Team Nutrition: Some Procurement and Personnel Management Requirements
Not Followed (Testimony, 09/18/96, GAO/T-RCED-96-247).

Pursuant to a congressional request, GAO discussed the Department of
Agriculture's (USDA) Team Nutrition contracts, cooperative agreement,
and grant for multimedia nutrition education. GAO noted that: (1) Team
Nutrition officials acted improperly in assigning tasks under the the
Global contract and did not follow normal contracting procedures in
dealing with Global's subcontractors; (2) Team Nutrition officials did
not provide the technical direction that another contractor needed to
perform several tasks; (3) Team Nutrition failed to determine the
message that children were receiving from the Team Nutrition Initiative
advertisement; (4) the Under Secretary for Food, Nutrition, and Consumer
Services (FCS) violated federal ethics regulations by participating in
the administration of this grant; (5) FCS improperly reviewed the former
project manager's employment application, academic credentials, and
financial disclosure statements; (6) USDA management problems resulted
from USDA failure to follow agency procedures and its lack of a
strategic plan for the Team Nutrition Initiative; and (7) FCS has taken
steps to improve its procurement and personnel practices, including
establishing new operational procedures, increasing reporting
responsibilities, requiring procurement administration training,
establishing an agency ombudsman to handle procurement improprieties,
tightening procedures for the applications process, reviewing applicant
documentation, and intensifying collection of employee financial
disclosure statements.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-96-247
     TITLE:  Team Nutrition: Some Procurement and Personnel Management 
             Requirements Not Followed
      DATE:  09/18/96
   SUBJECT:  Irregular procurement practices
             Subcontractors
             Personnel management
             Educational grants
             Financial disclosure reporting
             Cooperative agreements
             Nutrition research
             Contracting procedures
             Ethical conduct
             Grant administration
IDENTIFIER:  USDA Team Nutrition
             USDA Team Nutrition Initiative
             Food Stamp Program
             National School Lunch Program
             Special Supplemental Food Program for Women, Infants, and 
             Children
             WIC
             
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Cover
================================================================ COVER


Before the Subcommittee on Department Operations, Nutrition, and
Foreign Agriculture, Committee on Agriculture, House of
Representatives

For Release on Delivery
Expected at
1:00 p.m.  EDT
Wednesday
September 18,1996

TEAM NUTRITION - SOME PROCUREMENT
AND PERSONNEL MANAGEMENT
REQUIREMENTS NOT FOLLOWED

Statement of Robert A.  Robinson, Director
Food and Agriculture Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-96-247

GAO/RCED-96-247T


(150262)


Abbreviations
=============================================================== ABBREV

  USDA -
  GAO -
  FCS -
  CO -
  COTR -
  COR -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss our findings on the U.S. 
Department of Agriculture's (USDA) Team Nutrition initiative.  The
goal of this nationwide initiative is to improve the nutrition and
health education of American schoolchildren.  USDA is attempting to
achieve this goal through a two-pronged approach:  (1) a training and
technical assistance program for schools' food service workers to
help them provide lunches that are nutritious and appealing and (2) a
multimedia nutrition education campaign designed to promote healthy
food choices among schoolchildren. 

At this Subcommittee's request, we reviewed the initiative from two
perspectives--procurement and personnel management.  Our testimony
today provides our observations on two contracts, a cooperative
agreement, and a grant that USDA entered into to support the
nutrition education element of the initiative.  These efforts we
examined accounted for about two-thirds of the funds available to the
nutrition education component of the initiative since 1994.  In
addition, our testimony today summarizes information on Team
Nutrition provided earlier.\1 We did not examine, nor do we draw any
conclusions about, the merits of the Team Nutrition initiative
itself. 

