Segment 2 Of 2 Previous Hearing Segment(1)
SPEAKERS CONTENTS INSERTS Tables
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CCC Reimbursement of Net Realized Losses
Mr. SKEEN. On page 2 of your testimony you say that farm programs are more market-oriented which significantly lowers outlays. However, the budget this year requires an increase of $8 billion for CCC. What is the need for the increase?
RESPONDENT. The increase in the FY 1999 request for reimbursement of CCC net realized losses has nothing to do with the level of CCC net outlays. Net outlays or net expenditures measure ''cash flow'' which is the principal measure of overall Government fiscal and financial needs for a given fiscal year. On the other hand, net realized losses represent the nonrecoverable expenses that CCC incurs, including expenses such as production flexibility contract payments, conservation program payments, and the market access program.
The reason that the 1998 request for reimbursement was low ($783.5 million) relative to the 1999 request ($8.549 billion) is that the 1998 request made last year asked only for reimbursement of the balance of fiscal year 1996 actual unrestored losses and did not include any estimated losses as in the past. Prior to the 1998 request, requests for appropriations to reimburse the CCC for net realized losses have been based on estimated losses. The estimate could exceed or fall short of the actual amount of loss. Last year, in response to OIG recommendations, the request for appropriations to reimburse CCC for net realized losses covered only the remaining actual amount of the unreimbursement until actually recorded on the books of CCC. Fiscal year 1998 was a transition year to the new policy and only $783.5 million of actual 1996 losses remained unreimbursed. The 1999 budget requests $8.439 billion for the balance of actual 1997 losses. Appropriations to reimburse CCC for net realized losses incurred in 1998, currently estimated to total $8.5 billion, will be requested in the 2000 budget, and will represent the actual losses recorded in CCC's books.
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DLOS
Mr. SKEEN. What part of the projected $250 million in savings from the establishment of the DLOS center in St. Louis is reflected in the FY 99 budget and in which accounts are the savings to be found?
RESPONDENT. The FY 1999 budget includes savings attributable to DLOS of about $95 million, of which $64 million is in mandatory accounts and $31 million is in discretionary accounts. The $31 million is due primarily to the reduction of 600 FTEs that occurred in FY 1997. The mandatory savings is a result of savings on vouchering of property taxes and reduced default and foreclosure costs.
Export Enhancement Program
Mr. SKEEN. The Administration is proposing multi-year funding for the Export Enhancement Program (EEP) with the funding in individual years to be set by USDA. Please provide a list of the annual maximum level of export subsidy funding allowable for each year of the GATT/WTO agreement.
RESPONDENT. That information will be provided for the record. The maximum expenditure levels will be provided separately for dairy products and non-dairy products, because the former are programmed under the Dairy Export Incentive Program while the latter are programmed under EEP.
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Fund for Rural America
Mr. SKEEN. How many FTE equivalent positions are required to administer the Fund for Rural America?
RESPONDENT. Currently, eight full time permanent staff with the Cooperative State Research, Extension and Education Service (CSREES) administer the research portions of the Fund for Rural America. These include six persons who conduct the scientific and programmatic aspects of the Fund (a Deputy Administrator, a scientist, and four support staff) and two positions in the Office of Extramural Programs to handle the substantially increased workload in proposal services and grants management. In addition, several temporary and part-time employees including Panel Managers, students and two employees on reimbursable detail to CSREES from the Forest Service and Rural Development assist in the implementation of the Fund A critical and substantial contribution to the Fund's implementation comes from CSREES professional staff with responsibilities for other programs of the agency. They have served as Fund program managers responsible for developing program plans and the Request for Proposals, selecting reviewers and leading peer panel review of proposals, and negotiating and recommending awards.
Mr. SKEEN. What percentage of the Fund is used for administrative costs versus program costs?
RESPONDENT. Of the total $36.1 million available for research within the Fund in fiscal years 1997 and 1998, four percent or $1.444 million is retained for administrative costs.
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P.L. 480 Title I Program
Mr. SKEEN. The Administration is again requesting a very large cut in the P.L. 480 Title I program. Is this due to a lack of opportunity in Title I activities or to higher priorities in other programs?
RESPONDENT. The proposed reduction in P.L. 480 Title I in 1999 is due to the tight budget situation and the stringent targets for discretionary spending that were established in conjunction with efforts to balance the Federal budget. In developing our budget proposals, difficult choices had to be made among programs in order to meet those spending targets, and P.L. 480 Title I is one of the programs for which reduced funding has been proposed.
Computers
Mr. SKEEN. Is it true that the Office of the Chief Financial Officer recently purchased new accounting software that was not Year 2000 compatible?
RESPONDENT. As you know, the National Finance Center provides financial services to USDA agencies as well as to a large number of other Government agencies. It therefore a operates number of complex financial management systems. The Office of the Chief Financial Officer has been working to upgrade these systems as part of the Department's overall effort to improve its financial management. The heart of this upgrade is the Foundation Financial Information System.
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The Foundation Financial Information System is based on an off-the-shelf software program which was purchased by the Chief Financial Officer in 1994. The first phase of deployment occurred this past October with the installation of the system in two regions and an experiment station of the Forest Service. While the initial deployment was, in fact, a non-compliant version of the software, work is underway to assure that the system is compliant by the end of this summer. I have advised the Chief Financial Officer that there should be no further deployment of this system until Year 2000 compliance is achieved.
Mr. SKEEN. What is USDA's latest estimate of the amount it will spend to correct the Department's Year 2000 problems in fiscal Year 1998 and 1999? Please provide, for the record, a breakdown of these costs by agency.
RESPONDENT. USDA plans to spend about $58 million this fiscal year and about $27 million in fiscal year 1999 to fix the Year 2000 problem. As requested, I will provide the cost estimate by agency for the record.
[The information follows:]
Mr. SKEEN. What will be the cost for each fiscal year from 1998 to 2002 of providing one-stop shopping for the Department's Field Service Centers? Can you quantify the financial and other benefits that will result from these information technology investments.
RESPONDENT. We estimate that the Department will spend about $95 million in FY 1998 to continue the implementation of the Service Center information technology initiatives. This will be accomplished within the available funds of the partner agencies. The FY 1999 budget includes about $100 million. This includes a $30 million increase requested under the salaries and expense account of the Farm Service Agency. These funds will cover the initial phase of the Common Computing Environment (CCE) acquisition for the Service Centers. In addition, approximately $250 million will be needed over the following two years to complete the acquisition of the CCE epuipment and software for the Service Centers. The funding sources for future years have not been determined at this time.
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In terms of benefits, the county-based field offices are being restructured into Service Centers to improve customer service. At the core of this initiative is a shared information system built on a CCE that will provide Service Center staffs access to customer, program, technical, and administrative information, regardless of the agency they represent. The CCE is based on identified business needs and will provide the enabling technology for implementing reengineered business processes to provide one-stop service to customers.
In light of the fact that the Department has far fewer people in the field, the reengineering of the business processes and the replacement of the aging information technology systems are imperative in order for us to continue to provide service to our customers and certainly to improve our service to customers. The CCE will enable USDA to: optimize the data, equipment, and staff sharing opportunities at the service centers; overcome the extreme limitations of the current legacy systems; and enhance customer service into the 21st Century.
Water 2000
Mr. SKEEN. A recent Department report indicated that, over the past 3 years, about $1.3 billion in loans and grants have been committed to Water 2000 projects. Can you explain how these projects differed from your normal water and waste disposal program activity, in other words, what defined them as Water 2000 projects?
RESPONDENT. The Water 2000 projects are those that either provide water service to residents for the first time, those that eliminate significant problems resulting from poor quality drinking water or a significantly diminished supply, or those that require a significant amount of grant funds because of the income levels of the residents.
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"The Official Committee record contains additional material here."
WEDNESDAY, FEBRUARY 4, 1998.
OFFICE OF THE INSPECTOR GENERAL
WITNESSES
ROGER C. VIADERO, INSPECTOR GENERAL
JAMES R. EBBITT, ASSISTANT INSPECTOR GENERAL FOR AUDIT
JON E. NOVAK, ACTING ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
DELMAS R. THORNSBURY, DIRECTOR, RESOURCES MANAGEMENT DIVISION
STEPHEN B. DEWHURST, BUDGET OFFICER, UNITED STATES DEPARTMENT OF AGRICULTURE
Opening Remarks
Mr. SKEEN. Mr. Viadero, let me welcome you here today. We always like to kick off our hearing schedule with your testimony because you are involved with all agencies and programs at the Department and can provide the subcommittee with valuable information as we get ready for agency budget hearings.
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For the first time in recent memory, we may be asking you some budget questions since you are seeking a major increase in your account.
Before you begin, I want to welcome back our returning members to the subcommittee: Ms. Kaptur, our ranking member; Mr. Walsh from New York; Mr. Dickey from Arkansas; Mr. Kingston from Georgia; Mr. Nethercutt from Washington; Mr. Bonilla from Texas; Mr. Latham from Iowa; Mr. Fazio from California; Mr. Serrano from New York; and Ms. DeLauro from Connecticut. The distinguished Chairman of the Appropriations Committee, Mr. Livingston from Louisiana, and the distinguished ranking member of the Appropriations Committee, Mr. Obey from Wisconsin, are also returning members.
With that, I turn over the microphone to you, Roger. I would ask you to be as brief as possible in your opening remarks. I know you are modest and you would not mind doing this, and we will have every word of your statement printed in the record. In your opening remarks, but if you would highlight it, we would appreciate it because our backside cannot take an awful lot of this sitting.
We have tried to read your statement, but this is the longest statement we have received in recent memory. Despite the cost to get this thing printed in the record, it will be published in its entirety.
We are delighted to have you today and you are the first up. We welcome you and you may begin your testimony.
Mr. VIADERO. Thank you, Mr. Chairman. As always it is a pleasure to be here before you.
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Good afternoon, both Mr. Chairman and members of the subcommittee. I am pleased to have this opportunity to visit with you today to discuss the activities of the Office of Inspector General.
Before I begin, I would like to introduce members of my staff with me today. James Ebbitt, Assistant Inspector General for Audits. The Acting Assistant Inspector General for Investigations, Jon Novak. Del Thornsbury, Director of our Resources Management Division. And I am indeed privileged to introduce, on our side of the table, the esteemed Director of the Office of Budget Policy, OBPA is easier to say, Mr. Steve Dewhurst.
Mr. SKEEN. We cannot operate this thing without Mr. Dewhurst.
Mr. VIADERO. I reiterate that, we cannot operate without Mr. Dewhurst, that is correct.
I want to thank the committee for the support it has shown me and the agency during the nearly three-and-a-half years since my appointment as Inspector General. We have tried to work closely with you and I hope we have been able to address some of your concerns.
I am proud to say that in fiscal year 1997 we continue to more than pay our way. In the audit arena, we issued 255 audit reports and obtained management agreement on 1,392 recommendations. Our audits resulted in questioned costs of $900 million. Management also agreed, as a result of our audit work, to recover $19 million and put $267 million to better use.
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Additionally, our investigative staff completed 958 investigations and obtained 703 convictions. Investigations also resulted in $83 million in fines, restitutions and other recoveries and penalties during this period.
Before I move to our special law enforcement initiative, which is the bulk of our budget increase request, and other specific audit and investigative activities, I would like to give to you and the committee an update on our progress in implementing the Results Act and our forfeiture authority.
We have made significant progress in implementing the Results Act in the Office of Inspector General. We have prepared a five year strategic plan that describes our mission and sets forth our general goals and objectives through fiscal year 2002.
We have completed our first annual performance plan under the Results Act which contains specific performance goals and objectives for the fiscal year. We have also developed performance measures to assess our progress in achieving these goals and objectives under the plan, so that we might make adjustments to maximize our effectiveness.
On the forfeiture front, as I described last year, with the committee's support we are now authorized to receive proceeds from forfeiture actions arising from our investigations. While over $11 million in assets has been seized for possible forfeiture to the Government as a result of our investigative actions since the Office of Inspector General was provided with the authority in November, 1995, to date this agency has only received approximately $100,000 from these proposed forfeitures.
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We are continuing to work with the Department, the Office of Management and Budget, and the Departments of Treasury and Justice to ensure OIG receives its appropriate share of proceeds from the proposed forfeiture of assets, as you approved our authority to accept the funds. However, after more than two years, the Department of Justice still has not signed a memorandum of understanding with this agency.
Mr. Chairman, at this time I would like to discuss our special law enforcement initiative included in the 1999 budget. This initiative will be a major undertaking for the agency and we ask your support and the support of this committee to provide the resources necessary for it. I have provided each of you with a handout on the initiative, highlighting our need and what we expect to achieve from this effort.
This special law enforcement initiative is to provide funding for this office to crack down on fraud and abuse in the Food Stamp Program and other nutrition programs, as well as assistance programs such as Rural Rental Housing and disaster and health and safety programs mandating an immediate response from this organization.
Health and safety of food from production to consumer is of special concern because of such highly visible emergencies as contaminated strawberries in the School Lunch Program and tainted meat in the food distribution chain which resulted in the recall of 25 million pounds of ground beef.
Also this office's recent pilot effort, we code-named Operation Talon, in 24 metropolitan areas around the country, has been extremely successful, resulting in the arrest of more than 2,200 fugitive felons and the potential savings of millions of dollars to the United States treasury. This initiative is to allow the agency to expand these efforts nationwide.
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The Department of Agriculture estimates that in excess of $50 million a year in food stamps go illegally to fugitive felons and inmates. Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, also known as Welfare Reform, which the Congress passed for us, the exchange of information between law enforcement and state social service agencies was not allowed.
However, welfare reform provided many useful tools to the law enforcement community, such as making fugitives and people who are violating conditions of probation and parole ineligible for food stamps.
Additionally, the Welfare Reform legislation made it possible for state social service agencies to provide law enforcement authorities certain identifying information from their files pertaining to fugitives.
We initiated Operation Talon, as a result of the tools provided by welfare reform, a law enforcement initiative led by this office and carried out in conjunction with other law enforcement agencies and state social service agencies across the country.
Under this initiative, law enforcement agencies' fugitive records are matched by social service agencies with their food stamp recipient records. Information on the fugitives is shared with OIG and other law enforcement officials who use it to locate and apprehend fugitives.
As of January 13th this year, Operation Talon has resulted in 2,235 arrests of fugitive felons, the vast majority of whom were food stamp recipients or former recipients. These fugitives included numerous violent and dangerous offenders who were wanted for murder, child molestation, rape and kidnapping.
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This is Gail Jackson, we call her Vanna.
We have a map that identifies the 24 locations where we conducted our pilot investigative work. An example of the type of individuals we arrested is a fugitive for selling a large, very large, quantity of marijuana. He was arrested at a sting site in Chicago, Illinois. The individual came to the site believing he had an appointment to discuss his food stamp benefits.
Mr. SKEEN. You lured him with food stamps?
Mr. VIADERO. Yes, sir. Wherever the money is, that is where the bad guys would be.
When he was confronted by a Cook County sheriff's deputy, the fugitive attempted to flee, running down a small corridor where an OIG agent and a local police officer tackled him and subdued him.
This fugitive later threatened to burn down the Cook County detention facility and kill the police officers and the agents. This picture we have now shows the weaponry this one person was carrying, eight knives, 11 assorted lengths of steel pipe, two screwdrivers, one wrench.
Mr. SKEEN. He must have been a pretty healthy individual to carry that much hardware around.
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Mr. VIADERO. In addition to that, he also had the materials for the Molotov cocktails he was threatening to use. Interesting fellow.
Operation Talon is a success story. I say this not only for OIG but also for state and local law enforcement agencies whom we helped to locate and arrest these fugitive felons. Even more importantly, Operation Talon is a success for the American people, who know that their communities are indeed safer, now that these people wanted for murder, rape, drug dealing, child molestation, are off their streets and dangerous criminals have been removed from the streets, and that food stamp benefits go only to those who need them.
By this operation, we took money back in, by preventing it from going out illegally.
On December 18, 1997, Vice President Gore publicly announced Operation Talon during a press conference at the White House. Also present at this announcement were members of state and local law enforcement agencies whom we worked with during the operation.
Another area we are looking at in our initiative is the Child and Adult Care Feeding Program, also known as day care. The objective of the day care program is to ensure that children and adults are being cared for in participating day care homes and centers and receiving nutritious meals.
But we are finding that the delivery of nutritious meals is not always the goal of some of the sponsors. For example, in a day care investigation in California, four executives of a non-profit child care sponsoring organization are awaiting sentencing in March after they pled guilty to mail fraud in connection with their participation in the day care program.
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The organization oversaw in excess of 60 day care centers and 175 day care homes in Los Angeles and Orange County, California. Our investigation disclosed that through various fictitious names and bogus identities two of the executives fraudulently obtained and diverted approximately $2,300,000 in day care funds for personal and non-program related expenses, including the purchase of this $1,500,000 residence located just outside of Los Angeles.
The payment of their children's college related expenses were just some of the other benefits these people derived.
The other two executives claimed and received in excess of $60,000 in child care funds for non-existent day care home providers.
Due to the significant problems found, we have included this work in our nationwide initiative to identify abusive sponsors. These efforts will include sweeps, unannounced targeted visits of sponsors and providers, conducted jointly by Office of Inspector General auditors and investigators with the assistance of FNS and state agency personnel. Because the sweeps place a large cadre of reviewers at selected onsite locations simultaneously and without warning, they will provide an authentic snapshot of day care operations in the targeted area.
Those sponsors found to be abusing the program will be removed from sponsorship, ineligible payments recovered and, if warranted, prosecuted.
Yet another area we plan to emphasize in our initiative is monitoring of electronic benefits transfer, EBT, systems that deliver program benefits. This office remains the lead agency under an agreement with the President's Council on Integrity and Efficiency, to review EBT systems that deliver state administered programs.
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While the majority of Food Stamp Program benefits are still distributed in the form of paper coupons, electronic distribution of benefits is growing rapidly and currently distributes approximately 27 percent of local food stamp benefits.
Currently, 26 states have operational online food stamp EBT systems with eight of the states operating state-wide systems. Two states have operational offline systems, using smart cards, with one of those states using its system for the Women, Infants and Children program. Many of the remaining states have selected EBT vendors and are at various stages of awarding contracts. The welfare reform legislation mandates EBT for all states by 2002.
While EBT has an impressive impact in identifying individuals and retailers who are committing fraud in the program, trafficking of benefits has not been eliminated by EBT, but we believe the number of individuals involved in street trafficking has been reduced.
EBT benefits are less negotiable on the street and thus, less likely to be used as a second currency. We have not found, to any significant extent, the exchange of EBT benefits for illegal drugs, a common occurrence with coupons. Instead, the individuals now exchanging cash and non-food items with recipients are generally retailers or those working with them.
As an example, a significant EBT investigation was completed recently in Baltimore. Maryland was the first state to implement EBT state-wide. In this case, eight people pled guilty in Federal court to a variety of money laundering, conspiracy, and food stamp trafficking charges for their roles in a conspiracy that defrauded the program of $2,300,000.
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The group used eight stores, both authorized and unauthorized, to purchase and then redeem EBT benefits. In the unauthorized stores, ring members obtained the account and personal or PIN numbers from recipients and then relayed the information over the telephone to members in an authorized store. The authorized store had EBT machines which were used to access the recipient's accounts and remove the benefits. The recipient was then paid a reduced amount of cash.
In addition, other ring members purchased benefits on the street and used mobile telephones to call in recipient information. I have a chart showing the break down of the recipients that were disqualified.
This case is also useful in demonstrating how EBT data can identify traffickers. During analysis of EBT data during another trafficking investigation in Baltimore our agencies identified the earlier mentioned conspiracy. We used the system to follow recipients with suspicious transactions to the second group of stores.
We also followed recipients from the second group of stores to yet another trafficking operation in Baltimore. Members of all three trafficking operations were prosecuted.
OIG's highest priority is the investigation of criminal activity which poses a threat to the general health and safety of the public. Because of the high-profile cases in this area during the past year, and our belief that these cases are only examples of possible threats to the health and safety of the public, we have included health and safety as part of our special initiative which must be enhanced.
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Among these crimes are violations involving the processing and sale of adulterated meat, poultry and egg products, criminal tampering with food products consumed by the public, and product substitution, adulteration, or other misrepresentation of food products which are regulated or purchased by USDA.
Office of Inspector General investigations in the health and safety area have traditionally focused, almost exclusively, in the red meat industry. OIG agents traditionally investigated meat packers who clandestinely slaughtered diseased cattle and supplied the meat for public consumption, and processors who surreptitiously mixed tainted meat with wholesome meat, which was sold to the public.
The financial incentives for those who commit this type of crime remain so high, that this office expects to continue responding to these types of criminal activity far into the future.
While OIG continues to conduct these traditional health and safety investigations, recent investigations of health-related criminal activity involving the inspection programs, and other USDA programs, have identified an increasing need for OIG attention.
Last spring, this office immediately responded and took control of an investigation surrounding an outbreak of Hepatitis A in Michigan. This outbreak sickened 190 school children, and was believed to have been spread through eating of strawberries served in USDA's School Lunch Program.
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The president of a San Diego-based food processing company, his company, and the former sales manager, pled guilty to conspiracy in regard to substituting Mexican-grown strawberries for U.S. domestic strawberries in this case.
Sentencing for all defendants has been scheduled for next month. The company, through three brokers, supplied 1,700,000 pounds of frozen strawberries to the School Lunch Program for which the Department paid in excess of $900,000. The Department's contract called for frozen strawberries that were 100 percent grown and processed in the United States.
The company's president certified to USDA that all of the 1,700,000 pounds of product were domestically produced and processed, when in fact at least 99 percent of the product supplied to USDA was grown in Mexico. Also during this past year, OIG was called upon to investigate the circumstances surrounding another life-threatening emergency, this time involving the often deadly bacteria, E. coli.
Knowing this to be the same type of outbreak which had caused fatalities in previous occurrences, we immediately dispatched an emergency response team to the Nebraska meat processing plant which prepared the ground beef patties identified by State health department officials as the source of the bacteria.
While our criminal investigation into this matter continues—and it would be inappropriate for me to discuss our findings at this time—this is a perfect example of how OIG must react—say again—must react to emergency situations involving USDA-regulated matters and the type of activity we plan to expand as part of our special law enforcement initiative.
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We also plan to place special emphasis on the Rural Rental Housing Program, Section 515 of the Rural Development Statute, as part of this initiative. A recent legislative change provided a new weapon to this office and to the Rural Housing Service for use in the fight against program fraud and hazardous living conditions in the Nation's 16,300 rural multi-family housing projects.
With these new criminal sanctions, the agencies can take aggressive action to identify and eliminate the worst offenders—those who convert tenant rental proceeds and Federal assistance to personal use, while neglecting the physical condition of the deteriorating properties.
Owners, agents, or managers convicted of equity skimming or diversion of project's assets can be fined up to $250,000, or imprisoned for not more than five years in jail, or both.
Using automated audit techniques, and in consultation with Rural Housing staff, we will identify Rural Rental Housing projects that have certain risk factors attendant to them, such as chronically underfunded reserve accounts that may point to financial irregularities, and threats to tenants' health and safety.
A team comprised of an auditor, an investigator, and an RHS employee will make visits to high-risk projects. We will follow up with detailed audit and investigative work where indications of fraud or unsafe living conditions are identified.
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To the extent necessary, local officials such as fire marshals and building inspectors may be involved to further corroborate any problems and to provide additional impetus for improving substandard living conditions.
I have a chart showing the dollars involved in the Rural Rental Housing program to highlight the amount of money in this program that must be looked at.
Although the appropriation for fiscal 1998 is approximately $600 million, it goes to support a loan portfolio in excess of $12 billion, a large hunk of change. I also have some pictures depicting some of the problems we've uncovered in a sample sweep.
Exposed electrical wiring problems. Those wirings are exposed to the elements, including large amounts of moisture in the form of rain and snow. Deteriorating siding on a house, with its numerous—pestilence and other forms of rat infestation, and deteriorating siding on a house and a doorway. This is what we paid for.
Mr. Chairman, these are just some of the areas I wanted to highlight regarding our initiative. Successful as they are, activities such as Operation Talon, and other areas in our initiative, are not without price. As of January 13th, 1998, 116 OIG agents had expended nearly 2,500 staff days on Operation Talon alone, and that was just the pilot.
We can continue to recover and save money for the taxpayers only if we have the resources needed to perform our mission. Adequate funding and staffing for OIG makes good sense because we help create a Government that works better, produces positive results, and saves the taxpayers a whole bunch of money.
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We believe the success demonstrated through our pilot work in Operation Talon, and the other areas of our special initiative provide outstanding examples of what can be accomplished if the necessary resources are made available to the agency to perform this critical work.
In addition to these examples of our activities, my written statement also includes additional examples of the results of many of the other audits and investigations of the Department's varied programs.
This concludes my presentation, Mr. Chairman, and I would be very pleased to respond to any questions you or the committee may have.
[CLERK'S NOTE—Inspector General Viadero's written testimony appears on pages 348 through 440. Biographical sketches appear on pages 344 through 347. The Office of the Inspector General's explanatory statement appears on pages 445 through 499.]
