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




   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2015

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                             SECOND SESSION
                                ________

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

 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.
                  Tom O'Brien, Betsy Bina, Pam Miller,
                           and Andrew Cooper,
                            Staff Assistants
                                ________

                                 PART 3
                                                                   Page
 USDA Inspector General...........................................    1
 Commodity Futures Trading Commission.............................  135
 USDA Research, Education, and Economics..........................  349



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                ________

         Printed for the use of the Committee on Appropriations





















   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2015

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                             SECOND SESSION
                                ________

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

 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.
                  Tom O'Brien, Betsy Bina, Pam Miller,
                           and Andrew Cooper,
                            Staff Assistants
                                ________

                                 PART 3
                                                                   Page
 USDA Inspector General...........................................    1
 Commodity Futures Trading Commission.............................  135
 USDA Research, Education, and Economics..........................  349



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                ________

         Printed for the use of the Committee on Appropriations

                     U.S. GOVERNMENT PRINTING OFFICE

 89-902                     WASHINGTON : 2014













                           COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

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

               William E. Smith, Clerk and Staff Director

                                  (ii)

 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2015

                              ----------                              

                                          Wednesday, March 5, 2014.

                     U.S. DEPARTMENT OF AGRICULTURE

                               WITNESSES

HON. PHYLLIS FONG, INSPECTOR GENERAL, U.S. DEPARTMENT OF AGRICULTURE
KAREN ELLIS, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS, U.S. 
    DEPARTMENT OF AGRICULTURE
GIL HARDEN, ASSISTANT INSPECTOR GENERAL FOR AUDIT, U.S. DEPARTMENT OF 
    AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. Okay. The subcommittee will come to order. 
Good morning, everybody. Welcome to the Agriculture 
Appropriations Subcommittee's first hearing for fiscal year 
2015. I would like to approach our fiscal year 2015 bills with 
basically three things in mind: number one, ensuring the proper 
use of funds for robust oversight; second, ensuring the 
appropriate level of regulation to protect producers and the 
public; and ensuring funding is targeted to vital programs.
    The audits and investigations conducted by the Office of 
the Inspector General are key to the subcommittee's effort to 
ensure the proper use of funds, to detect and reduce waste, 
fraud, and abuse, and to strengthen the management of USDA's 
agency and programs. The work is vital to us to make sure that 
the decisions on how to allocate the funds and our oversight 
work to ensure that the funding that we provide is utilized in 
a proper way.
    This morning I am pleased to welcome USDA Inspector General 
Phyllis Fong, Assistant Inspector General for Investigations, 
Karen Ellis, and Assistant Inspector General for Audits, Gil 
Harden, to the hearing this morning. So welcome and thank each 
of you for being here.
    Ms. Fong, I would like to first of all congratulate you on 
receiving the Distinguished Federal Leadership award from the 
Association of Government Accountants last month. For those of 
you who may not know, this recognizes Federal officials who 
exemplify and promote excellence in enhancing sound financial 
management legislation, regulations, practices, policies and 
systems. So we are fortunate to have you at USDA, Ms. Fong, and 
thank you for your service.
    Before I begin the hearing, I do want to recognize our 
ranking member, Mr. Farr from California, for any opening 
comments that he might like to make.
    Mr. Farr. Thank you very much, Mr. Chairman, and I 
apologize for being late. I appreciate you getting the hearing 
started. This is the first hearing of the year and we start 
with the inspector general. I have to tell you I have mixed 
emotions about inspector generals. I think that where you can 
be very constructive in improving government is great, but I 
have also seen a lot of unintended consequences from IG reports 
that have led to things getting a lot worse. Before I got into 
elected politics, I worked in the auditor's--in the legislative 
analyst's office in Sacramento under a really famous fellow who 
started the first state legislative analyst's office, Alan 
Post, and I found that oftentimes when we were analyzing the 
programs for the legislature, what we learned was that the 
programs--I mean, the legislature just didn't write good law 
and there--and got a lot of unintended consequences. And what I 
would like to--I appreciate that you are also a member of the 
Federal Inspectors General's Federal, what do you call it, the 
government-wide program where you--73 Federal inspectors. I 
just--when I get to questioning, I want to just discuss some of 
the issues of how you fix things that are broken, but I 
appreciate what--I echo the appreciation for the award you 
received. We love public servants that are recognized by their 
peers as outstanding, and you are certainly one of them, and 
thank you for being here today.
    Mr. Aderholt. Thank you. As this is our first meeting, let 
me just go over a little few things about how the procedures 
for the hearings are to our members. And we will work under, as 
we always and have in the past, the 5-minute rule. Members will 
be recognized for 5 minutes in order of seniority at the dais 
at the beginning of the hearing and then in order of 
appearance. We will alternate between the majority and the 
minority members. And we may have a couple rounds to allow 
members to get their question in.
    So I would like to ask anybody with electronic devices, if 
you can turn them off or put them on silent, that would be 
helpful.
    Inspector General Fong, I will note that your written 
testimony will be included in the record, and I would like to 
recognize you now for your oral statement and then we will 
proceed with the questions.

                           Opening Statement

    Ms. Fong. Thank you, Mr. Chairman, Ranking Member Farr and 
members of the subcommittee. I appreciate the very warm welcome 
that you are extending to our office today, and as always, we 
appreciate the interest that you show in our work and what we 
do at USDA.
    As you know, our mission is to help USDA deliver its 
programs effectively and with integrity, and we provide audit 
and investigative services. Since you have my full written 
statement, let me just highlight some of the significant work 
we did over the last year aswell as some of the work that we 
have in process that may be of interest.
    In the area of food safety, we recently reported on swine 
slaughter plants, and we found that a number of plants 
repeatedly violated food safety regulations with little or no 
consequence. We also issued a report on the need for FSIS to 
test boxed beef for E. coli. That report came out a number of 
months ago, but we believe it is very significant.
    We are currently conducting audits of FSIS's public health 
information system for the domestic inspection module, and we 
are also doing an inspection of ground turkey processing.
    OIG focuses also on helping USDA safeguard and effectively 
deliver its programs. Given the importance of the SNAP program, 
it had an $86 billion budget last year, which represents 56 
percent of USDA's portfolio, we in OIG devoted more than half 
of our investigative resources to addressing trafficking in 
SNAP benefits, and this resulted in almost 400 convictions and 
over $49 million in fiscal year 2013. We also spent a number of 
resources on our audit side to issue recommendations to the 
Department to better screen SNAP retailers who wish to enter 
the program and remain in the program.
    This year, we have kicked off an initiative with FNS to 
work collaboratively to address SNAP fraud on a multi-agency 
level that will involve our State and local partners as well, 
and we have great expectations that this program will be 
proactive.
    Other work that we have in process focuses on how FNS 
reports its SNAP payment error rates, and we are also looking 
at factors that are causing high average food costs in the WIC 
program.
    Finally, as you all know, we work to help USDA improve its 
overall management systems. This year we issued reports on the 
Department's settlement of the civil rights complaints as a 
follow-on to the Pigford litigation. We also issued reports on 
IT security, financial statements and improper payments. We 
have ongoing work on the claims review process for women and 
Hispanic farmers and we also are looking at the use of Economy 
Act transfers and reimbursable agreements by the Department as 
it manages its funds.
    Let me just briefly conclude my oral statement by 
addressing the fiscal year 2015 request for the OIG. As you all 
know, in response to government-wide budget constraints, we 
have had to streamline our operations, as has every other 
Federal agency, and we are presently operating at our lowest 
level of staffing. We want to thank you at the subcommittee for 
providing us with a much needed increase in fiscal year 2014. 
This will enable us to provide more effective oversight of USDA 
programs while we continue to look for cost saving 
opportunities within our operation.
    For fiscal year 2015, the President's request provides a 
modest increase for us to adopt an innovative approach to 
addressing improper payments in USDA programs, and we hope that 
you are able to support that request. We are hoping to use data 
analytics to really focus on the level of improper payments 
across USDA, starting with the issues that we see in RMA and 
some of the other agencies.
    So thank you today for inviting me to testify before the 
subcommittee, and we are pleased to answer any questions that 
you might have.
    [The information follows:]


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                        DEPARTMENTAL CHALLENGES

    Mr. Aderholt. Thank you, Inspector. First of all, I would 
like to start out with something that I believe I had mentioned 
last year when we started out the subcommittee hearings, and 
that was talking about the challenges and the successes. You 
have mentioned some of those in your opening statement, but I 
think last year I asked about the USDA's greatest challenges 
and whether the Department is doing enough to address those 
challenges. And can you tell a little bit about what you see 
from your perspective and from your office, what is the 
greatest challenges as you look to the year ahead?
    Ms. Fong. Well, that is a very good question, and it gives 
us a chance to look at the body of our work and see the major 
themes coming out.
    As we were preparing for this hearing, we were talking, and 
one of the things that we see across the Department is that 
there is a need to provide more attention to effective 
management of the Department's programs and oversight of 
programs both within the agencies and with respect to third-
party providers of benefits. We have done a number of reports 
in the agencies. I think if you look at our IT security 
reports, that is an indication of some of the problems that we 
are seeing with agencies who need to really focus on their IT 
security. Improper payments becomes a symptom of perhaps the 
need for more effective oversight of how agencies deliver 
programs. And what we were seeing is that in this era of budget 
constraints, program managers are looking as a top priority to 
deliver programs, to get the money out, to get the benefits out 
to recipients and participants, and we believe that that is a 
very important goal.
    When an agency has perhaps less resources than it has had 
in the past, sometimes agencies have to make some tough choices 
about delivering benefits versus making sure that there are 
enough controls in place, that there is enough oversight of how 
those benefits are delivered, and we believe that there needs 
to be a little more attention on the oversight side of that. We 
see that in the SNAP program, in the nutrition programs, in the 
crop insurance programs, in the farm programs. And as our 
statement points out, we are doing continued work on those 
oversight efforts by the agencies to see how effectively those 
programs are working.
    Mr. Aderholt. Where is USDA--in what areas are they doing a 
good job in tackling the waste, fraud, and abuse?
    Ms. Fong. Well, we are very encouraged by the partnership 
that we have with FNS. We recognize that the SNAP program poses 
a number of challenges for everyone at the Federal, State and 
local levels in terms of delivery, but FNS has been very 
willing and enthusiastic in terms of working with us to roll 
out our initiative this year. And let me just talk a little bit 
about that. We are partnering with them to work with State and 
local administrative agencies as well as law enforcement to 
really get at some of the root causes for vulnerabilities and 
fraud in the program, and to ensure that fraud where we find it 
is being addressed both at the retailer as well as the local 
recipient level, and to also proactively get the message out to 
people around the country that if they engage in fraudulent 
activities, that there will be some consequences to that. So we 
are rolling that initiative out as we speak, and FNS has been a 
very, very active partner.

                           PROGRAM OVERSIGHT

    Mr. Aderholt. You mentioned about the oversight of programs 
and how important that is. I assume that is going to be one of 
your top recommendations for USDA. What are some other 
recommendations that would be near the top there that would 
fall in that same category?
    Ms. Fong. We feel very strongly that the Department needs 
to focus on its IT security initiatives. I think there is a 
recognition at the Department that this is a significant issue. 
The use of IT cuts across all program areas. As we are becoming 
more computerized, it is essential that we have good databases 
and security of data. I think there is a good recognition of 
the problem. The solutions are taking time, and they will 
continue to require time and attention.
    Mr. Aderholt. Okay. Thank you. Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman.

                            IG WORK PROCESS

    I would like to pursue a little bit of just the process in 
which the IG's work, because you are on the council of--you are 
chair, aren't you, of the Council on Integrity and Efficiency? 
Congratulations. That is--you are in charge of what, 73 other 
inspector generals?
    Let's take the SNAP question that the chairman asked. I 
mean, that seems to me, and just quickly thinking, that there 
is probably no program in the Federal Government that has more 
responsibilities to audit the recipient of the money, of the 
benefit, and then how that benefit is spent. In most cases, it 
is just does the money get to the right place, not how is the 
money from the person spent. Nobody checks how Social Security 
money is spent, but they do check on how SNAP programs are 
spent.
    So as you review these, and obviously, as you said, it is a 
huge program. It is, what, 56 percent of the entire Department 
of Agriculture's budget spent on food in America? Do you also 
come in with recommendations on how to improve the program or 
just that it isn't--because I have found in a lot of these 
programs, like the school feeding program that I am really 
interested in, we had seven or eight different programs within 
schools. Nobody's come in and said why don't we put those under 
one title and manage them under one silo rather than seven 
separate silos, and whatever technology, because you are also 
reviewing use of technology, appropriate technology, sort of 
bar coding of the meals or bar coding the process.
    I mean, there is just--do those recommendations, do the 
IG's come in and say there is a better way of managing this law 
that we are required to have you comply with?
    Ms. Fong. You have raised a number of very interesting 
thoughts in your question. Let me just comment on a number of 
them. You mentioned the Council of the Inspectors General on 
Integrity and Efficiency. It is composed of the 73 Federal 
IG's. And our task, our mission is to identify issues that cut 
across multiple agencies and then to do cross-cutting work and 
come up with recommendations where appropriate. As you 
mentioned----
    Mr. Farr. Is that--excuse me. Is that also program change 
or just how the IG's can better function?
    Ms. Fong. It is both. We do focus on how IG's can better 
function. We also look at program change. For example, we have 
issued reports in the last few years on suspension and 
debarment government-wide, on IT cyber security and how to 
better evaluate that, and we have done something on export and 
import trade. And one of the projects we are working on now 
deals with cloud security, the security of the agencies using 
cloud computing to manage a lot of their IT practices.
    As you can imagine, it is not always easy to find topics 
that cut across department and agency lines. For example, you 
know, you mentioned that on the Social Security side that 
perhaps people do not look at how Social Security recipients 
spend their money. I would say----
    Mr. Farr. Well, there is no law--there is no law into that 
of how you spend it, where there is with SNAP, you are limited 
as to how you can spend the money.
    Ms. Fong [continuing]. And along those lines----
    Mr. Farr [continuing]. The benefit.
    Ms. Fong. At the IG level, at the IG council level 
government-wide, what we would focus on in dealing with the 
IG's from, say, the Social Security Administration or, say, the 
Department of Health and Human Services with respect to 
Medicaid, or Veterans Affairs with respect to veterans 
benefits, is to find issues that we have in common, for 
example, the need to match databases, not to pay people who are 
on the death master list or who may be ineligible for other 
reasons, and we have been able to do work at that kind of macro 
level.
    Mr. Farr. Does that come back to--I mean, here all of us 
are elected to fix things that are broken in government, and 
some of us think sometimes that it is broken on the collection 
side and some of us think it is broken on the expenditure side. 
I mean, that is the politics. But it seems to me that you are--
the thing I see in Congress different from when I was in local 
and State government is that we do everything on a very general 
level. We make law very general and then we have these rule 
writings that gets into writing the detail, but the only people 
that really examine and know how it really ends up on the 
street are people like inspector generals and/or managers of 
those programs, and very rarely do we get back sort of the 
feedback, you designed this thing poorly. It is just--it is not 
going to work the way you have written it. There is a smarter, 
better way. That is what--the kind of feedback, you know, and 
nobody knows that except the technicians on the inside. I 
always tell everybody who is a public employee, tell us what is 
broken. If you are running a program and you have to do a bunch 
of dumb-dumb stuff, we want to know dumb-dumb, because we can 
fix dumb-dumb, but we don't get it. I mean, we don't always get 
it unless there is sort of a scandal or something like that.
    And I just wondered if part of your responsibilities was to 
come back and say, you know what, either the law or the regs 
are just poorly written.
    Ms. Fong. And that is a very good point. We do try to point 
that out in our reports where we think that a regulation or a 
law should be looked at and perhaps revised. The one that comes 
to mind immediately is our recent report on SNAP retailers and 
how the Department authorizes and reauthorizes retailers who 
participate. There are a number of recommendations we made in 
there that may require a change to law or regulation if the 
Department decides it wants to pursue that, and so I would draw 
your staff's attention to some of those recommendations.
    Mr. Farr. Thank you.
    Mr. Aderholt. Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman.

                               NASS DATA

    And welcome; appreciate your work. Your testimony reported 
a lack of antiquated enforcement procedures and security 
measures meant to protect the National Agricultural Statistic 
Service information and understanding how important security is 
on that information, the effects it can have on markets and 
insider trading, whatever that--it is a little concerning to me 
to hear that there are real problems.
    Was there any data that was actually released prior to what 
it should have been, or do you know if information did get out 
ahead of--to affect the market?
    Mr. Harden. Yes, sir. We would probably have to get back 
with you on details, but before we did our review, I think a 
couple years prior, there was some information that was 
released a couple minutes ahead of time, but the impact on 
that, I don't know the exact impact that it had on the market.
    [The information follows:]


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    Mr. Latham. Okay. Are you confident now that the 
information is secure, that the data's not----
    Mr. Harden. I know that as we did the review and we brought 
the problems to NASS, they were very receptive and started 
working on fixing the problems before the field work was even 
finished. So in terms of the recognition of the problem, I 
think they have a better handle on it now. We would have to go 
back and look at it in the future to see if the fix is 
sufficiently implemented.
    Mr. Latham. Do you have any additional recommendations or 
any other concerns or--other than what you have already----
    Mr. Harden. No.

                        RECOVERY RECOMMENDATIONS

    Mr. Latham. Okay. There were--I think in your testimony, 
you did 17 audits, and as a result, determined there was $424 
million of ``questioned'' or unsupported costs at USDA, and 
there was $12 million that was recommended for recovery and 
$412 not. Why would you not want to recover more than $12 
million rather than the $412?
    Ms. Fong. Let me just talk generally in terms of our 
recommendations. We--as you point out, we make dollar 
recommendations in a number of categories, and that cost 
avoidance category generally applies when we are making 
recommendations to the agency to take action before the money 
goes out. Don't let the money go out to an ineligible person. 
The recovery category is when the money has already gone out 
and we tell the agency, take a look at this, we think it may 
have gone, and they may be using it for an ineligible purpose 
or an improper purpose. We will make those recommendations.
    At that point, the agency then has to assess whether they 
can take action, whether it is within the statute of 
limitations, whether they have a likelihood of recovery, 
whether there is any other factor that comes into play there. 
And so we work with the agency to come up with recommendations 
that are possible and implementable.
    Gil, did you want to add----
    Mr. Harden. And just to point out, a big part of the number 
that was not recommended for recovery, I think if I go back and 
look at the details, they are going to be connected with 
statistical projections. So on the--we take a sample and we do 
it statistically. If there are individual members of that 
sample where we note that they were potentially ineligible, we 
can make specific recommendations to the agency to go look at 
those specific sample items, but then with our statistician, we 
can take that data and apply it to the universe that we were 
looking at at that point in time, which comes up with an amount 
that is potentially ineligible, but it is something that is not 
recoverable because it is not connected with a specific sample 
item.
    Mr. Latham. So these numbers are actually projections of 
maybe?
    Mr. Harden. Statistically, yes, those.
    Mr. Latham. Okay. Again, define your question, unsupported 
costs. What does that mean?
    Mr. Harden. The unsupported costs category is where they 
did not have the documentary support for whatever----
    Mr. Latham. Okay.
    Mr. Harden [continuing]. The decision was that was made, 
and they couldn't provide it to us during field work or maybe 
they were able to provide it to us after, they were able to 
come up with it, or if not, then it stays as unsupported. It is 
part of the question cost category.
    Ms. Fong. For example, if the Department were to give a 
grant to a recipient to carry out a certain kind of activity, 
and the recipient then claimed costs under the grant, say, for 
salaries or for purchase of equipment or whatever it is, if 
they don't have the supporting receipts or documentation, then 
the Department should not be paying that. The claimed costs 
need to be supported and justified.
    Mr. Latham. Okay. I am out of time. Thank you.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you very much, Mr. Chair.
    Thank you for your testimony and all of the work you do on 
behalf of the USDA and investigating things that really need to 
be understood.

                        INVESTIGATION PRIORITIES

    Let me just start with some of the questions around how you 
decide where to focus your investigations. You did a great job 
in the beginning, I think, explaining that because SNAP is such 
a large percentage of the budget at USDA, it has been a focus, 
and you have certainly done a lot of work of trying to sort out 
what the areas are of fraud. It is always a volatile topic here 
when it comes to the policy and the funding. And I appreciate 
the fact that you have really started to look at some of the 
retailing issues as opposed to just focusing on individuals, 
because I think all too often we think about the individual who 
committed the fraud.
    So I want to just get a little bit of a comparison. I see 
from 2012 data, about 50 percent of your investigations went 
into SNAP fraud. My understanding is about 99 percent of the 
people eligible for SNAP are completely truly eligible, so 
clearly, some of this is happening in the retailing side. 
Payment accuracy is 96.2 percent from 2011 data.
    In Maine, where I represent, the average SNAP benefit is 
about $122 a month, so individuals who do something incorrect 
aren't necessarily defrauding the government for high numbers.
    I, of course, want to compare this a little bit to some of 
the farmers who receive different kinds of payments through 
USDA. And the average of the top 10 percent of farmers is 
$32,000 a year in crop subsidies. So just give me a sense on 
how much you have done on that side, given the dollar value, 
how able we are to understand when people are receiving those 
subsidies appropriately, and how you balance out the use of 
those resources, and I would say particularly in light of the 
fact that with this passage of the farm bill, there are going 
to be a tremendous number of changes in how farmers receive 
subsidies, so it seems to me it will be an area of a certain 
amount of confusion in the beginning.
    Ms. Fong. Let me just comment generally about how we set 
our priorities for our work. As you mentioned, on our 
investigative side, which makes up about 40 percent of the 
resources of our office, SNAP has taken up more than half of 
our attention. And we generally focus on the retailers, because 
that is the Federal level of responsibility, leaving the 
recipient fraud generally to the State and locals to 
investigate.
    Now, both our audit side of the house and our investigative 
side of the house, every year we look at the areas of highest 
risk within USDA as we plan our work. And in order to kind of 
assess that, we ask for input from Congress, from the Secretary 
as to areas where you all might believe we could focus our 
attention. We also look at the history of the various programs 
in the portfolios based on our experience, the level of 
funding, whether there are new legislative initiatives that are 
being implemented, and any other factor that could come into 
play. We then decide what areas pose the greatest risk at the 
current time, and are ripe for a look. Many times we will not 
look at a very new program, because we want to give the agency 
a chance to start implementing it.
    I think if you look at our full portfolio, you will see 
that every year we are mandated by law to carry out financial 
statement audits, which we do of the whole Department. We have 
to look at IT security. We have to look at improper payments by 
law, and so we spend quite a bit of resources on that. We have 
also spent a lot of time on the conservation programs because 
of the way those programs have been managed in the past. Crop 
insurance is a matter of great interest to us, as is any food 
safety issue. That tends to be one of our top priorities.

                           IMPROPER PAYMENTS

    Ms. Pingree. So perhaps I could have the opportunity to do 
a little more research on this or you could provide me with 
that, but I am curious, given some of the priorities around 
improper payments and what would be quite a bit of changes in 
crop insurance. So, again, I am somewhat interested in how many 
improper payments or how that is evaluated when it comes to 
subsidies to farmers. And you may not have all that information 
today, but I would be just generally interested in 
understanding better how well we are able to investigate that 
and how much of your resources go to that investigation.
    And just as a little follow-up on that, so I know that part 
of the new resources that are in the President's budget are on 
the creation of these audit centers of excellence, which seems 
like a potentially good way of going about doing that, so 
again, in the future, do you have an understanding of how much 
of that will be devoted to investigating SNAP fraud as opposed 
to investigating subsidy payments?
    Ms. Fong. We would be happy to provide some additional 
detail for the record.
    Ms. Pingree. I am out of time, so I know you probably don't 
have a lengthy answer, but I would be happy to get more 
information on that.
    Ms. Fong. We would be happy to provide that.
    Ms. Pingree. Great. Thanks.
    [The information follows:]


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    Mr. Aderholt. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.

                                 IPERA

    Ms. Fong, you state in your report that the USDA has not 
complied with the Improper Payments Elimination Recovery Act of 
2010. What areas is the USDA lacking full compliance with 
IPERA?
    Ms. Fong. Well, there are seven areas that we are supposed 
to assess, and they are non-compliant with three of them. They 
have not----
    Gil, go ahead to make sure we get it right.
    Mr. Harden. The three areas that they were not compliant--
we found issues with eight of the 16 high-risk programs.
    Mr. Nunnelee. Eight of the 16 what?
    Mr. Harden. High-risk programs that are covered as part of 
IPERA. So for two programs, they have not published improper 
payment estimates; for two programs they haven't published 
improper payment rates of less than 10 percent; and then in six 
programs, they haven't met their annual reduction targets.
    Mr. Nunnelee. So what are they doing to correct these 
areas?
    Mr. Harden. By--this was the second year in a row that we 
had--we had reported the non-compliance, and so we are doing 
the current work right now, but they had to get with OMB and do 
some extra work this year because they have not shown 
compliance, but I will have to get back to you on exactly what 
they have done.
    Mr. Nunnelee. All right. So you--you know, we will submit 
that for the record.
    [The information follows:]


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    Mr. Nunnelee. All right. Last year you testified that there 
were 10 States that have not met deadlines for recommendations 
that you had recommended for the State compliance. Where are we 
with those?

                         STATE SNAP COMPLIANCE

    Mr. Harden. Those are with the SNAP----
    Mr. Nunnelee. Yes.
    Mr. Harden [continuing]. Databases?
    Mr. Aderholt. Speak a little closer to the mike.
    Mr. Harden. Those were with the SNAP----
    Mr. Nunnelee. Yes.
    Mr. Harden [continuing]. Databases? And we have gotten 
agreement with FNS on all of those recommendations in terms of 
the plan forward in terms of making corrections. We had 
initiated work to do some follow-up work in that area, but when 
we started that work earlier this year, we learned that FNS had 
let its own contract to look at some of the very same things 
that we were going to look at where they were working with 
States to improve the methods for tracking down, you know, the 
improper payments. So what we are doing with that right now is 
monitoring how they are doing to see whether we need to go in 
the future, as opposed to duplicating the effort that they are 
doing right now.
    Mr. Nunnelee. So is it reasonable to think that when we 
come back this time next year, you will be able to report that 
they have made significant progress?
    Mr. Harden. I will look into that and see if we can say 
that. I know that we can--one of the things that we are working 
on right now is their quality control rate, and we are 
continuing--we are starting to see problems with that error 
rate as well, as well as errors with the school lunch and 
breakfast. So it is a big, big problem, and they are making 
incremental changes.
    Mr. Nunnelee. Thank you. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Chairman. Good morning.
    Ms. Fong, first let me thank you, congratulate you on the 
major award you received. And several years ago when I was 
chairman of the Subcommittee on Nutrition on the House 
Agricultural Committee, we had a robust dialogue about fraud 
and waste in the SNAP program. You took some additional 
initiative there and dug a little deeper, and I think we have 
got some good outcomes, so thank you for that initiative.
    I think it is important to say up front that this is 
America. We don't let people bleed in the street, we don't let 
people starve in their homes, and that is why programs such as 
SNAP are important. Given the magnitude of it, given the amount 
of money that it spends, even a small bit of fraud in it 
creates the potential for savings, which, in turn, are 
necessary in this tight fiscal time, but also it is not fair to 
those who are in vulnerable circumstances to have dollars that 
could be used to help them divided to people who are abusing 
the system. So this--in that spirit is why we tend to focus 
pretty narrowly pretty quickly on the SNAP program.

