food and nutrition 
programs were designed to provide a vital safety net for those 
in need. However, I am sure there will be a disagreement among 
us on how these programs are managed and operated on a daily 
basis. My goal is to assure the integrity of these programs and 
to make sure taxpayers dollars are spent wisely, as wisely as 
possible.
    Before I recognize Ms. Rowe for her opening statement, I 
would like to recognize the ranking member of the subcommittee, 
the distinguished gentleman from California to see if he has 
any opening remarks.

                           Opening Statement

    Mr. Farr. Thank you, Mr. Chairman.
    This is one of the programs that I think is most important 
for this Nation. Indeed, we had a huge debate about health care 
in America and the cost of health care, and we learned very 
quickly that the biggest cost was because of people not taking 
care of themselves; too many people getting sick because of bad 
eating behaviors, and inactivity. We pointed out that the 
military is having a problem recruiting. Kids today aren't 
getting access to healthy foods. WIC--Women, Infants and 
Children--enrollees, essentially get access to preventive care. 
This is the place where we deal with that.
    And in light of your remarks about the integrity of 
expenditures, the wise expenditure, the wisest expenditure 
would be to grow healthy kids by getting them access to healthy 
foods, and this is the place that we do it.
    I think if we are going to really invest in an ounce of 
prevention for health care, sort of the first responders to a 
new healthy America, it has got to be in the government feeding 
programs. And when you look at what we do, we spend about $65 
billion a year, two-thirds of this budget, on buying food. And 
we ought to be leading by example that the guidelines we 
develop for nutrition are implemented, and I don't think they 
are. I think we say one thing, and then we go out and buy the 
wrong things and feed them, whether it is to the military, 
whether it is to the people who are housed in other Federal 
institutions, hospitals, jails, so on, where the government is 
involved with the feeding.
    And so I have looked forward to seeing how we can use the 
power of this committee to make sure that that ounce of 
prevention really is reaching every child who is in need of 
food in order to have a healthy education.
    Thank you for your leadership.
    Mr. Aderholt. Thank you, Mr. Farr.
    I will now turn it over to you Ms. Rowe. Without objection, 
your full testimony will be included in the record and 
following your statement, we will then go into questioning.
    So thank you and you have the floor.

                           Opening Statement

    Ms. Rowe. Thank you, Mr. Chairman, and members of the 
subcommittee, for this opportunity to speak to you today.
    As you know, we are facing great challenges. Food and 
nutrition assistance remains critically important to millions 
of Americans. And although the economy is recovering and more 
people are finding jobs, many still struggle to put nutritious 
foods on their tables. In 2011, nearly 17 million American 
households had difficulty getting enough food, and in over 6.8 
million households, one or more people simply did not get 
enough to eat; they had to cut the size of the meals, they had 
to skip meals or even go a day without food at some time during 
the year.
    Programs like SNAP, the school meals program, and WIC are 
essential to many American families still facing economic 
disruption and hardship. The positive impact of these programs 
is felt in communities across the country and reflect the 
dedication of the State and local agencies that operate them in 
partnership with USDA. We must continue to work together to 
keep these programs strong and effective.
    At the same time, Federal resources are constrained, and we 
must ensure that each hard-earned tax dollar is used 
responsibly. Americans expect and deserve nothing less. This 
has been a priority at FNS, where we have reduced 
administrative costs while staying focused on our mission under 
the Secretary's Blueprint for Stronger Service to modernize 
service delivery, while improving customer experience.
    I am particularly proud of our effort to reengineer the 
SNAP retailer operations. We created a single, national 
integrated structure, resulting in enhanced oversight, greater 
consistency and efficiency, improved communication and better 
quality service. These changes maximize our resources and 
improve our ability to fight fraud.
    Program integrity is even more critical. While the vast 
majority of those involved in our programs are honest, any 
dollar lost or misused due to integrity problems cannot help 
feed a family in need. And waste or fraud can undermine public 
confidence in these vital programs.
    So we do not tolerate fraud or abuse. We take strong action 
against the small minority of bad actors who break the rules. 
Our approach looks across programs to focus on the greatest 
risk and takes advantage of best practices in one program to 
improve oversight of others.
    Our record today reflects real achievements. We have 
reduced SNAP payment error from 8.9 percent in 2000 to 3.8 
percent in 2001, avoiding more than $3.6 billion in improper 
payments alone--for 2011. In trafficking, the illegal sale of 
SNAP benefits has dropped from 4 to 1 percent over the last 15 
years. Preventing the misuse of about $2 billion in 2012 alone. 
At the same time we are pursuing new policies to combat misuse 
of benefits and penalize violators more strongly.
    We are focused on reducing errors in the school meals 
program, without compromising access for low-income families or 
increasing burdens for the school. Our State partners have 
greatly expanded direct certification, preventing errors and 
reducing paperwork for schools and for families. And we are 
aggressively implementing new integrity tools, clarifying 
requirements and helping schools who are in trouble correct 
problems.
    We have reduced improper certification in WIC to about 3 
percent and sustained the low rate of improper vendor charges 
at about 1 percent, but we must remain vigilant. We recently 
took decisive action to investigate and deal with vendor 
management problems in a few States.
    FNS programs also address problems of poor diet, which 
often coexist with food insecurity. Today, more than one-third 
of adults and 17 percent of children are obese.
    We are implementing the Healthy, Hunger-Free Kids Act, 
including updating our school meal standards, which are tied to 
Federal funding, increased Federal funding. We are 
implementing--implementation can be challenging and we have 
provided flexibility in key areas to help schools be 
successful. Other reforms are underway, including proposed 
standards for other school foods. We continue to listen and 
provide assistance and support.
    Almost all Americans need help to improve their diet. The 
Center for Nutrition Policy and Promotion motivates Americans 
to eat better and be more physically active through their 
dietary guidelines, MyPlate and SuperTracker. FNS aligns its 
programs with the Center's guidance and education efforts. In 
sum, FNS programs will fill our Nation's commitment to 
nutrition for millions of American low-income children and 
families every day. To achieve this, we use every tool to 
manage effectively, efficiently and with great integrity. I 
would be happy to answer any questions that you may have.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.042
    
    [GRAPHIC] [TIFF OMITTED] 82566A.043
    
    [GRAPHIC] [TIFF OMITTED] 82566A.044
    
    [GRAPHIC] [TIFF OMITTED] 82566A.045
    
    [GRAPHIC] [TIFF OMITTED] 82566A.046
    
    [GRAPHIC] [TIFF OMITTED] 82566A.047
    
    [GRAPHIC] [TIFF OMITTED] 82566A.048
    
    [GRAPHIC] [TIFF OMITTED] 82566A.049
    
    [GRAPHIC] [TIFF OMITTED] 82566A.050
    
                  BROAD-BASED CATEGORICAL ELIGIBILITY

    Mr. Aderholt. Thank you, Ms. Rowe.
    I think it is important--by the way, let me say, we will go 
by the 5-minute rule, so we will each have a round with 5 
minutes so we will proceed under normal proceedings.
    I think it is important that Congress protects the 
integrity of the nutrition program so that they can serve those 
who need assistance. I think everyone on this dais would agree 
with that. But also I think participants need to meet the 
eligibility requirements established by law. I think a lot of 
Americans are very concerned right now about the exploding 
participation and cost of the SNAP program over the past 4 
years.
    In fiscal year 2008, as I alluded to earlier, there was an 
average of 28.2 million participants compared to the average of 
46.6 million participants in fiscal year 2012. Of course, the 
economy has certainly been a factor in the increase, and we 
cannot deny that other policies have contributed to that 
growth. There are 43 States that have implemented a policy 
called a broad-based categorical eligibility or automatic 
eligibility for SNAP. Under this policy, most households are 
automatically eligible for SNAP primarily because they qualify 
for a noncash benefit from the Temporary Assistance for Needy 
Families program. It also means households may not be meeting 
the assets or gross income limits eligible by the SNAP law.
    Can you describe the type of noncash benefits that these 
households are receiving in order to become automatically 
eligible for SNAP?
    Ms. Rowe. Well, broad-based categorical eligibility, as you 
know, is an optional policy that allows States to align their 
income and asset limits with other means-tested programs. That 
would be TANF, general assistance, Social Security Income. It 
is available--or SSI, I should say. It is available in 43 
States. It is a program simplification. It makes it easier for 
States to manage their eligibility process. The contribution to 
people who have come in through the broad-based categorical 
eligibility is about 2.3 percent, and we see this as a--and 
that is less than 1 percent of the benefits. So we see the 
continued flexibility that this program, that this option, 
provides the States is the reason that they are very interested 
in continuing it.
    Mr. Aderholt. What about the aspect of the households 
receiving the informational brochures on marriage counseling 
courses or having access to an 800 number hotline for pregnancy 
prevention, that aspect of it?
    Ms. Rowe. Well, when I was State administrator of these 
programs, that was something that you provided to people as 
part of the education and information, but they still had to 
meet all of the eligibility requirements to participate in the 
program.
    Mr. Aderholt. So if a taxpayer or--I am sorry, if an 
individual received an informational brochure or was given 
access to a hotline number, that would in no way--their 
eligibility would come into play there, is that what you are 
saying?
    Ms. Rowe. Yes, sir. They would still have to go through all 
of the eligibility requirements for the State.
    Mr. Aderholt. Well, under this policy, it is my 
understanding that there is no limit to the amount of assets a 
household can have to be eligible for SNAP. How many States 
have no asset limit?
    Ms. Rowe. I am not quite sure.
    Yeah, we can provide that information to you, sir.
    [The information follows:]

                  Broad-Based Categorical Eligibility

    Thirty-six (36) States have no limit on assets for households that 
receive or are eligible to receive a non-cash Temporary Assistance for 
Needy Families (TANF) or State maintenance of effort (MOE) funded 
benefit. These households are categorically eligible for SNAP under a 
State option referred to as broad-based categorical eligibility (BBCE). 
In total, 43 States have adopted BBCE policies.

    Mr. Aderholt. All right. Would you say that there is a 
substantial number of States that would fall in that category?
    Ms. Rowe. Yes.
    Mr. Aderholt. More than half of the States maybe?
    Ms. Rowe. Very well.
    Mr. Aderholt. Do you think Congress should change the laws 
or reduce USDA, change the regulations to ensure fairness 
across the States on the issues of assets and gross income 
limits?
    Ms. Rowe. Well, I think we certainly would look forward to 
working with Congress and identifying ways in which we could 
ensure that there was consistency across all the States.
    Mr. Aderholt. And I assume you would agree that also if 
someone certainly their assets accumulated quite a bit of gross 
income, then they would not qualify, correct?
    Ms. Rowe. That very well could be, yes.
    Mr. Aderholt. I think my time is up.
    Mr. Farr.

                           ASSET LIMITATIONS

    Mr. Farr. Thank you, Mr. Chairman.
    Let me just follow up on that, on asset limits, you are 
talking about all the assets, if you own a car.
    Ms. Rowe. Yes.
    Mr. Farr. The value of that car?
    Ms. Rowe. Yes.
    Mr. Farr. What has that got to do with hungry kids?
    Ms. Rowe. Well, it is an asset limit that gets factored 
into your eligibility requirement. So these are all issues that 
I certainly think we can discuss as we try and look at ways in 
which to have consistency across all of the States with regard 
to assets.
    Mr. Farr. Well, one of my criticisms of this program in 
visiting a lot of schools and coming back from a background of 
being a Peace Corps volunteer and dealing with a culture of 
poverty, is you are dealing with parties that aren't like 
people sitting in this room. They are not college graduates. 
Many of them are not high school grads. Many of them can't even 
read and write. And the old program had a form that you had to 
fill out to prove that you were poor, listing all your assets. 
You didn't even know what the word ``asset'' meant, much less 
being able to fill out these forms, which the people said here 
are kids in our school that are so poor that their parents 
cannot fill out the forms, and therefore, we cannot make them 
eligible. That form was larger than the tax form. It was 
ridiculous.

                          NUTRITION EDUCATION

    So this idea of grandfathering in children because their 
parents have qualified for social benefits that are eligible in 
those States, it seems to be a wise thing. If we are going to 
go back and try to knock them off the rolls because of some new 
asset requirement, I think that is missing the purpose. The 
purpose here is to reduce hunger and improve diet. And part of 
the thing of improving diets is education; education is so 
important. We are being educated in the wrong way in this 
country. We are being educated to eat all the fast foods, and 
look at what problems Bloomberg had just trying to limit the 
size of drinks in New York.
    There is a war against nutritional education. And we have 
got to fight that war, and we are not fighting it well. We cut 
28 percent of the education programs, $109 million in the 
fiscal year 2013 budget going back to fiscal year 2012 levels.
    Mr. Chairman, I am a little concerned if we are going to 
try to go back and make it harder for kids to qualify. I think 
what we need to do is start making the diets that we tell--the 
education--and you know what Colorado did, is that they waived 
the payment requirement for those kids that could afford it, 
just saying, look, if you are in school you ought to all get--
and a lot of nutrition counselors tell me that, in the program, 
you have kids from wealthy families who have dysfunctional 
parents; they don't get up and give their kids a breakfast in 
the morning. They just send them to school, and they are 
hungry. And they would never qualify because their parents have 
too much of an income to get access to these food programs, 
unless they have--carrying money or are getting qualified.
    And I think that if we are really going to try to grow 
healthy kids in this country and give people in poverty access 
to food, it is not a problem, I think, too many people are 
asking for food stamps. My God, we have been in a recession; 
there are so many people out of work. Even people in the 
military, even with the good payments and benefits you have in 
the military, there were still families of such size that their 
parents had to go down and ask for food stamps in order to make 
ends meet.
    So I am interested in making sure that there is not this 
big rip off of fraud in the providers, but I don't think we 
ought to do it at the expense of kids in need of food.
    And there is a little bit of time left.
    What I would like to know is, since we cut back on the 
education, how are we going to--the basic assumption of the 
American health care act is that we can grow healthier people 
in America, by changing, and this is a cultural pattern. I grew 
up without any fast food; the first McDonald's came to my 
district in 1962. I had graduated from college, had never seen 
fast food, never heard of it. So our lifestyle growing up was 
sort of fresh, living in a place where you could get access to 
stuff. We were just beginning to get into fresh frozen; 
everything was--remember, World War II, everything was still in 
cans.
    It seems to me, with the fast food industry, we have been 
able to give the wrong message, getting a lot of the wrong 
foods. That is why school districts are rebelling and taking 
soda pops out of schools and things like that. What are we 
doing in the national level to enforce a good healthy lifestyle 
in school? It is not just the school lunch program, but all of 
the other programs, the snack programs and things like that.
    Ms. Rowe. Well, clearly, we have undertaken a major public 
information, public awareness campaign, not only associated 
with our schools programs but through CNPP and the work that 
they are doing for the dietary guidelines and SuperTracker and 
MyPlate, the work that is going on with the First Lady and 
Let's Move, and the activities that are going on in the 
schools, the Healthy, Hunger-Free Kids Act--I mean, the Healthy 
U.S. School Challenge, where we have worked very hard with over 
3,000 schools and families, associated with schools to provide 
information.
    Nutrition education is a high priority. If we are going to 
change people's behavior, not only do we need to educate them, 
but we need to give them access. And that is the other part of 
the equation, we work very closely with the other parts of USDA 
to look at farmers' markets, to look at programs that will 
increase access. That is why I am so very interested in 
programs like the Corner Store Program that is in Philadelphia. 
Philadelphia is starting to see some changes because of some 
mix of strategies that they are using, but access, once you 
educate folks, make sure they have access and then the 
resources to be able to purchase the food is also very 
important.
    Mr. Farr. Thank you.
    Mr. Aderholt. Mr. Valadao.

                            WIC FOOD PACKAGE

    Mr. Valadao. Thank you.
    I am sorry, I don't fully understand the reasoning behind 
the WIC program using an outdated set of dietary guidelines, 
the 2005 dietary guidelines, for example. For the basis of this 
recommendation to exclude fresh white potatoes from the WIC 
program while this allows every other fresh vegetable and fruit 
in its produce aisle, it seems to me that the USDA would want 
to use the latest available science, which is the 2010 dietary 
guideline, as the foundation for the operation of the WIC 
program. So, at this point, I would appreciate you explaining 
this.
    I have another question before, while fresh white potatoes 
cannot be purchased with WIC benefits at a grocery store or 
supermarkets, those same potatoes can be purchased with those 
same benefits at a farmers' market, what is the nutritional 
science behind this?
    Ms. Rowe. Well, first of all, the WIC food package, it was 
the result of the work of the Institute of Medicine. And we 
took the results of the Institute of Medicine recommendations 
and looked at them, published them, had feedback on them.
    One of the things that the research demonstrated was that 
the most widely consumed vegetable, in this case starchy 
vegetable, was white potatoes. What was not consumed for 
pregnant women and young children was access to fruits, 
vegetables, whole grains. So that became the focus of our food 
package, because we knew that the access to white potatoes or 
other starchy vegetables, individuals would be able to purchase 
on their own.
    But the package is to look at the health needs of the 
individual, of things that they may not have normally purchased 
and made a part of their diet, to get them into their diet so 
it becomes a part of their behavior, so while they are pregnant 
and in the early stages of breastfeeding and the growth of the 
child we are able to have healthy options.
    Mr. Valadao. So why the difference between the farmers' 
market and the grocery store?
    Ms. Rowe. The grocery stores are--the farmers' market is a 
voucher, cash-value voucher, an individual can use that cash-
value voucher to purchase any products that they want available 
at the farmers' markets.
    Mr. Valadao. All right, thank you.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair.
    Thank you very much for your testimony here today and to 
the conversation my colleagues have had previously. I 
appreciate the mention of the white potato coming from Maine. 
We have weighed in on the potato controversy several times. And 
so, you know, we have an interest in the availability and 
access to potatoes.

                         WIC CASH VALUE VOUCHER

    I want to follow up a little bit on some more technical 
things about farmers' markets and some of the other things you 
are dealing with. I am really happy to see the recent update in 
the WIC package includes access to fresh fruits and vegetables. 
I know it increases the amount available for children and 
adults. And the way I understand it, under current WIC rules, 
State agencies are able to make the determination about 
farmers' markets, whether they are permitted to accept the 
fresh fruit and vegetable coupons. It seems like a win-win: It 
is good for our farmers, and it is, obviously, good for the 
nutrition of our children and families. And it is just doing 
everything we think should be happening with the growth of 
farmers' markets and more interest in local food.
    I guess one of the things I don't understand is why don't 
the WIC rules treat this more uniformly? Why don't they require 
every State to allow WIC to be accepted at farmers' markets? Is 
this an issue that FNS can deal with? Does it have to be 
addressed in statute? Can you make what I think is a very 
commonsense change on your own? Can you talk a little bit about 
that?
    Ms. Rowe. Well, I mean, clearly we want to see the use of 
our cash-value vouchers as widely as possible because that is 
the purpose of getting additional healthy foods available to 
individuals. It is a State option currently. We have worked 
with States and encouraged them to have as broad a definition 
for use of those cash-value vouchers as possible. It is 
something that I would be happy to have further conversations 
to determine whether we should have more of a uniformity 
mandate. Coming as a former State commissioner, I like to be 
encouraged to do things and to become aware of the most 
important thing to do and why it is important to do something 
than to have it mandated to me all the time, but it certainly 
would be something that we could have a conversation about.
    Ms. Pingree. So just clarify for me, and I would be happy 
to have a further conversation. And I understand that people 
like to be encouraged, not required, but we require a lot of 
things.
    Ms. Rowe. True.
    Ms. Pingree. In the food programs, and many of them that 
people push back on, and some of them are hard to administrate. 
Is this a statute change, or is this something that you can 
change?
    Ms. Rowe. I believe that it would be something that would 
require--and I----
    Ms. Pingree. You can get back to me.
    Ms. Rowe. Okay. It is a regulation so it is something that 
we could----
    Ms. Pingree. I would be interested in talking to you about 
that further. I think it has a lot of positive benefit. It also 
allows people to buy more potatoes.

                    WIC ELECTRONIC BENEFIT TRANSFER

    By law, WIC is required to transition to EBT by 2020. 
However, no funds were provided for WIC EBT transition in 2012, 
and as a result of the current CR, there are no funds for 2013. 
Can you update us a little bit about the current status of the 
WIC EBT implementation?
    Ms. Rowe. Well, we have currently about 10 States that are 
fully implementing WIC EBT. We have a number of States with the 
funding that we have who are in the developmental stage of 
implementing or designing a WIC EBT technology for their 
program. There are a number of other States that are in some 
planning stages. We have been encouraging States to talk to 
other State agencies within their geography, who are looking at 
changes in technology to determine whether there is some way to 
leverage what already is in place to allow for a use of WIC 
EBT, but until we have additional funding, we can't take it 
further than where we are right now.
    Ms. Pingree. So it is going to stay stalled until we move 
beyond the CR?
    Ms. Rowe. Leverage funding in States where States are 
starting to look at software development and replacing legacy 
systems and where the health departments are looking at 
changes, if we can incorporate WIC EBT into those conversations 
that would be possible.

                         FARM TO SCHOOL PROGRAM

    Ms. Pingree. I am going to run out of time in a minute, but 
just quickly I am very interested in the Farm-to-School 
program, and I had a chance to meet with the Farm-to-School 
director, and I am really impressed with the vision and the 
direction that is going.
    Do these programs have the resources that they need to 
continue to expand technical assistance to schools? Again, I 
think they are a great win for our schools. Every school I have 
seen participating has been enthusiastic with their stories 
about how much more kids want to eat, how much they like 
learning where their food comes from. It is obviously good for 
the farmers in our communities. I think it is good for 
communities overall. And the families who hear about the food 
that kids eat at school, and then they come home and say hey, 
can we go to the farmers' market and try buying that or can I 
get it in the grocery store. So I think it's a great pathway to 
healthy nutrition and good for farmers. I am curious about the 
resources and what assistance you are able to provide.
    Ms. Rowe. Well, first of all, let me thank you for the work 
that you were doing in Maine in bringing together participants 
in the farmers' market. That has been very--I mean the Farm-to-
School program; that has been very, very important. I think we 
have current funding. We anticipate funding in our fiscal year 
2013 budget that will allow us to continue. I am right now 
confident that with the vision that we have, that we can 
generate more participation in the Farm-to-School program.
    Ms. Pingree. Thanks.
    Thank you Mr. Chair.
    Mr. Aderholt. Mr. Nunnelee.