Mr. SKEEN. Roger, let me start off by saying that this committee has always been very supportive of the Inspector General's Office as long as I have been a Member. In many cases, we have tried to increase your budget, when most of the agencies were not receiving any increase.
In addition, we have tried to help you out, including language in the last three appropriation acts to allow your agency to retain funds transferred through forfeiture proceedings.
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Now the administration is seeking $22 million for a special initiative, and $3 million in other increases, almost a 40 percent increase to your budget for fiscal year 1999, and you have stated that the Department of Justice is holding you up on receiving funds through forfeitures, and that Justice, after more than two years, has not signed a Memorandum of Understanding with your agency. They must have a reason for not signing the memorandum.
What is going on? Why will not the Department of Justice sign the Memorandum of Understanding with you?
ASSET FORFEITURE
Mr. VIADERO. The best I can determine, sir, it is a control issue, both control of turf, and control of the monies.
Mr. SKEEN. Well, is there any condemnation done on the efficiency with which you have done your job, and so forth, or is this some kind of an idea, an in-house thing, that they will not sign a forfeiture agreement with you?
Mr. VIADERO. At this juncture, sir, it appears to be an in-house thing. I sent a letter, last night, to several Members, and as an attachment to the letter I put a time-line, showing all that we have done. I really do not know what else we can do. I did have a chat, the other day, with the Deputy Attorney General. He was not aware of this issue. He is a recent appointee.
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Mr. SKEEN. Well, is there any faint hope of getting this thing resolved?
Mr. VIADERO. I hope to hear back from him very shortly, sir.
Mr. SKEEN. Well, it seems like you are all on the same team.
Mr. VIADERO. That was my question. Since we are all on the same team, and he only wants to be injured by this, quote, unquote, ''bad guys.'' We stated in our legislative initiative for that money it was a deterrent to crime. But, we also have other issues, for instance, with the Petitions for Remission, where we did receive funds from one petition. We received 40 percent of the funds from the Petition for Remission, when, technically, under the law, we should have gotten 100 percent, and the Department of the Treasury kept 60 percent of the money and gave us forty.
I am still trying to figure—I am the CPA. I cannot figure that one out and I can get two and two to be anything you want.
Mr. SKEEN. Well, maybe that agency was having a little trouble with its own accounting.
Mr. VIADERO. I am not qualified to pass on that one, Mr. Chairman.
Mr. SKEEN. He is not here to defend himself, so we will not get into that. But according to your statement, over $11 million has been identified for possible forfeitures as a result of the work that you and your crew has been doing, and also, your testimony has stated that you have only received about $100,000.
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Mr. VIADERO. And we understand that part of that was in error. To be quite honest, Mr. Chairman, one of the people from Justice, out in one of their regions, said, ''Oh, okay, they are on a list, they can get it.'' They sent us a check.
Mr. SKEEN. For $100,000?
Mr. VIADERO. Yes. And the sad part about that is the people back here in Washington do not know that we got the hundred thousand yet, so we expect them to petition us to give them back the $100,000.
Mr. SKEEN. How much of this $11 million should have been received, if you had a forfeiture agreement?
Mr. VIADERO. Approximately 80 percent of it, sir.
Mr. SKEEN. About 80 percent?
Mr. VIADERO. Yes, sir. A handsome chunk of change to this agency.
Mr. SKEEN. Well, I would like to hear some of the answers from some of those folks over there about why they have not signed the forfeiture agreement, because you certainly have done your work.
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Mr. VIADERO. Well, in fact it would make two of us that would like to hear some response from the people that refuse to sign.
Mr. SKEEN. Ms. Kaptur.
Ms. KAPTUR. Yes. Thanks, Mr. Chairman, very much, and we welcome the Inspector General, and all of your colleagues. Glad to have you here today. I wanted to follow up on the questions dealing with the forfeiture issue.
Did you mention in your testimony the amount of money that has been recovered from the forfeiture fund, or, to date, how much do you view as having been sent there, and never having returned? Is there a total figure you can give us?
Mr. VIADERO. Yes. Approximately $11 million.
Ms. KAPTUR. It is $11 million. I wanted to ask, in your view, knowing this subcommittee, what would be the best we could to help you out? Do you want to take a stab at that? This is your time to shine.
Mr. SKEEN. We know what we could do. We could just hold up their appropriation. [Laughter.]
Mr. VIADERO. Whatever the Chairman sees fit, sir. I concurred with the esteemed Chairman's position before. We are at an absolute standstill.
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Ms. KAPTUR. All right.
Mr. VIADERO. We call over. We respond to every request. For instance, on Petitions for Remission, within one month they changed the sample Petition for Remission three times for us, yet other agencies—quite honestly, I have seen prisoners when, believe it or not—I was still an agent in the street—petitions go to the Department of Justice written on toilet paper from a prison with a pencil, and those petitions were accepted.
Yet we now have to have these petitions sworn to by the agent who was involved in the case. The rules keep changing. There are ever-evolving rules, and they appear to be evolving rules at the Department of Justice. I just do not know what else to say, Ms. Kaptur.
Ms. KAPTUR. Are they receiving funds from other Cabinet level departments as well?
Mr. VIADERO. I understand they are getting it—HHS through FDA. FDA has forfeiture authority as does Fish and Wildlife.
Ms. KAPTUR. Okay. I am not on that subcommittee so I do not really know exactly which fund we are talking about or how it gets money and who contributes to that fund. What level of Justice you are communicating with, or is the fund at Treasury?
Mr. VIADERO. The fund is at Justice. My counsel informs me that the fund is at Justice. Yes?
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Ms. KAPTUR. All right.
Mr. VIADERO. Yes, the funds are at Justice.
Ms. KAPTUR. Okay. So they must be receiving money, through forfeiture, from several entities of the Government of the United States.
So one of my questions as an appropriator is how much is it, and then what are they using the money for?
I mean, do they take the money and then transfer it over to Treasury, or do they use it for internal accounts within Justice's purview? Do you know?
Mr. VIADERO. The legislation that you folks passed for us two years ago was as an equitable share, which means that the fund would receive its operating cost, which statutorily is 20 percent. So if we take $100, the fund would keep 20 percent, and then 80 percent would be disbursed to the agencies that did the work.
For instance, if we did a joint operation with the FBI, the FBI would get 40 percent, we would get 40 percent, an equitable share based upon the amount of work you put in.
Ms. KAPTUR. What work do they do at Justice?
Mr. VIADERO. We routinely have joint operations with other entities, other law enforcement entities.
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Ms. KAPTUR. I see.
Mr. VIADERO. Due to our size, we need help out there. However, Justice said they will not do an equitable share with us. They will only allow us in as a participating agency, which means they set the amount of funds that we get at the end of the year. There is a percentage that is given out and that percentage could be 2 percent. That percentage could be 1 percent of what we put in. We have no say over that as a participating agency. The bulk of the money does go to the larger enforcement agencies—DEA, FBI, agencies of that size.
But we have no say as to how much money we get, and we even agreed to sign as a participating agency, but they even reneged on that with us. The MOU is just not signed.
Ms. KAPTUR. Well, I might respectfully suggest to the Chairman, this might be an interesting area for us to probe into a little bit.
Mr. SKEEN. You can bet on it.
Ms. KAPTUR. Yes. It would be nice to know what happens to the money. Anybody on that subcommittee here?
Mr. LATHAM. If I may, I can assure you that we will be looking into and questioning Justice on this, and making sure that they are held at the same accountability that other agencies or departments are.
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Mr. VIADERO. Thank you, sir.
Mr. LATHAM. Certainly. Or the idea of holding back their appropriation sounds reasonable also.
OPERATION TALON
Ms. KAPTUR. I wanted to move on and we will be happy, on this side of the aisle, to try to be helpful there. I wanted to ask you, on Operation Talon, you said that more than $50 million in the Food Stamp Program goes to convicted felons and prison inmates, and that as of January 13th, over 2,000 arrests had resulted in over two dozen cities.
Do you have an estimated dollar savings from the arrests made thus far?
Mr. VIADERO. From the arrests made thus far, I would think—to date, Mr. Novak informs me, approximately 600 people were removed from the program.
However, if we took all 2,235 and calculated their contribution there, their estimated earning of about $150 a month for those people, then it is between $3–4 million.
Ms. KAPTUR. That is a huge amount.
Mr. VIADERO. That is if we keep them off for the year. So if we add that—and I think the surprising part is as we go through and do our State by State jail matches, with people that are in prison and still receiving food benefits, which, to me, is ludicrous, yet we run into people calling us and saying prisoners have a right to eat, and I thought that the dietician at the individual Department of Correction is capable of giving them food.
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I do not know where they are going to go at 8:00 o'clock at night, if they are going to run to the 7–11 and use a couple of the stamps. [Laughter.]
To me, it is absolutely ludicrous, but people will keep them on there because, needless to say, that does impact the families' amount of food stamps, food benefit that's in there. I mean, we have documented instances—again, EBT is a wonderful tool—it is a wonderful tool—and to be quite honest with you, as it rolls out nationwide by 2002, it is imperative that we stay on top of EBT.
If EBT gets away from us, ladies and gentlemen, we have lost the parade, and it is very important, especially to everybody in this room, because by 2002, all of our pensions will be on EBT. So we want to insure that this system works properly. We have found instances where a person was sitting in jail in Maryland and his EBT card was being used. So we know it is out there. We know what is happening. That cost with the inmates alone is in excess of—if we get the inmate, we suspend those benefits for a year, we take a 12 month period, that's in excess of $24 million. That is a lot of money. That is a direct savings that this operation has to the public. We prevent $24 million from going out there.
FNS—CHILD AND ADULT CARE FOOD PROGRAM
Ms. KAPTUR. Might I move on to the child and adult care food program, 1,200 sponsors, 195,000 children nationwide.
Mr. VIADERO. That is 195,000 homes.
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Ms. KAPTUR. 195,000 homes?
Mr. VIADERO. Yes, ma'am.
Ms. KAPTUR. So we are talking about several million?
Mr. VIADERO. Yes, ma'am.
Ms. KAPTUR. Several million children?
Mr. VIADERO. Yes, ma'am.
Ms. KAPTUR. Do you think that the Food and Nutrition Service has sufficient staff to oversee the number and volume of programs it manages?
Mr. VIADERO. Well, if I can digress a bit, the Food and Nutrition Service has approximately 50 compliance officers. There are approximately 200,000 authorized food stamp retailers which they have to go out and check, that 50 people are responsible for, or about 4,000 sites each, per year. That is an awful lot to put on 50 people.
And some of the neighborhoods, to be more than honest with you, when we did our food stamp sweep, as you will recall back in 1995, I hesitated to send two agents in with guns into some of these neighborhoods, much less just one compliance officer walking down a street going in to ensure that some of these homes are proper.
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And as an example of some of the things we found, we found 22 children in a room, 10 foot by 15 foot, 22 children in a room that is 150 square feet, with no windows and no smoke detectors. It was in a basement. And that was the day care home. That is almost inhumane. It is a little bit more than 6 square foot a child.
Ms. KAPTUR. Have you made recommendations to the Food and Nutrition Service on what they might do to improve the situation and have they followed up on any of your recommendations?
Mr. VIADERO. Well, happily, and very happily, I would like to say, I report that the Under Secretary, Shirley Watkins, in FNS, and Under Secretary Jill Long-Thompson in Rural Development, have jointly signed a memo to the Secretary, signed a memo with me and them, to support IG's intervention into their programs, to go in and put the big ''I'', integrity, back into the programs. I have provided you copies of these memos with my testimony.
Of course, quite honestly, I think unless we get some integrity back in these very, very important programs, we are going to lose them. Somebody has got to go out there—and we have identified the areas of immediate concern, and both of the Under Secretaries concur with that.
That is why they signed a memo with us and we went forward with it to the Secretary. So no longer are we viewed as, quote, unquote, the big bad wolf out there.
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These two Under Secretaries see the need for us to come in, because we have the ability to put integrity back in these programs.
Ms. KAPTUR. Do you think that the changes that would improve can be achieved, administratively, or do you think it will require legislation?
Mr. VIADERO. I think perhaps a mix. Mr. Ebbitt seems to have some views on this one.
Mr. EBBITT. Well, probably a mix, I would expect, Ms. Kaptur, but I think essentially the legislation, and the regulations are there. What we are trying to do, initially, is identify the worst of the worst offenders, and we are working with the State agencies on this, because State agencies have a big role in administering these programs, and frequently they know where the problems are.
But either because of staffing or other issues, they cannot get to them either.
In the California example, it did not work because the person who had that house worked for the State agency administering the program. So you had some internal problems associated with that particular issue.
But they know where the problems are. So we want to identify, again, the worst of the worst and go out and get them out of the program. You know, get them off the program, stop the flow of the money, and then deal with it from a criminal aspect, if that is what is involved.
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Ms. KAPTUR. This places a lot of responsibility on the State, does it not? On the State?
Mr. EBBITT. This program is essentially a State-administered program.
Ms. KAPTUR. Yes. My thought there is that—I only speak for my own State—there has to be oversight on the State, too, and as you develop recommendations—I am thinking of my years on the Banking Committee where we had camel rating systems for all the banks, and that we ought to consider something like that for the various programs that the States administer. I mean, put them up on the boards for public scrutiny as well.
You do that internally, but where there is 10 percent or more fraud and abuse in the nutrition programs, let us say, whether it be those that are in day care centers, or people in prisons, I mean, that is a huge amount of money.
The public is telling us lots of things, that they do not like these programs, and they probably, in their anecdotal experience, come up against different aspects of this. But I do not completely trust the States. So there ought to be a way of holding them up to public scrutiny as well.
Mr. VIADERO. Well, as part of our review, we noted that the States received approximately $88 million in funds from USDA to audit these programs, of which some States returned up to $24 million, to the Department because the States did not use the money——
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Ms. KAPTUR. $24 million out of $80 million?
Mr. VIADERO. $24 million was returned by States because they did not do it or they did their review in conjunction with another program and they did not want to double-bill us, if you will. So that is $64 million out there and we are finding, as we go through, instances where the States have done nothing. So now we are beginning to enter into negotiation with the State, saying, well, you did not spend it, it is our money, how about giving it back to us?
We are starting a billing process, for lack of a better term, and there is a huge cry that everybody should forgive this money.
Well, money was appropriated for a specific purpose, and it was not used for that purpose. Therefore, we would like our money back.
Ms. KAPTUR. I know there are other questions that Members have, and I will suspend my questioning at this point. I thank you very much.
Mr. VIADERO. Thank you.
Mr. SKEEN. Mr. Kingston.
Mr. KINGSTON. Thank you.
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PERSONNEL BREAKDOWN OF INITIATIVE AREAS
Do you have a breakdown of the number of people that you have in each of these inspection divisions? It may be in here. I have been unable to find it, but how many people do you have in Operation Talon? How many people do you have in the rural rental housing investigation unit, and what is the budget for each of those departments? And how much money do you bring in in terms of real money, and how much do you stop in the name of fraud?
Mr. VIADERO. Well, let me try and back into this question for you and answer all your points.
First of all, this was not a funded operation. I just thought it was time, from a management point, to be much more proactive than the typical knee-jerk reactive type activity that this office had undergone in the past.
In order to maintain this proactive process, I said, Where are we at risk? All right. And FNS is at risk. All of the nutrition programs are at risk, both the special feeding programs and the Food Stamp Program.
So we decided to run a pilot project. Operation Talon, sir, is a pilot project. We diverted resources from other investigations in each region, and said let us just see what we are going to come up with on this first go-around.
We ran a pilot project in two very small, very rural counties of Kentucky and we came out with approximately 85 people. We ran that in conjunction with the two district attorneys, the United States attorney, and the State attorney general. It was very, very fruitful.
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So we decided, well, let us see where else we are going to go with this. And again, it is a very costly operation, travel and per diem costs, so we fundamentally picked locations where we had at least suboffices at, because of these costs.
Mr. KINGSTON. But you are asking for money for it specifically now?
Mr. VIADERO. Yes, sir, because I tried it as a pilot. It is so successful as a pilot, and there are in excess of 20,000 fugitive felons out there, that we believe are also on food stamps, we need money to go rockin' and rollin' across the country.
Mr. KINGSTON. Here is my question. Do you have a breakdown of what that would be in terms of funds and personnel, and, say, the same thing for food and health, safety, and so forth, like that? Is that kind of a breakdown possible?
Mr. VIADERO. Yes. We can provide that for you, sir.
Mr. KINGSTON. That would be useful.
[The information follows:]
MISCONDUCT CASES
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Mr. KINGSTON. Now also, switching gears, I am alarmed to see that 21 members of the USDA have been convicted of crimes, 67 personnel actions. Should this committee be alarmed about this USDA, or is that normal for all USDA, and is that normal for Government programs? I think that is 21 convictions, USDA employees, is alarming, and I assume that does not mention the 73 who were mishandling their credit cards, because that is mentioned on a different page.
And is there something that this committee needs to be concerned about?
Mr. VIADERO. In answer to your question whether the committee should be concerned, I think not, and I will tell you why.
In my former job, I was the agent in charge of auditing, and chief auditor for the Federal Bureau of Investigation. That is all internal work, and fortunately, or unfortunately, the darker side of that job was doing integrity investigations, and that is an agency of approximately 20,000. Their numbers exceed this, and that is the FBI. I think we have something to be proud of within USDA as to the overall integrity of employees.
Mr. KINGSTON. So cases like this FSA employee embezzling $945,000 in Texas, those are rare and unusual circumstances?
Mr. VIADERO. I think it is an aberration; yes, sir.
Mr. KINGSTON. And we do not have a big corruption problem in USDA?
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Mr. VIADERO. No, sir, and we handle those—basically, if we get an allegation of one, we handle those immediately.
Mr. KINGSTON. Okay. The credit card misuse. I am very ashamed, as an American, that Federal Government employees would be misusing their credit cards in such a manner. Do you feel that the controls that you have recommended will be implemented and will that stop the problem?
I was particularly bothered that three former employees had kept their credit cards and used them. Has that stopped? And again let me ask you: Is that typical of Federal Government agencies? Or is that something that——
Mr. VIADERO. I think when you look at the total numbers of approximately 100,000 USDA employees, what we are looking at is minuscule, if you put it in scale with other departments and the integrity investigations that are being run there. So far as the credit cards go, we continue to work with the department to strengthen the controls. To that end, we recently had briefed every State director on the Farm Service Agency side and every State director on the Rural Development side, when they came back for training, as to what we, in the Inspector General's office, are looking for, and what our powers are.
AMERICORP
Mr. KINGSTON. Okay. Another question. I see that the USDA entered into a contract with Americorp, which, as you know, is under a lot of controversy always for spending, and I see that the USDA experience with Americorp was what other people have found, that they had inadequate control systems, that they did not comply with audits, they did not do the work that was required, and, in effect, Americorp now owes USDA $290,000. Is that correct?
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Mr. VIADERO. That is correct; yes.
Mr. KINGSTON. How can we help USDA recover that, because that is money that could be going to food safety and protection of people, and so forth, and for another Government agency to be ripping off one agency is ridiculous.
You know, we are always hearing these Americorp stories, and this is one more of them.
Is there something, that you could make a recommendation as to what we could do to make sure that that money is recovered?
Mr. VIADERO. Yes, sir. We will send you our recommendation.
CONVICTED FELONS AND INMATES
Mr. KINGSTON. Thank you. Thank you, Mr. Chairman.
Mr. SKEEN. Before I go to Mr. Nethercutt, let me ask you, again, how many of those convicted felons and prison inmates did you say, sir? 30,000?
Mr. VIADERO. There are about 20,000 fugitive felons out there and approximately 16,000 inmates, presently incarcerated.
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Mr. SKEEN. So you have got 36,000?
Mr. VIADERO. There are about 36,000, sir.
Mr. SKEEN. Is that not wonderful?
Mr. Nethercutt.
Mr. NETHERCUTT. Thank you, Mr. Chairman.
EBT SYSTEM
Welcome, gentlemen. It is always good to have you here.
I was struck by your testimony, Roger, regarding the EBT system, and the data collected so far. We have to remind ourselves, that was a welfare measure, that really came up this last couple years, and I think it is going to prove to be a good way to look at fraud, and decide, you know, what the true efficiencies are in some of these programs.
I looked at page 19 of your testimony on the Baltimore, Maryland experience regarding fraud and abuse, and if I am reading that correctly, it looks like 8.3 percent of all Baltimore households receiving benefits have been disqualified from FSP based on EBT data.
And then you look at another 11,000 plus households. 18.2 percent of the total households receiving benefits are in various stages of administrative action.
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First of all, I assume that is accurate, that those figures and the percentages are accurate, and if I add those up, it is roughly 25 percent?
Mr. VIADERO. Yes, sir.
Mr. NETHERCUTT. How representative of the country is the Baltimore experience? And, you know, maybe you have a number that we are looking at, nationwide, that we can be fairly assured would be ineligible, or would be essentially ripping off the system.
Perhaps I have missed it in your testimony, but I would like to have it restated, if you can.
Mr. VIADERO. I think it would be unfair to project a national figure based upon our Baltimore experience. The State of Maryland was the first State to go statewide on EBT, and I must say, we enjoy an excellent working relationship both with the vendor who handles the EBT system, the State IG, the State Department of Human Resources, and us.
It is a pretty nice relationship wherein if any of, or either of the four involved find a new twist to what is going on, they notify everybody else. So that, we are staying pretty much on top of.
The best we can determine, there has never been a survey conducted—nobody has had time to do a survey as to the fraud. But I think, as I testified last year, that the food stamp fraud and abuse nationwide is approaching $3 billion, which would be about 12 percent of the program.
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Mr. NETHERCUTT. The ineligibility under the EBT data would constitute fraud. Are you including all that in there? That is fraud as you see it?
Mr. VIADERO. Yes, sir, because they had to physically go and get the card.
Mr. NETHERCUTT. Got it.
Mr. VIADERO. This is not part of the error rate.
Mr. NETHERCUTT. And that is real money, obviously, that we are looking at.
Mr. VIADERO. Yes, sir.
Mr. NETHERCUTT. I think the faster we can get that system deployed nationwide, the better off we are.
Mr. VIADERO. That is why, in my statement, I said we have to stay on top of this, because if this one—EBT—gets away from us—we went into Houston, Texas, a few years ago. EBT went in on February 1st, three years ago, and by February 6th questionable transactions were first noticed. We made our first arrests about a month later. It took us some time to locate them, so they were up and running within a few days after the system.
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CONSERVATION RESERVE PROGRAM (CRP)
Mr. NETHERCUTT. I do not have a lot of time but just a couple of more quick questions.
In your testimony, you state that 47 percent of the CRP worksheets for the last sign-up, the 15th sign-up for CRP, you verified—the worksheets that you verified contained errors and inconsistencies.
There were a lot of appeals filed with FSA regarding that 15th sign-up. My State was particularly hard-hit, and we did our best to bring that to everybody's attention.
It is my understanding—and this is anecdotal—but from what I can tell, the misinformation and the miscalculations appeals have been just denied, even though perhaps some of those appeals may have been justified.
Did your investigation reveal anything relative to the propriety of what we see as a blanket denial of this misinformation and miscalculation appeals?
Mr. LATHAM. Mr. Nethercutt, could I reiterate those facts.
Mr. NETHERCUTT. Surely.
Mr. LATHAM. 47 percent of them were wrong. I mean, a 3-year-old flipping a coin could have almost gotten that close, couldn't they?
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Mr. NETHERCUTT. Yes. That is why I am going on Mr. Viadero's testimony, and that is 47 percent of the CRP worksheets for the 15th sign-up contained errors and inconsistencies. At least the ones you verified.
Mr. VIADERO. I am going to ask Mr. Ebbitt to respond to you.
Mr. EBBITT. We worked in approximately 17 States, in both the 15th and the 16th sign-up, and you are absolutely right. I mean, when we were out there in FSA county offices looking at these sheets, all kinds of errors, just loads of errors, and one of the basic problems—and we have been telling FSA this for several sign-up periods—is that each State, with perhaps some justification, is asked to come up with a scoring plan based on environmental concerns and land use issues for each of your individual States, and that probably makes some sense.
But in doing that, it creates, automatically, some scoring differences from State to State, and frequently, county to county.
In Washington State, for example, Mr. Nethercutt, in the 15th sign-up, we looked specifically at Oregon and Washington. As you are well aware, many more acres in Oregon came into the program in 15 than happened in Washington State.
Mr. NETHERCUTT. 80 percent, roughly, versus 20 percent.
Mr. EBBITT. That was primarily because——
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Mr. NETHERCUTT. Border to border in some cases.
Mr. EBBITT. Absolutely. But that was primarily because the scoring decisions were made by State officials within Washington State, and also in Oregon.
What we were pointing out to FSA is that, for example, what happened in Washington and Oregon did not make any sense. Absolutely did not make any sense. And we are trying to push FSA to come up with a scoring process that would be more uniform, that would avoid the county border issue, State to State issue, that we saw in Washington and Oregon.