                               SNAP FRAUD

    Back to that point, where do you find--do you find fraud in 
the program concentrated in one area of the country or another?
    Ms. Fong. I don't think we would say it is concentrated in 
particular areas, because we don't--you know, it is hard to 
project that. We do have major investigations going on all the 
time around the country in all of the major urban centers that 
you can imagine. The initiative that we are working on with FNS 
has identified a couple of areas that we are going to focus on, 
because the State and local authorities there are happy to work 
with us and because we see opportunity there. And I----
    Mr. Fortenberry. That is on the retailer side?
    Ms. Fong. Retailer as well as recipient. It will----
    Mr. Fortenberry. Let me ask you a question simply. How does 
the most basic type of fraud take place? In other words, if you 
are a SNAP recipient, somebody offers you some cash for the use 
of the card, is that the fundamental way in which SNAP 
recipients could potentially abuse the program, and the same 
thing for the retailer?
    Ms. Fong. That is basically the scheme. There are many 
variations on it, but the idea is that if you are a recipient, 
you offer your card up. You get perhaps $0.50 on the dollar for 
that, so you are free to spend that money any way you see fit, 
and then the retailer can redeem that card and get full value 
for it.
    Mr. Fortenberry. And I recognize that this fraud in the 
program has dropped significantly since going to the electronic 
benefit, but this basic problem still potentially exists and is 
dependent upon the goodwill, the self-enforcement of the person 
using it primarily. I imagine that is very difficult to stop.

                            AUDIT PRIORITIES

    You walked through this a little bit, but I wanted to get a 
better understanding of how you prioritize your work, how you 
prioritize your audits. Is it simply based upon the magnitude 
of the programs, where the money's spent, so you tend to divide 
up what you have in terms of resources and focus on those 
areas, or when something arises that looks problematic and you 
are alerted to it, you tend to prioritize that?
    Ms. Fong. It is all of those factors.
    Mr. Fortenberry. Okay. And who makes that decision?
    Ms. Fong. We do, the senior staff within IG.
    Mr. Fortenberry. I assume you'd want suggestions.
    Ms. Fong. Absolutely. We welcome suggestions from all 
Members of Congress.
    Mr. Fortenberry. Well, two points. You have asked for a 
budgetary increase. I think it would be helpful to do some type 
of study to show that if you are--the correlation between 
budgetary increases and better outcomes for programs measured 
in terms of impact as well as cost savings. That way, it helps 
very much justify the case for an increase in your part.

                          PAYMENT LIMITATIONS

    The second issue before I am out of time is Ms. Pingree had 
a very good point. We are interested in stopping fraud, making 
the system more effective no matter where it is, and in this 
regard, I am interested in the question of exotic legal 
arrangements that help skirt payment limitations and actively 
engaged rules, if you will, for the appropriation of farm 
payments. This is an area that I think we need to take a closer 
look at.
    Ms. Fong. Yes, I appreciate that. We do have information on 
our return on investment. Over the last 8 years, we have 
averaged $12 for every dollar invested in our operation, and so 
we strongly believe that any increase in budget for us will 
result in better and more audits and investigations that bring 
back more money to the government.
    And in terms of payment limitations and actively engaged 
issues, we are very aware of those. We have a long history of 
carrying out investigations into schemes involving that as well 
as some audit work in that area. So we will take your 
suggestion and explore that for next year.
    Mr. Fortenberry. Thank you. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Rooney.
    Mr. Rooney. Thank you, Mr. Chairman.

                                  NASS

    Last month your office released an audit of the USDA's 
National Agricultural Statistical Service, or NASS. Your 
security review found that the agency failed to adequately 
enforce critical security procedures and physical security 
measures intended to protect NASS's information. You also 
identified several instances where sensitive commodity market 
data was compromised due to lapses in technology.
    Has your office decided to conduct additional audits 
related to the security of NASS in the programs?
    Mr. Harden. Not at this--not at this time, because they 
have been very receptive and proactive in working on the 
recommendations and the problems that we noted, and so we would 
probably include it as--in future planning to go back and see 
if the measures they took, you know, solved the problems.
    Mr. Rooney. What would you be looking for to see if they 
did solve those problems?
    Mr. Harden. I mean, we would follow up on the 
recommendations that we just made. We would give them time to 
implement those recommendations and then see if they 
implemented them.
    Mr. Rooney. Okay. NASS collects personally identifiable 
information data for a number of surveys, including the 
agricultural census, so based on the findings in your recent 
security review, do you believe we should be concerned about 
the USDA's ability to sufficiently protect this sensitive data 
as well?
    Mr. Harden. That was not something that was specifically 
part of it. If I can get back to you on that, I would 
appreciate it.
    [The information follows:]

    Based on our audit work, we have concerns about NASS' ability to 
sufficiently protect all of its sensitive data, including data 
containing PII. We conducted vulnerability scans of NASS' entire 
network on which this information resides and identified multiple 
critical and high IT vulnerabilities. NASS had not been timely 
addressing these vulnerabilities. As a result of our review, NASS 
created a group that has started taking action to remediate these 
vulnerabilities.

    Mr. Rooney. Okay. Thank you. And do you believe that NASS's 
security weaknesses could lead to potential violation of the 
agency's statutorily required confidentiality pledge?
    Mr. Harden. I would also like to get back to you on that.
    [The information follows:]

    As previously stated, we found multiple vulnerabilities on NASS' 
network that could affect the security of the information it collects 
and thus its confidentiality statement. NASS is actively working to 
remediate the vulnerabilities.

    Mr. Rooney. USDA also has a good deal of secret and 
sensitive, non-personally identifiable information, including 
sensitive information regarding its plant and animal disease 
research. What is your assessment of the USDA's cyber security 
on this type of data?
    Mr. Harden. That I don't think we have done recent work, 
but I can look in to see what we have done in the past.
    [The information follows:]

    In our FY 2013 FISMA report, we continued to report a material 
weakness in USDA's IT security, including agency IT security. The 
Department has not (1) developed policies, procedures, or strategies 
for continuous monitoring or risk management; (2) the Department and 
its agencies are not in compliance with baseline configurations; (3) 
vulnerabilities are not being remediated in a timely manner; (4) 
separated employees' access to computer systems is not terminated in a 
timely manner; (5) policies defining the detection and removal of 
unauthorized network connections have not been developed or 
implemented; and (6) policies have not been issued defining required 
oversight of information technology systems that contractors or other 
entities operate on USDA's behalf, including systems and services 
residing in the cloud. Until these issues are resolved, all of USDA's 
information systems and the information residing on these systems, 
including PII and sensitive information (which includes plant and 
animal disease information) have an increased risk of being lost, 
disclosed, altered, and/or destroyed.

    Mr. Rooney. Okay. I ask a lot of this because I also sit on 
the Intelligence Committee, so this is sort of an area that I 
am interested in, so I appreciate your getting back to me on--
--
    The next question is, does the agency have sufficient 
resources dedicated to protecting its secret non-personally 
identifiable information?
    Mr. Harden. That--let me get back to you on that one, too.
    Mr. Rooney. Finally, Mr. Chairman, does the agency have 
appropriate safeguards in place to ensure only those allowed to 
access the information are able to do so?
    Ms. Fong. I am just going to interject here. And since you 
have a background in intelligence and data, you know that every 
year we have to do a review under the FISMA statute which does 
a comprehensive look at the Department's IT security across 
agencies and from the whole IT security process from soup to 
nuts, and I think it is safe to say that over the last few 
years, we have found significant issues with the Department's 
overall IT security processes.
    We have made 49 recommendations to correct them, to come 
into compliance with NIST guidelines. And many of the questions 
that you are asking really go to the kinds of points that we 
have been making, that the Department needs to tighten up and 
come into compliance in those areas. So I just wanted to offer 
that as background.
    Mr. Rooney. Well, if you could also help me with the 
answers to those questions as well, maybe I can help you in 
that regard.
    [The information follows:]

    We had no audit work directed specifically at secret non-personally 
identifiable information. But, one consistent theme throughout the 
Department is not patching for known vulnerabilities, which 
cybercriminals can use to exploit systems. As part of our FY 2013 FISMA 
audit testing, we performed a vulnerability assessment on seven 
agencies that were included in our FY 2008-2012 FISMA reviews to 
determine if each agency was mitigating its vulnerabilities in a timely 
manner and thus improving its security posture. We compared the average 
number of vulnerabilities per device identified in our 2013 scans to 
the average number of vulnerabilities found during the previous FISMA 
reviews. For all seven agencies, the average number of vulnerabilities 
per device increased--in most cases the number doubled; and for three 
agencies, the number increased by more than eightfold. As a result, 
USDA systems have an increased risk of sensitive and PII information 
being lost, disclosed, altered, or destroyed.

    Mr. Rooney. So thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Valadao.
    Mr. Valadao. Thank you, Mr. Chair.

                                  WIC

    You mentioned FNS's work with State agencies on fraud. I 
know California has had problems with their WIC oversight. The 
WIC moratorium in California was a product of abuse of the 
system, and I am very pleased with the action--or action was 
taken. With that being said, the moratorium was set in 2008, 
and little has changed since then. What steps have been taken 
in California to address the control of high risk vendors?
    Mr. Harden. I do know, and it is information that we will 
have to get to you later, but as part of our current review of 
the WIC program where we are looking at how States are 
containing costs or how costs for the food packages are 
determined, California is part of our review and it touches on 
some of those questions.
    [The information follows:]

    We are currently reviewing FNS' WIC program and California is one 
of the States included in this audit review. Our audit objectives are 
to evaluate the factors that contribute to the high average food costs 
reported for various states within the WIC program. We will also 
evaluate FNS oversight activities for monitoring food costs. We would 
be happy to brief the subcommittee once the report is ready to be 
issued.

    Mr. Valadao. One of the issues that we face, obviously in 
my part of the country in California, we are suffering from 
this water crisis and unemployment numbers are getting to 
pretty extreme numbers now. WIC is obviously something that is 
important to a lot of those people in the area, but at the same 
time, you have got new stores opened up with an opportunity for 
those people to be serviced or be able to purchase their 
product through stores closer to home, something more 
convenient for these people, and that opportunity is not being 
afforded them, and I think it is something that needs to be 
looked into, so I appreciate you looking into it and seeing 
what we come up with. Thank you.
    Mr. Aderholt. Mr. Bishop.
    Mr. Bishop. Thank you very much.

                      FOREIGN AGRICULTURE SERVICE

    I have a question on foreign ag service. As you know, 
during June of 2010, the U.S. Agents of International 
Development transferred $86.3 million to the Department of 
Agriculture for capacity-building activities in Afghanistan, 
and the OIG just recently released an audit of the Foreign 
Agriculture Services' management of those funds, and the 
program's activities in Afghanistan, and the audit found that 
FAS had been aware of deficiencies in the management of the 
capacity-building activities over in Afghanistan for quite a 
while, but did not adequately implement corrective actions to 
strengthen the management and control of activities until 2 
years after the audit--after the funds were disbursed, I should 
say.
    The audit recommended that FAS forego accepting any further 
USAID funds until full implementation in the form of a 
monitoring process and other controls were put in place.
    Has FAS begun to implement the recommendations as well as 
those of their consultants? How much--can you tell us how much 
has been spent in the capacity-building activities before your 
audit, and did you see any positive results from the money 
spent? And, finally, does FAS have similar capacity-building 
programs in other parts of the world, and if so, should we be 
concerned with the management of those programs as well?
    Mr. Harden. In terms of whether--and I may not get all the 
questions. If I forget one, I may ask to have it repeated. But 
in terms of implementing the recommendations from the 
consultant in response to our recommendation to get those 
started, we do know that those are underway. From my 
understanding--you know, I would have to rely on the numbers 
that are in the report in terms of how much money they have 
spent in terms of what we looked at. I do know that this was 
the largest amount of money in these type of funds that they 
had ever tried to manage, and so they recognized that as we had 
discussions about that, that they really were not equipped to 
handle it right off the bat.
    And as far as capacity-building of this nature in other 
parts of the world, I am not aware of any, but I will go back 
and ask.
    [The information follows:]

    The Department, under the Foreign Agricultural Service's (FAS) 
oversight and administration, does fund and participate in various 
capacity building initiatives in foreign countries, with the primary 
intent of building future markets for American agricultural products 
and secondarily increasing agricultural productivity, agricultural 
services, and livelihoods in these countries. These projects include 
activities such as developing or rebuilding local market 
infrastructures, rehabilitating watersheds and improving irrigation 
infrastructure, and providing agricultural technical assistance to 
local producers. However, starting in 2010 with the transfers of 
Section 632(a) funds from U.S. Agency for International Development 
and/or the U.S. Department of State, the level of funding and 
activities by the Department increased significantly, particularly for 
capacity building in Pakistan and Afghanistan. Because of this 
significant increase in funding level, FAS commissioned an independent 
study to strengthen its policies and procedures and its control 
structure and to ensure that it could properly administer the increased 
influx of funds. Also, under the increased funding provided under the 
Section 632(a) funds, the Department's involvement changed. As part of 
the U.S. Government's Agricultural Assistance Strategy for Afghanistan, 
the Department partnered with the Afghanistan Ministry for Agriculture, 
Irrigation, and Livestock (MAIL) to improve MAIL's capacity to provide 
agricultural services to the Afghanis. In this situation, FAS worked 
directly with MAIL to assist in developing a better infrastructure.

    Mr. Bishop. Thank you. Let me just look at the farm bill, 
which was really a roadmap for the management of our USDA 
programs for which we use. Can you tell us whether Congress 
addressed all of the key issues facing the Department and 
moving into the future? Example, the question of who is really 
a farmer as the farm bill terms it, who is actively engaged in 
farming, that is--that continues to be a somewhat vague issue 
and one that I think the Department is developing regulations 
on. In theory, these regulations will potentially address the 
concerns of many people who believe that farm subsidies 
should--that farm subsidies often, not necessarily should, wind 
up in the hands of the people who aren't working on the farm or 
who don't have an active interest in the farm.

                        FARM BILL AND OVERSIGHT

    So my question is whether or not the farm bill did enough 
on this and other ongoing issues, and what gaps in 
opportunities do you see in terms of the challenges that are 
facing the Department in managing agriculture under the farm 
bill?
    Ms. Fong. Well, let me just generally comment that we are 
still in the process of going through the farm bill, trying to 
get a handle on what the new provisions are and what they might 
mean to us as we develop our priorities for next year's work.
    I appreciate the fact that both you and Mr. Fortenberry 
have raised the issue of actively engaged. I think that is a 
very difficult and complex issue. I know in our history at USDA 
IG, we have had a number of cases where we have taken 
successful prosecutions against people who have taken advantage 
of some of the different approaches to that, people who've, you 
know, engaged with some--created 17 or 18 straw partnerships to 
triple or quadruple or whatever the amount of money they get 
under that program fraudulently. So we are aware that there are 
some vulnerabilities in that, and I appreciate your raising 
that.

                             PROGRAM FRAUD

    Mr. Bishop. How does the fraud, waste, and abuse with 
regard to the insurance programs, the FSA programs stack up 
with the fraud in nutrition in terms of dollars with the 
nutrition programs, such as SNAP, WIC and the other nutrition 
programs?
    Ms. Ellis. I think that based on the work that we have done 
the past several years and with the large influx of funds in 
the SNAP program, we are seeing a large amount of fraud there 
just because it is large dollars.
    With regard to farm programs, I do know that we have cases 
across the country both in the various farm program cases as 
well as crop insurance. So far our work is not stacking up to 
the same amount as we are on SNAP.
    Mr. Bishop. But in terms of the percentage of fraud and the 
dollars in fraud, do the nutrition programs add up to more 
fraud or less fraud as compared to the disaster programs and 
the FSA programs?
    Ms. Ellis. It is hard for us to actually figure out what 
the fraud amount is. What I can go based on is the type of work 
that we do and where we are spending our time, and with regard 
to SNAP----
    Mr. Bishop. You don't have any idea about the number of 
dollars?
    Ms. Ellis. No, because we don't know all of the fraud that 
is actually going on. There could be parts of fraud that I am 
just not aware of.
    Mr. Bishop. I mean the ones that you have investigated----
    Ms. Ellis. Right.
    Mr. Bishop [continuing]. And that you have found?
    Ms. Ellis. We have--the larger amount has been in the SNAP 
program as opposed to the other farm programs.
    Mr. Bishop. And just to follow up on that, was it on the 
part of those administering the program, was it on the part of 
those who were recipients? Where do the fraud--was it the 
vendors?
    Ms. Ellis. With regard to SNAP, our responsibility is 
chiefly with the retailers, so our work is mainly with the 
retailers and that is where we are seeing the fraud. The States 
and the locals are responsible for dealing with the majority of 
the recipient fraud.
    Ms. Fong. Just to offer a couple of comments on the 
dollars. Just looking at our investigative statistics for the 
last 2 years or so, in the farm programs, we had about $33 
million in terms of investigative recoveries for fraud, and in 
the crop insurance program, about $40 million. There is a huge 
case in North Carolina involving the tobacco farmers that 
accounts for much of that. So I think what we are seeing is 
that when we find fraud in those programs, they tend to involve 
multi-million dollars and many people.
    Mr. Bishop. In the FSA programs?
    Ms. Fong. FSA and RMA.
    Mr. Aderholt. We are going to need to move on. Mr. Yoder.
    Mr. Yoder. Thank you, Mr. Chairman.
    Inspector Fong, thank you for your testimony this morning. 
I appreciate having you before the committee. Certainly a lot 
of issues have been covered. There are probably many, many more 
we won't have time for this morning, as the USDA's a vast 
agency with a lot of responsibilities. I think a lot of our 
conversation this morning has been how we try to provide the 
services the USDA is supposed to provide for the most amount of 
people and the most effective and cost efficient way, which is, 
I think, what everybody, both parties and everyone in this 
town, I think, hopes occurs.

                                  WIC

    I would like to discuss maybe one that hasn't been brought 
up this morning, and this is the WIC program. And I don't know 
if you are familiar with the Government Accountability Office 
report last year about the WIC program in February of 2013, 
which was entitled ``Improved Oversight of Income Eligibility 
Determination Needed'', and it highlighted some disturbing 
trends that have occurred in the WIC program related to how 
States are implementing it in an inconsistent manner, and it 
talks about, in part, how over 60 percent of States use only 
income within the last 30 days, when the standard for WIC 
eligibility is annual household income. They only count a 
portion of the income of a household instead of the household--
income of every member of a household.
    Some States have increased their eligibility threshold 
beyond the 185 percent of the Federal poverty level and their 
adjunctive eligibility options that as States increase the 
threshold for other programs, then they become adjunctively 
eligible for the WIC program.
    The GAO study found that the FNS has never examined the 
reports for State and local WIC agencies' compliance with 
Federal regulations despite over one-third of the States having 
problems in this area, and that the last time the FNS provided 
guidance to States on the income eligibility determinations was 
1999. This has led to a point where now over half of the 
infants in the country, born in this country start out on a 
Federal program. They start out on the WIC program. And so we 
want to ensure the dollars we spend go to the families that are 
most needy, and that the idea that the majority of the country 
would be on these programs from birth because of ineffective 
implementation from States is very concerning to, I think, all 
of us on the committee.
    And I guess, are you familiar with this report, and what 
sort of inspection have you looked into as to how the FNS could 
resolve these concerns that were, I think, disturbingly brought 
up in the GAO report?
    Mr. Harden. I guess just as a way to start, being as GAO 
was already looking at that, we did not do work on income 
eligibility just so that we weren't duplicating efforts, but 
yes, we were aware of what they were doing.
    Some of the work that we reported on last year that would 
be a little different but is also part of the problem is how 
States oversee the vendors and their vendor management, because 
they have a new rule on that, and we noted some similar type 
problems where they weren't doing the monitoring that they 
should have been doing.
    And currently we have work in process to look at how 
States--the cost of the food baskets for the different 
participants, to see how some States make those dollars go 
further than others and if there are ways that we could have 
more consistencies in that from State to State.
    Mr. Yoder. So are you aware of FNS efforts to correct these 
problems that were cited in the GAO report?
    Mr. Harden. I would have to go back and look and see what 
they said they were going to do. And I don't have specific work 
right now to see if they are doing those, if that is what you 
are asking.
    Mr. Yoder. Right. So as far as you know, these--the States' 
implementation that is inconsistent in allowing these things to 
occur, it is continuing to this very day?
    Mr. Harden. We are seeing some of that in our work, that 
there are inconsistencies from State to State.
    Mr. Yoder. Well, I would actually look into that. There are 
many, many areas where this occurs where we have States that 
don't follow the guidelines, and it is not fair, and I think 
the folks in States that do follow the guidelines and if the 
policies are implemented in an inconsistent way, it doesn't get 
to the people that need it the most as these programs get 
stretched and expanded beyond our capacity to--to support them.
    Just maybe one general question on USDA and their size and 
operation. I mean, one of our hopes on this committee is that 
we can, you know, run a leaner operation in Washington, D.C., 
therefore allowing the dollars that we do spend here that are 
scarce, to be able to spend them to actually help folks who 
need them the most.
    What measures have you suggested or have you seen USDA can 
use to provide greater services to farmers and folks that they 
are charged with overseeing and regulating and providing 
services to in a more cost-effective manner using technology, 
or in a way that might create savings over the long-term? How 
can we run the USDA in a more cost-effective manner?

                         OPERATIONAL EFFICIENCY

    Mr. Harden. I have to go back and pull some specific 
recommendations, but we have noted across the Department and in 
terms of talking to the program officials, the agency has, in 
terms of now that you are in a leaner operating environment, to 
really look at their operations from a risk-based approach to 
make sure that they are prioritizing their work and monitoring 
where they really need to be spending that.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Harden. The analogy I use with them is, in the past, if 
you had a priority to look at 10 things, and you can't look at 
all 10 things anymore, you can only look at five, tell me what 
those five are and how you got to those decisions so we can 
either agree or disagree as to how you got there.
    And there is a variety of work that we have done, and I 
have to go back and pull specifics where we talked to them 
about their use of computer information systems in rural 
development as well as some of the farm programs to better use 
that information or have the information to do it on a leaner 
staff.
    Mr. Yoder. And the reason I really go to this point--I 
think this was brought up by one of my colleagues as well, is 
that you have, you know, we have fewer farmers today than we 
had years ago, and is the USDA, are their operations consistent 
with the dollars per farmer ratio? How are we responding to the 
changing agricultural world?
    Ms. Fong. I think one of the things that we have been 
seeing in our reviews across the board is, as you mentioned, it 
is important that the States implement effectively and 
consistently all the programs that they have. It is also 
important that USDA program managers and agency officials 
communicate effectively with their State and regional 
structures, the Federal structures. As the programs 
decentralize and more staff is put into the field and the 
responsibilities devolve into the field, it is critical that 
the field employees really understand the programs, the 
requirements of the programs as they administer them, with 
respect to individual farmers, conservationists and ranchers.
    We are seeing that with the departure of institutional 
knowledge and less staff and perhaps less training, there needs 
to be increased focus on that, on the part of the USDA 
officials at the management level.
    Mr. Yoder. All right. Thank you for your response. Thank 
you, Mr. Chairman.
    Mr. Aderholt. Inspector General, when I started out the 
questioning, we talked about the challenges and the Department 
knew enough to address some of the issues and successes that we 
see.
    Let me pose one question to you just summing that up.

                        DEPARTMENTAL PRIORITIES

    If you were the Secretary, what would you focus your 
efforts on in that regard as far as trying to make sure that 
the issues that are before you that you see that need to be 
dealt with from your chair as Inspector General and you were 
advising the Secretary, or if you were to change positions to 
be the Secretary, what would be the effort that you would focus 
on?
    Ms. Fong. I think it all goes back to the very basic issue 
of leading and managing the Department with a diverse 
portfolio. You have to set a very strong tone, which I believe 
the Secretary does, that management is important. It is 
important in delivering our programs that we deliver them 
effectively to the right people and that we avoid situations 
where fraud or improper payments could occur. And that message 
needs to then permeate the organization. It is a huge 
organization. I think each agency has its challenges in terms 
of workforce and resources and training and priorities, but I 
do believe that this Secretary and Deputy Secretary have set 
that tone and are willing to be very supportive of the message 
that we bring forward as the Inspector General's office. When 
we find situations that require attention, we find that the 
Department does respond very positively to that.
    Mr. Aderholt. The USDA is making improvements but still has 
problems with accurate reporting of improper payments as we 
have discussed. In your testimony, you note that USDA has taken 
more effective measures, or if they had taken more effective 
measures to avoid noncompliance, it could avoid $74 million in 
improper payments. What could USDA have done to save that $74 
million?

                           IMPROPER PAYMENTS

    Ms. Fong. I think that goes back to our audit report that 
we were discussing a few minutes earlier about whether USDA was 
in compliance with the Improper Payments Act; and the $74 
million is our estimate of what USDA could have avoided if it 
had taken steps to comply with every portion of that Act.
    Mr. Harden. More specifically, if they had met the targets 
for reducing improper payments that they set for themselves, or 
for the six programs that that was associated with, they would 
have avoided $74 million in improper payments; so it is them 
meeting their targets.
    Ms. Fong. You all probably are aware that the provisions in 
the Improper Payments Act now require USDA to work with OMB to 
actively address the situations this year because it has been 2 
years in a row that the Department has not met those targets. 
What happens next year is if the Department continues to miss 
its targets, the Department is then required to work with 
Congress to determine ways to address these issues, so there is 
an escalating set of requirements in the Act.

                               SNAP FRAUD

    Mr. Aderholt. Your report on SNAP retailers raise concerns 
about the Food and Nutrition Services ability to effectively 
carry out oversight and enforcement activities related to 
fraud, and we have talked quite a bit this morning about the 
SNAP issues; but the subcommittee has repeatedly directed USDA 
to permanently disbar retailers that are found guilty of fraud, 
yet the report found that some retailers were still 
participating in the SNAP program after being permanently 
disqualified. What more does the Food and Nutrition Services 
need to do to ensure fraudulent retailers are permanently 
removed from SNAP?
    Mr. Harden. That is where we made recommendations where we 
felt that legislative changes were needed, and we are currently 
working with FNS to get agreement on those. Their most current 
statements to us is that there were changes in the farm bill 
that may address some of the issues that we had. We are waiting 
for them to show us those things to see if whatever the 
provisions were would address the problem. If not, we will 
continue to work with the Department to make that a proposal, 
because that is something we feel that should be done.
    Mr. Aderholt. Thank you. Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman. I want to invite you out 
to my district. It is a different perspective on agriculture 
than I think your State. I represent one county, Monterey 
County, that the gross sales of--there is over 100 crops grown 
in the county, and the gross sales exceed that of 25 States in 
the United States of their total agricultural sales. And it 
doesn't have any subsidies at all. No water subsidies, no power 
subsidies, no conservation subsidies, no price support. We 
don't grow the commodity programs, but we do rely on, you know, 
people eating nutritious food because that is what we grow, the 
salad mix of the world.
    And we have a lot of poor people harvesting those crops, 
and they do rely on the WIC program and the SNAP program, and I 
think it is right that we look at particularly the retailers 
that are defrauding. Individuals, I think that amount of money 
to try to collect from a poor person because they bought the 
wrong thing is, we ought to put the emphasis on, as you have 
stated, on the retailers.