                              SNAP BUDGET

    Mr. Nunnelee. Thank you, Mr. Chairman.
    Thank you, Administrator Rowe, for being here with us. Food 
stamps are growing at a rate we can't sustain. We were spending 
$18 billion a year in 2001. We are spending $80 billion today 
and rising. Now I understand we have gone through a recession, 
and we have had families on tough times, but now, even while 
unemployment is going down, our spending on food stamps is 
continuing to go up. While the percentage of people living in 
poverty are going down, what we are spending on food stamps is 
going up.
    As a member of the Appropriations Committee, I am telling 
you we can't continue to spend this kind of money, we can't 
continue to grow this. So I need recommendations. What can we 
do to save money and not spend as much money on food stamps?
    Ms. Rowe. Well, Congressman, first of all, I mean you did 
acknowledge that growth in the food stamp program has to do 
with where our economy is today, but as we are seeing the job 
market improve, there is a lag time between seeing the impact 
of that improvement on the SNAP program. However, I was 
encouraged today in reading a couple of articles that we are 
seeing decreases in places like Arizona and parts of Florida, 
where there is starting to be a decrease in participation. 
Having jobs, helping people who are in the program who are 
working who still don't have sufficient resources and meet our 
Federal guidelines, having them have jobs that will then 
provide a living wage for their families so they don't have to 
participate in the program is the way, the only way that I see 
that we can continue to decrease the rolls.
    Mr. Nunnelee. So you are telling me, short of seeing the 
economy improve, there is nothing we can do administratively to 
change it?
    Ms. Rowe. Well, there are things that we are doing 
administratively, looking at certainly fraud and any 
trafficking activities to make sure that we are spending the 
dollars that are in the program appropriately and efficiently, 
but the real answer is to have a more robust economy so that 
people can have sufficient resources to put food on the table.

                  BROAD-BASED CATEGORICAL ELIGIBILITY

    Mr. Nunnelee. Let's talk about categorical eligibility.
    Now, your testimony before the chairman's question, 2.3 
percent of the people that are qualified for food stamps come 
in under categorical eligibility. Can you give me a dollar 
amount for the number of people--what are we spending for 
people who would otherwise not be eligible for food stamps that 
come in under categorical eligibility?
    Ms. Rowe. I will need to get back to you on the exact 
dollar amount, but it is about 1 percent of the benefit.
    [The information follows:]

                  Broad-Based Categorical Eligibility

    In 2011, less than 5 percent of SNAP participants lived in 
households that exceeded the SNAP Federal gross income limit. These 
households received about 3 percent of SNAP benefits, an indication 
that these households receive fewer benefits. The Government 
Accountability Office (GAO) found in a 2012 audit that participating 
households that were eligible only through broad-based categorical 
eligibility were more likely to have: children, earned income, higher 
shelter expenses, and higher dependent care costs. In order to receive 
benefits, all SNAP households must still have income low enough to 
received benefits and meet all other SNAP eligibility criteria.

    Mr. Nunnelee. One percent of $80 billion are people that 
otherwise wouldn't qualify but come in through the door of 
categorical eligibility?
    Ms. Rowe. Well, they--yes, they would--they come in through 
that vehicle if they come into the program, yes.
    Mr. Nunnelee. My question math says----
    Ms. Rowe. But they meet all of the other requirements to be 
in the program, let me be clear about that.
    Mr. Nunnelee. And so in response to the chairman's question 
about States with no asset test, this would allow someone who 
wins the lottery, for instance, to continue to get food stamps 
by coming in the door through categorical eligibility with no 
asset test?
    Ms. Rowe. States have the ability to design their policies 
to prevent individuals who would win a lottery. For example, 
Michigan has done that, so that they have a limit that they 
have established for an individual in terms of assets. So 
States do have some flexibility to look at their policies.
    Mr. Nunnelee. But still we say there is nothing we can do 
administratively to change the program to help us save money.
    Ms. Rowe. As I have said, Congressman, the way that I see 
this program saving money or reducing its expenditures is 
having a more robust economy.
    Mr. Nunnelee. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Ms. Rowe, good morning.
    Ms. Rowe. Good morning.
    Mr. Fortenberry. You have one of the most powerful jobs in 
the United States Government. Did you know that?
    Ms. Rowe. I love my job, I know that.
    Mr. Fortenberry. I don't think many people would 
acknowledge or recognize that, but the amount of budgeting that 
goes through your auspices is enormous.

                       SNAP FRAUD AND TRAFFICKING

    Just a couple of questions for you. I would like to have a 
deeper understanding as to how fraud actually still happens in 
the SNAP program. Now, to your credit, there has been a very 
aggressive and successful reduction in the amount of fraud, 
which has saved us billions of dollars. But explain for those 
of us who don't have criminal minds how this actually can occur 
and then what steps are now underway to tackle it.
    Ms. Rowe. Well----
    Mr. Fortenberry. One of the major ways, as I understand it, 
is complicity with the retailer.
    Ms. Rowe. Right. And that is trafficking, and it is the 
area where we concentrate a great deal of our resources, both 
in terms of the technology that we have in place, where we are 
constantly reviewing the sales that go on in real time in 
stores, we are able to identify anomalies when we see anomalies 
in the purchases in a particular day.
    Mr. Fortenberry. So the retailer would be complicit with 
the individual?
    Ms. Rowe. Right.
    Mr. Fortenberry. Saying you take this amount, and I will 
give you cash back.
    Ms. Rowe. And I will give you cash, 10 cents on the dollar, 
50 cents on the dollar, those kinds of things. When that 
happens, when we identify that and we disqualify a retailer, do 
an investigation, disqualify a retailer, we send that 
information to the State so that the State can then look at the 
client, because it takes two to participate in a trafficking 
event. So the States can then take action with respect to the 
clients.
    We have bad actors. Some of the things that we are looking 
at, for example, is we have 236,000 retailers in the program. 
They set, by law, the retailer definition of who can 
participate. We have some concerns about that, because we are 
able to identify those stores in those places where it is more 
likely to have trafficking, and if we had some greater, higher 
level, a definition with higher standards, then we would be 
able to take some of those stores out, and we would see less 
trafficking.
    Mr. Fortenberry. How do we get that done?
    Ms. Rowe. It has to be done by Congress.
    Mr. Fortenberry. I would appreciate your recommendations on 
that, because I think that is important, an ability to 
prosecute more quickly and ban a person, and that ban follows 
them around, because apparently these things open up, 
particularly maybe smaller retailers open up on the fly, as I 
understand it.
    Ms. Rowe. Well, what happens quite often is the retailer 
will attempt; we find them; we will disqualify them; they will 
attempt to sell it to someone else that they know. We have 
changed our policies and become more aggressive in that area so 
that once a new retailer is coming in from a disqualified 
store, we actually do more collateral checks to make sure that 
there isn't still going to be some arm's length relationship. 
We catch as many as we can, and those that we still have a 
belief but can't catch, we refer to OIG so they can do the 
investigations.
    Mr. Fortenberry. Would you give me those recommendations?
    Ms. Rowe. I certainly will.
    Mr. Fortenberry. That would be helpful.
    [The information follows:]

                       SNAP Fraud and Trafficking

    Last year's House Committee Farm Bill action included several 
provisions that we believe would have improved the quality of stores 
that could be authorized to participate in SNAP and, at the same time, 
limit those types of retailers that are more likely to act 
fraudulently. These provisions included limiting stores that have 
significant sales of liquor, cigarettes/tobacco products, or hot foods. 
As the Farm Bill and these related provisions were not enacted, we 
would look forward to again working with the Committee on options for 
enhancing the type of retailers that participate in SNAP to improve 
integrity in the program.

                       SNAP RETAILER ELIGIBILITY

    This also brings up the next point, we have vastly expanded 
the number of retailers, just based on anecdotal evidence, I 
see people hanging signs out front of certain kinds of shops 
that would previously not have been EBT eligible. Is that in 
conflict with food and nutrition goals? We have two sets of 
standards here in which we are trying to achieve that are 
seemingly that are in tension: One is to bring people who are 
in vulnerable circumstances the right amount of caloric intake 
but also move us toward a system where we are actually 
promoting healthier foods. But then we are setting up the 
ability to buy foods that are not consistent with that 
nutrition goal.
    Ms. Rowe. We are constrained by the definition that is in 
the law, and we are concerned about it. I mean, I--we talk 
about, this is one area that we discuss a lot. We have had some 
relief in the farm bill discussions that were going on, so when 
we get a farm bill it is my hope that----
    Mr. Fortenberry. I just came off the Ag Committee by the 
way, so all of this is fresh, and I know it is a tension, but 
if have you recommendations in that regard that would be 
appropriate for this committee as well, that would be helpful 
because this is a problem. I mean, we have got broad health 
care goals. We know that health care is inextricably tied to 
the type of food you intake, and we have set ourselves up for 
conflicting situations, I think, in terms of not incentivizing 
the right types of nutrition on one side of the aisle, and on 
the other side of the USDA corridor, we are trying to achieve 
that goal. So----
    Ms. Rowe. We would be happy to give you some 
recommendations.
    [The information follows:]

                       SNAP Retailer Eligibility

    Last year's House Committee Farm Bill action included several 
provisions that we believe would have improved the quality of stores 
that could be authorized to participate in SNAP and, at the same time, 
limit those types of retailers that are more likely to act 
fraudulently. These provisions included limiting stores that have 
significant sales of liquor, cigarettes/tobacco products, and prepared 
foods. The current statutory requirements for stores to be authorized 
to accept SNAP benefits are minimal and may allow stores that have low 
food stock, few healthy choices, and a higher risk of trafficking. As 
the Farm Bill and these related provisions were not enacted, we would 
look forward to working with the Committee on these and other standards 
that would promote healthy eating.

    Mr. Fortenberry. Okay. Mr. Chairman, do I still have time 
for a couple more questions?
    Mr. Aderholt. On our next round.
    Mr. Rooney.
    Mr. Rooney. Thank you, Mr. Chairman, and I apologize for 
walking in late.

                    SCHOOL MEAL NUTRITION STANDARDS

    I will switch gears a little bit if I could here because 
the district that I represent in South Central Florida has 
about as many oranges and cows as they do people, so I do need 
to ask some questions specifically with regard to school lunch 
and our programs there.
    We have a lot of family farms, as I mentioned, and a lot of 
kids who grow up helping out on these farms. And when updating 
the lunch and breakfast program standards, it seems like you 
kind of took a one-size-fits-all approach. I am concerned that 
some of the guidelines you are promoting overlook the 
importance of protein as part of a balanced diet. Could you 
please elaborate on how the USDA came to the decision of 
putting maximum requirements on meat for the school lunch and 
breakfast programs? Specifically, who at the USDA was involved? 
Did you work with any other agencies?
    Ms. Rowe. Well, first of all, the recommendations, the 
initial recommendations were a result of the work that we did 
with the Institute of Medicine. They did a study for us, gave 
us a series of recommendations. Those recommendations ended up 
into our policy recommendations, which we then sought public 
input. We had an extensive number of public comments. We 
reviewed each one of those comments and made a determination of 
which calorie limits we would leave in the program and why 
those calorie limits were important. We had a lot of support 
for limits on certain calories in the school meal program and 
we made a determination.
    Now we also determined, after the final rules were 
implemented and schools were trying to implement this program, 
that there needed to be some flexibilities. And so we went back 
and looked at our policy and allowed for some flexibility both 
in this school year and in the next school year, and we will be 
looking to determine whether it should be some permanent 
flexibility that would allow schools to increase the use of 
grains and meats within their school lunch programs and within 
the menu.
    Mr. Rooney. Was it based on calories almost exclusively? I 
mean, after the study and the comment period, was the decision 
just based on caloric intake, or were things like proteins and 
grains considered?
    Ms. Rowe. Yes, it was to create a balanced meal for a child 
at lunch. For many children, this is the only balanced meal 
that they get. And so we were trying to create a balanced meal 
that would be available for all children, and then, where 
needed, allow for some flexibility for different school 
districts to design their meal pattern so that it met their 
needs.
    Mr. Rooney. If I could just ask one more part to this, many 
of my constituents support the 1-year elimination of the 
maximum requirement for meat. Are there any plans to make that 
elimination permanent after the year is done? And if not, do 
you plan to ensure these kids are getting enough protein? If 
you consider what foods have the highest amount of proteins, my 
constituents will tell you that they won't touch tofu nor would 
our school children, and the allergies to dairy, nuts, seafood 
and eggs seem to be increasingly common, so what is left, and I 
would say that is beef. I am just wondering what your next 
steps will be.
    Ms. Rowe. Our next step is that we currently have extended 
the flexibility for this school year and next school year, and 
we are looking at the options for moving forward. We are also 
looking, and I should have mentioned this earlier when I talked 
about IOM, is dietary guidelines for Americans was part of our 
consideration as we looked at what the school meal patterns 
recommendations would be.
    Mr. Rooney. Thank you, I appreciate you being flexible as 
we move forward.
    Thank you, I yield back.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.
    I want to welcome our witness this morning and say, thank 
you, to you very, very much. It is a pleasure to see you back 
here today. I always have to say thank you for the great work 
that you did in Connecticut. We were really sorry to lose you 
but glad you are sitting here today. And I also want to say 
that the great work you are doing with food safety through the 
Produce Safety University is really first rate. Thank you.
    I understand that there was a comment before I came in 
about how we might be able to reduce SNAP, usage of SNAP, food 
stamps program. If we grow our economy and we put people to 
work, we will reduce the need for food stamps in the United 
States.

                      SEQUESTRATION IMPACT ON WIC

    My first question relates to a topic we heard about 
extensively yesterday, and that is sequestration. Can you 
detail for us the impact of sequestration on the programs that 
you are responsible for, specifically the WIC program? I am 
concerned about the long-term implications of sequestration and 
the Budget Control Act on WIC, because my understanding of 
sequestration 600,000 to 750,000 eligible women, infants and 
kids will not receive the good nutrition that they need between 
now and October 1st.
    Given the spending caps in the BCA, there will be 
tremendous pressure to reduce all discretionary spending, 
including WIC, in 2014 and in future years. What would be the 
consequences if we break our longstanding commitment to serving 
all eligible women, infants and kids who apply for WIC?
    Ms. Rowe. Congresswoman, if we just apply the way the 
sequestration was constructed, if we just apply the 5 percent 
to that account, it is about 600,000 individuals--women, 
infants and children that would be affected. However, we have 
been working continuously in this program to look at ways to 
contain costs. We are identifying and working with States now 
to determine the best way to mitigate the impact and try and 
understand what the exact impact will be on each State. We are 
looking at moneys that haven't been expended just yet, so 
whether some of those dollars can be reallocated. So we are 
working very aggressively with our States to determine what the 
final impact will be, and clearly, with the discussions that 
are going on at the budget level, we hope those, too, will help 
mitigate.
    But if nothing happens, if everything remains and we can't 
find additional funding, we can't find any way to mitigate the 
impact, the 5 percent in that account would be 600,000 women, 
infants and children.
    Ms. DeLauro. And that is between now and October 1st.
    Ms. Rowe. October 1st.
    Ms. DeLauro. In terms of the 600,000 and let's say your 
attempts to use other areas, other resources, what you can 
cobble together, are there people who are going to be 
jettisoned, are there women infants and children who will be 
jettisoned from that program, given the 600,000 number, which 
is a substantial number of people?
    Ms. Rowe. Well, again, given the critical nature of this 
program and what it provides to pregnant moms and to infants 
and to children, and its longstanding bipartisan support in the 
Congress, we believe that if working together with our State 
partners and with the Congress, that we can find ways to 
mitigate this impact. It is our, you know, fervent desire to 
ensure that we do not have to see a single wait list develop, 
which would end up with perhaps probably those women who are 
postpartum participating on wait lists, those kinds of things. 
But right now, we are doing everything we can to mitigate the 
impact.
    Ms. DeLauro. I appreciate that.
    And I also think it might be important, Mr. Chairman, for 
the members of the committee to know that within WIC, when we 
would begin to restrict funds, they have a listing of who goes 
first, and it really is pretty incredible. This is a priority 
list, the WIC priority list. If we don't have the funding, 
pregnant women, breast-feeding women and infants determined to 
be at nutritional risk is a first priority; infants up to 6 
months of age whose mothers participated in WIC could have--in 
any case, they have got a list of what the priorities are, the 
flip side of who will be able to continue that service are the 
people who will not be, and it is not like you are sent out a 
notification 30 days in advance for a furlough. These folks 
will come one day, and they are not going to be able to 
participate in the program because if you are postpartum and 
you are not breastfeeding, you are going off the list. And that 
word gets around, people will not come. This will be a major, 
major setback, to women, infants and children and their health. 
And this has been a program that has had extreme bipartisan 
support.
    And I thank you for what you are trying to do to mitigate 
against the loss.

                  BROAD-BASED CATEGORICAL ELIGIBILITY

    Mr. Aderholt. Thank you.
    Let me--I want to return back to what we were talking about 
earlier about the noncash benefits of the broad-based 
categorical eligibility. And I had mentioned to you earlier 
about the example about the households receiving the 
informational brochures on marriage counseling courses or 
having access to an 800 number hotline for pregnancy 
prevention. It is my understanding and I want to get it 
clarified because of some--I may not have asked the question 
exactly right, but what my question is if, in some States, if 
an individual qualifies for a TANF program, then do they--and 
such as receiving these informational brochures on marriage 
counseling courses or the 800 hotline, are they automatically 
eligible for the SNAP program?
    Ms. Rowe. They can apply for the SNAP program, but they are 
not automatically eligible for the SNAP program.
    Mr. Aderholt. There was a letter that was sent out by USDA 
to all the original administrators that--in one portion of the 
letter, it says, from this time forward, we will use the term 
broad-based categorical eligibility to refer to the policy that 
makes most, if not all, households categorically eligible for 
SNAP because they receive a noncash TANF-funded benefit or 
service, such as an informational pamphlet or 800 number.
    Ms. Rowe. Yes. I mean, I know the letter went out, but an 
individual still has to meet the eligibility requirements--the 
benefit requirements, I am sorry, the benefit requirements to 
participate in the program. You may get the brochure; you still 
have to sit down with an eligible worker, and there still has 
to be a determination that you meet the benefit requirements 
before you can participate in the program.
    Mr. Aderholt. Okay, so you are saying, just receiving those 
things in the mail it does not automatically qualify you to----
    Ms. Rowe. No.

                            SNAP OIG AUDITS

    Mr. Aderholt [continuing]. Get in the program. Okay, all 
right.
    In September, an OIG report reviewed SNAP fraud and found 
that in one State almost 7,000 households were participating in 
SNAP who had assets exceeding the limits set by law. Another 
State found that more than 61,000 households with income 
exceeding the limits set by law. What my question would be and 
what I think has concerned a lot of people is with that out 
there and if that is--if these numbers are wrong, please, let 
me know, but what our concern is, is hurting the integrity of 
the program when you have these kind of numbers of households 
that are exceeding the income limit.
    Ms. Rowe. Well, Congressman, what I would be happy to do is 
to take that information and do some additional checking on it. 
I mean, 99 percent of the individuals who participate in the 
program are eligible to participate. So I am not sure where 
those numbers, you know, how those numbers were derived by 
those States, but would be more than happy to take a look at 
it.
    Mr. Aderholt. If you could check into that.
    Ms. Rowe. I will.
    [The information follows:]

                  Broad-Based Categorical Eligibility

    This data is drawn from the OIG Audit, ``Analysis of FNS' 
Supplemental Nutrition Assistance Program (SNAP) Fraud Prevention and 
Detection Efforts--27002-0011-13.'' In the report, under a paragraph 
titled, ``Income limitations exceeded in SNAP,'' it states that in one 
State, ``we found 6,970 households that exceeded the asset limit of the 
SNAP program.''
    These households were determined to be eligible under broad-based 
categorical eligibility (BBCE). As the report acknowledges, this is 
``not a program violation or a case of questionable payments.''
    SNAP rules provide State agencies with a number of policy options 
that provide States with the flexibility to tailor SNAP to meet the 
needs of the low-income population in their States. BBCE is one of 
these allowable policy options. BBCE allows States to align SNAP income 
and asset limits with those of a Temporary Assistance for Needy 
Families (TANF) program. Under BBCE, a household may be considered 
categorically eligible for SNAP because they qualify for a non-cash 
TANF or State maintenance of effort (MOE) funded benefit. The Gross 
Income Limit of the TANF/MOE varies by State but is no greater than 200 
percent of the Federal Poverty Guidelines (FPG). Therefore, to say that 
these households exceeded income limitations is incorrect. In order to 
receive SNAP benefits, households must still have income low enough to 
receive benefits and meet all other SNAP eligibility criteria.
    OIG identified no improvements needed and provided no findings or 
recommendations regarding these 6,970 households.