And by the way, I might add that we have a specific report on Washington and Oregon, that we are going to have ready for you very soon.
WIC PROGRAM
Mr. NETHERCUTT. Yes, sir. I knew that was required and that is great. I am glad to hear that.
Let me just ask one final question, if I could have a moment, Mr. Chairman.
This subcommittee has been very concerned, I think, to a person, about the oversight of the WIC Program. I think we are supportive of the WIC Program. We want it to work well, it has a good reputation, and so on.
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But we are wondering, and we are trying to get a handle on whether it is mismanaged out there in the real world and whether we are losing money by overcharging by WIC vendors, whether, you know, you have had an adequate time, or been given adequate instruction, or jurisdiction to go out and look at the WIC program, and see to what extent it is properly managed, so that we are not wasting money. It is a huge number.
We will have more pressure this year. You know, everyone wants to help kids and wants to help nutrition with young kids. But just if you have not done an investigation to the extent that you want to, tell us. If you have some observations about what your sense of the program is and the propriety of its management, let us know that so we can get a handle.
And third, would you accept an instruction, or an assignment to dig into the WIC Program and determine whether it is meeting the needs of the program, whether it is serving the country properly, the taxpayer as well as the recipient.
I have asked you a lot of questions, but do your best.
Mr. VIADERO. Well, to start, understand that most authorized WIC retailers are also authorized food stamp retailers, and because of the legislation, again, that we got through back in 1996, and you folks passed for us, when a store is suspended because of food stamp fraud, and they are also a WIC store, they are automatically suspended from WIC.
If they are suspended from WIC, they are automatically suspended from food stamps. So that was a large disincentive right off the bat.
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However, when we get down to a prosecutive case on WIC, this is where we start running into the minimum, the prosecutive guidelines of the individual judicial district—what do we have?—92 Federal districts in the country, and the basic WIC voucher is approximately $30. So a United States attorney will not accept—if they have a prosecutive threshold of $100,000, that is a whole bunch of WIC vouchers before we can get through the door.
The best we can do is refer those cases, as we find them, to FNS, and we have the sentiments of you, totally. We would also like to highlight where there is an excellent WIC program going on, and that is in the city of Chicago, where the city of Chicago has taken and opened up basically a supermarket for just WIC, and people are getting bargains there because the city of Chicago is buying in quantity. That is a real dollar savings, and we might want to take another look at that and visit the Chicago experience and see if maybe we want to recommend that nationwide, which is almost like the old welfare issue, because I thought, as a kid, I was always called by my family because I was exceptionally good-looking, but I was the kid that had to bring back the 10 pounds of flour and 5 pounds of cheese every month from the welfare center. But I did get an ice cream cone. And maybe we should go back to that, but we would be happy to meet with you and address it.
Mr. NETHERCUTT. All right. Thank you very much.
Mr. SKEEN. Ms. DeLauro.
EBT
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Ms. DELAURO. Thank you very much, Mr. Chairman.
Thank you very much, Mr. Viadero, and the other members here, thanks for the great job that you are doing, and I offer my congratulations. I read through your Operation Talon book, and you really are doing a job that is very critical and very important, in an effort to try to look at who should and who should not be receiving food stamp benefits.
To follow up on a question of my colleague, Mr. Nethercutt, if we—and I think it was Mr. Nethercutt—we clearly know the benefits of the electronic benefits transfer program. EBT works. We have known that for as long as I have served on this committee. Every time we have these hearings, we talk about EBT, and it is working.
What has always been a mystery to me is why that in fact, since we know that it works, we know that it can get done, that, nationally, we cannot have this program implemented.
Would it make sense—and I have heard that what we do not do here is to provide States with the wherewithal, if you will, to set up such a system, or even—I hate to use the word—a mandate to do such a thing, and then if you do that it is an unfunded mandate.
The long and the short of my question on this issue is, should we, in the Congress, do more than encourage the States to implement EBT. Say we are going to do this, nationally, and in fact we are going to match your effort or provide some effort to do something with you, so that in fact we get you on line, and we then can attack the problem nationwide, instead of ''hit or miss.''
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Give us some advice about what we should do here.
Mr. VIADERO. Well, first of all, on the welfare reform, every State has to be online by 2002.
Ms. DELAURO. Are they getting any assistance from the Federal Government to do that?
Mr. VIADERO. They get matching money from this Department. Our bigger issue is to get the controls on it. But the States have to find their own vendor. That is where many of the States have created alliances, because they feel that they can go in this with other States, in a joint venture, so to speak. It spreads the costs out. That is fine.
From our point of the controls, we cannot understand why the people that—and this goes back to Treasury now—do not go for the card specs, the increased card specs on the individual EBT card.
For instance, a basic EBT card, just a plain vanilla EBT card, with no controls, costs $1.70 on average. That is per household.
An EBT card with whistles and bells, state of the art fraud controls, state of the art fraud profiles being built into the computer systems that run these in the States, costs $1.92.
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For 22 cents, less than the cost of a first-class stamp, of which the State will only pay 11 cents because USDA funds the other 11 cents. We cannot get that through. I think that is where you all could really give us a hand, on card specs, the security specs on EBT.
Ms. DELAURO. Okay.
Mr. VIADERO. Because the better the specs, the higher the quality of the fraud profile that we develop with the vendor.
These companies can kick us out a fraud profile on anybody. For instance, Mr. Thornsbury here received a call that I was making calls from Ohio to Lyons, France, on my calling card, my AT&T calling card. I was in New York the week before, and I was at Penn Station, and somebody took my PIN number off the card.
Now AT&T has my number in there. I call two numbers, basically. I call the office and I call my house when I am on the road. That is it. And they are saying that this guy is, first of all, he was just in New York. Now he is in Washington. What is he doing calling France from Ohio the same day? Pretty good catch.
Mr. Thornsbury will say, we had a great deal of discussion, because he called, and said, ''Did you give your number to anybody?'' A great deal of discretion, I would like to say.
Ms. DELAURO. He was careful. It was a smart way to phrase the question. [Laughter.]
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Mr. VIADERO. We could not work without him. But there is an example of how when business is involved and it is business money, they watch it, because AT&T ate those calls. Actually, we all ate those calls because I am sure they passed it on to every one of us.
Ms. DELAURO. Well, and what is it? 2002, or 2000?
Mr. VIADERO. 2002, ma'am.
Ms. DELAURO. 2002. We will go back. You know, sometimes we are penny-wise and pound-foolish here. We certainly do know the system works, and again, I sat on this committee, not the last session, but prior to that time, and all these years and when we know that something is working and it can be working effectively, I don't know why we have to wait another four years to get EBT on line across the country.
WASTE AND FRAUD
Let me ask another question. Some of my colleagues have brought several programs up where we appear to have some defrauding or opportunities to look at how we can cut back on waste and fraud.
Is your mandate, in terms of examining some of the areas that this committee deals with, stretched to crop insurance, rural housing, commodity programs, and are you providing us with information about those programs, and the level and the dollar amounts of fraud, or, if you will, returned to the Federal Government?
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I recall a program, again, in this committee, several years ago—I think it is the Rural Housing Program—where we discovered that in fact $11 billion is owed to the Federal Government from loans that were made many years ago, if you will, and the rest in the Midwest, and that at the time the stipulation was, in terms of the return, to come from non-farm income.
Well, there were a number of folks out there who were sitting with millions and millions of dollars—the returns were supposed to come from farm income. They were sitting with millions and millions of dollars in non-farm income and used the view that they could not pay the Federal Government back those billions of dollars because, technically speaking, they needed to do that only from farm income.
My point is that we are dealing with a whole variety of programs and what I frankly would like—again, I would love to have the opportunity to sit down and talk with you about: crop insurance and eligibility and how we may be being defrauded there, the commodity programs in the same way, and in the rural housing area.
You clearly have done a great job in looking at some of these areas and have the capacity and the will to really go after some of this stuff and I think it would be very useful information to this committee. I, in particular, would like to have that, so that we can in fact get a sense of the scale of fraud that is going on out there in the wide range of programs that we have jurisdiction over.
Mr. VIADERO. Well, of course we'd be more than happy to meet with you and any other Member of the committee on any issue involving this really great Department. This really is a great Department, Agriculture.
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We have identified some of these; however, I do not want to sound that my cup is empty. Actually, I was going to ask that OIG be put on the combined Federal campaign list.
However, even with the funding, if we were to receive all this funding, that would only bring our staffing up to what it was in 1993.
I think it is important to note, over the last two years, we have dropped 135 bodies just through budgetary restraints.
Ms. DELAURO. Right.
Mr. VIADERO. And I guess what I am saying is I think we have demonstrated just through our pilot projects of what we are capable of doing.
Ms. DELAURO. Right.
Mr. VIADERO. To me, it just puts integrity back in, not only for the Department, and not only for Government in general, but also to the guy and the gal who is picking the bill up on the street, that they are getting a better shake for their tax dollar.
That somebody really cares, and is watching for them, and I think that is what our job is.
Ms. DELAURO. Yes, and as I say, I watch. Again, it is years ago, and I would be happy to get an update on thatprogram—there was a 60 Minutes special, or something, there was a gentleman—and I do not know where he was from—he collected airplanes, old airplanes, and it was very startling. You know, you are trying to get yourself ready for the next day, and trying to kind of chill out. I was watching this. He was sitting there with his airplanes in the back of him, explaining how he could not pay the Federal Government back, because technically, he could pay back out of farm income.
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He had millions and millions of dollars in non-farm income, and he was collecting airplanes, and the Federal Government was taking the hit, and that person on the street was taking a hit for doing that.
So what I want to do is take a look at what we need to do here to be able to recapture some of this money that is out there, that in fact this committee could use to do some other things, because we usually get short-changed in the process on this committee, when it comes to the budget, and we ought to be able to collect some of that dough that is out there.
I thank you very, very much. I have several other questions. I will submit them for the record, in terms of what we can do in food and safety with the expansion of what you are doing on the E. coli. Thanks very, very much for your work.
Mr. VIADERO. Thank you, ma'am.
Mr. SKEEN. Mr. Bonilla.
Mr. BONILLA. Thank you, Mr. Chairman.
Roger, I would like to point out, as you and I have discussed before, I really like the way you point out the savings that your office produces, whether it is through an audit or through a particular operation like Operation Talon and the funds recovered. I think it is important for us to continue on this subcommittee to understand how you are almost, not really, a revenue producer for USDA and that is very important for all of us, I think, to keep out in front of us for us to understand how we get a good bang for the bucks that we put into your office.
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You are doing a good job and from the first day of being on this subcommittee, it is only my second year of doing this, it has been very enlightening every time we have had a meeting on this.
FOOD ASSISTANCE PROGRAMS
I would like to follow-up on something that has come up before already with the child and adult care feeding programs. Since that first came to light with all the fraud and abuse that the program is experiencing nationally, I went back and checked with our State and the Texas Department of Human Resources it turns out, we learned, is going above and beyond even the USDA guidelines to try and ensure that those are the sponsors and the contractors are legitimate.
According to the information of the State as a result of their actions I have some figures here: 37 day care home sponsors have been declared seriously deficient; 389 day care homes have been declared seriously deficient by their sponsors; six sponsors and 77 day care homes have been referred to the District Attorney for suspicion of fraud.
The question is, have you had the opportunity to review the actions taken by the State of Texas and, if so, do you think they are sufficient to guarantee the integrity of the program at least in the State of Texas? And if States are taking proactive stances like this to try to ensure that the program is clean, is your office working with proactive States on initiatives like this?
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Mr. VIADERO. Well, in fact, we always deal with 20 percent of America, the great State of Texas. We have a regional office down there and the Regional Inspector General for Audit has met with the Texas Department of Human Resources and Education who has oversight of these committees.
We have a great working relationship all the way around, both food stamps with the IG, and the different sheriff's offices. As noted in Talon, we did work up in Ft. Worth and in Dallas. We do not, at this time, have any issues with the State of Texas because the State of Texas seems to have a handle on it.
And, again, it is due to, shall we say, trust and a good working relationship between us and the State. I think the State of Texas and this office and this Department share a common goal, provide a quality level of service to the people, to the constituents.
And in line with that, when Texas has an issue that does belong rightfully to the Feds, they pick up the phone, they call us and likewise. So, we have a good working relationship. We do not have any horror stories we can share with you about the Lone Star State.
Mr. BONILLA. That is good to hear considering the suspicion of fraud and abuse and I know you are, obviously, looking hard into this program right now nationally. What is your view on the proposal by the Administration to increase funding for this program with all these pending questions that are out there right now about fraud and abuse?
Mr. VIADERO. Well, this particular program is not part of the President's initiative as I understand it. We are only looking at it from USDA, Food and Nutrition Services, and basically as I understand it, this is funded out of the education committee of the Senate.
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We thought something was wrong. We took a selection of 12 in a sample. Eleven of the 12 were just absolutely abysmal. Four of those are under criminal investigation. We expanded the sample to look at another 12 or another 1 percent and so far just for Fiscal Year 1998, we are up to 21 criminal cases, active. So, this is just mushrooming.
There is only one State that does not use the sponsor system and that is the State of Virginia. The State administers the program, itself.
And we did a limited review in certain day care centers that came in through a hot-line, if you will, a complaint and we looked at those and we found some minor administrative things, nothing of any criminal intent. Sloppy bookkeeping, wrong type of fruit served or whatever, goes with the particular meal but we did not find anything large.
Mr. BONILLA. Now, the numbers we have seen in the budget, Roger, do call for an increase in funding. Is it your view that this should be considered, an increase, while you are looking into the depth of the fraud and abuse across the country?
Mr. VIADERO. Well, based upon what we are finding, sir, we are doubting, we are questioning of the $1.7 billion, we are questioning $1.7 billion. And that this is sort of like being the grim reaper. We are not the good news guys, so to speak. It is like being a professional mourner. We just have not found any ones that are working yet. I mean that is the bottom line to be quite honest with you.
Again, we are selecting those based upon our developed and statistically valid, fraud profile. So, we are only picking the players that we think are bad. And so far, we are 100 percent on the bad players. Actually we are better than 100 percent.
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Mr. BONILLA. Moving now to the food stamp program and operation Talon, tell me what you think of the finger imaging system? I am not sure exactly how that would work. If you could explain it and tell me what you think about it I would appreciate it.
Mr. VIADERO. Yes. The finger imaging system they were thinking—on the card again, this goes back to the card specs—of having an image reader which would—for identification purposes in a criminal case you need a minimum of ten points of identification on a print.
They were thinking of three to five. And that classification, that particular code would be imprinted in a card. So, when the individual goes to the store the card goes through the machine at which time the person would take a finger and put the finger on a card reader.
Now, it is not enhanced like, you know, criminal justice information system in Clarksburg that the Bureau runs, but it would be sufficient to have that card, if you will, match the print of the person or the person match the print on the card.
The issue there comes, how do we—let us say it is your grandmother's card, you send your grandson for food, it is not going to match. And then that would get into, you know, how well the person is known with the retailer.
Also, Los Angeles is looking at it and it has helped them on duplicate participation such as L.A. County and Orange County, looking at the matches there.
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Mr. BONILLA. The technology is good enough though to be accurate with reading that finger?
Mr. VIADERO. Yes. Well, I mean they are only looking at three to five points. So, at least they rough it down to the nearest billionth of a person, if you will. I mean it would not hold up for a criminal case. You would need the full set of ten prints and at least ten points on each finger of the count.
But, yes, it would help. Again, it is the amount of money that we want to invest in it. The dollars seem to always be the trade-off on it.
STATE MEDIATION GRANTS
Mr. BONILLA. Well, I guess we will be hearing more about that in the future in terms of cost and how to implement it.
Roger, my last question is about something that is of concern to a Texas member, as well, on the authorizing committee and it is about State mediation grants that you have been investigating. As you know, the Texas program was not recertified this year based on your recommendations and the ongoing investigations in your office. And we all understand that that needs to be done but this has been going on for some time now.
My question is, do you have a time-line of when you expect to have your investigations complete? You have also included five recommendations to FSA in your testimony for improving the program. Can you expand on these recommendations? Tell us if the States are in compliance already, with any of the five recommendations? And if any of this has been resolved by FSA?
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Mr. VIADERO. Okay. I am going to ask Mr. Ebbitt to join in, in a second here.
One of the people subject to mediation raised an appeal to the court of appeals and it presently sits in the Fifth Circuit Court of Appeals.
That is where that sits. So, everything is at a standstill until the Fifth Circuit rules on it, but it is still an active case being covered in the——
Mr. BONILLA. There is no speculation on the time-line, then?
Mr. VIADERO. No, sir.
Mr. BONILLA. It is in their hands?
Mr. VIADERO. I never speculate on time-lines that a circuit court would do. No, sir. On the recommendations maybe Mr. Ebbitt can fill us in.
Mr. EBBITT. One of the primary recommendations, Mr. Bonilla, was for FSA to more clearly define what is mediation? Because what is happening is that one State defines it one way and will offer mediation services and bill the Department when, in fact, if you read Webster it is not mediation. It is providing financial advice to a farmer that might come in; it is helping the farmer fill out the application form when, in fact, that is what the USDA county office employee is supposed to do.
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So, it is differences from State-to-State and one of our primary recommendations was to get them to clarify that. What are you going to pay for so, that States will be consistent in their claims. They are working on the regulation. They are not working as fast as I think we would like to see them but they have some draft regs but they need to get them out.
Mr. BONILLA. I appreciate that. And my closing comment I am just going to bring up again as I brought up before, Roger, the situation in my district and Reeves County—we are hoping that in a couple of weeks you will complete your work, maybe you can give me a smile if you think that is going to happen.
Mr. VIADERO. I think in a couple of weeks we can get back to you and I also thank you for your note the other day.
Mr. BONILLA. Thank you very much.
Thank you, Mr. Chairman.
RURAL HOUSING
Mr. SKEEN. Roger, last year when we had this bill on the House floor and again in conference, we spent an awful lot of time on the rural housing program, particularly in Gault, California.
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And we asked for an audit of the rural housing program in Gault. Have you found any violations of the law in the program and tell us what you have found, first of all, and then maybe we can get an editorialization out of this thing. Should we continue to try to provide the type of housing in Gault?
Mr. VIADERO. Well, sir, we went in and we reviewed the policies and the procedures that the Department has and compared them to the vendor, this was the Gault issue. And we did not find any issues in the policies and procedures that were followed.
I am going to ask Mr. Ebbitt again, he has taken a beating today, I am going to ask Mr. Ebbitt again to join in because he is very familiar with this one—but some of them have to do with the Mello-Roos tax.
In California, by nature, is a different entity, if you will, tax-wise, than many other States.
Mr. SKEEN. Yes, we found them to be quite different.
Mr. VIADERO. And if you take a plot of land in this case for $35,000 and add on their mandatory Mello-Roos tax of $27,000, before you can lay a brick or clear a tree off the property you already have $62,000 invested in the project. And that is an issue.
Mr. EBBITT. Well, Mr. Chairman, we have met with the mayor of Gault several times. We have talked to the California State Director for Rural Development, rural housing and there is a night and day difference between their positions. If you talk to the mayor you get one story, if you talk to the Rural Director you get another story.
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I am not really sure what the answer is. We are still there looking at it.
Mr. SKEEN. You got some good stories, though.
Mr. EBBITT. We got some excellent stories. It is a real contentious issue, as you are well aware. And as Roger indicated, we are talking about sweat-equity. This is a process where the individual, the project is designed to bring people into good, decent housing where they do not have a down payment to get in. It is a great program.
And you have got the self-help project that tries to help these people and run it. And then the borrowers come in and they actually help build the house. And that is their capital investment into the project.
But, as Roger indicated, when you start with a lot that costs $35,000, when you add onto that a local taxing situation of $27,000 so the project starts at $62,000, the house ends up costing approximately $110,000, $120,000. Half of the investment is in the lot and the tax.
It raises some questions, at least in our minds, as to the economic feasibility of the concept of what we are doing there on a sweat-equity project.
And I do not know what the answer is. Again, if you talk to the State Director in California he will give you a lot of reasons as to why all this makes sense. On the other hand, if you talk to the mayor and the community you are going to hear a lot of reasons from the city's standpoint as to why it does not make sense.
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But, again, what we are really looking for is that you have legislation, you have a regulatory package that says this is what the Department should do in considering these applications and in making the approval. So far we have not found a violation of either legislation or the regulatory package. But I guess the quandary that everyone is having here, including the auditors that are on-site, is, you know, does this make sense?
And I think what we are going to try and do is make some comparisons of the cost of other projects like this, plus, compare that to the regular 502 program and see what those costs are and lay them out on a sheet of paper and, I think everyone is going to have to make their own judgments.
Mr. SKEEN. As I gather, you have found a very extraordinary situation.
Mr. EBBITT. Yes, sir, we have.
Mr. SKEEN. It goes way beyond the bounds. We had no idea that it would ever occur because it is unique to a place like California.
Mr. VIADERO. But, again, we do have this open door, if you will, with the Under Secretary in Rural Development. And once again, Jill Long-Thompson jointly signed a memo for all the programs for us to look at them. I guess what I am trying to say, folks, is that in the three-and-a-half years we are here, at least we have a dialogue with all of the major mission areas within the Department. Something that when I came in here, we did not have. And it is due to the fine work of everybody that is attending from this office, and not necessarily the speaker here. But these guys and gals have really done a super job here.
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And without them, this whole Department would be a worse place.
Mr. SKEEN. I think you all are all to be commended for the work you have done. It gives us some kind of security that we have at least some way to find out what is going on with the program, how well they are administered. You have done outstanding work and you have got an outstanding team, too, to work with and we cannot do an awful lot but we appreciate it.
Mr. VIADERO. We loved it.
USDA OPERATIONS STATUS
Mr. SKEEN. Ms. Kaptur.
Ms. KAPTUR. Thank you, Mr. Chairman.
Mr. Chairman, I just wanted to ask Mr. Viadero several other questions. You have been I.G. for three-and-a-half years?
Mr. VIADERO. Yes, Ma'am.
Ms. KAPTUR. Comparing the way the Department operates today in your area versus five, six, seven years ago, is it my sense that perhaps the IG's office was extremely busy but responding to individual emergency situations? If there was a red meat plant that you got word of and you would dispatch someone?
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Was it more of an ad hoc operation versus today where, in addition to that, you have tried to identify certain comprehensive initiatives that are nationwide?
You are trying to get at fraud and abuse through such means as Operation Talon, for example. And perhaps that kind of comprehensive initiative might not have gone on in past years? I am trying to hear what you have said during this hearing so that I properly understand what happened. I like history, so I like to understand where we have come from and where we are going. Is that a correct characterization of what is happening?
Mr. VIADERO. Yes. What we have tried to do here at the management level is to make this a more proactive organization, get a better bang for the buck, right? Not work better. These folks have always worked very fine. But work smarter. Use the computers, use the tools that we have, the EBT, our own systems, our own computer systems, which I would also like to say already meet the year 2000 requirement, thank goodness. So, we are compliant.
But in line with the red meat issue, the only thing I would say is if there is any food problem we drop everything and we respond to that food problem. During our Hudson Packing situation, FSIS had their SWAT team out there which consisted of two individuals. I had 16 agents and auditors out there.
As a matter of fact, we are still out there conducting active investigtions throughout the Midwest and the West on that particular case. So, we cannot say too much on it because of the court action.
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But we are the bulk of the Department's response team when we go out there.
Ms. KAPTUR. And how many total personnel do you have nowversus four years ago?
Mr. THORNSBURY. We have 732 permanent employees on board right now. We had almost 900 then.
Mr. VIADERO. We have taken the cuts—and again, I do not want to say how great they are or anything, but these men and women here really, I think are, they are out there, they are riding the road and I think they are bringing the toll money back in here.
FOOD ASSISTANCE PROGRAMS
Ms. KAPTUR. I wanted to ask you on the child and adult care food program, I appreciate your bringing that to our attention. And in looking at page 13 of the testimony where you say you reviewed 12 sponsors in ten States, and 11 of the 12 were seriously deficient. Then you said you picked another dozen this year and it appears as though it is equally problematic? Did I hear you say that?
Mr. VIADERO. That dozen is not as strong as the 21 criminal investigations.
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Ms. KAPTUR. The first dozen or the——
Mr. VIADERO. No, the second dozen.
Ms. KAPTUR. The second dozen?
Mr. VIADERO. Yes, Ma'am. So, it has blossomed from 12 sweeps and we already have 21 open criminal investigations. So, again, meeting our fraud profile now—I mean I do not want to give a blanket condemnation of every day child care center in the country but those that meet our fraud profile far exceed even our greatest expectations.
Ms. KAPTUR. One of the questions I have of you in this area of child care and adult programs, and even to some extent some of the work you have done on food stamps, is it your sense that as somebody who worked over at the FBI that some of this fraud is not just local in nature but rather there are networks of people that are connected at either the regional, State or perhaps national level that are involved in fraud? Or is it largely a lot of petty thieves at the local level?
To the extent that you have gotten into it thus far, what is your sense of what is out there?