                      FOREIGN AGRICULTURE SERVICE

    I want to shift, because I think one of the biggest frauds 
that has happened to the United States has been our 
expenditures on the war efforts in Iraq and Afghanistan. All we 
hear every day is the amount of contracts that have been let 
that don't--and you talk in your paper about, and I think Mr. 
Bishop brought it up, about capacity building. And as a 
returned Peace Corps volunteer, I am very interested in 
countries' capacity building.
    We just got back from Colombia, which we did a very 
successful thing with capacity building there. The unfortunate 
thing is that almost every single contract let was to an 
American company, so we really weren't building capacity within 
Colombia or Afghanistan or Iraq. We were building capacity of 
American contractors.
    Your report points out that the Department of International 
Development transferred $86.3 million to USDA to work on 
capacity building, I guess agricultural capacity building in 
Afghanistan; and your review found that senior managers of FAS 
were aware of the general control weakness before receiving the 
funding. Nevertheless, the FAS had not implemented performance-
monitoring plans for all the projects until over 2 years after 
the first project began. You go on to say, without adequate 
management controls in place, FAS cannot effectively monitor 
these projects and faces difficulty in providing adequate 
insurance that the funds are effectively accomplishing the 
program goals, the program goals being capacity building.
    FAS has agreed to all the recommendations. So what 
happened? Did anything happen? You just agreed to the fact that 
you indicated that these things weren't in place and that there 
was money misspent?
    I don't think Congress is asking enough questions about how 
our money is being spent, and I think capacity building is very 
important, but we ended up trying to dictate what capacities 
they ought to build, spend our money on it, and they don't use 
it, like that big, huge warehouse that we built in Afghanistan, 
millions of dollars, that the Afghans didn't want. We found out 
in Iraq we built all kinds of generators for people but never 
taught them how to run the generators or change the oil and all 
that is melted down. I mean, there is tons and tons, millions 
and probably billions of dollars misspent.
    As your Council of the Inspector Generals on Integrity and 
Efficiency, have you collectively looked at our capacity 
building, so-called capacity building expenditures, in our war 
effort? Because you are looking agency by agency, and I wonder 
what the sum total of that----
    Ms. Fong. Actually, USDA has a very small piece of capacity 
building in effect in Afghanistan. Most of the money that is 
going there my understanding is it is coming through State, 
Defense, and AID, and the Inspectors General at those agencies 
are working together very closely. They are on the ground in 
Afghanistan. The Special Inspector General for Afghanistan 
Reconstruction has issued a number of very hard-hitting reports 
showing that the funds have not been going to where they should 
be going.
    My understanding is that at USDA, this is the one piece of 
the funding pot that we have. We don't have any more because 
FAS recognizes that it needs to put into place a management 
system of controls before it accepts any more funds. So I think 
from a macro level, the IGs are in there. At USDA, it is a very 
small piece of our portfolio.
    Mr. Farr. In this case they knew before they even received 
the money they didn't have adequate implementation in place?
    Mr. Harden. Yes, and part of the reason why we couldn't get 
any further into that issue is there was lots of finger 
pointing when we started asking the questions, and the people 
that accepted the money and were running the programs when it 
started are no longer there.
    Mr. Farr. I know my time is expired, but I just want to 
have you think about this. Capacity building is our future. If 
we are going to get out of anything, we have got to leave the 
host company with its capacity to function. And it seems to me 
we do not review. We just sort of throw money. It is a war. We 
got to fight the war, and we waste so damned much money that we 
shouldn't be wasting. We ought to be smarter about capacity 
building, and we ought to have your inputs on how to do that.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Give me your highest recommendations, your 
best recommendations, for legal changes that would save money 
and improve outcomes.

                      LEGISLATIVE RECOMMENDATIONS

    Ms. Fong. Well, I think we talked a little bit a few 
minutes ago about our recommendations in the retailers, the 
SNAP retailer report. Other recommendations are to look at 
implementation of how programs are being run. I am thinking in 
terms primarily of the crop insurance program to make sure that 
the improper payments rates are being hit there and that the 
program is being implemented and overseen as effectively as it 
can be as well as the conservation programs. There have been a 
number of new programs enacted that we want to take a look at. 
We recognize that there are a number of management challenges 
there that need to be addressed.
    Mr. Fortenberry. I assume the mission of your office is 
twofold. One is to ensure effective implementation of the law 
as written by Congress, but then to turn and make suggestions 
about how if the general goal is such, certain programmatic 
changes empowered by legal considerations could be implemented 
to make, again, the outcome more effective. The more you can 
specify that, the more helpful it is. This conversation has 
been very good and productive and helpful, but again, bringing 
it down into very narrow specifics that we can include in must-
pass bills. Not a lot of things get passed on a regular basis; 
but when we have something that can improve outcomes and save 
money, it is helpful, I think, to all of us, speaking on behalf 
of my colleagues, with limited staff and limited resources to 
be able to pinpoint specific things in terms of an outcome 
here.
    Again, it is not meant to put you in a political position, 
but consistent with the mission that is already laid out in 
law, if certain changes would be made, this mission would be 
met better and/or savings could be achieved.
    Ms. Fong. In that spirit, I would draw the committee's 
attention to the question of overlap and duplication in 
programs. I think all of you know that GAO has issued a number 
of reports on overlap and duplication across government 
entities. And some of the issues that they identify were 
potential overlap in nutrition programs as well as potential 
overlap in RD and business enterprise programs. And we have 
issued a report, I think in the last year, making some 
recommendations with respect to nutrition programs and how the 
Department and Congress could think about those issues.
    We are in the process of doing a report on potential 
overlap and duplication in the RD business enterprise programs 
which I think will be issued in the next several months, so I 
would draw your attention to some of those reports.
    Mr. Fortenberry. I am familiar with the GAO's last work in 
this regard, and I think they are in the process of updating 
that now. One of the difficulties is we always want a number. 
Give us the number of what we can save. In those reports, the 
GAO is hesitant to give a number, preferring instead to talk in 
terms of broad ranges of a probability of tens of millions of 
dollars, where some people interpret this as into the billions 
or even hundreds of billions of dollars. So that is one of the 
difficult problems here, again, to narrow it down and to try to 
get hard numbers, so that we can prioritize what makes sense 
and work it through a process here which is, again, quite 
difficult to get consensus with.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair. Thank you for all your 
comments and answers here today.

                         ACTIVELY ENGAGED RULES

    At the risk of duplicating, I just want to reinforce what 
Mr. Fortenberry talked about; Mr. Bishop talked about this, and 
I mentioned it in the beginning; but I do think there is 
particular interest in some of the things that you talked 
about, the actively-engaged rules. Mr. Bishop said, you know, 
the idea of people who receive direct payments and other 
subsidies that have nothing to do with or aren't really 
participants in farming. I know there is always a lot of 
political interest around SNAP and SNAP recipients and 
retailers and all the fraud and potential fraud in that program 
and how much it can add up because of the big dollars in the 
program; but as you mentioned earlier, sometimes in the subsidy 
programs when you discover that there has been a lot of people 
involved, $33 million, $40 million, nothing gets under people's 
skin like this idea that there are crop subsidies going out 
there that don't go to farmers they go to, you know, mainly ZIP 
Codes in big east coast cities. I mean, there is just a lot of 
interest in this, and I know you have done some work; but I 
just want to reinforce that this is an area, I think, of 
continuing concern. It came up a lot in the farm bill, and with 
all the changes in the farm bill I know it will take you a 
while to sort out how this could be looked at; but I just think 
it is a really critical area to be examined. The dollars are 
high.
    You mentioned that there is always a lot of exotic legal 
arrangements, legal maneuvers. I would say the second thing 
that really gets under people's skin is when they realize that 
a lot of lawyers figure out a lot of fancy maneuvers and then 
somehow the money doesn't go to the right people.
    Mr. Farr mentioned an issue that is a big issue in my 
district. I don't have a lot of subsidized crops. I don't have 
corn, wheat, all the big ones; but we have a lot of vegetable 
growers, a lot of people who are trying to expand their very 
small farms. And the first thing they will always say to me is 
how come the money always goes to all those other guys and 
there is so little available to us?
    It is a huge resource issue for USDA. Every time we manage 
to enhance a little bit in some of those areas, people always 
look at it and say, well, what about the billion, 70 times as 
much money goes into the commodity crops as into ``specialty 
crops,'' which is really the vegetables and things that people 
want to buy locally. They want to buy direct. There is huge 
consumer interest in this.
    I just can't say it enough. I thought that one of my issues 
that I was so pleased that Mr. Fortenberry brought up but I was 
going to say the same thing is sometimes the only way you can 
skirt a legal maneuver is by understanding what legal changes 
Congress can make that at least it will take the lawyers 3 
years to figure out how to change it again.
    So I think that is extremely beneficial, particularly in 
this area, where it is not just the simple thing of, you know, 
SNAP fraud, somebody gives their card to somebody else. You 
know, it is not that easy. It is very complicated. I understand 
that, but sometimes that means we need real suggestions and 
ideas of how to get at the root of this and how to make those 
changes, because I think this is a big issue in how resources 
are divided around supporting farmers in this country and very 
lopsided. And as you said, when the fraud is discovered, it is 
usually big. It involves a lot of people, and it is often not 
going to the people who are literally are putting the hard work 
in a farm every day.
    So I do hope as you are looking into the next year and how 
your resources will be spent, that you really hear that that is 
bipartisan across the board, across the country, people are 
concerned with that issue.
    The only other thing I wanted to bring up, and I think you 
have answered a lot of questions about are there adequate 
resources; it seems as though given the number of things we 
want to know about and the challenges that are out there, there 
are never adequate resources, particularly in cost-cutting 
time, but it would be helpful just to hear a little bit more 
about that.

                                  WIC

    Oh, and the only other specific question I was going to ask 
you previously, you mentioned something that you were looking 
into in the future about WIC food costs. I didn't know exactly 
what you were referring to. So to the little time I have, and I 
know you are going to say you need more resources; so maybe you 
should answer the food cost thing first.
    Mr. Harden. On the WIC food costs, we have got an audit 
currently underway where we are looking at how States manage 
those costs and with the food packages. We have seen some 
States have high food costs, others have lower food costs and 
see if there is any efficiencies or consistencies that can go 
from one State to another. That is something we are working on 
now and expect to have out in the next several months.
    Ms. Pingree. Thanks. I am good.
    Mr. Aderholt. Mr. Bishop.

                               PIGFORD II

    Mr. Bishop. Thank you very much. The OIG recently released 
its Pigford II audit, which was required by Congress as a part 
of agreeing to fund the settlement of the case against the 
Department. I was pleased to learn that in your opinion, the 
final adjudication process of Pigford claims and related 
administrative issues went relatively smooth outside of a 
handful of claims, I think about 20, which may not have been 
handled properly.
    In your audit report you said that in connection with our 
audit, nothing came to our attention to indicate that the 
administrative entities were not adequately implementing the 
claims process in accordance with the settlement agreement. So 
it would appear that USDA and the Department of Justice did a 
pretty good job in managing and placing the adequate controls 
on the final adjudication process. Would you say that that is 
correct? And of the 20 problems that you had, how many claims 
were successfully paid out appropriately?
    Ms. Fong. Let me just offer a couple of comments on that 
audit. As you point out, we are required by law to do an audit, 
a statistical sampling audit, of finally adjudicated claims. 
Because this issue has been of great interest to a lot of 
people, we decided to do an audit prior to final payout of 
claims just to make sure that the process was running 
correctly; and so as you pointed out, we generally found that 
the process that was developed was a good process to handle the 
adjudication. We did find some problems that we pointed out to 
the neutral and arbitrator, and they, to their credit, took 
action on those during our audit and are dealing with that.
    They are now in the process of getting ready to pay the 
claims, at which point we are now starting our statutorily-
required audit of the claims that have actually been paid to 
make sure that the money is going to the right people who are 
eligible. So I just wanted to tell you that we are doing a 
little bit more than required by law to ensure that this whole 
process runs effectively.
    Mr. Bishop. How many total claims were there, are you 
paying out?
    Mr. Harden. Say in the neighborhood of 40,000. I would have 
to go back and get the specifics.
    Mr. Bishop. Somewhere in the neighborhood of 40,000?
    Mr. Harden. I think so, but I would have to go back and----
    [The information follows:]

    With respect to the In re Black Farmers Discrimination Litigation, 
the Claims Administrator received approximately 40,000 claims during 
the entire claims process. According to the final accounting document, 
dated August 2013, 18,409 Track A claims were approved for awards, 
totaling over $1.1 billion. There were no Track B claims approved.

    Ms. Fong. That are going through the process.
    Mr. Bishop. And you picked up some possible problems with 
20 of those?
    Ms. Fong. Well, we took a sample of 100 claims to look at, 
and of those 100 claims we found 35 of them had some questions. 
So that was a random sample. At this stage of the game we are 
now involved in auditing claims that have actually been paid, 
and we will see how that turns out.

                             BUDGET IMPACTS

    Mr. Bishop. With regard to the staff reductions that you 
have experienced, you have gone through several staff 
reductions, including volunteer buyouts and early retirements. 
Given the impact of sequestration and the related 
administrative reductions in the Department spending, your 
staff has been hit pretty hard. What has been the impact on 
your ability to carry out your responsibilities, to identify 
and undertake new audits and investigations with which you are 
tasked; and are there audits which you would like to have 
undertaken but you were unable to undertake as a result of a 
lack of funding or a lack of staff?
    Ms. Fong. Well, as you know, we were not exempt from any of 
the reductions and sequestrations, and as a result of that, we 
have taken significant reductions to our resources, especially 
on our staff. We are at the lowest level of staffing that we 
have ever had. And because of that, we have had to really 
narrowly define our priorities and we have only been able to 
focus on the highest priority work.
    We are very grateful for the increase that you all are 
giving us in 2014. In fiscal year 2013, we had to basically 
eliminate training. There was a period of time where we could 
not do any job-related travel on our investigation side, which, 
as you can imagine, was very challenging because allegations of 
fraud come in from around the country; and if our investigators 
can't travel there, they can't really look into that.
    On the audit side, we have lost very experienced staff. We 
are unable to backfill there. And so we weren't able to 
undertake all of the audits that we would normally want to 
undertake. As you know, the IG function is a level of resource 
function. To the extent that we have resources, we can do more 
work, and we can bring back our return on investment, which is 
roughly $12 for every dollar invested, so we believe that we 
are a good investment for the taxpayer.
    Mr. Bishop. But you haven't been able to do all that you 
were obligated to do with the directives that you received from 
Congress and under the law because of limited resources?
    Mr. Harden. I would say on the audit side, the way we 
continue to prioritize our work, those mandatory items, if we 
have direction from Congress on like the financial statements 
or IT security or improper payments, those go at the top of the 
list. Those are the first ones that are going to be part of the 
plan. Then we go into what I view as our discretionary time; 
and that is where we really look at the risks associated with 
different programs of the Department. Are they a new program? 
Have we seen problems before? And we continuously have to 
prioritize that each year. As staff has gone down, then there 
is less to this plan; but we, you know, try to keep that on the 
forefront as we go.
    Mr. Bishop. Thank you.
    Mr. Aderholt. Let me follow-up with a little bit of what 
Mr. Bishop was talking about as far as the resources. In your 
testimony in the most recent semiannual report to Congress, 
which was released last December, you write that since fiscal 
year 2012, the Office of Inspector General's appropriations 
have fallen to the lowest level since 2008, and the staffing is 
at the lowest level the agency has established. Of course, 
Congress was able to provide full funding for your office for 
fiscal year 2014. Will this allow you to address the staffing 
needs?
    Ms. Fong. We are, right now, backfilling or filling 
critical vacancies that became vacant, and that is very 
important to us. We are also anticipating that we will be able 
to do some hiring of entry level auditors and investigators 
which is critical to our future success. We have not been able 
to hire new staff for several years because of hiring freezes 
and, you know, the potential for furlough, which fortunately we 
didn't have to do. So we are looking this year to bring back 
and fill some critical vacancies. We don't have a precise 
number yet, but we can keep your staff apprised of that.
    Mr. Aderholt. How will the full funding affect the 
priorities that you set for your audits and investigations for 
the remainder of the fiscal year?
    Mr. Harden. I guess the way I would answer that is we are 
implementing our plan as we put it out last October. But next 
week, I meet with all of my audit directors from around the 
country to talk about are there any mid-course corrections that 
we need to make? Is there anything that we thought was a 
priority that really wasn't the priority that it needed to be; 
is there something that needs to take its place? That is 
something we do at least twice a year to see if there is any 
specific changes. And then we make changes to the plan as 
different things come in and are brought to our attention like 
if there is a congressional request or something from the 
Secretary's office.

                              IT SECURITY

    Mr. Aderholt. Inspector Fong, you talked a little bit about 
IT security. In fiscal year 2010, 2011 and 2012, USDA had the 
worst cyber security score of all the large departments. As you 
know, USDA's score comes from your office or the office of the 
chief information officer. The score board for fiscal year 2013 
has not yet been released. Do you see improvements?
    Ms. Fong. We would characterize the Department's progress 
on this as slow but moving in the right direction. We have, as 
you all know, issued a number of very significant audits on 
various aspects of the IT security program at USDA. The bottom 
line here is that the CIO recognizes that this is a major 
weakness that needs to be addressed. And what we are 
recommending to the CIO is that they identify and focus on a 
priority grouping of issues to deal with and accomplish that 
and then go ahead and move on with identifying a second group 
and a third group and a fourth group, so that at least they can 
show measurable progress. What we have seen is that in the last 
year, the CIO has issued some significant policy directives in 
three areas in the Department to give guidance to the agencies. 
We think that is a very good first step. They need to keep 
continuing to take concrete steps and ensuring that the 
agencies then implement within their own jurisdictions, and 
that, I think, is one of the big challenges for the CIO.
    Mr. Aderholt. Does Congress need to consider legislative 
changes to help USDA address the problem?
    Ms. Fong. I should give some thought to that. My initial 
response is that there is quite a bit of guidance in law and 
regulation. NIST puts out all kinds of directives on how these 
programs need to be addressed. I don't think there is a lack of 
guidance and requirements. So I am not sure what additional 
legislative action would be appropriate. Perhaps continuous 
reporting might be useful.
    Mr. Aderholt. Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman. I know as we 
have this discussion, it strikes me that the IGs are sort of 
the fiscal grand jury of the Federal Government. You do these 
reviews like our civil grand juries do back in California, and 
they come up with recommendations for how a local government 
can improve itself. I just wondered if, as chair of the Council 
of Inspector Generals on Integrity and Efficiency, CIGIE; is 
that what you call it?
    Ms. Fong. CIGIE.
    Mr. Farr. How do you pronounce it?
    Ms. Fong. CIGIE.
    Mr. Farr. CIGIE. As chair of CIGIE, is there a report that 
CIGIE puts out every year sort of prioritizing what are the 
common needs of across-the-board, all 73 agencies that have 
IGs?
    Ms. Fong. Actually we do. We put out an annual report to 
Congress and the President. And I would be happy to provide 
your staff with a copy of that.
    Mr. Farr. Yeah, I think it would be very interesting. I 
think Mr. Fortenberry and Ms. Pingree, and what all of us up 
here have said is that we are looking for fixing things that 
are broken. I would hope that maybe even the Council could talk 
about it. Do the reports the way you are doing, but it would 
also be very helpful to us if you get a list of, this is the 
first hearing we have, so all of the Department of Agriculture 
is going to come in here after you, and it would really be good 
to set us up with, you know, things that, you know, need 
fixing, that we could address our approach to, address our 
questions to.
    So I think that the presentation for all IGs would be 
improved if we could get those kinds of questions that 
everybody here has been asking you; and I just take it back to 
the Council and see if that could be part of the presentations 
that you all make. I think it would put us and your IGs in 
general in a much better, more useful, I guess, more useful to 
us as lawmakers rather than just--certainly the audits are 
important and all of that, but the information from those 
audits is try to improve our law making. That is what we do, 
and our allocation of limited resources. Thank you, Mr. 
Chairman.
    Mr. Aderholt. Mr. Bishop.
    Mr. Bishop. Nothing.
    Mr. Aderholt. Okay. Well, thank you for your testimony here 
this morning, and we look forward to working with you as we go 
through the appropriations for fiscal year 2015; and, again, we 
appreciate your information and look forward to following up on 
some of the things you will be presenting to the subcommittee 
on the follow-up questions, so with this, the hearing is 
adjourned. 


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                           Thursday, March 6, 2014.