    Mr. Aderholt. I think everybody at this dais realizes the 
importance of this program for the people who need it. I think 
it is what the American public and what so many individuals in 
Congress and what we hear back from our constituents is the 
frustration of the program for those who do not need the 
program and who would not qualify. And like I said, it hurts 
the integrity of the program because we want to see the people 
who need the help receive it. And for those people, it is a 
great program, and it can serve a real purpose. But to have the 
fraud and the abuse, it really hurts the integrity of the 
program, and it hurts the integrity of the work that you are 
doing. That is why I think we really need to look at this.
    We often hear that part of the reason for allowing 
households to qualify for one low-income program is to qualify 
for SNAP program is to reduce the burden on the case workers. 
Now, again, we can dispute whether that is the case or not, but 
if there was--say there is such a policy does--is 
administrative costs saved in that in any way?
    Ms. Rowe. No, I mean, once again, having worked in 
Connecticut as a commissioner and the District of Columbia as 
commissioner, administering these programs, you don't have a 
savings as a result--you have a savings is when you streamline 
the process for individuals that come in. It gets to the 
Congressman's comment with regard to the application process 
and how--what information you actually need to make a 
determination based on the law, what information is nice to 
have. We need the information that is needed to make a 
determination against the rules set by the legislation.
    The other is creating options for people to do online. Even 
if you apply online, there is still a review that is undertaken 
by a case worker. Even though technology has predictive 
intelligence and you should be able to do these things 
automatically and make a determination, the worker still needs 
to be involved. So our administrative costs, our administrative 
costs reductions, States are trying to grapple with reduced 
budgets, has more to do with how we streamline the process than 
anything else that we are trying to achieve.
    Mr. Aderholt. All right my time is up.
    Mr. Bishop.
    Mr. Bishop. Thank you very much.

                             WIC IN GEORGIA

    Ms. Rowe, it is a pleasure to see you and have you back 
before the subcommittee again. I would like to spend a little 
time on a situation we are having down in Georgia, which I 
believe you are familiar with, with respect to the WIC program. 
Can you give us an update on the status of the Food and 
Nutrition Service moratorium on the Georgia WIC program? I 
understand that your agency has only recently received the 
State's response to the original communication where the State 
was informed of your intent to place a moratorium on the WIC 
program and the particular approval of any new vendors 
statewide. Do you have any idea when you will be able to have a 
resolution to this matter so we can sort of move forward?
    Ms. Rowe. Well, as you know, Congressman, we have made some 
great progress with the leadership in the State, with the 
agencies, et cetera. We have asked for some specific 
documentation to help us with the remaining issues and findings 
that we have outstanding. Actually, as of March 15th, the 
absence of having that information in, then we will issue a 
letter of moratorium for adding new stores into the program 
until such time as we have the resolution and know the vendor 
management in the State is being handled in an efficient 
manner. And we certainly will keep you abreast of the next 
steps that we are going to engage in.
    Mr. Bishop. I am very, very frustrated with what has become 
really a major challenge within our State. There is no question 
that Georgia has for some time faced some challenges in 
administering the WIC program. But the real victims are really 
not the bureaucrats at the State and Federal level, who are 
bickering and bickering back and forth over the compliance with 
regulation, whether it was filed correctly or not; the real 
victims are really our constituents, who, throughout the State, 
will be negatively impacted by this impasse.
    You may or may not know that Bell Foods acquired 15 major 
grocery stores in Georgia, and having received some bad advice 
from the previous State administration, WIC officials, during 
the certification process, they are now barred from accepting 
WIC vouchers because they accepted them when they took over the 
new stores before it was finally approved. Unfortunately, 
because of these larger issues with the moratorium, I have a 
lot of constituents who now don't have access to grocery stores 
that accept WIC. So it is a real problem, and it is frustrating 
because the people who need the programs are the ones that are 
suffering while the bureaucrats bicker.
    Ms. Rowe. Well, we have been working very aggressively, and 
we, too, are concerned about access, and we want to make sure 
that all of our participants have access to the food products 
they need. I am not familiar with the Bell Foods, but I will 
take a look at that. We have, all the way up to our under 
secretary, have been engaged in looking at this issue in 
general. But I can assure you, Congressman, that we will do 
everything we can if we need to put in place a moratorium to 
have that moratorium lifted as quickly as possible. We have had 
to do this in other States and it gets people's attention, and 
we are able to resolve the issues much more quickly, but we 
will do everything we can so that people are not adversely 
impacted.
    [The information follows:]

                          Georgia WIC Program

    Belle Foods acquired 15 stores in Georgia, most operating as Piggly 
Wiggly stores, in July 2012. All 15 of the newly-acquired stores 
applied to become WIC vendors, as required, but prior to authorization 
by the Georgia WIC State Agency, these stores accepted $300,000 in WIC 
food instruments, thus violating WIC Program regulations. Georgia WIC 
requires vendor applicants who accept food instruments prior to 
authorization to wait 1 year before seeking WIC authorization again. 
The 1-year period can be waived if the store is needed for participant 
access. One store (Piggly Wiggly #745 in Gordon, Georgia) received a 
waiver and was authorized because there was no other authorized WIC 
vendor within a 10 mile radius, per Georgia WIC's approved participant 
access policy. The authorization became effective on January 3, 2013.
    A moratorium stops a WIC State Agency from approving any additional 
vendors for WIC; vendors that have already been authorized can continue 
to accept WIC. Under the FNS moratorium that was made effective on 
March 18, 2013, Georgia WIC cannot authorize any new vendors. FNS has 
met with Georgia WIC leadership and has accepted corrective action 
plans (CAPs) for 19 of the 20 findings from the Management Evaluation. 
To date, only three of the CAPs have been closed. The moratorium will 
remain in effect until additional corrective action plans that address 
the findings from the Management Evaluation are completed. The 1-year 
waiting period for the remaining 14 Belle Food stores expires in July 
2013, at which time they can seek WIC authorization. However, if the 
moratorium is still in effect, Georgia WIC cannot authorize any stores, 
Belle Foods or otherwise, other than those needed for participant 
access.

    Mr. Bishop. As I understand it the current administration 
has just recently taken over, and they inherited this problem 
from the previous administration, and they are working 
aggressively to try to correct it, but in the mean time, you 
know, it is the recipients who are suffering.
    Ms. Rowe. And we are providing technical assistance, and we 
will, if necessary, provide even more technical assistance 
because we just--you have heard our conversation; this is a 
critical program, and we don't want to see recipients not have 
access to the benefits that they can receive from it, so we 
will do everything we can to ensure that Georgia's residents 
are not adversely affected.
    Mr. Bishop. Thank you very kindly. I appreciate that.
    I yield back.
    Mr. Aderholt. Mr. Fortenberry.

                           SNAP PARTICIPATION

    Mr. Fortenberry. Ms. Rowe, can you tell me the average 
amount of time a person spends receiving SNAP benefits?
    Ms. Rowe. You know, the average amount of time that--it is 
about 10 months that individuals come in and then are able to 
have sufficient income through job promotions or changes in 
their circumstances and are able to meet their basic needs.
    Mr. Fortenberry. Is there a group of persons who are 
generally on the program for longer term because of certain 
incapacities, and so what percent of those SNAP recipient 
population does that represent versus this other group of 
persons, who, because of job circumstances or some temporary 
vulnerability become, eligible but then move off? You 
understand the intent of the question?
    I am trying to get a broader understanding of the nature of 
the need, because it goes to the heart of what we have been 
discussing earlier. If we would see economic improvement, 
certainly there would be a correlation to dropping off of SNAP 
benefits as well as the time spent on the SNAP benefits, but 
there is probably a population with a significant vulnerability 
that remains stable versus a population that we could correlate 
to the potential of the declining use of the program if 
economic circumstances were different.
    Ms. Rowe. I can get you the exact number, but there is a 
population of individuals who remain on the program for about 7 
years, those individuals are folks with chronic needs. One of 
the things that needs to happen for many of these individuals 
is, are there other services in programs outside of SNAP that 
they need to benefit from? So it may be individuals with major 
mental illness problems, major drug, substance abuse problems, 
major disabilities. They may be chronically homeless 
individuals. So there are a variety of circumstances in terms 
of chronic needs that these individuals have. So the exact 
number--the average length of time that they remain is about 7 
years, but the exact percentage of that, I will get back to you 
on.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.051
    
    Mr. Fortenberry. That would be helpful to know, whether it 
is 20 percent of the program or 5 percent, I would assume it is 
not the majority of the program.
    Ms. Rowe. No, no.

                        SNAP STUDENT ELIGIBILITY

    Mr. Fortenberry. Explain to me the eligibility of students 
for SNAP benefits.
    Ms. Rowe. Currently, and I am going to need some help on 
this one, I believe, because we have gone backwards and forth, 
students have to be categorically eligible to participate in 
the program, and they have to be working. So there are some--
they can be categorically eligible, and they have to be 
working, which is the way the program was, and I will admit 
before members of this committee, I was a student and found 
myself in a situation where I needed to participate in the SNAP 
program. I was in the SNAP program for about 4 months until I 
graduated. I had some working income, but it was not sufficient 
as a pregnant mom and with a family to be able to put food on 
the table. But as you can see, I benefited from the program, 
because that is why it was there, and now I am sitting before 
you today. There are many individuals like myself, who were 
students who have participated in the program, used it for what 
it was designed for, who were married, had children and needed 
that help for that short period of time. And so, as we have 
worked on this, because of my own circumstances and experiences 
and understanding, I want to make sure that students who need 
the program in order to sustain themselves and their families 
can avail themselves.
    [The information follows:]

                        SNAP Student Eligibility

    Section 6(e) of the Food and Nutrition Act provides that no 
individual who is a member of a household otherwise eligible to 
participate in SNAP shall be eligible to participate if that individual 
is enrolled at least half-time in an institution of education, unless 
the individual is:
           Under 18 or is age 50 or older;
           Not mentally or physically fit;
           Assigned to or placed in a college through:
                   a program under the Workforce Investment 
                Act,
                   a program under Section 236 of the Trade 
                Act of 1974,
                   part of an employment and training 
                program under the SNAP act, or
                   part of an employment and training 
                program operated by a State or local government;
           Working at least 20 hours a week or participating in 
        a State or Federally financed work study program;
           A parent responsible for the care of a dependent 
        household member under the age of 6;
           A parent responsible for the care of a dependent 
        household member over the age of 5 but under age 12 and does 
        not have adequate child care to enable them to attend school 
        and work a minimum of 20 hours;
           Receiving public assistance benefits under title IV-
        A of the Social Security Act; or is
           Enrolled as a result of participation in the work 
        incentive program under title IV of the Social Security Act; or 
        is
           A single parent enrolled full-time in college and 
        responsible for the care of a dependent household member under 
        the age of 12.
    If a student enrolled at least half-time does not meet one of the 
above requirements, he or she is not eligible for SNAP benefits.

    Mr. Fortenberry. I understand what you are saying, student 
is not some sort of a static, easy-to-define concept. You don't 
want to be in a situation where you have someone in an 
undergrad college who has received scholarships and may not 
have an income level and is at a substantial university taking 
out students loans, who is using money in the program for their 
own needs, because again, that takes away money and undermines, 
as the chairman rightly points out, the integrity of the 
program and takes away the funds that we do have for persons 
who are in significantly vulnerable circumstances.
    Ms. Rowe. Students are generally not eligible, but--unless 
they meet certain conditions.
    Mr. Fortenberry. Okay.

                         SNAP ASSET LIMITATIONS

    Let's go back to this question of asset test, because there 
is no cost share by States except in the administration of the 
program, you think that is a lack of incentive for States to 
actually ensure that people who don't have--who have 
significant assets but maybe a lower level of income aren't 
eligible for the program. I mean, if someone has a million 
dollars of assets and they are eligible for SNAP benefits, 
again to the question of the integrity of the program and 
really our priorities, again, we want to ensure that this is 
readily available for persons who are either incapacitated by 
something temporary or maybe chronic, as you suggested, it 
helps get them through.
    Ms. Rowe. Well, one of the things that assets, allowing 
some level of assets is that it does promote savings and for 
those who have little or no income.
    Mr. Fortenberry. I understand, again not a static concept.
    Ms. Rowe. Yes.
    Mr. Fortenberry. It would be interesting to know if you 
have the statistic, have you done any studies on this? What are 
the assets of person who are receiving this? And are there some 
outliers, where you are getting people with very high levels of 
assets but would be peculiarly qualified based upon the way in 
which we have written the standards.
    Ms. Rowe. We haven't done any studies, but if you would 
like for us to take a look at that question----
    Mr. Fortenberry. Do you think it is a wise idea, Mr. 
Chairman?
    Mr. Aderholt. We will be happy to try to entertain. We will 
work with the staff and see if something can be done.
    Mr. Fortenberry. Because, again, please understand, I think 
the chairman very well said it; it goes to the heart of the 
integrity of the program and what its core mission should be. 
And of course, we are all dealing with constraints, and we want 
this targeted to persons really in need. So just because we 
haven't defined something precisely enough and allowed for 
people who, when considering the totality of their 
circumstances, probably shouldn't be in it, actually impedes 
our ability to deliver it to the right people so----
    Ms. Rowe. You are absolutely right. And as I said, we would 
be happy to take a look at this.

                  SCHOOL MEAL STANDARDS IMPLEMENTATION

    Mr. Fortenberry. One more question, going to Mr. Rooney's 
comment, we had to do some aggressive amount of research on 
this problem of mothers writing to me, kids writing to me, 
school persons--persons involved with school lunch programs 
saying, the kids are hungry, you have to do something about 
this. Now I come from Nebraska; we tend to eat a lot, 
particularly beef. And we had a lot of difficulty a few months 
ago unpacking exactly what the problem is. Now could you go 
back and re-explain where we are in terms of the new 
guidelines, the attempts that you are making currently to 
implement flexibility? I would like a broader understanding of 
that so we can write back to people with some good information 
directly from the top.
    Ms. Rowe. Well, first of all, let me say that a lot of 
those calls, letters, which I received as well----
    Mr. Fortenberry. Should I just send you mine?
    Ms. Rowe. I have my own set. The initial implementation of 
the program, and I was on the road all the time, just trying to 
understand what was going on. And there were a number of issues 
that we were beginning to identify. One, for school districts, 
just the complexity of how to plan the meal, how to ensure that 
they were providing sufficient options for students, that some 
schools did not have an option versus serve process in their 
school. We have encouraged schools to do that and have provided 
a lot of technical assistance as we found issues.
    One of the things that I should mention is that we did make 
the flexibility in meats and grains and the calories. The 
difference in the meals that students have now in terms of 
calories, not much different than the calories that they had 
before the implementation of this program. What is different is 
the mix of what is on the tray. So students may see less of one 
product--of one food that they really like and a lot of 
another, and that has resulted in----
    Mr. Fortenberry. You don't want to see a young person going 
to a vending machine an hour later. I mean, again, it conflicts 
with our earlier nutrition goals. Thank you.
    Mr. Aderholt. Mr. Farr, I think we may have skipped over 
you in that last round, so we will give you a little bit of 
extra time on this. Go ahead.

                        NUTRITION PROGRAM ACCESS

    Mr. Farr. Thank you, Mr. Chairman.
    I think this discussion is really important because you 
don't want to have rip offs when you have essentially what we 
call help programs. I hope that the committee would really 
focus on what we are talking about, particularly with school 
lunch programs and school snack programs.
    I have spent a lot of time studying education in California 
and visit a school a week. One of the things I try to do is 
also go through the lunch rooms. What I have learned from the 
food service providers is that essentially the most regulated 
part of the entire school day is the feeding program, far more 
regulated than the classroom. And we have made it so regulated, 
and that is one of the problems. The reason people didn't get 
access is because it is difficult--we have made it difficult to 
prove that you are poor. Some don't even know how to answer 
these questions. I will bring in the long form of the SNAP 
program. I think you probably have a lower error rate under the 
EBT program than you do under the old coupon rate. So going to 
technology is one way, and the savings are much greater.
    I think, when you look at health programs, we ought not to 
have means tests so strict that we fail to carry out the 
intent. The program is here to get food to people who need it, 
not deny them necessarily because their parents have two or 
three cars. In my district, I have poor people living in real 
estate that is literally worth a million dollars; their annual 
income is $12,000. So what do you tell them in a means test? 
You have to sell your house; you are an elderly person, you 
know, people are going after them to get reverse mortgages and 
those things. There are other programs out there. But you know, 
we don't means test the kid when he wakes up in the morning and 
gets on the school bus and say, well, your parents are too 
wealthy, they could drive you to school. We don't means test 
the kid when he goes into the library and say, your parents can 
afford enough to buy you a book. Yet we means test it when they 
go into the lunch program. And the bureaucracy of that means 
test is part of the big cost to the program. And that is why 
some States have just said, look, we will make up the 
difference, Colorado has done this. I don't know if other 
States have done it. We are going to pick up every kid. And I 
think if we are going--this is where the school providers, 
because you have free and reduced meals and then the other kids 
have to pay. And they tell me, look, these kids parents can 
afford to pay, but they are not feeding the kids, and they are 
hungry. I say, what do you do? They say, we just take the money 
out of our pockets and give it to them.
    And you should see the bureaucracy of monitors. They have 
to monitor every single child; does this one qualify or not? 
And then they have to monitor which foods that child picked up; 
were they the right foods on the tray, for each child? It is a 
huge thing. And I am trying to get bar coded, bar code the kid, 
bar code the lunch and let it all be done by computers, it 
would save us billions of dollars. So, in our desire to try to 
cut the costs, let's go to the administrative side of it, 
rather than knock the kids out from the feeding side.

          HEALTHY, HUNGER-FREE KIDS ACT OF 2010 IMPLEMENTATION

    Let me ask this one question, I understand that under the 
new meal pattern that we have to develop and schools have been 
implementing, you have a section 209 of the Healthy Hunger-Free 
Kids Act of 2010 requires that local education agencies report 
information about school nutrition environment. Under this 
provision, the Secretary is required to provide guidelines to 
help these local agencies know how to properly provide 
information for nutritional quality of school program meals. I 
understand you intend to publish the proposed rule this summer 
to implement section 209. What can you tell me about how you 
are proceeding and what kinds of items that might be required? 
And let me just throw all of this into one big question. Given 
that you now have the authority to set the nutrition standards 
for competitive foods, not just reimbursable meals, is it 
reasonable to expect section 209 standards will also apply to 
competitive foods.
    And lastly, private vendors have been required to get FNS 
approval before being able to offer systems to schools getting 
certified for menu compliance required to get the additional--
in order to get the additional 6 cents provided by the HHFKA. 
The FNS has also required vendors to have nutritional analysis 
tools certified before they can be offered. Since you have 
already established these requirements, do you anticipate 
requiring a similar certification process for any system used 
in schools to rate the nutritional quality of food items in 
meals sold to schools? And would you expect these systems to be 
compliant with recommendations made by the Institute of 
Medicine report on nutrition and rating systems, including the 
IOM's primary recommendation that such systems provide a 
nonproprietary transparent translation of nutritional 
information into the health meeting? I can give you this all in 
writing if you want.
    Ms. Rowe. Well, let me just say that we probably need to 
have a conversation with you and sit down with you and your 
staff on several of the points that you made in your question, 
but there are a couple of things. One, we are moving forward 
with the regulations. We expect to have them out this summer. 
One of the--we are in the process of meeting with stakeholders, 
talking to them and getting their input into what they think is 
important that we include in the regulations, and after we have 
gone through that process, we will then move to publish those 
regulations.
    With regard to various systems, I would like to just better 
understand for myself the questions that you are asking and how 
we can be responsive to it.

                          ADMINISTRATIVE COSTS

    The one thing I should mention that I should have before is 
direct certification; about 86 percent of the children who were 
participating in the program are participating as a result of 
direct certification. That is a significant increase. We will 
continue, because that takes down a lot of that administrative 
paperwork and misunderstanding the parents may have about 
filling out the form or the form being in the backpack, and 
they never see it. So we are certainly working with direct 
certification to expand that in schools to reduce the 
administrative burden. And only about 8 percent of the cost of 
running this program goes into the administrative side. The 
rest is into the food side.
    Mr. Farr. But you have two administrative sides; you have 
the Federal administrative side, and then you have the State 
administrative side, and then the local administrative side, 
does that 8 percent include all of those levels of 
administration?
    Ms. Rowe. It is coming from the Federal administration.
    Mr. Farr. Just the Federal side. So there are still a lot 
of costs, particularly in the compliance because that has 
really got to be done at the local level.
    Ms. Rowe. And we provide the oversight to that compliance 
that goes on at the local level. So the administrative side and 
I think we can certainly again sit down and talk to you about 
the State level, and the Federal level, and the local level, 
school district level and breakdown how the administrative 
costs, what administrative costs go toward the operation of the 
program. But as I said, when we get to direct--as we expand 
direct certification the aspect of the application and 
information being--education and information being shared with 
parents will be significantly reduced.
    Mr. Farr. I will end with this, I want to say Mr. Chairman, 
I think that the Secretary of Agriculture, Secretary Vilsack, 
has done more to cut administrative costs within his agency 
than any other Secretary and done the things that we and all of 
us across political boundaries would agree needed to be done. 
Nobody likes waste and duplication and unnecessary spending. I 
think he has done an incredible job.
    At the same time, I am furious that the White House sends 
the President over here but won't send the budget over here. We 
need to have a budget. That is what we are working off. That is 
our base document. We are going to be making decisions this 
year in Congress appropriating funds for next fiscal year 
without ever having seen the President's budget. And that never 
in history has this happened. So you can tell the Secretary 
that I am pleased with his work but disappointed in his lack of 
ability to send Mr. Concannon and the other Secretary, and you 
are doing a wonderful job.
    Ms. Rowe. Thank you, sir.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair.
    I have a whole host of questions, if I don't get to all of 
them today, I know you and I will find another time to talk 
about some of the interests I have in my own district about DOD 
fresh and geographic preference, which I would love to talk to 
you some more about.