Mr. VIADERO. On the food stamp cases, it would be unfair of me to talk about the day care center since we are still wading a fight into these investigations ourselves.
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On the food stamp issue we have some major investigations ongoing that due to various court proceedings we cannot talk about, that go through many States. And that there is a system there, there is a network.
Ms. KAPTUR. You are talking billions of dollars.
Mr. VIADERO. And again, unless—if we took the historic view of going out and just doing a person who is dealing food stamps on the street, that is historically what was done. And it was a good case because if you were on the street you saw an immediate response. But now that we have the computers, we have the technology and we now have the ability to sit back, if you will, and follow these people from one site to another site.
In other words, go up the chain. There are food stamp cartels, if you will, if this was a drug case.
Ms. KAPTUR. I was reading about this fellow that was arrested in Chicago and with all those weapons. He had come in for a food stamp investigation. Why would someone who is trafficking in drugs, and obviously making money off of it, fully loaded with weapons, come into an office about food stamps? I mean this seems like such a little fly on the carcass of an elephant. Why would anybody in that situation come in to talk about food stamps unless it were connected to something beyond himself? That is my question.
Mr. VIADERO. Well, I always use a quote. You know, I used to teach the budgeting course at the FBI Academy and I used to tell the students it is not the money, it is the money and that really holds true. These are all crimes of greed.
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And we find that although these felons, these fugitives will not necessarily give their correct name, date of birth or address to the constabulary, to the law enforcement agencies, they are always going to give them the correct name and definitely the correct address to those who are giving them money.
And this is why we really applaud the efforts of everybody up on the Hill here in passing welfare reform. Because this allowed us to compare the fugitive records against the recipient records and now we have the correct address.
The Chicago scenario was simple. We sent out letters. We have cheated you. You are owed more money, come on in and see us. And, you know, what? A bunch of them came in and saw us. And we are very happy about that.
We are also very happy that in another case we have a serial murderer that we just convicted this week in a state court also wanted for the homicide of a police officer and he is going to be returned to the State of Florida. And, Ma'am, we cannot tell you how many homicides this individual has done but we were able to do this strictly through the legislation that you folks crafted here.
So, from the cops and robbers side of OIG, we thank you because we get some really bad people off the street. I mean just in that sweep we got 10 child molesters off the street, that is important especially for those of us who are parents. That is a heavy one.
Ms. KAPTUR. The crime rates are going down so we, obviously, have to credit the Department of Agriculture and the OIG's office with that.
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Mr. VIADERO. And not modestly either I would like to say. [Laughter.]
Mr. SKEEN. We are an equal opportunity employer.
Ms. KAPTUR. I want to make sure that I have heard this correctly. You do not have to go at length in answering it but within the USDA with Jill Long Thompson you have talked about some type of memorandum, with the Food and Nutrition Service. Do you feel confident that whatever that is, that memo, that we are going to be able to get the kind of oversight investigation in the Food and Nutrition Service programs that we need? Or are we going to have to give them additional staff beyond the 50 that they have?
Mr. VIADERO. I did not say.
Ms. KAPTUR. Did you not say that you had a memo?
Mr. VIADERO. I have a memo of understanding where——
Ms. KAPTUR. Does that take care of the problem?
Mr. VIADERO. No, Ma'am. Where the understanding is that FNS says we have a problem in these programs, we want you to look at them.
And until we had Ms. Watkins, and Ms. Keeffe, her predecessor who was the Acting Undersecretary, we were not necessarily welcome at FNS.
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Ms. KAPTUR. Okay. All right.
Do you know whether the Head Start programs across this country, if the Food and Nutrition Service makes them eligible for receipt of meals? Are Head Start programs like some of the child care programs, do they apply for meal service?
Mr. EBBITT. I do not directly know the answer to that question. I suspect they are though. I mean we have Head Start operating in various locations and I suspect very much so that they are getting USDA meals.
Ms. KAPTUR. I would only ask that you check into that and let me know. You do not have to make it part of the record but if it is such that you do find that they are eligible and they fall into this Food and Nutrition Service I think you should take a look at it.
I do not know who looks at these folks.
Mr. VIADERO. Well, you know, we would also like to say that by moving the calendar up it is most beneficial for us on this side of the table because we have our semi-annual audit planning conference where we bring in all the regional Inspectors General, all the desk officers from the various audit units and we discuss exactly where we are at the mid-year and what is coming up for the second half. Because we are going to have to adjust some priorities. And I think we will address that at that time, too.
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Ms. KAPTUR. If you are doing work with the Food and Nutrition Service and that might be a sub-component somewhere down the road through linkages it has with HHS, do not forget it.
I cannot even imagine how many sites there are around the country there. There is 195,000 sites for child and adult?
Mr. VIADERO. Yes. That is just the individual homes. We have about 230,000 sites if you include the centers. So, it is a bunch of locations out there. It boggles the mind.
RURAL RENTAL HOUSING
Ms. KAPTUR. On the rural rental housing you talked about 17,000 projects and I am curious what percent of the projects have you investigated to date? You have pulled up some of the examples here, but of the whole portfolio what percent and from that percent, what have you recovered in misused funds? I am trying to get a sense of the context here.
Mr. VIADERO. On the investigative side for Fiscal Year 1996 to 1997 we did 16 investigations.
Ms. KAPTUR. Sixteen, okay.
Mr. VIADERO. Yes, Ma'am. We had 12 indictments and received 12 convictions and recovered through monetary results, fines, et cetera, et cetera, $6.4 million.
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So, that is about a half-a-million-dollars a case recovery. However, this initiative that we are talking about, we are just going out as we speak. We are having a planning conference in two weeks and Jill Long-Thompson is attending it.
We just finished the day care people, our folks that are doing that review. And that we had a planning conference in August on, for this present go-around that we are doing right now.
The rural rental housing one is scheduled for two weeks from now in Chicago and Ms. Long-Thompson will be attending the conference. She thought it was important to meet the auditors and the investigators. And her personnel will also be in it and she and I will be out there giving them, let us do this one for the Gipper, if you will, you know, the pump-them-up speech and tell them what we expect of them and what we would like to find.
In line with that, we have targeted 12 States and approximately 43 projects in each State.
WASTE AND FRAUD
Ms. KAPTUR. Of these programs you are looking at, whether it is the nutrition programs, whether it is this housing program, do you have a ballpark judgment as to which might be more subject to fraud?
Mr. VIADERO. I cannot give you that. That would just be——
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Ms. KAPTUR. Because the nutrition programs you are saying at least 10 percent.
Mr. VIADERO. On average, that is what we are finding.
Ms. KAPTUR. And the housing, in the 515 housing program?
Mr. VIADERO. I really do not know yet, but as soon as find out and get a handle on it, I will be happy to report to you.
Ms. KAPTUR. Because you know in the banking industry we would always say, well, if they get over 1.5 percent defaulted loans we got a problem. But here you are talking 10 percent. These are pretty significant numbers for publicly managed programs.
Mr. VIADERO. Well, if you were to take a quote from the National Crime Information Center, NCIC, and the book that, again, my former employer publishes on the crime statistics, white collar crime is historically reported at about 10 percent in the programs. So, if we use the 10 percent figure it is still a large amount of money. And that would just be using the industry standard, if you will, of 10 percent.
FOOD SAFETY AND INSPECTIONS
Ms. KAPTUR. I have two brief questions.
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Mr. VIADERO. Yes, Ma'am.
Ms. KAPTUR. One deals with the food safety issue and any recommendations you might have on ways we could improve our inspection systems to assure that our food supply is safe?
You were kind enough to inform the committee when that strawberry investigation was going on and we very much appreciate that. And we have had, you talked this morning about the Hudson meat situation as well. If we were to try harder as a country to inspect what comes over our borders for those items that are imported, as well as inspect better what we have inside the country.
Do you have any suggestions, first, on the imported side of the equation? In fruits and vegetables should we adopt, for example, what they do in the meat packing industry for imported items? What advice can you give us there based on what you now know?
Mr. VIADERO. Well, again, I would like to give a big tip of the hat to our friends in APHIS, Animal Plant Health Inspection Service at the Department. We work exceptionally well with our APHIS folks.
And we get a sense that if we took the inspection standards, for instance, where we are now importing 20,000 carcasses in from Argentina and Uruguay, if we took the inspection standards and take it from the meat side of the house and place it on the vegetables, let us say, Guatemala, who, I think it was FDA that said with the cyclospora coming up on raspberries out of there, perhaps they should be pre-inspected down there or perhaps we can provide training or Guatemala can send their people up here to be trained by us as to what to look for. Because I am not speaking for the Guatemalan Government at all but I am sure they do not want this to happen either because it really impacts their economy.
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I mean that is the only place you are going to get raspberries at this time of the year, I guess. So, if we want them as consumers I think it is incumbent upon us to perhaps increase this type of activity, either train them or have them pre-inspected somehow.
Ms. KAPTUR. Does pre-inspection involve one of our inspectors going down there, is that what happens in the case of Argentinean beef?
Mr. EBBITT. Well, with fruits and vegetables pre-inspection you have going on now in Mexico but not with beef. With meat products you are depending upon an equal to service being provided by the foreign government, equal to U.S. inspection processes and procedures. With then some testing of certain samples as they come into the United States.
Ms. KAPTUR. I will tell you, for the record, I would really appreciate it if you could get back to me on this point because I really do care deeply about this for our country and for the integrity of our food supply.
And if you could walk me through it. I have not spent time as an inspector. So, I do not really know exactly administratively what happens with each type of item that is brought into the country. And if there is a difference on the fresh fruits and vegetables side or frozen fruits and vegetables or meat. I mean you know all the different categories. If you could tell me if I wanted to strengthen the system, how would I do it? Will it require more staff? If so, where? Does it require more training money? If so, where? I would like to know that.
And my final question deals with concentration. On page 66 of your report, you talk about the Grain Inspection Packers and Stockyards Administration are lacking. Some of their investigative techniques are lacking for anti-competitive practices.
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And I am wondering, knowing that about three firms control the majority of the red meat that reaches our tables, to your knowledge, does GIPSA have any type of effort to restructure or to retrain to handle this new initiative?
Mr. EBBITT. Well, Grain Inspection and Packers and Stockyards is looking at some reorganization. They have some studies underway in-house to look at that. We suggested that they need to do several things. First of all, you have to have the right kind of trained professionals to do these kinds of investigations. It takes attorneys, it takes lawyers, it takes economists and it takes program people working together to make these cases.
They are very tough, very complex cases but you have to have that body of talent to be able to make the case.
The Department has the talent. Right now you have economists in the economist office, you have got, of course, attorneys and General Counsel. We are not suggesting necessarily you push all those together but that they need to bring those elements to the investigation when the investigation is occurring.
It really takes a good economic viewpoint when you are making those cases and that is what they need to do.
Mr. SKEEN. Let me interrupt here. We have got a second bell and I would like to have Mr. Nethercutt wind this up.
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Ms. KAPTUR. That was my last question, Mr. Chairman.
FOOD AND NUTRITION SERVICE
Mr. NETHERCUTT. Thank you, Mr. Chairman.
Very quickly, gentlemen. The last few years the old Food and Consumer Service is now the Food and Nutrition Service has had tremendous accounting problems. You brought it to our attention. Are those satisfied or solved to your satisfaction? Are they having any deficiencies that recur or can you help us with this?
Mr. VIADERO. Yes. If you refer to two years ago, I issued a disclaimer of opinion on FNS. They could not find $18 billion.
Mr. NETHERCUTT. Exactly.
Mr. VIADERO. The issue right now is jointly shared by FNS and the States and that is the amount of receivables that the States still owe FNS. So, in essence, they will more than probably get a qualified opinion again because of that recurring receivable problem. They are aware of it, and we are working with them to go through it.
But in certain parts of that issue, it is the States.
Mr. NETHERCUTT. You are not finding any polling groups or Lion King commercials or any of that stuff that we were so critical of in the last, you know, two years ago in Food and Nutrition Service at this point?
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Mr. VIADERO. No, sir, not that we are aware of.
FOOD SAFETY
Mr. NETHERCUTT. The second question, quickly. What percentage of, shall I say, adulterated seafood do you find versus adulterated beef, for example, or other kinds of food? In other words, as a percentage of the total, is this a big problem, seafood contamination?
Mr. VIADERO. Well, I am not qualified to answer. That comes under a different department. Agriculture does not handle that one. That comes under Commerce.
Mr. NETHERCUTT. Thank you.
Mr. VIADERO. Yes, sir.
DISASTER ASSISTANCE
Mr. NETHERCUTT. One final one. You mentioned in your written statement that you folks spent some time in the Pacific Northwest after our flooding. What do you look for in those situations? Did you find any irregularities in anything that I need to worry about in terms of the Pacific Northwest?
Mr. VIADERO. Well, in fact, we noted and using again, a proactive stance when there is a disaster for emergency distribution of commodities or emergency distribution of food stamps or replacement of food stamps, we wanted it limited to the immediate affected area.
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And I got a call from the Governor of Oregon because he wanted it to go county-wide. And FNS would not approve it until, because we beat up on them pretty bad on that one. And the Governor called me and I chatted with him and he said, well, you are apparently an East Coaster, and I said, yes, sir. And he said, understand that there are more people in your town than I have in a county. He said and a lot of them are wage earners.
And that is the type work we went out and did there. We did the same in the State of Washington and the State of Idaho. And what did we end up with, 30 families I think in Washington and 17 families in Idaho. It was minimis, but the point was that everybody knew that we were on-site doing this because in Georgia by us being on-site 4,100 families would have been eligible under the county system but we reduced it to 1,600 families in the immediate area. So, we saved a bunch of bucks there. Just a proactive view.
Mr. SKEEN. Thank you, Roger.
We appreciate very much what you are doing and how well you are doing it and we appreciate the testimony you have given us today.
Mr. VIADERO. Thank you, Mr. Chairman.
[CLERK'S NOTE.—The following questions were submitted to be answered for the record.]
Office of the Inspector General
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SPECIAL LAW ENFORCEMENT INITIATIVE FUNDING
Mr. SKEEN. In your proposal for a special law enforcement initiative, you cite three primary areas of focus: Fraud and abuse in the food stamp nutrition programs; rural rental housing; and health and safety programs requiring immediate response. How much of the special initiative funds would go to each of these areas? How many staff years would be devoted to each? Would any of the funding go to any other programs or areas within OIG?
RESPONDENT. I will provide the information for the record.
[The information follows:]
ADDITIONAL STAFFING
Mr. SKEEN. The special law enforcement initiative calls for an additional 170 staff years. At what grade level do you anticipate recruiting?
RESPONDENT. We anticipate recruiting the additional staff-years at entry level positions, such as GS 5/7/9, from colleges and through media advertisements.
PERSONNEL COMPENSATION
MR. SKEEN. In reviewing personnel compensation in the object class breakout, you show an increase of $16.5 million. After adjusting out $1.461 million for pay cost and $325,000 for other audits, the average cost per staff year averages over $86,000. Why is the cost per average staff year so high?
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RESPONDENT. The agency's current object class II costs for salary are approximately 68 percent of our costs. The requested funding level for the FY 1999 initiative is at the same level. Although this may appear to be a higher average staff year cost when estimated for the projected budget year, historically our actual costs have demonstrated that agency's expenditures will be incurred at approximately this percentage level. Our projected costs were, therefore, estimated at this higher amount.
STAFFING TIMELINE
Mr. SKEEN. If the special initiative were approved, please provide a timeline that shows how you would bring 170 people on board in one year.
RESPONDENT. The agency would use open continuous recruitment announcements and special Government hiring authorities to recruit nationwide for the special initiative staffing. This effort would begin immediately upon approval with announcements being issued no later than the first 2 months of the fiscal year and actual hiring to follow. Most hiring would then be accomplished during the second quarter of the year. Since the new staff will be mostly auditors and special agents spread throughout our offices across the country, we believe that overall assimilation of the new staff into the agency's individual offices and organizations can be accomplished without a major impact on the agency because of the overall small number of individuals to be hired per office.
STAFFING DISTRIBUTION
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Mr. SKEEN. For the record, provide the rationale for each State in your geographic distribution table receiving equal increases in funding (39 percent) and each State receiving equal increase in staff years (23 percent).
RESPONDENT. The areas to be addressed by our special initiative affect many of the Department's programs nationwide. There is no one specific field area or location in which we would concentrate these activities more than any other. Because of this, we expect to distribute our staff for the new initiative evenly across all of our offices nationwide to handle these efforts.
TRAVEL COSTS
Mr. SKEEN. You are proposing an increase of $2 million for fiscal year 1999 in travel costs, which is a 36% increase. What would cause such an increase?
RESPONDENT. OIG is a staff intensive agency, and our auditors and agents must travel to the field locations where the Department's programs operate. We are proposing a $2 million increase in travel funds to adequately handle the travel costs associated with the staffing increase of 175 positions for FY 1999 for these auditors and agents to travel to these Department program field operation sites. We anticipate such an increase in travel costs due to the staffing needs involved in the special law enforcement initiative which will address the issue of fraud and abuse in the food stamp and other nutrition programs, rural rental housing, and disaster and health and safety programs.
TRANSPORTATION OF THINGS
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Mr. SKEEN. Object class 22, transportation of things, shows an increase of $161,000. What is the reason for the increase? Are you planning on paying any relocation costs for the 170 additional staff years in your special initiative?
RESPONDENT. The increase of $161,000 for object class 22, transportation of things, is for two primary areas, relocation costs and vehicle rentals. Our current estimate for the overall FY 1999 relocation costs is projected to be $800,000, compared to $633,000 for FY 1997, due to an increase of employees relocating. The increase will include expenses in object class 2210, change of official duty station, which involves shipment of household goods. Also, with the implementation of major operations, such as Operation Talon, under our special law enforcement initiative there will be a need to increase our existing fleet of 4x4's and minivans.
ADVISORY AND ASSISTANCE SERVICES
Mr. SKEEN. Why does object class 25.1, advisory and assistance services, show an estimated $47,000 for fiscal year 1998 when no funds were obligated in this object class for fiscal year 1997. Please describe what services you are planning to use. Why does this increase to $60,000 in fiscal year 1999?
RESPONDENT. The advisory and assistance services estimated for FY 1998 and FY 1999 are to provide the agency needed expertise in management and professional support services that are currently unavailable within the agency. For example, in the past we have used these services to provide OIG with specialized expertise and advice to assist the agency in carrying out such legislative mandates as the Chief Financial Officers Act to audit financial statements of the Department's agencies. These funds would provide similar services in FY 1998 and FY 1999 as needed.
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EQUIPMENT INCREASE
Mr. SKEEN. Why does object class 31, equipment, increase by $350,000 in fiscal year 1999?
RESPONDENT. The additional funds would be utilized to purchase necessary ADP, furniture, and specialized law enforcement equipment for our requested staff increase.
CHILD AND ADULT CARE FOOD PROGRAM REVIEW
Mr. SKEEN. In the Child and Adult Care Food Program facet of the budget justification, you discuss adopting a systematic approach to review over 14,000 sponsors. Please describe how systematic works? How do you review 14,000 sponsors?
RESPONDENT. Our current effort is focused on judgmentally selected sponsors from approximately 1,200 sponsors of day care homes. The sponsors we are reviewing were selected from those identified by OIG, FNS, or State agencies as potential ''problem'' sponsors or sponsors about which they have concerns. Our systematic approach to cover the remaining sponsors is to use a statistical sampling approach.
ERROR RATE—ILLINOIS
Mr. SKEEN. How does the rest of the country compare to the 19 percent error rate you found in your review of the Illinois School Lunch and School Breakfast Program? Is the Illinois program an aberration?
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RESPONDENT. FNS does not require States to assemble and report error rates found as a result of verifications school food authorities perform. We therefore have no data from other States against which Illinois may be compared. However, in our discussions with FNS officials, they are of the opinion that similar error rates may exist in other States.
OPERATION TALON
Mr. SKEEN. How much money did Operation Talon save American taxpayers? What was the cost of Operation Talon?
RESPONDENT. As Operation Talon is a relatively recent event, many of the States have neither calculated the savings nor completed the administrative process required to take action against the food stamp recipients who illegally received benefits. We have been in contact with officials at FNS who are in communication with the States concerning administrative action. Such actions may include suspending food stamp benefits, establishing claims for repayment, and determining a cost avoidance figure. We have been told by FNS and by some State officials that many States intend to take action on the fugitive felons identified during Operation Talon.
To date, Operation Talon expenses have totaled approximately $1.5 million in personnel costs and related travel expenditures.
FOOD STAMP ROLLS
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Mr. SKEEN. How many convicted felons and prison inmates do you estimate are on food stamp rolls? What are the estimated savings if they all were removed from the food stamp rolls?
RESPONDENT. We project that there are in excess of 20,100 fugitive felons and about 16,600 inmates who are on the food stamp rolls nationwide. We further estimate these people to be illegally receiving approximately $50 million in annual food stamp benefits.
RESOURCES USED TO MONITOR THE FOOD STAMP PROGRAM
Mr. SKEEN. Please update the table that appears on page 298 of last year's hearing record, which shows how much of your budget is spent on monitoring the food stamp program, to reflect fiscal year 1997 actuals and fiscal year 1998 and 1999 estimates.
RESPONDENT. I will provide the information for the record.
[The information follows:]
QUESTIONABLE EBT TRANSACTIONS
Mr. SKEEN. Your office assisted the Food and Nutrition Services in the development of a computer package to assist in identifying EBT traffickers. The nationwide system became operational in the Fall of 1996. In last year's hearing record you indicated that you had not begun an evaluation of this system. Have you started the evaluation yet?
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RESPONDENT. The Anti-fraud Locator EBT Redemption (ALERT) system is now in use by FNS nationwide with the deployment to FNS' Western regional office in February 1997. We have not begun an evaluation of the system; however, we have consulted with and provided comments to FNS on the implementation and operation of this system.
UNOBLIGATED BALANCE
Mr. SKEEN. At the end of fiscal year 1997, you had an unobligated balance of over $900,000. In light of your predicament to get people trained, purchase new equipment, or fund other one-time purchases, why do you show such a large amount of unspent funds?
RESPONDENT. The $900,000 is overstated. The agency's internal records indicated the agency's balance was approximately $375,000 at the end of the fiscal year. The National Finance Center was contacted at the close of the fiscal year to confirm the unobligated balance, at which time a balance of approximately $390,000 was given. It was not until after the end of the fiscal year, in early November, that OIG was notified the official unobligated balance had changed to over $900,000.
REPRESENTATION EXPENSES
Mr. SKEEN. You are once again requesting appropriations language for representation expenses. Last year, you indicated that any such expenditures incurred must be paid out of pocket by the Inspector General. What level of expenditures were incurred in fiscal year 1997? Is specific authority needed to carry out representation?
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RESPONDENT. Specific authority is needed for the agency to pay for representation expenditures. This authority would allow the agency to pay for hosting official functions for organizations such as the International Criminal Police Organization, the International Association of Chiefs of Police, the President's Council on Integrity and Efficiency, and similar organizations, as well as provide tokens of appreciation to International, State, or local law enforcement organizations that assist the agency in joint law enforcement operations and activities. Currently, because such expenditures cannot be paid by the agency and must be paid out of pocket by the Inspector General or other agency employees, and agency declines to host many of these events or provide tokens of appreciation although it is customary practice to do so, especially in the law enforcement arena. Since the events and practices are currently very limited and are considered personal expenditures, no actual records are kept of the actual costs, although the agency estimates employees spent about $1,000-$1,500 during FY 1997 on such activities.
CONFIDENTIAL FUND INCREASE
Mr. SKEEN. You are requesting an increase of $30,000 for confidential operations. Since your limitation was raised to $95,000 in 1994, the highest level of expenditures was $83,995 and the average expenditure level since 1994 is about $78,000. Why is an increase needed when you have not spent close to your present limitation?
RESPONDENT. OIG is requesting an increase in budget authority from $95,000 to $125,000 for confidential funds because the current $95,000 limitation is insufficient to provide funds for all of our planned and ongoing nationwide undercover investigative operations. Conducting an undercover law enforcement operation is a highly unpredictable activity which sometimes requires large amounts of ''seed'' money up front, in which the demands on this authority have increased each year. For the past few years, some cases have been delayed until funds could be moved from other regions. Also, our various special law enforcement initiatives will involve extensive undercover operations as we expand them nationwide.
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Moreover, OIG recently published our new informant policy, which will be the cornerstone of our new informant program. The goal of this program is to ensure adequate informant coverage in program areas, which are an investigative priority. The program is also designed to provide a better intelligence base nationwide. Intrinsic to this is the development of confidential informants, cooperating witnesses, and sources of information in strategic areas. The development of informants requires funds to pay them and to finance related investigative operations to address burgeoning areas of crime in a proactive and efficient manner. As a result, there will be an increased demand for confidential funds as the program goes into operation this fiscal year and beyond.
SERVICE CENTER INITIATIVE OVERSIGHT
Mr. SKEEN. Please tell us what you are doing in terms of oversight of the Service Center Initiative?