                  COMMODITY FUTURES TRADING COMMISSION

                                WITNESS

HON. MARK WETJEN, ACTING CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION
    Mr. Aderholt. Okay. The subcommittee will come to order.
    Chairman Wetjen, I welcome you today to the subcommittee. 
We apologize for a late start, but votes were called, and of 
course, we are not in control of the vote schedule. So thank 
you for bearing with us on that.
    Congratulations on your new job and new role as Acting 
Chair. I appreciate your taking the opportunity to testify. As 
the Acting Chairman and accommodating our short schedule this 
year to have this hearing in order to accommodate our regular 
order, we look forward to your testimony this morning and 
hearing from you.
    As we all know, the Commodity Futures Trading Commission is 
responsible for principle-based regulations of commodities, 
futures, options and swap markets in the marketplace. These 
markets are integral to our Nation's free enterprise system.
    Some would say that the CFTC is resource starved. I think 
we need to take a closer look at that perception. This agency 
has received seven consecutive annual increases in funding, an 
overall increase of 92 percent since the financial crisis of 
2008.
    There are not many agencies that have enjoyed such an 
increase. For this reason, I am glad to see the decreased 
budget request of $280 million and the President's 
acknowledgement that this committee has been saying for a while 
now that the requests for the past few years were inflated and 
not based on real needs.
    One of those issues I want to be sure to address today is 
the absolutely unnecessary furloughs that occurred in 2013. I 
understand that this did not happen under your watch as the 
chairman, but I do want to be sure that the employees of the 
CFTC understand that they were victims of what some of us think 
were some questionable decision making.
    We sent out a statement on October 24th, 2013, and it was 
reported to the press that the CFTC had explicit legal 
authority to spend amounts necessary to avoid furloughs. At 
that time, CFTC told me that they could not use the authority.
    However, a short while later, in January, two days after 
the day of agency-wide unpaid leave, CFTC used this same 
authority to prevent more furloughs. CFTC's choice to not 
prevent all agency furloughs rests squarely on its shoulder.
    With regard to CFTC's fiscal year 2015 budget request, I 
look forward to ensuring that CFTC puts priority on resources 
by performing core functions properly and avoiding regulatory 
overreach. CFTC has finished the majority of the rulemaking 
under the Dodd-Frank bill without the bloated budget request 
over the past few years.
    Similarly, they should be able to implement the regulations 
without excessive funding increases. As I say, we look forward 
to working with the CFTC to find ways to streamline operations, 
put a priority on the resources that are there, and avoid 
unnecessary regulatory overreach.
    Before we recognize you, Mr. Chairman, for your opening 
statement, I would like to recognize the Ranking Member of the 
subcommittee, the distinguished gentleman from California, Mr. 
Farr.
    Mr. Farr. Well, thank you, Mr. Chairman.
    And I would like to echo your words. Congratulations and 
thank you for being here today.
    I was impressed with your testimony. What happens in this 
committee is it is sort of a push-pull here. Some people think 
that we are going to solve our problems by cutting everything, 
and others feel that we are going to solve our problems by 
adding everything.
    I was just interested in where the two areas, and you do 
not have to answer this right now because this is opening 
statement, but I want to address a sentence in your statement, 
that for the responsibility that we have given you in law that 
Congress has enacted, Dodd-Frank, how many cops do you need on 
the beat.
    At the same time, this issue on technology, I mean, your 
increase is 70 percent increase in technology, and the play 
between using technology so that you can have less employees, I 
mean, is just a smart, modern operation. But it seems to me 
that you cannot use technology for cops on the beat. I mean, we 
have not replaced in all the technology we use in law 
enforcement; we have not replaced literally the cop on the 
street.
    Perhaps you can share with us how that interplays and why 
you need to sustain the budget that the President has asked 
for.
    Mr. Aderholt. Thank you, Mr. Farr.
    With that, I will turn it over to you, Chairman Wetjen.
    Without objection, your full testimony will be included in 
the record. If you would like to summarize your testimony and 
hit the highlights and then we can proceed with the questions.
    Again, we know we started late. So we will try to make up 
some time in trying to condense some things. So, again, 
welcome. We look forward to your testimony.
    Mr. Wetjen. Thank you very much, Mr. Chairman.
    Good morning, Chairman Aderholt, Ranking Member Farr, and 
members of the subcommittee. Thank you for inviting me to the 
hearing today on the President's fiscal year 2015 budget 
request for the Commission.
    In both my written and delivered remarks, I attempt to 
provide this subcommittee useful context to the important role 
the Commission plays in the financial system and the economy as 
a whole, as well as the important role this committee plays in 
helping our agency achieve its mission.
    I also hope to provide a clear picture of the potential 
risks posed by the continued state of underfunding for the 
agency.
    As you know, the Commission was directed by Congress to 
police the derivatives markets, which includes futures, 
options, and swaps contracts relating to underlying 
commodities. These markets are critical to the efficient 
functioning of the global financial system and the economies it 
supports. Without them, a farmer cannot lock in a price for his 
crop. A small business cannot lock in an interest rate that 
would otherwise fluctuate, perhaps raising its costs. A global 
manufacturer cannot lock in a currency value, making it harder 
to plan and grow its global business. And a lender cannot 
manage its assets and balance sheet to ensure it can continue 
lending, fueling the economy and the process.
    The derivatives markets better enable these enterprises to 
do what they do best, create jobs and grow the economy. When 
not overseen properly, irregularities or failures of firms in 
these markets can severely and negatively impact the economy 
and cause dramatic losses for individual participants, and this 
is why appropriately funding the CFTC is so critical.
    The unfortunate reality is that at current funding levels 
the Commission is unable to adequately fulfill the mission 
Congress gave it. That mission is to prevent disruptions to 
market integrity and the build-up of systemic risk, as well as 
ensure that these markets are free of fraud and manipulation.
    Recent increases in the agency's funding have been 
essential and appreciated. They have not, however, kept pace 
with the growth of the commission's responsibilities, including 
under Dodd-Frank. Allow me to explain how the markets we 
oversee and the responsibilities of the Commission have grown.
    The notional value of derivatives centrally cleared by 
clearinghouses was $124 trillion in 2010 and is now $223 
trillion. That is nearly a 100 percent increase. Now more than 
ever a clearinghouse's failure to follow international 
guidelines in the commission's regulations designed to ensure 
proper risk management could have significant economic 
consequences.
    The amount of customer funds managed by clearinghouses and 
futures commission merchants was $177 billion in 2010, and is 
now over $225 billion. The Commission's rules are designed to 
ensure customer funds are safely kept by these firms, and a 
failure to provide appropriate oversight increases the chance 
of risky practices, placing customer funds at risk.
    I must remind the committee that two such firms have failed 
in the last few years.
    The total number of registrants and registered entities 
overseen directly by the Commission, depending on the measure, 
has increased by at least 40 percent in the last four years. 
This includes 99 swap dealers, two major swap participants, and 
dozens of clearinghouses and trading venues.
    The CFTC also oversees more than 4,000 advisors and 
operators of managed funds, some of which have significant 
outward exposures across the financial markets.
    Additionally, the Commission directly or indirectly 
supervises approximately another 64,000 registrants. These 
intermediaries are by and large well run firms that perform 
important services for their customers. But those relying upon 
these firms in the American public deserve assurances that the 
risks the firms pose are being mitigated by an agency capable 
of meaningful oversight. Yet the agency's current onboard staff 
responsible for this mission is just 644 employees.
    The fiscal year 2015 request is a significant step towards 
the longer term funding level that is necessary to fully and 
responsibly fulfill the agency's core mission. It recognizes 
the immediate need for an appropriation of $280 million and 
approximately 920 staff-years, which is heavily weighted 
towards examinations, surveillance, and technology functions.
    The request balances the need for more technological tools 
to monitor the markets and identify risk and compliance issues 
with the need for expert staff to analyze the data collected 
through technology.
    In conclusion, the Commission's ability to appropriately 
oversee the derivatives marketplace hinges on security 
additional resources.
    Thank you for inviting me today, and I would be happy to 
answer any questions.
    Mr. Aderholt. Thank you, Mr. Chairman.
    As I mentioned in my opening statement, I would like to 
correct the misperception that CFTC has been purposely starved 
for resources since the financial crisis of 2008. CFTC has 
received a 91 percent increase in funding, practically doubling 
its size from 112 million to 215 million. Yet we constantly 
read in the press that the agency is just barely getting by, 
and you yourself have referred to the agency as resource 
constrained at different hearings.
    Given the substantial increase in funding and the work that 
CFTC has already accomplished, why CFTC needs another 30 
percent increase in funding is what we would, you know, like to 
hear your argument on that.
    Mr. Wetjen. I appreciate the question, Mr. Chairman.
    I tried to in my previous remarks just now give a number of 
different measurements of both the marketplace and the entities 
that function in the marketplace that we oversee, and I tried 
to give a sense of scale and also a sense of the increase in 
responsibilities.
    And on the scale side, those two measurements of the 
notional value of the market plus the amount of customer funds 
that are supposed to be safely kept under our regulations by 
both clearinghouses and FCMs is a good measure.
    And then I think the total number of registered entities 
that we either directly or indirectly oversee is a rather large 
number. As I said, it is roughly a total of 68,000 registered 
entities, and that reflects an increase in one of the 
subcategories of about 40 percent over the last several years.
    So all that said, those descriptions try to give you a 
sense that the responsibilities have, in fact, grown. Some of 
that is a function of new responsibilities given in recent 
years, but the rest of it has to do with just regular organic 
growth in the marketplace and organic growth among the 
registered entities who are trying to serve needs for 
participants in these markets.
    Mr. Aderholt. Of course, the President did decrease the 
budget request this year, and what is your rationale of his 
decrease?
    Mr. Wetjen. Well, the budget request this year and in 
previous years when I have been involved in the process, I have 
always looked at each of them with the three primary focuses in 
mind, if you will, and I have always looked at these requests 
to determine are we doing enough on the three core functions of 
surveillance, examinations, and enforcement.
    And prior to my current role, I would review them with 
those goals in mind, to look and see are we leveraging 
technology sufficiently and are we including or adding enough 
staff to make sure we can satisfy those three key areas.
    I believe previous budget requests did that. I think 
today's budget request before you that we are here to discuss 
will put us in a very, very strong footing if funded at that 
level. I think we are going to be able to do a level job on 
those three key areas.
    The other thing I would point out is that the request this 
year is a little bit different because it tries to be 
respectful of the Congress' direction through the budget 
resolution, which basically called for level funding for 
discretionary spending as it relates to the current level of 
spending on the discretionary side. So in light of that it just 
felt sensible and the right thing to do to be a little bit more 
constrained or restrained in the request.
    Mr. Aderholt. Well, I understand that this is the first 
time that you have been the chairman as far as with the budget, 
and so you have not had as much involvement as you have now as 
chairman with the resources, but thank you for the response.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    You indicated in your questioning there or noted the 
percentage of increase in the budget, but I think it also fails 
to note the percentage of increase in responsibility. Can you 
put that into some kind of percentage terms?
    And I also read that you only have 40 more employees than 
you did 20 years ago. So lay out for me a little bit about what 
the magnitude of the Dodd-Frank responsibility is, and that is 
what this whole debate is about. We have enacted a law. It 
gives you lots of things to do in these categories in an area 
that had never been regulated before. So you are going in to do 
something that nobody really had a lot of experience with, rule 
writing, all of that stuff, with a budget that we keep whacking 
away at.
    It does not seem to me that you can do what you are 
mandated to do in law even with the ``ask'' the President is 
making. So could you put that into some context of what the 
increase in responsibility is?
    Mr. Wetjen. I appreciate the question, Congressman.
    Again, I mentioned several before, but we might just key in 
on those entities that we directly oversee at the CFTC. Those 
would be these intermediaries, such as futures commission 
merchants, managed funds, swap dealers, and major swap 
participants. In those four key categories alone we have seen 
an increase of 40 percent in the number of entities now 
registered with us.
    And of course, once an entity registers, it is subject to a 
host of responsibilities under our regulations that we at the 
agency must oversee and enforce. So I think that is a pretty 
instructive measurement.
    The other, as I said a little bit earlier, the amount of 
customer funds now being held by clearinghouses and futures 
commission merchants has increased by more than $50 billion, I 
think the figure was. That is additional money that belongs to 
customers that has to be managed well and safely kept, and in 
the event that some sort of failure, which is something we have 
seen unfortunately in the last few years, those funds can be 
lost or tied up in a bankruptcy proceeding or whatever else for 
some amount of time, and we need to do our level best to make 
sure that does not happen again.
    Mr. Farr. How short of what the President has asked for do 
you think the ``ask'' is? I mean, you seem from what I have 
read, and part of it came out of this New Republic article 
which was November of last year that really defends, I think, 
very strongly that Congress has been underfunding its 
responsibility for your duties.
    Mr. Wetjen. So, Congressman, the question is how much----
    Mr. Farr. Well, I hear you have fewer people now for 
enforcement than you did in 2002. How can that be? Is that just 
because we have not put enough money into enforcement?
    Mr. Wetjen. Well, that is probably part of it. Some of it 
obviously has to do with attrition, but again, with more 
responsibilities at the agency, the growth within the Division 
of Enforcement has not been as fast as perhaps other divisions 
within the agency had to be in light of some of these new 
responsibilities. So that explains some of it, too.
    But, no, the request, again, before you today I think will 
get us to the minimum level of staff that I believe we need to, 
again, execute on those three core areas: examination, 
surveillance of the marketplace, and a good, strong credible 
enforcement program.
    Mr. Farr. My time has expired. Thank you.
    Mr. Aderholt. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.
    Mr. Chairman, thanks for being here.
    Justice Oliver Wendell Holmes one day said, ``I am not near 
as concerned where men stand as in what direction he is 
headed.'' (sic) And I like the direction you are headed. I like 
it when folks come here and say, ``We are going to request less 
money than before.'' I appreciate that attitude.
    But I have been around government long enough to know that 
when an agency comes and says, ``We are going to make do on 
significantly less money,'' I need to ask a couple questions.
    So my main question is you are not looking to supplant the 
decrease in funding that you are requesting by any type of 
increase or any new user fees, are you?
    Mr. Wetjen. Mr. Congressman, I appreciate the question.
    The President's proposal or request references user fees, 
and if that is something that Congress entertains, there would 
be a lot of issues to work through, and you know, the CFTC 
would want to be part of that process.
    My view on the matter at the moment is that, again, even in 
the relatively short while that I have been serving as acting 
chair, I have seen firsthand the types of effects it has on the 
agency and our ability to respond to questions, to respond to 
petitions from the marketplace, to try and respond to 
international regulators who are asking for us to enhance and 
improve upon or increase our coordination efforts and 
harmonization efforts.
    All those things take time and resources and people, and so 
the fact that we are falling a little bit short in our ability 
to do those types of things, it leaves me in the position where 
I am basically open to considering anything to make sure that 
we, again, have the people we need to do the job and the 
technology necessary to leverage that human capital.
    Mr. Nunnelee. We need to talk long and hard before we start 
talking about adding new user fees or increasing anything 
charged.
    All right. Let us move on. I understand you are involved in 
looking at the regulations dealing with high frequency trading. 
Just explain to me from a layman's point of view what you are 
hoping to accomplish and how you want to accomplish that.
    Mr. Wetjen. Well, Congressman, the main thing the agency 
has done is we put out for comment a concept release that asked 
a series of questions to the marketplace concerning how do we 
make sure these types of firms do not pose unacceptable risks 
to the marketplaces that they are operating in, and the use of 
algorithms and computer technology to increase the speed with 
which trading occurs.
    It creates a certain type of risk that has to be accounted 
for, and the exchanges and the participants themselves have a 
number of risk controls in place already, and so the basic 
thrust of the concept release was asking questions to the 
marketplace: are the controls in place now the sorts of 
controls that are bare minimum necessities to control for that 
risk?
    And then it also asks questions about what other types of 
controls might we consider, and so the focus is really on risk, 
and it is the type of risk that is posed by the fact that the 
trading activity happens so fast through the use of computers, 
and again, it creates unique sorts of risks and issues for 
policy that the commission needs to work through.
    Mr. Nunnelee. In light of the fact that you have not fully 
implemented all of your rulemaking required under the Dodd-
Frank Act, why would you think it is necessary to move forward 
in new areas of regulation?
    Mr. Wetjen. Well, I think, again, as it relates to high 
frequency trading, where we are in the process is we have put 
out for comment this concept release, and recently the comment 
period was extended. I think it might be closed now.
    So what we will do now is we will read through what was 
submitted to us. I am sure there will be a number of 
discussions that take place, and depending again on what the 
input from the marketplace is or was through that process, we 
will have to make a judgment about what to do going forward, 
but I have not prejudged the concept release or the comment 
letters that have been filed under it. So that is where we are 
in the process at the moment.
    Mr. Nunnelee. All right. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.
    And welcome, Mr. Wetjen. As you know, there have been 
several entities who have been working for some time with the 
CFTC on enforcement with respect to the metals market for 
aluminum at the London Metals Exchange. Your predecessor, 
Chairman Gensler, last summer indicated the CFTC has the 
authority to act in training manipulation related to the London 
Metals Exchange.
    Given the CFTC's role in protecting and preserving the 
integrity of commodity markets, are there funding or research 
issues that are preventing the commission from exerting its 
proper authority or to bring the London Metals Exchange 
practices in accord with global commodity exchanges where 
commodities are traded?
    Mr. Wetjen. Mr. Congressman, I thank you for the question.
    Whenever the agency and the staff at the CFTC hear anything 
from the marketplace about possible manipulative activity, we 
take all of it very, very seriously, and we look into it.
    If we are resource constrained, obviously that could have 
some level of impact on our ability to pursue certain sorts of 
conduct or activity that is revealed through some kind of an 
investigation that we might do at the agency.
    Mr. Bishop. Is that the case in all cases?
    Mr. Wetjen. Well, I cannot speak to any ongoing 
investigations specifically, but it does stand to reason, you 
know, the fewer resources we have, the harder it will be to 
pursue that in the best way possible.
    Mr. Bishop. You ultimately would need additional resources 
in order to address those concerns?
    Mr. Wetjen. It would definitely be helpful, yes.
    Mr. Bishop. Thank you for that forthright answer.
    As you may know, last year I shared my concern with 
Chairman Gensler regarding the potential international reach of 
the CFTC's proposed cross-border rules, particularly as they 
might impact Europe and Asia. Specifically there was a concern 
in the industry with respect to the scope of cross-border 
applicability, as well as the fact that both the SEC and the 
CFTC share some responsibility for regulating swaps.
    Can you give the subcommittee an update on this matter? And 
I am particularly interested in where you and the SEC are in 
terms of the rulemaking process and whether or not there is a 
possibility of enacting rules that would be similar, if not the 
same, so that the regulated parties will not have to comply 
with multiple rules.
    Also, can you update us on any discussion with your 
counterparts in Asia and Europe regarding this issue and any 
outcomes?
    It is our understanding that the European Union is not 
expected to take up any rulemakings until 2016. Just tell me 
whether or not that is going to create some heartburn for the 
U.S. because of the delay.
    Mr. Wetjen. Thank you, Mr. Congressman.
    I guess there are two points. The first is our coordination 
with the SEC, and then our coordination with Europe. On the 
former, as you likely know, the CFTC finalized its cross-border 
guidance last summer, and that was the result of a fairly 
lengthy process that included a proposal where we solicited 
comments from the marketplace. The final guidance was issued 
last summer, there was a deliberative process that led to it, 
and I think that we did a level job of taking into account the 
feedback we got through the comment process.
    So, again, that has been in place now for more than six 
months. Meanwhile the SEC continues its effort to implement a 
cross-border policy, and I can assure you there is a lot of 
discussion taking place between the two agencies. In fact, in 
just the last few weeks as sponsor of the Global Markets 
Advisory Committee at the CFTC, I hosted a meeting on the 
CFTC's cross-border policy, and we had staff from the SEC who 
were present at the meeting and presented and gave us their 
views on a host of different topics. So that is just one 
example of how the agencies continue to work fairly closely.
    Some of this happens outside the public eye, of course, and 
a lot of it happens through the staff, but there is a lot of 
dialogue I can assure you, especially now, as I said, given the 
fact that the SEC still has to do a few things by way of 
rulemakings to put their policy in place.
    Mr. Bishop. I think my time has just about expired. Thank 
you.
    Mr. Aderholt. Mr. Valadao.
    Mr. Valadao. Thank you, Mr. Chair.
    And, Chairman, Andrei Kirilenko, former CFTC Chief 
Economist, recipient of the CFTC Chairman's Award for 
Excellence in 2010, and co-authored the 2010 Flash Crash 
Report, has recently produced a new paper on financial 
regulation in his role at the Massachusetts Institute of 
Technology.
    Some recommendations he had for the financial regulators 
are: financial regulations should recognize the automation 
increasingly higher transaction speeds make it nearly 
impossible for humans to provide effective layers of risk 
management. Regulators need to change their surveillance and 
enforcement practices to be more cyber centric rather than 
human centric.
    My question is your budget requests only a small increase 
for the development, modernization and enhancement of 
technology. However, it requests an increase of 35 percent for 
new staff. Can you explain the discrepancy, given these 
recommendations?
    Mr. Wetjen. Thank you, Mr. Congressman.
    I go back to the three key areas of our mission that I 
mentioned before, and they are, again, surveillance, 
examinations of our registered entities, and enforcement. And 
in order to do a sufficient job in those three key areas, we 
need the additional staff request under this budget.
    That is not to say we do not need additional investment in 
technology, and I completely agree that we do. I have not read 
Mr. Kirilenko's paper, but I do agree with his thesis, and we 
have been trying to use and deploy some of the new funds set 
aside for technology for new initiatives. One of those new 
initiatives that is being considered is trying to collect and 
analyze order message data. That is something that some of the 
other commissioners at the agency have shown some interest in 
as well, and that is the sort of thing that I think would speak 
to or respond to some of the issues it sounds like raised in 
Mr. Kirilenko's paper.
    Mr. Valadao. Thank you.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Good morning.
    Mr. Aderholt. Good morning.
    Ms. DeLauro. Thank you. I am sorry I was not here for your 
testimony, but I am delighted to have you as a witness this 
morning.
    I want to first say very quickly that I was stunned, but 
pleasantly stunned, to read your forthrightness, your honesty, 
and the clarity of both yourself and Commissioner Chilton about 
underfunding and what that means to your agency.
    A couple of very quick yes or no, and then I want to move 
on to the question. Are you a regulatory agency?
    Mr. Wetjen. Yes.
    Ms. DeLauro. Okay. And with that, simply what do you 
regulate?
    Mr. Wetjen. The derivatives markets.
    Ms. DeLauro. How much money is involved in that derivatives 
market?
    Mr. Wetjen. Well, the size, the notional value of the 
markets fluctuate, but it is anywhere between four and $500 
trillion.
    Ms. DeLauro. Four to $500 trillion. A trillion dollars a 
day my colleague Mr. Farr talks. More than that.
    Now, I am going to get to dollars that you need and the 
risk to underfunding that may not come up in this round, but I 
will get back to that, but your testimony, CFTC has fallen far, 
far short ``of performance goals for its examinations 
activities due to a significant lack of resources.''
    Now, this is a subcommittee that has recently been obsessed 
with reducing fraud and error rates in the SNAP Program, which 
has one of the lowest error rates of any Federal program at 3.4 
percent. I would hope that my colleagues would be equally 
concerned with fraud and abuses that go unchecked in the swaps, 
futures, and commodity markets.
    I might add that as I understand it, you had 82 enforcement 
actions over the last three years. You brought in more than 
$1.7 billion in sanctions. This would seem an area where 
additional funding would yield additional revenue for the 
government. And we have provided an appropriations amount at 
that time of about $600 million.
    When you have been forced to prioritize your 
investigations, what has been left out? What would you be able 
to accomplish with a more robust funding level?
    Mr. Wetjen. Congresswoman, I appreciate the question and 
your interest in the agency.
    Just speaking to, again, one of those three core areas that 
I had mentioned, enforcement, as you alluded to in your 
question, we have not really grown that division much over the 
last number of years, and we are actually at a lower level than 
we were more than a few years ago. And so with fewer staff in 
enforcement, obviously, it stands to reason there are probably 
going to be fewer enforcement matters the division can bring.
    So we want to have a credible enforcement program, and so 
we want to be able to pursue any relevant type of conduct or 
manipulative conduct that an investigation turns up. And, 
again, in order to do that, in order to respond to every 
referral that comes in in a meaningful way, in order to respond 
to referrals from our Division of Market Oversight, which is 
the division responsible for surveillance, we have to have----
    Ms. DeLauro. Would you be able to bring in more revenues?
    Mr. Wetjen. It is hard to predict that because it sort of 
depends on the nature of the case, but it would stand to reason 
that the more matters you bring presumably the more revenues 
you would bring in by way of fines, yes.
    Ms. DeLauro. To be repetitive, it has been three years, 
$1.7 billion. What a heck of a return on an investment there.
    I also might add that my understanding is that in 2002 you 
had enforcement people. The numbers were 154. In 2014, we had 
149, and just very quickly, once again, the difference between 
what you were doing in 2002 and what you are doing in 2014, and 
the dollar amount that you are dealing with now as opposed to 
2002.
    Mr. Wetjen. Yes, Congresswoman, that is right. Again, I 
mentioned the 40 percent increase in the number of registered 
entities directly overseen by the agency. I think that is a 
very good measure of the growth of responsibilities.
    I also go back to the increase in the amount of customer 
funds that clearinghouses and futures commission merchants have 
to keep safe and manage for risk. Both numbers have increased 
substantially and so all the more reason why we need to keep a 
close eye on what is happening in these markets.
    Ms. DeLauro. I would just conclude by saying that my own 
view, and I think it is evident here, is that strong funding 
for the CFTC reduces the deficit in many more ways than a lot 
of other actions that we are presuming to take on, and so that 
we ought to be able to provide the resources necessary for this 
regulatory agency to carry out its mission.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Yoder.
    Mr. Yoder. Thank you, Mr. Chairman.
    Mr. Chairman, thank you for joining us today. I appreciate 
your testimony, and I want to compliment you on your open 
approach towards making sure that we have good information, 
good comment opportunities for folks to weigh in on some of the 
important decisions you are making at the CFTC.
    I want to echo some of the concerns that Mr. Bishop brought 
up regarding cross-border swaps. In fact, our committee last 
year passed a bipartisan amendment to support the notion that 
the SEC and the CFTC should coordinate on these swaps so that 
we have as much certainty and consistency, predictability, and 
openness in the process to ensure that the rulemaking is done 
in a way that achieves the goal, which is to protect consumers 
and ensure that the CFTC can do its proper oversight.
    I just want to note that I think the changes you brought 
forward as acting chair have been very positive and improved in 
that regard, and it has been noticed.
    I want to ask a little bit of a follow-up from Mr. Bishop's 
question, and the guidance that you put out, I guess, in 
November, I know you have put that on hold and are seeking 
further comment because of the disarray it has caused in the 
market.
    Can you give us a status report on the comments that you 
are seeking with respect to the November changes?
    Mr. Wetjen. Thank you, Mr. Congressman, and I appreciate 
your kind words.
    The advisory you mentioned from November 14th of last year 
was, indeed, put out for comment by the commission at the 
beginning of the year, and I think there is a little bit of 
time left in the comment period.
    Once the comment period closes, we need to carefully review 
what has been submitted and get a better sense of how exactly 
the marketplace thinks that we should resolve the set of 
circumstances addressed in the advisory, and there are a number 
of different ways we could do that, including sticking with the 
advisory, but depending, again, on what the comments that come 
in say, we could consider a number of different things.
    So I can assure you there is openness to considering any 
number of different ways to handle this, but I think that with 
respect to the guidance from the summer, the cross-border 
guidance from the summer, I think that people can perhaps 
quibble around the edges, but I think it reflects pretty sound 
policy and was the result of a very long, lengthy deliberation 
process. So I am very interested in making sure that that stays 
in place and people can continue working and complying with it.
    Mr. Yoder. What is the time line on the completion of the 
November guidance?
    Mr. Wetjen. The no action relief currently in place lasts 
until September. So the comment period, as I said, I believe 
closes in another week or so. So, again, presumably we would 
want to, after reviewing the comment letters, make some sort of 
a decision about what to do before the related no action relief 
expires in September.
    Mr. Yoder. Fair enough. We have seen a lot of news about 
banks' involvement in the commodities markets. I know the 
Federal Reserve is seeking public comment on this topic. 
However, the CFTC has the authority to police those markets for 
manipulation. Do you believe the CFTC has enough statutory 
authority to gather the necessary information to protect the 
commodities markets from fraud and manipulation?
    Mr. Wetjen. Yes, I believe so. There are, of course, 
reporting obligations over the marketplace related to 
derivatives. The agency also has special call authority that it 
can rely upon if it hears of something and it gets a referral 
and wants to follow up with additional information. So that is 
something that we have at our disposal.
    We, of course, can share information with other Federal 
agencies, and an example of this that does not necessarily 
relate to all of the energy markets, but at least with respect 
to power and electricity, we just announced the first transfer 
of data from the CFTC to the FERC yesterday, and that was done 
pursuant to a memorandum of understanding that the two agencies 
entered into, which we were directed to do by the Congress 
several years ago.
    So I feel reasonably confident now that we are able to get 
the information that we need to pursue any enforcement actions 
if necessary if there is manipulation taking place.
    Mr. Yoder. Thank you, Mr. Chairman. I yield back.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Thank you.
    Good morning, Mr. Chairman. I am sorry I did not have the 
benefit of your earlier testimony so I am playing a little bit 
of catch-up here, but I did review some of it.
    Are the derivatives markets broken?
    Mr. Wetjen. I do not believe so, no.
    Mr. Fortenberry. Do they function well?
    Mr. Wetjen. I think they function reasonably well. There is 
a structural shift taking place on the swap side, as you know, 
given the reforms over the last several years, and there is 
going to be some adjustment that goes along with that, but I am 
not hearing or seeing anything that leads me to believe that 
there is brokenness in the markets, no.
    Mr. Fortenberry. Here is why I asked the question, and I 
think you are probably aware of what I am hinting at. When you 
have an inverse relationship of what has traditionally been 
between hedgers and speculators, when you have unexplained 
price volatility when there is not a disruption of supply, for 
instance, the very purpose of a derivatives market, which is to 
hedge risk and decrease volatility and make the market more 
perfect, actually may be lending itself to increased volatility 
and market brokenness, and that is the point of my question.
    The point in the example here, in 2008, the price of oil 
shot up to $145 a barrel. Then it rebounded, came back down. By 
2011, there was a run-up of about 20 percent in the price of 
oil, but gasoline prices went up to their 2008 levels, again, 
no interruption of supply.
    So this unexplainable price volatility begs the question as 
to whether or not speculation in the market itself is 
undermining the very purpose of the market to decrease 
volatility and hedge risk.
    Mr. Wetjen. I appreciate the question.
    I think I have not studied the data closely. It probably 
would be confirmed in most studies that certainly there has 
been perhaps an increase in volatility at least during certain 
periods of time or the last number of years in the markets. 
There are a number of possible explanations for that, including 
the question asked earlier about the presence of high frequency 
trading firms.
    So the trading velocity and the trading volume has changed 
a lot, but I think the real measure of whether the markets are 
working or not or the best measure is: Is there sufficient 
liquidity for those who really need to do traditional hedging? 
Is there sufficient liquidity in the marketplace for them to 
achieve that purpose?
    By and large my sense is that in most cases anyway that is 
something that is achievable for them.
    Mr. Fortenberry. Well, I would not disagree with that, but 
at what cost given the volatility and what is causing the 