                        SNAP NUTRITION EDUCATION

    As you know, the State of Maine chose a new vendor to 
administer our SNAP education program. And my understanding is 
there has been some difficulties in the transition, and I am 
just hopeful that FNS will make a concerted effort to work 
directly with the State of Maine and the new vendor at UNE to 
ensure that Maine continues to have a strong and very impactful 
SNAP education program. It is such a good idea, and I think it 
is helpful to the families who are receiving SNAP benefit to 
have that nutrition education. So I would appreciate at some 
point to get an update from you about that. And just make sure 
this transition works well.

                       SNAP RECOVERY ACT BENEFITS

    You know, we have so much focus here on the growth of the 
program, the challenges that people are experiencing right now 
in just balancing the budget, working families who just don't 
have enough money to put food on the table. I not only hear so 
much about the need for SNAP benefits, but our food pantries 
are emptying out every week because people aren't finding their 
SNAP benefits sufficient. And it is hard to feed a family. As 
all of us know, it is a limited amount of money, and virtually 
everybody who tries the challenge of feeding yourself for $1.30 
per meal per day or feeding your children and family for that, 
it is a stretch. And I think I can confidently say most of us 
in Congress spend more money on ourselves every day to eat or 
feed our families.
    It is my understanding that, in November, for a whole 
variety of budgeting reasons, including how we funded the 
Healthy, Hunger-Free Kids Act, there is going to be a $25 
reduction per month for families in their SNAP benefits, unless 
we find funding somewhere else. So I know we are talking about 
the growth of the program and what people see as excesses or 
people who are getting it who shouldn't. I am actually worried 
about those families who are going to see the $25 cut in 
November, unless we find that funding.
    I hear from people all the time. We have had issues around 
how LIHEAP funding has decreased some of the funding we have in 
our home State. And people often think, okay, $25, no big deal, 
but I get a lot of calls when people with children can't just 
make it stretch; that is a lot of money when it is $1.30 per 
meal, per person, per day. So can you talk a little bit about 
what you think the impact of that is going to be and your 
concerns around it, if you have any?
    Ms. Rowe. Yes, I do have concerns. Clearly, that is a 
result of the ARRA increase that families have been able to 
enjoy. I think the impact is going to be that more people are 
going to be food insecure. We know from some program pilot 
projects, programs that we have initiated, that increased 
availability of resources decreases food insecurity, and we can 
show a direct link. The Economic Research Service has looked at 
that same issue and that same question. People who are not 
going to receive this benefit are going to find themselves--we 
are going to find more people who are going to be food 
insecure.
    Ms. Pingree. Well, I just want to have that out there 
because I think we spend a lot of time worrying about the 
growth of the program and are really forgetting that people are 
about to see a cut, and that, in this economy, could be a real 
challenge.

                               DOD FRESH

    Since I have a little more time, let me just make sure I 
put this out on the table, about DOD Fresh. I think you know 
that, in the last several years, there has been growing 
criticism about delivery of DOD Fresh. There have been stories 
about rotten, unusable produce arriving at schools because 
supply chains are so long from farm to table. You may not get a 
chance to answer all of this, but I would like to hear more 
about whether you think or there is continuing belief that DOD 
is the best way to administer the school nutrition program? Are 
there efforts for FNS to work more collaboratively with DOD to 
ensure the program is carried out with the goals of FNS to 
deliver fresh healthy foods? And I am also very interested and 
have had some experience in my own district around this 
geographic preference issue. It seems to me that there is still 
confusion about it, I hope you can provide me with some 
clarity. I would like to think and I would like you to clarify 
that, is the intent to have geography or the ability to provide 
food locally more important than the cost? Is that the intent? 
And could it be clarified if cost is the most important factor, 
where does the geographic preference fall? I am interested on 
the side, of course, of schools getting healthy food, but also 
from farmers, who need to be able to plan, but I think they 
encounter a lot of road blocks and some confusion. I am out of 
time, but it is an issue I am deeply concerned about and I hope 
you can talk about it more.
    Ms. Rowe. Well, clearly, we are promoting aggressively 
local sourcing. We are encouraging schools as they work with 
farmers to work locally, so that we can increase local produce 
coming into the schools. We are working with DOD. We have made 
it clear to them that their customer is getting some feedback 
from our customers that there are some challenges in their 
product, and so we are going to be sitting down with them. We 
have had some previous conversations. We will have follow-up 
conversation with them.
    We are also--you know, schools have the ability to use some 
of their cash to purchase locally, and that is where we are 
encouraging them to do local sourcing. We will soon be 
providing, for the produce that will be going into schools for 
the USDA foods, we will soon be providing origin of source so 
that schools will know where the food is coming from that they 
are purchasing as they look down the list. We will be reaching 
out more to local farmers and local geographic areas to get 
them into the program.
    I have learned a lot more about farming since I have been 
engaged in this area, and I know it is very difficult for 
farmers to be able to plan and understand what they are going 
to need to plant and when it is going to be harvested and how 
much they are going to need. So we are working very closely 
with school districts so that they can understand that this 
planning has to go on. And we need to have some guarantees for 
farmers, so they understand what their yield will bring to them 
in terms of new revenue.
    So we would be happy to have some more conversation with 
you on it, but it is one that I have become very much aware of 
and have been very much an advocate in working with our schools 
and working with our farmers and understanding how to work with 
the schools, which is the other side of the equation.
    Ms. Pingree. Great, I am happy to hear that. And I will be 
glad to talk to you further. Thank you.
    Mr. Aderholt. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.

                           SNAP PARTICIPATION

    Ms. Rowe, I understand while I was gone, there was some 
discussion about the length of time that people are on food 
stamps. And I will tell you, last year, I asked Secretary 
Concannon that question, and his response was that roughly half 
the people that are on food stamps are on 7 years or longer. 
And it is not fair to ask him or ask you to respond to a 
question like that off the top of your head, so I am just 
asking for the record. Can you submit some type of aging 
information? Let's get a snapshot, whether it is the close of 
the calendar year or the close of the fiscal year that shows 
how long how many people are on food stamps. If you could do 
that, that would be helpful.
    Ms. Rowe. I would be happy to do that, sir.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.052
    
                            SNAP TRAFFICKING

    Mr. Nunnelee. Thank you. Now I do still stand in amazement 
that your response was there is virtually nothing we can do to 
improve the rising costs other than improve the economy. So I 
have just got to ask you a couple of questions in that area. 
When I go to the grocery store and I use my debit card, they 
seem to go through elaborate hoops and hurdles to make sure 
that I am the owner of that debit card. Is there nothing we can 
do to make sure that when somebody uses an EBT card, that it is 
the one who has been issued that card that is using it and not 
somebody else?
    Ms. Rowe. Well, when the card is issued, there are a number 
of people in the household who may be approved to use that card 
when they go shopping. There is a PIN, and that is the unique 
identifier that someone has to enter into the system, just as 
you or I enter our PIN number so that we know that Audrey Rowe 
is the person that is making this purchase.
    Mr. Nunnelee. I will make me be the bad guy, not Ms. Rowe. 
But there is nothing in the system that prohibits me as an EBT 
recipient from getting cash from somebody and allowing them to 
go use my EBT card if I give them that PIN?
    Ms. Rowe. Well, that is trafficking. And that is when you 
set yourself up for disqualification from the program, both the 
trafficker, the person that is making the purchase and 
yourself; that is a different situation, but if you are, which 
a majority of our people are, honestly giving your card to your 
daughter, son, representative, payee give them your PIN, they 
go in. But yes, if someone does that, that is trafficking.
    Mr. Nunnelee. How do we uncover that trafficking?
    Ms. Rowe. Usually, in a number of ways. We are able to look 
at the vendor transactions, usually trafficking when someone 
goes in, there are some anomalies in the kinds of purchases 
that that card has made previously and what they are purchasing 
now. When we see those anomalies, we take some immediate 
action. We may actually go and do an undercover. We may do a 
variety of things to try and identify, is this store or is this 
person--is this store allowing those transactions to take place 
because they are colluding with the individual, or if this is 
an individual who has passed their card on? And we catch those 
all the time. We aggressively go after them. We turn them over 
to OIG. We will prosecute someone. I mean, we make it real 
clear that, within the program, that kind of activity is 
illegal, and you will be prosecuted.
    Mr. Nunnelee. And I have got in front of me applications 
from my home State. The thing that jumps out at me, we have 
gone to great lengths as a Congress to make sure that if a 
person takes out a loan or a credit card application, that 
there are certain disclaimers that are in very large print and 
in much more bold font than the rest of the application. And I 
don't expect you to be familiar with those type of regulations, 
but it jumps out at me that the application for food stamps in 
my home State, there is the disclaimer that says, ``if you 
commit fraud, you are personally responsible,'' but it is 
blended in with all the other font. The thing that does jump 
out says, ``you can get benefits within 7 days.'' That is in 
big bold font.
    Can we not require large font on the applications 
concerning fraud, concerning trafficking, as you described, so 
that we can make it much more plain to individuals applying, 
that if you commit fraud, you will be personally liable for 
this?
    Ms. Rowe. Well I can say, yes, we can look into and 
determine whether we can do that. For someone who is applying 
as a retailer, there is big font on there, that if we determine 
that you are trafficking, you can be prosecuted or immediately 
disqualified. That is part of our new very aggressive program 
to address trafficking and fraud in the program. So, yes, we 
can look into that and suggest to States that they make some 
change with regard to the font that they have on their program 
for trafficking, for illegal use as well.
    [The information follows:]

                        SNAP State Applications

    Each State Agency develops its own SNAP application. Under SNAP 
regulations, States must include prominent and boldface lettering that 
explains:
           That the applicant may be subject to criminal 
        prosecution for knowingly providing incorrect information; and
           The civil and criminal provisions and penalties for 
        violations of the Food and Nutrition Act, which includes those 
        provisions against fraud and trafficking.
    As States have implemented online applications, FNS has built these 
requirements into guidance and checklists for conducting State reviews. 
Mississippi has not developed an online application to date. We will 
work with the State to ensure all requirements are met.

    Mr. Nunnelee. For individuals.
    Ms. Rowe. For individuals as well, yes.
    Mr. Nunnelee. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.

                          SEQUESTRATION IMPACT

    Mr. Bishop. Thank you very much.
    I kind of want to turn my attention now to veterans, hunger 
and sequestration. I have been very encouraged to find out that 
the Food and Nutrition Service has worked very hard to make 
sure that veterans and their families are informed about 
potential benefits, particularly since less than 1 percent of 
all of the nutrition benefits go to veterans. For example, FNS 
has developed a Web site, which can help veterans navigate the 
network of services, including SNAP, food stamps, collaborated 
with the Veterans Affairs Readjustment Counseling Service to 
distribute a brochure, which I think you prepared, entitled, 
``How to Get Food Help.'' And you have done that in 300 
adjustment centers and 70 mobile veteran centers around the 
country. And you are working with the Department of Veterans 
Affairs to cross promote benefits and resources to disabled 
veterans and their families and to identify new areas of 
collaboration.
    And I congratulate you and thank you very much for that.
    Can you tell us, though, what, if any, impact sequestration 
and the other proposed reductions in the food nutrition 
programs will have on these initiatives aimed at veterans?
    Ms. Rowe. Well, I don't believe that--as I think about, I 
am thinking about how the work that we do with veterans is our 
staff going in and training individuals who are working with 
vets who are reentering back into their homes. We have been in 
this process with regard to our staffing. We will not be 
furloughing any of our staff as of right now. So I anticipate 
that those kinds of requests to continue to work with veterans 
and veteran agencies we will be able to continue.
    Mr. Bishop. So you don't anticipate a staff shortage to 
make that collaboration more difficult?
    Ms. Rowe. Well, sir, we have, starting in 2011, we started 
experiencing reduction in our budget. Our current staff level 
is at the 2003 staff level. One of the reasons we have taken so 
much action and focused aggressively in reengineering our 
processes is so that we can reallocate staff to target into 
working in areas that we have targeted as high priority. So, in 
that sense, no, I do not see any change in the work that we are 
doing with veterans today.
    Mr. Bishop. And the utilization of your IT upgrades, that 
will facilitate some of the things that will allow you to do 
more with less?
    Ms. Rowe. Yes, absolutely. We have upgraded our IT systems. 
We have been reengineering our contracting systems. We have 
reduced our footprint around the country. We have many more 
workers who are engaged in telework, appropriately stationed. 
We have done a number of things within the agency to allow us 
to work within the availability of resources that we have.

                            PROGRAM OUTREACH

    Mr. Bishop. Okay. According to a recent Gallup poll, more 
than one in six Americans said that, in 2012, there have been 
times over the last year they didn't have enough money to buy 
food that they and their families needed. We also know that the 
rate at which SNAP eligible people are enrolled and receiving 
benefits vary substantially by State and locality. For example, 
less than 75 percent of people in Georgia who are eligible to 
participate in SNAP actually receive benefits. How many States 
have SNAP outreach plans, and what is FNS doing with respect to 
helping States optimize their participation of SNAP programs? 
And the same thing goes for the school lunch program, where, 
according to reports, less than half of the poor children that 
are eligible for breakfast are not participating in a program? 
And of course, the only ones who arrive who get breakfast are 
those who come early, and the others--many don't want to own up 
to the fact that they are poor and they need it. What 
strategies do you have in place to increase the number of 
eligible children and to increase the outreach?
    Ms. Rowe. Well, again, clearly, with regard to our overall 
outreach that we are engaged in, all States are required to 
have a State plan for outreach, which regional offices review 
very carefully. We look for a number of things to ensure that 
they are properly targeted to populations of people who are not 
participating in the program but who would be eligible. We work 
with our schools, some of the outreach that we encourage our 
schools to do is through PTAs and other forums that exist in 
the school environment, that information is made available to 
the breakfast programs. We work with schools through the State 
agencies, and States have primary responsibility, but to the 
extent we know of best practices that are working in another 
State, we share that. We use our Web site to convey a great 
deal of information that would be technical support to States. 
So we aggressively look at ways to educate individuals about 
the program and the eligibility requirements.
    Mr. Bishop. So you encourage the States and the local 
school districts and the localities to visit your Web site 
and--so that is stressed.
    Ms. Rowe. Absolutely.
    Mr. Bishop. Before the electronic age, they would have to 
depend on the State to transmit that information, but now they 
can get it directly from your Web site.
    Ms. Rowe. They can go to our Web site. There is something 
called the Food Service Management Institute, located in 
Oxford, Mississippi, which does a great job at training, 
information. That is directly available to the food service 
staff and the food service directors in the States, but we do 
look carefully because of the feedback that we have gotten that 
everyone is not necessarily--the kind of communication that 
that we would like to see, it is not necessarily taking place. 
So we zero in to make sure that nonprofit organizations, 
organizations that are what I consider to be the boots on the 
ground, organizations that really touch people who need these 
programs are given the information that they need.
    [The information follows:]

                     Nutrition Assistance Outreach

    In FY 2012, FNS approved 42 State outreach plans.

    Mr. Bishop. Thank you.
    Mr. Yoder [presiding]. Ms. Rowe, I am Congressman Yoder 
from Kansas. I am taking the seat of Chairman Aderholt. He had 
to step out for a minute.
    Welcome to the committee.

                         WIC INCOME ELIGIBILITY

    I had a few questions for you. I wanted to particularly ask 
you about the GAO report from February 2013, entitled ``WIC 
Program Improved Oversight of Income Eligibility Determination 
Needed.'' Are you familiar with this report?
    Ms. Rowe. Yes.
    Mr. Yoder. I noted just some conclusions of the report and 
wanted to get some information and feedback from you. In 
particular, the report questions integrity of the WIC program 
and identifies potential improvements in program administration 
to strengthen the WIC program for the future. Among its key 
findings, the GAO concluded that FNS has not monitored States' 
compliance with Federal regulations on income eligibility 
determinations, that FNS allows too much discretion to the 
States and local WIC agencies, and that adjunctive eligibility 
is no longer in line with WIC program goals, stating that many 
States have increased their eligibility thresholds beyond the 
185 percent poverty level. And as a result, more than half of 
all U.S. infants are now enrolled in the WIC program. Have you 
responded to this report yet, and how do you respond to the 
assertions made?
    Ms. Rowe. Yes, we have responded to the report. With regard 
to the income eligibility, we have income guidelines, which 
have been in existence for some time; we have updated them with 
policy guidance over the years. What we will be doing this 
April is issuing new updated eligibility income guidelines for 
all States to follow. Then we will be going out to make sure 
that States are trained and understand what is expected of them 
with regard to these new guidelines. I have asked staff to do 
management evaluations of all of our State agencies to ensure 
that they are adhering to the guidelines that we not only have 
for income, but any of the other management guidelines that we 
have issued that States are adhering. So we will start that 
management evaluation next month, and we will run those until 
we have looked at every single State.

                       WIC ADJUNCTIVE ELIGIBILITY

    With regard to adjunctive eligibility, which is what you 
were referring to, I do, you know, I think the big--the program 
itself is well targeted to those who are most vulnerable; 76 
percent of the participants in the WIC program are eligible. 
However, Federal law allows those individuals who are eligible 
to participate in SNAP, Medicaid and TANF to be deemed eligible 
adjunctively to participate in the WIC program. It, again, is a 
small percentage; it is about 2.9 percent of our participants 
who exceed the 185 percent of poverty level. We continually 
monitor that data, but that is, of course, a State option, and 
it is Federal law.
    Mr. Yoder. Do we know how many children that affects?
    Ms. Rowe. I can get you that information. I don't have it.
    [The information follows:]

    Nationwide, WIC certification errors were approximately 3 percent 
in 2009. FNS regularly provides technical assistance to WIC State 
agencies regarding income eligibility determinations, which are a part 
of the certification process. The guidance we plan to issue will ensure 
consistent use and application of income determination policy across 
State agencies.
    The Child Nutrition Act confers adjunctive (or automatic) income 
eligibility for WIC for categorically eligible persons participating in 
the following programs: Supplemental Nutrition Assistance Program 
(SNAP), Medicaid or Temporary Assistance for Needy Families (TANF). In 
addition, if you are a member of a family that includes a pregnant 
woman or infant who participates in Medicaid, any categorically 
eligible family member is adjunctively income eligible for WIC.
    In some States, individuals with incomes higher than those 
established for WIC participation (185 percent of the federal poverty 
level) are eligible for Medicaid. Therefore, by law, such individuals 
are eligible for WIC and State agencies cannot deny benefits based on 
their income level. Our guidance to States will be consistent with the 
law. We do not have data on how many participants, including how many 
children, would be affected if adjunctive eligibility was not in place.

    Mr. Yoder. Certainly, not having a uniform system when we 
are dealing with the thresholds and income levels and certainly 
those things affect families in one State differently than 
other family; that is obviously a concern you addressed as 
well. Do you know if you move to retraining and refocusing our 
State folks to ensure they are following the rules and the 
thresholds, et cetera, in a consistent way, how many children 
that would take off the rolls?
    Ms. Rowe. Well, let me just say the rules or the training 
that we would provide would be targeted to ensuring that all of 
those who are on the rolls are eligible to be on the rolls. I 
cannot tell you how many will be affected until we go through 
the entire process, but the intent would be to ensure that 
anyone who is participating in the program either participates 
as a result of adjunctive eligibility or through the regular 
application.
    Mr. Yoder. And what we don't know is how many people 
qualify who don't qualify under one of those two measures are 
receiving benefits who don't qualify under adjunctive or income 
eligibility?
    Ms. Rowe. Under adjunctive or--it is about--I think the 
number is about 3 percent.
    Mr. Yoder. That don't qualify under one of those two 
criteria but are still receiving benefits.
    Ms. Rowe. Correct.
    Mr. Yoder. So they may be taken off the system them.
    Ms. Rowe. They may be impacted.
    Mr. Yoder. Follow the GAO report. Okay. And do we know how 
many children that is?

                      SCHOOL NUTRITION FLEXIBILITY

    Mr. Yoder. And I just wanted to echo some of the comments 
of my colleagues that have been made earlier regarding the 
nutrition programs. Many of our local schools are obviously 
having challenges with this uniform system. And do we have 
opportunities to create flexibility in what we could look at 
that would help schools tailor the needs towards local 
communities?
    Ms. Rowe. We created some flexibility. We continue to 
listen and are willing to create flexibility, where 
appropriate, so that we can make it easy for the schools to do 
what we want--what we all want to see happen, and that is a 
healthy environment for our children. We will evaluate, and we 
want to get through the first year. We are going to evaluate 
the impact. We are going to look at what worked, what didn't 
work, what changes we may need to consider for future years. 
And so nothing is static, as far as I am concerned. We all 
have--it is a dynamic process, but the bottom line of what we 
are trying to achieve is ensuring that our children have access 
to healthy food from the time they enter the school day until 
the time they leave.
    Mr. Yoder. Thank you, Ms. Rowe.
    Ms. DeLauro.

                           IMPROPER PAYMENTS

    Ms. DeLauro. Thank you very much, Mr. Chairman.
    There has been a lot of talk about SNAP and waste, fraud 
and abuse, and error. I think it is interesting to note for the 
record that the SNAP error rate is about 3 percent. I wish we 
could go to a variety of other Federal programs and look at 
their error rates. Case in point, and I want to ask the 
chairman to see if this is a committee that can look into the 
issue of--before I say that, let me just say this, we have in 
other farm programs with direct payments, we continue to send 
direct payments to people who are dead and who have been dead 
for several years. We ought to try to take a look at that in 
terms of what the loss is in that area as well, in terms of 
waste.
    But I want to specifically mention the Crop Insurance 
Program. I will just try to do this very, very quickly. I don't 
know how much is known about the Crop Insurance Program. I 
support it. I wish it applied to my part of the country in the 
way that it does in other parts of the country. However, 
Federal Government picks up 60 percent of the cost of the 
premiums in the Crop Insurance Program; that does not even 
include administrative costs.
    Secondly, there are 26 beneficiaries, 26, who receive at 
least $1 million in a premium subsidy. There is no income 
threshold. There is no asset test. There is nothing that says 
you will get your million dollars, and you know what? We can't 
find out who they are. We can't find out who the 26 are, 
because we are forbidden by statute; transparency is forbidden.
    So I want to ask this committee to let us look into the 
Crop Insurance Program. Let us take a look at the waste in that 
program that is there and figure out how the Federal Government 
can save money, in addition to the direct payments that we are 
paying to dead people in this Nation.