In summary, the Team Nutrition contracts, cooperative agreement,
grant, and personnel management practices we examined exhibited a
pattern of poor management and, in some cases, violated federal
procurement law and ethics regulations.  Each contract, cooperative
agreement, and grant that we examined had some problems, such as
tasks assigned that were beyond the scope of the contract,
unauthorized individuals providing direction to a contractor,
inattention to the agency's obligations under the terms of the
cooperative agreement, and the violation of the federal ethics
regulations pertaining to a grant.  Furthermore, as we reported
earlier, we identified several concerns with the manner in which the
position of the former Team Nutrition Project Manager was filled and
the salary set.  The problems in the management of those aspects of
the Team Nutrition initiative we examined can be attributed largely
to the failure to adhere to the agency's procedures and the lack of a
documented strategic plan for the initiative.  USDA has acknowledged
and is taking steps to address some of the weaknesses we identified,
but it is too soon to determine whether its actions are sufficient to
correct these problems. 


--------------------
\1 On May 8, 1996, we testified on the results of our review of one
subcontract under a Team Nutrition contract before the House
Committee on Agriculture (Food Stamp Program:  Focus Group Research
and Procurement Problems (GAO/T-RCED-96-157).  On Aug.  8, 1996, we
reported on several issues related to the employment of three key
members of the Team Nutrition management team (Team Nutrition
Personnel and Under Secretary's Travel (GAO/RCED-96-229R). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Seeking to improve the health and nutrition education of American
schoolchildren, USDA began the Team Nutrition initiative (commonly
known as Team Nutrition) in fiscal year 1995 by seeking and obtaining
$20.3 million in funding.  The Congress made another $10.5 million
available for Team Nutrition in fiscal year 1996 and $10 million for
fiscal year 1997.  Elementary and secondary schools can participate
in the initiative--and become Team Nutrition schools--by agreeing to
support the initiative's mission and principles and by making a
commitment to meet USDA's dietary guidelines for Americans.\2 Once a
school joins the "team," it can obtain nutrition education materials
on healthy eating habits.  As of August 16, 1996, over 14,000 schools
spread across all 50 states, the District of Columbia, Puerto Rico,
and the U.S.  Virgin Islands had become Team Nutrition schools.  The
Secretary of Agriculture is encouraging the remaining 80,000 schools
across the nation to become Team Nutrition schools so that they can
also obtain the materials being developed under the initiative. 

USDA considers Team Nutrition to be a key vehicle for promoting one
of its top priorities:  integrating the latest nutrition knowledge
into each of USDA's food assistance programs.\3 At Team Nutrition's
inception, the Under Secretary for Food, Nutrition and Consumer
Services decided that Team Nutrition would be administered by USDA's
Food and Consumer Service (FCS).  Until August 1996, when it was
placed in FCS' Special Nutrition Programs, Team Nutrition was managed
by the Office of the FCS Administrator.  The initiative is composed
of two basic components:  (1) training and technical assistance,
which is managed by the Associate Administrator for Food and Consumer
Services, and (2) nutrition education, which is managed by Team
Nutrition's Acting Project Manager. 

Much of Team Nutrition's efforts are carried out through contracts
and cooperative agreements.  These contracts and agreements support
both of Team Nutrition's components.  Each component received
approximately half of the funds appropriated for Team Nutrition.  We
reviewed two contracts for support services, one with Global
Exchange, Inc.  (Global), and one with Prospect Associates, Ltd. 
(Prospect); a cooperative agreement with Buena Vista Pictures
Distribution, Inc., a subsidiary of the Walt Disney Company (Disney),
to use animated characters to promote healthy eating; and a grant to
an author to write a children's book about nutrition.  Table 1
provides details on these activities. 



                                Table 1
                
                 Team Nutrition's Activities to Support
                Nutrition Education, as of September 13,
                                  1996

                                                  Amount    Expiration
Awardee               Type of action           obligated          date
--------------------  ------------------  --------------  ------------
Global                Support services        $1,310,000       9/30/98
                       contract
Prospect              Support services         6,698,733       2/28/98
                       contract
Disney                Cooperative                395,000       9/30/96
                       agreement
Children's author     Grant                       25,000       3/16/96
----------------------------------------------------------------------
FCS obtains support services for Team Nutrition from Global and
Prospect through task order contracts.  A task order contract is used
when the procuring agency knows the type, but not the precise
quantities, of services that will be required during the contract
period.  These contracts permit flexibility in (1) scheduling tasks
and (2) ordering services after the requirements materialize.  The
Federal Acquisition Regulation stipulates that task order contracts
may be used when the agency anticipates a recurring need for the
contractor's services. 