volatility. Is it basically underlying structures of supply and 
demand? Not clearly, and so the market itself maybe a factor, a 
significant factor in the increase of volatility, which is very 
disruptive to free market economies. In other words, it begs 
the question of as to whether or not this is functioning 
properly.
    It is a larger academic question. I recognize that and your 
day-to-day management of trying to ensure there is not fraud of 
insider trading, all the things that you do maybe do not lend 
itself to deeper reflection on this purpose, but I think it is 
important because the very reason we are talking about giving 
you more money is because we keep seeing problems here. We do 
not want any cheating. We want the free market to function 
properly, but at the same time if the fundamental structures 
are cracked betraying the very purpose of the market, I think 
that is something we have to look at and think through.
    Mr. Wetjen. Congressman, that is a very thoughtful point 
and question, and I agree. I think it would be worthwhile to 
take a step back and maybe look at the big picture and perhaps 
I could follow up with you after the hearing and figure out a 
way to do that and maybe get some additional information for 
you that could be useful. So I am happy to follow up with you 
on that.
    Mr. Fortenberry. I would appreciate that.
    Thank you, Mr. Chairman.
    Mr. Aderholt. You mentioned in your testimony that various 
statistics have been used to measure the increase of CFTC's 
responsibilities. One thing that is mentioned is the gross 
notional value of hundreds of trillions of dollars, which is 
several times larger than the world economy, but the Bank for 
International Settlements has published its data that would 
disagree with that.
    I would like to look at some other measurements. You are 
including one, increase in trading volume; number two, increase 
in customer funds; and number three, increase in registered 
entities under CFTC.
    Using your own statistics, number one, the increase in 
trading volume for futures is 13 percent. For swaps it is 33 
percent. The increase of customer funds is 27 percent. The 
increase in registered entities is 40 percent.
    So the highest metric you have given would be 40 percent. 
Yet the CFTC's budget since the financial crisis of 2008 has 
increased 91 percent. Explain to us the request for another 30 
percent increase in CFTC's budget.
    Mr. Wetjen. Mr. Chair, I appreciate the question.
    The way I approached this budget was looking at those 
different ways of measuring, but also looking at the mission of 
the agency set out under the statute. I analyzed it by focusing 
on the number of people we have and then making judgments about 
the number of people that I thought we needed to execute on 
those mission activities, focusing, again, on three key ones 
for me which are enforcement, surveillance, and examinations.
    And I just went through the divisions and looked to see, 
well, how many people do we have doing those three key things 
in examinations? In the Division of Clearing and Risk, it is a 
very small number. I think it is around 12 or 13.
    In the Division of Swap Dealer and Intermediary Oversight, 
it is slightly larger because they have more registered 
entities under their purview, but still a pretty small number. 
In fiscal year 2013, it looks like it was 48.
    And, again, DSIO, that division oversees tens of thousands 
of entities, either directly or indirectly. Most of those are 
indirect, but a substantial number are under the CFTC's direct 
oversight.
    So we do not need enough people to look at every single 
last one of those registered entities year after year, but we 
need enough to basically keep the entities honest and to do at 
least a reasonable, acceptable level spot check of those 
registered entities, and again, based on the number we have 
today, we are not able to do that.
    Mr. Aderholt. You mentioned the CFTC's leverages of 
resources of self-regulatory structure. The number of 
regulatory includes around 800 staff plus CFTC's 647 employees, 
and that would make a total of about 1,450 employees to 
regulate the industry.
    Do you think it would be more transparent to acknowledge 
the totality of the hard working regulatory staff rather than 
just CFTC's own in asking for the increase?
    Mr. Wetjen. Well, I think the budget request itself does, 
indeed, acknowledge that. There is a reference to the fact that 
there is a coordination and cooperation effort with the self-
regulatory organizations, and so I can certainly concede that 
point.
    But the types of reviews that the SROs often do is a little 
bit different than the type of reviews at least focusing on 
examinations, the sort of examinations that the CFTC staff 
would be responsible for doing. The CFTC staff ultimately are 
the ones responsible for providing interpretations about what 
the regulations actually require, and they look at and do these 
examinations through a slightly different lens, I would 
suggest. It is much more risk based. It is much more policy 
driven, and so with that type of approach and combination with 
the approach taken by the SROs, I think in the cases where you 
have both entities involved, both the SRO and the CFTC, that is 
how you get the best oversight.
    But, again, even though that type of cooperation where we 
are doing it qualitatively, different type of review, and we 
are not doing it of all the registered entities that the SROs 
might have direct oversight over, we still do not have enough 
people to have that level of cooperation.
    So, again, that is why the request was made at the number 
it was requested at, because we need additional staff, 
additional FTEs focusing on that examination function, just 
focusing on the examination for now. That does not get into 
enforcement and surveillance.
    Mr. Aderholt. Mr. Farr.
    Mr. Farr. I find that people are always fighting regulation 
in politics at whatever level of government you are in, and yet 
it is the business sector that comes in and asks for 
regulations. They want licensing. They want standards set up. 
They want certainty, and certainly financing is of all of them. 
You know, you want some predictability that you are not going 
to have a disaster, that some unforeseen circumstances are 
going to occur because that makes it a lot more risky.
    There must be somebody out there in the private sector who 
wants you to have more staff and do a better job of providing 
an opportunity for transparency because this is what we are 
really talking about, is transparency and then where you find 
anomalies enforcement.
    Who are the people that might be interested in seeing you 
get a bigger budget?
    Mr. Wetjen. Mr. Congressman, I could identify them. I could 
probably give you their phone numbers, too, if you like 
although I will not do that here.
    Now, to be sure, that is, in fact, the case. We have 
tremendous demands placed on the agency right now, demands for 
clarifications, petitions for one purpose or another, including 
relief or including some other action expected or needed from 
the agency, demands for guidance, demands for interpretation.
    So, and I mentioned it a little bit earlier, there are a 
number of demands on the international front, and as we know, 
these are global markets, and there are other regulators and 
jurisdictions who have a say in the oversight of these markets, 
and there is a tremendous amount of dialogue that takes place 
between the other regulators around the globe. They have 
demands. We have demands of them.
    Let me give you an example. The European Commission right 
now is undertaking the number of equivalence determinations, 
and these are determinations about whether or not some of our 
rules are sufficiently similar to theirs or whether some of the 
entities based in the U.S. but operate over in Europe can 
follow CFTC regulation rather than European regulation. That 
includes dealers. That includes clearinghouses.
    And so there is a tremendous amount of work and time that 
gets put into having those dialogues and trying to work with 
these other regulators so that they come out with a good result 
on their own equivalency determinations.
    Mr. Farr. What U.S. entities or companies want better 
regulation?
    Mr. Wetjen. Well, I think my sense is that most 
participants in the derivatives markets think that confidence 
is built and there is greater credibility when there is 
sufficient strong oversight of the markets. When we saw the 
failures of the two FCMs several years back, it was kind of a 
jarring event, I think, for a lot of the participants in the 
futures market, in particular, because that was the failure of 
a sizable firm. A large number of customer funds were put at 
risk and tied up in bankruptcy, and I do not know if it was a 
crisis of confidence, but as I said, it had a real jarring 
effect. We could sense that at the agency, and it seemed very, 
very real to me.
    So those who are watching that incident very, very closely, 
I am sure most of them would agree that we need a properly 
overseen and properly regulated FCM community to make sure that 
people continue bringing liquidity to these markets that the 
FCMs intermediate in.
    Mr. Farr. Most of your activities you stated are in 
surveillance, examinations and enforcement. I think that is 
similar to what our intel agencies do. I am just thinking if 
you were an intelligence agency before a congressional 
community and asking for the assets to do this, I doubt that we 
would be criticizing you in the sense that you do not need the 
money or you do not need to do the work in order to have the 
intelligence of our markets, and in this esoteric area of 
future swaps and options, we need it more than ever.
    So I just think that this committee, we ought to think 
about this. This is our responsibility. Do we really want to 
handicap this agency at a time when we have enacted the law and 
told them what to do and then turning around and not allowing 
them to carry it out it seems to me very dangerous.
    Mr. Aderholt. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.
    The CFTC is involved in a rulemaking change that is going 
to lower the trigger for transactions from $8 billion to $3 
billion. How many firms will be added at the $3 billion trigger 
that are not covered with the $8 billion trigger?
    Mr. Wetjen. Thank you, Mr. Congressman.
    The agency does not know the answer to that right now. The 
way the swap dealer rule works is that it set the threshold at 
$8 billion, which is to last until October of 2017, and there 
was a request of the chairman, Chairman Aderholt, to try and do 
some of this analysis sooner, which we can and will do, but we 
will have to analyze and try and solicit some information from 
the dealing community itself to get a better handle on that, 
and we are happy to do that.
    But just as far as how the rule operates, the threshold 
remains in place until 2017. I think originally the thinking 
was that once we had pretty solid reporting from the SDRs on 
swap data activity, that would give us an even better handle on 
how to determine what the level of dealing activity was among 
these different firms and make a judgment closer to that date, 
but we can do it sooner if that is the wishes of the committee.
    Mr. Nunnelee. Do you have a feel for a range of the number 
of firms that may be added by this change in comparison to the 
number that you are currently regulating?
    Is it ten percent more, 100 percent more?
    Mr. Wetjen. Honestly, Congressman, now we have 99 swap 
dealers registered, and I do not have the feel for how many 
more it would be. I am sure it would be some because we are 
aware that there are other entities that do the sort of dealing 
activity that would be encompassed by the swap dealer rule we 
put in place a couple of years ago, but I would have to get 
back to you on a better approximation.
    Mr. Nunnelee. That is one of the things we will be 
interested in, and then as a follow-up, we want to know, okay, 
how are you going to regulate an increased number of firms 
while you are requesting less resources.
    Mr. Wetjen. Well, you know, on the request, what we 
requested today would be, I think, a substantial increase above 
what we have now, but I take your point.
    Mr. Nunnelee. We may be following up with questions for the 
record on that. Thank you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop. I am sorry.
    Mr. Bishop. Thank you very much.
    As you know, Dodd-Frank as a part of the CFTC's expanding 
enforcement obligations created an authorized Whistleblower 
Program, and it is my understanding that the Securities and 
Exchange Commission has recently received more attention for 
its Whistleblower Program. However, whistleblowers have been 
very active at the CFTC regarding a wide array of fraudulent 
practices from price manipulation to Ponzi schemes.
    In fact, the number of whistleblower claims filed with the 
FTC has jumped from 58 in fiscal year 2012 to 138 to fiscal 
year 2013. Can you update us on where the Whistleblower Program 
is currently with CFTC and what resources are being proposed 
for next year, and what are your plans for promoting its 
existence, including any awards program?
    Mr. Wetjen. Thank you, Congressman.
    We do, in fact, have a Whistleblower Program that is 
relatively new. There is a sizable budget for it. I would have 
to get back to you on the exact number, but as you pointed out, 
at the SEC we have seen the successes that can come from this 
program, and there are a lot of referrals that can be generated 
from this type of program.
    So, again, I think it is going to be a nice addition to the 
program at the CFTC to try to make sure we are responding to 
any manipulative or fraudulent activity in the marketplace, but 
I am happy to follow up with you on more specific figures.
    Mr. Bishop. As you know, the CFTC is included in the ag. 
appropriations bill because of its historical connection to the 
agriculture markets, but the number and the scope of non-
agricultural issues has dramatically grown at the Commission in 
recent decades.
    But despite the growing importance of the non-agricultural 
issues, agricultural issues still remain a critical component 
of your work. I am concerned that given the fiscal environment 
in which we are operating today and the inevitable budget 
reductions which will occur in every agency of the Federal 
Government, including yours, the CFTC's management of 
agriculture markets could possibly get the short end of the 
stick.
    How do we make sure that agriculture does not 
disproportionately pay for reductions in your budget, combined 
with the growing pressure you are under to expand the agency's 
non-agricultural activities, particularly as a result of Dodd-
Frank?
    Mr. Wetjen. Thank you, Congressman.
    You are right. The ag. markets, in particular, have played 
a special role in the history of the CFTC and also in the 
history of the markets. I think in a lot of ways they developed 
in that space and expanded from there, as you said.
    We are always trying to be mindful of the special needs or 
special issues that can materialize in the agricultural asset 
class, and we try to pay careful attention to that. Just to 
give you an example, we have a weekly surveillance meeting at 
the CFTC, and we are going to cover a couple of topics tomorrow 
that actually relate to agricultural products.
    So it continues to be an area of importance, and especially 
since the underlying commodities of these derivatives contracts 
are so meaningful and important to the everyday citizen. We 
always need to make sure we are taking care to understand 
exactly what is going on in those markets and watch them very 
carefully.
    Mr. Bishop. Right. Finally, let me ask you, going back to 
Dodd-Frank and farmers, one of the little known goals of the 
Dodd-Frank is the facilitation of a more transparent risk 
management process for farmers and ranchers. But it would 
appear that the resulting transparency has come at a real cost, 
particularly to the Nation's farmers and ranchers who utilize 
futures markets for hedging and are now experiencing 
dramatically increased risk management costs.
    As part of the CFTC's efforts to expand transparency, a new 
rule governing records of commodity interests and related cash 
forward transactions was issued and approved in December of 
2012. Under this rule all communications leading to a futures 
or swap transactions are required to be recorded, including 
voice and text message recordings.
    Voice recording systems can cost upwards of $50,000, which 
is likely cost prohibitive for most small to midsize working 
farmers and ranchers. Several major farm organizations have 
expressed some concern regarding the rule's recording 
requirements and their cost effectiveness.
    Can you tell us the thinking behind this particular 
requirement, and was the CFTC aware of the cost impact that 
this would have on farmers and ranchers?
    I am always reminded of a cost-benefit analysis that I feel 
should always be done when regulations are put in place.
    Mr. Wetjen. Congressman, I appreciate the question.
    There was a rulemaking on Regulation 1.35, which is the 
voice recordkeeping requirement that you mentioned. There was a 
cost-benefit type analysis done under the statute with respect 
to that rule, as it is done with every rule.
    I think it is fair to say that when crafting that rule, and 
there was an attempt to calibrate it in a way that it was 
focused on the categories of market participants where you are 
most likely to see manipulative or fraudulent activity. I think 
probably, Mr. Bishop, you and I would agree farmers do not 
normally come to mind.
    But we have heard some of these concerns raised as well at 
the agency, and for that reason, as well as because we are 
hearing some concerns about some of our other rulemakings that 
seem to impact the end user community, just this week I 
announced a roundtable on end user related issues, including 
1.35, including the special entity de minimis threshold for 
swap dealers, as well as this seven-part test for volumetric 
optionality, which is a long way of saying it is a test to 
figure out whether or not an instrument is a trade option or 
not.
    And so we are going to host a roundtable to talk through 
more detailed issues related to the rulemaking that you 
mentioned, and we will be doing that later this month, actually 
in early April.
    Mr. Bishop. Is there a likelihood that you might provide a 
little relief?
    Mr. Wetjen. Well, I think we are very much in fact finding 
mode. Again, if I could characterize it this way, and I am sure 
staff in the building at the CFTC might have more detail, but 
right now it is just noise, and so we need to get to the bottom 
of it, and that is the purpose of the roundtable.
    Mr. Aderholt. Mr. Yoder.
    Mr. Yoder. Thank you, Mr. Chairman.
    On the topic of transparency, you are the CFTC's rep. on 
the Financial Stability Oversight Council, FSOC, which was 
created by Dodd-Frank as one of the many regulations to create 
certainty and predictability in the markets and protect 
consumers, again. It has come under some criticism for being 
weak in terms of transparency, in terms of who is being 
regulated, why they are being regulated, how those things are 
arrived at.
    And I wonder if you can assure the committee that you will 
help do everything you can to increase the transparency on the 
FSOC so that American stakeholders, all of us, can ensure that 
we know what is going on and why it is happening.
    Mr. Wetjen. Mr. Congressman, I appreciate the question.
    I agree transparency is important. I will point out 
additionally that under Dodd-Frank there are a number of 
responsibilities given to the FSOC, as I am sure you are aware, 
including certain designations, systemic designations, of 
certain financial institutions, and there is a lot of 
sensitivity around that process for reasons I am sure you can 
imagine and are aware of.
    And so there has to be some balancing between the need for 
transparency, but also the need to make sure that some of the 
sensitive information that is discussed in the context of these 
FSOC meetings is kept close. But I am more than happy to 
continue talking with you about ways to improve transparency 
around FSOC where appropriate.
    Mr. Yoder. Well, I think anything we can do to ensure that 
Americans know why its government does what it does and what 
its rationale is and give voices to folks that do not normally 
have a voice in the process to ensure that when oversight is 
occurring, it is being done consistent with what congressional 
intent is, with what Americans want.
    I think my colleagues on both sides of the aisle would 
argue that we should always err on the side of transparency, 
absent, you know, national security questions or other things 
of classified nature. The idea that the deliberations of the 
FSOC would be less transparent or not be fully open to the 
public, I think, is concerning to a lot of us, and it weakens 
the effectiveness of those who would hope that we do a better 
job of oversight in the country.
    Finally, as you know, the CFTC's inter-affiliate rules do 
not just impact bank. They impact end users. They certainly 
have an effect on folks all across the country. As market 
participants work to come into compliance with new regulations, 
what will you do to ensure a smooth market transition?
    And will you work with market participants to provide 
relief when necessary?
    And, for example, the inter-affiliate exemption from 
clearing requirements will soon expire. How can the CFTC ensure 
that this does not have unintended consequences or market 
disruption?
    Mr. Wetjen. Well, you mentioned the inter-affiliate 
clearing exemption for clearing, and there is an actual 
Commission action that is outstanding that expires on March 
11th, as you mentioned. The extension of that has been 
circulated around the commission, and that will be released 
today.
    As far as orderly transition more generally, we have had to 
respond at the commission in a way over the last several years 
to ensure that very same thing that you mentioned, and there 
has been no actual relief that has been issued. There has been 
interpretive guidance issued and the like and we will continue 
to do that as necessary. In fact, we had to do it recently in 
the run-up to the effectiveness date of our trading mandate, 
and so some issues were brought to the Commission's attention 
regarding certain types of trades that are commonplace in the 
market, important for participants to continue doing, but there 
is not a state of readiness in the infrastructure for swaps to 
continue trading those on a regulated sub-platform. So we had 
to provide relief there.
    So that is just another example of what we needed to do, 
and I hope indicates the continued openness to doing that where 
necessary.
    Mr. Yoder. I appreciate it.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.
    The CFTC, unlike most other financial regulators, is 
dependent upon an annual appropriation from the Congress, and 
it has no reserve fund. I am not sure everyone understands 
this. Quite frankly, the other four main financial regulators 
have in some parts some self-funding mechanisms, and CFTC does 
not.
    When the government shut down last October, the equity 
markets were still overseen by the Security and Exchange 
Commission. Federal Reserve was open for business, and yet 
futures and most swap markets were left with essentially no cop 
on the beat.
    What happened or, rather, what activities were halted 
during the government shutdown?
    And the second part of that is would a fee-based system 
outside of the appropriations process add more certainty, if 
not more resources, to your work?
    Mr. Wetjen. Thank you, Congresswoman.
    The time of the shutdown was unfortunate. We were only able 
to have essential staff at the agency during that time.
    Ms. DeLauro. So you had to furlough?
    Mr. Wetjen. I suppose it is another way of putting it, you 
know, and so essential staff was present. So some of the key 
function areas of the agency had folks devoted to that during 
that time, but most of the agency, you know, was not in the 
office during the shutdown.
    So it was a little bit unfortunate, too, in the sense that 
we are also overseeing another key implementation date at the 
time. It was when the self-registrations became effective. So 
that created a number of different issues that had to be dealt 
with and made it especially difficult that we had so many staff 
away.
    Certainly I would think a user fee would----
    Ms. DeLauro. Let me just on the point you just made. What 
activities were halted during that shutdown?
    Mr. Wetjen. Well, I do not know. I would have to go back 
and get back to you, Congresswoman, because essential staff was 
allowed to come in, and so we probably had key people, at least 
the division directors, for example, there.
    Ms. DeLauro. I would like to, and if you can get back to me 
on that, I would like to know what interruptions there were in 
the course. You know, something had to give.
    Mr. Wetjen. Yes.
    Ms. DeLauro. Something had to give.
    Mr. Wetjen. There was not typical, normal operation, no.
    Ms. DeLauro. Okay. So please let me know what the result of 
that was.
    Mr. Wetjen. Sure.
    Ms. DeLauro. And I am sorry. I interrupted you on the fee.
    Mr. Wetjen. Yes, just on the fee, I mean, obviously that 
would be very, very important in terms of certainty, and it 
would give us a better ability I would think, too, to plan 
because you would be able to predict based on the calibration 
of the fee or however it is designed.
    Ms. DeLauro. As action tax, what?
    Mr. Wetjen. Yes, I think what the President's budget 
recommended was as user fee. So it is something like a 
transaction tax, but the details would have to be worked out 
later.
    Ms. DeLauro. Your colleague, Mr. Chilton, said at a 
President's request, ``This budget asks a strained and 
exhausted CFTC staff to do the impossible with too little. We 
work hard here. We have been granted needed regulatory tools to 
do the job. A magic wand, however, is not among those tools, 
and we are not magicians. The agency requires basic minimal 
support to accomplish our newly assigned tasks. Sadly, in this 
regard, the President's budget request fails.''
    In your testimony you stated that the CFTC is not able to 
complete its mission at current funding levels. Is the 
President's request enough for the CFTC to complete its 
mission?
    And then I have a follow-up question.
    Mr. Wetjen. I believe this request will put is at a level 
with respect to FTEs or staff to be able to execute on those 
three key core areas that I mentioned, enforcement, 
surveillance and examinations.
    Obviously, with even more resources we can do even more and 
do an even better job, I believe, but I think at the request 
level we would be on the pathway towards sustainability in 
terms of what we need to continue executing the way that I 
think the American public needs us to.
    Ms. DeLauro. Again, according to Commissioner Chilton, your 
limited resources have already led to slow investigations and 
the prioritization of enforcement cases. What is your 
investigations backlog?
    Are cases going uninvestigated?
    And are we setting ourselves up for the next MF Global or 
worse, another Great Recession, and that is about underfunded 
priorities? Can you?
    Mr. Wetjen. Yes. On the----
    Ms. DeLauro. What is the investigations backlog?
    Mr. Wetjen. I would have to get back with you on specifics, 
Congresswoman, but again, just speaking generally, the fewer 
resources we have means the fewer people we have, which means 
that there is just going to be a lessened ability to pursue 
referrals that come in from folks on the outside or the 
Whistleblower Office that Congressman Bishop mentioned or 
referrals that come in from our Division of Market Oversight, 
which surveils the markets, leverages technology to do that, 
but we are not going to be able to pursue all of those leads, 
if you will, and do the sort of investigation that we might 
otherwise like to do if we are constrained.
    Ms. DeLauro. Let me, if I can, I was just handed a piece of 
information, and my colleagues may be aware of this. The CFTC 
was unable to file charges--and that was my next question: what 
cases are going uninvestigated?--unable to file charges against 
certain individuals in the London Whale case because it did not 
have the funds to do that.
    This is from the head of Enforcement at CFTC in an 
interview with the Wall Street Journal last year. So I would 
also like to know what cases are going uninvestigated. That 
would, I think, bear some light for this committee to know what 
we are doing.
    I happen to believe that the budget is not enough. I heard 
your answer to that.
    Mr. Wetjen. Well, you and I agree on that. All right. Let 
me give you another example. There are two major cases underway 
right now. One is the MF Global bankruptcy proceeding as well 
as the MF Global enforcement actions, and to do an able job in 
those matters we need to have expert witnesses. That is another 
thing that has not been discussed, but it is critical to 
bringing a successful complex case, and again, if we do not 
have enough resources, we are not going to have the experts 
that our litigants need to be successful in court.
    Ms. DeLauro. Well, that leads me to what I had asked before 
about are we setting ourselves up for the next MF Global or 
worse, another Great Recession, as a result of shortchanging 
the resources to this regulatory agency which has been handed 
an exceptional amount of increased responsibility and with 
fewer funds than it needs in order to be able to carry out that 
mission.
    Could we look at another MF Global?
    Mr. Wetjen. It is certainly conceivable. Again, that goes 
back to the examinations function. To be confident that we are 
not going to see a situation like that again we need regular 
thorough examinations, not duplicative examinations, because 
the chairman's point is certainly right. There are other 
entities involved in this process, but just to do the sort of 
spot checking of the front line examiners, that is not being 
done now. It is not.
    And I was actually writing this in a conversation earlier 
this week. There was a time before, before these increased 
responsibilities, where you would see more of that, but again, 
we just do not have the staff among the examinations team to do 
that minimal level of examination.
    Ms. DeLauro. If I could just ask you to provide I would 
like to.
    Thank you, Mr. Chairman, for your indulgence.
    If you can, what I would like to know from you is at what 
level of funding are you able to carry out the regulatory 
function and mission that you have been tasked with. And I am 
not saying, you know, pie in the sky. I am asking you to let us 
know what this agency needs to be able to do its job and to be 
able to save maybe another $1.7 billion, help us to decrease 
the deficit, and just in terms of carrying out your operations.
    Thank you so much.
    Mr. Aderholt. Mr. Rooney.
    Mr. Rooney. Thank you, Mr. Chairman.
    Mr. Wetjen, in a Senate Banking Committee hearing last 
summer, former Chairman Gensler testified that the CFTC has 
clear authority to police the physical and derivative markets 
for aluminum. He also stated that the London Metals Exchange is 
operating under a no action letter agreement with the CFTC as a 
Foreign Board of Trade or FBOT. It is expected that the Foreign 
Board of Trade will maintain the same quality of market 
expected by American consumers and is typically exhibited in 
domestic exchanges regulated by the CFTC, such as the Chicago 
Mercantile Exchange and the International Commodity Exchange.
    Do you agree with those statements by your predecessor that 
the CFTC has the authority to regulate this FBOT?
    Mr. Wetjen. Thank you, Mr. Congressman.
    I will have to confirm this to be sure, but I am nearly 
certain that the LME has applied to become a Foreign Board of 
Trade. That is a relatively new rulemaking that was passed. In 
fact, it was one of the first rules I voted on. So it was 
finalized just a couple of years ago.
    But again, back to the overall discussion about resources 
at the agency, we are continuing to work through those 
applications, and that is another area that I have not focused 
on as much today during this testimony, but we also need staff 
to be reviewing these registration applications that are coming 
in from not on FBOTs, but other registration categories as 
well.
    Mr. Rooney. Okay. Well, the second part of the question is 
less about manpower and resources as opposed to your opinion on 
the matter when it comes to specifically an example. The Metro 
International Trade Services' waiting period for aluminum has 
grown from six weeks to 16 months since being purchased by 
Goldman Sachs. The company holds 1.5 million tons of aluminum, 
and this manmade backlog was created to drive up the commodity 
premium for profit, and it has cost American consumers, more 
than five billion over the last three years.
    Do you believe in your opinion that this type of behavior 
in the market violates the conditions of the no action letter 
that I referred to in the first question?
    Mr. Wetjen. Congressman, I have to get back to you because 
it would depend in part on the actual terms of the no action 
relief, but apart from that, as you alluded to in the earlier 
part of your question, we always have manipulation authority 
over the underlying commodity if it is something that is being 
used in interstate commerce. So we would have that authority in 
any event.
    I am not sure, and I can get back to you on this, but I am 
not sure exactly what the conditions and terms of the relief 
LME is operating under are, but again, I also think they have 
applied to become a Foreign Board of Trade, and there would be 
a number of obligations it would have to adhere to as a 
registered FBOT at the CFTC.
    But I can follow up and give you more details about how the 
no action relief they are under now actually operates.
    Mr. Rooney. Thank you, sir.
    Thank you, Mr. Chairman. I yield back.
    Mr. Aderholt. Mr. Farr.
    Mr. Farr. Did I hear you right that you oversee 400 
trillion?
    Mr. Wetjen. Yes. The notional value of the swap market 
fluctuates globally, but the last I checked I think it is 
somewhere between four and $500 trillion, yes. That is the 
outstanding notional value.
    Mr. Farr. And we are arguing over a budget increase of 65 
million?
    Ms. DeLauro. Yes.
    Mr. Farr. You know, I think your budget sucks, to put it in 
the street language. [Laughter.]
    And I am glad this hearing has all been recorded and taken 
down because if anything goes wrong, I want people to reflect 
back on March 6th, 2014 to the ag. appropriations hearing, just 
to reflect on, you know, that we asked you these questions 
about this responsibility.
    I think the Administration is underfunding you. I mean, you 
got 100 million less than what you asked for last year, and now 
you come back in and certainly needed that 100 million and are 
only asking for 65 million.
    I mean we are just sitting here trying to figure out how 
much 400 trillion is. Nobody in all of our bright staff back 
here can figure it all out. It is a lot of money, and you are 
not open seven days a week. So this is more than a trillion a 
day.
    Mr. Wetjen. It is a substantial marketplace, sir. There is 
no doubt it is huge.
    Mr. Farr. Well, what is the worst case scenario? What 
happens if you fail, if somebody gets by your surveillance, 
examinations or lack of enforcement?
    Mr. Wetjen. Well, I think maybe one way to answer it, Mr. 
Congressman, would be to just look back over the last six years 
or so, and we have seen what happens when you have major 
participants in the derivatives marketplace fail, and we have 
seen several examples of that, and it had a reverberating 
effect throughout the financial system.
    I am not suggesting that the only cause of those failures 
was the activities of those firms in the derivatives markets, 
but it gives you some sense of how bad things can get if these 
markets are not overseen properly. There is just no doubt.
    Mr. Farr. Has anybody figured out what that value is, how 
many trillions that is?
    Mr. Wetjen. I am sorry. Trillions?
    Mr. Farr. Of what the market, the negative, does that 
reach.
    Mr. Wetjen. I mean, what did we lose, eight million jobs, 
as a result of the financial crisis?
    Mr. Farr. Just in this country.
    Mr. Wetjen. Yes.
    Mr. Farr. I think we are getting the point across. I have 
been on this committee a long time, and I have to admit that 
not many people in Congress or this country understand what 
this trading commission does. You are the only one that is not 
self-funded, I understand. I mean, all of the others have a 
user fee.
    Mr. Wetjen. Yes.
    Mr. Farr. And you collected $1.7 billion in fines.
    Mr. Wetjen. Yes, the SEC has a bit of a hybrid system, but 
yes.
    Mr. Farr. And we cannot even give you another 65 million 
when you have collected a gazillion times more than you are 
asking for?
    I mean, I think I am just trying to plead with my committee 
members and our colleagues that this is really an important 
responsibility. You know, most of us here in Congress are just 
ordinary people, and we do not have a lot of background in 
financial markets and things like that, and I do not think most 
of us could discuss intelligently swaps and options and 
futures, and yet we have that responsibility in this committee.
    And I am just pleading with my colleagues that I do not 
think we want to play loosely with your budget, particularly 
when you are in a new realm after what we have gone through. 
You are the future. You know, we are supposed to fix things 
that are broken, and we learned that this was broken and it had 
a very serious, detrimental effect to the American economy, to 
the world economy, and now we are going to try to make sure it 
does not happen again.
    And we are--I cannot say that publicly--we are just kind of 
being a penny wise, pound foolish right here, and I hope that 
our committee will follow your request and fully fund you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you.
    Well, thank you, Mr. Chairman, for your testimony. Of 
course, I think good people can disagree on exactly how the 
funding and dire need of resources and look at this, but we 
have taken your testimony into consideration, and we certainly 
understand that you have an important responsibility and that 
what you do is no small thing, and so we do understand that.
    We want to provide the resources that you need, but at the 
same time we want to make sure that we are responsible to the 
taxpayers and find that medium and happy balance between the 
two.
    So, again, we appreciate your work at the Commodity Futures 
Trading Commission, you and all of your colleagues, and so we 
look forward to working with you on this as we continue through 
the hearing process and through the fiscal year 2015.
    Thank you.
    Mr. Wetjen. Thank you very much, Mr. Chairman. Thank you.
    Mr. Aderholt. The subcommittee stands adjourned.