                       SNAP RECOVERY ACT BENEFITS

    With that, Ms. Rowe, let me move and ask you, I want to 
follow up on something my colleague, Ms. Pingree, was 
mentioning. A cut in benefits this fall when ARRA ends, the 
average household, and SNAP receives $281 million in SNAP 
benefits, $413 a month for a household with kids. Eighty 
percent of SNAP benefits are used in the first half of the 
month, and yet starting in November, every SNAP recipient will 
lose about $25 a month in food assistance for a family of four. 
I share your concern and my colleague's concern about the 
impact of that reduction.

                    SNAP PARTICIPANT CHARACTERISTICS

    Can you, Ms. Rowe, discuss the make up of the SNAP case 
load? It is my understanding that 55 percent of the case load 
lives below half the Federal poverty line, not in the case of 
the folks who are getting at least a million dollars in the 
premium subsidy--I suspect they are eating well, probably more 
than three meals a day. Folks below half the Federal poverty 
line, that is below $9,500 per year for a family of three, and 
that more than 90 percent of SNAP recipients live below 100 
percent of the Federal poverty line. Can you discuss how SNAP 
has been effective at targeting resources to the poorest 
Americans?
    Ms. Rowe. Well, let me talk about the characteristics of 
the participants. Nearly 75 percent of individuals on the SNAP 
program are under the age of 18, or 60 or older, or disabled, 
so it is children, seniors or disabled. If you look at the data 
between SNAP households that had, in 1991, 41 percent of all 
SNAP households received cash welfare and only 20 percent had 
earnings; if you look at 2011, 8 percent of the households 
received cash only, and 31 percent have earnings. And so even 
though people are working, they are still needing to 
participate in this program. In 2011, 43 percent of recipients 
had a gross income at or below 50 percent of the poverty line, 
and so that would be, for a family of three, $763 would have 
been the gross income that was available. For participants, in 
terms of diversity, 35 percent are White, 23 percent are 
African American, 15 percent are Hispanic, 3 percent Asian, 4 
percent Native Americans. And the balance, we do no have that 
data because they did not report, but for those who reported, 
that is the data that we have available.
    Ms. DeLauro. I want to thank you for that, and I also just 
want to say to you, I would ask you to explain it, my time is 
going to run out, but the system that USDA uses to make sure 
that only people who are truly eligible receive the assistance 
from this program, I think it is really incredible what has 
been done, and that has an error rate at 3 percent. I defy 
you--and I come from a State that is defense dependent, so I do 
make a case here, but I will tell you, let's take a look at 
what 99 percent of the defense contractors are getting and 
let's take a look at the waste, fraud and abuse that exists 
there, before we begin to talk about people who live well below 
the poverty line. And these days, in my district, Connecticut, 
richest State in the Union statistically, one in seven, one in 
seven don't know where their next meal is coming from, and it 
is not food insecurity. They are going to bed hungry. And that 
is kids going to bed hungry in this Nation. And it is not 
something that we can afford, and if we do create jobs, if we 
do grow the economy, we can allow for them to move forward.
    Thank you for the great work that you do.
    Ms. Rowe. Thank you.
    Mr. Yoder. Thank you, Ms. DeLauro.
    Any other questions?
    That concludes our hearing.
    Thank you so much.
    Ms. Rowe. Thank you, sir.
    [Questions submitted for the record:]
    [GRAPHIC] [TIFF OMITTED] 82566A.053
    
    [GRAPHIC] [TIFF OMITTED] 82566A.054
    
    [GRAPHIC] [TIFF OMITTED] 82566A.055
    
    [GRAPHIC] [TIFF OMITTED] 82566A.056
    
    [GRAPHIC] [TIFF OMITTED] 82566A.057
    
    [GRAPHIC] [TIFF OMITTED] 82566A.058
    
    [GRAPHIC] [TIFF OMITTED] 82566A.059
    
    [GRAPHIC] [TIFF OMITTED] 82566A.060
    
    [GRAPHIC] [TIFF OMITTED] 82566A.061
    
    [GRAPHIC] [TIFF OMITTED] 82566A.062
    
    [GRAPHIC] [TIFF OMITTED] 82566A.063
    
    [GRAPHIC] [TIFF OMITTED] 82566A.064
    
    [GRAPHIC] [TIFF OMITTED] 82566A.065
    
    [GRAPHIC] [TIFF OMITTED] 82566A.066
    
    [GRAPHIC] [TIFF OMITTED] 82566A.067
    
    [GRAPHIC] [TIFF OMITTED] 82566A.068
    
    [GRAPHIC] [TIFF OMITTED] 82566A.069
    
    [GRAPHIC] [TIFF OMITTED] 82566A.070
    
    [GRAPHIC] [TIFF OMITTED] 82566A.071
    
    [GRAPHIC] [TIFF OMITTED] 82566A.072
    
    [GRAPHIC] [TIFF OMITTED] 82566A.073
    
    [GRAPHIC] [TIFF OMITTED] 82566A.074
    
    [GRAPHIC] [TIFF OMITTED] 82566A.075
    
    [GRAPHIC] [TIFF OMITTED] 82566A.076
    
    [GRAPHIC] [TIFF OMITTED] 82566A.077
    
    [GRAPHIC] [TIFF OMITTED] 82566A.078
    
    [GRAPHIC] [TIFF OMITTED] 82566A.079
    
    [GRAPHIC] [TIFF OMITTED] 82566A.080
    
    [GRAPHIC] [TIFF OMITTED] 82566A.081
    
    [GRAPHIC] [TIFF OMITTED] 82566A.082
    
    [GRAPHIC] [TIFF OMITTED] 82566A.083
    
    [GRAPHIC] [TIFF OMITTED] 82566A.084
    
    [GRAPHIC] [TIFF OMITTED] 82566A.085
    
    [GRAPHIC] [TIFF OMITTED] 82566A.086
    
    [GRAPHIC] [TIFF OMITTED] 82566A.087
    
    [GRAPHIC] [TIFF OMITTED] 82566A.088
    
    [GRAPHIC] [TIFF OMITTED] 82566A.089
    
    [GRAPHIC] [TIFF OMITTED] 82566A.090
    
    [GRAPHIC] [TIFF OMITTED] 82566A.091
    
    [GRAPHIC] [TIFF OMITTED] 82566A.092
    
    [GRAPHIC] [TIFF OMITTED] 82566A.093
    
    [GRAPHIC] [TIFF OMITTED] 82566A.094
    
    [GRAPHIC] [TIFF OMITTED] 82566A.095
    
    [GRAPHIC] [TIFF OMITTED] 82566A.096
    
    [GRAPHIC] [TIFF OMITTED] 82566A.097
    
    [GRAPHIC] [TIFF OMITTED] 82566A.098
    
    [GRAPHIC] [TIFF OMITTED] 82566A.099
    
    [GRAPHIC] [TIFF OMITTED] 82566A.100
    
    [GRAPHIC] [TIFF OMITTED] 82566A.101
    
    [GRAPHIC] [TIFF OMITTED] 82566A.102
    
    [GRAPHIC] [TIFF OMITTED] 82566A.103
    
    [GRAPHIC] [TIFF OMITTED] 82566A.104
    
    [GRAPHIC] [TIFF OMITTED] 82566A.105
    
    [GRAPHIC] [TIFF OMITTED] 82566A.106
    
    [GRAPHIC] [TIFF OMITTED] 82566A.107
    
    [GRAPHIC] [TIFF OMITTED] 82566A.108
    
    [GRAPHIC] [TIFF OMITTED] 82566A.109
    
    [GRAPHIC] [TIFF OMITTED] 82566A.110
    
    [GRAPHIC] [TIFF OMITTED] 82566A.111
    
    [GRAPHIC] [TIFF OMITTED] 82566A.112
    
    [GRAPHIC] [TIFF OMITTED] 82566A.113
    
    [GRAPHIC] [TIFF OMITTED] 82566A.114
    
    [GRAPHIC] [TIFF OMITTED] 82566A.115
    
    [GRAPHIC] [TIFF OMITTED] 82566A.116
    
    [GRAPHIC] [TIFF OMITTED] 82566A.117
    
    [GRAPHIC] [TIFF OMITTED] 82566A.118
    
    [GRAPHIC] [TIFF OMITTED] 82566A.119
    
    [GRAPHIC] [TIFF OMITTED] 82566A.120
    
    [GRAPHIC] [TIFF OMITTED] 82566A.121
    
    [GRAPHIC] [TIFF OMITTED] 82566A.122
    
    [GRAPHIC] [TIFF OMITTED] 82566A.123
    
    [GRAPHIC] [TIFF OMITTED] 82566A.124
    
    [GRAPHIC] [TIFF OMITTED] 82566A.125
    
    [GRAPHIC] [TIFF OMITTED] 82566A.126
    
    [GRAPHIC] [TIFF OMITTED] 82566A.127
    
    [GRAPHIC] [TIFF OMITTED] 82566A.128
    
    [GRAPHIC] [TIFF OMITTED] 82566A.129
    
    [GRAPHIC] [TIFF OMITTED] 82566A.130
    
    [GRAPHIC] [TIFF OMITTED] 82566A.131
    
    [GRAPHIC] [TIFF OMITTED] 82566A.132
    
    [GRAPHIC] [TIFF OMITTED] 82566A.133
    
    [GRAPHIC] [TIFF OMITTED] 82566A.134
    
    [GRAPHIC] [TIFF OMITTED] 82566A.135
    
    [GRAPHIC] [TIFF OMITTED] 82566A.136
    
    [GRAPHIC] [TIFF OMITTED] 82566A.137
    
    [GRAPHIC] [TIFF OMITTED] 82566A.138
    
    [GRAPHIC] [TIFF OMITTED] 82566A.139
    
    [GRAPHIC] [TIFF OMITTED] 82566A.140
    
    [GRAPHIC] [TIFF OMITTED] 82566A.141
    
    [GRAPHIC] [TIFF OMITTED] 82566A.142
    
    [GRAPHIC] [TIFF OMITTED] 82566A.143
    
    [GRAPHIC] [TIFF OMITTED] 82566A.144
    
    [GRAPHIC] [TIFF OMITTED] 82566A.145
    
    [GRAPHIC] [TIFF OMITTED] 82566A.146
    
    [GRAPHIC] [TIFF OMITTED] 82566A.147
    
    [GRAPHIC] [TIFF OMITTED] 82566A.148
    
    [GRAPHIC] [TIFF OMITTED] 82566A.149
    
    [GRAPHIC] [TIFF OMITTED] 82566A.150
    
    [GRAPHIC] [TIFF OMITTED] 82566A.151
    
    [GRAPHIC] [TIFF OMITTED] 82566A.152
    
    [GRAPHIC] [TIFF OMITTED] 82566A.153
    
    [GRAPHIC] [TIFF OMITTED] 82566A.154
    
    [GRAPHIC] [TIFF OMITTED] 82566A.155
    
    [GRAPHIC] [TIFF OMITTED] 82566A.156
    
    [GRAPHIC] [TIFF OMITTED] 82566A.157
    
    [GRAPHIC] [TIFF OMITTED] 82566A.158
    
    [GRAPHIC] [TIFF OMITTED] 82566A.159
    
    [GRAPHIC] [TIFF OMITTED] 82566A.160
    
    [GRAPHIC] [TIFF OMITTED] 82566A.161
    
    [GRAPHIC] [TIFF OMITTED] 82566A.162
    
    [GRAPHIC] [TIFF OMITTED] 82566A.163
    
    [GRAPHIC] [TIFF OMITTED] 82566A.164
    
    [GRAPHIC] [TIFF OMITTED] 82566A.165
    
    [GRAPHIC] [TIFF OMITTED] 82566A.166
    
    [GRAPHIC] [TIFF OMITTED] 82566A.167
    
    [GRAPHIC] [TIFF OMITTED] 82566A.168
    
    [GRAPHIC] [TIFF OMITTED] 82566A.169
    
    [GRAPHIC] [TIFF OMITTED] 82566A.170
    
    [GRAPHIC] [TIFF OMITTED] 82566A.171
    
    [GRAPHIC] [TIFF OMITTED] 82566A.172
    
    [GRAPHIC] [TIFF OMITTED] 82566A.173
    
    [GRAPHIC] [TIFF OMITTED] 82566A.174
    
    [GRAPHIC] [TIFF OMITTED] 82566A.175
    
    [GRAPHIC] [TIFF OMITTED] 82566A.176
    
    [GRAPHIC] [TIFF OMITTED] 82566A.177
    
    [GRAPHIC] [TIFF OMITTED] 82566A.178
    
    [GRAPHIC] [TIFF OMITTED] 82566A.179
    
    [GRAPHIC] [TIFF OMITTED] 82566A.180
    
    [GRAPHIC] [TIFF OMITTED] 82566A.181
    
    [GRAPHIC] [TIFF OMITTED] 82566A.182
    
    [GRAPHIC] [TIFF OMITTED] 82566A.183
    
    [GRAPHIC] [TIFF OMITTED] 82566A.184
    
    [GRAPHIC] [TIFF OMITTED] 82566A.185
    
    [GRAPHIC] [TIFF OMITTED] 82566A.186
    
                                          Thursday, March 21, 2013.

                     U.S. DEPARTMENT OF AGRICULTURE

                               WITNESSES

PHYLLIS K. FONG, INSPECTOR GENERAL
KAREN L. ELLIS, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
GIL H. HARDEN, ASSISTANT INSPECTOR GENERAL FOR AUDIT

                       Introduction of Witnesses

    Mr. Aderholt. The subcommittee will come to order.
    We have before us today USDA Inspector General Phyllis 
Fong, and Assistant Inspector General for Investigations Karen 
Ellis, and the Assistant Inspector General for Audit Gil 
Harden.
    We welcome all of you to the Subcommittee, and thank you 
for being here this morning. This Subcommittee has always 
appreciated the work of the Office of the Inspector General.
    Ms. Fong, thank you and your staff for the work to combat 
fraud, waste, and abuse within the USDA's programs. We are 
especially interested in your work on the Supplemental 
Nutrition Assistance Program, known as SNAP, and also the 
department's longstanding challenges with security over its 
information technology infrastructure and processes. So we look 
forward to your testimony here this morning.
    Before you begin, I would like to ask the Subcommittee 
ranking member, the distinguished gentleman from California, 
Mr. Farr, if he has any opening comments.
    Mr. Farr. Well, thank you very much, Mr. Chairman.
    And it is always one of our annual meetings that I look 
forward to. Unfortunately, we are not addressing you with any 
budget. We have got to make--with these hearings, we have got 
to make budgetary decisions based on zip. And it is very 
difficult to do that.
    So, as I told the last panel, I wish that the White House 
would send the budget up here rather than the President up 
here, because appropriators need a budget to work with. But 
hopefully, we will do the right thing, and we look forward to 
your testimony. I have a couple questions I would like to ask 
on specifics, and we will get to that at the Q and A period. 
Thank you very much.
    Mr. Aderholt. Thank you, Mr. Farr.
    Subcommittee members, we will proceed with the usual of the 
hearing under the 5-minute rule. We may have several rounds. It 
is my understanding we will be having votes within the next 
probably 20 minutes, and we will be called away. What we will 
do is, when the votes are called, we will take a recess. And 
then we will return, reconvene after the vote, and continue 
with the questions from the members.
    But I think, Inspector General, we will be able to get your 
testimony in this morning. And so you go ahead and start with 
your remarks. And your written testimony will be included for 
the record. So I would recognize you now for your oral 
statement, and then, as we proceed with time, before the votes, 
with questions; if not, when we return. Thank you.

                           Opening Statement

    Ms. Fong. Okay. Good morning, Mr. Chairman, Ranking Member 
Farr, and members of the Subcommittee.
    We thank you for the opportunity to come today and testify 
about the OIG's oversight work at USDA. We certainly appreciate 
this Subcommittee's longstanding support for our office and 
your interest in our work. And as always, we welcome the chance 
to address your interests and concerns. As you know, our 
mission at the IG's office is to help USDA deliver its programs 
effectively and with integrity. We do this by providing 
independent, professional audit and investigative services, and 
by keeping you and the Secretary informed of our findings.
    As you know, our audits can result in recommendations to 
improve program operations, while our investigations can lead 
to criminal sanctions, disqualification from USDA programs, and 
disciplinary actions. We do not have programmatic or operating 
authority, as you know. Instead, it is the responsibility of 
USDA agencies themselves to take appropriate corrective 
actions. As we plan our work, we look at four key areas within 
the department's portfolio as a framework for prioritizing how 
we do our efforts.
    Our first area of focus is to support the department in 
ensuring the wholesomeness of the U.S. food supply. In this 
area, we recently reported on APHIS's smuggling interdiction 
activities and FSIS testing for E. coli in beef trim, as well 
as FSIS meat inspection activities. As summarized in my full 
statement, our findings led to several significant 
recommendations. Currently, we have in process work on E. coli 
testing in boxed beef products, as well as FSIS inspection 
procedures at swine slaughterhouses.
    Our second area of focus is to help USDA safeguard and 
effectively deliver its benefit programs.
    Mr. Chairman, you mentioned the SNAP program. That is 
certainly the biggest program within the USDA portfolio, and as 
such, we have devoted a significant portion of our 
investigative and audit resources to this program. Last year, 
we reported over $57 million in results and 342 convictions 
from our investigative activities. We have also issued a group 
of audits addressing eligibility and fraud detection in the 
SNAP program. We have issued audits on soil rental rates in the 
Conservation Reserve Program, and we have looked at the crop 
insurance program from the perspective of new producers and 
organic programs. We have significant work ongoing right now 
vis-a-vis vendor management in the WIC program, as well as RD's 
business and industry guaranteed loan program.
    Our third area of focus deals with assisting the department 
in improving its own management systems. Again, Mr. Chairman, 
you mentioned the department's IT security challenges. We have 
certainly spent quite a bit of time on those issues, as well as 
the department's financial statements and its efforts to reduce 
improper payments. All of those audits are statutorily 
required, and we are in process again this year looking at all 
of those areas.
    We have also focused on the grant management process within 
the department. Specifically, we issued a report on OAO's 
grants management activities. And we have ongoing work to 
assess FAS' trade strategies, as well as the settlement claim 
process for the so-called Pigford litigation.
    Finally, in the area of helping USDA improve its 
stewardship of natural resources, we issued a number of audits 
regarding NRCS' efforts in the area of oversight and compliance 
activities, floodplain easements, and migratory bird habitats. 
That was all within the last year. We have ongoing audits on 
the EQIP program and the rehabilitation of flood control dams. 
As you know, we are also working to finish our remaining 
oversight concerning USDA's $28 billion in Recovery Act funds. 
And we view these audits and investigations as very 
significant, because even though they apply to the money that 
was provided under the Recovery Act, the recommendations that 
we make will go to how the programs function moving forward 
with their regular appropriations. And so we believe that our 
recommendations for action can have a lasting impact on the 
management of those programs. We issued recently an audit of 
RD's Business Enterprise Grant Program, as well as loss claims 
in the Single Family Housing Program. And I think you all are 
very much aware of those audits.
    Significant work that we have ongoing involves reviews of 
the broadband initiative program and Forest Service grant 
making activities. In conclusion, Mr. Chairman, I want to thank 
you again and just point out that we within the IG's office are 
very cognizant of the need to improve our own activities. We 
have been engaged in streamlining our activities. And we 
appreciate the support that you have given us over the years. 
Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.187
    
    [GRAPHIC] [TIFF OMITTED] 82566A.188
    
    [GRAPHIC] [TIFF OMITTED] 82566A.189
    
    [GRAPHIC] [TIFF OMITTED] 82566A.190
    
    [GRAPHIC] [TIFF OMITTED] 82566A.191
    
    [GRAPHIC] [TIFF OMITTED] 82566A.192
    
    [GRAPHIC] [TIFF OMITTED] 82566A.193
    
    [GRAPHIC] [TIFF OMITTED] 82566A.194
    
    [GRAPHIC] [TIFF OMITTED] 82566A.195
    
    [GRAPHIC] [TIFF OMITTED] 82566A.196
    
    [GRAPHIC] [TIFF OMITTED] 82566A.197
    
                        DEPARTMENTAL CHALLENGES

    Mr. Aderholt. Thank you for your testimony and for giving 
us an overview of what you are doing there in your department. 
And as I mentioned in my opening statement, we will probably 
have votes here shortly, but we will go ahead and proceed with 
the questioning aspect of the hearing.
    And I will begin this morning, and then we will go as far 
as we can before the votes are called. Your office is uniquely 
situated within USDA and has a view of the greatest challenges 
and the ways in which it performs very well. What would you say 
that right now is USDA's biggest challenges that you see from 
your standpoint?
    Ms. Fong. Well, that is a very good question to ask. I 
think what we are seeing overall department-wide is that, as 
with every other Federal department, the challenge for the 
department is to continue to deliver its mission and its 
programs in an era of constrained resources where the demand 
for programs is increasing. And as the department moves to 
deliver its programs, it faces challenges in providing an 
adequate level of oversight. And I know that we have discussed 
this among our team.
    Frequently, managers view their priority as delivering the 
program. Because they have perhaps a limited amount of 
resources available, the oversight and effectiveness of that 
delivery may not be their top priority. And so we see that it 
is important to increase the emphasis on the need for really 
delivering the program as efficiently as possible in accordance 
with rules and regulations, bringing integrity to the program. 
And that is where we believe that our value lies.
    Mr. Aderholt. What would be the top three recommendations 
that you would make to USDA? Or I say top three, or as many as 
you----
    Ms. Fong. Well, okay. We have made a lot of recommendations 
over the years. I think increased emphasis needs to be placed 
on improper payments, eliminating and reducing improper 
payments across the board. The department has engaged in these 
activities. We need to continue to work in FNS. The school 
lunch program and school breakfast programs deserve some focus. 
The SNAP program improper payment rate has been reported to be 
decreasing, which is terrific. But increased focus can be 
placed on identifying the level of fraud on the part of both 
retailers and recipients. And I think we have made 
recommendations to the SNAP program management, to really focus 
on those issues. Obviously, if the department can reduce its 
rate of improper payments, more money will be available to 
provide to eligible recipients. And so I think that is a goal 
that all of us share.
    Mr. Aderholt. Which programs or processes within USDA do 
you see as doing a good job and being a leader?
    Ms. Fong. Well, I want to start by saying that I see an 
increased emphasis from the Secretary on down through the 
management ranks in terms of emphasizing the need to play by 
the rules. And so whenever we issue an audit report or an 
investigation report and we point out areas where changes need 
to be made, we do see a commitment on the part of program 
management to make those changes.
    I think, you know, one good example is in the SNAP arena. 
We have been working very closely with the FNS officials 
because we all share the goal of eliminating or reducing 
trafficking and fraud. And we believe that we have a very good 
working relationship with that agency. Now, much more needs to 
be done, of course, but they are open to our recommendations.
    Mr. Aderholt. Okay.
    Since the vote is coming, let me go ahead and recognize Mr. 
Farr. And why don't we do for 5 minutes? And then we will 
recess for a vote, and then we will come back.
    Mr. Farr. Thank you, Mr. Chairman.
    It seems that some of the questions rise on whether the 
extent of what you have to do, you have enough budget to do it 
in these investigations. And the second thing I just wondered 
is how do you respond to an agency when you make 
recommendations and yet they don't have any money in their 
budget to fill them out? I always found when I was in local 
government, we had grand jury reports criticizing agencies of 
local government. And it was easy to criticize, but to fix it 
was always a monetary issue. And maybe it would be really--I 
mean, this is probably a bigger discussion for your IG 
association is to figure out how do we use those 
recommendations also to build into our appropriation process so 
that, indeed, if these are things that need to be cleared up, 
cleaned up, and they don't have enough resources to do it, some 
of that judgment of whether there is enough money to do it. Can 
they do it within internal--or could you just make them, and 
then the heads of the departments have to make sure that they 
are doing something about it, right? I mean, there is really no 
enforcement tool other than the transparency of your report. Do 
you understand the question?
    Ms. Fong. I do.
    Mr. Farr. And also let me just--part of that, too, would be 
that I think that the issue on food stamps--not food stamps, I 
mean school lunch, when I got into the details on it, it was 
probably one of the most regulated programs we could ever do in 
giving out benefits to people. More regulated than anything 
else. And we are talking about kids in a setting like a school 
cafeteria. And yet proving that every kid who received a meal 
every day was poor enough to receive it and that what was on 
their plate met all the incredible, it is a huge bureaucracy. 
And it just seems to me that some of these rules we make 
probably are dumb rules, that the amount error is so de 
minimis. Yes, again, there are some violations of law because 
we made the law so tight. Do you ever get into recommending 
that there is--that Congress ought to be cleaning up, revising 
some of their standards to make them more practical?