RESPONDENT. We have a survey planned this fiscal year in which we will determine if the partner agencies have identified their long-range computer processing plans to facilitate the effective planning for Departmental sharing of information resources. Areas of concentration will include information technology, business process reengineering, and change management.
DISASTER FOOD STAMP HANDBOOK RECOMMENDATIONS
Mr. SKEEN. What was your recommendation to FNS on proposed changes to the Disaster Food Stamp Handbook? What is the status of implementation of the recommendations?
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RESPONDENT. We recommended that FNS revise the handbook to furnish guidance for determining the amount of replacement allotments in various situations. Replacements should be prorated based on the date of the disaster in relation to the time regular benefits were last issued, when the next issuance is scheduled, whether losses primarily affected perishable food due to power outages versus catastrophic losses. FNS agreed to an alternative to amending the handbook. As each disaster response is developed, FNS will work closely with the State agency involved to ensure that the most equitable response to the disaster victims (ongoing recipients and new households) is developed.
EMPLOYMENT AND TRAINING PROGRAM AUDITS
Mr. SKEEN. Is the Welfare Reform Act the primary reason for the Employment and Training Program costs increasing from $75 million in fiscal year 1996 to an estimated $138.6 million in fiscal year 1997? In light of the increase are you planning more audits of the program?
RESPONDENT. According to FNS, the increase was necessary to provide the additional 100 percent Federal funding required by the Welfare Reform Act for matching funds for participants' reimbursement and State administrative costs to carry out the Employment and Training Program. We are currently performing a review of the program in Ohio.
EBT PROCESSOR OPERATION AUDITS
Mr. SKEEN. You initiated a President's Council on Integrity and Efficiency working group to develop standards for audits of EBT processor operations. Tell us how your efforts are coordinated between Federal, State and public accounting representatives.
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RESPONDENT. When the project was first conceived, invitations to participate in developing audit procedures to be undertaken at EBT processors were made to various organizations which were involved with EBT and its development and implementation, professional auditing and accounting organizations, and audit groups who had EBT audit experience or would be expected to audit EBT operations. These various organizations included Offices of Inspector General for the U.S. Departments of Treasury and Health and Human Services; the Social Security Administration; the U.S. General Accounting Office; the Office of Management and Budget; the National Association of State Auditors, Comptrollers and Treasurers; the State Auditors Association; the American Institute of Certified Public Accountants; the General Services Administration, Card Technology Division; the Food and Nutrition Service; the National Automated Clearing House Association; the EBT Council Fraud Committee; the U.S. Department of Treasury, Financial Management Services; and various State and private audit organizations. The majority of the organizations have participated in the project.
Various meetings were held to lay out the need for the project and its objectives, to develop areas that needed audit coverage at EBT processors, and to make assignments to draft the audit procedures for the identified areas. The various procedures, by area, have been drafted, and we are now consolidating them into one document which will be circulated among the working group for review and comment. Once the draft is agreed on, it will be circulated to various professional associations and audit groups for review and comment before it is published in final form.
FOOD STAMP CASES
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Mr. SKEEN. Provide a table similar to the one that appears on page 301 of last year's hearing record showing the number of food stamp cases that were issued, the number referred to the Department of Justice, and the number accepted by the Department of Justice, for fiscal year 1997.
RESPONDENT. I will provide the information for the record.
[The information follows:]
STATE MEDIATION PROGRAM
Mr. SKEEN. Bring us up to date on the State Mediation Program. Are the same problems in existence today that were with us at this time last year?
RESPONDENT. Together, FSA and OIG have made significant strides to resolve the problems that were with us last year. For example, the FSA Administrator requested the State-administrated Mediation Programs to identify the names and addresses of mediation participants, the issue accepted for mediation, and the results of the mediation for USDA program participants involved in mediation. Each State has provided a list of these USDA participants and the number of non-USDA participants involved in mediation. Working from the lists of USDA program participants, we have completed limited evaluations of the impact of mediation on USDA programs in Alabama, Arkansas, Michigan, and North Dakota. We concluded in each State that the mediation program appeared to be an effective tool to help resolve USDA-related issues. We are continuing to review FSA's January 14, 1998, response to OIG Evaluation Report No. 03801–23–Te, State-Administered Mediation Programs Need Strengthening.
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STATE MEDIATION PROGRAM RECOMMENDATIONS
Mr. SKEEN. In your testimony you cite five recommendations you made to FSA regarding the mediation program. What is the status on the implementation of the recommendations.
RESPONDENT. Our first recommendation was to withhold grant funds from the four States visited until records are made available—the FSA Administrator requested three of four State-Administrated Mediation Programs to identify the name and addresses of mediation participants, the issue accepted for mediation, and the results of the mediation for USDA program participants involved in mediation. Each State has provided a list of these USDA participants and the number of non-USDA participants involved in mediation. OIG agreed that the three States were compliant and concurred with the FSA decision to continue funding the grant programs.
The second recommendation was to amend regulations to specify what costs can be claimed for reimbursement—FSA is currently revising their regulations. The last version that FSA shared with us did more clearly specify what costs can be claimed for reimbursement. However, those changes are subject to further amendment. We continue to work with FSA to reach management decision on this issue.
We also recommended that FSA recover $1.2 million in questionable and unsupported costs, reduce the cost per case for the State mediation program, and stop obligating more grant funds in a fiscal year than are appropriated by Congress—we continue to work with FSA to resolve these issues.
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FEDERAL MATCHING FUNDS
Mr. SKEEN. On page 37 of your testimony you highlight a case where $15.3 million in Federal matching funds from FNS was approved for the costs of continuing a U.S. Department of Health and Human Services jobs programs whose normal allocations had run out. In addition, you indicate that reimbursement of these transferred costs could constitute a violation of appropriations laws and may need to be refunded to FNS. Were these funds made available to a particular State? If so, what State? Has a determination been made if this transfer was a violation of appropriations law? If it was determined that the transfer was a violation of appropriations law have the funds been refunded to FNS?
RESPONDENT. FNS agreed to provide Federal funds to cover expenses originally allocated to Wisconsin's operation of the U.S. Department of Health and Human Services' JOBS Program. We considered these costs as questionable since Wisconsin did not provide adequate evidence of its eligibility for matching funds under the Employment and Training (E&T) Program and because JOBS Program participants are not generally eligible to participate in the E&T Program. It was FNS' position that the cost incurred by the State agency were eligible for Federal matching funds, and OIG recommended that FNS obtain an opinion from USDA's Office of General Counsel (OGC) on whether the transfer of funds constituted a violation of applicable appropriation laws. OGC rendered an opinion that transfer of the funds were appropriate.
AUDITS OF MARKETING AND REGULATORY PROGRAMS
Mr. SKEEN. You are requesting an increase of $325,000 and five staff years for audits of marketing and regulatory programs. Where would these auditors be located?
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RESPONDENT. Most marketing and regulatory activities take place at various locations around the country. The additional staff will, therefore, be assigned to OIG's field operations to reflect where the greatest marketing and regulatory activities occur.
BACKLOG OF COMPLAINTS
Mr. SKEEN. You reported that your review of the backlog of complaints made by disadvantaged and minority farmers increased from 530 to 984 as of August 1997. What are the major reasons for this increase.
REPSONDENT. There are several reasons for the increased backlog. The major reason is the failure of FSA's State and county offices to forward discrimination complaints to the national office. After we issued our Phase I report on February 27, 1997, the Acting Assistant Secretary for Administration sent a memorandum to all agencies requesting that they forward all complaints held at the State and county offices to the office of Civil Rights.
In addition, a number of complaints were registered through the civil rights listening sessions held by the Department's Civil Rights Action Team. Also, the added publicity concerning the African American farmer and discrimination issues resulted in additional farmers coming forward and filing complaints which resulted from situations occurring several years ago.
YEAR 2000 UPDATE
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Mr. SKEEN. Provide an update on the work you are doing to review the Year 2000 initiative.
RESPONDENT. We have recently completed a review of the Department's performance of the first two phases (awareness and assessment) of the Year 2000 conversion process prescribed by the Office of Management and Budget and the U.S. General Accounting Office. We found that the Department needed to expedite its activities to provide assurance that the entire effort would be consummated prior to the turn of the century. Our audit of the subsequent phases (renovation, validation, and implementation) is ongoing, and will continue to assist the Department in meeting the critical due date.
Mr. SKEEN. In your testimony, you indicate that 10 USDA agencies purchased $31.6 million of computer equipment that was Year 2000 incompatible. What agencies were involved? From what department-wide contract were these computers procured?
RESPONDENT. The agencies involved in the contract were the Animal and Plant Health Inspection Service, Forest Service, National Agricultural Library, Office of the Chief Financial Officer, Office of the Chief Information Officer, Natural Resources Conservation Service, Office of Inspector General, Office of the Secretary, and what was then the Farmers Home Administration and the Office of Advocacy and Enterprise. The computers were procured from Micro Star Co., Inc., under contract No. 54–3142–3–1151.
Mr. SKEEN. Your audit report of the Year 2000 initiative is scheduled to be issued in early 1998. Please provide a copy for the record.
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RESPONDENT. We will provide a copy of the report upon release. We anticipate issuance by March 31, 1998.
[CLERK'S NOTE.—A copy of the report has been provided to the committee, however it is too lengthy to be included in the hearing record. A copy of the report will be maintained in the subcommittee office.]
FINANCIAL STATEMENT AUDITS
Mr. SKEEN. Please update the table that appears on page 302 of last year's hearing record showing which financial statement audits you contract out and which you do in-house as well as the cost of each audit to include fiscal year 1997 actuals and fiscal year 1998 estimates.
RESPONDENT. I will provide the information for the record.
[The information follows:]
Except for the FS's financial statements and USDA's consolidated statements, costs should not vary significantly for audit activity during FY 1998. FS will be producing auditable financial statements for the year ending September 30, 1997. We estimate that the cost to audit FS during FY 1998 will be $1,206,000. Similarly, we will be able to perform more complete audits of USDA's consolidated statements at an estimated cost of $448,000. Also, during FY 1998, OIG began auditing the financial statements for Alternative Agricultural Research and Commercialization Corporation (AARCC), a corporation within USDA. We estimate that the first year audit will cost approximately $60,000 during the fiscal year.
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ROLLING STORES
Mr. SKEEN. Have you conducted a follow-up audit to identify what action FNS has taken on ''rolling stores.''
RESPONDENT. As a result of our 1995 audit of ''rolling stores,'' FNS followed through and removed a number of ''rolling stores'' from program participation in Atlanta, Los Angeles, and Hawaii. During 1997, we reviewed ''rolling store'' activity in four Louisiana parishes. These parishes had 29 authorized ''rolling stores'' of which we selected 12 for review. We could only locate 4 of the 12 selected, and none of the 4 could provide financial and related records to support their food coupon redemptions. FNS investigated these for trafficking and removed those found to be trafficking from the program. FNS is in the process of reviewing other ''rolling stores'' to terminate participation for those that cannot be found and determining if others are needed for participating households to purchase food.
WIC PROGRAM
Mr. SKEEN. Bring us up to date on all the audit and investigation work you are doing in the WIC Program.
RESPONDENT. During this fiscal year, we will perform audits of the WIC Program in three of our regions. Our audits will (1) evaluate the controls over the receipt, distribution, and reconciliation of WIC vouchers in Minnesota; (2) review operations in each State in the Southeast Region and focus on problem areas unique to individual States; and (3) determine whether vendor monitoring in Maryland and Virginia is adequate and claims are established as required.
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On the investigative side, we currently have two open unreported WIC Program investigations. During FY 1997, we obtained 10 indictments and $150,000 in monetary results. WIC violations are also often discovered during our investigations of food stamp trafficking and are charged in the same indictment. However, since the investigations were initiated as food stamp cases and tracked as such in our management information system, we are unable to identify WIC Program statistics from these cases.
CCC FINANCIAL AUDITS
Mr. SKEEN. What was your cost of performing audits of CCC financial statements in fiscal year 1997? What was the reimbursement from CCC? What is the reason that the reimbursement to perform audits of CCC financial statements are not fully reimbursed? Can't the CCC adjust its reimbursement to OIG after the actual costs are known?
RESPONDENT. Our in-house cost to perform audits of CCC's financial statements during FY 1996 cost $981,000 or $168,000 more than the $795,000 reimbursement. For FY 1997, the reimbursement was increased to $842,000 to better reflect the cost of audit activity. Our audit costs for CCC totaled $850,000 during FY 1997—only $8,000 greater than the reimbursement. Accordingly, we believe there was no need for any significant adjustment. Financial statement audit work involves the cyclical coverage of operations needing detailed control testing, and, as familiar areas are re-
visited, audits are performed more efficiently. Consequently, needed fieldwork varies and actual audit costs can fluctuate from one year to the next. For FY 1998, our reimbursable agreement with CCC is $842,000. Similar to FY 1997, we anticipate the reimbursement to closely reflect the actual cost of audit activity during the year.
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REIMBURSEMENTS
Mr. SKEEN. Please update the table that appears on page 303 of last year's hearing record showing the reimbursement received, and the actual cost of the audit for CCC, FCIC, and RUS, to include 1997.
RESPONDENT. I will provide the information for the record.
[The information follows:]
Mr. SKEEN. Please update the table that appears on pages 303 and 304 of last year's hearing record showing the amount of funds expended for outside public accountants hired under contract, to include fiscal year 1997 actuals and fiscal year 1998 estimates. Also, provide an explanation for the increases which occurred over the years.
RESPONDENT. The information will be provided for the record.
[The information follows:]
FOREIGN AGRICULTURAL SERVICES
Mr. SKEEN. In the Inspector General's second-half fiscal year 1997 report, you identify a number of problems concerning the operation of two joint commissions in the former Soviet Union. You made a number of recommendations including that Foreign Agricultural Services seek to recover $7 million. According to the report, $6 million was recovered. Why was the FAS not able to recover the full $7 million?
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RESPONDENT. Auditors recommended that the U.S. Embassy issue a demarche to the Russian Federation to recover 34 billion rubles (approximately $6.3 million in U.S. dollars) seized by the Russian tax authorities. On June 4, 1997, a demarche was issued. In August 1997, the funds were returned to the U.S.-Russian Federation Joint Commission for Agribusiness and Rural Development.
Contrary to the terms of the donation agreement, the Government of Kyrgyzstan bartered U.S. donated food valued at approximately $1.3 million in exchange for natural gas from Uzbekistan. FAS determined that issuing a demarche for repayment of the funds would not achieve a positive result. In view of the economic conditions of the country, rather than seeking recovery of the funds, FAS allowed Kyrgyzstan to retain the $1.3 million to support future agricultural developmental activities as outlined in the Section 416(b) donation agreement.
CONFIDENTIAL OPERATIONAL ACTIVITIES
Mr. SKEEN. Update the table that appears on page 305 of last year's hearing record showing the amount spent for confidential operational activities, to include fiscal year 1997 actuals and fiscal year 1998 estimates.
RESPONDENT. I will provide the information for the record.
[The information follows:]
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Throughout the year, as we conduct day-to-day investigations, we often have a need for more confidential funds than appropriated for this purpose. During our numerous undercover investigations, we utilize confidential informants whom we pay for important information concerning criminal activity. Because these needs vary so greatly depending on the particular workload, the $95,000 limitation can restrict the agency's investigative flexibility.
HOTLINE
Mr. SKEEN. How many complaints did you receive though the hotline in fiscal year 1997?
RESPONDENT. The hotline received 3,806 calls, letters, and walk-ins in FY 1997.
HOTLINE RESPONSES
Mr. SKEEN . How many were you able to look into; how many were referred to an agency; how many were referred to the Department of Justice; and how many went unanswered?
RESPONDENT. OIG inquired into 157 of the hotline complaints received in FY 1997, of which 8 were referred to the U.S. Department of Justice for a prosecutive determination. We referred 3,183 complaints to the appropriate USDA agency. Of the complaints referred, we requested a response on 837; 1,748 complaints concerning food stamp recipients were forwarded to FNS for corrective action with no response required and 598 were minor violations that required no response back to us. Of the remaining complaints, 290 were referred to a State agency for their action, 123 were referred to other law enforcement agencies for their action, and no action was taken on 53 complaints because they contained insufficient information.
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INDICTMENTS, CONVICTIONS, AND SUITS
Mr. SKEEN. Please update the table that appears on pages 307 and 308 of last year's hearing record on the number of indictments, convictions, and lawsuits for fiscal year 1997.
RESPONDENT. I will provide the information for the record.
[The information follows:]
1997 AUDIT AND INVESTIGATIONS RESULTS
Mr. SKEEN. Please update the table that appears on page 308 of last year's hearing record showing the number of audit reports, investigative reports, indictments, convictions, and lawsuits filed, to include fiscal year 1997.
RESPONDENT. I will provide the information for the record.
[The information follows:]
AGRICULTURAL MARKET TRANSITION ACT
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Mr. SKEEN. Please provide an update on your review of Phases II and III of the Agricultural Market Transition Act.
RESPONDENT. We issued one report (Audit No. 03601–15–Te) on September 30, 1997, which provided the results of both our Phase II and Phase III audits of the Agricultural Marketing Transition Act (AMTA). We determined that overall controls over compliance activities were adequate to preclude overpayments, and producers complied with planting flexibility and agricultural land use requirements applicable to contract acres. We also determined that farms were generally enrolled by the individuals or entities that actually controlled the operations.
ATTEMPTS TO CIRCUMVENT PAYMENT LIMITATIONS
Mr. SKEEN. In last year's hearing record, you indicated that OIG and FSA were working together on appropriate corrective action on the problem of landowners using combination leases to circumvent payment limitations. Have corrective actions been taken? Do you have an estimate of what the circumvention costs?
RESPONDENT. FSA has issued regulations, effective for the 1999 crop year, that, in effect, make all combination lease arrangements share leases. This will eliminate producers' advantages created by entering into a combination lease for payment limitation purposes. As to the total cost of this circumvention, we do not have information as to the total number of combination leases and the number of acres covered. Therefore, we do not have an estimate as to the total cost to the Government.
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LIST AND TYPE OF FIREARMS
Mr. SKEEN. Please update the table on page 309 of last year's record showing OIG owned firearms.
RESPONDENT. I will provide the information for the record.
[The information follows:]
BUDGET REQUEST
MR. SKEEN. Provide a detailed breakout of your request to the Secretary; the Secretary's request to OMB; and the OMB allowance.
RESPONDENT. Our budget request to the Secretary was for $157,046,000; the Secretary's request to OMB was $111,568,000; and the OMB allowance was $87,689,000.
USE OF INVESTIGATIONS AND AUDIT RESOURCES BY AGENCY FOR FISCAL YEAR 1997
Mr. SKEEN. Provide tables similar to the ones that appear on page 310 of last year's hearing record showing the breakdown of OIG's resources and the percent of each that went towards investigations and audits of each agency under USDA for fiscal year 1997.
RESPONDENT. I will provide the information for the record:
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[The information follows:]
ALTERNATIVE AGRICULTURAL RESEARCH AND COMMERCIALIZATION CORPORATION
Mr. SKEEN. After identifying potential conflicts of interest with the Alternative Agriculture Research and Commercialization Center board of directors, you reviewed and approved new policies. Your office had scheduled a follow-up evaluation for the second half of fiscal year 1997. Did that evaluation occur? If so, what were the results of the evaluation?
RESPONDENT. We have incorporated the potential conflict of interest into our financial statement audit of the Alternative Agricultural Research and Commercialization Corporation. The audit, which is now underway, will assess management controls over all critical aspects of the Center's operations, with emphasis on the distribution of funds.
OIG FIELD AUDITORS AND SUPERVISORS
Mr. SKEEN. Provide an update of the table that occurs on page 315 of last year's hearing record that shows the number of supervisors and field auditors at the agency to include fiscal year 1997.
RESPONDENT. I will provide the information for the record.
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[The information follows:]
FNS—PROGRAM RECOMMENDATIONS
Mr. SKEEN. Based on the work the OIG is doing in the Child and Adult Care Food Program and the abuse and mismanagement you are discovering, have any recommendations been made to FNS to strengthen the management of the program?
RESPONDENT. Reports are being issued to FNS for each of the audits of the 12 referenced sponsors. These reports will contain recommendations to deal with the conditions found at each sponsor, including addressing any funds which should be returned to the Government. To date, reports have been issued for nine sponsors. We also have made recommendations to FNS headquarters during the audit process such as requiring the State agency to verify all day care income that is or is not reported for Food Stamp Program eligibility and establishing a realistic rate that sponsors may retain for administering the program in day care centers. We will be making additional recommendations to strengthen the management of the program upon completion of our current efforts.
ENVIRONMENTAL BENEFITS INDEX SCORING RECOMMENDATIONS
Mr. SKEEN. Your office reviewed the Conservation Reserve Program and found significant inconsistencies in the methodologies used by States when they assigned scores for various conservation factors. As a result, you recommended that FSA and NRCS provide specific guidance on criteria for assigning points and to require field offices to review and correct Environmental Benefits Index scoring. What has been the result of your recommendations?
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RESPONDENT. The agencies implemented our recommendations to provide specific guidance on criteria for assigning points and to correct EBI scoring. In many instances, the agencies were able to correct problems prior to notifying the offerer of acceptance into the Conservation Reserve Program (CRP). However, there were about 1,000 offers that had been tentatively accepted which were ultimately not accepted into CRP. In these cases, USDA offered these producers a one-time, 1-year payment equivalent to a CRP payment.
RISK MANAGEMENT AGENCY
Mr. SKEEN. Provide an update on your recommendation for the Risk Management Agency (RMA) to develop a plan to ensure that reinsured companies comply with program regulations in their management of the Fresh Market Tomato Crop Insurance Program.
RESPONDENT. This audit report was issued on September 30, 1997. As of February 12, 1998, RMA had not responded to the audit regarding corrective actions.
INDEMNITY PAYMENTS
Mr. SKEEN. Your office also recommended to RMA that RMA obtain data on all cases where there was no commodity loss and to recover any indemnity payments that should not have been paid. Have either of these recommendations been implemented? If so, how much in indemnity payments have been recovered?
RESPONDENT. This audit report was issued on September 30, 1997. As of February 12, 1998, RMA had not responded to the audit regarding corrective actions.
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NEW MEXICO'S CONTRACT WITH EBT PROCESSOR
Mr. SKEEN. On page 6g–14 of your explanatory notes, you note that New Mexico's contract with its Electronic Benefits Transfer (EBT) processor expires in 1998, and that it does not have a contingency plan to continue food stamp benefits if it must operate without its existing EBT processor. What are the implications for the Food Stamp Program?
RESPONDENT. The initial contract between New Mexico and its EBT processor expired September 30, 1996. New Mexico and the processor agreed to an extension of the contract through June 30, 1998. The extension coincides with New Mexico's timetable for selection of a new vendor but did not allow for any unscheduled delays. FNS informed us that delays are typical with challenges to the contract awards being a common problem. This could result in the contract expiring without a new processor in place ready to deliver benefits. New Mexico either needed to have a contract modification agreed to which would require the present processor to continue issuance until a new system is in place or come up with a contingency plan to ensure benefit delivery without disruption which may have involved reverting to issuance of paper food coupons. New Mexico has signed an agreement with its present EBT processor which obligates the processor to provide EBT services on a month-to-month basis after June 30, 1998, until a new system is operational.
OVERPAYMENT OF KARNAL BUNT COMPENSATION
Mr. SKEEN. The Office of Inspector General identified that payment procedures resulted in a major grain handler in Arizona receiving over $900,000 in excess Karnal bunt compensation payments. What payment procedures were in place that would have resulted in such a large overpayment? What agencies were responsible for establishing the compensation payments? Can these costs be recovered?
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RESPONDENT. In March 1996, the Secretary declared an ''extraordinary emergency'' that authorized compensation for destroyed crops for the loss in value of wheat grown in quarantined areas. The compensation formula developed by APHIS resulted in the grain handler receiving over $900,000 more than the economic loss in the value of Karnal bunt positive wheat.
APHIS wanted the compensation to be limited to the loss in value of wheat due to the quarantine, and the payment procedures were modified to reduce grower payments when it was discovered that the growers were selling their quarantined wheat for more than the salvage value. Compensation for growers with Karnal bunt positive wheat was computed as the estimated market price or contract price less the higher of the $3.60 salvage value or actual price received.
Compensation for the grain handlers' Karnal bunt positive wheat was computed as the estimated market price less the salvage value of $3.60 with a total per-bushel payment limit of $2.50 per bushel. Grain handlers received the allowed payment of $2.50 regardless of the price they received for the affected wheat.
We determined that the Arizona handler actually received $4.35 to $4.50 per bushel for the Karnal bunt positive wheat sold to feedlots. Although the actual economic loss was $1.85 per bushel (the estimated market price of $6.13 less the actual price received for the wheat, which was an average of $4.28 per bushel), this handler was compensated $2.50 per bushel for his economic loss on 1.4 million bushels. This resulted in the handler being compensated about $900,000 in excess of his actual economic loss (($2.50–$1.85) multiplied by 1.4 million bushels = $910,000).