FCS awarded the Global and Prospect contracts to provide (1)
marketing and consumer research on how to best market nutrition
education; (2) message development, design, and production services
for multimedia nutrition education materials; and (3) ways to create
and maintain partnerships with organizations concerned about
nutrition education.  The cooperative agreement with Disney allows
FCS to use two of Disney's popular animated characters in Team
Nutrition's media campaigns.  In accordance with the agreement,
Disney developed and distributed four animated public service
announcements and additional nutrition education materials featuring
Pumbaa and Timon, characters from its recent film, The Lion King. 
Finally, FCS awarded a $25,000 grant to an author to write a
children's book promoting good nutrition. 


--------------------
\2 Among other things, these guidelines, which represent the official
nutritional policy of the U.S.  government, recommend diets that are
low in fat, saturated fat, and cholesterol. 

\3 These 15 food assistance programs include the Food Stamp Program,
the National School Lunch Program, and the Special Supplemental
Nutrition Program for Women, Infants, and Children.  Responsibility
for these programs in USDA rests with the Under Secretary for Food,
Nutrition and Consumer Services. 


   TEAM NUTRITION'S CONTRACTS,
   COOPERATIVE AGREEMENT, AND
   GRANT THAT GAO REVIEWED REVEAL
   POOR MANAGEMENT
---------------------------------------------------------- Chapter 0:2

Our review of two contracts, a cooperative agreement, and a grant
under the Team Nutrition initiative revealed poor management and, in
some cases, a violation of federal procurement law and ethics
regulations.  The problems we found with each of these efforts are
discussed below. 


      GLOBAL
-------------------------------------------------------- Chapter 0:2.1

We found no irregularities in the manner in which FCS awarded the
contract to Global.  However, we believe that Team Nutrition
officials acted improperly in assigning tasks under the Global
contract that were beyond the contract's scope of work.  These
officials also did not follow normal contracting procedures in
dealing with subcontractors under the Global contract. 

Federal procurement law requires that an agency conduct a separate
procurement when it wishes to acquire services that are beyond the
scope of an existing contract.  A matter is outside the scope of the
original contract when it is materially different from the original
purpose or nature of the contract.  In our view, Team Nutrition
officials assigned Global two tasks--tasks 9 and 10--under its
contract that materially deviated from the original contract's
overall scope of work. 

Under its contract with FCS, Global was to provide support services
to assist Team Nutrition in conducting a national nutrition education
campaign, including the planning and development of educational
materials and communication efforts related to nutrition.  As we
discussed in our May 1996 testimony, task 9 was to conduct focus
group research to assess the reactions of the general public and food
stamp recipients to USDA's proposals to change the Food Stamp
Program.  We concluded that this work, which cost FCS about $33,000,
was outside the scope of Global's support services contract. 

Similarly, task 10--to evaluate the success of the San Francisco
County Jail's garden project and to develop a guidebook on the
project to show other communities how to implement similar
programs--has no substantive relationship to nutrition education or
the dissemination of sound nutrition information.  The garden project
is a program to rehabilitate former prisoners by having them grow
produce that is either donated to the needy or sold to restaurants. 
This evaluation, for which FCS has budgeted about $49,000, differs
materially from the subject matter of the Global contract, which is
to assist FCS in its efforts to provide "effective nutrition
education" and to communicate "sound nutrition information."

Furthermore, contrary to normal contracting practices, Team Nutrition
officials directed Global to hire specific subcontractors and did not
give Global the opportunity to perform the work itself.  Generally,
once an agency awards a contract, the contractor is responsible for
performing the work, either by using its own resources or by hiring a
subcontractor.  Team Nutrition officials negotiated directly with
five firms to perform work for certain elements of its nutrition
education campaign before the five firms signed subcontract
agreements with Global.\4 Representatives from three of these firms
also met with the Under Secretary to discuss their work before any
contractual arrangement had been made between these firms and Global. 
All five firms then started work for Team Nutrition without the
knowledge of, or any signed agreements with, Global.  These firms
were later added as subcontractors to the Global contract. 