                        PROGRAM RECOMMENDATIONS

    Ms. Fong. Well, let me offer a few comments on your 
questions. And I appreciate your message here. Let me just talk 
generally about how we go about making our recommendations and 
how we view that process. As you know, when we go in and look 
at a program, we spend a lot of time talking with the program 
officials to get their viewpoints as to how it is operating, 
what they believe to be their challenges, where they believe 
they have obtained some successes. And we try to document all 
of that in our reports. And as we go through the process of 
formulating recommendations for the program officials, we are 
very cognizant of the fact that many times they are operating 
without additional resources. We know that this is a difficult 
time for all agency managers. And so we view the recommendation 
process in many ways as a dialogue, where we try to come up 
with suggestions that we believe could work. We are very open 
when they come back and say, you know, that is really not going 
to fix the problem, or that is going to create other problems, 
or we have resource issues here. And if you are asking us do 
that, it is just not going to work with our current level of 
staff or the expertise that we have. We do not want to be in a 
position where we are making recommendations that really are 
not practical, that an agency manager will say, I can't agree 
with this. Because that doesn't help anybody. We are really 
here to help the agency move forward. And so that is the 
philosophy with which we approach these recommendations. I 
think if we look at our statistics on recommendations, most of 
the time we have reached agreement with the agency managers. By 
the time we issue our audit reports, they will say, yes, we 
agree with the approach you are recommending, and we will 
commit to take action on that. And that, to me, is an indicator 
that it is a practical recommendation.
    Mr. Farr. How about feedback to Congress that we have 
enacted some laws that are not practical?
    Ms. Fong. I am going to defer to my colleague here.
    Mr. Harden. We don't have as many of those type of 
recommendations. But if we are working on something and see 
that the legislation is not working, we will make 
recommendations to the agency for them to bring that forward as 
part of their legislative process, or as I understand the 
process to work, for the Secretary to bring that forward. 
Because our recommendations go to the agency. And it is what 
they are able to get on the plate for a legislative change.
    Mr. Farr. I am excited to hear that. I don't think I have 
ever seen it since I have been in Congress. I wish we had 
ability to have reviews, revisions of the law, essentially is 
what you need, is to look at law that has been enacted over 
many, many years ago, and it is now not practical to try to 
carry out to that detail, and that there is better ways of 
doing it so that we can get back. But I am glad there is a 
system there that allows for that feedback. My time is up.
    Mr. Aderholt. What I would like to do at this point, we 
will go recess for the vote and then come back, and we will 
start back with Mr. Rooney. You will be the first one up when 
we come back from the vote. So if you will bear with us, we 
will go cast our votes, and we will resume here very shortly. 
Thank you.
    [Recess.]
    Mr. Aderholt. Okay. The subcommittee will resume.
    And at this point, we will recognize Mr. Rooney for any 
questions that he may have.
    Mr. Rooney. Thank you, Mr. Chairman.

                          FSA OFFICE CLOSURES

    Thank you, Ms. Fong, for your testimony and for answering 
our questions. My district is in South Central Florida. It is 
what is sort of locally called Florida's heartland. If you look 
at Lake Okeechobee and go north almost to Mickey Mouse, 
everything in between not on the water is my district, and it 
is oranges, grapefruit, sugar, and beef cattle and dairy. And 
one of the things that I have heard about most often from my 
ranchers, farmers and growers over the last couple of years, 
one of the biggest issues for them, has been the closures and 
consolidations of the Farm Service Agency offices.
    I don't really have a question with that, but there seems 
to be a lot of strife and possible management issues. I have 
just heard a lot of negative things with regard to FSA 
closures. Those offices are supposed to help these people 
navigate USDA rules and regulations; everything that your 
office would support them in trying to do the right thing 
with--and to be able to operate their property. So, I would ask 
you to look into that. I don't know what is going on, but it 
literally is the biggest issue that I hear about on a continual 
basis.
    [The information follows:]

    Because we have not performed work related to the recent office 
closures by FSA, we asked FSA to provide us with summary information 
related to office closures in Florida's 16th District.
    According to the Farm Service Agency (FSA), one FSA office in 
Florida's 16th District was closed and its operations were consolidated 
into an adjacent county office as part of the agency's 2012 office 
consolidation plan. This office was located in Highlands County, 
Florida, and was closed because it had zero full-time permanent 
employees. In addition to the criteria provided by Congress in the 2008 
Farm Bill directing FSA to first close offices that are located within 
20 miles of another office and having two or fewer employees, FSA 
notified Congress that it was going to recommend for closure all of its 
county offices that had zero full-time permanent employees regardless 
of their proximity to another FSA office. In total, 31 offices were 
identified as having zero full-time permanent staff and were outside 
the 20 mile radius of another FSA office. Of those, 28 were identified 
for closure and 3 were maintained in order to continue part-time 
service delivery to limited resource and socially disadvantaged 
farmers.
    According to FSA, some producers and community members in Highlands 
County expressed their desire to retain the Highlands County FSA 
office. These viewpoints were conveyed at the public meeting held in 
that county and through written public comment. While FSA considered 
and reviewed this feedback prior to the finalization of the 
consolidation, Highlands County was still found to meet the criteria of 
having zero full-time permanent employees. FSA producers were provided 
the option of receiving service from a different FSA location than the 
one proposed by the State FSA for their convenience. They will continue 
to have the opportunity to vote for representation on the local FSA 
committee that oversees the office serving them.

                        WETLAND RESERVE PROGRAM

    Now, specifically, I wrote a letter to Secretary Vilsack on 
March 27th of last year commending the Wetland Reserve Program, 
which greatly helps Florida's ranchers and growers. The letter 
recommends and I obviously hope that it continues, because it 
allows them to bridge the gap in tough times, to be able to use 
the money that they get for the easement, also to be able to 
store water north of the lake, not going to go into the whole 
Everglades restoration, but you understand it, and so we think 
it is a win-win, and obviously, we hope that that continues.
    But, my question to you is, in 2008, you audited the 
Agency's WRP, the Wetland Reserve Program, and you found 
numerous cases of financial mismanagement. In fact, your audit 
found a number of cases where mismanaged easements had 
destroyed the restoration process all together. This was very 
disturbing to me because the farmers and ranchers rely on this 
to supplement their land use, and if there are problems with 
regard to what the easements are supposed to be for, which is 
water storage and the ability to help the environment, and 
audits show mismanagement of those easements, it kind of 
appears that the farmers are behind the eight ball, so to 
speak, in what they are trying to do.
    Do you believe that the mismanagement of funds has diverted 
resources from individuals who need it the most, and will you 
continue to monitor the NRSC's management of these conservation 
programs?
    Ms. Fong. Let me make a few comments, and then I am going 
to defer to Mr. Harden for more specifics. We, clearly, and I 
appreciate your question, are very aware of the conservation 
programs and how NRCS is managing them, and as you point out, 
we have issued a number of audits over the last number of years 
on different aspects of the conservation programs, and we 
continue to watch these programs because we think that there 
are many actions that the agency can take to improve the 
management.
    With respect to the specific audit, Gil, I don't know if 
you know whether the actions have all been implemented yet?
    Mr. Harden. I know we would have reached agreement on all 
of the recommendations, and that particular one, I would have 
to go back and check on it, the implementation of them, but 
given the age, I would assume that they are moving on those. 
But more recently, I mean, we are finding similar type problems 
in other conservation programs, so yes, as Ms. Fong says, NRCS 
and their management of their easement programs and the 
different conservation programs is definitely something that we 
are looking at on a routine basis in trying to work with them 
to strengthen their oversight and control of those programs and 
how they implement them.
    Mr. Rooney. Well, I would appreciate if you have any 
further information, if you can let our office know. There is a 
perception out there that farmers are out to injure the 
environment, and this program demonstrates that we want to be 
good partners with those that are trying to do the right thing, 
and so the sooner that we can figure out how to rectify this 
mismanagement, I think, the better for everybody.
    Mr. Harden. I guess one thing I will add to what I was 
saying before. A lot of our recent work has not shown farmers 
to be doing incorrect things. It has been more on the agency's 
side in terms of how they are implementing their programs.
    Mr. Rooney. I understand that. I don't want the whole thing 
to blow up just because, you know, the government is having 
problems, but anyway, thank you very much.
    Mr. Chairman, I yield back.
    Ms. Fong. We will be happy to provide that information for 
the record.
    [The information follows:]

    OIG audit report 10099-0004-SF, Natural Resources 
Conservation Service (NRCS) Wetlands Reserve Program (WRP) 
Wetlands Restoration and Compliance, was issued August 2008. In 
reviewing payments for wetland restoration, we found that NRCS 
was obligating expired funds. We determined that NRCS incurred 
obligations for new easements and restoration work because NRCS 
had assumed that 1996 Farm Bill funds-like 1990 Farm Bill 
funds-were no-year funds and were available for obligation in 
subsequent fiscal years. However, this changed with the 1996 
Farm Bill, which restricted the period of availability for WRP 
funds to FYs 1996 to 2002. Upon the advice of the Office of the 
General Counsel, NRCS found available unobligated WRP funds and 
adjusted its accounts, avoiding the necessity of reporting an 
Anti-Deficiency Act (ADA) violation to Congress and the 
President.
    Concerning the monitoring of restored WRP easements, we saw 
opportunities for improvement. We recommended that NRCS develop 
a monitoring system to prioritize the easements and optimize 
monitoring resources by implementing, for example, a risk-based 
system. In the management decision process, OIG and NRCS agreed 
that NRCS would create and implement a risk-based monitoring 
system for WRP easements. NRCS agreed to create the Agency 
Conservation Easement Management Plan which was designed to 
outline actions to prioritize site visits of potential 
violations. Additionally, NRCS agreed to utilize high-
resolution aerial photography and trained remote sensing 
specialists to complement on-site monitoring activities of all 
WRP easements annually. On March 4, 2009, NRCS and USDA's 
Office of the Chief Financial Officer, agreed that NRCS had 
achieved final action and closed the recommendation. http://
www.usda.gov/oig/webdocs/10099-4-SF.pdf

    Mr. Aderholt. Thank you very much.
    Mr. Bishop.
    Mr. Bishop. Thank you very much.

                    OFFICE OF ADVOCACY AND OUTREACH

    And welcome, Ms. Fong and your associates. Let me just 
explore the audit of the 2501 Program. Just a couple of weeks 
ago, you completed and released an audit of the Office of 
Advocacy and Outreach, and of course, OAO is an office within 
the department management of USDA and was established by the 
Farm Bill of 2008 to assist farmers and ranchers who have 
moderate size operations, have recently begun operations or 
classified as socially disadvantaged. And it is designed to 
help them gain access to USDA programs. And of course, the 
Office of Advocates and Outreach uses outreach and assistance 
for Socially Disadvantaged Farmers and Ranchers Program to gain 
and improve that access. And of course, as a very strong 
supporter of the 2501 program, I want you to know that I 
welcome all of the internal efforts aimed at improving the 
administration and effectiveness of that grant assistance 
program
    My question is, your audit cited a number of missteps in 
administering the program on the part of some of the OAO 
employees as well as a general lack of management controls of 
the grant-making process. Assuming that your recommendations 
are put in place and carried out fully, and I noticed that they 
accepted all of your recommendations, are you confident, moving 
forward, that the program will be managed in a proper manner?
    Ms. Fong. Well, let me make a few comments and then I will 
turn to Mr. Harden. I appreciate your question
    Mr. Bishop. I do have some follow ups on that, too
    Ms. Fong. We did start that audit because, as you point 
out, the whole purpose of our audit was to help the department 
deliver that program as effectively as possible, and you know, 
we are very happy to say that the department took our 
recommendations and implemented them immediately, even as we 
were doing our audit work, to ensure that the final recipients 
of that program were properly looked at in terms of eligibility 
and the funds.
    My understanding is that for that program, I am not sure 
that there is money moving forward. I think 2013 is the last--
2012 is the last year with funds, and so it is still being 
implemented. So, I think, you know, for future years, if 
Congress appropriates additional money, then there would be a 
future for that program, but right now, we are not aware that 
it is going to move forward.
    I also should note that----
    Mr. Bishop. And the Senate----
    Ms. Fong. Go ahead.
    Mr. Bishop. In the Senate farm bill draft, I think they did 
include it, but they also added some additional groups, an 
additional group in particular, veterans, for that program, 
which would again stretch the eligibility, to some extent, but 
it is my anticipation that it will continue if we get a farm 
bill. I am sorry. Go ahead if you want to continue.
    Ms. Fong. And to address one of your other questions. We 
are very encouraged by the fact that the department did take 
our recommendations and put into place a good grant-making 
process once we had our audit work presented to them.
    Mr. Bishop. How will sequestration impact the program for 
the remaining life of it, as well as, are there any additional 
administrative costs that were associated with carrying out the 
recommendations that you made?
    Mr. Harden. I don't know the specific administrative costs 
associated--I don't know of specific administrative costs for 
carrying out the recommendations. It is like you mentioned, if 
it is reauthorized with the Farm Bill, we think it will be a 
stronger program going forward.

                       FOOD AND NUTRITION SERVICE

    Mr. Bishop. Okay. Let me go to SNAP right quick. I think 
you are pretty familiar, Ms. Fong, with some of the challenges 
that we are facing in the State of Georgia with our WIC 
program, and it is clear that FNS was fully aware for a number 
of years that the State of Georgia didn't have the resources or 
the expertise to appropriately manage and operate the WIC 
program. In fact, you issued a report in 2006 which said as 
much.
    But from a national perspective, it seems like the Food and 
Nutrition Service should have some way to red flag State SNAP 
and WIC programs which are facing administrative and management 
issues. Do you think that there are adequate management flags 
or safeguards in place at FSN which would assist in identifying 
issues before they become major problems, particularly at the 
regional level?
    Ms. Fong. I think that the WIC program does present a 
number of administrative challenges for the Department. That 
has been pointed out through work that we have done, as well as 
work that GAO has done. And as the WIC program starts moving 
toward an electronic delivery system, we anticipate that they 
will face similar challenges to what they had with the movement 
of the SNAP program when it went to the EBT delivery program.
    You know, on the fraud side, we are seeing some significant 
fraud schemes where people seek to take advantage of the 
program improperly. On the management side, there are some 
issues with respect to vendors and whether those vendors are 
being properly overseen. We do have some audit work planned.
    Mr. Harden. And another way to approach your question. I do 
believe that FNS has the right type of oversight or control 
structure. It is a matter of how well they implement that. In 
talking, because I can't specifically talk about the WIC 
program right now, but similarly, in the school lunch program 
and work that we recently completed, we found that they had a 
management evaluation process in place. They just were not 
following it at either the Federal level or the State or local 
level, so we would have to watch and see how they use that 
process, which would be able to flag States that have problems.
    Mr. Bishop. Do you have adequate technical assistance 
training or other target assistance to make sure that the 
States can rectify any issues or problems that come forward? 
Are there any specific training programs, technical assistance 
opportunities that the department has for the States to 
eliminate or to ameliorate or to reduce those kinds of 
problems?
    Mr. Harden. I am generally aware that they have those for 
all those types of programs. I am generally aware that they 
have those types of programs for--those types of training in 
all of their programs. Specifically, I know we looked a little 
bit at what they have set up for the school lunch program as 
far as recent work we did, so some of it is available to them.
    Mr. Bishop. Yeah. We heard from the school lunch program 
and some of the provisions that are being implemented there to 
help local lunchroom folks through the Web site and other 
electronic means, but I was wondering if the same thing was 
available for WIC and for SNAP.
    Ms. Fong. We can certainly reach out to the program 
officials and provide that information for the record.
    [The information follows:]

    Yes. We discussed this issue with Food and Nutrition 
Service (FNS) officials who provided the following information.
    WIC. FNS has an automated WIC management evaluation tool as 
discussed under training programs above.
    SNAP. FNS continues to provide technical assistance to 
enhance the effectiveness of State integrity oversight through 
electronic means and automation. For example, FNS provided 
States with a tool to automate the monitoring of social media 
websites so that when an individual attempts to buy or sell 
SNAP benefits online, a State fraud investigator is notified 
via email and can evaluate the situation for potential 
investigation. In addition, FNS is conducting a data mining 
project to devise guidelines and technical assistance for 
States to better detect recipient fraud consistently, as well 
as to audit the integrity of data systems in order to establish 
standards for data management and input controls.
    Our audit work has identified several electronic tools used 
by FNS to identify and reduce problems. The primary tools are:
     The Anti-Fraud Locator Using Electronic Benefits 
Transfer Retailer Transactions (ALERT), maintained by FNS, 
analyzes patterns in States' EBT transaction data to identify 
suspicious patterns most commonly associated with SNAP retailer 
fraudulent behavior such as benefit trafficking.
     The Watch List compiles retailer data that meet 
predefined parameters (generally, retailers with the highest 
ALERT scores) into a single list. Investigators use the Watch 
List to identify stores for investigation.
     The Store Tracking and Redemptions System (STARS) 
helps FNS manage data on participating retailers. It contains 
information about the retailers and identifies their 
investigative history.

    Mr. Aderholt. All right. Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Chairman.