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APHIS, which had the responsibility of compensating handlers for the losses, entered into a reimbursable agreement with the Farm Service Agency (FSA) to administer this program through FSA facilities using CCC checkwriting authority. In regard to the recovery of the funds, APHIS officials concluded that the handler was paid consistent with formulas outlined in the regulations of July 5, 1996. While APHIS agrees the ex-post salvage value has higher than the forecast used in the regulations, APHIS believes this reflects the success of the program in preventing a collapse in the wheat market. And, as a result of the risks borne by this handler in working with the program, APHIS determined no further action appeared warranted.
AGRICULTURAL MARKETING TRANSITION ACT TRANSITION PAYMENTS
Mr. LATHAM. It is also my understanding that you audited the AMTA Transition Payments system mandated by the 1996 Farm Bill. What did you find?
RESPONDENT. We performed the AMTA audit in three phases. The first phase report (Audit No. 03601–11–Te) was issued on March 30, 1997, covering AMTA program enrollment. In this report, we gave FSA high marks in the implementation stage of the program. Considering the volume of workload, the short timeframe, and the changing instructions, the number of errors for the counties reviewed was small.
We issued another report (Audit No. 03601–15–Te) on September 30, 1997, which provided the results of both our Phase II and Phase III audits of AMTA. We determined that overall controls over compliance activities were adequate to preclude overpayments, and producers complied with planting flexibility and agricultural land use requirements applicable to contract acres. We also determined that farms were generally enrolled by the individuals or entities that actually controlled the operations.
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IOWA'S CHILD AND ADULT CARE FOOD PROGRAM
Mr. LATHAM. You have testified about fraud and abuse in the Child and Adult Care Food Program. How is the state of Iowa doing with this program?
RESPONDENT. We have not performed any audits in Iowa to date.
INFORMATION TECHNOLOGY
Mr. LATHAM. One of my long-standing concerns with the Department has been the issue of waste and mismanagement in the Information Technology budget at USDA. Has your office ever looked into this sizable portion of the budget (I believe it was more than $1 billion last year) and if so could you share with the committee any of your findings?
RESPONDENT. Information technology is a key area of consideration in our audit planning process. Much of our work has focused on major systems developed, such as the Foundation Financial Information System (FFIS) at the National Finance Center. This multimillion-dollar system will serve as the Department's integrated financial management system. Our review disclosed, in part, that an integrated project plan to track critical path tasks was needed, and the validation and conversion of data from the old accounting system to FFIS needed to be accelerated.
FOOD STAMP FRAUD
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Ms. DELAURO. I am pleased to see the efforts to combat food stamp fraud outlined in the Special Law Enforcement Initiative. Congratulations on the arrest of over 2,200 fugitive felons and the successful sweep of 11 fraudulent sponsors of day-care centers. Could you elaborate on what the $21.7 million increase would enable the IG to further achieve in FY 1999?
RESPONDENT. In addition to expanding the areas mentioned, the additional funding will allow us to monitor additional EBT systems as they are developed and implemented. Given the estimated annual outlays of some $114 billion to be issued through EBT systems, of which $28 billion is USDA funds, it is imperative that we assure these systems work and have the necessary controls to protect the Government's interests. We also have a long-term strategy to continue identifying and addressing problem Child and Adult Care Food Program sponsors of day-care homes and centers. The sponsors you referenced, which we found to be seriously deficient in their administration of the program, received $20.3 million in FY 1996. At risk in FY 1997 is about $1.7 billion in estimated outlays.
We have also found major problems in the Rural Rental Housing (RRH) program with use of reserve, operating, and tenant security deposits for personal gain, and use of ''identity of interest'' companies to skim project funds. From fiscal years 1990 to 1995, we were only able to review 329 of 17,106 projects and identified $103 million in misused funds. Some of the problems have resulted in health and safety issues, physical deterioration of the properties, and excessive rental assistance subsidies. The total portfolio value is $11.6 billion with estimated rental subsidies in FY 1998 of $593 million.
We must also have the necessary resources to respond to disasters to assure that program benefits are properly and promptly determined and that the Government's interests are adequately protected. In FY 1997 alone, disasters were declared in 37 States with various forms of assistance totaling $463 million. Other emergency situations impacting health and safety issues also occur such as the E. Coli outbreak at Hudson Foods and allegations of unsanitary conditions at meat plants. Our work in these areas from fiscal years 1993 through 1997 resulted in savings to the Government of about $179 million, as well as improved food safety measures.
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The increased funding for OIG will allow us to improve our services to this Department, to the U.S. Congress, and to the American people. Our law Enforcement Initiative identifies our plans to increase enforcement in some of the most vital programs within USDA. Specifically, our initiative is directed at increasing our activities in areas such as emergency response to threats to the public's health and safety, as well as during natural disasters; enforcement of the food stamp and other nutrition programs, including additional operations to identify fugitive felons and inmates receiving food stamps; retailer integrity sweeps and food stamp trafficking investigations, as well as continued review and unannounced sweeps to identify mismanagement and criminal activity in child care and school lunch programs; proactive reviews, including sweeps in the RRH program to identify fraud within the construction and management of these multifamily housing units; to continue our investigations in the Department's all-important Farm, Export, and Natural Resources programs; and to provide our investigators and auditors with adequate equipment with which to do their job, such as surveillance equipment, much of which is up to 15 years old, worn out and unreliable, and which often poses a safety hazard to our dedicated employees.
HEALTH AND SAFETY
Ms. DELAURO. I am especially interested in the health and food safety part of the Special Law Enforcement Initiative and would like to congratulate you on your office's leadership in investigating the delivery of contaminated strawberries to school lunch programs and the outbreak of E-coli 0157 in a meat processing plant. How will the IG expand and strengthen the health and food safety arm of the Special Law Enforcement Initiative?
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RESPONDENT. OIG's highest priority is the investigation of criminal activity which poses a threat to the general health and safety of the public. While OIG is justifiably pleased with its record in the area of health and safety, we believe we can do more. However, our investigative resources have been overextended. OIG has never had sufficient personnel to regularly conduct proactive investigative work in these areas. If the resources were available, OIG could develop an intelligence base, thus giving us a better opportunity to detect health and safety-related criminal activity before hazardous food products reach the public.
Considering the size of the commitment by the Department to regulate these industries, it is surprising that the resources available to combat the criminal activity within it are so small. Although OIG redirects its resources as necessary to immediately investigate such activities, our total commitment is still only about 4 percent for the last 2 years. We continue to respond reactively to health and safety-related criminal activity because our remaining investigators are committed to investigations of significant criminal matters in other USDA programs.
BACKLOG OF COMPLAINTS
Ms. DELAURO. An ad hoc team was formed in the spring of 1997 to eliminate the backlog of discrimination complaints filed by disadvantaged and minority farmers. However, by August 1997, that backlog had increased from 530 to 984 complaints and the ad hoc team was disbanded. Would you comment on what steps will be taken to resolve this problem?
RESPONDENT. The Director of the Office of Civil Rights found that the ad hoc team could not determine if discrimination had occurred based on the information contained in the case files. The complaints had not been properly investigated. Therefore, the Office of Civil Rights has contracted with 10 private firms to investigate the complaints. Also, the Office of Civil Rights has reestablished the civil rights investigation section and hired investigators to review all program complaints filed with the Department.
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FARM SERVICE AGENCY
Mr. EDWARDS. The Farm Bill of 1996 made several changes to the Farm Service Agency (FSA) loan program. What efforts has your office made in terms of reviewing guidance set for loan making, loan servicing and the disposal of farm inventory properties? What results have your reviews yielded?
RESPONDENT. On March 31, 1997, we issued Audit Report No. 03099–23–KC, Audit of the Farm Service Agency, Management of Acquired Farm Property. The audit disclosed that many of the inventory properties were not sold, or advertised, or leased to qualified parties in accordance with the FAIR Act. We attributed the cause to a lack of a transition period for the agency to develop adequate policies and procedures. We recommended that FSA seek technical adjustments to the inventory property management provisions of the FAIR Act to accommodate uncontrollable factors that prevented the Department from complying with the FAIR Act.
We are continuing field work in our reviews of the 1996 FAIR Act Provisions Affecting Farm Credit Programs Loan Servicing and 1996 FAIR Act Provisions Affecting Farm Program Direct Loans.
"The Official Committee record contains additional material here."
Thursday, March 5, 1998.
DEPARTMENTAL ADMINISTRATION
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ADMINISTRATIVE, FINANCIAL, AND COMPUTER
WITNESSES
PEARLIE REED, FORMER ACTING ASSISTANT SECRETARY FOR ADMINISTRATION, DEPARTMENT OF AGRICULTURE
ANNE F. THOMSON REED, CHIEF INFORMATION OFFICER, DEPARTMENT OF AGRICULTURE
SALLY THOMPSON, CHIEF FINANCIAL OFFICER, DEPARTMENT OF AGRICULTURE
IRWIN T. DAVID, DEPUTY CHIEF FINANCIAL OFFICER, DEPARTMENT OF AGRICULTURE
CONSTANCE D. GILLAM, BUDGET OFFICER, OFFICE OF THE CHIEF FINANCIAL OFFICER, DEPARTMENT OF AGRICULTURE
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
Opening Remarks
Mr. SKEEN [presiding]. Good afternoon. We have with us today three separate agencies covering the administrative, financial and computer functions at USDA. Anne Reed is the chief information officer at USDA, and is responsible for all USDA information technology and computer matters.
I understand that 2000 is going to give us a real bad time with computers.
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Ms. ANNE REED. We have some major challenges, no question about it.
Mr. SKEEN. Ms. Reed, I must note that your testimony arrived here about two days late, and I hope that you can assure us that it's not a problem with the computers.
Ms. ANNE REED. It is not. It was not the computers, sir.
Mr. SKEEN. A little levity doesn't hurt this thing to start off with.
Sally Thompson is the chief financial officer, and this is her first appearance before the subcommittee, and congratulations, Ms. Thompson, on your appointment, and we're going to not disappoint you.
Pearlie Reed is here, representing the Departmental Administration, which he has headed for about one year. Mr. Reed has just been named Chief of the National Resources Conservation Service, so he's pulling double duty here today. Welcome.
I'd like to invite each of you to make a brief statement for the record, and then we'll go to questions. You may proceed in whatever order that you wish. So, I turn it over to you.
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FIVE OBSERVATIONS
Mr. PEARLIE REED. Mr. Chairman——
Mr. SKEEN. You're the conductor.
Mr. PEARLIE REED [continuing]. Yes, sir. I am pleased to appear before you here today. You already have the budget request and supporting material for the Assistant Secretary for Administration. However, I have five observations I'd like to make.
First, it has been a good year for me, serving as the Acting Assistant Secretary for Administration at USDA, and I believe we have accomplished a lot.
The second observation is that, I'd like to thank Secretary Glickman and his leadership team at USDA, including my colleagues here at the table, for the support over the last year, especially in dealing with civil rights issues.
You've already mentioned that as of this past Monday, I entered on duty as the Chief of the NRCS, so of course today I'm here in the capacity as the former Acting Assistant Secretary for Administration.
The third point is that I would like to thank the Committee for your support as expressed in the 1998 appropriations bill. We could not have made the progress we have made without your support, and we want to thank you for that Mr. Chairman.
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Fourth, civil rights. We have an unprecedented effort underway to ensure that all employees and customers at USDA are treated fairly and equitably, with dignity and respect. Last year our Civil Rights Action Team Report provided a blueprint to make that happen, and I'm pleased to report to you today that, on Monday of this week, Secretary Glickman issued a status report one year later of what we've accomplished, and we're all proud of that. And I'd like to provide a copy of this document for the record.
Mr. SKEEN. Thank you, Mr. Reed, and it will be done.
[CLERK'S NOTE.—The status report is too lengthy to be printed. A copy will be retained in Committee files.]
Mr. PEARLIE REED. And the fifth thing that I'd like to say is that, last year when the Secretary asked me to assume this job, he also asked that I provide the leadership to try and improve the coordination of department administrative functions, and I think we've made substantial progress in that arena as well. And we also would like to say that our budget request reflects what we think is needed in order to accomplish what the Secretary would like to do in that arena.
Mr. Chairman, I will close by simply saying, thank you, and we look forward to your continuing support.
Mr. SKEEN. Thank you, Mr. Reed.
Ms. Reed.
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INTRODUCTORY STATEMENT OF OCIO
Ms. ANNE REED. Mr. Chairman, I want to thank you for inviting me here today. I will, with your permission, submit my testimony for the record, but offer here just a few remarks.
Mr. SKEEN. We'll do it just exactly like you ordered it. Thank you.
Ms. ANNE REED. First, I want to say how pleased I am to work with Secretary Glickman, whose leadership and commitment has helped transform USDA into a vibrant and vital force for the American people and their communities. With the strong bipartisan support and cooperation of people such as yourself, USDA is stronger, abler, leaner, and more cohesive, and I believe we'll better serve our Nation.
Though we have turned the corner on a new path of efficiency and quality program delivery, we still face many challenges, such as assuring Year 2000 compliance, and in the area of implementing new technologies. We recognize that the challenges come at a time when the Federal Government has fewer and fewer resources, and we realize that creativity, innovation, and hard work are needed to assure that we stretch every dollar in our budget.
Our Secretary has worked long and hard with the White House to lay out a vision for USDA, and the President's budget seeks to fund and promote priorities which will expand opportunities for family farmers in rural communities, make a major commitment to food safety and in fighting hunger, provide stewardship of our natural resources, and protect the integrity of USDA programs. Within each of these priorities lies the needs for expanded use and integration of new technology applications.
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USDA INFORMATION TECHNOLOGY BUDGET
The 1999 budget request for information technology at the Department is $1.2 billion. This includes approximately $326 million for acquisitions, including equipment and software; $237 million for commercial support services, $31 million for supplies; $447 million for intergovernmental payments, such as transfers to the states and our Federal telecommunication services; $280 million in personnel costs; and $75 million in other services. Offsetting these costs are collections from non-USDA agencies of approximately $146 million.
Now the overall budget request for USDA continues to shrink in response to greater efficiency and fiscal necessity. The President's budget singled out the information technology budget area as one of the few that will experience stability in funding, so that we can continue to perform the much needed IT oversight and planning.
SYSTEMS INTEGRATION
The Department is making headway in efforts to integrate systems and expand the applications of new technologies. Our proposed infrastructure investments include $27 million to ensure that every USDA system and application is Year 2000 compliant—the $27 million is proposed for Fiscal Year 1999—$67 million for the common computing environment, a USDA service center implementation project that will provide a single computing platform for USDA service centers. Other proposed technology expenditures include $8.1 million for Rural Development's, Dedicated Loan Origination and Servicing System, which provides centralized servicing of housing loans; $150 million in loans and $12.5 million in grants for telemedicine projects.
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All of this is to say that the Department is seeking to use its resources, including information technology, to provide better service to the American public and fulfill our mission.
OCIO BUDGET REQUEST
While I believe that we're turning the corner, it is important to continue the funding of my office so that I can help provide the leadership and oversight that is required. My office's budget request for 1999 totals $7.2 million, an increase of about $1.7 million over the 1998 level. This recognizes the Secretary's and the Administration's commitment, to assuring that we are moving in the right direction as a department, not just as a collection of individual agencies.
The program increase is comprised of two primary parts: part for information technology capital planning and investment process, and part for the development of a technical architecture and management systems. These will help us make better decisions about what information technology we need in the Department, so that we're being more cohesive in the decisionmaking process and more disciplined about the process.
I believe that this budget does illustrate the Secretary's challenge to the Department to strengthen our corporate management of technology. My office has developed a blueprint or a plan of action, which we have shared with some of your staff, the actions which we plan to take to fulfill this responsibility.
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IT PRIORITIES
First among those is assuring Year 2000 compliance. Also the development of a single information technology infrastructure, improvement of our telecommunications management, and furthering the development of policies and procedures for implementing the Clinger-Cohen legislation.
I cannot emphasize enough that my top priority is Year 2000, however there are additional issues that must be addressed with our legacy systems, computer security, interoperability, electronic commerce, management of change and the skilled labor shortage that we have with information technology professionals.
There's a growing awareness that only in improved corporate management of the information technology infrastructure at USDA can we fully achieve the mission that is intended.
I want to thank you again, and I look forward to answering any questions that you might have about the work that we're about.
Mr. SKEEN. Thank you, Ms. Reed. We'll turn to Ms. Thompson.
INTRODUCTORY STATEMENT OF CFO
Ms. THOMPSON. Mr. Chairman, and Members of the Committee, I am pleased to be here today to discuss the Fiscal Year 1999 budget of the Office of the Chief Financial Officer. With me today is the Deputy Chief Financial Officer, Ted David, whom I might say has served with distinction as the Acting CFO for USDA for the past two and a half years; and also Connie Gillam, our Budget Officer.
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OCFO BUDGET REQUEST
You have my formal statement, which I submitted for the record, and I'm sure, as you realize, because I was sworn into the Department as the Chief Financial Officer just this past Monday, I have not had an opportunity to become fully familiar with the budget and the program activities of the Office of the CFO. However, I have become sufficiently familiar with the responsibilities of that office to conclude that an increase of $272,000 and 2 staff years is a very modest one, particularly given that only $121,000 of that is associated with the program increase. The balance covers salary increases, benefits, and Civil Service Retirement services. This is a fairly modest increase.
The increase will support two of the Office of the CFOs strategic goals; financial management information, advice and council, and Departmentwide policy and oversight with specific focus on implementing Government Performance and Results Act—GPRA.
My formal statement is presented in the context of the strategic plan for our office. Of course the plan was developed before my arrival. While at this time I have no reason to change the plan, I do intend to spend time with my staff, and with all the staff within the USDA, and our customers, to make sure that we are heading in the right direction.
I firmly believe in the principles of GPRA: establishment of strategic plans, development of annual performance plans, and development of ways to measure output and outcomes of both the strategic plan and the annual plan. They are the proper approach to business planning, whether we're in the public sector or the private sector.
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This approach is how I plan to manage the Office of the CFO, and in my role as GPRA coordinator, and how I intend to help the agencies and USDA manage their programs.
NATIONAL FINANCE CENTER
Among my responsibilities is management and oversight of the National Finance Center.
Mr. Chairman, from all that I have read so far, the National Finance Center is a crown jewel of franchising and cross servicing in the Federal Government, and it is my intent to see that it stays that way. I want to assure you that it will become Year 2000 compliant; that it will enhance its personnel, administrative and financial systems; and that it will expand its businesses, both at USDA and with non-USDA agencies.
FFIS IMPLEMENTATION
I understand that we have experienced difficulties in the implementation of our Foundation Financial Information System, FFIS, but believe this is something that occurs with such a large and complex system implementation. I will be monitoring the FFIS very closely and look forward to the report that we will have within a few days of the independent validation and verification study that's been carried out under a contract with CIO. From what I know at this time, I am confident that the system will be fully implemented at USDA, but it looks like it may take longer, and cost more.
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I have joined the management team at USDA to work towards the overall goals of the Department, and will do what I can to make sure that the activities of our office contribute to the achievement of USDA's goals. I consider this opportunity an honor, and an assignment I will take very seriously, and commit all of my strength and talents to that.
PRIORITIES OF THE CFO
After three days on the job, I can tell you what my top priorities will be. My first priority is a single integrated financial management system up and running for all agencies of the Department of Agriculture, that provides useful management information reports and cost accounting reports, and results in a clean audit finding. And, I commit to you that all of these systems at the National Finance Center will be Year 2000 compliant.
My second priority will be to continue the implementation of GPRA with this strategic plan and its annual performance plan.
The third priority is all of the other things that come under the responsibility of the CFO.
Mr. Chairman, I thank you, and Ted and I will be pleased to answer any questions that you have.
[CLERK'S NOTE.—Mr. Pearlie Reed's written testimony appears on pages 788 through 798. Ms. Anne Thompson Reed's written testimony appears on pages 799 through 821. Ms. Sally Thompson's written testimony appears on pages 822 through 833. Written testimony of the Office of Communications appears on pages 834 through 837. Written testimony of the Office of the General Counsel appears on pages 838 through 858. Written testimony of the National Appeals Division appears on pages 859 through 863. Biographical Sketches appear on pages 780 through 787. The Departmental Administration's budget justification appears on pages 864 through 921. The Office of the Chief Information Officer's budget justification appears on pages 922 through 934. The Office of the Chief Financial Officer's budget justification appears on pages 935 through 966. The Office of Communication's budget justification appears on pages 967 through 978. The Office of the General Counsel's budget justification appears on pages 979 through 1013. The National Appeals Division's budget justification appears on pages 1014 through 1022.]
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Mr. SKEEN. Thank you, Ms. Thompson, and I want to tell you that I'm much impressed with the Finance Center, and I visited it some years ago, and it was a good guideline at that time for future operations and futuristic planning, and innovative work from a governmental entity. And you're to be complimented on taking that job on, because I think you'll do—if you want a job done right, get a woman to do it, but men get the last word, and that's, yes, ma'am, you did it well.
Ms. THOMPSON. Thank you, sir.
Mr. SKEEN. We thank you.
IMPLEMENTING CRIT RECOMMENDATIONS
Let me start with Mr. Reed.
You testified last year that few, if any, of the Department's previous civil rights reports, including the 1990 Blue Ribbon Task Force, were implemented or taken seriously. Do we have any guarantee that we're not going to go through this same exercise again this time?
Mr. PEARLIE REED. Yes, sir.
Mr. SKEEN. I thought I'd throw you a soft one.
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Mr. PEARLIE REED. Well, I hope that's the last one.
Yes, sir. I'm please to report that we are well underway in implementing 90 of the 92 recommendations that were in our Civil Rights Action Team Report that we released about a year ago today.
CIVIL RIGHTS GOALS
Mr. SKEEN. Very good.
There's a lot of new money in the budget identified with the civil rights initiatives, and I don't know whether money is going to solve the problems, but I believe that we gave USDA an additional $1.5 million last year, if I'm not mistaken to resolve a backlog of cases. And the Inspector General reports that the caseload has doubled. Is this correct?
Mr. PEARLIE REED. That is correct.
Mr. SKEEN. Can you provide us the specific goals that you have for these investments?
Mr. PEARLIE REED. Yes, sir. I can tell you the reasons why the caseload seems to have doubled is because our records did not accurately reflect what the caseload was. As we have gone about doing those things that we need to do to fix the civil rights problems at USDA, we have discovered a lot of case records that had not been filed. We've developed a system so that we can keep better track of cases as they come in.
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The resources that we're asking for in the budget are either directly in support of civil rights, or indirectly in support of civil rights. The thing that we've found is that most of the civil rights problems were due to related problems—poor personnel management. Our supervisors and managers, I should say some of our supervisors and managers, were not doing what needed to be done up front to deal with problems before they manifested themselves in the system as formal complaints.
The old-timers tell me that departmental administration has been on the decline for at least 20 years. As I indicated in my opening statement, one of the things that the Secretary asked me to do about a year ago was to turn that around, and in part, our budget reflects that need.
CONTINUITY IN CIVIL RIGHTS
Mr. SKEEN. Well, I'm not picking on you. I do want to make this observation. I think you walked into a buzzsaw of a program to take care of. You took on a huge job to begin with, and you've done very well with it, even though the statistics do not bear that out. But, you've started us down the road to doing the right thing.
I recall that you first testified before us a few days after you took the job, and now you're going back to NRCS. We want to congratulate you and wish you the best, but who's going to make sure there is some continuity in the work that you've done?
Mr. PEARLIE REED. The Secretary, and——
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Mr. SKEEN. Have you told him yet?
Mr. PEARLIE REED. No, he tells me. Mr. Chairman, the Secretary has asked a person that I cannot announce today to be acting until the person that he has selected to go into the job permanently goes through the confirmation process. We have a team in place that picked up Monday morning where we left off.
Mr. SKEEN. So you've got continuity?
Mr. PEARLIE REED. Yes, sir.
Mr. SKEEN. Well, we want to thank you once again for the work that you've done on it.
YEAR 2000 COMPLIANCE
Ms. Reed, does your work on the year 2000 problem have a separate budget or can you tell us what it will cost to fix the problem?
Ms. ANNE REED. Our current projection for cost for the Year 2000 is about $120 million over the period of years. We have devoted considerable resources within the Department. I should tell you that $120 million reflects just what we consider to be the added cost for this.
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Mr. SKEEN. Added cost?
Ms. ANNE REED. That is just to address the Year 2000.
Mr. SKEEN. To the situation as we have it now. So it's not new work.
Ms. ANNE REED. If we had already planned to replace a system for other business reasons, we don't count that cost, if we are also bringing it into Year 2000 compliance. We want to capture exactly what cost is due solely to Year 2000. It's still a very substantial number.
Mr. SKEEN. You isolated the problem, but we're not sure what it's going to cost, but you've got at least some idea.
Ms. ANNE REED. We have a fairly good idea of the cost for our hardware and software systems. We have a complete inventory and we've done this total assessment of it. That work is well underway. I have a lesser degree of confidence in the cost projections for what we call embedded technology in the telecommunications equipment and in personal and real property.