Because Team Nutrition officials directed Global to hire these firms,
Global did not obtain competitive offers, nor did it conduct a
cost-reasonableness analysis of their proposed budgets.  After they
signed subcontract agreements with Global, these subcontractors
continued to be directed by Team Nutrition officials instead of
Global.  These officials often did not include Global in planning
meetings with the subcontractors and did not provide the
subcontractors with well-defined tasks that had specific
deliverables.  As a result, Global had little control over its
subcontractors' work and costs.  Furthermore, Global and FCS
officials told us that they did not understand what work one of the
subcontractors had done to justify the $40,000 payment it had
received.  Only after the subcontractor had been paid did Global and
FCS officials ask the subcontractor to document the tasks it had
performed. 


--------------------
\4 These firms, the duties they performed, their payments, and the
effective dates of their subcontracts are provided as an appendix. 


      PROSPECT
-------------------------------------------------------- Chapter 0:2.2

As with Global, we found that FCS' contract with Prospect was awarded
in a fashion consistent with applicable procurement regulations.\5
However, the history of the Prospect contract indicates a pattern of
careless management.  This careless management may have reduced the
contract's contributions to Team Nutrition. 

When the Prospect contract was awarded, Team Nutrition officials
provided only minimal technical direction for the contract's tasks. 
The Contracting Officer's Representative (COR),\6 who was not the
Team Nutrition Project Manager, did not have a clear understanding of
how Prospect was to support the Team Nutrition mission.  Therefore,
the COR did not provide the technical direction that Prospect needed
to effectively perform several tasks.  Moreover, without notifying
the Contracting Officer, and without having the authority to do so,
the COR allowed a number of unauthorized individuals to provide
technical direction to Prospect and/or to change the scope of the
work defined in at least two tasks.  In one instance, the director of
a USDA division unrelated to Team Nutrition directed Prospect to
conduct focus group research worth about $78,000 without the
Contracting Officer's approval.  In another instance, a Contracting
Officer's Technical Representative directed a significant change in a
task's scope of work without authorization.  The Contracting Officer
and the COR did not become aware of this directed change until
Prospect submitted a revised cost proposal to increase the cost of
the task by about $500,000. 

Furthermore, a change to one effort under the Prospect contract,
while within the scope of the contract, involved work that was more
complex than anticipated, given the statement of work and the
projected budget in the contract's task orders.  Team Nutrition
officials expanded a relatively basic $173,000 evaluation of the
effectiveness of Team Nutrition to a more comprehensive $2.3 million
effort.  FCS contracting officials told us that while this work was
within the scope of the contract, it would have been preferable for
the agency to obtain this expanded work through a separate,
competitive procurement.  They believed that a separate procurement
was preferable because of the magnitude of the change and the
addition of work that required a higher degree of technical expertise
than was originally specified.  However, FCS contracting officials
told us that, given Team Nutrition's desire to move quickly in
initiating the work, they did not have sufficient time to solicit and
award a new competitive contract. 


--------------------
\5 When FCS awarded this contract to Prospect, a competing firm
protested the award.  In Feb.  1995, GAO upheld the agency's award. 
(Porter/Novelli, B-258831, Feb.  21, 1995). 

\6 Responsibility for contract administration rests with the
Contracting Officer (CO) who awarded the contract.  However, the CO
may delegate contract administration responsibilities to other
individuals.  The CO may authorize a COR to perform specifically
delegated functions, generally to monitor the contractor's cost,
schedule, and technical performance against the contract's
specifications or statement of work.  Also, FCS' policy allows a COR
to designate a Contracting Officer's Technical Representative (COTR)
to provide technical guidance to a contractor.  Any communication
between a COTR and a contractor must be memorialized in writing and
any specific direction must be coordinated with the COR.  Neither the
COR nor the COTR can direct the contractor to deviate from the
contract's terms.  The CO alone has the authority to make changes in
the contract's terms. 


      COOPERATIVE AGREEMENT WITH
      DISNEY
-------------------------------------------------------- Chapter 0:2.3

We found no problem with the process FCS used to award the
cooperative agreement to Disney.  However, once again, we found
weaknesses in FCS' performance in managing this cooperative
agreement. 