                        STATE DETECTION OF FRAUD

    Ms. Fong, nice to see you again. Thank you for coming 
today. As you recall, several years ago, I had been the 
Subcommittee chairman on department oversight and operations on 
the Agriculture Committee, and we had a very forthright hearing 
in which we discussed the delays in your audits as well as the 
problems of a lack of enforcement mechanisms that the State 
could engage--States could engage with in order to detect 
fraud.
    Since then, I have noticed that you stated in direct 
response to that hearing that you have expanded your audit 
scope and you have made specific recommendations in this 
regards to potentially help stop fraud by stating what tools 
are available that should be more aggressively used as well as 
identifying which tools are not available and how the 
department should move forward in that regard.
    I think it would be helpful to everybody if you explain 
what your recommendations are. You said the department has 
accepted those recommendations, and what do you envision as the 
timeline on the implementation of the recommendations?
    Ms. Fong. Well, thank you, Congressman, and I appreciate 
your interest in these issues. You know, based on your interest 
and your encouragement, we were able to complete a group of 
audits on the SNAP fraud issues that you mentioned, and we 
issued the 10 State audits as well as a roll-up report late 
last year, basically finding that FNS needed to do a little 
more work in order to nail down the level of fraud in the 
program, both on the part of retailers as well as on the part 
of beneficiaries. And what we pointed out was that currently, 
there is no good methodology for calculating the percentage of 
fraud at either of those levels in the program.
    Our audits also pointed out that numbers of beneficiaries 
were possibly ineligible for benefits because the States were 
not doing the kinds of data matching activities that they 
should have been doing. We found that in a number of States, 
there were people who were receiving benefits from more than 
one State. They had bad Social Security numbers, and they were 
receiving benefits that way, and so we pointed out to FNS that 
there were things that FNS could do to fix this problem.
    Now, I believe that FNS has agreed to all of our 
recommendations. In terms of the timeframes, I don't know 
specifically what--we would have to provide that for the 
record, I think, on the timeframes
    Mr. Harden. Overall--I want to get back to the specific 
timeframes, but overall they were reasonable or else we 
wouldn't be at agreement on the recommendations.
    Mr. Fortenberry. Do you have an estimate of how much that 
could potentially save the system?
    Now, again, all of this is said in the spirit of ensuring 
the integrity of the program because this is an important 
program for many Americans who are vulnerable and particularly 
those who need temporary transitional types of assistance as 
well as those who have longer-term needs. When we have a system 
that is not ensuring that those who need the help are getting 
it in a timely fashion, we are potentially wasting it; we are 
undermining our own mission here. So you have a very important 
mission, and I, again, I appreciate your aggressive response to 
the earlier hearing where it was a forthright conversation 
about some of the gaps that we have here.
    Do you have an estimate of what that could potentially save 
if implemented?
    Mr. Harden. What we identified in the 10 States that we 
looked at, we identified about 13.9 million average recipients 
who were possibly ineligible, and that equated to about $3.7 
million a month. Now, because of differing circumstances, it is 
not exactly right to extrapolate that over a period of time, 
but that is what it was.
    Mr. Fortenberry. That is extrapolated nationwide or is that 
a subsample?
    Mr. Harden. That is just for those 10 States that we 
sampled.
    Mr. Fortenberry. So extrapolating that nationwide, roughly 
you are looking at maybe close to half a billion dollars? It is 
simple math.
    Mr. Harden. It is simple math. If you are going to apply it 
that way, you could, but that is not something we can 
extrapolate.
    Mr. Fortenberry. Well, one of the difficulties here is 
again, because of the great expansion of the program, 
particularly in our difficult economic times and those finding 
themselves in need of this type of assistance, the numbers have 
grown so substantially, so even when there is a small amount of 
fraud, the numbers are actually very large.
    So, if you could find out what the timeline is for 
implementation and then the specifics as to which States 
perhaps are leading in their efforts to implement these 
recommendations along with FNS guidance, that would be helpful, 
and perhaps which States are lagging.
    Thank you, Mr. Chairman.
    Ms. Fong. Be happy to look into that.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.198
    
    [GRAPHIC] [TIFF OMITTED] 82566A.199
    
    [GRAPHIC] [TIFF OMITTED] 82566A.200
    
    Mr. Aderholt. Ms. DeLauro.

                              FOOD SAFETY

    Ms. DeLauro. Thank you, Mr. Chairman.
    And I want to just say welcome, and it is always wonderful 
to have you here before the Subcommittee, Ms. Fong. I want to 
thank you for your testimony. You mentioned several food safety 
issues, which I would just like to follow up on.
    First, I wonder if you can provide us with an update of 
your November 30th, 2012, report on oversight of shell egg 
inspections. In the report you found that USDA did not have a 
unified approach to ensure the safety of shell eggs either 
internal within the department or external in coordination with 
the FDA. Has FSIS provided you with the information that you 
requested regarding recommendations? There are the 
recommendations 1, 2, 3, 9, and 10, and they essentially 
develop a plan coordinating--coordination of USDA, FDA related 
to shell eggs; develop and plan to share information within 
USDA and FDA on shell eggs; develop and implement a data 
collection plan re-sanitation at egg processing facilities; 
develop and implement a science-based policy for shell egg 
storage temperature; and develop implementation enforcing 
policy for violations that are a risk to consumers. If you have 
that information, I don't know if you have that information. If 
you do not, I would love to have the information for the 
record.
    Mr. Harden. We can definitely provide it for the record, 
but just for your information, either late last week or early 
this week, we reached management decision on all of those 
recommendations that were outstanding, so there is agreement on 
them moving forward and how they are going to move forward and 
it does address the points that we made in our recommendations, 
but we can get the specifics on that for you.
    Ms. DeLauro. Terrific. Appreciate that.
    [The information follows:]

    Our audit on USDA Controls Over Shell Egg Inspections 
(50601-0001-23) was issued November 30, 2012. We recommended 
that the Food Safety and Inspection Service (FSIS) coordinate 
with the Food and Drug Administration (FDA) to implement a 
seamless farm-to-table approach to shell egg safety, and ensure 
that crucial information related to shell egg safety is 
collected and shared between USDA agencies and with FDA. We 
also recommended that FSIS implement a scientific policy on 
shell egg refrigeration, and that AMS take the necessary steps 
to prevent the USDA grademark from being placed on shell eggs 
that are potentially contaminated with Salmonella. AMS and FSIS 
agreed with our findings and we have reached management 
decision of all of the report's recommendations. USDA has taken 
action to implement 4 of the 10 recommendations 
(recommendations 4, 5, 6, and 8). According to OCFO's records 
as of April 2, 2013, AMS has one recommendation (recommendation 
7) that needs to be implemented. Five recommendations made to 
FSIS (recommendations 1, 2, 3, 9, and 10) also remain 
unimplemented.

    And in an April 2012 report, you identified multiple 
shortcomings related to the inspection of meat and poultry 
processing facilities. Your note that you were unable to 
determine the efficiency of the FSIS staffing level because of 
inadequate data was of particular concern to me. I wonder if 
you could talk a bit more about your findings and any action 
taken by FSIS since, specifically related to the first and 
third recommendations. Now that the U.S. is relying more on 
PHIS, P-H-I-S, when do you expect to conduct a followup to the 
audit?
    Mr. Harden. Well, they did respond favorably to our 
recommendations in terms of thinking of putting in mitigating 
factors for if inspectors are not able to get do their 
processing plants when they are assigned, so, you know, we had 
a very good response on that.
    And I would say that we would probably follow up on that 
after a period of time and give them a chance to implement it. 
But with regard, just for informational purposes, in regard to 
the public health information system, we currently have work 
ongoing because, in response to a number of reports we have 
issued in the last several years, FSIS' response was always, we 
will take care of that when we implement the public health 
information system, we will make sure that is included, and so 
we are following up on several of those recommendations right 
now.
    Ms. DeLauro. Question is I know they have agreed but they 
are actually working at doing this? Okay. If there is any 
update on that, I would be happy to know that.

                         RISK MANAGEMENT AGENCY

    And then, Ms. Fong, I was interested in your work related 
to the risk management agency and crop insurance. I know the 
statistics were somewhat breathtaking: 154 of the 176 new 
policies you sampled, a staggering about 87-and-a-half percent 
were sold to ineligible producers, yet the taxpayers footed a 
reinsurance bill for companies as if all 176 policyholders were 
eligible. Between this report and the GAO report on data 
mining, it is clear that RMA needs to evaluate its data 
collection analysis. Can you tell us more about your findings 
or related to RMA's database and the use of data validation to 
ensure accuracy in this program?
    Mr. Harden. In response to that question. Part of the 
answer goes back to things that the IG mentioned in the opening 
statement in response to some of the major challenges at the 
department. With the new producer program, we found that the 
AIPs were not carrying out their role in the----
    Ms. DeLauro. The AIP----
    Mr. Harden. The Approved Insurance Providers, the private 
sector providers that are supposed to be doing checks, and they 
were relying on information from RMA in a way that they should 
not have been relying on it.
    Ms. DeLauro. Was the information not accurate from RMA or 
was it--why wouldn't they----
    Mr. Harden. They were trying to use an audit check that RMA 
kept in its system as a check for eligibility when that is not 
what it was designed to do.
    Ms. DeLauro. Okay.
    Mr. Harden. They were just not carrying out the 
responsibility that they were supposed to. In addition to that, 
RMA was not doing enough oversight of the insurance providers 
to make sure they were doing what they needed to be doing.
    Ms. DeLauro. Okay. But let me ask you this. Was RMA dealing 
with, in terms of this program, looking at eligibility and 
their mechanism for determining eligibility as well as the 
insurance companies not doing what they are doing, do we have a 
problem both within the agency and with the insurance companies 
in terms of accuracy of data and how are we going to address 
it? Well, my time is out, so----
    Mr. Aderholt. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.

                           IMPROPER PAYMENTS

    As I understand it, the Office of the Inspector General is 
charged with the responsibility of reviewing the agency under 
the Improper Payments Elimination Recovery Act. And in that 
process, you identified some high-risk programs, so maybe to 
start with, so that we will be on the same page, how do you 
identify a high-risk program? What is that?
    Mr. Harden. Actually, we do not identify the high-risk 
programs. The agency, the department and its agencies have to 
apply criteria coming out of OMB as to what would be decided is 
a high-risk program, and then we look to see how they carry out 
the responsibilities with regard to that.
    Mr. Nunnelee. All right. So how do they identify a high-
risk program?
    Ms. Fong. Well, OMB issues guidance to all Federal agencies 
that says if you have got a certain level of improper payments 
totalling a certain dollar amount that kicks you into the high-
risk category. So each agency has to go through its programs, 
identify which ones have that level of improper payments in 
that dollar range and identify it. And what happens then is 
that once they are designated as a high-risk program, then they 
have--the agency has certain obligations to identify how they 
are going to address the problem, mitigation that they can do 
to bring the improper payment rate down. And our role, as the 
IG's office, is to go in every year and to audit what the 
agency is doing in terms of whether there are actions to lower 
the improper payment rates, are they successful, are the rates 
coming down, are they identifying the right things?
    Mr. Nunnelee. Okay.
    Ms. Fong. So that is the overall scheme.
    Mr. Nunnelee. So what has been your experience in recent 
years with this agency? Have they identified the right areas; 
are they addressing them; and are the rates coming down?
    Mr. Harden. I will start by saying they are making 
progress. Last year our fiscal year 2011 report noted that they 
weren't meeting four of the seven requirements, and this year's 
report, which we issued on time last week when it was required, 
they are not meeting three of the seven requirements. Last 
year, when we went in, because of the problems, because it was 
new, the Department did not have all the processes and controls 
set up to know that it could collect the information to really 
monitor it.
    They are making progress on that so we didn't make 
additional recommendations this year to them, but what we did 
find was the sub-agencies that have the high-risk programs did 
not have all the controls in place to get their information to 
the Department, so we made specific recommendations to them. 
They have not responded to those recommendations yet just 
because they didn't have time to in us issuing the report by 
the mandated time, but I do expect to hear from them. So they 
are making progress to get it done.
    Because the Department has not made the progress it needs 
to or is not compliant for 2 years, two consecutive years, they 
have to talk to OMB about what they are going to do now to 
rectify the problem. Our recommendation to the department this 
year was to have that conversation, document that conversation 
so we can see what was done as we look at it next year.
    Mr. Nunnelee. All right. So these sub-agencies you have 
identified that aren't headed in the right direction, which 
sub-agencies are those?
    Mr. Harden. The six agencies that are involved are FNS, and 
those are big programs like SNAP and school lunch and the Child 
and Adult Care Program. You have got CCC and some of the farm 
payments, Forest Service, Natural Resource Conservation 
Service, the Risk Management Agency is one, and rural 
development is the last.
    Mr. Nunnelee. All right. Is that in any particular order? 
Did you go from best to worst or----
    Mr. Harden. No, I wouldn't say that I put them in any 
particular order. I was just working from my notes.
    Mr. Nunnelee. All right. And of these agencies, the six 
that you identified, how would you compare your report this 
year to last year? Are there new problems that have come in, or 
are they still failing to address the same old problems?
    Mr. Harden. Well, the three areas that they were 
noncompliant in this year are three of the areas they were not 
compliant last year, so there is consistency in terms of--but 
we did know that the improper payment rate overall went down, 
so they are making progress, but you know, it is just a big 
problem to address.
    Mr. Nunnelee. All right. Thank you, Mr. Chairman.

                 IMPLEMENTATION OF OIG RECOMMENDATIONS

    Mr. Aderholt. In the semi-annual report to Congress for 
April to September 2012, you note that for this period, OIG 
issued 176 program improvement recommendations and that USDA's 
managers agreed to implement 174 of them. When an agency 
implements a program improvement, it reports the action to the 
USDA's chief financial officer. OIG does not oversee the 
implementation of the recommendation.
    My question would be, is this the most effective way to 
ensure the agencies adopt an OIG recommendation?
    Ms. Fong. Well, it is the process that is envisioned 
through the Inspector General Act, which created our offices, 
and sets forth the roles of the various parties within an 
agency. Basically, it requires us to report, to work with 
agencies to reach decision on recommendations, and then it 
requires the Secretary to report on actions taken to implement, 
and so that is the overall structure.
    Now, within that structure, once we reach agreement with 
the agency as to what it is going to do, we don't just walk 
away from it. We do keep an eye on what the agencies are doing 
as they implement their recommendations, and frequently, as we 
develop our audit plans every year, we are watching to see 
whether it is time to go back in to look at a program again to 
see if the implementation has been working or if actually it 
occurred or if there are still issues that need to be 
addressed. And so we view our oversight and relationship with 
the agency as sort of a continuous ongoing relationship.
    Mr. Aderholt. And so speak again about the follow up on the 
reports to an agency and how that works again, the follow up?
    Ms. Fong. Well----
    Mr. Aderholt. And how often that occurs.
    Ms. Fong. When we issue a report, we are engaged very 
deeply in discussions as to whether or not the agency is going 
to agree with our recommendations, and so that is one level of 
discussion that occurs in great depth through our audit 
process.
    Once we reach an agreement, then the agency has to report 
to the CFO's office its progress on implementing its actions, 
and there is a mechanism there under the Inspector General Act 
that says that if the agency does not implement its corrective 
action within a certain period of time, I think it is 6 months, 
a year, then the Secretary has to report that, as do we, that 
these actions have not yet been implemented. So we have ongoing 
dialogue with the CFO's office as well as with the agencies to 
keep track of the progress of those actions.
    Mr. Harden. And one other granular part of that. As they 
are implementing a recommended action, we provide the agency 
and OCFO with a document that says, okay, to reach that final 
action, to know that it has been adequately resolved, we expect 
the agency to do A, B, C, and provide this information to OCFO. 
If OCFO gets that information and it doesn't look like it 
matches, they send something to us saying, `hey, is this doing 
what you intended for it to do or not?', so they don't accept 
final action on an audit recommendation that they shouldn't. 
And so that is another way that we are part of that process.
    And depending on the sensitivity of the recommendations and 
the programs involved, we will kind of gauge our planning 
process as to when we will go back in. Some we may have to go 
back in sooner because of the sensitivity; some we may, due to 
other priorities, may need to pick up later.
    Mr. Aderholt. Have you ever encountered a case where an 
agency didn't do what it said it was going to do or made a 
change that didn't meet the intent of the recommendation?
    Mr. Harden. I would have to go back and find a specific 
example, but yes, when we go in and do follow up, we do 
sometimes find it didn't quite fix the problem, and so we--and 
we may have an additional recommendation to make at that point 
in time or we--it is rare, but you can reopen a recommendation 
and say, you didn't finish it, so you got to go back and fix it 
the way we originally talked about.
    Mr. Aderholt. How can we find out whether an OIG 
recommendation and then a related management decision has been 
implemented?
    Mr. Harden. I would say you would need to work with the 
CFO's office. I mean, they keep that data, and we could 
definitely work with you in getting it, but they maintain the 
data as to the documentation that it was done, and we go to 
them as we start audit work to make sure, you know, if we are 
following up on a recommendation, that they did what they said 
they were going to do. We would first go to OCFO and say, okay, 
what did they provide you? We can see documents match. Now 
let's go in the field and see if they actually did it. Did the 
retraining of people, did the instruction that was given, was 
it clear, and did people follow it the way that it was intended 
to be followed?
    Ms. Fong. You can also contact our office, have your staff 
reach out to us, and we would be very happy to brief on what we 
know about the status of any audit recommendation.
    Mr. Aderholt. Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.

                            HORSE SLAUGHTER

    There has been a big controversy in this country about 
horse slaughter. We banned it, and now the Congress has lifted 
that restriction on the ban, and I understand that USDA is 
thinking about licensing a company in New Mexico. You have 
investigated the USDA's Food Safety Inspection Service, and in 
your 2010 audit of the National Residue Program, you pointed 
out that the Food Safety Inspection Service should at least 
annually assess the risk of drug residues by canvassing drug 
industry experts and private practitioners about the veterinary 
drugs that could end up in the food supply and also that the 
FSIS should subject every shipment of livestock coming from 
unknown producers to additional residue testing.
    What is interesting about horses is that they are not 
raised for commercial meat purposes. They come from all kinds 
of backgrounds, you know, racehorses, show horses, pet horses, 
the list goes on and on, you can imagine, so that there is 
really no known process of what each one of those handlers has 
done in using drugs with them. And so, because they aren't 
raised for food, every shipment of horses will come from 
unknown producers and will have been exposed to a huge variety 
of unknown drugs.
    It seems like the Food Safety Inspection Service is posed 
to disregard your advice of 2 years ago by resuming horse 
slaughter without giving sufficient consideration to food 
safety. Are you prepared to investigate whether the food safety 
inspection service has the appropriate systems and protocols in 
place to ensure the safety of horse meat?
    Ms. Fong. We are aware that this is a very sensitive issue, 
and that the agency is engaged in making decisions as to how it 
is going to go about implementing its program, if it does. I am 
not aware that they have yet approved any process.
    Mr. Farr. They have not approved, but they are considering 
it. I think an application has been filed, at least that is 
what I have heard
    Ms. Fong. And I agree that that is my understanding as 
well. We, as you pointed out, we did issue a very significant 
audit on residues in meat last year, and I believe we reached 
management decision with FSIS on that. We would be very happy 
to go back to FSIS and just reiterate the findings that we had 
in that audit just to make sure that they are fully aware and 
cognizant of those findings.
    Mr. Farr. I think the Committee would appreciate it 
generally. I mean, the other side of it is we have just seen 
that they were going to cut back meat inspectors. They were 
going to rift them, and you know, the Senate bill we just voted 
on the floor restores that, but in their testimony here, they 
are faced with sequestration. And it seems a moment when food 
safety and particularly with drugs in animals is at an all-time 
concern, that this is the last place that we ought to be--as 
pointed out, these are first responders, and first responders 
shouldn't be cut back to responding to concerns.
    Why don't I yield to you.
    Ms. DeLauro. I would just add the one thing that we know, 
what just happened in Britain and finding out all over the 
world that horse meat is being used in products in which it is 
not supposed to be used, and that has been happening. So I 
think we opened a door here that really would put our food 
safety in that--it would put it at risk.
    Mr. Farr. I mean, obviously, if the department doesn't have 
the funds, then they ought not to be giving the permit to start 
this new enterprise that has got all kinds of risks and high 
controversy.
    Ms. Fong. Well, I didn't know if that was a question. I 
understand your concern. We will certainly engage in dialogue 
with FSIS on our residue audit, just to make sure that that is 
at the forefront of their minds.
    Mr. Farr. Can you report back to this Committee on what 
your judgment is, whether they are equipped to handle it?
    Ms. Fong. We will be happy to gather our thoughts on that 
and provide something for the record.
    Mr. Farr. Appreciate that. Thank you.
    [The information follows:]

    To date, FSIS' inspection program for horse slaughter is 
not in place, and they have not approved any facility for horse 
slaughter. From FSIS' appropriations hearing testimony (before 
this Subcommittee) on March 13, 2013, OIG learned that FSIS is 
working within the National Residue Program framework to 
develop its horse slaughter inspection program. As FSIS' horse 
slaughter inspection program is in early development, we do not 
anticipate performing a review at this time. However, we may 
consider a review of such processes at a later date.

    Mr. Aderholt. Mr. Fortenberry.

               USDA IMPLEMENTATION OF OIG RECOMMENDATIONS

    Mr. Fortenberry. I would like to follow up a little bit 
more on how the culture and interaction between your agency and 
the department is structured, and then go into the specifics of 
how the CFO, the chief financial officer, contains or controls 
the data as to how well implementations are going or being 
implemented and what type of timelines, and your comment, where 
you said, well, contact the CFO's office. I heard you adjust 
that slightly to say, we are also available to do that.
    I think it is important to recognize that we depend upon 
you to bring us the results of your audits and in a timely 
fashion, that are substantive and clear. So if the CFO has 
information that perhaps is not transparent to us, us going to 
the CFO, I would think, would be a circuitous route to try to 
get to the heart of the matter, which you are charged with.
    So, in that regard, it is my understanding that they keep 
basically some type of scorecard as to how well these 
recommendations have been implemented. Could you report that to 
us as a part of your general findings?
    Ms. Fong. We would be happy to do that.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.201
    
    [GRAPHIC] [TIFF OMITTED] 82566A.202
    
    Mr. Fortenberry. I think that might be an improvement, and 
it would get us out of this entanglement as to the centralized 
authority in this regard to find out how well program missions 
and clarifications of implementation are actually being 
followed in a timely manner.
    So, again, we are looking--sometimes some of this can turn 
into gotcha, a gotcha type of hearing, and that is not the 
intent here. The intent here is to again ensure the integrity 
of the missions of the programs, and our substantive way of 
doing that is through you being the basic watchdog. Do you have 
sufficient autonomy and independence from the agencies in which 
you are charged to audit to effectively carry that out? Again, 
I am unpacking a little bit from the nuance of what you said 
regarding the CFO's office to ensure that you answer my 
question, yes, absolutely.
    Ms. Fong. Yes, absolutely.
    Mr. Fortenberry. All right. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.