We are still in a process of discovery. The industry itself does not have complete information available about which systems are compliant, and which are not. There's quite a large effort underway in that regard.
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Mr. SKEEN. The Inspector General has pointed out a potential serious problem in the Risk Management Agency for the year 2000. And the IG says in his November 1997 report, that the RMA had not identified mission critical systems, or developed a conversion strategy. If RMA fails, they can't deliver crop insurance, and lack of crop insurance could mean a huge damage to the farm system. What does RMA need to get this problem fixed?
Ms. ANNE REED. Well, I can assure you that Gus Schumacher, Under Secretary and Ken Ackerman, Administrator of the Risk Management Agency—RMA, are now personally and deeply engaged in this. RMA does have a plan of action. I believe that the work of the Inspector General for the Risk Management Agency, and in fact for some of our other agencies, helped them to fully appreciate and understand the dimensions of the problem. Resources are now clearly being brought to bear on it.
Mr. SKEEN. So if they need help from us, they're going to be in shape to make it. We're going to get something done.
Ms. ANNE REED. I am informed that they are well underway.
NFC COMPUTER PURCHASES
Mr. SKEEN. I have a question for Ms. Reed and Ms. Thompson, either one or both.
The Inspector General reports that the CFO has purchased about $31 million worth of new computers for the National Finance Center, and they were purchased from a vendor under a contract worth more than $100 million. The IG says that some of the computers are not year 2000 compliant.
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Can you give us the details on this, and tell us the status of the problem, if there is one?
Ms. THOMPSON. If that's all right with you, Mr. Chairman, I will let Mr. David answer that.
Mr. SKEEN. Certainly.
Mr. DAVID. If I can, sir. I appreciate the question.
The IG report did say there were $31 million of computers purchased. Of that amount the National Finance Center purchased less than $1 million. I don't know where the rest of that money was spent.
Those computers, those PCs, were purchased in 1983 and 1984. They were purchased under a mandatory USDA contract with an 8(a) vendor. I believe it is the case that NFC was the one that brought this problem to the attention of the IG. These computers have now outlived their useful life. We currently have a plan in place that will replace all of those computers in a timely fashion.
Mr. SKEEN. So, it won't be considered a total loss?
Mr. DAVID. No, they've all been very well used, since they were purchased in 1993 and 1994. They're several years old as it is. And, we have a plan in place to replace all that were purchased by the NFC.
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Mr. SKEEN. I see.
Mr. DAVID. And, as I say, NFC cost was less than $1 million of the total amount of the $31 million.
Ms. ANNE REED. Mr. Chairman——
Mr. SKEEN. Yes, Ms. Reed?
Ms. ANNE REED. I will add to that, if I might. We were able to get information out to all of the agencies that purchased on that contract, so that they have all done a complete evaluation of the computers that were purchased.
Mr. SKEEN. So you've got a pretty good handle on them?
Ms. ANNE REED. Yes, we do. But we certainly appreciated the knowing that we had to address the problem. The system's working.
Mr. SKEEN. It's not always as bad as you think it might be, but sometimes it's worse.
Ms. ANNE REED. Too true.
FOUNDATION FINANCIAL MANAGEMENT SYSTEM—FFMS
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Mr. SKEEN. Ms. Thompson, being new gives you disadvantage in terms of existing problems. Originally, the single integrated financial management system for the Department, the Foundation Financial Information System, was to have been implemented by October 1997, and now it appears that the target is to be substantially implemented by the year 2000.
What's caused this delay and how much is it going to cost? Or do we have any idea what it cost? Or let Mr. David——
Mr. DAVID. If I may, sir.
Mr. SKEEN. Yes, sir.
Mr. DAVID. We did implement the first agency, the first part of the Forest Service, as of October 1, 1997. We have experienced some difficulties, some of which are the natural consequence of a large system; some that are a little different than we anticipated. And, we are currently working with all parties, including the Chief Information Officer, the Forest Service, and the other agencies to identify the issues and to recast our implementation plan. We are in the process of doing that as we speak, and should have a better idea within the next month or so.
Mr. SKEEN. Then, we've got the problem surrounded?
Mr. DAVID. We've got the problem surrounded. I think we understand what the issues are. We have learned a lot of lessons. We have a bit of scar tissue to show for it. And, we have a much better idea about what the overall implementation will require for that system.
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Mr. SKEEN. Well, I think it's a premier installation, and it certainly has been a forerunner and a guide, so you can make government operations really mean something, other than being wasteful, and inefficient, all those good things that you hear time and time again.
I want to compliment all of you, because the quality is what you're after and that's what you're bringing with you, and we appreciate it.
Ms. Kaptur.
Ms. KAPTUR. Thank you, Mr. Chairman.
I want to welcome you, Mr. Reed and Ms. Thompson, Mr. David, Ms. Gillam. Mr. Dewhurst has been at every one of our meetings, so we welcome him back as well. I know, he's got to be tired after all of this.
I wanted to just ask a few questions for Mr. Reed.
LEGISLATION FOR CRAT RECOMMENDATIONS
Many of the recommendations that were in the Civil Rights Action Team Report require legislation, and our colleague, Eva Clayton, has introduced legislation to implement most of those recommendations.
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Do you know whether the Authorizing Committee intends to take up that legislation, and beyond that what this committee might do to help you move forward with any of your recommendations?
Mr. PEARLIE REED. No, I do not know the current intent of the Authorizing Committee, but I do know that the Secretary has weighed in formally with the Authorizing Committee on his position on both the Clayton Bill, as well as the Smith Bill. The only thing that I can offer at this time that this Committee can do is to support the Clayton Bill and the Secretary's position on the Clayton Bill, as well as to support us with the funding that we need across USDA to correct the problems that we found and reported out about a year ago.
SUPPLEMENTAL FOR CIVIL RIGHTS
Ms. KAPTUR. Your testimony indicates that the president has proposed $4.8 million in supplemental authority, to ensure that those civil rights recommendations can be sustained during this fiscal year.
I'd like to ask you, how does this supplemental activity help you move forward with your work, and also, where are the offsets for those proposed dollars, please?
Mr. PEARLIE REED. Okay, the question on the offsets I'd have to refer to Mr. Dewhurst, because I know he has been working on that. But the purpose of the supplemental is to fund either direct or indirect activities at the Department of Agriculture that are necessary to do those management kinds of things to support the civil rights organization.
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For example, our report last year recommended that we establish an Associate General Counsel for Civil Rights at USDA, and we have done that. We need resources to fully staff that office and get it up and operating.
There are other areas that we recommended, such as establishing a conflict resolution group. There are some situations dealing with ethics that we haven't been able to fund in the past. These things and the specifics that we have listed in our Explanatory Notes, will add up to the $4.8 million that we're asking for and need.
OFFSETS TO CIVIL RIGHTS SUPPLEMENTAL
Mr. DEWHURST. When the president submitted the supplemental request on the 20th of February, he also submitted a series of rescission requests, rescind funding in order to offset that supplemental. Those requests would reduce the salaries and expenses budgets of a number of our agencies, including the Forest Service, the Farm Service Agency, and the Rural Housing Service.
The reductions are allocated to agencies essentially consistent with what they have to gain through the effective implementation of the Department's civil rights initiative. So they're either agencies with large employment levels and significant EEO problems, or agencies with large programs and significant program complaint problems. But those rescissions are all laid out in the President's request.
ADMINISTRATIVE CONVERGENCE
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Ms. KAPTUR. Thank you very much for that.
I wanted to ask, Ms. Thompson, can you highlight where we are today with the administrative convergence at the county level, county administrative level, with computing systems?
Ms. THOMPSON. I'd be a little afraid to say on that.
Mr. DAVID. I am also going to pass. I'd like to ask Mr. Reed to respond, if I can. [Laughter.]
Ms. ANNE REED. There may be a little bit of confusion here. My full name is Anne F. Thomson Reed, so you have before you two Reeds and two Thompsons.
Ms. KAPTUR. Yes, this is very confusing.
Ms. ANNE REED. I believe that may be a source of some of your confusion.
Your question is with respect to the administrative convergence, particularly with respect to the information technology in the service centers.
During this year we have launched the first phase of that project, which is something that we call the LAN/WAN Voice project. Essentially it brings a telecommunications infrastructure to those service centers that will support the platform that we have proposed in our budget for Fiscal Year 1999. Substantial resources have been identified for 1999 to help us bring in that new platform for those service centers.
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Ms. KAPTUR. Currently, today you're saying that, there's really not—as far as the computer systems themselves, there's a lot of disarray then still at the county level.
Ms. ANNE REED. That's absolutely correct.
As you may well be aware, there's been a long history, with respect to the effort to bring the new technology into these service centers.
We spent significant time, based in large part on the recommendations of GAO, studying what the actual business requirements would be, how we could better integrate the work of those agencies so that we would be purchasing the right kind of technical infrastructure to support a new business process, a new way of bringing service, so that we can present ourselves as a single entity to farmers and producers, rather than as multiple entities. And, it takes time to understand that business requirement.
Ms. KAPTUR. And could you tell us, on the Year 2000 difficulty for software around our country, do you know the magnitude of the problem, and the cost of this for USDA?
Ms. ANNE REED. We are currently projecting a total of $120 million for the cost across the Department, that's across multiple years. It would not surprise me for that estimate to go up as we get further into testing, as we further identify the embedded systems which may or may not be compliant. We are working with others across the Federal Government, and with State and local governments, and with industry to get a much stronger understanding of what the linkages are going to be, and what information is available on systems, like telecommunications systems, and air conditioning systems, and elevators. This is an enormously complex and pervasive problem for us.
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NATIONAL FINANCE CENTER
Ms. KAPTUR. Thank you.
And finally, Ms. Thompson, even though you've only been in your position for four days or three days—and perhaps you and Mr. David might be able just to give me a lay person's understanding. I have not visited the center, and therefore don't have a sense of all of the activities that it conducts. But I understand that a lot—you do serve a financial service center for many, many agencies.
In layperson's terms, could explain to me how significant that is in terms of the government of the United States?
Mr. DAVID. Thank you. The National Finance Center provides administrative and financial computing services to a number of agencies, including all of the USDA agencies, but also a number of agencies outside of USDA.
We particularly provide payroll services for a number of larger agencies. We currently payroll approximately 440,000 people every 2 weeks, which includes the USDA workforce, and the employees of a number of, non-USDA agencies, such as Treasury and Justice.
The National Finance Center is also the recordkeeper for the Thrift Savings Plan, which is the Federal Government's 401(k) plan, where we keep the records for approximately 2.2 million enrollees. We provide other kinds of administrative and financial services to other agencies.
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Ms. KAPTUR. Do you select the companies that invest the money in index funds for that thrift plan?
Mr. DAVID. We do not. The investment management is carried out by the Thrift Investment Board, which is a separate Federal agency that manages the way the money is spent, and it also is our customer. We only provide the recordkeeping services to the Thrift Investment Board, and receive the contributions from the employees, and their agencies, and distribute it as the Thrift Investment Board directs us to.
Ms. KAPTUR. Just ballpark, you would accommodate then what percent of the Federal workforce in the financing accounting systems? You said 440,000.
Mr. DAVID. In our payroll systems——
Ms. KAPTUR. In your payroll.
Mr. DAVID. There are not many users in our accounting systems. I believe that's probably 25 or 30 percent of the Federal civilian workforce.
Ms. KAPTUR. Thank you. Thank you both, and good luck to you.
Thanks, Mr. Chairman.
Mr. SKEEN. Mr. Latham?
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Mr. LATHAM. Thank you very much, Mr. Chairman, and welcome. This is confusing. Why don't I call you Anne.
Ms. ANNE REED. That's perfectly acceptable, sir.
NFC COMPUTER PURCHASE
Mr. LATHAM. Welcome. I wish you the best of luck in your new assignment, Ms. Thompson. And I have a few questions. Earlier you talked about the delivery or the purchase of a computer system that was not year 2000 compliant. The first time you said it was purchased in 1983 or 1984, then you said it was 1993 or 1994. Which?
Mr. DAVID. Sorry, I misspoke. It was personal computer, not a system, and they were purchased in 1993 and 1994.
Mr. LATHAM. When were they delivered?
Mr. DAVID. They were delivered in 1993 and 1994.
Mr. LATHAM. And as far as you're concerned, they're worn out by now or they're pretty well obsolete.
Mr. DAVID. Yes, sir.
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Mr. LATHAM. And you also said there was $31 million in total; that you only used $1 million for that. Where did the other $30 million go?
Mr. DAVID. The Inspector General reported $31 million. I do not know where the rest of it was spent. Our agency, the National Finance Center, spent less than $1 million.
Mr. LATHAM. Do you know where it went, Anne?
Ms. ANNE REED. I don't have that specifically; however I will say that we did a significant outreach effort to everybody. We notified everybody who was participating in that contract, that they did need to address this. So I can get back to you, for the record, and tell you exactly what that break is, but I will tell you that we did go to the effort to make sure that all of the agencies that purchased under that contract were aware of the issue.
[The information follows.]
YEAR 2000 COMPLIANCE AT NFC
Mr. LATHAM. Okay.
And in testimony earlier, I thought it was back 1991 or 1992, I guess, when it was purchased. So it's nice to know at least when it was.
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The CFO oversees the National Finance Center in New Orleans. You state you've allocated significant NFC resources to the Year 2000 compliance. How much is included in your budget, Ms. Thompson, for the compliance?
Mr. DAVID. The National Finance Center is financed through our working capital fund, so none of the money in our appropriated budget goes to the Year 2000 compliance. But we do anticipate that over a 4-year time period, NFC will devote about $12 to $13 million to the Year 2000 compliant issues.
Mr. LATHAM. Okay. In your written statement you mention a target date, established by OMB and the CIO for the National Finance Center. Do you know what the target date is?
Mr. DAVID. And I would defer to Ms. Reed, but I believe that OMB's target date for all Y2K compliances, I believe March of 1999, Anne?
Ms. ANNE REED. That's correct.
Mr. DAVID. And NFC will beat that target date, in terms of having the NFC systems Y2K compliant.
Mr. LATHAM. Okay. So when you talked about financial systems being in compliance long before, you're talking about 9 months before, the bomb goes off.
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Mr. DAVID. The systems at NFC will be compliant even long before that particular date. We are very comfortable.
Mr. LATHAM. How long before?
Mr. DAVID. We would think by this fall.
Mr. LATHAM. Okay. I mean, we are getting very close. What happens if you find out on March 1st that this whole thing's going to blow up? Do you have nine months? Is that enough time to straighten it out?
God, I hope it doesn't happen.
Ms. ANNE REED. I need to tell you, I want to appreciate the support that Mr. David has given this effort. We have, jointly been meeting with the Chief Financial Officers of all of the agencies to assure that all of the Department's financial systems are on track, and that it is the focus not just of the agency administrator or the Chief Information Officer, but also the Chief Financial Officer to assure that we've got the right kind of oversight.
The financial systems are clearly of primary interest to us. We are looking at contingency plans. Where we had planned to replace a system, we are now going ahead and making sure, even though we are on track with the replacement system, which is Year 2000 compliant, that the current base system compliant as a hedge because sometimes these projects do take longer to get in. So that's one kind of contingency we've put in place.
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We are beginning to look at what other contingencies are. GAO just came out with guidelines on how to approach contingency planning. As you can appreciate, however, with financial systems, it's going to be a very complex process for the Department. We will do everything to get our systems compliant, but we also integrate with a lot of other financial systems at other Departments. So we're all in this challenge together.
Mr. LATHAM. In the National Finance Center, is there a danger if one department or agency that is paid out of there is not in compliance, that it somehow will burn up the whole system?
Mr. DAVID. If I could respond to that, we are working with each of our client agencies to assure that the information they provide us is Y2K-compliant and that the information we provide them meets their needs for Y2K compliancy. We also are going to be setting up a test facility this summer which will enable our client agencies to test their systems, the information they provide to us, and we will be able to test the information we provide to them. So we will be building those interfaces and relationships.
Mr. LATHAM. Is that interagency or inter——
Mr. DAVID. Interdepartment with the other departments that we service, as well as certain of the agencies with USDA—both.
COMMON COMPUTING ENVIRONMENT
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Mr. LATHAM. Okay. Anne, I hate to do this.
Ms. ANNE REED. It's quite all right.
Mr. LATHAM. Speak more formally here, I guess. The FSA and NRCS and Rural Development Agencies are proposing a project called the Common Computing Environment. Have you reviewed and approved this project, and are you comfortable with the plan, and that it will succeed?
Ms. ANNE REED. Yes, sir, I have reviewed this project. In fact, I have on my staff a senior executive whose primary responsibility is the oversight of this project. We have provided a great deal of quite specific guidance which the agencies have really supported. One of the things that we have done, is that we have taken to heart the lessons that were learned from the InfoShare Project. We've considered the recommendations of GAO. We've structured a process that invests in business process re-engineering first, so that the agencies are working together to define their business processes, and only after that is done do we identify what the technical infrastructure should be.
The project is phased, so that we're now in the first phase with deploying a telecommunications infrastructure which will support a new technical infrastructure. We're phasing the development of a technical infrastructure so that we can move forward, stop, assess that it works, then move forward again. So we're following what has come to be known, as the Raines rules for implementing——
Mr. LATHAM. Raines?
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Ms. ANNE REED. Yes, Director Raines of OMB——
Mr. LATHAM. Oh.
Ms. ANNE REED. He has taken a very strong interest in the management of major information technology projects, and we've taken that seriously.
INDEPENDENT VERIFICATION AND VALIDATION
Another thing that I have done in the past year is invested in an ongoing, independent verification and validation process. I have external expertise that comes in at specific points in time and evaluates pieces of each of these projects to assure that we are on track with what the industry norm is. They're looking at it from a management perspective, as well as from a technical perspective. We've been able to integrate the information these technical experts bring into the program as we move along, and that, we hope, will prevent us from many of the unfortunate pitfalls that such large projects do occasionally run into.
AUTHORITY OF CIO
Mr. LATHAM. I think just the makeup of the Department—and we've visited about this several times—in a project like this or anything else in USDA, when you've got 29 different agencies, and you have no one with the ultimate authority to make anyone do anything, if one of these agencies would decide, for some reason, maybe in a bit of turf battle, that they think maybe one side is going to take over the county offices and the other one isn't, and they decide then that they're going to kind of drag their feet or not be as cooperative, there really is no one who has the power to tell that agency to shape up, I mean as far as the information system. You can't go in right now and tell an agency exactly what they do. They may listen; they may not. Isn't that correct?
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Ms. ANNE REED. I think that's probably a slight exaggeration.
Mr. LATHAM. I mean, historically, you have to——
Ms. ANNE REED. I have managed during the last year to exercise quite a bit of authority in that respect, and I would have to say that those agencies are beginning, because they've been through these trials, to work relatively well together. They do get a very high degree of oversight from my office, however, an unusual degree for the Department.
Mr. LATHAM. But you also need the authority to do something about it, to take it out of their hands, if they're not in compliance also, or someone does? Somebody's got to be responsible someplace, and I don't think it's there now. And you're well aware of the legislation that Mr. Goodlatte and myself are putting forth. We visited—was it yesterday or the day before, I guess, about it——
Ms. ANNE REED. Yes, sir.
Mr. LATHAM. And I know you have some concerns, but I just don't see these problems really going away until it's finally determined at the Department that somebody has the authority to do something. It's maybe unfortunate, and it may seem extreme to some people, but we can't continue like the InfoShare situation, throwing good money after bad; it's just outrageous. It's just got to stop.
On that happy, I'll thank the chairman and thank you.
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Mr. SKEEN. Mr. Fazio.
Mr. FAZIO. Thank you, Mr. Chairman, and I'd like to welcome everyone this afternoon here. I want to particularly congratulate Pealie Reed on this appointment as head of the Natural Resources Conservation Service.
CULTURAL CHANGE IN USDA
It reminds me a bit of the President. You know, he started in Arkansas, made a name for himself there, and went to California and did even better. [Laughter.]
And he comes back here in fine shape, and we're happy to have him, not only in his new role, but in the role that he's just completed on the civil rights issues that have already been discussed.
I also wanted to reference, I think, something that Anne Reed has talked about, and that is the service center concept that USDA is putting together that's being pushed by the Secretary as a way of making one-stop shopping available to the various clients of the Department.
It strikes me—and maybe you can both comment on this—that to make USDA a unified entity, and to deal with civil rights issues, both requiring a cultural change in a large bureaucracy. I don't mean to say that they're impossible to accomplish. I'm glad we're working on both of them. But I wonder if you'd comment on the broader implications of how you make this kind of permanent change in a bureaucratic agency that has long done things differently.
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FRAMEWORK FOR CIVIL RIGHTS RESPONSIBILITIES
Mr. PEARLIE REED. I'll start by saying, as it relates to the civil rights issues, Mr. Fazio, we have embarked on a journey that would take the appropriate management instruments in place so that the Secretary would have a framework to hold his sub-cabinet officers and agency heads accountable for doing the right thing. I think, as we follow through in trying to implement our strategic plan and do all those things that we need to do from a management standpoint, and with the leadership coming from the top, it will take time, but I honestly believe that we are on the road to victory.
Mr. FAZIO. It will have to be consistently applied, though, ongoing; is that your assumption?
Mr. PEARLIE REED. Yes, and again, as it relates——
Mr. FAZIO. No interruption? You know, change your party, change your President; it can't change; it has to be continued.
Mr. PEARLIE REED. It has to be a continuum, and we recognize that. Again, I will use an example related to civil rights. I think recommendation number two in our civil rights action team report called for the Secretary to lift the responsibility from the mission areas and have it rest with the Assistant Secretary for Administration for the next three years, to rate the agency heads on their civil rights performance. At USDA that's serious business, especially with our senior-level people, if somebody gets a score less than average, then by regulation they could be removed from their jobs.
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Mr. FAZIO. Certainly your advancement will be limited. Is that a correct way to look at it?
Mr. PEARLIE REED. Absolutely. And we're doing that. In fact, I issued the first report card for the first quarter last week, and the Secretary is following up with the sub-cabinet, giving them his views on how they're performing. I think that's the kind of thing that we're going to have to do in order to force the system into this change mode.
Mr. FAZIO. So your own career, in fact, will be impacted by what happens on your watch within your staff, which makes you want to be proactive, not just reactive, because you can't afford to have a problem occur, even if you had no role in its creation?
Mr. PEARLIE REED. That is correct. Let me answer that by saying that we found and documented a year ago, that one of the big problems that we had at USDA was that a lot of the routine management issues, the routine problems, that were being elevated to the Secretary's office were problems that his sub-cabinet agency heads and the lower-level management structure should be dealing with. We have fixed that now. The Secretary is putting the appropriate discipline in the system, and again, I'm confident that USDA is going to get to where it needs to be.
Mr. FAZIO. That may be a good transition because we all know that USDA is much more than one agency—a lot of agencies, all jealously protecting their own prerogatives. It makes one-stop shopping almost a concept beyond the realm of reason a few years ago. I mean, I've had the effort of trying to put together a building for USDA in my area. I found how resistant people were to have to rent space next to or share a building with people from the Department, because they were the Farm Service Agency, or you name it.
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IT CULTURE CHANGE
Ms. Reed, how are we counteracting this long imbued tendency at this loosely-defined Department of Agriculture?
Ms. ANNE REED. Well, I think you're quite accurate in your assessment of this as an extraordinary cultural change, and within the area of information technology, you put that into the context of moving into the information age with the degree of change that is enabled by technology. We're able to do things now that we couldn't even think about doing even five years ago, and how you position yourself to make the right kind of technology decisions, which reflect changes in the way you do business, and that repetivity with which you change creates fear among the people.
I think that Pearlie was quite accurate when he used the word ''leadership,'' and that's absolutely central to this. You have to have leadership, and you have to have vision. It has to be communicated at all levels of the organization, and then people need to be held accountable for their actions. It's just equally true in how you manage information technology as it is in civil rights.
Mr. FAZIO. Well, it strikes me that the experience I've had in trying to unify the Department's various agencies in one building is not a bad way to go about breaking down these walls that seem to separate these——
Ms. ANNE REED. Yes, sir.
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Mr. FAZIO. I mean, just sharing common equipment or meeting rooms, or things that would make all of these departments more efficient perhaps, and perhaps at some point—maybe this is what's threatening—reduce some overhead that is, at least on the surface, somewhat duplicative.
Is there a way we can go about making that more the norm instead of the exception, generated from pressure from the local Congressmen, which probably may be as much in the other direction at times as it was in mine?
CHANGE MANAGEMENT
Ms. ANNE REED. One of the things that the service center initiative project has done is implement a change management training program across the Nation, which brings together at one time in one place all of the employees from these service centers, from these multiple agencies, to talk about issues like this. They have gotten enormously positive feedback from the process of bringing people together, so that you take away some of the mystery of who you are and what you're trying to accomplish, and begin, then, to understand how you can work together. It's not a matter of pitting people against each other; it's how you pull together. But, it takes some very conscious effort.
Mr. FAZIO. I know in the private sector we often have within the same company business units that compete with each other——
Ms. ANNE REED. Yes, sir.