FCS entered into this agreement, which allows it to use two Disney
characters from The Lion King to promote good nutrition, while these
characters were also being used in advertisements and in-store
promotions for a national fast food restaurant chain.  To assess the
impact of these characters on the Team Nutrition nutrition education
campaign, FCS had Global conduct focus groups to determine what
messages children were receiving from these characters.  However, in
conducting this evaluation, FCS did not test the possible messages
children could receive from the fast food advertisements.  Therefore,
the information gathered from this research may be inconclusive. 

Furthermore, the Disney agreement, originally scheduled to expire on
September 30, 1996, required Team Nutrition to return to Disney all
materials that used the animated characters at the expiration of the
agreement.  These materials are included in the nutrition education
kits that FCS is distributing to Team Nutrition schools.  When we
questioned the potential impact of this requirement on Team
Nutrition's goals, we discovered that Team Nutrition officials had
not been attentive to the fact that the agreement was about to
expire.  They acknowledged our concerns, subsequently contacted
Disney, and sought Disney's consent to extend the agreement's
expiration date.  On August 8, 1996, Team Nutrition officials told us
that Disney had agreed to a 1-year extension; but as of September 16,
1996, no contract extension had been executed.  Even with this
extension, under the current terms of the agreement, FCS will be
required to return the materials in September 1997.  Since Team
Nutrition officials had planned to distribute these materials to
schools through February 1998, the requirement to return the Disney
materials before that date may curtail some elements of the nutrition
education campaign. 


      GRANT FOR A CHILDREN'S BOOK
-------------------------------------------------------- Chapter 0:2.4

We found that the process FCS followed in the award of a $25,000
sole-source grant to an author to write a children's book on
nutrition was consistent with departmental criteria.  These criteria
allow sole-source grant awards for amounts less than $75,000, and FCS
contracting officials exercised their authority under these criteria. 
However, the Under Secretary for Food, Nutrition and Consumer
Services, through her involvement in the administration of this
grant, violated federal ethics regulations. 

These regulations prohibit employees from using public office for the
private gain of their friends.\7 Specifically, to ensure that an
employee's actions do not create the appearance of the use of public
office for private gain, or of giving preferential treatment, these
regulations require the employee whose official duties would affect
the financial interests of a friend to comply with certain other
regulations.  These latter regulations prohibit an employee from
participating in a specific matter likely to have a direct and
predictable effect on the financial interests of the friend, unless
that employee has informed the agency's designated ethics official of
the appearance problem and received authorization from that official
to participate in the matter.\8

The grantee and the Under Secretary have known one another for 15
years and are close personal friends.  Despite this relationship, the
Under Secretary did not inform USDA's ethics officials about her
friendship with the author, nor did she recuse herself from approving
the grantee's performance before payment was made to the author, or
from other actions that would financially benefit the author.  The
Under Secretary maintained close personal involvement throughout the
period of the grantee's performance.  For example, her staff
regularly kept her informed of the discussions and developments
between FCS and the author's agent, and the Under Secretary provided
comments to her staff on these matters. 

In addition, under the terms of the grant, the author was to receive
interim payments based on her performance in writing the book.  These
interim payments depended upon the Department's review and approval
of the author's manuscript.  Our review showed that the Under
Secretary was given the manuscript for her approval and that her
Executive Assistant--although not the COR for this effort--personally
conveyed the Department's final approval to the author's agent. 
Moreover, during the development of the manuscript, the Under
Secretary met in person with the author at USDA to convey the
Department's comments on the manuscript. 

To date, FCS has paid the author $11,250.  The final payment of
$13,750 will be made, as specified by the terms of the grant, when
the book is published.  Furthermore, the author's grant application
explicitly stated that the author hoped and expected to earn
"considerably more" through sales of the book.  Thus, the publication
of the book would provide income to the author in two ways:  (1) the
final payment under the grant and (2) the sales of the book.  In this
connection, at least as early as February 1994, the author's agent
raised the idea with the Under Secretary's office that USDA would at
some point purchase a significant quantity of the published books. 