                 EMPLOYEE BUYOUTS AND EARLY RETIREMENTS

    Ms. Fong, in your testimony, you indicated that your office 
is offering voluntary early retirement authority and voluntary 
separation incentive pay payment to 39 employees. I noticed, 
however, that last year, you testified that during the first 
quarter of fiscal year 2012, your office had approved voluntary 
buyouts and early retirement for 21 employees and that you were 
implementing plans to approve similar measures, including 
offering 30 additional employees buyouts and early retirements 
by the end of December of last year.
    What is the status of those buyouts and those retirements 
that you spoke of last year, and does the 39 employee figure 
include or exclude any of those employees that you spoke of 
last year? And can you give us an indication of who those folks 
are in terms of positions and grades and years of experience? 
And given the apparent institutionalization of our continuing 
resolution process here in Congress and the added burden of 
sequestration, have your staff reductions had any impact on the 
ability of your office to complete the audits and the 
investigations with which OIG is tasked? And have you 
experienced a brain drain with all of your staff departures?
    Ms. Fong. Okay. Let me go ahead, and I appreciate your 
question. We should definitely clarify what we did in terms of 
buyouts for our staff. Bottom line is that in fiscal year 2012, 
last fiscal year, we offered three buyout opportunities because 
looking forward to 2013, we saw that we would need to bring our 
staff down, the numbers of our staff down, so we offered three 
buyout opportunities.
    Mr. Bishop. Was that because you didn't have enough work 
for them to do?
    Ms. Fong. I wish I could say that. And basically, 39 
employees, during those three buyouts, a total of 39 employees 
left our rolls. That includes the 21 that we testified about 
last year, plus an additional 18.
    I will note as a matter of interest, we offered three 
buyouts. In the third offering, no one accepted a buyout, and 
so we concluded that we had pretty much offered a buyout to 
anybody who was interested in doing that. So, coming forward 
into fiscal year 2013, the staff who we lost through buyouts 
ranged from extremely senior auditors and investigators and 
managers at career levels, who had 30 years of experience, all 
through our ranks, all the way down through our ranks. Most of 
the people that we lost were in our audit and investigative 
offices.
    Needless to say, because we are a staff-intensive 
organization, we depend on human resources to carry out our 
mission, and so this year, we are operating at a much lower 
staffing level. The impact of sequestration for us is that we 
have had to reduce travel funds. Every time we have a request 
for an audit or an investigation or an allegation of 
wrongdoing, we have to assess where that falls in our 
priorities and whether it will require us to spend money that 
we may not have. So that is the impact of sequestration on our 
operations.
    Mr. Bishop. Do you have a brain drain such that it will 
limit your capacity to carry out the responsibilities with 
which you have been tasked by this Congress?
    Ms. Fong. Well, because we have lost so many experienced 
people, and under the rules of the buyouts, we are not allowed 
to fill those vacancies, generally speaking. Once you lose a 
very experienced person, you can't really replace that. That 
being said, we have a very dedicated workforce of people around 
the country. And we are committed to doing the very best that 
we can, given our resources.
    Mr. Bishop. Okay. So I take that as a maybe?
    Ms. Fong. It is a practical reality I think.
    Mr. Bishop. Thank you.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.

                           ELIGIBILITY IN RMA

    I want to follow up on where we left off in the last round. 
But let me make this point, as I understand it. OIG found that 
nearly two-tenths of 1 percent of SNAP participants in New York 
were potentially ineligible for the program, compared to the 
87.5 percent of new policies that OIG found were sold to 
ineligible producers. Clearly, it would seem to me that we have 
work to do to ensure a proper--appropriate oversight by RMA of 
insurers, which was my last point at the last round. So that 
where are we with regard to RMA? And whatever database, if they 
are using the wrong database to make some conclusions, do they 
have a database that deals with eligibility criteria, et 
cetera? Are they following that protocol? Or do they not have 
one at all and they make a determination by some other alchemy? 
And then where is the safeguard on the insurance side of this? 
And where are you making your recommendations to deal with this 
kind of 87.5 percent that are going to ineligible producers?
    Mr. Harden. In terms of the database, as I understand it, I 
may have to correct this if I get it wrong, but approved 
insurance providers, the private sector folks are the ones that 
are making the eligibility determinations for particular 
farmers or policies. That is overseen by RMA, similar--to make 
an analogy, it is like FNS overseeing a State operation for 
SNAP or school lunch. Where we have seen problems is at the AIP 
level, the insured provider level, that they are not doing an 
adequate job, and where we find significant, you know, 
problems, eligibility, as you are pointing out here, policies 
that shouldn't have been paid, we are making recommendations to 
RMA to go back and----

                             RMA OVERSIGHT

    Ms. DeLauro. What should RMA be doing?
    Mr. Harden. They should be providing better oversight of 
the providers.
    Ms. DeLauro. Okay. So they need to provide better oversight 
of providers. Do you have a dollar amount attached to, you 
know, what it cost us in terms of not having a better oversight 
mechanism? Do they have a mechanism now or are they just, as I 
said, are they not dealing with it? Is it not tight enough? 
What exists? Because you have a very stringent requirement on 
the SNAP program, which has over the years been put into place, 
so you are looking at an error record underpayment, overpayment 
of about 3.8 percent. And we go through this all the time. But 
what I want to find out is what is the similar process that we 
deal with, with RMA and with insurance companies to make sure 
that we don't get an 87.5 percent rate of ineligible producers 
getting an advantage?
    Ms. Fong. You make some very good points.
    Ms. DeLauro. And is there a dollar amount attached to any 
of this? And if you don't have that, I really want to know what 
we are doing here in terms of dollars as well.
    Ms. Fong. We can certainly provide information for the 
record----
    Ms. DeLauro. Please.
    Ms. Fong [continuing]. On RMA's improper payment rate, 
which is an issue we are working with very intensely, as well 
as a number of audits we have done in the last few years that 
pinpoint dollar recoveries.
    [The information follows:]

    In USDA's FY 2012 Agency Financial Report, RMA reported 
that Federal Crop Insurance Corporation improper payments were 
approximately $173 million, a 4.08 percent error rate. We have 
not audited this improper payment error rate; therefore, we 
cannot attest to the validity or accuracy of the rate. In 2009, 
OIG issued an audit report on RMA Compliance Activities (05601-
0011-At) that determined that RMA's sampling methodology to 
estimate improper payments was statistically inadequate because 
RMA evaluators excluded certain payments, such as premium 
subsidies and denied claims. OIG's recommendation to include 
all payment types in its sampling methodology has not been 
resolved; therefore, OIG believes RMA's reported estimated 
improper payment rate of 4.08 percent may have been 
understated.

    Ms. DeLauro. Tell me how often has RMA been audited to see 
about these efforts?
    Ms. Fong. We have done a number of audits of RMA in the 
last 3 or 4 years. I am thinking of the citrus work that we 
did.
    Ms. DeLauro. But the last 3 or 4 years. So the last 3 or 4 
years.
    Ms. Fong. And we have a long history of audit work in RMA. 
And we have a very significant audit that made significant 
findings about RMA's oversight of the insurance industry, 
saying that they really need to do a better job. We can provide 
you with a number of dollar results on that.
    Ms. DeLauro. Sure.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 82566A.203
    
    [GRAPHIC] [TIFF OMITTED] 82566A.204
    
    Ms. Fong. And as you may know, there have been some very 
significant investigations and fraud in the crop insurance 
program. Most recently, the tobacco industry in North Carolina.
    Ms. DeLauro. Right.
    Ms. Fong. Multimillion dollars where the producers and the 
insurance agents both defrauded the government, many, many 
convictions and sentences, which highlights the need for 
oversight, I think.
    Ms. DeLauro. With my time just about up, I would appreciate 
that information and the recommendations and the structures 
that are in place that really address this issue and what needs 
to be done to tighten them up. Thank you.
    Thank you, Mr. Chairman.
    [The information follows:]

    RMA has three major divisions--Product Management, 
Insurance Services, and Risk Compliance. Insurance Services is 
responsible for program delivery, and local program 
administration and support. Product Management is responsible 
for overseeing product development. Risk Compliance monitors 
compliance with program provisions by both producers and the 
approved insurance providers (AIPs) that sell and service 
policies.
    Risk Compliance looks to its National Program Operations 
Reviews (NPOR) as its primary tool for monitoring and oversight 
of the AIPs. An NPOR is a review conducted approximately once 
every 3 years by a designated Lead Regional Compliance Office, 
along with other assigned regional compliance offices, of 
selected operations of an AIP, to determine their compliance 
with laws, regulations, the Standard Reinsurance Agreement, 
and/or associated Appendices, and/or approved FCIC policies and 
procedures. Risk Compliance, Strategic Data Acquisition and 
Analysis (SDAA) uses data mining as a tool for monitoring and 
oversight of AIPs and indemnity payments. Through data mining, 
Risk Compliance identifies policyholders for possible onsite 
spot check inspections, which are conducted by Farm Service 
Agency field personnel. Risk Compliance, through its field 
compliance offices, initially follows up on referrals that may 
involve potentially fraudulent payments; Risk Compliance also 
works closely with (and refers to) OIG's Office of 
Investigations on any referrals or other incidents involving 
potential fraudulent payments.
    Under the Standard Reinsurance Agreement between RMA and 
the AIPs, and AIPs are required to conduct a number of quality 
control reviews involving their agents, policies, and indemnity 
claims, and forward the results of their quality control 
reviews to Risk Compliance. Risk Compliance monitors and 
collects the results of these quality control reviews conducted 
by the AIPs. Risk Compliance also requires the AIPs to notify 
RMA upon receiving notice of a potential claim on an eligible 
crop insurance contract where the production loss of indemnity 
is likely to exceed $500,000, or such other amount determined 
by RMA. RMA may elect to participate in the loss determinations 
and review the actions of the AIP taken in the settlement of 
the claim before agreement is reached with the producer and 
before the AIP makes payment. These are called Large Claims 
Reviews. Conversely, RMA may elect to decline participation or 
review of the claim.

    Mr. Aderholt. With our time concluding at almost the noon 
hour, I am going to go ahead and recognize Mr. Farr. I think he 
has got a couple more questions.

                   APHIS OVERSIGHT OF INVASIVE PESTS

    Mr. Farr. I just have one more question, Mr. Chairman, and 
I appreciate it. And it is this oversight issue. We have spent 
hundreds of millions of dollars trying to detect and eradicate 
invasive pests. In the area in California that I represent, 
probably California as a State probably has more issues than 
anyone because of the amount of travel in and out, the amount 
of transshipment of goods, everything. It is really a problem. 
Because when we do have an invasive pest, it can wipe out the 
wine industry or multibillion dollar industries, any of the 400 
industries that we have in agriculture, especially crops and so 
on.
    And I know every year, we appropriate millions of dollars 
each year to the Animal and Plant Health Inspection Services, 
APHIS, to trace and eradicate these pests once they are in the 
country. The Department of Homeland Security has personnel from 
the Ag Department now moved over to DHS who are responsible for 
protection of the ports of entry. And huge sums have also been 
allocated from the Commodity Credit Corporation to fight 
invasive pests. So I was really disturbed to learn that in a 
report last August, you found that from fiscal year 2008 to 
2011 there was virtually no management accountability in the 
smuggling, interdiction, and trade compliance unit of APHIS. 
That group has the front line responsibility at APHIS for 
closing the pathways by which pests get into this country.
    As a result, there was an extremely low success rate in 
finding these pests and tracing how they got here in the first 
place. To paraphrase your testimony, 90 percent of the surveys 
that APHIS undertook did not result in a seizure or trace back 
of a prohibited product, and APHIS did not take action to stop 
further shipments on 96 percent of the surveys that did result 
in seizure and trace back.
    I mean, these figures are shocking. And, you know, I can 
understand that APHIS has taken your recommendations to heart. 
But how does the management of a program get so bad in the 
first place that it takes your shop to uncover it? What is 
going on in there? And when they take your recommendations, do 
they fix it for good, or is it you are going to come back and 
discover stuff that they ought to be doing under their watch, 
under their responsibility to detect the gaps and the lack of 
strong, effective management?
    Mr. Harden. When we brought this to their attention during 
the field work, they immediately started taking action. But 
oversimplifying the cause of what they told us as why this got 
to the state it was, was the managers higher up trusted their 
people to do the right thing. Now, this is a very sensitive 
matter, and it is something that we will follow up on. But they 
took very seriously what we brought to them.
    Mr. Farr. The question is why did those managers let it get 
that bad? You as an outsider, this is not your expertise, this 
is what they are hired to do.
    Mr. Harden. I don't know that I can answer why they let it 
get that bad, because when we asked them, why is this going on, 
the answer we basically got was, well, we trusted them to do 
the right thing. That is not a good answer, but that is the 
answer that we were able to get.
    Mr. Farr. Are they still around?
    Mr. Harden. Yes, but one of the deputy administrators, as I 
understand it, that was new to this program area in terms of 
the management of that area.
    Mr. Farr. So does your recommendations, I mean, sometimes 
it seems it is just such gross mismanagement that people ought 
to be held accountable for it.
    Mr. Harden. I understand that. And if it were at that 
level, then there would be that recommendation, or if we felt 
there was something----
    Mr. Farr. You can make those recommendations?
    Mr. Harden. If we feel like there is something criminal, we 
would refer it to investigations. If we found like----
    Mr. Farr. Criminal is pretty secure--I mean, pretty 
difficult to prove in these things. It is just malfeasance and 
lack of professional oversight, things like that. But does your 
report bring that to the attention?
    Mr. Harden. We can when we feel it is appropriate to bring 
that type of recommendation forward, yes.
    Mr. Farr. Did you feel so in this situation?
    Mr. Harden. That wasn't part of our recommendations because 
of how they were reacting to it. It was different players. So, 
I mean, it is hard to--to generalize, it is hard to take 
somebody out if they are very new to the game, and they are 
looking at you and saying, I am going to try and fix this.
    Mr. Farr. Yeah, but 96 percent of their surveys where they 
found problems they did not take any action on. Well, I hope we 
can plug that hole, Mr. Chairman, with your help. Thank you for 
your testimony. Thank you for being here today.
    Mr. Aderholt. Thank you, Mr. Farr.
    And certainly, we will be glad to follow up on that to see 
what the Subcommittee can do. Thank you, Ms. Fong for being 
here. Ms. Ellis, Mr. Harden, thank you for joining us here 
today for the testimony. And we look forward to working with 
you. We do have some questions for the record that I know that 
I have that we will submit for the record, and other members 
may do as well. So, again, we thank you, and the Subcommittee 
is adjourned.
    [Questions submitted for the record:]
    [GRAPHIC] [TIFF OMITTED] 82566A.205
    
    [GRAPHIC] [TIFF OMITTED] 82566A.206
    
    [GRAPHIC] [TIFF OMITTED] 82566A.207
    
    [GRAPHIC] [TIFF OMITTED] 82566A.208
    
    [GRAPHIC] [TIFF OMITTED] 82566A.209
    
    [GRAPHIC] [TIFF OMITTED] 82566A.210
    
    [GRAPHIC] [TIFF OMITTED] 82566A.211
    
    [GRAPHIC] [TIFF OMITTED] 82566A.212
    
    [GRAPHIC] [TIFF OMITTED] 82566A.213
    
    [GRAPHIC] [TIFF OMITTED] 82566A.214
    
    [GRAPHIC] [TIFF OMITTED] 82566A.215
    
    [GRAPHIC] [TIFF OMITTED] 82566A.216
    
    [GRAPHIC] [TIFF OMITTED] 82566A.217
    
    [GRAPHIC] [TIFF OMITTED] 82566A.218
    
    [GRAPHIC] [TIFF OMITTED] 82566A.219
    
    [GRAPHIC] [TIFF OMITTED] 82566A.220
    
    [GRAPHIC] [TIFF OMITTED] 82566A.221
    
    [GRAPHIC] [TIFF OMITTED] 82566A.222
    
    [GRAPHIC] [TIFF OMITTED] 82566A.223
    
    [GRAPHIC] [TIFF OMITTED] 82566A.224
    
    [GRAPHIC] [TIFF OMITTED] 82566A.225
    
    [GRAPHIC] [TIFF OMITTED] 82566A.226
    
    [GRAPHIC] [TIFF OMITTED] 82566A.227
    
    [GRAPHIC] [TIFF OMITTED] 82566A.228
    
    [GRAPHIC] [TIFF OMITTED] 82566A.229
    
    [GRAPHIC] [TIFF OMITTED] 82566A.230
    
    [GRAPHIC] [TIFF OMITTED] 82566A.231
    
    [GRAPHIC] [TIFF OMITTED] 82566A.232
    
    [GRAPHIC] [TIFF OMITTED] 82566A.233
    
    [GRAPHIC] [TIFF OMITTED] 82566A.234
    
    [GRAPHIC] [TIFF OMITTED] 82566A.235
    
    [GRAPHIC] [TIFF OMITTED] 82566A.236
    
    [GRAPHIC] [TIFF OMITTED] 82566A.237
    
    [GRAPHIC] [TIFF OMITTED] 82566A.238
    
    [GRAPHIC] [TIFF OMITTED] 82566A.239
    
    [GRAPHIC] [TIFF OMITTED] 82566A.240
    
    [GRAPHIC] [TIFF OMITTED] 82566A.241
    
    [GRAPHIC] [TIFF OMITTED] 82566A.242
    
    [GRAPHIC] [TIFF OMITTED] 82566A.243
    
    [GRAPHIC] [TIFF OMITTED] 82566A.244
    
    [GRAPHIC] [TIFF OMITTED] 82566A.245
    
    [GRAPHIC] [TIFF OMITTED] 82566A.246
    
    [GRAPHIC] [TIFF OMITTED] 82566A.247
    
    [GRAPHIC] [TIFF OMITTED] 82566A.248
    
    [GRAPHIC] [TIFF OMITTED] 82566A.249
    
    [GRAPHIC] [TIFF OMITTED] 82566A.250
    
    [GRAPHIC] [TIFF OMITTED] 82566A.251
    
    [GRAPHIC] [TIFF OMITTED] 82566A.252
    
    [GRAPHIC] [TIFF OMITTED] 82566A.253
    
    [GRAPHIC] [TIFF OMITTED] 82566A.254
    
    [GRAPHIC] [TIFF OMITTED] 82566A.255
    
    [GRAPHIC] [TIFF OMITTED] 82566A.256
    
    [GRAPHIC] [TIFF OMITTED] 82566A.257
    
    [GRAPHIC] [TIFF OMITTED] 82566A.258
    
    [GRAPHIC] [TIFF OMITTED] 82566A.259
    
    [GRAPHIC] [TIFF OMITTED] 82566A.260
    
    [GRAPHIC] [TIFF OMITTED] 82566A.261
    
    [GRAPHIC] [TIFF OMITTED] 82566A.262
    
    [GRAPHIC] [TIFF OMITTED] 82566A.263
    
    [GRAPHIC] [TIFF OMITTED] 82566A.264
    
    [GRAPHIC] [TIFF OMITTED] 82566A.265
    
    [GRAPHIC] [TIFF OMITTED] 82566A.266
    
    [GRAPHIC] [TIFF OMITTED] 82566A.267
    
    [GRAPHIC] [TIFF OMITTED] 82566A.268
    
    [GRAPHIC] [TIFF OMITTED] 82566A.269
    
    [GRAPHIC] [TIFF OMITTED] 82566A.270
    
    [GRAPHIC] [TIFF OMITTED] 82566A.271
    
    [GRAPHIC] [TIFF OMITTED] 82566A.272
    
    [GRAPHIC] [TIFF OMITTED] 82566A.273
    
    [GRAPHIC] [TIFF OMITTED] 82566A.274
    
    [GRAPHIC] [TIFF OMITTED] 82566A.275
    
    [GRAPHIC] [TIFF OMITTED] 82566A.276
    
    [GRAPHIC] [TIFF OMITTED] 82566A.277
    
    [GRAPHIC] [TIFF OMITTED] 82566A.278
    
    [GRAPHIC] [TIFF OMITTED] 82566A.279
    
    [GRAPHIC] [TIFF OMITTED] 82566A.280
    
    [GRAPHIC] [TIFF OMITTED] 82566A.281
    
    [GRAPHIC] [TIFF OMITTED] 82566A.282
    
    [GRAPHIC] [TIFF OMITTED] 82566A.283
    
    [GRAPHIC] [TIFF OMITTED] 82566A.284
    
    [GRAPHIC] [TIFF OMITTED] 82566A.285
    
    [GRAPHIC] [TIFF OMITTED] 82566A.286
    
    [GRAPHIC] [TIFF OMITTED] 82566A.287
    
    [GRAPHIC] [TIFF OMITTED] 82566A.288
    
    [GRAPHIC] [TIFF OMITTED] 82566A.289
    
    [GRAPHIC] [TIFF OMITTED] 82566A.290
    
    [GRAPHIC] [TIFF OMITTED] 82566A.291
    
    [GRAPHIC] [TIFF OMITTED] 82566A.292
    
    [GRAPHIC] [TIFF OMITTED] 82566A.293
    
    [GRAPHIC] [TIFF OMITTED] 82566A.294
    
    [GRAPHIC] [TIFF OMITTED] 82566A.295
    
    [GRAPHIC] [TIFF OMITTED] 82566A.296
    
    [GRAPHIC] [TIFF OMITTED] 82566A.297
    
    [GRAPHIC] [TIFF OMITTED] 82566A.298
    
    [GRAPHIC] [TIFF OMITTED] 82566A.299
    
    [GRAPHIC] [TIFF OMITTED] 82566A.300
    
    [GRAPHIC] [TIFF OMITTED] 82566A.301
    
    [GRAPHIC] [TIFF OMITTED] 82566A.302
    


                           W I T N E S S E S

                              ----------                              
                                                                   Page
Almanza, A. V....................................................     1
Ellis, K. L......................................................   267
Fong, P. K.......................................................   267
Hagen, Elisabeth.................................................     1
Harden, G. H.....................................................   267
Rowe, Audrey.....................................................    83

                                  