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Mr. FAZIO [continuing]. For good people, as well as assignments, missions. Is there any possibility we'd be able to see career tracks that allow people to move from one agency to another and not have to stay in line in the agency in which they somehow found themselves, in order to further the process of creating the feeling that they're part of a department of government?
Ms. ANNE REED. You can handle that in some ways. Pearlie, you may want to address this as well. Agency cultures are very strong, a lot of times detailing has been used to positive advantage, where you just give a person an exposure, an opportunity to participate in another environment, and that can be very effective.
Mr. PEARLIE REED. Let me just respond to that, Mr. Fazio, by saying that I mentioned earlier that when the Secretary asked me to take this job about a year ago, one of the things that he asked me to do was to provide the leadership to improve the coordination and the central administration of the Department of Agriculture. One of the things that would help this personnel situation that you just mentioned, would be if the Department of Agriculture had one centralized, well-coordinated personnel management system that was applicable to all agencies.
Mr. FAZIO. I'm sure the Secretary would love it.
Mr. PEARLIE REED. Yes, and let me just say, following up on Mrs. Kaptur's question, the supplemental will help us get there.
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Mr. FAZIO. You took your opportunity, I saw. [Laughter.]
Maybe we ought to be a little more explicit, though. I don't know what the chairman's inclination would be, but it seems to me that we need to continue some of the reorganization that has begun in this decade, and to try to drive that kind of a change in a way we, say, handle our personnel. I mean, there seems to be an information office, a personnel office, a you-name-it office, in every agency, and sometimes I don't know that they even know they're working together, because I know they're not in some cases. It seems to me the Department doesn't have the tools sometimes to deal with the inclination of these very subsets to go their own route. You're kind of there without the tools.
Mr. PEARLIE REED. Yes, and I should say, Mr. Fazio, that we are in the process really of doing incrementally what you are espousing. I'd like to call your attention to the administrative convergence activity that the Secretary has underway for the so-called ''field-based agencies,'' the NRCS, the FSA, and Rural Development. There's an effort underway right now to merge all of those administrative systems, and I'm sure the Secretary will be providing the Congress with the appropriate information on that as we proceed.
Mr. FAZIO. He has the authority to do that?
Mr. PEARLIE REED. Yes.
Mr. FAZIO. And Congress hopefully won't object. That's the key, I'm sure.
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Mr. PEARLIE REED. Yes, sir.
Mr. FAZIO. Well, I have some other questions, but I'll put them in the record. Thank you very much. I appreciate seeing you all.
THRIFT SAVINGS PLAN
Mr. David, the sooner you can make sure that the Thrift Savings Plan operates like most everybody else's 401(k), we'll all be happy. You know, having the ability to move your investment decisions overnight, rather than have to wait up to 45 days——
Mr. DAVID. If I could comment on that, sir, that is the current method. I understand the Thrift Investment Board, which has that responsibility is now in process of implementing the systems that will provide that capability in the Year 2000.
Mr. FAZIO. Yes, I was pleased to hear that; the year 2000 was what was discordant—[laughter]—but I appreciate the fact that they are moving in that direction.
Mr. DAVID. They are moving in that direction.
Mr. FAZIO. Mr. Walsh and Mr. Serrano, and the rest of us in the Legislative branch will keep sending you work, so that you keep doing for us efficiently what we used to do less efficiently.
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Mr. DAVID. We are looking forward to that.
Mr. FAZIO. Can we make that a quid pro quo? We'll send you the work if you'll fix the Thrift Savings Plan? [Laughter.]
Mr. DAVID. We will certainly do our best.
Mr. FAZIO. Thank you.
Mr. SKEEN. Mr. Serrano.
Mr. SERRANO. Thank you, Mr. Chairman.
Thank you all for coming.
Mr. Chairman, I will just have a couple of questions. Then I'll submit the rest for the record.
DIFFICULTY ENFORCING CIVIL RIGHTS
Mr. Reed, you were quoted as saying in The Washington Post recently on the difficulty of enforcing civil rights regulations, ''I am charged with meddling into everyone's business. When you do that, you're going to make people mad. It just comes with the territory.''
My question to you at this point is: How mad did you make people? What was the backlash, if any, and most importantly, as you depart, do you feel that there is something in place that will continue the work you're doing, and not just necessarily the desire of someone else who comes to that position to do it, but one of the problems with replacing anyone at any time is that we all have our own way of doing things. In some cases, when you're dealing with something as sensitive as the civil rights issue, some other person's great intentions may not fall in line immediately with the work that you are doing and the progress you are making.
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What was the feeling, and how much did people get upset, which sometimes is very good, and what's in place to make sure that some people do keep getting upset?
Mr. PEARLIE REED. Well, the backlash is very subtle, and you can feel it. The people at USDA are sophisticated enough, and they're professional enough, to act professionally, you have differences of opinions, but you don't get the cooperation that you really need in order to do what the Secretary wants done.
An example of the kind of meddling and how it makes people mad, I mentioned in responding to Mr. Fazio's question. I have issued the first report card on all of the agency heads, and I didn't give anybody anything better than average. About half of the USDA agency heads at the end of the year get an outstanding performance rating, and if their performance doesn't improve substantially, next year they aren't going to get an outstanding performance rating, and that makes folks mad. And that's just one example.
But to respond to your question about institutionally how we proceed from here, everything that we've done since we started implementing the Civil Rights Action Team recommendations was centered around getting things institutionalized in such a way that it doesn't matter who is in what particular job. The policies and the procedures require that certain things be done. People will be graded on what they do. In order to change things, somebody will have to come back through and change the policies and procedures.
I feel that, based on the leadership that we have at USDA right now, and I think leadership that will follow the current leadership, we will have the appropriate support and discipline to make sure that things that we should be doing in civil rights to make sure that all—and I underscore the word ''all''—employees and customers are treated fairly, equitably, with dignity and respect, is something that we all can work for. That's what this civil rights issue and this civil rights implementation effort is all about.
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CONTINUATION OF CIVIL RIGHTS
Mr. SERRANO. You feel comfortable that, whoever takes over, there's something in place to just carry you through?
Mr. PEARLIE REED. Yes, and I don't believe that the Congress nor our customers nor the employees at USDA, the rank-and-file employees at USDA, will allow us to regress back to where we were.
Mr. SERRANO. Now you make an interesting point on that, about the Congress. I'll tell you, on the House floor, when we ever go for a vote, there's always a lot of conversation. It's a time to speak to one another, and sometimes you don't see each other unless it's on closed-circuit TV in your office, you know. Yet, I've noticed in the last couple of years that if there is conversation about an agency, one of the hot topics has been about the whole of USDA and the civil rights issues. And it grew; it grew from, I must say, a couple of years ago, from just some people having some historical need or experience which would get them involved in the issue or concerned about the issue, to a lot of people, perhaps the whole House, understanding that something is up; some changes were being made, significant changes were being made, to the point now where people would get nervous that an interruption in the leadership would tear that apart or bring it back in some way. So I'm glad to hear from you, that you're confident that the work you've done—and believe me, no one wanted to be in your place a year ago; we respect what you've done.
CIVIL RIGHTS INVESTIGATIONS
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There's also been talk about the lack of people to do the kind of investigations work that has to be done, and we don't know if that was just an assignment of staff or a need for new dollars, which is a bad phrase around here, but can you just comment on that for a second?
Mr. PEARLIE REED. Yes, it's a sign of both. But the bottom line is that 15, 20 years ago, somewhere in that timeframe, our civil rights investigation capability at the USDA was dismantled, and we didn't even know it. When I say, ''we,'' there were some that knew it. Those who the Secretary put in charge of fixing the problem discovered that about this time last year. It meant that all of the backlog that we had, all the cases that we thought we could come in and deal with, we had to go back in and investigate those that needed to be investigated before we could make a decision.
As a result of the 1998 appropriations, I think we have an appropriate level of funding to do those things that we need to do to investigate complaints. I'd like to let you know, though, that right now, as we work to Fiscal Year 1998, in order to deal with the backlog, in addition to the permanent staff we have brought onboard, we have 10 investigative firms that we have contracted with to help us with that backlog, and we hope to be beyond dealing with the backlog by the end of this Fiscal Year.
NUMBER OF BACKLOG CASES
Mr. SERRANO. And I'm sorry if I missed it before, but the backlog would be in what neighborhood, what are the numbers?
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Mr. PEARLIE REED. There were approximately 1,088 cases that we were dealing with at the time. Of that universe, we have closed about 225. So we have about 800 cases right now that are in some form of the investigation process or the process that we use to either dismiss a case, investigate, and do everything else that's needed to bring the issues to closure.
Mr. SERRANO. Once again, you feel, then, that the staff that's in place now for the kind of work that needs to be done will be able to tackle the remaining 800-odd cases?
Mr. PEARLIE REED. Yes, we do.
Mr. SERRANO. All right, thank you once again for the work you've done, and thank you all.
Thank you, Mr. Chairman.
CLOSING REMARKS
Mr. SKEEN. Well, you folks have done it. You've just about worn out the time. [Laughter.]
I just wanted you to know how much we do appreciate the work that you folks do. We come in with these great questions about what happened to the factory and where did it go wrong, and so forth; we don't intend to beat you over the head with it, but we know you are the kind of people that can straighten it out. We want to help you do your job, and you're helping us by letting us know what we ought to be doing to back you up.
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We're most appreciative of everything that you do and the great service that you give this country, on a day-by-day basis.
That financial center has really been, I think, a stellar installation.
Mr. DAVID. We want to invite you and your colleagues to join us down there again, sir.
Mr. SKEEN. We look forward to that. Thank you, sir.
We'll get the computer situation all worked out. We'll be down there to take lessons, to see if you can show us how to do Free Cells on them. [Laughter.]
Anyone else? Ms. Kaptur.
Free Cells—haven't you ever played that? Oh, you're serious about your computer. [Laughter.]
Thank you all. We're adjourned.
[CLERK'S NOTE.—The following questions were submitted to be answered for the record.]
"The Official Committee record contains additional material here."
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IT MORATORIUM
Mr. SKEEN. USDA's Secretary invoked a moratorium on new information technology activities in November 1996 so that USDA could improve its management of information technology. Has the moratorium been lifted?
RESPONDENT. Secretary Glickman has continued the IT acquisition moratorium to ensure that USDA agencies focus on achieving Year 2000 compliance. In August 1997, Secretary Glickman expanded the criteria for moratorium waiver requests to include Year 2000 planning and performance. Agencies must produce an acceptable Year 2000 plan and demonstrate progress on implementation before requesting any waiver to the moratorium. OCIO has also tightened the requirements of the moratorium. Any IT acquisitions over $25,000, rather than $250,000, need waivers. Waivers are now granted only for Year 2000 compliance or emergencies.
EXEMPTION TO THE MORATORIUM
Mr. SKEEN. Please provide a table, by category and amount, of IRM expenditures exempted from the moratorium in fiscal years 1997 and 1998. Please provide the rationale for each exempted category.
RESPONDENT. OCIO exempted certain categories of IRM acquisitions from the moratorium, but not specific amounts. The current exemptions are:
A. Renewals of existing contracts for mission-critical maintenance and leases, if optional enhancements and/or upgrades which cost in excess of $25,000 are not involved.
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B. Information technology acquisitions by organizations other than USDA agencies which are funded by USDA grants.
The rationale for the first category was that on-going maintenance activities for mission-critical programs should not be affected by the moratorium. The moratorium should focus on controlling purchases of new hardware, new software, new telecommunications equipment and services and new development of software until the Year 2000 conversion, validation, and implementation is completed.
For the second exempted category, these purchases are for use by organizations other than USDA agencies, such as State governments for the Food Stamp Program, and will not be part of the USDA information technology architecture.
LAN/WAN/VOICE PROJECT
Mr. SKEEN. In January 1997, USDA suspended LAN/WAN/Voice project installation except for Direct Loan Origination and Services (DLOS) system and emergency sites because USDA did not want to install technology in offices that could close. How many field service centers will have LAN/WAN/Voice capability installed by the end of fiscal year 1997, 1998, and 1999?
[The information follows:]
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LAN/WAN/VOICE SUSPENSION
Mr. SKEEN. Has the LAN/WAN/Voice suspension been lifted at USDA? If so, how were the issues resolved in order to lift the suspension?
RESPONDENT. In October 1997, the LAN/WAN/Voice suspension was lifted and associated waivers were granted, based on a number of conditions including office certifications and other requirements. Before lifting the suspension, my office engaged a contractor to do an independent verification and validation (IV&V) on the LAN/WAN/Voice project in July 1997. Recommendations for project improvements were provided to the LAN/WAN/Voice Team. The recommendations included certifying sites for installation based on economic payback, ensuring Year 2000 compliance, strengthening management systems, and implementing a measured pipeline process to track the installation process from start to finish. The recommendations were implemented by the project team and considered successful in a follow-up IV&V.
LAN/WAN/VOICE INSTALLATION COSTS
Mr. SKEEN. Please provide the Committee with a table showing costs for fiscal year 1996 through fiscal year 1999 to complete the LAN/WAN/Voice installation.
[The information follows:]
TELECOMMUNICATIONS RECOMMENDATIONS BY GAO
Mr. SKEEN. Please provide an update on the action USDA has taken on the telecommunications services recommendations made by GAO in 1995.
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RESPONDENT. USDA has taken several actions to specifically address the cost reduction issues presented by GAO.
USDA TELECOMMUNICATIONS IMPROVEMENTS
A. We have completed the USDA optimization/consolidation project—aggregation network planning, whose purpose is to aggregate USDA voice, data and video traffic which is located in the same building or region onto a backbone network.
Objective—Identify opportunities to optimize/consolidate FTS 2000 telecommunications services for USDA agencies and offices to reduce duplication of FTS 2000 telecommunications services at locations where agencies are co-located in the same building. The project will: provide agencies with site specific cost reduction recommendations; track agencies' decision on recommendations and implementation of recommendations; validate total cost reductions made as a result of this project; and train agency personnel in the USDA Network Analysis Process.
Project Status—Through February 1997, agencies and/or offices have saved nearly $40,000 per month by implementing the recommendations made by the Project Team, and approximately $23,000 per month by implementing alternatives to the recommendations presented by the Project Team. This will result in an overall savings to the Department of $2.18 million for the remainder of the FTS 2000 contract, which is scheduled to end on December 11, 1998. If the contract is extended one year, this savings will increase to $2.95 million. These figures have been verified by the FTS 2000 billing data.
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As part of the Departmentwide IT moratorium, the OCIO has revitalized the optimization and concentration activities. The following steps were taken:
1. The USDA Network Analysis model has been refreshed with FTS 2000 data reflected through September, 1997.
2. The Telecommunications Network Stabilization and Migration Program was initiated to stabilize the telecommunications environment within USDA and move us towards the implementation of an enterprise network.
3. A waiver from the OCIO is needed before the ordering of all dedicated telecommunications circuits, services and equipment.
4. The OCIO has utilized the requests for waivers to aggregate and optimize the services at multi-agency sites. Currently, Atlanta and Boise are being aggregated and optimized for both data and voice. There are about twenty other USDA multi-agency sites identified for optimization in fiscal year 1998.
5. The initial optimization of data circuits in the Washington DC South Building complex has been completed. A new initiative has been undertaken, the Washington Metropolitan Area Optimization project—WAMO—to carry the optimization effort for voice and data to the entire metropolitan area. This project is in the beginning stages and is scheduled to be completed by early 1999.
6. Data Set 7 under the optimization/consolidation has been sent to agency telecommunications control officers. The agency response date for this data set is February 20, 1998. This data set identifies approximately $800,000 in additional savings over the remaining life of the FTS 2000 contract should all recommendations be accepted.
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B. FTS 2000 Service Aggregation Billing Disputes—On-Going.
We have filed 49 disputes with AT&T concerning inaccurate service aggregation point billing for the agencies. The resolved disputes as of August, 1997, resulted in one-time credit adjustments of $19,920 and a cost reduction of $41,000 per month or $1,098,027 over the remainder of the FTS space 2000 contract.
Should the FTS 2000 contract be extended one (1) year, the total savings would be approximately $1.6 million.
Under the Telecommunications Network Stabilization and Migration Program, 18 additional disputes were filed with a cost reduction of $6,825 a month or $103,940 over the remaining life of the FTS 2000 contract. If the contract is extended one (1) year, the savings will be $185,840.
C. Intra-LATA Discount Tariff Agreements—On-Going.
We would like to share with you information on the implementation of Departmentwide discount tariff agreements for intra-LATA voice traffic. Use of the FTS 2000 contract for this traffic is not mandatory, and in most States the local telephone company carries the traffic and bills USDA at the normal business rate. The effort to implement agreements with AT&T and Local Exchange Carriers has continued. In areas where there are large concentrations of Federal Agencies, this is a cost-effective program. However, where there are few Federal employees or little traffic, this program would yield no effective savings.
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The projected savings from agreements with both US West and AT&T for FY 1997 is more than $296,000.
We are continuing to pursue implementation of agreements with various telecommunications companies, as we analyze their discount plans. A new agreement with US West for the states of Montana and Idaho has been submitted to USDA. Analysis of those agreements is underway to determine cost savings.
D. GSA Shared Service Locations—On-Going.
We are addressing GSA Shared Service locations to verify current usage charges and intra-LATA toll charges on GSA local switches to ensure cost-effective rates.
We have also notified GSA of actions which they have taken which have caused significant cost increases for USDA agencies, such as making changes at GSA local switches without ensuring service aggregations remain in effect. We are currently working on this situation in Boise, Idaho.
We work with GSA Regional Services to improve our management of the local telecommunications services provided by GSA. We have supported the Local Service Policy Agreement between the Interagency Management Council and GSA to promote sharing of telecommunications resources among government agencies in local communities across the country.
E. Enhance geographic network analysis—On-Going.
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In anticipation of the migration to a USDA Enterprise Network, we have completed a project to identify, develop and document an enhanced network analysis process. The application resulting from this project was distributed as an enhancement to the Network Analysis Model as a part of the TNSMP. This has given agency Telecommunication Mission Area Control Officers the ability to analyze sharing opportunities within a 10-mile radius of any location in addition to access optimization at a single location. This project has identified opportunities to share telecommunications resources in and around many USDA locations across the United States. These opportunities include reducing the number of service access requirements within a geographical region or operational area, and sharing excess or unused capacity.
TELECOMMUNICATION SAVINGS
Mr. SKEEN. How much has USDA saved to date by taking corrective action on telecommunications services?
RESPONDENT. I have outlined specific savings that total approximately $5 million.
INFORMATION TECHNOLOGY INVESTMENTS
Mr. SKEEN. Please provide an update of your activities to identify information technology investments which would result in shared benefits or reduced costs with other government agencies, such as sharing telecommunications networks and data systems under the Clinger-Cohen Act.
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RESPONDENT. In February 1995, a Memorandum of Agreement—MOA—was signed by the Office of Information Resources Management, the predecessor agency of the Office of the Chief Information Officer, and its counterpart in the Department of the Interior to facilitate the voluntary sharing of DOINet's telecommunications resources where appropriate to improve service and reduce costs. As a follow-on to this agreement and USDA Forest Service participation in DOI's Alaska Regional Telecommunications Network—ARTNet, the Forest Service and OCIO representatives attended a DOI's Telecommunications Management Improvement Program held in Phoenix, AZ in September of 1997. At this forum, further cost saving opportunities between DOI and USDA were identified and a commitment obtained from both agencies to aggressively pursue the implementation of these opportunities. The original MOA of February 1995 was also updated.
USDA participates in, or leads various cross-cutting information sharing initiatives across the Federal Government, including the International Trade Data System—ITDS, the Benefit Systems Review Team—BSRT—and the Federal Geographic Data Committee—FGDC.
Several USDA agencies, including the Agricultural Marketing Service, the Economic Research Service, the Food Safety and Inspection Service, the Farm Service Agency, and the Animal and Plant Health Inspection Service are participating in the ITDS project.
The Food and Consumer Service—FCS—has been involved with electronic benefits transfer for several years and conducted some of the first pilot initiatives for the Federal government. The FCS served on the BSRT.
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The Natural Resources and Environment mission area and other USDA agencies have served on, and led, several subgroups of the FGDC. The Forest Service—FS—and the Natural Resources Conservation Service have participated in defining metadata for government-wide applications. FS has several initiatives underway with the Bureau of Land Management and state land management agencies.
YEAR 2000 HIGHLIGHTS
Mr. SKEEN. Please submit for the record and discuss the highlights of USDA's plan to address the Year 2000 issue to include the most recent information that is available.
RESPONDENT. I will provide a copy of the most recent USDA Quarterly Year 2000 Report to OMB, dated February 13, 1998, for the record. This report highlights USDA's progress in meeting the Year 2000 challenge and includes the most recent information.
"The Official Committee record contains additional material here."
YEAR 2000 COMPLIANCE PROGRAM UPDATE
Mr. SKEEN. Please provide a complete update on USDA's Year 2000 Compliance Program to include an agency by agency status on the Year 2000 program?
[The information follows:]
"The Official Committee record contains additional material here."
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RESPONSE TO GAO AND OIG AUDITS
Mr. SKEEN. Briefly describe the findings and recommendations and actions taken on each GAO and OIG audit listed in the explanatory notes.
RESPONDENT. The following information outlines the status and actions taken, or planned to be taken, on the GAO and OIG audits referenced in the Explanatory Notes.
Office of Inspector General Reports
#58–009–0001–FM—02/26/96: National Computer Center General Control Review for Fiscal Year 1996.
Status: Action completed on all recommendations and audit closed on March 13, 1998.
Actions taken: Controls over secure ID's put in place; performed reviews of mainframe security reports to ensure that violations are detected; ABORT mode security implemented for CICS production regions; ensured proper level of restrictions for certain transactions; strengthened management commitment to implement adequate security controls; established procedures to review the accesses of ''super'' ID's; eliminated non-cancellable batch ID's without passwords; reviewed violation reports and eliminated redundant logging; implemented APF library controls; performed analysis of personnel with console command capability, and limited access to these functions; limited access to CA-Automate commands.
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#50–099–0007–FM—03/31/97: USDA Access to the Internet.
Status: Actions underway for all recommendations: Internet addressing plan, security, OCIO oversight. Final actions due to be completed by the end of September, 1998.
OIG recommendations: Develop Departmental Internet Protocol (IP) addressing plan; require agencies to establish IP addresses which achieve planned efficiencies; perform Departmental oversight of Internet.
#58–600–0002–FM—03/29/95: General Controls at the National Computer Center.
Status: Action completed on all recommendations and audit closed on March 13, 1998.
Actions taken: Completed OIG-recommended corrective actions. Assigned ID and password to jobs currently using the default ID; eliminated ACF2 option which assigns a default ID to batch jobs.
General Accounting Office Reports
#AIMD–96–59–1996: USDA Telecommunications: More effort needed to Address Telephone Abuse and Fraud.
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Status: Action completed on all recommendations and audit closed on July 25, 1997.
Actions taken: Telephone waste, fraud and abuse audit completed; Departmental regulations, procedures and controls changed to minimize the opportunity for abuse; conducted awareness training for employees; telephone bills reviewed to identify unauthorized calls, and agencies advised on appropriate investigative and disciplinary actions; collect call blocking procedures implemented; disputed bills settled.
#AIMD–97–67–1997: Telecommunications Management: More Effort Needed by U.S. Department of the Interior and the USDA Forest Service to Achieve Savings.
Status: Action completed on all recommendations and audit closed on October 9, 1997.
Actions taken: Determined where USDA and DoI sites are collocated; USDA Telecommunications Network Stabilization and Migration Program (TNSMP) started and results in improved coordination; have named a Forest Service liaison with DoI to implement effective sharing of telecommunications services and equipment; established Forest Service moratorium on radio system purchases until DoI and Forest Service document opportunities for sharing; Forest Service participates on DoI's ''Strategy for Improving Telecommunications Management'' team.
"The Official Committee record contains additional material here."
CHARLES RAWLS, ACTING GENERAL COUNSEL
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Rawls came to USDA in June 1993, serving as executive assistant to Deputy Secretary of Agriculture Richard Rominger. In that position he provided the Deputy Secretary and the Secretary with support and assistance on a wide variety of policy, management, and administrative matters, including the Department's annual budget, disaster coordination, international environmental issues, pesticide policy, and personnel matters. He was the principle point of contact in the effort to restructure and reinvent USDA.
Prior to joining USDA, Rawls served as administrative assistant from 1991 to 1993 and legislative director from 1988 to 1990 for Congressman Martin Lancaster of North Carolina. His legislative experience also includes five years with the House Committee on Agriculture where he served as the associate general counsel from 1985 to 1988, and earlier as counsel to the House Agriculture Subcommittee on Forest, Family Farms, and Energy from 1983 to 1985.
Rawls was born in Wilmington, N.C., and grew up in Raleigh. He is a member of the North Carolina bar, graduating from Campbell University School of Law in Buies Creek in 1982. He also holds a B.A. in business management, graduating in 1979 from North Carolina State University in Raleigh.
"The Official Committee record contains additional material here."