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                                         Wednesday, March 26, 2014.

                 USDA RESEARCH, EDUCATION AND ECONOMICS

                               WITNESSES

DR. CATHERINE E. WOTEKI, UNDER SECRETARY, RESEARCH, EDUCATION AND 
    ECONOMICS
DR. CHAVONDA JACOBS-YOUNG, ADMINISTRATOR, AGRICULTURAL RESEARCH SERVICE
DR. SONNY RAMASWAMY, DIRECTOR, NATIONAL INSTITUTE OF FOOD AND 
    AGRICULTURE
DR. MARY BOHMAN, ADMINISTRATOR, ECONOMIC RESEARCH SERVICE
DR. CYNTHIA CLARK, ADMINISTRATOR, NATIONAL AGRICULTURAL STATISTICS 
    SERVICE
DR. DONALD K. BICE, ASSOCIATE DIRECTOR, OFFICE OF BUDGET AND PROGRAM 
    ANALYSIS, DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. Well, good morning. The subcommittee will 
come to order. Thank you for joining us this morning and to 
discuss the USDA's fiscal year 2015 budget request for its 
research agencies.
    As I have mentioned before, the subcommittee is focused on 
the themes of ensuring the proper use of funds through 
oversight, ensuring the appropriate level of regulation to 
protect producers and the public, and ensuring funding is 
targeted to vital programs. We will be reviewing the budget 
requests with this in mind this morning.
    I would like to welcome to the subcommittee Dr. Cathie 
Woteki, the Under Secretary for Research, Education, Economics, 
and chief scientist for the U.S. Department of Agriculture. 
Also joining today will be Dr. Cynthia Clark, Administrator of 
the National Agricultural Statistics Service; Dr. Mary Bohman, 
Administrator of the Economic Research Service; Dr. Chavonda 
Jacobs-Young, Administrator of the Agricultural Research 
Service; Dr. Sonny Ramaswamy, Director of the National 
Institute for Food and Agriculture; and Mr. Don Bice, Associate 
Director of Office of Budget and Program Analysis. Welcome, 
everybody.

                    Opening Statement--Mr. Aderholt

    USDA is proposing a $63 million increase over the fiscal 
year 2014 enacted level for its research programs. It does not 
include the additional $227 million for research that was 
included in the President's Opportunity, Growth, and Security 
Initiative. We cannot consider the initiative because it is 
outside the established budget cap for fiscal year 2015.
    The budget request includes a significant increase of 50--
sorry, of $75 million to create three new innovation 
institutes. We will explore this proposal in detail as this was 
not part of the discussion of the 2014 farm bill.
    There are also many other increases, decreases, 
consolidations and transfers in the budget proposal. The 
hearing today will allow the subcommittee to thoroughly examine 
them and ultimately help to determine whether USDA is 
effectively administering its programs, its activities, and 
meeting its broad mandate for agricultural research consistent 
with congressional intent.
    Before I conclude, I do want to recognize Dr. Clark, who 
recently announced her retirement from the National 
Agricultural Statistics Service. Thank you for sharing your 
expertise and time with USDA over the years, and also with the 
agricultural community.
    I also congratulate Dr. Jacobs-Young on her new appointment 
as Administrator of the Agricultural Research Service. We look 
forward to working with you. I enjoyed our visit yesterday when 
you came by the office, so thank you for doing that.
    I also would like to thank Dr. Bohman for the timely 
assistance that your staff has recently provided this 
subcommittee on research questions. Your staff knew right where 
to go to find--to help us find the right answers, so thank you, 
Dr. Bohman, for that.
    And finally, thank you, Dr. Ramaswamy, for your work to 
ensure that the National Institute of Food and Agriculture is 
sharing information with Congress, particularly in those as it 
relates to agriculture and food research initiatives which help 
us to make good funding decisions.
    This subcommittee and all of agriculture is fortunate to 
have all of you that are sitting at the table this morning as 
experts, as professionals, as leaders in the ag community 
serving not only the Department of Agriculture, but also the 
Nation as a whole, so thank you for that.
    At this point, I would like to recognize our ranking member 
for the subcommittee, Mr. Farr of California, and see if he has 
some opening remarks.

                      Opening Statement--Mr. Farr

    Mr. Farr. Thank you very much, Mr. Chairman, and I echo 
your accolades for the fine work that the committee has done. 
It is nice to see the diversity here of women before our 
committee in a Department that has been predominantly, 
throughout its history, a very male-oriented Department.
    I think this subject matter, I mean, it probably isn't 
controversial, so it doesn't attract a lot of people to come 
in, but it is--to me, our investment in research, America's 
investment in research, is probably the distinguishing factor 
of how America can stay ahead of the rest of the world in 
economic development.
    I chaired the economic development committee in the 
California State Legislature and had a chance meeting with all 
of the top industrial leaders in the State, and every one of 
them indicated that the one thing that the government could do 
that they couldn't do alone is the investment in research; also 
investment in education, because of all their workforce came 
out of education. And, frankly, it wasn't about how much taxes 
and regulations there were; it was about how do you also create 
communities of quality of life that attract an intellectual 
capital that they need to hire in their companies, and sort of 
these things that were external were beyond the companies' 
ability to do on their own. And David Packard was very 
instrumental in my life and certainly built a beautiful 
aquarium in Monterey, but his interest was always--even with 
that aquarium--was in research and in marine research and 
applying that research.
    So I find that this arm of the U.S. Department of 
Agriculture is key to America, and I am going to be asking some 
questions about why there isn't more investment, or why is 
there not an investment in one thing or another, or why there 
are cuts, because I think that if we are going to, in this 
competitive world--we are unique, Mr. Chairman, in that we have 
a lot of microclimates in this country that other countries 
don't have, particularly in the fresh vegetable area where you 
just can't grow these crops in other places of the world or 
even other places in the United States.
    You know, there is a lot of pressure on food safety, food 
security, inputs, pesticides, herbicides, sort of the negative 
things that can affect the environment and have downstream 
effect. So, if we are going to really find alternatives to 
things that we don't want to continue to use, and if we are 
going to find better ways of producing food in a more cost-
effective way, we are going to have to really strongly support 
our research service, so I appreciate the committee being here 
today and having this discussion. Thank you.
    Mr. Aderholt. Thank you, Mr. Farr.
    And, Dr. Woteki, again, welcome to the subcommittee. We 
will turn to you for your opening statements. Your full 
statements, of course, will be included in the record, so feel 
free to summarize any way that you would like, and then we will 
proceed on with the questions.
    So Dr. Woteki.

                     Opening Statement--Dr. Woteki

    Dr. Woteki. Well, thank you, Chairman Aderholt, and good 
morning to you, and to Ranking Member Farr, and to 
Representative Pingree. It is a real pleasure for my colleagues 
and me to appear before you to talk about our budget request 
for fiscal year 2015. And as you have noticed and noted 
already, we are appearing before you with a new addition as the 
Administrator of the Agricultural Research Service. Dr. 
Chavonda Jacobs-Young testifies for the first time in this 
capacity. And I also greatly appreciate your noting the many 
contributions that Dr. Clark has made. So we are looking 
forward, though, to finding an outstanding replacement for Dr. 
Clark.
    My colleagues and I have provided quite extensive written 
testimony for the record. We appreciate your putting that in, 
and I will summarize just at a very high level.
    In addition to preparing for this hearing, we have been 
spending a lot of time in implementing the Agricultural Act of 
2014, and our budget proposal includes additional reporting 
information for the National Institute of Food and Agriculture, 
for the Agricultural Research Service, and also for the 
Economic Research Service, which was required by section 7513.
    A second report on research accomplishments, 5-year 
projections of our research priorities, and also examining 
potential areas of the duplication with the private sector and 
other Federal agencies is in final clearance and will be 
submitted to you very promptly.
    The President's fiscal year 2015 budget proposal and the 
farm bill provide for new ways of partnering with university 
scientists, with educators, and with the private sector. This 
investment in science and education is an important contributor 
to rural economic growth, to the creation of new industries, 
and also for keeping U.S. agricultural productivity high.
    The return on the Federal investment in agricultural 
research is in the range of 20 to 1, and nearly 1 in 10 jobs in 
the U.S., about 16 million jobs total, is in the agriculture 
and food-related sectors.
    The farm value of production is estimated to be $400 
billion, and the research investment, as Congressman Farr 
noted, pays off in a lot of different ways, in an educated 
workforce, in patents and licensing agreements that lead to new 
agricultural products and consumer goods, and in the creation 
of new businesses.
    This past year the REE agencies accomplished a lot. ARS 
entered into more than 50 new Cooperative Research and 
Development Agreements (CRADAs) and continued working in 
another 250 active CRADAs, helping companies to solve problems 
through cooperative research. ARS annually files over 100 
patent applications and averages over 400 active licensing 
agreements.
    NASS completed the Census of Agriculture that is providing 
important information for informed policy decisions, and also 
program delivery.
    The Economic Research Service informed public and private 
decisions with 268 new research publications and updates to 
over 70 different data products.
    Work supported by the National Institute on Food and 
Agriculture at the University of Nebraska has resulted in the 
reduction in irrigation water used annually by 114 billion 
gallons. That is enough water to supply a city the size of 
Tucson, Arizona, for a year.
    And to meet the opportunities to grow our scientific 
workforce, NIFA also supported the education and training of 
over 1,100 doctoral and post doctoral students.
    So, the total request for the REE agencies is $2.9 billion. 
The request includes $75 million to establish three new 
innovation institutes focused on high priorities for research. 
The institutes are going to be virtual organizations, meaning 
no buildings will be built with these funds, but they will 
include multiple partners from academia, from the private 
sector, and from Federal labs. These will be public-private 
partnerships with the intention of leveraging private 
investment into them, and NIFA will be administering them as a 
competitive program.
    The institutes are going to focus on three high-priority 
areas: pollination and pollinator health; combating the 
development of pathogens that are resistant to antibiotics; and 
the third one is going to focus on building a national network 
for bioproducts manufacturing innovation.
    We are also committed in the budget to helping sister 
agencies in furthering food safety, and there is, within NIFA, 
a $2.5 million request to establish a program to provide food 
safety training and outreach to owners and operators of small 
farms, food processors, and fruit and vegetable vendors that 
are affected by the Food Safety Modernization Act of 2011.
    The President's 2015 budget request, as you have indicated, 
also includes a separate Opportunity, Growth, and Security 
Initiative, and within that there is $277 million targeted 
investments in this mission area. The initiative includes $197 
million for the Agricultural Research Service, and most of that 
would be dedicated to replacing the Southeast Poultry Disease 
Research Laboratory in Athens, Georgia, where very critical 
research on avian influenzas is conducted. And the initiative 
also includes $80 million to enhance NIFA's base formula and 
competitive programs at Hatch and Evans-Allen and AFRI.
    So, in conclusion, I believe that these initiatives that I 
have highlighted, as well as the high-priority budget increases 
and reallocations that are indicated in the agency testimony, 
are critical to sustaining and enhancing a well-rounded 
research and education portfolio.
    Mr. Chairman, we look forward to working with you as we 
continue together to support a world-class level of science and 
to increase the strength of U.S. agriculture. My colleagues and 
I are ready to answer any questions you might have.
    Mr. Aderholt. Okay. Thank you. Thank you, Dr. Woteki.
    [The information follows:]


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                     RESEARCH INFORMATION SECURITY

    Mr. Aderholt. Let me start out, and I will ask about 
something that we heard earlier this year. The inspector 
general issued a report on the effectiveness of your agency's 
lockup procedure to ensure the security of sensitive 
information on commodities.
    The inspector general, from my understanding, complimented 
the National Agricultural Statistics Service on a swift 
response, but tell the subcommittee why it took an audit to 
bring these issues to light.
    Dr. Woteki. Well, Mr. Aderholt, we take our security and 
our lockup procedures very, very seriously, and the National Ag 
Statistics Service has, over the years, improved their 
approaches towards security. I would like to ask Dr. Clark to 
tell you specifically the steps that they have undertaken in 
response to this recent audit.
    Mr. Aderholt. Okay.
    Dr. Clark. We take our security very, very seriously, but 
you need to understand that we are working in an environment 
where technology is constantly changing, and in order to meet 
the release time, which is to the minute, to the second even, 
we need to be on top of all of our security procedures.
    We did have an incident several years ago where we had a 
switch failure, which caused an early media release and since 
then we have been doing a number of different things to enhance 
our security. We have, most recently, installed a scanning 
procedure for people going in to pick up iPhones, or any 
computers, or any other equipment. We have cameras at the 
entrance of our lockup procedure. We have enhanced the 
procedures in our area where the media is located to ensure 
that no release can happen except at the time when it is 
scheduled.
    The audit asks for us to have an external review on an 
annual basis, and we have had several reviews in the last year; 
and also to have an internal review committee that is 
periodically looking at our security procedures. So this is 
what we are planning to do, and we will be keeping on top of 
it, and we also work with other statistical agencies. In fact, 
our procedures are probably the most secure of all of the 
agencies.
    Mr. Aderholt. Now, I know that the inspector general's 
report noted that management decisions have reached--been 
reached some 14 of 17 recommendations?
    Dr. Clark. Yes.
    Mr. Aderholt. And what is the status of those remaining?
    Dr. Clark. Most of them are all in progress or--and 
completed. We provided dates at which they would be completed. 
They would all be completed by October of 2014, and they are 
all on the way.
    Mr. Aderholt. So you feel confident that the problems found 
by the inspector general have been addressed at this point?
    Dr. Clark. Yes.
    Mr. Aderholt. And what would be the result of a leak of 
this sensitive data?
    Dr. Clark. Well, it is market-sensitive data, and you have 
trading that goes on within seconds of the time of the release, 
and the media--we have allowed media to have access to our 
lockup procedure. They provide reports. We provide data that 
goes out exactly at the time of release. But if you have a 
breach of security, then it affects the markets.

                         INNOVATION INSTITUTES

    Mr. Aderholt. Okay. The budget proposes $75 million in new 
funding to create three new innovative institutes. I understand 
this proposal is based on the recommendation from the 
President's Council of Advisors on Science and Technology. Just 
talk a little bit about the innovation institutes and their 
connection with the 2014 farm bill. That was not in the farm 
bill; is that correct?
    Dr. Woteki. That is correct.
    Mr. Aderholt. And----
    Mr. Farr. Food Safety Modernization Act probably.
    Mr. Aderholt. Were they proposed by the administration, and 
have they been debated at Congress at all at this point?
    Dr. Woteki. Well, I think we are having that discussion 
right now as part of our budget request. The innovation 
institutes were recommended to the President by his Council of 
Advisors on Science and Technology, and they did an in-depth 
study of the challenges that are facing American agriculture. 
And we are asking the question, is our research infrastructure 
up to those challenges, and if not, what are the things that we 
need to be doing differently? And one of their recommendations 
was to establish what they called a new innovation 
infrastructure that would take us into closer working 
relationships with the private sector and really focusing our 
efforts on some of the big problems and big challenges.
    So the innovation institutes are essentially a reflection 
of that recommendation to the President. The advisors had 
recommended the establishment of six innovation institutes, 
each one to be funded at the level of $25 million a year for a 
period of 5 years minimum, and that these innovation institutes 
should be public-private partnerships so that they would be--
the research agenda would be determined in close consultation 
with the private-sector contributors to the innovation 
institutes.
    Mr. Aderholt. My time is up.
    Mr. Farr.

                          FOOD SAFETY OUTREACH

    Mr. Farr. Thank you very much, Mr. Chair.
    I do think we also have to consider that the responsibility 
for this agency and our other FDA agencies are newly mandated 
under the Food Safety Modernization Act, and one of the 
questions I have is that one of the new programs that you 
mentioned under the extension of the food safety outreach is 
the Food Safety Outreach Program, which is a proposal to work 
with small and medium-sized farms.
    I mean, they think this law is a big challenge to have to 
meet. They don't want to be priced out of the market. And I 
appreciate the fact that you are going to try to reach out to 
them to get them on board, but why just 2\1/2\ million bucks? 
That is for the whole country. That doesn't look like it can 
reach about anybody. What do you plan to do with that?
    Dr. Woteki. Well, we have had ongoing discussions with the 
Food and Drug Administration about what is the role that our 
intramural programs can play in helping them establish the 
evidence base for their programs, and also, more recently, what 
is the role that the extramural programs that are administered 
by NIFA can play. Out of those consultations has come this 
proposal for $2.5 million, and I would like to ask Dr. 
Ramaswamy to talk with you in more detail about the content of 
that.
    Mr. Farr. Is this more to deal with the coordination of all 
these programs, or it really is to use the money for outreach 
to small farmers?
    Dr. Ramaswamy. So, Congressman Farr, thank you so much, and 
thank you so much, Mr. Chairman, for having us here this 
morning. And indeed, you are correct. The intent is to use 
these funds that we are requesting to develop educational 
information in the form of outreach and extension for the small 
producers and small processors, and we will partner with FDA 
very closely in working with them, and also with the other 
agencies within USDA and outside of USDA as well to make sure 
that we are getting all the information put together to create 
this information.
    Mr. Farr. Well, I am little concerned that it might be just 
Federal one size fits all. Remember, our States and local 
governments have a lot of regulation on farming practices, and 
California's standards are much higher than anything the 
Federal Government has, pesticide regulation, what you can and 
cannot use, setbacks. So I would hope that you might integrate 
these on a sort of regional basis, bringing in what the local 
laws also require.
    Dr. Ramaswamy. Indeed. So what we intend doing is to work 
through the Cooperative Extension Services; they are going to 
be very much involved in this.
    Mr. Farr. Okay.
    Dr. Ramaswamy. And so as you currently pointed out, each 
State is a little bit different in terms of the rules and 
regulations and laws that they have, and so we would be working 
through that network and making sure that we are developing the 
knowledge and creating the delivery mechanisms as well.
    Mr. Farr. I appreciate that.
    Dr. Bohman, I was very interested and intrigued but to see 
the following statement near the end of your testimony: Quote, 
``ERS will examine the effects of FSMA across the fresh produce 
supply chain, including the guidance issued by FDA as it 
relates to the development of a risk-based food safety 
system.''
    Can you discuss how you are going to--is this research or 
how are we going to measure FDA's guidance, because there are 
some concerns as to the practicality of them.
    Dr. Bohman. Well, thank you very much.
    As you mentioned, the Economic Research Service has a 
group, a team that works on food safety issues that is 
collaborating with our experts on horticulture markets, and we 
are coordinating what we are doing with the USDA food safety 
group and with the economists at FDA.
    I think our strength is that we can bring the realities of 
the markets and our economic expertise to these food safety 
issues. So we have been providing our expertise in terms of the 
internal rulemaking process, and we are developing research 
that can look at what data we would need to understand how the 
rules are impacting the industry, you know, what is working, 
what is not working, and start to build that research now as 
before and during the implementation of the Food Safety 
Modernization Act.
    Mr. Farr. I think it would be very important to share that 
lessons learned with Congress, because I am afraid that what 
Members will do is hear from their local growers and then come 
in here and try to piecemeal the amendment to the Food Safety 
Act, and who knows what politics will be about? So, if you are 
ahead of the curve, and you are telling us that we can fix 
these things or you can fix them administratively would really 
be helpful to us.
    Dr. Bohman. Well, thank you. That is--our plan is to make 
all our research results public, and we are happy to share our 
plans with you as they evolve.
    Mr. Farr. My time is up. I will have to ask next round. I 
want to go into the horticulture issue.
    Mr. Aderholt. Mr. Yoder.
    Mr. Yoder. Thank you, Mr. Chairman. And I appreciate all of 
your testimony today.
    Dr. Ramaswamy, it is good to see a fellow Kansan or K 
State----
    Dr. Ramaswamy. Yes, sir.
    Mr. Yoder [continuing]. Background. We all had a rough 
weekend in St. Louis.
    Dr. Ramaswamy. Indeed. Indeed. Sorry about KU losing that.
    Mr. Yoder. Sorry about K State losing.
    Dr. Ramaswamy. What a bummer as well.
    Mr. Yoder. We thought our friends in Kentucky were our 
friends, but apparently they took out K State and Wichita State 
and----
    Dr. Ramaswamy. Indeed.

                    WHEAT AND BARLEY SCAB INITIATIVE

    Mr. Yoder [continuing]. So a tough weekend for all of us. 
But on to more important issues.
    Certainly as a Kansan and someone who grew up on a farm and 
had a great appreciation for wheat, Kansas is the greatest 
wheat-producing State in the country, last year I expressed 
some concern over the administration's proposal to eliminate 
the U.S. Wheat and Barley Scab Initiative Research Project that 
funds a substantial portion of research at K State.
    What does the future of this program look like? I believe 
there is over 5 million recommended in the--I think in the 
budget. What does the future look like in terms of the 
administration's support for this program, and what can I tell 
farmers back home regarding our ability to resolve some of 
these concerns regarding wheat and barley scab?
    Dr. Ramaswamy. So--go ahead.
    Dr. Woteki. Well, I am happy actually to report to you, Mr. 
Yoder, that we have been able to restore funding for the Wheat 
and Barley Scab Initiative back to the 2011 levels in the 2014 
budget. Then there really has been some very significant 
progress that has been made over the last several years coming 
out of what has been an extended research effort. It has 
focused on breeding, and there has been an increase in the 
varieties with resistance for this particular disease in wheat, 
as well as one barley variety with partial resistance that was 
released by ARS in 2011.
    There is better information made available to farmers so 
that--coming out of the surveillance and monitoring activities, 
so that when they do apply fungicides, they can do it with a 
much better timing and help to head off an outbreak of scab. 
And that alert system goes directly to the farmer through an 
email or a text message.
    So, we are really pleased that with the 2014 appropriation, 
that we have been able to restore these funds.
    Mr. Yoder. Well, I think that is welcome news, and I 
appreciate the message that sends, I think, to Kansas wheat 
farmers.
    In terms of laboratories, what are the ARS's plans for 
upgrading regional small grains genotyping laboratories to 
next-generation genotype technology?
    Dr. Woteki. Let me ask Dr. Jacobs-Young if she is prepared 
to answer that question.
    Dr. Jacobs-Young. Thank you for your question, Mr. Yoder.
    So as you can see in the fiscal year 2015 proposal, we have 
$155 million requested for a facility in Athens. Along with 
that facility, there are many other facilities that we have 
listed on our Capital Investment Strategy where we need to make 
significant investments to modernize those facilities. We are 
definitely supportive of the small grains facility, and we have 
been working to look at ways to use creative mechanisms to 
invest in those facilities.
    I wanted to add on the wheat, we are also looking at the 
testing for wheat and trying to bring those up to date. We have 
a test that we use in the wheat quality laboratory that is 80 
years old, and I think it is called the ``falling number,'' and 
we feel there is a better way to do that, and so we are also 
looking at how we can--how we can bring that into the 20th--at 
least 21st century.

                              FOOD SURVEY

    Mr. Yoder. Well, I think certainly our efforts to modernize 
all this makes a big difference and, I think, speaks to how, 
with technology, we can create efficiencies and opportunities 
all across the country.
    I had another question regarding the National Household 
Food Acquisition and Purchase Survey. I noticed that that was 
in the proposed budget. We have had some issues with other 
surveys in the Federal Government being mandatory, being 
compulsory, and having penalties and fines. Could you explain 
how this survey works; and is it voluntary, mandatory; and who 
would be being surveyed; and how it is effectuated?
    Dr. Bohman. Yes. We are reporting for fiscal year 2015 that 
we will be publishing results from this survey----
    Mr. Yoder. Okay.
    Dr. Bohman [continuing]. Which was conducted in 2012. And 
it was a voluntary survey that ERS and the Food and Nutrition 
Service funded and was carried out by Mathematica Policy 
Institute. And the goal is to provide a comprehensive overview 
of how people acquire food, not just what they buy in the 
grocery stores, what they eat out, what food may be given to 
them or that they acquire from a food pantry. And so we did a 
week-long diary with people who agreed to do this voluntarily, 
and we had made sure that we included a large number of low-
income respondents so we can look at questions that are in the 
public domain about what people eat who are part of the 
Supplemental Nutrition Assistance Program.
    So we expect to have this data. It is in the final clearing 
stages by the end of May, and we will be publishing reports 
this year and into next year using that information.
    Mr. Yoder. Look forward to seeing the results.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.

                             PLANT BREEDING

    Ms. Pingree. Thank you very much, Mr. Chair.
    Thank you all for being here today and for all your hard 
work on behalf of consumers and farmers.
    I am going to start with a question around plant and seed 
breeding. So, Dr. Woteki, I think probably this is for you, but 
I am happy to have anyone talk about it.
    In the administration's fiscal year 2015 budget, the USDA 
proposes a new initiative on genetic improvement in 
translational breeding within the Agricultural Research 
Service. One of the target areas of funding is classical 
breeding, among other research areas.
    I have a perspective representing a lot of farmers, having 
a small farm myself, and like a lot of other farmers, I am 
personally very concerned about farmers' dwindling options for 
locally adapted and publicly available seed varieties and 
animal breeds. I think that for agriculture to be successful in 
the long term, particularly given current trends, our farmers 
need access to seeds that are adapted to their local climate, 
pest conditions, and growing systems.
    You also know that in order to be effective, the adaptation 
process needs to be ongoing, because climatic conditions and 
pest challenges are also constantly changing, and it seems like 
they are changing more rapidly now than they ever have before. 
So farmers increasingly need seeds that are bred in their local 
conditions and cropping systems. They need, in my opinion, 
seeds that are classically bred and available for public use.
    So just to sort of continue with this thought, there has 
been extensive dialogue between concerned farmers like myself 
and the Administration regarding the implementation of the 2008 
Farm Bill directive to make conventional plant and animal 
breeding a priority within the Competitive Research Program. So 
I appreciate that the Administration recognizes that this is a 
concern and has put in stronger language in the Fiscal Year 
2014 request for applications within the Agriculture and Food 
Research Initiative.
    So in spite of these small signs from the Administration 
and all the steps that you have taken over the last few years, 
it is clear, I think, that more needs to be done not only to 
ensure our Nation's future food security, but also to ensure 
that today's farmers, especially some of the young and 
beginning farmers engaging in the new opportunities out there 
for local and organic markets, have access to the highest-
quality seeds that are bred for their types of farming 
conditions.
    We are losing the pipeline of future plant breeders who 
will be essential in solving the pest and disease problems that 
the next generation of farmers face, and, again, especially 
concerning some of our climatic uncertainties.
    So, my question. I think there are a lot of grave concerns 
out there from all kinds of farmers. Can you talk a little bit 
about the USDA's efforts to reverse the trend of declining seed 
varieties, and how the new ARS initiative that you are 
proposing will help solve some of these problems or work 
towards it?
    Dr. Woteki. Certainly. And I very much hear and understand 
your request. I also want to note that not only your voice, but 
many others have been approaching us, making this plea for a 
greater emphasis on classical breeding techniques.
    In response we have done a couple of things. We held a 
workshop last year. We have actually posted the results of 
that. It was a listening session where there was a really broad 
spectrum of individuals and organizations that came in and 
spent a day talking with us about what they viewed as being the 
needs across the spectrum in plant breeding. But there were a 
lot of voices expressing concern about the diminishing--
apparent diminishing interest on the part of our programs in 
classical breeding.
    We don't feel that that perception is necessarily correct. 
We feel that in our programs, both the intramural ones and the 
extramural ones, that we are providing opportunities for 
researchers to put in proposals for funding in the--if they are 
in the extramural community, in the universities, to be funded 
by the National Institute of Food and Agriculture, and that 
also within the ARS programs, that there is a wide variety of 
breeding approaches that are taken from the classical through 
to the latest techniques in genetic--using the new genetic 
technologies.
    So, we have established, though, as a follow-up to this 
listening session, a working group within the Department that 
is focused on plant breeding. And I have been meeting with that 
working group in recent weeks and have asked them to develop a 
roadmap on breeding approaches for us to be following.
    So we hear the concerns, and we have taken these very 
positive steps of the listening sessions, and the internal 
working group, and now this roadmap. And in the meantime we 
also share your concerns about education and training, and the 
translational breeding initiative in this budget request is a 
key step for ARS, the in-house agency. In addition, NIFA, 
through the capacity funding that it provides to the State 
agricultural experiment stations that is in turn matched by the 
States is enormously important for doing exactly that local 
adaption breeding at the land-grant university that is so 
important in the State for farmers within that State. So that 
is another mechanism that we have of supporting classical 
efforts that are done really to come up with that locally 
adapted variety.
    Mr. Aderholt. Okay. Mr. Rooney.
    Ms. Pingree. I am out of time, but I will follow up later. 
Thank you.