During the period in which the manuscript was being developed, there
were frequent and insistent communications from the author's agent to
USDA about the need for a purchase commitment from USDA for a large
quantity of these books as part of the initial production run.  The
Under Secretary's staff informed her several times about this issue. 
These developments culminated in October 1995, shortly after USDA
gave final approval to the manuscript.  The Team Nutrition Project
Manager and the COR prepared a procurement request on October 2,
1995, for approximately 25,000 copies of the book, at a cost of
approximately $50,000.  However, the FCS Budget Division questioned
the request because, in less than 1 year, FCS would be able to copy
the books itself.  When informed of these concerns, the Under
Secretary replied, in writing, that "the Need in Schools is Now" and
advised that "If [the] justification is adequate, we proceed."
However, when told of the circumstances, the FCS Administrator
directed that this procurement not go forward.  To date, the book has
not been published. 


--------------------
\7 This regulation is found at 5 C.F.R.  2635.702. 

\8 This regulation is found at 5 C.F.R.  2635.502. 


   PREVIOUS WORK REVEALED
   IRREGULARITIES IN PERSONNEL
   ACTIONS
---------------------------------------------------------- Chapter 0:3

In our August 1996 report, we identified a number of irregularities
in the process used to hire the former Project Manager, set her
salary, and collect financial disclosure statements from her and the
former Assistant Project Manager.\9 As we previously reported, FCS
complied with the federal regulatory procedures for establishing,
advertising, and considering applicants for the positions to which
the Project Manager, Assistant Project Manager, and Project
Coordinator were subsequently appointed.  FCS judged each of these
employees as qualified for the positions for which they applied, and
the Office of Personnel Management certified that these applicants
met the general standards for the positions for which they
applied.\10 However, our review of the former Project Manager's
employment application raised several concerns about her
qualifications for the position she held.  These concerns included
the very short period of time she had spent in a previous job that
FCS considered to be crucial experience in judging her
qualifications, her apparent misrepresentation of her academic
credentials, and her lack of answers to some questions on her
application and her incomplete answers to others.  Because FCS
performed only a perfunctory review of the former Manager's
paperwork, it was unaware of the potential problems with her
experience and her academic credentials. 

In addition, we found that FCS did not have an adequate basis for
establishing the former Project Manager's salary.  FCS did not
require her to submit documentation sufficient for it to assess her
salary history, as required by USDA's procedures.  The former Project
Manager may have overstated her prior salary by including in it the
estimated value of pro bono consulting work, payments allegedly made
to her husband, and projected earnings for several months in which
she did not earn a salary.  FCS was unaware of the former Manager's
apparent overstatement of her prior salary.  As a result of her
representation of her prior salary, FCS appointed her to a
significantly higher pay level than might have otherwise been
justified. 

Finally, although the former Project Manager and the former Assistant
Project Manager were required to submit financial disclosure
statements within the first 30 days of their employment at FCS,
neither employee did so.  The former Project Manager did not submit a
statement until a year after it was due, and the statement covered
only a small portion of the period in which she was employed at FCS. 
The former Assistant Manager submitted a completed form 5 months
after being hired, but only after the threat of disciplinary action. 


--------------------
\9 The Project Manager resigned on July 12, 1996, and the position is
currently occupied by an Acting Project Manager.  The Assistant
Project Manager resigned on July 31, 1996. 

\10 The Office of Personnel Management's review of an application is
designed to determine whether the applicant's qualifications meet the
general standards associated with the appropriate federal job series
and grade for the open position.  The Office also compares the
application with the requirements detailed in the vacancy
announcement to assess the applicant's qualifications for the
position.  However, the Office does not replicate the in-depth review
that should be conducted by the hiring agency. 


   FAILURE TO COMPLY WITH AGENCY'S
   PROCEDURES AND POOR PLANNING
   RESULTED IN PROCUREMENT AND
   PERSONNEL PROBLEMS
---------------------------------------------------------- Chapter 0:4

USDA's problems in managing its Team Nutrition procurement and
personnel hiring practices can be attributed largely to the failure
to follow the agency's procedures and the lack of a strategic plan
for the Team Nutrition initiative.  From Team Nutrition's inception,
the Under Secretary has provided continual and specific direction of
the initiative.  The Under Secretary suggested the hiring of the
former Project Manager and made decisions on procurements and a grant
that demonstrated poor judgment and, in some cases, violated federal
procurement law and ethics regulations.  In addition, even though the
initiative has been in effect and operating for nearly 2 years, there
is no documented strategic plan to guide its operations.  Without a
strategic plan in place, FCS has had difficulty in determining how
its contracts would be used to support Team Nutrition's goals. 


      AGENCY'S PROCEDURES NOT
      FOLLOWED
-------------------------------------------------------- Chapter 0:4.1

The Under Secretary for Food, Nutrition and Consumer Services
considers Team Nutrition to be an important initiative that requires
her personal leadership.  Therefore, from its inception, the Team
Nutrition initiative did not operate within FCS' existing program
management structure.  Instead, the Under Secretary placed the
initiative within the Office of the FCS Administrator.  According to
the Under Secretary, she made this decision so that the new
initiative would not be lost among the agency's competing priorities
and so that it could benefit from high-level support and attention. 
The Under Secretary required all Team Nutrition managers to take
programmatic direction from her through meetings and weekly reports. 
She made specific recommendations about whom to hire and how funds
should be spent. 

The agency's normal internal controls and reporting and review
processes were not followed for decisions on Team Nutrition.  For
example, contractors typically select their own subcontractors and
monitor their subcontractors' performance.  This situation did not
occur in the Global contract because the Under Secretary selected
some subcontractors and, in some cases, directly managed their work. 
Consequently, Global had little control over these subcontractors'
work and costs.  As we noted earlier, FCS and Global officials did
not understand what work one subcontractor had done to justify his
$40,000 payment. 


      PLANNING FOR THE TEAM
      NUTRITION INITIATIVE WAS NOT
      ADEQUATE
-------------------------------------------------------- Chapter 0:4.2

Team Nutrition officials were hampered in their efforts to manage the
contracts, cooperative agreement, and grant because they had no
documented strategic plan to guide these actions and measure their
progress.  Without a strategic plan, Team Nutrition officials had
little understanding of the specific tasks that should be performed,
the order in which these tasks should occur, and the way in which
these tasks should be integrated to support Team Nutrition's goals. 
For example, the COR told us that he was unable to provide Prospect
with meaningful, substantive work because Team Nutrition had no
documented strategic plan. 

With no strategic plan to guide their decision-making, Team Nutrition
officials added tasks and funds to the Prospect contract in a
haphazard fashion.  For example, the Team Nutrition Project Manager
decided to add six new tasks totaling $3 million to the contract 1
week before its expiration date for adding new work.  She requested
the work despite the fact that she had informed the FCS contracting
officials 14 days earlier that no new work would be added to the
contract.  According to the FCS contracting officials, they had to
rush to complete the modification before the expiration date for
adding new work.  This time pressure precluded any meaningful price
negotiations with the contractor before work began. 

Similarly, under the Global contract, Team Nutrition officials
directed Global to hire five subcontractors but did not clearly
define the tasks these subcontractors were to perform, including the
products that were to result from these tasks.  This lack of clear
instructions resulted in duplication of effort and uncertain
contributions to the Team Nutrition mission.  For example,
duplication occurred when FCS asked Global to hire two different
firms to develop plans for the June 1995 launch of Team Nutrition. 
These two subcontracts totaled about $50,000, but neither plan was
ever used, according to an FCS official. 


   FCS TAKING ACTIONS TO IMPROVE
   PROCUREMENT AND PERSONNEL
   PRACTICES
---------------------------------------------------------- Chapter 0:5

FCS recognized that it had a number of problems with its procurement
administration and personnel management and has begun improvement
efforts.  In June 1995, FCS took steps to improve its management of
the Global and Prospect contracts.  These steps included establishing
new operational procedures and increasing reporting responsibilities. 

Nearly a year later, FCS formed a Contract Management Review Task
Force that assessed FCS' policies and procedures for contract
management.  The task force recommended changes to improve FCS'
contract management.  On June 21, 1996, the FCS Administrator issued
numerous directives resulting from the task force's recommendations. 
Several of these directives recommend that the agency adhere to
existing policies.  New policies include training requirements for
all staff involved with procurement and the establishment of an
agency ombudsman for staff to contact about potential procurement
improprieties. 