                             CITRUS DISEASE

    Mr. Rooney. Thank you, Mr. Chairman. I want to thank my 
friend from Kansas for--I understand, before I came in, he was 
singing the praises of the Florida Gators, and rightfully so, 
so I appreciate that. It takes a big man to admit greatness.
    I just want to say, before I get into my questions, if I 
could, a couple of thank yous to the members that are sitting 
on this panel on behalf of the Florida citrus industry for your 
efforts in combating citrus greening and canker. Obviously, you 
all know the situation in my home State and now the situation 
for the rest of the country, so hopefully the efforts that you 
are undertaking right now will help save our industry.
    I am happy to support your work here in Congress. As you 
know, the lines of communication with my office are open, with 
my staff, specifically the one back here with the orange shirt 
on. We are always in character.
    So I also want to say a special thank you to Dr. Jacobs-
Young for your efforts in hiring a new director in the ARS Fort 
Pierce lab. I have been down there numerous times, and I know 
how important that work is, and I really feel like, based on my 
visits there, that they are close to getting what they need. So 
this transition is important, so I appreciate all that you have 
done in getting the most qualified and best person to continue 
on, especially at this pivotal time.
    I would like to ask a couple of quick questions, if I 
could, to Dr. Ramaswamy about the Emergency Citrus Disease, 
Research and Extension Program. As you know, in the 2014 farm 
bill, the intent of the legislation is that research projects 
funded under this authority should be prioritized based on the 
critical threat of citrus greening, and to the maximum extent 
practical, the agencies should adhere to the recommendations of 
the Citrus Disease Subcommittee. And the farm bill required the 
establishment of the Citrus Subcommittee within 45 days.
    Can you let us know where we are at with that, and then 
once appointed, what is the timeline moving forward? Once 
recommendations by that committee have been provided, do you 
consider those proposals simultaneously, or do you wait until 
after the proposals have been made?
    Dr. Ramaswamy. Thank you very much, Congressman Rooney, and 
thank you for your support as well of the overall agricultural 
research and education enterprise as well.
    Very specifically, in response to your question, we are 
indeed in the process of soliciting nominations. So there is 
the Citrus Disease Subcommittee that is part of the NAREEE 
Advisory Board's specialty crops research--or specialty crops 
committee. That committee, we have already got six members that 
are from last year, and we are in the process of--we are 
seeking nominations for three more. And that request was sent 
out to the community at large last week, and our intent is once 
the nominations come in to the Secretary, that they will be 
vetted, and then by the 25th of April, we hope to have that.
    By the 1st of May we hope--our staff hopes to have a 
consultation with that subcommittee and get input on the 
priorities that are needed. And then our hope is to incorporate 
that and then release a request for application--as a 
supplement to the Specialty Crops Research Initiative request 
for applications that has already gone out. If so, it will come 
out as a supplement. If everything falls in place, we hope it 
happens on the 15th of May, and then beyond that, you know, it 
is a two-step process.
    We have to make sure that the work that is to be undertaken 
is relevant to the industry first. And then once that is done, 
the proposal will be recommended for a full-blown scientific 
merit review. That is the second step. And once that is done, 
the decision is going to be made to make the funding available 
to the individuals that are involved in research and extension.
    Mr. Rooney. Okay. And as you know, the Citrus Disease 
Research Program received $25 million in mandatory funding for 
Fiscal Year 2014, and this is good news. For our industry there 
is a considerable amount of ongoing research related to citrus 
greening that has been supported by this program.
    Can you explain how your agency can ensure that the funds 
are effectively spent in a relatively short period of time 
while avoiding duplicative research? The reason I ask this is 
because when I was down in the district, after we got the good 
news that this was all going to happen, obviously one of the 
biggest concerns of the growers is, you know, time is of the 
essence. It is good that we have got this funding, but we are 
kind of at the moment of truth here with regard to where we go 
in the future of growing oranges in Florida. So, if you could 
help reassure that it is going to be as quickly as possible.
    Dr. Ramaswamy. You have my word on it, Congressman.
    Mr. Rooney. Okay. Thank you very much.
    With that, Mr. Chairman, I yield back.
    Mr. Aderholt. Mr. Bishop.

                 SOUTHEAST POULTRY RESEARCH LABORATORY

    Mr. Bishop. Thank you very much.
    Let me welcome all of our panelists this morning and thank 
you collectively for what you do and what your agencies do to 
assure that American agriculture is the highest quality, the 
safest, the most abundant and most economical fruit and fiber 
anywhere in the world, and it is because of what you do that 
makes us that way.
    I want to go back to the Southeast Poultry Research 
Laboratory, Ms. Jacobs--Dr. Jacobs-Young. Last year, of course, 
as was indicated earlier, you proposed to invest $155 million 
in the new Southeast Poultry Research Laboratory in Athens, 
which was the Department's number one priority for the agency 
last year.
    As you may know, I am the cochair of the Congressional 
Chicken Caucus. Georgia is the number one producer and exporter 
of poultry products in the Nation, and, of course, the chicken 
industry as a whole is an integral part of our national 
economy. And according to the Chicken Council and the U.S. 
Poultry and Egg Association, the poultry industry directly and 
indirectly provided over a million jobs, $47 billion in wages, 
and $197.5 billion in economic activity, and $17.2 billion in 
government revenue.
    The construction of the new lab is critical, because the 
lab provides solutions to national and international exotic, 
emerging, and endemic poultry disease problems that impact 
poultry as well as human health. This year you put the research 
lab into Opportunity, Growth and Security Initiative, OGS, for 
a total of $197 million, which included five additional 
projects in addition to the SEPRL.
    What is the current status of the Southeastern Poultry Lab, 
how much was obligated for the lab in the current fiscal year 
2014, and can you share with us your thinking behind the OGS 
Initiative? And the final part of that question is in the event 
that Congress should not choose to fund the OGS Initiative, 
what will happen to the projects that were included in that OGS 
Initiative, particularly the research lab in Athens?
    Dr. Jacobs-Young. So, Congressman Bishop, thank you for 
that question, and you are absolutely correct. The poultry lab 
was our number one priority last fiscal year, and it is our 
number one priority this fiscal year. And we did not receive 
funding to begin the project, and so there was no money 
obligated to modernize that facility.
    SEPRL is 33 years old. It has been built with a technology 
that was very innovative at that time. It is no longer 
innovative. SEPRL is separated into many different buildings, 
so the chickens are housed in one building, and we do the 
laboratory work in another. And so we have duplicative systems 
to keep the avian influenzas, the BS3--BSL3 laboratories for 
its containment, so it is very important. We can do energy 
conservation at the least if we were to consolidate all of our 
efforts into one building.
    There is also a desire to consolidate the Avian Disease and 
Oncology Laboratory from Michigan into that facility, so we 
will fortify our work in this very important area and also 
build critical mass.
    We only need to look at the news to see how avian influenza 
has impacted the global economy, and our scientists have 
traveled to help our sister countries be able to deal with this 
very significant issue. If we don't have this modernized 
facility, and we are one of the world's largest producers of 
poultry, then I am--I think we lose a step in our ability to be 
able to respond to issues that could be significant, 
significant to our industry.
    Dr. Woteki. I might note also, Mr. Bishop, that this 
laboratory was indicated as being the highest priority for 
replacement within the ARS infrastructure. In the report that 
Congress requested that we develop 2 years ago assessing the 
research infrastructure and providing a capital investment plan 
for improving that infrastructure, our assessment is to 
maintain and improve our laboratory infrastructure within ARS, 
we will need approximately $150 million a year. And this 
particular laboratory, because it is so critical in research on 
preventing avian influenzas, in understanding them so that we 
can develop countermeasures for them, because it requires 
containment to both--to protect our flocks as well as the 
people that are working with these infectious viruses, that 
this--this is our highest priority.
    We put it in the new initiative that the President has in--
called the OGSI because the budget proposal that we brought 
forward is within the agreement levels, for 2014 and 2015. This 
high-priority additional research infrastructure and research 
projects are being highlighted in the budget because, with 
these investments, we can do more, and we can do it better, and 
we can do it safely within this kind of new laboratory.
    So the whole intent in bringing forward the OGSI is to also 
demonstrate that for this investment, for agriculture's future, 
you are going to get a return.
    Mr. Aderholt. Mr. Valadao.
    Mr. Valadao. Thank you, Mr. Chair.
    Doctor--and if I pronounce this incorrect, I apologize--
Woteki?
    Dr. Woteki. Exactly right.

              FOUNDATION FOR FOOD AND AGRICULTURE RESEARCH

    Mr. Valadao. Perfect.
    The farm bill created the Foundation for Food and 
Agriculture Research that will match private and nonprofit 
sectors with public funds. Have you outlined your research 
priorities for this project yet?
    Dr. Woteki. Well, we were really pleased, Congressman, that 
the Foundation for Food and Agriculture Research was authorized 
in the farm bill because it provides us with a new way of 
working with partners outside the Federal Government and 
outside the historic partnership that we have with the land-
grant universities.
    The legislation itself has a lot of attributes that are 
very similar to the foundation for the National Institutes of 
Health, and also a foundation for the Food and Drug 
Administration, and a number of other similar types of 
foundations that have been established in recent years. So we 
have taken the opportunity to meet with the executive directors 
and the general counsels of those foundations to learn more 
about how they operate and also to get some advice from them 
about how to go about establishing this new entity.
    Mr. Valadao. I am sorry, the priorities, is what I was 
getting at. Just any idea where the research is going to be--
the money is going to be spent on what type of research?
    Dr. Woteki. Well, that is actually going to be coming from 
the external world.
    Mr. Valadao. Okay.
    Dr. Woteki. But I think the guideposts are established in 
the legislation saying that this is work that is supposed to 
complement the already funded programs that we have.
    You know, the ideas are going to be coming from external. 
They are going to be coming from companies, they are going to 
be coming from organizations, and they are going to be coming 
to the foundation and saying, we would like to partner with you 
and with the Federal partners in USDA in this project, and then 
the board of directors is going to be deciding whether they are 
going to take this on or not.

                     U.S. AGRICULTURE PRODUCTIVITY

    Mr. Valadao. Okay. You mention in your testimony that the 
U.S. agriculture productivity is now growing more slowly than 
both China and Brazil, and that you believe it is due to the 
amount of money both these countries spend on research.
    Do you think that our overburdened regulation such as rules 
treating milk spills like oil spills, obviously the release of 
personal information of some of the farmers that happened not 
too long ago, or the changing of the definition of waters of 
the U.S. without going through Congress were also to blame? Or 
even things as simple as the marketplace going towards a more 
organic-type farm where production is obviously less per acre 
or per cow. Or whatever type of product. There is a difference 
in production, but what do you attribute this more to than 
anything?
    Dr. Woteki. Yeah. I think that the increase in agricultural 
productivity that I am referring to is being measured before 
the marketplace in which the regulation that you are referring 
to would be implemented. The kind of investment that is made in 
agricultural science is leading the farmers to new ways, new 
seeds, new ways of production that are increasing yield per 
acre, which is the way really that we are measuring that kind 
of agricultural productivity.

                          RESEARCH INFORMATION

    Mr. Valadao. Through science, we have seen many 
breakthroughs in agriculture that improve crop yields, dairy 
productivity, and feed-to-grain ratios. An ARS initiative 
outlined in your budget directs 26 million to focus on crop and 
livestock genetic improvements. However, despite our success 
moving forward, many still fight the outcomes of the very 
research to improve feed efficiency, resist pesticides, or weed 
growth, to name a few.
    What ideas would you have to disseminate the information to 
the public so that the American people can continue to trust 
our farmers and ranchers to deliver safe and healthy product?
    Dr. Woteki. Well, I think everybody here with me, the 
administrators of our agencies, agree with the sentiment in 
your question that we need better science education in the 
U.S., and we also need a better part--a bigger part of our 
curriculum devoted to providing information both through school 
curricula and through more informal routes of education about 
where your food comes from.
    Mr. Valadao. Well, one of the things that I see, because I 
am a dairy farmer myself, and I do farm a little bit of row 
crops as well, we see a lot of product come out onto the 
marketplace, and we struggle to get either released or approved 
by whatever agency would have to do so. And then once it is 
approved, then you see some of the agencies even come out and 
not be as supportive publicly as the farmers would appreciate 
or ask the agencies to be so.
    I mean, genetics on cows, obviously that is probably an 
easy one because you breed just like you do any other animal; 
you look for superior traits in an animal, and you breed the 
animal alongside of that. But when it comes in to row crops, if 
you are looking for certain types of crops to grow that are 
more drought tolerant, whatever it may be, we do struggle as a 
farmer getting our word out, and it would be helpful, I guess, 
if the agencies would help a little bit with the information on 
how safe these products are and how the consumer shouldn't be 
concerned and be able to purchase the product. So thank you.
    Dr. Woteki. Yeah. Well, we also understand that sentiment. 
We had an opportunity yesterday--it was the 100th anniversary 
of Norman Borlaug's birth--to hold a symposium in his honor 
yesterday afternoon. We also participated in the ceremony with 
the unveiling of his statue in the Rotunda. Mr. Latham was one 
of the speakers at the program.
    But in the afternoon symposium, we had a number of 
students, high school students, college students, who were 
speaking, and they actually were addressing this question as 
well about how do we provide more information to the public so 
that there will be that level of trust in their food, and where 
it comes from, and in the safety of that food.
    Mr. Valadao. Thank you, Mr. Chairman.
    Dr. Woteki. And they very much were emphasizing the 
importance of it is for everybody who is involved in 
agriculture to be conveying that message.
    Mr. Aderholt. We need to go on with Mr. Fortenberry.

                           FARM WORKER WAGES

    Mr. Fortenberry. Thank you, Mr. Chairman.
    Good morning, everyone. Good afternoon.
    I want to start right away into a question regarding what 
is called the adverse effect wage rate. I don't know what 
``adverse effect'' means, but, nonetheless, it is adversely 
affectingly us in Nebraska. The adverse effect wage rate is 
$13.41, the highest in the country. The reason this is a 
difficulty--and I will give you a story.
    Two small farmers came to see me recently. They are 
specialty crop farmers, and they use the H-2A visa program for 
help. They are trying to do this legally, in the right way, 
and, yet, they are being effectively penalized by this peculiar 
determination by the Department that the adverse effect wage 
rate is $13.41.
    Now, right next door in Iowa it is $12.22. Next door in 
Minnesota it is $11.49. In Colorado, it is $10.89. In 
California, it is $11. That means that they cannot compete 
based upon an artificial statistic that is coming out of the 
Department in conjunction with the Department of Labor.
    So I want to know what is the methodology for this. I want 
you to know the impacts that this is having. I would like to 
see this reexamined as quickly as possible because this is not 
a matter of taking months and months to unpack something that 
is very deep in the Department.
    It is affecting farmers on the ground right now who are 
trying to do exactly what the Department is asking them to do 
by developing traditional means of production, creating local 
food markets, entering into a field of, again, agriculture that 
has diminished over the years, but now is reemerging. That is 
exactly what we have been trying to do in agriculture to 
augment the ag family.
    But it seems to me that we are artificially penalizing them 
by this very high wage rate and creating an unlevel playing 
field for them. I don't know. I surmise that having North 
Dakota at the same rate has to do with something that is 
related to oil field worker salaries.
    So that has created an artificial demand in the northern 
part of this, again, artificial grouping of states, an 
artificial demand for labor that is completely inconsistent 
with what the reality is on the ground in Nebraska and in the 
surrounding states. I mean, even in Oklahoma it is a little 
over $10.
    So I would like this addressed, please, as to what this is, 
how it is determined, how we fix this so that it is more fair, 
but quickly. Because we are undermining one of the Department's 
goals here by a statistic that is generated through some 
process that is unfamiliar to me.
    Dr. Woteki. Well, I had not heard about this particular 
statistic until very recently. It is derived from a survey that 
the National Agricultural Statistics Service does called the 
Farm Labor Survey.
    And Dr. Clark could give you a brief overview of the 
methodology. But, also, if you would like a more in-depth 
consultation, we would be happy to provide that.
    Mr. Fortenberry. Well, I would like it fixed. I mean, that 
is the reality. I don't think this is fair. How we are grouped 
all the way with, again, oil field workers in Nebraska who--why 
is this happening?
    Again, it is inconsistent with the Department's goals to 
promote this form of agriculture. And you are penalizing 
farmers, again, who are trying to do this the right way by 
using labor through a legal program, and I think it is 
fundamentally unfair.
    Dr. Woteki. As I said, sir, we would be happy to provide 
you with information about the methodology. We understand your 
concerns.
    [The information follows:]

                    Methodology of Farm Labor Survey

            national agricultural statistics service (nass)
    The Department of Labor (DOL) is responsible for determining the 
adverse effect wage rates. In order to determine these rates, DOL has a 
reimbursable agreement with the National Agricultural Statistics 
Service (NASS). Under the agreement NASS collects data on the number of 
hired farm workers, average hours worked, and wage rates based on DOL 
specifications.
    The target population for the Farm Labor Survey includes U.S. farms 
with sales of $1,000 or more. The survey uses a combined sample size of 
about 12,000 farms. Survey data is collected for the week in which the 
12th of each month occurs in January, April, July, and October. Data is 
collected through computer-assisted telephone interviews. Personal 
interviews are reserved for special classes of non-respondents, some 
large operators, and other special cases.

    Mr. Fortenberry. Okay. I am questioning the methodology.
    Dr. Woteki. And we'd be happy to----
    Mr. Fortenberry. This is a time I have right now.
    Dr. Woteki. We would be happy to talk it through with you.
    Dr. Clark. I could give you a few details.
    The adverse effect wage rate is equal to the highest of 
three indicators: The prevailing wage rate, the minimum wage 
rate, and the annual weighted average hourly rate for field and 
livestock workers that is published by USDA. This is a 
Department of Labor regulation, and it is for the H-2A.
    NASS conducts a semiannual survey that provides data 
annually at the request of the Department of Labor. This is 
funded by the Department of Labor. And that is the survey that 
you are referring to.
    And, generally speaking, it might be the highest of those 
three wage rates; so, it would be used in calculating the 
adverse effect wage rate.
    Mr. Fortenberry. What is the minimum wage in California?
    Dr. Clark. I am not sure I could tell you that.
    Mr. Farr. $10. !
    Mr. Fortenberry. That is about 2\1/2\ lower than where I 
am. So you understand the point here?
    Dr. Clark. Yes.
    Mr. Fortenberry. We have taken some sort of statistical 
model and applied it in realtime that is penalizing farmers who 
are trying to do this the right way and are acting consistently 
with the intentions of farm programs in the Department.
    But I think this has to be reviewed, again, not--with all 
due respect, Madam Secretary, not in my office with me, but I 
would like this reviewed now back in the Department to 
demonstrate--or at least have it reconsidered--how this is 
inconsistent with the reality of what wage rates are in 
Nebraska.
    Dr. Clark. We can address the survey. But, as I mentioned, 
it is not--it is done as a reimbursable survey at the request 
of the Department of Labor.
    So we are affected by the funding that is provided by the 
Department of Labor to design a survey that has the quality 
that you are seeking.
    We can have a discussion of that, but it has to be in 
conjunction with the Department of Labor that is funding this 
survey.
    Mr. Fortenberry. Okay. That is still not clear to me, what 
you just said. Is it the Department of Labor's or the 
Department of Agriculture's responsibility?
    Dr. Clark. We are collecting the data. We are doing it to 
the specifications that the Department of Labor is providing us 
and the budget they are providing us. And so, if the data is 
not at the----
    Mr. Fortenberry. So you have the input data. You have 
responsibility for the input of data to determine the outcome 
that the Department of Labor is using in their survey--or as 
part of their report?
    Dr. Clark. We are doing the survey in conjunction with them 
under their specifications.
    Mr. Fortenberry. Okay. Fine.
    We have got a problem here. Okay? Who is going to help me?
    Dr. Woteki. Mr. Fortenberry, we will certainly look into 
it, and I will be reporting back to you.
    [The information follows:]

       Determining and Implementing the Adverse Effect Wage Rate

            national agricultural statistics service (nass)
    The Department of Labor (DOL) is responsible for determining the 
adverse effect wage rates. DOL has a reimbursable agreement with NASS 
to collect data for the Farm Labor Survey based on DOL specifications. 
DOL's current H-2A regulations state that the Adverse Effect Wage Rate 
(AEWR) shall be equal to the highest of the following three indicators: 
(1) The Prevailing Wage Rate, (2) The Minimum Wage Rate, or (3) The 
annual weighted average hourly wage rate for field and livestock 
workers (combined) for the region as published by USDA based on its 
quarterly Farm Labor wage survey.

    Mr. Fortenberry. Very quickly, please.
    Dr. Woteki. Very quickly.
    Mr. Aderholt. Mr. Farr, the Ranking Member, would like to 
say something.
    Mr. Farr. I just happened to get about 3,000 guest workers 
over the border for these programs and you have to really go 
through three departments, first of all, the Department of 
Labor, USDA, and State Department. You might want to bring all 
three of those departments into your office and see if you can 
clean it up.
    Mr. Fortenberry. Thank you.
    Mr. Aderholt. At this time I would like to recognize Mr. 
Latham. But before I do, there has been a request for him to 
sing the Iowa Corn Song.

                       ANTI-MICROBIAL RESISTANCE

    Mr. Latham. We did that yesterday in Statuary Hall. Thank 
you very much, Mr. Chairman. And later in private I will be 
glad to do that. But welcome.
    And, first of all, I am very pleased in the budget that you 
are not taking money out of the formula funding for places like 
Iowa State. And I know you are cheering for the Cyclones in the 
tournament this week, being a former dean there.
    But I was very pleased, also, in your testimony you 
mentioned that a one-dimensional approach that targets meat is 
inadequate to mitigate the problem of antimicrobial resistance. 
It is common and popular to blame the resistance solely on 
livestock production, even though the issue, as we understand 
it today, is far more complex and nuanced.
    Unfortunately, some Federal agencies, such as the Centers 
for Disease Control and Prevention, sometimes join in that 
chorus, and some report on resistance threats target livestock 
production, but make no mention of the overprescription and 
misuse of antibiotics by humans.
    I am curious. How much do you engage with the CDC and other 
Federal agencies on the issue? What research is USDA conducting 
on the issue? What has research shown? And can you assure us, I 
guess, that USDA talks to other agencies to get a more balanced 
approach as far as what they are saying to the public?
    Dr. Woteki. Well, Mr. Latham, we do work very closely with 
the Centers for Disease Control, with the Center for Veterinary 
Medicine at the Food and Drug Administration and, also, with 
the National Institutes of Health in a three-pronged approach 
towards antimicrobial resistance.
    We have a role in surveillance and--with APHIS and ARS, 
both, involved in what is called the NARMS system, the National 
Antimicrobial Resistance Monitoring System. And it is focused 
on three pathogens: E. coli O157:H7, salmonella and 
Campylobacter.
    Our research programs are both conducted by ARS, and NIFA 
also sponsors research at universities across the country, 
land-grant universities like Iowa State, and that research 
program has two focuses.
    One is identifying alternatives to the use of antibiotics 
in livestock rearing, and, secondly, on just fundamental 
understanding of the ecology of pathogens in livestock-rearing 
operations, how these resistance genes exist in the environment 
and are transmitted from the environment to livestock and then 
through to the consumer.
    So that research program has that fundamental emphasis, 
but, also, the real practical thing of, ``What can we be doing 
to reduce the presence of these organisms in livestock 
rearing?'' And that is where the third prong comes in, and that 
is outreach and education.
    So what we find from these research programs goes through 
to the extension programs, goes through the veterinary medical 
education and animal science curricula. So it is a three-
pronged approach.
    And we are active participants with the other Federal 
agencies in a task force that is focused on antimicrobial 
resistance. We work with them under the plan that is public, 
out of this task force, and updated every few years to reflect 
what we have learned and new directions that we are heading in.

                            PORCINE DISEASE

    Mr. Latham. Do you ever--a lot of producers are obviously 
very concerned that the perception out there is that, by eating 
meat or whatever, that somehow they are losing resistance. I 
see I am very short on time here. I talked too much about Iowa 
State.
    But I did want to know what you are doing about the PED 
virus and that situation. It is a huge issue, obviously, with 
the devastation--death of up to 5 million pigs so far and what 
is going on.
    Dr. Woteki. Well, we share your concerns about the Porcine 
Epidemic Diarrhea (PED) virus. ARS has had a really active 
program of research. And I think Dr. Jacobs-Young could fill 
you on in that.
    Dr. Jacobs-Young. So, Congressman Latham, I am sure you are 
aware that there is no current effective vaccine for PED. So we 
are working in our animal protection work in ARS to help 
develop a vaccine for PED.
    One of the things that we have recognized is that it is 
transferred from fecal to oral. That is how it is transferred.
    So what we have learned early on is just management 
practices can also help mitigate some of the spread of the PED. 
That is washing hands, washing boots, keeping populations 
separated.
    It has the worst impact on pigs from 0 to 3 weeks old. So 
that is where it can be really devastating. So how can we 
impart some immunity in some of our older hogs.
    And so we are new on this activity. 2013, I believe, is 
when it first really reared its head. And so we are making some 
progress on that.
    And our work at the National Animal Disease Center (NADC), 
which I am sure you are very familiar with; over at Clay 
Center; and here in Beltsville, Maryland--between those three 
centers, we will get it figured out.
    Mr. Latham. Thank you very much.

                     RESEARCH INFORMATION SECURITY

    Mr. Aderholt. Thank you.
    Interesting article in The New York Times last month about 
the espionage. And, of course, it reports on the growing 
efforts to steal feed technology by foreign nationals. 
Obviously hurts American producers, companies, and researchers.
    Dr. Woteki, I will address to you. I know the Department of 
Agriculture is aware of the seriousness of this problem, no 
doubt.
    Can you walk us through some of the things that the 
Department is doing to protect the secretive and sensitive 
research information.
    Dr. Woteki. Most certainly, Mr. Aderholt.
    In our research programs, there are really three--three 
pillars to them. And one is that, to the fullest extent we 
possibly can, we want to share our results. And we have this 
ethic of sharing the research through publication and journals 
and, more recently, by providing data publicly online.
    But the other two pillars are we also respect the privacy 
issues. So when we enter into research agreements with 
companies or when the statistical agencies obtain data from 
farmers, that protection of privacy is very important.
    And then the third pillar is the protection of intellectual 
property where, when we, again, enter into agreements with 
companies, with sharing of data, we also sign confidentiality 
agreements with them and we honor those confidentiality 
agreements.
    In that context, the events of intellectual property theft 
that you were referring to were ones that we found very deeply 
troubling. We have in the Agricultural Research Service 
undertaken a review of our procedures that we have in place to 
make sure that, first of all, everybody is current on their 
training and has a full understanding of what their roles and 
responsibilities are and, secondly, to do the kind of internal 
audit of the way that we are operating to determine, you know, 
if we are meeting our own standards.
    So Dr. Jacobs-Young is new in this job, but she is taking 
these aspects of protection of intellectual property very 
seriously.
    Mr. Aderholt. What protocols are in place to ensure that 
foreign nationals who work for the Department's research agency 
are not engaged in espionage?
    Dr. Woteki. It is very difficult to assure, as you have 
posed this question, that someone is not engaged in espionage.
    What we do do is to make sure that personnel are thoroughly 
vetted before they are hired into critical positions and, when 
they are hired, that they are properly trained and understand 
what our rules and requirements are.

                 SOUTHEAST POULTRY RESEARCH LABORATORY

    Mr. Aderholt. Okay. Let me switch over to something Mr. 
Bishop had inquired about, about the President's Opportunity, 
Growth, and Security Initiative for the design and build of the 
poultry science lab in Athens.
    Of course, as I mentioned, while we cannot consider the 
request this year because it exceeds the budget cap for fiscal 
year 2015, the subcommittee recognizes the need to invest in 
infrastructure for agricultural research.
    What are we looking at as far as the length of time to 
design and build the facility?
    Dr. Woteki. I don't have a firm timetable immediately on 
hand. I am looking to Dr. Jacobs-Young.
    Do you know the timetable?
    Dr. Jacobs-Young. From design to finish, we are talking 3 
to 4 years.
    Mr. Aderholt. Okay. Do you anticipate costs will rise and 
additional appropriations are going to be needed in the future? 
Whoever.
    Dr. Jacobs-Young. Cost of inflation. So the cost of 
inflation is the only thing that I can see from this point. As 
technology changes--we really can't predict where technology is 
going to go. But I assure you we will do our best to stay 
within the confines of the budget.
    Dr. Woteki. The one thing that we do know, sir, is that the 
longer that we delay in beginning this construction, the 
greater the cost is going to be.

                            SPECIALTY CROPS

    Mr. Aderholt. Sure.
    What is ARS's strategy for future investments, such as what 
is needed for specialty crops?
    Dr. Woteki. With respect to infrastructure, sir?
    Mr. Aderholt. No. Specialty crops. Well, what is ARS's 
strategy for future investments when it is needed? I know Mr. 
Farr has noted this need for years.
    Dr. Woteki. Well, we have asked our external advisory 
committee, the NAREEE board, to do a review of our portfolio of 
research.
    One of the recommendations that the President's Council of 
Advisors on Science and Technology made--or one of the 
inferences, actually, in their report was that the balance in 
our research portfolio between the major crops and the 
specialty crops was not appropriate.
    So we have asked NAREEE Board to provide us with some 
advice, to do a really thorough review of that balance within 
the portfolio.
    We do think that the specialty crops area is one in which, 
if the budget situation turns around, that there is a great 
opportunity for increased investment that will be very 
beneficial for American farmers.
    So we are looking to come back to you in a year with a 
report from our advisory committee about that balance and some 
recommendations about future directions.
    Mr. Aderholt. Okay. Mr. Farr.

                              FLORICULTURE

    Mr. Farr. Mr. Chairman, thank you for asking that question. 
I will just follow up quickly.
    The Secretary was in here suggesting that the unfunded 
balance--the unspent balance every year of the USDA ought to be 
rolled over into a capital outlay fund and use that fund for 
funding the projects that you have prioritized.
    I appreciate--what the committee asked them to do is to 
take a look at what the Defense Department does in doing their 
capital outlay for all the different services. They have a 
thing called the FYDP, which is a 5-year list, and you get on 
that based on, you know, priority needs.
    So the services--you don't end up just building all Air 
Force or all Army or whatever it is and they are all on merit 
and we never have any earmarks. And so it makes the process 
very fair. And that is what you have done, and I appreciate 
that.
    And now we have to find the money to pay for it. And so 
that is what the Secretary suggested, that we create a capital 
outlay fund, because Congress has a hard time appropriating 
that money now that we--you know, we have to rob from Peter to 
pay Paul and nobody wants to give it up.
    There are no Peters around. Nobody wants to rob from Peter 
anymore. Lots of Pauls, but no Peters.
    But, anyway, I want to ask something about the bump--well, 
first of all, the floriculture issue. I have a lot of flower 
and nursery production in my district, and I was really 
surprised to see that your budget cuts money from that 
floriculture nursery research.
    That is a research program that is well supported by the 
industry, leverages a lot of industry funds. When there were 
earmarks, we put them in there. Congress has supported it.
    I am surprised why you would cut almost three-quarters of a 
million dollars out of the program toward administration 
priorities.
    Why do you pick on this program?
    Dr. Woteki. Well, each year, Congressman, we go through a 
prioritizing of projects. I think we have talked in past 
hearings about the cycles of program reviews that we go through 
to identify what----
    Mr. Farr. Yeah. But why this one? Do you have any 
specifics?
    Dr. Woteki. Well, these are judgments of what are lower 
priority programs. Sometimes those judgments are also based on 
an assessment of--has the research program largely met its 
goals.
    So for each cycle in our budget, you are going to see this 
request for appropriation going towards a higher priority and a 
retiring of areas that are deemed to be lower priorities.
    Mr. Farr. In prioritizing that, do you also look at 
industry match and industry involvement?
    Dr. Woteki. That is certainly part of the assessment. Yes.
    Mr. Farr. I mean, road-building projects, if you don't 
produce part of the money at the local level, I mean, in 
California, they won't even consider it. Some counties in 
California and cities have created a special tax for just that 
purpose.
    But you have--it's a sort of--you go to the first of the 
line if you are putting up money. And it seems to me that where 
there is enough interest in the industry to put up private 
capital to support balanced research, then we ought to 
prioritize those higher. And it seems like that's here but--
    Dr. Woteki. And that is also one of the ideas behind this 
Foundation for Food and Agriculture research that will provide 
new opportunities for doing that kind of partnering, accepting 
funds from external organizations to complement research 
programs----

               SUSTAINABLE AG- RES- AND EDUCATION PROGRAM

    Mr. Farr. I think that is a great idea, and I hope you will 
follow through with that.
    Let me ask Mr. Ramaswamy about the sustainable agriculture 
and research, the SARE program.
    You know, I think it has a proven track record to 
delivering farmer-ready research innovations to farmers in the 
field. And I am pleased that you bumped it up, but it has only 
got about one-third of its authorized level.
    Why aren't we putting more money into it?
    Dr. Ramaswamy. Thank you very much, Mr. Farr, for that 
question. And, indeed, you are right. The SARE program has done 
very well in supporting--or helping to develop sustainable 
approaches to production agriculture.
    And so, as we were developing the budget for 2014, we 
stayed within the bipartisan agreement and, looking at 
increasing one place, you had to come up with an offset in some 
other place.
    And so, as you might well imagine, there are a lot of 
programs that really need--desperately need very significant 
increases in funding. And so we had to, you know, juggle these 
numbers across all the different lines.
    As you know, we have about 60 different lines that we have 
within NIFA and we are trying to figure out how best to support 
all of these different programs. You know, like you, we're 
supportive of the SARE program as well.
    Mr. Farr. Well, I think it goes to the former question, 
too. I mean, these are all specialty crop issues, and it seems 
to me that so much of our research, as you have indicated, is 
tilted and their facilities and everything else have been about 
traditional--the commodity programs. And we'd like some parity 
here.
    Dr. Ramaswamy. In addition to the SARE program, of course, 
we have got the Specialty Crop Research Initiative, the Organic 
Research and Extension Initiative, and other programs that the 
individuals that seek support for SARE could apply to those 
other programs as well. So we have seen an increase in those, 
including the Agriculture and Food Research Initiative as well.
    So, hopefully, you know, we are trying to meet the needs 
that are out there. Obviously, as you stated in your opening 
statement, it is not commensurate with the needs that are out 
there----
    Mr. Farr. I would be interested in what you just said about 
they can apply to the other programs. Would you give us a list 
of how many of those have been funded from the other programs?
    Dr. Ramaswamy. Yes, sir.
    [The information follows:]

                Sustainable Agriculture Research Funding

    National Institute of Food and Agriculture is now advancing 
sustainable agriculture practices as a part of many new programs that 
did not exist when SARE was the primary funding source for sustainable 
agriculture research and extension. Many of these programs were created 
and/or funded through the 2008 and 2014 Farm Bills. These include the 
Specialty Crop Research Initiative (SCRI), the Organic Agriculture 
Research and Extension Initiative, the Beginning Farmer and Rancher 
Development Program (BFRDP), the Agriculture and Food Research 
Initiative and the Community Food Projects Competitive Grants Program.
    In comparing the lists of SARE grant recipients between 2008 and 
2013 with the grant recipients from these other programs, we found that 
eight individuals had received funding from SARE and one of these other 
programs. In fact, one of the recipients was Dr. Press at University of 
California, Santa Cruz. In general these recipients had smaller SARE 
grants first which were followed later with larger grants from the 
BFRDP or SCRI. The following is the list of grant recipients who 
received a grant from both SARE and one of the other programs.
     Leigh Adcock, Women, Food and Agriculture Network, SARE 
and BFRDP;
     Douglas Collins, Washington State University, SARE and 
BFRDP;
     Sally Miller, Ohio State University, SARE and SCRI;
     Michael Morris, National Center for Appropriate 
Technology, SARE and BFRDP;
     Daniel Press, University of California, SARE and BFRDP;
     Anusuya Rangarajan, Cornell University, SARE and BFRDP;
     Harald Scherm, University of Georgia, SARE and SCRI; and
     Glenn Teves, University of Hawaii, SARE and BFRDP.

    Mr. Farr. I would like to share those with my growers.
    Mr. Aderholt. Mr. Nunnelee.

                             ARS LEADERSHIP

    Mr. Nunnelee. Thank you, Mr. Chairman.
    I presume I need to ask Dr. Jacobs-Young, unless somebody 
else could better answer the questions.
    The Agricultural Research Service has their five-state mid-
south headquarters in Stoneville, Mississippi. Last year, the 
mid-south director, Dr. Ed King, retired. And I just need to 
know a timetable on filling that vacancy.
    Dr. Jacobs-Young. Thank you for that question, Congressman 
Nunnelee.
    Yes. We definitely miss Dr. Ed King. He was a historical 
monument in ARS. And so we miss his leadership.
    The timetable--we are looking at October 1st where we are 
going to do a little bit of reshuffling of our senior 
executives in ARS. And so October 1st we will have a 
permanent--our plans are to have a permanent senior executive 
in place.
    Currently, we have an acting area director, Dr. Dan 
Upchurch, who is also--you know, he is great. So he is serving 
in that position. And Archie Tucker, who is the number two 
there, has also been there for many, many years. So it is under 
great leadership.

                           CHILDHOOD OBESITY

    Mr. Nunnelee. All right. Thank you.
    One other question. Last month researchers at the Centers 
for Disease Control and Prevention published an article that 
claimed that prevalence of obesity among preschoolers had 
fallen by 43 percent in the last decade.
    Since then, numerous researchers have said that the 
headlines were simply too good to be true. As a statistician 
and economist, I hope you can shed some light on the issue.
    Dr. Bohman. Well, thank you, Mr. Nunnelee.
    You are asking about one of these perennial research 
questions on the changes in obesity, what is causing them, what 
are links to government programs, such as school nutrition or 
the Supplemental Nutrition Assistance Program.
    And the Economic Research Service has active work in this 
area. We bring our strength in understanding consumer demand 
and data. And we have also found some positive results in 
nutrition trends.
    We released a study a couple of months ago that looked at 
changes in diet using data from the National Center for Health 
Statistics, the National Health and Nutrition Examination 
Survey (NHANES survey), over the period of the recent 
recession, and we find that during that period you see an 
improvement in diet.
    Some attributed this to people eating out less, where we do 
know that data shows us that the food consumed in restaurants 
is of higher fat and lower nutritional value, but, also, some 
evidence that people who read nutrition labels and pay 
attention to dietary advice have seen improvements in diet over 
this period.
    We have also looked at research on whether SNAP 
participants have better diets than nonparticipants. We see a 
mixed result, depending on whether you look at fats or which 
types of foods.
    So I think it is still an open question, but we have seen 
some positive results, and we see a need to continue investing 
in research in this area.
    Mr. Nunnelee. Thank you.
    I yield back, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.

                           POLLINATOR HEALTH

    Ms. Pingree. Thank you very much, Mr. Chair. Again, thank 
you for all your input this morning.
    I want to talk a little bit about the pollinator research 
in the Fiscal Year 2015 budget. I think we have all heard a lot 
about the concerns in American agriculture.
    Obviously, there is a huge dependence on honeybees to 
populate the crops. Some estimates say we are losing 30 percent 
of our honeybee colonies every year. So, obviously, there is a 
lot of interest in acting on this and putting in more research 
on it.
    I signed a letter that many of my colleagues signed to the 
President last month, urging that his budget include increased 
funding and research for the causes of colony collapse 
disorder, and I was pleased to see in the President's proposal 
that the creation of the Innovation Institutes--one of them 
would receive up to $5 million to focus on this.
    Given that this is a $20 million impact, in a sense, on the 
industry, is this enough? Can you talk a little bit about what 
you are likely to do, should this come through, and sort of 
your concerns on this issue.
    Dr. Woteki. Well, we have received numerous letters from 
Members of Congress over this past year----
    Ms. Pingree. We like our honeybees.
    Dr. Woteki [continuing]. With an emphasis on doing more on 
pollinator health.
    So this innovation institute is one response that we are 
proposing. It would be a way to partner with the private sector 
and, really, to focus research on understanding what are--at 
least a half dozen different hypotheses about what is causing 
the decline in honeybees and in pollinators, in general.
    And through that--and, again, because these innovation 
institutes would be public-private partnerships, also focusing 
on getting the solutions coming out of those insights into the 
hands of beekeepers and farmers and changing whatever 
agricultural practices we may have to change in a way that will 
support pollinators and, also, support pollination and be an 
economically feasible approach for American agriculture.
    We are also partnering with a number of other agencies 
within USDA and with agencies external to USDA in planning 
those efforts and in coordinating the research that is already 
underway in this very important problem area.
    So we hope that, through this combined effort of continuing 
our ongoing activities and then augmenting them with an 
innovation institute, that that focused level of activity 
within a defined period of time is going to provide some real 
insights and some products and practices that can be adopted to 
help immediately.
    Ms. Pingree. Just a little follow-up on that. I mean, this 
is proposed funding, and you said that you are already doing 
some research. I think a lot of people see this as a crisis in 
the industry and, obviously, having a huge impact already.
    Have you made some strides? I mean, are we getting close? 
Are there some practices that you are already suggesting? 
Because it is hard to talk about it in the future when it is so 
imminent.
    Dr. Woteki. Dr. Ramaswamy happens to be an entomologist and 
for my team has been our lead person on this pollinator 
interagency work and activity.
    So, Sonny, why don't you just----
    Dr. Ramaswamy. Thank you very much, Congresswoman Pingree.
    And, indeed, the U.S. Department of Agriculture is 
investing quite a bit of resources in addressing honeybee 
health in general and also looking at other pollinators as 
well.
    And between the Agricultural Research Service and the 
National Institute of Food and Agriculture, we are investing in 
the neighborhood of around about $25 million a year currently 
in addressing particularly honeybee health. But as I said, you 
know, bumblebees and other pollinators are being impacted as 
well.
    And, specifically, a couple of examples about things that 
are going on: We have the community of scientists that are 
working together, including our extension specialists and the 
extension educators as well that come together collaboratively 
to work across the United States in multidisciplinary teams.
    They have identified some of the reasons for why we have 
declines in the population of bees, the honeybee specifically, 
and these relate to the loss of habitat. These relate to the 
parasites and pathogens, such as viruses and varroa mites. 
These relate to the nutritional status of honeybees.
    These relate to what we call migration because we are 
transporting bees long distances. As you might well know, well 
over half the honeybee hives are used to pollinate almonds like 
in the month of February, which is when they should be resting.
    So there are a lot of factors that go into this. Those have 
now been identified. And in addition to identifying those, 
there is work that is going on across the board, whether it is 
Federal scientists or State-based scientists, coming up with 
ways of, you know, improving the genetics of the honeybees. 
There are some really excellent discoveries that have been made 
in that realm.
    Also, for varroa mites, there have been some new ways of 
controlling them that includes technologies related to 
biotechnology that is called interference RNA methods, and it, 
you know, hits the varroa mites. There is also some 
biopesticides that are in the process of being registered. One 
of those biopesticides is from hop, you know, the hop plant 
that goes into flavoring beer.
    There are these hop beta acids and that is in the process--
again, based on research that the Agricultural Research 
Service, scientists have undertaken, and that is in the process 
of being registered currently as a biopesticide.
    So we have made a lot of progress and, unfortunately, it is 
almost like a moving target and we need to continue to invest 
our intellectual and monetary resources to address that.
    Ms. Pingree. Thank you very much.
    Mr. Aderholt. Mr. Fortenberry.
    Dr. Clark. Maybe I could add something to that. One of the 
things that has been missing is an information base. NASS has 
had a survey of beekeepers where they have been measuring honey 
production.
    But this survey----we have an initiative to include in this 
survey questions related to colony losses, pests and parasites, 
management practices, crops pollinated, and locations served, 
as well as estimates of revenues and expenses, which will help 
us provide a benchmark to know what is happening and then could 
be repeated in the future to see if any of the research that is 
being conducted has an impact.
    Ms. Pingree. So my time is up. But this is a survey you are 
proposing to do or are in the process of doing it?
    Dr. Clark. It is in the budget. We are proposing $2 million 
to expand our current survey of honeybee production.
    Mr. Aderholt. Mr. Fortenberry.

                           FARM WORKER WAGES

    Mr. Fortenberry. Thanks, Mr. Chairman.
    I want to return briefly to this adverse effect wage rate 
issue simply to make my point in a little more conciliatory 
manner. Since becoming a Member of Congress, one of my key 
policy concerns is how do we ensure that we have a robust 
agricultural sector.
    And that is a very broad spectrum and production 
agriculture is at its heart and that is essential, but we have 
also worked on trying to figure out ways to expand the ag 
family. And in the farm bill we have had all kinds of new and 
emerging policies to help small beginning farmers and specialty 
crop farmers.
    So here I stumble upon a circumstance where we are doing 
exactly the policy outcome and they are being affected by a 
strange type of statistical problem that is being generated in 
a cross-jurisdictional manner between the Department of Labor 
and the Department of Agriculture. This is why I think I am 
coming across so passionately about this.
    I don't want to see them go out of business. And they can't 
compete based upon this higher wage rate which is being foisted 
upon them, but is inconsistent with wage rates, I would 
suggest, all around us where I live. We have a grouping of 
States here that have disproportionately high adverse effect 
wage rates. It seems very peculiar, given the other States 
where minimum wage and prevailing wages are much, much higher.
    That is why I am saying please get to the bottom of this 
quickly. I understand the entangled explanation--or I didn't 
fully understand the entangled explanation of how this has 
cross-jurisdictional boundaries, but I am just trying to get to 
the bottom of how we reevaluate this quickly before these 
farmers give it up because they simply cannot compete based 
upon what is being told to them by the government in a policy 
that is inconsistent with other policies across the hall. So 
that is why I want to push this and make this clear.
    Dr. Woteki. We understand, sir.

                  CENTERS FOR AGRICULTURAL EXCELLENCE

    Mr. Fortenberry. Thank you.
    The second issue I wanted to raise briefly is we have a 
wonderful community college in northeast Nebraska called 
Northeast Community College. They have written to you asking--
with their interest in becoming one of the Centers for 
Agricultural Excellence.
    And I know that is in the farm bill--that is authorized in 
the farm bill. I would appreciate any consideration you could 
give them. They have a long agricultural tradition there. I 
think the initial response from you was that this has not been 
funded previously.
    But do you anticipate these centers developing in the near 
term?
    Dr. Woteki. Well, I was in Omaha in January and had the 
opportunity, actually, to have lunch with the President of 
Northeast Community College.
    Mr. Fortenberry. Okay. I am sure he told you what I just 
told you.
    Dr. Woteki. Yes. And they have a great concept for the 
development of agriculture as part of the college curriculum.
    At the time that we met, what I was referring to was that 
there was a provision in the 2008 farm bill for Centers of 
Excellence. We were unable to use that authority as it had been 
enacted without an appropriation to go with it.
    With the new farm bill, there is additional language that 
Dr. Ramaswamy and his team----
    Mr. Fortenberry. He knows a lot about Nebraska.
    Dr. Woteki [continuing]. Have been thinking through how 
they are going to implement this new authority.
    So, Sonny, you want to talk about your current thinking.
    Dr. Ramaswamy. Right. Thank you very much, Dr. Woteki.
    And thank you, Congressman Fortenberry. Good to see you 
again, sir.
    Indeed, within the AFRI program--the Agriculture and Food 
Research Initiative--we have an opportunity to create these 
Centers of Excellence. And so we have a team of individuals 
that is putting together the approach that we are going to 
take.
    And as you likely know, Deputy Secretary Krysta Harden is, 
you know, helping us look through the Farm Bill and how do we 
approach these things, and we are putting together as we go 
forward--and I can't tell you a lot more because we are still 
developing it.
    It could potentially offer an opportunity. I don't know. I 
mean, in this particular case, I read the letter as well, and I 
have spoken to a lot of other community colleges as well about, 
you know, the possibility of engaging them in creating the 
pipeline of young people that we need to--that needs to come 
into the agricultural workforce, the scientific disciplines, et 
cetera.
    And as it has been construed in the language in the Farm 
Bill, it is more about offering funding for research 
enterprises--research and education enterprises if the 
community college in Nebraska partners with the University of 
Nebraska in Lincoln, Iowa State, and others as a member--as a 
consortium, as it were. They will be able to participate in 
this as well.
    By themselves, for the land that they have that they would 
like to utilize in offering education and research sorts of 
opportunities, in and of itself, I don't know if they will be 
able to be competitive. So it might be a separate conversation 
with them and connecting them with Ronnie Green and others.
    Mr. Fortenberry. Sure. That is an absolutely fair answer 
because we do an extraordinarily large amount of agricultural 
research through the university system and we are proud of 
that.
    And I somewhat anticipated that might be a potential 
outcome here, but I did just want to raise the issue for your 
awareness.
    Thank you very much, Mr. Chair.
    Mr. Aderholt. As we conclude, I am going to go ahead and 
recognize Mr. Farr.

                           CALIFORNIA DROUGHT

    Mr. Farr. Thank you very much, Mr. Chairman. I guess these 
are last questions.
    But Governor Brown of California has had an emergency 
declaration of the drought that exists there. He has asked 
Congress and the President to declare a national disaster.
    I don't think Obama has done that--President Obama has done 
that yet. But I am sure your department must have been asked 
what you might do to help mitigate the problem. That is all we 
are talking about in California, is the drought.
    And I wondered if you had any--and we all know the 
conservation and all that stuff. Is there anything innovative 
coming out of the department that might be helpful?
    And, particularly, agriculture gets a bad rap because of 
the water they use, and we are pitting the population of 
California, the urban--I mean, it is the L.A. Basin where all 
the people live and where all the food they eat is consumed.
    But, you know, there are constantly letters to the editor 
complaining about the lack of best management practices in 
agriculture. So time is really short. But if you have anything 
you are working on, I would like to know about it.
    Dr. Woteki. Well, one of them is a new initiative within 
the competitive grants program that Dr. Ramaswamy has 
initiated.
    Dr. Ramaswamy. Thank you very much, Mr. Farr.
    Indeed, we have just released--just about a month ago we 
have released a request for applications in the water area in 
the Agriculture and Food Research Initiative, and we are 
proposing to invest $30 million over the next 5 years. And the 
intent there is very----
    Mr. Farr. 30 million bucks? That is nothing.
    Dr. Ramaswamy. For starters. I mean, we are hoping to 
continue to make investments, and ARS and other sister agencies 
within USDA are also making very significant investments--
intellectual investments as well as monetary investments in 
this area.
    Mr. Farr. But it seems to me what we are doing mostly in 
our area is reclamation. And, frankly, the State kind of led 
that. Feds were way behind in being able to use, you know, 
sewage water treated----
    Dr. Ramaswamy. Right. In addition to this particular 
request for applications, we are also supporting efforts in 
water reuse and recycling, in genetics and plant breeding, in 
improving varieties that can be drought-tolerant and salt-
tolerant, et cetera.
    So there are a number of programs, and we could certainly 
provide you a list of things that we are supporting and----
    Mr. Farr. Well, it might be very helpful just to--maybe in 
conjunction with the ag department in California and others, to 
pull together kind of the state-of-the-art knowledge and stuff 
that we have in all these different areas so at least people 
who are searching for some innovation can find out where to 
find it.
    It would be helpful for all of us in--you know, with 54 
Members of Congress from California who are all asking this 
question, and it would be--I think it might be helpful.
    And there is nothing--without more rain, there is no--
nobody wins. You can't build anything fast enough to meet this 
year. But we certainly will be--I think we are going to get 
through it just by squeezing every drop out of the system.
    Dr. Jacobs-Young. So, Congressman Farr, currently ARS 
invests a little over $30 million a year in drought research. 
And so we are--similar to what Dr. Ramaswamy talked about, we 
are looking at optimized irrigation systems. ``How do we get 
more crop per drop?'' is what the National Program Leader (NAL) 
told me about.
    We are looking at using nontraditional water sources, 
looking at salinity-tolerant crops and then, most importantly, 
building predictive systems.
    We have a system that is called the evaporative stress 
index, which is able to predict drought and, so, giving 
producers an opportunity to make decisions ahead of the drought 
actually occurring.
    And so that system is currently able to produce predictions 
a couple of weeks ahead of our traditional systems that we 
currently have in place. And so we are working on more 
predictive systems for----
    Mr. Farr. I don't know if that is as effective as just 
getting this total use of water. I mean, it has got to be used 
over and over again. We don't use it enough.
    And I think California therein is the answer, is that we 
are going to develop some more productions out of saltwater. We 
are going to probably do a lot more inground storage on drawing 
water off the rivers in peak flow.
    We are probably going to build some more off-stream 
reservoirs, not on-stream. We are not for dams. And I think we 
can build the infrastructure that can be consistent in low-rain 
years.
    But I think it is that technology in drip irrigation, 
reclamation, all of that kind of micro stuff, that is really 
going to be almost mandatory in the industry.
    And I think that is where you could really be helpful, 
showing us the science that you know about how little you can 
get by on.
    Dr. Ramaswamy. Indeed. And there is a lot of wonderful work 
that is going on in California, ARS labs as well as the 
University of California (UC) system as well. And we will get 
you a----
    Mr. Farr. A list.
    Dr. Ramaswamy [continuing]. A composite list of it.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                    FARM AND RANCH IRRIGATION SURVEY

    Dr. Clark. Could I just add that the National Agricultural 
Statistics Service, as part of the Census of Agriculture, 
conducts the Farm and Ranch Irrigation Survey, and we just will 
complete that data and release it in October of this year, 
covering the previous year.
    This survey is done every 5 years. So we will give you at 
least the information on what practices are and the changes 
that have happened between 2013 and the past 5 years.
    Mr. Farr. That would only be helpful for us if it was done 
on California almost by county because it is not--you know, who 
cares what the national standard is? We only care about our own 
backyard.
    Dr. Clark. I know we have State data. I don't know if it is 
at the county level. But it is a survey.
    [The information follows:]

                    Farm and Ranch Irrigation Survey

            national agricultural statistics service (nass)
    NASS estimates it will release the results of the Farm and Ranch 
Irrigation Survey in November 2014. These results are based on regions 
or States that have a large enough sample. California is included among 
those States with a large enough sample to publish by States, but not 
by county.

             FOUNDATION FOR FOOD AND AGRICULTURAL RESEARCH

    Mr. Aderholt. Thank you.
    Well, as we conclude today, thank you for being here.
    Let me just ask Dr. Woteki one last thing. You note in your 
testimony about the 2014 farm bill created the Foundation for 
Food and Agricultural Research, provided $200 million in 
mandatory funding for it, USDA is directed to stand up the 
foundation.
    What is your time frame, expecting that to be operating?
    Dr. Woteki. Well, we expect the Foundation to be up and 
operating in mid-summer. The Secretary did a listening session 
about the farm bill implementation a few weeks ago and, at that 
point, indicated that was our time line.
    Mr. Aderholt. Okay. Thank you.
    All right. Well, again, thank you each for being here this 
morning and for your testimony. We look forward to working with 
you as we progress with the fiscal year 2015 budget. Thank you.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bice, Dr. D. K...................................................   349
Bohman, Dr. Mary.................................................   349
Clark, Dr. Cynthia...............................................   349
Ellis, Karen.....................................................     1
Fong, Phyllis....................................................     1
Harden, Gil......................................................     1
Jacobs-Young, Dr. Chavonda.......................................   349
Ramaswamy, Dr. Sonny.............................................   349
Wetjen, Mark.....................................................   135
Woteki, Dr. C. E.................................................   349
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