To sustain the Team Nutrition initiative, on July 26, 1996, the FCS
Administrator recommended to the Under Secretary that, in the short
term, Team Nutrition's activities be placed in FCS' existing
programmatic structure--as part of Special Nutrition Programs.  Until
a new director for the Nutrition and Technical Services Division is
appointed, the Deputy Administrator of Special Nutrition Programs
will oversee the initiative's day-to-day operations.  She will report
to the Associate Administrator for Food and Consumer Services, who
will, in turn, report to the FCS Administrator.  However, according
to the Associate Administrator, although the Under Secretary approved
this recommendation on August 8, 1996, the Under Secretary has
continued to provide programmatic direction to Team Nutrition
managers. 

With respect to personnel management, as we reported earlier, FCS
plans to (1) tighten procedures for examining the qualifications of
applicants for senior-level positions; (2) strengthen its procedures
for obtaining and properly reviewing documentation submitted by
applicants that is sufficient for making appointments at salaries
above the minimum rate; and (3) intensify its efforts to collect
financial disclosure statements by aggressively following through
with disciplinary action if its requests are not successful.  In
addition, the Administrator told us that he has directed the Human
Resources Division to conduct an internal review of its personnel
practices and that the Under Secretary had directed the Regional
Administrator for FCS' Mid-Atlantic Region to conduct a similar
review. 

The actions FCS has taken so far to address procurement and personnel
problems are steps in the right direction.  However, it is too soon
to determine whether these actions are sufficient to correct the
problems that we identified. 

In conclusion, we found that the Team Nutrition contracts,
cooperative agreement, grant, and personnel management practices we
examined demonstrate a pattern of poor management and, in some cases,
violated federal procurement law and ethics regulations.  The
problems in the management of the Team Nutrition initiative can be
attributed largely to the failure to follow the agency's procedures
and the lack of a strategic plan for the initiative.  FCS has taken
some actions to address its procurement and personnel problems. 
However, unless better management judgment is exercised and the
agency's procedures are adhered to, these problems are likely to
persist. 


-------------------------------------------------------- Chapter 0:5.1

Mr.  Chairman, this completes my prepared statement.  I would be
pleased to respond to any questions you or Members of the
Subcommittee may have. 


SELECTED SUBCONTRACTORS TO THE
GLOBAL EXCHANGE CONTRACT
=========================================================== Appendix I

                                              Paym  Effective dates of
Subcontractor             Statement of work    ent         subcontract
------------------------  ------------------  ----  ------------------
Donna Bojarsky            Provide support     $45,   4/8/95 thru 6/20/
                           for the Team        589                  95
                           Nutrition launch,
                           including
                           strategic counsel
                           and management of
                           the event.
The Burkett Group         Provide strategic   $40,     1/15/95 thru 4/
                           planning for Team   000               15/95
                           Nutrition's
                           public relations
                           campaign and for
                           coordinating the
                           entertainment
                           industry's
                           participation in
                           Team Nutrition.
Edelman Public Relations  Provide research    $48,   3/1/95 thru 5/31/
                           and development     442                  95
                           for the Team
                           Nutrition launch,
                           participation in
                           strategic
                           planning,
                           development of
                           press materials,
                           and coordination
                           of invitation
                           mailing lists for
                           the launch.
Lake Research, Inc.       Conduct focus       $25,   3/7/95 thru 4/30/
                           group research to   000                  95
                           assess the
                           reactions of the
                           general public
                           and food stamp
                           recipients to the
                           U.S. Department
                           of Agriculture's
                           proposals to
                           change the Food
                           Stamp Program.
Podesta Associates, Inc.  Develop and         $26,   3/1/95 thru 5/15/
                           execute the U.S.    503                  95
                           Department of
                           Agriculture's
                           Great Nutrition
                           Adventure,
                           including
                           strategic
                           development,
                           organization of
                           national events,
                           press relations,
                           preparation of
                           press materials,
                           and follow-up
                           contacts.
----------------------------------------------------------------------

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